New Residential Investment Corp. (NYSE:NRZ, the “Company”) announced today that the Company and other third-party co-investors (collectively, “Buyer”) agreed to acquire approximately $3.2 billion of servicing advances from Nationstar Mortgage LLC (“Nationstar”). The advances relate to non-Agency residential mortgage loans with an unpaid principal balance of approximately $58 billion.
The total purchase price is approximately $3.2 billion (1), excluding working capital, and will be funded with 90% debt and 10% equity. The Buyer assumed two servicing advance debt facilities transferred from Nationstar, and will finance this acquisition by utilizing a portion of those facilities. New Residential will fund its pro rata share of the equity, which is approximately $0.2 billion, using cash on hand. The Buyer has agreed to make future advances related to the underlying loans.
The investment is expected to generate a stable 14% return (2) for the Buyer, with the potential for upside. The Buyer’s return will be supported by the servicing cash flows related to the $58 billion of underlying loans. Nationstar will continue to service the loans in exchange for a servicing fee plus the ability to earn performance compensation. Nationstar will also retain all ancillary, Solutionstar and originations income related to the loans.
Furthermore, the Buyer has the right, but not the obligation, to acquire Nationstar’s remaining non-Agency advances on substantially the same terms as this acquisition, subject to certain conditions. Nationstar currently has approximately $3.1 billion of remaining advances related to $72 billion of non-Agency loans.New Residential Chief Executive Officer, Michael Nierenberg, commented "The servicing advances acquired through this acquisition are highly complementary to our current stable of servicing related assets. We continue to believe that our robust portfolio of servicing related assets, non-Agency RMBS, consumer loans and other related investments positions us well to generate strong returns for our shareholders."