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Real Estate Securities (Tables)

6 Months Ended

Jun. 30, 2013

Fair Values of Real Estate Securities by Collateral Type and Entity

We invest in mortgage-backed securities. The following table presents the fair values of our real estate securities by collateral type at June 30, 2013 and December 31, 2012.


(In Thousands)	June 30, 2013		December 31, 2012
Residential	$	1,314,305	$	1,094,684
Commercial		-		14,069

Total Real Estate Securities	$	1,314,305	$	1,108,753

Trading Securities by Collateral Type

The following table presents trading securities by collateral type at June 30, 2013 and December 31, 2012.


(In Thousands)	June 30, 2013		December 31, 2012
Senior Securities
Residential prime	$	123,591	$	10,409
Residential non-prime		17,525		22,134

Total Senior Securities		141,116		32,543

Subordinate Securities
Residential prime		354		468
Residential non-prime		145		161

Total Subordinate Securities		499		629

Total Trading Securities	$	141,615	$	33,172

Available for Sale Securities by Collateral Type

The following table presents the fair value of our available-for-sale securities held at Redwood by collateral type at June 30, 2013 and December 31, 2012.


(In Thousands)	June 30, 2013		December 31, 2012
Senior Securities
Residential prime	$	410,159	$	466,523
Residential non-prime		224,687		245,266

Total Senior Securities		634,846		711,789

Re-REMIC Securities		154,167		163,035

Subordinate Securities
Residential prime		381,631		184,528
Residential non-prime		2,046		2,160
Commercial		-		14,069

Total Subordinate Securities		383,677		200,757

Total AFS Securities	$	1,172,690	$	1,075,581

Components of Carrying Value (Which Equals Fair Value) of Residential Available for Sale Securities

The following table presents the components of carrying value (which equals fair value) of residential AFS securities at June 30, 2013 and December 31, 2012.

Carrying Value of Residential AFS Securities


(In Thousands)	June 30, 2013		December 31, 2012
Principal balance	$	1,453,596	$	1,277,401
Credit reserve		(190,410)		(187,032)
Unamortized discount, net		(235,846)		(203,421)

Amortized cost		1,027,340		886,948
Gross unrealized gains		158,883		176,929
Gross unrealized losses		(13,533)		(2,365)

Carrying Value	$	1,172,690	$	1,061,512

Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities

The following table presents the changes for the three and six months ended June 30, 2013, in unamortized discount and designated credit reserves on residential AFS securities.

Changes in Unamortized Discount and Designated Credit Reserves on Residential AFS Securities


	Three Months Ended June 30, 2013
(In Thousands)	Credit Reserve		Unamortized Discount, Net
Beginning balance	$	190,690	$	220,568
Amortization of net discount		-		(8,153)
Realized credit losses		(4,117)		-
Acquisitions		3,495		23,102
Sales, calls, other		(338)		(633)
Impairments		1,642		-
(Release of) transfers to credit reserves		(962)		962

Ending Balance	$	190,410	$	235,846


	Six Months Ended June 30, 2013
(In Thousands)	Credit Reserve		Unamortized Discount, Net
Beginning balance	$	187,032	$	203,421
Amortization of net discount		-		(15,847)
Realized credit losses		(11,965)		-
Acquisitions		8,397		54,523
Sales, calls, other		(338)		(633)
Impairments		1,666		-
Transfers to (release of) credit reserves		5,618		(5,618)

Ending Balance	$	190,410	$	235,846

Components of Carrying Value of Available for Sale Securities in Unrealized Loss Position

The following table presents the components comprising the total carrying value of residential AFS securities that were in a gross unrealized loss position at June 30, 2013 and December 31, 2012.


	Less Than 12 Consecutive Months							12 Consecutive Months or Longer
(In Thousands)	Amortized Cost		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Losses			Fair Value
June 30, 2013	$	299,244	$	(11,837	)	$	287,407	$	13,974	$	(1,696	)	$	12,278
December 31, 2012		22,803		(293	)		22,510		26,729		(2,072	)		24,657

Summary of Significant Valuation Assumptions for Available for Sale Securities

The table below summarizes the significant valuation assumptions we used for our AFS securities at June 30, 2013.

Significant Valuation Assumptions


	Range for Securities
June 30, 2013	Prime		Non-prime
Prepayment rates		4 - 50 %		3 - 10 %
Loss severity		22 - 56 %		30 - 58 %
Projected losses		0 - 38 %		3 - 24 %

Activity of Credit Component of Other-than-Temporary Impairments

The following table details the activity related to the credit component of OTTI (i.e., OTTI in either current earnings or retained earnings) for AFS securities that also had a non-credit component and were still held at June 30, 2013 and 2012. The balance of the credit component of OTTI at June 30, 2013 and 2012, includes all market valuation adjustments recorded through the income statement for securities still held on our balance sheet at June 30, 2013 and 2012, as well as a portion of OTTI previously recognized in other comprehensive income.

Activity of the Credit Component of Other-than-Temporary Impairments


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2013		2012		2013		2012
Balance at beginning of period	$	45,611	$	73,698	$	50,852	$	78,126
Additions
Initial credit impairments		-		55		-		161
Subsequent credit impairments		-		91		-		91
Reductions
Securities sold, or expected to sell		(2,191)		-		(2,191)		-
Securities with no outstanding principal at period end		(746)		(6,790)		(5,987)		(11,324)

Balance at End of Period	$	42,674	$	67,054	$	42,674	$	67,054

Gross Realized Gains and Losses on Sales and Calls of Available for Sale Securities

The following table presents the gross realized gains on sales and calls of AFS securities for the three and six months ended June 30, 2013 and 2012.


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2013		2012		2013		2012
Gross realized gains - sales	$	193	$	6,989	$	12,231	$	14,774
Gross realized gains - calls		333		-		333		113
Gross realized losses - sales		-		-		-		(1,600)
Gross realized losses - calls		-		-		-		-

Total Realized Gains on Sales and Calls of AFS Securities, net	$	526	$	6,989	$	12,564	$	13,287

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

+ References+ Details

- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

+ References+ Details

- Definition

Tabular disclosure of investments in trading securities.

+ References+ Details