The Company classifies its Non-Agency RMBS as senior, senior IO, subordinated, or subordinated IO. The Company also invests in Agency residential, commercial and IO MBS. Senior interests in Non-Agency RMBS are considered to be entitled to the first principal repayments in their pro-rata ownership interests at the acquisition date. The tables below present amortized cost, fair value and unrealized gain/losses of Company's MBS investments as of September 30, 2019 and December 31, 2018.



			September 30, 2019
			(dollars in thousands)
	Principal or Notional Value		Total Premium		Total Discount			Amortized Cost		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gain/(Loss)
Non-Agency RMBS
Senior	$	2,105,577	$	1,336	$	(994,843	)	$	1,112,070	$	1,752,045	$	640,293	$	(318	)	$	639,975
Senior, interest-only	7,795,886		309,533		—			309,533		296,916		47,593		(60,210		)	(12,617		)
Subordinated	808,647		10,609		(310,055		)	509,201		589,955		81,147		(393		)	80,754
Subordinated, interest-only	195,807		9,050		—			9,050		10,918		2,089		(221		)	1,868
Agency MBS
Residential	7,790,386		180,508		—			7,970,894		8,137,984		170,596		(3,506		)	167,090
Commercial	3,031,643		62,600		(5,029		)	3,089,214		3,298,306		209,372		(280		)	209,092
Interest-only	3,206,236		182,652		—			182,652		179,033		2,212		(5,831		)	(3,619		)
Total	$	24,934,182	$	756,288	$	(1,309,927	)	$	13,182,614	$	14,265,157	$	1,153,302	$	(70,759	)	$	1,082,543



			December 31, 2018
			(dollars in thousands)
	Principal or Notional Value		Total Premium		Total Discount			Amortized Cost		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gain/(Loss)
Non-Agency RMBS
Senior	$	2,386,049	$	537	$	(1,112,368	)	$	1,274,218	$	1,943,124	$	669,356	$	(450	)	$	668,906
Senior, interest-only	5,667,198		286,942		—			286,942		254,890		31,123		(63,175		)	(32,052		)
Subordinated	394,037		8,642		(179,669		)	223,010		276,467		53,702		(245		)	53,457
Subordinated, interest-only	221,549		9,932		—			9,932		11,649		2,000		(283		)	1,717
Agency MBS
Residential	8,984,249		221,606		—			9,205,855		9,174,382		51,986		(83,459		)	(31,473		)
Commercial	2,895,679		61,727		(4,469		)	2,952,937		2,881,222		6,303		(78,018		)	(71,715		)
Interest-only	3,028,572		136,026		—			136,026		133,346		1,986		(4,666		)	(2,680		)
Total	$	23,577,333	$	725,412	$	(1,296,506	)	$	14,088,920	$	14,675,080	$	816,456	$	(230,296	)	$	586,160



	For the Quarters Ended						For the Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(dollars in thousands)						(dollars in thousands)
Balance at beginning of period	$	1,181,373		$	1,266,640		$	1,248,309		$	1,303,590
Purchases	—			4,444			—			10,178
Yield income earned	(53,636		)	(57,078		)	(165,228		)	(174,595		)
Reclassification (to) from non-accretable difference	(8,921		)	32,022			36,241			113,517
Sales and deconsolidation	(11,010		)	(1,733		)	(11,516		)	(8,395		)
Balance at end of period	$	1,107,806		$	1,244,295		$	1,107,806		$	1,244,295



	For the Nine Months Ended		For the Year Ended
	September 30, 2019		December 31, 2018
	(dollars in thousands)
Outstanding principal balance:
Beginning of period	$	2,325,154	$	2,673,350
End of period	$	2,070,603	$	2,325,154
Amortized cost:
Beginning of period	$	1,158,291	$	1,381,839
End of period	$	1,020,791	$	1,158,291

The following tables present the gross unrealized losses and estimated fair value of the Company’s RMBS by length of time that such securities have been in a continuous unrealized loss position at September 30, 2019 and December 31, 2018. All available for sale securities in an unrealized loss position have been evaluated by the Company for OTTI.



						September 30, 2019
						(dollars in thousands)
	Unrealized Loss Position for Less than 12 Months						Unrealized Loss Position for 12 Months or More						Total
	Estimated Fair Value		Unrealized Losses			Number of Positions	Estimated Fair Value		Unrealized Losses			Number of Positions	Estimated Fair Value		Unrealized Losses			Number of Positions
Non-Agency RMBS
Senior	$	—	$	—		—	$	31,980	$	(318	)	1	$	31,980	$	(318	)	1
Senior, interest-only	65,646		(22,863		)	43	65,254		(37,347		)	68	130,900		(60,210		)	111
Subordinated	19,229		(198		)	5	1,828		(195		)	11	21,057		(393		)	16
Subordinated, interest-only	2,499		(221		)	3	—		—			—	2,499		(221		)	3
Agency MBS
Residential	367		(3		)	1	582,810		(3,503		)	18	583,177		(3,506		)	19
Commercial	—		—			—	45,391		(280		)	4	45,391		(280		)	4
Interest-only	102,161		(3,433		)	18	10,738		(2,398		)	7	112,899		(5,831		)	25
Total	$	189,902	$	(26,718	)	70	$	738,001	$	(44,041	)	109	$	927,903	$	(70,759	)	179



						December 31, 2018
						(dollars in thousands)
	Unrealized Loss Position for Less than 12 Months						Unrealized Loss Position for 12 Months or More						Total
	Estimated Fair Value		Unrealized Losses			Number of Positions	Estimated Fair Value		Unrealized Losses			Number of Positions	Estimated Fair Value		Unrealized Losses			Number of Positions
Non-Agency RMBS
Senior	$	—	$	—		—	$	33,303	$	(450	)	1	$	33,303	$	(450	)	1
Senior, interest-only	34,236		(4,276		)	29	95,108		(58,899		)	91	129,344		(63,175		)	120
Subordinated	13,404		(245		)	7	—		—			8	13,404		(245		)	15
Subordinated, interest-only	2,104		(158		)	2	303		(125		)	1	2,407		(283		)	3
Agency MBS
Residential	779,322		(6,220		)	17	1,809,566		(77,239		)	114	2,588,888		(83,459		)	131
Commercial	1,697,555		(56,382		)	548	504,570		(21,636		)	183	2,202,125		(78,018		)	731
Interest-only	5,769		(48		)	2	41,659		(4,618		)	17	47,428		(4,666		)	19
Total	$	2,532,390	$	(67,329	)	605	$	2,484,509	$	(162,967	)	415	$	5,016,899	$	(230,296	)	1,020

At September 30, 2019, the Company did not intend to sell any of its RMBS that were in an unrealized loss position, and it was not more likely than not that the Company would be required to sell these RMBS before recovery of their amortized cost basis, which may be at their maturity. With respect to RMBS held by consolidated VIEs, the ability of any entity to cause the

Gross unrealized losses on the Company’s Agency residential and commercial MBS (excluding Agency MBS which are reported at fair value with changes in fair value recorded in earnings) were $1 million and $95 million as of September 30, 2019 and December 31, 2018, respectively. Given the inherent credit quality of Agency MBS, the Company does not consider any of the current impairments on its Agency MBS to be credit related. In evaluating whether it is more likely than not that it will be required to sell any impaired security before its anticipated recovery, which may be at their maturity, the Company considers the significance of each investment, the amount of impairment, the projected future performance of such impaired securities, as well as the Company’s current and anticipated leverage capacity and liquidity position. Based on these analyses, the Company determined that at September 30, 2019 and December 31, 2018, unrealized losses on its Agency MBS were temporary.

Gross unrealized losses on the Company’s Non-Agency RMBS (excluding Non-Agency RMBS which are reported at fair value with changes in fair value recorded in earnings) were $379 thousand and $601 thousand at September 30, 2019 and December 31, 2018, respectively. Based upon the most recent evaluation, the Company does not consider these unrealized losses to be indicative of OTTI and does not believe that these unrealized losses are credit related, but rather are due to other factors. The Company has reviewed its Non-Agency RMBS that are in an unrealized loss position to identify those securities with losses that are other-than-temporary based on an assessment of changes in cash flows expected to be collected for such RMBS, which considers recent bond performance and expected future performance of the underlying collateral.



	For the Quarters Ended					For the Nine Months Ended
	September 30, 2019		September 30, 2018			September 30, 2019			September 30, 2018
	(dollars in thousands)					(dollars in thousands)
Total other-than-temporary impairment losses	$	—	$	(772	)	$	(801	)	$	(1,871	)
Portion of loss recognized in other comprehensive income (loss)	—		(6,461		)	(4,052		)	(15,651		)
Net other-than-temporary credit impairment losses	$	—	$	(7,233	)	$	(4,853	)	$	(17,522	)

The following table presents a roll forward of the credit loss component of OTTI on the Company’s Non-Agency RMBS for which a portion of loss was recognized in OCI. The table delineates between those securities that are recognizing OTTI for the first time as opposed to those that have previously recognized OTTI.



	For the Quarters Ended						For the Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(dollars in thousands)
Cumulative credit loss beginning balance	$	587,778		$	582,661		$	587,199		$	591,521
Additions:
Other-than-temporary impairments not previously recognized	—			4,929			1,479			6,069
Reductions for securities sold or deconsolidated during the period	—			(1,032		)	—			(5,980		)
Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments	—			2,304			3,375			11,453
Reductions for increases in cash flows expected to be collected over the remaining life of the securities	(266		)	(2,237		)	(4,541		)	(16,438		)
Cumulative credit impairment loss ending balance	$	587,512		$	586,625		$	587,512		$	586,625

Cash flows generated to determine net other-than-temporary credit impairment losses recognized in earnings are estimated using significant unobservable inputs. The significant inputs used to measure the component of OTTI recognized in earnings for the Company’s Non-Agency RMBS for the periods reported are summarized as follows:



	For the Nine Months Ended
	September 30, 2019	September 30, 2018
Loss Severity
Weighted Average	69%	63%
Range	53% - 102%	34% - 132%
60+ days delinquent
Weighted Average	8%	21%
Range	2% - 18%	13% - 30%
Credit Enhancement ⁽¹⁾
Weighted Average	0%	24%
Range	0% - 0%	0% - 55%
3 Month CPR
Weighted Average	8%	12%
Range	3% - 21%	0% - 39%
12 Month CPR
Weighted Average	9%	12%
Range	3% - 12%	1% - 28%



			September 30, 2019
			(dollars in thousands)
	Gross Unrealized Gain Included in Accumulated Other Comprehensive Income		Gross Unrealized Gain Included in Cumulative Earnings		Total Gross Unrealized Gain		Gross Unrealized Loss Included in Accumulated Other Comprehensive Income			Gross Unrealized Loss Included in Cumulative Earnings			Total Gross Unrealized Loss
Non-Agency RMBS
Senior	$	640,293	$	—	$	640,293	$	(318	)	$	—		$	(318	)
Senior, interest-only	—		47,593		47,593		—			(60,210		)	(60,210		)
Subordinated	59,702		21,445		81,147		(61		)	(332		)	(393		)
Subordinated, interest-only	—		2,089		2,089		—			(221		)	(221		)
Agency MBS
Residential	7,659		162,937		170,596		(586		)	(2,920		)	(3,506		)
Commercial	62,661		146,711		209,372		(280		)	—			(280		)
Interest-only	—		2,212		2,212		—			(5,831		)	(5,831		)
Total	$	770,315	$	382,987	$	1,153,302	$	(1,245	)	$	(69,514	)	$	(70,759	)



			December 31, 2018
			(dollars in thousands)
	Gross Unrealized Gain Included in Accumulated Other Comprehensive Income		Gross Unrealized Gain Included in Cumulative Earnings		Total Gross Unrealized Gain		Gross Unrealized Loss Included in Accumulated Other Comprehensive Income			Gross Unrealized Loss Included in Cumulative Earnings			Total Gross Unrealized Loss
Non-Agency RMBS
Senior	$	669,356	$	—	$	669,356	$	(450	)	$	—		$	(450	)
Senior, interest-only	—		31,123		31,123		—			(63,175		)	(63,175		)
Subordinated	50,235		3,467		53,702		(151		)	(94		)	(245		)
Subordinated, interest-only	—		2,000		2,000		—			(283		)	(283		)
Agency MBS
Residential	1,708		50,278		51,986		(59,552		)	(23,907		)	(83,459		)
Commercial	811		5,492		6,303		(35,125		)	(42,893		)	(78,018		)
Interest-only	—		1,986		1,986		—			(4,666		)	(4,666		)
Total	$	722,110	$	94,346	$	816,456	$	(95,278	)	$	(135,018	)	$	(230,296	)



	September 30, 2019
	Principal or Notional Value at Period-End (dollars in thousands)		Weighted Average Amortized Cost Basis		Weighted Average Fair Value	Weighted Average Coupon		Weighted Average Yield at Period-End ⁽¹⁾
Non-Agency RMBS
Senior	$	2,105,577	$	52.82	83.21	5.0	%	20.5	%
Senior, interest-only	7,795,886		3.97		3.81	1.0	%	7.9	%
Subordinated	808,647		62.97		72.96	3.8	%	7.5	%
Subordinated, interest-only	195,807		4.62		5.58	0.9	%	15.1	%
Agency MBS
Residential pass-through	7,790,386		102.32		104.46	4.0	%	3.2	%
Commercial pass-through	3,031,643		101.90		108.80	3.7	%	3.5	%
Interest-only	3,206,236		5.70		5.58	1.1	%	3.9	%



	December 31, 2018
	Principal or Notional Value at Period-End (dollars in thousands)		Weighted Average Amortized Cost Basis		Weighted Average Fair Value		Weighted Average Coupon		Weighted Average Yield at Period-End ⁽¹⁾
Non-Agency RMBS
Senior	$	2,386,049	$	53.40	$	81.44	5.0	%	19.5	%
Senior, interest-only	5,667,198		5.06		4.50		1.2	%	8.4	%
Subordinated	394,037		56.60		70.16		4.0	%	9.9	%
Subordinated, interest-only	221,549		4.48		5.26		1.1	%	16.4	%
Agency MBS
Residential pass-through	8,984,249		102.47		102.12		4.0	%	3.6	%
Commercial pass-through	2,895,679		101.98		99.50		3.6	%	3.4	%
Interest-only	3,028,572		4.49		4.40		0.8	%	4.3	%

Actual maturities of MBS are generally shorter than the stated contractual maturities. Actual maturities of the Company’s MBS are affected by the contractual lives of the underlying mortgages, periodic payments of principal and prepayments of principal. The following tables provide a summary of the fair value and amortized cost of the Company’s MBS at September 30, 2019 and December 31, 2018 according to their estimated weighted-average life classifications. The weighted-average lives of the MBS in the tables below are based on lifetime expected prepayment rates using an industry prepayment model for the Agency MBS portfolio and the Company’s prepayment assumptions for the Non-Agency RMBS. The prepayment model considers current yield, forward yield, steepness of the interest rate curve, current mortgage rates, mortgage rates of the outstanding loan, loan age, margin, and volatility.



	September 30, 2019
	(dollars in thousands)
	Weighted Average Life
	Less than one year		Greater than one year and less than five years		Greater than five years and less than ten years		Greater than ten years		Total
Fair value
Non-Agency RMBS
Senior	$	5,763	$	297,033	$	855,174	$	594,075	$	1,752,045
Senior interest-only	6		72,833		87,014		137,063		296,916
Subordinated	—		40,185		111,390		438,380		589,955
Subordinated interest-only	—		—		8,927		1,991		10,918
Agency MBS
Residential	—		7,735,996		401,621		367		8,137,984
Commercial	15,995		—		29,729		3,252,582		3,298,306
Interest-only	—		25,419		153,614		—		179,033
Total fair value	$	21,764	$	8,171,466	$	1,647,469	$	4,424,458	$	14,265,157
Amortized cost
Non-Agency RMBS
Senior	$	5,731	$	223,022	$	525,205	$	358,112	$	1,112,070
Senior interest-only	—		94,064		88,549		126,920		309,533
Subordinated	—		26,215		95,919		387,067		509,201
Subordinated interest-only	—		—		6,969		2,081		9,050
Agency MBS
Residential	—		7,576,086		394,438		370		7,970,894
Commercial	15,958		—		29,089		3,044,167		3,089,214
Interest-only	—		27,447		155,205		—		182,652
Total amortized cost	$	21,689	$	7,946,834	$	1,295,374	$	3,918,717	$	13,182,614



	December 31, 2018
	(dollars in thousands)
	Weighted Average Life
	Less than one year		Greater than one year and less than five years		Greater than five years and less than ten years		Greater than ten years		Total
Fair value
Non-Agency RMBS
Senior	$	7,611	$	357,543	$	946,536	$	631,434	$	1,943,124
Senior interest-only	1,189		38,407		96,401		118,893		254,890
Subordinated	—		39,825		43,744		192,898		276,467
Subordinated interest-only	—		303		9,321		2,025		11,649
Agency MBS
Residential	—		640,713		8,524,211		9,458		9,174,382
Commercial	—		15,468		28,205		2,837,549		2,881,222
Interest-only			48,580		84,766		—		133,346
Total fair value	$	8,800	$	1,140,839	$	9,733,184	$	3,792,257	$	14,675,080
Amortized cost
Non-Agency RMBS
Senior	$	7,522	$	277,025	$	585,187	$	404,484	$	1,274,218
Senior interest-only	2,250		46,944		111,538		126,210		286,942
Subordinated	—		29,487		26,036		167,487		223,010
Subordinated interest-only	—		428		7,358		2,146		9,932
Agency MBS
Residential	—		645,368		8,550,766		9,721		9,205,855
Commercial	—		15,543		29,447		2,907,947		2,952,937
Interest-only			53,076		82,950		—		136,026
Total amortized cost	$	9,772	$	1,067,871	$	9,393,282	$	3,617,995	$	14,088,920

The Non-Agency RMBS portfolio is subject to credit risk. The Non-Agency RMBS portfolio is primarily collateralized by Alt-A first lien mortgages. An Alt-A mortgage is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or prime, and less risky than subprime, the riskiest category. Alt-A interest rates, which are determined by credit risk, therefore tend to be between those of prime and subprime home loans. Typically, Alt-A mortgages are characterized by borrowers with less than full documentation, lower credit scores and higher loan-to-value ratios. At origination of the loan, Alt-A mortgage securities are defined as Non-Agency RMBS where (i) the underlying collateral has weighted average FICO scores between 680 and 720 or (ii) the FICO scores are greater than 720 and RMBS have 30% or less of the underlying collateral composed of full documentation loans. At September 30, 2019 and December 31, 2018, 57% and 64% of the Non-Agency RMBS collateral was classified as Alt-A, respectively, based on fair value. At September 30, 2019 and December 31, 2018, 14% and 12% of the Non-Agency RMBS collateral was classified as prime, respectively, based on fair value. Previously issued financial statement filings were based on current face. We believe fair value provides improved representation of the credit quality of the Company's Non-Agency RMBS portfolio. The remaining Non-Agency RMBS collateral is classified as subprime.

The Non-Agency RMBS in the Portfolio have the following collateral characteristics at September 30, 2019 and December 31, 2018.



	September 30, 2019				December 31, 2018
Weighted average maturity (years)		23.6				21.3
Weighted average amortized loan to value⁽¹⁾		63.0		%		62.9		%
Weighted average FICO⁽²⁾		717				708
Weighted average loan balance (in thousands)		$	325			$	308
Weighted average percentage owner occupied		87.7		%		85.7		%
Weighted average percentage single family residence		61.1		%		63.8		%
Weighted average current credit enhancement		1.0		%		1.4		%
Weighted average geographic concentration of top four states	CA	34.2		%	CA	33.8		%
	FL	6.6		%	FL	7.7		%
	NY	5.9		%	NY	7.4		%
	TX	2.5		%	NJ	2.1		%

Gross realized gains and losses are recorded in “Net realized gains (losses) on sales of investments” on the Company’s Consolidated Statements of Operations. The proceeds and gross realized gains and gross realized losses from sales of investments for the quarters and nine months ended September 30, 2019 and 2018 are as follows:



	For the Quarters Ended						For the Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(dollars in thousands)						(dollars in thousands)
Proceeds from sales	$	33,437		$	32,050		$	1,968,906		$	64,601

Gross realized gains	24			1,489			27,449			5,872
Gross realized losses	(17		)	(7,713		)	(26,366		)	(9,929		)
Net realized gain (loss)	$	7		$	(6,224	)	$	1,083		$	(4,057	)

Included in the gross realized gains for the quarter and nine months ended September 30, 2018 in the table above are exchanges of securities with a fair value of $7 million and $28 million. The Company exchanged its investment in a re-REMIC security for the underlying collateral supporting the group related to the exchanged asset. These exchanges were treated as non-cash sales and purchases and resulted in a realized gain of $114 thousand and $2 million, respectively, reflected in earnings for the quarter and nine months ended September 30, 2018. There were no such exchanges during the quarter and nine months ended September 30, 2019.