Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018, respectively, on the Company’s condensed consolidated balance sheets (dollar amounts in thousands):

	Measured at Fair Value on a Recurring Basis at
	June 30, 2019								December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets carried at fair value
Investment securities available for sale:
Agency RMBS	$	—	$	994,200	$	—	$	994,200	$	—	$	1,037,730	$	—	$	1,037,730
Non-Agency RMBS	—		432,840		—		432,840		—		214,037		—		214,037
CMBS	—		292,090		—		292,090		—		207,785		52,700		260,485
ABS	—		24,739		—		24,739		—		—		—		—
Multi-family loans held in securitization trusts	—		—		14,573,925		14,573,925		—		—		11,679,847		11,679,847
Distressed and other residential mortgage loans, at fair value	—		—		1,061,954		1,061,954		—		—		737,523		737,523
Derivative assets:
Interest rate swaps (1)	—		14,047		—		14,047		—		10,263		—		10,263
Investments in unconsolidated entities	—		—		88,108		88,108		—		—		32,994		32,994
Total	$	—	$	1,757,916	$	15,723,987	$	17,481,903	$	—	$	1,469,815	$	12,503,064	$	13,972,879
Liabilities carried at fair value
Multi-family collateralized debt obligations	$	—	$	—	$	13,772,726	$	13,772,726	$	—	$	—	$	11,022,248	$	11,022,248
Total	$	—	$	—	$	13,772,726	$	13,772,726	$	—	$	—	$	11,022,248	$	11,022,248

⁽¹⁾ 

All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $27.8 million netted against a variation margin of $41.9 million at June 30, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.

Changes in Valuation of Level 3 Assets

⁽¹⁾  All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $27.8 million netted against a variation margin of $41.9 million at June 30, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.

The following tables detail changes in valuation for the Level 3 assets for the six months ended June 30, 2019 and 2018, respectively (amounts in thousands):

Level 3 Assets:

	Six Months Ended June 30, 2019
	Multi-family loans held in securitization trusts			Distressed and other residential mortgage loans			Investments in unconsolidated entities			CMBS held in securitization trusts			Total
Balance at beginning of period	$	11,679,847		$	737,523		$	32,994		$	52,700		$	12,503,064
Total gains/(losses) (realized/unrealized)
Included in earnings	574,231			25,359			5,753			17,734			623,077
Included in other comprehensive income (loss)	—			—			—			(13,665		)	(13,665		)
Transfers in	—			—			—			—			—
Transfers out	—			(182		)	—			—			(182		)
Contributions	—			—			50,000			—			50,000
Paydowns/Distributions	(106,363		)	(61,275		)	(639		)	—			(168,277		)
Sales	—			(19,814		)	—			(56,769		)	(76,583		)
Purchases (1)	2,426,210			380,343			—			—			2,806,553
Balance at the end of period	$	14,573,925		$	1,061,954		$	88,108		$	—		$	15,723,987

⁽¹⁾ 

During the six months ended June 30, 2019, the Company purchased first loss PO securities and certain IOs and mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $2.4 billion during the six months ended June 30, 2019 (see Notes 2 and 6)

Changes in Valuation of Level 3 Liabilities

	Six Months Ended June 30, 2018
	Multi-family loans held in securitization trusts			Distressed and other residential mortgage loans			Investments in unconsolidated entities			CMBS held in securitization trusts		Total
Balance at beginning of period	$	9,657,421		$	87,153		$	42,823		$	47,922	$	9,835,319
Total (losses)/gains (realized/unrealized)
Included in earnings	(244,181		)	(475		)	3,575			1,915		(239,166		)
Included in other comprehensive income (loss)	—			—			—			297		297
Transfers in	—			—			—			—		—
Transfers out	—			—			—			—		—
Contributions	—			—			—			—		—
Paydowns/Distributions	(67,880		)	(9,371		)	(1,246		)	—		(78,497		)
Sales	—			(2,185		)	—			—		(2,185		)
Purchases	—			94,075			—			—		94,075
Balance at the end of period	$	9,345,360		$	169,197		$	45,152		$	50,134	$	9,609,843

The following table details changes in valuation for the Level 3 liabilities (Multi-family CDOs) for the six months ended June 30, 2019 and 2018, respectively (amounts in thousands):

Level 3 Liabilities:

	Six Months Ended June 30,
	2019			2018
Balance at beginning of period	$	11,022,248		$	9,189,459
Total losses (gains) (realized/unrealized)
Included in earnings (1)	531,930			(282,738		)
Purchases (2)	2,324,639			—
Paydowns	(106,091		)	(67,880		)
Balance at the end of period	$	13,772,726		$	8,838,841

⁽¹⁾  Amounts included in interest expense on Multi-Family CDOs and unrealized gain on multi-family loans and debt held in securitization trusts.

⁽²⁾ 

During the six months ended June 30, 2019, the Company purchased PO securities and certain IOs and mezzanine CMBS securities issued from securitizations that it determined to consolidate and include in the Consolidated K-Series. As a result, the Company consolidated liabilities of these securitizations in the amount of $2.3 billion (see Notes 2 and 6)

Changes in Unrealized Gains (Losses) Included in Earnings for Level 3 Assets and Liabilities

The following table details the changes in unrealized gains (losses) included in earnings for the three and six months ended June 30, 2019 and 2018 for our Level 3 assets and liabilities held as of June 30, 2019 and 2018, respectively (dollar amounts in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Assets
Multi-family loans held in securitization trusts (1)	$	330,105		$	(47,200	)	$	604,788		$	(219,746	)
Investments in unconsolidated entities (2)	1,698			1,858			5,359			2,896
Distressed and other residential mortgage loans, at fair value (3)	10,329			(34		)	19,666			(126		)
Liabilities
Multi-family debt held in securitization trusts (1)	(324,898		)	59,219			(590,171		)	239,310

⁽¹⁾  Presented in unrealized gain on multi-family loans and debt held in securitization trusts, net on the Company's condensed consolidated statements of operations.

⁽²⁾  Presented in other income on the Company's condensed consolidated statements of operations.

⁽³⁾ 

Presented in net gain (loss) on distressed and other residential mortgage loans at fair value on the Company's condensed consolidated statements of operations.

Schedule of Assets Measured at Fair Value on a Non-recurring Basis

The following table presents assets measured at fair value on a non-recurring basis as of June 30, 2019 and December 31, 2018, respectively, on the Company's condensed consolidated balance sheets (dollar amounts in thousands):

	Assets Measured at Fair Value on a Non-Recurring Basis at
	June 30, 2019						December 31, 2018
	Level 1	Level 2	Level 3		Total		Level 1	Level 2	Level 3		Total
Residential mortgage loans held in securitization trusts – impaired loans, net	—	—	$	5,590	$	5,590	—	—	$	5,921	$	5,921

Schedule of Gains (Losses) Incurred for Assets Measured at Fair Value on a Non-recurring Basis

The following table presents gains (losses) incurred for assets measured at fair value on a non-recurring basis for the three and six months ended June 30, 2019 and 2018, respectively, on the Company’s condensed consolidated statements of operations (dollar amounts in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019			2018
Residential mortgage loans held in securitization trusts – impaired loans, net	—	—	$	(38	)	$	110

Schedule of Carrying Value and Estimated Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at June 30, 2019 and December 31, 2018, respectively (dollar amounts in thousands):

		June 30, 2019				December 31, 2018
	Fair Value Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	134,993	$	134,993	$	103,724	$	103,724
Investment securities available for sale	Level 2 or 3	1,743,869		1,743,869		1,512,252		1,512,252
Distressed and other residential mortgage loans, at fair value	Level 3	1,061,954		1,061,954		737,523		737,523
Distressed and other residential mortgage loans, net	Level 3	218,094		221,615		285,261		289,376
Investments in unconsolidated entities	Level 3	166,148		166,983		73,466		73,833
Preferred equity and mezzanine loan investments	Level 3	191,387		193,875		165,555		167,739
Multi-family loans held in securitization trusts	Level 3	14,573,925		14,573,925		11,679,847		11,679,847
Derivative assets	Level 2	14,047		14,047		10,263		10,263
Mortgage loans held for sale, net (1)	Level 3	2,460		2,621		3,414		3,584
Mortgage loans held for investment (1)	Level 3	1,580		1,580		1,580		1,580
Financial Liabilities:
Repurchase agreements	Level 2	2,604,356		2,604,356		2,131,505		2,131,505
Residential collateralized debt obligations	Level 3	45,280		43,468		53,040		50,031
Multi-family collateralized debt obligations	Level 3	13,772,726		13,772,726		11,022,248		11,022,248
Securitized debt	Level 3	—		—		42,335		45,030
Subordinated debentures	Level 3	45,000		45,044		45,000		44,897
Convertible notes	Level 2	131,839		138,773		130,762		135,689

⁽¹⁾  Included in receivables and other assets in the accompanying condensed consolidated balance sheets.