Loans Held for Investment

12 Months Ended

Dec. 31, 2020

Investments, Debt and Equity Securities [Abstract]

The Loans held for investment are comprised primarily of loans collateralized by seasoned reperforming residential mortgages. Additionally, it includes non-conforming, single family, owner occupied, jumbo, prime residential mortgages.

At December 31, 2020, all Loans held for investment are carried at fair value. See Note 5 for a discussion on how the Company determines the fair values of the Loans held for investment. As changes in the fair value of these loans are reflected in earnings, the Company does not estimate or record a loan loss provision. The total amortized cost of our Loans held for investment was $12.5 billion and $13.7 billion as of December 31, 2020 and December 31, 2019, respectively.

The following table provides a summary of the changes in the carrying value of Loans held for investment at fair value at December 31, 2020 and December 31, 2019:


	For the Year Ended		For the Year Ended
	December 31, 2020		December 31, 2019
	(dollars in thousands)
Balance, beginning of period	$	14,292,815	$	12,572,581
Purchases	1,860,998		5,086,491
Principal paydowns	(1,966,590)		(1,717,745)
Sales and settlements	(1,053,943)		(1,812,760)
Net periodic accretion (amortization)	(85,794)		(77,491)
Realized gains (losses) on sales and settlements	—		1,590
Change in fair value	64,643		240,149
Balance, end of period	$	13,112,129	$	14,292,815

The primary cause of the change in fair value is due to market demand and changes in credit risk of mortgage loans. During the year ended December 31, 2020, the Company sold $1.1 billion of loans, with the Company retaining $22 million of beneficial interests. During the year ended December 31, 2019, the Company sold $1.8 billion of loans, with the Company retaining $124 million of beneficial interests.

During the year ended December 31, 2020 and December 31, 2019, the Company transferred loans with unpaid principal balances of $653 million and $343 million, respectively, to a third party. The Company evaluated the sales under ASC 860 and determined that the sales did not effectively transfer control of the loans from the Company, the transferor, to the third party, the transferee, due to a right by the Company to call the loans at a fixed price at a future date. As such, these transfers have been accounted for by the Company as secured borrowings and no gain or loss was recorded upon the transfer of the loans. The proceeds received, net of any collateral received in the transfer, has been recorded as a Securitized debt at fair value, collateralized by loans held for investment on the Consolidated Statements of Financial Condition. The secured borrowings related to the unpaid principal amount of these loans are non-recourse to the Company and these loans can only be used to satisfy the obligations of the transferee and the obligations of the transferee are non-recourse to the Company. See footnote 7 for more details regarding Securitized debt.

Residential mortgage loans

The loan portfolio for all residential mortgages were originated during the following periods:


Origination Year	December 31, 2020		December 31, 2019 (1)
2002 and prior	6.9	%	6.8	%
2003	5.9	%	6.0	%
2004	12.0	%	12.6	%
2005	18.2	%	18.6	%
2006	22.7	%	22.5	%
2007	22.4	%	20.7	%
2008	6.4	%	6.4	%
2009	1.3	%	1.5	%
2010 and later	4.2	%	4.9	%
Total	100.0	%	100.0	%

(1) The table above excludes approximately $754 million of Loans held for investments for December 31, 2019, which was purchased prior to the reporting date and settled subsequent to the reporting period.

The following table presents a summary of key characteristics of the residential loan portfolio at December 31, 2020 and December 31, 2019:


	December 31, 2020				December 31, 2019 (1)
Number of loans		132,134				139,194
Weighted average maturity (years)		19.6				19.3
Weighted average loan to value		86.1		%		87.4		%
Weighted average FICO		630				627
Weighted average loan balance (in thousands)		$	96			$	95
Weighted average percentage owner occupied		87.7		%		88.0		%
Weighted average percentage single family residence		83.3		%		84.4		%
Weighted average geographic concentration of top five states	CA	12.4		%	CA	11.6		%
	FL	8.0		%	FL	7.4		%
	NY	7.3		%	NY	6.9		%
	PA	5.0		%	OH	5.3		%
	VA	4.9		%	PA	5.3		%

The following tables show various characteristics of our residential loan portfolio and outstanding principal balance of the loans that are 30 days delinquent and greater for the years ended December 31, 2020 and 2019, respectively.


December 31, 2020
(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	7,347	1.00% to 17.74%	6/1/1983 - 2/1/2059	594,201	49,615	54,702
$250 to $500	425	1.51% to 10.63%	12/1/2027 - 2/1/2057	141,621	14,166	13,453
$500 to $750	80	2.00% to 9.88%	1/1/2034 - 10/1/2056	47,936	3,202	6,943
$750 to $1,000	25	1.97% to 7.88%	7/1/2036 - 2/1/2052	21,516	—	3,511
Over $1,000	15	2.88% to 6.63%	10/1/2034 - 6/1/2049	26,274	2,884	7,134
	7,892			831,548	69,867	85,743








Fixed loans:
$1 to $250	116,831	0.00% to 21.20%	6/1/1989 - 5/1/2062	8,897,433	713,804	720,323
$250 to $500	6,386	0.00% to 11.59%	12/1/2005 - 3/1/2065	2,115,608	215,357	253,377
$500 to $750	740	1.00% to 10.14%	6/1/2020 - 10/1/2059	433,973	35,765	66,947
$750 to $1,000	146	2.00% to 9.00%	3/1/2013 - 11/1/2058	124,869	7,620	23,804
Over $1,000	139	2.00% to 9.00%	12/1/2019 - 6/1/2059	236,762	18,563	40,235
	124,242			11,808,645	991,109	1,104,686

Total	132,134			12,640,193	1,060,976	1,190,429

The foreclosure, bankruptcy, and REO principal balances on our loans were $298 million, $277 million and $30 million, respectively, as of December 31, 2020, which are included in the table above.


December 31, 2019 (1)
(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	7,776	1.00% to 19.24%	6/1/1983 - 3/13/2057	655,914	75,436	44,117
$250 to $500	497	2.00% to 13.13%	3/1/2023 - 7/1/2057	163,972	18,117	10,950
$500 to $750	96	2.00% to 9.38%	1/1/2034 - 10/1/2056	56,661	2,224	2,747
$750 to $1,000	20	1.97% to 8.13%	10/1/2036 - 11/1/2048	16,947	759	862
Over $1,000	12	2.00% to 6.63%	5/1/2036 - 10/1/2048	19,499	1,222	3,869
	8,401			912,993	97,758	62,545








Fixed loans:
$1 to $250	123,580	0.00% to 24.00%	6/1/1989 - 5/1/2062	9,482,855	1,021,054	571,242
$250 to $500	6,259	0.00% to 11.69%	12/1/2019 - 3/1/2065	2,059,131	275,574	131,472
$500 to $750	712	2.00% to 10.69%	8/1/2019 - 9/1/2059	418,044	46,972	12,137
$750 to $1,000	137	2.00% to 8.00%	3/1/2013 - 1/1/2058	116,993	6,224	5,312
Over $1,000	105	2.00% to 9.50%	9/1/2019 - 12/1/2057	179,827	10,497	—
	130,793			12,256,850	1,360,321	720,163

Total	139,194			13,169,843	1,458,079	782,708

The foreclosure, bankruptcy, and REO principal balances on our loans were $299 million, $322 million and $59 million, respectively, as of December 31, 2019, which are included in the table above.

The fair value of residential mortgage loans 90 days or more past due was $910 million and $597 million as of December 31,

2020 and December 31, 2019, respectively.