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New Residential boosts income, securitization activity in 3Q

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New Residential Investment Corp.’s pre-tax income increased by nearly 72% in the third quarter – buoyed in part by seven loan and servicing-related securitizations – but fell short of analysts’ projections on earnings per share, in the REIT’s quarterly earnings report issued Monday.

The company (NYSE: NRZ) produced a net income of $131.6 million from the $312.3 million in pre-tax income that up 72% from the second quarter, as the company more than doubled originations activity ($18.1 billion) from the previous three-month period. The company had a GAAP net loss of $8.9 billion in the second quarter.

New Residential, through origination and servicing subsidiary NewRez, issued two mortgage-servicing rights debt securitizations for $426 million during the quarter, two servicer advance securitizations totaling $1.2 billion and three loan-asset securitizations with a total collateral of $1.3 billion during the third quarter. Two of the loan securitizations were for non-performing loans, and one for a performing-loan portfolio.

New Residential closed three securitizations in the second quarter, including a $265 million deal collateralized by Fannie Mae mortgage servicing rights on $43.1 billion of unpaid principal balances.
The company also refinanced an existing securitization in the third quarter representing $663 million of collateral.

"New Residential had a strong third quarter, bolstered by solid earnings in our Origination and Servicing segments," said Michael Nierenberg, chairman, chief executive officer and president of New Residential, in a statement. "Origination and servicing delivered over $340 million in pre-tax earnings during the third quarter as these businesses continued to scale and capture additional market share."

The company held $841 million in cash of Sept. 30, but also saw rising debt leverage to 3.5x compared to 2.1x at the end of the second quarter.

According to Seeking Alpha, the company's earnings per share of 31 cents missed the average analyst estimate of 36 cents and slipped from 34 cents in the second quarter.

In subsequent post-third quarter activity, New Residential has already issued one servicer advance securitization for $500 million.

“With rates at current lows,” Nierenberg added, “we believe our investment portfolio is well positioned; in particular, our MSR portfolio stands to benefit as rates rise and multiples improve. We intend to maintain high levels of cash to deploy opportunistically. Heading into the end of the year, we are confident in our ability to grow book value and generate earnings for our shareholders."

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