March 16, 2009

Mr. William H. Demarest IV

Staff Accountant

United States Securities and Exchange Commission

Division of Corporation Finance

Mail Stop 4561

100 F Street, N.E.

Washington, D.C. 20549

Form 10-K for the year ended December 31, 2007

Filed February 29, 2008

Form 10-Q for the period ended June 30, 2008

Filed August 11, 2008

Form 10-Q for the period ended September 30, 2008

Filed November 10, 2008

File No. 1-31458

Dear Mr. Demarest:

We have received the letter dated February 5, 2009 (the “Letter”), from the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “SEC” or “Commission”) with respect to its review of the Company’s Form 10-K for the fiscal year ended December 31, 2007 (the “Form 10-K”) filed on February 29, 2008, of the Company’s Form 10-Q for the period ended June 30, 2008 filed on August 11, 2008, and of the Company’s Form 10-Q for the period ended September 30, 2008 (the “Form 10-Q”) filed on November 10, 2008.

For reference purposes, the text of each of the Staff’s numbered comments has been provided herein in bold. Our responses follow the Staff’s numbered comments.

General

Response

In response to the Staff’s comment, we have set forth below samples of our intended future disclosures.

Form 10-Q for the period ended September 30, 2008

Consolidated Statements of Operations, page 2

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 2

Response

We respectfully inform the Staff that we will revise our statement of operations presentation as requested. We expect the new statement of operations format to be substantially similar to the draft set forth below.

We also respectfully inform the Staff that the components of Other income (loss), net are disclosed in Note 2 of our Form 10-Qs for the fiscal periods ended June 30, 2008 and September 30, 2008 and will be disclosed in Note 2 of our Form 10-K for the fiscal year ended December 31, 2008. Such components primarily include gains and losses on derivatives.

Revenues

    Interest income

Expenses

    Interest expense

    Loan and security servicing expense

    Provision for credit losses – Note 5

    General and administrative expense

    Management fee to affiliate – Note 10

    Incentive compensation to affiliate – Note 10

    Depreciation and amortization

Impairment

    Other-than-temporary impairment – Note 4

    Loan impairment – Note 5

    Provision for losses, loans held for sale – Note 5

Operating Income (Loss)

Other Income (Loss)

    Gain (loss) on sale of investments, net – Note 2

    Gain (loss) on extinguishment of debt – Note 8

    Other income (loss), net – Note 2

    Equity in earnings of unconsolidated subsidiaries – Note 3

Income (loss) from continuing operations

    Income (loss) from discontinued operations – Note 6

Net Income (Loss)

    Preferred dividends

Income (Loss) Applicable To Common Stockholders

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 3

Consolidated Statements of Cash Flows, page 4

Response

We respectfully inform the Staff that you are correct. This presentation was inadvertent, and we will separate these items into two line items in future filings.

Note 3. Real Estate Securities, page 10

Response

We respectfully inform the Staff that we will clarify our disclosure in future filings. We expect the new Critical Accounting Policies disclosure to be substantially similar to the draft set forth below.

Also, for those securities within the scope of EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” as amended by FSP EITF 99-20-1, whenever there is a probable adverse change in the timing or amounts of estimated cash flows of a security from the cash flows previously projected, an other-than-temporary impairment is considered to have occurred. Securities within the scope of EITF 99-20 are also analyzed for other-than-temporary impairment under the guidelines applicable to all securities as described herein. We note that primarily all of our securities, except our FNMA/FHLMC securities, fall within the scope of EITF 99-20.

Furthermore, we expect to include a disclosure in our Recent Accounting Pronouncements regarding FSP EITF 99-20-1 which will be substantially similar to the draft set forth below.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 4

In January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20.” This FSP amends EITF No. 99-20 to achieve more consistent determination of whether an other-than-temporary impairment has occurred, with the same objective as SFAS 115. In particular, it changed a requirement to analyze a security’s estimated cash flows from a market participant’s perspective to an analysis from the perspective of the holder. It is effective for periods ending after December 15, 2008 and is applied prospectively. Due to the prospective nature of its adoption, the adoption of FSP EITF 99-20-1 did not have a material impact on our financial condition, liquidity or results of operations. It could have a material impact on our impairment analyses subsequent to adoption, to the extent that our estimation of a security’s cash flows differ from our estimation of how a market participant would estimate such cash flows. However, we believe we generally analyze cash flows of securities in a manner consistent with market practice.

Response

We respectfully inform the Staff that we would record other-than-temporary impairment with respect to a security, even if our estimated cash flow analysis indicates that it is not probable that we will incur a loss of contractual principal or interest, assuming we have the intent and ability to hold the security until recovery, in certain circumstances where there is an adverse change in the timing of expected cash flows. For instance, if a security were expected to be repaid on a

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 5

date beyond its maturity date, or if a security was delinquent or was expected to become delinquent in its interest payments, we would record other-than-temporary impairment with respect to that security even if we expected to ultimately receive all contractual cash flows.

We also respectfully inform the Staff that our consideration of the other factors described above is taken into account in establishing the inputs and assumptions used in our projection of a security’s estimated cash flows. We will clarify our disclosure in future filings in this regard. However, we respectfully inform the Staff that it is not possible to indicate explicitly how each such factor is considered in our cash flow analysis. Each security is impacted by different factors and each factor may impact a security in different ways. We will clarify our disclosure in future filings to indicate this fact and the fact that the more negative factors which exist with respect to a given security, the more likely we are to determine that we will not receive all contractual payments when due.

We also note that, as of December 31, 2008, we recorded other-than-temporary impairment with respect to all of our securities that were in an unrealized loss position as we could no longer express the intent and ability to hold such securities until maturity or recovery due to events that took place in the fourth quarter of 2008. Furthermore, we classified all of our loans as held for sale and marked them to the lower of cost or fair value (generally resulting in impairment charges) for the same reason.

We expect the new Critical Accounting Policies disclosure to be substantially similar to the draft set forth below.

We must also assess whether unrealized losses on securities, if any, reflect a decline in value which is other-than-temporary and, if so, write the impaired security down to its fair value through earnings. A decline in value is deemed to be other-than-temporary if it is probable that we will be unable to collect all amounts due according to the contractual terms of a security which was not impaired at acquisition, or if we do not have the ability and intent to hold a security in an unrealized loss position until its anticipated recovery (if any). For the purposes of performing this analysis, we assume the anticipated recovery period is until the respective security’s expected maturity. As of December 31, 2008, we determined that we could not express the intent and ability to hold all of our securities which are in an unrealized loss position until their anticipated recovery. See “– Market Considerations” above. Also, for those securities within the scope of EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” as amended by FSP EITF 99-20-1, whenever there is a probable adverse change in the timing or amounts of estimated cash flows of a security from the cash flows previously projected, an other-than-temporary impairment is considered to have occurred. Securities within the scope of EITF 99-20 are also analyzed for other-than-temporary impairment under the guidelines applicable to all securities as described herein. We note that primarily all of our securities, except our FNMA/FHLMC securities, fall within the scope of EITF 99-20.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 6

Temporary declines in value generally result from changes in market factors, such as market interest rates and credit spreads, or from certain macroeconomic events, including market disruptions and supply changes, which do not directly impact our ability to collect amounts contractually due. We continually evaluate the credit status of each of our securities and the collateral supporting our securities. This evaluation includes a review of the credit of the issuer of the security (if applicable), the credit rating of the security, the key terms of the security (including credit support), debt service coverage and loan to value ratios, the performance of the pool of underlying loans and the estimated value of the collateral supporting such loans, including the effect of local, industry and broader economic trends and factors. These factors include loan default expectations and loss severities, which are analyzed in connection with a particular security’s credit support, as well as prepayment rates. These factors are also analyzed in relation to the amount of the unrealized loss and the period elapsed since it was incurred. The result of this evaluation is considered when determining management’s estimate of cash flows, particularly with respect to developing the necessary inputs and assumptions. Each security is impacted by different factors and in different ways; generally the more negative factors which are identified with respect to a given security, the more likely we are to determine that we do not expect to receive all contractual payments when due with respect to that security. Significant judgment is required in this analysis.

During the year ended December 31, 2008, we had 121, or $233.4 million carrying amount of, securities that were downgraded. All of these securities were determined to be other-than-temporarily impaired during this period. However, we do not depend on credit ratings in underwriting our securities, either at acquisition or on an ongoing basis. As mentioned above, a credit rating downgrade is one factor that we monitor and consider in our analysis regarding other-than-temporary impairment, however it is not determinative. Our securities generally benefit from the support of one or more subordinate classes of securities or equity or other forms of credit support. Therefore, credit rating downgrades, even to the extent they relate to an expectation that a securitization we have invested in, on an overall basis, has credit issues, may not ultimately impact cash flow estimates for the class of securities in which we are invested.

Furthermore, the analysis of whether we have the intent and ability to hold the securities until recovery can also be subject to significant judgment, particularly in times of market illiquidity such as we are currently experiencing. If we sell assets for liquidity reasons, without a significant change in facts and circumstances, with respect to which we had previously expressed an intent and ability to hold, this could “taint” the reliability of our expressed intent and ability and cause us to record significant incremental impairments in the future. See “– Market Considerations” above.

We expect our summary disclosure regarding our fourth quarter impairment charges to be substantially similar to the draft set forth below.

In the fourth quarter of 2008, in accordance with current accounting rules, we recorded an impairment charge of $2.6 billion through our statement of operations on our securities and loans. In accordance with the applicable accounting rules, Newcastle is required to evaluate its intent and ability to hold its assets as of the end of each fiscal quarter. If we cannot express the intent and ability to hold our assets to recovery, we are required, under the applicable accounting rules, to record impairment with respect to all of our assets that were in an unrealized loss position as of quarter end. We note the following with respect to this charge:

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 7

For a further discussion of this impairment and the events that lead to its being recorded, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Considerations” as well as Part I , Item 1A, “Risk Factors–Risks Relating to Our Business–Our investments have previously been – and in the future may be – subject to significant impairment charges, which adversely affect our results of operations.”

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 8

Response

We respectfully inform the Staff that we will include this disclosure in future filings to the extent that we sell securities for which we have previously expressed an intent and ability to hold. We note that, as described above and in our revised disclosure, as of December 31, 2008, we no longer expressed the intent and ability to hold any of our securities and loans that were in an unrealized loss position until maturity or recovery due to events that took place in the fourth quarter of 2008.

Response

We respectfully inform the Staff that, prior to the fourth quarter of 2008 and excluding the one-time events of the first quarter of 2008 as described in our prior responses, sales of investments for liquidity purposes came primarily from the pool of investments that either (i) were not in an unrealized loss position, or (ii) had been other-than-temporarily impaired as of the most recent balance sheet date. In other words, the sales were primarily of investments for which we had not expressed an intent and ability to hold until maturity or for the foreseeable future. We note that, as described above and in our revised disclosure, as of December 31, 2008, we no longer expressed the intent and ability to hold any of our securities and loans that were in an unrealized loss position until maturity or recovery due to events which took place in the fourth quarter of 2008.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 9

Response

We respectfully inform the Staff to refer to the response to comment #7 above.

Response

We respectfully inform the Staff that, for purposes of performing this analysis, we always assume that the anticipated recovery period is the period of time from the date as of which the analysis is conducted through the expected maturity date of the respective security. We will clarify this disclosure in future filings, as shown in the response to comment #5 above.

Response

We respectfully inform the Staff that, to the extent applicable, we will include this disclosure in future filings. We note that, as described above and in our revised disclosure, as of December 31, 2008, we no longer expressed the intent and ability to hold any of our securities and loans that were in an unrealized loss position until maturity or recovery due to events that took place in the fourth quarter of 2008.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 10

Response

We respectfully inform the Staff that there are a large number of externally-managed mortgage REITs and that we do not believe the intent of the guidance regarding exclusive decision making ability relative to the intent and ability to hold securities was to preclude all externally-managed entities from expressing an intent and ability to hold their assets. Pursuant to the terms of our Management Agreement with our Manager, all investment decisions for the Company are made by the Manager. Further, the employees of the Manager that make those decisions are officers or directors of the Company. We believe that constitutes exclusive decision making authority for these purposes. We believe the intent of this guidance was to preclude an entity from expressing an intent and ability to hold securities over which an independent third party has control, such as in the case where a trustee or servicer has the right or requirement to cause the entity’s assets to be sold under certain circumstances.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 11

Response

We respectfully inform the Staff that we will include this disclosure in future filings. We expect the new Critical Accounting Policy disclosure to be substantially similar to the draft set forth in response to comment #5.

Response

We respectfully inform the Staff that we will include a discussion regarding the potential impact of geographic concentrations of investments, especially in light of current market conditions, in our future filings. We expect the new footnote disclosure to be substantially similar to the draft set forth below.

Geographic concentrations of investments expose Newcastle to the risk of economic downturns within the relevant regions, particularly given the current unfavorable market conditions. These market conditions may make regions more vulnerable to downturns in certain market factors. Any such downturn in a region where Newcastle holds significant investments could have a material, negative impact on Newcastle.

Note 6. Fair Value of Financial Instruments, page 14

Response

We respectfully inform the Staff that we will amend our footnote disclosure in this manner in future filings.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 12

Response

We respectfully inform the Staff that we will amend our footnote disclosure in this manner in future filings. Transfers in and out of Level 3 will be shown separately in the table. We will disclose our policy that transfers are assumed to have occurred at the beginning of the quarter. We will quantify the gain or loss on instruments transferred into Level 3 in a tabular format. We expect our disclosure regarding the reason for significant transfers into Level 3 (during the third quarter of 2008) to be substantially similar to the draft set forth below.

As a result of the relative illiquidity in the mortgage-backed securities market, management determined that there was little or no price transparency in the broker quotations used in the valuation of our CMBS, ABS and REIT debt as of September 30, 2008 and therefore classified such securities as Level 3A assets under the fair value hierarchy.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Application of Critical Accounting Policies, page 21

Response

We respectfully inform the Staff that our methodology is to use quotes from parties that did not sell us the securities being marked, unless those quotes are the only marks available. When we have two or more quotes, one of which is usually from the selling broker, we do not use the selling broker’s quote unless the quotes provided by other (non-selling) brokers are, in our judgment, not representative of fair value. Even if we have two or more quotes on a particular security that come

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 13

from non-selling brokers, we do not use an average because we believe using an actual quote more closely represents a transactable price for the security than an average level. Furthermore, in some cases there is a wide disparity between the quotes we receive. We believe using an average of the quotes in these cases would generally not represent the fair value of the asset. Based on our own fair value analysis using internal models, we select one of the quotes which we believe more accurately reflects fair value. We never adjust quotes received. We will clarify our disclosures in future filings with respect to this point. We expect the new footnote disclosure, which relates only to securities where we have received two or more quotes, to be substantially similar to the draft set forth below.

Management generally obtained broker quotations from two sources, one of which was generally the seller (the party that sold us the security). Management selected one of the quotes received as being most representative of fair value and did not use an average of the quotes. Newcastle’s methodology is to not use quotes from selling brokers, unless those quotes are the only marks available, or unless the quotes provided by other (non-selling) brokers are, in management’s judgment, not representative of fair value. Even if Newcastle receives two or more quotes on a particular security that come from non-selling brokers, it does not use an average because management believes using an actual quote more closely represents a transactable price for the security than an average level. Furthermore, in some cases there is a wide disparity between the quotes Newcastle receives. Management believes using an average of the quotes in these cases would generally not represent the fair value of the asset. Based on Newcastle’s own fair value analysis using internal models, management selects one of the quotes which is believed to more accurately reflect fair value. Newcastle never adjusts quotes received.

Response

We respectfully inform the Staff that our procedures primarily consist of comparing the broker quotations we receive to the outputs of our internal models. These internal models are, as described above, based on inputs and assumptions derived from a variety of sources which we believe are consistent with market practices. Our internal models take into account all of the factors already

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 14

described in our Critical Accounting Policies. We perform this analysis with respect to each quote received in each quarter. In future filings, we will clarify our disclosure regarding these procedures.

Outlying prices are addressed in our response to comment #16 above.

We understand that the broker quotations we are currently receiving are generally based on models prepared by such brokers. We have little visibility with respect to the inputs used by the brokers in their models. However, based on the procedures we perform with respect to the quotations, we believe that their inputs are reasonable. In future filings, we will clarify our disclosure regarding this conclusion.

We expect the new Critical Accounting Policy disclosure to be substantially similar to the draft set forth below.

We generally classify the broker quotations we receive as level 3A inputs, except for certain liquid securities. They are quoted prices in generally inactive and illiquid markets for identical or similar securities. These quotations are generally received via email and contain disclaimers which state that they are “indicative” and not “actionable” – meaning that the party giving the quotation is not bound to actually purchase the security at the quoted price. These quotations are generally based on models prepared by the brokers and we have little visibility into the inputs they use. Based on procedures we have performed with respect to prior quotations received from these brokers in comparison to the outputs generated from our internal pricing models and transactions we have completed with respect to these securities, as well as on our knowledge and experience of these markets, we have generally determined that these quotes represent a reasonable estimate of fair value. In addition, management performs its own quarterly analysis of fair value, based on internal pricing models, to confirm that each of the quotations received represented a reasonable estimate of fair value as defined under SFAS 157.

Response

We respectfully inform the Staff that we have previously disclosed how we considered the lack of liquidity in modeling the fair values of our securities in our Critical Accounting Policies under “Valuation and Impairment of Securities.” In combination with the new disclosure in response to comment #17 above, which clarifies that our procedures to validate broker quotations include the comparison of such quotations to the outputs from our internal models, we believe this comment has been addressed.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 15

Response

We respectfully inform the Staff that we will include a summary of our inputs in our fair value footnote in future filings. We believe the second part of our response to comment #5 above addresses how our assumptions were developed. In future filings, we will include a discussion of why assumptions changed from period to period in our Critical Accounting Policies.

We expect the new footnote disclosure to be substantially similar to the draft set forth below.

We expect the new Critical Accounting Policy disclosure to be substantially similar to the draft set forth below.

In comparison to the prior year end, we have used slower prepayment speeds, higher default rates and higher severity assumptions as inputs to our pricing models in order to reflect current market conditions. In 2008, Newcastle lowered the prepayment assumptions based on observed reductions in actual prepayment speeds and slower expected future prepayments consistent with market projections. The slower prepayments were the result of increasing difficulties for borrowers to refinance, caused by a tightening of underwriting standards, decline in home prices, contraction of available lenders due to bank failures and a distressed securitization market. Default assumptions were increased due to higher levels of delinquent underlying loans. Loss severity assumptions were increased based on observed increases in recent loss severities that have been driven by falling home prices and the increasing number of foreclosures or distressed home sales in the residential sector and higher losses as a result of the increasing number of foreclosures and bankruptcies of borrowers experienced in the commercial sector.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 16

Response

We respectfully inform the Staff that the key drivers are the inputs that will be disclosed in future filings in response to comment #19 above. We will supplement this disclosure in future filings with information regarding the relative observability of such inputs. We expect the new footnote disclosure to be substantially similar to the draft set forth below.

All of the assumptions listed have some degree of market observability, based on Newcastle’s knowledge of the market, relationships with market participants, and use of common market data sources. Collateral prepayment, default and loss severity projections are in the form of “curves” or “vectors” that vary for each monthly collateral cash flow projection. Methods used to develop these projections vary by asset class (e.g., CMBS projections are developed differently than Home Equity ABS projections) but conform to industry conventions. We use assumptions that generate our best estimate of future cash flows of each respective security.

The prepayment vector specifies the percentage of the collateral balance that is expected to voluntarily pay off at each point in the future. The prepayment vector is based on projections from the widely published investment bank model which considers factors such as collateral FICO score, loan-to-value ratio, debt-to-income ratio, and vintage on a loan level basis. This vector is scaled up or down to match recent collateral-specific prepayment experience, as obtained from remittance reports and market data services.

Loss severities are based on recent collateral-specific experience with additional consideration given to collateral characteristics. Collateral age is taken into consideration because severities tend to initially increase with collateral age before eventually stabilizing. We typically use projected severities that are higher than the historic experience for collateral that is relatively new (e.g., 2007 vintage origination) to account for this effect. Collateral characteristics such as loan size, lien position, and location (state) also effect loss severity. We consider whether a collateral pool has experienced a significant change in its composition with respect to these factors when assigning severity projections.

Default vectors are determined from the current “pipeline” of loans that are more than 90 days delinquent, in foreclosure, or are real estate owned (REO). These seriously delinquent loans determine the first 24 months of the default vector. Beyond month 24, the default vector transitions to a steady-state value that is generally equal to or greater than that given by the widely published investment bank model.

The discount rates we use are derived from a range of observable pricing on securities backed by similar collateral and offered in a live market. As the markets in which we transact have become less liquid, we have had to rely on fewer data points in this analysis.

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 17

Response

We respectfully inform the Staff that we will include, in future filings, a tabular disclosure setting forth the sensitivity of the aggregate fair value of Level 3B assets to a 10% unfavorable change in each significant input. We note that the impact on unrealized losses would be equal to the change in fair value, while the impact on losses recorded in our statement of operations cannot be determined until a related impairment analysis is completed (for the sensitivity analysis as of December 31, 2008, primarily all of the change would have impacted losses). We expect the new footnote disclosure to be substantially similar to the draft set forth below.

For securities valued with internal models, which have an aggregate fair value of $179.8 million as of December 31, 2008, a 10% unfavorable change in our assumptions would result in the following decreases in such aggregate fair value:

Response

We respectfully inform the Staff that, to the extent applicable, we will make this statement in future filings. We note that, as described above and in our revised disclosure, as of December 31, 2008 we no longer expressed the intent and ability to hold any of our securities and loans that were in an unrealized loss position

Mr. William Demarest

Securities and Exchange Commission

March 16, 2009

Page 18

until maturity or recovery due to events which took place in the fourth quarter of 2008.

In connection with our response to the Staff’s comments, we acknowledge that:

Should you have any additional questions or comments, please contact me at 212-479-5343.

Sincerely,