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Mortgage-Backed and Credit Risk Transfer Securities (Tables)
 9 Months Ended
Sep. 30, 2016
Investments, Debt and Equity Securities [Abstract]  
Summary of Investment Portfolio
The following tables summarize the Company’s MBS and GSE CRT portfolio by asset type as of September 30, 2016 and December 31, 2015.
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ in thousands
Principal/ Notional
Balance
 
Unamortized
Premium
(Discount)
 
Amortized
Cost
 
Unrealized
Gain/
(Loss), net
 
Fair
Value
 
Net
Weighted
Average
Coupon (1)
 
Period-
end
Weighted
Average
Yield (2)
 
Quarterly
Weighted
Average
Yield (3)
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
3,453,364

 
153,698

 
3,607,062

 
30,890

 
3,637,952

 
3.13
%
 
2.21
%
 
1.86
%
30 year fixed-rate
3,331,034

 
215,594

 
3,546,628

 
88,937

 
3,635,565

 
4.21
%
 
2.72
%
 
2.55
%
ARM*
321,140

 
2,917

 
324,057

 
7,896

 
331,953

 
2.71
%
 
2.62
%
 
2.18
%
Hybrid ARM
2,593,484

 
46,411

 
2,639,895

 
44,213

 
2,684,108

 
2.71
%
 
2.55
%
 
2.06
%
Total Agency pass-through
9,699,022

 
418,620

 
10,117,642

 
171,936

 
10,289,578

 
3.38
%
 
2.49
%
 
2.17
%
Agency-CMO(4)
1,611,750

 
(1,257,836
)
 
353,914

 
10,122

 
364,036

 
2.22
%
 
3.25
%
 
2.42
%
Non-Agency RMBS(5)(6)(7)
4,078,976

 
(2,065,395
)
 
2,013,581

 
95,534

 
2,109,115

 
2.18
%
 
5.06
%
 
5.06
%
GSE CRT(8)(9)
591,460

 
20,580

 
612,040

 
31,018

 
643,058

 
1.53
%
 
0.83
%
 
0.98
%
CMBS(10)(11)
3,076,101

 
(559,789
)
 
2,516,312

 
151,978

 
2,668,290

 
3.89
%
 
4.33
%
 
4.28
%
Total
19,057,309

 
(3,443,820
)
 
15,613,489

 
460,588

 
16,074,077

 
3.05
%
 
3.07
%
 
2.84
%
* Adjustable-rate mortgage ("ARM")
 
(1)
Net weighted average coupon as of September 30, 2016 is presented net of servicing and other fees.
(2)
Period-end weighted average yield is based on amortized cost as of September 30, 2016 and incorporates future prepayment and loss assumptions.
(3)
Quarterly weighted average portfolio yield for the period was calculated by dividing interest income, including amortization of premiums and discounts, by the Company's average of the amortized cost of the investments. All yields are annualized.
(4)
Agency collateralized mortgage obligation ("Agency-CMO") includes interest-only securities ("Agency IO"), which represent 83.5% of principal/notional balance, 24.0% of amortized cost and 24.3% of fair value.
(5)
Non-Agency RMBS held by the Company is 46.8% fixed rate, 46.1% variable rate, and 7.1% floating rate based on fair value.
(6)
Of the total discount in non-Agency RMBS, $261.7 million is non-accretable based on the Company's estimated future cash flows of the securities.
(7)
Non-Agency RMBS includes interest-only securities which represent 44.0% of principal/notional balance, 1.5% of amortized cost and 1.4% of fair value.
(8)
The Company has elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 3.5% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.
(9)
GSE CRT weighted average coupon and weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option recorded as realized and unrealized credit derivative income (loss), net.
(10)
CMBS includes interest-only securities which represent 20.2% of principal/notional balance, 0.9% of amortized cost and 0.9% of fair value.
(11)
The Company has elected the fair value option for CMBS purchased on or after September 1, 2016 which represent 0.4% of principal/notional balance, 0.6% of amortized cost and 0.5% of fair value.

December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ in thousands
Principal/Notional
Balance
 
Unamortized
Premium
(Discount)
 
Amortized
Cost
 
Unrealized
Gain/
(Loss), net
 
Fair
Value
 
Net
Weighted
Average
Coupon (1)
 
Period-
end
Weighted
Average
Yield (2)
 
Quarterly
Weighted
Average
Yield (3)
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
1,527,877

 
72,389

 
1,600,266

 
10,664

 
1,610,930

 
3.72
%
 
2.47
%
 
2.40
%
30 year fixed-rate
3,796,091

 
249,285

 
4,045,376

 
18,581

 
4,063,957

 
4.24
%
 
2.81
%
 
2.85
%
ARM
417,424

 
4,625

 
422,049

 
3,976

 
426,025

 
2.72
%
 
2.58
%
 
2.26
%
Hybrid ARM
3,240,967

 
63,324

 
3,304,291

 
5,234

 
3,309,525

 
2.73
%
 
2.56
%
 
2.22
%
Total Agency pass-through
8,982,359

 
389,623

 
9,371,982

 
38,455

 
9,410,437

 
3.54
%
 
2.65
%
 
2.53
%
Agency-CMO(4)
1,774,621

 
(1,386,284
)
 
388,337

 
482

 
388,819

 
2.23
%
 
4.29
%
 
3.42
%
Non-Agency RMBS(5)(6)(7)
4,965,978

 
(2,363,799
)
 
2,602,179

 
90,308

 
2,692,487

 
2.20
%
 
5.11
%
 
4.90
%
GSE CRT(8)(9)
657,500

 
22,593

 
680,093

 
(21,865
)
 
658,228

 
1.32
%
 
0.72
%
 
0.62
%
CMBS(10)
3,429,655

 
(558,749
)
 
2,870,906

 
45,058

 
2,915,964

 
3.95
%
 
4.30
%
 
4.35
%
Total
19,810,113

 
(3,896,616
)
 
15,913,497

 
152,438

 
16,065,935

 
3.08
%
 
3.31
%
 
3.16
%
 
(1)
Net weighted average coupon as of December 31, 2015 is presented net of servicing and other fees.
(2)
Period-end weighted average yield is based on amortized cost as of December 31, 2015 and incorporates future prepayment and loss assumptions.
(3)
Quarterly weighted average portfolio yield for the period was calculated by dividing interest income, including amortization of premiums and discounts, by the Company's average of the amortized cost of the investments. All yields are annualized.
(4)
Agency collateralized mortgage obligation ("Agency CMO") includes interest-only securities ("Agency IO"), which represent 84.4% of principal (notional) balance, 27.5% of amortized cost and 27.6% of fair value.
(5)
Non-Agency RMBS held by the Company is 48.4% variable rate, 45.2% fixed rate, and 6.4% floating rate based on fair value.
(6)
Of the total discount in non-Agency RMBS, $281.6 million is non-accretable based on the Company's estimated future cash flows of the securities.
(7)
Non-Agency RMBS includes interest-only securities, which represent 42.1% of principal/notional balance, 1.3% of amortized cost and1.3% of fair value.
(8)
The Company has elected the fair value option for GSE CRT purchased on or after August 24, 2015, which represent 1.9% of the balance based on fair value. As a result, GSE CRT accounted for under the fair value option are not bifurcated between the debt host contract and the embedded derivative.
(9)
GSE CRT weighted average coupon and weighted average yield excludes coupon interest associated with embedded derivatives not accounted for under the fair value option recorded as realized and unrealized credit derivative income (loss), net.
(10)
CMBS includes interest-only securities and commercial real estate mezzanine loan pass-through certificates, which represent 0.9% and 0.7% of the balance based on fair value, respectively.
The components of the carrying value of the Company’s MBS and GSE CRT portfolio at September 30, 2016 and December 31, 2015 are presented below. 
$ in thousands
September 30, 2016
 
December 31, 2015
Principal balance
19,057,309

 
19,810,113

Unamortized premium
512,631

 
495,539

Unamortized discount
(3,956,451
)
 
(4,392,155
)
Gross unrealized gains
485,503

 
303,890

Gross unrealized losses
(24,915
)
 
(151,452
)
Fair value
16,074,077

 
16,065,935
Components of Non-Agency RMBS Portfolio by Asset Type
The following table summarizes the Company's non-Agency RMBS portfolio by asset type based on fair value as of September 30, 2016 and December 31, 2015.
$ in thousands
September 30, 2016
 
% of Non-Agency
 
December 31, 2015
 
% of Non-Agency
Prime
938,893

 
44.5
%
 
1,081,428

 
40.2
%
Alt-A
465,127

 
22.1
%
 
544,306

 
20.2
%
Re-REMIC
406,703

 
19.3
%
 
663,853

 
24.7
%
Subprime/reperforming
298,392

 
14.1
%
 
402,900

 
14.9
%
Total Non-Agency
2,109,115

 
100.0
%
 
2,692,487

 
100.0
%
Components of Senior Re-REMIC at Fair Value
The following table summarizes the credit enhancement provided to the Company's re-securitization of real estate mortgage investment conduit ("Re-REMIC") holdings as of September 30, 2016 and December 31, 2015.
  
Percentage of Re-REMIC Holdings at Fair Value
Re-REMIC Subordination(1)
September 30, 2016
 
December 31, 2015
0% - 10%
15.9
%
 
11.0
%
10% - 20%
7.3
%
 
5.6
%
20% - 30%
13.5
%
 
12.7
%
30% - 40%
16.1
%
 
20.8
%
40% - 50%
28.5
%
 
32.8
%
50% - 60%
16.1
%
 
13.3
%
60% - 70%
2.6
%
 
3.8
%
Total
100.0
%
 
100.0
%
 
(1)
Subordination refers to the credit enhancement provided to the Re-REMIC tranche held by the Company by any junior Re-REMIC tranche or tranches in a resecuritization. This figure reflects the percentage of the balance of the underlying securities represented by any junior tranche or tranches at the time of resecuritization. Generally, principal losses on the underlying securities in excess of the subordination amount would result in principal losses on the Re-REMIC tranche held by the Company. 32.6% of the Company's Re-REMIC holdings are not senior tranches.
Fair Value of Mortgage-Backed Securities and GSE CRT Portfolio According to Weighted Average Life Classification
The following table summarizes the Company’s MBS and GSE CRT portfolio according to estimated weighted average life classifications as of September 30, 2016 and December 31, 2015. 
$ in thousands
September 30, 2016
 
December 31, 2015
Less than one year
238,817

 
427,678

Greater than one year and less than five years
10,957,834

 
6,237,547

Greater than or equal to five years
4,877,426

 
9,400,710

Total
16,074,077

 
16,065,935
Unrealized Losses and Estimated Fair Value of MBS and GSE CRT by Length of Time
The following tables present the estimated fair value and gross unrealized losses of the Company's MBS and GSE CRTs by length of time that such securities have been in a continuous unrealized loss position at September 30, 2016 and December 31, 2015.
September 30, 2016
  
Less than 12 Months
 
12 Months or More
 
Total
$ in thousands
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
785,124

 
(2,384
)
 
36

 
69,916

 
(680
)
 
14

 
855,040

 
(3,064
)
 
50

30 year fixed-rate
36,352

 
(27
)
 
5

 
891,280

 
(5,546
)
 
37

 
927,632

 
(5,573
)
 
42

ARM
—

 
—

 
—

 
1,360

 
(36
)
 
1

 
1,360

 
(36
)
 
1

Hybrid ARM
89,303

 
(217
)
 
7

 
254

 
(4
)
 
2

 
89,557

 
(221
)
 
9

Total Agency pass-through
910,779

 
(2,628
)
 
48

 
962,810

 
(6,266
)
 
54

 
1,873,589

 
(8,894
)
 
102

Agency-CMO (1)
24,918

 
(1,255
)
 
15

 
26,085

 
(759
)
 
4

 
51,003

 
(2,014
)
 
19

Non-Agency RMBS
582,750

 
(7,881
)
 
63

 
265,241

 
(3,824
)
 
27

 
847,991

 
(11,705
)
 
90

GSE CRT (2)
—

 
—

 
—

 
36,080

 
(947
)
 
3

 
36,080

 
(947
)
 
3

CMBS (3)
68,209

 
(318
)
 
10

 
61,382

 
(1,037
)
 
6

 
129,591

 
(1,355
)
 
16

Total
1,586,656

 
(12,082
)
 
136

 
1,351,598

 
(12,833
)
 
94

 
2,938,254

 
(24,915
)
 
230

(1)
Fair value includes unrealized losses on Agency IO of $1.7 million and unrealized losses on CMO of $346,000.
(2)
Fair value includes unrealized losses on both the debt host contract and the embedded derivative.
(3)
Amounts disclosed includes CMBS with a fair value of $10.7 million for which the fair value option has been elected. Such securities have unrealized losses of $36,000.
December 31, 2015
  
Less than 12 Months
 
12 Months or More
 
Total
$ in thousands
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
 
Fair
Value
 
Unrealized
Losses
 
Number
of
Securities
Agency RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 year fixed-rate
600,480

 
(8,081
)
 
33

 
77,506

 
(1,482
)
 
6

 
677,986

 
(9,563
)
 
39

30 year fixed-rate
776,065

 
(14,827
)
 
32

 
1,120,391

 
(39,497
)
 
47

 
1,896,456

 
(54,324
)
 
79

ARM
200,863

 
(501
)
 
11

 
—

 
—

 
—

 
200,863

 
(501
)
 
11

Hybrid ARM
1,913,872

 
(17,082
)
 
111

 
—

 
—

 
—

 
1,913,872

 
(17,082
)
 
111

Total Agency pass-through
3,491,280

 
(40,491
)
 
187

 
1,197,897

 
(40,979
)
 
53

 
4,689,177

 
(81,470
)
 
240

Agency-CMO (1)
166,754

 
(3,296
)
 
14

 
9,118

 
(6,934
)
 
9

 
175,872

 
(10,230
)
 
23

Non-Agency RMBS
872,575

 
(7,286
)
 
66

 
316,010

 
(10,699
)
 
20

 
1,188,585

 
(17,985
)
 
86

GSE CRT (2)
340,116

 
(10,050
)
 
16

 
120,877

 
(13,605
)
 
7

 
460,993

 
(23,655
)
 
23

CMBS
1,224,985

 
(17,328
)
 
85

 
31,533

 
(784
)
 
2

 
1,256,518

 
(18,112
)
 
87

Total
6,095,710

 
(78,451
)
 
368

 
1,675,435

 
(73,001
)
 
91

 
7,771,145

 
(151,452
)
 
459


(1)
Fair value includes unrealized losses on Agency IO of $8.3 million and unrealized losses on CMO of $1.9 million.
(2)
Fair value includes unrealized losses on both the debt host contract and the embedded derivative.
Changes in other than temporary impairment included in earnings
The following table presents the changes in OTTI included in earnings for the three and nine months ended September 30, 2016 and 2015.
$ in thousands
Three Months 
 ended 
 September 30, 2016
 
Three Months 
 ended 
 September 30, 2015
 
Nine Months ended 
 September 30, 2016
 
Nine Months ended 
 September 30, 2015
Cumulative credit loss at beginning of period
7,208

 
—

 
—

 
—

Additions:
—

 
—

 
—

 
—

Other-than-temporary impairments not previously recognized
1,038

 
—

 
8,364

 
—

Increases related to other-than-temporary impairments on securities with previously recognized other-than-temporary impairments
118

 
—

 
—

 
—

Cumulative credit loss at end of period
8,364

 
—

 
8,364

 
—
Impact of MBS and GSE CRT on Accumulated Other Comprehensive Income
The following table summarizes the changes in accumulated other comprehensive income (loss) related to the Company’s GSE CRT debt host contracts and available-for-sale MBS for the three and nine months ended September 30, 2016 and 2015.  The Company reclassifies unrealized gains and losses from other comprehensive income to gain (loss) on investments, net when it sells investments.
The table excludes MBS and GSE CRT that are accounted for under the fair value option.
$ in thousands
Three Months 
 ended 
 September 30, 2016
 
Three Months 
 ended 
 September 30, 2015
 
Nine Months ended 
 September 30, 2016
 
Nine Months ended 
 September 30, 2015
Accumulated other comprehensive income (loss) from MBS and GSE CRT securities:
 
 
 
 
 
 
 
Unrealized gain (loss) on MBS and GSE CRT at beginning of period
404,794

 
298,251

 
177,799

 
376,336

Unrealized gain (loss) on MBS and GSE CRT
32,015

 
42,933

 
270,591

 
(30,611
)
Reclassification of unrealized (gain) loss on sale of MBS and GSE CRT to gain (loss) on investments, net
—

 
389

 
(11,581
)
 
(4,152
)
Balance at the end of period
436,809

 
341,573

 
436,809

 
341,573
Realized Gain (Loss) on Investments
The following table summarizes the components of the Company's total gain (loss) on investments, net for the three and nine months ended September 30, 2016 and 2015.
$ in thousands
Three Months 
 ended 
 September 30, 2016
 
Three Months 
 ended 
 September 30, 2015
 
Nine Months ended 
 September 30, 2016
 
Nine Months ended 
 September 30, 2015
Gross realized gain on sale of investments
144

 
991

 
14,196

 
5,498

Gross realized loss on sale of investments
(1,449
)
 
(1,404
)
 
(3,920
)
 
(1,370
)
Other-than-temporary impairment losses
(1,156
)
 
—

 
(8,364
)
 
—

Net unrealized gains and losses on MBS accounted for under the fair value option
(5,412
)
 
(1,554
)
 
2,530

 
6,891

Net unrealized gains and losses on GSE CRT accounted for under the fair value option
1,181

 
—

 
1,418

 
—

Net unrealized gains and losses on U.S. Treasury securities accounted for as trading securities
(463
)
 
—

 
—

 
—

Total gain (loss) on investments, net
(7,155
)
 
(1,967
)
 
5,860

 
11,019
Components of MBS and GSE CRT Interest Income
The following table presents components of interest income recognized on the Company’s MBS and GSE CRT portfolio for the three and nine months ended September 30, 2016 and 2015. GSE CRT interest income excludes coupon interest associated with embedded derivatives not accounted for under the fair value option recorded as realized and unrealized credit derivative income (loss), net.
For the three months ended September 30, 2016
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
88,615

 
(31,773
)
 
56,842

Non-Agency
22,775

 
3,509

 
26,284

GSE CRT
2,268

 
(765
)
 
1,503

CMBS
29,872

 
(2,788
)
 
27,084

Other
795

 
(41
)
 
754

Total
144,325

 
(31,858
)
 
112,467

For the three months ended September 30, 2015
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
93,366

 
(32,153
)
 
61,213

Non-Agency
26,761

 
4,452

 
31,213

GSE CRT
1,663

 
(782
)
 
881

CMBS
38,350

 
(3,342
)
 
35,008

Other
(10
)
 
—

 
(10
)
Total
160,130

 
(31,825
)
 
128,305

For the nine months ended September 30, 2016
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
258,826

 
(84,235
)
 
174,591

Non-Agency
72,751

 
9,645

 
82,396

GSE CRT
6,601

 
(2,307
)
 
4,294

CMBS
93,612

 
(8,567
)
 
85,045

Other
1,305

 
(58
)
 
1,247

Total
433,095

 
(85,522
)
 
347,573

For the nine months ended September 30, 2015
$ in thousands
Coupon
Interest
 
Net (Premium
Amortization)/Discount
Accretion
 
Interest
Income
Agency
282,132

 
(93,840
)
 
188,292

Non-Agency
85,854

 
13,445

 
99,299

GSE CRT
4,849

 
(2,312
)
 
2,537

CMBS
113,862

 
(8,193
)
 
105,669

Other
47

 
—

 
47

Total
486,744

 
(90,900
)
 
395,844