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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

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, 2022 and 2021, on the consolidated balance sheets by the valuation hierarchy, as previously described:

Fair Value at December 31, 2022

(In Thousands)						Level 1						Level 2						Level 3						Total
Assets:
Residential whole loans, at fair value						$	—					$	51,094					$	5,676,430					$	5,727,524
Securities, at fair value						—						333,364						—						333,364
Total assets carried at fair value						$	—					$	384,458					$	5,676,430					$	6,060,888
Liabilities:
Agreements with non-mark-to-market collateral provisions						$	—					$	—					$	578,879					$	578,879
Agreements with mark-to-market collateral provisions						—						—						884,495						884,495
Securitized debt						—						2,435,370						—						2,435,370
Total liabilities carried at fair value						$	—					$	2,435,370					$	1,463,374					$	3,898,744

Fair Value at December 31, 2021

(In Thousands)						Level 1						Level 2						Level 3						Total
Assets:
Residential whole loans, at fair value						$	—					$	1,082,765					$	4,222,584					$	5,305,349
Securities, at fair value						—						256,685						—						256,685
Total assets carried at fair value						$	—					$	1,339,450					$	4,222,584					$	5,562,034
Liabilities:
Agreements with non-mark-to-market collateral provisions						$	—					$	—					$	1,322,362					$	1,322,362
Agreements with mark-to-market collateral provisions						—						—						628,280						628,280
Securitized debt						—						1,316,131						—						1,316,131
Total liabilities carried at fair value						$	—					$	1,316,131					$	1,950,642					$	3,266,773

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, 2022 and 2021:

						December 31, 2022
(Dollars in Thousands)						Fair Value (1)						Valuation Technique						Unobservable Input						Weighted Average (2)						Range
Purchased Non-Performing Loans						$	546,675					Discounted cash flow						Discount rate						7.0		%				6.3-10.0%
																		Prepayment rate						8.9		%				0.0-33.5%
																		Default rate						3.7		%				0.0-52.4%
																		Loss severity						11.3		%				0.0-100.0%
						$	249,219					Liquidation model						Discount rate						7.8		%				7.8-7.8%
																		Annual change in home prices						6.9		%				(5.4)-59.7%
																		Liquidation timeline (in years)						1.9						0.1-4.5
																		Current value of underlying properties (3)						$	743					$28-$4,000
Total						$	795,894

						December 31, 2021
(Dollars in Thousands)						Fair Value (1)						Valuation Technique						Unobservable Input						Weighted Average (2)						Range
Purchased Non-Performing Loans						$	720,766					Discounted cash flow						Discount rate						3.6		%				1.5-9.8%
																		Prepayment rate						14.4		%				0.0-44.0%
																		Default rate						3.9		%				0.0-50.8%
																		Loss severity						11.7		%				0.0-100.0%
						$	351,008					Liquidation model						Discount rate						8.0		%				6.7-50.0%
																		Annual change in home prices						9.7		%				4.5-21.9%
																		Liquidation timeline (in years)						1.7						0.1-4.5
																		Current value of underlying properties (3)						$	770					$10-$3,995
Total						$	1,071,774

(1)Excludes approximately $215,000 and $496,000 of loans for which management considers the purchase price continues to reflect the fair value of such loans at December 31, 2022 and 2021, 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 $457,000 and $421,000 as of December 31, 2022 and 2021, respectively.

						December 31, 2022
(Dollars in Thousands)						Fair Value						Valuation Technique						Unobservable Input						Weighted Average (1)						Range
Purchased Performing Loans						$	4,857,587					Discounted cash flow						Discount rate						7.6		%				5.6-22.7%
																		Prepayment rate						7.9		%				0.0-44.8%
																		Default rate						0.8		%				0.0-19.4%
																		Loss severity						7.3		%				0.0-100.0%
						$	22,734					Liquidation model						Discount rate						7.8		%				7.8-7.8%
																		Annual change in home prices						3.2		%				(1.0)-10.7%
																		Liquidation timeline (in years)						1.9						0.8-4.2
																		Current value of underlying properties						$	1,319					$50-$2,850
Total						$	4,880,321

						December 31, 2021
(Dollars in Thousands)						Fair Value						Valuation Technique						Unobservable Input						Weighted Average (1)						Range
Purchased Performing Loans						$	3,142,366					Discounted cash flow						Discount rate						3.9		%				1.4-25.9%
																		Prepayment rate						19.0		%				0.0-47.2%
																		Default rate						0.2		%				0.0-17.8%
																		Loss severity						8.4		%				0.0-10.0%
						$	7,948					Liquidation model						Discount rate						7.0		%				7.0%-7.0%
																		Annual change in home prices						6.5		%				—%-14.8%
																		Liquidation timeline (in years)						2.0						0.8-4.2
																		Current value of underlying properties						$	691					$60-$1,750
Total						$	3,150,314

(1)Amounts are weighted based on the fair value of the underlying loan.

Schedule of Significant Unobservable Inputs Used in Fair Value Measurement

The following table presents additional information for the years ended December 31, 2022 and 2021 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)						2022						2021
Balance at beginning of period						$	4,222,584					$	1,216,902
Purchases and originations						2,749,275						4,367,423
Draws						361,035						53,599
Changes in fair value recorded in Net gain on residential whole loans measured at fair value through earnings						(668,899)						16,243
Repayments						(925,773)						(295,790)
Sales and repurchases						(10,496)						(2,023)
Transfer to REO						(51,296)						(51,005)
Transfer to Level 2 (1)						—						(1,082,765)
Balance at end of period						$	5,676,430					$	4,222,584

(1)The Company determined that the market inputs used in valuing its Agency eligible investor loans were sufficiently observable to be classified as Level 2 beginning in 2021.

The following table presents additional information for the years ended December 31, 2022 and 2021 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
						Year Ended December 31,
(In Thousands)						2022						2021
Balance at beginning of period						$	628,280					$	1,159,213
Issuances						554,823						—
Payment of principal						(602,969)						(529,874)
Change in unrealized gains						(1,255)						(1,059)
Balance at end of period						$	578,879					$	628,280

The following table presents additional information for the years ended December 31, 2022 and 2021 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
						Year Ended December 31,
(In Thousands)						2022						2021
Balance at beginning of period						$	1,322,362					$	1,124,162
Issuances						1,153,555						1,275,265
Payment of principal						(1,591,422)						(1,077,065)
Balance at end of period						$	884,495					$	1,322,362

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, 2022 and 2021:

						December 31, 2022						December 31, 2022												December 31, 2021
						Level in Fair Value Hierarchy						Carrying Value						Estimated Fair Value						Carrying Value						Estimated Fair Value
(In Thousands)
Financial Assets:
Residential whole loans						3						$	7,467,645					$	7,397,421					$	6,830,235					$	6,983,686
Residential whole loans (1)						2						51,094						51,094						1,082,765						1,082,765
Securities, at fair value						2						333,364						333,364						256,685						256,685
Cash and cash equivalents						1						334,183						334,183						304,696						304,696
Restricted cash						1						159,898						159,898						99,751						99,751
Financial Liabilities (2):
Financing agreements with non-mark-to-market collateral provisions						3						1,003,604						1,004,260						939,540						940,257
Financing agreements with mark-to-market collateral provisions						3						2,111,396						2,111,647						2,403,151						2,403,724
Financing agreements with mark-to-market collateral provisions						2						111,651						111,651						159,148						159,148
Securitized debt (3)						2						3,357,590						3,217,905						2,650,473						2,646,203
Convertible senior notes						2						227,845						211,015						226,470						239,292

(1)At December 31, 2021, $654.7 million of Agency eligible investor loans were valued based on the observable prices of related securitized debt.

(2)Carrying value of securitized debt, Convertible Senior Notes, Senior Notes and certain repurchase agreements is net of associated debt issuance costs.

(3)Includes securitized debt that is carried at amortized cost basis and fair value.

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- Definition

Tabular disclosure of input and valuation technique used to measure fair value and change in valuation approach and technique for each separate class of asset and liability measured on recurring and nonrecurring basis.

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-Publisher FASB
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-Topic 820
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-Section 50
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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
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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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-Publisher FASB
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