Commercial Mortgage Residual Interests:

As of December 31, 2015, NNN held the commercial mortgage residual interests (“Residuals”) from seven loan securitizations. In 2016, the loan servicer of five of the securitizations exercised its clean-up call option. These clean-up calls allowed the servicers to purchase all of the trusts’ assets, thereby terminating future cash distributions payable to NNN as the holder of these residual interests. During the years ended December 31 2016, 2015 and 2014, NNN recorded an other than temporary valuation impairment as a reduction of earnings from operations. The other than temporary valuation impairment recorded during the year ended December 31, 2016 related to the execution of the clean-up call option on the five securitizations, as well as the fair value adjustment on the remaining two securitizations.

Unrealized gains and losses are reported as other comprehensive income in stockholders’ equity and other than temporary losses as a result of a change in the timing or amount of estimated cash flows are recorded as an other than temporary valuation impairment. The following table summarizes the recognition of unrealized gains and/or losses recorded as other comprehensive income as well as other than temporary valuation impairment (dollars in thousands):



	2016			2015			2014
Unrealized gains (losses), net	$	(182	)	$	(585	)	$	875
Other than temporary valuation impairment	6,830			531			256

As of December 31, 2016, the remaining two Residuals are recorded at fair value. Certain valuation assumptions are made based on the expected timing of future cash flows relating to the Residuals. The following table summarizes the key assumptions used in determining the value of the Residuals as of December 31 (dollars in thousands):



	2016			2015
Discount rate	20		%	20		%
Average life equivalent CPR⁽¹⁾ speeds range	0.87% to 21.56% CPR			0.87% to 21.73% CPR
Foreclosures:
Frequency curve default model	0% - 1.33% range			0.72% - 1.57% range
Loss severity of loans in foreclosure	20		%	20		%
Yield:
LIBOR	Forward 3-month curve			Forward 3-month curve
Prime	Forward curve			Forward curve
Fair value at December 31	$	36		$	11,115


⁽¹⁾	Conditional prepayment rate