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Valuation

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and December 31, 2022:

September 30, 2023:


Description	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Securities, at fair value:
Agency RMBS	$	—	$	960,220	$	4,066	$	964,286
Non-Agency RMBS	—		139,587		170,225		309,812
CMBS	—		7,175		13,412		20,587
CLOs	—		14,080		15,870		29,950
Asset-backed securities, backed by consumer loans	—		—		80,524		80,524
Other ABS	—		—		1,285		1,285
Corporate debt securities	—		—		10,292		10,292
Corporate equity securities	642		—		10,293		10,935
U.S. Treasury securities	—		74,378		—		74,378
Loans, at fair value:
Residential mortgage loans	—		—		2,987,515		2,987,515
Commercial mortgage loans	—		—		290,944		290,944
Consumer loans	—		—		2,408		2,408
Corporate loans	—		—		6,623		6,623
Reverse mortgage loans	—		—		8,633,382		8,633,382
MSRs, at fair value	—		—		29,653		29,653
Servicing asset, at fair value	—		—		2,295		2,295
Loan commitments, at fair value	—		—		3,752		3,752
Investment in unconsolidated entities, at fair value	—		—		113,474		113,474
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	—		—		76		76
Credit default swaps on asset-backed indices	—		3,574		—		3,574
Credit default swaps on corporate bond indices	—		2,298		—		2,298
Interest rate swaps	—		177,288		—		177,288
Total return swaps	—		—		16		16
TBAs	—		6,826		—		6,826
Warrants	—		1,517		—		1,517
Futures	6,165		—		—		6,165
Forwards	—		263		—		263
Total assets	$	6,807	$	1,387,206	$	12,376,105	$	13,770,118



Liabilities:
Securities sold short, at fair value:
Government debt	$	—	$	(163,644)	$	—	$	(163,644)
Common stock	(188)		—		—		(188)


Description	Level 1		Level 2		Level 3		Total
(continued)	(In thousands)
Financial derivatives–liabilities, at fair value:
Credit default swaps on asset-backed indices	—		(33)		—		(33)
Credit default swaps on corporate bonds	—		(268)		—		(268)
Credit default swaps on corporate bond indices	—		(8,891)		—		(8,891)
Interest rate swaps	—		(28,463)		—		(28,463)
TBAs	—		(683)		—		(683)
Futures	(163)		—		—		(163)
Forwards	—		(19)		—		(19)
Other secured borrowings, at fair value	—		—		(1,404,567)		(1,404,567)
HMBS-related obligations, at fair value	—		—		(8,181,922)		(8,181,922)
Senior notes, at fair value	—		—		(189,735)		(189,735)
Total liabilities	$	(351)	$	(202,001)	$	(9,776,224)	$	(9,978,576)

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)

The following tables identify the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of September 30, 2023 and December 31, 2022:

September 30, 2023:


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
	(In thousands)
Non-Agency RMBS	$	108,481	Market Quotes	Non Binding Third-Party Valuation	$	0.46		$	171.21		$	74.48
	61,744		Discounted Cash Flows
	170,225			Yield	0.0		%	142.5		%	11.8		%
				Projected Collateral Prepayments	0.0		%	100.0		%	33.7		%
				Projected Collateral Losses	0.0		%	86.9		%	14.1		%
				Projected Collateral Recoveries	0.0		%	41.8		%	13.0		%
Non-Agency CMBS	6,695		Market Quotes	Non Binding Third-Party Valuation	$	6.45		$	53.85		$	34.12
	6,717		Discounted Cash Flows
	13,412			Yield	7.5		%	34.8		%	16.2		%
				Projected Collateral Losses	—		%	54.5		%	5.6		%
				Projected Collateral Recoveries	45.5		%	100.0		%	93.0		%
CLOs	6,480		Market Quotes	Non Binding Third-Party Valuation	$	0.50		$	84.03		$	57.50
	9,390		Discounted Cash Flows
	15,870			Yield	14.6		%	222.6		%	49.4		%
Agency interest only RMBS	358		Market Quotes	Non Binding Third-Party Valuation	$	13.79		$	13.79		$	13.79
	3,708		Option Adjusted Spread ("OAS")
	4,066			LIBOR OAS(1)(2)	53			4,232			595
				Projected Collateral Prepayments	22.8		%	100.0		%	52.8		%


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
(continued)	(In thousands)
ABS	$	1,285	Market Quotes		$	64.00		$	65.70		$	64.65
	80,524		Discounted Cash Flows
	81,809			Yield	7.3		%	29.3		%	11.8		%
				Projected Collateral Prepayments	0.0		%	16.4		%	11.7		%
				Projected Collateral Losses	0.8		%	31.0		%	24.7		%



Corporate debt and equity	20,585		Discounted Cash Flows	Yield	11.6		%	44.1		%	16.8		%
Performing and re-performing residential mortgage loans	1,359,588		Discounted Cash Flows	Yield	0.2		%	19.4		%	9.0		%
Securitized residential mortgage loans(3)(4)	1,434,783		Market Quotes	Non Binding Third-Party Valuation	$	0.66		$	96.78		$	82.97
	103,971		Discounted Cash Flows
	1,538,754			Yield	4.0		%	19.1		%	7.5		%
Non-performing residential mortgage loans	89,173		Discounted Cash Flows	Yield	0.2		%	104.9		%	16.4		%
				Recovery Amount	1.9		%	231.6		%	98.6		%
				Months to Resolution	7.0			106.9			22.5
Performing commercial mortgage loans	258,766		Discounted Cash Flows	Yield	9.9		%	45.9		%	13.1		%
Non-performing commercial mortgage loans	32,178		Discounted Cash Flows	Yield	12.6		%	26.2		%	18.7		%
				Recovery Amount	100.0		%	135.8		%	116.0		%
				Months to Resolution	2.0			15.0			8.9



Consumer loans	2,408		Discounted Cash Flows	Yield	10.4		%	20.4		%	17.3		%
				Projected Collateral Prepayments	0.0		%	13.9		%	7.4		%
				Projected Collateral Losses	0.5		%	50.1		%	16.6		%
Corporate loans	6,623		Discounted Cash Flows	Yield	7.0		%	25.2		%	12.5		%
Reverse Mortgage Loans—HECM	8,367,001		Discounted Cash Flows	Yield	2.2		%	7.3		%	5.1		%
				Conditional Prepayment Rate	8.5		%	45.7		%	9.7		%
Reverse Mortgage Loans—HECM buyouts	19,360		Discounted Cash Flows	Yield	8.5		%	15.0		%	10.8		%
				Months to Resolution	0.3			83.0			26.2
Reverse Mortgage Loans—Proprietary	247,021		Discounted Cash Flows	Yield	8.0		%	8.8		%	8.3		%
				Conditional Prepayment Rate	11.0		%	37.1		%	14.9		%
MSRs	29,653		Discounted Cash Flows	Yield	17.4		%	17.4		%	17.4		%
				Conditional Prepayment Rate	6.3		%	78.4		%	15.6		%
Servicing Asset	2,295		Discounted Cash Flows	Yield	15.0		%	15.0		%	15.0		%
Loan Commitments	3,752		Discounted Cash Flows	Pull-through rate	71.9		%	100.0		%	78.2		%
				Cost to originate	2.9		%	6.1		%	4.7		%
Investment in unconsolidated entities—Loan origination entities	31,568		Enterprise Value	Equity Price-to-Book(5)	0.7x			1.4x			0.9x
Investment in unconsolidated entities—Other	81,364		Enterprise Value	Net Asset Value	n/a			n/a			n/a
Investment in unconsolidated entities—Loan origination-related entities	542		Recent Transactions	Transaction Price	n/a			n/a			n/a
	113,474


	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description					Min			Max
(continued)	(In thousands)
Total return swaps	$	16	Discounted Cash Flows	Yield	—		%	—		%	—		%
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(3)	(1,404,567)		Market Quotes	Non Binding Third-Party Valuation	$	54.98		$	96.78		$	85.15
				Yield	5.7%			9.2%			6.4%
				Projected Collateral Prepayments	86.5%			92.6%			88.7%
HMBS-related obligations, at fair value	(8,181,922)		Discounted Cash Flows	Yield	2.1%			7.2%			5.1%
				Conditional Prepayment Rate	8.5%			45.7%			9.7%
Senior notes, at fair value	(189,735)		Market Quotes	Non Binding Third-Party Valuation	$	90.35		$	90.35		$	90.35

(1)Shown in basis points.

(2)For range minimum, range maximum, and the weighted average of LIBOR OAS, exclude Agency interest only securities with a negative LIBOR OAS, with a total fair value of $0.4 million. Including these securities the weighted average was 427 basis points.

(3)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.

(4)Includes $15.2 million of non-performing securitized residential mortgage loans.

(5)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 investments in unconsolidated entities with a total fair value of $4.7 million. Including such investments the weighted average price-to-book ratio was 6.9x.

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




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		%


	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
Description					Min		Max
(continued)	(In thousands)
Other secured borrowings, at fair value(5)	$	(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)Represent 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.

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 three- and nine-month periods ended September 30, 2023 and 2022 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.

Three-Month Period Ended September 30, 2023


(In thousands)	Beginning Balance as of June 30, 2023		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 September 30, 2023
Assets:
Securities, at fair value:
Agency RMBS	$	5,355	$	(353)	$	(358)	$	188	$	—	$	(597)	$	183	$	(352)	$	4,066
Non-Agency RMBS	168,609		(239)		(124)		(4,375)		9,739		(1,729)		534		(2,190)		170,225
CMBS	12,308		130		26		(904)		1,314		(318)		1,576		(720)		13,412
CLOs	19,733		(359)		(6,183)		5,729		2,069		(134)		550		(5,535)		15,870
Asset-backed securities backed by consumer loans	77,139		(1,885)		(4,864)		11		18,070		(7,947)		—		—		80,524
Other ABS	—		26		—		7		1,252		—		—		—		1,285
Corporate debt securities	9,633		—		306		(107)		2,209		(1,749)		—		—		10,292
Corporate equity securities	10,736		—		(206)		218		479		(934)		—		—		10,293
Loans, at fair value:
Residential mortgage loans	2,993,683		(2,176)		913		(25,384)		393,880		(373,401)		—		—		2,987,515
Commercial mortgage loans	348,360		—		2		(4,647)		63,567		(116,338)		—		—		290,944
Consumer loans	3,059		(199)		(192)		194		137		(591)		—		—		2,408
Corporate loan	6,532		—		—		—		544		(453)		—		—		6,623
Reverse mortgage loans(3)	8,471,061		—		—		98,686		435,094		(371,459)		—		—		8,633,382
MSRs, at fair value(3)	7,473		—		—		22,180		—		—		—		—		29,653
Servicing asset, at fair value	1,304		—		—		991		—		—		—		—		2,295
Loan commitments, at fair value	3,800		—		—		(48)		—		—		—		—		3,752
Investments in unconsolidated entities, at fair value	118,420		—		2,301		(3,279)		42,289		(46,257)		—		—		113,474
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	76		—		—		—		—		—		—		—		76
Total return swaps	—		—		30		16		—		(30)		—		—		16
Total assets, at fair value	$	12,257,281	$	(5,055)	$	(8,349)	$	89,476	$	970,643	$	(921,937)	$	2,843	$	(8,797)	$	12,376,105
Liabilities:
Other secured borrowings, at fair value	(1,472,368)		(308)		—		18,660		49,449		—		—		—		(1,404,567)
Senior notes, at fair value	(185,325)		—		—		(4,410)		—		—		—		—		(189,735)
HMBS-related obligations, at fair value	(8,055,288)		—		—		(115,729)		357,638		(368,543)		—		—		(8,181,922)
Total liabilities, at fair value	$	(9,712,981)	$	(308)	$	—	$	(101,479)	$	407,087	$	(368,543)	$	—	$	—	$	(9,776,224)

(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 Condensed 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 September 30, 2023, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended September 30, 2023. For Level 3 financial instruments held by the Company at September 30, 2023, change in net unrealized gain (loss) of $1.3 million, $(30.1) million, $22.2 million,

$1.0 million, $(48) thousand, $(4.0) million, $16 thousand, $18.7 million, $(4.4) million, and $(115.7) million for the three-month period ended September 30, 2023 relate to securities, loans, MSRs, servicing asset, loan commitments, investments in unconsolidated entities, financial derivative-assets, other secured borrowings, Senior notes, and HMBS-related obligations, at fair value, respectively.

At September 30, 2023, the Company transferred $8.8 million of assets from Level 3 to Level 2 and $2.8 million of assets 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.

Three-Month Period Ended September 30, 2022


(In thousands)	Beginning Balance as of June 30, 2022		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 September 30, 2022
Assets:
Securities, at fair value:
Agency RMBS	$	12,389	$	(751)	$	(723)	$	(62)	$	—	$	(2,214)	$	1,094	$	(1,914)	$	7,819
Non-Agency RMBS	131,449		(73)		216		(5,402)		—		(13,789)		3,240		(9,856)		105,785
CMBS	9,380		54		1,932		(581)		—		(3,265)		3,230		(2,081)		8,669
CLOs	23,378		(631)		3,324		(221)		—		(6,086)		643		(3,119)		17,288
Asset-backed securities backed by consumer loans	78,183		(2,376)		318		(2,618)		13,063		(11,002)		—		—		75,568
Corporate debt securities	1,767		—		133		(148)		5,391		(3,541)		—		—		3,602
Corporate equity securities	10,276		—		(80)		188		785		—		—		—		11,169
Loans, at fair value:
Residential mortgage loans	2,995,584		(3,394)		(1,561)		(114,175)		712,965		(240,609)		—		—		3,348,810
Commercial mortgage loans	477,378		—		11		54		77,888		(90,818)		—		—		464,513
Consumer loans	7,410		(362)		(1,172)		986		523		(1,347)		—		—		6,038
Corporate loan	10,448		—		—		—		100		(7,014)		—		—		3,534
Investments in unconsolidated entities, at fair value	192,269		—		(1,317)		(24,196)		36,928		(32,305)		—		—		171,379
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	202		—		(844)		717		2		—		—		—		77
Total assets, at fair value	$	3,950,113	$	(7,533)	$	237	$	(145,458)	$	847,645	$	(411,990)	$	8,207	$	(16,970)	$	4,224,251
Liabilities:
Financial derivatives–liabilities, at fair value:
Total return swaps	$	—	$	—	$	—	$	(37)	$	—	$	—	$	—	$	—	$	(37)
Other secured borrowings, at fair value	$	(1,448,182)	$	(397)	$	—	$	79,430	$	57,864	$	(324,544)	$	—	$	—	$	(1,635,829)
Senior notes, at fair value	(202,650)		—		—		9,135		—		—		—		—		(193,515)
Total liabilities, at fair value	$	(1,650,832)	$	(397)	$	—	$	88,528	$	57,864	$	(324,544)	$	—	$	—	$	(1,829,381)

(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.

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Condensed 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 September 30, 2022, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended September 30, 2022. For Level 3 financial instruments held by the Company at September 30, 2022, change in net unrealized gain (loss) of $(8.0) million, $(113.1) million, $(27.0) million, $0.7 million, $(37) thousand, $79.4 million, and $9.1 million, for the three-month period ended September 30, 2022 relate to

securities, loans, investments in unconsolidated entities, financial derivatives–assets, financial derivatives–liabilities, other secured borrowings, and Senior notes, at fair value, respectively.

At September 30, 2022, the Company transferred $17.0 million of assets from Level 3 to Level 2 and $8.2 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.

Nine-Month Period Ended September 30, 2023


(In thousands)	Beginning Balance as of December 31, 2022		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 September 30, 2023
Assets:
Securities, at fair value:
Agency RMBS	$	7,027	$	(987)	$	(669)	$	621	$	336	$	(1,561)	$	1,143	$	(1,844)	$	4,066
Non-Agency RMBS	132,502		(78)		1,764		(12,268)		39,654		(32,586)		50,768		(9,531)		170,225
CMBS	12,649		210		23		(3,337)		3,441		(459)		3,101		(2,216)		13,412
CLOs	24,598		(289)		(5,944)		3,778		6,112		(7,009)		2,304		(7,680)		15,870
Asset-backed securities backed by consumer loans	73,644		(4,202)		(11,573)		2,148		47,762		(27,255)		—		—		80,524
Other ABS	—		26		—		7		1,252		—		—		—		1,285
Corporate debt securities	7,533		—		(784)		633		13,463		(10,553)		—		—		10,292
Corporate equity securities	11,111		—		(210)		599		1,573		(2,780)		—		—		10,293
Loans, at fair value:
Residential mortgage loans	3,115,518		(6,408)		(7,614)		13,061		1,073,182		(1,200,224)		—		—		2,987,515
Commercial mortgage loans	404,324		—		2		(54)		127,012		(240,340)		—		—		290,944
Consumer loans	4,843		(675)		(387)		150		587		(2,110)		—		—		2,408
Corporate loan	4,086		—		354		10		3,961		(1,788)		—		—		6,623
Reverse mortgage loans(3)	8,097,237		—		(3)		309,647		1,280,465		(1,053,964)		—		—		8,633,382
MSRs, at fair value(3)	8,108		—		—		21,545		—		—		—		—		29,653
Servicing asset, at fair value	999		—		—		1,296		—		—		—		—		2,295
Loan commitments, at fair value	3,060		—		—		692		—		—		—		—		3,752
Investments in unconsolidated entities, at fair value	127,046		—		2,527		(5,930)		123,891		(134,060)		—		—		113,474
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	76		—		—		—		—		—		—		—		76
Total return swaps	—		—		30		16		—		(30)		—		—		16
Total assets, at fair value	$	12,034,361	$	(12,403)	$	(22,484)	$	332,614	$	2,722,691	$	(2,714,719)	$	57,316	$	(21,271)	$	12,376,105
Liabilities:
Other secured borrowings, at fair value	(1,539,881)		(972)		—		1,133		135,153		—		—		—		(1,404,567)
Senior notes, at fair value	(191,835)		—		—		2,100		—		—		—		—		(189,735)
HMBS-related obligations, at fair value	(7,787,155)		—		—		(271,840)		973,755		(1,096,682)		—		—		(8,181,922)
Total liabilities, at fair value	$	(9,518,871)	$	(972)	$	—	$	(268,607)	$	1,108,908	$	(1,096,682)	$	—	$	—	$	(9,776,224)

(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.

Level 3 financial instruments held by the Company at September 30, 2023, as well as Level 3 financial instruments disposed of by the Company during the nine-month period ended September 30, 2023. For Level 3 financial instruments held by the Company at September 30, 2023, change in net unrealized gain (loss) of $(11.9) million, $12.3 million, $21.5 million, $1.3 million, $0.7 million, $(6.7) million, $16 thousand, $1.1 million, $2.1 million, and $(271.8) million for the nine-month period ended September 30, 2023 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, at fair value, respectively.

At September 30, 2023, the Company transferred $21.3 million of assets from Level 3 to Level 2 and $57.3 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.

Nine-Month Period Ended September 30, 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 September 30, 2022
Assets:
Securities, at fair value:
Agency RMBS	$	9,710	$	(1,595)	$	9	$	(1,421)	$	840	$	(1,074)	$	3,393	$	(2,043)	$	7,819
Non-Agency RMBS	134,888		743		2,167		(14,655)		18,614		(26,541)		18,916		(28,347)		105,785
CMBS	13,134		97		3,050		(2,142)		620		(5,297)		5,470		(6,263)		8,669
CLOs	26,678		(2,048)		6,231		(2,859)		—		(13,659)		8,205		(5,260)		17,288
Asset-backed securities backed by consumer loans	73,108		(4,528)		18		(8,250)		49,300		(34,080)		—		—		75,568
Corporate debt securities	5,198		—		1,666		(1,828)		10,703		(12,137)		—		—		3,602
Corporate equity securities	7,556		—		1,659		(1,176)		5,768		(2,638)		—		—		11,169
Loans, at fair value:
Residential mortgage loans	2,016,228		(12,405)		56		(297,423)		2,332,444		(690,090)		—		—		3,348,810
Commercial mortgage loans	326,197		—		22		(1,170)		411,693		(272,229)		—		—		464,513
Consumer loans	62,365		(2,885)		(1,870)		615		11,505		(63,692)		—		—		6,038
Corporate loan	10,531		—		(1,000)		—		2,425		(8,422)		—		—		3,534
Investment in unconsolidated entities, at fair value	195,643		—		(177)		(54,107)		232,838		(202,818)		—		—		171,379
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities	303		—		(853)		615		12		—		—		—		77
Total assets, at fair value	$	2,881,539	$	(22,621)	$	10,978	$	(383,801)	$	3,076,762	$	(1,332,677)	$	35,984	$	(41,913)	$	4,224,251
Liabilities:
Financial derivatives–liabilities, at fair value:
Total return swaps	$	—	$	—	$	—	$	(37)	$	—	$	—	$	—	$	—	$	(37)
Other secured borrowings, at fair value(3)	$	(984,168)	$	(397)	$	—	$	202,329	$	271,817	$	(1,125,410)	$	—	$	—	$	(1,635,829)
Senior notes, at fair value	—		—		—		16,485		—		(210,000)		—		—		(193,515)
Total liabilities, at fair value	$	(984,168)	$	(397)	$	—	$	218,777	$	271,817	$	(1,335,410)	$	—	$	—	$	(1,829,381)

(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.

Company at September 30, 2022, change in net unrealized gain (loss) of $(31.8) million, $(297.6) million, $(61.0) million, $0.6 million, $(37) thousand, $202.3 million, and $16.5 million, for the nine-month period ended September 30, 2022 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, financial derivatives–liabilities, other secured borrowings, and Senior notes, at fair value, respectively.

At September 30, 2022, the Company transferred $41.9 million of assets from Level 3 to Level 2 and $36.0 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 September 30, 2023 and December 31, 2022:


	As of
	September 30, 2023				December 31, 2022
(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
Other financial instruments
Assets:
Cash and cash equivalents	$	174,664	$	174,664	$	217,053	$	217,053
Restricted cash	1,604		1,604		4,816		4,816
Due from brokers	38,870		38,870		36,761		36,761
Reverse repurchase agreements	175,197		175,197		226,444		226,444
Liabilities:
Repurchase agreements	2,573,043		2,573,043		2,609,685		2,609,685
Other secured borrowings	301,131		301,131		276,058		276,058
Due to brokers	80,180		80,180		34,507		34,507

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.

- 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