Consolidated Securitization Vehicles and Other Variable Interest Entities

9 Months Ended

Sep. 30, 2024

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, 2024, the Company consolidated approximately $468 million unpaid principal balance of seasoned reperforming residential mortgage loans. During the quarter and nine months ended September 30, 2023, the Company consolidated approximately $1.4 billion and $2.6 billion, respectively, unpaid principal balance of seasoned residential reperforming residential 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, 2024 and December 31, 2023.


	September 30, 2024		December 31, 2023
	(dollars in thousands)
Assets:
Non-Agency RMBS, at fair value (1)	$	241,017	$	248,993
Loans held for investment, at fair value	10,142,236		10,184,538
Accrued interest receivable	51,702		52,712
Other assets	18,226		15,597
Total Assets:	$	10,453,181	$	10,501,840

Liabilities:
Securitized debt, collateralized by Non-Agency RMBS	$	72,174	$	75,012
Securitized debt at fair value, collateralized by Loans held for investment	7,639,906		7,248,768
Accrued interest payable	24,155		23,310
Other liabilities	1,599		2,019
Total Liabilities:	$	7,737,834	$	7,349,109

(1) September 30, 2024 and December 31, 2023 balances includes allowance for credit losses of $8 million and $6 million, respectively.

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


	For the Quarter Ended
		September 30, 2024		September 30, 2023
	(dollars in thousands)
Interest income, Assets of consolidated VIEs		$	146,007	$	153,710
Interest expense, Non-recourse liabilities of VIEs		71,668		75,902
Net interest income		$	74,339	$	77,808

Increase (decrease) in provision for credit losses		$	(975)	$	(1,560)


Servicing fees		$	6,533	$	7,199


	For the Nine Months Ended
		September 30, 2024		September 30, 2023
	(dollars in thousands)
Interest income, Assets of consolidated VIEs		$	436,950	$	443,286
Interest expense, Non-recourse liabilities of VIEs		214,483		208,678
Net interest income		$	222,467	$	234,608

Increase (decrease) in provision for credit losses		$	1,760	$	(3,519)


Servicing fees		$	19,965	$	21,403

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, 2024, ranged from less than $1 million to $22 million with an aggregate amount of $881 million. The fair value of the Company’s investments in each unconsolidated VIEs at December 31, 2023, ranged from less than $1 million to $20 million, with an aggregate amount of $795 million. The Company’s maximum exposure to loss from these unconsolidated VIEs was $840 million and $772 million and at September 30, 2024 and December 31, 2023, 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.