New Residential Investment Corp., a real estate investment trust, is preparing to issue $1.96 billion of securities backed by mortgage servicing advance receivables.

The collateral consists entirely of repayment of funds advanced by Nationstar Mortgage on mortgages that it services, according to a presale report published by Standard & Poor’s. New Residential is a unit of Newcastle Investment Trust that was formed to acquire the receivables from Nationstar and other real estate-related assets. Both Nationstar and Newcastle are controlled by Fortress Investment Group.

The notes will be issued in three series, 2014-VF1, 2014-T1, and 2014-T2. The $912.5 million VF1 series consists of four classes of one-year variable-funding notes: the $779 million class A is rated ‘AAA,’ the $63.1 million class B is rated ‘AA,’ the $32.7 million class C is rated ‘A,’ and the $25.2 million class D is rate ‘BBB.’

The $500 million T1 series consists of several classes of one-year term notes with ratings ranging from ‘AAA’ to ‘B.’

The $500 million T2 series consists of several classes of three-year term notes with ratings ranging from ‘AAA’ to ‘B.’

Residential mortgage servicers are required to advance scheduled payments of principal and interest when borrowers fail to make timely payments. They are also required to front some of the expense of preserving a mortgaged property, such as property taxes and insurance premiums, as well as costs incurred during the foreclosing, preserving, and selling of mortgaged properties, according to the presale report.

These advances are typically the first thing repaid when a mortgage is repaid and in many cases they have a priority on collections on other mortgage loans in the related pool of mortgages after the servicer advance is determined to be nonrecoverable.

Among the risks to the deal, S&P noted that the three-year term notes will not receive any principal payments during the revolving period, so the risk of principal nonpayment increases as the amortization period for the term notes is delayed.

“Approximately one-fourth of the issued notes in the master trust will have revolving periods longer than one year, which we view to be risky due to the short-term nature of the collateral and the decrease in advancing needs as loan performance continues to improve,” the report stated.

The deal is expected to close March 18.

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