Mikhail Goberman

Mikhail Goberman questioned the primary reasons behind the significant 30% quarter-over-quarter reduction in G&A expenses. He also sought management's perspective on future share buyback strategies and their approach to the two series of preferred stock. Additionally, he requested an updated book value figure deeper into the current quarter.

Answer

CFO Apeksha Patel clarified that the G&A expense drop was due to the normalization of expenses in Q4, following non-recurring personnel-related costs incurred in Q3. President and CEO Jay Lown addressed the equity strategy, stating the company is monitoring preferreds, especially Series B, for potential buybacks given its recent discount. He also noted the common stock is considered undervalued, with a focus on growth, and that share repurchases are evaluated for their impact on book value. Ms. Patel then provided an update, reporting a 1% increase in book value as of March 31st compared to December 31st.

Mikhail Goberman asked for financial projections for the RealGenius partnership, clarification on the company's 'risk-on' investment strategy, and an update on the current book value.

Answer

President & CEO Jay Lown stated that RealGenius is expected to be profitable within six to seven months and pay dividends within a year, but noted there was nothing definitive to report on other alternative investments. Interim CFO Apeksha Patel reported that book value per share as of July 31 was approximately flat compared to June 30.

Mikhail Goberman of Citizens JMP asked about the market impact of the Rocket-Cooper deal on MSR pricing, the contribution of internalization savings to Q1 EAD, and the specific reason for the expected decline in future EAD.

Answer

Executive Raymond Slater commented that the MSR market has been quiet and he does not expect the Rocket-Cooper combination to substantially alter pricing dynamics. Executive Michael Hutchby quantified that G&A savings from internalization contributed about $0.02 to Q1 EAD and confirmed that future EAD is expected to decline due to the recent maturity of a large, income-generating interest rate swap.

Mikhail Goberman of Citizens JMP Securities asked how a 'higher for longer' rate environment would impact capital allocation between MSRs and RMBS, whether MSR exposure would increase, how potential Fed rate cuts would alter that calculus, and for an update on the current book value.

Answer

Executive Jeffrey Lown stated the recent rise in MSR allocation was due to valuation gains, not purchases, as MSRs are richly priced and levered returns on RMBS are currently better. Executive Julian Evans confirmed the short-term focus is on RMBS. Regarding Fed cuts, Jeffrey Lown noted the complexity and higher financing costs on MSRs, indicating they will adjust as policy becomes clearer. Executive Michael Hutchby reported that book value was approximately flat as of the end of February compared to year-end.

Mikhail Goberman asked about the strategic trade-off between Agency MBS and MSRs, the potential for increasing financial leverage, and the quarter-to-date book value performance.

Answer

Executive Jeffrey Lown explained that while MSRs have benefits, Agency MBS currently presents a better risk-adjusted return profile on a levered basis due to current pricing. He also stated that the company maintains prudent leverage to manage liquidity and cash, especially given recent market volatility and margin calls. Executive Michael Hutchby added that book value per share was estimated to be down 4% to 5% quarter-to-date, prior to any Q4 dividend accrual.

Mikhail Goberman asked about expectations for Lima One's margins and total volumes throughout the year, as well as how the product mix will develop with the addition of wholesale and multifamily lending.

Answer

Bryan Wulfsohn (President and Chief Investment Officer) highlighted healthy spreads for Lima One, with low five-handle cost of funds and 8%-11% rates on new loans, leading to strong ROEs. He noted significant premiums on term loan sales (north of 103) and projected material growth for Lima One in 2026, especially in the back half, due to new multifamily and wholesale channels coming online.

Mikhail Goberman asked about Lima One's expectations for margins and total volumes throughout the year, as well as how the product mix will evolve with the introduction of wholesale and multifamily lending.

Answer

President and Chief Investment Officer Bryan Wulfsohn indicated healthy spreads, with low five-handle cost of funds against 8-11% loan rates, and significant premiums (north of 103) on term loan sales. He projected material growth for Lima One, particularly in the back half of 2026, as the new multifamily and wholesale channels, which are just coming online, gain momentum.

Mikhail Goberman requested an outlook for the Lima One platform for 2025, including product focus and management structure, and also asked for an update on the company's current book value.

Answer

President & CIO Bryan Wulfsohn stated that Lima One's focus remains on single-family transitional and term rental loans, with 2025 originations projected around $1.5 billion. He confirmed the Lima One team reports collectively to MFA's senior management. Executive Harold Schwartz added that economic book value was effectively unchanged since year-end, net of the dividend accrual.

Mikhail Goberman followed up on CoreVest, asking about originations, first-quarter 2026 volumes, and margin performance. He also inquired about Redwood Trust's interest in other real estate loan products and the potential value of owning a bank for FHLB funding.

Answer

CEO Chris Abate projected higher Q1 2026 volumes sequentially across all businesses, including CoreVest, with consistent margins. He noted CoreVest's profitability in 2025 was due to capital efficiency and expense reduction. President Dash Robinson added that CoreVest continues to focus on smaller balance RTL and DSCR products, with RTL being the largest product type in Q4 2025. He highlighted the reliable economics and capital turnover from the JV with CPP and the growing rental products. CFO Brooke Carillo mentioned that term and portfolio DSCR products, which are higher margin, are an increasing mix of CoreVest's originations. Chris Abate stated that owning a bank is not in the current plan, but Redwood Trust is extracting value from bank partnerships. He affirmed a focus on existing core products like non-QM, BPL (CoreVest), and exploring under-penetrated areas like second-lien mortgages (HEI) within Sequoia.

Mikhail Goberman asked about CoreVest's originations, Q1 volumes, and margin performance, and also inquired about Redwood Trust's interest in other real estate loan products or if they plan to focus on growing existing products, including the potential value of owning a bank for FHLB funding.

Answer

CEO Chris Abate projected higher Q1 volumes for CoreVest with consistent margins, noting the different volume-to-profitability dynamics due to JV partners. President Dash Robinson emphasized CoreVest's focus on smaller balance RTL and DSCR products, which are currently well-bid. CFO Brooke Carillo added that term and portfolio DSCR products, which are higher margin, are an increasing mix of originations. Chris Abate stated that owning a bank is not in current plans, but they continue to extract value from bank partnerships. He confirmed Redwood Trust will largely stick to its core products: non-QM, BPL (CoreVest), and under-penetrated second-lien mortgages/HEI in Sequoia, leveraging their seller base.

Mikhail Goberman of Citizens Financial Group inquired about Orchid Island Capital's current book value, the outlook for prepayment speeds given the portfolio's construction and premiums paid on prepay-protected pools, and the company's capacity for further expense reduction.

Answer

Chairman and CEO Robert Cauley stated that the book value was up slightly, approximately 1.6%, inclusive of the dividend accrual. Regarding prepays, Mr. Cauley and CFO and CIO Hunter Haas explained that the company targeted par to slight premiums for securities, primarily in 5%, 5.5%, and 6% coupons, avoiding the highest forms of protection. Mr. Haas detailed their focus on mid-tier call protection and credit-sensitive borrowers in specific geographies. They noted high implied speeds in the roll market but questioned their sustainability given the Fed's outlook. On expenses, Mr. Cauley clarified that almost all increases were due to management fees, with non-management fee expenses rising only marginally, and projected continued expense ratio reduction asymptotically towards 1% as the company grows.

Mikhail Goberman of Citizens inquired about Orchid Island Capital's current book value, the outlook for prepayment speeds, the premiums paid on their prepay-protected mortgage-backed securities (MBS) pools, and the company's capacity for further expense reduction.

Answer

Chairman and CEO Robert Cauley stated that the current book value was up slightly, inclusive of dividend accrual. Regarding prepayments and premiums, Mr. Cauley and CFO and CIO Hunter Haas explained their strategy of targeting par to slight premiums on specified pools, focusing on mid-tier call protection and credit-sensitive borrowers in specific geographies. They noted that implied speeds in the roll market are high but questioned their long-term sustainability. For expense reduction, Mr. Cauley highlighted that non-management fee expenses increased only marginally, with the marginal management fee now at 100 basis points for capital over $500 million, suggesting continued efficiency gains.

Mikhail Goberman from Citizens JMP Securities asked about the percentage of Orchid Island Capital's portfolio covered by call protection if rates were to sharply decline by 50 basis points. He also inquired about the potential benefit to the portfolio if swap spreads were to continue widening and asked for an update on the current month-to-date book value.

Answer

Chairman and CEO Robert Cauley stated that almost 100% of the portfolio has some form of call protection, including lower payout stories like high LTVs, which are less prone to refinancing. He noted that while a 50 basis point rally would make the portfolio faster, the call protection should mitigate detrimental premium amortization, which was modest this quarter. Chief Investment Officer, CFO and Director Hunter Haas added that they strategically bought higher quality stories in the first discount space. Regarding swap spreads, Robert Cauley confirmed that continued widening would be beneficial, estimating a $2 million DV01 sensitivity, translating to about $0.12-$0.15 per book for a 10 basis point move. He also mentioned that the month-to-date book value was up very modestly.

Mikhail Goberman asked about the percentage of Orchid Island Capital's portfolio covered by call protection in a scenario of a sharp 50 basis point rate decrease. He also inquired about the potential benefit to the portfolio if swap spreads were to widen further and requested an update on the current month-to-date book value.

Answer

Chairman and CEO Robert Cauley and CIO Hunter Haas stated that almost 100% of the portfolio has some form of call protection, including low LTV stories and higher coupon premium assets. They anticipate that even with a 50 basis point rate rally, premium amortization would not be detrimental due to this protection. Robert Cauley explained that widening swap spreads continue to benefit the portfolio, estimating it at around $2 million DV01, though significant further widening might require quantitative easing. He also noted that the month-to-date book value is up very modestly.

Mikhail Goberman from Citizens JMP asked for an outlook on prepayment speeds for the third quarter, noting the uptick observed in Q2.

Answer

Robert Cauley, Chairman, President & CEO, responded that he expects prepayment speeds to be 'very muted.' He explained that Q2 is a seasonal peak and the recent spike was due to a brief market rally that is not expected to continue. He also mentioned that the addition of newer issue specified pools should help lower the weighted average prepayment speed going forward.

Mikhail Goberman asked for management's thoughts on the Rocket-Mr. Cooper deal's impact on prepayment speeds and the outlook for MBS supply if the Fed were to begin easing.

Answer

Executive Robert Cauley stated the Rocket/Nationstar merger is a negative for the mortgage universe's convexity, but the ultimate impact on specified pool pay-ups is yet to be determined. CIO/CFO George Haas added that he doesn't expect a material impact on their portfolio. Regarding supply, Cauley anticipates a below-average summer for MBS issuance, citing low housing affordability, high rates, and economic uncertainty as significant headwinds.

Mikhail Goberman sought clarification on the updated book value calculation, the outlook for MBS supply, and management's view on potential GSE reform or other regulatory changes from the new administration.

Answer

Executive Robert Cauley confirmed the book value update was inclusive of the declared dividend. Both Cauley and CIO George Haas view GSE reform as highly unlikely, citing the political risk of making housing less affordable and the severe capital implications it would create for banks holding agency MBS under current regulations. Regarding supply, they noted that street estimates are already being revised lower, a trend they expect to continue.

Mikhail Goberman requested an update on quarter-to-date book value performance and asked for more detail on why a bear steepening of the yield curve is considered the greatest risk. He also questioned if economic leverage would be reduced in such a scenario.

Answer

Executive Robert Cauley reported that book value was down approximately 3.7% quarter-to-date due to mortgage spread widening. He explained that a bear steepening is the primary risk because it could erode premiums on their higher-coupon assets. In that scenario, Cauley noted they could reduce leverage to maintain the dividend, given modest NIM improvement. Executive George Haas added that leverage reduction would likely occur via adding TBA shorts or slowing reinvestment, not outright asset sales.

Mikhail Goberman asked about any specific expense targets or run rates for Q1 2026, given the company's plans to manage expenses alongside partnership growth, and inquired about the general stability and strength of the mortgage industry and consumer behavior.

Answer

Vishal Garg, Founder and CEO of Better Home & Finance Holding Company, did not provide a specific expense number for Q1 2026 but expressed hope for a billion-a-month origination run rate within six months, continued expense scale, and further corporate cost reductions, aiming for profitability by Q3 2026. Regarding the industry, he anticipates a recession, which could disadvantage purchase mortgages but benefit refi if rates drop below 6%. He also highlighted the massive untapped home equity market. He emphasized Better's competitive D2C model with improved conversion rates (3.3% to 6.1%) and market share gains from incumbent platforms, making them relatively agnostic to market cycles.

Mikhail Goberman inquired about specific expense reduction targets for Q1 2026, particularly in relation to managing new partnerships, and sought Better Home & Finance's general outlook on the stability of the mortgage industry and consumer behavior amidst economic uncertainty.

Answer

Vishal Garg, Founder and CEO, did not provide a specific expense run rate but expressed optimism for reaching a $1 billion/month origination run rate within six months, continuing expense scale, and driving corporate cost reductions to achieve profitability by Q3 2026. He anticipated a recession, potentially boosting refinance activity if rates drop below 6%, and highlighted the untapped home equity market. He emphasized Better's competitive D2C model (81% conversion rate increase) and market share gains through Tin Man partnerships, making them relatively agnostic to market cycles.

Mikhail Goberman from Citizens JMP asked for the primary drivers behind the decision to raise the gain on sale margin guidance for the upcoming quarter.

Answer

Chairman, CEO & President Mat Ishbia attributed the guidance increase to a comprehensive analysis of the market, including housing inventory, interest rates, and bond trading. He stated he felt confident for the first time in years to raise the margin guidance to a new level that he believes UWM can sustain and control in the wholesale channel.

Mikhail Goberman asked how the announced upcoming technological changes are expected to affect UWM's expense base going forward.

Answer

Chairman and CEO Mathew Ishbia explained that while technology and AI investments will continue, they are expected to drive down costs and increase revenue over time. He emphasized that the current higher expense level is a strategic investment to prepare for future growth and market dominance, stating that fixed costs are near a peak and the company is positioned to handle significantly more volume with minimal added expense.

Mikhail Goberman from Citizens JMP Securities posed a hypothetical scenario of a significant drop in Treasury yields, asking about the interplay between the origination and servicing businesses, particularly the effect on servicing earnings and valuations.

Answer

CEO Mathew Ishbia described this scenario as a "massive" opportunity. He explained the primary interplay is a timing issue, where an MSR write-down could occur in one quarter before the offsetting origination profits are booked in the next. However, he stressed that UWM is uniquely prepared to double its origination volume to capitalize on the opportunity, with profits that would far outweigh the MSR valuation impact.

Mikhail Goberman from Citizens JMP asked about the company's growth outlook, specifically the balance between organic recruiting and M&A, and for commentary on the current landscape for potential acquisitions.

Answer

Executive Terry Schmidt stated that while Guild is constantly vetting potential acquisitions, the company is highly selective, and organic growth has been stronger in the first half of the year. President and COO David Neylan added that Guild is benefiting from a 'flight to quality' in organic recruiting, noting that Guild's loan officers are on average 30% more productive than the industry average, which makes the company an attractive destination for top talent.

Mikhail Goberman from Citizens JMP asked what factors would lead ARMOUR to increase or decrease leverage, inquired about the outlook for swap spreads, and confirmed the current book value.

Answer

Desmond Macauley stated that ARMOUR is comfortable with its current leverage. An increase would require more clarity on GSE reform and QT tapering, while a decrease could be triggered by tail risks like significant yield curve flattening. Sergey Losyev noted that swap spreads have widened and ARMOUR's 75% swap hedge position is a comfortable base case. Desmond Macauley confirmed the book value was $19.18.

Mikhail Goberman of Citizens JMP asked what factors would be necessary for Mr. Cooper to reach the upper end of its Q1 originations EBT guidance of $30 million to $50 million. He inquired about the role of correspondent momentum versus DTC and the expected mix between the two channels.

Answer

President Mike Weinbach identified a drop in interest rates as the biggest driver to hit the high end of the range, as it would unlock rate-term refinance opportunities. CEO Jay Bray added that positive results in the DTC channel, particularly the growing second-lien home equity business, could also be a key driver. CFO Kurt Johnson highlighted that growing investor comfort with their second-lien product is leading to better execution and pricing.

Mikhail Goberman inquired about the 2025 outlook for Agency MBS spreads, the expected evolution of the MSR versus MBS portfolio allocation, and any perspective on potential GSE reform.

Answer

Chief Investment Officer Nicholas Letica stated that mortgage spreads have shown a more controlled response due to a predictable Fed path, and he remains constructive on mortgage returns, noting the firm does not need spreads to tighten to achieve performance. He also confirmed that the MSR allocation is expected to remain steady. Interim CFO William Dellal addressed GSE reform, stating the company has no special insight and declined to speculate on the status of privatization or the government guarantee.