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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2024

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, 2024 and December 31, 2023, respectively, on the Company’s condensed consolidated balance sheets (dollar amounts in thousands):


	Measured at Fair Value on a Recurring Basis at
	June 30, 2024								December 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets carried at fair value
Residential loans:
Residential loans	$	—	$	—	$	667,218	$	667,218	$	—	$	—	$	827,535	$	827,535
Consolidated SLST	—		—		1,004,944		1,004,944		—		—		754,860		754,860
Residential loans held in securitization trusts	—		—		1,831,029		1,831,029		—		—		1,501,908		1,501,908
Investment securities available for sale:
Agency RMBS	—		2,613,842		—		2,613,842		—		1,989,324		—		1,989,324

Non-Agency RMBS	—		58,237		—		58,237		—		24,493		—		24,493
Multi-family loans	—		—		92,997		92,997		—		—		95,792		95,792
Equity investments	—		—		142,915		142,915		—		—		147,116		147,116
Derivative assets:
Interest rate caps (1) (2)	—		3,049		—		3,049		—		6,510		—		6,510
Options (2)	—		779		—		779		—		—		—		—
Interest rate swaps (2) (4)	—		—		—		—		—		—		—		—
Assets of disposal group held for sale (3)	—		2,560		—		2,560		—		2,960		—		2,960
Total	$	—	$	2,678,467	$	3,739,103	$	6,417,570	$	—	$	2,023,287	$	3,327,211	$	5,350,498
Liabilities carried at fair value





CDOs:
Consolidated SLST	$	—	$	—	$	844,032	$	844,032	$	—	$	—	$	593,737	$	593,737
Residential loan securitizations	—		733,079		—		733,079		—		—		—		—
Senior unsecured notes	—		60,000		—		60,000		—		—		—		—
Derivative liabilities:
U.S. Treasury futures (2) (4)	—		—		—		—		—		—		—		—
Credit default swaps (2) (4)	—		—		—		—		—		—		—		—
Total	$	—	$	793,079	$	844,032	$	1,637,111	$	—	$	—	$	593,737	$	593,737

(1)Excludes assets of disposal group held for sale (see Note 9).

(2)Included in other assets or other liabilities, respectively, in the condensed consolidated balance sheets.

(3)Includes interest rate caps classified as Level 2 instruments in the amount of $2.6 million and $3.0 million as of June 30, 2024 and December 31, 2023, respectively.

(4)All of the Company’s interest rate swaps, credit default swaps and U.S. Treasury futures outstanding are cleared through central clearing houses. The Company exchanges variation margin for the derivative instruments based upon daily changes in fair value. Includes derivative assets of $28.8 million netted against derivative liabilities of $17.2 million and a net variation margin of $11.6 million as of June 30, 2024. Includes derivative liabilities of $40.5 million netted against derivative assets of $13.1 million and a variation margin of $27.4 million as of December 31, 2023. See Note 10 for additional information.

Schedule of Changes in Valuation of Level 3 Assets

The following tables detail changes in valuation for the Level 3 assets for the three and six months ended June 30, 2024 and 2023, respectively (dollar amounts in thousands):

Level 3 Assets:


	Three Months Ended June 30, 2024
	Residential loans
	Residential loans		Consolidated SLST		Residential loans held in securitization trusts		Multi-family loans		Equity investments		Total
Balance at beginning of period	$	640,729	$	738,126	$	1,724,250	$	91,905	$	137,943	$	3,332,953
Total gains/(losses) (realized/unrealized)
Included in earnings	4,081		(2,551)		(3,465)		2,654		6,108		6,827
Transfers out (1)	(22,821)		—		(884)		—		—		(23,705)
Transfer to securitization trust, net (2)	(262,479)		—		262,479		—		—		—

Paydowns/Distributions	(83,738)		(15,688)		(177,567)		(1,562)		(1,136)		(279,691)

Sales	(3,006)		—		—		—		—		(3,006)
Purchases (3)	394,452		285,057		26,216		—		—		705,725
Balance at the end of period	$	667,218	$	1,004,944	$	1,831,029	$	92,997	$	142,915	$	3,739,103

(1)Transfers out of Level 3 assets represents the transfer of residential loans to real estate owned, single-family rental properties and other assets.

(2)During the three months ended June 30, 2024, the Company transferred certain residential loans into residential loan securitizations (see Note 7 for further discussion of the Company's residential loan securitizations).

(3)During the three months ended June 30, 2024, the Company purchased first loss subordinated securities issued from a securitization that it determined to consolidate as Consolidated SLST. As a result, the Company consolidated assets of the securitization (see Note 7).


	Three Months Ended June 30, 2023
	Residential loans
	Residential loans		Consolidated SLST		Residential loans held in securitization trusts		Multi-family loans		Equity investments		Equity investments in disposal group held for sale		Total
Balance at beginning of period	$	921,000	$	829,153	$	1,624,703	$	95,309	$	191,148	$	10,070	$	3,671,383
Total gains/(losses) (realized/unrealized)
Included in earnings	772		(24,154)		(5,139)		3,440		5,032		(2,375)		(22,424)


Transfers out (1)	(2,664)		—		(1,504)		—		—		—		(4,168)
Transfer to securitization trust, net (2)	(103,972)		—		103,972		—		—		—		—
Funding/Contributions	—		—		—		8,985		—		—		8,985
Paydowns/Distributions	(144,017)		(15,030)		(152,133)		(10,312)		(27,425)		—		(348,917)

Sales	—		—		(441)		—		—		—		(441)
Purchases	86,145		—		20,121		—		—		—		106,266
Balance at the end of period	$	757,264	$	789,969	$	1,589,579	$	97,422	$	168,755	$	7,695	$	3,410,684

(1)Transfers out of Level 3 assets represents the transfer of residential loans to real estate owned.

(2)During the three months ended June 30, 2023, the Company transferred certain residential loans into residential loan securitizations (see Note 7 for further discussion of the Company's residential loan securitizations).


	Six Months Ended June 30, 2024
	Residential loans
	Residential loans		Consolidated SLST		Residential loans held in securitization trusts		Multi-family loans		Equity investments		Total
Balance at beginning of period	$	827,535	$	754,860	$	1,501,908	$	95,792	$	147,116	$	3,327,211
Total gains/(losses) (realized/unrealized)
Included in earnings	1,157		(2,689)		(5,238)		517		4,071		(2,182)
Transfers out (1)	(41,001)		—		(3,770)		—		—		(44,771)
Transfer to securitization trust, net (2)	(633,283)		—		633,283		—		—		—

Paydowns/Distributions	(146,456)		(32,284)		(330,373)		(3,312)		(8,272)		(520,697)

Sales	(25,210)		—		(6,708)		—		—		(31,918)
Purchases (3)	684,476		285,057		41,927		—		—		1,011,460
Balance at the end of period	$	667,218	$	1,004,944	$	1,831,029	$	92,997	$	142,915	$	3,739,103

(1)Transfers out of Level 3 assets represents the transfer of residential loans to real estate owned, single-family rental properties and other assets.

(2)During the six months ended June 30, 2024, the Company transferred certain residential loans into residential loan securitizations (see Note 7 for further discussion of the Company's residential loan securitizations).

(3)During the six months ended June 30, 2024, the Company purchased first loss subordinated securities issued from a securitization that it determined to consolidate as Consolidated SLST. As a result, the Company consolidated assets of the securitization (see Note 7).


	Six Months Ended June 30, 2023
	Residential loans
	Residential loans		Consolidated SLST		Residential loans held in securitization trusts		Multi-family loans		Equity investments		Equity investments in disposal group held for sale		Total
Balance at beginning of period	$	1,081,384	$	827,582	$	1,616,114	$	87,534	$	179,746	$	9,010	$	3,801,370
Total gains/(losses) (realized/unrealized)
Included in earnings	173		(9,033)		27,902		6,329		8,483		(1,315)		32,539


Transfers out (1)	(2,757)		—		(1,737)		—		—		—		(4,494)
Transfer to securitization trust, net (2)	(190,082)		—		190,082		—		—		—		—
Funding/Contributions	—		—		—		15,405		15,528		—		30,933
Paydowns/Distributions	(285,372)		(28,580)		(283,044)		(11,846)		(35,002)		—		(643,844)

Sales	(166)		—		(441)		—		—		—		(607)
Purchases	154,084		—		40,703		—		—		—		194,787
Balance at the end of period	$	757,264	$	789,969	$	1,589,579	$	97,422	$	168,755	$	7,695	$	3,410,684

(1)Transfers out of Level 3 assets represents the transfer of residential loans to real estate owned.

(2)During the six months ended June 30, 2023, the Company transferred certain residential loans into residential loan securitizations (see Note 7 for further discussion of the Company's residential loan securitizations).

Schedule of Changes in Valuation of Level 3 Liabilities

The following table details changes in valuation for the Level 3 liabilities for the three and six months ended June 30, 2024 and 2023, respectively (dollar amounts in thousands):

Level 3 Liabilities:


	Consolidated SLST CDOs
	Three Months Ended June 30,
	2024		2023
Balance at beginning of period	$	582,627	$	638,513
Total gains (realized/unrealized)
Included in earnings	(1,536)		(10,266)

Purchases (1)	275,200		—
Paydowns	(12,259)		(11,079)


Balance at the end of period	$	844,032	$	617,168

(1)During the three months ended June 30, 2024, the Company purchased first loss subordinated securities issued from a securitization that it determined to consolidate as Consolidated SLST. As a result, the Company consolidated liabilities of the securitization (see Note 7).


	Consolidated SLST CDOs
	Six Months Ended June 30,
	2024		2023
Balance at beginning of period	$	593,737	$	634,495
Total (losses)/gains (realized/unrealized)
Included in earnings	(140)		4,245

Purchases (1)	275,200		—
Paydowns	(24,765)		(21,572)


Balance at the end of period	$	844,032	$	617,168

(1)During the six months ended June 30, 2024, the Company purchased first loss subordinated securities issued from a securitization that it determined to consolidate as Consolidated SLST. As a result, the Company consolidated liabilities of the securitization (see Note 7).

Schedule of Quantitative Information Regarding Significant and Unobservable Inputs used in Valuation of Level 3 Assets and Liabilities

The following table discloses quantitative information regarding the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value (dollar amounts in thousands, except input values):


June 30, 2024	Fair Value	Valuation Technique	Unobservable Input	Weighted Average	Range
Assets
Residential loans:
Residential loans and residential loans held in securitization trusts (1)	$2,307,581	Discounted cash flow	Lifetime CPR	5.2%	—	-	58.7%
			Lifetime CDR	0.8%	—	-	23.7%
			Loss severity	11.4%	—	-	100.0%
			Yield	7.8%	5.2%	-	43.3%

	$190,666	Liquidation model	Annual home price appreciation/(depreciation)	0.3%	—	-	10.7%
			Liquidation timeline (months)	18	9	-	54
			Property value	$2,078,581	$14,000	-	$12,750,000
			Yield	7.6%	7.5%	-	26.5%

Consolidated SLST (3)	$1,004,944		Liability price	N/A

Total	$3,503,191

Multi-family loans (1)	$92,997	Discounted cash flow	Discount rate	12.5%	11.0%	-	20.5%
			Months to assumed redemption	29	1	-	52
			Loss severity	—

Equity investments (1) (2)	$104,071	Discounted cash flow	Discount rate	15.0%	13.0%	-	17.5%
			Months to assumed redemption	11	2	-	37
			Loss severity	—

Liabilities
Consolidated SLST CDOs (3) (4)	$844,032	Discounted cash flow	Yield	5.8%	4.8%	-	16.8%
			Collateral prepayment rate	5.9%	2.6%	-	7.1%
			Collateral default rate	1.3%	—	-	9.7%
			Loss severity	19.8%	12.2%	-	51.2%

(1)Weighted average amounts are calculated based on the weighted average fair value of the assets.

(2)Equity investments do not include equity ownership interests in an entity that originates residential loans. The fair value of this investment is determined using weighted multiples of origination volume and earnings before taxes, depreciation and amortization and NAV of the entity.

(3)In accordance with the practical expedient in ASC 810, the Company determines the fair value of the residential loans held in Consolidated SLST based on the fair value of the CDOs issued by Consolidated SLST, including investment securities we own, as the fair value of these instruments is more observable. At June 30, 2024, the fair value of investment securities we own in Consolidated SLST amounts to $156.0 million.

(4)Weighted average yield calculated based on the weighted average fair value of the CDOs issued by Consolidated SLST, including investment securities we own. Weighted average collateral prepayment rate, weighted average collateral default rate, and weighted average loss severity are calculated based on the weighted average unpaid balance of the CDOs issued by Consolidated SLST, including investment securities we own.

Schedule of 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, 2024 and 2023, respectively, for our Level 3 assets and liabilities held as of June 30, 2024 and 2023, respectively (dollar amounts in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Assets
Residential loans:
Residential loans (1)	$	(1,912)	$	(449)	$	(10,592)	$	(4,344)
Consolidated SLST (1)	(1,306)		(23,332)		(800)		(7,525)
Residential loans held in securitization trusts (1)	(6,359)		(8,169)		(7,156)		21,497
Multi-family loans (1)	(16)		334		(4,794)		779
Equity investments (2)	(419)		(1,083)		(6,581)		(3,675)
Equity investments in disposal group held for sale (2)	—		(2,375)		—		(1,315)
Liabilities
Consolidated SLST CDOs (1)	1,848		11,004		1,306		(2,504)

(1)Presented in unrealized gains (losses), net on the Company's condensed consolidated statements of operations.

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

Schedule of Carrying Value and Estimated Fair Value of Financial Instruments

The following table presents a summary of the assets, liabilities and non-controlling interests of the Company's residential loan securitizations, Consolidated SLST and Consolidated Real Estate VIEs as of June 30, 2024 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.


	Financing VIEs		Other VIEs
	Residential Loan Securitizations			Consolidated SLST		Consolidated Real Estate		Total
Cash and cash equivalents	$	—		$	—	$	8,368	$	8,368
Residential loans, at fair value	1,831,029			1,004,944		—		2,835,973
Real estate, net held in Consolidated VIEs (1)	—			—		732,437		732,437
Assets of disposal group held for sale (2)	—			—		373,538		373,538
Other assets	152,024			4,394		24,947		181,365
Total assets	$	1,983,053		$	1,009,338	$	1,139,290	$	4,131,681

Collateralized debt obligations ($972,389 at amortized cost, net and $1,577,111 at fair value)	$	1,705,468		$	844,032	$	—	$	2,549,500
Mortgages payable on real estate, net in Consolidated VIEs (3)	—			—		592,919		592,919
Liabilities of disposal group held for sale (2)	—			—		340,138		340,138
Other liabilities	12,517			7,965		15,730		36,212
Total liabilities	$	1,717,985		$	851,997	$	948,787	$	3,518,769
Redeemable non-controlling interest in Consolidated VIEs (4)	$	—		$	—	$	23,088	$	23,088
Non-controlling interest in Consolidated VIEs (5)	$	—		$	—	$	9,628	$	9,628
Net investment (6)	$	265,068		$	157,341	$	157,787	$	580,196

(1)Included in real estate, net in the accompanying condensed consolidated balance sheets.

(2)Represents assets and liabilities, respectively, of certain Consolidated Real Estate VIEs included in disposal group held for sale (see Note 9).

(3)Included in mortgages payable on real estate, net in the accompanying condensed consolidated balance sheets.

(4)Represents redeemable third-party ownership of membership interests in Consolidated Real Estate VIEs. See Redeemable Non-Controlling Interest in Consolidated VIEs below.

(5)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.

(6)The net investment amount is the maximum amount of the Company's investment that is at risk to loss and represents the difference between the carrying value of total assets and total liabilities held by VIEs, less non-controlling interests, if any.

The following table presents a summary of the assets, liabilities and non-controlling interests of the Company's residential loan securitizations, Consolidated SLST and Consolidated Real Estate VIEs as of December 31, 2023 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.


	Financing VIEs		Other VIEs
	Residential Loan Securitizations		Consolidated SLST		Consolidated Real Estate		Total
Cash and cash equivalents	$	—	$	—	$	15,612	$	15,612
Residential loans, at fair value	1,501,908		754,860		—		2,256,768
Real estate, net held in Consolidated VIEs (1)	—		—		979,934		979,934
Assets of disposal group held for sale (2)	—		—		426,017		426,017
Other assets	98,451		2,960		37,035		138,446
Total assets	$	1,600,359	$	757,820	$	1,458,598	$	3,816,777

Collateralized debt obligations ($1,276,780 at amortized cost, net and $593,737 at fair value)	$	1,276,780	$	593,737	$	—	$	1,870,517
Mortgages payable on real estate, net in Consolidated VIEs (3)	—		—		784,421		784,421
Liabilities of disposal group held for sale (2)	—		—		386,024		386,024
Other liabilities	8,421		5,638		21,797		35,856
Total liabilities	$	1,285,201	$	599,375	$	1,192,242	$	3,076,818
Redeemable non-controlling interest in Consolidated VIEs (4)	$	—	$	—	$	28,061	$	28,061
Non-controlling interest in Consolidated VIEs (5)	$	—	$	—	$	20,328	$	20,328
Net investment (6)	$	315,158	$	158,445	$	217,967	$	691,570

(1)Included in real estate, net in the accompanying condensed consolidated balance sheets.

(2)Represents assets and liabilities, respectively, of certain Consolidated Real Estate VIEs included in disposal group held for sale (see Note 9).

(3)Included in mortgages payable on real estate, net in the accompanying condensed consolidated balance sheets.

(4)Represents redeemable third-party ownership of membership interests in Consolidated Real Estate VIEs. See Redeemable Non-Controlling Interest in Consolidated VIEs below.

(5)Represents third-party ownership of membership interests in Consolidated Real Estate VIEs.

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at June 30, 2024 and December 31, 2023, respectively (dollar amounts in thousands):


		June 30, 2024				December 31, 2023
	Fair Value Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	235,514	$	235,514	$	187,107	$	187,107
Residential loans	Level 3	3,503,191		3,503,191		3,084,303		3,084,303
Investment securities available for sale	Level 2	2,672,079		2,672,079		2,013,817		2,013,817
Multi-family loans	Level 3	92,997		92,997		95,792		95,792
Equity investments	Level 3	142,915		142,915		147,116		147,116
Derivative assets	Level 2	3,828		3,828		6,510		6,510
Derivative assets in disposal group held for sale	Level 2	2,560		2,560		2,960		2,960
Financial Liabilities:
Repurchase agreements	Level 2	2,952,289		2,952,289		2,471,113		2,471,113
Collateralized debt obligations:
Residential loan securitizations at amortized cost, net	Level 3	972,389		939,527		1,276,780		1,237,531
Residential loan securitizations at fair value	Level 2	733,079		733,079		—		—
Consolidated SLST	Level 3	844,032		844,032		593,737		593,737

Subordinated debentures	Level 3	45,000		36,682		45,000		32,137

Senior unsecured notes:
Senior unsecured notes at amortized cost, net	Level 2	98,492		96,197		98,111		94,952
Senior unsecured notes at fair value	Level 2	60,000		60,000		—		—
Mortgages payable on real estate	Level 3	592,919		565,929		784,421		761,194
Mortgages payable on real estate in disposal group held for sale	Level 3	330,400		329,336		378,386		377,735

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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