v3.19.1
Valuation (Tables)
 3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Schedule of Financial Instruments
The table below reflects the value of the Company's Level 1, Level 2, and Level 3 financial instruments that are measured at fair value on a recurring basis as of March 31, 2019:
Description
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In thousands)
Assets:
 
 
 
 
 
 
 
 
Securities, at fair value-
 
 
 
 
 
 
 
 
Agency RMBS
 
$
—

 
$
1,137,826

 
$
6,389

 
$
1,144,215

Non-Agency RMBS
 
—

 
111,500

 
94,670

 
206,170

CMBS
 
—

 
28,055

 
5,137

 
33,192

CLOs
 
—

 
76,559

 
21,438

 
97,997

Asset-backed securities, backed by consumer loans
 
—

 
—

 
24,108

 
24,108

Corporate debt securities
 
—

 
—

 
5,737

 
5,737

Corporate equity securities
 
—

 
—

 
1,465

 
1,465

U.S. Treasury securities
 
—

 
16,601

 
—

 
16,601

Loans, at fair value-
 
 
 
 
 
 
 
 
Residential mortgage loans
 
—

 
—

 
583,252

 
583,252

Commercial mortgage loans
 
—

 
—

 
239,623

 
239,623

Consumer loans
 
—

 
—

 
192,115

 
192,115

Investment in unconsolidated entities, at fair value
 
—

 
—

 
58,152

 
58,152

Financial derivatives–assets, at fair value-
 
 
 
 
 
 
 
 
Credit default swaps on asset-backed securities
 
—

 
—

 
1,233

 
1,233

Credit default swaps on asset-backed indices
 
—

 
3,276

 
—

 
3,276

Credit default swaps on corporate bonds
 
—

 
715

 
—

 
715

Credit default swaps on corporate bond indices
 
—

 
3,519

 
—

 
3,519

Interest rate swaps
 
—

 
5,391

 
—

 
5,391

TBAs
 
—

 
531

 
—

 
531

Futures
 
138

 
—

 
—

 
138

Forwards
 
—

 
430

 
—

 
430

Total return swaps
 
—

 
123

 
—

 
123

Total assets
 
$
138

 
$
1,384,526

 
$
1,233,319

 
$
2,617,983

 
 
 
 
 
 
 
 
 
Description
 
Level 1
 
Level 2
 
Level 3
 
Total
(continued)
 
(In thousands)
Liabilities:
 
 
 
 
 
 
 
 
Securities sold short, at fair value-
 
 
 
 
 
 
 
 
Government debt
 
$
—

 
$
(21,771
)
 
$
—

 
$
(21,771
)
Corporate debt securities
 
—

 
(4,441
)
 
—

 
(4,441
)
Financial derivatives–liabilities, at fair value-
 
 
 
 
 
 
 
 
Credit default swaps on asset-backed indices
 
—

 
(822
)
 
—

 
(822
)
Credit default swaps on corporate bonds
 
—

 
(953
)
 
—

 
(953
)
Credit default swaps on corporate bond indices
 
—

 
(11,907
)
 
—

 
(11,907
)
Interest rate swaps
 
—

 
(7,571
)
 
—

 
(7,571
)
TBAs
 
—

 
(3,075
)
 
—

 
(3,075
)
Futures
 
(2,454
)
 
—

 
—

 
(2,454
)
Forwards
 
—

 
(122
)
 
—

 
(122
)
Other secured borrowings, at fair value
 
—

 
—

 
(282,124
)
 
(282,124
)
Total liabilities
 
$
(2,454
)
 
$
(50,662
)
 
$
(282,124
)
 
$
(335,240
)
The following table summarizes the estimated fair value of all other financial instruments not measured at fair value on a recurring basis as of March 31, 2019:
 
 
March 31, 2019
(In thousands)
 
Fair Value
 
Carrying Value
Other financial instruments
 
 
 
 
Assets:
 
 
 
 
Cash and cash equivalents
 
$
55,876

 
$
55,876

Restricted cash
 
175

 
175

Due from brokers
 
58,145

 
58,145

Reverse repurchase agreements
 
25,381

 
25,381

Liabilities:
 
 
 
 
Repurchase agreements
 
1,550,016

 
1,550,016

Other secured borrowings
 
117,315

 
117,315

Senior notes, net
 
85,100

 
85,100

Due to brokers
 
4,820

 
4,820

The table below reflects the value of the Company's Level 1, Level 2, and Level 3 financial instruments at December 31, 2018:
Description
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In thousands)
Assets:
 
 
 
 
 
 
 
 
Cash equivalents
 
$
12,460

 
$
—

 
$
—

 
$
12,460

Investments, at fair value-
 
 
 
 
 
 
 
 
Agency residential mortgage-backed securities
 
$
—

 
$
1,442,924

 
$
7,293

 
$
1,450,217

U.S. Treasury securities
 
—

 
76

 
—

 
76

Private label residential mortgage-backed securities
 
—

 
211,348

 
91,291

 
302,639

Private label commercial mortgage-backed securities
 
—

 
33,105

 
803

 
33,908

Commercial mortgage loans
 
—

 
—

 
211,185

 
211,185

Residential mortgage loans
 
—

 
—

 
496,830

 
496,830

Collateralized loan obligations
 
—

 
108,978

 
14,915

 
123,893

Consumer loans and asset-backed securities backed by consumer loans
 
—

 
—

 
206,761

 
206,761

Corporate debt
 
—

 
16,074

 
6,318

 
22,392

Secured notes
 
—

 
—

 
10,917

 
10,917

Real estate owned
 
—

 
—

 
34,500

 
34,500

Common stock
 
2,200

 
—

 
—

 
2,200

Corporate equity investments
 
—

 
—

 
43,793

 
43,793

Total investments, at fair value
 
2,200

 
1,812,505

 
1,124,606

 
2,939,311

Financial derivatives–assets, at fair value-
 
 
 
 
 
 
 
 
Credit default swaps on asset-backed securities
 
—

 
—

 
1,472

 
1,472

Credit default swaps on corporate bond indices
 
—

 
733

 
—

 
733

Credit default swaps on corporate bonds
 
—

 
2,473

 
—

 
2,473

Credit default swaps on asset-backed indices
 
—

 
8,092

 
—

 
8,092

Total return swaps
 
—

 
1

 
—

 
1

Interest rate swaps
 
—

 
7,224

 
—

 
7,224

Forwards
 
—

 
6

 
—

 
6

Total financial derivatives–assets, at fair value
 
—

 
18,529

 
1,472

 
20,001

Repurchase agreements, at fair value
 
—

 
61,274

 
—

 
61,274

Total investments, financial derivatives–assets, and repurchase agreements, at fair value
 
$
2,200

 
$
1,892,308

 
$
1,126,078

 
$
3,020,586

Liabilities:
 
 
 
 
 
 
 
 
Investments sold short, at fair value-
 
 
 
 
 
 
 
 
Agency residential mortgage-backed securities
 
$
—

 
$
(772,964
)
 
$
—

 
$
(772,964
)
Government debt
 
—

 
(54,151
)
 
—

 
(54,151
)
Corporate debt
 
—

 
(6,529
)
 
—

 
(6,529
)
Common stock
 
(16,933
)
 
—

 
—

 
(16,933
)
Total investments sold short, at fair value
 
(16,933
)
 
(833,644
)
 
—

 
(850,577
)
 
 
 
 
 
 
 
 
 
Description
 
Level 1
 
Level 2
 
Level 3
 
Total
(continued)
 
(In thousands)
Financial derivatives–liabilities, at fair value-
 
 
 
 
 
 
 
 
Credit default swaps on corporate bond indices
 
$
—

 
$
(11,557
)
 
$
—

 
$
(11,557
)
Credit default swaps on corporate bonds
 
—

 
(3,246
)
 
—

 
(3,246
)
Credit default swaps on asset-backed indices
 
—

 
(2,125
)
 
—

 
(2,125
)
Interest rate swaps
 
—

 
(3,397
)
 
—

 
(3,397
)
Total return swaps
 
—

 
(6
)
 
—

 
(6
)
Futures
 
(355
)
 
—

 
—

 
(355
)
Forwards
 
—

 
(120
)
 
—

 
(120
)
Total financial derivatives–liabilities, at fair value
 
(355
)
 
(20,451
)
 
—

 
(20,806
)
Other secured borrowings, at fair value
 
—

 
—

 
(297,948
)
 
(297,948
)
Total investments sold short, financial derivatives–liabilities, and other secured borrowings, at fair value
 
$
(17,288
)
 
$
(854,095
)
 
$
(297,948
)
 
$
(1,169,331
)

The tables below include a roll-forward of the Company's financial instruments for the three-month period ended March 31, 2018 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.
Level 3—Fair Value Measurement Using Significant Unobservable Inputs:
Three-Month Period Ended March 31, 2018
(In thousands)
Ending
Balance as of 
December 31, 2017
 
Accreted
Discounts /
(Amortized
Premiums)
 
Net Realized
Gain/
(Loss)
 
Change in Net
Unrealized
Gain/(Loss)
 
Purchases/
Payments
 
Sales/
Issuances
 
Transfers Into Level 3
 
Transfers Out of Level 3
 
Ending
Balance as of 
March 31, 2018
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, at fair value-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency residential mortgage-backed securities
$
6,173

 
$
(600
)
 
$
39

 
$
264

 
$
1,101

 
$
(388
)
 
$
—

 
$
(461
)
 
$
6,128

Private label residential mortgage-backed securities
101,297

 
106

 
2,288

 
293

 
20,660

 
(21,574
)
 
11,561

 
(2,769
)
 
111,862

Private label commercial mortgage-backed securities
12,347

 
(183
)
 
1,554

 
121

 
9,624

 
(7,366
)
 
—

 
(2,388
)
 
13,709

Commercial mortgage loans
108,301

 
618

 
330

 
(161
)
 
3,988

 
(3,782
)
 
—

 
—

 
109,294

Residential mortgage loans
182,472

 
(715
)
 
(54
)
 
(653
)
 
73,040

 
(13,309
)
 
—

 
—

 
240,781

Collateralized loan obligations
24,911

 
455

 
2

 
226

 
10,095

 
(8,210
)
 
—

 
—

 
27,479

(In thousands)
Ending
Balance as of 
December 31, 2017
 
Accreted
Discounts /
(Amortized
Premiums)
 
Net Realized
Gain/
(Loss)
 
Change in Net
Unrealized
Gain/(Loss)
 
Purchases/
Payments
 
Sales/
Issuances
 
Transfers Into Level 3
 
Transfers Out of Level 3
 
Ending
Balance as of 
March 31, 2018
(Continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer loans and asset-backed securities backed by consumer loans
$
135,258

 
$
(5,896
)
 
$
501

 
$
3,804

 
$
42,133

 
$
(27,378
)
 
$
—

 
$
—

 
$
148,422

Corporate debt
23,947

 
(114
)
 
52

 
364

 
456

 
(6,705
)
 
—

 
—

 
18,000

Real estate owned
26,277

 
—

 
(456
)
 
615

 
4,098

 
(1,424
)
 
—

 
—

 
29,110

Corporate equity investments
37,465

 
—

 
—

 
4,326

 
9,078

 
—

 
—

 
—

 
50,869

Total investments, at fair value
658,448

 
(6,329
)
 
4,256

 
9,199

 
174,273

 
(90,136
)
 
11,561

 
(5,618
)
 
755,654

Financial derivatives–assets, at fair value-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit default swaps on asset-backed securities
3,140

 
—

 
86

 
(71
)
 
24

 
(110
)
 
—

 
—

 
3,069

Total financial derivatives– assets, at fair value
3,140

 
—

 
86

 
(71
)
 
24

 
(110
)
 
—

 
—

 
3,069

Total investments and financial derivatives–assets, at fair value
$
661,588

 
$
(6,329
)
 
$
4,342

 
$
9,128

 
$
174,297

 
$
(90,246
)
 
$
11,561

 
$
(5,618
)
 
$
758,723

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other secured borrowings, at fair value
$
(125,105
)
 
$
—

 
$
—

 
$
784

 
$
10,546

 
$
—

 
$
—

 
$
—

 
$
(113,775
)
Total other secured borrowings, at fair value
$
(125,105
)
 
$
—

 
$
—

 
$
784

 
$
10,546

 
$
—

 
$
—

 
$
—

 
$
(113,775
)

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at March 31, 2018, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended March 31, 2018. For Level 3 financial instruments held by the Company at March 31, 2018, change in net unrealized gain (loss) of $8.6 million, $(0.1) million, and $0.8 million, for the three-month period ended March 31, 2018 relate to investments, financial derivatives–assets, and other secured borrowings, at fair value, respectively.
Schedule of Significant Unobservable Inputs, Qualitative Information
The following table identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of March 31, 2019:
 
 
Fair Value
 
Valuation 
Technique
 
Unobservable Input
 
Range
 
Weighted
Average
Description
 
 
 
 
Min
 
Max
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Non-Agency RMBS
 
$
42,096

 
Market Quotes
 
Non Binding Third-Party Valuation
 
$
15.72

 
$
184.92

 
$
82.84

CMBS
 
5,137

 
Market Quotes
 
Non Binding Third-Party Valuation
 
5.94

 
70.90

 
60.88

CLOs
 
13,508

 
Market Quotes
 
Non Binding Third-Party Valuation
 
27.30

 
80.00

 
72.87

Agency interest only RMBS
 
705

 
Market Quotes
 
Non Binding Third-Party Valuation
 
8.42

 
14.43

 
11.96

Corporate debt and equity
 
1,452

 
Market Quotes
 
Non Binding Third-Party Valuation
 
83.50

 
83.50

 
83.50

Non-Agency RMBS
 
52,574

 
Discounted Cash Flows
 
Yield
 
0.5
%
 
67.1
%
 
9.5
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
15.1
%
 
77.8
%
 
46.6
%
 
 
 
 
 
 
Projected Collateral Losses
 
0.1
%
 
17.6
%
 
8.8
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
1.7
%
 
15.8
%
 
8.2
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
16.3
%
 
63.0
%
 
36.4
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Corporate debt and equity
 
5,750

 
Discounted Cash Flows
 
Yield
 
10.0
%
 
19.6
%
 
16.7
%
CLOs
 
7,930

 
Discounted Cash Flows
 
Yield
 
8.7
%
 
15.2
%
 
11.8
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
19.9
%
 
87.3
%
 
52.5
%
 
 
 
 
 
 
Projected Collateral Losses
 
5.3
%
 
30.8
%
 
15.7
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
4.2
%
 
13.7
%
 
8.8
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
—
%
 
65.2
%
 
23.0
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
(continued)
 
Fair Value
 
Valuation 
Technique
 
Unobservable Input
 
Range
 
Weighted
Average
Description
 
 
 
 
Min
 
Max
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
ABS backed by consumer loans
 
24,108

 
Discounted Cash Flows
 
Yield
 
12.0
%
 
18.7
%
 
12.2
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
0.0
%
 
11.0
%
 
9.4
%
 
 
 
 
 
 
Projected Collateral Losses
 
1.6
%
 
16.6
%
 
14.9
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
72.9
%
 
98.4
%
 
75.7
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Consumer loans
 
192,115

 
Discounted Cash Flows
 
Yield
 
7.0
%
 
10.0
%
 
8.0
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
0.0
%
 
55.4
%
 
41.5
%
 
 
 
 
 
 
Projected Collateral Losses
 
4.0
%
 
86.6
%
 
8.0
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
13.4
%
 
85.7
%
 
50.5
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Performing commercial mortgage loans
 
198,823

 
Discounted Cash Flows
 
Yield
 
8.0
%
 
22.5
%
 
9.4
%
Non-performing commercial mortgage loans
 
40,800

 
Discounted Cash Flows
 
Yield
 
10.5
%
 
14.1
%
 
12.8
%
 
 
 
 
 
 
Months to Resolution
 
0.0

 
5.0

 
3.0

Performing and re-performing residential mortgage loans
 
274,572

 
Discounted Cash Flows
 
Yield
 
4.1
%
 
22.6
%
 
6.0
%
Securitized residential mortgage loans(1)
 
296,366

 
Discounted Cash Flows
 
Yield
 
4.4
%
 
4.6
%
 
4.5
%
Non-performing residential mortgage loans
 
12,314

 
Discounted Cash Flows
 
Yield
 
4.3
%
 
33.3
%
 
11.9
%
 
 
 
 
 
 
Months to Resolution
 
13.5

 
62.6

 
32.3

Credit default swaps on asset-backed securities
 
1,233

 
Net Discounted Cash Flows
 
Projected Collateral Prepayments
 
34.1
%
 
38.6
%
 
36.0
%
 
 
 
 
 
 
Projected Collateral Losses
 
11.7
%
 
18.1
%
 
13.3
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
14.2
%
 
17.5
%
 
16.2
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
29.1
%
 
36.5
%
 
34.5
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Agency interest only RMBS
 
5,684

 
Option Adjusted Spread ("OAS")
 
LIBOR OAS(2)
 
93

 
3,527

 
654

 
 
 
 
 
 
Projected Collateral Prepayments
 
30.0
%
 
100.0
%
 
67.7
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
0.0
%
 
70.0
%
 
32.3
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Investment in unconsolidated entities
 
31,849

 
Enterprise Value
 
Equity Price-to-Book(3)
 
1.0X
 
 3.1X
 
1.4X
Investment in unconsolidated entities
 
3,000

 
Recent Transactions
 
Transaction Price
 
n/a
 
n/a
 
n/a
Investment in unconsolidated entities
 
23,303

 
Discounted Cash Flows
 
Yield(4)
 
5.5%
 
19.6%
 
10.2%
Other secured borrowings, at fair value(1)
 
(282,124
)
 
Discounted Cash Flows
 
Yield
 
4.0%
 
4.1%
 
4.1%
(1)
Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFE as discussed in Note 2.
(2)
Shown in basis points.
(3)
Represent an estimation of where market participants might value an enterprise on a price-to-book basis.
(4)
Represents the significant unobservable inputs used to fair value the financial instruments of the unconsolidated entity. The fair value of such financial instruments is the largest component of the valuation of such entity as a whole.
The following table identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of December 31, 2018:
 
 
Fair Value
 
Valuation 
Technique
 
Unobservable Input
 
Range
 
Weighted
Average
Description
 
 
 
 
Min
 
Max
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Private label residential mortgage-backed securities
 
$
36,945

 
Market Quotes
 
Non Binding Third-Party Valuation
 
$
17.42

 
$
178.00

 
$
78.31

Collateralized loan obligations
 
5,828

 
Market Quotes
 
Non Binding Third-Party Valuation
 
2.64

 
375.00

 
167.78

Corporate debt, non-exchange traded corporate equity, and secured notes
 
13,976

 
Market Quotes
 
Non Binding Third-Party Valuation
 
9.69

 
91.00

 
59.18

Private label commercial mortgage-backed securities
 
576

 
Market Quotes
 
Non Binding Third-Party Valuation
 
5.93

 
6.36

 
6.14

Agency interest only residential mortgage-backed securities
 
744

 
Market Quotes
 
Non Binding Third-Party Valuation
 
1.70

 
9.12

 
5.64

Private label residential mortgage-backed securities
 
54,346

 
Discounted Cash Flows
 
Yield
 
3.5
%
 
66.1
%
 
10.7
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
16.0
%
 
92.1
%
 
50.4
%
 
 
 
 
 
 
Projected Collateral Losses
 
0.0
%
 
23.1
%
 
8.7
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
1.5
%
 
14.6
%
 
7.3
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
6.1
%
 
61.8
%
 
33.6
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Private label commercial mortgage-backed securities
 
227

 
Discounted Cash Flows
 
Yield
 
3.4
%
 
3.4
%
 
3.4
%
 
 
 
 
 
 
Projected Collateral Losses
 
2.0
%
 
2.0
%
 
2.0
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
6.6
%
 
6.6
%
 
6.6
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
91.4
%
 
91.4
%
 
91.4
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Corporate debt and non-exchange traded corporate equity
 
4,793

 
Discounted Cash Flows
 
Yield
 
17.5
%
 
17.5
%
 
17.5
%
(continued)
 
Fair Value
 
Valuation 
Technique
 
Unobservable Input
 
Range
 
Weighted
Average
Description
 
 
 
 
Min
 
Max
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Collateralized loan obligations
 
$
9,087

 
Discounted Cash Flows
 
Yield
 
12.6
%
 
103.1
%
 
26.7
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
8.1
%
 
88.4
%
 
65.2
%
 
 
 
 
 
 
Projected Collateral Losses
 
3.7
%
 
40.8
%
 
13.5
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
4.2
%
 
38.0
%
 
11.9
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
3.5
%
 
13.5
%
 
9.4
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Consumer loans and asset-backed securities backed by consumer loans
 
206,761

 
Discounted Cash Flows
 
Yield
 
7.0
%
 
18.3
%
 
8.5
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
0.0
%
 
45.9
%
 
33.5
%
 
 
 
 
 
 
Projected Collateral Losses
 
2.6
%
 
84.8
%
 
9.1
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
15.2
%
 
96.6
%
 
57.4
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Performing commercial mortgage loans
 
163,876

 
Discounted Cash Flows
 
Yield
 
8.0
%
 
22.5
%
 
9.6
%
Non-performing commercial mortgage loans and commercial real estate owned
 
80,513

 
Discounted Cash Flows
 
Yield
 
9.6
%
 
27.4
%
 
13.2
%
 
 
 
 
 
 
Months to Resolution
 
3.0

 
16.0

 
7.9

Performing residential mortgage loans
 
171,367

 
Discounted Cash Flows
 
Yield
 
2.7
%
 
12.9
%
 
6.0
%
Securitized residential mortgage loans(1)
 
314,202

 
Discounted Cash Flows
 
Yield
 
4.3
%
 
4.6
%
 
4.6
%
Non-performing residential mortgage loans and residential real estate owned
 
12,557

 
Discounted Cash Flows
 
Yield
 
4.3
%
 
25.1
%
 
11.3
%
 
 
 
 
 
 
Months to Resolution(2)
 
1.9

 
42.2

 
27.8

Credit default swaps on asset-backed securities
 
1,472

 
Net Discounted Cash Flows
 
Projected Collateral Prepayments
 
33.6
%
 
42.0
%
 
36.5
%
 
 
 
 
 
 
Projected Collateral Losses
 
11.1
%
 
15.6
%
 
12.8
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
10.3
%
 
18.7
%
 
15.8
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
32.0
%
 
36.5
%
 
34.9
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Agency interest only residential mortgage-backed securities
 
6,549

 
Option Adjusted Spread ("OAS")
 
LIBOR OAS(3)
 
211

 
3,521

 
677

 
 
 
 
 
 
Projected Collateral Prepayments
 
37.7
%
 
100.0
%
 
66.2
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
0.0
%
 
62.3
%
 
33.8
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Non-exchange traded common equity investment in mortgage-related entity
 
6,750

 
Enterprise Value
 
Equity Price-to-Book(4)
 
3.3x
 
3.3x
 
3.3x
Non-exchange traded preferred equity investment in mortgage-related entity
 
27,317

 
Enterprise Value
 
Equity Price-to-Book(4)
 
1.1x
 
1.1x
 
1.1x
Non-exchange traded preferred equity investment in loan origination entity
 
3,000

 
Recent Transactions
 
Transaction Price
 
N/A
 
N/A
 
N/A
Non-controlling equity interest in limited liability company
 
5,192

 
Discounted Cash Flows
 
Yield(5)
 
12.9%
 
16.1%
 
15.4%
Other secured borrowings, at fair value(1)
 
(297,948
)
 
Discounted Cash Flows
 
Yield
 
3.9%
 
4.4%
 
4.3%

(1)
Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFE as discussed in Note 2.
(2)
Excludes certain loans that are re-performing.
(3)
Shown in basis points.
(4)
Represent an estimation of where market participants might value an enterprise on a price-to-book basis.
(5)
Represents the significant unobservable inputs used to fair value the financial instruments of the limited liability company. The fair value of such financial instruments is the largest component of the valuation of the limited liability company as a whole.
Fair Value Measurement Using Significant Unobservable Inputs
The tables below include a roll-forward of the Company's financial instruments for the three-month period ended March 31, 2019 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.
Level 3—Fair Value Measurement Using Significant Unobservable Inputs:
Three-Month Period Ended March 31, 2019
(In thousands)
Beginning Balance as of 
January 1, 2019
 
Accreted
Discounts /
(Amortized
Premiums)
 
Net Realized
Gain/
(Loss)
 
Change in Net
Unrealized
Gain/(Loss)
 
Purchases/
Payments
 
Sales/
Issuances
 
Transfers Into Level 3
 
Transfers Out of Level 3
 
Ending
Balance as of 
March 31, 2019
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities, at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency RMBS
$
7,293

 
$
(774
)
 
$
(594
)
 
$
189

 
$
6

 
$
—

 
$
842

 
$
(573
)
 
$
6,389

Non-Agency RMBS
91,291

 
63

 
(101
)
 
(535
)
 
15,546

 
(19,436
)
 
10,492

 
(2,650
)
 
94,670

CMBS
803

 
(14
)
 
—

 
(8
)
 
—

 
—

 
4,356

 
—

 
5,137

CLOs
14,915

 
(406
)
 
(83
)
 
49

 
8,304

 
—

 
—

 
(1,341
)
 
21,438

Asset-backed securities backed by consumer loans
22,800

 
(609
)
 
(512
)
 
762

 
4,940

 
(3,273
)
 
—

 
—

 
24,108

Corporate debt securities
6,318

 
16

 
(1
)
 
(77
)
 
384

 
(903
)
 
—

 
—

 
5,737

Corporate equity securities
1,530

 
—

 
—

 
(65
)
 
—

 
—

 
—

 
—

 
1,465

Loans, at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage loans
496,829

 
(927
)
 
(136
)
 
1,901

 
157,602

 
(72,017
)
 
—

 
—

 
583,252

Commercial mortgage loans
195,301

 
306

 
—

 
(333
)
 
48,857

 
(4,508
)
 
—

 
—

 
239,623

Consumer loans
183,961

 
(8,572
)
 
(2,055
)
 
1,842

 
54,256

 
(37,317
)
 
—

 
—

 
192,115

Investment in unconsolidated entities, at fair value
72,302

 
276

 
1,560

 
(39
)
 
13,428

 
(29,375
)
 
—

 
—

 
58,152

Financial derivatives–assets, at fair value-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit default swaps on asset-backed securities
1,472

 
—

 
275

 
(239
)
 
2

 
(277
)
 
—

 
—

 
1,233

Total assets, at fair value
$
1,094,815

 
$
(10,641
)
 
$
(1,647
)
 
$
3,447

 
$
303,325

 
$
(167,106
)
 
$
15,690

 
$
(4,564
)
 
$
1,233,319

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other secured borrowings, at fair value
$
(297,948
)
 
$
—

 
$
—

 
$
57

 
$
15,767

 
$
—

 
$
—

 
$
—

 
$
(282,124
)
Total liabilities, at fair value
$
(297,948
)
 
$
—

 
$
—

 
$
57

 
$
15,767

 
$
—

 
$
—

 
$
—

 
$
(282,124
)
The tables below include a roll-forward of the Company's financial instruments for the three-month period ended March 31, 2018 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.
Level 3—Fair Value Measurement Using Significant Unobservable Inputs:
Three-Month Period Ended March 31, 2018
(In thousands)
Ending
Balance as of 
December 31, 2017
 
Accreted
Discounts /
(Amortized
Premiums)
 
Net Realized
Gain/
(Loss)
 
Change in Net
Unrealized
Gain/(Loss)
 
Purchases/
Payments
 
Sales/
Issuances
 
Transfers Into Level 3
 
Transfers Out of Level 3
 
Ending
Balance as of 
March 31, 2018
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, at fair value-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency residential mortgage-backed securities
$
6,173

 
$
(600
)
 
$
39

 
$
264

 
$
1,101

 
$
(388
)
 
$
—

 
$
(461
)
 
$
6,128

Private label residential mortgage-backed securities
101,297

 
106

 
2,288

 
293

 
20,660

 
(21,574
)
 
11,561

 
(2,769
)
 
111,862

Private label commercial mortgage-backed securities
12,347

 
(183
)
 
1,554

 
121

 
9,624

 
(7,366
)
 
—

 
(2,388
)
 
13,709

Commercial mortgage loans
108,301

 
618

 
330

 
(161
)
 
3,988

 
(3,782
)
 
—

 
—

 
109,294

Residential mortgage loans
182,472

 
(715
)
 
(54
)
 
(653
)
 
73,040

 
(13,309
)
 
—

 
—

 
240,781

Collateralized loan obligations
24,911

 
455

 
2

 
226

 
10,095

 
(8,210
)
 
—

 
—

 
27,479

(In thousands)
Ending
Balance as of 
December 31, 2017
 
Accreted
Discounts /
(Amortized
Premiums)
 
Net Realized
Gain/
(Loss)
 
Change in Net
Unrealized
Gain/(Loss)
 
Purchases/
Payments
 
Sales/
Issuances
 
Transfers Into Level 3
 
Transfers Out of Level 3
 
Ending
Balance as of 
March 31, 2018
(Continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer loans and asset-backed securities backed by consumer loans
$
135,258

 
$
(5,896
)
 
$
501

 
$
3,804

 
$
42,133

 
$
(27,378
)
 
$
—

 
$
—

 
$
148,422

Corporate debt
23,947

 
(114
)
 
52

 
364

 
456

 
(6,705
)
 
—

 
—

 
18,000

Real estate owned
26,277

 
—

 
(456
)
 
615

 
4,098

 
(1,424
)
 
—

 
—

 
29,110

Corporate equity investments
37,465

 
—

 
—

 
4,326

 
9,078

 
—

 
—

 
—

 
50,869

Total investments, at fair value
658,448

 
(6,329
)
 
4,256

 
9,199

 
174,273

 
(90,136
)
 
11,561

 
(5,618
)
 
755,654

Financial derivatives–assets, at fair value-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit default swaps on asset-backed securities
3,140

 
—

 
86

 
(71
)
 
24

 
(110
)
 
—

 
—

 
3,069

Total financial derivatives– assets, at fair value
3,140

 
—

 
86

 
(71
)
 
24

 
(110
)
 
—

 
—

 
3,069

Total investments and financial derivatives–assets, at fair value
$
661,588

 
$
(6,329
)
 
$
4,342

 
$
9,128

 
$
174,297

 
$
(90,246
)
 
$
11,561

 
$
(5,618
)
 
$
758,723

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other secured borrowings, at fair value
$
(125,105
)
 
$
—

 
$
—

 
$
784

 
$
10,546

 
$
—

 
$
—

 
$
—

 
$
(113,775
)
Total other secured borrowings, at fair value
$
(125,105
)
 
$
—

 
$
—

 
$
784

 
$
10,546

 
$
—

 
$
—

 
$
—

 
$
(113,775
)

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at March 31, 2018, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended March 31, 2018. For Level 3 financial instruments held by the Company at March 31, 2018, change in net unrealized gain (loss) of $8.6 million, $(0.1) million, and $0.8 million, for the three-month period ended March 31, 2018 relate to investments, financial derivatives–assets, and other secured borrowings, at fair value, respectively.
As of June 30, 2017, the Company modified its procedures to determine the level within the hierarchy for certain financial instruments. Under the revised procedures, the Company examines financial instruments individually rather than in cohorts of like instruments as it had previously. As of March 31, 2018, the Company transferred $5.6 million of securities from Level 3 to Level 2 and $11.6 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.