MBS and CRT Securities (Tables)

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Schedule of information about MBS and CRT Securities

The following tables present certain information about the Company’s MBS and CRT Securities at March 31, 2015 and December 31, 2014:

March 31, 2015

(In Thousands)	Principal/ Current Face		Purchase Premiums		Accretable Purchase Discounts			Discount Designated as Credit Reserve and  OTTI (1)			Amortized Cost (2)		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gain/(Loss)
Agency MBS:
Fannie Mae	$	4,389,055	$	166,626	$	(69	)	$	—		$	4,555,612	$	4,643,862	$	98,174	$	(9,924	)	$	88,250
Freddie Mac	973,777		37,449		—			—			1,011,987		1,016,464		11,214		(6,737		)	4,477
Ginnie Mae	10,415		182		—			—			10,597		10,869		272		—			272
Total Agency MBS	5,373,247		204,257		(69		)	—			5,578,196		5,671,195		109,660		(16,661		)	92,999
Non-Agency MBS:
Expected to Recover Par (3)(4)	2,624,690		405		(36,178		)	—			2,588,917		2,620,279		33,147		(1,785		)	31,362
Expected to Recover Less Than Par (3)	4,738,962		—		(352,530		)	(873,533		)	3,512,899		4,235,044		724,028		(1,883		)	722,145
Total Non-Agency MBS (5)	7,363,652		405		(388,708		)	(873,533		)	6,101,816		6,855,323		757,175		(3,668		)	753,507
Total MBS	12,736,899		204,662		(388,777		)	(873,533		)	11,680,012		12,526,518		866,835		(20,329		)	846,506
CRT securities	128,000		—		(4,569		)	—			123,431		127,182		4,038		(287		)	3,751
Total MBS and CRT securities	$	12,864,899	$	204,662	$	(393,346	)	$	(873,533	)	$	11,803,443	$	12,653,700	$	870,873	$	(20,616	)	$	850,257

December 31, 2014

(In Thousands)	Principal/ Current Face		Purchase Premiums		Accretable Purchase Discounts			Discount Designated as Credit Reserve and  OTTI (1)			Amortized Cost (2)		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Net Unrealized Gain/(Loss)
Agency MBS:
Fannie Mae	$	4,587,823	$	174,245	$	(71	)	$	—		$	4,761,997	$	4,843,084	$	102,187	$	(21,100	)	$	81,087
Freddie Mac	1,011,659		38,895		—			—			1,051,096		1,049,854		11,280		(12,522		)	(1,242		)
Ginnie Mae	10,811		189		—			—			11,000		11,269		269		—			269
Total Agency MBS	5,610,293		213,329		(71		)	—			5,824,093		5,904,207		113,736		(33,622		)	80,114
Non-Agency MBS:
Expected to Recover Par (3)(4)	431,788		461		(29,501		)	—			402,748		428,431		26,735		(1,052		)	25,683
Expected to Recover Less Than Par (3)	4,888,113		—		(370,063		)	(900,557		)	3,617,493		4,327,001		712,168		(2,660		)	709,508
Total Non-Agency MBS (5)	5,319,901		461		(399,564		)	(900,557		)	4,020,241		4,755,432		738,903		(3,712		)	735,191
Total MBS	10,930,194		213,790		(399,635		)	(900,557		)	9,844,334		10,659,639		852,639		(37,334		)	815,305
CRT securities	109,500		—		(4,727		)	—			104,773		102,983		324		(2,114		)	(1,790		)
Total MBS and CRT securities	$	11,039,694	$	213,790	$	(404,362	)	$	(900,557	)	$	9,949,107	$	10,762,622	$	852,963	$	(39,448	)	$	813,515

(1) Discount designated as Credit Reserve and amounts related to OTTI are generally not expected to be accreted into interest income.  Amounts disclosed at March 31, 2015 reflect Credit Reserve of $850.9 million and OTTI of $22.6 million.  Amounts disclosed at December 31, 2014 reflect Credit Reserve of $877.6 million and OTTI of $23.0 million.

(2) Includes principal payments receivable of $761,000 and $542,000 at March 31, 2015 and December 31, 2014, respectively, which are not included in the Principal/Current Face.

(3) Based on management’s current estimates of future principal cash flows expected to be received.

(4) At March 31, 2015 RPL/NPL MBS had a $2.320 billion Principal/Current face, $2.317 billion amortized cost and $2.318 billion fair value. At December 31, 2014, RPL/NPL MBS had a $161.0 million Principal/Current face, $161.0 million amortized cost and $161.0 million fair value (excludes RPL/NPL MBS with $1.850 billion Principal/Current face, $1.847 billion amortized cost and $1.847 billion fair value that were presented as a component of Linked Transactions at December 31, 2014).

(5) At March 31, 2015 and December 31, 2014, the Company expected to recover approximately 88% and 83%, respectively, of the then-current face amount of Non-Agency MBS.

Schedule of information about MBS and CRT Securities that were in an unrealized loss position

The following table presents information about the Company’s MBS and CRT securities that were in an unrealized loss position at March 31, 2015:

Unrealized Loss Position For:

	Less than 12 Months					12 Months or more					Total
	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
(Dollars in Thousands)
Agency MBS:
Fannie Mae	$	217,621	$	1,106	24	$	964,033	$	8,818	108	$	1,181,654	$	9,924
Freddie Mac	262,660		1,750		33	361,001		4,987		64	623,661		6,737
Total Agency MBS	480,281		2,856		57	1,325,034		13,805		172	1,805,315		16,661
Non-Agency MBS:
Expected to Recover Par (1)	636,219		959		12	19,608		826		8	655,827		1,785
Expected to Recover Less Than Par (1)	71,290		816		8	22,343		1,067		6	93,633		1,883
Total Non-Agency MBS	707,509		1,775		20	41,951		1,893		14	749,460		3,668
Total MBS	1,187,790		4,631		77	1,366,985		15,698		186	2,554,775		20,329
CRT securities	4,713		287		1	—		—		—	4,713		287
Total MBS and CRT securities	$	1,192,503	$	4,918	78	$	1,366,985	$	15,698	186	$	2,559,488	$	20,616

(1) Based on management’s current estimates of future principal cash flows expected to be received.

Schedule of composition of OTTI charges recorded

The following table presents the composition of OTTI charges recorded by the Company for the three months ended March 31, 2015 and 2014:

(In Thousands)	Three Months Ended   March 31, 2015			Three Months Ended   March 31, 2014
Total OTTI losses	$	(395	)	$	—
OTTI reclassified from OCI	(12		)	—
OTTI recognized in earnings	$	(407	)	$	—

Schedule of changes in credit loss component of OTTI

The following table presents a roll-forward of the credit loss component of OTTI on the Company’s Non-Agency MBS for which a non-credit component of OTTI was previously recognized in OCI.  Changes in the credit loss component of OTTI are presented based upon whether the current period is the first time OTTI was recorded on a security or a subsequent OTTI charge was recorded.

(In Thousands)	Three Months Ended   March 31, 2015		Three Months Ended   March 31, 2014
Credit loss component of OTTI at beginning of period	$	36,115	$	36,115
Additions for credit related OTTI not previously recognized	395		—
Subsequent additional credit related OTTI recorded	12		—
Credit loss component of OTTI at end of period	$	36,522	$	36,115

Schedule of changes in the components of the purchase discount on Non-Agency MBS

The following tables present the changes in the components of the Company’s purchase discount on its Legacy Non-Agency MBS between purchase discount designated as Credit Reserve and OTTI and accretable purchase discount for the three months ended March 31, 2015 and 2014:

	Three Months Ended   March 31, 2015						Three Months Ended   March 31, 2014
(In Thousands)	Discount Designated as Credit Reserve and OTTI			Accretable Discount (1)			Discount Designated as Credit Reserve and OTTI (2)			Accretable Discount (1)(2)
Balance at beginning of period	$	(900,557	)	$	(399,564	)	$	(1,043,037	)	$	(460,039	)
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing	(15,543		)	1,832			—			—
Accretion of discount	—			24,800			—			27,431
Realized credit losses	19,624			—			25,037			—
Purchases	(34		)	(3,410		)	(63,317		)	23,406
Sales	1,049			9,969			3,487			2,943
Net impairment losses recognized in earnings	(407		)	—			—			—
Transfers/release of credit reserve	22,335			(22,335		)	35,897			(35,897		)
Balance at end of period	$	(873,533	)	$	(388,708	)	$	(1,041,933	)	$	(442,156	)

(1) Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security.

(2) The Company reallocated $115,000 of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the three months ended March 31, 2014.

Schedule of impact of MBS on AOCI

The following table presents the impact of the Company’s MBS and CRT securities on its AOCI for the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,
(In Thousands)	2015			2014
AOCI from MBS and CRT securities:
Unrealized gain on MBS and CRT securities at beginning of period	$	813,515		$	752,912
Unrealized gain on Agency MBS, net	12,885			17,843
Unrealized gain on Non-Agency MBS, net	20,609			51,417
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing	4,537			—
Reclassification adjustment for MBS sales included in net income	(6,423		)	(2,950		)
Reclassification adjustment for OTTI included in net income	(407		)	—
Unrealized gain on CRT securities	5,541			—
Change in AOCI from MBS and CRT securities	36,742			66,310
Balance at end of period	$	850,257		$	819,222

Schedule of interest income on MBS and CRT Securities

The following table presents the components of interest income on the Company’s Agency MBS for the three months ended March 31, 2015 and 2014: 

	Three Months Ended March 31,
(In Thousands)	2015			2014
Coupon interest	$	40,743		$	49,499
Effective yield adjustment (1)	(9,070		)	(10,170		)
Agency MBS interest income	$	31,673		$	39,329

(1)  Includes amortization of premium paid net of accretion of purchase discount.  For Agency MBS, interest income is recorded at an effective yield, which reflects net premium amortization based on actual prepayment activity.

The following table presents components of interest income for the Company’s Legacy Non-Agency MBS (including MBS transferred to consolidated VIEs) for the three months ended March 31, 2015 and 2014: 

	Three Months Ended March 31,
(In Thousands)	2015		2014
Coupon interest	$	49,355	$	54,389
Effective yield adjustment (1)	24,406		27,389
Legacy Non-Agency MBS interest income	$	73,761	$	81,778

(1)  The effective yield adjustment is the difference between the net income calculated using the net yield, which is based on management’s estimates of the amount and timing of future cash flows for Legacy Non-Agency MBS, less the current coupon yield.

The following table presents components of interest income for the Company’s RPL/NPL MBS for the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,
(In Thousands)	2015		2014
Coupon interest	$	19,186	$	41
Effective yield adjustment (1)	344		—
RPL/NPL MBS interest income	$	19,530	$	41

(1)  The effective yield adjustment is the difference between the net income calculated using the net yield, which is based on management’s estimates of the timing of future cash flows for RPL/NPL MBS, less the current coupon yield.

The following table presents components of interest income for the Company’s CRT securities for the three months ended March 31, 2015 and 2014: 

	Three Months Ended March 31,
(In Thousands)	2015		2014
Coupon interest	$	1,202	$	—
Effective yield adjustment (1)	158		—
CRT securities interest income	$	1,360	$	—

(1) The effective yield adjustment is the difference between the net interest income calculated using the net yield, which is based on management’s estimates of the timing of future cash flows for CRT securities, less the current coupon yield.