MBS (Tables)

9 Months Ended

Sep. 30, 2011

MBS

Schedule of information about MBS

September 30, 2011
								Discount
								Designated
	Principal/				Accretable			as Credit					Carrying		Gross		Gross			Net
	Current		Purchase		Purchase			Reserve			Amortized		Value/		Unrealized		Unrealized			Unrealized
(In Thousands)	Face		Premiums		Discounts			and OTTI (1)			Cost (2)		Fair Value		Gains		Losses			Gain/(Loss)
Agency MBS:
Fannie Mae	$	6,293,420	$	159,120	$	(140	)	$	—		$	6,452,400	$	6,635,600	$	186,548	$	(3,348	)	$	183,200
Freddie Mac	813,340		24,387		—			—			842,199		866,468		24,447		(178		)	24,269
Ginnie Mae	16,291		282		—			—			16,573		16,934		361		—			361
Total Agency MBS	7,123,051		183,789		(140		)	—			7,311,172		7,519,002		211,356		(3,526		)	207,830
Non-Agency MBS (3)
Rated AAA	13,356		267		—			—			13,623		13,623		—		—			—
Rated AA	48		1		—			—			49		35		—		(14		)	(14		)
Rated A	34,059		797		(885		)	(594		)	33,377		29,494		399		(4,282		)	(3,883		)
Rated BBB	58,681		42		(7,736		)	(1,111		)	49,876		49,199		2,255		(2,932		)	(677		)
Rated BB	87,402		33		(6,290		)	(2,532		)	78,613		73,845		211		(4,979		)	(4,768		)
Rated B	442,396		18		(38,165		)	(30,335		)	373,914		364,068		7,887		(17,733		)	(9,846		)
Rated CCC	1,195,769		—		(80,268		)	(229,354		)	886,147		893,583		43,414		(35,978		)	7,436
Rated CC	1,295,750		—		(47,184		)	(267,554		)	981,012		961,899		32,853		(51,966		)	(19,113		)
Rated C	1,386,314		—		(35,893		)	(362,101		)	988,320		989,877		44,666		(43,109		)	1,557
Unrated and D-rated(4)	823,734		—		(23,288		)	(302,820		)	497,626		513,687		35,279		(19,218		)	16,061
Total Non-Agency MBS	5,337,509		1,158		(239,709		)	(1,196,401		)	3,902,557		3,889,310		166,964		(180,211		)	(13,247		)
Total MBS	$	12,460,560	$	184,947	$	(239,849	)	$	(1,196,401	)	$	11,213,729	$	11,408,312	$	378,320	$	(183,737	)	$	194,583
December 31, 2010
								Discount
								Designated
	Principal/				Accretable			as Credit					Carrying		Gross		Gross			Net
	Current		Purchase		Purchase			Reserve			Amortized		Value/		Unrealized		Unrealized			Unrealized
(In Thousands)	Face		Premiums		Discounts			and OTTI (1)			Cost (2)		Fair Value		Gains		Losses			Gain/(Loss)
Agency MBS:
Fannie Mae	$	5,083,076	$	88,654	$	(210	)	$	—		$	5,171,520	$	5,323,475	$	157,365	$	(5,410	)	$	151,955
Freddie Mac	602,921		16,171		—			—			628,355		638,582		12,744		(2,517		)	10,227
Ginnie Mae	17,830		311		—			—			18,141		18,566		425		—			425
Total Agency MBS	5,703,827		105,136		(210		)	—			5,818,016		5,980,623		170,534		(7,927		)	162,607
Non-Agency MBS (3)
Rated AAA	2,157		52		—			—			2,209		1,994		—		(215		)	(215		)
Rated AA	33,257		905		(446		)	—			33,716		30,805		334		(3,245		)	(2,911		)
Rated A	26,761		43		(6,441		)	(1,632		)	18,731		22,968		4,773		(536		)	4,237
Rated BBB	44,313		27		(2,329		)	(840		)	41,171		39,468		438		(2,141		)	(1,703		)
Rated BB	44,305		—		(3,671		)	(2,250		)	38,384		42,441		4,057		—			4,057
Rated B	93,552		—		(15,108		)	(7,173		)	71,271		80,976		9,753		(48		)	9,705
Rated CCC	764,579		—		(69,899		)	(192,503		)	502,177		565,043		67,382		(4,516		)	62,866
Rated CC	620,114		—		(54,361		)	(196,106		)	369,647		432,542		63,179		(284		)	62,895
Rated C	1,004,627		—		(60,308		)	(281,070		)	663,249		745,292		88,388		(6,345		)	82,043
Unrated and D-rated(4)	187,824		—		(16,403		)	(65,104		)	106,317		116,558		13,131		(2,890		)	10,241
Total Non-Agency MBS	2,821,489		1,027		(228,966		)	(746,678		)	1,846,872		2,078,087		251,435		(20,220		)	231,215
Total MBS	$	8,525,316	$	106,163	$	(229,176	)	$	(746,678	)	$	7,664,888	$	8,058,710	$	421,969	$	(28,147	)	$	393,822

(1) Discount designated as Credit Reserve and amounts related to OTTI are generally not expected to be accreted into interest income.  Amounts disclosed at September 30, 2011 reflect Credit Reserve of $1.146 billion and OTTI of $50.7 million.  Amounts disclosed at December 31, 2010 reflect Credit Reserve of $700.3 million and OTTI of $46.4 million.

(2) Includes principal payments receivable of $4.5 million and $9.3 million at September 30, 2011 and December 31, 2010, respectively, which are not included in the Principal/Current Face.

(3) Non-Agency MBS, including Non-Agency MBS transferred to consolidated VIEs, are reported based on the lowest rating issued by a Rating Agency, if more than one rating is issued on the security, at the date presented.  

(4) Includes 52 Non-Agency MBS that were D-rated and had an aggregate amortized cost and fair value of $483.2 million and $498.5 million, respectively, at September 30, 2011 and 13 Non-Agency MBS that were D-rated and had an aggregate amortized cost and fair value of $98.6 million and $105.9 million, respectively, at December 31, 2010.

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

Unrealized Loss Position For:
	Less than 12 Months					12 Months or more					Total
	Fair		Unrealized		Number of	Fair		Unrealized		Number of	Fair		Unrealized
(In Thousands)	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Agency MBS:
Fannie Mae	$	535,456	$	1,572	39	$	154,717	$	1,776	18	$	690,173	$	3,348
Freddie Mac	22,526		117		2	3,003		61		1	25,529		178
Total Agency MBS	557,982		1,689		41	157,720		1,837		19	715,702		3,526
Non-Agency MBS:
Rated AA	—		—		—	35		14		1	35		14
Rated A	2,842		282		1	24,933		4,000		3	27,775		4,282
Rated BBB	36,422		2,509		5	1,499		423		2	37,921		2,932
Rated BB	62,485		3,957		7	10,270		1,022		2	72,755		4,979
Rated B	245,293		15,497		17	14,392		2,236		2	259,685		17,733
Rated CCC	600,747		31,975		48	18,012		4,003		3	618,759		35,978
Rated CC	727,495		51,424		50	3,516		542		2	731,011		51,966
Rated C	653,817		36,562		50	81,490		6,547		2	735,307		43,109
Unrated and other	290,904		15,118		23	18,202		4,100		2	309,106		19,218
Total Non-Agency MBS	2,620,005		157,324		201	172,349		22,887		19	2,792,354		180,211
Total MBS	$	3,177,987	$	159,013	242	$	330,069	$	24,724	38	$	3,508,056	$	183,737

Schedule of composition of OTTI charges recorded

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In Thousands)	2011		2010		2011		2010
OTTI included in earnings	$	3,991	$	—	$	6,383	$	5,412
OTTI recognized in/(reclassified from) other comprehensive income	10,922		—		9,167		(5,228		)
Total OTTI losses	$	14,913	$	—	$	15,550	$	184

Schedule of changes in credit loss component of OTTI

	Three Months Ended		Nine Months Ended
(In Thousands)	September 30, 2011		September 30, 2011
Credit loss component of OTTI at beginning of period	$	26,739	$	24,347
Additions for credit related OTTI not previously recognized	3,991		3,991
Subsequent additional credit related OTTI recorded	—		2,392
Credit loss component of OTTI at end of period	$	30,730	$	30,730

Schedule of significant inputs considered and assumptions made in determining the measurement of the component of OTTI recorded earnings

	Three Months Ended	Nine Months Ended
	September 30, 2011	September 30, 2011
Credit enhancement(1) (2)
Weighted average(3)	2.70%	3.02%
Range(4)	0.00-10.40%	0.00-13.30%
Projected CPR(2) (5)
Weighted average(3)	11.00%	10.90%
Range(4)	6.90-12.20%	1.90-12.20%
Projected Loss Severity(2) (6)
Weighted average(3)	56.10%	53.60%
Range(4)	46.10-70.00%	41.90-70.00%
60+ days delinquent(2) (7)
Weighted average(3)	21.40%	21.30%
Range(4)	9.10-36.70%	7.30-36.70%

(1) Represents a level of protection for these securities, expressed as a percentage of total current underlying loan balance.

(2) Information provided is based on loans for all groups that provide credit enhancement for MBS with credit enhancement.  If an MBS no longer has credit enhancement, information provided is based on loans for the individual group owned by the Company.

(3) Calculated by weighting the relevant input/assumptions for each individual security by current outstanding face of the security.

(4) Represents the range of inputs/assumptions based on individual securities.

(5) CPR - conditional prepayment rate.

(6) Projected loss severity represents the projected amount of loss realized on liquidated properties as a percentage of the principal balance.

(7) Includes, for each security, underlying loans 60 or more days delinquent, foreclosed loans and other real estate owned.

Schedule of impact of MBS on accumulated other comprehensive income

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In Thousands)	2011			2010		2011			2010
Accumulated other comprehensive income on MBS:
Unrealized gain on MBS at beginning of period	$	292,376		$	353,457	$	393,822		$	339,470
Unrealized gain/(loss) on Agency MBS, net	12,035			5,899		50,092			(1,465		)
Unrealized (loss)/gain on Non-Agency MBS, net	(109,294		)	42,162		(250,845		)	99,560
Reclassification adjustment for MBS sales included in net income	(4,525		)	—		(4,869		)	(41,459		)
Reclassification adjustment for OTTI included in net income	3,991			—		6,383			5,412
Balance at end of period	$	194,583		$	401,518	$	194,583		$	401,518

Schedule of changes in the components of the purchase discount on Non-Agency MBS

	Three Months Ended						Nine Months Ended
	September 30, 2011						September 30, 2011
	Discount						Discount
	Designated as						Designated as
	Credit Reserve			Accretable			Credit Reserve			Accretable
(In Thousands)	and OTTI (1)			Discount (1) (2)			and OTTI (1)			Discount (1)
Balance at beginning of period	$	(1,174,890	)	$	(222,930	)	$	(746,678	)	$	(228,966	)
Accretion of discount	—			10,785			—			33,107
Realized credit losses	10,735			—			20,612			—
Purchases	(29,141		)	(16,198		)	(360,655		)	(19,035		)
Reclass discount for OTTI	—			—			101			(101		)
Net impairment losses recognized in earnings	(3,991		)	—			(6,383		)	—
Unlinking of Linked Transactions	(10,419		)	(61		)	(116,489		)	(11,623		)
Transfers/release of credit reserve	11,305			(11,305		)	13,091			(13,091		)
Balance at end of period	$	(1,196,401	)	$	(239,709	)	$	(1,196,401	)	$	(239,709	)

	Three Months Ended						Nine Months Ended
	September 30, 2010						September 30, 2010
	Discount						Discount
	Designated as						Designated as
	Credit Reserve			Accretable			Credit Reserve			Accretable
(In Thousands)	and OTTI (3)			Discount (2) (3)			and OTTI (3)			Discount (3)
Balance at beginning of period	$	(604,785	)	$	(208,938	)	$	(472,710	)	$	(149,319	)
Accretion of discount	—			9,355			—			27,138
Realized credit losses	2,019			—			3,153			—
Purchases	(67,547		)	(10,694		)	(266,593		)	(19,483		)
Sales	—			—			7,856			683
Reclass discount for OTTI	—			—			520			(520		)
Net impairment losses recognized in earnings	—			—			(5,412		)	—
Unlinking of Linked Transactions	(23,639		)	241			(26,379		)	(2,922		)
Transfers/release of credit reserve	5,145			(5,145		)	70,758			(70,758		)
Balance at end of period	$	(688,807	)	$	(215,181	)	$	(688,807	)	$	(215,181	)

(1) In addition, the Company reallocated $1.3 million and $474,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions during the three and nine months ended September 30, 2011, respectively.

(2) Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security.

(3) In addition, the Company reallocated $1.1 million and $18.3 million of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the three and nine months ended September 30, 2010, respectively.

Schedule of components of interest income on the entity's Agency MBS

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In Thousands)	2011			2010			2011			2010
Coupon interest	$	70,654		$	68,887		$	212,703		$	226,010
Effective yield adjustment (1)	(10,697		)	(8,497		)	(26,589		)	(32,412		)
Agency MBS interest income	$	59,957		$	60,390		$	186,114		$	193,598

(1) Includes amortization of premium paid net of accretion of purchase discount.  For Agency MBS, interest income is recorded at an effective yield, which reflects net premium amortization and discount accretion based on actual prepayment activity.

Schedule of components of interest income on the entity's Non-Agency MBS

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In Thousands)	2011		2010		2011		2010
Coupon interest	$	60,038	$	27,605	$	153,563	$	72,849
Effective yield adjustment(1)	10,746		9,301		32,970		27,008
Non-Agency MBS interest income	$	70,784	$	36,906	$	186,533	$	99,857

(1) The effective yield adjustment is the difference between the net income calculated using the net yield, which is based on management’s estimates of future cash flows for Non-Agency MBS, less the current coupon yield.