MBS (Tables)

12 Months Ended

Dec. 31, 2012

December 31, 2012

								Discount
								Designated
					Accretable			as Credit							Gross		Gross			Net
	Current		Purchase		Purchase			Reserve			Amortized				Unrealized		Unrealized			Unrealized
(In Thousands)	Face		Premiums		Discounts			and OTTI (1)			Cost (2)		Fair Value		Gains		Losses			Gain/(Loss)
Agency MBS:
Fannie Mae	$	5,977,388	$	196,686	$	(58	)	$	—		$	6,174,016	$	6,351,621	$	178,970	$	(1,365	)	$	177,605
Freddie Mac	800,854		30,447		—			—			835,724		858,560		22,925		(89		)	22,836
Ginnie Mae	14,526		251		—			—			14,777		15,279		502		—			502
Total Agency MBS	6,792,768		227,384		(58		)	—			7,024,517		7,225,460		202,397		(1,454		)	200,943
Non-Agency MBS (3)
Rated AAA	25,209		158		(219		)	—			25,148		25,905		757		—			757
Rated A	1,147		24		—			—			1,171		1,086		—		(85		)	(85		)
Rated BBB	49,301		637		(1,741		)	(378		)	47,819		48,563		1,806		(1,062		)	744
Rated BB	118,031		39		(8,892		)	(853		)	108,325		112,905		4,937		(357		)	4,580
Rated B	247,532		—		(31,133		)	(12,462		)	203,937		225,281		21,452		(108		)	21,344
Rated CCC	1,235,638		14		(107,618		)	(201,126		)	926,908		1,055,757		131,826		(2,977		)	128,849
Rated CC	579,632		—		(41,191		)	(132,061		)	406,380		468,017		61,739		(102		)	61,637
Rated C	952,984		—		(55,294		)	(166,529		)	731,161		812,523		81,850		(488		)	81,362
Unrated and D-rated (4)	3,300,086		—		(125,538		)	(867,097		)	2,307,451		2,632,128		325,796		(1,119		)	324,677
Total Non-Agency MBS	6,509,560		872		(371,626		)	(1,380,506		)	4,758,300		5,382,165		630,163		(6,298		)	623,865
Total MBS	$	13,302,328	$	228,256	$	(371,684	)	$	(1,380,506	)	$	11,782,817	$	12,607,625	$	832,560	$	(7,752	)	$	824,808

December 31, 2011

								Discount
								Designated
					Accretable			as Credit							Gross		Gross			Net
	Current		Purchase		Purchase			Reserve			Amortized				Unrealized		Unrealized			Unrealized
(In Thousands)	Face		Premiums		Discounts			and OTTI (1)			Cost (2)		Fair Value		Gains		Losses			Gain/(Loss)
Agency MBS:
Fannie Mae	$	5,981,834	$	154,809	$	(135	)	$	—		$	6,136,508	$	6,329,925	$	194,997	$	(1,580	)	$	193,417
Freddie Mac	743,517		22,717		—			—			768,572		791,085		22,677		(164		)	22,513
Ginnie Mae	15,920		275		—			—			16,195		16,521		326		—			326
Total Agency MBS	6,741,271		177,801		(135		)	—			6,921,275		7,137,531		218,000		(1,744		)	216,256
Non-Agency MBS (3)
Rated AAA	12,258		245		—			—			12,503		12,258		—		(245		)	(245		)
Rated AA	47		1		—			—			48		34		—		(14		)	(14		)
Rated A	28,950		765		(624		)	(5		)	29,086		24,911		341		(4,516		)	(4,175		)
Rated BBB	46,593		42		(3,020		)	(582		)	43,033		38,352		—		(4,681		)	(4,681		)
Rated BB	100,513		33		(10,749		)	(3,223		)	86,574		81,789		2,232		(7,017		)	(4,785		)
Rated B	355,930		17		(30,584		)	(25,004		)	300,359		277,438		2,729		(25,650		)	(22,921		)
Rated CCC	1,031,407		—		(68,174		)	(203,185		)	760,048		741,028		27,767		(46,787		)	(19,020		)
Rated CC	687,664		—		(33,478		)	(142,777		)	511,409		487,619		14,209		(37,999		)	(23,790		)
Rated C	2,128,919		—		(64,963		)	(487,397		)	1,576,559		1,503,737		44,988		(117,810		)	(72,822		)
Unrated and D-rated (4)	1,022,072		—		(38,887		)	(366,593		)	616,592		608,280		34,934		(43,246		)	(8,312		)
Total Non-Agency MBS	5,414,353		1,103		(250,479		)	(1,228,766		)	3,936,211		3,775,446		127,200		(287,965		)	(160,765		)
Total MBS	$	12,155,624	$	178,904	$	(250,614	)	$	(1,228,766	)	$	10,857,486	$	10,912,977	$	345,200	$	(289,709	)	$	55,491

(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, 2012 reflect Credit Reserve of $1.332 billion and OTTI of $48.7 million. Amounts disclosed at December 31, 2011 reflect Credit Reserve of $1.174 billion and OTTI of $54.5 million.

(2) Includes principal payments receivable of $4.4 million and $2.3 million at December 31, 2012 and December 31, 2011, respectively, which are not included in the Principal/Current Face.

(3) Non-Agency MBS, including Non-Agency MBS transferred to consolidated VIEs, are reported based on the lowest rating issued by a Rating Agency, if more than one rating is issued on the security, at the date presented.

(4) Includes 246 Non-Agency MBS that were D-rated and had an aggregate amortized cost and fair value of $2.252 billion and $2.573 billion, respectively, at December 31, 2012 and 78 Non-Agency MBS that were D-rated and had an aggregate amortized cost and fair value of $602.0 million and $593.8 million, respectively, at December 31, 2011.

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

The following table presents information about the Company’s MBS that were in an unrealized loss position at December 31, 2012:

	Unrealized Loss Position For:
	Less than 12 Months					12 Months or more					Total
	Fair		Unrealized		Number of	Fair		Unrealized		Number of	Fair		Unrealized
(In Thousands)	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Agency MBS:
Fannie Mae	$	263,564	$	616	35	$	41,497	$	749	10	$	305,061	$	1,365
Freddie Mac	53,138		85		7	2,698		4		1	55,836		89
Total Agency MBS	316,702		701		42	44,195		753		11	360,897		1,454
Non-Agency MBS:
Rated A	—		—		—	1,086		85		2	1,086		85
Rated BBB	—		—		—	22,121		1,062		3	22,121		1,062
Rated BB	—		—		—	20,893		357		4	20,893		357
Rated B	—		—		—	8,899		108		1	8,899		108
Rated CCC	23,582		258		5	55,185		2,719		5	78,767		2,977
Rated CC	18,251		102		1	—		—		—	18,251		102
Rated C	21,995		213		3	18,613		275		2	40,608		488
Unrated and other	26,510		83		5	18,835		1,036		2	45,345		1,119
Total Non-Agency MBS	90,338		656		14	145,632		5,642		19	235,970		6,298
Total MBS	$	407,040	$	1,357	56	$	189,827	$	6,395	30	$	596,867	$	7,752

Schedule of composition of OTTI charges recorded

	For the Year Ended December 31,
(In Thousands)	2012			2011			2010
Total OTTI losses	$	(879	)	$	(45,144	)	$	(6,042	)
OTTI (reclassified from)/recognized in other comprehensive income/(loss)	(321		)	34,574			(6,235		)
OTTI recognized in earnings	$	(1,200	)	$	(10,570	)	$	(12,277	)

Schedule of changes in credit loss component of OTTI

	For the Year Ended December 31,
(In Thousands)	2012		2011		2010
Credit loss component of OTTI at beginning of period	$	34,915	$	24,345	$	17,928
Additions for credit related OTTI not previously recognized	458		7,158		—
Subsequent additional credit related OTTI recorded	742		3,412		6,417
Credit loss component of OTTI at end of period	$	36,115	$	34,915	$	24,345

Schedule of significant inputs considered and assumptions made in determining the measurement of the component of OTTI recorded in earnings

	For the Year Ended December 31,
	2012	2011	2010
Credit enhancement (1) (2)
Weighted average (3)	3.26%	2.90%	6.30%
Range (4)	0.00-16.50%	0.00-13.30%	0.00% - 23.11%

Projected CPR (2) (5)
Weighted average (3)	9.90%	10.70%	11.22%
Range (4)	9.10-13.30%	1.90-13.80%	5.19% - 19.85%

Projected Loss Severity (2) (6)
Weighted average (3)	55.50%	52.10%	51.48%
Range (4)	45.90-60.00%	41.90-70.00%	45.00% - 62.00%

60+ days delinquent (2) (7)
Weighted average (3)	24.40%	22.60%	20.56%
Range (4)	18.20-32.40%	7.30-36.70%	5.46% - 36.76%

(1) Represents a level of protection for these securities, expressed as a percentage of total current underlying loan balance.

(2) Information provided is based on loans for all groups that provide credit enhancement for MBS with credit enhancement. If an MBS no longer has credit enhancement, information provided is based on loans for the individual group owned by the Company.

(3) Calculated by weighting the relevant input/assumptions for each individual security by current outstanding face of the security.

(4) Represents the range of inputs/assumptions based on individual securities.

(5) CPR - conditional prepayment rate.

(6) Projected loss severity represents the projected amount of loss realized on liquidated properties as a percentage of the principal balance.

(7) Includes, for each security, underlying loans 60 or more days delinquent, foreclosed loans and other real estate owned.

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

	For the Year Ended December 31,
	2012						2011
	Discount						Discount
	Designated as						Designated as
	Credit Reserve			Accretable			Credit Reserve			Accretable
(In Thousands)	and OTTI (1)			Discount (1) (2)			and OTTI (3)			Discount (2) (3)

Balance at beginning of period	$	(1,228,766	)	$	(250,479	)	$	(746,678	)	$	(228,966	)
Accretion of discount	—			38,185			—			42,358
Realized credit losses	162,458			—			33,074			—
Purchases	(427,741		)	3,497			(402,093		)	(23,440		)
Reclass discount for OTTI	866			(866		)	101			(101		)
Net impairment losses recognized in earnings	(1,200		)	—			(10,570		)	—
Unlinking of Linked Transactions	(38,662		)	(9,424		)	(127,102		)	(15,828		)
Transfers/release of credit reserve	152,539			(152,539		)	24,502			(24,502		)
Balance at end of period	$	(1,380,506	)	$	(371,626	)	$	(1,228,766	)	$	(250,479	)

(1) In addition, the Company reallocated $420,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions for the year ended December 31, 2012.

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

(3) In addition, the Company reallocated $20,000 of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions for the year ended December 31, 2011.

Schedule of impact of MBS on accumulated other comprehensive income/(loss)

	For the Year Ended December 31,
(In Thousands)	2012			2011			2010
Accumulated other comprehensive income from MBS:
Unrealized gain on MBS at beginning of period	$	55,491		$	393,822		$	339,470
Unrealized (loss)/gain on Agency MBS, net	(7,820		)	61,149			(59,644		)
Unrealized gain/(loss) on Non-Agency MBS, net	785,830			(381,410		)	167,732
Reclassification adjustment for MBS sales included in net income	(7,493		)	(7,500		)	(41,459		)
Reclassification adjustment for OTTI included in net income	(1,200		)	(10,570		)	(12,277		)
Change in accumulated other comprehensive income/(loss) from MBS	769,317			(338,331		)	54,352
Balance at end of period	$	824,808		$	55,491		$	393,822

Schedule of components of interest income on the entity's Agency MBS

	For the Year Ended December 31,
(In Thousands)	2012			2011			2010
Coupon interest	$	248,048		$	280,206		$	291,138
Effective yield adjustment (1)	(51,990		)	(38,212		)	(40,536		)
Agency MBS interest income	$	196,058		$	241,994		$	250,602

(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.

Schedule of components of interest income on the entity's Non-Agency MBS

	For the Year Ended December 31,
(In Thousands)	2012		2011		2010
Coupon interest	$	265,018	$	212,452	$	105,592
Effective yield adjustment (1)	37,954		42,165		34,759
Non-Agency MBS interest income	$	302,972	$	254,617	$	140,351

(1) The effective yield adjustment is the difference between the net interest income calculated using the net yield, which is based on management’s estimates of future cash flows for Non-Agency MBS, less the current coupon yield.