New Residential Investment's (NRZ) CEO Michael Nierenberg on Q1 2014 Results - Earnings Call Transcript

May.14.14 | About: New Residential (NRZ)

New Residential Investment Corp. (NYSE:NRZ)

Q1 2014 Results Earnings Conference Call

May 14, 2014 10:00 AM ET

Executives

Sarah Watterson - Director IR

Michael Nierenberg - Chief Executive Officer

Susan Givens - Chief Financial Officer

Analysts

Bose George - KBW

Douglas Harter - Credit Suisse

Henry Coffey - Sterne Agee

Michael Klein - Citigroup

Operator

Ladies and gentlemen thank you for standing by and welcome to the New Residential Investment Corp’s First Quarter 2014 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

Thank you. I would now like to turn the call over to Sarah Watterson. You may begin.

Sarah Watterson

Thank you, Victoria and good morning everyone. Welcome to New Residential's first quarter 2014 earnings call. With me today from management I have Michael Nierenberg, the CEO of New Residential; Susan Givens, the CFO of New Residential; and Jon Brown, the CAO of New Residential will join us for the question-and-answer portion of the call.

Throughout the call, we're going to reference the earnings supplement that was just posted to the website this morning. If you haven’t already done so I would suggest that you download it now.

And briefly, please let me remind you that statements made today maybe forward-looking statements. These statements by their nature are uncertain and may differ materially from actual results. We encourage you to read the forward-looking statements disclaimer in our supplement as well as the risk factors in New Residential’s 10-Q. I would also like to remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any securities. And the webcast and audiocast is copyrighted material of New Residential and cannot be duplicated, reproduced, or rebroadcasted without our consent.

With that, let me turn it over to Michael.

Michael Nierenberg

Thanks Sarah. Good morning everyone and thanks for joining us. 2014 is off to a terrific start and we look forward to sharing our results and thoughts with you. What we wanted to do is try to simplify our message a bit. So for those of you who are new to our company we’re a publicly traded mortgage REIT that invests across the $20 trillion housing market. Since our spend from NCT last May our performance has been great, generating an ROE of 25% plus. This quarter was particularly strong as we grew our core earnings to $0.16 a share from $0.14 in Q4 2013. In addition, we’ve paid out a $0.175 quarterly dividend for the past three quarters.

In total including special dividends we’ve paid out $0.67 of dividends per share over the past year. Susan will provide more color on our financial highlights on the call. Going forward our mission is simple, we invest in assets that offer reliable mid-teens returns throughout various interest rate environments. Today our portfolio consists of the following, servicing related assets which includes excess MSRs and servicing advances, residential mortgage loans including performing and non-performing mortgage loans, reverse mortgage loans, non-agency mortgage securities and agency securities. And then finally we have one other portfolio which is our consumer portfolio which we’ll speak to a little bit later.

If you can now flip to page three in this supplement. As you can see, day one strategy for new residential was to invest in Excess MSRs. The early investments have been great ones. We have also made one-off acquisitions where we believe we could generate outsized returns for our shareholders. We believe this strategy has led us to have a great investment portfolio which should do extremely well in all interest rate scenarios.

If you look at our chronology, you can see how we have evolved over the past couple of years. If you start to the left beginning in 2011 while part of NCT, that’s when the company began making its first initial investments in Excess MSRs. And as you walk through, you can see we acquired non-agency mortgage securities; we acquired the consumer loan portfolio approximately a year ago; in Q4 we made some smaller investments in the non-performing loan business; and in late December, we made an announcement that we were acquiring approximately $6.3 billion of servicer advances.

Now, if you could flip to page four of the supplement. NRZ today: At the end of Q1, our portfolio consisted of $1.5 billion of net investments across the company with a lifetime targeted yield in excess of 20%. Our servicing related business which accounts for greater than 50% of our net investments is well positioned to appreciate in value as rates rise. The one thing I want to point, it’s also a lower FICO, higher LTV, more credit impaired portfolio that should remain in this narrow range. The portfolio we believe will continue to performance extremely well. If you look to the bottom left on the pie chart, you could get a sense as far as what the composition of our portfolios are. Again, it’s 823 million of servicing and servicing related assets that’s the Excess MSRs and the servicing advances; 421 million of residential securities and loans that includes our non-agency portfolios which are loans that include our agency pools and then other investments is the consumer portfolio.

If you flip to page five, I would like to take you through the pipeline. Today we are more optimistic on our pipeline than we have been in quite some time. Our partners at Nationstar Mortgage have done a great job with the various regulatory bodies putting them and us in a great place today to acquire MSRs, and we can discuss that a little bit later.

And Nationstar mortgage has approvals today to grow their portfolio and we believe the banks will continue to work with approved non-bank services to sell assets. On the NPL front, pipelines are relatively huge. And while prices have risen, we believe there is enough supply to meet our investment objectives.

We have a small amount of equity invested in the non-performing loan sector and look forward to growing our presence in this sector as long as we are able to generate what we believe or mid-teens to upper-teens returns.

Looking at other opportunities, as we think about what the new mortgage market will above into, we are very focused on non-QM working with Nationstar and other originators and developing origination programs that we feel will supply us with not only mortgage loans for either securitization or for our portfolio but also creating more MSRs from our origination businesses.

And then other investments we continue to look for one-off opportunities. And what I would like to tell you there is something that is here today, there is nothing that we could point to right now that we will we are going to talk about today.

If you flip to page six, as you can see in Q1, we’ve had a very active quarter. We have invested in different portfolios of MSRs, Excess MSRs. We agreed to invest $19 million to acquire a 33% interest and equivalent $8 billion of MSRs. Just to give you a little bit of color on that, it's a 692 FICO, it's got the 60 plus day delinquency bucket, a 17% plus and it's got a 4.5% gross coupon. So, our feeling on that is again it's another one of what we like to call a credit impaired portfolio, speeds should remain very constant on the slower side and we think returns are going to again be in the 15% to 20% kind of area.

Subsequent to the quarter we invested $34 million in another pool of MSRs, $13 billion pool. The details on that are it's a 390 gross whack. To give you a sense on that, current coupon mortgages approximately 4.25 to 430ish and somewhere in that range. So, the coupons added the money. Again we're targeting 15% plus returns on this. And so far when we look at some of our investments, recent investments in the excess MSR space, the returns have outperformed expectations.

On the servicer advance side, we announced in December that we have the ability or the option to acquire 6.3 billion of servicing advances, I think at that time, we committed to purchasing a little bit over $3 billion of servicing advances in the quarter, New Residential and we have some co-investors with us on this closed on $1.6 billion of advances which is $225 million of equity, of which New Residential committed to $82 million of that equity.

Subsequent to quarter-end, we closed on $618 million of advances which is another $86 million of equity which was 100% funded by New Residential. Returns to date have been fantastic. Initially the investment was targeted to be a 14% to 15% return, currently it's about a 20% return and we'll talk to the reasons why a little bit later in the presentation.

On the non-performing loan side, we acquired $72 million UPB of non-performing loans in Q1. Subsequent to the quarter, we agreed to acquire two separate pools of NPLs with UPB of $618 million, again our targeted returns on these portfolios of 15% to 20%. The one thing I would also point out on non-performing loan business all these portfolios, not every portfolio is the same. For example, the large portfolio which we'll talk to a little bit later had characteristics where 50% of the pool has equity in hand. So again, it's -- not every pool is the same.

Returns to-date continued to outperform our expectations. So far cash and cash returns are 24% on our existing NPL business. I will caution that it is early and typically as we look at through liquidation, but I liquidated fair amount of loans early on, but we'll continue to monitor that portfolio. But initially this is -- the pace of liquidations are exceeding, what our initial underwriting thoughts were.

And then on the non-agency portfolios, we had a very active quarter. If you roll back across the Q4 of 2013, we made some decisions to sell non-agency mortgage securities as the Dutch government was selling approximately $10 billion of INGs, non-agency mortgage portfolio. We were concerned as you went into year-end with liquidity.

Nonetheless spread did not widen, so what we did is coming out of the gates in Q1 we made a number of different investments in the non-agency mortgage space early on. And so far those investments have been terrific. And if you look where spreads are in the credit market, the credit markets continue to trade extremely well and prices are higher since the beginning of the quarter.

Now if you could flip to page seven in the supplement, I want to talk about our excess MSRs. In particular, this quarter proved to be an eventful one in terms of MSR performance and activities. Valuations of our MSR pools remained strong and we benefited from slower prepays, improving credit characteristics and lower defaults. In Q1, CPR slowed to 14% versus 16% in Q4 2013 and again versus our initial underwriting expectations of something closer to 17% or 18%; we outperformed our underwriting expectations.

Our prepayment was slower than the industry benchmarks, even on the seasonality adjusted basis. Furthermore, we experienced significant improvement in recapture and delinquencies quarter-over-quarter, one of the reasons being because Nationstar finally boarded all the pools that they originally agreed to acquire from [BofA] and other financial institutions.

Recapture rate increased from 31% in Q4 to 38% on our agency portfolio in Q1 and delinquencies improved from 13% in Q4 to 10% in Q1. To-date we have received $230 million of cash flow from our MSR investments including $43 million in Q1 and we still expect to receive approximately $1.2 billion of cash flow over the weighted average life of approximately six years. In addition, during the quarter as we spoke about before, we committed $19 million to invest in Excess MSRs and a portfolio of $8 billion of non-agency mortgage loans.

Despite the increased regulatory focus on the servicing industry in recent quarters, we continue to believe that from a regulatory standpoint things are slowing a bit. As it relates to Nationstar Mortgage and I mentioned that a minute ago, they’ve done a great job working with the authorities and they are now -- they now have approvals to actually acquire MSRs, both agency and non-agency MSRs from the different regulatory bodies and we continue to work closely with Nationstar and Nationstar continues to work closely with the regulatory authorities. So we are very, very optimistic that we are going to start to see us sowing in the MSRs that are going to come market. The banks still want to sell MSRs. And I think as it relates to the way that we are approaching it, we are working closely with the banks as well. So to the extent that we could source portfolios, new residential will be an active participant along with the Nationstar mortgage on these portfolios.

If you flip to page nine on our servicing advances, we mentioned we had the right to acquire 6.3 billion of advances from Nationstar in December. We had the -- we agreed to acquire I think it was 3.2 billion; we had the other options to fund in 2014. So to-date, we have agreed to acquire 6.3 billion of advances from Nationstar Mortgage. This is going to be completed in stages; to-date New Residential has committed $284 million to our -- with us and our co-partners and what we call Advance Purchaser and that equaled 42% of that vehicle that’s acquiring the servicing advances. The reason that the portfolio returns have been so much higher I think than what we initially thought is advanced balances have decreased by $1.8 billion in the quarter versus initial projections of little bit over $0.5 billion and the UPB ratio has declined 1.4% versus our initial projection of 0.3%.

So if you look to the bottom right, there is a couple I think -- one is the graph on the bottom right. Our actual advances versus UPB is currently at 3.8% with a target of down towards 3%, and then if you look to the bottom right you could see some metrics as far as how we have done. Again when we started this investment, when we began this investment, our advances to UPB were 5.2%; now they are down to 3.8%. The total equity required at the time of this investment was $788 million, today it’s down to $487 million. And you can see the actual changes that have occurred over the four months.

So one thing I just want to mention as well, to run a bunch of numbers that move in and out as these pools tend to pay down and as they require -- as Nationstar mortgage recovers advances quickly, it will require less amount of equity from Nationstar Mortgage as well as from Advance Purchaser to purchase servicing advances.

If you take a look at page -- flip to page 9, and this talks a little bit about how the transaction was structured. Initial structure was targeted at again a 15% IRR; today, we are looking at a 20% IRR. And the reasons again for improvement are one, advance balances continue to come down, the other thing that we have done working closely with Nationstar is we’ve improved the capital structure, we did a term securitization early in Q1 which gave us an advance rate of approximately 94% versus what we thought was going to be 90% and we lowered the cost of funds from north of 3% to 2.5%.

The other thing we have done recently, we’ve agreed on a two year facility that is going to give us a 94ish percent advance rate with again 2.5% cost of funds.

On the bottom of the page, you can see the sensitive analysis to advances versus the UPB of the mortgage loans and again how the [LTVs] work, how the sensitivities if we are able to increase our advances rates versus what we initially thought and how that impacts our returns.

If you flip to page 10, just talking about the non-performing loan business for a sec. Again, I mentioned we agreed to acquire $72 million in Q1 of UPB of non-performing loans. At the end of Q1 our total portfolio was $229 million, 24% cash-on-cash returns, higher than expected liquidations out of the gates, which is fantastic. We continue to work with our servicers on that. We anticipate again, we're underwriting this to a 15% to 20% targeted IRR.

The primary drivers of returns are going to be recovery timeline, as well as our HPA assumptions. And we believe our HPA assumptions are relatively modest as we think about it and looking at housing data et cetera particularly some of the recent numbers that have come out.

Subsequent to quarter-end, we've agreed to acquire two separate pools of NPLs for the total UPB of $618 million; one was a little bit north of $500 million the other was $92 million. From a financing standpoint, you could take a look at the bottom or the left side of the page on 10, to give you an idea how we've currently financed our existing portfolio.

What I want to say is that I think liquidity from a financing perspective is very abundant in the markets today. The banks need to lend money. And advance rates have gone from I would say a year ago where advance rates were roughly 60%, advance rates are now at least 75% on allotted portfolios that we're currently looking at and cost of funds have come down as well. And then on the right you'll see a sensitivity analysis to recovery timelines and how HPA is going to affect the targeted lifetime return.

If you flip to page 11, I wanted to spend a minute on non-agency activities. Currently as of the end of Q1, we have $1.6 billion phase amount of non-agency RMBS for the carrying value of $1.2 billion. One of the big drivers there, if you look at the middle of the page is we purchased $626 million space of a non-agency mortgage security interest for $553 million. So that was a big driver in the growth, part of our growth in the non-agency space.

As I mentioned earlier in the quarter and opportunistically we took the advantage to buy non-agency mortgages with the expectation that the credit markets would remain firm and that from an overall returns standpoint that we’d be able to achieve returns kind of in the mid-teens.

We think, we've done that while did not widen out from as we expected. This one portfolio, buying step early on in the quarter were terrific purchases. We've also been opportunistic and did a small amount of selling as well. Today non-agencies are yielding approximately 10% to 12% on a levered basis. So quite frankly the markets are very, very well bid. And again we'll look at opportunistically, we’ll look at the markets to make sure one is we protect our capital, but two is to the extent that sub continues to do better and better we'll look to potentially sell some assets overtime.

The other thing I wanted to mention in the non-agency business is that we own the call rates on 800 plus non-agency mortgage deals which is 13% of the non-agency mortgage universe. It equates about $100 billion UPB of mortgage loans. And to give you a sense, in the month of May now we're actually in the market recalling 18 deals and we’ll be in the market with the securitization which should be a good one for us.

So with that, I'm going to turn it over to Susan.

Susan Givens

Thanks Michael and good morning everyone. Turning to our summary financial results on page 12, we had a really strong quarter and a great start to the year. We reported core earnings of $42 million or $0.16 per share, that's up $0.02 per share from Q4 when we reported core earnings of $37 million or $0.14 per share. The $0.02 increase in core earnings was primarily driven by our investment in servicer advances which we made in December 2013. Q1 was the first quarter to reflect a full three month contribution from this investment.

As of year-end, we had invested about $116 million of equity in servicer advances. During Q1, we invested an additional $82 million which brought our total equity invested in servicer advances to $198 million at quarter-end. Subsequent to the quarter, we invested an additional $86 million of equity. So, if you include that, to-date our total equity investment in servicer advances is about $284 million as Michael mentioned previously. We expect these pieces of the business to contribute even more to our core earnings as we move forward and as we start to benefit from the additional investments made in the first and second quarters.

Moving on to GAAP income, for the first quarter, we generated GAAP income of $49 million or $0.19 per share. This was down versus Q4 2013 when we generated $81 million of GAAP income or $0.31 per share. The difference between the first quarter and Q4 was primarily attributable to gains we generated last quarter from the sale of non-agency securities.

With respect to dividends, we pay out $44 million of common dividend in the first quarter or $0.175 per share. In total, including special dividends, we paid out $0.67 per share of dividends over the past year. And since the spin off in May of last year, we’ve generated a 25% annualized return on equity.

Now turning to our balance sheet we ended the first quarter with approximately $141 million of cash. That number includes working capital associated with the servicer advances and if you exclude that cash, our balance sheet was about $65 million at quarter-end.

Subsequent to quarter-end, we raised approximately $175 million of gross proceeds to the sale of about 29 million shares of our common stock. We’re using those proceeds to fund new investment activity including investments in excess MSRs, servicer advances and non-performing loans.

On page 13 we’ve laid out an analysis to give you a little bit of insight into how we think about our balance sheet. On this page we’ve broken out our primary asset categories along with the associated asset values and GAAP book value as of 3/31. The majority of our assets are marked each quarter so we believe there are two standout assets that could be worth meaningfully more than where they are marked today.

First the excess MSRs, this has been a great investment for us and this is really the core piece of our business. Our excess MSRs make up more than 50% of our book value today. To-date we have invested $701 million of total equity in excess MSRs and we’ve received $230 million of cash flows from our investments. The primary drivers of value are prepayment fees recapture rates and discount rates. In a rising interest environment we believe that all three of these metrics could change pretty substantially. We think prepayment fees could slow from 14% today to something in neighborhood of 8% to 10%. We think recapture rates to increase from 30% to something around 35%, and we think discount rates could tighten from 12% to 13% to something closer 8% to 9%.

If any or all of those things happen our investment could be meaningfully more valuable than where we [have it marked] today. We also think there is meaningful upside in our consumer loans which appears on this page under the heading other investments. This has been a truly great investment for us we made this investment last April along with two other co-investors we purchased a portfolio of consumer loans of the UPBS 3.9 billion for 3 billion or about 76% of par. NRZ invested $241 million to purchase a 30% interest in the portfolio. In September of last year we sold a med piece and took out about $110 million of proceeds so our cash basis in the investment is about $130 million. We carry the investment on our books at $230 million and we believe that if we were to sell or refinance our entire position today the implied value of our investment could be well north of where we hold on our books. If you keep the rest of the balance sheet constant you will see that based on the assumptions I laid out our book value could increase from $5.04 per share today, that is something that could be potentially closer to $6 to $6.50 per share, so an increase of a $1 to $1.50.

Obviously this is all pull through, but hopefully this provides a little color as to how we think about it. So to wrap up, we had a great start of the year and we are making great progress on multiple fronts and we look forward to updating you on our results in the second quarter.

And with that, I will turn it over to the operator for Q&A.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from Bose George with KBW.

Bose George - KBW

Hey, good morning. Just given the timing of some of the investments, is there a way to think about how much excess capital was due in the quarter?

Susan Givens

It was I think last quarter we talked about we had kind of a $150 million of invested cash on our balance sheet, we are not providing a comparable metric this quarter. I think on we ended the quarter with like I said $65 million of cash on our balance sheet. So we obviously invested that at various points throughout the quarter, but I don’t think we are in a position to say we had a meaningful cash drag on the balance sheet like we talked about last quarter, does that answer to your question.

Bose George - KBW

Next question then. Thank you. Just switching Question on the non-performing loan market. Can you just talk about the competition there, you know supply where that is trending versus last year et cetera?

Michael Nierenberg

Sure. First of all the pipelines are huge, I mean it’s all the big money center banks are going to continue to sell lots and lots in non-performing loans. As you think the GSEs at some point will come out with some non-performing loan sales as well and then we coupled that with (inaudible) announcing recently that they are going to sell $5 billion of non-performing loans in I believe it’s early June. The amount of supply is and we think it’s going to continue to be there with a non-performing and reperforming loan market that’s north of $1 trillion, we think there will be tons of supply that are going to continue to come over the course of the next couple of years.

So I would say that, prices have gone up a fair amount and to your question Bose that competition, there is a plenty of pools of money out there that are involved in the sector. I guess our feeling is one is we're not going to purchase every non-performing loan pool, because the investment returns in every non-performing loan pool won't meet our objectives. So what we think are going to kind of the mid teens to upper teens return. But while saying that, it is a competitive market, there will be plenty of supply, if you think about from a capital structure standpoint, if you are committing to as I pointed out roughly 75% leverage, or 70% leverage on some of these pools, if you took a $1 billion pool for example and said the prices give or take $0.70 and then you assume that you are going to need 30% in equity that's going to give you a $200 million in equity.

So, I think there is plenty of supply around to satisfy the dollars that are out there, that are there in the sector, it's very competitive. However working closely with Nationstar and other services, we're very optimistic that we're going to be able to achieve those returns. Nationstar is making a very, very big push in the non-performing loan servicing sector and be in they are our partner, working close with them I think we're optimistic that we'll get there.

Bose George - KBW

Okay. Great. And then just one more, on the Springleaf portfolio, you guys considering refinance there?

Michael Nierenberg

Yes. I think -- we mentioned I think on the last call that we were looking at a refinance. Today, we do have the ability to refinance and work with that capital structure, there is three ways we are thinking about that, one is the refinance, two is obviously always looking to selling an asset and then three is some kind of other structured financing. And we would expect to do something this quarter on that.

Bose George - KBW

Okay, great. Thanks.

Operator

Your next question comes from the line of Paul Miller with FBR.

Unidentified Analyst

Hi guys, this is [Jessica] for Paul. Just a quick question on the servicing advance pipeline that you noted in the presentation. Would you be looking at servicing advances at other servicers or just with Nationstar and then thinking about what they can acquire?

Michael Nierenberg

I think it's both. I think it's going to be a little bit difficult, more difficult to do it with other servicers today, because there is not that -- I mean quite frankly, there is that many what I would call non-bank servicers that are equipped to actually acquire the types of MSR or servicing portfolios that we do. So the majority of that from a servicing advance standpoint will likely come from our relationship with Nationstar. And we feel like and as I pointed out earlier that Nationstar is in a great position now to acquire portfolios of servicing.

Unidentified Analyst

Okay. And what Nationstar has the agency advances on its portfolio? And I remember when you made the servicing advance transaction initially you talked about getting the right approvals. Is that still something that's on the table or where is that now?

Michael Nierenberg

It is, I think when you look at Nationstar today, I think their financing with their financing lines and the things that they have with the agencies, I think for now it's probably likely to remain there, but we're always looking at it.

Unidentified Analyst

Okay. Thank you very much.

Michael Nierenberg

Thank you.

Operator

Next question comes from the line of Douglas Harter with Credit Suisse.

Douglas Harter - Credit Suisse

Thanks. I was wondering if you could talk about how you would expect to fund the pipeline of excess servicing and servicer advances.

Susan Givens

Sure. So obviously, we raised some capital. So we’re going to use some of that capital we raised to fund servicer advances and some of the Excess MSRs. Something else you’ve seen us kind of do in the past, you saw us do it last quarter is that we continuously evaluate our portfolio in particular our non-agency securities and you saw us sell some of the securities last quarter where we were able to book some pretty significant gains. And we’re going to continue to kind of look at that portfolio and see if things like that make sense. So I think we have a lot of options and a lot of things we can do with our existing balance sheet to generate some liquidity.

Douglas Harter - Credit Suisse

Great. And then can you just remind where do you see the returns on the non-performing pools that are in the market right now?

Michael Nierenberg

Again Doug, it depends on the type of pools, some are on an unlevered basis; some could be in the 5 to 7 range so with leverage you put your lower double-digit; some could be in the kind of upper single-digit. So I think the way that we’re targeting the sector is again we’re a 15, I mean the way that we look at our company is we target 15% plus returns, so we’re not going to buy every pool that’s out there. And with prices recently gravitating higher, again certain pools may not fit our returns. But we think it’s up in the 15% to 20% return.

Douglas Harter - Credit Suisse

Great, thank you guys.

Michael Nierenberg

Thanks.

Operator

(Operator Instructions). Your next question comes from the line of Henry Coffey with Sterne Agee.

Henry Coffey - Sterne Agee

Hi, good morning everyone. Just going back to some of the other questions; and I am just jumping to your balance sheet schedule. Can you talk a little bit about how the equity in the HSBC loans works? If you go in there and you’re able to refinance, maybe you can just kind of walk through how a refinance would take you from $231 million of book value to the number that you are suggesting here?

Susan Givens

Yes sure. Henry what we are to do there is just kind of show sort of illustratively what either a refinance or a sale would look like. Realistically if we were to do a refi, it would just increase our cash. So that’s how to think about it. An out rate sale would obviously contribute to our cash as well, but that’s how we are kind of trying to illustrate it.

Henry Coffey - Stern Agee

And then looking at the income statement briefly, there was sort of a gain on the settlement and then I was just looking at some of the unraveling between -- unwinding between core and non-core. Can you talk about that a little bit?

Susan Givens

Sure. So we sold some non-agencies this quarter, so the gain you are seeing is from that. It was less than last quarter, but we did a little bit of sales this quarter. And then I am not sure what you are…

Henry Coffey - Stern Agee

That’s the line item called gain on settlement.

Susan Givens

Yes, that’s right.

Henry Coffey - Stern Agee

And then were there any other realized gains in there?

Susan Givens

Note that it’s really just non-agency sales.

Henry Coffey - Stern Agee

Now some of your, on some of the mortgage REIT calls companies have talked about creating insurance subs and then actively entering negotiations with the home loan banks? Has that sort of surfaced as an option for NRZ yet or…

Michael Nierenberg

It has and we are exploring and working on that as we speak. I will say Henry that there is a ton of liquidity the way that we see it in the lending markets from banks and non-bank type lenders to fund ample amounts of assets. However we are down the path with looking at that.

Henry Coffey - Stern Agee

What would be the advantage of their financing versus the five other options you probably have?

Michael Nierenberg

It could be cost, it could be term where this -- once we got to go down the path with them and understand what assets turn that to finance other assets they won’t, but we are currently in discussion with them now.

Henry Coffey - Stern Agee

Great, thank you very much.

Michael Nierenberg

Thanks Henry.

Susan Givens

Thanks Henry.

Operator

We do have a follow-up question from the line of Bose George with KBW.

Bose George - KBW

Yes. I just wanted to ask about the potential of calling those securitizations, just curious about how the economic benefits work in terms of calling them and re-securitizing them?

Michael Nierenberg

If you look at the -- those securities were issued call it in if you go back it’s probably ‘03 to ‘07ish. The coupons on those, on the underlying collateral were much higher than where other coupons are currently in the market. So it’s nice seasoned collateral that investors really they will pay up for. So what we -- the way that we think about it we are doing some securities in the portfolio that our market discounts to par. So that’s part one; part two is the absolute levels of execution or above par.

So the way that we think about it, we have the rights to call over 800 deals, not every deal is economics as it depends upon the performance. But, so we’ll call them, we’ll do a re-securitization which we are currently doing now and then sell up all the parts and put the money.

Bose George - KBW

And do you think this could be a reasonably material number where the economics work?

Michael Nierenberg

It’s hard to say material, Henry, but it depends on the deal, but we look at every single deal that we have the option to do it on. Some are going to be more meaningful than others.

Bose George - KBW

Okay, great. Thanks.

Michael Nierenberg

All right.

Operator

Your next question comes from Michael Klein with Citigroup.

Michael Klein - Citigroup

Hi, just wondering update, do you have any interest in buying additional mortgage loans from Springleaf?

Michael Nierenberg

We do and we continue to look at that and work with them on their mortgage loan portfolio. They have a bunch of stuff that's in that raw mortgage loans, as well as they have some stuff that's in securitization. So, we do have active dialog with them on that.

Michael Klein - Citigroup

Okay. Thank you.

Operator

At this time, I'd like to turn the call back over to Michael for any closing remarks.

Michael Nierenberg

Thank you very much. Appreciate everybody calling in. And look forward to updating you throughout the quarter.

Operator

Again, thank you for your participation. This concludes today's call. You may now disconnect.

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