XML 24 R13.htm IDEA: XBRL DOCUMENT
v3.21.2

Other Assets | 6 Months Ended
--- | ---
Jun. 30, 2021
Other Assets [Abstract] |
Other Assets | Other Assets The following table presents the components of the Company’s Other assets at June 30, 2021 and December 31, 2020:
(In Thousands) |  | June 30, 2021 |  | December 31, 2020
REO (1) |  | $ | 204,762 |  |  | $ | 249,699 |
Capital contributions made to loan origination partners |  | 81,512 |  |  | 47,148 |
Other interest-earning assets |  | 7,875 |  |  | — |
Interest receivable |  | 36,225 |  |  | 38,850 |
Other MBS and loan related receivables |  | 22,198 |  |  | 16,682 |
Lease right-of-use asset (2) |  | 38,137 |  |  | 758 |
Other |  | 48,638 |  |  | 32,244 |
Total Other Assets |  | $ | 439,347 |  |  | $ | 385,381 |
(1) Includes $53.3 million and $61.8 million of REO that is held-for-investment at June 30, 2021 and December 31, 2020, respectively. (2) An estimated incremental borrowing rate of 7.5% was used in connection with the Company’s primary operating lease (see Notes 2 and 10). (a) Real Estate Owned At June 30, 2021, the Company had 766 REO properties with an aggregate carrying value of $204.8 million. At December 31, 2020, the Company had 946 REO properties with an aggregate carrying value of $249.7 million. At June 30, 2021, $203.7 million of residential real estate property was held by the Company that was acquired either through a completed foreclosure proceeding or from completion of a deed-in-lieu of foreclosure or similar legal agreement. In addition, formal foreclosure proceedings were in process with respect to $144.9 million of residential whole loans held at carrying value and $405.2 million of residential whole loans held at fair value at June 30, 2021. The following table presents the activity in the Company’s REO for the three and six months ended June 30, 2021 and 2020:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Balance at beginning of period |  | $ | 220,393 |  |  | $ | 411,473 |  |  | $ | 249,699 |  |  | $ | 411,659 |
Adjustments to record at lower of cost or fair value |  | (68) |  |  | (7,138) |  |  | (943) |  |  | (11,889) |
Transfer from residential whole loans (1) |  | 18,302 |  |  | 8,526 |  |  | 38,370 |  |  | 59,219 |
Purchases and capital improvements, net |  | 406 |  |  | 3,492 |  |  | 624 |  |  | 9,301 |
Disposals (2) |  | (34,181) |  |  | (67,537) |  |  | (82,567) |  |  | (119,271) |
Depreciation |  | (90) |  |  | (300) |  |  | (421) |  |  | (503) |
Balance at end of period |  | $ | 204,762 |  |  | $ | 348,516 |  |  | $ | 204,762 |  |  | $ | 348,516 |
Number of properties |  | 766 |  |  | 1,352 |  |  | 766 |  |  | 1,352 |
(1)Includes a net gain recorded on transfer of approximately $22,000 for the three months ended June 30, 2021 and a net loss recorded on transfer of approximately $190,000 for the three months ended June 30, 2020; and a net loss recorded on transfer of approximately $1.1 million and $4.0 million for the six months ended June 30, 2021 and 2020, respectively. (2)During the three and six months ended June 30, 2021, the Company sold 139 and 319 REO properties for consideration of $38.0 million and $88.6 million, realizing net gains of approximately $3.9 million and $6.1 million, respectively. During the three and six months ended June 30, 2020, the Company sold 296 and 545 REO properties for consideration of $70.5 million and $125.3 million, realizing net gains of approximately $3.0 million and $6.1 million, respectively. These amounts are included in Other Income, net on the Company’s consolidated statements of operations. (b) Capital Contributions Made to Loan Origination Partners The Company has made investments in several loan originators as part of its strategy to be a reliable source of capital to select partners from whom it sources residential mortgage loans through both flow arrangements and bulk purchases. To date, such contributions of capital include the following investments (based on their carrying value prior to any impairments): $49.7 million of common equity (including partnership interests) and $100.4 million of preferred equity. In addition, for certain partners, options or warrants may have also been acquired that provide the Company the ability to increase the level of its investment if certain conditions are met. At the end of each reporting period, or earlier if circumstances warrant, the Company evaluates whether the nature of its interests and other involvement with the investee entity requires the Company to apply equity method accounting or consolidate the results of the investee entity with the Company’s financial results. As of June 30, 2021, the nature of the Company’s interests and/or involvement with investee companies has not resulted in consolidation. Further, to the extent that the nature of the Company’s interests has resulted in the need for the Company to apply equity method accounting, the impact of such accounting on the Company’s results for periods subsequent to that in which the Company was determined to have significant influence over the investee company was not material for any period. As the interests acquired to date by the Company generally do not have a readily determinable fair value, the Company accounts for its non-equity method interests (including any acquired options and warrants) in loan originators initially at cost. The carrying value of these investments will be adjusted if it is determined that an impairment has occurred or if there has been a subsequent observable transaction in either the investee company’s equity securities or a similar security that provides evidence to support an adjustment to the carrying value. Following an evaluation of the anticipated impact of COVID-19 on economic conditions for the short to medium term, the Company recorded impairment charges of $7.1 million and $65.2 million on investments in certain loan origination partners during the three and six months ended June 30, 2020, respectively, which was included in “Impairment and other losses on securities available-for-sale and other assets” on the consolidated statements of operations. The Company did not record any impairment charges to earnings on investments in certain loan origination partners during the three and six months ended June 30, 2021. At June 30, 2021, approximately $704.0 million of the Company’s Residential whole loans, at carrying value were serviced by entities in which the Company has an investment. (c) Derivative Instruments The Company’s derivative instruments have historically generally been comprised of Swaps, the majority of which were designated as cash flow hedges against the interest rate risk associated with certain borrowings. In addition, in connection with managing risks associated with purchases of longer duration Agency MBS, the Company also entered into Swaps that were not designated as hedges for accounting purposes. In response to the turmoil in the financial markets resulting from COVID-19 experienced during the three months ended March 31, 2020, and given that management no longer considered these transactions to be effective hedges in the then prevailing interest rate environment, the Company unwound all of its approximately $4.1 billion of Swap hedging transactions late in the first quarter of 2020 in order to recover previously posted margin. The following table presents the net impact of the Company’s derivative hedging instruments on its net interest expense and the weighted average interest rate paid and received for such Swaps for the three and six months ended June 30, 2021 and 2020:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(Dollars in Thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Interest (expense)/income attributable to Swaps |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (3,359) |
Weighted average Swap rate paid |  | — | % |  | — | % |  | — | % |  | 2.06 | %
Weighted average Swap rate received |  | — | % |  | — | % |  | — | % |  | 1.63 | %
During the six months ended June 30, 2020, the Company recorded net losses on Swaps not designated in hedging relationships of approximately $4.3 million, which included $9.4 million of losses realized on the unwind of certain Swaps. These amounts are included in Other income, net on the Company’s consolidated statements of operations. Impact of Derivative Hedging Instruments on AOCI The following table presents the impact of the Company’s derivative hedging instruments on its AOCI for the three and six months ended June 30, 2021 and 2020:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
AOCI from derivative hedging instruments: |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | — |  |  | $ | (71,208) |  |  | $ | — |  |  | $ | (22,675) |
Net loss on Swaps |  | — |  |  | — |  |  | — |  |  | (50,126) |
Reclassification adjustment for losses/gains related to hedging instruments included in net income |  | — |  |  | 64,032 |  |  | — |  |  | 65,625 |
Balance at end of period |  | $ | — |  |  | $ | (7,176) |  |  | $ | — |  |  | $ | (7,176) |
TBA Securities In order to economically hedge the risks arising from the investments in Agency eligible investor loans, the Company has entered into short positions in certain TBA securities. The table below summarizes open short positions in TBA securities as of June 30, 2021.
TBA Security |  | Notional Amount |  | Settlement Date
(In Thousands) |  |  |  |
FNCL 2.0 7/21 |  | $ | 100,000 |  |  | July 14, 2021
FNCL 2.5 7/21 |  | $ | 120,000 |  |  | July 14, 2021
TBA short positions are subject to margining requirements which serve to mitigate counterparty credit risk associated with these transactions. Open TBA positions are measured at fair value each reporting date, with realized and unrealized changes in the fair value of these positions recorded in Other income, net in our consolidated statements of operations. For the three months ended June 30, 2021, the Company recorded a net loss on TBA short positions of $1.1 million. No TBA short positions had been entered into in prior periods.

X
- References No definition available. + Details
Name: | us-gaap_OtherAssetsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for other assets. This disclosure includes other current assets and other noncurrent assets. + References No definition available. + Details
Name: | us-gaap_OtherAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration