Residential Loans at Fair Value

6 Months Ended

12 Months Ended

Jun. 30, 2014

Dec. 31, 2013

9. Residential Loans at Fair Value

Residential Loans Held for Investment

Residential loans held for investment and carried at fair value include reverse loans, forward loans in Non-Residual Trusts and charged-off loans. The Company purchased and originated reverse loans in the amount of $393.0 million and $800.2 million during the three months ended June 30, 2014 and 2013, respectively. The Company purchased and originated reverse loans in the amount of $716.2 million and $1.9 billion during the six months ended June 30, 2014 and 2013, respectively. The Company purchased charged-off loans with an unpaid principal balance of $3.3 billion for $57.1 million during the three and six months ended June 30, 2014.

Residential Loans Held for Sale

The Company sells substantially all of its originated or purchased forward loans into the secondary market for securitization or to private investors as whole loans. The Company typically retains the right to service these loans. Refer to Note 5 for additional information regarding these sales of residential loans.

A reconciliation of the changes in residential loans held for sale is presented in the following table (in thousands):


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Balance at beginning of period	$	630,456		$	278,474		$	1,015,607		$	45,065
Purchases and originations of loans held for sale		4,453,761			4,848,332			8,037,309			5,281,349
Proceeds from sales of and payments on loans held for sale⁽¹⁾		(4,045,058	)		(3,522,518	)		(8,104,759	)		(3,749,979	)
Realized gains on sales of loans⁽²⁾		102,517			67,218			189,350			75,526
Change in unrealized gains (losses) on loans held for sale⁽²⁾		23,353			(15,897	)		19,177			(2,271	)
Interest income⁽²⁾		8,721			8,473			17,066			9,261
Transfers from loans held for investment		—			43			—			5,183
Other		(162	)		90			(162	)		81

Balance at end of period	$	1,173,588		$	1,664,215		$	1,173,588		$	1,664,215

⁽¹⁾	Excludes realized gains (losses) on freestanding derivatives.

⁽²⁾	Amount is a component of net gains on sales of loans on the consolidated statements of comprehensive income (loss). Refer to Note 6 for additional information.

9. Residential Loans at Fair Value

Residential loans at fair value are comprised of the following types of loans (in thousands):


	December 31,
	2013		2012
Reverse loans⁽¹⁾	$	8,738,503	$	6,047,108
Forward loans in Non-Residual Trusts		587,265		646,498
Forward loans held for sale		1,015,607		16,605

Residential loans at fair value	$	10,341,375	$	6,710,211

⁽¹⁾	Includes $28.5 million in reverse loans held for sale at December 31, 2012. There were no reverse loans held for sale at December 31, 2013.

Residential Loans Held for Investment

Residential loans held for investment and carried at fair value include reverse loans and forward loans in Non-Residual Trusts. The Company purchased reverse loans to be held for investment in the amount of $2.1 billion and $565.2 million, and originated $940.1 million and $29.1 million in reverse loans held for investment, during the years ended December 31, 2013 and 2012, respectively. There were no purchases or originations of reverse loans during the year ended December 31, 2011.

Residential Loans Held for Sale

The Company sells or securitizes forward loans it originates, or purchases from third parties, generally in the form of mortgage-backed securities that are guaranteed by Fannie Mae. The Company accounts for these transfers as sales and typically retains the right to service the loans. Refer to Note 5 for additional information regarding these transfers of residential loans.

A reconciliation of the changes in residential loans held for sale to the amounts presented on the consolidated statements of cash flows is presented in the following table (in thousands). There were no residential loans sold by the Company during the year ended December 31, 2011.


	For the Year Ended December 31,
	2013			2012
Balance at beginning of year	$	45,065		$	—
Purchases and originations of residential loans held for sale		16,141,573			22,259
Proceeds from sales of and payments on residential loans held for sale		(15,452,196	)		(15,985	)
Realized gains on sales of loans		218,504			537
Change in unrealized gains on loans held for sale		24,771			266
Interest income		32,625			16
Acquisition of S1L		—			37,972
Transfers from residential loans held for investment		5,183			—
Other		82			—

Balance at end of year	$	1,015,607		$	45,065

Concentrations of Credit Risk

Concentrations of credit risk associated with the residential loan portfolio are limited due to the large number of customers and their dispersion across many geographic areas. The table below provides the percentage of all residential loans (both those carried at fair value and amortized cost) on the Company’s consolidated balance sheets by the state in which the home securing the loan is located and is based on their unpaid principal balances. Other consists of loans in states in which concentration individually represents less than 5% of total unpaid principal balance.


	December 31,
	2013			2012
California		18	%		15	%
Texas		11	%		14	%
Florida		7	%		8	%
New York		5	%		5	%
Other		59	%		58	%

Total		100	%		100	%