XML 95 R27.htm IDEA: XBRL DOCUMENT v3.3.0.814
MBS and CRT Securities (Tables)
 9 Months Ended
Sep. 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 September 30, 2015 and December 31, 2014:
 
September 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
 
$
3,875,329

 
$
146,519

 
$
(61
)
 
$
—

 
$
4,021,787

 
$
4,086,523

 
$
79,498

 
$
(14,762
)
 
$
64,736

Freddie Mac
 
887,904

 
34,118

 
—

 
—

 
923,134

 
923,872

 
8,796

 
(8,058
)
 
738

Ginnie Mae
 
9,666

 
169

 
—

 
—

 
9,835

 
10,082

 
247

 
—

 
247

Total Agency MBS
 
4,772,899

 
180,806

 
(61
)
 
—

 
4,954,756

 
5,020,477

 
88,541

 
(22,820
)
 
65,721

Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Expected to Recover Par (3)(4)
 
2,764,021

 
232

 
(31,691
)
 
—

 
2,732,562

 
2,755,036

 
27,326

 
(4,853
)
 
22,473

Expected to Recover Less than Par (3)
 
4,271,588

 
—

 
(304,016
)
 
(815,397
)
 
3,152,175

 
3,769,186

 
621,564

 
(4,553
)
 
617,011

Total Non-Agency MBS (5)
 
7,035,609

 
232

 
(335,707
)
 
(815,397
)
 
5,884,737

 
6,524,222

 
648,890

 
(9,406
)
 
639,484

Total MBS
 
11,808,508

 
181,038

 
(335,768
)
 
(815,397
)
 
10,839,493

 
11,544,699

 
737,431

 
(32,226
)
 
705,205

CRT securities (6)
 
156,000

 
—

 
(5,072
)
 
—

 
150,928

 
149,968

 
788

 
(1,748
)
 
(960
)
Total MBS and CRT securities
 
$
11,964,508

 
$
181,038

 
$
(340,840
)
 
$
(815,397
)
 
$
10,990,421

 
$
11,694,667

 
$
738,219

 
$
(33,974
)
 
$
704,245


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 September 30, 2015 reflect Credit Reserve of $793.7 million and OTTI of $21.7 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 $1.1 million and $542,000 at September 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 September 30, 2015 RPL/NPL MBS had a $2.492 billion Principal/Current face, $2.490 billion amortized cost and $2.487 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 September 30, 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.
(6)
Amounts disclosed at September 30, 2015 includes CRT securities with a fair value of $27.7 million for which the fair value option has been elected. Such securities have gross unrealized gains of approximately $515,000, gross unrealized losses of approximately $19,000 and net unrealized gains of approximately $496,000 at September 30, 2015. For the three and nine months ended September 30, 2015, such securities generated net unrealized losses of approximately $14,000 and net unrealized gains of approximately $496,000, respectively, that are included in Other Income, net in our consolidated statements of operations.
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 September 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
 
$
508,889

 
$
2,921

 
63

 
$
852,198

 
$
11,841

 
109

 
$
1,361,087

 
$
14,762

Freddie Mac
 
259,638

 
2,369

 
35

 
332,303

 
5,689

 
64

 
591,941

 
8,058

Total Agency MBS
 
768,527

 
5,290

 
98

 
1,184,501

 
17,530

 
173

 
1,953,028

 
22,820

Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Expected to Recover Par (1)
 
1,411,102

 
4,117

 
33

 
13,249

 
736

 
8

 
1,424,351

 
4,853

Expected to Recover Less than Par (1)
 
120,040

 
1,982

 
24

 
67,908

 
2,571

 
11

 
187,948

 
4,553

Total Non-Agency MBS
 
1,531,142

 
6,099

 
57

 
81,157

 
3,307

 
19

 
1,612,299

 
9,406

Total MBS
 
2,299,669

 
11,389

 
155

 
1,265,658

 
20,837

 
192

 
3,565,327

 
32,226

CRT securities (2)
 
89,253

 
1,285

 
19

 
4,538

 
463

 
1

 
93,791

 
1,748

Total MBS and CRT securities
 
$
2,388,922

 
$
12,674

 
174

 
$
1,270,196

 
$
21,300

 
193

 
$
3,659,118

 
$
33,974



(1)
Based on management’s current estimates of future principal cash flows expected to be received.  
(2)
Amounts disclosed at September 30, 2015 includes CRT securities with a fair value of $9.6 million for which the fair value option has been elected. Such securities have unrealized losses of $19,000 at September 30, 2015.
Schedule of composition of OTTI charges recorded
The following table presents the composition of OTTI charges recorded by the Company for the three and nine months ended September 30, 2015 and 2014:
 
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In Thousands)
 
2015
 
2014
 
2015
 
2014
Total OTTI losses
 
$
—

 
$
—

 
$
(525
)
 
$
—

OTTI reclassified from OCI
 
—

 
—

 
(180
)
 
—

OTTI recognized in earnings
 
$
—

 
$
—

 
$
(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 
 September 30, 2015
 
Nine Months Ended 
 September 30, 2015
Credit loss component of OTTI at beginning of period
 
$
36,820

 
$
36,115

Additions for credit related OTTI not previously recognized
 
—

 
461

Subsequent additional credit related OTTI recorded
 
—

 
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 nine months ended September 30, 2015 and 2014:

 
 
Three Months Ended 
 September 30, 2015
 
Three Months Ended 
 September 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
 
$
(847,017
)
 
$
(362,946
)
 
$
(986,842
)
 
$
(436,111
)
Accretion of discount
 
—

 
22,805

 
—

 
25,504

Realized credit losses
 
21,527

 
—

 
20,733

 
—

Purchases
 
(455
)
 
113

 
(4,200
)
 
272

Sales
 
3,676

 
11,193

 
21,024

 
4,169

Transfers/release of credit reserve
 
6,872

 
(6,872
)
 
20,185

 
(20,185
)
Balance at end of period
 
$
(815,397
)
 
$
(335,707
)
 
$
(929,100
)
 
$
(426,351
)

 
 
Nine Months Ended 
 September 30, 2015
 
Nine Months Ended 
 September 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
 
—

 
71,700

 
—

 
78,701

Realized credit losses
 
62,377

 
—

 
69,129

 
—

Purchases
 
(1,200
)
 
(4,012
)
 
(70,535
)
 
25,314

Sales
 
5,573

 
28,995

 
34,780

 
10,236

Net impairment losses recognized in earnings
 
(705
)
 
—

 
—

 
—

Transfers/release of credit reserve
 
34,658

 
(34,658
)
 
80,563

 
(80,563
)
Balance at end of period
 
$
(815,397
)
 
$
(335,707
)
 
$
(929,100
)
 
$
(426,351
)

(1)
Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security.
(2)
The Company reallocated $333,000 of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the three months ended September 30, 2014.
(3)
The Company reallocated $218,000 of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the nine months ended September 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 nine months ended September 30, 2015 and 2014:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands)
2015
 
2014
 
2015
 
2014
AOCI from AFS securities:
 
 

 
 

 
 

 
 

Unrealized gain on AFS securities at beginning of period
 
$
759,151

 
$
905,704

 
$
813,515

 
$
752,912

Unrealized (loss)/gain on Agency MBS, net
 
(2,028
)
 
(14,937
)
 
(14,393
)
 
46,000

Unrealized (loss)/gain on Non-Agency MBS, net
 
(42,011
)
 
(28,473
)
 
(72,791
)
 
70,973

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

 
—

 
4,537

 
—

Reclassification adjustment for MBS sales included in net income
 
(11,363
)
 
(13,589
)
 
(26,414
)
 
(21,180
)
Reclassification adjustment for OTTI included in net income
 
—

 
—

 
(705
)
 
—

Change in AOCI from AFS securities
 
(55,402
)
 
(56,999
)
 
(109,766
)
 
95,793

Balance at end of period
 
$
703,749

 
$
848,705

 
$
703,749

 
$
848,705
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 nine months ended September 30, 2015 and 2014: 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands)
 
2015
 
2014
 
2015
 
2014
Agency MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
35,154

 
$
46,529

 
$
113,543

 
$
145,864

Effective yield adjustment (1)
 
(11,536
)
 
(13,463
)
 
(32,513
)
 
(35,860
)
Interest income
 
$
23,618

 
$
33,066

 
$
81,030

 
$
110,004

 
 
 
 
 
 
 
 
 
Legacy Non-Agency MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
44,824

 
$
52,270

 
$
141,152

 
$
161,318

Effective yield adjustment (2)
 
21,955

 
25,477

 
69,816

 
78,561

Interest income
 
$
66,779

 
$
77,747

 
$
210,968

 
$
239,879

 
 
 
 
 
 
 
 
 
RPL/NPL MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
22,898

 
$
97

 
$
63,602

 
$
800

Effective yield adjustment (2)
 
753

 
—

 
1,662

 
—

Interest income
 
$
23,651

 
$
97

 
$
65,264

 
$
800

 
 
 
 
 
 
 
 
 
CRT securities
 
 
 
 
 
 
 
 
Coupon interest
 
$
1,432

 
$
30

 
$
4,000

 
$
30

Effective yield adjustment (2)
 
161

 
—

 
477

 
—

Interest income
 
$
1,593

 
$
30

 
$
4,477

 
$
30

 
(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.