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Investments
 6 Months Ended
Jun. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Investments Investments
The Company holds investments in various debt securities and beneficial interests which are the net residual interest of the Company’s investments in securitization trusts holding pools of mortgage loans. Beneficial interests may be trust certificates and/or subordinate notes depending on the structure of the securitization. The Company's debt securities and beneficial interests are issued by securitization trusts, which are VIEs that the Company does not consolidate since it has determined it is not the primary beneficiary. See Note 10 — Related Party Transactions. The Company designated its debt securities as AFS or HTM based on the intent and ability to hold each security to maturity. The Company carries its AFS debt securities at fair value using prices provided by financing counterparties and believes any unrealized losses to be temporary. The Company carries its investments in securities HTM at amortized cost, net of any required allowance for credit losses. The Company carries its investments in beneficial interests at amortized cost.

As described in Note 2 — Summary of Significant Accounting Policies, on January 1, 2023, the Company transferred $83.0 million of investment securities from AFS to HTM due to sale restrictions pursuant to Article 6(1) of Regulation (EU) 2017/2402 of the European Parliament and of the Council (as amended, the "EU Securitization Regulation" and, together with applicable regulatory and implementing technical standards in relation thereto, the "EU Securitization Rules"). Pursuant to the terms of these debt securities, the Company must hold at least 5.01% of the nominal value of each class of securities offered or sold to investors (the "EU Retained Interest") subject to the EU Securitization Rules. Under the EU Securitization Rules, the Company is prohibited from selling, transferring or otherwise surrendering all or part of the EU Retained Interest until all such classes are paid in full or redeemed.

Transfers of securities from AFS to HTM are non-cash transactions and are recorded at fair value. On the date of transfer, accumulated other comprehensive income included unrealized losses of $10.9 million, which continues to be reported in accumulated other comprehensive income and is amortized into interest income on a level-yield basis over the remaining life of the securities. This amortization will offset the effect on interest income of the amortization of the discount resulting from the transfer recorded at fair value. During the three and six months ended June 30, 2023, the Company recorded amortization of $1.1 million and $3.2 million, respectively, of unrealized losses in accumulated other comprehensive income and of unamortized discount related to transfers of securities from AFS to HTM.

Risks inherent in the Company's debt securities portfolio, affecting both the valuation of its securities as well as the portfolio's interest income include the risk of default, delays and inconsistency in the frequency and amount of payments,
interest rate risk, risks affecting borrowers such as man-made or natural disasters and damage to or delay in realizing the value of the underlying collateral. Additionally, slower prepayments can result in lower yields on the Company's debt securities acquired at a discount and on its beneficial interest. The Company monitors the credit quality of the mortgage loans underlying its debt securities 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. The following table presents information regarding the Company's investments in debt securities and investments in beneficial interests ($ in thousands):

As of June 30, 2023
Basis(1)
Gross unrealized gainsGross unrealized lossesFair value
Debt securities available-for-sale, at fair value$153,864 $— $(11,760)$142,104 
Debt securities held-to-maturity at amortized cost, net of allowance for credit losses71,706 229 (982)70,953 
Investment in beneficial interests at amortized cost, net of allowance for credit losses127,474 — (21,430)106,044 
Total investments$353,044 $229 $(34,172)$319,101 
(1)Basis amount is net of amortized discount, principal paydowns and interest receivable on securities AFS and HTM of $0.1 million and $30 thousand, respectively.

As of December 31, 2022
Basis(1)
Gross unrealized gainsGross unrealized lossesFair value
Debt securities available-for-sale, at fair value$282,711 $— $(25,649)$257,062 
Investment in beneficial interests at amortized cost, net of allowance for credit losses134,552 — — 134,552 
Total investments$417,263 $— $(25,649)$391,614 
(1)Basis amount is net of amortized discount, principal paydowns and interest receivable on securities AFS of $0.1 million.
The following table presents a breakdown of the Company's gross unrealized losses on its investments in debt securities AFS ($ in thousands):

As of June 30, 2023
Step-up date(s)(1)
Basis(2)
Gross unrealized lossesFair value
Debt securities due February 2028(3)
February 2026$37,206 $(422)$36,784 
Debt securities due November 2051(4)
March 20253,763 (122)3,641 
Debt securities due September 2059(4)
April 20232,075 (77)1,998 
Debt securities due December 2059(4)
July 202323,534 (960)22,574 
Debt securities due March 2060(4)
February 20256,062 (769)5,293 
Debt securities due June 2060(4)
March 20243,757 (124)3,633 
Debt securities due September 2060(3)
March 20241,464 (30)1,434 
Debt securities due December 2060(4)
July 202921,906 (4,451)17,455 
Debt securities due January 2061(4)
September 20244,886 (619)4,267 
Debt securities due June 2061(5)
January 2025/February 202513,367 (1,618)11,749 
Debt securities due October 2061(4)
April 202912,061 (1,177)10,884 
Debt securities due March 2062(4)
May 202910,687 (1,049)9,638 
Debt securities due July 2062(3)
February 203012,961 (342)12,619 
Total$153,729 $(11,760)$141,969 
(1)Step-up date is the date at which the coupon interest rate on the security increases. The Company intends for the security to be called before the step-up date.
(2)Basis amount is net of any realized amortized costs and principal paydowns.
(3)This security has been in an unrealized loss position for less than 12 months.
(4)This security has been in an unrealized loss position for 12 months or longer.
(5)This line is comprised of two securities that are both due June 2061. One security with a balance of $0.5 million has been in an unrealized loss position for 12 months or longer and has a step-up date in January 2025, and the other security of $1.1 million has been in a loss position for 12 months or longer and has a step-up date in February 2025.

As of December 31, 2022
Step-up date(s)(1)
Basis(2)
Gross unrealized lossesFair value
Debt securities due February 2028(3)
February 2026$38,843 $(82)$38,761 
Debt securities due November 2051(4)
March 202536,829 (2,429)34,400 
Debt securities due September 2059(5)
February 2023/April 202314,945 (1,045)13,900 
Debt securities due November 2059(4)
April 20236,752 (313)6,439 
Debt securities due December 2059(4)
July 202333,569 (2,083)31,486 
Debt securities due March 2060(4)
February 202514,492 (1,909)12,583 
Debt securities due June 2060(4)
March 20248,002 (394)7,608 
Debt securities due September 2060(3)
March 20243,242 (15)3,227 
Debt securities due December 2060(4)
July 202943,216 (7,868)35,348 
Debt securities due January 2061(4)
September 202411,883 (1,342)10,541 
Debt securities due June 2061(6)
January 2025/February 202547,302 (6,303)40,999 
Debt securities due October 2061(3)
April 202912,401 (1,013)11,388 
Debt securities due March 2062(3)
May 202911,096 (853)10,243 
Total$282,572 $(25,649)$256,923 
(1)Step-up date is the date at which the coupon interest rate on the security increases. The Company intends for the security to be called before the step-up date.
(2)Basis amount is net of any realized amortized costs and principal paydowns.
(3)This security has been in an unrealized loss position for less than 12 months.
(4)This security has been in an unrealized loss position for 12 months or longer.
(5)This line is comprised of two securities that are both due September 2059. One security with a balance of $0.6 million has been in a loss position for 12 months or longer and has a step-up date in February 2023, and the other security of $0.5 million has been in a loss position for 12 months or longer and has a step-up date in April 2023.
(6)This line is comprised of two securities that are both due June 2061. One security with a balance of $3.0 million has been in an unrealized loss position for 12 months or longer and has a step-up date in January 2025, and the other security of $3.3 million has been in a loss position for 12 months or longer and has a step-up date in February 2025.

As of June 30, 2023, the Company had a gross unrealized loss of $11.8 million and no gross unrealized gains in fair valuation adjustments in accumulated other comprehensive income on the consolidated balance sheet on total investments AFS with a fair value of $142.1 million, which includes $0.1 million in interest receivable. As of December 31, 2022, the Company recorded a gross unrealized loss of $25.6 million and no gross unrealized gains in fair valuation adjustments in accumulated other comprehensive income on the consolidated balance sheet on total investments AFS with a fair value of $257.1 million, which includes $0.1 million in interest receivable.

During the three months ended June 30, 2023, the Company acquired no debt securities and beneficial interests; however, during the six months ended June 30, 2023, the Company re-securitized, with an accredited institutional investor, Ajax Mortgage Loan Trust 2019-E, 2019-G and 2019-H ("2019-E, -G and -H") joint ventures into Ajax Mortgage Loan Trust 2023-A ("2023-A") and retained 8.6% or $16.1 million of varying classes of agency rated securities and equity. 2023-A acquired 1,085 RPLs and NPLs with UPB of $205.1 million and an aggregate property value of $497.4 million. The AAA through A rated securities represent 79.8% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 3.46%. All of the securities retained from 2023-A are classified as AFS. Comparatively, during both the three and six months ended June 30, 2022, the Company re-securitized, with an accredited institutional investor, Ajax Mortgage Loan Trust 2018-D and 2018-G ("2018-D and -G") joint ventures into Ajax Mortgage Loan Trust 2022-A ("2022-A") and retained $49.2 million of varying classes of agency rated securities and equity. The Company acquired 23.3% of the securities and trust certificates from the trust. 2022-A acquired 811 RPLs and NPLs with UPB of $215.5 million and an aggregate property value of $518.8 million. The AAA through A rated securities represent 71.9% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 3.47%. This is the first fully rated securitization structure to include a substantial amount of NPLs. Approximately 33.90% of loan UPB in 2022-A was 60 days or more delinquent. Also, the Company refinanced, with an accredited institutional investor, Ajax Mortgage Loan Trust 2019-A and 2019-B ("2019-A and -B") joint ventures into Ajax Mortgage Loan Trust 2022-B ("2022-B") and retained $36.8 million of varying classes of agency rated securities and equity. The Company acquired 17.2% of the securities and trust certificates from the trust. 2022-B acquired 1,106 RPLs and NPLs with UPB of $220.8 million and an aggregate property value of $575.5 million. The AAA through A rated securities represent 76.9% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 3.47%.

At June 30, 2023, the investments in debt securities AFS, investments in debt securities HTM and beneficial interests were carried on the Company's consolidated balance sheet at $142.1 million, $71.7 million and $127.5 million, respectively. At December 31, 2022, the investments in debt securities AFS and beneficial interests were carried on the Company's consolidated balance sheet at $257.1 million and $134.6 million, respectively.

During the three months ended June 30, 2023, the Company sold no senior notes issued by certain joint ventures; however, during the six months ended June 30, 2023, the Company sold senior notes issued by certain joint ventures and recognized a loss of $3.0 million. Comparatively, during both the three and six months ended June 30, 2022, the Company sold senior notes issued by certain joint ventures and recognized a loss of $0.1 million. As of June 30, 2023 and December 31, 2022, the Company had no securities that were past due.

During the second quarter of 2023, the Company recorded an other than temporary impairment of $8.8 million on its beneficial interests due to the refinancing of eight joint ventures that were redeemed or partially paid down and the underlying loans were re-securitized to form Ajax Mortgage Loan Trusts 2023-B and 2023-C ("2023-B and -C"). The $8.8 million was recorded on the Company's consolidated statements of operations and became a realized loss when the transactions closed during the third quarter of 2023. Although the Company retained approximately a proportionate investment in the securities issued by 2023-B and -C, the beneficial interests are accounted for as distinct legal securities and the loss recorded represents the mark to market adjustment on the sale of the underlying loans by the eight joint ventures to 2023-B and -C.

During the first quarter of 2023, the Company re-securitized 2019-E, -G and -H. The re-securitization resulted in a loss of $1.0 million on its beneficial interests in 2019-H. Although the Company retained a proportionate interest in the underlying
mortgage loans and related cash flows, the beneficial interests are accounted for as distinct legal securities and the loss recorded represents the mark to market adjustment on the sale of the underlying loans to 2023-A.

During the first quarter of 2022, the Company recorded an other than temporary impairment of $4.0 million on its beneficial interests in 2018-D and -G when the underlying mortgage loans were re-securitized into 2022-A. The loss became a realized loss when the transaction closed in the second quarter of 2022. Also, during the second quarter of 2022, the Company recorded a loss of $2.1 million on its beneficial interests in 2019-A and -B when the underlying mortgage loans were re-securitized into 2022-B. Although the Company retained a proportionate interest in the underlying mortgage loans and related cash flows in the new trusts, the beneficial interests are accounted for as distinct legal securities and the loss recorded represents the mark to market adjustment on the sale of the underlying loans to 2022-A and 2022-B.

The following table presents a reconciliation between the purchase price and par value for the Company's beneficial interests acquisitions for the three and six months ended June 30, 2023 and 2022 ($ in thousands):

Three months ended June 30,Six months ended June 30,
2023202220232022
Par$— $14,720 $2,051 $14,720 
Premium— 1,087 963 1,087 
Purchase Price$— $15,807 $3,014 $15,807 

The Company generally recognizes accretable yield and increases and decreases in the net present value of expected cash flows in earnings in the period they occur. For the three and six months ended June 30, 2023, the Company recognized accretable yield of $2.0 million and $4.1 million, respectively, on its beneficial interest. Comparatively, for the three and six months ended June 30, 2022, the Company recognized accretable yield of $2.5 million and $6.6 million, respectively, on its beneficial interest. For the three and six months ended June 30, 2023, the Company recognized accretable yield of $0.6 million and $1.2 million, respectively, on its investments in securities HTM. An expense is recorded to increase the allowance for expected credit losses when there is a reduction in the Company’s expected future cash flows compared to contractual amounts due. Income is recognized if there is an increase in expected future cash flows to the extent an allowance has been recorded against the beneficial interest or investments in securities HTM. If there is no allowance for expected credit losses recorded against a beneficial interest or investments in securities HTM, any increase in expected cash flows is recognized prospectively as a change in yield. 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 reduction to the allowance through the income statement. Management assesses the credit quality of the portfolio and the adequacy of loss reserves on a quarterly basis, or more frequently as necessary.

During the three and six months ended June 30, 2023, the Company had no activity related to the balance in the allowance for expected credit losses for investments in securities HTM.

During the three and six months ended June 30, 2023, the Company had no activity related to the balance in the allowance for expected credit losses for beneficial interests. Comparatively, during three and six months ended June 30, 2022, the Company recorded a $0.4 million and $0.8 million reclassification to non-credit discount from the allowance for changes in payment expectations and a $0.4 million and $0.1 million increase in the allowance for expected credit losses due to decreases in the net present value of expected cash flows, respectively.

An analysis of the balance in the allowance for expected credit losses for beneficial interests account follows ($ in thousands):

Three months ended June 30,Six months ended June 30,
2023202220232022
Allowance for expected credit losses, beginning balance$— $— $— $(615)
Reclassification to non-credit discount from the allowance for changes in payment expectations— 448 — 759 
Credit loss expense on beneficial interests— — — (50)
Increase in allowance for expected credit losses due to decreases in the net present value of expected cash flows— (448)— (94)
Allowance for expected credit losses, ending balance$— $— $— $—