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Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE) (Tables)

9 Months Ended

Sep. 30, 2019

Variable Interest Entity, Consolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]

Schedule of Assets and Liabilities of Consolidated VIE's

The following table presents a summary of the assets and liabilities of the Residential CDOs, the Consolidated K-Series, and KRVI of as of September 30, 2019 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.



	Financing VIE		Other VIEs
	Residential Mortgage Loan Securitization		Consolidated K-Series		Other		Total
Cash and cash equivalents	$	—	$	—	$	656	$	656
Residential mortgage loans held in securitization trusts, net	45,672		—		—		45,672
Multi-family loans held in securitization trusts, at fair value	—		15,863,264		—		15,863,264
Receivables and other assets	1,274		51,950		14,098		67,322
Total assets	$	46,946	$	15,915,214	$	14,754	$	15,976,914

Residential collateralized debt obligations	$	42,119	$	—	$	—	$	42,119
Multi-family collateralized debt obligations, at fair value	—		14,978,199		—		14,978,199
Mortgages and notes payable in consolidated variable interest entities	—		—		935		935
Accrued expenses and other liabilities	35		50,783		120		50,938
Total liabilities	$	42,154	$	15,028,982	$	1,055	$	15,072,191

The following table presents a summary of the assets and liabilities of the Financing VIEs, the Consolidated K-Series, KRVI, and The Clusters as of December 31, 2018 (dollar amounts in thousands):



	Financing VIEs						Other VIEs
	Multi-family CMBS Re- securitization ⁽¹⁾		Distressed Residential Mortgage Loan Securitization ⁽²⁾		Residential Mortgage Loan Securitization		Consolidated K-Series ⁽³⁾		Other		Total
Cash and cash equivalents	$	—	$	—	$	—	$	—	$	708	$	708
Investment securities available for sale, at fair value held in securitization trusts	52,700		—		—		—		—		52,700
Residential mortgage loans held in securitization trusts, net	—		—		56,795		—		—		56,795
Distressed residential mortgage loans held in securitization trusts, net	—		88,096		—		—		—		88,096
Multi-family loans held in securitization trusts, at fair value	1,107,071		—		—		10,572,776		—		11,679,847
Real estate held for sale in consolidated variable interest entities	—		—		—		—		29,704		29,704
Receivables and other assets	4,243		10,287		1,061		37,679		23,254		76,524
Total assets	$	1,164,014	$	98,383	$	57,856	$	10,610,455	$	53,666	$	11,984,374

Residential collateralized debt obligations	$	—	$	—	$	53,040	$	—	$	—	$	53,040
Multi-family collateralized debt obligations, at fair value	1,036,604		—		—		9,985,644		—		11,022,248
Securitized debt	30,121		12,214		—		—		—		42,335
Mortgages and notes payable in consolidated variable interest entities	—		—		—		—		31,227		31,227
Accrued expenses and other liabilities	4,228		444		26		37,022		1,166		42,886
Total liabilities	$	1,070,953	$	12,658	$	53,066	$	10,022,666	$	32,393	$	11,191,736

⁽¹⁾

The Company classified the multi-family CMBS issued by two securitizations and held by this Financing VIE as available for sale securities. The Financing VIE consolidated one securitization included in the Consolidated K-Series that issued certain of the multi-family CMBS owned by the Company, including its assets, liabilities, income and expenses, in its financial statements, as based on a number of factors, the Company determined that it was the primary beneficiary and has a controlling financial interest in this particular K-Series securitization (see Note 6).

⁽²⁾

The Company engaged in this transaction for the purpose of financing certain distressed residential mortgage loans acquired by the Company. The distressed residential mortgage loans serving as collateral for the financing are comprised of re-performing and, to a lesser extent, non-performing and other delinquent mortgage loans secured by first liens on one- to four- family properties. Balances as of December 31, 2018 are related to a securitization transaction that closed in April 2016 that involved the issuance of $177.5 million of Class A Notes representing the beneficial ownership in a pool of performing and re-performing seasoned mortgage loans. The Company held 5% of the Class A Notes issued as part of the securitization transaction, which were eliminated in consolidation.


⁽³⁾	Eight of the securitizations included in the Consolidated K-Series were not held in a Financing VIE as of December 31, 2018.

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



		September 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	$	65,906	$	65,906	$	103,724	$	103,724
Investment securities, available for sale	Level 2 or 3	1,904,018		1,904,018		1,512,252		1,512,252
Distressed and other residential mortgage loans, at fair value	Level 3	1,116,128		1,116,128		737,523		737,523
Distressed and other residential mortgage loans, net	Level 3	210,466		213,398		285,261		289,376
Investments in unconsolidated entities	Level 3	168,933		170,150		73,466		73,833
Preferred equity and mezzanine loan investments	Level 3	178,997		181,626		165,555		167,739
Multi-family loans held in securitization trusts	Level 3	15,863,264		15,863,264		11,679,847		11,679,847
Derivative assets	Level 2	20,673		20,673		10,263		10,263
Mortgage loans held for sale, net ⁽¹⁾	Level 3	2,437		2,525		3,414		3,584
Mortgage loans held for investment ⁽¹⁾	Level 3	—		—		1,580		1,580
Financial Liabilities:
Repurchase agreements	Level 2	2,559,880		2,559,880		2,131,505		2,131,505
Residential collateralized debt obligations	Level 3	42,119		40,534		53,040		50,031
Multi-family collateralized debt obligations	Level 3	14,978,199		14,978,199		11,022,248		11,022,248
Securitized debt	Level 3	—		—		42,335		45,030
Subordinated debentures	Level 3	45,000		41,273		45,000		44,897
Convertible notes	Level 2	132,395		140,557		130,762		135,689


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

Schedule of Securitized Debt Collateralized

The geographic concentrations of credit risk exceeding 5% of the total preferred equity and mezzanine loan investment amounts as of September 30, 2019 and December 31, 2018 are as follows:



	September 30, 2019		December 31, 2018
Tennessee	12.2	%	6.8	%
Georgia	11.7	%	15.3	%
Texas	10.6	%	16.6	%
Alabama	10.0	%	8.6	%
Florida	9.4	%	11.3	%
South Carolina	9.1	%	9.5	%
Virginia	8.5	%	9.1	%
New Jersey	5.0	%	2.6	%

Preferred equity and mezzanine loan investments consist of the following as of September 30, 2019 and December 31, 2018 (dollar amounts in thousands):



	September 30, 2019			December 31, 2018
Investment amount	$	180,394		$	166,789
Deferred loan fees, net	(1,397		)	(1,234		)
Total	$	178,997		$	165,555

The following table summarizes the Company’s securitized debt collateralized by multi-family CMBS or distressed residential mortgage loans as of December 31, 2018 (dollar amounts in thousands):



	Multi-family CMBS Re-securitization ⁽¹⁾			Distressed Residential Mortgage Loan Securitization
Principal Amount at December 31, 2018	$	33,177		$	12,381
Carrying Value at December 31, 2018 ⁽²⁾	$	30,121		$	12,214
Pass-through rate of notes issued	5.35		%	4.00		%


⁽¹⁾	The Company engaged in the re-securitization transaction primarily for the purpose of obtaining non-recourse financing on a portion of its multi-family CMBS portfolio. As a result of engaging in this transaction, the Company remained economically exposed to the first loss position on the underlying multi-family CMBS transferred to the Consolidated VIE.


⁽²⁾	Presented net of unamortized deferred costs of $0.2 million related to the issuance of the securitized debt, which included underwriting, rating agency, legal, accounting and other fees.

Schedule of Contractual Maturities of Financing VIE's

The following table presents contractual maturity information about the Financing VIEs’ securitized debt as of December 31, 2018 (dollar amounts in thousands):



Scheduled Maturity (principal amount)	December 31, 2018
Within 24 months	$	12,381
Over 24 months to 36 months	—
Over 36 months	33,177
Total	45,558
Discount	(2,983		)
Debt issuance cost	(240		)
Carrying value	$	42,335

As of September 30, 2019, maturities for debt on the Company's condensed consolidated balance sheet are as follows (dollar amounts in thousands):



Year Ending December 31,	Total
2019	$	935
2020	—
2021	—
2022	138,000
2023	—
Thereafter	87,319
	$	226,254

Schedule of Classification and Carrying Value of Unconsolidated VIEs [Table Text Block]



	December 31, 2018
	Investment securities, available for sale, at fair value, held in securitization trusts		Receivables and other assets		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
Multi-family CMBS	$	52,700	$	72	$	—	$	—	$	52,772
Preferred equity investments in multi-family properties	—		—		154,629		40,472		195,101
Mezzanine loans on multi-family properties	—		—		10,926		—		10,926
Equity investments in entities that invest in residential properties	—		—		—		10,954		10,954
Total assets	$	52,700	$	72	$	165,555	$	51,426	$	269,753

The following tables present the classification and carrying value of unconsolidated VIEs as of September 30, 2019 and December 31, 2018, (dollar amounts in thousands):



	September 30, 2019
	Investment securities, available for sale, at fair value		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
ABS	$	48,254	$	—	$	—	$	48,254
Preferred equity investments in multi-family properties	—		172,826		92,684		265,510
Mezzanine loans on multi-family properties	—		6,171		—		6,171
Equity investments in entities that invest in residential properties and loans	—		—		61,779		61,779
Total assets	$	48,254	$	178,997	$	154,463	$	381,714

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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