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Residential Loans | 12 Months Ended
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Dec. 31, 2020
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] |
Residential Loans | Residential Loans The Company’s acquired residential loans, including performing, re-performing and non-performing residential loans, and business purpose loans, are presented at fair value on its consolidated balance sheets as of December 31, 2020 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 consolidated statements of operations. Certain of the residential loans acquired by the Company prior to January 1, 2020 were accounted for under ASC 310-30 as of December 31, 2019. Additionally, certain of the residential loans held in securitization trusts as of December 31, 2019 were carried at their unpaid principal balances, net of unamortized premium or discount, unamortized loan origination costs and allowance for loan losses as of December 31, 2019. The following table presents the carrying value of the Company's residential loans as of December 31, 2020 and 2019, respectively (dollar amounts in thousands):
| December 31, 2020 |  | December 31, 2019
Residential loans, at fair value | $ | 3,049,166 |  |  | $ | 2,758,640 |
Residential loans, net (1) | — |  |  | 202,756 |
Total carrying value | $ | 3,049,166 |  |  | $ | 2,961,396 |
(1)Includes residential loans accounted for under ASC 310-30 with a carrying value of $158.7 million as of December 31, 2019. Residential Loans, at Fair Value The following table presents the Company’s residential loans, at fair value, which consist of residential loans held by the Company, Consolidated SLST and other securitization trusts, as of December 31, 2020 and 2019, respectively (dollar amounts in thousands):
| December 31, 2020 |  | December 31, 2019
| Residential loans (1) |  | Consolidated SLST (2) |  | Residential loans held in securitization trusts (3) |  | Total |  | Residential loans (1) |  | Consolidated SLST (2) |  | Total
Principal | $ | 1,097,528 |  |  | $ | 1,231,669 |  |  | $ | 696,543 |  |  | $ | 3,025,740 |  |  | $ | 1,464,984 |  |  | $ | 1,322,131 |  |  | $ | 2,787,115 |
(Discount)/premium | (42,259) |  |  | 1,337 |  |  | (41,506) |  |  | (82,428) |  |  | (81,372) |  |  | 6,455 |  |  | (74,917) |
Unrealized gains | 35,661 |  |  | 33,779 |  |  | 36,414 |  |  | 105,854 |  |  | 46,142 |  |  | 300 |  |  | 46,442 |
Carrying value | $ | 1,090,930 |  |  | $ | 1,266,785 |  |  | $ | 691,451 |  |  | $ | 3,049,166 |  |  | $ | 1,429,754 |  |  | $ | 1,328,886 |  |  | $ | 2,758,640 |
(1)Certain of the Company's residential loans, at fair value are pledged as collateral for repurchase agreements as of December 31, 2020 and 2019 (s ee Note 10). (2)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 Consolidated SLST CDOs issued to permanently finance these residential loans, representing Consolidated SLST. Consolidated SLST CDOs are included in collateralized debt obligations on the Company's consolidated balance sheets. (3)On January 1, 2020, the Company made a fair value election for certain residential loans held in securitization trusts that were carried at amortized cost, net as of December 31, 2019. During the year ended December 31, 2020, the Company transferred residential loans to two securitization trusts for the purpose of obtaining non-recourse, longer-term financing on these residential loans (s ee Note 7). The Company's residential loans held in securitization trusts are pledged as collateral for CDOs issued by the Company. These CDOs are accounted for as financings and included in collateralized debt obligations on the Company's consolidated balance sheets (s ee Note 11). The following table presents the unrealized gains (losses), net attributable to residential loans, at fair value for the years ended December 31, 2020, 2019 and 2018, respectively (dollar amounts in thousands):
| For the Years Ended December 31,
| 2020 |  | 2019 |  | 2018
| Residential loans |  | Consolidated SLST (1) |  | Residential loans held in securitization trusts |  | Residential loans | Consolidated SLST (1) |  | Residential loans
Unrealized (losses) gains, net | $ | (4,440) |  |  | $ | 33,479 |  |  | $ | 29,690 |  |  | $ | 42,087 |  | $ | 300 |  |  | $ | 4,096 |
(1)The fair value of residential loans held in Consolidated SLST is determined in accordance with the practical expedient in 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 $18.1 million of net realized losses on the sale of residential loans, at fair value for the year ended December 31, 2020. The Company recognized $2.9 million and $4.2 million of net realized gains on the sale of residential loans, at fair value during the years ended December 31, 2019 and 2018, respectively. The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of residential loans, at fair value as of December 31, 2020 and 2019, respectively, are as follows:
| December 31, 2020 |  | December 31, 2019
| Residential loans |  | Consolidated SLST |  | Residential loans held in securitization trusts |  | Residential loans |  | Consolidated SLST
California | 23.6 | % |  | 10.9 | % |  | 19.8 | % |  | 23.9 | % |  | 11.0 | %
Florida | 13.1 | % |  | 10.5 | % |  | 8.1 | % |  | 9.4 | % |  | 10.6 | %
New York | 9.2 | % |  | 9.3 | % |  | 8.9 | % |  | 8.0 | % |  | 9.1 | %
Texas | 5.6 | % |  | 4.0 | % |  | 4.3 | % |  | 5.4 | % |  | 4.0 | %
New Jersey | 5.6 | % |  | 7.1 | % |  | 5.6 | % |  | 5.1 | % |  | 6.9 | %
Maryland | 2.8 | % |  | 3.8 | % |  | 6.3 | % |  | 4.6 | % |  | 3.8 | %
Illinois | 2.5 | % |  | 6.8 | % |  | 2.7 | % |  | 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 December 31, 2020 and 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 |  |
December 31, 2020 | $ | 149,444 |  |  | $ | 169,553 |  |  | $ | 16,057 |  |  | $ | 17,748 |  |  |
December 31, 2019 | 106,199 |  |  | 122,918 |  |  | 9,291 |  |  | 10,705 |  |  |
Residential loans held in Consolidated SLST with an aggregate unpaid principal balance of $236.7 million and $50.7 million were 90 days or more delinquent as of December 31, 2020 and 2019, respectively. 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 consolidated statements of operations. 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 December 31, 2020 and 2019, respectively). The net fair value of our investment in Consolidated SLST, which represents the difference between the carrying values of residential loans held in Consolidated SLST less the carrying value of Consolidated SLST CDOs, approximates the fair value of our underlying securities and amounted to $212.1 million and $276.8 million at December 31, 2020 and 2019, respectively (see Notes 7 and 14). During the year ended December 31, 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 consolidated statements of operations. The condensed consolidated balance sheets of Consolidated SLST at December 31, 2020 and 2019, respectively, are as follows (dollar amounts in thousands):
Balance Sheet | December 31, 2020 |  | December 31, 2019
Assets |  |  |
Residential loans, at fair value | $ | 1,266,785 |  |  | $ | 1,328,886 |
Receivables (1) | 4,075 |  |  | 5,244 |
Total Assets | $ | 1,270,860 |  |  | $ | 1,334,130 |
Liabilities and Equity |  |  |
Collateralized debt obligations, at fair value | $ | 1,054,335 |  |  | $ | 1,052,829 |
Other liabilities | 2,781 |  |  | 2,643 |
Total Liabilities | 1,057,116 |  |  | 1,055,472 |
Equity | 213,744 |  |  | 278,658 |
Total Liabilities and Equity | $ | 1,270,860 |  |  | $ | 1,334,130 |
(1)Included in other assets on the accompanying consolidated balance sheets. The condensed consolidated statements of operations of Consolidated SLST for the years ended December 31, 2020 and 2019, respectively, are as follows (dollar amounts in thousands):
| For the Years Ended December 31,
Statements of Operations | 2020 |  | 2019 |  |
Interest income | $ | 45,194 |  |  | $ | 4,764 |  |  |
Interest expense | 31,663 |  |  | 2,945 |  |  |
Net interest income | 13,531 |  |  | 1,819 |  |  |
Unrealized losses, net (1) | (32,073) |  |  | (83) |  |  |
Net (loss) income | $ | (18,542) |  |  | $ | 1,736 |  |  |
(1)Presented in unrealized gains (losses), net on the Company’s consolidated statements of operations. Includes $33.5 million and $0.3 million of unrealized gains on residential loans held in Consolidated SLST for the years ended December 31, 2020 and 2019, respectively, and $65.6 million and $0.4 million of unrealized losses on Consolidated SLST CDOs for the years ended December 31, 2020 and 2019, respectively. Residential Loans, Net As of December 31, 2019, the carrying value of the Company’s residential loans, net accounted for under ASC 310-30 amounted to approximately $158.7 million. Certain of the residential loans, net were pledged as collateral for repurchase agreements as of December 31, 2019 (s ee Note 10). The following table details activity in accretable yield for the residential loans, net for the year ended December 31, 2019 (dollar amounts in thousands):
| December 31, 2019 |  |
Balance at beginning of period | $ | 195,560 |  |  |
Additions | 1,784 |  |  |
Disposals | (53,624) |  |  |
Accretion | (7,015) |  |  |
Balance at end of period (1) | $ | 136,705 |  |  |
(1)Accretable yield is the excess of the residential loans’ cash flows expected to be collected over the purchase price. The cash flows expected to be collected represented the Company’s estimate of the amount and timing of undiscounted principal and interest cash flows. Additions included reclassification to accretable yield from nonaccretable yield. Disposals included residential loan dispositions, which include refinancing, sale and foreclosure of the underlying collateral and resulting removal of the residential 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 were based on various estimates regarding loan performance and the value of the underlying real estate securing the loans. As the Company continued to update its estimates regarding the loans and the underlying collateral, the accretable yield was subject to change. Therefore, the amount of accretable income recorded for the year ended December 31, 2019 was not necessarily indicative of future results. The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of our residential loans, net as of December 31, 2019 were as follows:
| December 31, 2019 |  |
North Carolina | 10.5 | % |  |
Florida | 10.1 | % |  |
Georgia | 7.0 | % |  |
South Carolina | 5.8 | % |  |
Texas | 5.6 | % |  |
New York | 5.5 | % |  |
Ohio | 5.2 | % |  |
Virginia | 5.2 | % |  |
Residential Loans Held in Securitization Trusts, Net Residential loans held in securitization trusts, net were comprised of ARM loans transferred to Consolidated VIEs that issued CDOs. Residential loans held in securitization trusts, net consisted of the following as of December 31, 2019 (dollar amounts in thousands):
| December 31, 2019 |  |
Unpaid principal balance | $ | 47,237 |  |  |
Deferred origination costs – net | 301 |  |  |
Allowance for loan losses | (3,508) |  |  |
Total | $ | 44,030 |  |  |
Allowance for Loan Losses - The following table presents the activity in the Company’s allowance for loan losses on residential loans held in securitization trusts, net for the years ended December 31, 2019 and 2018, respectively (dollar amounts in thousands):
| For the Years Ended December 31,
| 2019 |  | 2018 |  |
Balance at beginning of period | $ | 3,759 |  |  | $ | 4,191 |  |  |
Provisions for loan losses | 25 |  |  | 166 |  |  |
Transfer to real estate owned | (167) |  |  | — |  |  |
Charge-offs | (109) |  |  | (598) |  |  |
Balance at the end of period | $ | 3,508 |  |  | $ | 3,759 |  |  |
Prior to January 1, 2020, the Company evaluated the adequacy of its allowance for loan losses on a recurring basis. 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 loans held in securitization trusts. As part of the Company’s allowance for loan loss adequacy analysis, management assessed an overall level of allowances while also assessing credit losses inherent in each non-performing residential loan held in securitization trusts. These estimates involved 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. As of December 31, 2019, we had 18 delinquent loans with an aggregate principal amount outstanding of approximately $10.2 million categorized as residential loans held in securitization trusts, net, of which $6.7 million, or 66%, were under some form of temporary modified payment plan. The table below shows delinquencies in our portfolio of residential 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 | %
The geographic concentrations of credit risk exceeding 5% of the total loan balances in our residential loans held in securitization trusts, net as of December 31, 2019 were as follows:
| December 31, 2019 |  |
New York | 36.1 | % |  |
Massachusetts | 17.2 | % |  |
New Jersey | 12.8 | % |  |
Florida | 12.1 | % |  |
Maryland | 5.5 | % |  |

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