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Re: NRZ - the recent PRFrom the 10K on page 82: They owned nonagency RMBS with a face of $24.8 billion, amortized cost of $7.3 billion, carrying value of $7.9 billion and outstanding repo debt of $7.3 billion. Just doing some rough math 7.3/24.8 equates to a purchase price of 29.4, but that's just an average. So the sale price doesn't appear to be a loss, and it might even be a gain. The bigger issue that jumps out to me is the amount of leverage. $600mm equity on 7.9 billion. That's 13 times if my math is correct for NONAGENCY. 13 times would be excessive for agency in my experience following different mREITs. By comparison, they owned agencies of $11.5 billion with repo debt of 10.4, so leverage closer to 10. The spread on the Agencies was only 0.79%, so that explains the big bet on nonagencies. But the spread on the nonagencies was only 1.94%, so to generate double digit returns, they had to run big leverage on the only thing that had spread, but the problem was that the spread was very tight. With the economy doing fine and the Fed cutting rates, that might have seemed like a good bet, but it was a big bet. I am not an accountant or a mortgage trader so take everything for what it is worth. Others may have a better explanation or different view. |
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Msg # | Subject | Author | Recs | Date Posted |
3662 | Re: NRZ - the recent PR | Berner | 8 | 4/4/2020 2:03:37 PM |