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Fair Value of Financial Instruments (Tables) | 12 Months Ended
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Dec. 31, 2019
Fair Value Disclosures [Abstract] |
Schedule of significant unobservable inputs used in fair value measurement | The following table presents additional information for the years ended December 31, 2019 and 2018 about the Company’s Residential whole loans, at fair value, which are classified as Level 3 and measured at fair value on a recurring basis:
|  | Residential Whole Loans, at Fair Value
|  | For the Year Ended December 31,
(In Thousands) |  | 2019 |  | 2018 (1)
Balance at beginning of period |  | $ | 1,471,263 |  |  | $ | 1,325,115 |
Purchases and capitalized advances (2) |  | 234,979 |  |  | 500,004 |
Changes in fair value recorded in Net gain on residential whole loans measured at fair value through earnings |  | 47,848 |  |  | 36,725 |
Collection of principal, net of liquidation gains/(losses) |  | (152,011 | ) |  | (199,203 | )
Repurchases |  | (1,337 | ) |  | (1,807 | )
Transfer to REO |  | (219,159 | ) |  | (189,571 | )
Balance at end of period |  | $ | 1,381,583 |  |  | $ | 1,471,263 |
(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) | Included in the activity presented for the year ended December 31, 2019 is an adjustment of $70.6 million for loans the Company committed to purchase during the year ended December 31, 2018, but for which the closing of the purchase transaction occurred during the three months ended March 31, 2019. The adjustment was required following the finalization of due diligence performed prior to the closing of the purchase transaction and resulted in a downward revision to the prior estimate of the loan purchase amount.
The following table presents additional information for the years ended December 31, 2019 and 2018 about the Company’s investments in term notes backed by MSR-related collateral, which were classified as Level 3 prior to September 30, 2019 and measured at fair value on a recurring basis:
|  | Term Notes Backed by MSR-Related Collateral
|  | Year Ended December 31,
(In Thousands) |  | 2019 |  | 2018
Balance at beginning of period |  | $ | 538,499 |  |  | $ | 381,804 |
Purchases |  | 573,137 |  |  | 548,404 |
Collection of principal |  | (12,897 | ) |  | (390,898 | )
Changes in unrealized gain/(losses) |  | 5,391 |  |  | (811 | )
Transfer to Level 2 |  | (1,104,130 | ) |  | — |
Balance at end of period |  | $ | — |  |  | $ | 538,499 |
Schedule of quantitative information about significant unobservable inputs | The following tables present the Company’s financial instruments carried at fair value on a recurring basis as of December 31, 2019 and 2018, on the consolidated balance sheets by the valuation hierarchy, as previously described: Fair Value at December 31, 2019
(In Thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Agency MBS |  | $ | — |  |  | $ | 1,664,582 |  |  | $ | — |  |  | $ | 1,664,582 |
Non-Agency MBS |  | — |  |  | 2,063,529 |  |  | — |  |  | 2,063,529 |
CRT securities |  | — |  |  | 255,408 |  |  | — |  |  | 255,408 |
Residential whole loans, at fair value |  | — |  |  | — |  |  | 1,381,583 |  |  | 1,381,583 |
Term notes backed by MSR-related collateral |  | — |  |  | 1,157,463 |  |  | — |  |  | 1,157,463 |
Total assets carried at fair value |  | $ | — |  |  | $ | 5,140,982 |  |  | $ | 1,381,583 |  |  | $ | 6,522,565 |
Fair Value at December 31, 2018
(In Thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Agency MBS |  | $ | — |  |  | $ | 2,698,213 |  |  | $ | — |  |  | $ | 2,698,213 |
Non-Agency MBS |  | — |  |  | 3,318,299 |  |  | — |  |  | 3,318,299 |
CRT securities |  | — |  |  | 492,821 |  |  | — |  |  | 492,821 |
Residential whole loans, at fair value |  | — |  |  | — |  |  | 1,665,978 |  |  | 1,665,978 |
Term notes backed by MSR-related collateral |  | — |  |  | — |  |  | 538,499 |  |  | 538,499 |
Total assets carried at fair value |  | $ | — |  |  | $ | 6,509,333 |  |  | $ | 2,204,477 |  |  | $ | 8,713,810 |
The following tables present a summary of quantitative information about the significant unobservable inputs used in the fair value measurement of the Company’s residential whole loans held at fair value for which it has utilized Level 3 inputs to determine fair value as of December 31, 2019 and 2018:
|  | December 31, 2019 |  |
(Dollars in Thousands) |  | Fair Value (1) |  | Valuation Technique |  | Unobservable Input |  | Weighted Average (2) |  | Range
Residential whole loans, at fair value |  | $ | 829,842 |  |  | Discounted cash flow |  | Discount rate |  | 4.2 | % |  | 3.8-8.0%
|  |  |  |  |  | Prepayment rate |  | 4.5 | % |  | 0.7-18.0%
|  |  |  |  |  | Default rate |  | 4.0 | % |  | 0.0-23.0%
|  |  |  |  |  | Loss severity |  | 12.9 | % |  | 0.0-100.0%
|  | $ | 551,271 |  |  | Liquidation model |  | Discount rate |  | 8.0 | % |  | 6.2-50.0%
|  |  |  |  |  | Annual change in home prices |  | 3.7 | % |  | 2.4-8.0%
|  |  |  |  |  | Liquidation timeline (in years) |  | 1.8 |  |  | 0.1-4.5
|  |  |  |  |  | Current value of underlying properties (3) |  | $ | 684 |  |  | $10-$4,500
Total |  | $ | 1,381,113 |  |  |  |  |  |  |  |  |
|  | December 31, 2018 |  |
(Dollars in Thousands) |  | Fair Value (1) |  | Valuation Technique |  | Unobservable Input |  | Weighted Average (2) |  | Range
Residential whole loans, at fair value |  | $ | 700,250 |  |  | Discounted cash flow |  | Discount rate |  | 5.2 | % |  | 4.5-8.0%
|  |  |  |  |  | Prepayment rate |  | 4.8 | % |  | 0.9-15.9%
|  |  |  |  |  | Default rate |  | 4.1 | % |  | 0.0-24.1%
|  |  |  |  |  | Loss severity |  | 12.9 | % |  | 0.0-100.0%
|  | $ | 683,252 |  |  | Liquidation model |  | Discount rate |  | 8.0 | % |  | 6.1-50.0%
|  |  |  |  |  | Annual change in home prices |  | 3.5 | % |  | (0.5)-12.2%
|  |  |  |  |  | Liquidation timeline (in years) |  | 1.8 |  |  | 0.1-4.5
|  |  |  |  |  | Current value of underlying properties (3) |  | $ | 802 |  |  | $2-$7,950
Total |  | $ | 1,383,502 |  |  |  |  |  |  |  |  |
(1) | Excludes approximately $470,000 and $282.5 million of loans for which management considers the purchase price continues to reflect the fair value of such loans at December 31, 2019 and 2018, respectively.
(2) | Amounts are weighted based on the fair value of the underlying loan.
(3) The simple average value of the properties underlying residential whole loans held at fair value valued via a liquidation model was approximately $365,000 and $400,000 as of December 31, 2019 and 2018, respectively.
Schedule of carrying value and fair value of financial instruments | The following table presents the carrying values and estimated fair values of the Company’s financial instruments at December 31, 2019 and 2018:
|  | Level in Fair Value Hierarchy |  | December 31, 2019 |  | December 31, 2018
(In Thousands) |  |  | Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
Financial Assets: |  |  |  |  |  |  |  |  |  |
Agency MBS |  | 2 |  | $ | 1,664,582 |  |  | $ | 1,664,582 |  |  | $ | 2,698,213 |  |  | $ | 2,698,213 |
Non-Agency MBS |  | 2 |  | 2,063,529 |  |  | 2,063,529 |  |  | 3,318,299 |  |  | 3,318,299 |
CRT securities |  | 2 |  | 255,408 |  |  | 255,408 |  |  | 492,821 |  |  | 492,821 |
Residential whole loans, at carrying value |  | 3 |  | 6,066,345 |  |  | 6,248,745 |  |  | 3,016,715 |  |  | 3,104,401 |
Residential whole loans, at fair value |  | 3 |  | 1,381,583 |  |  | 1,381,583 |  |  | 1,665,978 |  |  | 1,665,978 |
MSR-related assets (1) |  | 2 and 3 |  | 1,217,002 |  |  | 1,217,002 |  |  | 611,807 |  |  | 611,807 |
Cash and cash equivalents |  | 1 |  | 70,629 |  |  | 70,629 |  |  | 51,965 |  |  | 51,965 |
Restricted cash |  | 1 |  | 64,035 |  |  | 64,035 |  |  | 36,744 |  |  | 36,744 |
Financial Liabilities (2): |  |  |  |  |  |  |  |  |  |  |  |
Repurchase agreements |  | 2 |  | 9,139,821 |  |  | 9,156,209 |  |  | 7,879,087 |  |  | 7,896,672 |
Securitized debt |  | 2 |  | 570,952 |  |  | 575,353 |  |  | 684,420 |  |  | 680,209 |
Convertible Senior Notes |  | 2 |  | 223,971 |  |  | 244,088 |  |  | — |  |  | — |
Senior Notes |  | 1 |  | 96,862 |  |  | 103,231 |  |  | 96,816 |  |  | 99,951 |
(1) | Includes $59.5 million of MSR-related assets that are measured at fair value on a non-recurring basis that are classified as Level 3 in the fair value hierarchy.
(2) Carrying value of securitized debt, Convertible Senior Notes, Senior Notes and certain repurchase agreements is net of associated debt issuance costs.

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- Definition Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19279-110258 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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