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Investments

3 ways RCS purchase helps American Capital

Can now invest across broader spectrum

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American Capital Mortgage Investment Corp. (MTGE) posted a net loss for the fourth quarter of $17.3 million, or 33 cents per share, and net book value of $21.47 per share. But after a strategic move to purchase Residential Credit Solutions in October, the company is opportunistic about investing across a wider market.

As HousingWire said back in October, American Capital Mortgage Investment said it signed definitive documentation to acquire mortgage servicer Residential Credit Solutions.

“Currently, RCS manages a servicing portfolio of approximately 53,000 loans, representing almost $10 billion in unpaid principal balance,” American Capital Mortgage said in its earnings.

In light of the acquisition, American Capital is excited about three distinct areas it can now invest in more comfortably by utilizing RCS expertise.

1: Mortgage-servicing rights

The deal brings more benefits for the mortgage-servicing rights portfolio, with reasonable return on equity at current valuation levels but likely to be very attractive over time.   

2: Whole loan investments

The acquisition allows for new prime jumbo and nonqualified mortgage whole loan investments, with the operational capability to purchase, service and securitize prime jumbo and non-QM loans.

3: Non-performing/Re-performing

The RCs purchase also gives the company the chance to invest in legacy non-performing/re-performing mortgages, which have near-term opportunity to provide appropriate risk-adjusted returns.  

"We are confident that our commitment to active portfolio management, our growing capabilities across the mortgage investment spectrum and our continued prioritization of risk management over short term metrics should help us to generate attractive returns for our shareholders over the long term," stated Gary Kain, MTGE's president and chief investment. 

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