David Spector: Hey, Kevin, it’s David. Look, I think that we’ve brought a little bit of CAS and STACR in the third quarter. And we bought $58 million in sub bonds, albeit it’s not really credit because we’re buying more I would say, at the top of the credit stack. But suffice it to say, I think that given what we’re seeing with the capital regs that have come up for banks, I expect there will be more securitization. Out of that, I’m hopeful that we’ll see opportunities for PMT. PMT is really positioned well. We do see an increased amount of securitization. And I think there’s going to be potential for jumbo securitization. And I think that right now, for all the [closed end] second production is being done in PFSI, that product is being sold [indiscernible], but others are securitizing that, albeit at returns that are – that don’t meet PMT’s minimum return.
But ultimately, I can see there being an opportunity for securitization of closed end seconds where there is a retained investment for PMT.
Daniel Perotti: Another factor that’s sort of important to note that we called out this quarter, is just – if you look at our current investments in the mortgage servicing rights and the GSE credit risk transfer, which 50% and 15% of our shareholders’ equity together 65%. Those are all based in very low note rate – have very low note rate borrowers underlying those investments. They’re running off very slowly for that reason, and they both have very strong credit characteristics of the underlying borrowers to drive them. And so as we are waiting for some of these other trends to develop or we’re seeing some of these other trends develop, we have this really strong base of assets that is running off at a slow rate that we expect to perform really well over time.
Kevin Barker: So ideally, over the long-term, how would you want PMT’s balance sheet structured from an equity investment standpoint, credit sensitive strategies versus interest rate sensitive strategy.
David Spector: I don’t – Kevin, I think that we always optimize for is return on equity. So I always start there. We’ve – the 50% mortgage servicing rights is higher than we’d like. Now albeit some of that – a lot of that is because of the write-up of the asset. And I think if you saw a rate decline, you would see it get much more in line or much closer to where the credit risk is. I think all things being equal, if returns are identical to one another, then you could say, okay, maybe a 50-50 split – but I think the ROE is always going to be the driving factor. And then the ongoing – if we can find the investment that is ongoing when we’re creating franchise value for PMT as well as we saw going all the way back to NPLs or then followed on by the CRT we did from 2015 to 2020, that’s something that we would definitely be supportive of.
But as you know, I think that suffice it to say, right now, we see the 50%, 15% split between mortgage servicing rights and CRT as one that we’d like to get a little bit more in balance.
Kevin Barker: Okay, great. Thank you
Operator: [Operator Instructions] Your next question comes from the line of Eric Hagen from BTIG. Please go ahead.
Eric Hagen: Hey, again, how are you doing? Just a question around risk management and managing just rate risk and leverage and such. How much more MBS do you think you need to maybe add to the portfolio for given an increase in the MSR portfolio from here? Like are there levels of spreads for – on the MBS side where you can – it looks to get more aggressive there and even raise leverage? And how much room do you have to raise leverage in that portfolio?
