MBS, CRT Securities and MSR Related Assets (Tables)

12 Months Ended

Dec. 31, 2017

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 December 31, 2017 and 2016:

December 31, 2017

(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	$	2,170,974	$	82,271	$	(40	)	$	—		$	2,253,205	$	2,246,600	$	21,736	$	(28,341	)	$	(6,605	)
Freddie Mac	561,346		21,683		—			—			584,920		571,748		1,624		(14,796		)	(13,172		)
Ginnie Mae	6,142		112		—			—			6,254		6,333		79		—			79
Total Agency MBS	2,738,462		104,066		(40		)	—			2,844,379		2,824,681		23,439		(43,137		)	(19,698		)
Non-Agency MBS:
Expected to Recover Par (3)(4)	1,128,808		50		(22,737		)	—			1,106,121		1,132,205		26,518		(434		)	26,084
Expected to Recover Less than Par (3)	2,589,935		—		(192,588		)	(593,227		)	1,804,120		2,401,761		597,660		(19		)	597,641
Total Non-Agency MBS (5)	3,718,743		50		(215,325		)	(593,227		)	2,910,241		3,533,966		624,178		(453		)	623,725
Total MBS	6,457,205		104,116		(215,365		)	(593,227		)	5,754,620		6,358,647		647,617		(43,590		)	604,027
CRT securities (6)	602,799		8,887		(3,550		)	—			608,136		664,403		56,290		(23		)	56,267
Total MBS and CRT securities	$	7,060,004	$	113,003	$	(218,915	)	$	(593,227	)	$	6,362,756	$	7,023,050	$	703,907	$	(43,613	)	$	660,294

December 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	$	2,879,807	$	108,310	$	(51	)	$	—		$	2,988,066	$	3,014,464	$	45,706	$	(19,308	)	$	26,398
Freddie Mac	693,945		26,736		—			—			723,285		716,209		4,809		(11,885		)	(7,076		)
Ginnie Mae	7,550		136		—			—			7,686		7,824		138		—			138
Total Agency MBS	3,581,302		135,182		(51		)	—			3,719,037		3,738,497		50,653		(31,193		)	19,460
Non-Agency MBS:
Expected to Recover Par (3)(4)	2,706,418		57		(24,273		)	—			2,682,202		2,706,311		26,477		(2,368		)	24,109
Expected to Recover Less than Par (3)	3,359,200		—		(253,918		)	(694,241		)	2,411,041		2,978,525		570,318		(2,834		)	567,484
Total Non-Agency MBS (5)	6,065,618		57		(278,191		)	(694,241		)	5,093,243		5,684,836		596,795		(5,202		)	591,593
Total MBS	9,646,920		135,239		(278,242		)	(694,241		)	8,812,280		9,423,333		647,448		(36,395		)	611,053
CRT securities (6)	384,993		3,312		(5,557		)	—			382,748		404,850		22,105		(3		)	22,102
Total MBS and CRT securities	$	10,031,913	$	138,551	$	(283,799	)	$	(694,241	)	$	9,195,028	$	9,828,183	$	669,553	$	(36,398	)	$	633,155

(1) Discount designated as Credit Reserve and amounts related to OTTI are generally not expected to be accreted into interest income. Amounts disclosed at December 31, 2017 reflect Credit Reserve of $579 million and OTTI of $14.2 million. Amounts disclosed at December 31, 2016 reflect Credit Reserve of $675.6 million and OTTI of $18.6 million.

(2) Includes principal payments receivable of $1.9 million and $2.6 million at December 31, 2017 and 2016, 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) Includes RPL/NPL MBS, which at December 31, 2017 had a $922.0 million Principal/Current face, $920.1 million amortized cost and $923.1 million fair value. At December 31, 2016, RPL/NPL MBS had a $2.5 billion Principal/Current face, $2.5 billion amortized cost and $2.5 billion fair value.

(5) At December 31, 2017 and 2016, the Company expected to recover approximately 84% and 89%, respectively, of the then-current face amount of Non-Agency MBS.

(6) Amounts disclosed at December 31, 2017 includes CRT securities with a fair value of $480.8 million for which the fair value option has been elected. Such securities had gross unrealized gains of approximately $40.5 million and gross unrealized losses of approximately $23,000 at December 31, 2017. Amounts disclosed at December 31, 2016 includes CRT securities with a fair value of $271.2 million for which the fair value option has been elected. Such securities had gross unrealized gains of approximately $12.7 million and gross unrealized losses of approximately $3,000 at December 31, 2016.

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 December 31, 2017:

	Unrealized Loss Position For:
	Less than 12 Months					12 Months or more					Total
(Dollars in Thousands)	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
Agency MBS:
Fannie Mae	$	385,839	$	3,128	104	$	871,828	$	25,213	200	$	1,257,667	$	28,341
Freddie Mac	63,924		472		23	407,885		14,324		105	471,809		14,796
Ginnie Mae	233		—		1	—		—		—	233		—
Total Agency MBS	449,996		3,600		128	1,279,713		39,537		305	1,729,709		43,137
Non-Agency MBS:
Expected to Recover Par (1)	64,394		195		2	12,531		239		9	76,925		434
Expected to Recover Less than Par (1)	6,237		19		4	—		—		—	6,237		19
Total Non-Agency MBS	70,631		214		6	12,531		239		9	83,162		453
Total MBS	520,627		3,814		134	1,292,244		39,776		314	1,812,871		43,590
CRT securities (2)	16,266		23		4	—		—		—	16,266		23
Total MBS and CRT securities	$	536,893	$	3,837	138	$	1,292,244	$	39,776	314	$	1,829,137	$	43,613

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

(2) Amounts disclosed at December 31, 2017 includes CRT securities with a fair value of $16.3 million for which the fair value option has been elected. Such securities have unrealized losses of $23,000 at December 31, 2017.

Schedule of composition of OTTI charges recorded

The following table presents the composition of OTTI charges recorded by the Company for the years ended December 31, 2017, 2016 and 2015:

	For the Year Ended December 31,
(In Thousands)	2017			2016			2015
Total OTTI losses	$	(63	)	$	(1,255	)	$	(525	)
OTTI recognized in/(reclassified from) OCI	(969		)	770			(180		)
OTTI recognized in earnings	$	(1,032	)	$	(485	)	$	(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 for the years ended December 31, 2017, 2016 and 2015.  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.

	For the Year Ended December 31,
(In Thousands)	2017		2016		2015
Credit loss component of OTTI at beginning of period	$	37,305	$	36,820	$	36,115
Additions for credit related OTTI not previously recognized	63		314		461
Subsequent additional credit related OTTI recorded	969		171		244
Credit loss component of OTTI at end of period	$	38,337	$	37,305	$	36,820

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

The following table presents 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 years ended December 31, 2017 and 2016:

	For the Year Ended December 31,
	2017						2016
(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	$	(694,241	)	$	(278,191	)	$	(787,541	)	$	(312,182	)
Impact of RMBS Issuer settlement (2)	—			—			—			(59,900		)
Accretion of discount	—			77,513			—			80,548
Realized credit losses	49,291			—			64,217			—
Purchases	(29,810		)	18,386			(25,999		)	13,094
Sales	31,730			17,802			17,863			37,953
Net impairment losses recognized in earnings	(1,032		)	—			(485		)	—
Transfers/release of credit reserve	50,835			(50,835		)	37,704			(37,704		)
Balance at end of period	$	(593,227	)	$	(215,325	)	$	(694,241	)	$	(278,191	)

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

(2) Includes the impact of approximately $61.8 million and $7.0 million of cash proceeds (a one-time payment) received by the Company during the year ended December 31, 2016 in connection with the settlements of litigation related to certain Countrywide and Citigroup sponsored residential mortgage backed securitization trusts, respectively.

Schedule of impact of AFS on AOCI

The following table presents the impact of the Company’s AFS securities on its AOCI for the years ended December 31, 2017, 2016, and 2015:

	For the Year Ended December 31,
(In Thousands)	2017			2016			2015
AOCI from AFS securities:
Unrealized gain on AFS securities at beginning of period	$	620,403		$	585,250		$	813,515
Unrealized loss on Agency MBS, net	(39,158		)	(9,322		)	(51,332		)
Unrealized gain/(loss) on Non-Agency MBS, net	79,142			81,882			(143,558		)
Cumulative effect adjustment on adoption of revised accounting standard for repurchase agreement financing (1)	—			—			4,537
Reclassification adjustment for MBS sales included in net income	(38,707		)	(36,922		)	(37,207		)
Reclassification adjustment for OTTI included in net income	(1,032		)	(485		)	(705		)
Change in AOCI from AFS securities	245			35,153			(228,265		)
Balance at end of period	$	620,648		$	620,403		$	585,250

(1) Cumulative effect adjustment on adoption of accounting guidance that was effective for the Company as of January 1, 2015 which prospectively eliminated the use of linked transactions accounting for certain assets that were purchased from and financed by the same counterparty.

Schedule of interest income on MBS, CRT Securities and MSR Related Assets

The following table presents components of interest income on the Company’s MBS, CRT securities and MSR related assets for the years ended December 31, 2017, 2016 and 2015:

	For the Year Ended December 31,
(In Thousands)	2017			2016			2015
Agency MBS
Coupon interest	$	96,678		$	119,966		$	147,066
Effective yield adjustment (1)	(31,323		)	(36,897		)	(41,231		)
Interest income	$	65,355		$	83,069		$	105,835
Legacy Non-Agency MBS
Coupon interest	$	127,645		$	154,057		$	183,349
Effective yield adjustment (2)	76,005			78,443			91,003
Interest income	$	203,650		$	232,500		$	274,352
RPL/NPL MBS
Coupon interest	$	65,957		$	98,213		$	87,429
Effective yield adjustment (1)	1,505			2,108			1,789
Interest income	$	67,462		$	100,321		$	89,218
CRT securities
Coupon interest	$	27,706		$	13,023		$	5,844
Effective yield adjustment (2)	4,009			1,747			728
Interest income	$	31,715		$	14,770		$	6,572
MSR related assets
Coupon interest	$	24,534		$	2,090		$	—
Effective yield adjustment (1)	296			10			—
Interest income	$	24,830		$	2,100		$	—

(1) Includes amortization of premium paid net of accretion of purchase discount.  For Agency MBS, RPL/NPL MBS and the corporate loan secured by MSRs, interest income is recorded at an effective yield, which reflects net premium amortization/accretion 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.