New Residential Investment Corp. [NRZ] Filings

10-Q 1 nrz-20210930.htm 10-Q nrz-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________to________________

Commission File Number: 001-35777


New Residential Investment Corp.
(Exact name of registrant as specified in its charter)

Delaware

45-3449660

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1345 Avenue of the Americas

New York

10105

(Address of principal executive offices)

(Zip Code)


(212)			798-3150
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:		Name of each exchange on which registered:
Common Stock, $0.01 par value per share	NRZ	New York Stock Exchange
7.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	NRZ PR A	New York Stock Exchange
7.125% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	NRZ PR B	New York Stock Exchange
6.375% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	NRZ PR C	New York Stock Exchange
7.00% Fixed-Rate Reset Series D Cumulative Redeemable Preferred Stock	NRZ PR D	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date.

Common stock, $0.01 par value per share: 466,579,920 shares outstanding as of October 29, 2021.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Such forward-looking statements relate to, among other things, the operating performance of our investments, the stability of our earnings, our financing needs and the size and attractiveness of market opportunities. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations, cash flows or financial condition or state other forward-looking information. Our ability to predict results or the actual outcome of future plans or strategies is inherently limited. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results.

Our ability to implement our business strategy is subject to numerous risks, as more fully described under “Risk Factors.” These risks include, among others:

•the uncertainty and economic impact of the ongoing coronavirus (“COVID-19”) pandemic and of responsive measures implemented by various governmental authorities, businesses and other third parties, as well as the ultimate impact on us, our operations and personnel;

•our exposure to risks of loss resulting from adverse weather conditions, man-made or natural disasters, the effect of climate change, and pandemics, such as the COVID-19 pandemic;

•our ability to successfully execute our business and investment strategy;

•our ability to deploy capital accretively and the timing of such deployment;

•reductions in the value of, cash flows received from, or liquidity surrounding, our investments, which are based on various assumptions that could differ materially from actual results;

•our reliance on, and counterparty concentration and default risks in, the servicers and subservicers we engage (“Servicing Partners”) and other third parties;

•the impact of current or future legal proceedings and regulatory investigations and inquiries involving us, our Servicing Partners or other business partners;

•the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau (“CFPB”) and its enforcement of such regulations;

•the risks related to our origination and servicing operations, including, but not limited to, compliance with applicable laws, regulations and other requirements, significant increases in delinquencies for the loans, compliance with the terms of related servicing agreements, financing related servicer advances and the origination business, expenses related to servicing high risk loans, unrecovered or delayed recovery of servicing advances, foreclosure rates, servicer ratings, and termination of government mortgage refinancing programs;

•our ability to obtain and maintain financing arrangements on terms favorable to us or at all, particularly in light of the current disruption in the financial markets;

•changes in general economic conditions, in our industry and in the commercial finance and real estate markets, including the impact on the value of our assets or the performance of our investments;

•the relative spreads between the yield on the assets in which we invest and the cost of financing;

•impairments in the value of the collateral underlying our investments and the relation of any such impairments to the value of our securities or loans;

•risks associated with our indebtedness, including our senior unsecured notes, and related restrictive covenants and non-recourse long-term financing structures;

•adverse changes in the financing markets we access affecting our ability to finance our investments on attractive terms, or at all;

•changing market conditions could potentially lead to increased margin calls, lenders not extending our secured financing agreements or other financings in accordance with their current terms or not entering into new financings with us;

•changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;

•the impact that risks associated with subprime mortgage loans and consumer loans, as well as deficiencies in servicing and foreclosure practices, may have on the value of our mortgage servicing rights (“MSRs”), excess mortgage servicing rights (“Excess MSRs”), servicer advance investments, residential mortgage-backed securities (“RMBS”), residential mortgage loans and consumer loan portfolios;

•the risks that default and recovery rates on our MSRs, Excess MSRs, servicer advance investments, servicer advance receivables, RMBS, residential mortgage loans and consumer loans deteriorate compared to our underwriting estimates;

•changes in prepayment rates on the loans underlying certain of our assets, including, but not limited to, our MSRs or Excess MSRs;

•the risk that projected recapture rates on the loan pools underlying our MSRs or Excess MSRs are not achieved;

•servicer advances may not be recoverable or may take longer to recover than we expect, which could cause us to fail to achieve our targeted return on our Servicer Advance Investments or MSRs;

•cybersecurity incidents and technology disruptions or failures;

•our dependence on counterparties and vendors to provide certain services, which subjects us to various risks;

•our exposure to counterparties that are unwilling or unable to honor contractual obligations, including their obligation to indemnify us or repurchase defective mortgage loans;

•our ability to maintain our exclusion from registration under the Investment Company Act of 1940 (the “1940 Act”), and limits on our operations from maintaining such exclusion;

•our ability to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, and limits on our operations from maintaining REIT status;

•competition within the finance and real estate industries;

•our ability to attract and retain highly skilled personnel;

•impact from our past and future acquisitions, and our ability to successfully integrate the acquired assets and assumed liabilities;

•the impact of any material transactions or relationships with FIG LLC (the “Manager”) or one of its affiliates, including the impact of any actual, potential or perceived conflicts of interest;

•the legislative/regulatory environment, including, but not limited to, the impact of the Dodd-Frank Act, regulation of corporate governance and public disclosure, changes in accounting rules, U.S. government programs intended to grow the economy, future changes to tax laws, the federal conservatorship of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and legislation that permits modification of the terms of residential mortgage loans;

•the risk that actions by Fannie Mae or the Freddie Mac or other regulatory initiatives or actions may adversely affect returns from investments in MSRs and Excess MSRs and may lower gain on sale margins;

•adverse market, regulatory or interest rate environments or our issuance of debt or equity, any of which may negatively affect the market price of our common stock;

•our ability to pay distributions on our common stock; and

•risks associated with the acquisition of Caliber Home Loans Inc., potential adverse impacts on our business and operations from uncertainties associated with the acquisition and our ability to successfully integrate the businesses and realize the anticipated benefits of the acquisition.

We also direct readers to other risks and uncertainties referenced in this report, including those set forth under “Risk Factors.” We caution that you should not place undue reliance on any of our forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is

impossible for us to predict those events or how they may affect us. Except as required by law, we are under no obligation (and expressly disclaim any obligation) to update or alter any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future events or otherwise.

SPECIAL NOTE REGARDING EXHIBITS

In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about New Residential Investment Corp. (the “Company,” “New Residential” or “we,” “our” and “us”) or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements proved to be inaccurate;

•have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

•were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Quarterly Report on Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov. See “Business-Corporate Governance and Internet Address; Where Readers Can Find Additional Information.”

The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading.

NEW RESIDENTIAL INVESTMENT CORP.

FORM 10-Q

INDEX


			PAGE
Part I. Financial Information

Item 1. Financial Statements (Unaudited)			1

Consolidated Balance Sheets			1

Consolidated Statements of Income			2

Consolidated Statements of Comprehensive Income			3

Consolidated Statements of Changes in Stockholders’ Equity			4

Consolidated Statements of Cash Flows			8

Notes to Consolidated Financial Statements			11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			68

Item 3. Quantitative and Qualitative Disclosures About Market Risk			105

Item 4. Controls and Procedures			111

Part II. Other Information

Item 1. Legal Proceedings			112

Item 1A. Risk Factors			112

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			163

Item 3. Defaults Upon Senior Securities			163

Item 4. Mine Safety Disclosures			163

Item 5. Other Information			163

Item 6. Exhibits			164

Signatures			173

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)


	September 30, 2021 (Unaudited)		December 31, 2020
Assets
Excess mortgage servicing rights assets, at fair value	$	359,288	$	410,855
Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value(A)	6,565,267		4,585,841
Servicer advance investments, at fair value(A)	472,004		538,056
Real estate and other securities	9,973,795		14,244,558
Residential loans and variable interest entity consumer loans held-for-investment, at fair value(A)	1,142,807		1,359,754
Residential mortgage loans, held-for-sale ($13,972,557 and $4,705,816 at fair value, respectively)	14,117,300		5,215,703
Residential mortgage loans subject to repurchase(B)	1,826,620		1,452,005
Cash and cash equivalents(A)	1,366,678		944,854
Restricted cash(A)	194,745		135,619
Servicer advances receivable	2,782,622		3,002,267
Receivable for investments sold	—		4,180
Other assets(A)	2,802,989		1,358,422
	$	41,604,115	$	33,252,114
Liabilities and Equity
Liabilities
Secured financing agreements(A)	$	22,759,985	$	17,547,680
Secured notes and bonds payable ($798,198 and $1,662,852 at fair value, respectively)(A)	8,248,092		7,644,195
Residential mortgage loan repurchase liability(B)	1,826,620		1,452,005
Unsecured senior notes, net of issuance costs	542,849		541,516
Payable for investments purchased	—		154
Due to affiliates	8,895		9,450
Dividends payable	124,999		90,128
Accrued expenses and other liabilities(A)	1,465,562		537,302
	34,977,002		27,822,430
Commitments and Contingencies

Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 52,210,000 and 33,610,000 issued and outstanding, $1,305,250 and $840,250 aggregate liquidation preference, respectively	1,262,498		812,992
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 466,579,920 and 414,744,518 issued and outstanding, respectively	4,667		4,148
Additional paid-in capital	6,057,739		5,547,108
Retained earnings (accumulated deficit)	(856,803)		(1,108,929)
Accumulated other comprehensive income	87,989		65,697
Total New Residential stockholders’ equity	6,556,090		5,321,016
Noncontrolling interests in equity of consolidated subsidiaries(A)	71,023		108,668
Total equity	6,627,113		5,429,684
	$	41,604,115	$	33,252,114

(A)The Company's Consolidated Balance Sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations and liabilities of the VIE for which creditors do not have recourse to the primary beneficiary (New Residential). As of September 30, 2021, and December 31, 2020, total assets of consolidated VIEs were $3.1 billion and $2.7 billion, respectively, and total liabilities of consolidated VIEs were $2.4 billion and $2.1 billion, respectively. See Note 13 for further details.

(B)See Note 5 for details.

See Notes to Consolidated Financial Statements.


NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues
Servicing fee revenue, net and interest income from MSRs and MSR financing receivables	$	398,645	$	450,859	$	1,168,431	$	1,390,042
Change in fair value of MSRs and MSR financing receivables (includes realization of cash flows of $(287,318), $(509,624), $(924,766) and $(1,135,515), respectively)	(195,623)		(415,339)		(421,332)		(1,731,378)
Servicing revenue, net	203,022		35,520		747,099		(341,336)
Interest income	190,633		169,780		593,342		622,224
Gain on originated mortgage loans, held-for-sale, net	566,761		488,253		1,257,094		966,813
	960,416		693,553		2,597,535		1,247,701

New Residential Investment Corp. [NRZ] Filings
New Residential Investment Corp. [NRZ-PC] Filings
New Residential Investment Corp. [NRZ-PA] Filings
New Residential Investment Corp. [NRZ-PB] Filings
New Residential Investment Corp. [NRZ-PD] Filings
10-Q	[2021-11-05]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-02-16]
10-Q	[2020-10-29]
10-Q	[2020-07-27]
10-Q	[2020-05-11]
10-K	[2020-02-20]
10-Q	[2019-10-29]
10-Q	[2019-08-01]
10-Q	[2019-05-02]
10-K	[2019-02-19]
10-Q	[2018-10-30]
10-Q	[2018-07-30]
10-Q	[2018-05-01]
10-K	[2018-02-15]
10-Q	[2017-11-01]
10-Q	[2017-08-03]
10-Q	[2017-05-04]
10-K	[2017-02-22]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-05]
10-K	[2016-02-26]
10-Q	[2015-11-05]
10-Q	[2015-08-10]
10-Q	[2015-05-11]
10-K	[2015-03-02]
10-Q	[2014-11-07]
10-Q	[2014-08-07]
10-Q	[2014-05-15]
10-K	[2014-03-28]
10-Q	[2013-11-12]
10-Q	[2013-08-08]
10-Q	[2013-06-12]

New Residential Investment Corp. [NRZ] Filings

New Residential Investment Corp. [NRZ-PC] Filings

New Residential Investment Corp. [NRZ-PA] Filings

New Residential Investment Corp. [NRZ-PB] Filings

New Residential Investment Corp. [NRZ-PD] Filings