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Fair Value Measurements (Tables)
 3 Months Ended
Mar. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value, Financial Assets and Liabilities Carried at Fair Value on a Recurring Basis
The Company’s financial assets and liabilities carried at fair value on a recurring basis, including the level in the fair value hierarchy, at March 31, 2017 and December 31, 2016 is presented below.

 
March 31, 2017
 
(dollars in thousands)  
 
Level 1
Level 2
Level 3
Counterparty and Cash Collateral, netting
Total
Assets:
 

 

 

 

 

Non-Agency RMBS, at fair value
$
—

$
—

$
3,228,391

$
—

$
3,228,391

Agency MBS, at fair value
—

4,101,851

—

—

4,101,851

Securitized loans held for investment, at fair value
—

—

12,713,273

—

12,713,273

Derivatives
136

23,957

—

(13,204
)
10,889

 
 
 
 
 
 
Liabilities:
 

 

 

 

 

Securitized debt at fair value, collateralized by loans held for investment
—

—

(10,111,293
)
—

(10,111,293
)
Derivatives
(919
)
(14,695
)
—

13,987

(1,627
)
Total
$
(783
)
$
4,111,113

$
5,830,371

$
783

$
9,941,484


 
December 31, 2016
 
(dollars in thousands)
 
Level 1
Level 2
Level 3
Counterparty and Cash Collateral, netting
Total
Assets:
 
 
 
 
 
Non-Agency RMBS, at fair value
$
—

$
—

3,330,063

$
—

$
3,330,063

Agency MBS, at fair value
—

4,167,754

—

—

4,167,754

Securitized loans held for investment, at fair value
—

—

8,753,653

—

8,753,653

Derivatives
1,785

22,327

—

(14,435
)
9,677

 
 
 
 
 
 
Liabilities:
 

 

 

 

 

Securitized debt at fair value, collateralized by loans held for investment
—

—

(6,941,097
)
—

(6,941,097
)
Derivatives
—

(17,225
)
—

14,875

(2,350
)
Total
$
1,785

$
4,172,856

$
5,142,619

$
440

$
9,317,700
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation
The table below provides a summary of the changes in the fair value of securities classified as Level 3 at March 31, 2017 and December 31, 2016.
Fair Value Reconciliation, Level 3

For the Quarter Ended, March 31, 2017

(dollars in thousands)
 
Non-Agency RMBS
Securitized Loans
Securitized Debt
Total
Beginning balance Level 3 assets
$
3,330,063

$
8,753,653

$
(6,941,097
)
$
5,142,619

Transfers in to Level 3 assets
6,112

—

—

6,112

Transfers out of Level 3 assets
—

—

—

—

Purchases
25,745

4,165,322

(3,457,535
)
733,532

Principal payments
(127,929
)
(324,851
)
331,290

(121,490
)
Sales and Settlements
(20,063
)
1,289

—

(18,774
)
Accretion (amortization) of purchase discounts
30,661

(3,109
)
(4,525
)
23,027

Gains (losses) included in net income
 
 
 
 
Other than temporary credit impairment losses
(16,726
)
—

—

(16,726
)
Realized gains (losses) on sales and settlements
5,150

—

—

5,150

Net unrealized gains (losses) included in income
(8,551
)
120,969

(39,426
)
72,992

Gains (losses) included in other comprehensive income
 
 
 
 
   Total unrealized gains (losses) for the period
3,929

—

—

3,929

Ending balance Level 3 assets
$
3,228,391

$
12,713,273

$
(10,111,293
)
$
5,830,371


Fair Value Reconciliation, Level 3
 
For the Year Ended, December 31, 2016
 
(dollars in thousands)
 
Non-Agency RMBS
Securitized Loans
Securitized Debt
Total
Beginning balance Level 3 assets
$
3,675,841

$
4,768,416

$
(3,720,496
)
$
4,723,761

Transfers in to Level 3 assets
—

—

—

—

Transfers out of Level 3 assets
—

—

—

—

Purchases
257,914

4,897,370

(4,797,255
)
358,029

Principal payments
(532,696
)
(1,022,414
)
1,059,854

(495,256
)
Sales and Settlements
(149,938
)
5,007

608,816

463,885

Accretion (amortization) of purchase discounts
120,638

(41,363
)
(2,128
)
77,147

Gains (losses) included in net income
 

 

 

 
Other than temporary credit impairment losses
(57,986
)
—

—

(57,986
)
Realized gains (losses) on sales and settlements
13,761

—

(122
)
13,639

Net unrealized gains (losses) included in income
3,173

146,637

(89,766
)
60,044

Gains (losses) included in other comprehensive income
 

 



—

   Total unrealized gains (losses) for the period
(644
)
—

—

(644
)
Ending balance Level 3 assets
$
3,330,063

$
8,753,653

$
(6,941,097
)
$
5,142,619
Fair Value Measurements, Significant Unobservable Inputs, Liabilities
A summary of the significant inputs used to estimate the fair value of securitized debt at fair value, collateralized by loans held for investment, as of March 31, 2017 and December 31, 2016 follows:
 
March 31, 2017
 
December 31, 2016
 
Significant Inputs
 
Significant Inputs
 
CPR Range
CDR Range
Loss Severity Range
 
CPR Range
CDR Range
Loss Severity Range
Securitized debt at fair value, collateralized by loans held for investment
1% - 30%
0% - 25%
35% - 70%
 
1% - 35%
0% - 30%
35% - 65%
Fair Value, by Balance Sheet Grouping
The following table presents the carrying value and fair value, as described above, of the Company’s financial instruments not carried at fair value on a recurring basis at March 31, 2017 and December 31, 2016.
 
March 31, 2017
 
(dollars in thousands)
 
Level in Fair Value Hierarchy
Carrying Amount
Fair Value
Repurchase agreements
2
5,851,204

5,873,452

Securitized debt, collateralized by Non-Agency RMBS
3
303,389

292,285


 
December 31, 2016
 
(dollars in thousands)
 
Level in Fair Value Hierarchy
Carrying Amount
Fair Value
Repurchase agreements
2
5,600,903

5,619,385

Securitized debt, collateralized by Non-Agency RMBS
3
334,124

324,261
Securitized Loans Held for Investment at Fair Value  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements, Significant Unobservable Inputs, Assets
A summary of the significant inputs used to estimate the fair value of Securitized loans held for investment collateralized by seasoned subprime mortgages at fair value as of March 31, 2017 and December 31, 2016 follows:
 
 
 
 
 
March 31, 2017
 
December 31, 2016
Factor:
 
 
 
Coupon
 
 
 
Base Rate
5.2%
 
5.2%
Actual
7.1%
 
7.1%
 
 
 
 
FICO
 
 
 
Base Rate
634
 
632
Actual
637
 
621
 
 
 
 
Loan-to-value (LTV)
 
 
 
Base Rate
86%
 
87%
Actual
88%
 
88%
 
 
 
 
Loan Characteristics:
 
 
 
Occupancy
 
 
 
Owner Occupied
97%
 
97%
Investor
2%
 
2%
Secondary
1%
 
1%
Property Type
 
 
 
Single family
86%
 
86%
Manufactured housing
6%
 
6%
Multi-family/mixed use/other
8%
 
8%
Non-agency MBS  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements, Significant Unobservable Inputs, Assets
A summary of the significant inputs used to estimate the fair value of Non-Agency RMBS held for investment at fair value as of March 31, 2017 and December 31, 2016 follows:

 
March 31, 2017
 
December 31, 2016
 
Significant Inputs
 
Significant Inputs
  
Weighted Average Discount Rate
CPR
CDR
Loss Severity
 
Weighted Average Discount Rate
CPR
CDR
Loss Severity
  
Range
 
Range
Non-Agency RMBS
 
 
 
 
 
 
 
 
 
Senior
5.1%
1% -40%
0% -22%
35% -95%
 
5.4%
1% -35%
0% -22%
35% -95%
Senior interest-only
12.7%
3% -25%
0% -23%
35% -95%
 
12.5%
3% -30%
0% -22%
35% -95%
Subordinated
5.9%
1% -25%
0% -18%
10% -74%
 
6.2%
1% -25%
0% -18%
0% -79%
Subordinated interest-only
11.6%
6% -20%
0% -11%
35% -78%
 
13.2%
6% -15%
0% -11%
35% -76%