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Fair Value of Financial Instruments (Tables)
3 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measured on Recurring Basis
The following tables present our assets and liabilities measured at fair value on a recurring basis.
 
March 31, 2017
 
 
 
Fair Value Measurements Using:
 
 
$ in thousands
Level 1
 
Level 2
 
Level 3
 
NAV as a practical expedient(3)
 
Total at
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
Mortgage-backed and credit risk transfer securities(1)(2)

 
15,889,854

 
31,243

 

 
15,921,097

Derivative assets

 
5,799

 

 

 
5,799

Other assets(4)
4,017

 

 

 
33,336

 
37,353

Total assets
4,017

 
15,895,653

 
31,243

 
33,336

 
15,964,249

Liabilities:
 
 
 
 
 
 
 
 
 
Derivative liabilities

 
45,623

 

 

 
45,623

Total liabilities

 
45,623

 

 

 
45,623

 
December 31, 2016
 
 
 
Fair Value Measurements Using:
 
 
$ in thousands
Level 1
 
Level 2
 
Level 3
 
NAV as a practical expedient(3)
 
Total at
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
Mortgage-backed and credit risk transfer securities(1)(2)

 
14,964,236

 
17,095

 

 
14,981,331

Derivative assets

 
3,186

 

 

 
3,186

Other assets(4)
500

 

 

 
33,301

 
33,801

Total assets
500

 
14,967,422

 
17,095

 
33,301

 
15,018,318

Liabilities:
 
 
 
 
 
 
 
 
 
Derivative liabilities

 
134,228

 

 

 
134,228

Total liabilities

 
134,228

 

 

 
134,228

(1)
For more detail about the fair value of our MBS and GSE CRTs, refer to Note 4 - "Mortgage-Backed and Credit Risk Transfer Securities."
(2)
Our GSE CRTs purchased prior to August 24, 2015 are accounted for as hybrid financial instruments with an embedded derivative. The hybrid instruments consist of debt host contracts classified as Level 2 and embedded derivatives classified as Level 3. As of March 31, 2017, the net embedded derivative asset position of $31.2 million includes
$32.8 million of embedded derivatives in an asset position and $1.6 million of embedded derivatives in a liability position. As of December 31, 2016, the net embedded derivative liability position of $17.1 million includes $21.0 million of embedded derivatives in an asset position and $3.9 million of embedded derivatives in a liability position.
(3)
Investments in unconsolidated ventures are valued using the net asset value ("NAV") as a practical expedient and are not subject to redemption, although investors may sell or transfer their interest at the approval of the general partner of the underlying funds. As of March 31, 2017 and December 31, 2016, the weighted average remaining term of investments in unconsolidated ventures is 1.3 and 1.3 years, respectively.
(4)
Includes $4.0 million and $0.5 million of investment in an exchange-traded fund as of March 31, 2017 and December 31, 2016, respectively.
Embedded Derivatives Level 3 Roll Forward
The following table shows a reconciliation of the beginning and ending fair value measurements of our GSE CRT embedded derivatives, which we have valued utilizing Level 3 inputs:
 
Three Months Ended 
 March 31,
$ in thousands
2017
 
2016
Beginning balance
17,095

 
(25,722
)
Sales and settlements

 
920

Total net gains / (losses) included in net income:

 

Realized gains/(losses), net

 
(920
)
Unrealized gains/(losses), net(1)
14,148

 
3,016

Ending balance
31,243

 
(22,706
)

(1)
Included in realized and unrealized credit derivative income (loss), net in the condensed consolidated statements of operations are $14.1 million in net unrealized gains and $2.1 million in net unrealized gains attributable to assets still held as of March 31, 2017 and March 31, 2016, respectively. During the thee months ended March 31, 2016, we reversed $920,000 in net unrealized losses on securities sold during the period. We did not reverse any unrealized gains or losses on securities sold in the three months ended March 31, 2017.
Embedded Derivatives Fair Value Inputs
The following table summarizes significant unobservable inputs used in the fair value measurement of our GSE CRT embedded derivatives:
 
Fair Value at
 
Valuation
 
Unobservable
 
 
 
Weighted
$ in thousands
March 31, 2017
 
Technique
 
Input
 
Range
 
Average
GSE CRT Embedded Derivatives
31,243

 
Market Comparables, Vendor Pricing
 
Weighted average life
 
4.1 - 7.7
 
6.1
 
Fair Value at
 
Valuation
 
Unobservable
 
 
 
Weighted
$ in thousands
December 31, 2016
 
Technique
 
Input
 
Range
 
Average
GSE CRT Embedded Derivatives
17,095

 
Market Comparables, Vendor Pricing
 
Weighted average life
 
2.5 - 7.7
 
5.3
Carrying Value and Estimated Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the condensed consolidated balance sheets at March 31, 2017 and December 31, 2016:
 
March 31, 2017
 
December 31, 2016
$ in thousands
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial Assets
 
 
 
 
 
 
 
Commercial loans, held-for-investment
275,944

 
277,340

 
273,355

 
275,319

Other assets
74,250

 
74,250

 
74,250

 
74,250

Total
350,194

 
351,590

 
347,605

 
349,569

Financial Liabilities
 
 
 
 
 
 
 
Repurchase agreements
12,289,899

 
12,289,777

 
11,160,669

 
11,161,034

Secured loans
1,650,000

 
1,650,000

 
1,650,000

 
1,650,000

Exchangeable senior notes
248,530

 
252,188

 
397,041

 
400,000

Total
14,188,429

 
14,191,965

 
13,207,710

 
13,211,034