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Mortgage Backed Securities Mortgage backed securities
 9 Months Ended
Sep. 30, 2016
Investments, Debt and Equity Securities [Abstract]  
Mortgage-backed securities
MORTGAGE-BACKED SECURITIES
 
The majority of the Company's MBS are pledged as collateral to cover initial and variation margins for the Company's secured borrowings and derivative instruments. The following tables present the Company’s MBS by investment type as of the dates indicated:
 
September 30, 2016
 
Par
 
Net Premium (Discount)
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
 
WAC (1)
RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
$
1,239,856

 
$
61,141

 
$
1,300,997

 
$
5,270

 
$
(8,549
)
 
$
1,297,718

 
3.04
%
Non-Agency
41,514

 
(19
)
 
41,495

 
109

 
(54
)
 
41,550

 
3.58
%
 
1,281,370

 
61,122

 
1,342,492

 
5,379

 
(8,603
)
 
1,339,268

 
 
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
898,317

 
11,048

 
909,365

 
35,901

 
(62
)
 
945,204

 
3.32
%
Non-Agency
82,190

 
(7,552
)
 
74,638

 
8,135

 
(1
)
 
82,772

 
4.89
%
 
980,507

 
3,496

 
984,003

 
44,036

 
(63
)
 
1,027,976

 
 
CMBS IO (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
—

 
385,968

 
385,968

 
8,597

 
(139
)
 
394,426

 
0.68
%
Non-Agency
—

 
344,792

 
344,792

 
4,921

 
(916
)
 
348,797

 
0.61
%
 
—

 
730,760

 
730,760

 
13,518

 
(1,055
)
 
743,223

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Total AFS securities:
$
2,261,877

 
$
795,378

 
$
3,057,255

 
$
62,933

 
$
(9,721
)
 
$
3,110,467

 
 
(1)
The current weighted average coupon ("WAC") is the gross interest rate of the pool of mortgages underlying the security weighted by the outstanding principal balance (or by notional balance in the case of an IO security).
(2)
The notional balance for Agency CMBS IO and non-Agency CMBS IO was $12,226,782 and $10,687,732, respectively, as of September 30, 2016.
 
December 31, 2015
 
Par
 
Net Premium (Discount)
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Fair Value
 
WAC (1)
RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
$
1,536,733

 
$
77,617

 
$
1,614,350

 
$
4,362

 
$
(20,190
)
 
$
1,598,522

 
3.03
%
Non-Agency
66,003

 
(45
)
 
65,958

 
70

 
(818
)
 
65,210

 
3.25
%
 
1,602,736

 
77,572

 
1,680,308

 
4,432

 
(21,008
)
 
1,663,732

 
 
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
876,751

 
13,252

 
890,003

 
10,542

 
(14,614
)
 
885,931

 
3.45
%
Non-Agency
156,218

 
(8,133
)
 
148,085

 
7,039

 
(941
)
 
154,183

 
4.29
%
 
1,032,969

 
5,119

 
1,038,088

 
17,581

 
(15,555
)
 
1,040,114

 
 
CMBS IO (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
—

 
421,857

 
421,857

 
5,922

 
(1,651
)
 
426,128

 
0.80
%
Non-Agency
—

 
365,554

 
365,554

 
1,992

 
(3,819
)
 
363,727

 
0.71
%
 
—

 
787,411

 
787,411

 
7,914

 
(5,470
)
 
789,855

 
 



 
 
 


 


 
 
 


 
 
Total AFS securities:
$
2,635,705

 
$
870,102

 
$
3,505,807

 
$
29,927

 
$
(42,033
)
 
$
3,493,701

 



(1)
The current weighted average coupon ("WAC") is the gross interest rate of the pool of mortgages underlying the security weighted by the outstanding principal balance (or by notional balance in the case of an IO security).
(2)
The notional balance for the Agency CMBS IO and non-Agency CMBS IO was $12,180,291 and $10,328,628, respectively, as of December 31, 2015.

Actual maturities of MBS are affected by the contractual lives of the underlying mortgage collateral, periodic payments of principal, prepayments of principal, and the payment priority structure of the security; therefore, actual maturities are generally shorter than the securities' stated contractual maturities.

The following table presents information regarding the sales included in "gain (loss) on sale of investments, net" on the Company's consolidated statements of comprehensive income for the periods indicated:
 
Three Months Ended
 
September 30,
 
2016
 
2015
 
Proceeds Received
 
Realized Gain (Loss)
 
Proceeds Received
 
Realized Gain (Loss)
Agency RMBS (1)
$
—

 
$
—

 
$
(2,694
)
 
$
(59
)
Agency CMBS IO
—

 
—

 
12,620

 
172

Non-Agency CMBS IO
—

 
—

 
—

 
—

 
$
—

 
$
—

 
$
9,926

 
$
113

(1)
There were no sales of Agency RMBS during the three months ended September 30, 2015. The amounts shown reflect an adjustment to proceeds received and the realized loss recognized during the three months ended September 30, 2015 related to pre-settlement factor changes.
 
Nine Months Ended
 
September 30,
 
2016
 
2015
 
Proceeds Received
 
Realized Gain (Loss)
 
Proceeds Received
 
Realized Gain (Loss)
Agency RMBS
$
54,178

 
$
(3,010
)
 
$
153,676

 
$
(2,256
)
Agency CMBS
—

 
—

 
98,887

 
(822
)
Non-Agency CMBS
33,640

 
(1,228
)
 
—

 
—

Agency CMBS IO
—

 
—

 
42,005

 
1,646

Non-Agency CMBS IO
—

 
—

 
44,764

 
1,362

 
$
87,818

 
$
(4,238
)
 
$
339,332

 
$
(70
)

The following table presents certain information for those MBS in an unrealized loss position as of the dates indicated:
 
September 30, 2016
 
December 31, 2015
 
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
$
352,253

 
$
(1,484
)
 
40
 
$
1,332,849

 
$
(19,062
)
 
109
Non-Agency MBS
24,448

 
(99
)
 
5
 
351,650

 
(5,347
)
 
72
 
 
 
 
 
 
 
 
 
 
 
 
Continuous unrealized loss position for 12 months or longer:
 
 
 
 
 
 
 
 
 
 
 
Agency MBS
$
379,488

 
$
(7,266
)
 
61
 
$
775,484

 
$
(17,393
)
 
72
Non-Agency MBS
84,959

 
(872
)
 
28
 
8,306

 
(231
)
 
7


Because the principal related to Agency MBS is guaranteed by the government-sponsored entities Fannie Mae and Freddie Mac which 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 September 30, 2016 and December 31, 2015 were temporary.

The Company reviews any non-Agency MBS in an unrealized loss position to evaluate whether any decline in fair value represents an OTTI. 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 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 OTTI amounts as of September 30, 2016 or December 31, 2015.