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Valuation

12 Months Ended

Dec. 31, 2022

Valuation

The tables below reflect the value of the Company's Level 1, Level 2, and Level 3 financial instruments that are measured at fair value on a recurring basis as of December 31, 2022 and 2021:

December 31, 2022:


Description	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Securities, at fair value:
Agency RMBS	$	—	$	961,236	$	7,027	$	968,263
Non-Agency RMBS	—		129,676		132,502		262,178
CMBS	—		5,604		12,649		18,253
CLOs	—		6,463		24,598		31,061
Asset-backed securities, backed by consumer loans	—		—		73,644		73,644
Corporate debt securities	—		—		7,533		7,533
Corporate equity securities	—		—		11,111		11,111
U.S. Treasury securities	—		87,422		—		87,422
Loans, at fair value:
Residential mortgage loans	—		—		3,115,518		3,115,518
Commercial mortgage loans	—		—		404,324		404,324
Consumer loans	—		—		4,843		4,843
Corporate loans	—		—		4,086		4,086
Reverse mortgage loans	—		—		8,097,237		8,097,237
MSRs, at fair value	—		—		8,108		8,108
Servicing asset, at fair value	—		—		999		999
Loan commitments, at fair value	—		—		3,060		3,060
Investment in unconsolidated entities, at fair value	—		—		127,046		127,046
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	—		—		76		76
Credit default swaps on asset-backed indices	—		3,366		—		3,366
Credit default swaps on corporate bond indices	—		83		—		83
Interest rate swaps	—		117,022		—		117,022
TBAs	—		7,985		—		7,985
Warrants	—		1,137		—		1,137
Futures	2,772		—		—		2,772
Forwards	—		77		—		77
Total assets	$	2,772	$	1,320,071	$	12,034,361	$	13,357,204


Description	Level 1		Level 2		Level 3		Total
(continued)	(In thousands)
Liabilities:
Securities sold short, at fair value:
Government debt	$	—	$	(209,203)	$	—	$	(209,203)
Financial derivatives–liabilities, at fair value:
Credit default swaps on asset-backed indices	—		(33)		—		(33)
Credit default swaps on corporate bonds	—		(259)		—		(259)
Credit default swaps on corporate bond indices	—		(1,513)		—		(1,513)
Interest rate swaps	—		(50,290)		—		(50,290)
TBAs	—		(2,007)		—		(2,007)
Futures	(96)		—		—		(96)
Other secured borrowings, at fair value	—		—		(1,539,881)		(1,539,881)
HMBS-related obligations, at fair value	—		—		(7,787,155)		(7,787,155)
Senior notes, at fair value	—		—		(191,835)		(191,835)
Total liabilities	$	(96)	$	(263,305)	$	(9,518,871)	$	(9,782,272)

December 31, 2021:


Description	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Securities, at fair value:
Agency RMBS	$	—	$	1,686,906	$	9,710	$	1,696,616
Non-Agency RMBS	—		81,666		134,888		216,554
CMBS	—		12,509		13,134		25,643
CLOs	—		35,651		26,678		62,329
Asset-backed securities, backed by consumer loans	—		—		73,108		73,108
Corporate debt securities	—		356		5,198		5,554
Corporate equity securities	—		—		7,556		7,556
Loans, at fair value:
Residential mortgage loans	—		—		2,016,228		2,016,228
Commercial mortgage loans	—		—		326,197		326,197
Consumer loans	—		—		62,365		62,365
Corporate loans	—		—		10,531		10,531
Investment in unconsolidated entities, at fair value	—		—		195,643		195,643
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	—		—		303		303
Credit default swaps on asset-backed indices	—		1,751		—		1,751
Credit default swaps on corporate bond indices	—		156		—		156
Interest rate swaps	—		13,993		—		13,993
TBAs	—		1,229		—		1,229
Options	—		278		—		278
Warrants	—		706		—		706
Futures	478		—		—		478
Total assets	$	478	$	1,835,201	$	2,881,539	$	4,717,218


Description	Level 1		Level 2		Level 3		Total
(continued)	(In thousands)
Liabilities:
Securities sold short, at fair value:
Government debt	$	—	$	(120,525)	$	—	$	(120,525)
Financial derivatives–liabilities, at fair value:
Credit default swaps on asset-backed indices	—		(39)		—		(39)
Credit default swaps on corporate bonds	—		(99)		—		(99)
Credit default swaps on corporate bond indices	—		(1,870)		—		(1,870)
Interest rate swaps	—		(9,098)		—		(9,098)
TBAs	—		(909)		—		(909)
Futures	(75)		—		—		(75)
Forwards	—		(208)		—		(208)
Other secured borrowings, at fair value	—		—		(984,168)		(984,168)
Total liabilities	$	(75)	$	(132,748)	$	(984,168)	$	(1,116,991)

The following tables identify the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of December 31, 2022 and 2021:

December 31, 2022:


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
	(In thousands)
Non-Agency RMBS	$	59,831	Market Quotes	Non Binding Third-Party Valuation	$	0.45		$	159.91		$	69.79
	72,671		Discounted Cash Flows
	132,502			Yield(1)	—		%	95.7		%	12.1		%
				Projected Collateral Prepayments	—		%	100.0		%	52.0		%
				Projected Collateral Losses	—		%	97.4		%	16.5		%
				Projected Collateral Recoveries	—		%	69.5		%	15.4		%
Non-Agency CMBS	12,080		Market Quotes	Non Binding Third-Party Valuation	$	5.54		$	69.07		$	38.37
	569		Discounted Cash Flows
	12,649			Yield	9.4		%	17.5		%	12.7		%
				Projected Collateral Losses	1.2		%	39.8		%	5.8		%
				Projected Collateral Recoveries	60.2		%	96.5		%	92.8		%
CLOs	17,925		Market Quotes	Non Binding Third-Party Valuation	$	3.96		$	92.00		$	57.94
	6,673		Discounted Cash Flows
	24,598			Yield(2)	13.2		%	36.1		%	23.3		%
Agency interest only RMBS	2,358		Market Quotes	Non Binding Third-Party Valuation	$	11.83		$	20.44		$	16.54
	4,669		Option Adjusted Spread ("OAS")
	7,027			LIBOR OAS(3)(4)	57			4,217			554
				Projected Collateral Prepayments	23.2		%	100.0		%	55.3		%


	Fair Value	Valuation Technique	Unobservable Input	Range						Weighted Average
Description				Min			Max
(continued)	(In thousands)
ABS backed by consumer loans	73,644	Discounted Cash Flows	Yield	6.7		%	27.9		%	13.5		%
			Projected Collateral Prepayments	0.0		%	18.3		%	14.4		%
			Projected Collateral Losses	0.6		%	35.2		%	21.3		%
Corporate debt and equity	18,644	Discounted Cash Flows	Yield	0.0		%	49.6		%	16.4		%
Performing and re-performing residential mortgage loans	1,416,951	Discounted Cash Flows	Yield	0.5		%	53.5		%	8.7		%
Securitized residential mortgage loans(5)(6)	1,539,170	Market Quotes	Non Binding Third-Party Valuation	$	0.54		$	98.22		$	86.45
	125,900	Discounted Cash Flows
	1,665,070		Yield	4.4		%	40.8		%	8.3		%
Non-performing residential mortgage loans	33,497	Discounted Cash Flows	Yield	3.7		%	79.6		%	13.7		%
			Recovery Amount	1.5		%	220.6		%	21.4		%
			Months to Resolution	3.0			105.6			16.8
Performing commercial mortgage loans	386,741	Discounted Cash Flows	Yield	5.2		%	16.5		%	10.5		%
Non-performing commercial mortgage loans	17,583	Discounted Cash Flows	Yield	23.0		%	25.1		%	24.8		%
			Recovery Amount	100.0		%	100.5		%	100.4		%
			Months to Resolution	1.8			5.8			2.3
Consumer loans	4,843	Discounted Cash Flows	Yield	10.6		%	28.2		%	17.6		%
			Projected Collateral Prepayments	0.1		%	21.7		%	12.2		%
			Projected Collateral Losses	0.4		%	61.2		%	13.2		%
Corporate loans	4,086	Discounted Cash Flows	Yield	6.0		%	13.0		%	7.1		%
Reverse Mortgage Loans—HECM	7,993,635	Discounted Cash Flows	Yield	4.2		%	6.3		%	5.2		%
			Conditional Prepayment Rate	1.8		%	44.6		%	9.8		%
Reverse Mortgage Loans—Proprietary	103,602	Discounted Cash Flows	Yield	6.5		%	8.6		%	8.1		%
			Conditional Prepayment Rate	11.0		%	37.1		%	13.8		%
MSRs	8,108	Discounted Cash Flows	Yield	12.0		%	12.0		%	12.0		%
			Conditional Prepayment Rate	11.0		%	37.1		%	14.7		%
Servicing Asset	999	Discounted Cash Flows	Yield	11.7		%	11.7		%	11.7		%
Loan Commitments	3,060	Discounted Cash Flows	Pull-through rate	56.2		%	100.0		%	73.7		%
			Cost to originate	2.4%			7.1%			4.4%
Investment in unconsolidated entities—Loan origination entities	37,099	Enterprise Value	Equity Price-to-Book(7)	1.0x			1.8x			1.1x
Investment in unconsolidated entities—Other	88,905	Enterprise Value	Net Asset Value	n/a			n/a			n/a
Investment in unconsolidated entities—Loan origination-related entities	1,042	Recent Transactions	Transaction Price	n/a			n/a			n/a
	127,046


	Fair Value	Valuation Technique	Unobservable Input	Range						Weighted Average
Description				Min			Max
(continued)	(In thousands)
Credit default swaps on asset-backed securities	76	Net Discounted Cash Flows	Projected Collateral Prepayments	22.9		%	22.9		%	22.9		%
			Projected Collateral Losses	8.6		%	8.6		%	8.6		%
			Projected Collateral Recoveries	12.3		%	12.3		%	12.3		%
Other secured borrowings, at fair value(4)	(1,539,881)	Market Quotes	Non Binding Third-Party Valuation	$	54.94		$	98.22		$	87.34
			Yield	3.7%			8.5%			6.9%
			Projected Collateral Prepayments	93.3%			96.3%			94.5%
HMBS-related obligations, at fair value	(7,787,155)	Discounted Cash Flows	Yield	4.1%			6.1%			5.1%
			Conditional Prepayment Rate	7.3%			36.7%			9.8%
Senior notes, at fair value	(191,835)	Market Quotes	Non Binding Third-Party Valuation	$	91.35		$	91.35		$	91.35

(1)For the range minimum, the range maximum, and the weighted average yield, excludes non-Agency RMBS with a negative yield, with a total fair value of $0.2 million. Including these securities the weighted average yield was 11.9%.

(2)For the range minimum, the range maximum, and the weighted average yield, excludes CLOs with a negative yield, with a total fair value of $0.6 million. Including these securities the weighted average yield was 22.3%.

(3)Shown in basis points.

(4)For range minimum, range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $0.6 million. Including these securities the weighted average was 437 basis points.

(5)Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFEs as discussed in Note 2.

(6)Includes $9.0 million of non-performing securitized residential mortgage loans.

(7)Represents an estimation of where market participants might value an enterprise on a price-to-book basis. For the range minimum, the range maximum, and the weighted average yield, excludes investment in unconsolidated entity with a total fair value of $7.3 million. Including such investment the weighted average price-to-book ratio was 3.2x.

December 31, 2021:


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
	(In thousands)
Non-Agency RMBS	$	89,344	Market Quotes	Non Binding Third-Party Valuation	$	0.34		$	222.87		$	85.17
	45,544		Discounted Cash Flows
	134,888			Yield(1)	—		%	38.6		%	6.8		%
				Projected Collateral Prepayments	—		%	74.4		%	39.1		%
				Projected Collateral Losses	—		%	82.9		%	22.5		%
				Projected Collateral Recoveries	—		%	91.5		%	17.5		%
Non-Agency CMBS	12,866		Market Quotes	Non Binding Third-Party Valuation	$	7.00		$	90.77		$	56.98
	268		Discounted Cash Flows
	13,134			Yield	7.6		%	26.3		%	10.3		%
				Projected Collateral Losses	—		%	6.5		%	2.3		%
				Projected Collateral Recoveries	10.0		%	100.0		%	95.0		%


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
(continued)	(In thousands)
CLOs	18,664		Market Quotes	Non Binding Third-Party Valuation	$	14.00		$	99.75		$	54.99
	8,014		Discounted Cash Flows
	26,678			Yield(2)	9.0		%	292.1		%	32.8		%
				Projected Collateral Prepayments	13.4		%	94.5		%	91.3		%
				Projected Collateral Losses	1.9		%	68.9		%	4.4		%
				Projected Collateral Recoveries	1.3		%	17.8		%	3.4		%
Agency interest only RMBS	3,558		Market Quotes	Non Binding Third-Party Valuation	$	0.72		$	20.36		$	7.31
	6,152		Option Adjusted Spread ("OAS")
	9,710			LIBOR OAS(3)(4)	135			19,247			683
				Projected Collateral Prepayments	49.5		%	100.0		%	78.8		%
ABS backed by consumer loans	73,108		Discounted Cash Flows	Yield	9.5		%	22.8		%	15.7		%
				Projected Collateral Prepayments	0.0		%	11.6		%	9.0		%
				Projected Collateral Losses	1.0		%	31.1		%	20.9		%
Corporate debt and equity	12,754		Discounted Cash Flows	Yield	8.1		%	44.3		%	14.7		%
Performing and re-performing residential mortgage loans	933		Recent Transactions	Transaction Price	n/a			n/a			n/a
	951,723		Discounted Cash Flows
	952,656			Yield	0.9		%	57.5		%	4.7		%
Securitized residential mortgage loans(5)(6)	1,003,164		Market Quotes	Non Binding Third-Party Valuation	$	88.36		$	102.14		$	99.83
	38,381		Discounted Cash Flows
	1,041,545			Yield	1.3		%	23.5		%	4.2		%

Non-performing residential mortgage loans	$	22,027	Discounted Cash Flows	Yield	0.8		%	35.9		%	11.5		%
				Recovery Amount	0.5		%	174.8		%	34.8		%
				Months to Resolution	5.8			100.8			29.5
Performing commercial mortgage loans	310,735		Discounted Cash Flows	Yield	5.1		%	10.6		%	7.2		%
Non-performing commercial mortgage loans	15,462		Discounted Cash Flows	Yield	10.6		%	10.6		%	10.6		%
				Recovery Amount	100.2		%	100.2		%	100.2		%
				Months to Resolution	1.8			1.8			1.8
Consumer loans	62,365		Discounted Cash Flows	Yield	5.2		%	75.6		%	9.3		%
				Projected Collateral Prepayments	0.0		%	28.4		%	14.1		%
				Projected Collateral Losses	0.9		%	86.6		%	9.7		%
Corporate loans	7,000		Market Quotes	Non Binding Third-Party Valuation	$	100.00		$	100.00		$	100.00
	3,531		Discounted Cash Flows
	10,531			Yield	3.0		%	21.9		%	16.1		%


	Fair Value	Valuation Technique	Unobservable Input	Range						Weighted Average
Description				Min			Max
(continued)	(In thousands)
Investment in unconsolidated entities—Loan Originators(6)	123,779	Enterprise Value	Equity Price-to-Book(7)	1.2x			1.9x			1.5x
Investment in unconsolidated entities—Other(6)	57,828	Enterprise Value	Net Asset Value	n/a			n/a			n/a
	14,036	Recent Transactions	Transaction Price	n/a			n/a			n/a
	195,643
Credit default swaps on asset-backed securities	303	Net Discounted Cash Flows	Projected Collateral Prepayments	33.9		%	41.9		%	40.1		%
			Projected Collateral Losses	6.5		%	8.8		%	7.0		%
			Projected Collateral Recoveries	11.2		%	11.4		%	11.3		%
Other secured borrowings, at fair value(5)	(984,168)	Market Quotes	Non Binding Third-Party Valuation	$	93.34		$	102.14		$	99.94
			Yield	1.8%			2.5%			2.1%
			Projected Collateral Prepayments	—%			97.2%			68.1%

(1)For the range minimum, the range maximum, and the weighted average yield, excludes non-Agency RMBS with a negative yield, with a total fair value of $2.1 million. Including these securities the weighted average yield was 6.5%.

(2)For the range minimum, the range maximum, and the weighted average yield, excludes CLOs with a negative yield, with a total fair value of $14 thousand. Including these securities the weighted average yield was 32.7%.

(3)Shown in basis points.

(4)For range minimum, range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $2.1 million. Including these securities the weighted average was 485 basis points.

(5)Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFEs as discussed in Note 2.

(6)Includes $8.8 million of non-performing securitized residential mortgage loans.

(7)Represent an estimation of where market participants might value an enterprise on a price-to-book basis.

Third-party non-binding valuations are validated by comparing such valuations to internally generated prices based on the Company's models and, when available, to recent trading activity in the same or similar instruments.

For those instruments valued using discounted and net discounted cash flows, collateral prepayments, losses, recoveries, and scheduled amortization are projected over the remaining life of the collateral and expressed as a percentage of the collateral's current principal balance. Averages are weighted based on the fair value of the related instrument. In the case of credit default swaps on asset-backed securities, averages are weighted based on each instrument's bond equivalent value. Bond equivalent value represents the investment amount of a corresponding position in the reference obligation, calculated as the difference between the outstanding principal balance of the underlying reference obligation and the fair value, inclusive of accrued interest, of the derivative contract. For those assets valued using the LIBOR Option Adjusted Spread ("LIBOR OAS") valuation methodology, cash flows are projected using the Company's models over multiple interest rate scenarios, and these projected cash flows are then discounted using the LIBOR rates implied by each interest rate scenario. The LIBOR OAS of an asset is then computed as the unique constant yield spread that, when added to all LIBOR rates in each interest rate scenario generated by the model, will equate (a) the expected present value of the projected asset cash flows over all model scenarios to (b) the actual current market price of the asset. LIBOR OAS is therefore model-dependent. Generally speaking, LIBOR OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any interest rate options embedded in the asset. The Company considers the expected timeline to resolution in the determination of fair value for its non-performing commercial and residential mortgage loans.

Material changes in any of the inputs above in isolation could result in a significant change to reported fair value measurements. Additionally, fair value measurements are impacted by the interrelationships of these inputs. For example, for instruments subject to prepayments and credit losses, such as non-Agency RMBS and consumer loans and ABS backed by consumer loans, a higher expectation of collateral prepayments will generally be accompanied by a lower expectation of collateral losses. Conversely, higher losses will generally be accompanied by lower prepayments. Because the Company's credit default swaps on asset-backed security holdings represent credit default swap contracts whereby the Company has purchased credit protection, such credit default swaps on asset-backed securities generally have the directionally opposite sensitivity to prepayments, losses, and recoveries as compared to the Company's long securities holdings. Prepayments do not represent a significant input for the Company's commercial mortgage-backed securities and commercial mortgage loans. Losses and recoveries do not represent a significant input for the Company's Agency RMBS interest only securities, given the guarantee of the issuing government agency or government-sponsored enterprise.

The tables below includes a roll-forward of the Company's financial instruments for the years ended December 31, 2022, 2021, and 2020 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.

Year Ended December 31, 2022


(In thousands)	Beginning Balance as of December 31, 2021		Accreted Discounts / (Amortized Premiums)		Net Realized Gain/ (Loss)		Change in Net Unrealized Gain/(Loss)		Purchases/Payments(1)		Sales/Issuances(2)		Transfers Into Level 3		Transfers Out of Level 3		Ending Balance as of December 31, 2022
Assets:
Securities, at fair value:
Agency RMBS	$	9,710	$	(1,963)	$	(130)	$	(1,169)	$	3,132	$	(1,442)	$	3,024	$	(4,135)	$	7,027
Non-Agency RMBS	134,888		993		37		(13,934)		77,994		(35,522)		13,235		(45,189)		132,502
CMBS	13,134		120		3,050		(2,807)		620		(5,297)		3,829		—		12,649
CLOs	26,678		(1,884)		6,245		(2,825)		—		(13,628)		15,178		(5,166)		24,598
Asset-backed securities backed by consumer loans	73,108		(5,865)		(36)		(11,771)		62,348		(44,140)		—		—		73,644
Corporate debt securities	5,198		—		1,362		(1,514)		13,577		(11,090)		—		—		7,533
Corporate equity securities	7,556		—		880		(456)		5,768		(2,637)		—		—		11,111
Loans, at fair value:
Residential mortgage loans	2,016,228		(13,607)		(18,124)		(335,384)		2,754,030		(1,287,625)		—		—		3,115,518
Commercial mortgage loans	326,197		—		22		(2,156)		428,568		(348,307)		—		—		404,324
Consumer loans	62,365		(3,070)		(2,145)		427		11,948		(64,682)		—		—		4,843
Corporate loan	10,531		—		(1,000)		(46)		3,040		(8,439)		—		—		4,086
Reverse mortgage loans(3)	—		—		(197)		200,741		8,143,368		(246,675)		—		—		8,097,237
MSRs, at fair value(3)	—		—		—		(66)		8,174		—		—		—		8,108
Servicing asset, at fair value	—		—		—		35		964		—		—		—		999
Loan commitments, at fair value	—		—		—		(30)		3,090		—		—		—		3,060
Investments in unconsolidated entities, at fair value	195,643		—		14,712		(78,326)		257,731		(262,714)		—		—		127,046
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	303		—		(855)		615		13		—		—		—		76
Total assets, at fair value	$	2,881,539	$	(25,276)	$	3,821	$	(248,666)	$	11,774,365	$	(2,332,198)	$	35,266	$	(54,490)	$	12,034,361
Liabilities:
Other secured borrowings, at fair value	(984,168)		(802)		—		258,140		312,359		(1,125,410)		—		—		(1,539,881)
Senior notes, at fair value	—		—		—		18,165		—		(210,000)		—		—		(191,835)
HMBS-related obligations	—		—		—		(162,381)		248,453		(7,873,227)		—		—		(7,787,155)
Total liabilities, at fair value	$	(984,168)	$	(802)	$	—	$	113,924	$	560,812	$	(9,208,637)	$	—	$	—	$	(9,518,871)

(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.

(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.

(3)Change in net unrealized gain (loss) represents the net change in fair value which can include interest income and realized and unrealized gains and losses.

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at December 31, 2022, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2022. For Level 3 financial instruments held by the Company at December 31, 2022, change in net unrealized gain (loss) of $(38.3) million, $(136.1) million, $(66) thousand, $35 thousand, $(30) thousand, $(36.1) million, $0.6 million, $258.1 million, $18.2 million, and $(162.4) million for the year ended December 31, 2022 relate to securities, loans, MSRs, servicing asset, loan commitments, investments in unconsolidated entities, financial derivatives–assets, other secured borrowings, senior notes, and HMBS-related obligations, respectively.

At December 31, 2022, the Company transferred $54.5 million of assets from Level 3 to Level 2 and $35.3 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.

Year Ended December 31, 2021


(In thousands)	Beginning Balance as of December 31, 2020		Accreted Discounts / (Amortized Premiums)		Net Realized Gain/ (Loss)		Change in Net Unrealized Gain/(Loss)		Purchases/Payments(1)		Sales/Issuances(2)		Transfers Into Level 3		Transfers Out of Level 3		Ending Balance as of December 31, 2021
Assets:
Securities, at fair value:
Agency RMBS	$	11,663	$	(3,565)	$	882	$	(1,924)	$	2,889	$	(1,533)	$	3,683	$	(2,385)	$	9,710
Non-Agency RMBS	127,838		2,484		3,363		(3,735)		51,099		(49,406)		8,181		(4,936)		134,888
CMBS	63,148		434		4,329		5,000		902		(60,449)		389		(619)		13,134
CLOs	111,100		(1,580)		935		18,843		104		(78,892)		1,544		(25,376)		26,678
Asset-backed securities backed by consumer loans	44,925		(5,537)		(1,881)		(2,122)		77,713		(39,990)		—		—		73,108
Corporate debt securities	4,082		—		1,818		212		4,224		(5,138)		—		—		5,198
Corporate equity securities	1,590		—		324		1,783		5,829		(1,970)		—		—		7,556
Loans, at fair value:
Residential mortgage loans	1,187,069		(13,746)		(423)		(20,204)		1,546,371		(682,839)		—		—		2,016,228
Commercial mortgage loans	213,031		(8)		304		(271)		403,078		(289,937)		—		—		326,197
Consumer loans	47,525		(7,633)		(1,415)		(5)		58,010		(34,117)		—		—		62,365
Corporate loan	5,855		—		—		—		11,334		(6,658)		—		—		10,531
Investment in unconsolidated entities, at fair value	141,620		—		5,510		52,594		168,757		(172,838)		—		—		195,643
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	347		—		34		(44)		15		(49)		—		—		303
Total return swaps	9		—		170		(9)		—		(170)		—		—		—
Total assets, at fair value	$	1,959,802	$	(29,151)	$	13,950	$	50,118	$	2,330,325	$	(1,423,986)	$	13,797	$	(33,316)	$	2,881,539
Liabilities:
Financial derivatives–liabilities, at fair value:
Total return swaps	$	(484)	$	—	$	(1,427)	$	484	$	1,427	$	—	$	—	$	—	$	—
Other secured borrowings, at fair value(3)	(754,921)		—		—		15,843		583,874		(828,964)		—		—		(984,168)
Total liabilities, at fair value	$	(755,405)	$	—	$	(1,427)	$	16,327	$	585,301	$	(828,964)	$	—	$	—	$	(984,168)

(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.

(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.

(3)Conformed to current period presentation.

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at December 31, 2021, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2021. For Level 3 financial instruments held by the Company at December 31, 2021, change in net unrealized gain (loss) of $7.0 million, $(20.5) million, $51.7 million, $(43) thousand, and $15.8 million, for the year ended December 31, 2021 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, and other secured borrowings, at fair value, respectively.

At December 31, 2021, the Company transferred $33.3 million of assets from Level 3 to Level 2 and $13.8 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.

Year Ended December 31, 2020


(In thousands)	Beginning Balance as of December 31, 2019		Accreted Discounts / (Amortized Premiums)		Net Realized Gain/ (Loss)		Change in Net Unrealized Gain/(Loss)		Purchases/ Payments(1)		Sales/ Issuances(2)		Transfers Into Level 3		Transfers Out of Level 3		Ending Balance as of December 31, 2020
Assets:
Securities, at fair value:
Agency RMBS	$	19,904	$	(7,903)	$	722	$	3,175	$	8,307	$	(5,046)	$	1,083	$	(8,579)	$	11,663
Non-Agency RMBS	89,581		1,557		1,009		(1,283)		64,362		(40,841)		17,425		(3,972)		127,838
CMBS	29,805		813		62		(2,477)		52,915		(38,553)		20,583		—		63,148
CLOs	44,979		2,185		(8,862)		(13,132)		48,120		(6,747)		53,052		(8,495)		111,100
Asset-backed securities backed by consumer loans	48,610		(4,986)		(138)		(1,245)		30,899		(28,215)		—		—		44,925
Corporate debt securities	1,113		—		914		1,068		5,668		(4,681)		—		—		4,082
Corporate equity securities	1,394		—		7		(165)		366		(12)		—		—		1,590
Loans, at fair value:
Residential mortgage loans	932,203		(6,445)		(165)		11,593		594,397		(344,514)		—		—		1,187,069
Commercial mortgage loans	274,759		128		135		(166)		121,844		(183,669)		—		—		213,031
Consumer loans	186,954		(24,586)		(4,843)		(2,891)		141,245		(248,354)		—		—		47,525
Corporate loan	18,510		—		—		—		1,445		(14,100)		—		—		5,855
Investment in unconsolidated entities, at fair value	71,850		—		424		37,509		61,589		(29,752)		—		—		141,620
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	993		—		(5,451)		5,402		24		(621)		—		—		347
Total return swaps	620		—		288		(611)		126		(414)		—		—		9
Total assets, at fair value	$	1,721,275	$	(39,237)	$	(15,898)	$	36,777	$	1,131,307	$	(945,519)	$	92,143	$	(21,046)	$	1,959,802
Liabilities:
Financial derivatives–liabilities, at fair value:
Total return swaps	$	(436)	$	—	$	(551)	$	(48)	$	592	$	(41)	$	—	$	—	$	(484)
Other secured borrowings, at fair value(3)	(594,396)		—		—		(9,316)		305,828		(457,037)		—		—		(754,921)
Total liabilities, at fair value	$	(594,832)	$	—	$	(551)	$	(9,364)	$	306,420	$	(457,078)	$	—	$	—	$	(755,405)

(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.

(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.

(3)Conformed to current period presentation.

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at December 31, 2020, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2020. For Level 3 financial instruments held by the Company at December 31, 2020, change in net unrealized gain (loss) of $(33.3) million, $8.6 million, $37.1 million, $0.5 million, $(0.5) million, and $(9.3) million, for the year ended December 31, 2020 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, financial derivatives–liabilities, and other secured borrowings, at fair value, respectively.

At December 31, 2020, the Company transferred $21.0 million of assets from Level 3 to Level 2 and $92.1 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.

The following table summarizes the estimated fair value of all other financial instruments not measured at fair value on a recurring basis as of December 31, 2022 and 2021:


	As of
	December 31, 2022				December 31, 2021
(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
Other financial instruments
Assets:
Cash and cash equivalents	$	217,053	$	217,053	$	92,661	$	92,661
Restricted cash	4,816		4,816		175		175
Due from brokers	36,761		36,761		93,549		93,549
Reverse repurchase agreements	226,444		226,444		123,250		123,250
Liabilities:
Repurchase agreements	2,609,685		2,609,685		2,469,763		2,469,763
Other secured borrowings	276,058		276,058		96,622		96,622
Senior notes, net	—		—		86,249		85,802
Due to brokers	34,507		34,507		2,233		2,233

Cash and cash equivalents generally includes cash held in interest bearing overnight accounts, for which fair value equals the carrying value, and investments which are liquid in nature, such as investments in money market accounts or U.S. Treasury Bills, for which fair value equals the carrying value; such assets are considered Level 1. Restricted cash includes cash held in a segregated account for which fair value equals the carrying value; such assets are considered Level 1. Due from brokers and Due to brokers include collateral transferred to or received from counterparties, along with receivables and payables for open and/or closed derivative positions. These receivables and payables are short term in nature and any collateral transferred consists primarily of cash; fair value of these items is approximated by carrying value and such items are considered Level 1. The Company's reverse repurchase agreements, repurchase agreements, and other secured borrowings are carried at cost, which approximates fair value due to their short term nature. Reverse repurchase agreements, repurchase agreements, and other secured borrowings are classified as Level 2 based on the adequacy of the collateral and their short term nature. Senior notes, net are considered Level 3 liabilities given the relative unobservability of the most significant inputs to valuation estimation as well as the lack of trading activity of these instruments. As of December 31, 2021, the estimated fair value of the Company's Senior notes, net was based on a third-party valuation.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details