Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2016
Subsequent Events [Abstract]  
These financial statements include a discussion of material events that have occurred subsequent to September 30, 2016 (referred to as “subsequent events”) through the issuance of these condensed consolidated financial statements. Events subsequent to that date have not been considered in these financial statements.

Corporate Activities

On September 23, 2016, New Residential’s Board of Directors declared a third quarter 2016 dividend of $0.46 per common share or $115.4 million, which was paid on October 28, 2016 to stockholders of record as of October 3, 2016.

In October 2016, New Residential entered into a $345.0 million corporate loan secured by Non-Agency Excess MSRs. The loan bears interest equal to 5.68% and matures in July 2021.

In October 2016, the Consumer Loan Companies, 53.5% owned and consolidated by New Residential, refinanced their outstanding asset-backed notes with a new asset-backed securitization. The issuance consisted of $1.7 billion of asset-backed notes comprised of six classes with maturity dates in November 2023 and March 2024, of which approximately $157.6 million was voluntarily retained by the Consumer Loan Companies. As a result, the Consumer Loan Companies will record approximately $4.7 million of loss on extinguishment of debt related to an unamortized discount.

See Note 9 for a subsequent event related to the purchase of consumer loans.

Servicer Advances Debt

In October 2016, New Residential, through its wholly owned subsidiary, NRZ Advance Receivables Trust 2015-ON1, issued servicer advance backed notes consisting of $500.0 million and $400.0 million of series 2016-T2 and series T3 term notes with maturity dates of October 2019 and October 2021, respectively, and repaid a portion of the existing VFN facility with the proceeds.

Walter Transaction

On August 8, 2016, New Residential Mortgage LLC (“NRM”), a Delaware limited liability company and a wholly-owned subsidiary of New Residential, entered into a flow and bulk agreement for the purchase and sale of mortgage servicing rights (the “Walter Purchase Agreement”) with Ditech Financial LLC (“Ditech”), a subsidiary of Walter Investment Management Corp. Pursuant to the Walter Purchase Agreement, NRM agreed to (i) purchase the MSRs and related servicing advances with respect to approximately 254,531 existing Fannie Mae residential mortgage loans with a total unpaid principal balance of approximately $32.3 billion (the “Existing MSRs”) for an aggregate purchase price of approximately $240.0 million in cash, including $28.1 million of servicing advances, subject to certain adjustments set forth in the Walter Purchase Agreement, and (ii) provide ongoing daily pricing to Ditech for the purchase of MSRs from Ditech relating to new mortgage loans originated or purchased by Ditech on a flow basis and pooled into Fannie Mae, Freddie Mac or, if applicable, Ginnie Mae (collectively, the “Agencies”) securities (the “Flow MSRs”). The purchase of the Existing MSRs closed on October 3, 2016. The initial term of the Walter Purchase Agreement is three years, with annual, one-year renewals thereafter, subject to certain termination rights; provided, that, NRM may decline to provide pricing for Flow MSRs on any day and may terminate the Walter Purchase Agreement with respect to Flow MSRs on 30 days’ notice. The purchase of the Existing MSRs and any Flow MSRs are subject to, among other customary conditions, the approval of the applicable Agencies, all of which were obtained for the Existing MSRs purchased. Ditech will initially service the mortgage loans related to the Existing MSRs and the Flow MSRs pursuant to the Subservicing Agreement referred to below.

On August 8, 2016, in connection with the Walter Purchase Agreement, Walter Investment Management Corp. (with its applicable subsidiaries, including Ditech, “Walter”), a Maryland corporation and the parent of Ditech, provided NRM with a payment and performance guaranty (the “Guaranty”) of Ditech’s obligations, including repurchase and indemnification obligations, under the Walter Purchase Agreement.

On August 8, 2016, in connection with the Walter Purchase Agreement, NRM and Ditech entered into a subservicing agreement (the “Subservicing Agreement”), pursuant to which Ditech agreed to act as subservicer for NRM and perform all of the actual servicing activities (“subservicing”) required under the servicing agreements relating to the Existing MSRs, any Flow MSRs purchased by NRM under the Walter Purchase Agreement and certain other MSRs that may be acquired in the future by NRM. Under the Subservicing Agreement and related documents, Ditech will perform all daily servicing obligations on behalf of NRM, including collecting payments from borrowers and offering refinancing options to borrowers for purposes of minimizing portfolio runoff. Ditech agreed to perform subservicing on behalf of NRM at fixed prices set forth in the Subservicing Agreement for an initial term of one year, with annual, one-year renewals thereafter, subject to certain termination rights set forth in the Subservicing Agreement. With respect to NRM, the initial term of the Subservicing Agreement will expire on the first anniversary of the effective date and shall automatically terminate unless renewed on a month-by-month basis, subject to certain termination rights set forth in the Subservicing Agreement. NRM is responsible for all advance obligations related to the Existing MSRs and Flow MSRs. Based on the terms of the Subservicing Agreement, the estimated weighted average subservicing rate for the life of the Existing MSRs is 7.7 bps.

In addition, on August 8, 2016, New Residential entered into a “recapture agreement” with respect to the MSRs subserviced by Ditech. Under the recapture agreement, New Residential is entitled to the MSRs on any initial or subsequent refinancing by Ditech of a loan underlying the Existing MSRs or Flow MSRs.

WCO Transaction

NRM, Walter and Walter Capital Opportunity, LP have agreed in principle for the purchase and sale of substantially all of the assets of Walter Capital Opportunity, LP and its subsidiaries (“WCO”), along with certain related assets owned by Walter, which, collectively, represent an estimated $34.2 billion UPB of MSRs and $40.8 million of servicing advances, for an aggregate purchase price of approximately $299.9 million.

The transaction, which is subject to negotiation and execution of definitive documentation, regulatory approval and approval from the applicable Agencies, is expected to contain similar general terms, including term, representations and warranties, covenants and indemnification, and be subject to similar conditions precedent, such as regulatory and Agency approvals, as the Walter Purchase Agreement described above, as well as additional terms and conditions customary for a transaction of this type. There can be no assurance that definitive documentation will be entered into on the terms described herein, or at all, or that the required regulatory or Agency approvals will be obtained.

Upon acquisition of the assets in the WCO transaction, New Residential expects that Ditech will subservice the related mortgage loans for NRM under the Subservicing Agreement described above.