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DEBT OBLIGATIONS

9 Months Ended

Sep. 30, 2020

Secured Financing Agreements

The Company finances the acquisition of certain assets within its investment portfolio using secured financing agreements, including repurchase agreements and warehouse credit facilities. Repurchase agreements and warehouse credit facilities are treated as collateralized financing transactions and carried at their contractual amounts, including accrued interest, as specified in the respective agreements. The carrying amount of the Company’s secured financing agreements and warehouse credit facilities approximates fair value. The Company pledges certain securities, loans or other assets as collateral under secured financing agreements and warehouse credit facilities with financial institutions, the terms and conditions of which are negotiated on a transaction-by-transaction basis. The amounts available to be borrowed under repurchase agreements and warehouse credit facilities are dependent upon the fair value of the securities, or loans pledged as collateral, which can fluctuate with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries.

The following table presents certain information regarding New Residential’s secured financing agreements and secured notes and bonds payable debt obligations:


	September 30, 2020															December 31, 2019
									Collateral
Debt Obligations/Collateral	Outstanding Face Amount		Carrying Value(A)		Final Stated Maturity(B)	Weighted Average Funding Cost		Weighted Average Life (Years)	Outstanding Face		Amortized Cost Basis		Carrying Value		Weighted Average Life (Years)	Carrying Value(A)
Secured Financing Agreements(C)
Repurchase Agreements:
Warehouse Credit Facilities-Residential Mortgage Loans(F)	$	3,759,627	$	3,754,803	Oct-20 to Jul-22	2.5	%	1.0	$	4,156,437	$	4,250,005	$	4,215,066	17.1	$	5,053,207
Agency RMBS(D)	$	9,958,246	$	9,958,246	Oct-20 to Dec-20	0.2	%	0.2	$	9,930,973	$	10,285,282	$	10,361,950	3.8	$	15,481,677
Non-Agency RMBS(E)	$	952,323	$	950,836	Oct-20 to Dec-20	4.1	%	0.1	$	18,999,108	$	1,730,072	$	1,734,798	6.0	$	7,317,519
Real Estate Owned(G)(H)	$	2,983	$	2,983	Oct-20 to Jul-22	3.94	%	1.3	N/A		N/A		3,796		N/A	63,822
Total Secured Financing Agreements	14,673,179		14,666,868			1.05	%	0.4								27,916,225
Secured Notes and Bonds Payable
Excess MSRs(I)	264,980		264,980		Nov-20 to Aug-24	3.91	%	1.1	107,584,509		333,874		421,907		6.0	217,300
MSRs(J)	2,794,108		2,786,144		Jan-21 to Jul-25	4.57	%	2.3	444,177,336		4,645,075		4,675,648		5.8	2,640,036
Servicer Advance Investments(K)	412,538		412,538		Apr-21 to Aug-21	2.27	%	0.6	434,998		510,995		535,760		6.3	581,777
Servicer Advances(K)	2,502,158		2,492,239		Apr-21 to Sep-23	2.84	%	1.9	2,747,433		2,857,040		2,857,040		0.7	2,599,895
Residential Mortgage Loans(L)	1,103,847		1,096,638		Apr-21 to Aug-60	4.26	%	30.1	1,656,351		1,588,739		1,413,258		4.1	864,451
Consumer Loans(M)	678,951		681,109		September-37	2.03	%	3.0	663,047		718,287		718,287		3.6	816,689
Total Secured Notes and Bonds Payable	7,756,582		7,733,648			3.60	%	6.1								7,720,148
Total/ Weighted Average	$	22,429,761	$	22,400,516		1.93	%	2.3								$	35,636,373

(A)Net of deferred financing costs.

(B)All debt obligations with a stated maturity through October 31, 2020 were refinanced, extended or repaid.

(C)These secured financing agreements had approximately $19.5 million of associated accrued interest payable as of September 30, 2020.

(D)All Agency RMBS repurchase agreements have a fixed rate.

(E)All Non-Agency RMBS secured financing agreements have LIBOR-based floating interest rates. This also includes repurchase agreements and related collateral of $30.4 million and $37.3 million, respectively, on retained bonds collateralized by Agency MSRs.

(F)Includes $270.7 million of repurchase agreements which bear interest at a fixed rate of 4.4%. All remaining repurchase agreements have LIBOR-based floating interest rates.

(G)All repurchase agreements have LIBOR-based floating interest rates.

(H)Includes financing collateralized by receivables including claims from FHA on Ginnie Mae EBO loans for which foreclosure has been completed and for which New Residential has made or intends to make a claim on the FHA guarantee.

(I)Includes $70.2 million of corporate loans which bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR and (ii) a margin of 2.50% and $194.7 million of corporate loans which bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR and (ii) a margin of 3.50%. The outstanding face amount of the collateral represents the UPB of the residential mortgage loans underlying the interests in MSRs that secure these notes.

(J)Includes $933.0 million of MSR notes which bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR and (ii) a margin of 4.50%; $37.4 million of MSR notes which bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR and (ii) a margin of 2.50%; $326.1 million of MSR notes which bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR and (ii) a margin of 4.50%; and

$1,497.6 million of capital markets notes with fixed interest rates ranging 3.55% to 5.44%. The outstanding face amount of the collateral represents the UPB of the residential mortgage loans underlying the MSRs and MSR financing receivables that secure these notes.

(K)$1.9 billion face amount of the notes have a fixed rate while the remaining notes bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR or a cost of funds rate, as applicable, and (ii) a margin ranging from 1.38% to 1.85%. Collateral includes Servicer Advance Investments, as well as servicer advances receivable related to the mortgage servicing rights and MSR financing receivables owned by NRM.

(L)Represents (i) a $989.1 million note payable to Mr. Cooper which includes a $1.4 million receivable from government agency and bears interest equal to one-month LIBOR plus 2.88%, (ii) $75.1 million face amount of SAFT 2013-1 mortgage-backed securities issued with fixed interest rate of 3.72% (see Note 12 for fair value details), (iii) $165.5 million of MDST Trusts asset-backed notes held by third parties which bear interest equal to 6.63% (see Note 12 for fair value details), and (iv) $989.1 million of bonds held by third parties which bear interest at a fixed rate ranging from 3.23% to 5.00%.

(M)Includes the SpringCastle debt, which is primarily composed of the following classes of asset-backed notes held by third parties: $610.0 million UPB of Class A notes with a coupon of 1.97% and a stated maturity date in September 2037 and $53.0 million UPB of Class B notes with a coupon of 2.66% and a stated maturity date in September 2037.

As of September 30, 2020, New Residential had no outstanding secured financing agreements where the amount at risk with any individual counterparty or group of related counterparties exceeded 10% of New Residential’s stockholders' equity. The amount at risk under secured financing agreements is defined as the excess of carrying amount (or market value, if higher than the carrying amount) of the securities or other assets sold under agreement to repurchase, including accrued interest plus any cash or other assets on deposit to secure the repurchase obligation, over the amount of the repurchase liability (adjusted for accrued interest).

General

Certain of the debt obligations included above are obligations of New Residential’s consolidated subsidiaries, which own the related collateral. In some cases, such collateral is not available to other creditors of New Residential.

As of September 30, 2020, New Residential has margin exposure on $14.7 billion of secured financing agreements. To the extent that the value of the collateral underlying these secured financing agreements declines, New Residential may be required to post margin, which could significantly impact its liquidity.

Activities related to the carrying value of New Residential’s debt obligations were as follows:


	Excess MSRs		MSRs		Servicer Advances(A)		Real Estate Securities		Residential Mortgage Loans and REO		Consumer Loans		Total
Balance at December 31, 2019	$	217,300	$	2,640,036	$	3,181,672	$	22,799,196	$	5,981,480	$	816,689	$	35,636,373
Secured Financing Agreements:
Borrowings	—		—		—		101,149,870		39,427,045		—		140,576,915
Repayments	—		—		—		(113,038,497)		(40,782,949)		—		(153,821,446)
Capitalized deferred financing costs, net of amortization	—		—		—		(1,487)		(3,337)		—		(4,824)
Secured Notes and Bonds Payable:
Borrowings	97,173		2,367,635		3,053,589		—		875,758		663,047		7,057,202
Repayments	(49,493)		(2,220,067)		(3,328,415)		—		(640,924)		(797,904)		(7,036,803)
Discount on borrowings, net of amortization	—		1,457		—		—		—		(2,882)		(1,425)
Unrealized loss on notes, fair value	—		—		—		—		(2,694)		2,159		(535)
Capitalized deferred financing costs, net of amortization	—		(2,917)		(2,069)		—		45		—		(4,941)
Balance at September 30, 2020	$	264,980	$	2,786,144	$	2,904,777	$	10,909,082	$	4,854,424	$	681,109	$	22,400,516

(A)New Residential net settles daily borrowings and repayments of the Secured notes and bonds payable on its servicer advances.

Maturities

New Residential’s debt obligations as of September 30, 2020 had contractual maturities as follows:


Year Ending	Nonrecourse		Recourse		Total
October 1 through December 31, 2020	$	1,296	$	11,670,545	$	11,671,841
2021	1,632,734		3,097,533		4,730,267
2022	119,403		1,691,631		1,811,034
2023	1,200,000		321,685		1,521,685
2024	—		522,589		522,589
2025 and thereafter	919,583		1,802,761		2,722,344
	$	3,873,016	$	19,106,744	$	22,979,760

Borrowing Capacity

The following table represents New Residential’s borrowing capacity as of September 30, 2020:


Debt Obligations / Collateral	Borrowing Capacity		Balance Outstanding		Available Financing(A)
Secured Financing Agreements
Residential mortgage loans and REO	$	5,011,258	$	995,151	$	4,016,107
New loan originations	5,283,000		2,767,458		2,515,542

Secured Notes and Bonds Payable
Excess MSRs	311,237		264,980		46,257
MSRs	1,750,000		1,296,506		453,494
Servicer advances	4,645,000		2,914,696		1,730,304
Residential mortgage loans	650,000		—		650,000
	$	17,650,495	$	8,238,791	$	9,411,704

(A)New Residential’s unused borrowing capacity is available if New Residential has additional eligible collateral to pledge and meets other borrowing conditions as set forth in the applicable agreements, including any applicable advance rate.

Certain of the debt obligations are subject to customary loan covenants and event of default provisions, including event of default provisions triggered by certain specified declines in New Residential’s equity or a failure to maintain a specified tangible net worth, liquidity, or indebtedness to tangible net worth ratio. New Residential was in compliance with all of its debt covenants as of September 30, 2020.

2020 Term Loan

On May 19, 2020, the Company, as borrower, entered into a three-year senior secured term loan facility agreement (the “2020 Term Loan”) in the principal amount of $600.0 million at a fixed annual rate of 11.0%.

In conjunction with the 2020 Term Loan, the Company issued common stock purchase warrants (the “2020 Warrants”) to the lenders. The 2020 Warrants expire approximately three years after the issuance date. The Company recorded the value of the 2020 Term Loan and 2020 Warrants on a relative fair value basis. The estimated fair value of the 2020 Warrants at the date of issuance was approximately $53.5 million and the Company recognized it as a discount to the 2020 Term Loan. Refer to Note 14, Equity and Earnings Per Share, for further details.

In August 2020, the Company made a $51.0 million prepayment on the 2020 Term Loan. As a result, The Company recorded a $5.7 million loss on extinguishment of debt, representing a write-off of unamortized debt issuance costs and original issue discount.

In September 2020, the Company used the net proceeds from a private debt offering, together with cash on hand, to fully retire all of the outstanding principal balance on the 2020 Term Loan. As a result, the Company recorded a $61.1 million loss on extinguishment of debt, primarily representing a write-off of unamortized debt issuance costs and original issue discount.

The table below summarizes the interest expense on the 2020 Term Loan:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Coupon interest at 11.00%	$	13,652	$	—	$	20,435	$	—
Amortization of debt discounts and issuance costs	3,368		—		5,006		—
Total	$	17,020	$	—	$	25,441	$	—

The 2020 Term Loan contained certain customary affirmative and negative covenants and also required the Company to maintain compliance with certain financial covenants. The Company was in compliance with all financial covenants through extinguishment of the 2020 Term Loan.

2025 Senior Unsecured Notes

On September 16, 2020, the Company, as borrower, completed a private offering of $550.0 million aggregate principal amount of 6.250% senior unsecured notes due 2025 (the “2025 Senior Notes”). Interest on the 2025 Senior Notes accrue at the rate of 6.250% per annum with interest payable semi-annually in arrears on each April 15 and October 15, commencing on April 15, 2021.

The 2025 Senior Notes mature on October 15, 2025 and the Company may redeem some or all of the 2025 Senior Notes at the Company’s option, at any time from time to time, on or after October 15, 2022 at a price equal to the following fixed redemption prices (expressed as a percentage of principal amount of the 2025 Senior Notes to be redeemed):


Year						Price
2022						103.125%
2023						101.563%
2024 and thereafter						100.000%

Prior to October 15, 2022, the Company will be entitled at its option on one or more occasions to redeem the 2025 Senior Notes in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2025 Senior Notes originally issued prior to the applicable redemption date at a fixed redemption price of 106.250%.

Net proceeds from the offering were approximately $544.5 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by the Company. The Company used the net proceeds from the offering, together with cash on hand, to prepay and retire its then-existing 2020 Term Loan and to pay related fees and expenses. The Company recorded a $61.1 million loss on extinguishment of debt, representing a write-off of unamortized debt issuance costs and original issue discount.

The Company incurred fees of approximately $8.3 million in relation to the issuance of the 2025 Senior Notes. These fees were capitalized as debt issuance cost and are grouped and presented as part of Unsecured senior notes, net of issuance costs on the condensed consolidated balance sheets. For both the three and nine months ended September 30, 2020, the Company recognized $1.3 million of interest expense. At September 30, 2020, the unamortized debt issuance costs was approximately $8.2 million.

The 2025 Senior Notes are senior unsecured obligations and rank pari passu in right of payment with all of the Company’s existing and future senior unsecured indebtedness and senior unsecured guarantees. At the time of issuance, the 2025 Senior Notes were not guaranteed by any of the Company’s subsidiaries and none of its subsidiaries are required to guarantee the 2025 Senior Notes in the future, except under limited specified circumstances.

The 2025 Senior Notes contain financial covenants and other non-financial covenants, including, among other things, limits on the ability of the Company and its restricted subsidiaries to incur certain indebtedness (subject to various exceptions), requires that the Company maintain total unencumbered assets (as defined in the debt agreement) of not less than 120% of the aggregate principal amount of the outstanding unsecured debt, and imposes certain requirements in order for the Company to merge or consolidate with or transfer all or substantially all of its assets to another person, in each case subject to certain qualifications set forth in the debt agreement. If the Company were to fail to comply with these covenants, after the expiration of the applicable cure periods, the debt maturity could be accelerated or other remedies could be sought by the lenders. As of September 30, 2020, the Company was in compliance with all covenants.

In the event of a change of control, each holder of the 2025 Senior Notes will have the right to require the Company to repurchase all or any part of the outstanding balance at a purchase price of 101% of the principal amount of the 2025 Senior Notes repurchased, plus accrued and unpaid interest, if any, to, but not including, the date of such repurchase.