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Residential Loans, at Fair Value | 9 Months Ended
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Sep. 30, 2020
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] |
Residential Loans, at Fair Value | Residential Loans, at Fair Value The Company’s acquired residential loans, including distressed residential loans, non-QM loans, second mortgages and residential bridge loans, are presented at fair value on its condensed consolidated balance sheets as a result of a fair value election made at the time of acquisition or as of January 1, 2020 (see Note 2). Subsequent changes in fair value are reported in current period earnings and presented in unrealized gains (losses), net on the Company’s condensed consolidated statements of operations. The following table presents t he Company’s residential loans, at fair value, which consist of residential loans held by the Company, Consolidated SLST and other securitization trusts, as of September 30, 2020 and December 31, 2019, respectively (dollar amounts in thousands):
| September 30, 2020 |  | December 31, 2019
| Residential loans |  | Consolidated SLST (1) |  | Residential loans held in securitization trusts (2) |  | Residential loans |  | Consolidated SLST (1)
Principal | $ | 1,207,391 |  |  | $ | 1,259,063 |  |  | $ | 371,826 |  |  | $ | 1,464,984 |  |  | $ | 1,322,131 |
(Discount)/premium | (58,904) |  |  | 2,628 |  |  | (24,874) |  |  | (81,372) |  |  | 6,455 |
Unrealized gains | 28,811 |  |  | 28,314 |  |  | 8,534 |  |  | 46,142 |  |  | 300 |
Carrying value | $ | 1,177,298 |  |  | $ | 1,290,005 |  |  | $ | 355,486 |  |  | $ | 1,429,754 |  |  | $ | 1,328,886 |
(1)In 2019, the Company invested in first loss subordinated securities and certain IOs and senior securities issued by a Freddie Mac-sponsored residential loan securitization. In accordance with GAAP, the Company has consolidated the underlying seasoned re-performing and non-performing residential loans held in the securitization and the SLST CDOs issued to permanently finance these residential loans, representing Consolidated SLST. SLST CDOs are included in residential collateralized debt obligations, at fair value on the Company's condensed consolidated balance sheets. (2)On January 1, 2020, the Company made a fair value election for its residential loans held in securitization trusts which were included in residential loans, net on the Company's condensed consolidated balance sheets as of December 31, 2019 (see Note 5). In July 2020, the Company transferred additional residential loans to residential loans held in securitization trusts (see Note 9). The following table presents the unrealized gains (losses), net attributable to residential loans, at fair value for the three and nine months ended September 30, 2020 and 2019, respectively (dollar amounts in thousands):
| Three Months Ended
| September 30, 2020 |  | September 30, 2019
| Residential loans |  | Consolidated SLST (1) |  | Residential loans held in securitization trusts |  | Residential loans
Unrealized gains, net | $ | 25,583 |  |  | $ | 41,063 |  |  | $ | 10,143 |  |  | $ | 16,818 |
| Nine Months Ended
| September 30, 2020 |  | September 30, 2019
| Residential loans |  | Consolidated SLST (1) |  | Residential loans held in securitization trusts |  | Residential loans
Unrealized (losses) gains, net | $ | (17,899) |  |  | $ | 28,014 |  |  | $ | 8,418 |  |  | $ | 34,580 |
(1)The fair value of residential loans held in Consolidated SLST is determined in accordance with the practical expedient in ASC 810, Consolidation, ("ASC 810") (see Note 14). See Consolidated SLST below for unrealized gains (losses), net recognized by the Company on its investment in Consolidated SLST. The Company also recognized $2.4 million of net realized gains and $11.7 million of net realized losses on the sale and payoff of residential loans, at fair value during the three and nine months ended September 30, 2020, respectively. The Company recognized $1.7 million and $7.2 million of net realized gains on the sale and payoff of residential loans, at fair value during the three and nine months ended September 30, 2019, respectively. The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of residential loans, at fair value as of September 30, 2020 and December 31, 2019, respectively, are as follows:
| September 30, 2020 |  | December 31, 2019
| Residential loans |  | Consolidated SLST |  | Residential loans held in securitization trusts |  | Residential loans |  | Consolidated SLST
California | 23.4 | % |  | 10.9 | % |  | 15.8 | % |  | 23.9 | % |  | 11.0 | %
Florida | 11.7 | % |  | 10.5 | % |  | 6.4 | % |  | 9.4 | % |  | 10.6 | %
New York | 8.0 | % |  | 9.2 | % |  | 11.0 | % |  | 8.0 | % |  | 9.1 | %
Texas | 5.6 | % |  | 4.0 | % |  | 4.4 | % |  | 5.4 | % |  | 4.0 | %
New Jersey | 5.2 | % |  | 7.0 | % |  | 6.0 | % |  | 5.1 | % |  | 6.9 | %
Maryland | 3.6 | % |  | 3.8 | % |  | 8.1 | % |  | 4.6 | % |  | 3.8 | %
Massachusetts | 2.5 | % |  | 2.8 | % |  | 5.5 | % |  | 2.8 | % |  | 2.9 | %
Illinois | 2.7 | % |  | 6.7 | % |  | 3.2 | % |  | 2.8 | % |  | 6.6 | %
The following table presents the fair value and aggregate unpaid principal balance of the Company's residential loans and residential loans held in securitization trusts in non-accrual status as of September 30, 2020 and December 31, 2019, respectively (dollar amounts in thousands):
| Greater than 90 days past due |  | Less than 90 days past due |  |
| Fair Value |  | Unpaid Principal Balance |  | Fair Value |  | Unpaid Principal Balance |  |
September 30, 2020 | $ | 136,023 |  |  | $ | 157,682 |  |  | $ | 18,586 |  |  | $ | 20,255 |  |  |
December 31, 2019 | 106,199 |  |  | 122,918 |  |  | 9,291 |  |  | 10,705 |  |  |
Residential loans held in Consolidated SLST with an aggregate unpaid principal balance of $173.2 million and $50.7 million were 90 days or more delinquent as of September 30, 2020 and December 31, 2019, respectively. Repurchase Agreements - Residential Loans Residential loans with a fair value of approximately $938.6 million and $881.2 million at September 30, 2020 and December 31, 2019, respectively, are pledged as collateral for repurchase agreements (see Note 11). Residential Collateralized Debt Obligations The Company's residential loans held in securitization trusts are pledged as collateral for the Residential CDOs issued by the Company. These Residential CDOs are accounted for as financings and included in residential collateralized debt obligations on the Company's condensed consolidated balance sheets. In July 2020, the Company completed a securitization of certain residential loans (see Note 9). As of September 30, 2020, the Company had Residential CDOs outstanding of $268.8 million recorded as liabilities on the Company’s condensed consolidated balance sheets with a current weighted average interest rate of 3.57%. The Company had a net investment in four residential securitization trusts of $98.0 million. The net investment amount 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 residential loans, real estate owned and receivables held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding. The Residential CDOs are non-recourse debt for which the Company has no obligation. Consolidated SLST The Company has elected the fair value option on the assets and liabilities held within Consolidated SLST, which requires that changes in valuations in the assets and liabilities of Consolidated SLST be reflected in the Company’s condensed consolidated statements of operations. Our investment in Consolidated SLST is limited to the securities that we own with an aggregate net carrying value of $210.9 million and $276.8 million at September 30, 2020 and December 31, 2019, respectively (see Note 9). During the nine months ended September 30, 2020, the Company purchased approximately $40.0 million in additional senior securities issued by Consolidated SLST and subsequently sold its entire investment in the senior securities issued by Consolidated SLST for sales proceeds of approximately $62.6 million at a realized loss of approximately $2.4 million, which is included in realized gains (losses), net on the Company's condensed consolidated statements of operations. The condensed consolidated balance sheets of Consolidated SLST at September 30, 2020 and December 31, 2019, respectively, are as follows (dollar amounts in thousands):
Balance Sheet | September 30, 2020 |  | December 31, 2019
Assets |  |  |
Residential loans, at fair value | $ | 1,290,005 |  |  | $ | 1,328,886 |
Receivables (1) | 4,162 |  |  | 5,244 |
Total Assets | $ | 1,294,167 |  |  | $ | 1,334,130 |
Liabilities and Equity |  |  |
Residential collateralized debt obligations, at fair value | $ | 1,077,980 |  |  | $ | 1,052,829 |
Accrued expenses and other liabilities (2) | 3,664 |  |  | 2,643 |
Total Liabilities | 1,081,644 |  |  | 1,055,472 |
Equity | 212,523 |  |  | 278,658 |
Total Liabilities and Equity | $ | 1,294,167 |  |  | $ | 1,334,130 |
(1)Included in receivables and other assets on the accompanying condensed consolidated balance sheets. (2)Included in accrued expenses and other liabilities on the accompanying condensed consolidated balance sheets. The SLST CDOs had aggregate unpaid principal balances of approximately $1.3 billion at September 30, 2020 and December 31, 2019. As of September 30, 2020 and December 31, 2019, the weighted average interest rate on the SLST CDOs was 3.53%. The Company does not have any claims to the assets or obligations for the liabilities of Consolidated SLST (other than those securities owned by the Company as of September 30, 2020 and December 31, 2019, respectively). The net fair value of our investment in Consolidated SLST, which represents the difference between the carrying values of residential loans, at fair value held in Consolidated SLST less the carrying value of SLST CDOs, approximates the fair value of our underlying securities (see Note 14). The condensed consolidated statements of operations of Consolidated SLST for the three and nine months ended September 30, 2020, respectively, are as follows (dollar amounts in thousands):
Statements of Operations | Three Months Ended September 30, 2020 |  | Nine Months Ended September 30, 2020
Interest income (1) | $ | 10,896 |  |  | $ | 34,542 |
Interest expense (2) | 7,562 |  |  | 24,255 |
Net interest income | 3,334 |  |  | 10,287 |
Unrealized gains (losses), net (3) | 27,145 |  |  | (34,893) |
Net income (loss) | $ | 30,479 |  |  | $ | (24,606) |
(1)Included in the Company’s accompanying condensed consolidated statements of operations in interest income, residential loans. (2)Included in the Company’s accompanying condensed consolidated statements of operations in interest expense, residential collateralized debt obligations. (3)Presented in unrealized gains (losses), net on the Company’s condensed consolidated statements of operations. Includes $41.1 million and $28.0 million of unrealized gains on residential loans held in Consolidated SLST for the three and nine months ended September 30, 2020, respectively, and $13.9 million and $62.9 million of unrealized losses on SLST CDOs for the three and nine months ended September 30, 2020, respectively.

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