Consolidated Securitization Vehicles and Other Variable Interest Entities

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated Securitization Vehicles and Other Variable Interest Entities

Since its inception, the Company has utilized VIEs for the purpose of securitizing whole mortgage loans or re-securitizing RMBS and obtaining long-term, non-recourse financing. The Company evaluated its interest in each VIE to determine if it is the primary beneficiary.

During the quarter and nine months ended September 30, 2021, the Company securitized and consolidated approximately $450 million and $6.0 billion, respectively, unpaid principal balance of seasoned residential subprime mortgage loans. During the quarter and nine months ended September 30, 2020, the Company securitized and consolidated approximately $338 million and $1.9 billion, respectively, unpaid principal balance of seasoned residential subprime mortgage loans.

VIEs for Which the Company is the Primary Beneficiary

The retained beneficial interests in VIEs for which the Company is the primary beneficiary are typically the subordinated tranches of these securitizations and in some cases the Company may hold interests in additional tranches. The table below reflects the assets and liabilities recorded in the Consolidated Statements of Financial Condition related to the consolidated VIEs as of September 30, 2021 and December 31, 2020.


	September 30, 2021		December 31, 2020
	(dollars in thousands)
Assets:
Non-Agency RMBS, at fair value (1)	$	424,320	$	505,479
Loans held for investment, at fair value	10,382,307		11,591,598
Accrued interest receivable	48,436		53,804
Other assets	10,738		14,136
Total Assets:	$	10,865,801	$	12,165,017

Liabilities:
Securitized debt, collateralized by Non-Agency RMBS	$	92,204	$	113,433
Securitized debt at fair value, collateralized by Loans held for investment	7,290,663		7,923,523
Accrued interest payable	15,452		23,677
Other liabilities	2,179		2,477
Total Liabilities:	7,400,498		8,063,110

(1) December 31, 2020 balance includes allowance for credit losses of $117 thousand.

Income and expense amounts related to consolidated VIEs recorded in the Consolidated Statements of Operations is presented in the tables below.


	For the Quarters ended
	September 30, 2021		September 30, 2020
	(dollars in thousands)
Interest income, Assets of consolidated VIEs	$	138,984	$	171,442
Interest expense, Non-recourse liabilities of VIEs	43,525		74,753
Net interest income	$	95,459	$	96,689

(Increase) decrease in provision for credit losses	$	(365)	$	126




Servicing fees	$	6,561	$	8,291


	For the Nine Months ended
	September 30, 2021		September 30, 2020
	(dollars in thousands)
Interest income, Assets of consolidated VIEs	$	446,198	$	515,250
Interest expense, Non-recourse liabilities of VIEs	159,666		210,198
Net interest income	$	286,532	$	305,052

(Increase) decrease in provision for credit losses	$	(117)	$	(91)




Servicing fees	$	20,244	$	24,673

VIEs for Which the Company is Not the Primary Beneficiary

The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not the primary beneficiary. In such cases, the Company does not have both the power to direct the entities’ most significant activities, such as rights to replace the servicer without cause, and the obligation to absorb losses or right to receive benefits that could potentially be significant to the VIEs. The Company’s investments in these unconsolidated VIEs are carried in Non-Agency RMBS on the Consolidated Statements of Financial Condition and include senior and subordinated bonds issued by the VIEs. The fair value of the Company’s investments in each unconsolidated VIEs at September 30, 2021, ranged

from less than $1 million to $211 million, with an aggregate amount of $1.5 billion. The fair value of the Company’s investments in each unconsolidated VIEs at December 31, 2020, ranged from less than $1 million to $190 million, with an aggregate amount of $1.6 billion. The Company’s maximum exposure to loss from these unconsolidated VIEs was $1.2 billion and $1.3 billion at September 30, 2021 and December 31, 2020, respectively. The maximum exposure to loss was determined as the amortized cost of the unconsolidated VIE, which represents the purchase price of the investment adjusted by any unamortized premiums or discounts as of the reporting date.