XML 46 R36.htm IDEA: XBRL DOCUMENT

Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2022

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, 2022 and December 31, 2021, on the consolidated balance sheets by the valuation hierarchy, as previously described:

Fair Value at September 30, 2022


(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Residential whole loans, at fair value	$	—	$	852,996	$	5,462,970	$	6,315,966
Securities, at fair value	—		227,407		—		227,407
Total assets carried at fair value	$	—	$	1,080,403	$	5,462,970	$	6,543,373
Liabilities:
Agreements with non-mark-to-market collateral provisions	$	—	$	—	$	604,721	$	604,721
Agreements with mark-to-market collateral provisions	—		—		932,496		932,496
Securitized debt	—		2,860,253		—		2,860,253
Total liabilities carried at fair value	$	—	$	2,860,253	$	1,537,217	$	4,397,470

Fair Value at December 31, 2021


(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Residential whole loans, at fair value	$	—	$	1,082,765	$	4,222,584	$	5,305,349
Securities, at fair value	—		256,685		—		256,685
Total assets carried at fair value	$	—	$	1,339,450	$	4,222,584	$	5,562,034
Liabilities:
Agreements with non-mark-to-market collateral provisions	—		—		628,280		628,280
Agreements with mark-to-market collateral provisions	$	—	$	—	$	1,322,362	$	1,322,362
Securitized debt	—		1,316,131		—		1,316,131
Total liabilities carried at fair value	$	—	$	1,316,131	$	1,950,642	$	3,266,773

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, 2022 and December 31, 2021:


	September 30, 2022
(Dollars in Thousands)	Fair Value (1)		Valuation Technique	Unobservable Input	Weighted Average (2)			Range

Purchased Non-Performing Loans	$	585,502	Discounted cash flow	Discount rate	6.8		%	5.8-10.4%
				Prepayment rate	8.8		%	0.0-34.9%
				Default rate	3.6		%	0.0-52.4%
				Loss severity	11.4		%	0.0-100.0%

	$	261,694	Liquidation model	Discount rate	7.7		%	7.7-7.7%
				Annual change in home prices	5.6		%	0.0-16.4%
				Liquidation timeline (in years)	1.9			0.1-4.5
				Current value of underlying properties (3)	$	765		$36-$3,704
Total	$	847,196


	December 31, 2021
(Dollars in Thousands)	Fair Value (1)		Valuation Technique	Unobservable Input	Weighted Average (2)			Range

Purchased Non-Performing Loans	$	720,766	Discounted cash flow	Discount rate	3.6		%	1.5-9.8%
				Prepayment rate	14.4		%	0.0-44.0%
				Default rate	3.9		%	0.0-50.8%
				Loss severity	11.7		%	0.0-100.0%

	$	351,008	Liquidation model	Discount rate	8.0		%	6.7-50.0%
				Annual change in home prices	9.7		%	4.5-21.9%
				Liquidation timeline (in years)	1.7			0.1-4.5
				Current value of underlying properties (3)	$	770		$10-$3,995
Total	$	1,071,774

(1) Excludes approximately $367,000 and $496,000 of loans for which management considers the purchase price continues to reflect the fair value of such loans at September 30, 2022 and December 31, 2021, 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 $451,000 and $421,000 as of September 30, 2022 and December 31, 2021, respectively.


	September 30, 2022
(Dollars in Thousands)	Fair Value		Valuation Technique	Unobservable Input	Weighted Average (1)			Range

Purchased Performing Loans	$	4,595,467	Discounted cash flow	Discount rate	7.3		%	5.6-25.6%
				Prepayment rate	8.2		%	0.0-50.7%
				Default rate	0.5		%	0.0-28.3%
				Loss severity	7.5		%	0.0-100.0%

	$	19,940	Liquidation model	Discount rate	7.5		%	7.5-7.5%
				Annual change in home prices	6.2		%	0.0-11.8%
				Liquidation timeline (in years)	1.7			0.8-4.2
				Current value of underlying properties	$	1,455		$60-$2,900
Total	$	4,615,407


	December 31, 2021
(Dollars in Thousands)	Fair Value		Valuation Technique	Unobservable Input	Weighted Average (1)			Range

Purchased Performing Loans	$	3,142,366	Discounted cash flow	Discount rate	3.9		%	1.4-25.9%
				Prepayment rate	19.0		%	0.0-47.2%
				Default rate	0.2		%	0.0-17.8%
				Loss severity	8.4		%	0.0-10.0%

	$	7,948	Liquidation model	Discount rate	7.0		%	7.0%-7.0%
				Annual change in home prices	6.5		%	—%-14.8%
				Liquidation timeline (in years)	2.0			0.8-4.2
				Current value of underlying properties	$	691		$60-$1,750
Total	$	3,150,314

(1) Amounts are weighted based on the fair value of the underlying loan.

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, 2022 and 2021 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)	2022		2021		2022		2021
Balance at beginning of period	$	5,252,047	$	2,003,580	$	4,222,584	$	1,216,902
Purchases and originations (1)	591,184		1,968,079		2,379,428		2,805,939
Draws	106,633		11,152		250,455		11,575
Changes in fair value recorded in Net gain on residential whole loans measured at fair value through earnings	(241,093)		20,494		(623,012)		58,807
Repayments	(236,236)		(65,985)		(718,983)		(130,488)
Sales and repurchases	—		241		(10,496)		671
Transfer to REO	(9,565)		(6,978)		(37,006)		(32,823)

Balance at end of period	$	5,462,970	$	3,930,583	$	5,462,970	$	3,930,583

(1) Excluded from the table above are approximately $163.0 million of Residential whole loans, at fair value for which the closing of the purchase transaction had not occurred as of September 30, 2021.

The following table presents additional information for the three and nine months ended September 30, 2022 and 2021 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)	2022		2021		2022		2021
Balance at beginning of period	$	441,883	$	795,341	$	628,280	$	1,159,213
Issuances	418,183		—		418,183		—
Payment of principal	(255,345)		(104,549)		(440,487)		(467,695)
Changes in unrealized losses	—		(209)		(1,255)		(935)
Balance at end of period	$	604,721	$	690,583	$	604,721	$	690,583

The following table presents additional information for the three and nine months ended September 30, 2022 and 2021 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)	2022		2021		2022		2021
Balance at beginning of period	$	1,433,857	$	858,066	$	1,322,362	$	1,124,162
Issuances	272,005		597,761		1,142,611		989,407
Payment of principal	(773,366)		(180,655)		(1,532,477)		(838,397)

Balance at end of period	$	932,496	$	1,275,172	$	932,496	$	1,275,172

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, 2022 and December 31, 2021:


	September 30, 2022	September 30, 2022				December 31, 2021
	Level in Fair Value Hierarchy	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
(In Thousands)
Financial Assets:
Residential whole loans	3	$	7,341,053	$	7,282,872	$	6,830,235	$	6,983,686
Residential whole loans	2	852,996		852,996		1,082,765		1,082,765
Securities, at fair value	2	227,407		227,407		256,685		256,685
Cash and cash equivalents	1	434,086		434,086		304,696		304,696
Restricted cash	1	167,310		167,310		99,751		99,751
Financial Liabilities (1):
Financing agreements with non-mark-to-market collateral provisions	3	1,104,849		1,105,441		939,540		940,257
Financing agreements with mark-to-market collateral provisions	3	1,981,904		1,981,934		2,403,151		2,403,724
Financing agreements with mark-to-market collateral provisions	2	142,887		142,887		159,148		159,148
Securitized debt (2)	2	3,832,311		3,722,703		2,650,473		2,646,203
Convertible senior notes	2	227,489		200,742		226,470		239,292

(1)Carrying value of securitized debt, Convertible Senior Notes, Senior Notes and certain repurchase agreements is net of associated debt issuance costs.

(2)Includes Securitized debt that is carried at amortized cost basis and fair value.