
	March 31, 2020
	Fair Value
	Level I		Level II		Level III		Total
Assets
Agency CMBS	$	—	$	413,394	$	—	$	413,394

Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		2,792		—		2,792

Agency RMBS Interest-Only Strips	—		—		9,952		9,952
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		—		4,490		4,490
Subtotal Agency MBS	—		416,186		14,442		430,628
Non-Agency CMBS	—		243,444		6,865		250,309
Non-Agency RMBS	—		—		21,123		21,123
Non-Agency RMBS Interest-Only Strips	—		—		5,174		5,174

Subtotal Non-Agency MBS	—		243,444		33,162		276,606

Other securities	—		40,040		7,371		47,411
Total mortgage-backed securities and other securities	—		699,670		54,975		754,645

Residential Whole Loans	—		—		1,309,795		1,309,795
Residential Bridge Loans	—		—		26,050		26,050
Securitized commercial loans	—		—		477,131		477,131
Commercial Loans	—		—		320,308		320,308
Derivative assets	—		33,675		—		33,675
Total Assets	$	—	$	733,345	$	2,188,259	$	2,921,604

Liabilities
Derivative liabilities	$	—	$	43,967	$	—	$	43,967
Securitized debt	—		396,663		161		396,824

Total Liabilities	$	—	$	440,630	$	161	$	440,791


	December 31, 2019
	Fair Value
	Level I		Level II		Level III		Total
Assets

Agency CMBS	$	—	$	1,435,477	$	—	$	1,435,477

Agency CMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		3,092		—		3,092
Agency RMBS	—		340,771		—		340,771
Agency RMBS Interest-Only Strips	—		—		10,343		10,343
Agency RMBS Interest-Only Strips accounted for as derivatives, included in MBS	—		—		5,572		5,572
Subtotal Agency MBS	—		1,779,340		15,915		1,795,255

Non-Agency CMBS	—		316,019		—		316,019
Non-Agency RMBS	—		—		38,131		38,131
Non-Agency RMBS Interest-Only Strips	—		—		7,683		7,683

Subtotal Non-Agency MBS	—		316,019		45,814		361,833

Other securities	—		62,965		17,196		80,161
Total mortgage-backed securities and other securities	—		2,158,324		78,925		2,237,249

Residential Whole Loans	—		—		1,375,860		1,375,860
Residential Bridge Loans	—		—		33,269		33,269
Securitized commercial loan	—		—		370,213		370,213
Commercial Loans	—		—		909,040		909,040
Derivative assets	—		5,111		—		5,111
Total Assets	$	—	$	2,163,435	$	2,767,307	$	4,930,742

Liabilities
Derivative liabilities	$	—	$	6,370	$	—	$	6,370
Securitized debt	—		680,586		1,057		681,643
Total Liabilities	$	—	$	686,956	$	1,057	$	688,013

When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will use independent pricing services and if the independent pricing service cannot price a particular asset or liability, the Company will obtain third party broker quotes. The Manager’s pricing group, which functions independently from its portfolio management personnel, reviews the third party broker quotes by comparing the broker quotes for reasonableness to alternate sources when available. If independent pricing services or third party broker quotes, are not available, the Company determines the fair value of the securities using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and when applicable, estimates of prepayments and credit losses.

In instances when the Company is required to consolidate a VIE that is determined to be a qualifying collateralized financing entity ("CFE"), under GAAP and the Company has elected the fair value option for the securitized debt, the Company will measure both the financial assets and financial liabilities of the VIE using the fair value of either the VIE’s financial assets or financial liabilities, whichever is more observable.

In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. Agency CMBS, given the amount of available observable market data, generally are classified in Level II. For newly issued Agency CMBS securities that have not settled at period end and do not have a CUSIP yet, the Company utilizes a broker quote due to lack of observable market data. Accordingly these securities are classified in Level III. For Agency IOs, Non-Agency RMBS, CMBS and other securities, to determine whether a security should be a Level II, the securities are grouped by security type and the Manager reviews the internal trade history, for the quarter, for each security type. If there is sufficient trade data above a predetermined threshold of a security type, the Manager determines it has sufficient observable market data and the security will be categorized as a Level II; otherwise, the security is classified as a Level III.

Values for the Company’s securities are based upon prices obtained from independent third party pricing services. The valuation methodology of the third party pricing services incorporates market information and commonly used market pricing methods, which include actual trades and quoted prices for similar or identical instruments, and are designed to produce a pricing process that is responsive to market conditions. Depending on the type of asset and the underlying collateral, the primary inputs to the model include yields for TBAs, Agency RMBS, the U.S. Treasury market and floating rate indices such as LIBOR, the Constant Maturity Treasury rate and the prime rate as a benchmark yield. In addition, the model may incorporate the current weighted average maturity and additional pool level information such as prepayment speeds, default frequencies and default severities, if applicable. When the third party pricing service cannot adequately price a particular security, the Company utilizes a broker’s quote which is reviewed for reasonableness by the Manager’s pricing group.

Values for the Company's Non-QM Residential Whole Loans and Bridge Loans are based upon prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a discounted cash flow valuation model that is calibrated to recent loan trade execution. Their valuation methodology incorporates commonly used market pricing methods, which include the inputs considered most significant to the determination of fair value of the Company's Residential Whole Loans and Residential Bridge Loans. The key loan inputs include loan balance, interest rate, loan to value, delinquencies and fair value of the collateral for collateral dependent loans. The assumption made by the independent third party pricing service includes the market discount rate, yield, default assumption and loss severity. Other inputs and assumptions relevant to the pricing of Residential Whole Loans include FICO scores and prepayment speeds.

As of December 31, 2019, the values for the Conforming Residential Whole Loan Portfolio were based on a third party pricing service valuation model that assigns a loan value using TBA prices, adjusted for delivery to Fannie Mae using Fannie Mae's loan-level price adjustment matrix. As of March 31, 2020, the values for the confirming loans were based on a prices from pool of conforming residential whole loans that traded in April 2020. In addition to pricing the underlying mortgages, the third party pricing service uses a service release premium valuation representing the sale of the right to service the mortgages. Together, the TBA price and service release premium price form the "All-In" price for these mortgages.

The Company reviews the analysis provided by pricing service as well as the key assumptions made available to the company. Due to the inherent uncertainty of such valuation, the fair values established for residential loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's loans are classified as Level III.

Values for the Company's Commercial Loans are based upon prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a valuation model that is calibrated to recent loan trade execution. Their valuation methodology incorporates commonly used market pricing methods, which include the inputs considered most significant to the determination of fair value of the Company's Commercial Loans. The assumptions made by the independent third party pricing vendor include a market discount rate, default assumption and loss severity. The Company reviews the analysis provided by pricing service as well as the key assumptions. Due to the inherent uncertainty of such valuation, the fair

Values for the Company’s securitized commercial loans are based on the CFE valuation methodology. Since there is an extremely limited market for the securitized commercial loans, the Company determined the securitized debt is more actively traded and therefore was more observable. Due to the inherent uncertainty of the securitized commercial loan's valuation, the Company classifies its securitized commercial loans as Level III.

Values for the Company's securitized debt are based upon prices obtained from independent third party pricing services. The valuation methodology of the third party pricing services incorporates market information and commonly used market pricing methods, which include actual trades and quoted prices for similar or identical instruments. In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. Since the securitized debt represents traded debt securities, the Manager's pricing team reviews the trade activity during the quarter for each security to determine the appropriate level within the fair value hierarchy. If there is sufficient trade data above a predetermined volume threshold, the Manager determines it has sufficient observable market data and the debt security will be categorized as a Level II. If there is not sufficient observable market data the debt security will be categorized as a Level III.

Values for the Company's derivatives are based upon prices from third party pricing services, whose pricing is subject to review by the Manager’s pricing committee. In valuing its over-the-counter interest rate derivatives, such as swaps and swaptions, its currency derivatives, such as swaps and forwards and credit derivatives such as total return swaps, the Company considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each derivative agreement, from the perspective of both the Company and its counterparties. No credit valuation adjustment was made in determining the fair value of interest rate derivatives and/or futures contracts for the periods ended March 31, 2020 and December 31, 2019.

The Company performs quarterly reviews of the independent third party pricing data. These reviews may include a review of the valuation methodology used by third party valuation specialists and review of the daily change in the prices provided by the independent pricing vendor which exceed established tolerances or comparisons to executed transaction prices, utilizing the Manager’s pricing group. The Manager’s pricing group, which functions independently from its portfolio management personnel, reviews the price differences or changes in price by comparing the vendor price to alternate sources including other independent pricing services or broker quotations. If the price change or difference cannot be corroborated, the Manager’s pricing group consults with the portfolio management team for market color in reviewing such pricing data as warranted. To the extent that the Manager has information, typically in the form of broker quotations that would indicate that a price received from the independent pricing service is outside of a tolerance range, the Manager generally challenges the independent pricing service price.

The following tables present a summary of the available quantitative information about the significant unobservable inputs used in the fair value measurement of financial instruments for which the Company has utilized Level III inputs to determine fair value as of March 31, 2020 and December 31, 2019 (dollars in thousands):


	Fair Value at			Range
	March 31, 2020	Valuation Technique	Unobservable Input	Minimum		Maximum			Weighted Average






Residential Whole-Loans⁽²⁾	1,161,199	Discounted Cash Flow	Yield	4.7	%	8.9	%		6.6	%
			Weighted Average Life	1.2		6.6			2.5
Residential Bridge Loans	26,050	Discounted Cash Flow	Yield	8.5	%	26.3	%	⁽¹⁾	11.6	%
			Weighted Average Life	0.2		1.8			0.8



Commercial Loans	320,308	Discounted Cash Flow	Yield	6.5	%	14.9	%		9.4	%
			Weighted Average Life	1.2		2.7			1.4


	Fair Value at			Range
	December 31, 2019	Valuation Technique	Unobservable Input	Minimum		Maximum			Weighted Average






Residential Whole-Loans⁽²⁾	1,200,566	Discounted Cash Flow	Yield	3.4	%	7.0	%		3.7	%
			Weighted Average Life	1.4		7.8			3.0
Residential Bridge Loans	33,269	Discounted Cash Flow	Yield	7.5	%	27.0	%	⁽¹⁾	9.8	%
			Weighted Average Life	0.3		1.8			0.8

Commercial Loans	370,213	Discounted Cash Flow	Yield	4.7	%	10.9	%		7.5	%
			Weighted Average Life	0.4		2.9			1.6

(2) As of March 31, 2020, excludes $148.6 million of conforming residential whole loans, which were valued based on prices from a pool of conformning residential loans that traded in April 2020. As of December 31, 2019, excludes $175.3 million of Conforming Residential Whole Loans, which were valued using TBA prices, adjusted for delivery to Fannie Mae using Fannie Mae's loan-level price adjustment matrix. As of December 31, 2019, the TBA prices used for valuing the conforming loans range from $101.39 to $107.63.


	Three months ended March 31, 2019
$ in thousands	Agency MBS		Non-Agency MBS		Other Securities		Residential Whole Loans		Residential Bridge Loans		Commercial Loans		Securitized commercial loan		Securitized debt
Beginning balance	$	19,837	$	50,555	$	8,951	$	1,041,885	$	211,999	$	216,123	$	1,013,511	$	2,286
Transfers into Level III from Level II	—		—		8,386		—		—		—		—		—
Transfers from Level III into Level II	—		—		—		—		—		—		—		—
Purchases	—		—		—		248,105		—		121,189		903,770		—
Sales and settlements	—		—		—		—		—		—		—		3,769
Principal repayments	—		(252)		—		(28,532)		(66,612)		(165)		(988,714)		—
Total net gains / losses included in net income					0
Realized gains/(losses), net on assets	—		—		—		—		(87)		—		—		—

Other than temporary impairment	(25)		(241)		—		—		—		—		—		—
Unrealized gains/(losses), net on assets⁽¹⁾	387		(1,193)		121		5,886		(780)		223		1,349		—
Unrealized (gains)/losses, net on liabilities⁽²⁾	—		—		—		—		—		—		—		(1,970)
Premium and discount amortization, net	(1,091)		(477)		(78)		(181)		(350)		208		(442)		(316)
Ending balance	$	19,108	$	48,392	$	17,380	$	1,267,163	$	144,170	$	337,578	$	929,474	$	3,769

Unrealized gains/(losses), net on assets held at the end of the period⁽¹⁾	$	387	$	(1,193)	$	121	$	6,108	$	(780)	$	223	$	1,377	$	—
Unrealized gains/(losses), net on liabilities held at the end of the period⁽²⁾	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(28)

Transfers between hierarchy levels for the three months ended March 31, 2020 and March 31, 2019 were based on the availability of sufficient observable inputs. Movements from Level II to Level III was based on the back-testing of historical sales transactions performed by the Manager, which did not provide sufficient observable data to meet Level II versus Level III criteria, resulting in the movement from Level II to Level III. Movements from Level III to Level II was based on information received from a third party pricing service which, along with the back-testing of historical sales transactions performed by the Manager, which provided the sufficient observable data for the movement from Level III to Level II. The Company did not have transfers between either Level I and Level II or Level I and Level III for the three months ended March 31, 2020 and March 31, 2019.

Certain Residential Bridge Loans, repurchase agreement borrowings, convertible senior unsecured notes and securitized debt are not carried at fair value in the consolidated financial statements. The following table presents the carrying value and estimated fair value of the Company’s financial instruments that are not carried at fair value as of March 31, 2020 and December 31, 2019 in the consolidated financial statements (dollars in thousands):


	March 31, 2020						December 31, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets
Residential Bridge Loans	$	2,584	$	2,575	$	3,150	$	3,148
Total	$	2,584	$	2,575	$	3,150	$	3,148

Liabilities
Borrowings under repurchase agreements	$	1,553,715	$	1,358,436	$	2,824,801	$	2,829,093
Convertible senior unsecured notes	197,984		65,801		197,299		209,172
Securitized debt⁽¹⁾	747,371		709,366		801,109		810,914
Total	$	2,499,070	$	2,133,603	$	3,823,209	$	3,849,179

Values for the Company's Bridge Loans are based upon prices obtained from an independent third party pricing service that specializes in loan valuation, utilizing a discounted cash flow valuation model that is calibrated to recent loan trade execution. Their valuation methodology incorporates commonly used market pricing methods, which include the inputs considered most significant to the determination of fair value of the Residential Bridge Loans. The key loan inputs include loan balance, interest rate, loan to value, FICO score, debt to income ratio and delinquencies. The assumption made by the independent third party pricing service includes the market discount rate, prepayment, default assumption and loss severity. The Company reviews the analysis provided by pricing service as well as the key assumptions made available to the Company. Due to the inherent uncertainty of such valuation, the fair values established for residential loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's loans are classified as Level III.

The fair values of the borrowings under repurchase agreements are based on a net present value technique. This method discounts future estimated cash flows using rates the Company determined best estimates current market interest rates that would be offered for loans with similar characteristics and credit quality. The use of different market assumptions or estimation methodologies could have a material effect on the fair value amounts. This fair value measurement is based on observable inputs, and as such, are classified as Level II.

Values for the Company's securitized debt, related to the securitization of a portion of its Residential Whole Loans, are based upon prices obtained from independent third party pricing services. The valuation methodology of the third party pricing services incorporates market information and commonly used market pricing methods, which include actual trades and quoted prices for similar or identical instruments. In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. Since the securitized debt represents traded debt securities, the Manager's pricing team reviews the trade activity during the quarter for each security to determine the appropriate level within the fair value hierarchy. If there is sufficient trade data above a predetermined threshold, the Manager determines it has sufficient observable market data and the debt security will be categorized as a Level II. If there is not sufficient observable market data the debt security will be categorized as a Level III. At March 31, 2020, there was not sufficient observable market data for the debt to be classified as a Level II, accordingly it was classified as a Level III.