Real Estate Securities (Tables)

6 Months Ended

Jun. 30, 2014

The following table presents the fair values of our real estate securities by type at June 30, 2014 and December 31, 2013.


(In Thousands)	June 30, 2014		December 31, 2013
Trading	$	173,281	$	124,555
Available-for-sale		1,671,786		1,558,306

Total Real Estate Securities	$	1,845,067	$	1,682,861

Trading Securities by Collateral Type

The following table presents trading securities by collateral type at June 30, 2014 and December 31, 2013.


(In Thousands)	June 30, 2014		December 31, 2013
Senior Securities
Prime	$	159,311	$	110,505
Non-prime		8,380		9,070

Total Senior Securities		167,691		119,575

Subordinate Securities
Prime		5,590		4,980
Non-prime		-		-

Total Subordinate Securities		5,590		4,980


Total Trading Securities	$	173,281	$	124,555

Available for Sale Securities by Collateral Type

The following table presents the fair value of our available-for-sale securities held at Redwood by collateral type at June 30, 2014 and December 31, 2013.


(In Thousands)	June 30, 2014		December 31, 2013
Senior Securities
Prime	$	711,710	$	662,306
Non-prime		192,256		193,386

Total Senior Securities		903,966		855,692

Re-REMIC Securities		192,596		176,376

Subordinate Securities
Prime		575,067		526,095
Non-prime		157		143

Total Subordinate Securities		575,224		526,238


Total AFS Securities	$	1,671,786	$	1,558,306

Components of Carrying Value (Which Equals Fair Value) of Residential Available for Sale Securities

The following table presents the components of carrying value (which equals fair value) of residential AFS securities at June 30, 2014 and December 31, 2013.

Carrying Value of Residential AFS Securities


June 30, 2014	Senior
(In Thousands)	Prime		Non-prime		Re-REMIC		Subordinate		Total
Principal balance	$	710,620	$	209,967	$	223,389	$	717,838	$	1,861,814
Credit reserve		(5,476)		(9,697)		(17,788)		(50,315)		(83,276)
Unamortized discount, net		(37,763)		(36,387)		(89,089)		(141,054)		(304,293)

Amortized cost		667,381		163,883		116,512		526,469		1,474,245
Gross unrealized gains		45,952		28,385		76,084		54,289		204,710
Gross unrealized losses		(1,623)		(12)		-		(5,534)		(7,169)

Carrying Value	$	711,710	$	192,256	$	192,596	$	575,224	$	1,671,786


December 31, 2013	Senior
(In Thousands)	Prime		Non-prime		Re-REMIC		Subordinate		Total
Principal balance	$	670,051	$	218,603	$	214,046	$	706,292	$	1,808,992
Credit reserve		(10,144)		(13,840)		(30,429)		(62,457)		(116,870)
Unamortized discount, net		(44,133)		(36,882)		(80,188)		(137,266)		(298,469)

Amortized cost		615,774		167,881		103,429		506,569		1,393,653
Gross unrealized gains		47,980		25,654		72,947		41,205		187,786
Gross unrealized losses		(1,448)		(149)		-		(21,536)		(23,133)

Carrying Value	$	662,306	$	193,386	$	176,376	$	526,238	$	1,558,306

Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities

The following table presents the changes for the three and six months ended June 30, 2014, in unamortized discount and designated credit reserves on residential AFS securities.

Changes in Unamortized Discount and Designated Credit Reserves on Residential AFS Securities


	Three Months Ended June 30, 2014
(In Thousands)	Credit Reserve		Unamortized Discount, Net
Beginning balance	$	95,688	$	303,733
Amortization of net discount		-		(10,586)
Realized credit losses		(3,973)		-
Acquisitions		257		3,246
Sales, calls, other		(476)		(584)
Impairments		264		-
Transfers to (release of) credit reserves, net		(8,484)		8,484

Ending Balance	$	83,276	$	304,293


	Six Months Ended June 30, 2014
(In Thousands)	Credit Reserve		Unamortized Discount, Net
Beginning balance	$	116,870	$	298,469
Amortization of net discount		-		(21,884)
Realized credit losses		(7,310)		-
Acquisitions		257		2,837
Sales, calls, other		(1,412)		(635)
Impairments		377		-
Transfers to (release of) credit reserves, net		(25,506)		25,506

Ending Balance	$	83,276	$	304,293

Components of Carrying Value of Available for Sale Securities in Unrealized Loss Position

The following table presents the components comprising the total carrying value of residential AFS securities that were in a gross unrealized loss position at June 30, 2014 and December 31, 2013.


	Less Than 12 Consecutive Months						12 Consecutive Months or Longer
(In Thousands)	Amortized Cost		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Losses		Fair Value
June 30, 2014	$	300,804	$	(2,691)	$	298,113	$	122,012	$	(4,478)	$	117,534
December 31, 2013		607,030		(21,195)		585,835		19,828		(1,938)		17,890

Summary of Significant Valuation Assumptions for Available for Sale Securities

The table below summarizes the significant valuation assumptions we used for our OTTI AFS securities at June 30, 2014.

Significant Valuation Assumptions


	Range for Securities
June 30, 2014	Prime Securities		Non-prime
Prepayment rates		7 - 20 %		10 - 10 %
Loss severity		20 - 53 %		35 - 35 %
Projected default rate		1 - 20 %		11 - 11 %

Activity of Credit Component of Other-than-Temporary Impairments

The following table details the activity related to the credit loss component of OTTI (i.e., OTTI recognized through earnings) for AFS securities held at June 30, 2014 and 2013, for which a portion of an OTTI was recognized in other comprehensive income.

Activity of the Credit Component of Other-than-Temporary Impairments


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2014		2013		2014		2013
Balance at beginning of period	$	35,786	$	45,611	$	37,149	$	50,852
Additions
Initial credit impairments		190		-		261		-
Subsequent credit impairments		28		-		70		-
Reductions
Securities sold, or expected to sell		(904)		(2,191)		(904)		(2,191)
Securities with no outstanding principal at period end		(844)		(746)		(2,320)		(5,987)

Balance at End of Period	$	34,256	$	42,674	$	34,256	$	42,674

Gross Realized Gains and Losses on Sales and Calls of Available for Sale Securities

The following table presents the gross realized gains and losses on sales and calls of AFS securities for the three and six months ended June 30, 2014 and 2013.


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2014		2013		2014		2013
Gross realized gains - sales	$	992	$	193	$	992	$	12,231
Gross realized gains - calls		-		333		987		333
Gross realized losses - sales		-		-		-		-
Gross realized losses - calls		-		-		-		-

Total Realized Gains on Sales and Calls of AFS Securities, net	$	992	$	526	$	1,979	$	12,564

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

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- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

+ References+ Details

- Definition

Tabular disclosure of investments in trading securities.

+ References+ Details