Valuation (Tables)

6 Months Ended

Jun. 30, 2012

The table below reflects the value of the Company's Level 1, Level 2 and Level 3 financial instruments at June 30, 2012:


(In thousands)
Description		Level 1				Level 2				Level 3			Total
Assets:
Cash and cash equivalents	$	48,120			$	0			$	0		$	48,120
Investments at fair value-
U.S. Treasury and Agency residential
mortgage-backed securities	$	0		$		708,461		$		4,667		$	713,128
Private label residential mortgage-backed
securities		0				0				385,059			385,059
Private label commercial mortgage-backed
securities		0				0				28,405			28,405
Commercial Mortgage Loans		0				0				4,650			4,650
Total investments at fair value		0				708,461				422,781			1,131,242
Financial derivatives-assets at fair value-
Credit default swaps on corporate indices		0				316				0			316
Credit default swaps on asset-backed securities		0				0				38,759			38,759
Credit default swaps on asset-backed indices		0				35,212				0			35,212
Interest rate swaps		0				17				0			17
Total financial derivatives-assets at fair value		0				35,545				38,759			74,304
Repurchase agreements		0				36,748				0			36,748
Total investments, financial derivatives-assets
at fair value and repurchase agreements	$	0		$		780,754		$		461,540		$	1,242,294

Liabilities:
Investments sold short at fair value-
U.S. Treasury and Agency residential
mortgage-backed securities	$	0		$		(494,524	)		$	0		$	(494,524	)
Financial derivatives-liabilities at fair value-
Credit default swaps on asset-backed indices		0				(22,838	)			0			(22,838	)
Total return swaps		0				(253	)			0			(253	)
Interest rate swaps		0				(5,535	)			0			(5,535	)
Unrealized depreciation on futures contracts		(54	)			-				0			(54	)
Total financial derivatives-liabilities at fair value		(54	)			(28,626	)			0			(28,680	)
Securitized debt		0				0				(1,415	)		(1,415	)
Total investments sold short, financial derivatives-
liabilities at fair value and securitized debt	$	(54	)	$		(523,150	)	$		(1,415	)	$	(524,619	)

The table below reflects the value of the Company's Level 1, Level 2 and Level 3 financial instruments at December 31, 2011:


(In thousands)
Description		Level 1			Level 2				Level 3		Total
Assets:
Cash and cash equivalents	$	62,737		$	0			$	0	$	62,737
Investments at fair value-
U.S. Treasury and Agency residential
mortgage-backed securities	$	0	$		769,120		$		5,337	$	774,457
Private label residential mortgage-backed
securities		0			0				417,533		417,533
Private label commercial mortgage-backed
securities		0			0				16,093		16,093
Commercial mortgage loans		0			0				4,400		4,400
Total investments at fair value		0			769,120				443,363		1,212,483
Financial derivatives-assets at fair value-
Credit default swaps on corporate indices		0			963				0		963
Credit default swaps on asset-backed securities		0			0				61,498		61,498
Credit default swaps on asset-backed indices		0			40,303				0		40,303
Interest rate swaps		0			95				0		95
Unrealized appreciation on futures contracts		12			0				0		12
Total financial derivatives-assets at fair value		12			41,361				61,498		102,871
Repurchase agreements		0			15,750				0		15,750
Total investments, financial derivatives-assets
at fair value andrepurchase agreements	$	12	$		826,231		$		504,861	$	1,331,104

Liabilities:
Investments sold short at fair value-
U.S. Treasury and Agency residential
mortgage-backed securities	$	0	$		(462,394	)		$	0	$	(462,394	)
Financial derivatives-liabilities at fair value-
Credit default swaps on asset-backed indices		0			(9,548	)			0		(9,548	)
Total return swaps		0			(274	)			0		(274	)
Interest rate swaps		0			(17,218	)			0		(17,218	)
Total financial derivatives-liabilities at fair value		0			(27,040	)			0		(27,040	)
Total investments sold short and financial
derivatives-liabilities at fair value	$	0	$		(489,434	)		$	0	$	(489,434	)

Schedule Of Significant Unobservable Inputs, Qualitative Information

The following table identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of June 30, 2012:


					Range
		Fair Value as of	Valuation						Weighted
Description		June 30, 2012	Technique	Unobservable Input	Min		Max		Average
		(In thousands)
Private label residential mortgage-backed			Discounted Cash
securities ⁽¹⁾	$	383,644	Flows	Yield	4.2	%	37.7	%	9.3	%
				Projected Collateral Prepayments	0.6	%	42.5	%	15.7	%
				Projected Collateral Losses	4.0	%	87.9	%	36.6	%
				Projected Collateral Recoveries	0.0	%	41.6	%	21.0	%
				Projected Collateral Scheduled Amortization	3.5	%	89.8	%	26.7	%
									100.0	%

Credit default swaps on asset-backed			Net Discounted
securities		38,759	Cash Flows	Projected Collateral Prepayments	5.6	%	36.2	%	13.5	%
				Projected Collateral Losses	25.2	%	62.3	%	48.6	%
				Projected Collateral Recoveries	11.5	%	37.9	%	19.4	%
				Projected Collateral Scheduled Amortization	8.6	%	37.3	%	18.5	%
									100.0	%

Private label commercial mortgage-backed			Discounted Cash
securities and Commercial mortgage loans		33,055	Flows	Yield	-25.5	%	13.0	%	7.7	%
				Projected Collateral Losses	0.0	%	28.2	%	5.7	%
				Projected Collateral Recoveries	0.0	%	42.3	%	16.8	%
				Projected Collateral Scheduled Amortization	50.5	%	100.0	%	77.5	%
									100.0	%

Agency interest only residential			Option Adjusted
mortgage-backed securities		4,667	Spread ("OAS")	LIBOR OAS⁽²⁾	723		2,719		1,173
				Projected Collateral Prepayments	83.5	%	94.3	%	87.5	%
				Projected Collateral Scheduled Amortization	5.7	%	16.5	%	12.5	%
									100.0	%

⁽¹⁾Includes securitized debt with a fair value of $1.4 million as of June 30, 2012.

⁽²⁾Shown in basis points.

Fair Value Measurement Using Significant Unobservable Inputs

Three Month Period Ended June 30, 2012


		Beginning			Accreted						Change in								Transfers		Ending
		Balance as of			Discounts /						Net								In and/or		Balance as of
		March 31,			Amortized			Realized			Unrealized								Out of Level		June 30,
(In thousands)		2012			Premiums			Gain/(Loss)			Gain/(Loss)			Purchases		Sales			3		2012
Assets:
Investments at fair value-
U.S. Treasury and Agency
residential mortgage-backed
securities	$	6,016		$	(553	)	$	0		$	(796	)	$	0	$	0		$	0	$	4,667
Private label residential
mortgage-backed securities		408,230			4,914			848			7,475			59,941		(96,349	)		0		385,059
Private label commercial
mortgage-backed securities		12,171			139			(35	)		(404	)		21,407		(4,873	)		0		28,405
Commercial mortgage loans		4,500			22			0			128			0		0			0		4,650
Total investments at fair value		430,917			4,522			813			6,403			81,348		(101,222	)		0		422,781

Financial derivatives- assets at fair value -
Credit default swaps on asset-backed
securities		48,746			0			(734	)		1,308			103		(10,664	)		0		38,759
Total financial derivatives- assets at fair value		48,746			0			(734	)		1,308			103		(10,664	)		0		38,759

Total investments and financial derivatives-
assets at fair value	$	479,663		$	4,522	$		79		$	7,711		$	81,451	$	(111,886	)	$	0	$	461,540

Liabilities:
Securitized debt	$	(1,485	)	$	(15	)	$	0		$	10		$	75	$	0		$	0	$	(1,415	)
Total securitized debt	$	(1,485	)	$	(15	)	$	0		$	10		$	75	$	0		$	0		(1,415	)

Three Month Period Ended June 30, 2011


		Beginning		Accreted					Change in							Transfers		Ending
		Balance as of		Discounts /					Net							In and/or		Balance as
		March 31,		Amortized			Realized		Unrealized							Out of		of June 30,
(In thousands)		2011		Premiums			Gain/(Loss)		Gain/(Loss)			Purchases		Sales		Level 3		2011
Assets:
Investments at fair value-
Agency residential mortgage-backed
securities	$	4,298	$	(327	)	$	97	$	(158	)	$	2,472	$	(1,155	)	0	$	5,227
Private label residential
mortgage-backed securities		354,682		3,672			3,380		(16,000	)		89,832		(77,672	)	0		357,894
Private label commercial
mortgage-backed securities		13,083		148			126		(1,231	)		1,405		(2,589	)	0		10,942
Commercial mortgage loans		4,675		46			0		(71	)		0		0		0		4,650
Total investments at fair value		376,738		3,539			3,603		(17,460	)		93,709		(81,416	)	0		378,713

Financial derivatives- assets at fair value -
Credit default swaps on asset-backed
securities		90,382		0			2,628		(1,490	)		29		(21,720	)	0		69,829
Total financial derivatives- assets at fair value		90,382		0			2,628		(1,490	)		29		(21,720	)	0		69,829

Total investments and financial derivatives-
assets at fair value	$	467,120	$	3,539		$	6,231	$	(18,950	)	$	93,738	$	(103,136	)	0	$	448,542

Six Month Period Ended June 30, 2012


		Beginning		Accreted						Change in							Transfers		Ending
		Balance as of		Discounts /						Net							In and/or		Balance as of
		December 31,		Amortized			Realized			Unrealized							Out of		June 30,
(In thousands)		2011		Premiums			Gain/(Loss)			Gain/(Loss)			Purchases		Sales		Level 3		2012
Assets:
Investments at fair value-
U.S. Treasury and Agency residential
mortgage-backed securities	$	5,337	$	(1,177	)		0		$	(365	)	$	872		0		0	$	4,667
Private label residential
mortgage-backed securities		417,533		9,288			7,049			25,136			158,618		(232,565	)	0		385,059
Private label commercial
mortgage-backed securities		16,093		256			309			1,283			22,716		(12,252	)	0		28,405
Commercial mortgage loans		4,400		50			0			200			0		0		0		4,650
Total investments at fair value		443,363		8,417			7,358			26,254			182,206		(244,817	)	0		422,781

Financial derivatives- assets at fair value -
Credit default swaps on asset-
backed securities		61,498		0			(5,477	)		8,107			226		(25,595	)	0		38,759
Total financial derivatives- assets at fair value		61,498		0			(5,477	)		8,107			226		(25,595	)	0		38,759

Total investments and financial
derivatives-assets at fair value	$	504,861	$	8,417		$	1,881		$	34,361		$	182,432	$	(270,412	)	0	$	461,540

Liabilities:
Securitized debt		0	$	(29	)		0		$	21			115	$	(1,522	)	0	$	(1,415	)
Total Securitized debt		0	$	(29	)		0		$	21			115	$	(1,522	)	0	$	(1,415	)

Six Month Period Ended June 30, 2011


		Beginning		Accreted					Change in							Transfers		Ending
		Balance as of		Discounts /					Net							In and/or		Balance as of
		December 31,		Amortized			Realized		Unrealized							Out of		June 30,
(In thousands)		2010		Premiums			Gain/(Loss)		Gain/(Loss)			Purchases		Sales		Level 3		2011
Assets:
Investments at fair value-
Agency residential
mortgage-backed securities		0	$	(420	)	$	97	$	(150	)	$	6,855	$	(1,155	)	0	$	5,227
Private label residential
mortgage-backed securities		338,839		7,321			14,557		(22,638	)		186,259		(166,444	)	0		357,894
Private label commercial
mortgage-backed securities		1,850		231			898		(1,479	)		16,751		(7,309	)	0		10,942
Commercial mortgage loans		0		61			0		(86	)		4,675		0		0		4,650
Total investments at fair value		340,689		7,193			15,552		(24,353	)		214,540		(174,908	)	0		378,713

Financial derivatives- assets at fair value -
Credit default swaps on asset-backed
securities		102,850		0			5,308		(4,740	)		405		(33,994	)	0		69,829
Total financial derivatives- assets at fair value		102,850		0			5,308		(4,740	)		405		(33,994	)	0		69,829

Total investments and financial
derivatives-assets at fair value	$	443,539	$	7,193		$	20,860	$	(29,093	)	$	214,945	$	(208,902	)	0	$	448,542

- Definition

This element represents the disclosure related to assets and liabilities by class, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring and/or nonrecurring basis in periods after initial recognition (for example, impaired assets). The disclosures that may be required or desired include: (a) the fair value measurements recorded during the period and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a),(b)

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19190-110258

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 5

-Subparagraph (a),(b)

-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 33

-Subparagraph a, b

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 6

-Footnote 4

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

- 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, 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, issuances, 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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