Quarterly report pursuant to Section 13 or 15(d)

RESIDENTIAL MORTGAGE LOANS

v3.21.2
RESIDENTIAL MORTGAGE LOANS
9 Months Ended
Sep. 30, 2021
Receivables [Abstract]  
RESIDENTIAL MORTGAGE LOANS RESIDENTIAL MORTGAGE LOANS
New Residential’s residential mortgage loan portfolio consists of loans acquired through pool acquisitions and the execution of call rights. New Residential, through its wholly-owned subsidiaries, Newrez and Caliber, originates residential mortgage loans for sale and securitization to third parties and generally retains the servicing rights on the underlying loans.

Loans are accounted for based on New Residential’s strategy for the loan and on whether the loan was credit-impaired at the date of acquisition. As of September 30, 2021, New Residential accounts for loans based on the following categories:

Loans held-for-investment, at fair value
Loans held-for-sale, at lower of cost or fair value
Loans held-for-sale, at fair value

The following table presents certain information regarding New Residential’s residential mortgage loans outstanding by loan type:
September 30, 2021 December 31, 2020
Loan Type Outstanding Face Amount Carrying
Value
Loan
Count
Weighted Average Yield
Weighted Average Life (Years)(A)
Carrying Value
Total residential mortgage loans, held-for-investment, at fair value(B)
$ 657,427  $ 595,012  11,472  6.3  % 5.3 $ 674,179 
Acquired reverse mortgage loans(C)
$ 12,690  $ 6,120  28  7.7  % 3.7 $ 5,884 
Acquired performing loans(D)
150,127  136,921  2,977  6.7  % 4.5 129,345 
Acquired non-performing loans(E)
2,123  1,702  24  7.5  % 4.8 374,658 
Total residential mortgage loans, held-for-sale, at lower of cost or market $ 164,940  $ 144,743  3,029  6.8  % 4.4 $ 509,887 
Acquired performing loans(D)(F)
$ 2,100,079  $ 2,112,181  12,575  3.4  % 11.0 $ 1,423,159 
Acquired non-performing loans(F)
160,098  146,370  923  4.8  % 5.6 335,544 
Originated loans 11,403,519  11,714,006  13,538  3.0  % 27.7 2,947,113 
Total residential mortgage loans, held-for-sale, at fair value $ 13,663,696  $ 13,972,557  27,036  3.1  % 24.9 $ 4,705,816 
Total residential mortgage loans, held-for-sale, at fair value/lower of cost or market $ 13,828,636  $ 14,117,300  $ 5,215,703 
(A)For loans classified as Level 3 in the fair value hierarchy, the weighted average life is based on the expected timing of the receipt of cash flows. For Level 2 loans, the weighted average life is based on the contractual term of the loan.
(B)Residential mortgage loans, held-for-investment, at fair value is grouped and presented as part of Residential loans and variable interest entity consumer loans held-for-investment, at fair value on the Consolidated Balance Sheets.
(C)Represents a 70% participation interest that New Residential holds in a portfolio of reverse mortgage loans. Mr. Cooper holds the other 30% interest and services the loans. The average loan balance outstanding based on total UPB was $0.6 million. Approximately 54% 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.
(D)Performing loans are generally placed on nonaccrual status when principal or interest is 120 days or more past due.
(E)As of September 30, 2021, New Residential has placed non-performing loans, held-for-sale on nonaccrual status, except as described in (F) below.
(F)Includes $981.3 million and $101.6 million UPB of Ginnie Mae EBO performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.
The table below summarizes the geographic distribution of the underlying residential mortgage loans:
Percentage of Total Outstanding Unpaid Principal Amount
State Concentration September 30, 2021 December 31, 2020
California 15.3  % 11.9  %
Washington 10.7  % 1.8  %
Florida 9.3  % 7.1  %
Texas 7.4  % 10.1  %
New York 4.1  % 7.1  %
New Jersey 3.6  % 4.2  %
Virginia 3.6  % 2.5  %
Georgia 3.0  % 5.8  %
Illinois 3.0  % 3.0  %
Maryland 2.9  % 2.3  %
Other U.S. 37.1  % 44.2  %
100.0  % 100.0  %

See Note 11 regarding the financing of residential mortgage loans.

The following table summarizes the difference between the aggregate unpaid principal balance and the aggregate fair value of loans:
September 30, 2021 December 31, 2020
Days Past Due Unpaid Principal Balance Fair Value Fair Value Over (Under) Unpaid Principal Balance Unpaid Principal Balance Fair Value Fair Value Over (Under) Unpaid Principal Balance
90 to 119 $ 28,898  $ 26,442  $ (2,456) $ 71,567  $ 59,679  $ (11,888)
120+ 410,134  397,483  (12,651) 950,564  790,788  (159,776)
$ 439,032  $ 423,925  $ (15,107) $ 1,022,131  $ 850,467  $ (171,664)

Call Rights

New Residential has executed calls with respect to Non-Agency RMBS trusts and purchased performing and non-performing residential mortgage loans and REO assets contained in such trusts prior to their termination. In certain cases, New Residential sold portions of the purchased loans through securitizations, and retained bonds issued by such securitizations. In addition, New Residential received par on the securities issued by the called trusts which it owned prior to such trusts’ termination. For the nine months ended September 30, 2021, New Residential executed calls on a total of 65 trusts and recognized $3.3 million of interest income on securities held in the collapsed trusts and $28.7 million of gain on securitizations accounted for as sales. For the nine months ended September 30, 2020, New Residential executed calls on a total of 15 trusts and recognized $12.0 million of interest income on securities held in the collapsed trusts and $48.3 million of gain on securitizations accounted for as sales. Refer to Note 16 for transactions with affiliates.
The following table summarizes the activity for residential mortgage loans:
Loans Held-for-Investment, at Fair Value Loans Held-for-Sale, at Lower of Cost or Fair Value Loans Held-for-Sale, at Fair Value Total
Balance at December 31, 2020
$ 674,179  $ 509,887  $ 4,705,816  $ 5,889,882 
Caliber acquisition (Note 1) —  —  7,685,681  7,685,681 
Originations —  —  84,990,504  84,990,504 
Sales —  (370,743) (88,980,603) (89,351,346)
Purchases/additional fundings —  —  5,797,205  5,797,205 
Proceeds from repayments (91,074) (26,988) (360,757) (478,819)
Transfer of loans to other assets(A)
—  294  7,990  8,284 
Transfer of loans to real estate owned (13,121) (7,163) (3,235) (23,519)
Valuation (provision) reversal on loans —  39,456  —  39,456 
Fair value adjustments due to:
Changes in instrument-specific credit risk (1,841) —  (10,247) (12,088)
Other factors 26,869  —  140,203  167,072 
Balance at September 30, 2021
$ 595,012  $ 144,743  $ 13,972,557  $ 14,712,312 
(A)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 grouped and presented as part of claims receivable in Other Assets (Note 2).

Net interest income

The following table summarizes the net interest income for residential mortgage loans:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Interest income:
Loans held-for-investment, at fair value $ 11,090  $ 12,647  $ 34,061  $ 40,985 
Loans held-for-sale, at lower of cost or fair value 5,449  7,406  18,241  38,673 
Loans held-for-sale, at fair value 75,802  31,267  163,769  104,565 
Total interest income 92,341  51,320  216,071  184,223 
Interest expense:
Loans held-for-investment, at fair value 4,238  5,326  13,129  15,934 
Loans held-for-sale, at lower of cost or fair value 4,030  4,068  16,303  17,501 
Loans held-for-sale, at fair value 49,187  20,909  103,785  64,206 
Total interest expense 57,455  30,303  133,217  97,641 
Net interest income $ 34,886  $ 21,017  $ 82,854  $ 86,582 

Gain on originated mortgage loans, held-for-sale, net

Newrez and Caliber, both wholly-owned subsidiaries of New Residential, originate conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. The GSEs or Ginnie Mae guarantee conventional and government-insured mortgage securitizations and mortgage investors issue nonconforming private label mortgage securitizations while Newrez and Caliber respectively generally retain the right to service the underlying residential mortgage
loans. In connection with the transfer of loans to the GSEs or mortgage investors, New Residential reports Gain on Originated Mortgage Loans, Held-for-Sale, Net in the Consolidated Statements of Income.

Gain on Originated Mortgage Loans, Held-for-Sale, Net is summarized below:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Gain on loans originated and sold, net(A)
$ 249,848  $ 244,225  $ 347,574  $ 520,096 
Gain (loss) on settlement of mortgage loan origination derivative instruments(B)
(105,594) (68,789) 48,522  (290,671)
MSRs retained on transfer of loans(C)
415,054  156,353  878,190  424,451 
Other(D)
27,614  12,460  79,716  33,890 
Realized gain on sale of originated mortgage loans, net $ 586,922  $ 344,249  $ 1,354,002  $ 687,766 
Change in fair value of loans
(70,932) 67,998  (67,545) 96,375 
Change in fair value of interest rate lock commitments (Note 10)
(101,411) 82,019  (281,094) 206,073 
Change in fair value of derivative instruments (Note 10)
152,182  (6,013) 251,731  (23,401)
Gain on originated mortgage loans, held-for-sale, net $ 566,761  $ 488,253  $ 1,257,094  $ 966,813 
(A)Includes loan origination fees of $678.4 million and $566.3 million for the three months ended September 30, 2021 and 2020, respectively, and $1,775.7 million and $953.1 million for the nine months ended September 30, 2021 and 2020, respectively.
(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.