Glen Messina: Yes. So let me go in reverse order. So commercial and reverse subservicing has a much higher cost structure than resi forward. The requirements are more complex, particularly at the, I’ll call it, end of life for reverse assets. So more complex loss mitigation and conveyance process or conveying loans back to HUD. And there’s more things you have to do; occupancy certs, property inspections to make sure that they’re — the properties are kept in good stead and the like. So the servicing costs are a lot higher for small balance commercial and multifamily as well as for the reverse portfolio. If you look at our last quarter’s presentation, we did show that for our typical subservicing contract on a marginal basis, so we continue to grow, we would expect that profitability would average between 2 to 3 basis points on subservicing growth as we go forward.
Obviously, depending upon the size of the relationship, scale of the relationship, if it’s a plain vanilla portfolio that’s largely current, that can have a pretty broad range of 1 to 3 basis points. But generally, call it, 2, 2.5 to 3 basis points of profitability on a marginal basis for a typical servicing portfolio – subservicing relationship.
Operator: [Operator Instructions] We have our next question coming from the line of Matthew Howlett from B. Riley.
Matthew Howlett: Congrats on all around good quarter. I want to focus on the debt repurchases, obviously, $15 million. I think you said it included in October. Glen, you mentioned taking down leverage to the peer group. My question is sort of how much can you knock down that senior debt? Is that the area you want to focus on in terms of deleveraging? And then in terms of liquidity, you did some of those synthetic transactions last quarter. Clearly, there’s going to be some seasonality with the origination business. What could you do? What steps could you do to generate more cash for deleveraging?
Glen Messina: So Matt, look, as we said, our growth is primarily going to be — or we would expect our growth to primarily be in subservicing and leveraging our MSR capital partners. We do need to maintain a target level of owned MSR UPB. Our target level is between $115 billion and $135 billion to maintain what we believe are appropriate debt service coverage ratio. So while we do have our corporate debt balances, we focus on debt service coverage as well. So look, as excess liquidity permits on a go-forward basis, we would expect to continue to allocate that excess liquidity to pay down our debt. So far in the last 18 months or so, it’s about $40 million of corporate debt reduction. The easiest debt to reduce is the PHH senior secured notes in the marketplace.
Obviously, we’ll continue to focus on various stratifications of our debt as opportunities permit to further reduce. At this stage of the game, we’ve not set a specific target of how much debt we want to reduce by quarter. We do think we need to maintain a prudent and flexible approach to allocating our capital against the priority of maintaining our own servicing UPB and as well allocating excess liquidity when available to reduce debt.
Sean O’Neil: Yes. Matt, it’s Sean. The other thing you mentioned was engaging in more synthetic subservicing transactions to promote liquidity to do something else, whether it be delever, et cetera, the constant tension we have to measure is we make significantly more — we and any other servicer make significantly more on an owned MSR than a subservice MSR. You can see all that in the Q. And so it’s kind of a — it’s a relevant target to watch where the market is. And so when the market rewards us to sell into subservicing, then it could be a useful transaction. But it frees up cash today, it’s with the commensurate lower cash flows in the future. So that’s something you have to take a 2 to 4-year kind of NPV on and understand what you’re doing to your total cash production capability if you move in that direction.
