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Other Assets
 9 Months Ended
Sep. 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 September 30, 2023 and December 31, 2022:

(In Thousands)September 30, 2023December 31, 2022
Receivable for sale of unsettled residential whole loans$— $275,656 
REO113,090 130,605 
Goodwill61,076 61,076 
Intangibles, net (1)
8,800 12,200 
Capital contributions made to loan origination partners20,034 28,308 
Commercial loans
76,546 61,510 
Interest receivable89,554 68,704 
Other loan related receivables30,649 23,463 
Lease Right-of-Use Asset (2)
37,762 39,459 
Other65,576 65,240 
Total Other Assets$503,087 $766,221 

(1) Net of aggregate accumulated amortization of $19.2 million and $15.8 million as of September 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 September 30, 2023, the Company had 320 REO properties with an aggregate carrying value of $113.1 million. At December 31, 2022, the Company had 388 REO properties with an aggregate carrying value of $130.6 million.
At September 30, 2023, $112.7 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 $94.0 million of residential whole loans held at carrying value and $256.9 million of residential whole loans held at fair value at September 30, 2023.
The following table presents the activity in the Company’s REO for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars In Thousands)2023202220232022
Balance at beginning of period$119,996 $135,847 $130,605 $156,223 
Adjustments to record at lower of cost or fair value
(958)(1,655)(3,811)(2,426)
Transfer from residential whole loans16,991 16,658 66,171 61,875 
Purchases and capital improvements, net88 215 344 845 
Disposals and other (1)
(23,027)(18,402)(80,219)(83,854)
Balance at end of period$113,090 $132,663 $113,090 $132,663 
Number of properties320 412 320 412 
(1)During the three and nine months ended September 30, 2023, the Company sold 77 and 271 REO properties for consideration of $26.2 million and $91.7 million, realizing net gains of approximately $3.2 million and $12.2 million, respectively. During the three and nine months ended September 30, 2022, the Company sold 74 and 333 REO properties for consideration of $23.8 million and $105.0 million, realizing net gains of approximately $5.3 million and $21.3 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 nine months ended September 30, 2023 is summarized in the table below:

(Dollars in Thousands)Carrying Value at December 31, 2022Amortization
Nine Months Ended
September 30, 2023		Carrying Value at
September 30, 2023
Amortization Period (Years) (1)
Trademarks / Trade Names$3,400 $(300)$3,100 10
Customer Relationships6,000 (2,500)3,500 4
Internally Developed Software2,800 (600)2,200 5
Total Identified Intangibles$12,200 $(3,400)$8,800 

(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 September 30, 2023, the carrying value of these investments (including adjustments for impairments or mark-to-market changes) was $20.0 million, including $4.9 million of common equity (including partnership interests) and $15.1 million of preferred equity.

During the three months ended September 30, 2023, the Company recorded an impairment charge in earnings of $2.3 million against the carrying value of its investment in one loan origination partner. In September 2023, the Company sold a preferred equity interest in one loan origination partner, which was recorded at $6.6 million, and recorded a gain of $0.1 million.
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) Commercial Mortgage Loans

The Company owns a portfolio of participations in commercial mortgage bridge loans, which are accounted for at fair value. The participations range from 49% to 75% of the total UPB of the related loans; the remaining interest in each loan was retained by the originator of such loan. The commercial mortgage loans are predominantly collateralized by multi-family properties; the collateral also includes senior living, industrial, parking, and office properties. The commercial mortgage loans are generally first liens and bear variable interest rates.

The following table presents certain additional information about the Company’s commercial mortgage loans as of September 30, 2023 and December 31, 2022:

(In Thousands)Fair Value / Carrying Value
UPB
Weighted Average CouponWeighted Average Term to Maturity (Months)UPB 60+ Days Delinquent
Commercial Mortgage Loans - September 30, 2023
$76,546 $76,546 12.93 %3$3,389 
Commercial Mortgage Loans - December 31, 2022
$61,510 $61,510 11.54 %10$— 
(e) 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 September 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 September 30, 2023, and December 31, 2022:
(In Thousands)September 30,
2023		December 31,
2022
Agency MBS, at fair value
$35,565 $— 
Restricted Cash26,985 60,764 
 
At September 30, 2023, the Company had Swaps with an aggregate notional amount of $3.1 billion and an average maturity of approximately 36 months with a maximum term of approximately 119 months.

The following table presents information about the Company’s Swaps at September 30, 2023, and December 31, 2022:
 
 September 30, 2023December 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$— — %— %$— — %— %
Within 30 days— — — — — — 
Over 30 days to 3 months— — — — — — 
Over 3 months to 6 months100,000 1.49 5.32 — — — 
Over 6 months to 12 months— — — — — — 
Over 12 months to 24 months1,125,010 1.27 5.32 550,010 1.01 4.30 
Over 24 months to 36 months— — — 775,000 1.75 4.30 
Over 36 months to 48 months1,425,000 1.53 5.32 450,000 1.12 4.30 
Over 48 months to 60 months19,100 4.22 5.32 1,075,000 1.86 4.30 
Over 60 months to 72 months310,000 2.95 5.32 — — — 
Over 72 months to 84 months— — — 310,000 2.95 4.30 
Over 84 months113,400 4.00 5.32 — — — 
Total Swaps$3,092,510 1.69 %5.32 %$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 gain on derivatives used for risk management purposes for the three and nine months ended September 30, 2023 and 2022, which is presented in Other income in the consolidated statements of operations:

Three Months Ended September 30,Nine Months Ended September 30,
 (In Thousands)2023202220232022
Income on swap variable receive leg$41,427 $17,273 $113,062 $22,580 
Expense on swap fixed pay leg(12,563)(13,623)(36,416)(28,730)
Unrealized mark-to-market gain
9,433 108,918 5,704 221,437 
Net price alignment expense on margin collateral received(3,437)(752)(8,247)(752)
Net gain on TBA short positions— — — 39,186 
Total Net gain on derivatives used for risk management purposes
$34,860 $111,816 $74,103 $253,721