We invest in real estate securities that we create and retain from our unconsolidated jumbo loan securitizations or acquire from third parties. The following table presents the fair values of our real estate securities by type at September 30, 2025 and December 31, 2024.

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. Exclusive of our re-performing loan securities, 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, 2024 for further information and our accounting policies for our trading and AFS real estate 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.

On September 30, 2025, as part of the sale of a $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust, we retained a $182 million subordinate beneficial interest in the Legacy Trust. The beneficial interest represents our right to residual cash flows from the Legacy Trust after payment of senior financing and preferred interests and is recorded as an AFS security, measured at fair value and classified as a Level 3 asset.

The retained beneficial interest is valued using discounted expected cash flows that incorporate assumptions for principal repayments, credit losses, and market discount rates. We did not record a separate allowance for credit losses at initial recognition because the fair value measurement already reflected expected credit losses; however, we will re-evaluate expected credit losses at each reporting period and record an allowance if updated expectations indicate one is required. See Note 8 for further discussion on this transaction.


September 30, 2025
(In Thousands)	Senior		Mezzanine		Subordinate		Total
Amortized cost	$	—	$	—	$	259,915	$	259,915
Gross unrealized gains	—		—		29,104		29,104
Gross unrealized losses	—		—		(3,852)		(3,852)
Allowance for credit losses	—		—		(795)		(795)
Total Carrying Value	$	—	$	—	$	284,372	$	284,372

December 31, 2024
(In Thousands)	Senior		Mezzanine		Subordinate		Total
Amortized cost	$	39,135	$	31,250	$	121,053	$	191,438
Gross unrealized gains	230		668		25,733		26,631
Gross unrealized losses	—		(51)		(5,623)		(5,674)
Allowance for credit losses	—		—		(921)		(921)
Total Carrying Value	$	39,365	$	31,867	$	140,242	$	211,474


September 30, 2025
(In Thousands)	Senior		Mezzanine		Subordinate		Total
Other third-party securities	$	—	$	—	$	185,983	$	185,983

Sequoia securities	—		—		98,389		98,389
Total Fair Value	$	—	$	—	$	284,372	$	284,372

December 31, 2024
(In Thousands)	Senior		Mezzanine		Subordinate		Total
Other third-party securities	$	39,365	$	28,948	$	40,191	$	108,504
Multifamily securities	—		2,919		8,830		11,749
Sequoia securities	—		—		91,221		91,221
Total Fair Value	$	39,365	$	31,867	$	140,242	$	211,474

Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of income. During the three and nine months ended September 30, 2025, we recognized net gains of zero and $1.2 million, respectively, on sales of AFS securities. For the three and nine months ended September 30, 2024 we did not sell any AFS securities. During the three and nine months ended September 30, 2025, we had $2 million and $6 million of net unrealized gains on AFS securities, respectively.

At September 30, 2025, we had zero AFS securities with contractual maturities less than five years, $5 million AFS securities 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.

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, 2025 and December 31, 2024.


	Less Than 12 Consecutive Months				12 Consecutive Months or Longer
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
(In Thousands)
September 30, 2025	$	—	$	—		$	21,315	$	(3,852)
December 31, 2024	30,351		(391)			19,817		(5,283)

At September 30, 2025, after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheets included 63 AFS securities, of which 11 were in an unrealized loss position and 11 were in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2024, our consolidated balance sheets included 90 AFS securities, of which 20 were in an unrealized loss position and 11 were in a continuous unrealized loss position for 12 consecutive months or longer.

Credit impairments on our AFS 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, 2025, our allowance for credit losses related to our AFS securities was $0.8 million.

Table 9.4 – Rollforward of Allowance for Credit Losses


	Three Months Ended September 30,
(In Thousands)	2025		2024
Beginning balance allowance for credit losses	$	839	$	1,339

Additions to allowance for credit losses on securities for which credit losses were not previously recorded	—		25
Additional decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period	(44)		(497)





Ending balance of allowance for credit losses	$	795	$	867


	Nine Months Ended September 30,
(In Thousands)	2025		2024
Beginning balance allowance for credit losses	$	921	$	2,482

Additions to allowance for credit losses on securities for which credit losses were not previously recorded	—		25
Additional decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period	(126)		(1,640)





Ending balance of allowance for credit losses	$	795	$	867