New Residential Investment Corp. has co-invested with Nationstar Mortgage LLC in Nationstar's recent acquisition of a mortgage servicing rights (MSRs) portfolio. The portfolio has an unpaid principal balance (UPB) of approximately $23 billion and is composed of residential mortgage loans in government-sponsored enterprise pools.
New Residential invested approximately $38 million to acquire the right to receive one-third of the monthly cashflow generated by the MSRs, net of a basic fee paid to Nationstar. Nationstar is the servicer of the loans and will perform all of the day-to-day servicing functions. New Residential will not own the servicing rights and will have no servicing duties, advance obligations or liabilities associated with the portfolio. A fund managed by Fortress Investment Group has also acquired a one-third interest in the MSR cash flows.
Under the terms of this investment, to the extent that any loans in the portfolio are refinanced by Nationstar, the resulting MSRs will be included in the portfolio, subject to certain limitations. This arrangement is expected to significantly reduce the impact of prepayments on New Residential's investment, the company notes.
This transaction is expected to bring New Residential's total initial investment in MSR cash flows to approximately $645 million and the UPB of the underlying loans to over $310 billion.