XML 213 R13.htm IDEA: XBRL DOCUMENT v3.20.2
INVESTMENTS IN EXCESS MORTGAGE SERVICING RIGHTS ASSETS
 6 Months Ended
Jun. 30, 2020
Transfers and Servicing [Abstract]  
INVESTMENTS IN EXCESS MORTGAGE SERVICING RIGHTS ASSETS INVESTMENTS IN EXCESS MORTGAGE SERVICING RIGHTS ASSETS
 
Excess mortgage servicing rights assets include New Residential’s direct investments in Excess MSRs and investments in joint ventures jointly controlled by New Residential and Fortress-managed funds investing in Excess MSRs. The table below summarizes the components of excess mortgage servicing rights assets as presented on the Condensed Consolidated Balance Sheets:

June 30, 2020December 31, 2019
Direct investments in Excess MSRs$346,450  $379,747  
Excess MSR Joint Ventures112,473  125,596  
Excess mortgage servicing rights assets, at fair value$458,923  $505,343  

Direct Investments in Excess MSRs

The following table presents activity related to the carrying value of New Residential’s direct investments in Excess MSRs:
Servicer
Mr. Cooper
SLS(A)
Total
Balance as of December 31, 2019$377,692  $2,055  $379,747  
Interest income12,561  21  12,582  
Other income1,202  —  1,202  
Proceeds from repayments(35,708) (216) (35,924) 
Proceeds from sales(48) —  (48) 
Change in fair value(11,184) 75  (11,109) 
Balance as of June 30, 2020$344,515  $1,935  $346,450  

(A)Specialized Loan Servicing LLC (“SLS”).

Mr. Cooper or SLS, as applicable, as servicer performs all of the servicing and advancing functions, and retains the ancillary income, servicing obligations and liabilities as the servicer of the underlying loans in the portfolio.
New Residential has entered into a “recapture agreement” with respect to each of the direct Excess MSR investments serviced by Mr. Cooper and SLS. Under such arrangements, New Residential is generally entitled to a pro rata interest in the Excess MSRs on any refinancing by Mr. Cooper of a loan in the original portfolio. These recapture agreements do not apply to New Residential’s Servicer Advance Investments (Note 6).

New Residential elected to record its direct investments in Excess MSRs at fair value pursuant to the fair value option for financial instruments to provide users of the financial statements with better information regarding the effects of prepayment risk and other market factors on the Excess MSRs.

The following is a summary of New Residential’s direct investments in Excess MSRs:
June 30, 2020December 31, 2019
UPB of Underlying MortgagesInterest in Excess MSR
Weighted Average Life Years(A)
Amortized Cost Basis(B)
Carrying Value(C)
Carrying Value(C)
New Residential(D)
Fortress-managed fundsMr. Cooper
Agency
Original and Recaptured Pools
$39,833,663  32.5% - 66.7% (53.3%)0.0% - 40.0%20.0% - 35.0%5.8$162,415  $186,928  $209,633  
Non-Agency(E)
Mr. Cooper and SLS Serviced:
Original and Recaptured Pools
41,832,962  33.3% - 100.0% (59.4%)0.0% - 50.0%0.0% - 33.3%6.5118,875  159,522  170,114  
Total$81,666,625  6.1$281,290  $346,450  $379,747  
 
(A)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 and recapture agreements, as applicable.
(D)Amounts in parentheses represent weighted averages.
(E)New Residential is also invested in related Servicer Advance Investments, including the basic fee component of the related MSR as of June 30, 2020 (Note 6) on $28.8 billion UPB underlying these Excess MSRs.

Changes in fair value recorded in other income is composed of the following:
Three Months Ended
June 30,		Six Months Ended
June 30,
2020201920202019
Original and Recaptured Pools$(85) $(8,455) $(11,109) $(3,828) 

As of June 30, 2020, a weighted average discount rate of 8.3% was used to value New Residential’s investments in Excess MSRs (directly and through equity method investees).

Excess MSR Joint Ventures

New Residential entered into investments in joint ventures (“Excess MSR joint ventures”) jointly controlled by New Residential and Fortress-managed funds investing in Excess MSRs. New Residential elected to record these investments at fair value pursuant to the fair value option for financial instruments to provide users of the financial statements with better information regarding the effects of prepayment risk and other market factors.
The following tables summarize the financial results of the Excess MSR joint ventures, accounted for as equity method investees, held by New Residential:
June 30, 2020December 31, 2019
Excess MSR assets$200,650  $226,843  
Other assets24,983  25,035  
Other liabilities(687) (687) 
Equity$224,946  $251,191  
New Residential’s investment$112,473  $125,596  
New Residential’s ownership50.0 %50.0 %

Three Months Ended
June 30,		Six Months Ended
June 30,
2020201920202019
Interest income$536  $190  $7,850  $4,261  
Other income (loss)(4,632) (6,727) (12,852) (5,557) 
Expenses(8) (15) (16) (32) 
Net income (loss)$(4,104) $(6,552) $(5,018) $(1,328) 

The following table summarizes the activity of New Residential’s investments in equity method investees:
Balance at December 31, 2019$125,596  
Distributions of earnings from equity method investees(1,172) 
Distributions of capital from equity method investees(9,442) 
Change in fair value of investments in equity method investees(2,509) 
Balance at June 30, 2020$112,473  

The following is a summary of New Residential’s Excess MSR investments made through equity method investees:
June 30, 2020
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$31,923,937  66.7 %50.0 %$156,169  $200,650  5.6
 
(A)The remaining interests are held by Mr. Cooper.
(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 and recapture agreements, as applicable.
(D)Represents the weighted average expected timing of the receipt of cash flows of each investment.