Distressed Residential Mortgage Loans

As of December 31, 2015 and December 31, 2014, the carrying value of the Company’s acquired distressed residential mortgage loans amounts to approximately $559.0 million and $582.7 million, respectively.

The Company considers its purchase price for the acquired distressed residential mortgage loans, including distressed residential mortgage loans held in securitization trusts, to be at fair value at the date of acquisition. The Company only establishes an allowance for loan losses subsequent to acquisition.

The following table presents information regarding the estimates of the contractually required payments, the cash flows expected to be collected, and the estimated fair value of the distressed residential mortgage loans acquired during the years ended December 31, 2015 and December 31, 2014, respectively (dollar amounts in thousands):



	December 31, 2015			December 31, 2014
Contractually required principal and interest	$	327,611		$	910,787
Non-accretable yield	(17,276		)	(85,474		)
Expected cash flows to be collected	310,335			825,313
Accretable yield	(158,149		)	(424,444		)
Fair value at the date of acquisition	$	152,186		$	400,869

The following table details activity in accretable yield for the distressed residential mortgage loans, including distressed residential mortgage loans held in securitization trusts, for the years ended December 31, 2015 and December 31, 2014, respectively (dollar amounts in thousands):



	December 31, 2015			December 31, 2014
Balance at beginning of period	$	640,416		$	171,112
Additions	173,497			598,247
Disposals	(195,615		)	(110,309		)
Accretion	(39,289		)	(18,634		)
Balance at end of period ⁽¹⁾	$	579,009		$	640,416

(1)

Accretable yield is the excess of the distressed residential mortgage loans’ cash flows expected to be collected over the purchase price. The cash flows expected to be collected represents the Company’s estimate of the amount and timing of undiscounted principal and interest cash flows. Additions include accretable yield estimates for purchases made during the period and reclassification to accretable yield from nonaccretable yield. Deletions include distressed residential mortgage loan dispositions, which include refinancing, sale and foreclosure of the underlying collateral and resulting removal of the distressed residential mortgage loans from the accretable yield, and reclassifications from accretable to nonaccretable yield. The reclassifications between accretable and nonaccretable yield and the accretion of interest income is based on various estimates regarding loan performance and the value of the underlying real estate securing the loans. As the Company continues to gather additional information regarding the loans and the underlying collateral, the accretable yield may change. Therefore, the amount of accretable income recorded in the twelve-month period ended December 31, 2015 is not necessarily indicative of future results.

The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance in our distressed residential mortgage loans, including distressed residential mortgage loans held in securitization trusts, as of December 31, 2015 and December 31, 2014, respectively, are as follows:



	December 31, 2015		December 31, 2014
Florida	12.6	%	12.4	%
North Carolina	8.1	%	8.2	%
California	7.7	%	8.9	%
Georgia	6.1	%	6.9	%
Maryland	5.4	%	3.5	%
New York	5.2	%	5.1	%

The Company’s distressed residential mortgage loans held in securitization trusts with a carrying value of approximately $114.2 million and $221.6 million at December 31, 2015 and December 31, 2014, respectively, are pledged as collateral for certain of the Securitized Debt issued by the Company (see Note 7). In addition, distressed residential mortgage loans with a carrying value of approximately $307.0 million and $327.4 million at December 31, 2015 and December 31, 2014, respectively, are pledged as collateral for a Master Repurchase Agreement, with Deutsche Bank AG, Cayman Islands Branch (see Note 10).