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MBS and CRT Securities (Tables)
 3 Months Ended
Mar. 31, 2016
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, 2016 and December 31, 2015:
 
March 31, 2016
(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
 
$
3,512,731

 
$
132,452

 
$
(57
)
 
$
—

 
$
3,645,126

 
$
3,684,575

 
$
54,304

 
$
(14,855
)
 
$
39,449

Freddie Mac
 
816,393

 
31,343

 
—

 
—

 
848,854

 
851,230

 
7,358

 
(4,982
)
 
2,376

Ginnie Mae
 
8,740

 
155

 
—

 
—

 
8,895

 
9,078

 
183

 
—

 
183

Total Agency MBS
 
4,337,864

 
163,950

 
(57
)
 
—

 
4,502,875

 
4,544,883

 
61,845

 
(19,837
)
 
42,008

Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Expected to Recover Par (3)(4)
 
2,774,846

 
66

 
(28,004
)
 
—

 
2,746,908

 
2,747,272

 
19,377

 
(19,013
)
 
364

Expected to Recover Less than Par (3)
 
3,876,544

 
—

 
(253,327
)
 
(757,564
)
 
2,865,653

 
3,353,485

 
499,855

 
(12,023
)
 
487,832

Total Non-Agency MBS (5)
 
6,651,390

 
66

 
(281,331
)
 
(757,564
)
 
5,612,561

 
6,100,757

 
519,232

 
(31,036
)
 
488,196

Total MBS
 
10,989,254

 
164,016

 
(281,388
)
 
(757,564
)
 
10,115,436

 
10,645,640

 
581,077

 
(50,873
)
 
530,204

CRT securities (6)
 
222,085

 
—

 
(6,466
)
 
—

 
215,619

 
215,803

 
1,668

 
(1,484
)
 
184

Total MBS and CRT securities
 
$
11,211,339

 
$
164,016

 
$
(287,854
)
 
$
(757,564
)
 
$
10,331,055

 
$
10,861,443

 
$
582,745

 
$
(52,357
)
 
$
530,388


December 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
 
$
3,690,020

 
$
139,243

 
$
(59
)
 
$
—

 
$
3,829,204

 
$
3,865,485

 
$
62,111

 
$
(25,830
)
 
$
36,281

Freddie Mac
 
851,087

 
32,680

 
—

 
—

 
884,798

 
877,109

 
6,906

 
(14,595
)
 
(7,689
)
Ginnie Mae
 
9,296

 
164

 
—

 
—

 
9,460

 
9,650

 
190

 
—

 
190

Total Agency MBS
 
4,550,403

 
172,087

 
(59
)
 
—

 
4,723,462

 
4,752,244

 
69,207

 
(40,425
)
 
28,782

Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Expected to Recover Par (3)(4)
 
2,906,878

 
73

 
(31,576
)
 
—

 
2,875,375

 
2,878,532

 
23,300

 
(20,143
)
 
3,157

Expected to Recover Less than Par (3)
 
4,054,615

 
—

 
(280,606
)
 
(787,541
)
 
2,986,468

 
3,542,285

 
564,031

 
(8,214
)
 
555,817

Total Non-Agency MBS (5)
 
6,961,493

 
73

 
(312,182
)
 
(787,541
)
 
5,861,843

 
6,420,817

 
587,331

 
(28,357
)
 
558,974

Total MBS
 
11,511,896

 
172,160

 
(312,241
)
 
(787,541
)
 
10,585,305

 
11,173,061

 
656,538

 
(68,782
)
 
587,756

CRT securities (6)
 
192,000

 
—

 
(5,689
)
 
—

 
186,311

 
183,582

 
418

 
(3,147
)
 
(2,729
)
Total MBS and CRT securities
 
$
11,703,896

 
$
172,160

 
$
(317,930
)
 
$
(787,541
)
 
$
10,771,616

 
$
11,356,643

 
$
656,956

 
$
(71,929
)
 
$
585,027

 
(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, 2016 reflect Credit Reserve of $736.4 million and OTTI of $21.2 million.  Amounts disclosed at December 31, 2015 reflect Credit Reserve of $766.0 million and OTTI of $21.5 million.
(2)
Includes principal payments receivable of $1.1 million and $1.0 million at March 31, 2016 and December 31, 2015, 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, 2016 RPL/NPL MBS had a $2.515 billion Principal/Current face, $2.514 billion amortized cost and $2.496 billion fair value. At December 31, 2015, RPL/NPL MBS had a $2.648 billion Principal/Current face, $2.645 billion amortized cost and $2.626 billion fair value.
(5)
At March 31, 2016 and December 31, 2015, the Company expected to recover approximately 89% and 89%, respectively, of the then-current face amount of Non-Agency MBS.
(6)
Amounts disclosed at March 31, 2016 includes CRT securities with a fair value of $92.9 million for which the fair value option has been elected. Such securities have gross unrealized gains of approximately $1.4 million, gross unrealized losses of approximately $132,000 and net unrealized gains of approximately $1.2 million at March 31, 2016. Amounts disclosed at December 31, 2015 includes CRT securities with a fair value of $62.2 million for which the fair value option has been elected. Such securities have gross unrealized gains of approximately $332,000, gross unrealized losses of approximately $555,000 and net unrealized losses of approximately $223,000 at December 31, 2015.
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, 2016:
 
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
 
$
566,376

 
$
4,507

 
95

 
$
976,991

 
$
10,348

 
129

 
$
1,543,367

 
$
14,855

Freddie Mac
 
4,523

 
1

 
1

 
517,333

 
4,981

 
92

 
521,856

 
4,982

Total Agency MBS
 
570,899

 
4,508

 
96

 
1,494,324

 
15,329

 
221

 
2,065,223

 
19,837

Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Expected to Recover Par (1)
 
1,841,079

 
15,689

 
55

 
181,507

 
3,324

 
10

 
2,022,586

 
19,013

Expected to Recover Less than Par (1)
 
276,920

 
7,233

 
43

 
67,129

 
4,790

 
15

 
344,049

 
12,023

Total Non-Agency MBS
 
2,117,999

 
22,922

 
98

 
248,636

 
8,114

 
25

 
2,366,635

 
31,036

Total MBS
 
2,688,898

 
27,430

 
194

 
1,742,960

 
23,443

 
246

 
4,431,858

 
50,873

CRT securities (2)
 
95,402

 
1,071

 
23

 
4,588

 
413

 
1

 
99,990

 
1,484

Total MBS and CRT securities
 
$
2,784,300

 
$
28,501

 
217

 
$
1,747,548

 
$
23,856

 
247

 
$
4,531,848

 
$
52,357



(1)
Based on management’s current estimates of future principal cash flows expected to be received.  
(2)
Amounts disclosed at March 31, 2016 includes CRT securities with a fair value of $24.7 million for which the fair value option has been elected. Such securities have unrealized losses of $132,000 at March 31, 2016.
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, 2016 and 2015:
 
 
 
Three Months Ended 
 March 31,
(In Thousands)
 
2016
 
2015
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.
 
 
 
Three Months Ended 
 March 31,
(In Thousands)
 
2016
 
2015
Credit loss component of OTTI at beginning of period
 
$
36,820

 
$
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
 
$
36,820

 
$
36,522
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 months ended March 31, 2016 and 2015:

 
 
Three Months Ended 
 March 31, 2016
 
Three Months Ended 
 March 31, 2015
(In Thousands)
 
Discount
Designated as
Credit Reserve and OTTI
 
Accretable
Discount (1) 
Discount
Designated as
Credit Reserve and OTTI
 
 Accretable Discount (1)
Balance at beginning of period
 
$
(787,541
)
 
$
(312,182
)
 
$
(900,557
)
 
$
(399,564
)
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing
 
—

 
—

 
(15,543
)
 
1,832

Accretion of discount
 
—

 
21,406

 
—

 
24,800

Realized credit losses
 
18,050

 
—

 
19,624

 
—

Purchases
 
(4,294
)
 
1,606

 
(34
)
 
(3,410
)
Sales
 
12,020

 
12,040

 
1,049

 
9,969

Net impairment losses recognized in earnings
 
—

 
—

 
(407
)
 
—

Transfers/release of credit reserve
 
4,201

 
(4,201
)
 
22,335

 
(22,335
)
Balance at end of period
 
$
(757,564
)
 
$
(281,331
)
 
$
(873,533
)
 
$
(388,708
)

(1)
Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security.
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 months ended March 31, 2016 and 2015:
 
 
Three Months Ended March 31,
(In Thousands)
2016
 
2015
AOCI from AFS securities:
 
 

 
 

Unrealized gain on AFS securities at beginning of period
 
$
585,250

 
$
813,515

Unrealized gain on Agency MBS, net
 
13,226

 
12,885

Unrealized (loss)/gain on Non-Agency MBS, net
 
(58,840
)
 
26,150

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

 
4,537

Reclassification adjustment for MBS sales included in net income
 
(10,485
)
 
(6,423
)
Reclassification adjustment for OTTI included in net income
 
—

 
(407
)
Change in AOCI from AFS securities
 
(56,099
)
 
36,742

Balance at end of period
 
$
529,151

 
$
850,257
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 months ended March 31, 2016 and 2015: 
 
 
Three Months Ended March 31,
(In Thousands)
 
2016
 
2015
Agency MBS
 
 
 
 
Coupon interest
 
$
32,132

 
$
40,743

Effective yield adjustment (1)
 
(8,135
)
 
(9,070
)
Interest income
 
$
23,997

 
$
31,673

 
 
 
 
 
Legacy Non-Agency MBS
 
 
 
 
Coupon interest
 
$
40,309

 
$
49,356

Effective yield adjustment (2)
 
19,913

 
24,406

Interest income
 
$
60,222

 
$
73,762

 
 
 
 
 
RPL/NPL MBS
 
 
 
 
Coupon interest
 
$
24,370

 
$
19,185

Effective yield adjustment (2)
 
1,560

 
344

Interest income
 
$
25,930

 
$
19,529

 
 
 
 
 
CRT securities
 
 
 
 
Coupon interest
 
$
2,356

 
$
1,202

Effective yield adjustment (2)
 
336

 
158

Interest income
 
$
2,692

 
$
1,360

 
(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.