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Valuation (Tables)
 9 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]  
Schedule of Fair Value Measurements
The following tables present the Company's financial instruments measured at fair value on:
September 30, 2013:
(In thousands)
 
 
 
 
 
 
 
 
Description
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
Real estate securities, at fair value:
 
 
 
 
 
 
 
 
Agency RMBS:
 
 
 
 
 
 
 
 
15-year fixed rate mortgages
 
$
—

 
$
199,450

 
$
—

 
$
199,450

30-year fixed rate mortgages
 
—

 
1,194,445

 
—

 
1,194,445

Adjustable rate mortgages
 
—

 
31,707

 
—

 
31,707

Interest only securities
 
—

 
—

 
12,722

 
12,722

Non-Agency RMBS
 
—

 
—

 
34,467

 
34,467

Real estate securities, at fair value
 
—

 
1,425,602

 
47,189

 
1,472,791

Financial derivatives-assets at fair value:
 
 
 
 
 
 
 
 
Fixed payer interest rate swaps
 
—

 
23,077

 
—

 
23,077

TBAs
 
—

 
104

 
—

 
104

Total financial derivatives-assets at fair value
 
—

 
23,181

 
—

 
23,181

Total real estate securities and financial derivatives-assets, at fair value
 
$
—

 
$
1,448,783

 
$
47,189

 
$
1,495,972

Liabilities:
 
 
 
 
 
 
 
 
Financial derivatives-liabilities at fair value:
 
 
 
 
 
 
 
 
Fixed payer interest rate swaps
 
$
—

 
$
(1,409
)
 
$
—

 
$
(1,409
)
Fixed payer swaptions
 
—

 
(86
)
 
—

 
(86
)
TBAs
 
—

 
(5,572
)
 
—

 
(5,572
)
Total financial derivatives-liabilities at fair value
 
$
—

 
$
(7,067
)
 
$
—

 
$
(7,067
)
There were no transfers of financial instruments between Levels 1, 2, or 3 of the fair value hierarchy during the nine month period ended September 30, 2013.
December 31, 2012:
(In thousands)
 
 
 
 
 
 
 
 
Description
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
Real estate securities, at fair value:
 
 
 
 
 
 
 
 
Non-Agency RMBS
 
$
—

 
$
—

 
$
13,596

 
$
13,596

Total real estate securities, at fair value
 
$
—

 
$
—

 
$
13,596

 
$
13,596

There were no transfers of financial instruments between Levels 1, 2, or 3 of the fair value hierarchy during the period September 25, 2012 (commencement of operations) through December 31, 2012.
Unobservable Input Reconciliation
The following tables present additional information about the Company's investments which are measured at fair value for which the Company has utilized Level 3 inputs to determine fair value:
Three month period ended September 30, 2013:
(In thousands)
Agency
RMBS
 
Non-Agency RMBS
Beginning balance at 6/30/2013
$
9,905

 
$
38,810

Transfers(1):
 
 
 
Transfers into level 3
—

 
—

Transfers out of level 3
—

 
—

Purchases
3,094

 
6,402

Proceeds from sales
—

 
(9,247
)
Principal repayments
—

 
(2,927
)
(Amortization)/accretion, net
(626
)
 
307

Net realized gains
—

 
581

Change in net unrealized gains (losses)
349

 
541

Ending balance at 9/30/2013
$
12,722

 
$
34,467

Change in net unrealized gains (losses) for level 3 assets still held as of September 30, 2013
$
349

 
$
718

(1)
Transfers are assumed to occur at the beginning of the period.
Nine month period ended September 30, 2013:
(In thousands)
Agency
RMBS
 
Non-Agency RMBS
Beginning balance at 12/31/2012
$
—

 
$
13,596

Transfers(1):
 
 
 
Transfers into level 3
—

 
—

Transfers out of level 3
—

 
—

Purchases
12,116

 
37,180

Proceeds from sales
—

 
(14,556
)
Principal repayments
—

 
(4,390
)
(Amortization)/accretion, net
(761
)
 
631

Net realized gains
—

 
1,469

Change in net unrealized gains (losses)
1,367

 
537

Ending balance at 9/30/2013
$
12,722

 
$
34,467

Change in net unrealized gains (losses) for level 3 assets still held as of September 30, 2013
$
1,367

 
$
630

(1)
Transfers are assumed to occur at the beginning of the period.

September 25, 2012 (commencement of operations) to September 30, 2012:
(In thousands)
Non-Agency RMBS
Beginning balance at 09/25/2012
$
—

Transfers(1):
 
Transfers into level 3
—

Transfers out of level 3
—

Purchases
5,134

Proceeds from sales
—

Principal repayments
—

(Amortization)/accretion, net
—

Net realized gains
—

Change in net unrealized gains (losses)
—

Ending balance at 9/30/2012
$
5,134

Change in net unrealized gains (losses) for level 3 assets still held as of September 30, 2013
$
—

(1)
Transfers are assumed to occur at the beginning of the period.
Quantitative Information
The following tables identify the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of September 30, 2013 and December 31, 2012:
September 30, 2013:
 
 
Range
 
 
Description
 
Fair Value
 
Valuation Technique
 
Significant
Unobservable Input
 
Min
 
Max
 
Weighted Average(1)
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Private Label Residential Mortgage-Backed Securities
 
$
30,962

 
Market quotes
 
Non Binding Indicative Price
 
$
30.25

 
$
102.97

 
$
78.94

Private Label Residential Mortgage-Backed Securities
 
$
3,505

 
Discounted Cash Flows
 
Yield
 
12.0
%
 
19.1
%
 
15.9
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
30.0
%
 
43.3
%
 
37.3
%
 
 
 
 
 
 
Projected Collateral Losses
 
4.0
%
 
6.0
%
 
4.9
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
6.5
%
 
12.6
%
 
9.2
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
46.3
%
 
51.4
%
 
48.6
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Agency RMBS–Interest Only Securities
 
$
2,351

 
Option Adjusted Spread ("OAS")
 
LIBOR OAS (2)
 
540

 
645

 
583

 
 
 
 
 
 
Projected Collateral Prepayments
 
59.1
%
 
67.7
%
 
62.6
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
32.3
%
 
40.9
%
 
37.4
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
Agency RMBS–Interest Only Securities
 
$
10,371

 
Market quotes
 
Non Binding Indicative Price
 
$
4.89

 
$
21.42

 
$
13.80

(1)
Averages are weighted based on the fair value of the related instrument.
(2)
Shown in basis points.
December 31, 2012:
 
 
Range
 
 
Description
 
Fair Value
 
Valuation Technique
 
Significant
Unobservable Input
 
Min
 
Max
 
Weighted Average(1)
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Private Label Residential Mortgage-Backed Securities
 
$
13,596

 
Discounted Cash Flows
 
Yield
 
6.2
%
 
20.4
%
 
8.5
%
 
 
 
 
 
 
Projected Collateral Prepayments
 
12.6
%
 
52.2
%
 
29.4
%
 
 
 
 
 
 
Projected Collateral Losses
 
11.3
%
 
41.4
%
 
26.9
%
 
 
 
 
 
 
Projected Collateral Recoveries
 
6.8
%
 
33.2
%
 
23.8
%
 
 
 
 
 
 
Projected Collateral Scheduled Amortization
 
3.0
%
 
52.7
%
 
19.9
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
(1)
Averages are weighted based on the fair value of the related instrument.