Valuation (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2013

Dec. 31, 2012

The table below reflects the value of the Company's Level 1, Level 2, and Level 3 financial instruments at December 31, 2012:



(In thousands)
Description	Level 1			Level 2			Level 3			Total
Assets:
Cash and cash equivalents	$	59,084		$	—		$	—		$	59,084
Investments at fair value-
Agency residential mortgage-backed securities	$	—		$	811,233		$	6,644		$	817,877
Private label residential mortgage-backed securities	—			—			528,366			528,366
Private label commercial mortgage-backed securities	—			—			19,327			19,327
Commercial mortgage loans	—			—			9,546			9,546
Total investments at fair value	—			811,233			563,883			1,375,116
Financial derivatives-assets at fair value-
Credit default swaps on asset-backed securities	—			—			36,031			36,031
Credit default swaps on asset-backed indices	—			12,468			—			12,468
Interest rate swaps	—			5			—			5
Total financial derivatives-assets at fair value	—			12,473			36,031			48,504
Repurchase agreements	—			13,650			—			13,650
Total investments, financial derivatives-assets at fair value, and repurchase agreements	$	—		$	837,356		$	599,914		$	1,437,270
Liabilities:
Investments sold short at fair value-
U.S. Treasury and Agency residential mortgage-backed securities	$	—		$	(622,301	)	$	—		$	(622,301	)
Financial derivatives-liabilities at fair value-
Credit default swaps on corporate indices	—			(484		)	—			(484		)
Credit default swaps on asset-backed indices	—			(13,468		)	—			(13,468		)
Credit default swaps on asset-backed securities	—			—			(1		)	(1		)
Interest rate swaps	—			(1,124		)	—			(1,124		)
Total return swaps	—			(65		)	—			(65		)
Unrealized depreciation on futures contracts	(70		)	—			—			(70		)
Total financial derivatives-liabilities at fair value	(70		)	(15,141		)	(1		)	(15,212		)
Securitized debt	$	—		$	—		$	(1,335	)	$	(1,335	)
Total investments sold short and financial derivatives-liabilities at fair value	$	(70	)	$	(637,442	)	$	(1,336	)	$	(638,848	)

The table below reflects the value of the Company's Level 1, Level 2, and Level 3 financial instruments at March 31, 2013:



(In thousands)
Description	Level 1			Level 2			Level 3			Total
Assets:
Cash and cash equivalents	$	64,753		$	—		$	—		$	64,753
Investments at fair value-
Agency residential mortgage-backed securities	$	—		$	934,747		$	16,228		$	950,975
Private label residential mortgage-backed securities	—			—			557,820			557,820
Private label commercial mortgage-backed securities	—			—			5,778			5,778
Commercial mortgage loans	—			—			9,713			9,713
Other asset-backed securities	—			—			11,638			11,638
Total investments at fair value	—			934,747			601,177			1,535,924
Financial derivatives-assets at fair value-
Credit default swaps on asset-backed securities	—			—			26,398			26,398
Credit default swaps on asset-backed indices	—			9,407			—			9,407
Interest rate swaps	—			384			—			384
Total return swaps	—			61			—			61
Total financial derivatives-assets at fair value	—			9,852			26,398			36,250
Repurchase agreements	—			42,614			—			42,614
Total investments, financial derivatives-assets at fair value, and repurchase agreements	$	—		$	987,213		$	627,575		$	1,614,788
Liabilities:
Investments sold short at fair value-
U.S. Treasury and Agency residential mortgage-backed securities	$	—		$	(649,756	)	$	—		$	(649,756	)
Financial derivatives-liabilities at fair value-
Credit default swaps on corporate indices	—			(2,759		)	—			(2,759		)
Credit default swaps on asset-backed indices	—			(14,170		)	—			(14,170		)
Credit default swaps on asset-backed securities	—			—			(2		)	(2		)
Interest rate swaps	—			(1,484		)	—			(1,484		)
Total return swaps	—			(27		)	—			(27		)
Unrealized depreciation on futures contracts	(48		)	—			—			(48		)
Total financial derivatives-liabilities at fair value	(48		)	(18,440		)	(2		)	(18,490		)
Securitized debt	—			—			(1,205		)	(1,205		)
Total investments sold short, financial derivatives-liabilities at fair value, and securitized debt	$	(48	)	$	(668,196	)	$	(1,207	)	$	(669,451	)

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 March 31, 2013:



	Fair Value as of March 31, 2013		Valuation Technique	Unobservable Input	Range						Weighted Average
Description	Fair Value as of March 31, 2013		Valuation Technique	Unobservable Input	Min			Max			Weighted Average
	(In thousands)
Private label residential mortgage-backed securities and Other asset-backed securities⁽¹⁾	$	501,742	Market Quotes	Non Binding Indicative Price	$	1.31		$	151.77		$	79.13
Private label residential mortgage-backed securities	66,511		Discounted Cash Flows	Yield	4.7		%	17.9		%	8.6		%
				Projected Collateral Prepayments	0.7		%	51.0		%	24.5		%
				Projected Collateral Losses	14.6		%	48.6		%	27.5		%
				Projected Collateral Recoveries	2.3		%	34.3		%	19.0		%
				Projected Collateral Scheduled Amortization	9.4		%	67.2		%	29.0		%
											100.0		%
Credit default swaps on asset-backed securities	26,396		Net Discounted Cash Flows	Projected Collateral Prepayments	8.9		%	44.5		%	14.6		%
				Projected Collateral Losses	20.2		%	56.6		%	46.4		%
				Projected Collateral Recoveries	13.2		%	32.8		%	24.8		%
				Projected Collateral Scheduled Amortization	10.2		%	35.9		%	14.2		%
											100.0		%
Private label commercial mortgage-backed securities and Commercial mortgage loans	10,728		Market Quotes	Non Binding Indicative Price	$	75.89		$	99.00		$	90.50
Commercial mortgage loans⁽²⁾	4,763		Discounted Cash Flows	Yield	15.0		%	15.0		%	15.0		%
				Recovery Timeline⁽³⁾	3			3			3
Agency interest only residential mortgage-backed securities	16,228		Market Quotes	Non Binding Indicative Price	$	6.58		$	23.14		$	14.48


(1)	Includes securitized debt with a fair value of $1.2 million as of March 31, 2013.


(2)	Represents non-performing commercial whole loan.


(3)	Represented in number of months.

The following table identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of December 31, 2012:



	Fair Value as of December 31, 2012		Valuation Technique	Unobservable Input	Range				Weighted Average
Description	Fair Value as of December 31, 2012		Valuation Technique	Unobservable Input	Min		Max		Weighted Average
	(In thousands)
Private label residential mortgage-backed securities⁽¹⁾	$	527,031	Discounted Cash Flows	Yield	2.6	%	29.1	%	7.8	%
				Projected Collateral Prepayments	0.7	%	64.6	%	22.7	%
				Projected Collateral Losses	3.7	%	79.7	%	28.0	%
				Projected Collateral Recoveries	0.0	%	41.0	%	21.4	%
				Projected Collateral Scheduled Amortization	4.1	%	90.4	%	27.9	%
									100.0	%
Credit default swaps on asset-backed securities	36,030		Net Discounted Cash Flows	Projected Collateral Prepayments	8.7	%	44.1	%	18.7	%
				Projected Collateral Losses	20.4	%	57.1	%	37.8	%
				Projected Collateral Recoveries	12.2	%	32.8	%	19.3	%
				Projected Collateral Scheduled Amortization	9.8	%	35.5	%	24.2	%
									100.0	%
Private label commercial mortgage-backed securities and Commercial mortgage loans	28,873		Discounted Cash Flows	Yield	5.2	%	17.9	%	9.5	%
				Projected Collateral Losses	0.0	%	25.1	%	3.9	%
				Projected Collateral Recoveries	0.0	%	88.9	%	20.5	%
				Projected Collateral Scheduled Amortization	0.0	%	100.0	%	75.6	%
									100.0	%
Agency interest only residential mortgage-backed securities	6,644		Option Adjusted Spread ("OAS")	LIBOR OAS ⁽²⁾	816		7,558		1,189
				Projected Collateral Prepayments	81.0	%	100.0	%	92.7	%
				Projected Collateral Scheduled Amortization⁽³⁾	0.0	%	19.0	%	7.3	%
									100.0	%


(1)	Includes securitized debt with a fair value of $1.3 million as of December 31, 2012.


(2)	Shown in basis points.


(3)	For simplicity of presentation, net negative amortization is disregarded.

Fair Value Measurement Using Significant Unobservable Inputs

Level 3—Fair Value Measurement Using Significant Unobservable Inputs:

Three Month Period Ended March 31, 2012



(In thousands)	Beginning Balance as of December 31, 2011		Accreted Discounts / (Amortized Premiums)			Net Realized Gain/ (Loss)			Change in Net Unrealized Gain/(Loss)		Purchases/ Payments		Sales/ Issuances			Transfers In and/or Out of Level 3		Ending Balance as of March 31, 2012
Assets:
Investments at fair value-
U.S. Treasury Agency residential mortgage-backed securities	$	5,337	$	(624	)	$	—		$	431	$	872	$	—		$	—	$	6,016
Private label residential mortgage-backed securities	417,533		4,374			6,201			17,660		98,678		(136,216		)	—		408,230
Private label commercial mortgage-backed securities	16,093		117			344			1,688		1,308		(7,379		)	—		12,171
Commercial mortgage loans	4,400		28			—			72		—		—			—		4,500
Total investments at fair value	443,363		3,895			6,545			19,851		100,858		(143,595		)	—		430,917
Financial derivatives- assets at fair value -
Credit default swaps on asset-backed securities	61,498		—			(4,744		)	6,799		123		(14,930		)	—		48,746
Total financial derivatives- assets at fair value	61,498		—			(4,744		)	6,799		123		(14,930		)	—		48,746
Total investments and financial derivatives- assets at fair value	$	504,861	$	3,895		$	1,801		$	26,650	$	100,981	$	(158,525	)	$	—	$	479,663
Liabilities:
Securitized debt	$	—	$	(13	)	$	—		$	10	$	—	$	(1,482	)	$	—	$	(1,485	)
Total securitized debt	$	—	$	(13	)	$	—		$	10	$	—	$	(1,482	)	$	—	$	(1,485	)

Level 3—Fair Value Measurement Using Significant Unobservable Inputs:

Three Month Period Ended March 31, 2013



(In thousands)	Beginning Balance as of December 31, 2012			Accreted Discounts / (Amortized Premiums)			Net Realized Gain/ (Loss)			Change in Net Unrealized Gain/(Loss)			Purchases/ Payments		Sales/ Issuances			Transfers In and/or Out of Level 3		Ending Balance as of March 31, 2013
Assets:
Investments at fair value-
Agency residential mortgage-backed securities	$	6,644		$	(870	)	$	—		$	238		$	10,216	$	—		$	—	$	16,228
Private label residential mortgage-backed securities	528,366			6,640			15,602			24,020			72,832		(89,640		)	—		557,820
Private label commercial mortgage-backed securities	19,327			57			(1,449		)	3,244			12,344		(27,745		)	—		5,778
Commercial mortgage loans	9,546			8			—			159			—		—			—		9,713
Other asset-backed securities	—			(49		)	—			(107		)	11,794		—			—		11,638
Total investments at fair value	563,883			5,786			14,153			27,554			107,186		(117,385		)	—		601,177
Financial derivatives- assets at fair value-
Credit default swaps on asset-backed securities	36,031			—			3,251			(5,599		)	49		(7,334		)	—		26,398
Total financial derivatives- assets at fair value	36,031			—			3,251			(5,599		)	49		(7,334		)	—		26,398
Total investments and financial derivatives-assets at fair value	$	599,914		$	5,786		$	17,404		$	21,955		$	107,235	$	(124,719	)	$	—	$	627,575
Liabilities:
Financial derivatives- liabilities at fair value-
Credit default swaps on asset-backed securities	$	(1	)	$	—		$	(28	)	$	(1	)	$	—	$	28		$	—	$	(2	)
Total financial derivatives- liabilities at fair value	$	(1	)	$	—		$	(28	)	$	(1	)	$	—	$	28		$	—	$	(2	)
Securitized debt:
Securitized debt	$	(1,335	)	$	(9	)	$	—		$	69		$	70	$	—		$	—	$	(1,205	)
Total securitized debt	$	(1,335	)	$	(9	)	$	—		$	69		$	70	$	—		$	—	$	(1,205	)
Total financial derivatives- liabilities at fair value and securitized debt	$	(1,336	)	$	(9	)	$	(28	)	$	68		$	70	$	28		$	—	$	(1,207	)

- Definition

Tabular disclosure related to assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a recurring and/or nonrecurring basis in periods after initial recognition. Disclosures include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3) as well as transfers between levels 1 and 2.

+ References

Reference 1: 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.

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

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a,b,bb)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258

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 2C

-URI http://asc.fasb.org/extlink&oid=7578670&loc=SL7498348-110258

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

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19279-110258

Reference 6: 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=7578670&loc=d3e19190-110258

Reference 7: 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.

+ 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 (loss), 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, issues, 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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