FAIR VALUE MEASURMENT (Tables)

12 Months Ended

Dec. 31, 2017

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 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, 2017 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)	$	217,121,299	$	1,173,713	$	—	$	—	$	1,173,713	$	1,173,713
Excess mortgage servicing rights, equity method investees, at fair value^(A)	50,501,054		171,765		—		—		171,765		171,765
Mortgage servicing rights, at fair value^(A)	172,454,150		1,735,504		—		—		1,735,504		1,735,504
Mortgage servicing rights financing receivables, at fair value^(A)	64,344,893		598,728		—		—		598,728		598,728
Servicer advance investments, at fair value	3,581,876		4,027,379		—		—		4,027,379		4,027,379
Real estate and other securities, available-for-sale	14,822,986		8,071,140		—		2,096,351		5,974,789		8,071,140
Residential mortgage loans, held-for-investment	806,635		691,155		—		—		694,692		694,692
Residential mortgage loans, held-for-sale	1,907,052		1,725,534		—		—		1,794,210		1,794,210
Consumer loans, held-for-investment	1,377,792		1,374,263		—		—		1,379,746		1,379,746
Derivative assets	772,500		2,423		—		2,423		—		2,423
Cash and cash equivalents	295,798		295,798		295,798		—		—		295,798
Restricted cash	150,252		150,252		150,252		—		—		150,252
Other assets	1,788,354		28,802		19,259		—		9,543		28,802
			$	20,046,456	$	465,309	$	2,098,774	$	17,560,069	$	20,124,152
Liabilities:
Repurchase agreements	$	8,663,747	$	8,662,139	$	—	$	8,663,747	$	—	$	8,663,747
Notes and bonds payable	7,097,223		7,084,391		—		—		7,109,803		7,109,803
Derivative liabilities	4,115,100		697		—		697		—		697
			$	15,747,227	$	—	$	8,664,444	$	7,109,803	$	15,774,247


(A)	The notional amount represents the total unpaid principal balance of the residential mortgage loans underlying the MSRs, MSR financing receivables, and 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)	$	277,975,997	$	1,399,455	$	—	$	—	$	1,399,455	$	1,399,455
Excess mortgage servicing rights, equity method investees, at fair value^(A)	60,677,300		194,788		—		—		194,788		194,788
Mortgage servicing rights, at fair value^(A)	79,935,302		659,483		—		—		659,483		659,483
Servicer advance investments, at fair value	5,617,759		5,706,593		—		—		5,706,593		5,706,593
Real estate securities, available-for-sale	8,788,957		5,073,858		—		1,530,298		3,543,560		5,073,858
Residential mortgage loans, held-for-investment	203,673		190,761		—		—		190,343		190,343
Residential mortgage loans, held-for-sale	908,930		696,665		—		—		717,985		717,985
Consumer loans, held-for-investment	1,809,952		1,799,486		—		—		1,819,106		1,819,106
Derivative assets	6,776,052		6,762		—		6,762		—		6,762
Cash and cash equivalents	290,602		290,602		290,602		—		—		290,602
Restricted cash	163,095		163,095		163,095		—		—		163,095
Other assets	888,412		4,856		—		—		4,856		4,856
			$	16,186,404	$	453,697	$	1,537,060	$	14,236,169	$	16,226,926
Liabilities
Repurchase agreements	$	5,193,686	$	5,190,631	$	—	$	5,193,686	$	—	$	5,193,686
Notes and bonds payable	8,015,097		7,990,605		—		—		7,993,326		7,993,326
Derivative liabilities	3,640,000		3,021		—		3,021		—		3,021
			$	13,184,257	$	—	$	5,196,707	$	7,993,326	$	13,190,033


(A)	The notional amount represents the total unpaid principal balance of the residential mortgage loans underlying the MSRs and 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 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						MSRs^(A)			Mortgage Servicing Rights Financing Receivables^(A)		Servicer Advance Investments			Non-Agency RMBS			Total
Balance at December 31, 2015	$	437,201		$	1,144,316		$	217,221		$	—		$	—	$	7,426,794		$	1,584,283		$	10,809,815
Transfers^(C)
Transfers from Level 3	—			—			—			—			—		—			—			—
Transfers to Level 3	—			—			—			—			—		—			—			—
Gains (losses) included in net income
Included in other-than-temporary impairment on securities^(D)	—			—			—			—			—		—			(10,264		)	(10,264		)
Included in change in fair value of investments in excess mortgage servicing rights^(D)	(5,372		)	(1,925		)	—			—			—		—			—			(7,297		)
Included in change in fair value of investments in excess mortgage servicing rights, equity method investees^(D)	—			—			16,526			—			—		—			—			16,526
Included in servicing revenue, net^(E)	—			—			—			88,325			—		—			—			88,325
Included in change in fair value of servicer advance investments	—			—			—			—			—		(7,768		)	—			(7,768		)
Included in gain (loss) on settlement of investments, net	—			—			—			—			—		—			(18,117		)	(18,117		)
Included in other income (loss), net^(D)	2,452			350			—			—			—		—			(4,875		)	(2,073		)
Gains (losses) included in other comprehensive income^(F)	—			—			—			—			—		—			124,669			124,669
Interest income	35,526			114,615			—			—			—		364,350			209,706			724,197
Purchases, sales, repayments and transfers
Purchases	—			124			—			571,158			—		15,266,816			2,746,409			18,584,507
Proceeds from sales	—			—			—			—			—		—			(261,192		)	(261,192		)
Proceeds from repayments	(88,050		)	(239,782		)	(38,959		)	—			—		(17,343,599		)	(827,059		)	(18,537,449		)
Balance at December 31, 2016	$	381,757		$	1,017,698		$	194,788		$	659,483		$	—	$	5,706,593		$	3,543,560		$	11,503,879
Transfers^(C)
Transfers from Level 3	—			—			—			—			—		—			—			—
Transfers to Level 3	—			—			—			—			—		—			—			—
Gains (losses) included in net income
Included in other-than-temporary impairment on securities^(D)	—			—			—			—			—		—			(10,334		)	(10,334		)
Included in change in fair value of investments in excess mortgage servicing rights^(D)	(3,037		)	7,359			—			—			—		—			—			4,322
Included in change in fair value of investments in excess mortgage servicing rights, equity method investees^(D)	—			—			12,617			—			—		—			—			12,617
Included in servicing revenue, net^(E)	—			—			—			(67,672		)	—		—			—			(67,672		)
Included in change in fair value of investments in mortgage servicing rights financing receivables^(D)	—			—			—			—			66,394		—			—			66,394
Included in change in fair value of servicer advance investments	—			—			—			—			—		84,418			—			84,418
Included in gain (loss) on settlement of investments, net	—			—			—			—			—		9,327			18,050			27,377
Included in other income (loss), net^(D)	2,150			2,227			—			—			—		—			2,883			7,260
Gains (losses) included in other comprehensive income^(F)	—			—			—			—			—		—			244,608			244,608
Interest income	28,351			74,702			—			—			—		528,356			333,297			964,706
Purchases, sales and repayments
Purchases	—			—			—			1,143,693			467,884		12,168,519			3,052,965			16,833,061
Proceeds from sales	(13,505		)				—			—			—		—			(182,325		)	(195,830		)
Proceeds from repayments	(71,080		)	(180,927		)	(35,640		)	—			—		(13,988,614		)	(1,027,915		)	(15,304,176		)
Ocwen Transaction (Note 5)	—			(71,982		)	—			—			64,450		(481,220		)	—			(488,752		)
Balance at December 31, 2017	$	324,636		$	849,077		$	171,765		$	1,735,504		$	598,728	$	4,027,379		$	5,974,789		$	13,681,878


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


(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)	The components of Servicing revenue, net are disclosed in Note 5.


(F)	These gains (losses) were included in net unrealized gain (loss) on securities in the Consolidated Statements of Comprehensive Income.

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, 2017
	Significant Inputs^(A)
	Prepayment Rate^(B)		Delinquency^(C)		Recapture Rate^(D)		Mortgage Servicing Amount or Excess Mortgage Servicing Amount (bps)^(E)	Collateral Weighted Average Maturity Years^(F)
Excess MSRs Directly Held (Note 4)
Agency
Original Pools	9.7	%	3.0	%	31.6	%	21	23
Recaptured Pools	7.1	%	4.4	%	23.1	%	22	24
Recapture Agreement	7.1	%	4.3	%	26.2	%	21	—
	8.8	%	3.5	%	29.1	%	21	23
Non-Agency^(G)
Nationstar and SLS Serviced:
Original Pools	12.2	%	N/A		15.4	%	15	24
Recaptured Pools	6.9	%	N/A		19.8	%	22	24
Recapture Agreement	6.9	%	N/A		19.7	%	20	—
Ocwen Serviced Pools	8.8	%	N/A		—	%	14	26
	9.4	%	N/A		4.0	%	15	26
Total/Weighted Average--Excess MSRs Directly Held	9.2	%	3.5	%	10.9	%	16	25

Excess MSRs Held through Equity Method Investees (Note 4)
Agency
Original Pools	11.3	%	5.0	%	34.8	%	19	22
Recaptured Pools	7.3	%	4.7	%	24.3	%	23	24
Recapture Agreement	7.3	%	4.7	%	24.2	%	23	—
Total/Weighted Average--Excess MSRs Held through Investees	9.3	%	4.8	%	29.5	%	21	23

Total/Weighted Average--Excess MSRs All Pools	9.2	%	3.8	%	14.9	%	17	25

MSRs
Agency
Mortgage Servicing Rights^(H)	10.5	%	0.9	%	25.4	%	27	21
Mortgage Servicing Rights Financing Receivables^(H)	10.3	%	0.9	%	14.8	%	27	20
Non-Agency
Mortgage Servicing Rights Financing Receivables^(H)	10.0	%	10.9	%	—	%	34	22



	December 31, 2016
	Significant Inputs^(A)
	Prepayment Rate^(B)		Delinquency^(C)		Recapture Rate^(D)		Mortgage Servicing Amount or Excess Mortgage Servicing Amount (bps)^(E)	Collateral Weighted Average Maturity Years^(F)
Excess MSRs Directly Held (Note 4)
Agency
Original Pools	10.1	%	3.2	%	32.6	%	21	24
Recaptured Pools	7.4	%	4.3	%	23.0	%	21	25
Recapture Agreement	7.4	%	5.0	%	20.0	%	22	—
	9.3	%	3.6	%	29.5	%	21	24
Non-Agency^(G)
Nationstar and SLS Serviced:
Original Pools	11.8	%	N/A		10.7	%	14	24
Recaptured Pools	7.9	%	N/A		20.0	%	21	24
Recapture Agreement	7.5	%	N/A		20.0	%	20	—
Ocwen Serviced Pools	8.8	%	N/A		—	%	14	26
	9.4	%	N/A		2.7	%	14	26
Total/Weighted Average--Excess MSRs Directly Held	9.4	%	3.6	%	10.0	%	16	26

Excess MSRs Held through Equity Method Investees (Note 4)
Agency
Original Pools	11.8	%	5.2	%	35.0	%	19	23
Recaptured Pools	7.3	%	4.5	%	24.7	%	23	25
Recapture Agreement	7.3	%	5.0	%	20.0	%	23	—
Total/Weighted Average--Excess MSRs Held through Investees	9.8	%	5.0	%	29.8	%	21	24

Total/Weighted Average--Excess MSRs All Pools	9.5	%	3.9	%	14.2	%	17	26

MSRs
Agency
Mortgage Servicing Rights^(H)	12.4	%	2.8	%	27.5	%	26	23


(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 residential mortgage loans in the pool for which the borrower will miss its mortgage payments.


(D)	Percentage of voluntarily prepaid loans that are expected to be refinanced by the related servicer or subservicer, as applicable.


(E)	Weighted average total mortgage servicing amount, in excess of the basic fee as applicable, measured in bps. A weighted average cost of subservicing of $7.23 per loan per month was used to value the agency MSRs, including MSR Financing Receivables. A weighted average cost of subservicing of $12.45 per loan per month was used to value the non-agency MSRs, including MSR Financing Receivables.


(F)	Weighted average maturity of the underlying residential mortgage loans in the pool.


(G)	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.


(H)	For certain pools, recapture rate represents the expected recapture rate with the successor subservicer appointed by NRM.

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 Advance Investments, including the basic fee component of the related MSRs:



	Significant Inputs
	Weighted Average
	Outstanding Servicer Advances to UPB of Underlying Residential Mortgage Loans		Prepayment Rate^(A)		Delinquency		Mortgage Servicing Amount^(B)		Discount Rate		Collateral Weighted Average Maturity (Years)^(C)
December 31, 2017	1.7	%	10.0	%	13.8	%	18.2	bps	6.8	%	25.6
December 31, 2016	2.1	%	9.8	%	14.9	%	8.3	bps	5.6	%	24.8


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


(B)	Mortgage servicing amount is net of 12.5 bps and 22.4 bps which represent the amounts New Residential paid its servicers as a monthly servicing fee as of December 31, 2017 and 2016, respectively.


(C)	Weighted average maturity of the underlying residential mortgage loans in the pool.

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, 2017
Agency RMBS	$	1,203,629	$	1,247,093	$	1,243,617	$	—	$	1,243,617	2
Treasury	862,000		858,028		852,734		—		852,734		2
Non-Agency RMBS^(C)	12,757,357		5,599,644		5,963,577		11,212		5,974,789		3
Total	$	14,822,986	$	7,704,765	$	8,059,928	$	11,212	$	8,071,140
December 31, 2016
Agency RMBS	$	1,486,739	$	1,532,421	$	1,530,298	$	—	$	1,530,298	2
Non-Agency RMBS^(C)	7,302,218		3,415,906		3,028,094		515,466		3,543,560		3
Total	$	8,788,957	$	4,948,327	$	4,558,392	$	515,466	$	5,073,858

(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 evaluates quotes received and determines one as being most representative of fair value, and does 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 has not adjusted any of the quotes received in the periods presented. 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.

The third-party pricing services and brokers engaged by New Residential (collectively, “valuation providers”) use either the income approach or the market approach, or a combination of the two, in arriving at their estimated valuations of RMBS. Valuation providers using the market approach generally look at prices and other relevant information generated by market transactions involving identical or comparable assets. Valuation providers using the income approach create pricing models that generally incorporate such assumptions as discount rates, expected prepayment rates, expected default rates and expected loss severities. New Residential has reviewed the methodologies utilized by its valuation providers and has found them to be consistent with GAAP requirements. In addition to obtaining multiple quotations, when available, and reviewing the valuation methodologies of its valuation providers, New Residential creates its own internal pricing models for Level 3 securities and uses the outputs of these models as part of its process of evaluating the fair value estimates it receives from its valuation providers. These models incorporate the same types of assumptions as the models used by the valuation providers, but the assumptions are developed independently. These assumptions are regularly refined and updated at least quarterly by New Residential, and reviewed by its valuation group, which is separate from its investment acquisition and management group, to reflect market developments and actual performance.

For 82.5% of New Residential’s Non-Agency RMBS, the ranges of assumptions used by New Residential’s valuation providers are summarized in the table below. The assumptions used by New Residential’s valuation providers with respect to the remainder of New Residential’s Non-Agency RMBS were not readily available.

Fair Value

Discount Rate

Prepayment Rate^(a)

CDR^(b)

Loss Severity^(c)

Non-Agency RMBS

4,928,338

2.38% to 32.75%

0.25% to 22.40%

0.10% to 9.00%

5.0% to 100%


(a)	Represents the annualized rate of the prepayments as a percentage of the total principal balance of the pool.


(b)	Represents the annualized rate of the involuntary prepayments (defaults) as a percentage of the total principal balance of the pool.


(c)	Represents 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 balance.


(B)	New Residential was unable to obtain quotations from more than one source on these securities. For approximately $10.5 million in 2017 and $509.6 million in 2016, 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 certain loans:



	Carrying Value		Fair Value		Discount Rate		Weighted Average Life (Years)^(A)	Prepayment Rate		CDR^(B)		Loss Severity^(C)
December 31, 2017
Reverse Mortgage Loans^(D)	$	6,870	$	8,964	7.0	%	4.5	N/A		N/A		9.6	%
Performing Loans	857,865		866,020		6.6	%	5.3	7.5	%	2.3	%	42.8	%
Non-Performing Loans	826,630		888,594		5.9	%	4.0	2.8	%	3.0	%	32.6	%
Total/Weighted Average	$	1,691,365	$	1,763,578	6.3	%	4.7					37.7	%

Consumer Loans	$	1,374,263	$	1,379,746	9.4	%	3.5	22.7	%	6.2	%	92.7	%

December 31, 2016
Reverse Mortgage Loans^(D)	$	11,468	$	12,952	7.0	%	4.5	N/A		N/A		9.5	%
Performing Loans	23,758		24,420		7.4	%	5.6	6.2	%	2.1	%	50.3	%
Non-Performing Loans	445,916		464,674		7.6	%	2.7	2.0	%	N/A		30.0	%
Total/Weighted Average	$	481,142	$	502,046	7.6	%	2.9					30.5	%

Consumer Loans	$	1,799,486	$	1,819,106	9.3	%	3.8	15.4	%	5.7	%	87.6	%


(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% participation interest New Residential holds in the portfolio of reverse mortgage loans.

The following table summarizes the inputs used in valuing these residential mortgage loans:



	Fair Value and Carrying Value		Discount Rate		Weighted Average Life (Years)^(A)	Prepayment Rate		CDR^(B)		Loss Severity^(C)
December 31, 2017
Performing Loans	$	721,121	3.8	%	4.8	11.5	%	1.1	%	36.9	%
Non-Performing Loans	4,203		7.5	%	3.8	3.0	%	3.0	%	30.0	%
Total/Weighted Average	$	725,324	3.8	%	4.8	11.5	%			36.9	%
December 31, 2016
Performing Loans	$	151,436	3.8	%	6.0	11.7	%	1.2	%	24.4	%
Non-Performing Loans	254,848		5.6	%	3.0	2.8	%	N/A		30.0	%
Total/Weighted Average	$	406,284	4.9	%	4.1	6.1	%			27.9	%


(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.