XML 36 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
MBS, CRT Securities and MSR Related Assets (Tables)
 9 Months Ended
Sep. 30, 2018
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, 2018 and December 31, 2017:
 
September 30, 2018
(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: (3)
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Fannie Mae
 
$
1,851,447

 
$
70,882

 
$
(29
)
 
$
—

 
$
1,922,300

 
$
1,896,739

 
$
14,650

 
$
(40,211
)
 
$
(25,561
)
Freddie Mac
 
987,833

 
40,183

 
—

 
—

 
1,028,453

 
1,003,583

 
1,027

 
(25,897
)
 
(24,870
)
Ginnie Mae
 
5,028

 
92

 
—

 
—

 
5,120

 
5,168

 
48

 
—

 
48

Total Agency MBS
 
2,844,308

 
111,157

 
(29
)
 
—

 
2,955,873

 
2,905,490

 
15,725

 
(66,108
)
 
(50,383
)
Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

Expected to Recover Par (4)(5)
 
1,343,835

 
41

 
(23,835
)
 
—

 
1,320,041

 
1,343,272

 
25,146

 
(1,915
)
 
23,231

Expected to Recover Less than Par (4)
 
2,165,454

 
—

 
(167,910
)
 
(531,757
)
 
1,465,787

 
1,991,338

 
525,770

 
(219
)
 
525,551

Total Non-Agency MBS (6)
 
3,509,289

 
41

 
(191,745
)
 
(531,757
)
 
2,785,828

 
3,334,610

 
550,916

 
(2,134
)
 
548,782

Total MBS
 
6,353,597

 
111,198

 
(191,774
)
 
(531,757
)
 
5,741,701

 
6,240,100

 
566,641

 
(68,242
)
 
498,399

CRT securities (7)
 
495,018

 
9,936

 
(178
)
 
—

 
504,776

 
538,945

 
34,173

 
(4
)
 
34,169

Total MBS and CRT securities
 
$
6,848,615

 
$
121,134

 
$
(191,952
)
 
$
(531,757
)
 
$
6,246,477

 
$
6,779,045

 
$
600,814

 
$
(68,246
)
 
$
532,568


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: (3)
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

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 (4)(5)
 
1,128,808

 
50

 
(22,737
)
 
—

 
1,106,121

 
1,132,205

 
26,518

 
(434
)
 
26,084

Expected to Recover Less than Par (4)
 
2,589,935

 
—

 
(192,588
)
 
(593,227
)
 
1,804,120

 
2,401,761

 
597,660

 
(19
)
 
597,641

Total Non-Agency MBS (6)
 
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 (7)
 
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

 
(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, 2018 reflect Credit Reserve of $519.6 million and OTTI of $12.2 million.  Amounts disclosed at December 31, 2017 reflect Credit Reserve of $579.0 million and OTTI of $14.2 million.
(2)
Includes principal payments receivable of $438,000 and $1.9 million at September 30, 2018 and December 31, 2017, respectively, which are not included in the Principal/Current Face.
(3)
Amounts disclosed at September 30, 2018 include Agency MBS with a fair value of $746.7 million for which the fair value option has been elected. Such securities had no unrealized gains and gross unrealized losses of approximately $5.5 million at September 30, 2018. The Company did not have any Agency MBS for which the fair value option had been elected at December 31, 2017.
(4)
Based on management’s current estimates of future principal cash flows expected to be received.
(5)
Includes RPL/NPL MBS, which at September 30, 2018 had a $1.2 billion Principal/Current face, $1.2 billion amortized cost and $1.2 billion fair value. At December 31, 2017, RPL/NPL MBS had a $922.0 million Principal/Current face, $920.1 million amortized cost and $923.1 million fair value.
(6)
At September 30, 2018 and December 31, 2017, the Company expected to recover approximately 85% and 84% of the then-current face amount of Non-Agency MBS, respectively.
(7)
Amounts disclosed at September 30, 2018 includes CRT securities with a fair value of $538.9 million for which the fair value option has been elected. Such securities had gross unrealized gains of approximately $34.2 million and gross unrealized losses of approximately $4,000 at September 30, 2018. Amounts disclosed at December 31, 2017 includes CRT securities with a fair value of $528.9 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.
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, 2018:
 
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: (1)
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Fannie Mae
 
$
438,980

 
$
4,293

 
105

 
$
838,566

 
$
35,918

 
251

 
$
1,277,546

 
$
40,211

Freddie Mac
 
668,566

 
6,020

 
37

 
298,083

 
19,877

 
103

 
966,649

 
25,897

Total Agency MBS
 
1,107,546

 
10,313

 
142

 
1,136,649

 
55,795

 
354

 
2,244,195

 
66,108

Non-Agency MBS:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Expected to Recover Par (2)
 
435,011

 
1,849

 
15

 
3,877

 
66

 
7

 
438,888

 
1,915

Expected to Recover Less than Par (2)
 
44,630

 
219

 
6

 
—

 
—

 
—

 
44,630

 
219

Total Non-Agency MBS
 
479,641

 
2,068

 
21

 
3,877

 
66

 
7

 
483,518

 
2,134

Total MBS
 
1,587,187

 
12,381

 
163

 
1,140,526

 
55,861

 
361

 
2,727,713

 
68,242

CRT securities (3)
 
15,754

 
4

 
4

 
—

 
—

 
—

 
15,754

 
4

Total MBS and CRT securities
 
$
1,602,941

 
$
12,385

 
167

 
$
1,140,526

 
$
55,861

 
361

 
$
2,743,467

 
$
68,246



(1)
Amounts disclosed at September 30, 2018 include Agency MBS with a fair value of $746.7 million on which the fair value option has been elected. Such securities had unrealized losses of $5.5 million at September 30, 2018. 
(2)
Based on management’s current estimates of future principal cash flows expected to be received.
(3)
Amounts disclosed at September 30, 2018 represent CRT securities on which the fair value option has been elected.

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, 2018 and 2017:
 
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In Thousands)
 
2018
 
2017
 
2018
 
2017
Total OTTI losses
 
$
—

 
$
—

 
$
—

 
$
(63
)
OTTI reclassified from OCI
 
—

 
—

 
—

 
(969
)
OTTI recognized in earnings
 
$
—

 
$
—

 
$
—

 
$
(1,032
)
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 
 September 30,
 
Nine Months Ended 
 September 30,
(In Thousands)
 
2018
 
2018
Credit loss component of OTTI at beginning of period
 
$
38,337

 
$
38,337

Additions for credit related OTTI not previously recognized
 
—

 
—

Subsequent additional credit related OTTI recorded
 
—

 
—

Credit loss component of OTTI at end of period
 
$
38,337

 
$
38,337
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, 2018 and 2017:

 
 
Three Months Ended 
 September 30, 2018
 
Three Months Ended 
 September 30, 2017
(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
 
$
(553,596
)
 
$
(202,248
)
 
$
(626,498
)
 
$
(257,967
)
Impact of RMBS Issuer Settlement (2)
 
—

 
(2,734
)
 
—

 
—

Accretion of discount
 
—

 
20,115

 
—

 
18,621

Realized credit losses
 
12,042

 
—

 
13,982

 
—

Purchases
 
(1,975
)
 
1,368

 
—

 
(1,929
)
Sales
 
1,552

 
1,974

 
4,620

 
11,244

Transfers/release of credit reserve
 
10,220

 
(10,220
)
 
14,762

 
(14,762
)
Balance at end of period
 
$
(531,757
)
 
$
(191,745
)
 
$
(593,134
)
 
$
(244,793
)

 
 
Nine Months Ended 
 September 30, 2018
 
Nine Months Ended 
 September 30, 2017
(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
 
$
(593,227
)
 
$
(215,325
)
 
$
(694,241
)
 
$
(278,191
)
Impact of RMBS Issuer Settlement (2)(3)
 
—

 
(14,822
)
 
—

 
—

Accretion of discount
 
—

 
54,860

 
—

 
60,461

Realized credit losses
 
31,443

 
—

 
39,445

 
—

Purchases
 
(2,510
)
 
1,856

 
(484
)
 
(3,449
)
Sales
 
7,144

 
7,079

 
29,398

 
10,166

Net impairment losses recognized in earnings
 
—

 
—

 
(1,032
)
 
—

Transfers/release of credit reserve
 
25,393

 
(25,393
)
 
33,780

 
(33,780
)
Balance at end of period
 
$
(531,757
)
 
$
(191,745
)
 
$
(593,134
)
 
$
(244,793
)

(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 $2.7 million of cash proceeds (a one-time payment) received by the Company during the three and nine months ended September 30, 2018 in connection with the settlement of litigation related to certain residential mortgage backed securitization trusts that were sponsored by Lehman Brothers Holdings Inc.
(3)
Includes the impact of approximately $12.1 million of cash proceeds (a one-time payment) received by the Company during the nine months ended September 30, 2018 in connection with the settlement of litigation related to certain residential mortgage backed securitization trusts that were sponsored by JP Morgan Chase & Co. and affiliated entities.

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, 2018 and 2017:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands)
2018
 
2017
 
2018
 
2017
AOCI from AFS securities:
 
 

 
 

 
 

 
 

Unrealized gain on AFS securities at beginning of period
 
$
548,551

 
$
668,223

 
$
620,648

 
$
620,403

Unrealized loss on Agency MBS, net
 
(9,177
)
 
(3,032
)
 
(27,507
)
 
(22,241
)
Unrealized (loss)/gain on Non-Agency MBS, net
 
(25,101
)
 
10,020

 
(62,743
)
 
93,429

Reclassification adjustment for MBS sales included in net income
 
(9,455
)
 
(14,935
)
 
(25,580
)
 
(30,283
)
Reclassification adjustment for OTTI included in net income
 
—

 
—

 
—

 
(1,032
)
Change in AOCI from AFS securities
 
(43,733
)
 
(7,947
)
 
(115,830
)
 
39,873

Balance at end of period
 
$
504,818

 
$
660,276

 
$
504,818

 
$
660,276
Schedule of interest income on MBS, CRT Securities and MSR Related Assets
The following table presents the components of interest income on the Company’s MBS, CRT securities and MSR related assets for the three and nine months ended September 30, 2018 and 2017: 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands)
 
2018
 
2017
 
2018
 
2017
Agency MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
21,549

 
$
23,473

 
$
62,546

 
$
74,589

Effective yield adjustment (1)
 
(7,217
)
 
(7,940
)
 
(19,751
)
 
(24,575
)
Interest income
 
$
14,332

 
$
15,533

 
$
42,795

 
$
50,014

 
 
 
 
 
 
 
 
 
Legacy Non-Agency MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
27,026

 
$
30,688

 
$
83,791

 
$
97,796

Effective yield adjustment (2)(3)
 
18,984

 
18,005

 
53,648

 
59,033

Interest income
 
$
46,010

 
$
48,693

 
$
137,439

 
$
156,829

 
 
 
 
 
 
 
 
 
RPL/NPL MBS
 
 
 
 
 
 
 
 
Coupon interest
 
$
11,526

 
$
13,947

 
$
31,167

 
$
54,475

Effective yield adjustment (1)(4)
 
1,131

 
612

 
1,206

 
1,424

Interest income
 
$
12,657

 
$
14,559

 
$
32,373

 
$
55,899

 
 
 
 
 
 
 
 
 
CRT securities
 
 
 
 
 
 
 
 
Coupon interest
 
$
7,257

 
$
7,868

 
$
23,484

 
$
19,712

Effective yield adjustment (2)
 
491

 
808

 
2,455

 
3,186

Interest income
 
$
7,748

 
$
8,676

 
$
25,939

 
$
22,898

 
 
 
 
 
 
 
 
 
MSR related assets
 
 
 
 
 
 
 
 
Coupon interest
 
$
6,407

 
$
7,117

 
$
19,005

 
$
17,621

Effective yield adjustment (1)
 
—

 
77

 
1,244

 
212

Interest income
 
$
6,407

 
$
7,194

 
$
20,249

 
$
17,833


 
(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.
(3) Includes accretion income recognized due to the impact of redemptions of certain securities that had been previously been purchased at a discount of $2.3 million during the three months ended September 30, 2018 and $2.3 million and $1.7 million during the nine months ended September 30, 2018 and 2017, respectively.
(4) Includes accretion income recognized due to the impact of redemptions of certain securities that had been previously been purchased at a discount of $1.1 million and $575,000 during the three months ended September 30, 2018 and 2017, respectively and $1.2 million during each of the nine months ended September 30, 2018 and 2017, respectively.