DERIVATIVES

As of December 31, 2017, New Residential’s derivative instruments included economic hedges that were not designated as hedges for accounting purposes. New Residential uses economic hedges to hedge a portion of its interest rate risk exposure. Interest rate risk is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, as well as other factors. New Residential’s credit risk with respect to economic hedges is the risk of default on New Residential’s investments that results from a borrower’s or counterparty’s inability or unwillingness to make contractually required payments.

As of December 31, 2017, New Residential held to-be-announced forward contract positions (“TBAs”) of $3.1 billion in a short notional amount of Agency RMBS and any amounts or obligations owed by or to New Residential are subject to the right of set-off with the TBA counterparty. New Residential’s net short position in TBAs was entered into as an economic hedge in order to mitigate New Residential’s interest rate risk on certain specified mortgage backed securities. As of December 31, 2017, New Residential separately held TBAs of $1.0 billion in a long notional amount of Agency RMBS and any amounts or obligations owed by or to New Residential are subject to the right of set-off with the TBA counterparty. As part of executing these trades, New Residential has entered into agreements with its TBA counterparties that govern the transactions for the TBA purchases or sales made, including margin maintenance, payment and transfer, events of default, settlements, and various other provisions. New Residential has fulfilled all obligations and requirements entered into under these agreements.

New Residential’s derivatives are recorded at fair value on the Consolidated Balance Sheets as follows:



		December 31,
	Balance Sheet Location	2017		2016
Derivative assets
Interest Rate Caps	Other assets	$	2,423	$	4,251
TBAs	Other assets	—		2,511
		$	2,423	$	6,762
Derivative liabilities
Interest Rate Swaps^(A)	Accrued expenses and other liabilities	$	—	$	3,021
TBAs	Accrued expenses and other liabilities	697		—
		$	697	$	3,021


(A)	Net of related variation margin accounts. As of December 31, 2017, no variation margin accounts existed.

The following table summarizes notional amounts related to derivatives:



	December 31,
	2017		2016
TBAs, short position^(A)	$	3,101,100	$	3,465,500
TBAs, long position^(A)	1,014,000		2,125,552
Interest Rate Caps^(B)	772,500		1,185,000
Interest Rate Swaps^(C)	—		3,640,000


(A)	Represents the notional amount of Agency RMBS, classified as derivatives.


(B)	As of December 31, 2017, caps LIBOR at 0.50% for $425.0 million of notional, at 2.00% for $185.0 million of notional, at 4.00% for $12.5 million of notional, and at 4.00% for $150.0 million of notional. The weighted average maturity of the interest rate caps as of December 31, 2017 was 11 months.


(C)	Receive LIBOR and pay a fixed rate. The weighted average maturity of the interest rate swaps as of December 31, 2016 was 22 months and the weighted average fixed pay rate was 1.35%. There were no interest rate swaps outstanding at December 31, 2017.

The following table summarizes all income (losses) recorded in relation to derivatives:



	Year Ended December 31,
	2017			2016			2015
Other income (loss), net^(A)
TBAs	$	(1,793	)	$	(414	)	$	(2,058	)
Interest Rate Caps	323			688			(1,749		)
Interest Rate Swaps	(720		)	5,500			269
	(2,190		)	5,774			(3,538		)
Gain (loss) on settlement of investments, net
TBAs	$	(44,224	)	$	(17,927	)	$	(27,142	)
Interest Rate Caps	(1,911		)	(4,754		)	(1,180		)
Interest Rate Swaps	6,921			(4,810		)	(18,660		)
	(39,214		)	(27,491		)	(46,982		)
Total income (losses)	$	(41,404	)	$	(21,717	)	$	(50,520	)


(A)	Represents unrealized gains (losses).