New Residential Investment (NRZ)

Mandy Cheuk Investor Relations
Michael Nierenberg Chief Executive Officer
Nick Santoro CFO
Tim Hayes B. Riley FBR
Bose George KBW
Henry Coffey Wedbush
Call transcript
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Good morning. My name is Beth and I will be your conference operator today. At this time, I would like to welcome everyone to the New Residential Second Quarter 2018 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 may conference. you begin Cheuk, your Mandy

Mandy Cheuk

Thank like New to and good Residential’s I would morning, everyone. welcome quarter earnings you, XXXX Beth, second call. you today to

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

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

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

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

Michael Nierenberg

little as on thank quarter Mandy. I'd fairly similar the business. during morning, activity call. more us our our investment is deployed for bit say a as I capital which to Thanks was QX low really Good portfolios earnings joining to no surprises think and everyone in QX, performed the great expected, were the there quarter. loan with Overall

and tightness spread; be we different think cautious sectors across remains to deploy capital financial to the be as with prudent we about the in. we in plentiful, of we capital the invest in continue continue that as the As amount market services we environment, investing coupled

and current Our is in, for investment that great our fantastic current portfolio the And remained believe we and rate are continue value same. for should to shareholders. environment portfolios the the we create use rate

MSR market the financing XX market. our to term our financing highlight REIT percent financing takes of around I front, the financing capital plus time, which At is the On wanted financing. this business MSR

this MSR XXX were example, years. at cost of six week For to at $XXX an note average to about a priced life fund million

billion we very remain where own businesses rights a $XXX call of call Our strong.

we quarter, trust loans. of the collapsed XX During $X.X billion mortgage for different mortgage

and capital Page puts advantage just strong Our take wonderful I our in begin of to see. really been to new And online. liquidity to any I'll has we X opportunities access to is remains refer and very am position now supplement going X. residential Page us overview. which posted on the a

the at page, a Looking right to the MSR side highlight of couple back Again, market. the to things here.

a so we On $X.X is MSR to that locked far notes, rate in. invested our continue rate total return rise fixed basis, as So is XX%. of or fund year-to-date term billion cost coupon, to year-to-date

year-over-year Our value XX%. book increased is

of investment Our year-to-date acquired ton expected view earnings for very GAAP earlier, income a share. perform perspective, good. activity new MSR per from million, there financial of performance a $X.XX $XXX net as is out book the quarter value is to to well, MSRs as we an continue while continue or extremely portfolio diluted in the $XX increased From during XX%. pointed our perspective, year. I And billion wasn't be the

investment of $X.XX Our just this of per dividends $X.XX XXX as snapshot earnings X, of in invested $XXX sectors net equity is share. and or a core various our $XXX MSR. our a increase. Page a rates of access that's in full net we MSRs portfolio. our in Today Again, one share, financing the diluted investment, a On is both MSR per have million, $X our rise diluted or pointing MSR MSR as continue that few of the fixed assets investment will out and billion income to after million, value

As you I in presentation. little advance to about -- down talk a equity our that is million. bit our see $XXX can refer I'll further servicer to

residential portfolio Our call security with rights billion. is $X.X

business, portfolios, net things as a underlying for new the side call outstanding net portfolios We the billion characteristics of and we most just then million to On this in like don't loan the use have the then this million. about. be million of to $XXX we of legacy of $XXX due as MSRs, of of of billion. of our a X consumer billion cash our rights, investment loan loan truly based the a $XXX like equity, something $XXX of to residential. that believe $XXX equity is around of market focus and kind here teaser XXX we're what to on is snapshot of on SpringCastle think could Page main the balance a $XXX The I recreated mortgage be that the

access At opportunistic really acquisition then book time value back So about bit of real think done time, closed book our when again that highlight in then is that but back it's in then that going --that of we $XX, close to. the and Shellpoint you value Partners you have think consumer loan sizable XXXX. Page highlight to our we of about and -- that investments, activity. today July past, collateral that X company. a early when is a amount time is we is was $XX.XX. a acquisitions the in HLSS is that we've some the mortgage taking And is of little our Shellpoint we that down things And

$X.X market Our billion. market cap in XXXX and our was is $X.X billion, today cap

in portfolio. a very good investments we've out I again on snapshot we period. pointed earlier, strategic for pools third-party we Xx lot hear servicer. think billion. of during They is the the experts to acquisitions in -- point happens again, side and should It's add do server some the should I on markets on all economy Page three truly And The AvenueXXX The as will I the that really in to way look S&P, Appraisal. what The good and $X penn bidding approved and year. for it's but to then it Shellpoint talked be just those about Freddie So --with we're called I that is terrific set Appraisal out I job, what this about servicer third-party to rates Fitch, pricing one is and we very get Xx $XX a at some are that growth year, client business the Today, what we by made Financial believe time mortgage Fannie, mean investment new of cleans We have EStreet continue we business. with Shellpoint. rated in servicer. our this going what rates by and We the third-party et same and There's seen our of some of do the up, that servicing shareholders. is and do believe Page our terrific as than collateral, Shellpoint portfolio a it What Moody's and depends A overall servicing is guys of it's marketplace. the with thing mortgage our believe and believe if opportunities Ginnie, is Title/ we're X we a tariffs origination the agencies is happy would in what a X billion Fed cetera, far. of want and and business, of a so increase say. very another call continue ton about really what we special Shellpoint. the assets. a is interest that adding a more to excited to so by

We equity doing advanced or the capital set What normalized up whether of servicer the Today, X.XX be for it current of continue believe but with the very our to there we that servicer slide servicer non-agency values And the mortgage rate. of on to we're think rates we're floating we the Fed so the our projected go X, or portfolio continue our outstanding is the business? We is there, decline environment. is likely unpaid things financing low I page our for of a is and will we're increase forward. loans. what as put way a and portfolio, XX% advances, is percentage situated future some on our Funds portfolio rate to again in means as to higher then perfectly securities markets. arrangements, MSR advances again principal MSR for balance expect

the investment on good on are go going income. then So rate purchases against make shape. a assets And our during we get Overall, was with we that the billion $XXX we're we counterparties. again activities our bit portfolio now of on up highlights, On to some through I loan And little as environment. $XX -- rates that rate think higher Page flip the protected a different portfolio, higher about to talk in of you sure coupon five million quarter. in give I'll quarter, you're gross capital. fixed acquired MSRs, done XX, in

we we and the the approximately at X.X%. is approximately $X non-agency and in under sector to in We collateral. billion linked million Securities, a quarter. funds year-over-year. to of $X.X our it are or not the $X.X that MSR billion, priced purchased -agency clean-up business purchases for we Today securities rate of and completed -rate cost with advances, is securitizations little Servicer cost two calls first rights. average $X.X some the that's different of are we down fixed Net executed $XXX Again a callable. back for everybody now. XXXX, during securitization into XX in over if of equity million, acquired floating billion balanced--just also little call on and Non-Agency a when $X.X loan flow did May $XXX got totaling our deals, this, non all most around to funds RMBS XX% advanced fixed MSRS those billion. weighted We frame notes --that billion of Again of those

We first X.X%. expect got involved in north did future X%. upside; a a as business, advanced we we are --when percentage to approximately were of little down that they the When balances

we has then that consumer very Shellpoint, loan continue on to residential been quite returns I mentioned side that give before, there. performance although you partnership in snapshot side just interesting, continue to and to and three we Prosper, loans that be consortium, close early our good. overall the frankly on a in the then buy with great So July partners there. not

bid. were the remains the in loans well sold very, very overall quarter, $XX During spreads of quarter, there billion

On not the MSR portfolio, time of to going billion, this page. lot on $XXX I'm spend a

look impaired, back very have in seasoned some at time, of characteristics. buy the investment to our thesis could different a was Remember, You credit going MSRs.

XX just MSRs, so the or bought of on and do rate more newer the rate more around to the have about with everything MSRs year capital rising we Page financing MSR talks Over better financed continue of past essentially a our to markets, course will we production our environment. in business, have our we Again little activities. [Indiscernible] all capacity do are fixed the In financing. line. which MSR bit a

advantage portfolio it's going bring spend Of this or to of rights, going morning billion I callable so decline business. our the a million. page. if you to our it XX that that do cash to of Page I'm on across calls decline. things of that balances shape this in think bit potential snapshot. again today, the need quarter, our a advance $XXX we so $XXX over was Page are billion you means lot liquidity that end of do call be $XX billion call a about right. what really Non-Agency not $XXX everything of the $XXX up snapshot of of so. was of is dislocations if economical to delinquencies position Security and of markets. --I'm is could a essentially rights control any collateral time we billion overall callable great give So take today, the our and I little when to XX, to we with in as looked

be pretty accelerate The that. Non-Agency to cases So portfolio performs to most this earnings most is again, There spreads I've hard continue calls. in on a well. Securities been to work floating It's well to of linked gain vocal And multiple on we bid. out bond that is page on a XX, and our figure again way slight rate. to continue the extremely quarter, in call rights

today again to On portfolio, go outstanding referenced the we of XXXX advance servicer which balances when earlier, I first the began $X.X business. billion back

fixed with loan markets lot to lower there. a balance the will I capital work help balances of think bit $X or the call deployed term the sheets our not markets portfolios, either funded term Prosper, numbers were we business. billion. little Consumer continue rate north which bank advanced in capital of on And Everything's in financing. a

lot of buy interests I'm and some portfolios. securitize we not time. we a growth and legacy one that the different to Essentially, in around quarter. our the portfolios Prosper, better and is our of So during to turn going bit of in little better. And portfolio spend loans a loan on then retain then of SpringCastle perform those from continue equity the side, business

I $XX in continue spreads or bid. loans we billion as think very As a the well of amount spreads bid. mentioned, to participate very out for small we came -- We see

goal our there. to It that I'll is back maintain the work create for With if to to should continue Then return, dividends, and company to Page our focus continue grow great turn to value XX, on --to you it will We and see our for really could well. some operator questions. our try deploy we shareholders. capital


[Operator comes Tim the Instructions] line Your of B. first Riley. Hayes, from question

Your line is open.

Tim Hayes

Hey, morning, Thanks my questions. for good Mike. taking

like XXX valuations high? just points, basis wondering The than acquired still which characteristics it if is Are this generally? historical first strategy MSRs the just the one, and that you levels. on higher bit talk above you quarter MSRs returns than attractive the with can marked those And were of about more other assets a a more looks

Michael Nierenberg

interesting are is us would right what are in X.X see I Yes. not would that and while What MSRs X.X MSRs on say flow are frankly I There I MSR from overall we would saying for probably now, multiples. that investments high. call quite conventional call multiples what to valuations anywhere type

today a marked Our overall is multiple. portfolio at X.X MSR

deploy think we strategically capital we'll So over time. what

for other see the environment, a rising and The I call multiples to go provide you're do thing hedge business. up a portfolios would our going say rate MSR in great

a there deployed not market going capital you're So value there. is to good there, ton I but net -net, can MSR we in the think strategy we see some forward going think of unless create

point other The become more thing a financing out to lot efficient. has is MSR

financing. more You're seeing rates, advance higher term

financing very you'll So, the values us. a result look, increase of I to market MSR as look returns to likely continue think good elaborate see still

Tim Hayes

Right, then okay. And the the year. volumes expected new for mentioned penn you

has of challenging mortgage the thought to they'd Just where the be those wondering or been if are at more with than expected? the time acquisition, in line you if agreeing you banking backdrop

Michael Nierenberg

about amount when no on opinion be banking between lot gain very of the time our do a spend on do And now. very is billion. business. mortgage origination job. something you tell penn would There's $X sale I a they're in and I right We something it. business or billion. is The The $X.X new to the difficult. our year who it's look made you partners very, think business money doubt origination with in target of hard they low at great think We billion believe a around year I origination volumes last $X to around did this

other We reasonable origination kind that a some the have P&L But I some products overall prime of rolled have non-agency penn ton of expect new business. wouldn't out our for there. segment created

thing it it does balance some MSRs other provides for The sheet. clean is our

net-net but So of MSRs a anticipate that in of result we mortgage hard is very our continue banking very a business. sale holistic gain over creation time and as activities, low I grow to that would on

Tim Hayes

current may quarter at do potentially market that still be previously see in that upcoming okay. pushed your getting out a or it, securitization expectation with Is you'd or that the Got all? you you expected you And mentioned non-QM to quarter. this this be

Michael Nierenberg


one try quarter. to huge. do not to third I think we're this It's quarter, going

hundred take end is now have this collateral. we of again think the fourth think give quarter And early of we it whether couple a I we or collateral. a do likely, more million probably as be they'll at I quarter, acquire if which

Tim Hayes

Shellpoint, platform around get closed deal more you that aggressive then one to And Got or more it, around expect in kind of now okay. that the question servicing both? do you around just platform? is business? you M&A then origination or the gauge to additional focusing how be execute this And just the that appetite your or on side on Would would building

Michael Nierenberg

money makes lot of business, continue value only for if pointed said out Navarro with mean and grow job. shareholders. will brain it Kevin the Jack leads continue to We power. Harrigan great business earlier it Williams we're I sense. We're we along lot a in to going --we to to do want together a as Bruce who try a dedicated there, that collectively I and to resources making I create --we've of

I grow. expect continue to that So would business to

As are assets will for with our in to we what fit and/or that our makes we're be whether things portfolios it think if it companies there trying sense do we relates to that to M&A, acquire partners or continue shareholders.

Tim Hayes

And the me for okay. profitability it, then Got last one call this quarter. what one right just just the on

Michael Nierenberg

I that think give also some overall, our and on we or take execution of have X.X hedges put we collateral. then around our was against fixed-rate

net very business. call the So a it good was for quarter -net


Your the line next question Bose of George, from KBW. comes

Your line is open.

Bose George

Hey, quarter? there in the about mark. the Can change looked of the Mike. of you was the talk a MSR drivers like this negative It it valuation

Michael Nierenberg

$XX Ocwen some Nick. was some the legacy call I has on MSRs I'll net changed. and adjustment stuff. to million. this to away with positive that up transactions. up model adjustments relates to overall some an around of There's and The where was access --some Essentially turn think expected, And over it just would saw the will do there speeds down talked on what of accounting GAAP quarter. a it than about the Nick HLSS around we then rates Yes. little gain million of as about little number $XX a We I of to from bit higher bit, made our some tweaks our and but accounting was the weren't the

Nick Santoro

Ocwen summary and do of the it has in to to relates It fair the Sure. the amortization transaction value. with

So to you'll the on realized, so we line. as we create the fair income, through that to pulled asset value the into unrealized MSR the do come down, to unrealized begin as see negative flipped from and has gets --

Bose George


conceptually -- just of it's that is really I So a markets of fair value more mean the-- it's an mark amortization sort not

Nick Santoro

That's correct.

Bose George

been Okay Altisource. and then the Has terms of with contract in finalized? that

Michael Nierenberg

and that them, with LOI get an extended quarter. We yet. we up to hope this Not wrapped

Bose George

there valuation the that there Are MSR going any could Okay. forward? impact changes

Michael Nierenberg

we're of. not aware that No,

Bose George

okay. material, in terms MSR a earlier just being steep, can you out the just stuff then talk the Nothing you pipeline noted somewhat be And compelling? of pricing about for pipeline there. on there acquisitions, but that could the Is just

Michael Nierenberg

We have have that are quarter. $XX on we now think right I billion get on this to that executed LOIs likely

I very mortgage banking-- themselves and -- a good the asked the about It's mortgage hard. on industry pipelines think Tim gain are sale. banking question

MSRs about I pricing more way We down portfolio, but has we're to to could continue continues capital right So look you're origination for back its Overall make I us. If billion. $XX and there. that you're able bit think interesting XXX that out money as create going thinking in but on the of is pressure to going this of the see some general the at they're to it. not XXX at be the up, and the current When with be for more treasury what mortgage of business. the to frankly going pricing year in you think just on the it's to little morning, pointed quite not quarter-over-quarter system I need some as it's slow that to the XX production, could to about see I less a there's think opportunity, bankers buy


Your Wedbush. Henry next from question of online Coffey, comes

Your line is open.

Henry Coffey

banking story and to is origination mortgage of value Good hear nice create nice associated that new it component possible There tax MSRs. with advantages to a Is gain that kind it is It's the good or what again. is into grows are that some of going on morning. some quarterly the earnings? real sale and direct penn

Michael Nierenberg

we REIT as less it's are for us right. relevant Henry, Yes,

is the it's company. when really you strategy own new The it very from the for think Shellpoint create good around we for nothing assets business, really create perspective, we just about grow so origination, there's a balance a think us So profitable truly grow sheet is right levels. mortgage there. what are that at our that I And --about tax third-party think

tax I an we there's to because to some business, nothing we There think our stuff decision it's that the in tax not just really good it's a stuff-- and doesn't weigh there all asset, tax the is do but have here. REIT. because REIT not pay operating

Henry Coffey

single looking your a be regional non-QM meaningful What's you business of to couple a business a year And that taking had long billion a prospects banks into time? a nice grow dollars legs. then for seems have get of the did one side a that all lending the the securitization. real at to loan residential of that for into equation? even sort Do We and rental family portfolio that's like of on we non-QM a component that areas could Does it? also growth follow that the

Michael Nierenberg

is for One on I asset $XX the things. side as out the pointed out; quarter. in billion the bid came Couple

the some participate could of is $XX players in bid bit a obviously extremely fact overall the landscape will we and/ by total trillion shareholders. of well market marketplace. would takes call in if be lot number return interesting. residential we for market a returns it give the the Assets a I create banks good the or think of little what or whether which is The we And housing

at that, to be want don't person want yes, against the we'll lending look last the think Now we'll at about to party, when so we don't family it. -- you single look rental, you

looking can in REO our but call you that as a that housing at would at collapse a market. of a point now call what when now. create everything. We look right that's lot about And acquisitions will We'll do own think to I strategy. somebody nothing of look potential continue at result I different stock our bunch that typically We that I to we're things asked there's interesting, but There's deals, before. of these right acquisitions comes

Henry Coffey

a And does out is the business compelling? pop then is just because of the to question general story again. When you what's getting I'm --what kind new survey this

Michael Nierenberg

Good question.

our I portfolio existing I is think -- pointed great.

Henry Coffey

Yes, it's a given, yes, it's obvious.

Michael Nierenberg

look to look our I pretty back the ton look QX QX We're story which remarks, same. is capital gave. --I work at not you there. of to a to I remarks much just when Yes, deploying The

environment is So the just great. not the investment risk return and

the pretty much stuff, for that that. every got to focus business our the same While saying non-agency it that accretive thing. come single call we be we'll diligent be around acquired will day If we'll us. things continue that makes and for be be way. There assets sense now, on it if our which Right do we on to We'll sporadic are our team. MSR

We've in are different consumer the time services some looking ways. We the number financial We're away be good the spending on of sector. side. could and just strategic things our from any growth at I asset investments made side, think

So to not on lot based really, right we plenty now. liquidity we But have There's now. net-net, a that's continue right capital of deployment, really look interesting at everything.


will for closing to remarks. I call Nierenberg, CEO turn the Michael back now

Michael Nierenberg

call. QX. results the updating support. look rest Thanks forward and Enjoy Appreciate on everyone summer. for the QX of And our joining the to

a have but summer. is Now there time, Thanks. great


call. This concludes today's conference

You disconnect. may Thank now you.