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SECURITIES
 12 Months Ended
Dec. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
SECURITIES
5. SECURITIES
The Company’s investments in securities include agency, credit risk transfer, non-agency and commercial mortgage-backed securities. All of the debt securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with changes in fair value recognized in other comprehensive income, unless the fair value option is elected in which case changes in fair value are recognized in Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss). Transactions for securities are recorded on trade date, including
TBA securities that meet the regular-way securities scope exception from derivative accounting. Gains and losses on disposals of securities are recorded on trade date based on the specific identification method.
Impairment – Management evaluates available-for-sale securities and held-to-maturity debt securities for impairment at least quarterly, and more frequently when economic or market conditions warrant such evaluation. When the fair value of an available-for-sale security is less than its amortized cost, the security is considered impaired. For securities that are impaired, the Company determines if it (1) has the intent to sell the security, (2) is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, or (3) does not expect to recover the entire amortized cost basis of the security.  Further, the security is analyzed for credit loss (the difference between the present value of cash flows expected to be collected and the amortized cost basis). The credit loss, if any, will then be recognized in the Consolidated Statements of Comprehensive Income (Loss) as a Securities Loss Provision and reflected as an Allowance for Credit Losses on Securities on the Consolidated Statements of Financial Condition, while the balance of losses related to other factors will be recognized as a component of Other comprehensive income (loss).  When the fair value of a held-to-maturity security is less than the cost, the Company performs an analysis to determine whether it expects to recover the entire cost basis of the security. There was no impairment recognized for the years ended December 31, 2020, 2019 and 2018.
Agency Mortgage-Backed Securities - The Company invests in mortgage pass-through certificates, collateralized mortgage obligations and other MBS representing interests in or obligations backed by pools of residential or multifamily mortgage loans and certificates. Many of the underlying loans and certificates are guaranteed by the Government National Mortgage Association (“Ginnie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) or the Federal National Mortgage Association (“Fannie Mae”) (collectively, “Agency mortgage-backed securities”). 
Agency mortgage-backed securities may include forward contracts for Agency mortgage-backed securities purchases or sales of a generic pool, on a to-be-announced basis (“TBA securities”). TBA securities without intent to accept delivery (“TBA derivatives”), are accounted for as derivatives as discussed in the “Derivative Instruments” Note.
CRT Securities - CRT securities are risk sharing instruments issued by Fannie Mae and Freddie Mac, and similarly structured transactions arranged by third party market participants. CRT securities are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors.
Non-Agency Mortgage-Backed Securities- The Company invests in non-Agency mortgage-backed securities such as those issued in prime loan, Alt-A loan, subprime loan, non-performing loan (“NPL”) and re-performing loan (“RPL”) securitizations.
Agency mortgage-backed securities, non-Agency mortgage-backed securities and residential CRT securities are referred to herein as “Residential Securities.” Although the Company generally intends to hold most of its Residential Securities until maturity, it may, from time to time, sell any of its Residential Securities as part of the overall management of its portfolio.
Commercial Mortgage-Backed Securities (“Commercial Securities”) - Certain commercial mortgage-backed securities are classified as available-for-sale and reported at fair value with unrealized gains and losses reported as a component of Other comprehensive income (loss). Management evaluates such Commercial Securities for impairment at least quarterly. The Company elected the fair value option on certain Commercial Securities, including conduit commercial mortgage-backed securities, to simplify the accounting where the unrealized gains and losses on these financial instruments are recorded through earnings.
The following represents a rollforward of the activity for the Company’s securities, excluding securities transferred or pledged to securitization vehicles, for the year ended December 31, 2020:
Residential SecuritiesCommercial SecuritiesTotal
(dollars in thousands)
Beginning balance January 1, 2020$114,560,557 $273,023 $114,833,580 
Purchases33,082,119 25,285 33,107,404 
Sales and transfers (1)
(52,367,095)(204,061)(52,571,156)
Principal paydowns(19,531,705)(4,933)(19,536,638)
(Amortization) / accretion(1,374,490)652 (1,373,838)
Fair value adjustment1,202,268 (9,224)1,193,044 
Ending balance December 31, 2020$75,571,654 $80,742 $75,652,396 
(1)     Includes transfers to securitization vehicles with a carrying value of $533.3 million during the year ended December 31, 2020.
The following tables present the Company’s securities portfolio, excluding securities transferred or pledged to securitization vehicles, that was carried at their fair value at December 31, 2020 and 2019:
 December 31, 2020
 Principal /
Notional		Remaining PremiumRemaining DiscountAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Estimated Fair Value
Agency(dollars in thousands)
Fixed-rate pass-through$64,800,235 $3,325,020 $(22,143)$68,103,112 $3,200,542 $(1,076)$71,302,578 
Adjustable-rate pass-through455,675 2,869 (3,369)455,175 22,341 — 477,516 
CMO139,664 2,177 — 141,841 7,926 — 149,767 
Interest-only2,790,537 564,297 — 564,297 3,513 (145,901)421,909 
Multifamily (1)
1,910,384 50,148 (1,057)1,604,913 59,548 (954)1,663,507 
Reverse mortgages47,585 4,183 — 51,768 252 (238)51,782 
Total agency securities$70,144,080 $3,948,694 $(26,569)$70,921,106 $3,294,122 $(148,169)$74,067,059 
Residential credit       
CRT (2)
$544,780 $7,324 $(2,430)$538,941 $3,062 $(9,600)$532,403 
Alt-A93,001 51 (17,368)75,684 4,644 — 80,328 
Prime177,852 5,126 (15,999)166,979 14,607 (77)181,509 
Prime interest-only194,687 1,882 — 1,882 — (642)1,240 
Subprime197,779 584 (18,181)180,182 8,312 (61)188,433 
NPL/RPL475,108 821 (2,416)473,513 3,782 (1,448)475,847 
Prime jumbo (>=2010 vintage)44,696 207 (5,300)39,603 3,680 — 43,283 
Prime jumbo (>=2010 vintage) Interest-only291,624 6,803 — 6,803 — (5,251)1,552 
Total residential credit securities$2,019,527 $22,798 $(61,694)$1,483,587 $38,087 $(17,079)$1,504,595 
Total Residential Securities$72,163,607 $3,971,492 $(88,263)$72,404,693 $3,332,209 $(165,248)$75,571,654 
Commercial
Commercial Securities$89,858 — $(7,471)$82,387 $54 $(1,699)$80,742 
Total securities$72,253,465 $3,971,492 $(95,734)$72,487,080 $3,332,263 $(166,947)$75,652,396 
 December 31, 2019
 Principal /
Notional		Remaining PremiumRemaining DiscountAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Estimated Fair Value
Agency(dollars in thousands)
Fixed-rate pass-through$102,448,565 $4,345,053 $(46,614)$106,747,004 $2,071,583 $(95,173)$108,723,414 
Adjustable-rate pass-through1,474,818 72,245 (1,400)1,545,663 10,184 (31,516)1,524,331 
CMO156,937 2,534 — 159,471 545 — 160,016 
Interest-only4,486,845 862,905 — 862,905 2,787 (157,130)708,562 
Multifamily1,619,900 19,981 (2,280)1,637,601 82,292 (2,696)1,717,197 
Reverse mortgages54,553 5,053 — 59,606 550 (309)59,847 
Total agency investments$110,241,618 $5,307,771 $(50,294)$111,012,250 $2,167,941 $(286,824)$112,893,367 
Residential credit       
CRT (2)
$517,110 $15,850 $(2,085)$515,950 $16,605 $(1,233)$531,322 
Alt-A160,957 250 (22,306)138,901 12,482 — 151,383 
Prime277,076 3,362 (17,794)262,644 14,142 (529)276,257 
Prime interest-only391,234 3,757 — 3,757 — (590)3,167 
Subprime370,263 1,356 (59,727)311,892 37,205 (118)348,979 
NPL/RPL164,180 351 (440)164,091 191 (14)164,268 
Prime jumbo (>=2010 vintage)182,709 1,026 (4,281)179,454 5,360 (150)184,664 
Prime jumbo (>=2010 vintage) Interest-only554,189 9,001 — 9,001 — (1,851)7,150 
Total residential credit securities$2,617,718 $34,953 $(106,633)$1,585,690 $85,985 $(4,485)$1,667,190 
Total Residential Securities$112,859,336 $5,342,724 $(156,927)$112,597,940 $2,253,926 $(291,309)$114,560,557 
Commercial
Commercial Securities$263,965 $10,873 $(9,393)$265,445 $7,710 $(132)$273,023 
Total securities$113,123,301 $5,353,597 $(166,320)$112,863,385 $2,261,636 $(291,441)$114,833,580 
(1) Principal/Notional amount includes $354.6 million and $0 million of an Agency CMBS interest-only security    as of December 31, 2020 and December 31, 2019, respectively.
(2) Principal/Notional amount includes $10.7 million and $14.9 million of a CRT interest-only security as of December 31, 2020 and December 31, 2019, respectively.

The following table presents the Company’s Agency mortgage-backed securities portfolio, excluding securities transferred or pledged to securitization vehicles, by issuing Agency at December 31, 2020 and 2019:
 
December 31, 2020December 31, 2019
Investment Type(dollars in thousands)
Fannie Mae$56,218,033 $76,656,831 
Freddie Mac17,735,041 36,087,100 
Ginnie Mae113,985 149,436 
Total$74,067,059 $112,893,367 
Actual maturities of the Company’s Residential Securities are generally shorter than stated contractual maturities because actual maturities of the portfolio are affected by periodic payments and prepayments of principal on the underlying mortgages.
The following table summarizes the Company’s Residential Securities, excluding securities transferred or pledged to securitization vehicles, at December 31, 2020 and 2019, according to their estimated weighted average life classifications:
 December 31, 2020December 31, 2019
Estimated Fair ValueAmortized
Cost		Estimated Fair ValueAmortized
Cost
Estimated weighted average life(dollars in thousands)
Less than one year$110,203 $109,540 $3,997 $4,543 
Greater than one year through five years45,643,138 43,404,877 36,290,254 35,581,833 
Greater than five years through ten years28,509,058 27,610,923 77,732,756 76,504,845 
Greater than ten years1,309,255 1,279,353 533,550 506,719 
Total$75,571,654 $72,404,693 $114,560,557 $112,597,940 
The estimated weighted average lives of the Residential Securities at December 31, 2020 and 2019 in the table above are based upon projected principal prepayment rates. The actual weighted average lives of the Residential Securities could be longer or shorter than projected.
The following table presents the gross unrealized losses and estimated fair value of the Company’s Agency mortgage-backed securities, accounted for as available-for-sale where the fair value option has not been elected, by length of time that such securities have been in a continuous unrealized loss position at December 31, 2020 and 2019.
 December 31, 2020December 31, 2019
 
Estimated Fair Value (1)
Gross Unrealized Losses (1)
Number of Securities (1)
Estimated Fair Value (1)
Gross Unrealized Losses (1)
Number of Securities (1)
 (dollars in thousands)
Less than 12 months$777,586 $(2,030)30 $7,388,239 $(24,056)139 
12 Months or more— — — 11,619,280 (105,329)352 
Total$777,586 $(2,030)30 $19,007,519 $(129,385)491 
(1)     Excludes interest-only mortgage-backed securities and reverse mortgages.



The decline in value of these securities is solely due to market conditions and not the quality of the assets. Substantially all of the Agency mortgage-backed securities are “AAA” rated or carry an implied “AAA” rating. The investments are not considered to be impaired because the Company currently has the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of the amortized cost bases, which may be maturity. 
During the years ended December 31, 2020 and 2019, the Company disposed of $51.8 billion and $25.5 billion, respectively, of Residential Securities. The following table presents the Company’s net gains (losses) from the disposal of Residential Securities for the years ended December 31, 2020 and 2019.
 Gross Realized GainsGross Realized LossesNet Realized Gains (Losses)
For the year ended(dollars in thousands)
December 31, 2020$942,450 $(305,449)$637,001 
December 31, 2019$172,518 $(210,317)$(37,799)