FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2017

Schedule of Fair Values, Assets and Liabilities Measured on Recurring Basis

The following tables present the estimated fair values of financial instruments measured at fair value on a recurring basis. There were no transfers between levels of the fair value hierarchy during the periods presented.

	Level 1		Level 2		Level 3		Total
June 30, 2017	(dollars in thousands)
Assets:
Agency mortgage-backed securities	$	-	$	73,963,998	$	-	$	73,963,998
Credit risk transfer securities		-		605,826		-		605,826
Non-Agency mortgage-backed securities		-		1,234,053		-		1,234,053
Residential mortgage loans		-		779,685		-		779,685
Mortgage servicing rights		-		-		605,653		605,653
Commercial real estate debt investments		-		3,972,560		-		3,972,560
Interest rate swaps		-		10,472		-		10,472
Other derivatives		124,109		29,895		-		154,004
Total assets	$	124,109	$	80,596,489	$	605,653	$	81,326,251
Liabilities:
Securitized debt of consolidated VIEs	$	-	$	3,438,675	$	-	$	3,438,675
Interest rate swaps		-		614,589		-		614,589
Other derivatives		42,103		57,277		-		99,380
Total liabilities	$	42,103	$	4,110,541	$	-	$	4,152,644



	Level 1		Level 2		Level 3		Total
December 31, 2016	(dollars in thousands)
Assets:
Agency mortgage-backed securities	$	-	$	75,589,873	$	-	$	75,589,873
Credit risk transfer securities		-		724,722		-		724,722
Non-Agency mortgage-backed securities		-		1,401,307		-		1,401,307
Residential mortgage loans		-		342,289		-		342,289
Mortgage servicing rights		-		-		652,216		652,216
Commercial real estate debt investments		-		4,321,739		-		4,321,739
Interest rate swaps		-		68,194		-		68,194
Other derivatives		168,209		3,057		-		171,266
Total assets	$	168,209	$	82,451,181	$	652,216	$	83,271,606
Liabilities:
Securitized debt of consolidated VIEs	$	-	$	3,655,802	$	-	$	3,655,802
Interest rate swaps		-		1,443,765		-		1,443,765
Other derivatives		24,912		61,525		-		86,437
Total liabilities	$	24,912	$	5,161,092	$	-	$	5,186,004

Information about Significant Unobservable Inputs Used for Recurring Fair Value Measurements for Level 3 MSRs

The table below presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 MSRs. The table does not give effect to the Company’s risk management practices that might offset risks inherent in these Level 3 investments.

	June 30, 2017		December 31, 2016
		Range		Range
Valuation Technique	Unobservable Input⁽¹⁾	(Weighted Average)	Unobservable Input⁽¹⁾	(Weighted Average)
Discounted cash flow	Discount rate	10.0% -15.0% (10.4%)	Discount rate	10.0% -15.0% (10.4%)
	Prepayment rate	5.7% - 23.6% (10.3%)	Prepayment rate	5.1% - 18.8% (8.7%)
	Delinquency rate	0.0% - 8.0% (1.9%)	Delinquency rate	0.0% - 10.0% (2.3%)
	Cost to service	$84 - $152 ($101)	Cost to service	$83 - $152 ($100)

⁽¹⁾Represents rates, estimates and assumptions that the Company believes would be used by market participants when valuing these assets.

Schedule of Estimated Fair Value for All Financial Assets and Liabilities

The following table summarizes the estimated fair value for financial assets and liabilities as of June 30, 2017 and December 31, 2016.

			June 30, 2017				December 31, 2016
	Level in Fair Value Hierarchy		Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:			(dollars in thousands)
Cash and cash equivalents ⁽¹⁾		1	$	700,692	$	700,692	$	1,539,746	$	1,539,746
Agency mortgage-backed securities		2		73,963,998		73,963,998		75,589,873		75,589,873
Credit risk transfer securities		2		605,826		605,826		724,722		724,722
Non-Agency mortgage-backed securities		2		1,234,053		1,234,053		1,401,307		1,401,307
Residential mortgage loans		2		779,685		779,685		342,289		342,289
Mortgage servicing rights		3		605,653		605,653		652,216		652,216
Commercial real estate debt investments		2		3,972,560		3,972,560		4,321,739		4,321,739
Commercial real estate debt and preferred equity, held for investment		3		928,181		931,309		970,505		968,824
Commercial loans held for sale, net		3		-		-		114,425		114,425
Corporate debt ⁽²⁾		2		773,957		775,468		773,274		776,310
Interest rate swaps ⁽¹⁾		2		10,472		10,472		68,194		68,194
Other derivatives		1,2		154,004		154,004		171,266		171,266

Financial liabilities:
Repurchase agreements		1,2	$	62,497,400	$	62,521,751	$	65,215,810	$	65,256,505
Other secured financing		1,2		3,785,543		3,798,234		3,884,708		3,885,430
Securitized debt of consolidated VIEs		2		3,438,675		3,438,675		3,655,802		3,655,802
Participation sold		2		-		-		12,869		12,827
Mortgage payable		3		311,810		315,474		311,636		312,442
Interest rate swaps ⁽¹⁾		2		614,589		614,589		1,443,765		1,443,765
Other derivatives		1,2		99,380		99,380		86,437		86,437

⁽¹⁾

As a result of a change to a clearing organization’s rulebook effective January 3, 2017, beginning with the first quarter 2017 and in subsequent periods the Company is presenting the fair value of centrally cleared interest rate swaps net of variation margin pledged under such transactions. The variation margin was previously reported under cash and cash equivalents and is currently reported as a reduction to interest rate swaps, at fair value.

⁽²⁾	Includes a held-to-maturity debt security carried at amortized cost of $84.5 million, with a fair value of $87.8 million, as of December 31, 2016. The bond was paid down during the three months ended June 30, 2017.