Good morning. My name is Stephanie and I will be your conference operator. At this time, I will like to welcome everyone to the New Residential second quarter 2014 earnings conference 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, Investor Relations. Please go ahead.

Thank you and good morning, everyone. Welcome to the New Residential second quarter 2014 earnings call. With me today from management; I have Michael Nierenberg, company CFO -- or CEO rather and; Susan Givens, Company's CFO; I also have Jon Brown, the CAO, present for questions afterwards. Throughout the call, we are 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, let me remind you that statements made today may be forward-looking statements. These statements, by their nature, uncertain, may differ materially from actual results. We encourage you to read the forward-looking statements disclaimer on our supplement and the risk factors in the New Residential's 10-Q. I would also like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any securities. And the webcast and audio cast is copyrighted material of New Residential and cannot be duplicated, reproduced, or rebroadcasted without our consent. With that, I would like to turn it over to Michael.

Yes, good morning, everyone, and thanks for joining us. First, I am going to go through -- we are going to talk a little bit about the quarter. We'll talk a little bit about the Company. Then I'm going to turn it over to Susan, she'll talk about our results and then we'll go through our different segments. So first of all, Q2 was a fantastic quarter for our shareholders as we had a record quarter. Our core earnings in the quarter grew from $0.16 in Q1 to $0.20 per share. On a GAAP basis, we earned $0.44 per share. We paid $0.175 per share in regular dividends and we paid a special dividend of $0.075 per share. We announced a two-for-one reverse stock split. Since our spin from Newcastle in May of 2013, we have generated a 28% return on equity and we have paid $0.92 of dividends per share. We continue to focus on our core strategies which is servicing and servicing-related assets. Our investment thesis is to invest in assets that we believe will generate mid-teens returns in various interest rate environments. Today, our portfolio consists of excess MSRs and servicing advances, loans, non-agency mortgage securities, agency mortgage securities and a consumer loan portfolio. So, now if you will flip to page three in our supplement. In Q2, we had a very active quarter. We invested $36 million in excess MSRs related to $14 billion in mortgage loans. This is great news as we frequently get asked questions as far as when the MSR market will reopen. When we started investing two-and-a-half years ago in excess MSRs, we believed based on new capital regulations that the banks would need and want to sell MSRs. At that time, large banks owned approximately 90% to 95% of mortgage servicing…

Turning to our summary financial results on page 5, as Michael mentioned, we had a really terrific quarter by just about any measure. We reported core earnings of 56 million or $0.20 per share. That's up significantly from Q1 when we reported core earnings of $42 million or $0.16 per share. Our core earnings story is really a great one. Core earnings had steadily increased over the last four quarters from $0.15 per share in Q3, 2013 to $0.16 per share last quarter to the current $0.20 per share. Moving on to GAAP income, for the second quarter, we generated GAAP income of $124 million or $0.44 per share. This is up significantly versus Q1 when we generated $49 million of GAAP income or $0.19 per share. Over the last four quarters, GAAP income has totaled a $1.18 per share or about $320 million in nominal dollars. The significant increase in GAAP income this quarter was mainly attributable to gains we generated from the sale of non-agency securities. During the quarter, we strategically sold a little north of a $1 billion of market value of securities taking our non-agency portfolio from $1.2 billion at the end of Q1 to about $217 million. As a result of these gains and the strong quarterly performance, on June 17th, we declared a common dividend of $0.25 per share or 70 million, which included a regular dividend of $0.175 per share and a special dividend of $0.075 per share. In total, including special dividends, we have paid out $0.92 per share of dividends since the spin out in May of last year and we generated a 28% annualized return on equity over that same period. Now, turning to page six, last quarter, we laid out this analysis to give you a little bit of…

Thanks, Susan. If you could flip to Page 9, as of Q2 2014, NRZ has acquired non-performing and re-performing loans with a UPB of approximately $896 million. As I mentioned in Q2, we acquired $653 million UPB of non-performing and re-performing loans, of which approximately $500 million of those loans were a pool that we purchased from a large money center bank. And, again, of that pool, 50% of those loans had equity. When you look at the non-performing loan market and as you think about NRZ strategy, we've actually approach this in what we think is in a very prudent way. Throughout the course of the first six months of this year, we've seen approximately $30 billion of distress loans trade and that's both in the non-performing and re-performing loan sector. We've acquired approximately $896 million, so a relatively small amount of loans. Our strategy there is actually to go slow to, make sure that we are comfortable as we look at the pace of liquidations and continue to work with our servicers such as Nationstar on timelines. As you think about it and when we put -- what we think is a pretty helpful chart in the bottom left part of this page, pre-crisis, when you think about the non-performing loan business, there is a couple of drivers that are going to help drive performance. One is your timelines, the other is going to be HPA and what happens with home prices. So pre-crisis, if you take a look, judicial time lines were approximately 26 months. Currently, we see judicial timelines at approximately 23 months. And if you look back to pre-crisis, they were approximately 18 months. Looking to the right side of the page, to the extent that the timeline shortened by approximately three months, we believe…

Stephanie, if you could turn it over to questions please. Thank you. (Operator Instructions).

Your first question comes from the line of Bose George with KBW.

Hey. Good morning. Actually, first, just a question on the outlook for core earnings. You guys did $0.20 this quarter. Just given the mix in your portfolio right now, is that kind of reasonable run rate?

Hey, Bose. Yes, I think what we talked about in previous quarters was, obviously, the servicer advance transaction. We funded that in phases. And so what you're seeing this quarter in our numbers is really the full funding and the full recognition of our earnings from those assets. So I think we've talked about, in previous quarters, once we kind of got that fully funded, we expected it to be a couple of cents to our core earnings. You're really seeing the full benefit of that this quarter. In addition, you're seeing a -- really a full quarter's worth of contribution from our residential loan portfolio. So, again, we did some acquisitions back in the first quarter, more in the second quarter. So you're getting the pick-up in our core earnings from that investment as well. So our view is that $0.20 is a great number. We feel very good about that and we think it's a great quarter by just about, like I said, any measure.

Okay. Great. And then actually switching to the NPL commentary you guys made, actually what's the breakout of that $30 billion you mentioned between NPLs and RPLs? And I assume -- are you just focus on NPLs and what's the different return profile between the two?

I think as we look at the market, the NPL -- we think about the NPL and RPL market of roughly $1.1 trillion. I think the mix is roughly $500 million to $600 million what we believe -- $500 billion to $600 billion of NPLs. With current pricing where it is, and I mentioned, when you think about it, $30 billion is traded in the first half of the year, we purchased about $896 million. So we've acquired a very small amount. Current pricing, overall, probably is not something that's really that interesting to us. As we think about it, going forward, to the extent that yields rise a little bit, that's how we're going to -- that's how we're thinking about playing in the sector. We're not specific to either RPL or NPLs as long as we could meet our return bogeys the way that we think about it, as a mid-teens type of return, then I think we'll deploy capital.

And the returns you feel like are similar in both RPLs and NPLs?

RPLs are probably a little bit tighter today. But again, I think we are starting to see a little bit -- with the equity markets rolling over a little bit. We're starting to see a little bit of weakness in some fixed income securities. So we'll keep our eye on it, but it's not something we're going to jump in and buy a ton of loans, RPLs or NPLs, unless we think we can meet our return hurdles.

And then just last one on the callable, the clean-up calls you guys are doing. Actually, just given pre-payments -- the level of pre-payments, how much of that $98 billion do you think becomes callable every year?

Well, we estimate, right now, we have in our portfolio approximately $10 billion of securities that are callable. It depends -- keep in mind, these are very seasoned securities. And again, we do think they're going to be called over time. So we think it's roughly going to be something between 10% and 20% per year.

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

Thanks. Can you talk -- on the consumer portfolio, in the past, you had talked about possibly refinancing that and being able to pull more of your equity out of that. Can you give us some update on that?

We are currently evaluating it, as we stated, I think, last quarter as well. We do believe it's something that will occur. But that's kind of where we are right now.

Great. And then on the MSR acquisition side, can you talk about your comfort and you mentioned that you are happy with the Nationstar's regulatory relationships, but just in your comfort in the ability to get deals from the signed agreement to actually boarded about that comfort level?

The folks at Nationstar have done a great job working with the regulators. And I think the way that they are approaching this business alongside with us is they're working with the regulators first. So to the extent that there is a pool of MSRs that we believe can be acquired, we are seeking the appropriate regulatory approvals prior to purchasing these assets. So we feel like they are in a great place relative to their peers in the marketplace to be able to execute on that strategy. And as I mentioned earlier in the call, while we're finishing up documentation, we did agree to purchase a $10 billion pool last week.

And then just one last one. As you sold the majority of your non-agency MBS holdings, where are you thinking of deploying that capital or, I guess, has that already -- that capital already been deployed?

We still have capital to deploy, again agreeing on a pool of $10 billion of MSRs last week. We'll continue to focus on MSRs and MSR-related investments or servicing-related investments.

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

Yes. Thanks a lot, guys. On NSM, when they had their call today, they talked about their recapture rates dropping from 50% to 30%. I know that recapture rates do have a lot of implications to the economics of those excess MSRs. Is there any -- can you add some color to that or -- to those numbers?

I don't -- as it relates -- I think what you are seeing a little bit there, as HPA has gone up, you're starting to see a little bit of housing turnover. While saying that, we don't think that it is a long-term trend. And I think the way that we see our portfolio is -- if you look at the non-agency side, which is roughly half of our portfolio on MSRs that really doesn't prepay. On the agency side, you'll see a little bit more turnover. But overall, we expect this to be more of a short-term phenomenon. And with our outlook for rates to be higher down the road, we think it will be a muted effect. Keep in mind the other thing is prepayment speeds have actually slowed up in the quarter. So there is the offset between recapture and prepayments speeds.

And then you talk about -- I think it was -- it's going to be 75% GSCs and 25% PLSs is what Nationstar said this morning. So I know it's a small portfolio, but would you also be participating in those advances as they come over?

To the extent that we have the opportunity to invest in more advances, we would.

Okay. And then, can you talk a little bit about the economics behind the collapsing of the deals. You talked about the -- you collapsed 16 season deals and sold $1 billion of that for about $53 million in gains. Is that the economics behind the collapsing of the 16 deals and what type of expenses are associated with it?

On the 16 deals, related to $280 million of collateral, so it's not $1 billion. So again, the way it works is we buy the securities out at par and the deals that we did, roughly 90% of those loans were current. So 90% of the loans actually went into the securitization, the other 10% remains in our non-performing loan portfolio which gets marked to market at that time. We then take those -- if you say roughly $280 million, so roughly $30 million of those loans don't come in. So you do $250 million securitization. And then the difference in pricing between par and we actually execute that deal results in your gain, minus your mark-to-market on your non-performing loans. So on that deal, we made $8 million on the $280 million of loan.

So then the $1 billion which you securitized, where does that all -- was that part of the $250 million and then other $750 million of what?

No, the $1 billion, Paul, was just the reduction of our non-agency holdings throughout the quarter. So the loan collateral is one strategy and then you have just your non-agency securities portfolio. And then, keep in mind, at the end of Q2, as we pointed out, we had $70 million total in equity in the non-agency mortgage securities business.

(Operator Instructions). Your next question comes from the line of Sam Martini with Omega. Mr. Martini, your line is open. Your next question comes from the line of Michael Kaye with Citigroup.

If you guys are interested in exploring acquiring MSRs directly on your own by obtaining a servicing license, perhaps organically or by an acquisition?

I think, at this point, we continue to work with our partners at Nationstar. And I think that's the way that we're going to proceed going forward. We always look at opportunities, whether it be to acquire licensing or any other, quite frankly, asset that's going to be accretive to our Company. But I think, at this point, we're going to continue to focus on MSR acquisitions with Nationstar.

Your next question comes from the line of Bose George with KBW.

Hey, guys. Just wondering, can you breakout the core earnings contribution from servicing advances this quarter?

We don't actually disclose the core earnings contribution by segment. But I think the way to think about it is, roughly half of our core earnings come from our servicing and servicing-related assets. That's kind of how we think about it. And I think the balance of the portfolio is comprised of the consumer loans, the residential loans, and our securities. So this quarter, I think, the contribution between the MSRs and the servicer advances was actually north of 50%. So it's a pretty big piece of it.

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

Thank you. On the NPL trade -- and if you've mentioned this in the call, I missed it and I apologize -- are you going to buy NPLs and then re-perform and keep the re-performing loans or are you going to re-perform them and sell them and to turn over the capital? I know there's two different strategies out there in the NPL trade. What exactly will you do with the NPLs once you acquire them?

We're likely going to turn them over, Paul. So once you get re-performing loans, either do a securitization or sell them back out into the market.

And we're hearing that the pricing on that type of trade has really been tight. So, I guess, like what do you think you can buy them at or where do you think you can sell them at? Because that crowd is very -- the trade is very crowded?

It's very crowed. I think at -- based on where we see current returns on where assets are trading, it's not as interesting to us today as they might be down the road. However, I will say that with $30 billion, what we expect, more in supply to come throughout the course of the year and depending upon what happens with the overall fixed income and equity markets, it could create some opportunities for us. $30 billion have traded in the first roughly six months of this year, of which we repurchased $896 million in total. It's a very small part of our business at this point.

At this time we have reached the allotted time for questions. I'll turn it back over to management for closing remarks.

I think that's it. Thanks so much for participating on the call. Have a great day.

Thank you. This concludes today's conference call. You may now disconnect.