Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENT (Tables)

v3.20.1
FAIR VALUE MEASUREMENT (Tables)
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Schedule of Carrying Values and Fair Values of Financial Assets Recorded at Fair Value on a Recurring Basis

The carrying values and fair values of New Residential’s assets and liabilities recorded at fair value on a recurring basis, as well as other financial instruments for which fair value is disclosed, as of March 31, 2020 were as follows:
 
 
 
 
 
Fair Value
 
Principal Balance or Notional Amount
 
Carrying Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
Investments in:
 
 
 
 
 
 
 
 
 
 
 
Excess mortgage servicing rights, at fair value(A)
$
85,009,386

 
$
363,932

 
$

 
$

 
$
363,932

 
$
363,932

Excess mortgage servicing rights, equity method investees, at fair value(A)
33,251,300

 
119,609

 

 

 
119,609

 
119,609

Mortgage servicing rights, at fair value(A)
403,706,059

 
3,934,384

 

 

 
3,934,384

 
3,934,384

Mortgage servicing rights financing receivables, at fair value
123,066,762

 
1,604,431

 



 
1,604,431

 
1,604,431

Servicer advance investments, at fair
    value
461,723

 
515,574

 

 

 
515,574

 
515,574

Real estate and other securities, available-for-sale
20,834,705

 
2,479,603

 

 
318,568

 
2,161,035

 
2,479,603

Residential mortgage loans, held-for-sale
1,470,604

 
1,264,533

 

 

 
1,264,533

 
1,264,533

Residential mortgage loans, held-for-sale, at fair value
3,476,667

 
3,283,973

 

 
1,633,481

 
1,650,492

 
3,283,973

Residential mortgage loans, held-for-investment, at fair value
919,461

 
824,183

 

 

 
824,183

 
824,183

Residential mortgage loans subject to repurchase
197,715

 
197,715

 

 
197,715

 

 
197,715

Consumer loans, held-for-investment, at fair value
771,998

 
780,821

 

 

 
780,821

 
780,821

Derivative assets
14,724,133

 
132,616

 

 
48

 
132,568

 
132,616

Note receivable
46,724

 
42,787

 

 

 
42,787

 
42,787

Cash and cash equivalents
360,453

 
360,453

 
360,453

 

 

 
360,453

Restricted cash
147,435

 
147,435

 
147,435

 

 

 
147,435

Other assets(B)
N/A

 
45,118

 
2,902

 

 
42,216

 
45,118

 
 
 
$
16,097,167

 
$
510,790

 
$
2,149,812

 
$
13,436,565

 
$
16,097,167

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Repurchase agreements
$
10,815,570

 
$
10,814,130

 
$

 
$
10,815,570

 
$

 
$
10,815,570

Notes and bonds payable(C)
7,028,099

 
7,014,579

 

 

 
6,238,923

 
6,238,923

Residential mortgage loan repurchase liability
197,715

 
197,715

 

 
197,715

 

 
197,715

Derivative liabilities
18,169,875

 
160,353

 

 
158,925

 
1,428

 
160,353

Excess spread financing
2,839,463

 
25,614

 

 

 
25,614

 
25,614

Contingent consideration
N/A

 
56,836

 

 

 
56,836

 
56,836

 
 
 
$
18,269,227

 
$

 
$
11,172,210

 
$
6,322,801

 
$
17,495,011

 
(A)
The notional amount represents the total unpaid principal balance of the residential mortgage loans underlying the MSRs, MSR financing receivables and Excess MSRs. New Residential does not receive an excess mortgage servicing amount on non-performing loans in Agency portfolios.
(B)
Excludes the indirect equity investment in a commercial redevelopment project that is accounted for at fair value on a recurring basis based on the NAV of New Residential’s investment. The investment had a fair value of $31.9 million as of March 31, 2020.
(C)
Includes the SAFT 2013-1 and MDST Trusts mortgage backed securities issued for which the fair value option for financial instruments was elected and resulted in a fair value of $272.3 million as of March 31, 2020.

Schedule of Financial Assets Measured at Fair Value on a Recurring Basis using Level 3 Inputs
New Residential’s assets measured at fair value on a recurring basis using Level 3 inputs changed as follows:
 
Level 3
 
 
 
 
 
Excess MSRs(A)
 
Excess MSRs in Equity Method Investees(A)(B)
 
MSRs(A)
 
MSR Financing Receivables(A)
 
Servicer Advance Investments
 
Non-Agency RMBS
 
Derivatives(C)
 
Residential Mortgage Loans
 
Consumer Loans
 
 
 
Agency
 
Non-Agency
 
 
 
 
 
 
Total
Balance at December 31, 2019
$
209,633

 
$
170,114

 
$
125,596

 
$
3,967,960

 
$
1,718,273

 
$
581,777

 
$
7,957,785

 
$
39,891

 
$
3,998,825

 
$

 
$
18,769,854

Transfers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transfers from Level 3

 

 

 

 

 

 

 

 
(467,263
)
 


 
(467,263
)
Transfers to Level 3

 

 

 

 

 

 

 

 
440,168

 
827,545

 
1,267,713

Shellpoint Acquisition

 

 

 

 

 

 

 

 

 

 

Transfers from investments in mortgage servicing rights financing receivables to investments in mortgage servicing rights

 

 

 

 

 

 

 

 

 

 

Gains (losses) included in net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Included in provision (reversal) for credit losses on securities(D)

 

 

 

 

 

 
(44,149
)
 

 

 

 
(44,149
)
Included in change in fair value of investments in excess mortgage servicing rights(D)
(5,557
)
 
(5,467
)
 

 

 

 

 

 

 

 

 
(11,024
)
Included in change in fair value of investments in excess mortgage servicing rights, equity method investees(D)

 

 
(457
)
 

 

 

 

 

 

 

 
(457
)
Included in servicing revenue, net(E)

 

 

 
(655,800
)
 

 

 

 

 

 

 
(655,800
)
Included in change in fair value of investments in mortgage servicing rights financing receivables(D)

 

 

 

 
(104,111
)
 

 

 

 

 

 
(104,111
)
Included in change in fair value of servicer advance investments

 

 

 

 

 
(18,749
)
 

 

 

 

 
(18,749
)
Included in change in fair value of investments in residential mortgage loans

 

 

 

 

 

 

 

 
(265,244
)
 

 
(265,244
)
Included in gain (loss) on settlement of investments, net
8

 
1

 

 

 

 

 
(924,897
)
 

 

 

 
(924,888
)
Included in other income (loss), net(D)
557

 
70

 

 

 

 

 
(87,650
)
 
91,249

 
730

 
(39,916
)
 
(34,960
)
Gains (losses) included in other comprehensive income(F)

 

 

 

 

 

 
(640,403
)
 

 
(6,020
)
 
36,472

 
(609,951
)
Interest income
6,146

 
7,080

 

 

 

 
(18,089
)
 
67,123

 

 

 
6,932

 
69,192

Purchases, sales and repayments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases

 

 

 
436,395

 

 
330,140

 
538,964

 

 
1,250,157

 
11,002

 
2,566,658

Proceeds from sales
(31
)
 
(3
)
 

 
(8,504
)
 
(3,708
)
 

 
(4,358,894
)
 

 
(2,393,309
)
 

 
(6,764,449
)
Proceeds from repayments
(10,589
)
 
(8,030
)
 
(5,530
)
 
(1,563
)
 
(6,023
)
 
(359,505
)
 
(346,844
)
 

 
(83,369
)
 
(61,214
)
 
(882,667
)
Originations and other

 

 

 
195,896

 

 

 

 

 

 

 
195,896

Balance at March 31, 2020
$
200,167

 
$
163,765

 
$
119,609

 
$
3,934,384

 
$
1,604,431

 
$
515,574

 
$
2,161,035

 
$
131,140

 
$
2,474,675

 
$
780,821

 
$
12,085,601

 
(A)
Includes the recapture agreement for each respective pool, as applicable.
(B)
Amounts represent New Residential’s portion of the Excess MSRs held by the respective joint ventures in which New Residential has a 50% interest.
(C)
For the purpose of this table, the IRLC asset and liability positions are shown net.
(D)
The gains (losses) recorded in earnings during the period are attributable to the change in unrealized gains (losses) relating to Level 3 assets still held at the reporting dates and realized gains (losses) recorded during the period.
(E)
The components of Servicing revenue, net are disclosed in Note 5.
(F)
These gains (losses) were included in net unrealized gain (loss) on securities in the Condensed Consolidated Statements of Comprehensive Income.
Schedule of Financial Liabilities Measured at Fair Value on a Recurring Basis using Level 3 Inputs
New Residential’s liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:
 
 
Level 3
 
 
 
 
Excess Spread Financing
 
Mortgage-Backed Securities Issued
 
Contingent Consideration
 
 
 
 
 
Total
Balance at December 31, 2019
 
$
31,777

 
$
659,738

 
$
55,222

 
$
746,737

Transfers
 
 
 
 
 
 
 
 
Transfers from Level 3
 

 

 

 

Transfers to Level 3
 

 

 

 

Acquisition
 

 

 

 

Gains (losses) included in net income
 
 
 
 
 
 
 
 
Included in provision (reversal) for credit losses on securities(A)
 

 

 

 

Included in change in fair value of investments in excess mortgage servicing rights
 

 

 

 

Included in change in fair value of investments in excess mortgage servicing rights, equity method investees(A)
 

 

 

 

Included in servicing revenue, net(B)
 
(6,425
)
 

 

 
(6,425
)
Included in change in fair value of investments in notes receivable - rights to MSRs
 

 

 

 

Included in change in fair value of servicer advance investments
 

 

 

 

Included in change in fair value of investments in residential mortgage loans
 

 
(17,002
)
 

 
(17,002
)
Included in gain (loss) on settlement of investments, net
 

 

 

 

Included in other income(A)
 

 

 
1,614

 
1,614

Gains (losses) included in other comprehensive income, net of tax(C)
 

 

 

 

Interest income
 

 

 

 

Purchases, sales and repayments
 
 
 
 
 
 
 
 
Purchases
 

 

 

 

Proceeds from sales
 

 

 

 

Payments
 

 
(368,979
)
 

 
(368,979
)
Other
 
262

 
(1,465
)
 

 
(1,203
)
Balance at March 31, 2020
 
$
25,614

 
$
272,292

 
$
56,836

 
$
354,742


(A)
The gains (losses) recorded in earnings during the period are attributable to the change in unrealized gains (losses) relating to Level 3 liabilities still held at the reporting dates and realized gains (losses) recorded during the period.
(B)
The components of Servicing revenue, net are disclosed in Note 5.
(C)
These gains (losses) were included in net unrealized gain (loss) on securities in the Condensed Consolidated Statements of Comprehensive Income.

Summary of Measurement Inputs and Valuation Techniques

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing residential mortgage loans held-for-investment, at fair value classified as Level 3:
 
 
Fair Value
 
Discount Rate
 
Prepayment Rate
 
CDR
 
Loss Severity
Residential Mortgage Loans Held-for-Investment, at Fair Value
 
$
824,183

 
4.0% - 10.5%
(8.2%)
 
3.0% - 15.0%
(6.6%)
 
2.0% - 2.9%
(2.4%)
 
20.0% - 47.9%
(36.6%)

The following table summarizes certain information regarding the ranges and weighted averages of inputs used as of March 31, 2020:
 
 
Significant Inputs(A)
 
 
Prepayment
Rate
(B)
 
Delinquency(C)
 
Recapture
Rate
(D)
 
Mortgage Servicing Amount or Excess Mortgage Servicing Amount (bps)(E)
 
Collateral Weighted Average Maturity (Years)(F)
Excess MSRs Directly Held (Note 4)
 
 
 
 
 
 
 
 
 
 
Agency

 
 
 
 
 
 
 
 
 
Original Pools

5.7% - 10.2% (8.1%)
 
0.0% - 4.8% (1.7%)
 
4.4% - 28.7% (18.5%)
 
15 - 31 (21)
 
15 - 22 (20)
Recaptured Pools
 
6.4% - 11.2% (10.1%)
 
0.1% - 4.0% (0.8%)
 
0.0% - 35.7% (26.3%)
 
20 - 29 (23)
 
20 - 24 (23)


5.7% - 11.2% (8.7%)
 
0.0% - 4.8% (1.4%)
 
0.0% - 35.7% (21.0%)
 
15 - 31 (22)
 
15 - 24 (21)
Non-Agency(G)

 
 
 
 
 
 
 
 
 
Mr. Cooper and SLS Serviced:
 
 
 
 
 
 
 
 
 
 
Original Pools

7.8% - 11.9% (8.9%)
 
N/A
 
0.0% - 14.2% (12.5%)
 
5 - 25 (15)
 
19 - 31 (23)
Recaptured Pools
 
6.2% - 7.5% (7.1%)
 
N/A
 
12.3% - 16.5% (14.9%)
 
22 - 27 (25)
 
21 - 24 (23)


6.2% - 11.9% (8.6%)
 
N/A
 
0.0% - 16.5% (12.9%)
 
5 - 27 (16)
 
19 - 31 (23)
Total/Weighted AverageExcess MSRs Directly Held

5.7% - 11.9% (8.7%)
 
N/A
 
0.0% - 35.7% (17.2%)
 
5 - 31 (19)
 
15 - 31 (22)


 
 
 
 
 
 
 
 
 
Excess MSRs Held through Equity Method Investees (Note 4)
 
 
 
 
 
 
 
 
Agency

 
 
 
 
 
 
 
 
 
Original Pools

8.4% - 9.2% (8.6%)
 
1.2% - 4.0% (2.1%)
 
13.7% - 28.6% (19.8%)
 
15 - 25 (19)
 
18 - 20 (19)
Recaptured Pools
 
9.4% - 10.2% (9.9%)
 
0.7% - 1.7% (1.2%)
 
20.8% - 29.3% (24.6%)
 
22 - 28 (24)
 
21 - 24 (22)
Total/Weighted AverageExcess MSRs Held through Investees

8.4% - 10.2% (9.2%)
 
0.7% - 4.0% (1.7%)
 
13.7% - 29.3% (22.1%)
 
15 - 28 (21)
 
18 - 24 (20)
 
 
 
 
 
 
 
 
 
 
 
Total/Weighted AverageExcess MSRs All Pools
 
5.7% - 11.9% (8.9%)
 
N/A
 
0.0% - 35.7% (18.9%)
 
5 - 31 (20)
 
15 - 31 (21)
 
 
 
 
 
 
 
 
 
 
 
MSRs
 
 
 
 
 
 
 
 
 
 
Agency(H)
 
 
 
 
 
 
 
 
 
 
Mortgage Servicing Rights(I) (J)
 
10.7% - 16.5% (12.0%)
 
0.1% - 3.4% (1.2%)
 
5.1% - 25.1% (20.5%)
 
25 - 33 (28)
 
0 - 30 (22)
MSR Financing Receivables(I)
 
11.8% - 14.9% (13.1%)
 
0.5% - 0.8% (0.6%)
 
12.4% - 18.6% (15.1%)
 
25 - 29 (27)
 
0 - 30 (25)
 
 
10.7% - 16.5% (12.1%)
 
0.1% - 3.4% (1.2%)
 
5.1% - 25.1% (19.8%)
 
25 - 33 (28)
 
0 - 30 (22)
Non-Agency
 
 
 
 
 
 
 
 
 
 
Mortgage Servicing Rights(I)
 
8.7% - 11.9% (11.7%)
 
0.3% - 13.2% (0.9%)
 
1.9% - 24.5% (23.5%)
 
26 - 87 (28)
 
0 - 30 (16)
MSR Financing Receivables(I)
 
8.1%
 
15.1%
 
9.4%
 
48
 
0 - 30 (25)
 
 
8.1% - 11.9% (8.2%)
 
0.3% - 15.1% (14.8%)
 
1.9% - 24.5% (9.6%)
 
26 - 87 (47)
 
0 - 30 (25)
Ginnie Mae
 
 
 
 
 
 
 
 
 
 
Mortgage Servicing Rights(I) (J)
 
14.3% - 17.0% (15.8%)
 
2.0% - 6.1% (5.6%)
 
15.3% - 35.0% (23.9%)
 
32 - 52 (45)
 
0 - 30 (27)
 
 
 
 
 
 
 
 
 
 
 
Total/Weighted AverageMSRs
 
8.1% - 17.0% (11.8%)
 
0.1% - 15.1% (4.5%)
 
1.9% - 35.0% (20.0%)
 
25 - 87 (34)
 
0 - 30 (23)

(A)
Weighted by fair value of the portfolio.
(B)
Projected annualized weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.
(C)
Projected percentage of residential mortgage loans in the pool for which the borrower will miss its mortgage payments.
(D)
Percentage of voluntarily prepaid loans that are expected to be refinanced by the related servicer or subservicer, as applicable.
(E)
Weighted average total mortgage servicing amount, in excess of the basic fee as applicable, measured in basis points (bps). A weighted average cost of subservicing of $6.2 - $8.8 ($7.6) per loan per month was used to value the agency MSRs, including MSR Financing Receivables. A weighted average cost of subservicing of $11.20 per loan per month was used to value the Non-Agency MSRs, including MSR Financing Receivables. A weighted average cost of subservicing of $9.70 per loan per month was used to value the Ginnie Mae MSRs.
(F)
Weighted average maturity of the underlying residential mortgage loans in the pool.
(G)
For certain pools, the Excess MSR will be paid on the total UPB of the mortgage portfolio (including both performing and delinquent loans until REO). For these pools, no delinquency assumption is used.
(H)
Represents Fannie Mae and Freddie Mac MSRs.
(I)
For certain pools, recapture rate represents the expected recapture rate with the successor subservicer appointed by NRM.
(J)
Includes valuation of the related Excess spread financing (Note 5).

The assumptions used by New Residential’s valuation providers with respect to the remainder of New Residential’s Non-Agency RMBS were not readily available.
 
 
Fair Value
 
Discount Rate
 
Prepayment Rate(a)
 
CDR(b)
 
Loss Severity(c)
Non-Agency RMBS
 
$
1,637,017

 
1.6% - 11.8% (5.1%)
 
2.3% - 27.1% (10.5%)
 
0% - 3.0% (1.0%)
 
12.9% - 85.6% (43.8%)

(a)
Represents the annualized rate of the prepayments as a percentage of the total principal balance of the pool.
(b)
Represents the annualized rate of the involuntary prepayments (defaults) as a percentage of the total principal balance of the pool.
(c)
Represents the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding balance.
(B)
New Residential was unable to obtain quotations from more than one source on these securities.
(C)
Includes New Residential’s investments in interest-only notes for which the fair value option for financial instruments was elected.


The following table summarizes certain information regards the ranges and weighted averages of inputs used in valuing Mortgage-Backed Securities Issued:
 
 
Fair Value
 
Discount Rate
 
Prepayment Rate
 
CDR
 
Loss Severity
Mortgage-Backed Securities Issued
 
$
272,292

 
4.0% - 7.3%
(6.2%)
 
3.3% - 15.0%
(7.5%)
 
2.0% - 2.8%
(2.5%)
 
20.0% - 30.0%
(26.5%)


The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing IRLCs:
 
 
Fair Value
 
Loan Funding Probability
 
Fair Value of initial servicing rights (bps)
IRLCs (net)
 
$
131,140

 
43% - 100% (76.5%)
 
2.33 - 306 (139.8)

The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing residential mortgage loans held-for-sale, at fair value classified as Level 3:
 
 
Fair Value
 
Discount Rate
 
Prepayment Rate
 
CDR
 
Loss Severity
Acquired Loans
 
$
1,527,770

 
4.1% - 11.0%
(6.5%)
 
0.0% - 14.1%
(5.0%)
 
0.0% - 34.7%
(4.0%)
 
0.0% - 60.0%
(27.0%)
Originated Loans
 
122,722

 
7.0%
 
14.1%
 
1.2%
 
50.0%
Residential Mortgage Loans Held-for-Sale, at Fair Value
 
$
1,650,492

 

 

 

 


Summary of Certain Information Regarding the Inputs used in Valuing the Servicer Advances
The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing the Servicer Advance Investments, including the basic fee component of the related MSRs:
 
Significant Inputs
 
Outstanding Servicer Advances to UPB of Underlying Residential Mortgage Loans
 
Prepayment Rate(A)
 
Delinquency
 
Mortgage Servicing Amount(B)
 
Discount Rate
 
Collateral Weighted Average Maturity (Years)(C)
March 31, 2020
0.8% - 1.6% (1.6%)
 
8.2% - 8.7% (8.7%)
 
5.4% - 17.7% (17.3%)
 
15.6 - 19.8 (19.6)
bps
5.8% - 6.3% (5.8%)
 
22.5 - 22.7 (22.7)


(A)
Projected annual weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.
(B)
Mortgage servicing amount is net of 11.0 bps which represents the amount New Residential paid its servicers as a monthly servicing fee.
(C)
Weighted average maturity of the underlying residential mortgage loans in the pool.
Schedule of Inputs Used in Valuing Residential Mortgage Loans The following table summarizes the inputs used in valuing these residential mortgage loans as of March 31, 2020:
 
 
Fair Value and Carrying Value
 
Discount Rate
 
Weighted Average Life (Years)(A)
 
Prepayment Rate
 
CDR(B)
 
Loss Severity(C)
Performing Loans
 
$
753,288

 
5.0% - 11.0%
(6.1%)
 
2.4 - 4.8
(4.2)
 
4.3% - 20.0%
(8.5%)
 
1.3% - 34.7%
(6.9%)
 
0.0% - 100.0%
(38.5%)
Non-Performing Loans
 
511,245

 
5.8% - 8.5%
(8.3%)
 
2.3 - 5.1
(3.2)
 
2.0% - 6.3%
(3.1%)
 
2.7% - 2.9%
(2.9%)
 
18.9% - 30.0%
(29.6%)
Total/Weighted Average
 
$
1,264,533

 
7.0%
 
3.8
 
6.3%
 
5.3%
 
34.9%

(A)
The weighted average life is based on the expected timing of the receipt of cash flows.
(B)
Represents the annualized rate of the involuntary prepayments (defaults) as a percentage of the total principal balance.
(C)
Loss severity is the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding loan balance.