4. Securitized Loans Held for Investment

The Securitized loans held for investment is comprised of two portfolios. The first portfolio is comprised of loans collateralized by non-conforming, single family, owner occupied, jumbo, prime residential mortgages. The second portfolio is comprised primarily of loans collateralized by seasoned sub-prime residential mortgages.

At December 31, 2015, all securitized loans held for investment are carried at fair value. See Note 5 to our Consolidated Financial Statements for a discussion on how the Company determines the fair values of the securitized loans held for investment. As changes in the fair value of these securitized loans are reflected in earnings, the Company does not estimate or record a loan loss provision. At December 31, 2014, $626 million of securitized loans held for investment comprised primarily of non-conforming, single family, owner occupied, jumbo, prime loans were carried at amortized cost, net of an allowance for loan losses.

The following table provides a summary of the changes in the carrying value of securitized loans held for investment at fair value at December 31, 2015 and December 31, 2014:

	For the Year Ended			For the Year Ended
	December 31, 2015			December 31, 2014
	(dollars in thousands)
Balance, beginning of period(1)	$	5,306,501		$	-
Purchases		577,036			4,722,824
Principal paydowns		(707,996	)		(173,597	)
Sales and settlements		(9,638	)		-
Net periodic acrretion (amortization)		(19,100	)		5,028
Change in fair value		(90,581	)		144,960
Transfer due to deconsolidation		(287,806	)		-
Balance, end of period	$	4,768,416		$	4,699,215

(1) Includes Securitized loans held for investment of $607 million for which the fair value option election was made beginning January 1, 2015.

The primary cause of the change in fair value is due to changes in credit risk of the portfolio.

Jumbo prime residential mortgage loans

The securitized loan portfolio collateralized by jumbo prime residential mortgages was originated during the following years:

Origination Year	December 31, 2015	December 31, 2014
2004	0.1%	0.9%
2007	8.5%	8.1%
2008	7.4%	7.0%
2009	0.3%	0.2%
2010	5.1%	6.3%
2011	33.1%	35.4%
2012	45.5%	42.1%
Total	100.0%	100.0%

A summary of key characteristics of the loan portfolio collateralized primarily of non-conforming, single family, owner occupied, jumbo, prime mortgages follows:

	December 31, 2015		December 31, 2014
Number of loans		657		869
Weighted average maturity (years)		25.5		26.4
Weighted average loan to value (1)		70.7%		71.6%
Weighted average FICO (2)		765		766
Weighted average loan balance (in thousands)		$ 682		$ 716
Weighted average percentage owner occupied		94.3%		95.0%
Weighted average percentage single family residence		70.1%		71.0%
Weighted average geographic concentration of top five states	CA	32.4%	CA	34.8%
	VA	6.4%	NJ	5.6%
	NJ	6.3%	VA	5.5%
	MD	6.2%	MD	5.1%
	TX	5.1%	NY	5.1%

(1) Value represents appraised value of the collateral at the time of loan origination.
(2) FICO as determined at the time of loan origination.

The following table summarizes the outstanding principal balance of the jumbo prime loans which are 30 days delinquent and greater as reported by the servicer at December 31, 2015 and December 31, 2014.

	30 Days Delinquent		60 Days Delinquent		90+ Days Delinquent		Bankruptcy		Foreclosure		REO		Total
(dollars in thousands)
December 31, 2015	$	3,079	$	-	$	2,915	$	-	$	2,875	$	2,312	$	11,181
December 31, 2014	$	2,621	$	565	$	988	$	-	$	7,152	$	-	$	11,326

The fair value of the jumbo prime residential mortgage loans 90 days or more past due is $2 million as of December 31, 2015.

Seasoned sub-prime residential mortgage loans

The securitized loan portfolio collateralized by seasoned sub-prime residential mortgages originated during the following years:

Origination Year	December 31, 2015	December 31, 2014
2002 and prior	11.2%	6.0%
2003	4.0%	4.4%
2004	11.1%	12.3%
2005	19.3%	20.6%
2006	17.4%	18.2%
2007	25.4%	26.3%
2008	9.5%	9.9%
2009	1.1%	1.2%
2010 and later	1.0%	1.1%
Total	100.0%	100.0%

A summary of key characteristics of the loan portfolio collateralized by seasoned sub-prime residential mortgages follows:

	December 31, 2015		December 31, 2014
Number of loans		56,870		58,170
Weighted average maturity (years)		21.5		22.2
Weighted average loan to value (1)		80.7%		80.3%
Weighted average FICO (1)		625		629
Weighted average loan balance (in thousands)		$ 76		$ 79
Weighted average percentage owner occupied		96.0%		95.8%
Weighted average percentage single family residence		72.5%		73.6%
Weighted average geographic concentration of top five states	CA	8.8%	CA	9.3%
	FL	7.2%	FL	7.0%
	NC	7.1%	NC	7.0%
	VA	6.3%	VA	6.4%
	OH	6.1%	OH	6.0%
(1) As provided by the Trustee

The following table summarizes the outstanding principal balance of the loan portfolio consisting of seasoned sub-prime residential mortgage loans which are 30 days delinquent and greater as reported by the servicer at December 31, 2015 and December 31, 2014.

	30 Days Delinquent	60 Days Delinquent	90+ Days Delinquent	Bankruptcy	Foreclosure	REO	Total
(dollars in thousands)
December 31, 2015	$ 189,816	$ 66,429	$ 125,897	$ 117,308	$ 218,493	$ 36,124	$ 754,067
December 31, 2014	$ 226,154	$ 92,363	$ 192,245	$ 154,279	$ 80,148	$ 16,556	$ 761,745

The fair value of seasoned sub-prime residential mortgage loans 90 days or more past due is $341 million as of December 31, 2015.

Securitized loans held for investment, net of allowance for loan losses

As of December 31, 2014, $626 million of securitized loans held for investment comprised primarily of non-conforming, single family, owner occupied, jumbo, prime loans were carried at amortized cost, net of an allowance for loan losses of $7 million.

The prime jumbo securitized loans held for investment for which the Company has not elected the fair value option are carried at amortized cost which is their principal balance outstanding, plus unamortized premiums, less unaccreted discounts and an allowance for loan losses. The following table provides a summary of the changes in the carrying value of these securitized loans held for investment at December 31, 2014:

	December 31, 2014

Balance, beginning of period	$	783,484
Principal paydowns		(153,063	)
Net periodic (amortization) accretion		(4,541	)
Change to loan loss provision		232
Balance, end of period	$	626,112

The following table represents the Company’s prime jumbo securitized residential mortgage loans held for investment which are carried at amortized cost at December 31, 2014:

	December 31, 2014

Securitized loans, at amortized cost	$	633,386
Less: allowance for loan losses		7,274
Securitized loans held for investment	$	626,112

The following table summarizes the changes in the allowance for loan losses for the securitized mortgage loan portfolio carried at amortized cost at December 31, 2014:


	December 31, 2014

Balance, beginning of period	$	9,063
Provision for loan losses		(232	)
Charge-offs		(1,557	)
Balance, end of period	$	7,274

The Company established an allowance for loan losses related to jumbo prime securitized loans carried at amortized cost that is composed of a general and specific reserve. The balance in the allowance for loan losses related to the general reserve and specific reserve at December 31, 2014 was $3 million and $4 million, respectively.

The Company is not involved with the servicing or modification of the jumbo prime loans held for investments except for its ability to approve certain loan modifications. The servicer of the respective securitization is responsible for servicing and modifying these loans. The Company is required to make certain assumptions in accounting for these loans due to the limitation of information available to the Company.

As all loans are carried at fair value as of December 31, 2015, there is no longer a reserve for losses as of December 31, 2015.

The following table displays the loan product type and accompanying loan characteristic of residential loans recorded on our consilidated balance sheets as of December 31, 2015 and 2014.

December 31, 2015
(dollars in thousands)

Loan Balance	Number of Loans		Interest Rate	Maturity Date	Total Principal		30-89 Days Delinquent		90+ Days Delinquent
Held-for-Investment at fair value:
Adjustable rate loans:
$1 to $250		2,119	1.7% to 15.2%	2/1/2003 - 10/1/2055		138,321		11,140		5,292
$250 to $500		66	2% to 10.375%	1/1/2030 - 9/1/2055		23,021		1,201		2,277
$500 to $750		29	2% to 5.75%	2/1/2032 - 4/1/2038		17,186		-		1,688
$750 to $1,000		7	2.875% to 2.875%	1/1/2038 - 4/1/2038		5,867		-		-
Over $1,000		6	2.875% to 4%	12/1/2037 - 4/1/2038		8,402		-		1,730
		2,227				192,797		12,341		10,986

Hybrid loans:
$1 to $250		2	6.67% to 6.83%	8/1/2037 - 9/1/2037		193		-		-
$250 to $500		2	5.762% to 5.875%	7/1/2037 - 4/1/2038		908		-		-
$500 to $750		8	4% to 7.188%	7/1/2037 - 3/1/2038		4,751		1,081		1,744
$750 to $1,000		2	5.625% to 5.75%	4/1/2037 - 4/1/2038		1,730		-		-
		14				7,582		1,081		1,744

Fixed loans:
$1 to $250		52,774	0% to 24%	1/1/1999 - 5/1/2062		3,540,447		245,151		359,559
$250 to $500		1,957	2% to 11.93%	12/1/2019 - 10/1/2065		645,347		33,405		58,336
$500 to $750		374	2% to 9.75%	6/1/2022 - 9/1/2057		226,481		3,205		4,005
$750 to $1,000		130	3.75% to 7%	7/1/2037 - 10/1/2042		112,490		1,729		1,892
Over $1,000		51	2.25% to 7.125%	3/1/2013 - 10/1/2042		62,773		-		-
		55,286				4,587,538		283,490		423,792

Total		57,527				4,787,918		296,912		436,521

December 31, 2014
(dollars in thousands)
Loan Balance	Number of Loans		Interest Rate	Maturity Date	Total Principal		30-89 Days Delinquent		90+ Days Delinquent
Held-for-Investment:
Adjustable rate loans:
$250 to $500		7	2.00% to 3.00%	8/1/2037 - 2/1/2042		3,131		-		-
$500 to $750		12	2.00% to 4.00%	1/1/2038 - 4/1/2038		7,497		565		-
$750 to $1,000		5	2.75% to 2.875%	1/1/2038 - 4/1/2038		4,328		-		-
Over $1,000		4	2.875% to 4.00%	12/1/2037 - 3/1/2038		5,879		-		1,730
		28				20,835		565		1,730

Hybrid loans:
$0 to $250		3	6.50% to 6.83%	8/1/2037 - 1/1/2038		283		-		-
$250 to $500		11	2.125% to 6.875%	6/1/2037 - 4/1/2038		5,123		-		498
$500 to $750		31	2.75% to 7.188%	5/1/2037 - 4/1/2038		18,817		1,154		1,709
$750 to $1,000		5	5.625% to 6.35%	4/1/2037 - 4/1/2038		4,327		-		-
Over $1,000		3	3.00% to 5.75%	2/1/2038 - 4/1/2038		4,170		-		1,629
		53				32,720		1,154		3,836

Fixed loans:
$0 to $250		2	4.375% to 6.75%	6/1/2037 - 8/1/2042		85		-		-
$250 to $500		137	2.00% to 7.875%	7/1/2022 - 10/1/2042		61,868		-		958
$500 to $750		371	2.00% to 7.875%	9/1/2022 - 10/1/2042		230,894		506		1,616
$750 to $1,000		190	3.50% to 7.00%	9/1/2037 - 10/1/2042		165,065		961		-
Over $1,000		88	2.25% to 7.125%	1/1/2038 - 10/1/2042		110,440		-		-
		788				568,352		1,467		2,574

Total		869				621,907		3,186		8,140

Held-for-Investment at fair value:
Adjustable rate loans:
$0 to $250		570	1.625% to 13.99%	5/1/2017 - 11/1/2054		57,908		1,451		3,663
$250 to $500		61	1.875% to 9.375%	3/1/2034 - 5/1/2054		19,641		395		3,138
$500 to $750		4	4.29% to 5.75%	2/1/2032 - 6/1/2035		2,210		-		547
		635				79,759		1,846		7,348

Fixed loans:
$0 to $250		55,300	0.00% to 24.00%	7/1/2012 - 5/1/2062		3,789,721		275,076		356,916
$250 to $500		2,128	0.00% to 11.93%	6/1/2014 - 11/1/2065		688,464		37,387		75,661
$500 to $750		106	2.00% to 9.75%	6/1/2022 - 9/1/2057		60,445		3,405		3,303
$750 to $1,000		1	5.50% to 5.50%	7/1/2037 - 7/1/2037		804		804		-
		57,535				4,539,434		316,672		435,880

Total		58,170				4,619,193		318,518		443,228