Quarterly report pursuant to Section 13 or 15(d)

EXCESS MORTGAGE SERVICING RIGHTS ASSETS (Tables)

v3.21.2
EXCESS MORTGAGE SERVICING RIGHTS ASSETS (Tables)
9 Months Ended
Sep. 30, 2021
Transfers and Servicing [Abstract]  
Schedule of Activity Related to the Carrying Value of Investments in Excess MSRs
The table below summarizes the components of excess mortgage servicing rights assets as presented on the Consolidated Balance Sheets:
September 30, 2021 December 31, 2020
Direct investments in Excess MSRs $ 270,180  $ 310,938 
Excess MSR Joint Ventures 89,108  99,917 
Excess mortgage servicing rights assets, at fair value $ 359,288  $ 410,855 
The following table presents activity related to the carrying value of direct investments in Excess MSRs:
Servicer
Mr. Cooper
SLS(A)
Total
Balance as of December 31, 2020 $ 309,009  $ 1,929  $ 310,938 
Purchases —  —  — 
Interest income 16,315  (127) 16,188 
Other income 303  (325) (22)
Proceeds from repayments (42,971) (267) (43,238)
Proceeds from sales (20) —  (20)
Change in fair value (14,092) 426  (13,666)
Balance as of September 30, 2021
$ 268,544  $ 1,636  $ 270,180 
(A)Specialized Loan Servicing LLC (“SLS”).
The following table presents activity related to the carrying value of MSRs and MSR Financing Receivables:
Balance as of December 31, 2020 $ 4,585,841 
Caliber acquisition (Note 1) 1,507,524 
Purchases, net(A)
7,965 
Originations(B)
878,190 
Proceeds from sales (42,075)
Change in fair value due to:
    Realization of cash flows(C)
(928,646)
    Change in valuation inputs and assumptions 573,556 
    (Gain) loss realized (17,088)
Balance at September 30, 2021 $ 6,565,267 
(A)Net of purchase price adjustments and purchase price fully reimbursable from MSR sellers as a result of prepayment protection.    
(B)Represents MSRs retained on the sale of originated mortgage loans.
(C)Based on the paydown of the underlying residential mortgage loans.
The following is a summary of MSRs and MSR Financing Receivables as of September 30, 2021:
UPB of Underlying Mortgages
Weighted Average Life (Years)(A)
Carrying Value(B)
Agency $ 374,945,577  5.9 $ 4,273,376 
Non-Agency 68,903,562  8.0 966,051 
Ginnie Mae(C)
105,975,422  5.4 1,325,840 
Total $ 549,824,561  6.1 $ 6,565,267 
(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)Carrying value represents fair value. As of September 30, 2021, weighted average discount rates of 7.4% (range 6.9% - 12.5%) were used to value New Residential’s MSRs and MSR Financing Receivables.
(C)As of September 30, 2021, New Residential holds approximately $1.8 billion in residential mortgage loans subject to repurchase and the related residential mortgage loans repurchase liability on its Consolidated Balance Sheets.
Summary of Direct Investments in Excess MSRs
The following is a summary of direct investments in Excess MSRs:
September 30, 2021 December 31, 2020
UPB of Underlying Mortgages Interest in Excess MSR
Weighted Average Life Years(A)
Amortized Cost Basis(B)
Carrying Value(C)
Carrying Value(C)
New Residential(D)
Fortress-managed funds Mr. Cooper
Agency
Original and Recaptured Pools
$ 28,418,993 
32.5% - 66.7%
(53.3%)
0.0% - 40%
20.0% - 35.0%
6.0 $ 125,402  $ 139,289  $ 162,645 
Non-Agency(E)
Mr. Cooper and SLS Serviced:
Original and Recaptured Pools
32,179,863 
33.3% - 100.0%
(59.4%)
0.0% - 50%
0.0% - 33.3%
6.6 98,407  130,891  148,293 
Total $ 60,598,856  6.3 $ 223,809  $ 270,180  $ 310,938 
(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)The amortized cost basis of the recapture agreements is determined based on the relative fair values of the recapture agreements and related Excess MSRs at the time they were acquired.
(C)Carrying value represents the fair value of the pools and recapture agreements, as applicable.
(D)Amounts in parentheses represent weighted averages.
(E)New Residential is also invested in related Servicer Advance Investments, including the basic fee component of the related MSR as of September 30, 2021 (Note 6) on $21.6 billion unpaid principal balance (“UPB”) underlying these Excess MSRs.

Changes in fair value of investments consists of the following:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Original and Recaptured Pools $ (4,837) $ (664) $ (13,666) $ (11,773)
Summary of the Financial Results of Excess MSR Joint Ventures, Accounted for as Equity Method Investees
The following tables summarize the financial results of the Excess MSR joint ventures, accounted for as equity method investees:
September 30, 2021 December 31,
2020
Excess MSR assets $ 158,916 $ 179,762
Other assets 19,987 20,759
Other liabilities (687) (687)
Equity $ 178,216 $ 199,834
New Residential’s investment $ 89,108 $ 99,917
New Residential’s percentage ownership 50.0  % 50.0  %

Three Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Interest income $ 261  $ 12,249  $ 6,500  $ 20,099 
Other income (loss) (2,605) (13,027) (3,634) (25,879)
Expenses (8) (8) (24) (24)
Net income (loss) $ (2,352) $ (786) $ 2,842  $ (5,804)

The following table summarizes the activity of investments in equity method investees:
Balance at December 31, 2020 $ 99,917 
Distributions of capital from equity method investees (12,230)
Change in fair value of investments in equity method investees 1,421 
Balance at September 30, 2021 $ 89,108 
Summary of Excess MSR Investments made through Equity Method Investees
The following is a summary of Excess MSR investments made through equity method investees:
September 30, 2021
Unpaid Principal Balance
Investee Interest in Excess MSR(A)
New Residential Interest in Investees
Amortized Cost Basis(B)
Carrying Value(C)
Weighted Average Life (Years)(D)
Agency
Original and Recaptured Pools $ 24,230,726  66.7  % 50.0  % $ 119,814  $ 158,916  5.7
(A)The remaining interests are held by Mr. Cooper.
(B)Represents the amortized cost basis of the equity method investees in which New Residential holds a 50% interest. The amortized cost basis of the recapture agreements is determined based on the relative fair values of the recapture agreements and related Excess MSRs at the time they were acquired.
(C)Represents the carrying value of the Excess MSRs held in equity method investees, in which New Residential holds a 50% interest. Carrying value represents the fair value of the pools and recapture agreements, as applicable.
(D)Represents the weighted average expected timing of the receipt of cash flows of each investment.