SERVICER ADVANCE INVESTMENTS

12 Months Ended

Dec. 31, 2021

Investments, All Other Investments [Abstract]

New Residential’s Servicer Advance Investments consist of arrangements to fund existing outstanding servicer advances and the requirement to purchase all future servicer advances made with respect to a specified pool of residential mortgage loans in exchange for the basic fee component of the related MSR. New Residential elected to record its Servicer Advance Investments, including the right to the basic fee component of the related MSRs, at fair value pursuant to the fair value option for financial instruments to provide users of the financial statements with better information regarding the effects of market factors.

A taxable wholly owned subsidiary of New Residential is the managing member of Advance Purchaser LLC (the “Buyer”), a joint venture entity, and owned an approximately 73.2% interest in the Buyer as of December 31, 2020. In July 2021, New Residential entered into a purchase and sales agreement with certain third-party co-investors whereby New Residential agreed to purchase from certain third-party co-investors approximately 16.1% of aggregate interest in the Buyer, increasing New Residential’s ownership of the Buyer to approximately 89.3% as of December 31, 2021. As of December 31, 2021, third-party co-investors, owning the remaining interest in the Buyer, have funded capital commitments to the Buyer of $75.0 million and New Residential has funded capital commitments to the Buyer of $627.4 million. The Buyer may call capital up to the commitment amount on unfunded commitments and recall capital to the extent the Buyer makes a distribution to the co-investors, including New Residential. As of December 31, 2021, the noncontrolling third-party co-investors and New Residential had previously funded their commitments, however, the Buyer may recall $70.8 million and $592.5 million of capital distributed to the third-party co-investors and New Residential, respectively. Neither the third-party co-investors nor New Residential is obligated to fund amounts in excess of their respective capital commitments, regardless of the capital requirements of the Buyer.

The Buyer has purchased servicer advances from Mr. Cooper, is required to purchase all future servicer advances made with respect to this portfolio of loans from Mr. Cooper, and receives cash flows from advance recoveries and the basic fee component of the related MSRs, net of compensation paid back to Mr. Cooper in consideration of Mr. Cooper’s servicing activities. The compensation paid to Mr. Cooper as of December 31, 2021 was approximately 9.2% of the basic fee component of the related MSRs plus a performance fee that represents a portion (up to 100%) of the cash flows in excess of those required for the Buyer to obtain a specified return on its equity.

New Residential has determined that the Buyer is a VIE. See Note 15 for information regarding the assets and liabilities related to this consolidated VIE.

New Residential also acquired a portion of the call rights related to this portfolio of loans.

The following table summarizes Servicer Advance Investments, including the right to the basic fee component of the related MSRs:


	Amortized Cost Basis		Carrying Value(A)		Weighted Average Discount Rate		Weighted Average Yield		Weighted Average Life (Years)(B)
December 31, 2021
Servicer Advance Investments	$	405,786	$	421,807	5.2	%	5.5	%	6.9
December 31, 2020
Servicer Advance Investments	$	512,958	$	538,056	5.2	%	5.7	%	6.0

(A)Represents the fair value of the Servicer Advance Investments, including the basic fee component of the related MSRs.

(B)Represents the weighted average expected timing of the receipt of expected net cash flows for this investment.

The following table provides additional information regarding the Servicer Advance Investments and related financing:


									Loan-to-Value (“LTV”)(A)				Cost of Funds(C)
	UPB of Underlying Residential Mortgage Loans		Outstanding Servicer Advances		Servicer Advances to UPB of Underlying Residential Mortgage Loans		Face Amount of Secured Notes and Bonds Payable		Gross		Net(B)		Gross		Net
December 31, 2021
Servicer Advance Investments(D)	$	20,314,977	$	369,440	1.8	%	$	356,580	91.4	%	90.7	%	1.3	%	1.2	%
December 31, 2020
Servicer Advance Investments(D)	$	26,061,499	$	449,150	1.7	%	$	423,144	88.4	%	88.6	%	1.5	%	1.3	%

(A)Based on outstanding servicer advances, excluding purchased but unsettled servicer advances.

(B)Ratio of face amount of borrowings to par amount of servicer advance collateral, net of any general reserve.

(C)Annualized measure of the cost associated with borrowings. Gross cost of funds primarily includes interest expense and facility fees. Net cost of funds excludes facility fees.

(D)The following table summarizes the types of advances included in Servicer Advance Investments:


	December 31,
	2021		2020
Principal and interest advances	$	67,014	$	84,976
Escrow advances (taxes and insurance advances)	174,681		186,426
Foreclosure advances	127,745		177,748
Total	$	369,440	$	449,150

The following table summarizes interest income related to Servicer Advance Investments:


	Year Ended December 31,
	2021		2020		2019
Interest income, gross of amounts attributable to servicer compensation	$	12,501	$	34,262	$	51,940
Amounts attributable to basic servicer compensation	(1,798)		(3,248)		(6,209)
Amounts attributable to incentive servicer compensation	(9,025)		(12,832)		(18,065)
Interest income from servicer advance investments	$	1,678	$	18,182	$	27,666

See Note 13 regarding the financing of Servicer Advance Investments.