Annual report pursuant to Section 13 and 15(d)

EXCESS MORTGAGE SERVICING RIGHTS (Tables)

v3.20.4
EXCESS MORTGAGE SERVICING RIGHTS (Tables)
12 Months Ended
Dec. 31, 2020
Transfers and Servicing [Abstract]  
Schedule of Servicing Assets at Fair Value The table below summarizes the components of excess mortgage servicing rights assets as presented on the consolidated balance sheets:
Year Ended December 31,
2020 2019
Direct investments in Excess MSRs $ 310,938  $ 379,747 
Excess MSR Joint Ventures 99,917  125,596 
Excess mortgage servicing rights assets, at fair value $ 410,855  $ 505,343 
The following table presents activity related to the carrying value of New Residential’s direct investments in Excess MSRs:
Servicer
Mr. Cooper
SLS(A)
Total
Balance as of December 31, 2018 $ 445,328  $ 2,532  $ 447,860 
Interest income 32,587  60  32,647 
Other income 3,851  —  3,851 
Proceeds from repayments (83,612) (419) (84,031)
Proceeds from sales (10,075) —  (10,075)
Change in fair value (10,387) (118) (10,505)
Balance as of December 31, 2019 377,692  2,055  379,747 
Interest income 28,217  135  28,352 
Other income (12,123) —  (12,123)
Proceeds from repayments (67,340) (405) (67,745)
Proceeds from sales (1,061) —  (1,061)
Change in fair value (16,376) 144  (16,232)
Balance as of December 31, 2020 $ 309,009  $ 1,929  $ 310,938 
(A)Specialized Loan Servicing LLC (“SLS”).
Changes in fair value recorded in other income is composed of the following:
Year Ended December 31,
2020 2019 2018
Original and Recaptured Pools $ (16,232) $ (10,505) $ (58,656)
The following table presents activity related to the carrying value of New Residential’s MSRs and MSR Financing Receivables:
MSRs MSR Financing Receivables Total
Balance as of December 31, 2018 $ 2,884,100  $ 1,644,504  $ 4,528,604 
Purchases, net(A)
678,424  652,902  1,331,326 
Transfers(B)
367,121  (367,121) — 
Other transfers(C)
(410) —  (410)
Ditech Acquisition (Note 3) 387,170  —  387,170 
Originations(D)
374,450  —  374,450 
Proceeds from sales (1,539) (22,989) (24,528)
Change in fair value due to:
Realization of cash flows(E)
(537,111) (203,732) (740,843)
Change in valuation inputs and assumptions(F)
(187,530) 21,094  (166,436)
  (Gain) loss realized 3,285  (6,385) (3,100)
Balance as of December 31, 2019 $ 3,967,960  $ 1,718,273  $ 5,686,233 
Purchases, net(A)
449,875  (18,267) 431,608 
Transfers (G)
320,613  (320,613) — 
Originations(D)
666,414  —  666,414 
Proceeds from sales (11,282) (4,059) (15,341)
Change in fair value due to:
Realization of cash flows(E)
(1,369,607) (222,674) (1,592,281)
Change in valuation inputs and assumptions(F)
(536,694) (54,745) (591,439)
  (Gain) loss realized 2,396  (1,749) 647 
Balance as of December 31, 2020 $ 3,489,675  $ 1,096,166  $ 4,585,841 
(A)Net of purchase price adjustments and purchase price fully reimbursable from MSR sellers as a result of prepayment protection.
(B)Represents MSRs previously accounted for as MSR Financing Receivables. As a result of the length of the initial term of the related subservicing agreement between NRM and PHH, although the MSRs were legally sold, solely for accounting purposes, the purchase agreement was not treated as a sale under GAAP through June 30, 2019.
(C)Represents Ginnie Mae MSRs repurchased.
(D)Represents MSRs retained on the sale of originated mortgage loans.
(E)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.
(F)Includes changes in inputs or assumptions used in the valuation model.
(G)Represents MSRs previously accounted for as MSR Financing Receivables. As a result of the length of prepayment protection between NRM and MSR sellers, although the MSRs were legally sold, solely for accounting purposes, the purchase agreement was not treated as a sale under GAAP through June 30, 2020.
The following is a summary of New Residential’s MSRs and MSR Financing Receivables as of December 31, 2020 and 2019:
UPB of Underlying Mortgages
Weighted Average Life (Years)(A)
Carrying Value(B)
2020
MSRs:
Agency(C)
$ 300,200,826  5.1 $ 2,799,728 
Non-Agency 5,962,225  4.2 17,512 
Ginnie Mae 57,106,825  4.1 672,435 
MSR Financing Receivables:
Agency(C)
5,517,730  5.2 49,275 
Non-Agency 66,648,221  8.0 1,046,891 
Total $ 435,435,827  5.4 $ 4,585,841 
2019
MSRs:
Agency(C)
$ 315,427,933  5.1 $ 3,319,035 
Non-Agency 6,402,833  5.4 20,283 
Ginnie Mae 52,019,295  4.6 628,642 
MSR Financing Receivables:
Agency(C)
54,866,978  4.7 547,351 
Non-Agency 76,117,892  7.6 1,170,922 
Total $ 504,834,931  5.4 $ 5,686,233 
(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)Carrying Value represents fair value. As of December 31, 2020 and 2019, weighted average discount rates of 7.7% (range of 7.3%-13.0%) and 7.8%, respectively, were used to value New Residential’s MSRs, respectively. As of December 31, 2020 and 2019, weighted average discount rates of 9.4% (range of 7.4%-9.5%) and 8.9%, respectively, were used to value New Residential’s MSR Financing Receivables.
(C)Represents Fannie Mae and Freddie Mac MSRs.
Servicing Asset at Amortized Cost
The following is a summary of New Residential’s direct investments in Excess MSRs:
December 31, 2020
UPB of Underlying Mortgages Interest in Excess MSR
Weighted Average Life Years(A)
Amortized Cost Basis(B)
Carrying Value(C)
New Residential(D)
Fortress-managed funds Mr. Cooper
Agency
Original and Recaptured Pools $ 34,593,406 
32.5% - 66.7% (53.3%)
—% - 40.0%
20.0% - 35.0%
5.9 $ 141,204  $ 162,645 
Non-Agency(E)
Mr. Cooper and SLS Serviced:
Original and Recaptured Pools 38,095,499 
33.3% - 100.0% (59.4%)
—% - 50.0%
—% - 33.3%
6.5 109,697  148,293 
Total $ 72,688,905  $ 250,901  $ 310,938 
December 31, 2019
UPB of Underlying Mortgages Interest in Excess MSR
Weighted Average Life Years(A)
Amortized Cost Basis(B)
Carrying Value(C)
New Residential(D)
Fortress-managed funds Mr. Cooper
Agency
Original and Recaptured Pools $ 43,310,917 
32.5% - 66.7%
(53.3)%
—% - 40.0%
20.0% - 35.0%
5.5 $ 178,603  $ 209,633 
Non-Agency(E)
Mr. Cooper and SLS Serviced:
Original and Recaptured Pools 45,034,320 
33.3% - 100.0%
(59.4)%
—% - 50.0%
—% - 33.3%
6.5 124,875  170,114 
Total $ 88,345,237  $ 303,478  $ 379,747 
(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)The amortized cost basis of the recapture agreements is determined based on the relative fair values of the recapture agreements and related Excess MSRs at the time they were acquired.
(C)Carrying Value represents the fair value of the pools and recapture agreements, as applicable.
(D)Amounts in parentheses represent weighted averages.
(E)New Residential is also invested in related Servicer Advance Investments, including the basic fee component of the related MSR as of December 31, 2020 and 2019 (Note 7) on $26.1 billion and $31.4 billion UPB, respectively, underlying these Excess MSRs.
Summary of the Financial Results of Excess MSR Joint Ventures, Accounted for as Equity Method Investees
The following tables summarize the financial results of the Excess MSR joint ventures, accounted for as equity method investees, held by New Residential:
December 31,
2020 2019
Excess MSR assets $ 179,762  $ 226,843 
Other assets 20,759  25,035 
Other liabilities (687) (687)
Equity $ 199,834  $ 251,191 
New Residential’s investment $ 99,917  $ 125,596 
New Residential’s percentage ownership 50.0  % 50.0  %
Year Ended December 31,
2020 2019 2018
Interest income $ 22,507  $ 23,872  $ 26,363 
Other income (loss) (29,461) (10,208) (9,649)
Expenses (24) (64) — 
Net income $ (6,978) $ 13,600  $ 16,714 

The following table summarizes the activity of New Residential’s investments in equity method investees:
December 31,
2020 2019
Balance at beginning of period $ 125,596  $ 147,964 
Contributions to equity method investees —  — 
Distributions of earnings from equity method investees (1,170) (8,999)
Distributions of capital from equity method investees (21,020) (20,169)
Change in fair value of investments in equity method investees (3,489) 6,800 
Balance at end of period $ 99,917  $ 125,596 
Summary of Excess MSR Investments made through Equity Method Investees
The following is a summary of New Residential’s Excess MSR investments made through equity method investees:
December 31, 2020
Unpaid Principal Balance
Investee Interest in Excess MSR(A)
New Residential Interest in Investees
Amortized Cost Basis(B)
Carrying Value(C)
Weighted Average Life (Years)(D)
Agency
Original and Recaptured Pools $ 28,453,512  66.7% 50.0% $ 139,251  $ 179,762  5.8
December 31, 2019
Unpaid Principal Balance
Investee Interest in Excess MSR(A)
New Residential Interest in Investees
Amortized Cost Basis(B)
Carrying Value(C)
Weighted Average Life (Years)(D)
Agency
Original and Recaptured Pools $ 33,592,554  66.7% 50.0% $ 168,807  $ 226,843  5.4
(A)The remaining interests are held by Mr. Cooper.
(B)Represents the amortized cost basis of the equity method investees in which New Residential holds a 50% interest. The amortized cost basis of the recapture agreements is determined based on the relative fair values of the recapture agreements and related Excess MSRs at the time they were acquired.
(C)Represents the carrying value of the Excess MSRs held in equity method investees, in which New Residential holds a 50% interest. Carrying value represents the fair value of the pools and recapture agreements, as applicable.
(D)Represents the weighted average expected timing of the receipt of cash flows of each investment.