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Fair Value of Financial Instruments (Tables) | 12 Months Ended
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Dec. 31, 2021
Fair Value Disclosures [Abstract] |
Carrying Values and Estimated Fair Values of Assets and Liabilities | The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at December 31, 2021 and 2020. Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities
|  | December 31, 2021 |  | December 31, 2020
|  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
(In Thousands) |  |  |  |
Assets |  |  |  |  |  |  |  |
Residential loans, held-for-sale at fair value |  | $ | 1,845,248 |  |  | $ | 1,845,248 |  |  | $ | 176,604 |  |  | $ | 176,604 |
Residential loans, held-for-investment |  | 5,747,150 |  |  | 5,747,150 |  |  | 4,072,410 |  |  | 4,072,410 |
Business purpose loans, held-for-sale |  | 358,309 |  |  | 358,309 |  |  | 245,394 |  |  | 245,394 |
Business purpose loans, held-for-investment |  | 4,432,680 |  |  | 4,432,680 |  |  | 3,890,959 |  |  | 3,890,959 |
Multifamily loans |  | 473,514 |  |  | 473,514 |  |  | 492,221 |  |  | 492,221 |
Real estate securities |  | 377,411 |  |  | 377,411 |  |  | 344,125 |  |  | 344,125 |
Servicer advance investments (1) |  | 350,923 |  |  | 350,923 |  |  | 231,489 |  |  | 231,489 |
MSRs (1) |  | 12,438 |  |  | 12,438 |  |  | 8,815 |  |  | 8,815 |
Excess MSRs (1) |  | 44,231 |  |  | 44,231 |  |  | 34,418 |  |  | 34,418 |
HEIs (1) |  | 192,740 |  |  | 192,740 |  |  | 42,440 |  |  | 42,440 |
Other investments (1) |  | 12,663 |  |  | 12,663 |  |  | 18,847 |  |  | 18,847 |
Cash and cash equivalents |  | 450,485 |  |  | 450,485 |  |  | 461,260 |  |  | 461,260 |
Restricted cash |  | 80,999 |  |  | 80,999 |  |  | 83,190 |  |  | 83,190 |
Derivative assets |  | 26,467 |  |  | 26,467 |  |  | 53,238 |  |  | 53,238 |
REO (2) |  | 36,126 |  |  | 39,272 |  |  | 8,413 |  |  | 9,229 |
Margin receivable (2) |  | 7,269 |  |  | 7,269 |  |  | 4,758 |  |  | 4,758 |
FHLBC stock (2) |  | 10 |  |  | 10 |  |  | 5,000 |  |  | 5,000 |
Pledged collateral (2) |  | — |  |  | — |  |  | 1,177 |  |  | 1,177 |
Liabilities |  |  |  |  |  |  |  |
Short-term debt |  | $ | 2,177,362 |  |  | $ | 2,177,362 |  |  | $ | 522,609 |  |  | $ | 522,609 |
Margin payable (3) |  | 24,368 |  |  | 24,368 |  |  | — |  |  | — |
Guarantee obligation (3) |  | 7,459 |  |  | 7,133 |  |  | 10,039 |  |  | 7,843 |
Point HEI non-controlling interest |  | 17,035 |  |  | 17,035 |  |  | — |  |  | — |
Derivative liabilities |  | 3,317 |  |  | 3,317 |  |  | 16,072 |  |  | 16,072 |
ABS issued net |  |  |  |  |  |  |  |
Fair value |  | 8,843,147 |  |  | 8,843,147 |  |  | 6,900,362 |  |  | 6,900,362 |
Amortized cost |  | 410,410 |  |  | 410,471 |  |  | 200,299 |  |  | 204,892 |
Other long-term debt, net (4) |  | 988,483 |  |  | 989,570 |  |  | 774,726 |  |  | 783,570 |
Convertible notes, net (4) |  | 513,629 |  |  | 537,300 |  |  | 511,085 |  |  | 499,865 |
Trust preferred securities and subordinated notes, net (4) |  | 138,721 |  |  | 97,650 |  |  | 138,674 |  |  | 80,910 |
(1)These investments are included in Other investments on our consolidated balance sheets. (2)These assets are included in Other assets on our consolidated balance sheets. (3)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets. (4)The liabilities are included in Long-Term debt, net of our consolidated balance sheets.
Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at December 31, 2021 and 2020, as well as the fair value hierarchy of the valuation inputs used to measure fair value. Table 5.2 – Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2021 |  | Carrying Value |  | Fair Value Measurements Using
(In Thousands) |  |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |
Residential loans |  | $ | 7,592,398 |  |  | $ | — |  |  | $ | — |  |  | $ | 7,592,398 |
Business purpose loans |  | 4,790,989 |  |  | — |  |  | — |  |  | 4,790,989 |
Multifamily loans |  | 473,514 |  |  | — |  |  | — |  |  | 473,514 |
Real estate securities |  | 377,411 |  |  | — |  |  | — |  |  | 377,411 |
Servicer advance investments |  | 350,923 |  |  | — |  |  | — |  |  | 350,923 |
MSRs |  | 12,438 |  |  | — |  |  | — |  |  | 12,438 |
Excess MSRs |  | 44,231 |  |  | — |  |  | — |  |  | 44,231 |
HEIs |  | 192,740 |  |  | — |  |  | — |  |  | 192,740 |
Other investments |  | 17,574 |  |  | — |  |  | — |  |  | 17,574 |
Derivative assets |  | 26,467 |  |  | 2,906 |  |  | 18,928 |  |  | 4,633 |
FHLBC stock |  | 10 |  |  | — |  |  | 10 |  |  | — |
Liabilities |  |  |  |  |  |  |  |
Derivative liabilities |  | $ | 3,317 |  |  | $ | 1,563 |  |  | $ | 1,251 |  |  | $ | 503 |
ABS issued |  | 8,843,147 |  |  | — |  |  | — |  |  | 8,843,147 |
December 31, 2020 |  | Carrying Value |  | Fair Value Measurements Using
(In Thousands) |  |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |
Residential loans |  | $ | 4,249,014 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,249,014 |
Business purpose loans |  | 4,136,353 |  |  | — |  |  | — |  |  | 4,136,353 |
Multifamily loans |  | 492,221 |  |  | — |  |  | — |  |  | 492,221 |
Real estate securities |  | 344,125 |  |  | — |  |  | — |  |  | 344,125 |
Servicer advance investments |  | 231,489 |  |  | — |  |  | — |  |  | 231,489 |
MSRs |  | 8,815 |  |  | — |  |  | — |  |  | 8,815 |
Excess MSRs |  | 34,418 |  |  | — |  |  | — |  |  | 34,418 |
HEIs |  | 42,440 |  |  | — |  |  | — |  |  | 42,440 |
Derivative assets |  | 53,238 |  |  | 18,260 |  |  | 19,951 |  |  | 15,027 |
Pledged collateral |  | 1,177 |  |  | 1,177 |  |  | — |  |  | — |
FHLBC stock |  | 5,000 |  |  | — |  |  | 5,000 |  |  | — |
Liabilities |  |  |  |  |  |  |  |
Derivative liabilities |  | 16,072 |  |  | 15,495 |  |  | — |  |  | 577 |
ABS issued |  | 6,900,362 |  |  | — |  |  | — |  |  | 6,900,362 |
Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2021 and 2020. Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
|  | Assets |  |  |  |
|  | Residential Loans |  | Business Purpose Loans |  | Multifamily Loans |  | Trading Securities |  | AFS Securities |  | Servicer Advance Investments |  | Excess MSRs |  | HEIs |  | MSRs and Other Investments |  |  |  |
(In Thousands) |  |  |  |  |  |  |  |  |  |  |
Beginning balance - December 31, 2020 |  | $ | 4,249,014 |  |  | $ | 4,136,353 |  |  | $ | 492,221 |  |  | $ | 125,667 |  |  | $ | 218,458 |  |  | $ | 231,489 |  |  | $ | 34,418 |  |  | $ | 42,440 |  |  | $ | 27,662 |  |  |  |  |
Acquisitions |  | 13,139,907 |  |  | 136,685 |  |  | — |  |  | 58,917 |  |  | 19,100 |  |  | 196,583 |  |  | 17,830 |  |  | 155,023 |  |  | 15,215 |  |  |  |  |
Originations |  | — |  |  | 2,150,539 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Sales |  | (8,449,328) |  |  | (211,113) |  |  | — |  |  | (34,802) |  |  | (4,785) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Principal paydowns |  | (1,360,649) |  |  | (1,307,566) |  |  | (7,639) |  |  | (2,713) |  |  | (57,953) |  |  | (76,223) |  |  | — |  |  | (19,395) |  |  | (14,751) |  |  |  |  |
Gains (losses) in net income (loss), net |  | 16,688 |  |  | (77,357) |  |  | (11,068) |  |  | 23,550 |  |  | 40,735 |  |  | (926) |  |  | (8,017) |  |  | 13,774 |  |  | (2,846) |  |  |  |  |
Unrealized losses in OCI, net |  | — |  |  | — |  |  | — |  |  | — |  |  | (8,763) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Other settlements, net (1) |  | (3,234) |  |  | (36,552) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 898 |  |  | (179) |  |  |  |  |
Ending balance - December 31, 2021 |  | $ | 7,592,398 |  |  | $ | 4,790,989 |  |  | $ | 473,514 |  |  | $ | 170,619 |  |  | $ | 206,792 |  |  | $ | 350,923 |  |  | $ | 44,231 |  |  | $ | 192,740 |  |  | $ | 25,101 |  |  |  |  |
Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis (continued)
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Liabilities
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Derivatives (2) |  | Point HEI Non-Controlling Interest |  | ABS Issued
(In Thousands) |  |  |  |  |  |  |  |  |  |
Beginning balance - December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 14,450 |  |  | — |  |  | $ | 6,900,362 |
Acquisitions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 16,639 |  |  | 4,202,070 |
Principal paydowns |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | (1,922,313) |
Gains (losses) in net income (loss), net |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 10,437 |  |  | 396 |  |  | (336,972) |
Other settlements, net (1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (20,757) |  |  | — |  |  | — |
Ending balance - December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 4,130 |  |  | $ | 17,035 |  |  | $ | 8,843,147 |
|  | Assets |  |  |  |
(In Thousands) |  | Residential Loans |  | Business Purpose Loans |  | Multifamily Loans |  | Trading Securities |  | AFS Securities |  | Servicer Advance Investments |  | Excess MSRs |  | HEIs |  | MSRs and Other Investments |  |  |  |  |  |
Beginning balance - December 31, 2019 |  | $ | 7,714,745 |  |  | $ | 3,506,743 |  |  | $ | 4,408,524 |  |  | $ | 860,540 |  |  | $ | 239,334 |  |  | $ | 169,204 |  |  | $ | 31,814 |  |  | $ | 45,085 |  |  | $ | 67,313 |  |  |  |  |  |  |
Acquisitions |  | 4,483,473 |  |  | — |  |  | — |  |  | 108,249 |  |  | 57,652 |  |  | 179,419 |  |  | 10,906 |  |  | 3,517 |  |  | 450 |  |  |  |  |  |  |
Originations |  | — |  |  | 1,431,251 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |
Sales |  | (6,262,958) |  |  | (135,800) |  |  | — |  |  | (603,529) |  |  | (55,192) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |
Principal paydowns |  | (1,552,171) |  |  | (753,026) |  |  | (7,703) |  |  | (8,687) |  |  | (17,924) |  |  | (107,527) |  |  | — |  |  | (4,278) |  |  | (5,843) |  |  |  |  |  |  |
Deconsolidations |  | — |  |  | — |  |  | (3,849,779) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |
Gains (losses) in net income, net |  | (132,307) |  |  | 99,590 |  |  | (58,821) |  |  | (230,906) |  |  | 10,792 |  |  | (9,607) |  |  | (8,302) |  |  | (1,884) |  |  | (34,258) |  |  |  |  |  |  |
Unrealized gains in OCI, net |  | — |  |  | — |  |  | — |  |  | — |  |  | (16,204) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |
Other settlements, net (1) |  | (1,768) |  |  | (12,405) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |
Ending balance - December 31, 2020 |  | $ | 4,249,014 |  |  | $ | 4,136,353 |  |  | $ | 492,221 |  |  | $ | 125,667 |  |  | $ | 218,458 |  |  | $ | 231,489 |  |  | $ | 34,418 |  |  | $ | 42,440 |  |  | $ | 27,662 |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Liabilities
(In Thousands) |  |  |  |  |  |  |  |  |  |  |  | Derivatives (2) |  | Contingent Consideration |  | ABS Issued
Beginning balance - December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  | $ | 8,860 |  |  | $ | 28,484 |  |  | $ | 10,515,475 |
Acquisitions |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 1,478,589 |
Principal paydowns |  |  |  |  |  |  |  |  |  |  |  | — |  |  | (13,353) |  |  | (1,487,958) |
Deconsolidations |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | (3,706,789) |
Gains (losses) in net income, net |  |  |  |  |  |  |  |  |  |  |  | 56,972 |  |  | (446) |  |  | 101,045 |
Other settlements, net (1) |  |  |  |  |  |  |  |  |  |  |  | (51,382) |  |  | (14,685) |  |  | — |
Ending balance - December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  | $ | 14,450 |  |  | $ | — |  |  | $ | 6,900,362 |
(1) Other settlements, net for residential and business purpose loans represents the transfer of loans to REO, and for derivatives, the settlement of forward sale commitments and the transfer of the fair value of loan purchase or interest rate lock commitments at the time loans are acquired to the basis of residential and single-family rental loans. Other settlements, net for contingent consideration reflects the reclassification from a contingent liability to a deferred liability during the period due to an amendment in the underlying agreement. See Note 16 for further discussion. Other settlements, net for trading securities relates to the consolidation of Freddie Mac K-Series securitization entities. (2) For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, forward sale commitments, and interest rate lock commitments, are presented on a net basis.
Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held and Included in Net Income | The following table presents the portion of gains or losses included in our consolidated statements of income (loss) that were attributable to Level 3 assets and liabilities recorded at fair value on a recurring basis and held at December 31, 2021, 2020, and 2019. Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the years ended December 31, 2021, 2020, and 2019 are not included in this presentation. Table 5.4 – Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at December 31, 2021, 2020, and 2019 Included in Net Income
|  | Included in Net Income
|  | Years Ended December 31,
(In Thousands) |  | 2021 |  | 2020 |  | 2019
Assets |  |  |  |  |  |
Residential loans at Redwood |  | $ | 5,886 |  |  | $ | 1,138 |  |  | $ | 67,470 |
Business purpose loans |  | 9,444 |  |  | 9,420 |  |  | 14,603 |
Net investments in consolidated Sequoia entities (1) |  | 12,455 |  |  | (14,646) |  |  | 4,529 |
Net investments in consolidated Freddie Mac SLST entities (1) |  | 62,124 |  |  | (21,220) |  |  | 27,225 |
Net investments in consolidated Freddie Mac K-Series entities (1) |  | 11,599 |  |  | (9,309) |  |  | 21,430 |
Net investments in consolidated CAFL SFR entities (1) |  | 8,198 |  |  | (37,062) |  |  | (14,681) |
Net investments in consolidated Point HEI entity (1) |  | 614 |  |  | — |  |  | — |
Trading securities |  | 738 |  |  | (83,327) |  |  | 18,865 |
Available-for-sale securities |  | — |  |  | (388) |  |  | — |
Servicer advance investments |  | (926) |  |  | (8,902) |  |  | 3,001 |
MSRs |  | 629 |  |  | (17,545) |  |  | (11,957) |
Excess MSRs |  | (8,017) |  |  | (8,302) |  |  | (3,260) |
HEIs at Redwood |  | 212 |  |  | (1,884) |  |  | 842 |
Loan purchase and interest rate lock commitments |  | 4,633 |  |  | 15,027 |  |  | 10,190 |
Liabilities |  |  |  |  |  |
Non-controlling interest in consolidated Point HEI entity |  | $ | (396) |  |  | $ | — |  |  | $ | — |
Loan purchase commitments |  | (503) |  |  | $ | (577) |  |  | $ | (1,290) |
Contingent consideration |  | — |  |  | — |  |  | (3,217) |
(1) Represents the portion of net gains or losses included in our consolidated statements of income (loss) related to loans and the associated ABS issued at our consolidated securitization entities held at December 31, 2021, 2020, and 2019, which netted together represent the change in value of our investments at the consolidated VIEs. The net gain attributable for the Point HEI entity excludes valuation change in the non-controlling interest in consolidated Point HEI entity, which is separately shown in Table 5.4 above.
Assets and Liabilities Measured at Fair Value on Non-Recurring Basis | The following table presents information on assets recorded at fair value on a non-recurring basis at December 31, 2021 and 2020. This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at December 31, 2021 and 2020. Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
|  |  |  |  |  |  |  |  |  | Gain (Loss) for Year Ended
December 31, 2021 |  | Carrying Value |  | Fair Value Measurements Using |
(In Thousands) |  |  | Level 1 |  | Level 2 |  | Level 3 |  | December 31, 2021
Assets |  |  |  |  |  |  |  |  |  |
REO |  | $ | 588 |  |  | $ | — |  |  | $ | — |  |  | $ | 588 |  |  | $ | (217) |
|  |  |  |  |  |  |  |  |  | Gain (Loss) for Year Ended
December 31, 2020 |  | Carrying Value |  | Fair Value Measurements Using |
(In Thousands) |  |  | Level 1 |  | Level 2 |  | Level 3 |  | December 31, 2020
Assets |  |  |  |  |  |  |  |  |  |
REO |  | $ | 1,117 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,117 |  |  | $ | (157) |
Market Valuation Adjustments | The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income (loss) for the years ended December 31, 2021, 2020, and 2019. Table 5.6 – Market Valuation Gains and Losses, Net
|  | Years Ended December 31,
(In Thousands) |  | 2021 |  | 2020 |  | 2019
Mortgage Banking Activities, Net |  |  |  |  |  |
Residential loans held-for-sale, at fair value |  | $ | 73,332 |  |  | $ | (15,477) |  |  | $ | 3,267 |
Residential loan purchase and forward sale commitments |  | 10,401 |  |  | 56,761 |  |  | 60,260 |
Single-family rental loans held-for-sale, at fair value |  | 63,206 |  |  | 82,169 |  |  | 15,043 |
Single-family rental loan purchase and interest rate lock commitments |  | 666 |  |  | 341 |  |  | 1,961 |
Bridge loans |  | 8,253 |  |  | (4,998) |  |  | 4,518 |
Trading securities (1) |  | (352) |  |  | (4,535) |  |  | — |
Risk management derivatives, net |  | 41,060 |  |  | (47,779) |  |  | (15,723) |
Total mortgage banking activities, net (2) |  | $ | 196,566 |  |  | $ | 66,482 |  |  | $ | 69,326 |
Investment Fair Value Changes, Net |  |  |  |  |  |
Residential loans held-for-investment at Redwood |  | $ | 2,812 |  |  | $ | (93,314) |  |  | $ | 58,891 |
Single-family rental loans held-for-investment |  | — |  |  | (20,806) |  |  | 272 |
Bridge loans held-for-investment |  | (65) |  |  | (10,629) |  |  | (2,139) |
Trading securities |  | 23,935 |  |  | (226,196) |  |  | 56,046 |
Servicer advance investments |  | (925) |  |  | (8,901) |  |  | 3,001 |
Excess MSRs |  | (8,017) |  |  | (8,302) |  |  | (3,260) |
Net investments in Legacy Sequoia entities (3) |  | (1,558) |  |  | (1,513) |  |  | (1,545) |
Net investments in Sequoia entities (3) |  | 14,176 |  |  | (13,244) |  |  | 6,947 |
Net investments in Freddie Mac SLST entities (3) |  | 62,374 |  |  | (21,160) |  |  | 27,206 |
Net investments in Freddie Mac K-Series entities (3) |  | 11,599 |  |  | (81,039) |  |  | 21,430 |
Net investments in CAFL entities (3) |  | 10,271 |  |  | (36,754) |  |  | (3,636) |
Net investments in Point HEI entities (3) |  | 218 |  |  | — |  |  | — |
HEIs at Redwood |  | 13,207 |  |  | (1,883) |  |  | — |
Other investments |  | (366) |  |  | (5,167) |  |  | (544) |
Risk management derivatives, net |  | — |  |  | (59,142) |  |  | (127,169) |
Change in allowance for credit losses on AFS securities |  | 388 |  |  | (388) |  |  | — |
Total investment fair value changes, net |  | $ | 128,049 |  |  | $ | (588,438) |  |  | $ | 35,500 |
Other Income |  |  |  |  |  |
MSRs |  | $ | (3,182) |  |  | $ | (33,409) |  |  | $ | (18,856) |
Risk management derivatives, net |  | — |  |  | 13,966 |  |  | 8,595 |
Gain on re-measurement of 5 Arches investment |  | — |  |  | — |  |  | 2,441 |
Total other income (4) |  | $ | (3,182) |  |  | $ | (19,443) |  |  | $ | (7,820) |
Total Market Valuation (Losses) Gains, Net |  | $ | 321,433 |  |  | $ | (541,399) |  |  | $ | 97,006 |
(1)Represents fair value changes on trading securities that are being used along with risk management derivatives to manage the mark-to-market risks associated with our residential mortgage banking operations. (2)Mortgage banking activities, net presented above does not include fee income from loan originations or acquisitions, provisions for repurchases expense, and other expenses that are components of Mortgage banking activities, net presented on our consolidated statements of income (loss), as these amounts do not represent market valuation changes. (3)Includes changes in fair value of the residential loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs. (4)Other income presented above does not include net MSR fee income or provisions for repurchases for MSRs, as these amounts do not represent market valuation adjustments.
Quantitative Information about Significant Unobservable Inputs Used in Valuation of Level 3 Assets and Liabilities Measured at Fair Value | The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value. Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments
December 31, 2021 |  | Fair Value |  |  |  | Input Values
(Dollars in Thousands, except Input Values) |  |  | Unobservable Input |  | Range |  |  | Weighted Average (1)
Assets |  |  |  |  |  |  |  |  |  |  |  |
Residential loans, at fair value: |  |  |  |  |  |  |  |  |  |  |  |
Jumbo fixed-rate loans |  | $ | 1,200,322 |  |  | Prepayment rate (annual CPR) |  | 20 |  | - | 20 |  | % |  | 20 |  | %
|  |  |  | Whole loan spread to TBA price |  | $ | 2.56 |  | - | $ | 2.56 |  |  |  | $ | 2.56 |  |
|  |  |  | Whole loan spread to swap rate |  | 185 |  | - | 185 |  | bps |  | 185 |  | bps
|  |  |  | Called loan dollar price |  | $ | 102 |  | - | $ | 102 |  |  |  | $ | 102 |  |
Jumbo loans committed to sell |  | 644,926 |  |  | Whole loan committed sales price |  | $ | 101.91 |  | - | $ | 102.58 |  |  |  | $ | 102.19 |  |
Loans held by Legacy Sequoia (2) |  | 230,455 |  |  | Liability price |  |  |  | N/A |  |  | N/A |
Loans held by Sequoia (2) |  | 3,628,465 |  |  | Liability price |  |  |  | N/A |  |  | N/A |
Loans held by Freddie Mac SLST (2) |  | 1,888,230 |  |  | Liability price |  |  |  | N/A |  |  | N/A |
Business purpose loans: |  |  |  |  |  |  |  |  |  |  |  |
Single-family rental loans |  | 358,309 |  |  | Senior credit spread |  | 85 |  | - | 110 |  | bps |  | 91 |  | bps
|  |  |  | Subordinate credit spread |  | 125 |  | - | 1,517 |  | bps |  | 362 |  | bps
|  |  |  | Senior credit support |  | 36 |  | - | 36 |  | % |  | 36 |  | %
|  |  |  | IO discount rate |  | 8 |  | - | 14 |  | % |  | 9 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 3 |  | - | 3 |  | % |  | 3 |  | %
|  |  |  | Non-securitizable loan dollar price |  | $ | 78 |  | - | $ | 103 |  |  |  | $ | 99 |  |
Single-family rental loans held by CAFL |  | 3,488,074 |  |  | Liability price |  |  |  | N/A |  |  | N/A |
Bridge loans |  | 944,606 |  |  | Discount rate |  | 4 |  | - | 15 |  | % |  | 6 |  | %
Multifamily loans held by Freddie Mac K-Series (2) |  | 473,514 |  |  | Liability price |  |  |  | N/A |  |  | N/A |
Trading and AFS securities |  | 377,411 |  |  | Discount rate |  | 2 |  | - | 47 |  | % |  | 7 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 7 |  | - | 50 |  | % |  | 26 |  | %
|  |  |  | Default rate |  | — |  | - | 27 |  | % |  | 4 |  | %
|  |  |  | Loss severity |  | — |  | - | 50 |  | % |  | 24 |  | %
|  |  |  | CRT dollar price |  | $ | 96 |  | - | $ | 112 |  |  |  | $ | 103 |  |
Servicer advance investments |  | 350,923 |  |  | Discount rate |  | 2 |  | - | 4 |  | % |  | 3 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 17 |  | - | 30 |  | % |  | 18 |  | %
|  |  |  | Expected remaining life (3) |  | 4 | - | 5 | yrs |  | 5 | yrs
|  |  |  | Mortgage servicing income |  | 2 |  | - | 18 |  | bps |  | 11 |  | bps
MSRs |  | 12,438 |  |  | Discount rate |  | 12 |  | - | 15 |  | % |  | 13 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 6 |  | - | 79 |  | % |  | 24 |  | %
|  |  |  | Per loan annual cost to service |  | $ | 95 |  | - | $ | 95 |  |  |  | $ | 95 |  |
Excess MSRs |  | 44,231 |  |  | Discount rate |  | 13 |  | - | 19 |  | % |  | 17 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 19 |  | - | 31 |  | % |  | 22 |  | %
|  |  |  | Excess mortgage servicing amount |  | 9 |  | - | 17 |  | bps |  | 11 |  | bps
Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments (continued)
December 31, 2021 |  | Fair Value |  |  |  | Input Values
(Dollars in Thousands, except Input Values) |  |  | Unobservable Input |  | Range |  |  | Weighted Average
Assets (continued) |  |  |  |  |  |  |  |  |  |  |  |
Shared Home Appreciation Options |  | $ | 33,187 |  |  | Discount rate |  | 10 |  | - | 10 |  | % |  | 10 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 1 |  | - | 24 |  | % |  | 17 |  | %
|  |  |  | Home Price Appreciation |  | 3 |  | - | 4 |  | % |  | 3 |  | %
HEIs held by Point HEI entity |  | $ | 159,553 |  |  | Liability price |  |  |  | N/A |  |  | N/A |
REO |  | 588 |  |  | Loss severity |  | 9 |  | - | 100 |  | % |  | 17 |  | %
Residential loan purchase commitments, net |  | 3,464 |  |  | Prepayment rate (annual CPR) |  | 20 |  | - | 20 |  | % |  | 20 |  | %
|  |  |  | Whole loan spread to TBA price |  | $ | 2.56 |  | - | $ | 2.56 |  |  |  | $ | 2.56 |  |
|  |  |  | Whole loan spread to swap rate |  | 185 |  | - | 185 |  | bps |  | 185 |  | bps
|  |  |  | Pull-through rate |  | 7 |  | - | 100 |  | % |  | 69 |  | %
|  |  |  | Committed sales price |  | $ | 101.97 |  | - | $ | 102.62 |  |  |  | $ | 102.07 |  |
Single-family rental interest rate lock commitments |  | 666 |  |  | Senior credit spread |  | 85 |  | - | 85 |  | bps |  | 85 |  | bps
|  |  |  | Subordinate credit spread |  | 125 |  | - | 1,517 |  | bps |  | 450 |  | bps
|  |  |  | Senior credit support |  | 30 |  | - | 30 |  | % |  | 30 |  | %
|  |  |  | IO discount rate |  | 8 |  | - | 8 |  | % |  | 8 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 3 |  | - | 3 |  | % |  | 3 |  | %
|  |  |  | Pull-through rate |  | 100 |  |  | 100 |  | % |  | 100 |  | %
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
ABS issued (2) |  |  |  |  |  |  |  |  |  |  |  |
At consolidated Sequoia entities |  | 3,610,929 |  |  | Discount rate |  | 1 |  | - | 18 |  | % |  | 4 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 7 |  | - | 50 |  | % |  | 28 |  | %
|  |  |  | Default rate |  | — |  | - | 37 |  | % |  | 1 |  | %
|  |  |  | Loss severity |  | 25 |  | - | 50 |  | % |  | 32 |  | %
At consolidated CAFL SFR entities (4) |  | 3,207,444 |  |  | Discount rate |  | 1 |  | - | 12 |  | % |  | 3 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 3 |  | - | 3 |  | % |  | 3 |  | %
|  |  |  | Default rate |  | 5 |  | - | 20 |  | % |  | 8 |  | %
|  |  |  | Loss severity |  | 30 |  | - | 30 |  | % |  | 30 |  | %
At consolidated Freddie Mac SLST entities |  | 1,445,507 |  |  | Discount rate |  | 2 |  | - | 7 |  | % |  | 3 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 6 |  | - | 8 |  | % |  | 6 |  | %
|  |  |  | Default rate |  | 9 |  | - | 10 |  | % |  | 9 |  | %
|  |  |  | Loss severity |  | 35 |  | - | 35 |  | % |  | 35 |  | %
At consolidated Freddie Mac K-Series entities (4) |  | 441,857 |  |  | Discount rate |  | 1 |  | - | 8 |  | % |  | 2 |  | %
At consolidated Point HEI entities(4) |  | 137,410 |  |  | Discount rate |  | 4 |  | - | 15 |  | % |  | 5 |  | %
|  |  |  | Prepayment rate (annual CPR) |  | 20 |  | - | 20 |  | % |  | 20 |  | %
|  |  |  | Default rate |  | 6 |  | - | 6 |  | % |  | 6 |  | %
|  |  |  | Loss severity |  | 25 |  | - | 25 |  | % |  | 25 |  | %
|  |  |  | Home price appreciation |  | 3 |  | - | 4 |  | % |  | 3 |  | %
Footnotes to Table 5.7 (1)The weighted average input values for all loan types are based on the unpaid principal balance. The weighted average input values for all other assets and liabilities are based on relative fair value. (2)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. At December 31, 2021, the fair value of securities we owned at the consolidated Sequoia, CAFL SFR, Freddie Mac SLST, Freddie Mac K-Series, and Point HEI entities was $248 million, $302 million, $445 million, $32 million, and $10 million, respectively. (3)Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool). (4)As a market convention, certain securities are priced to a no-loss yield and therefore do not include default and loss severity assumptions.

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