Fair Value (Tables)

6 Months Ended

Jun. 30, 2013

Schedule of Financial Instruments Accounted for at Fair Value on a Recurring Basis

The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis as of June 30, 2013, by level within the fair value hierarchy:

	Assets and Liabilities at Fair Value
	Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	-	$	-	$	120,783,425	$	120,783,425
Real estate securities
Agency RMBS
30-year adjustable rate mortgage		-		2,591,883		-		2,591,883
30-year fixed rate mortgage		-		171,910,223		-		171,910,223
Non-Agency RMBS		-		-		270,034,590		270,034,590
Derivative assets		-		7,169,531		-		7,169,531
Total	$	-	$	181,671,637	$	390,818,015	$	572,489,652
Liabilities
Derivative liabilities	$	-	$	5,069,472	$	-	$	5,069,472
Total	$	-	$	5,069,472	$	-	$	5,069,472

The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis as of December 31, 2012, by level within the fair value hierarchy:

	Assets and Liabilities at Fair Value
	Level 1		Level 2		Level 3		Total
Assets
Real estate securities
Agency RMBS
30-year adjustable rate mortgage	$	-	$	3,240,330	$	-	$	3,240,330
30-year fixed rate mortgage		-		66,519,702		-		66,519,702
Non-Agency RMBS		-		-		100,911,651		100,911,651
Total	$	-	$	69,760,032	$	100,911,651	$	170,671,683
Liabilities
Derivative liabilities	$	-	$	1,144,744	$	-	$	1,144,744
Total	$	-	$	1,144,744	$	-	$	1,144,744

Schedule of Financial Instruments Utilizing Level 3 Inputs

The following table presents additional information about the Company's financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

	June 30, 2013						December 31, 2012
	RMBS			Mortgage loans			RMBS			Mortgage loans
Beginning balance	$	100,911,651		$	-		$	76,473,092		$	-
Total net transfers into/out of Level 3		-			-			-			-
Acquisitions		193,538,950			119,758,049			68,617,460			-
Proceeds from sales		-			-			(43,379,205	)		-
Net accretion of discounts		6,706,957			259,435			1,337,369			-
Proceeds from principal repayments		(24,322,480	)		(867,594	)		(16,938,626	)		-
Total losses (realized / unrealized) included in earnings		(7,505,685	)		-			(2,579,401	)		-
Total gains (realized / unrealized) included in earnings		705,197			1,633,535			17,380,962			-
Ending balance	$	270,034,590		$	120,783,425		$	100,911,651		$	-
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date	$	(14,228,335	)	$	1,567,291		$	10,764,268		$	-

Schedule of Quantitative Information about Level 3 Fair Value Measurements

The following table presents quantitative information about the Company's real estate securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max		Weighted Average
Non-Agency RMBS ⁽¹⁾
Alternative - A	$	112,066,781	Broker quotes/comparable trades	Constant voluntary prepayment	2.2%	17.1%	7.9%
				Constant default rate	1.3%	11.5%	6.1%
				Loss severity	0.7%	67.9%	40.6%
				Delinquency	9.4%	39.9%	20.1%
Pay option adjustable rate		27,680,063	Broker quotes/comparable trades	Constant voluntary prepayment	1.2%	22.5%	9.0%
				Constant default rate	2.8%	9.4%	5.3%
				Loss severity	1.9%	84.1%	46.0%
				Delinquency	8.7%	35.0%	16.7%
Prime		97,763,571	Broker quotes/comparable trades	Constant voluntary prepayment	3.4%	22.6%	12.1%
				Constant default rate	0.2%	9.0%	5.6%
				Loss severity	3.8%	69.2%	38.3%
				Delinquency	2.9%	29.2%	15.8%
Subprime		32,524,175	Broker quotes/comparable trades	Constant voluntary prepayment	1.1%	14.3%	4.3%
				Constant default rate	3.1%	16.4%	5.6%
				Loss severity	9.9%	81.0%	50.3%

Quantitative Information about Level 3 Fair Value Measurements

Fair Value as of

Weighted

June 30, 2013

Valuation Technique(s)

Unobservable Input

Min / Max

Average

Delinquency

12.9%

30.7%

20.0

Total Non-Agency RMBS

270,034,590

____________________

(1)

The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level.

The following table presents quantitative information about the Company's mortgage loans which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of								Weighted
	June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max				Average
Mortgage Loans	$	120,783,425	Model	Constant voluntary prepayment	1.1	%	7.6	%	3.5	%
				Constant default rate	0.1	%	5.3	%	4.0	%
				Loss severity	13.9	%	42.8	%	33.8	%
	$	120,783,425		Delinquency	3.4	%	14.5	%	13.5	%

Schedule of Fair Value Option

The following table presents the difference between the fair value and the aggregate unpaid principal amount and/or notional balance of assets for which the fair value option was elected:

	June 30, 2013							December 31, 2012
			Principal							Principal
			and/or Notional							and/or Notional
	Fair Value		Balance⁽¹⁾		Difference			Fair Value		Balance		Difference
Financial instruments
Assets
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	2,591,883	$	2,531,514	$	60,369		$	3,240,330	$	3,083,892	$	156,438
30-year fixed rate mortgage		171,910,223		170,265,662		1,644,561			66,519,702		61,034,333		5,485,369
Non-Agency RMBS		270,034,590		401,105,036		(131,070,446	)		100,911,651		109,197,632		(8,285,981	)
Total RMBS		444,536,696		573,902,212		(129,365,516	)		170,671,683		173,315,857		(2,644,174	)
Mortgage loans		120,783,425		151,108,199		(30,324,774	)		-		-		-
Total financial instruments	$	565,320,121	$	725,010,411	$	(159,690,290	)	$	170,671,683	$	173,315,857	$	(2,644,174	)
____________________

(1)

Non-Agency RMBS includes an IO with a notional balance of $80.0 million.

Schedule of Fair Value of Other Financial Instruments

The following table summarizes the estimated fair value for all other financial instruments:

		June 30, 2013		December 31, 2012
	Other financial instruments
	Assets
	Cash	$	21,174,544	$	19,061,110
	Restricted Cash		12,545,944		3,768,151
	Liabilities
	Repurchase agreements	$	308,672,976	$	109,270,298
	Loan repurchase facility		89,331,282		-
	Common stock repurchase liability		-		11,190,687

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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