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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)
 9 Months Ended
Sep. 30, 2015
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 New Residential’s financial assets recorded at fair value on a recurring basis, as well as other financial instruments for which fair value is disclosed, as of September 30, 2015 were as follows:
 
 
 
 
 
Fair Value
 
Principal Balance or Notional Amount
 
Carrying Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
Investments in:
 
 
 
 
 
 
 
 
 
 
 
Excess mortgage servicing rights, at fair value(A)
$
322,753,832

 
$
1,459,690

 
$
—

 
$
—

 
$
1,459,690

 
$
1,459,690

Excess mortgage servicing rights, equity method investees, at fair value(A)
76,072,734

 
213,318

 
—

 
—

 
213,318

 
213,318

Servicer advances
7,644,435

 
7,499,775

 
—

 
—

 
7,499,775

 
7,499,775

Real estate securities, available-for-sale
3,787,204

 
2,428,729

 
—

 
1,249,285

 
1,179,444

 
2,428,729

Residential mortgage loans, held-for-investment
59,485

 
40,813

 
—

 
—

 
41,965

 
41,965

Residential mortgage loans, held-for-sale
782,852

 
713,917

 
—

 
—

 
718,104

 
718,104

Non-hedge derivatives
2,560,000

 
1,318

 
—

 
1,318

 
—

 
1,318

Cash and cash equivalents
348,312

 
348,312

 
348,312

 
—

 
—

 
348,312

Restricted cash
165,039

 
165,039

 
165,039

 
—

 
—

 
165,039

 
 
 
$
12,870,911

 
$
513,351

 
$
1,250,603

 
$
11,112,296

 
$
12,876,250

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Repurchase agreements
$
3,774,653

 
$
3,773,880

 
$
—

 
$
3,774,653

 
$
—

 
$
3,774,653

Notes payable
7,264,070

 
7,245,200

 
—

 
—

 
7,265,725

 
7,265,725

Derivative liabilities
4,444,000

 
29,364

 
—

 
29,364

 
—

 
29,364

 
 
 
$
11,048,444

 
$
—

 
$
3,804,017

 
$
7,265,725

 
$
11,069,742

 
(A)
The notional amount represents the total unpaid principal balance of the mortgage loans underlying the Excess MSRs. New Residential does not receive an excess mortgage servicing amount on non-performing loans in Agency portfolios.
Schedule of Financial Assets Measured at Fair Value on a Recurring Basis using Level 3 Inputs
New Residential’s financial 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)
 
 
 
 
 
 
 
 
 
Agency
 
Non-Agency
 
Agency
 
Non-Agency
 
Servicer Advances
 
Non-Agency RMBS
 
Linked Transactions
 
Total
Balance at December 31, 2014
$
217,519

 
$
200,214

 
$
232,618

 
$
98,258

 
$
3,270,839

 
$
723,000

 
$
32,402

 
$
4,774,850

Transfers(C)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transfers from Level 3
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Transfers to Level 3
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Transfers from investments in excess mortgage servicing rights, equity method investees, to investments in excess mortgage servicing rights
—

 
98,258

 
—

 
(98,258
)
 
—

 
—

 
—

 
—

Gains (losses) included in net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Included in other-than-temporary impairment (“OTTI”) on securities(D)
—

 
—

 
—

 
—

 
—

 
(3,294
)
 
—

 
(3,294
)
Included in change in fair value of investments in excess mortgage servicing rights(D)
1,985

 
(2,259
)
 
—

 
—

 
—

 
—

 
—

 
(274
)
Included in change in fair value of investments in excess mortgage servicing rights, equity method investees(D)
—

 
—

 
16,443

 
—

 
—

 
—

 
—

 
16,443

Included in change in fair value of investments in servicer advances
—

 
—

 
—

 
—

 
(1,845
)
 
—

 
—

 
(1,845
)
Included in gain on settlement of investments, net
—

 
—

 
—

 
—

 
—

 
3,808

 
—

 
3,808

Included in other income(D)
2,246

 
—

 
—

 
—

 
—

 
(1,074
)
 
—

 
1,172

Gains (losses) included in other comprehensive income, net of tax(E)
—

 
—

 
—

 
—

 
—

 
(717
)
 
—

 
(717
)
Interest income
22,114

 
65,760

 
—

 
—

 
256,045

 
39,217

 
—

 
383,136

Purchases, sales, repayments and transfers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases
131,488

 
919,531

 
—

 
—

 
15,746,159

 
778,085

 
—

 
17,575,263

Proceeds from sales
—

 
—

 
—

 
—

 
—

 
(389,719
)
 
—

 
(389,719
)
Proceeds from repayments
(43,277
)
 
(153,889
)
 
(35,743
)
 
—

 
(11,771,423
)
 
(86,694
)
 
—

 
(12,091,026
)
De-linked transactions(F)
—

 
—

 
—

 
—

 
—

 
116,832

 
(32,402
)
 
84,430

Balance at September 30, 2015
$
332,075

 
$
1,127,615

 
$
213,318

 
$
—

 
$
7,499,775

 
$
1,179,444

 
$
—

 
$
10,352,227

 
(A)
Includes the Recapture Agreement for each respective pool.
(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)
Transfers are assumed to occur at the beginning of each respective period.
(D)
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 and realized gains (losses) recorded during the period.
(E)
These gains (losses) were included in net unrealized gain (loss) on securities in the Condensed Consolidated Statements of Comprehensive Income.
(F)
See Note 10 for a discussion of transactions formerly accounted for as linked transactions.
Summary of Certain Information Regarding the Inputs used in Valuing the Servicer Advances
The following table summarizes certain information regarding the weighted average inputs used in valuing the Excess MSRs owned directly and through equity method investees as of September 30, 2015:
 
 
Significant Inputs(A)
Directly Held (Note 4)
 
Prepayment Speed(B)
 
Delinquency(C)
 
Recapture Rate(D)
 
Excess Mortgage Servicing Amount
(bps)(E)
Agency

 
 
 
 
 
 
 
Original and Recaptured Pools

10.6
%
 
4.2
%
 
32.5
%
 
21

Recapture Agreement

7.7
%
 
4.6
%
 
20.0
%
 
24



10.3
%
 
4.2
%
 
31.3
%
 
21

Non-Agency(F)

 
 
 
 
 
 
 
Nationstar and SLS Serviced:
 
 
 
 
 
 
 
 
Original and Recaptured Pools

12.7
%
 
N/A

 
10.3
%
 
13

Recapture Agreement

7.5
%
 
N/A

 
20.0
%
 
20

Ocwen Serviced Pools
 
9.5
%
 
N/A

 
—
%
 
14



10.1
%
 
N/A

 
2.3
%
 
14

Total/Weighted Average--Directly Held

10.1
%
 
4.2
%
 
7.9
%
 
15



 
 
 
 
 
 
 
Held through Equity Method Investees (Note 5)

 
 
 
 
 
 
 
Agency

 
 
 
 
 
 
 
Original and Recaptured Pools

12.6
%
 
6.3
%
 
33.4
%
 
19

Recapture Agreement

7.7
%
 
4.5
%
 
20.0
%
 
23

Total/Weighted Average--Held through Investees

11.8
%
 
6.0
%
 
31.3
%
 
19

 
 
 
 
 
 
 
 
 
Total/Weighted Average--All Pools
 
10.4
%
 
4.6
%
 
12.4
%
 
16


(A)
Weighted by amortized cost basis of the mortgage loan portfolio.
(B)
Projected annualized weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.
(C)
Projected percentage of mortgage loans in the pool that will miss their mortgage payments.
(D)
Percentage of voluntarily prepaid loans that are expected to be refinanced by Nationstar.
(E)
Weighted average total mortgage servicing amount in excess of the basic fee.
(F)
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.
Summary of Certain Information Regarding the Inputs used in Valuing the Servicer Advances
The following table summarizes certain information regarding the inputs used in valuing the servicer advances:
 
Significant Inputs
 
Weighted Average
 
 
 
 
 
Outstanding Servicer Advances to UPB of Underlying Residential Mortgage Loans
 
Prepayment Speed
 
Delinquency
 
Mortgage Servicing Amount(A)
 
Discount Rate
September 30, 2015
2.4
%
 
10.5
%
 
17.5
%
 
20.6

bps
5.5
%


(A)
Mortgage servicing amount excludes the amounts New Residential pays its servicers as a monthly servicing fee.
Schedule of Securities Valuation Methodology and Results
As of September 30, 2015, 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
 
Level
Agency RMBS
 
$
1,192,781

 
$
1,251,358

 
$
1,249,285

 
$
—

 
$
1,249,285

 
2

Non-Agency RMBS(C)
 
2,594,423

 
1,166,464

 
821,555

 
357,889

 
1,179,444

 
3

Total
 
$
3,787,204

 
$
2,417,822

 
$
2,070,840

 
$
357,889

 
$
2,428,729

 
 
 
(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 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 it 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. 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 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. 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.
(B)
New Residential was unable to obtain quotations from more than one source on these securities. The one source was the party that sold New Residential the security.
(C)
Includes New Residential’s investments in interest-only notes for which the fair value option for financial instruments was elected.
Schedule of Inputs Used in Valuing Residential Mortgage Loans
The following table summarizes the inputs used in valuing residential mortgage loans as of September 30, 2015:
 
 
Carrying Value
 
Fair Value
 
Valuation Provision/ (Reversal) In Current Year
 
Discount Rate
 
Weighted Average Life (Years)(A)
 
Prepayment Rate
 
CDR(B)
 
Loss Severity(C)
Reverse Mortgage Loans(D)
 
$
20,316

 
$
20,316

 
$
245

 
10.0
%
 
4.1
 
N/A

 
N/A

 
7.4
%
Performing Loans
 
225,666

 
228,494

 
118

 
5.3
%
 
6.5
 
16.3
%
 
1.6
%
 
32.7
%
Non-performing Loans
 
297,714

 
300,225

 
N/A

 
5.2
%
 
1.7
 
2.1
%
 
N/A

 
29.4
%
Total/Weighted Average
 
$
543,696

 
$
549,035

 
$
363

 
5.4
%
 
3.8
 
 
 
 
 
30.0
%

(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.
(D)
Carrying value and fair value represent a 70% interest New Residential holds in the reverse mortgage loans.
The following table summarizes the inputs used in valuing these residential mortgage loans as of September 30, 2015:
September 30, 2015
 
Fair Value
 
Discount Rate
 
Weighted Average Life (Years)(A)
 
Prepayment Rate
 
CDR(B)
 
Loss Severity(C)
Non-performing Loans
 
$
211,034

 
5.6
%
 
3.1
 
3.0
%
 
N/A
 
29.7
%

(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.