Good morning. My name is Jack, and I will be your conference operator today. At this time, I would like to welcome everyone to the New Residential Investment Corp. Second Quarter 2019 Earnings Call. . Thank you. Kaitlyn Mauritz, with Investor Relations, you may begin your conference.

Thank you, Jack, and good morning, everyone. I'd like to welcome you today to New Residential's Second Quarter 2019 Earnings Call. Joining me here today are Michael Nierenberg, our Chairman, CEO and President; and Nick Santoro, our CFO. Throughout the call this morning, we are going to reference the earnings supplement that was posted to the New Residential website this morning. If you have not already done so, I'd encourage you to download the presentation now.

Thanks, Kait. Good morning, everyone, and thanks for dialing into our earnings call this morning. As treasury rates and mortgage rates continued to fall during the quarter, the diverse nature of our investment portfolios helped to offset the decline in MSR values. During the quarter, yields on 10-year Treasury rates declined by 40 basis points and, since late last year, over 100 basis points since the highs we saw last November. Mortgage rates in the quarter declined by 33 basis points and about the same, they declined about 100 basis points since the high it falls late last year. Our growth in our loan portfolios, bond portfolios and our hedging strategies helped generate gains and income, which helped to offset some of the negative MSR marks we had in the quarter. With the Fed signaling they will likely cut rates this week, our portfolios across all of our business lines, including MSRs, are fully hedged. We are looking at all of our financing lines and deals we have in the marketplace, and we will be lowering rates wherever we can and take advantage of this current rate environment. During the second quarter, we refinanced a $900 million consumer deal, the SpringCastle deal, by lowering cost of funds by 150 basis points. Subsequent to Q2, we lowered our cost of funds in one of our advanced facilities and securitizations by over 80 basis points. There'll be a lot more of those to do as we go forward. Our call business should continue to perform extremely well in this rate environment. As I've stated in the past, we are working on ways to clean up the legacy mortgage market and have established new relationships with third-party vendors to help clean up some of the pipelines at delinquent loans. You will see in our deck the different partnerships we have established and will continue to do so.

. Doug Harter with Crédit Suisse.

Mike, I was just hoping you could just talk a little bit about the attractiveness of the MSRs, kind of away from Ditech that you got acquired in the second -- in the third quarter, what are those? What do those assets look like? And what types of returns? And how do those returns sort of compared to kind of the larger bulk deal?

So most of them are bulk. It's not like there's a ton of smaller -- there's some smaller acquisitions, but mostly when we talk about bulk, they're give or take something around -- there's one for $8 billion, there's another one for $18 billion, there's another one for $24 billion, and then there are smaller ones. So most of them are bulk. We expect returns to be something between probably 13% and 15%. As I pointed out before, they are fully hedged. There's a part of it that the actual return on the asset from a yield year perspective. The other part is, as we continue to grow our third-party businesses and grow our ancillary businesses, we think having 3.5 million or 4 million customers will -- as we integrate our operating businesses, will continue to pay off for our shareholders, maybe not today around some of those businesses, but down the road. So returns 13% to 15% on a leverage basis, fully hedged assets, and then a lot more upside around the ancillary businesses that we're focused on.

And then if you could just build a little more clarity around the comment you said a couple of times, kind of fully hedged on the MSRs, kind of how we should think about what that means for kind of rate sensitivity and kind of just a little description of kind of how you've gone about hedging that?

Yes. So when we think about MSRs, we think about the entire investment portfolio we have. So we have our loan book which has give or take about $1 billion of equity. I think I pointed out last quarter we've been running long duration there. We have our bond portfolio which we've been running long duration there. Our MSR portfolio obviously has negative duration. So throughout the quarter, we've been adding spec pools and putting on swaps as receivers to protect the value of that asset. So when we think overall, to give you a sense, I think there is -- in the queues, there is always some kind of interest rate and credit spread insensitivity. I think in a down 25% rate environment from where we're now, we estimate that the value of our portfolios will go up about $20 million. In an up 25% rate environment, we expect the value of our business to be down about $20 million. So give or take, what we're trying to do is, run our books as close to our home. I think it's a really good question, Doug. If we go back to last year in November, I was looking at some swap rates. Sometime in November last year, on 10-year swaps when we thought rates were going to go significantly higher, we paid on swaps at 3.27%, just to give you a sense. Today 10-year swap rates are give or take around 2%. So we have had a massive rally in rates, and I think overall, the portfolios are fairly well protected. The other thing I want to point out despite the fact that taking negative marks in our MSRs, we still, year-to-date, today, have a gain in our overall MSR portfolio of $540 million. So if we just see the projected value of those assets, the markets themselves, it seems like are going to continue to rally. Being a seasoned person for 30-plus years, it's hard to believe that Fed is going to cut rates this week, but I guess, they are. 25% of the overall debt markets have negative yields now. So we're not going to fight the Fed, and we're not going to fight the tape. So we need to protect the assets. And by getting -- by putting hedges against our MSR assets and our other -- and running long in our others portfolios, we think we're in a great position to do that.

Bose George with KBW.

First a follow-up to Doug's question on the MSR returns. Can you just give the unlevered deals on that? Is it conventional, Ginnie?

It's mostly conventional. Our levered yields were about 13% right now. It's the way that we're sizing it. And then you have your -- you have spec pools against them from a hedge perspective. We think overall returns on the new production stuff are going to be something around, I would say, lower double-digit 13% and 15%.

Is that the levered yield or?

That's a levered yield. Unlevered, those, we think are something around an 8% kind of unlevered.

Okay. Great. And the $95 million gain on the residential loans this quarter, does that include the bond portfolio? Or it just -- can you just disaggregate that gain?

The $95 million gain includes approximately $30 million related to the mark on our origination book, on the Shellpoint origination book. And the remaining relates to the gain on our loan portfolio here at NRZ.

Okay. How did the agency MBS bond portfolio do?

I'm sorry. How did the agency MBS bond portfolio?

Yes.

Well, keep in mind, throughout the quarter, Q2, you saw our agency MBS, for the most part, I think, it widened a little bit on a nominal basis versus swaps. But overall, for using that to hedge our MSR portfolios, when they go up in value, they will have some gains in those portfolios because they are not hedged on the other side.

Yes. Yes. Okay. And then just in -- your comment about capturing incremental ancillary revenues, I mean, do you need to -- are there more acquisitions you need to do to position for that? Or just can you sort of go over what needs to be done in sort of flesh out that opportunity a little bit?

Sure. So as it relates to Covius, Covius has a lot of, what I would call, origination and servicing revenue streams. That is truly going to be running, say, third-party business. We invested so far about $27 million. So when you think about it from a shareholder perspective, you're not really going to see any gains today. And you could almost think about that as more dilutive for our returns today than then where we will go down the road. So I think about that as more of a strategic investment in an operating business that we think will truly grow and at some time will have a monetization event for NRZ shareholders, which will -- which we believe will be very good. The Matic one is small. There will be some -- there will be some ancillary revenue that will come from that. The auction.com side getting cleaning up the legacy mortgage market has been a focus of ours. We think with that, again, you'll have much lower loss severities rather than T loans sit in a stuck legacy mortgage deal by -- and waiting for those to go into REO. The other thing is we think that will truly benefit bondholders to lower severities. So there will be some revenue there. We are continuing to look at investments in other, what I would call, other operating tight businesses. Some of them are smaller in nature, quite frankly, that we think we could really grow. So when you look at the strategy overall, the Shellpoint acquisition, well, that was, give or take, something around $200 million. A good chunk of that was the value of the MSRs. So the ones in the premium paid to book there. And that has been just a great month for us, again, not only just from an earnings perspective, but I think overall protecting the franchise and giving us the ability to learn more about the ancillary business, having the expertise of Bruce Williams and his team, and they've been great partners of ours. So we'll continue to look and be opportunistic. The bond stuff isn't just not that interesting. I've been saying that quarter after quarter. Leverage yields are 5%, 6%, 7%, don't do a lot for our shareholders. So we continue to look at ways to generate more alpha and more returns for our shareholders by either selling certain assets. We're acquiring other things that we think are going to be higher in yield or making strategic investments in the operating businesses. So we're thrilled where we are. I mean, I won't say the markets are -- they're not giving anybody anything. I think the operating stuff is going to pay real dividend for shareholders down the road. And those are truly investments. But the power of our existing portfolios today should continue to enable us to play our dividends and continue to run our investment portfolios like we have been.

Tim Hayes with B. Riley.

My first question, just a follow-up on the MSR acquisitions. Just wondering who the seller profiles are? Is it mostly banks or funds? And is it a function of regulatory headwinds? Or are those just looking to get ahead of kind of wave of prepayments potentially?

It's more of the mortgage banking community for the most part. There was one that was strategic that was, what I would say, a fund. But in general, we haven't seen a ton of selling from the banks. In this environment, could that happen, the answer is yes, but we're really not sure. But a few different sellers, they've been more bulky in nature. And again, part of our theory is to acquire more assets, where it's not only just the return of the MSR asset, but it's really growing our customer base. And having 3.5 billion, 4 billion, 5 billion customers and then what we can do with them for other products or other services and where the ancillary revenue.

Okay. Understood. My second question, can you just maybe clarify what the assumptions that are currently reflected in the MSR valuation are? I assume there's -- that does not reflect any potential rate cut this week or any other time before the end of the year. I'm just wondering how these rate cuts could potentially impact the valuation going forward. What your expectations are? And then what you think CPRs could look like in August and September?

Yes. I think, first of all, when we look at buying any asset, we look at buying forward rates. We have to make assumptions. As I pointed out earlier, being a fixed income person forever, hard to believe where we are, but I do believe we're going to be in this rate environment for a long, long time, if I see to look at the global footprint and having 25% of the overall debt markets having negative yield. When we look at speeds, I think capacity is an issue. Speeds for the quarter, we're actually two CPRs slower than what we initially thought. Going forward, we do have increases in CPRs as we think about this, particularly as we go through July, August and September, once you get into the winter months or the late fall, you're going to have your seasonality where home buying should probably come off a little bit, not that the new home buying numbers have been that robust. So we expect speeds to increase. Speeds for the quarter were actually two CPRs slower than our model speeds. The way that we thought about it, I think capacity is an issue at this point where we are in the rate market for origination, and we see it in our own business, and that's something that we're working on. So we'll see.

Okay. Got it. And then G&A increased more significantly than gain on sale income this quarter. I would have thought maybe you would have gotten better operating leverage in a seasonally stronger quarter. Just wondering if there was some ramp-up with new lenders you brought on. Or in -- just in general, do you expect profitability at the mortgage bank to improve going forward?

Yes. I think we are seeing -- as we grow our origination at some of the agency products, the gain on sale will clearly be smaller than the gain on sale that you're going to see in the non-QM business. But overall, I'm not -- we'd have to -- I'd have to come back to you on the G&A numbers. I was looking at something this morning that somebody published that our operating expenses are up 70% or something year-over-year. That's -- we have a large operating business in Shellpoint and NewRez. That company will make $100 million to $150 million of EBITDA either this year or in the next couple of years. So we're thrilled about that. And that's fully loaded net-net. Then that will give us the ability to pivot around recapturing and work with our third-parties around ancillary and some of the servicing partners we have. So I'm not sure about the G&A. We'll come back to you on that. But net-net, we are -- that's been a great one for us.

Okay. And do you know what the mix of purchase versus refi at NewRez was this quarter? And what your expectations are for the back half of the year?

I think the refi market will continue to remain fairly robust. I think the couple of points to note on our stuff, give or take 70% of our portfolios-ish are legacy/more credit impaired. Let me just double check on the purchase of refi number, and I'll get back to you once we're done with all these questions.

Sure. Sure. And then just one more from me and I'll back in the queue. As I'm sure you saw late last week, Mike, the CFPB basically came out and said they're letting the QM patch expire in 2021. Just wondering what your thoughts were around this? If it comes as a surprise to you, if you think at all end up being the case? And if so, what opportunity that might bring for NewRez?

Yes. I think all of this stuff, assuming the current administration stays intact, I think all of these moves will likely be beneficial to our business model as we go forward in a sense as the government tries to step back from their footprint in the mortgage market. Whether it happens or not, I really don't know. I think all these things are very hard politically. I do think the current setup is working extremely well, particularly for the agencies, as they are able to shed credit risk and make money and provide quite frankly lower rates for homeowners. Getting back to your other question, refi purchase is about 50-50, and that was towards the end of Q2. July, it looks like it's about 60% refi, 40% purchase. One other point I want to make there is on the refi stuff, it's much easier for us to recapture, pay loan that's refinancing than a loan that is a new purchase as the homeowner decides to move somewhere else.

Stephen Laws with Raymond James.

I missed one part of your response to Tim's questions, so apologize if this is a repeat. But looks like the CFPB -- the draft rules going to let the QM patch expire in January 2021, shift about $150 billion give or take of non-QM loans into the private market. How big of an opportunity is that for you? What kind of market share of that do you think fits appropriately with the new residential focus?

Again, I think it will be a great opportunity I think for us from an origination perspective and servicing perspective. How big of an opportunity is? I don't know. And until all these rules kind of play out, it's very hard to guestimate. But I think, net-net, if the current administration stays in place, I do think there'll be very positive things that can come in common -- that could come out of some of the potential new rules and regulations that will benefit our thesis around our operating businesses.

Right. And Michael, looks like loans increased from about 12% to 16% of the portfolio. I know there's some marks here or there and other things that may shift that. But how large should we think about that growing given the recent acquisitions and investments and the things you're doing to focus on origination, recapture, but how big of a percentage should we think about that coming over the next couple of years?

I think loans themselves are seeing -- the banks have cleaned up a good chunk of their pipelines to have the agencies around what I would call nonperforming loans. Our ability to call loans is second to none. If you think about our call business, we have 100 billion-ish calls on the legacy mortgage market. That is an enormous amount of collateral that we could theoretically control if we could clean up the legacy mortgage market, thus the new relationship, for example, with the folks at auction.com would do a great job. Loan sales this year are down pretty substantially year-over-year. Our growth in loans we brought $1.6 billion I think of RPLs in the quarter. I did believe that the loan margin is probably the cheapest sector in the mortgage market that we currently focus on as well as some of the MSR stuff that we're doing. So I think it will grow. But keep in mind it will grow if we could call more details, but I think the pipeline of loans being sold is smaller today than it was a year ago.

Thanks for that color. And lastly, I forgot which page but you mentioned asset prices were elevated, I know one of the bullets the same slide you referred to patient growth. Are there any asset classes where you're -- you stopped investing due to what you view as the -- being fairly priced or even assets that you're liquidating? Do you think they are overvalued? I know part of that drops the call rights business in general. But are there any segments of your business that you seem much less excited about right now given where asset prices are?

Sure. So on the bond stuff -- on the bond portfolios, anything that's not accretive or core, I think, to our call strategy, we're evaluating today based on levered returns of call it 5% or 6% of whatever those numbers are. So there's the potential to rotate out of those assets. While saying that, I do think, if you look at what happened on high yield last week and if you look at what happened to investment-grade bonds, they continue to tighten on us on a nominal spread basis and do better. The mortgage market has lagged that tightening, and I do think asset prices will likely raise and spreads will get tighter across the board. Loan stuff is interesting. I think we continue to stay around the hoop on some of the MSR sales that will come out of some of the mortgage bankers. So in general, there's no giveaways. I think on the asset side, our strategy of acquiring MSRs is making sure they're fully hedged now. It's something that's really important to us because we think that if we could purchase them now from a return perspective, that will be -- should be accretive for shareholders and kind of where we are. Clearly, we've had -- we have some big gains in our MSR portfolio. We need to protect that as we go forward. We're in a different rate environment. So there is, again, no giveaways, nothing that cheap out there. Loans and bonds should do better, and we'll continue to focus on those on a go-forward basis.

Kevin Barker with Piper Jaffray.

Mike, you took some losses on derivatives on mortgage loans. I believe it looks like there was a small loss as well on the originated mortgage loans as well. Is there anything specific that stands out with this rate environment that caused maybe this derivative losses this quarter given we would expect probably gains this quarter given the movement in rates?

So we have, I pointed out, I think, at the end of last year, when we covered it, we're going to go significantly higher. We put on hedges versus our long positions in some of our bond and loan portfolios. And as some of those hedges kind of came to fruition, we've had some losses in our derivative portfolio. I don't think something like that is systemic as we go forward because we are running, what I would say, a little bit long from a DV01 in the market and protecting our assets. On the mortgage origination side, I'd have to get back to you regarding the losses versus -- I'm not sure, Kevin, what you're looking at. So I need to -- I'll go through with Nick and kind of our CFO who's at NewRez and just get back to you on that.

I believe that's a $30 million loss on mortgage loan origination derivatives. And a lot of the movement of rates and maybe even the unrealized losses on derivative instruments, which was $37 million, it would seem that those would go the other way, but we can follow up on this. And then...

Yes. Kevin, let me double check on that and get back to you on that.

Okay. And then the $1.6 billion purchase RPLs this quarter, you mentioned that it was attractive. But I mean the RPL and NPL purchasing has become -- there's a very little supply out there, and that market has been very competitive, especially over the last few years. Why make those investments now, given the competition in the market and what you're seeing just broadly around the RPL and NPL market?

One is, I think what we've learned and what we've seen with our servicing partners at Shellpoint and others that we could actually improve the performance of these loans that have been sitting whether it be with some of the agencies or some of the banks. And working closely with Shellpoint, I think I pointed out that I think 7% of one of those pools is actually from a performance standpoint has improved. So what we're seeing is that our underwriting -- we're surpassing our underwriting as it relates to performance by working with our different servicing partners, whether it be Shellpoint, Fay or others around that business. We're not going to buy every pool. I mean last week, Wells sold -- or two weeks ago, Wells sold a bunch of stuff. We didn't participate there. We've seen some significant gains in those portfolios based on its rate environment. I do think loans are the cheapest part of what we do for a living. And part of it is we have to separate ourself. We're not a trading desk. We're an investment business. And If we think stuff is going to outperform or do better and we're going to realize not only the returns on the actual asset but our servicers are going to be able to grow their ancillary revenue and make money around the servicing side, we'll continue to invest capital there. But again, there's just not that much supply there, and I don't think it will be that meaningful. And we're not going to chase anything up here. We've seen some of the assets that we purchased a couple of months ago were up 4, 5 points outperforming treasuries, outperforming mortgages, outperforming swaps. So we'll be prudent about how we deploy that capital.

Okay. And then moving on to Ditech. It's -- that business struggled for a long time. And you obviously are purchasing just the asset, not the liabilities. And there's different things as part of it. Could you just give us idea like why to make that purchase right now? And what do you think the pro forma earnings capacity could be coming out of Ditech? And how you can make that profitable given the company was not profitable for a long period of time?

Great question. So first the asset side, the side asset side, I think, the valuation of the assets where we currently are, we think they're fine. The only thing I want to point out on the MSR side is that those valuations are floating with the market. So to the extent that we get confirmed next week, the multiples on those assets will be extremely attractive to shareholders. So that's one. Two, from an operating standpoint, we -- the origination business in call center business has been very good for a number of years. I can't talk to their expenses and how those -- how they were run for the past number of years. Obviously, we have a lot of personal relationships going back many years with people that have run the companies, but the way that we think about it as follows: All of our origination -- one is the asset side is very attractive. Two, when we look at it from an origination standpoint, this will really -- we believe with their folks, we're going to be able to grow our origination business to become a $40-plus billion originators. And we think rates are going to be low for a long time. That's going to pay dividend because that is going to give us more profitability around the origination segment. It's going to give us more ability to focus and recapture on every MSR that we have in our book, particularly with some of the white label things that we're doing today. On the mortgage servicing side, we get operations in Arizona. We don't have anything out west. So -- and they have -- and the people -- quite frankly, the people at Ditech have been there for a number of years, and they've been through some tough times, two bankruptcies in three years is not a great way to live your life. So we think the talent pool there is terrific. The asset price is where we're going to get -- where we're going to acquire the assets are very good. The operations -- Jack Navarro runs our servicing business. He'll continue to lead that effort around all of the servicing. We'll pick up a couple of sites. So we think it's going to be really, really good for us. We're not paying a premium to book. And I can go on and on. I think from an earnings perspective, I pointed out when we did the Ditech -- the Shellpoint deal a year ago in July, I think fiscal 2018 earnings were about $30 million. This year, we hope to be something around $100 million. Those are good numbers. And I think with Ditech stuff, we -- and we're making investments as well. This is not like we did when I make money. We go to make investments for the future so we're able to continue to pay dividends and grow our business. So we're excited.

So as a stand-alone entity today, would you say it's profitable? Or do you feel like it needs to be integrated with the NRZ business system?

Ditech?

Yes.

Yes. They will be -- this is not -- we're not looking to -- this will be one company. It will be folded under the Shellpoint and NewRez company. The origination will be on NewRez. Shellpoint will be the third-party servicer. And then there'll be a servicing division called NewRez for the clean servicing. So it's all one. We're not running four different servicing companies here.

All what I'm saying is would that need to occur the integration with NewRez need to happen in order for it to ultimately be profitable? Or do you feel like it's profitable today?

No. We would not do this deal unless we integrate it now. I would tell you that we've been working closely with the Ditech folks with the anticipation of getting confirmed. There's a -- again, there's a lot of great people there. We're excited to work with them. We've identified leadership and management and all kinds of different things. So this will be integrated. If we get blessed next week, we're hoping for an 8/31 close and get on to business as usual.

Trevor Cranston with JMP Securities.

Question around recaptures this quarter. I think you gave the volume that you're able to do through Shellpoint. But I was wondering if you could provide some additional color around that in terms of what percentage of refi -- potential refis you were able to recapture this quarter. And how much room do you think there is to improve that going forward as the Shellpoint, NewRez platform continues to grow?

So here's what I was telling. Across the Board on all of our servicing, including our subservicing partners such as Cooper and others, recapture percentages on purchase are not great. We saw -- on the Ginnie Mae portfolios recapture percentage is actually pretty much in line with underwriting. I think on the conventional side, we underperformed across the Board, and this includes not only on the NewRez Shellpoint side, but also includes Cooper and some of the other folks out there. I think part is capacity, part is -- again, you asked a good question. On refis, it's much easier to recapture a refi than it is a purchase. So if you have 50-50 purchase refi, it's going to be harder to recapture some of the purchase folks. On the refi side, you should be able to do better. I think there is a ton of improvement that we could do as a company. And this is something that is the utmost focus on us, not just on the NewRez side but also working with our partners. Now that can include predictive modeling. We've hired a number of folks around that rather than waiting for the phone to ring. There's a lot of stuff as we work with our Shellpoint and NewRez folks that we think we can improve collectively together to give us better performance around recapture. I did point out that speeds were a little bit slower than we underwrote. So that offsets the kind of the underperformance, I would say, in recapture. But there is no sitting back for us and waiting for speeds to slow down and saying recapture percentages are appropriate. So we have -- we'll make a lot of investment in that area. 3.5 million customers, 4 million customers, whatever that number ends up being, we want to retain each and every one of them to the best of our ability, and that is got to be around our recapture businesses and offering other ancillary services and products to them.

Got it. Okay, that's helpful. And then a question about the Freddie Mac MSR note you issued this quarter. Can you talk a little bit about -- more about that in terms of how that compares to other structures you might have available in the private market? And how big of a source of financing you think the Freddie Mac program could potentially be for you guys going forward?

So most of our MSRs are financed now in the term market. The Freddie Mac MSR note is quite frankly very similar to the Fannie MSR notes that we've done. They're term in nature. They have very limited mark-to-market triggers on them. I think LTVs have to go up to something like 80% or 90% before you even trigger any LTV or kind of cash contribution on those parts of mark-to-market. So our goal ultimately would be to term out as much of our debt as we possibly could, and we'll continue to do that whether it be with Fannie notes. We don't do a ton in the Ginnie space, but we'll continue to focus on that. Cost of funds, relative to what you could finance in the banks is probably a three handle, and we'll continue to try to improve that. So if you think about -- one with LIBOR, I think it's 220 something now give or take. It's LIBOR plus 120 or something like that, 125 to 150. So rates have come down a lot. I think that's one of the benefits we're seeing also in this rally in the rate market is our true cost of financing across the board will likely go down on all of our asset classes.

Matthew Howlett with Nomura.

Just to follow on that, holistically, how do you think about the improvement in the cost of funds over the next year? Is it sort of call some of these old legacy deals and reintroduce, do some financing and then also the benefit of the Fed they do ease 100 bps?

Listen, Matt, I'm not sure we get a Fed easing off a 100 bps. But if that's going to happen, call me on the outside and let me know. I don't think they go 100 bps. I think they're going to go 25 this week and then see what happens. It's an opportunity for us to continue to lower cost of funds. We issued an advance deal this -- in July. I think the cost of funds was 270 something. We lowered our SpringCastle by 150 basis points. We have a couple of billion more of advance facilities to lower the cost of funds on our bond book. So we're working hard on -- if we can figure out better ways to term out that debt with lower cost of funds or even in some of the repo stuff that we currently do. So I think overall, we're going to see considerable savings which should add to income as we go forward.

Okay. You said the servicing events, that came down to 80 bps on the one that you've resecuritized?

Yes. That was that one deal. And there's more behind it. We're getting another deal ready to go now.

Got it. And then I was only going to ask the question on capital. You did the preferred which was your first one. I know in the old Newcastle, you used to issue preferred. But this is the first one. It looks like it went well. You're closing obviously hopefully the Ditech and some other servicing. How do you look at -- what's the capital position of the company looking at 3Q? You clearly said, you'd like to access more of the preferred, if you can. Just walk me through a little bit how you think about the capital in the back half of the year?

Great question. Just so we're clear on the Ditech acquisition, I think, Matt, equity on that deal if and when it happens is going to be about $200 million-ish. And I think that the $200 million could be staggered depending upon when we get approvals, whether it be on the Ginnie side versus the conventional side. So there's no need for capital on that deal. We currently have cash on our balance sheet. We did this retail preferred deal for a reason. Our stock is trading below book. So I don't anticipate seeing any equity issuance where we are currently trading right now. I think that if we come to market and want to raise capital, there's two ways to do that. One is by selling some assets that we think are not accretive to where we currently are trading in the marketplace. And we did a little bit of that even yesterday just to give you for example. And on the retail preferred stuff, we will likely get another deal queued up in the near term here and get ready to go. And that deal, whether it's a $150 million, $200 million or whatever these market wants to give us, I think the cost of funds on that could be around sevenhandle now. So if you think about this sevenhandle cost of funds selling assets, let's say, even on some of the legacy bonds that are nonaccretive at this point at something around 6% to 7%, it's a good source of capital for our shareholders.

Yes, you just did the last one 7.5%. You think it could go down to 7% as you kind of hit -- access that market more. We're seeing them as low as 6.5% from some of the bigger guys. But -- and the other part is, I mean, how big preferred be as part of -- I mean some of the rates are mid-teens in terms of total capital. I mean could you -- I mean you have a long ways to go. Just any thoughts around the pricing trends in overall where you want that to be as far as your capital structure?

Our current deal is trading above where it was. So that's a good thing for, I think, the folks that purchased those assets.

We're currently experiencing some technical difficulties. Your lines will be on musical until the conference begins. The presenters have reconnected.

Sorry, guys. Technical difficulties. Got to pay the bills. Matt?

Yes. Mike, just on the comment on how big do you want the preferred as part of the capital, maybe long-term?

I don't know. I mean, they are small deals, right? We have almost $7 billion of equity. And when you think about that, we did $155 million on small and nominal basis. The way that we look at all this, if it's a good source of capital for our shareholders and we can create more earnings and dividends, then we'll continue to do so. So they are not massive deals.

There are no further questions at this time. I would now like to turn the call back over to Michael Nierenberg for closing remarks.

Thanks, everyone, for dialing in. Appreciate the support. Any follow-up questions, don't hesitate to give us a call. Enjoy the rest of the summer, and we'll see when we see you. Thanks.

This concludes the New Residential Investment Corp. Second Quarter 2019 Earnings Call. We thank you for your participation. You may now disconnect.