New Residential records 2Q profit in wake of MSR sweep
New Residential posts strong profit after spinning off from Newcastle
Real estate investment trust New Residential Investment Corp. posted a higher second-quarter profit in the wake of the company’s massive mortgage servicing rights buying spree.
New Residential, which spun off from Newcastle Investment in May, recorded a core profit of $37.5 million, or 15 cents a share. That compares to earnings of $12.8 million, or 5 cents a share, in the first quarter.
On a GAAP basis, the company’s profit came in at $109.2 million, or 43 cents a share, up from $13.1 million, or 5 cents a share, in the first quarter of 2013.
The REIT’s profit arrived in the wake of a busy and productive period.
During the second quarter, New Residential became an independent and publicly traded company as investments in mortgage servicing rights became an even larger part of its investment strategy.
New Residential invested $180 million in a $23 billion portfolio of agency loans, including $40 million excess MSRs during the quarter. Another $140 million investment focused on non-agency RMBS loans.
New Residential reported mark-to-market gains on excess MSRs of $59 million, with the MSR portfolio’s weighted average discount rate declining from 18% to 12.5%.
When assessing the firm’s consumer loan performance, the REIT estimates unleveraged lifetime returns of 14%, which is improved from the company’s target of 12%.
The company’s expected leveraged lifetime returns could run as high as 20-plus percent.