Mortgage backed securities Mortgage backed securities (Notes)

3 Months Ended

Mar. 31, 2013

Schedule of Available-for-sale Securities [Line Items]

Mortgage-backed securities

MORTGAGE-BACKED SECURITIES

The following table presents the components of the Company’s MBS designated as AFS as of March 31, 2013 and December 31, 2012 and includes MBS pending settlement:

	March 31, 2013
	Par		Net Premium (Discount)			Amortized Cost		Net Unrealized Gain (Loss)		Fair Value		Weighted average coupon
Agency:
RMBS (including pending settlements)	$	2,732,173	$	158,205		$	2,890,378	$	4,643	$	2,895,021	3.56	%
CMBS	280,842		21,562			302,404		19,812		322,216		5.18	%
CMBS IO (1)	—		576,161			576,161		25,228		601,389		1.02	%
Total Agency AFS:	3,013,015		755,928			3,768,943		49,683		3,818,626
Non-Agency:
RMBS	10,053		(758		)	9,295		285		9,580		4.20	%
CMBS	472,650		(16,685		)	455,965		40,310		496,275		5.40	%
CMBS IO (1)	—		104,930			104,930		6,476		111,406		0.93	%
Total non-Agency AFS:	482,703		87,487			570,190		47,071		617,261
Total AFS securities (including pending settlements)	$	3,495,718	$	843,415		$	4,339,133	$	96,754	$	4,435,887

(1) The combined notional balance for Agency CMBS IO and non-Agency CMBS IO is $10,873,160 and $2,385,979, respectively, as of March 31, 2013.

	December 31, 2012
	Par		Net Premium (Discount)			Amortized Cost		Net Unrealized Gain (Loss)		Fair Value		Weighted average coupon
Agency:
RMBS	$	2,425,826	$	137,168		$	2,562,994	$	8,343	$	2,571,337	3.67	%
CMBS	280,602		21,907			302,509		21,564		324,073		5.19	%
CMBS IO (1)	—		550,171			550,171		17,009		567,180		0.95	%
Total Agency AFS:	2,706,428		709,246			3,415,674		46,916		3,462,590
Non-Agency:
RMBS	11,411		(781		)	10,630		408		11,038		4.28	%
CMBS	463,747		(17,313		)	446,434		39,908		486,342		5.31	%
CMBS IO (1)	—		108,928			108,928		5,014		113,942		0.86	%
Total non-Agency AFS:	475,158		90,834			565,992		45,330		611,322
Total AFS securities	$	3,181,586	$	800,080		$	3,981,666	$	92,246	$	4,073,912

(1) The combined notional balance for the Agency CMBS IO and non-Agency CMBS IO is $10,059,495 and $2,393,614, respectively, as of December 31, 2012.

The Company has investments in additional Agency CMBS not included in the tables above that are designated as trading securities by the Company with fair values of $29,808 and $30,069 as of March 31, 2013 and December 31, 2012, respectively. Changes in the fair value of these Agency CMBS are recognized each reporting period within "fair value adjustments, net" in the Company's consolidated statements of income. As of March 31, 2013 and December 31, 2012, the amortized cost of these Agency CMBS designated as trading securities was $27,381 and $27,535, respectively. The Company recognized a net unrealized loss for the three months ended March 31, 2013 of $(107) compared to a net unrealized loss of $(136) for the three months ended March 31, 2012, respectively, related to changes in fair value. The Company also has derivatives designated as trading instruments, and the changes in their fair value are also included within "fair value adjustments, net". Please refer to Note 7 for additional information on these derivatives designated as trading instruments.

The following table presents certain information for those Agency MBS in an unrealized loss position as of March 31, 2013 and December 31, 2012:

	March 31, 2013						December 31, 2012
	Fair Value		Gross Unrealized Losses			# of Securities	Fair Value		Gross Unrealized Losses			# of Securities
Continuous unrealized loss position for less than 12 months:
Agency MBS	$	1,034,706	$	(8,997	)	87	$	1,026,277	$	(6,552	)	83
Non-Agency MBS	4,480		(314		)	2	13,877		(76		)	3
Continuous unrealized loss position for 12 months or longer:
Agency MBS	$	251,664	$	(6,415	)	35	$	271,719	$	(5,797	)	34
Non-Agency MBS	2,188		(161		)	6	2,701		(198		)	8

Because the principal and interest related to Agency MBS are guaranteed by the government-sponsored entities Fannie Mae and Freddie Mac who have the implicit guarantee of the U.S. government, the Company does not consider any of the unrealized losses on its Agency MBS to be credit related. Although the unrealized losses are not credit related, the Company assesses its ability and intent to hold any Agency MBS with an unrealized loss until the recovery in its value. This assessment is based on the amount of the unrealized loss and significance of the related investment as well as the Company’s current leverage and anticipated liquidity.  Based on this analysis, the Company has determined that the unrealized losses on its Agency MBS as of March 31, 2013 and December 31, 2012 were temporary.

The Company also reviews any non-Agency MBS in an unrealized loss position to evaluate whether any decline in fair value represents an other-than-temporary impairment. The evaluation includes a review of the credit ratings of these non-Agency MBS and the seasoning of the mortgage loans collateralizing these securities as well as the estimated future cash flows which include projected losses. The Company performed this evaluation for the non-Agency MBS in an unrealized loss position as of March 31, 2013 and has determined that there have not been any adverse changes in the timing or amount of estimated future cash flows that necessitate a recognition of other-than-temporary impairment amounts as of March 31, 2013.