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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of Information on Assets Measured and Recorded at Fair Value

The following tables present information on assets measured and recorded at fair value as of June 30, 2020 and December 31, 2019, by level, in the fair value hierarchy (in thousands):

	Fair value measurements using						Total at
June 30, 2020	Level 1		Level 2		Level 3		fair value
Recurring fair value measurements:
Loans held for investment, at fair value	$	—	$	—	$	2,956	$	2,956
Interest-only strips		—		—		845		845
Total recurring fair value measurements		—		—		3,801		3,801
Nonrecurring fair value measurements:
Loans held for sale, net		—		—		212,344		212,344
Real estate owned, net		—		—		15,648		15,648
Individually evaluated loans requiring specific allowance, net		—		—		269,499		269,499
Total nonrecurring fair value measurements		—		—		497,491		497,491
Total assets	$	—	$	—	$	501,292	$	501,292

	Fair value measurements using						Total at
December 31, 2019	Level 1		Level 2		Level 3		fair value
Recurring fair value measurements:
Loans held for investment, at fair value	$	—	$	—	$	2,960	$	2,960
Interest-only strips		—		—		894		894
Total recurring fair value measurements		—		—		3,854		3,854
Nonrecurring fair value measurements:
Loans held for sale, net		—		—		214,467		214,467
Real estate owned, net		—		—		13,068		13,068
Impaired loans requiring specific allowance, net		—		—		11,373		11,373
Total nonrecurring fair value measurements		—		—		238,908		238,908
Total assets	$	—	$	—	$	242,762	$	242,762

Schedule of Gains and Losses Recognized on Assets Measured on Nonrecurring Basis

The following table presents gains and losses recognized on assets measured on a nonrecurring basis for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
Gain (loss) on assets measured on a nonrecurring basis	2020			2019			2020			2019
Loans held for sale, net	$	(921	)	$	(20	)	$	(961	)	$	69
Real estate held for sale, net		(648	)		(363	)		(1,216	)		(377	)
Individually evaluated loans requiring specific allowance, net		(431	)		(66	)		(360	)		(167	)
Total net loss	$	(2,000	)	$	(449	)	$	(2,537	)	$	(475	)

Valuation Techniques and Unobservable Inputs Related to Level 3 Assets

The following tables present the primary valuation techniques and unobservable inputs related to Level 3 assets as of June 30, 2020 and December 31, 2019 (dollars in thousands):

	June 30, 2020
Asset category	Fair value		Primary valuation technique	Unobservable input	Range	Weighted average
Individually evaluated loans requiring allowance, net	$	269,499	Market comparables	Selling costs	8.0%	8.0%
Real estate owned, net		15,648	Market comparables	Selling costs	8.0%	8.0%
Loans held for investment, at fair value		2,956	Discounted cash flow	Discount rate	10.5%	10.5%
				Collateral value (% of UPB)	8.0% to 97.0%	88.0%
				Timing of resolution/payoff (months)	5 to 212		60.0
				Prepayment rate	15.0%	15.0%
				Default rate	1.0%	1.0%
				Loss severity rate	10.0%	10.0%
Loans held for sale		212,344	Discounted cash flow	Discount rate	12.0% to 15.0%	14.5%
				Timing of resolution/payoff (months)	0 to 13		7.6

Interest-only strips		845	Discounted cash flow	Discount rate	15.0%	15.0%
				Timing of resolution/payoff (months)	0 to 13.0		2.4

	December 31, 2019
Asset category	Fair value		Primary valuation technique	Unobservable input	Range	Weighted average
Collateral dependent impaired loans requiring specific allowance, net	$	11,373	Market comparables	Selling costs	8.0%	8.0%
Real estate owned, net		13,068	Market comparables	Selling costs	8.0%	8.0%
Loans held for investment, at fair value		2,960	Discounted cash flow	Discount rate	10.5%	10.5%
				Collateral value (% of UPB)	18.0% to 94.0%	87.0%
				Timing of resolution/payoff (months)	5 to 218		65.0
				Prepayment rate	15.0%	15.0%
				Default rate	1.0%	1.0%
				Loss severity rate	10.0%	10.0%
Loans held for sale		214,467	Discounted cash flow	Discount rate	12.0% to 15.0%	14.7%
				Timing of resolution/payoff (months)	0 to 12		7.0

Interest-only strips		894	Discounted cash flow	Discount rate	15.0%	15.0%
				Timing of resolution/payoff (months)	0 to 7.0		2.1

Rollforward of Loans and Interest Only Strips Measured at Estimated Fair Value on Recurring Basis

The following is a rollforward of loans that are measured at estimated fair value on a recurring basis for the periods indicated (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Beginning balance	$	2,987		$	2,971		$	2,960		$	3,463
Loans liquidated		—			45			—			(421	)
Principal paydowns		(18	)		(17	)		(36	)		(34	)
Total unrealized gain (loss) included in net income		(13	)		(25	)		32			(34	)
Ending balance	$	2,956		$	2,974		$	2,956		$	2,974

The following is a rollforward of interest-only strips that are measured at estimated fair value on a recurring basis for the periods indicated (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Beginning balance	$	1,534		$	1,609		$	894		$	812
Interest-only strip additions		—			330			1,820			1,634
Interest-only strip write-offs		(689	)		(661	)		(1,869	)		(1,131	)
Total unrealized loss included in net income		—			(85	)		—			(122	)
Ending balance	$	845		$	1,193		$	845		$	1,193

Carrying Amounts and Estimated Fair Values of Financial Instruments

The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated (in thousands):

	June 30, 2020
	Carrying								Estimated
Asset category	Value		Level 1		Level 2		Level 3		Fair Value
Assets:
Cash	$	9,803	$	9,803	$	—	$	—	$	9,803
Restricted cash		6,735		6,735		—		—		6,735
Loans held for sale, net		212,344		—		—		212,344		212,344
Loans held for investment, net		1,861,819		—		—		1,767,635		1,767,635
Loans held for investment, at fair value		2,956		—		—		2,956		2,956
Accrued interest receivables		17,793		17,793		—		—		17,793
Interest-only strips		845		—		—		845		845

Liabilities:
Secured financing, net	$	74,571	$	—	$	—	$	75,010	$	75,010
Warehouse repurchase facilities, net		160,796		—		160,796		—		160,796
Securitizations, net		1,599,719		—		—		1,617,114		1,617,114
Accrued interest payable		7,777		7,777		—		—		7,777

	December 31, 2019
	Carrying								Estimated
Asset category	Value		Level 1		Level 2		Level 3		Fair Value
Assets:
Cash	$	21,465	$	21,465	$	—	$	—	$	21,465
Restricted cash		6,087		6,087		—		—		6,087
Loans held for sale, net		214,467		—		—		222,260		222,260
Loans held for investment, net		1,863,360		—		—		1,913,481		1,913,481
Loans held for investment, at fair value		2,960		—		—		2,960		2,960
Accrued interest receivable		13,295		13,295		—		—		13,295
Real estate owned, net		13,068		—		—		13,068		13,068
Interest-only strips	894			—		—	894		894

Liabilities:
Secured financing, net	$	145,599	$	—	$	—	$	153,000	$	153,000
Warehouse repurchase facilities, net		421,548		—		421,548		—		421,548
Securitizations, net		1,438,629		—		—		1,486,990		1,486,990
Accrued interest payable		7,190		7,190		—		—		7,190