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Real Estate Securities (Tables)
 9 Months Ended
Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]  
Fair Values of Real Estate Securities by Type
The following table presents the fair values of our real estate securities by type at September 30, 2017 and December 31, 2016.
Table 7.1 – Fair Values of Real Estate Securities by Type
(In Thousands)
 
September 30, 2017
 
December 31, 2016
Trading
 
$
820,134

 
$
445,687

Available-for-sale
 
536,138

 
572,752

Total Real Estate Securities
 
$
1,356,272

 
$
1,018,439
Trading Securities by Collateral Type
The following table presents the fair value of trading securities by position and collateral type at September 30, 2017 and December 31, 2016.
Table 7.2 – Trading Securities by Position and Collateral Type
(In Thousands)
 
September 30, 2017
 
December 31, 2016
Senior Securities
 
$
62,767

 
$
37,067

Subordinate Securities
 
 
 
 
Mezzanine
 
458,299

 
256,226

Subordinate
 
299,068

 
152,394

Total Subordinate Securities
 
757,367

 
408,620

Total Trading Securities
 
$
820,134

 
$
445,687
Available-for-Sale Securities by Collateral Type
The following table presents the fair value of our available-for-sale securities by position and collateral type at September 30, 2017 and December 31, 2016.
Table 7.3 – Available-for-Sale Securities by Position and Collateral Type
(In Thousands)
 
September 30, 2017
 
December 31, 2016
Senior Securities
 
$
153,232

 
$
136,546

Re-REMIC Securities
 
39,033

 
85,479

Subordinate Securities
 
 
 
 
Mezzanine
 
119,687

 
163,715

Subordinate
 
224,186

 
187,012

Total Subordinate Securities
 
343,873

 
350,727

Total AFS Securities
 
$
536,138

 
$
572,752
Carrying 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, 2017 and December 31, 2016.
Table 7.4 – Carrying Value of AFS Securities
September 30, 2017
 
 
 
 
 
 
 
 
(In Thousands)
 
Senior
 
Re-REMIC
 
Subordinate
 
Total
Principal balance
 
$
156,936

 
$
44,896

 
$
442,219

 
$
644,051

Credit reserve
 
(3,024
)
 
(5,810
)
 
(38,041
)
 
(46,875
)
Unamortized discount, net
 
(36,575
)
 
(10,412
)
 
(142,405
)
 
(189,392
)
Amortized cost
 
117,337


28,674

 
261,773

 
407,784

Gross unrealized gains
 
37,155

 
10,359

 
83,185

 
130,699

Gross unrealized losses
 
(1,260
)
 
—

 
(1,085
)
 
(2,345
)
Carrying Value
 
$
153,232


$
39,033

 
$
343,873

 
$
536,138

December 31, 2016
 
 
 
 
 
 
 
 
(In Thousands)
 
Senior
 
Re-REMIC
 
Subordinate
 
Total
Principal balance
 
$
148,862

 
$
95,608

 
$
456,359

 
$
700,829

Credit reserve
 
(4,814
)
 
(6,857
)
 
(35,802
)
 
(47,473
)
Unamortized discount, net
 
(41,877
)
 
(19,613
)
 
(136,622
)
 
(198,112
)
Amortized cost
 
102,171


69,138

 
283,935

 
455,244

Gross unrealized gains
 
36,304

 
16,341

 
68,032

 
120,677

Gross unrealized losses
 
(1,929
)
 
—

 
(1,240
)
 
(3,169
)
Carrying Value
 
$
136,546


$
85,479

 
$
350,727

 
$
572,752
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, 2017, in unamortized discount and designated credit reserves on residential AFS securities.
Table 7.5 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities
 
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
 
 
Credit
Reserve
 
Unamortized
Discount, Net
 
Credit
Reserve
 
Unamortized
Discount, Net
(In Thousands)
 
 
 
 
Beginning balance
 
$
47,588

 
$
192,063

 
$
47,473

 
$
198,112

Amortization of net discount
 
—

 
(4,631
)
 
—

 
(14,697
)
Realized credit losses
 
(795
)
 
—

 
(3,232
)
 
—

Acquisitions
 
1,665

 
2,732

 
8,256

 
11,375

Sales, calls, other
 
(144
)
 
(2,214
)
 
(3,405
)
 
(7,863
)
Impairments
 
3

 
—

 
248

 
—

Transfers to (release of) credit reserves, net
 
(1,442
)
 
1,442

 
(2,465
)
 
2,465

Ending Balance
 
$
46,875

 
$
189,392

 
$
46,875

 
$
189,392
Components of Fair Value of Available for Sale Securities Securities by Holding Periods
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, 2017 and December 31, 2016.
Table 7.6 – 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, 2017
 
$
10,164

 
$
(694
)
 
$
9,470

 
$
31,001

 
$
(1,651
)
 
$
29,350

December 31, 2016
 
15,772

 
(330
)
 
15,442

 
60,035

 
(2,839
)
 
57,196
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, 2017.
Table 7.7 – Significant Valuation Assumptions
September 30, 2017
 
Range for Securities
Prepayment rates
 
8%
-
15%
Projected losses
 
0.25%
-
8%
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, 2017 and 2016, for which a portion of an OTTI was recognized in other comprehensive income.
Table 7.8 – Activity of the Credit Component of Other-than-Temporary Impairments
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands)
 
2017
 
2016
 
2017
 
2016
Balance at beginning of period
 
$
25,802

 
$
28,198

 
$
28,261

 
$
28,277

Additions
 
 
 
 
 
 
 
 
Initial credit impairments
 
—

 
—

 
178

 
291

Subsequent credit impairments
 
—

 
—

 
47

 
—

Reductions
 
 
 
 
 
 
 
 
Securities sold, or expected to sell
 
—

 
—

 
(2,282
)
 
(261
)
Securities with no outstanding principal at period end
 
(42
)
 
—

 
(444
)
 
(109
)
Balance at End of Period
 
$
25,760

 
$
28,198

 
$
25,760

 
$
28,198
Gross Realized Gains and Losses on 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, 2017 and 2016.
Table 7.9 – Gross Realized Gains and Losses on AFS Securities
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands)
 
2017
 
2016
 
2017
 
2016
Gross realized gains - sales
 
$
1,734

 
$
1,990

 
$
9,381

 
$
22,395

Gross realized gains - calls
 
—

 
—

 
677

 
1,210

Gross realized losses - sales
 
—

 
—

 
—

 
(2,293
)
Gross realized losses - calls
 
—

 
—

 
(497
)
 
—

Total Realized Gains on Sales and Calls of AFS
Securities, net
 
$
1,734

 
$
1,990

 
$
9,561

 
$
21,312