We invest in real estate securities that we create and retain from our unconsolidated loan securitizations or acquire from third parties. The following table presents the fair values of our real estate securities by type at December 31, 2025 and 2024.

Table 9.1 – Fair Value of Real Estate Securities by Type


(In Thousands)	December 31, 2025		December 31, 2024
Trading	$	135,459	$	193,749
AFS	287,557		211,474
Total Real Estate Securities	$	423,016	$	405,223

Our real estate securities include mortgage-backed securities, which are classified in accordance with their general position within a securitization structure based on their rights to cash flows. Senior securities are those interests in a securitization that generally have the first right to cash flows and are last in line to absorb losses. Mezzanine securities are interests that are generally subordinate to senior securities in their rights to receive cash flows, and have subordinate securities below them that are first to absorb losses. Subordinate securities are all interests below mezzanine. Exclusive of our re-performing loan securities, nearly all of our residential securities are supported by collateral that was designated as prime at the time of issuance.

We elected the fair value option for certain securities and classify them as trading securities. Our trading securities generally include both residential and multifamily mortgage-backed interest-only and subordinate securities. Refer to Note 6 for further information on the inputs into the fair valuation of our real estate trading securities.

In the third quarter of 2025, as part of the sale of a $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust, we retained a $182 million subordinate beneficial interest in the Legacy Trust. The beneficial interest represents our right to residual cash flows from the Legacy Trust after payment of senior financing and preferred interests and is recorded as an AFS security, measured at fair value and classified as a Level 3 asset.

The retained beneficial interest is valued using discounted expected cash flows that incorporate assumptions for expected recoveries on the underlying collateral, including the timing and amount of principal repayments, credit losses and market discount rates. We did not record a separate allowance for credit losses at initial recognition because the fair value measurement already reflected expected credit losses; however, we will re-evaluate expected credit losses at each reporting period and record an allowance if updated expectations indicate one is required. During the fourth quarter of 2025, we recognized a credit loss allowance of $0.3 million related to this retained beneficial interest.

Subsequent changes in fair value of the retained beneficial interest are recognized in Other comprehensive income (loss). Interest income is recognized using the cost recovery method, under which cash receipts are first applied to the recovery of the recorded investment balance, with income recognized only after the investment is fully recovered. See Note 8 for further discussion on this transaction.

Table 9.2 – Carrying Value and Fair Value of AFS Securities by Type


December 31, 2025
(In Thousands)	Senior		Mezzanine		Subordinate		Total
Amortized cost	$	—	$	—	$	260,381	$	260,381
Gross unrealized gains	—		—		31,334		31,334
Gross unrealized losses	—		—		(3,092)		(3,092)
Allowance for credit losses	—		—		(1,066)		(1,066)
Total Carrying Value	$	—	$	—	$	287,557	$	287,557

December 31, 2024
(In Thousands)	Senior		Mezzanine		Subordinate		Total
Amortized cost	$	39,135	$	31,250	$	121,053	$	191,438
Gross unrealized gains	230		668		25,733		26,631
Gross unrealized losses	—		(51)		(5,623)		(5,674)
Allowance for credit losses	—		—		(921)		(921)
Total Carrying Value	$	39,365	$	31,867	$	140,242	$	211,474


December 31, 2025
(In Thousands)	Senior		Mezzanine		Subordinate		Total
Other third-party securities	$	—	$	—	$	185,737	$	185,737

Sequoia securities	—		—		101,820		101,820
Total Fair Value	$	—	$	—	$	287,557	$	287,557

December 31, 2024
(In Thousands)	Senior		Mezzanine		Subordinate		Total
Other third-party securities	$	39,365	$	28,948	$	40,191	$	108,504
Multifamily securities	—		2,919		8,830		11,749
Sequoia securities	—		—		91,221		91,221
Total Fair Value	$	39,365	$	31,867	$	140,242	$	211,474

Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of (loss) income. During the year ended December 31, 2025, we recognized net gains of $1 million on sales of AFS securities. During the year ended December 31, 2024, we did not sell any AFS securities. During the year ended December 31, 2025 and 2024 we had $9 million and $12 million of net unrealized gains on AFS securities.

At December 31, 2025, we had $183 million AFS securities with contractual maturities less than five years, $4 million AFS securities with contractual maturities greater than five years but less than ten years, and the remainder of our AFS securities had contractual maturities greater than ten years.

The following table presents the total carrying value (fair value) and unrealized losses of residential AFS securities that were in a gross unrealized loss position at December 31, 2025 and 2024.


	Less Than 12 Consecutive Months				12 Consecutive Months or Longer
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
(In Thousands)
December 31, 2025	$	—	$	—		$	22,079	$	(3,092)
December 31, 2024	30,351		(391)			19,817		(5,283)

At December 31, 2025, after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheets included 63 AFS securities, of which 11 were in an unrealized loss position, including 11 in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2024, our consolidated balance sheet included 90 AFS securities, of which 20 were in an unrealized loss position including 11 that were in a continuous unrealized loss position for 12 consecutive months or longer.

Credit impairments on our AFS securities are recorded in earnings using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. We evaluate all securities in an unrealized loss position to determine if the impairment is credit-related (resulting in an allowance for credit losses recorded in earnings) or non-credit-related (resulting in an unrealized loss through other comprehensive income). The allowance for credit losses is calculated using a discounted cash flow approach and is measured as the difference between the beneficial interest’s amortized cost and the estimate of cash flows expected to be collected, discounted at the effective interest rate used to accrete the beneficial interest. No allowance is recorded for beneficial interests in an unrealized gain position.

Table 9.4 – Rollforward of Allowance for Credit Losses


	Year Ended		Year Ended
(In Thousands)	December 31, 2025		December 31, 2024
Beginning balance allowance for credit losses	$	921	$	2,482

Additions to allowance for credit losses on securities for which credit losses were not previously recorded	270		88
Additional decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period	(125)		(1,649)




Ending balance of allowance for credit losses	$	1,066	$	921