NRZ - New Residential: Unique Hedging Strategy Results In Highly Concentrated Risk

• The U.S. mortgage industry remains depressed despite a boom in the broader property market.
• The mortgage company New Residential Investment Corp. has garnered significant interest from investors due to its high dividend yield and extremely diversified platform.
• Unlike most peers, New Residential has positive exposure to mortgage spreads and interest rates - likely boosting its book value from Q3 levels.
• While New Residential's risks are few, the company operates at high leverage with particularly significant exposure to non-agency assets which carry higher delinquency rates.
• If the U.S. property market proves to be overheated and reverses, New Residential's unique strategy may face rapid failure.

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