Quarterly report pursuant to Section 13 or 15(d)

MORTGAGE SERVICING RIGHTS AND MSR FINANCING RECEIVABLES (Tables)

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MORTGAGE SERVICING RIGHTS AND MSR FINANCING RECEIVABLES (Tables)
9 Months Ended
Sep. 30, 2021
Transfers and Servicing of Financial Assets [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.
Fees Earned in Exchange for Servicing Financial Assets
Servicing Revenue, Net consists of the following:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 384,953  $ 404,373  $ 1,069,544  $ 1,249,504 
Ancillary and other fees 13,692  46,486  98,887  140,538 
Servicing fee revenue and fees 398,645  450,859  1,168,431  1,390,042 
Change in fair value due to:
Realization of cash flows(A)
(287,318) (509,624) (924,766) (1,135,515)
Change in valuation inputs and assumptions(B)
147,233  97,832  573,213  (598,226)
Change in fair value of derivative instruments (41,365) —  (41,564) — 
(Gain) loss realized (739) (3,547) (17,088) 2,363 
Gain (loss) on settlement of derivative instruments (13,434) (11,127) — 
Servicing revenue, net $ 203,022  $ 35,520  $ 747,099  $ (341,336)
(A)Includes $1.3 million and $2.4 million of fair value adjustment due to realization of cash flows to Excess spread financing for the three months ended September 30, 2021 and 2020, respectively, and $3.9 million and $6.1 million for the nine months ended September 30, 2021 and 2020, respectively.
(B)Includes $1.3 million and $0.2 million of fair value adjustment to Excess spread financing for the three months ended September 30, 2021 and 2020, respectively, and $0.3 million and $6.2 million for the nine months ended September 30, 2021 and 2020, respectively.
Summary of the Geographic Distribution of the Underlying Residential Mortgage Loans of the Direct Investment in MSRs
The table below summarizes the geographic distribution of the underlying residential mortgage loans of the MSRs and MSR Financing Receivables:
Percentage of Total Outstanding Unpaid Principal Amount
State Concentration September 30, 2021 December 31, 2020
California 18.4  % 21.2  %
Florida 8.5  % 7.4  %
Texas 6.1  % 5.6  %
New York 6.1  % 7.0  %
Washington 5.4  % 2.9  %
New Jersey 4.6  % 4.8  %
Illinois 3.4  % 3.6  %
Virginia 3.4  % 2.9  %
Maryland 3.3  % 3.1  %
Colorado 3.0  % 2.8  %
Other U.S. 37.8  % 38.7  %
100.0  % 100.0  %
Summary of Investments in Servicer Advances
The following types of advances are included in the Servicer Advances Receivable:
September 30, 2021 December 31, 2020
Principal and interest advances $ 592,212  $ 665,538 
Escrow advances (taxes and insurance advances) 1,414,507  1,547,796 
Foreclosure advances 801,466  816,400 
Total(A)(B)(C)
$ 2,808,185  $ 3,029,734 
(A)Includes $555.9 million and $583.9 million of servicer advances receivable related to Agency MSRs, respectively, recoverable either from the borrower or the Agencies.
(B)Includes $183.0 million and $181.2 million of servicer advances receivable related to Ginnie Mae MSRs, respectively, recoverable from either the borrower or Ginnie Mae. Expected losses for advances associated with Ginnie Mae loans in the MSR portfolio are considered in the MSR fair valuation through a nonreimbursable advance loss assumption.
(C)Excludes $25.6 million and $27.5 million, respectively, in unamortized advance discount and reserves, net of accruals for advance recoveries. These reserves relate to inactive loans in the foreclosure or liquidation process.
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)
September 30, 2021
Servicer advance investments $ 453,442  $ 472,004  5.2  % 5.6  % 6.0
December 31, 2020
Servicer advance investments $ 512,958  $ 538,056  5.2  % 5.7  % 6.0
(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.

The following is additional information regarding the Servicer Advance Investments and related financing:
UPB of Underlying Residential Mortgage Loans Outstanding Servicer Advances Servicer Advances to UPB of Underlying Residential Mortgage Loans Face Amount of Secured Notes and Bonds Payable
Loan-to-Value (“LTV”)(A)
Cost of Funds(C)
Gross
Net(B)
Gross Net
September 30, 2021
Servicer Advance Investments(D)
$ 21,568,182  $ 408,085  1.9  % $ 381,286  89.4  % 88.7  % 1.3  % 1.2  %
December 31, 2020
Servicer Advance Investments(D)
$ 26,061,499  $ 449,150  1.7  % $ 423,144  88.4  % 88.6  % 1.5  % 1.3  %
(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:
September 30, 2021 December 31, 2020
Principal and interest advances $ 75,564  $ 84,976 
Escrow advances (taxes and insurance advances) 170,817  186,426 
Foreclosure advances 161,704  177,748 
Total $ 408,085  $ 449,150 
Schedule Of Servicer Advances Reserve
The following table summarizes servicer advances reserve:
Balance at December 31, 2020 $ 22,852 
Caliber acquisition (Note 1) 15,068 
Provision 9,340 
Transfers and Other (10,961)
Write-offs (1,663)
Balance at September 30, 2021 $ 34,636