XML 22 R11.htm IDEA: XBRL DOCUMENT
v3.23.2

SECURITIES | 6 Months Ended
--- | ---
Jun. 30, 2023
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 debt 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 gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). Effective July 1, 2022, the Company elected the fair value option for any newly purchased Agency mortgage-backed securities in order to simplify the accounting for these securities. Agency mortgage-backed securities purchased prior to July 1, 2022, are still classified as available-for-sale with changes in fair value recognized in other comprehensive income. During the three and six months ended June 30, 2023, ($744.7) million and $358.0 million, respectively, of unrealized gains (losses) on Agency mortgage-backed securities were reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss). The Company has also elected the fair value option for CRT securities, interest only securities, Non-Agency and commercial mortgage-backed securities in order to simplify the accounting. Transactions for regular-way securities are recorded on trade date, including to-be-announced (“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 where the fair value option has not been elected 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. 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 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, prime jumbo 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”) - The Company invests in Commercial Securities such as conduit, credit CMBS, single-asset single borrower and collateralized loan obligations. The following represents a rollforward of the activity for the Company’s securities for the six months ended June 30, 2023:
| Agency Securities |  | Residential Credit Securities |  | Commercial Securities |  | Total
| (dollars in thousands)
Beginning balance January 1, 2023 | $ | 62,274,895 |  |  | $ | 2,988,703 |  |  | $ | 526,309 |  |  | $ | 65,789,907 |
Purchases | 20,646,908 |  |  | 563,963 |  |  | 23,940 |  |  | 21,234,811 |
Sales | (13,221,595) |  |  | (405,028) |  |  | (189,866) |  |  | (13,816,489) |
Principal paydowns | (2,834,559) |  |  | (173,160) |  |  | (4,781) |  |  | (3,012,500) |
(Amortization) / accretion | (100,881) |  |  | 11,242 |  |  | 630 |  |  | (89,009) |
Fair value adjustment | 999,496 |  |  | 86,787 |  |  | 9,458 |  |  | 1,095,741 |
Ending balance June 30, 2023 | $ | 67,764,264 |  |  | $ | 3,072,507 |  |  | $ | 365,690 |  |  | $ | 71,202,461 |
The following tables present the Company’s securities portfolio that were carried at their fair value at June 30, 2023 and December 31, 2022:
| June 30, 2023
| Principal / Notional |  | Remaining Premium |  | Remaining Discount |  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Estimated Fair Value
Agency | (dollars in thousands)
Fixed-rate pass-through | $ | 68,032,859 |  |  | $ | 1,851,124 |  |  | $ | (1,203,805) |  |  | $ | 68,680,178 |  |  | $ | 43,777 |  |  | $ | (3,375,157) |  |  | $ | 65,348,798 |
Adjustable-rate pass-through | 209,207 |  |  | 18,434 |  |  | (69) |  |  | 227,572 |  |  | 1,963 |  |  | (17,985) |  |  | 211,550 |
CMO | 97,934 |  |  | 1,715 |  |  | — |  |  | 99,649 |  |  | — |  |  | (14,147) |  |  | 85,502 |
Interest-only | 2,308,196 |  |  | 492,333 |  |  | — |  |  | 492,333 |  |  | 1,913 |  |  | (200,727) |  |  | 293,519 |
Multifamily(1) | 11,502,217 |  |  | 348,474 |  |  | (1,549) |  |  | 1,867,896 |  |  | 4,609 |  |  | (75,382) |  |  | 1,797,123 |
Reverse mortgages | 27,225 |  |  | 3,310 |  |  | — |  |  | 30,535 |  |  | — |  |  | (2,763) |  |  | 27,772 |
Total agency securities | $ | 82,177,638 |  |  | $ | 2,715,390 |  |  | $ | (1,205,423) |  |  | $ | 71,398,163 |  |  | $ | 52,262 |  |  | $ | (3,686,161) |  |  | $ | 67,764,264 |
Residential credit |  |  |  |  |  |  |  |  |  |  |  |  |
Credit risk transfer | $ | 1,037,685 |  |  | $ | 3,987 |  |  | $ | (4,686) |  |  | $ | 1,036,986 |  |  | $ | 32,292 |  |  | $ | (4,877) |  |  | $ | 1,064,401 |
Alt-A | 137,130 |  |  | 9 |  |  | (5,054) |  |  | 132,085 |  |  | 450 |  |  | (13,320) |  |  | 119,215 |
Prime (2) | 837,579 |  |  | 9,454 |  |  | (21,866) |  |  | 234,903 |  |  | 1,488 |  |  | (39,778) |  |  | 196,613 |
Subprime | 226,613 |  |  | — |  |  | (30,469) |  |  | 196,144 |  |  | 2,187 |  |  | (17,445) |  |  | 180,886 |
NPL/RPL | 1,271,228 |  |  | 4,490 |  |  | (13,052) |  |  | 1,262,666 |  |  | 473 |  |  | (69,789) |  |  | 1,193,350 |
Prime jumbo (>=2010 vintage) (3) | 8,388,475 |  |  | 63,124 |  |  | (50,068) |  |  | 351,332 |  |  | 6,797 |  |  | (40,087) |  |  | 318,042 |
Total residential credit securities | $ | 11,898,710 |  |  | $ | 81,064 |  |  | $ | (125,195) |  |  | $ | 3,214,116 |  |  | $ | 43,687 |  |  | $ | (185,296) |  |  | $ | 3,072,507 |
Total residential securities | $ | 94,076,348 |  |  | $ | 2,796,454 |  |  | $ | (1,330,618) |  |  | $ | 74,612,279 |  |  | $ | 95,949 |  |  | $ | (3,871,457) |  |  | $ | 70,836,771 |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial securities | $ | 375,364 |  |  | $ | — |  |  | $ | (1,347) |  |  | $ | 374,017 |  |  | $ | 93 |  |  | $ | (8,420) |  |  | $ | 365,690 |
Total securities | $ | 94,451,712 |  |  | $ | 2,796,454 |  |  | $ | (1,331,965) |  |  | $ | 74,986,296 |  |  | $ | 96,042 |  |  | $ | (3,879,877) |  |  | $ | 71,202,461 |
| December 31, 2022
| Principal / Notional |  | Remaining Premium |  | Remaining Discount |  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Estimated Fair Value
Agency | (dollars in thousands)
Fixed-rate pass-through | $ | 63,232,479 |  |  | $ | 2,105,813 |  |  | $ | (1,003,225) |  |  | $ | 64,335,067 |  |  | $ | 62,060 |  |  | $ | (4,367,369) |  |  | $ | 60,029,758 |
Adjustable-rate pass-through | 232,028 |  |  | 17,065 |  |  | (85) |  |  | 249,008 |  |  | 2,138 |  |  | (16,759) |  |  | 234,387 |
CMO | 101,543 |  |  | 1,781 |  |  | — |  |  | 103,324 |  |  | — |  |  | (13,714) |  |  | 89,610 |
Interest-only | 1,824,339 |  |  | 438,295 |  |  | — |  |  | 438,295 |  |  | 153 |  |  | (220,371) |  |  | 218,077 |
Multifamily (1) | 9,801,375 |  |  | 311,785 |  |  | (1,021) |  |  | 1,750,737 |  |  | 7,588 |  |  | (84,160) |  |  | 1,674,165 |
Reverse mortgages | 28,478 |  |  | 3,379 |  |  | — |  |  | 31,857 |  |  | — |  |  | (2,959) |  |  | 28,898 |
Total agency investments | $ | 75,220,242 |  |  | $ | 2,878,118 |  |  | $ | (1,004,331) |  |  | $ | 66,908,288 |  |  | $ | 71,939 |  |  | $ | (4,705,332) |  |  | $ | 62,274,895 |
Residential credit |  |  |  |  |  |  |  |  |  |  |  |  |
Credit risk transfer | $ | 1,013,368 |  |  | $ | 6,790 |  |  | $ | (4,828) |  |  | $ | 1,015,330 |  |  | $ | 6,629 |  |  | $ | (24,402) |  |  | $ | 997,557 |
Alt-A | 111,009 |  |  | 9 |  |  | (5,048) |  |  | 105,970 |  |  | — |  |  | (14,754) |  |  | 91,216 |
Prime (2) | 1,946,186 |  |  | 19,496 |  |  | (17,375) |  |  | 240,694 |  |  | 1,528 |  |  | (44,352) |  |  | 197,870 |
Subprime | 202,304 |  |  | — |  |  | (32,188) |  |  | 170,116 |  |  | 1,275 |  |  | (15,078) |  |  | 156,313 |
NPL/RPL | 1,426,616 |  |  | 1,624 |  |  | (15,500) |  |  | 1,412,740 |  |  | 87 |  |  | (95,673) |  |  | 1,317,154 |
Prime jumbo (>=2010 vintage) (3) | 5,717,558 |  |  | 37,260 |  |  | (29,242) |  |  | 272,623 |  |  | 1,685 |  |  | (45,715) |  |  | 228,593 |
Total residential credit securities | $ | 10,417,041 |  |  | $ | 65,179 |  |  | $ | (104,181) |  |  | $ | 3,217,473 |  |  | $ | 11,204 |  |  | $ | (239,974) |  |  | $ | 2,988,703 |
Total residential securities | $ | 85,637,283 |  |  | $ | 2,943,297 |  |  | $ | (1,108,512) |  |  | $ | 70,125,761 |  |  | $ | 83,143 |  |  | $ | (4,945,306) |  |  | $ | 65,263,598 |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial securities | $ | 546,499 |  |  | $ | — |  |  | $ | (2,405) |  |  | $ | 544,094 |  |  | $ | — |  |  | $ | (17,785) |  |  | $ | 526,309 |
Total securities | $ | 86,183,782 |  |  | $ | 2,943,297 |  |  | $ | (1,110,917) |  |  | $ | 70,669,855 |  |  | $ | 83,143 |  |  | $ | (4,963,091) |  |  | $ | 65,789,907 |
(1) Principal/Notional amount includes $10.0 billion and $8.4 billion of Agency Multifamily interest-only securities as of June 30, 2023 and December 31, 2022, respectively. (2) Principal/Notional amount includes $0.6 billion and $1.7 billion of Prime interest-only securities as of June 30, 2023 and December 31, 2022, respectively. (3) Principal/Notional amount includes $8.1 billion and $5.5 billion of Prime Jumbo interest-only securities as of June 30, 2023 and December 31, 2022, respectively.
The following table presents the Company’s Agency mortgage-backed securities portfolio by issuing Agency at June 30, 2023 and December 31, 2022:
| June 30, 2023 |  | December 31, 2022
Investment Type | (dollars in thousands)
Fannie Mae | $ | 60,770,531 |  |  | $ | 54,043,015 |
Freddie Mac | 6,938,615 |  |  | 8,174,080 |
Ginnie Mae | 55,118 |  |  | 57,800 |
Total | $ | 67,764,264 |  |  | $ | 62,274,895 |
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 at June 30, 2023 and December 31, 2022, according to their estimated weighted average life classifications:
| June 30, 2023 |  | December 31, 2022
| Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value |  | Amortized Cost
Estimated weighted average life | (dollars in thousands)
Less than one year | $ | 205,983 |  |  | $ | 217,068 |  |  | $ | 247,921 |  |  | $ | 264,637 |
Greater than one year through five years | 3,409,612 |  |  | 3,550,741 |  |  | 3,002,471 |  |  | 3,206,250 |
Greater than five years through ten years | 64,372,051 |  |  | 67,829,362 |  |  | 55,593,990 |  |  | 59,658,578 |
Greater than ten years | 2,849,125 |  |  | 3,015,108 |  |  | 6,419,216 |  |  | 6,996,296 |
Total | $ | 70,836,771 |  |  | $ | 74,612,279 |  |  | $ | 65,263,598 |  |  | $ | 70,125,761 |
The estimated weighted average lives of the Residential Securities at June 30, 2023 and December 31, 2022 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 June 30, 2023 and December 31, 2022.
| June 30, 2023 |  | December 31, 2022
| 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 | $ | 2,437,743 |  |  | $ | (145,721) |  |  | 155 |  |  | $ | 33,061,267 |  |  | $ | (3,448,120) |  |  | 2,481 |
12 Months or more | 21,348,507 |  |  | (2,241,721) |  |  | 2,065 |  |  | 1,260,378 |  |  | (266,686) |  |  | 129 |
Total | $ | 23,786,250 |  |  | $ | (2,387,442) |  |  | 2,220 |  |  | $ | 34,321,645 |  |  | $ | (3,714,806) |  |  | 2,610 |
(1) Excludes interest-only mortgage-backed securities and reverse mortgages and effective July 1, 2022, newly purchased Agency pass-through, collateralized mortgage obligation (“CMO”) and multifamily securities.
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 have an actual or implied credit rating that is the same as that of the U.S. government. An impairment has not been recognized in earnings related to these investments because the decline in value is not related to credit quality, the Company currently has not made a decision to sell the securities nor is it more likely than not that the securities will be required to be sold before recovery. During the three and six months ended June 30, 2023, the Company disposed of $8.4 billion and $13.6 billion of Residential Securities, respectively. During the three and six months ended June 30, 2022, the Company disposed of $6.6 billion and $9.4 billion of Residential Securities, respectively. The following table presents the Company’s net gains (losses) from the disposal of Residential Securities for the three and six months ended June 30, 2023 and 2022, which is included in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
| Gross Realized Gains |  | Gross Realized Losses |  | Net Realized Gains (Losses)
For the three months ended | (dollars in thousands)
June 30, 2023 | $ | 9,496 |  |  | $ | (608,732) |  |  | $ | (599,236) |
June 30, 2022 | $ | 27,263 |  |  | $ | (684,560) |  |  | $ | (657,297) |
For the six months ended |  |  |  |  |
June 30, 2023 | $ | 13,765 |  |  | $ | (1,134,849) |  |  | $ | (1,121,084) |
June 30, 2022 | $ | 28,828 |  |  | $ | (830,615) |  |  | $ | (801,787) |

X
- References No definition available. + Details
Name: | us-gaap_InvestmentsDebtAndEquitySecuritiesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 320 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//320/tableOfContent Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 320 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 10 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481800/320-10-50-10 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6B -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-6B Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6B -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-6B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) -Publisher SEC Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 946 -SubTopic 320 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//946-320/tableOfContent Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 940 -SubTopic 320 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//940-320/tableOfContent Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 942 -SubTopic 320 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//942-320/tableOfContent + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration