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FINANCIAL INSTRUMENTS
 12 Months Ended
Dec. 31, 2016
Fair Value Disclosures [Abstract]  
Financial Instruments Disclosure [Text Block]
NOTE 13 – FINANCIAL INSTRUMENTS
 
GAAP defines fair value and provides a consistent framework for measuring fair value under GAAP. ASC 820 “Fair Value Measurement” expands fair value financial statement disclosure requirements. ASC 820 does not require any new fair value measurements and only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments.
 
Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels are defined as follows:
 
 
•
Level 1 Inputs
– Quoted prices for identical instruments in active markets.
 
 
•
Level 2 Inputs
– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
 
 
•
Level 3 Inputs
– Instruments with primarily unobservable value drivers.
 
The following tables summarize the valuation of the Company’s assets and liabilities at fair value within the fair value hierarchy levels as of December 31, 2016 and December 31, 2015:
 
 
 
December 31, 2016
 
 
 
Quoted prices in
 
 
Significant
 
 
 
 
 
 
 
 
 
active markets
 
 
other observable
 
 
Unobservable
 
 
 
 
 
 
for identical assets
 
 
inputs
 
 
inputs
 
 
Balance as of
 
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
December 31, 2016
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities (a)
 
$
-
 
 
$
870,929,601
 
 
$
-
 
 
$
870,929,601
 
Residential mortgage loans
 
 
-
 
 
 
2,849,536
 
 
 
-
 
 
 
2,849,536
 
Multi-Family mortgage loans held in securitization trusts
 
 
-
 
 
 
1,222,905,433
 
 
 
-
 
 
 
1,222,905,433
 
Residential mortgage loans held in securitization trusts
 
 
-
 
 
 
141,126,720
 
 
 
-
 
 
 
141,126,720
 
Mortgage servicing rights
 
 
-
 
 
 
-
 
 
 
3,440,809
 
 
 
3,440,809
 
Futures
 
 
8,053,813
 
 
 
-
 
 
 
-
 
 
 
8,053,813
 
Total
 
$
8,053,813
 
 
$
2,237,811,290
 
 
$
3,440,809
 
 
$
2,249,305,912
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-family securitized debt obligations
 
$
-
 
 
$
(1,204,583,678
)
 
$
-
 
 
$
(1,204,583,678
)
Residential securitized debt obligations
 
 
-
 
 
 
(134,846,348
)
 
 
-
 
 
 
(134,846,348
)
Total
 
$
-
 
 
$
(1,339,430,026
)
 
$
-
 
 
$
(1,339,430,026
)
 
 
 
December 31, 2015
 
 
 
Quoted prices in
 
 
Significant
 
 
 
 
 
 
 
 
 
active markets
 
 
other observable
 
 
Unobservable
 
 
 
 
 
 
for identical assets
 
 
inputs
 
 
inputs
 
 
Balance as of
 
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
December 31, 2015
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities (a)
 
$
-
 
 
$
571,466,581
 
 
$
-
 
 
$
571,466,581
 
Residential mortgage loans
 
 
-
 
 
 
10,900,402
 
 
 
-
 
 
 
10,900,402
 
Multi-Family mortgage loans held in securitization trusts
 
 
-
 
 
 
1,449,774,383
 
 
 
-
 
 
 
1,449,774,383
 
Residential mortgage loans held in securitization trusts
 
 
-
 
 
 
411,881,097
 
 
 
-
 
 
 
411,881,097
 
Mortgage servicing rights
 
 
-
 
 
 
-
 
 
 
4,268,673
 
 
 
4,268,673
 
FHLB Stock
 
 
2,403,000
 
 
 
-
 
 
 
-
 
 
 
2,403,000
 
Futures
 
 
2,558,350
 
 
 
-
 
 
 
-
 
 
 
2,558,350
 
Total
 
$
4,961,350
 
 
$
2,444,022,463
 
 
$
4,268,673
 
 
$
2,453,252,486
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-family securitized debt obligations
 
$
-
 
 
$
(1,364,077,012
)
 
$
-
 
 
$
(1,364,077,012
)
Residential securitized debt obligations
 
 
-
 
 
 
(380,638,423
)
 
 
-
 
 
 
(380,638,423
)
Total
 
$
-
 
 
$
(1,744,715,435
)
 
$
-
 
 
$
(1,744,715,435
)
 
(a)
For more detail about the fair value of the Company’s MBS, see Note 3 and Note 4.
 
During the years ended December 31, 2016 and December 31, 2015, the Company did not have any transfers between any of the levels of the fair value hierarchy. Transfers between levels are deemed to take place on the last day of the reporting period in which the transfer takes place.
 
As of December 31, 2016 and December 31, 2015, the Company had $3,440,809 and $4,268,673, respectively, in Level 3 assets. The Company’s Level 3 assets are comprised of MSRs. Accordingly, for more detail about Level 3 assets, also see Note 12.
 
The following table provides quantitative information about the significant unobservable inputs used in the fair value measurement of the Company’s MSRs classified as Level 3 fair value assets at December 31, 2016 and December 31, 2015:
 
As of December 31, 2016
Valuation Technique
 
Unobservable Input
 
Range
 
 
Weighted Average
 
Discounted cash flow
 
Constant prepayment rate
 
 
8.0 - 26.5
%
 
 
13.7
%
 
 
Discount rate
 
 
12.0
%
 
 
12.0
%
 
As of December 31, 2015
Valuation Technique
 
Unobservable Input
 
Range
 
 
Weighted Average
 
Discounted cash flow
 
Constant prepayment rate
 
 
6.5 - 28.6
%
 
 
13.3
%
 
 
Discount rate
 
 
12.0
%
 
 
12.0
%