Residential Whole Loans (Tables)

6 Months Ended

Jun. 30, 2020

Residential Whole Loans, at Carrying Value

The following table presents the components of the Company’s Residential whole loans, at carrying value at June 30, 2020 and December 31, 2019:



(Dollars In Thousands)	June 30, 2020			December 31, 2019
Purchased Performing Loans:
Non-QM loans	$	2,574,184		$	3,707,245
Rehabilitation loans	862,895			1,026,097
Single-family rental loans	494,248			460,742
Seasoned performing loans	155,279			176,569
Total Purchased Performing Loans	4,086,606			5,370,653
Purchased Credit Deteriorated Loans (1)	726,513			698,717
Total Residential whole loans, at carrying value	$	4,813,119		$	6,069,370
Allowance for credit losses on residential whole loans held at carrying value	(136,589		)	(3,025		)
Total Residential whole loans at carrying value, net	$	4,676,530		$	6,066,345

Number of loans	14,689			17,082

(1) The amortized cost basis of Purchased Credit Deteriorated Loans was increased by $62.6 million on January 1, 2020 in connection with the adoption of ASU 2016-13.

Schedule of Interest Income Components

The following table presents the components of interest income on the Company’s Residential whole loans, at carrying value for the three and six months ended June 30, 2020 and 2019:



	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2020		2019		2020		2019
Purchased Performing Loans:
Non-QM loans	$	37,259	$	26,578	$	86,329	$	48,992
Rehabilitation loans	13,312		13,256		28,639		23,189
Single-family rental loans	7,268		3,926		14,611		6,627
Seasoned performing loans	2,253		3,122		4,853		6,295
Total Purchased Performing Loans	60,092		46,882		134,432		85,103
Purchased Credit Deteriorated Loans	9,335		10,997		18,481		22,396
Total Residential whole loans, at carrying value	$	69,427	$	57,879	$	152,913	$	107,499

Financing Receivable Credit Quality Indicators

The following table presents additional information regarding the Company’s Residential whole loans, at carrying value at June 30, 2020:

June 30, 2020



	Carrying Value		Amortized Cost Basis		Unpaid Principal Balance (“UPB”)		Weighted Average Coupon (1)		Weighted Average Term to Maturity (Months)	Weighted Average LTV Ratio (2)		Weighted Average Original FICO (3)	Aging by Amortized Cost Basis
															Past Due Days
(Dollars In Thousands)													Current		30-59		60-89		90+
Purchased Performing Loans:
Non-QM loans (4)	$	2,542,831	$	2,574,184	$	2,501,547	5.87	%	354	64	%	712	$	2,502,521	$	24,927	$	23,192	$	23,544
Rehabilitation loans (4)	832,895		862,895		862,895		7.26		6	63		720	620,315		60,762		65,226		116,592
Single-family rental loans (4)	487,317		494,248		489,947		6.28		321	70		734	444,308		25,428		12,730		11,782
Seasoned performing loans (4)	155,055		155,279		169,469		3.76		176	42		723	150,800		1,740		442		2,297
Purchased Credit Deteriorated Loans (4)(5)	658,432		726,513		838,673		4.46		291	79		N/A	N/M		N/M		N/M		105,536
Residential whole loans, at carrying value, total or weighted average	$	4,676,530	$	4,813,119	$	4,862,531	5.86	%	272

December 31, 2019



	Carrying Value		Amortized Cost Basis		Unpaid Principal Balance (“UPB”)		Weighted Average Coupon (1)		Weighted Average Term to Maturity (Months)	Weighted Average LTV Ratio (2)		Weighted Average Original FICO (3)	Aging by UPB
															Past Due Days
(Dollars In Thousands)													Current		30-59		60-89		90+
Purchased Performing Loans:
Non-QM loans (4)	$	3,706,857	$	3,707,245	$	3,592,701	5.96	%	368	67	%	716	$	3,492,533	$	59,963	$	19,605	$	20,600
Rehabilitation loans (4)	1,023,766		1,026,097		1,026,097		7.30		8	64		717	868,281		67,747		27,437		62,632
Single-family rental loans (4)	460,679		460,741		457,146		6.29		324	70		734	432,936		15,948		2,047		6,215
Seasoned performing loans	176,569		176,569		192,151		4.24		181	46		723	187,683		2,164		430		1,874
Purchased Credit Impaired Loans (5)	698,474		698,718		873,326		4.46		294	81		N/A	N/M		N/M		N/M		108,998
Residential whole loans, at carrying value, total or weighted average	$	6,066,345	$	6,069,370	$	6,141,421	5.96	%	288


(1)	Weighted average is calculated based on the interest bearing principal balance of each loan within the related category. For loans acquired with servicing rights released by the seller, interest rates included in the calculation do not reflect loan servicing fees. For loans acquired with servicing rights retained by the seller, interest rates included in the calculation are net of servicing fees.

(2)

LTV represents the ratio of the total unpaid principal balance of the loan to the estimated value of the collateral securing the related loan as of the most recent date available, which may be the origination date. For Rehabilitation loans, the LTV presented is the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan, where available. For certain Rehabilitation loans, totaling $280.6 million and $269.2 million at June 30, 2020 and December 31, 2019, respectively, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation. The weighted average LTV of these loans based on the current unpaid principal balance and the valuation obtained during underwriting, is 68% and 69% at June 30, 2020 and December 31, 2019, respectively. Excluded from the calculation of weighted average LTV are certain low value loans secured by vacant lots, for which the LTV ratio is not meaningful.


(3)	Excludes loans for which no Fair Isaac Corporation (“FICO”) score is available.


(4)	At June 30, 2020 and December 31, 2019 the difference between the Carrying Value and Amortized Cost Basis represents the related allowance for credit losses.

(5)

Purchased Credit Deteriorated Loans tend to be characterized by varying performance of the underlying borrowers over time, including loans where multiple months of payments are received in a period to bring the loan to current status, followed by months where no payments are received. Accordingly, delinquency information is presented for loans that are more than 90 days past due that are considered to be seriously delinquent.

The following table presents certain additional credit-related information regarding our residential whole loans, at carrying value:



	Amortized Cost Basis by Origination Year and LTV Bands
(Dollars In Thousands)	2020		2019		2018		2017		2016		Prior		Total
Non-QM loans
LTV < 80% (1)	$	375,156	$	1,265,076	$	733,368	$	81,119	$	7,718	$	—	$	2,462,437
LTV >= 80% (1)	28,605		40,518		32,765		9,706		153		—		111,747
Total Non-QM loans	$	403,761	$	1,305,594	$	766,133	$	90,825	$	7,871	$	—	$	2,574,184
Six Months Ended June 30, 2020 Gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Six Months Ended June 30, 2020 Recoveries	—		—		—		—		—		—		—
Six Months Ended June 30, 2020 Net write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Rehabilitation loans
LTV < 80% (1)	$	43,735	$	659,139	$	128,777	$	8,141	$	—	$	—	$	839,792
LTV >= 80% (1)	3,626		17,229		548		1,700		—		—		23,103
Total Rehabilitation loans	$	47,361	$	676,368	$	129,325	$	9,841	$	—	$	—	$	862,895
Six Months Ended June 30, 2020 Gross write-offs	$	—	$	—	$	816	$	32	$	—	$	—	$	848
Six Months Ended June 30, 2020 Recoveries	—		—		—		—		—		—		—
Six Months Ended June 30, 2020 Net write-offs	$	—	$	—	$	816	$	32	$	—	$	—	$	848

Single family rental loans
LTV < 80% (1)	$	22,765	$	296,485	$	144,006	$	13,900	$	—	$	—	$	477,156
LTV >= 80% (1)	1,391		15,489		212		—		—		—		17,092
Total Single family rental loans	$	24,156	$	311,974	$	144,218	$	13,900	$	—	$	—	$	494,248
Six Months Ended June 30, 2020 Gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Six Months Ended June 30, 2020 Recoveries	—		—		—		—		—		—		—
Six Months Ended June 30, 2020 Net write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Seasoned performing loans
LTV < 80% (1)	$	—	$	—	$	—	$	—	$	80	$	147,302	$	147,382
LTV >= 80% (1)	—		—		—		—		—		7,897		7,897
Total Seasoned performing loans	$	—	$	—	$	—	$	—	$	80	$	155,199	$	155,279
Six Months Ended June 30, 2020 Gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Six Months Ended June 30, 2020 Recoveries	—		—		—		—		—		—		—
Six Months Ended June 30, 2020 Net write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Purchased credit deteriorated loans
LTV < 80% (1)	$	—	$	—	$	—	$	637	$	3,480	$	429,166	$	433,283
LTV >= 80% (1)	—		—		—		—		3,474		289,756		293,230
Total Purchased credit deteriorated loans	$	—	$	—	$	—	$	637	$	6,954	$	718,922	$	726,513
Six Months Ended June 30, 2020 Gross write-offs	$	—	$	—	$	—	$	—	$	—	$	426	$	426
Six Months Ended June 30, 2020 Recoveries	—		—		—		—		—		—		—
Six Months Ended June 30, 2020 Net write-offs	$	—	$	—	$	—	$	—	$	—	$	426	$	426

Total LTV < 80% (1)	$	441,656	$	2,220,700	$	1,006,151	$	103,797	$	11,278	$	576,468	$	4,360,050
Total LTV >= 80% (1)	33,622		73,236		33,525		11,406		3,627		297,653		453,069
Total residential whole loans, at carrying value	$	475,278	$	2,293,936	$	1,039,676	$	115,203	$	14,905	$	874,121	$	4,813,119
Total Gross write-offs	$	—	$	—	$	816	$	32	$	—	$	426	$	1,274
Total Recoveries	—		—		—		—		—		—		—
Total Net write-offs	$	—	$	—	$	816	$	32	$	—	$	426	$	1,274

(1)

LTV represents the ratio of the total unpaid principal balance of the loan to the estimated value of the collateral securing the related loan as of the most recent date available, which may be the origination date. For Rehabilitation loans, the LTV presented is the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan, where available. For certain Rehabilitation loans, totaling $280.6 million at June 30, 2020, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation. The weighted average LTV of these loans based on the current unpaid principal balance and the valuation obtained during underwriting, is 68% at June 30, 2020. Certain low value loans secured by vacant lots are categorized as LTV >= 80%.

Schedule of Credit Losses

The following table presents a roll-forward of the allowance for credit losses on the Company’s Residential Whole Loans, at Carrying Value:



	Six Months Ended June 30, 2020
(Dollars In Thousands)	Non-QM Loans			Rehabilitation Loans (1)(2)			Single-family Rental Loans			Seasoned Performing Loans			Purchased Credit Deteriorated Loans (3)			Totals
Allowance for credit losses at December 31, 2019	$	388		$	2,331		$	62		$	—		$	244		$	3,025
Transition adjustment on adoption of ASU 2016-13 (4)	6,904			517			754			19			62,361			70,555
Current provision	26,358			33,213			6,615			230			8,481			74,897
Write-offs	—			(428		)	—			—			(219		)	(647		)
Valuation adjustment on loans held for sale	70,181			—			—			—			—			70,181
Allowance for credit and valuation losses at March 31, 2020	$	103,831		$	35,633		$	7,431		$	249		$	70,867		$	218,011
Current provision/(reversal)	(2,297		)	(5,213		)	(500		)	(25		)	(2,579		)	(10,614		)
Write-offs	—			(420		)	—			—			(207		)	(627		)
Valuation adjustment on loans held for sale	(70,181		)	—			—			—			—			(70,181		)
Allowance for credit losses at June 30, 2020	$	31,353		$	30,000		$	6,931		$	224		$	68,081		$	136,589



	Six Months Ended June 30, 2019
(Dollars In Thousands)	Non-QM Loans		Rehabilitation Loans			Single-family Rental Loans		Seasoned Performing Loans		Purchased Credit Deteriorated Loans		Totals
Allowance for credit losses at December 31, 2018	$	—	$	—		$	—	$	—	$	968	$	968
Current provision	—		500			—		—		183		683
Write-offs	—		—			—		—		—		—
Allowance for credit losses at March 31, 2019	$	—	$	500		$	—	$	—	$	1,151	$	1,651
Current provision	—		—			—		—		385		385
Write-offs	—		(50		)	—		—		—		(50		)
Allowance for credit losses at June 30, 2019	$	—	$	450		$	—	$	—	$	1,536	$	1,986


(1)	In connection with purchased Rehabilitation loans, the Company had unfunded commitments of $94.5 million, with an allowance for credit losses of $2.1 million at June 30, 2020. Such allowance is included in “Other liabilities” in the Company’s consolidated balance sheets (see Note 9).


(2)	Includes $181.8 million of loans that were assessed for credit losses based on a collateral dependent methodology.


(3)	Includes $100.0 million of loans that were assessed for credit losses based on a collateral dependent methodology.

(4)

Of the $70.6 million of reserves recorded on adoption of ASU 2016-13, $8.3 million was recorded as an adjustment to stockholders’ equity and $62.4 million was recorded as a “gross up” of the amortized cost basis of Purchased Credit Deteriorated Loans.

Residential Whole Loans, Fair Value

The following table presents information regarding the Company’s residential whole loans held at fair value at June 30, 2020 and December 31, 2019:



(Dollars in Thousands)	June 30, 2020			December 31, 2019
Less than 60 Days Past Due:
Outstanding principal balance	$	593,389		$	666,026
Aggregate fair value	$	545,953		$	641,616
Weighted Average LTV Ratio (1)	74.64		%	76.69		%
Number of loans	2,981			3,159

60 Days to 89 Days Past Due:
Outstanding principal balance	$	79,684		$	58,160
Aggregate fair value	$	69,303		$	53,485
Weighted Average LTV Ratio (1)	82.43		%	79.48		%
Number of loans	342			313

90 Days or More Past Due:
Outstanding principal balance	$	694,590		$	767,320
Aggregate fair value	$	585,725		$	686,482
Weighted Average LTV Ratio (1)	88.06		%	89.69		%
Number of loans	2,642			2,983
Total Residential whole loans, at fair value	$	1,200,981		$	1,381,583

(1)

LTV represents the ratio of the total unpaid principal balance of the loan, to the estimated value of the collateral securing the related loan. Excluded from the calculation of weighted average LTV are certain low value loans secured by vacant lots, for which the LTV ratio is not meaningful.

Residential Whole Loans, Fair Value, Component of Net gain on residential whole loans

The following table presents the components of Net gain/(loss) on residential whole loans measured at fair value through earnings for the three and six months ended June 30, 2020 and 2019:



	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2020		2019		2020			2019
Coupon payments, realized gains, and other income received (1)	$	18,171	$	24,007	$	37,207		$	45,763
Net unrealized gains/(losses)	2,010		21,188		(72,546		)	20,128
Net gain on transfers to REO	139		6,278		2,899			10,849
Total	$	20,320	$	51,473	$	(32,440	)	$	76,740

(1)

Primarily includes gains on liquidation of non-performing loans, including the recovery of delinquent interest payments, recurring coupon interest payments received on mortgage loans that are contractually current, and cash payments received from private mortgage insurance on liquidated loans.