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Real Estate Securities (Tables)
 6 Months Ended
Jun. 30, 2021
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, 2021 and December 31, 2020.
Table 9.1 – Fair Values of Real Estate Securities by Type
(In Thousands)June 30, 2021December 31, 2020
Trading$142,425 $125,667 
Available-for-sale212,461 218,458 
Total Real Estate Securities$354,886 $344,125 
Trading Securities by Collateral Type The following table presents the fair value of trading securities by position and collateral type at June 30, 2021 and December 31, 2020.
Table 9.2 – Fair Value of Trading Securities by Position
(In Thousands)June 30, 2021December 31, 2020
Senior
Interest-only securities (1)
$25,267 $28,464 
Total Senior25,267 28,464 
Mezzanine
Sequoia securities— 3,649 
Total Mezzanine— 3,649 
Subordinate
RPL securities60,887 47,448 
Multifamily securities8,266 5,592 
Other third-party residential securities48,005 40,514 
Total Subordinate117,158 93,554 
Total Trading Securities$142,425 $125,667 
(1)Includes $17 million and $13 million of Sequoia certificated mortgage servicing rights at June 30, 2021 and December 31, 2020, respectively.
The following table presents the unpaid principal balance of trading securities by position and collateral type at June 30, 2021 and December 31, 2020.
Table 9.3 – Unpaid Principal Balance of Trading Securities by Position
(In Thousands)June 30, 2021December 31, 2020
Senior (1)
$— $— 
Mezzanine— 3,577 
Subordinate208,381 242,278 
Total Trading Securities$208,381 $245,855 
(1)Our senior trading securities include interest-only securities, for which there is no principal balance.
The following table provides the activity of trading securities during the three and six months ended June 30, 2021 and 2020.
Table 9.4 – Trading Securities Activity
Three Months Ended June 30,Six Months Ended June 30,
(In Thousands)2021202020212020
Principal balance of securities acquired$1,750 $10,250 $17,630 $66,721 
Principal balance of securities sold18,068 85,747 52,811 704,614 
Net market valuation gains (losses) recorded (1)
1,798 42,246 23,147 (221,079)
(1)Net market valuation gains (losses) on trading securities are recorded through Investment fair value changes, net and Mortgage banking activities, net on our consolidated statements of income (loss).
Available-for-Sale Securities by Collateral Type
The following table presents the fair value of our available-for-sale securities by position and collateral type at June 30, 2021 and December 31, 2020.
Table 9.5 – Fair Value of Available-for-Sale Securities by Position
(In Thousands)June 30, 2021December 31, 2020
Mezzanine
Other third-party residential securities$— $2,014 
Total Mezzanine— 2,014 
Subordinate
Sequoia securities140,321 136,475 
Multifamily securities34,213 43,663 
Other third-party residential securities37,927 36,306 
Total Subordinate212,461 216,444 
Total AFS Securities$212,461 $218,458 
The following table provides the activity of available-for-sale securities during the three and six months ended June 30, 2021 and 2020.
Table 9.6 – Available-for-Sale Securities Activity
Three Months Ended June 30,Six Months Ended June 30,
(In Thousands)2021202020212020
Fair value of securities acquired$522 $— $1,600 $31,181 
Fair value of securities sold2,585 8,736 4,785 55,193 
Net realized gains recorded 1,307 783 1,507 4,635 
Carrying Value of Residential Available for Sale Securities
The following table presents the components of carrying value (which equals fair value) of AFS securities at June 30, 2021 and December 31, 2020.
Table 9.7 – Carrying Value of AFS Securities
June 30, 2021
(In Thousands)MezzanineSubordinateTotal
Principal balance$— $254,784 $254,784 
Credit reserve— (40,349)(40,349)
Unamortized discount, net— (90,216)(90,216)
Amortized cost— 124,219 124,219 
Gross unrealized gains— 88,321 88,321 
Gross unrealized losses— (79)(79)
CECL allowance— — — 
Carrying Value$— $212,461 $212,461 
December 31, 2020
(In Thousands)MezzanineSubordinateTotal
Principal balance$2,000 $281,284 $283,284 
Credit reserve— (44,967)(44,967)
Unamortized discount, net— (95,718)(95,718)
Amortized cost2,000 140,599 142,599 
Gross unrealized gains14 77,280 77,294 
Gross unrealized losses— (1,047)(1,047)
CECL allowance— (388)(388)
Carrying Value$2,014 $216,444 $218,458 
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, 2021, in unamortized discount and designated credit reserves on residential AFS securities.
Table 9.8 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities
Three Months Ended 
 June 30, 2021		Six Months Ended 
 June 30, 2021
Credit
Reserve		Unamortized
Discount, Net		Credit
Reserve		Unamortized
Discount, Net
(In Thousands)
Beginning balance$44,947 $94,188 $44,967 $95,718 
Amortization of net discount— (1,569)— (3,183)
Realized credit losses(112)— (249)— 
Acquisitions890 368 2,825 1,208 
Sales, calls, other(718)(7,429)(992)(9,729)
Transfers to (release of) credit reserves, net(4,658)4,658 (6,202)6,202 
Ending Balance$40,349 $90,216 $40,349 $90,216 
Components of Fair Value of Available for Sale Securities by Holding Periods
The following table presents the components comprising the total carrying value of residential AFS securities that were in a gross unrealized loss position at June 30, 2021 and December 31, 2020.
Table 9.9 – Components of Fair Value of AFS Securities by Holding Periods
Less Than 12 Consecutive Months12 Consecutive Months or Longer
Amortized
Cost		Unrealized
Losses		Fair
Value		Amortized
Cost		Unrealized
Losses		Fair
Value
(In Thousands)
June 30, 2021$— $— $— $3,600 $(79)$3,521 
December 31, 20209,129 (1,047)7,920 — — — 
Summary of Significant Valuation Assumptions for Available for Sale Securities Credit Loss
The table below summarizes the weighted average of the significant credit quality indicators we used for the credit loss allowance on our AFS securities at June 30, 2021.
Table 9.10 – Significant Credit Quality Indicators
June 30, 2021Subordinate Securities
Default rate0.35%
Loss severity18%
Activity of Allowance for Credit Losses for Available-for-sale Securities
The following table details the activity related to the allowance for credit losses for AFS securities for the three and six months ended June 30, 2021.
Table 9.11 – Rollforward of Allowance for Credit Losses
Three Months Ended June 30, 2021Six Months Ended June 30, 2021
(In Thousands)
Beginning balance allowance for credit losses$13 $388 
Additions to allowance for credit losses on securities for which credit losses were not previously recorded— — 
Additional increases (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period(13)(388)
Allowance on purchased financial assets with credit deterioration— — 
Reduction to allowance for securities sold during the period— — 
Reduction to allowance for securities we intend to sell or more likely than not will be required to sell— — 
Write-offs charged against allowance— — 
Recoveries of amounts previously written off— — 
Ending balance of allowance for credit losses$— $— 
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, 2021 and 2020.
Table 9.12 – Gross Realized Gains and Losses on AFS Securities
Three Months Ended June 30,Six Months Ended June 30,
(In Thousands)2021202020212020
Gross realized gains - sales$1,307 $1,074 $1,507 $8,779 
Gross realized gains - calls6,687 — 9,095 — 
Gross realized losses - sales— (291)— (4,144)
Total Realized Gains on Sales and Calls of AFS Securities, net$7,994 $783 $10,602 $4,635