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EXCESS MORTGAGE SERVICING RIGHTS
 12 Months Ended
Dec. 31, 2021
Transfers and Servicing [Abstract]  
EXCESS MORTGAGE SERVICING RIGHTS EXCESS MORTGAGE SERVICING RIGHTS
Excess mortgage servicing rights assets include New Residential’s direct investments in Excess MSRs and investments in joint ventures jointly controlled by New Residential and Fortress-managed funds investing in Excess MSRs.

The table below summarizes the components of Excess MSRs as presented on the Consolidated Balance Sheets:
Year Ended December 31,
20212020
Direct investments in Excess MSRs$259,198 $310,938 
Excess MSR Joint Ventures85,749 99,917 
Excess mortgage servicing rights assets, at fair value$344,947 $410,855 

Direct Investments in Excess MSRs

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, 2019$377,692 $2,055 $379,747 
Interest income28,217 135 28,352 
Other income(12,123)— (12,123)
Proceeds from repayments(67,340)(405)(67,745)
Proceeds from sales(1,061)— (1,061)
Change in fair value(16,376)144 (16,232)
Balance as of December 31, 2020309,009 1,929 310,938 
Interest income20,355 (59)20,296 
Other income403 (325)78 
Proceeds from repayments(55,702)(350)(56,052)
Proceeds from sales(984)— (984)
Change in fair value(15,508)430 (15,078)
Balance as of December 31, 2021$257,573 $1,625 $259,198 
(A)Specialized Loan Servicing LLC (“SLS”).

Mr. Cooper or SLS, as applicable, as servicer performs all of the servicing and advancing functions, and retains the ancillary income, servicing obligations and liabilities as the servicer of the underlying loans in the portfolio.

New Residential has entered into a “recapture agreement” with respect to each of the direct Excess MSR investments serviced by Mr. Cooper and SLS. Under such arrangements, New Residential is generally entitled to a pro rata interest in the Excess MSRs on any refinancing by Mr. Cooper of a loan in the original portfolio. These recapture agreements do not apply to New Residential’s Servicer Advance Investments (Note 7).
The following summarizes direct investments in Excess MSRs:
December 31, 2021
UPB of Underlying MortgagesInterest in Excess MSR
Weighted Average Life Years(A)
Amortized Cost Basis(B)
Carrying Value(C)
New Residential(D)
Fortress-managed fundsMr. Cooper
Agency
Original and Recaptured Pools$26,856,946 
32.5% - 66.7% (53.3%)
—% - 40.0%
20.0% - 35.0%
6.0$118,631 $131,997 
Non-Agency(E)
Mr. Cooper and SLS Serviced:
Original and Recaptured Pools30,565,231 
33.3% - 100.0% (59.4%)
—% - 50.0%
—% - 33.3%
6.695,608 127,201 
Total$57,422,177 $214,239 $259,198 
December 31, 2020
UPB of Underlying MortgagesInterest in Excess MSR
Weighted Average Life Years(A)
Amortized Cost Basis(B)
Carrying Value(C)
New Residential(D)
Fortress-managed fundsMr. Cooper
Agency
Original and Recaptured Pools$34,593,406 
32.5% - 66.7%
(53.3)%
—% - 40.0%
20.0% - 35.0%
5.9$141,204 $162,645 
Non-Agency(E)
Mr. Cooper and SLS Serviced:
Original and Recaptured Pools38,095,499 
33.3% - 100.0%
(59.4)%
—% - 50.0%
—% - 33.3%
6.5109,697 148,293 
Total$72,688,905 $250,901 $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 December 31, 2021 and 2020 (Note 7) on $20.3 billion and $26.1 billion UPB, respectively, underlying these Excess MSRs.

Changes in fair value of investments consists of the following:
Year Ended December 31,
202120202019
Original and Recaptured Pools$(15,078)$(16,232)$(10,505)

As of December 31, 2021 and 2020, weighted average discount rates of 7.8% (range 7.5%-8.0%) and 7.8% (range 7.5%-8.0%), respectively, were used to value New Residential’s investments in Excess MSRs (directly and through equity method investees).
Excess MSR Joint Ventures

New Residential entered into investments in joint ventures (“Excess MSR joint ventures”) jointly controlled by New Residential and Fortress-managed funds investing in Excess MSRs.

The following tables summarize the financial results of the Excess MSR joint ventures, accounted for as equity method investees:
December 31,
20212020
Excess MSRs$152,383 $179,762 
Other assets19,802 20,759 
Other liabilities(687)(687)
Equity$171,498 $199,834 
New Residential’s investment$85,749 $99,917 
New Residential’s percentage ownership50.0 %50.0 %
Year Ended December 31,
202120202019
Interest income$7,574 $22,507 $23,872 
Other income (loss)(3,906)(29,461)(10,208)
Expenses(32)(24)(64)
Net income (loss)$3,636 $(6,978)$13,600 

The following table summarizes the activity of investments in equity method investees:
December 31,
20212020
Balance at beginning of period$99,917 $125,596 
Contributions to equity method investees— — 
Distributions of earnings from equity method investees— (1,170)
Distributions of capital from equity method investees(15,986)(21,020)
Change in fair value of investments in equity method investees1,818 (3,489)
Balance at end of period$85,749 $99,917 

The following table summarizes Excess MSR investments made through equity method investees:
December 31, 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$23,039,453 66.7%50.0%$112,840 $152,383 5.7
December 31, 2020
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$28,453,512 66.7%50.0%$139,251 $179,762 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.
MORTGAGE SERVICING RIGHTS AND MSR FINANCING RECEIVABLES
The Company owns and records at fair value the rights to service residential mortgage loans, either as a result of purchase transactions or from the retained mortgage servicing associated with the sales and securitizations of loans originated. MSRs are composed of servicing rights of both Agency and Non-Agency loans. In certain cases where New Residential has legally purchased MSRs or the right to the economic interest in MSRs, New Residential has determined that the purchase agreement would not be treated as a sale under GAAP. Therefore, rather than recording an investment in MSRs, New Residential has recorded an investment in MSR Financing Receivables.

The following table summarizes activity related to MSRs and MSR Financing Receivables:
Total
Balance as of December 31, 2019$5,686,233 
Purchases, net(A)
431,608 
Originations(B)
666,414 
Proceeds from sales(15,341)
Change in fair value due to:
Realization of cash flows(C)
(1,592,281)
Change in valuation inputs and assumptions(591,439)
(Gain) loss realized647 
Balance as of December 31, 2020$4,585,841 
Caliber acquisition (Note 3)1,507,524 
Purchases, net(A)
10,949 
Originations(B)
1,331,626 
Proceeds from sales(63,451)
Change in fair value due to:
Realization of cash flows(C)
(1,196,527)
Change in valuation inputs and assumptions680,431 
(Gain) loss realized2,410 
Balance as of December 31, 2021$6,858,803 
(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 residential mortgage loans.
(C)Based on the paydown of the underlying residential mortgage loans.
The following table summarizes components of Servicing Revenue, Net:
Year Ended December 31,
202120202019
Servicing fee revenue, net and interest income from MSRs and MSR financing receivables$1,446,509 $1,457,211 $1,216,069 
Ancillary and other fees113,045 185,061 318,056 
Servicing fee revenue and fees, net1,559,554 1,642,272 1,534,125 
Change in fair value due to:
Realization of cash flows(A)
(1,192,646)(1,583,628)(733,763)
Change in valuation inputs and assumptions(B)
680,088 (585,928)(165,110)
Change in fair value of derivative instruments(30,481)— — 
(Gain) loss realized2,410 647 (3,100)
Gain (loss) on settlement of derivative instruments(34,724)— — 
Servicing revenue, net$984,201 $(526,637)$632,152 
(A)Includes $3.9 million, $8.7 million and $7.1 million of fair value adjustment due to realization of cash flows to Excess spread financing for the year ended December 31, 2021, 2020, and 2019, respectively.
(B)Includes $0.3 million, $5.5 million and $1.3 million of fair value adjustment due to changes in valuation inputs and assumptions to Excess spread financing for the year ended December 31, 2021, 2020, and 2019, respectively.
The following is a summary of MSRs and MSR Financing Receivables as of December 31, 2021 and 2020:
UPB of Underlying Mortgages
Weighted Average Life (Years)(A)
Carrying Value(B)
2021
Agency$374,815,579 6.1$4,443,713 
Non-Agency63,851,154 8.3943,210 
Ginnie Mae(c)
109,946,356 5.71,471,880 
Total$548,613,089 6.3$6,858,803 
2020
Agency$305,718,556 5.1$2,849,003 
Non-Agency72,610,446 7.91,064,403 
Ginnie Mae(c)
57,106,825 4.1672,435 
Total$435,435,827 5.4$4,585,841 
(A)Represents the weighted average expected timing of the receipt of expected cash flows for this investment.
(B)Represents fair value. As of December 31, 2021 and 2020, weighted average discount rates of 7.4% (range of 6.9%-12.5%) and 8.1% (range of 7.3%-13.0%), respectively, were used to value New Residential’s MSRs and MSR Financing Receivables, respectively.
(C)As of December 31, 2021 and 2020, New Residential holds approximately $1.8 billion and $1.5 billion in residential mortgage loans subject to repurchase and the related residential mortgage loans repurchase liability on its Consolidated Balance Sheets.

Residential Mortgage Loans Subject to Repurchase

New Residential, through its wholly owned subsidiaries as approved issuers of Ginnie Mae MBS, originates and securitizes government-insured residential mortgage loans. As the issuer of the Ginnie Mae-guaranteed securitizations, New Residential has the unilateral right to repurchase loans from the securitizations when they are delinquent for more than 90 days. Loans in forbearance that are three or more consecutive payments delinquent are included as delinquent loans permitted to be repurchased. Under GAAP, New Residential is required to recognize the right to loans on its balance sheet and establish a corresponding liability upon the triggering of the repurchase right regardless of whether New Residential intends to repurchase
the loans. As of December 31, 2021 and 2020, New Residential holds approximately $1,787.3 million and $1,452.0 million, respectively, in residential mortgage loans subject to repurchase and residential mortgage loans repurchase liability on its Consolidated Balance Sheets. New Residential may re-pool repurchased loans into new Ginnie Mae securitizations upon re-performance of the loan or otherwise sell to third-party investors. The Company does not change the accounting for MSRs related to previously sold loans upon recognizing loans eligible for repurchase. Rather, upon repurchase of a loan, the MSR is written off. As of December 31, 2021 and 2020, New Residential holds approximately $1,082.3 million and $810.9 million, respectively, of reacquired residential mortgage loans and is reflected in Residential Mortgage Loans, Held-for-Sale, at Fair Value on the Consolidated Balance Sheets.

Ocwen MSR Financing Receivable Transactions

In July 2017, Ocwen Loan Servicing, LLC (collectively with certain affiliates, “Ocwen”) and New Residential entered into an agreement in which both parties agreed to undertake certain actions to facilitate the transfer from Ocwen to New Residential of Ocwen’s remaining interests in the MSRs relating to loans with an aggregate unpaid principal balance of approximately $110.0 billion and with respect to which New Residential already held certain rights (“Rights to MSRs”). Ocwen and New Residential concurrently entered into a subservicing agreement pursuant to which Ocwen agreed to subservice the residential mortgage loans related to the MSRs that were transferred to New Residential.

In January 2018, Ocwen sold and transferred to New Residential certain “Rights to MSRs” and other assets related to mortgage servicing rights for loans with an unpaid principal balance of approximately $86.8 billion. PHH (as successor by merger to Ocwen) will continue to service the residential mortgage loans related to the MSRs until any necessary third-party consents to transferring the MSRs are obtained and all other conditions to transferring the MSRs are satisfied.

Of the “Rights to MSRs” sold and transferred to NRM and Newrez, consents and all other conditions to transfer have been received with respect to approximately $66.7 billion UPB of underlying loans. Although legally sold and entitled to the economics of the transfer, as of December 31, 2021 and 2020, with respect to MSRs representing approximately $14.0 billion and $16.3 billion UPB of underlying loans, respectively, it was determined for accounting purposes that substantially all of the risks and rewards inherent in owning the MSRs had not been transferred to Newrez and therefore are not treated as a sale under GAAP and are classified as MSR Financing Receivables.

The table below summarizes the geographic distribution of the underlying residential mortgage loans of the MSRs and MSR Financing Receivables:
Percentage of Total Outstanding Unpaid Principal Amount
State ConcentrationDecember 31, 2021December 31, 2020
California18.1 %21.2 %
Florida8.6 %7.4 %
Texas6.2 %5.6 %
New York6.0 %7.0 %
Washington5.6 %2.9 %
New Jersey4.5 %4.8 %
Virginia3.4 %2.9 %
Illinois3.4 %3.6 %
Maryland3.4 %3.1 %
Georgia3.0 %3.3 %
Other U.S.37.8 %38.2 %
100.0 %100.0 %

Geographic concentrations of investments expose New Residential to the risk of economic downturns within the relevant states. Any such downturn in a state where New Residential holds significant investments could affect the underlying borrower’s ability to make mortgage payments and therefore could have a meaningful, negative impact on the MSRs.
Residential Mortgage Loan Subservicing

The Mortgage Company performs servicing of residential mortgage loans for third parties under subservicing agreements. The subservicing does not meet the criteria to be recognized as a servicing right asset and, therefore, is not recognized on New Residential’s Consolidated Balance Sheets. The UPB of residential mortgage loans subserviced for others as of December 31, 2021 and 2020 was $78.8 billion and $66.9 billion, respectively. Subservicing revenue of $158.5 million and $201.6 million was included within Servicing Revenue, Net in the Consolidated Statements of Income for the year ended December 31, 2021 and 2020, respectively.

NRM engages third party licensed mortgage servicers as subservicers and, in relation to certain MSR purchases, including to perform the operational servicing duties, including recapture activities, in connection with the MSRs it acquires, in exchange for a subservicing fee which is recorded as Subservicing Expense and reflected as part of General and Administrative expenses in New Residential’s Consolidated Statements of Income. As of December 31, 2021, these subservicers include PHH, Mr. Cooper, LoanCare, Valon and Flagstar, which subservice 10.4%, 9.4%, 8.1%, 0.9% and 0.3% of the MSRs held by New Residential. The remaining 70.9% of the underlying UPB of the related mortgages is subserviced by the Mortgage Company (Note 1 to the Consolidated Financial Statements).

Servicer Advances Receivable

In connection with New Residential’s ownership of MSRs, the Company assumes the obligation to serve as a liquidity provider to initially fund servicer advances on the underlying pool of mortgages (Note 17) it services. These servicer advances are recorded when advanced and are included in Servicer Advances Receivable on the Consolidated Balance Sheets.

The following types of advances are included in the Servicer Advances Receivable:
December 31,
20212020
Principal and interest advances$562,418 $665,538 
Escrow advances (taxes and insurance advances)1,523,154 1,547,796 
Foreclosure advances793,098 816,400 
Total(A)(B)(C)
$2,878,670 $3,029,734 
(A)Includes $593.0 million and $583.9 million of servicer advances receivable related to Agency MSRs, respectively, recoverable either from the borrower or the Agencies.
(B)Includes $212.9 million and $181.2 million of servicer advances receivable related to Ginnie Mae MSRs, respectively, recoverable from either the borrower or Ginnie Mae. Expected losses for advances associated with Ginnie Mae loans in the MSR portfolio are considered in the MSR fair valuation through a non reimbursable advance loss assumption.
(C)Net of $23.5 million and $27.5 million, respectively, in unamortized advance discount and reserves, net of accruals for advance recoveries. These reserves relate to inactive loans in the foreclosure or liquidation process.

New Residential’s Servicer Advances Receivable related to Non-Agency MSRs generally have the highest reimbursement priority pursuant to the underlying servicing agreements (i.e., “top of the waterfall”) and New Residential is generally entitled to repayment from respective loan or REO liquidation proceeds before any interest or principal is paid on the bonds that were issued by the trust. In the majority of cases, advances in excess of respective loan or REO liquidation proceeds may be recovered from pool-level proceeds. Furthermore, to the extent that advances are not recoverable by New Residential as a result of the subservicer’s failure to comply with applicable requirements in the relevant servicing agreements, New Residential has a contractual right to be reimbursed by the subservicer. For advances on loans that have been liquidated, sold, paid in full or modified, the Company has reserved $32.1 million and $22.8 million for expected non-recovery of advances as of December 31, 2021 and 2020, respectively.

The following table summarizes the activity of the servicer advances reserve:
Balance as of December 31, 2019$1,680 
Provision21,619 
Write-offs(450)
Balance as of December 31, 2020$22,849 
Caliber acquisition (Note 3)15,068 
Provision11,560 
Write-offs(17,355)
Balance as of December 31, 2021$32,122 

See Note 13 regarding the financing of MSRs and Servicer Advances Receivable.