FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of Carrying Values and Fair Values of Financial Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The carrying values and fair values of New Residential’s financial 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 December 31, 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)	$	329,367,971	$	1,581,517	$	—	$	—	$	1,581,517	$	1,581,517
Excess mortgage servicing rights, equity method investees, at fair value^(A)	73,058,050		217,221		—		—		217,221		217,221
Servicer advances	7,578,110		7,426,794		—		—		7,426,794		7,426,794
Real estate securities, available-for-sale	4,418,552		2,501,881		—		917,598		1,584,283		2,501,881
Residential mortgage loans, held-for-investment	506,135		330,178		—		—		330,433		330,433
Residential mortgage loans, held-for-sale	859,714		776,681		—		—		784,750		784,750
Non-hedge derivatives	3,400,000		2,689		—		2,689		—		2,689
Cash and cash equivalents	249,936		249,936		249,936		—		—		249,936
Restricted cash	94,702		94,702		94,702		—		—		94,702
			$	13,181,599	$	344,638	$	920,287	$	11,924,998	$	13,189,923
Liabilities:
Repurchase agreements	$	4,043,942	$	4,043,054	$	—	$	4,043,942	$	—	$	4,043,942
Notes payable	7,262,056		7,249,568		—		—		7,260,909		7,260,909
Derivative liabilities	4,644,000		13,443		—		13,443		—		13,443
			$	11,306,065	$	—	$	4,057,385	$	7,260,909	$	11,318,294


(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.



					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)	$	102,481,758	$	417,733	$	—	$	—	$	417,733	$	417,733
Excess mortgage servicing rights, equity method investees, at fair value^(A)	146,257,821		330,876		—		—		330,876		330,876
Servicer advances	3,102,492		3,270,839		—		—		3,270,839		3,270,839
Real estate securities, available-for-sale	3,542,511		2,463,163		—		1,740,163		723,000		2,463,163
Residential mortgage loans, held-for-investment	69,581		47,838		—		—		47,913		47,913
Residential mortgage loans, held-for-sale	1,364,216		1,126,439		—		—		1,140,070		1,140,070
Non-hedge derivatives^(B)	399,625		32,597		—		195		32,402		32,597
Cash and cash equivalents	212,985		212,985		212,985		—		—		212,985
Restricted cash	29,418		29,418		29,418		—		—		29,418
			$	7,931,888	$	242,403	$	1,740,358	$	5,962,833	$	7,945,594
Liabilities
Repurchase agreements	$	3,149,090	$	3,149,090	$	—	$	2,246,651	$	902,439	$	3,149,090
Notes payable	2,913,209		2,908,763		—		822,587		2,092,814		2,915,401
Derivative liabilities	2,341,000		14,220		—		14,220		—		14,220
			$	6,072,073	$	—	$	3,083,458	$	2,995,253	$	6,078,711


(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.


(B)	The notional amount for formerly linked transactions consisted of the aggregate UPB amounts of the loans and securities that comprised the asset portion of the linked transaction.

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, 2013	$	144,660		$	179,491		$	245,399		$	107,367		$	2,665,551		$	570,425		$	35,926		$	3,948,819
Transfers^(C)
Transfers from Level 3	—			—			—			—			—			—			—			—
Transfers to Level 3	—			—			—			—			—			—			—			—
Gains (losses) included in net income
Included in other-than-temporary impairment (OTTI) on securities^(D)	—			—			—			—			—			(927		)	—			(927		)
Included in change in fair value of investments in excess mortgage servicing rights^(D)	24,265			17,350			—			—			—			—			—			41,615
Included in change in fair value of investments in excess mortgage servicing rights, equity method investees^(D)	—			—			40,120			17,160			—			—			—			57,280
Included in change in fair value of investments in Servicer Advances	—			—			—			—			84,217			—			—			84,217
Included in gain (loss) on settlement of investments, net	—			—			—			—			—			60,553			5,652			66,205
Included in other income (loss), net^(D)	1,157			—			—			—			—			—			1,187			2,344
Gains (losses) included in other comprehensive income^(E)	—			—			—			—			—			8,819			—			8,819
Interest income	22,451			26,729			—			—			190,206			17,713			—			257,099
Purchases, sales and repayments
Purchases/contributions from Newcastle	66,197			27,916			—			—			6,830,266			1,455,996			39,538			8,419,913
Proceeds from sales	—			—			—			—			—			(1,288,980		)	(25,240		)	(1,314,220		)
Proceeds from repayments	(41,211		)	(51,272		)	(52,901		)	(26,269		)	(6,499,401		)	(100,599		)	(9,069		)	(6,780,722		)
Settlements^(F)	—			—			—			—			—			—			(15,592		)	(15,592		)
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)	—			—			—			—			—			(5,788		)	—			(5,788		)
Included in change in fair value of investments in excess mortgage servicing rights^(D)	(3,080		)	41,723			—			—			—			—			—			38,643
Included in change in fair value of investments in excess mortgage servicing rights, equity method investees^(D)	—			—			31,160			—			—			—			—			31,160
Included in change in fair value of investments in Servicer Advances	—			—			—			—			(57,491		)	—			—			(57,491		)
Included in gain (loss) on settlement of investments, net	—			—			—			—			—			3,061			—			3,061
Included in other income (loss), net^(D)	2,852			147			—			—			—			879			—			3,878
Gains (losses) included in other comprehensive income^(E)	—			—			—			—			—			(6,701		)	—			(6,701		)
Interest income	30,742			103,823			—			—			352,316			69,632			—			556,513
Purchases, sales, repayments and transfers
Purchases	254,149			917,078			—			—			20,042,582			1,288,901			—			22,502,710
Proceeds from sales	—			—			—			—			—			(425,761		)	—			(425,761		)
Proceeds from repayments	(64,981		)	(216,927		)	(46,557		)	—			(16,181,452		)	(179,772		)	—			(16,689,689		)
Other																—						—
De-linked transactions^(G)	—			—			—			—			—			116,832			(32,402		)	84,430
Balance at December 31, 2015	$	437,201		$	1,144,316		$	217,221		$	—		$	7,426,794		$	1,584,283		$	—		$	10,809,815


(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 the 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 Consolidated Statements of Comprehensive Income.


(F)	Includes value of 1) residential mortgage loans transferred to REO net of associated repurchase financing agreements, and 2) residential mortgage loans no longer treated as linked transactions due to repayment of associated repurchase financing.


(G)	See Note 10 for a discussion of transactions formerly accounted for as linked transactions.

Summary of Certain Information Regarding Weighted Average Inputs used in Valuing Excess MSRs Owned Directly and through Equity Method Investees

The following tables summarize certain information regarding the weighted average inputs used in valuing the Excess MSRs owned directly and through equity method investees:



	December 31, 2015
	Significant Inputs^(A)
Directly Held (Note 4)	Prepayment Speed^(B)		Delinquency^(C)		Recapture Rate^(D)		Excess Mortgage Servicing Amount (bps)^(E)
Agency
Original Pools	10.7	%	3.5	%	29.5	%	21
Recaptured Pools	7.5	%	4.9	%	20.0	%	20
Recapture Agreement	7.6	%	4.9	%	20.0	%	22
	10.0	%	3.8	%	27.4	%	21
Non-Agency^(F)
Nationstar and SLS Serviced:
Original Pools	12.5	%	N/A		10.2	%	14
Recaptured Pools	7.5	%	N/A		20.0	%	20
Recapture Agreement	7.5	%	N/A		20.0	%	20
Ocwen Serviced Pools	9.3	%	N/A		—	%	14
	10.0	%	N/A		2.6	%	14
Total/Weighted Average--Directly Held	10.0	%	3.8	%	9.5	%	16

Held through Equity Method Investees (Note 5)
Agency
Original Pools	12.6	%	5.9	%	34.3	%	19
Recaptured Pools	7.7	%	5.0	%	20.0	%	23
Recapture Agreement	7.7	%	4.9	%	20.0	%	23
Total/Weighted Average--Held through Investees	10.8	%	5.6	%	29.0	%	20

Total/Weighted Average--All Pools	10.2	%	4.2	%	13.6	%	17



	December 31, 2014
	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	11.0	%	5.6	%	31.6	%	22
Recapture Agreement	8.0	%	5.0	%	19.9	%	20
	10.6	%	5.5	%	30.1	%	22
Non-Agency^(F)
Original and Recaptured Pools	12.5	%	N/A		10.0	%	15
Recapture Agreement	8.0	%	N/A		20.0	%	20
	12.3	%	N/A		10.5	%	15
Total/Weighted Average--Directly Held	11.4	%	5.5	%	20.7	%	18

Held through Equity Method Investees (Note 5)
Agency
Original and Recaptured Pools	13.3	%	6.6	%	33.1	%	19
Recapture Agreement	8.0	%	5.0	%	20.0	%	23
	12.3	%	6.3	%	30.6	%	20
Non-Agency^(F)
Original and Recaptured Pools	13.4	%	N/A		10.0	%	12
Recapture Agreement	8.0	%	N/A		20.0	%	20
	13.0	%	N/A		10.8	%	12
Total/Weighted Average--Held through Investees	12.5	%	6.3	%	24.6	%	17

Total/Weighted Average--All Pools	12.1	%	6.2	%	23.1	%	18


(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 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 or Ocwen, as applicable.


(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^(A)		Delinquency		Mortgage Servicing Amount^(B)		Discount Rate
December 31, 2015	2.3	%	10.4	%	17.5	%	9.2	bps	5.6	%
December 31, 2014	2.1	%	12.6	%	15.6	%	19.4	bps	5.4	%


(A)	Projected annual weighted average lifetime voluntary and involuntary prepayment rate using a prepayment vector.


(B)	Mortgage servicing amount excludes the amounts New Residential pays its servicers as a monthly servicing fee.

Schedule of Securities Valuation Methodology and Results

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
December 31, 2015:
Agency RMBS	$	884,578	$	918,633	$	917,598	$	—	$	917,598	2
Non-Agency RMBS^(C)	3,533,974		1,579,445		1,029,981		554,302		1,584,283		3
Total	$	4,418,552	$	2,498,078	$	1,947,579	$	554,302	$	2,501,881
December 31, 2014:
Agency RMBS	$	1,646,361	$	1,724,329	$	1,740,163	$	—	$	1,740,163	2
Non-Agency RMBS^(C)	1,896,150		710,515		709,346		13,654		723,000		3
Total	$	3,542,511	$	2,434,844	$	2,449,509	$	13,654	$	2,463,163

(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 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. 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, 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)	Management was unable to obtain quotations from more than one source on these securities. For approximately $228.5 million in 2015 and $13.7 million in 2014, 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:



	Carrying Value		Fair Value		Valuation Provision/ (Reversal) In Current Year		Discount Rate		Weighted Average Life (Years)^(A)	Prepayment Rate		CDR^(B)		Loss Severity^(C)
December 31, 2015
Reverse Mortgage Loans^(D)	$	19,560	$	19,560	$	35	10.0	%	4.2	N/A		N/A		8.1	%
Performing Loans	246,190		248,858		43		4.8	%	5.2	6.6	%	1.2	%	14.3	%
Non-Performing Loans	588,096		593,754		N/A		5.4	%	2.5	1.4	%	N/A		13.1	%
Total/Weighted Average	$	853,846	$	862,172	$	78	5.3	%	3.3					13.3	%
December 31, 2014
Reverse Mortgage Loans^(D)	$	24,965	$	24,965	$	1,057	10.2	%	3.9	N/A		N/A		5.9	%
Performing Loans	374,745		383,689		N/A		4.6	%	7.0	5.7	%	2.2	%	44.9	%
Non-Performing Loans	164,444		169,206		N/A		5.5	%	2.8	2.3	%	N/A		25.8	%
Total/Weighted Average	$	564,154	$	577,860	$	1,057	5.1	%	5.6					37.6	%


(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:



	Fair Value		Discount Rate		Weighted Average Life (Years)^(A)	Prepayment Rate		CDR^(B)		Loss Severity^(C)
December 31, 2015
Performing Loans	$	50,858	5.0	%	4.2	9.2	%	2.8	%	35.2	%
Non-Performing Loans	202,155		5.7	%	3.4	2.9	%	N/A		19.6	%
Total/Weighted Average	$	253,013	5.6	%	3.6	4.2	%			22.7	%
December 31, 2014
Performing Loans	$	36,613	4.6	%	7.5	4.2	%	4.2	%	40.2	%
PCD Loans	573,510		5.7	%	2.6	2.9	%	N/A		30.9	%
Total/Weighted Average	$	610,123	5.6	%	2.9	3.0	%			31.5	%


(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. Not applicable for PCD Loans that are not 100% in default.


(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.