RESIDENTIAL MORTGAGE LOANS

9 Months Ended

Sep. 30, 2021

New Residential’s residential mortgage loan portfolio consists of loans acquired through pool acquisitions and the execution of call rights. New Residential, through its wholly-owned subsidiaries, Newrez and Caliber, 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 September 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:


	September 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)	$	657,427	$	595,012	11,472	6.3	%	5.3	$	674,179

Acquired reverse mortgage loans(C)	$	12,690	$	6,120	28	7.7	%	3.7	$	5,884
Acquired performing loans(D)	150,127		136,921		2,977	6.7	%	4.5	129,345
Acquired non-performing loans(E)	2,123		1,702		24	7.5	%	4.8	374,658
Total residential mortgage loans, held-for-sale, at lower of cost or market	$	164,940	$	144,743	3,029	6.8	%	4.4	$	509,887

Acquired performing loans(D)(F)	$	2,100,079	$	2,112,181	12,575	3.4	%	11.0	$	1,423,159
Acquired non-performing loans(F)	160,098		146,370		923	4.8	%	5.6	335,544
Originated loans	11,403,519		11,714,006		13,538	3.0	%	27.7	2,947,113
Total residential mortgage loans, held-for-sale, at fair value	$	13,663,696	$	13,972,557	27,036	3.1	%	24.9	$	4,705,816

Total residential mortgage loans, held-for-sale, at fair value/lower of cost or market	$	13,828,636	$	14,117,300					$	5,215,703

(A)For loans classified as Level 3 in the fair value hierarchy, the weighted average life is based on the expected timing of the receipt of cash flows. For Level 2 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 54% 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 September 30, 2021, New Residential has placed non-performing loans, held-for-sale on nonaccrual status, except as described in (F) below.

(F)Includes $981.3 million and $101.6 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	September 30, 2021		December 31, 2020
California	15.3	%	11.9	%
Washington	10.7	%	1.8	%
Florida	9.3	%	7.1	%
Texas	7.4	%	10.1	%
New York	4.1	%	7.1	%
New Jersey	3.6	%	4.2	%
Virginia	3.6	%	2.5	%
Georgia	3.0	%	5.8	%
Illinois	3.0	%	3.0	%
Maryland	2.9	%	2.3	%
Other U.S.	37.1	%	44.2	%
	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:


	September 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	$	28,898	$	26,442	$	(2,456)	$	71,567	$	59,679	$	(11,888)
120+	410,134		397,483		(12,651)		950,564		790,788		(159,776)
	$	439,032	$	423,925	$	(15,107)	$	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 nine months ended September 30, 2021, New Residential executed calls on a total of 65 trusts and recognized $3.3 million of interest income on securities held in the collapsed trusts and $28.7 million of gain on securitizations accounted for as sales. For the nine months ended September 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
Caliber acquisition (Note 1)	—		—		7,685,681		7,685,681
Originations	—		—		84,990,504		84,990,504
Sales	—		(370,743)		(88,980,603)		(89,351,346)
Purchases/additional fundings	—		—		5,797,205		5,797,205
Proceeds from repayments	(91,074)		(26,988)		(360,757)		(478,819)
Transfer of loans to other assets(A)	—		294		7,990		8,284
Transfer of loans to real estate owned	(13,121)		(7,163)		(3,235)		(23,519)


Valuation (provision) reversal on loans	—		39,456		—		39,456
Fair value adjustments due to:
Changes in instrument-specific credit risk	(1,841)		—		(10,247)		(12,088)
Other factors	26,869		—		140,203		167,072
Balance at September 30, 2021	$	595,012	$	144,743	$	13,972,557	$	14,712,312

(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 grouped and presented as part of 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 September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Interest income:
Loans held-for-investment, at fair value	$	11,090	$	12,647	$	34,061	$	40,985
Loans held-for-sale, at lower of cost or fair value	5,449		7,406		18,241		38,673
Loans held-for-sale, at fair value	75,802		31,267		163,769		104,565
Total interest income	92,341		51,320		216,071		184,223

Interest expense:
Loans held-for-investment, at fair value	4,238		5,326		13,129		15,934
Loans held-for-sale, at lower of cost or fair value	4,030		4,068		16,303		17,501
Loans held-for-sale, at fair value	49,187		20,909		103,785		64,206
Total interest expense	57,455		30,303		133,217		97,641

Net interest income	$	34,886	$	21,017	$	82,854	$	86,582

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

Newrez and Caliber, both wholly-owned subsidiaries of New Residential, originate 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 and Caliber respectively generally retain 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 September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Gain on loans originated and sold, net(A)	$	249,848	$	244,225	$	347,574	$	520,096
Gain (loss) on settlement of mortgage loan origination derivative instruments(B)	(105,594)		(68,789)		48,522		(290,671)
MSRs retained on transfer of loans(C)	415,054		156,353		878,190		424,451
Other(D)	27,614		12,460		79,716		33,890
Realized gain on sale of originated mortgage loans, net	$	586,922	$	344,249	$	1,354,002	$	687,766
Change in fair value of loans	(70,932)		67,998		(67,545)		96,375
Change in fair value of interest rate lock commitments (Note 10)	(101,411)		82,019		(281,094)		206,073
Change in fair value of derivative instruments (Note 10)	152,182		(6,013)		251,731		(23,401)
Gain on originated mortgage loans, held-for-sale, net	$	566,761	$	488,253	$	1,257,094	$	966,813

(A)Includes loan origination fees of $678.4 million and $566.3 million for the three months ended September 30, 2021 and 2020, respectively, and $1,775.7 million and $953.1 million for the nine months ended September 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.