Securitized Loans Held for Investment

The Securitized loans held for investment is comprised primarily of loans collateralized by seasoned subprime residential mortgages. Additionally, it includes non-conforming, single family, owner occupied, jumbo, prime residential mortgages.

At March 31, 2017, all securitized loans held for investment are carried at fair value. See Note 5 for a discussion on how the Company determines the fair values of the securitized loans held for investment. As changes in the fair value of these securitized loans are reflected in earnings, the Company does not estimate or record a loan loss provision. The total amortized cost of our Securitized loans held for investments was $12.4 billion and $8.6 billion as of March 31, 2017 and December 31, 2016, respectively.

The following table provides a summary of the changes in the carrying value of securitized loans held for investment at fair value at March 31, 2017 and December 31, 2016:



	For the Quarter Ended			For the Year Ended
	March 31, 2017			December 31, 2016
	(dollars in thousands)
Balance, beginning of period	$	8,753,653		$	4,768,416
Purchases	4,165,322			4,897,370
Principal paydowns	(324,851		)	(1,022,414		)
Sales and settlements	1,289			5,007
Net periodic accretion (amortization)	(3,109		)	(41,363		)
Change in fair value	120,969			146,637
Balance, end of period	$	12,713,273		$	8,753,653

The primary cause of the change in fair value is due to changes in credit risk of the portfolio.

Residential mortgage loans

The securitized loan portfolio for all residential mortgages were originated during the following years:



Origination Year	March 31, 2017		December 31, 2016
2002 and prior	8.2	%	8.9	%
2003	7.0	%	5.2	%
2004	15.4	%	11.9	%
2005	20.7	%	20.5	%
2006	20.8	%	22.0	%
2007	19.1	%	20.9	%
2008	6.0	%	6.5	%
2009	0.5	%	0.6	%
2010 and later	2.3	%	3.5	%
Total	100.0	%	100.0	%

The following table presents a summary of key characteristics of the securitized residential loan portfolio at March 31, 2017 and December 31, 2016:



	March 31, 2017				December 31, 2016
Number of loans		140,899				95,155
Weighted average maturity (years)		19.0				19.8
Weighted average loan to value⁽¹⁾		87.3		%		86.9		%
Weighted average FICO⁽¹⁾		640				627
Weighted average loan balance (in thousands)		$	90			$	93
Weighted average percentage owner occupied		97.0		%		96.6		%
Weighted average percentage single family residence		86.0		%		85.0		%
Weighted average geographic concentration of top five states	CA	9.2		%	CA	10.0		%
	FL	6.8		%	FL	6.7		%
	OH	6.4		%	OH	6.5		%
	PA	5.5		%	VA	5.9		%
	VA	5.5		%	NC	5.1		%

(1) As provided by the Trustee.

The following table summarizes the outstanding principal balance of the residential loan portfolio which are 30 days delinquent and greater as reported by the servicer at March 31, 2017 and December 31, 2016.



	30 Days Delinquent		60 Days Delinquent		90+ Days Delinquent		Bankruptcy		Foreclosure		REO		Total
	(dollars in thousands)
March 31, 2017	$	376,365	$	127,936	$	235,111	$	198,395	$	187,021	$	41,158	$	1,165,986
December 31, 2016	$	363,899	$	140,495	$	190,991	$	207,364	$	203,265	$	40,709	$	1,146,723

The fair value of residential mortgage loans 90 days or more past due is $499 million and $449 million as of March 31, 2017 and December 31, 2016, respectively.

Real estate owned

Real estate owned (“REO”) represents properties which the Company has received the legal title of the property to satisfy the outstanding loan. REO is re-categorized from loan to REO when the Company takes legal title of the property. REO assets are measured and reported at the estimated fair value less the estimated cost to sell at the end of each reporting period. At the time the asset is re-categorized, any difference between the previously recorded loan balance and the carrying value of the REO at the time the Company takes legal title of the property, is recognized as a loss. All REO assets of the Company are held-for-sale and it is the Company’s intention to sell the property in the shortest time possible to maximize their return and recovery on the previously recorded loan. The carrying value of REO assets at March 31, 2017 and December 31, 2016 was $12 million and $13 million, respectively, and were recorded in Other Assets on the Company’s consolidated statements of financial condition.