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Residential Whole Loans | 9 Months Ended
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Sep. 30, 2019
Receivables [Abstract] |
Residential Whole Loans | Residential Whole Loans Included on the Company’s consolidated balance sheets at September 30, 2019 and December 31, 2018 are approximately $6.4 billion and $4.7 billion, respectively, of residential whole loans arising from the Company’s interests in certain trusts established to acquire the loans and certain entities established in connection with its loan securitization transactions. The Company has assessed that these entities are required to be consolidated for financial reporting purposes. Residential Whole Loans, at Carrying Value The following table presents the components of the Company’s Residential whole loans, at carrying value at September 30, 2019 and December 31, 2018:
(Dollars In Thousands) |  | September 30, 2019 |  | December 31, 2018
Purchased Performing Loans: |  |  |  |
Non-QM loans |  | $ | 2,727,006 |  |  | $ | 1,354,774 |
Rehabilitation loans |  | 968,867 |  |  | 494,576 |
Single-family rental loans |  | 366,362 |  |  | 145,327 |
Seasoned performing loans |  | 188,982 |  |  | 224,051 |
Total Purchased Performing Loans |  | 4,251,217 |  |  | 2,218,728 |
Purchased Credit Impaired Loans |  | 718,197 |  |  | 797,987 |
Total Residential whole loans, at carrying value |  | $ | 4,969,414 |  |  | $ | 3,016,715 |
Number of loans |  | 14,968 |  |  | 11,149 |
The following table presents components of interest income on the Company’s Residential whole loans, at carrying value for the three and nine months ended September 30, 2019 and 2018:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Purchased Performing Loans: |  |  |  |  |  |  |  |
Non-QM loans |  | $ | 30,258 |  |  | $ | 10,284 |  |  | $ | 79,250 |  |  | $ | 16,177 |
Rehabilitation loans |  | 15,142 |  |  | 4,708 |  |  | 38,331 |  |  | 8,323 |
Single-family rental loans |  | 5,025 |  |  | 918 |  |  | 11,652 |  |  | 1,733 |
Seasoned performing loans |  | 3,166 |  |  | 2,416 |  |  | 9,461 |  |  | 2,416 |
Total Purchased Performing Loans |  | 53,591 |  |  | 18,326 |  |  | 138,694 |  |  | 28,649 |
Purchased Credit Impaired Loans |  | 10,635 |  |  | 11,198 |  |  | 33,031 |  |  | 33,139 |
Total Residential whole loans, at carrying value |  | $ | 64,226 |  |  | $ | 29,524 |  |  | $ | 171,725 |  |  | $ | 61,788 |
The following table presents additional information regarding the Company’s Residential whole loans, at carrying value at September 30, 2019: September 30, 2019
|  | Carrying Value |  | Unpaid Principal Balance (“UPB”) |  | Weighted Average Coupon (1) |  | Weighted Average Term to Maturity (Months) |  | Weighted Average LTV Ratio (2) |  | Aging by UPB
|  |  |  |  |  |  |  |  | Past Due Days
(Dollars In Thousands) |  |  |  |  |  |  | Current |  | 30-59 |  | 60-89 |  | 90+
Purchased Performing Loans: (3) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-QM loans |  | $ | 2,667,482 |  |  | $ | 2,582,746 |  |  | 6.15 | % |  | 365 |  | 66 | % |  | $ | 2,527,231 |  |  | $ | 29,208 |  |  | $ | 14,349 |  |  | $ | 11,958 |
Rehabilitation loans (4) |  | 969,255 |  |  | 969,255 |  |  | 7.32 |  |  | 8 |  | 65 |  |  | 843,034 |  |  | 70,130 |  |  | 16,801 |  |  | 39,290 |
Single-family rental loans |  | 366,362 |  |  | 364,350 |  |  | 6.27 |  |  | 325 |  | 69 |  |  | 349,967 |  |  | 10,974 |  |  | 2,256 |  |  | 1,153 |
Seasoned performing loans |  | 188,982 |  |  | 205,243 |  |  | 4.40 |  |  | 183 |  | 47 |  |  | 200,643 |  |  | 2,223 |  |  | 1,048 |  |  | 1,329 |
Purchased Credit Impaired Loans (5) |  | 718,197 |  |  | 900,183 |  |  | 4.44 |  |  | 297 |  | 83 |  |  | N/M |  |  | N/M |  |  | N/M |  |  | 104,008 |
Residential whole loans, at carrying value, total or weighted average |  | $ | 4,910,278 |  |  | $ | 5,021,777 |  |  | 6.03 | % |  | 274 |  |  |  |  |  |  |  |  |  |
(1) | Weighted average is calculated based on the interest bearing principal balance of each loan within the related category. For loans acquired with servicing rights released by the seller, interest rates included in the calculation do not reflect loan servicing fees. For loans acquired with servicing rights retained by the seller, interest rates included in the calculation are net of servicing fees.
(2) | LTV represents the ratio of the total unpaid principal balance of the loan to the estimated value of the collateral securing the related loan as of the most recent date available, which may be the origination date. For Rehabilitation loans, the LTV presented is the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan, where available. For certain Rehabilitation loans, totaling $250.0 million, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation. The weighted average LTV of these loans based on the current unpaid principal balance and the valuation obtained during underwriting, is 69%. Excluded from the calculation of weighted average LTV are certain low value loans secured by vacant lots, for which the LTV ratio is not meaningful.
(3) | Excluded from the table above are approximately $59.5 million of Purchased Performing Loans for which the closing of the purchase transaction had not occurred as of September 30, 2019.
(4) | Carrying value of Rehabilitation loans excludes an allowance for loan losses of $388,000 at September 30, 2019.
(5) | Purchased Credit Impaired Loans tend to be characterized by varying performance of the underlying borrowers over time, including loans where multiple months of payments are received in a period to bring the loan to current status, followed by months where no payments are received. Accordingly, delinquency information is presented for loans that are more than 90 days past due that are considered to be seriously delinquent.
Purchased Performing Loans As of September 30, 2019, there were 166 Purchased Performing Loans held at carrying value that have been placed on non-accrual status because they are 90 or more days delinquent or otherwise had not met the necessary criteria to be returned to accrual status. Such loans have an unpaid balance of approximately $66.4 million. These non-accrual loans represent approximately 1.6% of the total outstanding principal balance of all of the Company’s Purchased Performing Loans and have a weighted average LTV of 68%. As of September 30, 2019, the Company had established an allowance for loan losses of $388,000. For the three months ended September 30, 2019, no provision for loan losses was recorded. For the nine months ended September 30, 2019, a provision for loan losses of $622,000 was recorded, which is included in Operating and Other expense on the Company’s consolidated statements of operations. No provision for loan losses was recorded in the prior year periods. In connection with purchased Rehabilitation loans, the Company had unfunded commitments of $126.0 million at September 30, 2019. Purchased Credit Impaired Loans As of September 30, 2019 and 2018, the Company had established an allowance for loan losses of approximately $1.9 million and $461,000, respectively, on its Purchased Credit Impaired Loans held at carrying value. For the three and nine months ended September 30, 2019, a net provision for loan losses of approximately $347,000 and $915,000 was recorded, respectively, which is included in Operating and Other expense on the Company’s consolidated statements of operations. For the three and nine months ended September 30, 2018, a provision for loan losses of approximately $164,000 and $131,000 was recorded, respectively. The following table presents the activity in the Company’s allowance for loan losses on its Purchased Credit Impaired Loans held at carrying value for the three and nine months ended September 30, 2019 and 2018:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Balance at the beginning of period |  | $ | 1,536 |  |  | $ | 297 |  |  | $ | 968 |  |  | $ | 330 |
Provisions for loan losses |  | 347 |  |  | 164 |  |  | 915 |  |  | 131 |
Balance at the end of period |  | $ | 1,883 |  |  | $ | 461 |  |  | $ | 1,883 |  |  | $ | 461 |
The Company did not acquire any Purchased Credit Impaired Loans held at carrying value during the three and nine months ended September 30, 2019. The following table presents information regarding the estimates of contractually required payments, the cash flows expected to be collected, and the estimated fair value of the Purchased Credit Impaired Loans held at carrying value acquired by the Company for the three and nine months ended September 30, 2018:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2019 |  | 2018 (1) |  | 2019 |  | 2018 (1)
Contractually required principal and interest |  | $ | — |  |  | $ | 154,911 |  |  | $ | — |  |  | $ | 154,911 |
Contractual cash flows not expected to be collected (non-accretable yield) |  | — |  |  | (15,378 | ) |  | — |  |  | (15,378 | )
Expected cash flows to be collected |  | — |  |  | 139,533 |  |  | — |  |  | 139,533 |
Interest component of expected cash flows (accretable yield) |  | — |  |  | (41,947 | ) |  | — |  |  | (41,947 | )
Fair value at the date of acquisition |  | $ | — |  |  | $ | 97,586 |  |  | $ | — |  |  | $ | 97,586 |
(1) | Included in the activity presented for the three and nine months ended September 30, 2018 is approximately $54.9 million of Purchase Credit Impaired Loans held at carrying value the Company committed to purchase during the three months ended June 30, 2018, but for which the closing of the purchase transaction occurred during the three months ended September 30, 2018.
The following table presents accretable yield activity for the Company’s Purchased Credit Impaired Loans held at carrying value for the three and nine months ended September 30, 2019 and 2018:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2019 |  | 2018 (1) |  | 2019 |  | 2018 (1)
Balance at beginning of period |  | $ | 376,264 |  |  | $ | 401,075 |  |  | $ | 415,330 |  |  | $ | 421,872 |
Additions |  | — |  |  | 41,947 |  |  | — |  |  | 41,947 |
Accretion |  | (10,635 | ) |  | (11,198 | ) |  | (33,031 | ) |  | (33,139 | )
Liquidations and other |  | (11,399 | ) |  | (8,378 | ) |  | (33,695 | ) |  | (23,388 | )
Reclassifications from non-accretable difference, net |  | 3,892 |  |  | 9,694 |  |  | 9,518 |  |  | 25,848 |
Balance at end of period |  | $ | 358,122 |  |  | $ | 433,140 |  |  | $ | 358,122 |  |  | $ | 433,140 |
(1) | Included in the activity presented for the three and nine months ended September 30, 2018 is approximately $54.9 million of Purchase Credit Impaired Loans held at carrying value the Company committed to purchase during the three months ended June 30, 2018, but for which the closing of the purchase transaction occurred during the three months ended September 30, 2018.
Accretable yield for Purchased Credit Impaired residential whole loans is the excess of loan cash flows expected to be collected over the purchase price. The cash flows expected to be collected represent the Company’s estimate of the amount and timing of undiscounted principal and interest cash flows. Additions include accretable yield estimates for purchases made during the period and reclassification to accretable yield from non-accretable yield. Accretable yield is reduced by accretion during the period. The reclassifications between accretable and non-accretable yield and the accretion of interest income are based on changes in estimates regarding loan performance and the value of the underlying real estate securing the loans. In future periods, as the Company updates estimates of cash flows expected to be collected from the loans and the underlying collateral, the accretable yield may change. Therefore, the amount of accretable income recorded during the three and nine months ended September 30, 2019 is not necessarily indicative of future results. Residential Whole Loans, at Fair Value Certain of the Company’s residential whole loans are presented at fair value on its consolidated balance sheets as a result of a fair value election made at the time of acquisition. Subsequent changes in fair value are reported in current period earnings and presented in Net gain on residential whole loans measured at fair value through earnings on the Company’s consolidated statements of operations. The following table presents information regarding the Company’s residential whole loans held at fair value at September 30, 2019 and December 31, 2018:
(Dollars in Thousands) |  | September 30, 2019 |  | December 31, 2018 (1)
Less than 60 Days Past Due: |  |  |  |
Outstanding principal balance |  | $ | 654,542 |  |  | $ | 610,290 |
Aggregate fair value |  | $ | 617,172 |  |  | $ | 561,770 |
Weighted Average LTV Ratio (2) |  | 77.08 | % |  | 76.18 | %
Number of loans |  | 3,140 |  |  | 2,898 |
60 Days to 89 Days Past Due: |  |  |  |
Outstanding principal balance |  | $ | 66,657 |  |  | $ | 63,938 |
Aggregate fair value |  | $ | 60,262 |  |  | $ | 54,947 |
Weighted Average LTV Ratio (2) |  | 77.02 | % |  | 82.86 | %
Number of loans |  | 340 |  |  | 285 |
90 Days or More Past Due: |  |  |  |
Outstanding principal balance |  | $ | 871,647 |  |  | $ | 970,758 |
Aggregate fair value |  | $ | 775,735 |  |  | $ | 854,545 |
Weighted Average LTV Ratio (2) |  | 78.26 | % |  | 90.24 | %
Number of loans |  | 3,397 |  |  | 3,531 |
Total Residential whole loans, at fair value |  | $ | 1,453,169 |  |  | $ | 1,471,262 |
(1) | Excluded from the table above are approximately $194.7 million of residential whole loans held at fair value for which the closing of the purchase transaction had not occurred as of December 31, 2018.
(2) | LTV represents the ratio of the total unpaid principal balance of the loan, to the estimated value of the collateral securing the related loan. Excluded from the calculation of weighted average LTV are certain low value loans secured by vacant lots, for which the LTV ratio is not meaningful.
The following table presents the components of Net gain on residential whole loans measured at fair value through earnings for the three and nine months ended September 30, 2019 and 2018:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Coupon payments and other income received (1) |  | $ | 20,176 |  |  | $ | 17,634 |  |  | $ | 61,060 |  |  | $ | 52,034 |
Net unrealized gains |  | 13,185 |  |  | 8,442 |  |  | 33,312 |  |  | 26,788 |
Net gain on payoff/liquidation of loans |  | 2,026 |  |  | 3,251 |  |  | 6,906 |  |  | 10,203 |
Net gain on transfers to REO |  | 4,788 |  |  | 5,615 |  |  | 15,637 |  |  | 16,858 |
Total |  | $ | 40,175 |  |  | $ | 34,942 |  |  | $ | 116,915 |  |  | $ | 105,883 |
(1) Primarily includes recovery of delinquent interest upon the liquidation of non-performing loans, recurring coupon interest payments received on mortgage loans that are contractually current, and cash payments received from private mortgage insurance on liquidated loans.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI http://asc.fasb.org/subtopic&trid=2196772 + Details
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