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Fair Value (Tables)

6 Months Ended

Jun. 30, 2019

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, 2019 and December 31, 2018 (amounts in thousands):


	June 30, 2019
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	1,372,398	$	—	$	—	$	1,372,398
RMBS		200,874		—		—		200,874
CMBS		44,702		—		10,419		34,283
Equity security		11,833		11,833		—		—
Domestic servicing rights		18,874		—		—		18,874
Derivative assets		53,676		—		53,676		—
VIE assets		57,667,606		—		—		57,667,606
Total	$	59,369,963	$	11,833	$	64,095	$	59,294,035
Financial Liabilities:
Derivative liabilities	$	8,891	$	—	$	8,891	$	—
VIE liabilities		56,446,619		—		54,072,617		2,374,002
Total	$	56,455,510	$	—	$	54,081,508	$	2,374,002


	December 31, 2018
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	671,282	$	—	$	—	$	671,282
RMBS		209,079		—		—		209,079
CMBS		41,347		—		16,119		25,228
Equity security		11,893		11,893		—		—
Domestic servicing rights		20,557		—		—		20,557
Derivative assets		52,691		—		52,691		—
VIE assets		53,446,364		—		—		53,446,364
Total	$	54,453,213	$	11,893	$	68,810	$	54,372,510
Financial Liabilities:
Derivative liabilities	$	15,415	$	—	$	15,415	$	—
VIE liabilities		52,195,042		—		50,753,596		1,441,446
Total	$	52,210,457	$	—	$	50,769,011	$	1,441,446

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

The changes in financial assets and liabilities classified as Level III are as follows for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):


							Domestic
	Loans						Servicing				VIE
Three Months Ended June 30, 2019	Held-for-sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
April 1, 2019 balance	$	841,687	$	204,835	$	38,335	$	19,790	$	56,974,864	$	(2,046,559)	$	56,032,952
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		21,891		—		1,016		(916)		126,589		3,492		152,072
Net accretion		—		2,535		—		—		—		—		2,535
Included in OCI		—		(79)		—		—		—		—		(79)
Purchases / Originations		911,938		—		—		—		—		—		911,938
Sales		(367,045)		—		(750)		—		—		—		(367,795)
Issuances		—		—		—		—		—		(25,045)		(25,045)
Cash repayments / receipts		(36,073)		(6,417)		(5,402)		—		—		(2,881)		(50,773)
Transfers into Level III		—		—		—		—		—		(594,399)		(594,399)
Transfers out of Level III		—		—		—		—		—		294,227		294,227
Consolidation of VIEs		—		—		—		—		824,070		(4,541)		819,529
Deconsolidation of VIEs		—		—		1,084		—		(257,917)		1,704		(255,129)
June 30, 2019 balance	$	1,372,398	$	200,874	$	34,283	$	18,874	$	57,667,606	$	(2,374,002)	$	56,920,033
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2019	$	5,547	$	2,535	$	410	$	(916)	$	126,589	$	3,492	$	137,657


							Domestic
	Loans						Servicing				VIE
Three Months Ended June 30, 2018	Held-for-sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
April 1, 2018 balance	$	723,733	$	240,853	$	23,969	$	24,945	$	49,233,307	$	(2,205,734)	$	48,041,073
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		14,833		141		(542)		(2,203)		(1,766,507)		297,960		(1,456,318)
Net accretion		—		2,622		—		—		—		—		2,622
Included in OCI		—		1,023		—		—		—		—		1,023
Purchases / Originations		633,433		—		1,463		—		—		—		634,896
Sales		(215,133)		(807)		—		—		—		—		(215,940)
Cash repayments / receipts		(64,097)		(8,036)		(240)		—		—		(45,177)		(117,550)
Transfers into Level III		—		—		—		—		—		(160,071)		(160,071)
Transfers out of Level III		(195,510)		—		—		—		—		109,592		(85,918)
Consolidation of VIEs		—		—		—		—		725,189		—		725,189
Deconsolidation of VIEs		—		—		—		—		(147,116)		1,315		(145,801)
June 30, 2018 balance	$	897,259	$	235,796	$	24,650	$	22,742	$	48,044,873	$	(2,002,115)	$	47,223,205
Amount of total gain (losses) included in earnings attributable to assets still held at June 30, 2018	$	2,071	$	2,623	$	(542)	$	(2,203)	$	(1,766,507)	$	297,960	$	(1,466,598)


							Domestic
	Loans						Servicing				VIE
Six Months Ended June 30, 2019	Held-for-sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
January 1, 2019 balance	$	671,282	$	209,079	$	25,228	$	20,557	$	53,446,364	$	(1,441,446)	$	52,931,064
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		33,157		—		721		(1,683)		420,934		37,449		490,578
Net accretion		—		5,038		—		—		—		—		5,038
Included in OCI		—		(466)		—		—		—		—		(466)
Purchases / Originations		1,652,234		—		—		—		—		—		1,652,234
Sales		(928,747)		—		(3,978)		—		—		—		(932,725)
Issuances		—		—		—		—		—		(58,723)		(58,723)
Cash repayments / receipts		(55,528)		(12,777)		(5,590)		—		—		(3,270)		(77,165)
Transfers into Level III		—		—		5,350		—		—		(1,265,141)		(1,259,791)
Transfers out of Level III		—		—		—		—		—		430,819		430,819
Consolidation of VIEs		—		—		—		—		4,104,135		(107,850)		3,996,285
Deconsolidation of VIEs		—		—		12,552		—		(303,827)		34,160		(257,115)
June 30, 2019 balance	$	1,372,398	$	200,874	$	34,283	$	18,874	$	57,667,606	$	(2,374,002)	$	56,920,033
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2019	$	5,145	$	5,038	$	(157)	$	(1,683)	$	420,934	$	37,449	$	466,726


							Domestic
	Loans						Servicing				VIE
Six Months Ended June 30, 2018	Held-for-sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
January 1, 2018 balance	$	745,743	$	247,021	$	24,191	$	30,759	$	51,045,874	$	(2,188,937)	$	49,904,651
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		22,633		141		13		(8,017)		(3,793,715)		535,050		(3,243,895)
Net accretion		—		5,441		—		—		—		—		5,441
Included in OCI		—		2,186		—		—		—		—		2,186
Purchases / Originations		910,692		—		1,463		—		—		—		912,155
Sales		(481,765)		(807)		—		—		—		—		(482,572)
Issuances		—		—		—		—		—		(7,948)		(7,948)
Cash repayments / receipts		(104,534)		(18,186)		(1,017)		—		—		(57,810)		(181,547)
Transfers into Level III		—		—		—		—		—		(690,959)		(690,959)
Transfers out of Level III		(195,510)		—		—		—		—		317,850		122,340
Consolidation of VIEs		—		—		—		—		1,815,070		—		1,815,070
Deconsolidation of VIEs		—		—		—		—		(1,022,356)		90,639		(931,717)
June 30, 2018 balance	$	897,259	$	235,796	$	24,650	$	22,742	$	48,044,873	$	(2,002,115)	$	47,223,205
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2018	$	1,482	$	5,388	$	13	$	(8,017)	$	(3,793,715)	$	535,050	$	(3,259,799)

Schedule of fair value of financial instruments not carried at fair value

The following table presents the fair values, all of which are classified in Level III of the fair value hierarchy, of our financial instruments not carried at fair value on the condensed consolidated balance sheets (amounts in thousands):


	June 30, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets not carried at fair value:
Loans held-for-investment, loans held-for-sale and loans transferred as secured borrowings	$	8,978,717	$	9,026,285	$	9,122,972	$	9,178,709
HTM debt securities		592,163		593,773		644,149		643,948
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	$	9,284,887	$	9,191,375	$	8,757,804	$	8,662,548
Unsecured senior notes		1,924,711		1,973,413		1,998,831		1,945,160

Schedule of quantitative information for Level 3 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 (dollars in thousands):


	Carrying Value at		Valuation	Unobservable	Range as of (1)
	June 30, 2019		Technique	Input	June 30, 2019	December 31, 2018
Loans held-for-sale, fair value option	$	1,372,398	Discounted cash flow	Yield (b)	3.8% - 6.1%	4.6% - 6.1%
				Duration (c)	2.3 - 11.4 years	2.5 - 14.4 years
RMBS		200,874	Discounted cash flow	Constant prepayment rate (a)	3.3% - 18.8%	3.2% - 25.2%
				Constant default rate (b)	0.8% - 4.8%	1.1% - 5.5%
				Loss severity (b)	0% - 89% (e)	0% - 73% (e)
				Delinquency rate (c)	4% - 32%	4% - 31%
				Servicer advances (a)	22% - 85%	21% - 83%
				Annual coupon deterioration (b)	0% - 1.7%	0% - 1.4%
				Putback amount per projected total collateral loss (d)	0% - 7%	0% - 7%
CMBS		34,283	Discounted cash flow	Yield (b)	0% - 254.2%	0% - 473.5%
				Duration (c)	0 - 9.7 years	0 - 9.7 years
Domestic servicing rights		18,874	Discounted cash flow	Debt yield (a)	7.75%	7.75%
				Discount rate (b)	15%	15%
				Control migration (b)	0% - 80%	0% - 80%
VIE assets		57,667,606	Discounted cash flow	Yield (b)	0% - 825.9%	0% - 290.9%
				Duration (c)	0 - 13.2 years	0 - 20.4 years
VIE liabilities		(2,374,002)	Discounted cash flow	Yield (b)	0% - 825.9%	0% - 290.9%
				Duration (c)	0 - 13.4 years	0 - 13.7 years

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

Sensitivity of the Fair Value to Changes in the Unobservable Inputs

(a)	Significant increase (decrease) in the unobservable input in isolation would result in a significantly higher (lower) fair value measurement.

(b)	Significant increase (decrease) in the unobservable input in isolation would result in a significantly lower (higher) fair value measurement.

(c)	Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (higher or lower) fair value measurement depending on the structural features of the security in question.

(d)	Any delay in the putback recovery date leads to a decrease in fair value for the majority of securities in our RMBS portfolio.

(e)	36% and 55% of the portfolio falls within a range of 45%-80% as of June 30, 2019 and December 31, 2018, respectively.