VARIABLE INTEREST ENTITIES

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

In the normal course of business, New Residential enters into transactions with special purpose entities (SPEs), which primarily consist of trusts established for a limited purpose. The SPEs have been formed for the purpose of transactions in which the Company transfers assets into an SPE in return for various forms of debt obligations supported by those assets. In these transactions, the Company typically receives cash and/or other interests in the SPE as proceeds for the transferred assets. The Company retains the right to service the transferred receivables. The Company evaluates its interests in each SPE for classification as a variable interest entity (VIE).

VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE.

To assess whether New Residential has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, New Residential considers all the facts and circumstances, including its role in establishing the VIE and

its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. To assess whether New Residential has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, New Residential considers all of its economic interests and applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. When an SPE meets the definition of a VIE and the Company determines that it is the primary beneficiary, the Company includes the SPE in its consolidated financial statements.

Consolidated VIEs

Servicer Advances

New Residential, through a taxable wholly owned subsidiary, is the managing member of the Buyer and owned approximately 89.3% of the Buyer as of December 31, 2021. In 2013, New Residential created the Buyer to acquire the then outstanding servicing advance receivables related to a portfolio of residential mortgage loans from a third party. The Buyer is required to purchase all future servicer advances made with respect to this portfolio of residential mortgage loans and is entitled to receive cash flows from advance recoveries and a basic fee component of the related MSRs, net of subservicing compensation paid.

The Buyer may call capital up to the commitment amount on unfunded commitments and recall capital to the extent the Buyer makes a distribution to the co-investors, including New Residential. As of December 31, 2021, the noncontrolling third-party co-investors and New Residential had previously funded their commitments, however the Buyer may recall $70.8 million and $592.5 million of capital distributed to the third-party co-investors and New Residential, respectively. Neither the third-party co-investors nor New Residential is obligated to fund amounts in excess of their respective capital commitments, regardless of the capital requirements of the Buyer.

Shelter Joint Ventures

A wholly owned subsidiary of Newrez, Shelter Mortgage Company LLC (“Shelter”) is a mortgage originator specializing in retail originations. Shelter operates its business through a series of joint ventures (“Shelter JVs”) and is deemed to be the primary beneficiary of the joint ventures as a result of its ability to direct activities that most significantly impact the economic performance of the entities and its ownership of a significant equity investment.

Residential Mortgage Loans

During the third quarter of 2020, New Residential formed several entities that separately issued securitized debt collateralized by non-performing and reperforming residential mortgage loans (the “NPL/RPL Securitization Trusts”). New Residential determined that these securitizations should be evaluated for consolidation under the VIE model rather than the voting interest entity model as the equity holders as a group lack the characteristics of a controlling financial interest. Under the VIE model, New Residential’s consolidated subsidiaries had both 1) the power to direct the most significant activities of the securitizations and 2) significant variable interests in each of the securitizations, through their control of the related optional redemption feature and their ownership of certain notes issued by the securitizations and, therefore, met the primary beneficiary criterion and, accordingly, the Company consolidated the securitizations. As of December 31, 2021, no securitizations remained outstanding.

On October 1, 2019, as a result of New Residential’s acquisition of servicing assets from Ditech and its pre-existing ownership of the equity, New Residential consolidated the MDST Trusts. New Residential’s determination to consolidate the MDST Trusts is a result of its ownership of the equity in these trusts in conjunction with the ability to direct activities that most significantly impact the economic performance of the entities with the acquisition of the servicing by Newrez.

In May 2021, Newrez issued $750.0 million in notes through a securitization facility (the “2021-1 Securitization Facility”) that bear interest at 30-day LIBOR plus a margin. The 2021-1 Securitization Facility is secured by newly originated, first-lien, fixed- and adjustable-rate residential mortgage loans eligible for purchase by the GSEs and Ginnie Mae. Through a master repurchase agreement, Newrez sells its originated loans to the 2021-1 Securitization Facility, which then issues notes to third party qualified investors, with Newrez retaining the trust certificate. The loans serve as collateral with the proceeds from the note issuance ultimately financing the originations. The 2021-1 Securitization Facility will terminate on the earlier of (i) the

three-year anniversary of the initial closing date, (ii) the Company exercising its right to optional prepayment in full, or (iii) a repurchase triggering event. The Company determined it is the primary beneficiary of the 2021-1 Securitization Facility as it has both (i) the power to direct the activities of a VIE that most significantly impact its economic performance and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE.

Caliber Mortgage Participant I, LLC was formed to acquire, receive, participate, hold, release, and dispose of participation interests in certain of Caliber’s residential mortgage loans held for sale (“MLHFS PC”). The Caliber Mortgage Participant I, LLC transfers the MLHFS PC in exchange for cash. Caliber is the primary beneficiary of the VIE and therefore, consolidates the SPE. The transferred MLHFS PC is classified on the Consolidated Balance Sheets as Residential Mortgage Loans, Held-for-Sale, at Fair Value and the related warehouse credit facility liabilities as part of Secured Financing Agreements. Caliber retains the risks and benefits associated with the assets transferred to the SPEs.

Caliber remains the servicer of the underlying residential mortgage loans and has the power to direct the SPE’s activities. Holders of the term notes issued by the Trust can look only to the assets of the Trust for satisfaction of the debt and have no recourse against Caliber.

Consumer Loan Companies

New Residential has a co-investment in a portfolio of consumer loans held through the Consumer Loan Companies. As of December 31, 2021, New Residential owns 53.5% of the limited liability company interests in, and consolidates, the Consumer Loan Companies.

On September 25, 2020, certain entities comprising the Consumer Loan Companies, in a private transaction, issued $663.0 million of asset-backed notes (“SCFT 2020-A”) securitized by a portfolio of consumer loans.

The Consumer Loan Companies consolidate certain entities that issued securitized debt collateralized by the consumer loans (the “Consumer Loan SPVs”). The Consumer Loan SPVs are VIEs of which the Consumer Loan Companies are the primary beneficiaries.

MSR Financing Facilities

CHL GMSR Issuer Trust is an SPE created for the purpose of transferring a participation certificate (“MSR PC”) representing a beneficial interest in Caliber’s GNMA MSRs in exchange for a variable funding note (“MSR Financing VFN”) and a trust certificate with Caliber, as well for the issuance of term notes in exchange for cash. Caliber consolidates this SPE because it is the primary beneficiary of the VIE. The MSR PC is classified in Mortgage Servicing Rights and MSR Financing Receivables, at Fair Value and the MSR Financing VFN and term notes are classified as Secured Notes and Bonds Payable on the Consolidated Balance Sheets. The SPE uses collections from a specified portion of GNMA MSR net service fees collected to repay principal and interest and to pay the expenses of the entity.

Additionally, Caliber has also transferred a participation certificate representing a beneficial interest certain of Caliber’s GNMA servicer advances (“Servicer Advance PC”) to CHL GMSR Issuer Trust in exchange for a VFN (“Servicer Advance VFN”). The transferred Servicer Advance PC is classified on the Consolidated Balance Sheets as Servicing Advances Receivable and the related liabilities as part of Accrued Expenses and Other Liabilities. CHL GMSR Issuer Trust uses collections of the pledged advances to repay principal and interest and to pay the expenses of the Servicer Advance VFN.

The following table summarizes the carrying value and classification of the assets and liabilities of consolidated VIEs on the Consolidated Balance Sheets:


	The Buyer		Shelter Joint Ventures		Residential Mortgage Loans		Consumer Loan SPVs		Servicer Advance Facilities		MSR Financing Facilities		Total
December 31, 2021
Assets
Mortgage servicing rights, at fair value	$	—	$	—	$	—	$	—	$	—	$	403,301	$	403,301
Servicer advance investments, at fair value	409,475		—		—		—		—		—		409,475
Residential mortgage loans, held-for-investment, at fair value	—		—		93,226		—		—		—		93,226
Residential mortgage loans, held-for-sale	—		—		—		—		—		—		—
Residential mortgage loans, held-for-sale, at fair value	—		—		798,644		—		—		—		798,644
Consumer loans	—		—		—		507,291		—		—		507,291
Cash and cash equivalents	33,777		37,369		2,882		—		—		—		74,028
Restricted cash	2,210		—		171		7,249		—		—		9,630
Servicer advance facilities	—		—		—		—		94,306		—		94,306
Other assets	9		903		2,902		6,851		24,699		332,521		367,885
Total Assets	445,471		38,272		897,825		521,391		119,005		735,822		2,757,786
Liabilities
Secured financing agreements(A)	—		—		24,683		—		—		—		24,683
Secured notes and bonds payable(A)	348,670		—		802,526		458,580		93,145		367,871		2,070,792
Accrued expenses and other liabilities	806		6,588		10,163		862		27,771		134		46,324
Total Liabilities	$	349,476	$	6,588	$	837,372	$	459,442	$	120,916	$	368,005	$	2,141,799
December 31, 2020
Assets
Servicer advance investments, at fair value	$	522,901	$	—	$	—	$	—	$	—	$	—	$	522,901
Residential mortgage loans, held-for-investment, at fair value	—		—		358,629		—		—		—		358,629
Residential mortgage loans, held-for-sale	—		—		346,250		—		—		—		346,250
Residential mortgage loans, held-for-sale, at fair value	—		—		614,868		—		—		—		614,868
Consumer loans	—		—		—		682,932		—		—		682,932
Cash and cash equivalents	53,012		39,031		—		—		—		—		92,043
Restricted cash	2,808		—		—		8,090		—		—		10,898
Other assets	5		9,151		30,621		9,201		—		—		48,978
Total Assets	578,726		48,182		1,350,368		700,223		—		—		2,677,499
Liabilities
Secured notes and bonds payable(A)	413,701		—		1,034,093		628,759		—		—		2,076,553
Accrued expenses and other liabilities	1,081		9,455		1,661		764		—		—		12,961
Total Liabilities	$	414,782	$	9,455	$	1,035,754	$	629,523	$	—	$	—	$	2,089,514

(A)The creditors of the VIEs do not have recourse to the general credit of New Residential, and the assets of the VIEs are not directly available to satisfy New Residential’s obligations.

Non-Consolidated VIEs

The following table comprises unconsolidated bonds retained pursuant to required risk retention regulations:


	As of and for the Year Ended December 31,
	2021		2020
Residential mortgage loan UPB	$	10,752,079	$	14,211,351
Weighted average delinquency(A)	4.45%		10.06%
Net credit losses	$	130,392	$	76,725
Face amount of debt held by third parties(B)	$	9,897,879	$	12,671,168

Carrying value of bonds retained by New Residential(C)(D)	$	927,490	$	1,361,624
Cash flows received by New Residential on these bonds	$	330,197	$	315,939

(A)Represents the percentage of the UPB that is 60+ days delinquent.

(B)Excludes bonds retained by New Residential.

(C)Includes bonds retained pursuant to required risk retention regulations.

(D)Classified within Level 3 of the fair value hierarchy as the valuation is based on certain unobservable inputs including discount rate, prepayment rates and loss severity. See Note 14 for details on unobservable inputs.

Noncontrolling Interests

Noncontrolling interests represent the ownership interests in certain consolidated subsidiaries held by entities or persons other than New Residential. These interests are related to noncontrolling interests in consolidated entities that hold New Residential’s Servicer Advance Investments (Note 7), the Shelter JVs, (Note 9) and Consumer Loans (Note 10).

Others’ interests in the equity of New Residential’s consolidated subsidiaries is computed as follows:


	December 31, 2021									December 31, 2020
	The Buyer(A)			Shelter Joint Ventures			Consumer Loan Companies			The Buyer(A)			Shelter Joint Ventures			Consumer Loan Companies
Total consolidated equity	$	95,995		$	31,684		$	83,597		$	163,944		$	38,727		$	96,418
Others’ ownership interest	10.7		%	49.5		%	46.5		%	26.8		%	50.1		%	46.5		%
Others’ interest in equity of consolidated subsidiary	$	10,251		$	15,683		$	39,414		$	43,882		$	19,402		$	45,384

Others’ interests in the New Residential’s net income (loss) is computed as follows:


	Year Ended December 31,
	2021									2020									2019
	The Buyer(A)			Shelter Joint Ventures			Consumer Loan Companies			The Buyer(A)			Shelter Joint Ventures			Consumer Loan Companies			The Buyer(A)			Shelter Joint Ventures			Consumer Loan Companies
Net income	$	(13,937)		$	22,839		$	51,307		$	3,326		$	31,188		$	77,760		$	15,892		$	12,717		$	69,143
Others’ ownership interest as a percent of total	12.9		%	49.5		%	46.5		%	26.8		%	50.1		%	46.5		%	26.8		%	49.0		%	46.5		%
Others’ interest in net income of consolidated subsidiaries	$	(1,800)		$	11,298		$	23,858		$	891		$	15,625		$	36,158		$	4,255		$	6,231		$	32,151

(A)As a result, New Residential owned 89.3% (since July 2021, see Note 7), 73.2% and 73.2% of the Buyer as of the year ended December 31, 2021, 2020 and 2019, respectively. See Note 13 regarding the financing of Servicer Advance Investments.