Fair Value (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value

Schedule of financial assets and liabilities carried at fair value on a recurring basis

The following tables present our financial assets and liabilities carried at fair value on a recurring basis in the condensed consolidated balance sheets by their level in the fair value hierarchy as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	June 30, 2014
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	154,412	$	—	$	—	$	154,412
RMBS	231,605		—		—		231,605
CMBS	284,619		—		2,258		282,361
Equity security	16,104		16,104		—		—
Domestic servicing rights	138,318		—		—		138,318
Derivative assets	4,681		—		4,681		—
VIE assets	114,091,158		—		—		114,091,158
Total	$	114,920,897	$	16,104	$	6,939	$	114,897,854
Financial Liabilities:
Derivative liabilities	$	26,294	$	—	$	26,294	$	—
VIE liabilities	113,541,151		—		108,355,026		5,186,125
Total	$	113,567,445	$	—	$	108,381,320	$	5,186,125

	December 31, 2013
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	206,672	$	—	$	—	$	206,672
RMBS	296,236		—		—		296,236
CMBS	255,306		—		47,300		208,006
Equity security	15,247		15,247		—		—
Domestic servicing rights	150,149		—		—		150,149
Derivative assets	7,769		—		7,769		—
VIE assets	103,151,624		—		—		103,151,624
Total	$	104,083,003	$	15,247	$	55,069	$	104,012,687
Financial Liabilities:
Derivative liabilities	$	24,192	$	—	$	24,192	$	—
VIE liabilities	102,649,263		—		101,051,279		1,597,984
Total	$	102,673,455	$	—	$	101,075,471	$	1,597,984

Schedule of changes in financial assets and liabilities classified as Level III

The changes in financial assets and liabilities classified as Level III were as follows for the three and six months ended June 30, 2014 and 2013 (amounts in thousands):

Three Months ended June 30, 2014	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights			VIE Assets			VIE Liabilities			Total
April 1, 2014 balance	$	74,117		$	291,217		$	240,665		$	144,898		$	118,451,518		$	(3,482,922	)	$	115,719,493
Total realized and unrealized (losses) gains:
Included in earnings:
Change in fair value / gain on sale	11,546			10,130			4,393			(5,523		)	(3,332,084		)	(1,664		)	(3,313,202		)
Net accretion	—			3,323			—			—			—			—			3,323
Included in OCI	—			(9,363		)	2,740			—			—			—			(6,623		)
Purchases / Originations	320,566			—			42,740			—			—			—			363,306
Sales	(251,612		)	(53,236		)	(13,457		)	—			—			—			(318,305		)
Issuances	—			—			—			—			—			(25,995		)	(25,995		)
Cash repayments / receipts	(205		)	(10,466		)	(421		)	—			—			50,984			39,892
Transfers into Level III	—			—			5,480			—			—			(1,983,525		)	(1,978,045		)
Transfers out of Level III	—			—			—			(1,057		)	—			293,115			292,058
Consolidations of VIEs	—			—			—			—			3,720,885			(68,772		)	3,652,113
Deconsolidations of VIEs	—			—			221			—			(4,749,161		)	32,654			(4,716,286		)
June 30, 2014 balance	$	154,412		$	231,605		$	282,361		$	138,318		$	114,091,158		$	(5,186,125	)	$	109,711,729
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2014	$	688		$	2,804		$	4,513		$	(5,523	)	$	(3,332,084	)	$	(1,664	)	$	(3,331,266	)

Three Months ended June 30, 2013	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights		VIE Assets			VIE Liabilities			Total
April 1, 2013 balance	$	—		$	321,043		$	—		$	—	$	—		$	—		$	321,043
Acquisition of LNR	256,502			—			62,432			156,993		90,989,793			(1,994,243		)	89,471,477
Total realized and unrealized (losses) gains:	—			—			18			—		—			—			18
Included in earnings:	—			—			—			—		—			—			—
Change in fair value	458						(1,187		)	2,898		(3,794,641		)	94,448			(3,698,024		)
Impairment	—			(359		)	—			—		—			—			(359		)
Net accretion	—			5,755			—			—		—			—			5,755
Included in OCI	—			(11,103		)	1,908			—		—			—			(9,195		)
Purchases / Originations	390,669			20,090			39			—		—			—			410,798
Sales	(476,336		)	—			(10,072		)	—		—			—			(486,408		)
Issuances	—			—			—			—		—			—			—
Cash repayments / receipts	(117		)	(15,771		)	—			—		—			79,735			63,847
Transfers into Level III	—			—			115,814			—		—			(489,513		)	(373,699		)
Transfers out of Level III	—			—			(3,499		)	—		—			152,683			149,184
Consolidations of VIEs	—			—			—			—		10,674,125			(178,631		)	10,495,494
Deconsolidations of VIEs	—			—			(1,054		)	—		(584,804		)	861			(584,997		)
June 30, 2013 balance	$	171,176		$	319,655		$	164,399		$	159,891	$	97,284,473		$	(2,334,660	)	$	95,764,934
Amount of total (losses) gains included in earnings attributable to assets still held at June 30, 2013	(8,344		)	6,627			(3,430		)	2,898		(3,794,641		)	94,448			(3,702,442		)

Six Months ended June 30, 2014	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights			VIE Assets			VIE Liabilities			Total
January 1, 2014 balance	$	206,672		$	296,236		$	208,006		$	150,149		$	103,151,624		$	(1,597,984	)	$	102,414,703
Total realized and unrealized (losses) gains:
Included in earnings:
Change in fair value / gain on sale	32,439			11,141			9,600			(10,774		)	(7,013,623		)	99,837			(6,871,380		)
OTTI	—			(213		)	—			—			—			—			(213		)
Net accretion	—			9,887			—			—			—			—			9,887
Included in OCI	—			(4,615		)	2,207			—			—			—			(2,408		)
Purchases / Originations	582,391			—			46,571			—			—			—			628,962
Sales	(554,073		)	(62,546		)	(29,301		)	—			—			—			(645,920		)
Issuances	—			—			—			—			—			(71,756		)	(71,756		)
Cash repayments / receipts	(297		)	(18,285		)	(829		)	—			—			86,349			66,938
Transfers into Level III	—			—			52,780			—			—			(2,555,137		)	(2,502,357		)
Transfers out of Level III	(112,720		)	—			(179		)	(1,057		)	—			712,856			598,900
Consolidations of VIEs	—			—			(6,715		)	—			23,991,532			(1,892,944		)	22,091,873
Deconsolidations of VIEs	—			—			221			—			(6,038,375		)	32,654			(6,005,500		)
June 30, 2014 balance	$	154,412		$	231,605		$	282,361		$	138,318		$	114,091,158		$	(5,186,125	)	$	109,711,729
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2014	$	688		$	7,971		$	9,018		$	(10,774	)	$	(7,013,623	)	$	99,837		$	(6,906,883	)

Six Months ended June 30, 2013	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights		VIE Assets			VIE Liabilities			Total
January 1, 2013 balance	$	—		$	333,153		$	—		$	—	$	—		$	—		$	333,153
Acquisition of LNR	256,502			—			62,432			156,993		90,989,793			(1,994,243		)	89,471,477
Total realized and unrealized (losses) gains:	—			2,129			18			—		—			—			2,147
Included in earnings:	—			—			—			—		—			—			—
Change in fair value	458			—			(1,187		)	2,898		(3,794,641		)	94,448			(3,698,024		)
Impairment	—			(402		)	—			—		—			—			(402		)
Net accretion	—			11,906			—			—		—			—			11,906
Included in OCI	—			(1,871		)	1,908			—		—			—			37
Purchases / Originations	390,669			20,090			39			—		—			—			410,798
Sales	(476,336		)	(12,712		)	(10,072		)	—		—			—			(499,120		)
Issuances	—			—			—			—		—			—			—
Cash repayments / receipts	(117		)	(32,638		)	—			—		—			79,735			46,980
Transfers into Level III	—			—			115,814			—		—			(489,513		)	(373,699		)
Transfers out of Level III	—			—			(3,499		)	—		—			152,683			149,184
Consolidations of VIEs	—			—			—			—		10,674,125			(178,631		)	10,495,494
Deconsolidations of VIEs	—			—			(1,054		)	—		(584,804		)	861			(584,997		)
June 30, 2013 balance	$	171,176		$	319,655		$	164,399		$	159,891	$	97,284,473		$	(2,334,660	)	$	95,764,934
Amount of total (losses) gains included in earnings attributable to assets still held at June 30, 2013	(8,344		)	14,306			(3,430		)	2,898		(3,794,641		)	94,448			(3,694,763		)

Schedule of fair value of financial instruments not carried at fair value (level III)

The following table presents the fair values of our financial instruments not carried at fair value on the consolidated balance sheets (amounts in thousands):

	June 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets not carried at fair value:
Loans held-for-investment and loans transferred as secured borrowings	$	5,028,721	$	5,163,988	$	4,544,132	$	4,609,040
Securities, held-to-maturity	370,096		371,603		368,318		368,453
European servicing rights	18,528		18,528		27,024		29,327
Non-performing residential loans	—		—		215,371		215,371
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	$	2,704,082	$	2,705,452	$	2,438,798	$	2,436,708
Convertible senior notes	1,003,847		1,190,700		997,851		1,160,000

Schedule of quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis

The following is quantitative information about significant unobservable inputs in our Level III measurements for those assets and liabilities measured at fair value on a recurring basis (dollar amounts in thousands):

	Carrying Value at		Valuation		Range as of (1)
	June 30, 2014		Technique	Unobservable Input	June 30, 2014	December 31, 2013
Loans held-for-sale, fair value option	$	154,412	Discounted cash flow	Yield (b)	4.5% - 5.2%	5.2% - 5.9%
				Duration(c)	5.0 - 10.0 years	5.0 - 10.0 years
RMBS	231,605		Discounted cash flow	Constant prepayment rate(a)	0.3% - 16.8%	(0.6)% - 16.6%
				Constant default rate(b)	1.5% - 9.5%	1.4% - 11.3%
				Loss severity(b)	12% - 81%(e)	15% - 92%(e)
				Delinquency rate(c)	3% - 32%	3% - 48%
				Servicer advances(a)	23% - 96%	24% - 95%
				Annual coupon deterioration(b)	0% - 0.8%	0% - 0.7%
				Putback amount per projected total collateral loss(d)	0% - 11%	0% - 9%
CMBS	282,361		Discounted cash flow	Yield(b)	0% - 527.9%	0% - 890.0%
				Duration(c)	0 – 11.5 years	0 - 11.0 years
Domestic servicing rights	138,318		Discounted cash flow	Debt yield(a)	8.75%	8.75%
				Discount rate(b)	15%	15%
				Control migration(b)	0% - 80%	0% - 80%
VIE assets	114,091,158		Discounted cash flow	Yield(b)	0% - 912.2%	0% - 952.3%
				Duration(c)	0 – 21.9 years	0 - 22.7 years
VIE liabilities	5,186,125		Discounted cash flow	Yield(b)	0% - 912.2%	0% - 952.3%
				Duration(c)	0 – 21.9 years	0 - 22.7 years

(1) The ranges of significant unobservable inputs are represented in percentages and years.