Mortgage Loans

12 Months Ended

Dec. 31, 2019

The following table presents information regarding the carrying value for the Mortgage loan categories of RPL, NPL, SBC and originated as of December 31, 2019 and 2018 ($ in thousands):


	As of December 31,
Loan portfolio basis by asset type	2019		2018
Residential RPL loan pools	$	1,085,514	$	1,242,207
SBC loan pools	11,652		21,203
SBC loans non-pooled⁽¹⁾	23,434		11,140
Residential NPL loan pools	30,869		36,323
Total	$	1,151,469	$	1,310,873

(1)SBC loans not pooled are accounted for using ASC 310-20 versus ASC 310-30 for our loan pools.

Included on the Company’s consolidated Balance Sheets as of December 31, 2019 and December 31, 2018 are approximately $1.2 billion and $1.3 billion, respectively, of RPLs, NPLs, and SBCs. RPLs, NPLs and SBCs are categorized at

acquisition. The carrying value of all loans reflects the original investment amount, plus accretion of interest income and discount, less principal and interest cash flows received. The carrying values at December 31, 2019 and December 31, 2018 for the Company's loans in the table above are presented net of a cumulative allowance for loan losses of $2.0 million and $1.2 million, respectively, reflected in the totals for each line in the table above. For the years ended December 31, 2019, 2018 and 2017 the Company recognized $0.8 million, $1.2 million and $0, respectively. For the years ended December 31, 2019, 2018 and 2017, the Company accreted $95.1 million, $102.5 million and $89.9 million, respectively, into interest income with respect to its RPL, NPL and SBC loan pools.

The Company’s loan acquisitions for the year ended December 31, 2019 consisted of 573 purchased RPLs with $122.5 million UPB, 35 NPLs with $6.7 million UPB and 22 originated SBC loans with $19.0 million UPB. Comparatively during the year ended December 31, 2018, the Company acquired 810 purchased RPLs with $175.5 million UPB, 36 NPLs with $6.0 million UPB and eight originated SBC loans with $6.4 million UPB.

The following table presents information regarding the accretable yield and non-accretable amount for purchased loans acquired during the following periods ($ in thousands):


	For the year ended December 31,
	2019						2018
	Re-performing loans		Non-performing loans		Re-performing loans		Non-performing loans
Contractually required principal and interest	$	207,348	$	11,542	$	299,462	$	10,976
Non-accretable amount	(70,953)		(4,917)		(104,940)		(4,891)
Expected cash flows to be collected	136,395		6,625		194,522		6,085
Accretable yield	(31,917)		(957)		(35,471)		(675)
Fair value at acquisition	$	104,478	$	5,668	$	159,051	$	5,410

The Company determines the accretable yield on new acquisitions by comparing the expected cash flows from its Manager's proprietary cash flow model to the remaining contractual cash flows at acquisition. The difference between the expected cash flows and the portfolio acquisition price is accretable yield. The difference between the remaining contractual cash flows and the expected cash flows is the non-accretable amount. Accretable yield and accretion amounts do not include any of the interest income on unpooled SBC loans at December 31, 2019 and 2018. The following table presents the 2019 and 2018 accretable yield and non-accretable amount for the loan portfolio ($ in thousands):


	For the year ended December 31,
	2019						2018
	Re-performing loans		Non-performing loans		Re-performing loans		Non-performing loans
Balance at beginning of period	$	311,806	$	6,459	$	344,141	$	7,370
Accretable yield additions	31,917		957		35,471		675
Accretion	(94,334)		(787)		(101,195)		(1,316)
Reclassification from (to) non-accretable amount, net	(30,273)		(2,922)		33,389		(270)
Balance at end of period	$	219,116	$	3,707	$	311,806	$	6,459

During the year ended December 31, 2019, the Company reclassified a net $33.2 million from accretable yield to non-accretable amount, consisting of a $30.3 million transfer from accretable yield to non-accretable amount for RPLs, and a $2.9 million transfer from accretable yield to non-accretable amount for NPLs. Comparatively, during the year ended 2018, the Company reclassified a net $33.1 million from non-accretable amount to accretable yield, consisting of a $33.4 million transfer from non-accretable amount to accretable yield for its RPLs and $0.3 million from accretable yield to non-accretable amount on NPLs. The Company recalculates the amount of accretable yield and non-accretable amount on a quarterly basis. Reclassifications between the two categories are primarily based upon changes in expected cash flows and actual prepayments, including payoffs in full or in part, prior to modeled expecations. Additionally, the accretable yield and non-accretable amounts are revised when loans are reclassified to REO or sold because the future expected cash flows are removed from the pool. The primary driver of the reclassification from accretable yield to non-accretable amount for the year ended 2019 was the sale of $176.9 million of loans to an unconsolidated joint venture. The 2018 reclassifications from non-accretable amount to accretable yield were driven by actual loan payment performance exceeding expectations at acquisition. This is offset by the removal of

the accretable yield for loans that are removed from the pool at foreclosure and loan payoffs, both in full or in part, prior to modeled expectations.

The Company performs an analysis of its expectation of the amount of undiscounted cash flows expected to be collected from its mortgage loan pools at the end of each calendar quarter. If the Company expects to collect greater cash flows over the life of the pool, the accretable yield amount increases and the expected yield to maturity is adjusted on a prospective basis. An allowance for loan losses is established when it is probable the Company will not collect all amounts previously estimated to be collectible due to a reduction in loan performance or a reduction in the estimate of the underlying property value. Management assesses the credit quality of the portfolio and the adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. During the year ended December 31, 2019, the Company recorded an impairment of $0.8 million of the value of five of its NPL pools acquired in 2014, 2015 and 2016. During the year ended December 31, 2018, the Company recorded an impairment of $1.2 million of the value of three of its NPL pools acquired in 2014 and 2015. The Company had no allowance for loan losses at December 31, 2017. An analysis of the balance in the allowance for loan losses account follows ($ in thousands):


	For the year ended December 31,
	2019		2018		2017
Allowance for loan losses, beginning of period	$	(1,164)	$	—	$	—
Provision for loan losses	(803)		(1,164)		—
Recovery of loan losses	7		—		—
Allowance for loan losses, end of period	$	(1,960)	$	(1,164)	$	—

The following table sets forth the carrying value of the Company’s mortgage loans, and related unpaid principal balance by delinquency status as of December 31, 2019 and 2018 ($ in thousands):


	As of December 31,
	2019								2018
	Number of loans	Carrying value		Unpaid principal balance		Number of loans	Carrying value		Unpaid principal balance
Current	3,449	$	676,144	$	735,307	3,929	$	757,276	$	848,551
30	851	146,208		158,363		1,006	167,286		185,742
60	568	93,806		102,661		711	123,078		136,586
90	1,173	197,014		224,078		1,188	200,419		231,063
Foreclosure	143	38,297		47,717		277	62,814		79,777
Mortgage loans	6,184	$	1,151,469	$	1,268,126	7,111	$	1,310,873	$	1,481,719