Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Schedule of unpaid principal, fair value and impact of change in fair value

The table below shows the unpaid principal, fair value and impact of change in fair value on each of the financial instruments carried with fair value option as of December 31, 2019 and 2018, respectively:

	December 31, 2019
	(dollars in thousands)
	Unpaid Principal/ Notional	Fair Value	Year to Date Gain/(Loss) on Change in Fair Value
Assets:
Non-agency RMBS
Subordinated	580,761	422,826	10,513
Interest-only	7,458,653	288,899	18,064
Agency RMBS
Pass-through	6,080,549	6,362,628	124,685
Interest-only	1,539,941	127,667	(13,359	)
Agency CMBS
Project loans	1,753,755	1,889,923	146,441
Interest-only	1,817,246	49,025	2,054
Loans held for investment, at fair value	13,924,291	14,292,815	240,148
Liabilities:
Securitized debt at fair value, collateralized by loans held for investment	8,184,369	8,179,608	(118,911	)

	December 31, 2018
	(dollars in thousands)
	Unpaid Principal/ Notional	Fair Value		Year to Date Gain/(Loss) on Change in Fair Value
Assets:
Non-agency RMBS
Subordinated	N/A	$	12,014	$	(145	)
Interest-only	5,888,747	266,539		21,356
Agency RMBS
Pass-through	7,573,835	7,739,382		31,185
Interest-only	578,284	65,675		3,785
Agency CMBS
Project loans	1,607,626	1,595,681		(35,002		)
Interest-only	2,450,288	67,670		444
Loans held for investment, at fair value	12,432,582	12,572,581		(27,201		)
Liabilities:
Securitized debt at fair value, collateralized by loans held for investment	8,561,319	8,455,376		52,209

Schedule of 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 December 31, 2019 and 2018 are presented below.

	December 31, 2019
	(dollars in thousands)
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral, netting			Total
Assets:
Non-Agency RMBS, at fair value	$	—	$	—	$	2,614,408	$	—		$	2,614,408
Agency RMBS, at fair value	—		6,490,293		—		—			6,490,293
Agency CMBS, at fair value	—		2,850,717		—		—			2,850,717
Loans held for investment, at fair value	—		—		14,292,815		—			14,292,815
Derivatives	3,611		1,092		—		(1,092		)	3,611
Liabilities:
Securitized debt at fair value, collateralized by loans held for investment	—		—		8,179,608		—			8,179,608
Derivatives	—		205,703		—		(205,703		)	—

	December 31, 2018
	(dollars in thousands)
	Level 1		Level 2		Level 3	Counterparty and Cash Collateral, netting			Total
Assets:
Non-Agency RMBS, at fair value	$	—	$	—	2,486,130	$	—		$	2,486,130
Agency RMBS, at fair value	—		9,240,057		—	—			9,240,057
Agency CMBS, at fair value	—		2,948,893		—	—			2,948,893
Loans held for investment, at fair value	—		—		12,572,581	—			12,572,581
Derivatives	—		89,121		—	(51,653		)	37,468
Liabilities:
Securitized debt at fair value, collateralized by loans held for investment	—		—		8,455,376	—			8,455,376
Derivatives	13,375		169,790		—	(183,165		)	—

Summary of the changes in the fair value of securities classified as Level 3

The table below provides a summary of the changes in the fair value of financial instruments classified as Level 3 at December 31, 2019 and 2018.

Fair Value Reconciliation, Level 3
	For the Year Ended
	December 31, 2019
	(dollars in thousands)
	Non-Agency RMBS			Loans held for investment			Securitized Debt
Beginning balance Level 3	$	2,486,130		$	12,572,581		$	8,455,376
Transfers in to Level 3	—			—			—
Transfers out of Level 3	—			—			—
Purchases of assets/ issuance of debt	497,848			5,086,491			1,487,286
Principal payments	(415,518		)	(1,717,745		)	(1,530,818		)
Sales and Settlements	(38,605		)	(1,812,760		)	(314,454		)
Net accretion (amortization)	95,562			(77,491		)	(26,758		)
Gains (losses) included in net income
Other than temporary credit impairment losses	(4,853		)	—			—
Realized gains (losses) on sales and settlements	(1,088		)	1,590			(9,925		)
Net unrealized gains (losses) included in income	28,577			240,149			118,901
Gains (losses) included in other comprehensive income
Total unrealized gains (losses) for the period	(33,645		)	—			—
Ending balance Level 3	$	2,614,408		$	14,292,815		$	8,179,608

Fair Value Reconciliation, Level 3
	For the Year Ended
	December 31, 2018
	(dollars in thousands)
	Non-Agency RMBS			Loans held for investment			Securitized Debt
Beginning balance Level 3	$	2,851,316		$	13,678,263		$	9,388,657
Transfers in to Level 3	—			—			—
Transfers out of Level 3	—			—			—
Purchases of assets/ issuance of debt	253,952			1,671,330			1,769,539
Principal payments	(521,109		)	(1,859,155		)	(1,778,625		)
Sales and Settlements	(100,786		)	(807,364		)	(834,414		)
Net accretion (amortization)	101,088			(83,393		)	(11,197		)
Gains (losses) included in net income
Other than temporary credit impairment losses	(21,791		)	—			—
Realized gains (losses) on sales and settlements	201			101			(26,375		)
Net unrealized gains (losses) included in income	21,208			(27,201		)	(52,209		)
Gains (losses) included in other comprehensive income
Total unrealized gains (losses) for the period	(97,949		)	—			—
Ending balance Level 3	$	2,486,130		$	12,572,581		$	8,455,376

A summary of the significant inputs used to estimate the fair value of securitized debt at fair value, collateralized by loans held for investment

A summary of the significant inputs used to estimate the fair value of Non-Agency RMBS held for investment at fair value as of December 31, 2019 and 2018 follows:

	December 31, 2019
	Significant Inputs
	Discount Rate		Prepay Rate		CDR		Loss Severity
	Range	Weighted Average	Range	Weighted Average	Range	Weighted Average	Range	Weighted Average
Non-Agency RMBS
Senior	3% -8%	3.8%	6% -20%	9.4%	0% -9%	1.8%	26% -82%	42.0%
Subordinated	0% -13%	5.1%	6% -35%	9.6%	0% -6%	1.3%	27% -55%	36.7%
Interest-only	0% -100%	12.5%	6% -43%	18.5%	0% -6%	1.0%	26% -83%	35.3%

	December 31, 2018
	Significant Inputs
	Discount Rate		Prepay Rate		CDR		Loss Severity
	Range	Weighted Average	Range	Weighted Average	Range	Weighted Average	Range	Weighted Average
Non-Agency RMBS
Senior	3% -8%	4.5%	1% -25%	6.7%	0% -11%	2.5%	35% -81%	44.6%
Subordinated	4% -20%	5.8%	1% -19%	7.9%	0% -6%	1.9%	30% -65%	40.3%
Interest-only	8% -100%	11.1%	3% -32%	10.7%	0% -8%	1.9%	30% -86%	42.1%

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 December 31, 2019 and 2018 follows:

	December 31, 2019
	Significant Inputs
	Discount Rate		Prepay Rate		CDR		Loss Severity
	Range	Weighted Average	Range	Weighted Average	Range	Weighted Average	Range	Weighted Average
Securitized debt at fair value, collateralized by loans held for investment	0% -10%	3.3%	6% - 20%	9.1%	0% - 3%	1.4%	30% - 75%	59.8%

	December 31, 2018
	Significant Inputs
	Discount Rate		Prepay Rate		CDR		Loss Severity
	Range	Weighted Average	Range	Weighted Average	Range	Weighted Average	Range	Weighted Average
Securitized debt at fair value, collateralized by loans held for investment	0% -10%	4.5%	6% - 18%	9.3%	0% - 23%	1.4%	30% - 65%	58.7%

Schedule of carrying value and fair value of financial instruments not carried at fair value on a recurring basis

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 December 31, 2019 and 2018.

	December 31, 2019
	(dollars in thousands)
	Level in Fair Value Hierarchy	Carrying Amount	Fair Value
Repurchase agreements	2	13,427,545	13,450,193
Securitized debt, collateralized by Non-Agency RMBS	3	133,557	117,552

	December 31, 2018
	(dollars in thousands)
	Level in Fair Value Hierarchy	Carrying Amount	Fair Value
Repurchase agreements	2	14,030,465	14,085,164
Securitized debt, collateralized by Non-Agency RMBS	3	159,955	140,711

Loans Held for Investment at Fair Value

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

A summary of the significant inputs used to estimate the fair value of securitized debt at fair value, collateralized by loans held for investment

A summary of the significant inputs used to estimate the fair value of Loans held for investment collateralized primarily by seasoned subprime mortgages at fair value as of December 31, 2019 and 2018 follows:

	December 31, 2019	December 31, 2018
Factor:
Coupon
Base Rate	4.3%	5.2%
Actual	6.6%	6.9%
FICO
Base Rate	636	638
Actual	624	626
Loan-to-value (LTV)
Base Rate	86%	88%
Actual	88%	88%
Loan Characteristics:
Occupancy
Owner Occupied	89%	90%
Investor	2%	1%
Secondary	9%	9%
Property Type
Single family	85%	86%
Manufactured housing	4%	4%
Multi-family/mixed use/other	11%	10%