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Mortgage Backed Securities Mortgage backed securities (Notes) | 3 Months Ended
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Mar. 31, 2014
Investments, Debt and Equity Securities [Abstract] |
Mortgage-backed securities | MORTGAGE-BACKED SECURITIES The following table presents the components and weighted average coupon ("WAC") for the portion of the Company’s MBS designated as AFS as of March 31, 2014 and December 31, 2013:
| March 31, 2014
| Par |  | Net Premium (Discount) |  | Amortized Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Fair Value |  | WAC
Agency: |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS | $ | 2,438,133 |  |  | $ | 139,899 |  |  | $ | 2,578,032 |  |  | $ | 6,708 |  |  | $ | (45,438 | ) |  | $ | 2,539,302 |  |  | 3.20 | %
CMBS | 286,931 |  |  | 19,838 |  |  | 306,769 |  |  | 11,384 |  |  | (509 | ) |  | 317,644 |  |  | 5.23 | %
CMBS IO (1) | — |  |  | 461,523 |  |  | 461,523 |  |  | 11,581 |  |  | (1,859 | ) |  | 471,245 |  |  | 0.94 | %
Total Agency AFS: | 2,725,064 |  |  | 621,260 |  |  | 3,346,324 |  |  | 29,673 |  |  | (47,806 | ) |  | 3,328,191 |  |  |  |
Non-Agency: |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS | 15,454 |  |  | (7 | ) |  | 15,447 |  |  | 209 |  |  | (86 | ) |  | 15,570 |  |  | 4.42 | %
CMBS | 375,209 |  |  | (17,819 | ) |  | 357,390 |  |  | 19,448 |  |  | (842 | ) |  | 375,996 |  |  | 5.05 | %
CMBS IO (1) | — |  |  | 209,301 |  |  | 209,301 |  |  | 3,374 |  |  | (1,148 | ) |  | 211,527 |  |  | 0.80 | %
Total non-Agency AFS: | 390,663 |  |  | 191,475 |  |  | 582,138 |  |  | 23,031 |  |  | (2,076 | ) |  | 603,093 |  |  |  |
Total AFS securities | $ | 3,115,727 |  |  | $ | 812,735 |  |  | $ | 3,928,462 |  |  | $ | 52,704 |  |  | $ | (49,882 | ) |  | $ | 3,931,284 |  |  |
(1) | The notional balance for Agency CMBS IO and non-Agency CMBS IO was $10,582,484 and $5,053,884, respectively, as of March 31, 2014.
| December 31, 2013
| Par |  | Net Premium (Discount) |  | Amortized Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Fair Value |  | WAC
Agency: |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS | $ | 2,591,568 |  |  | $ | 154,220 |  |  | $ | 2,745,788 |  |  | $ | 6,104 |  |  | $ | (59,742 | ) |  | $ | 2,692,150 |  |  | 3.22 | %
CMBS | 273,830 |  |  | 19,061 |  |  | 292,891 |  |  | 10,793 |  |  | (900 | ) |  | 302,784 |  |  | 5.07 | %
CMBS IO (1) | — |  |  | 453,766 |  |  | 453,766 |  |  | 9,895 |  |  | (3,334 | ) |  | 460,327 |  |  | 0.83 | %
Total Agency AFS: | 2,865,398 |  |  | 627,047 |  |  | 3,492,445 |  |  | 26,792 |  |  | (63,976 | ) |  | 3,455,261 |  |  |  |
Non-Agency: |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS | 13,845 |  |  | (338 | ) |  | 13,507 |  |  | 338 |  |  | (80 | ) |  | 13,765 |  |  | 4.61 | %
CMBS | 375,703 |  |  | (18,277 | ) |  | 357,426 |  |  | 15,366 |  |  | (3,511 | ) |  | 369,281 |  |  | 5.10 | %
CMBS IO (1) | — |  |  | 150,518 |  |  | 150,518 |  |  | 2,618 |  |  | (1,999 | ) |  | 151,137 |  |  | 0.66 | %
Total non-Agency AFS: | 389,548 |  |  | 131,903 |  |  | 521,451 |  |  | 18,322 |  |  | (5,590 | ) |  | 534,183 |  |  |  |
Total AFS securities | $ | 3,254,946 |  |  | $ | 758,950 |  |  | $ | 4,013,896 |  |  | $ | 45,114 |  |  | $ | (69,566 | ) |  | $ | 3,989,444 |  |  |
(1) | The notional balance for the Agency CMBS IO and non-Agency CMBS IO was $10,160,502 and $4,274,957, respectively, as of December 31, 2013.
The Company has investments in additional Agency CMBS not included in the tables above that are designated as trading securities by the Company with fair values of $28,568 and $28,717 as of March 31, 2014 and December 31, 2013, respectively. Changes in the fair value of these Agency CMBS are recognized each reporting period within "fair value adjustments, net" as a component of the Company's net income. As of March 31, 2014 and December 31, 2013, the amortized cost of these Agency CMBS designated as trading securities was $26,786 and $26,920, respectively. The Company recognized a net unrealized loss for the three months ended March 31, 2014 of $(17) compared to a net unrealized loss of $(107) for the three months ended March 31, 2013, respectively, related to changes in fair value of these Agency CMBS designated as trading securities. The following table presents certain information for those Agency MBS in an unrealized loss position as of March 31, 2014 and December 31, 2013:
| March 31, 2014 |  | December 31, 2013
| Fair Value |  | Gross Unrealized Losses |  | # of Securities |  | Fair Value |  | Gross Unrealized Losses |  | # of Securities
Continuous unrealized loss position for less than 12 months: |  |  |  |  |  |  |  |  |  |  |
Agency MBS | $ | 1,563,078 |  |  | $ | (29,207 | ) |  | 120 |  |  | $ | 1,912,937 |  |  | $ | (43,543 | ) |  | 150
Non-Agency MBS | 126,578 |  |  | (1,990 | ) |  | 23 |  |  | 162,558 |  |  | (5,435 | ) |  | 39
Continuous unrealized loss position for 12 months or longer: |  |  |  |  |  |  |  |  |  |  |
Agency MBS | $ | 767,744 |  |  | $ | (18,600 | ) |  | 80 |  |  | $ | 670,402 |  |  | $ | (20,433 | ) |  | 67
Non-Agency MBS | 1,676 |  |  | (86 | ) |  | 5 |  |  | 6,310 |  |  | (155 | ) |  | 6
Because the principal and interest related to Agency MBS are guaranteed by the government-sponsored entities Fannie Mae and Freddie Mac who have the implicit guarantee of the U.S. government, the Company does not consider any of the unrealized losses on its Agency MBS to be credit related. Although the unrealized losses are not credit related, the Company assesses its ability and intent to hold any Agency MBS with an unrealized loss until the recovery in its value. This assessment is based on the amount of the unrealized loss and significance of the related investment as well as the Company’s current leverage and anticipated liquidity. Based on this analysis, the Company has determined that the unrealized losses on its Agency MBS as of March 31, 2014 and December 31, 2013 were temporary. The Company also reviews any non-Agency MBS in an unrealized loss position to evaluate whether any decline in fair value represents an OTTI. The evaluation includes a review of the credit ratings of these non-Agency MBS and the seasoning of the mortgage loans collateralizing these securities as well as the estimated future cash flows which include projected losses. The Company performed this evaluation for the non-Agency MBS in an unrealized loss position and has determined that there have not been any adverse changes in the timing or amount of estimated future cash flows that necessitate a recognition of OTTI amounts as of March 31, 2014 or December 31, 2013.

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