Good morning. My name is Beth and I will be your conference operator today. At this time I would like to welcome everyone to the New Residential First Quarter 2018 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.

Mandy Cheuk, Investor Relations, you may begin your conference..

Thank you, Bess and good morning, everyone. I would like to welcome you today to New Residential’s first quarter 2018 earnings call. Joining me here today are Michael Nierenberg, our CEO; Nick Santoro, our CFO; and Jonathan Brown, our CAO.

Throughout the call, we’re going to reference earnings 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 earnings supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC.

In addition, we’ll be discussing some non-GAAP financial measures during today’s call. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. And now, I would like to turn the call over to Michael..

Thanks, Mandy. Good morning, everyone, and thanks for joining our earnings call.

I was getting ready for this earnings call, I was looking back to our Q4 earnings call and the comments and we did that call in February and quite frankly from February to where we are today, there's really not a lot of that has changed despite some of the deal political and the things that have occurred in the world.

For the quarter we had a really good quarter. The business performed very well, quite frankly like it should. Our portfolio performance was excellent and our investment thesis continues to create terrific value for our shareholders, where we are and based on our view of the current interest rate environment I feel like we’re in great shape.

Activity levels overall during Q1 were fairly muted as the investment opportunities, quite frankly are just not that abundant. As I mentioned on our prior earnings call, the abundance of capital continues to create an environment where most asset classes are fully priced and do not offer a ton of great value for shareholders.

Our $540 billion MSR portfolio and $140 billion call right portfolio make us a very, very unique company. Quite frankly, you can’t can replicate this company. As we move forward we continue to have plenty of liquidity and access to the capital markets, should we have something that we need to be investing in we will do so.

As we move to the supplement, we tried to simplify our business a little bit and we put some glossary of terms in there, so as I walk through the supplement, I hope that this makes it a little bit more self-explanatory. I’ll now refer to the supplement, which has been posted online and I’m now going to begin on Page 2.

Currently NRZ we are obviously a mortgage REIT and we have a market cap of $5.7 billion.

As you look to the right side of the page, there’s a little bit of a highlight reel from ’17, but our ’17 numbers we had 24% return on activity, our total return was 26% and again I still want to highlight the two large asset classes that we have, one is the $540 billion MSR portfolio and then our call right portfolio of $140 billion.

The other thing I want to point out, our book value, which we reported at the end of Q4 at $15.26 is now $16.85. So again, very good performance. On page three for the quarter, our GAAP net income number $604 million or $1.81 per diluted share.

Our core earnings $195 million or $0.58 per diluted share and our dividend $160 million or $0.50 per diluted share. So again, very good performance and as I pointed out earlier, the portfolio continues to perform like we think it should and in this kind of interest of environment.

On page four, couple of things to point out here, one is we are a leading capital provider to the U.S. mortgage industry. If you think about the amount of one home-owners that we touched due to servicing business, two, the counterparties that we have in this servicing business, I believe we play a very important role in the U.S. housing market.

The asset classes again and try to simplify our business, mortgage servicing rights with advances non-agency mortgage securities that we purchased where we have the associated call rights and we make opportunistic investments. As you could see on this page, we try to define the different terms that we use when we speak about our business.

On the right side of the page from an opportunistic standpoint, in November we announced the acquisition of Shellpoint Partners, that is a full-scale mortgage origination and servicing business and I think we’re going to have a lot of optionality in that business continues to perform well and I’ll talk to that in a little bit.

On page five, again a little bit more of a highlight reel.

The most important thing I want to continue to point out, different type of company, setup extremely well for the current interest rate environment, growth in book value, stable core earnings and then we try to take our capital and be as opportunistic in nature as possible and then the bottom part of the page you could see 2015 the HLSS was a transformational deal for our Company, 2016 we became fully licensed we’re about to acquire MSRs independently from our different servicing partners, 2017 we made some large bulk acquisitions from a number of different counterparties including Citi Mortgage.

2017 we joined a four-member consortium with Jefferies, Third Point and Soros and agreed to buy consumer loans as well as get equity in the company of about 6% to 7% and then in 2017 we acquired Shellpoint. On page six, Shellpoint today.

Shellpoint is again a full-scale mortgage servicer and an originator and it's got an ancillary business with title and an appraisal business. On the mortgage servicing side, Shellpoint today services a little over $50 billion in mortgages of which 35 plus billion are third-party servicing.

As we look forward Shellpoint will continue to focus on its third-party business, it will not become for example the size of a nation store, we think it's very important for Shellpoint to maintain its independence and focus on its third-party business which is been very fruitful for both the third-party as well as for Shellpoint.

On the origination side, last year Shellpoint did $6 billion, we expect that to do something between $8 billion and $10 billion this year and turn the business into a profitable business and then its rated by S&P, Moody’s and Fitch and fully approved by Fannie Freddie and once the acquisition closes between NRZ and Shellpoint we expect to be fully licensed by Ginnie as well.

Page 7 is just really on how we see the market and this page on the bunch of Fed speak. We think Fed is going to go at least another two times maybe as many three times this year. What does that mean for us. If you flip to page 8, I can talk in each after class, what that means to use a shareholder and how we think about our business.

MSRs is one of the few fixed income assets that were actually increasing value as rate rise. So, when you look at the quarter, we had some large gap numbers that we can talk to in a little bit. Some of that’s due to MSRs, some of that due to some of the conversions from excess MSRs to full MSRs.

But in general, in a higher interest rate environment having $540 billion portfolio off MSRs, should do extremely well for our shareholders. Servicer advances as you look to and we will talk to each bucket shortly. As you look to the servicer advance portfolio, the amount of equity, we have in that business today is a 146 million.

The team at NRZ has done a fantastic job financing that asset in the capital markets along with our bank partners. So, it’s really a less important part of our business today. And when you think about it as home owners continue to clean-up and delinquencies continue to trend lower the amount of servicer advances outstanding will likely decrease.

On a non-agency securities and call rights 94% of our business are floating rate. So as the Fed rates is raised, we’re going to achieve higher net interest income. And on the other portions of our business that had fixed rate components to the underlying assets, we used interest rate hedges to hedge out that interest rate risk.

On a loan and consumer loan business. On the loan side, most of our loans are a higher coupon, very short duration assets, for example 5.5% or 6% coupons. So even in the current interest rate environment where you have Fed funds around one and three quarters.

So, you have LIBOR 190, the amount of net interest income on that portfolio continues to be extremely high and then where we have situations where our fixed rate assets have lower coupon, we have interest rate hedges on our balance sheet to protect us against higher rates.

Overall, we think, we’re in a great position for the current interest rate environment. Now, if you click to page 10, I’ll just take you through the different asset classes, the amount of equity we currently have in our business. And then I’ll wrap up on page 11 and then open it up for questions.

On MSRs, which are both excess info, our net investment amount is $3 billion, our growth investment amount is a little bit over $5 billion. Servicer advances I just pointed out, our net investment is $146 million.

When you look at our residential securities and call rights we have approximately $1.5 billion of net equity there, which has been pretty consistent with where we’ve been in prior quarters.

On a residential loan portfolio, you’ll see our net equity of $725 million, while that’s up a little bit, the recent that’s up a little bit is because we paid down a little bit of our debt there with some of our excess cash on our balance sheet and then our consumer loan portfolio, you’ll see is a $112 million.

Finally, our cash amount at the end of Q1 was $233 million. Now on page 11 talking about Q1 and then some of the recent activity levels we had. In general, we were, I think our investment activities as I pointed out earlier were fairly muted, there wasn’t a lot to do in the markets that we thought would add a lot of value to our shareholders.

We did acquire $38 billion of MSRs during the quarter and then we've also agreed in principle to acquire up to another $30 billion subsequent to the end of Q1.

In January we paid Ocwen, a restructuring fee of $280 million to obtain the remaining rights to the MSRs on our legacy non-agency portfolio at Ocwen services that totals [$87 million] and then we also priced two fixed rate MSR notes in January and February, totaling $930 million at a weighted average cost of funds of 3.6%.

I think this is very important to note, as you think about the size of our MSR portfolio, one of the things that we've been very, very focused on is converting our floating rate financing to fixed rate financing, if you recall going back to 2016 and 2017, we did that in our servicing advanced portfolio and as the MSR markets continued to mature we're seeing a much more receptive investor base to be able to issue debt backed by our MSRs so that we think that’s a very good transfer for our business and going forward.

We executed 32 seasons, non-agent clean-up cost and 32 season, non-agency deals that was about $500 million during the quarter. We completed the $700 million securitization in January and during the quarter, we purchased a little under $700 million on non-agency RMBS, bringing our net equity again to give or take $1.5 billion.

Our Servicer Advance business, totaled about $4 billion as I pointed out in prior earnings calls, at their peak I think it was a little over $8 billion, really that’s just indicative of, one, the seasoning of the portfolio, two, is as the homeowner continues to heal and three is, delinquent loans continue to work their way through the pipeline.

On the consumer side, it’s really just executing on our current portfolio prosper, the amount of equity that we have invested in that business is fairly low, we expect lifetime IRRs to be about 20%.

The SpringCastle deal is a legacy deal again 90% IRR and that continues to perform extremely well, and then our loan portfolios continue to perform well and for the most part our loan portfolios will grow over time and contract over time as it relates to our call activities.

We did buy a pool of loans from Fannie Mae in subsequent to the end of Q1 there was about $686 million. And then finally we raised $482 million of equity in January to help fund some of our different acquisitions as well as have a little bit more cash on the balance sheet and based on what we felt were going to be choppy market.

Rather than go through the entire portfolio review, I’m going to turn it back to the operator and open it up for questions.

Operator?.

[Operator Instructions] Our first question comes from the line of Bose George at KBW. Your line is open..

Hey, good morning.

First, just a question about book value, can you just talk about the drivers of the increase, is it just rates or is there more idiosyncratic things in terms of assumptions or any marks on the ancillary fees from the Ocwen portfolio, you guys acquired?.

Sure. So, it's driven by a couple of things. Clearly with a large MSR portfolio in a rising rate environment, the mark on our existing portfolio away from what I would call Ocwen would be adjustments from the Ocwen acquisition were about $150 million.

As you look to the Ocwen transaction one is, are the referral fees, we get on [REO] were not accounted for in our business and that was about $175 million and then the conversion from excess deferral was about $125 million. So, the bulk of the growth in our -- call it our GAAP earnings was related to our MSR business and that was really it..

Okay great, thanks helpful. Thanks.

And then actually just when you think about the move in rates we’ve had since the end of the quarter, how should we think about the impact it kind of have that $150 million maybe in terms of the increase?.

You mean going forward?.

Yes, just the 25 basis points or so, moving ahead into Q2..

Here's what I would say in our MSR portfolios.

Currently I believe there is more room regarding further GAAP earnings as we go forward, as it relates to rates, the one thing to think about and you will see increases in our book value as we go forward, but the one thing to keep in mind on MSR assets and really other fixed income assets, at some point you’re going to reach -- you get to a point where there is a negative convexity and the valuation of your assets will only go up so much.

While saying that, when you look at where multiples are right now on the MSR portfolios, where things are trading in the marketplace, we feel like there is a fair amount of room to go to the upside..

Okay great, that’s helpful.

And then just actually one more on -- once you guys have the Ginnie May license is that kind of an area where we could see sort of meaningful capital deployment or just kind of incremental?.

I think as long as we feel there is value in the asset class and we do, I think you can see some meaningful deployment.

The bigger picture around I think MSRs and the overall mortgage banking community in a higher rate environment based on the competitive nature of that business, and when you look at real margins on the origination side which quite frankly are fairly compressed right now, I think what you’re going to see overall as the mortgage banking community continue to contract there’ll be needs for more capital to be deployed on these MSR portfolios, as well as on the originators who are going to need capital to quite frankly function in their business.

And I think when you look at Shellpoint and the acquisition of Shellpoint and the ability of us to bolt-on either further origination platforms or acquire other portfolios of MSRs, I feel like we’re in great shape in a great position to do that and then you coupled out with our other servicing relationships, we’re very excited about the future.

I think mortgage banking is going to be really hard, but the ability to deploy more capital around these asset classes assuming that they don’t go crazy through the roof, I think again we’re very excited about that..

Your next question comes from the line of Ken Bruce, from Bank of America Merrill Lynch. Your line is open..

Hey thank you and good morning. I have got a couple of different questions and the first one is a little bit -- I assume maybe a little bit technical in nature but hoping you could square a circle for me.

So, if you look back really over the last several, didn’t want to go back too far in history, if you look at the several dividends, there is a certain amount of ordinary dividend and you have got a significant amount of paid in capital, paid out of capital or I should say return to capital.

And so those of us who have been around mortgage REITS for a long time, we’ve always kind of been schooled in the thought of if somebody is paying out effectively capital that’s in a sense drinking their own blood and is non-sustainable situation in the case of new residential.

Your GAAP earnings have been well through your dividends, your core earnings have been well through your dividends as well.

So, can you just maybe help me understand kind of what creates that backdrop for your dividend to have such a high percentage of return of capital in it?.

It’s really driven by our capital taxable income that generates the capital piece any ordinary income piece. So today, for tax purposes, we have had our taxable income has been relatively low with respect to our dividend..

And is this timing issues or what, I guess I am still not quite clear to what creates that?.

It’s timing..

Okay.

At some point, I guess that should reverse over a longer window?.

That’s correct..

And I guess recently there is just the other day, there was an announcement of, acquisition of mortgage REIT in the agency space. And it kind of underscores what many of us have thought about consolidation in the space. You guys have been active in terms of acquiring different types of portfolios and companies and the like.

And when you look at a transaction like that, I know you’re not necessarily interested in agency MBS investing, but you do have the experience in that nature and frankly you’ve got one of the better currencies to work with for effectively acquiring capital cheap.

Is there anything that you can kind of discuss as to kind of what your interest might be in terms of participating in consolidation across the sector?.

Sure. Obviously, we see most of the deals that are getting done in the marketplace particularly around the consolidation in the REIT based. The one thing and we’ve been very, very clear about this is we don’t want to just issue equity, for the sake of issuing equity. Or we don’t want to just raise capital for the sake of raising capital.

When you look at some of these deals, the way that we look at this particularly deal quite frankly is one first and foremost we need to put our shareholder first. And we say, okay.

If we’re going to try to do something like this and raise capital and everybody always wants more capital although, I would say the investing environment for generic assets is really not that good. But if you’re going to go on and raise capital, really what is are cost of raising capital.

And typically, we took raise capital and the equity capital markets, I’m going to say discount of something between 3% and 5% if we needed to raise capital.

When we look at an acquisition like this and breakage cost and the premium you have to pay after everything is all set and done, and the way that we saw it is, you’re paying 5 plus points of premium and then we’re taking market risk, which could effectively be dilutive for shareholders.

And then we’re also taking more market risk where, we might create goodwill on our balance sheet. So overall, this works for certain folks and quite frankly and looking at some of these deals. and not to say that we will never do this and we want to look at everything.

Unless, we think it’s meaningful for our shareholders and we need the capital, we’re not going to do it..

And I don’t know maybe just lastly, I guess I’m always intrigued with the Shellpoint strategy and if I understood your talking point there I guess, you see that as another area where there’s going to be some structural change in terms of the operator landscape and that Shellpoint should be able to gain share in that market both from an origination and servicing standpoint, am I understanding that properly?.

Yes, so here is a way to think about Shellpoint, Shellpoint has a number of different third-party clients that they service for. That business needs to stay that way and the person that runs that Jack Navarro, does a fantastic job. And he is looking to and he and we are looking to grow that and quite frankly keep it independent from NRZ.

So, it's not going to be a captive servicer at NRZ so if we acquire a large portfolio of mortgage servicing, there is a strong likelihood that it would not go there.

We announced subsequent to the end of Q1 that we’re acquiring -- that we’re in agreement to acquire a number of different portfolios and the likelihood is we would use our existing servicing partners for example, Mr. Cooper, IE Nation store, who we would continue to work with on some of our different sub-servicing.

Shellpoint is a terrific third-party servicer, it's also a very good special servicer, so that business will likely grow there around that.

On the origination side, we’d like to continue to grow origination and we feel that the origination business while it is a very, very hard business for those of that have been in the mortgage industry for many years, we think the growth in origination could actually be a seeder for our balance sheet around the MSR portfolios.

Gain on sale in mortgage origination is very, very tight and very low right now and is a very hard business, and as you think about rates backing up, you’re going to see volumes come down and hedging those portfolios is very, very hard.

So, I think Shellpoint third-party special servicing will continue growth of that independent of NRZ won’t be the size of a so-called nation store, we continue to have our relationships with Ditechs and Ocwens and the like and PHH obviously. And on the origination side we want to grow that and actually use that as a feeder of MSRs for our business.

Than away from that as we look at the ancillary landscape, I think we’re very focused on seeing if there’s any opportunities to offer for example, our customers to mortgage, the mortgage or as different types of products that could be meaningful for our Company..

If your phone is on mute, please unmute. Your next question comes from the line of Kevin Barker, Piper Jaffray. Your line is open..

In regard to the call rights moving in interest rates, can you just give us your view on the movement in the value of these call rights when rates move higher and how that opportunity looks given where 30-year rates stand now, what the secondary market looks like?.

Sure, so first of all higher interest rates in fixed income as we all know will lead to overall lowering dollar prices on the issuance of the debt. That's one. So, when you think about whether we make a point, two points, three points, so whatever we do on this different call transactions that's something that we keep an eye on.

I think the flip side of that is based on the current economy and what we’re seeing in the housing markets, as delinquencies come down we’ll have to buy -- we’ll have to fund less fewer delinquent loans, when we call these deals, and as a result when we buy a non-performing loan for example and pay for it and then market down to whatever that number is $0.80 or something like that, we’ll have to do lesser that.

So, the overall profitability should still be very good.

On the capital markets front, there is a fair amount of issuance that has been done, not only by us but a number of our peers in the marketplace whether that be on reperforming loans, whether that be on non-QM, whether that be on prime collateral and the market is very receptive and you’ve seen spreads on overall assets continue to tighten relative to their benchmark index.

What all of that means is that our activity should continue to be robust, as we sit in this market, if interest rates really go up a fair amount, yeah I think that you’re going to see activities slow down, the flip side to a lot of this is when we identify a pool of collateral we’ll typically put interest rate hedges on, that protect us in a higher rate environment.

So, overall, I would expect that business to continue to do well. I think the bigger picture for the call business has got to be the solution to the legacy non-agency mortgage market when you clean out these pipelines of delinquent loans.

If you look at the all these legacy deals, give or take 2% or 3% of our call rights, on those deals fit in REO, so 2% on just using round numbers a $150 billion, is $3 billion or REO, there is no reason that those loans should sit in in these mortgage trust and quite frankly if we work together as an industry I would think that we should be able to liquidate those loans.

So that something we’re focused on, I’ve had some conversations with different folks around that and it's something that we’ll continue to try to push ahead to try to clean up this business..

Okay.

And then if I heard you correctly in your prior comments you mentioned there was a markup in the REO, whether fees associated with REO, could you just detail that a little bit?.

There was no markup, so when we did the full MSR transaction with Ocwen, keep in mind Altisource provides REO services for Ocwen on the underlying assets that Ocwen services for us.

We were not accounting for the referral fees that we would get from that business and part of the Q1 GAAP earnings reflects that REO business and the referral fees that we will get as a result of that transaction..

Correct me if I am wrong, was that about 0.5 on those fees or has that changed within negotiation?.

I would tell you that the total amount was about a $175 million for the quarter..

Did markup or the total amount that you expect over [hasn’t value basis is in the value of that]?.

Well keep in mind, it wasn’t been accounted for, so it's just a result of now accounting for those referral fees that we’ll get as a result of that portfolio..

Okay. And then regards to the acquisition you just made, the MSRs the $38 million, obviously some of its Walter and it was a mix of portfolios but the valuation seemed to be relatively high compared to past acquisitions.

Can you just detail a little bit about that portfolio and the reason behind going after portfolio that tend to be closer to 100 basis points in value and why you find it attractive purchasing that portfolio today?.

3% 10-year notes, slower speeds and kind of where the market is. Overall, if you go back in time, when we present the MSR business, we didn’t have any leverage on our balance sheet. Now with the efficiency of the financing markets around MSRs.

We feel these acquisitions and financing and we’ll return give us, return on investment of about probably lower double-digits. So that’s really, the reason why we did it..

Your next question comes from the line of Tim Hayes, B. Riley FBR. Your line is open..

So, I apologize if any questions asked have already been asked and answered.

So, upon the closing of Shellpoint and receiving the license, what do you think your appetites to acquire Ginnie will be like just given the risk adjusted return and assets to financing you’re seeing there versus with agencies today?.

I think it will be good, it depends on valuations. I pointed out in my earlier comments, we didn’t deploy a lot of capital for the reasons being that things were just not that interesting from an investment perspective. As it relates to the MSR portfolio, our investment thesis continues to be the same.

We believe, the Fed is going to raise rates another 2 to 3 times this year and then likely go into 19 years raise rates. As a result, we think yields on our treasuries will be higher, mortgages rates will be higher and the asset class itself, will continue to be a very good asset class for us investing on behalf of shareholders.

While saying that, we need to be mindful of the overall values where things are straight, multiples are up a fair amount. And it should be, because of the absolute level of interest rate. So, for us, if we find the investment attractive, we’ll deploying more capital there.

We haven’t deployed really any capital and Ginnie's we haven’t been licensed, Shellpoint is licensed upon the settlement and the closing of the Shellpoint deal, if it’s an attractive investment, we’re likely acquire that investment.

But as I pointed out earlier, it does not necessarily mean that we’re going to grow our MSR portfolio a ton on the Shellpoint side versus doing sub-servicing some of our other sub-servicing counter parties..

And then did you happen to give, just the core earnings impact from the call rights this quarter?.

It’s $0.02 per quarter..

$0.02, okay.

And then can you just give a little bit of color around the profitability from this quarter securitization and are you seeing any change in fundamentals that are driving kind of better or worse economics?.

I think it’s been averaging something around a point and half. The other thing I mentioned is, when we identify a pool of collateral we will typically put some interest rate hedges on to protect us against higher rates. You’ve seen spread compression on the issuance meaning where assets are actually trading on tighter and tighter spreads.

So that’s helped our overall arbitrage, you ‘re seeing loan prices up, that’s helped our arbitrage. And then the counter to that is interest rates are higher, so that’s hurt our arbitrage. So overall, you’re seeing something in the vicinity of, I guess about a point and half. And each deal is different to be honest.

I mean for the quarter there was always only $0.02 per share..

Okay. And then one last one for me.

What kind of discount were you able to acquire the non-agency at this quarter and how much of the non-agencies you acquired were pulled out of class deals?.

The non-agencies are really bought in the market. Again, they were associated with yields where we are on call rights. And I believe the average price was something around $0.68 or a little bit south of $0.70..

Your next question comes from the line of Bose George, KBW. Your line is open..

I just had a quick follow-up on the MSR. The 175 million was from the REO referral fees.

Jim, what was the 125 million that you mentioned?.

That was the conversion of excess that we had on. Because as you recall the initial transaction with HLSS and Ocwen, we only owned excess. And then when we made the payment to Ocwen in January, we converted the excess to full MSR. So that difference was approximately $125 million..

Just trying to figure out the driver of the marks because you contributed whatever the fee to purchase that strip.

So, is it kind of, essentially kind of the discount that you got on that or like how should we think about that mark?.

It’s a couple of things close, I’m going to let Andrew Miller, who is sitting here with me to 6 points this year..

So, the biggest component of it is just improved liquidity as you move from an excess MSR to full MSR. There is also slight difference in the accounting treatment for the associated advances, those are the two biggest drivers of 125..

That makes sense. And then actually just an accounting question. The mark that you guys show on the MSR financing receivables.

Is that related to the answer you just gave or is there something else that’s driving that?.

That is related to the answer we just gave..

Your next question comes from the line of Trevor Cranston, JMP Securities. Your line is open..

Just one question on Shellpoint. You mentioned hopefully using it as a feed of NRZ’s balance sheet on the MSR side.

I was wondering, if you could comment on whether or not Shellpoint currently has much in the way of non-agency origination capabilities and if you guys foresee, like prime jumbo or non-QM type originations that something that could be interest for NRZ's balance sheet also in the future? Thanks..

Shellpoint is currently originating some non-QM products, they’re also originating some prime jumbos. So that business should increase, the volumes are not large right now. I think there is a strong chance we will be in the market with a non-QM deal in Q3 based on the origination volumes from the company.

We’ve also, quite frankly, we’ve add tops with a number of different originators and I think overtime, we could actually be a capital provider to them as well. But you are seeing more activity around jumbo and non-QM from Shellpoint, I think you’re going to see some other originators as well..

Your question comes from the line of Kevin Barker, Piper Jaffray. Your line is open..

Michael in regards to the Shellpoint comments you made about 6 to 8 billion this year.

Could you give us an idea, that’s the entire year or is that just when after the deal closes?.

No, it's an entire year, so last year Shellpoint did about $6.2 billion in origination, this year I would expect it to do -- it's hard to tell right, but I am going to say something between the $8 billion and $10 billion of production on a full year basis. And again, the way we think about it, the MSR -- Shellpoint is truly a third-party business.

So, we’re going to use the best X model just like Jack running his servicing business will focus on third-party clients.

And on the origination side, if they originate volumes and somebody has got a much better MSR bid I think you’ll see that could actually trade away, so it's going to be operated as a third-party business, but the short answer is its roughly between $8 billion and $10 billion of production..

Could you give us an update on your expectations for difference between agency, non-agency, how much is retail and how much refi versus purchase in that mix [of 8]?.

Kevin, I have to back to you, I am going to guess, in refi markets you’re going to see less, I think going forward home prices are up, but I got to get back to you with a mix..

Okay..

I think it would be consistent with what you are seeing from other mortgage bankers but let me get some better numbers and I’ll get back to you shortly..

Okay, and then you are reiterating by the end of second quarter deal will close?.

Yeah, again I don’t want to show the date, but it we’re hopefully close this absolutely by the end of the second quarter..

Okay and then one more follow-up on the PHH Ocwen deal, do you expect any disruptions or any changes associated with how those loans are serviced given their pretty big counterparty as they transition from a new servicing platform and the integration between PHH and us?.

No, we don’t. I think whether it be Ron or now Glen has taken over the operations I would think both organizations have been in the servicing role for a long time, so we expect it to be fairly seamless..

There are no further questions, I will now turn the call back to Michael Nierenberg, for closing remarks..

So, thanks for joining our call this quarter, hopefully lot of questions and hopefully we gave you what I think is a very good runway, we’re excited about the future, I think our comments are going to be consistent in the near – as we look forward.

Love the way that we’re set up in our portfolio, the overall investing environment is just not that interesting and our growth in our business were likely be through some opportunistic and strategic acquisitions. With that happy Friday, have great weekend and thanks for all your support. Bye bye..

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