Mr Cooper Group Inc (COOP) 2018 Q3 法說會逐字稿

Good day, Ladies and gentlemen, and thank you for your patience. You've joined the Mr. Cooper Group's Third Quarter 2018 Earnings Call. (Operator Instructions) As a reminder, this conference may be recorded. I would now like to turn the call over to your host, CFO, Amar Patel.

Good morning, everyone. I'd like to welcome you to Mr. Cooper Group's Third Quarter 2018 Earnings Call. Joining us today from the company is our Chairman and CEO, Jay Bray. Before we get started, I'd like to remind you that our quarterly press release and earnings supplement are available from the investor information section of our website www.mrcoopergroup.com, that is mrcoopergroup.com.

In addition, we'll be making forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today containing our earnings release and quarterly supplement. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in the earnings release and in the quarterly supplement available on the website.

Before Jay presents third quarter results, I would like to go over the changes to Mr. Cooper's financial statement presentation. Mr. Cooper was determined to be the accounting acquirer in the merger and Nationstar is considered the predecessor, and its assets and liabilities are reflected at fair values as of the merger date of July 31, 2018. Mr. Cooper's interim consolidated financial statements for periods following the close of the merger are labeled successor and reflected acquired assets and liabilities from Nationstar.

With respect to the 3 months ended September 30, 2018, the company has separately provided the financial results of the predecessor for the period from July 1, 2018 through July 31, 2018. And the results of the successor for the period from August 1, 2018 through September 30, 2018, which -- where both are presented under GAAP. The presentation also includes a combined column that combines the predecessor and successor results referenced above with respect to the 3 months ended September 30, 2018. The combined column reflects non-GAAP financial measures, as a different basis of accounting was used with respect to the financial results for the predecessor as compared to the financial results of the successor. All this will become more meaningful when you see our 10-Q, which will be filed by the end of the week.

I'd like to now turn the call over to Jay Bray.

Thank you, Amar, and hello, everyone. As you can see on the first page, this was an extraordinary quarter for our company. We completed the merger with WMIH Corp.; subsequently renamed the company to Mr. Cooper Group Inc.; changed the ticker symbol to C-O-O-P, COOP; and finalized the 12 for 1 reverse stock split. In addition to closing the Assurant acquisition, we made strides in every business segment. Servicing achieved 6.5 basis points of profitability; corresponded originations ranked among the top 10 in the industry; and Xome increased its third-party revenue to 56%. We remain committed to the market in identifying opportunities to create more shareholder value. Today, we are announcing the acquisition of Pacific Union, which I will get into shortly. We're continuing to make strategic investments to grow all our segments, including new products and technologies like Home Intelligence designed to increase customer recapture and revenue per customer.

Now let's discuss the third quarter results. For the quarter, we reported adjusted earnings of $54 million or $0.58 per diluted share, which is a 9% increase from the prior quarter. Servicing generated 6.5 basis points of adjusted profitability on a servicing portfolio of $500 billion. Originations earned $33 million adjusted pretax income and delivered $5.1 billion of funded volume. Xome earned $11 million adjusted pretax income, sold over 3,200 properties, and increased third-party revenue share from 28% to 56% at the end of the quarter.

Let's take a closer look at servicing and move to Slide 5.

Servicing had another great quarter as it again performed better than expected, achieving $81 million of adjusted pretax income or 6.5 basis points of profitability in the quarter. The increase in profitability of approximately 12% from the prior quarter was mostly from other income improving by $9 million quarter-over-quarter due to a decrease in interest expense related to MSR financing and higher float income. Prepayment and delinquency trends also continue to be favorable for the business.

We boarded $37 billion throughout the quarter, ending with a $514 billion portfolio with 3.2 million customers. For the fourth quarter, we already have more than $40 billion scheduled to board. These transfers should take our portfolio to $535 billion by the end of the year, which achieves our targeted 5% growth. In addition, the opportunities for further growth are significant, and we are well positioned to capture these opportunities. We remain confident in achieving adjusted profitability in excess of 6 basis points on average for the full year 2018, propelled by a lower prepayment environment and continued cost savings initiatives.

So let's take a closer look at our platform and path for growth. If you look at Slide 6, we have a very successful track record of profitability growing the servicing portfolio. We believe no other company has done more transfers than we have, and no other company has consistently grown the platform.

We've completed over 1,000 transfers from virtually every large financial institution in every system that exists in the marketplace, and we've done so while continuing to be the low-cost -- lowest cost provider in the space. Our platform is self-sustaining with originations, flow from existing MSR and sub-servicing partners, and bulk opportunities, not only replacing principal reductions, but also providing incremental growth. For 2018, we will achieve 5% growth in the servicing portfolio. For 2019, we already have visibility to at least 7% growth with what we have presently scheduled to board. We continue to leverage our scale in servicing to capitalize on the many available market opportunities, being the lowest cost provider provides competitive advantage to capture additional market share.

Servicing is also well positioned to benefit from rising interest rates. Rising rates lead to slower prepayment speeds, which leads to improved value and profitability. For example, as you can see on the page, a 25 basis point increase in rates equates to about a 1 CPR reduction, which translates into an $80-plus million increase in the book value of the MSRs and a $20 million annual pick up in profitability. Put altogether, this is a fantastic environment for our servicing business.

Now let's move to originations. Originations delivered $33 million in adjusted pretax income, which is the same as last quarter. This is an amazing accomplishment in the current environment. This was primarily driven by higher revenue margins. In the quarter, we funded nearly 23,000 loans totaling $5.1 billion, which was composed of $2.4 billion from the consumer direct channel and $2.7 billion from the correspondent channel. In the consumer direct channel, we have improved refinance recapture rates to 57%. That's an 8% increase quarter-over-quarter.

We have also seen meaningful improvements in our purchase, insurance and second lien volumes quarter-over-quarter. We are using our tune-up feature in the Home Intelligence app to help customers manage their personal balance sheets. And we have a tremendous opportunity to help nearly 750,000 of our existing customers consolidate debt and improve their cash flow. Currently, over 70% of our consumer direct volume is debt consolidation solutions to our customer. Given the current interest rate and market environment, our full target for 2018 is $115 million of adjusted pretax income in the originations business.

From an industry perspective, the current rate environment has helped servicing, however, originations has had its challenges. Anyone who reviews the origination landscape can see that it has been a tough environment for most industry participants. I'm really proud of our team for its accomplishments in this environment. Now let's move to Xome.

This quarter, Xome earned $11 million in adjusted pretax income, which was below our original target. Xome originally began taking Mr. Cooper field service orders in the second quarter, but we discontinued the internal buildout of the field services platform once we knew the acquisition of Assurant was imminent. We will continue to focus on the Assurant integration and transforming throughout 2019, growing margin and fully ramping up the capture of Mr. Cooper's field services opportunities by mid-2019.

Putting the field services ramp aside, Xome has performed well relative to the market, while the market has experienced a 6% reduction in quarter over quarter mortgage refinance volume for the MBA, and a 14% reduction in REO units quarter-over-quarter, Xome has been able to grow revenues by 6%. In addition, Xome has dramatically shifted to third-party business post the Assurant acquisition with 49% third-party revenue for the third quarter compared to 28% third-party revenue in the prior quarter. We exited the quarter at 56% third-party revenue, and the business is posed to further grow third-party share. The number of clients also grew significantly with the addition of Assurant's 560-plus active clients.

Before we dive into Assurant, I want to highlight that Xome is another area where we are making meaningful investments for our future. First, we've invested in new leadership as we've hired Ray Mathoda as Chief Executive Officer responsible for all Xome operations. Ray brings a 20-year track record of success in the real estate and mortgage markets, including most recently, as Co-CEO and member of the Board of Directors of Genesis Capital and serving as President of Hudson & Marshall. Ray will oversee the growth of Xome throughout all segments, including the expansion of third-party opportunities across the exchange, title, valuation and field services businesses as well as the integration and transformation of the recently acquired Assurant mortgage solutions business.

Now let's talk about Assurant and move to Slide 9. In August, we announced the closing of Assurant mortgage solutions, a strategic complement to Xome. The company provides origination valuations, default valuations, field services and title to 560-plus active clients. And we have been working to integrate the platform into Xome. The combined business will leverage the best team and technologies to offer more products to clients and become a leading provider in the mortgage services market. Ultimately, we will have a better platform with more clients, more revenues and improved margins.

We expect Xome earnings to be below historical levels temporarily in the very near-term as we integrate and transform the title valuation and field services businesses we acquired from Assurant. However, combining the XOME and Assurant mortgage services business is absolutely the right thing to do for the long-term expansion and profitability of Xome. The Assurant acquisition and related activities are currently at or ahead of our plans. And now let's move to our latest acquisition.

Today, we are excited to announce that we have entered into an agreement to acquire Pacific Union Financial. Pacific Union is a leading originator with a servicing portfolio of approximately $25 billion. Specifically, integration of the platform enables Mr. Cooper to expand its presence in correspondent and wholesale originations with delegated and nondelegated product offerings, and it supports Mr. Cooper's expansion into non-QM. The company brings over 700 active clients, and the business is quite complementary as there is only about 20% overlap with Mr. Cooper's existing clients. We estimate the incremental annual originations volume potential is in excess of $10 billion, with over 80% of that volume being purchase loans.

Subject to regulatory approvals, we anticipate closing in the first quarter of 2019, at which time, we will welcome Pacific Union team members to Mr. Cooper, and board approximately $25 billion of servicing to our platform.

Let's move to Q4 and beyond. While the third quarter was a great success, I'm even more excited about what's to come. For servicing, our focus is continuously growing our sourcing portfolio profitability. We are exceeding our growth target for this year, and we have already achieved 7% growth for next year with increased originations, volume from our existing partners and the servicing from Pacific Union. And I am pleased with the progress we have made so far in Project Titan. We remain focused on improving the customer experience while bending the cost curve. For 2019, we expect servicing profitability to improve due to a combination of higher revenues and greater efficiencies from Project Titan. I firmly believe that we have unique technology, products and tools to help customers manage their personal balance sheets. The integration of Pacific Union and its 700-plus active clients is expected to build on our platform capabilities and provide incremental origination volume of $10-plus billion.

On the Xome front, we are aiming to continually increase market share across all segments. Our integration of Assurant is underway and unlocking the platform's full potential continues to be our focus in 2019. And we remain committed to creating shareholder value through our disciplined capital management strategies. I'm truly excited about the future of our differentiated platform, and we look forward to profitably growing our business in a prudent manner that benefits our customers, our team members and our shareholders.

And with that, I'll now hand it back over to the operator for Q&A.

(Operator Instructions) Our first question comes from the line of Bose George of KBW.

First question is just on the Pacific Union acquisition. Is there much of a cash outlay for the origination platform, or is that more of an earnout? And then, for the MSR part, are you going to fund that with cash or just -- how is that going to happen?

Sure, I mean, for the -- we're looking at -- it's a total company acquisition. The primary purchase price is related to the assets of the company, which is primarily the MSRs. We will be acquiring that and then funding it with normal kind of facilities or coinvestment deals that we do with normal transactions. The bulk of the purchase price is related to the assets of the company.

Okay. And then just a couple of accounting questions on the transaction. Post the deal, what was the size of the DTA valuation allowance?

Right at merger, it was close to $990 million.

Actually not the DTA, but the...

He's asking the allowance. He's asking the allowance.

Yes, just the allowance, yes.

So the full value is $1.26 billion. And then --

$1.26 billion, okay. So just that minus the 9 34?

Correct, yes.

Okay. And then in terms of the expenses, the $148 million, was that all deal related? And are there any deal related expenses next quarter, or is that done now?

No, that is done. That is done. Obviously, this was a transition quarter with the merger. But all the purchase price accounting is completed. And there are -- there is still a window where there may be some adjustments as we have about a year window to complete that. But we felt pretty good about where we've ended up. So unless there's any other adjustments there, there's not going to be any other merger-related expenses coming through the P&L.

Yes. But just from a GAAP standpoint, you have a year to true it up, if you will, but we don't expect any more true merger-related expenses and doubtful we'll have any more purchase accounting adjustments. But for GAAP purposes, you do have a year.

Okay. And then just one last one for me. On the MSR mark, the $49 million, how much of that was driven by rates?

Almost all of them.

All of them. Yes, just about all of it.

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

Jay, you mentioned as you look for -- towards 2019, servicing profitability should be improved. Just I guess trying to get a sense, is that from kind of the full year north of 6 basis points? Or is that from the 6.5 basis point level that you achieved in the third quarter?

Well, it's definitely from the full 6, right? But I think we do have momentum. We've kind of locked in the growth on the portfolio, like we shared in the comments. And then we also still feel very confident in our, what we call, Project Titan initiative where we're looking at revenue enhancements and cost reductions. So I think for the year -- next year, certainly, we would expect to be above 6.5.

Great. And then, as you're looking at -- obviously, you already have kind of the 7% growth locked in for next year. I guess can you talk about kind of what that -- the pipeline of additional opportunities looks like? Are there a lot of other acquisitions like Pacific Union out there, or larger transactions? I guess, how do you view the pipeline?

I think it's strong. I mean, I think we're going to be selective and really take a hard look at -- I mean, if you think about what we can do with Titan, if you think about what we can do now with Pacific Union and our existing origination platform, there's a lot of growth and there's a lot of opportunity there to improve core earnings. Not to mention what we think we can do with Xome and Assurant over time. So I think the pipeline is large. I think there's a lot of consolidation opportunities there that can present themselves.

There are some larger strategic opportunities as well. But we're going to be very mindful of -- and selective on what we do. I think as we kind of enter '19, we feel actually great. I mean, given that we've locked-in kind of a pretty strong growth rate already, and given that we've got Pac U and some things I think that will be very important on the origination side, so we're not going to chase things. We're going to be very disciplined in that approach, and I think that's the way you should think about it.

Our next question comes from Henry Coffey of Wedbush.

You did make comment on mortgage, that you would expect it to be at about $115 million this year. Xome should be a little light because of the expected -- the related integration cost, but obviously, an important merger. And then on the servicing front, with servicing at 6.5 basis points now, should we assume that the contribution from that will be a little higher? Or you didn't -- just going back to some of the hard numbers you've given us before in terms of guidance for 2018?

Yes, the short answer is, yes, Henry I do think we'll -- you'll see some offsets from originations in Xome within the servicing.

We have seasonal factors come in, right? Because of seasonal factors, prepays are typically down. That also means the lower origination volume as well.

Right, right. We're figuring that in there. And then in terms of putting this Project Titan, as a look at your technology options, and now, with the acquisition, do you start changing technology vendors? Do you start developing your own mortgage origination technology? And I know that you're big Ellie users, and Ellie Mae is a very, very popular technology in the correspondent business because of its ability to access small customers. So when you look at what you might be able to accomplish in terms of operating efficiency with your existing mortgage technology, what are your thoughts about where you might take that?

Yes, I think it's unlikely we build our own in the near-term. I think when we look at the different -- Pac U has a different provider than we do on the correspondent side, so we're going to take the time to evaluate that and select the best platform. They have some great portals. We think they're actually best-in-class. And so I think we will be picking up some technology there that's going to be great for our customers and great for us, and frankly, I think will drive efficiencies as well. But I think we're going to -- the short answer is, we're going to take the next 90 days and really do a deep dive into their platform, our platform and make some decisions. And unlikely, we build our own, but we try to take the best of breed and kind of move forward from there.

Home equity line of credit, I finally have heard people start talking about that. It was like -- at the beginning of the year, I was like, "Shh, shh. Don't say anything." Obviously -- I mean, I did the analysis with my own mortgage broker, he was like, "Yes, you don't want to do a cash out." But there are so many people out there with sub-4% rates where a cash out refinance is just not the right product. And so now, that's going to open up the home equity line of credit door, which was a problem -- it was a great asset, it's a great opportunity, then it was a problematic loan, and then. So where are we today with that? Where's Mr. Cooper today with that? How big of an opportunity is that for people? What are your thoughts in terms of what you might be able to accomplish on that front?

Well, I think it's a massive opportunity. I mean, if you look -- if we just stick with the cash out refi opportunity first where someone could refi their first lien, we have 750,000 customers that we think we can save over $500 a month, and a debt consolidation makes a ton of sense for them. And so that, I would say, is first, the product that -- and now, 75% of what we're doing on the -- in our direct consumer refi is cash out, debt consolidation loans. And so I think that's here to stay, and I think it's going to grow, and I think we have a massive opportunity there.

We have a second lien product that actually is growing pretty significantly now. Again, the numbers are small compared to our overall originations but we do think that's a product that customers are going to want, and they are kind of demanding. And really Henry, it gets back to -- it kind of gets back to your technology question. I mean, the way to think about our technology platform is the Ellie Maes and some of the others are kind of just the behind-the-scenes foundation. We're building tools and an ecosystem, if you will, around that LOS that's very customer-enabled, right? It's a great customer experience.

You've heard us talk about Home Intelligence. You've heard us talk about My Way; My Way is our version of Rocket Mortgage. Home Intelligence is going to be our app for all of our existing customers to really go in and look at their homes. It's going to be home-centered, and it's going to have a tuneup feature that's going to allow them to really go and look at the liability side of their balance sheet and then provide them the best solution. And that best solution could be a cash out debt consolidation loan, like we talked about; it could be a second lien; it could be a personal loan; it could be a home equity line of credit. And so we're going to have all those products available for the customer and find the best solution for them. So that's how we're thinking about it. I do think it is massive opportunity, and I think we're well positioned for it.

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

Could you talk about what the amortized value of the MSR is versus the fair value today? And then the portion of the amortization expense associated with the fair value markup in the MSR this quarter?

Yes, sure, Kevin. The difference is between the fair value and the amortized amount, is approximately about $42 million. And right now, there is about a 45 to 48 basis point differential between the fair value of the MSRs relative to our cost basis.

Okay. And then in regards to Pacific Union, you said you're just buying the assets, right? so you're going to finance the transaction through -- yourself, right? So you're just basically buying the assets, and then either are going to issue debt or use co-funding to do it. Could you just provide a little more detail on how you're going to finance that transaction?

Well, we're buying -- we're actually buying the company. So it's not just the assets, we're buying the company. And the assets will be financed; predominantly, we coinvest. So we have our partners, as we've talked about in the past, but there won't be any additional debt, if you will. That will be all coinvest.

So you'll have your cash, and then the co-investments from other companies in order to basically supplement whatever you're paying for it, is that a good way to think about it?

That's right. That's correct.

Okay. And then what is the capitalized value of the MSRs that you're acquiring in Pacific Union.

I'm not sure we can get into those details. I mean, that is -- we're buying a $25 billion portfolio, which we believe is market price for the assets. The portfolio itself is fairly recently originated. It's about 2 years old.

Okay. So low CPR, relatively new MSRs that, I'm going to assume most of them are government-insured?

That is correct.

All right. And then in regards to the adjustments that you laid out, the $148 million that you said are merger-related. There was 2 big numbers. There's one on the servicing side, and then there was another on the corporate side. Could you detail exactly how much was related to the merger with WMIH and the merger with Assurant? And how that plays out? And was any of that related to DTA?

Sure. Nothing was related to DTA. Items related to Assurant are essentially in -- they're not merger-related adjustments. And that ends up being about $5 million of the Xome adjustments, $5 million of the $7 million that we've listed for XOME. But everything else, the $131 million that we'd outlined is all for merger-related items. Having to do with assessment of the balance sheet at the time of merger, or the purchase price accounting that is entailed with that. And then so we had the fixed purchase price, or WMIH had a fixed purchase price of acquiring the company. And in that, there was an assessment of the assets and liabilities as of the merger date of 7/31.

When that happens, most of these items go through a balance sheet reclass, but some items may go through -- a P&L item, through the predecessor, which is Nationstar. And so that essentially gets to that $131 million adjustment. At the end, the balance -- the purchase price is what it is, and the balance sheet is what it is, it's just a matter of how you kind of get to the ending spot.

Okay. And so was any of that related to interest expense or the issuance of debt or the prepayment of debt? Or was this more just fees and other adjustments associated with the merger?

It was fees -- a lot of it was fees. It was also related to some calls of prior debt. But that was part of the things that we enumerated when we outlined the transaction.

Got it. Okay. And then the DTA declined by $81 million from the pro forma number in the second quarter. Was that due to the lower valuation allowance or expectations for future use of the DTA?

No, I think it's -- we fully expect to utilize that DTA, particularly through the term, which extends beyond 2032. When you get to the final booking of the valuation allowance, we just essentially got to a number that was slightly below the $1 billion that we had out up here.

Okay. And then on your adjusted number, you had roughly $5 million worth of taxes in your adjusted EPS, which implies roughly a 5% tax rate. Is that the expectation that you have on a GAAP basis? Or is that what you're going to use for an adjusted number going forward?

We expect to use about a 3% number for the adjusted basis. From a GAAP basis, it will be the full rate, which will be approximately 24%.

(Operator Instructions) Our next question comes from the line of Mark DeVries of Barclays.

Sorry, if I missed this. Is there any color you can give us on your expectations for accretion from the Pacific Union deal? And any color you can give on how the margins of the origination and servicing business, does that compare to what you've got and any kind of opportunities for efficiencies down the road?

Yes, on the origination side, I think their current run rate is, call it, $15 million of originations. We are forecasting, I think, somewhere between $10 million and $15 million, just to be conservative. And today, they're -- I think they're around 40 basis points in profitability. We're slightly south of that, obviously, so.

On correspondent.

On correspondent, yes, yes.

Total, we're close to 60 basis points on average. That's the combination of consumer direct and correspondent. But their margin on the correspondent, given the clients they have, the products they do, is higher than our existing business.

And on the servicing side?

On the servicing side, like I was saying, it's a market-type transaction. Most of the portfolio is government. And we look at all deals to be accretive to us, and we try to hit, you know, low to midteens type of returns, and we think we've gotten that with this deal.

Okay. A follow-up question on the pipeline. I mean, I think there was at least one deal out there that was materially bigger than this. Just curious -- and maybe this is a naïve question given how many balls in the air though. What the Pacific Union does for your appetites, in kind of the near-term, to do any other kind of acquisitions?

Yes, I think like we said earlier, we're going to be pretty selective as we think about other opportunities. The Pacific Union transaction itself, it's 25 -- if you think about it from a servicing standpoint, it's fairly simple, it's $25 billion of portfolio size, and we've done a number of those size transactions. So we think it's not overly complicated there. On the origination, it is more complicated from an integration standpoint. But we've been working with these guys for 90 days now, and Tony Ebers and team are all over it and quite good at the integration. And we have time between signing and close as well, so I don't feel like it certainly doesn't put us on the sidelines by any stretch of imagination.

But I think it's -- again, when we think about new opportunities, we really -- we like the Pac U platform. I mean, we actually -- we think it's going to be very accretive in the sense that more volume. They have 700 clients that -- and there's very little overlap, and so we think it's 80% purchase. So we really -- we love the origination platform, and we think the servicing is very complementary to what we have. So that type of acquisition, I think, makes a ton of sense, and we're going to be selective on others. But clearly, we're not constrained from looking at other things.

Okay, that's helpful. And then finally, on Assurant, can you just talk a little bit more about your plans to improve margins there and get the margins in that segment of the business up to kind of where you were with Xome prior to the acquisition?

Yes, Assurant is -- if you go back to kind of their strategy, they acquired, I think, it was 4 different companies -- 3 to 4 different companies, and they were on different platforms. And so -- and they were, at the time of our acquisition, kind of going through a strategic review on how to consolidate those. So we stepped in, we are now assessing the platforms, trying to determine the best technology on the field services side. Clearly, we've already made the decision to not grow that de novo and leverage what they have. But it's -- it will take us I think a couple of quarters to get that integrated and to get back to the margins that we would expect to be at. So it's going to take a little bit of time.

I think the great news, again, they have a number of clients. It takes our revenue -- doubles our revenue, and then some. And so I think that's a good thing. And then with Ray, she is all over this, and is doing a great job of integrating and laying out the plan, so. But still, it's a complicated -- multiple platforms. It's going to take us a couple of quarters to get to where we want to be.

Our next question comes from the line of Mark Hammond of Bank of America, High Yield.

Jay and Amar, I had 2 questions. So on Pacific Union, could you give any finer points on the mix of type of servicing and origination, like Fannie, Freddie and Ginnie?

It's predominantly government. I don't know Amar, if you have the actual percentages.

Right. The servicing portfolio is predominantly government. On the origination type, there is a mix between agency and government, but it's predominantly, I believe, it's 70% or 80% government.

And can you give us a sense for their servicing profitability? Or whether or not they were servicing their own, or if they sub services out?

They were servicing on their own, on their own platform. And obviously, their size is $25 billion. We've got scale and efficiency on the $500 billion portfolio, and so we'll achieve, clearly, a lot of efficiencies there.

Got it. And then lastly, in the past, there was this $30 million of annualized corporate savings from the 2017 number, but I didn't see that repeated anywhere in the release today. Can you give us an update on where you see corporate expense savings going?

Yes, I'll jump in and let Amar correct me. I think the 30 was -- it was $15 million in corporate interest expense save, because as we entered the year, our plan was to continue to delever and pay interest -- or pay debt down, therefore, less interest expense. And $15 million was true, kind of hard cost reductions in spend saves. We clearly are ahead of the $15 million on the expense side where we're hedged in overall spend. On the debt, obviously, the picture has changed, right. We -- as part of the merger, we took on more debt, so that piece is -- it's kind of a fresh day for that, and our debt expense clearly, as you guys know and you know, is going up given the additional debt expense.

But overall, as we think about corporate, I think our teams have done a good job of hitting the numbers that we outlined and exceeding those. And as we typically do, we're going through this process where we take a hard look at corporate expense throughout the company. So I think there will be some additional opportunities there. But we definitely hit what we had expected to for the year from kind of an expense reduction standpoint excluding the debt piece.

At this time, I'd like to turn the call back over to Chairman and CEO, Jay Bray, for any closing remarks. Sir?

Thank you, guys. Really appreciate your time, and look forward to chatting further. Have a great day.

Thank you, sir. Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may disconnect your lines at this time.