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Real Estate Securities (Tables)

6 Months Ended

Jun. 30, 2018

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 June 30, 2018 and December 31, 2017.

Table 7.1 – Fair Values of Real Estate Securities by Type

(In Thousands)		June 30, 2018				December 31, 2017
Trading		$	1,054,295			$	968,844
Available-for-sale		399,641				507,666
Total Real Estate Securities		$	1,453,936			$	1,476,510

Trading Securities by Collateral Type

The following table presents the fair value of trading securities by position and collateral type at June 30, 2018 and December 31, 2017.

Table 7.2 – Trading Securities by Position and Collateral Type

(In Thousands)		June 30, 2018				December 31, 2017
Senior		$	138,329			$	69,974
Mezzanine		600,629				563,475
Subordinate		315,337				335,395
Total Trading Securities		$	1,054,295			$	968,844

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 June 30, 2018 and December 31, 2017.

Table 7.3 – Available-for-Sale Securities by Position and Collateral Type

(In Thousands)		June 30, 2018				December 31, 2017
Senior (1)		$	147,490			$	179,864
Mezzanine		37,263				92,002
Subordinate		214,888				235,800
Total AFS Securities		$	399,641			$	507,666

(1) Includes $34 million and $39 million of re-REMIC securities at June 30, 2018 and December 31, 2017, respectively. Re-REMIC securities were created through the resecuritization of certain senior security interests to provide additional credit support to those interests. These re-REMIC securities are therefore subordinate to the remaining senior security interests, but senior to any subordinate tranches of the securitization from which they were created.

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 June 30, 2018 and December 31, 2017.

Table 7.4 – Carrying Value of AFS Securities

June 30, 2018
(In Thousands)		Senior				Mezzanine				Subordinate				Total
Principal balance		$	152,651			$	38,036			$	312,983			$	503,670
Credit reserve		(8,187		)		—				(34,004		)		(42,191		)
Unamortized discount, net		(34,376		)		(3,993		)		(131,721		)		(170,090		)
Amortized cost		110,088				34,043				147,258				291,389
Gross unrealized gains		38,153				3,220				68,236				109,609
Gross unrealized losses		(751		)		—				(606		)		(1,357		)
Carrying Value		$	147,490			$	37,263			$	214,888			$	399,641

December 31, 2017
(In Thousands)		Senior				Mezzanine				Subordinate				Total
Principal balance		$	189,125			$	91,471			$	327,549			$	608,145
Credit reserve		(8,756		)		—				(37,793		)		(46,549		)
Unamortized discount, net		(44,041		)		(9,407		)		(130,305		)		(183,753		)
Amortized cost		136,328				82,064				159,451				377,843
Gross unrealized gains		44,771				9,938				76,481				131,190
Gross unrealized losses		(1,235		)		—				(132		)		(1,367		)
Carrying Value		$	179,864			$	92,002			$	235,800			$	507,666

Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities

The following table presents the changes for the three and six months ended June 30, 2018, 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 June 30, 2018								Six Months Ended June 30, 2018
		Credit Reserve				Unamortized Discount, Net				Credit Reserve				Unamortized Discount, Net
(In Thousands)
Beginning balance		$	40,616			$	178,302			$	46,549			$	183,753
Amortization of net discount		—				(3,848		)		—				(7,908		)
Realized credit losses		(385		)		—				(1,341		)		—
Acquisitions		2,251				495				4,787				2,130
Sales, calls, other		(299		)		(4,907		)		(1,066		)		(14,679		)
Impairments		56				—				56				—
(Release of) transfers to credit reserves, net		(48		)		48				(6,794		)		6,794
Ending Balance		$	42,191			$	170,090			$	42,191			$	170,090

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 June 30, 2018 and December 31, 2017.

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)
June 30, 2018		$	18,610			$	(606	)		$	18,004			$	25,887			$	(751	)		$	25,136
December 31, 2017		8,637				(132		)		8,505				28,557				(1,235		)		27,322

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 June 30, 2018.

Table 7.7 – Significant Valuation Assumptions

June 30, 2018		Range for Securities
Prepayment rates		6%	-	10%
Projected losses		0.20%	-	3%

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 June 30, 2018 and 2017, 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 June 30,								Six Months Ended June 30,
(In Thousands)		2018				2017				2018				2017
Balance at beginning of period		$	20,924			$	26,390			$	21,037			$	28,261
Additions
Initial credit impairments		43				81				43				178
Subsequent credit impairments		—				47				—				47
Reductions
Securities sold, or expected to sell		—				(716		)		(99		)		(2,282		)
Securities with no outstanding principal at period end		—				—				(14		)		(402		)
Balance at End of Period		$	20,967			$	25,802			$	20,967			$	25,802

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 six months ended June 30, 2018 and 2017.

Table 7.9 – Gross Realized Gains and Losses on AFS Securities

		Three Months Ended June 30,								Six Months Ended June 30,
(In Thousands)		2018				2017				2018				2017
Gross realized gains - sales		$	4,674			$	2,555			$	14,037			$	7,647
Gross realized gains - calls		43				66				43				677
Gross realized losses - sales		(3		)		—				(3		)		—
Gross realized losses - calls		—				(497		)		—				(497		)
Total Realized Gains on Sales and Calls of AFS Securities, net		$	4,714			$	2,124			$	14,077			$	7,827

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