Mike Nierenberg Proposes Thinking Outside the Bank for your Investment Needs


The traditional roles of banks are continuing to evolve so it is imperative to think of new investment opportunities. In the past years, both investors and financial services clients have seen modifications in banking due to the 1999 Glass-Steagall Act and the crisis on credit in the year 2007, both influencing the radical changes.

One objective indicator is recent non-banking trends for mortgages. Residential mortgage share for traditional banks has fallen dramatically, with more than 50percent of the clients seeking a mortgage through different means.


The NRZ or the New Residential Team

Michael Nierenberg Bear Sterns and the New Residential team were the original pioneers of a system in response to the bank's changes. They established new investment opportunities that focused on residential mortgages because this is a massive market in the US, with about 63% o f homeowners needing this kind of debt. NRZ noted that investment opportunities exist in the dynamic mortgage market, but the mortgage industry pertaining to residential housing is shifting the way these mortgages are drafted, served, and owned.

In 2013, NRZ began to operate as a publicly-traded company with a thrust on real estate investment to address the surge in the complexity of the whole residential mortgage process. As an example, 80% of residential mortgages are not scrutinized. This particular complexity created a new investment opportunity where NRZ’s portfolio has incorporated into their product what is known as Real Mortgage-Backed Securities (RMBS).

There is also now a need for a more active and engaging style in managing portfolios, which can be rather time-consuming and requiring skills specialization to achieve long-term goals. There are two chattels in the NRZ portfolio called the RMBS and Mortgage Servicing Rights (MSR). These two require rigorous monitoring and the making of timely decisions.

Non-Bank Mortgage Origination

In addition, the NRZ has taken the initiative to acquire non-agency assets and has identified a specific and special chance in non-agency versions of the RMBs. They have also acquired “call rights” for $125 billion of mortgages that showcase more than 1/3 of all the non-agency mortgages. And last but not least, the NRZ has chosen to encompass many services from loan origination, titling services, appraisals, mortgage servicing, and real estate owned a management.

The New Residential Corporation is qualified for MSR ownership in all 50 states. They have been approved as a lender for the FHA or Federal Housing Authority. They also act as a servicer of Fannie May and Freddie Mac. These innovations are all thanks to the leadership of Mike Nierenberg as a well-known and respected figure in the residential mortgage industry for more than 20 years now.

Non-bank loan originators have taken the reigns, lessening the clients of banks in the mortgage sector. The increasing trends for non-bank mortgages have many factors such as borrowers desiring better choices, borrowers wanting more flexible options, banks are now providing more funds to non-mortgage areas, new capital reserve requirements that have been established by banks have effected changes across the board, and the mortgage industry consolidation where failing banks are taken over by other financial institutions.

New Residential is a pioneer in non-bank mortgage lending and investing. Their acquisition of Shellpoint last year has served to be a crucial foundation in the company’s objective in capturing the whole consumer chain. Mike Neirenberg, the board chairman, noted that they are a pioneer in the industry has paid out more than 2.4 billion dollars to their happy shareholders since 2013. Even the stock price of the company is at an all-time high.

Non-Bank Mortgage Servicing

Opportunity seeking business strategies have been put in place since the evolution of banking practices. As a consequence, there are many servicing companies that came about. Hereunder the different non-bank mortgage service companies:

Legal Challenges —Risk management is an ever-present factor in business. However, the scope of penalties imposed on many banks as a result of issues on mortgages should not be ignored even if they hit the bottom line.

Bank Failures —A lot of banks failed in their responsibilities with the healthier banks assuming their responsibilities. Because of this, there have been disruptions in processing and servicing of mortgages.

Tighter Profit Margins — Mortgage servicing depends on the high-volume flow of money to produce profits. But the high rates of loans that have not been paid for and foreclosures meant profits were down and ownership changes. NRZ found this angle attractive, making their sales with loan modifications and collections rather than foreclosures.


These are just a few issues in mortgage servicing that also touched on the positive aspects of sales of mortgage servicing rights, banks making fewer mortgage loans, and the complexity of mortgage servicing which has increased through the years. The mortgage industry influence and vision of Mike Nierenberg and New Residential Investment Corp has indeed taken investment outside the bank to greater heights.


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