MBS and CRT Securities (Tables)

12 Months Ended

Dec. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Schedule of information about MBS and CRT Securities

The following tables present certain information about the Company’s MBS and CRT securities at December 31, 2015 and 2014:

December 31, 2015

(In Thousands)	Principal/ Current Face		Purchase Premiums		Accretable Purchase Discounts			Discount Designated as Credit Reserve and  OTTI (1)			Amortized Cost (2)		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gain/(Loss)
Agency MBS:
Fannie Mae	$	3,690,020	$	139,243	$	(59	)	$	—		$	3,829,204	$	3,865,485	$	62,111	$	(25,830	)	$	36,281
Freddie Mac	851,087		32,680		—			—			884,798		877,109		6,906		(14,595		)	(7,689		)
Ginnie Mae	9,296		164		—			—			9,460		9,650		190		—			190
Total Agency MBS	4,550,403		172,087		(59		)	—			4,723,462		4,752,244		69,207		(40,425		)	28,782
Non-Agency MBS:
Expected to Recover Par (3)(4)	2,906,878		73		(31,576		)	—			2,875,375		2,878,532		23,300		(20,143		)	3,157
Expected to Recover Less than Par (3)	4,054,615		—		(280,606		)	(787,541		)	2,986,468		3,542,285		564,031		(8,214		)	555,817
Total Non-Agency MBS (5)	6,961,493		73		(312,182		)	(787,541		)	5,861,843		6,420,817		587,331		(28,357		)	558,974
Total MBS	11,511,896		172,160		(312,241		)	(787,541		)	10,585,305		11,173,061		656,538		(68,782		)	587,756
CRT securities (6)	192,000		—		(5,689		)	—			186,311		183,582		418		(3,147		)	(2,729		)
Total MBS and CRT securities	$	11,703,896	$	172,160	$	(317,930	)	$	(787,541	)	$	10,771,616	$	11,356,643	$	656,956	$	(71,929	)	$	585,027

December 31, 2014

(In Thousands)	Principal/ Current Face		Purchase Premiums		Accretable Purchase Discounts			Discount Designated as Credit Reserve and  OTTI (1)			Amortized Cost (2)		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gain/(Loss)
Agency MBS:
Fannie Mae	$	4,587,823	$	174,245	$	(71	)	$	—		$	4,761,997	$	4,843,084	$	102,187	$	(21,100	)	$	81,087
Freddie Mac	1,011,659		38,895		—			—			1,051,096		1,049,854		11,280		(12,522		)	(1,242		)
Ginnie Mae	10,811		189		—			—			11,000		11,269		269		—			269
Total Agency MBS	5,610,293		213,329		(71		)	—			5,824,093		5,904,207		113,736		(33,622		)	80,114
Non-Agency MBS:
Expected to Recover Par (3)(4)	431,788		461		(29,501		)	—			402,748		428,431		26,735		(1,052		)	25,683
Expected to Recover Less than Par (3)	4,888,113		—		(370,063		)	(900,557		)	3,617,493		4,327,001		712,168		(2,660		)	709,508
Total Non-Agency MBS (5)	5,319,901		461		(399,564		)	(900,557		)	4,020,241		4,755,432		738,903		(3,712		)	735,191
Total MBS	10,930,194		213,790		(399,635		)	(900,557		)	9,844,334		10,659,639		852,639		(37,334		)	815,305
CRT securities	109,500		—		(4,727		)	—			104,773		102,983		324		(2,114		)	(1,790		)
Total MBS and CRT securities	$	11,039,694	$	213,790	$	(404,362	)	$	(900,557	)	$	9,949,107	$	10,762,622	$	852,963	$	(39,448	)	$	813,515

(1) Discount designated as Credit Reserve and amounts related to OTTI are generally not expected to be accreted into interest income. Amounts disclosed at December 31, 2015 reflect Credit Reserve of $766.0 million and OTTI of $21.5 million. Amounts disclosed at December 31, 2014 reflect Credit Reserve of $877.6 million and OTTI of $23.0 million.

(2) Includes principal payments receivable of $1.0 million and $542,000 at December 31, 2015 and 2014, respectively, which are not included in the Principal/Current Face.

(3) Based on management’s current estimates of future principal cash flows expected to be received.

(4) At December 31, 2015 RPL/NPL MBS had a $2.648 billion Principal/Current face, $2.645 billion amortized cost and $2.626 billion fair value. At December 31, 2014, RPL/NPL MBS had a $161.0 million Principal/Current face, $161.0 million amortized cost and $161.0 million fair value (excludes RPL/NPL MBS with $1.850 billion Principal/Current face, $1.847 billion amortized cost and $1.847 billion fair value that were presented as a component of Linked Transactions at December 31, 2014).

(5) At December 31, 2015 and 2014, the Company expected to recover approximately 89% and 83%, respectively, of the then-current face amount of Non-Agency MBS.

(6) Amounts disclosed at December 31, 2015 includes CRT securities with a fair value of $62.2 million for which the fair value option has been elected. Such securities have gross unrealized gains of approximately $332,000, gross unrealized losses of approximately $555,000 and net unrealized losses of approximately $223,000 at December 31, 2015.

Schedule of information about MBS and CRT Securities that were in an unrealized loss position

The following table presents information about the Company’s MBS and CRT securities that were in an unrealized loss position at December 31, 2015:

	Unrealized Loss Position For:
	Less than 12 Months					12 Months or more					Total
(Dollars in Thousands)	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
Agency MBS:
Fannie Mae	$	856,602	$	7,548	121	$	813,485	$	18,282	109	$	1,670,087	$	25,830
Freddie Mac	298,768		5,463		42	315,566		9,132		64	614,334		14,595
Total Agency MBS	1,155,370		13,011		163	1,129,051		27,414		173	2,284,421		40,425
Non-Agency MBS:
Expected to Recover Par (1)	2,239,418		16,717		59	212,584		3,426		12	2,452,002		20,143
Expected to Recover Less than Par (1)	184,664		4,348		35	64,081		3,866		11	248,745		8,214
Total Non-Agency MBS	2,424,082		21,065		94	276,665		7,292		23	2,700,747		28,357
Total MBS	3,579,452		34,076		257	1,405,716		34,706		196	4,985,168		68,782
CRT securities (2)	137,585		2,672		33	4,525		475		1	142,110		3,147
Total MBS and CRT securities	$	3,717,037	$	36,748	290	$	1,410,241	$	35,181	197	$	5,127,278	$	71,929

(1) Based on management’s current estimates of future principal cash flows expected to be received.  

(2) Amounts disclosed at December 31, 2015 includes CRT securities with a fair value of $54.1 million for which the fair value option has been elected. Such securities have unrealized losses of $555,000 at December 31, 2015.

Schedule of composition of OTTI charges recorded

The following table presents the composition of OTTI charges recorded by the Company for the years ended December 31, 2015, 2014 and 2013:

	For the Year Ended December 31,
(In Thousands)	2015			2014		2013
Total OTTI losses	$	(525	)	$	—	$	—
OTTI reclassified from OCI	(180		)	—		—
OTTI recognized in earnings	$	(705	)	$	—	$	—

Schedule of changes in credit loss component of OTTI

The following table presents a roll-forward of the credit loss component of OTTI on the Company’s Non-Agency MBS for which a non-credit component of OTTI was previously recognized in OCI.  Changes in the credit loss component of OTTI are presented based upon whether the current period is the first time OTTI was recorded on a security or a subsequent OTTI charge was recorded.

	For the Year Ended December 31,
(In Thousands)	2015		2014		2013
Credit loss component of OTTI at beginning of period	$	36,115	$	36,115	$	36,115
Additions for credit related OTTI not previously recognized	461		—		—
Subsequent additional credit related OTTI recorded	244		—		—
Credit loss component of OTTI at end of period	$	36,820	$	36,115	$	36,115

Schedule of changes in the components of the purchase discount on Non-Agency MBS

The following table presents the changes in the components of the Company’s purchase discount on its Non-Agency MBS between purchase discount designated as Credit Reserve and OTTI and accretable purchase discount for the years ended December 31, 2015 and 2014:

	For the Year Ended December 31,
	2015						2014
(In Thousands)	Discount Designated as Credit Reserve and OTTI			Accretable Discount (1)			Discount Designated as Credit Reserve and OTTI (2)			Accretable Discount (1)(2)
Balance at beginning of period	$	(900,557	)	$	(399,564	)	$	(1,043,037	)	$	(460,039	)
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing	(15,543		)	1,832			—			—
Accretion of discount	—			93,173			—			103,653
Realized credit losses	80,821			—			89,481			—
Purchases	(1,200		)	(4,925		)	(80,256		)	30,003
Sales	8,525			38,420			44,692			20,360
Net impairment losses recognized in earnings	(705		)	—			—			—
Unlinking of Linked Transactions	—			—			(6,414		)	1,436
Transfers/release of credit reserve	41,118			(41,118		)	94,977			(94,977		)
Balance at end of period	$	(787,541	)	$	(312,182	)	$	(900,557	)	$	(399,564	)

(1) Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security.

(2)  The Company reallocated $218,000 of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions for the year ended December 31, 2014.

Schedule of impact of Available-for-Sale Securities on AOCI

The following table presents the impact of the Company’s AFS securities on its AOCI for the years ended December 31, 2015, 2014, and 2013:

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
AOCI from AFS securities:
Unrealized gain on AFS securities at beginning of period	$	813,515		$	752,912		$	824,808
Unrealized (loss)/gain on Agency MBS, net	(51,332		)	65,739			(186,568		)
Unrealized (loss)/gain on Non-Agency MBS, net	(143,558		)	29,812			134,505
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing	4,537			—			—
Reclassification adjustment for MBS sales included in net income	(37,207		)	(34,948		)	(19,833		)
Reclassification adjustment for OTTI included in net income	(705		)	—			—
Change in AOCI from AFS securities	(228,265		)	60,603			(71,896		)
Balance at end of period	$	585,250		$	813,515		$	752,912

Schedule of interest income on MBS and CRT Securities

The following table presents components of interest income on the Company’s MBS and CRT securities for the years ended December 31, 2015, 2014 and 2013:

	For the Year Ended December 31,
(In Thousands)	2015			2014			2013
Agency MBS
Coupon interest	$	147,066		$	189,355		$	213,995
Effective yield adjustment (1)	(41,231		)	(46,812		)	(57,949		)
Interest income	$	105,835		$	142,543		$	156,046
Legacy Non-Agency MBS
Coupon interest	$	183,349		$	212,073		$	253,560
Effective yield adjustment (2)	91,003			103,491			73,189
Interest income	$	274,352		$	315,564		$	326,749
RPL/NPL MBS
Coupon interest	$	87,429		$	898		$	21
Effective yield adjustment (2)	1,789			(132		)	—
Interest income	$	89,218		$	766		$	21
CRT securities
Coupon interest	$	5,844		$	665		$	—
Effective yield adjustment (2)	728			107			—
Interest income	$	6,572		$	772		$	—

(1)  Includes amortization of premium paid net of accretion of purchase discount.  For Agency MBS, interest income is recorded at an effective yield, which reflects net premium amortization based on actual prepayment activity.

(2)  The effective yield adjustment is the difference between the net income calculated using the net yield, which is based on management’s estimates of the amount and timing of future cash flows, less the current coupon yield.