Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2015 and 2014, respectively, on the Company’s consolidated balance sheets (dollar amounts in thousands):



	Measured at Fair Value on a Recurring Basis at
	December 31, 2015								December 31, 2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets carried at fair value
Investment securities available for sale:
Agency RMBS	$	—	$	713,116	$	—	$	713,116	$	—	$	779,505	$	—	$	779,505
Non-Agency RMBS	—		1,567		—		1,567		—		1,939		—		1,939
CLOs	—		—		—		—		—		35,203		—		35,203
U.S. Treasury Bills	10,037		—		—		10,037		—		—		—		—
Investment securities available for sale held in securitization trusts:
CMBS	—		—		40,734		40,734		—		—		38,594		38,594
Multi-family loans held in securitization trusts	—		—		7,105,336		7,105,336		—		—		8,365,514		8,365,514
Derivative Assets:
TBA Securities	—		226,929		—		226,929		—		284,971		—		284,971
Options on U.S. Treasury futures	15		—		—		15		92		—		—		92
U.S. Treasury futures	—		—		—		—		379		—		—		379
Interest rate swap futures	706		—		—		706		—		—		—		—
Interest rate swaps	—		304		—		304		—		1,135		—		1,135
Swaptions	—		821		—		821		—		2,273		—		2,273
Investments in unconsolidated entities	—		—		67,571		67,571		—		—		38,496		38,496
Total	$	10,758	$	942,737	$	7,213,641	$	8,167,136	$	471	$	1,105,026	$	8,442,604	$	9,548,101
Liabilities carried at fair value
Multi-family collateralized debt obligations	$	—	$	—	$	6,818,901	$	6,818,901	$	—	$	—	$	8,048,053	$	8,048,053
Derivative liabilities:
Interest rate swaps	—		258		—		258		—		232		—		232
Interest rate swap futures	—		—		—		—		331		—		—		331
Eurodollar futures	1,242		—		—		1,242		900		—		—		900
Total	$	1,242	$	258	$	6,818,901	$	6,820,401	$	1,231	$	232	$	8,048,053	$	8,049,516

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table details changes in valuation for the Level 3 assets for the years ended December 31, 2015, 2014 and 2013, respectively (amounts in thousands):

Level 3 Assets:



	Years Ended December 31,
	2015			2014			2013
Balance at beginning of period	$	8,442,604		$	8,209,702		$	5,514,065
Total gains (realized/unrealized)
Included in earnings⁽¹⁾	(90,662		)	384,826			(470,334		)
Included in other comprehensive income (loss)	(360		)	(5,863		)	15,532
Purchases/(Sales) ⁽²⁾	(1,075,529		)	(93,578		)	3,218,301
Contributions	26,461			33,075			5,969
Paydowns	(85,979		)	(80,451		)	(73,831		)
Distributions	(2,894		)	(1,712		)	—
Sale of real estate owned	—			(3,395		)	—
Balance at the end of period	$	7,213,641		$	8,442,604		$	8,209,702


(1)	Amounts included in interest income from multi-family loans held in securitization trusts, unrealized gain on multi-family loans and debt held in securitization trusts, realized gain (loss) on investment securities and related hedges, net, other income and gain on deconsolidation.


(2)	In February 2015, the Company sold a first loss PO security from one of the Company’s 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.

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following table details changes in valuation for the Level 3 liabilities for the years ended December 31, 2015, 2014 and 2013, respectively (amounts in thousands):

Level 3 Liabilities:



	Years Ended December 31,
	2015			2014			2013
Balance at beginning of period	$	8,048,053		$	7,871,020		$	5,319,573
Total gains (realized/unrealized)
Included in earnings⁽¹⁾	(133,245		)	260,872			(521,416		)
Included in other comprehensive income	—			—			—
Purchases/(Sales) ⁽²⁾	(1,009,942		)	—			3,146,676
Paydowns	(85,965		)	(83,839		)	(73,813		)
Balance at the end of period	$	6,818,901		$	8,048,053		$	7,871,020


(1)	Amounts included in interest expense on multi-family collateralized debt obligations, realized gain (loss) on investment securities and related hedges, net and unrealized gain on multi-family loans and debt held in securitization trusts, net.


(2)	In February 2015, the Company sold a first loss PO security from one of the Company’s 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.

Fair Value, Measured on Recurring Basis, Gain (Loss) Included in Earnings

The following table details the changes in unrealized gains (losses) included in earnings for our Level 3 assets and liabilities for the years ended December 31, 2015, 2014 and 2013, respectively (dollar amounts in thousands):



	Years Ended December 31,
	2015			2014			2013
Change in unrealized gains (losses) – assets	$	(61,957	)	$	390,371		$	(423,949	)
Change in unrealized (losses) gains – liabilities	74,325			(333,440		)	455,444
Net change in unrealized gains included in earnings for assets and liabilities	$	12,368		$	56,931		$	31,495

Fair Value Measurements, Nonrecurring

The following table presents assets measured at fair value on a non-recurring basis as of December 31, 2015 and 2014, respectively, on the consolidated balance sheets (dollar amounts in thousands):



	Assets Measured at Fair Value on a Non-Recurring Basis at
	December 31, 2015								December 31, 2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Residential Mortgage loans held in securitization trusts – impaired loans (net)	$	—	$	—	$	8,976	$	8,976	$	—	$	—	$	9,323	$	9,323
Real estate owned held in residential securitization trusts	—		—		411		411		—		—		965		965

Fair Value, Losses for Assets Measured on Nonrecurring Basis

The following table presents gains (losses) incurred for assets measured at fair value on a non-recurring basis for the years ended December 31, 2015, 2014 and 2013, respectively, on the Company’s consolidated statements of operations (dollar amounts in thousands):



	Years Ended December 31,
	2015			2014			2013
Residential mortgage loans held in securitization trusts – impaired loans (net)	$	(1,261	)	$	(998	)	$	(701	)
Real estate owned held in residential securitization trusts	100			(103		)	(433		)

Fair Value, by Balance Sheet Grouping

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.