Fair Value (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value [Abstract]

Company's Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis as of the dates indicated (dollars in thousands).

Recurring Fair Value Measurements

As of June 30, 2021

	Level 1		Level 2		Level 3		Carrying Value
Assets
RMBS
Fannie Mae	$	-	$	617,044	$	-	$	617,044
Freddie Mac		-		381,755		-		381,755
RMBS total		-		998,799		-		998,799
Derivative assets
Interest rate swaps		-		15,164		-		15,164
Interest rate swaptions		-		1,516		-		1,516
TBAs		-		883		-		883
U.S. treasury futures options		-		83		-		83
Derivative assets total		-		17,646		-		17,646
Servicing related assets		-		-		211,995		211,995
Total Assets	$	-	$	1,016,445	$	211,995	$	1,228,440
Liabilities
Derivative liabilities
Interest rate swaps		-		896		-		896
U.S. treasury futures		-		24		-		24
Derivative liabilities total		-		920		-		920
Total Liabilities	$	-	$	920	$	-	$	920

As of December 31, 2020

	Level 1		Level 2		Level 3		Carrying Value
Assets
RMBS
Fannie Mae	$	-	$	715,156	$	-	$	715,156
Freddie Mac		-		506,954		-		506,954
Private Label MBS		-		6,141		-		6,141
RMBS total		-		1,228,251		-		1,228,251
Derivative assets
Interest rate swaps		-		10,791		-		10,791
Interest rate swaptions		-		798		-		798
TBAs		-		4,129		-		4,129
Treasury futures		-		252		-		252
Derivative assets total		-		15,970		-		15,970
Servicing related assets		-		-		174,414		174,414
Total Assets	$	-	$	1,244,221	$	174,414	$	1,418,635
Liabilities
Derivative liabilities
Interest rate swaps		-		5,878		-		5,878
Derivative liabilities total		-		5,878		-		5,878
Total Liabilities	$	-	$	5,878	$	-	$	5,878

Company's Level 3 Assets (Servicing Related Assets) Measured at Fair Value on Recurring Basis

The tables below present the reconciliation for the Company’s Level 3 assets (Servicing Related Assets) measured at fair value on a recurring basis as of the dates indicated (dollars in thousands):

Level 3 Fair Value Measurements

As of June 30, 2021

	Level 3
	MSRs
Balance at December 31, 2020	$	174,414
Purchases, sales and principal paydowns:
Purchases		36,059
Other changes (A)		(441	)
Purchases, sales and principal paydowns:	$	35,618
Changes in Fair Value due to:
Changes in valuation inputs or assumptions used in valuation model		47,201
Other changes in fair value (B)		(45,238	)
Unrealized gain (loss) included in Net Income	$	1,963
Balance at June 30, 2021	$	211,995

As of December 31, 2020

	Level 3
	MSRs
Balance at December 31, 2019	$	291,111
Purchases, sales and principal paydowns:
Purchases		54,439
Sales		(27,754	)
Other changes (A)		(1,482	)
Purchases, sales and principal paydowns:	$	25,203
Changes in Fair Value due to:
Changes in valuation inputs or assumptions used in valuation model		(8,318	)
Other changes in fair value (B)		(133,582	)
Unrealized gain (loss) included in Net Income	$	(141,900	)
Balance at December 31, 2020	$	174,414

(A) Represents purchase price adjustments, principally contractual prepayment protection, and changes due to the Company’s repurchase of the underlying collateral.

(B) Represents changes due to realization of expected cash flows and estimated MSR runoff.

Significant Unobservable Inputs Used in Fair Value Measurement

The tables below present information about the significant unobservable inputs used in the fair value measurement of the Company’s Servicing Related Assets classified as Level 3 fair value assets as of the dates indicated (dollars in thousands):

Fair Value Measurements

As of June 30, 2021

	Fair Value		Valuation Technique	Unobservable Input (A)	Range		Weighted Average
MSRs	$	211,995	Discounted cash flow	Constant prepayment speed	6.9% - 25.0	%		12.7	%
				Uncollected payments	0.3% - 2.5	%		0.7	%
				Discount rate				7.0	%
				Annual cost to service, per loan			$	76
Total	$	211,995

As of December 31, 2020

	Fair Value		Valuation Technique	Unobservable Input (A)	Range		Weighted Average
MSRs	$	174,414	Discounted cash flow	Constant prepayment speed	5.0% -38.0	%		15.4	%
				Uncollected payments	0.3% - 2.6	%		0.6	%
				Discount rate				6.1	%
				Annual cost to service, per loan			$	76
Total	$	174,414

(A) Significant increases (decreases) in any of the inputs in isolation may result in significantly lower (higher) fair value measurements. A change in the assumption used for discount rates may be accompanied by a directionally similar change in the assumption used for the probability of uncollected payments and a directionally opposite change in the assumption used for prepayment rates.

(B) Weighted averages for unobservable inputs are calculated based on the unpaid principal balance of the portfolios.