Onity Group - Earnings Call - Q3 2021
November 8, 2021
Transcript
Speaker 0
Greetings, and welcome to the Ocwen Financial Corporation Third Quarter Earnings and Business Update Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr.
Diko Akwasalian, Senior Vice President, Corporate Communications. Thank you, sir. You may begin.
Speaker 1
Good morning, and thank you for joining us for Ocwen's third quarter twenty twenty one earnings call. Please note that our third quarter earnings release and slide presentation are available on our website. Speaking on the call will be Ocwen's Chief Executive Officer, Glenn Messina and Chief Financial Officer, June Campbell. As a reminder, the presentation or comments today may contain forward looking statements made pursuant to the safe harbor provisions of the federal securities laws. These forward looking statements may be identified by reference to a future period or by use of forward looking terminology and address matters that are to different degrees uncertain.
You should bear this uncertainty in mind when considering such statements and should not place undue reliance on such statements. Forward looking statements involve assumptions, risks and uncertainties, including the risks and uncertainties described in our SEC filings, including our Form 10 ks for the year ended 12/31/2020, and our current and quarterly reports since such date. In the past, actual results have differed materially from those suggested by forward looking statements, and this may happen again. Our forward looking statements speak only as of the date they are made, and we disclaim any obligation to update or revise any forward looking statement, whether as a result of new information, future events or otherwise. In addition, the presentation or comments contain references to non GAAP financial measures such as adjusted pretax income and adjusted expenses, among others.
We believe these non GAAP financial measures provide a useful supplement to discussions and analysis of our financial condition and an alternate way to view certain aspects of our business that is instructed. Non GAAP financial measures should be viewed in addition to and not as an alternative for the company's reported results under accounting principles generally accepted in The United States. A reconciliation of the non GAAP measures used in this presentation to their most directly comparable GAAP measures may be found in the press release and the appendix in the investor presentation. Now, I will turn the call over to Glenn Messina.
Speaker 2
Thanks, Diko. Good morning, everyone, and thanks for joining us. We're looking forward to sharing our progress with you this morning. So we'll get started with some highlights for the third quarter. If you could please turn to Slide four.
I'm really proud of what our team has accomplished and really appreciate all their hard work. We delivered strong GAAP net income and adjusted pretax income. And our ROE exceeded guidance largely due to strong top line performance. I believe this demonstrates the strong operating leverage we have in our business. This was our eighth consecutive quarter of positive adjusted pretax income.
Our team continues to execute well against our operating objectives, strong originations growth and servicing additions, solid operational execution and performance, cost reduction is tracking ahead of targets. We also closed our planned call rights transaction for the third quarter and have deployed more than 50% of Mav's investment commitment. October as well, we had some milestones. So in October, we closed our acquisition of the RMS reverse mortgage servicing platform. And also in October, I'm pleased to announce that we exceeded our recapture rate objective.
We continue to make solid progress on our actions to expand our addressable market. We're growing in higher margin channels, services and products giving us strong momentum. And the RMS platform acquisition gives us access to a potential 86,000,000,000 reverse mortgage subservicing market, which is an exciting new growth opportunity for us. And finally, we continue to navigate a volatile and unpredictable environment, and I'll talk a bit more about that later. Let's turn to Slide five for some highlights on originations.
Originations again delivered really solid performance against our operating objectives. We closed $20,000,000,000 in total servicing additions in the third quarter with very strong performance in subservicing additions. With the closing of the TCB acquisition, correspondent volume doubled versus last quarter. The TCB team is off to a really strong start, and I'm so glad to have them with us and appreciate the contributions they're making to the business. We're seeing great results from our actions to grow subservicing.
We secured $20,000,000,000 in new awards and expect this volume to commence boarding in the fourth quarter. Our subservicing pipeline has never been more robust. Our top 10 prospects represent roughly $63,000,000,000 in opportunity and our total prospect pipeline has grown to slightly over $200,000,000,000 We're excited about this activity level and believe we have a very compelling value proposition. I'll spend a little bit more time on our subservicing value prop a little bit later. Our enterprise sales approach and the TCP acquisition have allowed us to grow our base of sellers to 700 at the end of Q3.
That's roughly 2.5 times over third quarter last year, and we're continuing to grow. Nondelegated and best efforts delivery services were rolled out as expected and we're seeing steady adoption. As well, our Ginnie Mae product mix is improving. It's up to about 10% of total originations excluding co issue. We're still well below industry mix in Ginnie Mae, so I believe we have room for improvement here.
We recently attended the MBA Mortgage Bankers Association Annual Convention and client attendance at our meeting room exceeded our expectations and the response to the quality of our team and operating execution was very positive. So many thanks to all our correspondent, co issue and subservicing clients for choosing us as one of their key business partners. We look forward to serving them and supporting new clients as we expand our addressable market. Our Consumer Direct team continues to improve recapture performance. We did see a little bit of slippage in the third quarter versus the second quarter due to accelerated runoff in select client portfolios versus Q2.
That said, we saw a very strong recovery in October with refinance recapture rate achievement of 36%, which is a milestone for us and a huge congratulations to our recapture team. We believe we're on track to meet our 30% refinance recapture rate objectives in the fourth quarter. Overall, our originations team is making terrific progress against their objectives for this year and they're energized for the fourth quarter and for 2022. Let's turn to Slide six for a progress update on our margin and market expansion actions. The team continues to make strong progress in growing higher margin products, channels and services.
These actions do help us expand our addressable market as well as deflect margin pressure as industry volume levels contract. Year over year, Consumer Direct volume in both forward and reverse is up 61%. Both forward and reverse delivered record retail funding and lot volumes in October. The marketing eligible population for our forward recapture business increased about 43% from the second quarter to the third quarter. And we now have roughly 174,000 loans where borrowers could save $100 or more per month by refinancing and our team will be focused on trying to help these borrowers.
Total reverse originations are up 86% year over year. Team is executing very well. Our reverse market share is up from 6.5% in third quarter twenty twenty to 7% in third quarter twenty twenty one. And this compares to about 4.2% in the 2019. So great progress by the team growing our share and our business.
In forward correspondent, we have meaningful opportunity to grow our best efforts in non delegated delivery services. We our team is focused there and we launched those recently. Today, services are just a fraction of the levels we see across the industry generally. Our long term goal is to get best efforts in non delegated to roughly 25% to 30% of volume and about 40% to 50% of our gain on sale revenues. Let's turn to Slide seven to cover some highlights on our servicing business.
In servicing, continuing to improve cost and customer experience are the key objectives for us and the team is performing really well. To achieve these objectives, we're focused on moving the needle in four key areas: technology, process simplification, scale and portfolio composition. The results have been good so far. Overall, servicing operating costs are down roughly 25% from third quarter twenty twenty levels, and we've already achieved our full year target for 2021. Technology is a big driver for us, and our technology agenda has a three part focus, and that's reduce cost, improve execution and improve the customer experience.
We believe our actions to improve client, borrower and investor experience are critical elements to support our growth and recapture rate objectives over the long run. And with technology as the enabler, we can reduce cost and improve execution at the same time. In terms of scale, we've increased our total servicing UPB about 33 versus the 2020. And our percentage of prime servicing is now 70% of our total servicing UPB. In terms of portfolio composition, increasing the percentage of agency loans is helping to increase average loan balance and decrease delinquencies.
Both of these trends will improve our ratio of operating expenses as a percent of UPB. We believe we have tremendous operating leverage in our servicing platform and we're focused on increasing scale by growing our own servicing and subservicing. Now let's turn to Slide eight and look at some of our operating execution and servicing. Again, here the team continues to perform very well in several areas. Average speed of answer and call abandonment rate continued to outperform the industry average as reported by the NBA.
Our average speed of answer is just a fraction of the NBA average and abandonment rates are roughly half the industry average. We continue to be laser focused on supporting borrowers who are exiting forbearance and helping them understand their options. We believe the best path for the homeowner and the investor is to find what works within investor guidelines to keep the consumer in their home. In this regard, we outperformed the industry as reported by the MBA relating to the percentage of borrowers with an agency loan who exit forbearance with the reinstatement or loss mitigation solution in place. Between September 2020 and June 2021, roughly ninety three percent of our borrowers who exited forbearance had a reinstatement or loss mitigation plan in place and that compares to the industry average of eighty three percent.
What that means is about seven percent of our borrowers on forbearance have exited without a reinstatement plan or loss mitigation solution versus over seventeen percent for the industry. Based on the MBA data, we're delivering 20% more loss mitigation solutions for homeowners versus the industry average. And again, I believe this demonstrates how our servicing capabilities deliver superior performance for homeowners and investors. NPS is up six points over 2020 and even with the impact of boarding over 280,000 loans in the third quarter onto our servicing platform and helping over 4,700 borrowers exit forbearance. Also worth noting, Moody's and S and P upgraded our servicer quality assessment as master servicer along with Fitch.
And along with Fitch, all three affirmed our servicer ratings. Some of the key strengths noted by the agencies were our reporting and remitting processes, proactive servicer oversight in master servicing, management organization, industry experience, multiple levels of internal controls and our diligent response to the pandemic, as well as our enterprise wide risk and compliance management framework. Now, let's turn to Slide nine and cover some highlights on our servicing revenue diversification opportunities. We've put put significant effort into diversifying our servicing revenue streams over the last two years. Our focus has been on growing own servicing, growing our subservicing and taking advantage of ancillary or intrinsic revenue streams in our business, Ginnie Mae EBO gains and call right opportunities.
These efforts have paid off as the percentage of our servicing revenue derived from the NRZ subservicing agreement has been reduced by more than 50%. It's now just 17 of our revenues. From a loan count perspective, the NRZ loans are down to 33% of the total as compared to 54% in third quarter of last year. And the NRZ loans also comprise about two thirds, 67% of our total nonperforming loans as of the 2021. EBOs and call rights continue to be an opportunity for us.
We settled our planned call rights transaction in the third quarter involving seven deals, and we're pleased with the results. As of the 2021, our call rights our owned call rights for approximately 121 deals. And we estimate the near term opportunity for call rates that could potentially be actionable is about 30 to 40 deals. Market appetite for seasoned non agency loans remained strong and there is sustained activity from other legacy non agency servicers. Respect to our previously announced fourth quarter transaction, we received a request from the trustee Deutsche Bank asking us to pause the cleanup calls.
They wanted to confirm the call price met the requirements of underlying PSAs. We believe the call price we've calculated is consistent with the applicable PSAs in our course of conduct with Deutsche Bank and relevant third parties and with established industry practice. We intend to work with Deutsche Bank in their analysis, including if Deutsche Bank chooses to seek input from a court of competent jurisdiction. Meanwhile, we have agreed to pause our calls to allow that analysis to take place. Regarding EPOs, we realized $12,300,000 in EBO gains year to date third quarter with loans now emerging from forbearance.
We expect to see an increase in EBO activity as loans are modified throughout 2022. Now let's turn to slide 10 to discuss our approach in subservicing. We believe we've built a best in class servicing platform for performing and special servicing with capacity for growth that can offer compelling value proposition to existing and prospective clients. During 2020 and 2021, we performed an end to end review of our platform and capabilities against what we believe are client expectations. Based on this review, we believe our platform delivers best practice performance levels for clients across six Cs of performance.
These include competency, putting the client first, customer centricity, technology enabled capabilities, a well staffed bank rate risk and compliance model, and a strong value based culture that underpins everything we do. We've made several investments in borrower and client facing technology to address the needs of clients and consumers and to streamline our business and improve the ability for consumer and client self-service. We can offer swift onboarding, responsive service to our clients and consumers and as we covered on Pages seven and eight, industry leading operating performance. We believe our operations can deliver superior total cost and service level performance versus our peers. And we've been rewarded for the investments we've made in our platform.
We've secured $28,000,000,000 of subservicing additions in the last twelve months. We secured $20,000,000,000 in new awards in the third quarter and we have a $63,000,000,000 opportunity with our top 10 prospects and a potential prospect pipeline of $200,000,000,000 and growing. With the closing of RMS as well, we are positioned to enter the $86,000,000,000 reverse mortgage servicing market once the integration is complete. So while these opportunities do have a longer sales cycle, I'm nonetheless very excited about the opportunity we have here. Now let's turn to Slide 11 to discuss our thoughts on the operating environment for 2022.
Generally, year, industry volume levels continue to be very robust, certainly as compared to historic levels both forward and reverse. We continue to deal with incredible interest rate volatility in August. Ten year treasury rate was trading at 117 basis points. By quarter end, it was 153. It's now in the high 140s.
So it's been volatile. We are seeing non parallel interest rate movements as well as mortgage to treasury spread compression and discount margin volatility in reverse as well. These risks are not covered by our hedging program and we did feel the effects of this in the third quarter. June will talk a little bit more about that later. Consensus industry forecast is for rising rates and about a 28% average reduction in industry origination volumes.
This is based upon the consensus of Fannie Mae, Freddie Mac and MBA forecast. That said, 2022 projected volume levels are still relatively high compared to historic levels, especially in the twenty eighteen, twenty nineteen time frame. Reverse mortgage endorsement volume remains strong and is expected to remain strong compared to last year. In a contracting market, we would expect some continued pressure on originations margins until capacity excess capacity industry could be eliminated. That said, margins were roughly stable in the third quarter.
With rising rates, we would expect increased servicing profitability and MSR values as payoffs and runoff portfolio runoff decreases. And we also expect perhaps some M and A and bulk purchase opportunities may emerge as market participants consider exiting as the origination market contracts. And we also expect to see the agency's buy box expand a bit with higher loan limits and support for first time and low to moderate income buyers. To address the dynamic environment, we're focused on a few straightforward strategies: prudent growth by expanding our client base, products, services and addressable markets continuing to drive best in class operating performance to deliver superior value proposition to clients, investors and consumers providing a service experience that delivers on our commitments enhancing our competitiveness through scale and low cost, aggressively pursuing our subservicing opportunity pipeline and expanding into reverse subservicing. And lastly, continuing to be prudent in bulk purchases through Mav and M and A opportunities to increase scale and capabilities.
Now let's turn to Slide 12 to discuss our operating objectives for the balance of 2021 and our initial thoughts on 2022. By now, you're familiar with our key operating objectives for 2021, and we're well on our way to achieving our targets in each of the five categories. We believe we've got strong momentum. And our key operating objective framework will remain the same for 2022. We are targeting over $100,000,000,000 in total owned servicing and subservicing additions.
We're targeting to maintain recapture rates over 30% with the long term objective of industry best practice levels by investor type. Continuous cost and process improvement is part of our DNA and we're driving base cost and variable cost productivity improvement to support our competitiveness. We're targeting roughly another reduction in servicing and overhead OpEx as a percent of UPB from third quarter twenty twenty one levels. Industry leading operation execution and delivering on our commitments to clients, borrowers and investors is a critical component of our value proposition. So this will continue to be a focus and emphasis for us in 2022 and beyond.
And for 2022, we're targeting about 50% growth in subservicing additions and harvesting embedded EBO and call rights income to diversify and grow our revenue. Consistent with our operating objectives this year, we continue to target low double digit to mid teen after tax operating ROEs in 2022. And with that, I'll turn it over to June, who'll discuss our financial performance in more detail.
Speaker 3
Thank you, Glenn. Please turn to Slide 13. We reported $37,000,000 in adjusted pretax income and 32% in adjusted pretax ROE. This is the eighth consecutive quarter of positive adjusted pretax income. Net income in the quarter was $22,000,000 including $27,000,000 in unfavorable notables, largely driven by MSR fair value changes from higher actual prepayments than modeled, negative effects of basis risk, partially offset by higher market interest rates net of hedging.
We achieved 19% after tax GAAP ROE, exceeding our low double digit to mid teen guidance. Our earnings per share was $2.35 beating analyst consensus by over two times. On the top right bar chart, you can see that we're delivering on our growth objectives and cost leadership. Revenue increased 38% year over year, largely due to higher servicing fees on an additional $66,000,000,000 in UPB and executing the CallRite transactions. Operating expense as a percentage of average UPB was favorable year over year after absorbing cost to maintain capacity for both the new bulk volume that boarded in August and September, incurring temporary interim subservicing expense on MSR bulk acquisitions, and as I mentioned previous quarters carrying excess costs during foreclosure moratorium in expectation of borrower need.
Equity increased to $470,000,000 and book value per share increased $2 to $51 per share. Please turn to Slide 14. This slide demonstrates that our balanced business model is operating well with originations growth replenishing our servicing portfolio more than offsetting runoff. The replenishment rate in the quarter was 170%. On the left side of the slide, you can see that volume is up across all channels, approximately 77% versus the same quarter last year.
Adjusted pretax income was impacted by lower revaluation gains on MSR cash window and flow purchases and expected margin normalization. You can see on the margins graph, Consumer Direct margins increased slightly versus last quarter, but lower than this time last year. Mix adjusted correspondent lending margins were relatively flat versus last quarter. The adjustment in the second quarter correspondent margins is attributed to gains recognized in the second quarter on certain loans that were acquired under favorable circumstances, resulting in higher than market average margins for these loans. Adjusting for these loans, second quarter margins were consistent with the first quarter at approximately 12 basis points.
As Glenn mentioned, we're growing higher margin products, channels and services, which we believe will help deflect margin pressure as industry volume levels contract. On the right side of the slide, you can see the results in our servicing segment from building scale. Third quarter total servicing UPB is $248,000,000,000 a $62,000,000,000 increase over the 2020. Subservicing plus mAb UPB, and as you know, we began subservicing mAb this quarter, doubled year over year, largely replacing the NRZ UPB decline. NRZUPP concentration dropped from 46% to 24% year over year.
We expect this trend to accelerate as we grow subservicing for other clients in Mav. Servicing adjusted pretax income of $41,000,000 was largely driven by higher servicing fees from higher UPB, expanding servicing revenue with approximately $23,000,000 in call right gains as well as cost leadership. You saw earlier that servicing operating costs are down three basis points year over year, and we expect continued improvement, which I'll show you on the next slide. Please turn to Slide 15. This is our roadmap page.
We told you last quarter that we're positioned for step function change in profitability in the second half of the year. And we delivered on this in the third quarter with GAAP earnings and 19% ROE. This is our operating framework for 2022 assuming a stable interest rate environment and no adverse changes in market conditions or legal and regulatory environment. The page is broken down by our operating objectives in the origination, servicing and corporate segments. I'll provide a few highlights, but please let me know if any of you want to review in more detail separately and I'd be happy to.
We reflect the full quarterly impact from the bulk transactions closed in June we talked about last quarter. Flow MSR volume was redirected to Mav in the third quarter and we continue to grow performing subservicing, which results in a mix shift to higher margin consumer direct and reverse channels. We expect EBO, call rights and other revenue diversification in the range of 20,000,000 to $25,000,000 and the segments continue to achieve productivity targets. Now I'll turn it
Speaker 0
back over to Glenn.
Speaker 2
Thanks, June. And if you could all please turn to Slide 16, a couple of comments just to wrap up before questions. We had a great quarter, delivered really strong financial performance. I'm proud of how the team is executing and we're excited about the opportunities ahead. We're demonstrating a solid track record of delivering on our operational and financial commitments and continued development of our balanced and diversified business model.
We're focused on a few straightforward strategies to navigate this dynamic market environment prudent growth by expanding client base product services to expand addressable markets superior value proposition to clients, investors and consumers through best in class operating performance providing a service experience that delivers on our commitments and enhancing our competitiveness through scale and low cost. I'd to thank and recognize our Board of Directors and Global Business team for the hard work and enduring commitment to our success. I'm proud of what our team accomplished in the third quarter and very appreciative of all their efforts. And with that, Laura, let's open up the call for questions.
Speaker 0
You. Our first question comes from the line of Bose George with KBW. You may proceed with your question.
Speaker 4
Everyone. Good morning. Just wanted to ask first just about gain on sale trends, what you guys are seeing in October by channel? And then what you're sort of expecting going into next year?
Speaker 2
Sure, Bose. In forward retail, our consumer direct platform, channels were roughly flat, maybe up slightly. In correspondent on the surface, it did look like margins came down. You'll see in our Q and on June's presentation, there was it looks like margins reflected down. Although in the second quarter, we did have an opportunistic purchase of a pool of loans that had an extraordinarily large margin embedded in them.
So if you normalize out for that, basically 2Q forward correspondent margins were about 12 basis points. 3Q was again about that 12 basis points range. Third quarter was about 10 basis points. So maybe a little bit of pressure, but I think within range of reasonableness. Don't get me wrong, it's competitive.
We fight for every deal with every customer. So we've got to keep our pencil sharp, but it's been pretty consistent like that for the past six months or so. In reverse, we're seeing a little bit of volatility. When you look at our K, you'll see we had discount margin affects the tail gains and that tends to move around a little bit. It's moved around a little bit during the third quarter with the industry volatility I spoke about.
So those margins came down a little bit. So generally, again, nothing out of line that we would expect to see in this environment and frankly relatively stable on the forward side.
Speaker 4
Okay, great. Thanks. And then just on the correspondent, you noted the mix shift, more best efforts versus mandatory. And can you just talk about what that implies? Like what are the margin differences there?
How that could impact your margin outlook in correspondent?
Speaker 2
June, do you want to address that?
Speaker 3
Oh, sure. So we are expecting the best efforts in non delegated margins to improve period over period. What we reported last quarter in our deck is that the non delegated is about two times the mandatory correspondent margins, and we expect to continue at that level.
Speaker 4
Okay, great. Thanks. And then just one last one. The comment you guys made on Deutsche Bank and the call rights, just in terms of how that's playing into your expectation for call rights in the fourth quarter and next year, Is that sort of pushing out some of the call rights into next year? Just how is that going to impact you sort of operationally in terms of when those are called?
Speaker 2
Sure. So Bose, yes. Look, we agreed to cooperate with Deutsche Bank. We believe we've calculated the call price correctly. We've done it consistent with our past practice.
We've done it consistent with our prior dealings with Deutsche Bank. And frankly, very consistent with how under other industry participants who own these legacy private calls performed their calculations. It will, I think, push out our fourth quarter So we did agree to put that on hold. So we do expect to push that. It's going to be pushed into next year.
June, do have
Speaker 3
some Just one thing to add is in Q2, we provided some guidance that EBO and call rights would achieve about 35,000,000 to $40,000,000 and actual to date, we're at about $40,000,000 So we don't expect the call rights delay to have an impact on our Q4 results.
Speaker 0
Our next question comes from the line of Marco Rodriguez with Stonegate Capital. You may proceed with your question.
Speaker 5
Good morning, everybody. Thank you for taking my questions.
Speaker 2
Good morning, Marco.
Speaker 5
Good I was wondering, are you guys seeing any increased competition in the reverse mortgage market, just sort of given the favorable demographic outlook?
Speaker 2
So Marco, the answer is yes. While market competition has increased, we've been successful in increasing our market share over the past two years, And we've delivered about 86 growth year over year in the third quarter in total endorsement volume. The RMS transaction will position Ocwen as the only reverse originator, issuer and direct servicer in the industry. We think this unique ability will allow us to capitalize on the demographics the demographic outlook and positions us very well as compared to competitors.
Speaker 5
Got it. In that same kind of line of thinking here, just if maybe you can kind of broadly outline what differentiates you from your competitors and why do you actually think that you're going to be the winners in this industry?
Speaker 2
Yes. Look, Marco, I believe we're entering 2022 from a position of strength. We are new we've built a very high performing correspondent consumer direct and reverse mortgage business. With that said, we are a new entrant in originations and we believe we can generate growth by expanding our addressable market. And we're doing that with expansion into higher margin products and services and growing our client base.
Our sales team has been very effective with the enterprise sales model, helping to grow subservicing and we have demonstrated terrific performance vis a vis the MBA and Moody's reported statistics across multiple dimensions of our servicing operating performance. We believe we've got a technology enabled controlled scalable servicing platform that delivers leading operating and cost performance. And as I just mentioned, with the acquisition of the RMS Reverse servicing platform, we are the only end to end reverse mortgage provider, giving us access to an estimated $86,000,000,000 in potential reverse subservicing opportunities. And then lastly, look, we've got a relationship, a strategic alliance with financial and capital partners to help support our business as we go forward. So I'm excited about how we're positioned and looking forward to competing effectively in 2022.
Speaker 5
Fantastic. Great information there. Any plans to improve your brand awareness going forward?
Speaker 2
Yes. Marco, look, I'll
Speaker 6
say
Speaker 2
a little bit more about this later, but we are such a different company today than when we were just a few short years ago. So we are rethinking the company brand. It's something we're considering. We've transformed our business. It's now a balanced business model.
We do both performing and special. It's not quite aqua and it's not quite PHH. We really are something completely different. So we do want to ensure our brand reflects who we are today and our vision. So we're evaluating our potential opportunities here.
Speaker 5
Got it. Thank you very much. Appreciate your time.
Speaker 2
Yes, sir. Thank you.
Speaker 0
Our next question comes from the line of Matt Haudlet with B. Riley. You may proceed with your question.
Speaker 6
Thanks for taking my question. And congrats to you, Glenn and the team, really turning around the story here. The question is on capital. I mean, getting tight for capital, the guidance with the owned, and I realize subservicing doesn't require much capital. But what are your options going to pursue new capital?
Can you talk a little bit about what might be available and if you'd look to that at some point in 2022?
Speaker 2
Sure. So look, we are first and foremost, Matt, thank you for your kind words and your comments. The team really appreciates it. Look, we are focused on driving prudent sensible growth in the business. June's laid out the framework we have for the business.
We believe we have the capital base to support that operating framework for 2022. We've been very successful in capital deployment through Mab. So we've deployed about 50% of the targeted investment commitment for Mab. I have really enjoyed the working relationship with Oaktree. They're great partners.
To the extent Mab performs well, we certainly wouldn't be shy about going to exploring with Oaktree, expanding Mab and its capability or capacity there. So look, if the opportunity prevents itself for something that is special for our business and can really drive extraordinary growth and extraordinary performance, assuming it's in the best interest of our shareholders, we would evaluate options to take advantage of the growth for the business and explore different mechanisms on raising capital if the situation permits and again, if it makes sense for shareholders.
Speaker 6
Thanks for that. And that was my question on NAV. If you'd look to expand and it sounds like it's off to a great start. We'd look forward to hearing more about that. But on I mean, you talked to rating agencies in terms of capabilities?
I mean, would a preferred work, there's a peer of yours in the market for non secured debt now. Mean, all of that, is that open for discussion? Or is this something that needs a lot of work with the rating agencies and so forth?
Speaker 2
Look, we've been in touch with we always stay in touch with the rating agencies and with our banking partners, to speak, investment banking partners. A preferred is something we would consider. Again, it's a way to be to not dilute common shareholders, right? So that makes a lot of sense. Pricing is attractive.
I know a number of our competitors have issued preferred at attractive prices. So it definitely is something we would consider. We are talking to the rating agencies every quarter with our financial performance and reminding them of how strong the business performance is. They gave us great remarks, great comments on the servicing servicer performance ratings. But for the total corporate ratings, again, we are continuing to pound the message home that we are a different company.
We are driving superior performance in our business. And yes, we certainly would consider all options and preferred being one of them to take advantage of growth opportunities that they present themselves.
Speaker 6
No, I really look forward we really appreciate that and look forward to hearing more about it. And then on that topic on the bulk market, just we read the industry reports that the bulk market is opening back up, you guys are right in the mix. Can you talk a little bit about just the dynamics that are going on pricing, whether
Speaker 5
or
Speaker 6
not that's going to accelerate as we get potentially consolidation in the mortgage industry?
Speaker 2
So look, I think it will. It's one of the things I mentioned in my overview of the industry as rates back up, a lot of originators have kept MSRs on their balance sheet. And as cash margins in the origination space continues to compress at this part of the market cycle, people who have held MSRs tend to sell MSRs. So we are seeing a bit of a pickup in the bulk market. Look, think pricing is tight.
It's competitive. I think people are leaning into prepayment speed assumptions. Interest rates are at record lows. The expectation is for rates to continue to go up. Personally, I believe we're going to see speeds if rates go up the way the industry is predicting speeds will be the slowest probably that the industry has ever seen.
And I don't think I'm unique in sharing that perspective. I think a lot of others share that perspective. So I expect to see some increase in bulk. I expect it's going to be competitive. I think people will be leaning into speeds.
And we're going to be prudent in our approach and work with our partners Oaktree to prudently acquire a business that delivers the appropriate returns for MAP and for Oaktree and our shareholders.
Speaker 6
Glenn, I appreciate it. It's good to see you, Ocwen back in the mix.
Speaker 2
Thanks, Matt. Appreciate it.
Speaker 0
Our next question comes from the line of Drew McIntosh with McIntosh Investor Relations. You may proceed with your question.
Speaker 2
Hi guys. My questions have actually already been answered, but great job on the quarter. Thanks, Drew. Appreciate it.
Speaker 0
Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Glenn Messina for closing remarks.
Speaker 2
Thanks, Laura. To wrap up, I just completed three years with Ocwen in October. And looking back from where we came, the transformation is incredible. We faced 2019 when I joined the company with a mountain of challenges in front of us. We were digging out of a 2Q twenty eighteen pro form a annualized adjusted pretax loss of over $300,000,000 for Ocwen and PHH combined.
We faced a large scale integration that affected every function in the business, where we had to convert 1,000,000 loans onto a new servicing system, enterprise wide technology and telephony modernization, cutting our cost structure almost in half, massive single client concentration risk, building sustainable origination capabilities from scratch, inadequate recapture performance, refinancing our capital structure, addressing legacy regulatory matters. It was just a mountain of things that this team had to overcome. And here we are today, I believe we're entering 2022 from a position of strength. We've delivered eight consecutive quarters of positive adjusted pretax income. We're winning in our target markets.
We're delivering on our growth and return objectives. And our origination and servicing platforms have capacity for growth and strong operating leverage. Our multichannel origination platform is focused on expanding our addressable markets through new products and services and expanding our client base. Our servicing platform delivers industry leading performance in multiple loan types, has a highly competitive cost structure, and we are relentless in our pursuit of delivering on our commitments. We've modernized our technology platform with proprietary centers of excellence driving automation and lead process reengineering, and I just couldn't be more excited about our potential for '22 and really couldn't be prouder, more proud of the Ocwen team and just so thankful for what they've accomplished and helped us do in the business.
So thank you for your continued interest in Ocwen, and I look forward to speaking with you on the next quarter business update.
Speaker 0
Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time.