Quarterly report pursuant to Section 13 or 15(d)

SERVICER ADVANCE INVESTMENTS

v3.20.1
SERVICER ADVANCE INVESTMENTS
3 Months Ended
Mar. 31, 2020
Investments, All Other Investments [Abstract]  
SERVICER ADVANCE INVESTMENTS
SERVICER ADVANCE INVESTMENTS

All of New Residential’s Servicer Advance Investments are composed of outstanding servicer advances, the requirement to purchase all future servicer advances made with respect to a specified pool of residential mortgage loans, and the basic fee component of the related MSR. New Residential elected to record its Servicer Advance Investments, including the right to the basic fee component of the related MSRs, at fair value pursuant to the fair value option for financial instruments to provide users of the financial statements with better information regarding the effects of market factors.

A taxable wholly-owned subsidiary of New Residential is the managing member of Advance Purchaser LLC (the “Buyer”), a joint venture entity, and owned an approximately 73.2% interest in the Buyer as of March 31, 2020. As of March 31, 2020, third-party co-investors, owning the remaining interest in the Buyer, have funded capital commitments to the Buyer of $389.6 million and New Residential has funded capital commitments to the Buyer of $312.7 million. The Buyer may call capital up to the commitment amount on unfunded commitments and recall capital to the extent the Buyer makes a distribution to the co-investors, including New Residential. As of March 31, 2020, the noncontrolling third-party co-investors and New Residential had previously funded their commitments; however, the Buyer may recall $328.4 million and $306.9 million of capital distributed to the third-party co-investors and New Residential, respectively. Neither the third-party co-investors nor New Residential is obligated to fund amounts in excess of their respective capital commitments, regardless of the capital requirements of the Buyer.
 
See Note 5 regarding the New Ocwen Agreements. Subsequent to the New Ocwen Agreements, the Servicer Advance Investments serviced by Ocwen are accounted for as Servicer Advances Receivable, as described in Note 5.

The following is a summary of New Residential’s Servicer Advance Investments, 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)
March 31, 2020
 
 
 
 
 
 
 
 
 
Servicer Advance Investments
$
509,989

 
$
515,574

 
5.8
%
 
5.6
%
 
6.7
December 31, 2019
 
 
 
 
 
 
 
 
 
Servicer Advance Investments
$
557,444

 
$
581,777

 
5.3
%
 
5.7
%
 
6.3
  
(A)
Carrying value represents the fair value of the Servicer Advance Investments, 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.

 
 
Three Months Ended  
 March 31,
 

2020

2019
Change in fair value of Servicer Advance Investments
 
$
(18,749
)
 
$
7,903


The following is additional information regarding the Servicer Advance Investments and related financing:
 
 
 
 
 
 
 
 
 
Loan-to-Value (“LTV”)(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
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicer Advance Investments(D)
$
30,043,832

 
$
461,723

 
1.5
%
 
$
423,910

 
88.0
%
 
87.1
%
 
1.7
%
 
1.7
%
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicer Advance Investments(D)
$
31,442,267

 
$
462,843

 
1.5
%
 
$
443,248

 
88.3
%
 
87.2
%
 
3.4
%
 
2.8
%
 
(A)
Based on outstanding servicer advances, excluding purchased but unsettled servicer advances.
(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 are included in the Servicer Advance Investments:


March 31, 2020

December 31, 2019
Principal and interest advances

$
87,292


$
71,574

Escrow advances (taxes and insurance advances)

173,617


180,047

Foreclosure advances

200,814


211,222

Total

$
461,723

 
$
462,843


 
Interest income recognized by New Residential related to its Servicer Advance Investments was composed of the following:

 
Three Months Ended  
 March 31,


2020

2019
Interest income, gross of amounts attributable to servicer compensation

$
(10,250
)

$
15,076

Amounts attributable to base servicer compensation

882


(1,565
)
Amounts attributable to incentive servicer compensation

(8,721
)

(6,427
)
Interest income from Servicer Advance Investments
 
$
(18,089
)
 
$
7,084