REAL ESTATE AND OTHER SECURITIES

12 Months Ended

Dec. 31, 2021

Investments, Debt and Equity Securities [Abstract]

“Agency” residential mortgage backed securities (“RMBS”) are RMBS issued by a government sponsored enterprise, such as Fannie Mae or Freddie Mac. “Non-Agency” RMBS are issued by either public trusts or private label securitization entities.

The following table summarizes Real Estate and Other Securities by designation:


	December 31, 2021
			Gross Unrealized							Weighted Average
	Outstanding Face Amount		Gains		Losses		Carrying Value(A)		Number of Securities	Rating(B)	Coupon(C)		Yield		Life (Years)(D)	Principal Subordination(E)
RMBS designated as available for sale (AFS):
Agency(F)	$	91,572	$	7,008	$	—	$	98,367	1	AAA	3.50	%	3.50	%	4.4	N/A
Non-Agency(G)(H)	2,956,066		84,494		(117)		522,416		334	AA	3.29	%	3.18	%	3.4	26.6	%
RMBS measured at fair value through net income (FVO):
Agency(F)	8,307,771		204		(226,309)		8,346,230		40	AAA	2.13	%	2.13	%	7.0	N/A
Non-Agency(G)(H)	12,958,891		32,814		(51,892)		429,526		271	AA+	2.15	%	3.91	%	3.2	20.3	%
Total/ Weighted Average	$	24,314,300	$	124,520	$	(278,318)	$	9,396,539	646	AAA	2.19	%	2.27	%	6.6

	December 31, 2020
			Gross Unrealized							Weighted Average
	Outstanding Face Amount		Gains		Losses		Carrying Value(A)		Number of Securities	Rating(B)	Coupon(C)		Yield		Life (Years)(D)	Principal Subordination(E)
RMBS designated as available for sale (AFS):
Agency(F)	$	110,360	$	10,612	$	—	$	121,761	1	AAA	3.50	%	3.50	%	5.9	N/A
Non-Agency(G)(H)	3,628,870		62,890		(7,394)		752,004		364	AA	3.40	%	3.50	%	4.9	19.7	%
RMBS measured at fair value through net income (FVO):
Agency(F)	12,380,792		101,414		—		12,941,873		57	AAA	2.20	%	2.20	%	4.3	N/A
Non-Agency(G)(H)	15,749,660		25,208		(53,423)		428,920		225	AA+	1.90	%	5.00	%	4.4	19.0	%
Total/ Weighted Average	$	31,869,682	$	200,124	$	(60,817)	$	14,244,558	647	AAA	2.3 %		2.4 %		4.3

(A)Fair value is equal to carrying value for all securities.

(B)Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. This excludes the ratings of the collateral underlying 298 bonds with a carrying value of $346.1 million which either have never been rated or for which rating information is no longer provided. For each security rated by multiple rating agencies, the lowest rating is used. New Residential used an implied AAA rating for the Agency RMBS. Ratings provided were determined by third party rating agencies, and represent the most recent credit ratings available as of the reporting date and may not be current.

(C)Excludes residual bonds, and certain other Non-Agency bonds, with a carrying value of $23.5 million and $2.8 million, respectively, for which no coupon payment is expected.

(D)Based on the timing of expected principal reduction on the assets.

(E)Percentage of the amortized cost basis of securities that is subordinate to New Residential’s investments, excluding fair value option securities.

(F)The total outstanding face amount was $8.4 billion and $12.5 billion for fixed rate securities and $0.0 billion and $0.0 billion for floating rate securities as of December 31, 2021 and 2020, respectively.

(G)The total outstanding face amount was $9.6 billion (including $8.7 billion of residual and fair value option notional amount) and $11.9 billion (including $10.9 billion of residual and fair value option notional amount) for fixed rate securities and $6.4 billion (including $6.2 billion of residual and fair value option notional amount) and $7.5 billion (including $7.2 billion of residual and fair value option notional amount) for floating rate securities as of December 31, 2021 and 2020, respectively.

(H)Includes other asset backed securities (“ABS”) consisting primarily of (i) interest-only securities and servicing strips which New Residential elected to carry at fair value (fair value option securities) and record changes to valuation through the income statement, (ii) bonds backed by consumer loans and (iii) corporate debt. The following table summarizes these securities:


			Gross Unrealized							Weighted Average
Asset Type	Outstanding Face Amount		Gains		Losses		Carrying Value		Number of Securities	Rating	Coupon		Yield		Life (Years)
December 31, 2021
Corporate debt	$	414	$	9	$	—	$	423	1	B-	8.25	%	8.25	%	3.3
Consumer loan bonds	2,960		878		—		2,974		3	N/A	N/A		N/A		0.0
Fair value option securities
Interest-only securities	7,368,874		8,099		(43,626)		152,489		127	AA+	1.19	%	1.54	%	2.0
Servicing strips	4,413,700		6,869		(7,758)		59,120		59	N/A	1.40	%	13.12	%	2.6
December 31, 2020
Corporate Debt	$	500	$	23	$	—	$	523	1	B-	8.25	%	8.25	%	4.3
Consumer loan bonds	13,022		503		—		12,862		6	N/A	N/A		N/A		0.0

Fair value option securities
Interest-only securities	9,457,488		6,600		(43,781)		211,073		124	AA+	1.22	%	5.09	%	2.1
Servicing strips	4,979,723		5,865		(9,476)		46,378		58	N/A	0.42	%	8.38	%	3.9

The following table summarizes purchases and sales of Real Estate and Other Securities:


	Year Ended December 31,
	2021				2020
(in millions)	Agency		Non-Agency		Agency		Non-Agency
Purchases
Face	$	5,907.2	$	2,999.3	$	21,593.3	$	5,083.1
Purchase price	6,098.8		174.3		22,290.3		575.0

Sales
Face	$	7,830.8	$	1,686.9	$	19,321.7	$	8,450.1
Amortized cost	8,135.6		193.2		19,666.2		6,242.0
Sale price	8,074.3		164.7		19,886.8		5,288.5
Gain (loss) on sale	(61.3)		(28.5)		220.5		(953.5)

As of December 31, 2021 and 2020, there were no unsettled trades. Unsettled sales and purchases are recorded on a trade date basis and grouped and presented within Receivable for Investments Sold and Payable for Investments Purchased on the Consolidated Balance Sheets.

New Residential has exercised its call rights with respect to Non-Agency RMBS trusts and purchased performing and non-performing residential mortgage loans and REO 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. Refer to Notes 9 and 18 for further details on these transactions.

Unrealized losses attributable to credit impairment associated with securities designated as AFS are recognized in net income. During the year ended December 31, 2021, 2020 and 2019, New Residential recorded a reversal of credit impairment of $5.2 million, a credit impairment of $13.4 million and a credit impairment of $25.2 million, respectively. Any remaining unrealized losses on New Residential’s securities were primarily the result of changes in market factors, rather than issue-specific credit impairment. New Residential performed analyses in relation to such securities, using its best estimate of cash flows, which support its belief that the carrying values of such securities were fully recoverable over their expected holding period. New Residential has no intent to sell, and is not more likely than not to be required to sell, these securities.

The following table summarizes certain information for RMBS designated as AFS in an unrealized loss position as of December 31, 2021.


			Amortized Cost Basis											Weighted Average
Securities in an Unrealized Loss Position	Outstanding Face Amount		Before Credit Impairment		Credit Impairment(A)		After Credit Impairment		Gross Unrealized Losses		Carrying Value		Number of Securities	Rating	Coupon		Yield		Life (Years)
Less than 12 Months	$	3,755	$	3,535	$	(20)	$	3,514	$	(24)	$	3,490	2	AAA	1.60	%	1.34	%	2.4
12 or More Months	19,723		10,563		(3,451)		7,111		(93)		7,018		13	AA+	—	%	0.89	%	0.4
Total/Weighted Average	$	23,478	$	14,098	$	(3,471)	$	10,625	$	(117)	$	10,508	15	AAA	0.53	%	1.04	%	1.0

(A)Represents credit impairment on securities in an unrealized loss position as of December 31, 2021.

New Residential performed an assessment of all RMBS designated as AFS that are in an unrealized loss position (an unrealized

loss position exists when a security’s amortized cost basis, excluding the effect of credit impairment, exceeds its fair value) and

determined the following:


	December 31, 2021								December 31, 2020
					Gross Unrealized Losses								Gross Unrealized Losses
RMBS Designated as AFS	Fair Value		Amortized Cost Basis After Credit Impairment		Credit(A)		Non-Credit(B)		Fair Value		Amortized Cost Basis After Credit Impairment		Credit(A)		Non-Credit(B)
Securities New Residential intends to sell	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Securities New Residential is more likely than not to be required to sell(C)	—		—		—		—		—		—		—		—
Securities New Residential has no intent to sell and is not more likely than not to be required to sell:
Credit impaired securities	6,581		6,581		(3,471)		—		21,326		21,326		(8,672)		—
Non-credit impaired securities	3,927		4,044		—		(117)		270,821		331,638		—		(60,817)
Total debt securities in an unrealized loss position	$	10,508	$	10,625	$	(3,471)	$	(117)	$	292,147	$	352,964	$	(8,672)	$	(60,817)

(A)Required to be recorded through earnings. In measuring the portion of credit losses, New Residential estimates the expected cash flow for each of the securities. This evaluation included a review of the credit status and the performance of the collateral supporting those securities, including the credit of the issuer, key terms of the securities and the effect of local, industry and broader economic trends. Significant inputs in estimating the cash flows included New Residential’s expectations of prepayment rates, default rates and loss severities. Credit losses were measured as the decline in the present value of the expected future cash flows discounted at the security’s effective interest rate.

(B)Represents unrealized losses on securities that are due to non-credit factors.

(C)New Residential may, at times, be more likely than not to be required to sell certain securities for liquidity purposes. While the amount of the securities to be sold may be an estimate, and the securities to be sold have not yet been identified, New Residential must make its best estimate, which is subject to significant judgment regarding future events, and may differ materially from actual future sales.

The following table summarizes the activity related to the allowance for credit losses on RMBS designated as AFS (excluding credit impairment relating to securities New Residential intends to sell or is more likely than not required to sell):


RMBS Designated as AFS	Purchased Credit Deteriorated		Non-Purchased Credit Deteriorated		Total
Allowance for credit losses on available-for-sale debt securities at December 31, 2019	$	—	$	—	$	—
Additions to the allowance for credit losses on securities for which credit losses were not previously recorded	—		—		—
Additions to the allowance for credit losses arising from purchases of available-for-sale debt securities accounted for as purchased financial assets with credit deterioration	—		—		—
Reductions for securities sold during the period	—		—		—
Reductions in the allowance for credit losses because the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis	—		—		—
Additional increases (decreases) to the allowance for credit losses on securities that had credit losses or an allowance recorded in a previous period	8,672		—		8,672
Write-offs charged against the allowance	—		—		—
Recoveries of amounts previously written off	—		—		—
Allowance for credit losses on available-for-sale debt securities at December 31, 2020	$	8,672	$	—	$	8,672
Additions to the allowance for credit losses on securities for which credit losses were not previously recorded	—		—		—
Additions to the allowance for credit losses arising from purchases of available-for-sale debt securities accounted for as purchased financial assets with credit deterioration	—		—		—
Reductions for securities sold during the period	(2,182)		—		(2,182)
Reductions in the allowance for credit losses because the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis	—		—		—
Additional increases (decreases) to the allowance for credit losses on securities that had credit losses or an allowance recorded in a previous period	(3,019)		—		(3,019)
Write-offs charged against the allowance	—		—		—
Recoveries of amounts previously written off	—		—		—
Allowance for credit losses on available-for-sale debt securities at December 31, 2021	$	3,471	$	—	$	3,471

The following table summarizes the activity related to credit losses on debt securities:


	Year Ended December 31, 2019
Beginning balance of credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income	$	52,803
Increases to credit losses on securities for which an other-than-temporary impairment was previously recognized and a portion of an other-than-temporary impairment was recognized in other comprehensive income	23,059
Additions for credit losses on securities for which an other-than-temporary impairment was not previously recognized	2,115
Reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis	—
Reduction for credit losses on securities for which no other-than-temporary impairment was recognized in other comprehensive income at the current measurement date	—
Reduction for securities sold/paid off during the period	(18,914)
Ending balance of credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income	$	59,063

New Residential evaluates the credit quality of its real estate securities, as of the acquisition date, for evidence of credit quality deterioration. As a result, New Residential identified a population of real estate securities for which it was determined that it was probable that New Residential would be unable to collect all contractually required payments.

The following is the outstanding face amount and carrying value for securities, for which, as of the acquisition date, it was probable that New Residential would be unable to collect all contractually required payments, excluding residual and fair value option securities:


	Outstanding Face Amount		Carrying Value
December 31, 2021	$	512,731	$	180,890
December 31, 2020	727,216		280,876

The following is a summary of the changes in accretable yield for these securities:


	Year Ended December 31,
	2021		2020
Beginning balance	$	189,562	$	1,882,477
Additions	8,324		76,960
Accretion	(4,720)		(60,868)
Reclassifications from (to) non-accretable difference	(8,015)		(167,793)
Disposals	(149,058)		(1,541,214)
Ending balance	$	36,093	$	189,562

See Note 13 regarding the financing of Real Estate and Other Securities.