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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2025

Schedule of Unpaid Principal, Fair Value and Impact of Changes in Fair Value on Financial Instruments

The table below shows the unpaid principal and fair value of the financial instruments carried at fair value with changes in fair value reflected in earnings under the fair value option election as of March 31, 2025 and December 31, 2024, respectively:


	March 31, 2025				December 31, 2024
	(dollars in thousands)
	Unpaid Principal/ Notional		Fair Value		Unpaid Principal/ Notional		Fair Value
Assets:
Non-Agency RMBS
Senior	$	13,424	$	12,546	$	14,163	$	13,036
Subordinated	478,222		274,565		483,136		274,435
Interest-only	2,589,059		81,147		2,644,741		73,335
Agency RMBS
Pass-through	149,420		149,497		—		—
CMO	451,023		449,448		464,640		461,658
Interest-only	379,113		15,852		380,311		16,784
Agency CMBS
Project loans	40,875		35,002		40,882		34,370
Interest-only	294,363		6,538		449,437		6,408
Loans held for investment, at fair value	11,292,225		10,983,840		11,659,420		11,196,678
Liabilities (1):
Secured Financing Agreements, at fair value	332,346		320,730		337,245		319,456
Securitized debt at fair value, collateralized by Loans held for investment	7,767,291		7,198,089		7,570,721		6,984,495

1) The Company recorded $1.1 million unrealized loss for contingent earn-out liability as of March 31, 2025, the contingent earn-out liability balance is included in Accounts payable and other liabilities on the Company’s Consolidated Statement of Financial Condition.

The table below shows the impact of change in fair value on each of the financial instruments carried at fair value with changes in fair value reflected in earnings under the fair value option election in the Consolidated Statement of Operations for the quarters ended March 31, 2025 and 2024:


	For the Quarters Ended
	March 31, 2025		March 31, 2024
	(dollars in thousands)
	Gain/(Loss) on Change in Fair Value
Assets:
Non-Agency RMBS
Senior	$	226	$	197
Subordinated	1,283		3,304
Interest-only	9,835		(8,654)
Agency RMBS
Pass-through	(731)		—
CMO	1,467		—
Interest-only	(604)		(409)
Agency CMBS
Project loans	639		3,075
Interest-only	369		(455)
Loans held for investment, at fair value	151,931		74,026
Liabilities: (1)
Secured Financing Agreements, at fair value	(6,174)		7,024
Securitized debt at fair value, collateralized by Loans held for investment	(28,247)		(1,343)

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 March 31, 2025 and December 31, 2024 are presented below.


	March 31, 2025
	(dollars in thousands)
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral, netting		Total
Assets:
Non-Agency RMBS, at fair value	$	—	$	—	$	1,059,840	$	—	$	1,059,840
Agency MBS, at fair value	—		656,335		—		—		656,335
Loans held for investment, at fair value	—		286,697		10,697,143		—		10,983,840
Derivatives, at fair value	—		8,518		—		(8,518)		—

Liabilities:
Secured Financing Agreement, at fair value	—		320,730		—		—		320,730
Securitized debt at fair value, collateralized by Loans held for investment	—		—		7,198,089		—		7,198,089
Derivatives, at fair value	—		240		—		—		240


	December 31, 2024
	(dollars in thousands)
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral, netting		Total
Assets:
Non-Agency RMBS, at fair value	$	—	$	—	$	1,064,169	$	—	$	1,064,169
Agency MBS, at fair value	—		519,218		—		—		519,218
Loans held for investment, at fair value	—		337,833		10,858,845		—		11,196,678
Derivatives, at fair value	117		7,146		—		(7,146)		117

Liabilities:
Secured Financing Agreement, at fair value	—		319,456		—		—		319,456
Securitized debt at fair value, collateralized by Loans held for investment	—		—		6,984,495		—		6,984,495
Derivatives, at fair value	—		—		—		—		—

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 March 31, 2025 and December 31, 2024.


Fair Value Level 3 Rollforward - Assets
	For the Quarter Ended		For the Year Ended
	March 31, 2025		December 31, 2024
	(dollars in thousands)
	Non-Agency RMBS		Loans held for investment		Non-Agency RMBS		Loans held for investment
Beginning balance Level 3	$	1,064,169	$	10,858,845	$	1,043,806	$	11,125,052
Transfers into Level 3	—		—		—		—
Transfers out of Level 3	—		—		—		—

Purchases of assets	454		(21,428)		97,646		759,900
Principal payments	(16,604)		(288,720)		(74,091)		(1,184,167)
Sales and Settlements	—		(1,782)		—		(3,441)
Net accretion (amortization)	5,543		(1,700)		34,267		(39,490)
Gains (losses) included in net income
(Increase) decrease in provision for credit losses	(3,387)		—		(9,869)		—
Realized gains (losses) on sales and settlements	—		—		—		—
Net unrealized gains (losses) included in income	11,344		151,927		(1,391)		200,991

Gains (losses) included in other comprehensive income	(1,679)		—		(26,199)		—
Ending balance Level 3	$	1,059,840	$	10,697,143	$	1,064,169	$	10,858,845


Fair Value Level 3 Rollforward - Liabilities
	For the Quarter Ended		For the Year Ended
	March 31, 2025		December 31, 2024
	(dollars in thousands)
	Securitized Debt		Securitized Debt
Beginning balance Level 3	$	6,984,495	$	7,601,881
Transfers into Level 3	—		—
Transfers out of Level 3	—		—

Issuance of debt	780,166		340,096
Principal payments	(284,776)		(1,170,579)
Sales and Settlements	(316,078)		—
Net (accretion) amortization	3,913		17,039
(Gains) losses included in net income

Realized (gains) losses on sales and settlements	2,122		—
Net unrealized (gains) losses included in income	28,246		196,058

Gains (losses) included in other comprehensive income	—		—
Ending balance Level 3	$	7,198,089	$	6,984,495

Summary of Unobservable Inputs Assumptions - Non-Agency RMBS Held for Investment

A summary of the significant inputs used to estimate the fair value of Level 3 Non-Agency RMBS held for investment at fair value as of March 31, 2025 and December 31, 2024 follows. The weighted average discount rates are based on fair value.


	March 31, 2025
	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	5%-12%	6.3%	6%-18%	6.6%	0%-16%	1.2%	25%-86%	30.5%
Subordinated	0%-15%	8.4%	6%-22%	8.4%	0%-3%	0.7%	25%-50%	32.1%
Interest-only	9%-100%	10.7%	6%-25%	6.8%	0%-13%	0.9%	0%-89%	28.1%


	December 31, 2024
	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	5% -10%	6.6%	6% -20%	6.6%	0% -13%	1.2%	25% -86%	30.0%
Subordinated	0% -15%	8.5%	6% -20%	8.1%	0% -3%	0.7%	25% -50%	33.1%
Interest-only	9% -100%	11.8%	6% -25%	7.0%	0% -7%	0.9%	0% -83%	29.4%

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 March 31, 2025 and December 31, 2024 follows:

March 31, 2025

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

5%-9%

6.0%

6%-15%

7.7%

0%-4%

0.5%

20%-50%

34.3%

December 31, 2024

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

5%-9%

6.0%

6%-15%

7.5%

0%-5%

0.6%

20%-55%

35.5%

A summary of the significant factors used to estimate the fair value of Loans held for investment collateralized primarily by seasoned reperforming residential mortgages at fair value as of March 31, 2025 and December 31, 2024 follows:



	March 31, 2025	December 31, 2024
Factor:
Coupon
Base Rate	5.8%	6.2%
Actual	5.9%	5.9%

FICO
Base Rate	640	640
Actual	668	665

Loan-to-value (LTV)
Base Rate	86%	86%
Actual	78%	78%

Loan Characteristics:
Occupancy
Owner Occupied	84%	86%
Investor	11%	9%
Secondary	5%	5%
Property Type
Single family	77%	78%
Manufactured housing	3%	3%
Multi-family/mixed use/other	20%	19%

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 March 31, 2025 and December 31, 2024.


	March 31, 2025
	(dollars in thousands)
	Level in Fair Value Hierarchy	Carrying Amount		Fair Value
Equity method investments (1)	3	$	63,509	$	63,509
Secured financing agreements	2	2,673,460		2,702,473
Securitized debt, collateralized by Non-Agency RMBS	3	69,990		49,020
Long term debt	2	134,928		140,234

(1) Included in other assets on the Consolidated Statements of Financial Condition


	December 31, 2024
	(dollars in thousands)
	Level in Fair Value Hierarchy	Carrying Amount		Fair Value
Equity method investments (1)	3	$	63,947	$	63,947
Secured financing agreements	2	2,504,915		2,534,652
Securitized debt, collateralized by Non-Agency RMBS	3	71,247		49,022
Long term debt	2	134,646		140,563

(1) Included in other assets on the Consolidated Statements of Financial Condition

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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