| REAL ESTATE RELATED LOANS, RESIDENTIAL MORTGAGE LOANS, SUBPRIME MORTGAGE LOANS |
5. REAL ESTATE RELATED LOANS, RESIDENTIAL MORTGAGE LOANS, SUBPRIME MORTGAGE LOANS
The following is a summary of real estate related loans, residential mortgage loans and subprime mortgage loans. The loans contain various terms, including fixed and floating rates, self-amortizing and interest only. They are generally subject to prepayment.
| |
|
December 31, 2012
|
|
|
December 31, 2011
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Coupon
|
|
|
Weighted Average Maturity
(Years) (B)
|
|
|
Floating Rate Loans as a % of Face Amount
|
|
|
|
|
|
|
|
|
|
|
|
Loan Type
|
|
Outstanding
Face Amount
|
|
|
Carrying
Value (A)
|
|
|
Loan
Count
|
|
|
Wtd. Avg. Yield
|
|
|
Delinquent Face Amount (C)
|
|
|
Carrying
Value
|
|
|
Wtd. Avg. Yield
|
|
|
Mezzanine Loans
|
|
$ |
527,793 |
|
|
$ |
442,529 |
|
|
|
17 |
|
|
|
10.10 |
% |
|
|
8.57 |
% |
|
|
2.2 |
|
|
|
67.0 |
% |
|
$ |
12,000 |
|
|
$ |
469,326 |
|
|
|
10.35 |
% |
|
Corporate Bank Loans
|
|
|
391,904 |
|
|
|
208,863 |
|
|
|
7 |
|
|
|
18.85 |
% |
|
|
8.66 |
% |
|
|
3.6 |
|
|
|
47.8 |
% |
|
|
- |
|
|
|
161,153 |
|
|
|
21.79 |
% |
|
B-Notes
|
|
|
171,258 |
|
|
|
161,610 |
|
|
|
6 |
|
|
|
10.40 |
% |
|
|
5.37 |
% |
|
|
2.1 |
|
|
|
86.4 |
% |
|
|
- |
|
|
|
152,535 |
|
|
|
12.25 |
% |
|
Whole Loans
|
|
|
30,130 |
|
|
|
30,130 |
|
|
|
3 |
|
|
|
5.21 |
% |
|
|
3.82 |
% |
|
|
1.1 |
|
|
|
96.6 |
% |
|
|
- |
|
|
|
30,566 |
|
|
|
5.31 |
% |
Total Real Estate Related Loans Held-for-Sale, Net (D)
|
|
$ |
1,121,085 |
|
|
$ |
843,132 |
|
|
|
33 |
|
|
|
12.15 |
% |
|
|
7.98 |
% |
|
|
2.6 |
|
|
|
64.0 |
% |
|
$ |
12,000 |
|
|
$ |
813,580 |
|
|
|
12.78 |
% |
|
Non-Securitized Manufactured Housing Loan Portfolio I
|
|
$ |
573 |
|
|
$ |
163 |
|
|
|
15 |
|
|
|
38.84 |
% |
|
|
7.75 |
% |
|
|
0.7 |
|
|
|
0.0 |
% |
|
$ |
103 |
|
|
$ |
199 |
|
|
|
39.80 |
% |
|
Non-Securitized Manufactured Housing Loan Portfolio II
|
|
|
3,072 |
|
|
|
2,308 |
|
|
|
115 |
|
|
|
15.46 |
% |
|
|
10.03 |
% |
|
|
5.5 |
|
|
|
9.1 |
% |
|
|
346 |
|
|
|
2,488 |
|
|
|
15.54 |
% |
Total Residential Mortgage Loans Held-for-Sale, Net (F)
|
|
$ |
3,645 |
|
|
$ |
2,471 |
|
|
|
130 |
|
|
|
17.00 |
% |
|
|
9.67 |
% |
|
|
4.7 |
|
|
|
7.7 |
% |
|
$ |
449 |
|
|
$ |
2,687 |
|
|
|
17.34 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitized Manufactured Housing Loan Portfolio I
|
|
$ |
118,746 |
|
|
$ |
100,124 |
|
|
|
3,172 |
|
|
|
9.48 |
% |
|
|
8.66 |
% |
|
|
6.8 |
|
|
|
0.8 |
% |
|
$ |
1,558 |
|
|
$ |
112,316 |
|
|
|
9.51 |
% |
|
Securitized Manufactured Housing Loan Portfolio II
|
|
|
153,193 |
|
|
|
150,123 |
|
|
|
5,381 |
|
|
|
7.54 |
% |
|
|
9.63 |
% |
|
|
5.6 |
|
|
|
16.8 |
% |
|
|
2,775 |
|
|
|
175,120 |
|
|
|
7.55 |
% |
|
Residential Loans
|
|
|
56,131 |
|
|
|
42,214 |
|
|
|
198 |
|
|
|
7.41 |
% |
|
|
2.56 |
% |
|
|
6.2 |
|
|
|
100.0 |
% |
|
|
9,852 |
|
|
|
43,800 |
|
|
|
7.92 |
% |
|
Total Residential Mortgage Loans Held-for-Investment, Net (E) (F)
|
|
$ |
328,070 |
|
|
$ |
292,461 |
|
|
|
8,751 |
|
|
|
8.19 |
% |
|
|
8.07 |
% |
|
|
6.1 |
|
|
|
25.2 |
% |
|
$ |
14,185 |
|
|
$ |
331,236 |
|
|
|
8.26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime Mortgage Loans Subject to Call Option
|
|
$ |
406,217 |
|
|
$ |
405,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
404,723 |
|
|
|
|
|
|
(A)
|
The aggregate United States federal income tax basis for such assets at December 31, 2012 was approximately $1.3 billion (unaudited), excluding the securitized subprime mortgage loans, which are fully consolidated for tax purposes. Carrying value includes interest receivable of $0.1 million for the residential housing loans and principal and interest receivable of $4.8 million for the manufactured housing loans.
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|
(B)
|
The weighted average maturity is based on the timing of expected principal reduction on the assets.
|
|
(C)
|
Includes loans that are 60 days or more past due (including loans that are in foreclosure and borrowers’ in bankruptcy) or considered real estate owned (“REO”). As of December 31, 2012 and December 31, 2011, $137.7 million and $117.2 million face amount of real estate related loans, respectively, was on non-accrual status.
|
|
(D)
|
Loans which are more than 3% of the total current carrying value (or $25.3 million) at December 31, 2012 are as follows:
|
| |
|
|
|
|
December 31, 2012
|
|
|
Loan Type
|
|
|
|
|
Outstanding
Face Amount
|
|
|
Carrying Value
|
|
|
Prior Liens (1)
|
|
|
Loan
Count
|
|
|
Yield (2)
|
|
|
Coupon (2)
|
|
|
Weighted Average Maturity (Years)
|
|
|
Individual Bank Loan
|
|
|
(3) |
|
|
$ |
158,991 |
|
|
$ |
128,991 |
|
|
|
607,130 |
|
|
|
1 |
|
|
|
24.85 |
% |
|
|
15.55 |
% |
|
|
6.50 |
|
|
Individual Mezzanine Loan
|
|
|
(5) |
|
|
|
68,741 |
|
|
|
68,741 |
|
|
|
721,776 |
|
|
|
1 |
|
|
|
8.65 |
% |
|
|
8.65 |
% |
|
|
3.50 |
|
|
Individual Mezzanine Loan
|
|
|
(4) |
|
|
|
53,510 |
|
|
|
53,510 |
|
|
|
815,728 |
|
|
|
1 |
|
|
|
10.00 |
% |
|
|
10.46 |
% |
|
|
1.50 |
|
|
Individual B-Note Loan
|
|
|
(4) |
|
|
|
50,000 |
|
|
|
50,000 |
|
|
|
225,000 |
|
|
|
1 |
|
|
|
8.54 |
% |
|
|
5.93 |
% |
|
|
3.25 |
|
|
Individual Bank Loan
|
|
|
(6) |
|
|
|
128,230 |
|
|
|
47,637 |
|
|
|
- |
|
|
|
1 |
|
|
|
6.28 |
% |
|
|
2.22 |
% |
|
|
1.66 |
|
|
Individual B-Note Loan
|
|
|
(4) |
|
|
|
53,574 |
|
|
|
46,672 |
|
|
|
2,065,615 |
|
|
|
1 |
|
|
|
12.00 |
% |
|
|
3.09 |
% |
|
|
1.75 |
|
|
Individual Mezzanine Loan
|
|
|
(4) |
|
|
|
45,000 |
|
|
|
45,000 |
|
|
|
317,000 |
|
|
|
1 |
|
|
|
9.95 |
% |
|
|
9.25 |
% |
|
|
2.00 |
|
|
Individual Mezzanine Loan
|
|
|
(4) |
|
|
|
40,000 |
|
|
|
40,000 |
|
|
|
324,940 |
|
|
|
1 |
|
|
|
8.42 |
% |
|
|
8.00 |
% |
|
|
1.17 |
|
|
Individual Mezzanine Loan
|
|
|
(4) |
|
|
|
38,510 |
|
|
|
38,510 |
|
|
|
815,728 |
|
|
|
1 |
|
|
|
12.00 |
% |
|
|
12.19 |
% |
|
|
1.50 |
|
|
Individual Mezzanine Loan
|
|
|
(4) |
|
|
|
36,485 |
|
|
|
36,485 |
|
|
|
214,243 |
|
|
|
1 |
|
|
|
8.67 |
% |
|
|
8.00 |
% |
|
|
1.58 |
|
|
Individual Mezzanine Loan
|
|
|
(4) |
|
|
|
36,667 |
|
|
|
35,017 |
|
|
|
745,600 |
|
|
|
1 |
|
|
|
8.00 |
% |
|
|
7.00 |
% |
|
|
3.25 |
|
|
Individual Whole Loan
|
|
|
(7) |
|
|
|
29,117 |
|
|
|
29,117 |
|
|
|
- |
|
|
|
1 |
|
|
|
5.15 |
% |
|
|
3.69 |
% |
|
|
1.12 |
|
|
Others
|
|
|
(8) |
|
|
|
382,260 |
|
|
|
223,452 |
|
|
|
|
|
|
|
21 |
|
|
|
11.78 |
% |
|
|
7.11 |
% |
|
|
1.86 |
|
| |
|
|
|
|
|
$ |
1,121,085 |
|
|
$ |
843,132 |
|
|
|
|
|
|
|
33 |
|
|
|
12.15 |
% |
|
|
7.98 |
% |
|
|
2.62 |
|
|
(1)
|
Represents face amount of third party liens that are senior to Newcastle’s position.
|
| |
|
(2)
|
For others, represents weighted average yield and weighted average coupon.
|
| |
|
(3)
|
Interest accrued to principal balance over life to maturity with a discounted payoff option prior to April 2015.
|
| |
|
(4)
|
Interest only payments over life to maturity and balloon principal payment upon maturity.
|
| |
|
(5)
|
Principal repayment based on a 30-year amortization schedule after July 2013.
|
| |
|
(6)
|
Annual amortization payment equal to 50% of excess cash flow.
|
| |
|
(7)
|
Interest only payment over life to maturity with a discontinued pay off option prior to April 2014.
|
| |
|
(8)
|
Various terms of payment. This represents $104.7 million, $208.9 million, $67.7 million and $1.0 million face amounts of bank loans, mezzanine loans, B-notes and whole loans, respectively. Each of the twenty one loans had a carrying value of less than $25.3 million at December 31, 2012.
|
|
(E)
|
The following is an aging analysis of past due residential loans held-for-investment as of December 31, 2012:
|
| |
|
30-59 Days
|
|
|
60-89 Days
|
|
|
Over 90 Days
|
|
|
|
|
|
Total Past
|
|
|
|
|
|
Total Outstanding
|
|
| |
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
REO
|
|
|
Due
|
|
|
Current
|
|
|
Face Amount
|
|
|
Securitized Manufactured
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Housing Loan Portoflio I
|
|
$ |
690 |
|
|
$ |
275 |
|
|
$ |
791 |
|
|
$ |
492 |
|
|
$ |
2,248 |
|
|
$ |
116,498 |
|
|
$ |
118,746 |
|
|
Securitized Manufactured
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Housing Loan Portoflio II
|
|
$ |
1,158 |
|
|
$ |
501 |
|
|
$ |
1,512 |
|
|
$ |
762 |
|
|
$ |
3,933 |
|
|
$ |
149,260 |
|
|
$ |
153,193 |
|
|
Residential Loans
|
|
$ |
- |
|
|
$ |
488 |
|
|
$ |
9,250 |
|
|
$ |
114 |
|
|
$ |
9,852 |
|
|
$ |
46,279 |
|
|
$ |
56,131 |
|
Newcastle’s management monitors the credit quality of the Manufactured Housing Loan Portfolios I and II primarily by using the aging analysis, current trends in delinquencies and the actual loss incurrence rate.
|
(F)
|
Loans acquired at a discount for credit quality.
|
Newcastle’s investments in real estate related loans and non-securitized manufactured housing loans were classified as held-for-sale as of December 31, 2012 and December 31, 2011. Loans held-for-sale are marked to the lower of carrying value or fair value.
Newcastle’s investment in the securitized manufactured housing loan portfolios I and II were classified as held-for-investment as of December 31, 2012 and December 31, 2011. In connection with the securitizations of the manufactured housing loan portfolios, Newcastle gave representations and warranties with respect to the manufactured housing loans sold to the securitization trusts. To the extent a breach of any such representations and warranties materially and adversely affects the value or enforceability of the related loans, Newcastle will be required to repurchase such loans from the respective securitization trusts.
Newcastle’s investment in the residential loans was classified as held-for-investment as of December 31, 2012 and December 31, 2011.
The following is a summary of real estate related loans by maturity at December 31, 2012:
| |
|
Outstanding
|
|
|
|
|
|
Number of
|
|
|
Year of Maturity (1)
|
|
Face Amount
|
|
|
Carrying Value
|
|
|
Loans
|
|
|
Delinquent (2)
|
|
$ |
12,000 |
|
|
$ |
- |
|
|
|
1 |
|
|
2013
|
|
|
96,942 |
|
|
|
44,850 |
|
|
|
4 |
|
|
2014
|
|
|
445,380 |
|
|
|
273,288 |
|
|
|
12 |
|
|
2015
|
|
|
59,907 |
|
|
|
56,185 |
|
|
|
5 |
|
|
2016
|
|
|
236,892 |
|
|
|
235,242 |
|
|
|
5 |
|
|
2017
|
|
|
95,359 |
|
|
|
90,161 |
|
|
|
4 |
|
|
Thereafter
|
|
|
174,605 |
|
|
|
143,406 |
|
|
|
2 |
|
|
Total
|
|
$ |
1,121,085 |
|
|
$ |
843,132 |
|
|
|
33 |
|
|
(1)
|
Based on the final extended maturity date of each loan investment as of December 31, 2012.
|
|
(2)
|
Includes loans that are non-performing, in foreclosure, or under bankruptcy.
|
Activities relating to the carrying value of our real estate loans and residential mortgage loans are as follows:
| |
|
Held for Sale
|
|
|
Held for Investment
|
|
| |
|
Real Estate Related Loans
|
|
|
Residential Mortgage Loans
|
|
|
Residential Mortgage Loans
|
|
|
December 31, 2009
|
|
$ |
573,862 |
|
|
$ |
383,647 |
|
|
$ |
- |
|
|
Purchases / additional fundings
|
|
|
113,733 |
|
|
|
- |
|
|
|
- |
|
|
Interest accrued to principal balance
|
|
|
12,535 |
|
|
|
- |
|
|
|
- |
|
|
Principal paydowns
|
|
|
(136,078 |
) |
|
|
(34,781 |
) |
|
|
(10,916 |
) |
|
Sales
|
|
|
(51,225 |
) |
|
|
- |
|
|
|
- |
|
|
Transfer to held for investment
|
|
|
- |
|
|
|
(135,942 |
) |
|
|
135,942 |
|
|
Transfer to other investments
|
|
|
(24,907 |
) |
|
|
- |
|
|
|
- |
|
|
Valuation (allowance) reversal on loans
|
|
|
299,620 |
|
|
|
41,227 |
|
|
|
(960 |
) |
|
Accretion of loan discount and other amortization
|
|
|
- |
|
|
|
- |
|
|
|
1,035 |
|
|
Deconsolidation of CDO VII
|
|
|
(5,453 |
) |
|
|
- |
|
|
|
- |
|
|
Other
|
|
|
518 |
|
|
|
(938 |
) |
|
|
(127 |
) |
|
December 31, 2010
|
|
$ |
782,605 |
|
|
$ |
253,213 |
|
|
$ |
124,974 |
|
|
Purchases / additional fundings
|
|
|
384,850 |
|
|
|
- |
|
|
|
- |
|
|
Interest accrued to principal balance
|
|
|
19,507 |
|
|
|
- |
|
|
|
- |
|
|
Principal paydowns
|
|
|
(270,767 |
) |
|
|
(8,818 |
) |
|
|
(30,514 |
) |
|
Sales
|
|
|
(125,141 |
) |
|
|
- |
|
|
|
- |
|
|
Transfer to held for investment
|
|
|
- |
|
|
|
(238,721 |
) |
|
|
238,721 |
|
|
Valuation (allowance) reversal on loans
|
|
|
21,629 |
|
|
|
(2,864 |
) |
|
|
(3,602 |
) |
|
Accretion of loan discount and other amortization
|
|
|
(7 |
) |
|
|
- |
|
|
|
2,371 |
|
|
Other
|
|
|
904 |
|
|
|
(123 |
) |
|
|
(714 |
) |
|
December 31, 2011
|
|
$ |
813,580 |
|
|
$ |
2,687 |
|
|
$ |
331,236 |
|
|
Purchases / additional fundings
|
|
|
109,491 |
|
|
|
- |
|
|
|
- |
|
|
Interest accrued to principal balance
|
|
|
22,835 |
|
|
|
- |
|
|
|
- |
|
|
Principal paydowns
|
|
|
(129,950 |
) |
|
|
(686 |
) |
|
|
(38,182 |
) |
|
Valuation (allowance) reversal on loans
|
|
|
28,213 |
|
|
|
493 |
|
|
|
(4,119 |
) |
|
Loss on repayment of loans held for sale
|
|
|
(1,614 |
) |
|
|
- |
|
|
|
- |
|
|
Accretion of loan discount and other amortization
|
|
|
- |
|
|
|
- |
|
|
|
4,002 |
|
|
Other
|
|
|
577 |
|
|
|
(23 |
) |
|
|
(476 |
) |
|
December 31, 2012
|
|
$ |
843,132 |
|
|
$ |
2,471 |
|
|
$ |
292,461 |
|
The following is a rollforward of the related loss allowance:
| |
|
Held for Sale
|
|
|
Held for Investment
|
|
| |
|
Real Estate Related Loans
|
|
|
Residential Mortgage Loans
|
|
|
Residential Mortgage Loans (C)
|
|
|
Balance at December 31, 2010
|
|
$ |
(321,591 |
) |
|
$ |
(25,193 |
) |
|
$ |
(21,350 |
) |
|
Charge-offs (A)
|
|
|
71,945 |
|
|
|
4,232 |
|
|
|
5,802 |
|
|
Reclassified as accretable discount (B)
|
|
|
- |
|
|
|
- |
|
|
|
14,439 |
|
|
Transfer to held-for-investment
|
|
|
- |
|
|
|
21,364 |
|
|
|
(21,364 |
) |
|
Valuation (allowance) reversal on loans
|
|
|
21,629 |
|
|
|
(2,864 |
) |
|
|
(3,602 |
) |
|
Balance at December 31, 2011
|
|
$ |
(228,017 |
) |
|
$ |
(2,461 |
) |
|
$ |
(26,075 |
) |
|
Charge-offs (A)
|
|
|
17,742 |
|
|
|
896 |
|
|
|
7,716 |
|
|
Valuation (allowance) reversal on loans
|
|
|
28,213 |
|
|
|
493 |
|
|
|
(4,119 |
) |
|
Balance at December 31, 2012
|
|
$ |
(182,062 |
) |
|
$ |
(1,072 |
) |
|
$ |
(22,478 |
) |
|
(A)
|
The charge-offs for real estate related loans represent two and six loans which were written off, sold, restructured, or paid off at a discounted price during 2012 and 2011, respectively.
|
|
(B)
|
Represents the accretable discount of the residential loans upon the reclassification from held-for-sale to held-for-investment, which will be recognized prospectively as an adjustment of the loans’ yield over the expected life of the loans.
|
|
(C)
|
The allowance for credit losses was determined based on the guidance for loans acquired with deteriorated credit quality.
|
The average carrying amount of Newcastle’s real estate related loans was approximately $843.4 million, $795.3 million and $670.7 million during 2012, 2011 and 2010, respectively, on which Newcastle earned approximately $81.5 million, $65.7 million and $53.3 million of gross interest revenues, respectively.
The average carrying amount of Newcastle’s residential mortgage loans was approximately $312.5 million, $354.9 million and $388.1 million during 2012, 2011 and 2010, respectively, on which Newcastle earned approximately $31.6 million, $34.1 million and $37.8 million of gross interest revenues, respectively.
The loans are encumbered by various debt obligations as described in Note 10.
Securitization of Subprime Mortgage Loans
Newcastle acquired and securitized two portfolios of subprime residential mortgage loans (“Subprime Portfolio I” and “Subprime Portfolio II”), through subsidiaries, as summarized in the table below. Both portfolios are being serviced by an affiliate of the Manager for a servicing fee equal to 0.50% per annum on their respective unpaid principal balances.
Both portfolios were securitized through special purpose entities (“Securitization Trust 2006”) and (“Securitization Trust 2007”) which are not consolidated by Newcastle. Newcastle retained a portion of the notes issued by, and all of the equity of, both entities. Newcastle, as holder of the equity (or residual interest), has the option (a call option) to redeem the notes once the aggregate principal balance of Subprime Portfolio I or Subprime Portfolio II is equal to or less than 20% or 10%, respectively, of such balance at the date of the transfer. The transactions between Newcastle and each securitization trust qualified as sales for accounting purposes. However, the loans which are subject to a call option by Newcastle were not treated as being sold and are classified as “held for investment” subsequent to the completion of the securitizations. The loans subject to call option and the corresponding financing recognize interest income and expense based on the expected weighted average coupons of the loans subject to call option at the call date of 9.24% and 8.68% for Subprime Portfolios I and II, respectively. The call options are “out of the money,” meaning that the price Newcastle would have to pay to acquire such loans exceeds their fair value at this time, and there is no requirement to exercise such options.
In both transactions, the residual interests and the retained bonds are reported as real estate securities, available for sale. The retained loans subject to call option and corresponding financing are reported as separate line items on Newcastle’s balance sheet.
Newcastle has no obligation to repurchase any loans from either of its subprime securitizations. Therefore, it is expected that its exposure to loss is limited to the carrying amount of its retained interests in the securitization entities, as described above. A subsidiary of Newcastle gave limited representations and warranties with respect to Subprime Portfolio II and is required to pay the difference, if any, between the repurchase price of any loan in such portfolio and the price required to be paid by a third party originator for such loan. Such subsidiary, however, has no assets and does not have recourse to the general credit of Newcastle.
|
|
|
Subprime Portfolio
|
|
| |
|
|
I |
|
|
II
|
|
|
Date of acquisition
|
|
March 2006
|
|
|
March 2007
|
|
|
Original number of loans (approximate)
|
|
11,300 |
|
|
|
7,300 |
|
|
Predominant origination date of loans
|
|
2005 |
|
|
|
2006 |
|
|
Original face amount of purchase
|
|
$1.5 billion
|
|
|
$1.3 billion
|
|
| |
|
|
|
|
|
|
|
|
|
Pre-securitization loan write-down
|
|
($4.1 million)
|
|
|
($5.8 million)
|
|
|
Gain on pre-securitization hedge
|
|
$5.5 million
|
|
|
$5.8 million
|
|
|
Gain on sale
|
|
Less than $0.1 million
|
|
|
$0.1 million
|
|
| |
|
|
|
|
|
|
|
|
|
Securitization date
|
|
April 2006
|
|
|
July 2007
|
|
|
Face amount of loans at securitization
|
|
$1.5 billion
|
|
|
$1.1 billion
|
|
|
Face amount of notes sold by trust
|
|
$1.4 billion
|
|
|
$1.0 billion
|
|
|
Stated maturity of notes
|
|
March 2036
|
|
|
April 2037
|
|
|
Face amount of notes retained by Newcastle
|
|
$37.6 million
|
|
|
$38.8 million
|
|
|
Fair value of equity retained by Newcastle
|
|
$62.4 million (A)
|
|
|
$46.7 million (A)
|
|
|
Key assumptions in measuring such fair value (A):
|
|
|
|
|
|
|
|
|
|
Weighted average life (years)
|
|
|
3.1 |
|
|
|
3.8 |
|
|
Expected credit losses
|
|
|
5.3 |
% |
|
|
8.0 |
% |
|
Weighted average constant prepayment rate
|
|
|
28.0 |
% |
|
|
30.1 |
% |
|
Discount rate
|
|
|
18.8 |
% |
|
|
22.5 |
% |
(A) As of the date of transfer.
The following table presents information on the retained interests in the securitizations of Subprime Portfolios I and II at December 31, 2012:
| |
|
Subprime Portfolio
|
|
|
|
|
| |
|
|
I |
|
|
II
|
|
|
Total
|
|
|
Total securitized loans (unpaid principal balance) (A)
|
|
$ |
423,872 |
|
|
$ |
564,569 |
|
|
$ |
988,441 |
|
|
Loans subject to call option (carrying value)
|
|
$ |
299,176 |
|
|
$ |
106,638 |
|
|
$ |
405,814 |
|
|
Retained interests (fair value) (B)
|
|
$ |
1,344 |
|
|
$ |
- |
|
|
$ |
1,344 |
|
|
(A)
|
Average loan seasoning of 89 months and 71 months for Subprime Portfolios I and II, respectively, at December 31, 2012.
|
|
(B)
|
The retained interests include retained bonds of the securitizations. Their fair value is estimated based on pricing models. Newcastle’s residual interests were written off in 2010. The yield of the retained note was 8.36% as of December 31, 2012.
|
The following table summarizes certain characteristics of the underlying subprime mortgage loans, and related financing, in the securitizations as of December 31, 2012 (unaudited, except stated otherwise):
| |
|
Subprime Portfolio
|
|
| |
|
|
I |
|
|
II
|
|
|
Loan unpaid principal balance (UPB) (A)
|
|
$ |
423,872 |
|
|
$ |
564,569 |
|
|
Weighted average coupon rate of loans
|
|
|
5.59 |
% |
|
|
4.71 |
% |
|
Delinquencies of 60 or more days (UPB) (B)
|
|
$ |
109,213 |
|
|
$ |
200,253 |
|
|
Net credit losses for year ended
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
$ |
27,548 |
|
|
$ |
34,866 |
|
|
December 31, 2011
|
|
$ |
29,460 |
|
|
$ |
54,217 |
|
|
Cumulative net credit losses
|
|
$ |
220,417 |
|
|
$ |
256,719 |
|
|
Cumulative net credit losses as a % of original UPB
|
|
|
14.7 |
% |
|
|
23.6 |
% |
|
Percentage of ARM loans (C)
|
|
|
51.0 |
% |
|
|
64.4 |
% |
|
Percentage of loans with loan-to-value ratio >90%
|
|
|
10.4 |
% |
|
|
17.2 |
% |
|
Percentage of interest-only loans
|
|
|
20.8 |
% |
|
|
4.1 |
% |
|
Face amount of debt (A) (D)
|
|
$ |
418,906 |
|
|
$ |
564,569 |
|
|
Weighted average funding cost of debt (E)
|
|
|
0.57 |
% |
|
|
1.11 |
% |
|
(A)
|
Audited.
|
|
(B)
|
Delinquencies include loans 60 or more days past due, in foreclosure, under bankruptcy filing or real estate owned.
|
|
(C)
|
ARM loans are adjustable-rate mortgage loans. An option ARM is an adjustable-rate mortgage that provides the borrower with an option to choose from several payment amounts each month for a specified period of the loan term. None of the loans in the subprime portfolios are option ARMs.
|
|
(D)
|
Excludes face amount of $4.0 million of retained notes for Subprime Portfolio I at December 31, 2012.
|
|
(E)
|
Includes the effect of applicable hedges.
|
Cash flows related to the two securitizations were as follows:
| |
|
Suprime Portfolio
|
|
| |
|
|
I |
|
|
II
|
|
|
Net cash inflows from retained interests
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
$ |
29 |
|
|
$ |
77 |
|
| |
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
$ |
315 |
|
|
$ |
629 |
|
|