Business Context and Reporting Period
This Form 8-K is filed by New Residential Investment Corp. (NRZ) on August 28, 2017. The filing reports the entry into a material definitive agreement with REALHome Services and Solutions, Inc. (RHSS), a subsidiary of Altisource Portfolio Solutions S.A. (Altisource). The agreement establishes a strategic partnership for real estate brokerage services related to NRZ's mortgage servicing right (MSR) portfolios.
Key Financial Metrics and Agreements
The filing does not provide specific revenue, profit, cash flow, or debt figures for the reporting period. Instead, it details the scope of the new agreement:
- Agreement Term: The Cooperative Brokerage Agreement extends through August 2025.
- Portfolio Scope: The agreement covers REO properties from two specific MSR portfolios:
- Ocwen Portfolio: Approximately $110 billion Unpaid Principal Balance (UPB) as of June 30, 2017.
- PHH Portfolio: Approximately $6 billion UPB as of June 30, 2017.
- Revenue Model: NRZ Brokerage will receive a referral commission for each REO property sold by RHSS on behalf of NRZ.
Material Changes and Strategic Developments
On August 28, 2017, NRZ entered into three key documents with Altisource entities:
- Cooperative Brokerage Agreement: RHSS will exclusively provide marketing and listing services for REO properties in the Covered Portfolios. This creates a direct relationship between the brokerages independent of NRZ's subservicer.
- Letter Agreement: Provides for NRZ to directly appoint RHSS to perform brokerage services if NRZ Brokerage does not refer the business, allowing the designated Altisource subsidiary to retain the seller's brokerage commission.
- Services Letter of Intent (LOI): Outlines a non-binding intent to negotiate a services agreement for fee-based services (e.g., REO management, liquidations, valuations) regarding the Ocwen Portfolio through August 31, 2025.
Outlook, Risks, and Contingencies
Management commentary and forward-looking statements highlight several risks and contingencies:
- Termination Rights: RHSS may terminate the Brokerage and Letter Agreements with 90 days' notice if a binding services agreement is not signed during the 30-day "Standstill Period" (extendable by another 30 days).
- Non-Binding Nature: The Services LOI is largely non-binding; there is no assurance a final services agreement will be reached.
- Transaction Risks: Risks include the satisfaction of closing conditions for the MSR acquisitions, third-party approvals, litigation, and potential delays in transferring portfolios.
- Vendor Approval: REO referrals for the PHH Portfolio are subject to PHH Corporation's approval of Altisource as a vendor.
Investor Verification Checklist
- Verify the status of the Ocwen and PHH MSR portfolio acquisitions and any required third-party approvals.
- Monitor the negotiation timeline for the binding Services Agreement within the 30-60 day Standstill Period.
- Confirm PHH Corporation's vendor approval status for Altisource regarding the PHH Portfolio.
- Review the specific terms of the referral commission structure in the Brokerage Agreement.
- Assess the potential impact of the 90-day termination clause if the Services Agreement is not finalized.