Good morning. My name is Downey and I will be your conference operator today. At this time, I will like to welcome everyone to the New Residential Third Quarter 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. I would now like to turn the call over to Ms. Mandy Chalk [ph] of Investor Relations.

Thank you, Downey and good morning, everyone. I would like to welcome you today to New Residential's third quarter earnings conference call. Joining me today are Michael Nierenberg, CEO and Jonathan Brown, Interim CFO and CAO. Before I turn the call over to Mike, I would like to point out that certain statements made today will be forward-looking statements. These statements, by their nature, uncertain, and may differ materially from actual results. I encourage you to review the disclaimers in our earnings release and investor supplement 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, everybody, and thanks for joining our third quarter earnings call. New Residential had a terrific quarter and we're looking forward to sharing our results and thoughts with you as we go through our supplement. Throughout the call, I will be referring to our supplement which is been posted online. As we flip through the deck, I think you'll find that our core business which is investing in excess MSRs in callable non-agency mortgage securities is very unique as it’s very difficult to replicate that portfolio today. We're in a great position leveraging our expertise in the business, as well as our manager at Fortress in creating value for our US shareholders. Now if you could refer to the supplement and we're going to begin on page 2. We continue to invest in the $20 trillion US housing market. In the quarter, we recorded the highest quarterly results in the company's history. We've had core earnings of $0.43 per share and since our spin in May of 2013 we've generated a 29% return on equity. We'll go through more of the numbers in detail over the next couple of pages. Our message is simple, we invest in assets that offer reliable mid teens type returns through various interest rate scenarios. Today, our portfolio consist of excess MSRs, non-agency mortgage securities of which we own call rights on approximately 95% of our assets and other investments which were call – which are more opportunistic in nature. And now, if you could flip to page 3. Our financial highlights for Q – for the third quarter. We had a great quarter, our GAAP income today is $126 million on a per share basis at $0.88, core earnings, highest in company's history of $63 million or $0.43 per share. We…

(Operator Instructions) Our first question comes from Douglas Harter at Credit Suisse.

Michael, when you're doing one of the clean-up, using exercise in the call rights, how long does it – does that capital get used in order to generate those 2 to 3 points?

It you know, it depends, typically it could be a 30 to 60 day kind of gestation [ph] period. There were times when we're able to do it all within a couple of weeks. We've been able to source in a large amount of financing for our company through our relationships in the banking world. So there's times where, while call deals for example for October and the way that will work is we'll call them on roughly the middle part of the month. There will be small amount of capital that’s outlaid for the next couple of weeks up until settlement. So I would think about it more in the context of like a 30 day period.

So, I am guessing the return on your invested capital is then quite high in that?

Yes. That’s correct.

Got it. And then just noticing that you had kind of moved the servicing advances into kind of the other investment category. I guess, were you viewing there to be less growth in that and sort of putting it in that section?

We put it there because the amount of capital or a carrying basis on our existing servicing advances today is a $135 million. Obviously in December when we embarked on or we did this first transaction with Nationstar, we haven’t seen return of non-agency mortgage servicing sold into the marketplace. We are working on a couple of portfolios that we believe at some point may come to fruition. But overall we think it’s a little bit spotty, so we're going to – so we put it more into opportunistic investing bucket.

Great. Thank you, Michael.

Thanks, Doug.

Thank you. Our next question comes from Henry Coffey of Sterne Agee.

Good morning, everyone. Yes, continuing where Doug was, the call strategy, your value add, you know, nobody gets anything for free, is your capacity to manage the whole capital process, is it really tied to your relationship with Nationstar, is it your ability to manage the re-securitization, what – where do you step in and saw the great value in the equation?

Well, the first thing is, Henry, as we own calls which are you know, which pretty much very few people own in the marketplace. So when we think about this opportunity it’s very unique to us. As we pointed out, we own calls in over 800 different mortgage securitizations. With our expertise in the capital markets between all of the folks we have here, we probably have about 150 years of mortgage experience and that make us kind of collectively. So I think our capital markets expertise is terrific. Our relationship with our partner Nationstar is terrific, because they service a lot of the securitization. So overall I think its one, having the calls in New Residential, two, a relationship with Nationstar and three, quite frankly the you know, our group here that has this many, many years of experience in the mortgage market.

And how much kind of shelf light [ph] this year in terms you know, for how many quarters do we get to really think about that?

Well, you know we expect through Q4 that we call approximately $1.5 billion of deals. If you think about that and there is a $100 billion less to call or $99 billion, this is something that could go on for many, many years. Currently, the callable pool of loans that we – or securities that we call today is a little bit under $10 billion, keep in mind not all of those will be albeit a call today because some of these deals are just non-economic as you work through delinquencies. Another way that we go about is, is we go into the marketplace and buy discount mortgage securities which then lower our basis. So its gives the ability to call loans even when they don’t execute well above par.

And this is in terms REIT income, this is considered a gain, good REIT, bad REIT income, how does that work into the equation?

The way we've done it Henry, is we've called mortgage securities, or we call the pool of loans. We've then done a securitization or sold up loans at a premium. In these pools typically there is a certain amount of delinquent loans that we retain for our portfolio. Those delinquent loans as we liquidate them we will continue to flow into core earnings. So we think that the growth in our core earnings, one of the areas of growth in core earnings will come from this business.

And then just looking forward, the exciting things about you guys are always looking at the next edge. The capital requirements in the servicing business growth, already that one in Nationstar's competitors talking about selling assets. Do you – are you going to deploying capital, do you think in areas around traditional servicing, do you think its going to be more in the Ginnie Mae area, is it just going to be helping with MSR financing or can you give us some sense of where the opportunity lies in terms of capital redeployment?

Sure. I think first of all Nationstar, as I pointed out earlier Jay and his team have done a great job, working with the regulators, making sure their balance sheet is super sound and tight. So we feel really, really good about where they are as it relates to new proposed capital rules that will come to the non-bank services over the course of next year or so. So we feel really good about that. As it relates to New Residential and our ability to deploy capital in the MSR space, we think the next portfolio of MSRs that we will likely acquire is probably going to be in the Ginnie Mae space. However, we're in discussion on a number of different portfolios. I would tell that we're probably more optimistic today than we've been in the long time about our ability to source more MSRs and actually execute on them. And a lot of that has to do with the job the guys of Nationstar have done with the regulators and actually doing in a outreach program and keeping the regulatory bodies very involved in their business. So we feel really good about that.

They just though $43 billion in servicing, I am assuming that’s an opportunity for you too?

Yes.

Thank you. Great, quarter. Thanks for your time.

Thank you.

Thank you. Our next question comes from Bose George of KBW.

Hey, guys good morning. This is actually Chas Tyson on for Bose. Just a couple more on the clean-up calls. How much you guys retaining from that as opposed to you know, calling and then securitizing and is there a difference between the returns on the retain portion versus the kind of the trade portion where your calls securitized?

On the amount we retain it depends deal-by-deal. The more the delinquent loans you have obviously in a deal the more you're going to retain because typically those will not going into the securitization. As it relates to the economics, we view the economics in a similar fashion. We own these – we own the delinquent loans what we'll call as a very, very attractive basis for our company and as we liquidate those over time we still think we're going to generate returns well in excess of 20%.

Okay. That’s helpful. And then is there, I mean, you know you guys talked about this kind of significant run way and this opportunity, you know, there is billions to be called. But is there kind of an easy way for us to think about how to model this going forward on kind of quarterly basis there I think we can look to?

You know, as I pointed out earlier in the presentation, the – our experience so far has been we've been averaging something in the vicinity of you know, call it 2 to 3 points on each deal collapse to date or through Q4 we expect to call about a $1.5 billion of securities. I think it will be a bit lumpy, but if we use that and actually think about that potentially growing over time, because we did our first one I believe in May of this year. We think the run rate will continue for a long time and the amount of loans hopefully as we acquire more non-agency securities at discounts, we'll continue to grow. So, it’s a hard one, I know it’s a pinpoint, but we're typically in the kind of 2 to 3 points range, year-to-date we'll about a $1.5 billion as we get through Q4.

Okay. That’s helpful. And then just one last one, I wanted to get your guys color on the NPL market, what you guys are seeing in terms of pricing you know, how active you've been in seeking out to new NPLs, I mean, if the pricing is kind of come down of recent hires?

You know, the way that we look at the NPL market, as we think about it more opportunistic. The investments we made have been strategic. As you know, we have seen $40 billion of loans sold into the marketplace to date. We have purchased about 2% of that. Our equity in the – and call it the secondary NPL market is about a $175 million as of the end of Q3. We actually monetize some early HUD pools that we purchased in the quarter for 53% IRR and this was stuff [ph] that we purchased last year and that generated a gain of approximately $9 million. So the way that we're going to look at it is more opportunistic. I wouldn’t anticipate as going out and buying large portfolios of NPLs unless pricing cheapens up, subsequent to Q3 we did buy a small amount of HUD NPLs and the pricing on that was down approximately 5 to 6 points from some of the recent print. So, again it’s a more opportunistic thing. I don’t anticipate a lot of growth unless this sector really cheapens up and our growth in our NPL business will be sourcing loans to our called loan strategy. And one of the point I'd like to make is that we are actually very, when we buy a poor loans, we're very much aware of where we – we have process as far as what we think of the housing market on a go forward basis. So we try to typically buy loans that have, to the extent we can buy loans that have equity we do that, and about 50% of our portfolio today currently has equity. So that protects us from downside risks to the extent housing softens out.

Okay. Thank you. I appreciate it.

Thank you.

Our next question comes from Michael Kaye of Citigroup.

Hi, Mike. You had couple very strong quarters back-to-back, just wondering how you're thinking about the dividend here as the core earnings are now well above the dividend?

It’s something that we are currently evaluating and thinking about without giving you forward guidance which we can't do. But it’s something that’s obviously on our minds and I am sure it’s on the minds of all of our shareholders. As we think about the company, you know, we try to grow our core earnings. I think we represented that we've done a good job doing that, in any kind of, as we make decisions around our dividend we'll go to – we'll discuss it with our board and then you know, and lead back to the market.

Great. The returns on a SpringCastle co-investment have been obviously a fantastic, just looking ahead if hypothetically if Springleaf were to do a large acquisition with another consumer lender. Could this be something that New Resi could be a part of, I wasn’t sure if a New Resi co-investment will be possible if structured more of a entire company investment versus buying a portfolio like SpringCastle?

Yes, I think we look at it deal-by-deal as it relates to any potential acquisitions by Springleaf clearly with our relationship with our manager at Fortress and some of our sister companies. There is always what we'll call opportunistic investments that we see. I would say now where Springleaf has placed [ph] it in a very good place based on some of their recent activity to do what they have to do. So it’s a on a deal-by-deal basis Michael.

Okay. Great, thank you.

Our next question comes from Jason Deleeuw of Piper Jaffray.

Hey, thank you. And good morning. The call pipeline pace, can you just help us kind of understand what the key drivers of that pace is. It sounds like just working the delinquencies lower, is that the key thing to focus on in terms of trying to think about the pace of those deals coming into a callable position?

It’s that, it’s also our ability to source collateral at a discount, which will then lower our basis. So if you think about with Nationstar, servicing a fair amount of the deals and as we work through the pipelines on these delinquent loans, clearly that’s going to make a more attractive to be called. The other thing is – the other way that we think about it is to the extent that we could buy a discount mortgage securities in the marketplace that will lower our basis. So to give you an example today, on our portfolio we own call rights of 95% of our securities that are sitting on our balance sheet and that’s as of the end of Q3 and our basis on those – on our securities as of the end of Q3 are approximately $0.67 in a $1 [ph] So we think about it from a discount security stand point and as we clean-up the pipeline, that’s why it is going to be a bit a lumpy. But we think the run rate for growth in that business for us is going to be for a very, very long time.

And just to be clear, are all those earnings, would they all flow through the core earnings or is there some GAAP earning in the two. Can you just kind of help us understand that a little bit more?

Our current strategy is to try to grow our core earnings for shareholders. So again as I pointed out in our example before, if we call a pool of securities, we then turnaround and make sure we have securitization at a premium, as we acquire more you know, call it, if there is more delinquent loans in that portfolio, the likelihood is that would flow through our core earnings. To the extent that is a – it’s entirely clean pull of collateral where you liquidate the entire pool of collateral at that time, that would probably flow through GAAP earnings. And we did that I believe in the second quarter.

Okay. So when you guys think about the dividend and you got to kind of – your business is going to be a source of earnings here with the callable deals, you got to kind of think about what would be core and what would be GAAP, is this that how you're thinking about it or and then in terms of what you would set your, and your core dividend add versus will you would prefer a special dividend?

Yes.

And then the $262 million of un-invested cash, how quickly do you think you can put that to work. It sounds like there is some MSR opportunities here. Can you just give us a sense of when you can get that capital working again?

Well, we always see different opportunities. One of the things that I think we – that we are mindful of is and this goes back to the turmoil we saw in the markets in early October, we always want to make sure we have a ample amount of cash on our balance sheet to protect our company and you our shareholders. On the $262 million, we're looking at pools of MSRs that we're hopeful that we could agree upon. Our pipeline today really is $150 billion, not all of that works quite frankly, but some of that we believe will work. We also see a bunch of non-agency portfolios that continue to trade in the marketplace. So, you know, we think its something that we'll be able to deploy over the near future.

Great. And then lastly, the capital structure, any update on the capital structure that you think about for NRZ?

Meaning?

I am just wondering, you know, from a debt perspective, is there anyway to possibly, from a balance sheet perspective maybe add more debt to the business here or not, or you guys comfortable with where you're at, just how you're thinking about the equity in the debt capital kind of going forward?

I think we're very comfortable where we are right now. When you think about the company it’s very, very low leverage relative to a lot of other kind of investment vehicles in the market. Our leverage is between one and two times, and I think we're going to kind of try to maintain that at this point. Obviously if there is something huge that comes along that’s really accretive to our company, we'll think about all kinds of different capital strategies. But for now I think we're comfortable where we are.

Great. Thank you very much.

Thank you.

At this time there are no further questions. I'll now turn the call back to Mike.

Thanks, everyone. Look forward to talking to you next quarter.

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