Management's discussion and analysis of financial condition and results of operations is intended to help the reader understand the results of operations and financial condition of New Residential. The following should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto, and with "Risk Factors."
Management's discussion and analysis of financial condition and results of operations is intended to allow readers to view our business from management's perspective by (i) providing material information relevant to an assessment of our financial condition and results of operations, including an evaluation of the amount and certainty of cash flows from operations and from outside sources, (ii) focusing the discussion on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or future financial condition, including descriptions and amounts of matters that are reasonably likely, based on management's assessment, to have a material impact on future operations, and (iii) discussing the financial statements and other statistical data management believes will enhance the reader's understanding of our financial condition, changes in financial condition, cash flows and results of operations. As permitted by SEC Final Rule Release No. 33-10890, Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, this section discusses our results of operations for the current quarter endedMarch 31, 2022 compared to the immediately preceding prior quarter endedDecember 31, 2021 .
GENERAL
New Residential is a publicly traded REIT primarily focused on opportunistically investing in, and actively managing, investments related to the residential real estate market. We seek to generate long-term value for our investors by using our investment expertise to identify, create and invest primarily in mortgage related assets, including operating companies, that offer attractive risk-adjusted returns. Our investment strategy also involves opportunistically pursuing acquisitions and seeking to establish strategic partnerships that we believe enable us to maximize the value of the mortgage loans we originate and service by offering products and services to customers, servicers, and other parties through the lifecycle of transactions that affect each mortgage loan and underlying residential property. For more information about our investment guidelines, see "Item 1. Business - Investment Guidelines" of our annual report on Form 10-K for the year endedDecember 31, 2021 .
As of
We have elected to be treated as a REIT for
OUR MANAGER
We are externally managed by an affiliate of
OnDecember 27, 2017 , SoftBank Group Corp. ("SoftBank") acquired Fortress and Fortress operates within SoftBank as an independent business headquartered inNew York . MARKET CONSIDERATIONS Incoming economic data and indicators regarding the overall financial health and condition of theU.S. for the first quarter of 2022 were somewhat mixed. On balance, the annualizedU.S. real gross domestic product ("GDP") decreased for the first quarter of 2022 compared to an increase in the fourth quarter of 2021. Labor market conditions continued to improve with the total unemployment rate stepping down to 3.6% atMarch 31, 2022 from 3.9% atDecember 31, 2021 . The consumer price inflation-as measured by the 12-month percentage change in the personal consumption expenditures ("PCE") price index-remained elevated and well above theFederal Reserve's longer-term goal of 2.0%, largely driven by supply constraints and bottlenecks exacerbated by the geopolitical risks associated with the war inUkraine . Consumer spending remained robust during the first quarter of 2022, driven by improved social mobility as authorities in theU.S. continued to ease restrictions amid a reduction in COVID-19 cases and tempered concerns regarding the pervasiveness of the Omicron variant. 67 -------------------------------------------------------------------------------- Inflation indicators remained high and persistent throughout the first quarter of 2022, driven by strong aggregate demand for goods and services, significant increases in energy and commodity prices, and global supply chain disruptions. As a response, theFederal Reserve continues to signal its intention to move ahead with reducing policy accommodation. InMay 2022 , theU.S. central bank's policy-settingFederal Open Market Committee voted unanimously to increase the benchmark federal funds rate by 50 basis points. The decision to raise rates by a half percentage point marked the most aggressive increase made in a single meeting sinceMay 2000 . Over the last two decades, theFederal Reserve has opted to raise interest rates only in increments of 25 basis points, with the latest move underscoring the severity that inflation poses at the moment. Financial markets were volatile during the first quarter of 2022, reflecting heightened geopolitical risks, uncertainty about the outlook for monetary policy, and elevated financial market volatility. Equity indexes declined modestly, while spreads in the bond markets generally increased to pre-pandemic levels. In particular, nominal treasury yields increased during the quarter, driven byFederal Reserve communications viewed as implying a more rapid removal of monetary policy accommodation than previously expected. Housing demand remained strong, although activity in the residential housing sector continued to be restrained by shortages of construction materials, buildable lots, and other inputs. The number of mortgage rate locks for home purchases throughMarch 2022 was elevated relative to pre-pandemic levels. Mortgage credit for households with lower credit scores continued to ease during the first quarter of 2022 but remained tighter than before the pandemic. Delinquency rates for mortgages, which include loans in forbearance and other loans behind on payments, continued to trend down. Residential mortgage rates increased, mostly as a result of widening MBS spreads, which market participants attributed mainly to the tapering of theFederal Reserve's agency MBS purchases and uncertainty surrounding the market supply of agency MBS that would accompany balance sheet runoff by theFederal Reserve . Conventional 30-year rates increased to 4.2% as ofMarch 31, 2022 compared to 3.1% as ofDecember 31, 2021 . The increase in mortgage rates is expected to normalize origination volumes for 2022. TheMortgage Bankers Association estimates full year 2022 production volume of$2.6 trillion , down from full year 2021 volume of$4.0 trillion . Furthermore, 33% of 2022 volume is estimated to be refinance volume compared to 57% in 2021.
The market conditions discussed above influence our investment strategy and
results, many of which have been impacted since
The following table summarizes the
Three Months Ended March 31, December 31, September 30, June 30, March 31, 2022(A) 2021 2021 2021 2021 Real GDP (1.4) % 6.9 % 2.3 % 6.7 % 6.3 %
(A)Annualized rate based on the advance estimate.
The following table summarizes the
March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 Unemployment rate 3.6 % 3.9 % 4.7 % 5.9 % 6.0 % The following table summarizes the 10-yearTreasury rate and the 30-year fixed mortgage rates: March 31, December 31, September 30, June 30, March 31, 2022 2021 2021 2021 2021 10-year U.S. Treasury rate 2.6 % 1.5 %
1.5 % 1.5 % 1.7 %
30-year fixed mortgage rate 4.2 % 3.1 %
2.9 % 3.0 % 3.1 %
We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as ofMarch 31, 2022 ; however, uncertainty over the ultimate impact COVID-19 as well as the geopolitical risks associated with the Russian invasion ofUkraine will have on the global economy generally, and our business in particular, makes any estimates and assumptions as ofMarch 31, 2022 inherently less certain than they would be absent the current and potential impacts of COVID-19 and the war inUkraine . Actual results may materially differ from those estimates. The COVID-19 pandemic and the war inUkraine and their impact on the current financial, economic and capital 68 --------------------------------------------------------------------------------
markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity and ability to pay distributions.
CHANGES TO LIBOR
LIBOR is used extensively in theU.S. and globally as a "benchmark" or "reference rate" for various commercial and financial contracts, including corporate and municipal bonds and loans, floating rate mortgages, asset-backed securities, consumer loans, and interest rate swaps and other derivatives. It had been expected that a number of private-sector banks currently reporting information used to set LIBOR would stop doing so after 2021 when their current reporting commitment ends, which would either cause LIBOR to stop publication immediately or cause LIBOR's regulator to determine that its quality has degraded to the degree that it is no longer representative of its underlying market. OnMarch 5, 2021 , Intercontinental Exchange Inc. ("ICE") announced thatICE Benchmark Administration Limited , the administrator of LIBOR, intends to stop publication of the majority of USD-LIBOR tenors (overnight, 1-, 3-, 6-, and 12-month) onJune 30, 2023 . OnJanuary 1, 2022 , ICE discontinued the publication of the 1-week and 2-month tenors of USD-LIBOR. In theU.S. , the Alternative Reference Rates Committee ("ARRC") has identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative rate forU.S. dollar-based LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized byU.S. Treasury securities, and is based on directly observableU.S. Treasury -backed repurchase transactions. However, some market participants are still evaluating what convention of SOFR will be adopted for various types of financial instruments and securitization vehicles. For example, the mortgage and derivatives markets have adopted the daily compounded and paid in arrears SOFR convention. In contrast, GSEs, such as Fannie Mae and Freddie Mac, have begun issuing adjustable rate mortgages and mortgage-backed securities indexed to the 30-, 90-, and 180-day Average SOFR rates published by theFederal Reserve Bank of New York as well as term SOFR rates in the future. We have material contracts that are indexed to USD-LIBOR and are monitoring this activity, evaluating the related risks and our exposure, and adding alternative language to contracts, where necessary. Certain contracts, such as interest rate swaps, have an orderly market transition already in process. However, it is not possible to predict the effect of any of these developments, and any future initiatives to regulate, reform or change the manner of administration of LIBOR could result in adverse consequences to the rate of interest payable and receivable on, market value of and market liquidity for LIBOR-based financial instruments. We do not currently intend to amend our 7.50% Series A-, 7.125% Series B-, 6.375% Series C- Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock to change the existing USD-LIBOR cessation fallback language. TheFinancial Accounting Standards Board has issued accounting guidance that provides optional expedients and exceptions to contracts, hedging relationships and other transactions impacted by LIBOR transition if certain criteria are met. The guidance can be applied as ofJanuary 1, 2020 . In preparation for the phase-out of LIBOR, we adopted and implemented the SOFR index for our Freddie Mac and Fannie Mae adjustable-rate mortgages ("ARMs") and Non-QM residential loans. For debt facilities that do not mature prior to the phase-out of LIBOR, we adopted the allowable contract modification relief optional expedient and have implemented amending terms to transition to an alternative benchmark. For the quarter endedMarch 31, 2022 , new and renewed facilities began adopting the SOFR index, while other facilities early adopted and transitioned to the SOFR index. 69 --------------------------------------------------------------------------------
OUR PORTFOLIO
Our portfolio, as ofMarch 31, 2022 , is composed of servicing and origination, including our subsidiary operating entities, residential securities and loans and other investments, as described in more detail below. The assets in our portfolio are described in more detail below (dollars in thousands). Residential Securities, Properties and Origination and Servicing Loans Total Properties and MSR Related Origination and Real Estate Residential Mortgage Loans Origination Servicing Investments Servicing Securities Mortgage Loans Consumer Loans Receivable Corporate TotalMarch 31, 2022 Investments$ 4,967,437 $ 6,666,098 $ 2,835,711 $ 14,469,246 $ 9,509,930 $ 2,791,926 $ 462,055 $ 1,670,415 $ -$ 28,903,572 Cash and cash equivalents 609,337 278,059 269,187 1,156,583 301,454 2,900 29,702 39,048 141,490 1,671,177 Restricted cash 47,166 68,090 62,224 177,480 11,308 1,591 23,734 80,612 312 295,037 Other assets 869,977 2,671,819 2,143,253 5,685,049 713,256 165,379 35,702 113,293 200,883 6,913,562Goodwill 11,836 12,540 5,092 29,468 - - - 55,731 - 85,199 Total assets$ 6,505,753 $ 9,696,606 $ 5,315,467 $ 21,517,826 $ 10,535,948 $ 2,961,796 $ 551,193 $ 1,959,099 $ 342,685 $ 37,868,547 Debt$ 4,795,869 $ 4,621,279 $ 3,433,522 $ 12,850,670 $ 9,485,486 $ 2,331,373 $ 413,881 $ 1,413,739 $ 610,047 $ 27,105,196 Other liabilities 503,738 2,201,283 364,851 3,069,872 7,346 310,112 973 26,615 163,721 3,578,639 Total liabilities 5,299,607 6,822,562 3,798,373 15,920,542 9,492,832 2,641,485 414,854 1,440,354 773,768 30,683,835 Total equity 1,206,146 2,874,044 1,517,094 5,597,284 1,043,116 320,311 136,339 518,745 (431,083) 7,184,712 Noncontrolling interests in equity of consolidated subsidiaries 13,334 - 9,999 23,333 - - 38,745 - - 62,078 Total New Residential stockholders' equity$ 1,192,812 $ 2,874,044 $ 1,507,095 $ 5,573,951 $ 1,043,116 $ 320,311 $ 97,594 $ 518,745 $ (431,083) $ 7,122,634 Investments in equity method investees $ - $ -$ 93,129 $ 93,129 $ - $ - $ - $ - $ -$ 93,129 Operating Investments Origination For the three months endedMarch 31, 2022 , loan origination volume was$26.9 billion , down from$38.1 billion in the prior quarter. Gain on sale margin for the three months endedMarch 31, 2022 was 1.53%, 12 bps lower than the 1.65% for the prior quarter, primarily driven by rising interest rates coupled with excess industry capacity. We expect margins to stabilize throughout 2022, especially in third-party originated channels, as industry capacity continues to adjust to demand. Included in our Origination segment are the financial results of two services businesses,E Street Appraisal Management LLC ("eStreet") andAvenue 365 Lender Services, LLC ("Avenue 365"). E Street offers appraisal valuation services, and Avenue 365 provides title insurance and settlement services to ourMortgage Company . 70 -------------------------------------------------------------------------------- The tables below provide selected operating statistics for our Origination segment: Unpaid Principal Balance Three Months Ended December 31, (in millions) March 31, 2022 % of Total 2021 % of Total QoQ Change
Production by Channel
Direct to Consumer$ 4,425 16 %$ 6,680 18 %$ (2,255) Retail / Joint Venture 6,404 24 % 9,168 24 % (2,764) Wholesale 4,646 17 % 6,628 17 % (1,982) Correspondent 11,401 43 % 15,645 41 % (4,244) Total Production by Channel$ 26,876 100 %$ 38,121 100 %$ (11,245)
Production by Product
Agency$ 18,086 67 %$ 26,330 69 %$ (8,244) Government 7,576 28 % 10,402 27 % (2,826) Non-QM 549 2 % 356 1 % 193 Non-Agency 515 2 % 830 2 % (315) Other 150 1 % 203 1 % (53) Total Production by Product$ 26,876 100 %$ 38,121 100 %$ (11,245) % Purchase 54 % 51 % % Refinance 46 % 49 % Three Months Ended (dollars in thousands) March 31, 2022 December 31, 2021 QoQ Change Gain on originated residential mortgage loans, held-for-sale, net(A)(B)(C)(D) $ 407,269$ 540,662 $ (133,393) Pull through adjusted lock volume$ 26,683,082 $ 33,509,582 $ (6,826,500) Gain on originated residential mortgage loans, as a percentage of pull through adjusted lock volume, by channel: Direct to Consumer 3.14 % 3.22 % Retail / Joint Venture 2.85 % 3.42 % Wholesale 0.90 % 0.91 % Correspondent 0.13 % 0.20 %
Total gain on originated residential mortgage loans, as a percentage of pull through adjusted lock volume
1.53 % 1.65 % (A)Includes realized gains on loan sales and related new MSR capitalization, changes in repurchase reserves, changes in fair value of IRLCs, changes in fair value of loans held for sale and economic hedging gains and losses. (B)Includes loan origination fees of$252.5 million and$478.0 million for the three months endedMarch 31, 2022 andDecember 31, 2021 , respectively. (C)Excludes$64.7 million and$29.2 million of Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net for the three months endedMarch 31, 2022 andDecember 31, 2021 , respectively, related to the MSR Related Investments, Servicing, and Residential Mortgage Loans segments, as well as intercompany eliminations (Note 8 to the Consolidated Financial Statements). (D)Excludes mortgage servicing rights revenue on recaptured loan volume delivered back to NRM.
Total Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net
decreased by
Servicing
Our servicing business operates through our performing loan servicing division and a special servicing division, Shellpoint Mortgage Servicing ("SMS"). The performing loan servicing division services performing Agency and government-insured loans. SMS services delinquent government-insured, Agency and Non-Agency loans on behalf of the owners of the underlying 71 -------------------------------------------------------------------------------- mortgage loans. As ofMarch 31, 2022 , the performing loan servicing division (theMortgage Company ) serviced$392.6 billion UPB of loans andShellpoint Mortgage Servicing serviced$104.3 billion UPB of loans, for a total servicing portfolio of$496.9 billion UPB, representing a 3% increase fromDecember 31, 2021 . In addition, the 30-year conventional mortgage rate was 106 bps higher during the first quarter of 2022, in turn slowing down prepayments on mortgages and amortization on MSR assets.
The table below provides the mix of our serviced assets portfolio between subserviced performing servicing on behalf of New Residential or its subsidiaries (labeled as "Performing Servicing") and subserviced non-performing, or special servicing (labeled as "Special Servicing") for third parties and delinquent loans subserviced for other New Residential subsidiaries for the periods presented.
Unpaid Principal Balance
December 31, (in millions) March 31, 2022 2021 QoQ Change Performing Servicing MSR Assets$ 387,394 $ 376,218 $ 11,176 Residential Whole Loans 4,889 7,539 (2,650) Third Party 304 509 (205) Total Performing Servicing 392,587 384,266 8,321 Special Servicing MSR Assets 11,336 13,634 (2,298) Residential Whole Loans 7,093 6,558 535 Third Party 85,875 78,305 7,570 Total Special Servicing 104,304 98,497 5,807 Total Servicing Portfolio$ 496,891 $ 482,763 $ 14,128 Agency Servicing MSR Assets$ 281,456 $ 272,919 $ 8,537 Third Party 10,735 11,027 (292) Total Agency Servicing 292,191 283,946 8,245 Government-insured Servicing MSR Assets 111,693 109,577 2,116 Total Government Servicing 111,693 109,577 2,116 Non-Agency (Private Label) Servicing MSR Assets 5,581 7,356 (1,775) Residential Whole Loans 11,982 14,097 (2,115) Third Party 75,444 67,787 7,657 Total Non-Agency (Private Label) Servicing 93,007 89,240 3,767 Total Servicing Portfolio$ 496,891 $ 482,763 $ 14,128 72
-------------------------------------------------------------------------------- The table below summarizes base servicing fees and other fees for the periods presented: Three Months Ended (in thousands) March 31, 2022 December 31, 2021 QoQ Change Base Servicing Fees MSR Assets$ 281,110 $ 254,905$ 26,205 Residential Whole Loans 3,389 2,930 459 Third Party 23,653 26,566 (2,913) Total Base Servicing Fees 308,152 284,401 23,751 Other Fees Incentive fees 21,244 21,493 (249) Ancillary fees 13,451 12,570 881 Boarding fees 1,808 2,848 (1,040) Other fees 4,403 8,434 (4,031) Total Other Fees(A) 40,906 45,345 (4,439) Total Servicing Fees$ 349,058 $ 329,746$ 19,312
(A)Includes other fees earned from third parties of
MSR Related Investments
MSRs and MSR Financing Receivables
As ofMarch 31, 2022 , we had$8.0 billion carrying value of MSRs and MSR Financing Receivables. As ofMarch 31, 2022 , our Full and Excess MSR portfolio decreased to$626 billion UPB from$629 billion UPB as ofDecember 31, 2021 . Full MSRs as ofMarch 31, 2022 remained relatively unchanged at$549 billion UPB fromDecember 31, 2021 . Excess MSRs as ofMarch 31, 2022 decreased to$77 billion UPB from$80 billion as ofDecember 31, 2021 . The increase in portfolio size during the periods presented was predominantly a result of favorable mark-to-market changes in valuations inputs and assumptions. We finance our MSRs and MSR financing receivables with short- and medium-term bank and public capital markets notes. These borrowings are primarily recourse debt and bear both fixed and variable interest rates offered by the counterparty for the term of the notes of a specified margin over LIBOR or SOFR. The capital markets notes are typically issued with a collateral coverage percentage, which is a quotient expressed as a percentage equal to the aggregate note amount divided by the market value of the underlying collateral. The market value of the underlying collateral is generally updated on a quarterly basis and if the collateral coverage percentage becomes greater than or equal to a collateral trigger, generally 90%, we may be required to add funds, pay down principal on the notes, or add additional collateral to bring the collateral coverage percentage below 90%. The difference between the collateral coverage percentage and the collateral trigger is referred to as a "margin holiday."
See Note 18 to our Consolidated Financial Statements for further information regarding financing of our MSRs and MSR Financing Receivables.
We have contracted with certain subservicers and, in relation to certain MSR purchases, interim subservicers, to perform the related servicing duties on the residential mortgage loans underlying our MSRs. As ofMarch 31, 2022 , these subservicers include PHH, Mr. Cooper,LoanCare , Valon and Flagstar, which subservice 9.9%, 8.9%, 7.5%, 0.9% and 0.3% of the underlying UPB of the related mortgages, respectively (includes both MSRs and MSR Financing Receivables). The remaining 72.5% of the underlying UPB of the related mortgages is subserviced by ourMortgage Company . We are generally obligated to fund all future servicer advances related to the underlying pools of residential mortgage loans on our MSRs and MSR Financing Receivables. Generally, we will advance funds when the borrower fails to meet, including forbearances, contractual payments (e.g. principal, interest, property taxes, insurance). We will also advance funds to maintain and report foreclosed real estate properties on behalf of investors. Advances are recovered through claims to the related investor and subservicers. Pursuant to our servicing agreements, we are obligated to make certain advances on residential mortgage loans to be in compliance with applicable requirements. In certain instances, the subservicer is required to reimburse us for any advances that were deemed nonrecoverable or advances that were not made in accordance with the related servicing contract. 73 -------------------------------------------------------------------------------- We finance our servicer advances with short- and medium-term collateralized borrowings. These borrowings are non-recourse committed facilities that are not subject to margin calls and bear both fixed and variable interest rates offered by the counterparty for the term of the notes, generally less than one year, of a specified margin over LIBOR or SOFR. See Note 18 to our Consolidated Financial Statements for further information regarding financing of our servicer advances. The table below summarizes our MSRs and MSR Financing Receivables as ofMarch 31, 2022 : (dollars in millions) Current UPB Weighted Average MSR (bps) Carrying Value GSE$ 376,795.2 29 bps$ 5,318.6 Non-Agency 60,341.6 48 858.0 Ginnie Mae 111,972.2 39 1,787.9 Total$ 549,109.0 33 bps$ 7,964.5 The following table summarizes the collateral characteristics of the residential mortgage loans underlying our MSRs and MSR Financing Receivables as ofMarch 31, 2022 (dollars in thousands):
Collateral Characteristics
Three Month Three Month Three Month Three Month Current Carrying Current Principal Average Loan Age Adjustable Rate Average Average Average Average Recapture Amount Balance Number of Loans WA FICO Score(A) WA Coupon WA Maturity (months) (months) Mortgage %(B) CPR(C) CRR(D) CDR(E) Rate GSE$ 5,318,541 $ 376,795,155 2,052,288 755 3.6 % 281 48 1.5 % 12.5 % 12.4 % 0.1 % 20.8 % Non-Agency 857,998 60,341,642 530,439 638 4.2 % 291 187 10.5 % 12.3 % 10.8 % 1.6 % 6.9 %Ginnie Mae 1,787,926 111,972,212 494,140 697 3.2 % 332 24 0.7 % 13.6 % 13.3 % 0.3 % 24.5 % Total$ 7,964,465 $ 549,109,009 3,076,867 730 3.6 % 292 58 2.3 % 12.7 % 12.4 % 0.3 % 20.0 % Collateral Characteristics Delinquency 30 Delinquency 60 Delinquency 90+ Real Estate Days(F) Days(F) Days(F) Loans in Foreclosure Owned Loans in Bankruptcy GSE 0.8 % 0.2 % 1.1 % 0.2 % - % 0.1 % Non-Agency 6.8 % 2.6 % 5.8 % 5.5 % 0.8 % 2.3 % Ginnie Mae 2.5 % 0.8 % 2.0 % 0.3 % - % 0.3 % Total 1.8 % 0.6 % 1.8 % 0.8 % 0.1 % 0.4 % (A)Based on the weighted average of information provided by the loan servicer on a monthly basis. The loan servicer generally updates the FICO score when loans are refinanced or become delinquent. (B)Represents the percentage of the total principal balance of the pool that corresponds to adjustable rate mortgages. (C)Represents the annualized rate of the prepayments during the quarter as a percentage of the total principal balance of the pool. (D)Represents the annualized rate of the voluntary prepayments during the quarter as a percentage of the total principal balance of the pool. (E)Represents the annualized rate of the involuntary prepayments (defaults) during the quarter as a percentage of the total principal balance of the pool. (F)Represents the percentage of the total principal balance of the pool that corresponds to loans that are delinquent by 30-59 days, 60-89 days or 90 or more days. 74
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Excess MSRs
The following tables summarize the terms of our Excess MSRs:
Summary of Direct Excess MSRs as ofMarch 31, 2022
MSR Component(A) Excess MSR Weighted Current UPB Weighted Average Average Excess Carrying Value (billions) MSR (bps) MSR (bps) Interest in Excess MSR (%) (millions) Agency$ 25.4 29 bps 21 bps 32.5% - 66.7%$ 129.7 Non-Agency(B) 29.2 35 15 33.3% - 100% 127.7 Total/Weighted Average$ 54.6 32 bps 18 bps$ 257.4 (A)The MSR is a weighted average as ofMarch 31, 2022 , and the Excess MSR represents the difference between the weighted average MSR and the basic fee (which fee remains constant). (B)Serviced by Mr. Cooper and SLS, we also invested in related Servicer advance investments, including the basic fee component of the related MSR (Note 6 to our Consolidated Financial Statements) on$19.2 billion UPB underlying these Excess MSRs. Summary of Excess MSRs Through Equity Method Investees as ofMarch 31, 2022 MSR Component(A) Weighted Average New Residential Investee New Residential Current UPB Weighted Average Excess MSR Interest in Interest in Effective Ownership Investee Carrying (billions) MSR (bps) (bps) Investee (%) Excess MSR (%) (%) Value (millions) Agency$ 21.8 33 bps 22 bps 50.0 % 66.7 % 33.3 %$ 148.7 Total/Weighted Average$ 21.8 33 bps 22 bps$ 148.7
(A)The MSR is a weighted average as of
The following table summarizes the collateral characteristics of the loans underlying our direct Excess MSRs as ofMarch 31, 2022 (dollars in thousands): Collateral Characteristics Current Three Month Three Month Three Month Three Month Carrying Current Principal Average Loan Age Adjustable Rate Average Average Average Average Amount Balance Number of Loans WA FICO Score(A) WA Coupon WA Maturity (months) (months) Mortgage %(B) CPR(C) CRR(D) CDR(E) Recapture Rate Agency Original Pools$ 70,037 $ 15,326,409 133,431 731 4.5 % 223 147 1.5 % 19.2 % 18.5 % 0.9 % 23.5 % Recaptured Loans 59,630 10,104,134 63,898 737 3.8 % 261 49 - % 18.8 % 18.5 % 0.4 % 43.4 %$ 129,667 $ 25,430,543 197,329 734 4.2 % 238 107 0.8 % 19.1 % 18.5 % 0.7 % 31.6 % Non-Agency(F) Mr. Cooper and SLS Serviced: Original Pools$ 101,431 $ 25,461,696 149,045 679 4.2 % 266 192 8.4 % 17.2 % 14.6 % 1.5 % 15.8 % Recaptured Loans 26,290 3,725,361 17,791 743 3.5 % 273 29 - % 16.8 % 16.8 % - % 48.4 %$ 127,721 $ 29,187,057 166,836 687 4.1 % 267 172 6.7 % 17.2 % 14.9 % 1.3 % 19.9 %
Total/Weighted Average(H)
364,165 708 4.2 % 254 143 3.7 % 18.0 % 16.5 % 1.0 % 25.9 % 75
-------------------------------------------------------------------------------- Collateral Characteristics Delinquency Real Loans in Estate Loans in 30 Days(G) 60 Days(G) 90+ Days(G) Foreclosure Owned Bankruptcy Agency Original Pools 2.2 % 0.6 % 2.7 % 0.5 % 0.1 % 0.1 % Recaptured Loans 1.4 % 0.4 % 1.6 % 0.1 % - % - % 1.9 % 0.5 % 2.2 % 0.3 % 0.1 % 0.1 % Non-Agency(F) Mr. Cooper and SLS Serviced: Original Pools 12.1 % 2.8 % 4.5 % 5.1 % 0.4 % 1.5 % Recaptured Loans 1.5 % 0.3 % 1.0 % - % - % - % 10.8 % 2.5 % 4.0 % 4.5 % 0.4 % 1.3 % Total/Weighted Average(H) 6.8 % 1.6 % 3.2 % 2.6 % 0.2 % 0.8 % (A)Based on the weighted average of information provided by the loan servicer on a monthly basis. The loan servicer generally updates the FICO score when loans are refinanced or become delinquent. (B)Represents the percentage of the total principal balance of the pool that corresponds to adjustable rate mortgages. (C)Constant prepayment rate, represents the annualized rate of the prepayments during the quarter as a percentage of the total principal balance of the pool. (D)Represents the annualized rate of the voluntary prepayments during the quarter as a percentage of the total principal balance of the pool. (E)Represents the annualized rate of the involuntary prepayments (defaults) during the quarter as a percentage of the total principal balance of the pool. (F)We also invested in related Servicer Advance Investments, including the basic fee component of the related MSR (Note 6 to our Consolidated Financial Statements) on$19.2 billion UPB underlying these Excess MSRs. (G)Represents the percentage of the total principal balance of the pool that corresponds to loans that are delinquent by 30-59 days, 60-89 days or 90 or more days. (H)Weighted averages exclude collateral information for which collateral data was not available as of the report date. The following table summarizes the collateral characteristics as ofMarch 31, 2022 of the loans underlying Excess MSRs made through joint ventures accounted for as equity method investees (dollars in thousands). For each of these pools, we own a 50% interest in an entity that invested in a 66.7% interest in the Excess MSRs. Collateral Characteristics Current Current New Residential Three Month Three Month Three Month Three Month Carrying Principal Effective Ownership Number Average Loan Adjustable Rate Average Average Average Average Amount Balance (%) of Loans WA FICO Score(A) WA Coupon WA Maturity (months) Age (months) Mortgage %(B) CPR(C) CRR(D) CDR(E) Recapture Rate Agency Original Pools$ 59,508 $ 10,825,969 33.3 % 124,457 717 5.1 % 212 166 1.2 % 18.8 % 17.3 % 1.8 % 25.9 % Recaptured Loans 89,195 11,005,723 33.3 % 84,475 723 3.9 % 256 59 - % 19.9 % 19.2 % 1.0 % 49.1 %
Total/Weighted Average(G)
208,932 720 4.5 % 234 112 1.2 % 19.4 % 18.2 % 1.4 % 38.3 % Collateral Characteristics Delinquency Real Loans in Estate Loans in 30 Days(F) 60 Days(F) 90+ Days(F) Foreclosure Owned Bankruptcy Agency Original Pools 3.0 % 0.8 % 2.6 % 0.7 % 0.2 % 0.1 % Recaptured Loans 2.0 % 0.5 % 1.7 % 0.1 % - % 0.1 % Total/Weighted Average(G) 2.5 % 0.6 % 2.1 % 0.4 % 0.1 % 0.1 % (A)Based on the weighted average of information provided by the loan servicer on a monthly basis. The loan servicer generally updates the FICO score on a monthly basis. (B)Represents the percentage of the total principal balance of the pool that corresponds to adjustable rate mortgages. (C)Represents the annualized rate of the prepayments during the quarter as a percentage of the total principal balance of the pool. 76 -------------------------------------------------------------------------------- (D)Represents the annualized rate of the voluntary prepayments during the quarter as a percentage of the total principal balance of the pool. (E)Represents the annualized rate of the involuntary prepayments (defaults) during the quarter as a percentage of the total principal balance of the pool. (F)Represents the percentage of the total principal balance of the pool that corresponds to loans that are delinquent by 30-59 days, 60-89 days or 90 or more days. (G)Weighted averages exclude collateral information for which collateral data was not available as of the report date.
Servicer Advance Investments
The following is a summary of our Servicer Advance Investments, including the right to the basic fee component of the related MSRs (dollars in thousands): March 31, 2022 Servicer Advances to UPB of Underlying UPB of Underlying Amortized Cost Carrying Residential Outstanding Residential Mortgage Basis Value(A) Mortgage Loans Servicer Advances Loans Servicer advance investments Mr. Cooper and SLS serviced pools$ 375,232 $ 390,770 $ 19,171,537 $ 354,566 1.8 %
(A)Represents the fair value of the Servicer advance investments, including the basic fee component of the related MSRs.
The following is additional information regarding our Servicer advance
investments, and related financing, as of and for the three months ended
Three Months EndedMarch 31, 2022 Loan-to-Value ("LTV")(A) Cost of Funds(B) Change in Fair Face Amount of Weighted Average Weighted Average Life Value Recorded Secured Notes and Discount Rate (Years)(C) in Other Income Bonds Payable Gross Net(D) Gross Net Servicer advance investments(E) 5.2 % 7.3$ (483) $ 329,437 92.8 % 92.0 % 1.2 % 1.2 % (A)Based on outstanding servicer advances, excluding purchased but unsettled servicer advances. (B)Annualized measure of the cost associated with borrowings. Gross Cost of Funds primarily includes interest expense and facility fees.Net Cost of Funds excludes facility fees. (C)Represents the weighted average expected timing of the receipt of expected net cash flows for this investment. (D)Ratio of face amount of borrowings to par amount of servicer advance collateral, net of any general reserve. (E)The following table summarizes the types of advances included in Servicer Advance Investments (dollars in thousands): March 31, 2022 Principal and interest advances$ 63,594 Escrow advances (taxes and insurance advances) 165,808 Foreclosure advances 125,164 Total$ 354,566
MSR Related Services Businesses
Our MSR related investments segment also includes the activity from several wholly-owned subsidiaries or minority investments in companies that perform various services in the mortgage and real estate industries. Our subsidiary Guardian is a national provider of field services and property management services. We also made a strategic minority investment in Covius, a provider of various technology-enabled services to the mortgage and real estate industries. As ofMarch 31, 2022 , our ownership interest in Covius is 18.1%. 77 --------------------------------------------------------------------------------
Agency RMBS
The following table summarizes our Agency RMBS portfolio as ofMarch 31, 2022 (dollars in thousands): Gross Unrealized Percentage of Outstanding Outstanding Face Amortized Cost Total Amortized Carrying Weighted Average Repurchase Asset Type Amount Basis Cost Basis Gains Losses Value(A) Count Life (Years) 3-Month CPR(B) Agreements Agency RMBS$ 9,078,723 $ 9,338,295 100.0 %$ 602 $ (806,137) $ 8,532,760 43 9.1 10.8 %$ 8,852,537 (A)Carrying value equals fair value. (B)Represents the annualized rate of the prepayments during the quarter as a percentage of the total amortized cost basis.
The following table summarizes the net interest spread of our Agency RMBS
portfolio for the three months ended
Net Interest Spread(A) Weighted Average Asset Yield 2.18 % Weighted Average Funding Cost 0.23 % Net Interest Spread 1.95 %
(A)The Agency RMBS portfolio consists of 100.0% fixed rate securities (based on amortized cost basis). See table above for details on rate resets of the floating rate securities.
We finance our investments in Agency RMBS with short-term borrowings under master repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over one-month LIBOR. The repurchase agreements represent uncommitted financing. AtMarch 31, 2022 andDecember 31, 2021 , the Company pledged Agency RMBS with a carrying value of approximately$8.5 billion and$8.4 billion , respectively, as collateral for borrowings under repurchase agreements. To the extent available on desirable terms, we expect to continue to finance our acquisitions of Agency RMBS with repurchase agreement financing. See Note 18 to our Consolidated Financial Statements for further information regarding financing of our Agency RMBS.
Non-Agency RMBS
The following table summarizes our Non-Agency RMBS portfolio as ofMarch 31, 2022 (dollars in thousands): Gross Unrealized Outstanding Outstanding Face Amortized Cost Carrying Repurchase Asset Type Amount Basis Gains Losses Value(A) Agreements Non-Agency RMBS$ 17,081,763 $ 942,742 $ 99,383 $ (64,955) $ 977,170 $ 632,949
(A)Fair value, which is equal to carrying value for all securities.
The following tables summarize the characteristics of our Non-Agency RMBS portfolio and of the collateral underlying our Non-Agency RMBS as ofMarch 31, 2022 (dollars in thousands): Non-Agency RMBS Characteristics(A) Average Percentage of Minimum Outstanding Face Amortized Cost Total Amortized Weighted Average Weighted Average Vintage(B) Rating(C) Number of Securities Amount Basis Cost Basis Carrying Value Principal Subordination(D) Excess Spread(E) Life (Years) Coupon(F) Pre-2008 NR 122$ 447,877 $ 17,148 1.8 %$ 21,335 - % - % 4.3 3.4 % 2008 and later BBB 504 16,631,633 924,155 98.2 % 953,398 24.6 % 0.2 % 3.4 2.7 % Total/weighted average BBB- 626$ 17,079,510 $ 941,303 100.0 %$ 974,733 24.0 % 0.2 % 3.4 2.7 % 78
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Collateral Characteristics(A)(G) Cumulative Losses to Vintage(B) Average Loan Age (years) Collateral Factor(H) 3-Month CPR(I) Delinquency(J) Date Pre-2008 13.8 0.08 8.0 % 9.4 % 11.2 % 2008 and later 11.9 0.62 17.7 % 3.5 % 0.6 % Total/weighted average 12.0 0.61 17.5 % 3.6 % 20.6 % (A)Excludes$1.8 million face amount of bonds backed by consumer loans and$0.4 million face amount of bonds backed by corporate debt. (B)The year in which the securities were issued. (C)Ratings provided above were determined by third party rating agencies, represent the most recent credit ratings available as of the reporting date and may not be current. This excludes the ratings of the collateral underlying 307 bonds with a carrying value of$349.5 million , which either have never been rated or for which rating information is no longer provided. We had no assets that were on negative watch for possible downgrade by at least one rating agency as ofMarch 31, 2022 . (D)The percentage of amortized cost basis of securities and residual interests that is subordinate to our investments. This excludes interest-only bonds. (E)The current amount of interest received on the underlying loans in excess of the interest paid on the securities, as a percentage of the outstanding collateral balance for the quarter endedMarch 31, 2022 . (F)Excludes residual bonds, and certain other Non-Agency bonds, with a carrying value of$18.6 million and$2.2 million , respectively, for which no coupon payment is expected. (G)The weighted average loan size of the underlying collateral is$290.6 thousand . (H)The ratio of original UPB of loans still outstanding. (I)Three-month average constant prepayment rate and default rates. (J)The percentage of underlying loans that are 90+ days delinquent, or in foreclosure or considered REO.
The following table summarizes the net interest spread of our Non-Agency RMBS
portfolio for the three months ended
Net Interest Spread(A) Weighted average asset yield 4.23 % Weighted average funding cost 2.81 % Net interest spread 1.42 %
(A)The Non-Agency RMBS portfolio consists of 39.1% floating rate securities and 60.9% fixed rate securities (based on amortized cost basis).
We finance our investments in Non-Agency RMBS with short-term borrowings under master repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over one-month LIBOR. The repurchase agreements represent uncommitted financing. AtMarch 31, 2022 andDecember 31, 2021 , the Company pledged Non-Agency RMBS with a carrying value of approximately$931.0 million and$924.9 million , respectively, as collateral for borrowings under repurchase agreements. A portion of collateral for borrowings under repurchase agreements is subject to daily mark-to-market fluctuations and margin calls. In addition, a portion of collateral for borrowings under repurchase agreements is not subject to daily margin calls unless the collateral coverage percentage, a quotient expressed as a percentage equal to the current carrying value of outstanding debt divided by the market value of the underlying collateral, becomes greater than or equal to a collateral trigger. The difference between the collateral coverage percentage and the collateral trigger is referred to as a "margin holiday." See Note 18 to our Consolidated Financial Statements for further information regarding financing of our Non-Agency RMBS.
Call Rights
We hold a limited right to cleanup call options with respect to certain securitization trusts (including securitizations we have issued) serviced or master serviced by Mr. Cooper whereby, when the UPB of the underlying residential mortgage loans falls below a pre-determined threshold, we can effectively purchase the underlying residential mortgage loans at par, plus unreimbursed servicer advances, resulting in the repayment of all of the outstanding securitization financing at par, in exchange for a fee of 0.75% of UPB paid to Mr. Cooper at the time of exercise. We similarly hold a limited right to cleanup call options with respect to certain securitization trusts master serviced by SLS for no fee, and also with respect to certain securitization trusts serviced or master serviced by Ocwen subject to a fee of 0.5% of UPB on loans that are current or thirty (30) days or less 79 --------------------------------------------------------------------------------
delinquent, paid to Ocwen at the time of exercise. The aggregate UPB of the
underlying residential mortgage loans within these various securitization trusts
is approximately
We continue to evaluate the call rights we acquired from each of our servicers, and our ability to exercise such rights and realize the benefits therefrom are subject to a number of risks. See "Risk Factors-Risks Related to Our Business-Our ability to exercise our cleanup call rights may be limited or delayed if a third party also possessing such cleanup call rights exercises such rights, if the related securitization trustee refuses to permit the exercise of such rights, or if a related party is subject to bankruptcy proceedings." The actual UPB of the residential mortgage loans on which we can successfully exercise call rights and realize the benefits therefrom may differ materially from our initial assumptions. We have exercised our call rights with respect to Non-Agency RMBS trusts and purchased performing and non-performing residential mortgage loans and REO contained in such trusts prior to their termination. In certain cases, we sold portions of the purchased loans through securitizations, and retained bonds issued by such securitizations. In addition, we received par on the securities issued by the called trusts which we owned prior to such trusts' termination. Refer to Notes 8 and 23 in our Consolidated Financial Statements for further details on these transactions.
Refer to Note 23 for additional discussion regarding call rights and transactions with affiliates.
Residential Mortgage Loans
As ofMarch 31, 2022 , we had approximately$7.9 billion outstanding face amount of residential mortgage loans (see below). These investments were financed with secured financing agreements with an aggregate face amount of approximately$6.5 billion and secured notes and bonds payable with an aggregate face amount of approximately$0.8 billion . We acquired these loans through open market purchases, through loan origination, as well as through the exercise of call rights and acquisitions.
The following table presents the total residential mortgage loans outstanding by
loan type at
Outstanding Face Carrying Loan Weighted Average Weighted Average Life Amount Value Count Yield (Years)(A) Total residential mortgage loans, held-for-investment, at fair value(B)$ 605,417 $ 547,404 10,891 7.1 % 5.1 Acquired performing loans(C) 135,025 122,889 2,705 7.0 % 4.7 Acquired non-performing loans(D) 3,352 2,670 41 7.4 %
4.5
Total residential mortgage loans, held-for-sale, at lower of cost or market$ 138,377 $ 125,559 2,746 7.0 %
4.7
Acquired performing loans(C)(E)$ 1,592,694 $ 1,550,278 9,535 3.9 %
11.7
Acquired non-performing loans(D)(E) 597,699.0 559,201 3,278 3.4 % 4.9 Originated loans 4,984,128 4,967,437 8,113 3.8 % 27.5 Total residential mortgage loans, held-for-sale, at fair value/lower of cost or market$ 7,174,521 $ 7,076,916 20,926 3.8 % 22.1 (A)For loans classified as Level 3 in the fair value hierarchy, the weighted average life is based on the expected timing of the receipt of cash flows. For Level 2 loans, the weighted average life is based on the contractual term of the loan. (B)Residential mortgage loans, held-for-investment, at fair value is grouped and presented as part of Residential Loans and Variable Interest Entity Consumer Loans, Held-for-Investment, at Fair Value on the Consolidated Balance Sheets. (C)Performing loans are generally placed on nonaccrual status when principal or interest is 120 days or more past (D)As ofMarch 31, 2022 , we have placed all Non-Performing Loans, held-for-sale on nonaccrual status, except as described in (E) below. (E)Includes$725.3 million and$363.9 million UPB of Ginnie Mae EBO performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.
We consider the delinquency status, loan-to-value ratios, and geographic area of residential mortgage loans as our credit quality indicators.
80 -------------------------------------------------------------------------------- We finance a significant portion of our investments in residential mortgage loans with borrowings under repurchase agreements. These recourse borrowings bear variable interest rates offered by the counterparty for the term of the proposed repurchase transaction, generally less than one year, of a specified margin over the one-month LIBOR or SOFR. AtMarch 31, 2022 andDecember 31, 2021 , the Company pledged residential mortgage loans with a carrying value of approximately$7.2 billion and$11.0 billion , respectively, as collateral for borrowings under repurchase agreements. A portion of collateral for borrowings under repurchase agreements is subject to daily mark-to-market fluctuations and margin calls. A portion of collateral for borrowings under repurchase agreements is not subject to daily margin calls unless the collateral coverage percentage, a quotient expressed as a percentage equal to the current carrying value of outstanding debt divided by the market value of the underlying collateral, becomes greater than or equal to a collateral trigger. The difference between the collateral coverage percentage and the collateral trigger is referred to as a "margin holiday." See Note 18 to our Consolidated Financial Statements for further information regarding financing of our residential mortgage loans.
Other
Consumer Loans
The table below summarizes the collateral characteristics of the consumer loans, including those held in the Consumer Loan Companies and those acquired from the Consumer Loan Seller, as ofMarch 31, 2022 (dollars in thousands): Collateral Characteristics Weighted Average Personal Original Average Unsecured Loans Personal FICO Weighted Adjustable Rate Average Loan Age Expected Delinquency 30 Delinquency 60 Delinquency 90+ 12-Month 12-Month UPB % Homeowner Loans % Number of Loans Score(A) Average Coupon Loan % (months) Life (Years) Days(B) Days(B) Days(B) CRR(C) CDR(D) Consumer loans$ 414,888 57.4 % 42.6 % 66,752 688 17.6 % 13.2 % 206 3.1 1.6 % 0.9 % 1.6 % 23.5 % 4.3 % (A)Represents the FICO score at the time the loan was originated. (B)Represents the percentage of the total principal balance of the pool that corresponds to loans that are delinquent by 30-59 days, 60-89 days or 90 or more days, respectively. (C)Represents the annualized rate of the voluntary prepayments during the three months as a percentage of the total principal balance of the pool. (D)Represents the annualized rate of the involuntary prepayments (defaults) during the three months as a percentage of the total principal balance of the pool. We have financed our investments in consumer loans with securitized non-recourse long-term notes with a stated maturity date ofMay 2036 . See Note 18 to our Consolidated Financial Statements for further information regarding financing of our consumer loans.
Single-Family Rental ("SFR") Portfolio
As ofMarch 31, 2022 , our SFR portfolio consisted of approximately 3,285 properties with an aggregate carrying value of$814.9 million , up from 2,551 units with an aggregate carrying value of$579.6 million as ofDecember 31, 2021 . During the three months endedMarch 31, 2022 andDecember 31, 2021 , we acquired approximately 734 and669 SFR properties, respectively. Our ability to identify and acquire properties that meet our investment criteria is impacted by property prices in our target markets, the inventory of properties available, competition for our target assets and our available capital. Properties added to our portfolio through traditional acquisition channels require expenditures in addition to payment of the purchase price, including property inspections, closing costs, liens, title insurance, transfer taxes, recording fees, broker commissions, property taxes and homeowners' association ("HOA") fees, when applicable. In addition, we typically incur costs to renovate a property acquired through traditional acquisition channels to prepare it for rental. Renovation work varies, but may include paint, flooring, cabinetry, appliances, plumbing hardware and other items required to prepare the property for rental. The time and cost involved to prepare our properties for rental can impact our financial performance and varies among properties based on several factors, including the source of acquisition channel and age and condition of the property. Our operating results are also impacted by the amount of time it takes to market and lease a property, which can vary greatly among properties, and is impacted by local demand, our marketing techniques and the size of our available inventory.
Our revenues are derived primarily from rents collected from tenants for our SFR properties under lease agreements which typically have a term of one to two years. Our rental rates and occupancy levels are affected by macroeconomic factors and local and property-level factors, including market conditions, seasonality and tenant defaults, and the amount of time it takes to turn properties when tenants vacate.
81 -------------------------------------------------------------------------------- Once a property is available for its initial lease, we incur ongoing property-related expenses, which consist primarily of property taxes, insurance, HOA fees (when applicable), utility expenses, repairs and maintenance, leasing costs, marketing expenses, and property administration. All of our SFR properties are managed through an external property manager. Prior to a property being rentable, certain of these expenses are capitalized as building and improvements. Once a property is rentable, expenditures for ordinary repairs and maintenance thereafter are expensed as incurred, and we capitalize expenditures that improve or extend the life of a property.
The following table summarizes certain key SFR property metrics as of
Average Gross Book % of Total SFR % of Total Net Value per Average Number ofSFR Properties Properties Net Book Value Book Value Property Average Occupancy Monthly Rent Average Sq. Ft.Alabama 85 2.6 %$ 15,683 1.9 %$ 185 69.1 %$ 1,411 1,586Arizona 118 3.6 % 43,142 5.3 % 366 8.4 % 2,005 1,527Florida 753 22.9 % 192,009 23.6 % 255 48.1 % 1,783 1,458Georgia 664 20.2 % 146,855 18.0 % 221 59.7 % 1,654 1,775Indiana 111 3.4 % 22,631 2.8 % 204 29.5 % 1,490 1,596Mississippi 97 3.0 % 16,772 2.1 % 173 88.6 % 1,450 1,660Missouri 319 9.7 % 59,800 7.3 % 187 45.8 % 1,458 1,491Nevada 94 2.9 % 29,309 3.6 % 312 24.1 % 1,799 1,402North Carolina 368 11.2 % 105,853 13.0 % 288 50.6 % 1,735 1,542Oklahoma 30 0.9 % 6,401 0.8 % 213 16.7 % 1,465 1,660Tennessee 80 2.4 % 24,438 3.0 % 305 62.8 % 1,920 1,485Texas 488 14.9 % 123,785 15.2 % 254 32.3 % 1,852 1,783 OtherU.S. 78 2.4 % 28,193 3.5 % 361 44.6 % 1,669 1,580 Total/Average 3,285 100.0 %$ 814,871 100.0 %$ 248 47.1 %$ 1,707 1,603 We primarily rely on the use of credit facilities and mortgage-backed securitizations to finance purchases of SFR properties. During the first quarter of 2022, we completed a mortgage-backed securitization collateralized by certain SFR properties. We utilized the proceeds from our securitization to fund repayments of the then-outstanding indebtedness on our credit facility. We expect to continue financing SFR properties with the use of securitization structures in the future.
2022-SFR1 Securitization
The 2022-SFR 1 Securitization is a fixed-rate loan for$267.3 million with a 5-year term maturing inFebruary 2027 and has a weighted-average interest rate of 3.51%. The loan is secured by first priority mortgages on a portfolio of1,200 SFR properties. In addition to the SFR pass-through certificates sold to third parties, we acquired 5.0% of each Class, except for Class R certificates, which bear no interest, for$13.4 million in the aggregate. We evaluated the purchased Class certificates as a variable interest in the trust and concluded that each Class certificate will not absorb a majority of the trust's expected losses or receive a majority of the trust's expected residual returns. We also concluded that each Class certificate does not provide us with an ability to direct activities that could impact the trust's economic performance. We do not consolidate the trust and the$13.4 million of aggregate purchased Class certificates are grouped and presented within Real Estate andOther Securities on the Consolidated Balance Sheets. Gross proceeds to us from the transaction, after purchase of 5.0% of each Class certificates, were$253.9 million , before issuance costs of$6.2 million , and were used to pay down the outstanding balance on the credit facility and for general corporate purposes. The loan agreement requires maintenance of covenants typical for securitization transactions including maintaining certain reserve accounts and a debt service coverage ratio of at least 1.20 to 1.00. The loan agreement defines the debt service coverage ratio as of any determination date as a ratio in which the numerator is the net cash flow divided by the aggregate debt service for the 12-month period following the date of determination. 82 -------------------------------------------------------------------------------- The following table summarizes our mortgage-backed securitizations (dollars in thousands): Weighted Average Outstanding Principal Balance Origination Date Maturity Date Interest Rate March 31, 2022 December 31, 2021 2022-SFR1 Jan-2022 Feb-2027 3.5 %$ 267,326 $ - Total securitizations 267,326 - The following table summarizes the number of properties pledged as collateral for the Company's mortgage-backed securitizations and the aggregate net book values (dollars in thousands): March 31, 2022 December 31, 2021 Number of Properties Net Book Value Number of Properties Net Book Value 2022-SFR1 1,200$ 253,420 - $ - Total encumbered properties 1,200 253,420 - $ - Mortgage Loans Receivable
Through our wholly owned subsidiary Genesis, we specialize in originating and managing a portfolio of primarily short-term mortgage loans to fund single-family and multi-family real estate developers with construction, renovation and bridge loans.
Construction - Loans provided for ground-up construction, including mid-construction refinancing of ground-up construction, and the acquisition of such properties.
Renovation - Acquisition or refinance loans for properties requiring renovation, excluding ground-up construction.
Bridge - Loans for initial purchase, refinance of completed projects, or rental properties.
We currently finance construction, renovation and bridge loans using a warehouse credit facility but we expect to finance these loans with revolving securitization structures in the future.
Properties securing our loans are typically secured by a mortgage or a first deed of trust lien on real estate. Depending on loan type, the size of each loan committed is based on a maximum loan value in accordance with our lending policy. For construction and renovation loans, we generally use loan-to-cost ("LTC") or loan-to-after-repair-value ("LTARV") ratio. For bridge loans, we use a loan-to-value ("LTV") ratio. LTC and LTARV are measured by the total commitment amount of the loan at origination divided by the total estimated cost of a project or value of a property after renovations and improvements to a property. LTV is measured by the total commitment amount of the loan at origination divided by the "as-complete" appraisal. At the time of origination, the difference between the initial outstanding principal and the total commitment is the amount held back for future release subject to property inspections, progress reports and other conditions in accordance with the loan documents. Loan ratios described above do not reflect interim activity such as construction draws or interest payments capitalized to loans, or partial repayments of the loan.
Each loan is backed by a corporate or personal guarantee to provide further credit support for the loan. The guarantee may be collaterally secured by a pledge of the guarantor's interest in the borrower or other real estate or assets owned by the guarantor.
Loan commitments at origination are typically interest only and bear a variable interest rate tied to either LIBOR or the SOFR plus a spread ranging from 3.8% to 8.5%, and have initial terms typically ranging from 6 to 36 months in duration based on the size of the project and expected timeline for completion of construction, which we often elect to extend for several months based on our evaluation of the project. As ofMarch 31, 2022 , the average commitment size of our loans was$1.6 million and the weighted average remaining term to contractual maturity of our loans was 8.9 months. We typically receive loan origination fees, or "points" of up to 5.0% of the total commitment at origination, along with loan amendment and extension fees, each of which varies in amount based upon the term of the loan and the quality of the borrower 83 -------------------------------------------------------------------------------- and the underlying collateral. In addition, we charge fees on past due receivables and receive reimbursements from borrowers for costs associated with services provided by us, such as closing costs, collection costs on defaulted loans, and inspection fees. Typical borrowers include real estate investors and developers. Loan proceeds are used to fund the construction, development, investment, land acquisition and refinancing of residential properties and to a lesser extent mixed-use properties. We also make loans to fund the renovation and rehabilitation of residential properties. Our loans are generally structured with partial funding at closing and additional loan installments disbursed to the borrower upon satisfactory completion of previously agreed stages of construction. A principal source of new loans has been repeat business from our customers and their referral of new business. Our retention originations typically have lower customer acquisition costs than originations to new customers, positively impacting our profit margins.
As of
The following table summarizes certain information related to our mortgage loans receivable activity as of and for the three months endedMarch 31, 2022 (dollars in thousands): Loans originated$ 688,653 Loans repaid(A)$ 357,025 Number of loans originated 403 Unpaid principal balance$ 1,650,091 Total commitment$ 2,322,440 Average total commitment$ 1,632 Weighted average contractual interest(B) 7.1 % (A)Based on commitment. (B)Excludes loan fees and based on commitment at funding. 84 --------------------------------------------------------------------------------
The following table summarizes our total mortgage loans receivable portfolio by
loan purpose as of
Weighted Average Number of Committed Loan Loans % Total Commitment % Balance to Value(A) Construction 560 39.4 %$ 1,328,033 57.2 % 76.0% - 65.3% Bridge 484 34.0 % 709,984 30.6 % 77.4 % Renovation 379 26.6 % 284,423 12.2 % 78.3% - 66.2% 1,423 100.0 %$ 2,322,440 100.0 %
(A)Weighted by commitment LTV for bridge loans and LTC or LTARV for construction and renovation loans.
The following table summarizes our total mortgage loans receivable portfolio by
geographic location as of
Number of Loans % Total Commitment % California 643 45.2 %$ 1,354,611 58.3 % Washington 167 11.7 % 255,253 11.0 % New York 39 2.7 % 115,522 5.0 % Other U.S. 574 40.3 % 597,054 25.7 % 1,423 99.9 %$ 2,322,440 100.0 % TAXES We have elected to be treated as a REIT forU.S. federal income tax purposes. As a REIT we generally pay no federal or state and local income tax on assets that qualify under the REIT requirements if we distribute out at least 90% of the current taxable income generated from these assets. We hold certain assets, including Servicer Advance Investments and MSRs, in taxable REIT subsidiaries ("TRSs") that are subject to federal, state and local income tax because these assets either do not qualify under the REIT requirements or the status of these assets is uncertain. We also operate our securitization program, servicing, origination, and services businesses through TRSs.
As our operating investments continue to grow and become a larger component of our total consolidated income, we anticipate income subject to tax will increase, along with a corresponding increase in tax expense and our consolidated effective tax rate.
AtMarch 31, 2022 , we recorded a net deferred tax liability of$642.0 million , primarily composed of deferred tax liabilities generated through the deferral of gains from loans sold by our origination business with servicing retained by us and deferred tax liabilities generated from changes in fair value of MSRs, loans, and swaps held within taxable entities. For the three months andMarch 31, 2022 , we recognized deferred tax expense of$201.3 million , primarily reflecting deferred tax expense generated from changes in the fair value of MSRs, loans, and swaps held within taxable entities as well as income in our servicing and origination business segments.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Actual results could differ from these estimates. We believe that the estimates and assumptions utilized in the preparation of the Consolidated Financial Statements are prudent and reasonable. Actual results historically have generally been in line with our estimates and judgments used in applying each of the accounting policies described below, as modified periodically to reflect current market conditions. 85 --------------------------------------------------------------------------------
Our critical accounting policies as of
The ultimate duration and impact of the COVID-19 pandemic, and to a lesser extent the war inUkraine , and response thereto remain uncertain. We believe the estimates and assumptions underlying our Consolidated Financial Statements are reasonable and supportable based on the information available as ofMarch 31, 2022 ; however, uncertainty over the ultimate impact COVID-19 and the Russian invasion ofUkraine will have on the global economy generally, and our business in particular, makes any estimates and assumptions as ofMarch 31, 2022 inherently less certain than they would be absent the current and potential impacts of COVID-19 and the war inUkraine . Actual results may materially differ from those estimates.
Recent Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table summarizes the changes in our results of operations for the
three months ended
Three Months Ended December 31, March 31, 2022 2021 QoQ Change Revenues
Servicing fee revenue, net and interest income from MSRs and MSR financing receivables
$ 456,400 $ 464,200 $ (7,800)
Change in fair value of MSRs and MSR financing receivables
(includes realization of cash flows of
575,393 (154,021) 729,414 Servicing revenue, net 1,031,793 310,179 721,614 Interest income 225,413 217,555 7,858 Gain on originated residential mortgage loans, held-for-sale, net 471,996 569,815 (97,819) 1,729,202 1,097,549 631,653 Expenses Interest expense and warehouse line fees 138,833 141,936 (3,103) General and administrative 246,238 289,861 (43,623) Compensation and benefits 392,619 441,891 (49,272) Management fee to affiliate 25,189 25,772 (583) 802,879 899,460 (96,581) Other Income (Loss) Change in fair value of investments (147,119) 10,499 (157,618) Gain (loss) on settlement of investments, net 61,184 (45,642) 106,826 Other income (loss), net 56,072 54,271 1,801 (29,863) 19,128 (48,991) Impairment Provision (reversal) for credit losses on securities 711 (181) 892 Valuation and credit loss provision (reversal) on loans and real estate owned (REO) 3,029 74 2,955 3,740 (107) 3,847 Income Before Income Taxes 892,720 217,324 675,396 Income tax expense (benefit) 202,789 29,485 173,304 Net Income$ 689,931 $ 187,839 $ 502,092
Noncontrolling interests in income (loss) of consolidated subsidiaries
5,609 4,908 701 Dividends on preferred stock 22,461 22,495 (34) Net Income Attributable to Common Stockholders$ 661,861 $ 160,436 $ 501,425 86
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Servicing Revenue, Net
Servicing Revenue, Net consists of the following:
Three Months Ended December 31, March 31, 2022 2021 QoQ Change
Servicing fee revenue, net and interest income from MSRs and MSR financing receivables
$ 421,555 $ 450,042 $ (28,487) Ancillary and other fees 34,845 14,158 20,687 Servicing fee revenue and fees 456,400 464,200 (7,800) Change in fair value due to: Realization of cash flows (200,325) (267,880) 67,555 Change in valuation inputs and assumptions(A) 845,037 106,875 738,162 Change in fair value of derivative instruments 7,189 11,083 (3,894) (Gain) loss realized 306 19,498 (19,192) Gain (loss) on settlement of derivative instruments (76,814) (23,597) (53,217) Servicing revenue, net$ 1,031,793 $ 310,179 $ 721,614
(A)The following table summarizes the components of servicing revenue, net related to changes in valuation inputs and assumptions:
Three Months Ended December 31, March 31, 2022 2021 QoQ Change Changes in interest and prepayment rates$ 969,165 $ 90,185 $ 878,980 Changes in discount rates (65,317) - (65,317) Changes in other factors (58,811) 16,690 (75,501) Change in valuation and assumptions$ 845,037 $ 106,875 $ 738,162
The table below summarizes the unpaid principal balances of our MSRs and MSR Financing Receivables:
Unpaid Principal Balance (dollars in millions) March 31, 2022 December 31, 2021 QoQ Change GSE$ 376,795.2 $ 374,815.6 $ 1,979.6 Non-Agency 60,341.6 63,851.1 (3,509.5) Ginnie Mae 111,972.2 109,946.4 2,025.8 Total$ 549,109.0 $ 548,613.1 $ 495.9
Servicing revenue, net increased
87 -------------------------------------------------------------------------------- adjustments of$845.0 million for the three months endedMarch 31, 2022 were primarily driven by changes in assumptions related to slower prepayment rates and higher float income due to rate sell off observed during the quarter.
Interest Income
Interest income increased by
Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net
The following table provides information regarding Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net as a percentage of pull through adjusted lock volume, by channel:
Three Months Ended March 31, 2022 December 31, 2021 Direct to Consumer 3.14 % 3.22 % Retail / Joint Venture 2.85 % 3.42 % Wholesale 0.90 % 0.91 % Correspondent 0.13 % 0.20 % 1.53 % 1.65 % 88
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The following table summarizes funded loan production by channel:
Unpaid Principal Balance Three Months Ended (in millions) March 31, 2022 December 31, 2021 QoQ Change Production by Channel Direct to Consumer$ 4,425 $ 6,680$ (2,255) Retail / Joint Venture 6,404 9,168 (2,764) Wholesale 4,646 6,628 (1,982) Correspondent 11,401 15,645 (4,244) Total Production by Channel$ 26,876 $ 38,121$ (11,245) Gain on originated residential mortgage loans, held-for-sale, net decreased$97.8 million primarily driven by a reduction in the pull through adjusted lock volume attributable to an increase in interest rates during the quarter. Gain on sale margin for the three months endedMarch 31, 2022 was 1.53%, 12 bps lower than 1.65% for the prior quarter. For the three months endedMarch 31, 2022 , loan origination volume was$26.9 billion , down from$38.1 billion in the prior quarter as production in all four channels continued to decrease to more historical levels.
Interest Expense and Warehouse
Interest expense decreased by$3.1 million quarter over quarter primarily due to lower loan fundings on our secured financing warehouse lines, partially offset by higher interest expense driven by an increase in interest rates during the quarter. General and Administrative
General and Administrative expenses consists of the following:
Three Months Ended March 31, 2022 December 31, 2021 QoQ Change Legal and professional$ 28,586 $ 35,889$ (7,303) Loan origination 39,901 59,347 (19,446) Occupancy 29,777 31,433 (1,656) Subservicing 46,808 62,616 (15,808) Loan servicing 5,304 3,158 2,146 Property and maintenance 23,603 21,867 1,736 Other 72,259 75,551 (3,292) Total$ 246,238 $ 289,861$ (43,623) General and administrative expenses decreased$43.6 million quarter over quarter, primarily driven by a reduction in loan origination expenses of$19.4 million related to the decrease in loan production and a reduction in subservicing expense of$15.8 million related to reclasses to subservicing fees on theHLSS portfolio during the fourth quarter of 2021, as well as a decrease in UPB and transfers of servicing from external services to internal servicers.
Compensation and Benefits
Compensation and benefits expense decreased
Change in Fair Value of Investments
Change in Fair Value of Investments consists of the following:
89 --------------------------------------------------------------------------------
Three Months Ended March 31, 2022 December 31, 2021 QoQ Change Excess MSRs$ (2,630) $ (1,412)$ (1,218) Excess MSRs, equity method investees 1,703 397 1,306 Servicer advance investments (483) (2,541) 2,058 Real estate and other securities (605,295) (64,360) (540,935) Residential mortgage loans (106,920) 774 (107,694) Consumer loans (13,733) (6,795) (6,938) Mortgage loans receivable 5,542 - 5,542 Derivative instruments 574,697 84,436 490,261
Change in fair value of investments
$ (157,618)
Change in Fair Value of Real Estate and
Change in fair value of investments in real estate securities decreased$540.9 million , primarily driven by unfavorable changes in the fair value of Agency securities attributable to an increase in interest rates during the quarter.
Change in Fair Value of Residential Mortgage Loans
Change in fair value of investments in residential mortgage loans decreased$107.7 million , primarily due to unfavorable changes in valuation inputs and assumptions largely attributable to an increase in interest rates during the quarter and decreases in loan pricing in the market.
Change in Fair Value of Consumer Loans
Change in fair value of consumer loans decreased
Change in Fair Value of Derivative Instruments
Change in fair value of derivative instruments increased$490.3 million , driven by favorable changes in inputs and assumptions on interest rate swaps used as economic hedges within our investment portfolio-i.e., the current outstanding swap positions are primarily fixed payors and higher interest rates during the quarter resulted in favorable mark to market adjustments.
Gain (Loss) on Settlement of Investments, Net
Gain (Loss) on Settlement of Investments, Net consists of the following:
Three Months Ended December 31, March 31, 2022 2021 QoQ Change Sale of real estate securities$ (1,557) $ (311) $ (1,246) Sale of acquired residential mortgage loans 50,419 4,276 46,143 Settlement of derivatives 47,475 (19,668) 67,143 Liquidated residential mortgage loans (29,932) (78) (29,854) Sale of REO (2,090) (2,808) 718 Extinguishment of debt - (1,568) 1,568 Other (3,131) (25,485) 22,354$ 61,184 $ (45,642) $ 106,826 Gain on settlement of investments, net increased$106.8 million during the first quarter of 2022, primarily due to net realized gains on loan sales and settlement of derivatives, partially offset by an increase in realized losses associated with collapse loan purchases.
Other Income (Loss), Net
90 --------------------------------------------------------------------------------
Other Income (Loss), Net consists of the following:
Three Months Ended December 31, March 31, 2022 2021 QoQ Change
Unrealized gain (loss) on secured notes and bonds payable $ 7,194
$ (552) Rental revenue 8,129 5,919 2,210 Property and maintenance revenue 34,305 31,032 3,273 Other income (loss) 6,444 9,574 (3,130)$ 56,072 $ 54,271 $ 1,801
Other income increased
Income Tax Expense
Income tax expense increased
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, and other general business needs. Additionally, to maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income. We note that a portion of this requirement may be able to be met in future years through stock dividends, rather than cash, subject to limitations based on the value of our stock.
Our primary sources of funds are cash provided by operating activities (primarily income from loan originations and servicing), sales of and repayments from our investments, potential debt financing sources, including securitizations, and the issuance of equity securities, when feasible and appropriate.
Our primary uses of funds are the payment of interest, management fees, servicing and subservicing expenses, outstanding commitments (including margins and loan originations), other operating expenses, repayment of borrowings and hedge obligations, dividends and funding of future servicer advances. The Company's total cash and cash equivalents atMarch 31, 2022 was$1,671.2 million . Our ability to utilize funds generated by the MSRs held in our servicer subsidiaries, NRM,Newrez , and Caliber, is subject to and limited by certain regulatory requirements, including maintaining liquidity, tangible net worth and ratio of capital to assets. Moreover, our ability to access and utilize cash generated from our regulated entities is an important part of our dividend paying ability. As ofMarch 31, 2022 , approximately$1,126.1 million of our cash and cash equivalents were held at NRM,Newrez , and Caliber, of which$955.7 million were in excess of regulatory liquidity requirements. NRM,Newrez , and Caliber are expected to maintain compliance with applicable liquidity and net worth requirements throughout the year. Currently, our primary sources of financing are secured financing agreements and secured notes and bonds payable, although we have in the past and may in the future also pursue one or more other sources of financing such as securitizations and other secured and unsecured forms of borrowing. As ofMarch 31, 2022 , we had outstanding secured financing agreements with an aggregate face amount of approximately$17.3 billion to finance our investments. The financing of our entire RMBS portfolio, which generally has 30- to 90-day terms, is subject to margin calls. Under secured financing agreements, we sell a security to a counterparty and concurrently agree to repurchase the same security at a later date for a higher specified price. The sale price represents financing proceeds and the difference between the sale and repurchase prices represents interest on the financing. The price at which the security is sold generally represents the market value of the security less a discount or "haircut," which can range broadly. During the term of the secured financing agreement, the counterparty holds the security as collateral. If the agreement is subject to margin calls, the counterparty monitors and calculates what it estimates to be the value of the collateral during the term of the agreement. If this value declines by more than a de minimis threshold, the counterparty could require us to post additional collateral (or "margin") in order to maintain the initial haircut on the collateral. This margin is typically required to be posted in the form of cash and cash equivalents. Furthermore, we may, from time to time, be a party to derivative agreements or financing arrangements that may be subject to margin calls based on the value of such instruments. In addition, 91 --------------------------------------------------------------------------------$4.8 billion face amount of our MSR and Excess MSR financing is subject to mandatory monthly repayment to the extent that the outstanding balance exceeds the market value (as defined in the related agreement) of the financed asset multiplied by the contractual maximum loan-to-value ratio. We seek to maintain adequate cash reserves and other sources of available liquidity to meet any margin calls or related requirements resulting from decreases in value related to a reasonably possible (in our opinion) change in interest rates. Our ability to obtain borrowings and to raise future equity capital is dependent on our ability to access borrowings and the capital markets on attractive terms. We continually monitor market conditions for financing opportunities and at any given time may be entering or pursuing one or more of the transactions described above. Our Manager's senior management team has extensive long-term relationships with investment banks, brokerage firms and commercial banks, which we believe enhance our ability to source and finance asset acquisitions on attractive terms and access borrowings and the capital markets at attractive levels. Our ability to fund our operations, meet financial obligations and finance acquisitions may be impacted by our ability to secure and maintain our secured financing agreements, credit facilities and other financing arrangements. Because secured financing agreements and credit facilities are short-term commitments of capital, lender responses to market conditions may make it more difficult for us to renew or replace, on a continuous basis, our maturing short-term borrowings and have imposed, and may continue to impose, more onerous conditions when rolling such financings. If we are not able to renew our existing facilities or arrange for new financing on terms acceptable to us, or if we default on our covenants or are otherwise unable to access funds under our financing facilities or if we are required to post more collateral or face larger haircuts, we may have to curtail our asset acquisition activities and/or dispose of assets. While market volatility attributable to COVID-19 has subsided, it is possible that volatility may increase again due to the continued uncertainty brought about by the initial COVID-19 strain as well as its evolving variants. Consequently, our lenders may become unwilling or unable to provide us with financing and we could be forced to sell our assets at an inopportune time when prices are depressed. In addition, if the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us. Our lenders also have revised and may continue to revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, including haircuts and requiring additional collateral in the form of cash, based on, among other factors, the regulatory environment and their management of actual and perceived risk. Moreover, the amount of financing we receive under our secured financing agreements will be directly related to our lenders' valuation of our assets that cover the outstanding borrowings. InFebruary 2022 , the FHFA released re-proposed Enterprise Single Family Seller/Servicers Eligibility Requirements for comment. The FHFA's re-proposed requirements, if adopted, would increase our capital and liquidity requirements and, as a result, would lower our returns on capital. With respect to the next 12 months, we expect that our cash on hand combined with our cash flow provided by operations and our ability to roll our secured financing agreements and servicer advance financings will be sufficient to satisfy our anticipated liquidity needs with respect to our current investment portfolio, including related financings, potential margin calls, loan origination and operating expenses. Our ability to roll over short-term borrowings is critical to our liquidity outlook. We have a significant amount of near-term maturities, which we expect to be able to refinance. If we cannot repay or refinance our debt on favorable terms, we will need to seek out other sources of liquidity. While it is inherently more difficult to forecast beyond the next 12 months, we currently expect to meet our long-term liquidity requirements through our cash on hand and, if needed, additional borrowings, proceeds received from secured financing agreements and other financings, proceeds from equity offerings and the liquidation or refinancing of our assets. These short-term and long-term expectations are forward-looking and subject to a number of uncertainties and assumptions, including those described under "-Market Considerations" as well as "Risk Factors." If our assumptions about our liquidity prove to be incorrect, we could be subject to a shortfall in liquidity in the future, and such a shortfall may occur rapidly and with little or no notice, which could limit our ability to address the shortfall on a timely basis and could have a material adverse effect on our business. Our cash flow provided by operations differs from our net income due to these primary factors (i) the difference between (a) accretion and amortization and unrealized gains and losses recorded with respect to our investments and (b) cash received therefrom, (ii) unrealized gains and losses on our derivatives, and recorded impairments, if any, (iii) deferred taxes, and (iv) principal cash flows related to held-for-sale loans, which are characterized as operating cash flows under GAAP. 92 --------------------------------------------------------------------------------
Debt Obligations
The following table summarizes certain information regarding our debt obligations (dollars in thousands):
March 31, 2022 December 31, 2021 Collateral Outstanding Face Weighted Average Weighted Average Amortized Cost Weighted Average Debt Obligations/Collateral Amount Carrying Value(A) Final Stated Maturity(B) Funding Cost Life (Years) Outstanding Face Basis Carrying Value Life (Years) Carrying Value(A) Secured Financing Agreements(C) Repurchase Agreements: Warehouse Credit Facilities-Residential Mortgage Loans(F)$ 6,499,733 $ 6,496,986 Apr-22 to Sep-25 2.02 % 0.8$ 7,301,583 $ 7,243,197 $ 7,151,031 21.0$ 10,138,297 Warehouse Credit Facilities-Mortgage Loans Receivable(E) 1,089,677 1,089,677 Dec-23 2.59 % 1.7 1,314,181 1,314,181 1,327,176 0.7 1,252,660 Agency RMBS(D) 8,852,537 8,852,537 Apr-22 to Jun-22 0.23 % 0.1 9,076,373 9,335,810 8,530,172 9.1 8,386,538 Non-Agency RMBS(E) 634,347 634,347 Apr-22 to Oct-23 2.81 % 0.1 14,324,636 902,889 931,034 3.2656,874 SFR properties(E) 208,326 208,326 Dec-22 2.77 % 0.7 N/A 292,626 292,626 N/A 158,515 Total Secured Financing Agreements 17,284,620 17,281,873 1.18 % 0.4
20,592,884
Secured Notes and Bonds Payable Excess MSRs(G) 228,497 228,497 Aug-25 3.74 % 3.4 76,449,292 268,120 330,248 6.7 237,835 MSRs(H) 4,538,376 4,528,074 Dec-22 to Dec-26 3.53 % 3.0 529,125,502 5,668,359 7,610,826 6.8 4,234,771 Servicer Advance Investments(I) 329,437 328,586 Apr-22 to Dec-22 1.22 % 0.7 354,566 375,232 390,770 7.3 355,722 Servicer Advances(I) 2,249,796 2,244,605 May-22 to Nov-24 2.32 % 1.4 2,712,916 2,652,210 2,652,210 0.7 2,355,969 Residential Mortgage Loans(J) 775,179 774,476 Mar-24 to Jul-43 1.43 % 2.7 782,973 784,969 784,969 26.8 802,526 Consumer Loans(K) 419,866 413,881 Sep-37 2.06 % 8.1 414,800 426,933 462,023 3.2458,580 SFR Properties 437,660 437,414 Mar-23 - Feb-27 3.21 % 3.3 N/A 483,268 483,268 N/A 199,407 Mortgage Loans Receivable(L) 324,062 324,062 Dec-26 4.21 % 4.7 356,514 356,514 356,514 0.4
-
Total Secured Notes and Bonds Payable 9,302,873 9,279,595 2.93 % 2.8 8,644,810 Total/ Weighted Average$ 26,587,493 $ 26,561,468 1.80 % 1.3$ 29,237,694 (A)Net of deferred financing costs. (B)All debt obligations with a stated maturity through the date of issuance were refinanced, extended or repaid. (C)Includes approximately$21.3 million of associated accrued interest payable as ofMarch 31, 2022 . (D)All fixed interest rates. (E)All LIBOR-based floating interest rates. (F)Includes$240.1 million which bear interest at a fixed rate of 4.0% with the remaining having LIBOR-based floating interest rates. (G)Includes$228.5 million of corporate loans which bear interest at a fixed rate of 3.7%. (H)Includes$2.4 billion of MSR notes which bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR or SOFR, and (ii) a margin ranging from 2.5% to 3.5%; and$2.2 billion of capital market notes with fixed interest rates ranging 3.0% to 5.4%. The outstanding face amount of the collateral represents the UPB of the residential mortgage loans underlying the MSRs and MSR Financing Receivables securing these notes. (I)$1.8 billion face amount of the notes have a fixed rate while the remaining notes bear interest equal to the sum of (i) a floating rate index equal to one-month LIBOR or a cost of funds rate, as applicable, and (ii) a margin ranging from 1.1% to 3.5%. Collateral includes Servicer Advance Investments, as well as servicer advances receivable related to the mortgage servicing rights and MSR financing receivables owned by NRM. (J)Represents (i)$25.2 million ofSAFT 2013-1 mortgage-backed securities issued with fixed interest rate of 3.8%, and (ii)$750.0 million securitization backed by a revolving warehouse facility to finance newly originated first-lien, fixed- and adjustable-rate residential mortgage loans which bears interest equal to one-month LIBOR plus 1.1%. (K)Includes the SpringCastle debt, which is primarily composed of the following classes of asset-backed notes held by third parties:$366.8 million UPB of Class A notes with a coupon of 2.0% and a stated maturity date inSeptember 2037 and$53.0 million UPB of Class B notes with a coupon of 2.7% and a stated maturity date inSeptember 2037 (collectively, "SCFT 2020-A"). (L)Reflects the 2022-RTL1 Securitization. Refer to Note 20 for details.
Certain of the debt obligations included above are obligations of our consolidated subsidiaries, which own the related collateral. In some cases, such collateral is not available to other creditors of ours.
We have margin exposure on$17.3 billion of repurchase agreements. To the extent that the value of the collateral underlying these repurchase agreements declines, we may be required to post margin, which could significantly impact our liquidity. 93 --------------------------------------------------------------------------------
The following tables provide additional information regarding our short-term borrowings (dollars in thousands):
Three Months Ended
Outstanding Average Daily Balance at Amount Maximum Amount Weighted Average March 31, 2022 Outstanding(A) Outstanding Daily Interest Rate Secured Financing Agreements Agency RMBS$ 8,852,537 $ 9,015,478 $ 11,494,782 0.20 % Non-Agency RMBS 634,347 646,092 667,277 2.59 % Residential mortgage loans 6,010,632 7,477,038 11,167,266 1.90 % Real estate owned 3,948 4,703 5,168 2.29 %
Secured Notes and Bonds Payable
MSRs 592,000 521,267 592,000 3.47 % Servicer advances 852,128 1,051,673 1,242,051 1.70 % Total/weighted average$ 16,945,592 $ 18,716,251 $ 25,168,544 1.08 %
(A)Represents the average for the period the debt was outstanding.
Average Daily Amount Outstanding(A) Three Months Ended September 30, March 31, 2022 December 31, 2021 2021 June 30, 2021 Secured Financing Agreements Agency RMBS$ 9,015,478 $ 8,789,698 $ 10,098,123 $ 15,169,877 Non-Agency RMBS 646,092 711,931 715,802 724,014 Residential mortgage loans 7,477,038 8,497,137 4,879,365 4,622,809 Real estate owned 4,703 5,609 9,923 19,294
(A)Represents the average for the period the debt was outstanding.
Corporate Debt
On
InAugust 2020 , we made a$51.0 million prepayment on the 2020 Term Loan. As a result, we recorded a$5.7 million loss on extinguishment of debt, representing a write-off of unamortized debt issuance costs and original issue discount. In conjunction with the issuance of the 2020 Term Loan, we issued warrants providing the lenders with the right to acquire, subject to anti-dilution adjustments, up to 43.4 million shares of our common stock in the aggregate (the "2020 Warrants"). The 2020 Warrants are exercisable in cash or on a cashless basis and expire onMay 19, 2023 and are exercisable, in whole or in part, at any time or from time to time afterSeptember 19, 2020 at the following prices (subject to certain anti-dilution provisions): approximately 24.6 million shares of common stock at$6.11 per share and approximately 18.9 million shares of common stock at$7.94 per share. As ofMarch 31, 2022 , the weighted average exercise price was$6.40 per share. OnSeptember 16, 2020 , we, as borrower, completed a private offering of$550.0 million aggregate principal amount of 6.250% senior unsecured notes due 2020 (the "2025 Senior Notes"). Interest on the 2025 Senior Notes accrue at the rate of 6.250% per annum with interest payable semi-annually in arrears on eachApril 15 andOctober 15 , commencing onApril 15, 2021 . Net proceeds from the offering were approximately$544.5 million , after deducting the initial purchasers' discounts and commissions and estimated offering expenses payable by us. We used the net proceeds from the offering, together with cash on hand, to prepay and retire our then-existing 2020 Term Loan and to pay related fees and expenses. As a result, we recorded a$61.1 million loss on extinguishment of debt, representing a write-off of unamortized debt issuance costs and original issue discount. The 2025 Senior Notes mature onOctober 15, 2025 and we may redeem some or all of the 2025 Senior Notes at our option, at any time from time to time, on or afterOctober 15, 2022 at a price equal to the following fixed redemption prices (expressed as a percentage of principal amount of the 2025 Senior Notes to be redeemed): 94 --------------------------------------------------------------------------------
Year Price 2022 103.125% 2023 101.563% 2024 and thereafter 100.000% Prior toOctober 15, 2022 , we will be entitled at its option on one or more occasions to redeem the 2025 Senior Notes in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2025 Senior Notes originally issued prior to the applicable redemption date at a fixed redemption price of 106.250%.
For additional information on our debt activities, see Note 18 to our Consolidated Financial Statements.
Maturities
Our debt obligations as ofMarch 31, 2022 , as summarized in Note 18 to our Consolidated Financial Statements, had contractual maturities as follows (in thousands): Year Ending Nonrecourse(A) Recourse(B)
Total
$ 14,018,417 2023 1,200,000 4,790,712 5,990,712 2024 1,196,018 1,358,936 2,554,954 2025 - 1,954,100 1,954,100 2026 - 1,906,939 1,906,939 2027 and thereafter 445,044 267,327 712,371$ 3,551,896 $ 23,585,597 $ 27,137,493
(A)Includes secured notes and bonds payable of
The weighted average differences between the fair value of the assets and the face amount of available financing for the Agency RMBS repurchase agreements and Non-Agency RMBS repurchase agreements were 3.8% and 32%, respectively, and for residential mortgage loans andSFR Properties were 9% and 29%, respectively, during the three months endedMarch 31, 2022 .
Borrowing Capacity
The following table summarizes our borrowing capacity as of
Borrowing Balance Available Debt Obligations / Collateral Capacity Outstanding Financing(A) Secured Financing Agreements Residential mortgage loans and REO$ 5,353,992 $ 3,050,672 $ 2,303,320 Loan origination 16,404,154 5,497,064 10,907,090 Secured Notes and Bonds Payable Excess MSRs 286,380 228,497 57,883 MSRs 5,582,219 4,538,376 1,043,843 Servicer advances 4,033,346 2,579,233 1,454,113 Residential mortgage loans 200,000 170,335 29,665$ 31,860,091 $ 16,064,177 $ 15,795,914 (A)Although available financing is uncommitted, our unused borrowing capacity is available to us if we have additional eligible collateral to pledge and meet other borrowing conditions as set forth in the applicable agreements, including any applicable advance rate. 95 --------------------------------------------------------------------------------
Covenants
Certain of the debt obligations are subject to customary loan covenants and event of default provisions, including event of default provisions triggered by certain specified declines in our equity or failure to maintain a specified tangible net worth, liquidity, or indebtedness to tangible net worth ratio. Additionally, with the expected phase out of LIBOR, we expect the calculated rate on certain debt obligations will be changed to another published reference standard before the planned cessation of LIBOR quotations in 2023. However, we do not anticipate this change having a significant effect on the terms and conditions, ability to access credit, or on our financial condition. We were in compliance with all of our debt covenants as ofMarch 31, 2022 .
Stockholders' Equity
Preferred Stock
Pursuant to our certificate of incorporation, we are authorized to designate and
issue up to 100.0 million shares of preferred stock, par value of
The following table summarizes preferred shares:
Dividends Declared per Share Three Months Ended Number of Shares March 31, Liquidation Issuance Carrying Series March 31, 2022 December 31, 2021 Preference(A) Discount Value(B) 2022 2021 Series A, 7.50% issued July 2019(C) 6,210 6,210$ 155,250 3.15 %$ 150,026 $ 0.47 $ 0.47 Series B, 7.125% issued August 2019(C) 11,300 11,300 282,500 3.15 % 273,418 0.45 0.45 Series C, 6.375% issued February 2020(C) 15,928 16,100 398,209 3.15 % 385,734 0.40 0.40 Series D, 7.00%, issued September 2021(D) 18,600 18,600 465,000 3.15 % 449,489 0.44 - Total 52,038 52,210$ 1,300,959 $ 1,258,667 $ 1.76 $ 1.32
(A)Each series has a liquidation preference or par value of
Our Series A, Series B, Series C, and Series D rank senior to all classes or series of our common stock and to all other equity securities issued by us that expressly indicate are subordinated to the Series A, Series B, Series C, and Series D with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up. Our Series A, Series B, Series C, and Series D have no stated maturity, are not subject to any sinking fund or mandatory redemption and rank on parity with each other. Under certain circumstances upon a change of control, our Series A, Series B, Series C, and Series D are convertible to shares of our common stock. From and including the date of original issue,July 2, 2019 ,August 15, 2019 ,February 14, 2020 , andSeptember 17, 2021 but excludingAugust 15, 2024 ,August 15, 2024 ,February 15, 2025 , andNovember 15, 2026 , holders of shares of our Series A, Series B, Series C, and Series D are entitled to receive cumulative cash dividends at a rate of 7.50%, 7.125%, 6.375%, and 7.00% per annum of the$25.00 liquidation preference per share (equivalent to$1.875 ,$1.781 ,$1.594 , and$1.750 per annum per share), respectively, and from and includingAugust 15, 2024 ,August 15, 2024 andFebruary 15, 2025 , at a floating rate per annum equal to the three-month LIBOR plus a spread of 5.802%, 5.640%, and 4.969% per annum, for our Series A, Series B, and Series C, respectively. Holders of shares of our Series D, from and includingNovember 15, 2026 , are entitled to receive cumulative cash dividends based on the five-year treasury rate plus a spread of 6.223%. Dividends for the Series A, Series B, Series C, and Series D are payable quarterly in arrears on or about the 15th day of each February, May, August and November. The Series A and Series B will not be redeemable beforeAugust 15, 2024 , the Series C will not be redeemable beforeFebruary 15, 2025 , and the Series D will not be redeemable beforeNovember 15, 2026 except under certain limited circumstances intended to preserve our qualification as a REIT forU.S. federal income tax purposes and except upon the occurrence of a Change of Control (as defined in the Certificate of Designations). On or afterAugust 15, 2024 for the Series A and Series B,February 15, 2025 for the Series C, andNovember 15, 2026 for the Series D we may, at our option, upon not less than 30 nor more than 60 days' written notice, redeem the Series A, Series B, Series C, and Series D in whole or in part, at any time or from time to time, for cash at a redemption price of$25.00 per share, plus any accumulated and unpaid dividends thereon (whether or not authorized or declared) to, but excluding, the redemption date, without interest. 96 --------------------------------------------------------------------------------
Common Stock
Our certificate of incorporation authorizes 2.0 billion shares of common stock,
par value
Approximately 2.4 million shares of our common stock were held by Fortress,
through its affiliates, and its principals as of
OnApril 14, 2021 , we priced our underwritten public offering of 45,000,000 shares of its common stock at a public offering price of$10.10 per share. In connection with the offering, we granted the underwriters an option for a period of 30 days to purchase up to an additional 6,750,000 shares of common stock at a price of$10.10 per share. OnApril 16, 2021 , the underwriters exercised their option, in part, to purchase an additional 6,725,000 shares of common stock. The offering closed onApril 19, 2021 . To compensate the Manager for its successful efforts in raising capital for us, we granted options to the Manager relating to 5.2 million shares of New Residential's common stock at$10.10 per share. We used the net proceeds of approximately$512.0 million from the offering, along with cash on hand and other sources of liquidity, to finance the Caliber acquisition in the third quarter of 2021. OnMay 19, 2021 , we entered into a Distribution Agreement to sell shares of our common stock, par value$0.01 per share (the "ATM Shares"), having an aggregate offering price of up to$500.0 million , from time to time, through an "at-the-market" equity offering program (the "ATM Program"). No share issuances were made during the three months endedMarch 31, 2022 . OnSeptember 14, 2021 , we priced our underwritten public offering of 17,000,000 of our 7.00% fixed-rate reset series D cumulative redeemable preferred stock, par value$0.01 per share, with a liquidation preference of$25.00 per share for net proceeds of approximately$449.5 million . The offering closed onSeptember 17, 2021 . In connection with the offering, we granted the underwriters an option for a period of 30 days to purchase up to an additional 2,550,000 shares of preferred stock at a price of $24.2125 per share. OnSeptember 22, 2021 , the underwriters exercised their option, in part, to purchase an additional 1,600,000 shares of preferred stock. To compensate the Manager for its successful efforts in raising capital for us, we granted options to the Manager relating to approximately 1.9 million shares of our common stock at$10.89 per share. InDecember 2021 , our board of directors authorized the repurchase of up to$200.0 million of our common stock and$100.0 million of our preferred stock throughDecember 31, 2022 . Repurchases may be made at any time and from time to time through open market purchases or privately negotiated transactions, pursuant to one or more plans established pursuant to Rule 10b5-1 under the Exchange Act, by means of one or more tender offers, or otherwise, in each case, as permitted by securities laws and other legal and contractual requirements. The amount and timing of the purchases will depend on a number of factors including the price and availability of our shares, trading volume, capital availability, our performance and general economic and market conditions. The share repurchase programs may be suspended or discontinued at any time. No share repurchases have been made as of the filing of this report. Repurchases may impact our financial results, including fees paid to our Manager. During the three months endedMarch 31, 2022 , we repurchased approximately$3.8 million of Preferred Series C at a weighted average price of$22.20 per share.
The following table summarizes outstanding options as of
Held by the Manager
18,467,776
Issued to the Manager and subsequently assigned to certain of the Manager's employees
3,004,214
Issued to the independent directors 6,000 Total 21,477,990
As of
Common Dividends We are organized and intend to conduct our operations to qualify as a REIT forU.S. federal income tax purposes. We intend to make regular quarterly distributions to holders of our common stock.U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income. We intend to make regular quarterly distributions of our taxable income to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our board of directors. Before we pay any dividend, whether forU.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and 97 -------------------------------------------------------------------------------- debt service on our secured financing agreements and other debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets or raise capital to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. We make distributions based on a number of factors, including an estimate of taxable earnings per common share. Dividends distributed and taxable and GAAP earnings will typically differ due to items such as fair value adjustments, differences in premium amortization and discount accretion, other differences in method of accounting, non-deductible general and administrative expenses, taxable income arising from certain modifications of debt instruments and investments held in TRSs. Our quarterly dividend per share may be substantially different than our quarterly taxable earnings and GAAP earnings per share. We will continue to monitor market conditions and the potential impact the ongoing volatility and uncertainty may have on our business. Our board of directors will continue to evaluate the payment of dividends as market conditions evolve, and no definitive determination has been made at this time. While the terms and timing of the approval and declaration of cash dividends, if any, on shares of our capital stock is at the sole discretion of our board of directors and we cannot predict how market conditions may evolve, we intend to distribute to our stockholders an amount equal to at least 90% of our REIT taxable income determined before applying the deduction for dividends paid and by excluding net capital gains consistent with our intention to maintain our qualification as a REIT under the Code. The following table summarizes common dividends declared for the periods presented: Common Dividends Declared for the Period Ended Paid/Payable Amount Per Share March 31, 2021 April 2021 $ 0.20 June 30, 2021 July 2021 0.20 September 30, 2021 October 2021 0.25 December 31, 2021 January 2022 0.25 March 31, 2022 April 2022 0.25 Cash Flows
The following table summarizes changes to our cash, cash equivalents, and restricted cash for the periods presented:
Three Months Ended March 31, December 31, 2022 2021 Change Beginning of period - cash, cash equivalents, and restricted cash$ 1,528,442
Net cash provided by (used in) operating activities 3,890,152 3,570,367 319,785 Net cash provided by (used in) investing activities (736,320) (500,790) (235,530) Net cash provided by (used in) financing activities (2,716,060) (3,102,558) 386,498 Net increase (decrease) in cash, cash equivalents, and restricted cash 437,772 (32,981) 470,753 End of period - cash, cash equivalents, and restricted cash$ 1,966,214 $ 1,528,442 $ 437,772 Operating Activities Net cash provided by operating activities were approximately$3.9 billion and$3.6 billion for the three months endedMarch 31, 2022 andDecember 31, 2021 , respectively. Operating cash inflows for the three monthsMarch 31, 2022 primarily consisted of proceeds from sales and principal repayments of purchased residential mortgage loans, held-for-sale, servicing fees received, net interest income received, and net recoveries of servicer advances receivable. Operating cash outflows primarily consisted of purchases of residential mortgage loans, held-for-sale, loan originations, management fees paid to the Manager, and subservicing fees paid. 98 --------------------------------------------------------------------------------
Investing Activities
Cash flows (used in) investing activities were$(0.7) billion and$(0.5) billion for the three months endedMarch 31, 2022 andDecember 31, 2021 , respectively. Investing activities for the three monthsMarch 31, 2022 primarily consisted of cash paid for SFR properties, real estate securities, and the funding of servicer advance investments, net of principal repayments from servicer advance investments, MSRs, real estate securities and loans as well as proceeds from the sale of real estate securities, loans and REO, and derivative cash flows.
Financing Activities
Cash flows (used in) financing activities were approximately$(2.7) billion and$(3.1) billion for the three months endedMarch 31, 2022 andDecember 31, 2021 , respectively. Financing activities for the three monthsMarch 31, 2022 primarily consisted of borrowings net of repayments under debt obligations, margin deposits net of returns, capital contributions net of distributions from noncontrolling interests in the equity of consolidated subsidiaries, and payment of dividends.
INTEREST RATE, CREDIT AND SPREAD RISK
We are subject to interest rate, credit and spread risk with respect to our investments. These risks are further described in "Quantitative and Qualitative Disclosures About Market Risk."
OFF-BALANCE SHEET ARRANGEMENTS
We have material off-balance sheet arrangements related to our non-consolidated securitizations of residential mortgage loans treated as sales in which we retained certain interests. We believe that these off-balance sheet structures presented the most efficient and least expensive form of financing for these assets at the time they were entered and represented the most common market-accepted method for financing such assets. Our exposure to credit losses related to these non-recourse, off-balance sheet financings is limited to$1.0 billion . As ofMarch 31, 2022 , there was$11.7 billion in total outstanding unpaid principal balance of residential mortgage loans underlying such securitization trusts that represent off-balance sheet financings.
We are party to mortgage loan participation purchase and sale agreements, pursuant to which we have access to uncommitted facilities that provide liquidity for recently sold MBS up to the MBS settlement date. These facilities, which we refer to as gestation facilities, are a component of our financing strategy and are off-balance sheet arrangements.
As of
CONTRACTUAL OBLIGATIONS
Our contractual obligations as ofMarch 31, 2022 included all of the material contractual obligations referred to in our annual report on Form 10-K for the year endedDecember 31, 2021 , excluding debt that was repaid as described in "-Liquidity and Capital Resources-Debt Obligations."
In addition, we executed the following material contractual obligations during
the three months ended
•Derivatives - as described in Note 17 to our Consolidated Financial Statements, we altered the composition of our economic hedges during the period. •Debt obligations - as described in Note 18 to our Consolidated Financial Statements, we borrowed additional amounts.
See Notes 16, 22 and 25 to our Consolidated Financial Statements included in this report for information regarding commitments and material contracts entered into subsequent toMarch 31, 2022 , if any. As described in Note 22, we have committed to purchase certain future servicer advances. The actual amount of future advances is subject to significant uncertainty. However, we currently expect that net recoveries of servicer advances will exceed net fundings for the foreseeable future. This expectation is based on judgments, estimates and assumptions, all of which are subject to significant uncertainty. In addition, the Consumer Loan Companies have invested in loans with an aggregate of$237.9 million of unfunded and available revolving credit privileges as ofMarch 31, 2022 . However, under the terms of these loans, requests for draws may be denied and unfunded availability may be terminated at management's discretion. Lastly, Genesis had commitments to fund up to$672.3 million of additional advances on existing mortgage loans as ofMarch 31, 2022 . These commitments are generally 99 -------------------------------------------------------------------------------- subject to loan agreements with covenants regarding the financial performance of the customer and other terms regarding advances that must be met before Genesis funds the commitment. INFLATION Virtually all of our assets and liabilities are financial in nature. As a result, interest rates and other factors affect our performance more so than inflation, although inflation rates can often have a meaningful influence over the direction of interest rates. Furthermore, our financial statements are prepared in accordance with GAAP and our distributions are determined by our board of directors primarily based on our taxable income, and, in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation. See "Quantitative and Qualitative Disclosures About Market Risk-Interest Rate Risk."
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