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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Carrying Values and Estimated Fair Values of Assets and Liabilities

The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at June 30, 2013 and December 31, 2012.


	June 30, 2013				December 31, 2012
(In Thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Residential loans, held-for-sale
At fair value	$	1,219,368	$	1,219,368	$	553,576	$	553,576
At lower of cost or fair value		1,730		1,807		9,082		9,324
Residential loans, held-for-investment		1,998,178		1,801,052		2,272,812		2,062,352
Commercial loans, held-for-sale
At fair value		149,470		149,470		-		-
At lower of cost or fair value		-		-		8,500		8,500
Commercial loans, held-for-investment		345,353		349,212		304,510		309,547
Trading securities		141,615		141,615		33,172		33,172
Available-for-sale securities		1,172,690		1,172,690		1,075,581		1,075,581
Mortgage servicing rights		43,098		43,098		5,315		5,315
Cash and cash equivalents		207,694		207,694		81,080		81,080
Restricted cash		405		405		383		383
Accrued interest receivable		16,111		16,111		12,442		12,442
Derivative assets		43,341		43,341		2,972		2,972
REO ⁽¹⁾		3,965		4,971		4,245		5,540
Margin receivable ⁽¹⁾		55,926		55,926		63,424		63,424
Other collateral posted ⁽¹⁾		5,000		5,000		-		-

Liabilities
Short-term debt	$	1,445,961	$	1,445,961	$	551,918	$	551,918
Accrued interest payable		8,682		8,682		4,592		4,592
Derivative liabilities		29,571		29,571		51,081		51,081
ABS issued		2,214,296		1,991,401		2,529,941		2,372,971
Commercial borrowings		16,591		16,591		-		-
Convertible notes		287,500		283,547		-		-
Other long-term debt		139,500		104,625		139,500		90,675

(1)	These assets are included in Other Assets on our consolidated balance sheets.

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents the assets and liabilities recorded that are reported at fair value on our consolidated balance sheets on a recurring basis at June 30, 2013, as well as the fair value hierarchy of the valuation inputs used to measure fair value.

Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2013


June 30, 2013	Carrying		Fair Value Measurements Using
(In Thousands)	Value		Level 1		Level 2		Level 3
Assets
Residential loans, at fair value	$	1,219,368	$	-	$	-	$	1,219,368
Commercial loans, at fair value		149,470		-		149,470		-
Trading securities		141,615		-		-		141,615
Available-for-sale securities		1,172,690		-		-		1,172,690
MSRs		43,098		-		-		43,098
Derivative assets		43,341		8,983		34,358		-

Liabilities
Derivative liabilities		29,571		1,786		27,785		-

Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the six months ended June 30, 2013.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis


	Assets
(In Thousands)	Residential Loans		Trading Securities		AFS Securities		MSRs
Beginning balance - December 31, 2012	$	553,576	$	33,172	$	1,075,581	$	5,315
Principal paydowns		(2,486)		(31)		(81,218)		-
(Losses) gains in net income, net		(19,601)		33,558		26,722		9,169
Unrealized losses in OCI, net		-		-		(41,230)		-
Acquisitions		5,154,352		91,850		207,096		28,614
Sales		(4,465,558)		(16,934)		(14,261)		-
Other settlements, net		(915)		-		-		-

Ending Balance - June 30, 2013	$	1,219,368	$	141,615	$	1,172,690	$	43,098

Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held and Included in Net Income

The following table presents the portion of gains or losses included in our consolidated statements of income that were attributable to Level 3 assets and liabilities recorded at fair value on a recurring basis and held at both June 30, 2013 and 2012. Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three and six months ended June 30, 2013 and 2012 are not included in this presentation.

Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at June 30, 2013 and 2012 Included in Net Income


	Included in Net Income
	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2013		2012		2013		2012
Assets
Residential loans, at fair value	$	(59,649)	$	-	$	(59,641)	$	-
Commercial loans, at fair value		-		111		-		122
Trading securities		31,354		10,585		30,866		43,019
Available-for-sale securities		(1,642)		(303)		(1,665)		(635)
MSRs		9,450		(476)		9,532		(482)

Liabilities
Derivative liabilities		-		(195)		-		(1,090)
ABS issued - Acacia		-		(12,973)		-		(45,026)

Assets and Liabilities Measured at Fair Value on Non-Recurring Basis

The following table presents information on assets recorded at fair value on a non-recurring basis at June 30, 2013. This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our balance sheet at June 30, 2013.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at June 30, 2013


									Gain (Loss) for
June 30, 2013	Carrying		Fair Value Measurements Using						Three Months Ended		Six Months Ended
(In Thousands)	Value		Level 1		Level 2		Level 3		June 30, 2013		June 30, 2013
Assets
Residential loans, at lower of cost or fair value	$	1,122	$	-	$	-	$	1,122	$	37	$	42
REO		2,117		-		-		2,117		(368)		(459)

Market Valuation Adjustments, Net

The following table presents the components of market valuation adjustments, net, recorded in our consolidated statements of income for the three and six months ended June 30, 2013 and 2012.

Market Valuation Adjustments, Net


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2013		2012		2013		2012
Other
Residential loans, at lower of cost or fair value	$	38	$	405	$	78	$	498
Commercial loans, at fair value		-		111		-		122
Trading securities		(4,140)		16,349		(4,707)		49,824
Impairments on AFS securities		(1,642)		(303)		(1,665)		(635)
REO		(558)		(162)		(331)		(144)
Other derivative instruments, net		44		(3,513)		64		(5,982)
ABS issued - Acacia		-		(12,973)		-		(45,026)

Total other		(6,258)		(86)		(6,561)		(1,343)

Mortgage banking activities
Residential loans, at fair value		(41,405)		-		(6,535)		-
Commercial loans, at fair value		(345)		-		(345)		-
Trading securities		36,336		(5,363)		38,265		(4,674)
MSRs		8,827		(527)		9,169		(544)
Derivative instruments, net		49,544		(3,282)		50,567		(6,398)

Total mortgage banking activities		52,957		(9,172)		91,121		(11,616)

Total Market Valuation Adjustments, Net	$	46,699	$	(9,258)	$	84,560	$	(12,959)

Quantitative Information about Significant Unobservable Inputs Used in Valuation of Level 3 Assets and Liabilities Measured at Fair Value

The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value.

Fair Value Methodology for Level 3 Financial Instruments


June 30, 2013	Fair						Weighted
(Dollars in Thousands)	Value		Unobservable Input	Range			Average
Assets
Residential loans, at fair value
Loans priced to securitization	$	1,047,686	Discount rate		4 - 4 %			4 %
			Prepayment rate		10 - 10 %			10 %
			Default rate		1 - 1 %			1 %
			Loss severity		22 - 22 %			22 %
			Credit support		7 - 7 %			7 %

Loans priced to whole loan market		171,682	Pool fallout assumption		0 - 5 %			4 %
			Fallout assumption price discount		0 - 5 pt	s		4 pt	s

Residential loans, at lower of cost or fair value		1,122	Loss severity		15 - 28 %			21 %

Trading and AFS securities		1,314,305	Discount rate		6 - 18 %			7 %
			Prepayment speed		1 - 40 %			14 %
			Default rate		0 - 37 %			10 %
			Loss severity		20 - 64 %			38 %
			Credit support		0 - 59 %			6 %

MSRs		43,098	Discount rate		12 - 12 %			12 %
			Prepayment rate		6 - 50 %			8 %

REO		2,117	Historical loss adjustment		0 - 40 %			10 %

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References+ Details