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Mortgage Backed Securities Mortgage backed securities (Notes) | 9 Months Ended
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Sep. 30, 2014
Investments, Debt and Equity Securities [Abstract] |
Mortgage-backed securities | MORTGAGE-BACKED SECURITIES The following tables present the components and weighted average coupon ("WAC") for the portion of the Company’s MBS designated as AFS as of September 30, 2014 and December 31, 2013:
| September 30, 2014
| Par |  | Net Premium (Discount) |  | Amortized Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Fair Value |  | WAC
Agency: |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS | $ | 2,200,149 |  |  | $ | 120,667 |  |  | $ | 2,320,816 |  |  | $ | 7,593 |  |  | $ | (31,105 | ) |  | $ | 2,297,304 |  |  | 3.14 | %
CMBS | 305,566 |  |  | 19,186 |  |  | $ | 324,752 |  |  | 13,803 |  |  | (224 | ) |  | 338,331 |  |  | 5.22 | %
CMBS IO (1) | — |  |  | 400,886 |  |  | $ | 400,886 |  |  | 10,944 |  |  | (113 | ) |  | 411,717 |  |  | 0.83 | %
Total Agency AFS: | $ | 2,505,715 |  |  | $ | 540,739 |  |  | $ | 3,046,454 |  |  | $ | 32,340 |  |  | $ | (31,442 | ) |  | $ | 3,047,352 |  |  |  |
Non-Agency: |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS | $ | 9,522 |  |  | $ | (4 | ) |  | $ | 9,518 |  |  | $ | 118 |  |  | $ | (81 | ) |  | $ | 9,555 |  |  | 4.20 | %
CMBS | 266,596 |  |  | (12,374 | ) |  | 254,222 |  |  | 16,397 |  |  | (346 | ) |  | 270,273 |  |  | 4.89 | %
CMBS IO (1) | — |  |  | 282,890 |  |  | 282,890 |  |  | 5,636 |  |  | (313 | ) |  | 288,213 |  |  | 0.69 | %
Total non-Agency AFS: | $ | 276,118 |  |  | $ | 270,512 |  |  | $ | 546,630 |  |  | $ | 22,151 |  |  | $ | (740 | ) |  | $ | 568,041 |  |  |  |
Total AFS securities | $ | 2,781,833 |  |  | $ | 811,251 |  |  | $ | 3,593,084 |  |  | $ | 54,491 |  |  | $ | (32,182 | ) |  | $ | 3,615,393 |  |  |
(1) | The notional balance for Agency CMBS IO and non-Agency CMBS IO was $9,461,823 and $7,246,832, respectively, as of September 30, 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 (1) | 273,830 |  |  | 19,061 |  |  | 292,891 |  |  | 10,793 |  |  | (900 | ) |  | 302,784 |  |  | 5.07 | %
CMBS IO (2) | — |  |  | 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 (2) | — |  |  | 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) | As of December 31, 2013, the Company had Agency CMBS with an amortized cost of $26,920 and fair value of $28,717 which were designated as trading securities and are not included in this table. The Company changed the designation of these Agency CMBS to AFS during the three months ended June 30, 2014. Changes in the fair value of these MBS while they were designated as trading were recognized in net income within "fair value adjustments, net". Changes in the fair value of these MBS, which are now designated as AFS, are recognized in "other comprehensive income". As of September 30, 2014, the Company does not have any MBS designated as trading.
(2) | 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 following table presents certain information for those Agency MBS in an unrealized loss position as of September 30, 2014 and December 31, 2013:
| September 30, 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 | $ | 155,501 |  |  | $ | (1,142 | ) |  | 25 |  | $ | 1,912,937 |  |  | $ | (43,543 | ) |  | 150
Non-Agency MBS | 74,239 |  |  | (427 | ) |  | 17 |  | 162,558 |  |  | (5,435 | ) |  | 39
Continuous unrealized loss position for 12 months or longer: |  |  |  |  |  |  |  |  |  |  |
Agency MBS | $ | 1,701,638 |  |  | $ | (30,299 | ) |  | 129 |  | $ | 670,402 |  |  | $ | (20,433 | ) |  | 67
Non-Agency MBS | 31,348 |  |  | (313 | ) |  | 8 |  | 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 which 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 September 30, 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 September 30, 2014 or December 31, 2013.

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