Fair Value (Tables)

3 Months Ended

Mar. 31, 2021

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 March 31, 2021 and December 31, 2020 (amounts in thousands):

	March 31, 2021
	Total		Level I		Level II		Level III
Financial Assets:
Loans under fair value option	$	763,773	$	—	$	—	$	763,773
RMBS		160,301		—		—		160,301
CMBS		19,256		—		—		19,256
Equity security		10,655		10,655		—		—
Domestic servicing rights		12,406		—		—		12,406
Derivative assets		38,029		—		38,029		—
VIE assets		62,367,110		—		—		62,367,110
Total	$	63,371,530	$	10,655	$	38,029	$	63,322,846
Financial Liabilities:
Derivative liabilities	$	34,805	$	—	$	34,805	$	—
VIE liabilities		60,896,709		—		58,669,281		2,227,428
Total	$	60,931,514	$	—	$	58,704,086	$	2,227,428

	December 31, 2020
	Total		Level I		Level II		Level III
Financial Assets:
Loans under fair value option	$	1,022,979	$	—	$	—	$	1,022,979
RMBS		167,349		—		—		167,349
CMBS		19,457		—		—		19,457
Equity security		11,247		11,247		—		—
Domestic servicing rights		13,202		—		—		13,202
Derivative assets		40,555		—		40,555		—
VIE assets		64,238,328		—		—		64,238,328
Total	$	65,513,117	$	11,247	$	40,555	$	65,461,315
Financial Liabilities:
Derivative liabilities	$	41,324	$	—	$	41,324	$	—
VIE liabilities		62,776,371		—		60,756,495		2,019,876
Total	$	62,817,695	$	—	$	60,797,819	$	2,019,876

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 months ended March 31, 2021 and 2020 (amounts in thousands):

							Domestic
	Loans at						Servicing				VIE
Three Months Ended March 31, 2021	Fair Value		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
January 1, 2021 balance	$	1,022,979	$	167,349	$	19,457	$	13,202	$	64,238,328	$	(2,019,876)	$	63,441,439
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		(9,478)		—		372		(796)		(2,264,591)		65,681		(2,208,812)
Net accretion		—		2,606		—		—		—		—		2,606
Included in OCI		—		(2,403)		—		—		—		—		(2,403)
Purchases / Originations		375,270		—		—		—		—		—		375,270
Sales		(571,927)		—		—		—		—		—		(571,927)
Issuances		—		—		—		—		—		(11,604)		(11,604)
Cash repayments / receipts		(53,071)		(7,251)		(573)		—		—		(1,137)		(62,032)
Transfers into Level III		—		—		—		—		—		(409,267)		(409,267)
Transfers out of Level III		—		—		—		—		—		148,775		148,775
Consolidation of VIEs		—		—		—		—		393,373		—		393,373
March 31, 2021 balance	$	763,773	$	160,301	$	19,256	$	12,406	$	62,367,110	$	(2,227,428)	$	61,095,418
Amount of unrealized gains (losses) attributable to assets still held at March 31, 2021:
Included in earnings	$	(7,708)	$	2,606	$	372	$	(796)	$	(2,264,591)	$	65,681	$	(2,204,436)
Included in OCI	$	—	$	(2,403)	$	—	$	—	$	—	$	—	$	(2,403)

							Domestic
	Loans at						Servicing				VIE
Three Months Ended March 31, 2020	Fair Value		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
January 1, 2020 balance	$	1,436,194	$	189,576	$	25,008	$	16,917	$	62,187,175	$	(2,537,392)	$	61,317,478
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		(16,134)		—		5,738		(393)		(3,506,792)		146,282		(3,371,299)
Net accretion		—		2,661		—		—		—		—		2,661
Included in OCI		—		(15,048)		—		—		—		—		(15,048)
Purchases / Originations		746,880		—		—		—		—		—		746,880
Sales		(751,746)		—		(7,940)		—		—		—		(759,686)
Issuances		—		—		—		—		—		(24,376)		(24,376)
Cash repayments / receipts		(67,397)		(6,549)		(371)		—		—		(8,916)		(83,233)
Transfers into Level III		—		—		—		—		—		(101,265)		(101,265)
Transfers out of Level III		—		—		—		—		—		1,090,325		1,090,325
Consolidation of VIEs		—		—		—		—		2,477,422		(71,095)		2,406,327
March 31, 2020 balance	$	1,347,797	$	170,640	$	22,435	$	16,524	$	61,157,805	$	(1,506,437)	$	61,208,764
Amount of unrealized (losses) gains attributable to assets still held at March 31, 2020:
Included in earnings	$	(39,070)	$	2,661	$	(647)	$	(393)	$	(3,506,792)	$	146,282	$	(3,397,959)
Included in OCI	$	—	$	(15,048)	$	—	$	—	$	—	$	—	$	(15,048)

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

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

	March 31, 2021				December 31, 2020
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets not carried at fair value:
Loans held-for-investment and loans held-for-sale	$	12,402,351	$	12,460,388	$	11,116,929	$	11,107,316
HTM debt securities		488,075		466,687		538,605		515,253
Financial liabilities not carried at fair value:
Secured financing agreements and CLO	$	11,827,110	$	11,900,381	$	11,076,744	$	11,108,364
Unsecured senior notes		1,735,658		1,803,224		1,732,520		1,786,667

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 (Weighted Average) as of (1)
	March 31, 2021		Technique	Input	March 31, 2021	December 31, 2020
Loans under fair value option	$	763,773	Discounted cash flow, market pricing	Coupon (d)	3.4% - 9.5% (5.5%)	3.3% - 9.7% (5.9%)
				Remaining contractual term (d)	7.0 - 39.0 years (24.7 years)	7.3 - 39.3 years (26.3 years)
				FICO score (a)	519 - 823 (732)	519 - 823 (727)
				LTV (b)	15% - 94% (66%)	5% - 94% (68%)
				Purchase price (d)	85.6% - 104.8% (101.7%)	84.4% - 104.8% (99.8%)
RMBS		160,301	Discounted cash flow	Constant prepayment rate (a)	3.5% - 17.3% (7.4%)	3.6% - 19.4% (7.6%)
				Constant default rate (b)	0.7% - 5.0% (2.2%)	0.7% - 5.4% (2.4%)
				Loss severity (b)	0% - 84% (17%) (f)	0% - 85% (20%) (f)
				Delinquency rate (c)	9% - 32% (18%)	10% - 32% (19%)
				Servicer advances (a)	23% - 84% (53%)	23% - 82% (54%)
				Annual coupon deterioration (b)	0.0% - 1.2% (0.1%)	0.0% - 0.9% (0.1%)
				Putback amount per projected total collateral loss (e)	0% -17% (0.8%)	0% -17% (0.8%)
CMBS		19,256	Discounted cash flow	Yield (b)	0% - 298.5% (5.9%)	0% - 536.6% (7.1%)
				Duration (c)	0 - 7.6 years (6.0 years)	0 - 7.6 years (5.3 years)
Domestic servicing rights		12,406	Discounted cash flow	Debt yield (a)	7.25% (7.25%)	7.50% (7.50%)
				Discount rate (b)	15% (15%)	15% (15%)
VIE assets		62,367,110	Discounted cash flow	Yield (b)	0% - 752.4% (16.9%)	0% - 312.2% (14.3%)
				Duration (c)	0 - 20.6 years (3.8 years)	0 - 16.3 years (3.8 years)
VIE liabilities		(2,227,428)	Discounted cash flow	Yield (b)	0% - 752.4% (17.3%)	0% - 312.2% (14.4%)
				Duration (c)	0 - 11.0 years (3.7 years)	0 - 10.8 years (3.8 years)

(1) Unobservable inputs were weighted by the relative carrying value of the instruments as of March 31, 2021 and December 31, 2020.

Information about Uncertainty of Fair Value Measurements

(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) This unobservable input is not subject to variability as of the respective reporting dates.

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

(f) 14% and 23% of the portfolio falls within a range of 45% - 80% as of March 31, 2021 and December 31, 2020, respectively.