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Distressed and Other Residential Mortgage Loans, At Fair Value | 12 Months Ended
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Dec. 31, 2019
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] |
Distressed and Other Residential Mortgage Loans, At Fair Value | Distressed and Other Residential Mortgage Loans, At Fair Value Certain of the Company’s acquired residential mortgage loans, including distressed residential mortgage loans, non-QM loans, second mortgages and residential bridge loans, are presented at fair value on its consolidated balance sheets as a result of a fair value election made at the time of acquisition. Subsequent changes in fair value are reported in current period earnings and presented in unrealized gains (losses), net on the Company’s consolidated statements of operations. The Company’s distressed and other residential mortgage loans at fair value consist of the following as of December 31, 2019 and 2018, respectively (dollar amounts in thousands):
| Principal |  | Premium/(Discount) |  | Unrealized Gains/(Losses) |  | Carrying Value
December 31, 2019 | $ | 1,464,984 |  |  | $ | (81,372 | ) |  | $ | 46,142 |  |  | $ | 1,429,754 |
December 31, 2018 | 788,372 |  |  | (54,905 | ) |  | 4,056 |  |  | 737,523 |
The following table presents the components of realized gains (losses), net and unrealized gains (losses), net attributable to distressed and other residential mortgage loans at fair value for the years ended December 31, 2019, 2018 and 2017 respectively (dollar amounts in thousands):
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Net realized gains on payoff and sale of loans | $ | 9,187 |  |  | $ | 4,606 |  |  | $ | 1,719 |
Net unrealized gains (losses) | 42,087 |  |  | 4,096 |  |  | (41 | )
The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of distressed and other residential mortgage loans at fair value as of December 31, 2019 and 2018, respectively, are as follows:
| December 31, 2019 |  | December 31, 2018
California | 23.9 | % |  | 27.9 | %
Florida | 9.4 | % |  | 9.0 | %
New York | 8.0 | % |  | 5.1 | %
Texas | 5.4 | % |  | 4.2 | %
New Jersey | 5.1 | % |  | 3.8 | %
The following table presents the fair value and aggregate unpaid principal balance of the Company’s distressed and other residential mortgage loans at fair value greater than 90 days past due and in non-accrual status as of December 31, 2019 and 2018, respectively (dollar amounts in thousands):
| Fair Value |  | Unpaid Principal Balance
December 31, 2019 | $ | 106,199 |  |  | $ | 122,918 |
December 31, 2018 | 60,117 |  |  | 75,167 |
Additionally, the fair value and aggregate unpaid principal balance of distressed and other residential mortgage loans at fair value held in non-accrual status but less than 90 days past due was approximately $9.3 million and $10.7 million, respectively, as of December 31, 2019. Distressed and other residential mortgage loans with a fair value of approximately $881.2 million and $626.2 million at December 31, 2019 and 2018, respectively, are pledged as collateral for master repurchase agreements (see Note 12). Distressed and Other Residential Mortgage Loans, Net Distressed Residential Mortgage Loans, Net As of December 31, 2019 and 2018, the carrying value of the Company’s distressed residential mortgage loans accounted for under ASC 310-30 amounts to approximately $158.7 million and $228.5 million, respectively. The Company has elected the fair value option for all distressed residential mortgage loans purchased after June 30, 2017 (see Note 4). The following table details activity in accretable yield for the distressed residential mortgage loans, net for the years ended December 31, 2019 and 2018, respectively (dollar amounts in thousands):
| December 31, 2019 |  | December 31, 2018
Balance at beginning of period | $ | 195,560 |  |  | $ | 303,949 |
Additions | 1,784 |  |  | 7,972 |
Disposals | (53,624 | ) |  | (99,603 | )
Accretion | (7,015 | ) |  | (16,758 | )
Balance at end of period (1) | $ | 136,705 |  |  | $ | 195,560 |
(1) | Accretable yield is the excess of the distressed residential mortgage loans’ cash flows expected to be collected over the purchase price. The cash flows expected to be collected represents the Company’s estimate of the amount and timing of undiscounted principal and interest cash flows. Additions include reclassification to accretable yield from nonaccretable yield. Disposals include distressed residential mortgage loan dispositions, which include refinancing, sale and foreclosure of the underlying collateral and resulting removal of the distressed residential mortgage loans from the accretable yield, and reclassifications from accretable to nonaccretable yield. The reclassifications between accretable and nonaccretable yield and the accretion of interest income is based on various estimates regarding loan performance and the value of the underlying real estate securing the loans. As the Company continues to update its estimates regarding the loans and the underlying collateral, the accretable yield may change. Therefore, the amount of accretable income recorded in each of the years ended December 31, 2019 and 2018 is not necessarily indicative of future results.
The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of our distressed residential mortgage loans, net as of December 31, 2019 and 2018, respectively, are as follows:
| December 31, 2019 |  | December 31, 2018
North Carolina | 10.5 | % |  | 9.0 | %
Florida | 10.1 | % |  | 10.4 | %
Georgia | 7.0 | % |  | 7.2 | %
South Carolina | 5.8 | % |  | 5.6 | %
Texas | 5.6 | % |  | 4.9 | %
New York | 5.5 | % |  | 5.4 | %
Ohio | 5.2 | % |  | 5.0 | %
Virginia | 5.2 | % |  | 5.3 | %
The Company had no distressed residential mortgage loans held in securitization trusts pledged as collateral for securitized debt as of December 31, 2019. The Company’s distressed residential mortgage loans held in securitization trusts with a carrying value of approximately $88.1 million at December 31, 2018 were pledged as collateral for certain of the Securitized Debt issued by the Company (see Note 9). In addition, distressed residential mortgage loans with a carrying value of approximately $80.6 million and $128.1 million at December 31, 2019 and 2018, respectively, are pledged as collateral for a master repurchase agreement (see Note 12). Residential Mortgage Loans Held in Securitization Trusts, Net Residential mortgage loans held in securitization trusts, net are comprised of certain ARMs transferred to Consolidated VIEs that have been securitized into sequentially rated classes of beneficial interests. Residential mortgage loans held in securitization trusts, net consist of the following as of December 31, 2019 and 2018, respectively (dollar amounts in thousands):
| December 31, 2019 |  | December 31, 2018
Unpaid principal balance | $ | 47,237 |  |  | $ | 60,171 |
Deferred origination costs – net | 301 |  |  | 383 |
Allowance for loan losses | (3,508 | ) |  | (3,759 | )
Total | $ | 44,030 |  |  | $ | 56,795 |
Allowance for Loan Losses - The following table presents the activity in the Company’s allowance for loan losses on residential mortgage loans held in securitization trusts, net for the years ended December 31, 2019, 2018 and 2017, respectively (dollar amounts in thousands):
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Balance at beginning of period | $ | 3,759 |  |  | $ | 4,191 |  |  | $ | 3,782 |
Provisions for loan losses | 25 |  |  | 166 |  |  | 475 |
Transfer to real estate owned | (167 | ) |  | — |  |  | (6 | )
Charge-offs | (109 | ) |  | (598 | ) |  | (60 | )
Balance at the end of period | $ | 3,508 |  |  | $ | 3,759 |  |  | $ | 4,191 |
On an ongoing basis, the Company evaluates the adequacy of its allowance for loan losses. The Company’s allowance for loan losses at December 31, 2019 was $3.5 million, representing 743 basis points of the outstanding principal balance of residential mortgage loans held in securitization trusts, as compared to 625 basis points as of December 31, 2018. As part of the Company’s allowance for loan loss adequacy analysis, management will assess an overall level of allowances while also assessing credit losses inherent in each non-performing residential mortgage loan held in securitization trusts. These estimates involve the consideration of various credit related factors, including but not limited to, current housing market conditions, current loan to value ratios, delinquency status, the borrower’s current economic and credit status and other relevant factors. The Company’s residential mortgage loans held in securitization trusts, net and real estate owned are pledged as collateral for the Residential CDOs issued by the Company. The Company’s net investment in these residential securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between (i) the carrying amount of the mortgage loans, real estate owned and receivables held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding, was $4.9 million and $4.8 million as of December 31, 2019 and 2018, respectively. Delinquency Status of Our Residential Mortgage Loans Held in Securitization Trusts, Net As of December 31, 2019, we had 18 delinquent loans with an aggregate principal amount outstanding of approximately $10.2 million categorized as residential mortgage loans held in securitization trusts, net, of which $6.7 million, or 66%, are under some form of temporary modified payment plan. The table below shows delinquencies in our portfolio of residential mortgage loans held in securitization trusts, net, including real estate owned (REO) through foreclosure, as of December 31, 2019 (dollar amounts in thousands): December 31, 2019
Days Late | Number of Delinquent Loans |  | Total Unpaid Principal |  | % of Loan Portfolio
30 - 60 | 2 |  | $ | 211 |  |  | 0.44 | %
90+ | 16 |  | $ | 10,010 |  |  | 21.05 | %
Real estate owned through foreclosure | 1 |  | $ | 360 |  |  | 0.76 | %
As of December 31, 2018, we had 19 delinquent loans with an aggregate principal amount outstanding of approximately $10.9 million categorized as residential mortgage loans held in securitization trusts, net, of which $6.6 million, or 61%, were under some form of temporary modified payment plan. The table below shows delinquencies in our portfolio of residential mortgage loans held in securitization trusts, net as of December 31, 2018 (dollar amounts in thousands): December 31, 2018
Days Late | Number of Delinquent Loans |  | Total Unpaid Principal |  | % of Loan Portfolio
90+ | 19 |  | $ | 10,926 |  |  | 18.16 | %
The geographic concentrations of credit risk exceeding 5% of the total loan balances in our residential mortgage loans held in securitization trusts, net as of December 31, 2019 and 2018, respectively, are as follows:
| December 31, 2019 |  | December 31, 2018
New York | 36.1 | % |  | 33.9 | %
Massachusetts | 17.2 | % |  | 20.0 | %
New Jersey | 12.8 | % |  | 14.5 | %
Florida | 12.1 | % |  | 9.9 | %
Maryland | 5.5 | % |  | 5.3 | %
Schedule IV - Mortgage Loans on Real Estate (dollar amounts in thousands) December 31, 2019
Asset Type |  | Number of Loans |  | Interest Rate |  | Maturity Date |  | Carrying Value |  | Principal Amount of Loans Subject to Delinquent Principal or Interest
Distressed and other residential mortgage loans, net |  |  |  |  |  |  |  |  |  |
First mortgage loans |  |  |  |  |  |  |  |  |  |
Original loan amount $0 - $99,999 |  | 1,355 |  | 1.99% - 14.99% |  | 08/25/2007 - 01/10/2060 |  | $ | 62,833 |  |  | $ | 12,942 |
Original loan amount $100,000 - $199,999 |  | 577 |  | 2.00% - 12.48% |  | 11/19/2011 - 12/01/2059 |  | 62,926 |  |  | 13,302 |
Original loan amount $200,000 - $299,999 |  | 139 |  | 0.00% - 11.44% |  | 06/01/2029 - 11/01/2059 |  | 27,775 |  |  | 7,914 |
Original loan amount over $299,999 |  | 112 |  | 2.00% - 9.75% |  | 11/01/2021 - 05/01/2057 |  | 49,222 |  |  | 16,477 |
Residential mortgage loans, at fair value |  |  |  |  |  |  |  |  |  |
First mortgage loans |  |  |  |  |  |  |  |  |  |
Original loan amount $0 - $99,999 |  | 1,482 |  | 1.38% - 13.50% |  | 10/10/2018 - 12/01/2059 |  | 84,154 |  |  | 6,901 |
Original loan amount $100,000 - $199,999 |  | 2,769 |  | 1.50% - 13.38% |  | 07/01/2018 - 12/01/2059 |  | 328,284 |  |  | 29,491 |
Original loan amount $200,000 - $299,999 |  | 1,484 |  | 0.25% - 12.00% |  | 01/07/2020 - 11/01/2059 |  | 301,835 |  |  | 29,612 |
Original loan amount over $299,999 |  | 1,701 |  | 2.00% - 12.00% |  | 01/08/2020 - 02/01/2060 |  | 668,673 |  |  | 56,318 |
Second mortgage loans |  |  |  |  |  |  |  |  |  |
Original loan amount $0 - $99,999 |  | 701 |  | 5.75% - 9.00% |  | 12/01/2030 - 11/01/2049 |  | 32,827 |  |  | 595 |
Original loan amount $100,000 - $199,999 |  | 74 |  | 6.25% - 9.13% |  | 05/01/2032 - 10/01/2049 |  | 9,549 |  |  | — |
Original loan amount $200,000 - $299,999 |  | 18 |  | 6.25% - 8.63% |  | 03/01/2046 - 11/01/2049 |  | 4,137 |  |  | — |
Original loan amount over $299,999 |  | 1 |  | 6.88% - 6.88% |  | 11/01/2047 - 11/01/2047 |  | 295 |  |  | — |
Other mortgage loans |  |  |  |  |  |  |  |  |  |
Residential loans and loans held for sale |  | 14 |  | 2.36% - 5.63% |  | 07/01/2027 - 08/01/2046 |  | 2,406 |  |  | 413 |
Residential loans held in securitization trust, at fair value |  |  |  |  |  |  |  |  |  |
First mortgage loans |  | 8,103 |  | 1.38% - 10.50% |  | 02/01/2022 - 12/01/2058 |  | 1,328,886 |  |  | 50,741 |
Multi-family loans held in securitization trusts, at fair value |  |  |  |  |  |  |  |  |  |
First mortgage loans |  | 828 |  | 3.04% - 5.76% |  | 1/1/2020 - 1/1/2034 |  | 17,816,746 |  |  | — |
|  |  |  |  |  |  |  | $ | 20,780,548 |  |  | $ | 224,706 |
Reconciliation of Balance Sheet Reported Amounts of Mortgage Loans on Real Estate
|  | For the year ended December 31,
(in thousands) |  | 2019 |  | 2018 |  | 2017
Beginning balance |  | $ | 12,707,625 |  |  | $ | 10,157,126 |  |  | $ | 7,565,459 |
Additions during period: |  |  |  |  |  |
Purchases |  | 8,762,553 |  |  | 2,983,295 |  |  | 2,987,775 |
Accretion of purchase discount |  | 11,234 |  |  | 19,940 |  |  | 19,686 |
Change in realized and unrealized gains (losses) |  | 638,557 |  |  | 4,096 |  |  | 10,214 |
Deductions during period: |  |  |  |  |  |
Repayments of principal |  | (1,052,812 | ) |  | (182,163 | ) |  | (175,664 | )
Collection of interest |  | (11,429 | ) |  | (21,754 | ) |  | (26,081 | )
Transfer to REO |  | (6,105 | ) |  | (7,998 | ) |  | (7,228 | )
Cost of mortgages sold |  | (213,871 | ) |  | (109,000 | ) |  | (176,470 | )
Provision for loan loss |  | 2,780 |  |  | (1,235 | ) |  | 1,739 |
Change in realized and unrealized gains (losses) |  | — |  |  | (85,115 | ) |  | (270 | )
Amortization of premium |  | (57,984 | ) |  | (49,567 | ) |  | (42,034 | )
Balance at end of period |  | $ | 20,780,548 |  |  | $ | 12,707,625 |  |  | $ | 10,157,126 |

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- Definition The entire disclosure for investment in mortgage loan on real estate by entity with substantial portion of business acquiring and holding investment real estate or interest in real estate. Includes, but is not limited to, information for each mortgage loan receivable equaling or exceeding three percent of carrying amount of mortgage. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 12 -Subsection 29 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 948 -SubTopic 310 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-29) -URI http://asc.fasb.org/extlink&oid=6589523&loc=d3e617274-123014 + Details
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