Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS IN MORTGAGE SERVICING RIGHTS AND MORTGAGE SERVICING RIGHTS FINANCING RECEIVABLE (Tables)

v3.7.0.1
INVESTMENTS IN MORTGAGE SERVICING RIGHTS AND MORTGAGE SERVICING RIGHTS FINANCING RECEIVABLE (Tables)
6 Months Ended
Jun. 30, 2017
Equity Method Investments and Joint Ventures [Abstract]  
Fees Earned in Exchange for Servicing Financial Assets
Servicing revenue, net recognized by New Residential related to its investments in MSRs was comprised of the following:
 
Three Months Ended June 30, 2017
 
Six Months Ended 
 June 30, 2017
Servicing fee revenue
$
120,432

 
$
185,901

Ancillary and other fees
24,982

 
27,170

Servicing fee revenue and fees
145,414

 
213,071

Amortization of servicing rights
(64,305
)
 
(90,601
)
Change in valuation inputs and assumptions
89,742

 
88,983

Servicing revenue, net
$
170,851

 
$
211,453

Interest income from investments in mortgage servicing rights financing receivable was comprised of the following:
 
Three Months Ended June 30, 2017
 
Six Months Ended 
 June 30, 2017
Servicing fee revenue
$
2,675

 
$
2,675

Ancillary and other fees
75

 
75

Less: subservicing expense
(294
)
 
(294
)
Interest income, investments in mortgage servicing rights financing receivable
$
2,456

 
$
2,456


Change in fair value of investments in mortgage servicing rights financing receivable was comprised of the following:
 
Three Months Ended June 30, 2017
 
Six Months Ended 
 June 30, 2017
Amortization of servicing rights
$
(1,127
)
 
$
(1,127
)
Change in valuation inputs and assumptions
6,723

 
6,723

Change in fair value of investments in mortgage servicing rights financing receivable
$
5,596

 
$
5,596

Schedule of Activity Related to the Carrying Value of Investments in Excess MSRs
The following table presents activity related to the carrying value of New Residential’s direct investments in Excess MSRs:
 
 
Servicer
 
 
Nationstar
 
SLS(A)
 
Ocwen(B)
 
Total
Balance as of December 31, 2016
 
$
611,293

 
$
3,935

 
$
784,227

 
$
1,399,455

Purchases
 

 

 

 

Interest income
 
21,263

 
(495
)
 
28,778

 
49,546

Other income
 
1,342

 

 

 
1,342

Proceeds from repayments
 
(62,691
)
 
(1,023
)
 
(63,604
)
 
(127,318
)
Change in fair value
 
215

 
339

 
(18,913
)
 
(18,359
)
Balance as of June 30, 2017
 
$
571,422

 
$
2,756

 
$
730,488

 
$
1,304,666


(A)
Specialized Loan Servicing LLC (“SLS”).
(B)
Ocwen Loan Servicing LLC, a subsidiary of Ocwen Financial Corporation (together with its subsidiaries, including Ocwen Loan Servicing LLC, “Ocwen”), services the loans underlying the Excess MSRs and Servicer Advances acquired from HLSS.

The following table presents activity related to the carrying value of New Residential’s investments in mortgage servicing rights financing receivable:
Balance as of December 31, 2016
 
$

Investments made
 
112,887

Amortization of servicing rights(A)
 
(1,127
)
Change in valuation inputs and assumptions
 
6,723

Balance as of June 30, 2017
 
$
118,483


(A)
Based on the ratio of the current UPB of the underlying residential mortgage loans relative to the original UPB of the underlying residential mortgage loans.

The following is a summary of New Residential’s investments in mortgage servicing rights financing receivable as of June 30, 2017:
 
UPB of Underlying Mortgages
 
Weighted Average Life (Years)(A)
 
Amortized Cost Basis
 
Carrying Value(B)
Agency
$
13,070,096

 
6.3
 
$
111,760

 
$
118,483


(A)
Weighted Average Life represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)
Carrying Value represents fair value. As of June 30, 2017, a weighted average discount rate of 11.0% was used to value New Residential’s investments in mortgage servicing rights financing receivable.

The following table presents activity related to the carrying value of New Residential’s investments in MSRs:
Balance as of December 31, 2016
 
$
659,483

Purchases
 
1,091,478

Amortization of servicing rights(A)
 
(90,601
)
Change in valuation inputs and assumptions
 
88,983

Balance as of June 30, 2017
 
$
1,749,343


(A)
Based on the ratio of the current UPB of the underlying residential mortgage loans relative to the original UPB of the underlying residential mortgage loans.

The following is a summary of New Residential’s investments in MSRs as of June 30, 2017:
 
UPB of Underlying Mortgages
 
Weighted Average Life (Years)(A)
 
Amortized Cost Basis
 
Carrying Value(B)
Agency
$
180,887,054

 
6.9
 
$
1,556,681

 
$
1,749,343

Non-Agency
67,944

 
7.0
 

 

Total
$
180,954,998

 
6.9
 
$
1,556,681

 
$
1,749,343


(A)
Weighted Average Life represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)
Carrying Value represents fair value. As of June 30, 2017, a weighted average discount rate of 10.5% was used to value New Residential’s investments in MSRs.
Summary of the Geographic Distribution of the Underlying Residential Mortgage Loans of the Direct Investment in MSRs
The table below summarizes the geographic distribution of the underlying residential mortgage loans of the investments in MSRs and mortgage servicing rights financing receivable:
 
 
Percentage of Total Outstanding Unpaid Principal Amount
State Concentration
 
June 30, 2017
 
December 31, 2016
California
 
20.7
%
 
20.5
%
Texas
 
6.0
%
 
6.3
%
New York
 
5.9
%
 
2.8
%
Florida
 
5.8
%
 
7.3
%
New Jersey
 
4.7
%
 
4.5
%
Illinois
 
4.3
%
 
4.1
%
Massachusetts
 
4.0
%
 
4.1
%
Michigan
 
3.9
%
 
3.1
%
Pennsylvania
 
3.1
%
 
2.9
%
Georgia
 
3.0
%
 
2.7
%
Other U.S.
 
38.6
%
 
41.7
%
 
 
100.0
%
 
100.0
%