Rithm Capital Corp. (RITM) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the New Residential Market Update Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Kaitlyn Mauritz, Investor Relations. Thank you. Please go ahead.

Thank you, Lisa, and good morning, everyone. I'd like to welcome you today to New Residential's update call. Joining me here today are Michael Nierenberg, Chairman, CEO and President; and Nick Santoro, our Chief Financial Officer. Before I turn the call over to Michael, I'd like to point out that certain statements made today will be forward-looking statements. These statements, by their nature, are uncertain and may differ materially from actual results. I encourage you to review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we'll be discussing some non-GAAP financial measures during today's call. A reconciliation of these measures to the most directly comparable GAAP measures can also be found on our website. And with that, I'll turn the call over to Michael.

Thanks, Kait. Thanks, everyone -- good morning -- for jumping on the call. We thought based on the volatility we're seeing in the markets, it would be helpful to jump on a call, give you some thoughts and some color on both the markets and our company. As many of you saw yesterday, the mortgage REIT sector got clobbered and for the most part, I think, mortgage REITs are trading down as a result of liquidity concerns and leverage. And we see this from time to time when the markets get truly dislocated. The recent moves by the Fed to flood the markets with large-scale repo operations and yesterday, they announced that the buying treasuries, has truly helped and will help squash concerns around funding. So funding is really for us in this space is not an issue. This should also help the market to trade better, particularly in issues that are sitting on bank balance sheets like off-the-run treasuries and other things like that. Obviously, the banks have seen very large corporations, such as Boeing, draw down on their liquidity facilities and that's also created some fear in the market. So really for the mortgage market, the thing that we're missing, quite frankly, at this point is whether or not the Fed comes in and announces that they'll be buying mortgages. If we do get that, the agency mortgage market should stabilize and that should provide a floor on prices, I think, on many of the mortgage REIT stocks. I will say, today, the mortgage basis and it's doing much better this morning. The mortgage basis is at the widest levels we saw since the financial crisis. So there's a lot of value there. For us at NRZ, we're focused on 3 things right now. One, liquidity; two, book value and three, earnings. And I could tell you on this call right now, that we could check the box in all three. We have plenty of liquidity, our book value is very stable, and we project our core earnings to far surpass our stated dividend. Now I'm not going to give you a -- I'm not going to discuss what we're doing with our dividend, but I'm just giving you some thoughts and some color on our company. On leverage, our leverage ratios for our company, including our agency mortgage position, which we use to hedge our mortgage servicing rights is 4.3:1. If we didn't have our agency mortgages and we do or if we decided to sell them, our leverage ratios go to 2.5:1 on a balance sheet. So here's a quick snapshot as to where we stand. A little bit of color for the quarter. On our MSR book, we anticipate a large market in the vicinity of $500 million right now. As I stated earlier, that book is hedged with agency mortgages and we've been, quite frankly, we've been fortunate because we're very short at the mortgage basis, which has helped us tremendously. Mortgage rates, which began the year at 3.80% have only fallen by about 21 basis points. So being short at the mortgage basis against our MSR book has helped us a lot. On our own MSRs we estimate, right now, based on current mortgage rates that only 21% or actually, give or take, 25% of our homeowners have a mortgage payment based on today's rates that is only lower by $100. So that's kind of one of the metrics we use, will engage how refinanceable our entire book is. On the mortgage company, our mortgage company, NewRez. We're expecting a quarterly result of something between $125 million and $150 million. I want to put this into context for you. Based on our dividend that we've been paying of $208 million, the amount of money being generated by our mortgage company has helped us tremendously with both book value and core earnings. On financing counterparties, we have approximately 25 to 30 different counterparties, active ones. During the quarter, with the Fed cutting rates, and they have a meeting next week and likely going to cut rates again. We've lowered our cost of funds and all of our financings by $8 million. We project this number to increase to $40 million on a go-forward basis. As far as our counterparties and funding, as I pointed out earlier in the call, everything has been orderly, and we expect the markets, based in all of their liquidity being injected into the system by the Fed, to operate in an orderly fashion. On our MSR financing, 58% is currently term financed in the capital markets. And by the end of Q2, we expect our capital markets funding and MSRs to be approximately 85%. On our entire book, we'll continue to term out as much financing as possible. So overall, the markets are really difficult, hard to look at screens every day, but our company is in great shape. We'll continue to execute on our core business lines and do all we can to provide shareholder value. I'll now turn it to the operator because I'm sure we have a ton of questions and we'll open it up for Q&A.

[Operator Instructions] And our first question today comes from the line of Tim Hayes from B. Riley FBR.

I have my first one here, and I just want to clarify, that $125 million to $150 million. Was that -- I missed that. What exactly was that number?

That's from the mortgage company, NewRez.

Is that earnings? Core earnings?

Earnings -- core earnings.

Got you. Would you be able [Technical Difficulty] update on originations and what you're seeing with recapture so far?

On originations the large bulk of our earnings are coming from origination. On recapture, I think our recapture numbers have been pretty steady. We're not seeing a huge increase just based on the volumes that we're seeing in the marketplace, and quite frankly, capacity issues. We announced a couple of hires recently, which I think are going to help along that front and adding personnel on the recapture side. We hired a new Chief Marketing Officer, but quite frankly, we have a lot of work to do on the recapture side. But right now, recapture numbers are give or take -- refinancing activity is -- if you get refinancing activity, you can see 30% to 50% depending upon the product side. On the -- our new purchase, we're probably 10% to 20%. So I think all in, we're give or take about 20%.

Okay. Got it. And I know you made some comments around the MSR market expected this quarter. But can you maybe just give us -- if mortgage rates remain static here for a prolonged period of time, can you just maybe talk through what percentage of the MSR portfolio you see to be refinanceable? How much you would expect I guess the -- I guess, potential markdowns to the MSR, if they do stay here for several months? And then how well protected you see book value?

So earlier, I stated that approximately 25% of our portfolio, the borrowers have the ability to see their payment lowered based on current mortgage rates of $100 per month. So we use that as a benchmark to say, okay, will somebody refinance their mortgage based on $100 drop in payment. And if so, how long will that take? So that should kind of frame it, hopefully, frame it for you. Keep in mind, we still have a lot of legacy stuff, although we've added a lot of new production stuff with our mortgage company and some of the other acquisitions that we've made in the marketplace. As it relates to book value, book value at the end of Q4 was $16.21. I'm not going to -- our numbers are not tied out at this point, but I could give you a range and tell you that our book value is probably down something around 3% at this point in the quarter. So 2 -- something between 2% and 3%. Now it's -- again, our numbers are not tied out, but that's kind of our best guesstimate right now.

Okay. That's helpful. And then can you maybe talk about the capacity you have at NewRez right now? Are you able to meet the demand that's coming your way? And are you continuing that resources there and just seeing how gain on sales trending?

Gain on sale is pretty robust, as you could imagine. There were capacity issues, I think, everywhere in the system. Obviously, with the virus, a lot of folks are going to be working remotely. So I think that remains a challenge, not just for us, but quite frankly, for the world. I do think you're going to see pipeline kind of extend in this marketplace. For us, in the NewRez side, we -- just to give you a quick snapshot of our geographic locations. We have servicing operations in Greenville, South Carolina. We have servicing operations in Tempe, Arizona. We have servicing operations in Houston, Texas. We have call centers. We have processing folks in Milwaukee. On the origination side, when we first brought new pen, there was a site there. Then we moved all of our folks to the Ditech site. Now we're utilizing both sites down in the Fort Washington area. We have call centers in Charlotte. We have call centers in -- we're building call centers in Arizona. We've recently begun to hire and build out Jacksonville. So we have people all over the place. We're adding bodies. I think in the next week, we'll probably have 100 to 150 new hires in Jacksonville. So yes, capacity is an issue, but we're hiring quite a few people.

Okay. Understood. And I'll just ask one more high-level and then hop back in the queue. Just -- I know you made some comments around the funding side. But between funding, what you're seeing on the rate side and credit, which potential angle of risk would you say most concerns you?

Everything. No, listen, the markets are very difficult. I think when you look at our portfolio, as I pointed out, we have a lot of our MSRs or term finance. Yes, we've had margin calls, and we've paid down some of our facilities. When you look and think about our book, we have our agency mortgage book, which hedges our MSR pipeline. Yesterday, mortgages closed the day, give or take, and I'm given a number down -- I think it was down 0.625 or 0.75 point. We had a margin call, we paid that. So we're concerned about everything. But when I think about our liquidity position and what we're doing in the ability to raise capital in and around our existing balance sheet, I feel very comfortable where we are. We're on it. It's -- these are not easy times, and we want to make sure we continue to deliver in every facet we can.

Our next question comes from the line of Doug Harter from Crédit Suisse.

Michael, could you just put in context that $125 million to $150 million of NewRez earnings? How did that compare kind of the fourth quarter last year, third quarter last year, just to get some context around that?

The total earnings for the company last year were $225 million, that's for NewRez. The prior year, the total earnings were $34 million. When we looked at Q1 versus Q4. I think our Q4 numbers were -- what were they? About $80 million?

Yes.

Q4 numbers were about $80 million. So our numbers this quarter are, give or take, a little bit less than a double from what they were in Q4. And usually the winter months are slower than the summer months. So I think if mortgage rates stay in this current range, I think you could see a pretty robust origination market as we get through the virus and get into the warmer weather.

Got it. And then I appreciate the comments around the 25% that's refinanceable. I guess how should we think about the sensitivity kind of if the Fed comes in and agency spreads tighten and mortgage rates are able to fall, is there kind of a big pickup down 25 basis points? Or I guess, how should we think about kind of the sensitivity to kind of the agency market normalizing?

I'll give you a sense. This morning, bond prices or U.S. treasuries are lower in price, agency mortgages are higher in price by about 0.5 from last night. We are long in many other parts of our business, as you know, we have Non-Agency mortgage securities than we have loans. So we feel pretty comfortable with a tightening of the basis and should the agency mortgage market normalize, which we expect at some point it will, that the complementary nature of the different portfolios that we manage should offset each other on a go-forward basis.

Our next question comes from the line of Matthew Howlett from Nomura.

Michael, can you hear me okay?

Matt, I can hear you loud and clear.

Just -- let's just -- as someone that managed through the financial crisis with everything went there. Can you just kind of give us a context, how is this comparing in terms of liquidity? Could there be any potential for default on the mortgage landscape, in the consumer landscape? Just some context around the different stressed environment?

So I think on liquidity, the Fed is throwing a ton of liquidity at the banks. And I don't see a funding issue right now. I think when you look at our overall leverage ratios, we're not very levered. If I wanted to sell our $12 billion of agency mortgages, we could do that pretty easily. And that would raise, give or take, another $0.5 billion of liquidity for us. So I feel very good about our overall liquidity and our ability to manage through this if liquidity became an issue. And again, the announcement yesterday by the Feds to come in and begin coupon passes and buying off-the-run treasuries, I think, should help the market a fair amount. The markets themselves, I've never seen markets trade like this and I've been doing this for 30-plus years. You have the long bond, which is trading in 5-point increments, agency mortgages yesterday traded at 0.25, 1.5 range. So it's very, very difficult from an overall trading perspective, we're not treating the market like we used to do when we were on the sell side. So it's really just relative value investing, making sure that we take care of our core business lines and make sure that we actually fund our balance sheet properly. And as I pointed out in -- earlier in the call, there's 3 pillars, the way that we think about our life right now. First is liquidity; second is book value; and third is earnings. And knock wood, right now, we got them all covered. So the virus stuff, I think, is going to have an impact on -- could have an impact on either both prepayments and defaults. I think prepayments as a result will likely -- they'll be a little bit more episodic until we get through this. And on defaults, you could see some defaults based on, I just think the current landscape and what's happening, although most people that are working remotely are getting paid. So it remains to be seen. But overall, the markets themselves are, by far, the hardest markets that I've seen in my career.

I certainly appreciate it. I mean you talked about the Fed coming in and starting the MBS buying. I mean obviously, we'll wait and see, I guess, the market is projecting that. They're obviously projecting 100 basis points up the next meeting. Is there anything else you would like to see from the Fed or Washington? I mean anything else that just would help the markets?

I pointed out earlier, I think on the mortgage REIT landscape, I think if they did come in and announce a buy program for agency mortgages that would stabilize the agency mortgage market, and that would cause that -- I think you'd see your agency mortgage REIT stocks go up a fair amount, seeing moves of -- on our company, for example, down 20%, it seems way overdone. But it's -- my philosophy is, don't catch the falling knife, but I could only speak for ourselves that we're in very, very good shape.

Our next question comes from the line of Bose George from KBW.

I actually just wanted to follow-up on that last question. In terms of market trends, are you seeing any changes either in haircuts, funding cost, advance rates, anything on that front?

So far, nothing on the haircut side, you are starting to see a little bit from the banks if they could grab a little bit of extra margin on the financing side. And I think that is to be expected as you -- again, I brought up the Boeing, and that's in the press. But Boeing drawing down on the liquidity line. So I think to the extent that the banks can grab a little bit more, they're going to do that. But overall, I did point out that based on the financing activities that we did prior to this move down, we estimate Q2 to have a $40 million savings in overall run rate or really $40 million more in earnings for our company. So I think that should help us a ton. But we're monitoring it. Our leverage ratios overall as a company, I think, are fairly moderate. And to the extent that we wanted to delever more, we could do that, I think, fairly easily.

Okay. Great. And then on book value, that was great to get that range of where you stand. The $500 million MSR mark you noted, is that net of your agency hedges? Or is that kind of a gross number?

It's a gross number. But I will caution everybody that's going to move around a fair amount. And just to frame it for those of you that are -- when we talk about MSR multiples and really, for those of you on the call, an MSR multiple, the way that we think about this, if we're collecting a servicing fee of 25 basis points, that 25 basis points will trade at a so-called multiple of -- a multiple, and that's how we mark our book. So for example, 25 basis points at a 4 multiple would equal an MSR value of 1 point. I will tell you, during the quarter, when I look at MSR multiples and think about this in the context of where MSR multiples have been from a historic basis, they've been as high as 6% to 6.5%. And we've seen that over the course of the past year. Today, when I look at it, we have our conventional MSR multiples with a low 3 print. We have our Ginnie Mae's with a 2 handle. So I feel good as far as where we are. At some point, you'll see these MSR multiples actually have positive convexity if they go down even a little bit more from here. So overall I -- again, based on where we are in closing up shop last night. I feel good about where that is.

Okay. That's helpful. And then just on the primary rates, it looks like it actually went up this week, the Freddie Mac weekly number is up, I guess 336 from 329 looks like on industry capacity. Have you -- at the mortgage bank, are you guys seeing the same sort of pricing power?

Yes. The pricing power has been very good. Yesterday was a day, quite frankly, where you saw -- you didn't see as much volume or we didn't see as much volume, but the margins, I think, across our different lending channels, whether it be correspondent, wholesale, et cetera, have been extremely robust. And that's helped a lot as you think about the quarterly earnings for Q1.

Our next question comes from the line of Trevor Cranston from JMP Securities.

Can you maybe provide some color on what you guys have seen in the securitization markets over the last couple of weeks? If there's been any issuance, if you guys would consider those markets open for you to continue to execute like you have in the past? Or any color you could provide around that would be useful.

Yes. I think there's been very, very limited securitizations done over the course of the past couple of weeks. I would say, Non-Agency spreads are out 40 to 50 basis points. And as a result, there's very little transacting going on there at this point. We have an arm deal, a floating REIT deal in the marketplace, that at some point, we'll get done. But in general, we did some issuance earlier on in the quarter around a large RPL deal. But overall, I would say, the securitization market -- and you'd expect it in markets like we saw yesterday and over the past week, are kind of shut down for now.

Our next question comes from the line of Kevin Barker from Piper Sandler.

And in regards to the MSR mark that you mentioned, the $500 million, is that purely on the MSR? Or is that including the finance receivables as well?

It's both.

The total $5.7 billion, not off of the $4 billion?

Correct.

Okay. And then when you think about -- and just to follow-up on the mortgage rates and the potential for prepay's fees. Understanding that there's significant capacity issues in the market. But with the 10-year where it is, we could see mortgage rates closer to maybe 2.75% or somewhere around that level. If we got to that level, how much of your homeowners would save $100 a month like you -- as you measure potential refinanceability?

We get some of that number to be something around -- I think it's in the upper 40s. I think it's 40 -- it's about 45% to 50% would -- no, it's -- at 3%, I think, is something around a 45-ish number from an overall percentage standpoint. That would save $100.

At 3%?

At 3%. Correct.

If it went to 2.75%, where would that number go to?

Higher.

Because you have a large Non-Agency book, right, that...

Yes. We have -- I mean here's the way that we think about it. We have a large legacy MSR book. We've -- obviously, we've been more active on new production, both through our origination channels as well as some of the stuff that we bought in the marketplace at 2 or 3 multiples. To the extent that you had a 2.75% mortgage rate. I think there's a couple of things that play out on our business. One is your origination gains will be extremely robust, and that will help offset what you're going to see in the runoff on the MSR side. But listen, you're going to see prepayments. The legacy stuff is going to be less impacted. I think that the time lines for people to get loans closed, as I pointed out, as a result of the virus and people working from home will extend and capacity issues will cause prepayments to probably be a little bit lower. Kevin, just at a 2.75% rate with $100 savings, it's about 55-ish percent is the number.

Okay. And then you mentioned that you had termed out the MSR to 80% finance rate. Is that...

Yes, what we --- that will be...

Is that adjusted for the mark or this quarter? Or is that premark?

It's based on the total amount of debt. So the way that we think about it is, we have, let's say, you had $1 of debt. We project on that $1 of debt by the end of Q2, 85% of that will be financed in the capital markets. And we're working with Fannie and Freddie to create more capital markets notes. The Ginnie stuff is a little bit slower, quite frankly. But our Ginnie exposure is much less than our Fannie, Freddie exposure.

Okay. Is that -- was that on the mark as of today? Or is that on -- so like in the -- so you're saying it's in the future, right?

Yes. It's not about the mark, Kevin. It's about the debt. So the overall -- I mean, the way that I want you -- everybody to think about this. If we had $1 of debt and we were financed at repo at 100%, that $1 of debt would be a repo-type facility. That $1 of debt will be 85% financed in the capital markets by the end of Q2. Right now, it's 50% or 60%.

Okay. And then you mentioned that there was some margin calls and you're protecting your book. Is there specific margin calls that are happening in -- obviously, it's in different asset classes, but where are you seeing it? I would assume that there'll probably be some stuff in the NPL or RPL market. Are you seeing anything there in particular?

No. Fannie Mae sold $1.8 billion loans this week, they traded well. They traded wider, but they traded well. We didn't participate in those. Agencies, for example, yesterday, agency mortgages were down 0.625 or 0.75. We're long-term agencies. You have some financing against them. So you'll have a haircut. And I think that's part of -- or I'm sorry, you'll have a margin call. That's part of the concern, I think, what you're seeing in some of the other larger agency, some of our peers in the agency REIT space. But that's really been, I think, a big driver of the downward pressure we're seeing in equity prices in some of the preferred issues that are out in the marketplace.

Okay. Are you seeing still fairly strong pricing in the NPL market as well?

The NPL market, I mean, listen, there's $1.8 billion traded sold by Fannie Mae. Those traded well. When I think about that in the context of our existing loan book, we did some RPL securitizations earlier on in the year. And the way that we're marked, we feel that we're properly marked relative to where those assets traded.

Our next question comes from the line of Henry Coffey from Wedbush.

We get the $500 million mark on the MSR. And then the question is, from an equity guy's point of view, trying to track where agency RMBS is tough. But it looks like from December to at the end of February, at least the TBA marks were fairly flat, they're actually up a shade this week. But then when you look at spreads, the returns are insane. So that tells me that, that TBA mark is probably bad. So what -- give me an instinct, a sense about -- if we think about your RMBS as a hedge, where are those values gone from the end of December to February? And where have they gone from February to today?

On our agency stuff, it's a little bit higher in price on the quarter. It's not materially higher. Yesterday, agency mortgages got crushed. So overall, they're up a little bit. Keep in mind, we use those as a hedge against our MSRs. And I pointed out earlier, Henry, that the short -- us not being longer the mortgage basis versus our MSRs has helped us a ton in the quarter. So when we think about that, that is a positive thing. The long agency spec pools that we have against our MSRs are actually higher in price. So there's some positive P&L there. The other parts of our business, in the conversation with Kevin just now, everything is mark-to-market nightly. Our loan book is marked in the context of where the stuff traded this week, and that's $1.8 billion print. And on -- in the Non-Agency side, rates have rallied so much, we're 40 to 50 basis points wider. So when you think about all in, everything that we do is captured in our nightly book value the way that we calculate book value because it's based on mark-to-market. And that also includes our MSR mark that are done every single night.

But the non-MSR assets, given the drop in treasuries between December and today are so "up a shade" and it's more the pain on the day-to-day chaos in the RMBS market that's causing all the chaos?

Yes. Price are higher, the spreads are much wider because 10-year rate rallied from 1.92%. And on Monday, I think it got -- or whatever day it was this week, got to 35 basis points. So it not all -- prices aren't higher, you just have a massive spread widening versus a irrational treasury market is the way I think about it.

No I -- yes it's -- I -- all the normal stuff I used to track this, I kind of threw out about 2 weeks ago. And then common sense I gave up on this week. The -- when we look at the mortgage rates and the capacity issue, right now, it seems like the business is saying, "We'll take the profitability and worry about market share later." So kind of around Kevin's question, do we get to a sub 3%, 30-year fixed rate mortgage? Or does the industry just say we're not going there, regardless of where treasuries go?

I think it's hard to tell. I do think that you could -- you will potentially get there. I mean we have an FOMC meeting next week on the 18th, I wouldn't be surprised if rates go to 0 or Fed funds go to 0. Does that mean that mortgage rates go to 2.5% or 3%? You need people to buy them, one. You need people to process them, two, and the banks have to be willing to hold a bunch of this stuff and keep them on their balance sheet. So I think it remains to be seen and it depends what happens with other asset classes that are in the market. We're not isolated and it's not just that the mortgage market is wider, high yields gap 300 basis points. IG corporates have gapped wider. Everything's gap wider, so it's not specific to us. I would think at some point, we get to lower mortgage rates, but I think that would be really great for our mortgage company. And as I pointed out, last year, we made $225 million in our mortgage company. This year, I would be very shocked if we don't make something between $400 million and $500 million. And that helps us when you're paying out $800 million in dividends a year.

It's very clear the opportunity today is in the mortgage company. I know RoundPoint in North Carolina, a big servicer was -- is supposedly being sold to somebody, but that hasn't closed yet. There were probably other assets out there even one of your -- one of the -- one or 2 of the public companies. What are your thoughts in here about acquisitions on a big scale?

If there's something that's accretive for shareholders, we will do it. Clearly, we're trading well below book right now on our equity price. So we don't intend on doing anything unless it's going to create long-term shareholder value. And right now, I can tell you, there's nothing in the pipeline, that's that interesting. That doesn't mean something won't come our way. Our stock is -- when you look, we closed $11.60, I think, last night. And fundamentally, I've given you guys a little bit of color on book value, I would think the cheapest thing out in the market is our own company.

Our next question comes from the line of Giuliano Bologna from BTIG.

A couple of little things that I wanted to kind of touch base on. One thing that was probably a little bit different than some of the other questions, but you guys had agreed or in principle to buy a $40 billion UPB MSR book in the first quarter. Is there any sense of if that's closed? Or if there are any price protections in that deal if it hasn't closed?

It's closed. And we have hedges against it. So certain things we have on some of the newer stuff that we bought, we've actually settled for lower price with hedges and less prepay protection. That doesn't mean they're not going to be lightening, quite frankly, based on a 3% mortgage rate, but we feel like we're protected on the other side with our hedges.

That makes sense. Then can I jump in on that point on hedges? Obviously, we've seen some pretty big moves or pretty crazy moves in the market. Is there any -- are you guys changing around the way that you're hedging the book going forward because you've had some pretty big moves in the market? Or how do you think about your hedges on a go-forward basis?

At some point, we'll likely add to the mortgage basis that we have, being that we think it's as cheap as it's been since the financial crisis. We're constantly trying to figure out total return for shareholders. So if we think that agency mortgages are cheaper than nonperforming loans we'll go down that path. But in general, right now, and based on the market moves, again, the 3 pillars of what we're doing, are liquidity, book value and core earnings. We're not trying to be heroes right here.

That makes a lot of sense. And then even related to one of your more recent comments that you made on acquisitions. You still have roughly $200 million outstanding on that repurchase authorization. So far, you've been able to hit the 3 pillars, granted, the market's pretty wild. So you're probably not jumping out there doing anything out of the ordinary. But would you consider using any of that repurchase authorization with the stock trading where it is? And do you feel comfortable with liquidity -- your liquidity position to be able to utilize it?

The answer is yes and yes. But again, there's no guarantee we're going to be in the market buying stock.

Our next question comes from the line of Stephen Laws from Raymond James.

A lot has been covered, but I want to continue down one line of questioning, just feel like the -- a couple of people hit on like the impact of a 2.75% mortgage rate. You've quantified, obviously, we'd see a negative impact on servicing, positive on Shellpoint. How much incremental are NewRez? How much incremental volume do you think the business can do in that type of scenario? And then along those lines, the other piece, what type of impact on the call right strategy with that type of repayment environment -- mortgage rate environment have on that impact for 2020?

Great questions. On capacity and production, we will do -- the mortgage company will originate about $12 billion in mortgages this quarter. Could we drive more through the pipe with tighter pricing? The answer is yes, and it's still profitable, but we want to be mindful of capacity in the system. As we go forward, with a 2.75% mortgage rate, do I expect to see more production? The answer is yes. I pointed out that we're hiring 100 or 150 of talented professionals in Jacksonville, and that will come online in the next couple of weeks. But we've been adding capacity everywhere and more in a geographically dispersed method and across the country rather than just hiring a ton of people in one space based on what's happening with the virus. As we think about our call rights, I'm looking at some numbers. And there -- whenever we call a deal, there's so much work that goes in. One is, is it callable? How do we think about our advances? How do we think about the factors, et cetera? And also working with other industry participants. Currently, I think we have $500 million queued up for April, and looking at other call rights down the road, I think, the number based on where rates are is something closer to between -- something closer to $10 billion. However, we have a lot of work to do to get that out of trusties and bondholders and all that kind of good stuff. So it will be a bigger part of our business as we go through the rest of the year. But right now, for what we currently have in the pipeline, I think it's $500 million.

Great. Last question I have. You've done -- really focused on executing the last couple of years adding ancillary services, other businesses. You've made investments, small acquisitions. When you think about what's going on around COVID-19 and travel disruptions, how much -- I assume almost all of those ancillary services are largely local -- localized. But can you talk about any potential disruptions that may extend the pipeline? I think you referenced earlier, how much would that be extended by -- kind of how should we think about business impacts for some of those ancillary services?

Yes. I mean it's just so hard to gauge, right? Because any one of us could be impacted. Hopefully, we're not, but any one of us could be impacted. It's more including our businesses. So when you ask about ancillary, for example, Covius which -- where we own 25% of that company, is headquartered in Jacksonville. Our title and appraisal business is headquartered in Pittsburgh. And when we think about those businesses, even on Covius, which is headquartered in Jacksonville, they also have a lot of people out in Denver. So there's people all over the country in these different businesses. I don't expect them to get impacted, but people working remotely, you just don't know at this point. And I think this is not specific to us. It's specific to the broader financial services industry. When you look at our friends at a large money center banks, a lot of them are working, particularly folks in New York, they are working in New Jersey, Connecticut and other places. So -- and we have done the same thing here. We have a large number of personnel that's out working remotely for the next couple of weeks. We think that is a prudent measure to take not only for the individual, but for what we're doing as a country right now.

Our final question today comes from the line of Bose George from KBW.

I just wanted to ask about the FHA market, you kind of touched on this, but the delinquencies increase and FHA, we see that in the FHA market. Can you just walk through some of the issues there? But the higher cost, I guess, will be borne by your partner, but just about servicing advances, can you fund them? P&I advances, just how that can impact your business?

Yes. Good question. I think that, number one, the size of our Ginnie Mae portfolio as a percentage of our overall book is, give or take, about $50 billion in total. So when you think about it on a scale -- from a scale perspective, it's relatively small. So we expect over time to potentially have to pay up more or fund more advances. The answer is yes. I think it remains to be seen, but you're going to -- I personally believe that you're going to see some higher delinquencies, and I think that we're more than prepared based on our advanced facilities and our capital to handle that. The other thing is, when you look at our advanced facilities, and we've been pretty active over the past 5 years about issuing advanced securitizations and refinancing them. That is another area that we'll continue to focus on. But there's plenty of capital that we have and there's plenty of capacity we have in our counterparties around the advanced facilities to the extent that we needed to go there.

I would now like to turn the call back over to our presenters for closing remarks.

So first of all, I want to thank everybody for jumping on the call. I think this is helpful. Hopefully, it's helpful for all of you, but it's helpful for us to talk about our business. And I do hope it helps our peers out there. Good luck with everything, stay well, and we look forward to finalizing our Q1 numbers at some point towards the end of April. Thanks, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.