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Mortgage-Backed Securities (Tables)
 12 Months Ended
Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Schedule of present amortized cost, fair value and unrealized gain/losses of Company's MBS investments 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
Schedule of changes in accretable yield
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
Schedule of non-agency RMBS having deteriorated credit when acquired
The table below presents the outstanding principal balance and related amortized cost at December 31, 2019 and 2018, as it pertains to the Company’s Non-Agency RMBS portfolio accounted for according to ASC 310-30 guidance.
 
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
Schedule of temporary impairment losses, investments
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
Other than temporary impairment, credit losses recognized in earnings
A summary of the OTTI included in earnings for the years ended December 31, 2019, 2018 and 2017 and are presented below.

 
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
Other than temporary impairment of investments recorded in earnings, significant inputs and assumptions 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%

(1) Calculated as the combined credit enhancement to the Re-REMIC and underlying from each of their respective capital structures.
Summary of unrealized gains and losses on MBS
The following tables present a summary of unrealized gains and losses at December 31, 2019 and 2018.
 
 
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
)
Residential mortgage backed securities collateral characteristics
The following tables provide a summary of the Company’s MBS portfolio at December 31, 2019 and 2018.
 
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
%
(1) Bond Equivalent Yield at period end.

 
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
%
(1) Bond Equivalent Yield at period end.
Credit ratings of residential MBS
The following table presents the weighted average credit rating of the Company’s Non-Agency RMBS portfolio at December 31, 2019 and 2018.
 
December 31, 2019
December 31, 2018

AAA
0.4
%
0.5
%
AA
0.1
%
0.1
%
A
0.9
%
0.3
%
BBB
1.6
%
0.4
%
BB
3.8
%
3.6
%
B
1.6
%
1.1
%
Below B or not rated
91.6
%
94.0
%
Total
100.0
%
100.0
%
Schedule of MBS by estimated weighted average life classification 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
Schedule of collateral characteristics of underlying Mortgages of Non-Agency RMBS portfolio
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
%
(1) Value represents appraised value of the collateral at the time of loan origination.
(2) FICO as determined at the time of loan origination.
Schedule of percentage of Non-Agency RMBS by year originated
The table below presents the origination year of the underlying loans related to the Company’s portfolio of Non-Agency RMBS at December 31, 2019 and 2018.
Origination Year
December 31, 2019
December 31, 2018

2003 and prior
1.3
%
1.3
%
2004
1.5
%
1.7
%
2005
10.7
%
12.9
%
2006
52.9
%
49.8
%
2007
26.6
%
31.0
%
2008 and later
7.0
%
3.3
%
Total
100.0
%
100.0
%
Schedule of gains and losses from sales of investments 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