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Q3'19 Investor Supplement vFinal New Residential Investment Corp. Quarterly Supplement
Third Quarter 2019
Disclaimers
IN GENERAL. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as the "Presentation."
FORWARD-LOOKING STATEMENTS. Certain statements regarding New Residential Investment Corp. (together with its subsidiaries, "New Residential," "New Residential," the "Company" or "we") in this Presentation may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, the ability to succeed in various interest rate environments, the Company's expectations for closing, funding and financing various transactions, ability to grow and transform our mortgage servicing and origination platforms into top 15 industry companies, the ability to realize our long-term strategy for Ditech Holding Corp. ("Ditech"), statements on future interest rates, spreads and market conditions, ability to take advantage of future investment opportunities, our targeted lifetime IRRs and yields, expected or projected cash flows, expected returns, and any annualized data and numbers, projections on UPB, targeted or expected cost savings, ability to execute the Company's overall MSR strategy, ability to mitigate prepayment risk for the MSR asset, ability to continue to work with strong counterparties, ability to capitalize on certain partnership opportunities, expectations regarding interest rates and housing, sustainability of earnings or our dividend, ability to create shareholder value, ability to continue diversifying servicing counterparties, actual unpaid principal balance of loans subject to our call rights and Excess MSRs, expected shortening or acceleration of callability timelines for call rights, projected overall callable balance of call rights, the ability to execute and profit from our deal collapse strategy, the value of call rights increasing as interest rates decline or decreasing as interest rates increase, ability to execute future servicer advance and call rights mortgage loan securitizations and call rights, expectation that servicer advance maturity dates will be extended, ability to access a long-term pipeline of residential mortgage assets, future mortgage origination rates, potential to be subject to certain claims and legal proceedings, expectations for future prepayment speeds, ability to help protect returns in the event of a rise in voluntary prepayment rates, expectation of potential future upside as advance balances continue to decline, investments benefiting from an increase in interest rates or an improving macro backdrop, ability to hedge our portfolio, ability to protect our book value, the performance of residential loans and consumer loans, the continuing decline of delinquencies, the ability to capture ancillary economics related to our mortgage asset, expectations regarding our partnership with Matic and statements regarding the Company's investment pipeline and investment opportunities. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. New Residential can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements made in this Presentation. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's most recent reports on Form 10-Q and Form 10-K and other filings with the U.S. Securities and Exchange Commission (the "SEC"), which are available on the Company's website (www.newresi.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this Presentation. New Residential expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
CAUTIONARY NOTE REGARDING ESTIMATED / TARGETED RETURNS AND YIELDS. The Company calculates the estimated return/yield, or the IRR, of an investment as the annualized effective compounded rate of return (assuming monthly compounding) earned over the life of the investment after giving effect, in the case of returns, to existing leverage. Life-to-date IRR, including life-to-date IRRs on the overall MSR portfolio, servicer advance investments, Non-Agency securities portfolio, residential loans and consumer loans, is based on the purchase price for an investment and the estimated value of the investment, or "mark," which is calculated based on cash flows actually received and the present value of expected cash flows over the life of the investment, using an estimated discount rate. Targeted returns and targeted yields reflect a variety of estimates and assumptions that could prove to be incorrect, such as an investment's coupon, amortization of premium or discount, costs and fees, and our assumptions regarding prepayments, defaults and loan losses, among other things. Income and cash flows recognized by the Company in future periods may be significantly less than the income and cash flows that would have been recognized had expected returns been realized. As a result, an investment's lifetime return may differ materially from an IRR to date. In addition, the Company's calculation of IRR may differ from a calculation by another market participant, as there is no standard method for calculating IRRs. Statements about estimated and targeted returns and targeted yields in this Presentation are forward-looking statements. You should carefully read the cautionary statement above under the caption "Forward-looking Statements," which directly applies to our discussion of estimated and targeted returns and targeted yields.
PAST PERFORMANCE. Past performance is not a reliable indicator of future results and should not be relied upon for any reason.
NO OFFER; NO RELIANCE. This Presentation is for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security and may not be relied upon in connection with the purchase or sale of any security. Any reference to a potential financing does not constitute, nor should it be construed as, an offer to purchase or sell any security. There can be no assurance if or when the Company or any of its affiliates will offer any security or the terms of any such offering. Any such offer would only be made by means of formal documents, the terms of which would govern in all respects. You should not rely on this Presentation as the basis upon which to make any investment decision.
NON-GAAP MEASURES. This Presentation includes non-GAAP measures, such as Core Earnings. See "Appendix" in this presentation for information regarding this non-GAAP measure, including a definition, purpose and reconciliation to net income, the most directly comparable GAAP financial measure.
1
NRZ Overview
New Residential Investment Corp. Differentiated Strategy
Our mission is to identify and invest in assets that offer attractive risk-adjusted returns while protecting our existing portfolio and generating long-term value for our investors
~$6.5 Billion
Market Cap
$41.3 Billion
Total Assets(1)
~12.8%
Dividend Yield(2)
63%
Book Value Per Common Share Growth Since Inception(3)
147%
Total Shareholder Return Since Inception(3)
Over $3.0 Billion
Dividends Declared to Shareholders Since Inception(3)(4)
New Residential's Differentiated Platform
Diversified Portfolio
Hard-toReplicate Portfolio
New Residential's portfolio includes MSRs, call rights, residential securities / loans,
consumer loans, complementary operating businesses and revenue from ancillary services
Proven Track Record
We have achieved scale across our differentiated and hard-to-replicate portfolio
of value-creating strategies
Focus on Capturing
"Whole Mortgage Pie"
Throughout our history, we have created
substantial long-term value and proven the
~6% strength of our strategy through execution and
performance
YoY Book
Value
Increase We are well-positioned to capture incremental
long-term value in the full mortgage asset
through our operating companies and
partnerships
Opportunistic Approach to
Growth Prospects
We are disciplined and opportunistic where it aligns with our long-term strategy; our size, liquidity and positioning allow us to be nimble
when opportunities arise
Shareholder Focus
Our ultimate goal continues to be generating stable earnings and risk-adjusted returns for
our shareholders
Detailed endnotes are included in the Appendix.
3
Q3 2019 Company and Financial Highlights
Company and Financial Highlights GAAP Net Income of $225 Million, or $0.54 Per Diluted Share(1) Core Earnings of $207 Million, or $0.50 Per Diluted Share(1)(2) Third Quarter Common Stock Dividend of $0.50 Per Common Share
12.8% dividend yield as of September 30, 2019(3) $16.26 Book Value Per Common Share as of September 30, 2019
Book value per common share increased +0.6% QoQ from $16.17 as of June 30, 2019 Total economic return of +3.6% during Q3'19 comprised of +$0.09 increase in book value per common
share and $0.50 dividend per common share Raised $438 million of gross proceeds across two preferred stock offerings(4)
Investment Portfolio(5)
Consumer Loans 1%
Cash 10%
Residential Loans 19%
$7.2 bn Net Equity
MSRs & Servicer Advances
42%
Residential Securities & Call Rights
28%
Detailed endnotes are included in the Appendix.
Total Assets
$41.3 Billion(6)
Market Cap
~$6.5 Billion
YTD Returns
+9.3%
`19 YTD Economic Return(7)
+20.9%
`19 YTD Total Shareholder Return(8)
4
Investment Portfolio
New Residential has built a differentiated, hard-to-replicate portfolio with diversified and value-creating investment strategies
Investment Portfolio Overview(1)
Investment Portfolio Composition Over Time
MSRs & Servicer Advances
Net Equity
% of Portfolio
Targeted Lifetime Net Yield
$3,070 million
42%
MSRs: 12 15% Advances: 15 25%
Residential Securities & Call Rights
Net Equity
% of Portfolio
Targeted Lifetime Net Yield
$1,988 million 28% 12 - 15%
Residential Loans
Net Equity
% of Portfolio
Targeted Lifetime Net Yield
$1,375 million 19% 13%+
Net Equity ($ billions)
$8.0 $7.2
$7.0
$6.1 $6.0
$5.0
$4.9
$4.0 $3.4
$2.9 $3.0
$2.0
$1.7
$1.4
$1.0
Consumer Loans
Net Equity
% of Portfolio
Targeted Lifetime Net Yield
$56 million 1% 15%+
Detailed endnotes are included in the Appendix.
$0.0 Q4'13 Q4'14 Q4'15(2) Q4'16 Q4'17 Q4'18 Q3'19
MSRs & Servicer Advances Residential Loans Cash
Residential Securities & Call Rights Consumer Loans
5
Active Portfolio Management and Hedging
New Residential emphasizes dynamic asset allocation, hedging and portfolio diversification to protect our book value
New Residential Portfolio Hedging and Positioning(1)
We actively manage and hedge our portfolio to help protect book value The balanced and diversified nature of our overall portfolio (including positive and negative duration positions) contributes to book value stability Our operating businesses and ancillary services provide additional off-sets and revenue streams
In 2019, we have focused on strengthening our hedging strategy as a means of mitigating interest rate risk, which include: Adding Agency hedges Growing our origination and servicing businesses Increasing recapture efforts Building and adding ancillary services
New Residential's Balanced Portfolio
Positive Duration
Operating Businesses Call Rights Whole Loans
Legacy Bonds Agency Bonds
Negative Duration MSRs
New Residential's portfolio is constructed with positive and negative duration positions
Detailed endnotes are included in the Appendix.
10-Yr Treasury (%)
Book Value Per Common Share ($)
NRZ Book Value Stability in 2019 Relative to Nominal Rates
3.50% 3.00%
$16.25
$16.42
$16.17
$16.26
2.50%
2.00%
1.50%
1.00%
Q4'18
The 10-Yr Treasury has declined over 100bps
in 2019
Q1'19
Q2'19
Q3'19
10-Yr Treasury
NRZ Book Value
Though rates have been volatile in 2019, New Residential has been successful in protecting book value
6
Markets Have Changed...and So Have We
Over time, New Residential has built a diversified investment portfolio including complementary operating businesses providing differentiated revenue streams
2013
P Excess MSRs
Investment Management Company
P RMBS
Residential
P Mortgage Loans
P Consumer Loans
$1.4bn AUM(1)
Fully Integrated Mortgage Platform
Organic Portfolio Growth
Hard-toReplicate Strategy
Diversification
Scale
Detailed endnotes are included in the Appendix.
Today
Investment Management Company
Provider of Capital and Services to the Financial Services Industries
P Excess MSRs (from inception) P Residential Mortgage Loans
(from inception)
P SpringCastle & Prosper Portfolio (added 2013 and 2017)
P Servicer Advances (added 2013, 2014 & 2015)
P Resi Securities & Call Rights (added 2015)
P Full MSRs (added 2016)
Operating and Ancillary Businesses
P Mortgage Originator (added 2018)
P Mortgage Servicer (added 2018)
P Ancillary Mortgage Services (added 2019)
$41.3bn AUM(2)
7
Recent Market Drivers and Impacts
Trends in the broader market have contributed to New Residential's performance
1 Month LIBOR (%)
2.60 2.40 2.20 2.00 1.80
Jan-19
LIBOR has been declining...
LIBOR declined 38bps in Q3'19
Apr-19
Jun-19
Sep-19
30-Yr Primary Mortgage Rate (%)
Mortgage rates are low...
5.00
4.50
4.00
3.50 Mortgage rates are near
3.00 the lowest rates since 2016
2.50
Jan-19
Apr-19
Jun-19
Sep-19
The consumer is healthy...
12.0%
10.0%
8.0%
6.0%
4.0%
Unemployment is at the
2.0%
lowest rate in 50 years
0.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Unemployment Rate (%)(4)
Detailed endnotes are included in the Appendix.
...helping New Residential achieve lower funding costs(1)
Weighted Average Cost of Funds (%)
3.90% 3.50% 3.10%
3.58%
3.53%
3.46%
3.08%
2.70%
Q4'18
Q1'19
Q2'19
Q3'19
Weighted Average Cost of Funds (%)
~$50 million of targeted savings over the next twelve months due to the decrease in LIBOR(2)
...resulting in favorable origination climate for NewRez(3)
UPB ($ billions)
$8.0
$6.0
NewRez origination is up 200% YoY
$5.7 $3.9
$4.0
$2.0
$1.3
$1.9
$1.9
$2.1
$2.2
$0.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 NewRez Origination ($UPB billions)
...benefiting New Residential's bonds and call population
% Delinquency
17.00% 16.0%
15.00% 14.2%
13.00% 11.00%
9.00%
Delinquencies have improved
11.7% 11.5%
Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19
Call Population Delinquencies
Bond Portfolio Delinquencies
8
Ditech Acquisition Summary
Subsequent to Q3'19, New Residential completed the acquisition of select assets from Ditech
What did New Residential Acquire from Ditech?
1
Asset Portfolio(1)
2
Operating Platform (Sites & Employees)
~$62bn UPB MSRs
$35bn FNMA MSRs $22bn GNMA MSRs $5bn MH/PLS MSRs
Other Financial Assets
$418mm Servicer Advances (par balance)
$44mm Mortgage Loans and REO
$2.2bn Owned Recovery Portfolio
Mortgage Origination
Operations in Pennsylvania
Strong Correspondent Platform and
Retention Division
Mortgage Servicing
Operations in Arizona
Strong Performing Servicing Division
Employees
1,100 new employees to support the
increase in volume to existing origination
and servicing operations
3 Purchase Price
Financing(2)
~$200mm Cash on Hand
~$1.0bn Financing Facilities (including loan warehouse, MSR and servicer advance)
Asset Portfolio(4)
Pro Forma (New Residential + Ditech Assets) Entity(3)
Origination(5)(6)
Servicing(5)(6)
Operations
~$650bn UPB Owned MSRs
Over $40bn Assets on Balance
Sheet
4.0mm+ Customers
Top 5 Non-Bank Originator
~$40bn UPB Targeted FY'20
Origination
Top Non-Bank Servicer
~$300bn UPB Targeted FY'20
Servicing
Bi-Coastal Presence
~4,000 Employees
Through the acquisition of these assets from Ditech, we believe we can further grow our servicing and origination platforms while also creating shareholder value(7)
Detailed endnotes are included in the Appendix.
9
Q3 2019 Highlights
New Residential made progress on a number of key initiatives in Q3'19
During Q3'19 we...
Grew our origination and servicing businesses by 200% and 100% YoY, respectively
Acquired field services provider Guardian Asset Management
P Contributed additional earnings through
operating businesses
P Grew ancillary portfolio
P
Issued $438 million of preferred equity in two separate offerings(1)
Diversified capital structure
Surpassed $3.0 billion in dividends declared since inception(2)
Lowered overall cost of funding through securitizations and term financing; ~$75 million of targeted savings over the next twelve months(3)
P Continued to create and drive shareholder
value
PImproved funding costs and reduced interest
rate risk
Detailed endnotes are included in the Appendix.
10
NRZ Operating Businesses
Operating Businesses Capturing the Whole Mortgage Pie(1)
New Residential's operating business investments create growth opportunities throughout the mortgage loan life cycle Phases in Mortgage Loan Life Cycle
Origination
Performing Loan Servicing
Special Servicing
(60 days+ delinquent loans)
Ancillary Services Delivered by NRZ Affiliate Businesses(2)
Title Insurance Appraisal Credit & Asset Verification Flood Insurance Tax Tracking HOA Review Due Diligence Services
Recapture Services Home Insurance Marketing Tax
Tracking Document Services Lien Release
Property Inspections Property Preservation Default Title & Valuation Loss Mitigation Document Management Foreclosure Auction REO Management REO Auction Real Estate Brokerage Services
Drivers of Revenue and Volume Growth Across Ancillary Services Businesses
Low mortgage rates Growing origination capacity
Expansion into new products Growing brand awareness
Detailed endnotes are included in the Appendix.
An increase in delinquencies An increase in foreclosures
12
Origination Q3'19 Performance
Origination activity across all origination channels picked up in Q3'19
Q3'19 Origination Activity
Increased loan origination during the quarter across all channels; total origination volume of $5.7 billion, +49% QoQ and +200% YoY
Record lock volume of $7.7 billion in Q3'19(1); up 31% QoQ Recapture volume of $1.1 billion represents 19% of total
Q3'19 volume and was up +82% QoQ Recapture growth driven by higher pay-off rates and expanded footprint on newer targeted portfolios
Acquisition of assets from Ditech will add additional volume in Q4'19 and beyond Estimated FY'19 volume of ~$22 billion and targeted FY'20 volume of ~$40 billion(2)
Origination Activity Over Time(3)
$7.0
49% QoQ increase
$6.0
200% YoY increase
$5.0
$4.0
$5.7 $3.9
(UPB $ billions)
$3.0
$1.9
$1.9
$2.1
$2.2
$2.0 $1.3
$1.0
$0.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19
Direct-to-Consumer JV/Retail Wholesale Detailed endnotes are included in the Appendix.
Correspondent Lending
Product Mix(3)
47%
47%
46%
42%
43%
52%
56%
42%
33%
8% Q1'18
9% 10%
Q2'18
Non-Agency
31%
15% 7% Q3'18
33%
19% 5% Q4'18
38%
14% 5% Q1'19
35% 9% Q2'19
Non-QM Government Agency
33% 8% Q3'19 Other
Q3'19 Refi vs. Purchase Mix(4)
Purchase 46%
Refi 54%
13
Servicing Q3'19 Performance
New Residential's servicing portfolio continued to grow, driven by origination volume and additional transfers
Q3'19 Servicing Activity
Servicing portfolio continues to grow Total UPB of $184 billion (+16% QoQ and +100% YoY)
Third Party UPB was up 6% QoQ and 40% YoY Record Profitability pre-tax income up 30% QoQ and 75%
YoY Acquisition of assets from Ditech will add volume in Q4'19
and beyond Estimated FY'19 servicing UPB of ~$200 billion and targeted FY'20 servicing UPB of ~$300 billion(1)
Shellpoint Servicing(2)
UPB by Investor
Private Other 18%
GNMA 16%
Private MBS 12%
FHLMC 24%
FNMA 30%
UPB by Delinquency
UPB ($ billions)
$200 $150 $100
$50 $0
16% QoQ increase 100% YoY increase
$142
$160
$109
$59
$92
$56
$69
$53
$45
$49
$85
$101
$47
$56
$20
Q2'18 Q3'18 Q4'18 Q1'19 Q2'19
Shellpoint 3rd Party / 60+ DPD
Detailed endnotes are included in the Appendix.
$184 $62
$122 Q3'19
30 DPD 2%
60+ DPD 5%
Current 93%
14
Q3'19 Portfolio Summary
NRZ Investment Portfolio Q3'19 Highlights & Subsequent Events
MSRs & Servicer Advances
Settled on ~$45 billion UPB of MSRs (that were agreed to in Q2'19) for ~$542 million from 10 different counterparties
MSR portfolio totaled $593 billion UPB as of September 30, 2019, compared to $576 billion as of June 30, 2019(1)
Issued three capital markets term notes for servicer advances (totaling $1.2 billion), resulting in reduction in cost of funds and extension of maturity
Non-Agency Securities & Call Rights
Sold $1.2 billion face value of Non-Agency securities Successfully executed on our call rights strategy, calling 38 deals with collateral of ~$1.3 billion UPB (+22% QoQ)(2) Completed two securitizations of loans through exercise of call rights with ~$976 million UPB
Residential Loans
Completed one Non-QM securitization of ~$381 million and one RPL securitization of ~$429 million Funded $521 million of Non-QM origination from NewRez
Other
Raised $438 million of gross proceeds across two preferred stock offerings, with the second preferred stock offering pricing ~38bps tighter than the inaugural offering(3)
Across the entire portfolio, lowered overall cost of funding through securitizations and term financing
~$75 million of targeted savings over the next twelve months(4)
Post Q3'19 Activity
Closed $1.2 billion acquisition of select assets from Ditech Completed $1.7 billion RPL securitization, $796 million collapse securitization and $400 million advance securitization
Detailed endnotes are included in the Appendix.
16
MSRs Q3'19 Performance
New Residential's MSR portfolio grew $17 billion UPB QoQ
Q3'19 MSR Portfolio Activity MSR portfolio totaled $593 billion UPB as of September 30, 2019, compared to $576 billion as of June 30, 2019(1) (+3% QoQ) New Residential settled on ~$45 billion UPB of MSRs for ~$542 million from 10 different counterparties in Q3'19(2) New Residential is focused on continuing to grow MSRs organically through recapture and origination Subsequent to quarter end, New Residential added $62 billion UPB of MSRs through the acquisition of assets from Ditech
Seasoned portfolio of borrowers Low loan balances
UPB ($bn) WAC
WALA (Mth) Cur LTV Cur FICO 60+ DQ
FHLMC 124 4.3% 50 68% 752 0.4%
Full MSRs(3)
FNMA 226
GNMA 29
Non-Agency 83
Full MSR Total(3) $462 bn
4.3%
3.8%
4.5%
4.3%
64
36
161
76 Mth
64%
89%
82%
70%
747
681
646
724
0.9%
3.2%
15.4%
3.5%
FHLMC 36
4.6% 85 55% 730
1.3%
Excess MSRs(3)
FNMA 26
GNMA 22
Non-Agency
Excess MSR Total(3)
47
$131 bn
4.7%
4.8%
4.8%
4.7%
100
101
164
123 Mth
49%
60%
68%
60%
720
695
674
700
1.9%
0.9%
9.6%
4.9%
TOTAL(4)
(1)
$593 bn 4.4%
82 Mth 69% 720 3.7%
Detailed endnotes are included in the Appendix.
17
MSRs Differentiation of NRZ's MSRs
New Residential's MSR portfolio benefits from differentiated characteristics as well as a platform of operating businesses and ancillary services
NRZ's Differentiated MSR Strategy(1)
Our MSR portfolio composition is differentiated from others, given the greater share of seasoned, credit impaired and/or PLS loans
100% of our MSR portfolio is subject to recapture agreements or prepayment protection We are also able to extract additional value from our MSR portfolio by:
Transferring subservicing to our in-house servicer (Shellpoint Mortgage Servicing) Recapturing through our originator Using owned or partnered ancillary services companies to offer additional products to borrowers
NRZ MSR Population Compared to Industry New Residential's lower refinanceable population
NRZ
Lower Average Loan Size
$159k
More Seasoned Loans
82 WALA
More Credit Impaired
720 FICO
Smaller Refinanceable Population(3)
24%
Detailed endnotes are included in the Appendix.
Industry(2)
$182k 51 WALA 730 FICO
54%
NRZ's MSR Capacity Relative to Peers(4)
New Residential has greater ability to fully service its MSRs than certain non-bank peers
Hedges MSRs
NRZ Peer A Peer B Peer C Peer D Peer E Peer F
P
P
P
P
P
P
In-House Origination
P
P
P
P
P
Recapture Capabilities
P
P
P
P
P
Ancillary Services
P
P
In-House Performing Servicer
P
P
P
P
P
In-House Special Servicer
P
P
P
P
18
Call Rights Q3'19 Performance
Given lower rates in 2019, call volume has increased and we anticipate continued elevated volumes if rates remain low(1)
Q3'19 Call Rights Portfolio Activity Successfully executed on our call rights strategy during Q3'19, calling 38 deals with collateral of ~$1.3 billion in UPB (+22% QoQ)(2) Completed two securitizations of loans through exercise of call rights with ~$976 million of UPB 60+ day delinquencies declined to 11.5% from 12.3% (6.5% decline QoQ)(3) Large callable population
New Residential controls call rights to ~$101 billion of mortgage collateral, representing ~34% of the Non-Agency market(1)(2) ~$42 billion UPB, or ~41%, of our call rights population is currently callable(2)
UPB ($ billions) Count
Call Deals Executed (UPB $ billions)
New Residential Callable Population(2)
$45.0
$40.0
$38.0
$39.5
$39.5
$42.4
$41.5
1,100 1,050
$35.0
1,000
$30.0
950 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019
NRZ Callable UPB (LHS)
NRZ Callable Count (RHS)
Detailed endnotes are included in the Appendix.
Calls ExeCcuatllesdERxelcauttivioentoHNisotomryinal Rates
$5.0
$4.7
$4.0 $3.3
$3.0
$2.7
$2.0
$1.4
$1.0
60 $0.0
FY'14
$1.2
$1.2
53
50
176
88
102
FY'15 FY'16
# of Deals
FY'17 FY'18 `19 YTD
UPB ($ billions)
19
Non-Agency Bond Portfolio Q3'19 Performance
New Residential was active in delevering our bond portfolio as we capitalized on lower interest rates while our portfolio's collateral performance also continued to improve
Q3'19 Non-Agency Bond Portfolio Activity
During the quarter, Non-Agency bond prices increased driven by lower yields and healthy collateral performance New Residential sold $1.2 billion face value of Non-Agency securities
Lower interest rates tend to benefit our Non-Agency portfolio(1) Lower rates help generate more excess spread and delever mezzanine bonds more quickly
Current portfolio positioning 70%+ of our Legacy Non-Agency portfolio is currently callable or expected to be callable within 3 years(1)(2) Low LTV (~61%) driven by 10+ years of HPA and improved collateral performance Borrower delinquency and default rates have continued to improve
3m CDR 60+ DPD (%)
YTDQ3PI'ne1r9vfeoPsrotmmrtafeonnlciteoGoCrfaoHdmeipgChorsYeitdiieoiltnd(3a) nd
($ in millions) Current Face Cost Basis Carrying Value
Total $8,748 $6,547 $7,205
By Vintage <=2004 7%
2005 15%
WAC WALA 60+ DPD
5.0% 153 9.6%
$6.5 bn
>=2006 78%
Delinquency and Default Rates(4)
4.5
15.0%
4.0
14.5%
3.5
14.0%
13.5% 3.0
13.0% 2.5
12.5%
2.0
12.0%
1.5
11.5%
1.0
11.0%
3m CDR
60+DPD
Detailed endnotes are included in the Appendix.
20
Residential Loans Q3'19 Performance
New Residential has been successful in improving the pay performance of its RPLs through special servicing
Recent Residential Loan Portfolio Activity
NRZ continues to provide multiple loss mitigation options to borrowers to stay in their homes Special servicing strategy has continued to demonstrate
strong results
Sample acquisition pool has shown significant delinquency
improvement since acquisition, from 69% current to 80% current in 6 months(1) Improvement in pay history has resulted in increased securitizations New Residential's securitization platform has continued to grow, allowing for efficient financing of our loan portfolio New Residential continues to buy loans at a discount (positive duration) which acts as a hedge relative to our MSR exposure
% of Pool that is Current
Improvement in Pay History for Sample RPL Pool Since Acquisition(1)
80%
80%
78%
69%
Purchase
Q1'19
Q2'19
Q3'19
Q3'19 Portfolio
($ in millions) Loan Count UPB BPO Carrying Value Fair Value % < 100 LTV
Total 51,209 $6,151 $11,945 $5,886 $5,890 84%
Seasoned Performing
$4,953
Non-QM FHA Insured,
REO $48
$23 (2)
$48
UPB ($mm)
NonPerforming
$171
FHA Insured $78(2) Non-QM
$189
REO $108
NonPerforming
$823
Seasoned Performing
$810
Equity Invested ($mm)
Detailed endnotes are included in the Appendix.
Q3'19 Loan Acquisitions
$1.8 Billion
Non-QM $521
Called Loans $1,300
21
Securitization Diversified and Robust Platform
Q3'19 was the most active quarter ever for New Residential's securitization platform as we continued to focus on lowering cost of funds on outstanding debt
`19 YTD Securitization Activity
Completed seven securitizations during Q3'19 for a total of $3.0 billion
Robust issuance in 2019 YTD; New Residential has completed 18 securitizations totaling $9.9 billion(1)
Through these securitizations, New Residential has been able to reduce financing costs and interest rate risk
Term financing helps New Residential reduce sensitivity to interest rate moves(2)
Subsequent to quarter end, New Residential priced three securitizations for a total of $2.9 billion
($ millions)
NRZ has completed 18 securitizations totaling $9.9bn in 2019 YTD(1)
$2,669
$2,986
$1,346
$2,922
Q1'19 Non-QM RPL
Q2'19 Collapse
Q3'19
Q4'19 QTD(3)
Advances SpringCastle MSR
Q3'19 Securitization Activity
Q4'19 Securitization Activity(3)
$400 Million Advance Securitization
NRART 2019-TI July 2019
$400 Million Advance Securitization
NRART 2019-T2 August 2019
$400 Million Advance Securitization
NRART 2019-T3 September 2019
$381 Million Non-QM Securitization NRMLT 2019-NQM 4
September 2019
$400 Million Advance Securitization
NRART 2019-T4 October 2019
$1,726 Million RPL Securitization NRMLT 2019-RPL3
October 2019
$393 Million Collapse Securitization
NRMLT 2019-3 July 2019
$583 Million Collapse Securitization
NRMLT 2019-4 August 2019
Detailed endnotes are included in the Appendix.
Non-QM
$429 Million RPL Secu6ritization
NRMLT 2019-RPL2
July 2019
RPL
Collapse
Advances
$796 Million Collapse Securitization
NRMLT 2019-5 October 2019
22
Our Focus(1)
Creating Value for Shareholders
Our mission is to identify and invest in assets that offer attractive riskadjusted returns while also protecting our existing portfolio and generating long-term value for our investors
Opportunistic Investing
We will continue to be opportunistic and disciplined where it aligns with our long-term strategy
Growing Recapture, Origination and Servicing
Against the current market backdrop, we believe there is significant opportunity for the growth of our recapture, origination and servicing
business to contribute to earnings
Protecting the Value of Our Assets
Leveraging our diversified portfolio, we continue to be diligent, focused and proactive in protecting the value of our assets
Maximizing the Value of Each Loan We Service
Ancillary services and partnerships position us to capitalize on opportunities that improve servicing performance, customer
experience and maximize the shareholder value of each loan we service
Risk Management
Risk management is fundamental to our investment process and we are perpetually focused on risk across our business
23
Appendix
1) Financial Statements
Condensed Consolidated Balance Sheets
($000s, except per common share data)
ASSETS
Investments in: Excess mortgage servicing rights, at fair value Excess mortgage servicing rights, equity method investees, at fair value Mortgage servicing rights, at fair value Mortgage servicing rights financing receivables, at fair value Servicer advance investments, at fair value Real estate and other securities, available-for-sale Residential mortgage loans, held-for-investment (includes $113,133 and $117,155 at fair value at September 30, 2019 and June 30, 2019, respectively) Residential mortgage loans, held-for-sale Residential mortgage loans, held-for-sale, at fair value Consumer loans, held-for-investment
Cash and cash equivalents Restricted cash Servicer advances receivable Trades receivable Deferred tax asset, net Other assets (includes $168,532 and $141,581 in residential mortgage loans subject to repurchase at September 30, 2019 and June 30, 2019, respectively)
Total Assets
LIABILITIES
Repurchase agreements Notes and bonds payable (includes $474,309 and $484,441 at fair value at September 30, 2019 and June 30, 2019, respectively) Trades payable Dividends payable Accrued expenses and other liabilities (includes $168,532 and $141,581 in residential mortgage loans repurchase liabilities at September 30, 2019 and June 30, 2019 respectively)
Total Liabilities
Preferred Stock, 7.50% Series A
Preferred Stock, 7.125% Series B Noncontrolling interests in equity of consolidated subsidiaries
Book Value
Per Common Share
As of 9/30/19 (Unaudited)
$
398,064
132,259
3,431,968
1,811,261
600,547
16,853,910
613,657
1,349,997 5,206,251
881,183 738,219 163,148 2,911,798 4,487,772
43,372
1,724,519
$
41,347,925
$
23,110,359
7,405,872
2,536,188 213,098
820,291
$
34,085,808
150,026
273,418 83,652
$6,755,021
$
16.26
As of 6/30/19 (Unaudited)
$
411,537
133,468
2,976,008
1,941,139
637,914
12,125,826
641,389
1,154,256 5,588,540
938,956 406,038 159,151 3,047,201 5,307,642
39,333
1,283,977
$
36,792,375
$
21,480,245
7,297,765
265,125 207,760
740,650
$
29,991,545
-
-
82,865
$
6,717,965
$
16.17
26
Condensed Consolidated Income Statements
($ 000s)
Interest Income Interest Expense
Net Interest Income
Impairment Other-than-temporary impairment (OTTI) on securities Valuation and loss provision (reversal) on loans and real estate owned (REO)
Net Interest Income after impairment Servicing revenue, net of change in fair value $(228,405), $(334,599), respectively Gain on sale of originated mortgage loans, net Other Income
Change in fair value of investments in excess MSRs Change in fair value of investments in excess MSRs, equity method investees Change in fair value of investments in mortgage servicing rights financing receivables Change in fair value of servicer advance investments Change in fair value of investments in residential mortgage loans Change in fair value of derivative instruments Gain (loss) on settlement of investments, net Earnings from investments in consumer loans, equity method investees Other (loss) income, net
Operating Expenses General and administrative expenses Management fee to affiliate Incentive compensation to affiliate Loan servicing expense Subservicing expense
Income (Loss) Before Income Taxes
Income tax (benefit) expense
Net Income (Loss)
Noncontrolling Interests in Income of Consolidated Subsidiaries Dividends on preferred stock Net Income (Loss) Attributable to Common Stockholders
3 Months Ended September 30, 2019
(Unaudited)
$
448,127
245,902 202,225
5,567 (10,690)
(5,123)
207,348 53,050
100,541
2,407 4,751
(41,410)
6,641 (19,037)
58,508 154,752 (2,547) (35,219) 128,846
133,513 20,678 36,307
7,192 52,875 250,565
239,220
(5,440)
$
244,660
14,738
5,338
$
224,584
3 Months Ended June 30, 2019 (Unaudited)
$
416,047
228,004 188,043
8,859 13,452
22,311
165,732 (85,537)
49,504
(8,455) (3,276)
(55,411)
1,388 95,025 (36,729) 29,584 (2,654) 6,095 25,567
118,906 19,623
9,372 53,962 201,863
(46,597)
(21,577)
$
(25,020)
6,923
-
$
(31,943)
27
2) GAAP Reconciliation & Endnotes
Unaudited GAAP Reconciliation of Core Earnings
Management uses Core Earnings, which is a Non-GAAP measure, as one measure of operating performance. Please see next slide for the definition of Core Earnings.
($000s, except per common share data) Reconciliation of Core Earnings Net income (loss) attributable to common stockholders Adjustments for Non-Core Earnings:
Impairment
Change in fair value of investments in mortgage servicing rights Change in fair value of servicer advance investments Change in fair value of investments in residential mortgage loans Change in fair value of derivative instruments (Gain) loss on settlement of investments, net Other (income) loss Other Income and Impairment attributable to non-controlling interests Gain (loss) on sale or securitization of originated mortgage loans Non-capitalized transaction-related expenses Incentive compensation to affiliate Preferred stock management fee to affiliate Deferred taxes Interest income on residential mortgage loans, held-for-sale Limit on RMBS discount accretion related to called deals Adjust consumer loans to level yield Core earnings of equity method investees: Excess mortgage servicing rights Core Earnings Net Income/(Loss) Per Diluted Share Core Earnings Per Diluted Share Weighted Average Number of Shares of Common Stock Outstanding, Diluted
3Q 2019
$
224,584
(5,123)
45,541 (6,641)
7,290 (41,910) (135,935)
35,271 (994)
21,611 8,155 36,307 1,055 (6,652) 18,852
(34) 1,922
3,987
$
207,286
$
0.54
$
0.50
415,588,238
2Q 2019
$
(31,943)
22,311
256,219 (1,388) (95,025) 36,729
157 (6,095) (5,626) 24,944
9,284 -
(21,599) 23,888 7,815
87
$
219,758
$
(0.08)
$
0.53
415,665,460
29
Reconciliation of Non-GAAP Measures
Core Earnings
We have four primary variables that impact our operating performance: (i) the current yield earned on our investments, (ii) the interest expense under the debt incurred to finance our investments, (iii) our operating expenses and taxes and (iv) our realized and unrealized gains or losses, including any impairment, on our investments. "Core earnings" is a non-GAAP measure of our operating performance, excluding the fourth variable above and adjusts the earnings from the consumer loan investment to a level yield basis. Core earnings is used by management to evaluate our performance without taking into account: (i) realized and unrealized gains and losses, which although they represent a part of our recurring operations, are subject to significant variability and are generally limited to a potential indicator of future economic performance; (ii) incentive compensation paid to our Manager; (iii) non-capitalized transaction-related expenses; and (iv) deferred taxes, which are not representative of current operations.
Our definition of core earnings includes accretion on held-for-sale loans as if they continued to be held-for-investment. Although we intend to sell such loans, there is no guarantee that such loans will be sold or that they will be sold within any expected timeframe. During the period prior to sale, we continue to receive cash flows from such loans and believe that it is appropriate to record a yield thereon. In addition, our definition of core earnings excludes all deferred taxes, rather than just deferred taxes related to unrealized gains or losses, because we believe deferred taxes are not representative of current operations. Our definition of core earnings also limits accreted interest income on RMBS where we receive par upon the exercise of associated call rights based on the estimated value of the underlying collateral, net of related costs including advances. We created this limit in order to be able to accrete to the lower of par or the net value of the underlying collateral, in instances where the net value of the underlying collateral is lower than par. We believe this amount represents the amount of accretion we would have expected to earn on such bonds had the call rights not been exercised.
Our investments in consumer loans are accounted for under ASC No. 310-20 and ASC No. 310-30, including certain non-performing consumer loans with revolving privileges that are explicitly excluded from being accounted for under ASC No. 310-30. Under ASC No. 310-20, the recognition of expected losses on these non-performing consumer loans is delayed in comparison to the level yield methodology under ASC No. 310-30, which recognizes income based on an expected cash flow model reflecting an investment's lifetime expected losses. The purpose of the Core Earnings adjustment to adjust consumer loans to a level yield is to present income recognition across the consumer loan portfolio in the manner in which it is economically earned, avoid potential delays in loss recognition, and align it with our overall portfolio of mortgage-related assets which generally record income on a level yield basis. With respect to consumer loans classified as held-for-sale, the level yield is computed through the expected sale date. With respect to the gains recorded under GAAP in 2014 and 2016 as a result of a refinancing of the debt related to our investments in consumer loans, and the consolidation of entities that own our investments in consumer loans, respectively, we continue to record a level yield on those assets based on their original purchase price.
While incentive compensation paid to our Manager may be a material operating expense, we exclude it from core earnings because (i) from time to time, a component of the computation of this expense will relate to items (such as gains or losses) that are excluded from core earnings, and (ii) it is impractical to determine the portion of the expense related to core earnings and non-core earnings, and the type of earnings (loss) that created an excess (deficit) above or below, as applicable, the incentive compensation threshold. To illustrate why it is impractical to determine the portion of incentive compensation expense that should be allocated to core earnings, we note that, as an example, in a given period, we may have core earnings in excess of the incentive compensation threshold but incur losses (which are excluded from core earnings) that reduce total earnings below the incentive compensation threshold. In such case, we would either need to (a) allocate zero incentive compensation expense to core earnings, even though core earnings exceeded the incentive compensation threshold, or (b) assign a "pro forma" amount of incentive compensation expense to core earnings, even though no incentive compensation was actually incurred. We believe that neither of these allocation methodologies achieves a logical result. Accordingly, the exclusion of incentive compensation facilitates comparability between periods and avoids the distortion to our non-GAAP operating measure that would result from the inclusion of incentive compensation that relates to non-core earnings.
With regard to non-capitalized transaction-related expenses, management does not view these costs as part of our core operations, as they are considered by management to be similar to realized losses incurred at acquisition. Non-capitalized transaction-related expenses are generally legal and valuation service costs, as well as other professional service fees, incurred when we acquire certain investments, as well as costs associated with the acquisition and integration of acquired businesses.
Since the third quarter of 2018, as a result of the Shellpoint Acquisition, we, through its wholly owned subsidiary, NewRez, originates conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. In connection with the transfer of loans to the GSEs or mortgage investors, we report realized gains or losses on the sale of originated residential mortgage loans and retention of mortgage servicing rights, which we believe is an indicator of performance for the Servicing and Origination segment and therefore included in core earnings. Realized gains or losses on the sale of originated residential mortgage loans had no impact on core earnings in any prior period, but may impact core earnings in future periods.
Beginning with the third quarter of 2019, as a result of the continued evaluation of how Shellpoint operates its business and its impact on the Company's operating performance, core earnings includes Shellpoint's GAAP net income with the exception of the unrealized gains or losses due to changes in valuation inputs and assumptions on MSRs owned by NewRez, and non-capitalized transaction-related expenses. This change was not material to core earnings for the quarter ended September 30, 2019.
Management believes that the adjustments to compute "core earnings" specified above allow investors and analysts to readily identify and track the operating performance of the assets that form the core of our activity, assist in comparing the core operating results between periods, and enable investors to evaluate our current core performance using the same measure that management uses to operate the business. Management also utilizes core earnings as a measure in its decision-making process relating to improvements to the underlying fundamental operations of our investments, as well as the allocation of resources between those investments, and management also relies on core earnings as an indicator of the results of such de cisions. Core earnings excludes certain recurring items, such as gains and losses (including impairment as well as derivative activities) and non-capitalized transaction-related expenses, because they are not considered by management to be part of our core operations for the reasons described herein. As such, core earnings is not intended to reflect all of our activity and should be considered as only one of the factors used by management in assessing our performance, along with GAAP net income which is inclusive of all of our activities.
The primary differences between core earnings and the measure we use to calculate incentive compensation relate to (i) realized gains and losses (including impairments), (ii) non-capitalized transactionrelated expenses and (iii) deferred taxes (other than those related to unrealized gains and losses). Each are excluded from core earnings and included in our incentive compensation measure (either immediately or through amortization). In addition, our incentive compensation measure does not include accretion on held-for-sale loans and the timing of recognition of income from consumer loans is different. Unlike core earnings, our incentive compensation measure is intended to reflect all realized results of operations . The Gain on Remeasurement of Consumer Loans Investment was treated as an unrealized gain for the purposes of calculating incentive compensation and was therefore excluded from such calculation.
30
Endnotes to Slides 3 and 4
Endnotes to Slide 3: Source: Company filings and data, and Bloomberg. Financial data as of September 30, 2019 unless otherwise noted. Market data as of September 30, 2019. (1) Refer to the condensed consolidated balance sheets on slide 26 of this presentation for additional information. (2) Dividend yield based on NRZ closing price of $15.68 on September 30, 2019 and annualized dividend based on a $0.50 per common share quarterly dividend. (3) "Inception" date refers to May 2, 2013. (4) Represents both common and preferred dividends. Inclusive of common and preferred dividends declared to shareholders on September 23, 2019.
Endnotes to Slide 4: Source: Company filings and data, and Bloomberg. Financial and market data as of September 30, 2019 unless otherwise noted. (1) Per common share calculations of GAAP Net Income and Core Earnings are based on 415,588,238 weighted average diluted common shares during the quarter ended September 30, 2019. (2) Core earnings is a non-GAAP measure. See Reconciliation pages in the Appendix for a reconciliation to the most comparable GAAP measure. (3) Dividend yield based on NRZ closing price of $15.68 on September 30, 2019 and annualized dividend based on a $0.50 per common share quarterly dividend. (4) Includes $155 million of New Residential's 7.50% Series A Cumulative Redeemable Preferred Stock and $283 million of New Residential's 7.125% Series B Cumulative Redeemable Preferred Stock. (5) MSRs and Servicer Advances: Excess MSRs - Net Investment of $276 million includes (A) $530 million investment in 9/30/19 Legacy NRZ Excess MSRs, and (B) $17 million of restricted cash and other assets, net of debt and other liabilities of $271 million (debt issued on the NRZ Agency Excess MSR portfolio). At 9/30/19 Net Investment excludes Excess MSR Cash (included in Cash as of 9/30/19). MSRs - Net Investment of $2,692 million includes $8,773 million of total assets, net of debt and other liabilities of $6,070 million and non-controlling interests in the portfolio of $11 million; includes Originations. At 9/30/19 Net Investment excludes MSR cash (included in cash as of 9/30/19). Servicer Advances: Net Investment of $102 million includes (A) $95 million net investment in AP LLC Advances, with $583 million of total assets, net of debt and other liabilities of $438 million and non-controlling interests in the portfolio of $50 million and (B) $7 million net investment in SLS Advances, with $21 million of total assets, net of debt and other liabilities of $14 million. At 9/30/19 Net Investment excludes Servicer Advance Cash (included in Cash as of 9/30/19). Targeted Lifetime Net Yield is targeted IRR for pools that have settled.
Residential Securities & Call Rights: Net Investment of $1,988 million includes (A) $1,572 million net investment in Non-Agency RMBS, with $8,229 million of assets, net of debt and other liabilities of $6,657 million, (B) $416 million in Agency RMBS, with $13,564 million of assets (including $4,427 million of Open Trades Receivable), net of debt and other liabilities of $13,148 million (including $2,535 million of Open Trades Payable) and (C) $0.3 million net investment in Call Rights. At 9/30/19, Net Investment excludes Residential Securities Cash (included in Cash as of 9/30/19). Targeted Lifetime Net Yield represents the targeted future IRR over a weighted average life of 6.3 years for Non-Agency RMBS, assuming actual and targeted leverage, and represents the IRR over a weighted average life of 4.6 years for Agency RMBS. Note that the economic returns from our call right strategy could be adversely affected by a rise in interest rates and are contingent on the level of delinquencies and outstanding advances in each transaction, fair market value of the related collateral and other economic factors and market conditions. We may become subject to claims and legal proceedings, including purported class-actions, in the ordinary course of our business, challenging our right to exercise these call rights. Call rights are usually exercisable when current loan balances in a related portfolio are equal to, or lower than, 10% of their original balance. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements.
Residential Loans: Net Investment of $1,375 million includes (A) $1,356 million net investment in Residential Loans & REO, with $7,635 million of total assets, net of debt and other liabilities of $6,279 million, (B) $18 million net investment in EBOs, with $48 million of total assets, net of debt and other liabilities of $30 million and (C) $1 million net investment in Reverse Loans, with $9 million of total assets, net of debt and other liabilities of $8 million. At 9/30/19 Net Investment excludes Residential Loan Cash (included in Cash as of 9/30/19). Targeted Lifetime Net Yield represents the IRR over a weighted average life of 10.0 years.
Consumer Loans: Net Investment of $56 million includes $972 million of total assets, net of debt and other liabilities of $893 million and non-controlling interests in the portfolio of $23 million. At 9/30/19 Net Investment excludes Consumer Loan Cash (included in Cash as of 9/30/19). Targeted Lifetime Net Yield represents the IRR over a weighted average life of 3.9 years.
Cash: As of September 30, 2019, cash and cash equivalents totaled $738 million. (6) Refer to the condensed consolidated balance sheets on slide 26 of this presentation for additional information. (7) `19 YTD Economic Return represents NRZ book value change from December 31, 2018 through September 30, 2019 plus common dividends declared during that time ($1.50). (8) `19 YTD Total Shareholder Return represents NRZ share price appreciation from December 31, 2018 through September 30, 2019 plus common dividends declared during that time ($1.50).
31
Endnotes to Slide 5
Endnotes to Slide 5: Source: Company filings and data. Data as of September 30, 2019. (1) MSRs and Servicer Advances: Excess MSRs - Net Investment of $276 million includes (A) $530 million investment in 9/30/19 Legacy NRZ Excess MSRs, and (B) $17 million of restricted cash and other assets, net of debt and other liabilities of $271 million (debt issued on the NRZ Agency Excess MSR portfolio). At 9/30/19 Net Investment excludes Excess MSR Cash (included in Cash as of 9/30/19). MSRs - Net Investment of $2,692 million includes $8,773 million of total assets, net of debt and other liabilities of $6,070 million and non-controlling interests in the portfolio of $11 million; includes Originations. At 9/30/19 Net Investment excludes MSR cash (included in cash as of 9/30/19). Servicer Advances: Net Investment of $102 million includes (A) $95 million net investment in AP LLC Advances, with $583 million of total assets, net of debt and other liabilities of $438 million and non-controlling interests in the portfolio of $50 million and (B) $7 million net investment in SLS Advances, with $21 million of total assets, net of debt and other liabilities of $14 million. At 9/30/19 Net Investment excludes Servicer Advance Cash (included in Cash as of 9/30/19). Targeted Lifetime Net Yield is targeted IRR for pools that have settled.
Residential Securities & Call Rights: Net Investment of $1,988 million includes (A) $1,572 million net investment in Non-Agency RMBS, with $8,229 million of assets, net of debt and other liabilities of $6,657 million, (B) $416 million in Agency RMBS, with $13,564 million of assets (including $4,427 million of Open Trades Receivable), net of debt and other liabilities of $13,148 million (including $2,535 million of Open Trades Payable) and (C) $0.3 million net investment in Call Rights. At 9/30/19, Net Investment excludes Residential Securities Cash (included in Cash as of 9/30/19). Targeted Lifetime Net Yield represents the targeted future IRR over a weighted average life of 6.3 years for Non-Agency RMBS, assuming actual and targeted leverage, and represents the IRR over a weighted average life of 4.6 years for Agency RMBS. Note that the economic returns from our call right strategy could be adversely affected by a rise in interest rates and are contingent on the level of delinquencies and outstanding advances in each transaction, fair market value of the related collateral and other economic factors and market conditions. We may become subject to claims and legal proceedings, including purported class-actions, in the ordinary course of our business, challenging our right to exercise these call rights. Call rights are usually exercisable when current loan balances in a related portfolio are equal to, or lower than, 10% of their original balance. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements.
Residential Loans: Net Investment of $1,375 million includes (A) $1,356 million net investment in Residential Loans & REO, with $7,635 million of total assets, net of debt and other liabilities of $6,279 million, (B) $18 million net investment in EBOs, with $48 million of total assets, net of debt and other liabilities of $30 million and (C) $1 million net investment in Reverse Loans, with $9 million of total assets, net of debt and other liabilities of $8 million. At 9/30/19 Net Investment excludes Residential Loan Cash (included in Cash as of 9/30/19). Targeted Lifetime Net Yield represents the IRR over a weighted average life of 10.0 years.
Consumer Loans: Net Investment of $56 million includes $972 million of total assets, net of debt and other liabilities of $893 million and non-controlling interests in the portfolio of $23 million. At 9/30/19 Net Investment excludes Consumer Loan Cash (included in Cash as of 9/30/19). Targeted Lifetime Net Yield represents the IRR over a weighted average life of 3.9 years.
Remaining 10% is attributable to cash. As of September 30, 2019, cash and cash equivalents totaled $738 million.
Targeted Lifetime Net Yield is based upon management's current views and estimates, and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements.
(2) Q4'15 excludes $39 million of consumer debt.
32
Endnotes to Slides 6 through 9
Endnotes to Slide 6: Source: Company filings and data, and Bloomberg. Financial and market data as of September 30, 2019 unless otherwise noted. (1) Based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements.
Endnotes to Slide 7: Source: Company filings and data. (1) "2013" AUM refers to New Residential AUM as of December 31, 2013. (2) "Today" AUM refers to New Residential AUM as of September 30, 2019.
Endnotes to Slide 8: Source: Company filings and data, and Bloomberg. Financial and market data as of September 30, 2019 unless otherwise noted. (1) Based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements. (2) Based upon the average decline in 1 month Libor during Q3'19, if held constant, we would expect to save $50 million in interest expense over the next twelve months. Based on
management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements. (3) Numbers presented for NewRez prior to Q3'18 are not included in New Residential results or balance sheet and are not audited. (4) Source: Bureau of Labor Statistics.
Endnotes to Slide 9: (1) Ditech asset values as of August 31, 2019. (2) Financing facilities include loan warehouse, MSR and servicer advance facilities. (3) "Pro Forma" numbers, unless otherwise noted, are based on New Residential September 30, 2019 numbers combined with the acquisition of assets (values as of August 31, 2019) and
employees from Ditech. (4) Number of customers is based on total New Residential MSR loan count pro forma for acquisition of assets from Ditech (Ditech loan count as of August 31, 2019). (5) Projections refer to FY'20 estimates and are based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this
Presentation for more information on forward-looking statements. (6) Rankings are based on Inside Mortgage Finance rankings as of October 4, 2019 and October 18, 2019. (7) Based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements.
33
Endnotes to Slides 10 through 14
Endnotes to Slide 10: Source: Company filings and data as of September 30, 2019. (1) Includes $155 million of New Residential's 7.50% Series A Cumulative Redeemable Preferred Stock and $283 million of New Residential's 7.125% Series B Cumulative Redeemable
Preferred Stock. (2) Represents both common and preferred dividends. Inclusive of common and preferred dividends declared to shareholders on September 23, 2019. (3) Based upon the average decline in 1M Libor during Q3'19, if held constant, we would expect to save $50 million in interest expense over the next twelve months. In addition, during
Q3'19, NRZ refinanced existing debt which is projected to save $25 million in interest expense over the next twelve months. Based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements.
Endnotes to Slide 12: (1) Based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements. (2) New Residential portfolios on which New Residential affiliate businesses provide services may vary depending on the terms of the servicing or subservicing contract in place between
New Residential and the applicable servicer or subservicer. All transactions between New Residential (and between any such servicer or subservicer) and its affiliate businesses are negotiated contracts with market pricing. Endnotes to Slide 13: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) Lock volume refers to interest rate lock commitments across all channels. (2) FY'19 and FY'20 estimates are based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements. (3) Numbers presented prior to Q3'18 are not included in New Residential results or balance sheet and are not audited. (4) Based on Q3'19 funded volume. Endnotes to Slide 14: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) FY'19 and FY'20 estimates are based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements. (2) Numbers presented prior to Q3'18 are not included in New Residential results or balance sheet and are not audited.
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Endnotes to Slides 16 through 19
Endnotes to Slide 16: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) Includes Excess MSRs and Full MSRs. (2) Call rights UPB estimated as of September 30, 2019. The UPB of the loans relating to our call rights may be materially lower than the estimates in this Presentation, and there can be no
assurance that we will be able to execute on this pipeline of callable deals in the near term, on the timeline presented above, or at all, or that callable deals will be economically favorable. The economic returns from this strategy could be adversely affected by a rise in interest rates and are contingent on the level of delinquencies and outstanding advances in each transaction, fair market value of the related collateral and other economic factors and market conditions. We may become subject to claims and legal proceedings, including purported class-actions, in the ordinary course of our business, challenging our right to exercise these call rights. Call rights are usually exercisable when current loan balances in a related portfolio are equal to, or lower than, 10% of their original balance. (3) Includes $155mm of New Residential's 7.50% Series A Cumulative Redeemable Preferred Stock and $283mm of New Residential's 7.125% Series B Cumulative Redeemable Preferred Stock. (4) Based upon the average decline in 1M Libor during Q3'19, if held constant, we would expect to save $50 million in interest expense over the next twelve months. In addition, during Q3'19, NRZ refinanced existing debt which is projected to save $25 million in interest expense over the next twelve months. Based on management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements.
Endnotes to Slide 17: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) MSR UPB includes Excess MSRs and Full MSRs. (2) These figures do not include any origination from Shellpoint and "counterparties" refers to external counterparties. (3) See "Abbreviations" in Appendix for more information. (4) "Total" columns reflect weighted average calculations accounting for partial Excess MSR ownership.
Endnotes to Slide 18: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) Based on management's current views and estimates, and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements. (2) Industry data for "Lower Average Loan Size", "More Seasoned Loans" and "More Credit Impaired" is per FNMA/FHLMC/GNMA agency data via eMBS provider. (3) Refinance population refers to percentage of population with 25bps or more incentive to refinance. Industry data for refinanceable population is per Barclays Capital data and
research. Based upon management's current views and estimates and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements. (4) Peer group includes publicly traded non-banks with MSR ownership (in alpha order: CHMI, COOP, FBC, PFSI / PMT, TWO, OCN).
Endnotes to Slide 19: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) Based on management's current views and estimates, and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements. (2) Call rights UPB estimated as of September 30, 2019. The UPB of the loans relating to our call rights may be materially lower than the estimates in this Presentation, and there can be no
assurance that we will be able to execute on this pipeline of callable deals in the near term, on the timeline presented above, or at all, or that callable deals will be economically favorable. The economic returns from this strategy could be adversely affected by a rise in interest rates and are contingent on the level of delinquencies and outstanding advances in each transaction, fair market value of the related collateral and other economic factors and market conditions. We may become subject to claims and legal proceedings, including purported class-actions, in the ordinary course of our business, challenging our right to exercise these call rights. Call rights are usually exercisable when current loan balances in a related portfolio are equal to, or lower than, 10% of their original balance. (3) Delinquency rate represents delinquency for all deals for which New Residential owns call rights.
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Endnotes to Slides 20 through 23
Endnotes to Slide 20: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) Based on management's current views and estimates, and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements. (2) There can be no assurance that we will be able to execute on this pipeline of callable deals in the near term, on the timeline presented above, or at all, or that callable deals will be
economically favorable. The economic returns from this strategy could be adversely affected by a rise in interest rates and are contingent on the level of delinquencies and outstanding advances in each transaction, fair market value of the related collateral and other economic factors and market conditions. We may become subject to claims and legal proceedings, including purported class-actions, in the ordinary course of our business, challenging our right to exercise these call rights. Call rights are usually exercisable when current loan balances in a related portfolio are equal to, or lower than, 10% of their original balance. (3) Represents principal and interest-paying securities, excludes bonds backed by consumer loans. (4) Default Source: Bank of America U.S. Securitized products Research and Webbs Hill Advisors. Delinquency Source: New Residential Company filings and data. Rate represents delinquency for the New Residential's Non-Agency Bond Portfolio.
Endnotes to Slide 21: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) Sample population is based on a pool that was purchased by New Residential in 2018 and was over $1 billion UPB in size. Based on management's current views and estimates, and
actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-looking statements. (2) EBO claims receivables is included in the FHA insured portfolio along with EBO loans.
Endnotes to Slide 22: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) Includes Q4'19 activity. (2) Based on management's current views and estimates, and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements. (3) Represents activity from October 1, 2019 through October 24, 2019.
Endnotes to Slide 23: (1) Based on management's current views and estimates, and actual results may vary materially. See "Disclaimers" at the beginning of this Presentation for more information on forward-
looking statements.
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Abbreviations
Abbreviations: This Presentation may include abbreviations, which have the following meanings:
SI Short Interest
60+ DQ Percentage of loans that are delinquent by 60 days or more
TSO Total Shares Outstanding
Age (mths) or Loan Age (mths) Weighted average number of months loans are outstanding BPO Broker's Price Opinion BV Book Value CDR Conditional Default Rate CLTV Ratio of current loan balance to estimated current asset value CPR Constant Prepayment Rate CRR Constant Repayment Rate Cur - Current Current UPB UPB as of the end of the current month DPD Days past due DQ Delinquency DTI Debt to Income
Uncollected Payments Percentage of loans that missed their most recent payment
UPB Unpaid Principal Balance Updated IRR Internal rate of return calculated based on the cash flow received
to date through the current month and the projected future cash flow based on our original underwriting assumptions U/W LTD Underwritten life-to-date WA Weighted Average WAC Weighted Average Coupon WAL Weighted Average Life to Maturity WALA Weighted Average Loan Age YoY Year-over-year
EBO Residential Mortgage Loans acquired through the GNMA early buy-out program
Excess MSRs Monthly interest payments generated by the related Mortgage Servicing Rights (MSRs), net of a basic fee required to be paid to the servicer
FHLMC Freddie Mac / Federal Home Loan Mortgage Corporation
FICO A borrower's credit metric generated by the credit scoring model created by the Fair Isaac Corporation
Flow Arrangements Contractual recurring agreements, often monthly or quarterly, to purchase servicing of newly originated or highly delinquent loans
FNMA Fannie Mae / Federal National Mortgage Association
GNMA Ginnie Mae / Government National Mortgage Association
GWAC Gross Weighted Average Coupon
HPA Home Price Appreciation
IRR Internal Rate of Return
LHS Left Hand Side
LTD Life to Date
LTD Cash Flows Actual cash flow collected from the investment as of the end of the current month
LTV Loan to Value
Non-QM Non-qualified
NPL Non-Performing Loans
MSR Mortgage servicing rights
Original UPB UPB at time of securitization
PLS Private Label Securitizations
Proj. Future Cash Flows Future cash flow projected with the Company's original underwriting assumptions
QoQ Quarter-over-quarter
Recapture Rate Percentage of voluntarily prepaid loans that are refinanced by the servicer
REO Real Estate Owned
RHS Right Hand Side
RPL Reperforming Loan
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