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Other Assets

12 Months Ended

Dec. 31, 2023

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

The following table presents the components of the Company’s Other assets at December 31, 2023 and 2022:


(In Thousands)	December 31, 2023		December 31, 2022
Receivable for sale of unsettled residential whole loans	$	—	$	275,656
REO	110,174		130,605
Commercial REO	22,717		—
Goodwill	61,076		61,076
Intangibles, net (1)	8,000		12,200
Capital contributions made to loan origination partners	19,780		28,308
Commercial loans	51,426		61,510
Interest receivable	98,924		68,704
Other loan related receivables	24,084		23,463
Lease Right-of-Use Asset (2)	37,819		39,459
Other	63,097		65,240
Total Other Assets	$	497,097	$	766,221

(1)Net of aggregate accumulated amortization of $20.0 million and $15.8 million as of December 31, 2023 and 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 and Commercial REO

At December 31, 2023, the Company had 300 REO properties with an aggregate carrying value of $110.2 million. At December 31, 2022, the Company had 388 REO properties with an aggregate carrying value of $130.6 million.

At December 31, 2023, $110.1 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 $89.1 million of residential whole loans held at carrying value and $264.5 million of residential whole loans held at fair value at December 31, 2023.

The following table presents the activity in the Company’s REO for the years ended December 31, 2023 and 2022:


	For the Year Ended December 31,
(Dollars In Thousands)	2023		2022
Balance at beginning of period	$	130,605	$	156,223
Adjustments to record at lower of cost or fair value	(4,867)		(4,255)
Transfer from residential whole loans (1)	84,662		82,911
Purchases and capital improvements, net	421		978
Disposals and other (2)	(100,647)		(105,252)
Balance at end of period	$	110,174	$	130,605

Number of properties	300		388

(1)Includes a net loss recorded on transfer of approximately $400,000 and $1.2 million, respectively, for the years ended December 31, 2023 and December 31, 2022.

(2)During the year ended December 31, 2023, the Company sold 342 REO properties for consideration of $114.3 million, realizing net gains of approximately $14.4 million. During the year ended December 31, 2022, the Company sold 416 REO properties for consideration of $133.8 million, realizing net gains of approximately $28.7 million. These amounts are included in Other Income/(Loss), net on the Company’s consolidated statements of operations.

Commercial REO

The Company received a 75% interest in an entity which owns a newly constructed industrial property as part of the negotiated settlement of a delinquent commercial mortgage loan. The entity was determined to be a VIE but the Company was not determined to be the primary beneficiary; as a result, the investment in the entity is considered an equity method investment. At the time the Company received this interest, it was valued at $22.7 million and the Company recorded a $0.3 million gain over the carrying value of the commercial loan. The entity accounts for this commercial REO similarly to the manner in which the Company accounts for its residential REO. The entity does not own any other significant assets or carry any significant liabilities and the property is currently vacant and considered held for sale.

(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 years ended December 31, 2023, 2022 and 2021 is summarized in the table below:


(Dollars in Thousands)	Acquisition Date July 1, 2021		Amortization Year Ended December 31, 2021		Amortization Year Ended December 31, 2022		Amortization Year Ended December 31, 2023		Carrying Value at December 31, 2023		Amortization Period (Years) (1)
Trademarks / Trade Names	$	4,000	$	(200)	$	(400)	$	(400)	$	3,000	10
Customer Relationships	16,000		(4,000)		(6,000)		(3,000)		3,000		4
Internally Developed Software	4,000		(400)		(800)		(800)		2,000		5
Non-Compete Agreements	4,000		(2,000)		(2,000)		—		—		1
Total Identified Intangibles	$	28,000	$	(6,600)	$	(9,200)	$	(4,200)	$	8,000

(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

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 December 31, 2023, the carrying value of these investments (including adjustments for impairments or mark-to-market changes) was $19.8 million, including $4.7 million of common equity (including partnership interests) and $15.1 million of preferred equity.

During the year ended December 31, 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 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.

During the year ended December 31, 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 as of June 30, 2022. This impairment charge was recorded in Provision for credit losses on other assets in the consolidated statement of operations.

Further, for the year ended December 31, 2022, the Company recorded a valuation adjustment of $21.9 million against its investment in a loan origination partner that is accounted for at fair value through earnings. During the year ended December 31, 2021, the Company reversed $10.0 million of previously recorded impairment as two of the Company’s preferred equity investments were repaid in full. In addition, the Company recorded a gain of $24.0 million related to a preferred equity investment that had been previously impaired and that was required to be revalued during the period, as the investee company completed a capital transaction with an unrelated third party. The Company did not record any impairment charges to earnings on investments in loan origination partners during the year ended December 31, 2021.

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. On July 1, 2021, the Company completed the acquisition of certain ownership interests in Lima One, which resulted in the Company owning all of Lima One’s outstanding ownership interests (see Note 15). Accordingly, the Company consolidated Lima One’s financial results beginning on that date.

(d) Commercial Mortgage Loans

The Company owns a portfolio of participations in commercial mortgage bridge loans, which are accounted for at fair value under the fair value option, and are classified as Level 3 fair value measurements in the fair value hierarchy. 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 one senior living property, one parking, and one office property. The commercial mortgage loans are generally first liens and bear variable interest rates. The Company received an interest in one of the underlying properties in the fourth quarter of 2023, as further described above under “Commercial REO.”

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


(In Thousands)	Fair Value / Carrying Value		UPB		Weighted Average Coupon		Weighted Average Term to Maturity (Months)	UPB 60+ Days Delinquent
Commercial Mortgage Loans - December 31, 2023	$	51,426	$	51,602	13.18	%	2	$	3,521

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 December 31, 2023, none of the Company’s Swaps were designated as hedges for accounting purposes.

Variation margin payments on the Company’s Swaps are treated as a legal settlement of the exposure under the related Swap contract, the effect of which reduces what would have otherwise been reported as the fair value of the Swap, generally to zero.

The following table presents the assets pledged as collateral against the Company’s Swaps at December 31, 2023, and December 31, 2022:


(In Thousands)	December 31, 2023		December 31, 2022
Agency MBS, at fair value	$	41,179	$	—
Restricted Cash	22,880		60,764

At December 31, 2023, the Company had Swaps with an aggregate notional amount of $3.3 billion and an average maturity of approximately 38 months with a maximum term of approximately 119 months.

The following table presents information about the Company’s Swaps at December 31, 2023 and 2022:


	December 31, 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	$	—	—	%	—	%	$	—	—	%	—	%
Over 30 days to 3 months	100,000		1.49		5.38		—		—		—
Over 3 months to 6 months	—		—		—		—		—		—
Over 6 months to 12 months	450,010		0.90		5.38		—		—		—
Over 12 months to 24 months	675,000		1.52		5.38		550,010		1.01		4.30
Over 24 months to 36 months	450,000		1.12		5.38		775,000		1.75		4.30
Over 36 months to 48 months	975,000		1.73		5.38		450,000		1.12		4.30
Over 48 months to 60 months	24,600		4.28		5.38		1,075,000		1.86		4.30
Over 60 months to 72 months	310,000		2.95		5.38		—		—		—
Over 72 months to 84 months	—		—		—		310,000		2.95		4.30
Over 84 months	292,650		4.32		5.38		—		—		—
Total Swaps	$	3,277,260	1.85	%	5.38	%	$	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/(loss) on derivatives used for risk management purposes for the years ended December 31, 2023, 2022 and 2021, which is presented in Other Income/(Loss), net in the consolidated statements of operations:


	For the Year Ended December 31,
(In Thousands)	2023		2022		2021
Income on swap variable receive leg	$	158,554	$	52,395	$	34
Expense on swap fixed pay leg	(51,400)		(42,353)		(703)
Unrealized mark-to-market gain/(loss)	(91,696)		208,712		70
Net price alignment expense on margin collateral received	(11,697)		(2,762)		—
Net gain on TBA short positions	—		39,187		2,025
Total Net gain/(loss) on derivatives used for risk management purposes	$	3,761	$	255,179	$	1,426