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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Schedule of Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018, respectively, on the Company’s condensed consolidated balance sheets (dollar amounts in thousands):

	Measured at Fair Value on a Recurring Basis at
	March 31, 2019																December 31, 2018
	Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Assets carried at fair value
Investment securities available for sale:
Agency RMBS	$	—			$	1,023,938			$	—			$	1,023,938			$	—			$	1,037,730			$	—			$	1,037,730
Non-Agency RMBS	—				314,086				—				314,086				—				214,037				—				214,037
CMBS	—				245,941				—				245,941				—				207,785				52,700				260,485
Multi-family loans held in securitization trusts	—				—				14,328,336				14,328,336				—				—				11,679,847				11,679,847
Distressed and other residential mortgage loans, at fair value	—				—				875,566				875,566				—				—				737,523				737,523
Derivative assets:
Interest rate swaps (1)	—				14,873				—				14,873				—				10,263				—				10,263
Investments in unconsolidated entities	—				—				36,575				36,575				—				—				32,994				32,994
Total	$	—			$	1,598,838			$	15,240,477			$	16,839,315			$	—			$	1,469,815			$	12,503,064			$	13,972,879
Liabilities carried at fair value
Multi-family collateralized debt obligations	$	—			$	—			$	13,547,195			$	13,547,195			$	—			$	—			$	11,022,248			$	11,022,248
Total	$	—			$	—			$	13,547,195			$	13,547,195			$	—			$	—			$	11,022,248			$	11,022,248

⁽¹⁾  All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $12.8 million netted against a variation margin of $27.7 million at March 31, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.

Changes in Valuation of Level 3 Assets

⁽¹⁾  All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $12.8 million netted against a variation margin of $27.7 million at March 31, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.

The following tables detail changes in valuation for the Level 3 assets for the three months ended March 31, 2019 and 2018, respectively (amounts in thousands):

Level 3 Assets:

	Three Months Ended March 31, 2019
	Multi-family loans held in securitization trusts			Distressed and other residential mortgage loans			Investments in unconsolidated entities			CMBS held in securitization trusts				Total
Balance at beginning of period	$	11,679,847		$	737,523		$	32,994		$	52,700			$	12,503,064
Total (losses)/gains (realized/unrealized)
Included in earnings	259,764			9,945			3,892			17,734				291,335
Included in other comprehensive income (loss)	—			—			—			(13,665		)		(13,665		)
Transfers in	—			—			—			—				—
Transfers out	—			(182		)	—			—				(182		)
Contributions	—			—			—			—				—
Paydowns/Distributions	(37,485		)	(24,930		)	(311		)	—				(62,726		)
Sales	—			(6,448		)	—			(56,769		)		(63,217		)
Purchases (1)	2,426,210			159,658			—			—				2,585,868
Balance at the end of period	$	14,328,336		$	875,566		$	36,575		$	—			$	15,240,477

⁽¹⁾  During the three months ended March 31, 2019, the Company purchased PO securities and certain IOs and mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $2.4 billion during the three months ended March 31, 2019 (see Notes 2 and 6)

Changes in Valuation of Level 3 Liabilities

	Three Months Ended March 31, 2018
	Multi-family loans held in securitization trusts			Distressed and other residential mortgage loans			Investments in unconsolidated entities			CMBS held in securitization trusts				Total
Balance at beginning of period	$	9,657,421		$	87,153		$	42,823		$	47,922			$	9,835,319
Total (losses)/gains (realized/unrealized)
Included in earnings	(184,678		)	(181		)	1,319			939				(182,601		)
Included in other comprehensive income (loss)	—			—			—			(4		)		(4		)
Transfers in	—			—			—			—				—
Transfers out	—			—			—			—				—
Contributions	—			—			—			—				—
Paydowns/Distributions	(34,434		)	(3,458		)	(638		)	—				(38,530		)
Sales	—			—			—			—				—
Purchases	—			15,966			—			—				15,966
Balance at the end of period	$	9,438,309		$	99,480		$	43,504		$	48,857			$	9,630,150

The following table details changes in valuation for the Level 3 liabilities (Multi-family CDOs) for the three months ended March 31, 2019 and 2018, respectively (amounts in thousands):

Level 3 Liabilities:

	Three Months Ended March 31,
	2019				2018
Balance at beginning of period	$	11,022,248			$	9,189,459
Total losses (gains) (realized/unrealized)
Included in earnings (1)	237,789				(201,558		)
Purchases (2)	2,324,639				—
Paydowns	(37,481		)		(34,434		)
Balance at the end of period	$	13,547,195			$	8,953,467

⁽¹⁾  Amounts included in interest expense on Multi-Family CDOs and unrealized gain on multi-family loans and debt held in securitization trusts.

⁽²⁾  During the three months ended March 31, 2019, the Company purchased PO securities and certain IOs and mezzanine CMBS securities issued from securitizations that it determined to consolidate and include in the Consolidated K-Series. As a result, the Company consolidated liabilities of these securitizations in the amount of $2.3 billion (see Notes 2 and 6)

Changes in Unrealized Gains (Losses) Included in Earnings for Level 3 Assets and Liabilities

The following table details the changes in unrealized gains (losses) included in earnings for the three months ended March 31, 2019 and 2018 for our Level 3 assets and liabilities held as of March 31, 2019 and 2018, respectively (dollar amounts in thousands):

	Three Months Ended March 31,
	2019				2018
Assets
Multi-family loans held in securitization trusts (1)	$	274,683			$	(172,546	)
Investments in unconsolidated entities (2)	3,661				1,038
Distressed and other residential mortgage loans at fair value (3)	9,337				(92		)
Liabilities
Multi-family debt held in securitization trusts (1)	(265,273		)		180,091

⁽¹⁾  Presented in unrealized gain on multi-family loans and debt held in securitization trusts, net on the Company's condensed consolidated statements of operations.

⁽²⁾  Presented in other income on the Company's condensed consolidated statements of operations.

⁽³⁾  Presented in net gain (loss) on distressed and other residential mortgage loans at fair value on the Company's condensed consolidated statements of operations.

Schedule of Assets Measured at Fair Value on a Non-recurring Basis

The following table presents assets measured at fair value on a non-recurring basis as of March 31, 2019 and December 31, 2018, respectively, on the Company's condensed consolidated balance sheets (dollar amounts in thousands):

	Assets Measured at Fair Value on a Non-Recurring Basis at
	March 31, 2019																December 31, 2018
	Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Residential mortgage loans held in securitization trusts – impaired loans, net	$	—			$	—			$	5,779			$	5,779			$	—			$	—			$	5,921			$	5,921

Schedule of Gains (Losses) Incurred for Assets Measured at Fair Value on a Non-recurring Basis

The following table presents gains (losses) incurred for assets measured at fair value on a non-recurring basis for the three months ended March 31, 2019 and 2018, respectively, on the Company’s condensed consolidated statements of operations (dollar amounts in thousands):

	Three Months Ended March 31,
	2019				2018
Residential mortgage loans held in securitization trusts – impaired loans, net	$	(38	)		$	110

Schedule of Carrying Value and Estimated Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at March 31, 2019 and December 31, 2018, respectively (dollar amounts in thousands):

			March 31, 2019								December 31, 2018
	Fair Value Hierarchy Level		Carrying Value				Estimated Fair Value				Carrying Value				Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1		$	65,359			$	65,359			$	103,724			$	103,724
Investment securities available for sale	Level 2 or 3		1,583,965				1,583,965				1,512,252				1,512,252
Distressed and other residential mortgage loans, at fair value	Level 3		875,566				875,566				737,523				737,523
Distressed and other residential mortgage loans, net	Level 3		262,193				264,476				285,261				289,376
Investments in unconsolidated entities	Level 3		92,364				92,961				73,466				73,833
Preferred equity and mezzanine loan investments	Level 3		175,128				177,602				165,555				167,739
Multi-family loans held in securitization trusts	Level 3		14,328,336				14,328,336				11,679,847				11,679,847
Derivative assets	Level 2		14,873				14,873				10,263				10,263
Mortgage loans held for sale, net (1)	Level 3		2,960				3,134				3,414				3,584
Mortgage loans held for investment (1)	Level 3		1,580				1,580				1,580				1,580
Financial Liabilities:
Repurchase agreements	Level 2		2,273,005				2,273,005				2,131,505				2,131,505
Residential collateralized debt obligations	Level 3		49,247				47,004				53,040				50,031
Multi-family collateralized debt obligations	Level 3		13,547,195				13,547,195				11,022,248				11,022,248
Securitized debt	Level 3		—				—				42,335				45,030
Subordinated debentures	Level 3		45,000				45,011				45,000				44,897
Convertible notes	Level 2		131,301				136,693				130,762				135,689

⁽¹⁾  Included in receivables and other assets in the accompanying condensed consolidated balance sheets.

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