Quarterly report pursuant to Section 13 or 15(d)

SERVICER ADVANCE INVESTMENTS (Tables)

v3.19.3
SERVICER ADVANCE INVESTMENTS (Tables)
9 Months Ended
Sep. 30, 2019
Investments, All Other Investments [Abstract]  
Summary of Investments in Servicer Advances
The following types of advances are included in the Servicer Advances Receivable:
 
 
September 30, 2019
 
December 31, 2018
Principal and interest advances
 
$
723,155

 
$
793,790

Escrow advances (taxes and insurance advances)
 
1,945,271

 
2,186,831

Foreclosure advances
 
173,032

 
199,203

Total(A) (B) (C)
 
$
2,841,458

 
$
3,179,824


(A)
Includes $243.0 million and $231.2 million of servicer advances receivable related to Agency MSRs, respectively, recoverable from the Agencies.
(B)
Includes $62.7 million and $41.6 million of servicer advances receivable related to Ginnie Mae MSRs, respectively, recoverable from Ginnie Mae. Reserves for advances associated with Ginnie Mae loans in the MSR portfolio are considered in the MSR fair valuation through a nonreimbursable advance loss assumption.
(C)
Net of $70.3 million and $98.0 million, respectively, in accrual for advance recoveries.
The following is a summary of New Residential’s Servicer Advance Investments, including the right to the basic fee component of the related MSRs:
 
Amortized Cost Basis

Carrying Value(A)

Weighted Average Discount Rate
 
Weighted Average Yield

Weighted Average Life (Years)(B)
September 30, 2019
 
 
 
 
 
 
 
 
 
Servicer Advance Investments
$
570,570

 
$
600,547

 
5.1
%
 
5.7
%
 
6.3
As of December 31, 2018
 
 
 
 
 
 
 
 
 
Servicer Advance Investments
$
721,801

 
$
735,846

 
5.9
%
 
5.8
%
 
5.7
  
(A)
Carrying value represents the fair value of the Servicer Advance Investments, including the basic fee component of the related MSRs.
(B)
Weighted Average Life represents the weighted average expected timing of the receipt of expected net cash flows for this investment.

 
 
Three Months Ended 
 September 30,
 
Nine Months Ended  
 September 30,
 
 
2019

2018

2019

2018
Change in Fair Value of Servicer Advance Investments
 
$
6,641

 
$
(5,353
)
 
$
15,932

 
$
(86,581
)

The following is additional information regarding the Servicer Advance Investments and related financing:
 
 
 
 
 
 
 
 
 
Loan-to-Value (“LTV”)(A)
 
Cost of Funds(C)
 
UPB of Underlying Residential Mortgage Loans
 
Outstanding Servicer Advances
 
Servicer Advances to UPB of Underlying Residential Mortgage Loans
 
Face Amount of Notes and Bonds Payable
 
Gross
 
Net(B)
 
Gross
 
Net
September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicer Advance Investments(D)
$
33,406,320

 
$
492,480

 
1.5
%
 
$
449,731

 
87.3
%
 
86.1
%
 
3.8
%
 
3.1
%
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicer Advance Investments(D)
$
40,096,998

 
$
620,050

 
1.5
%
 
$
574,117

 
88.3
%
 
87.2
%
 
3.7
%
 
3.1
%
 
(A)
Based on outstanding servicer advances, excluding purchased but unsettled servicer advances.
(B)
Ratio of face amount of borrowings to par amount of servicer advance collateral, net of any general reserve.
(C)
Annualized measure of the cost associated with borrowings. Gross Cost of Funds primarily includes interest expense and facility fees. Net Cost of Funds excludes facility fees.
(D)
The following types of advances are included in the Servicer Advance Investments:


September 30, 2019

December 31, 2018
Principal and interest advances

$
82,999


$
108,317

Escrow advances (taxes and insurance advances)

185,774


238,349

Foreclosure advances

223,707


273,384

Total

$
492,480

 
$
620,050


Schedule of Interest Income Related to Investments in Servicer Advances
Interest income recognized by New Residential related to its Servicer Advance Investments was comprised of the following:


Three Months Ended 
 September 30,
 
Nine Months Ended  
 September 30,


2019

2018

2019

2018
Interest income, gross of amounts attributable to servicer compensation

$
14,212


$
21,183


$
43,220


$
63,731

Amounts attributable to base servicer compensation

(1,606
)

(2,347
)

(4,578
)

(6,354
)
Amounts attributable to incentive servicer compensation

(7,273
)

(7,095
)

(20,780
)

(14,255
)
Interest income from Servicer Advance Investments

$
5,333

 
$
11,741

 
$
17,862

 
$
43,122


New Residential has determined that the Buyer is a VIE. The following table presents information on the assets and liabilities related to this consolidated VIE.
 
 
As of
 
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
 
Servicer advance investments, at fair value
 
$
580,829

 
$
713,239

Cash and cash equivalents
 
36,457

 
29,833

All other assets
 
8,662

 
10,223

Total assets(A)
 
$
625,948

 
$
753,295

Liabilities
 
 
 
 
Notes and bonds payable
 
$
435,935

 
$
556,340

All other liabilities
 
2,021

 
2,442

Total liabilities(A)
 
$
437,956

 
$
558,782


(A)
The creditors of the Buyer do not have recourse to the general credit of New Residential and the assets of the Buyer are not directly available to satisfy New Residential’s obligations.

Others’ interests in the equity of the Buyer is computed as follows:
 
 
September 30, 2019
 
December 31, 2018
Total Advance Purchaser LLC equity
 
$
187,992

 
$
194,513

Others’ ownership interest
 
26.8
%
 
26.8
%
Others’ interest in equity of consolidated subsidiary
 
$
50,319

 
$
52,066


Others’ interests in the Buyer’s net income is computed as follows:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended  
 September 30,
 
 
2019
 
2018
 
2019
 
2018
Net Advance Purchaser LLC income
 
$
6,288

 
$
(299
)
 
$
16,678

 
$
8,667

Others’ ownership interest as a percent of total
 
26.8
%
 
27.1
%
 
26.8
%
 
27.2
%
Others’ interest in net income of consolidated subsidiaries
 
$
1,684

 
$
(81
)
 
$
4,466

 
$
2,358


 
Three Months Ended 
 September 30,
 
Nine Months Ended  
 September 30,
 
2019
 
2018
 
2019
 
2018
Interest Income:
 
 
 
 
 
 
 
Acquired Residential Mortgage Loans, held-for-investment
$
14,532

 
$
19,466

 
$
47,167

 
$
58,689

Acquired Residential Mortgage Loans, held-for-sale
15,966

 
7,433

 
43,423

 
30,001

Acquired Residential Mortgage Loans, held-for-sale, at fair value
43,288

 
15,453

 
96,393

 
28,344

Originated Residential Mortgage Loans, held-for-sale, at fair value
13,185

 
6,430

 
32,926

 
6,430

Total Interest Income on Residential Mortgage Loans
86,971

 
48,782

 
219,909

 
123,464

 
 
 
 
 
 
 
 
Interest Expense:
 
 
 
 
 
 
 
Acquired Residential Mortgage Loans, held-for-investment
3,953

 
6,537

 
15,717

 
17,447

Acquired Residential Mortgage Loans, held-for-sale
9,357

 
8,306

 
26,873

 
26,264

Acquired Residential Mortgage Loans, held-for-sale, at fair value
30,053

 
7,531

 
77,247

 
13,588

Originated Residential Mortgage Loans, held-for-sale,at fair value
2,344

 
1,288

 
6,451

 
1,288

Total Interest Expense on Residential Mortgage Loans
45,707

 
23,662

 
126,288

 
58,587

 
 
 
 
 
 
 
 
Total Net Interest Income on Residential Mortgage Loans
$
41,264

 
$
25,120

 
$
93,621

 
$
64,877