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Mortgage Loans
 9 Months Ended
Sep. 30, 2021
Mortgage Loans [Abstract]  
Mortgage Loans Mortgage Loans
The following table presents information regarding the carrying value for the Company's RPLs, NPLs and SBC loans as of September 30, 2021 and December 31, 2020 ($ in thousands):

September 30, 2021December 31, 2020
Loan portfolio basis by asset typeMortgage loans held-for-investment, netMortgage loans held-for-sale, netMortgage loans held-for-investment, netMortgage loans held-for-sale, net
Residential RPLs$834,309 $30,963 $1,057,454 $— 
Residential NPLs117,681 — 38,724 — 
SBC loans24,361 — 23,194 — 
Total$976,351 $30,963 $1,119,372 $— 

Included on the Company’s consolidated balance sheets as of September 30, 2021 and December 31, 2020 are approximately $976.4 million and $1.1 billion, respectively, of RPLs, NPLs, and SBC loans that are held-for-investment and approximately $31.0 million and zero, respectively, of RPLs that are held-for-sale. At September 30, 2021 the Company reclassified $31.0 million of Mortgage loans held-for-investment to the Mortgage loans held-for-sale line in its consolidated
balance sheet. The Company intends to sell the loans to a joint venture trust held with a third party institutional accredited investor.

The categorization of RPLs, NPLs and SBC loans is determined at acquisition. The carrying value of RPLs, NPLs and SBC loans reflects the original investment amount, plus accretion of interest income and credit and non-credit discount, less principal and interest cash flows received. The carrying values at September 30, 2021 and December 31, 2020 for the Company's loans in the table above are presented net of a cumulative allowance for expected credit losses of $13.9 million and $13.7 million, respectively, reflected in the appropriate lines in the table by loan type. For the three and nine months ended September 30, 2021, the Company recognized a $0.9 million and $9.1 million, respectively, of revenue during the three and nine month periods due to a net decrease in expected credit losses resulting from increases in the present value of the expected cash flows. For the three and nine months ended September 30, 2020, the Company recognized $3.0 million and $2.9 million, respectively, of revenue, respectively due to a net decrease in expected credit losses resulting from increases in the present value of the expected cash flows. For the three and nine months ended September 30, 2021, the Company accreted $16.6 million and $58.1 million, respectively, net of the impact of changes in expected credit losses into interest income with respect to its RPL, NPL and SBC loans. For the three and nine months ended September 30, 2020, the Company accreted $21.2 million and $61.1 million, respectively, net of the impact of net changes in expected credit losses into interest income with respect to its RPL, NPL and SBC loans.

Loss estimates are determined based on the net present value of the difference between the contractual cash flows and the expected cash flows over the expected life of the loans. Contractual cash flows are calculated based on the stated terms of the loans using a constant prepayment rate assumption. Expected cash flows are based on the Manager's proprietary model, which includes factors such as resolution method, resolution timeline, foreclosure costs, rehabilitation costs and eviction costs. Additional variables bearing upon cash flow expectations include the specific location of the underlying property, loan-to-value ratio, property age and condition, change and rate of change of borrower credit rating, servicing notes, interest rate, monthly payment amount and neighborhood rents.

The Company's mortgage loans are secured by real estate. Risks inherent in the Company's mortgage loan portfolio, affecting both the valuation of its mortgage loans as well as the portfolio's interest income include the risk of default, delays and inconsistency in the frequency and amount of payments, risks affecting borrowers such as man-made or natural disasters, or the pandemic caused by the novel coronavirus ("COVID-19") outbreak, and damage to or delay in realizing the value of the underlying collateral. The Company monitors the credit quality of the mortgage loans in its portfolio on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluates whether and when it becomes probable that all amounts contractually due will not be collected.

During the three and nine months ended September 30, 2021, the Company purchased four and 241 RPLs with UPB of $0.5 million and $41.7 million, respectively. Comparatively, during the three and nine months ended September 30, 2020 the Company purchased 244 and 270 RPLs with UPB of $46.3 million and $48.2 million, respectively. During the three and nine months ended September 30, 2021, the Company purchased 364 and 367 NPLs with UPB of $90.9 million and $91.5 million, respectively. During the three and nine months ended September 30, 2020, one and two NPLs were purchased with UPB of $0.5 million and $0.7 million, respectively. The Company had no SBC acquisitions during the three months ended September 30, 2021; however, during the nine months ended September 30, 2021, the Company acquired one SBC loan with UPB of $3.6 million. Comparatively, during both the three and nine months ended September 30, 2020 two SBC loans were acquired with UPB of $1.9 million.

During the three months ended September 30, 2021, the Company sold no mortgage loans. During the nine months ended September 30, 2021, the Company re-securitized 760 loans from 2017-D with a carrying value of $129.2 million and UPB of $133.8 million through a sponsored joint venture between the Company and a third party accredited institutional investor. The Company retained various classes of securities from the joint venture. During the three months ended September 30, 2020 the Company sold no mortgage loans; however, during the nine months ended September 30, 2020, the Company sold 26 loans with a carrying value of $26.1 million and UPB of $26.2 million and collateral value of $44.2 million to Gaea, a related party. See Note 10 — Related Party Transactions.

The Company adopted CECL using the prospective transition approach for PCD assets on January 1, 2020. At the time, $10.2 million of loan discount was reclassified to the allowance for expected credit losses with no net impact on the amortized cost basis of the portfolio. The Company views its mortgage loan portfolio based on loan performance, or legal ownership for loans held by certain consolidated trusts, and used five and six pools at September 30, 2021 and December 31, 2020, respectively, to aggregate its portfolio of PCD loans, and one pool for its non-PCD loans as of both September 30, 2021 and December 31, 2020. Among the PCD loans, separate pools exist for loans that have been securitized in rated secured
borrowings during 2019, 2020 and 2021 ("Great Ajax II REIT") and for loans that are consolidated under U.S. GAAP but where the Company did not own 100% of the loan pool (2017-D and 2018-C). During the quarter ending March 31, 2021 the Company acquired the non-controlling interest in securitization trust 2018-C previously held by its joint venture partner. As a result of the acquisition, the non-controlling interest was eliminated and the loans in securitization trust 2018-C were reclassified into new pools based on their payment status as of the acquisition date of the non-controlling interest. Subsequent to the acquisition date, a significant portion of the loans from 2018-C were added to the Great Ajax II REIT pool as these loans became the collateral for a secured borrowing at that entity. As of March 31, 2021 the loans pooled under 2017-D were designated as held-for-sale. During the second quarter of 2021, 760 loans from 2017-D were re-securitized into a new joint venture, leaving 22 loans in the trust. The remaining loans were reclassified into new pools based on their payment status as of the sale date. A significant portion of the remaining loans from 2017-D were added to the 7f7 and better pool, and the remaining loans were added to the 4f4-6f6 and below pool. As of September 30, 2021 the loans pooled under Ajax N Trust were designated as held-for-sale while these loans were designated as held-for-investment as of June 30, 2021. Since the criteria for pooling loans includes a combination of both performance and legal ownership by subsidiary trust, these factors are not always mutually exclusive. The following table presents information regarding the year of origination of the Company's mortgage loan portfolio by basis as of September 30, 2021 and December 31, 2020 ($ in thousands):

September 30, 2021
Mortgage loans held-for-investment, net2021202020192018201720162009-20152006-20082005 and priorTotal
Great Ajax II REIT$— $762 $180 $697 $329 $1,749 $47,403 $357,311 $131,165 $539,596 
California— — 1,265 632 370 — 4,019 44,297 12,351 62,934 
7f7 and better— — 933 108 435 449 14,274 95,403 32,125 143,727 
4f4-6f6 and below— 109 2,802 2,203 209 366 25,373 118,411 49,171 198,644 
Non-PCD13,686 9,621 4,580 78 2,592 124 733 24 12 31,450 
Total$13,686 $10,492 $9,760 $3,718 $3,935 $2,688 $91,802 $615,446 $224,824 $976,351 

September 30, 2021
Mortgage loans held-for-sale, net2021202020192018201720162009-20152006-20082005 and priorTotal
Ajax N Trust$— $— $332 $— $— $— $4,602 $16,545 $9,484 $30,963 
Total$— $— $332 $— $— $— $4,602 $16,545 $9,484 $30,963 

December 31, 2020
Mortgage loans held-for-investment, net202020192018201720162009-20152006-20082005 and priorTotal
Great Ajax II REIT$— $— $257 $488 $1,991 $41,746 $280,606 $99,909 $424,997 
2018-C— — — — — 14,100 119,343 39,778 173,221 
2017-D— — — 121 — 6,826 94,711 32,238 133,896 
California2,221 952 1,484 362 — 5,292 60,393 18,084 88,788 
7f7 and better— 911 434 — 2,125 17,520 88,414 32,831 142,235 
4f4-6f6 and below872 1,397 2,054 336 305 13,409 78,202 30,239 126,814 
Non-PCD21,387 4,738 64 2,493 99 611 20 9 29,421 
Total$24,480 $7,998 $4,293 $3,800 $4,520 $99,504 $721,689 $253,088 $1,119,372 
The following table presents a reconciliation between the purchase price and par value for the Company's loan acquisitions and originations for the three and nine months ended September 30, 2021 and 2020 ($ in thousands):

Three months ended September 30,Nine months ended September 30,
2021202020212020
PCD LoansNon-PCD LoansPCD LoansNon-PCD LoansPCD LoansNon-PCD LoansPCD LoansNon-PCD Loans
Par$91,392 $— $46,811 $1,859 $133,245 $3,611 $47,038 $3,811 
Premium/(discount)2,582 — (3,901)(41)(737)(8)(3,938)(788)
Allowance(5,962)— (1,272)— (7,689)— (1,276)— 
Purchase Price$88,012 $— $41,638 $1,818 $124,819 $3,603 $41,824 $3,023 

The Company performs an analysis of its expectation of the amount of undiscounted cash flows to be collected from its mortgage loan pools at the end of each calendar quarter. Under CECL, the Company adjusts its allowance for expected credit losses when there are changes in its expectation of future cash flows. An increase to the allowance for expected credit losses will occur when there is a reduction in the Company's expected future cash flows. Reduction to the allowance, or recovery, may occur if there is an increase in expected future cash flows that were previously subject to an allowance for expected credit loss. A decrease in the allowance for expected credit losses is generally facilitated by reclassifying amounts to non-credit discount from the allowance and then recording the recovery. During the three months ended September 30, 2021 the Company recorded a $1.2 million reclassification to non-credit discount from the allowance for expected credit losses, and during the nine months ended September 30, 2021 the Company recorded a $2.6 million reclassification from non-credit discount to the allowance for expected credit losses. This was followed by a $0.9 million and $9.1 million reduction of the allowance for expected credit losses, respectively, due to increases in the net present value of expected cash flows. During the three and nine months ended September 30, 2021, the Company also recorded a $6.0 million and $7.7 million increase, respectively, in the allowance for expected credit losses due to new acquisitions. Comparatively, during the three and nine months ended September 30, 2020 the Company recorded a $2.1 million and $3.9 million reclassification, respectively, from non-credit discount to the allowance for expected credit losses followed by a $3.0 million and $2.9 million reduction of allowance for expected credit losses, respectively, due to increases in the net present value of expected cash flows. During the three and nine months ended September 30, 2020, the Company also recorded a $1.3 million increase in the allowance for expected credit losses due to new acquisitions. An analysis of the balance in the allowance for expected credit losses account follows ($ in thousands):

Three months ended September 30,Nine months ended September 30,
2021202020212020
Allowance for expected credit losses, beginning of period$(9,833)$(14,450)$(13,712)$(1,960)
Beginning period adjustment for CECL adoption— — — (10,156)
Reclassification to/(from) non-credit discount from/(to) the allowance for changes in payment expectations1,175 (2,137)(2,607)(3,870)
Increase in allowance for expected credit losses for loan acquisitions(5,962)(1,272)(7,689)(1,276)
Credit loss expense on mortgage loans(164)(291)(757)(794)
Reversal of allowance for expected credit losses due to increases in the net present value of expected cash flows908 2,996 9,148 2,902 
Reversal of allowance upon reclass of pool 2017-D to mortgage loans held-for-sale, net— — 1,741 — 
Allowance for expected credit losses, end of period$(13,876)$(15,154)$(13,876)$(15,154)
The following table sets forth the carrying value of the Company’s mortgage loans by delinquency status as of September 30, 2021 and December 31, 2020 ($ in thousands):

September 30, 2021
Mortgage loans held-for-investment, netCurrent306090ForeclosureTotal
Great Ajax II REIT$474,914 $22,649 $11,594 $28,018 $2,421 $539,596 
California28,456 4,880 5,270 17,436 6,892 62,934 
7f7 and better68,210 21,403 15,374 38,299 441 143,727 
4f4-6f6 and below24,164 4,271 5,331 113,691 51,187 198,644 
Non-PCD30,707 — 12 84 647 31,450 
Total$626,451 $53,203 $37,581 $197,528 $61,588 $976,351 

September 30, 2021
Mortgage loans held-for-sale, netCurrent306090ForeclosureTotal
Ajax N Trust$16,940 $1,899 $1,338 $9,108 $1,678 $30,963 
Total$16,940 $1,899 $1,338 $9,108 $1,678 $30,963 

December 31, 2020
Mortgage loans held-for-investment, netCurrent306090ForeclosureTotal
Great Ajax II REIT$311,941 $48,266 $19,559 $43,364 $1,867 $424,997 
2018-C70,034 20,541 15,300 57,538 9,808 173,221 
2017-D58,198 24,906 12,437 36,106 2,249 133,896 
California42,214 7,660 5,519 29,343 4,052 88,788 
7f7 and better72,613 14,003 12,447 41,383 1,789 142,235 
4f4-6f6 and below13,976 10,773 7,157 68,677 26,231 126,814 
Non-PCD22,562 6,099 56 704 — 29,421 
Total$591,538 $132,248 $72,475 $277,115 $45,996 $1,119,372