Loans Held for Investment

12 Months Ended

Dec. 31, 2019

Investments, Debt and Equity Securities [Abstract]

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

At December 31, 2019, all 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 Loans held for investment. As changes in the fair value of these loans are reflected in earnings, the Company does not estimate or record a loan loss provision. The total amortized cost of our Loans held for investment was $13.7 billion and $12.2 billion as of December 31, 2019 and 2018, respectively.

The following table provides a summary of the changes in the carrying value of Loans held for investment at fair value at December 31, 2019 and 2018:



	For the Year Ended
	December 31, 2019			December 31, 2018
	(dollars in thousands)
Balance, beginning of period	$	12,572,581		$	13,678,263
Purchases	5,086,491			1,671,330
Principal paydowns	(1,717,745		)	(1,859,155		)
Sales and settlements	(1,812,760		)	(807,364		)
Net periodic accretion (amortization)	(77,491		)	(83,393		)
Realized gains (losses) on sales and settlements	1,590			101
Change in fair value	240,149			(27,201		)
Balance, end of period	$	14,292,815		$	12,572,581

The primary cause of the change in fair value is due to market demand and changes in credit risk of mortgage loans. During the year ended December 31, 2019, the Company sold $1.8 billion of loans to a trust, with the Company retaining $124 million of beneficial interests. During the year ended December 31, 2018, the Company sold $415 million of loans to a trust, with the Company retaining $40 million of beneficial interests.

During the year ended December 31, 2019, the Company transferred loans with an unpaid principal balance of $343 million to a third party. The Company evaluated the sale under current accounting guidance and determined that the sale did not effectively transfer control of the loans from the Company, the transferor, to the third party, the transferee, due to a right by the Company to call the loans at a fixed price at a future date. As such, the transfer has been accounted for by the Company as a secured borrowing and no gain or loss was recorded upon the transfer of the loans. The proceeds received, net of any collateral received in the transfer, has been recorded as a Securitized debt at fair value, collateralized by loans held for investment on the Consolidated Statements of Financial Condition. The secured borrowing related to unpaid principal amount of these loans is non-recourse to the Company and these loans can only be used to satisfy the obligations of the transferee and the obligations of the transferee are non-recourse to the Company. See footnote 7 for more details regarding Securitized debt.

Residential mortgage loans

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



Origination Year	December 31, 2019⁽¹⁾		December 31, 2018
2002 and prior	6.8	%	7.3	%
2003	6.0	%	6.6	%
2004	12.6	%	13.6	%
2005	18.6	%	19.5	%
2006	22.5	%	22.7	%
2007	20.7	%	19.5	%
2008	6.4	%	6.2	%
2009	1.5	%	1.0	%
2010 and later	4.9	%	3.6	%
Total	100.0	%	100.0	%

(1) The table above excludes approximately $754 million of Loans held for investments which were purchased prior to December 31, 2019 and will settle subsequent to December 31, 2019.

The following table presents a summary of key characteristics of the residential loan portfolio at December 31, 2019 and 2018:



	December 31, 2019 ⁽¹⁾				December 31, 2018
Number of loans		139,194				140,345
Weighted average maturity (years)		19.3				18.6
Weighted average loan to value⁽²⁾		87.4		%		87.5		%
Weighted average FICO⁽²⁾		627				629
Weighted average loan balance (in thousands)		$	95			$	89
Weighted average percentage owner occupied		88.0		%		90.1		%
Weighted average percentage single family residence		84.4		%		86.3		%
Weighted average geographic concentration of top five states	CA	11.6		%	CA	9.0		%
	FL	7.4		%	FL	7.3		%
	NY	6.9		%	OH	5.9		%
	OH	5.3		%	NY	5.7		%
	PA	5.3		%	PA	5.6		%

(1) The table above excludes approximately $754 million of Loans held for investments which were purchased prior to December 31, 2019 and will settle subsequent to December 31, 2019.

(2) As provided by the Trustee.

The following tables show various characteristics of our residential loan portfolio and outstanding principal balance of the loans that are 30 days delinquent and greater for the year ended December 31, 2019 and 2018, respectively.



December 31, 2019⁽¹⁾
(dollars in thousands)

Loan Balance	Number of Loans	Interest Rate	Maturity Date	Total Principal		30-89 Days Delinquent		90+ Days Delinquent
Held-for-Investment at fair value:
Adjustable rate loans:
$1 to $250	7,776	1.00% to 19.24%	6/1/1983 - 3/13/2057	$	655,914	$	75,436	$	44,117
$250 to $500	497	2.00% to 13.13%	3/1/2023 - 7/1/2057	163,972		18,117		10,950
$500 to $750	96	2.00% to 9.38%	1/1/2034 - 10/1/2056	56,661		2,224		2,747
$750 to $1,000	20	1.97% to 8.13%	10/1/2036 - 11/1/2048	16,947		759		862
Over $1,000	12	2.00% to 6.63%	5/1/2036 - 10/1/2048	19,499		1,222		3,869
	8,401			$	912,993	$	97,758	$	62,545

Fixed loans:
$1 to $250	123,580	0.00% to 24.00%	6/1/1989 - 5/1/2062	$	9,482,855	$	1,021,054	$	571,242
$250 to $500	6,259	0.00% to 11.69%	12/1/2019 - 3/1/2065	2,059,131		275,574		131,472
$500 to $750	712	2.00% to 10.69%	8/1/2019 - 9/1/2059	418,044		46,972		12,137
$750 to $1,000	137	2.00% to 8.00%	3/1/2013 - 1/1/2058	116,993		6,224		5,312
Over $1,000	105	2.00% to 9.50%	9/1/2019 - 12/1/2057	179,827		10,497		—
	130,793			$	12,256,850	$	1,360,321	$	720,163

Total	139,194			$	13,169,843	$	1,458,079	$	782,708

(1) The table above excludes approximately $754 million of Loans held for investments which were purchased prior to December 31, 2019 and will settle subsequent to December 31, 2019.

The foreclosure, bankruptcy, and REO principal balances on our loans were $299 million, $322 million and $59 million, respectively, as of December 31, 2019, which are included in the table above.



December 31, 2018
(dollars in thousands)

Loan Balance	Number of Loans	Interest Rate	Maturity Date	Total Principal		30-89 Days Delinquent		90+ Days Delinquent
Held-for-Investment at fair value:
Adjustable rate loans:
$1 to $250	8,258	1.00% to 19.49%	6/1/1983 - 6/1/2058	$	713,392	$	80,781	$	48,235
$250 to $500	456	2.00% to 12.75%	3/1/2023 - 2/1/2057	148,867		17,722		10,779
$500 to $750	65	2.00% to 10.00%	1/1/2034 - 8/1/2047	38,148		2,979		2,762
$750 to $1,000	7	4.13% to 5.13%	4/1/2035 - 4/1/2038	6,008		784		—
Over $1,000	7	4.00% to 5.00%	7/1/2037 - 8/1/2039	12,195		—		1,164
	8,793			$	918,610	$	102,266	$	62,940

Fixed loans:
$1 to $250	126,085	0.00% to 24.00%	6/1/1989 - 5/1/2062	$	9,566,517	$	894,574	$	591,283
$250 to $500	4,942	0.00% to 12.52%	4/1/2018 - 11/1/2061	1,595,673		160,015		128,876
$500 to $750	406	2.00% to 10.69%	7/1/2031 - 5/1/2058	238,292		12,239		10,600
$750 to $1,000	88	2.00% to 7.98%	3/1/2013 - 12/1/2055	75,289		2,677		1,805
Over $1,000	31	3.00% to 6.38%	6/1/2037 - 6/1/2057	38,200		—		—
	131,552			$	11,513,971	$	1,069,505	$	732,564

Total	140,345			$	12,432,581	$	1,171,771	$	795,504

The foreclosure, bankruptcy, and REO principal balances on our loans were $292 million, $266 million and $47 million, respectively, as of December 31, 2018, which are included in the table above.