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Real Estate Securities | 9 Months Ended
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Sep. 30, 2024
Investments, Debt and Equity Securities [Abstract] |
Real Estate Securities | Real Estate Securities We invest in real estate securities that we create and retain from our unconsolidated Sequoia securitizations or acquire from third parties. The following table presents the fair values of our real estate securities by type at September 30, 2024 and December 31, 2023. Table 9.1 – Fair Value of Real Estate Securities by Type
(In Thousands) |  | September 30, 2024 |  | December 31, 2023
Trading |  | $ | 128,780 |  |  | $ | 40,424 |
Available-for-sale |  | 205,361 |  |  | 87,373 |
Total Real Estate Securities |  | $ | 334,141 |  |  | $ | 127,797 |
Our real estate securities include mortgage-backed securities, which are classified in accordance with their general position within a securitization structure based on their rights to cash flows. Senior securities are those interests in a securitization that generally have the first right to cash flows and are last in line to absorb losses. Mezzanine securities are interests that are generally subordinate to senior securities in their rights to receive cash flows, and have subordinate securities below them that are first to absorb losses. Subordinate securities are all interests below mezzanine. Nearly all of our residential securities are supported by collateral that was designated as prime at the time of issuance. Refer to Note 3 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2023 for further information and our accounting policies for our trading and available-for-sale real estate securities. Trading Securities We elected the fair value option for certain securities and classify them as trading securities. Our trading securities generally include both residential and multifamily mortgage-backed interest-only and subordinate securities. Refer to Note 6 for further information on the inputs into the fair valuation of our real estate trading securities. AFS Securities The following tables present the detail of our AFS securities, by position and collateral type, at September 30, 2024 and December 31, 2023. Table 9.2 – Carrying Value and Fair Value of AFS Securities by Type
September 30, 2024 |  |  |  |  |  |  |  |  |
(In Thousands) |  | Senior |  | Mezzanine |  | Subordinate |  | Total |
Amortized cost |  | $ | 32,217 |  |  | $ | 34,143 |  |  | $ | 114,181 |  |  | $ | 180,541 |  |
Gross unrealized gains |  | 139 |  |  | 916 |  |  | 28,945 |  |  | 30,000 |  |
Gross unrealized losses |  | — |  |  | — |  |  | (4,313) |  |  | (4,313) |  |
Allowance for credit losses |  | — |  |  | — |  |  | (867) |  |  | (867) |  |
Total Carrying Value |  | $ | 32,356 |  |  | $ | 35,059 |  |  | $ | 137,946 |  |  | $ | 205,361 |  |
December 31, 2023 |  |  |  |  |  |  |  |  |
(In Thousands) |  | Senior |  | Mezzanine |  | Subordinate |  | Total |
Amortized cost |  | $ | — |  |  | $ | — |  |  | $ | 79,635 |  |  | $ | 79,635 |  |
Gross unrealized gains |  | — |  |  | — |  |  | 16,973 |  |  | 16,973 |  |
Gross unrealized losses |  | — |  |  | — |  |  | (6,753) |  |  | (6,753) |  |
Allowance for credit losses |  | — |  |  | — |  |  | (2,482) |  |  | (2,482) |  |
Total Carrying Value |  | $ | — |  |  | $ | — |  |  | $ | 87,373 |  |  | $ | 87,373 |  |
September 30, 2024 |  |  |  |  |  |  |  |
(In Thousands) |  | Senior |  | Mezzanine |  | Subordinate |  | Total
Other third-party securities |  | $ | 32,356 |  |  | $ | 32,178 |  |  | $ | 38,208 |  |  | $ | 102,742 |
Multifamily securities |  | — |  |  | 2,881 |  |  | 4,504 |  |  | 7,385 |
Sequoia securities |  | — |  |  | — |  |  | 95,234 |  |  | 95,234 |
Total Fair Value |  | $ | 32,356 |  |  | $ | 35,059 |  |  | $ | 137,946 |  |  | $ | 205,361 |
December 31, 2023 |  |  |  |  |  |  |  |
(In Thousands) |  | Senior |  | Mezzanine |  | Subordinate |  | Total
Other third-party securities |  | $ | — |  |  | $ | — |  |  | $ | 3,971 |  |  | $ | 3,971 |
Multifamily securities |  | — |  |  | — |  |  | 4,460 |  |  | 4,460 |
Sequoia securities |  | — |  |  | — |  |  | 78,942 |  |  | 78,942 |
Total Fair Value |  | $ | — |  |  | $ | — |  |  | $ | 87,373 |  |  | $ | 87,373 |
Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of income. During the nine months ended September 30, 2024, we did not sell any AFS securities. During the nine months ended September 30, 2023, we realized gains of $2 million on sales of AFS securities. During the three and nine months ended September 30, 2024, we had $7 million and $17 million of net unrealized gains on AFS securities, respectively. At September 30, 2024, we had $46 million of AFS securities with contractual maturities less than five years, $5 million with contractual maturities greater than five years but less than ten years, and the remainder of our AFS securities had contractual maturities greater than ten years. AFS Securities with Unrealized Losses 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, 2024 and December 31, 2023. Table 9.3 – AFS Securities in Gross Unrealized Loss Position by Holding Periods
|  | Less Than 12 Consecutive Months |  | 12 Consecutive Months or Longer
|  | Fair Value |  | Unrealized Losses |  |  |  | Fair Value |  | Unrealized Losses |  |
(In Thousands) |  |  |  |  |  |
September 30, 2024 |  | $ | 15,077 |  |  | $ | (44) |  |  |  |  | $ | 20,809 |  |  | $ | (4,269) |  |  |
December 31, 2023 |  | 2,374 |  |  | (128) |  |  |  |  | 27,299 |  |  | (6,625) |  |  |
At September 30, 2024, after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheets included 88 AFS securities, of which 14 were in an unrealized loss position and 11 were in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2023, our consolidated balance sheets included 66 AFS securities, of which 21 were in an unrealized loss position and 19 were in a continuous unrealized loss position for 12 consecutive months or longer. Allowance for Credit Losses Credit impairments on our available-for-sale securities are recorded in earnings using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. We evaluate all securities in an unrealized loss position to determine if the impairment is credit-related (resulting in an allowance for credit losses recorded in earnings) or non-credit-related (resulting in an unrealized loss through other comprehensive income). The allowance for credit losses is calculated using a discounted cash flow approach and is measured as the difference between the beneficial interest’s amortized cost and the estimate of cash flows expected to be collected, discounted at the effective interest rate used to accrete the beneficial interest. No allowance is recorded for beneficial interests in an unrealized gain position. At September 30, 2024, our allowance for credit losses related to our AFS securities was $0.9 million. 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, 2024. Table 9.4 – Rollforward of Allowance for Credit Losses
|  | Three Months Ended September 30, 2024 |  | Nine Months Ended September 30, 2024
(In Thousands) |  |
Beginning balance allowance for credit losses |  | $ | 1,339 |  |  | $ | 2,482 |
Additions to allowance for credit losses on securities for which credit losses were not previously recorded |  | 25 |  |  | 25 |
Additional increases (or decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period |  | (497) |  |  | (1,640) |
Reduction to allowance for securities sold during the period |  | — |  |  | — |
Ending balance of allowance for credit losses |  | $ | 867 |  |  | $ | 867 |

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