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Variable Interest Entities
6 Months Ended
Jun. 30, 2020
Variable Interest Entities  
Variable Interest Entities

NOTE 5. VARIABLE INTEREST ENTITIES

As discussed in Note 1, “Summary of Significant Accounting Policies,” we have determined that we are the primary beneficiary of certain securitization trusts. The following table presents a summary of the assets and liabilities of our consolidated securitization trusts as of June 30, 2020 and December 31, 2019:

​

​

​

​

​

​

​

​

​

​

June 30, 

​

December 31, 

​

    

2020

    

2019

​

​

(in thousands)

Residential mortgage loans held-for-investment through consolidated securitization trusts

​

$

367,539

​

$

458,348

Accrued interest receivable

​

 

1,259

​

 

1,495

Total assets

​

$

368,798

​

$

459,843

Accrued interest payable

​

$

1,214

​

$

1,448

Asset-backed securities issued by securitization trusts

​

 

358,854

​

 

448,987

Total liabilities

​

$

360,068

​

$

450,435

​

Our risk with respect to each investment in a securitization trust is limited to our direct ownership in the securitization trust. We own the most subordinated classes on all of the trusts. The residential mortgage loans held by the consolidated securitization trusts are held solely to satisfy the liabilities of the securitization trusts, and the investors in the securitization trusts have no recourse to the general credit of the Company for the ABS issued by the securitization trusts. The assets of a consolidated securitization trust can only be used to satisfy the obligations of that trust. ABS are not paid down according to any schedule, but rather as payments are made on the underlying mortgages. The final distribution dates for the three trusts are all at various dates in 2045. We are not contractually required and have not provided any additional financial support to the securitization trusts for the period ended June 30, 2020.

Residential Mortgage Loans Held-for-Investment Through Consolidated Securitization Trusts

Residential mortgage loans held-for-investment through consolidated securitization trusts are carried at unpaid principal balances net of any premiums or discounts and allowances for loan losses. The residential mortgage loans are secured by first liens on the underlying residential properties. As we still retain the most subordinated tranches in these trusts, we continue to be the primary beneficiary of these trusts and believe that we are still required to consolidate these trusts. All of the loans in these trusts were originated during 2015. During the three and six months ended June 30, 2020, we did not sell any of our investment in these trusts. During the year ended December 31, 2019, we did not sell any of our investment in these trusts.

The following table details the carrying value for residential mortgage loans held-for-investment through consolidated securitization trusts at June 30, 2020 and December 31, 2019:

​

​

​

​

​

​

​

​

​

​

June 30, 

​

December 31, 

​

    

2020

    

2019

​

​

(in thousands)

Principal balance

​

$

366,584

​

$

456,768

Unamortized premium and costs

​

 

1,102

​

 

1,755

Allowance for loan losses

​

​

(147)

​

​

(175)

Carrying value

​

$

367,539

​

$

458,348

​

The following table provides a reconciliation of the carrying value of residential mortgage loans held-for-investment through consolidated securitization trusts for the three and six months ended June 30, 2020 and June 30, 2019 and for the year ended December 31, 2019:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months

  

Six Months

  

Three Months

  

Six Months

  

For the Year

​

​

Ended

​

Ended

​

Ended

​

Ended

​

Ended

​

​

June 30, 

​

June 30, 

​

June 30, 

​

June 30, 

​

December 31, 

​

    

2020

    

2020

    

2019

    

2019

    

2019

​

​

(in thousands)

Balance at beginning of period

​

$

416,571

​

$

458,348

​

$

535,077

​

$

549,016

​

$

549,016

Deductions during period:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Collections of principal

​

 

(48,736)

​

 

(90,184)

​

​

(19,925)

​

​

(33,445)

​

 

(89,113)

Principal paydowns and other deductions

​

 

(316)

​

 

(653)

​

​

(403)

​

​

(833)

​

 

(1,566)

Provision for credit losses

​

​

(564)

​

​

(594)

​

​

—

​

​

—

​

​

—

Charge-offs, net

​

​

584

​

​

622

​

​

—

​

​

11

​

​

11

Balance at end of period

​

$

367,539

​

$

367,539

​

$

514,749

​

$

514,749

​

$

458,348

​

The following table details various portfolio characteristics of the residential mortgage loans held-for-investment through consolidated securitization trusts at June 30, 2020 and December 31, 2019:

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 

​

​

December 31, 

 

​

    

2020

    

    

2019

 

​

​

(dollar amounts in thousands)

 

Portfolio Characteristics:

​

  

​

​

​

  

​

 

Number of loans

 

​

580

 

​

​

704

​

Current principal balance

​

$

366,584

​

​

$

456,768

​

Average loan balance

​

$

632

​

​

$

649

​

Net weighted average coupon rate

​

 

3.86

%  

​

 

3.87

%

Weighted average maturity (years)

​

 

23.8

​

​

 

24.3

​

Weighted average FICO score

​

 

761

​

​

 

762

​

Current Performance:

​

 

  

​

​

 

  

​

Current

​

$

361,114

​

​

$

452,875

​

30 days delinquent

​

 

3,494

​

​

 

2,122

​

60 days delinquent

​

 

1,250

​

​

 

726

​

90+ days delinquent

​

 

726

​

​

 

1,045

​

Bankruptcy/foreclosure

​

 

—

​

​

 

—

​

Total

​

$

366,584

​

​

$

456,768

​

​

The following table summarizes the geographic concentrations of residential mortgage loans held-for-investment through consolidated securitization trusts at June 30, 2020 and December 31, 2019, based on principal balance outstanding:

​

​

​

​

​

​

​

​

​

​

June 30, 

​

​

December 31, 

 

State

    

2020

    

​

2019

 

California

 

43

%  

​

43

%

Florida

 

7

 

​

7

​

Texas

​

6

​

​

—

​

Other states (none greater than 5%)

 

44

 

​

50

​

Total

 

100

%  

​

100

%

​

Allowance for Loan Losses on Residential Mortgage Loans Held by Consolidated Securitization Trusts

As discussed in Note 1, “Summary of Significant Accounting Policies,” the Company establishes and maintains an allowance for loan losses on residential mortgage loans held by consolidated securitization trusts based on the Company’s estimate of credit losses.

The following table summarizes the activity in the allowance for loan losses for the three and six months ended June 30, 2020 and June 30, 2019 and for the year ended December 31, 2019:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months

​

Six Months

​

Three Months

​

Six Months

Year

​

​

Ended

​

Ended

​

Ended

​

Ended

Ended

​

​

June 30, 

​

June 30, 

​

June 30

​

June 30, 

December 31,

​

    

2020

    

2020

    

2019

    

2019

2019

​

​

(in thousands)

Balance at beginning of period

​

$

167

​

$

175

​

$

175

​

$

186

$

186

Impact of adopting ASC 326

​

​

—

​

​

—

​

​

—

​

​

—

​

—

Provision for credit losses

​

​

564

​

​

594

​

​

—

​

​

—

​

—

Charge-offs, net

​

 

(584)

​

​

(622)

​

​

—

​

​

(11)

 

(11)

Balance at end of period

​

$

147

​

$

147

​

$

175

​

$

175

$

175

​

Asset-Backed Securities Issued by Securitization Trusts

Asset-backed securities issued by securitization trusts are recorded at principal balances net of unamortized premiums and discounts. Asset-backed securities issued by securitization trusts are issued in various tranches and had a principal balance of $352.8 million at June 30, 2020 and $449.0 million at December 31, 2019. The investors in the asset-backed securities are not affiliated with the Company and have no recourse to the general credit of the Company.