Onity Group Inc (ONIT) 2002 Q1 法說會逐字稿

Good morning and welcome to the Ocwen quarterly earnings report. Online, be on listen only and the question answer session of the conference. Today's conference is being recorded if anyone has any objection should be disconnect. At this time, I would like to introduce Robert J. Leist, Vice President and Chief Accounting Officer.

Good morning everyone and thank you for joining us today. Our presentation may contain certain forward-looking statements that are made presumed to the straightforward provisions of Federal Securities Laws. These forward looking statements may be identified by reference to future period or by 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 factors that may cause such a difference please refer to the risk disclosure statement in today's earnings release as well as the company's filings with the Securities and Exchange commission including exhibit 99.1 attached to OCN's 2001 10k. We are happy to make Ocwen new releases 10Qs, 10Ks and other materials available to you via the mail. If you are not already receiving our materials by E-mail and would like to be added to our distribution list please mail E-mail at Linda Ludwig@ocwen.com. Joining us for today's presentation William C. Erbey - Chairman and Chief Executive Officer of Ocwen, Ronald M. Faris - President, Art Ringwald - President and Chief Executive Officer of OTX, Mark S. Zeidman - Senior Vice President and Chief Financial Officer. This presentation will be followed by question and answer period, during which we will be taking questions from those of you attending the conference by telephone. With that further delay I will now turn the call over to William Erbey.

Thank you Bob, and thanks all of you for attending Ocwen's first quarter conference call. I would like to open this meeting with my perspective on our performance for the first quarter of 2002 after which Ron, Art, and Mark will provide more detailed information. The first quarter of 2002 Mark continue progress towards the achievement of our strategic goals. I am proud of the accomplishments of our people in maintaining their focus on achieving our strategic objectives and continued to be confident that we are on the correct cores to achieve meaningful value for our stake holders including stock holders, our employees and our business partners. During the first quarter we reduced our non-core assets remaining to be sold by 26 percent or 139 million dollars. Leaving us with 400.5 million on the books as of March 31, 2002.

We expect to continue a strong phase of asset dispositions throughout 2002. The combined results of our core businesses also showed strong earnings growth in the first quarter. After adjusting for non-recurring amounts in both periods and for the effective of the change in accounting for intangible assets the combined earnings for these business grew by 4.7 million as compared to a loss of 1.6 million in the first quarter of 2001 and improvement of 6.3 million dollars.

During the first quarter we also announced the formation of a new venture with Merrill Lynch to service their non-performing assets globally. But still in the form of the stages we anticipate significant results from this activity in the future as we continued to expand our global presence. In our residential servicing business growth was headest of the budget with the unpaid principal balance of loan service increasing by 7.3 percent since the end of last year.

We are also very pleased to receive Moody's top rating of `strong ` for its Subprime and Special Servicing capabilities. We continued to remain focused on cost reduction and quality in our servicing business and towards that goal our expansion of our Indian facilities continued. We expect to see meaningful results from this initiative in the course of 2002. OTX results have improved since the first quarter of last year. Reflecting a 1.8 million dollar reduction and losses after adjusting for nonrecurring items and our change in accounting. This primarily reflects the impact of our ongoing cost reduction efforts.

As our use of Indian resources in OTX continues we expect further improvements year we continued to be excited about the expansion of our Real Trans product which we now believe is the major player in its market space. Existing real trans clients originate more than 25 percent of all mortgages in the United States. We continued to see to sign on new customers as well. At in RBC mortgage formerly known as Prism mortgage, the Asia's 21st largest lender charter 1 bank and then largest lender in city financial the nation's second largest subprime lender during the first quarter.

The key to achieve profitability in this business is no longer the addition of new account but rather to achieve full geographic and product line integration in our existing customer's operations. Our preparations for a full market launch of real servicing continue and we anticipate a formal product launch in the third quarter of this year. More importantly we had active discussions with the top five and top ten servicers for the light 5:15 seen that the fault management components are real servicing.

Our first quarter earnings were significantly impacted by increased reserves of 15.3 million dollars on our Affordable Housing assets. As of March 31, we had 95.8 million of properties and loans remaining on the balance sheet. The majority of these are subject to sales contracts with only 33.1 million remaining to be sold. Our efforts to dispose these properties are continuing, in April we signed a contract on an additional property with a booked value of 4.9 million dollars. I remain convinced that our strategy to look with non-core assets and use the proceeds to reduce leverage, is the best course for stake holders.

Since December of 1999 when we began the implementation of this strategy, our non-core assets to be sold have been reduced from 1.9 billion dollars to 400.5 million the remained to be sold as of March 31, 2002. A decrease of 79 percent. Our reserves on our remaining assets continue at record high levels, the percentage of assets. We are in the final stages of achieving our goal. For provisions and reserves continued to hurt our bottom line, the benefits can be seen in reduced leverage and strong equity.

Today, we have equity of 375 million in cash and cash equivalents of 274 million. We are confident at this strong financial foundation, will provide us with the ability to stay the course and achieve our strategic objectives. Looking ahead to the remainder of the year, we intend to grow our servicing business and realize meaningful growth in OTX revenues. We are continuing our emphasis on achieving expense reduction and quality improvement throughout the organization. I would now like to turn the call over to our President - Ronald Faris, go give you an update on recent development.

Thank you William. Remarks today will cover the servicing business, Ocwen Realty Advisors, and unsecured collections as well as our non-core business line, Discount loan, Affordable Housing, and the inactive subprime Finance business. In the Residential loan servicing business we recorded 8.5 million dollars in pre-tax net income, exclusive of 1 million dollar litigation reserve associated with a pending settlement of a class action claim.

Compared to 8.5 million in the first quarter of 2001 as well. Although, the first quarter 2002 earnings in servicing business is strong, they continue to be impacted by lower earnings on pay off fund held on as a result of the lower short term interest rate environment, we have experience since the first quarter of 2001. The change in the slope of the yield curve resulted in 3.1 million dollars lessen revenue in the first quarter of 2002 as compared to 2001. As a result of over night reinvestment rate coming down much faster than longer term financing rates. Amounts recorded as net interest expense in compensating interest expense, which represents the servicers expense for the difference between a 4 months interest and the interest collected on loan to the pay off before the end of the calendar month. Increase 3.2 million dollars from the first quarter of 2001 for the first quarter of 2002 as a result of larger balances due to the increase in the size of our servicing portfolio.

While income earned on pay off fund held on actually declined by 69 thousand dollars quarter over quarter despite the increase in balances as a result of much lower over night reinvestment rates. I am pleased to report that we have continued to see strong new product slow as our servicing portfolio grew from 21.9 billion dollars at December 31, 2001 to 23.5 billion dollars at March 31, 2002, a 7.3 percent increase. We also entered into three forward flow during the first quarter of 2002 that are expected to generate 4.5 billion dollars to 7 billion dollars of new servicing volume during the year.

We remain confident that we have the human and technical resources to capitalize on the market opportunities that exist today to continue to grow our servicing portfolio in 2002. On the expense side as Bill mentioned we continued to transition job functions to India. At March 31, 2002 we had approximately 270 servicing staffs in India up from 200 a year-end. We continued to be impressed with the quality of our staffs in India. We also remain committed to better serving our customers and improving our efficiency through the use of six sigma. We expect a start and complete eight new six sigma projects in the servicing business in 2002 with estimated annual savings of over 2 million dollars. Excluding the 1 million-dollar litigation reserve recorded during the quarter, the pre-tax profit margin in the servicing business remains strong as 33 percent. Before I move on from servicing, I would also like to point out some other recent developments directly impacting the servicing operation.

First, we were again able to improve our servicing quality ratings including our ability to resolve seriously doing loans prefer closure. We achieved a closure resolution rate of 81 percent in the first quarter of 2002 up 77 percent in all of 2001. In March we received ratings of `Strong` or `SQ1` for Subprime and Special Servicing capabilities for Moody's Investor's Services. Their highest ratings, this rating further affirms the high quality of servicing we provide and also provides our customers improved execution level on their securitization, finally during the quarter we officially want our new investor reporting website.

We believe that this site provides significant value to our client and we have received a very positive feedback both from them and from the investors in their securitization. In our unsecured collections or asset recovery business we posed a pre-tax income of 900,000 dollars in the first quarter as compared to a loss of 2.2 million dollars in the first quarter of 2001. This represents the second quarter in a row that we have achieved positive earnings in this business line. We continued to make progress in improving our collection capability and in attracting new fee base collection contracts. Ocwen Realty Advisors in our property evaluation division earned pre-tax income of 520,000 dollars for the first quarter of 2002 compared to 141, 000 dollars in the first quarter of 2001. Reflecting both the revenue increase of 1.4 million dollars or 51percent and an improvement in margin from 5.2 percent to 12.6 percent.

Both the Asset recovery business and Ocwen Realty Advisors complement our servicing business and provide additional value added services to our core client base. Both business lines have also made progress in reducing the cost structures in approving their product quality through the use of our Indian labor force.

In our non-core business we successfully reduced our non-core assets remaining to be sold by an additional 139 million dollars during the first quarter to 400.5 million dollars, a 26 percent reduction from December 31, .

Unsold non-core Residential Discount Loan assets were reduced by 75 percent or 42 million dollars primarily as a result of a Box of 36 million dollars of loan. We are pleased to report that we were able to reduce our non-investment grade securities by 25.2 million dollars with 38 percent from 65.1 million dollars at December 31, 2001 to 40 million dollars at March 31, 2002. Our commercial loans, REO, and real estate assets in our commercial finance business were reduced by 39 million dollars to 315 million dollars were approximately 11 percent below the December 2001 balance.

This leaves us with just 43 remaining commercial assets to resolve. Once again we strengthened our reserves on commercial loan and REO during the quarter. Our portable housing properties remaining to be sold decreased by 32 million dollars or 49 percent from 65.2 million dollars on December 31, 2001 to 33.1 million dollars at March 31, 2002.

As Bill already mentioned an additional sale of 4.9 million dollars occurred in April, leaving only 28.2 million dollars unsold as of today. Overall we were pleased with our ability to effectively resolve non-core assets during the first quarter. For the remaining assets we continued to take a conservative view of prevailing market condition in determining all of our reserve requirements. The pre-tax loss from non-core business of 16.8 million dollars in the first quarter of 2002 was in line with that of the first quarter of 2001. The first quarter 2002 loss was primarily resolved of loses from Affordable housing properties as result of the additional reserves built previously discussed.

Fortunately, we have only 28.2 million dollars for the Affordable Housing assets left to sale. It is also important to know that residential discount loans, commercial finance, and the subprime finance business all posted better results in the first quarter of 2002 as compared to 2001. In summary, we had growth and volume in the servicing business during the quarter, we again improved our quality measures and reduced our . 15:44. Most importantly, we made significant progress towards eliminating risks associated with our non-core business line. Thank you everyone, I would now like turn the call over to Art Ringwald.

Thanks Ron, Good morning everyone. During the first quarter Ocwen technology exchange continued to gain as we had several large lenders to the real trans platform. Is still noted RBC mortgage, formerly known as Prism mortgage the Asia's 29th largest lender and city financial the nation's second largest subprime lender of altering the network. As well also noted REAL Trans customers now control over 25 percent of loans originated in the United States. More importantly REAL Trans is consistently winning in competitive situations.

Having signed many of the nations largest lenders we now need to focus more energy on corp. selling REAL Trans within our existing lender base. Corp. selling increases our revenue stream in two ways, first by production units that have already used REAL Trans to our additional products that yield higher revenues thereby increasing eventual revenue for transactions. Second, by increasing overall quick volumes of the result of adding new production units from existing Lender customers. With regard to the first type of gross sale, I would note that many of our customers have elected to launch the usage of REAL Trans platform with the lowest over all revenue-generating product in our menu flood determinations.

As these customers migrate to other products which yield up to 20 times per quick of flood determinations we expect our average revenue per to increase. As an example our average revenue per transaction in April increased by 25 percent over the average of the first quarter. We expect to complete a significant number of flood determination integrations in the second quarter as new customers come on line therefore revenue growth per will likely flatten out in the near term but begin rising again in the third quarter. Examples of the second type of cross sales in the first quarter includes successful as well as Bank of America and City financial.

Bank of America is one of the Nation's largest construction loan lenders. Based on their extremely positive experience with REAL Trans at the home equity division, Bank of America has elected to utilize REALTrans and its construction-lending unit. Bank of America will utilize REAL Trans to communicate with our Network. Of 2000 field inspectors and appraisers who perform the critical inspections required for each construction loan typically 6 to 8 inspections are ordered per transaction at each of which will be ordered over the REALTrans network thereby generating additional revenue for OTX. Similarly, based on the very positive experience that City Mortgage have with REAL Trans, they referred us to their affiliate at City Financial where they will be utilizing the REALTrans platform to order many other products and services required to process their loans. Upon our continued sales excessive for region transaction volume was disappointing.

Specifically, REALTrans volume was approximately 17,000 transactions in the first quarter of 2002 down significantly from fourth quarter of 2001. Because of the short falls directly relate to the decrease of originations of our customer base. We have been assured that the decline was not related to any deterioration at the REALTrans share of their ordering volume. Component, our will resume as soon as several of our major new lenders complete the integration process and go within the next 90 days. For the support of reversible discount, you can find in looking at April's transaction volume, they represented quarterly run rate excess with 90,000 transactions.

Next to the financial performance of REAL Trans the first quarter pre-tax operating loss was down slightly adjustive for one-time changes in charges and credits despite the follow up, include volume. Moving on to real servicing we continue preparations to take this product to market and expect that we will in position to the platforms, to plot management module and our really management module in the third quarter. This should yield implementations as early as effecting quarter of 2003. I like to take a moment to share with you, some of real servicing is competitive with damages as identified by major services during our preliminary marketing efforts.

These include the advance functionality of the Real servicing default management modules LRW and REO and the proven success that Ocwen Federal Bank a nationally recognized leader in default management process. Real servicing ability to scale to over 5 million loans within a single production environment. Real servicing is 24 by 7 availability, which will assist you to take advantage of the significantly lower cost labor force available on optional locations.

Real service is a unique work on its ability attributes, which includes tabular vs. programs enabling the user rather than to set rules. Real Servicing's ability to store significant number of data for customers, which can provide a foundation for cross initiatives. As per the financial performance of REALServicing, in the first quarter pre-tax offering was excluding Ocwen federal bank revenues from late expenses remained essentially flat. I remain very enthusiastic on the prospects for REALServicing products as we progressed to appoint where we can begin to aggressively market the product. REALSynergy, last quarter enough the completion of the offset management module for the real synergy platform.

This new product has been named REAL SAMM, which stands for REALSynergies asset management module. Real SAMM provides advanced investor reporting, the top management, workflow, and financial forecasting capabilities to effectively manage commercial mortgage loans and portfolios loans. Not only this rule stands significantly expand real synergies potential customer base it is also OTX's first application designed for the global market place as the application is adaptable to the complex loan structures that are, outside of the united states.

To this point and please to announce that we have added it to a major partnership to deliver the REAL SAMM technology platform to Merrill Lynch on a global basis starting in Japan in a migraine to other countries. In addition, REAL SAMM is currently being strong in Italy in conjunction with the joint venture involving the Ocwen Financial Corporation. All most the most important please turn out the signing of two new REALSynergy clients this past quarter. Trans America REAL estate services and first change in .

This recent success service support for optimism for the REALSynergy platform. First quarter pre-tax operating loss of REALSynergy was 450,000 dollars better than the fourth quarter loss. This is not of a one-time adjustment of 200,000 dollars related to goodwill amortization, which was not included in the first quarter. As you know from previous calls Ocwen technology exchange is truly a global company. At the end of 2001 OTX along with their affiliates, they built the team of 43 technologies at the India development center. Based on the attributions made by our India software development team we will stand up the team strength to more than 60 technologist by the end of the first quarter and are planning to have an excess by year end. In conclusion OTX continues to make solid progress. Three critical factors are now key to our success. One REALTrans Corp sales were continued to excess gives as reason for optimism. Two, REALServicing sales, where we are nearing completion of key functionality to allow begin marketing in the product aggressively in the second half of the year.

Three, improvement in pre-tax operating results which will continue to be driven by a strong focus on expense management, our global efforts of the sale and cross sale of various revenue producing products and the completion of scheduled integration projects. As I have noted on each call, I continued to be optimistic with regard to OTX's future. It is my belief that we are demonstrating very significant progress on a number of critical fronts, the ship provide confronter we are in a positive track to deliver significant value of our shareholder. I will turn the call over to Mark Zeidman the chief financial officer of Ocwen Financial Corporation.

The first quarters 2001 reflects the continuation of the strategy we followed through the last 2 years. Of building up our core fee-based servicing business and our technology business while liquidating our remaining investments and capital-intensive non-core business line. Accordingly, we are able to report that pre tax income from our core businesses root from the profit of 2.6 million in the fourth quarter of 2001 to a profit of 3.7 million in the first quarter of 2002.

Note that this represents the fifth consecutive quarter in which the combine pre-tax results from core businesses improved quarter over quarter. As Ronald mentioned our loan servicing business continued to expand as the unpaid principle balance of loan service for others approximately 1.6 million or 7.3 percent in the first quarter and as that reported our technology business of OTX continued to add new clients for the REALTrans system. On the other hand we continued to incur losses in our non-core business lines, which reported a combined pre-tax loss of 16.8 million in the first quarter of 2002. As compared to the pre-tax loss of 7.6 million in the fourth quarter of 2001.

The increased loss in our non-core businesses was primarily due to additional reserves of 15.3 million recorded in the Affordable Housing Business largely due to changes in market values. However, the first quarter losses are non-core assets should be understood within the context to the progress made in reducing the companies remaining exposure in these asset classes.

Specifically, our total investment in unsold non-core asset was reduced by 139 million or 26 percent in the first quarter to approximately 401 million at the end of March as compared to 539 million at the end of 2001. It is important to know that the liquidation of the significant amount of our remaining investments in subprime residuals and residential discount loans was executed as for above recorded values. For example, total subordinates and residuals decreased by 25 million or 38 percent in the first quarter to 40 million at the end of March, largely due to sales of securities executed at realize gains of approximately 2.9 million.

According, the subprime business unit posed to the pre-tax profit of 4.5 million in the first quarter. Similarly, the sale of 36 million of residential loan was executed at a small profit and helped the residential discount loan business unit posed profit of 1.1 million in the first quarter. Largely, because of the sale the company's remaining investment in unsold residential loans in REO has been reduced by 42 million or 78 percent to only 12 million at the end of March.

Additionally, although we reported material losses in the Affordable Housing business, the amount of remaining unsold, affordable Housing assets at the end of march was reduced by 49 percent to 33 million at the end of March and we have subsequently sold additional affordable housing assets in April. Bulk of the company's remaining investment in non-core assets is in the commercial finance business. Commercial assets decreased by 39 million or 11 percent during the first quarter. At the end of the first quarter, commercial loans and real estate comprise 315 million or 78 percent of the company's remaining investment in the non-core assets.

The company also made progress in the first quarter from a cash and liquidity point of view. Despite the net loss reported for the quarter, the company was able to both increase its bounce of cash and cash equivalent and reduce its liability. Operating activities generated positive cash flow of approximately 72 million. Primarily, from sales up and principal payments on subprime residuals, non-investment grade subordinates and liquidity bound. Investing activities generated positive cash flow of approximately 54 million, primarily form the sale of non-core assets, offset in part by 22 million of acquisitions of new servicing right.

Financing activities use 113 million of cash primarily to pay down maturing certificates of deposits. On a net basis therefore, the company's balance of cash and cash equivalent increased by 13 million in the first quarter to approximately 274 million at the end of March, up this amount 115 million was at the bank and 159 million was at the Holding company. Additional sources of liquidity available include approximately 60 million of unpledged triple 29:27 residential CMO's and approximately 200 million of unpledged servicing advances. As a result of these activities the companies ratio of access to equity strengthen from 22.2 percent at the end of 2001 to 23.8 percent at the end of March. Similarly, the company's debt equity ratio improved from 3.401 at the end of December to 321 at the end of March. Now I liked to turn the call back to William Erbey.

30:00 call up to any questions.

Good morning, at this time, we are ready to begin the question and answer session, if you would like to ask a question, please press star 1 you will announced prior to asking your question to withdraw your question you may press star 2. Once again to ask a question please press star 1. One moment please, our first question comes from Merrill Ross of FBR & Co. You may ask your question.

The agreement with Merrill Lynch, that you mention starting in Japan, give any concept of the size of the asset you will be talking about there?

Yes, I am not sure that I can really go in divulge with the asset basis of one of our clients within a given country, I am afraid I may not have .

On the sale that you have mentioned in April, on the Affordable Housing was there any thing right now associated with that or is that captured in the 15.3?

It was already captured in 15.3.

Right, thank you.

Jack Wolcott of Investment Management Virginia, you may ask your question.

Hello, this is a question for all I think, I missed part of the call so if you may have covered it, but with regard to real servicing and when you would began marketing it aggressively. What are the hurdles or matrix there, that allowed you to proceed with more aggressive marketing? Thanks.

Basically we are in the final stages of development of the product for marketing purposes otherwise we use the product internally right now, there are certain functionality aspects of the product that are required to run Ocwen's business. But our required if you are an A type service chaser whoever, so we are in the final stage completing those modules now. Once those are completed we are ready to roll and we expect that to happen around the end of June.

Thank you.

Once again to answer a question, please press start 1. One moment, Peter Fauher our former Partners. You may ask your question.

Good afternoon, I just had a question for Bill, only on in the presentation Bill you said something very quickly and I just simply didn't understand. I will just try incur you that you said you are two conversations for REALServicing, something about number five and number 10. I didn't know what you were telling us. I just want to know if you get just repeat that or give us a little bit more inside us to what you were referring to.

Yes, we have the loss mitigation modules at the back and do with default management and REO. Those are infact in the market today. We just have started marketing those and we are having discussions with two top peer services in the United States to utilize these modules.

Thanks.

Joss Elwing of U.S. Bancorp Piper Jaffray Inc. You may ask your question.

I have to ask a question regarding REALTrans, I was wondering if there is an update on the relationship with , I understand I was pushed out, ?

We have an update unfortunately, it has not been made public yet, so I can't speak to it. We really fall behind their own origination system as soon as that's implemented, we are already integrated it with that and so the question is really is our access to watching to mutual and quick volume will occur as they implement, we want origination system. I am current on what the latest public announcements have been on that. We have a private announcements as those really we can't share that for obvious reasons.

Secondly, when do you expect completing the sale of non-core asset?

I think that is pretty much an ongoing process, I think you see in the rate of pace that we have been able to look with assets I suspect when you get down to the last handful of them is not going to go with the same phase, but we have been very successful at selling on average over the past six quarters or more for memory of around 100 million a quarter. So we would hope that up to a certain point we can continue that. I suspect there will be some assets at the end, such as performing loans etc. that we are just going to let on and off in the due course, but the vast majority assets, we hope to get off in the next few quarters.

Thank you very much.

Andrea Kanab of Sikovia . You may ask your question.

Good morning, I had a question actually regarding City mortgage, City mortgage is supposed to be fully implemented in March. Is that the situation now or they fully using product REALTrans?

Usually, mortgage's implementation was completed got from memory of 3 or 4 weeks ago, so they are alive and on the system now. What happens is we have to integrate each product individually, so they want I think they should actually call which product they show first, but they will be evaluating to a and other higher yielding products in the very near future. We have a complete schedule for that roll out, but you are correct the initial integration was completed and then alive about 3 or 4 weeks ago.

you see people integrating, the product degenerate the least amount of revenue, is the simplest product for them, is not off let. It is the fewest not pieces of data information, so they take baby steps first by implementing a very simple product and then as they gain experience from that they migrate up to higher value more data intense of products throughout their life cycle.

A very established schedule with you when the certain products that are going to come along, so we should expect full implementation by the middle of 2003, is that the time frame that we should be anticipating because you know going back last year when signed up and we were expecting a lot quicker roll out on a lot of these products. So the question is, it is just a one in the door and then you are going to see how it works and then take your time or you will be able to convince them at times, how is your ability to move the process along?

It is fairly in the case of city mortgages, city mortgages will sound press for the city financial is that you guys need to use this product and we have now signed a deal with City Financial in a very short period of time, we are not going that kind of relationship building there. We are having similar things with Bank of America they called as soon and asked us to construction lending product building on this successfully had in there home equity business and other areas we were talking about as well. Really, the biggest issue I think I addressed this may be two or three calls back assured when a number of bit. But big banks seem to have waves of focus and we spend the focus on something like this we moved very quickly, there is something else going on in the environment, and CEO of the we are going to really work on this. So I think we will see at this point in time my senses everybody started to focus more in the we actually have an integration schedule, the delays are with regard to a number of large customers precisely the dates that they have committed to complete the integration of the series of products. The only time I felt those actually occurred we obviously can't tell them what to do, but optimistic that much of that is going to happen in couple of quarters.

We were talking about the system is being put in the place, I know BFH was framework and I guessed it was a mutual framework. Did City Mortgage have their own system or they using eastern or older ones and still there was a less problem with that system, in getting it up in the running.

I guess, the answer to your question. I don't know which system they were using about whatever they were wanting the process of changing it. So if there is no problem for us to go complete the integration and then start . In the case of Watson they are in the process of revamping their own originations system and are installing frame work as the new platform until that installation gets done we can't move ahead with them, we are integrating the frame work, but frame work is not a system of record or Watson they difference was the they are continuing to use whatever they had, we didn't have to wait behind anything we simply wanted completed our part of the integration and we are up in running a very short period of time.

I think too, it depends on how each firm uses as well, it is not just the yellow system by itself, the integrations are required with other systems within their company and its more origination could be vendor management, it could be a wide variety of other applications in business department to get drawn into that, next. So it is not a question that we would say that one origination system is better or worse then an other it depends on how what or trying to do in the deployment, the rate of change they are undergoing within the origination system.

Are there other opportunities out there say selected by someone like a welfare have you seen that may be that even shows in the vendor or they really see the REALTrans, but have you seen someone in front of the LOS systems get chosen? Have they won any contract lately, is that the front end of the system that getting processed heating up for some of the ?

The LOS systems are getting chosen form time to time, we actually have strategic alliances with at least eastern are both strategic partners of REALTrans and will be easy for us to integrate with either one of those as they install their system some . I actually don't know how each of the LOS has been respectively in terms of winning new contracts.

I sense that the underlying question, correct me if I am wrong. Your underlined question is or the assumption is that a change in LOS would generate a purchase of REALTrans or an other vendor management system. The reason I think that this main relevant to the whole processes. People are going to select vendor management systems, they are going to select LOS's. It just happens to be one of the most high profile accounts within the process of making very substantial changes to their operating system. Please don't assume that I have changed that automatically assumed that someone is going on by vendor management system at that time or vice versa.

Thanks. At this time there are no further questions.