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Other Assets | 6 Months Ended
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Jun. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] |
Other Assets | Other Assets The following table presents the components of the Company’s Other assets at June 30, 2023 and December 31, 2022:
(In Thousands) |  | June 30, 2023 |  | December 31, 2022
Receivable for sale of unsettled residential whole loans |  | $ | — |  |  | $ | 275,656 |
REO |  | 119,996 |  |  | 130,605 |
Goodwill |  | 61,076 |  |  | 61,076 |
Intangibles, net (1) |  | 9,600 |  |  | 12,200 |
Capital contributions made to loan origination partners |  | 27,437 |  |  | 28,308 |
Other interest-earning assets |  | 70,473 |  |  | 63,964 |
Interest receivable |  | 79,490 |  |  | 68,704 |
Other loan related receivables |  | 25,745 |  |  | 23,463 |
Lease Right-of-Use Asset (2) |  | 38,340 |  |  | 39,459 |
Other |  | 66,598 |  |  | 62,786 |
Total Other Assets |  | $ | 498,755 |  |  | $ | 766,221 |
(1) Net of aggregate accumulated amortization of $18.4 million and $15.8 million as of June 30, 2023 and December 31, 2022, 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 9). (a) Real Estate Owned At June 30, 2023, the Company had 338 REO properties with an aggregate carrying value of $120.0 million. At December 31, 2022, the Company had 388 REO properties with an aggregate carrying value of $130.6 million. At June 30, 2023, $119.6 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 $89.0 million of residential whole loans held at carrying value and $238.2 million of residential whole loans held at fair value at June 30, 2023. The following table presents the activity in the Company’s REO for the three and six months ended June 30, 2023 and 2022:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(Dollars In Thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Balance at beginning of period |  | $ | 121,215 |  |  | $ | 145,568 |  |  | $ | 130,605 |  |  | $ | 156,223 |
Adjustments to record at lower of cost or fair value |  | (1,800) |  |  | (324) |  |  | (2,853) |  |  | (772) |
Transfer from residential whole loans |  | 28,256 |  |  | 23,138 |  |  | 49,181 |  |  | 45,217 |
Purchases and capital improvements, net |  | 118 |  |  | 277 |  |  | 256 |  |  | 629 |
Disposals and other (1) |  | (27,793) |  |  | (32,812) |  |  | (57,193) |  |  | (65,450) |
Balance at end of period |  | $ | 119,996 |  |  | $ | 135,847 |  |  | $ | 119,996 |  |  | $ | 135,847 |
Number of properties |  | 338 |  |  | 438 |  |  | 338 |  |  | 438 |
(1)During the three and six months ended June 30, 2023, the Company sold 95 and 194 REO properties for consideration of $31.7 million and $65.5 million, realizing net gains of approximately $4.0 million and $9.0 million, respectively. During the three and six months ended June 30, 2022, the Company sold 124 and 259 REO properties for consideration of $39.6 million and $81.2 million, realizing net gains of approximately $3.9 million and $6.1 million, respectively. These amounts are included in Other Income, net on the Company’s consolidated statements of operations. (b) Goodwill and Intangible Assets On July 1, 2021, the Company completed the acquisition of Lima One. In connection with the acquisition of Lima One, the Company identified and recorded goodwill of $61.1 million and finite-lived intangible assets totaling $28.0 million. The amortization period for each of the finite lived intangible assets and the activity for the six months ended June 30, 2023 is summarized in the table below:
(Dollars in Thousands) |  | Carrying Value at December 31, 2022 |  | Amortization Six Months Ended June 30, 2023 |  | Carrying Value at June 30, 2023 |  | Amortization Period (Years) (1)
Trademarks / Trade Names |  | $ | 3,400 |  |  | $ | (200) |  |  | $ | 3,200 |  |  | 10
Customer Relationships |  | 6,000 |  |  | (2,000) |  |  | 4,000 |  |  | 4
Internally Developed Software |  | 2,800 |  |  | (400) |  |  | 2,400 |  |  | 5
Total Identified Intangibles |  | $ | 12,200 |  |  | $ | (2,600) |  |  | $ | 9,600 |  |  |
(1) Amortization is calculated on a straight-line basis over the amortization period, except for Customer Relationships, where amortization is calculated based on expected levels of customer attrition. (c) 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 the Company sources residential mortgage loans through both flow arrangements and bulk purchases. At June 30, 2023, the carrying value of these investments (including adjustments for impairments or mark-to-market changes) was $27.4 million, including $3.4 million of common equity (including partnership interests) and $24.0 million of preferred equity. The Company did not record any impairment charges to earnings on its investments in loan origination partners during the three and six months ended June 30, 2023. During the three and six months ended June 30, 2022, the Company recorded an impairment charge in earnings of $28.6 million against the carrying value of its investment in one loan origination partner, bringing the net carrying value of this investment to zero at June 30, 2022. For certain of the Company’s investments, the interests acquired to date by the Company generally do not have a readily determinable fair value. Consequently, the Company accounts for these 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. In addition, for certain partners, options or warrants 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. (d) Derivative Instruments Swaps The Company’s derivative instruments include Swaps, which are used to economically hedge the interest rate risk associated with certain borrowings. Pursuant to these arrangements, the Company agreed to pay a fixed rate of interest and receive a variable interest rate, generally based on the Secured Overnight Financing Rate (“SOFR”), on the notional amount of the Swap. At June 30, 2023, none of the Company’s Swaps were designated as hedges for accounting purposes. The following table presents the assets pledged as collateral against the Company’s Swaps at June 30, 2023, and December 31, 2022:
(In Thousands) |  | June 30, 2023 |  | December 31, 2022 |  |
Restricted Cash |  | $ | 55,672 |  |  | $ | 60,764 |  |  |
At June 30, 2023, the Company had Swaps with an aggregate notional amount of $3.0 billion and an average maturity of approximately 36 months with a maximum term of approximately 72 months. The following table presents information about the Company’s Swaps at June 30, 2023, and December 31, 2022:
|  | June 30, 2023 |  | December 31, 2022 |  |  |  |
Maturity (1) |  | Notional Amount |  | Weighted Average Fixed-Pay Interest Rate |  | Weighted Average Variable Interest Rate (2) |  | Notional Amount |  | Weighted Average Fixed-Pay Interest Rate |  | Weighted Average Variable Interest Rate (2) |  |  |  |
(Dollars in Thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Within 30 days to 12 months |  | $ | — |  |  | — | % |  | — | % |  | $ | — |  |  | — | % |  | — | % |  |  |  |
Over 6 months to 12 months |  | 100,000 |  |  | 1.49 |  |  | 5.09 |  |  | — |  |  | — |  |  | — |  |  |  |  |
Over 12 months to 24 months |  | 1,125,010 |  |  | 1.27 |  |  | 5.09 |  |  | 550,010 |  |  | 1.01 |  |  | 4.30 |  |  |  |  |
Over 24 months to 36 months |  | — |  |  | — |  |  | — |  |  | 775,000 |  |  | 1.75 |  |  | 4.30 |  |  |  |  |
Over 36 months to 48 months |  | 1,425,000 |  |  | 1.53 |  |  | 5.09 |  |  | 450,000 |  |  | 1.12 |  |  | 4.30 |  |  |  |  |
Over 48 months to 60 months |  | — |  |  | — |  |  | — |  |  | 1,075,000 |  |  | 1.86 |  |  | 4.30 |  |  |  |  |
Over 60 months to 72 months |  | 310,000 |  |  | 2.95 |  |  | 5.09 |  |  | — |  |  | — |  |  | — |  |  |  |  |
Over 72 months to 84 months |  | — |  |  | — |  |  | — |  |  | 310,000 |  |  | 2.95 |  |  | 4.30 |  |  |  |  |
Total Swaps |  | $ | 2,960,010 |  |  | 1.58 | % |  | 5.09 | % |  | $ | 3,160,010 |  |  | 1.69 | % |  | 4.30 | % |  |  |  |
(1)Each maturity category reflects contractual amortization and/or maturity of notional amounts. (2)Reflects the benchmark variable rate due from the counterparty at the date presented. This rate adjusts daily based on SOFR. Impact of Derivative Instruments on Earnings The following table present the components of Net (loss)/gain on derivatives used for risk management purposes for the years ended June 30, 2023 and 2022, which is presented in Other income in the consolidated statements of operations:
|  | For the Three Months Ended June 30, |  | For the Six Months Ended June 30,
(In Thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Income on swap variable receive leg |  | $ | 37,784 |  |  | $ | 4,899 |  |  | $ | 71,635 |  |  | $ | 5,306 |
Expense on swap fixed pay leg |  | (11,819) |  |  | (9,172) |  |  | (23,853) |  |  | (15,108) |
Unrealized mark-to-market (loss)/gain |  | 37,018 |  |  | 31,767 |  |  | (3,729) |  |  | 112,521 |
Net price alignment expense on margin collateral received |  | (2,532) |  |  | — |  |  | (4,810) |  |  | — |
Net gain on TBA short positions |  | — |  |  | 20,310 |  |  | — |  |  | 39,186 |
Total Net (loss)/gain on derivatives used for risk management purposes |  | $ | 60,451 |  |  | $ | 47,804 |  |  | $ | 39,243 |  |  | $ | 141,905 |

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