INVESTMENTS IN REAL ESTATE SECURITIES
|9 Months Ended|
Sep. 30, 2013
|Investments In Real Estate Securities|
|INVESTMENTS IN REAL ESTATE SECURITIES||
4. INVESTMENTS IN REAL ESTATE SECURITIES
During 2013, New Residential acquired $661.2 million face amount of Non-Agency RMBS for approximately $450.0 million and $413.2 million face amount of Agency ARM RMBS for approximately $437.3 million. In addition, Newcastle contributed $1.0 billion face amount of Agency ARM RMBS to New Residential during this period. New Residential sold $153.5 million face amount of Non-Agency RMBS for approximately $123.1 million and recorded a gain of $11.3 million.
During the third quarter of 2013, Nationstar exercised their cleanup call option related to four Non-Agency RMBS deals, in which Nationstar was the master servicer. New Residential owned $2.6 million face amount of Non-Agency RMBS in these deals. New Residential received par on these securities, which had an amortized cost basis of $2.1 million prior to the repayment, and recorded interest income of $0.6 million related to these securities in the third quarter of 2013.
The following is a summary of New Residential’s real estate securities at September 30, 2013, all of which are classified as available-for-sale and are, therefore, reported at fair value with changes in fair value recorded in other comprehensive income.
Unrealized losses that are considered other than temporary are recognized currently in earnings. During the nine months ended September 30, 2013, New Residential recorded other-than-temporary impairment charges (“OTTI”) of $3.8 million with respect to real estate securities held prior to the spin-off on May 15, 2013. Based on Newcastle management’s analysis of these securities, Newcastle determined it did not have the intent to hold the securities past May 15, 2013. Any remaining unrealized losses on New Residential’s securities were primarily the result of changes in market factors, rather than issue-specific credit impairment. New Residential performed analyses in relation to such securities, using management’s best estimate of their cash flows, which support its belief that the carrying values of such securities were fully recoverable over their expected holding period. New Residential has no intent to sell, and is not more likely than not to be required to sell, these securities.
The following table summarizes New Residential’s securities in an unrealized loss position as of September 30, 2013.
The table below summarizes the geographic distribution of the collateral securing New Residential’s Non-Agency RMBS at September 30, 2013:
New Residential evaluates the credit quality of its real estate securities, as of the acquisition date, for evidence of credit quality deterioration. As a result, New Residential identified a population of real estate securities for which it was determined that it was probable that New Residential would be unable to collect all contractually required payments. For securities acquired during the nine months ended September 30, 2013, the face amount of these real estate securities was $549.4 million, with total expected cash flows of $442.2 million and a fair value of $354.4 million on the dates that New Residential purchased the respective securities.
The following is the outstanding face amount and carrying value for securities, for which, as of the acquisition date, it was probable that New Residential would be unable to collect all contractually required payments, at December 31, 2012 and September 30, 2013:
The following is a summary of the changes in accretable yield for these securities:
The entire disclosure for investments in certain debt and equity securities.
Reference 1: http://www.xbrl.org/2003/role/presentationRef