New Residential accumulated its residential mortgage loan portfolio through various bulk acquisitions and the execution of call rights. New Residential, through its wholly-owned subsidiary, NewRez, originates residential mortgage loans for sale and securitization to third parties and generally retains the servicing rights on the underlying loans.

NewRez, as an approved issuer of Ginnie Mae MBS, originates and securitizes government-insured residential mortgage loans. As the issuer of the Ginnie Mae guaranteed securitizations, NewRez has the unilateral right to repurchase loans from the

securitizations when they are delinquent for more than 90 days. Loans in forbearance that are unpaid for at least 90 days are included as delinquent loans permitted to be repurchased. Under GAAP, NewRez is required to recognize the right to loans on its balance sheet and establish a corresponding liability upon the triggering of the repurchase right regardless of whether NewRez intends to repurchase the loans. As of June 30, 2020, New Residential holds approximately $1,075.0 million in residential mortgage loans subject to repurchase and residential mortgage loans repurchase liability on its Condensed Consolidated Balance Sheets.

Upon adoption of ASU 2016-13 on January 1, 2020, New Residential elected to apply the fair value option for all held-for-investment residential mortgage loans. The fair value option provides an election which allows a company to irrevocably elect fair value for certain financial assets and liabilities on an instrument-by-instrument basis. The Company elected the fair value option for these loans to better align reported results with the underlying economic changes in value of the loans on the Company’s Condensed Consolidated Balance Sheets.

The election of the fair value option resulted in the Company recognizing an adjustment of $6.0 million to reduce retained earnings attributable to the change in the fair value of residential mortgage loans. Unrealized gains (losses) from the change in fair value of residential mortgage loans are recognized in Change in fair value of investments in the Condensed Consolidated Statements of Income. Realized gains (losses) are recorded in Gain (loss) on settlement of investments, net in the Condensed Consolidated Statements of Income.

Residential mortgage loans for which the fair value option has been elected are not evaluated for credit impairment as changes in fair value are recorded in the Condensed Consolidated Statements of Income.

Loans are accounted for based on New Residential’s strategy for the loan and on whether the loan was credit-impaired at the date of acquisition. As of June 30, 2020, New Residential accounts for loans based on the following categories:


	June 30, 2020										December 31, 2019
	Outstanding Face Amount		Carrying Value		Loan Count	Weighted Average Yield		Weighted Average Life (Years)^(A)	Carrying Value
Loan Type
Total Residential Mortgage Loans, held-for-investment, at fair value^(B)	$	830,117	$	750,332	13,168	7.2	%	6.4	$	925,706

Acquired Reverse Mortgage Loans^(C)	$	12,604	$	6,458	29	7.9	%	3.9	$	5,844
Acquired Performing Loans^(D)(F)	224,268		198,150		4,680	6.0	%	4.1	857,821
Acquired Non-Performing Loans^(E)(F)	617,062		490,222		4,703	7.3	%	3.3	565,387
Total Residential Mortgage Loans, held-for-sale	$	853,934	$	694,830	9,412	7.0	%	3.5	$	1,429,052

Acquired Performing Loans^(D)(F)	$	1,245,660	$	1,075,996	9,258	4.8	%	8.0	$	3,024,288
Originated Loans	1,675,955		1,748,913		6,111	3.3	%	27.2	1,589,324
Total Residential Mortgage Loans, held-for-sale, at fair value	$	2,921,615	$	2,824,909	15,369	3.9	%	19.0	$	4,613,612

Total Residential Mortgage Loans, held-for-sale	$	3,775,549	$	3,519,739					$	6,042,664

(B)Residential mortgage loans, held-for-investment, at fair value is grouped and presented as part of residential loans and variable interest entity consumer loans held-for-investment, at fair value on the Condensed Consolidated Balance Sheets.

(C)Represents a 70% participation interest that New Residential holds in a portfolio of reverse mortgage loans. Mr. Cooper holds the other 30% interest and services the loans. The average loan balance outstanding based on total UPB

was $0.6 million. Approximately 51% of these loans have reached a termination event. As a result of the termination event, each such loan has matured and the borrower can no longer make draws on these loans.

New Residential generally considers the delinquency status, loan-to-value ratios, and geographic area of residential mortgage loans as its credit quality indicators. Delinquency status is a primary credit quality indicator as loans that are more than 60 days past due provide an early warning of borrowers who may be experiencing financial difficulties. Current LTV ratio is an indicator of the potential loss severity in the event of default. Finally, the geographic distribution of the loan collateral also provides insight as to the credit quality of the portfolio, as factors such as the regional economy, home price changes and specific events will affect credit quality.


	Percentage of Total Outstanding Unpaid Principal Amount
State Concentration	June 30, 2020		December 31, 2019
California	13.8	%	16.8	%
New York	8.5	%	9.9	%
Texas	8.3	%	7.5	%
Florida	7.5	%	7.7	%
Georgia	5.4	%	4.6	%
New Jersey	4.5	%	4.6	%
Illinois	3.4	%	3.4	%
Pennsylvania	3.3	%	3.1	%
North Carolina	3.0	%	2.6	%
Maryland	3.0	%	2.6	%
Other U.S.	39.3	%	37.2	%
	100.0	%	100.0	%


Days Past Due	Unpaid Principal Balance		Fair Value		Fair Value Over (Under) Unpaid Principal Balance
90 to 119	$	292,123	$	244,837	$	(47,286)
120+	717,573		597,082		(120,491)
	$	1,009,696	$	841,919	$	(167,777)

New Residential has executed calls with respect to Non-Agency RMBS trusts and purchased performing and non-performing residential mortgage loans and REO assets contained in such trusts prior to their termination. In certain cases, New Residential sold portions of the purchased loans through securitizations, and retained bonds issued by such securitizations. In addition, New Residential received par on the securities issued by the called trusts which it owned prior to such trusts’ termination. For the six months ended June 30, 2020, New Residential executed calls on a total of 15 trusts and recognized $12.0 million of interest

income on securities held in the collapsed trusts and $48.3 million of gain on securitizations accounted for as sales. For the six months ended June 30, 2019, New Residential executed calls on a total of 59 trusts and recognized $37.2 million of interest income on securities held in the collapsed trusts and $8.1 million of gain on securitizations accounted for as sales. Refer to Note 16 for transactions with affiliates.

The following table provides past due information regarding New Residential’s Performing Loans, which is an important indicator of credit quality and the establishment of the allowance for credit losses:


	Loans Held-for-Investment, at Fair Value		Loans Held-for-Sale, at Lower Cost or Fair Value		Loans Held-for-Sale, at Fair Value		Total
Balance at December 31, 2019	$	925,706	$	1,429,052	$	4,613,612	$	6,968,370
Fair value adjustment due to fair value option	(6,020)		—		—		(6,020)
Originations	—		—		19,252,135		19,252,135
Sales	—		(642,644)		(21,900,008)		(22,542,652)
Purchases/additional fundings	—		110,741		1,036,587		1,147,328
Proceeds from repayments	(64,802)		(81,699)		(95,595)		(242,096)
Transfer of loans to other assets^(A)	—		(1,793)		(13,516)		(15,309)
Transfer of loans to real estate owned	(4,021)		(16,277)		(3,591)		(23,889)
Transfers of loans to held for sale	(59,681)		—		59,681		—

Valuation provision on loans	—		(102,550)		—		(102,550)

Changes in instrument-specific credit risk	6,923		—		(46,512)		(39,589)
Other factors	(47,773)		—		(77,884)		(125,657)
Balance at June 30, 2020	$	750,332	$	694,830	$	2,824,909	$	4,270,071

(A)Represents loans for which foreclosure has been completed and for which New Residential has made, or intends to make, a claim with the governmental agency that has guaranteed the loans that are recognized as claims receivable in Other Assets (Note 2).


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Interest Income:
Loans Held for Investment, at Fair Value	$	13,229	$	15,432	$	28,338	$	32,636
Loans Held-for-Sale, at Lower Cost or Fair Value	15,303		13,572		33,458		28,752
Loans Held-for-Sale, at Fair Value	27,715		39,075		71,107		72,844
Total Interest Income	56,247		68,079		132,903		134,232

Interest Expense:
Loans Held for Investment, at Fair Value	5,408		5,759		10,608		11,764
Loans Held-for-Sale, at Lower Cost or Fair Value	6,358		8,708		14,888		17,515
Loans Held-for-Sale, at Fair Value	11,372		37,599		41,842		66,198
Total Interest Expense	23,138		52,066		67,338		95,477

Total Net Interest Income	$	33,109	$	16,013	$	65,565	$	38,755

NewRez, a wholly-owned subsidiary of New Residential, originates conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. The GSEs or Ginnie Mae guarantee conventional and government-insured mortgage securitizations and mortgage investors issue nonconforming private label mortgage securitizations while NewRez generally retains the right to service the underlying residential mortgage loans. In connection with the transfer of loans to the GSEs or mortgage investors, New Residential reports gain on originated mortgage loans, held-for-sale, net in the Condensed Consolidated Statements of Income.


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Gain on loans originated and sold, net^(A)	$	236,583	$	25,347	$	275,870	$	52,889
Gain (loss) on settlement of mortgage loan origination derivative instruments^(B)	(175,568)		(18,318)		(221,881)		(29,741)
MSRs retained on transfer of loans^(C)	72,202		57,920		268,098		94,349
Other^(D)	15,962		9,499		32,590		16,779
Realized gain on sale of originated mortgage loans, net	$	149,179	$	74,448	$	354,677	$	134,276
Change in fair value of loans	6,102		22,633		28,377		27,982
Change in fair value of interest rate lock commitments (Note 10)	32,806		7,701		124,054		10,909
Change in fair value of derivative instruments (Note 10)	121,935		(3,764)		(17,388)		(4,979)
Gain on originated mortgage loans, held-for-sale, net	$	310,022	$	101,018	$	489,720	$	168,188

(A)Includes loan origination fees of $109.8 million and $386.8 million in the three and six months ended June 30, 2020, respectively, $60.9 million and $85.9 million in the three and six months ended June 30, 2019, respectively.