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

6 Months Ended

Jun. 30, 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 June 30, 2016 and December 31, 2015, respectively (dollar amounts in thousands):



		June 30, 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	$	49,941	$	49,941	$	61,959	$	61,959
Investment securities available for sale⁽¹⁾	Level 1, 2 or 3	796,489		796,489		765,454		765,454
Residential mortgage loans held in securitization trusts (net)	Level 3	106,173		93,314		119,921		109,120
Distressed residential mortgage loans (net) ⁽²⁾	Level 3	543,361		544,858		558,989		564,310
Multi-family loans held in securitization trusts	Level 3	7,282,145		7,282,145		7,105,336		7,105,336
Derivative assets	Level 1 or 2	291,680		291,680		228,775		228,775
Mortgage loans held for sale (net) ⁽³⁾	Level 3	5,283		5,328		5,471		5,557
Mortgage loans held for investment ⁽³⁾	Level 3	10,391		10,531		2,706		2,846
Mezzanine loan and preferred equity investments ⁽⁴⁾	Level 3	75,300		76,004		44,151		44,540
Investment in unconsolidated entities⁽⁵⁾	Level 3	73,839		74,304		87,662		87,558
Financial Liabilities:
Financing arrangements, portfolio investments	Level 2	$	618,050	$	618,050	$	577,413	$	577,413
Financing arrangements, residential mortgage loans	Level 2	174,798		174,798		212,155		212,155
Residential collateralized debt obligations	Level 3	102,597		92,522		116,710		105,606
Multi-family collateralized debt obligations	Level 3	6,981,813		6,981,813		6,818,901		6,818,901
Securitized debt	Level 3	244,016		252,252		116,541		123,776
Derivative liabilities	Level 1 or 2	6,438		6,438		1,500		1,500
Payable for securities purchased	Level 1	286,452		286,452		227,969		227,969
Subordinated debentures	Level 3	45,000		44,081		45,000		42,731


⁽¹⁾	Includes $42.3 million and $40.7 million of investment securities for sale held in securitization trusts as of June 30, 2016 and December 31, 2015, respectively.


⁽²⁾	Includes distressed residential mortgage loans held in securitization trusts with a carrying value amounting to approximately $225.4 million and $114.2 million at June 30, 2016 and December 31, 2015, respectively, and distressed residential mortgage loans with a carrying value amounting to approximately $318.0 million and $444.8 million at June 30, 2016 and December 31, 2015, respectively.


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


⁽⁴⁾	Includes mezzanine loan 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 $63.1 million and $67.6 million at June 30, 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
Principal Amount at June 30, 2016	$	33,666	$	55,853	$	162,411
Principal Amount at December 31, 2015	$	33,781	$	55,853	$	33,656
Carrying Value at June 30, 2016 ⁽³⁾	$	27,961	$	55,751	$	160,304
Carrying Value at December 31, 2015 ⁽³⁾	$	27,613	$	55,629	$	33,299
Pass-through rate of Notes issued	5.35%		One-month LIBOR plus 5.25%		4% - 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 issued in this re-securitization transaction 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⁾	Classified as securitized debt in the liability section of the Company’s accompanying condensed consolidated balance sheets, net of debt issuance costs.

The following tables present the classification and carrying value of unconsolidated VIEs as of June 30, 2016 and December 31, 2015 (dollar amounts in thousands):



	June 30, 2016
	Investment securities, available for sale, at fair value		Receivables and other Assets		Mezzanine loan and preferred equity investments		Investment in unconsolidated entities		Total
Multi-family CMBS	$	42,271	$	75	$	—	$	—	$	42,346
Mezzanine/Construction loan on multi-family properties	—		—		19,180		—		19,180
Preferred equity investment on multi-family properties	—		—		56,120		10,784		66,904
Equity investment in entities that invest in multi-family properties	—		—		—		22,955		22,955
Total assets	$	42,271	$	75	$	75,300	$	33,739	$	151,385



	December 31, 2015
	Investment securities, available for sale, at fair value		Receivables and other Assets		Mezzanine loan and preferred equity investments		Investment in unconsolidated entities		Total
Multi-family CMBS	$	40,734	$	76	$	—	$	—	$	40,810
Mezzanine/Construction loan on multi-family properties	—		—		8,663		8,718		17,381
Preferred equity investment on multi-family properties	—		—		35,488		10,776		46,264
Equity investment in entities that invest in multi-family properties	—		—		—		66,242		66,242
Total assets	$	40,734	$	76	$	44,151	$	85,736	$	170,697

Schedule of Contractual Maturities of Financing VIE's

The following table presents contractual maturity information about the Financing VIEs’ securitized debt as of June 30, 2016 and December 31, 2015, respectively (dollar amounts in thousands):



Scheduled Maturity (principal amount)	June 30, 2016			December 31, 2015
Within 24 months	$	55,853		$	89,509
Over 24 months to 36 months	162,411			—
Over 36 months	33,666			33,781
Total outstanding principal	251,930			123,290
Discount	(6,154		)	(5,763		)
Debt Issuance Cost	(1,760		)	(986		)
Carrying value	$	244,016		$	116,541

Financing VIE

Variable Interest Entity [Line Items]

Schedule of Assets and Liabilities of Consolidated VIE's

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



	Financing VIEs								Non-financed VIE
	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	$	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⁾

Assets and Liabilities of Consolidated VIEs as of June 30, 2016 (dollar amounts in thousands):



	Financing VIEs								Other VIEs
	Multi-family CMBS re- securitization⁽¹⁾		Collateralized Recourse Financing⁽²⁾		Distressed Residential Mortgage Loan Securitization⁽³⁾		Residential Mortgage Loan Securitization		Non-financed VIE - Multi- family CMBS ⁽²⁾		Other		Total
Cash and cash equivalents	$	—	$	—	$	—	$	—	$	—	$	852	$	852
Investment securities available for sale, at fair value held in securitization trusts	42,271		—		—		—		—		—		42,271
Residential mortgage loans held in securitization trusts (net)	—		—		—		106,173		—		—		106,173
Distressed residential mortgage loans held in securitization trust, (net)	—		—		225,370		—		—		—		225,370
Multi-family loans held in securitization trusts, at fair value	1,251,124		4,784,427		—		—		1,246,594		—		7,282,145
Receivables and other assets	4,316		14,467		8,696		810		5,238		16,060		49,587
Total assets	$	1,297,711	$	4,798,894	$	234,066	$	106,983	$	1,251,832	$	16,912	$	7,706,398

Residential collateralized debt obligations	$	—	$	—	$	—	$	102,597	$	—	$	—	$	102,597
Multi-family collateralized debt obligations, at fair value	1,193,483		4,607,016		—		—		1,181,314		—		6,981,813
Securitized debt	27,961		55,751		160,304		—		—		—		244,016
Accrued expenses and other liabilities	4,296		14,148		287		17		5,238		74		24,060
Total liabilities	$	1,225,740	$	4,676,915	$	160,591	$	102,614	$	1,186,552	$	74	$	7,352,486

⁽¹⁾

⁽²⁾

⁽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. Balances are related to a securitization transaction that closed in April 2016 that involved the issuance of $177.5 million of Class A Notes representing the beneficial ownership in a pool of performing and re-performing seasoned mortgage loans having an aggregate principal balance of approximately $282.8 million. The Company holds 5% of the Class A Notes issued as part of the securitization transaction. The Company has repaid the outstanding notes from its distressed residential mortgage loan securitizations completed in December 2012, July 2013 and September 2013 as of June 30, 2016. In connection with the repayment of the notes from the Company's distressed residential mortgage loan securitizations completed in December 2012, July 2013 and September 2013, the Company terminated and deconsolidated the Financing VIE 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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