New Residential will begin marketing a $500 million securitization of performing mortgage loans acquired by the mortgage real estate investment trust from called legacy RMBS next week.
The mortgage REIT said during its third quarter 2015 earnings call on Tuesday that it plans to also issue another deal in December.
New Residential said on Tuesday's call that it owns the call rights on approximately $200 billion of outstanding private label securitizations and it expects to call at least $100 billion of the legacy paper. The mortgage REIT is able to exercise clean up calls on the legacy RMBS when at least 90% of the original transaction is paid down.
The performing loans that are acquired are sold to New Residential's securitization trust and the delinquent loans are kept on balance sheet to be either modified or liquidated over time.
Most of the loans called by the REIT benefit from at least eight years of seasoning having been issued from 2003 to 2007.
In total, New Residential said it called seven non-agency private-label mortgage securitizations totaling $576 million over the third quarter 2015.
In the second quarter, the company recalled 18 seasoned non-agency mortgage deals with approximately $369 million in unpaid principal balance. It then issued a $334 million securitization, called New Residential Mortgage Loan Trust 2015-1.
"The feeling is, if we can clean up the legacy mortgage market of which we own a significant amount of calls related to that business, it should bear great fruit for our company and our shareholders," said Michael Nierenberg during the earnings conference call Tuesday. "It is also good for the servicers as servicing delinquent loans is not a profitable business and we know and it will be very good for bondholders. So we think it would be a win for the entire market."