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Variable interest entities and securitization activities | 9 Months Ended
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Sep. 30, 2022
Variable interest entities and securitization activities |
Variable interest entities and securitization activities | Note 14. Variable interest entities and securitization activities ​ In the normal course of business, the Company enters into certain types of transactions with entities that are considered to be VIEs. The Company’s primary involvement with VIEs has been related to its securitization transactions in which it transfers assets to securitization vehicles, most notably trusts. The Company primarily securitizes its acquired and originated loans, which provides a source of funding and has enabled it to transfer a certain portion of economic risk on loans or related debt securities to third parties. The Company also transfers originated loans to securitization trusts sponsored by third parties, most notably Freddie Mac. Third-party securitizations are securitization entities in which it maintains an economic interest but does not sponsor. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE. The majority of the VIE activity in which the Company is involved in are consolidated within its financial statements. Refer to Note 3 – Summary of Significant Accounting Policies for a discussion of accounting policies applied to the consolidation of the VIE and transfer of the loans in connection with the securitization. ​ Securitization-related VIEs ​ Company sponsored securitizations. In a securitization transaction, assets are transferred to a trust, which generally meets the definition of a VIE. The Company’s primary securitization activity is in the form of SBC and SBA loan securitizations, conducted through securitization trusts, which are typically consolidated, as the Company is the primary beneficiary. ​ As a result of the consolidation, the securitization is viewed as a loan financing to enable the creation of the senior security and ultimately, sale to a third-party investor. As such, the senior security is presented in the consolidated balance sheets as securitized debt obligations of consolidated VIEs. The third-party beneficial interest holders in the VIE have no recourse against the Company, with the exception of an obligation to repurchase assets from the VIE in the event that certain representations and warranties in relation to the loans sold to the VIE are breached. In the absence of such a breach, the Company has no obligation to provide any other explicit or implicit support to any VIE. ​ The securitization trust receives principal and interest on the underlying loans and distributes those payments to the certificate holders. The assets and other instruments held by the securitization trust are restricted in that they can only be used to fulfill the obligations of the securitization trust. The risks associated with the Company’s involvement with the VIE is limited to the risks and rights as a certificate holder of the securities retained by the Company. ​ The consolidation of securitization transactions includes the senior securities issued to third parties which are shown as securitized debt obligations of consolidated VIEs in the consolidated balance sheets. ​ The table below presents additional information on the Company’s securitized debt obligations. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2022 | ​ | ​ | December 31, 2021 | ​
​ |  | Current |  | ​ | ​ |  | Weighted | ​ |  | Current |  | ​ | ​ |  | Weighted | ​
​ | ​ | Principal | ​ | Carrying | ​ | Average | ​ | ​ | Principal | ​ | Carrying | ​ | Average | ​
(in thousands) | ​ | Balance | ​ | value | ​ | Interest Rate | ​ | ​ | Balance | ​ | value | ​ | Interest Rate | ​
ReadyCap Lending Small Business Trust 2019-2 | ​ | $ | 55,221 | ​ | $ | 54,580 | ​ | 3.4 | % | ​ | $ | 79,294 | ​ | $ | 78,268 | ​ | 2.6 | %
Sutherland Commercial Mortgage Trust 2017-SBC6 | ​ | ​ | 9,722 | ​ | ​ | 9,581 | ​ | 4.3 | ​ | ​ | ​ | 16,729 | ​ | ​ | 16,471 | ​ | 3.8 | ​
Sutherland Commercial Mortgage Trust 2019-SBC8 | ​ | ​ | 127,529 | ​ | ​ | 125,589 | ​ | 2.9 | ​ | ​ | ​ | 145,351 | ​ | ​ | 143,153 | ​ | 2.9 | ​
Sutherland Commercial Mortgage Trust 2020-SBC9 | ​ | ​ | — | ​ | ​ | — | ​ | 4.2 | ​ | ​ | ​ | 86,680 | ​ | ​ | 85,459 | ​ | 4.1 | ​
Sutherland Commercial Mortgage Trust 2021-SBC10 | ​ | ​ | 115,881 | ​ | ​ | 114,086 | ​ | 1.6 | ​ | ​ | ​ | 159,745 | ​ | ​ | 157,483 | ​ | 1.6 | ​
ReadyCap Commercial Mortgage Trust 2014-1 | ​ |  | — | ​ | ​ | — | ​ | 5.7 | ​ | ​ |  | 6,770 | ​ | ​ | 6,756 | ​ | 5.7 | ​
ReadyCap Commercial Mortgage Trust 2015-2 | ​ |  | 2,873 | ​ | ​ | 2,462 | ​ | 5.1 | ​ | ​ |  | 17,598 | ​ | ​ | 15,960 | ​ | 5.1 | ​
ReadyCap Commercial Mortgage Trust 2016-3 | ​ |  | 12,602 | ​ | ​ | 11,965 | ​ | 5.1 | ​ | ​ |  | 19,106 | ​ | ​ | 18,285 | ​ | 4.9 | ​
ReadyCap Commercial Mortgage Trust 2018-4 | ​ | ​ | 62,811 | ​ | ​ | 60,572 | ​ | 4.3 | ​ | ​ | ​ | 81,379 | ​ | ​ | 78,751 | ​ | 4.1 | ​
ReadyCap Commercial Mortgage Trust 2019-5 | ​ | ​ | 117,304 | ​ | ​ | 110,939 | ​ | 4.5 | ​ | ​ | ​ | 150,547 | ​ | ​ | 143,204 | ​ | 4.3 | ​
ReadyCap Commercial Mortgage Trust 2019-6 | ​ | ​ | 216,964 | ​ | ​ | 212,054 | ​ | 3.3 | ​ | ​ | ​ | 269,315 | ​ | ​ | 263,752 | ​ | 3.2 | ​
ReadyCap Commercial Mortgage Trust 2022-7 | ​ | ​ | 203,257 | ​ | ​ | 194,932 | ​ | 4.2 | ​ | ​ | ​ | — | ​ | ​ | — | ​ | — | ​
Ready Capital Mortgage Financing 2019-FL3 | ​ | ​ | 59,556 | ​ | ​ | 59,556 | ​ | 3.0 | ​ | ​ | ​ | 92,930 | ​ | ​ | 92,921 | ​ | 1.6 | ​
Ready Capital Mortgage Financing 2020-FL4 | ​ | ​ | 236,085 | ​ | ​ | 234,384 | ​ | 4.1 | ​ | ​ | ​ | 304,157 | ​ | ​ | 300,832 | ​ | 3.1 | ​
Ready Capital Mortgage Financing 2021-FL5 | ​ | ​ | 444,208 | ​ | ​ | 441,474 | ​ | 2.4 | ​ | ​ | ​ | 506,721 | ​ | ​ | 501,697 | ​ | 1.5 | ​
Ready Capital Mortgage Financing 2021-FL6 | ​ | ​ | 542,990 | ​ | ​ | 538,070 | ​ | 2.2 | ​ | ​ | ​ | 543,223 | ​ | ​ | 536,270 | ​ | 1.3 | ​
Ready Capital Mortgage Financing 2021-FL7 | ​ | ​ | 752,104 | ​ | ​ | 745,738 | ​ | 2.5 | ​ | ​ | ​ | 753,314 | ​ | ​ | 744,449 | ​ | 1.6 | ​
Ready Capital Mortgage Financing 2022-FL8 | ​ | ​ | 913,675 | ​ | ​ | 906,004 | ​ | 3.0 | ​ | ​ | ​ | — | ​ | ​ | — | ​ | — | ​
Ready Capital Mortgage Financing 2022-FL9 | ​ | ​ | 612,055 | ​ | ​ | 599,117 | ​ | 5.1 | ​ | ​ | ​ | — | ​ | ​ | — | ​ | — | ​
Total | ​ | $ | 4,484,837 |  | $ | 4,421,103 | ​ | 3.2 | % |  | $ | 3,232,859 |  | $ | 3,183,711 | ​ | 2.2 | %
​ The table above excludes non-company sponsored securitized debt obligations of $8.7 million and $30.6 million that are consolidated in the consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively. Repayment of securitized debt will be dependent upon the cash flows generated by the loans in the securitization trust that collateralize such debt. The actual cash flows from the securitized loans are comprised of coupon interest, scheduled principal payments, prepayments and liquidations of the underlying loans. The actual term of the securitized debt may differ significantly from the Company’s estimate given that actual interest collections, mortgage prepayments and/or losses on liquidation of mortgages may differ significantly from those expected. ​ Third-party sponsored securitizations. For most third-party sponsored securitizations, the Company determined that it is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the economic performance of these entities. Specifically, the Company does not manage these entities or otherwise solely hold decision making powers that are significant, which include special servicing decisions. As a result of this assessment, the Company does not consolidate any of the underlying assets and liabilities of these trusts and only accounts for its specific interests in them. ​ Joint Venture Investments- VIEs ​ Unconsolidated VIEs. The Company does not consolidate variable interests held in an acquired joint venture investment accounted for as an equity method investment as it does not have the power to direct the activities that most significantly impact their economic performance and therefore, the Company only accounts for its specific interest. ​ Consolidated VIEs. The Company consolidates variable interests held in an acquired joint venture investment for which it is the primary beneficiary. The equity held by the remaining owners and their portions of net income (loss) are reflected in stockholders’ equity on the consolidated balance sheets as Non-controlling interests and in the consolidated statements of income as Net income attributable to noncontrolling interests, respectively. As of September 30, 2022, the Company’s financial results on joint venture investments identified as consolidated VIEs were not material. ​ Assets and liabilities of consolidated VIEs The table below presents assets and liabilities of consolidated VIEs. ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(in thousands) |  | September 30, 2022 |  | December 31, 2021
Assets: | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents |  | $ | 1,247 |  | $ | 9,041
Restricted cash |  | ​ | 52,339 | ​ | ​ | 33,187
Loans, net | ​ | ​ | 5,683,307 | ​ | ​ | 4,081,848
Investments held to maturity | ​ | ​ | 108,423 | ​ | ​ | —
Other assets | ​ | ​ | 38,058 | ​ | ​ | 21,488
Total assets | ​ | $ | 5,883,374 | ​ | $ | 4,145,564
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Securitized debt obligations of consolidated VIEs, net | ​ | ​ | 4,429,846 | ​ | ​ | 3,214,303
Due to third parties | ​ | ​ | 4,120 | ​ | ​ | —
Accounts payable and other accrued liabilities | ​ | ​ | 9 | ​ | ​ | —
Total liabilities | ​ | $ | 4,433,975 | ​ | $ | 3,214,303
​ ​ Assets of unconsolidated VIEs The table below reflects variable interests in identified VIEs for which the Company is not the primary beneficiary. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Carrying Amount |  | Maximum Exposure to Loss (1)
(in thousands) | ​ | September 30, 2022 | ​ | December 31, 2021 | ​ | September 30, 2022 | ​ | December 31, 2021
MBS, at fair value(2) |  | $ | 24,344 | ​ | $ | 80,756 |  | $ | 24,344 | ​ | $ | 80,756
Investment in unconsolidated joint ventures | ​ | ​ | 112,776 | ​ | ​ | 74,334 | ​ | ​ | 112,776 | ​ | ​ | 74,334
Total assets in unconsolidated VIEs | ​ | $ | 137,120 | ​ | $ | 155,090 | ​ | $ | 137,120 | ​ | $ | 155,090
(1) Maximum exposure to loss is limited to the greater of the fair value or carrying value of the assets as of the consolidated balance sheet date.
(2) Retained interest in other third party sponsored securitizations.
​

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- Definition N/A + References No definition available. + Details
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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI https://asc.fasb.org/topic&trid=2197479 + Details
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