David Spector: Well, we have built a really great model in terms of growing the servicing portfolio as a byproduct of our organic growth strategy. And as we continue to lead in the correspondent space, and continue to grow our presence in the broker direct space, I expect that our servicing will continue to grow, at probably even a little faster clip. I don’t, we don’t have – servicing size goals in the company. We could go out and buy a big blob of servicing and get really big, really fast. What I’m really focused on is the organic growth of the portfolio. And I think that we’ve done a great job in the 17 years that we built this company, to build this balanced business model with a flywheel that, when rates do decline, we can offer refinances to our borrowers, and we have a strong consumer direct channel to meet that challenge.
And so, I would expect the port to continue to grow. And I think that as we see that growth takes place, we’re going to continue to be on the right side of that growth such that I’m not, I don’t see a melting ice cube scenario anytime in the future.
Dan Perotti: Yes. Just to give a little bit more definition to that, if you look at what our pace of origination/acquisition through our – direct lending and correspondent channels. We’ve typically been adding $20 billion to $25 billion of servicing overall to the platform per quarter. We have some runoff against that. I think we’re around $10 billion this quarter so that, you can sort of do the math there overall. Adding $10 billion to $15 billion a quarter is, around the pace that we’d expect to see most likely through the rest of the year. And we do, we do look at servicing portfolios in terms of the acquisitions. We do review the portfolios that come out onto the market. But as David mentioned, we are focused on adding to PFSI’s portfolio generally at higher note rates.
There are a few more of those types of portfolios that, have come out recently, but there are also still a preponderance of lower note rate mortgage servicing portfolios, which, may be attractive as a PMT, more as a PMT investment, but less so for PFSI. And although we look at those portfolios, generally speaking, the return, we’ve not seen any that sort of meet our return hurdle, as well as the portfolio characteristics that we would want to add to our portfolio. We have significant control over the characteristics of the loans that we add to our portfolio through our – production channels. And specifically in correspondent able to shape the type of loans, or the characteristics of the loans that we’re bringing on to be able to limit the downside.
And you have less control of that, if you’re buying sort of blocks of servicing, bulk servicing.
Crispin Love: Great. Thank you. I appreciate that. And just one last one from me, again on sale margins increase in the quarter, looks to be mostly driven by broker direct. Can you just discuss some of the dynamics there, and what drove the margins higher? And then just competition in broker direct broadly with you, being a top three player in the channel?
David Spector: Look, I think that, the broker direct story in Q1, is really something everyone in the organization is incredibly proud of. We’re continuing to gain share of broker direct. And I think it’s really a byproduct in that, top brokers see PennyMac as a strong alternative to the top two participants. We’ve got great tech supporting our brokers and brokers need a strong second option. I would say, as it pertains to gain on sale margins, look there was a period of time, a year or two back when there was irrational pricing taking place in this part of the market. And I think, we’ve seen a kind of a return to more rational pricing. And it’s, margins are continue to remain, good. And I think that it’s something that, I foresee continuing in Q2, and beyond.
But it’s just, there’s just a lot of good things coming out of broker direct, just from broker feedback and we’re seeing increased amount of jumbo activity at a broker direct. And it’s a very meaningful shift quarter-over-quarter.
Dan Perotti: The one other note that I’d have on the broker margins too, is that if you look back to the fourth quarter, the broker margins were impacted by some fallout in excess of our model that we experienced in the fourth quarter as we had that sharp interest rate rally. And that did not recur in the first quarter. And so, we view the first quarter as a bit more normalized for the current environment and in line with our expectations, barring some significant change as we’re going forward in terms of the broker margins specifically.
Crispin Love: Okay. Yes. Thanks for all that. Thank you for taking my questions.
Operator: The next question comes from the line of Kyle Joseph with Jefferies. Please ask your question.
Kyle Joseph: Hi. Good afternoon. Thanks for taking my questions. A lot of them have been asked. I just wanted to hone in on Slide 6, regarding technology and post-unlock. You laid out four strategies. Is it going to be a four-pronged approach? Do you anticipate, focusing on one of these more than the others, and give us a sense for the timeframe for the layout of this?
David Spector: Yes. Look, I think it’s not a linear approach we’re taking. We’re exploring all options, as it pertains to SSE. And I’m really encouraged with the opportunities that they’ve presented themselves. I mean, clearly we have the most advanced system in the marketplace. And as you can see – on earlier slides that, just what we’ve done to, or later slides, what we’ve done to drive down servicing costs is really remarkable. And that’s a testament to the system that we have. We continue to identify efficiencies. And I look at, you know, the opportunities and they’re plentiful. I think first and foremost, we need to focus on continuing to drive down the costs. And we need to continue to optimize our investment in servicing.
Furthermore, I think Dan, with that, we have a competitive advantage and they’ll allow us to, increase our production capabilities in the organization. And that will be vitally important. But I think as it pertains to SSE, the next logical step is subservicing. And we need to expand beyond PMT. And there’s some real opportunities there in soliciting correspondent sellers who maintain smaller servicing portfolios. I think that there are banks and other large servicers, who perhaps want to get out of servicing, but clearly our success on SSE, compared to other offerings in the marketplace is being noticed. And I think that that’s a very, I think that’s a great selling point for us. We’re also, having good conversations with technologists and other innovative parties in the industry, interesting in building on our technology, and working with us to get the technology out into the marketplace.
