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, allowance for credit losses, fair value and unrealized gain/losses of Company's MBS investments as of September 30, 2021 and December 31, 2020.


			September 30, 2021
			(dollars in thousands)
	Principal or Notional Value		Total Premium		Total Discount		Amortized Cost		Allowance for credit losses		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gain/(Loss)
Non-Agency RMBS
Senior	$	1,340,949	$	3,907	$	(691,120)	$	653,736	$	(121)	$	1,054,227	$	400,801	$	(190)	$	400,611
Subordinated	849,256		5,794		(278,206)		576,844		(1)		648,585		93,326		(21,584)		71,742
Interest-only	4,225,195		201,508		—		201,508		—		187,218		40,268		(54,558)		(14,290)
Agency RMBS

Interest-only	1,067,557		106,477		—		106,477		—		65,889		106		(40,694)		(40,588)
Agency CMBS
Project loans	825,894		16,278		(812)		841,360		—		926,306		84,946		—		84,946
Interest-only	2,351,641		131,734		—		131,734		—		135,825		4,241		(150)		4,091
Total	$	10,660,492	$	465,698	$	(970,138)	$	2,511,659	$	(122)	$	3,018,050	$	623,688	$	(117,176)	$	506,512



			December 31, 2020
			(dollars in thousands)
	Principal or Notional Value		Total Premium		Total Discount		Amortized Cost		Allowance for credit losses		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gain/(Loss)
Non-Agency RMBS
Senior	$	1,560,135	$	3,934	$	(773,804)	$	790,265	$	(180)	$	1,277,800	$	487,963	$	(248)	$	487,715
Subordinated	905,674		7,059		(347,056)		565,677		—		610,655		83,007		(38,029)		44,978
Interest-only	5,628,240		249,610		—		249,610		—		262,259		67,868		(55,219)		12,649
Agency RMBS

Interest-only	1,262,963		118,867		—		118,867		—		90,738		270		(28,399)		(28,129)
Agency CMBS
Project loans	1,527,621		28,559		(861)		1,555,319		—		1,714,483		159,233		(69)		159,164
Interest-only	1,326,665		23,572		—		23,572		—		25,885		2,659		(346)		2,313
Total	$	12,211,298	$	431,601	$	(1,121,721)	$	3,303,310	$	(180)	$	3,981,820	$	801,000	$	(122,310)	$	678,690

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 September 30, 2021 and December 31, 2020. All available for sale Non-Agency RMBS not accounted under the fair value option election in an unrealized loss position have been evaluated by the Company for current expected credit losses.


					September 30, 2021
					(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	$	9,596	$	(190)	1	$	—	$	—	—	$	9,596	$	(190)	1
Subordinated	42,385		(478)		7	21,600		(21,106)		10	63,985		(21,584)		17
Interest-only	25,352		(4,992)		34	24,475		(49,566)		51	49,827		(54,558)		85
Agency RMBS

Interest-only	16,904		(5,980)		5	47,141		(34,714)		18	64,045		(40,694)		23
Agency CMBS
Project loans	—		—		—	—		—		—	—		—		—
Interest-only	24,118		(150)		3	—		—		—	24,118		(150)		3
Total	$	118,355	$	(11,790)	50	$	93,216	$	(105,386)	79	$	211,571	$	(117,176)	129



					December 31, 2020
					(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	$	11,985	$	(248)	2	$	—	$	—	—	$	11,985	$	(248)	2
Subordinated	253,822		(8,711)		5	34,697		(29,318)		15	288,519		(38,029)		20
Interest-only	38,604		(8,682)		34	22,761		(46,537)		43	61,365		(55,219)		77
Agency RMBS

Interest-only	31,059		(4,938)		6	54,153		(23,461)		16	85,212		(28,399)		22
Agency CMBS
Project loans	—		—		—	8,581		(69)		1	8,581		(69)		1
Interest-only	4,052		(346)		6	—		—		—	4,052		(346)		6
Total	$	339,522	$	(22,925)	53	$	120,192	$	(99,385)	75	$	459,714	$	(122,310)	128

At September 30, 2021, the Company did not intend to sell any of its Agency and Non-Agency MBS that were in an unrealized loss position, and it was not more likely than not that the Company would be required to sell these MBS investments 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 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 September 30, 2021.

The Company did not have any gross unrealized losses on its Agency MBS (excluding Agency MBS which are reported at fair value with changes in fair value recorded in earnings) as of September 30, 2021. 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 $69 thousand as of December 31, 2020. 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, 2021 and December 31, 2020, 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), net of any allowance for credit losses, were $190 thousand and $248 thousand, at September 30, 2021 and December 31, 2020, respectively. After evaluating the securities and recording the allowance for credit losses, the Company concluded that the remaining unrealized losses reflected above were non-credit related and would be recovered from the securities' estimated future cash flows. The Company considered a number of factors in reaching this conclusion, including that it did not intend to sell the securities, it was not considered more likely than not that it would be forced to sell the securities prior to recovering the amortized cost, and there were no material credit events that would have caused the Company to otherwise conclude that it would not recover the amortized cost. The allowance for credit losses are calculated by comparing the estimated future cash flows of each security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to the net amortized cost basis. Significant judgment is used in projecting cash flows for Non-Agency RMBS.

The Company has reviewed its Non-Agency RMBS that are in an unrealized loss position to identify those securities with losses that are credit related 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. A summary of the credit losses allowance on available-for-sale securities for quarters and nine months ended September 30, 2021 and 2020 is presented below.


	For the Quarter Ended				For the Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	(dollars in thousands)				(dollars in thousands)
Beginning allowance for credit losses	$	508	$	1,817	$	180	$	—


Additions to the allowance for credit losses on securities for which credit losses were not previously recorded	7		22		475		6,582
Allowance on purchased financial assets with credit deterioration	—		—		—		—
Reductions for the securities sold during the period	—		—		—		(321)
Increase/(decrease) on securities with an allowance in the prior period	(544)		(1,074)		(721)		(3,778)
Write-offs charged against the allowance	(23)		(642)		(86)		(2,389)
Recoveries of amounts previously written off	174		44		274		73

Ending allowance for credit losses	$	122	$	167	$	122	$	167


			September 30, 2021
			(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	$	400,801	$	—	$	400,801	$	(190)	$	—	$	(190)
Subordinated	35,171		58,155		93,326		—		(21,584)		(21,584)
Interest-only	—		40,268		40,268		—		(54,558)		(54,558)
Agency RMBS

Interest-only	—		106		106		—		(40,694)		(40,694)
Agency CMBS
Project loans	3,133		81,813		84,946		—		—		—
Interest-only	—		4,241		4,241		—		(150)		(150)
Total	$	439,105	$	184,583	$	623,688	$	(190)	$	(116,986)	$	(117,176)


			December 31, 2020
			(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	$	487,963	$	—	$	487,963	$	(248)	$	—	$	(248)
Subordinated	65,043		17,964		83,007		—		(38,029)		(38,029)
Interest-only	—		67,868		67,868		—		(55,219)		(55,219)
Agency RMBS

Interest-only	—		270		270		—		(28,399)		(28,399)
Agency CMBS
Project loans	5,407		153,826		159,233		(69)		—		(69)
Interest-only	—		2,659		2,659		—		(346)		(346)
Total	$	558,413	$	242,587	$	801,000	$	(317)	$	(121,993)	$	(122,310)

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.


	September 30, 2021
	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	$	1,340,949	$	48.75	78.62	4.4	%	17.6	%
Subordinated	849,256		67.92		76.37	3.8	%	6.7	%
Interest-only	4,225,195		4.77		4.43	1.6	%	12.8	%
Agency RMBS

Interest-only	1,067,557		9.97		6.17	1.3	%	0.7	%
Agency CMBS
Project loans	825,894		101.87		112.16	4.3	%	4.1	%
Interest-only	2,351,641		5.60		5.78	0.7	%	5.3	%


	December 31, 2020
	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	$	1,560,135	$	50.65	$	81.90	4.5	%	16.9	%
Subordinated	905,674		62.46		67.43		3.8	%	6.3	%
Interest-only	5,628,240		4.43		4.66		1.5	%	16.2	%
Agency RMBS

Interest-only	1,262,963		9.41		7.18		1.7	%	1.6	%
Agency CMBS
Project loans	1,527,621		101.81		112.23		4.1	%	3.8	%
Interest-only	1,326,665		1.78		1.95		0.6	%	8.4	%

Actual maturities of MBS are generally shorter than the stated contractual maturities. Actual maturities of the Company’s MBS are affected by the underlying mortgages, periodic payments of principal, realized losses 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, 2021 and December 31, 2020 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 the Company's prepayment assumptions for the Agency MBS and 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, 2021
	(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	$	7,744	$	351,515	$	303,819	$	391,149	$	1,054,227
Subordinated	2,885		155,226		244,959		245,515		648,585
Interest-only	3,821		155,664		27,732		1		187,218
Agency RMBS

Interest-only	—		—		65,889		—		65,889
Agency CMBS
Project loans	8,480		—		—		917,826		926,306
Interest-only	2,387		129,921		3,517		—		135,825
Total fair value	$	25,317	$	792,326	$	645,916	$	1,554,491	$	3,018,050
Amortized cost
Non-Agency RMBS
Senior	$	5,978	$	243,637	$	167,673	$	236,448	$	653,736
Subordinated	—		132,268		223,810		220,766		576,844
Interest-only	30,408		149,352		21,690		58		201,508
Agency RMBS

Interest-only	—		—		106,477		—		106,477
Agency CMBS
Project loans	8,454		—		—		832,906		841,360
Interest-only	1,840		126,622		3,272		—		131,734
Total amortized cost	$	46,680	$	651,879	$	522,922	$	1,290,178	$	2,511,659


	December 31, 2020
	(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	$	7,850	$	366,218	$	467,336	$	436,396	$	1,277,800
Subordinated	5		105,272		102,805		402,573		610,655
Interest-only	5,780		143,631		110,468		2,380		262,259
Agency RMBS

Interest-only	—		864		89,874		—		90,738
Agency CMBS
Project loans	8,581		—		—		1,705,902		1,714,483
Interest-only	620		21,500		3,765		—		25,885
Total fair value	$	22,836	$	637,485	$	774,248	$	2,547,251	$	3,981,820
Amortized cost
Non-Agency RMBS
Senior	$	4,691	$	256,935	$	257,188	$	271,451	$	790,265
Subordinated	—		83,188		78,435		404,054		565,677
Interest-only	26,286		138,150		82,368		2,806		249,610
Agency RMBS

Interest-only	—		1,898		116,969		—		118,867
Agency CMBS
Project loans	8,650		—		—		1,546,669		1,555,319
Interest-only	788		19,273		3,511		—		23,572
Total amortized cost	$	40,415	$	499,444	$	538,471	$	2,224,980	$	3,303,310


	September 30, 2021				December 31, 2020
Weighted average maturity (years)		21.6				22.2
Weighted average amortized loan to value (1)		60.6		%		61.4		%
Weighted average FICO (2)		708				714
Weighted average loan balance (in thousands)		$	263			$	291
Weighted average percentage owner-occupied		83.7		%		81.8		%
Weighted average percentage single family residence		61.8		%		61.7		%
Weighted average current credit enhancement		1.1		%		0.9		%
Weighted average geographic concentration of top four states	CA	31.5		%	CA	33.8		%
	NY	10.0		%	NY	8.7		%
	FL	8.0		%	FL	7.9		%
	NJ	4.5		%	NJ	4.3		%

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, 2021 and 2020 are as follows:


	For the Quarters Ended					For the Nine Months Ended
		September 30, 2021		September 30, 2020			September 30, 2021		September 30, 2020
	(dollars in thousands)					(dollars in thousands)
Proceeds from sales:
Non-Agency RMBS		—		604			47,877		142,564
Agency RMBS		—		—			626		5,710,134
Agency CMBS		—		734,320			201,037		1,060,987

Gross realized gains:
Non-Agency RMBS		—		—			37,742		21,274
Agency RMBS		—		—			—		74,264
Agency CMBS		—		70,237			13,735		88,927
Gross realized losses:
Non-Agency RMBS		—		(2,214)			(4,955)		(8,392)
Agency RMBS		—		—			(1,209)		(5,816)
Agency CMBS		—		(2,982)			—		(2,982)
Net realized gain (loss)		$	—	$	65,041		$	45,313	$	167,275

During the first quarter of 2020, the Company transferred Non-Agency RMBS investments with a market value of $135 million to a third party. As part of the transfer, the Company purchased an option to re-acquire these assets for a fixed price at a future date. This transfer was accounted for as a secured borrowing within the Secured financing agreements on the Statement of Financial Condition. During the third quarter of 2020, the Company exercised its option and repurchased the transferred investments with an amortized cost of $196 million for $252 million, which eliminated the secured borrowing. This transaction resulted in a loss on extinguishment of debt of $56 million. There were no such transfers during the first nine months of 2021.