Annual report pursuant to Section 13 and 15(d)

INVESTMENTS IN RESIDENTIAL MORTGAGE LOANS AND REAL ESTATE OWNED (Tables)

v3.19.3.a.u2
INVESTMENTS IN RESIDENTIAL MORTGAGE LOANS AND REAL ESTATE OWNED (Tables)
12 Months Ended
Dec. 31, 2019
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:
December 31, 2019
Outstanding Face Amount
 
Carrying
Value
 
Loan
Count
 
Weighted Average Yield
 
Weighted Average Life (Years)(A)
 
Floating Rate Loans as a % of Face Amount
 
LTV Ratio(B)
 
Weighted Avg. Delinquency(C)
 
Weighted Average FICO(D)
Loan Type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performing Loans(G) (J)
$
858,703

 
$
859,428

 
13,627

 
6.9
%
 
5.3
 
8.8
%
 
76.1
%
 
15.8
%
 
646

Purchased Credit Deteriorated Loans(H)
96,420

 
66,278

 
945

 
8.5
%
 
3.2
 
21.8
%
 
91.1
%
 
60.0
%
 
588

Total Residential Mortgage Loans, held-for-investment
$
955,123

 
$
925,706

 
14,572

 
7.1
%
 
5.1
 
10.1
%
 
77.6
%
 
20.2
%
 
641

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse Mortgage Loans(E) (F)
$
11,628

 
$
5,844

 
28

 
7.9
%
 
4.6
 
5.7
%
 
149.9
%
 
69.5
%
 
N/A

Performing Loans(G) (I)
839,141

 
857,821

 
12,808

 
4.5
%
 
4.0
 
62.7
%
 
50.1
%
 
7.8
%
 
688

Non-Performing Loans(H) (I)
680,736

 
565,387

 
5,032

 
5.2
%
 
3.1
 
11.8
%
 
73.8
%
 
77.3
%
 
587

Total Residential Mortgage Loans, held-for-sale
$
1,531,505

 
$
1,429,052

 
17,868

 
4.9
%
 
3.6
 
39.7
%
 
61.4
%
 
39.2
%
 
643

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired Loans
3,132,007

 
3,024,288

 
19,204

 
4.0
%
 
7.0
 
3.3
%
 
62.2
%
 
23.1
%
 
626

Originated Loans
1,543,799

 
1,589,324

 
5,806

 
3.8
%
 
28.6
 
3.5
%
 
79.0
%
 
8.2
%
 
674

Total Residential Mortgage Loans, held-for-sale, at fair value(K)
$
4,675,806

 
$
4,613,612

 
25,010

 
4.0
%
 
14.1
 
3.4
%
 
67.8
%
 
18.2
%
 
642

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan Type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performing Loans(G) (J)
$
636,874

 
$
591,264

 
8,424

 
8.0
%
 
4.8
 
20.3
%
 
77.7
%
 
8.9
%
 
649

Purchased Credit Deteriorated Loans(H)
191,497

 
144,065

 
1,556

 
7.6
%
 
3.1
 
16.4
%
 
84.6
%
 
71.5
%
 
596

Total Residential Mortgage Loans, held-for-investment
$
828,371

 
$
735,329

 
9,980

 
7.9
%
 
4.4
 
19.4
%
 
79.3
%
 
23.3
%
 
637

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse Mortgage Loans(E) (F)
$
13,807

 
$
6,557

 
37

 
8.1
%
 
4.8
 
10.6
%
 
142.5
%
 
67.8
%
 
N/A

Performing Loans(G) (I)
408,724

 
413,883

 
7,144

 
4.4
%
 
3.9
 
56.6
%
 
61.3
%
 
9.0
%
 
670

Non-Performing Loans(H) (I)
621,700

 
512,040

 
5,029

 
5.5
%
 
3.0
 
14.9
%
 
88.1
%
 
72.6
%
 
588

Total Residential Mortgage Loans, held-for-sale
$
1,044,231

 
$
932,480

 
12,210

 
5.1
%
 
3.4
 
31.2
%
 
78.3
%
 
47.6
%
 
621

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired Loans
2,295,340

 
2,153,269

 
12,873

 
4.5
%
 
8.0
 
7.7
%
 
75.7
%
 
14.0
%
 
626

Originated Loans
638,173

 
655,260

 
2,307

 
5.2
%
 
28.5
 
96.3
%
 
80.0
%
 
3.8
%
 
714

Total Residential Mortgage Loans, held-for-sale, at fair value(K)
$
2,933,513

 
$
2,808,529

 
15,180

 
4.6
%
 
12.5
 
27.0
%
 
76.6
%
 
11.8
%
 
645


(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. Mr. Cooper holds the other 30% interest and services the loans. The average loan balance outstanding based on total UPB was $0.6 million and $0.5 million at December 31, 2019 and 2018, respectively. Approximately 45.6% and 54.9% of these loans have reached a termination event at December 31, 2019 and 2018, respectively. 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 December 31, 2019, New Residential has placed Non-Performing Loans, held-for-sale on nonaccrual status, except as described in (J) below.
(I)
Includes $36.0 million and $26.9 million UPB of Ginnie Mae EBO performing and non-performing loans as of December 31, 2019, respectively, on accrual status as contractual cash flows are guaranteed by the FHA. As of December 31, 2018, these amounts were $24.3 million and $51.9 million, respectively.
(J)
Includes $107.7 million and $345.1 million UPB of non-agency mortgage loans underlying the SAFT 2013-1 securitization and MDST Trusts, respectively, which are carried at fair value based on New Residential’s election of the fair value option. Interest earned on loans measured at fair value are reported in other income.
(K)
New Residential elected the fair value option to measure these loans at fair value on a recurring basis. Interest earned on loans measured at fair value are reported in other income.
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
 
 
December 31,
State Concentration
 
2019
 
2018
California
 
16.1
%
 
16.7
%
New York
 
9.0
%
 
11.7
%
Florida
 
8.4
%
 
8.8
%
Texas
 
7.1
%
 
4.7
%
Georgia
 
4.8
%
 
2.7
%
New Jersey
 
4.2
%
 
5.3
%
Illinois
 
3.6
%
 
4.0
%
Maryland
 
3.3
%
 
3.6
%
Massachusetts
 
3.3
%
 
3.1
%
Pennsylvania
 
2.9
%
 
3.1
%
Other U.S.
 
37.3
%
 
36.3
%
 
 
100.0
%
 
100.0
%

Past Due Financing Receivables
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:
December 31, 2019
Days Past Due
 
Delinquency Status(A)
Current
 
86.5
%
30-59
 
7.0
%
60-89
 
2.7
%
90-119(B)
 
0.7
%
120+(C)
 
3.1
%
 
 
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:
December 31, 2019
Days Past Due
 
Delinquency Status(A)
Current
 
95.3
%
30-59
 
1.8
%
60-89
 
1.2
%
90-119(B)
 
0.7
%
120+(B) (C)
 
1.0
%
 
 
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, 2017
$
183,540

Purchases/additional fundings
29,785

Sales

Proceeds from repayments
(38,276
)
Accretion of loan discount and other amortization
24,124

(Allowance) reversal for loan losses(A)

Transfer of loans to real estate owned
(28,060
)
Transfer of loans to held-for-sale
(27,048
)
Balance at December 31, 2018
$
144,065

Purchases/additional fundings

Sales

Proceeds from repayments
(16,855
)
Accretion of loan discount and other amortization
16,041

(Allowance) reversal for loan losses
(2,332
)
Transfer of loans to real estate owned
(14,487
)
Transfer of loans to held-for-sale
(60,154
)
Balance at December 31, 2019
$
66,278



(A)
An allowance represents the present value of cash flows expected at acquisition that are no longer expected to be collected. A reversal results from an increase to expected cash flows that reverses a prior allowance.

Activities related to the carrying value of performing residential mortgage loans held-for-investment were as follows:
 
 
Performing Loans
Balance at December 31, 2017
 
$
507,615

Shellpoint Acquisition
 
125,350

Purchases/additional fundings
 
55,993

Proceeds from repayments
 
(106,236
)
Accretion of loan discount (premium) and other amortization(A)
 
15,773

Provision for loan losses
 
(1,028
)
Transfer of loans to other assets(B)
 

Transfer of loans to real estate owned
 
(5,131
)
Transfers of loans to held for sale
 
(1,555
)
Fair value adjustment
 
472

Balance at December 31, 2018
 
$
591,253

Ditech Acquisition(C)
 
381,039

Purchases/additional fundings
 

Proceeds from repayments
 
(102,340
)
Accretion of loan discount (premium) and other amortization(A)
 
12,661

Provision for loan losses
 
(595
)
Transfer of loans to other assets(B)
 

Transfer of loans to real estate owned
 
(6,223
)
Transfers of loans to held for sale
 
(20,505
)
Fair value adjustment
 
4,138

Balance at December 31, 2019
 
$
859,428



(A)
Includes accelerated accretion of discount on loans paid in full and on loans transferred to other assets.
(B)
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).
(C)
As a result of the Ditech Acquisition, New Residential acquired the servicing on certain residual tranches of Non-Agency RMBS it already owned, and now consolidates the trusts.

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, 2017
 
$
196

Provision for loan losses(A)
 
1,028

Charge-offs(B)
 
(1,224
)
Balance at December 31, 2018
 
$

Provision for loan losses(A)
 
595

Charge-offs(B)
 
(595
)
Balance at December 31, 2019
 
$


(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, 2017
 
$
4,429

 
$
1,676

 
$
6,105

Provision (reversal) for loan losses
 
47,839

 
388

 
48,227

Net charge-offs(C)
 
(49,664
)
 

 
(49,664
)
Balance at December 31, 2018
 
$
2,604

 
$
2,064

 
$
4,668

Provision (reversal) for loan losses
 
30,008

 
846

 
30,854

Net charge-offs(C)
 
(32,057
)
 

 
(32,057
)
Balance at December 31, 2019
 
$
555

 
$
2,910

 
$
3,465


(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 December 31, 2019, there are $18.0 million in UPB and $15.9 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 $8.6 million and $9.0 million in recoveries of previously charged-off UPB in 2019 and 2018, respectively.

Summary of Changes in Accretable Yield
The following is a summary of the changes in accretable yield for these loans:
Balance at December 31, 2017
$
88,631

Additions
15,644

Accretion
(24,124
)
Reclassifications from non-accretable difference(A)
5,493

Disposals(B)
(7,257
)
Transfer of loans to held-for-sale(C)
(9,755
)
Balance at December 31, 2018
$
68,632

Additions

Accretion
(16,041
)
Reclassifications from (to) non-accretable difference(A)
9,361

Disposals(B)
(11,515
)
Transfer of loans to held-for-sale(C)
(13,415
)
Balance at December 31, 2019
$
37,022


(A)
Represents a probable and significant increase (decrease) 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, at lower of cost or fair value were as follows:
Balance at December 31, 2017
$
1,725,534

Purchases(A)
3,653,608

Transfer of loans from held-for-investment(B)
28,603

Sales
(4,205,375
)
Transfer of loans to other assets(C)
(9,811
)
Transfer of loans to real estate owned
(54,114
)
Proceeds from repayments
(195,797
)
Valuation (provision) reversal on loans(D)
(10,168
)
Balance at December 31, 2018
$
932,480

Purchases(A)
1,124,099

Ditech Acquisition
9,136

Transfer of loans from held-for-investment(B)
80,659

Sales
(495,925
)
Transfer of loans to other assets(C)
(10,154
)
Transfer of loans to real estate owned
(49,459
)
Proceeds from repayments
(184,683
)
Valuation (provision) reversal on loans(D)
22,899

Balance at December 31, 2019
$
1,429,052


(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 $5.2 million and $59.2 million of provision related to the call transactions executed during the years ended December 31, 2019 and 2018, respectively.

Schedule of Loans Held For Sale, Fair Value
Activities related to the carrying value of originated loans held-for-sale, at fair value were as follows:
Balance at December 31, 2018
 
$
655,260

Originations
 
19,512,072

Ditech Acquisition
 
618,297

Sales
 
(19,176,028
)
Proceeds from repayments
 
(48,626
)
Transfer of loans to other assets
 
(412
)
Change in fair value
 
28,761

Balance at December 31, 2019
 
$
1,589,324


Activities related to the carrying value of acquired loans held-for-sale, at fair value were as follows:
Balance at December 31, 2018
 
$
2,153,269

Purchases(A)
 
7,499,614

Sales
 
(6,362,077
)
Proceeds from repayments
 
(187,311
)
Transfer of loans to real estate owned
 
(4,155
)
Accretion of loan discount and other amortization
 

Change in fair value
 
(75,052
)
Balance at December 31, 2019
 
$
3,024,288



(A)
Includes an acquisition date fair value adjustment increase of $13.3 million on loans acquired through call transactions executed during the twelve months ending December 31, 2019.

Schedule of Net Interest Income
Interest income recognized by New Residential related to its Servicer Advance Investments was comprised of the following:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Interest income, gross of amounts attributable to servicer compensation
$
51,940

 
$
83,807

 
$
871,506

Amounts attributable to base servicer compensation
(6,209
)
 
(8,491
)
 
(227,585
)
Amounts attributable to incentive servicer compensation
(18,065
)
 
(25,098
)
 
(115,565
)
Interest income from Servicer Advance Investments
$
27,666

 
$
50,218

 
$
528,356


Net Interest Income
 
 
December 31,
 
 
2019
 
2018
Interest Income:
 
 
 
 
Acquired Residential Mortgage Loans, held-for-investment
 
$
60,301

 
$
76,129

Acquired Residential Mortgage Loans, held-for-sale
 
65,926

 
45,653

Acquired Residential Mortgage Loans, held-for-sale, at fair value
 
123,446

 
35,904

Originated Residential Mortgage Loans, held-for-sale, at fair value
 
52,480

 
15,658

Total Interest Income on Residential Mortgage Loans
 
302,153

 
173,344

 
 
 
 
 
Interest Expense:
 
 
 
 
Acquired Residential Mortgage Loans, held-for-investment
 
19,381

 
23,618

Acquired Residential Mortgage Loans, held-for-sale
 
40,067

 
35,796

Acquired Residential Mortgage Loans, held-for-sale, at fair value
 
98,850

 
21,496

Originated Residential Mortgage Loans, held-for-sale,at fair value
 
10,873

 
2,690

Total Interest Expense on Residential Mortgage Loans
 
169,171

 
83,600

 
 
 
 
 
Total Net Interest Income on Residential Mortgage Loans
 
$
132,982

 
$
89,744


Schedule of Originated Mortgage Loans is summarized below:
 
 
Year Ended December 31,
 
 
2019
 
2018(A)
Gain on loans originated and sold, net(B)
 
$
53,554

 
$
47,172

Gain (loss) on settlement of mortgage loan origination derivative instruments(C)
 
(53,374
)
 
1,234

MSRs retained on transfer of loans(D)
 
374,450

 
35,311

Other(E)
 
42,912

 
14,057

Realized gain on sale of originated mortgage loans, net
 
$
417,542

 
$
97,774

Change in fair value of loans
 
28,761

 
3,695

Change in fair value of interest rate lock commitments (Note 11)
 
26,151

 
23

Change in fair value of derivative instruments (Note 11)
 
3,001

 
(5,347
)
Gain on originated mortgage loans, held-for-sale, net
 
$
475,455

 
$
96,145


(A)
Includes results from July 3, 2018, the date of acquisition.
(B)
Includes loan origination fees of $421.3 million and $21.8 million in the years ended December 31, 2019 and December 31, 2018, respectively.
(C)
Represents settlement of forward securities delivery commitments utilized as an economic hedge for mortgage loans not included within forward loan sale commitments.
(D)
Represents the initial fair value of the capitalized mortgage servicing rights upon loan sales with servicing retained.
(E)
Includes fees for services associated with the loan origination process.
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, 2017
 
$
128,295

Purchases
 
33,377

Transfer of loans to real estate owned
 
107,577

Sales(A)
 
(152,725
)
Valuation provision on REO
 
(3,114
)
Balance at December 31, 2018
 
$
113,410

Purchases
 
68,024

Transfer of loans to real estate owned
 
86,167

Sales(A)
 
(150,431
)
Valuation (provision) reversal on REO
 
635

Balance at December 31, 2019
 
$
117,805



(A)
Recognized when control of the property has transferred to the buyer.