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Financing Agreements | 9 Months Ended
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Sep. 30, 2021
Disclosure of Repurchase Agreements [Abstract] |
Financing Agreements | Financing Agreements The following tables present the components of the Company’s Financing agreements at September 30, 2021 and December 31, 2020:
|  | September 30, 2021
(In Thousands) |  | Unpaid Principal Balance |  | Amortized Cost Balance |  | Fair Value/Carrying Value(1)
Financing agreements, at fair value |  |  |  |  |  |
Agreements with mark-to-market collateral provisions |  | $ | 1,275,172 |  |  | $ | 1,275,172 |  |  | $ | 1,275,172 |
Agreements with non-mark-to-market collateral provisions |  | 689,205 |  |  | 689,205 |  |  | 690,583 |
Securitized debt |  | 527,160 |  |  | 527,154 |  |  | 530,829 |
Total Financing agreements, at fair value |  | $ | 2,491,537 |  |  | $ | 2,491,531 |  |  | $ | 2,496,584 |
Financing agreements, at carrying value |  |  |  |  |  |
Securitized debt |  | $ | 1,522,354 |  |  |  |  | $ | 1,514,900 |
Agreements with mark-to-market collateral provisions |  | 1,155,964 |  |  |  |  | 1,155,820 |
Agreements with non-mark-to-market collateral provisions |  | 157,784 |  |  |  |  | 157,366 |
Convertible senior notes |  | 230,000 |  |  |  |  | 226,138 |
Total Financing agreements, at carrying value |  | $ | 3,066,102 |  |  |  |  | $ | 3,054,224 |
Total Financing agreements |  | $ | 5,557,639 |  |  |  |  | $ | 5,550,808 |
|  | December 31, 2020
(In Thousands) |  | Unpaid Principal Balance |  | Amortized Cost Balance |  | Fair Value/Carrying Value(1)
Financing agreements, at fair value |  |  |  |  |  |
Agreements with non-mark-to-market collateral provisions |  | $ | 1,156,899 |  |  | $ | 1,156,899 |  |  | $ | 1,159,213 |
Agreements with mark-to-market collateral provisions |  | 1,338,077 |  |  | 1,338,077 |  |  | 1,338,077 |
Securitized debt |  | 866,203 |  |  | 857,553 |  |  | 869,482 |
Total Financing agreements, at fair value |  | $ | 3,361,179 |  |  | $ | 3,352,529 |  |  | $ | 3,366,772 |
Financing agreements, at carrying value |  |  |  |  |  |
Securitized debt |  | $ | 648,300 |  |  |  |  | $ | 645,027 |
Convertible senior notes |  | 230,000 |  |  |  |  | 225,177 |
Senior notes |  | 100,000 |  |  |  |  | 100,000 |
Total Financing agreements, at carrying value |  | $ | 978,300 |  |  |  |  | $ | 970,204 |
Total Financing agreements |  | $ | 4,339,479 |  |  |  |  | $ | 4,336,976 |
(1) Financing agreements at fair value are reported at estimated fair value each period as a result of the Company’s fair value option election. Other financing arrangements are reported at their carrying value (amortized cost basis) as the fair value option was not elected on these liabilities. Consequently, Total Financing agreements as presented reflects a summation of balances reported at fair value and carrying value. (a) Financing Agreements, at Fair Value In conjunction with its exit from forbearance arrangements in the second quarter of 2020, the Company entered into several asset backed financing arrangements and renegotiated financing arrangements for certain assets with existing lenders, which together resulted in the Company essentially refinancing the majority of its investment portfolio. The Company elected the fair value option on these financing arrangements, primarily to simplify the accounting associated with costs incurred to establish the new facilities or renegotiate existing facilities. The Company considers the most relevant feature that distinguishes between the various asset backed financing arrangements is how the financing arrangement is collateralized, including the ability of the lender to make margin calls on the Company based on changes in value of the underlying collateral securing the financing. Accordingly, further details are provided below regarding assets that are financed with agreements that have non-mark-to-market collateral provisions and assets that are financed with agreements that have mark-to-market collateral provisions. Agreements with non-mark-to-market collateral provisions In June 2020, the Company and certain of its subsidiaries entered into a non-mark-to-market term loan facility with certain lenders with an initial borrowing capacity of $1.65 billion. The Company’s borrowing subsidiaries have pledged, as collateral security for the facility, certain of their residential whole loans (excluding Rehabilitation loans), as well as the equity in subsidiaries that own the loans. The facility has an initial term of two years, which may be extended for up to an additional three years, subject to certain conditions, including the payment of an extension fee and provided that no events of default have occurred. For the initial two-year term, the financing cost for the facility will be calculated at a spread over the lender’s financing cost, which, depending on the lender, is expected to be based either on three-month London Interbank Offered Rate (‘LIBOR”), or an index that it expected over time to be closely correlated to changes in three-month LIBOR. At September 30, 2021, the amount financed under this facility was approximately $573.8 million. In addition, the Company also entered into non-mark-to-market financing facilities on Rehabilitation loans. Under these facilities, Rehabilitation loans, as well as the equity in subsidiaries that own the loans, are pledged as collateral. The facilities have a two-year term and the financing cost is calculated at a spread over three-month LIBOR. At September 30, 2021, the amount financed under these facilities was approximately $116.8 million. The following table presents information with respect to the Company’s financing agreements, at fair value with non-mark-to-market collateral provisions and associated assets pledged as collateral at September 30, 2021 and December 31, 2020:
(Dollars in Thousands) |  | September 30, 2021 |  | December 31, 2020
Non-mark-to-market financing secured by residential whole loans |  | $ | 681,567 |  |  | $ | 1,156,125 |
Fair value of residential whole loans pledged as collateral under financing agreements |  | $ | 1,191,747 |  |  | $ | 1,930,283 |
Weighted average haircut on residential whole loans |  | 42.03 | % |  | 39.46 | %
Non-mark-to-market financing secured by real estate owned |  | $ | 9,016 |  |  | $ | 3,088 |
Fair value of real estate owned pledged as collateral under financing agreements |  | $ | 23,296 |  |  | $ | 7,441 |
Weighted average haircut on real estate owned |  | 61.09 | % |  | 59.73 | %
Agreements with mark-to-market collateral provisions In addition to entering into the financing arrangements discussed above, the Company also entered into a reinstatement agreement with certain lending counterparties that facilitated its exit from the forbearance arrangements that the Company had previously entered into. In connection with the reinstatement agreement, terms of its prior financing arrangements on certain residential whole loans were renegotiated and those arrangements were reinstated on a go-forward basis. These financing arrangements continue to contain mark-to-market provisions that permit the lending counterparties to make margin calls on the Company should the value of the pledged collateral decline. The Company is also permitted to recover previously posted margin payments, should values of the pledged collateral subsequently increase. These facilities generally have a maturity ranging from one to three months and can be renewed at the discretion of the lending counterparty at financing costs reflecting prevailing market pricing. At September 30, 2021, the amount financed under these agreements was approximately $1.3 billion. The following table presents information with respect to the Company’s financing agreements, at fair value with mark-to-market collateral provisions and associated assets pledged as collateral at September 30, 2021 and December 31, 2020:
(Dollars in Thousands) |  | September 30, 2021 |  | December 31, 2020
Mark-to-market financing agreements secured by residential whole loans |  | $ | 1,262,811 |  |  | $ | 1,113,553 |
Fair value of residential whole loans pledged as collateral under financing agreements (1) |  | $ | 1,910,051 |  |  | $ | 1,798,813 |
Weighted average haircut on residential whole loans (2) |  | 31.84 | % |  | 34.17 | %
Mark-to-market financing agreements secured by securities at fair value |  | $ | — |  |  | $ | 213,915 |
Securities at fair value pledged as collateral under financing agreements |  | $ | — |  |  | $ | 399,999 |
Weighted average haircut on securities at fair value (2) |  | — | % |  | 41.16 | %
Mark-to-market financing agreements secured by real estate owned |  | $ | 12,361 |  |  | $ | 10,609 |
Fair value of real estate owned pledged as collateral under financing agreements |  | $ | 38,388 |  |  | $ | 22,525 |
Weighted average haircut on real estate owned (2) |  | 61.22 | % |  | 55.56 | %
(1)At December 31, 2020, includes Non-Agency MBS with an aggregate fair value of $141.9 million obtained in connection with the Company’s loan securitization transactions that are eliminated in consolidation. (2)Haircut represents the percentage amount by which the collateral value is contractually required to exceed the loan amount. In addition, the Company had aggregate restricted cash held in connection with its financing agreements of $55.5 million and $7.2 million at September 30, 2021 and December 31, 2020, respectively. The following table presents repricing information (excluding the impact of associated derivative hedging instruments, if any) about the Company’s financing agreements, at fair value that have non-mark-to-market collateral provisions as well as those that have mark-to-market collateral provisions, at September 30, 2021 and December 31, 2020:
|  | September 30, 2021 |  | December 31, 2020
Amortized Cost Basis |  | Weighted Average Interest Rate | Amortized Cost Basis |  | Weighted Average Interest Rate
Time Until Interest Rate Reset
(Dollars in Thousands) |  |  |  |  |  |  |  |
Within 30 days |  | $ | 1,964,377 |  |  | 2.55 | % |  | $ | 2,494,976 |  |  | 3.16 | %
Over 30 days to 3 months |  | — |  |  | — |  |  | — |  |  | — |
Over 3 months to 12 months |  | — |  |  | — |  |  | — |  |  | — |
Over 12 months |  | — |  |  | — |  |  | — |  |  | — |
Total financing agreements |  | $ | 1,964,377 |  |  | 2.55 | % |  | $ | 2,494,976 |  |  | 3.16 | %
Senior Secured Term Loan Facility On June 26, 2020, the Company entered into a $500 million senior secured term loan facility (the “Term Loan Facility”) with certain funds, accounts and/or clients managed by affiliates of Apollo Global Management, Inc. and affiliates of Athene Holding Ltd. The outstanding balance of the Term Loan Facility was repaid and the Term Loan Facility was terminated prior to December 31, 2020. (b) Financing Agreements, at Carrying Value Additional information regarding the Company’s Other financing arrangements as of September 30, 2021, is included below: Securitized Debt Securitized debt represents third-party liabilities of consolidated VIEs and excludes liabilities of the VIEs acquired by the Company that are eliminated in consolidation. The third-party beneficial interest holders in the VIEs have no recourse to the general credit of the Company. The weighted average fixed rate on the securitized debt was 1.55% at September 30, 2021 (see Notes 10 and 15 for further discussion). Agreements with non-mark-to-market collateral provisions The following table presents information with respect to the Company’s financing agreements, at carrying value with non-mark-to-market collateral provisions, for which the fair value option was not elected, and associated assets pledged as collateral at September 30, 2021 (none were outstanding at December 31, 2020):
(Dollars in Thousands) |  | September 30, 2021
Non-mark-to-market financing agreements secured by residential whole loans |  | $ | 157,366 |
Fair value of residential whole loans pledged as collateral under financing agreements |  | $ | 182,316 |
Weighted average haircut on residential whole loans (1) |  | 13.00 | %
(1)Haircut represents the percentage amount by which the collateral value is contractually required to exceed the loan amount. Agreements with mark-to-market collateral provisions The following table presents information with respect to the Company’s financing agreements, at carrying value with mark-to-market collateral provisions, for which the fair value option was not elected, and associated assets pledged as collateral at September 30, 2021 (none were outstanding at December 31, 2020):
(Dollars in Thousands) |  | September 30, 2021
Mark-to-market financing agreements secured by residential whole loans |  | $ | 984,016 |
Fair value of residential whole loans pledged as collateral under financing agreements |  | $ | 1,161,100 |
Weighted average haircut on residential whole loans (1) |  | 15.21 | %
Mark-to-market financing agreements secured by securities at fair value |  | $ | 171,804 |
Securities at fair value pledged as collateral under financing agreements |  | $ | 283,037 |
Weighted average haircut on securities at fair value (1) |  | 38.33 | %
(1)Haircut represents the percentage amount by which the collateral value is contractually required to exceed the loan amount. The following table presents repricing information (excluding the impact of associated derivative hedging instruments, if any) about the Company’s financing agreements, at carrying value that have non-mark-to-market collateral provisions as well as those that have mark-to-market collateral provisions, for which the fair value option was not elected, at September 30, 2021 and December 31, 2020:
|  | September 30, 2021
Amortized Cost Basis |  | Weighted Average Interest Rate
Time Until Interest Rate Reset
(Dollars in Thousands) |  |  |  |
Within 30 days |  | $ | 1,259,588 |  |  | 1.90 | %
Over 30 days to 3 months |  | 36,141 |  |  | 4.30 |
Over 3 months to 12 months |  | 18,018 |  |  | 4.50 |
Over 12 months |  | — |  |  | — |
Total financing agreements |  | $ | 1,313,747 |  |  | 2.00 | %
Convertible Senior Notes On June 3, 2019, the Company issued $230.0 million in aggregate principal amount of its Convertible Senior Notes in an underwritten public offering, including an additional $30.0 million issued pursuant to the exercise of the underwriters’ option to purchase additional Convertible Senior Notes. The total net proceeds the Company received from the offering were approximately $223.3 million, after deducting offering expenses and the underwriting discount. The Convertible Senior Notes bear interest at a fixed rate of 6.25% per year, paid semiannually on June 15 and December 15 of each year commencing December 15, 2019 and will mature on June 15, 2024, unless earlier converted, redeemed or repurchased in accordance with their terms. The Convertible Senior Notes are convertible at the option of the holders at any time until the close of business on the business day immediately preceding the maturity date into shares of the Company’s common stock based on an initial conversion rate of 125.7387 shares of the Company’s common stock for each $1,000 principal amount of the Convertible Senior Notes, which is equivalent to an initial conversion price of approximately $7.95 per share of common stock. The Convertible Senior Notes have an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 6.94%. The Company does not have the right to redeem the Convertible Senior Notes prior to maturity, except to the extent necessary to preserve its status as a REIT, in which case the Company may redeem the Convertible Senior Notes, in whole or in part, at a redemption price equal to the principal amount redeemed plus accrued and unpaid interest. The Convertible Senior Notes are the Company’s senior unsecured obligations and are effectively junior to all of the Company’s secured indebtedness, which includes the Company’s repurchase agreements and other financing arrangements, to the extent of the value of the collateral securing such indebtedness and equal in right of payment to the Company’s existing and future senior unsecured obligations, including the Senior Notes. Senior Notes On April 11, 2012, the Company issued $100.0 million in aggregate principal amount of its Senior Notes in an underwritten public offering. On January 6, 2021, the Company redeemed all of its outstanding Senior Notes. The Senior Notes bore interest at a fixed rate of 8.00% per year, paid quarterly in arrears on January 15, April 15, July 15 and October 15. The Senior Notes had an effective interest rate, including the impact of amortization to interest expense of debt issuance costs, of 8.31%. (c) Counterparties The Company had financing agreements, including repurchase agreements and other forms of secured financing, with 13 and 7 counterparties at September 30, 2021 and December 31, 2020, respectively. The following table presents information with respect to each counterparty under financing agreements for which the Company had greater than 5% of stockholders’ equity at risk in the aggregate at September 30, 2021:
|  | September 30, 2021
|  | Counterparty Rating (1) |  | Amount at Risk (2) |  | Weighted Average Months to Repricing for Repurchase Agreements |  | Percent of Stockholders’ Equity
Counterparty |  |  |  |
(Dollars in Thousands) |  |  |  |  |  |  |  |
Barclays Bank (3) |  | BBB/Aa3/A |  | $ | 527,745 |  |  | 1 |  | 20.3 | %
Credit Suisse |  | BBB+/Baa1/A- |  | 420,704 |  |  | 1 |  | 16.2 |
Wells Fargo |  | A+/Aa2/AA- |  | 296,559 |  |  | 1 |  | 11.4 |
(1)As rated at September 30, 2021 by S&P, Moody’s and Fitch, Inc., respectively. The counterparty rating presented is the lowest published rating for these entities. (2)The amount at risk reflects the difference between (a) the amount loaned to the Company through financing agreements, including interest payable, and (b) the cash and the fair value of the securities pledged by the Company as collateral, including accrued interest receivable on such securities. (3)Includes amounts at risk with various affiliates of Athene Holding, Ltd., held via participation in a loan syndication administered by Barclays Bank. (d) Pledged Collateral The following tables present the Company’s assets (based on carrying value) pledged as collateral for its various financing arrangements as of September 30, 2021 and December 31, 2020:
|  | September 30, 2021
|  | Financing Agreements
(In Thousands) |  | Non-Mark-to-Market |  | Mark-to-Market |  | Securitized |  | Total
Assets: |  |  |  |  |  |  |  |
Residential whole loans, at carrying value |  | $ | 794,267 |  |  | $ | 533,633 |  |  | $ | 1,679,702 |  |  | $ | 3,007,602 |
Residential whole loans, at fair value |  | 555,738 |  |  | 2,499,284 |  |  | 650,507 |  |  | 3,705,529 |
Securities, at fair value |  | — |  |  | 222,705 |  |  | — |  |  | 222,705 |
Other assets: REO |  | 19,919 |  |  | 32,363 |  |  | 36,053 |  |  | 88,335 |
Total |  | $ | 1,369,924 |  |  | $ | 3,287,985 |  |  | $ | 2,366,262 |  |  | $ | 7,024,171 |
|  | December 31, 2020
|  | Financing Agreements
(In Thousands) |  | Non-Mark-to-Market |  | Mark-to-Market |  | Securitized |  | Total
Assets: |  |  |  |  |  |  |  |
Residential whole loans, at carrying value |  | $ | 1,497,281 |  |  | $ | 1,207,364 |  |  | $ | 1,436,316 |  |  | $ | 4,140,961 |
Residential whole loans, at fair value |  | 430,183 |  |  | 396,817 |  |  | 382,349 |  |  | 1,209,349 |
Securities, at fair value |  | — |  |  | 442,773 |  |  | — |  |  | 442,773 |
Other assets: REO |  | — |  |  | — |  |  | 49,477 |  |  | 49,477 |
Total |  | $ | 1,927,464 |  |  | $ | 2,046,954 |  |  | $ | 1,868,142 |  |  | $ | 5,842,560 |

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- Definition The entire disclosure for repurchase agreements (also known as repos), resale agreements (also known as reverse repurchase agreements or reverse repos), securities borrowed transactions, and securities loaned transactions. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -URI http://asc.fasb.org/topic&trid=2197590 + Details
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