Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the fair value of the Company’s assets and liabilities presented on its consolidated balance sheets, segregated by the hierarchy level of the fair value estimate, that are measured at fair value on a recurring basis as of the dates indicated:



	March 31, 2017
	Fair Value		Level 1 - Unadjusted Quoted Prices in Active Markets		Level 2 - Observable Inputs		Level 3 - Unobservable Inputs
Assets:
Mortgage-backed securities	$	3,186,749	$	—	$	3,176,247	$	10,502
Derivative assets	272		—		272		—
Total assets carried at fair value	$	3,187,021	$	—	$	3,176,519	$	10,502
Liabilities:
Derivative liabilities	$	58	$	—	$	58	$	—
Total liabilities carried at fair value	$	58	$	—	$	58	$	—



	December 31, 2016
	Fair Value		Level 1 - Unadjusted Quoted Prices in Active Markets		Level 2 - Observable Inputs		Level 3 - Unobservable Inputs
Assets:
Mortgage-backed securities	$	3,212,084	$	—	$	3,201,157	$	10,927
Derivative assets	28,534		—		28,534		—
Total assets carried at fair value	$	3,240,618	$	—	$	3,229,691	$	10,927
Liabilities:
Derivative liabilities	$	6,922	$	—	$	6,922	$	—
Total liabilities carried at fair value	$	6,922	$	—	$	6,922	$	—

Fair Value Inputs, Assets, Quantitative Information

The table below presents quantitative information about the significant unobservable inputs used in the fair value measurement for the Company's Level 3 non-Agency CMBS and RMBS as of March 31, 2017:



	Unobservable Inputs
	Prepayment Speed	Default Rate		Severity		Discount Rate
Non-Agency CMBS ⁽¹⁾	0 CPY	—		—		10.7	%
Non-Agency RMBS	10 CPR	1.0	%	20.0	%	6.3	%


(1)	As of March 31, 2017, there are too few loans collateralizing our non-Agency CMBS to reasonably apply average prepayment speed, average default rate, or average severity. The loans were individually evaluated for prepayment and default in projecting the cash flows. Based on that review, the loans are expected to pay as scheduled.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The activity of the instruments measured at fair value on a recurring basis using Level 3 inputs is presented in the following table for the period indicated:



	Level 3 Fair Value
	Non-Agency CMBS			Non-Agency RMBS			Total assets
Balance as of December 31, 2016	$	9,669		$	1,258		$	10,927
Unrealized loss included in OCI ⁽¹⁾	(377		)	(3		)	(380		)
Principal payments	(383		)	(44		)	(427		)
Accretion	382			—			382
Balance as of March 31, 2017	$	9,291		$	1,211		$	10,502

Recorded basis and fair value

The following table presents a summary of the carrying value and estimated fair values of the Company’s financial instruments as of the dates indicated:



	March 31, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Mortgage-backed securities	$	3,186,749	$	3,186,749	$	3,212,084	$	3,212,084
Mortgage loans held for investment, net⁽¹⁾	18,183		15,120		19,036		15,971
Derivative assets	272		272		28,534		28,534
Liabilities:
Repurchase agreements ⁽²⁾	$	2,825,945	$	2,825,945	$	2,898,952	$	2,898,952
Non-recourse collateralized financing ⁽¹⁾	6,075		6,024		6,440		6,357
Derivative liabilities	58		58		6,922		6,922