Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS IN SERVICER ADVANCES (Tables)

v3.5.0.2
INVESTMENTS IN SERVICER ADVANCES (Tables)
9 Months Ended
Sep. 30, 2016
Investments, All Other Investments [Abstract]  
Summary of Investments in Servicer Advances
The following is a summary of the investments in Servicer Advances, including the right to the basic fee component of the related MSRs:
 
Amortized Cost Basis

Carrying Value(A)

Weighted Average Discount Rate
 
Weighted Average Yield

Weighted Average Life (Years)(B)
September 30, 2016
 
 
 
 
 
 
 
 
 
Servicer Advances(C)
$
6,012,315

 
$
6,043,369

 
5.4
%
 
5.3
%
 
4.5
As of December 31, 2015
 
 
 
 
 
 
 
 
 
Servicer Advances(C)
$
7,400,068

 
$
7,426,794

 
5.6
%
 
5.5
%
 
4.4
  
(A)
Carrying value represents the fair value of the investments in Servicer Advances, including the basic fee component of the related MSRs.
(B)
Weighted Average Life represents the weighted average expected timing of the receipt of expected net cash flows for this investment.
(C)
Excludes New Residential asset-backed securities collateralized by Servicer Advances, which have aggregate face amounts of $249.0 million and $431.0 million and aggregate carrying values of $250.7 million and $430.3 million as of September 30, 2016 and December 31, 2015, respectively. See Note 7 for details related to these securities.
 
 
Three Months Ended September 30,
 
Nine Months Ended  
 September 30,
 
 
2016

2015

2016

2015
Changes in Fair Value Recorded in Other Income
 
$
21,606

 
$
(18,738
)
 
$
4,328

 
$
(1,845
)

The following is additional information regarding the Servicer Advances and related financing:
 
 
 
 
 
 
 
 
 
 
Loan-to-Value(A)
 
Cost of Funds(C)
 
 
UPB of Underlying Residential Mortgage Loans
 
Outstanding Servicer Advances
 
Servicer Advances to UPB of Underlying Residential Mortgage Loans
 
Face Amount of Notes and Bonds Payable
 
Gross
 
Net(B)
 
Gross
 
Net
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicer Advances(D)
 
$
194,223,701

 
$
6,017,968

 
3.1
%
 
$
5,907,803

 
94.5
%
 
93.3
%
 
3.5
%
 
2.8
%
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicer Advances(D)
 
$
220,256,804

 
$
7,578,110

 
3.4
%
 
$
7,058,094

 
91.2
%
 
90.2
%
 
3.4
%
 
2.6
%
 
(A)
Based on outstanding Servicer Advances, excluding purchased but unsettled Servicer Advances and certain deferred servicing fees (“DSF”) on which New Residential receives financing. If New Residential were to include these DSF in the servicer advance balance, gross and net LTV as of September 30, 2016 would be 89.7% and 88.6%, respectively. Also excludes retained non-agency bonds with a current face amount of $110.1 million from the outstanding Servicer Advances debt. If New Residential were to sell these bonds, gross and net LTV as of September 30, 2016 would be 96.3% and 95.1%, respectively.
(B)
Ratio of face amount of borrowings to par amount of servicer advance collateral, net of any general reserve.
(C)
Annualized measure of the cost associated with borrowings. Gross Cost of Funds primarily includes interest expense and facility fees. Net Cost of Funds excludes facility fees.
(D)
The following types of advances comprise the investments in Servicer Advances:
    


September 30, 2016

December 31, 2015
Principal and interest advances

$
1,651,576


$
2,229,468

Escrow advances (taxes and insurance advances)

2,786,203


3,687,559

Foreclosure advances

1,580,189


1,661,083

Total

$
6,017,968

 
$
7,578,110

Schedule of Interest Income Related to Investments in Servicer Advances
Interest income recognized by New Residential related to its investments in Servicer Advances was comprised of the following:


Three Months Ended September 30,
 
Nine Months Ended  
 September 30,


2016

2015

2016

2015
Interest income, gross of amounts attributable to servicer compensation

$
161,601


$
221,613


$
581,231


$
511,931

Amounts attributable to base servicer compensation

(15,276
)

(26,553
)

(68,184
)

(65,111
)
Amounts attributable to incentive servicer compensation

(45,197
)

(89,952
)

(255,170
)

(190,775
)
Interest income from investments in Servicer Advances

$
101,128

 
$
105,108

 
$
257,877

 
$
256,045


New Residential has determined that the Buyer is a VIE. The following table presents information on the assets and liabilities related to this consolidated VIE.
 
 
As of
 
 
September 30, 2016
 
December 31, 2015
Assets
 
 
 
 
Servicer advance investments, at fair value
 
$
1,903,067

 
$
2,344,245

Cash and cash equivalents
 
35,000

 
40,761

All other assets
 
22,229

 
25,092

Total assets(A)
 
$
1,960,296

 
$
2,410,098

Liabilities
 
 
 
 
Notes and bonds payable
 
$
1,625,956

 
$
2,060,347

All other liabilities
 
6,119

 
6,111

Total liabilities(A)
 
$
1,632,075

 
$
2,066,458


(A)
The creditors of the Buyer do not have recourse to the general credit of New Residential and the assets of the Buyer are not directly available to satisfy New Residential’s obligations.

Others’ interests in the equity of the Buyer is computed as follows:
 
 
September 30, 2016
 
December 31, 2015
Total Advance Purchaser LLC equity
 
$
328,221

 
$
343,640

Others’ ownership interest
 
55.5
%
 
55.5
%
Others’ interest in equity of consolidated subsidiary
 
$
182,094

 
$
190,647


Others’ interests in the Buyer’s net income is computed as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended  
 September 30,
 
 
2016
 
2015
 
2016
 
2015
Net Advance Purchaser LLC income
 
$
33,985

 
$
12,960

 
$
60,207

 
$
40,258

Others’ ownership interest as a percent of total(A)
 
55.5
%
 
55.5
%
 
55.5
%
 
55.5
%
Others’ interest in net income of consolidated subsidiaries
 
$
18,853

 
$
7,193

 
$
33,400

 
$
22,332


(A)
As a result, New Residential owned 44.5% and 44.5% of the Buyer, on average during the three months ended September 30, 2016 and 2015, respectively, and 44.5% and 44.5% of the Buyer, on average during the nine months ended September 30, 2016 and 2015, respectively.