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INVESTMENTS IN MORTGAGE SERVICING RIGHTS AND MORTGAGE SERVICING RIGHTS FINANCING RECEIVABLES (Tables)
 12 Months Ended
Dec. 31, 2018
Transfers and Servicing [Abstract]  
Schedule of Mortgage Servicing Rights Acquired
During the year ended December 31, 2018, New Residential, through its wholly owned subsidiaries, completed the following MSR acquisitions accounted for as Mortgage Servicing Rights:
Date of Acquisition
 
Collateral Type(A)
 
UPB
(in billions)
 
Purchase Price
(in millions)
January 16, 2018
 
Agency
 
$
11.5

 
$
101.5

January 16, 2018
 
Agency
 
7.8

 
81.0

February 28, 2018
 
Agency
 
3.3

 
33.5

March 28, 2018
 
 Agency & Ginnie Mae
 
8.1

 
96.6

May 1, 2018
 
 Ginnie Mae
 
4.6

 
36.2

May 25, 2018
 
 Agency
 
2.1

 
26.3

May 31, 2018
 
 Agency & Ginnie Mae
 
6.1

 
79.9

June 1, 2018
 
 Ginnie Mae
 
0.5

 
6.1

June 4, 2018
 
 Agency
 
2.1

 
19.3

June 28, 2018
 
 Ginnie Mae
 
4.7

 
66.5

August 31, 2018
 
 Agency & Ginnie Mae
 
18.5

 
220.5

September 28, 2018
 
 Agency
 
1.1

 
13.6

September 28, 2018
 
 Agency
 
10.1

 
126.4

November 8, 2018
 
Ginnie Mae
 
0.1

 
1.5

December 31, 2018
 
 Agency & Ginnie Mae
 
7.0

 
81.4

December 31, 2018
 
 Agency
 
9.8

 
135.7

Various(B)
 
 Agency
 
5.6

 
60.0

Total
 
 
 
$
103.0

 
$
1,186.0


(A)
“Agency” represents Fannie Mae and Freddie Mac MSRs.
(B)
Represents Flow MSR acquisitions primarily from Ditech and Shellpoint for the year ended December 31, 2018.
Fees Earned in Exchange for Servicing Financial Assets
Interest income from investments in mortgage servicing rights financing receivables was comprised of the following:
 
Year Ended December 31, 2018
 
Year Ended December 31, 2017
Servicing fee revenue
$
705,812

 
$
94,945

Ancillary and other fees
146,829

 
17,313

Less: subservicing expense
(251,184
)
 
(33,686
)
Interest income, investments in mortgage servicing rights financing receivables
$
601,457

 
$
78,572


Change in fair value of investments in mortgage servicing rights financing receivables was comprised of the following:
 
Year Ended December 31, 2018
 
Year Ended December 31, 2017
Amortization of servicing rights
$
(197,703
)
 
$
(43,190
)
Change in valuation inputs and assumptions(A)
230,036

 
109,584

(Gain)/loss on sales(B)
(783
)
 
—

Change in fair value of investments in mortgage servicing rights financing receivables
$
31,550

 
$
66,394



(A)
Change in valuation inputs and assumptions includes changes in inputs or assumptions used in the valuation model and other changes due to the realization of expected cash flows.
(B)
Represents the realization of unrealized gain/(loss) as a result of sales.
Servicing revenue, net recognized by New Residential related to its investments in MSRs was comprised of the following:
 
Year Ended December 31,
 
2018
 
2017
 
2016
Servicing fee revenue
$
589,546

 
$
412,971

 
$
29,168

Ancillary and other fees
130,294

 
79,050

 
676

Servicing fee revenue and fees
719,840

 
492,021

 
29,844

Amortization of servicing rights(A)
(256,915
)
 
(223,167
)
 
(15,354
)
Change in valuation inputs and assumptions(B) (C)
68,587

 
155,495

 
103,679

(Gain)/loss on sales(D)
(2,917
)
 
—

 
—

Servicing revenue, net
$
528,595

 
$
424,349

 
$
118,169



(A)
Includes $1.2 million, $0.0 million and $0.0 million of amortization to Excess spread financing for the years ended December 31, 2018, 2017, and 2016, respectively.
(B)
Change in valuation inputs and assumptions includes changes in inputs or assumptions used in the valuation model and other changes due to the realization of expected cash flows.
(C)
Includes $7.4 million, $0.0 million and $0.0 million of fair value adjustment to Excess spread financing for the years ended December 31, 2018, 2017, and 2016, respectively.
(D)
Represents the realization of unrealized gain/(loss) as a result of sales.
Schedule of Servicing Assets at Fair Value
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
 
—

 
—

 
(71,982
)
 
(71,982
)
Interest income
 
—

 
—

 
—

 
—

Other income
 
46,393

 
(191
)
 
56,851

 
103,053

Proceeds from repayments
 
2,384

 
—

 
1,993

 
4,377

Proceeds from sales
 
(120,485
)
 
(1,400
)
 
(130,122
)
 
(252,007
)
Change in fair value
 
(13,505
)
 
—

 
—

 
(13,505
)
Ocwen Transaction (Note 5)
 
6,153

 
569

 
(2,400
)
 
4,322

Balance as of December 31, 2017
 
532,233

 
2,913

 
638,567

 
1,173,713

Purchases
 
—

 
—

 
—

 
—

Interest income
 
44,386

 
54

 
—

 
44,440

Other income
 
6,444

 
—

 
40,417

 
46,861

Proceeds from repayments
 
(100,215
)
 
(632
)
 
(26,946
)
 
(127,793
)
Proceeds from sales
 
(19,084
)
 
—

 
—

 
(19,084
)
Change in fair value
 
(18,436
)
 
197

 
(40,417
)
 
(58,656
)
Ocwen Transaction (Note 5)
 
—

 
—

 
(611,621
)
 
(611,621
)
Balance as of December 31, 2018
 
$
445,328

 
$
2,532

 
$
—

 
$
447,860


(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.
Changes in fair value recorded in other income is comprised of the following:
 
Year Ended December 31,
 
2018
 
2017
 
2016
Original and Recaptured Pools
$
(50,030
)
 
$
(5,630
)
 
$
(11,221
)
Recapture Agreements
(8,626
)
 
9,952

 
3,924

 
$
(58,656
)
 
$
4,322

 
$
(7,297
)
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
 
1,143,693

Amortization of servicing rights(A)
 
(223,167
)
Change in valuation inputs and assumptions(B)
 
155,495

Balance as of December 31, 2017
 
$
1,735,504

Purchases
 
1,042,933

Transfer In(C)
 
124,652

Shellpoint Acquisition(D) (E)
 
151,312

Originations(F)
 
35,311

Proceeds from sales
 
(5,776
)
Amortization of servicing rights(A)
 
(258,068
)
Change in valuation inputs and assumptions(B)
 
61,149

(Gain)/loss on sales(G)
 
(2,917
)
Balance as of December 31, 2018
 
$
2,884,100



(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.
(B)
Change in valuation inputs and assumptions includes changes in inputs or assumptions used in the valuation model and other changes due to the realization of expected cash flows.
(C)
Represents Ginnie Mae MSRs previously accounted for as Mortgage Servicing Rights Financing Receivable.
(D)
Represents MSRs acquired through New Residential’s acquisition of Shellpoint Partners LLC.
(E)
Includes $48.3 million of MSRs legally sold by New Penn treated as a secured borrowing as it did not meet the criteria for sale treatment. New Residential elected to record the excess spread financing liability at fair value pursuant to the fair value option.
(F)
Represents MSRs retained on the sale of originated mortgage loans.
(G)
Represents the realization of unrealized gain/(loss) as a result of sales.
The following table presents activity related to the carrying value of New Residential’s investments in mortgage servicing rights financing receivables:
Balance as of December 31, 2016
 
$
—

Purchases
 
467,884

Ocwen Transaction
 
64,450

Amortization of servicing rights(A)
 
(43,190
)
Change in valuation inputs and assumptions(B)
 
109,584

Balance as of December 31, 2017
 
$
598,728

Purchases
 
128,357

Transfer Out(C)
 
(124,652
)
New Ocwen Agreements
 
1,017,993

Proceeds from sales
 
(7,472
)
Amortization of servicing rights(A)
 
(197,703
)
Change in valuation inputs and assumptions(B)
 
230,036

(Gain)/loss on sales(D)
 
(783
)
Balance as of December 31, 2018
 
$
1,644,504


(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.
(B)
Change in valuation inputs and assumptions includes changes in inputs or assumptions used in the valuation model and other changes due to the realization of expected cash flows.
(C)
Represents Ginnie Mae MSRs owned by New Penn accounted for as Mortgage Servicing Rights as a result of the Shellpoint Acquisition.
(D)
Represents the realization of unrealized gain/(loss) as a result of sales.

The following is a summary of New Residential’s investments in mortgage servicing rights financing receivables:
 
UPB of Underlying Mortgages
 
Weighted Average Life (Years)(A)
 
Amortized Cost Basis
 
Carrying Value(B)
December 31, 2018
 
 
 
 
 
 
 
Agency
$
42,265,547

 
5.9
 
$
366,946

 
$
434,110

Non-Agency
88,251,018

 
7.2
 
936,792

 
1,210,394

Total
$
130,516,565

 
6.8
 
$
1,303,738

 
$
1,644,504

December 31, 2017
 
 
 
 
 
 
 
Agency
$
49,498,415

 
5.9
 
$
428,657

 
$
476,206

Non-Agency
14,846,478

 
5.6
 
60,487

 
122,522

Total
$
64,344,893

 
5.8
 
$
489,144

 
$
598,728


(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 December 31, 2018 and 2017, weighted average discount rates of 10.3% and 9.4%, respectively, were used to value New Residential’s investments in mortgage servicing rights financing receivables.
The following is a summary of New Residential’s investments in MSRs as of December 31, 2018 and 2017:
 
UPB of Underlying Mortgages
 
Weighted Average Life (Years)(A)
 
Amortized Cost Basis
 
Carrying Value(B)
2018
 
 
 
 
 
 
 
Agency(C)
$
226,295,778

 
6.4
 
$
2,189,039

 
$
2,506,676

Non-Agency
2,143,212

 
6.6
 
19,982

 
22,438

Ginnie Mae
30,023,713

 
7.4
 
357,673

 
354,986

Total
$
258,462,703

 
6.5
 
$
2,566,694

 
$
2,884,100

2017
 
 
 
 
 
 
 
Agency
$
172,392,496

 
6.3
 
$
1,476,330

 
$
1,735,504

Non-Agency
61,654

 
5.6
 
—

 
—

Total
$
172,454,150

 
6.3
 
$
1,476,330

 
$
1,735,504


(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 December 31, 2018 and 2017, weighted average discount rates of 8.7% and 9.1%, respectively, were used to value New Residential’s investments in MSRs.
(C)
Represents Fannie Mae and Freddie Mac MSRs.
Summary of the Geographic Distribution of the Underlying Residential Mortgage Loans of the Direct Investment in MSRs
The table below summarizes the geographic distribution of the underlying residential mortgage loans of the investments in MSRs and mortgage servicing rights financing receivables:
 
 
Percentage of Total Outstanding Unpaid Principal Amount
State Concentration
 
December 31, 2018
 
December 31, 2017
California
 
21.7
%
 
19.0
%
New York
 
7.8
%
 
6.3
%
Florida
 
6.9
%
 
6.0
%
Texas
 
5.3
%
 
5.7
%
New Jersey
 
5.0
%
 
5.2
%
Illinois
 
3.7
%
 
4.1
%
Massachusetts
 
3.5
%
 
3.8
%
Maryland
 
3.4
%
 
2.8
%
Pennsylvania
 
3.1
%
 
3.3
%
Virginia
 
3.1
%
 
3.1
%
Other U.S.
 
36.5
%
 
40.7
%
 
 
100.0
%
 
100.0
%
Schedule of Investment in Servicer Advances
The following types of advances are included in the Servicer Advances Receivable:
 
 
December 31, 2018
 
December 31, 2017
Principal and interest advances
 
$
793,790

 
$
172,467

Escrow advances (taxes and insurance advances)
 
2,186,831

 
482,884

Foreclosure advances
 
199,203

 
16,017

Total(A) (B) (C)
 
$
3,179,824

 
$
671,368


(A)
Includes $231.2 million and $167.9 million of servicer advances receivable related to Fannie Mae and Freddie Mac MSRs, respectively, recoverable from such agencies.
(B)
Includes $41.6 million and $0.0 million of servicer advances receivable related to Ginnie Mae MSRs, respectively, recoverable from Ginnie Mae. Reserves for advances associated with Ginnie Mae loans in the MSR portfolio are considered in the MSR fair valuation through a nonreimbursable advance loss assumption.
(C)
Net of $98.0 million in accrued advance recoveries and $4.2 million in unamortized discount and accrual for advance recoveries, respectively.
The following is a summary of New Residential’s Servicer Advance Investments, including the right to the basic fee component of the related MSRs:
 
Amortized Cost Basis
 
Carrying Value(A)
 
Weighted Average Discount Rate
 
Weighted Average Yield
 
Weighted Average Life (Years)(B)
 
Change in Fair Value Recorded in Other Income for Year then Ended
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Servicer Advance Investments
$
721,801

 
$
735,846

 
5.9
%
 
5.8
%
 
5.7
 
$
(89,332
)
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Servicer Advance Investments
$
3,924,003

 
$
4,027,379

 
6.8
%
 
7.3
%
 
5.1
 
$
84,418


(A)
Carrying value represents the fair value of the Servicer Advance Investments, including the basic fee component of the related MSRs.
(B)
Weighted Average Life represents the weighted average expected timing of the receipt of expected net cash flows for this investment.

The following is additional information regarding the Servicer Advance Investments and related financing:
 
 
 
 
 
 
 
 
 
Loan-to-Value (“LTV”)(A)
 
Cost of Funds(C)
 
UPB of Underlying Residential Mortgage Loans
 
Outstanding Servicer Advances
 
Servicer Advances to UPB of Underlying Residential Mortgage Loans
 
Face Amount of Notes and Bonds Payable
 
Gross
 
Net(B)
 
Gross
 
Net
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicer Advance Investments(D)
$
40,096,998

 
$
620,050

 
1.5
%
 
$
574,117

 
88.3
%
 
87.2
%
 
3.7
%
 
3.1
%
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicer Advance Investments(D)
$
139,460,371

 
$
3,581,876

 
2.6
%
 
$
3,461,718

 
93.2
%
 
92.0
%
 
3.3
%
 
3.0
%

(A)
Based on outstanding servicer advances, excluding purchased but unsettled servicer advances.
(B)
Ratio of face amount of borrowings to par amount of servicer advance collateral, net of any general reserve.
(C)
Annualized measure of the cost associated with borrowings. Gross Cost of Funds primarily includes interest expense and facility fees. Net Cost of Funds excludes facility fees.
(D)
The following types of advances are included in the Servicer Advance Investments:
    
 
December 31,
 
2018
 
2017
Principal and interest advances
$
108,317

 
$
909,133

Escrow advances (taxes and insurance advances)
238,349

 
1,636,381

Foreclosure advances
273,384

 
1,036,362

  Total
$
620,050

 
$
3,581,876