Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS IN REAL ESTATE SECURITIES (Tables)

v2.4.0.8
INVESTMENTS IN REAL ESTATE SECURITIES (Tables)
9 Months Ended
Sep. 30, 2014
Investments, Debt and Equity Securities [Abstract]  
Schedule of Real Estate Securities
The following is a summary of New Residential’s real estate securities as of September 30, 2014, 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, except for securities that are other-than-temporarily impaired.
 
 
 
 
 
 
Gross Unrealized
 
 
 
 
 
Weighted Average
 
December 31, 2013
Asset Type
 
Outstanding Face Amount
 
Amortized Cost Basis
 
Gains
 
Losses
 
Carrying Value(A)
 
Number of Securities
 
Rating(B)
 
Coupon
 
Yield
 
Life (Years)(C)
 
Principal Subordination(D)
 
Carrying Value
Agency
  RMBS(E)(F)(G)
 
$
1,697,608

 
$
1,785,873

 
$
4,504

 
$
(5,294
)
 
$
1,785,083

 
104

 
AAA
 
3.19
%
 
1.87
%
 
6.1
 
N/A

 
$
1,402,764

Non-Agency
    RMBS(H)
 
432,762

 
287,211

 
9,876

 
(2,458
)
 
294,629

 
84

 
CCC
 
1.72
%
 
5.63
%
 
7.7
 
12.2
%
 
570,425

Total/
   Weighted
    Average
 
$
2,130,370

 
$
2,073,084

 
$
14,380

 
$
(7,752
)
 
$
2,079,712

 
188

 
AA-
 
2.89
%
 
2.63
%
 
6.4
 
 

 
$
1,973,189

 
(A)
Fair value, which is equal to carrying value for all securities. See Note 12 regarding the estimation of fair value.
(B)
Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. This excludes the ratings of the collateral underlying six bonds for which New Residential was unable to obtain rating information. For each security rated by multiple rating agencies, the lowest rating is used. New Residential used an implied AAA rating for the Agency RMBS. Ratings provided were determined by third party rating agencies, and represent the most recent credit ratings available as of the reporting date and may not be current.
(C)
The weighted average life is based on the timing of expected principal reduction on the assets.
(D)
Percentage of the outstanding face amount of securities that is subordinate to New Residential’s investments.
(E)
Includes securities issued or guaranteed by U.S. Government agencies such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”).
(F)
Amortized cost basis and carrying value include principal receivable of $6.4 million.
(G)
The total outstanding face amount was $1.0 billion for fixed rate securities and $657.4 million for floating rate securities.
(H)
The total outstanding face amount was $18.3 million for fixed rate securities and $414.5 million for floating rate securities.
Schedule of Real Estate Securities in an Unrealized Loss Position
The following table summarizes New Residential’s securities in an unrealized loss position as of September 30, 2014.
 
 
 
 
Amortized Cost Basis
 
 
 
 
 
 
 
Weighted Average
Securities in an Unrealized Loss Position
 
Outstanding Face Amount
 
Before Impairment
 
Other-Than-
Temporary Impairment(A)
 
After Impairment
 
Gross Unrealized Losses
 
Carrying Value
 
Number of Securities
 
Rating(B)
 
Coupon
 
Yield
 
Life
(Years)
Less than Twelve
    Months
 
$
992,251

 
$
977,758

 
$
(143
)
 
$
977,615

 
$
(6,704
)
 
$
970,911

 
54

 
AA
 
3.36
%
 
3.15
%
 
6.6
Twelve or More
    Months
 
91,156

 
97,387

 
(386
)
 
97,001

 
(1,048
)
 
95,953

 
17

 
AA+
 
3.45
%
 
1.96
%
 
4.9
Total/Weighted
    Average
 
$
1,083,407

 
$
1,075,145

 
$
(529
)
 
$
1,074,616

 
$
(7,752
)
 
$
1,066,864

 
71

 
AA
 
3.37
%
 
3.05
%
 
6.4
 
(A)
This amount represents other-than-temporary impairment recorded on securities that are in an unrealized loss position as of September 30, 2014.
(B)
The weighted average rating of securities in an unrealized loss position for less than twelve months excludes the rating of six bonds for which New Residential was unable to obtain rating information.

New Residential performed an assessment of all of its debt securities that are in an unrealized loss position (an unrealized loss position exists when a security’s amortized cost basis, excluding the effect of OTTI, exceeds its fair value) and determined the following:
 
September 30, 2014
 
 
 
 
 
Unrealized Losses
 
Fair Value
 
Amortized Cost Basis After Impairment
 
Credit(A)
 
Non-Credit(B)
Securities New Residential intends to sell(C)
$

 
$

 
$

 
$

Securities New Residential is more likely than not to be
    required to sell(D)

 

 

 
N/A

Securities New Residential has no intent to sell and is not
    more likely than not to be required to sell:
 

 
 

 
 

 
 

Credit impaired securities
71,755

 
71,821

 
(529
)
 
(595
)
Non credit impaired securities
995,637

 
1,002,795

 

 
(7,157
)
Total debt securities in an unrealized loss position
$
1,067,392

 
$
1,074,616

 
$
(529
)
 
$
(7,752
)
  
(A)
This amount is required to be recorded as other-than-temporary impairment through earnings. In measuring the portion of credit losses, New Residential’s management estimates the expected cash flow for each of the securities. This evaluation includes a review of the credit status and the performance of the collateral supporting those securities, including the credit of the issuer, key terms of the securities and the effect of local, industry and broader economic trends. Significant inputs in estimating the cash flows include management’s expectations of prepayment speeds, default rates and loss severities. Credit losses are measured as the decline in the present value of the expected future cash flows discounted at the investment’s effective interest rate.
(B)
This amount represents unrealized losses on securities that are due to non-credit factors and recorded through other comprehensive income.
(C)
A portion of securities New Residential intends to sell have a fair value equal to their amortized cost basis after impairment, and, therefore do not have unrealized losses reflected in other comprehensive income as of September 30, 2014.
(D)
New Residential may, at times, be more likely than not to be required to sell certain securities for liquidity purposes. While the amount of the securities to be sold may be an estimate, and the securities to be sold have not yet been identified, New Residential must make its best estimate, which is subject to significant judgment regarding future events, and may differ materially from actual future sales.
Schedule of credit losses on debt securities
The following table summarizes the activity related to credit losses on debt securities:
 
Nine Months Ended September 30, 2014
Beginning balance of credit losses on debt securities for which a portion of an OTTI was
    recognized in other comprehensive income
$
2,071

Increases to credit losses on securities for which an OTTI was previously recognized and a portion
    of an OTTI was recognized in other comprehensive income
464

Additions for credit losses on securities for which an OTTI was not previously recognized
151

Reductions for securities for which the amount previously recognized in other comprehensive
    income was recognized in earnings because the entity intends to sell the security or more likely
    than not will be required to sell the security before recovery of its amortized cost basis

Reduction for credit losses on securities for which no OTTI was recognized in other
    comprehensive income at the current measurement date
(552
)
Reduction for securities sold during the period
(1,605
)
Ending balance of credit losses on debt securities for which a portion of an OTTI was recognized
    in other comprehensive income
$
529

Schedule of geographic distribution of collateral securing non-agency RMBS
The table below summarizes the geographic distribution of the collateral securing New Residential’s Non-Agency RMBS:
 
 
September 30, 2014
 
December 31, 2013
Geographic Location
 
Outstanding Face Amount

Percentage of Total Outstanding
 
Outstanding Face Amount

Percentage of Total Outstanding
Western U.S.
 
$
110,692


25.6
%
 
$
317,111

 
36.3
%
Southeastern U.S.
 
97,618


22.5
%
 
198,298

 
22.7
%
Northeastern U.S.
 
76,957


17.8
%
 
164,481

 
18.9
%
Midwestern U.S.
 
65,262


15.1
%
 
98,682

 
11.3
%
Southwestern U.S.
 
42,117


9.7
%
 
51,425

 
5.9
%
Other(A)
 
40,116


9.3
%
 
42,869

 
4.9
%
 
 
$
432,762


100.0
%
 
$
872,866

 
100.0
%
  
(A)
Represents collateral for which New Residential was unable to obtain geographic information.
Schedule of Real Estate Securities with a deteriorated credit quality rating
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:
 
Outstanding Face Amount
 
Carrying Value
September 30, 2014
$
179,446

 
$
140,475

December 31, 2013
729,895

 
483,680

Summary of changes in accretable yield for securities [Table Text Block]
The following is a summary of the changes in accretable yield for these securities:
 
Nine Months Ended September 30, 2014
Balance at December 31, 2013
$
143,067

Additions
86,810

Accretion
(10,947
)
Reclassifications to non-accretable difference
(8,654
)
Disposals
(156,193
)
Balance at September 30, 2014
$
54,083