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MBS and CRT Securities (Tables)
 6 Months Ended
Jun. 30, 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 June 30, 2015 and December 31, 2014:
 
June 30, 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
 
$
4,127,078

 
$
156,323

 
$
(65
)
 
$
—

 
$
4,283,336

 
$
4,354,077

 
$
91,055

 
$
(20,314
)
 
$
70,741

Freddie Mac
 
932,698

 
35,848

 
—

 
—

 
969,872

 
966,618

 
9,878

 
(13,132
)
 
(3,254
)
Ginnie Mae
 
10,078

 
176

 
—

 
—

 
10,254

 
10,516

 
262

 
—

 
262

Total Agency MBS
 
5,069,854

 
192,347

 
(65
)
 
—

 
5,263,462

 
5,331,211

 
101,195

 
(33,446
)
 
67,749

Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Expected to Recover Par (3)(4)
 
2,870,432

 
329

 
(30,932
)
 
—

 
2,839,829

 
2,865,202

 
27,633

 
(2,260
)
 
25,373

Expected to Recover Less than Par (3)
 
4,531,764

 
—

 
(332,014
)
 
(847,017
)
 
3,352,733

 
4,016,951

 
667,604

 
(3,386
)
 
664,218

Total Non-Agency MBS (5)
 
7,402,196

 
329

 
(362,946
)
 
(847,017
)
 
6,192,562

 
6,882,153

 
695,237

 
(5,646
)
 
689,591

Total MBS
 
12,472,050

 
192,676

 
(363,011
)
 
(847,017
)
 
11,456,024

 
12,213,364

 
796,432

 
(39,092
)
 
757,340

CRT securities
 
131,000

 
—

 
(4,411
)
 
—

 
126,589

 
128,910

 
2,815

 
(494
)
 
2,321

Total MBS and CRT securities
 
$
12,603,050

 
$
192,676

 
$
(367,422
)
 
$
(847,017
)
 
$
11,582,613

 
$
12,342,274

 
$
799,247

 
$
(39,586
)
 
$
759,661


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 June 30, 2015 reflect Credit Reserve of $824.8 million and OTTI of $22.2 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 $1.3 million and $542,000 at June 30, 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 June 30, 2015 RPL/NPL MBS had a $2.593 billion Principal/Current face, $2.590 billion amortized cost and $2.592 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 June 30, 2015 and December 31, 2014, the Company expected to recover approximately 89% 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 June 30, 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
 
$
488,886

 
$
4,232

 
57

 
$
891,047

 
$
16,082

 
108

 
$
1,379,933

 
$
20,314

Freddie Mac
 
304,443

 
4,749

 
40

 
343,992

 
8,383

 
64

 
648,435

 
13,132

Total Agency MBS
 
793,329

 
8,981

 
97

 
1,235,039

 
24,465

 
172

 
2,028,368

 
33,446

Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Expected to Recover Par (1)
 
703,830

 
1,473

 
14

 
16,734

 
787

 
8

 
720,564

 
2,260

Expected to Recover Less than Par (1)
 
186,923

 
2,491

 
23

 
29,530

 
895

 
7

 
216,453

 
3,386

Total Non-Agency MBS
 
890,753

 
3,964

 
37

 
46,264

 
1,682

 
15

 
937,017

 
5,646

Total MBS
 
1,684,082

 
12,945

 
134

 
1,281,303

 
26,147

 
187

 
2,965,385

 
39,092

CRT securities
 
30,677

 
145

 
5

 
4,650

 
349

 
1

 
35,327

 
494

Total MBS and CRT securities
 
$
1,714,759

 
$
13,090

 
139

 
$
1,285,953

 
$
26,496

 
188

 
$
3,000,712

 
$
39,586



(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 and six months ended June 30, 2015 and 2014:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands)
 
2015
 
2014
 
2015
 
2014
Total OTTI losses
 
$
(130
)
 
$
—

 
$
(525
)
 
$
—

OTTI reclassified from OCI
 
(168
)
 
—

 
(180
)
 
—

OTTI recognized in earnings
 
$
(298
)
 
$
—

 
$
(705
)
 
$
—
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 
 June 30, 2015
 
Six Months Ended 
 June 30, 2015
Credit loss component of OTTI at beginning of period
 
$
36,522

 
$
36,115

Additions for credit related OTTI not previously recognized
 
66

 
461

Subsequent additional credit related OTTI recorded
 
232

 
244

Credit loss component of OTTI at end of period
 
$
36,820

 
$
36,820
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 Non-Agency MBS between purchase discount designated as Credit Reserve and OTTI and accretable purchase discount for the three and six months ended June 30, 2015 and 2014:

 
 
Three Months Ended 
 June 30, 2015
 
Three Months Ended 
 June 30, 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
 
$
(873,533
)
 
$
(388,708
)
 
$
(1,041,933
)
 
$
(442,156
)
Accretion of discount
 
—

 
24,095

 
—

 
25,766

Realized credit losses
 
21,226

 
—

 
23,359

 
—

Purchases
 
(711
)
 
(715
)
 
(3,018
)
 
1,636

Sales
 
848

 
7,833

 
10,269

 
3,124

Net impairment losses recognized in earnings
 
(298
)
 
—

 
—

 
—

Transfers/release of credit reserve
 
5,451

 
(5,451
)
 
24,481

 
(24,481
)
Balance at end of period
 
$
(847,017
)
 
$
(362,946
)
 
$
(986,842
)
 
$
(436,111
)

 
 
Six Months Ended 
 June 30, 2015
 
Six Months Ended 
 June 30, 2014
(In Thousands)
 
Discount
Designated as
Credit Reserve and OTTI
 
Accretable
Discount (1) 
Discount
Designated as
Credit Reserve and OTTI (3)
 
 Accretable Discount (1)(3)
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
 
—

 
48,895

 
—

 
53,197

Realized credit losses
 
40,850

 
—

 
48,396

 
—

Purchases
 
(745
)
 
(4,125
)
 
(66,335
)
 
25,042

Sales
 
1,897

 
17,802

 
13,756

 
6,067

Net impairment losses recognized in earnings
 
(705
)
 
—

 
—

 
—

Transfers/release of credit reserve
 
27,786

 
(27,786
)
 
60,378

 
(60,378
)
Balance at end of period
 
$
(847,017
)
 
$
(362,946
)
 
$
(986,842
)
 
$
(436,111
)

(1)
Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security.
(2)
The Company did not reallocate any purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the three months ended June 30, 2014.
(3)
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 six months ended June 30, 2014.
Schedule of impact of AFS on AOCI
The following table presents the impact of the Company’s AFS securities on its AOCI for the three and six months ended June 30, 2015 and 2014:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands)
2015
 
2014
 
2015
 
2014
AOCI from AFS securities:
 
 

 
 

 
 

 
 

Unrealized gain on AFS securities at beginning of period
 
$
850,257

 
$
819,222

 
$
813,515

 
$
752,912

Unrealized (loss)/gain on Agency MBS, net
 
(25,250
)
 
43,094

 
(12,365
)
 
60,937

Unrealized (loss)/gain on Non-Agency MBS, net
 
(57,695
)
 
50,136

 
(31,402
)
 
101,554

Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing
 
—

 
—

 
4,537

 
—

Reclassification adjustment for MBS sales included in net income
 
(7,863
)
 
(6,748
)
 
(14,429
)
 
(9,699
)
Reclassification adjustment for OTTI included in net income
 
(298
)
 
—

 
(705
)
 
—

Change in AOCI from AFS securities
 
(91,106
)
 
86,482

 
(54,364
)
 
152,792

Balance at end of period
 
$
759,151

 
$
905,704

 
$
759,151

 
$
905,704
Schedule of interest income on MBS and CRT Securities
The following table presents the components of interest income on the Company’s MBS and CRT securities for the three and six months ended June 30, 2015 and 2014: 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In Thousands)
 
2015
 
2014
 
2015
 
2014
Agency MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
37,646

 
$
49,836

 
$
78,388

 
$
99,335

Effective yield adjustment (1)
 
(11,907
)
 
(12,227
)
 
(20,976
)
 
(22,397
)
Interest income
 
$
25,739

 
$
37,609

 
$
57,412

 
$
76,938

 
 
 
 
 
 
 
 
 
Legacy Non-Agency MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
46,974

 
$
55,289

 
$
96,330

 
$
109,678

Effective yield adjustment (2)
 
23,454

 
25,694

 
47,860

 
53,083

Interest income
 
$
70,428

 
$
80,983

 
$
144,190

 
$
162,761

 
 
 
 
 
 
 
 
 
RPL/NPL MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
21,518

 
$
33

 
$
40,703

 
$
74

Effective yield adjustment (2)
 
565

 
—

 
909

 
—

Interest income
 
$
22,083

 
$
33

 
$
41,612

 
$
74

 
 
 
 
 
 
 
 
 
CRT securities
 
 
 
 
 
 
 
 
Coupon interest
 
$
1,366

 
$
—

 
$
2,568

 
$
—

Effective yield adjustment (2)
 
158

 
—

 
316

 
—

Interest income
 
$
1,524

 
$
—

 
$
2,884

 
$
—

 
(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.
(2)  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, less the current coupon yield.