The Company classifies its Non-Agency RMBS as senior, subordinated, or Interest-only. The Company also invests in Agency MBS which it classifies as Agency RMBS to include residential and residential interest-only MBS and Agency CMBS to include commercial and commercial interest-only MBS. Senior interests in Non-Agency RMBS are generally 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 December 31, 2019 and 2018.



			December 31, 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	$	2,024,564	$	2,038	$	(953,916	)	$	1,072,686	$	1,700,911	$	628,518	$	(293	)	$	628,225
Subordinated	876,592		9,915		(332,913		)	553,594		624,598		76,272		(5,268		)	71,004
Interest-only	7,458,653		301,170		—			301,170		288,899		51,481		(63,752		)	(12,271		)
Agency RMBS
Pass-through	6,080,547		131,023		—			6,211,570		6,362,626		152,271		(1,215		)	151,056
Interest-only	1,539,941		139,536		—			139,536		127,667		220		(12,089		)	(11,869		)
Agency CMBS
Project loans	2,621,938		52,681		(4,961		)	2,669,658		2,801,692		132,700		(666		)	132,034
Interest-only	1,817,246		51,140		—			51,140		49,025		586		(2,701		)	(2,115		)
Total	$	22,419,481	$	687,503	$	(1,291,790	)	$	10,999,354	$	11,955,418	$	1,042,048	$	(85,984	)	$	956,064



			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
Subordinated	394,037		8,642		(179,669		)	223,010		276,467		53,702		(245		)	53,457
Interest-only	5,888,747		296,874		—			296,874		266,539		33,123		(63,458		)	(30,335		)
Agency RMBS
Pass-through	8,984,249		221,606		—			9,205,855		9,174,382		51,986		(83,459		)	(31,473		)
Interest-only	578,284		64,185		—			64,185		65,675		1,490		—			1,490
Agency CMBS
Project loans	2,895,679		61,727		(4,469		)	2,952,937		2,881,222		6,303		(78,018		)	(71,715		)
Interest-only	2,450,288		71,841		—			71,841		67,671		496		(4,666		)	(4,170		)
Total	$	23,577,333	$	725,412	$	(1,296,506	)	$	14,088,920	$	14,675,080	$	816,456	$	(230,296	)	$	586,160

The table below presents changes in accretable yield, or the excess of the security’s cash flows expected to be collected over the Company’s investment, solely as it pertains to the Company’s Non-Agency RMBS portfolio accounted for according to the provisions of ASC 310-30.



	For the Year Ended
	December 31, 2019			December 31, 2018
	(dollars in thousands)
Balance at beginning of period	$	1,248,309		$	1,303,589
Purchases	—			43,866
Yield income earned	(228,208		)	(231,205		)
Reclassification (to) from non-accretable difference	59,957			157,117
Sales and deconsolidation	(26,378		)	(25,058		)
Balance at end of period	$	1,053,680		$	1,248,309



	For the Year Ended
	December 31, 2019		December 31, 2018
	(dollars in thousands)
Outstanding principal balance:
Beginning of period	$	2,325,154	$	2,673,350
End of period	$	1,964,143	$	2,325,154
Amortized cost:
Beginning of period	$	1,158,291	$	1,381,839
End of period	$	965,546	$	1,158,291

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



						December 31, 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	$	—	$	—		—	$	31,635	$	(293	)	1	$	31,635	$	(293	)	1
Subordinated	69,178		(5,064		)	9	1,836		(204		)	11	71,014		(5,268		)	20
Interest-only	50,376		(22,737		)	46	64,129		(41,015		)	66	114,505		(63,752		)	112
Agency RMBS
Pass-through	11,398		(605		)	4	67,552		(610		)	5	78,950		(1,215		)	9
Interest-only	121,228		(12,089		)	22	—		—			—	121,228		(12,089		)	22
Agency CMBS
Project loans	41,971		(277		)	3	44,896		(389		)	4	86,867		(666		)	7
Interest-only	15,045		(295		)	6	9,930		(2,406		)	7	24,975		(2,701		)	13
Total	$	309,196	$	(41,067	)	90	$	219,978	$	(44,917	)	94	$	529,174	$	(85,984	)	184



						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
Subordinated	13,404		(245		)	7	—		—			8	13,404		(245		)	15
Interest-only	36,340		(4,434		)	31	95,411		(59,024		)	92	131,751		(63,458		)	123
Agency RMBS
Pass-through	779,322		(6,220		)	17	1,809,566		(77,239		)	114	2,588,888		(83,459		)	131
Interest-only	—		—			—	—		—			—	—		—			—
Agency CMBS
Project loans	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

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 sale by the VIE prior to the maturity of these RMBS is either expressly prohibited, not probable, or is limited to specified events of default, none of which have occurred as of December 31, 2019.

Gross unrealized losses on the Company’s Agency 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 December 31, 2019 and 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 December 31, 2019 and 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 $348 thousand and $601 thousand at December 31, 2019 and 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 Year Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	(dollars in thousands)
Total other-than-temporary impairment losses	$	(801	)	$	(2,556	)	$	(5,169	)
Portion of loss recognized in other comprehensive income (loss)	(4,052		)	(19,235		)	(56,687		)
Net other-than-temporary credit impairment losses	$	(4,853	)	$	(21,791	)	$	(61,856	)

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 Year Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	(dollars in thousands)
Cumulative credit loss beginning balance	$	587,199		$	591,521		$	556,485
Additions:
Other-than-temporary impairments not previously recognized	1,479			9,379			12,669
Reductions for securities sold or deconsolidated during the period	(175		)	(9,169		)	(12,405		)
Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments	3,375			12,412			47,211
Reductions for increases in cash flows expected to be collected over the remaining life of the securities	(5,593		)	(16,944		)	(12,439		)
Cumulative credit impairment loss ending balance	$	586,285		$	587,199		$	591,521

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 Year Ended
	December 31, 2019	December 31, 2018
Loss Severity
Weighted Average	69%	59%
Range	53% - 102%	5% - 132%
60+ days delinquent
Weighted Average	8%	13%
Range	2% - 18%	0% - 30%
Credit Enhancement ⁽¹⁾
Weighted Average	0%	14%
Range	0% - 0%	0% - 55%
3 Month Prepay Rate
Weighted Average	8%	10%
Range	3% - 21%	0% - 39%
12 Month Prepay Rate
Weighted Average	9%	11%
Range	3% - 12%	1% - 28%



			December 31, 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	$	628,518	$	—	$	628,518	$	(293	)	$	—		$	(293	)
Subordinated	57,174		19,098		76,272		(55		)	(5,213		)	(5,268		)
Interest-only	—		51,481		51,481		—			(63,752		)	(63,752		)
Agency RMBS
Pass-through	—		152,271		152,271		—			(1,215		)	(1,215		)
Interest-only	—		220		220		—			(12,089		)	(12,089		)
Agency CMBS
Project loans	23,643		109,057		132,700		(651		)	(15		)	(666		)
Interest-only	—		586		586		—			(2,701		)	(2,701		)
Total	$	709,335	$	332,713	$	1,042,048	$	(999	)	$	(84,985	)	$	(85,984	)



			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	)
Subordinated	50,235		3,467		53,702		(151		)	(94		)	(245		)
Interest-only	—		33,123		33,123		—			(63,458		)	(63,458		)
Agency RMBS
Pass-through	1,708		50,278		51,986		(59,552		)	(23,907		)	(83,459		)
Interest-only	—		1,490		1,490		—			—			—
Agency CMBS
Project loans	811		5,492		6,303		(35,125		)	(42,893		)	(78,018		)
Interest-only	—		496		496		—			(4,666		)	(4,666		)
Total	$	722,110	$	94,346	$	816,456	$	(95,278	)	$	(135,018	)	$	(230,296	)

Changes in prepayments, actual cash flows, and cash flows expected to be collected, among other items, are affected by the collateral characteristics of each asset class. The Company chooses assets for the portfolio after carefully evaluating each investment’s risk profile.



	December 31, 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	$	2,024,564	$	52.98	84.01	5.0	%	20.8	%
Subordinated	876,592		63.15		71.25	3.7	%	6.9	%
Interest-only	7,458,653		4.04		3.87	1.1	%	8.4	%
Agency RMBS
Pass-through	6,080,547		102.15		104.64	4.0	%	3.4	%
Interest-only	1,539,941		9.06		8.29	1.6	%	4.0	%
Agency CMBS
Project loans	2,621,938		101.82		106.86	3.7	%	3.6	%
Interest-only	1,817,246		2.81		2.70	0.7	%	4.7	%



	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	%
Subordinated	394,037		56.60		70.16		4.0	%	9.9	%
Interest-only	5,888,747		5.04		4.53		1.2	%	8.7	%
Agency RMBS
Pass-through	8,984,249		102.47		102.12		4.0	%	3.6	%
Interest-only	578,284		11.10		11.36		1.5	%	5.5	%
Agency CMBS
Project loans	2,895,679		101.98		99.50		3.6	%	3.4	%
Interest-only	2,450,288		2.93		2.76		0.6	%	3.2	%

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 December 31, 2019 and 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.



	December 31, 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	$	16,343	$	450,185	$	676,382	$	558,001	$	1,700,911
Subordinated	—		43,796		95,973		484,829		624,598
Interest-only	—		126,631		159,057		3,211		288,899
Agency RMBS
Pass-through	—		5,939,408		421,539		1,679		6,362,626
Interest-only	—		1,614		126,053		—		127,667
Agency CMBS
Project loans	15,065		—		29,385		2,757,242		2,801,692
Interest-only	—		20,528		28,497		—		49,025
Total fair value	$	31,408	$	6,582,162	$	1,536,886	$	3,804,962	$	11,955,418
Amortized cost
Non-Agency RMBS
Senior	$	15,206	$	304,850	$	409,958	$	342,672	$	1,072,686
Subordinated	—		29,085		86,033		438,476		553,594
Interest-only	—		150,221		148,889		2,060		301,170
Agency RMBS
Pass-through	—		5,796,044		414,482		1,044		6,211,570
Interest-only	—		2,260		137,276		—		139,536
Agency CMBS
Project loans	15,084		—		28,954		2,625,620		2,669,658
Interest-only	—		22,950		28,190		—		51,140
Total amortized cost	$	30,290	$	6,305,410	$	1,253,782	$	3,409,872	$	10,999,354



	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
Subordinated	—		39,825		43,744		192,898		276,467
Interest-only	1,189		38,710		105,722		120,918		266,539
Agency RMBS
Pass-through	—		640,713		8,524,211		9,458		9,174,382
Interest-only	—		—		65,675		—		65,675
Agency CMBS
Project loans	—		15,468		28,205		2,837,549		2,881,222
Interest-only	—		48,580		19,091		—		67,671
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
Subordinated	—		29,487		26,036		167,487		223,010
Interest-only	2,250		47,372		118,896		128,356		296,874
Agency RMBS
Pass-through	—		645,368		8,550,766		9,721		9,205,855
Interest-only			—		64,185		—		64,185
Agency CMBS
Project loans	—		15,543		29,447		2,907,947		2,952,937
Interest-only	—		53,076		18,765		—		71,841
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 December 31, 2019 and December 31, 2018, 58% and 64% of the Non-Agency RMBS collateral was classified as Alt-A, respectively, based on fair value. At December 31, 2019 and 2018, 12% of the Non-Agency RMBS collateral was classified as prime, respectively, based on fair value. The remaining Non-Agency RMBS collateral is classified as subprime.

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



	December 31, 2019				December 31, 2018
Weighted average maturity (years)		23.6				21.3
Weighted average amortized loan to value⁽¹⁾		63.2		%		62.9		%
Weighted average FICO⁽²⁾		719				708
Weighted average loan balance (in thousands)		$	313			$	308
Weighted average percentage owner occupied		80.6		%		85.7		%
Weighted average percentage single family residence		60.0		%		63.8		%
Weighted average current credit enhancement		1.1		%		1.4		%
Weighted average geographic concentration of top four states	CA	32.5		%	CA	33.8		%
	FL	6.6		%	FL	7.7		%
	NY	6.3		%	NY	7.4		%
	TX	2.0		%	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 years ended December 31, 2019, 2018 and 2017 are as follows:



	For the Year Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	(dollars in thousands)
Proceeds from sales:
Non-Agency RMBS	38,659			100,791			68,164
Agency RMBS	2,915,545			7,064			570,195
Agency CMBS	375,489			9,120			173,646

Gross realized gains:
Non-Agency RMBS	422			7,424			12,171
Agency RMBS	35,221			—			3,068
Agency CMBS	11,328			122			2,300
Gross realized losses:
Non-Agency RMBS	(1,445		)	(7,234		)	(20		)
Agency RMBS	(24,531		)	(1,919		)	(7,740		)
Agency CMBS	(2,225		)	(1,237		)	(656		)
Net realized gain (loss)	$	18,770		$	(2,844	)	$	9,123

Included in the gross realized gains for the year ended December 31, 2018 in the table above are exchanges of securities with a fair value of $81 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 net realized gain of $3 million, reflected in earnings for the year ended December 31, 2018. There were no such exchanges during the year ended December 31, 2019. For the year ended December 31, 2017, the fair value of these exchanges of securities was $63 million, and resulted in a realized gain of $9 million.