Residential Whole Loans (Tables)

3 Months Ended

Mar. 31, 2020

Residential Whole Loans, at Carrying Value

The following table presents the components of the Company’s Residential whole loans, at carrying value at March 31, 2020 and December 31, 2019:



(Dollars In Thousands)	March 31, 2020			December 31, 2019
Purchased Performing Loans:
Non-QM loans (1)	$	3,538,725		$	3,707,245
Rehabilitation loans	978,965			1,026,097
Single-family rental loans	506,352			460,742
Seasoned performing loans	165,592			176,569
Total Purchased Performing Loans	5,189,634			5,370,653
Purchased Credit Deteriorated Loans (2)	744,408			698,717
Total Residential whole loans, at carrying value	$	5,934,042		$	6,069,370
Allowance for credit and valuation losses on residential whole loans held at carrying value and held-for-sale	(218,011		)	(3,025		)
Total Residential whole loans at carrying value, net	$	5,716,031		$	6,066,345

Number of loans	16,999			17,082


(1)	Includes Non-QM loans held-for-sale with an amortized cost of $965.5 million and a net carrying value of $895.3 million at March 31, 2020.

(2)

The amortized cost basis of Purchased Credit Deteriorated Loans was increased by $62.6 million on January 1, 2020 in connection with the adoption of ASU 2016-13.

Schedule of Interest Income Components

The following table presents the components of interest income on the Company’s Residential whole loans, at carrying value and held-for-sale for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
(In Thousands)	2020		2019
Purchased Performing Loans:
Non-QM loans (1)	$	49,070	$	22,414
Rehabilitation loans	15,327		9,933
Single-family rental loans	7,343		2,701
Seasoned performing loans	2,600		3,173
Total Purchased Performing Loans	74,340		38,221
Purchased Credit Deteriorated Loans	9,146		11,399
Total Residential whole loans, at carrying value	$	83,486	$	49,620

(1)

Includes interest income on Non-QM loans held-for-sale at March 31, 2020.

Financing Receivable Credit Quality Indicators

The following table presents additional information regarding the Company’s Residential whole loans, at carrying value and held-for-sale at March 31, 2020:

March 31, 2020



	Carrying Value		Amortized Cost Basis		Unpaid Principal Balance (“UPB”)		Weighted Average Coupon (1)		Weighted Average Term to Maturity (Months)	Weighted Average LTV Ratio (2)		Weighted Average Original FICO (3)	Aging by Amortized Cost Basis
															Past Due Days
(Dollars In Thousands)													Current		30-59		60-89		90+
Purchased Performing Loans:
Non-QM loans (4)(5)	$	3,434,894	$	3,538,725	$	3,424,646	5.84	%	363	66	%	717	$	3,450,648	$	50,584	$	13,058	$	24,435
Rehabilitation loans (4)	943,332		978,965		978,965		7.24		7	64		720	806,413		61,723		20,973		89,856
Single-family rental loans (4)	498,921		506,352		501,925		6.28		322	70		734	482,499		17,536		2,009		4,308
Seasoned performing loans (4)	165,343		165,592		180,421		4.11		178	42		723	160,944		1,670		1,099		1,879
Purchased Credit Deteriorated Loans (4)(6)	673,541		744,408		858,122		4.46		292	80		N/A	N/M		N/M		N/M		87,179
Residential whole loans, at carrying value, total or weighted average	$	5,716,031	$	5,934,042	$	5,944,079	5.88	%	285

December 31, 2019



	Carrying Value		Amortized Cost Basis		Unpaid Principal Balance (“UPB”)		Weighted Average Coupon (1)		Weighted Average Term to Maturity (Months)	Weighted Average LTV Ratio (2)		Weighted Average Original FICO (3)	Aging by UPB
															Past Due Days
(Dollars In Thousands)													Current		30-59		60-89		90+
Purchased Performing Loans:
Non-QM loans (4)	$	3,706,857	$	3,707,245	$	3,592,701	5.96	%	368	67	%	716	$	3,492,533	$	59,963	$	19,605	$	20,600
Rehabilitation loans (4)	1,023,766		1,026,097		1,026,097		7.30		8	64		717	868,281		67,747		27,437		62,632
Single-family rental loans (4)	460,679		460,741		457,146		6.29		324	70		734	432,936		15,948		2,047		6,215
Seasoned performing loans	176,569		176,569		192,151		4.24		181	46		723	187,683		2,164		430		1,874
Purchased Credit Impaired Loans (6)	698,474		698,718		873,326		4.46		294	81		N/A	N/M		N/M		N/M		108,998
Residential whole loans, at carrying value, total or weighted average	$	6,066,345	$	6,069,370	$	6,141,421	5.96	%	288


(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 $259.4 million and $269.2 million at March 31, 2020 and December 31, 2019, respectively, 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 68% and 69% at March 31, 2020 and December 31, 2019, respectively. 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)	Excludes loans for which no Fair Isaac Corporation (“FICO”) score is available.


(4)	At March 31, 2020 and December 31, 2019 the difference between the Carrying Value and Amortized Cost Basis represents the related allowance for credit losses.


(5)	Includes Non-QM loans held-for-sale with a net carrying value of $895.3 million at March 31, 2020.

(6)

Purchased Credit Deteriorated 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.

The following table presents certain additional credit-related information regarding our residential whole loans, at carrying value:



	Amortized Cost Basis by Origination Year and LTV Bands
(Dollars In Thousands)	2020		2019		2018		2017		2016		Prior		Total
Non-QM loans (1)
LTV < 80% (2)	$	252,458	$	1,331,053	$	790,056	$	92,314	$	9,055	$	—	$	2,474,936
LTV >= 80% (2)	23,015		33,783		31,888		9,494		150		—		98,330
Total Non-QM loans	$	275,473	$	1,364,836	$	821,944	$	101,808	$	9,205	$	—	$	2,573,266
Three Months Ended March 31, 2020 Gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Three Months Ended March 31, 2020 Recoveries	—		—		—		—		—		—		—
Three Months Ended March 31, 2020 Net write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Rehabilitation loans
LTV < 80% (2)	$	48,534	$	735,912	$	160,334	$	8,243	$	—	$	—	$	953,023
LTV >= 80% (2)	4,984		17,470		1,788		1,700		—		—		25,942
Total Rehabilitation loans	$	53,518	$	753,382	$	162,122	$	9,943	$	—	$	—	$	978,965
Three Months Ended March 31, 2020 Gross write-offs	$	—	$	—	$	334	$	—	$	—	$	94	$	428
Three Months Ended March 31, 2020 Recoveries	—		—		—		—		—		—		—
Three Months Ended March 31, 2020 Net write-offs	$	—	$	—	$	334	$	—	$	—	$	94	$	428

Single family rental loans
LTV < 80% (2)	$	21,623	$	305,098	$	149,270	$	14,060	$	—	$	—	$	490,051
LTV >= 80% (2)	2,576		13,514		211		—		—		—		16,301
Total Single family rental loans	$	24,199	$	318,612	$	149,481	$	14,060	$	—	$	—	$	506,352
Three Months Ended March 31, 2020 Gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Three Months Ended March 31, 2020 Recoveries	—		—		—		—		—		—		—
Three Months Ended March 31, 2020 Net write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Seasoned performing loans
LTV < 80% (2)	$	—	$	—	$	—	$	—	$	81	$	156,733	$	156,814
LTV >= 80% (2)	—		—		—		—		—		8,778		8,778
Total Seasoned performing loans	$	—	$	—	$	—	$	—	$	81	$	165,511	$	165,592
Three Months Ended March 31, 2020 Gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Three Months Ended March 31, 2020 Recoveries	—		—		—		—		—		—		—
Three Months Ended March 31, 2020 Net write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Purchased credit deteriorated loans
LTV < 80% (2)	$	—	$	—	$	—	$	634	$	3,214	$	430,659	$	434,507
LTV >= 80% (2)	—		—		—		—		3,773		306,128		309,901
Total Purchased credit deteriorated loans	$	—	$	—	$	—	$	634	$	6,987	$	736,787	$	744,408
Three Months Ended March 31, 2020 Gross write-offs	$	—	$	—	$	—	$	—	$	—	$	219	$	219
Three Months Ended March 31, 2020 Recoveries	—		—		—		—		—		—		—
Three Months Ended March 31, 2020 Net write-offs	$	—	$	—	$	—	$	—	$	—	$	219	$	219

Total LTV < 80% (2)	$	322,615	$	2,372,063	$	1,099,660	$	115,251	$	12,350	$	587,392	$	4,509,331
Total LTV >= 80% (2)	30,575		64,767		33,887		11,194		3,923		314,906		459,252
Total residential whole loans, at carrying value	$	353,190	$	2,436,830	$	1,133,547	$	126,445	$	16,273	$	902,298	$	4,968,583
Total Gross write-offs	$	—	$	—	$	334	$	—	$	—	$	313	$	647
Total Recoveries	—		—		—		—		—		—		—
Total Net write-offs	$	—	$	—	$	334	$	—	$	—	$	313	$	647


(1)	Excludes Non-QM loans held-for-sale with an amortized cost of $965.5 million at March 31, 2020.

(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 $259.4 million at March 31, 2020, 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 68% at March 31, 2020. Certain low value loans secured by vacant lots are categorized as LTV >= 80%.

Schedule of Credit Losses

The following table presents a roll-forward of the allowance for credit losses on the Company’s Residential Whole Loans, at Carrying Value:



	Three Months Ended March 31, 2020
(Dollars In Thousands)	Non-QM Loans (1)		Rehabilitation Loans (2)(3)			Single-family Rental Loans		Seasoned Performing Loans		Purchased Credit Deteriorated Loans (4)			Totals
Allowance for credit losses at beginning of period	$	388	$	2,331		$	62	$	—	$	244		$	3,025
Transition adjustment on adoption of ASU 2016-13 (5)	6,904		517			754		19		62,361			70,555
Current provision	26,358		33,213			6,615		230		8,481			74,897
Write-offs	—		(428		)	—		—		(219		)	(647		)
Valuation adjustment on loans held for sale	70,181		—			—		—		—			70,181
Allowance for credit and valuation losses at end of period	$	103,831	$	35,633		$	7,431	$	249	$	70,867		$	218,011



	Three Months Ended March 31, 2019
(Dollars In Thousands)	Non-QM Loans		Rehabilitation Loans			Single-family Rental Loans		Seasoned Performing Loans		Purchased Credit Deteriorated Loans			Totals
Allowance for credit losses at beginning of period	$	—	$	—		$	—	$	—	$	968		$	968
Current provision	388		2,843			62		—		(724		)	2,569
Write-offs	—		(512		)	—		—		—			(512		)
Allowance for credit losses at end of period	$	388	$	2,331		$	62	$	—	$	244		$	3,025


(1)	Includes Non-QM loans held-for-sale with a net carrying value of $895.3 million at March 31, 2020.


(2)	In connection with purchased Rehabilitation loans, the Company had unfunded commitments of $123.1 million, with an allowance for credit losses of $3.5 million at March 31, 2020. Such allowance is included in “Other liabilities” on the Company’s Balance Sheet (see Note 9)


(3)	Includes $110.8 million of loans that were assessed for credit losses based on a collateral dependent methodology.


(4)	Includes $74.5 million of loans that were assessed for credit losses based on a collateral dependent methodology.

(5)

Of the $70.6 million of reserves recorded on adoption of ASU 2016-13, $8.3 million was recorded as an adjustment to stockholders’ equity and $62.4 million was recorded as a “gross up” of the amortized cost basis of Purchased Credit Deteriorated Loans.

Residential Whole Loans, Fair Value

The following table presents information regarding the Company’s residential whole loans held at fair value at March 31, 2020 and December 31, 2019:



(Dollars in Thousands)	March 31, 2020			December 31, 2019
Less than 60 Days Past Due:
Outstanding principal balance	$	664,362		$	666,026
Aggregate fair value	$	593,037		$	641,616
Weighted Average LTV Ratio (1)	75.27		%	76.69		%
Number of loans	3,186			3,159

60 Days to 89 Days Past Due:
Outstanding principal balance	$	60,720		$	58,160
Aggregate fair value	$	50,999		$	53,485
Weighted Average LTV Ratio (1)	85.06		%	79.48		%
Number of loans	279			313

90 Days or More Past Due:
Outstanding principal balance	$	693,380		$	767,320
Aggregate fair value	$	599,756		$	686,482
Weighted Average LTV Ratio (1)	88.12		%	89.69		%
Number of loans	2,685			2,983
Total Residential whole loans, at fair value	$	1,243,792		$	1,381,583

(1)

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.

Residential Whole Loans, Fair Value, Component of Net gain on residential whole loans

The following table presents the components of Net (loss)/gain on residential whole loans measured at fair value through earnings for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
(In Thousands)	2020			2019
Coupon payments, realized gains, and other income received (1)	$	19,036		$	21,756
Net unrealized losses	(74,556		)	(1,060		)
Net gain on transfers to REO	2,760			4,571
Total	$	(52,760	)	$	25,267

(1)

Primarily includes gains on liquidation of non-performing loans, including the recovery of delinquent interest payments, recurring coupon interest payments received on mortgage loans that are contractually current, and cash payments received from private mortgage insurance on liquidated loans.