Newcastle Buying Subprime Portfolio

Newcastle Investment (NCT Quote) agreed to buy a $1.7 billion portfolio of 7,300 subprime residential mortgage loans.

The New York-based investment company didn't name the seller but said it expects the deal to close in the next month. It said 28% of the assets are located in California, 13% in Florida, 10% in New York and the remaining balance diversified throughout 45 states. Approximately 94% of the portfolio is secured by first liens and 92% of the assets are owner occupied.

"We are very excited about this transaction," said CEO Kenneth Riis. "Constrained liquidity and the re-pricing of credit risk in the subprime mortgage market have created a unique opportunity for us to purchase a portfolio of loans at an attractive price with early payment default protection. We have underwritten this investment to generate an attractive return on capital using conservative default and loss assumptions."

The news comes just days after struggling mortgage player Accredited Home (LEND Quote) said it had agreed to sell substantially all of its $2.7 billion in loans held for sale in a bid to meet margin calls. News of Accredited's sale agreement, along with comments from big brokerage houses that they would be buyers of subprime assets at fire sale prices, have propped up shares of the subprime lenders in recent days after a sharp plunge earlier in the week. ...