Good morning. My name is Matthew and I'll be your conference operator today. At this time I'd like to welcome everyone to the New Residential Fourth Quarter and Full Year 2016 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, you may begin.

Thank you, Matthew and good morning everyone. I would like to welcome you today to New Residential's fourth quarter and full year 2016 earnings call. Joining me here today are Michael Nierenberg our CEO; and Nick Santoro, our CFO. Throughout the call we are going to reference to the earning 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 earning 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 the earning supplement. And now I would like to turn the call over to Michael.

Thanks, Mandy. Good morning everybody and thanks for joining us today. You know, some of this is all news obviously in light of our recent acquisition of the Citi MSRs and our equity raise where we went through some of the numbers. However, you know, we are extremely excited about the way that our company is positioned now and the results that we had last year for the company and for all of our shareholders. Last year was a good year for us and it was obviously a good year for shareholders. We continue to execute on our core business plan, which is to focus on MSRs, non-agency securities with call rights and servicer advances. Going forward, our strategy will be the same. I'll talk a little bit about servicer advances in a bit, as we've taken measures to protect the company against rising interest rates as it relates to the servicer advance business that we have. The way that we're set up, we have positioned our company and our portfolios for the current market environment, which should continue where we believe our portfolios should continue to perform extremely well. Last year we had a very active year, we grew our non-agency portfolio by 200%. We went from approximately $350 million at the end of 12/31/15 to a little bit north of - you know, give or take around $1 billion of investment – net investment value at the end of 2016. When you look at our portfolio today, based on mark-to-market, we haven't realized this. we have an unrealized gain in our portfolio of approximately $130 million. Our MSR portfolios for the year grew by $260 billion. This includes the City announcement. Again, trying to stay very focused on our core businesses, thinking about the current rate environment, and…

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

Good morning. Got a couple of questions. First, in terms of earnings, it’s a little hard to map, you guys did obviously very strong $0.62 this quarter. Can you just talk about what you think the run rate earnings is, and you know, the $0.62 what was the main driver of to beat over that run rate?

So the numbers $0.04 is roughly a mark on our MSR portfolio or excess MSR portfolio. If you recall going back, I think it was in '15 when rates rallied a bunch, our incentive income around our servicer advance business based on the forward curve came down. This quarter, we got the benefit because the forward curve rose. So as a result, we picked up roughly $0.07 or $0.08 on our servicer advance population to the current run rate its give or take in and around $0.50ish per quarter, is the way to think about it.

Okay, great. Thanks. And then in terms of rate sensitivity, the slide on page 18 is helpful. But I was wondering, if you could quantify that a bit more, like if rates fell 25 basis point or 50 basis point, what do you think that does to pro forma book, including the PHH and the City MSRs?

I have the numbers, I don't have them in front of me. I could - actually we could do this after the call. But the way that – and we haven't mapped out, but the way your City MSRs will come down your PHH MSRs will come down, keep in mind, Bose, a big part of this is our you know, a big part of the way that we think about this is our recapture provisions as well. So if we underwrite say to between 25% and 30% overall from a recapture perspective, we are estimating that one of every three loans will recapture. A drop of 25 basis points we believe is worth about one CPR on our overall – we call it a new production portfolio. But the offset is - the offset between our new MSRs and our call population, we think matches up extremely well. But I could take you through more finer numbers after this call, I just don't have that one in front of me.

Okay, great. Actually that’s helpful. And the second, one on the clean-up call, you know, just with the rate move this quarter, you know, its really, presumably the value of that - the clean-up call option goes down, when we look at the slide that shows that opportunity, is the decline in value really that it gets pushed out, so the IRR goes down, but the sort of the step that you can call you know, remains unchanged?

Yes. It is how we think about it. We currently – just for example, in the month of February we called $900 million in loans, so where you know, we're going to be in the market shortly with a new term securitization around the call population. If you think about the non-agency business, and you look at spread, our non-agency securities, just to give you sense from 12/31 of 2015 non-agency's spreads were approximately 295 basis points. If you look at where we are today, for example, our non-agency's spreads are 195 basis points. So overall, when you think about our population, the bond portfolios is up a fair amount, when we issue term securitizations, despite higher rates you're going to be able to issue them at tighter spread. So overall, the net impact of that is less then you would expect in a rising rate environment. So spreads are tighter, right. So overall, your cost of funds will remain fairly constant, then where we would have issued let's say a year ago because spreads are 100 basis points tighter. So if you think about short rates, you know, the two-year treasury for example right now is 119, a year ago in 2015 at the end of the year was 1.05, the difference is LIBOR is upper fair amount, but the net of that is tighter spreads on the non-agency securities, higher cost of funds, the net impact is very minor if anything at all.

Okay, great. Thank you.

And you have a question from Michael Kaye with Citi Group. Your line is open.

Morning. Could you just talk about banks exiting mortgage servicing, you know, we saw one happen which you took advantage of, do you see more banks exiting or is that kind of more of a one-off opportunity?

I think that bank, you know, quite frankly, I think the bank – the transfer of MSRs from the large bank to folks like us or other non-bank servicers, I think its contemplated run [ph] in its course I think. I think what you are going to see Michael going forward in a rising rate environment you should see some consolidation run at mortgage banking industry, and gain on sale with the government programs now running off, will likely be less. So I think there could be some opportunities from some of the smaller mortgage bankers for us to work with them. You saw that in a couple of our transactions in Q4, as well as in Q1 of this year. So I think that will be our source of product as we go forward.

Great. Just one other quick question. During the quarter you grew in your transactions, you are now you know, grown your MSR portfolio pretty massively, I think it was over $250 billion worth of the recent announcements, we've seen other players get tripped up you know, growing too big, too fast. Could you just talk about what you're doing inside New Resi in terms of compliance getting ready to monarch [ph] all these different servicing partners and also your discussions with the regulators? Thank you.

Yes, that’s a great question. For us we have - we have a very robust compliance group here at Fortress. We've also added a number of employees in and around the NRZ platform. On the compliance front, we are in constant dialogue with all of our friends in DC from FHFA to Fannie and Freddie around servicing transfers. I think a couple of very important things to point out, the PHH transaction, there was no transfer of MSRs off the PHH platform. So effectively for us its just a pure economic ownership transfer from PHH to us. On the City transaction, the initial settlement of that transaction will be purely economic and then Nationstar will likely be the sub-servicer and that will acquire - and that will occur over the course of the next year. So our big thing is making sure that we work closely with our sub-servicers you. We've pointed out over the course of the past couple years, we felt it was very important to establish relationships with a number of servicers, we've done that. We've also hired third-party contractors. For example, there's a company called Navigant, who was basically a full-time service provider to us around the compliance function. So we built that out in a very robust fashion. We'll continue to do that. There is constant dialogue with all of our friends, again, you know what it would be from a regulatory standpoint, as well as the folks at Fannie and Freddie on our business.

All right. Thank you very much…

All set where we are.

Thank you.

And your next question comes in line of Jessica Levi Ribner with FBR. Your line is open.

Hey. Good morning. Thanks so much for taking my question.

Hi.

Is there – I see that you extended out your financing for a lot of the portfolio, is there an eye towards extending it out even further, meaning 3 to 4 year kind of range?

I think you know, based on the forward curve if we could extend our maturities and term out our – whether it be our advance business or anything else, we will continue to do that. It is our expectations that the Feds going to at least two times, maybe as many as three and again that’s surely based on where we see the economy and listening to some of our market oriented friends as well. So protecting ourselves against higher interest rates is something that we've you know, taken very seriously. The other part of that is, we do have some strategic hedges around our debt, which should protect us in a higher rate environment. So when you look at some of our GAAP numbers even throughout the course of the Q4, we had a little bit a lift around that. So yeah, I mean, locking in fixed rate financing is very, very important to us, term financing is better because it gives us the ability to focus on other parts of our business.

Okay. Thank you. And then, in terms of your resi loan portfolio, especially those that you get when you collapse the call rights, how do we think about kind of how you are thinking about that portfolio in terms of holding those loans, do you look to monetize them and what do you view at those?

Well, there is couple of points. One is on our – when we acquired these transactions there was usually a percentage of real estate owned that were non-performing interest [ph] houses effectively. We try to get those out the door as quick as possible. You know, we've hired - now that we've accelerated our call strategy, I pointed out we are calling $900 million this quarter. So think about that versus our typical run rate of $300 million, if we're going to end up growing that, so we've hired eight - another team of - we've added another three resources to that business to get homes out the door, working with property managers, going to see houses or self, it’s a pretty labor-intensive business. On the non-performing loan side, we work with our servicing partners to try to get you know, whether we do loan mods for people or whether we do principal forgiveness. We do anything and everything we can to help the consumer stay in their home and do loan modifications. And that's a really important thing and once we get those performing then we could either securitized those or sell off the loans to the marketplace. So that's really our strategy there. We have done a couple one-off transactions where we've acquired loans. You know, quite frankly, right now where loans are trading it’s not as - we don't believe it’s as fruitful for our shareholders, there is other areas that we could deploy capital. So it will grow, but and so will the team around it. So again, loan modification is doing everything we can to help consumer stay in their homes and then REO [ph] getting that out the doors as quick as possible.

Okay. Thanks so much.

Thanks, Jess.

And you have a question from Jason Weaver with WED [ph] Securities. You line is open.

Hey. Thanks for taking my question. Given the rates and also the answer to a prior question there, I see that the advance rates on the City portfolio are somewhat higher. Can you talk about what you see is appropriate leveraging here and where you see that moving?

Yes. I think we have set out, we've done a couple of term MSR notes particularly on the PLS where I believe our advance rates are something around 60% or 65%. We did that and I believe it was '14 or '15. On the City portfolio, with another kind of new production portfolios, we'd like to cap at least for now our MSR financing at 50%. We don't want to run a hugely levered business just to give you a sense on leverage ratios, after putting on MSR financing of about 50% should be something between 1.7 and 1.8 overall. So when we think about leveraging our portfolio, we want to run the lowest levered business and obviously provide you know the best returns as possible for our shareholders. So I don’t believe that - we don't see it going above 50% right now.

Fair enough. Okay. And just one more, I wonder if you could talk about what if any changes you see for NRZ and the manager as a result of the SoftBank [ph]

There was no change, I think the - you know, NRZ is an important part of - obviously of Fortress, but as a result of this you know, acquisition by SoftBank its really just – you know there's a lot of fun there, that could be interesting things to do. But for NRZ it is just business as usual, there is no change at all.

Fair enough. Thanks again.

Thank you.

And your next question comes from the line of Brock Vandervliet with Nomura Securities. Your line is open.

Thanks very much. I just wanted to go back to the question that Bose asked, in terms of trying to better dimension some of your operating or your core performance. The servicing revenue that we see I guess is broken out listed on page 27 of the deck, $118 million, does that include those marks that you talked about or is that just the operating servicing fee?

I am sorry, the $118 million, where do you see that Brock?

Yeah, $118 million servicing revenue on slide 27?

Brock, that includes the mark from the full on our portfolio.

That does? That does, okay. What would you - what would you consider to be the core operating revs there X marks?

The mark that flow through for the quarter was approximately $104 million.

Okay, got it. All right, that makes sense, much more so with what we've modeled, okay. And Mike you called out I think really for the first time, obviously the $900 million called is a huge number, but you called out that linkage with lower servicing advances in a greater ability to execute these calls. Could you just kind of review that relationship?

Sure. So as servicer advances and delinquencies come down, the call population becomes more economical. And I pointed out earlier that when we first acquired you know, the HLSS advances or the Ocwen advances, couple that with the Nationstar advances, I believe that the amount of that portfolio was something between $8 million and $9 billion, its currently 5.9. So when you think about the overall cost around servicer advances, when we call a transaction we pay out for all these advances at par. If you don't have to pay them off at par the deals become more economical. So the more servicer advances that are outstanding, the less economical those deals are.

Got it. Okay. All right, thanks for taking my question.

Anytime. Thanks, Brock.

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

Hi, thanks. A follow up on the question about financing for the newer MSR portfolios, can you talk a little bit about sort of what financing options are out there for new MSRs you know, in terms of issuing notes versus sort of like warehouse line or secured debt from bank counterparty and also how much debt do you see in that financing markets? Thanks.

I'll take the last part first, the amount of debt is pretty – it’s very encouraging and a lot of that comes from our bank friends. We set up - we closed on a facility last week that was a very large one and I think that as there were number of banks that want to work with us and provide MSR financing. When we currently - our goal quite frankly is to lower - get lower cost of financing obviously and do something around the MSR asset that’s more term in nature. For example, tomorrow there's a group of us that are going down to Washington to meet with you know, FHFA to discuss different ways that we can potentially improve the financing market around the MSR asset class. And a lot of that has to do with you know, how do banks and others get comfortable around being first in the waterfall around secured lien not being subordinated to the others. So we're working hard at that. The depth is very large, typical cost of funds is being something around LIBOR plus 400 area and you know we've been able to go out a little bit more term in nature, but ultimately what we'd like to do is solve for a longer-term, non-mar to market, lower cost of funds facility which would obviously drive more the earnings around the asset class.

Got it. Okay. And then a question on the securities portfolio, you mentioned that spreads had come in at decent amount over last year and even a decent amount into the first quarter here. Are you guys going to still be looking to add to that portfolio meaningfully and does it continue to makes sense with tighter spreads, specifically on deals if you guys control the call rights on those?

You know, if in fact it enables us to call the transactions, we'll continue to deploy capital there, even though yields are lower, you know, we are very – and this is no secret because we've been focused on this and I've been mentioning this on pretty much every earnings call, we're doing all we can to accelerate call rights. You know, you know but it drove from $300 million last quarter, whatever you know, give or take at $900 million this quarter and as we look at the future, we are going to be more aggressive, advances are coming down, so economics with tighter spreads continue to improve, so to the extent that there were lower dollar price bonds that enable us to call these transactions we'll continue to deploy capital there. It’s less interesting quite frankly today then it’s been and the competition is pretty vast out there. You know a lot of the large money managers continue to deploy a lot of capital there. But we'll continue to search for opportunities there.

Okay, thank you.

Your next question comes from the line of Fred Small with Compass Research. Your line is open.

Hey. Good morning. Thanks. Just I don't know if I came up on any of the questions before on the core earnings, but can you sort of say or break out how much of core earnings were related to the call rights in the fourth quarter?

That was $0.04, it came through from accretion [ph] from collapses for core.

Okay. And I think that's where - it's when you've disclosed that before, that sort of where it's been and might talked about the run rate before, is that fairly linear as the UPB goes up, I know there are sort of some puts and takes on how it gets recognized versus the amount UPB?

Yeah, it varies. I mean, certain deals where we're going to make more money, it depends on how many bonds we have it at discounts on other deals. I mean, the one area I want to point out, the non-performing loan sector continues to perform extremely well, right. There is a lot of capital that’s being deployed there, as well as into the re-performing loan sector and part of it is if you think about you know, these large bank settlements, that have been agreed to with different regulatory entities, there's a bunch of principal forgiveness or loan modifications that need to happen as a result of that. What that's done effectively as it creates for us, you know, when you think about it, you know, if we were to call every loan we could today its between $30 billion and $40 billion, that’s the amount that's in the appropriate on a factor date. So think about it this way, we control roughly $40 billion of loans, with spreads doing better on the non-performing loans space and spreads doing better on the non-agency space, effectively it will enable us to call more transactions. I think that's part of the driver in our ability to do more here. The bigger strategy continues to be if we could work with industry participants and figure out more of a global thing, I think that would be a much better thing. The team here is had conversations with the rating agencies and with bond trustees in and around trying to figure out different ways that we could accelerate these call timelines. But some of the deals, you know, as it comes back to the economic will vary whether you make a point, two points, five points, it all depends on how much is delinquent and how much is not delinquent, how many bonds you have, et cetera.

Got it. Thanks. And then just one follow-up on that, is there sort of an – well, two follow ups, maybe one, is there sort of an average level of advances or delinquencies, however you want to think about it, where the economic start to make more sense on a specific deal - on a specific group of deals?

You know, again, a big part of it is the bond portfolio, because we have bonds that we own on a weighted average price of give or take $0.70 odd that is a big driver. As you think about accretion in the quarter, in any particular quarter and as you think about the deals, it’s hard to pinpoint that exactly. I think we have that slide that shows if delinquencies go down by 2% and advance balances go down by X percent we'll be able to call a certain amount more, I do think we're going to be active. We're currently trying to figure out if we can work with some of the banks that have agreed on some of the settlement, thus again, we control a population of you today 30 billion to 40 billion of loans and I don’t think anybody controls that kind of population where we could work with third parties on. So it's going to vary.

Okay. And then just a follow-up on that, just on average what percentage of the underlying bonds in the deals you've called to date or in the fourth quarter does NRZ own?

On every deal we typically own bonds that we call, because again, that helps with call economics, because there's delinquencies. I'd have to get back to you, maybe we can do a follow up on that, what we did in like for example the fourth quarter on the deals and we could show you how many bonds we own, we could go back to that. That would be a follow up…

Okay, great. Thanks a lot.

Thank you.

And your next question comes from the line of Ken Bruce with Bank of America. Your line is open.

Thanks. Good morning, Mike. A question relates to I guess, you touched on a couple different times the issue on advances and trying to – you know, you expect that to come down over time. Can you remind us or maybe kind of address kind of what this – what you believe this you can do with servicers to try to help to expedite getting those advance dollars down, you kind of touched on the delinquencies as being a key part of that. But could you kind of remind us what they can do. And then maybe separately, does the situation with Ocwen, does it look any better today you know, now that they kind of sounds like they're working through some of the regulatory issues that they have?

Okay, first question, on the servicer advances, you know, we don't control that part of the business. The servicer itself, you know, whether it would be Ocwen or Nationstar they control their own advances. They are in the specific pooling and servicing agreements, they have certain things that they could do to either call back advances or not. Keep in mind, as delinquencies - over time these deals were issued between 2003 and '07 call it, so let's say a weighted average date of issuance is for a rough you know, for taxes [ph] Is 2005 these deals were outstanding for 12 years now. So you'd think over time the delinquencies would come down, as delinquencies come down or loans get liquidated, advance balances come down. That will be - I think that'll be a bigger driver going forward versus to say servicer having the ability to call back advances. Clearly you know, those do so, because it costs them money to have advances outstanding, meaning, Ocwen and Nationstar. But I think from for both companies, the language that’s in the pooling and servicing agreements is how they service their loans. For us we don't really have influence on that. Obviously we always want to make sure that advanced balances are as low as possible, but they have to service according to the guide. As to really Ocwen in their financial health, you know, quite frankly ritual [ph] for them. I mean, we have a very good working relationship with Ocwen and having Ocwen healthy I think is a very important thing for the industry, really do. I mean, more is better. There's not that many folks that are out there. We have relationships with kind of the big four, but we're very happy for them. And you know, I would hope over time we can continue to do more business with them.

Right. And maybe just on the first point, I think back – there is a little bit of a dated question, just in terms of timing, you kind of identified or just highlighted that there needed to be some industry issues resolved to help to expedite the - getting the advance balances down, is there any update on that or are there - is there anything that you can do to just kind of again try to work on that as a large piece of your balance sheet?

Yes, the number of our team have gone down and met with the rating agency, met with Yvonne trustees, had extensive conversations with council. So we continue to work on that. There have been a couple deals over the course of the past year, which have got modified, the call dates have been modified. So we're going to continue down that path. I don't think it’s a dead end by any means, but it's something that there continues to be a lot of work and will be a big focus in '17 for us.

Thanks and appreciate all the information you provided in the supplement into the quarter. Thanks, again.

Thank you.

There are no further questions at this time. I'll turn the call back over to the presenters.

Well, thanks again everyone for all your support. We appreciate it. '17 hopefully will be a very good year for all of you and all of our shareholders. So we'll continue to do all we can to execute around our business. And thanks again. Bye-bye

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