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EXCESS MORTGAGE SERVICING RIGHTS ASSETS (Tables)

6 Months Ended

Jun. 30, 2021

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 Consolidated Balance Sheets:


	June 30, 2021		December 31, 2020
Direct investments in Excess MSRs	$	284,290	$	310,938
Excess MSR Joint Ventures	94,198		99,917
Excess mortgage servicing rights assets, at fair value	$	378,488	$	410,855

The following table presents activity related to the carrying value of direct investments in Excess MSRs:


	Servicer
	Mr. Cooper		SLS(A)		Total
Balance as of December 31, 2020	$	309,009	$	1,929	$	310,938
Purchases	—		—		—
Interest income	11,979		14		11,993
Other income	301		(325)		(24)
Proceeds from repayments	(29,594)		(181)		(29,775)
Proceeds from sales	(13)		—		(13)
Change in fair value	(9,198)		369		(8,829)
Balance as of June 30, 2021	$	282,484	$	1,806	$	284,290

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

The following table presents activity related to the carrying value of MSRs and MSR Financing Receivables:


	MSRs		MSR Financing Receivables		Total
Balance as of December 31, 2020	$	3,489,675	$	1,096,166	$	4,585,841
Purchases, net(A)	7,178		—		7,178
Transfers(B)	47,831		(47,831)		—
Originations(C)	463,136		—		463,136

Proceeds from sales	(33,691)		(3,204)		(36,895)
Change in fair value due to:
Realization of cash flow(D)	(599,439)		(40,630)		(640,069)
Change in valuation inputs and assumptions	440,554		(12,967)		427,587
(Gain) loss realized	(14,651)		(1,698)		(16,349)
Balance as of June 30, 2021	$	3,800,593	$	989,836	$	4,790,429

(A)Net of purchase price adjustments and purchase price fully reimbursable from MSR sellers as a result of prepayment protection.

(B)Represents MSRs previously accounted for as MSR Financing Receivables. As a result of the length of the initial term of the related subservicing agreement between NRM and Mr. Cooper, although the MSRs were legally sold, solely for accounting purposes, the purchase agreement was not treated as a sale under GAAP through January 31, 2021.

(C)Represents MSRs retained on the sale of originated mortgage loans.

(D)Based on the runoff of the underlying residential mortgage loans.

The following is a summary of MSRs and MSR Financing Receivables as of June 30, 2021:


	UPB of Underlying Mortgages		Weighted Average Life (Years)(A)	Carrying Value(B)
MSRs:
Agency(C)	$	269,342,646	5.8	$	2,938,754
Non-Agency	8,314,431		4.6	14,953
Ginnie Mae(D)	58,509,628		5.3	846,886
	336,166,705		5.7	3,800,593
MSR Financing Receivables:

Non-Agency	62,396,648		8.0	989,836

Total	$	398,563,353	6.1	$	4,790,429

(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 June 30, 2021, weighted average discount rates of 7.2% (range 6.9% - 12.5%) and 9.0% were used to value New Residential’s MSRs and MSR Financing Receivables, respectively.

(C)Represents Fannie Mae and Freddie Mac MSRs.

(D)As of June 30, 2021, New Residential holds approximately $1.3 billion in residential mortgage loans subject to repurchase and the related residential mortgage loans repurchase liability on its Consolidated Balance Sheets.

Summary of Direct Investments in Excess MSRs

The following is a summary of direct investments in Excess MSRs:


	June 30, 2021										December 31, 2020
	UPB of Underlying Mortgages		Interest in Excess MSR			Weighted Average Life Years(A)	Amortized Cost Basis(B)		Carrying Value(C)		Carrying Value(C)
			New Residential(D)	Fortress-managed funds	Mr. Cooper
Agency
Original and Recaptured Pools	$	30,224,299	32.5% - 66.7% (53.3%)	0.0% - 40%	20.0% - 35.0%	6.1	$	130,171	$	146,645	$	162,645
Non-Agency(E)
Mr. Cooper and SLS Serviced:
Original and Recaptured Pools	33,983,371		33.3% - 100.0% (59.4%)	0.0% - 50%	0.0% - 33.3%	6.6	102,910		137,645		148,293
Total	$	64,207,670				6.3	$	233,081	$	284,290	$	310,938

(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, 2021 (Note 6) on $21.7 billion unpaid principal balance (“UPB”) underlying these Excess MSRs.

Changes in fair value of investments consists of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Original and Recaptured Pools	$	(4,211)	$	(85)	$	(8,829)	$	(11,109)

Summary of the Financial Results of Excess MSR Joint Ventures, Accounted for as Equity Method Investees

The following tables summarize the financial results of the Excess MSR joint ventures, accounted for as equity method investees:


	June 30, 2021			December 31, 2020
Excess MSR assets	$	166,868		$	179,762
Other assets	22,214			20,759
Other liabilities	(687)			(687)
Equity	$	188,395		$	199,834

New Residential’s investment	$	94,198		$	99,917
New Residential’s percentage ownership	50.0		%	50.0		%


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Interest income	$	(2,919)	$	536	$	6,239	$	7,850
Other income (loss)	1,791		(4,632)		(1,029)		(12,852)
Expenses	(8)		(8)		(16)		(16)
Net income (loss)	$	(1,136)	$	(4,104)	$	5,194	$	(5,018)

The following table summarizes the activity of investments in equity method investees:


Balance at December 31, 2020	$	99,917


Distributions of capital from equity method investees	(8,316)
Change in fair value of investments in equity method investees	2,597
Balance at June 30, 2021	$	94,198

Summary of Excess MSR Investments made through Equity Method Investees

The following is a summary of Excess MSR investments made through equity method investees:


	June 30, 2021
	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	$	25,547,389	66.7	%	50.0	%	$	127,391	$	166,868	5.8

(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.