New Residential Investment (NRZ) Q4 2020 Earnings Call Transcript

New Residential Investment (RITM 1.60%)
Q4 2020 Earnings Call
Feb 09, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the New Residential Investment Corp.'s fourth-quarter and full-year 2020 earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kaitlyn Mauritz, investor relations. Ms.

Mauritz, please go ahead.

Kaitlyn Mauritz -- Investor Relations

Great. Thank you, Anita, and good morning, everyone. I'd like to thank you for joining us today for the New Residential's fourth-quarter and full-year 2020 earnings call. Joining me here today are Michael Nierenberg, our chairman, CEO, and president; Nick Santoro, our chief financial officer; and a number of members of the NewRez management team, including Baron Silverstein, president of NewRez; Cathy Dondzila, CFO; Josh Capell, head of strategy; and Jack Navarro, president, and CEO of the servicing division of NewRez.

Throughout the call this morning, we are going to reference the earnings supplement that was posted to the New Residential website this morning. If you've not already done so, I encourage you to download the presentation now. Before I turn the call over to Michael, I'd 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'd encourage you to review the disclaimers in our press release and earnings supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we'll be discussing some non-GAAP financial measures during today's call. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings element. And with that, I'll turn the call over to Michael.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thanks, Kait. Good morning, everyone, and thanks for joining us. Obviously, a big team on the call this morning excited to take you through a little bit of last year and more importantly, how we think about the company going forward. Baron is going to take you through some of the presentation around the mortgage company.

And I'll kick it off by giving you some comments here. As we look back at last year, reflect on the very difficult period we had when the pandemic first hit, I'm proud of the efforts of our team, and I'm super excited for the future of our company. The steps we undertake while initially painful has put us in a great position to continue our march toward returning our earnings to pre-COVID levels. Our liquidity has never been stronger, our portfolios have never been better financed, our mortgage company, NewRez, is just hitting its strides and the future looks bright.

With rates plummeting to historic lows last year, our 2018 acquisition of NewRez, formerly known as Shellpoint Partners, put us in a position to consolidate our servicing and grow our origination business. This has helped to offset some of the amortization we have seen in our MSR portfolio and help to grow earnings for our company. From a macro view, we believe interest rates will rise, which should be great for our company. This will enable us to recover the lost value we have seen as a result of the faster speeds in our MSR portfolio over the past year or so.

As you think about slower speeds, that will result in more cash flow from our MSR portfolio, higher recapture rates. And the combination of those two should more than offset the likely decline you're going to see in mortgage origination. On the investment side, we have been very patient, focusing on maintaining larger amounts of cash than in the past as investment yields remain at lower levels. Our efforts to refinance our debt and lockdown financing last year reduced our cost of funding and reliance on repo financing.

It is our expectation that the majority of our MSR financing will be financed in the capital markets by the end of Q2. We will remain patient looking for opportunities to deploy capital where we see the appropriate risk return for our shareholders. On the mortgage company side, NewRez had a great year, driven by low rates, higher origination volumes, and large gain on sale margins. While we expect volumes to come off, we are very excited about our growth prospects in our DTC channels which should lead to increased market share, higher earnings in that channel, and better recapture rates for our MSR portfolio.

Just to frame the growth of our mortgage company, when we acquired the company in 2018, Shellpoint Partners originated $7 billion of mortgages, that owned MSRs of approximately $15 billion and made $30 million at the end of 2018. 2020, the company originated $62 billion of mortgages, ended the year with a servicing portfolio of approximately $300 billion and earnings of $930 million. Tremendous growth and I firmly believe we are only in the middle innings as it relates to our growth initiatives, which include technology upgrades, branding, and working on and focusing on our customer retention. On the servicing side, Jack Navarro and his team continue to do a great job, and our focus we'll be on working with homeowners who need assistance, helping them with different programs to enable them to better manage their lives and stay in their homes.

Finally, I firmly believe our company is in a great place as we enter 2020 and look forward to growing earnings, growing dividends, providing our shareholders with growth -- with the appropriate growth that they expect from us. I'll now refer to the supplement, which has been posted online. I'm going to begin with Page 2. And this is our typical highlight page.

So over the -- since the company was formed in 2013, we paid $3.5 billion in dividends. We have net equity today of $5.3 billion. Our shareholder return since inception has been 77%, and our market cap today is $4.1 billion. When you look at the diversified nature of our portfolio, between full and excess MSRs, servicer advances, loans, and securities in our services business, at the end of 2020, we had $23.5 billion in assets and we're the largest nonbank owner of MSRs.

Our origination and servicing business. On the origination side, 2020 volumes, $61.6 billion, pre-tax income in our origination business of $801 million, and we're a top 15 nonbank mortgage originator. In the servicing division, we ended the year at $297.8 billion of UPB. Our pre-tax income was $132.9 million, and we remain one of the top 10 nonbank mortgage servicers.

Page 3 results. Our GAAP net income for the quarter, $0.16 per diluted share. Clearly, that was affected by higher amortization that we saw in the quarter as it related to our MSR portfolio. Core earnings, $0.32 per diluted share or $137 million.

On the quarter, we raised our dividend 33% quarter-over-quarter stock dividend increase, 8% dividend yield, and shareholder return of 28% in the fourth quarter. We ended the year with $945 million of cash. Again, book equity of $5.3 billion, and our book value at the end of the quarter was $10.87. Just to frame it as I fast forward to where we are today, book value today is approximately $11.35 as a result of higher interest rates.

Page 4, just shows you the book value calculation. We tried to break it out to give you a little bit more detail. Obviously, you could see the dramatic impact we saw during the quarter on our cash flow from our MSR business, which affected us negatively as it resulted from higher prepayments. Page 5, we like to show this page.

This is the sum of the parts page. When we get into the Q&A, I'm sure we'll discuss a little bit around the mortgage company. But essentially, the way that we think about it, we have our investment portfolio, reported book value of $10.87. As we think about the implied book value and the true valuation of our mortgage company, what we tried to do is we took operating income and took a guestimate for 2021, where we had a range from $700 million of EBITDA to $800 million of EBITDA.

After tax, $5.25 to $600 million. We put PE multiples of anywhere from four to six, just to give you a range that relates to some of our friends and peers out there the way that they trade. Enterprise value between $2.1 billion and $3.6 billion. When you think about that from an off-balance sheet standpoint and an implied value, effectively, it creates value of anywhere from $3 to $6 a share above our reported book value.

Page 6, what do higher rates mean for New Residential? clearly, we believe that we are in a rate environment that we will see more spending from the new administration and an increase in rates. If you look at most expectations from different economists, they are forecasting the same thing. So what we try to do is show below on the bottom part of the page, book value as of Q4 $10.87. If you believe from the end of Q4, where the 10-year ended at 90 basis points, up 50 basis points to 1.4% 10-year treasury, we think the implied change in book value is going to be $0.90, up 100 basis points, we think it could be as much as $1.80.

Again, these are all estimates, but we related that -- we went back to look at historical performance, how we think about prepayments, how we think about interest rates, and we truly believe that we are in a great, great position to see increased values in our MSR business, higher earnings, and higher book value. As you look at Page 7, again, it's a similar page, we believe that core earnings could increase to $0.50 as we see interest rates go up between 50 and 75 basis points. And really, just to simplify it on this page, this is a result of slower amortization, lower earnings in our mortgage company. And the net result is we think we're going to get back to pre-COVID levels.

Page 8, recapture. I will say on the recapture side, our recapture rates on newer production have probably been lower than what we initially expected. I think everybody has different reporting metrics as it relates to how folks report, recapture. If you look to the left side of the page, what we tried to do is break it out a little bit differently for you this quarter and show you the different buckets, how we think about recapture from a refinancing perspective.

Overall, 22% on the NewRez organization -- on the NewRez-originated product, 32%; and on a retail-originated product, 58%. So clearly, when you think about our desire to grow our DTC channels, have more customer retention, that is going to help drive, one, higher earnings; but two, more importantly, keeping our customers from a retention perspective and slowing down amortization. On the bottom part of the page -- on the bottom left, you can see recapture improvement provides upside for our portfolio. A 5% change in recapture rate at 4.2% to our change in what we believe our market value will be.

And then conversely, you can see on the other side, a 5% lower recapture rate will lead to a decrease in 4.2%. How are we going to do that? Have a look at the right side of the page. One is we're very focused on our brand. We're working on brand awareness.

And again, this goes back to our customer retention. Operating capacity, that's something that we'll get into on the Q&A side. We continue to add employees to certain divisions, which will help us fund loans quicker and get loans from a funding capacity to be able to drive more loans through the pipe. We've been pretty vocal about the Salesforce partnership that goes online at the end of the quarter.

That's going to be able to connect our origination and servicing business and really give us a single view of the borrower, which again, will help us recapture and other initiatives we have there. And then finally, around the technology side, we got a lot of work to do there, like I think every mortgage company does, and we look forward to kind of growing our technology business and being a world-class leader on that side of our operating business. As you look at Page 9, just real quick there. 2020 was a year spent, quite frankly, of locking down financing, rebuilding capital, and staying focused on shareholder returns.

Bottom right side of Page 9, you can see we did 17 securitizations during the year for $8 billion. We've financed most our term loan with senior unsecured debt. We did a lot of securitizations. We lowered our cost of funds.

And overall, a great job by the team. Page 10, as we talk about accomplishments and delivering results, one is when you look at our balance sheet today, we have $1.9 billion of unencumbered assets, of which $945 million is cash. We gained origination market share. NewRez was the largest fastest-growing mortgage originator from 2018 to 2020.

Keep in mind, we did start from a low bar. I pointed out earlier that we started with $7 billion in 2018. And this year, we ended with $61.6 billion. From a homeowner perspective, big focus of ours working with homeowners around forbearance plans and helping them navigate COVID-19.

The percentage of borrowers and forbearances decreased to 5.3%, which is down from 8.4% at the peak in 2020. Overall, when we think about financing, our daily mark-to-market exposure is just 2% of our investment portfolio. That's away from our agency mortgage business, which gets financed in the repo markets. I pointed out the securitizations.

And then finally, we raised our stock dividend three times in 2020 as we rebounded to from the dark days of March. I'll now going to flip to Page 12 and just talk quickly to our investment portfolio. As we think about the investment portfolio going forward, one of the areas that we've been focused on, we've added agency securities to offset some of our MSR portfolio. And also with the Fed then buying agency mortgages, we've seen a dramatic tightening in spread from the March days of last year to where we are today.

We've also added $321 million of early buyouts. That's an area that we continue to stay focused. One thing to point out on the Ginnie Mae space, our Ginnie Mae portfolio, as a percentage of our overall MSR portfolio, is generally on the smaller side. We have about $60 billion of Ginnie Maes versus a portfolio of about $550 billion total, which includes both full MSRs and excess MSRs.

During the quarter, we sold $195 million of residential loans. We sold $160 million of nonagency securities, mostly credit risk securities at lower yields than what we've seen in quite a long time. On the other side, again, I pointed out, we bought some agency securities. During the quarter, we bought $12 billion of MSRs from NewRez.

We call -- we began our call business again, we called $155 million of collateral during Q4. Post Q4, we called out $387 million of collateral and will be in the market with securitizations next month. As we look forward and think about additional opportunities, again, we expect call activity to pick up as advanced balances decline and delinquencies move a little bit lower. We do think there's going to be some opportunity for us in the EBO business.

We haven't been very large there. That's an area that we continue to focus on, particularly through our origination and servicing business. We'll continue to grow our MSR portfolio through originations with NewRez, our partner. We recently turned on in the mortgage company, our non-QM origination business, and we're focused on the SFR business now, and we'll talk to that in a little bit.

On the MSRs, I'm not going to beat a dead horse here. We truly believe that if you go back to 2020, we had fast amortization. We had writedowns in the overall value of MSRs. If you look at our overall mark in total, it's a little bit -- it's in and around a three multiple.

That was kind of unchanged in the fourth quarter. We do think in a normalized market, that will be in a four to five kind of multiple and again, I'll talk to that in a minute. On the loans and securities side, again, just to take you through Page 14 real quick. Net equity on the loans $708 million, which correlates to $3.1 billion.

100% of our business there has no daily mark-to-market weighted average financing for 20 months. It's either financed in the capital markets through securitizations or we have nonmark-to-market facilities with both banks and insurance companies. We'll continue to focus, as I pointed out, on the Ginnie Mae EBO space. On the right side of the page, nonagency residential securities.

Just to give you a sense, the larger portion of that $647 million relates to our risk retention bonds. Then we have a couple of other things there, including some MH residuals and a small amount of what we'll call forbearance bonds. Page 15, call rights. $80 billion of -- related to mortgage collateral.

Nobody has that as this population continues to clean up, and we do believe it will clean up because these loans were originated anywhere from 2003 to 2007. We believe the population is going to be more callable. While we represent today that $38 billion of that $80 billion is currently callable, that is by factor only. We can see advanced balances decline, and we also need to see delinquencies decline.

Servicer advances, Page 16. On the quarter, essentially unchanged. They're up from $3.4 billion to $3.6 billion. That's really related to the seasonal nature of property tax and escrow.

We expect that to continue to normalize and stay around the $3.4 billion number. During the quarter, we reduced our weighted average financing cost on advances to 1.34%, which is down from 2.17%. So a remarkable job and honestly, taking advantage of the front end of the yield curve where you have two-year treasury rates at 12 or 13 basis points. On our outstanding advance balances, we're financed with $3 billion of debt, of which $2 billion is in the capital markets, it's an $85 million LTV and all of our advanced financing is nonmark-to-market and nonrecourse.

Finally, on the investment portfolio, on the NRZ side, just a quick slide here. COVID related forbearances have continued to flatten. I pointed out earlier, peak of 8.4%, down to 5.3%. This is something that's really important to us as we think about homeowners, where we sit in the ecosystem, and how our servicers and special service will continue to work with homeowners to keep them in their homes.

I'll now flip to Page 19. And actually -- Baron, you want to take that?

Baron Silverstein -- President of NewRez

I thought you're ending with this one.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Fine. I'll take -- we'll talk a little bit about our origination and servicing business, and then I'll turn it over to Baron, who'll take you through a little bit more in detail. Q4 summary, $247.9 million of pre-tax income. Quarter over quarter, it's down 21% as volume is a little bit lower.

And gain on sale margins a little bit tighter during the quarter. We funded $23.9 billion of origination, which is up 32%. And from a pull-through and adjusted lock volume, $25.8 billion or up 18% in the quarter. As we look at 2020 summary, the origination business, pre-tax income, $801.6 million, up 447% year over year; funded origination of $61.6 billion, up 176% year over year; and our pull-through adjusted lock volume of $69.8 billion, which is up 178% year over year.

Again, our growth, as we think about this, the thing that I think is really important to focus on will continue to be as our growth in our DTC channels, which is Baron will talk to in a minute. As we look at Page 20, across every channel, direct-to-consumer, up 25% quarter over quarter or 169% year over year. Wholesale, up 18% quarter over quarter or 57% year over year. Our joint venture business, which is an origination channel that we work on through different real estate brokers, up 2% quarter over quarter, 93% year over year.

And then finally, our correspondent business up 40% and up 133% year over year. I pointed out in my opening remarks, I think that we're in the early to middle innings for this company, and I firmly believe that and thrilled with our management team, who I think are going to lead us to new heights there. On the servicing side, Q4 servicing pre-tax income, $47.8 million, up 58% quarter over quarter. Keep in mind, we did transfer a lot of servicing into the company from some of our other third-party servicers, continue to consolidate our servicing counterparties, bring servicing back in-house, and try to increase our recapture percentages as it relates to them.

Ended the year again, $297.8 billion of UPB, up 4% quarter over quarter. From a customer perspective, 1.7 million customers served, up 5% quarter over quarter. And again, we estimate that at the end of Q1, our servicing portfolio will be, give or take, about $300 billion. I'm now going to turn over the rest of the presentation to Baron, and then we'll open up the call to Q&A.

Baron Silverstein -- President of NewRez

All right. Thanks, Mike. Good morning, everybody. On the next few slides, I wanted to just provide a brief overview of what makes NewRez different.

A lot of news about mortgage companies in the market of late and I thought it would be helpful to differentiate NewRez from the pack. I just -- I felt it appropriate to say a big differentiator for us is, of course, our parent company, NRZ, and a relationship with NRZ is a critical part of our strength, including capital, market knowledge, visibility, and a core foundation of the mortgage industry, and I cannot stress enough the importance of this partnership. So just turning to Slide 23 is just a quick summary overall of how we -- our plan to position our operating platform for the future, including profitability and scale, market share growth, recapture that Michael has talked quite a bit about, nonagency products and, of course, our special servicing strength. Moving to Slide 24.

Two or three years ago, you weren't really hearing about NewRez. But since that time, we've established ourselves as a significant competitor in the origination and servicing market with growing profitability, origination footprint, servicing portfolio, customer base, and market share. This is also a good reminder that our platform originated $7 billion in 2018. So you can really see the impact of the acquisition of the Ditech assets and the importance of the partnership with NRZ and the MSR portfolio.

We may be the new guy in town, we still have a lot of work to do, but we're a well-rounded diversified mortgage platform and a lot of room to grow. Turning to Slide 25. Just wanted to highlight the market share growth as that's agnostic to market conditions as all mortgage companies have grown originations and production and profitability in 2020. We've demonstrated our ability to successfully grow not only our origination volumes but also our market share.

And as Michael said earlier, our focus is to continuing to capture more market share. We believe we can do that across our platform and across our channels. At the end of 2020, our market share was approximately 1.7% with two-year growth of approximately 130 basis points that we picked up. Small changes in market share can have a big impact on overall profitability, and that's what we're playing for.

We also have one of the largest servicing portfolios with approximately 1.7 million homeowners that we want to retain as customers of NewRez. As we continue to build out our brand and get better at recapture, the plan is to execute on that goal. Turning to Slide 26. As Michael previously discussed, MSR valuations will benefit as interest rates rise.

However, we believe our platform is well positioned to perform across different rate environments. From a historical perspective, as can be seen on the left side of the slide, our multichannel origination strategy allows us to position our focus to either refinance or purchase market. In anticipation of higher rates, we have a plan to position our channel to take advantage of the changing markets. The direct-to-consumer channel is a huge focus for NewRez as well as NRZ and a long-term opportunity for our company.

Within the next few months, we'll be launching our new brand strategy that will enhance brand awareness and recognition to further build customer loyalty. The focus being as we get better connecting to our consumers, our DTC platform will only continue to grow. We're also planning to restart a lead acquisition strategy to shift some of our capabilities if and when the refinance market slows down. Regarding our retail JV business, our joint venture business, we have 18 partnerships with different realtors and preferred partners across the country.

These partnerships are purchase focused and provides sticky origination volumes where we will continue to grow our capture rates. Our wholesale channel, which has historically been purchase-focused continues to grow with a record funding month in December by closing approximately $820 million, with a plan to expand our platform by adding new broker relationships and building out our direct-to-broker channel. In our correspondent loan channel, we'll continue to evaluate the market dynamics opportunistically by buying MSRs and adding to our customer base. It should be noted, we had record growth in the fourth quarter, purchasing $16 billion in mortgage loans, which grew our platform by 40% quarter over quarter as we continue to build out our capabilities and adding new customers.

Turning to Slide 27. We have proven the ability to originate nonagency products for borrowers that meet our credit and underwriting criteria. While we paused this production channel in March of last year, we relaunched our nonagency jumbo product in the third quarter and originated in excess of $150 million in the fourth quarter, which is already back to pre-crisis levels. Last month, we also announced the relaunch of our proprietary non-QM program, non-QM being a core competency for NewRez and the relaunch is very exciting for us.

But while we've done this before, we are cautiously entering back into originations to determine the extent of borrower demand, credit profiles, and pricing, but we expect momentum to pick up in the months to follow. Turning to Slide 28. We've talked a lot about origination, but it's important to recognize our incredible servicing division and in particular, our special servicer, our Shellpoint mortgage services. Jack Navarro and the entire servicing division do an outstanding job and are well recognized in the industry as one of the best special servicers in the business.

In addition to growth in the changing environment, we helped over 200,000 homeowners that were impacted by the COVID pandemic with support and solutions. The chart on the right side provides quarterly information for the aggregate number of homeowners that were impacted. Approximately 58% of all homeowners have had their forbearance and their hardship resolved, 28% of homeowners impacted still have their forbearance outstanding. And approximately 14% of homeowners impacted are an active loss mitigation where Shellpoint were help homeowners move into permit solutions such as repayment plans, deferments, and loan modifications.

Turning to Slide 29. We're extremely focused on our technology platform and are working toward new and innovative changes to make our company better. Some of the changes we're focused on including optimizing our customer journey by combining our lead generation and marketing to predictive analytics, which will help us drive our conversion rates. Changes to our fulfillment operations to improve employee efficiency, improve timelines, and reduced overall costs.

We've seen some of that change and improvement already with DTC fulfillment capacity, where we've had new funding milestones month after month for the past six months and our largest funding month ever in December of 2020, closing $1.6 billion in loans. Loan servicing has added borrower portals to assist consumers facing COVID hardships, but also connectivity between the origination team to ensure best customer outcomes, which include and relate to our partnership with Salesforce that will be launched by the end of the first quarter. And of course, our customer experience, which is critical to everything we do as a company, deliver solutions that produce exceptional customer satisfaction along the homeownership journey. Turning back to, Michael.

Thank you.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thanks, Baron. Great job. Operator, we'll now turn it back to you for some Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] The first question today comes from Kevin Barker with Piper Sandler. Please go ahead.

Kevin Barker -- Piper Sandler -- Analyst

Thank you. I appreciate all disclosure on NewRez.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Hi, Kevin.

Kevin Barker -- Piper Sandler -- Analyst

Hey, Michael. It's very helpful to see all the different channels and the progress that you guys made over the last couple of years, specifically within these different channels and the growth in the business. So to follow up on some of the disclosures on NewRez. Could you talk about where you stand on the filing of the S-1, given new confidential filed back in November? And where that stands as far as the separation of the two?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

So we are -- without getting too specific, we continue to evaluate what a total separation would mean to the company, meaning NRZ or -- and NewRez. So if we think that it will create more value for shareholders by separating the company and bringing it into the public markets. It's something that's absolutely on the table. As you've seen from some of the recent either attempts or IPOs that have come out with some of our friends and peers on the mortgage company side, some of them have gone OK, others have not gone as well.

But we continue -- we're there as we think about it, but we want to make sure when we show it or when we do it, that is really going to add value for shareholders and create, one, higher book value and then more importantly, as we think about higher earnings and higher dividends, et cetera. But it's on the table. It's just one of those things that we just want to make sure before we do it, that it's going to be something that's worth it for our shareholders. I will tell you that being part of the Fortress family, when you think about the amount of companies that we've taken public over the years, has been a tremendous amount of companies.

We have a lot of experience, obviously, in that side of the world as it relates to markets. I think when you look at NRZ today with, give or take $1 billion of cash, the mortgage company making north of $900 million. I think on the MSR side, we are poised to see slower amortization. Fourth quarter, for example, on the amortization side was $450 million.

As that comes down, I do think you're going to see lower production. So evaluating the MSR side with the origination side and how to think about that is something that we think we play around with every day. But we're essentially ready to go.

Kevin Barker -- Piper Sandler -- Analyst

OK. And then when you think about the separation, of the two companies, would you -- and part of disclosure was about $900 million of equity in the operating subsidiaries. Would you expect it to be a spin-off, where you would see the existing shareholders go with that $900 million in equity that's already capitalizing the operating business? Or would you expect new capital to be put in place at the operating companies in order to separate the two companies? And how should we think about that version?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

There's enough capital in the company to do -- to go either direction, to be honest. And again, I think our whole thing about bringing -- we have a public company. A lot of these mortgage companies don't have a public company. They don't have, what I would say, an uncle to be able to go out there and raise capital around different initiatives as we think about raising the equity or raising debt.

For us, the only reason that we would do this is to create separation and create more value for shareholders. It's there. And so I think to your question, there's enough capital in the company, so it could be a spin or we could just -- or if we wanted to raise capital separately, we could do that. But I think for now, just assume there's enough capital in the system, and it would likely at this point, it could be just a spend.

Kevin Barker -- Piper Sandler -- Analyst

All right. And then there was a -- you were also part of a economic SPAC that was created. Is there anything to preclude that SPAC from having some type of transaction with the operating subsidiaries given the structure that's in place today?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Yeah. Here's, I would tell you on the SPAC. The SPAC doesn't have anything really to do with NRZ. What it does do for us as a management team is it enables us to look at many different companies and think about ways to evaluate things that are in the financial services space.

So it makes us obviously a lot smarter. Clearly, we've been approached by a number of SPACs relating to taking NewRez public through a SPAC type vehicle. I would tell you that at this point, I would preclude the SPAC from taking this company public and continue to focus on either a spin or an IPO or keeping it as part of NewRez. And probably -- and keeping part of -- I'm sorry, as part of NRZ.

And then keeping us part of NRZ, there always likely be some relationship between the two companies, as Baron alluded to earlier.

Kevin Barker -- Piper Sandler -- Analyst

OK. That's all very helpful. Thank you. Thank you, Michael.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thanks, Kevin.

Operator

Our next question comes from Eric Hagen with BTIG. Please go ahead.

Eric Hagen -- BTIG -- Analyst

Hey, good morning, guys. A couple on the MSR and another on originations. Can you share how you're thinking about hedging the MSR with rates potentially on the move? And then separately, can you just give some color around how financing terms in the securitization market differ from term notes for MSR right now? Then on the origination side, do you feel like the origination business is comfortably staffed at this point? Are you guys looking to add some loan officers and underwriters here? And maybe you can go into a little bit more detail on where in the nonagency channel, you feel you can be more competitive, which cohorts of the market you have your eye on? I think -- I think I heard you mention single-family rental. That would be really helpful.

Thanks.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Sure. So on the first question, which was -- you gave us three questions.

Eric Hagen -- BTIG -- Analyst

Yeah. Hedging the MSR was my first question.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

On the hedging of the MSRs, what I would tell you is with long mortgages against our MSRs, we also have hedges against the mortgages that were long. So net-net, we are biased to a higher rate environment to realize a lot of value that we gave up in 2020. But there's a strong bias to, one, having some mortgage basis on to protect the MSR, but the other side is to protect against higher rates. Part two, why don't -- I'll take question three before question two and just talk about the nonagency opportunities in the SFR space.

When you look at the nonagency space where you think about the loan space, today, reperforming loans are trading 2.75% to 3% yields. It's something around 3% use that on an unlevered basis. For our cost of capital and the way that we think about risk return in the world, it probably doesn't work for us right now. So I don't see a lot of opportunity there.

Thus, when our comments of selling some loans and what I would call credit-related securities in Q4 and buying some agency mortgages, we think that is a huge pickup in IRR or return on equity for shareholders. As we look at the SFR space, clearly, that space is something that obviously started many years ago. Quite frankly, we were not early there. Today, we have, give or take, about I think it's 500 homes.

We expect to -- we're adding roughly 50 a week in that space. We think from a cap rate perspective, we're focused on different geographies, and our overall cap rate is about 5.75% unlevered with financing, it's about a 15% return. I did point out earlier, we're working with some insurance companies and other banks on what I would call term financing, so -- to not have more to market financing on that product. It's a hard business.

We're working with specific managers to collect rent, renovate homes. As you may or may not recall, we bought a company about two years ago, I think it is called Guardian, which is a property preservation business. They're a great partner of ours. That company has grown pretty dramatically, and we expect that to continue to grow.

So it's an area of focus. The other point on the nonagency side, I referenced that the mortgage company is starting to turn on non-QM. I would expect that to be a bigger part of our business as we look forward. But most importantly, we have to be patient with capital.

There is not a lot of yields in the market. We don't want to chase everything that's out there. We're going to continue to maintain higher levels of cash and think about ways that we could deploy capital in an accretive way. I did point out that we think MSRs here are very, very cheap.

We see -- from an unlevered perspective, we see that cash flow today, give or take, about 8% unlevered with financing something closer to 13% to 15%. So we'll continue to focus there. Obviously, we have a large portfolio there. Higher rates are going to be, I believe, good things for our company.

If conversely, on the other side, we do see a rate rally in the market, Baron and his team are extremely poised to continue to grow origination and grow earnings around that, which will hopefully offset a large amount of amortization. We'll continue to see. Baron, you want to talk a little bit about hiring and staffing?

Baron Silverstein -- President of NewRez

Yeah. I mean, we -- we are continuing to hire however, the flip side to that is we're currently punching above our weight, as I would look at it. I think we're -- our teams across all of our different channels and our servicing continue to outperform versus the amount of growth that we've had. So to the extent that we're looking at higher rate environments, I think we will end up being sized appropriately if that was to occur.

On top of that, as we continue to build out our technology, we'll continue to be more efficient in the processes that we do. However, we definitively still continue to hire employees, whether that's on the staff -- excuse me, on the sales side, or even on the fulfillment side.

Eric Hagen -- BTIG -- Analyst

Thanks. Very helpful color, appreciate it.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thanks, Eric.

Operator

Your next question comes from Doug Harter with Credit Suisse. Please go ahead.

Doug Harter -- Credit Suisse -- Analyst

Thanks. Michael, hoping you could put some context around the earnings you -- you put up projected earnings for 2021? How much of that rate increase that do you show in the subsequent slides is kind of baked into that forecast? Or are you kind of assuming more of a steady state in that forecast?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

No. I think -- first of all, good morning, Doug. I think as we look at the market, as we look at the macro environment around rates and we look at either MBA forecasts or we look at, as I alluded to earlier, the forecast from some of our different economists out in the world or the marketplace, we do think rates are going to rise. The numbers that we put out there we've grown -- I think 2019 EBITDA for the mortgage company was about $200 million.

2020 was $930 million. We think that number is going to come off just because you're going to see tighter margins and lower origination volumes. As you think about that, the growth for us, we're not -- and this is not disparaging. We just -- we're not where we want to be as it relates to in certain channels, more specifically in the DTC channel.

So when Baron talked about our ability to gain market share, that's going to hopefully get us to the numbers that we project in there. Now it is purely a projection, but we think if you look at $900-ish million for '20 and project something around $700 million to $800 million in '21, we feel that's really a doable thing. You got a $110 million to $115 million 10-year treasury, that's up from 90 basis points at the end of the year. I believe -- doing this -- been in this business for a long, long time, we could easily see a market where rates are up before you know it, 50 to 100 basis points as the government is going to continue to roll out, we think, bill after bill and really try to stimulate the economy and get us back to where full employment is next year.

You heard Yellen say, she thinks full employment could be next year. And you have the COVID vaccine. So this is -- I think our forecast is considering all factors and what we think and consulting with some of the different economists in the marketplace.

Doug Harter -- Credit Suisse -- Analyst

Thanks. And then thinking about the -- the dividend. So I guess how are you thinking about what the right kind of payout ratio is? Obviously, you kind of easily covering the dividend today and then that other slight rising rate environment if earnings can get back to $0.50. And I guess, how do you think about the different potential paths for the dividend in those scenarios?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

So, we raised our dividend three quarters in a row. Obviously, during March, which is a very, very difficult period for us. We cut our dividend from $0.50 as everybody knows. Maintaining $0.30 or $0.40 or $0.35, we want to grow our dividend.

So as the company continues to grow, and we truly believe that we're going to see higher core earnings, we'll get back to a normalized dividend policy. So we'll raise our dividend. So I -- I would hope as we grow earnings and rates rise -- if they do rise, I would expect you'll see higher dividends.

Doug Harter -- Credit Suisse -- Analyst

Great. Thank you.

Operator

The next question comes from Bose George with KBW. Please go ahead.

Bose George -- KBW -- Analyst

Guys, good morning. Just in response to an earlier question, you had noted the 8% unlevered yield on MSRs. Is that just on the GSE side? Or is it the same for Ginnie Mae? And then do you see anywhere else that you'd like to put money to work now? Or are MSRs kind of the best returns out there?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

So, it's -- your MSR multiples, the way that we view Ginnie versus conventional, our Ginnie multiples are lower than conventionals because, obviously, there's an element of credit risk in Ginnie Mae MSRs versus conventional. So I would assume that anything between 7% and 8% or 7%, 7.5%, and 8.5%. And again, these are all guesstimations based on where you think prepayments are going to come in. From an investment perspective, there's, quite frankly, both, there's not a lot of anything great out there to invest in other than in ourselves in our operating business, where the return on equity is terrific.

The MSR business, where we think, again, a higher rate environment, is going to lead to much higher earnings for our company. So that's where we're going to continue to stay focused. If there's a one-off thing that we're pretty good, being opportunistic investors. If there was something, for example, in the consumer space for us to consider, we would likely do that.

If there was something in a different space, we would consider that. But for now, core focus, operating business, our existing portfolios, growth in the SFR business, and growth in the -- our call business and then on the MSR business.

Bose George -- KBW -- Analyst

OK. Great. Thanks. That's helpful.

And then on Slide 7, again, where you showed that $0.50 run rate, which is helpful. When you look at the economic return, since that was a core earnings number, is the economic return do you think going to be it's fairly similar to that? Because I feel like most people are looking more at that than at core earnings?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Let me give you a little context as we think about -- let me just get to seven for a second. Yeah. As we think about our earnings and prepayments, Josh has put together a slide. When we think about going back to 2019, just to give you a sense, the 10-year treasury is 180, the 30-year mortgage rate was 3.7%, and amortization for us was 21 CPR.

You fast forward to Q4 of 2020, our amortization rate was double that at 40, the 10-year treasury was 90 basis points and the 30-year mortgage rate was 2.8%. So what I'm driving at is, as you think about this, on our MSRs, you're going to see lower amortization at some point. We think that is going to be a huge boon to our core earnings. And as a result, that's how we get to a place where we think dividends -- earnings will increase, dividends will increase, and we'll get back to that normalized run rate of $0.50.

If you go back to March of last year, during that two-week period of help for us. What happened was we sold a large -- think about the company, what's different then, essentially, very little to no credit risk because our financing stuff is locked down everywhere. We had -- our agency portfolio, we had a fair amount of agencies pre-COVID. The difference then is that the government back in March waited to buy agency mortgages.

So we ultimately sold them before the government bought them. But the big difference between then and now is we sold $6 billion of non-agency securities. And the mortgage company wasn't functioning anywhere near the way it is now. So as you fast forward, the difference in the company is we don't have that large portfolio of credit, the agency business is still kind of the same, but the mortgage company is clicking on all cylinders.

And we still have this large MSR portfolio. So as you think about that, you'll see lower amortization, higher rates. And from a mortgage rate perspective, we expect mortgage rates at some point to continue to creep up. And at some point, the government to take their foot off the pedal and stop buying all these mortgages because they got to fund everything else that they're -- from a fiscal standpoint that they're trying to do.

Bose George -- KBW -- Analyst

Yeah. No, that definitely makes sense. I guess what I was just trying to get at was if -- if that rate scenario plays out, could you -- could we see you making $2 a year while keeping your book value essentially flat to up at the same time?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Yeah. No, I think book value is going to go up. I pointed out book value today, which is up from the end of the year. Book value went from $10.87 to $11.35.

I think book value continues to increase, and earnings continue to increase. So the answer is yes and yes.

Bose George -- KBW -- Analyst

OK. That's great. Thanks. And then actually, going back to the earlier question, just about the separation of NRZ potentially.

Right now, the origination piece obviously provides essentially kind have a macro hedge to the servicing piece. So to the extent, there is a separation, would that kind of change the business model at the REIT where you essentially have to be more proactive on the hedging side?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

On the mortgage company today, the mortgage company currently hedges its own pipeline, which is separate from -- our NewRez hedges its own pipeline, which is separate from NRZ. As you go forward, if there was a separation, the company would function as its own company. Obviously, there would still be some relationship because NRZ would own the company essentially, even if it's in the public markets, because as we all know, when you take these companies public, typically, 10% of the equity or so gets sold into the public markets. So there'd still be that relationship or affiliation with each side, but it would likely be where origination would continue to flow on to the NewRez balance sheet unless we think there's a better way to do that, where NRZ obviously, does either an excess transaction with NewRez or some other sort of transaction that on a go-forward basis from a flow standpoint, depending upon how capital-light you make NewRez.

Bose George -- KBW -- Analyst

OK, great. Thanks.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thanks, Bose.

Operator

Your next question is from Stephen Laws with Raymond James. Please go ahead.

Stephen Laws -- Raymond James -- Analyst

Hi, good morning. Two follow-up questions to Doug Harter's questions earlier. First on -- on volumes. I think trying to reconcile Page 26 and Page 7.

You've got $18 billion of purchase volume, which was about 30%, so 70% refi. The Page 7, I think, on a longer term or Page 6, with refi is down 76%, potentially under certain rate scenarios by the MBA. Can you talk about which of the channels might be disproportionately impacted or more or less than others from a decline in refi activity? And kind of on a blended basis, how we should think about that impacting your gain on sale margin if we look out to, say, the end of next year, which I think was where -- where that slide -- Page 6, Page 7 was pointed?

Baron Silverstein -- President of NewRez

Well, I would say, if you focus on our direct-to-consumer channel, right, given the size of our servicing portfolio versus the size of our direct-to-consumer platform even in a rates up 50 scenario, we still have a significant number of consumers that we service that remain in the money from a refinance perspective. So we do believe that our runway with respect to our overall direct-to-consumer channel still is long. On top of that, we talk about growing our lead acquisition strategy. The other thought is that the market will continue to gradually increase from a rate perspective as opposed to -- we're looking at the MBA forecast or any of the economists forecast as to the gradual increase in rates is another view as to how we look at the performance of the direct-to-consumer channel overall.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Why don't you talk a little bit to the growth of what you've seen in the direct-to-consumer side? What you've done from quarter over quarter and what you expect Q1 to be?

Baron Silverstein -- President of NewRez

Right. So -- and the other thing I should just mention because you just briefly talked about margins. Certainly, margins have compressed over -- from the third quarter to the fourth quarter. That was the primary reason for the decline in earnings between the third quarter and the fourth quarter.

However, in January, we have seen a stabilization of margins from where they ended in December. That's specifically noted to our direct-to-consumer and our JV channels. Albeit our third-party channels do remain under competitive pressure across the market. However, we do believe that they're in context of where they were as to -- as to where they were a year ago.

The other thing is with respect to our growth overall, we continued -- and I mentioned this before, that we continue to fund more and more volume. In December alone, we funded $1.6 billion. That was our largest funding month for the direct-to-consumer channel. We actually funded more loans in January, and we're going to continue to see that progression within our direct-to-consumer by continuing to grow out that business for the remainder of the quarter and what we believe will at least be for the first half of 2021.

Stephen Laws -- Raymond James -- Analyst

Great. Thanks for the color on that. And as a follow-up to the rough run-rate earnings outlook of growing to back to $0.50 per share or getting there relative to the dividend payout. Can you give us a rough approximation of how much of that $0.50 would be in a taxable REIT subsidiary that to be retained? And maybe your thoughts on distribution levels of that $0.50 versus retaining some or as much as possible to simply grow book value by low to mid-single digits in addition to a dividend? And how you think about the retaining earnings versus dividend when you have the flexibility for income in the [Inaudible]?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

So a couple of questions there, Stephen. One is, as we think about $0.50. If we get to $0.50 and we could grow our dividend back to where we were, obviously, we're going to do that. Pre-COVID, just to throw a number to everybody.

I think early March, our core earnings we were projecting for the quarter was, I think, $0.61 or something like that. So when you think about the $0.50, what's in a taxable REIT subsidiary or what gets paid out? Keep in mind, as a REIT business, 90% of our taxable earnings get paid out to our shareholders. A good chunk of that will likely be in the form of excess which will be generated from our MSR portfolio, assuming that your origination gains continue to get compressed. So a lot of it's going to come from the $550 billion that we have in the MSR portfolio, which would not be taxable.

Obviously, the mortgage company stuff is taxable, but a lot of that sits in a TRS.

Stephen Laws -- Raymond James -- Analyst

Great. And lastly, you've covered -- you provided some details on a potential separation or spin or IPO of the entity. Can you talk about timing of that? Is that Q1 decision? Is it first half? Kind of what is the -- how do you think about the calendar as far as when that may occur, when you make a decision on the right course of action?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

I would say it's an everyday decision. And meaning like if we think it's going to work for shareholders, we're there. I did point out earlier that at Fortress, we've done a ton of IPOs and spins and raised capital in the public markets. So we do evaluate it every day, but it's not just to take a company public.

That's the one thing I want to make sure everybody understands. Because we have a public REIT that can raise capital and help grow the mortgage company, it's got to be something that's truly beneficial to shareholders to separate the two, which drives higher earnings and higher dividends for shareholders. Our main thing right now is to make sure that we grow earnings and we grow our dividends to get back to that place. That's why we alluded to the so-called $0.50 in core earnings.

And that correlates, obviously, to a dividend policy that's comparable to where we were pre-COVID.

Stephen Laws -- Raymond James -- Analyst

Great. Appreciate the color today, Michael and Baron. Take care.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thank you.

Operator

The next question comes from Giuliano Bologna with Compass Point. Please go ahead.

Giuliano Bologna -- Compass Point -- Analyst

Good morning, and thanks for taking my questions. Kind of going back to a similar topic, and I'll be as quick as possible here. When we think about the separation of the operating businesses, you'd likely separate the origination platform and the servicing business, potentially with some of the ancillary businesses. One of the big questions there is kind of how the relationship would work because you're originating loans generating MSRs at the originator, and you might be selling them or transferring a portion over to the REIT to put them in the REIT subsidiary.

Would you structure that as a kind of a forward flow agreement or right of first refusal? Because even in your disclosures, the language around the MSR is going from the origination segment to the servicers changed in the last couple of quarters where you're now describing it as a sale versus a transfer. I'm just trying to figure out how you -- how you could structure that?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

I think we can look at it a number of ways. I -- I did point out, if you did have a separate company, you could have a flow agreement between NewRez and NRZ and the REIT. You could also do it where the MSRs to stayed on the NewRez balance sheet and continue to grow it that way. And that company would then either sell them into the public markets or retain them on their balance sheet depending upon -- it could be depending upon capital and all -- and overall earnings.

So I think it really depends. I think you hit on something that we didn't discuss this morning -- yet on the call. When we think about our business at NRZ, I think the way that we'd like to articulate this company is, one, we have a great investment portfolio that has a large amount of MSRs that are going to benefit from higher rates. We have a loan and bond portfolio that is locked down in the -- from a financing perspective.

We have an agency mortgage position, which helps hedge our MSR portfolio. And then we have rate hedges against the agency MBS position just to protect us again in higher rates. When we think about the operating business, you have a great mortgage company in NewRez, where you have an origination business, a servicing business. You have a special servicer, which is under the brand of Shellpoint, which is really just as a division of the servicing business.

And the one area that we didn't discuss this morning is title and appraisal business. Really, the ancillary business lines that we really don't get any credit for. So if you turn around and you look, for example, at the title business and think about the amount of production we do and others do in the origination market, and you assume some kind of multiple on that business, you could argue that our title business and appraisal business have a value of something, even just running a number for '21 of $50 million, you could argue that that business is worth something between $400 million and $500 million that's not captured on our balance sheet. So the point is when you look at the ancillary businesses, there's no credit given for that.

The REIT trades, give or take, at something around book, so whether it be MSRs being sold between NRZ and NewRez, the capitalization of some of these ancillary businesses. I think there's a lot of different things that we have in our portfolio that are probably not as well understood as we'd like to articulate to the marketplace.

Giuliano Bologna -- Compass Point -- Analyst

I think you made a couple of great points on the -- on the ancillary service business, but then also on the NewRez side. I guess, what's probably helpful there is it sounds like there might be the option with the originator servicer or operating business to maintain retain MSRs on that side of the business? Because one of the big questions that comes up conceptually is that you have a business that, at the end of the third quarter, at least, had $750 million of book value and did $930 plus million of pre-tax income. So it's not really -- it shouldn't really be a book value business, but then the next question that always comes up is how do you deploy that capital? And it sounds like retaining more MSRs within that platform might be an option? And then are there any other options beyond that?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Yeah. I -- I just -- I think there's a lot of tools in our -- in our so-called tool chest. Our sole -- not our sole focus, but one of our sole focus is -- and I brought up the title stuff because we look at a lot of ancillary businesses that are out in the marketplace. And I think the valuations on some of these things, even if you think about a black knight that trades at 20 times EBITDA, not that we're a black knight by any means, I think there's a lot of value that's kind of to unleash out of our company as we continue to work toward doing that.

But really, the focus is how do we drive higher earnings and how do we drive higher dividends? That is the sole focus of what we do. And we need to get that -- we need to get back to the pre-COVID days, and that's what we're focused on. Clearly, we've made a lot of headway and progress over the course of the past nine months. It seems like we've been at this for 20 years, quite frankly.

But we want to get to a place where that dividend is back to where it was. So -- and if there's ways to do that by -- whether it be by spinning out NewRez, getting book value back to the higher levels, we think it's -- that will happen. So I'm really pumped about where we sit with the amount of cash and the potential for earnings growth in our company.

Giuliano Bologna -- Compass Point -- Analyst

That's great. I really appreciate it. I'm going to jump back in the queue.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thank you.

Operator

The next question comes from Henry Coffey with Wedbush. Please go ahead.

Henry Coffey -- Wedbush Securities -- Analyst

Yeah, good morning. Thank you for taking my questions. We're obviously talking about the same thing over and over. You -- you -- the -- if we're just focused on dividend and earnings, the combination of the mortgage company and the REIT is almost optimal because there's no debate about how to finance what, the REIT's there to do the financing, the mortgage company is there to do the origination and the servicing.

And if you could get all that working smoothly together, like you said, it gets us back to $0.50 a share. So the open issue then is just getting the appropriate valuation on each of your key pieces. And that leads to the question of what goes where? If we're building a -- if we're going to build a three-part model, where we look at the REIT, we look at the title and close and other ancillary businesses and services. And then we look at the originator servicer and maybe even the special servicer what goes where?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Good question. I think -- Henry, I think it really just comes down to how the -- the biggest part of that, obviously, is -- the two biggest parts are the portfolio composition, which assume at some point we migrate back toward book. And then the mortgage company, what kind of valuation you get on the mortgage company. And if we thought that the valuation of the mortgage company is such that we traded at six times at a multiple of book, clearly, that's something that we need to make sure that we capture for shareholders.

Now that doesn't mean if you did that, you couldn't have a flow agreement between NewRez and NRZ or NewRez and some other vehicle or NewRez and quite frankly, some other company. And I think it depends on truly the valuation of the mortgage company. I think early on, I commented about some of the recent IPOs that have happened from these different companies. And a lot of them, quite frankly, haven't traded as well as I think anybody probably would have hoped for.

But -- and the other thing is, as I related to some of the values that we've seen in the SPAC market, I think mortgage companies, in general, based on their earnings profile, are actually pretty cheap on a relative basis compared to some of these other companies that are projected to make money at some point down the road in the financial services space. So to me, it's -- and to us, it's really all about how we extract value for the mortgage company. If we can do that, we show the implied book value page of $14 to $18 a share. Couple that with higher interest rates, Baron pointed out, as we -- as we try to gain more traction in our direct-to-consumer business, MSR speed slow down, I think we're in a great place.

But I don't know that there's any easy answer now where you put Part A, B, or C. It's just a question of how we monetize that for investors, and can we get paid for that by creating three separate companies? We look at that --

Henry Coffey -- Wedbush Securities -- Analyst

Yeah. No, I would almost just argue is that the easier you can make it for us to understand the REIT. Maybe even show an average balance sheet the way the banks do that so we can just plug right into what that looks like? And then the better job we can do in projecting the earnings of just the mortgage business that might get you there. It's a tough road and it's an understatement to say that investor sentiment around mortgage companies is kind of negative right now.

On the --

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Yeah. I get it. I think what we did this quarter, and kudos to Kait and the team is really tried to show a full breakout of the mortgage company and how to think about the profitability in different channels. But obviously, the more we could do to articulate and -- and convey our story, we'll continue to do that.

Henry Coffey -- Wedbush Securities -- Analyst

Should we think about the mortgage company as owning MSRs or as more of a sub-servicer?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

I would -- I would assume it's going to own MSRs. The question is just what's the quantum of MSRs that it would own? If the mortgage company as a capital-light vehicle would trade better with just earnings from origination and servicing and selling the MSRs to another party, then we would do that. Again, it's all about value creation and how we create value, and I think we're pretty good at that. So now that we're kind of back at it after, what I would call, a very tough first and second quarter, I think that we're poised to really do good things and continue to extract value on where we see higher valuations of what I would call different types of companies in -- whether it be the public markets, the private markets, ancillary businesses, what have you.

Henry Coffey -- Wedbush Securities -- Analyst

No, thank you. And you are right, I mean the breakout in this deck is extremely helpful. So -- and probably represents an enormous amount of work. So, thank you.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thanks, Henry.

Operator

The next question comes from Jason Stewart with JonesTrading. Please go ahead.

Jason Stewart -- JonesTrading -- Analyst

Hey, good morning. I think we beat the horse on the mortgage company. So if I could switch back to the investment portfolio quickly. Could you talk about how much capital was allocated to agency and sort of what the net ROE was in the fourth quarter? If you could include it net of hedges, that would be helpful?

Baron Silverstein -- President of NewRez

The -- the total capital that's allocated to the agency book is approximately $600 million. We ended the quarter with $13 billion of market value in agencies.

Jason Stewart -- JonesTrading -- Analyst

And can you give an approximation of what the -- the ROE or contribution to earnings was in the fourth quarter?

Baron Silverstein -- President of NewRez

The -- the contribution to core earnings was approximately $50 million or $0.12 for the quarter.

Jason Stewart -- JonesTrading -- Analyst

OK. Thanks. And then Michael, I understand your point. As rates go up, we should see speeds go down.

Obviously, in the fourth quarter, I think 10-year rates were up 22 bps, and they're up 23 quarter to date so far this year. There are some other factors that are -- that are interplaying there, tighter primary secondary spreads and burn out, all those factors come together. Can you talk about how you think that plays out in terms of the MSR? And then maybe if you could just add one more point. For your number for book value today, was there any increase in the multiple on the MSR?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Yeah, there was a slight increase in the multiple on the MSR. We're still in the low threes, overall. What you're seeing on multiples, just to give you a sense, in the origination business now, you have what I would call conventional production in -- let's just use the correspondent channel. Multiples right now are give or take about four to four and a quarter.

On the Ginnie side, we see multiple something around three and a quarter-ish, three and a quarter to three and a half. So you've seen multiples go up from the lows fairly dramatically. As I pointed out, we ended 12/31 with an overall multiple on our book in the low threes. As we look at -- as we think about other competing factors, clearly, the government is buying pretty much all -- they buy, call it, $7 billion a week of -- of production.

You would think as we get to a more normalized world, at some point, that will stop or that will slow down. As that happens, you're going to see speeds come off. Your point on the primary secondary rate is a good one because we've seen mortgages tighten pretty dramatically, overall. You've seen rates back up, let's say, in the 10-year tenure from 90 to 115 basis points since the end of the year and Fannie two and a halves are unchanged in price.

So overall, tightening of spreads as a result of government buying, I think that will subside at some point. And again, you'll see slower amortization. So to your point, it's not only just a rate thing in the treasury market, but it's also, I think, sponsorship from the government.

Jason Stewart -- JonesTrading -- Analyst

OK. Thank you.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thank you.

Operator

The next question comes from Trevor Cranston with JMP Securities. Please go ahead.

Trevor Cranston -- JMP Securities -- Analyst

Great. Thanks. One more question on the DTC channel. One of the initiatives you guys brought up that you're working on is increasing the brand awareness.

And you put that in the context of improving recapture performance. But I was wondering as part of that effort to increase brand awareness, also going to be aimed at increasing nonportfolio originations in the DTC channel in the future, and how we should think about the long-term strategy around that?

Baron Silverstein -- President of NewRez

Yeah. The brand awareness actually is going to be for -- we look at it two ways, both internally for our company overall and our employees, but also externally and how our customers -- our existing customers and even new customers we'll see NewRez overall. We've already basically launched, at least initially launched our changes on our website. But that's going to include just what our overall customer strategy will be in the context of how we market, how we market to existing customers, how we evaluate where we think they may be looking either to buy a new home or even potentially evaluate what their refinance strategies are.

So the brand across the board is a multipronged strategy for us -- for NewRez. Obviously, it will impact the direct-to-consumer channel, but our plan is to take that brand and then bring that down to our joint venture partnerships as well as to expanding it into our wholesale channel when we launch our direct-to-broker initiative. So it's going to be across all three of our direct-to-consumer channels where we're talking directly to each of those consumers.

Trevor Cranston -- JMP Securities -- Analyst

Got it. OK. And then one follow-up on the question about the interplay between interest rates and MBS and MSR valuations. So just to clarify, when we look at Page 6 and you show the plus 50 and plus 100 basis point treasury rates.

Do you guys assume in that that mortgage rates would be up a similar amount? And I guess, kind of generally speaking, if we saw a 50 bps increase in treasuries, how much would you realistically expect mortgage rates to actually increase?

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Yeah. It's a great question. And I wish I had a crystal ball. I -- I do think, obviously, it's all related to where you see government support for the product.

And as I look back, even the pre-COVID days, there was no bid for mortgages as we all know in that two-week March period until the Fed came out or until the government came out and started -- announced they were going to start buying mortgages. So when we look at rates, we have to assume some backup in mortgage rates. I also think you're going to have a burnout factor. I mean, the mortgage industry, if you look at two of the largest players out there, they're great at refinancing mortgages.

I mean, they really are. So as you think about where we are from a rate perspective, we touched a little below 50 basis points on the 10-year note last year. I just think you're going to burn out, you're going to have mortgage rates creep up. Your prime and your secondary rate has tightened dramatically.

And overall, you'll see speeds really slow down. But I think it's a very good question where -- what happens to mortgage rates as a result of a 10-year treasury, call it, a 1.5%. They will go higher because, I mean, there's real relative value players that will say, "I'm just not going to buy these things at these rates." Because all of a sudden treasuries will be cheaper than mortgages, why we do not buy treasuries.

Trevor Cranston -- JMP Securities -- Analyst

Great. That makes sense. OK. Appreciate the comments.

Thank you.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thank you.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to Michael Nierenberg for any closing remarks.

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Thank you. Thanks, everyone, for all your questions and your support, and look forward to updating you throughout the quarter. And everybody, stay well. Thanks.

Operator

[Operator signoff]

Duration: 78 minutes

Call participants:

Kaitlyn Mauritz -- Investor Relations

Michael Nierenberg -- Chairman, Chief Executive Officer, and President

Baron Silverstein -- President of NewRez

Kevin Barker -- Piper Sandler -- Analyst

Eric Hagen -- BTIG -- Analyst

Doug Harter -- Credit Suisse -- Analyst

Bose George -- KBW -- Analyst

Stephen Laws -- Raymond James -- Analyst

Giuliano Bologna -- Compass Point -- Analyst

Henry Coffey -- Wedbush Securities -- Analyst

Jason Stewart -- JonesTrading -- Analyst

Trevor Cranston -- JMP Securities -- Analyst

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