Loan Securitization/Sale Activities

6 Months Ended

Jun. 30, 2019

Loan Securitization/Sale Activities

Loan Securitization/Sale Activities

11. Loan Securitization/Sale Activities

As described below, we regularly sell loans and notes under various strategies. We evaluate such sales as to whether they meet the criteria for treatment as a sale—legal isolation, ability of transferee to pledge or exchange the transferred assets without constraint and transfer of control.

Conduit Loan Securitizations

Within the Investing and Servicing Segment, we originate commercial mortgage loans with the intent to sell these mortgage loans to VIEs for the purposes of securitization. These VIEs then issue CMBS that are collateralized in part by these assets, as well as other assets transferred to the VIE by third parties. In certain instances, we retain an interest in the VIE and/or serve as special servicer for the VIE. In these circumstances, we generally consolidate the VIE into which the loans were sold. The following summarizes the fair value and par value of loans sold from our conduit platform, as well as the amount of sale proceeds used in part to repay the outstanding balance of the repurchase agreements associated with these loans for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):

					Repayment of
					repurchase
	Face Amount		Proceeds		agreements
For the Three Months Ended June 30,
2019	$	345,221	$	365,377	$	270,852
2018		208,141		215,133		157,538
For the Six Months Ended June 30,
2019	$	524,632	$	552,218	$	406,985
2018		464,959		481,765		351,382

Securitization Financing Arrangements and Sales

Within the Commercial and Residential Lending Segment, we originate or acquire residential and commercial mortgage loans, subsequently selling all or a portion thereof. Typically, our motivation for entering into these transactions is to effectively create leverage on the subordinated position that we will retain and hold for investment. These loans may be sold directly or through a securitization. In certain instances, we retain an interest in the VIE and continue to act as servicer, special servicer or servicing administrator for the loan following its sale. In these circumstances, similar to the case of our Investing and Servicing Segment described above, we generally consolidate the VIE into which the loans were sold. During the six months ended June 30, 2019, we consolidated the securitization VIE into which our residential loans were sold. In this instance, we retained an interest in the VIE. The following table summarizes our loans sold and loans transferred as secured borrowings by the Commercial and Residential Lending Segment, net of expenses (amounts in thousands):

									Loan Transfers
	Loan Transfers Accounted for as Sales								Accounted for as Secured
	Commercial				Residential				Borrowings
	Face Amount		Proceeds		Face Amount		Proceeds		Face Amount		Proceeds
For the Three Months Ended June 30,
2019	$	102,681	$	102,141	$	1,635	$	1,668	$	—	$	—
2018		50,000		49,477		—		—		—		—
For the Six Months Ended June 30,
2019	$	501,422	$	498,451	$	364,053	$	376,529	$	—	$	—
2018		196,400		194,720		—		—		—		—

During the six months ended June 30, 2019, we recognized a $0.3 million change in fair value of mortgage loans held-for-sale, net in our condensed consolidated statement of operations in connection with a residential mortgage loan securitization. There were no residential mortgage loan securitizations during the three months ended June 30, 2019. During the three and six months ended June 30, 2019, gains recognized by the Commercial and Residential Lending Segment on sales of commercial loans were $0.2 million and $3.0 million, respectively. During the three and six months ended June 30, 2018, gains (losses) recognized by the Commercial and Residential Lending Segment on sales of loans were not material.

Our securitizations have each been structured as bankruptcy-remote entities whose assets are not intended to be available to the creditors of any other party.

Infrastructure Loan Sales

During the three and six months ended June 30, 2019, the Infrastructure Lending Segment sold loans held-for-sale with an aggregate face amount of $176.5 million and $356.8 million, respectively, for proceeds of $173.6 million and $346.3 million, respectively, recognizing gain on sales of $2.3 million and $3.1 million, respectively. In connection with these sales, we sold an interest rate swap guarantee for cash payment of $3.1 million and recognized a decrease in fair value of $2.7 million within (loss) gain on derivative financial instruments in our condensed consolidated statement of operations during the three months ended June 30, 2019. Refer to Note 12 for further discussion of our interest rate swap guarantees.