INVESTMENTS IN REAL ESTATE SECURITIES



	Nine Months Ended September 30, 2015
	(in millions)
	Agency		Non Agency
Purchases
Face	$	3,936.1	$	1,250.9
Purchase Price	$	4,085.7	$	778.1

Sales
Face	$	4,278.5	$	441.1
Amortized Cost	$	4,439.2	$	385.9
Sale Price	$	4,466.7	$	389.7
Gain on Sale	$	27.4	$	3.8

On June 25, 2015, New Residential exercised its call rights related to 18 Non-Agency RMBS trusts and purchased performing and non-performing residential mortgage loans contained in such trusts prior to their termination. New Residential owned $13.7 million face amount of securities issued by these trusts and received par on these securities, which had an amortized cost basis of $9.1 million prior to the repayment. See Note 8 for further details on this transaction.

On September 25, 2015, New Residential exercised its call rights related to seven Non-Agency RMBS trusts and purchased performing and non-performing residential mortgage loans contained in such trusts prior to their termination. New Residential owned $7.4 million face amount of securities issued by these trusts and received par on these securities, which had an amortized cost basis of $4.5 million prior to the repayment. See Note 8 for further details on this transaction.

On September 30, 2015, New Residential sold and purchased $1.9 billion and $1.0 billion face amount of Agency RMBS for $2.0 billion and $1.1 billion, respectively. These unsettled sales and purchases were recorded on the balance sheet on trade date as Trade Receivable and Trades Payable.

See Note 10 for a discussion of transactions formerly accounted for as linked transactions.

The following is a summary of New Residential’s real estate securities, all of which are classified as available-for-sale and are, therefore, reported at fair value with changes in fair value recorded in other comprehensive income, except for securities that are other-than-temporarily impaired and except for securities which New Residential elected to carry at fair value and record changes to valuation through the income statement.



					Gross Unrealized								Weighted Average								December 31, 2014
Asset Type	Outstanding Face Amount		Amortized Cost Basis		Gains		Losses			Carrying Value^(A)		Number of Securities	Rating^(B)	Coupon		Yield		Life (Years)^(C)	Principal Subordination^(D)		Carrying Value
Agency RMBS^(E)(F)	$	1,192,781	$	1,251,358	$	480	$	(2,553	)	$	1,249,285	27	AAA	3.32	%	2.64	%	5.2	N/A		$	1,740,163
Non-Agency RMBS^{(G) (H)}	2,594,423		1,166,464		22,651		(9,671		)	1,179,444		201	B+	2.45	%	4.46	%	7.9	13.6	%	723,000
Total/ Weighted Average	$	3,787,204	$	2,417,822	$	23,131	$	(12,224	)	$	2,428,729	228	A-	2.82	%	3.52	%	6.5			$	2,463,163


(A)	Fair value, which is equal to carrying value for all securities. See Note 12 regarding the estimation of fair value.

(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 60 bonds 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)	The weighted average life is based on the timing of expected principal reduction on the assets.


(D)	Percentage of the outstanding face amount of securities that is subordinate to New Residential’s investments.


(E)	Includes securities issued or guaranteed by U.S. Government agencies such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”).


(F)	The total outstanding face amount was $1.0 billion for fixed rate securities and $192.6 million for floating rate securities as of September 30, 2015.


(G)	The total outstanding face amount was $1.6 billion (including $1.4 billion of residual and interest-only notional amount) for fixed rate securities and $966.9 million (including $44.8 million of residual and interest-only notional amount) for floating rate securities as of September 30, 2015.


(H)	Includes Other ABS consisting primarily of (i) interest-only securities which New Residential elected to carry at fair value and record changes to valuation through the income statement and representing 5.3% of the carrying value of the Non-Agency RMBS portfolio and (ii) bonds backed by servicer advances representing 10.4% of the carrying value of the Non-Agency RMBS portfolio.



					Gross Unrealized								Weighted Average
Asset Type	Outstanding Face Amount		Amortized Cost Basis		Gains		Losses			Carrying Value		Number of Securities	Rating	Coupon		Yield		Life (Years)	Principal Subordination
Other ABS	$	1,131,277	$	64,116	$	1,129	$	(1,835	)	$	63,410	9	AA+	1.86	%	8.71	%	4.2	N/A
Servicer Advance Bond	$	122,000	$	122,000	$	—	$	—		$	122,000	1	AAA	2.54	%	2.54	%	1.0	N/A

Unrealized losses that are considered other than temporary are recognized currently in earnings. During the nine months ended September 30, 2015, New Residential recorded other-than-temporary impairment charges (“OTTI”) of $3.3 million with respect to real estate securities. 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 their 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 New Residential’s securities in an unrealized loss position as of September 30, 2015.



			Amortized Cost Basis													Weighted Average
Securities in an Unrealized Loss Position	Outstanding Face Amount		Before Impairment		Other-Than- Temporary Impairment^(A)			After Impairment		Gross Unrealized Losses			Carrying Value		Number of Securities	Rating^(B)	Coupon		Yield		Life (Years)
Less than Twelve Months	$	1,352,966	$	509,529	$	(2,869	)	$	506,660	$	(10,135	)	$	496,525	89	BB-	2.09	%	3.90	%	8.3
Twelve or More Months	131,082		141,743		—			141,743		(2,089		)	139,654		16	AAA	2.41	%	2.21	%	5.0
Total/Weighted Average	$	1,484,048	$	651,272	$	(2,869	)	$	648,403	$	(12,224	)	$	636,179	105	BBB-	2.16	%	3.53	%	7.6


(A)	This amount represents other-than-temporary impairment recorded on securities that are in an unrealized loss position as of September 30, 2015.


(B)	The weighted average rating of securities in an unrealized loss position for less than twelve months excludes the rating of 23 bonds which either have never been rated or for which rating information is no longer provided.

New Residential performed an assessment of all of its debt securities that are in an unrealized loss position (an unrealized loss position exists when a security’s amortized cost basis, excluding the effect of OTTI, exceeds its fair value) and determined the following:



	September 30, 2015
					Unrealized Losses
	Fair Value		Amortized Cost Basis After Impairment		Credit^(A)			Non-Credit^(B)
Securities New Residential intends to sell^(C)	$	—	$	—	$	—		$	—
Securities New Residential is more likely than not to be required to sell^(D)	—		—		—			N/A
Securities New Residential has no intent to sell and is not more likely than not to be required to sell:
Credit impaired securities	111,179		113,435		(2,869		)	(2,256		)
Non-credit impaired securities	525,000		534,968		—			(9,968		)
Total debt securities in an unrealized loss position	$	636,179	$	648,403	$	(2,869	)	$	(12,224	)

(A)

This amount is required to be recorded as other-than-temporary impairment through earnings. In measuring the portion of credit losses, New Residential estimates the expected cash flow for each of the securities. This evaluation includes 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 include New Residential’s expectations of prepayment speeds, default rates and loss severities. Credit losses are measured as the decline in the present value of the expected future cash flows discounted at the investment’s effective interest rate.


(B)	This amount represents unrealized losses on securities that are due to non-credit factors and recorded through other comprehensive income.


(C)	A portion of securities New Residential intends to sell have a fair value equal to their amortized cost basis after impairment and, therefore, do not have unrealized losses reflected in other comprehensive income as of September 30, 2015.

(D)

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 credit losses on debt securities:



	Nine Months Ended September 30, 2015
Beginning balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income	$	1,127
Increases to credit losses on securities for which an OTTI was previously recognized and a portion of an OTTI was recognized in other comprehensive income	5
Additions for credit losses on securities for which an OTTI was not previously recognized	3,287
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 OTTI was recognized in other comprehensive income at the current measurement date	—
Reduction for securities sold during the period	(574		)
Ending balance of credit losses on debt securities for which a portion of an OTTI was recognized in other comprehensive income	$	3,845

The table below summarizes the geographic distribution of the collateral securing New Residential’s Non-Agency RMBS:



	September 30, 2015				December 31, 2014
Geographic Location^(B)	Outstanding Face Amount		Percentage of Total Outstanding		Outstanding Face Amount		Percentage of Total Outstanding
Western U.S.	$	829,570	33.5	%	$	779,930	41.1	%
Southeastern U.S.	623,324		25.2	%	409,755		21.6	%
Northeastern U.S.	483,036		19.5	%	344,716		18.2	%
Midwestern U.S.	259,430		10.5	%	190,480		10.0	%
Southwestern U.S.	274,590		11.1	%	170,829		9.0	%
Other^(A)	2,473		0.2	%	440		0.1	%
	$	2,472,423	100.0	%	$	1,896,150	100.0	%


(A)	Represents collateral for which New Residential was unable to obtain geographic information.


(B)	Excludes $122.0 million face amount of bonds backed by servicer advances.

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. For securities acquired during the nine months ended September 30, 2015, excluding residual and interest-only securities, the face amount of these real estate securities was $280.2 million, with total expected cash flows of $323.0 million and a fair value of $205.8 million on the dates that New Residential purchased the respective securities.

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 interest-only securities:



	Outstanding Face Amount		Carrying Value
September 30, 2015	$	596,801	$	404,884
December 31, 2014	536,342		414,298

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



	Nine Months Ended September 30, 2015
Balance at December 31, 2014	$	181,671
Adoption of ASU No. 2014-11 (Note 1)	146,741
Additions	117,286
Accretion	(19,926		)
Reclassifications from (to) non-accretable difference	(45,339		)
Disposals	(97,991		)
Balance at September 30, 2015	$	282,442

See Note 18 for recent activities related to New Residential’s investments in real estate securities.