Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE) (Tables)

12 Months Ended

Dec. 31, 2015

Variable Interest Entity [Line Items]

Summary of Assets and Liabilities of Consolidated VIEs

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at December 31, 2015 and 2014, respectively (dollar amounts in thousands):



		December 31, 2015				December 31, 2014
	Fair Value Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	61,959	$	61,959	$	75,598	$	75,598
Investment securities available for sale, at fair value	Level 1 or 2	724,720		724,720		816,647		816,647
Investment securities available for sale, at fair value held in securitization trusts	Level 3	40,734		40,734		38,594		38,594
Residential mortgage loans held in securitization trusts (net)	Level 3	119,921		109,120		149,614		135,241
Distressed residential mortgage loans (net) ⁽¹⁾	Level 3	558,989		564,310		582,697		599,182
Multi-family loans held in securitization trusts, at fair value	Level 3	7,105,336		7,105,336		8,365,514		8,365,514
Derivative assets	Level 1 or 2	228,775		228,775		288,850		288,850
Mortgage loans held for sale (net) ⁽²⁾	Level 3	5,471		5,557		7,712		7,713
Mortgage loans held for investment ⁽²⁾	Level 3	2,706		2,846		1,760		1,900
Mezzanine and preferred equity investments ⁽²⁾⁽³⁾	Level 3	44,151		44,540		24,907		25,212
Investments in unconsolidated entities ⁽⁴⁾	Level 3	87,065		87,558		48,366		48,490
Financial Liabilities:
Financing arrangements, portfolio investments	Level 2	$	577,413	$	577,413	$	651,965	$	651,965
Financing arrangements, distressed residential mortgage loans	Level 2	214,490		214,490		238,949		238,949
Residential collateralized debt obligations	Level 3	116,710		105,606		145,542		130,919
Multi-family collateralized debt obligations, at fair value	Level 3	6,818,901		6,818,901		8,048,053		8,048,053
Securitized debt	Level 3	117,528		123,776		232,877		240,341
Derivative liabilities	Level 1 or 2	1,500		1,500		1,463		1,463
Payable for securities purchased	Level 1	227,969		227,969		283,537		283,537
Subordinated debentures	Level 3	45,000		42,731		45,000		36,531


(1)	Includes distressed residential mortgage loans held in securitization trusts with a carrying value amounting to approximately $114.2 million and $221.6 million at December 31, 2015 and December 31, 2014, respectively and distressed residential mortgage loans with a carrying value amounting to approximately $444.8 million and $361.1 million at December 31, 2015 and December 31, 2014, respectively.


(2)	Included in receivables and other assets in the accompanying consolidated balance sheets.


(3)	Includes mezzanine and preferred equity investments accounted for as loans (see Note 2).


(4)	Includes investments in unconsolidated entities accounted for under the fair value option with a carrying value of $67.6 million and $38.5 million at December 31, 2015 and December 31, 2014, respectively.

Schedule of Securitized Debt Collateralized by Multi-family CMBS or Distressed Residential Mortgage Loans

The following table summarizes the Company’s securitized debt collateralized by multi-family CMBS or distressed residential mortgage loans (dollar amounts in thousands):



	Multi-family CMBS Re-securitization⁽¹⁾		Collateralized Recourse Financings⁽²⁾		Distressed Residential Mortgage Loan Securitizations⁽³⁾
Original Face amount of Notes issued by the VIE and purchased by 3rd party investors	$	35,000	$	55,853	$	176,970
Principal Amount at December 31, 2015	$	33,781	$	55,853	$	33,656
Principal Amount at December 31, 2014	$	34,208	$	55,853	$	149,364
Carrying Value at December 31, 2015⁽⁴⁾	$	28,019	$	55,853	$	33,656
Carrying Value at December 31, 2014⁽⁴⁾	$	27,660	$	55,853	$	149,364
Pass-through rate of Notes issued	5.35%		One-month LIBOR plus 5.25%		4.25 - 4.85%

(1)

The Company engaged in the re-securitization transaction primarily for the purpose of obtaining non-recourse financing on a portion of its multi-family CMBS portfolio. As a result of engaging in this transaction, the Company remains economically exposed to the first loss position on the underlying multi-family CMBS transferred to the Consolidated VIE. The holders of the Note have no recourse to the general credit of the Company, but the Company does have the obligation, under certain circumstances, to repurchase assets upon the breach of certain representations and warranties. The Company will receive all remaining cash flow, if any, through its retained ownership.


(2)	The Company entered into a CMBS Master Repurchase Agreements with a three-year term for the purpose of financing a portion of its multi-family CMBS portfolio. In connection with the transaction, the Company agreed to guarantee the due and punctual payment of its wholly-owned subsidiary's obligations under the CMBS Master Repurchase Agreement.

(3)

The Company engaged in these transactions for the purpose of financing distressed residential mortgage loans acquired by the Company. The distressed residential mortgage loans serving as collateral for the financings are comprised of performing, re-performing and to a lesser extent non-performing, fixed and adjustable-rate, fully-amortizing, interest only and balloon, seasoned mortgage loans secured by first liens on one to four family properties. Two of the four securitization transactions provide for a revolving period of one to two years from the date of the respective financing (“Revolving Period”) where no principal payments will be made on the note. All cash proceeds generated by the distressed residential mortgage loans and received by the respective securitization trust during the Revolving Period, after payment of interest on the note, reserve amounts and certain other transaction expenses, will be available for the purchase by the trust of additional mortgage loans that satisfy certain eligibility criteria. In December 2015, the Company repaid the Company’s outstanding notes from its distressed residential mortgage loan securitization transaction completed in December 2012 with an original principal amount of $38.7 million and outstanding principal balance at the time of repayment amounting to $5.5 million.. With the repayment of the notes, the Company terminated and deconsolidated the Financing VIE that facilitated this financing transaction and the distressed residential loans serving as collateral on the notes were transferred back to the Company.


(4)	Classified as securitized debt in the liability section of the Company’s accompanying consolidated balance sheets.

Schedule of Maturities of Long-term Debt

The following table presents contractual maturity information about the Financing VIEs’ securitized debt as of December 31, 2015 and December 31, 2014, respectively (dollar amounts in thousands):



Scheduled Maturity (principal amount)	December 31, 2015			December 31, 2014
Within 24 months	$	89,509		$	205,217
Over 36 months	33,781			34,208
Total	123,290			239,425
Discount	(5,762		)	(6,548		)
Carrying value	$	117,528		$	232,877

Schedule of Classification and Carrying Value of Unconsolidated VIEs

The following table presents the classification and carrying value of unconsolidated VIEs as of December 31, 2015 and 2014 (dollar amounts in thousands):



	December 31, 2015						December 31, 2014
	Investment securities available for sale, at fair value, held in securitization trusts		Receivables and other Assets		Total		Investment securities available for sale, at fair value, held in securitization trusts		Receivables and other Assets		Total
Multi-Family CMBS	$	40,734	$	76	$	40,810	$	38,594	$	80	$	38,674
Mezzanine loan, preferred equity and investments in unconsolidated entities	—		129,887		129,887		—		72,799		72,799
Total assets	$	40,734	$	129,963	$	170,697	$	38,594	$	72,879	$	111,473

Financing VIE

Variable Interest Entity [Line Items]

Summary of Assets and Liabilities of Consolidated VIEs

The following table presents a summary of the assets and liabilities of these Consolidated VIEs. Intercompany balances have been eliminated for purposes of this presentation.

Assets and Liabilities of Consolidated VIEs as of December 31, 2015 (dollar amounts in thousands):



	Financing VIEs								Non-financed VIEs
	Multi-family CMBS re-securitization⁽¹⁾		Collateralized Recourse Financing⁽²⁾		Distressed Residential Mortgage Loan Securitization ⁽³⁾		Residential Mortgage Loan Securitization		Multi- family CMBS⁽⁴⁾		Total
Investment securities available for sale, at fair value held in securitization trusts	$	40,734	$	—	$	—	$	—	$	—	$	40,734
Residential mortgage loans held in securitization trusts (net)	—		—		—		119,921		—		119,921
Distressed residential mortgage loans held in securitization trust (net)	—		—		114,214		—		—		114,214
Multi-family loans held in securitization trusts, at fair value	1,224,036		4,633,061		—		—		1,248,239		7,105,336
Receivables and other assets	4,864		15,281		6,076		1,200		5,456		32,877
Total assets	$	1,269,634	$	4,648,342	$	120,290	$	121,121	$	1,253,695	$	7,413,082
Residential collateralized debt obligations	$	—	$	—	$	—	$	116,710	$	—	$	116,710
Multi-family collateralized debt obligations, at fair value	1,168,470		4,464,340		—		—		1,186,091		6,818,901
Securitized debt	28,019		55,853		33,656		—		—		117,528
Accrued expenses and other liabilities	4,436		14,750		368		13		5,456		25,023
Total liabilities	$	1,200,925	$	4,534,943	$	34,024	$	116,723	$	1,191,547	$	7,078,162

(1)

The Company classified the multi-family CMBS issued by two K-Series securitizations and held by this Financing VIE as available for sale securities as the purpose is not to trade these securities. The Financing VIE consolidated one K-Series securitization that issued certain of the multi-family CMBS owned by the Company, including its assets, liabilities, income and expenses, in its financial statements, as based on a number of factors, the Company determined that it was the primary beneficiary and has a controlling financial interest in this particular K-Series securitization (see Note 6).

(2)

(3)

In December 2015, the Company repaid the Company’s outstanding notes from its distressed residential mortgage loan securitization transaction completed in December 2012 with an original principal amount of $38.7 million and outstanding principal balance at the time of repayment amounting to $5.5 million. With the repayment of the notes, the Company terminated and deconsolidated the Financing VIE that facilitated this financing transaction and the distressed residential loans serving as collateral on the notes were transferred back to the Company.


(4)	In February 2015, the Company sold a first loss tranche PO security issued by one of the Consolidated K-Series securitizations obtaining total proceeds of approximately $44.3 million and realizing a gain of approximately $1.5 million. The sale resulted in a de-consolidation of $1.1 billion in Multi-Family loans held in a securitization trust and $1.0 billion in Multi-Family CDOs.

Assets and Liabilities of Consolidated VIEs as of December 31, 2014 (dollar amounts in thousands):



	Financing VIEs								Non-financed VIEs
	Multi-family CMBS re-securitization⁽¹⁾		Collateralized Recourse Financings⁽²⁾		Distressed Residential Mortgage Loan Securitizations		Residential Mortgage Loan Securitizations		Multi- family CMBS⁽³⁾		Total
Investment securities available for sale, at fair value held in securitization trusts	$	38,594	$	—	$	—	$	—	$	—	$	38,594
Residential mortgage loans held in securitization trusts (net)	—		—		—		149,614		—		149,614
Distressed residential mortgage loans held in securitization trusts (net)	—		—		221,591		—		—		221,591
Multi-family loans held in securitization trusts, at fair value	1,273,633		4,720,908		—		—		2,370,973		8,365,514
Receivables and other assets	5,097		15,631		39,084		1,545		10,408		71,765
Total assets	$	1,317,324	$	4,736,539	$	260,675	$	151,159	$	2,381,381	$	8,847,078
Residential collateralized debt obligations	$	—	$	—	$	—	$	145,542	$	—	$	145,542
Multi-family collateralized debt obligations, at fair value	1,221,555		4,558,065		—		—		2,268,433		8,048,053
Securitized debt	27,660		55,853		149,364		—		—		232,877
Accrued expenses and other liabilities	4,581		14,639		1,024		14		10,304		30,562
Total liabilities	$	1,253,796	$	4,628,557	$	150,388	$	145,556	$	2,278,737	$	8,457,034

(1)

The Company classified the multi-family CMBS issued by two K-Series securitizations and held by the Financing VIE as available for sale securities as the purpose is not to trade these securities. The Financing VIE consolidated one K-Series securitization that issued certain of the multi-family CMBS owned by the Company, including its assets, liabilities, income and expenses, in its financial statements, as based on a number of factors, the Company determined that it was the primary beneficiary and has a controlling financial interest in this particular K-Series securitization (see Note 6).

(2)

The multi-family CMBS serving as collateral under the November 2013 collateralized recourse financing are comprised of securities issued from three separate Freddie Mac-sponsored multifamily K-Series securitizations. The Financing VIE consolidated these K-Series securitizations, including their assets, liabilities and expenses, in its financial statements as based on a number of factors, the Company determined that it was the primary beneficiary and has a controlling financial interest in such K-Series securitizations (see Note 6). In September 2014, the Company repaid the Company’s outstanding notes from its collateralized recourse financing transaction completed in November 2012 with a principal amount of $52.0 million. With the repayment of the notes, the Company terminated and deconsolidated the Financing VIE that facilitated this financing transaction and the multi-family CMBS serving as collateral on the notes were transferred back to the Company.


(3)	Two of the Company's Freddie Mac-sponsored multi-family K-Series securitizations included in the Consolidated K-Series are not subject to any Financing VIE as of December 31, 2014.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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