Newcastle Investment Corp., the mortgage-asset buyer managed by Fortress Investment Group LLC, rose by the most this month after saying it will invest in mortgage-servicing rights with Nationstar Mortgage LLC.
The real-estate investment trust will pay $44 million to acquire a 65 percent interest in some of the revenue generated from servicing rights on $9.9 billion of mortgages guaranteed by Fannie Mae or Freddie Mac, according to a presentation posted yesterday on the New York-based company’s website. It will split 29 basis points of the 35 basis points in revenue from the contracts with Nationstar, which is owned by Fortress.
The investment represents the REIT’s first in “excess” servicing rights and will generate about a 20 percent “unleveraged return,” Newcastle said yesterday in a statement after the close of trading. Nationstar services more than $100 billion of home loans, growing as larger banks scale back in the business and Fannie Mae and Freddie Mac force transfers of contracts to specialists.
“Residential mortgage servicing is a large market and we currently see a strong pipeline of similar investments at very attractive returns,” Newcastle Chief Executive Officer Kenneth Riis said in the statement.
Newcastle gained 4.6 percent to $4.60 as of 1:45 p.m. in New York. Fortress fell 3.2 percent to $3.30.
Nationstar, which acquired the $9.9 billion of MSRs in September, filed for an initial public offering in May. It separately agreed this month to buy servicing rights on $18 billion of so-called reverse mortgages from Bank of America Corp., according to a Dec. 5 filing with the Securities and Exchange Commission. A basis point is 0.01 percentage point.