New Residential Investment returned to profitability in the third quarter, with higher lending income and lower losses on mortgage service rights, and the servicer is promoting portfolio operations.
The company earned $ 77.9 million in the third quarter compared to a loss of $ 8.8 million in the second quarter. It earned $ 224.6 million in the third quarter of 2019.
Michael Kidneyberg, chairman, CEO and president of New Residential said the company is committed to capitalizing on the "great opportunities we see" in its origination and service channels, both of which come under the NewRez brand.
He noted, however, that "we don't see great opportunities on the portfolio side today and will maintain higher levels of cash and liquidity while being patient and opportunistic."
While the mortgage company had a strong quarter, Leberberg is aiming to increase the company's market share: "We are still relatively new to the operating business and still have room for improvement."
In the result of the previous quarter, Leberberg expressly pointed out the company's intention to expand the direct-to-consumer channel. That focus should help New Residential gain market share in the origins business while slowing down amortization in the MSR portfolio as resume rates improve, he said.
The origination business earned $ 236.1 million during the quarter compared to $ 126.5 million in the second quarter. Maintenance earned $ 24.2 million in the third quarter, up from $ 17.6 million in the second quarter.
The MSR and Service Advance segment lost $ 187.6 million in the third quarter, an improvement over the second quarter loss of $ 256 million.
However, losses in the corporate and other categories increased to $ 106.9 million from $ 24.4 million in the previous quarter.
The company earned $ 85.2 million in residential securities and call rights and $ 26.8 million in its residential loan investments in the third quarter, compared with $ 88.6 million and $ 38.9 million in the second Quarter.
New Residential posted sales of $ 18.1 billion for the third quarter, up from $ 8.3 billion in the second quarter and $ 5.7 billion in the third quarter of 2019.
The correspondence channel was again New Residential's largest source of origin after a second quarter disrupted by the chaos of the pandemic. It spent $ 11.5 billion in the third quarter, up from $ 3 billion in the second quarter.
In the first quarter of the year, the correspondence channel earned $ 7.1 billion of the company's total production of $ 11.4 billion. In the fourth quarter of last year, when Ditech's futures business was added, the correspondence channel was $ 6.9 billion of New Residential's total of $ 10.6 billion.
The direct-to-consumer channel had revenue of $ 3.4 billion for the quarter, up from $ 3 billion in the second quarter and $ 1.2 billion a year ago.
"Looking ahead, we believe the company wants to focus on the operating business, which we believe should perform well in the low interest rate environment, and invest opportunistically in targeted assets with term funding / low leverage." According to a report by B. Riley Securities analysts Michael Smyth and Randy Binner.
On the portfolio side, New Residential has resumed its cleanup calls for its mortgage-backed securities, an activity that had ceased at the start of the pandemic, and released notices of various off-agency securitisations for up to $ 400 million in November. Kidney Mountain said.
The company has termination rights on US $ 75 billion loans backed by RMBS. 59% of this is currently redeemable as the current balance for these mortgages is 10% or less of the original loan balance or less.
He also addressed the growing number of non-bank mortgage companies going public, saying, "We will continue to work towards unlocking the value of our operations and seeing our stock trading where it should."