Variable Interest Entities

Residential Whole-Loan Trusts

The consolidated financial statements also include the consolidation of certain trusts that each meet the definition of a VIE related to the acquisition of Residential Whole-Loans in which the Company has determined itself to be the primary beneficiary of each such trust. The Company determined that it was the primary beneficiary of the two residential Whole-Loan trusts, which were merged into one trust during the first quarter of 2016, because it was involved in certain aspects of the design of each trust, has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. The trust has issued a trust certificate to the Company which represents the entire beneficial interest in pools of Residential Whole-Loans held by the trust. As of December 31, 2017 and 2016, the Company financed the trust certificate with $189.3 million and $154.4 million, respectively, of repurchase borrowings, which is a liability held outside the trust. The Company classifies the underlying Residential Whole-Loans owned by the trust in "Residential Whole-Loans, at fair value" in the Consolidated Balance Sheets and has eliminated the intercompany trust certificate in consolidation.

Residential Bridge Loan Trust

In February 2017, Revolving Mortgage Investment Trust 2017-BRQ1 ("RMI Trust") issued a trust certificate to the Company, which represents the beneficial interest in pools of Residential Bridge Loans held by the trust. Residential Bridge Loans are mortgage loans secured by non owner occupied residences, typically short-term. The Company determined that RMI Trust was a VIE and itself the primary beneficiary because it was involved in certain aspects of the design of the trust, has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. As of December 31, 2017, the Company financed the trust certificate with $100.2 million of repurchase borrowings, which is a liability held outside the trust. The Company classifies both the underlying Residential Bridge Loans carried at amortized cost and the Residential Bridge Loans that it elected the fair value option in "Residential Bridge Loans" in the Consolidated Balance Sheets. The Company has eliminated the intercompany trust certificate in consolidation.

Commercial Loan Trust

In November 2015, the Company acquired a $14.0 million interest in the trust certificate issued by CMSC Trust 2015—Longhouse MZ ("CMSC Trust"), with a fair value of $13.9 million at December 31, 2017. The Company determined that CMSC Trust was a VIE and itself the primary beneficiary because it was involved in certain aspects of the design of the trust, has certain oversight rights on defaulted assets and has other significant decision making powers. In addition, the Company has the obligation to absorb losses to the extent of its ownership interest and the right to receive benefits from the trust that could potentially be significant to the trust. The CMSC Trust holds a $24.8 million mezzanine loan collateralized by interests in commercial real estate. The mezzanine loan serves as collateral for the $24.8 million of trust certificates issued. As of December 31, 2017, the Company classified the mezzanine loan at fair value in "Securitized commercial loan, at fair value" in the Consolidated Balance Sheets. The $24.8 million of trust certificates, of which $13.9 million was eliminated in consolidation and the remaining $10.9 million held by an affiliate is carried at fair value of $10.9 million and classified as "Securitized debt, at fair value" in the Consolidated Balance Sheets.

As of December 31, 2017 and December 31, 2016, the aggregate fair value of the securitized debt issued by the consolidated VIE was $10.9 million and $10.7 million which is classified as Securitized debt, at fair value in the Company’s Consolidated Balance Sheets. The cost of financing the securitized debt is approximately 8.9% for each of the years ended December 31, 2017 and December 31, 2016.

Consolidated Loan Trusts

The Company assesses modifications to VIEs on an ongoing basis to determine if a significant reconsideration event has occurred that would change the Company's initial consolidation assessment. The three consolidated trusts hold 616 Residential Whole-Loans, 340 Residential Bridge Loans and one commercial loan as of December 31, 2017.

The following table presents a summary of the assets and liabilities of the consolidated loan trusts included in the Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016 (dollars in thousands):



	December 31, 2017		December 31, 2016
Residential Whole-Loans, at fair value	$	237,423	$	192,136
Residential Bridge Loans⁽¹⁾	106,673		—
Securitized commercial loan, at fair value	24,876		24,225
Investment related receivable	7,665		1,241
Accrued interest receivable	3,358		1,622
Total assets	$	379,995	$	219,224
Securitized debt, at fair value	$	10,945	$	10,659
Accrued interest payable	70		85
Accounts payable and accrued expenses	189		2
Total liabilities	$	11,204	$	10,746

^{(1) Includes both Residential bridge loans for}^{$64.5 million}^{which are carried at fair value and}^{42.1 million}^{which are carried at amortized cost.}

The Company's risk with respect to its investment in each trust is limited to its direct ownership in the trust. The Residential Whole-Loans, Residential Bridge Loans and securitized commercial loan held by the consolidated trusts are held solely to satisfy the liabilities of the trust, and creditors of the trust have no recourse to the general credit of the Company for the trust certificates issued by the trusts. The assets of a consolidated trust can only be used to satisfy the obligations of that trust. The Company is not contractually required and has not provided any additional financial support to the trusts for the years ended December 31, 2017 and December 31, 2016. The Company did not deconsolidate any trusts during the years ended December 31, 2017 and December 31, 2016.

The following table presents the components of the carrying value of Residential Whole-Loans, Residential Bridge Loans and securitized commercial loan as of December 31, 2017 and December 31, 2016 (dollars in thousands):



	Residential Whole-Loans, at Fair Value						Residential Bridge Loans, at Fair Value⁽¹⁾					Residential Bridge Loans, at Amortized Cost⁽¹⁾					Securitized Commercial Loan, at Fair Value
	December 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016		December 31, 2017			December 31, 2016		December 31, 2017		December 31, 2016
Principal balance	$	232,270		$	187,765		$	63,802		$	—	$	42,066		$	—	$	24,846	$	25,000
Unamortized premium	2,021			1,311			293			—		122			—		—		—
Unamortized discount	(1,190		)	(539		)	(128		)	—		(41		)	—		—		—
Amortized cost	233,101			188,537			63,967			—		42,147			—		24,846		25,000
Gross unrealized gains	4,463			3,643			655			—		N/A			N/A		30		—
Gross unrealized losses	(141		)	(44		)	(96		)	—		N/A			N/A		—		(775		)
Fair value	$	237,423		$	192,136		$	64,526		$	—	N/A			N/A		$	24,876	$	24,225

^{(1) These loans are classified in Residential Bridge Loans in the consolidated balance sheets}

Residential Whole-Loans

The Residential Whole-Loans are comprised of non-qualifying, mostly adjustable rate mortgages with low loan to values (or "LTV's"). The following tables present certain information about the Company's Residential Whole-Loans investment portfolio at December 31, 2017 and December 31, 2016 (dollars in thousands):



December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Original FICO Score⁽¹⁾	Expected Life (years)	Contractual Maturity (years)	Coupon Rate
3.01 - 4.00%	142	$	55,593	55.5	%	751	1.7	29.1	3.9	%
4.01 - 5.00%	338	125,860		56.9	%	725	1.4	26.5	4.5	%
5.01 - 6.00%	132	48,553		58.2	%	728	1.6	27.0	5.2	%
6.01 - 7.00%	4	2,264		71.1	%	758	1.3	20.5	6.3	%
Total	616	$	232,270	57.0	%	734	1.5	27.1	4.5	%


(1)	The original FICO score is not available for 141 loans with a principal balance of approximately $56.5 million at December 31, 2017. The Company has excluded these loans from the weighted average computations.



December 31, 2016
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Original FICO Score⁽¹⁾	Expected Life (years)	Contractual Maturity (years)	Coupon Rate
3.01 - 4.00%	59	$	23,318	54.8	%	732	1.4	26.5	4.2	%
4.01 - 5.00%	180	69,930		57.1	%	728	1.5	27.3	4.6	%
5.01 - 6.00%	231	91,440		55.5	%	723	1.6	27.1	5.0	%
6.01 - 7.00%	5	3,077		71.2	%	738	1.3	21.1	6.3	%
Total	475	$	187,765	56.3	%	726	1.5	27.0	4.8	%

(1) The original FICO score is not available for 153 loans with a principal balance of approximately $66.7 million at December 31, 2016. The Company has excluded these loans from the weighted average computations.

The following table presents the various states across the United States in which the collateral securing the Company's Residential Whole-Loans at December 31, 2017 and December 31, 2016, based on principal balance, is located (dollars in thousands):



	December 31, 2017					December 31, 2016
	State Concentration		Principal Balance			State Concentration		Principal Balance
California	62.2	%	$	144,321	California	85.2	%	$	159,955
New York	24.4	%	56,631		Washington	5.6	%	10,591
Georgia	4.3	%	10,061		Massachusetts	5.4	%	10,161
Washington	4.0	%	9,244		New York	2.4	%	4,454
Massachusetts	3.9	%	9,114		Georgia	0.8	%	1,492
Other	1.2	%	2,899		Other	0.6	%	1,112
Total	100.0	%	$	232,270	Total	100.0	%	$	187,765

Residential Bridge Loans

The Residential Bridge Loans are comprised of short-term non-owner occupied fixed rate loans secured by single or multi-unit residential properties, with LTVs generally not to exceed 85%. The following table presents certain information about the Company’s Residential Bridge Loan investment portfolio at December 31, 2017 (dollars in thousands):



December 31, 2017
				Weighted Average
Current Coupon Rate	Number of Loans	Principal Balance		Original LTV		Contractual Maturity (months)	Coupon Rate
5.01 - 6.00%	9	$	4,016	64.5	%	10.8	5.9	%
6.01 - 7.00%	64	18,420		67.8	%	10.6	6.7	%
7.01 – 8.00%	98	25,608		66.4	%	9.5	7.6	%
8.01 – 9.00%	56	19,728		70.3	%	11.9	8.9	%
9.01 – 10.00%	67	25,001		73.3	%	6.8	9.7	%
10.01 – 11.00%	36	10,656		75.4	%	5.0	10.8	%
11.01 - 12.00%	2	919		89.8	%	8.2	11.4	%
17.01 – 18.00%	8	1,520		73.8	%	5.9	18.0	%
Total	340	$	105,868	70.1	%	9.0	8.6	%

The following table presents the various states across the United States in which the collateral securing the Company’s Residential Bridge Loans at December 31, 2017, based on principal balance, is located (dollars in thousands):



December 31, 2017
State	Concentration		Principal Balance
California	48.2	%	$	51,080
Florida	13.4	%	14,199
Washington	6.3	%	6,645
New York	4.4	%	4,703
Texas	4.4	%	4,660
Other	23.3	%	24,581
Total	100.0	%	$	105,868

Non-performing Loans

Residential Whole Loans

As of December 31, 2017, there was one Residential Whole-Loan over 90-days past due with a current unpaid principal balance of $579 thousand and a fair value of $570 thousand. This non-performing loan represents approximately 0.2% of the total outstanding principal balance. No allowance and provision for credit losses was recorded for this loan as of and for the year ended December 31, 2017, since the Company elected the fair value option. The Company stopped accruing interest income for this loan when it became contractually 90 days delinquent.

Residential Bridge Loans

As of December 31, 2017, there were 9 Residential Bridge Loans, which are carried at amortized cost, over 90-days past due with an unpaid principal balance of approximately $1.8 million. These nonperforming loans represent approximately 1.7% of the total outstanding principal balance, respectively. These loans are collateral dependent with a weighted average original LTV of 74%. No allowance and provision for credit losses was recorded for these loans as of and for the year ended December 31, 2017 since the fair value of the collateral balance less the cost to sell was in excess of the outstanding principal and interest balances.

Unconsolidated VIEs

The Company’s economic interests held in unconsolidated VIEs are limited in nature to those of a passive holder of RMBS and CMBS issued by securitization trusts; the Company was not involved in the design or creation of the securitization trusts which issued its investments in MBS. As of December 31, 2017 and December 31, 2016, the Company had three investments in VIEs in which it was not the primary beneficiary, and accordingly, the VIEs were not consolidated in the Company’s consolidated financial statements. As of December 31, 2017 and December 31, 2016, the Company’s maximum exposure to loss from these investments did not exceed the sum of the $62.1 million and $60.5 million carrying value of the investments, respectively, which are classified in "Mortgage-backed securities and other securities, at fair value" in the Company’s Consolidated Balance Sheets. Further, as of December 31, 2017 and December 31, 2016, the Company had not guaranteed any obligations of unconsolidated entities or entered into any commitment or intent to provide funding to any such entities.