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Fair Value | 6 Months Ended
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Jun. 30, 2020
Fair Value Disclosures [Abstract] |
Fair Value | Fair Value The following tables set forth the fair value of financial assets and liabilities by level within the fair value hierarchy as of June 30, 2020 and December 31, 2019 ($ in thousands):
|  | ​ |  | Level 1 |  | Level 2 |  | Level 3
June 30, 2020 |  | Carrying value |  | Quoted prices in active markets |  | Observable inputs other than Level 1 prices |  | Unobservable inputs
Financial assets |  |  |  |  |  |  |  |
Recurring financial assets |  |  |  |  |  |  |  |
Investments in debt securities at fair value |  | $ | 257,990 |  |  | $ | — |  |  | $ | 257,990 |  |  | $ | — |
Investments in beneficial interests |  | $ | 69,876 |  |  | $ | — |  |  | $ | 69,876 |  |  | $ | — |
Non-recurring financial assets |  |  |  |  |  |  |  |
Mortgage loans, net |  | $ | 1,080,617 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,080,621 |
Investment in Manager |  | $ | 1,223 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,939 |
Investment in AS Ajax E LLC |  | $ | 853 |  |  | $ | — |  |  | $ | 977 |  |  | $ | — |
Investment in GAFS, including warrants |  | $ | 2,819 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,320 |
Investment in Gaea |  | $ | 20,053 |  |  | $ | — |  |  | $ | — |  |  | $ | 20,053 |
Investment in legacy entities |  | $ | 628 |  |  | $ | — |  |  | $ | — |  |  | $ | 628 |
Financial liabilities |  |  |  |  |  |  |  |
Recurring financial liabilities |  |  |  |  |  |  |  |
Warrant liability |  | $ | 11,102 |  |  | $ | — |  |  | $ | 11,102 |  |  | $ | — |
Borrowings under repurchase transactions |  | $ | 400,035 |  |  | $ | — |  |  | $ | 400,035 |  |  | $ | — |
Non-recurring financial liabilities |  |  |  |  |  |  |  |
Secured borrowings, net |  | $ | 609,812 |  |  | $ | — |  |  | $ | 595,993 |  |  | $ | — |
Convertible senior notes, net |  | $ | 111,773 |  |  | $ | 107,231 |  |  | $ | — |  |  | $ | — |
​ |  | ​ |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2019 |  | Carrying value |  | Quoted prices in active markets |  | Observable inputs other than Level 1 prices |  | Unobservable inputs
Financial assets |  |  |  |  |  |  |  |
Recurring financial assets |  |  |  |  |  |  |  |
Investments in debt securities at fair value |  | $ | 231,685 |  |  | $ | — |  |  | $ | 231,685 |  |  | $ | — |
Investments in beneficial interests |  | $ | 57,954 |  |  | $ | — |  |  | $ | 57,954 |  |  | $ | — |
Non-recurring financial assets |  |  |  |  |  |  |  |
Mortgage loans, net |  | $ | 1,151,469 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,260,385 |
Investment in Manager |  | $ | 1,755 |  |  | $ | — |  |  | $ | — |  |  | $ | 7,721 |
Investment in AS Ajax E LLC |  | $ | 931 |  |  | $ | — |  |  | $ | 1,012 |  |  | $ | — |
Investment in GAFS, including warrants |  | $ | 3,023 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,320 |
Investment in Gaea |  | $ | 19,995 |  |  | $ | — |  |  | $ | — |  |  | $ | 19,995 |
Investment in legacy entities |  | $ | 760 |  |  | $ | — |  |  | $ | — |  |  | $ | 760 |
Financial liabilities |  |  |  |  |  |  |  |
Recurring financial liabilities |  |  |  |  |  |  |  |
Borrowings under repurchase transactions |  | $ | 414,114 |  |  | $ | — |  |  | $ | 414,114 |  |  | $ | — |
Non-recurring financial liabilities |  |  |  |  |  |  |  |
Secured borrowings, net |  | $ | 652,747 |  |  | $ | — |  |  | $ | — |  |  | $ | 657,918 |
Convertible senior notes, net |  | $ | 118,784 |  |  | $ | 132,173 |  |  | $ | — |  |  | $ | — |
The fair value of mortgage loans and beneficial interests is estimated using the Manager’s proprietary pricing model which estimates expected cash flows with the discount rate used in the present value calculation representing the estimated effective yield of the loan. The value of transfers of mortgage loans to REO is based upon the present value of future expected cash flows of the loans being transferred. The Company values its Investments in debt securities using estimates provided by its financing counterparties. The Company also relies on its Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on these investments as a comparison to the estimates received from financing counterparties (See Note 5 — Investments). The Company's investment in the Manager is valued by applying an earnings multiple to net income. The Company’s investment in AS Ajax E LLC is valued using estimates provided by financing counterparties. The fair value of the Company's investment in GAFS is presented by applying an earnings multiple to expected earnings. The Company's investment in Gaea and the legacy entities are presented as the carrying value due to the recent nature of the acquisition transactions. The fair value of secured borrowings is estimated using estimates provided by the Company's financing counterparties, which are compared for reasonableness to the Manager’s proprietary pricing model, which estimates expected cash flows of the underlying mortgage loans collateralizing the debt, and which drive the cash flows used to make interest payments. During the quarter ended June 30, 2020, the Company transferred its secured borrowings from level 3 to level 2 due to the Company's increased reliance on the use of estimates provided by its financing counterparties in the determination of secured borrowings fair values. The Company’s borrowings under repurchase agreements are short-term in nature, and the Company’s management believes it can renew the current borrowing arrangements on similar terms in the future. Accordingly, the carrying value of these borrowings approximates fair value. The Company’s convertible senior notes are traded on the NYSE; the debt’s fair value is determined from the NYSE closing price on the balance sheet date. The carrying values of its Cash and cash equivalents, Cash held in trust, Receivable from Servicer, Prepaid expenses and other assets, Management fee payable and Accrued expenses and other liabilities are equal to or approximate fair value. Non-financial assets Property held-for-sale is carried at the lower of its acquisition basis plus improvements (cost) or net realizable value. Net realizable value is determined based on appraisals, broker price opinions, or other market indicators of fair value less expected liquidation costs. The lower of cost or net realizable value for the Company’s REO Property is stated as its carrying value. The following tables set forth the fair value of non-financial assets by level within the fair value hierarchy as of June 30, 2020 and December 31, 2019 ($ in thousands):
|  |  |  |  |  | Level 1 |  | Level 2 |  | Level 3
June 30, 2020 |  | Carrying value |  | Six months ended fair value adjustment recognized in the consolidated statements of income |  | Quoted prices in active markets |  | Observable inputs other than Level 1 prices |  | Unobservable inputs
Non-financial assets |  |  |  |  |  |  |  |  |  |
Property held-for-sale |  | $ | 6,879 |  |  | $ | (1,000) |  |  | $ | — |  |  | $ | — |  |  | $ | 6,879 |
|  |  |  |  |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2019 |  | Carrying value |  | Fair value adjustment recognized in the consolidated statements of income |  | Quoted prices in active markets |  | Observable inputs other than Level 1 prices |  | Unobservable inputs
Non-financial assets |  |  |  |  |  |  |  |  |  |
Property held-for-sale |  | $ | 13,537 |  |  | $ | (2,104) |  |  | $ | — |  |  | $ | — |  |  | $ | 13,537 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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