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VARIABLE INTEREST ENTITIES
 9 Months Ended
Sep. 30, 2025
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
VARIABLE INTEREST ENTITIES
8. VARIABLE INTEREST ENTITIES
The Company’s exposure to the obligations of its VIEs is generally limited to the Company’s investment in the VIEs of $3.0 billion at September 30, 2025. Assets of the VIEs may only be used to settle obligations of the VIEs. Creditors of the VIEs have no recourse to the general credit of the Company. The Company is not contractually required to provide and has not provided any form of financial support to the VIEs. No gains or losses were recognized upon consolidation of existing VIEs. Interest income and expense are recognized using the effective interest method.
Residential Securitizations
The Company also invests in residential mortgage-backed securities issued by entities that are VIEs because they do not have sufficient equity at risk for the entities to finance their activities without additional subordinated financial support from other parties. The Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIEs’ economic performance. For these entities, the Company’s maximum exposure to loss is the amortized cost basis of the securities it owns and it does not provide any liquidity arrangements, guarantees or other commitments to these VIEs. Refer to the “Securities” Note for further information on Residential Securities.
OBX Trusts
Residential securitizations are issued by entities generally referred to collectively as the “OBX Trusts.” These securitizations represent financing transactions that provide non-recourse financing to the Company and are collateralized by residential mortgage loans purchased by the Company. Residential securitizations closed as of September 30, 2025 are included in the following table:
SecuritizationDate of ClosingFace Value at Closing
(dollars in thousands)
OBX 2025-NQM1January 2025$618,433 
OBX 2025-NQM2February 2025$719,218 
OBX 2025-NQM3February 2025$577,442 
OBX 2025-NQM4March 2025$625,807 
OBX 2025-HE1March 2025$216,455 
OBX 2025-NQM5March 2025$334,879 
OBX 2025-NQM6April 2025$553,236 
OBX 2025-NQM7April 2025$572,441 
OBX 2025-J1May 2025$325,702 
OBX 2025-NQM8May 2025$595,560 
OBX 2025-NQM9May 2025$275,711 
OBX 2025-NQM10June 2025$623,602 
OBX 2025-NQM11June 2025$650,072 
OBX 2025-NQM12July 2025$274,468 
OBX 2025-NQM13July 2025$662,708 
OBX 2025-NQM14August 2025$701,027 
OBX 2025-NQM15August 2025$697,303 
OBX 2025-HE2August 2025$216,324 
OBX 2025-J2September 2025$304,395 
OBX 2025-NQM16September 2025$708,473 
OBX 2025-NQM17September 2025$298,662 
The Company is deemed to be the primary beneficiary and consolidates the OBX Trusts because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs. Although the residential mortgage loans have been sold for bankruptcy and state law purposes, the transfers of the residential mortgage loans to the OBX Trusts did not qualify for sale accounting and are reflected as intercompany secured borrowings that are eliminated upon consolidation. Effective August 1, 2022, upon initial consolidation of new securitization entities, the Company elected to apply the measurement alternative for consolidated collateralized financing entities in order to simplify the accounting and valuation processes. The liabilities of these securitization entities are deemed to be more observable and are used to measure the fair value of the assets.
As of September 30, 2025 and December 31, 2024, a total carrying value of $26.3 billion and $19.5 billion, respectively, of bonds were held by third parties and the Company retained $3.0 billion and $2.3 billion, respectively, of MBS, which were eliminated in consolidation. The contractual principal amount of the OBX Trusts’ debt held by third parties was $26.8 billion and $20.5 billion at September 30, 2025 and December 31, 2024, respectively. During the three months ended September 30, 2025 and 2024, the Company recorded ($92.9) million and ($430.4) million, respectively, and ($322.9) million and ($339.6) million during the nine months ended September 30, 2025 and 2024, respectively, of unrealized gains (losses) on debt held by third parties issued by OBX Trusts, which is reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss).
In September 2025, the Company exercised its optional redemption on OBX 2022-NQM8 and liquidated the securitization trust. Upon deconsolidation, there was a $0.4 million gain recognized in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
Structured Repurchase Transaction
The Company pledged securities retained from its OBX Trusts to a new structured repurchase transaction, OBX 2025-SR1, to diversify its financing sources. The OBX 2025-SR1 Trust is deemed to be a VIE because the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support. The Company is deemed to be the primary beneficiary and consolidates the OBX 2025-SR1 Trust because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs. The securities issued by the OBX 2025-SR1 Trust are recognized as Debt issued by securitization vehicles in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss). The changes in the estimated fair value are presented within Net gains (losses) on investments and other.
The Company incurred $8.1 million and $5.0 million of costs during the three months ended September 30, 2025 and 2024, respectively, and $20.6 million and $14.0 million of costs during the nine months ended September 30, 2025 and 2024, respectively, in connection with these securitizations that were expensed as incurred.
Residential Credit Fund
The Company manages a fund investing in participations in residential mortgage loans and mortgage-backed securities. The residential credit fund is deemed to be a VIE because the entity does not have sufficient equity at risk to permit the legal entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders, as capital commitments are not considered equity at risk. The Company is not the primary beneficiary and does not consolidate the residential credit fund as its only interest in the fund is the management and performance fees that it earns, which are not considered variable interests in the entity. As of September 30, 2025 and December 31, 2024, the Company had outstanding participations issued in residential mortgage loans of $1.8 billion and $1.2 billion, respectively. These transfers do not meet the criteria for sale accounting and are accounted for as secured borrowings, thus the residential loans are reported as Loans, net and the associated liability is reported as Participations issued in the Consolidated Statements of Financial Condition. The Company elected the fair value option for participations issued with changes in fair value reflected in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss) to more accurately reflect the economics of the transfers as the underlying loans are carried at fair value through earnings.