Collateral Positions

9 Months Ended

Sep. 30, 2012

Collateral Positions

Collateral Positions

8.      Collateral Positions

The Company pledges securities or cash as collateral to its counterparties pursuant to its borrowings under repurchase agreements and its derivative contracts that are in an unrealized loss position, and it receives securities or cash as collateral pursuant to financing provided under reverse repurchase agreements and its derivative contracts in an unrealized gain position.  The Company exchanges collateral with its counterparties based on changes in the fair value, notional amount and term of the associated repurchase and reverse repurchase agreements and derivative contracts, as applicable.  Through this margining process, either the Company or its counterparty may be required to pledge cash or securities as collateral.  When the Company’s pledged collateral exceeds the required margin, the Company may initiate a reverse margin call, at which time the counterparty may either return the excess collateral, or provide collateral to the Company in the form of cash or high-quality securities.

The following table summarizes the fair value of the Company’s collateral positions, which includes collateral pledged and collateral held, with respect to its borrowings under repurchase agreements, reverse repurchase agreements and derivative hedging instruments at September 30, 2012 and December 31, 2011:

	September 30, 2012				December 31, 2011
(In Thousands)	Assets Pledged		Collateral Held		Assets Pledged		Collateral Held
Derivative hedging instruments:
Agency MBS	$	84,150	$	—	$	117,687	$	—
Cash (1)	7,013		—		15,502		—
	91,163		—		133,189		—
Repurchase Agreement Borrowings:
Agency MBS	$	6,818,804	$	—	$	6,549,276	$	—
Non-Agency MBS (2)(3)	3,215,875		—		2,067,221		—
U.S. Treasury securities	509,704		—		306,401		—
	10,544,383		—		8,922,898		—
Reverse Repurchase Agreements:
U.S. Treasury securities	$	—	$	509,704	$	—	$	306,401
	—		509,704		—		306,401
Total	$	10,635,546	$	509,704	$	9,056,087	$	306,401

(1)  Cash pledged as collateral is reported as “restricted cash” on the Company’s consolidated balance sheets.

(2)  Includes $1.726 billion and $1.375 billion of Non-Agency MBS acquired in connection with resecuritization transactions from consolidated VIEs at September 30, 2012 and December 31, 2011, respectively, that are eliminated from the Company’s consolidated balance sheet.

(3)  In addition, $797.3 million and $448.4 million of Non-Agency MBS are pledged as collateral in connection with contemporaneous repurchase and reverse repurchase agreements entered into with a single counterparty at September 30, 2012 and December 31, 2011, respectively.

The following table presents detailed information about the Company’s assets pledged as collateral pursuant to its borrowings under repurchase agreements and derivative hedging instruments at September 30, 2012:

	MBS Pledged Under Repurchase Agreements						MBS Pledged Against Derivative Hedging Instruments						Total Fair Value of
(In Thousands)	Fair Value		Amortized Cost		Accrued Interest on Pledged MBS		Fair Value		Amortized Cost		Accrued Interest on Pledged MBS		MBS Pledged and Accrued Interest
U.S. Treasury securities	$	509,704	$	513,316	$	—	$	—	$	—	$	—	$	509,704
Fannie Mae	$	6,254,273	$	6,032,905	$	17,715	$	65,883	$	62,901	$	185	$	6,338,056
Freddie Mac	562,372		538,205		2,156		8,949		8,563		37		573,514
Ginnie Mae	2,159		2,102		3		9,318		8,994		15		11,495
Agency MBS	$	6,818,804	$	6,573,212	$	19,874	$	84,150	$	80,458	$	237	$	6,923,065
Rated AAA	$	33,619	$	32,534	$	108	$	—	$	—	$	—	$	33,727
Rated A	21,164		22,217		59		—		—		—		21,223
Rated BBB	13,442		12,337		61		—		—		—		13,503
Rated BB	330,200		307,753		1,187		—		—		—		331,387
Rated B	99,176		89,421		327		—		—		—		99,503
Rated CCC	273,113		245,188		1,066		—		—		—		274,179
Rated CC	237,426		215,418		1,090		—		—		—		238,516
Rated C	171,079		156,944		910		—		—		—		171,989
Rated D	668,121		609,303		3,629		—		—		—		671,750
Not Rated	1,368,535		1,159,898		7,805		—		—		—		1,376,340
Non-Agency MBS (1) (2)	$	3,215,875	$	2,851,013	$	16,242	$	—	$	—	$	—	$	3,232,117
Total	$	10,544,383	$	9,937,541	$	36,116	$	84,150	$	80,458	$	237	$	10,664,886

(1)  Includes $1.726 billion of Non-Agency MBS acquired in connection with resecuritization transactions from consolidated VIEs at September 30, 2012, that are eliminated from the Company’s consolidated balance sheet.

(2)  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.