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Fair Value of Financial Instruments (Tables) | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Schedule of fair value measurement inputs and valuation techniques | The following tables present the Company’s financial instruments carried at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, on the consolidated balance sheets by the valuation hierarchy, as previously described: Fair Value at September 30, 2021
(In Thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Residential whole loans, at fair value |  | $ | — |  |  | $ | — |  |  | $ | 4,093,598 |  |  | $ | 4,093,598 |
Securities, at fair value |  | — |  |  | 283,037 |  |  | — |  |  | 283,037 |
Total assets carried at fair value |  | $ | — |  |  | $ | 283,037 |  |  | $ | 4,093,598 |  |  | $ | 4,376,635 |
Liabilities: |  |  |  |  |  |  |  |
Agreements with non-mark-to-market collateral provisions |  | $ | — |  |  | $ | — |  |  | $ | 690,583 |  |  | $ | 690,583 |
Agreements with mark-to-market collateral provisions |  | — |  |  | — |  |  | 1,275,172 |  |  | 1,275,172 |
Securitized debt |  | — |  |  | 530,829 |  |  | — |  |  | 530,829 |
Total liabilities carried at fair value |  | $ | — |  |  | $ | 530,829 |  |  | $ | 1,965,755 |  |  | $ | 2,496,584 |
Fair Value at December 31, 2020
(In Thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Residential whole loans, at fair value |  | $ | — |  |  | $ | — |  |  | $ | 1,216,902 |  |  | $ | 1,216,902 |
Securities, at fair value |  | — |  |  | 399,999 |  |  | — |  |  | 399,999 |
Total assets carried at fair value |  | $ | — |  |  | $ | 399,999 |  |  | $ | 1,216,902 |  |  | $ | 1,616,901 |
Liabilities: |  |  |  |  |  |  |  |
Agreements with non-mark-to-market collateral provisions |  | $ | — |  |  | $ | — |  |  | $ | 1,159,213 |  |  | $ | 1,159,213 |
Agreements with mark-to-market collateral provisions |  | — |  |  | 213,915 |  |  | 1,124,162 |  |  | 1,338,077 |
Securitized debt |  | — |  |  | 869,482 |  |  | — |  |  | 869,482 |
Total liabilities carried at fair value |  | $ | — |  |  | $ | 1,083,397 |  |  | $ | 2,283,375 |  |  | $ | 3,366,772 |
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 September 30, 2021 and December 31, 2020:
|  | September 30, 2021
(Dollars in Thousands) |  | Fair Value (1) |  | Valuation Technique |  | Unobservable Input |  | Weighted Average (2) |  | Range
Purchased Non-Performing Loans |  | $ | 774,666 |  |  | Discounted cash flow |  | Discount rate |  | 3.4 | % |  | 2.5-11.5%
|  |  |  |  |  | Prepayment rate |  | 12.2 | % |  | 0.0-43.8%
|  |  |  |  |  | Default rate |  | 4.0 | % |  | 0.0-31.3%
|  |  |  |  |  | Loss severity |  | 11.8 | % |  | 0.0-100.0%
|  | $ | 365,077 |  |  | Liquidation model |  | Discount rate |  | 8.1 | % |  | 6.7-50.0%
|  |  |  |  |  | Annual change in home prices |  | 9.3 | % |  | 4.6-27.3%
|  |  |  |  |  | Liquidation timeline (in years) |  | 1.7 |  | 0.1-4.8
|  |  |  |  |  | Current value of underlying properties (3) |  | $ | 788 |  |  | $10-$3,995
Total |  | $ | 1,139,743 |  |  |  |  |  |  |  |  |
|  | December 31, 2020
(Dollars in Thousands) |  | Fair Value (1) |  | Valuation Technique |  | Unobservable Input |  | Weighted Average (2) |  | Range
Purchased Non-Performing Loans |  | $ | 789,576 |  |  | Discounted cash flow |  | Discount rate |  | 3.9 | % |  | 3.3-8.0%
|  |  |  |  |  | Prepayment rate |  | 5.4 | % |  | 0.0-17.6%
|  |  |  |  |  | Default rate |  | 4.1 | % |  | 0.0-47.7%
|  |  |  |  |  | Loss severity |  | 12.7 | % |  | 0.0-100.0%
|  | $ | 427,061 |  |  | Liquidation model |  | Discount rate |  | 8.1 | % |  | 6.7-50.0%
|  |  |  |  |  | Annual change in home prices |  | 3.6 | % |  | 1.8-6.5%
|  |  |  |  |  | Liquidation timeline (in years) |  | 1.8 |  | 0.8-4.8
|  |  |  |  |  | Current value of underlying properties (3) |  | $ | 729 |  |  | $12-$4,500
Total |  | $ | 1,216,637 |  |  |  |  |  |  |  |  |
(1) Excludes approximately $1.1 million and $265,000 of loans for which management considers the purchase price continues to reflect the fair value of such loans at September 30, 2021 and December 31, 2020, 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 $432,000 and $380,000 as of September 30, 2021 and December 31, 2020, respectively.
|  | September 30, 2021
(Dollars in Thousands) |  | Fair Value (1) |  | Valuation Technique |  | Unobservable Input |  | Weighted Average (2) |  | Range
Purchased Performing Loans |  | $ | 2,780,698 |  |  | Discounted cash flow |  | Discount rate |  | 3.3 | % |  | 0.9-50.5%
|  |  |  |  |  | Prepayment rate |  | 18.4 | % |  | 0.0-50.1%
|  |  |  |  |  | Default rate |  | 0.3 | % |  | 0.0-21.8%
|  |  |  |  |  | Loss severity |  | 8.9 | % |  | 0.0-10.0%
|  | $ | 9,814 |  |  | Liquidation model |  | Discount rate |  | 7.0 | % |  | 7.0-7.0%
|  |  |  |  |  | Annual change in home prices |  | 7.8 | % |  | 0.0-12.4%
|  |  |  |  |  | Liquidation timeline (in years) |  | 2.2 |  | 1.0-4.4
|  |  |  |  |  | Current value of underlying properties |  | $ | 884 |  |  | $50-$2,075
Total |  | $ | 2,790,512 |  |  |  |  |  |  |  |  |
(1) Excludes approximately $162.2 million of loans for which management considers the purchase price continues to reflect the fair value of such loans at September 30, 2021. (2) Amounts are weighted based on the fair value of the underlying loan.
Schedule of significant unobservable inputs used in fair value measurement of residential whole loans | The following table presents additional information for the three and nine months ended September 30, 2021 and 2020 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
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Balance at beginning of period |  | $ | 2,003,580 |  |  | $ | 1,200,981 |  |  | $ | 1,216,902 |  |  | $ | 1,381,583 |
Purchases and originations |  | 1,968,079 |  |  | — |  |  | 2,805,939 |  |  | — |
Draws |  | 11,152 |  |  | — |  |  | 11,575 |  |  | — |
Changes in fair value recorded in Net gain on residential whole loans measured at fair value through earnings |  | 20,494 |  |  | 58,863 |  |  | 58,807 |  |  | (13,683) |
Repayments |  | (65,985) |  |  | (21,721) |  |  | (130,488) |  |  | (65,934) |
Sales and repurchases |  | 241 |  |  | (929) |  |  | 671 |  |  | (19,460) |
Transfer to REO |  | (6,978) |  |  | (7,530) |  |  | (32,823) |  |  | (52,842) |
Balance at end of period |  | $ | 3,930,583 |  |  | $ | 1,229,664 |  |  | $ | 3,930,583 |  |  | $ | 1,229,664 |
(1) Excluded from the table above are approximately $163.0 million of Residential whole loans, at fair value for which the closing of the purchase transaction had not occurred as of September 30, 2021. The following table presents additional information for the three and nine months ended September 30, 2021 and 2020 about the Company’s financing agreements with non-mark-to-market collateral provisions, which are classified as Level 3 and measured at fair value on a recurring basis:
|  | Agreements with Non-mark-to-market Collateral Provisions
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Balance at beginning of period |  | $ | 795,341 |  |  | $ | — |  |  | $ | 1,159,213 |  |  | $ | — |
Issuances |  | — |  |  | 2,036,597 |  |  | — |  |  | 2,036,597 |
Payment of principal |  | (104,549) |  |  | (312,638) |  |  | (467,695) |  |  | (312,638) |
Changes in unrealized losses |  | (209) |  |  | 3,448 |  |  | (935) |  |  | 3,448 |
Balance at end of period |  | $ | 690,583 |  |  | $ | 1,727,407 |  |  | $ | 690,583 |  |  | $ | 1,727,407 |
The following table presents additional information for the three and nine months ended September 30, 2021 and 2020 about the Company’s financing agreements with mark-to-market collateral provisions, which are classified as Level 3 and measured at fair value on a recurring basis:
|  | Agreements with Mark-to-market Collateral Provisions
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Balance at beginning of period |  | $ | 858,066 |  |  | $ | — |  |  | $ | 1,124,162 |  |  | $ | — |
Issuances |  | 597,761 |  |  | 1,386,592 |  |  | 989,407 |  |  | 1,386,592 |
Payment of principal |  | (180,655) |  |  | (156,032) |  |  | (838,397) |  |  | (156,032) |
Changes in unrealized losses |  | — |  |  | 1,174 |  |  | — |  |  | 1,174 |
Balance at end of period |  | $ | 1,275,172 |  |  | $ | 1,231,734 |  |  | $ | 1,275,172 |  |  | $ | 1,231,734 |
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 September 30, 2021 and December 31, 2020:
|  | September 30, 2021 |  | September 30, 2021 |  | December 31, 2020
Level in Fair Value Hierarchy | Carrying Value |  | Estimated Fair Value | Carrying Value |  | Estimated Fair Value
(In Thousands)
Financial Assets: |  |  |  |  |  |  |  |  |  |
Residential whole loans |  | 3 |  | $ | 7,081,462 |  |  | $ | 7,280,297 |  |  | $ | 5,325,401 |  |  | $ | 5,499,303 |
Securities, at fair value |  | 2 |  | 283,037 |  |  | 283,037 |  |  | 399,999 |  |  | 399,999 |
Cash and cash equivalents |  | 1 |  | 526,241 |  |  | 526,241 |  |  | 814,354 |  |  | 814,354 |
Restricted cash |  | 1 |  | 55,507 |  |  | 55,507 |  |  | 7,165 |  |  | 7,165 |
Financial Liabilities (1): |  |  |  |  |  |  |  |  |  |
Financing agreements with non-mark-to-market collateral provisions |  | 3 |  | 847,949 |  |  | 848,367 |  |  | 1,159,213 |  |  | 1,159,213 |
Financing agreements with mark-to-market collateral provisions |  | 3 |  | 2,259,188 |  |  | 2,259,332 |  |  | 1,124,162 |  |  | 1,124,162 |
Financing agreements with mark-to-market collateral provisions |  | 2 |  | 171,804 |  |  | 171,804 |  |  | 213,915 |  |  | 213,915 |
Securitized debt (2) |  | 2 |  | 2,045,729 |  |  | 2,053,714 |  |  | 1,514,509 |  |  | 1,519,567 |
Convertible senior notes |  | 2 |  | 226,138 |  |  | 234,328 |  |  | 225,177 |  |  | 228,287 |
Senior notes (3) |  | 1 |  | — |  |  | — |  |  | 100,000 |  |  | 100,031 |
(1)Carrying value of securitized debt, Convertible Senior Notes, Senior Notes and certain repurchase agreements is net of associated debt issuance costs. (2)Includes Securitized debt that is carried at amortized cost basis and fair value. (3)On January 6, 2021, the Company redeemed all of its outstanding Senior Notes (see Note 6).

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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=123874694&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=123874694&loc=d3e19207-110258 + Details
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