Beach rental equipments

NewRez creation profits drop 43% in the fourth quarter

With Caliber Home Loans and Genesis Capital LLC in the fold, real estate investment trust New Residential Investment Company. reported net income of $160.4 million in the fourth quarter, an increase of 10% from the prior quarter.

In a period largely defined by the integration and transition to the NRIC, gain-on-sale margins for the mortgage business actually increased in the fourth quarter. This is despite origination volume starting to slow down, as is the case with most originators.

In total, NRIC funded $38.1 billion in mortgages in the fourth quarter, the first quarter with fully combined reports between Caliber and its NewRez mortgage arm. Filings show that in the third quarter, Caliber issued $19.8 billion in mortgages and NewRez funded $25.5 billion, for a total of $45.3 billion. But in the fourth quarter, Caliber funded $16.7 billion and NewRez funded $21.5 billion in mortgages.

This drop in volume led to a reduction in profits from NewRez’s origination business to $101.5 million in the fourth quarter, down 42.8% quarter over quarter, according to the report on the results.

Origination volume for the full year reached $178 billion, making NewRez the fourth largest non-bank originator in the country. And there’s reason to be optimistic: it’s started cutting costs, managed a 51% buy mix in the fourth quarter, restructured its retail leadership by redistributing territories, and has opportunities growth in wholesale and direct-to-consumer sales.

Overall, NewRez reported that its total sales margin improved from 1.61% in the third quarter to 1.65% in the fourth quarter. In 2020, the profit margin on sale reached 2.04%. In its fourth-quarter earnings presentation, the company said the rate increase impacted margins and production volumes during the period.

Michael Nierenberg, Chairman and Chief Executive Officer, said in a statement that the company “will continue to prioritize reducing expenses and realizing synergies across all of our operating businesses.”

Since acquiring Caliber Home Loans in August for $1.675 billion, the company has laid off 386 employees, or about 3% of its total mortgage business workforce. In 2021, the integration of Caliber Home Loans secured $90 million of ongoing cost “synergies,” including staff reductions, reduced cost of funds, and vendor consolidation.

In the service business, the REIT’s portfolio grew in the fourth quarter to $483 billion in UPB, up 1.5% quarter-on-quarter. The segment’s pretax profit was $127.5 million, compared to $15 million in the third quarter.

Nierenberg said the company is well positioned to benefit from the high rate environment given MSR’s large portfolio. The company’s MSR portfolio totaled $629 billion in December, up from $635 billion in September. NRIC is the largest non-bank mortgage servicer in the country

In the first quarter of 2022, the company estimates it will generate between $25 billion and $30 billion in mortgages. The service portfolio will be between $490 billion and $500 billion.

Regarding its overall mortgage and financial services mix, NRIC posted a net profit of $705.5 million in 2021, compared to a loss of $1.46 billion the previous year.

The company highlighted the acquisition of Genesis Capital LLCa fix-and-flip lender, Goldman Sachs. New Residential’s fourth quarter and full year results include Genesis financials as of December 20, 2021. The transaction included a $1.5 billion portfolio of 100% performing commercial loans, NRIC said in its results presentation.