With Caliber Home Loans and Genesis Capital LLC in the fold, real estate investment trust New Residential Investment Corp. reported $160.4 million in net income in the fourth quarter, a 10% increase from the prior quarter.
In a period largely defined by integration and transition at NRIC, gain-on-sale margins for the mortgage business actually increased in Q4. That’s despite origination volume beginning to slow, as it has for most originators.
In total, NRIC funded $38.1 billion mortgages in the fourth quarter, the first quarter with fully combined reporting between Caliber and its mortgage arm NewRez. The filings show that in the third quarter, Caliber originated $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.
That drop in volume resulted in reduced profit for NewRez’s originations business to $101.5 million in the fourth quarter, down 42.8% quarter-over-quarter, according to the earnings report.
Origination volume for the full year reached $178 billion, which makes NewRez the fourth-largest nonbank originator in the country. And there are reasons to be optimistic – it has begun to reduce costs, has managed a 51% purchase mix in the fourth quarter, restructured retail leadership by redistributing territories, and has growth opportunities in wholesale and direct-to-consumer.
Overall, NewRez reported that its total gain-on-sale margin improved from 1.61% in the third quarter to 1.65% in the fourth quarter. In 2020, the gain-on-sale margin reached 2.04%. In its fourth quarter earnings presentation, the company said that increased rates impacted margins and production volumes during the period.
Michael Nierenberg, chairman and CEO, said in a statement the company “will continue to prioritize reducing expenses and achieving synergies across all of our operating businesses.”
Since the acquisition of Caliber Home Loans in August for $1.675 billion, the company has laid off 386 employees, about 3% of its mortgage business’ total workforce. In 2021, the integration of Caliber Home Loans guaranteed $90 million of run-rate cost “synergies,” including personnel reductions, reduced cost of funds and consolidation of vendors.
Regarding the servicing business, the REIT’s portfolio increased in the fourth quarter, growing to $483 billion in UPB, up 1.5% quarter-over-quarter. The segment pre-tax income was $127.5 million, up from $15 million in the third quarter.
Nierenberg said the company is well-positioned to benefit from the high-rate environment given the extensive portfolio of MSRs. The company’s MSR portfolio totaled $629 billion in December, compared to $635 billion in September. NRIC is the largest nonbank mortgage servicer in the country
In the first quarter of 2022, the company estimates it will originate between $25 billion and $30 billion in mortgages. The servicing portfolio will be between $490 billion to $500 billion.
Regarding its overall mix of mortgage and financial services, NRIC posted a net income of $705.5 million in 2021, compared to a loss of $1.46 billion in the previous year.
The company highlighted the acquisition of Genesis Capital LLC, a fix-and-flip lender, from Goldman Sachs. New Residential’s results for the fourth quarter and full year include the financials of Genesis beginning on December 20, 2021. The transaction included a $1.5 billion portfolio of 100% performing business purpose loans, NRIC said in its earnings presentation.