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Fair Value of Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Schedule of fair value measurement inputs and valuation techniques
The following tables present the Company’s financial instruments carried at fair value on a recurring basis as of September 30, 2020 and December 31, 2019, on the consolidated balance sheets by the valuation hierarchy, as previously described:

Fair Value at September 30, 2020
 
(In Thousands)Level 1Level 2Level 3Total
Assets:
Residential whole loans, at fair value$— $— $1,229,664 $1,229,664 
Non-Agency MBS— 56,430 — 56,430 
CRT securities— 96,335 — 96,335 
Term notes backed by MSR-related collateral— 234,091 — 234,091 
Total assets carried at fair value$— $386,856 $1,229,664 $1,616,520 
Liabilities:
Agreements with non-mark-to-market collateral provisions$— $— $1,727,407 $1,727,407 
Agreements with mark-to-market collateral provisions— 258,537 1,231,734 1,490,271 
Senior secured credit agreement— 473,993 — 473,993 
Securitized debt— 388,790 — 388,790 
Total liabilities carried at fair value$— $1,121,320 $2,959,141 $4,080,461 

Fair Value at December 31, 2019
 
(In Thousands)Level 1Level 2Level 3Total
Assets:    
Residential whole loans, at fair value$— $— $1,381,583 $1,381,583 
Non-Agency MBS
— 2,063,529 — 2,063,529 
Agency MBS— 1,664,582 — 1,664,582 
CRT securities— 255,408 — 255,408 
Term notes backed by MSR-related collateral— 1,157,463 — 1,157,463 
Total assets carried at fair value$— $5,140,982 $1,381,583 $6,522,565 
The following tables present a summary of quantitative information about the significant unobservable inputs used in the fair value measurement of the Company’s residential whole loans held at fair value for which it has utilized Level 3 inputs to determine fair value as of September 30, 2020 and December 31, 2019:

September 30, 2020
(Dollars in Thousands)
Fair Value (1)
Valuation TechniqueUnobservable Input
Weighted Average (2)
Range
Residential whole loans, at fair value$774,427 Discounted cash flowDiscount rate3.9 %3.2-8.0%
Prepayment rate3.9 %0.0-9.3%
Default rate6.2 %0.0-30.3%
Loss severity12.7 %0.0-100.0%
$454,760 Liquidation modelDiscount rate8.1 %6.7-50.0%
Annual change in home prices1.9 %(0.3)-5.5%
Liquidation timeline
(in years)
1.80.1-4.8
Current value of underlying properties (3)
$734 $12-$4,500
Total$1,229,187 

December 31, 2019
(Dollars in Thousands)
Fair Value (1)
Valuation TechniqueUnobservable Input
Weighted Average (2)
Range
Residential whole loans, at fair value
$829,842 
Discounted cash flow
Discount rate4.2 %3.8-8.0%
Prepayment rate4.5 %0.7-18.0%
Default rate4.0 %0.0-23.0%
Loss severity12.9 %0.0-100.0%
$551,271 Liquidation modelDiscount rate8.0 %6.2-50.0%
Annual change in home prices
3.7 %2.4-8.0%
Liquidation timeline
(in years)
1.80.1-4.5
Current value of underlying properties (3)
$684 $10-$4,500
Total$1,381,113 

(1) Excludes approximately $477,000 and $470,000 of loans for which management considers the purchase price continues to reflect the fair value of such loans at September 30, 2020 and December 31, 2019, respectively.
(2) Amounts are weighted based on the fair value of the underlying loan.
(3) The simple average value of the properties underlying residential whole loans held at fair value valued via a liquidation model was approximately $383,000 and $365,000 as of September 30, 2020 and December 31, 2019, respectively.
Schedule of significant unobservable inputs used in fair value measurement of residential whole loans
The following table presents additional information for the three and nine months ended September 30, 2020 and 2019 about the Company’s Residential whole loans, at fair value, which are classified as Level 3 and measured at fair value on a recurring basis:

Residential Whole Loans, at Fair Value
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2020
2019 (1)
2020
2019 (1)(2)
Balance at beginning of period$1,200,981 $1,438,827 $1,381,583 $1,471,263 
Purchases (2)
— 85,855 — 210,030 
Changes in fair value recorded in Net gain on residential whole loans measured at fair value through earnings
58,863 13,185 (13,683)33,312 
Cash collections, net of liquidation gains/(losses)(21,721)(31,212)(65,934)(94,821)
  Sales and repurchases(929)— (19,460)(1,216)
  Transfer to REO(7,530)(53,486)(52,842)(165,399)
Balance at end of period$1,229,664 $1,453,169 $1,229,664 $1,453,169 

(1)Included in the activity presented for the three months ended September 30, 2019 are approximately $87.0 million of residential whole loans held at fair value the Company committed to purchase during the three months ended June 30, 2019, but for which the closing of the purchase transaction occurred during the three months ended September 30, 2019.
(2)Included in the activity presented for the nine months ended September 30, 2019 is an adjustment of $70.6 million for loans the Company committed to purchase during the three months ended December 31, 2018, but for which the closing of the purchase transaction occurred during the three months ended March 31, 2019. The adjustment was required following the finalization of due diligence performed prior to the closing of the purchase transaction and resulted in a downward revision to the prior estimate of the loan purchase amount.

The following table presents additional information for the three and nine months ended September 30, 2019 about the Company’s investments in term notes backed by MSR-related collateral, which were classified as Level 3 prior to September 30, 2019 and measured at fair value on a recurring basis:

Term Notes Backed by MSR-Related Collateral
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)20192019
Balance at beginning of period$1,106,026 $538,499 
Purchases
— 573,137 
  Collection of principal(3,920)(12,897)
Changes in unrealized gains
2,024 5,391 
Transfer to Level 2
(1,104,130)(1,104,130)
Balance at end of period$— $— 
The following table presents additional information for the three and nine months ended September 30, 2020 about the Company’s financing agreements with non-mark-to-market collateral provisions, which are classified as Level 3 and measured at fair value on a recurring basis:
Agreements with Non-mark-to-market Collateral Provisions
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)20202020
Balance at beginning of period$— $— 
Transfer from Level 22,036,597 2,036,597 
Payment of principal(312,638)(312,638)
Changes in unrealized losses3,448 3,448 
Balance at end of period$1,727,407 $1,727,407 

The following table presents additional information for the three and nine months ended September 30, 2020 about the Company’s financing agreements with mark-to-market collateral provisions, which are classified as Level 3 and measured at fair value on a recurring basis:
Agreements with Mark-to-market Collateral Provisions
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)20202020
Balance at beginning of period$— $— 
Transfer from Level 21,386,592 1,386,592 
Payment of principal(156,032)(156,032)
Changes in unrealized losses1,174 1,174 
Balance at end of period$1,231,734 $1,231,734 
Schedule of carrying value and fair value of financial instruments
The following table presents the carrying values and estimated fair values of the Company’s financial instruments at September 30, 2020 and December 31, 2019:
 
September 30, 2020September 30, 2020December 31, 2019
Level in Fair Value HierarchyCarrying
Value		Estimated Fair ValueCarrying
Value		Estimated Fair Value
(In Thousands)
Financial Assets:
Residential whole loans, at carrying value3$4,387,559 $4,528,630 $6,069,370 $6,248,745 
Residential whole loans, at fair value31,229,664 1,229,664 1,381,583 1,381,583 
Non-Agency MBS
256,430 56,430 2,063,529 2,063,529 
Agency MBS2— — 1,664,582 1,664,582 
CRT securities296,335 96,335 255,408 255,408 
MSR-related assets (1)
2 and 3252,183 252,183 1,217,002 1,217,002 
Cash and cash equivalents1884,171 884,171 70,629 70,629 
Restricted cash15,303 5,303 64,035 64,035 
Financial Liabilities (2):
Financing agreements with non-mark-to-market collateral provisions31,727,407 1,727,407 — — 
Financing agreements with mark-to-market collateral provisions31,231,734 1,231,734 4,741,971 4,753,070 
Financing agreements with mark-to-market collateral provisions2258,537 258,537 4,397,850 4,403,139 
Senior secured credit agreement2473,993 473,993 — — 
Securitized debt (3)
2837,683 839,914 570,952 575,353 
Convertible senior notes2224,867 216,919 223,971 244,088 
Senior notes196,900 94,311 96,862 103,231 
 
(1)Includes $18.1 million and $59.5 million of MSR-related assets that are measured at fair value on a non-recurring basis that are classified as Level 3 in the fair value hierarchy at September 30, 2020 and December 31, 2019, respectively.
(2)Carrying value of securitized debt, Convertible Senior Notes, Senior Notes and certain repurchase agreements is net of associated debt issuance costs.
(3)Includes Securitized debt that is carried at amortized cost basis and fair value.