Bose George: Okay. Great. Makes sense. And then actually just switching over a follow-up on the MSR hedging question from earlier, you noted that you’re going to run a tighter hedge ratio, I think you said 100% last quarter on the call. if volatility abates, I mean, should we have a sort of a more match sort of hedge result, assuming we don’t see sort of a big pickup in prepayments?
Dan Perotti: So in the first quarter, so I said we are seeking to manage to a bit of a tighter hedge ratio. What we’ve seen so far in the first quarter, again, a fair amount of volatility and an inverted yield curve, both of which are negative in terms of our hedge costs. And as we continue to get further down into lower territory with a higher percentage of our portfolio and higher mortgage rates won’t necessarily be hedging quite as close to 100%. In the fourth quarter, we were at 80%, so I think you could expect us to be — we won’t necessarily be right at 100% in terms of our hedge ratio, still higher than we’ve been historically, but in terms of the cost and where the portfolio is positioned a little bit of potential for some differences between the MSR and hedge in the first quarter.
Operator: Our next question comes to the line of Mark DeVries with Deutsche Bank.
Mark DeVries: First, a question for Dan on the margin. I heard you comment on the quarter-over-quarter decline in margin in broker direct being attributable to the fallout effect. Didn’t hear whether you commented on the decline in consumer direct. Was it the same fallout effect? Or is there something else that pushed the gain sale level in consumer direct?
Dan Perotti: Sure. In consumer direct, really what was influencing the margin there is a shift toward more refinances as opposed to second lien origination. So second lien originations have a smaller balance. And so on a per unit basis, although the dollars of revenue per loan for a refinance is higher, the basis points are lower because the loan size is larger. So it really — that’s really what’s driving the margin decline in basis points from Q3 to Q4. is given the interest rate rally that we saw toward the end of Q4, we started seeing a pickup repo and react. And we’ve seen that continue here in the first quarter, with a further decline in interest rates. But it’s really — on a unit basis, actually, we’re seeing the revenue per unit go up. But on a basis points basis, we’re seeing those declines.
Mark DeVries: Okay. Got it. And then a follow-up for David on the new opportunities around your servicing platform. How do you think about the trade-offs between potentially sharing a source of competitive advantage with competitors versus the incremental revenue that you might be able to generate off of that?
David Spector: Look, I think — but from our perspective, these are all the questions we’re asking ourselves as we come out of the litigation. I think that there is demand in the marketplace for more competition. It’s not good or healthy for the industry to have reliance on any one person. And given the market share of the leader out there, there are many in the industry who share my point of view. I think from our perspective, we have to answer that question from an economic value. We best served by continuing to maintain the competitive advantage that we’re seeing in our servicing platform and in terms of driving down costs and increasing productivity versus what we can get by other means. But as I said earlier, this is very early on in the whole process, and this is something that we’re going to we’re working already on it, and this is something that we’re just going to continue to work on. And as we always do, we’re going to get to the right place.
Operator: Our next question comes from the line of Kyle Joseph with Jefferies.
Kyle Joseph: Yes. Just want to pick your brain a little bit more on the correspondent channel. So the number of sellers obviously went down, but what do you see that doing to margins over time? Obviously, that impacts supply, not necessarily demand. But, we’re just curious to get your thoughts on how that impacts your margins in that segment?
David Spector: Yes. I don’t think it’s really any impact on margins. It’s really sellers who weren’t selling us a lot of a lot of loans, and we weren’t active in the marketplace. I think margins are — margins have been pretty stable over the past couple of quarters. And even in January with volumes down, we’re seeing margins stable, albeit they’re up very nicely from where they were a year ago. Look, I think that, of course, we always like higher margins, and we’re I always remind you people to get more margin. But I think that Doug and Abby and the team do just a phenomenal job continuing to support the operation in terms of the value proposition that they provide to our correspondent sellers. And look, we’re on where loan prices are today, sellers can’t really can’t afford to keep servicing.
And so a lot of the alternative execution over the years has been to the GSE’s cash window where they would either retain the servicing for a lengthy period of time or ultimately sell it. And so I think we’re getting more loans coming in through the whole loan channel. And as I said, there’s just a natural flight to quality when you see a marketplace where there’s — where you have people going in and out and you got people getting out of the business. And we’ve been at this every day since we got into it almost 15 years ago. And it’s something that gives us a halo effect in correspondent and it allows us to maintain both margin and share.
Kyle Joseph: Got it. Very helpful. And then on just expenses, the outlook for ’24. Obviously, you guys have been doing a good job of getting more efficient in a tough market, but would you expect those to kind of stay in parallel with volumes? Or how much variability is there in that line item — sorry, particularly on the production segment.
Dan Perotti: On the Production segment, to your point, we did a lot of our work even going back to ’22 in terms of bringing down the expense base. That served us really well. in ’23. As David noted on the production side, we actually had higher pretax income in the production segment in ’23 than we did in ’22, and that was really due to getting our expense base rightsized. As we — in most of the rest of the business, if we’re talking about sort of the core functionality, the corporate and shared services as well as the servicing side. We expect those to be fairly stable as the servicing portfolio grows. There will be some additional expense but to the extent that we see the sort of soft landing and not significant increases in delinquencies, we expect those to grow really relatively slightly given some of the efficiencies that we have in that business and on the corporate side to be very contained.
