Bank Statement, DSCR, LOS, CE, Compliance Tools; Conference Chatter About Credit and Agency News “Why did the Dalai Lama go to Las Vegas? Because he loves Tibet.” Here at the “MBA Annual,” the puns may not be flying, but there is news bouncing off the walls, some of it learned just by chatting in the hallways. (And there is plenty of time spent walking through the convention center… I need a Segway!) The Mortgage Bankers Association (MBA) announced that total single-family mortgage origination volume is ex ...

Financial Data and Key Metrics Changes - The company reported GAAP earnings of $14.4 million or $0.10 per share, compared to a loss of $8.4 million or negative $0.07 per share in the previous quarter, indicating a significant sequential improvement [22] - Book value per share ended the quarter at $8.39, a slight decline from $8.46 in the fourth quarter, translating to a positive economic return of 1.3% for the first quarter [22] - Earnings available for distribution (EAD) for the first quarter was $19.8 million or $0.14 per share, up from $18.4 million or $0.13 per share in the fourth quarter [23] Business Line Data and Key Metrics Changes - Sequoia's first quarter performance showed $4 billion in locks, representing a 73% quarter-on-quarter growth, driven by wallet share growth and seasoned bulk portfolios [11] - Net income from Sequoia was $25.8 million, representing a 28% return on equity (ROE) for the quarter, up from 23% in the previous quarter [23] - CorVest generated net income of $2.9 million, resulting in a 20% ROE for the quarter, despite a slight decrease in volumes from the fourth quarter [24] Market Data and Key Metrics Changes - The company noted that the mortgage market has not experienced disproportionate effects from recent market volatility, unlike previous years [6] - The company observed a significant demand for the assets created, with trillions of dollars raised by private credit institutions looking to invest in the residential mortgage space [9] - The company reported that the average capital allocation ticked down for the quarter, indicating a focus on liquidity and execution risk management [38] Company Strategy and Development Direction - The company is focusing on strategic partnerships with entities on both the supply and demand side of the market as part of its growth initiatives [10] - The company is advocating for a leveling of the playing field between private capital and government-sponsored enterprises (GSEs) to streamline regulatory burdens [9] - The company aims to achieve annualized EAD returns on equity in the 9% to 12% range by reallocating capital towards operating platforms and reducing exposure to legacy investments [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the transformation in mortgage financing and the potential for significant growth opportunities in the housing finance policy landscape [8] - The management highlighted the importance of speed and efficiency in managing liquidity and execution risk amidst market volatility [40] - The company is adjusting production priorities in response to emerging local trends to meet growth goals at attractive risk-adjusted returns [17] Other Important Information - The company ended the quarter with unrestricted cash of $260 million, up from $245 million at year-end, indicating improved liquidity [25] - The company has a current share repurchase authorization of over $100 million and is actively evaluating opportunities for buybacks [64] - The company has reduced securities repo by 40% since March 31, reflecting a proactive approach to managing its debt profile [27] Q&A Session Summary Question: How did the company hedge its portfolio during recent market volatility? - Management indicated that they constantly turn capital and move risk quickly, utilizing various transactions to manage the portfolio effectively [32] Question: How does the company manage liquidity and execution risk with high volume locks? - Management emphasized the importance of speed and knowing where risk can be cleared, with half of the pipeline already sold or securitized since the end of the quarter [39] Question: Can you clarify the nature of the $1.9 billion bulk purchases? - Management confirmed that these were closed loans categorized as part of forward purchases, indicating a robust addressable market for such transactions [44] Question: What is the outlook for the bridge loans and the associated risks? - Management noted that the $1.6 per share figure pertains specifically to older vintage multifamily bridge loans, with ongoing efforts to optimize financing and pursue resolutions [49] Question: Can you elaborate on the expected EAD ROE for 2025? - Management indicated a target of 9% to 12% for the full year, with expectations for growth driven by increased flow activity and capital redeployment [59]

Financial Data and Key Metrics Changes - The company reported GAAP earnings of $14.4 million or $0.10 per share, compared to a loss of $8.4 million or negative $0.07 per share in the fourth quarter, indicating a significant sequential improvement driven by strong performance across operating platforms [22] - Book value per share ended the quarter at $8.39, a modest decline from $8.46 in the fourth quarter, translating to a positive economic return of 1.3% for the first quarter [23] - Earnings available for distribution (EAD) for the first quarter was $19.8 million or $0.14 per share, up from $18.4 million or $0.13 per share in the fourth quarter [24] Business Line Data and Key Metrics Changes - Sequoia's first quarter performance showed $4 billion in locks, representing a 73% quarter-on-quarter growth, while the net income from Sequoia was $25.8 million, representing a 28% return on equity (ROE) for the quarter, up from 23% in the previous quarter [11][24] - CorVest generated net income of $2.9 million, resulting in a 20% ROE for the quarter, despite a slight decrease in volumes from the fourth quarter [25] - Aspire's early lock volumes were just over $100 million, tracking within the same gain on sale margin range as Sequoia [25] Market Data and Key Metrics Changes - The company noted that while money center banks reported steep mortgage volume declines of 20% to 30%, Sequoia's growth was driven by wallet share growth and the emergence of seasoned bulk portfolios from banks [11] - The company observed a strong demand for the assets created, with trillions of dollars raised by private credit institutions looking to invest in the residential mortgage space [10] Company Strategy and Development Direction - The company is focusing on strategic partnerships with entities on both the supply and demand side of the market as part of its growth initiatives [10] - The company is advocating for a leveling of the playing field between private capital and government-sponsored enterprises (GSEs) to streamline regulatory burdens and enhance market efficiency [9] - The company aims to reallocate nearly 20% of capital towards operating platforms and retained operating investments while reducing exposure to legacy bridge investments [31] Management's Comments on Operating Environment and Future Outlook - Management indicated that the current macro environment has rendered most projections for 2025 obsolete, but the company is navigating market volatility from a position of strength [5][6] - The management expressed optimism about the potential transformation in housing finance policy and the opportunity for private sector financing without government support [9] - The company expects to achieve its full-year target despite potential short-term volume fluctuations due to market conditions [31] Other Important Information - The company ended the quarter with unrestricted cash of $260 million, up from $245 million at year-end, and recourse leverage stood at 2.5 times compared to 2.4 times in the fourth quarter [26] - The company has a current share repurchase authorization of over $100 million and is actively evaluating the potential for share buybacks [63] Q&A Session Summary Question: How did the company hedge its portfolio during the volatility in April? - The company emphasized its ability to turn capital and move risk quickly, which contributed to managing the period effectively across the book [33][34] Question: How does the company manage liquidity and execution risk with significant volume locks? - The company highlighted its efficient risk turnover and the ability to pre-sell or know where partners are lined up to execute, which mitigates liquidity risk [39][40] Question: Can the company provide clarity on the bulk purchases of seasoned loans? - The company confirmed that the bulk purchases are closed loans and emphasized their focus on distribution and hedging parameters [44][46] Question: What is the outlook for the bridge loans and the associated risks? - The company noted that the uptick in delinquency was a result of strategic decisions to pursue alternative resolutions and that they expect to resolve these issues throughout the year [50][52] Question: Can the company elaborate on the expected EAD ROE for 2025? - The company expects a year-end 2025 run rate of 9% to 12% for EAD ROE, driven by reallocating capital towards operating businesses [58][60]