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INVESTMENTS IN EXCESS MORTGAGE SERVICING RIGHTS (Tables)
 9 Months Ended
Sep. 30, 2017
Transfers and Servicing [Abstract]  
Schedule of Activity Related to the Carrying Value of Investments in Excess MSRs
The following table presents activity related to the carrying value of New Residential’s direct investments in Excess MSRs:
 
 
Servicer
 
 
Nationstar
 
SLS(A)
 
Ocwen(B)
 
Total
Balance as of December 31, 2016
 
$
611,293

 
$
3,935

 
$
784,227

 
$
1,399,455

Purchases
 
—

 
—

 
—

 
—

Interest income
 
33,837

 
(255
)
 
41,656

 
75,238

Other income
 
1,948

 
—

 
1,993

 
3,941

Proceeds from repayments
 
(98,802
)
 
(1,215
)
 
(95,677
)
 
(195,694
)
Change in fair value
 
(6,442
)
 
381

 
(26,589
)
 
(32,650
)
Ocwen Transaction (Note 5)
 
—

 
—

 
(71,982
)
 
(71,982
)
Balance as of September 30, 2017
 
$
541,834

 
$
2,846

 
$
633,628

 
$
1,178,308


(A)
Specialized Loan Servicing LLC (“SLS”).
(B)
Ocwen Loan Servicing LLC, a subsidiary of Ocwen Financial Corporation (together with its subsidiaries, including Ocwen Loan Servicing LLC, “Ocwen”), services the loans underlying the Excess MSRs and Servicer Advance Investments acquired from HLSS.

The following table presents activity related to the carrying value of New Residential’s investments in MSRs:
Balance as of December 31, 2016
 
$
659,483

Purchases
 
1,125,252

Amortization of servicing rights(A)
 
(159,451
)
Change in valuation inputs and assumptions
 
77,465

Balance as of September 30, 2017
 
$
1,702,749


(A)
Based on the ratio of the current UPB of the underlying residential mortgage loans relative to the original UPB of the underlying residential mortgage loans.

The following is a summary of New Residential’s investments in MSRs as of September 30, 2017:
 
UPB of Underlying Mortgages
 
Weighted Average Life (Years)(A)
 
Amortized Cost Basis
 
Carrying Value(B)
Agency
$
177,220,692

 
6.4
 
$
1,521,605

 
$
1,702,749

Non-Agency
64,733

 
5.8
 
—

 
—

Total
$
177,285,425

 
6.4
 
$
1,521,605

 
$
1,702,749


(A)
Weighted Average Life 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, 2017, a weighted average discount rate of 9.8% was used to value New Residential’s investments in MSRs.
The following table presents activity related to the carrying value of New Residential’s investments in mortgage servicing rights financing receivable:
Balance as of December 31, 2016
 
$
—

Investments made
 
467,118

Ocwen Transaction (Note 5)
 
64,450

Amortization of servicing rights(A)
 
(20,010
)
Change in valuation inputs and assumptions
 
95,838

Balance as of September 30, 2017
 
$
607,396


(A)
Based on the ratio of the current UPB of the underlying residential mortgage loans relative to the original UPB of the underlying residential mortgage loans.

The following is a summary of New Residential’s investments in mortgage servicing rights financing receivable as of September 30, 2017:
 
UPB of Underlying Mortgages
 
Weighted Average Life (Years)(A)
 
Amortized Cost Basis
 
Carrying Value(B)
Agency
$
51,533,451

 
5.6
 
$
447,925

 
$
473,669

Non-Agency
15,519,498

 
5.8
 
63,633

 
133,727

Total
$
67,052,949

 
5.6
 
$
511,558

 
$
607,396


(A)
Weighted Average Life 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, 2017, a weighted average discount rate of 10.4% was used to value New Residential’s investments in mortgage servicing rights financing receivable.
Summary of Direct Investments in Excess MSRs
The following is a summary of New Residential’s direct investments in Excess MSRs:
 
September 30, 2017
 
December 31, 2016
 
UPB of Underlying Mortgages
 
Interest in Excess MSR
 
Weighted Average Life Years(A)
 
Amortized Cost Basis(B)
 
Carrying Value(C)
 
Carrying Value(C)
 
 
 
New Residential(D)
 
Fortress-managed funds
 
Nationstar
 
 
 
 
 
 
 
 
Agency
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Original and Recaptured Pools
$
68,449,802

 
32.5% - 66.7% (53.3%)

 
0.0% - 40.0%

 
20.0% - 35.0%

 
5.8
 
$
263,374

 
$
288,345

 
$
330,323

Recapture Agreements
—

 
32.5% - 66.7% (53.3%)

 
0.0% - 40.0%

 
20.0% - 35.0%

 
12.6
 
20,299

 
45,504

 
51,434

 
68,449,802

 
 
 
 
 
 
 
6.3
 
283,673

 
333,849

 
381,757

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Agency(E)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nationstar and SLS Serviced:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Original and Recaptured Pools
$
67,453,347

 
33.3% - 100.0% (59.4%)

 
0.0% - 50.0%

 
0.0% - 33.3%

 
5.3
 
$
160,665

 
$
191,270

 
$
219,980

Recapture Agreements
—

 
33.3% - 100.0% (59.4%)

 
0.0% - 50.0%

 
0.0% - 33.3%

 
12.5
 
8,352

 
19,561

 
13,491

Ocwen Serviced Pools
92,270,579

 
100.0
%
 
—
%
 
—
%
 
6.0
 
617,401

 
633,628

 
784,227

 
159,723,926

 
 
 
 
 
 
 
5.9
 
786,418

 
844,459

 
1,017,698

Total
$
228,173,728

 
 
 
 
 
 
 
6.0
 
$
1,070,091

 
$
1,178,308

 
$
1,399,455

 
(A)
Weighted Average Life represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)
The amortized cost basis of the recapture agreements is determined based on the relative fair values of the recapture agreements and related Excess MSRs at the time they were acquired.
(C)
Carrying Value represents the fair value of the pools or recapture agreements, as applicable.
(D)
Amounts in parentheses represent weighted averages.
(E)
New Residential also invested in related Servicer Advance Investments, including the basic fee component of the related MSR as of September 30, 2017 (Note 6) on $145.8 billion UPB underlying these Excess MSRs.

Changes in fair value recorded in other income is comprised of the following:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended  
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Original and Recaptured Pools

$
(12,047
)
 
$
(15,395
)
 
$
(41,032
)
 
$
(28,392
)
Recapture Agreements

(2,244
)
 
(1,665
)
 
8,382

 
3,995

 
 
$
(14,291
)
 
$
(17,060
)
 
$
(32,650
)
 
$
(24,397
)
Summary of the Financial Results of Excess MSR Joint Ventures, Accounted for as Equity Method Investees
The following tables summarize the financial results of the Excess MSR joint ventures, accounted for as equity method investees, held by New Residential:
 
 
September 30, 2017
 
December 31, 2016
Excess MSR assets
 
$
329,986

 
$
372,391

Other assets
 
21,279

 
17,184

Other liabilities
 
—

 
—

Equity
 
$
351,265

 
$
389,575

New Residential’s investment
 
$
175,633

 
$
194,788

 
 
 
 
 
New Residential’s ownership
 
50.0
%
 
50.0
%

 
 
Three Months Ended 
 September 30,
 
Nine Months Ended  
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Interest income
 
$
6,969

 
$
12,205

 
$
20,083

 
$
24,526

Other income (loss)
 
(2,843
)
 
339

 
(7,908
)
 
(7,244
)
Expenses
 
(18
)
 
(22
)
 
(63
)
 
(66
)
Net income
 
$
4,108

 
$
12,522

 
$
12,112

 
$
17,216


New Residential’s investments in equity method investees changed during the nine months ended September 30, 2017 as follows:
Balance at December 31, 2016
$
194,788

Contributions to equity method investees
—

Transfers to direct ownership
—

Distributions of earnings from equity method investees
(11,054
)
Distributions of capital from equity method investees
(14,157
)
Change in fair value of investments in equity method investees
6,056

Balance at September 30, 2017
$
175,633

The following tables summarize the investment in LoanCo and WarrantCo held by New Residential:
 
 
September 30, 2017(A)
Consumer loans, at fair value
 
$
231,839

Warrants
 
32,500

Other assets
 
55,821

Warehouse financing
 
(149,185
)
Other liabilities
 
(942
)
Equity
 
$
170,033

New Residential’s investment
 
$
42,044

New Residential’s ownership
 
24.7
%


 
 
Three Months Ended 
 September 30, 2017(A)
 
Nine Months Ended  
 September 30, 2017(A)
Interest income
 
$
12,276

 
$
25,105

Interest expense
 
(2,635
)
 
(5,768
)
Change in fair value of consumer loans and warrants
 
12,475

 
16,030

Gain on sale of consumer loans(B)
 
6,928

 
18,778

Other expenses
 
(1,459
)
 
(3,039
)
Net income
 
$
27,585

 
$
51,106

New Residential’s equity in net income
 
$
6,769

 
$
12,649

New Residential’s ownership
 
24.5
%
 
24.8
%

(A)
Data as of, and for the periods ended, August 31, 2017, as a result of the one month reporting lag.
(B)
During the nine months ended September 30, 2017, LoanCo sold, through securitizations which were treated as sales for accounting purposes, $1.1 billion in UPB of consumer loans. LoanCo retained $121.3 million of residual interests in the securitizations and distributed them to the LoanCo co-investors, including New Residential.

The following is a summary of LoanCo’s consumer loan investments:
 
Unpaid Principal Balance
 
Interest in Consumer Loans
 
Carrying Value
 
Weighted Average Coupon
 
Weighted Average Expected Life (Years)(A)
 
Weighted Average Delinquency(B)
September 30, 2017(C)
$
231,839

 
25.0
%
 
$
231,839

 
16.4
%
 
1.4
 
0.3
%

(A)
Represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)
Represents the percentage of the total unpaid principal balance that is 30+ days delinquent. Delinquency status is the primary credit quality indicator as it provides early warning of borrowers who may be experiencing financial difficulties.
(C)
Data as of August 31, 2017 as a result of the one month reporting lag.

New Residential’s investment in LoanCo and WarrantCo changed as follows:
 
Nine Months Ended 
 September 30, 2017
Balance at beginning of period
$
—

Contributions to equity method investees
344,902

Distributions of earnings from equity method investees
(4,291
)
Distributions of capital from equity method investees
(306,938
)
Earnings from investments in consumer loans, equity method investees
12,649

Balance at end of period
$
46,322
Summary of Excess MSR Investments made through Equity Method Investees
The following is a summary of New Residential’s Excess MSR investments made through equity method investees:
 
September 30, 2017
 
Unpaid Principal Balance
 
Investee Interest in Excess MSR(A)
 
New Residential Interest in Investees
 
Amortized Cost Basis(B)
 
Carrying Value(C)
 
Weighted Average Life (Years)(D)
Agency
 
 
 
 
 
 
 
 
 
 
 
Original and Recaptured Pools
$
53,675,234

 
66.7
%
 
50.0
%
 
$
221,830

 
$
279,722

 
5.8
Recapture Agreements
—

 
66.7
%
 
50.0
%
 
24,827

 
50,264

 
12.5
Total
$
53,675,234

 
 
 
 
 
$
246,657

 
$
329,986

 
6.4
 
(A)
The remaining interests are held by Nationstar.
(B)
Represents the amortized cost basis of the equity method investees in which New Residential holds a 50% interest. The amortized cost basis of the recapture agreements is determined based on the relative fair values of the recapture agreements and related Excess MSRs at the time they were acquired.
(C)
Represents the carrying value of the Excess MSRs held in equity method investees, in which New Residential holds a 50% interest. Carrying value represents the fair value of the pools or recapture agreements, as applicable.
(D)
The weighted average life represents the weighted average expected timing of the receipt of cash flows of each investment.
Summary of the Geographic Distribution of the Underlying Residential Mortgage Loans of the Direct Investment in Excess MSRs
The table below summarizes the geographic distribution of the underlying residential mortgage loans of the Excess MSR investments:
 
 
Aggregate Direct and Equity Method Investees
 
 
Percentage of Total Outstanding Unpaid Principal Amount
State Concentration
 
September 30, 2017
 
December 31, 2016
California
 
24.1
%
 
24.1
%
Florida
 
8.6
%
 
8.6
%
New York
 
8.3
%
 
7.9
%
Texas
 
4.6
%
 
4.6
%
New Jersey
 
4.1
%
 
4.2
%
Maryland
 
3.7
%
 
3.7
%
Illinois
 
3.6
%
 
3.5
%
Georgia
 
3.1
%
 
3.1
%
Virginia
 
3.0
%
 
3.1
%
Massachusetts
 
2.7
%
 
2.7
%
Pennsylvania
 
2.5
%
 
2.5
%
Arizona
 
2.5
%
 
2.5
%
Other U.S.
 
29.2
%
 
29.5
%
 
 
100.0
%
 
100.0
%