Newcastle To Purchase $1.7 Billion Residential Mortgage Portfolio

Newcastle Investment Corp. (NYSE: NCT - News) today executed an agreement to purchase a $1.7 billion portfolio of approximately 7,300 subprime residential mortgage loans which is expected to close over the next 30 days. We are currently conducting due diligence on the portfolio. Based upon the results of our due diligence, the final pool may be different than that described herein.

Kenneth M. Riis, Newcastle’s Chief Executive Officer and President commented “We are very excited about this transaction. Constrained liquidity and the re-pricing of credit risk in the subprime mortgage market have created a unique opportunity for us to purchase a portfolio of loans at an attractive price with early payment default protection. We have underwritten this investment to generate an attractive return on capital using conservative default and loss assumptions.”

The loans are secured by residential homes located throughout the U.S. Approximately 28% of the assets are located in California, 13% in Florida, 10% in New York and the remaining balance diversified throughout 45 states. Approximately 94% of the portfolio is secured by first liens and 92% of the assets are owner occupied. The weighted average coupon is 8.02%. 74% of the mortgage loans are adjustable rate and 26% are fixed rate. The majority of the adjustable rate mortgage loans are fixed for a period of 2 to 3 years and then adjust over LIBOR subject to periodic and lifetime interest rate caps. The current weighted average FICO score of the borrowers is 644.

The loans will be serviced by Nationstar Mortgage LLC, an affiliate of our manager.

The acquisition will initially be financed under a repurchase agreement. The Company expects to finance this investment on a long-term basis through the securitization markets in the upcoming months, following which we expect to have approximately $75 million of capital invested in this portfolio.