Onity Group Inc (ONIT) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ocwen Financial fourth-quarter 2013 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer and instructions will follow at that time. (Operator Instructions). As a reminder this conference may be recorded.

I will now turn the call over to your host, Mr. John Britti, EVP and CFO. Please go ahead.

Thank you, operator. Good morning everyone and thank you for joining us today. My name is John Britti and I am Executive Vice President and Chief Financial Officer of Ocwen Financial Corporation.

Before we begin, I want to remind you that a slide presentation is available to accompany our remarks. To access these slides, log on to our website at www.Ocwen.com, select shareholder relations, then under events and presentations you will see the date and time for the Ocwen Financial fourth-quarter 2013 earnings. Click on this link. When done, click on access event.

As indicated on slide 2, our presentation contains forward-looking statements made pursuant to the Safe Harbor Provisions of the federal securities laws. These forward-looking statements may be identified by reference to a future period or by using forward-looking terminology. Forward-looking statements by their nature address matters that are to different degrees uncertain. 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.

Our presentation also contains references to non-GAAP financial measures such as normalized results and adjusted cash flow from operations. We believe these non-GAAP financial measures may provide additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measure should be viewed in addition to and not as an alternative for the Company's reported results under accounting principles generally accepted in the United States.

For an elaboration of the factors I just discussed, please refer to today's earnings release as well as the Company's filings with the Securities and Exchange Commission including Ocwen's 2012 Form 10-K and 2013 quarterly 10-Qs. Note that we expect to file our 2013 Form 10-K by Monday.

If you would like to receive our news releases, SEC filings and other materials, please email Linda Ludwig at Linda.Ludwig@ocwen.com.

Joining me today for the presentation are Bill Erbey, our Chairman, and Ron Faris, President and Chief Executive Officer. Now I will turn it over to Bill Erbey. Bill?

Thank you, John. Good morning and thank you for joining today's call. This morning I would like to cover three broad areas in my prepared remarks.

First, I thought it would be worthwhile to address some of what is being said about the Company in recent media reports. Second, I want to discuss our commitment to customer service and the substantial investments we have made and we expect to continue making to build upon our industry-leading servicing platform. And third, I would like to review why we remain confident in the Company's ability to continue to invest its capital and why we remain a buyer of the Company's stock.

After my comments, Ron will discuss our work with community groups and provide more details on our historical modification performance and an update on our results and operations. Finally, John will provide additional detail on our fourth-quarter funding and financial results.

Regarding the news, let me start by saying that I am obviously limited with what I can say about some things so please accept my apologies in advance if we do not answer every question you might have either in our remarks or in our Q&A. Never the less, it is probably useful to recap some facts.

Much of the recent media coverage relates to the suspension of our agreement to acquire a pool of mortgage servicing rights from Wells Fargo representing $39 billion in unpaid principal balance. One of our key regulators, the New York Department of Financial Services or DFS, expressed concerns about our recent large acquisitions of mortgage servicing and requested that we put the closing of the Wells transaction on indefinite hold pending further review. We agreed to do so.

Notwithstanding the false rumor in the trade press to the contrary, the transaction remains on a definite hold. The only other thing we can say is that we are cooperating fully with DFS.

We received a letter yesterday from the DFS asking about our relationships with four related companies, independent companies. I would note that the agreements among the companies are fully disclosed in our public SEC filings and we believe them to be on an arm's-length basis. We look forward to addressing the matters raised by DFS and will fully cooperate.

I would also like to address general media reports regarding the regulatory regime and capital position of non-bank servicers vis-a-vis banks. In short, we believe Ocwen compares favorably on both counts relative to other non-bank servicers.

First, some of the questions whether banks are shifting servicing from a regime of oversight under the National Settlement to one that avoids bad oversight. That may be true for other non-bank servicers but it is not true for Ocwen. Ocwen is subject to virtually identical servicing standards and oversights as the large banks because the National Regulatory settlement we agreed to closely mirrors theirs. Moreover, our acquisition of the ResCap portfolio was conditioned on our assuming the obligations to service it under the servicing standards and national monitoring requirements and GMAC's National Settlement which we have done so for over a year now.

These are also substantially the same standards and requirements as those in the National Settlements with JPMorgan Chase, Wells Fargo, Bank of America and Citibank. It is worth noting that as of the latest reporting by Joseph Smith, the national monitor over all of the settlements, only the ResCap portfolio has received credit for achieving its consumer relief targets through mid-2013.

With respect to capital, Ocwen is also in a different position than other non-bank servicers. Ocwen is the best capitalized public non-bank servicer by a large margin as you can see on slide 4. We have far more equity and net worth relative to debt compared to our peers. By other metrics of balance sheet strength such as debt coverage ratio, we are similarly stronger.

You can see that we show both unadjusted and adjusted levels. This is because unlike our peers, we carry MSRs at the lower of cost or market rather than marking them to market. were we to mark to market our MSRs, we would substantially increase book equity.

On slide 5, we show the impact of increasing our MSRs to fair value which would increase the book value of our stockholder's equity by $836 million. Note that this is based on broker marks that appear to lag be market valuation. Moreover just taking into account Ocwen's lower cost of servicing and not including our superior ability to lower delinquencies, the value would increase by at least another $830 million.

Ocwen holds far more capital relative to our MSRs than banks even under the new Basel regulation. Our ratio of equity to MSR value is essentially 1 to 1 which is well above the capital typically held by banks against their MSRs.

Next I would like to address various comments I have seen in news reports regarding data on Ocwen's ability to serve distressed borrowers. Ron will cover the data in more detail later but let me summarize a few pertinent facts.

Ocwen has completed more HAMP modifications than any other servicer including Wells Fargo, Bank of America, Citibank and JPMorgan Chase according to data from the US Treasury. Indeed we have done 20% of the total for all HAMP modification and 36% more HAMP modifications than the next highest servicer. Our performance on HAMP principal modifications relative to other servicers is even more impressive. We have accounted for about 39% of all HAMP principal modifications and exceed the number of the next highest servicer by a ratio of 2 to 1.

Finally, multiple independent data analysis shows that Ocwen has consistently provided more modification with lower re-defaults on private label subprime servicing than other servicers. For example, a Moody's analysis published in October cited Ocwen as the best in class servicer as compared to other large servicers. By tracking loans through the financial crisis from 2009 to mid-2013, they showed we secured more loans and had fewer noncurrent loans than we had previously modified.

The bottom line is that we get results. Indeed it is ironic that another recent news story about Ocwen was that we might be sued by RMBS investors for being too successful modifying loans. There is absolutely no substance to suggest that we change or will change our process for modifying loans because of the National Settlement. To the contrary, the settlement makes clear that we do not need to deviate from our contractual obligations to resolve delinquencies and the best interest of the (inaudible) trust.

Each loan modification is determined on a case-by-case basis in accordance with the applicable servicing agreement and Ocwen only performs a loan modification when the analysis shows that the modification will produce a net present value for the mortgage loan investor that is superior to that of foreclosure.

More importantly, we are confident that our modifications are net present value positive to investors. Another Moody's report published in 2013 shows that Ocwen generates more cash flow in securities than the other large servicers. This and many other studies consistently show that sensible modifications that help families keep their homes provide far superior outcomes for investors and communities.

Next let me talk broadly about our investments in servicing operations that reflect our commitment to quality servicing. Comments from policy makers and regulators cover industrywide questions about loan servicing transfers. We agree. Our leadership team and our employees embrace these conditions, these concerns. We will be the first to admit that we are not perfect and that our industry has a long way to go but we have worked hard to be part of the solution by raising standards for helping homeowners in distress for over two decades.

Ocwen pioneered forbearance and loan modifications even before the government HAMP program came into being. Similarly, Ocwen has been a leader in such innovation as the shared appreciation modification for underwater homeowners and alliances with community groups that support more effective borrower outreach. Moreover, we are making the investments required to continuously improve our service and quality and exceed compliant standards.

We've also invested in and will continue to invest in more robust auditing, quality control and validation of our servicing, quality and compliance. Notwithstanding our investments to date, we believe that there are many things we can do to be even more effective in addition in the future. Our commitment stems from a deeply held belief that exceptional borrower experiences, positive investor outcomes and servicer efficiencies are not in conflict but in fact are very much aligned.

My last topic has to do with Ocwen's ability to continue to produce solid value for shareholders. As noted a moment ago, we will continue to invest in our core servicing capability and this is part of our overall view that being better at mortgage servicing is something that has substantial value, not just now but into the future.

As Fannie Mae's CEO recently noted, specialty servicers provided much-needed capacity for the industry that the housing crisis started. Unfortunately despite some improvement in the housing market, the crisis has not ended. The number of families struggling with their mortgages remains substantially elevated as shown on slide 6. Our mission as a Company is to continue to be part of the solution by helping homeowners and investors.

Given the issues discussed above, we don't think it is appropriate to update our new business pipeline at this time.

Next, I would like to cover developments on our mortgage lending operation. Yesterday we closed our first notes issuance under our new Ocwen Asset Servicing Income Series, or our OASIS program in a private placement. These notes were secured by Ocwen owned mortgage servicing rights relating to $11.8 billion in unpaid principal balance of Freddie Mac 30-year fixed-rate mortgages. This financing is an example of an Ocwen innovation that should substantially improve our ability to compete in the prime origination space.

Notice that I said prime, not subprime. Ocwen has always been concerned about our exposure to prepayment risks inherent in prime mortgage loans. As a result, we have been somewhat tentative in our pricing of such assets. Now with OASIS, we can originate prime loans and sell the prepayment risk to investors seeking such exposure and with OASIS, our cost of capital is now more than competitive with commercial banks.

The OASIS transaction also demonstrates a substantial unrealized value on our prime servicing portfolio. On the deal we just closed, the assets in the transaction were on our books at a 3.1 multiple of the servicing spread while the notes traded at a 5 times multiple. Therefore the market is pricing the servicing at more than 1.9 times 31 basis points over 59 basis points of UPB higher than we were carrying the servicing on our books and also substantially higher than the third-party marks utilized in slide 5.

Also the bid in the aftermarket is up significantly based upon the aftermarket bid ask spread of 5.2 to 5.5 times servicing fee, the difference increased to between 65 and 74 basis points of unpaid principal balance. I might point out that we have over $260 billion of agency servicing.

If one remembers back to the ResCap transaction, pundits claimed that we overpaid for that acquisition. I can assure you that whether it is be ResCap or more recent acquisitions we are very focused on our return profile which we believe is as strong today as it has ever been.

Ocwen continues to evaluate other adjacent business opportunities that will benefit from our operational capabilities and where we can deploy our capital at high rates of return. I would hope to have a substantial update on our second-quarter earnings call.

Our relatively low leverage combined with our substantial positive cash flow means that we can both fund new investments and repurchase stock to maximize returns on equity. As we have noted previously, the cash flow generated by Ocwen is sizable. Our revenue run rate is now over $2 billion annually. Moreover, the value of our existing portfolio will generally increase as the economy improves. This is true for a few reasons.

First, higher interest rates slope prepayments especially on our prime portfolio, which prepaid at an annual rate of 14.5% in the fourth quarter. On our non-prime portfolio, the fourth-quarter constant prepayment rate or CPR of 11% was at an all-time low for at least the past few years. Most non-prime prepayments are a result of principal reduction modification, REO sales, short sales or charge-offs.

As we improve performance through our loss mitigation efforts and the economy improves, prepaids should continue to decline. Lower delinquencies also mean lower operating costs as it is far less expensive to service a performing loan versus a nonperforming loan. Lower delinquencies also reduce advances and related interest expense. All of this means that we expect our existing portfolio will generate substantial value.

In addition, we believe that our Company has substantial value embedded in our operating capability both for our existing business and more importantly, new business lines. A source of strength should not be turned upside down. The fact that we do not need to do any new business to maintain high levels of profitability does not mean that this is how we should be valued. Rather, our sizable intrinsic cash flow combined with substantial competitive advantage should suggest we are worth a sizable premium to the net present value of our future cash flow.

With all of this in mind, we will continue to be a buyer of our common stock under our authorized $500 million stock repurchase program. Generally our goal is for our purchases in the first three months following our earnings announcement to be at least as much as our prior quarter's earnings keeping in mind our desire to maintain the strongest capital ratios in the industry. Nevertheless, we may purchase more or less in any given time period.

I will now turn the call over to Ron to talk more about our commitment to the quality service, operational and segment level performance and cost management initiatives. Ron?

Thank you, Bill. This morning I will cover three topics in my prepared remarks. First, I will provide some additional perspective on our overall regulatory regime including the National Settlement we signed in December and was approved yesterday by the court. Second, I would like to go over some examples of what has made Ocwen stand out in the servicing industry including our engagement with community groups and details on our modifications and loss mitigation efforts. Finally, before turning the call over to John Britti, I will cover some fourth-quarter results and update our integration efforts.

First, let me review some facts regarding our regulatory regime. Contrary to some erroneous press reports, Ocwen is not a bank. We are a licensed servicer and mortgage originator in every jurisdiction in which we service and originate loans. We are subject to federal and local rules and oversight. We are also subject to oversight from Freddie Mac, Fannie Mae, Ginnie Mae, private trustees and other clients for whom we service or subservice loans.

With respect to the National Settlement, let me restate some facts. The agreement includes the CFPB, state regulatory agencies and 49 state attorneys general. The New York Department of Financial Services along with the State of Oklahoma's Attorney General and state mortgage regulator are not parties to the agreement. The agreement settles alleged mortgage servicing claims related to the period from 2009 up to and including December 18, 2013.

In addition, we will be subject to the same national monitor, Joseph Smith, as prior National Settlement with the large banks and legacy ResCap. The required servicing standards in the settlement are almost identical to the other national servicing settlements and in many cases similar to the new CFPB standards that took effect in January.

Let me move on to talk about some of Ocwen's long-standing work with community housing organizations. We strive to be the best in the business at helping homeowners in distress and thereby serving the interest of investors and communities. One way we do that is by improving the effectiveness of our communications with struggling homeowners. This is absolutely essential to preventing foreclosures.

Among the most powerful means we have for doing this is through our support and collaboration with nonprofit consumer advocacy and housing counseling partners all around the country. The effort of these groups are especially helpful in hard-hit areas and communities of color.

To name just a few, we are grateful for the Homeowner Outreach Assistance from Home Free USA, National Association of Neighborhoods, National Community Reinvestment Coalition, National Council of La Raza, Neighborhood Assistance Corporation of America, and Empowering and Strengthening Ohio's People.

We were pleased to have received various awards from community groups in recognition of support and innovation such as our shared appreciation modifications for underwater borrowers. We continue to expand our partnerships with nonprofit community groups across the country. Through these partnerships we are able to enhance our outreach to our customers who are struggling with their mortgage payments. The housing counseling firms we work closest with are highly experienced and effective at helping families through the delinquency resolution process. They are also skilled at educating families on financial literacy and household budgeting which has resulted in reduced re-default rates.

Moving on to talk about our success as a servicer, let me start with the HAMP program. On slide 7, we show the detailed Treasury data Bill referenced earlier with respect to HAMP modifications. As you can see, Ocwen has been the leader in total HAMP modifications overall and especially with regard to HAMP principal reduction modifications. Ocwen has started over 264,000 HAMP modifications with over 50,000 of them being in HAMP's principal reduction program.

It is worth noting that while Ocwen is now the fourth largest servicer, we only attained that status in the past 12 months. This data however is for the HAMP program since its inception in March 2009. Ocwen has thus been a substantial overachiever relative to our size as a servicer. Some of this is due to the fact that we have specialized in more delinquent portfolios than others but is also a function of our focus on building a robust and effective process to manage customer communications, financial hardship documentation and modification and short sale decisioning.

As required by law, we always check a borrower's qualifications for HAMP before offering other programs. Nevertheless, HAMP modifications have accounted for less than half of total modifications in recent periods as many borrowers simply failed to qualify for the HAMP program.

The next slide shows Treasury data related to the number of modifications or payment plans offered to borrowers who were not accepted in the HAMP program or who had their trial modification application canceled or disqualified. Again Ocwen outperforms other servicers by offering the largest number of alternative modifications or payment plans to borrowers with over 295,000 such offers. These results show up in other third-party data and analysis as well.

As shown on slide 9, Ocwen both modifies more loans and has fewer modified loans that are delinquent in private label subprime pools than other servicers. Ocwen has modified 59.9% of its PLS subprime portfolio compared to only 50.3% for other subprime servicers. Ocwen has also had better performance on modifications with those that are 60 or more days delinquent at only 26.7% compared to the non-Ocwen servicer re-default rate of 34.1%.

As shown on the next chart, our superior performance is consistent when lined up against any large subprime servicer. Some are a little better than average but none are better than Ocwen.

In October of last year, Moody's published a study where it tracked over 1 million loans that were 60 days or more delinquent in December 2008 and followed them through June 2013. Their analysis found Ocwen's performance to be the best in class. The results speak for themselves, Ocwen consistently achieved more modifications than its peers with lower rates of re-default.

On slide 11, we show historical modification numbers. Since 2008, we have helped about 463,000 families keep their homes with sensible modifications including government-sponsored HAMP modifications. Modifications are not the only way to provide homeowners with alternatives to foreclosure however. Payment plans, forbearance plans, short sales and deeds in lieu also provide ways to avoid the cost of foreclosure for both investors and communities.

For the full-year 2013, Ocwen helped over 200,000 borrowers receive sensible modifications and other loan resolutions that avoid foreclosure while improving cash flow to mortgage investors. For 2013, nearly 75% of all of our delinquency resolutions were resolved without resort to foreclosure. We are proud of our ability to resolve loans without foreclosure as this is best for struggling families, for blighted communities and for investors.

Moving on to our operating performance for the fourth quarter 2013 beginning with loss mitigation. In the fourth quarter, Ocwen completed 29,979 loan modifications. HAMP modifications accounted for 44% of the total. In the quarter, 54% of modifications included some forgiveness of principal with an average principal reduction of about 35%. Our shared appreciation modification accounted for 3807 of the modifications in the fourth quarter and almost 15,000 for the full year.

In addition to modifications, Ocwen had over 21,000 other pre-foreclosure resolutions of delinquent loans in the fourth quarter. Ocwen's overall 90 plus delinquency rate at December 31, 2013 was 14.5% representing a modest 1/10 percentage point decrease in delinquencies compared to September 30, 2013 numbers. The reduction would have been about 0.5% a percentage point but for the fact that the boarded portfolios from One West and Greenpoint had higher delinquency rates than our portfolio at the end of the third quarter 2013.

Moving on to our integration and recent acquisitions, the transfer of loans from One West and Greenpoint were substantially completed during the fourth quarter and early in the current quarter. More importantly, we are nearing the end of our integration of the legacy ResCap loans onto Ocwen's servicing platform. We expect to be able to finish our consolidation by the end of the second quarter. Consolidation will allow us to substantially lower our expenses and reduce the operating complexities of running multiple platforms.

Constant prepayment rate, or CPR, dropped 2.7 percentage points across all loan types averaging 13.1% in the fourth quarter as compared to 15.8% in the third quarter. Overall CPRs are down 7.7 percentage points over the second half of 2013. The CPR on nonprime loans averaged 11% for the fourth quarter which is down from 13.1% in the third quarter.

Slide 12 shows nonprime CPR trends including a CPR breakdown between voluntary, nonvoluntary and regular amortization. Prime loan CPR continued its more rapid decline to 14.5% in the fourth quarter from 18% in the third quarter. Slide 13 shows prime CPR broken into its components.

Moving onto originations, Homeward lending's funded volume was roughly flat at $1.3 billion in the fourth quarter of 2013 versus the third quarter's $1.4 billion. [Loss] volume for our own direct lending channel more than doubled quarter over quarter to just over $200 million. As a result of the higher retail mix, Ocwen's lending business generated a record high $14.8 million pretax income contribution in the fourth quarter despite the fact that rising interest rates reduced margin and volume below our expectations.

HARP refinances continue to be the major driver of earnings in our lending business. However, we expect this volume will begin to decline over the next few months as the number of marketable HARP eligible loans decreases. This may be offset to some extent by the improved execution we expect as a result of the Oasis transaction.

Our Liberty reverse mortgage subsidiary maintained its position as the top reverse mortgage lender with a 16.1% market share in 2013. The market is still dominated by variable rate LIBOR-based product which represents about 75% of new production. As noted on prior calls, this product feature lowers initial draws but we expect that it will generate higher income in later periods as subsequent draws occur.

Before I turn the call over to John, let me reflect on the bigger picture. As we immerse ourselves in the day to day, it is often easy to forget the substantial improvement we have achieved over the past year as our operating results have improved at rates few companies have matched. I appreciate the hard work that the Ocwen team has undertaken to make this possible.

As we look forward to this year, we expect to maintain strong operating performance by investing in our compliance management infrastructure that will enhance our ability to demonstrate our compliance, raising the bar on customer service through continued investments in training, new processes and new technologies, improving our cost structure by consolidating onto a single operating platform and taking advantage of our scale to further reduce overhead expenses and building our lending business and utilizing our core competencies to invest in adjacent businesses.

Now I would like to turn the call over to John Britti. John?

Thank you, Ron. Today I will cover three areas. First, I will review the fourth-quarter and full-year 2013 results in more detail. Second, I will discuss our funding activity in the quarter. Third, I will provide some perspective on MSR pricing in the market.

First, we will start with a review of our normalized results on slide 14. Normalized pretax earnings for the fourth quarter 2013 were $166.9 million which is a 13.5% increase over the third quarter 2013 and more than double normalized pretax earnings for the fourth quarter of 2012. Over 90% of normalization is for transition related expenses. As we noted last quarter, we expect these costs to remain elevated through midyear as we ramp down the legacy ResCap platform.

The settlement legal expense normalization relates largely to a true up on reserves to the National Settlement. Lastly, we backed out some trailing revenue on discontinued operations.

While we carry most of our MSR at lower cost or market, we have a small fair value portfolio that came from Homeward that we did not normalize. It does cause some volatility quarter to quarter. The $7.8 billion portfolio generated a $19 million gain in the fourth quarter versus a loss in the third quarter of about $0.2 million. This writeup was not driven so much by a change in rates rather it is a function of market information from timed MSR bids that were above where we have been carrying the assets.

Unlike the third quarter, the Ginnie Mae portfolio generated more stable gains on modifications that were consistent with our second-quarter results. Moreover we saw a modest decline in claim related losses in Ginnie Mae.

On slide 15, we show adjusted cash flow from operations relative to earnings. Adjusted cash flow from operations is slightly negative for the first time in many quarters driven by a few reasons.

First, as noted last quarter, we sold most of our servicing advances -- we have sold most of our servicing advances to HLSS including a very large transaction in July and a smaller one in October. The few seasoned advances on the books we were unable to benefit from typical advance reductions we would expect as our programs drive down delinquencies. Note that advanced sales to HLSS flow through the investing cash flow. Just the same, these sales accelerate cash onto our balance sheet that would have later come in as operating cash flow.

Second, there is a seasonal impact in the fourth quarter from tax assessments that tends to drive up escrow advances near year-end. Third, ramping up our origination activity consumes cash. We believe these issues are short-term in nature and we expect our adjusted cash flow from operations to return to positive levels in the first half of the year. In particular, the large advances related to One West should begin to drop as our loss mitigation efforts reduce delinquencies.

As with previous transfers, we are confident that homeowners and investors will benefit from Ocwen's modification program.

Let me next go over the impact of HLSS on our financials. On October 25, Ocwen sold rights to receive servicing fees on $9.9 billion of UPB and net servicing advances of $271.1 million for total proceeds of $299.8 million. Through the fourth quarter of 2013, we have sold rights to receive servicing fees on about $202 billion of UPB to HLSS. We have also sold the related advances of about $7.1 billion to HLSS.

These sales free up capital to funded growth without issuing additional common equity. This has proven to be efficient funding for Ocwen. In the fourth quarter of 2013, interest expense pertaining to HLSS was $77.2 billion. After considering the advanced financing cost that Ocwen would have borne absent the asset sales to HLSS, the net increase in Ocwen's interest expense is about $32.3 million which represents a cost of capital of approximately 6.3% taking into account accelerated deferred tax assets.

The total MSRs on Ocwen's balance sheet where we have sold HLSS the rights to receive servicing fees amounts to $180 billion of UPB as of December 31, 2013. In the first quarter of 2014, we expect interest expense pertaining to HLSS of between $75 million and $77 million. As noted by Bill earlier, yesterday we closed our first notes under our new OASIS program in a private placement.

OASIS is an agency MSR financing program whereby the company issues notes backed by individual closed end pools of agency MSRs that are owned by the company. These MSRs constitute the reference pools. Noteholders of this first OASIS issuance will be entitled to receive monthly payments from the company in the amount equal to 21 basis points per annum on the principal balance of the reference pool. The notes have a 14-year stated maturity with final payment dates on the ending principal balance of the reference pool.

The average servicing fee for the reference pool at the closing date was 31 basis points. Through the OASIS program, the Company achieves long-term match funded financing that mitigates our exposure to prepayment volatility. As Bill noted earlier, we are very excited about this program and its importance to the future of our lending business.

Turning to our stock repurchase program, we believe our balance sheet is strong with significant flexibility and ample access to multiple sources of capital. As a result, we believe we have substantial funding capacity for new investments and stock repurchases.

Let me update you on our share repurchase activities in the fourth quarter of 2014. We purchased 1.1 million shares at an average price of $53.34 per share for a total value of $60 million and as Bill said, we will continue to be a buyer of our own stock.

Lastly regarding MSR pricing, let me briefly address concerns I have heard regarding MSR pricing in the market and how it will affect Ocwen going forward.

Nonprime and nonperforming assets have not seen anything like the change in valuation that we have seen in prime MSR. That is because there are fewer capable buyers of such MSRs and the change in the interest rate environment is far less relevant to pricing of nonprime MSRs. Nonetheless, we have seen prices on nonprime MSRs go up over the past few years but the rise has been consistent with the fall in funding costs that have occurred in the same period especially on advanced (inaudible).

As a result, we still see pricing that should provide Ocwen midteens pretax returns on capital and target returns on equity of 25%. Many observers seem to fundamentally underestimate the value of nonprime private label MSRs. One problem is they take initial margins that they see in a forecast for a nonprime deal and they project them forward. As we have shown in the past, margins rise on nonperforming transactions over time. If we were to complete for example a nonprime MSR acquisition later this year, it would likely have only minor impact on our financials in 2014 with profits largely coming in 2015 and beyond.

This occurs for several reasons. We invest heavily in operating expenses to work deals early in their life cycle. Moreover funding cost are at their highest when we board new deals. As loans cure, ongoing operating expenses and funding costs generally declined faster than the runoff of the portfolio raising overall margins and profitability. Revenues also rise as we recover deferred servicing fees.

Based on historical experience, these recoveries increase over the first several months after boarding and they remain elevated as a percentage of UPB for up to three years before starting to fall off.

The next mistake I see is with capital. A very large component of our initial investment is equity in advances. As noted earlier, advances fall as delinquencies decline which has generally enabled us to quickly recover a sizable portion of our initial investment. Overall we believe that those who fully estimate nonprime MSR values start with our lowest operating margin and divide it by a maximum investment and then suggest that returns are low. We believe that more seasoned analysts better understand how we make money and they seem to better appreciate the prime profile of our earnings by nonprime MSRs.

So I'll end by summarizing a few key points. I would like to first say that we are committed to working closely with all regulatory bodies including the New York DFS to understand and address concerns that may arise from time to time. We believe Ocwen has an exemplary record of working closely with not-for-profit community groups and helping families keep their homes through sensible loan modification. We believe that we have sizable opportunities to invest in both our core servicing and lending businesses and in adjacent markets at solid returns for our shareholders. Our strong balance sheet positions us to fund this investment and return cash to shareholders through a stock repurchase program.

Before I will open up to questions, I will remind you that we will likely be limited in what we can discuss regarding some topics. Thank you.

I will now open it up for questions. Operator?

(Operator Instructions). Henry Coffey, Sterne, Agee.

Good morning, everyone, and thank you for taking my question. I didn't hear everything perfectly. In terms of your agreement with the CFPB, I know that there were 49 AGs that had signed on to the original settlement including the state of New York and you indicated that that same team agreed to your current settlement with them?

So maybe just to clarify, Henry, so the National Settlement that we signed in December which was approved in Federal Court yesterday covers -- the CFPB covers 49 of the states attorneys general and it includes state regulatory bodies. What it excludes is the New York Department of Financial Services and the Oklahoma Attorney General and state regulatory body. So that is what it covers.

So that means the New York Attorney General signed off on it but DFS did not?

Yes.

Secondly, I know that you are obviously limited into what you can say but can you give us any specific loan data on exactly what you have done in New York over the years in terms of foreclosures and loan modifications? Maybe just to give us a sense of what you have done inside that state?

Well, I think our performance there as far as loan modifications and principal reductions in assisting families is consistent with what we have done across the rest of the country, and sort of consistent with the information that I have provided in the prepared remarks. The State of New York, because of some of the nuances of the state, have seen lower completed foreclosures than many other states. And that is not just for Ocwen, but that is across the industry.

So the number of foreclosures is relatively low compared to the level of loan modifications and other borrower assistance that we provided.

Great, thank you. Then just one last question. On OASIS, is that sort of an open-ended funding, or do you have to go back to market every time you want to sell MSRs?

No, it would be a new issue each time.

Thank you. Thank you very much.

Mike Grondahl, Piper Jaffray.

Thanks for taking my questions, guys. The first one is really could you highlight the benefits again from OASIS? Maybe also include how much in prime MSRs are left on the balance sheet, where they valued, and if they were able to be pushed through or sold into the next OASIS deal, what would the market value of those be?

Let me first say we have got about -- I know (inaudible) in our 10-K when it comes out but we've got about I think it is $218 billion of Freddie and Fannie MSRs and then another $45 billion or $46 billion of Ginnie Mae. I think the best way to think about value would be that as we put in that one chart, we have about $836 million of fair value room based on broker marks and just to put it in perspective, the broker mark on the deal we just did was probably as much as half a turn light compared to where it is pricing in the market today. So even that broker mark we think is probably an understatement of the actual value in our prime portfolio.

Got you. So I think what you are saying is if the rest of these prime MSRs you could push through OASIS or sell into OASIS. Is there somewhere around $1 billion of value that you could free up?

Note that we also -- on this transaction I think which would be a good estimate I think we effectively financed in this case about two-thirds of the IO. So I mean I think that you would want to apply that to it as well. I think that your starting point is a good estimate.

Each pool has slightly different characteristics with regard to them. So that is why we hesitated to extrapolate the 65 basis points or 74 basis points over the entire UPB until we have had a chance to really go through and understand how the pricing dynamics will work because they will work quite differently for a seasoned portfolio versus one that is in fact newly originated. We would expect new originations based on color we have received to trade like with like a 6 multiple which is substantially in excess of what we have historically been willing to price into prepayments.

So it will vary considerably across the board and as we get more information as the variability we will try to give you more color on that. But it is a huge change in our business model where we no longer have to worry about -- we try to eliminate basically liquidity risk, duration risk, interest-rate risk, now we can eliminate prepayment risk so we can really focus on operational risk as our primary business aspect.

One other thing I might mention, Mike, is that fair value improvement in our portfolio, about three-quarters of it resides -- is with Freddie and Fannie MSRs.

Okay. Maybe one other question. Some of the media news has talked about subprime lending and I just want to verify you guys are not doing any subprime lending today?

No, we are not. As a matter of fact, if you read the underlying Moody's report, there is quite a bit of variance between what that article said of what the actual Moody's report said. So I think it is more illustrative for people just to read the basic report as opposed to the newspaper article.

One more quickly. The prepay speed for the nonprime obviously at 11% was very, very low. Did you guys say you expect that to trend down from 11% or sort of be stable for a while? What was your language you used there?

I don't know that we put a forecast in on CPR at all, Mike. But I wouldn't think that it would continue to trend down from there substantially.

Okay. Thank you, guys.

Bose George, KBW.

Good morning. Just a follow-up on that CPR question, looking at slide 11, it is a little hard to tell but is the drop being driven by involuntary prepayments and then the voluntary and amortization is staying stable?

Yes, if anything I think the voluntary has even come down a bit work, came down a bit in the second quarter, in the fourth quarter.

The more current we get the portfolio the more the involuntary prepayments will decline.

Okay, great. Then switching to prime servicing, how would you characterize the returns in prime servicing relative to that 25% ROE you noted for distressed?

We will have to give you a calculation of that. Obviously the capital cost in prime servicing shifted dramatically yesterday with the OASIS transaction. So we will have to give you a more thoughtful way of responding to that but you substantially drop the effective cost of capital on prime servicing with that trade.

Yes, that definitely makes sense. And actually switching to the regulatory stuff, has the behavior of any potential sellers in terms of negotiations with you, has anything changed based on what is happening on the regulatory front?

I think, as we said, I don't think we are going to discuss pipeline and we have never historically discussed sort of individual transactions so I think we are just going to pass on that.

Okay, understand. Thanks a lot, guys.

Kenneth Bruce, Bank of America Merrill Lynch.

Thank you. Good morning, everyone. I have a few questions. I will try to keep them somewhat short. I guess when you look at first of all, thank you for correcting some of the misinformation that seems to be in the market. I think that is important to do at this point.

Secondly, I guess when you look at servicing, special servicing in particular I guess at the moment or non-bank servicers, there is obviously a lot of scrutiny. It feels like we are going to a zero defect type policy similar to what we saw on the origination side. And I am wondering what is it that you think that Ocwen needs to demonstrate to the various constituents that they are effectively doing what they are supposed to be doing and if you will kind of clear some of the misinformation as it relates to what regulators are suggesting the problems are at Ocwen?

So first off maybe just talk about the historical record a little bit. There is a number of areas like for example the HAMP program as well as the National Settlement that related to the GMAC business where we have been subject to the same types of oversight and review and in the case of the National Monitor on the ResCap portfolio as the large banks and the information out there about the performance is public and has been positive.

As we sign up for the National Settlement, we will be expanding that National Monitoring process across our entire portfolio and we will be the only non-bank servicer out there that is subject to that and is basically on a comparable footing with the large banks.

With that being said, as we said in our prepared remarks, we have committed a lot of resources over the past year to enhancing our compliance management system. We will continue to do that bigger this year, we will continue to work to get to that zero defect rate from a customer service experience standpoint. It is I think because of that service that we have had historically is one of the reasons we have been able to accomplish such good results in the modification area and just overall loss mitigation for loan investors in general. And we are going to continue on that.

But there is no doubt that the environment particularly with the implementation of the CFPB rules here recently, it is a different regulatory environment than it was a number of years ago and I think we are as well positioned as others in the non-bank space or better positioned than others to over time demonstrate how well we do service loans and be a leader in the industry. But we will have to continue to commit management time and resources to that and we are going to do that.

Okay, thank you. And I recognize you are not going to discuss pipeline and that is understandable. But just given kind of the nature of what is in the market today, do you think that there has been a change in the rationale for sellers, bank sellers in particular to move forward with divesting of these assets? It has been suggested that they are somehow -- this is a skirting around of regulatory new regulations you have kind of already said that is not the case. But do you think that there is any change to the rationale for banks to sell?

I don't think, if anything the more difficult the environment becomes, the less attractive it becomes, I would think that more people would be looking to do that in general. There may be impediments to them doing it but the product we service is a very difficult to service product by and large and it is not something that I think many institutions really want to deal with it.

I guess understandably at this point. I guess to maybe tackle one of the other gorillas in the room. The push for regulators to be more consumer friendly not only just in terms of service but obviously trying to prevent foreclosure wherever possible obviously puts you in a little bit of a -- there is tension in the relationship between all of the stakeholders here, consumer, Ocwen and investors. And obviously there has been some suggestion that you may be -- the focus of a lawsuit. Do you see that this is basically you are just constantly going to be in a rock and a hard place trying to effectively balance the interest of all parties here?

We don't think they are at conflict at all. I mean I think you certainly see a different heightened sense of -- around the process and the industry. But from our way of thinking, is the better the job we do the more homeowners keep their homes and we have been the leader in the industry for doing that. As Ron said, it is over 300,000 families we have helped over the past few years. I think in terms of the better we are, actually we become more efficient.

If you look at our operations, when you have a client that is not dealt with efficiently and effective on the front-end, it essentially creates an enormous ripple effect through your organization. So we are not pushing back. Our goal is to be as effective as we possibly can in dealing with our customers because we think it helps the homeowner, we think it helps basically the investor because we generate more cash for the investor, the RMBS investor I should say, and we actually benefit from it. So we truly to try to look at this as a win-win situation and are working in that spirit.

Okay. Thank you. And enough with that. Just looking at the quarter, the mortgage banking, the gain on sale in particular was very strong relative to what we were expecting. Can you decompose that? Was that driven by the -- I know you kind of touched on this -- but was it driven by the mix of the pipeline that is driving the higher margin? At least the way that we are measuring it it looks like margins were up. I know you said it was the other way around but something is moving the needle here and I'm just trying to understand what that is.

Yes. It is the mix of HARP loans in the quarter was much higher. That was up substantially and so margins on the individual product components were either flat or down but the mix improved and we make that much higher margin on our retail than we do on correspondent loan.

At the beginning of the quarter, we had higher expectations for where the margin would be. So I think that is what we were referencing to in saying that margins were down. They are down across the industry. They were lower than we had expected at the beginning of the quarter but as John mentioned, because the mix of HARP refinances through our direct and partner channels was better than it was in prior quarters, that is what drove the improvement for us.

Got it. Maybe lastly, the information on OASIS is very encouraging so thank you for that. The next obvious question is how fast do you think that you can scale up your mortgage banking operations?

We have worked the past year to really develop a lot of capabilities there. If you look at our correspondent channel, we have already proven that we can do more volume than we are doing now but that we were doing more volume earlier in the year and that volume declined as kind of the market conditions shifted and as we sort of made sure that we were more conservative and comfortable with the business until we were able to get something like OASIS off the ground.

So I think we are in a pretty good position to take advantage of the fact that we now have a clearer picture as to what pricing is going to be in the market and what our capital cost is going to be because of the OASIS transaction. It brings us much closer to being able to compete competitively in the marketplace with the bank players.

I think there's still a few more things that we want to put in place before we significantly expand that business. I mean we kind of take a far more process driven and technology driven approach to the business so I wouldn't expect you to see large increases in volumes much before the really the latter part of this year because we still have some more infrastructure to put in place to expand.

Okay, great. Thank you for all of your comments this morning. Appreciate it.

Daniel Furtado, Jefferies.

Thank you for the opportunity. Just a follow-up on that last response, Bill. In terms of things that you are getting some ducks in a row on the technology side for the origination business, is there anything in particular or specific -- I assume it has toward the non-QM business but is there any insight you can give us in terms of what you need to line up there before getting a little more aggressive?

I think it will be an approach over time. There are companies like -- the firm I think does the best job in the world something like Quicken, a very, very strong solid technology infrastructure to provide a high-quality product. We think we have a lot of capabilities in the servicing space that can actually be ported over to the origination space.

For example, things such as our psychology and the dialogue engines to help maintain quality control over what gets sent to the borrower. We are in the process of developing today some very sophisticated underwriting engines to make sure there's absolute compliance with the underwriting. So it is a process. It is not something that you put the switch on. You develop that over time.

Understood. Then my last question is on the OASIS.

Unfortunately you are breaking up. We are not able to hear your question.

Is this any better? When you issue a new series, is there a true sale transfer there for unlocking some of this -- I guess you would have a mark to market on the portion of the assets that are sold?

No, it is a true financing, it is not a sale. So there is no markup but what it does is because the liability then will move essentially -- the liability will go down to the extent that the loan prepay faster. It mitigates the risk of prepayment.

Understood. So I guess one of the things I was thinking potentially the deal would do would be allow you to repurchase more shares by unlocking those mark to markets but that is an incorrect assumption I assume?

We have a choice once a year to go to mark to market. Certainly OASIS by basically matching the value on the asset or the liability so eliminate repayment risk would enable us to go to that mark to market should we choose to do so.

Understood. Okay, thank you so much for the responses.

Craig Perry, Panning Capital.

Thanks for taking my question. John, I was just wondering flipping all the way to back to the presentation, I know that you swapped methodology in providing essentially forecast cash flows over the next 20 years discounted at 10% between service scenario one, two and three. And prior to that, you did accumed cash flow forecast over the next 10 years.

One of the comments that you had made in your prepared remarks were that some of the mistakes quote unquote you have seen in terms of how people have tried to interpret your cash flow analysis or run down analysis taking margins and leaving them static. I was wondering if you could provide a little bit of sort of more granularity on this call or at a later date as to sort of some of the assumptions or details behind this slide.

So one thing in particular maybe it would just be helpful for us to understand absent guidance although this slide I guess sort of functions as guidance is for instance over the next two to three years, how much cash flow do you actually expect to generate if we thought about the shape of that cash flow?

And as well, maybe I just want to confirm the way to think about this slide is sort of in scenario one, where it says $7 billion would essentially be a runoff scenario. That $7 billion to the equity sort of net of repayment of all corporate borrowings of debt. So I know it is a long-winded question but if you could flush out any of that I think it would be helpful to us and to the marketplace.

Craig, a rather short answer maybe to your long question but we are not going to provide additional guidance at least not right now as much as I appreciate your question. And I think we will certainly take it under advisement for the future. I think it is what it says it is which is it represents adjusted cash flow from operations. I think as we have talked about in scenarios it does involve paying down our debt but I think it is best to -- we believe it is a proxy for but it is not the same as some kind of free cash flow analysis.

Sorry. So what do you think the purpose of providing it is if it is not effectively a free cash flow analysis available to the equity?

Because we do think it is a good proxy. The problem is we are not really trying to run -- even in the baseline scenario, we do reinvest cash at a 5% rate so it is not a pure liquidation analysis.

I guess I've just sort of seen pure liquidation analyses attempted by these sell side and the numbers are essentially half of what is even your lowest case scenario here. And I am just trying to match -- maybe your prepared remarks with -- I'm not asking you to respond particularly to the sell side but just help us understand where you think the delta is? Because on the one hand, we are essentially saying if you just ran the thing off which no one really expects that to happen, I guess maybe some people expect that to happen, there is $7 billion give or take allowing for a whole bunch of assumptions available for the equity holder.

On the other hand when we see the sell side attempt that, they come up with a number that is half as harsh. So obviously there is a disconnect going on somewhere and I am just trying to sense where you think the disconnect is?

Criag, I think it is a good question. We will give you a more detailed analysis coming back. One of the big differences is is that when you see what the value is for a nonprime MSR, it uses a very high discount rate in terms of that. It makes assumptions about CPRs that are a lot different than what we are actually experiencing.

So we give you a number that is a third-party mark, but if you were to run that out, let's suppose they discounted 16% or 18%, it is a higher discount rate and that actually makes a difference over a long period of time.

So we will get that back to you. The difference really is what -- one of the biggest differences is the discount rate used on those cash flows as opposed to what we used here.

Of course right. I mean obviously 10% versus an 18% discount rate is going to make a big difference but I actually just meant more versus the sell side who is supposed to be responsible for understanding and modeling out your cash flows, coming up with a runoff number that is half of the number that is your low case when your CPRs are below the number you have here. Seemingly there is a disconnect so I'm just trying to get a sense for how do we bridge that gap?

There is and we will try to come back with a little more thoughtful way of trying to reconcile it because the range even on the liquidating value is quite wide. I mean even amongst the different sell side analysts, it is quite large, that gap. This number if you were to look at the actual cash flows themselves and just comparing the difference between an 18% and a 10% cash flow over 10 or 20 years makes an enormous difference in value.

Of course, of course. Look, any additional color you can provide around this I think would be extremely helpful to us and to the market place. So I ask you to think about it and think what you can provide.

Brad Ball, Evercore.

I have a couple of follow-up questions on the regulatory environment. Could you talk about how you have in the past addressed the question of potential conflicts among affiliated companies? Any prior SEC filings or with regulators in the past? Could you just discuss how that has been addressed?

I would refer you to just look at all of our SEC filings. I think that we have been very complete and open about what those relationships are. So you are welcome even on all the spins you will see all of the contracts are disclosed and that nature so whenever we take say spin one company out of another, you have the complete contract package to look at and evaluate. So the way we have dealt with it is to have full disclosure.

So yes, so for example when Altisource was spun out from Ocwen, the filings that you provided to the SEC included full disclosures about affiliated arrangements, agreements among the companies and so on?

Yes. They exist. They are an important element of the investors' decisions to be reached and we provided those contracts and those relationships in our filings.

Great. Thank you.

Keep in mind when you have a spin, it is the same investors are on both -- if you had an investor that owned 1% of Ocwen and they got 1% of Altisource, no matter how you break that relationship up they still own 1% of both.

And the Boards of each of the affiliated companies are independent?

Yes.

And the --?

I am the only person that is on all Boards.

You are the only overlapping member.

There are more independent directors on every Board than non-independent.

Great. With respect to the Chief Risk Officer that was mentioned in the DSS letter yesterday at both Altisource and at Ocwen, how has that situation been remedied?

I don't think we are going to comment on anything related to DSF -- so I think we are not going to comment any further than what has been out there.

Okay, that is fair. Are you currently undergoing an examination by the DSS or by any other regulator? Do they have examiners in house?

It is public knowledge that Ocwen I think it was a little over a year ago signed an agreement with the Department of Financial Services to have a monitor in place and that monitor is in place at Ocwen. We have various state exams that go on all the time so there are state examiners from different states at one time or another in our offices. So I'm not going to get into specifics but that is an ongoing thing that we always have.

Great. And those ongoing exams presumably would check things like potential conflicts of interest, they check things like compliance with the servicing standards, they would check to make sure that customers and borrowers are not being mistreated, etc.?

We are not going to comment on the specifics of any of the exams.

Okay, fair enough. That is very helpful. Thank you.

Kevin Barker, Compass Point.

Could you stop servicing in the state of New York if you wanted to? Would (inaudible) have regulatory purview if you were to move out of the state of New York?

We would prefer not to answer that question. Kevin, thank you.

Okay, I understand. Have you had any actual conversations with investors concerning some of the conflicts of interest that was brought up related to the Gibbs & Bruns potential suit or how do you view some of that noise that is coming from that potential suit?

We don't comment on rumors out there about potential items so there is really nothing to comment on there.

Okay. And then it is more about I mean you have satisfied a lot of the servicing sentiment -- looking at each loan as MPB positive for both the MBS and the consumer from the investor. So if I look at that, is there any other protections you put in place to ensure that both the investor is both taken care of and your best interests are aligned in the servicing sentiment along with the borrower?

Yes, we have controls in place and have been servicing and will continue to service in accordance with the servicing agreements for each individual pool of loans that we service. So each our MBS transaction has a separate servicing agreement and we service in accordance with those agreements.

I don't think anyone would dispute that helping consumers through this process is important. It is good for the economy as a whole, for communities and -- but we are constrained in what we can do for the consumer by the servicing contracts which require that we service in the best interest of the investors and that means in most cases what that means is that any sort of resolution you enter into has to be net present value positive for the investor.

So I mean that is a generalization because we are talking about thousands of servicing agreements but we service in accordance with those agreements and our resolutions whether it is a modification, short sale, deed in lieu are net present value positive for the investor.

If you look at the Moody's report, it shows that we generate more cash flow than any other servicer to fund private label securitizations. On the prime side, you are really very much constrained by what the agencies tell you what you have to do to the rules of the agencies have. So in subprime we generate more cash flow to the trust and the general criteria is are you maximizing for the trust as a whole, not for individual tranches of investors?

I think it shows -- the data shows that we lead in modifications of keeping more people in their homes. And I think the data shows from independent third parties that we generate more cash flow to the trust than any other servicer out there. The reason that makes sense is if you look at severity numbers on either percentage loss that you have on a foreclosure today on most subprime pools, it is somewhere between 70% and 80% loss.

So in the vast majority of cases, a eight modification is net present value positive. In some cases you can't give modifications because the contract says that you can't do X within the contract and we comply with all of those. I can tell you unequivocally I think unequivocally that we are not changing our servicing practices as a result of the National Settlement. We believe that -- nor and the contracts explicit that we don't have to do that because we believe that our servicing practices will enable us to achieve our promised results that we had under that agreement.

Great. Then shifting back to some of the comments you made about the share repurchase program, you bought back 1.1 million shares during the fourth quarter. You mentioned that you would buy back the amount of your previous quarter's earnings but you did open the door there for it could be more or less in any given quarter. Could you just explain your strategy behind that and why you would, would you actually buy back more than your earnings in the previous quarter?

We could. It obviously depends on the share price. I think the whole management team and the Board is a big believer in the company and its future and we are not sellers, we are net buyers with regard to that. So depending on the relevant stock price, we may be slightly more aggressive. That always will be tempered by the fact though that I think on the national stage across -- just on the national stage as well as in New York, one of the prime criteria they want to have is that they want to have the servicers -- the non-banked servicers have very strong capital and a strong balance sheet. I think that is a fairly large dialogue that is going on today. We intend to keep that industry-leading position there.

Could you speak to some of the capital structure, some of the capital structures that -- the discussions that are out there about what the capital structure should look like or capital non-bank servicer should have in the market?

No, look, I think that some of this is very speculative and so we are not going to respond to the kind of speculation that is out there.

Okay. Thank you very much.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference. You may all disconnect and everyone have a great day.