MBS and CRT Securities (Tables)

12 Months Ended

Dec. 31, 2016

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, 2016 and 2015:

December 31, 2016

(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	$	2,879,807	$	108,310	$	(51	)	$	—		$	2,988,066	$	3,014,464	$	45,706	$	(19,308	)	$	26,398
Freddie Mac	693,945		26,736		—			—			723,285		716,209		4,809		(11,885		)	(7,076		)
Ginnie Mae	7,550		136		—			—			7,686		7,824		138		—			138
Total Agency MBS	3,581,302		135,182		(51		)	—			3,719,037		3,738,497		50,653		(31,193		)	19,460
Non-Agency MBS:
Expected to Recover Par (3)(4)	2,847,398		57		(24,273		)	—			2,823,182		2,847,291		26,477		(2,368		)	24,109
Expected to Recover Less than Par (3)	3,359,200		—		(253,918		)	(694,241		)	2,411,041		2,978,525		570,318		(2,834		)	567,484
Total Non-Agency MBS (5)	6,206,598		57		(278,191		)	(694,241		)	5,234,223		5,825,816		596,795		(5,202		)	591,593
Total MBS	9,787,900		135,239		(278,242		)	(694,241		)	8,953,260		9,564,313		647,448		(36,395		)	611,053
CRT securities (6)	384,993		3,312		(5,557		)	—			382,748		404,850		22,105		(3		)	22,102
Total MBS and CRT securities	$	10,172,893	$	138,551	$	(283,799	)	$	(694,241	)	$	9,336,008	$	9,969,163	$	669,553	$	(36,398	)	$	633,155

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	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

(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, 2016 reflect Credit Reserve of $675.6 million and OTTI of $18.6 million. Amounts disclosed at December 31, 2015 reflect Credit Reserve of $766.0 million and OTTI of $21.5 million.

(2) Includes principal payments receivable of $2.6 million and $1.0 million at December 31, 2016 and 2015, 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, 2016, 3 Year Step-up securities had a $2.7 billion Principal/Current face, $2.7 billion amortized cost and $2.7 billion fair value. At December 31, 2015, 3 Year Step-up securities had a $2.6 billion Principal/Current face, $2.6 billion amortized cost and $2.6 billion fair value.

(5) At December 31, 2016 and 2015, the Company expected to recover approximately 89% and 89%, respectively, of the then-current face amount of Non-Agency MBS.

(6) Amounts disclosed at December 31, 2016 includes CRT securities with a fair value of $271.2 million for which the fair value option has been elected. Such securities had gross unrealized gains of approximately $12.7 million and net unrealized losses of approximately $3,000 at December 31, 2016. 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 had 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, 2016:

	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	$	380,834	$	3,207	76	$	933,019	$	16,101	156	$	1,313,853	$	19,308
Freddie Mac	276,595		4,838		47	248,498		7,047		65	525,093		11,885
Total Agency MBS	657,429		8,045		123	1,181,517		23,148		221	1,838,946		31,193
Non-Agency MBS:
Expected to Recover Par (1)	691,114		1,426		19	196,431		942		14	887,545		2,368
Expected to Recover Less than Par (1)	37,344		310		8	94,320		2,524		14	131,664		2,834
Total Non-Agency MBS	728,458		1,736		27	290,751		3,466		28	1,019,209		5,202
Total MBS	1,385,887		9,781		150	1,472,268		26,614		249	2,858,155		36,395
CRT securities (2)	2,503		3		1	—		—		—	2,503		3
Total MBS and CRT securities	$	1,388,390	$	9,784	151	$	1,472,268	$	26,614	249	$	2,860,658	$	36,398

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

(2) Amounts disclosed at December 31, 2016 includes CRT securities with a fair value of $2.5 million for which the fair value option has been elected. Such securities have unrealized losses of $3,000 at December 31, 2016.

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, 2016, 2015 and 2014:

	For the Year Ended December 31,
(In Thousands)	2016			2015			2014
Total OTTI losses	$	(1,255	)	$	(525	)	$	—
OTTI recognized in/(reclassified from) OCI	770			(180		)	—
OTTI recognized in earnings	$	(485	)	$	(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)	2016		2015		2014
Credit loss component of OTTI at beginning of period	$	36,820	$	36,115	$	36,115
Additions for credit related OTTI not previously recognized	314		461		—
Subsequent additional credit related OTTI recorded	171		244		—
Credit loss component of OTTI at end of period	$	37,305	$	36,820	$	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, 2016 and 2015:

	For the Year Ended December 31,
	2016						2015
(In Thousands)	Discount Designated as Credit Reserve and OTTI			Accretable Discount (1)			Discount Designated as Credit Reserve and OTTI			Accretable Discount (1)
Balance at beginning of period	$	(787,541	)	$	(312,182	)	$	(900,557	)	$	(399,564	)
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing	—			—			(15,543		)	1,832
Impact of RMBS Issuer settlement (2)	—			(59,900		)	—			—
Accretion of discount	—			80,548			—			93,173
Realized credit losses	64,217			—			80,821			—
Purchases	(25,999		)	13,094			(1,200		)	(4,925		)
Sales	17,863			37,953			8,525			38,420
Net impairment losses recognized in earnings	(485		)	—			(705		)	—
Transfers/release of credit reserve	37,704			(37,704		)	41,118			(41,118		)
Balance at end of period	$	(694,241	)	$	(278,191	)	$	(787,541	)	$	(312,182	)

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

(2) Includes the impact of approximately $61.8 million and $7.0 million of cash proceeds (a one-time payment) received by the Company during the year ended December 31, 2016 in connection with the settlements of litigation related to certain Countrywide and Citigroup sponsored residential mortgage backed securitization trusts, respectively.

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, 2016, 2015, and 2014:

	For the Year Ended December 31,
(In Thousands)	2016			2015			2014
AOCI from AFS securities:
Unrealized gain on AFS securities at beginning of period	$	585,250		$	813,515		$	752,912
Unrealized (loss)/gain on Agency MBS, net	(9,322		)	(51,332		)	65,739
Unrealized gain/(loss) on Non-Agency MBS, net	81,882			(143,558		)	29,812
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing	—			4,537			—
Reclassification adjustment for MBS sales included in net income	(36,922		)	(37,207		)	(34,948		)
Reclassification adjustment for OTTI included in net income	(485		)	(705		)	—
Change in AOCI from AFS securities	35,153			(228,265		)	60,603
Balance at end of period	$	620,403		$	585,250		$	813,515

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, 2016, 2015 and 2014:

	For the Year Ended December 31,
(In Thousands)	2016			2015			2014
Agency MBS
Coupon interest	$	119,966		$	147,066		$	189,355
Effective yield adjustment (1)	(36,897		)	(41,231		)	(46,812		)
Interest income	$	83,069		$	105,835		$	142,543
Legacy Non-Agency MBS
Coupon interest	$	154,057		$	183,349		$	212,073
Effective yield adjustment (2)	78,443			91,003			103,491
Interest income	$	232,500		$	274,352		$	315,564
3 Year Step-up securities
Coupon interest	$	100,032		$	87,429		$	898
Effective yield adjustment (1)	2,108			1,789			(132		)
Interest income	$	102,140		$	89,218		$	766
CRT securities
Coupon interest	$	13,023		$	5,844		$	665
Effective yield adjustment (2)	1,747			728			107
Interest income	$	14,770		$	6,572		$	772

(1)  Includes amortization of premium paid net of accretion of purchase discount.  For Agency MBS and 3 Year Step-up securities, interest income is recorded at an effective yield, which reflects net premium amortization/accretion 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.