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

3 Months Ended

Mar. 31, 2016

Variable Interest Entity [Line Items]

Schedule of Assets and Liabilities of Consolidated VIE's

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at March 31, 2016 and December 31, 2015, respectively, (dollar amounts in thousands):



		March 31, 2016				December 31, 2015
	Fair Value Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	39,931	$	39,931	$	61,959	$	61,959
Investment securities available for sale⁽¹⁾	Level 1, 2 or 3	794,473		794,473		765,454		765,454
Residential mortgage loans held in securitization trusts (net)	Level 3	113,186		100,909		119,921		109,120
Distressed residential mortgage loans (net) ⁽²⁾	Level 3	537,616		547,818		558,989		564,310
Multi-family loans held in securitization trusts	Level 3	7,250,586		7,250,586		7,105,336		7,105,336
Derivative assets	Level 1 or 2	288,925		288,925		228,775		228,775
Mortgage loans held for sale (net) ⁽³⁾	Level 3	5,755		5,859		5,471		5,557
Mortgage loans held for investment ⁽³⁾	Level 3	6,501		6,641		2,706		2,846
Mezzanine and preferred equity investments ⁽³⁾⁽⁴⁾	Level 3	44,355		44,717		44,151		44,540
Investments in unconsolidated entities⁽⁵⁾	Level 3	85,497		86,090		87,065		87,558
Receivable for securities sold	Level 1	1,858		1,858		—		—
Financial Liabilities:
Financing arrangements, portfolio investments	Level 2	$	589,919	$	589,919	$	577,413	$	577,413
Financing arrangements, residential mortgage loans	Level 2	216,604		216,604		212,155		212,155
Residential collateralized debt obligations	Level 3	110,023		98,113		116,710		105,606
Multi-family collateralized debt obligations	Level 3	6,957,293		6,957,293		6,818,901		6,818,901
Securitized debt	Level 3	83,471		89,742		116,541		123,776
Derivative liabilities	Level 1 or 2	4,998		4,998		1,500		1,500
Payable for securities purchased	Level 1	311,250		311,250		227,969		227,969
Subordinated debentures	Level 3	45,000		33,846		45,000		42,731


⁽¹⁾	Includes $41.5 million and $40.7 million of investment securities for sale held in securitization trusts as of March 31, 2016 and December 31, 2015, respectively.


⁽²⁾	Includes distressed residential mortgage loans held in securitization trusts with a carrying value amounting to approximately $0 and $114.2 million at March 31, 2016 and December 31, 2015, respectively, and distressed residential mortgage loans with a carrying value amounting to approximately $537.6 million and $444.8 million at March 31, 2016 and December 31, 2015, respectively.


⁽³⁾	Included in receivables and other assets in the accompanying condensed consolidated balance sheets.


⁽⁴⁾	Includes mezzanine and preferred equity investments accounted for as loans (see Note 2).


⁽⁵⁾	Includes investments in unconsolidated entities accounted for under the fair value option with a carrying value of $65.8 million and $67.6 million at March 31, 2016 and December 31, 2015, respectively.

Summary of Securitized Debt

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



	Multi-family CMBS Re-securitization ⁽¹⁾		Collateralized Recourse Financing ⁽²⁾		Distressed Residential Mortgage Loan Securitizations ⁽³⁾
Principal Amount at March 31, 2016	$	33,720	$	55,853	$	—
Principal Amount at December 31, 2015	$	33,781	$	55,853	$	33,656
Carrying Value at March 31, 2016 ⁽⁴⁾	$	27,781	$	55,690	$	—
Carrying Value at December 31, 2015 ⁽⁴⁾	$	27,613	$	55,629	$	33,299
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 Agreement 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 these two notes. 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 respective note, reserve amounts and certain other transaction expenses, will be available for the purchase by the respective 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 condensed consolidated balance sheets, net of debt issuance costs.

Schedule of Contractual Maturities of Financing VIE's

The following table presents contractual maturity information about the Financing VIEs’ securitized debt as of March 31, 2016 and December 31, 2015, respectively:



Scheduled Maturity (principal amount)	March 31, 2016			December 31, 2015
(Dollar amount in thousands)
Within 24 months	$	55,853		$	89,509
Over 36 months	33,720			33,781
Total outstanding principal	89,573			123,290
Discount	(5,555		)	(5,763		)
Debt Issuance Cost	(547		)	(986		)
Carrying value	$	83,471		$	116,541

Schedule of Classification and Carrying Value of Unconsolidated VIEs

The following table presents the classification and carrying value of unconsolidated VIEs as of March 31, 2016 and December 31, 2015 (dollar amounts in thousands):



	March 31, 2016						December 31, 2015
	Investment securities available for sale, at fair value		Receivables and other Assets		Total		Investment securities available for sale, at fair value		Receivables and other Assets		Total
Multi-Family CMBS	$	41,490	$	75	$	41,565	$	40,734	$	76	$	40,810
Mezzanine loan, preferred equity and investments in unconsolidated entities	—		128,027		128,027		—		129,887		129,887
Total assets	$	41,490	$	128,102	$	169,592	$	40,734	$	129,963	$	170,697

Financing VIE

Variable Interest Entity [Line Items]

Schedule of Assets and Liabilities of Consolidated VIE's

Assets and Liabilities of consolidated Financing 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	27,613		55,629		33,299		—		—		116,541
Accrued expenses and other liabilities	4,436		14,750		368		13		5,456		25,023
Total liabilities	$	1,200,519	$	4,534,719	$	33,667	$	116,723	$	1,191,547	$	7,077,175

⁽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⁾

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 multi-family K-Series securitizations. The Financing VIE consolidated these K-Series securitizations, including their 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 such K-Series securitizations (see Note 6).

⁽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 March 31, 2016 (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		Total
Investment securities available for sale, at fair value held in securitization trusts	$	41,490	$	—	$	—	$	—	$	—	$	41,490
Residential mortgage loans held in securitization trusts (net)	—		—		—		113,186		—		113,186
Multi-family loans held in securitization trusts, at fair value	1,249,895		4,743,795		—		—		1,256,896		7,250,586
Receivables and other assets	4,476		14,981		856		1,150		5,432		26,895
Total assets	$	1,295,861	$	4,758,776	$	856	$	114,336	$	1,262,328	$	7,432,157

Residential collateralized debt obligations	$	—	$	—	$	—	$	110,023	$	—	$	110,023
Multi-family collateralized debt obligations, at fair value	1,193,308		4,570,783		—		—		1,193,202		6,957,293
Securitized debt	27,781		55,690		—		—		—		83,471
Accrued expenses and other liabilities	4,455		14,677		—		18		5,432		24,582
Total liabilities	$	1,225,544	$	4,641,150	$	—	$	110,041	$	1,198,634	$	7,175,369

⁽¹⁾

⁽²⁾

⁽³⁾

In February 2016, the Company repaid the Company’s outstanding notes from its distressed residential mortgage loan securitizations transactions completed in 2013 with original principal amounts of $138.3 million and outstanding principal balance at the time of repayment amounting to $31.9 million. With the repayment of the notes, the Company terminated and deconsolidated the Financing VIEs that facilitated these financing transactions and the distressed residential loans serving as collateral on the notes were transferred back to the Company.

- 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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