Other Assets and Liabilities

12 Months Ended

Dec. 31, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other assets at December 31, 2019 and December 31, 2018 are summarized in the following table.

Table 12.1 – Components of Other Assets



(In Thousands)	December 31, 2019		December 31, 2018
Margin receivable	$	209,776	$	100,773
FHLBC stock	43,393		43,393
Pledged collateral	32,945		42,433
Investment receivable	23,330		6,959
Right-of-use asset	11,866		—
REO	9,462		3,943
Fixed assets and leasehold improvements ⁽¹⁾	4,901		5,106
Other	12,590		15,218
Total Other Assets	$	348,263	$	217,825


(1)	Fixed assets and leasehold improvements had a basis of $11 million and accumulated depreciation of $7 million at December 31, 2019.

Accrued expenses and other liabilities at December 31, 2019 and December 31, 2018 are summarized in the following table.

Table 12.2 – Components of Accrued Expenses and Other Liabilities



(In Thousands)	December 31, 2019		December 31, 2018
Accrued compensation	$	33,888	$	19,769
Contingent consideration	28,484		—
Guarantee obligations	14,009		16,711
Lease liability	13,443		—
Payable to minority partner	13,189		14,331
Residential bridge loan holdbacks	10,682		—
Accrued taxes payable	5,268		423
Deferred tax liabilities	5,152		9,022
Residential loan and MSR repurchase reserve	4,268		4,189
Legal reserve	2,000		2,000
Margin payable	1,700		835
Other	14,155		11,439
Total Accrued Expenses and Other Liabilities	$	146,238	$	78,719

Margin Receivable and Payable

Margin receivable and payable resulted from margin calls between us and our counterparties under derivatives, master repurchase agreements, and warehouse facilities, whereby we or the counterparty posted collateral.

FHLBC Stock

In accordance with our FHLB-member subsidiary's borrowing agreement with the FHLBC, our subsidiary is required to purchase and hold stock in the FHLBC. See Note 3 and Note 15 for additional information on this borrowing agreement.

Pledged Collateral and Guarantee Obligations

The pledged collateral and guarantee obligations presented in the tables above are related to our risk-sharing arrangements with Fannie Mae and Freddie Mac, as well as collateral pledged for certain interest rate agreements. In accordance with these arrangements, we are required to pledge collateral to secure our guarantee obligations and to meet margin requirements for our interest rate agreements. See Note 3 and Note 16 for additional information on our risk-sharing arrangements.

Contingent Consideration

The contingent consideration presented in the table above is related to our acquisition of 5 Arches in 2019. See Note 16 for additional information on our contingent consideration liabilities.

Lease Liability and Right-of-Use Asset

The lease liability and right-of-use asset presented in the tables above resulted from our adoption of ASU 2016-02, "Leases," in the first quarter of 2019. The lease liability is equal to the present value of our remaining lease payments discounted at our incremental borrowing rate and the right-of-use asset is equal to the lease liability adjusted for our deferred rent liability. These balances are reduced as lease payments are made. See Note 16 for additional information on leases.

Residential Bridge Loan Holdbacks

Residential bridge loan holdbacks represent loan amounts payable to residential bridge loan borrowers subject to the completion of various phases of property rehabilitation.

Investment Receivable

At December 31, 2019, investment receivable primarily consisted of unsettled trade receivables related to real estate securities sales. In accordance with our policy to record purchases and sales of securities on the trade date, if the trade and settlement of a purchase or sale crosses over a quarterly reporting period, we will record an investment receivable for sales and an unsettled trades liability for purchases.

REO

The carrying value of REO at December 31, 2019, was $9 million, which included $0.5 million of REO from our Legacy Sequoia entities, $7 million from our residential bridge loan portfolio, $0.4 million from our consolidated Freddie Mac SLST entities, and $2 million from CAFL entities. At December 31, 2019, there were four REO assets at our Legacy Sequoia entities, four residential bridge loan REO assets, three REO assets at our Freddie Mac SLST entities, and two REO assets at our CAFL entities recorded on our consolidated balance sheets. During the year ended December 31, 2019, transfers into REO included $0.3 million from Legacy Sequoia entities, a $8 million residential bridge loan, and $0.5 million from Freddie Mac SLST entities. In connection with our acquisition of CoreVest during the fourth quarter of 2019, we acquired $3 million of REO associated with consolidated CAFL entities. During the year ended December 31, 2019, there were Legacy Sequoia REO liquidations of $5 million, resulting in $1 million of unrealized gains which were recorded in Investment fair value changes, net, on our consolidated statements of income. At December 31, 2018, our REO included 13 properties, all of which were owned at consolidated Legacy Sequoia entities.

Legal and Repurchase Reserves

See Note 16 for additional information on the legal and residential repurchase reserves.

Payable to Minority Partner

In 2018, Redwood and a third-party co-investor, through two partnership entities consolidated by Redwood, purchased servicer advances and excess MSRs related to a portfolio of residential mortgage loans serviced by the co-investor (see Note 4 and Note 10 for additional information on the partnership entities and associated investments). We account for the co-investor’s interests in the entities as liabilities and at December 31, 2019, the carrying value of their interests was $13 million, representing their current economic interest in the entities. Earnings from the partnership entities are allocated to the co-investors on a proportional basis and during the years ended December 31, 2019 and 2018, we allocated $1 million of gains and less than $0.1 million of losses to the co-investors, respectively, which were recorded in Other expenses on our consolidated statements of income.