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Real Estate Securities (Tables)

12 Months Ended

Dec. 31, 2014

Fair Values of Real Estate Securities by Collateral Type and Entity

We invest in residential mortgage-backed securities. The following table presents the fair values of our real estate securities by collateral type at December 31, 2014 and 2013.

(In Thousands)		December 31, 2014				December 31, 2013
Trading		$	111,606			$	124,555
Available-for-sale			1,267,624				1,558,306
Total Real Estate Securities		$	1,379,230			$	1,682,861

Trading Securities by Collateral Type

The following table presents trading securities by collateral type and ownership entity at December 31, 2014 and 2013.

(In Thousands)		December 31, 2014				December 31, 2013
Senior Securities
Prime		$	93,802			$	110,505
Non-prime			7,951				9,070
Total Senior Securities			101,753				119,575
Prime Subordinate Securities			9,853				4,980
Total Trading Securities		$	111,606			$	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 December 31, 2014 and 2013.

(In Thousands)		December 31, 2014				December 31, 2013
Senior Securities
Prime		$	307,813			$	662,306
Non-prime			179,744				193,386
Total Senior Securities			487,557				855,692
Re-REMIC Securities			168,347				176,376
Subordinate Securities
Prime Mezzanine (1)			448,838				384,849
Subordinate (2)			162,882				141,389
Total Subordinate Securities			611,720				526,238
Total AFS Securities		$	1,267,624			$	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 the fair value) of residential AFS securities at December 31, 2014 and 2013.

Carrying Value of Residential AFS Securities

December 31, 2014 (In Thousands)		Senior
		Prime				Non-prime				Re-REMIC				Subordinate				Total
Principal balance		$	311,573			$	196,258			$	195,098			$	742,150			$	1,445,079
Credit reserve			(3,660	)			(9,644	)			(15,202	)			(41,561	)			(70,067	)
Unamortized discount, net			(34,782	)			(31,491	)			(79,611	)			(150,458	)			(296,342	)
Amortized cost			273,131				155,123				100,285				550,131				1,078,670
Gross unrealized gains			35,980				24,682				68,062				63,026				191,750
Gross unrealized losses			(1,298	)			(61	)			—				(1,437	)			(2,796	)
Carrying Value		$	307,813			$	179,744			$	168,347			$	611,720			$	1,267,624
December 31, 2013 (In Thousands)		Senior
		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 years ended December 31, 2014 and 2013, of the unamortized discount and designated credit reserves on residential AFS securities.

Changes in Unamortized Discount and Designated Credit Reserves on Residential AFS Securities

		Year Ended December 31, 2014								Year Ended December 31, 2013
(In Thousands)		Credit Reserve				Unamortized Discount, Net				Credit Reserve				Unamortized Discount, Net
Beginning balance		$	116,870			$	298,469			$	187,032			$	203,421
Amortization of net discount			—				(42,835	)			—				(34,943	)
Realized credit losses			(11,501	)			—				(21,971	)			—
Acquisitions			3,581				15,348				13,604				92,124
Sales, calls, other			(2,555	)			(11,533	)			(19,868	)			(5,894	)
Impairments			565				—				1,834				—
Transfers to (release of) credit reserves, net			(36,893	)			36,893				(43,761	)			43,761
Ending Balance		$	70,067			$	296,342			$	116,870			$	298,469

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 December 31, 2014 and 2013.

		Less Than 12 Consecutive Months												12 Consecutive Months or Longer
(In Thousands)		Amortized Cost				Unrealized Losses				Fair Value				Amortized Cost				Unrealized Losses				Fair Value
December 31, 2014		$	126,681			$	(1,374	)		$	125,307			$	70,676			$	(1,422	)		$	69,254
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 AFS securities at December 31, 2014.

Significant Assumptions

		Range for Securities
December 31, 2014		Prime				Non-prime
Prepayment rates			8 - 15	%			10 - 10	%
Loss severity			20 - 52	%			35 - 35	%
Projected losses			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 December 31, 2014, 2013, and 2012, for which a portion of an OTTI was recognized in other comprehensive income.

Activity of the Credit Component of Other-than-Temporary Impairments

		Years Ended December 31,
(In Thousands)		2014				2013				2012
Balance at beginning of period		$	37,149			$	50,852			$	78,126
Additions
Initial credit impairments			261				137				325
Subsequent credit impairments			70				—				552
Reductions
Securities sold, or expected to sell			(922	)			(5,811	)			(10,024	)
Securities with no outstanding principal at period end			(2,709	)			(8,029	)			(18,127	)
Balance at End of Period		$	33,849			$	37,149			$	50,852

Gross Realized Gains and Losses on Sales and Calls of Available for Sale Securities

The following table presents the gross realized gains on sales and calls of AFS securities for the years ended December 31, 2014, 2013, and 2012.

		Years Ended December 31,
(In Thousands)		2014				2013				2012
Gross realized gains - sales		$	15,030			$	24,613			$	33,909
Gross realized gains - calls			1,600				366				142
Gross realized losses - sales			(2,713	)			(214	)			(1,600	)
Gross realized losses - calls			—				—				—
Total Realized Gains on Sales and Calls of AFS Securities, net		$	13,917			$	24,765			$	32,451

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