MBS (Tables)

3 Months Ended

Mar. 31, 2012

MBS

Schedule of information about MBS

	March 31, 2012
								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	$	5,909,628	$	160,767	$	(127	)	$	—		$	6,070,268	$	6,255,460	$	186,653	$	(1,461	)	$	185,192
Freddie Mac	735,518		22,994		—			—			763,269		787,949		24,741		(61		)	24,680
Ginnie Mae	15,626		269		—			—			15,895		16,220		325		—			325
Total Agency MBS	6,660,772		184,030		(127		)	—			6,849,432		7,059,629		211,719		(1,522		)	210,197
Non-Agency MBS (3)
Rated AAA	11,096		222		—			—			11,318		11,207		—		(111		)	(111		)
Rated AA	47		1		—			—			48		34		—		(14		)	(14		)
Rated A	27,664		729		(602		)	(5		)	27,786		24,875		362		(3,273		)	(2,911		)
Rated BBB	45,847		36		(2,875		)	(494		)	42,514		40,060		—		(2,454		)	(2,454		)
Rated BB	99,301		33		(10,259		)	(3,088		)	85,987		85,651		3,072		(3,408		)	(336		)
Rated B	357,121		16		(31,108		)	(24,127		)	301,902		297,421		6,408		(10,889		)	(4,481		)
Rated CCC	1,099,730		—		(67,095		)	(214,960		)	817,675		853,336		52,931		(17,270		)	35,661
Rated CC	799,895		—		(35,516		)	(149,703		)	614,676		616,769		19,688		(17,595		)	2,093
Rated C	1,890,796		—		(56,732		)	(436,617		)	1,397,447		1,429,309		61,888		(30,026		)	31,862
Unrated and D-rated (4)	1,588,886		—		(59,995		)	(515,724		)	1,013,167		1,056,615		73,271		(29,823		)	43,448
Total Non-Agency MBS	5,920,383		1,037		(264,182		)	(1,344,718		)	4,312,520		4,415,277		217,620		(114,863		)	102,757
Total MBS	$	12,581,155	$	185,067	$	(264,309	)	$	(1,344,718	)	$	11,161,952	$	11,474,906	$	429,339	$	(116,385	)	$	312,954

	December 31, 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	$	5,981,834	$	154,809	$	(135	)	$	—		$	6,136,508	$	6,329,925	$	194,997	$	(1,580	)	$	193,417
Freddie Mac	743,517		22,717		—			—			768,572		791,085		22,677		(164		)	22,513
Ginnie Mae	15,920		275		—			—			16,195		16,521		326		—			326
Total Agency MBS	6,741,271		177,801		(135		)	—			6,921,275		7,137,531		218,000		(1,744		)	216,256
Non-Agency MBS (3)
Rated AAA	12,258		245		—			—			12,503		12,258		—		(245		)	(245		)
Rated AA	47		1		—			—			48		34		—		(14		)	(14		)
Rated A	28,950		765		(624		)	(5		)	29,086		24,911		341		(4,516		)	(4,175		)
Rated BBB	46,593		42		(3,020		)	(582		)	43,033		38,352		—		(4,681		)	(4,681		)
Rated BB	100,513		33		(10,749		)	(3,223		)	86,574		81,789		2,232		(7,017		)	(4,785		)
Rated B	355,930		17		(30,584		)	(25,004		)	300,359		277,438		2,729		(25,650		)	(22,921		)
Rated CCC	1,031,407		—		(68,174		)	(203,185		)	760,048		741,028		27,767		(46,787		)	(19,020		)
Rated CC	687,664		—		(33,478		)	(142,777		)	511,409		487,619		14,209		(37,999		)	(23,790		)
Rated C	2,128,919		—		(64,963		)	(487,397		)	1,576,559		1,503,737		44,988		(117,810		)	(72,822		)
Unrated and D-rated (4)	1,022,072		—		(38,887		)	(366,593		)	616,592		608,280		34,934		(43,246		)	(8,312		)
Total Non-Agency MBS	5,414,353		1,103		(250,479		)	(1,228,766		)	3,936,211		3,775,446		127,200		(287,965		)	(160,765		)
Total MBS	$	12,155,624	$	178,904	$	(250,614	)	$	(1,228,766	)	$	10,857,486	$	10,912,977	$	345,200	$	(289,709	)	$	55,491

(1)  Discount designated as Credit Reserve and amounts related to OTTI are generally not expected to be accreted into interest income.  Amounts disclosed at March 31, 2012 reflect Credit Reserve of $1.290 billion and OTTI of $54.5 million.  Amounts disclosed at December 31, 2011 reflect Credit Reserve of $1.174 billion and OTTI of $54.5 million.

(2)  Includes principal payments receivable of $4.8 million and $2.3 million at March 31, 2012 and December 31, 2011, 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 116 Non-Agency MBS that were D-rated and had an aggregate amortized cost and fair value of $998.8 million and $1.041 billion, respectively, at March 31, 2012 and 78 Non-Agency MBS that were D-rated and had an aggregate amortized cost and fair value of $602.0 million and $593.8 million, respectively, at December 31, 2011.

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	$	435,903	$	927	31	$	49,880	$	534	10	$	485,783	$	1,461
Freddie Mac	19,763		51		2	2,904		10		1	22,667		61
Total Agency MBS	455,666		978		33	52,784		544		11	508,450		1,522
Non-Agency MBS:
Rated AAA	11,207		111		1	—		—		—	11,207		111
Rated AA	—		—		—	34		14		1	34		14
Rated A	—		—		—	23,239		3,273		3	23,239		3,273
Rated BBB	21,592		1,037		4	18,468		1,417		4	40,060		2,454
Rated BB	58,148		2,438		6	14,233		970		3	72,381		3,408
Rated B	106,974		4,818		7	82,603		6,071		8	189,577		10,889
Rated CCC	272,813		9,000		25	77,767		8,270		8	350,580		17,270
Rated CC	175,181		7,658		15	180,793		9,937		11	355,974		17,595
Rated C	339,136		8,738		31	445,331		21,288		22	784,467		30,026
Unrated and other	364,812		16,699		35	204,518		13,124		14	569,330		29,823
Total Non-Agency MBS	1,349,863		50,499		124	1,046,986		64,364		74	2,396,849		114,863
Total MBS	$	1,805,529	$	51,477	157	$	1,099,770	$	64,908	85	$	2,905,299	$	116,385

Schedule of composition of OTTI charges recorded

	Three Months Ended
	March 31,
(In Thousands)	2012			2011
Total OTTI losses	$	(879	)	$	—
OTTI reclassified from other comprehensive income	(41		)	—
OTTI recognized in earnings	$	(920	)	$	—

Schedule of changes in credit loss component of OTTI

	Three Months Ended
	March 31,
(In Thousands)	2012		2011
Credit loss component of OTTI at beginning of period	$	34,915	$	24,345
Additions for credit related OTTI not previously recognized	458		—
Subsequent additional credit related OTTI recorded	462		—
Credit loss component of OTTI at end of period	$	35,835	$	24,345

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

	Three Months Ended
	March 31, 2012
Credit enhancement(1) (2)
Weighted average(3)	4.40%
Range(4)	0.00-16.50%
Projected CPR(2) (5)
Weighted average(3)	10.20%
Range(4)	9.40-13.30%
Projected Loss Severity(2) (6)
Weighted average(3)	55.40%
Range(4)	45.90-60.00%
60+ days delinquent(2) (7)
Weighted average(3)	21.50%
Range(4)	18.20-23.80%

(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 (loss)/income

	Three Months Ended
	March 31,
(In Thousands)	2012			2011
Accumulated other comprehensive income from MBS:
Unrealized gain on MBS at beginning of period	$	55,491		$	393,822
Unrealized loss on Agency MBS, net	(3,158		)	(8,743		)
Unrealized gain on Non-Agency MBS, net	262,602			18,106
Reclassification adjustment for MBS sales included in net income	(2,901		)	—
Reclassification adjustment for OTTI included in net income	920			—
Change in accumulated other comprehensive income from MBS	$	257,463		$	9,363
Balance at end of period	$	312,954		$	403,185

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

	Three Months Ended						Three Months Ended
	March 31, 2012						March 31, 2011
	Discount						Discount
	Designated as						Designated as
	Credit Reserve			Accretable			Credit Reserve			Accretable
(In Thousands)	and OTTI (1)			Discount (1) (2)			and OTTI (3)			Discount (2)(3)
Balance at beginning of period	$	(1,228,766	)	$	(250,479	)	$	(746,678	)	$	(228,966	)
Accretion of discount	—			9,410			—			10,161
Realized credit losses	22,394			—			3,375			—
Purchases	(108,449		)	(7,433		)	(154,943		)	11,726
Reclass discount for OTTI	684			(684		)	—			—
Net impairment losses recognized in earnings	(920		)	—			—			—
Unlinking of Linked Transactions	(38,579		)	(6,078		)	(51,423		)	(3,030		)
Transfers/release of credit reserve	8,918			(8,918		)	3,816			(3,816		)
Balance at end of period	$	(1,344,718	)	$	(264,182	)	$	(945,853	)	$	(213,925	)

(1)  In addition, the Company reallocated $629,000 of purchase discount designated as accretable purchase discount to Credit Reserve on Non-Agency MBS underlying Linked Transactions during the three months ended March 31, 2012.

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

(3)  The Company reallocated $1.2 million of purchase discount designated as Credit Reserve to accretable purchase discount on Non-Agency MBS underlying Linked Transactions during the three months ended March 31, 2011.

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

	Three Months Ended March 31,
(In Thousands)	2012			2011
Coupon interest	$	64,008		$	67,707
Effective yield adjustment (1)	(10,708		)	(7,532		)
Agency MBS interest income	$	53,300		$	60,175

(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 March 31,
(In Thousands)	2012		2011
Coupon interest	$	60,860	$	39,537
Effective yield adjustment(1)	9,344		10,112
Non-Agency MBS interest income	$	70,204	$	49,649

(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.