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SECURITIES
 6 Months Ended
Jun. 30, 2022
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 gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). Transactions for regular-way securities are recorded on trade date, including to-be-announced (“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). When the fair value of a held-to-maturity security is less than the cost, the Company performs an analysis to determine whether it expects to recover the entire cost basis of the security. For the three months ended March 31, 2021, the Company recognized a $0.4 million impairment on a commercial mortgage-backed security that was sold subsequently in 2021.
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, prime jumbo 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.
The following represents a rollforward of the activity for the Company’s securities, excluding securities transferred or pledged to securitization vehicles, for the six months ended June 30, 2022:
Agency SecuritiesResidential Credit SecuritiesCommercial SecuritiesTotal
(dollars in thousands)
Beginning balance January 1, 2022
$60,525,605 $2,599,564 $530,505 $63,655,674 
Purchases14,731,945 1,243,293 112,396 16,087,634 
Sales and transfers
(9,042,404)(352,027)(169,224)(9,563,655)
Principal paydowns(5,385,047)(323,281)(3,446)(5,711,774)
(Amortization) / accretion28,799 2,358 78 31,235 
Fair value adjustment(5,265,562)(177,535)(13,283)(5,456,380)
Ending balance June 30, 2022
$55,593,336 $2,992,372 $457,026 $59,042,734 
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 June 30, 2022 and December 31, 2021:
 June 30, 2022
 Principal /
Notional		Remaining PremiumRemaining DiscountAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Estimated Fair Value
Agency(dollars in thousands)
Fixed-rate pass-through$55,460,523 $2,874,749 $(281,278)$58,053,994 $31,761 $(4,306,637)$53,779,118 
Adjustable-rate pass-through260,238 10,651 (270)270,619 5,183 (6,292)269,510 
CMO106,189 1,848 — 108,037 — (6,692)101,345 
Interest-only1,662,567 416,404 — 416,404 673 (196,588)220,489 
Multifamily(1)
8,182,519 312,441 (523)1,243,478 2,596 (55,978)1,190,096 
Reverse mortgages31,968 3,376 — 35,344 — (2,566)32,778 
Total agency securities$65,704,004 $3,619,469 $(282,071)$60,127,876 $40,213 $(4,574,753)$55,593,336 
Residential credit       
Credit risk transfer (2)
$1,010,209 $6,552 $(2,474)$1,014,287 $390 $(48,963)$965,714 
Alt-A138,473 33 (19,899)118,607 1,902 (4,931)115,578 
Prime (3)
1,227,193 15,855 (25,681)297,095 4,989 (32,367)269,717 
Subprime187,969 221 (17,896)170,294 4,045 (7,020)167,319 
NPL/RPL1,300,169 1,275 (6,026)1,295,418 343 (45,858)1,249,903 
Prime jumbo (>=2010 vintage) (4)
2,193,098 17,814 (26,089)250,065 2,954 (28,878)224,141 
Total residential credit securities$6,057,111 $41,750 $(98,065)$3,145,766 $14,623 $(168,017)$2,992,372 
Total Residential Securities$71,761,115 $3,661,219 $(380,136)$63,273,642 $54,836 $(4,742,770)$58,585,708 
Commercial
Commercial Securities$474,523 $— $(1,776)$472,747 $— $(15,721)$457,026 
Total securities$72,235,638 $3,661,219 $(381,912)$63,746,389 $54,836 $(4,758,491)$59,042,734 
 December 31, 2021
 Principal /
Notional		Remaining PremiumRemaining DiscountAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Estimated Fair Value
Agency(dollars in thousands)
Fixed-rate pass-through$54,432,252 $3,008,185 $(18,314)$57,422,123 $1,349,125 $(474,643)$58,296,605 
Adjustable-rate pass-through305,211 1,965 (2,124)305,052 16,223 (2)321,273 
CMO114,533 1,888 — 116,421 5,277 — 121,698 
Interest-only1,912,415 456,683 — 456,683 428 (163,197)293,914 
Multifamily (1)
5,671,138 273,553 — 1,453,946 15,330 (16,563)1,452,713 
Reverse mortgages36,807 3,550 — 40,357 — (955)39,402 
Total agency investments$62,472,356 $3,745,824 $(20,438)$59,794,582 $1,386,383 $(655,360)$60,525,605 
Residential credit       
Credit risk transfer (2)
$924,101 $8,754 $(1,176)$927,555 $9,641 $(968)$936,228 
Alt-A83,213 31 (17,133)66,111 3,627 (251)69,487 
Prime (3)
323,062 9,841 (14,757)268,117 10,853 (3,529)275,441 
Subprime170,671 349 (16,111)154,909 8,285 (118)163,076 
NPL/RPL987,415 950 (1,698)986,667 2,739 (5,968)983,438 
Prime jumbo (>=2010 vintage) (4)
299,783 5,680 (6,410)172,598 4,272 (4,976)171,894 
Total residential credit securities$2,788,245 $25,605 $(57,285)$2,575,957 $39,417 $(15,810)$2,599,564 
Total Residential Securities$65,260,601 $3,771,429 $(77,723)$62,370,539 $1,425,800 $(671,170)$63,125,169 
Commercial
Commercial Securities$533,071 $— $(127)$532,944 $165 $(2,604)$530,505 
Total securities$65,793,672 $3,771,429 $(77,850)$62,903,483 $1,425,965 $(673,774)$63,655,674 
(1) Principal/Notional amount includes $7.3 billion and $4.5 billion of Agency Multifamily interest-only securities as of June 30, 2022 and December 31, 2021, respectively.
(2) Principal/Notional amount includes $0.0 million and $4.1 million of a CRT interest-only security as of June 30, 2022 and December 31, 2021, respectively.
(3) Principal/Notional amount includes $920.3 million and $50.0 million of Prime interest-only securities as of June 30, 2022 and December 31, 2021, respectively.
(4) Principal/Notional amount includes $1.9 billion and $126.5 million of Prime Jumbo interest-only securities as of June 30, 2022 and December 31, 2021, 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 June 30, 2022 and December 31, 2021: 
June 30, 2022December 31, 2021
Investment Type(dollars in thousands)
Fannie Mae$46,415,070 $48,404,991 
Freddie Mac9,111,646 10,880,033 
Ginnie Mae66,620 1,240,581 
Total$55,593,336 $60,525,605 
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 June 30, 2022 and December 31, 2021, according to their estimated weighted average life classifications:
 June 30, 2022December 31, 2021
Estimated Fair ValueAmortized
Cost		Estimated Fair ValueAmortized
Cost
Estimated weighted average life(dollars in thousands)
Less than one year$149,516 $150,652 $253,129 $250,689 
Greater than one year through five years3,491,952 3,602,865 16,155,017 15,766,307 
Greater than five years through ten years45,977,144 49,646,767 45,470,212 45,102,607 
Greater than ten years8,967,096 9,873,358 1,246,811 1,250,936 
Total$58,585,708 $63,273,642 $63,125,169 $62,370,539 
The estimated weighted average lives of the Residential Securities at June 30, 2022 and December 31, 2021 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 June 30, 2022 and December 31, 2021.
 June 30, 2022December 31, 2021
 
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$43,643,601 $(2,950,746)2,712 $22,828,156 $(475,064)571 
12 Months or more8,592,827 (1,399,582)273 383,815 (10,960)19 
Total$52,236,428 $(4,350,328)2,985 $23,211,971 $(486,024)590 
(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. An impairment has not been recognized in earnings related to these investments because the decline in value is not related to credit quality, the Company currently has not made a decision to sell the securities nor is it more likely than not that the securities will be required to be sold before recovery.
During the three and six months ended June 30, 2022, the Company disposed of $6.6 billion and $9.4 billion of Residential Securities, respectively. During the three and six months ended June 30, 2021, the Company disposed of $3.3 billion and $6.2 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 six months ended June 30, 2022 and 2021.
 Gross Realized GainsGross Realized LossesNet Realized Gains (Losses)
For the three months ended(dollars in thousands)
June 30, 2022$27,263 $(684,560)$(657,297)
June 30, 2021$52,485 $(17,680)$34,805 
For the six months ended
June 30, 2022$28,828 $(830,615)$(801,787)
June 30, 2021$57,131 $(83,021)$(25,890)