Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS IN RESIDENTIAL MORTGAGE LOANS (Tables)

v3.7.0.1
INVESTMENTS IN RESIDENTIAL MORTGAGE LOANS (Tables)
6 Months Ended
Jun. 30, 2017
Receivables [Abstract]  
Schedule of Residential Mortgage Loans Outstanding by Loan Type, Excluding REO
The following table presents certain information regarding New Residential’s residential mortgage loans outstanding by loan type, excluding REO:


June 30, 2017
 
December 31, 2016


Outstanding Face Amount

Carrying
Value

Loan
Count

Weighted Average Yield

Weighted Average Life (Years)(A)

Floating Rate Loans as a % of Face Amount

Loan to Value Ratio (“LTV”)(B)

Weighted Avg. Delinquency(C)

Weighted Average FICO(D)
 
Carrying Value
Loan Type


















 

Reverse Mortgage Loans(E) (F)

$


$




%


%

%

%

N/A

 
$

Performing Loans(G)

589,962


527,098


8,294


8.0
%

5.5

18.8
%

84.3
%

8.4
%

652

 

Purchased Credit Deteriorated Loans(H)
 
319,239

 
230,323

 
2,572

 
5.5
%
 
3.3
 
14.7
%
 
87.2
%
 
86.9
%
 
597

 
190,761

Total Residential Mortgage Loans, held-for-investment

$
909,201

 
$
757,421

 
10,866


7.1
%

4.7

17.4
%

85.3
%

35.9
%

632

 
$
190,761

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse Mortgage Loans(E) (F)
 
$
20,481

 
$
10,709

 
59

 
6.8
%
 
4.6
 
15.7
%
 
137.0
%
 
76.1
%
 
N/A

 
$
11,468

Performing Loans(G) (I)
 
285,063

 
287,087

 
7,475

 
4.6
%
 
4.4
 
8.3
%
 
72.8
%
 
9.3
%
 
617

 
175,194

Non-Performing Loans(H) (I)
 
928,908

 
703,676

 
5,677

 
5.5
%
 
4.0
 
18.5
%
 
97.5
%
 
66.0
%
 
583

 
510,003

Total Residential Mortgage Loans, held-for-sale
 
$
1,234,452

 
$
1,001,472

 
13,211

 
5.3
%
 
4.1
 
16.1
%
 
92.5
%
 
53.1
%
 
591

 
$
696,665


(A)
The weighted average life is based on the expected timing of the receipt of cash flows.
(B)
LTV refers to the ratio comparing the loan’s unpaid principal balance to the value of the collateral property.
(C)
Represents the percentage of the total principal balance that is 60+ days delinquent.
(D)
The weighted average FICO score is based on the weighted average of information updated and provided by the loan servicer on a monthly basis.
(E)
Represents a 70% participation interest that New Residential holds in a portfolio of reverse mortgage loans. The average loan balance outstanding based on total UPB was $0.5 million. Approximately 61% of these loans have reached a termination event. As a result of the termination event, each such loan has matured and the borrower can no longer make draws on these loans.
(F)
FICO scores are not used in determining how much a borrower can access via a reverse mortgage loan.
(G)
Performing loans are generally placed on nonaccrual status when principal or interest is 120 days or more past due.
(H)
Includes loans with evidence of credit deterioration since origination where it is probable that New Residential will not collect all contractually required principal and interest payments. As of June 30, 2017, New Residential has placed Non-Performing Loans, held-for-sale on nonaccrual status, except as described in (I) below.
(I)
Includes $37.9 million and $76.5 million UPB of Ginnie Mae EBO performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.

Summary of the Geographic Distribution of the Underlying Residential Mortgage Loans
The table below summarizes the geographic distribution of the underlying residential mortgage loans:
 
 
Percentage of Total Outstanding Unpaid Principal Amount
State Concentration
 
June 30, 2017
 
December 31, 2016
New York
 
15.8
%
 
16.7
%
New Jersey
 
7.0
%
 
9.6
%
Florida
 
7.9
%
 
11.4
%
California
 
7.8
%
 
10.3
%
Texas
 
5.4
%
 
3.9
%
Maryland
 
3.1
%
 
4.7
%
Illinois
 
4.0
%
 
4.0
%
Massachusetts
 
3.3
%
 
3.5
%
Pennsylvania
 
3.8
%
 
2.9
%
Washington
 
2.1
%
 
2.8
%
Other U.S.
 
39.8
%
 
30.2
%
 
 
100.0
%
 
100.0
%
Schedule of Residential Mortgage Loan Transactions
The following table summarizes these transactions (dollars in millions).
 
 
 
 
Securities Owned Prior
 
Assets Acquired
 
 
 
Loans Sold (C)
 
Retained Bonds
 
Retained Assets (C)
Date of Call (A)
 
Number of Trusts Called
 
Face Amount
 
Amortized Cost Basis
 
Loan UPB
 
Loan Price (B)
 
REO & Other Price (B)
 
Date of Securitization
 
UPB
 
Gain (Loss)
 
Basis
 
Loan UPB
 
Loan Price
 
REO & Other Price
January 2017
 
2

 
$
49.3

 
$
43.6

 
$
98.8

 
$
96.7

 
$
7.5

 
N/A(C)
 
N/A(C)

 
N/A(C)

 
N/A(C)

 
N/A(C)

 
N/A(C)

 
N/A(C)

February 2017
 
31

 
60.9

 
40.1

 
882.0

 
895.5

 
10.1

 
March 2017
 
$
773.8

 
$
2.1

 
$
81.9

 
$
105.9

 
$
90.1

 
$
10.8

March 2017
 
12

 

 

 
222.4

 
228.8

 
0.4

 
N/A(C)
 
N/A(C)

 
N/A(C)

 
N/A(C)

 
27.7

 
25.7

 
0.4

April 2017
 

 

 

 

 

 

 
April 2017
 
668.0

 
10.3

 
76.1

 

 

 

April 2017
 
14

 
9.8

 
6.3

 
376.9

 
378.8

 
5.9

 
N/A(C)
 
N/A(C)

 
N/A(C)

 
N/A(C)

 
62.5

 
55.7

 
5.9

May 2017
 
15

 
26.4

 
16.9

 
420.5

 
424.4

 
3.7

 
June 2017#1
 
716.0

 
5.7

 
68.4

 
47.6

 
40.5

 
3.7

June 2017
 
20

 
1.0

 
0.5

 
534.8

 
549.8

 
0.8

 
June 2017#2
 
497.6

 
10.3

 
58.4

 
34.9

 
40.4

 
0.8

June 2017
 
3

 
28.2

 
17.3

 
101.7

 
106.6

 
1.9

 
N/A(C)
 
N/A(C)

 
N/A(C)

 
N/A(C)

 
N/A(C)

 
N/A(C)

 
N/A(C)


(A)
Any related securitization may occur on the same or a subsequent date, depending on market conditions and other factors.
(B)
Price includes par amount paid for all underlying residential mortgage loans of the trusts, plus the basis of the exercised call rights, plus advances and costs incurred (including MSR Fund Payments, as defined in Note 15) in exercising such call rights.
(C)
Loans were sold through a securitization which was treated as a sale for accounting purposes. Retained assets are reflected as of the date of the relevant securitization. The securitization that occurred in April 2017 primarily included loans from the March 2017 calls and other acquired loans. The June 2017#1 securitization primarily included loans from the April 2017 and May 2017 calls, but also included $31.1 million of previously acquired loans. No loans from the January 2017 calls and no loans from the last three June 2017 calls had been securitized by June 30, 2017. In May 2017, certain reperforming residential mortgage loans were financed with a securitization which was not treated as a sale for accounting purpose (see Variable Interest Entities below and Note 11).
Past Due Financing Receivable
The following table provides past due information regarding New Residential’s Performing Loans, which is an important indicator of credit quality and the establishment of the allowance for loan losses:
June 30, 2017
Days Past Due
 
Delinquency Status(A)
Current
 
47.4
%
30-59
 
44.2
%
60-89
 
8.4
%
90-119(B)
 
%
120+(C)
 
%
 
 
100.0
%

(A)
Represents the percentage of the total principal balance that corresponds to loans that are in each delinquency status.
(B)
Includes loans 90-119 days past due and still accruing interest because they are generally placed on nonaccrual status at 120 days or more past due.
(C)
Represents nonaccrual loans.
The following table provides past due information regarding New Residential’s performing consumer loans, held-for-investment, which is an important indicator of credit quality and the establishment of the allowance for loan losses:
June 30, 2017
Days Past Due
 
Delinquency Status(A)
Current
 
94.7
%
30-59
 
2.3
%
60-89
 
1.2
%
90-119(B)
 
0.7
%
120+(B) (C)
 
1.1
%
 
 
100.0
%

(A)
Represents the percentage of the total unpaid principal balance that corresponds to loans that are in each delinquency status.
(B)
Includes loans more than 90 days past due and still accruing interest.
(C)
Interest is accrued up to the date of charge-off at 180 days past due.

Summary of Activities Related to the Carrying Value of Reverse Mortgage Loans and Performing Loans and PCD Loans Held-for-Investment
Activities related to the carrying value of PCD loans held-for-investment were as follows:
Balance at December 31, 2016
$
190,761

Purchases/additional fundings
58,884

Sales

Proceeds from repayments
(15,277
)
Accretion of loan discount and other amortization
10,085

Transfer of loans to real estate owned
(14,130
)
Transfer of loans to held-for-sale

Balance at June 30, 2017
$
230,323

Activities related to the carrying value of residential mortgage loans held-for-investment were as follows:
 
Performing Loans
Balance at December 31, 2016
$

Purchases/additional fundings
527,098

Proceeds from repayments

Accretion of loan discount (premium) and other amortization(A)

Provision for loan losses

Transfer of loans to other assets

Transfer of loans to real estate owned

Balance at June 30, 2017
$
527,098


(A)
Includes accelerated accretion of discount on loans paid in full and on loans transferred to other assets.
Summary of Activities Related to the Valuation Provision on Reverse Mortgage Loans and Allowance for Loan Losses on Performing Loans Held-for-Investment
Activities related to the valuation and loss provision on reverse mortgage loans and allowance for loan losses on performing loans held-for-investment were as follows:
 
Performing Loans
Balance at December 31, 2016
$

Provision for loan losses(A)

Charge-offs(B)

Balance at June 30, 2017
$


(A)
Based on an analysis of collective borrower performance, credit ratings of borrowers, loan-to-value ratios, estimated value of the underlying collateral, key terms of the loans and historical and anticipated trends in defaults and loss severities at a pool level.
(B)
Loans, other than PCD loans, are generally charged off or charged down to the net realizable value of the collateral (i.e., fair value less costs to sell), with an offset to the allowance for loan losses, when available information confirms that loans are uncollectible.

Activities related to the allowance for loan losses on performing consumer loans, held-for-investment were as follows:
 
 
Collectively Evaluated(A)
 
Individually Impaired(B)
 
Total
Balance at December 31, 2016
 
$
2,441

 
$
997

 
$
3,438

Provision (reversal) for loan losses
 
36,845

 
275

 
37,120

Net charge-offs(C)
 
(35,314
)
 

 
(35,314
)
Balance at June 30, 2017
 
$
3,972

 
$
1,272

 
$
5,244


(A)
Represents smaller-balance homogeneous loans that are not individually considered impaired and are evaluated based on an analysis of collective borrower performance, key terms of the loans and historical and anticipated trends in defaults and loss severities, and consideration of the unamortized acquisition discount.
(B)
Represents consumer loan modifications considered to be troubled debt restructurings (“TDRs”) as they provide concessions to borrowers, primarily in the form of interest rate reductions, who are experiencing financial difficulty. As of June 30, 2017, there are $8.1 million in UPB and $8.2 million in carrying value of consumer loans classified as TDRs.
(C)
Consumer loans, other than PCD loans, are charged off when available information confirms that loans are uncollectible, which is generally when they become 180 days past due. Charge-offs are presented net of $4.8 million in recoveries of previously charged-off UPB.

Summary of Unpaid Principal Balance and Carrying Value for Loans Uncollectible
The following is the unpaid principal balance and carrying value for loans, for which, as of the acquisition date, it was probable that New Residential would be unable to collect all contractually required payments:
 
Unpaid Principal Balance
 
Carrying Value
June 30, 2017
$
319,239

 
$
230,323

December 31, 2016
203,673

 
190,761

Summary of Changes in Accretable Yield
The following is a summary of the changes in accretable yield for these loans:
Balance at December 31, 2016
$
23,688

Additions
21,454

Accretion
(10,085
)
Reclassifications from non-accretable difference(A)
3,750

Disposals(B)
(545
)
Transfer of loans to held-for-sale(C)

Balance at June 30, 2017
$
38,262


(A)
Represents a probable and significant increase in cash flows previously expected to be uncollectible.
(B)
Includes sales of loans or foreclosures, which result in removal of the loan from the PCD loan pool at its carrying amount.
(C)
Represents loans not initially acquired with the intent to sell for which New Residential determined that it no longer has the intent to hold for the foreseeable future, or until maturity or payoff.

Summary of Activities Related to the Carrying Value of Loans Held-for-sale
Activities related to the carrying value of loans held-for-sale were as follows:
 
 
For the  
 Six Months Ended 
 June 30, 2017
 
 
Loans Held-for-Sale
Balance at December 31, 2016
 
$
696,665

Purchases(A)
 
3,193,841

Transfer of loans from held-for-investment(B)
 

Sales
 
(2,782,877
)
Transfer of loans to other assets(C)
 
(10,135
)
Transfer of loans to real estate owned
 
(35,577
)
Proceeds from repayments
 
(57,167
)
Valuation (provision) reversal on loans(D)
 
(3,278
)
Balance at June 30, 2017
 
$
1,001,472


(A)
Represents loans acquired with the intent to sell.
(B)
Represents loans not initially acquired with the intent to sell for which New Residential determined that it no longer has the intent to hold for the foreseeable future, or until maturity or payoff.
(C)
Represents loans for which foreclosure has been completed and for which New Residential has made, or intends to make, a claim with the governmental agency that has guaranteed the loans that are now recognized as claims receivable in Other Assets (Note 2).
(D)
Represents the fair value adjustments to loans upon transfer to held-for-sale and provision recorded on certain purchased held-for-sale loans, including an aggregate of $8.1 million of provision related to the call transactions executed during the six months ended June 30, 2017.
Schedule of Real Estate Owned
New Residential recognizes REO assets at the completion of the foreclosure process or upon execution of a deed in lieu of foreclosure with the borrower. REO assets are managed for prompt sale and disposition at the best possible economic value.
 
 
Real Estate Owned
Balance at December 31, 2016
 
$
59,591

Purchases
 
19,168

Transfer of loans to real estate owned
 
61,319

Sales
 
(43,840
)
Valuation provision on REO
 
(746
)
Balance at June 30, 2017
 
$
95,492

Schedule of Assets and Liabilities Related to Consolidated Variable Interest Entities
The following table presents information on the combined assets and liabilities related to these consolidated VIEs.
 
 
As of
 
 
June 30, 2017
Assets
 
 
Residential mortgage loans
 
$
194,840

Other assets
 

Total assets(A)
 
$
194,840

Liabilities
 
 
Notes and bonds payable(B)
 
$
192,524

Accounts payable and accrued expenses
 
16

Total liabilities(A)
 
$
192,540


(A)
The creditors of the RPL Borrowers do not have recourse to the general credit of New Residential, and the assets of the RPL Borrowers are not directly available to satisfy New Residential’s obligations.
(B)
Includes $78.0 million of bonds retained by New Residential issued by these VIEs.

As described in “Call Rights” above, New Residential has issued securitizations which were treated as sales under GAAP. New Residential has no obligation to repurchase any loans from these securitizations and its exposure to loss is limited to the carrying amount of its retained interests in the securitization entities. These securitizations are conducted through variable interest entities, of which New Residential is not the primary beneficiary. The following table summarizes certain characteristics of the underlying residential mortgage loans, and related financing, in these securitizations as of June 30, 2017:
Residential mortgage loan UPB
 
$
4,631,527

Weighted average delinquency(A)
 
1.27
%
Net credit losses for the six months ended June 30, 2017
 
$
3,371

Face amount of debt held by third parties(B)
 
$
4,373,109

 
 
 
Carrying value of bonds retained by New Residential
 
$
409,391

Cash flows received by New Residential on these bonds for the six months ended June 30, 2017
 
$
34,510


(A)
Represents the percentage of the UPB that is 60+ days delinquent.
(B)
Excludes bonds retained by New Residential.

The following table presents information on the combined assets and liabilities related to these consolidated VIEs.
 
 
As of
 
 
June 30, 2017
Assets
 
 
Consumer loans, held-for-investment
 
$
1,447,008

Restricted cash
 
12,400

Accrued interest receivable
 
21,229

Total assets(A)
 
$
1,480,637

Liabilities
 
 
Notes and bonds payable(B)
 
$
1,450,605

Accounts payable and accrued expenses
 
850

Total liabilities(A)
 
$
1,451,455


(A)
The creditors of the Consumer Loan SPVs do not have recourse to the general credit of New Residential, and the assets of the Consumer Loan SPVs are not directly available to satisfy New Residential’s obligations.
(B)
Includes $121.0 million of bonds retained by New Residential issued by these VIEs.