Investments in Unconsolidated Entities

12 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

As of December 31, 2019 the Company had various equity investments in entities where the Company has the ability to exert significant influence over such entity, but does not control such entity. In these cases the criteria for consolidation have not been met and the Company is required to account for such investments under ASC 323-10; the Company has elected the FVO for its investments in unconsolidated entities. As of December 31, 2019, the Company's investments in unconsolidated entities had an aggregate fair value of $71.9 million, which is included on the Consolidated Balance Sheet in Investments in unconsolidated entities, at fair value. For the year ended December 31, 2019, the Company recognized $10.2 million in Earnings from investments in unconsolidated entities, on its Consolidated Statement of Operations. Certain of the entities that the Company accounts for under ASC 323-10 are deemed to be VIEs, and the maximum amount at risk is generally limited to the Company's investment in the VIE. As of December 31, 2019, the fair value of the Company's investments in unconsolidated entities that have been deemed to be VIEs was $28.5 million.

The following table provides details about the Company's investments in unconsolidated entities as of December 31, 2019:



Investment in Unconsolidated Entity	Form of Investment	Percentage Ownership of Unconsolidated Entity
Longbridge Financial, LLC⁽¹⁾	Preferred shares	49.7%
LendSure Mortgage Corp.⁽¹⁾	Common shares	49.9%
Jepson Holdings Limited⁽¹⁾⁽²⁾	Membership Interest	30.1%
Elizon AFG 2018-1 LLC⁽¹⁾⁽²⁾	Membership Interest	13.4%
Elizon DB 2015-1 LLC⁽¹⁾⁽²⁾	Membership Interest	3.5%
Other	Various	7.7%–51.0%


(1)	See Note 13 for additional details on the Company's related party transactions.

(2)

The Company has evaluated this entity and determined that it meets the definition of a VIE. The Company evaluated its interest in the VIE and determined that the Company does not have the power to direct the activities of the VIE and does not have control of the underlying assets, where applicable. As a result, the Company determined that it is not the primary beneficiary of this VIE and therefore has not consolidated the VIE.

The following table provides a summary of the combined financial position of the unconsolidated entities as of December 31, 2019, in which the Company has an investment:



	December 31, 2019
	(In thousands)
Assets
Investments in securities, loans, MSRs, and REO⁽¹⁾	$	560,949
Other assets	65,580
Total assets	$	626,529
Liabilities
Borrowings	$	387,910
Other liabilities	28,134
Total liabilities	416,044
Equity	210,485
Total liabilities and equity	$	626,529


(1)	Includes investments carried as the lower of cost or fair value as well as investments where the unconsolidated entity has elected the FVO.

The following table provides a summary of the combined results of operations of the unconsolidated entities as of December 31, 2019, in which the Company has an investment:



	Year Ended December 31, 2019
	(In thousands)
Net Interest Income
Interest income	$	30,587
Interest expense	(13,316		)
Total net interest income	17,271
Other Income (Loss)
Realized and unrealized gains (losses) on securities, loans, MSRs, and REO, net	40,901
Other, net	31,848
Total other income (loss)	72,749
Total expenses	58,018
Net income (loss) before income tax expense	32,002
Income tax expense (benefit)	979
Net Income (Loss)	$	31,023