INTEREST INCOME AND INTEREST EXPENSE (Tables)

12 Months Ended

Dec. 31, 2018

The following table summarizes the interest income recognition methodology for Residential Securities:



	Interest Income Methodology
Agency
Fixed-rate pass-through ⁽¹⁾	Effective yield ⁽³⁾
Adjustable-rate pass-through ⁽¹⁾	Effective yield ⁽³⁾
Multifamily ⁽¹⁾	Contractual Cash Flows
Collateralized mortgage obligation (“CMO”) ⁽¹⁾	Effective yield ⁽³⁾
Reverse mortgages ⁽²⁾	Prospective
Interest-only ⁽²⁾	Prospective
Residential credit
CRT ⁽²⁾	Prospective
Alt-A ⁽²⁾	Prospective
Prime ⁽²⁾	Prospective
Subprime ⁽²⁾	Prospective
NPL/RPL ⁽²⁾	Prospective
Prime jumbo ⁽²⁾	Prospective
Prime jumbo interest-only ⁽²⁾	Prospective


⁽¹⁾	Changes in fair value are recognized in Other comprehensive income (loss) on the accompanying Consolidated Statements of Comprehensive Income (Loss).


⁽²⁾	Changes in fair value are recognized in Net unrealized gains (losses) on instruments measured at fair value through earnings on the accompanying Consolidated Statements of Comprehensive Income (Loss).


⁽³⁾	Effective yield is recalculated for differences between estimated and actual prepayments and the amortized cost is adjusted as if the new effective yield had been applied since inception.

The following presents the components of the Company’s interest income and interest expense for the years ended December 31, 2018, 2017 and 2016.



	For the Years Ended December 31,
	2018		2017		2016
Interest income	(dollars in thousands)
Residential securities	$	2,830,521	$	2,170,041	$	1,944,457
Residential mortgage loans	83,260		30,540		4,147
Commercial investment portfolio ⁽¹⁾	356,981		273,884		252,436
U.S. Treasury securities	160		—		—
Reverse repurchase agreements	61,641		18,661		9,911
Total interest income	$	3,332,563	$	2,493,126	$	2,210,951
Interest expense
Repurchase agreements	1,698,930		891,819		585,826
Debt issued by securitization vehicles	98,013		60,304		44,392
Participation sold	—		195		627
Other	100,917		56,036		26,907
Total interest expense	1,897,860		1,008,354		657,752
Net interest income	$	1,434,703	$	1,484,772	$	1,553,199


⁽¹⁾	Includes commercial real estate debt and preferred equity, corporate debt and assets transferred or pledged to securitization vehicles.