Residential Mortgage Securities and MSR Related Assets (Tables)

12 Months Ended

Dec. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Debt Securities, Available-for-sale, Unrealized Loss Position, Fair Value

The following tables present certain information about the Company’s residential mortgage securities at December 31, 2020 and 2019:

December 31, 2020

(In Thousands)	Principal/ Current Face		Purchase Premiums		Accretable Purchase Discounts		Discount Designated as Credit Reserve (1)		Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gain/(Loss)		Fair Value
Non-Agency MBS (2)(3)(4)	$	57,847	$	—	$	(8,136)	$	(669)	$	49,042	$	8,585	$	(861)	$	7,724	$	56,766
CRT securities (5)	104,031		3,022		(70)		(20,768)		86,215		18,341		(322)		18,019		104,234
Total residential mortgage securities	$	161,878	$	3,022	$	(8,206)	$	(21,437)	$	135,257	$	26,926	$	(1,183)	$	25,743	$	161,000

December 31, 2019

(In Thousands)	Principal/ Current Face		Purchase Premiums		Accretable Purchase Discounts		Discount Designated as Credit Reserve (1)		Gross Amortized Cost (6)		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gain/(Loss)		Fair Value
Agency MBS: (7)
Fannie Mae	$	1,119,708	$	43,249	$	(22)	$	—	$	1,162,935	$	9,799	$	(14,741)	$	(4,942)	$	1,157,993
Freddie Mac	480,879		19,468		—		—		500,961		5,475		(3,968)		1,507		502,468
Ginnie Mae	3,996		73		—		—		4,069		52		—		52		4,121
Total Agency MBS	1,604,583		62,790		(22)		—		1,667,965		15,326		(18,709)		(3,383)		1,664,582
Non-Agency MBS:
Expected to Recover Par (2)(3)	722,477		—		(16,661)		—		705,816		19,861		(9)		19,852		725,668
Expected to Recover Less than Par (2)	1,472,826		—		(73,956)		(436,598)		962,272		375,598		(9)		375,589		1,337,861
Total Non-Agency MBS (4)	2,195,303		—		(90,617)		(436,598)		1,668,088		395,459		(18)		395,441		2,063,529
Total MBS	3,799,886		62,790		(90,639)		(436,598)		3,336,053		410,785		(18,727)		392,058		3,728,111
CRT securities (5)	244,932		4,318		(55)		—		249,195		6,304		(91)		6,213		255,408
Total residential mortgage securities	$	4,044,818	$	67,108	$	(90,694)	$	(436,598)	$	3,585,248	$	417,089	$	(18,818)	$	398,271	$	3,983,519

(1)Discount designated as Credit Reserve is generally not expected to be accreted into interest income.

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

(3)Includes RPL/NPL MBS, which at December 31, 2020 had a $55.0 million Principal/Current face, $46.9 million amortized cost and $53.9 million fair value. At December 31, 2019, RPL/NPL MBS had a $632.3 million Principal/Current face, $631.8 million amortized cost and $635.0 million fair value.

(4)At December 31, 2020 and 2019, the Company expected to recover approximately 99% and 80% of the then-current face amount of Non-Agency MBS, respectively.

(5)Amounts disclosed at December 31, 2020 includes CRT securities with a fair value of $66.2 million for which the fair value option has been elected. Such securities had $551,000 gross unrealized gains and gross unrealized losses of approximately $322,000 at December 31, 2020. Amounts disclosed at December 31, 2019 includes CRT securities with a fair value of $255.4 million for which the fair value option had been elected. Such securities had gross unrealized gains of approximately $6.3 million and gross unrealized losses of approximately $91,000 at December 31, 2019.

(6)Includes principal payments receivable of $614,000 at December 31, 2019, which is not included in the Principal/Current Face.

(7)Amounts disclosed at December 31, 2019 include Agency MBS with a fair value of $280.3 million, for which the fair value option has been elected. Such securities had $4.5 million unrealized gains and no gross unrealized losses at December 31, 2019, respectively.

Schedule of Sale of Residential Mortgage Securities

The following table presents information about the Company’s sales of its residential mortgage securities for the years ended December 31, 2020, 2019 and 2018. The Company has no continuing involvement with any of the sold securities.

	For the Year Ended December 31,
	2020				2019				2018
(In Thousands)	Sales Proceeds		Gains/(Losses)		Sales Proceeds		Gains/(Losses)		Sales Proceeds		Gains/(Losses)
Agency MBS	$	1,500,875	$	(19,291)	$	360,634	$	499	$	122,027	$	(6,810)
Non-Agency MBS	1,318,958		107,999		291,391		50,360		117,060		36,744
CRT Securities	243,025		(27,011)		256,671		11,143		299,878		31,373
Total	$	3,062,858	$	61,697	$	908,696	$	62,002	$	538,965	$	61,307

Schedule of information about MBS and CRT Securities that were in an unrealized loss position

The following table presents information about the Company’s residential mortgage securities that were in an unrealized loss position at December 31, 2020, with respect to which no allowance for credit losses has been recorded:

	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
Non-Agency MBS (1)	$	41,139	$	861	4	$	—	$	—	—	$	41,139	$	861
CRT securities (2)	62,252		322		8	—		—		—	62,252		322
Total residential mortgage securities	$	103,391	$	1,183	12	$	—	$	—	—	$	103,391	$	1,183

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

(2) Amounts disclosed at December 31, 2020 include CRT securities with a fair value of $62.2 million for which the fair value option has been elected. Such securities had unrealized losses of $322,000 at December 31, 2020

Debt Securities, Available-for-sale, Allowance for Credit Loss

The following table presents a roll-forward of the allowance for credit losses on the Company’s Residential mortgage securities and MSR-related assets:

	For the Year Ended December 31,
(Dollars In Thousands)	2020		2019
Allowance for credit losses at beginning of period	$	—	$	—
Current provision:	—		—
Securities with no prior loss allowance	344,269		—
Securities with a prior loss allowance	—		—
Write-offs, including allowance related to securities the Company intended to sell	(344,269)		—
Allowance for credit losses at end of period	$	—	$	—

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, 2020, 2019, and 2018:

	For the Year Ended December 31,
(In Thousands)	2020		2019		2018
AOCI from AFS securities:
Unrealized gain on AFS securities at beginning of period	$	392,722	$	417,167	$	620,648
Unrealized (loss)/gain on Agency MBS, net	(161)		21,844		(17,891)
Unrealized gain/(loss) on Non-Agency MBS, net	367,469		(6,682)		(131,939)
Unrealized gain/(loss) on MSR term notes, net	52,973		5,173		(812)
Reclassification adjustment for MBS sales included in net income	(389,127)		(44,600)		(51,580)
Reclassification adjustment for impairment included in net income	(344,269)		(180)		(1,259)
Change in AOCI from AFS securities	(313,115)		(24,445)		(203,481)
Balance at end of period	$	79,607	$	392,722	$	417,167

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 residential mortgage securities and MSR-related assets for the years ended December 31, 2020, 2019 and 2018:

	For the Year Ended December 31,
(In Thousands)	2020		2019		2018
Agency MBS
Coupon interest	$	14,038	$	82,446	$	88,233
Effective yield adjustment (1)	(5,186)		(26,545)		(25,930)
Interest income	$	8,852	$	55,901	$	62,303
Legacy Non-Agency MBS
Coupon interest	$	18,263	$	87,024	$	109,714
Effective yield adjustment (2)(3)	10,565		59,622		69,309
Interest income	$	28,828	$	146,646	$	179,023
RPL/NPL MBS
Coupon interest	$	8,376	$	53,086	$	46,339
Effective yield adjustment (1)(4)	560		338		1,434
Interest income	$	8,936	$	53,424	$	47,773
CRT securities
Coupon interest	$	7,010	$	20,532	$	30,628
Effective yield adjustment (2)	511		(1,949)		2,748
Interest income	$	7,521	$	18,583	$	33,376
MSR-related assets
Coupon interest	$	25,970	$	52,644	$	27,174
Effective yield adjustment (1)(2)	9,987		3		1,246
Interest income	$	35,957	$	52,647	$	28,420

(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 less the current coupon yield. The net yield may be based on management’s estimates of the amount and timing of future cash flows or in the instrument’s contractual cash flows, depending on the relevant accounting standards.

(3)Includes accretion income recognized due to the impact of redemptions of certain securities that had been previously been purchased at a discount of $14.5 million and $2.7 million during the years ended December 31, 2019 and 2018, 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 $329,000 and $1.4 million during the years ended December 31, 2019 and 2018, respectively.