New Residential Closes Excess MSR Transaction

New Residential completed an additional closing of excess mortgage servicing rights on loans with an unpaid principal balance of roughly $34 billion acquired from Nationstar Mortgage LLC and Bank of America.

The real estate investment trust whose stated focus is on “opportunistically investing and managing” residential real estate investments said it will not own the servicing rights and has no servicing duties, advance obligations or liabilities associated with the loans.

The portfolio consists of loans owned, insured or guaranteed by Ginnie Mae that are held in private-label securitizations with a UPB of $43 billion that “represents approximately 45% of the total PLS UPB” associated with the transaction.

New Residential said it invested approximately $65 million to acquire the right to receive one-third of the monthly cash flow generated by the MSRs in basic fees paid to Nationstar, the servicer of the loans.

Nationstar retains one-third interest in the excess MSRs, while the remaining one-third interest was acquired by an unnamed fund managed by the Fortress Investment Group.

Under the terms of the investment agreement, “subject to certain limitations” MSRs resulting from loan refinancing by Nationstar will also be included in the portfolio, which ultimately is expected to “significantly reduce the impact of prepayments on New Residential’s investment,” the company said.

Initially announced on July 1 the transaction is expected to be completed in the third quarter.