Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS IN RESIDENTIAL MORTGAGE LOANS (Tables)

v3.19.1
INVESTMENTS IN RESIDENTIAL MORTGAGE LOANS (Tables)
3 Months Ended
Mar. 31, 2019
Receivables [Abstract]  
Schedule of Residential Mortgage Loans Outstanding by Loan Type, Excluding REO The following table presents certain information regarding New Residential’s residential mortgage loans outstanding by loan type, excluding REO:


March 31, 2019
 
December 31, 2018


Outstanding Face Amount

Carrying
Value

Loan
Count

Weighted Average Yield

Weighted Average Life (Years)(A)

Floating Rate Loans as a % of Face Amount

Loan to Value Ratio (“LTV”)(B)

Weighted Avg. Delinquency(C)

Weighted Average FICO(D)
 
Carrying Value
Loan Type


















 

Performing Loans(G) (J)

$
613,104


$
570,480


8,348


8.0
%

4.8

20.1
%

77.4
%

9.3
%

647

 
$
591,264

Purchased Credit Deteriorated Loans(H)
 
143,476

 
101,870

 
1,297

 
8.2
%
 
3.3
 
18.7
%
 
88.1
%
 
62.0
%
 
595

 
144,065

Total Residential Mortgage Loans, held-for-investment

$
756,580

 
$
672,350

 
9,645


8.0
%

4.5

19.9
%

79.4
%

19.3
%

637

 
$
735,329

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse Mortgage Loans(E) (F)
 
$
13,523

 
$
6,500

 
35

 
8.3
%
 
4.6
 
10.9
%
 
145.2
%
 
69.0
%
 
N/A

 
$
6,557

Performing Loans(G) (I)
 
483,488

 
486,626

 
8,129

 
4.1
%
 
4.0
 
62.3
%
 
57.0
%
 
6.8
%
 
642

 
413,883

Non-Performing Loans(H) (I)
 
611,924

 
504,038

 
5,016

 
5.0
%
 
3.3
 
13.3
%
 
81.0
%
 
64.5
%
 
536

 
512,040

Total Residential Mortgage Loans, held-for-sale
 
$
1,108,935

 
$
997,164

 
13,180

 
4.7
%
 
3.7
 
34.7
%
 
71.3
%
 
39.4
%
 
583

 
$
932,480

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired Loans
 
$
2,483,358

 
$
2,375,501

 
16,288

 
4.4
%
 
7.7
 
2.8
%
 
73.2
%
 
19.6
%
 
623

 
$
2,153,269

Originated Loans
 
802,793

 
828,821

 
3,124

 
4.7
%
 
28.6
 
1.3
%
 
82.3
%
 
15.7
%
 
575

 
655,260

Total Residential Mortgage Loans, held-for-sale, at fair value(K)
 
$
3,286,151

 
$
3,204,322

 
19,412

 
4.5
%
 
12.8
 
2.4
%
 
75.4
%
 
18.6
%
 
611

 
$
2,808,529


(A)
The weighted average life is based on the expected timing of the receipt of cash flows.
(B)
LTV refers to the ratio comparing the loan’s unpaid principal balance to the value of the collateral property.
(C)
Represents the percentage of the total principal balance that is 60+ days delinquent.
(D)
The weighted average FICO score is based on the weighted average of information updated and provided by the loan servicer on a monthly basis.
(E)
Represents a 70% participation interest that New Residential holds in a portfolio of reverse mortgage loans. Nationstar holds the other 30% interest and services the loans. The average loan balance outstanding based on total UPB was $0.6 million. Approximately 59% of these loans have reached a termination event. As a result of the termination event, each such loan has matured and the borrower can no longer make draws on these loans.
(F)
FICO scores are not used in determining how much a borrower can access via a reverse mortgage loan.
(G)
Performing loans are generally placed on nonaccrual status when principal or interest is 120 days or more past due.
(H)
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. As of March 31, 2019, New Residential has placed Non-Performing Loans, held-for-sale on nonaccrual status, except as described in (I) below.
(I)
Includes $23.6 million and $48.8 million UPB of Ginnie Mae EBO performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.
(J)
Includes $120.2 million UPB of non-agency mortgage loans underlying the SAFT 2013-1 securitization, which are carried at fair value based on New Residential’s election of the fair value option. Interest earned on loans measured at fair value are reported in other income.
(K)
New Residential elected the fair value option to measure these loans at fair value on a recurring basis. Interest earned on loans measured at fair value are reported in other income.

Summary of the Geographic Distribution of the Underlying Residential Mortgage Loans The table below summarizes the geographic distribution of the underlying residential mortgage loans:
 
 
Percentage of Total Outstanding Unpaid Principal Amount
State Concentration
 
March 31, 2019
 
December 31, 2018
California
 
16.1
%
 
16.7
%
New York
 
10.0
%
 
11.7
%
Florida
 
9.4
%
 
8.8
%
New Jersey
 
5.2
%
 
4.7
%
Texas
 
5.1
%
 
5.3
%
Georgia
 
4.7
%
 
2.7
%
Illinois
 
3.8
%
 
4.0
%
Maryland
 
3.7
%
 
3.1
%
Pennsylvania
 
3.2
%
 
3.6
%
Massachusetts
 
3.2
%
 
3.1
%
Other U.S.
 
35.6
%
 
36.3
%
 
 
100.0
%
 
100.0
%
Past Due Financing Receivable The following table provides past due information regarding New Residential’s Performing Loans, which is an important indicator of credit quality and the establishment of the allowance for loan losses:
March 31, 2019
Days Past Due
 
Delinquency Status(A)
Current
 
82.4
%
30-59
 
9.7
%
60-89
 
2.7
%
90-119(B)
 
0.7
%
120+(C)
 
4.5
%
 
 
100.0
%

(A)
Represents the percentage of the total principal balance that corresponds to loans that are in each delinquency status.
(B)
Includes loans 90-119 days past due and still accruing interest because they are generally placed on nonaccrual status at 120 days or more past due.
(C)
Represents nonaccrual loans.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:
March 31, 2019
Days Past Due
 
Delinquency Status(A)
Current
 
94.8
%
30-59
 
2.0
%
60-89
 
1.2
%
90-119(B)
 
0.8
%
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.

Summary of Activities Related to the Carrying Value of Reverse Mortgage Loans and Performing Loans and PCD Loans Held-for-Investment Activities related to the carrying value of residential mortgage loans held-for-investment were as follows:
 
Performing Loans
Balance at December 31, 2018
$
591,253

Purchases/additional fundings

Proceeds from repayments
(21,992
)
Accretion of loan discount (premium) and other amortization(A)
2,599

Provision for loan losses
(386
)
Transfer of loans to other assets(B)

Transfer of loans to real estate owned
(1,348
)
Transfers of loans to held for sale
(168
)
Fair value adjustment
522

Balance at March 31, 2019
$
570,480


(A)
Includes accelerated accretion of discount on loans paid in full and on loans transferred to other assets.
(B)
Represents loans for which foreclosure has been completed and for which New Residential has made, or intends to make, a claim with the governmental agency that has guaranteed the loans that are now recognized as claims receivable in Other Assets (Note 2).

Activities related to the carrying value of PCD loans held-for-investment were as follows:
Balance at December 31, 2018
$
144,065

Purchases/additional fundings

Sales

Proceeds from repayments
(6,215
)
Accretion of loan discount and other amortization
6,235

(Allowance) reversal for loan losses(A)
(2,332
)
Transfer of loans to real estate owned
(6,917
)
Transfer of loans to held-for-sale
(32,966
)
Balance at March 31, 2019
$
101,870



(A)
An allowance represents the present value of cash flows expected at acquisition that are no longer expected to be collected. A reversal results from an increase to expected cash flows that reverses a prior allowance.
Summary of Activities Related to the Valuation Provision on Reverse Mortgage Loans and Allowance for Loan Losses on Performing Loans Held-for-Investment 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:
 
Performing Loans
Balance at December 31, 2018
$

Provision for loan losses(A)
386

Charge-offs(B)
(386
)
Balance at March 31, 2019
$


(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.

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 December 31, 2018
 
$
2,604

 
$
2,064

 
$
4,668

Provision (reversal) for loan losses
 
9,740

 
591

 
10,331

Net charge-offs(C)
 
(10,253
)
 

 
(10,253
)
Balance at March 31, 2019
 
$
2,091

 
$
2,655

 
$
4,746


(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.
(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 March 31, 2019, there are $15.4 million in UPB and $13.3 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 $2.1 million in recoveries of previously charged-off UPB.

Summary of Changes in Accretable Yield The following is a summary of the changes in accretable yield for these loans:
Balance at December 31, 2018
$
68,632

Additions

Accretion
(6,235
)
Reclassifications from (to) non-accretable difference(A)
(704
)
Disposals(B)
(1,771
)
Transfer of loans to held-for-sale(C)
(7,998
)
Balance at March 31, 2019
$
51,924


(A)
Represents a probable and significant increase (decrease) in cash flows previously expected to be uncollectible.
(B)
Includes sales of loans or foreclosures, which result in removal of the loan from the PCD loan pool at its carrying amount.
(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.

Summary of Activities Related to the Carrying Value of Loans Held-for-sale Activities related to the carrying value of loans held-for-sale, at lower of cost or fair value were as follows:
Balance at December 31, 2018
 
$
932,480

Purchases(A)
 
245,063

Transfer of loans from held-for-investment(B)
 
33,134

Sales
 
(157,009
)
Transfer of loans to other assets(C)
 
(2,244
)
Transfer of loans to real estate owned
 
(13,878
)
Proceeds from repayments
 
(49,562
)
Valuation (provision) reversal on loans(D)
 
9,180

Balance at March 31, 2019
 
$
997,164


(A)
Represents loans acquired with the intent to sell.
(B)
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.
(C)
Represents loans for which foreclosure has been completed and for which New Residential has made, or intends to make, a claim with the governmental agency that has guaranteed the loans that are now recognized as claims receivable in Other Assets (Note 2).
(D)
Represents the fair value adjustments to loans upon transfer to held-for-sale and provision recorded on certain purchased held-for-sale loans, including an aggregate of $4.6 million of provision related to the call transactions executed during the three months ended March 31, 2019.
Schedule of Loans Held For Sale, Fair Value Activities related to the carrying value of originated loans held-for-sale, at fair value were as follows:
Balance at December 31, 2018
 
$
655,260

Originations
 
2,017,584

Sales
 
(1,845,381
)
Proceeds from repayments
 
(3,783
)
Transfer of loans to other assets
 
(208
)
Change in fair value
 
5,349

Balance at March 31, 2019
 
$
828,821


Activities related to the carrying value of acquired loans held-for-sale, at fair value were as follows:
Balance at December 31, 2018
 
$
2,153,269

Purchases(A)
 
1,083,085

Sales
 
(855,280
)
Proceeds from repayments
 
(22,950
)
Transfer of loans to real estate owned
 

Accretion of loan discount and other amortization
 
8,685

Change in fair value
 
8,692

Balance at March 31, 2019
 
$
2,375,501


(A)
Includes an acquisition date fair value adjustment decrease of $14.7 million on loans acquired through call transactions executed during the three months ended March 31, 2019.
Schedule of Originated Mortgage Loans Gain on sale of originated mortgage loans, net is summarized below:
Gain on loans originated and sold(A)
 
$
11,698

Gain (loss) on settlement of mortgage loan origination derivative instruments(B)
 
(11,423
)
MSRs retained on transfer of loans(C)
 
36,429

Other(D)
 
7,280

Gain on sale of originated mortgage loans, net
 
$
43,984


(A)
Includes loan origination fees and direct loan origination costs. Other indirect costs related to loan origination are included within general and administrative expenses.
(B)
Represents settlement of forward securities delivery commitments utilized as an economic hedge for mortgage loans not included within forward loan sale commitments.
(C)
Represents the initial fair value of the capitalized mortgage servicing rights upon loan sales with servicing retained.
(D)
Includes fees for services associated with the loan origination process.
Schedule of Real Estate Owned New Residential recognizes REO assets at the completion of the foreclosure process or upon execution of a deed in lieu of foreclosure with the borrower. REO assets are managed for prompt sale and disposition at the best possible economic value.
 
 
Real Estate Owned
Balance at December 31, 2018
 
$
113,410

Purchases
 
9,823

Transfer of loans to real estate owned
 
27,128

Sales
 
(40,550
)
Valuation (provision) reversal on REO
 
(657
)
Balance at March 31, 2019
 
$
109,154

Schedule of Assets and Liabilities Related to Consolidated Variable Interest Entities The following table summarizes certain characteristics of the underlying residential mortgage loans, and related financing, in these securitizations as of March 31, 2019:
Residential mortgage loan UPB
 
$
9,399,416

Weighted average delinquency(A)
 
2.03
%
Net credit losses for the three months ended March 31, 2019
 
$
3,562

Face amount of debt held by third parties(B)
 
$
8,306,631

 
 
 
Carrying value of bonds retained by New Residential(C) (D)
 
$
1,271,126

Cash flows received by New Residential on these bonds for the three months ended March 31, 2019
 
$
62,845


(A)
Represents the percentage of the UPB that is 60+ days delinquent.
(B)
Excludes bonds retained by New Residential.
(C)
Includes bonds retained pursuant to required risk retention regulations.
(D)
Classified within Level 3 of the fair value hierarchy as the valuation is based on certain unobservable inputs including discount rate, prepayment rates and loss severity. See Note 12 for details on unobservable inputs.

The following table presents information on the combined assets and liabilities related to these consolidated VIEs.
 
 
Three Months Ended  
 March 31,
 
 
2019
 
2018
Assets
 
 
 
 
Residential mortgage loans
 
$
429,229

 
$

Other assets
 

 

Total assets(A)
 
$
429,229

 
$

Liabilities
 
 
 
 
Notes and bonds payable
 
$
377,382

 
$

Accounts payable and accrued expenses
 
2,635

 

Total liabilities(A)
 
$
380,017

 
$


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

The following table presents information on the assets and liabilities of the Shelter JVs.
 
 
March 31, 2019
Assets
 
 
Cash and cash equivalents
 
$
16,522

Property and equipment, net
 
124

Intangible assets, net
 
66

Prepaid expenses and other assets
 
511

Total assets
 
$
17,223

 
 
 
Liabilities
 
 
Accounts payable and accrued expenses
 
$
1,206

Reserve for sales recourse
 
1,019

Total liabilities
 
$
2,225


Noncontrolling Interests
Noncontrolling interests in the equity of the Shelter JVs is computed as follows:
 
 
March 31, 2019
Total consolidated equity of JVs
 
$
14,998

Noncontrolling ownership interest
 
51.0
%
Noncontrolling equity interest in consolidated JVs
 
$
7,649

 
 
 
Total consolidated net income of JVs
 
$
798

Noncontrolling ownership interest in net income
 
51.0
%
Noncontrolling interest in net income of consolidated JVs
 
$
407

The following table presents information on the combined assets and liabilities related to these consolidated VIEs.
 
 
As of
 
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
 
Consumer loans, held-for-investment
 
$
981,931

 
$
1,039,480

Restricted cash
 
9,899

 
10,186

Accrued interest receivable
 
14,438

 
15,627

Total assets(A)
 
$
1,006,268

 
$
1,065,293

Liabilities
 
 
 
 
Notes and bonds payable(B)
 
$
973,158

 
$
1,030,096

Accounts payable and accrued expenses
 
4,106

 
3,814

Total liabilities(A)
 
$
977,264

 
$
1,033,910


(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.
(B)
Includes $121.0 million face amount of bonds retained by New Residential issued by these VIEs.