RESIDENTIAL MORTGAGE LOANS

3 Months Ended

Mar. 31, 2022

New Residential accumulated its residential mortgage loan portfolio through various bulk acquisitions and the execution of call rights. New Residential, through its Mortgage Company, 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 March 31, 2022, 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 summarizes residential mortgage loans outstanding by loan type:


	March 31, 2022								December 31, 2021
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)	$	605,417	$	547,404	10,891	7.1	%	5.1	$	569,933


Acquired performing loans(C)	135,025		122,889		2,705	7.0	%	4.7	130,634
Acquired non-performing loans(D)	3,352		2,670		41	7.4	%	4.5	2,287
Total residential mortgage loans, held-for-sale, at lower of cost or market	$	138,377	$	125,559	2,746	7.0	%	4.7	$	132,921

Acquired performing loans(C)(E)	$	1,592,694	$	1,550,278	9,535	3.9	%	11.7	$	2,070,262
Acquired non-performing loans(D)(E)	597,699		559,201		3,278	3.4	%	4.9	315,063
Originated loans	4,984,128		4,967,437		8,113	3.8	%	27.5	8,829,599
Total residential mortgage loans, held-for-sale, at fair value	$	7,174,521	$	7,076,916	20,926	3.8	%	22.1	$	11,214,924

Total residential mortgage loans, held-for-sale, at fair value/lower of cost or market	$	7,312,898	$	7,202,475					$	11,347,845

(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)Performing loans are generally placed on nonaccrual status when principal or interest is 120 days or more past due.

(D)As of March 31, 2022, New Residential has placed non-performing loans, held-for-sale on nonaccrual status, except as described in (E) below.

(E)Includes $725.3 million and $363.9 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 following table summarizes the geographic distribution of the underlying residential mortgage loans:


	Percentage of Total Outstanding Unpaid Principal Amount
State Concentration	March 31, 2022		December 31, 2021
California	13.9	%	15.7	%
Florida	10.1	%	10.1	%
Texas	7.6	%	7.5	%
New York	7.1	%	7.1	%
Washington	6.0	%	6.7	%
New Jersey	4.0	%	3.8	%
Georgia	3.7	%	3.3	%
Virginia	3.1	%	3.1	%
Maryland	3.0	%	3.1	%
Illinois	2.8	%	2.8	%
Other U.S.	38.7	%	36.8	%
	100.0	%	100.0	%

See Note 18 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:


	March 31, 2022						December 31, 2021
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
Less than 120	$	4,413,616	$	4,303,086	$	(110,530)	$	11,101,345	$	11,323,443	$	222,098
120+	3,504,699		3,446,793		(57,906)		623,093		594,335		(28,758)
	$	7,918,315	$	7,749,879	$	(168,436)	$	11,724,438	$	11,917,778	$	193,340

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 three months ended March 31, 2022, New Residential executed calls on a total of 5 trusts and recognized no interest income on securities held in the collapsed trusts and $6.1 million of gain on securitizations accounted for as sales. For the three months ended March 31, 2021, New Residential executed calls on a total of 18 trusts and recognized $2.2 million of interest income on securities held in the collapsed trusts and $12.1 million of gain on securitizations accounted for as sales. Refer to Note 23 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, 2021	$	569,932	$	132,921	$	11,214,924	$	11,917,777
Originations	—		—		26,618,881		26,618,881
Sales	—		(720)		(32,771,297)		(32,772,017)
Purchases/additional fundings	7,183		—		2,303,775		2,310,958
Proceeds from repayments	(22,995)		(4,480)		(166,104)		(193,579)
Transfer of loans to other assets(A)	—		—		(23,014)		(23,014)
Transfer of loans to real estate owned	(762)		955		717		910


Valuation (provision) reversal on loans	—		(3,117)		—		(3,117)
Fair value adjustments due to:
Changes in instrument-specific credit risk	(1,810)		—		(5,054)		(6,864)
Other factors	(4,144)		—		(95,912)		(100,056)
Balance at March 31, 2022	$	547,404	$	125,559	$	7,076,916	$	7,749,879

(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 13).

Net Interest Income

The following table summarizes the net interest income for residential mortgage loans:


	Three Months Ended March 31,
	2022		2021
Interest income:
Loans held-for-investment, at fair value	$	10,280	$	11,060
Loans held-for-sale, at lower of cost or fair value	1,771		9,651
Loans held-for-sale, at fair value	70,309		38,463
Total interest income	82,360		59,174

Interest expense:
Loans held-for-investment, at fair value	7,346		4,811
Loans held-for-sale, at lower of cost or fair value	849		5,806
Loans held-for-sale, at fair value	42,108		28,722
Total interest expense	50,303		39,339

Net interest income	$	32,057	$	19,835

Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net

The Mortgage Company originates 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 the Mortgage Company generally retains 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 Residential Mortgage Loans, Held-for-Sale, Net in the Consolidated Statements of Income.

The following table summarizes the components of Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net:


	Three Months Ended March 31,
	2022		2021
Gain on residential mortgage loans originated and sold, net(A)	$	(370,421)	$	1,087
Gain (loss) on settlement of residential mortgage loan origination derivative instruments(B)	524,823		40,121
MSRs retained on transfer of residential mortgage loans(C)	461,452		255,473
Other(D)	27,701		23,697
Realized gain on sale of originated residential mortgage loans, net	$	643,555	$	320,378
Change in fair value of residential mortgage loans	(289,997)		(89,963)
Change in fair value of interest rate lock commitments (Note 17)	(127,685)		(234,982)
Change in fair value of derivative instruments (Note 17)	246,123		408,015
Gain on originated residential mortgage loans, held-for-sale, net	$	471,996	$	403,448

(A)Includes residential mortgage loan origination fees of $252.5 million and $658.3 million for the three months ended March 31, 2022 and 2021, 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 residential mortgage loan origination process.