RESIDENTIAL MORTGAGE LOANS

6 Months Ended

Jun. 30, 2021

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.

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, 2021, New Residential accounts for loans based on the following categories:

•Loans held-for-investment, at fair value

•Loans held-for-sale, at lower of cost or fair value

•Loans held-for-sale, at fair value

The following table presents certain information regarding New Residential’s residential mortgage loans outstanding by loan type:


	June 30, 2021								December 31, 2020
Loan Type	Outstanding Face Amount		Carrying Value		Loan Count	Weighted Average Yield		Weighted Average Life (Years)(A)	Carrying Value
Total residential mortgage loans, held-for-investment, at fair value(B)	$	662,210	$	617,951	11,246	5.9	%	5.2	$	674,179

Acquired reverse mortgage loans(C)	$	12,456	$	5,948	28	7.7	%	3.7	$	5,884
Acquired performing loans(D)	134,349		132,453		3,105	4.9	%	4.3	129,345
Acquired non-performing loans(E)	221,387		205,597		1,399	5.1	%	3.2	374,658
Total residential mortgage loans, held-for-sale, at lower of cost or market	$	368,192	$	343,998	4,532	5.1	%	3.6	$	509,887

Acquired performing loans(D)(F)	$	1,712,038	$	1,742,686	10,875	3.3	%	7.6	$	1,423,159
Acquired non-performing loans(F)	416,534		402,571		2,284	4.8	%	3.1	335,544
Originated loans	4,448,668		4,599,186		17,338	3.2	%	27.7	2,947,113
Total residential mortgage loans, held-for-sale, at fair value	$	6,577,240	$	6,744,443	30,497	3.3	%	20.9	$	4,705,816

Total residential mortgage loans, held-for-sale, at fair value/lower of cost or market	$	6,945,432	$	7,088,441					$	5,215,703

(A)Except for originated loans, the weighted average life is based on the expected timing of the receipt of cash flows. For originated loans, the weighted average life is based on the contractual term of the loan.

(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 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 52% 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.

(D)Performing loans are generally placed on nonaccrual status when principal or interest is 120 days or more past due.

(E)As of June 30, 2021, New Residential has placed non-performing loans, held-for-sale on nonaccrual status, except as described in (F) below.

(F)Includes $722.4 million and $200.2 million UPB of Ginnie Mae EBO performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.

The table below summarizes the geographic distribution of the underlying residential mortgage loans:


	Percentage of Total Outstanding Unpaid Principal Amount
State Concentration	June 30, 2021		December 31, 2020
California	16.3	%	11.9	%
Florida	8.2	%	7.1	%
New York	8.0	%	7.1	%
Texas	7.6	%	10.1	%
New Jersey	5.4	%	4.2	%
Georgia	4.6	%	5.8	%
Massachusetts	3.4	%	3.1	%
Pennsylvania	3.2	%	3.5	%
Illinois	3.2	%	3.0	%
Maryland	2.9	%	2.3	%
Other U.S.	37.2	%	41.9	%
	100.0	%	100.0	%

See Note 11 regarding the financing of residential mortgage loans.

The following table summarizes the difference between the aggregate unpaid principal balance and the aggregate fair value of loans:


	June 30, 2021						December 31, 2020
Days Past Due	Unpaid Principal Balance		Fair Value		Fair Value Over (Under) Unpaid Principal Balance		Unpaid Principal Balance		Fair Value		Fair Value Over (Under) Unpaid Principal Balance
90 to 119	$	82,036	$	76,074	$	(5,962)	$	71,567	$	59,679	$	(11,888)
120+	620,386		579,643		(40,742)		950,564		790,788		(159,776)
	$	702,422	$	655,717	$	(46,704)	$	1,022,131	$	850,467	$	(171,664)

Call Rights

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, 2021, New Residential executed calls on a total of 42 trusts and recognized $3.3 million of interest income on securities held in the collapsed trusts and $19.4 million of gain on securitizations accounted for as sales. 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. Refer to Note 16 for transactions with affiliates.

The following table summarizes the activity for residential mortgage loans:


	Loans Held-for-Investment, at Fair Value		Loans Held-for-Sale, at Lower of Cost or Fair Value		Loans Held-for-Sale, at Fair Value		Total
Balance at December 31, 2020	$	674,179	$	509,887	$	4,705,816	$	5,889,882

Originations	—		—		50,711,462		50,711,462
Sales	—		(188,855)		(52,422,982)		(52,611,837)
Purchases/additional fundings	—		—		3,789,824		3,789,824
Proceeds from repayments	(62,836)		(19,010)		(209,413)		(291,259)
Transfer of loans to other assets(A)	—		404		5,712		6,116
Transfer of loans to real estate owned	(9,524)		(4,909)		(1,260)		(15,693)


Valuation (provision) reversal on loans	—		46,481		—		46,481
Fair value adjustments due to:
Changes in instrument-specific credit risk	415		—		(3,432)		(3,017)
Other factors	15,717		—		168,716		184,433
Balance at June 30, 2021	$	617,951	$	343,998	$	6,744,443	$	7,706,392

(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).

Net interest income

The following table summarizes the net interest income for residential mortgage loans:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Interest income:
Loans held-for-investment, at fair value	$	11,911	$	13,229	$	22,971	$	28,338
Loans held-for-sale, at lower of cost or fair value	4,132		15,303		12,274		33,458
Loans held-for-sale, at fair value	48,513		27,715		88,485		71,107
Total interest income	64,556		56,247		123,730		132,903

Interest expense:
Loans held-for-investment, at fair value	4,079		5,408		8,890		10,608
Loans held-for-sale, at lower of cost or fair value	2,554		6,358		10,340		14,888
Loans held-for-sale, at fair value	29,790		11,372		56,532		41,842
Total interest expense	36,423		23,138		75,762		67,338

Net interest income	$	28,133	$	33,109	$	47,968	$	65,565

Gain on originated mortgage loans, held-for-sale, net

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 Consolidated Statements of Income.

Gain on Originated Mortgage Loans, Held-for-Sale, Net is summarized below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Gain on loans originated and sold, net(A)	$	96,639	$	236,583	$	97,726	$	275,872
Gain (loss) on settlement of mortgage loan origination derivative instruments(B)	113,995		(175,568)		154,116		(221,882)
MSRs retained on transfer of loans(C)	207,663		72,202		463,136		268,098
Other(D)	28,405		10,924		52,088		21,430
Realized gain on sale of originated mortgage loans, net	$	446,702	$	144,141	$	767,066	$	343,518
Change in fair value of loans	93,350		6,102		3,387		28,377
Change in fair value of interest rate lock commitments (Note 10)	55,299		32,806		(179,683)		124,055
Change in fair value of derivative instruments (Note 10)	(308,466)		121,935		99,549		(17,389)
Gain on originated mortgage loans, held-for-sale, net	$	286,885	$	304,984	$	690,319	$	478,561

(A)Includes loan origination fees of $438.9 million and $109.8 million for the three months ended June 30, 2021 and 2020, respectively, and $1,097.3 million and $386.8 million for the six months ended June 30, 2021 and 2020, respectively.

(B)Represents settlement of forward securities delivery commitments utilized as an economic hedge for mortgage loans not included within forward loan sale commitments.

(C)Represents the initial fair value of the capitalized mortgage servicing rights upon loan sales with servicing retained.

(D)Includes fees for services associated with the loan origination process.