Matthew Lambiase - President and Chief Executive Officer Choudhary Yarlagadda - Chief Operating Officer Robert Colligan - Chief Financial Officer Mohit Marria - Chief Investor Officer William Dyer - Head of Credit.

Douglas Harter - Credit Suisse Lee Cooperman - Omega Advisors Michael Widner - Keefe, Bruyette & Woods, Inc., Joel Houck - Wells Fargo Securities Brock Vandervliet - Nomura Securities Steve DeLaney - JMP Securities.

Good morning and welcome to the Second Quarter 2015 Earnings Call for Chimera Investment Corporation. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

Any forward-looking statements made during today’s call, or subject to risks and uncertainties which are outlined in the risk factors section in our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements.

We encourage you to read the forward-looking statement disclaimer in our earnings release in addition to our quarterly and annual filings. Additionally the content of this conference call may contain time sensitive information that is accurate only as of the date of this earnings call.

We do not undertake and specifically disclaim any obligation to update or revise this information. I would now like to turn the conference over to President and Chief Executive Officer, Matthew Lambiase. Please go ahead, sir..

Thank you, [Chad]. Good morning and welcome to the second quarter 2015 Chimera Investment Corporation earnings call. Joining me on the call this morning is Choudhary Yarlagadda, our Chief Operating Officer; Rob Colligan, our Chief Financial Officer; Mohit Marria, our Chief Investment Officer; and Bill Dyer, our Head of Credit.

On today’s call, I will go over the recent events that we announced in our press release last night. Mohit will address our portfolio activity in the quarter and then Rob will review the financial results. Afterwards, we’ll open up the call for questions.

Last night we issued joint press release with Annaly Capital and now Annaly in the independent members of the Chimera Board agreed to internalize the Company's management function. Fixed Income Discount Advisory Company or FIDAC are wholly-owned subsidiary of Annaly had been Chimera’s external manager.

Under the terms of the agreement FIDAC was continue to provide Chimera with structure and personal assistance, while Chimera transitions fully to with independent systems.

We believe that internalization is an important next step for Chimera’s development and will allow us to realize cost efficiency and more closely aligned management interests with those of our shareholders. The internalization also ensures the continuity of Chimera’s management team. In addition we have further strength in the team.

Choudhary Yarlagadda formally our head of structured products has been elevated to Chief Operating Officer and Phillip Kardis, a partner at K&L Gates in the company's external councils since inception will become our new General Counsel. All employees of Annaly that focus on Chimera’s business will become employees of Chimera in the transition.

We also announced last night that Chimera’s Board of Directors is authorized $250 million share repurchase program. Under this program we’ll buyback Annaly’s 4.4% stake in the company, which amounts to roughly $126 million worth of shares. Other share repurchase under the problem will occur time-to-time depending on market conditions.

Both the Board and Management believe that repurchasing Chimera shares at meaningful discount to book value. When the share price did not reflect the company’s intrinsic value create long-term value for our shareholders. Speaking for myself the other employees at Chimera I can say that all very excited for our new opportunity.

It has been great to work at Annaly and be part of the successful company that Mike Farrell and Wellington Denahan founded back in 1997.

However after listening to our shareholders and recognizing the market and business model must change over time to ensure continued success we believe it’s for both company’s best interest to operate independently of each other.

Both Wellington Denahan and Kevin Keyes the incoming CEO of Annaly have made great contribution through this transition and we appreciate their efforts to make the internalization processes seamless this possible. They are support will allow us the fully staff and operational is an independent company by the end of this year.

Chimera has approved in business model, strong portfolio and it’s well positioned to future growth. Our large portfolio mortgage credit assets are high-yielding performing well and would be difficult to acquire in today's market. Importantly our unique portfolio is offers an attractive risk reward profile.

We are able to produce a very high level of income for shareholders while operating at low leverage. We continue to take steps to further improve our risk reward profile. The company has work hard over the first two quarters 2015 to reduce our interest rate exposure.

In order to dampen the volatility of our book value while continuing to produce robust earnings. We’ve reduced our Agency portfolio by $2.5 billion since the beginning of the year. And we believe we’re well positioned to grow possible volatility in the bond market should the Federal Reserve increase short-term rates in the near future.

We believe a more cautious approach toward leverages appropriate positioned to adopt in today’s market until we have more clarity on the actions of the Fed and the direction of the market.

We maintain a lower leverage ratio, so we’re well positioned to add to our portfolio should opportunities present themselves and conversely if the market remains calm after a Fed move, we continue to have the ability to actively pursue opportunities to relever our portfolio.

In our opinion residential mortgage credit provide some of the best risk adjusted levered returns in the fixed market. We have significant exposure to the sector and we continue to add these assets to our portfolio.

Improving credit fundamentals and increasing liquidity in the non-agency market coupled with more financing avenues make investing in this asset class very attractive relative to other mortgage assets.

As the government pulls back from its sponsorship of the residential mortgage market, it’s clear to us, that there is a significant opportunity for private capital and that Chimera has the expertise in the capital to be a key player.

We’ve been able to develop and manage our portfolio of mortgage credit assets that has produced a high and durable dividend for our shareholders.

As an independent company, with the strong portfolio and attractive growth opportunities ahead of us, we are confident that we will continue to acquire assets and produce high relative returns for our shareholders in the coming quarters. Now I’d like to turn the call over to Mohit Marria to discuss the portfolio activity in the quarter..

Thanks, Matt and good morning everyone. I will quickly go over the investment activity for the quarter and turn the call around to Rob. As Matt, alluded to Chimera continues to identify and acquire attractive credit sensitive residential mortgage assets, without significantly increasing our overall interest rate exposure.

In the second quarter we added over $300 million in new non-agency investments as well as pricing two securitizations. Early in the quarter we priced at $268 million [Eco Credit] credit originated season sub-prime deal as previously announced. The collateral backing this deal is over 180 months seasoned with a weighted average interest rate of 8%.

We were able to sell 215 million senior notes with an interest rate of 1.93% Chimera retained 53 million in subordinated notes including the [indiscernible] deal, which we anticipate will produce a 12% to 13% ROE.

In addition at the end of April we were able to successfully call and restructure the second of our seven Springleaf transactions, recall that in late 2014, Chimera consolidated approximately 4.5 billion of seasoned sub-prime loans once owned by Springleaf Financials when we purchased the subordinate interest on seven, previously issued sub-prime securitizations.

The subordinate interest that we purchased have the rights to call this outstanding debt on the third anniversary of the issue dates, because the loans are consolidated on our balance sheet, there is no gain or loss on the call and reissuing of new debt.

To date we have been able to lower our interest rate costs and reduce our equity commitment to the portfolio when we call and reissue the debt in the new deal. In April, we exercise to call on a $330 million Springleaf deal that had 280 million senior bonds outstanding paying an interest rate of 4.51%.

Chimera had 122 million equity position in the deal. The new deal priced in April, we were able to sell 276 million of senior bonds with an average interest rate of 3.49% and Chimera’s new equity position retained in the deal will reduce to $53 million.

We were able to sell more senior bonds at a lower interest rate increasing our advanced rate to 84% from 63% on the previous deal. The economics or refinancing these deals has been attractive and we have a pipeline of deals to refinance for 2017.

While we have been reducing our 30-year MBS Agency portfolio we added to our Agency CMBS position by $270 million over the quarter. These assets offer a better [indiscernible] profile because the pre-payment lock-out versus Agency CMBS. We may increase the Agency CMBS portfolio with paid us from the MBS portfolio over time.

Our credit sensitive mortgage portfolio continues to exhibit positive overall performance as both delinquency and severity is trending down. Payable pre-payment and improving credit fundamentals help make the non-agency securities some of the most attractive investments in the fixed income market.

With that I will turn the call over to Rob, who will discuss our financial results for the quarter..

Thanks, Mohit. I’ll now review selective financial highlights for the second quarter. Our economic return on equity for the quarter was 2% based on our dividend and small decrease in economic book value. The asset income for the second quarter was $116 million up from $67 million last quarter and a $105 million for the second quarter of 2014.

On a Core basis, net income for the second quarter was a $109 million or $0.53 per share down from $120 million or $0.59 per share last quarter and up from $82 million or $0.41 per share in the second quarter of 2014.

GAAP book value ended the quarter at $16.73 per share down 2% from the first quarter and essentially flat compared to the second quarter of 2014. The yield on average interest earning assets was 6.1% down from 6.4% last quarter and our average cost of funds was 2.5% up slightly from 2.3% year quarter.

The net interest spread was 3.6%, down from 4% last quarter. Second quarter economic interest income was $142 million down from a $167 million last quarter and up from a $102 million in the second quarter of 2014. The reduction of interest income and spread was primarily driven by a smaller agency portfolio as well as faster prepayments fees.

Our net interest return on equity was 15% for the quarter down from 17% last quarter and up from 12% last year. Our return on average equity was 13% this quarter up from 8% last quarter and 12% last year. The annualized dividend yields for Chimera was 14% based on the second quarter dividend of $0.48.

Regarding our current expense stage in the internalization, we modeled our previous cost on an externally managed bases to an internally managed model and believe there will be cost savings. As we are fully transitioned, we expect our G&A expenses to be at the low end of the range for the peer group.

Regarding the stock buyback, we believe buying back stock when its dealing 14% is a very delusive capital. We believe at the end we will have the highest yield loss leverage and loss expense ratio in the peer group. That concludes our remarks and we’ll now open the call for questions..

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes today from Douglas Harter with Credit Suisse..

Thanks. I was wondering if you could talk about now being separated from Annaly.

If you think that will impact your access to kind of deal flow and seeing opportunities like the Springleaf portfolio that you acquired?.

Actually I think we've been operating as separate pool of capital and I think the market participants the people will know us, know that while we are managed or managed externally by subsidiary of Annaly Capital Management I don't believe anybody showed us anything because we are part of the complex here.

I think we're pretty well known at people on the street. I think people know that Chimera has the expertise and the ability to turn around very quickly when they are shown deal and I don't think any of that changes..

Great. Thanks Matt.

And then just to clarify on the buyback of the Annaly stake, what time period does that buyback happen?.

It will happen in this month..

Didn’t you already have that?.

Yes..

Great, thank you..

The strengthen shares were ready agreed so it’s gone..

Okay, perfect..

The next question comes from Lee Cooperman with Omega Advisors..

Yes, thank you. I apologize if you addressed this because I missed for other call, but I have several questions.

Obviously you went through pro forma before you enter into this transaction and well if you could share with us the accretion that occurs as a result of doing this transaction and assume Annaly made a profit on it and we’re not going to incur the. We are going to say with Annaly we’re not going to spend to create the same services.

Secondly, a little different question what is the timetable to complete the $250 million buyback. Annaly sold their stock, but basically we are going to enter the market right away or we are going to stretch this at over prolonged period of time.

Third, what impact will this transaction have on your dividend I kind of surprise the stock has dropped on this so clearly you know people I mean looking at dividends the principal source of return here.

So what was the impact going to be on the dividend as best as you can tell? The impact obviously on recurring earnings any help would be appreciated?.

So I’ll take those in order if I missed anything feel free to remind me.

So based on the pro forma on the cost obviously we feel we were paying 120 basis points or approximately $42 million a year we think we can do it at a lower cost on an internal basis we haven’t put out and we probably won't put out for a while what the exact cost will be a pro forma basis will had a transition period over the next four to five months and expect be running fully independent is their earlier part of next quarter, but obviously the model that we put together were strong enough and compelling up to feel like there adequate cost…..

What you share that with this now I mean is an open mike everybody listening I mean what the approximate savings..

By the time were John I think will be very similar to those that are externally manage and probably at the low end of that range..

What is that mean? What is the dollar amount do you think your quest you to replace with Annaly did 42 million is it 20 million, 15 million, 10 million.

Is that will agree to the distribution is a very critical question?.

Okay just not the number that we have decided probably disclose at this point. There are number of….

Let me replace why you should disclose it not to be argumentative, but you're buying back stock okay an essential trading against to your shareholders so you should as a manager want your shareholders have as much information as you really possible before you buy back the stock from them.

So you like Warren Buffett who was a good example for all of us. He says I am not buyback Berkshire Hathaway stock and less than below 110% of the book value, unless my cash positions above why and that this represents the best use of capital.

So he wants to share with his investors all the information so they have whatever they could have to make an intelligent decision where they were want to sell back to the company or whatever.

So I'm trying to figure out you know existing you know 25 million accretive 20 million accretive so I can divide by the number shares outstanding and determine what should happen all things being equal to $0.48 dividend..

Sure we haven’t disclose an exact number at this point and I think we will just move on to the next, the next question on your buyback plan, obviously we have completed the buyback from Annaly of their 4.4% stake its roughly 9 million shares that will close in the month of August, we will look at have you well enter the stock performance and you know while its yielding 14% we may be a little more active the trade up and start yielding a little less, you'll probably put plans on hold but that’s going to be over time we haven’t said an exact calendar timeframe for buying Berkshire buy thing its very shareholder friendly to plan of that size into execute in large scale upfront.

Going through dividend obviously earning $0.53 on core and paying $0.48, we feel like that dividend is well cover we will see our going for the rest of the year and we will update forecast towards the end of the year, but we’ve already announced $0.48 for the remaining two quarters for the year and feel very confident about that.

So we will see how things goes obviously you are right to extend our expense basis lower will have more income to distribute it just not a number of that we want to disclose at this point..

Let me just and exactly say I think your financial relations policies are wrong..

Okay. Thanks Lee..

Our next question comes from Mike Widner with KBW..

Thanks I think he actually yes I think you're up to the points that I was get hit on. Let me ask you a different one FHLB now that you’re independent from Annaly.

Annaly had FHLB membership that something you guys think about?.

We've had discussion with several of the regional banks and high probability that that will be in our future..

Any sense of timing I mean there’s been a lot this year I think more than half the group is now members I mean is it next couple of quarters or….

It is not something that we have to disclosed on but I would say that were in active discussion..

Okay great. I guess my only other question I mean results look pretty good relative to what your dividend is, but try to work through the model I see little handicap because there is no balance sheet in the press release and normally you guys release the Q last quarter at least it was the same day, we haven't seen that yet.

So I guess you any thoughts on the timing of seeing a 10-Q and related to that I mean why not give us a press release, balance sheet..

No, you are right. This is the first time that we haven’t put out the earnings release in the Q at the same time. I think in future quarters we may have a more full some release if there is a delay in between the two.

The Q will either come out Friday or Monday?.

Okay, and is the reason - I mean is the delay related to kind of the obvious stuff that's been going on or is there some other reason for the….

No, no. There is no other reason, it’s just you know obviously you look at the 8-K that came out yesterday was a 150 pages and a lot of effort went into everything that went into that and we’re taking a little bit of extra time to making out lot be reviewed in the Q before press release..

Yes, makes sense. And I said I wasn’t going to follow-up on Lee's question.

Let me ask you this in the very near term like the next quarter or two is it possible we might see, total expenses associated with hiring and bringing new people on and getting your own accountants and all that sort of stuff, might we see expenses a little higher before we see them lower?.

Again, it’s not something we’ve disclosed, obviously there will be some transition costs you know essentially all of the management team contracts or public and there are equity invested in there that will some of the compensation will come over time. So there are number of moving pieces when you get forecasting expenses.

And we prefer to let the dust settle before we’re prescriptive with the expense number..

All right. I appreciate it and thanks for the comments and congrats on autonomy..

Thank you..

The next question comes from Joel Houck with Wells Fargo..

Thanks and good morning guys.

So on the - when you deconsolidate the trust you gave us, the new advanced rates, I am wondering what the difference in the financing rate is when you deconsolidate the trust, what’s the difference the delta is?.

As I have mentioned on the call, advanced or the interest rate on the original securitization was 4.51 and the new one is 3.49, so it’s about a 100 basis points of savings along with lower equity position.

Okay, good. Now on the income statement, did the G&A expenses were up almost 34 from a year ago and in the first six months they’re almost up 34 versus the six months of last year.

Can you give us a little more color on what’s the pre-big magnitude, I mean especially given that you are still externally managed as of June 30?.

Sure. The biggest increase especially for comparing the first half of last year to the first half of this year are the servicing expenses related to Springleaf that was acquired August of last year. So that’s the biggest piece. That’s probably a $5 million to $6 million at quarter run rate that didn’t exist in the first half of 2014.

The other piece you know as we have….

And that’s because the loans are consolidated on our balance sheet, right and we’re obtaining the services cost..

That’s right. As far as the other expenses we did two securitizations during the quarter and there are some transaction cost related to those. I think what you will in quarters that we are working on securitizations, I have another one that quarter July with another one the Springleaf deal, the cost may trend up little bit.

So those are few big drivers, again if you are going last year to this year as servicing and then as we have more securitizations in the quarter, you will see a slight uptick..

Okay, so roughly $6 million run rate for Springleaf that accounts for $0.5 million increase and you are saying the rest in majority as an increased securitization expenses?.

Yes, I would say for each securitization, that could be a million to two depending on, every deal is a little bit different, but each one million or two uptick in expenses..

Okay. And so then on the management fee line you have expense recovery from the manager. Can you talk about the mechanics, I know those are going away and be replaced by operating expense, we’re just getting sense, I mean that the net management fees were only $5.5 million in the quarter and only $15 million for the first six months of this year.

So what is - if the question is what is being replaced. The right way to think about this is the net going away and what we have to compare coming in is all the expenses and salaries of all the employees.

Can you tell us how many - I guess the first question is what exactly is going away? How many employees are coming into Chimera?.

Sure, I think the best way to look at it is we’re replacing the gross expense. What’s really happening with that reimbursement from the manager those are all costs related to the restatement and related investigations and other things afterwards the FIDIC agree to pay. So as you are modeling out I really take the reimbursement and that against G&A..

Okay..

And we look at on the peer basis because that’s more of an apples comparison. What we are replacing is on an annual basis roughly $42 million of management fee with employee base that will be approximately 25, day-one growing to somewhere between 35 and 40 probably in the next six to nine months.

We have all key hires in place as well as a number of people are moving over day-one, 25 people and we’ll have another 10 to 12 or so over the next six to nine month..

And there is 10 to 12 is that for growth or is there some mechanical delay and the rest of the people coming over..

No, there are number of people focused on Annaly side were actually very helpful and I hope that transition from people.

There are just a few holes in more support class, obviously we - I believe that’s playing time error in their operations like hour or less, you have a full investment team at the top and the middle we are sharing things like HR, IC, Compliance and then we stand back out in the full finance accounting and reporting team.

So it’s the pieces in the middle where we need to add the staff over the next six months or so primarily and probably the biggest area is technologies..

Okay, so the 25 people are roughly senior management and investment professionals in the extra are more accounting IT the come in over time, is that more or less anything about….

Yes. Support staff..

Okay. And then lastly Matt, how should investors think about your agency strategy I mean I think right or wrong I think lot of investors of Chimera released the case more in a credit side obviously have a big agency book and that’s been winding down and you are kind of consistent what we are seeing with your peers.

Will that continue to happen? Who actually is a kind of responsible at Chimera for the agency strategy going forward and how is that function if it all separate from when you are kind of externally managed?.

It was always separate about function from Annaly so we always managed out agency positions separate from Annaly capitals portfolio manager. So there will be no change in the personal there. I think we started the year with roughly or ended last year with roughly $7.5 million worth of agencies on our balance sheet.

Now that’s we taken that we’re taking our decision down significantly and I think the proof of the putting is that the tangible of the economic book value of the company went down 1% in the quarter which I think is a good result and it shows that we’re managing down the interest rate exposure and the company because that’s a high degree of probability now in the near-term that the fed is going to do something with interest rates and being an actively managed portfolio it makes sense for us to take some of that.

Capital breaks a little bit and take some of the risk of the table and be conservative and I think we are at a good spot right now, with the agency portfolio I don’t see a decreasing any more than it - we took it down already this year.

And I think we’re at a place where we can earn our very high income and we can do and I think as safely as fast and as you can. You always have to take some risk in the bond markets.

We do that, but we have been actively trying to mitigate the interest rates risk here as we go into the uncharted waters of the federal reserves, it actually raising rates.

They have been at zero for such a long-time that it’s very hard for me as the manager or anybody her on the investment team to say we know exactly what’s going to happen when they do start raising interest rate.

And I think the best way to deal with that is to take down the leverage here and wait and see what’s going happened and that's what we've done and we feel good about the portfolio, we feel good about the way the company’s position I mean if you think about it where we’re producing quite a bit of income and we had very low volatility in our book value in a very, very difficult quarter for most people in the space..

I think you guys have a done terrific job especially compared you peer and I think from a strategy perspective you’ve been very transparent and I think the one thing I would add and I think you get just of it from previous callers any soon as you can provide clarity on the expense savings and differential I think it would be helpful I think it is important I know you guys get that that so.

Again congratulations on the economy and look forward to following you guys an independent company..

Thank you very much..

Thanks Joel..

Our next question comes from Brock Vandervliet with Nomura Securities..

Thanks for taking my question.

First half is there anything new to report in terms of the regulatory issues around the material weakness disclosures in the past is there been progress there are you running their new system in parallel?.

Yes, we actually disclose the well I would say we will disclose in our quarter that our camera system is done why we use it for the first time this quarter. So between that system going why and enhanced controls both executed and design we feel like the weakness will be remediate in 2015..

Okay, great.

And separately if you can just kind of help us with discussion more of the yields in the portfolio and clearly this quarter we saw step down and it was I get the sale of the agencies and look like it peeled off some of the higher coupon paper there but as more than just that portfolio is this so could you give us some more color there and talk to that? Thanks..

Yes, sure I think one of the biggest pieces a lot of focus in the space at the same issue and story is speeds of our a lot of higher than we have seen last year and amortization on the agency above was clearly growth in that yields on the agency book down, Mohit can give a little bit more color on current speeds and maybe where season things coming, but the second quarter is the higher point and we’ve seen in recent history on the premium amortization..

Yes, Brock quickly I mean you can see when we shifted the our agency book down from forth between after you alluded we had a pretty big take up and prepayments on pores which are the yield that we earned on an agency portfolio but on the non-agency portfolio side I mean the portfolio is yielding pretty healthy over 17% leverage and each purchase that we marking to that portfolio obviously is not at the same yield so we did have $300 million of new investment in the non-agency space.

Anywhere ranging from 5% to 6.5% and again on the level basis that will produce mid-teen returns, but just on a unleveled basis the yield will come down just as new assets that lower yields..

I think unfortunate think maybe for the company is our yield historically been very, very high and there coming down a little bit.

When you look at a lot of the similar competitors in the same stage, there gross yields are in the four range what is were in the six range that we still feel pretty good that we can earn the same level of earnings at two turns of leverage, where they’re at typically at three plus with the [indiscernible].

So again I think we feel pretty good about where we’re positioned?.

Okay. And just as a follow-up. Is there anything you can offer in terms of - how the pipeline looks specifically around the re-REMIC transactions? I know those are large and extremely lumpy.

But do you have any kind of telescope on look ahead for us?.

As it relate to the Springleaf transactions or as it relates to our other consolidated re-REMICs we’ve done. The Springleaf transactions are pretty well timelined as I mentioned each one is callable on their third anniversary date, we’ve done two so far. And we have done a third one in July. The next one will be in October and then three in 2017..

Yes, I was more asking about any new deals that you may see out there?.

I mean we are always being shown season loan packages, our field packages. Again it’s just going to come down to the economics and rather they work, there is no timeline as they when we will have the securitization, we had two in Q2, we already have one in Q3.

And again if there is other loan packages and/or opportunities that look attractive, we’ll definitely lever those up via securitization. I have nothing definitive to report on the call..

Yes, okay, thank you..

Thanks, Brock..

[Operator Instructions] The next question comes from Steve DeLaney with JMP..

Hey, good morning everyone. Exciting news last night and I know Matt it's been a long grind over the last three years for you and the team to kind of get to the position where you could do this, and happy to see that work out for you..

Thanks, Steve..

Actually and Rob you be relieved my question that I prepared was about expenses. But I think we covered that pretty thoroughly. So I'll probably pass that to my second.

So guess in the past you know we in terms of your credit strategy, which is where I think I agree with Joel, I mean when everybody thinks about Chimera, we think primarily about credit as the opportunity you certainly put yourself there with Springleaf. But in our past conversations, I bring up sometimes new credit versus legacy credit.

I bring it up because at some point I think all you know all resi-credit investors will have to address that, it's certainly not a near-term for you. But I'm just curious as you're building this new platform. So you guys now have an open playing field, so to speak.

Looking forward in terms of you know whether we look at it as far as you know conduits or operating companies how do you sort of see new originations and creating your own credit investments. How does that fit into your future and possibly even servicing and MSR's as well? Thanks..

Yes, thank you, Steve. We are certainly looking at new originations we price collateral and we look at deals all the time and new originated collateral when we talk to mortgage banks and people originate loans.

The problem right now, with Prime Jumbo frankly is that it’s - the banks have the better bid in the marketplace when the securitization exit for us. So that the problem is if you go out you build the franchise do that, which we could and we probably will do at some point in the future.

But right now today, put the capital out to do that - the higher the bodies that you need to build out the infrastructure to do a business that’s marginal best and has a lot of risk in terms of pipeline risks and hedging risks and execution risks of the securitization. It’s the economic just don’t come out the way we look at the risk award profile.

So you know as we think about that in the future the economics are going to have to change in order for us to get comfortable with that. I know there are people out there that are doing that business. But I think if you know you really have to be conscious that if rates to do rise.

I think a lot of the Prime Jumbo stuff that’s coming through these pipelines as we finance business. And if rates do rise you know I think that gets turned off as well. So I think you'd be really under some volume pressures there too.

So, there is a lot of risks right now for just to spend the money on to build out the infrastructure to do that business.

That’s not to say that we are not looking at non-UM, it’s not like we are saying we are not looking at other types of originated loans, but again that's something that we’re going to be have to work out with the rating agencies and the other participants in the market to see if we can get people to buy the securities of those types of lending programs.

And it’s slow going right and there is just not a lot of follow through with the investors to do things that are not outside of the bottle..

Understood. Yes, appreciate you are sharing the forward view and I agree it’s not a layoff at this point in time in terms of end market opportunity. So getting back to the question I think Joel asked this too, reducing agency exposure and obviously it’s not a question to much of your book value this quarter, but just how you kind of brand yourself.

I’m just curious in a sense whole loans obviously do provide help you with your 40 act exempt in the same way our pools.

Just curious what’s your view is on the MPL RPL pools and a lot of people think that’s supplies really going to pick up over the next couple of years?.

I think it will, we’ve been participating in the seniors potentially Mohit can speak about it, but in some RPL pools and buying the senior bonds off of those transactions I think they are attractive and I think there will be a lot of supply in that and I think the leverage returns are pretty attractive. Mohit, you want to….

Sure, Steve you are right and as far as production goes in both MPL and RPL I think they are both outpacing new prime Jumbo originations in terms of securitization as a matter we do.

We’ve participated from last year in acquiring senior bonds off of RPL deals, we are also looking at equity investments in RPLs, but haven't gotten there just yet maybe are still evaluating it.

On the MPL side I think we are less active currently again if opportunities present themselves we will look at those and reevaluate there, but just a lumpiness of the cash flows don't give us comfort, but RPLs I think has have the highest yielding levered returns out there in the marketplace and resi space..

And where do you think the ROE is on the levered RPLs senior?.

Yes, I think probably mid-teens so with the two or three return to leverage on the RPL….

Yes, it’s pretty attractive and those bonds have some significant subordination behind them as well right..

Yes, I think on average in RPL package senior bonds are over 40% and senior bonds are 30% of credit enhancement..

And you are taking about - you’ve got a floater and you’ve got a very short duration bond, well it’s not a floater, but it’s very short duration right?.

It’s is shorter duration..

And if it’s doesn’t get called and it extends the coupon do step up on all these securities..

Yes, great. I love that trade. Okay guys thank you for the comments and congratulations on where you sit today..

Thank you very much, Steve..

This concludes our question-and-answer session. I would like to turn the conference back over to Matthew Lambiase for any closing remarks..

Thank you all for participating on our second quarter 2015 earnings call. I’d like to just reiterate that we are all very excited about the new opportunity in front of us and we are excited to talk to you on the next earnings call. Thank you very much..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..