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Real Estate Securities (Tables) | 9 Months Ended
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Sep. 30, 2014
Fair Values of Real Estate Securities | The following table presents the fair values of our real estate securities by type at September 30, 2014 and December 31, 2013.
(In Thousands) |  | September 30, 2014 |  |  | December 31, 2013 |
Trading |  | $ | 108,750 |  |  | $ | 124,555 |
Available-for-sale |  |  | 1,286,235 |  |  |  | 1,558,306 |
Total Real Estate Securities |  | $ | 1,394,985 |  |  | $ | 1,682,861 |
Trading Securities by Collateral Type | The following table presents trading securities by collateral type at September 30, 2014 and December 31, 2013.
(In Thousands) |  | September 30, 2014 |  |  | December 31, 2013 |
Senior Securities |  |  |  |  |  |  |  |
Prime |  | $ | 100,612 |  |  | $ | 110,505 |
Non-prime |  |  | 7,758 |  |  |  | 9,070 |
Total Senior Securities |  |  | 108,370 |  |  |  | 119,575 |
Subordinate Securities |  |  |  |  |  |  |  |
Prime |  |  | 380 |  |  |  | 4,980 |
Total Subordinate Securities |  |  | 380 |  |  |  | 4,980 |
Total Trading Securities |  | $ | 108,750 |  |  | $ | 124,555 |
Available for Sale Securities by Collateral Type | The following table presents the fair value of our available-for-sale securities held at Redwood by collateral type at September 30, 2014 and December 31, 2013.
(In Thousands) |  | September 30, 2014 |  |  | December 31, 2013 |
Senior Securities |  |  |  |  |  |  |  |
Prime |  | $ | 358,813 |  |  | $ | 662,306 |
Non-prime |  |  | 186,223 |  |  |  | 193,386 |
Total Senior Securities |  |  | 545,036 |  |  |  | 855,692 |
Re-REMIC Securities |  |  | 176,117 |  |  |  | 176,376 |
Subordinate Securities |  |  |  |  |  |  |  |
Prime |  |  | 564,932 |  |  |  | 526,095 |
Non-prime |  |  | 150 |  |  |  | 143 |
Total Subordinate Securities |  |  | 565,082 |  |  |  | 526,238 |
Total AFS Securities |  | $ | 1,286,235 |  |  | $ | 1,558,306 |
Components of Carrying Value (Which Equals Fair Value) of Residential Available for Sale Securities | The following table presents the components of carrying value (which equals fair value) of residential AFS securities at September 30, 2014 and December 31, 2013. Carrying Value of Residential AFS Securities
September 30, 2014 |  | Senior |  |  |  |  |  |  |  |  |  |
(In Thousands) |  | Prime |  |  | Non-prime |  |  | Re-REMIC |  |  | Subordinate |  |  | Total |
Principal balance |  | $ | 362,902 |  |  | $ | 202,812 |  |  | $ | 206,212 |  |  | $ | 694,308 |  |  | $ | 1,466,234 |
Credit reserve |  |  | (4,082) |  |  |  | (9,894) |  |  |  | (16,553) |  |  |  | (43,346) |  |  |  | (73,875) |
Unamortized discount, net |  |  | (41,314) |  |  |  | (33,676) |  |  |  | (80,986) |  |  |  | (143,129) |  |  |  | (299,105) |
Amortized cost |  |  | 317,506 |  |  |  | 159,242 |  |  |  | 108,673 |  |  |  | 507,833 |  |  |  | 1,093,254 |
Gross unrealized gains |  |  | 42,113 |  |  |  | 27,004 |  |  |  | 67,444 |  |  |  | 59,427 |  |  |  | 195,988 |
Gross unrealized losses |  |  | (805) |  |  |  | (24) |  |  |  | - |  |  |  | (2,178) |  |  |  | (3,007) |
Carrying Value |  | $ | 358,814 |  |  | $ | 186,222 |  |  | $ | 176,117 |  |  | $ | 565,082 |  |  | $ | 1,286,235 |
December 31, 2013 |  | Senior |  |  |  |  |  |  |  |  |  |
(In Thousands) |  | Prime |  |  | Non-prime |  |  | Re-REMIC |  |  | Subordinate |  |  | Total |
Principal balance |  | $ | 670,051 |  |  | $ | 218,603 |  |  | $ | 214,046 |  |  | $ | 706,292 |  |  | $ | 1,808,992 |
Credit reserve |  |  | (10,144) |  |  |  | (13,840) |  |  |  | (30,429) |  |  |  | (62,457) |  |  |  | (116,870) |
Unamortized discount, net |  |  | (44,133) |  |  |  | (36,882) |  |  |  | (80,188) |  |  |  | (137,266) |  |  |  | (298,469) |
Amortized cost |  |  | 615,774 |  |  |  | 167,881 |  |  |  | 103,429 |  |  |  | 506,569 |  |  |  | 1,393,653 |
Gross unrealized gains |  |  | 47,980 |  |  |  | 25,654 |  |  |  | 72,947 |  |  |  | 41,205 |  |  |  | 187,786 |
Gross unrealized losses |  |  | (1,448) |  |  |  | (149) |  |  |  | - |  |  |  | (21,536) |  |  |  | (23,133) |
Carrying Value |  | $ | 662,306 |  |  | $ | 193,386 |  |  | $ | 176,376 |  |  | $ | 526,238 |  |  | $ | 1,558,306 |
Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities | The following table presents the changes for the three and nine months ended September 30, 2014, in unamortized discount and designated credit reserves on residential AFS securities. Changes in Unamortized Discount and Designated Credit Reserves on Residential AFS Securities
|  | Three Months Ended September 30, 2014 |
|  | Credit |  |  | Unamortized |
(In Thousands) |  | Reserve |  |  | Discount, Net |
Beginning balance |  | $ | 83,276 |  |  | $ | 304,293 |
Amortization of net discount |  |  | - |  |  |  | (10,890) |
Realized credit losses |  |  | (1,692) |  |  |  | - |
Acquisitions |  |  | 1,589 |  |  |  | 4,404 |
Sales, calls, other |  |  | (1,013) |  |  |  | (7,175) |
Impairments |  |  | 188 |  |  |  | - |
Transfers to (release of) credit reserves, net |  |  | (8,473) |  |  |  | 8,473 |
Ending Balance |  | $ | 73,875 |  |  | $ | 299,105 |
|  | Nine Months Ended September 30, 2014 |
|  | Credit |  |  | Unamortized |
(In Thousands) |  | Reserve |  |  | Discount, Net |
Beginning balance |  | $ | 116,870 |  |  | $ | 298,469 |
Amortization of net discount |  |  | - |  |  |  | (32,774) |
Realized credit losses |  |  | (9,002) |  |  |  | - |
Acquisitions |  |  | 1,846 |  |  |  | 7,241 |
Sales, calls, other |  |  | (2,425) |  |  |  | (7,810) |
Impairments |  |  | 565 |  |  |  | - |
Transfers to (release of) credit reserves, net |  |  | (33,979) |  |  |  | 33,979 |
Ending Balance |  | $ | 73,875 |  |  | $ | 299,105 |
Components of Carrying Value of Available for Sale Securities in Unrealized Loss Position | The following table presents the components comprising the total carrying value of residential AFS securities that were in a gross unrealized loss position at September 30, 2014 and December 31, 2013.
|  | Less Than 12 Consecutive Months |  |  | 12 Consecutive Months or Longer |
|  | Amortized |  |  | Unrealized |  |  | Fair |  |  | Amortized |  |  | Unrealized |  |  | Fair |
(In Thousands) |  | Cost |  |  | Losses |  |  | Value |  |  | Cost |  |  | Losses |  |  | Value |
September 30, 2014 |  | $ | 104,118 |  |  | $ | (1,097) |  |  | $ | 103,021 |  |  | $ | 75,582 |  |  | $ | (1,910) |  |  | $ | 73,672 |
December 31, 2013 |  |  | 607,030 |  |  |  | (21,195) |  |  |  | 585,835 |  |  |  | 19,828 |  |  |  | (1,938) |  |  |  | 17,890 |
Summary of Significant Valuation Assumptions for Available for Sale Securities | The table below summarizes the significant valuation assumptions we used for our OTTI AFS securities at September 30, 2014. Significant Valuation Assumptions
|  | Range for Securities |
September 30, 2014 |  | Prime Securities |  |  | Non-prime |
Prepayment rates |  |  | 15 - 20 | % |  |  | 10 - 10 % |
Loss severity |  |  | 20 - 52 | % |  |  | 35 - 35 % |
Projected default rate |  |  | 1 - 22 | % |  |  | 15 - 15 % |
Activity of Credit Component of Other-than-Temporary Impairments | The following table details the activity related to the credit loss component of OTTI (i.e., OTTI recognized through earnings) for AFS securities held at September 30, 2014 and 2013, for which a portion of an OTTI was recognized in other comprehensive income. Activity of the Credit Component of Other-than-Temporary Impairments
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(In Thousands) |  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Balance at beginning of period |  | $ | 34,256 |  |  | $ | 42,674 |  |  | $ | 37,149 |  |  | $ | 50,852 |
Additions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Initial credit impairments |  |  | - |  |  |  | - |  |  |  | 261 |  |  |  | - |
Subsequent credit impairments |  |  | - |  |  |  | - |  |  |  | 70 |  |  |  | - |
Reductions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities sold, or expected to sell |  |  | (18) |  |  |  | (3,288) |  |  |  | (922) |  |  |  | (5,479) |
Securities with no outstanding principal at period end |  |  | - |  |  |  | (764) |  |  |  | (2,320) |  |  |  | (6,751) |
Balance at End of Period |  | $ | 34,238 |  |  | $ | 38,622 |  |  | $ | 34,238 |  |  | $ | 38,622 |
Gross Realized Gains and Losses on Sales and Calls of Available for Sale Securities | The following table presents the gross realized gains and losses on sales and calls of AFS securities for the three and nine months ended September 30, 2014 and 2013.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(In Thousands) |  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Gross realized gains - sales |  | $ | 10,227 |  |  | $ | 10,532 |  |  | $ | 11,219 |  |  | $ | 22,762 |
Gross realized gains - calls |  |  | 462 |  |  |  | - |  |  |  | 1,449 |  |  |  | 333 |
Gross realized losses - sales |  |  | (2,713) |  |  |  | (214) |  |  |  | (2,713) |  |  |  | (214) |
Gross realized losses - calls |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total Realized Gains on Sales and Calls of AFS Securities, net |  | $ | 7,976 |  |  | $ | 10,318 |  |  | $ | 9,955 |  |  | $ | 22,881 |

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