Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS IN CONSUMER LOANS (Tables)

v3.5.0.2
INVESTMENTS IN CONSUMER LOANS (Tables)
9 Months Ended
Sep. 30, 2016
Investments In Consumer Loans Equity Method Investees [Abstract]  
Summary of the Investment in Consumer Loan Companies
The following table summarizes the investment in consumer loans, held-for-investment held by New Residential:
 
Unpaid Principal Balance(A)

Interest in Consumer Loans

Carrying Value

Weighted Average Coupon(B)

Weighted Average Expected Life (Years)(C)
 
Weighted Average Delinquency(D)
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Consumer Loan Companies
 
 
 
 
 
 
 
 
 
 
 
Performing Loans
$
1,345,573

 
53.5
%
 
$
1,391,388

 
18.7
%
 
4.3
 
5.7
%
Purchased Credit Deteriorated Loans(E)
396,462

 
53.5
%
 
339,916

 
16.6
%
 
3.6
 
13.2
%
Other - Performing Loans
91,523

 
100.0
%
 
90,675

 
14.3
%
 
1.5
 
%
Total Consumer Loans, held-for-investment
$
1,833,558

 
 
 
$
1,821,979

 
18.1
%
 
4.0
 
7.0
%
December 31, 2015(F)
 
 
 
 
 
 
 
 
 
 
 
Consumer Loan Companies
 
 
 
 
 
 
 
 
 
 
 
Total Consumer Loans, held-for-investment
$
2,094,904

 
30.0
%
 
$
1,698,130

 
18.2
%
 
4.4
 
7.2
%

(A)
Represents the balances as of September 30, 2016 and November 30, 2015, respectively.
(B)
Substantially all of the cash flows received on the loans held by the Consumer Loan Companies are required to be used to make payments on the notes described above.
(C)
Represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(D)
Represents the percentage of the total unpaid principal balance that is 30+ days delinquent. Delinquency status is the primary credit quality indicator as it provides early warning of borrowers who may be experiencing financial difficulties.
(E)
Includes loans with evidence of credit deterioration since origination where it is probable that New Residential will not collect all contractually required principal and interest payments, which are accounted for as PCD loans.
(F)
Held through an equity method investee, which had a carrying value of zero, at such time.
Past Due Financing Receivable
The following table provides past due information regarding New Residential’s performing consumer loans, held-for-investment, which is an important indicator of credit quality and the establishment of the allowance for loan losses:
September 30, 2016
Days Past Due
 
Delinquency Status(A)
Current
 
94.7
%
30-59
 
2.2
%
60-89
 
1.2
%
90-119(B)
 
0.7
%
120+(B) (C)
 
1.2
%
 
 
100.0
%

(A)
Represents the percentage of the total unpaid principal balance that corresponds to loans that are in each delinquency status.
(B)
Includes loans more than 90 days past due and still accruing interest.
(C)
Interest is accrued up to the date of charge-off at 180 days past due.

Schedule of Carrying Value of Performing Consumer Loans
Activities related to the carrying value of performing consumer loans, held-for-investment were as follows:
 
 
Performing Loans
Balance at December 31, 2015
 
$

SpringCastle Transaction
 
1,539,569

Purchases
 
92,069

Additional fundings(A)
 
33,137

Proceeds from repayments
 
(155,388
)
Accretion of loan discount and premium amortization, net
 
5,097

Net charge-offs
 
(30,535
)
Provision for loan losses
 
(1,886
)
Balance at September 30, 2016
 
$
1,482,063


(A)
Represents draws on consumer loans with revolving privileges.
Summary of Activities Related to the Valuation Provision on Reverse Mortgage Loans and Allowance for Loan Losses
Activities related to the valuation and loss provision on reverse mortgage loans and allowance for loan losses on performing loans held-for-investment were as follows:
 
Reverse Mortgage Loans
 
Performing Loans
Balance at December 31, 2015
$
1,553

 
$
119

Provision for loan losses(A)
73

 
4

Charge-offs(B)

 

Sales
(171
)
 

Transfer of loans to held-for-sale(C)
(1,455
)
 
(123
)
Balance at September 30, 2016
$

 
$


(A)
Based on an analysis of collective borrower performance, credit ratings of borrowers, loan-to-value ratios, estimated value of the underlying collateral, key terms of the loans and historical and anticipated trends in defaults and loss severities at a pool level.
(B)
Loans, other than PCD loans, are generally charged off or charged down to the net realizable value of the collateral (i.e., fair value less costs to sell), with an offset to the allowance for loan losses, when available information confirms that loans are uncollectible.
(C)
Represents loans not initially acquired with the intent to sell for which New Residential determined that it no longer has the intent to hold for the foreseeable future, or until maturity or payoff.

Activities related to the allowance for loan losses on performing consumer loans, held-for-investment were as follows:
 
 
Collectively Evaluated(A)
 
Individually Impaired(B)
 
Total
Balance at March 31, 2016
 
$

 
$

 
$

Provision for loan losses
 
31,382

 
1,039

 
32,421

Net charge-offs(C)
 
(30,535
)
 

 
(30,535
)
Balance at September 30, 2016
 
$
847

 
$
1,039

 
$
1,886


(A)
Represents smaller-balance homogeneous loans that are not individually considered impaired and are evaluated based on an analysis of collective borrower performance, key terms of the loans and historical and anticipated trends in defaults and loss severities, and consideration of the unamortized acquisition discount. Includes a provision for loan losses of $0.9 million for newly originated loans acquired during the three months ended September 30, 2016.
(B)
Represents consumer loan modifications considered to be troubled debt restructurings (“TDRs”) as they provide concessions to borrowers, primarily in the form of interest rate reductions, who are experiencing financial difficulty. As of September 30, 2016, there are $3.6 million in UPB and $2.5 million in carrying value of consumer loans classified as TDRs.
(C)
Consumer loans, other than PCD loans, are charged off when available information confirms that loans are uncollectible, which is generally when they become 180 days past due. Charge-offs are presented net of $5.6 million in recoveries of previously charged-off UPB.

Schedule of Carrying Value of Purchased Credit Deteriorated Loans
Activities related to the carrying value of PCD consumer loans, held-for-investment were as follows:
Balance at December 31, 2015
 
$

SpringCastle Transaction
 
395,129

Allowance for Loan Losses(A)
 
(2,115
)
Proceeds from repayments
 
(77,899
)
Accretion of loan discount and other amortization
 
24,801

Balance at September 30, 2016
 
$
339,916

Impaired Financing Receivables
The following is the unpaid principal balance and carrying value for consumer loans, for which, as of the acquisition date, it was probable that New Residential would be unable to collect all contractually required payments:
 
Unpaid Principal Balance
 
Carrying Value
September 30, 2016
$
396,462

 
$
339,916

March 31, 2016
450,611

 
395,129

Schedule of Changes in Accretable Yield
The following is a summary of the changes in accretable yield for these loans:
Balance at December 31, 2015
 
$

SpringCastle Transaction
 
176,387

Accretion
 
(24,801
)
Reclassifications from non-accretable difference(A)
 
24,167

Balance at September 30, 2016
 
$
175,753


(A)
Represents a probable and significant increase in cash flows previously expected to be uncollectible.
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net
Others’ interests in the equity of the Consumer Loan Companies is computed as follows at September 30, 2016:
Total Consumer Loan Companies equity
 
$
230,251

Others’ ownership interest
 
46.5
%
Others’ interests in equity of consolidated subsidiary
 
$
107,067


Others’ interests in the Consumer Loan Companies’ net income (loss) is computed as follows:
 
Three Months Ended September 30, 2016
 
Nine Months Ended 
 September 30, 2016
Net Consumer Loan Companies income (loss)
$
28,655

 
$
60,118

Others’ ownership interest as a percent of total
46.5
%
 
46.5
%
Others’ interest in net income (loss) of consolidated subsidiaries
$
13,325

 
$
27,955

Schedule of Assets and Liabilities Related to Consolidated Variable Interest Entities
The following table presents information on the combined assets and liabilities related to these consolidated VIEs.
 
 
As of
 
 
September 30, 2016
Assets
 
 
Consumer loans, held-for-investment
 
$
1,731,304

Restricted cash
 
13,866

Accrued interest receivable
 
25,468

Total assets(A)
 
$
1,770,638

Liabilities
 
 
Notes and bonds payable
 
$
1,590,387

Accounts payable and accrued expenses
 
1,150

Total liabilities(A)
 
$
1,591,537


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