Consolidated Securitization Vehicles and Other Variable Interest Entities

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated Securitization Vehicles and Other Variable Interest Entities

Since its inception, the Company has utilized VIEs for the purpose of securitizing whole mortgage loans or re-securitizing RMBS and obtaining long-term, non-recourse financing. The Company evaluated its interest in each VIE to determine if it is the primary beneficiary.

During the quarter and six months ended June 30, 2023, the Company consolidated approximately $1.4 billion and $2.6 billion, respectively, unpaid principal balance of seasoned residential reperforming residential mortgage loans. During the quarter and six months ended June 30, 2022, the Company consolidated approximately $728 million and $2.2 billion, respectively, unpaid principal balance of seasoned residential reperforming residential mortgage loans.

VIEs for Which the Company is the Primary Beneficiary

The retained beneficial interests in VIEs for which the Company is the primary beneficiary are typically the subordinated tranches of these securitizations and in some cases the Company may hold interests in additional tranches. The table below reflects the assets and liabilities recorded in the Consolidated Statements of Financial Condition related to the consolidated VIEs as of June 30, 2023 and December 31, 2022.


	June 30, 2023		December 31, 2022
	(dollars in thousands)
Assets:
Non-Agency RMBS, at fair value (1)	$	262,440	$	276,030
Loans held for investment, at fair value	10,780,926		9,855,390
Accrued interest receivable	56,713		47,553
Other assets	16,408		20,293
Total Assets:	$	11,116,487	$	10,199,266

Liabilities:
Securitized debt, collateralized by Non-Agency RMBS	$	77,195	$	78,542
Securitized debt at fair value, collateralized by Loans held for investment	7,652,488		6,673,917
Accrued interest payable	24,263		17,427
Other liabilities	2,210		2,239
Total Liabilities:	$	7,756,156	$	6,772,125

(1) June 30, 2023 and December 31, 2022 balances includes allowance for credit losses of $4 million and $2 million, respectively.

Income and expense amounts related to consolidated VIEs recorded in the Consolidated Statements of Operations is presented in the tables below.


	For the Quarter ended
	June 30, 2023		June 30, 2022
	(dollars in thousands)
Interest income, Assets of consolidated VIEs	$	149,674	$	140,209
Interest expense, Non-recourse liabilities of VIEs	72,624		50,193
Net interest income	$	77,051	$	90,016

(Increase) decrease in provision for credit losses	$	(531)	$	(3,120)


Servicing fees	$	7,336	$	6,692


	For the Six Months Ended
	June 30, 2023		June 30, 2022
	(dollars in thousands)
Interest income, Assets of consolidated VIEs	$	289,576	$	271,275
Interest expense, Non-recourse liabilities of VIEs	132,776		92,684
Net interest income	$	156,800	$	178,591

(Increase) decrease in provision for credit losses	$	(1,959)	$	(3,143)


Servicing fees	$	14,204	$	13,555

VIEs for Which the Company is Not the Primary Beneficiary

The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not the primary beneficiary. In such cases, the Company does not have both the power to direct the entities’ most significant activities, such as rights to replace the servicer without cause, and the obligation to absorb losses or right to receive benefits that could potentially be significant to the VIEs. The Company’s investments in these unconsolidated VIEs are carried in Non-Agency RMBS on the Consolidated Statements of Financial Condition and include senior and subordinated bonds issued by the VIEs.

The fair value of the Company’s investments in each unconsolidated VIEs at June 30, 2023, ranged from less than $1 million to $21 million, with an aggregate amount of $830 million. The fair value of the Company’s investments in each unconsolidated VIEs at December 31, 2022, ranged from less than $1 million to $23 million, with an aggregate amount of $871 million. The Company’s maximum exposure to loss from these unconsolidated VIEs was $787 million and $813 million at June 30, 2023 and December 31, 2022, respectively. The maximum exposure to loss was determined as the amortized cost of the unconsolidated VIE, which represents the purchase price of the investment adjusted by any unamortized premiums or discounts as of the reporting date.