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Real Estate Securities (Tables)
 9 Months Ended
Sep. 30, 2015
Investments, Debt and Equity Securities [Abstract]  
Fair Values of Real Estate Securities
The following table presents the fair values of our real estate securities by type at September 30, 2015 and December 31, 2014.
Table 8.1 – Fair Values of Real Estate Securities by Type
(In Thousands)
 
September 30, 2015
 
December 31, 2014
Trading
 
$
114,211

 
$
111,606

Available-for-sale
 
971,013

 
1,267,624

Total Real Estate Securities
 
$
1,085,224

 
$
1,379,230
Trading Securities by Collateral Type
The following table presents trading securities by collateral type at September 30, 2015 and December 31, 2014.
Table 8.2 – Trading Securities by Collateral Type
(In Thousands)
 
September 30, 2015
 
December 31, 2014
Senior Securities
 
 
 
 
Prime
 
$
51,308

 
$
93,802

Non-prime
 
6,514

 
7,951

Total Senior Securities
 
57,822

 
101,753

Subordinate Securities
 
 
 
 
Prime mezzanine
 
38,750

 
—

Prime subordinate
 
17,639

 
9,853

Total Subordinate Securities
 
56,389

 
9,853

Total Trading Securities
 
$
114,211

 
$
111,606
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, 2015 and December 31, 2014.
Table 8.3 – Available-for-Sale Securities by Collateral Type
(In Thousands)
 
September 30, 2015
 
December 31, 2014
Senior Securities
 
 
 
 
Prime
 
$
251,273

 
$
307,813

Non-prime
 
158,040

 
179,744

Total Senior Securities
 
409,313

 
487,557

Re-REMIC Securities
 
167,639

 
168,347

Subordinate Securities
 
 
 
 
Prime mezzanine (1)
 
233,458

 
448,838

Prime subordinate (2)
 
160,603

 
162,882

Total Subordinate Securities
 
394,061

 
611,720

Total AFS Securities
 
$
971,013

 
$
1,267,624

(1) Mezzanine includes securities initially rated AA, A and BBB- and issued in 2012 or later.
(2) Subordinate securities includes less than $1 million of non-prime securities at both September 30, 2015, and December 31, 2014.
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 AFS securities at September 30, 2015 and December 31, 2014.
Table 8.4 – Carrying Value of AFS Securities
September 30, 2015
 
Senior
 
 
 
 
 
 
(In Thousands)
 
Prime
 
Non-prime
 
Re-REMIC
 
Subordinate
 
Total
Principal balance
 
$
257,526

 
$
174,285

 
$
192,215

 
$
490,891

 
$
1,114,917

Credit reserve
 
(2,377
)
 
(8,964
)
 
(11,135
)
 
(32,865
)
 
(55,341
)
Unamortized discount, net
 
(27,476
)
 
(25,505
)
 
(74,377
)
 
(134,371
)
 
(261,729
)
Amortized cost
 
227,673

 
139,816

 
106,703

 
323,655

 
797,847

Gross unrealized gains
 
26,899

 
18,515

 
60,936

 
71,226

 
177,576

Gross unrealized losses
 
(3,299
)
 
(291
)
 
—

 
(820
)
 
(4,410
)
Carrying Value
 
$
251,273

 
$
158,040

 
$
167,639

 
$
394,061

 
$
971,013

December 31, 2014
 
Senior
 
 
 
 
 
 
(In Thousands)
 
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
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, 2015, in unamortized discount and designated credit reserves on residential AFS securities.
Table 8.5 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities
 
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
 
 
Credit
Reserve
 
Unamortized
Discount, Net
 
Credit
Reserve
 
Unamortized
Discount, Net
(In Thousands)
 
 
 
 
Beginning balance
 
$
61,700

 
$
273,119

 
$
70,067

 
$
296,342

Amortization of net discount
 
—

 
(9,115
)
 
—

 
(28,277
)
Realized credit losses
 
(1,706
)
 
—

 
(7,420
)
 
—

Acquisitions
 
—

 
—

 
858

 
5,705

Sales, calls, other
 
(1,632
)
 
(5,522
)
 
(1,632
)
 
(18,799
)
Impairments
 
—

 
226

 
—

 
226

Transfers to (release of) credit reserves, net
 
(3,021
)
 
3,021

 
(6,532
)
 
6,532

Ending Balance
 
$
55,341

 
$
261,729

 
$
55,341

 
$
261,729
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, 2015 and December 31, 2014.
Table 8.6 – Components of Fair Value of Residential AFS Securities by Holding Periods
 
 
Less Than 12 Consecutive Months
 
12 Consecutive Months or Longer
 
 
Amortized
Cost
 
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Unrealized
Losses
 
Fair
Value
(In Thousands)
 
 
 
 
 
 
September 30, 2015
 
$
87,796

 
$
(2,090
)
 
$
85,706

 
$
82,383

 
$
(2,320
)
 
$
80,063

December 31, 2014
 
126,681

 
(1,374
)
 
125,307

 
70,676

 
(1,422
)
 
69,254
Summary of Significant Valuation Assumptions for Available for Sale Securities
The table below summarizes the significant valuation assumptions we used for our AFS securities in unrealized loss positions at September 30, 2015.
Table 8.7 – Significant Valuation Assumptions
 
 
Range for Securities
 
September 30, 2015
 
Prime
 
 
Non-prime
 
Prepayment rates
 
10 - 20
%
 
10 - 12
%
Projected losses
 
0 - 9
%
 
5 - 9
%
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, 2015 and 2014, for which a portion of an OTTI was recognized in other comprehensive income.
Table 8.8 – Activity of the Credit Component of Other-than-Temporary Impairments
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands)
 
2015
 
2014
 
2015
 
2014
Balance at beginning of period
 
$
32,696

 
$
34,256

 
$
33,849

 
$
37,149

Additions
 
 
 
 
 
 
 
 
Initial credit impairments
 
226

 
—

 
226

 
261

Subsequent credit impairments
 
—

 
—

 
—

 
70

Reductions
 
 
 
 
 
 
 
 
Securities sold, or expected to sell
 
—

 
(18
)
 
(348
)
 
(922
)
Securities with no outstanding principal at period end
 
(446
)
 
—

 
(1,251
)
 
(2,320
)
Balance at End of Period
 
$
32,476

 
$
34,238

 
$
32,476

 
$
34,238
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, 2015 and 2014.
Table 8.9 – Gross Realized Gains and Losses on AFS Securities
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands)
 
2015
 
2014
 
2015
 
2014
Gross realized gains - sales
 
$
4,053

 
$
10,227

 
$
14,315

 
$
11,219

Gross realized gains - calls
 
1,607

 
462

 
1,967

 
1,449

Gross realized losses - sales
 
—

 
(2,713
)
 
—

 
(2,713
)
Gross realized losses - calls
 
(112
)
 
—

 
(112
)
 
—

Total Realized Gains on Sales and Calls of AFS Securities, net
 
$
5,548

 
$
7,976

 
$
16,170

 
$
9,955