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Home Loan Servicing Solutions Ltd. (NASDAQ:HLSS)

Q1 2013 Earnings Call

April 18, 2013 11:00 AM ET

Executives

Jim Lauter – SVP and CFO

Bill Erbey – Chairman

John van Vlack – President

Analysts

Bose George – KBW

Mark DeVries – Barclays

Adam Letson – Piper Jaffray

Ken Bruce – Bank of America Merrill Lynch

Stephen Laws – Deutsche Bank

Vik Agarwal – Wells Fargo Securities

Henry Coffey – Sterne, Agee

Jackie Earle – Compass Point

Operator

Welcome to the HLSS First Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator Instructions) Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to Mr. Jim Lauter. You may begin.

Jim Lauter

Thank you very much. Good morning, everybody, and thank you for joining us today. My name is Jim Lauter, and I’m the Chief Financial Officer of Home Loan Servicing Solutions or HLSS.

Before we begin, I want to remind you that a slide presentation is available to accompany our remarks. To access the slides, go to our website at www.hlss.com, select Shareholders, then select Events and Presentations, click on Listen to the Webcast and register. When done, click on Access Event, click on how you wish to listen to the event. Each viewer will be able to control the progression of the slides during the presentation. To move the slides ahead, please click on the gray button at the bottom of the page pointing to the right.

As indicated on slide two, our presentation may contain certain forward-looking statements pursuant to the Safe Harbor provisions of the federal securities laws. These forward-looking statements may be identified by reference to a future period or by the use of forward-looking terminology. They may involve risks and uncertainties that could cause the company’s actual results to differ materially from the results discussed in the forward-looking statements.

For an elaboration of the factors that may cause such a difference, please refer to the risks disclosure statement in today’s earnings release, as well as the company’s filings with the Securities and Exchange Commission, including our 2012 Form 10-K and our first quarter 2013 Form 10-Q, which will be filed later today. If you would like to receive our news releases, SEC filings and other materials via e-mail, please register on the Shareholders page of our website using the e-mail alerts button.

Our presentation also contains references to non-GAAP financial measures. We believe these non-GAAP performance measures may provide additional meaningful comparisons between our reported results and how we internally manage our business. Non-GAAP performance measures should be viewed in addition to, and not as an alternative for, the company’s reported results under accounting principles generally accepted in the United States.

As indicted on slide three, joining me for today’s discussions are Bill Erbey, Chairman of HLSS; and John van Vlack, President.

Now, I’ll turn the call over to Bill Erbey, Bill?

Bill Erbey

Thank you, Jim. It’s a pleasure to share with you HLSS’ results from the first quarter of 2013. During its first full year of operations, HLSS accomplished its goal of providing its shareholders with solid earnings and dividends that are particularly attractive given the stable valuation and low risk of its assets.

Slide four lists a few of the highlights for the first quarter. The company earned net income of $28.4 million or $0.44 per share, which was in line with guidance after adjusting for lower than expected prepayments fees and the timing of the flow purchase from Ocwen. Increased its dividends from $0.12 to $0.13 per month for February and March, and announced an increase of another $0.01 per month today.

Executed another benchmark financing in the ABS market and grew its portfolio to $92.5 billion of unpaid principle balance, with a $15.9 billion UPB flow acquisition in March. For those of you who recall the company’s IPO just over a year ago, consider the initial acquisition, as the first purchase was called, of $15.2 billion of UPB was smaller than the March flow purchase of $15.9 billion of UPB.

The growth of the company, the stability of its asset valuations, and the earnings visibility gives me confidence that HLSS will continue to deliver the level of performance we have seen to date.

Part of the reason for my confidence in HLSS’ earnings is my view that non-agency prepayments fees will remain subdued. When we formed HLSS, we assumed prepayments fees, for this non-agency mortgage portfolio would be 15% annually, which was in line with the recent history, yet somewhat conservative relative to our outlook.

Since that time mortgage rates have fallen to record lows and home prices have rebounded somewhat. Hence the prepayment rate has decreased from last year’s pace. This is consistent with our belief that there was no correlation between interest rates and prepayment rates for non-agency mortgages.

There are many reasons for the low non-agency prepayments fees. But one significant contributor is the underwriting practices that have made it harder for borrowers, especially credit-challenged borrowers to qualify for a new mortgage. But voluntary prepayments remained stable, the reduction in total prepayments that we have seen since the middle of last year has been driven by a reduction in involuntary prepayments.

While lengthening foreclosure timelines has been a factor, the longer-term driver of this reduction is Ocwen’s industry-leading resolution rates. In recognition of the company’s strong and stable earnings outlook and objective to pay out at least 90% of earnings over time, the HLSS Board of Directors increased the monthly dividend to $0.14 per share for the second quarter.

Now, I’ll turn the call over to John van Vlack, who will speak to the company’s first quarter results in more detail. John?

John van Vlack

Thank you, Bill. We continue to execute on our business plan in the first quarter and are pleased with the results and the scale we have achieved. Having achieved the scale that allows us to efficiently finance our assets, we feel we can be opportunistic in future financing transactions. Another benefit of scale is our operating expense ratio declined to 0.2% of assets under management in the first quarter or 0.15% after netting out expenses shared with Ocwen.

With respect to our assets, slide five provides an update and you will see little change in the composition this quarter. The $4.1 billion of total assets that we owned on March 31 were collateralized by $92.5 billion of unpaid principal balance of mortgage loan service. 90% of assets were cash for servicing advances which have no credit risk, given the overcollateralization and no mark-to-market risk under GAAP accounting.

The remaining 10% were comprised of non-agency rights to MSRs, which benefits from the same overcollateralization and as Bill mentioned, continue to experience no correlation between interest rates and prepayments fees.

Slide six provides an update of our financing terms. Our first quarter effective interest rate of 2.76% was very close to our prior projection and the second quarter forecast of 2.5% has not changed. With the March flow purchase, our variable funding note utilization is up and we are positioned for an ABS offering that will allow us to further extend the duration of our match funded liabilities.

ABS term notes allow us to closely match the maturity of our liabilities with the maturity of our assets and has the benefit of locking in borrowing capacity, spreads and the LIBOR component of our borrowing costs.

Our financing of the larger than normal $15.9 billion flow purchase in March, highlights the progress we have made optimizing our balance sheet. The starting point for funding flow purchases is always cash generated available for reinvestment, which after the dividend, contributed $65.9 million in the first quarter.

Added to that was $17.6 million from the exercise of the underwriters over-allotment from our December 24 equity offering. We also benefited from a 2 percentage point increase in the effective advance rate at our match funded liabilities during the first quarter. Part of this increase was from higher advance rates from S&P on the $1.15 billion of ABS notes issued in January and the rest was attributable to higher advance rates on the assets we purchased in March, which is attributable to the characteristics of these assets.

Slide seven is our retained fee curve that depicts the economic split with Ocwen for the assets we own, updated to reflect the assets acquired in the March flow purchase. At a high level, we established our retained fee on each asset purchase by calculating how much of the servicing fee HLSS needs to retain in order to cover our interest expense, amortization, operating cost and to maintain our earnings yield.

The retained fee on assets acquired in the March flow purchase was somewhat higher than the previous average because the MSR purchase price at 63 basis points exceeded the previous 40 basis point average. This higher purchase price reflects the average servicing fee of 63 basis points, which exceeds the 50 basis point average of the previous purchases. The retained fee on the March flow purchase was negotiated to provide a yield in excess of 8% on the equity deployed.

First quarter performance on the advance ratio, which is the advances divided by UPB, was strong, with the actual ratio exceeding the target by 1/100 of a percentage point.

As results of the prepayment trends Bill discussed earlier, we’ve revised our estimate of the benchmark annual prepayment rate for the HLSS portfolio from 15% to 13.5%. Taking into account the flow purchase and the new benchmark CPR of 13.5%, we expect to earn in the range of $0.45 to $0.46 per share in the second quarter. This will result in a payout ratio in the low 90% range, against our increased dividend.

Now, I’d like to turn the call over to Jim Lauter, who’ll walk through our income statement and cash flow.

Jim Lauter

Thank you, John. Slide eight shows our first quarter earnings and our management reporting format. Servicing revenue for the quarter was $102.3 million or 50 basis points of average UPB serviced. Subservicing fees were $27.1 million or 23 basis points, leaving us with 27 basis points of retained fee from which to – from which to pay our operating expenses and provide a return to our shareholders.

For the first quarter, the incentive portion of the subservicing fee paid to Ocwen was 74% of the total, which is important because this could be reduced as advances over-exceed the target.

Interest expense was $18.2 million or 9 basis points of UPB, down from 10 basis points in the fourth quarter as a result of the successful January ABS term note issuance. Continued lower prepayments resulted in amortization expense remaining flat versus the fourth quarter of last year, at 5 basis points or $10.6 million for the first quarter. Net income was $24.8 million or 12 basis points.

Slide nine is a graphical depiction of our cash available for reinvestment, which starts with our net income and then adds back non-cash amortization and changes in other assets. Advances declined by $307 million for the quarter, which combined with an improvement in our overall advance borrowing rate in the latest ABS offering, resulted in a recovery of our equity investment and advances of $50.3 million. Cash generated available for distribution exceeded dividends declared of $21.6 million by 4 times. After deducting dividends, we had almost $66 million of cash available for reinvestment, which contributed much of the cash used in the March flow purchase.

We expect to continue to generate significant cash in excess of our dividend. After Ocwen’s recently completed acquisitions of ResCap and Homeward, over $100 billion of UPB of similar assets remain available for purchase.

I’ll now hand it back to Bill for one final slide before we take questions. Bill?

Bill Erbey

Thank you, Jim. We introduced slide 10 last quarter and since it generated some interest, we thought we’d update it for this quarter. It compares the yield on our equity against that of our BBB-rated debt.

For you to compare it with a version from last quarter, you’d see that the yield on the most junior ABS notes has traded down to less than 3%. Since the last earnings call, the stock price is up, however, once again, it has been offset by higher earnings.

As you heard me say before, we believe that our required yield will decline as investors come to recognize the attractive risk adjusted returns HLSS offers. Earnings yield today of 8% is still close to where we were at the IPO. I believe more now than ever, that it is – there is substantial room for earnings yield to trade down, as the market starts to recognize the value of our equity relative to our debt.

I’d now like to turn the call open to questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Please standby for our first question. Our first question is from Bose George with KBW. Your line is open.

Bose George – KBW

Hi, guys. Good morning. I think you gave this in your 10-Q, but I was wondering if you had the number handy for the amortization of debt issuance cost. And also just where that would trend over time just given the – the different ways you’re funding, et cetera?

John van Vlack

So Jim is looking through his records to see if we can put our hands on that number. In terms of the outlook for debt issuance cost, there were some expenses that were incurred in moving the Homeward facility over at the time of the IPO. And so there’ll be some downtrend, we think, in the amortization costs after August of 2013, when those original variable funding notes that funded our advances expire.

Bose George – KBW

Okay. And then the Homeward amortization piece, so that’s the one that will continue, is that right?

John van Vlack

That’s right. So in the first quarter, we had $3.1 million of expense, which was amortization of debt issuance cost that would’ve included facility fees, rating fees and legal expenses.

Bose George – KBW

Okay. I mean, is there any way to kind of directionally say how much of that would go away, say, in the fourth quarter – by the fourth quarter of this year?

John van Vlack

Well, I think on the last call, I had made a prediction that based on the continuation of current trends in the ABS market and the reduction in the amortization of debt issuance costs that we could have an overall effective interest rate in the range of 2%.

Bose George – KBW

Okay, great. Thanks. And then just, in terms of the G&A, is the $2 million run rate that you did this quarter a good run rate for the rest of the year?

John van Vlack

I think there weren’t any unusual transactions, so I would say yes.

Bose George – KBW

Okay, thanks. And then just one last thing in terms of your – the dividend at HLSS has, I guess, stabilized at around 7% or I guess it’s up a little bit now with the higher dividend. But are you guys going to sort of revisit the target range in terms of your return as you do future deals with Ocwen?

John van Vlack

Well, at this point, we’re focusing on the earnings yield as opposed to dividend yield and that’s what we’ve used to – in negotiating the split of the servicing fee with Ocwen. And until we see a significant movement there, we have not raised that question. But in theory, if we achieve what we expect then there could be some future benefit to Ocwen in the form of a lower cost of capital. But as of now, that has not occurred.

Bose George – KBW

Okay, great. Thanks, nice job this quarter.

John van Vlack

Thank you, Bose.

Operator

Our next question is from Mark DeVries with Barclays. Your line is open.

Mark DeVries – Barclays

Thanks. I just wanted to clarify, John, did you indicate you expect earnings of $0.45 to $0.47 in the next quarter? Did I hear that correctly?

John van Vlack

$0.45 to $0.46 was the range that we projected.

Mark DeVries – Barclays

And is that assuming your new 13.5% CPR assumption in that range?

John van Vlack

Yeah.

Mark DeVries – Barclays

Okay. So theoretically, if you had another 12.7% realized CPR that would imply outside your reach?

John van Vlack

Yeah, that’s right. The earnings impact, the difference between the 12.7% that we achieved in Q1 versus the 13.5%, it’s almost $0.015 of additional amortization.

Mark DeVries – Barclays

Okay. And then...

John van Vlack

That had been subtracted.

Mark DeVries – Barclays

Okay, great. And given the strong fundamentals in the housing market and the impact that’s likely to have on kind of your involuntary CPRs, I mean is it fair to assume that that’s likely to go – trend down more than it is, so it’s a trend up from here?

John van Vlack

Well, the involuntary CPR, we do see that trending down and that really is due to the resolution rates. And so I think the resolution rates that we’re seeing through Ocwen’s servicing are below the industry average. But I think there is an improving trend across the non-agency spectrum.

Mark DeVries – Barclays

Okay. And just one last thing, do you expect future portfolio acquisitions will be priced assuming this new 13.5% CPR?

John van Vlack

Yes, we would.

Mark DeVries – Barclays

Okay, great.

John van Vlack

There’s not anything – there are no characteristics of the assets that would cause the new portfolio to differ from what we were seeing in the existing portfolio.

Mark DeVries – Barclays

Got it. Thanks.

Operator

Our next question is from Adam Letson with Piper Jaffray. Your line is open.

Adam Letson – Piper Jaffray

Thanks guys for taking my question. The first one, just on the $15.9 billion flow deal, can you give us a sense for how much you paid for the MSR, and then kind of what the net capital invested was?

John van Vlack

I think the MSR was right at $100 million, is that correct, Jim? And then the advances would have made up the remainder. And so the total – the total purchase price was $150 million. There will be a full disclosure of this in our 10-Q, which we would anticipate filing later today.

Adam Letson – Piper Jaffray

Great, great. And then, obviously, $15.9 billion in a flow deal, that’s a lot larger than anything you did last year. How can we kind of think about that going forward and kind of the scale you can add without adding new equity?

John van Vlack

The flow purchases will be smaller going forward, there were a couple of unique things this quarter. When we ended the year last year, we had $33 million of fully collateralized borrowing capacity. And so that gave us a leg up, we had the $70 million of proceeds from the underwriters over-allotment. And then, we had some lift to the overall advance rate, that totaled up to 2 percentage points, as I mentioned. And then there was another contributor, which is that in order to get tax accessibility for the – all of the expenses that we incurred in 2012 for the purposes of the PFIC Statement, we accelerated certain payments. And so that provided some additional cash this quarter. So many of those factors that I mentioned are not repeatable. What is repeatable, though, is the cash generated available for reinvestment.

Adam Letson – Piper Jaffray

Great. Thanks, guys and congrats on the continued progress.

John van Vlack

Thanks.

Operator

Our next question is from Ken Bruce with Bank of America Merrill Lynch. Your line is open.

Ken Bruce – Bank of America Merrill Lynch

Thank you, good morning. My first question is, you mentioned in the press release and in your remarks that part of your confidence around the prepayment speed expectations is the continued success at Ocwen for resolving delinquent loans. Could you – I guess, just to make sure – I want to make sure I understand what is that dynamic between Ocwen’s success on resolving delinquent loans and the prepayments space?

John van Vlack

Well clearly, when the overall prepayment rate is less, both HLSS and Ocwen benefit from that. So we get to earn the servicing fee over a longer period of time on the asset that we own. And Ocwen earns their subservicing fee over a longer period of time. So the incentive there, I think, are perfectly aligned. I think the way that you would look at this success is looking at the CPR for our portfolio versus like non-agency portfolios. And so I think you would see that on Ocwen’s service portfolio, there’s a lower CPR historically, and that has continued or accelerated.

Ken Bruce – Bank of America Merrill Lynch

Okay. And just to, I guess, elaborate on that, you had pointed out in your comments, or I believe Bill pointed out in his comments that part of this is being driven by the lack of access to capital or borrowings to these borrowers that are credit-impaired. And I guess, looking forward, what level of home price appreciation might you think that that would kind of resolve some of the – some of that lack of access to capital or over a period of time as credit cure, is there a natural kind of sunset as to these borrowers’ ability to access new borrowing?

Bill Erbey

Let me try that if I might. If anything, the trend is going the other directions. With the qualified mortgages being recently announced, it makes it extremely questionable as to whether even the existing block of borrowers could actually get a new mortgage.

And just recently published a study that says they believe that the number of people that could refinance today has been cut in half by QM. So the current trend is for a rep – a further heightening of credit standards in order for one to get a new mortgage. So I think it’s going – going in the direction that it will even further reduce voluntary prepayments for a considerable period of time.

Ken Bruce – Bank of America Merrill Lynch

Right.

Bill Erbey

Home prices are not the drivers, it’s the fact you can’t pass the debt to income test and the down payment.

Ken Bruce – Bank of America Merrill Lynch

Right, right.

Bill Erbey

It’s what’s driving it.

Ken Bruce – Bank of America Merrill Lynch

So despite home prices maybe being up, just a lack of access to capital or borrowing for these borrowers reflect their – essentially are going to impair their ability to turn over from one house to the next. And I think I understand that aspect. Even I would agree that QM has obviously made that harder not better.

There’s been a lot of movement in securitization markets and discussion around what the post-QM world might look like. And obviously, we still need to – and to decide before I think that ultimately is going to work out by the market, but do you see anything that is – I don’t want to say worrisome, but is there something that we can look to, to see if credit markets begin to open up that, that might become a bigger issue for HLSS? Is there any way to think about that?

Bill Erbey

Well, I mean obviously from the standpoint of – if credit markets were to open up, that would actually create an opportunity for more – for slightly more voluntary prepayments. But keep in mind, these people never prepay dramatically, even when the credit markets were open. They’re more cash-driven than interest-rate-driven, i.e., availability has always been the case in the non-prime market. And it would have to open up pretty substantially.

What QM has done is essentially created a discontinuity in the ability of people to finance. It’s raised the standard of – it’s raised the bar significantly for existing people who could refinance, right? And if you have to go away from an agency product and still be able to go on to the 43% debt to income ratio, there’s going to be a gap there because the non-agency market will require a higher return on equity and have slightly lower leverage.

So I don’t think, at least in the near-term, in the next year or two certainly, you’re going to see greater access to refinance for these borrowers, you’re going to see far less. Now we’re certainly trying to think about ways of – people are certainly thinking about ways of trying to open up the capital markets, but there’s been a – I don’t see a material increase.

Your voluntary is a small fraction of the total prepayment anyway. So if you’re going to focus on prepayments in this market, you need to focus on involuntary – and involuntary, which, if you’re proposing an increase in home prices that would trigger this, I think you get a far greater decline in involuntary than you would an increase in voluntary.

Ken Bruce – Bank of America Merrill Lynch

Okay, great. Thank you very much for that commentary. I appreciate it. Good quarter.

John van Vlack

Thank you.

Operator

Our next question is from Stephen Laws with Deutsche Bank. Your line is open.

Stephen Laws – Deutsche Bank

Hi, good morning and congratulations on a great quarter. Most of my questions have been hit on. I guess maybe just from a future acquisition standpoint, is it likely to remain just for flow purchases or how do you guys take into consideration a larger purchase by issuing, by raising the capital? And if the latter, should we expect it to continue to be common stock issuance or would you look at other ways to raise new capital?

John van Vlack

I think there are couple of questions embedded there. So we continue to generate cash in excess of the dividend. So you can certainly look forward to more flow purchases. And in a quarter where we issue equity, we generally would combine the cash flow from operations, and have one purchase, where we would deploy the proceeds of the equity as well as the cash generated in a single purchase.

We generally don’t announce transactions prior to their occurrence, so I can’t really provide guidance there. But with respect to the part of your question about other options to fund the growth in our business beyond equity, there certainly are some emerging still possibilities in the credit markets that we continue to evaluate. But again, I can’t provide any specific guidance on that.

Stephen Laws – Deutsche Bank

Okay. I appreciate the color there. And then maybe a follow-up to the cash flow that’s generated in excess of the dividend on a quarterly basis. It looks like a significant amount, $50 million roughly from a decrease in advanced haircut is the advance ratio decline. Then as slide seven shows clearly, expectation of continued, give or take 20 basis points declines per quarter. But how should we look at that? Is $50 million roughly a good number? Clearly that advance ratio is going to move around a little bit. But was this a bigger quarter of generating cash flow there or about normal?

Jim Lauter

Yes, Steven, that $50 million that you mentioned is really purely due to the decline in the advances. And then there was about $15 million improvement in the advanced borrowing rate. So I think that’s a pretty good number going forward.

John van Vlack

So the normal number would have been $35 million for the decline. The cash freed up from just the decline in the advances without the change in the borrowing rate.

Stephen Laws – Deutsche Bank

Okay, great. That’s helpful and again you guys have already covered my other questions. So thanks for the time and congrats.

John van Vlack

Thanks.

Operator

Our next question is from the Vik Agarwal with Wells Fargo Securities. Your line is open.

Vik Agarwal – Wells Fargo Securities

Good morning, guys. My questions have been answered and thanks.

Bill Erbey

Thank you.

Operator

Our next question is from Henry Coffey with Sterne, Agee. Your line is open.

Henry Coffey – Sterne, Agee

Good morning, everyone and let me add my congratulations. Just a stupid question, I just want to make sure I have it right, because of the lower advance rate on the new facility, you were able to – I heard you say it, but it’s $35 million, is the number?

Jim Lauter

That’s right.

Henry Coffey – Sterne, Agee

Of sort of cash that, that have freed up for you?

John van Vlack

$35 million is what the decreases in the advanced haircut would have been if there was no change in the overall borrowing rate. So this is in reference to slide nine, the bar, the $50.34 million would have been $35 million. So I think the purpose of offering up that number is to help investors size future flow purchases...

Henry Coffey – Sterne, Agee

So on a sort of a pro forma basis with the new facility in place, you’d be freeing up approximately $35 million in cash.

Jim Lauter

Yes.

Henry Coffey – Sterne, Agee

That you could reinvest in new deals, is that correct? I just want to make sure I get it right.

Jim Lauter

That’s correct, Henry.

Henry Coffey – Sterne, Agee

Longer term, you’ve identified about $100 billion of sort of future potential acquisitions. I think I’m a little more optimistic. I think ultimately policymakers will let – open up the door to at least non-prime issuance if not sub-prime issuance, but we’ll have to wait and see.

What sort of opportunities are on the long-term horizon in addition to buying sub-prime servicing, is there other opportunities in the Ginnie Mae market that you should be looking – you might be looking at? Are there related opportunities or do you think that HLSS’ mission will be strictly to focus on this one asset class?

John van Vlack

I think what we would look for in additional asset classes would be, no credit risk and little to no mark-to-market risk. So I think there may be a way to structure the purchase of Ginnie Mae buyback loans and agency advances in a way that would meet our mission to our investors.

But I also think that there – though there are potential non-agency acquisitions that we really – we really can’t comment on, that could increase Ocwen’s portfolio over time. And so that will be more appropriate for a discussion of Ocwen’s pipeline, which we can’t do here.

Henry Coffey – Sterne, Agee

Yeah. Well, that’s very helpful. Thank you very much.

Operator

Our next question is from Jackie Earle with Compass Point. Your line is open.

Jackie Earle – Compass Point

Good morning, guys, and thanks for taking the question. Most of mine had been answered, but one that I still have, are there any new thoughts about your willingness or discussions to work with servicers other than Ocwen?

John van Vlack

We certainly are open to that prospect. The contract with Ocwen is not exclusive, and we would need to be very comfortable with the – any new servicers as a counterparty, but that certainly is not something we would consider. Ocwen has kept us pretty busy up until now, but that remains a distinct possibility.

Jackie Earle – Compass Point

So you still see plenty of opportunity at Ocwen right now?

John van Vlack

We do.

Jackie Earle – Compass Point

Okay. And then, just a simple question. I’m not sure, if I missed this. I think it was in your last presentation about the book value for the quarter, did you guys leave that for this quarter?

John van Vlack

Yes, it was – the book value was up about $0.10. So it was a – like a one – and you can look at the actual financial statements in the Q as I mentioned will be out earlier – out soon – what we earned in excess of our dividend during the quarter and there was a favorable hedge revision. So I think the book value was $15.86, I think was the number.

Jackie Earle – Compass Point

Okay, okay.

John van Vlack

But I can calculate that.

Jackie Earle – Compass Point

Thank you so much. Thanks for taking the questions.

Operator

Our next question is from Bose George with KBW. Your line is open.

Bose George – KBW

Yes, thanks. Just wanted to clarify a statement you made earlier. Did you say that if prepayments came in at 12.7% versus your benchmark of 13.5%, there’s $0.015 of upside to your guidance, is that...?

John van Vlack

Yes. I think that’s about right. A little less than $0.015.

Bose George – KBW

Okay, great. Thanks.

Operator

At this time, I’m showing no further questions.

Bill Erbey

Thank you, everyone. Have a great day.

John van Vlack

Thanks.

Operator

Thank you for participating in the conference. The conference has now concluded. You may disconnect at this time.

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