Fair Value Of Financial Instruments Tables

Schedule of fair value of assets and liabilities measured on a recurring basis

The carrying value and fair value of New Residential’s financial assets and liabilities at December 31, 2012 were as follows:


	Principal Balance or				Fair Value
	Notional Amount		Carrying Value		Level 2		Level 3		Total
Assets:
Investments in Excess MSRs (A)	$	76,560,751	$	245,036	$	—	$	245,036	$	245,036
Real estate securities, available-for-sale	$	433,510	$	289,756	$	—	$	289,756	$	289,756
Liabilities:
Repurchase agreements	$	150,922	$	150,922	$	150,922	$	—	$	150,922

(A)	The notional amount represents the total unpaid principal balance of the mortgage loans underlying the Excess MSRs. Generally, New Residential does not receive an excess mortgage servicing amount on nonperforming loans.

Schedule of Excess MSRs owned directly and through equity method investments valued on a recurring basis using Level 3 inputs

Excess MSRs, owned directly (Note 4), measured at fair value on a recurring basis using Level 3 inputs changed during the year ended December 31, 2013 as follows:


	Level 3 (A)
	MSR Pool 1			MSR Pool 2			MSR Pool 3			MSR Pool 4			MSR Pool 5			MSR Pool 11			MSR Pool 12			MSR Pool 18			Total
Balance as of December 31, 2011	$	43,971		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	43,971
Transfers (B)
Transfers from Level 3		—			—			—			—			—			—			—			—			—
Transfers to Level 3		—			—			—			—			—			—			—			—			—
Gains (losses) included in net income (C)		5,877			1,226			2,780			1,004			(1,864	)		—			—			—			9,023
Interest income		7,955			3,450			3,409			1,381			11,293			—			—			—			27,488
Purchases, sales and repayments
Purchases		—			43,872			36,218			15,439			124,813			—			—			—			220,342
Purchase adjustments		(178	)		(1,522	)		—			—			—			—			—			—			(1,700	)
Proceeds from sales		—			—			—			—			—			—			—			—			—
Proceeds from repayments		(16,715	)		(7,704	)		(6,973	)		(2,788	)		(19,908	)		—			—			—			(54,088	)

Balance as of December 31, 2012	$	40,910		$	39,322		$	35,434		$	15,036		$	114,334		$	—		$	—		$	—		$	245,036

Transfers (B)																										—
Transfers from Level 3		—			—			—			—			—			—			—			—			—
Transfers to Level 3		—			—			—			—			—			—			—			—			—
Gains (losses) included in net income (C)		9,424			9,125			9,393			4,748			21,334			(30	)		(173	)		(489	)		53,332
Interest income		5,839			4,885			5,767			2,842			20,637			83			678			190			40,921
Purchases, sales and repayments		—			—			—			—			—			—			—			—			—
Purchases		—			—			—			—			26,637			2,391			17,393			17,013			63,434
Purchase adjustments		—			—			—			—			—			—			—			—			—
Proceeds from sales		—			—			—			—			—			—			—			—			—
Proceeds from repayments		(13,118	)		(11,511	)		(11,053	)		(4,698	)		(36,699	)		(129	)		(1,364	)		—			(78,572	)

Balance as of December 31, 2013	$	43,055		$	41,821		$	39,541		$	17,928		$	146,243		$	2,315		$	16,534		$	16,714		$	324,151

(A)	Includes the Recapture Agreement for each respective pool.

(B)	Transfers are assumed to occur at the beginning of the respective period.

(C)

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. These gains (losses) represent the change in fair value of the Excess MSRs and are recorded in “Change in fair value of investments in excess mortgage servicing rights” in the Consolidated Statements of Income.

Excess MSR joint ventures (Note 5), measured at fair value on a recurring basis using Level 3 inputs changed during the year ended December 31, 2013 as follows:


	Level 3 (A)
	MSR Pool 6			MSR Pool 7			MSR Pool 8			MSR Pool 9			MSR Pool 10			MSR Pool 11			Total
Balance as of December 31, 2012	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Purchases, sales and repayments
Purchases		57,803			137,469			70,440			147,015			229,430			75,572			717,729
Purchase adjustments		—			—			—			—			—			—			—
Proceeds from sales		—			—			—			—			—			—			—
Proceeds from repayments		(17,458	)		(33,012	)		(15,516	)		(16,258	)		(20,395	)		(10,243	)		(112,882	)
Transfers (B)
Transfers from Level 3		—			—			—			—			—			—			—
Transfers to Level 3		—			—			—			—			—			—			—
Gains (losses) included in net income (C)		10,958			12,887			6,025			24,181			(4,494	)		4,407			53,964
Interest income		7,336			11,982			5,558			8,669			10,193			2,983			46,721

Balance as of December 31, 2013	$	58,639		$	129,326		$	66,507		$	163,607		$	214,734		$	72,719		$	705,532

(A)	Includes the Recapture Agreement for each respective pool. Amounts represent all of the Excess MSRs held by the respective joint ventures in which New Residential has a 50% interest.

(B)	Transfers are assumed to occur at the beginning of the respective period.

(C)

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. These gains (losses) represent the change in fair value of the Excess MSRs and are recorded in “Change in fair value of investments in excess mortgage servicing rights” in the Consolidated Statements of Income.

Excess MSRs measured at fair value on a recurring basis using Level 3 inputs changed during the period December 8, 2011 (Commencement of operations) through December 31, 2011 and the year ended December 31, 2012 as follows:


	Level 3
	Pool 1 (A)			Pool 2 (A)			Pool 3 (A)			Pool 4 (A)			Pool 5 (A)			Total
Balance at December 8, 2011 (Commencement of operations)	$	—		$	—		$	—		$	—		$	—		$	—
Transfers (B)
Transfers from Level 3		—			—			—			—			—			—
Transfers into Level 3		—			—			—			—			—			—
Total gains (losses) included in net income (C)		367			—			—			—			—			367
Interest income		1,260			—			—			—			—			1,260
Purchases, sales and repayments
Purchases		43,742			—			—			—			—			43,742
Proceeds from sales		—			—			—			—			—			—
Proceeds from repayments		(1,398	)		—			—			—			—			(1,398	)

Balance at December 31, 2011	$	43,971		$	—		$	—		$	—		$	—		$	43,971

Transfers (B)
Transfers from Level 3		—			—			—			—			—			—
Transfers into Level 3		—			—			—			—			—			—
Total gains (losses) included in net income (C)		5,877			1,226			2,780			1,004			(1,864	)		9,023
Interest income		7,955			3,450			3,409			1,381			11,293			27,488
Purchases, sales and repayments
Purchases		—			43,872			36,218			15,439			124,813			220,342
Purchase adjustments		(178	)		(1,522	)		—			—			—			(1,700	)
Proceeds from sales		—			—			—			—			—			—
Proceeds from repayments		(16,715	)		(7,704	)		(6,973	)		(2,788	)		(19,908	)		(54,088	)

Balance at December 31, 2012	$	40,910		$	39,322		$	35,434		$	15,036		$	114,334		$	245,036

(A)	Includes the recapture agreement for each respective pool.

(B)	Transfers are assumed to occur at the beginning of the respective period.

(C)

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. These gains (losses) represent the change in fair value of the Excess MSRs and are recorded in “Change in fair value of investments in excess mortgage servicing rights” in the consolidated statements of income.

Schedule of inputs in valuing servicer advances

The following table summarizes certain information regarding the inputs used in valuing the servicer advances as of December 31, 2013:


	Significant Inputs
	Weighted Average
	Outstanding Servicer Advances to UPB of Underlying Residential Mortgage Loans	Prepayment Speed	Delinquency	Mortgage Servicing Amount	Discount Rate
Servicer advances	2.7%	13.3%	20.0%	21.2 bps	4.4%

Schedule of real estate securities valuation methodology and results

As of December 31, 2013, New Residential’s securities valuation methodology and results are further detailed as follows:


					Fair Value
Asset Type	Outstanding Face Amount		Amortized Cost Basis		Multiple Quotes (A)		Total		Level

Agency ARM RMBS	$	1,314,130	$	1,403,215	$	1,402,764	$	1,402,764		2
Non-Agency RMBS		872,866		566,760		570,425		570,425		3

Total	$	2,186,996	$	1,969,975	$	1,973,189	$	1,973,189

(A)

Management 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. Management selected one of the quotes received as being most representative of the fair value and did 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 management believes using an actual quote more closely represents a transactable price for the security than an average level. Furthermore, in some cases there is a wide disparity between the quotes New Residential receives. Management 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, management selects one of the quotes which is believed to more accurately reflect fair value. New Residential never adjusts quotes received. 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.

As of December 31, 2012 New Residential’s 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
ABS-Subprime	$	433,510	$	274,230	$	265,556	$	24,200	$	289,756

(A)

Management generally obtained pricing service quotations or broker quotations from two sources, one of which was generally the seller (the party that sold us the security). Management selected one of the quotes received as being most representative of the fair value and did 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 management believes using an actual quote more closely represents a transactable price for the security than an average level. Furthermore, in some cases there is a wide disparity between the quotes New Residential receives. Management 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 using internal models, management selects one of the quotes which is believed to more accurately reflect fair value. New Residential never adjusts quotes received. 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.

(B)	Management was unable to obtain quotations from more than one source on these securities. The one source was generally the seller (the party that sold us the security) or a pricing service.

Schedule of inputs used in valuing reverse mortgage loans

New Residential’s loans held-for-investment are categorized within Level 3 of the fair value hierarchy.


									Significant Inputs
Loan Type	Outstanding Face Amount (A)		Carrying Value (A)		Fair Value		Valuation Allowance/ (Reversal) In Current Year		Discount Rate			Weighted Average Life (Years) (B)

Reverse Mortgage Loans	$	57,552	$	33,539	$	33,539	$	461		10.3	%		3.7

(A)	Represents a 70% interest New Residential holds in the reverse mortgage loans.

(B)	The weighted average life is based on the expected timing of the receipt of cash flows.