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Residential Whole Loans
 9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Residential Whole Loans Residential Whole Loans
Included on the Company’s consolidated balance sheets at September 30, 2020 and December 31, 2019 are approximately $5.6 billion and $7.4 billion, respectively, of residential whole loans arising from the Company’s interests in certain trusts established to acquire the loans and certain entities established in connection with its loan securitization transactions. The Company has assessed that these entities are required to be consolidated for financial reporting purposes.

Residential Whole Loans, at Carrying Value

The following table presents the components of the Company’s Residential whole loans, at carrying value at September 30, 2020 and December 31, 2019:
(Dollars In Thousands)September 30, 2020December 31, 2019
Purchased Performing Loans:
Non-QM loans
$2,465,148 $3,707,245 
Rehabilitation loans
699,868 1,026,097 
Single-family rental loans
479,070 460,742 
Seasoned performing loans
147,706 176,569 
Total Purchased Performing Loans3,791,792 5,370,653 
Purchased Credit Deteriorated Loans (1)
702,013 698,717 
Total Residential whole loans, at carrying value$4,493,805 $6,069,370 
Allowance for credit losses on residential whole loans held at carrying value
(106,246)(3,025)
Total Residential whole loans at carrying value, net$4,387,559 $6,066,345 
Number of loans13,754 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.

The following table presents the components of interest income on the Company’s Residential whole loans, at carrying value for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended
September 30,		Nine Months Ended
September 30,
 (In Thousands)2020201920202019
Purchased Performing Loans:
Non-QM loans
$25,884 $30,258 $112,212 $79,250 
Rehabilitation loans
10,863 15,142 39,502 38,331 
Single-family rental loans
6,917 5,025 21,528 11,652 
Seasoned performing loans
1,945 3,166 6,799 9,461 
Total Purchased Performing Loans45,609 53,591 180,041 138,694 
Purchased Credit Deteriorated Loans8,784 10,635 27,265 33,031 
Total Residential whole loans, at carrying value$54,393 $64,226 $207,306 $171,725 
The following table presents additional information regarding the Company’s Residential whole loans, at carrying value at September 30, 2020:
September 30, 2020
Carrying ValueAmortized Cost BasisUnpaid 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)Current30-5960-8990+
Purchased Performing Loans:
Non-QM loans (4)
$2,438,395 $2,465,148 $2,397,247 5.87 %35264 %712$2,174,935 $74,231 $52,069 $163,913 
Rehabilitation loans (4)
677,235 699,868 699,868 7.28 463 718491,343 65,166 22,995 120,364 
Single-family rental loans (4)
474,045 479,070 475,072 6.28 31970 734439,503 16,111 7,373 16,083 
Seasoned performing loans (4)
147,556 147,706 161,257 3.45 17341 723136,622 1,406 880 8,798 
Purchased Credit Deteriorated Loans (4)(5)
650,328 702,013 812,614 4.45 28979 N/AN/MN/MN/M122,478 
Residential whole loans, at carrying value, total or weighted average
$4,387,559 $4,493,805 $4,546,058 5.81 %277

December 31, 2019
Carrying ValueAmortized Cost BasisUnpaid 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)Current30-5960-8990+
Purchased
   Performing Loans:
Non-QM loans (4)
$3,706,857 $3,707,245 $3,592,701 5.96 %36867 %716$3,492,533 $59,963 $19,605 $20,600 
Rehabilitation loans (4)
1,023,766 1,026,097 1,026,097 7.30 864 717868,281 67,747 27,437 62,632 
Single-family rental loans (4)
460,679 460,741 457,146 6.29 32470 734432,936 15,948 2,047 6,215 
Seasoned performing loans
176,569 176,569 192,151 4.24 18146 723187,683 2,164 430 1,874 
Purchased Credit Impaired Loans (5)
698,474 698,718 873,326 4.46 29481 N/AN/MN/MN/M108,998 
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 $222.2 million and $269.2 million at September 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 September 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 September 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.

No Residential whole loans, at carrying value were sold during the three months ended September 30, 2020. During the nine months ended September 30, 2020, $1.8 billion of Non-QM loans were sold, realizing losses of $273.0 million.
Allowance for 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:
Nine Months Ended September 30, 2020
(Dollars In Thousands)Non-QM Loans
Rehabilitation Loans (1)(2)
Single-family Rental LoansSeasoned 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 provision26,358 33,213 6,615 230 8,481 74,897 
Write-offs— (428)— — (219)(647)
Valuation adjustment on loans held for sale70,181 — — — — 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 
Current provision/(reversal)(4,568)(7,140)(1,906)(74)(16,374)(30,062)
Write-offs(32)(227)— — (22)(281)
Allowance for credit losses at September 30, 2020$26,753 $22,633 $5,025 $150 $51,685 $106,246 

Nine Months Ended September 30, 2019
(Dollars In Thousands)Non-QM LoansRehabilitation LoansSingle-family Rental LoansSeasoned Performing LoansPurchased Credit Deteriorated LoansTotals
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 $1,986 
Current provision— — — — 347 347 
Write-offs— (62)— — — (62)
Allowance for credit losses at September 30, 2019$— $388 $— $— $1,883 $2,271 

(1)In connection with purchased Rehabilitation loans, the Company had unfunded commitments of $73.2 million, with an allowance for credit losses of $1.6 million at September 30, 2020. Such allowance is included in “Other liabilities” in the Company’s consolidated balance sheets (see Note 9).
(2)Includes $143.4 million of loans that were assessed for credit losses based on a collateral dependent methodology.
(3)Includes $72.7 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.

The Company adopted ASU 2016-13 (“CECL”) on January 1, 2020 (see Note 2). The anticipated impact of the COVID-19 pandemic on expected economic conditions, including forecasted unemployment, home price appreciation, and prepayment rates, for the short to medium term resulted in significantly increased estimates of credit losses recorded under CECL for the first quarter of 2020 for residential whole loans held at carrying value. As of September 30, 2020, the Company
adjusted its estimates related to future rates of unemployment, which resulted in a reversal of the allowance for loan loss in the third quarter. However, the Company continues to anticipate that deteriorated market conditions will continue for an extended period, resulting in increased delinquencies and defaults compared to historical periods. Estimates of credit losses under CECL are highly sensitive to changes in assumptions and current economic conditions have increased the difficulty of accurately forecasting future conditions.

The amortized cost basis of Purchased Performing Loans on nonaccrual status as of September 30, 2020 and December 31, 2019 was $345.6 million and $99.9 million, respectively. The amortized cost basis of Purchased Credit Deteriorated Loans on nonaccrual status as of September 30, 2020 was $148.7 million. Because Purchase Credit Deteriorated Loans were previously accounted for in pools, there were no such loans on nonaccrual status as of December 31, 2019. No interest income was recognized from loans on nonaccrual status during the nine months ended September 30, 2020. At September 30, 2020, there were approximately $134.8 million of loans on nonaccrual status that did not have an associated allowance for credit losses, because they were determined to be collateral dependent and the estimated fair value of the related collateral exceeded the carrying value of each loan.

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)20202019201820172016PriorTotal
Non-QM loans
LTV < 80% (1)
$380,729 $1,196,185 $684,404 $74,862 $6,371 $— $2,342,551 
LTV >= 80% (1)
48,082 35,468 29,784 9,111 152 — 122,597 
Total Non-QM loans$428,811 $1,231,653 $714,188 $83,973 $6,523 $— $2,465,148 
Nine Months Ended September 30, 2020 Gross write-offs$— $— $32 $— $— $— $32 
Nine Months Ended September 30, 2020 Recoveries— — — — — — — 
Nine Months Ended September 30, 2020 Net write-offs$— $— $32 $— $— $— $32 
Rehabilitation loans
LTV < 80% (1)
$36,478 $542,865 $93,973 $7,546 $— $— $680,862 
LTV >= 80% (1)
1,262 15,496 548 1,700 — — 19,006 
Total Rehabilitation loans$37,740 $558,361 $94,521 $9,246 $— $— $699,868 
Nine Months Ended September 30, 2020 Gross write-offs$— $13 $1,030 $32 $— $— $1,075 
Nine Months Ended September 30, 2020 Recoveries— — — — — — — 
Nine Months Ended September 30, 2020 Net write-offs$— $13 $1,030 $32 $— $— $1,075 
Single family rental loans
LTV < 80% (1)
$22,400 $287,103 $140,017 $13,356 $— $— $462,876 
LTV >= 80% (1)
1,394 14,588 212 — — — 16,194 
Total Single family rental loans$23,794 $301,691 $140,229 $13,356 $— $— $479,070 
Nine Months Ended September 30, 2020 Gross write-offs$— $— $— $— $— $— $— 
Nine Months Ended September 30, 2020 Recoveries— — — — — — — 
Nine Months Ended September 30, 2020 Net write-offs$— $— $— $— $— $— $— 
Seasoned performing loans
LTV < 80% (1)
$— $— $— $— $79 $139,538 $139,617 
LTV >= 80% (1)
— — — — — 8,089 8,089 
Total Seasoned performing loans$— $— $— $— $79 $147,627 $147,706 
Nine Months Ended September 30, 2020 Gross write-offs$— $— $— $— $— $— $— 
Nine Months Ended September 30, 2020 Recoveries— — — — — — — 
Nine Months Ended September 30, 2020 Net write-offs$— $— $— $— $— $— $— 
Purchased credit deteriorated loans
LTV < 80% (1)
$— $— $— $633 $2,982 $420,265 $423,880 
LTV >= 80% (1)
— — — — 3,184 274,950 278,134 
Total Purchased credit deteriorated loans$— $— $— $633 $6,166 $695,215 $702,014 
Nine Months Ended September 30, 2020 Gross write-offs$— $— $— $— $— $448 $448 
Nine Months Ended September 30, 2020 Recoveries— — — — — — — 
Nine Months Ended September 30, 2020 Net write-offs$— $— $— $— $— $448 $448 
Total LTV < 80% (1)
$439,607 $2,026,153 $918,394 $96,397 $9,432 $559,803 $4,049,786 
Total LTV >= 80% (1)
50,738 65,552 30,544 10,811 3,336 283,039 444,020 
Total residential whole loans, at carrying value$490,345 $2,091,705 $948,938 $107,208 $12,768 $842,842 $4,493,806 
Total Gross write-offs$— $13 $1,062 $32 $— $448 $1,555 
Total Recoveries— — — — — — — 
Total Net write-offs$— $13 $1,062 $32 $— $448 $1,555 
(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 $222.2 million at September 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 September 30, 2020. Certain low value loans secured by vacant lots are categorized as LTV >= 80%.
Residential Whole Loans, at Fair Value

Certain of the Company’s residential whole loans are presented at fair value on its consolidated balance sheets as a result of a fair value election made at the time of acquisition. Subsequent changes in fair value are reported in current period earnings and presented in Net gain on residential whole loans measured at fair value through earnings on the Company’s consolidated statements of operations.

The following table presents information regarding the Company’s residential whole loans held at fair value at September 30, 2020 and December 31, 2019:
 (Dollars in Thousands)
September 30, 2020December 31, 2019
Less than 60 Days Past Due:
Outstanding principal balance
$599,461 $666,026 
Aggregate fair value
$577,761 $641,616 
Weighted Average LTV Ratio (1)
74.33 %76.69 %
Number of loans
3,038 3,159 
60 Days to 89 Days Past Due:
Outstanding principal balance
$55,183 $58,160 
Aggregate fair value
$49,188 $53,485 
Weighted Average LTV Ratio (1)
83.62 %79.48 %
Number of loans
259 313 
90 Days or More Past Due:
Outstanding principal balance
$679,211 $767,320 
Aggregate fair value
$602,715 $686,482 
Weighted Average LTV Ratio (1)
87.82 %89.69 %
Number of loans
2,532 2,983 
    Total Residential whole loans, at fair value$1,229,664 $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.


The following table presents the components of Net gain/(loss) on residential whole loans measured at fair value through earnings for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended
September 30,		Nine Months Ended
September 30,
 (In Thousands)2020201920202019
Coupon payments, realized gains, and other income received (1)
$17,477 $22,202 $54,684 $67,966 
Net unrealized gains/(losses)
58,863 13,185 (13,683)33,312 
Net gain on transfers to REO
531 4,788 3,430 15,637 
    Total$76,871 $40,175 $44,431 $116,915 

(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.

During the nine months ended September 30, 2020, loans at fair value with an aggregate unpaid principal balance of $24.1 million were sold, realizing net losses of $0.8 million.