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Other Assets
 6 Months Ended
Jun. 30, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Assets Other Assets
The following table presents the components of the Company’s Other assets at June 30, 2022 and December 31, 2021:

(In Thousands)June 30, 2022December 31, 2021
REO (1)
$135,847 $156,223 
Goodwill61,076 61,076 
Intangibles, net (2)
14,800 21,400 
Capital contributions made to loan origination partners31,999 71,673 
Other interest-earning assets53,540 57,522 
Interest receivable60,380 50,191 
Other loan related receivables32,344 34,191 
Lease right-of-use asset (3)
38,740 39,370 
Other69,363 73,910 
Total Other Assets$498,089 $565,556 

(1) Includes $2.3 million and $11.3 million of REO that is held-for-investment at June 30, 2022 and December 31, 2021, respectively.
(2) Net of aggregate accumulated amortization of $13.2 million and $6.6 million as of June 30, 2022 and December 31, 2021, respectively.
(3) An estimated incremental borrowing rate of 7.5% was used in connection with the Company’s primary operating lease (see Notes 2 and 9).
(a) Real Estate Owned

At June 30, 2022, the Company had 438 REO properties with an aggregate carrying value of $135.8 million. At December 31, 2021, the Company had 553 REO properties with an aggregate carrying value of $156.2 million.
At June 30, 2022, $135.4 million of residential real estate property was held by the Company that was acquired either through a completed foreclosure proceeding or from completion of a deed-in-lieu of foreclosure or similar legal agreement. In addition, formal foreclosure proceedings were in process with respect to $71.3 million of residential whole loans held at carrying value and $305.8 million of residential whole loans held at fair value at June 30, 2022.
The following table presents the activity in the Company’s REO for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
(Dollars In Thousands)2022202120222021
Balance at beginning of period$145,568 $220,393 $156,223 $249,699 
Adjustments to record at lower of cost or fair value
(324)(68)(772)(943)
Transfer from residential whole loans (1)
23,138 18,302 45,217 38,370 
Purchases and capital improvements, net277 406 629 624 
Disposals and other (2)
(32,812)(34,271)(65,450)(82,988)
Balance at end of period$135,847 $204,762 $135,847 $204,762 
Number of properties438 766 438 766 
(1)Includes a net loss recorded on transfer of approximately $9,000 for the three months ended June 30, 2022 and a net gain recorded on transfer of approximately $22,000 for the three months ended June 30, 2021; and a net gain recorded on transfer of approximately $400 for the six months ended June 30, 2022 and a net loss recorded on transfer of approximately $1.1 million for the six months ended June 30, 2021.
(2)During the three and six months ended June 30, 2022, the Company sold 124 and 259 REO properties for consideration of $39.6 million and $81.2 million, realizing net gains of approximately $7.3 million and $16.0 million, respectively. During the three and six months ended June 30, 2021, the Company sold 139 and 319 REO properties for consideration of $38.0 million and $88.6 million, realizing net gains of approximately $3.9 million and $6.1 million, respectively. These amounts are included in Other Income, net on the Company’s consolidated statements of operations.
(b) Goodwill and Intangible Assets

On July 1, 2021, the Company completed the acquisition of Lima One (see Note 15). In connection with the acquisition of Lima One, the Company identified and recorded goodwill of $61.1 million and finite-lived intangible assets totaling $28.0 million.

The amortization period for each of the finite lived intangible assets and the activity for the six months ended June 30, 2022 is summarized in the table below:

(Dollars in Thousands)Carrying Value at December 31, 2021Amortization
 Six Months Ended
 June 30, 2022		Carrying Value at
 June 30, 2022
Amortization Period (Years) (1)
Trademarks / Trade Names$3,800 $(200)$3,600 10
Customer Relationships12,000 (4,000)8,000 4
Internally Developed Software3,600 (400)3,200 5
Non-Compete Agreements2,000 (2,000)— 1
Total Identified Intangibles$21,400 $(6,600)$14,800 

(1) Amortization is calculated on a straight-line basis over the amortization period, except for Customer Relationships, where amortization is calculated based on expected levels of customer attrition.
(c) Capital Contributions Made to Loan Origination Partners

The Company has made investments in several loan originators as part of its strategy to be a reliable source of capital to select partners from whom the Company sources residential mortgage loans through both flow arrangements and bulk purchases. At June 30, 2022, the carrying value of these investments (including adjustments for impairments or mark-to-market changes) was $32.0 million, including $8.9 million of common equity (including partnership interests) and $23.1 million of preferred equity. During the three and six months ended June 30, 2022, the Company recorded an impairment charge in earnings of $28.6 million against the carrying value of its investment in one loan origination partner, bringing the net carrying value of this investment to zero at June 30, 2022. The Company did not record any impairment charges to earnings on
investments in loan origination partners during the three and six months ended June 30, 2021. Further, for the three months ended June 30, 2022, the Company recorded a valuation adjustment of $10.6 million against an investment in a loan origination partner that is accounted for at fair value through earnings. For certain of the Company’s investments, the interests acquired to date by the Company generally do not have a readily determinable fair value. Consequently, the Company accounts for these interests (including any acquired options and warrants) in loan originators initially at cost. The carrying value of these investments will be adjusted if it is determined that an impairment has occurred or if there has been a subsequent observable transaction in either the investee company’s equity securities or a similar security that provides evidence to support an adjustment to the carrying value. In addition, for certain partners options or warrants have also been acquired that provide the Company the ability to increase the level of its investment if certain conditions are met. At the end of each reporting period, or earlier if circumstances warrant, the Company evaluates whether the nature of its interests and other involvement with the investee entity requires the Company to apply equity method accounting or consolidate the results of the investee entity with the Company’s financial results. On July 1, 2021, the Company completed the acquisition of certain ownership interests in Lima One, which resulted in the Company owning all of Lima One’s outstanding ownership interests. Accordingly, the Company consolidated Lima One’s financial results beginning on that date.
(d) Derivative Instruments
 
Swaps

The Company’s derivative instruments include Swaps, which are used to economically hedge the interest rate risk associated with certain borrowings. Pursuant to these arrangements, the Company agreed to pay a fixed rate of interest and receive a variable interest rate, generally based on the Secured Overnight Financing Rate (“SOFR”), on the notional amount of the Swap. At June 30, 2022, none of the Company’s Swaps were designated as hedges for accounting purposes.

The following table presents the assets pledged as collateral against the Company’s Swap contracts at June 30, 2022, and December 31, 2021:
(In Thousands)June 30,
2022		December 31,
2021
Restricted Cash$70,216 $14,446 
 
At June 30, 2022, the Company had Swaps with an aggregate notional amount of $3.2 billion and an average maturity of approximately 48 months with a maximum term of approximately 84 months.

The following table presents information about the Company’s Swaps at June 30, 2022, and December 31, 2021:
 
 June 30, 2022December 31, 2021
Maturity (1)
Notional
Amount		Weighted
Average
Fixed-Pay
Interest Rate
Weighted
Average Variable
Interest Rate (2)
Notional
Amount		Weighted
Average
Fixed-Pay
Interest Rate
Weighted
Average Variable
Interest Rate (2)
(Dollars in Thousands)      
Within 30 days to 12 months$— — %— %$— — %— %
Over 12 months to 24 months100,000 1.49 1.50 — — — 
Over 24 months to 36 months1,225,010 1.44 1.50 450,010 0.90 0.05 
Over 36 months to 48 months— — — — — — 
Over 48 months to 60 months1,525,000 1.64 1.50 450,000 1.12 0.05 
Over 60 months to 72 months— — — — — — 
Over 72 months to 84 months310,000 2.95 1.50 — — — 
Total Swaps$3,160,010 1.69 %1.50 %$900,010 1.01 %0.05 %

(1)Each maturity category reflects contractual amortization and/or maturity of notional amounts.
(2)Reflects the benchmark variable rate due from the counterparty at the date presented, which rate adjusts daily based on SOFR. 
 
During the three and six months ended June 30, 2022, the Company recorded net gains on Swaps of approximately $27.5 million and $102.7 million, which includes net swap expense of $4.3 million and $9.8 million, respectively. These amounts are included in Other income, net on the Company’s consolidated statements of operations. The Company did not have any Swaps during the three and six months ended June 30, 2021.


TBA Securities

In order to economically hedge the risks arising from the investments in Agency eligible investor loans, the Company has entered into short positions in certain TBA securities. The Company did not have any open short positions in TBA securities at June 30, 2022. The table below summarizes open short positions in TBA securities as of December 31, 2021, which had an aggregate value of $(1.3) million and were included in Other assets/liabilities on the Company’s consolidated balance sheets.
December 31, 2021
(Dollars in Thousands)Notional AmountSettlement Date
TBA Security
FNCL 2.5$180,000 January 13, 2022
FNCL 2$130,000 January 13, 2022

TBA short positions are subject to margining requirements which serve to mitigate counterparty credit risk associated with these transactions. Open TBA positions are measured at fair value each reporting date, with realized and unrealized changes in the fair value of these positions recorded in Other income, net in the Company’s consolidated statements of operations. For the three and six months ended June 30, 2022, the Company recorded realized and unrealized changes in fair value on TBA short positions of $20.3 million and $39.2 million, respectively. For the three and six months ended June 30, 2021, the Company recorded realized and unrealized changes in fair value on TBA short positions of $1.1 million.