New Residential expects Caliber acquisition to drive growth

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New Residential Investment Corp. reported growth in the creation and service segments in the second quarter and expects MSR and residential investment, as well as recent Caliber acquisitionto ensure profitability in future quarters.

The New York-based REIT posted a second-quarter net income of $ 121.3 million in its income statement on Thursday, compared with a net loss of $ 8.9 million in the same quarter last year. affected by COVID. This year First quarterthe company’s net profit was $ 277.6 million.

As the portfolio of recently acquired Caliber Home Loans greatly complements New Residential’s lending business at NewRez, company executives are optimistic about the future, especially in terms of loans, following the closing of the deal in the third quarter.

“When it comes to retail and JV business, there are no coincidences. So, in our opinion, this is a 100% increase. On the [direct to consumer] business is the same. They manage their service portfolio and we manage our service portfolio. ” said Baron Silverstein, President of NewRez. “And then you look at third-party channels – according to our analysis, there is very limited overlap, and in fact it was a significant pleasant surprise when we looked at both of these third-party channels about the scale-up nature of the business. … “

New Residential had net income of $ 53.1 million in the first quarter, up from $ 151.3 million in the first quarter. NewRez’s production, funded by seed funding, had $ 23.5 billion in unpaid balance, down 14% from the prior quarter and 184% from the same period last year. Sales margins in the second quarter decreased to 1.31% from 1.43% in the first quarter.

The company also reported a net profit in the service segment of $ 24.2 million, slightly higher than the previous quarter of $ 23.7 million. The unpaid balance service portfolio grew to $ 305.9 billion, unchanged for the quarter, but up 10% over the second quarter of last year.

The quarterly fortunes of other New Residential divisions were mixed. Net income from securities and callbacks was $ 124.7 million, offsetting a net loss of $ 234.9 million in the first quarter.

But its MSR and Advance Services segment recorded a net loss of $ 206.3 million, compared with a profit of $ 292.1 million at the end of the first quarter. MSR’s New Residential portfolio as of June 30th had $ 489 billion in unpaid balance. The average share of newly created MSRs was 2.96%, up from 2.79% in the previous quarter.

Despite the loss of the segment, New Residential saw great potential for its MSR business in the future to increase its bottom line.

“When we look at the operational side, we continue to look for opportunities and see ourselves as opportunistic investors in the MSR portfolio,” said Michael Nirenberg, President and CEO of New Residential.

“We believe that when and if rates rise – and we truly believe they will – we will have significant upside potential that will increase book value, cash flow and bottom line as we move forward.” he said.

In the home lending segment, the company reported a net profit of $ 165.2 million, up from $ 89.9 million in the previous quarter.

New Residential has big plans for the single-family rental market, including a new brand that will be unveiled in the coming days. According to Nirenberg, New Residential plans to acquire $ 5 billion in the SFR sector over the next five years.

“We are purchasing houses and we currently have 1400 houses. Looking ahead, we intend to really grow this business and have hired an excellent leader and management team that we will announce next week, ”he said.

New Residential’s push to diversify its offerings, as noted by Eric Hagen, director and analyst for mortgages and special finance at BTIG, could help “smooth out volatility in mortgage lending.”

In a research note, he said, “The company mentioned that the master plan is to ultimately have a menu of potential products and sources of connectivity (beyond service and re-connectivity) to offer 2.4 million households in its post-conclusion service portfolio. deals with Caliber. completed. It is probably too early to attach importance to this broader possibility, but something worthy of attention. “

As part of the plan, NewRez recently launched marketing activities to promote its adjustable rate products

In the second quarter, New Residential also posted earnings of $ 0.31 per diluted share, in line with analyst estimates. EPS for the last quarter and the same period last year was $ 0.34.

The company’s stock was up immediately after the call on Thursday morning, opening at $ 9.65, up 1.9% from the previous day’s close, and ending the session up $ 9.87.

With New Residential’s recent moves, Nirenberg felt the company was poised to continue to grow, no matter how the markets might move in the coming months.

“The announcement of the Caliber acquisition, which we hope to complete early this quarter, will allow us to get started, expand our recapture rates and increase profits in all conditions. If rates rise significantly, our MSR portfolio could grow significantly, ”he said.



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