The Company has investments in Freddie Mac securitizations (“FREMF Trusts”) which are structured as pass-through entities that receive principal and interest on the underlying collateral and distribute those payments to the certificate holders. The FREMF Trusts are VIEs and the Company is considered to be the primary beneficiary as a result of its ability to replace the special servicer without cause through its ownership of the Class C Certificates and its current designation as the directing certificate holder. The FREMF Trusts are included in the “Commercial Trusts” in the tables below.

The Company purchased approximately $94 million of a subordinated tranche in a securitization trust in 2018. As the directing holder, the Company can remove the special servicer with or without cause as well as direct activities that are considered to be most significant to the economic performance of the trust. As such, the Company was determined to be the primary beneficiary and consolidates the trust. The trust is included in “Commercial Trusts” in the tables below.

Upon consolidation, the Company elected the fair value option for the financial assets and liabilities of the Commercial Trusts in order to avoid an accounting mismatch, and to represent more faithfully the economics of its interest in the entities. The fair value option requires that changes in fair value be reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss). The Company applied the practical expedient under ASU 2014-07, whereby the Company determines whether the fair value of the financial assets or financial liabilities is more observable as a basis for measuring the less observable financial instruments. The Company has determined that the fair value of the financial liabilities of the Commercial Trusts are more observable, since the prices for these liabilities are primarily available from third-party pricing services utilized for multifamily mortgage-backed securities, while the individual assets of the trusts are inherently less capable of precise measurement given their illiquid nature and the limitations on available information related to these assets. Given that the Company’s methodology for valuing the financial assets of the Commercial Trusts are an aggregate fair value derived from the fair value of the financial liabilities, the Company has determined that the fair value of each of the financial assets in their entirety should be classified in Level 2 of the fair value measurement hierarchy.

The Commercial Trusts mortgage loans had an aggregate unpaid principal balance of $2.2 billion at March 31, 2019. At March 31, 2019, there were no loans 90 days or more past due or on nonaccrual status. There is no gain or loss attributable to instrument-specific credit risk of the underlying loans or securitized debt securities at March 31, 2019 based upon the Company’s process of monitoring events of default on the underlying mortgage loans.

In February 2019, the Company closed NLY 2019-FL2 a managed commercial real estate collateralized loan obligation (“CLO”) securitization with a face value of $857.3 million, which provides non-recourse financing to the Company collateralized by certain commercial real estate mortgage loans originated by the Company. As of March 31, 2019 a total of $629.0 million of notes were held by third parties and the Company retained or purchased $228.5 million of subordinated notes and preferred shares, which eliminate upon consolidation. The Company has determined that it is the primary beneficiary because it has the right to direct the servicer as well as remove the special servicer without cause and it holds variable interests that could be potentially significant to the CLO. The transfers of loans to the CLO did not qualify for sale accounting because the Company maintains effective control over the loans. The Company elected the fair value option for the financial liabilities issued by the CLO in order to simplify the accounting; however, the commercial loans continue to be carried at amortized cost as they were not eligible for the fair value option as it was not elected at origination of the loans. The Company incurred $8.3 million of costs in connection with the CLO that were expensed as incurred during the three months ended March 31, 2019. The aggregate unpaid principal balance of loans in the CLO was $739.1 million at March 31, 2019 and there were no loans 90 days or more past due or on nonaccrual status. There is no gain or loss attributable to instrument-specific credit risk of the debt securities at March 31, 2019 based upon the Company’s process of monitoring events of default on the underlying mortgage loans. The contractual principal amount of the CLO debt held by third parties was $628.9 million at March 31, 2019.

The Company consolidates a securitization trust, which is included in “Residential Trusts” in the tables below, that issued residential mortgage-backed securities that are collateralized by residential mortgage loans that had been transferred to the trust by one of the Company’s subsidiaries. The Company owns the subordinate securities, and a subsidiary of the Company continues to be the master servicer. As such, the Company is deemed to be the primary beneficiary of the residential mortgage trust and consolidates the entity. The Company has elected the fair value option for the financial assets and liabilities of this VIE, but has not elected to apply the practical expedient under ASU 2014-13 as prices of both the financial assets and financial liabilities of the residential mortgage trust are available from third-party pricing services. The contractual principal amount of the residential mortgage trust’s debt held by third parties was $82.8 million at March 31, 2019.

In March 2018, the Company closed OBX 2018-1, with a face value of $327.5 million. In July 2018, the Company closed OBX 2018-EXP1 with a face value of 383.4 million. In October 2018, the Company closed OBX 2018-EXP2 with a face value of $384.0 million. In January 2019, the Company closed OBX 2019-INV1, with a face value of $394.0 million. The OBX 2018-1 Trust, the OBX 2018-EXP1 Trust, the OBX 2018-EXP2 Trust and the OBX 2019-INV1 Trust are referred to collectively as the “OBX Trusts”. These securitizations represent financing transactions which provide non-recourse financing to the Company that are collateralized by residential mortgage loans purchased by the Company. As of March 31, 2019, a total of $966.4 million of bonds were held by third parties and the Company retained $363.0 million of mortgage-backed securities, which were eliminated in consolidation. The Company is deemed to be the primary beneficiary and consolidates the OBX Trusts because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs. The Company has elected the fair value option for the financial assets and liabilities of these VIEs, but has not elected the practical expedient under ASU 2014-13 as prices of both the financial assets and financial liabilities of the residential mortgage trusts are available from third-party pricing services. The Company incurred $1.7 million and $1.5 million of costs in connection with these securitizations that were expensed as incurred during the three months ended March 31, 2019 and 2018, respectively. The contractual principal amount of the OBX Trusts’ debt held by third parties was $963.4 million at March 31, 2019.

Although the residential mortgage loans have been sold for bankruptcy and state law purposes, the transfers of the residential mortgage loans to the OBX Trusts did not qualify for sale accounting and are reflected as intercompany secured borrowings that are eliminated upon consolidation.

In June 2016, a consolidated subsidiary of the Company entered into a credit facility with a third party financial institution. As of March 31, 2019, the borrowing limit on this facility was $400.0 million. The subsidiary was deemed to be a VIE and the Company was determined to be the primary beneficiary due to its role as collateral manager and because it holds a variable interest in the entity that could potentially be significant to the entity. The Company has pledged as collateral for this facility corporate loans with a carrying amount of $555.4 million at March 31, 2019. The transfers did not qualify for sale accounting and are reflected as an intercompany secured borrowing that is eliminated upon consolidation. At March 31, 2019, the subsidiary had an intercompany receivable of $350.1 million, which eliminates upon consolidation and an Other secured financing of $350.1 million to the third party financial institution.

In July 2017, a consolidated subsidiary of the Company entered into a $150.0 million credit facility with a third party financial institution. The subsidiary was deemed to be a VIE and the Company was determined to be the primary beneficiary due to its role as servicer and because it holds a variable interest in the entity that could potentially be significant to the entity. The Company has transferred corporate loans to the subsidiary with a carrying amount of $233.8 million at March 31, 2019, which continue to be reflected in the Company’s Consolidated Statements of Financial Condition in Loans. At March 31, 2019, the subsidiary had an Other secured financing of $148.5 million to the third party financial institution.

In January 2019, a consolidated subsidiary of the Company (the “Borrower”) entered into a $200.0 million credit facility with a third party financial institution. As of March 31, 2019, the Borrower had not drawn on the credit facility.

The Company also owns variable interests in an entity that invests in MSRs and has structured its operations, funding and capitalization into pools of assets and liabilities, each referred to as a “silo.” Owners of variable interests in a given silo are entitled to all of the returns and subjected to the risk of loss on the investments and operations of that silo and have no substantive recourse to the assets of any other silo. While the Company previously held 100% of the voting interests in this entity, in August 2017, the Company sold 100% of such interests, and entered into an agreement with the entity’s affiliated portfolio manager giving the Company the power over the silo in which it owns all of the beneficial interests. As a result, the Company is considered to be the primary beneficiary and consolidates this silo.

The Company’s exposure to the obligations of its VIEs is generally limited to the Company’s investment in the VIEs of $2.1 billion at March 31, 2019. Assets of the VIEs may only be used to settle obligations of the VIEs. Creditors of the VIEs have no recourse to the general credit of the Company. The Company is not contractually required to provide and has not provided any form of financial support to the VIEs. No gains or losses were recognized upon consolidation of existing VIEs. Interest income and expense are recognized using the effective interest method.

The statements of financial condition of the Company’s VIEs, excluding the CLO, credit facility VIEs and OBX Trusts as the transfers of loans did not meet the criteria to be accounted for as sales, that are reflected in the Company’s Consolidated Statements of Financial Condition at March 31, 2019 and December 31, 2018 are as follows:



March 31, 2019
	Commercial Trusts		Residential Trusts		MSR Silo
Assets	(dollars in thousands)
Cash and cash equivalents	$	—	$	—	$	40,714
Loans	—		—		101,344
Assets transferred or pledged to securitization vehicles	2,205,768		101,994		—
Mortgage servicing rights	—		—		500,744
Interest receivable	11,269		540		—
Derivative assets	—		—		15
Other assets	—		—		27,290
Total assets	$	2,217,037	$	102,534	$	670,107
Liabilities
Debt issued by securitization vehicles (non-recourse)	$	2,016,202	$	82,220	$	—
Other secured financing	—		—		57,667
Payable for unsettled trades	—		—		15,924
Interest payable	4,334		196		—
Other liabilities	—		179		1,736
Total liabilities	$	2,020,536	$	82,595	$	75,327



December 31, 2018
	Commercial Trusts		Residential Trusts		MSR Silo
Assets	(dollars in thousands)
Cash and cash equivalents	$	—	$	—	$	30,444
Loans	—		—		97,464
Assets transferred or pledged to securitization vehicles	2,738,369		105,003		—
Mortgage servicing rights	—		—		557,813
Interest receivable	11,451		539		—
Other assets	—		4		28,756
Total assets	$	2,749,820	$	105,546	$	714,477
Liabilities
Debt issued by securitization vehicles (non-recourse)	$	2,509,264	$	71,324	$	—
Other secured financing	—		—		68,385
Interest payable	4,594		238		—
Other liabilities	—		—		1,975
Total liabilities	$	2,513,858	$	71,562	$	70,360

The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the Company’s VIEs, excluding the credit facility VIEs, OBX Trusts and CLO, at March 31, 2019 are as follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk



Commercial Trusts					Residential Trusts
Property Location	Principal Balance		% of Balance		Property Location	Principal Balance		% of Balance
(dollars in thousands)
Texas	$	546,190	17.9	%	California	$	45,023	44.5	%
California	461,478		15.1	%	Texas	13,261		13.1	%
Maryland	407,266		13.4	%	Washington	7,466		7.4	%
Virginia	349,921		11.5	%	Illinois	7,197		7.1	%
Pennsylvania	280,201		9.2	%	Florida	5,165		5.1	%
Other⁽¹⁾	1,005,457		32.9	%	Other ⁽¹⁾	23,155		22.8	%
Total	$	3,050,513	100.0	%		$	101,267	100.0	%


⁽¹⁾	No individual state greater than 5%.