FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Summary of fair value

The carrying values and estimated fair values of the Company’s financial instruments, which are both reported at fair value on a recurring basis (as indicated) or amortized cost/par, at December 31, 2019 and 2018 are as follows ($ in thousands):

December 31, 2019

											Weighted Average
	Outstanding Face Amount			Amortized Cost Basis/Purchase Price			Fair Value			Fair Value Method	Yield %		Remaining Maturity/Duration (years)
Assets:
CMBS(1)	$	1,640,597		$	1,640,905		$	1,644,322		Internal model, third-party inputs	3.08	%	2.41
CMBS interest-only(1)	1,559,160		(2)	28,553			29,146			Internal model, third-party inputs	3.04	%	2.53
GNMA interest-only(3)	109,783		(2)	1,982			1,851			Internal model, third-party inputs	4.59	%	2.77
Agency securities(1)	629			640			637			Internal model, third-party inputs	1.73	%	1.83
GNMA permanent securities(1)	31,461			31,681			32,369			Internal model, third-party inputs	3.17	%	1.93
Equity securities(3)	N/A			12,848			12,980			Observable market prices	N/A		N/A
Mortgage loan receivables held for investment, net, at amortized cost:
Mortgage loan receivables held for investment, net, at amortized cost	3,277,596			3,257,036			3,273,219			Discounted Cash Flow(4)	6.94	%	1.43
Provision for loan losses	N/A			(20,500		)	(20,500		)	(5)	N/A		N/A
Mortgage loan receivables held for sale	122,748			122,325			124,989			Internal model, third-party inputs(6)	4.20	%	9.99
FHLB stock(7)	61,619			61,619			61,619			(7)	4.75	%	N/A
Nonhedge derivatives(1)(8)	340,200			N/A			693			Counterparty quotations	N/A		0.25
Liabilities:
Repurchase agreements - short-term	1,781,253			1,781,253			1,781,253			Discounted Cash Flow(9)	2.50	%	0.19
Repurchase agreements - long-term	34,681			34,681			34,681			Discounted Cash Flow(10)	2.81	%	1.41
Mortgage loan financing	807,854			812,606			838,766			Discounted Cash Flow(10)	4.91	%	1.51
Borrowings from the FHLB	1,073,500			1,073,500			1,080,354			Discounted Cash Flow	2.33	%	2.08
Senior unsecured notes	1,166,201			1,157,833			1,208,860			Broker quotations, pricing services	5.39	%	3.28
Nonhedge derivatives(1)(8)	69,571			N/A			—			Counterparty quotations	N/A		0.36

(1) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.

(2) Represents notional outstanding balance of underlying collateral.

(3) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.

(4) Fair value for floating rate mortgage loan receivables, held for investment is estimated to approximate the outstanding face amount given the short interest rate reset risk (30 days) and no significant change in credit risk. Fair value for fixed rate mortgage loan receivables, held for investment is measured using a discounted cash flow model.

(5) Fair value is estimated to equal par value.

(6) Fair value for mortgage loan receivables, held for sale is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.

(7) Fair value of the FHLB stock approximates outstanding face amount as the Company’s captive insurance subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.

(8) The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

(9) Fair value for repurchase agreement liabilities and CLO debt is estimated to approximate carrying amount primarily due to the short interest rate reset risk (30 days) of the financings and the high credit quality of the assets collateralizing these positions. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.

(10) For repurchase agreements - long term and mortgage loan financing, the carrying value approximates the fair value discounting the expected cash flows at current market rates. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.

December 31, 2018  

											Weighted Average
	Outstanding Face Amount			Amortized Cost Basis			Fair Value			Fair Value Method	Yield %		Remaining Maturity/Duration (years)
Assets:
CMBS(1)	$	1,258,819		$	1,257,801		$	1,252,640		Internal model, third-party inputs	3.14	%	2.33
CMBS interest-only(1)	2,373,936		(2)	55,534			55,691			Internal model, third-party inputs	2.80	%	2.69
GNMA interest-only(3)	135,932		(2)	2,862			2,648			Internal model, third-party inputs	6.30	%	4.11
Agency securities(1)	668			682			662			Internal model, third-party inputs	1.83	%	2.36
GNMA permanent securities(1)	32,633			32,889			33,064			Internal model, third-party inputs	3.76	%	5.03
Corporate bonds(1)	55,305			54,257			53,871			Internal model, third-party inputs	5.04	%	2.51
Equity securities(3)	N/A			13,154			11,550			Observable market prices	N/A		N/A
Mortgage loan receivables held for investment, net, at amortized cost:
Mortgage loan receivables held for investment, net, at amortized cost	3,340,381			3,318,390			3,324,588			Discounted Cash Flow(4)	7.84	%	1.32
Provision for loan losses	N/A			(17,900		)	(17,900		)	(5)	N/A		N/A
Mortgage loan receivables held for sale	181,905			182,439			187,870			Internal model, third-party inputs(6)	5.46	%	9.75
FHLB stock(7)	57,915			57,915			57,915			(7)	4.50	%	N/A
Nonhedge derivatives(1)(8)	—			N/A			—			Counterparty quotations	N/A		0.00
Liabilities:
Repurchase agreements - short-term	436,957			436,957			436,957			Discounted Cash Flow(9)	3.42	%	0.23
Repurchase agreements - long-term	226,728			226,728			226,728			Discounted Cash Flow(10)	3.47	%	1.73
Mortgage loan financing	738,825			743,902			735,662			Discounted Cash Flow(10)	5.09	%	2.61
CLO debt	601,543			601,543			601,543			Discounted Cash Flow(9)	4.41	%	9.40
Participation Financing - Mortgage Loan Receivable	2,453			2,453			2,453			Discounted Cash Flow(11)	17.00	%	0.43
Borrowings from the FHLB	1,286,000			1,286,000			1,286,664			Discounted Cash Flow	2.55	%	2.46
Senior unsecured notes	1,166,201			1,154,991			1,111,288			Broker quotations, pricing services	5.39	%	4.28
Nonhedge derivatives(1)(8)	578,971			N/A			975			Counterparty quotations	N/A		0.25

(1) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.

(2) Represents notional outstanding balance of underlying collateral.

(3) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.

(4) Fair value for floating rate mortgage loan receivables, held for investment is estimated to approximate the outstanding face amount given the short interest rate reset risk (30 days) and no significant change in credit risk. Fair value for fixed rate mortgage loan receivables, held for investment is measured using a discounted cash flow.

(5) Fair value is estimated to equal par value.

(6) Fair value for mortgage loan receivables, held for sale is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.

(7) Fair value of the FHLB stock approximates outstanding face amount as the Company’s captive insurance subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.

(8) The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

(9) Fair value for repurchase agreement liabilities and CLO debt is estimated to approximate carrying amount primarily due to the short interest rate reset risk (30 days) of the financings and the high credit quality of the assets collateralizing these positions. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.

(10) For repurchase agreements - long term and mortgage loan financing, the carrying value approximates the fair value discounting the expected cash flows at current market rates. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.

(11) Fair value for Participation Financing - Mortgage Loan Receivable approximates amortized cost as this is a loan participation to a third party.

Summary of financial assets and liabilities, both reported at fair value on a recurring basis or amortized cost/par

The following table summarizes the Company’s financial assets and liabilities, which are both reported at fair value on a recurring basis (as indicated) or amortized cost/par, at December 31, 2019 and 2018 ($ in thousands):

December 31, 2019

Financial Instruments Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
				Level 1		Level 2		Level 3			Total
Assets:
CMBS(1)	$	1,628,476		$	—	$	—	$	1,632,714		$	1,632,714
CMBS interest-only(1)	1,548,061		(2)	—		—		28,342			28,342
GNMA interest-only(3)	109,783		(2)	—		—		1,851			1,851
Agency securities(1)	629			—		—		637			637
GNMA permanent securities(1)	31,461			—		—		32,369			32,369
Equity securities	N/A			12,980		—		—			12,980
Nonhedge derivatives(4)	340,200			—		693		—			693
				$	12,980	$	693	$	1,695,913		$	1,709,586
Liabilities:
Nonhedge derivatives(4)	69,571			$	—	$	—	$	—		$	—
Financial Instruments Not Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
				Level 1		Level 2		Level 3			Total
Assets:
Mortgage loan receivable held for investment, net, at amortized cost:
Mortgage loans held by consolidated subsidiaries	$	3,277,597		$	—	$	—	$	3,273,219		$	3,273,219
Provision for loan losses	N/A			—		—		(20,500		)	(20,500		)
Mortgage loan receivable held for sale	122,748			—		—		124,989			124,989
CMBS(5)	12,121			—		—		11,608			11,608
CMBS interest-only(5)	11,099		(2)	—		—		804			804
FHLB stock	61,619			—		—		61,619			61,619
				$	—	$	—	$	3,451,739		$	3,451,739
Liabilities:
Repurchase agreements - short-term	1,781,253			$	—	$	—	$	1,781,253		$	1,781,253
Repurchase agreements - long-term	34,681			—		—		34,681			34,681
Mortgage loan financing	807,854			—		—		838,766			838,766
Borrowings from the FHLB	1,073,500			—		—		1,080,354			1,080,354
Senior unsecured notes	1,166,201			—		—		1,208,860			1,208,860
				$	—	$	—	$	4,943,914		$	4,943,914

(1) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity. 

(2) Represents notional outstanding balance of underlying collateral. 

(3) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings. 

(4) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.  The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

(5) Restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust, which are classified as held-to-maturity and reported at amortized cost.

December 31, 2018

Financial Instruments Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
				Level 1		Level 2		Level 3			Total
Assets:
CMBS(1)	$	1,246,609		$	—	$	—	$	1,241,334		$	1,241,334
CMBS interest-only(1)	2,362,747		(2)	—		—		54,789			54,789
GNMA interest-only(3)	135,932		(2)	—		—		2,648			2,648
Agency securities(1)	668			—		—		662			662
GNMA permanent securities(1)	32,633			—		—		33,064			33,064
Corporate bonds(1)	55,305			—		—		53,871			53,871
Equity securities	N/A			11,550		—		—			11,550
				$	11,550	$	—	$	1,386,368		$	1,397,918
Liabilities:
Nonhedge derivatives(4)	$	605,871		$	—	$	975	$	—		$	975
Financial Instruments Not Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
				Level 1		Level 2		Level 3			Total
Assets:
Mortgage loan receivable held for investment, net, at amortized cost:
Mortgage loans held by consolidated subsidiaries	$	3,340,381		$	—	$	—	$	3,324,588		$	3,324,588
Provision for loan losses	N/A			—		—		(17,900		)	(17,900		)
Mortgage loan receivables held for sale	181,905			—		—		187,870			187,870
CMBS(5)	12,210			—		—		11,306			11,306
CMBS interest-only(5)	11,189		(2)	—		—		902			902
FHLB stock	57,915			—		—		57,915			57,915
				$	—	$	—	$	3,564,681		$	3,564,681
Liabilities:
Repurchase agreements - short-term	436,957			$	—	$	—	$	436,957		$	436,957
Repurchase agreements - long-term	226,728			—		—		226,728			226,728
Mortgage loan financing	738,825			—		—		735,662			735,662
CLO debt	601,543			—		—		601,543			601,543
Participation Financing - Mortgage Loan Receivable	2,453			—		—		2,453			2,453
Borrowings from the FHLB	1,286,000			—		—		1,286,664			1,286,664
Senior unsecured notes	1,166,201			—		—		1,111,288			1,111,288
				$	—	$	—	$	4,401,295		$	4,401,295

 

(1) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity. 

(2) Represents notional outstanding balance of underlying collateral. 

(3) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings. 

(4) Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.  The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

(5)

Restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust, which are classified as held-to-maturity and reported at amortized cost.

Schedule of changes in Level 3 of financial instruments

The following table summarizes changes in Level 3 financial instruments reported at fair value on the consolidated statements of financial condition for the years ended December 31, 2019 and 2018 ($ in thousands):

	Year Ended December 31,
Level 3	2019			2018
Balance at January 1,	$	1,398,576		$	1,106,517
Transfer from level 2	—			—
Purchases	1,627,063			756,449
Sales	(850,513		)	(322,979		)
Paydowns/maturities	(491,790		)	(109,446		)
Amortization of premium/discount	(12,185		)	(21,473		)
Unrealized gain/(loss)	10,014			(4,586		)
Realized gain/(loss) on sale(1)	14,748			(5,906		)
Balance at December 31,	$	1,695,913		$	1,398,576

(1) Includes realized losses on securities recorded as other than temporary impairments.

Schedule of quantitative information

The following is quantitative information about significant unobservable inputs in our Level 3 measurements for those assets and liabilities measured at fair value on a recurring basis ($ in thousands):

December 31, 2019

Financial Instrument	Carrying Value			Valuation Technique	Unobservable Input	Minimum		Weighted Average		Maximum
CMBS(1)	$	1,632,714		Discounted cash flow	Yield (4)	—	%	3.11	%	19.92	%
					Duration (years)(5)	0.00		1.63		6.87
CMBS interest-only(1)	28,342		(2)	Discounted cash flow	Yield (4)	1.57	%	3.93	%	7.62	%
					Duration (years)(5)	0.26		2.47		3.51
					Prepayment speed (CPY)(5)	100.00		97.24		100.00
GNMA interest-only(3)	1,851		(2)	Discounted cash flow	Yield (4)	(4.82	)%	15.13	%	44.5	%
					Duration (years)(5)	0.85		2.90		13.69
					Prepayment speed (CPJ)(5)	5.00		12.36		35.00
Agency securities(1)	637			Discounted cash flow	Yield (4)	—	%	1.7	%	2.16	%
					Duration (years)(5)	0.00		2.30		2.92
GNMA permanent securities(1)	32,369			Discounted cash flow	Yield (4)	56.56	%	166.79	%	410.00	%
					Duration (years)(5)	2.60		3.61		6.49
Total	$	1,695,913

(1) CMBS, CMBS interest-only securities, Agency securities, GNMA construction securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.

(2) The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.

(3) Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.

Sensitivity of the Fair Value to Changes in the Unobservable Inputs

(4) Significant increase (decrease) in the unobservable input in isolation would result in significantly lower (higher) fair value measurement.

(5) Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (lower or higher) fair value measurement depending on the structural features of the security in question.

December 31, 2018

Financial Instrument	Carrying Value			Valuation Technique	Unobservable Input	Minimum		Weighted Average		Maximum
CMBS(1)	$	1,252,640		Discounted cash flow	Yield (3)	—	%	3.54	%	21.67	%
					Duration (years)(4)	0.00		2.50		7.78
CMBS interest-only(1)	55,691		(2)	Discounted cash flow	Yield (3)	0.87	%	4.71	%	8.11	%
					Duration (years)(4)	0.14		2.96		6.86
					Prepayment speed (CPY)(4)	100.00		100.00		100.00
GNMA interest-only(3)	2,648		(2)	Discounted cash flow	Yield (4)	1.21	%	5.54	%	10.21	%
					Duration (years)(5)	0.04		3.13		4.77
					Prepayment speed (CPJ)(5)	5.00		6.58		15.00
Agency securities(1)	662			Discounted cash flow	Yield (4)	—	%	2.1	%	2.84	%
					Duration (years)(5)	0.00		2.83		3.82
GNMA permanent securities(1)	33,064			Discounted cash flow	Yield (4)	—	%	3.51	%	4	%
					Duration (years)(5)	0.00		5.62		5.88
Corporate bonds(1)	53,871			Discounted cash flow	Yield (4)	5.3	%	5.35	%	5.46	%
					Duration (years)(5)	1.94		2.19		2.70
Total	$	1,398,576

(1) CMBS, CMBS interest-only securities, Agency securities, GNMA construction securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.

(2) The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.

(3) Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.

Sensitivity of the Fair Value to Changes in the Unobservable Inputs

(4) Significant increase (decrease) in the unobservable input in isolation would result in significantly lower (higher) fair value measurement.

(5)

Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (lower or higher) fair value measurement depending on the structural features of the security in question.