DERIVATIVES

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

New Residential enters into economic hedges including interest rate swaps and TBAs to hedge a portion of its interest rate risk exposure. Interest rate risk is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, as well as other factors. New Residential’s credit risk with respect to economic hedges is the risk of default on New Residential’s investments that results from a borrower’s or counterparty’s inability or unwillingness to make contractually required payments.

New Residential may at times hold to-be-announced forward contract positions (“TBAs”) in order to mitigate New Residential’s interest rate risk on certain specified mortgage backed securities and MSRs. Amounts or obligations owed by or to New Residential are subject to the right of set-off with the TBA counterparty. As part of executing these trades, New Residential may enter into agreements with its TBA counterparties that govern the transactions for the TBA purchases or sales made, including margin maintenance, payment and transfer, events of default, settlements, and various other provisions. Changes in the value of derivatives designed to protect against mortgage backed securities and MSR fair value fluctuations, or hedging gains and losses, are reflected in the tables below.

As of March 31, 2022, New Residential also held interest rate lock commitments (“IRLCs”), which represent a commitment to a particular interest rate provided the borrower is able to close the loan within a specified period, and forward loan sale and securities delivery commitments, which represent a commitment to sell specific residential mortgage loans at prices which are fixed as of the forward commitment date. New Residential enters into forward loan sale and securities delivery commitments in

order to hedge the exposure related to IRLCs and residential mortgage loans that are not covered by residential mortgage loan sale commitments.

Derivatives are recorded at fair value on the Consolidated Balance Sheets as follows:


	Balance Sheet Location	March 31, 2022		December 31, 2021
Derivative assets
Interest rate swaps(A)	Other assets	$	72	$	52
Interest rate lock commitments	Other assets	44,333		114,871
TBAs	Other assets	478,457		15,472
Options on treasury futures	Other assets	—		7,778
		$	522,862	$	138,173
Derivative liabilities

Interest rate lock commitments	Accrued expenses and other liabilities	$	60,241	$	3,093

TBAs	Accrued expenses and other liabilities	26,909		31,490
		$	87,150	$	34,583

(A)Net of $506.2 million and $60.7 million of related variation margin balances as of March 31, 2022 and December 31, 2021, respectively.

The following table summarizes notional amounts related to derivatives:


	March 31, 2022		December 31, 2021

Interest rate swaps(A)	$	15,410,000	$	11,490,000
Interest rate lock commitments	10,043,200		10,653,850

TBAs, short position(B)	29,386,167		22,697,706
Treasury futures	—		314,500
Options on treasury futures	—		3,200,000

(A)Includes $15.4 billion notional of receive LIBOR/pay fixed of 1.25% and $0.0 billion notional of receive fixed of 0.00%/pay LIBOR with weighted average maturities of 42 months and 0 months, respectively, as of March 31, 2022. Includes $11.5 billion notional of receive LIBOR/pay fixed of 1.10% and $0.0 billion notional of receive fixed of 0.00%/pay LIBOR with weighted average maturities of 42 months and 0 months, respectively, as of December 31, 2021.

(B)Represents the notional amount of Agency RMBS, classified as derivatives.

The following table summarizes gain (loss) on derivatives and the related location on the Consolidated Statements of Income:


	Three Months Ended March 31,
	2022		2021
Servicing revenue, net(A)
TBAs	$	3,300	$	(8,823)
Treasury futures	(1,746)		—
Options on treasury futures	5,635		—
	7,189		(8,823)
Gain on originated residential mortgage loans, held-for-sale, net(A)
Interest rate lock commitments	(127,685)		(234,982)
TBAs	246,123		408,015

	118,438		173,033
Change in fair value of investments(A)

Interest rate swaps	464,334		206,205
TBAs	110,363		—
	574,697		206,205
Gain (loss) on settlement of investments, net(B)
Interest rate swaps	(25,679)		(33,826)
TBAs(C)	73,154		6,453
	47,475		(27,373)

Total gain (loss)	$	747,799	$	343,042

(A)Represents unrealized gain (loss).

(B)Excludes $76.8 million loss and $0.0 million gain for the three months ended March 31, 2022 and 2021, respectively, included within Servicing Revenue, Net (Note 5).

(C)Excludes $524.8 million gain and $40.1 million gain for the three months ended March 31, 2022 and 2021, respectively, included within Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net (Note 8).