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New Residential Investment (NRZ)

Participants
Mandy Cheuk Investor Relations
Michael Nierenberg Chief Executive Officer
Jessica Levi-Ribner B. Riley FBR
Eric Hagen KBW
Ken Bruce Bank of America
Call transcript
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Operator

Good morning. My name is Darla, and I will be your conference operator today. At this time, I’d like to welcome everyone to the New Residential Fourth Quarter and Full Year 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator like New the Residential. now Mandy over Cheuk, from to will conference turn to I Please ahead. go

Mandy Cheuk

Thank you, fourth Darla, like year to and earnings good morning, you XXXX to everyone. today New Residential’s call. quarter full welcome and I would

Residential our supplement today and our to that our Throughout was Nierenberg, Brown, going we’re New Nick the Santoro, posted Joining me call, Michael website to CEO; here CAO. are this CFO; morning. Jonathan reference the earnings

that already If it so, done you you suggest download would not have now. I

Before and risk regarding the like over today review the Michael, to earnings and actual These are to point to I filed forward-looking contained quarterly factors statements supplement disclaimers from made materially results. nature statements review to be release encourage forward-looking I the statements uncertain call turn you differ our with I and by their the reports out annual would that in will may SEC. and statements. certain press in our

In can addition, measures A would turn the over GAAP non-GAAP comparable now, during we’ll supplement. our most directly And Michael. measures the measures some of earnings to these reconciliation to I be found to in discussing be like today’s call. call financial

Michael Nierenberg

guys this and doing for time. everyone, Nationstar morning, in Good Mandy. their Thanks, some same joining morning. our call the exciting so will are thanks I get the call, know call we Obviously, at Dallas, down news through our

and back the a all XXXX quarter, look good we we very on as So, had fourth fronts year. on

times administration to to be four likely the great rates would year initiatives in other cause the to from put new today’s and frankly one, tax which what We the three the in higher as Fed to the The rates. bill mortgage this that than view unique it’s performed environment. company company a raise lead well. extremely All different quite and other to recreate very we virtually position REITs and segments way of our believe a impossible is we

few sheet will higher $XXX in mortgage as of the value investments which billion one of of balance Our increase result contains plus rates. servicing rights, a

our call acquisition quarter If our as recapturing very portfolios, recent the as around in you potential be couple climate our mention growth of the servicing billion most The excited with portfolios us is us classes Shellpoint to I our the MSR not for with future. this causing additional fourth rights XXX make including well provides investing our portfolios, abundance optionality The the current that fully as great. capital priced. business. of is asset of of

we million our have our to take continue today While refer way. posted supplement, now saying perform liquidity for been to advantage that, opportunities online. a plus of current our that XXX a in great should us our I’ll which portfolio to any puts has that come position of shareholders, well

at mortgage New I’m we’ll So, of the beginning the When of some you UPB The again for Residential open X. now up then into a servicing and Page then look get numbers reel, call part bit of going a is our highlight rights. on billion little to questions. begin are $XXX today, presentation

of environment. One rate rising will classes in up rise a few in it, the go asset that

expected we with the being actively we rate Fed changes rate When to we protect believe mid-teens think little priced. portfolio fully pointed out again, type have bit position I it risk, to also interest our I help do UPB asset great rates rights. raise are XXX classes as of in as although and to XXXX. a a as try call our now billion difficult we about We We against on right of are target manage investments, returns earlier all is

they trillion. while When $X.X when a the it and we $XX return market consumer asset total trillion. the XX%, apparent large housing may look very unsecured in not today increased we is be our U.S. dividend in times XXXX, two is the you think at one, For classes. opportunities, was all about The debt

there today, of around to we in be and to then Page do are we billion things bond XXXX. billion portfolio, right at was we something portfolios to look while are XXX our billion-ish to any way. our well may investments. deployed in a and deployed dislocations $XXX positioned now. related consumer our not we $X.X north may to again you loans. we sense, and XXX XXXX, activity believe of grow $X.X was market of related to capital try that we come exciting take servicing When So, in we X, we or our continue residential On advantage Little just show RMBS million again million give it,

that of a highest acquired XXXX, have then equity, strategy, One page, give X Page billion which XXXX billion Bottom amount we acquired by we investment rights XX% since two $XXX XXXX, we completed to to in we talks Fannie MSR call by of a today, XXXX, acquired billion, is, on sense three call for deals partners investment about, our in value since acquire a X to at company all increases. counter with our Prosper. portfolio number again from $X equity servicing to return call XXXX, is are increase you we we that in consumer of XXXX well X, of Shellpoint return as grew $X.X in $X.X these acquired up began our great parties XXXX, our is we we quarter. conjunction We really as just been you piece look and a amounts. XX in couple there the of company was fully about and acquired of in and servicing our portfolio we loans, of HLSS deals, a SpringCastle the We $XXX became in lot a this equity and total of of portfolio refinancing the billion billion doing XX% XXXX, that a made has and and strategic also strategy. right Page for and states net and rights began we different in our that to the side when a book the called agreed other portfolio lot Ocwen. with dividend grow from in of have billion in XX% then called highlights. licensed was billion we XXXX, is for of in Freddie, $X.X $X. company. a mortgage fourth

both the MSR the full. is on if of excess So, and Page, you our look side right

investment net of have equity XX/XX/XXXX a billion. We of $X.X as

as equity Servicer Servicer $XXX reduced that Our continue Advance to over will Ocwen again portfolio is both of by and down get to come Advances million, Nationstar. current continue time

and diluted were per $XXX holder $XXX as continue What diluted the income XXXX diluted of Core per $XXX earnings Our We $XXX net this into fourth of per both of per Page exposure, well then net million first fourth time residential diluted rights, securities did we of slide, fourth million. million as and billion our million. net $X.X per subsequent and share. the loans this quarter XX/XX/XXXX $XXX earnings pay place equity. quarter million, we net or pay Core and broke-out share. our $XXX continue cash quarter, residential $X.XX to to GAAP or call of on dividend $XXX or $XXX $XXX loan and of we of $X.XX to equity, consumer Full-year X, which Financial dividends $X.XX XXXX MSRs million, our correlated income consumer XXXX. we share. $X.XX of have $X.XX million highlights, million, $X.XX during quarter, as or of million, share. GAAP performance share, diluted of we loans as residential acquire for

we of know, that we we XX part servicing $XX counter UPB you Shellpoint, mortgage then rights of was acquisition rights, servicing announced and acquired acquired billion parties. billion As from other of also of mortgage the transaction

the that as as by January, in weighted restructuring billion. work rate, legacy this totals to Total securitizations for we was X.X%. rights rating basis funds our wait and of to was of we term mortgage name result agencies on This the fixed cost we into priced portfolios. did well month, PSAs $XX $XXX backed a servicing and those with two as that on trustees our MSRs We last great transfer paid Just fee our the million portfolio financing MSR Ocwen, to a non-agency others. mortgage non-agency on obtain a rights. week while past remaining we transactions Again, around company. two

balances purchased non-agency January non-agency look non-agency deals completed a to As and XX We non-agency we called million call continue we We million the out in servicer our bringing securitization quarter. billion. RMBS non-agency we XXXX down during to continue then deals. as QX also XXX on come of pointed at equity. of equity the business, million advance I XXX only $X.X of $XXX net to earlier, advances,

which residential and of that come you billion early & Page XX% other a business, loans between for If announced raised when just servicer in $X.X a perform really about Shellpoint We loan at call by the is S&P continue legacy grow - to was then there that’s by loan of continue million. IRR, help approximately in it’s re-took I one, our out way higher done It’s us Shellpoint billion. pointed they’re unless currently activities, origination recapture great Moody's we worth we $XX our Fannie, we of $X is at slide, residential acquired is, and equity of MSRs, billion. that’s is an HLSS, XX% this portfolio, to the think acquired to there as to Fitch, we of return. by seasoning again also into combination again, of our on what indicative we then about Shellpoint result Shellpoint. Prosper it’s and typically XXX approved most Shellpoint consumer portfolios. on fund counterparties quick back there, have now we Ginnie. about you November we Ocwen in this. the is or already rated home-owner well. and a loans Jan And on have optionality million job to The truly seen this our gives investments. XXXX out, Freddie extremely coupon fourth go of a servicer has then a a the some our and X, advances $XXX things portfolio. Nationstar could and lot quarter, of investments SpringCastle, will that’s do the investment about a healing

a fully Nationstar Ginnie shortly. Mae be result as to expect by announcement of able licensed to the We

So, give around and other that. acquiring Ginnie Mae very into us excited a foray about could again that. optionality MSRs, That then

of lot going slides and a As going through far time I’m our as spend portfolios, not to our portfolios. the

I there. then it we’ll what of I’ll the questions Nationstar, announcement think, I’ll go do in-light open Operator? the up from is, operator, by to and turn back for

Operator

Levi-Ribner Your first Instructions] B. question is from Jessica with Riley [Operator FBR.

Jessica Levi-Ribner

morning. securitizations and the gotten question. good a purchased for economics little on $XXX call that the Hi rights what of the about Thanks Non-Agencies Can you million my talk taking bit the you've loan and you at?

Michael Nierenberg

The call on or the have securitization, It from give see it deals loans X.X to approximately deals the average lower anywhere million think about down have and to call going way delinquencies, on non-performing the we then delinquencies per in bond nonagency accretion that depends fourth mark that and do our of think you're loans Sure. deal, we points. the we to certain higher that something portfolio we is, at it, The have you're way economics. worth see purchased take lower approximately rights, higher or other going that have $X.XX. $XXX MBS underlying economics, gains to we about X delinquent quarter, been

sense As which coupon underlying rate X%. we average is calls a to approximately a are go give into on higher our we weighted you environment, the

a likely higher. economics, our kind so optimistic So, lower gains higher we're just lead of securitization will call delinquencies, could frame lead obviously very for to rates still may but rates into to your business, everybody, so that be on higher

Jessica Levi-Ribner

securitization, Okay. you you do execution the on netted yet? the know And January what

Michael Nierenberg

you the of tell end will the at I quarter.

it You points. X assume should something anywhere from is to X.X

Jessica Levi-Ribner

Okay.

beyond the In of impact the immediate Nationstar this terms morning, we announcement can Ginnies? expect any

Michael Nierenberg

No.

of service of about are the company different that. but $XXX be be or you billion partner. Ocwen, of they real Nationstar whether business, own a things owner and I and still to If years number the where have excess. the we've go capital course forward, whether to supportive that the few them, Walter, provider our a loans industry will we PHH, have past tried as servicing think position very we’ve the for one of they think Obviously, great demonstrated be of be over a is They us, to the new Nationstar how subservice that counterparties a mortgage

to go I as forward. be partner So, ours we would anticipate them good continuing a of

Jessica Levi-Ribner

say And one just you mean, you've around a kind - dry that, I Okay. is seeing. today, made acquisition balance that there lot And we on knowing then last kind around of of you're powder can on that of the one tough I horizon? and the environment comments and I have of but opportunities sheet expect? know a lot is anything the that what

Michael Nierenberg

benefit acquisitions for, We or I investments always what that shareholders. strategic will would look strategic call our

the today, mean point at there some we but in lead We we are higher nothing out markets and corn to rates dislocation sit expect looking I there I kind don't to a success markets I at few some when. as I where our specific and years, continue just to the The for can happen everything. is company over markets. rate something will the of the point, know past and would fields will, likely in

to in down. volatility see the go as mortgage we you are see continue as you I rates the consolidation rising. - trajectory, the see around to going if interest this through market, business, believe come do upward year, their You origination origination volumes more stock rates

Jessica Levi-Ribner

enough. fair Okay, you. Thank

Michael Nierenberg

Jess. Thanks

Operator

Your is Bose Instructions] from George [Operator with question KBW. next

Eric Hagen

This for Thanks. is on morning. Bose. Good Eric

Michael Nierenberg

Hi Eric.

Eric Hagen

Hi, good morning.

can the said that of the during tell reflects you XQ? call have you quarter us amount the from if me earnings executed but core rates Forgive this, just

Michael Nierenberg

it’s $X.XX. Believe

Eric Hagen

mark-to-market valuation be move $X.XX, great, the would the this given you’ve seen on far rates just the thanks. then that across changes just seen so can you and And interest that us give and in just sense really comment if maybe we’ve MSRs, you year, portfolio a helpful? then could changes for

Michael Nierenberg

Sure.

of $XX MSR full was little up our up quarter, portfolio little $XX fourth was and a the excess under For portfolio our under million, MSR million.

at you $X.XX combination look when So, two it’s those earnings. GAAP of the in

Eric Hagen

just far so Great. can sorry in date, comment Maybe you to XXXX. on quarter

Michael Nierenberg

the MSRs can't comment more seeing I are but of I say to What that banks be quarter are are in we MSRs. some would on date MSR, you buying color. give up the they will the able in to is yet. you cleaner marginally, valuations

to only that continues of course through would first So, expect that you're rise. to continue seeing the throughout and increase quarter, extent to Treasury the valuations but I actually the the not XX-year the year

position the company So, that has our I past the way highlight currently the is a This and how that company. And forward, we’re yes, think $XXX something we’re great MSRs and years, today, out not you done actually a with existing think capital million is over take few positioned job between execute about a but call $XXX amount continue coupled way and frame team of the corelated our our investment the having of in and I around a call our course step the to about and wanted today. $X.X of if back, position a going a portfolios, I liquidity of without billion this ton and and of to to the XXXX reel. $X billion to we billion deploy rights, a strategies on go great, that’s great total

investment an knows, over always things down going back that and saying Jess’ we’re do from pay perspective, a different looking portfolios our everybody as to question, While and time.

in that be to are deploy rush to for capital, as deploy capital going right we we to think to continue now creative we opportunities So, look shareholders. need for but again we’re no

Eric Hagen

Mike. comments the for Thanks Great.

Michael Nierenberg

Thanks.

Operator

of And America. with your Bruce Bank from question is next Ken

Ken Bruce

morning. good Thanks,

Michael Nierenberg

Hi, Ken.

Ken Bruce

Hi. of questions. Couple

quarters surprised always guess guess servicing past from? I size just maybe overall about the of always addressable keep even you? of is kind talked and scope in a you the the surprised how to still first a little large we guess, the I the out coming you of I’m much kind available I little and few quarter, or in, nonagency where talking servicing transactions, the markets have been is righteous in to First, over market as a pulling I’m of

Michael Nierenberg

nonagency the on side? Ken, Specifically,

Ken Bruce

nonagency the side. on Yes,

Michael Nierenberg

with way outstandings. market $XXX probably the third view is, something I rights the I is The probably mortgage call their think way, billion I $XXX you we billion think control, if We this that between general know we mean, banks have think nonagency about a of it up you market. around our as legacy have, that most and of of exposure in servicing rights. cleaned it legacy

around think some continue ability be much that some were a There regulators the I legacy it acquire I PLS banks banks now. because settlements today be out years our nonagency servicing, not agreed the there. ton the there’s to of any, is the foresee settle think that or ago, lower but don't I as some of will think out I of of way some as with legacy going and few the of to a get coming just to to right much the

Ken Bruce

Okay.

more what it’s versus their just they’ve So, holding anything to got else? versus really on bank -

Michael Nierenberg

think I of Yes, a wrapped up it’s in still settlements. bunch

when in - certain banks. there service that of the know are and Shellpoint services approved are regulatory stuff some bodies certain Shellpoint, that of services the improved are servicers able some the there for portfolios different You even by to

they that. and regulators. to are you in would out, those I extent come different able does great grow to think some of portfolios by the be anything of when about are anticipate to a Shellpoint position If being number and So, there folks approved these banks

Ken Bruce

area? and I you’ve in referenced bit, been that the the a is right. squeezed or the servicing have All of And is margins returns one that mean squeeze included nonagency areas

Michael Nierenberg

as clean don't mortgage banks. to our about clean and profile that between want whether something have capital there. of, be of non-performing bid the servicing, less X out X.X Banks homes nonagency customers funds, customer think will but loans kind whether it it a because overall we. banks it call million customers, very be When extremely really abundance residential buy is large mortgage servicing, be less be want to acquire you well in I spreads, do the know, You whether it’s we it loans, just everything

portfolio way perform is, So, extremely it approaching continues our say we the well. okay, we’re that to

should in are environment, MSR higher great. rate We portfolios our a do

in as Our weighted you X% margin coupon squeeze average although do could continue the particularly of call to business front-end. see with rise, should rates better, the

So, we’re very and how be nothing strategic around be to everything to going well deploy interesting we is patient that is But now. here that’s try but bid, capital. there right

Ken Bruce

Right. want catalyst that an stepping And given mentioned to you and you some role New being the active from occur squeezed. be strategic Shellpoint? that as Residential operating to rates you games has anticipate consolidation, you consolidation what the originators that for more up primary market, had in think a how into and I mean, in being just benefits do it do to

Michael Nierenberg

are makes and for there. I believe both a be obviously something intend we parties. great a we I What will bit and of to of consolidation. the think business, sense hard I I business it the and either us, the operating winds years. likely the think very somebody be of is middle mean in it’s part would would When the hard, past or could be operating say I extent been it’s number think is, in that more I that will I of the shifting partner about for do

XXXX to out. know more While that can't to happen, but occur lot truly believe a as gets consolidation the consolidation, going I of you're what’s anticipate will going saying cleaned lot you that don't industry that, a in because see you just

Ken Bruce

you appreciate Okay, comments, Mike. for great. Thank your it

Michael Nierenberg

Ken. Thanks

Operator

Michael remarks. now Nierenberg I like back Thank any to the would turn to call for closing you. over

Michael Nierenberg

Obviously, XXXX a Well, was year. thanks support. all your good for

here. about to are We not highlight

all we to again, we we up Thanks. continue your good forward, support As will look day. we for can and to a put returns great do And appreciate shareholders. have

Operator

Thank earnings quarter full-year residential fourth call. you. new This and conference XXXX concludes

disconnect. You may now