XML 47 R33.htm IDEA: XBRL DOCUMENT v3.20.2
INVESTMENTS IN MORTGAGE SERVICING RIGHTS AND MSR FINANCING RECEIVABLES (Tables)
 9 Months Ended
Sep. 30, 2020
Transfers and Servicing of Financial Assets [Abstract]  
Schedule of Activity Related to the Carrying Value of Investments in Excess MSRs The table below summarizes the components of excess mortgage servicing rights assets as presented on the condensed consolidated balance sheets:
September 30, 2020December 31, 2019
Direct investments in Excess MSRs$328,623 $379,747 
Excess MSR Joint Ventures107,359 125,596 
Excess mortgage servicing rights assets, at fair value$435,982 $505,343 
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 income25,167 9 25,176 
Other income(12,175)— (12,175)
Proceeds from repayments(51,980)(311)(52,291)
Proceeds from sales(61)— (61)
Change in fair value(11,939)166 (11,773)
Balance as of September 30, 2020$326,704 $1,919 $328,623 
(A)Specialized Loan Servicing LLC (“SLS”).
The following table presents activity related to the carrying value of New Residential’s investments in MSRs and MSR Financing Receivables:
MSRsMSR Financing ReceivablesTotal
Balance as of December 31, 2019$3,967,960 $1,718,273 $5,686,233 
Purchases, net(A)
446,964 (18,227)428,737 
Transfers320,613 (320,613)— 
Originations(B)
424,451 — 424,451 
Proceeds from sales(10,452)(3,708)(14,160)
Amortization of servicing rights(C)
(959,482)(182,085)(1,141,567)
Change in valuation inputs and assumptions(D)
(542,361)(62,072)(604,433)
(Gain) loss realized4,112 (1,749)2,363 
Balance as of September 30, 2020$3,651,805 $1,129,819 $4,781,624 

(A)Net of purchase price adjustments and purchase price fully reimbursable from MSR sellers as a result of prepayment protection.    
(B)Represents MSRs retained on the sale of originated mortgage loans.
(C)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.
(D)Includes changes in inputs or assumptions used in the valuation model.
The following is a summary of New Residential’s investments in MSRs and MSR Financing Receivables as of September 30, 2020:
UPB of Underlying Mortgages
Weighted Average Life (Years)(A)
Carrying Value(B)
MSRs:
Agency(C)
$323,473,921 5.4$3,012,602 
Non-Agency5,605,074 4.516,598 
Ginnie Mae(D)
57,290,646 4.3622,605 
386,369,641 5.23,651,805 
MSR Financing Receivables:
Agency(C)
6,159,819 5.657,410 
Non-Agency69,089,988 7.81,072,409 
75,249,807 7.61,129,819 
Total$461,619,448 5.6$4,781,624 

(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)Carrying value represents fair value. As of September 30, 2020, weighted average discount rates of 7.7% and 9.4% were used to value New Residential’s investments in MSRs and MSR financing receivables, respectively.
(C)Represents Fannie Mae and Freddie Mac MSRs.
(D)As of September 30, 2020, New Residential holds approximately $1,458.3 million in residential mortgage loans subject to repurchase and residential mortgage loans repurchase liability on its condensed consolidated balance sheets.
Fees Earned in Exchange for Servicing Financial Assets
Servicing revenue, net recognized by New Residential related to its investments in MSRs was composed of the following:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Servicing fee revenue$320,880 $222,966 $945,568 $602,241 
Ancillary and other fees30,255 58,489 80,591 151,039 
Servicing fee revenue and fees351,135 281,455 1,026,159 753,280 
Amortization of servicing rights(473,490)(168,776)(953,430)(346,772)
Change in valuation inputs and assumptions(A) (B)
81,973 (61,858)(536,154)(275,371)
(Gain) loss realized(3,547)2,229 4,112 2,229 
Servicing revenue, net$(43,929)$53,050 $(459,313)$133,366 

(A)Includes changes in inputs or assumptions used in the valuation model.
(B)Includes $(0.2) million and $(3.6) million for the three months ended September 30, 2020 and 2019, respectively, and $6.2 million and $4.4 million for the nine months ended September 30, 2020 and 2019, respectively, of fair value adjustment to excess spread financing.

Interest income from investments in MSR Financing Receivables was composed of the following:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Servicing fee revenue$83,493 $128,936 $303,936 $385,306 
Ancillary and other fees16,231 21,417 59,947 82,695 
Less: subservicing expense(35,655)(40,410)(117,689)(145,649)
Interest income, investments in MSR financing receivables
$64,069 $109,943 $246,194 $322,352 

Change in fair value of investments in MSR Financing Receivables was composed of the following:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Amortization of servicing rights$(36,134)$(48,340)$(182,085)$(131,417)
Change in valuation inputs and assumptions(A)
15,859 9,349 (62,072)1,437 
(Gain) loss on sales(B)
— (2,419)(1,749)(3,220)
Change in fair value of investments in MSR financing receivables
$(20,275)$(41,410)$(245,906)$(133,200)

(A)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.
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 MSR Financing Receivables:
Percentage of Total Outstanding Unpaid Principal Amount
State ConcentrationSeptember 30, 2020December 31, 2019
California21.9 %21.9 %
Florida7.3 %6.9 %
New York6.7 %6.4 %
Texas5.4 %5.5 %
New Jersey4.8 %4.9 %
Illinois3.5 %3.6 %
Massachusetts3.3 %3.4 %
Georgia3.2 %3.1 %
Maryland3.1 %3.0 %
Washington3.1 %3.3 %
Other U.S.37.7 %38.0 %
100.0 %100.0 %