Earnings Call Transcript
Rithm Capital Corp. (RITM)
Earnings Call Transcript - RITM Q4 2021
Operator, Operator
Good day, and welcome to the New Residential Fourth Quarter and Full Year 2021 Earnings Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to the company representative. Please go ahead.
Unidentified Company Representative, Company Representative
Thank you, Jason, and good morning, everyone. I would like to thank you for joining us today for New Residential's Fourth Quarter 2021 Earnings Call. Joining me today are Michael Nierenberg, Chairman, CEO, and President of New Residential; and Nick Santoro, Chief Financial Officer of New Residential. Also with us today are Baron Silverstein, President, and Jordan Licht, Chief Operating Officer of NewRez/Caliber. Throughout the call, 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. I would like to point out that certain statements 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 earnings supplement regarding forward-looking statements and review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we will be discussing some non-GAAP financial measures during today's call. Reconciliations of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. And with that, I will turn the call over to Michael.
Michael Nierenberg, CEO
Thank you, everyone, for joining us this morning. 2021 was an excellent year for both our shareholders and our company as we pursued our strategy of building and acquiring top-notch operating companies capable of manufacturing assets for our balance sheet and creating a challenging-to-replicate investment portfolio. Our current positioning and the investment experience of our team should allow us to generate strong returns for shareholders moving forward. As interest rates rise, we will experience slower amortization of our mortgage servicing rights (MSR) portfolios. Our customer retention initiatives should enhance book value and mitigate any decline in origination earnings. We hold one of the largest MSR portfolios, and the value of MSRs tends to increase with rising interest rates. Currently, only 16% of our borrowers have an incentive to refinance, compared to nearly 50% in 2020. To illustrate, the 10-year treasury has increased around 45 basis points since year-end, alongside rising mortgage rates, contributing to an increase in our book value to approximately $11.75 to $12 per share. Our mortgage company NewRez performed very well this year, and the acquisition of Caliber in August has positioned us as a leading non-bank mortgage company. Our focus remains on being the best rather than the biggest, emphasizing collaborations with our government partners on affordable housing initiatives and servicing our 3.2 million customers with improved homeownership solutions. The previous two years in the mortgage origination business were exceptional and are unlikely to be repeated, with gain on margins expected to face pressure as rates rise. Many customers who desired to refinance have already done so in lower rate environments. In terms of our origination business, we have multiple channels and strategies in place that will allow us to swiftly adapt to the changing gain on sale environment. A prime example of this is our growth in the non-QM channel, where our year-over-year production rates have risen over 100%, and in the fourth quarter, we originated $700 million. We anticipate aiming for close to $1 billion in the first quarter of 2022. Regarding market share and gain on sale, we will not engage in a price war with competitors; our aim is not to increase market share but to focus on profitable areas and improve retention rates for our existing portfolios. I would also like to mention the strong retail purchase franchise resulting from the Caliber acquisition. Looking ahead, the purchase market will constitute a larger portion of the origination market, and we are well-positioned for that shift. The integration of the two organizations has been progressing smoothly, and we are optimistic about the contributions of our new Chief Digital Officer along with our current leadership team in enhancing our customers' digital experiences. We are beginning to see synergies from the merger, including considerable expense savings. In the fourth quarter, we completed the acquisition of Genesis Capital, and we are eager to collaborate with their team to scale that business. As a reminder, Genesis is a fix-and-flip lender, and the acquisition included $1.4 billion in short-duration assets at an approximate 8% coupon. Our investment portfolio will remain focused on MSRs, call rights, expanding our single-family rental business, and exploring other asset classes as increased bond market yields and volatility create favorable investment opportunities. Now, I will refer to the supplement posted online and start on Page 3, which provides an overview of New Residential. Since inception, we've distributed $3.9 billion in dividends, our book equity stands at $6.6 billion, and our market cap is around $5 billion. We maintain a balance sheet with approximately $40 billion in assets, making us the largest non-bank owner of MSRs and among the top five non-bank mortgage originators and servicers. Over the past three years, we've acquired complementary businesses in the mortgage sector, including title, appraisal, and field services, which have driven our earnings higher. On Page 4, our financial highlights for the fourth quarter show a GAAP net income of $160 million or $0.33 per diluted share, and core earnings of $191.9 million or $0.40 per diluted share, with a common stock dividend of $0.25, yielding 9.3%. Cash and liquidity were approximately $1.4 billion at year-end and now sit at about $1.3 billion. Our book value reached $11.44 at the end of December, up from $11.35, and I mentioned earlier that it is now estimated at around $11.75 to $12. In 2021, the acquisition of Caliber significantly transformed our mortgage business, which closed in August. Additionally, we completed almost $4 billion in securitization during the year. For shareholders, we achieved a return of 17%, and our full-year core earnings stood at $1.48. We also engaged in capital formation efforts, including common and preferred stock offerings. Within our mortgage operations, we originated loans totaling $178 billion, operating a servicing portfolio of $630 billion that includes loans serviced by our own company and others like Mr. Cooper, LoanCare, and Ocwen. Our journey began in 2013 with a focus on MSR asset ownership. As the first to gain REIT status from the IRS, we have matured from a small asset manager into a robust investment firm with complementary operating companies, and we take pride in our growth trajectory. On Page 7, our business highlights indicate that we maintain a $630 billion MSR portfolio. With the current 10-year note peaking around 195 basis points, we expect to see further improvements in the market value of our MSR portfolio. Our current dividend is $0.25, and we've successfully closed the Genesis acquisition. Notably, 99% of our non-agency portfolio is insulated from daily mark-to-market evaluations. Regarding cash and liquidity, we currently hold $1.3 billion, marginally down from $1.4 billion at year-end, and our call right business remains strong. Page 8 presents an overview of our company, including the mortgage originations and services we provide through Genesis Capital, which serves as a significant lender in the real estate market for construction and fix-and-flip projects. At present, our non-agency security portfolio is minimal aside from risk retention, alongside an array of loans associated with our origination efforts. Concerning market conditions, we anticipate the Federal Reserve will conduct between five and seven interest rate hikes in 2022, with the 10-year note likely to rise as the easing of financial conditions diminishes, including reduced purchases of mortgages and treasuries. Regarding origination, our aim is to prioritize servicing our customers and ensuring profitability rather than merely increasing loan volumes, which we expect could decline. Our portfolio will balance out anticipated drops in earnings in the origination sector. In the non-agency area, our origination has seen notable growth, with non-QM production reaching $700 million year-over-year in the fourth quarter, and we expect to approach $1 billion soon, while our prime jumbo lending continues to grow, with strong borrower health reflected in delinquency trends. We have strategies in place to create various asset pools for our balance sheet and for the market. In the agency origination sector, we estimate a total market of roughly $2.5 trillion for 2022, while the non-agency business is projected at about $600 billion, with an addressable market of approximately $500 billion in business-purpose lending. On Page 11, we emphasize our commitment to MSRs, as we recognize their value will increase with rising rates. Our operational businesses include Genesis Capital, Guardian Asset Management—our property preservation segment—and our title and insurance as well as appraisal services. As we move forward, NewRez and Caliber remain integral to our mortgage operations, with the emphasis on profitability over mere size. We are also focused on expanding in the commercial space this year as opportunities arise. Concerning fourth quarter performance, only 16% of our MSR portfolio is currently eligible for refinancing, compared to 29% at the previous quarter, down from nearly 50% in 2020. We expect MSR speeds and amortization rates to slow, and recent speed data have been lower than expected. Traditionally, January and February are slower months for mortgage origination; however, we anticipate a pick-up as the year progresses. On Page 15, we analyze the impact of changing 10-year treasury rates on amortization across our portfolios and the projected effects on the origination profit and loss. With a 100 basis point increase in rates, we anticipate a slowdown in amortization by around $175 million and a reduction in origination profit by approximately $125 million, netting a gain of around $50 million. For shareholders, this change equates to an expected increase of $0.11 in annual core earnings. Additionally, we expect our MSR multiples to grow as we move forward, projecting increases from $3.9 million to $4.4 million as rates rise, with potential for even higher valuations. We will maintain our call right strategy as the delinquency trends improve, allowing us to continue acquiring more loans strategically. In our single-family rental strategy, we have approximately 2,700 homes, and initiated our first securitization this quarter, with total equity in this branch exceeding $100 million. We aim to advance this business prudently, and we plan on acquiring around 300 homes from Zillow in the forthcoming weeks, although this won't be publicly announced. We are dedicated to smart growth as we anticipate a slight decline in home prices. On the loan portfolio detailed in Page 18, our end-of-Q4 portfolio value reached $1.2 billion in executed buyouts, with $500 million on the NRZ side and $300 million in non-QM. These will either be redirected into the Ginnie Mae market or sold off through securitization. Our servicer advance balances are low, reflecting robust homeowner financial conditions. Regarding interest rates and our financing, we enjoy very low costs of capital. Now, I will hand it over to Baron, who will discuss the highlights of the mortgage company, followed by Jordan on the next segment.
Jordan Licht, COO
Thank you, Michael. This is Jordan. As Michael mentioned, the integration of NewRez and Caliber is well underway as we continue to combine our origination platform, technology, service, and leadership. If you look through the fourth quarter, we've realized approximately $90 million of our target synergies as a result of actions taken in '21. These synergies include personnel reductions, reduced cost of funds, vendor consolidation, as well as increased efficiencies due to alignment and best practices. We expect to achieve an additional $45 million to $60 million of synergies in 2022 to complete our origination platform consolidation, removal of duplicate technology systems, and finalization of our servicing strategy. Once completed, our full year 2022 target run rate synergy is expected to be between $175 million to $200 million. As Michael mentioned, there's other exciting news, we hired a new Chief Digital Officer, and she will help us drive digital innovation, user experience, our customer experience, and increase engagement across our customer production and servicing channels. We've kicked off the year with both companies aligned with a single vision of helping our customers and homeowners. I'll now turn it to Baron.
Baron Silverstein, President
Thanks, Jordan, and good morning. Turning to Slide 21. The origination division ended the second quarter with $101 million of pretax income, funded volume of $38.1 billion, which is a decline of 43% and 14%, respectively, quarter-over-quarter. The biggest impact on PTI was the pressure on gain on sale margins, which had an 18 basis points drop quarter-over-quarter. And as I look at each one of the businesses, for our direct-to-consumer business, our margins increased approximately 6 basis points even with the reduction of funded volume, which was a 17% reduction over those two quarters. We've also seen a 14% pickup in locked volume in January and a flattening of margins when comparing December to January of 2022. For our retail and JV channels, our margins decreased approximately 23 basis points with the reduction in funded volume of 14% quarter-over-quarter. While we expect further competitive pressure within our retail channels, our platforms allow us to take advantage of the expected growth in the purchase market to come. For our third-party wholesale and correspondent channels, margins decreased 17 basis points and 13 basis points, respectively. However, while the higher interest rate environment presents headwinds for our origination business, our balanced business strategy provides us a competitive advantage over other mono-line competitors. As Michael previously mentioned, we intend on managing our business to focus on profitability, a disciplined approach to rightsizing the cost basis. Our plans include concentrating on our higher-margin channels, retail and direct-to-consumer, which was 42% of our funded volume in the fourth quarter. We're also looking to expand our partnership business through our joint venture platform. We're going to adjust our lower-margin channels towards higher-margin products, including non-agency and non-QM products. We're going to remain opportunistic on MSR origination and acquisition, and on the expense side, our overall expenses decreased approximately 13% quarter-over-quarter. A portion of which are synergies that Jordan talked about, but this also includes additional savings as we reduce our origination capacity based upon the current market environment. Our plan for the first quarter to stay focused on the efficient integration of both companies, readjusting origination volumes based upon profitability and being vigilant on reducing costs. Turning to Slide 22. And we've said this for the past few quarters, but our extensive presence in our distributed retail and JV business plus our direct-to-consumer channel that's coupled with 3.2 million homeowners in our MSR portfolio allows us to take advantage and grow market share in the forecasted growth in the purchase market in 2022. It's difficult to replicate these models and these models differentiate us from the competition. We've also fully rolled out our Smart Series programs, which previously was referred to as non-QM even though approximately 50% of our portfolio has been to qualified self-employed consumers. Michael talked about this. We've seen our lock volume nearly triple quarter-over-quarter. And in January alone, lock volume was 50% of everything we did in the fourth quarter. We continue to see growth in our Smart Series programs as approximately 75% of these purchases have been to purchase customers. And to date, only 10% of our sales force has participated so far. It is with our partnership with NRZ coupled with our ability to continue to roll out new products that will continue to drive growth in our origination business. And as with these products, can we further expand on our relationships, our existing relationships and build new relationships through our retail, wholesale, and correspondent programs. Turning to Slide 23. And Michael talked about the size of our NRZ portfolio, but I just want to talk about two different things here. The first is, given our focus on special servicing, we increased our subservicing portfolio by approximately 5% quarter-over-quarter, and our expectation is that we can capture additional share as the market dynamics change in 2022. The second point is we've announced a new head of servicing for both the Caliber and NewRez servicing platforms that will allow us to finalize our servicing strategies and align on best practices. Promoting chain and run servicing will assure our core focus of helping homeowners stay in their home, third-party subservicing clients, and continue to grow and build our servicing portfolio. On the last slide, Slide 24, talking about recapture. On the top right, you'll see that our recapture performance remains strong quarter-over-quarter. In the bottom two charts, you see our recapture performance where we have previously originated a loan and our ability to recapture the customer is much stronger, whether through purchase recapture or refinance recapture. So as we continue to mature in our relationships with our homeowners, we'll be able to take a higher share of opportunities, whether offering additional products or services, including recapture in the future. Even in a higher interest rate market, our ability to offer customers the ability to purchase a new home, provide cash-out refinances, business-purpose loan alternatives through Genesis, and other home equity solutions will provide for ongoing fuel in our direct-to-consumer channel. On that, Michael, back to you.
Michael Nierenberg, CEO
Thanks, Baron. Thanks, Jordan. We'll finish our supplement and then move on to Q&A. Page 25 discusses our operating companies. I won't read these off, but we have a comprehensive financial services company. When considering the complementary businesses tied to our mortgage company, Page 26 illustrates how we view ourselves. First, we see ourselves as an investment manager. We have a very strong balance sheet with ample cash and liquidity. The MSR portfolio in this rate environment is quite frankly AGM. It was challenging in 2020 when we did a lot of origination, but it is genuinely AGM today, and we anticipate it will yield very good returns moving forward. With that, I’ll turn it back to the operator for Q&A. Thank you.
Operator, Operator
We will now begin the question-and-answer session. Our first question comes from Bose George from KBW. Please go ahead.
Bose George, Analyst
Actually, first question just on gain on sale margins. You guys noted that in 1Q, you've seen a flattening, but you could see more pressure in retail going forward. Can you just give us some color on how much pressure you think you could see just how you think things will play out this year?
Baron Silverstein, President
Yes. In one month, we observed a flattening in our direct-to-consumer channel. Month-over-month, we are experiencing pressure across all channels regarding margins. This is a result of overcapacity and reduced production in the marketplace. Michael has communicated clearly, and we are shifting our origination business to emphasize core profitability. Within our retail, joint venture, and direct-to-consumer channels, we still maintain attractive margins. However, our third-party channels are facing additional pressure. We will remain focused on profitability and will be selective about opportunities in those channels as margins continue to tighten.
Michael Nierenberg, CEO
Bose, to add to that, when I mention origination, whether it's one loan or ten, take a step back to consider our business. I previously highlighted our $630 billion MSR portfolio. Following Baron’s point, on the wholesale and correspondent side, there will always be increased competition, especially since United Wholesale and Rocket are significant players in wholesale. I want to emphasize that if we can create MSRs, even without a substantial gain on sale, we will still originate that loan. We are currently pleased with MSR multiples and values, particularly in the Ginnie space. If we could originate $100 billion in the wholesale and correspondent channel, we would consider it, despite the overall production market being smaller. This could potentially lead us to acquire a Ginnie originator to enhance our Ginnie presence. As margins tighten due to the winter months, production will naturally decline, and we're also facing the highest 10-year rates since December 2019. However, once the market stabilizes in the spring, I anticipate a strong purchase market. Our retail and DTC divisions will thrive, and our origination business will perform well. We aim to be cautious in our approach to profitability and avoid simply originating loans without valuing the MSR appropriately.
Bose George, Analyst
Okay. That's very helpful. I have a question about the consolidation of servicing on one platform. What is the timeline for that? Is the plan still to move it to Caliber's MSP platform?
Baron Silverstein, President
Yes, we continue to evaluate it, Bose, and we have not made a final decision as to where we're headed. The change in the servicing leadership for us was the first step in the context of us evaluating which servicing platform we will end up operating on. And the other important fact for us is making sure that we're basically servicing the loans based on best practices to help our homeowners. That was really a critical fact for us in making sure that our leadership is aligned.
Operator, Operator
The next question comes from Kevin Barker from Piper Sandler. Please go ahead.
Kevin Barker, Analyst
I just wanted to follow up, Michael. I just wanted to follow up on your comments around the tangible as the tangible book at $11.75 to $12? Or was that book value?
Michael Nierenberg, CEO
That's book value.
Kevin Barker, Analyst
Okay. Okay. And then does that include the dividend? And could you outline what's driving that as far as quantifying how much was MSR markup? And then how much of that was offset by maybe portfolio marks or fair value marks?
Nick Santoro, CFO
Sure, Kevin. So the range of $11.75 to $12 does include an estimate for the dividend, keeping it the same as prior to. And the pickup is primarily due to the increase in MSR marks. And it does follow the page that we have in the deck that references the basis point change and the subsequent increase in fair value.
Kevin Barker, Analyst
So just with the sensitivity that you outlined?
Michael Nierenberg, CEO
And Kevin, part two of your question, as we think about other potential marks, we're fully hedged across our business. We've had this bias. I think I've alluded to this maybe forever, but to higher rates in the market, and we're really starting to see that play out the way we're positioned, whether it be in our loan portfolios, having hedges or anything else I feel like we're extremely well protected and look at the increase in book value, I think that going forward, hopefully, we see more of that to the extent that we remain in this rate environment towards higher rates.
Kevin Barker, Analyst
So if you're fully hedged, shouldn't the mark be minimal or just incremental relative to your total equity? Or do you feel like you're still quite biased to higher rates, given the composition of the portfolio today?
Michael Nierenberg, CEO
We are very inclined towards higher rates. Honestly, if the market rallies significantly in the opposite direction, the origination business can easily switch gears and ramp up activities. Currently, we are definitely leaning towards higher rates. Our mortgage servicing rights portfolio is completely hedged across all our investments, so we feel secure.
Operator, Operator
The next question comes from Eric Hagan from BTIG. Please go ahead.
Eric Hagen, Analyst
Can you discuss how the capital allocation across the business might change with higher interest rates? Do you see the possibility of reallocating from the production side to other areas of the business as origination volume shifts and how the capital needs to support the MSR might develop along with that?
Michael Nierenberg, CEO
The answer to your first question is yes, there will be less capital in the origination business. However, we will strive for higher returns on equity in our overall business. If wholesale is not producing much on the agency side but is generating more on the non-QM and geo side, we will allocate more capital to those production channels within wholesale. Overall, you are likely to see an increase in capital allocation. We believe there will be opportunities to acquire some origination or smaller originators due to the current rate environment. We are looking into some good retail Ginnie producers, for example. Jordan, is there anything else you would like to add on that front?
Baron Silverstein, President
No, I believe that in the current market environment, there are smaller players who are looking to either cash in or exit.
Michael Nierenberg, CEO
Due to the margins from gains on sales and the fact that people are retaining their mortgage servicing rights, the options are either to sell themselves or to sell the MSRs. To answer your question, yes, we will allocate more resources to the MSR business. You can expect a shift of some capital from the origination business into the MSR business. Additionally, in our origination business, we haven't discussed this much, but we recently hired someone on the digital side and promoted another individual in technology who is performing excellently to help reduce origination costs. Together with Bob Johnson, who oversees our fulfillment, we aim to lower our production costs. This reduction will make us more competitive in highly competitive sectors, potentially allowing us to adopt a more aggressive approach. We remain focused on cutting costs, primarily through our technology initiatives and new leadership.
Eric Hagen, Analyst
That's really helpful. I think you noted you expect the Fed to go 5x to 7x a year. Any thoughts on how that could translate into spreads at the longer end of the yield curve?
Michael Nierenberg, CEO
We believe they will consider their reinvestment strategies regarding mortgages and treasuries. We had a productive discussion with one of our economic advisers yesterday, and the consensus is that they anticipate five rate hikes instead of seven. Additionally, there is speculation about a 50 basis point hike in March. However, I don't foresee them opting for a 50 basis point increase in March, as that would lead to uncertainty about future hikes, potentially unsettling the market. While my perspective might differ, I believe there's a consensus on this. I also expect long-term rates to rise. My colleague and I were reflecting on 2018 when we hedged some of our business at 3.27% on swaps for ten-year notes. Today, with the ten-year at 1.95% and inflation at unprecedented levels, the Fed's decision to stop buying mortgages and reduce its balance sheet suggests that long-term rates are likely to increase significantly. I genuinely feel that the market is underestimating where the ten-year note could be headed, as a 1.95% rate is still historically very low. While we may experience some bear market rallies, I maintain that long-term rates are historically low.
Eric Hagen, Analyst
And then one more on the portfolio construction since the end of the year. Have you guys done anything with the Agency MBS portfolio as a hedge for the MSR where that sits today?
Michael Nierenberg, CEO
Yes. When we acquired Caliber on the agency MSR side, there was a hedge in place against the MSR. We've removed that, so at this point, there is no hedge against the MSR.
Operator, Operator
The next question comes from Douglas Harter from Credit Suisse. Please go ahead.
Douglas Harter, Analyst
I would like to clarify the comments regarding the expense synergies. Does that include the update synergies, and are you planning to take any further actions? Or would those additional actions be separate from those synergies?
Baron Silverstein, President
Yes, the further actions are going to be on top of those synergies. We looked at synergies as specific to the eventual merger of both operating businesses. And we looked at further adjustments due to market conditions. It's just BAU expense cost reductions.
Douglas Harter, Analyst
So I guess when all said and done and kind of those expense reductions are done, and obviously, it does take time, I guess, how would you expect your cost per unit of production to compare to kind of where they were last year?
Baron Silverstein, President
I mean, as Michael just talked about as well with our initiatives in the context of the technology side, we believe our costs are going to be materially lower than where they are today. And the other really great vantage point that we had with the acquisition of Caliber was we were able to look at two different operating businesses and the mousetraps that they each had to effectively close mortgage loans. And then you saw the differences between the costs. And we've been able to take advantage of best practices within our fulfillment strategy to effectively have a plan to reduce costs obviously, that also takes some technology initiatives for us to basically ensure that we meet those objectives and goals, but that is what we're basically working towards.
Operator, Operator
The next question comes from Trevor Cranston from JMP Securities. Please go ahead.
Trevor Cranston, Analyst
Question on the non-QM side, you mentioned that you're expecting the quarterly volume to reach up to about $1 billion this quarter. As that number grows to potentially $1 billion plus per quarter, is the anticipation that you guys will have the appetite and capital availability to bring that on to NRG's balance sheet? Or is there going to be some mix expected between selling loans to third parties and keeping some for NRZ?
Michael Nierenberg, CEO
The mortgage company is focused on profitability, and NRZ shares that goal. At this time, we do not plan to sell non-QM loans in the marketplace. The NRZ team has collaborated closely with the mortgage company, and our unique corporate and capital structure sets us apart from others. Looking ahead, we aim to transform this into a multibillion-dollar annual origination business. Our team at Fortress NRZ and the mortgage company has extensive experience in the securitization markets, spanning over 30 years. I foresee continued growth and close collaboration between the mortgage company and the NRZ team.
Trevor Cranston, Analyst
Okay. Got it. That's helpful. And you mentioned briefly in the prepared comments that you guys were exploring the commercial space and could get involved there in 2022. Can you elaborate any on sort of what segment of the commercial market would be the most likely place for NRZ to potentially become involved?
Michael Nierenberg, CEO
We currently have some small investments, primarily in the commercial space through secured term loans. We are exploring opportunities with a strong group of conduit originators that we have been in talks with for some time. Additionally, we are considering redevelopment projects with established operators. Our approach is more strategic than merely hiring someone to analyze CMBS. As we reflect on the evolution of our business from being solely an MSR owner to now incorporating operating companies that enhance our overall business, we can use NewRez and Caliber as examples, especially regarding their recapture efforts. The recapture rates for refinancing are in the 60s for Caliber and in the mid-40s for NewRez, which significantly strengthens our MSR franchise. As we pursue initiatives in the commercial space, our focus will be on strategic growth moving forward, and we are optimistic that we can finalize an arrangement within the next quarter or possibly during this quarter.
Operator, Operator
Our next question comes from Giuliano Bologna from Compass Point. Please go ahead.
Giuliano Bologna, Analyst
I just want to touch on some of the sensitivities that you guys put out there on Slide 15. We look at that table, and one of the things I just want to kind of make sure I was thinking about correctly there was that as the amortization goes down, you're obviously increasing eligible pretax income. But on the origination side, you're reducing taxable income. Am I right to think about it from that perspective because there's roughly a 20-ish or 21% tax rate on the origination side, so the impact should actually be slightly greater than just the pretax income numbers that you have on the slide.
Michael Nierenberg, CEO
Yes, I think that's correct. I mean, obviously, there's a portion of the MSR, if you're not in the operating business, the MSR becomes an asset. So the answer is yes to your question.
Giuliano Bologna, Analyst
That sounds good. Then thinking about a follow-up on a question that came up earlier about capital allocation. You originated $17 billion more MSRs or more of how MSR you ran off in the quarter. And you're up, you obviously have some growth plans of some of the other assets. I'm just trying to think about how you think about capital allocation and capital needs to fund some of the growth in the balance sheet versus dialing up the dividend?
Michael Nierenberg, CEO
On the MSR side, there is significant capital within the mortgage company currently. We have enough capital to transition from the origination business to acquire MSRs, whether through the mortgage company or on the NRZ side. With $1.3 billion in cash and liquidity, we believe we are well-positioned. I've made it clear in previous earnings calls that we intend to maintain a substantial amount of capital, and it's not about investing every dollar solely for minimal gains per share. As we consider the dividend, it's primarily a decision for the Board. The company's run rate will be informed by our collective perspectives. It will be interesting to observe trends in the spring as we emerge from winter and assess the origination business, particularly regarding demand for mortgages and gain on sale. This will influence our future dividend strategy. It's important to note that compared to some peers, we are witnessing an increase in our book value due to our market position and future macro outlook. Overall, we hope to continue raising our book value, which should lead to a higher stock price. Given that rates are still low, I believe our equity remains undervalued. Whether we yield 8%, 10%, or 6% in dividends, our capital, earnings expectations, and book value forecasts position us well for the future. The discussion on dividends will remain a Board matter, and we will continue to assess as a group, but there’s nothing specific I can address at this moment.
Trevor Cranston, Analyst
That makes sense. And then just a quicker got kind of two-part question. I notice there's a segment shift; you guys dropped off the consumer loan segment from a reporting perspective. The segment side, and you've added mortgage loans receivable. I'm assuming the edition is moving consumer loans in other, and the mortgage loan receivables seems to be Genesis. I just want to make sure that's correct. And then when you think about Genesis, is there a sense of how much you can originate on the Genesis platform? And what kind of assets, and if the assets should resemble the portfolio that came over on the $1.5 billion?
Nicola Santoro, CFO
Correct, Giuliano. So the Genesis business is shown in the separate segment, and we did move the consumer segment given its size.
Michael Nierenberg, CEO
On the Genesis front, we are just getting started and collaborating as partners. The growth potential there appears to be quite substantial moving forward. It's worth noting that they were previously owned by Goldman Sachs, which has a different corporate structure than ours. We expect to enter the market with our securitization on the Genesis side in about two weeks. We have acquired $1.4 billion and plan to issue around $500 million in our initial securitization. We believe there are significant growth opportunities, and we are eager to develop more products for the home building sector or the fix-and-flip market. Consequently, we anticipate that this business will experience considerable growth over time.
Operator, Operator
There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Michael Nierenberg for any closing remarks.
Michael Nierenberg, CEO
Thanks for joining us this morning. I am very excited about our current position, including our investment portfolio and the leadership team in the mortgage company. I look forward to providing updates during this quarter and the next. Stay well, and have a great day. Thank you.
Operator, Operator
Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.