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SECURITIES
 9 Months Ended
Sep. 30, 2021
Investments, Debt and Equity Securities [Abstract]  
SECURITIES
5. SECURITIES
The Company’s investments in securities include agency, credit risk transfer, non-agency and commercial mortgage-backed securities. All of the debt securities are classified as available-for-sale. Available-for-sale debt securities are carried at fair value, with changes in fair value recognized in other comprehensive income, unless the fair value option is elected in which case changes in fair value are recognized in Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss). Transactions for regular-way securities are recorded on trade date, including to-be-announced securities (“TBA securities”) that meet the regular-way securities scope exception from derivative accounting. Gains and losses on disposals of securities are recorded on trade date based on the specific identification method.
Impairment – Management evaluates available-for-sale securities and held-to-maturity debt securities for impairment at least quarterly, and more frequently when economic or market conditions warrant such evaluation. When the fair value of an available-for-sale security is less than its amortized cost, the security is considered impaired. For securities that are impaired, the Company determines if it (1) has the intent to sell the security, (2) is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, or (3) does not expect to recover the entire amortized cost basis of the security.  Further, the security is analyzed for credit loss (the difference between the present value of cash flows expected to be collected and the amortized cost basis). The credit loss, if any, will then be recognized in the Consolidated Statements of Comprehensive Income (Loss) as a Securities Loss Provision and reflected as an Allowance for Credit Losses on Securities on the Consolidated Statements of Financial Condition, while the balance of losses related to other factors will be recognized as a component of Other comprehensive income (loss). For the nine months ended September 30, 2021, the Company recognized a $0.4 million impairment on a commercial mortgage-backed security that it intends to sell. There was no impairment recognized for the three and nine months ended September 30, 2020.
Agency Mortgage-Backed Securities - The Company invests in mortgage pass-through certificates, collateralized mortgage obligations and other MBS representing interests in or obligations backed by pools of residential or multifamily mortgage loans and certificates. Many of the underlying loans and certificates are guaranteed by the Government National Mortgage Association (“Ginnie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) or the Federal National Mortgage Association (“Fannie Mae”) (collectively, “Agency mortgage-backed securities”). 
Agency mortgage-backed securities may include forward contracts for Agency mortgage-backed securities purchases or sales of a generic pool, on a to-be-announced basis. TBA securities without intent to accept delivery (“TBA derivatives”) are accounted for as derivatives as discussed in the “Derivative Instruments” Note.
CRT Securities - CRT securities are risk sharing instruments issued by Fannie Mae and Freddie Mac, and similarly structured transactions arranged by third party market participants. CRT securities are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors.
Non-Agency Mortgage-Backed Securities - The Company invests in non-Agency mortgage-backed securities such as those issued in prime loan, Alt-A loan, subprime loan, non-performing loan (“NPL”) and re-performing loan (“RPL”) securitizations.
Agency mortgage-backed securities, non-Agency mortgage-backed securities and residential CRT securities are referred to herein as “Residential Securities.” Although the Company generally intends to hold most of its Residential Securities until maturity, it may, from time to time, sell any of its Residential Securities as part of the overall management of its portfolio.
Commercial Mortgage-Backed Securities (“Commercial Securities”) - Certain commercial mortgage-backed securities (“CMBS”) are classified as available-for-sale and reported at fair value with any credit loss recognized through an allowance for credit losses and any other unrealized gains and losses reported as a component of Other comprehensive income (loss). Management evaluates its Commercial Securities for impairment at least quarterly. The Company elected the fair value option for all other Commercial Securities, including conduit and credit CMBS, to simplify the accounting where the unrealized gains and losses on these financial instruments are recorded through earnings. As of September 30, 2021, CMBS included in the announced sale of the Company’s CRE business are reported in Assets of disposal group held for sale and Securities, respectively, in the Consolidated Statements of Financial Condition. Refer to the “Sale of Commercial Real Estate Business” Note for additional information on the transaction.
The following represents a rollforward of the activity for the Company’s securities, excluding securities transferred or pledged to securitization vehicles, for the nine months ended September 30, 2021:
Agency SecuritiesResidential Credit SecuritiesCommercial SecuritiesTotal
(dollars in thousands)
Beginning balance January 1, 2021
$74,067,059 $1,504,595 $80,742 $75,652,396 
Purchases16,066,339 1,669,148 265,006 18,000,493 
Sales and transfers (1)
(10,961,428)(102,216)(78,770)(11,142,414)
Principal paydowns(14,083,553)(555,460)— (14,639,013)
(Amortization) / accretion(542,125)820 292 (541,013)
Fair value adjustment(1,728,213)18,280 1,836 (1,708,097)
Ending balance September 30, 2021
$62,818,079 $2,535,167 $269,106 $65,622,352 
(1) Includes transfers to assets of disposal group held for sale.
The following tables present the Company’s securities portfolio, excluding securities transferred or pledged to securitization vehicles, that were carried at their fair value at September 30, 2021 and December 31, 2020:
 September 30, 2021
 Principal /
Notional		Remaining PremiumRemaining DiscountAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Estimated Fair Value
Agency(dollars in thousands)
Fixed-rate pass-through$55,667,603 $3,107,102 $(19,552)$58,755,153 $1,815,792 $(272,823)$60,298,122 
Adjustable-rate pass-through331,164 1,644 (2,991)329,817 19,204 — 349,021 
CMO120,598 1,906 — 122,504 6,740 — 129,244 
Interest-only2,091,601 482,544 — 482,544 919 (153,522)329,941 
Multifamily(1)
4,435,186 243,588 (979)1,668,149 23,448 (21,125)1,670,472 
Reverse mortgages38,452 3,721 — 42,173 — (894)41,279 
Total agency securities$62,684,604 $3,840,505 $(23,522)$61,400,340 $1,866,103 $(448,364)$62,818,079 
Residential credit       
Credit risk transfer (2)
$780,039 $6,639 $(1,593)$776,784 $11,598 $(1,147)$787,235 
Alt-A66,805 31 (16,879)49,957 3,584 — 53,541 
Prime (3)
343,013 10,197 (15,226)269,586 12,191 (2,040)279,737 
Subprime183,962 403 (16,984)167,381 9,340 (285)176,436 
NPL/RPL1,130,807 1,107 (2,126)1,129,788 7,700 (357)1,137,131 
Prime jumbo (>=2010 vintage) (4)
252,011 6,105 (5,844)101,283 4,663 (4,859)101,087 
Total residential credit securities$2,756,637 $24,482 $(58,652)$2,494,779 $49,076 $(8,688)$2,535,167 
Total Residential Securities$65,441,241 $3,864,987 $(82,174)$63,895,119 $1,915,179 $(457,052)$65,353,246 
Commercial
Commercial Securities$269,000 $6 $(103)$268,903 $209 $(6)$269,106 
Total securities$65,710,241 $3,864,993 $(82,277)$64,164,022 $1,915,388 $(457,058)$65,622,352 
 December 31, 2020
 Principal /
Notional		Remaining PremiumRemaining DiscountAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Estimated Fair Value
Agency(dollars in thousands)
Fixed-rate pass-through$64,800,235 $3,325,020 $(22,143)$68,103,112 $3,200,542 $(1,076)$71,302,578 
Adjustable-rate pass-through455,675 2,869 (3,369)455,175 22,341 — 477,516 
CMO139,664 2,177 — 141,841 7,926 — 149,767 
Interest-only2,790,537 564,297 — 564,297 3,513 (145,901)421,909 
Multifamily (1)
1,910,384 50,148 (1,057)1,604,913 59,548 (954)1,663,507 
Reverse mortgages47,585 4,183 — 51,768 252 (238)51,782 
Total agency investments$70,144,080 $3,948,694 $(26,569)$70,921,106 $3,294,122 $(148,169)$74,067,059 
Residential credit       
Credit risk transfer (2)
$544,780 $7,324 $(2,430)$538,941 $3,062 $(9,600)$532,403 
Alt-A93,001 51 (17,368)75,684 4,644 — 80,328 
Prime (3)
372,539 7,008 (15,999)168,861 14,607 (719)182,749 
Subprime197,779 584 (18,181)180,182 8,312 (61)188,433 
NPL/RPL475,108 821 (2,416)473,513 3,782 (1,448)475,847 
Prime jumbo (>=2010 vintage) (4)
336,320 7,010 (5,300)46,406 3,680 (5,251)44,835 
Total residential credit securities$2,019,527 $22,798 $(61,694)$1,483,587 $38,087 $(17,079)$1,504,595 
Total Residential Securities$72,163,607 $3,971,492 $(88,263)$72,404,693 $3,332,209 $(165,248)$75,571,654 
Commercial
Commercial Securities$89,858 $— $(7,471)$82,387 $54 $(1,699)$80,742 
Total securities$72,253,465 $3,971,492 $(95,734)$72,487,080 $3,332,263 $(166,947)$75,652,396 
(1) Principal/Notional amount includes $3.0 billion and $354.6 million of Agency Multifamily interest-only securities as of September 30, 2021 and December 31, 2020, respectively.
(2) Principal/Notional amount includes $8.3 million and $10.7 million of a CRT interest-only security as of September 30, 2021 and December 31, 2020, respectively.
(3) Principal/Notional amount includes $68.4 million and $194.7 million of Prime interest-only securities as of September 30, 2021 and December 31, 2020, respectively.
(4) Principal/Notional amount includes $151.0 million and $291.6 million of Prime Jumbo interest-only securities as of September 30, 2021 and December 31, 2020, respectively.

The following table presents the Company’s Agency mortgage-backed securities portfolio, excluding securities transferred or pledged to securitization vehicles, by issuing Agency at September 30, 2021 and December 31, 2020: 
September 30, 2021December 31, 2020
Investment Type(dollars in thousands)
Fannie Mae$49,315,620 $56,218,033 
Freddie Mac12,230,337 17,735,041 
Ginnie Mae1,272,122 113,985 
Total$62,818,079 $74,067,059 
Actual maturities of the Company’s Residential Securities are generally shorter than stated contractual maturities because actual maturities of the portfolio are affected by periodic payments and prepayments of principal on the underlying mortgages.
The following table summarizes the Company’s Residential Securities, excluding securities transferred or pledged to securitization vehicles, at September 30, 2021 and December 31, 2020, according to their estimated weighted average life classifications:
 September 30, 2021December 31, 2020
Estimated Fair ValueAmortized
Cost		Estimated Fair ValueAmortized
Cost
Estimated weighted average life(dollars in thousands)
Less than one year$321,612 $319,986 $110,203 $109,540 
Greater than one year through five years16,777,839 16,217,155 45,643,138 43,404,877 
Greater than five years through ten years46,915,780 46,011,641 28,509,058 27,610,923 
Greater than ten years1,338,015 1,346,337 1,309,255 1,279,353 
Total$65,353,246 $63,895,119 $75,571,654 $72,404,693 
The estimated weighted average lives of the Residential Securities at September 30, 2021 and December 31, 2020 in the table above are based upon projected principal prepayment rates. The actual weighted average lives of the Residential Securities could be longer or shorter than projected.
The following table presents the gross unrealized losses and estimated fair value of the Company’s Agency mortgage-backed securities, accounted for as available-for-sale where the fair value option has not been elected, by length of time that such securities have been in a continuous unrealized loss position at September 30, 2021 and December 31, 2020.
 September 30, 2021December 31, 2020
 
Estimated Fair Value (1)
Gross Unrealized Losses (1)
Number of Securities (1)
Estimated Fair Value (1)
Gross Unrealized Losses (1)
Number of Securities (1)
 (dollars in thousands)
Less than 12 months$19,701,354 $(292,136)409 $777,586 $(2,030)30 
12 Months or more4,640 (136)2 — — — 
Total$19,705,994 $(292,272)411 $777,586 $(2,030)30 
(1) Excludes interest-only mortgage-backed securities and reverse mortgages.

The decline in value of these securities is solely due to market conditions and not the quality of the assets.  Substantially all of the Agency mortgage-backed securities have an actual or implied credit rating that is the same as that of the U.S. government. The investments are not considered to be impaired because the Company currently has the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of the amortized cost bases, which may be maturity. 
During the three and nine months ended September 30, 2021, the Company disposed of $4.8 billion and $11.1 billion of Residential Securities, respectively. During the three and nine months ended September 30, 2020, the Company disposed of $2.8 billion and $50.2 billion of Residential Securities, respectively. The following table presents the Company’s net gains (losses) from the disposal of Residential Securities for the three and nine months ended September 30, 2021 and 2020.
 Gross Realized GainsGross Realized LossesNet Realized Gains (Losses)
For the three months ended(dollars in thousands)
September 30, 2021$30,368 $(3,636)$26,732 
September 30, 2020$117,373 $(13,440)$103,933 
For the nine months ended
September 30, 2021$87,499 $(86,657)$842 
September 30, 2020$929,010 $(297,934)$631,076