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Fair Value (Tables)

9 Months Ended

Sep. 30, 2024

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

September 30, 2024

	Level 1		Level 2		Level 3		Carrying Value
Assets
RMBS
Fannie Mae	$	-	$	448,755	$	-	$	448,755
Freddie Mac		-		765,368		-		765,368
RMBS total		-		1,214,123		-		1,214,123
Derivative assets
Interest rate swaps		-		21,027		-		21,027
TBAs, net		-		1,330		-		1,330
U.S. treasury futures				906				906
Derivative assets total		-		23,263		-		23,263
Servicing related assets		-		-		226,782		226,782
Total Assets	$	-	$	1,237,386	$	226,782	$	1,464,168
Liabilities
Derivative liabilities
Interest rate swaps		-		4,749		-		4,749
Derivative liabilities total		-		4,749		-		4,749
Total Liabilities	$	-	$	4,749	$	-	$	4,749

December 31, 2023

	Level 1		Level 2		Level 3		Carrying Value
Assets
RMBS
Fannie Mae	$	-	$	401,126	$	-	$	401,126
Freddie Mac		-		611,004		-		611,004
RMBS total		-		1,012,130		-		1,012,130
Derivative assets
Interest rate swaps		-		19,504		-		19,504
Derivative assets total		-		19,504		-		19,504
Servicing related assets		-		-		253,629		253,629
Total Assets	$	-	$	1,031,634	$	253,629	$	1,285,263
Liabilities
Derivative liabilities
Interest rate swaps		-		2,799		-		2,799
TBAs, net		-		12,167		-		12,167
U.S. treasury futures		-		1,651		-		1,651
Derivative liabilities total		-		16,617		-		16,617
Total Liabilities	$	-	$	16,617	$	-	$	16,617

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

	Three Months Ended						Nine Months Ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Beginning Balance	$	234,263		$	264,906		$	253,629		$	279,739
Purchases and sales:
Purchases		-			-			-			5
Sales^(A)		-			-			(12,804	)		-
Other changes ^(B)		(14	)		(10	)		(7	)		(170	)
Purchases and sales:		(14	)		(10	)		(12,811	)		(165	)
Changes in Fair Value due to:
Changes in valuation inputs or assumptions used in valuation model		(3,624	)		6,060			(1,586	)		552
Other changes in fair value ^(C)		(3,843	)		(4,482	)		(12,450	)		(13,652	)
Unrealized gain (loss) included in Net Income		(7,467	)		1,578			(14,036	)		(13,100	)
Ending Balance	$	226,782		$	266,474		$	226,782		$	266,474

(A)	During the nine-month period ended September 30, 2024, the Company sold a portion of its MSRs to a third party for proceeds of $13.3 million and recognized a gain of $0.5 million on the sale.

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

(C)	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 September 30, 2024

	Fair Value		Valuation Technique	Unobservable Input ^(A)	Range			Weighted Average ^(B)
MSRs	$	226,782	Discounted cash flow	Constant prepayment speed		5.0% - 13.5	%		6.7	%
				Uncollected payments		0.6% - 6.2	%		0.8	%
				Discount rate					9.4	%
				Annual cost to service, per loan				$	88
TOTAL	$	226,782

As of December 31, 2023

	Fair Value		Valuation Technique	Unobservable Input ^(A)	Range			Weighted Average ^(B)
MSRs	$	253,629	Discounted cash flow	Constant prepayment speed		3.9% -14.8	%		6.9	%
				Uncollected payments		0.6% - 6.8	%		0.8	%
				Discount rate					9.6	%
				Annual cost to service, per loan				$	88
TOTAL	$	253,629

(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.

- 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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