Good morning. My name is Hope and I will be your conference operator today. At this time I would like to welcome everyone to the New Residential First Quarter 2016 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. Miss Mandy Cheuk with Investor Relations, you may begin your conference.

Thank you Hope, and good morning everyone. I would like to welcome you today to New Residential's first quarter of 2016 earnings call. Joining me here today are Michael Nierenberg our CEO; Nick Santoro, our CFO; and Jonathan Brown, our CAO. Throughout the call we are going to reference to the earning supplement that was posted to the New Residential website this morning. If you have not already done so, I would suggest that you download it now. Before I turn the call over to Michael, I would like to point out that certain statements made today will be forward-looking statements. These statements by their nature are uncertain and may differ materially from actual results. I encourage you to review the disclaimers in our press release and investor presentation regarding forward-looking statements and to review the Risk Factors contained in our annual and quarterly reports filed with the SEC. And now I would like to turn the call over to Michael.

Thanks, Mandy. Good morning everyone and thanks for joining us. You know, for us in the quarter quite frankly, it was a relatively uneventful quarter despite the fact that the markets were extremely volatile. You know, during the first quarter we saw huge swings in oil prices, the equity markets gyrated and had very large moves. Bonds markets rallied and then sold off, and then we saw the commodity markets move around pretty broadly as well. So as we thought about this and, you know, quite frankly doing this for many, many years, we are extremely cautious around our capital deployment versus what we initially thought we would do when we came into the beginning of the quarter. So throughout the quarter we maintained a greater level of liquidity as we were watching to see what the markets would do. We have seen markets like this before and quite frankly usually you are rewarded to be patient. So most of our capital deployment came towards the end of the first quarter versus early on when we thought we would deploy a fair amount of capital in the beginning of the year. It is important to note that while we waited towards the end of the quarter to deploy a bunch of capital the underlying core business lines have been performing extremely well. In a way, as I pointed out our quarter was fairly eventful, away from the acquisition of the remaining spring capital equity position which was an add-on to an existing investment that we had in our portfolio. When you think about this and the fact that the cash flow generated from our business generates terrific earnings, it is something worth noting as we have yet to deploy as much capital again as we thought we would have in…

[Operator Instructions]. Your first question comes from the line of Jessica Levi-Ribner with RSB Capital Markets.

Just a quick question surrounding the Call Rights, can you get into any detail about surrounding maybe how you are going to accelerate that or what kind of strategies you are working on?

Yes I think it is a much bigger thing than, than NRZ, quite frankly. I think it is more of a market thing. These are some of the grand aspirations I think we had as a Company to kind of fix the legacy mortgage market. So when you think about it there are really two factors which would enable us to call more deals. One is delinquencies getting reduced and the other would be advance balances getting reduced. Between Ocwen and Nationstar they service approximately, or we have Call Rights on approximately a third of the legacy mortgage market. A lot of these advances were made by prior servicers. So to the extent that we could get folks together to say okay, these advances excludes not be outstanding because they have been made, they have been outstanding for a long period of time and then couple that with delinquency pipelines coming down or a way to reduce the delinquency pipelines, that will accelerate the pace of collapse or ability to call this. It is a bigger thing quite frankly than just NRZ. My sense is there would be broad support for market participants to do this as well as our mortgage servicing partners and it is something that will take a lot of work but quite frankly I am pretty optimistic that something like this can get done, but it will take a lot of work and it is going to take a little bit of time. The other things is lot of these loans, if you think about it were originated between 2003 and 2007, so from a delinquency perspective they have been sitting in these pipelines or in these Non-Agency mortgage trusts for quite some time. So as a bond holder you would think that most bond holders would like these delinquent loans liquidated and as a result you have a much cleaner legacy mortgage market. So I am very optimistic but we have a lot of work to do on that.

All right. Thank you. And then just one more on the -- on your commentary around the MSR acquisition pipeline. Is there anything you are seeing in the market now or do you have any indication of where these will trade on a price basis? Are they still as attractive as they were two to three years ago? Or has something changed given all the market volatility?

I think they are as attractive if not more. We have not seen a ton quite frankly recently. I do think there is -- you know, there is -- and I think we are stating kind of the obvious. We are starting with the market rally you are seeing write-downs from the large money center banks you are seeing some of the non-bank servicers take impairment charges. So in general, I think some of the more smaller mortgage companies, some of the large banks and quite frankly I think you will see -- I think we are going to see plenty of supply come to market and I think we will be in a very good position to work with the various counterparties to acquire those MSRs.

And that would all be legacy product?

I think so.

Your next question comes from the line of Jeremy Campbell with Barclays.

So I just wanted to take a quick setback. So you economically own the old HLSS Ocwen MSRs but what is your license in all 50 states? Does the old purchase agreement with Ocwen allow you to transfer those over the legal ownership over to you guys onto your own balance sheet while still maintaining Ocwen as a servicer of record?

In April of 2017 it does. It is not today.

Okay. So you cannot transfer -- so April 2017 means you cannot transfer it even over to yourself while still maintaining that relationship with Ocwen?

Yes. That is right. I mean we cannot transfer it into our name until April of 2017.

Okay.

Based on the underlying agreements.

Got it. And then I want to clarify, how much dry powder do you guys have here?

We ended the quarter with approximately $250 million of cash. We made some investments subsequent to that. Our current investable cash today is little bit north of $100 million and we are working on some other additional financing around some of our existing portfolio; which we believe will create an additional -- could create additional capital of between $500 million and $750 million.

Got it. And as far as timing of the licenses, I know it is usually easier for the states to get done. You know, I think you mentioned sometime maybe end of Q2 bleeding into Q3 a little bit was that more on the state side, or is that for Fannie/Freddie/Ginnie as well?

What I would say is, we think on the state side we should be done by Q2. We do have applications into FHA right now. As soon as that gets turned we believe that will be kind of the lynch pin to get us licensed in the remaining states, particularly California; and then from there Fannie, Freddie, and Ginnie should follow. So I think the whole thing we are hopeful gets done I do not know if it is going to happen by the end of Q2. That is our target, but if not Q2 it should be early Q3.

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

Thanks. I guess you have talked about the potential for a large pipeline of MSR activity for a while. I guess what makes -- what gives you confidence that -- that kind of the stale mate or the logjam kind of gets broken in the near-term and actual transfers will happen again?

You know, I think part of it is -- I am not sure how much of it is transfers as it relates to just willing participants coming to market and saying, I want to sell MSRs. I do think with some of the impairment charges you are seeing in the marketplace, that could be the impetus to see whether it be from the banks and/or some of the -- whether it be mortgage companies or servicers, come to market with some portfolios. You know, I think it is something that -- I believe it is something that will happen. I really do. We are a better owner of the MSR than, quite frankly than I think most other folks because we are -- you know, if you think of as a real asset manager and having $1 billion-7ish of equity invested in that asset class I think it makes more sense for us to deploy capital and then whether you have servicing partners or have the banks on the other side I think it makes a ton of sense. So I do think it is going to happen.

And then just wanted to ask on the comment you made on the servicer advance side about the -- you know, the $0.07 or so that -- that the decline in rates costs you. Is that something that -- that could reverse itself if rate stay steady or do rates need to up for that to kind of reverse itself?

Keep in mind the way this works is from an accounting perspective is we get incentive payments based on advance balances from Ocwen, and the way that works is those incentive payments are based on LIBOR plus 275. That is based on forward LIBOR, so the way it works is on the asset side is forward LIBOR goes lower. What ends up is happening is your incentive payments get reduced. The flip side of that is your liability side from a financing perspective, you are not able to capture that on the other side. So it is really, it is a non cash thing, but your incentive payments get reduced but you are not able to capture the lower cost your liability on the other side should forward LIBOR come down. If rates go higher, we are going to get back some of that money. If rates stay where we are, it is probably something comparable. You are not going volunteer a hit but it is going to be something comparable but it is going to be somewhere around the numbers where we currently are on that asset class.

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

Hey. Good morning. I just wanted to follow up on the servicing advance. So the reduction and the value that we saw in the income statement this quarter, was that driven by the decline in LIBOR that you just referenced?

That is all it was. The asset class itself performed extremely well, but it is purely due to the decline in forward rates.

Okay. Great. Thanks. And then just one more on the foot value. What assets go through OCI that are not going through the P&L?

Hang on, Nick is here.

What goes through OCI is the unrealized gain or loss on [indiscernible] securities or Non-Agency Securities.

Okay. Okay. Great. Actually just switching over to the pipeline again, there have been a couple actually one of the big servicers, Walter, yesterday noted that there might be selling a lot of MSRs. There is been chatter in the market about PHA potentially doing it. Are these the kind of counterparties where you think could be some good opportunities?

We are hopeful. You know, I think all of us quite frankly whether it be NRZ or the mortgage market itself, want the health of the market servicing industry to be in a very, very good place. You know the mark to market movements, whether it be for somebody like Walter or Nationstar or Ocwen or even the large money center banks are not great for any of the, you know, for any of us quite frankly. So to the extent that there is some selling, we hope that we will be a good position to work with different servicer counterparties and be the acquirer of the MSR. So that is the way I would think about it.

Okay. Great actually just one last one. On the, the servicing license and the potential to move the legal servicing ownership to the servicing after April 2017 I mean is that something that would, could be worth doing just from a, the standpoint of being more legally protected in terms of that asset in case something does happen to Ocwen down the road as opposed to want to go move servicing away from them.

Yes. I think we feel we are extremely well-protected now and based on our existing agreements I think it is not something that is specific to Ocwen quite frankly. In 2017, it is more relative to how we think about our business and expanding our servicer counterparties and giving us quite frankly more flexibility. That is how we are thinking about it. Yes. If this helps from an overall legal perspective, yes, that is fine, but I think currently the way that our contracts are set up whether we are fully licensed or not we feel like we are in a very, very good place.

Your next question line of Jason Deleeuw with Piper Jaffray.

Thanks and good morning. On the MSR pipeline, if you take on some of these MSRs and sub-service them out, how are you guys thinking about managing the volatility of the MSRs with your balance sheet? Because that is been a strong positive for the portfolio right now is the volatility on the MSRs has been pretty minimal, so how are you guys thinking about if you were to take on some of those MSRs how that would impact the book value and the market?

I think we think about it the same way. I mean it depends obviously on where you acquire them. I think we are very comfortable in our existing valuation of our portfolio. You know from a volatility standpoint recapture is a very, very important thing for us. I think we have demonstrated that in our existing portfolio. The folks at Nationstar have done a very, very good job increasing their recapture percentages that not only helps us, but it also helps them. You know, for example on the agency portfolios one out of every three loans that are prepaying have been getting recaptured. I mean, that is on the conventional side. The Ginnies are in the 20s. So recapture is something. We are not out there quite frankly just to go out and buy a portfolio of MSRs and take a bet, so any MRS acquisition would be in conjunction with a recapture provision with, depending no matter who the counter party is. So that is kind of the way that we are thinking about it.

Okay. Thanks for that. And then when we think about the MSR pipeline and, are you looking to acquire the MSRs and then the seller of the MSRs would be the sub servicer or are some of the parties in the pipeline looking to just sell the MSRs and then you would have to go find another sub servicer for the MSRs?

I think it go either way. You know, our existing agreements and the way that we have done it so far has been where we bought excess MSRs from -- you know, from Nationstar and our acquisition of HLSS is the same. As we think about it going forward being licensed gives us more flexibility. We could go either way on that. I do think over time we will have more servicer counterparties depending upon which that counterparty wants to go and if it works for us it works for that company, that is what we will likely do.

And then when I just think about the portfolio at a high level, can we expect the Servicer Advances to continue to decline in terms of your investment there? And then the MSR investments and the Call Right securitization will continue to increase. Is that kind of a high level way -- is that a good way to think about how the portfolio is going to progress?

I think that is right. As -- you know, as these loans get more seasoned you have to think that servicer advance balances will continue to come down. That is a big focus of ours because that will lead to more call strategies. You know, current capital of $125 million of equity in that asset class. You know, there is two ways to think about it. One is advance balances come down, that number will get reduced; but from a financing standpoint I think we are probably at the place where we have maximized our LTVs in the way that we think about financing the asset. So I do not think they are going to come down a ton unless advance balances come down or -- they could go up if we acquire large portfolios of advances -- of MSRs where we have to put advance capital to work. That would be the flip side to that. But MSRs, Non-Agencies again we will be -- the same core strategy as we have done for the past couple years.

Got it and then just the last one. Thank you very much for slide nine on the CPRs. I think that is very helpful and can you update us on the voluntary versus involuntary CPR rates and at a high level if we just think about the trends over time, you know, with the delinquencies coming down, is not there natural downward pressure on the CPRs just with the involuntary CPRs coming lower?

Yes. You know, I think as these -- as they season more, Jason, I think -- if you think about the borrowers they have been in these homes for 100 and call it 10-plus years give or take. These folks have seen lows in rates; we saw 10 year notes at 140, I guess it was 141 or something last year during the first quarter. We saw 10 year notes touch 150-something intraday when we saw the market move pretty wildly. So I think you are going to see CPRs very, very stable to trend lower over time on the -- on these different MSRs. I think as it relates to voluntary and involuntary I need to kind of get back to you on that because I will get the -- you know, the folks in the group to put something together on that one.

Your next question comes from the line of that Matthew Holland with UBS.

The first one on the funding for the excess MSR is $225 million. Is that just a gain bigger bandwidth that you could buy portfolio, sub-service it out, or do you look for it as put some -- some financing on excess MSR maybe some of the agency stuff over time so you can hit a mid-teens hurdle how do we think about that long-term impossible your capital structure?

You know, it is really working capital for investment. If you think about it we have roughly $1.7 billion of equity, you know, in the asset class. I mentioned earlier we paid down half of our existing PLS MSR note that we issued a year ago. So our total financing on our MSR portfolio is about $300 million. We need capital obviously to run our business. We have not done any additional financing on our legacy PLS. We are working we are currently working on that so we have capital for deployment. You know, and again just take a step back. We did not deploy a lot of capital early on in the first quarter, as we should not have because the markets were all over the place. So when we think about earnings, most of our capital is deployed towards the end of Q1, and we had anticipated coming into the year of doing it financing on both Agency and Non-Agency MSRs and when we talk about our liquidity buckets, that number was something about $750 million. I pointed out that we did, you know, to your point, Matt, we financed about $225 million; so we still have existing capacity from a financing perspective or a capital generation of about $500 million to $750 million is the way that we think about it. And again it is really purely for investment. It is not -- that is all it is.

Just with everything around the cash and all the financing, you would define the excess capital of the Company today to -- now granted, you put some stuff to work at the end of the quarter that you did not get the full credit for but is it somewhere north of a $500 million and $750 million? I mean is that --

It is. You know, again, it is somewhere between $500 million and $750 million.

And of course you said the capital deployment in the quarter was weighted towards the quarter end so we did not get the faculty panel impact of that. I guess we are just trying to figure out what the core earnings run-rate of the Company is and appears to be significantly higher than the $0.49 that you reported. And on that notion I mean we have seen some -- some consolidation in the mortgage rate space you have talked about it for a long time some of these smaller public companies. Does that interest you anything out there that a Board may decide to sell below NAV? Might get you to a different business?

You know, I think if we could do, you know, if there is an acquisition that is accretive for shareholders and we think it makes sense from a strategy standpoint for, you know, for what we are doing we will consider it obviously but you it is got to be something that makes sense for shareholders quite frankly. I do think you will see more consolidation some of the consolidation you have seen have been within existing kind of sponsors I would say or, or affiliates, right? You saw, you saw a couple of those get done. Obviously the other one that got done, you know, we were not part of and when you think about from a dividend yield standpoint it probably did not make a lot of sense for us relative to where we are currently trading so it is got to make sense.

In general just to go back to your early comments article in Bloomberg about consolidation happening on a non-bank lenders some of the billing guys like freedom, quick in buy some of these smaller guys. I mean, what do you see, I mean you obviously have deep experience in the mortgage market. You know, going into next year out, are you just going to be massive consolidation with some of the top guys just buying these little guys? How do you look at it nest year out and how do you, how do you position yourself for it?

Listen, I think it is a pretty interesting time. I think rates are going to dictate a lot for some of the smaller mortgage bankers. You know, if rates stay where we are or rally a little bit I think you could see some fairly decent mortgage origination. If rates back up a bunch I think it is going to be much, much harder for some of these smaller folks to be able to compete. As it relates to the large bank servicers I mean obviously it is been a very difficult ride for them. You know, the past whatever. The past couple weeks. And we are close to everyone so we will see what happens, but we are rooting for everybody is what I would tell you.

Your next question comes from the line of Michael Kaye with Citigroup.

Hello?

Michael, your line is open. If you are on mute please unmute your line. There is no response from that line. We will go to the next question from Trevor Branston with JMP Securities.

Hey. Thanks. Most of my questions have already been asked, but just one detail I missed. You said that you had continued to acquire additional Non Agency Securities since the end of the quarter. Could you tell us roughly how much have you bought and kind of roughly what the, the yields you are booking those at?

We have been able to acquire securities at something close to kind of mid-teens, you know, in a base case. Keep in mind all the, almost every Non Agency security we buy is correlated to our, or associated with Call Rights that we own on the existing underlying deals, so it is a bigger strategy. Your IRRs, or your returns, will go up significantly at the time that we call these transactions. So it is consistent with what we are doing around our call strategy. Subsequent to Q2, I am sorry to Q1, we deployed equity of about $129 million, you know, and that is been since 3/31. So we have been fairly active acquiring assets in that space.

And there are no further questions at this time. I would now like to turn the floor back over to Mr. Nierenberg for any closing remarks.

Well, thank you for all of your support. We will continue to do, obviously, everything we can to drive shareholder value and maintain dividends, and grow dividends. We look forward to updating you on the next call. Have a great day, thank you.

Thank you. This does conclude today's conference call. You may disconnect.