Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS (Tables)

v3.21.2
FAIR VALUE MEASUREMENTS (Tables)
9 Months Ended
Sep. 30, 2021
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 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 September 30, 2021 were as follows:
Fair Value
Principal Balance or Notional Amount Carrying Value Level 1 Level 2 Level 3 Total
Assets
Excess MSRs(A)
$ 60,598,856  $ 270,180  $ —  $ —  $ 270,180  $ 270,180 
Excess MSRs, equity method investees(A)
24,230,726  89,108  —  —  89,108  89,108 
MSRs and MSR financing receivables(A)
549,824,561  6,565,267  —  —  6,565,267  6,565,267 
Servicer advance investments 408,085  472,004  —  —  472,004  472,004 
Real estate and other securities
25,494,437  9,973,795  —  8,982,687  991,108  9,973,795 
Residential mortgage loans, held-for-sale
164,940  144,743  —  —  146,906  146,906 
Residential mortgage loans, held-for-sale, at fair value
13,663,696  13,972,557  —  12,150,003  1,822,554  13,972,557 
Residential mortgage loans, held-for-investment, at fair value
657,427  595,012  —  —  595,012  595,012 
Residential mortgage loans subject to repurchase
1,826,620  1,826,620  —  1,826,620  —  1,826,620 
Consumer loans 486,350  547,795  —  —  547,795  547,795 
Derivative assets
51,930,667  266,904  —  122,539  144,365  266,904 
Notes receivable 54,092  51,663  —  —  51,663  51,663 
      Loans receivable
233,339  233,339  —  —  233,339  233,339 
Cash and cash equivalents
1,366,678  1,366,678  1,366,678  —  —  1,366,678 
Restricted cash 194,745  194,745  194,745  —  —  194,745 
Other assets(B)
N/A 39,902  4,834  —  35,068  39,902 
$ 36,610,312  $ 1,566,257  $ 23,081,849  $ 11,964,369  $ 36,612,475 
Liabilities
Secured financing agreements $ 22,763,086  $ 22,759,985  $ —  $ 22,759,985  $ —  $ 22,759,985 
Secured notes and bonds payable(C)
8,270,813  8,248,092  —  750,000  7,527,636  8,277,636 
Unsecured senior notes, net of issuance costs
542,849  542,849  —  —  555,550  555,550 
Residential mortgage loan repurchase liability
1,826,620  1,826,620  —  1,826,620  —  1,826,620 
Derivative liabilities 16,482,604  54,766  —  34,783  19,983  54,766 
Contingent consideration N/A 9,299  —  —  9,299  9,299 
$ 33,441,611  $ —  $ 25,371,388  $ 8,112,468  $ 33,483,856 
(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 $31.7 million as of September 30, 2021.
(C)Includes SAFT 2013-1, MDST Trust, RPL Securitization Trust and SCFT 2020-A mortgage backed securities issued for which the fair value option for financial instruments was elected and resulted in a fair value of $798.2 million as of September 30, 2021.
Schedule of Financial Assets Measured at Fair Value on a Recurring Basis using Level 3 Inputs
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 and MSR Financing Receivables(A)
Servicer Advance Investments Non-Agency RMBS
Derivatives(C)
Residential Mortgage Loans Consumer Loans Other Assets
Agency Non-Agency Notes Receivable Loans Receivable Total
Balance at December 31, 2020 $ 162,645  $ 148,293  $ 99,917  $ 4,585,841  $ 538,056  $ 1,180,924  $ 289,074  $ 2,320,384  $ 685,575  $ 52,389  $ —  $ 10,063,098 
Transfers
Transfers from Level 3 —  —  —  —  —  —  —  (15,134) —  —  —  (15,134)
Transfers to Level 3 —  —  —  —  —  —  —  —  —  —  —  — 
Caliber acquisition (Note 1) —  —  —  1,507,524  —  —  116,403  —  —  —  —  1,623,927 
Gain (loss) included in net income
Reversal for credit losses on securities(D)
—  —  —  —  —  5,020  —  —  —  —  —  5,020 
Change in fair value of excess MSRs(D)
(7,578) (6,088) —  —  —  —  —  —  —  —  —  (13,666)
Change in fair value of excess MSRs, equity method investees(D)
—  —  1,421  —  —  —  —  —  —  —  —  1,421 
Servicing revenue, net(E)
—  —  —  (372,178) —  —  —  —  —  —  —  (372,178)
Change in fair value of servicer advance investments —  —  —  —  (6,535) —  —  —  —  —  —  (6,535)
Change in fair value of residential mortgage loans —  —  —  —  —  —  —  154,984  —  —  —  154,984 
Change in fair value of investments in consumer loans —  —  —  —  —  —  —  —  (13,338) —  —  (13,338)
Gain (loss) on settlement of investments, net 297  —  —  —  (28,240) —  —  —  —  —  (27,938)
Other income (loss), net(D)
(325) —  —  —  14,856  (281,095) (87) —  (3,243) —  (269,893)
Gains (losses) included in other comprehensive income(F)
—  —  —  —  —  27,101  —  —  —  —  —  27,101 
Interest income 7,368  8,820  —  —  7,086  10,917  —  —  14,493  4,017  2,036  54,737 
Purchases, sales and repayments
Purchases, net(G)
—  —  —  7,965  976,629  145,920  —  3,151,597  21,680  1,688  250,000  4,555,479 
Proceeds from sales (18) (2) —  (42,075) (164,630) —  (2,821,072) —  —  —  (3,027,797)
Proceeds from repayments (23,134) (20,104) (12,230) —  (1,043,232) (200,760) —  (373,106) (160,615) (3,188) (18,697) (1,855,066)
Originations and other —  —  —  878,190  —  —  —  —  —  —  —  878,190 
Balance at September 30, 2021 $ 139,289  $ 130,891  $ 89,108  $ 6,565,267  $ 472,004  $ 991,108  $ 124,382  $ 2,417,566  $ 547,795  $ 51,663  $ 233,339  $ 11,762,412 
(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)Gain (loss) recorded in earnings during the period are attributable to the change in unrealized gain (loss) relating to Level 3 assets still held at the reporting dates and realized gain (loss) recorded during the period.
(E)The components of Servicing Revenue, Net are disclosed in Note 5.
(F)Gain (loss) included in Unrealized Gain (Loss) on Available-for-Sale Securities, Net in the Consolidated Statements of Comprehensive Income.
(G)Net of purchase price adjustments and purchase price fully reimbursable from MSR sellers as a result of prepayment protection.
Schedule of Financial Liabilities Measured at Fair Value on a Recurring Basis using Level 3 Inputs
Liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:
Level 3
Excess Spread Financing Asset-Backed Securities Issued Contingent Consideration
Total
Balance at December 31, 2020 $ 18,420  $ 1,662,852  $ 14,247  $ 1,695,519 
Transfers
Transfers from Level 3 —  —  —  — 
Transfers to Level 3 —  —  —  — 
Gains (losses) included in net income
Servicing revenue, net(A)
(3,537) —  —  (3,537)
Other income(B)
—  (5,245) 886  (4,359)
Purchases, sales and repayments
Proceeds from sales
(15,379) —  —  (15,379)
Payments
—  (859,409) (5,834) (865,243)
Other
496  —  —  496 
Balance at September 30, 2021 $ —  $ 798,198  $ 9,299  $ 807,497 
(A)The components of Servicing Revenue, Net are disclosed in Note 5.
(B)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.
Summary of Measurement Inputs and Valuation Techniques
The following table summarizes certain information regarding the ranges and weighted averages of inputs used as of September 30, 2021:
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
5.5% - 8.4%
(6.6%)
—% - 2.0%
(0.9%)
3.6% - 17.0%
(6.6%)
15 - 32 (21)
11 - 21 (18)
Recaptured Pools
4.7% - 8.6%
(6.6%)
—% - 2.2%
(0.4%)
—% - 21.9%
(10.8%)
21 - 27 (23)
19- 24 (22)
4.7% - 8.6%
(6.6%)
—% - 2.2%
(0.7%)
—% - 21.9%
(8.4%)
15 - 32 (22)
11 - 24 (20)
Non-Agency(G)
Mr. Cooper and SLS Serviced:
Original Pools
6.2% - 11.9%
(8.1%)
1.5% - 11.2%
(7.9%)
—% - 11.3%
(7.7%)
6 - 25 (15)
18 - 28 (23)
Recaptured Pools
3.7% - 5.1%
(4.2%)
0.1% - 0.3%
(0.2%)
6.6% - 11.4%
(8.1%)
23 - 25 (24)
21 - 23 (23)
3.7% - 11.9%
(7.4%)
0.1% - 11.2%
(7.9%)
—% - 11.4%
(7.8%)
6 - 25 (17)
18 - 28 (23)
Total/Weighted AverageExcess MSRs Directly Held
3.7% - 11.9%
(7.0%)
—% - 11.2%
(3.5%)
—% - 21.9%
(8.1%)
6 - 32 (19)
11 - 28 (21)
Excess MSRs Held through Equity Method Investees (Note 4)
Agency
Original Pools
6.5% - 8.4%
(6.8%)
0.7% - 1.6%
(1.1%)
3.6% - 9.7%
(5.0%)
15 - 25 (18)
17- 19 (18)
Recaptured Pools
5.5% - 7.6%
(6.5%)
0.3% - 0.9%
(0.7%)
5.1% - 11.4%
(7.2%)
22 - 26 (25)
20 - 23 (22)
Total/Weighted AverageExcess MSRs Held through Investees
5.5% - 8.4%
(6.7%)
0.3% - 1.6%
(0.8%)
3.6% - 11.4%
(6.5%)
15 - 26 (21)
17 - 23 (20)
Total/Weighted AverageExcess MSRs All Pools
3.7% - 11.9%
(6.9%)
—% - 11.2%
(2.6%)
—% - 21.9%
(7.3%)
6 - 32 (20)
11 - 28 (21)
MSRs and MSR Financing Receivables
Agency(H)
6.1% - 15.2%
(10.4%)
0.3% - 2.1%
(1.0%)
2.7% - 31.8%
(11.0%)
25 - 30 (28)
0 - 40 (23)
Non-Agency(H)
7.2% - 43.9%
(7.1%)
0.9% - 63.2%
(10.7%)
2.0% - 24.7%
(8.5%)
26 - 85 (48)
0 - 30 (24)
Ginnie Mae(H)
6.0% - 15.6%
(13.4%)
1.5% - 12.4%
(3.7%)
2.6% - 35.0%
(13.4%)
30 - 46 (39)
0 - 30 (28)
Total/Weighted AverageMSRs and MSR Financing Receivables
6.0% - 43.9%
(10.5%)
0.3% - 63.2%
(3.0%)
2.0% - 35.0%
(10.0%)
25 - 85 (33)
0 - 40 (24)
(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 $6.20 - $7.30 ($6.90) per loan per month was used to value the agency MSRs. A weighted average cost of subservicing of $10.60 - $16.70 ($10.80) per loan per month was used to value the Non-Agency MSRs, including MSR Financing Receivables. A weighted average cost of subservicing of $8.80 - $8.90 ($8.80) 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)For certain pools, recapture rate represents the expected recapture rate with the successor subservicer appointed by NRM.
As of September 30, 2021, securities valuation methodology and results are further detailed as follows:
Fair Value
Asset Type Outstanding Face Amount Amortized Cost Basis
Multiple Quotes(A)
Single Quote(B)
Total Level
Agency RMBS $ 8,879,217  $ 9,161,405  $ 8,982,687  $ —  $ 8,982,687  2
Non-Agency RMBS(C)
16,615,220  921,874  991,108  —  991,108  3
Total $ 25,494,437  $ 10,083,279  $ 9,973,795  $ —  $ 9,973,795 
(A)New Residential generally obtained pricing service quotations or broker quotations from two sources, one of which was generally the seller (the party that sold New Residential the security) for Non-Agency RMBS. New Residential evaluates quotes received and determines one as being most representative of fair value, and does not use an average of the quotes. Even if New Residential receives two or more quotes on a particular security that come from non-selling brokers or pricing services, it does not use an average because it believes using an actual quote more closely represents a transactable price for the security than an average level. Furthermore, in some cases, for Non-Agency RMBS, there is a wide disparity between the quotes New Residential receives. New Residential believes using an average of the quotes in these cases would not represent the fair value of the asset. Based on New Residential’s own fair value analysis, it selects one of the quotes which is believed to more accurately reflect fair value. New Residential has not adjusted any of the quotes received in the periods presented. These quotations are generally received via email and contain disclaimers which state that they are “indicative” and not “actionable” — meaning that the party giving the quotation is not bound to actually purchase the security at the quoted price. New Residential’s investments in Agency
RMBS are classified within Level 2 of the fair value hierarchy because the market for these securities is very active and market prices are readily observable.

The third-party pricing services and brokers engaged by New Residential (collectively, “valuation providers”) use either the income approach or the market approach, or a combination of the two, in arriving at their estimated valuations of RMBS. Valuation providers using the market approach generally look at prices and other relevant information generated by market transactions involving identical or comparable assets. Valuation providers using the income approach create pricing models that generally incorporate such assumptions as discount rates, expected prepayment rates, expected default rates and expected loss severities. New Residential has reviewed the methodologies utilized by its valuation providers and has found them to be consistent with GAAP requirements. In addition to obtaining multiple quotations, when available, and reviewing the valuation methodologies of its valuation providers, New Residential creates its own internal pricing models for Level 3 securities and uses the outputs of these models as part of its process of evaluating the fair value estimates it receives from its valuation providers. These models incorporate the same types of assumptions as the models used by the valuation providers, but the assumptions are developed independently. These assumptions are regularly refined and updated at least quarterly by New Residential, and reviewed by its valuation group, which is separate from its investment acquisition and management group, to reflect market developments and actual performance.

For 99.3% of Non-Agency RMBS, the ranges and weighted averages of assumptions used by New Residential’s valuation providers are summarized in the table below. The assumptions used by New Residential’s valuation providers with respect to the remainder of Non-Agency RMBS were not readily available.
Fair Value Discount Rate
Prepayment Rate(a)
CDR(b)
Loss Severity(c)
Non-Agency RMBS $ 984,616 
0.0% to 15.0% (4.7%)
0.0% to 25.0% (10.1%)
0.0% to 12.0% (0.8%)
0.0% to 100.0% (13.7%)
(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 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 $ 1,713,431 
2.8% - 7.5%
(3.5%)
1.9% - 22.4%
(13.8%)
—% - 15.8%
(0.9%)
3.0% -50.0%
(20.6%)
Originated loans 109,123 
4.0%
6.0%
3.0%
50.0%
Residential mortgage loans held-for-sale, at fair value $ 1,822,554 
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 $ 595,012 
6.4% - 7.5%
(6.5%)
1.9% - 11.4%
(10.6%)
2.1% - 15.8%
(3.3%)
38.4% - 57.0%
(55.3%)
The following table summarizes certain information regarding the ranges and weighted averages of inputs used in valuing consumer loans held-for-investment, at fair value, classified as Level 3:
Fair Value Discount Rate Prepayment Rate CDR Loss Severity
Consumer loans, held-for-investment, at fair value $ 547,795 
7.5% - 9.7%
(7.5%)
22.3% - 34.1%
(22.3%)
4.4% - 23.6%
(4.4%)
66.0% - 92.4%
(66.0%)
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 $ 124,382 
0.0% - 100.0%
(83.0%)
0.9 - 314.1
(120.7)
The following table summarizes certain information regards the ranges and weighted averages of inputs used in valuing Asset-Backed Securities Issued:
Fair Value Discount Rate Prepayment Rate CDR Loss Severity
Asset-backed securities issued $ 798,198 
1.7% - 5.9%
(2.5%)
8.6% - 40.0%
(18.7%)
0.3% - 4.4%
(3.1%)
20.0% - 95.0%
(72.1%)
Summary of Certain Information Regarding the Inputs used in Valuing the Servicer Advances
Servicer Advance Investments Valuation

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)
September 30, 2021
0.7% - 1.5% (1.5%)
6.6% - 8.2% (8.2%)
4.6% - 15.0% (14.8%)
17.6 - 19.8 (19.7)
bps
5.2% - 5.7% (5.2%)
21.0 - 22.2 (22.2)
(A)Projected annual weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.
(B)Mortgage servicing amount is net of 10.9 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 September 30, 2021:
Fair Value and Carrying Value Discount Rate
Weighted Average Life (Years)(A)
Prepayment Rate
CDR(B)
Loss Severity(C)
Performing loans $ 118,755 
3.8% - 7.0%
(7.0%)
4.6 - 8.1
(4.7)
5.6% - 8.6%
(6.6%)
1.0% - 9.7%
(6.0%)
31.2% - 49.7%
(39.4%)
Non-performing loans 7,822 
7.5% - 9.0%
(8.8%)
3.7 - 4.8
(3.9)
1.9% - 1.9%
(1.9%)
15.8% - 15.8%
(15.8%)
8.6% - 38.4%
(12.9%)
Total/weighted average $ 126,577 
7.1%
4.7
6.3%
6.6%
37.7%
(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.