New Residential takes loss, shifts gears in response to lower rates

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New Residential Investment Corp. took a $32 million net loss in the second quarter as it diversified its business lines and repositioned to protect its mortgage servicing rights from falling rates.

The real estate investment trust's 2Q19 results marked a drop from $175 million in net income during the same period a year earlier, and nearly $146 million in net income the previous quarter.

When adjusted for nonrecurring items, New Residential's earnings per share underperformed Zacks' consensus earnings estimates by a penny a share at $0.53. Its stock price was generally trending higher Tuesday morning at levels between $15 and $16 per share. New Residential trades under the ticker symbol NRZ.

"As rates moved lower throughout the second quarter, the balanced nature of our investment portfolio continued to demonstrate the value of our franchise. Through a diversified hedging and investment strategy, we continue to protect the value of our assets across various interest rate scenarios," Michael Nierenberg, chairman, CEO and president of New Residential, said in a press release.

"Given recent language from the Federal Reserve suggesting the potential for future rate cuts, we remain focused on protecting book value and executing on key business initiatives. In particular, our emphasis on developing our origination and recapture business is expected to help contribute to our overall performance as we navigate this environment."

As of quarter-end, the percentage of the company's investment portfolio dedicated to MSRs and servicer advances had dropped to 45%. Servicing-related investments accounted for more than half of the company's portfolio during the previous quarter and during the second quarter of last year.

New Residential engaged in a preferred equity stock offering during the second quarter that allowed it to raise $155 million in gross proceeds. The company also agreed to buy substantially all of the bankrupt Ditech Holding Corp.'s traditional mortgage business, and make a strategic investment in mortgage technology provider Covius Holdings.

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Earnings Stocks MSR Mortgage rates M&A New Residential Investment Corp. Ditech Mortgage