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Real Estate Securities (Tables)
 9 Months Ended
Sep. 30, 2022
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, 2022 and December 31, 2021.
Table 9.1 – Fair Values of Real Estate Securities by Type
(In Thousands)September 30, 2022December 31, 2021
Trading$116,933 $170,619 
Available-for-sale142,279 206,792 
Total Real Estate Securities$259,212 $377,411 
Trading Securities by Collateral Type The following table presents the fair value of trading securities by position and collateral type at September 30, 2022 and December 31, 2021.
Table 9.2 – Fair Value of Trading Securities by Position
(In Thousands)September 30, 2022December 31, 2021
Senior
Interest-only securities (1)
$28,860 $21,787 
Total Senior28,860 21,787 
Subordinate
RPL securities31,963 65,140 
Multifamily securities8,021 10,549 
Other third-party residential securities48,089 73,143 
Total Subordinate88,073 148,832 
Total Trading Securities$116,933 $170,619 
(1)Includes $25 million and $15 million of Sequoia certificated mortgage servicing rights at September 30, 2022 and December 31, 2021, respectively.
The following table presents the unpaid principal balance of trading securities by position and collateral type at September 30, 2022 and December 31, 2021.
Table 9.3 – Unpaid Principal Balance of Trading Securities by Position
(In Thousands)September 30, 2022December 31, 2021
Senior (1)
$— $— 
Subordinate220,888 235,306 
Total Trading Securities$220,888 $235,306 
(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 nine months ended September 30, 2022 and 2021.
Table 9.4 – Trading Securities Activity
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2022202120222021
Principal balance of securities acquired (1)
$— $10,750 $— $28,380 
Principal balance of securities sold (1)
— 750 12,716 53,561 
Net market valuation gains (losses) recorded (2)
(12,521)1,578 (30,019)24,725 
(1)For the three and nine months ended September 30, 2021, excludes $1 million and $3 million of securities bought and sold during the same quarter, respectively.
(2)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 ("AFS") securities by position and collateral type at September 30, 2022 and December 31, 2021.
Table 9.5 – Fair Value of Available-for-Sale Securities by Position
(In Thousands)September 30, 2022December 31, 2021
Subordinate
Sequoia securities$78,065 $127,542 
Multifamily securities13,211 22,166 
Other third-party residential securities51,003 57,084 
Total Subordinate142,279 206,792 
Total AFS Securities$142,279 $206,792 
The following table provides the activity of available-for-sale securities during the three and nine months ended September 30, 2022 and 2021.
Table 9.6 – Available-for-Sale Securities Activity
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2022202120222021
Fair value of securities acquired$— $— $10,000 $1,600 
Fair value of securities sold— — — 4,785 
Principal balance of securities called— 11,565 14,486 25,970 
Net unrealized (losses) gains on AFS securities (1)
(8,731)(2,658)(60,013)19,552 
(1)Net unrealized (losses) gains on AFS securities are recorded on our consolidated balance sheets through Accumulated other comprehensive loss.
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, 2022 and December 31, 2021.
Table 9.7 – Carrying Value of AFS Securities
September 30, 2022
(In Thousands)Total
Principal balance$227,715 
Credit reserve(30,247)
Unamortized discount, net(61,015)
Amortized cost136,453 
Gross unrealized gains19,017 
Gross unrealized losses(10,876)
CECL allowance(2,315)
Carrying Value$142,279 
December 31, 2021
(In Thousands)Total
Principal balance$242,852 
Credit reserve(27,555)
Unamortized discount, net(76,023)
Amortized cost139,274 
Gross unrealized gains67,815 
Gross unrealized losses(297)
CECL allowance— 
Carrying Value$206,792 
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, 2022, 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 
 September 30, 2022		Nine Months Ended 
 September 30, 2022
Credit
Reserve		Unamortized
Discount, Net		Credit
Reserve		Unamortized
Discount, Net
(In Thousands)
Beginning balance$30,619 $61,303 $27,555 $76,023 
Amortization of net discount— (830)— (10,647)
Realized credit recoveries (losses), net170 — 244 — 
Acquisitions— — — — 
Sales, calls, other— — (343)(1,570)
Transfers to (release of) credit reserves, net(542)542 2,791 (2,791)
Ending Balance$30,247 $61,015 $30,247 $61,015 
Components of Fair Value of Available for Sale Securities by Holding Periods
The following table presents the total carrying value (fair value) and unrealized losses of residential AFS securities that were in a gross unrealized loss position at September 30, 2022 and December 31, 2021.
Table 9.9 – AFS Securities in Gross Unrealized Loss Position by Holding Periods
Less Than 12 Consecutive Months12 Consecutive Months or Longer
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
(In Thousands)
September 30, 2022$65,585 $(10,685)$1,409 $(191)
December 31, 20216,827 (251)1,554 (46)
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 September 30, 2022.
Table 9.10 – Significant Credit Quality Indicators
September 30, 2022Subordinate Securities
Default rate0.8%
Loss severity20%
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 nine months ended September 30, 2022.
Table 9.11 – Rollforward of Allowance for Credit Losses
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
(In Thousands)
Beginning balance allowance for credit losses$1,771 $— 
Additions to allowance for credit losses on securities for which credit losses were not previously recorded30 1,520 
Additional increases (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period514 795 
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$2,315 $2,315 
Gross Realized Gains and Losses on Available for Sale Securities The following table presents the gross realized gains and losses on sales and calls of AFS securities for the three and nine months ended September 30, 2022 and 2021.
Table 9.12 – Gross Realized Gains and Losses on AFS Securities
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2022202120222021
Gross realized gains - sales$— $— $— $1,507 
Gross realized gains - calls— 6,389 1,914 15,484 
Gross realized losses - sales— — — — 
Total Realized Gains on Sales and Calls of AFS Securities, net$— $6,389 $1,914 $16,991