Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 13, 2015 | Jun. 30, 2014 | |
Document and Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | FALSE | ||
Document Period End Date | 31-Dec-14 | ||
Document Fiscal Year Focus | 2014 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | ZAIS Financial Corp. | ||
Entity Central Index Key | 1527590 | ||
Current Fiscal Year End Date | -19 | ||
Entity Filer Category | Accelerated Filer | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Common Stock, Shares Outstanding | 7,970,886 | ||
Entity Public Float | $129,625,928 | ||
Trading Symbol | ZFC |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Assets | ||
Cash | $33,791,013 | $57,060,806 |
Restricted cash | 7,143,078 | 2,128,236 |
Mortgage loans held for investment, at fair value - $415,814,067 and $331,522,165 pledged as collateral, respectively | 415,959,838 | 331,785,542 |
Mortgage loans held for investment, at cost | 1,338,935 | |
Mortgage loans held for sale, at fair value - $97,690,960 pledged as collateral | 97,690,960 | |
Real estate securities, at fair value - $135,779,193 and $183,722,511 pledged as collateral, respectively | 148,585,733 | 226,155,221 |
Other Investment Securities, at fair value - $2,040,532 and $0 pledged as collateral, respectively | 2,040,532 | |
Loans eligible for repurchase from Ginnie Mae | 21,710,284 | |
Mortgage servicing rights, at fair value | 33,378,978 | |
Derivative assets, at fair value | 2,485,100 | 284,454 |
Other assets | 6,092,863 | 2,666,799 |
Goodwill | 16,512,680 | |
Intangible Assets | 5,668,611 | |
Total assets | 792,398,605 | 620,081,058 |
Liabilities | ||
Warehouse lines of credit | 89,417,564 | |
Loan repurchase facilities | 300,092,293 | 236,058,976 |
Securities repurchase agreements | 103,014,105 | 138,591,678 |
Exchangeable Senior Notes | 55,474,741 | 54,539,051 |
Contingent consideration | 11,430,413 | |
Derivative liabilities, at fair value | 2,585,184 | 1,471,607 |
Dividends and distributions payable | 3,559,120 | 8,452,910 |
Accounts payable and other liabilities | 11,731,089 | 3,198,274 |
Liability for loans eligible for repurchase from Ginnie Mae | 21,710,284 | |
Total liabilities | 599,014,793 | 442,312,496 |
Commitments and Contingencies (Note 20) | ||
Stockholders' equity | ||
12.5% Series A cumulative non-voting preferred stock, $0.0001 par value; 50,000,000 shares authorized; zero shares issued and outstanding | ||
Common stock, $0.0001 par value; 500,000,000 shares authorized; 7,970,886 shares issued and outstanding | 798 | 798 |
Additional paid-in capital | 164,207,617 | 164,207,617 |
Retained earnings (accumulated deficit) | 9,029,947 | -4,958,607 |
Total ZAIS Financial Corp. stockholders' equity | 173,238,362 | 159,249,808 |
Non-controlling interests in operating partnership | 20,145,450 | 18,518,754 |
Total stockholders' equity | 193,383,812 | 177,768,562 |
Total liabilities and stockholders' equity | $792,398,605 | $620,081,058 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Consolidated Balance Sheets [Abstract] | ||
Mortgage loans held for investment, pledged as collateral | $415,814,067 | $331,522,165 |
Mortgage loans held for sale, pledged as collateral | 97,690,960 | |
Real estate securities, pledged as collateral | 135,779,193 | 183,722,511 |
Other investment securities, pledged as collateral | $2,040,532 | $0 |
12.5% Series A cumulative non-voting preferred stock, par or stated value per share | $0.00 | $0.00 |
12.5% Series A cumulative non-voting preferred stock, shares authorized | 50,000,000 | 50,000,000 |
12.5% Series A cumulative non-voting preferred stock, shares issued | 0 | 0 |
12.5% Series A cumulative non-voting preferred stock, shares outstanding | 0 | 0 |
Common stock, par value per share | $0.00 | $0.00 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 7,970,886 | 7,970,886 |
Common stock, shares outstanding | 7,970,886 | 7,970,886 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Interest income | |||
Mortgage loans held for investment | $26,140,679 | $10,470,435 | |
Mortgage loans held for sale | 594,217 | ||
Real estate securities | 14,313,293 | 15,947,892 | 9,398,319 |
Other investment securities | 544,558 | ||
Total interest income | 41,592,747 | 26,418,327 | 9,398,319 |
Interest expense | |||
Warehouse lines of credit | 121,194 | ||
Loan repurchase facilities | 8,906,849 | 3,612,167 | |
Securities repurchase agreements | 2,544,838 | 2,918,813 | 1,387,451 |
Exchangeable Senior Notes | 5,686,664 | 563,539 | |
Total interest expense | 17,259,545 | 7,094,519 | 1,387,451 |
Net interest income | 24,333,202 | 19,323,808 | 8,010,868 |
Non-interest income | |||
Mortgage banking activities, net | 5,439,006 | ||
Loan servicing fee income, net of direct costs | 929,718 | ||
Change in fair value of mortgage servicing rights | -1,684,373 | ||
Other income | 45,861 | ||
Other gains/(losses) | |||
Change in unrealized gain or loss | 19,090,520 | ||
Realized gain/(loss) on investments | 5,762,254 | ||
(Loss)/gain on derivative instruments related to investment portfolio | -5,921,725 | 5,614,815 | -1,171,219 |
Total other gains/(losses) | 18,931,049 | -2,166,254 | 16,435,633 |
Expenses | |||
Advisory fee - related party | 2,853,896 | 2,629,815 | 877,825 |
Salaries, commissions and benefits | 3,765,784 | ||
Operating expenses | 7,862,308 | 5,473,915 | 1,475,729 |
Other expenses | 4,511,741 | 1,500,359 | 1,827,350 |
Total expenses | 18,993,729 | 9,604,089 | 4,180,904 |
Net income/(loss) before income taxes | 29,000,734 | 7,553,465 | 20,265,597 |
Income tax benefit | -850,996 | ||
Net income/(loss) after income taxes | 29,851,730 | 7,553,465 | 20,265,597 |
Net income allocated to non controlling interests | 3,109,760 | 880,358 | 362,324 |
Preferred dividends | 15,379 | 15,424 | |
Net income attributable to ZAIS Financial Corp. common stockholders and common stock repurchase liability | 26,741,970 | 6,657,728 | 19,887,849 |
Income allocated to common stock repurchase liability | 454,047 | ||
Net income attributable to ZAIS Financial Corp. common stockholders | 26,741,970 | 6,657,728 | 19,433,802 |
Net income per share applicable to common stockholders - basic | $3.35 | $0.92 | $7.13 |
Net income per share applicable to common stockholders - diluted | $3.08 | $0.92 | $7.13 |
Weighted average number of shares of common stock: | |||
Basic | 7,970,886 | 7,273,366 | 2,724,252 |
Diluted | 10,677,360 | 8,200,280 | 2,773,845 |
Mortgage Loans [Member] | |||
Other gains/(losses) | |||
Change in unrealized gain or loss | 22,814,340 | 7,136,482 | |
Realized gain/(loss) on investments | 1,838,800 | 1,298,844 | |
Real Estate Securities [Member] | |||
Other gains/(losses) | |||
Change in unrealized gain or loss | -2,993,640 | -7,170,706 | 17,793,339 |
Realized gain/(loss) on investments | 3,694,256 | -9,045,689 | -186,487 |
Other Investment Securities [Member] | |||
Other gains/(losses) | |||
Change in unrealized gain or loss | -226,224 | ||
Realized gain/(loss) on investments | 226,743 | ||
Real Estate Owned [Member] | |||
Other gains/(losses) | |||
Change in unrealized gain or loss | -503,956 | ||
Realized gain/(loss) on investments | $2,455 |
Consolidated_Statements_of_Sto
Consolidated Statements of Stockholders' Equity (USD $) | Total | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings / (Accumulated Deficit) [Member] | Total ZAIS Financial Corp. Stockholders' Equity [Member] | Non-controlling Interests in Operating Partnership [Member] |
Balance at Dec. 31, 2011 | $55,317,874 | $302 | $60,452,038 | ($5,134,466) | $55,317,874 | ||
Balance, shares at Dec. 31, 2011 | 3,022,617 | ||||||
Net proceeds from offering of preferred stock | 115,499 | 115,499 | 115,499 | ||||
Net proceeds from offering of preferred stock, shares | 133 | ||||||
Net proceeds from offering of OP units | 20,393,704 | 20,393,704 | |||||
Common stock repurchase liability/Reversal of common stock repurchase liability | -10,923,944 | -52 | -10,923,892 | -10,923,944 | |||
Common stock repurchase liabilityReversal of common stock repurchase liability, shares | -515,035 | ||||||
Repurchase of shares | -14,181,259 | -67 | -14,181,192 | -14,181,259 | |||
Repurchase of shares, shares | -668,525 | ||||||
Net proceeds from offering of common stock | 4,757,470 | 24 | 4,757,446 | 4,757,470 | |||
Net proceeds from offering of common stock, shares | 232,039 | ||||||
Distributions on OP units | -1,117,280 | -1,117,280 | |||||
Dividends on common stock | -9,471,442 | -9,471,442 | -9,471,442 | ||||
Rebalancing of ownership percentage between the Company and operating partnership | -460,129 | -460,129 | 460,129 | ||||
Net income | 20,250,173 | 19,887,849 | 19,887,849 | 362,324 | |||
Balance at Dec. 31, 2012 | 65,140,795 | 207 | 39,759,770 | 5,281,941 | 45,041,918 | 20,098,877 | |
Balance, shares at Dec. 31, 2012 | 133 | 2,071,096 | |||||
Common stock repurchase liability/Reversal of common stock repurchase liability | 5,440,175 | 25 | 5,440,150 | 5,440,175 | |||
Common stock repurchase liabilityReversal of common stock repurchase liability, shares | 249,790 | ||||||
Repurchase of shares | -133,000 | -133,000 | -133,000 | ||||
Repurchase of shares, shares | -133 | ||||||
Net proceeds from offering of common stock | 118,862,500 | 566 | 118,861,934 | 118,862,500 | |||
Net proceeds from offering of common stock, shares | 5,650,000 | ||||||
Equity raise payments | -216,658 | -216,658 | -216,658 | ||||
Distributions on OP units | -1,965,060 | -1,965,060 | |||||
Dividends on common stock | -16,898,276 | -16,898,276 | -16,898,276 | ||||
Rebalancing of ownership percentage between the Company and operating partnership | 495,421 | 495,421 | -495,421 | ||||
Net income | 7,538,086 | 6,657,728 | 6,657,728 | 880,358 | |||
Balance at Dec. 31, 2013 | 177,768,562 | 798 | 164,207,617 | -4,958,607 | 159,249,808 | 18,518,754 | |
Balance, shares at Dec. 31, 2013 | 7,970,886 | ||||||
Distributions on OP units | -1,483,064 | -1,483,064 | |||||
Dividends on common stock | -12,753,416 | -12,753,416 | -12,753,416 | ||||
Net income | 29,851,730 | 26,741,970 | 26,741,970 | 3,109,760 | |||
Balance at Dec. 31, 2014 | $193,383,812 | $798 | $164,207,617 | $9,029,947 | $173,238,362 | $20,145,450 | |
Balance, shares at Dec. 31, 2014 | 7,970,886 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities | |||
Net income | $29,851,730 | $7,553,465 | $20,265,597 |
Adjustments to reconcile net (loss)/income to net cash provided by operating activities | |||
Change in unrealized gain or loss | -19,090,520 | ||
Realized (gains) / loss on investments | -5,762,254 | ||
Change in unrealized gain or loss on derivative instruments | 5,306,841 | -1,281,997 | 890,442 |
Amortization of Exchangeable Senior Notes discount | 935,690 | 88,457 | |
Depreciation and amortization expense | 154,010 | ||
Proceeds from sale and principal payments on mortgages held for sale | 245,140,671 | ||
Originations and purchases of mortgage loans held for sale | -253,934,598 | ||
Loss (gain) on sale of mortgages held for sale | 3,615,357 | ||
Capitalization of originated mortgage servicing rights | -2,763,014 | ||
Changes in operating assets and liabilities | |||
(Increase) decrease in other assets | 559,791 | -1,321,134 | -1,253,517 |
Increase (decrease) in accounts payable and other liabilities | 2,818,360 | 1,302,727 | 1,226,282 |
Net cash (used in) provided by operating activities | -4,689,880 | 8,131,267 | 2,628,160 |
Cash flows from investing activities | |||
Cash paid for the acquisition of GMFS, net of cash acquired | -49,542,840 | ||
Acquisitions of mortgage loans | -85,579,169 | -334,162,044 | |
Proceeds from principal repayments on mortgage loans | 31,519,288 | 13,871,059 | |
Acquisitions of real estate securities, net of change in payable for real estate securities purchased | -47,034,327 | -406,263,789 | -104,299,838 |
Proceeds from principal repayments on real estate securities | 28,197,740 | 46,752,670 | 23,277,965 |
Proceeds from sales of real estate securities, net of changes in receivable for real estate securities sold | 102,635,229 | 291,348,906 | 74,216,314 |
Acquisitions of other investment securities | -12,926,953 | ||
Proceeds from sale of other investment securities | 11,067,378 | ||
Purchase of swaption | -4,803,750 | ||
Restricted cash provided by/(used) in investment activities | -5,014,842 | 1,639,915 | -2,052,940 |
Net cash used in investing activities | -31,482,246 | -386,813,283 | -8,858,499 |
Cash flows from financing activities | |||
Proceeds from issuance of common stock upon exchange offer | |||
Proceeds from issuance of common stock, net | 118,862,500 | 4,757,470 | |
Proceeds from issuance of OP units, net | 20,393,704 | ||
Proceeds from issuance of preferred stock, net | 115,499 | ||
Repurchase of common stock | -14,181,259 | ||
Payment of common stock repurchase liability | -5,750,512 | ||
Net borrowings under warehouse lines of credit | 3,576,859 | ||
Net borrowings under loan repurchase facility | 64,033,317 | 236,058,976 | |
Borrowings from securities repurchase agreements | 138,210,170 | 366,103,785 | 79,129,751 |
Repayments of securities repurchase agreements | -173,787,743 | -343,592,574 | -60,646,294 |
Proceeds from issuance of Exchangeable Senior Notes | 54,450,594 | ||
Allocation of proceeds to conversion option on Exchangeable Senior Notes | 1,324,406 | ||
Dividends on common stock and distributions on OP Units (net of change in dividends and distributions payable) | -19,130,270 | -10,410,426 | -10,588,722 |
Repurchase of preferred stock including dividend | -148,379 | -15,424 | |
Equity raise payments | -216,658 | ||
Net cash provided by financing activities | 12,902,333 | 416,681,712 | 18,964,725 |
Net (decrease)/increase in cash | -23,269,793 | 37,999,696 | 12,734,386 |
Cash | |||
Beginning of period | 57,060,806 | 19,061,110 | 6,326,724 |
End of period | 33,791,013 | 57,060,806 | 19,061,110 |
Supplemental disclosure of cash flow information | |||
Interest paid on warehouse line of credit, loan repurchase facility, securities repurchase agreements and Exchangeable Senior Notes | 18,666,057 | 5,696,619 | 1,377,433 |
Taxes paid | |||
Supplemental disclosure of noncash investing and financing activities | |||
Increase in dividends payable | 3,559,120 | 8,452,910 | |
Acquisition of GMFS - assets acquired and liabilities assumed (See Note 3) | |||
Mortgage Loans [Member] | |||
Adjustments to reconcile net (loss)/income to net cash provided by operating activities | |||
Net (accretion)/amortization of (discounts)/premiums related to investments | -7,497,341 | -3,059,231 | |
Change in unrealized gain or loss | -22,814,340 | -7,136,482 | |
Realized (gains) / loss on investments | -1,838,800 | -1,298,844 | |
Real Estate Securities [Member] | |||
Adjustments to reconcile net (loss)/income to net cash provided by operating activities | |||
Net (accretion)/amortization of (discounts)/premiums related to investments | -5,528,538 | -2,932,089 | -893,792 |
Change in unrealized gain or loss | 2,993,640 | 7,170,706 | -17,793,339 |
Realized (gains) / loss on investments | -3,694,256 | 9,045,689 | 186,487 |
Other Investment Securities [Member] | |||
Adjustments to reconcile net (loss)/income to net cash provided by operating activities | |||
Net (accretion)/amortization of (discounts)/premiums related to investments | -180,438 | ||
Change in unrealized gain or loss | 226,224 | ||
Realized (gains) / loss on investments | -226,743 | ||
Real Estate Owned [Member] | |||
Adjustments to reconcile net (loss)/income to net cash provided by operating activities | |||
Change in unrealized gain or loss | 503,956 | ||
Realized (gains) / loss on investments | -2,455 | ||
Mortgage Servicing Rights [Member] | |||
Adjustments to reconcile net (loss)/income to net cash provided by operating activities | |||
Change in unrealized gain or loss | $1,684,373 |
Formation_and_Organization
Formation and Organization | 12 Months Ended |
Dec. 31, 2014 | |
Formation and Organization [Abstract] | |
Formation and Organization | 1. Formation and Organization |
ZAIS Financial Corp. (the "Company") was incorporated in Maryland on May 24, 2011, and has elected to be taxed and to qualify as a real estate investment trust ("REIT") beginning with the taxable year ended December 31, 2011. The Company completed its formation transaction and commenced operations on July 29, 2011. On February 13, 2013, the Company completed its initial public offering ("IPO"), pursuant to which the Company sold 5,650,000 shares of its common stock at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of $1.2 million were $118.9 million. | |
On October 31, 2014, the Company completed the acquisition of GMFS, LLC (“GMFS”), a mortgage banking platform that primarily originates and services agency and government guaranteed residential mortgage loans in the southern United States. The Company has begun to source non-agency mortgage loans through the GMFS platform, with the intent of holding these loans in its investment portfolio. In addition, the Company has begun to acquire newly originated, non-agency mortgage loans from other loan sellers through its newly originated loan purchase program. | |
The Company originates, acquires, finances, sells, services and manages residential mortgage loans. The Company originates mortgage loans through its GMFS mortgage banking platform and also acquires performing, re-performing and newly originated loans through other channels. The Company also invests in, finances and manages RMBS that are not issued or guaranteed by a federally chartered corporation, such as Fannie Mae or Freddie Mac, or an agency of the U.S. Government, such as Ginnie Mae (“non-Agency RMBS”) with an emphasis on securities that, when originally issued, were rated in the highest rating category by one or more of the nationally recognized statistical rating organizations and mortgage servicing rights (“MSRs”). The Company also has the discretion to invest in RMBS that are issued or guaranteed by a federally chartered corporation or a U.S. Government agency (“Agency RMBS”), including through To-Be-Announced (“TBA”) contracts, and in other real estate-related and financial assets, such as interest only strips created from RMBS (“IOs”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”). The Company refers collectively to the assets it targets as its target assets. | |
The Company's income is generated primarily by the net spread between the income it earns on its assets and the cost of its financing and hedging activities, and the origination, sale and servicing of residential mortgage loans by its mortgage banking operations. The Company's objective is to provide attractive risk-adjusted returns to its stockholders, primarily through quarterly distributions and secondarily through capital appreciation. | |
The Company is externally managed by ZAIS REIT Management, LLC (the “Advisor”), a subsidiary of ZAIS Group, LLC (“ZAIS”), and has no employees except for those employed by GMFS. The Company is the sole general partner of, and conducts substantially all of its business through, ZAIS Financial Partners, L.P., the Company's consolidated operating partnership subsidiary (the “Operating Partnership”). | |
The Company's charter authorizes the issuance of up to 500,000,000 shares of common stock with a par value of $0.0001 per share, and 50,000,000 shares of preferred stock, with a par value of $0.0001 per share. The Company's board of directors is authorized to amend its charter, without the approval of stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series of capital stock or to classify and reclassify any unissued shares of its capital stock into other classes or series of stock that the Company has the authority to issue. | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | |
2. Summary of Significant Accounting Policies | |
Basis of Presentation | |
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Professional fees, transaction costs, loan servicing fees and general and administrative expenses reported in prior years have been reclassified to operating expenses and other expenses to conform to the current period's presentation. The Company operates in the following two business segments: residential mortgage loan investments and residential mortgage banking. | |
Estimates | |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates. | |
Principles of Consolidation | |
The consolidated financial statements include the accounts of the Company and all of the wholly owned subsidiaries of the Operating Partnership. All intercompany balances have been eliminated in consolidation. | |
The Company, which serves as the sole general partner of and conducts substantially all of its business through the Operating Partnership, holds approximately 89.6% of the operating partnership units ("OP units") in the Operating Partnership at December 31, 2014 and December 31, 2013. The Operating Partnership in turn holds directly or indirectly all of the equity interests in its subsidiaries. Changes in the Company's ownership interest (and transactions with non-controlling interest unit holders in its consolidated subsidiaries) while the Company retains its controlling interest in the subsidiary, are accounted for as equity transactions. The carrying amount of the non-controlling interest is adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the Company. | |
Variable Interest Entities | |
A variable interest entity ("VIE") is an entity that lacks one or more of the characteristics of a voting interest entity. The Company evaluates each of its investments to determine whether it is a VIE based on: (1) the sufficiency of the entity's equity investment at risk to finance its activities without additional subordinated financial support provided by any parties, including the equity holders; (2) whether as a group the holders of the equity investment at risk have (a) the power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impacts the entity's economic performance, (b) the obligation to absorb the expected losses of the legal entity and (c) the right to receive the expected residual returns of the legal entity; and (3) whether the voting rights of these investors are proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected returns of their equity, or both, and whether substantially all of the entity's activities involve or are conducted on behalf of an investor that has disproportionately fewer voting rights. An investment that lacks one or more of the above three characteristics is considered to be a VIE. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. | |
A VIE is subject to consolidation if the equity investors either do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, are unable to direct the entity's activities, or are not exposed to the entity's losses or entitled to its residual returns. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses. | |
The Company's mortgage loans held for sale are sold predominantly to Fannie Mae and Freddie Mac, which are government sponsored enterprises (“GSEs” or “Agencies”). The Company also issues Ginnie Mae securities by pooling eligible loans through a pool custodian and assigning rights to the loans to Ginnie Mae. Fannie Mae, Freddie Mac and Ginnie Mae provide credit enhancement of the loans through certain guarantee provisions. The Company also purchases RMBS from securitization trusts or similar vehicles. These securitizations involve VIEs as the trusts or similar vehicles, by design, have the characteristics of a VIE. | |
The Company has evaluated its interests in its real estate investment securities and its interests in the securitizations discussed in the preceding paragraph to determine if each represents a variable interest in a VIE. The Company monitors these investments and analyzes them for potential consolidation. The Company determined that it was not the primary beneficiary of the VIEs and therefore none of the VIEs were consolidated at December 31, 2014 and December 31, 2013. The maximum exposure of the Company to VIEs is limited to the fair value of its investments in real estate securities and MSRs as disclosed in the Company's consolidated balance sheets. | |
Cash and Cash Equivalents | |
The Company considers highly liquid short-term interest bearing instruments with original maturities of three months or less and other instruments readily convertible into cash to be cash equivalents. The Company's deposits with financial institutions may exceed federally insurable limits of $250,000 per institution. The Company mitigates this risk by depositing funds with major financial institutions. At December 31, 2014, a portion of the Company's operating cash was held with two custodians. Additionally, at December 31, 2014, a portion of the Company's operating cash was held with two other financial institutions and the Company maintains separate cash accounts for each of its warehouse lines of credit and repurchase agreements related to its GMFS origination platform pursuant to such agreements. | |
Restricted Cash | |
Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or securities repurchase agreements. Cash held by counterparties as collateral is not available to the Company for general corporate purposes, but may be applied against amounts due to derivative or securities repurchase agreement counterparties or returned to the Company when the collateral requirements are exceeded or at the maturity of the derivatives or securities repurchase agreements. | |
Other Investment Securities | |
Other investment securities are comprised of investments in Freddie Mac Structured Agency Credit Risk Notes ("FMSA Notes") at December 31, 2014. During 2014, the Company also held Fannie Mae's Risk Transfer Notes ("FMRT Notes" and together with the FMSA Notes, the "Other Investment Securities"). The Other Investment Securities represent unsecured general obligations of Fannie Mae and Freddie Mac, respectively, and are structured to be subject to the performance of a certain pool of residential mortgage loans. | |
Mortgage Loans Held for Investment, Mortgage Loans Held for Sale, Real Estate Securities, Other Investment Securities and MSRs — Fair Value Election | |
U.S. GAAP permits entities to choose to measure certain eligible financial instruments at fair value. The Company has elected the fair value option for some of its mortgage loans held for investment, and each of its mortgage loans held for sale, real estate securities, Other Investment Securities and MSRs at the date of purchase. The fair value option election is irrevocable and requires the Company to measure these mortgage loans, real estate securities and Other Investment Securities at estimated fair value with the change in estimated fair value recognized in earnings. The Company has established a policy for these assets to separate interest income from the full change in fair value in the consolidated statements of operations. The interest income component is presented as interest income on mortgage loans held for investment, mortgage loans held for sale, real estate securities and Other Investment Securities and the remainder of the change in fair value is presented separately as change in unrealized gain or loss in the Company's consolidated statements of operations. | |
Determination of Fair Value Measurement | |
The "Fair Value Measurements and Disclosures" Topic of the FASB ASC defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. | |
Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values. Furthermore, the analysis of whether it is more likely than not that the Company will be required to sell securities in an unrealized loss position prior to an expected recovery in fair value (if any), the amount of such expected required sales, and the projected identification of which securities would be sold is also subject to significant judgment. | |
Any proposed changes to the valuation methodology will be reviewed by the Advisor to ensure changes are consistent with the applicable accounting guidance and approved as appropriate. The fair value methodology may produce a fair value calculation that may not be indicative of net realizable value. Furthermore, while the Company anticipates that the Advisor's valuation methods will be appropriate and consistent with other market participants, the use of different methodologies, or assumptions by other market participants, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. | |
The Company categorizes its financial instruments in accordance with U.S. GAAP, based on the priority of the inputs to the valuation, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. | |
Financial assets and liabilities recorded in the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: | |
Level 1 Quoted prices for identical assets or liabilities in an active market. | |
Level 2 Financial assets and liabilities whose values are based on the following: | |
Quoted prices for similar assets or liabilities in active markets | |
Quoted prices for identical or similar assets or liabilities in nonactive markets. | |
Pricing models whose inputs are observable for substantially the full term of the asset or liability. | |
Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability. | |
Level 3 Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement. | |
The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment. The Company utilizes proprietary modeling analysis to support the independent third party broker quotes selected to determine the fair value of its real estate securities, Other Investment Securities and derivative instruments. | |
The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy. | |
Mortgage Loans Held for Investment | |
The fair value of the Company's mortgage loans held for investment considers data such as loan origination information and additional updated borrower and loan servicing data, as available, forward interest rates, general economic conditions, home price index forecasts and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans held for investment include market-implied discount rates, projections of default rates, delinquency rates, loss severity (considering mortgage insurance) and prepayment rates. The Company uses loan level data, macro-economic inputs and forward interest rates to generate loss adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair values established for mortgage loans held for investment by the Company may differ from the fair values that would have been established if a ready market existed for these mortgage loans held for investment. Accordingly, mortgage loans held for investment are classified as Level 3 in the fair value hierarchy. | |
At December 31, 2014, approximately 10.3% in unpaid principal balance of the Company's mortgage loans carries mortgage insurance. | |
Mortgage Loans Held for Sale | |
The fair value of mortgage loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan. Accordingly, mortgage loans held for sale are classified as Level 2 in the fair value hierarchy. | |
Real Estate Securities and Other Investment Securities | |
The fair value of the Company's real estate securities and Other Investment Securities considers the underlying characteristics of each security including coupon, maturity date and collateral. The Company estimates the fair value of its RMBS and Other Investment Securities based upon a combination of observable prices in active markets, multiple indicative quotes from brokers and executable bids. In evaluating broker quotes the Company also considers additional observable market data points including recent observed trading activity for identical and similar securities, back-testing, broker challenges and other interactions with market participants, as well as yield levels generated by model-based valuation techniques. In the absence of observable quotes, the Company utilizes model-based valuation techniques that may contain unobservable valuation inputs. | |
When available, the fair value of real estate securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from either broker quotes, observed traded levels or model-based valuation techniques using observable inputs such as benchmark yields or issuer spreads. | |
While the Company's non-Agency RMBS and Other Investment Securities are valued using the same process with similar inputs as the Agency RMBS as described below, a significant amount of inputs are unobservable due to relatively low levels of market activity. The fair value of these securities is typically based on broker quotes or the Company's model-based valuation. Accordingly, the Company's non-Agency RMBS and Other Investment Securities are classified as Level 3 in the fair value hierarchy. Model-based valuation consists primarily of discounted cash flow and yield analyses. Significant model inputs and assumptions include constant voluntary prepayment rates, constant default rates, delinquency rates, loss severity, market-implied discount rates, default rates, expected loss severity, weighted average life, collateral composition, borrower characteristics and prepayment rates, and may also include general economic conditions, including home price index forecasts, servicing data and other relevant information. Where possible, collateral-related assumptions are determined on an individual loan level basis. | |
The Company's Agency RMBS, if any, are valued using the market data described above, which includes inputs determined to be observable or whose significant fair value drivers are observable. Accordingly, Agency RMBS securities are classified as Level 2 in the fair value hierarchy. | |
MSRs | |
The Company uses a third party vendor to estimate the fair value of MSRs. The third party vendor uses a discounted cash flow approach which consists of projecting servicing cash flows discounted at a rate that management believes market participants would use in their determinations of fair value. The key assumptions used in the estimation of the fair value of MSRs include prepayment speeds, discount rates, default rates, cost to service, contractual servicing fees, escrow earnings and ancillary income. MSRs are classified as Level 3 in the fair value hierarchy. | |
Derivative Instruments | |
Interest Rate Swaption Agreements | |
An interest rate swaption agreement represents an option that gives the Company the right, but not the obligation, to enter into a previously agreed upon interest rate swap agreement on a future date. If exercised the Company will enter into an interest rate swap agreement and is obligated to pay a fixed rate of interest and receive a floating rate of interest. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations received for interest rate swaption agreements. These counterparty valuations are generally based on models with observable market inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's interest rate swaption agreements are governed by International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. At December 31, 2014, no credit valuation adjustment was made in determining the fair value of the derivative. | |
Interest Rate Swap Agreements | |
An interest rate swap is an agreement between the Company and a counterparty to exchange periodic interest payments where one party to the contract makes a fixed rate payment in exchange for a floating rate payment from the other party. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations received for interest rate swap agreements. These counterparty valuations are generally based on models with observable market inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's interest rate swap agreements are governed by International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. At December 31, 2014 and December 31, 2013, no credit valuation adjustment was made in determining the fair value of the derivative. | |
Loan Purchase Commitments (“LPCs”) | |
LPCs are agreements with approved third-party residential loan originators to purchase residential loans at a future date. LPCs that qualify as derivatives are recorded at their estimated fair values in the Company's consolidated balance sheets. The fair value of the Company's LPC's are based on the prices the underlying loans can be purchased for in the secondary market, adjusted for an estimated pull through rate. Changes in fair value are reported in the statement of operations. LPCs are classified as Level 3 in the fair value hierarchy. | |
Interest Rate Lock Commitments (“IRLCs”) | |
IRLCs are agreements under which the Company agrees to extend credit to a borrower under certain specified terms and conditions in which the interest rate and the maximum amount of the loan are set prior to funding. Unrealized gains and losses on the IRLCs, reflected as derivative assets and derivative liabilities, respectively, are measured based on the value of the underlying mortgage loan, quoted GSE mortgage backed security (“MBS”) prices, estimates of the fair value of the MSRs and the probability that the mortgage loan will fund within the terms of the IRLC, net of commission expense and broker fees. IRLCs are classified as Level 3 in the fair value hierarchy. | |
MBS Forward Sales Contracts and TBA Securities | |
MBS forward sales contracts and TBA securities are forward contracts for the purchase or sale of MBS at a predetermined price with a stated face amount, coupon and stated maturity at a agreed upon future date. The specific MBS delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association (“SIFMA”), are not known at the time of the transaction. The Company estimates the fair value of MBS forward sales contracts and TBA securities based on third party vendor prices and quoted MBS prices. MBS forward sales contracts and TBA securities are classified as Level 2 in the fair value hierarchy. | |
Mortgage Loans Held for Investment, at Cost | |
Mortgage loans held for investment related to the Company's mortgage banking activities includes loans which, due to various reasons, are unable to be sold to a third party. Such loans are performing loans which the Company carries at amortized cost, less a valuation allowance for estimated credit losses, if applicable. | |
Revenue Recognition | |
Mortgage Loans Held for Investment, at fair value | |
Pursuant to the Company's policy for separately presenting interest income on mortgage loans, the Company follows acceptable methods under U.S. GAAP for allocating a portion of the change in fair value of certain mortgage loans held for investment to interest income. | |
When the Company purchases mortgage loans which are held for investment and which have shown evidence of credit deterioration since origination and management determines that it is probable the Company will not collect all contractual cash flows on those loans, the Company applies the guidance that addresses accounting for differences between contractual cash flows and cash flows expected to be collected if those differences are attributable to, at least in part, credit quality. | |
Interest income is recognized on a level-yield basis over the life of the loan as long as cash flows can be reasonably estimated. The level-yield is determined by the excess of the Company's initial estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the Company's initial investment in the mortgage loan (accretable yield). The amount of interest income to be recognized cannot result in a carrying amount that exceeds the payoff amount of the loan. The excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) will not be recognized as an adjustment of yield. | |
On a quarterly basis, the Company updates its estimate of the cash flows expected to be collected. For purposes of interest income recognition, any subsequent increases in cash flows expected to be collected are generally recognized as prospective yield adjustments (which establishes a new level yield) and any subsequent decreases in cash flows expected to be collected are recognized as an impairment to be recorded through change in unrealized gain or loss in the consolidated statements of operations. | |
Income recognition is suspended for a loan when cash flows cannot be reasonably estimated. | |
Interest income on newly originated mortgage loans which are purchased by the Company and held for investment, is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with these mortgage loans at the time of purchase are amortized into interest income over the life of such loan using the effective yield method and adjusted for actual prepayments. | |
Real Estate Securities and Other Investment Securities | |
Pursuant to the Company's policy for separately presenting interest income on real estate securities and Other Investment Securities, the Company follows acceptable methods under U.S. GAAP for allocating a portion of the change in fair value of real estate securities and Other Investment Securities to interest income. | |
Interest income on Agency RMBS, if any, is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency RMBS at the time of purchase are amortized into interest income over the life of such securities using the effective yield method and adjusted for actual prepayments. | |
Interest income on the non-Agency RMBS and Other Investment Securities, which were purchased at a discount to par value and/or were rated below AA at the time of purchase, is recognized based on the effective yield method. The effective yield on these securities is based on the projected cash flows from each security, which are estimated based on the Company's observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On a monthly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. Therefore, actual maturities of the securities are generally shorter than stated contractual maturities. | |
Based on the projected cash flows from the Company's non-Agency RMBS purchased at a discount to par value, a portion of the purchase discount may be designated as credit protection against future credit losses and, therefore, not accreted into interest income. The amount designated as credit discount is determined, and may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively. | |
RMBS and Other Investment Securities are evaluated for other-than-temporary impairment ("OTTI") each quarter. A security with a fair value that is less than amortized cost is considered impaired. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a security has been deemed to be other-than-temporarily impaired, the amount of OTTI is bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses is recognized in the consolidated statements of operations as a realized loss on real estate securities and realized loss on Other Investment Securities. The remaining OTTI related to the valuation adjustment is recognized as a component of change in unrealized gain or loss in the consolidated statements of operations. Realized gains and losses on sale of real estate securities and Other Investment Securities are determined using the specific identification method. Real estate securities and Other Investment Securities transactions are recorded on the trade date. | |
Mortgage Loans Held for Investment, at Cost and Mortgage Loans Held for Sale | |
Interest income on mortgage loans is accrued to income based upon the principal amount outstanding and contractual interest rates and is included in interest income on mortgage loans held for sale in the consolidated statements of operations. Income recognition is discontinued when loans become 90 days delinquent or when in management's opinion, the collectability of principal and income becomes doubtful and the mortgage loans held for sale or investment are put on nonaccrual status. | |
Mortgage Banking Activities | |
Gain on Sale of Mortgage Loans Held for Sale | |
Mortgage loans held for sale are considered sold when the Company surrenders control over the financial assets. Control is considered to have been surrendered when the transferred assets have been isolated from the Company, beyond the reach of the Company and its creditors; the purchaser obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and the Company does not maintain effective control over the transferred assets through an agreement that both entitles and obligates the Company to repurchase or redeem the transferred assets before their maturity or the ability to unilaterally cause the holder to return specific assets. Such transfers may involve securitizations, participation agreements or repurchase agreements. If the criteria above are not met, such transfers are accounted for as secured borrowings, in which the assets remain on the consolidated balance sheets, the proceeds from the transaction are recognized as a liability and no MSRs are recorded for the transferred loans. | |
Gains and losses from the sale of mortgages are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale and is included in Mortgage banking activities, net in the consolidated statements of operations. The sales proceeds reflect the cash received and the initial fair value of the separately recognized MSRs less the fair value of the incurred liability for mortgage repurchases and indemnifications. Gains and losses also includes the unrealized gains and losses associated with the mortgage loans held for sale and the realized and unrealized gains and losses from MBS forward sales contracts and IRLCs. | |
Loan Origination Fee Income | |
Loan origination fee income represents revenue earned from originating mortgage loans and is included in Mortgage banking activities, net in the Company's consolidated statements of operations. Loan origination fees and related direct loan origination costs are reflected in Mortgage banking activities, net when loans are sold and deferred and amortized over the life of the loan as an adjustment of yield. | |
Loan Servicing Fee Income | |
Loan servicing fee income represents revenue earned for servicing loans for various investors and is included in the consolidated statements of operations. The servicing fees are based on a contractual percentage of the outstanding principal balance and recognized into revenue as the related mortgage payments are received. Loan servicing expenses offset against loan servicing fee income as incurred. | |
Expense Recognition | |
Expenses are recognized when incurred. Expenses include, but are not limited to, loan servicing fees, advisory fees, professional fees for legal, accounting and consulting services, and general and administrative expenses such as insurance, custodial and miscellaneous fees. | |
Servicing Advances | |
Servicing advances represent escrows and advances on behalf of borrowers and investors to cover delinquent balances for property taxes, insurance premiums and other out-of-pocket costs. Advances are made in accordance with the servicing agreements and are recoverable upon liquidation. The Company periodically reviews the advances for collectability and amounts are written off when they are deemed uncollectible. At December 31, 2014, the Company had servicing advances of $2.0 million. Such amount is included in other assets on the Company's consolidated balance sheets. | |
Offering Costs | |
Offering costs are accounted for as a reduction of additional paid-in capital. Offering costs in connection with the Company's IPO were paid out of the proceeds of the IPO. Costs incurred to organize the Company were expensed as incurred. The Company's obligation to pay for organization and offering expenses directly related to the IPO was capped at $1.2 million and the Advisor paid for expenses incurred above the cap. | |
Repurchase Facilities | |
Loan Repurchase Facilities | |
The Company finances a portion of its mortgage loans held for investment through the use of repurchase agreements entered into under master repurchase agreements with certain lenders (the “Loan Repurchase Facilities”). Under the Loan Repurchase Facilities, the Company may sell, and later repurchase trust certificates representing interests in residential mortgage loans (the “Trust Certificates”). The borrowings under the Loan Repurchase Facilities are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreement. The borrowings under the Loan Repurchase Facilities are recorded on the trade date at the contract amount. | |
The Company pledges cash and certain of its Trust Certificates as collateral under the Loan Repurchase Facilities. The amounts available to be borrowed are dependent upon the fair value of the Trust Certificates pledged as collateral, which fluctuates with changes in interest rates, type of underlying mortgage loans and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in the fair value of pledged Trust Certificates, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. At December 31, 2014 and December 31, 2013, the Company has met all margin call requirements related to any outstanding balances under its Loan Repurchase Facilities. | |
Securities Repurchase Agreements | |
The Company finances a portion of its RMBS portfolio and Other Investment Securities through the use of securities repurchase agreements entered into under master repurchase agreements with four financial institutions at December 31, 2014. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Repurchase agreements are recorded on trade date at the contract amount. | |
The Company pledges cash and certain of its RMBS and Other Investment Securities as collateral under these securities repurchase agreements. The amounts available to be borrowed are dependent upon the fair value of the RMBS and Other Investment Securities pledged as collateral, which fluctuates with changes in interest rates, type of securities and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in the fair value of pledged RMBS and Other Investment Securities, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. At December 31, 2014 and December 31, 2013, the Company has met all margin call requirements under its securities repurchase agreements. | |
Derivatives and Hedging Activities | |
The Company accounts for its derivative financial instruments in accordance with derivative accounting guidance, which requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and to measure those instruments at fair value. The Company has not designated any of its derivative agreements as hedging instruments for accounting purposes. As a result, changes in the fair value of derivatives are recorded through current period earnings. | |
Real Estate Owned | |
The Company records its real estate owned at the properties fair value, less costs to sell. All legal fees and direct costs relating to real estate owned are expensed as incurred. At December 31, 2014, the Company had real estate owned of $1.3 million. Such amounts are included in other assets in the Company's consolidated balance sheets. | |
Loans Eligible for Repurchase from Ginnie Mae | |
When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company then records the right to repurchase the loan as an asset and liability on its consolidated balance sheets. There were no actual repurchases of Ginnie Mae delinquent or defaulted mortgage loans during the year ended December 31, 2014. | |
8% Exchangeable Senior Notes Due 2016 | |
On November 25, 2013, the Operating Partnership issued $57.5 million aggregate principal amount of unsecured 8.00% Exchangeable Senior Notes due 2016 (the "Exchangeable Senior Notes"). The Exchangeable Senior Notes are carried at amortized cost. Interest expense on the Exchangeable Senior Notes is computed using the effective interest method. The conversion features of the Exchangeable Senior Notes are deemed to be an embedded derivative. Accordingly, the Company is required to bifurcate the embedded derivative related to the conversion features of the Exchangeable Senior Notes. The Company recognized the embedded derivative as a liability in its consolidated balance sheets at December 31, 2014 and December 31, 2013, measured it at its estimated fair value and recognized changes in its estimated fair value in gain/(loss) on derivative instruments in the Company's consolidated statements of operations. | |
Liability for Loan Repurchases and Indemnifications | |
Loans sold to investors by the Company and which met investor and agency underwriting guidelines at the time of sale may be subject to repurchase or indemnification in the event of specific default by the borrower or subsequent discovery that underwriting standards were not met. The Company may, upon mutual agreement, agree to repurchase the loans or indemnify the investor against future losses on such loans. In such cases, the Company bears any subsequent credit loss on the loans. The Company has established a liability for potential losses related to these representations and warranties with a corresponding provision recorded for loan losses. The liability is included in accounts payable and other liabilities in the Company's consolidated balance sheets and the provision is included in mortgage banking activities, net in the Company's consolidated statements of operations. In assessing the adequacy of the liability, management evaluates various factors including actual losses on repurchases and indemnifications during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry. Actual losses incurred are reflected as charge-offs against the reserve liability. | |
Because of the uncertainty in the various estimates underlying the loan indemnification reserve, there is a range of losses in excess of the recorded loan indemnification reserve that is reasonably possible. The estimate of the range of possible losses for representations and warranties does not represent a probable loss, and is based on current available information, significant judgment, and a number of assumptions that are subject to change. | |
Escrow and Fiduciary Funds | |
The Company maintains segregated bank accounts in trust for investors and escrow balances for mortgagors. The balances of these accounts were $23.6 million at December 31, 2014 and are excluded from the Company's consolidated balance sheets. The Company did not have any segregated bank accounts in trust for investors or escrow balances for mortgagors at December 31, 2013. | |
Net Income (Loss) Per Share | |
The Company's basic earnings per share ("EPS") is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding OP units and Exchangeable Senior Notes were converted to common stock, where such exercise or conversion would result in a lower EPS. The dilutive effect of OP units is computed assuming all units are converted to common stock. The dilutive effect of the Exchangeable Senior Notes is computed assuming shares converted are limited to 1,779,560 pursuant to New York Stock Exchange ("NYSE") restrictions. The 1,779,560 shares of common stock were included in the calculation of diluted EPS as such inclusion was dilutive for the year ended December 31, 2014. | |
Income Taxes | |
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2011. The Company was organized and has operated and intends to continue to operate in a manner that will enable it to qualify to be taxed as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company's annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. GAAP). As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes its net taxable income to stockholders, does not engage in prohibited transactions, and maintains its intended qualification as a REIT. The majority of States also recognize the Company's REIT status. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service (“IRS”) grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. However, it is assumed that the Company will retain its REIT status and will incur no REIT level taxation as it intends to comply with the REIT regulations and annual distribution requirements. | |
The Company has made separate joint elections with three of its subsidiaries, ZFC Funding TRS, ZFC Trust TRS and Honeybee TRS, to treat such subsidiaries as taxable REIT subsidiaries (the “TRS entities”). The Company may perform certain activities through these TRS entities that could adversely impact the Company's REIT qualification if performed other than through a TRS entity. The Company's TRS entities file separate tax returns and are taxed as standalone U.S. C-Corporations irrespective of the dividends-paid deduction available to REITs for federal income tax purposes. | |
The Company assesses its tax positions for all open tax years and records tax benefits only if tax positions meet a more-likely-than-not threshold in accordance with U.S. GAAP for guidance on accounting for uncertainty in income taxes. | |
Goodwill and Intangible Assets | |
The purchase price of GMFS was allocated to the assets acquired, including identifiable intangible assets (trade name, customer relationships, licenses and favorable leases), and the liabilities assumed based on their estimated fair values at the date of acquisition. The excess of purchase price over the fair value of the net assets acquired was recognized as goodwill. Goodwill is carried at cost, net of impairment charges, and reflected on the Company's consolidated balance sheets. | |
Goodwill is not amortized but is tested for impairment on an annual basis, or frequently if events or changes in circumstances indicate that a potential impairment may have occurred. The testing of goodwill for impairment is initially based on a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill. If the facts indicate that it is more likely than not that that an impairment may exist, a two-step quantitative assessment is conducted to (a) calculate the fair value of the reporting unit and compare to its carrying value including goodwill and (b) if the carrying value of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss equal to the amount by which the carrying value of the goodwill exceeds the implied fair value of that goodwill. The impairment is recognized as an expense in the period in which the impairment occurs. | |
The Company does not amortize intangible assets with indefinite lives. The Company amortizes intangible assets with identified estimated useful lives on a straight-line basis over their estimated useful lives. | |
Recent Accounting Pronouncements | |
In January 2014, the FASB issued ASU 2014-04: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (“ASU 2014-04”), to reduce diversity in practice by clarifying when an in substance repossession or foreclosure has occurred and when a creditor should derecognize the associated loan receivable and recognize the real estate property. ASU 2014-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Adoption of ASU 2014-04 is not expected to have a material effect on the Company's consolidated financial statements. | |
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The objective of the guidance is to clarify the principles for recognizing revenue. ASU 2014-09 supersedes most current revenue recognition guidance, including industry-specific guidance, and also enhances disclosure requirements around revenue recognition and the related cash flows. The guidance is to be applied retrospectively to all prior periods presented or through a cumulative adjustment in the year of adoption, for interim and annual periods beginning after December 15, 2016. Early adoption is not permitted. The Company is currently evaluating the impact of adopting this new standard. | |
In June 2014, the FASB issued Accounting Standards Update No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”) which amends the accounting guidance for repo-to-maturity (“RTM”) transactions and repurchase agreements executed as repurchase financings. Under this new accounting guidance, RTMs will be accounted for as secured borrowings rather than sales of an asset, and transfers of financial assets with a contemporaneous repurchase agreement will no longer be evaluated to determine whether they should be accounted for on a combined basis as forward contracts. The new guidance also prescribes additional disclosures particularly on the nature of collateral pledged in repurchase agreements accounted for as secured borrowings. ASU 2014-11 is effective for the first interim or annual reporting periods beginning after December 15, 2014. Adoption of ASU 2014-11 is not expected to have a material effect on the Company's consolidated financial statements. | |
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued. If conditions or events indicate it is probable that an entity will be unable to meet its obligations as they become due within one year after the financial statements are issued, the update requires additional disclosures. The update is effective for periods beginning after December 15, 2016 with early adoption permitted. Adoption of ASU 2014-15 is not expected to have a material effect on the Company's consolidated financial statements. | |
In February 2015, the FASB issued ASU 2015-02, “Consolidation: Amendments to the Consolidation Analysis” (“ASU 2015-02”). ASU 2015-02 makes changes to both the variable interest model and the voting model. The guidance is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of adopting this new standard. | |
GMFS_Transaction
GMFS Transaction | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
GMFS Transaction [Abstract] | |||||||||||||
GMFS Transaction | 3. GMFS Transaction | ||||||||||||
On August 5, 2014, the Company, in its capacity as guarantor, entered into an agreement and plan of merger (the “Merger Agreement”) among ZFC Honeybee TRS, LLC (“Honeybee TRS”), an indirect subsidiary of the Company, ZFC Honeybee Acquisitions, LLC (“Honeybee Acquisitions”), a wholly owned subsidiary of Honeybee TRS, GMFS, and Honeyrep, LLC, solely in its capacity as the security holder representative. GMFS is an origination platform that primarily originates and services agency and government guaranteed residential mortgage loans in the southern United States. On October 31, 2014, the Company completed its acquisition of GMFS. Subject to the terms and conditions of the Merger Agreement, Honeybee Acquisitions was merged with and into GMFS (the “Merger”), with GMFS surviving the Merger as an indirect subsidiary of the Company. | |||||||||||||
The Merger Agreement contains customary representations and warranties by the parties, as well as customary covenants, including non-competition and non-solicitation covenants by GMFS's key managers, a covenant by GMFS to conduct its business and operations in the ordinary course between the date of the Merger Agreement and the closing of the Merger and indemnification covenants by both parties, subject to stated thresholds and limitations. | |||||||||||||
While subject to a final reconciliation of October 31, 2014 values, the preliminary purchase price was approximately $62.8 million at closing which was comprised of (i) the estimated fair market value of GMFS's MSR portfolio, (ii) the estimated value of GMFS's net tangible assets at October 31, 2014 and (iii) a purchase price premium. In addition to cash paid at closing, two contingent $1 million deferred premium payments payable in cash over two years, plus potential additional consideration based on future loan production and profits will be payable over a four-year period if certain conditions are met. The $2 million of deferred premium payments is contingent on GMFS remaining profitable and retaining certain key employees. The additional contingent consideration is dependent on GMFS achieving certain profitability and loan production goals and is capped at $20 million. Up to 50% of the additional contingent consideration may be paid in common stock of the Company, at the Company's option. The Company funded the closing cash payment through a combination of available cash and the liquidation of a portion of its non-agency RMBS portfolio. | |||||||||||||
Total consideration is as follows: | |||||||||||||
Cash paid to owners of GMFS | $ | 62,847,452 | |||||||||||
Contingent consideration | 11,430,413 | ||||||||||||
Total consideration | $ | 74,277,865 | |||||||||||
Contingent consideration represents the estimated present value of future earn-out payments as defined in the Merger Agreement. Contingent consideration was estimated based on future earnings projections of GMFS over the four year earn-out period and is re-measured to fair value at each reporting date until the contingency is resolved. The changes in fair value are recognized in earnings. The final consideration paid could be materially different from the estimate and the difference will be recorded through earnings in the Consolidated Statement of Operations. | |||||||||||||
Under the acquisition method of accounting, the total purchase price allocated to the identifiable tangible and intangible assets acquired and the liabilities assumed is based on management's preliminary valuation of GMFS's tangible and intangible assets acquired by the Company and GMFS's liabilities assumed by the Company as of October 31, 2014, and a preliminary valuation of the net assets acquired is summarized as follows: | |||||||||||||
Fair value of Assets: | |||||||||||||
Cash and cash equivalents | $ | 13,304,612 | |||||||||||
Mortgage loans held for sale | 92,512,390 | ||||||||||||
Mortgage loans held for investment | 1,098,897 | ||||||||||||
Derivative assets | 1,590,160 | ||||||||||||
Other assets | 2,713,950 | ||||||||||||
MSRs | 32,300,337 | ||||||||||||
Goodwill | 16,512,680 | ||||||||||||
Intangible Assets | 5,800,000 | ||||||||||||
Loans eligible for repurchase from Ginnie Mae | 21,169,329 | ||||||||||||
Total assets acquired | 187,002,355 | ||||||||||||
Fair value of Liabilities: | |||||||||||||
Warehouse lines of credit | 85,840,705 | ||||||||||||
Accounts payable and other liabilities | 5,714,456 | ||||||||||||
Liability for loans eligible for repurchase from Ginnie Mae | 21,169,329 | ||||||||||||
Total liabilities assumed | 112,724,490 | ||||||||||||
Fair value of net assets acquired | $ | 74,277,865 | |||||||||||
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired and liabilities assumed and is primarily made up of expected synergies and the assembled workforce of GMFS. This determination of goodwill is preliminary, and is subject to change when the valuation is complete. A preliminary determination of the goodwill is as follows: | |||||||||||||
Total purchase price | $ | 74,277,865 | |||||||||||
Less: Preliminary estimate of the fair value of the net assets acquired | (57,765,185 | ) | |||||||||||
Goodwill | $ | 16,512,680 | |||||||||||
Goodwill has been allocated to the Company's mortgage banking segment. Additionally, goodwill is expected to be deductible for tax purposes over a 15-year life. | |||||||||||||
The preliminary valuation above is based upon information available to the Company at December 31, 2014, and is subject to change. The Company continues to review the underlying assumptions and valuation techniques utilized to calculate the fair value of goodwill and intangible assets acquired. Additional adjustments may be recorded during the allocation period specified by U.S. GAAP as additional information becomes available. | |||||||||||||
The following table presents information about the intangible assets acquired by the Company: | |||||||||||||
Estimated Fair Value | Estimated Useful Life | ||||||||||||
Trade name | $ | 2.0 million | 10 years | ||||||||||
Customer relationships | 1.3 million | 10 years | |||||||||||
Licenses | 1.0 million | 3 years | |||||||||||
Favorable lease | 1.5 million | 12 years | |||||||||||
Total Intangible assets | $ | 5.8 million | |||||||||||
The Company has recognized the following revenues and earnings related to its investment in GMFS for the period from the acquisition date to December 31, 2014 which are reflected in the Company's consolidated statements of operations: | |||||||||||||
Interest income – mortgage loans held for sale | $ | 594,217 | |||||||||||
Mortgage banking activities, net: | |||||||||||||
Gain on sale of mortgage loans, net of direct costs | 5,344,361 | ||||||||||||
Loan origination fee income | 213,540 | ||||||||||||
Provision for loan indemnification | (118,895 | ) | |||||||||||
5,439,006 | |||||||||||||
Loan servicing fee income, net of direct costs | 929,718 | ||||||||||||
Change in fair value of mortgage servicing rights | (1,684,373 | ) | |||||||||||
Other income | 45,861 | ||||||||||||
Total non interest income | 4,730,212 | ||||||||||||
Net income before expenses and taxes relating to Honeybee TRS | $ | 583,073 | |||||||||||
Expenses of Honeybee TRS | (2,710,564 | ) | |||||||||||
Net loss after expenses of Honeybee TRS, before tax | (2,127,491 | ) | |||||||||||
Tax benefit | 850,996 | ||||||||||||
Net loss after expenses of Honeybee TRS, after tax | $ | (1,276,495 | ) | ||||||||||
Amortization expense related to the intangible assets acquired was $131,389 for the year ended December 31, 2014, and is recorded as other expenses in the consolidated statements of operations. Amortization expense related to the intangible assets for the five years subsequent to December 31, 2014 is as follows: | |||||||||||||
2015 | $ | 788,340 | |||||||||||
2016 | $ | 788,340 | |||||||||||
2017 | $ | 732,776 | |||||||||||
2018 | $ | 455,004 | |||||||||||
2019 | $ | 455,004 | |||||||||||
The results of GMFS are included in the Company's results beginning October 31, 2014. The unaudited pro forma revenues and net income of the consolidated entity for the year ended December 31, 2014, assuming the business combination was consummated on January 1, 2013, are as follows: | |||||||||||||
Year Ended | Year Ended | ||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||
Net interest income | $ | 21,623,473 | $ | 15,737,131 | |||||||||
Noninterest Income | |||||||||||||
Mortgage banking activities, net | 41,047,510 | 46,354,596 | |||||||||||
Loan servicing fees, net of direct costs | 5,239,010 | 3,022,447 | |||||||||||
Other income | 673,270 | 709,369 | |||||||||||
Net income | 35,213,626 | 11,465,008 | |||||||||||
The pro forma results are presented for illustrative purposes only and are not intended to represent or be indicative of the actual consolidated results of operations of the Company that would have been achieved had the business combination occurred on January 1, 2013, nor are they intended to represent or be indicative of future results of operations. |
Fair_Value
Fair Value | 12 Months Ended | ||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||||||||||
Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||
Fair Value | 4. Fair Value | ||||||||||||||||||||||||||||||||||||
Fair Value Measurement | |||||||||||||||||||||||||||||||||||||
Financial assets and liabilities recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. | |||||||||||||||||||||||||||||||||||||
The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis at December 31, 2014, by level within the fair value hierarchy: | |||||||||||||||||||||||||||||||||||||
Assets and Liabilities at Fair Value | |||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||
Mortgage loans held for investment | $ | — | $ | — | $ | 415,959,838 | $ | 415,959,838 | |||||||||||||||||||||||||||||
Mortgage loans held for sale | — | 97,690,960 | — | 97,690,960 | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | — | — | 148,585,733 | 148,585,733 | |||||||||||||||||||||||||||||||||
Other Investment Securities | — | — | 2,040,532 | 2,040,532 | |||||||||||||||||||||||||||||||||
MSRs | — | — | 33,378,978 | 33,378,978 | |||||||||||||||||||||||||||||||||
Derivative assets | — | — | 2,485,100 | 2,485,100 | |||||||||||||||||||||||||||||||||
Total | $ | — | $ | 97,690,960 | $ | 602,450,181 | $ | 700,141,141 | |||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||
Derivative liabilities | $ | — | $ | 2,585,184 | $ | — | $ | 2,585,184 | |||||||||||||||||||||||||||||
Total | $ | — | $ | 2,585,184 | $ | — | $ | 2,585,184 | |||||||||||||||||||||||||||||
The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis at December 31, 2013, by level within the fair value hierarchy: | |||||||||||||||||||||||||||||||||||||
Assets and Liabilities at Fair Value | |||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||
Mortgage loans held for investment | $ | — | $ | — | $ | 331,785,542 | $ | 331,785,542 | |||||||||||||||||||||||||||||
Non-Agency RMBS | — | — | 226,155,221 | 226,155,221 | |||||||||||||||||||||||||||||||||
Derivative assets | — | 284,454 | — | 284,454 | |||||||||||||||||||||||||||||||||
Total | $ | — | $ | 284,454 | $ | 557,940,763 | $ | 558,225,217 | |||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||
Derivative liabilities | — | 1,471,607 | $ | — | $ | 1,471,607 | |||||||||||||||||||||||||||||||
Total | $ | — | $ | 1,471,607 | $ | — | $ | 1,471,607 | |||||||||||||||||||||||||||||
The following table presents additional information about the Company's financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||||||||||||||||||
Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||||||||||||||||||
Mortgage | RMBS | Other | Mortgage | RMBS | |||||||||||||||||||||||||||||||||
Loans held for | Investment | Loans held for | |||||||||||||||||||||||||||||||||||
investment | Securities | investment | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | 331,785,542 | $ | 226,155,221 | $ | — | $ | — | $ | 100,911,651 | |||||||||||||||||||||||||||
Total net transfers into/out of Level 3 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Acquisitions | 85,579,169 | 47,034,327 | 12,926,953 | 334,162,044 | 234,397,506 | ||||||||||||||||||||||||||||||||
Proceeds from sales | — | (102,635,229 | ) | (11,067,378 | ) | — | (68,190,593 | ) | |||||||||||||||||||||||||||||
Net accretion of discounts | 7,497,341 | 5,528,538 | 180,438 | 3,059,231 | 3,727,702 | ||||||||||||||||||||||||||||||||
Proceeds from principal repayments | (31,759,326 | ) | (28,197,740 | ) | — | (13,871,059 | ) | (39,338,730 | ) | ||||||||||||||||||||||||||||
Conversion of mortgage loans to REO | (1,796,028 | ) | — | — | — | — | |||||||||||||||||||||||||||||||
Total losses (realized/unrealized) included in earnings | (8,250,003 | ) | (6,694,487 | ) | (226,224 | ) | (6,344,877 | ) | (9,138,009 | ) | |||||||||||||||||||||||||||
Total gains (realized/unrealized) included in earnings | 32,903,143 | 7,395,103 | 226,743 | 14,780,203 | 3,785,694 | ||||||||||||||||||||||||||||||||
Ending balance | $ | 415,959,838 | $ | 148,585,733 | $ | 2,040,532 | $ | 331,785,542 | $ | 226,155,221 | |||||||||||||||||||||||||||
Year Ended December 31, 2014 | |||||||||||||||||||||||||||||||||||||
LPCs | IRLCs | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | — | $ | — | |||||||||||||||||||||||||||||||||
Acquisition of GMFS | — | 2,702,954 | |||||||||||||||||||||||||||||||||||
Change in unrealized gain or loss | 4,037 | (221,891 | ) | ||||||||||||||||||||||||||||||||||
Ending balance | $ | 4,037 | $ | 2,481,063 | |||||||||||||||||||||||||||||||||
Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||||||||||||||||||
Mortgage | RMBS | Other | Mortgage | RMBS | |||||||||||||||||||||||||||||||||
Loans held for | Investment | Loans held for | |||||||||||||||||||||||||||||||||||
investment | Securities | investment | |||||||||||||||||||||||||||||||||||
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | $ | 22,957,500 | $ | (1,039,499 | ) | $ | (226,224 | ) | $ | 7,136,482 | $ | (2,822,969 | ) | ||||||||||||||||||||||||
The following table presents additional information about the Company's MSRs which are also financial instruments that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||||||||||||||||||
Year Ended | |||||||||||||||||||||||||||||||||||||
31-Dec-14 | |||||||||||||||||||||||||||||||||||||
Balance at beginning of year | $ | — | |||||||||||||||||||||||||||||||||||
Acquisition of MSRs in connection with purchase of GMFS | 32,300,337 | ||||||||||||||||||||||||||||||||||||
Additions due to loans sold, servicing retained | 2,763,014 | ||||||||||||||||||||||||||||||||||||
Fair value adjustment:(1) | |||||||||||||||||||||||||||||||||||||
Changes in assumptions(2) | (1,420,925 | ) | |||||||||||||||||||||||||||||||||||
Other changes(3) | (263,448 | ) | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2014 | $ | 33,378,978 | |||||||||||||||||||||||||||||||||||
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | $ | (1,420,925 | ) | ||||||||||||||||||||||||||||||||||
-1 | Included in change in fair value of MSRs on the consolidated statements of operations. | ||||||||||||||||||||||||||||||||||||
-2 | Primarily reflects changes in prepayment assumptions due to changes in interest rates and discount rates. | ||||||||||||||||||||||||||||||||||||
-3 | |||||||||||||||||||||||||||||||||||||
Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period. | |||||||||||||||||||||||||||||||||||||
There were no financial assets or liabilities that were accounted for at fair value on a nonrecurring basis at December 31, 2014 and December 31, 2013. During the year ended December 31, 2014, real estate owned was transferred out of Level 3. There were no other transfers into or out of Level 1, Level 2 or Level 3 during the years ended December 31, 2014 or December 31, 2013. | |||||||||||||||||||||||||||||||||||||
The following tables present quantitative information about the Company's mortgage loans held for investment, real estate securities and Other Investment Securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||||||||||||||||||
Fair Value at | Valuation | Unobservable Input | Min/Max | Weighted | |||||||||||||||||||||||||||||||||
December 31, | Technique(s) | Average | |||||||||||||||||||||||||||||||||||
2014 | |||||||||||||||||||||||||||||||||||||
Mortgage loans held for investment | $ | 415,959,838 | Discounted cash flow model | Constant voluntary prepayment | 1.4 | % | 27.1 | % | 3.9 | % | |||||||||||||||||||||||||||
Constant default rate | 0 | % | 4 | % | 2.9 | % | |||||||||||||||||||||||||||||||
Loss severity | 0 | % | 40.5 | % | 23.8 | % | |||||||||||||||||||||||||||||||
Delinquency | 0.1 | % | 13.6 | % | 10.6 | % | |||||||||||||||||||||||||||||||
Fair Value at | Valuation | Unobservable Input | Min/ Max | Weighted | |||||||||||||||||||||||||||||||||
December 31, | Technique(s) | Average | |||||||||||||||||||||||||||||||||||
2014 | |||||||||||||||||||||||||||||||||||||
Non-Agency RMBS(1) | |||||||||||||||||||||||||||||||||||||
Alternative – A | $ | 61,296,540 | Broker quotes/ comparable trades | Constant voluntary prepayment | 1.6 | % | 24.8 | % | 13.6 | % | |||||||||||||||||||||||||||
Constant default rate | 0.1 | % | 8.4 | % | 3.1 | % | |||||||||||||||||||||||||||||||
Loss severity | 0 | % | 81.1 | % | 20.5 | % | |||||||||||||||||||||||||||||||
Delinquency | 1.3 | % | 25.9 | % | 10.1 | % | |||||||||||||||||||||||||||||||
Pay option adjustable rate | $ | 45,541,325 | Broker quotes/ comparable trades | Constant voluntary prepayment | 1.7 | % | 20.1 | % | 8.9 | % | |||||||||||||||||||||||||||
Constant default rate | 1.6 | % | 19.4 | % | 4.3 | % | |||||||||||||||||||||||||||||||
Loss severity | 0 | % | 66.2 | % | 38 | % | |||||||||||||||||||||||||||||||
Delinquency | 6.8 | % | 29.1 | % | 15.2 | % | |||||||||||||||||||||||||||||||
Prime | $ | 39,065,076 | Broker quotes/ comparable trades | Constant voluntary prepayment | 2.6 | % | 17.3 | % | 9.2 | % | |||||||||||||||||||||||||||
Constant default rate | 0.2 | % | 9.2 | % | 4.1 | % | |||||||||||||||||||||||||||||||
Loss severity | 0 | % | 78.3 | % | 28.2 | % | |||||||||||||||||||||||||||||||
Delinquency | 5 | % | 24.8 | % | 13 | % | |||||||||||||||||||||||||||||||
Subprime | $ | 2,682,792 | Broker quotes/ comparable trades | Constant voluntary prepayment | 2.4 | % | 7.4 | % | 4.7 | % | |||||||||||||||||||||||||||
Constant default rate | 6 | % | 8 | % | 7.7 | % | |||||||||||||||||||||||||||||||
Loss severity | 65 | % | 85 | % | 72 | % | |||||||||||||||||||||||||||||||
Delinquency | 25.5 | % | 27.7 | % | 26.8 | % | |||||||||||||||||||||||||||||||
Total Non-Agency RMBS | $ | 148,585,733 | |||||||||||||||||||||||||||||||||||
-1 | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. | ||||||||||||||||||||||||||||||||||||
Fair Value at | Valuation | Unobservable Input | Weighted | ||||||||||||||||||||||||||||||||||
31-Dec-14 | Technique(s) | Average | |||||||||||||||||||||||||||||||||||
Other Investment Securities(1) | $ | 2,040,532 | Broker quotes/ | Constant voluntary prepayment | 7.5 | % | |||||||||||||||||||||||||||||||
comparable trades | |||||||||||||||||||||||||||||||||||||
-1 | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. | ||||||||||||||||||||||||||||||||||||
The following table presents quantitative information about the Company's MSRs which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||||||||||||||||||
Fair Value at | Valuation | Unobservable Input | Min/Max | Weighted | |||||||||||||||||||||||||||||||||
Year Ended, | Technique(s) | Average | |||||||||||||||||||||||||||||||||||
2014 | |||||||||||||||||||||||||||||||||||||
MSRs | $ | 33,378,978 | Discounted cash flow model | Constant prepayment rate | 7.6 | % | 58.2 | % | 10.6 | % | |||||||||||||||||||||||||||
Cost of servicing | $ | 76 | $ | 533 | $ | 91 | |||||||||||||||||||||||||||||||
Discount rate | 9 | % | 10 | % | 9.4 | % | |||||||||||||||||||||||||||||||
The following is a quantitative summary of key inputs used in the valuation of the Company's MSRs at December 31, 2014 and the effect on the estimated fair value from adverse changes in those assumptions (weighted averages are based upon unpaid principal balance): | |||||||||||||||||||||||||||||||||||||
31-Dec-14 | |||||||||||||||||||||||||||||||||||||
Range | |||||||||||||||||||||||||||||||||||||
(Weighted average) | |||||||||||||||||||||||||||||||||||||
Fair value | |||||||||||||||||||||||||||||||||||||
Discount rate | 9.0% - 10.0 | % | |||||||||||||||||||||||||||||||||||
(9.4 | %) | ||||||||||||||||||||||||||||||||||||
Effect on fair value of adverse change of: | |||||||||||||||||||||||||||||||||||||
5% | $ | (683,406 | ) | ||||||||||||||||||||||||||||||||||
10% | $ | (1,366,812 | ) | ||||||||||||||||||||||||||||||||||
20% | $ | (2,655,493 | ) | ||||||||||||||||||||||||||||||||||
Prepayment speed(1) | 7.6% - 58.2 | % | |||||||||||||||||||||||||||||||||||
(10.6 | %) | ||||||||||||||||||||||||||||||||||||
Effect on fair value of adverse change of: | |||||||||||||||||||||||||||||||||||||
5% | $ | (639,594 | ) | ||||||||||||||||||||||||||||||||||
10% | $ | (1,279,187 | ) | ||||||||||||||||||||||||||||||||||
20% | $ | (2,468,154 | ) | ||||||||||||||||||||||||||||||||||
Per-loan annual cost of servicing | $76 - $533 | ||||||||||||||||||||||||||||||||||||
$ | (91 | ) | |||||||||||||||||||||||||||||||||||
Effect on fair value of adverse change of: | |||||||||||||||||||||||||||||||||||||
5% | $ | (389,384 | ) | ||||||||||||||||||||||||||||||||||
10% | $ | (778,768 | ) | ||||||||||||||||||||||||||||||||||
20% | $ | (1,557,561 | ) | ||||||||||||||||||||||||||||||||||
-1 | Prepayment speed is measured using CPR. | ||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | |||||||||||||||||||||||||||||||||||||
The Company estimates the fair value of IRLCs based on quoted Agency MBS prices, its estimate of the fair value of the MSRs it expects to receive in the sale of the loans and the probability that the mortgage loan will be purchased as a percentage of the commitments it has made (the “pull-through rate”). The Company categorizes IRLCs as a “Level 3” financial statement item. | |||||||||||||||||||||||||||||||||||||
The significant unobservable inputs used in the fair value measurement of the Company's IRLCs are the pull-through rate and the MSR component of the Company's estimate of the value of the mortgage loans it has committed to purchase. Significant changes in the pull-through rate and the MSR component of the IRLCs, in isolation, may result in a significant change in fair value. The financial effects of changes in these assumptions are generally inversely correlated as increasing interest rates have a positive effect on the fair value of the MSR component of IRLC value, but increase the pull-through rate for loans that have decreased in fair value. | |||||||||||||||||||||||||||||||||||||
The following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs: | |||||||||||||||||||||||||||||||||||||
Key inputs | 31-Dec-14 | ||||||||||||||||||||||||||||||||||||
Pull-through rate | |||||||||||||||||||||||||||||||||||||
Range | 55.7% – 100.0% | ||||||||||||||||||||||||||||||||||||
Weighted average | 85.00% | ||||||||||||||||||||||||||||||||||||
MSR value expressed as: | |||||||||||||||||||||||||||||||||||||
Servicing fee multiple | |||||||||||||||||||||||||||||||||||||
Range | 0.4 – 6.0 | ||||||||||||||||||||||||||||||||||||
Weighted average | 4.4 | ||||||||||||||||||||||||||||||||||||
Percentage of unpaid principal balance | |||||||||||||||||||||||||||||||||||||
Range | 0.2% – 1.9% | ||||||||||||||||||||||||||||||||||||
Weighted average | 1.10% | ||||||||||||||||||||||||||||||||||||
The fair value measurements of these assets are sensitive to changes in assumptions regarding prepayment, probability of default, loss severity in the event of default, forecasts of home prices, and significant activity or developments in the real estate market. Significant changes in any of those inputs in isolation may result in significantly higher or lower fair value measurements. A change in the assumption used for forecasts of home price changes is accompanied by directionally opposite changes in the assumptions used for probability of default and loss severity. Significant increases (decreases) in any of these inputs in isolation would result in significantly lower (higher) fair value measurements. | |||||||||||||||||||||||||||||||||||||
Fair Value Option | |||||||||||||||||||||||||||||||||||||
Changes in fair value for assets and liabilities for which the fair value option was elected are recognized in earnings as they occur. The fair value option may be elected on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. | |||||||||||||||||||||||||||||||||||||
The following table presents the difference between the fair value and the aggregate unpaid principal amount and/or notional balance of assets for which the fair value option was elected at December 31, 2014 and December 31, 2013: | |||||||||||||||||||||||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||||||||||||||||||||||
Unpaid | Unpaid Principal | ||||||||||||||||||||||||||||||||||||
Principal and/or | and/or Notional | ||||||||||||||||||||||||||||||||||||
Notional | |||||||||||||||||||||||||||||||||||||
Fair Value | Balance(1) | Difference | Fair Value | Balance(1) | Difference | ||||||||||||||||||||||||||||||||
Financial instruments, at fair value Assets | |||||||||||||||||||||||||||||||||||||
Mortgage loans held for investment | $ | 415,959,838 | $ | 464,877,028 | $ | (48,917,190 | ) | $ | 331,785,542 | $ | 398,828,497 | $ | (67,042,955 | ) | |||||||||||||||||||||||
Mortgage loans held for sale | 97,690,960 | 92,917,659 | 4,773,301 | — | — | — | |||||||||||||||||||||||||||||||
Non-Agency RMBS | 148,585,733 | 226,501,915 | (77,916,182 | ) | 226,155,221 | 324,241,597 | (98,086,376 | ) | |||||||||||||||||||||||||||||
Other Investment Securities | 2,040,532 | 2,250,000 | (209,468 | ) | — | — | — | ||||||||||||||||||||||||||||||
MSRs | 33,378,978 | 3,078,974,342 | (3,045,595,364 | ) | — | — | — | ||||||||||||||||||||||||||||||
Total financial instruments, at fair value | $ | 697,656,041 | $ | 3,865,520,944 | $ | (3,167,864,903 | ) | $ | 557,940,763 | $ | 723,070,094 | $ | (165,129,331 | ) | |||||||||||||||||||||||
-1 | Non-Agency RMBS includes an IO with a notional balance of $48.6 million and $64.3 million at December 31, 2014 and December 31, 2013, respectively. | ||||||||||||||||||||||||||||||||||||
Fair Value of Other Financial Instruments | |||||||||||||||||||||||||||||||||||||
In addition to the above disclosures regarding assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure about the fair value of all other financial instruments. Estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair values. | |||||||||||||||||||||||||||||||||||||
The following table summarizes the estimated fair value for all other financial instruments at December 31, 2014 and December 31, 2013: | |||||||||||||||||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||
Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||||||||||||||||||||||||
Other financial instruments | |||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||
Cash | $ | 33,791,013 | $ | 33,791,013 | $ | 57,060,806 | $ | 57,060,806 | |||||||||||||||||||||||||||||
Restricted cash | 7,143,078 | 7,143,078 | 2,128,236 | 2,128,236 | |||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||
Warehouse lines of credit | $ | 89,417,564 | $ | 89,417,564 | $ | — | — | ||||||||||||||||||||||||||||||
Loan Repurchase Facilities | 300,092,293 | 300,092,293 | 236,727,512 | 236,058,976 | |||||||||||||||||||||||||||||||||
Securities repurchase agreements | 103,014,105 | 103,014,105 | 138,790,158 | 138,591,678 | |||||||||||||||||||||||||||||||||
Exchangeable Senior Notes | 59,933,400 | 55,474,741 | 54,737,573 | 54,539,057 | |||||||||||||||||||||||||||||||||
Cash includes cash on hand for which fair value equals carrying value (a Level 1 measurement). Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives, Loan Repurchase Facilities and securities repurchase agreements. Due to the short-term nature of the restrictions, fair value approximates carrying value (a Level 1 measurement). The fair value of the Company's warehouse lines of credit and repurchase agreements related to its GMFS origination platform, Loan Repurchase Facilities and securities repurchase agreements is based on an expected present value technique using observable market interest rates. As such, the Company considers the estimated fair value to be a Level 2 measurement. This method discounts future estimated cash flows using rates the Company determined best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality. The fair value of the Exchangeable Senior Notes is based on observable market prices (a Level 2 measurement). |
Mortgage_Loans_Held_for_Invest
Mortgage Loans Held for Investment, at Fair Value | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Investment, at Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Investment, at Fair Value | 5. Mortgage Loans Held for Investment, at Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||
Distressed and re-performing loans at the time of purchase | |||||||||||||||||||||||||||||||||||||||||||||||||
During the years ended December 31, 2014 and December 31, 2013, the Company's acquisition of mortgage loans held for investment which showed evidence of credit deterioration at the time of purchase were as follows: | |||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition Date | Aggregate Unpaid Principal Balance | Loan Repurchase Facilities Used | |||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, 2013: | |||||||||||||||||||||||||||||||||||||||||||||||||
22-Mar-13 | $ | 17.7 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||
May 30, 2013 | — | — | -1 | ||||||||||||||||||||||||||||||||||||||||||||||
May 31, 2013 | 134.5 | 78.5 | |||||||||||||||||||||||||||||||||||||||||||||||
July 25, 2013 | 162.4 | 98.7 | |||||||||||||||||||||||||||||||||||||||||||||||
August 28, 2013 | 98.2 | 54.8 | |||||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, 2014: | |||||||||||||||||||||||||||||||||||||||||||||||||
March 27, 2014 | 100.4 | 60.6 | |||||||||||||||||||||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
On May 30, 2013, the Company entered into the Citi Loan Repurchase Facility and utilized $10.6 million of the Citi Loan Repurchase Facility to finance its then existing residential mortgage loan portfolio. | |||||||||||||||||||||||||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's mortgage loans held for investment at December 31, 2014 and December 31, 2013 which showed evidence of credit deterioration at the time of purchase: | |||||||||||||||||||||||||||||||||||||||||||||||||
2014 | |||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid Principal Balance | Premium (Discount) | Amortized Cost | Gross Unrealized(1) | Fair Value | Weighted Average | ||||||||||||||||||||||||||||||||||||||||||||
Gains | Losses | Coupon | Yield(2) | ||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Investment | |||||||||||||||||||||||||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 265,306,697 | $ | -51,501,092 | $ | 213,805,605 | $ | 26,732,362 | $ | (1,383,524 | $ | 239,154,443 | 4.5 | % | 7.28 | % | |||||||||||||||||||||||||||||||||
ARM | 162,858,201 | (21,343,046 | ) | 141,515,155 | 9,568,296 | (1,441,035 | ) | 149,642,416 | 3.59 | 7.1 | |||||||||||||||||||||||||||||||||||||||
Total performing | 428,164,898 | (72,844,138 | ) | 355,320,760 | 36,300,658 | (2,824,559 | ) | 388,796,859 | 4.15 | 7.21 | |||||||||||||||||||||||||||||||||||||||
Non-performing(3) | 35,945,165 | (6,039,073 | ) | 29,906,092 | 840,097 | (4,369,886 | ) | 26,376,303 | 5.48 | 7.13 | |||||||||||||||||||||||||||||||||||||||
Total Mortgage Loans Held for Investment | $ | 464,110,063 | $ | -78,883,211 | $ | 385,226,852 | $ | 37,140,755 | $ | (7,194,445 | $ | 415,173,162 | 4.26 | % | 7.2 | % | |||||||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for these mortgage loans held for investment. The Company recorded a gain of $22.8 million for the year ended December 31, 2014 as change in unrealized gain or loss on mortgage loans held for investment in the consolidated statements of operations. | |||||||||||||||||||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||||||||||||||||||
(3) | |||||||||||||||||||||||||||||||||||||||||||||||||
Loans that are delinquent for 60 days or more are considered non-performing. | |||||||||||||||||||||||||||||||||||||||||||||||||
2013 | |||||||||||||||||||||||||||||||||||||||||||||||||
Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid Principal Balance | Premium (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Investment | |||||||||||||||||||||||||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 212,701,494 | $ | -43,530,581 | $ | 169,170,913 | $ | 7,842,598 | $ | -3,558,171 | $ | 173,455,340 | 4.56 | % | 7.05 | % | |||||||||||||||||||||||||||||||||
ARM | 170,178,466 | (25,617,563 | ) | 144,560,903 | 5,088,302 | (1,556,430 | ) | 148,092,775 | 3.76 | 6.67 | |||||||||||||||||||||||||||||||||||||||
Total performing | 382,879,960 | (69,148,144 | ) | 313,731,816 | 12,930,900 | (5,114,601 | ) | 321,548,115 | 4.2 | 6.88 | |||||||||||||||||||||||||||||||||||||||
Non-performing(3) | 15,948,537 | (5,031,293 | ) | 10,917,244 | 456,024 | (1,135,841 | ) | 10,237,427 | 5.06 | 8.03 | |||||||||||||||||||||||||||||||||||||||
Total Mortgage Loans Held for Investment | $ | 398,828,497 | $ | -74,179,437 | $ | 324,649,060 | $ | 13,386,924 | $ | -6,250,442 | $ | 331,785,542 | 4.24 | % | 6.91 | % | |||||||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans held for investment. The Company recorded a gain of $7.1 million for the year ended December 31, 2013, as change in unrealized gain or loss on mortgage loans in the consolidated statements of operations. | |||||||||||||||||||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||||||||||||||||||
(3) | |||||||||||||||||||||||||||||||||||||||||||||||||
Loans that are delinquent for 60 days or more are considered non-performing. | |||||||||||||||||||||||||||||||||||||||||||||||||
The following table presents the difference between the fair value and the aggregate unpaid principal balance of the Company's mortgage loans held for investment at December 31, 2014 and December 31, 2013 which showed evidence of credit deterioration at the time of purchase: | |||||||||||||||||||||||||||||||||||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Unpaid Principal Balance | Difference | Fair Value | Unpaid Principal Balance | Difference | ||||||||||||||||||||||||||||||||||||||||||||
Loan Type | |||||||||||||||||||||||||||||||||||||||||||||||||
Performing loans: | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 239,154,443 | $ | 265,306,697 | $ | -26,152,254 | $ | 173,455,340 | $ | 212,701,494 | $ | -39,246,154 | |||||||||||||||||||||||||||||||||||||
ARM | 149,642,416 | 162,858,201 | (13,215,785 | ) | 148,092,775 | 170,178,466 | (22,085,691 | ) | |||||||||||||||||||||||||||||||||||||||||
Total performing loans | 388,796,859 | 428,164,898 | (39,368,039 | ) | 321,548,115 | 382,879,960 | (61,331,845 | ) | |||||||||||||||||||||||||||||||||||||||||
Non-performing loans | 26,376,303 | 35,945,165 | (9,568,862 | ) | 10,237,427 | 15,948,537 | (5,711,110 | ) | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 415,173,162 | $ | 464,110,063 | $ | -48,936,901 | $ | 331,785,542 | $ | 398,828,497 | $ | -67,042,955 | |||||||||||||||||||||||||||||||||||||
The following table presents the change in accretable yield for the Company's mortgages held for investment which had shown evidence of credit deterioration since origination at the time of purchase for the years ended December 31, 2014 and December 31, 2013: | |||||||||||||||||||||||||||||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accretable yield, beginning of year | $223,401,697 | $ — | |||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | 55,532,098 | 222,899,189 | |||||||||||||||||||||||||||||||||||||||||||||||
Accretion | -26,137,006 | -10,470,435 | |||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications from nonaccretable difference | 14,713,116 | 10,972,942 | |||||||||||||||||||||||||||||||||||||||||||||||
Accretable yield, end of year | $ 267,509,905 | $ 223,401,697 | |||||||||||||||||||||||||||||||||||||||||||||||
For loans acquired during the year ended December 31, 2014, the contractually required payments and cash flows expected to be collected as of the acquisition date were approximately $187.5 million and $140.3 million, respectively. Additionally, the fair value of the loans acquired as of the acquisition date was equal to the purchase price. | |||||||||||||||||||||||||||||||||||||||||||||||||
Newly originated loans at the time of purchase | |||||||||||||||||||||||||||||||||||||||||||||||||
During the year ended December 31, 2014, the Company acquired newly originated mortgage loans held for investment with an unpaid principal balance of approximately $767,000. In connection with the acquisition the Company used funds from the Loan Repurchase Facilities of approximately $690,000 to fund a portion of the acquisition. | |||||||||||||||||||||||||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's mortgage loans held for investment at December 31, 2014 which were newly originated at the time of purchase: | |||||||||||||||||||||||||||||||||||||||||||||||||
2014 | |||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid Principal Balance | Premium (Discount) | Amortized Cost | Gross Unrealized(1) | Fair Value | Weighted Average | ||||||||||||||||||||||||||||||||||||||||||||
Gains | Losses | Coupon | Yield(2) | ||||||||||||||||||||||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 766,965 | $ | 16,173 | $ | 783,138 | $ | 3,538 | $ | — | $ | 786,676 | 4.38 | % | 4.2 | % | |||||||||||||||||||||||||||||||||
Total Mortgage Loans Held for Investment | $ | 766,965 | $ | 16,173 | $ | 783,138 | $ | 3,538 | $ | — | $ | 786,676 | 4.38 | % | 4.2 | % | |||||||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for these mortgage loans held for investment. The Company recorded a gain of $3,538 as change in unrealized gain or loss on mortgage loans held for investment in the consolidated statements of operations. | |||||||||||||||||||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||||||||||||||||||
Concentrations | |||||||||||||||||||||||||||||||||||||||||||||||||
At December 31, 2014 and December 31, 2013, the Company's mortgage loans held for investment consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of certain concentrations of credit risk in the mortgage loan portfolio at December 31, 2014 and December 31, 2013: | |||||||||||||||||||||||||||||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||
Concentration | |||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of fair value of mortgage loans with unpaid principal balance to current property value in excess of 100% | 55.7 | % | 73.6 | % | |||||||||||||||||||||||||||||||||||||||||||||
Percentage of fair value of mortgage loans secured by properties in the following states: | |||||||||||||||||||||||||||||||||||||||||||||||||
Each representing 10% or more of fair value: | |||||||||||||||||||||||||||||||||||||||||||||||||
California | 26.2 | % | 25.6 | % | |||||||||||||||||||||||||||||||||||||||||||||
Florida | 16.6 | % | 17.8 | % | |||||||||||||||||||||||||||||||||||||||||||||
Additional state representing more than 5% of fair value: | |||||||||||||||||||||||||||||||||||||||||||||||||
Georgia | 5.7 | % | 6.8 | % | |||||||||||||||||||||||||||||||||||||||||||||
New York | 5.1 | % | — | ||||||||||||||||||||||||||||||||||||||||||||||
At December 31, 2014, the interest rates on the Company's mortgage loans held for investment ranged from 1.75% – 12.20% and the contractual maturities ranged from 1 – 46 years. | |||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage_Loans_Held_for_Sale
Mortgage Loans Held for Sale | 12 Months Ended | ||
Dec. 31, 2014 | |||
Mortgage Loans Held for Sale [Abstract] | |||
Mortgage Loans Held for Sale | 6. Mortgage Loans Held for Sale | ||
The following summarizes mortgage loans held for sale, at fair value for the year ended December 31, 2014: | |||
Unpaid Principal Balance | Fair Value | ||
Conventional | $55,073,645 | $57,058,195 | |
Governmental | 13,407,781 | 14,601,797 | |
Reverse mortgage | 1,600,449 | 1,765,552 | |
United States Department of Agriculture loans | 16,105,088 | 17,069,138 | |
United States Department of Veteran Affairs loan | 6,730,696 | 7,196,278 | |
Total | $92,917,659 | $97,690,960 | |
For the year ended December 31, 2014 all of the Company's mortgage loans held for sale were pledged to secure warehouse lines of credit and repurchase agreements related to its GMFS origination platform. | |||
Real_Estate_Securities_and_Oth
Real Estate Securities and Other Investment Securities | 12 Months Ended | ||||||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||||||
Real Estate Securities and Other Investment Securities [Abstract] | |||||||||||||||||||||||||||||||||
Real Estate Securities and Other Investment Securities | 7. Real Estate Securities and Other Investment Securities | ||||||||||||||||||||||||||||||||
The Company's non-Agency RMBS portfolio is not issued or guaranteed by Fannie Mae, Freddie Mac or any other U.S. Government agency or a federally chartered corporation and is therefore subject to additional credit risks. | |||||||||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's RMBS and Other Investment Securities at December 31, 2014: | |||||||||||||||||||||||||||||||||
Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||||||||||
Principal or Notional Balance | Premium (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||||||||
Real estate securities | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||||||||
Alternative – A(3) | $ | 118,547,109 | $ | (58,583,222 | $ | 59,963,887 | $ | 1,916,611 | $ | (583,958 | ) | $ | 61,296,540 | 3.44 | % | 7.03 | % | ||||||||||||||||
Pay option adjustable rate | 58,122,808 | (11,491,663 | ) | 46,631,145 | 80,848 | (1,170,668 | ) | 45,541,325 | 0.93 | 6.12 | |||||||||||||||||||||||
Prime | 43,803,995 | (6,219,091 | ) | 37,584,904 | 1,545,452 | (65,280 | ) | 39,065,076 | 3.6 | 6.79 | |||||||||||||||||||||||
Subprime | 6,028,003 | (3,290,867 | ) | 2,737,136 | - | (54,344 | ) | 2,682,792 | 0.33 | 16.98 | |||||||||||||||||||||||
Total RMBS | $ | 226,501,915 | $ | (79,584,843 | ) | $ | 146,917,072 | $ | 3,542,911 | $ | (1,874,250 | $ | 148,585,733 | 2.62 | % | 6.96 | % | ||||||||||||||||
Other Investment Securities | $ | 2,250,000 | $ | 16,756 | $ | 2,266,756 | $ | - | $ | (226,224 | ) | $ | 2,040,532 | 3.92 | % | 5.9 | % | ||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for its real estate securities and Other Investment Securities. The Company recorded a loss of $3.0 million for the year ended December 31, 2014, as change in unrealized gain or loss on real estate securities in the consolidated statements of operations. The Company also recorded a loss of $0.2 million for the year ended December 31, 2014, as change in unrealized gain or loss on Other Investment Securities in the consolidated statements of operations. | |||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||
(3) | |||||||||||||||||||||||||||||||||
Alternative – A RMBS includes an IO with a notional balance of $48.6 million. | |||||||||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's RMBS at December 31, 2013: | |||||||||||||||||||||||||||||||||
Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||||||||||
Principal or Notional Balance | Premium (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||||||||
Real estate securities | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||||||||
Alternative – A(3) | $ | 160,590,487 | $ | -80,206,745 | $ | 80,383,742 | $ | 2,414,864 | $ | -1,112,077 | $ | 81,686,529 | 4.26 | 6.77 | |||||||||||||||||||
Pay option adjustable rate | 34,374,028 | (7,057,026 | ) | 27,317,002 | 464,756 | (345,915 | ) | 27,435,843 | 0.76 | 6.8 | |||||||||||||||||||||||
Prime | 109,136,108 | (13,590,489 | ) | 95,545,619 | 3,751,248 | (767,825 | ) | 98,529,042 | 4.77 | 6.45 | |||||||||||||||||||||||
Subprime | 20,140,974 | (1,894,417 | ) | 18,246,557 | 536,407 | (279,157 | ) | 18,503,807 | 1.07 | 5.97 | |||||||||||||||||||||||
Total RMBS | $ | 324,241,597 | $ | -102,748,677 | $ | 221,492,920 | $ | 7,167,275 | $ | -2,504,974 | $ | 226,155,221 | 3.8 | % | 6.57 | % | |||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. | |||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||
(3) | |||||||||||||||||||||||||||||||||
Alternative – A RMBS includes an IO with a notional balance of $64.3 million. | |||||||||||||||||||||||||||||||||
The following table presents certain information regarding the Company's non-Agency RMBS at December 31, 2014 by weighted average life: | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||||||||
Fair Value | Amortized Cost | Weighted Average Yield | |||||||||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||||||||
Greater than 5 years | $ | 148,585,733 | $ | 146,917,072 | 6.96 | % | |||||||||||||||||||||||||||
$ | 148,585,733 | $ | 146,917,072 | 6.96 | % | ||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||||||||||||||||||||||||||||||||
At December 31, 2014, the contractual maturities of the real estate securities ranged from 20.3 to 32.3 years, with a weighted average maturity of 24.9 years. All real estate securities held by the Company at December 31, 2014 were issued by issuers based in the United States. | |||||||||||||||||||||||||||||||||
The following table presents certain information regarding the Company's Other Investment Securities at December 31, 2014 by weighted average life: | |||||||||||||||||||||||||||||||||
Other Investment Securities | |||||||||||||||||||||||||||||||||
Fair Value | Amortized Cost | Weighted Average Yield | |||||||||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||||||||
Greater than 5 years | $ | 2,040,532 | $ | 2,266,756 | 5.9 | % | |||||||||||||||||||||||||||
$ | 2,040,532 | $ | 2,266,756 | 5.9 | % | ||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
Actual maturities of Other Investment Securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||||||||||||||||||||||||||||||||
At December 31, 2014, the contractual maturity of the Other Investment Securities was 9.7 years, with a weighted average maturity of 9.7 years. All Other Investment Securities held by the Company at December 31, 2014 were issued by issuers based in the United States. | |||||||||||||||||||||||||||||||||
The following table presents certain information regarding the Company's non-Agency RMBS at December 31, 2013 by weighted average life: | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||||||||
Fair Value | Amortized Cost | Weighted Average Yield | |||||||||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||||||||
Greater than 5 years | $ | 226,155,221 | $ | 221,492,920 | 6.57 | % | |||||||||||||||||||||||||||
$ | 226,155,221 | $ | 221,492,920 | 6.57 | % | ||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||||||||||||||||||||||||||||||||
At December 31, 2013, the contractual maturities of the real estate securities ranged from 7.7 to 33.0 years, with a weighted average maturity of 24.0 years. All real estate securities held by the Company at December 31, 2013 were issued by issuers based in the United States. | |||||||||||||||||||||||||||||||||
The following table presents certain additional information regarding the Company's RMBS: | |||||||||||||||||||||||||||||||||
Year Ended | |||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | |||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||||||||||||||||||
Proceeds from the sale of real estate securities | $ | 102,635,229 | $ | 291,348,906 | $ | 74,216,314 | |||||||||||||||||||||||||||
Proceeds from the sale of other investment securities | 11,067,378 | — | — | ||||||||||||||||||||||||||||||
Realized gain (loss) on the sale of real estate securities | 3,694,255 | (7,937,665 | ) | 28,858 | |||||||||||||||||||||||||||||
Realized gain (loss) on the sale of other investment securities | 226,743 | — | — | ||||||||||||||||||||||||||||||
Realized loss on OTTI | — | (1,108,024 | ) | (215,345 | ) | ||||||||||||||||||||||||||||
Mortgage_Servicing_Rights
Mortgage Servicing Rights | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Mortgage Servicing Rights [Abstract] | |||||||||||||
Mortgage Servicing Rights | 8. Mortgage Servicing Rights | ||||||||||||
The Company's MSRs consist of conforming conventional loans sold to Fannie Mae and Freddie Mac or loans securitized in Ginnie Mae securities. Similarly, the government loans serviced by the Company are secured through Ginnie Mae, whereby the Company is insured against loss by the FHA or partially guaranteed against loss by the VA. | |||||||||||||
The activity of MSRs for the year ended December 31, 2014 is as follows: | |||||||||||||
Balance at beginning of year | $ | — | |||||||||||
Acquisition of MSRs in connection with purchase of GMFS | 32,300,337 | ||||||||||||
Additions due to loans sold, servicing retained | 2,763,014 | ||||||||||||
Fair value adjustment:(1) | |||||||||||||
Changes in assumptions(2) | (1,420,925 | ) | |||||||||||
Other changes(3) | (263,448 | ) | |||||||||||
Balance at December 31, 2014 | $ | 33,378,978 | |||||||||||
-1 | Included in change in fair value of MSRs in the Company's consolidated statements of operations. | ||||||||||||
-2 | Primarily reflects changes in prepayment assumptions due to changes in interest rates and discount rates. | ||||||||||||
-3 | Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid off during the period. | ||||||||||||
The Company's MSR portfolio at December 31, 2014 is summarized as follows: | |||||||||||||
Unpaid Principal Balance | Fair Value | ||||||||||||
Fannie Mae | $ | 1,640,799,719 | $ | 17,078,181 | |||||||||
Ginnie Mae | 1,146,234,768 | 13,102,076 | |||||||||||
Freddie Mac | 291,939,855 | 3,198,721 | |||||||||||
Total | $ | 3,078,974,342 | $ | 33,378,978 | |||||||||
The Company contracts with licensed sub-servicers to perform all servicing functions for these loans. The following table presents the loan servicing fee income, net of direct costs: | |||||||||||||
Income | $ | 1,412,583 | |||||||||||
Late charges | 60 | ||||||||||||
Cost of sub-servicer | (482,925 | ) | |||||||||||
Loan servicing fees, net of direct costs | $ | 929,718 | |||||||||||
Warehouse_Lines_of_Credit
Warehouse Lines of Credit (Warehouse Agreement Borrowings [Member]) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Warehouse Agreement Borrowings [Member] | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Debt Disclosure | 9. Warehouse Lines of Credit | ||||||||||||
The Company has a $45,000,000 master repurchase agreement expiring January 15, 2015, which provides financing for the Company's origination of mortgage loans held for sale. Interest under the agreement is at 2.30% above LIBOR. The line is collateralized by the underlying mortgages and related documents and instruments. The Company is in current negotiations to renew the agreement for a twelve month period. The outstanding balance under the master repurchase agreement was $21,210,431 at December 31, 2014. The terms of this agreement were amended subsequent to December 31, 2014 (see Note 27 - Subsequent Events). | |||||||||||||
The Company has a $35,000,000 warehouse line of credit agreement expiring September 28, 2015, which provides financing for the Company's origination of mortgage loans held for sale. Interest under the agreement is 2.25% above LIBOR with a LIBOR floor of 2.50%. The line is collateralized by the underlying mortgages and related documents and instruments. The outstanding balance under the line amounted to $27,499,080 at December 31, 2014. | |||||||||||||
The Company has a $30,000,000 warehouse line of credit expiring October 26, 2015, which provides financing for the Company's origination of mortgage loans held for sale. Interest under the agreement is at 2.25% above LIBOR with a 2.75% floor. The line is collateralized by the underlying mortgages and related documents and instruments. The outstanding balance under the line amounted to $29,619,453 at December 31, 2014. | |||||||||||||
During 2014, the Company entered into a $20,000,000 master repurchase agreement expiring June 30, 2016, which provides financing for the Company's origination of mortgage loans held for sale. Interest under the agreement is at 2.75% above LIBOR. The line is collateralized by the underlying mortgages and related documents and instruments. The outstanding balance under the line amounted to $11,088,600 at December 31, 2014. | |||||||||||||
The above agreements contain covenants that include certain financial requirements, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and current ratio and limitations on capital expenditures, indebtedness, distributions, transactions with affiliates and maintenance of positive net income, as defined in the agreements. The Company was in compliance with all significant debt covenants for the year ended December 31, 2014. | |||||||||||||
The following table presents certain information regarding the Company's warehouse lines of credit at December 31, 2014 by remaining maturity: | |||||||||||||
31-Dec-14 | |||||||||||||
Balance | Weighted Average | ||||||||||||
Rate | |||||||||||||
Warehouse lines of credit maturing within | |||||||||||||
30 days or less | $ | 21,210,431 | 2.47 | % | |||||||||
Greater than 180 days to 1 year | 57,118,533 | 2.46 | |||||||||||
Greater than 1 year | 11,088,600 | 2.92 | |||||||||||
Total/weighted average | $ | 89,417,564 | 2.52 | % | |||||||||
Loan_Repurchase_Facility
Loan Repurchase Facility (Line of Credit [Member]) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Line of Credit [Member] | |||||||||||||||||
Short-term Debt [Line Items] | |||||||||||||||||
Debt Disclosure | 10. Loan Repurchase Facilities | ||||||||||||||||
The Loan Repurchase Facilities are used to fund purchases of the following mortgage loans held for investment: | |||||||||||||||||
Loan Repurchase Facility for Distressed and Re-Performing Loans | |||||||||||||||||
The Company entered into a master repurchase agreement with Citibank, N.A (the "Citi Loan Repurchase Facility") on May 30, 2013 to fund its distressed and re-performing loan portfolio with a borrowing capacity of $250.0 million, and was committed for a period of 364 days from inception. On March 27, 2014, the Company entered into an amendment of the Citi Loan Repurchase Facility providing it with an additional $75.0 million of uncommitted borrowing capacity for a total borrowing capacity of $325.0 million. On May 23, 2014 the Company entered into an amendment with Citi extending the termination date of the facility to May 22, 2015. The obligations are fully guaranteed by the Company. The Citi Loan Repurchase Facility had an outstanding balance of $299,402,024 and $236,058,976 at December 31, 2014 and December 31, 2013, respectively. | |||||||||||||||||
Loan Repurchase Facility for Newly Originated Loans | |||||||||||||||||
The Company entered into a master repurchase agreement with Credit Suisse First Boston Mortgage Capital LLC (the "Credit Suisse Loan Repurchase Facility") on August 14, 2014 to fund its newly originated loan portfolio with a borrowing capacity of $100.0 million, of which the entire $100.0 million is committed for a period of 364 days from inception. The obligations are fully guaranteed by the Company. The Credit Suisse Loan Repurchase Facility had an outstanding balance of $690,269 at December 31, 2014. | |||||||||||||||||
The principal amount paid by the lenders under the Loan Repurchase Facilities for the Trust Certificates, which represent interests in residential mortgage loans, is based on (i) in the case of the Citi Loan Repurchase Facility, a percentage of the lesser of the market value or the unpaid principal balance of such mortgage loans backing the Trust Certificates and (ii) in the case of the Credit Suisse Loan Repurchase Facility, a percentage of the lesser of the market value, the unpaid principal balance or the acquisition price of such mortgage loans backing the Trust Certificates. Upon the Company's repurchase of a Trust Certificates sold to the lenders under the Loan Repurchase Facilities, the Company is required to repay the lenders a repurchase amount based on the purchase price plus accrued interest. The Company is also required to pay the lenders a commitment fee for the Loan Repurchase Facilities, as well as certain other administrative costs and expenses in connection with the lenders' structuring, management and ongoing administration of the Loan Repurchase Facilities. The commitment fees are included in interest expense in the consolidated statements of operations. | |||||||||||||||||
The Loan Repurchase Facilities contain margin call provisions that provide the lenders with certain rights in the event of a decline in the market value of the mortgage loans backing the purchased Trust Certificates, subject to a floor amount. Under these provisions, the lenders may require the Company to transfer cash sufficient to eliminate any margin deficit resulting from such a decline. | |||||||||||||||||
The following table presents certain information regarding the Company's Loan Repurchase Facilities at December 31, 2014 and December 31, 2013, by remaining maturity: | |||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||
Balance | Weighted Average Rate | Balance | Weighted Average Rate | ||||||||||||||
Loan Repurchase Facilities borrowings maturing within | |||||||||||||||||
91-180 days | $ | 299,402,024 | 2.92 | % | $ | 236,058,976 | 2.92 | % | |||||||||
Greater than 180 days to 1 year | 690,269 | 2.46 | % | — | — | ||||||||||||
Total/weighted average | $ | 300,092,293 | 2.92 | % | $ | 236,058,976 | 2.92 | % | |||||||||
The following table presents information with respect to the Company's posting of mortgage loan collateral for the Loan Repurchase Facilities at December 31, 2014 and December 31, 2013: | |||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||
Loan Repurchase Facilities secured by mortgage loans held for investment | $ | 300,092,293 | $ | 236,058,976 | |||||||||||||
Fair value of Trust Certificates pledged as collateral under Loan Repurchase Facilities | 415,814,067 | 331,522,165 | |||||||||||||||
Fair value of mortgage loans not pledged as collateral under Loan Repurchase Facilities | 145,771 | 263,377 | |||||||||||||||
Cash pledged as collateral under Loan Repurchase Facilities | — | — | |||||||||||||||
Unused Amount(1) | 124,907,707 | 13,941,024 | |||||||||||||||
-1 | The amount the Company is able to borrow under the Loan Repurchase Facilities is tied to the fair value of unencumbered Trust Certificates eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold. | ||||||||||||||||
The following table presents additional information with respect to the Loan Repurchase Facilities: | |||||||||||||||||
Year Ended | Year Ended | ||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||
Weighted average interest rate | 3.11 | % | 2.92 | % | |||||||||||||
Average unpaid principal balance of loans sold under agreements to repurchase | $ | 193,332 | $ | 273,786 | |||||||||||||
Maximum daily amount outstanding | $ | 310,575,669 | $ | 242,099,994 | |||||||||||||
Total interest expense | $ | 8,906,849 | $ | 3,612,167 | |||||||||||||
The Company did not have any loan repurchase facilities during the year ended December 31, 2012. | |||||||||||||||||
Securities_Repurchase_Agreemen
Securities Repurchase Agreements | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Securities Repurchase Agreements [Abstract] | |||||||||||||||||||||||||
Securities Repurchase Agreements | 11. Securities Repurchase Agreements | ||||||||||||||||||||||||
Repurchase agreements related to real estate securities and Other Investment Securities involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date. The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." Repurchase agreements related to real estate securities and Other Investment Securities entered into by the Company are accounted for as financings and require the repurchase of the transferred securities at the end of each arrangement's term, typically 30 to 90 days. The Company maintains the beneficial interest in the specific securities pledged during the term of the repurchase arrangement and receives the related principal and interest payments. Interest rates on these borrowings are fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the repurchase arrangement at which time the Company may enter into a new repurchase arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty. In response to declines in fair value of pledged securities due to changes in market conditions or the publishing of monthly security paydown factors, the lender requires the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparty in order to re-establish the agreed-upon collateral requirements, referred to as margin calls. Under the terms of the Company's master repurchase agreements related to real estate securities and Other Investment Securities, the counterparty may sell or re-hypothecate the pledged collateral. | |||||||||||||||||||||||||
The following table presents certain information regarding the Company's securities repurchase agreements at December 31, 2014 and December 31, 2013 by remaining maturity and collateral type: | |||||||||||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||||||||||
Non-Agency RMBS | Other Investment Securities | Non-Agency RMBS | |||||||||||||||||||||||
Balance | Weighted Average Rate | Balance | Weighted Average Rate | Balance | Weighted Average Rate | ||||||||||||||||||||
Securities repurchase agreements maturing within | |||||||||||||||||||||||||
30 days or less | $ | 101,553,292 | 1.57 | % | $ | 1,460,813 | 1.66 | % | $ | 121,913,678 | 1.9 | % | |||||||||||||
31-60 days | — | — | — | — | 6,415,000 | 1.84 | |||||||||||||||||||
61-90 days | — | — | — | — | 10,263,000 | 1.85 | |||||||||||||||||||
Total/weighted average | $ | 101,553,292 | 1.57 | % | $ | 1,460,813 | 1.66 | % | $ | 138,591,678 | 1.89 | % | |||||||||||||
Although securities repurchase agreements are committed borrowings until maturity, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or cash to fund margin calls. | |||||||||||||||||||||||||
The following table presents information with respect to the Company's posting of collateral under its securities repurchase agreements at December 31, 2014 and December 31, 2013: | |||||||||||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||||||||||
Securities repurchase agreements secured by non-Agency RMBS | $ | 101,553,292 | $ | 138,591,678 | |||||||||||||||||||||
Securities repurchase agreements secured by Other Investment Securities | 1,460,813 | — | |||||||||||||||||||||||
Fair value of non-Agency RMBS pledged as collateral | 135,779,193 | 183,722,511 | |||||||||||||||||||||||
Fair value of Other Investment Securities pledged as collateral | 2,040,532 | — | |||||||||||||||||||||||
Fair value of non-Agency RMBS not pledged as collateral | 12,806,540 | 42,432,710 | |||||||||||||||||||||||
Fair value of Other Investment Securities not pledged as collateral | — | — | |||||||||||||||||||||||
Cash pledged as collateral | 684,256 | 1,360,528 | |||||||||||||||||||||||
80_Exchangeable_Senior_Notes_d
8.0% Exchangeable Senior Notes due 2016 | 12 Months Ended |
Dec. 31, 2014 | |
8.0% Exchangeable Senior Notes due 2016 [Abstract] | |
8.0% Exchangeable Senior Notes due 2016 | 12. 8.0% Exchangeable Senior Notes due 2016 |
On November 25, 2013, the Operating Partnership issued the Exchangeable Senior Notes with an aggregate principal amount of $57.5 million. The Exchangeable Senior Notes were issued pursuant to an Indenture, dated November 25, 2013, between the Company, as guarantor, the Operating Partnership and U.S. Bank National Association, as trustee. The sale of the Exchangeable Senior Notes generated net proceeds of approximately $55.3 million. Aggregate estimated offering expenses in connection with the transaction, including the initial purchasers' discount of approximately $1.7 million, were approximately $2.2 million. The unamortized discount as of December 31, 2014 and December 31, 2013 was $2.0 million and $3.0 million, respectively. | |
The Exchangeable Senior Notes bear interest at a rate of 8.0% per year, payable semiannually in arrears on May 15 and November 15 of each year, beginning on May 15, 2014. The effective interest rate of the Exchangeable Senior Notes, which is equal to the stated rate of 8.0% plus the amortization of the original issue discount and associated costs, is 10.2%. For the years ended December 31, 2014 and December 31, 2013, the interest incurred on this indebtedness was $5.7 million and $0.6 million, respectively. The Exchangeable Senior Notes will mature on November 15, 2016 (the "Maturity Date"), unless previously exchanged or repurchased in accordance with their terms. The Exchangeable Senior Notes are the Company's senior unsecured obligations and rank senior in right of payment to the Company's existing and future indebtedness that is expressly subordinated in right of payment to the Exchangeable Senior Notes; equal in right of payment to the Company's existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness (including existing unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries, financing vehicles or similar facilities. | |
The Exchangeable Senior Notes are exchangeable for shares of the Company's common stock or, to the extent necessary to satisfy NYSE listing requirements, cash, at the applicable exchange rate at any time prior to the close of business on the scheduled trading day prior to the Maturity Date. The Company may not elect to issue shares of common stock upon exchange of the Exchangeable Senior Notes to the extent such election would result in the issuance of 20% or more of the common stock outstanding immediately prior to the issuance of the Exchangeable Senior Notes (or 1,779,560 or more shares). | |
As a result of the NYSE related limitation on the use of share-settlement for the full conversion option, the embedded conversion option does not qualify for equity classification and instead is separately valued and accounted for as a derivative liability. The initial value allocated to the derivative liability was $1.3 million, which represents a discount to the debt to be amortized through interest expense using the effective interest method through the Maturity Date. During each reporting period, the derivative liability is marked to fair value through earnings. At December 31, 2014 and December 31, 2013, the derivative liability had a fair value of $1.0 million and $1.5 million, respectively. | |
The exchange rate was initially 52.5417 shares of common stock per $1,000 principal amount of Exchangeable Senior Notes (equivalent to an initial exchange price of approximately $19.03 per share of common stock). The exchange rate will be subject to adjustment for certain events, including for regular quarterly dividends in excess of $0.50 per share, but will not be adjusted for any accrued and unpaid interest. In addition, if certain corporate events occur prior to the Maturity Date, the exchange rate will be increased but will in no event exceed 60.4229 shares of common stock per $1,000 principal amount of Exchangeable Senior Notes. The exchange rate was adjusted on December 27, 2013 to 54.3103 shares of common stock per $1,000 principal amount of Exchangeable Senior Notes pursuant to the Company's special dividend of $0.55 per share of common stock and OP unit declared on December 19, 2013. | |
The Company does not have the right to redeem the Exchangeable Senior Notes prior to the Maturity Date, except to the extent necessary to preserve its qualification as a REIT for U.S. federal income tax purposes. No sinking fund is provided for the Exchangeable Senior Notes. In addition, if the Company undergoes certain corporate events that constitute a "fundamental change," the holders of the Exchangeable Senior Notes may require the Company to repurchase for cash all or part of their Exchangeable Senior Notes at a repurchase price equal to 100% of the principal amount of the Exchangeable Senior Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. | |
Derivative_Instruments
Derivative Instruments | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Derivative Instruments [Abstract] | |||||||||||||||||
Derivative Instruments | 13. Derivative Instruments | ||||||||||||||||
Interest Rate Swap and Swaption Agreements | |||||||||||||||||
To help mitigate exposure to higher short-term interest rates, the Company uses currently-paying and forward-starting, three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. Additionally, the Company enters into interest rate swaption agreements which gives the Company the right, but not the obligation, to enter into a previously agreed upon swap contract on a future date. If exercised the Company will enter into an interest rate swap agreement and is obligated to pay a fixed rate of interest and receive a floating rate of interest. These swap agreements establish an economic fixed rate on related borrowings because the variable-rate payments received on the interest rate swap agreements largely offset interest accruing on the related borrowings, leaving the fixed-rate payments to be paid on the interest rate swap agreements as the Company's effective borrowing rate, subject to certain adjustments including changes in spreads between variable rates on the interest rate swap agreements and actual borrowing rates. | |||||||||||||||||
The Company's interest rate swap agreements and interest rate swaption agreement have not been designated as hedging instruments. | |||||||||||||||||
LPCs | |||||||||||||||||
The Company enters into LPCs as a means to avoid interest rate risk. The LPCs are pursuant to Master Loan Purchase Agreements with approved, third party residential loan originators to purchase residential loans, which meet the guidelines established by the Company, at a future date. LPCs provide that loans acceptable to the Company be delivered if and when they close and are subject to "pair off" fees if the loans are not delivered by the seller. | |||||||||||||||||
IRLCs | |||||||||||||||||
The Company enters into IRLCs to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time (generally between 30 and 90 days), with customers who have applied for a loan and meet certain credit and underwriting criteria. | |||||||||||||||||
MBS Forward Sales Contracts and TBA Securities | |||||||||||||||||
Mortgage Banking Segment | |||||||||||||||||
The Company manages the interest rate price risk associated with its outstanding IRLCs and mortgage loans held for sale by entering into derivative loan instruments such as MBS forward sales contracts, some of which are TBA securities. The Company expects these derivatives will experience changes in fair value opposite to changes in fair value of the IRLCs and mortgage loans held for sale, thereby reducing earnings volatility. The Company takes into account various factors and strategies in determining the portion of the interest lock commitments and mortgage loans held for sale it wants to economically hedge. | |||||||||||||||||
Mortgage Loans Held for Investment Segment | |||||||||||||||||
The Company may, and has in the past, entered into TBA contracts as a means of acquiring exposure to Agency RMBS and may, from time to time, utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company may choose, prior to settlement, to move the settlement of these securities to a later date by entering into an offsetting position (referred to as a "pair off"), settling the paired off positions against each other for cash, and simultaneously entering into a similar TBA contract for a later settlement date, which is commonly and collectively referred to as a "dollar roll" transaction. The Company accounts for its TBA contracts as derivative instruments due to the fact that it does not intend to take physical delivery of the securities. | |||||||||||||||||
The Company had no exposure to TBA contracts at any time during the year ended December 31, 2014. During the year ended December 31, 2013, the Company paired off purchases of TBA securities with a combined notional amount of $643.0 million by entering into simultaneous sales of TBA securities and realized losses of $4.2 million and recognized a change in unrealized gains or losses of $0.5 million as a result. At December 31, 2014 and December 31, 2013, the Company did not have any TBA contracts outstanding. | |||||||||||||||||
Conversion Option – 8% Exchangeable Senior Notes Due 2016 | |||||||||||||||||
Changes in the fair value of the conversion option derivative related to the Exchangeable Senior Notes are recorded through earnings. | |||||||||||||||||
Derivative Instruments | |||||||||||||||||
The following table summarizes information related to derivative instruments at December 31, 2014 and December 31, 2013: | |||||||||||||||||
Non-hedge derivatives | 31-Dec-14 | December 31, 2013 | |||||||||||||||
Notional amount of interest rate swaption | $ | 225,000,000 | $ | — | |||||||||||||
Notional amount of interest rate swaps | 17,200,000 | 17,200,000 | |||||||||||||||
LPCs (Principal balance of underlying loans) | 1,905,700 | — | |||||||||||||||
IRLCs (Principal balance of underlying loans) | 118,486,590 | — | |||||||||||||||
MBS forward sales contracts | 154,000,000 | — | |||||||||||||||
The notional amount is not representative of the maximum exposure to the Company. | |||||||||||||||||
The following table presents the fair value of the Company's derivative instruments and their balance sheet location at December 31, 2014 and December 31, 2013: | |||||||||||||||||
Derivative instruments | Designation | Balance Sheet Location | December 31, 2014 | 31-Dec-13 | |||||||||||||
Interest rate swaption | Non-hedge | Derivative assets, at fair value | $ | — | $ | — | |||||||||||
Interest rate swaps | Non-hedge | Derivative (liabilities)/assets, at fair value | (860,553 | ) | 284,454 | ||||||||||||
Exchangeable Senior Notes conversion option | Non-hedge | Derivative liabilities, at fair value | (1,022,248 | ) | (1,471,607 | ) | |||||||||||
LPCs | Non-hedge | Derivative assets, at fair value | 4,037 | — | |||||||||||||
IRLCs | Non-hedge | Derivative assets, at fair value | 2,481,063 | — | |||||||||||||
MBS forward sales contracts | Non-hedge | Derivative liabilities, at fair value | (702,383 | ) | — | ||||||||||||
The following table summarizes gains and losses related to derivatives: | |||||||||||||||||
Non-hedge derivatives | Income Statement Location | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||||
Interest rate swaption | Gain/(loss) on derivative instruments | $ | (4,803,750 | $ | — | $ | — | ||||||||||
Interest rate swaps | Gain/(loss) on derivative instruments | (1,571,371 | ) | 10,548,012 | (1,171,219 | ) | |||||||||||
Exchangeable Senior Notes conversion option | Gain/(loss) on derivative instruments | 449,359 | (147,201 | ) | — | ||||||||||||
TBAs | Gain/(loss) on derivative instruments | — | (4,785,996 | ) | — | ||||||||||||
LPCs | Gain/(loss) on derivative instruments | 4,037 | — | — | |||||||||||||
IRLCs | Mortgage banking activities, net | (221,891 | ) | — | — | ||||||||||||
MBS forward sales contracts | Mortgage banking activities, net | 410,411 | — | — | |||||||||||||
The following table presents information about the Company's interest rate swaption agreement at December 31, 2014: | |||||||||||||||||
Swaption Expiration | Notional Amount | Strike Rate | Swap Maturity | ||||||||||||||
2015 | $ | 225,000,000 | 3.64 | % | 2025 | ||||||||||||
The credit support annex provisions of the Company's interest rate swaption agreement allow the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. | |||||||||||||||||
Restricted cash included $4.9 million of cash pledged as collateral against an interest rate swaption agreement at December 31, 2014. At December 31, 2014, all collateral provided under this agreement consisted of cash collateral. | |||||||||||||||||
The following tables present information about the Company's interest rate swap agreements at December 31, 2014 and December 31, 2013: | |||||||||||||||||
31-Dec-14 | |||||||||||||||||
Maturity | Notional Amount | Weighted Average Pay Rate | Weighted Average Receive Rate | Weighted Average Years to Maturity | |||||||||||||
2023 | $ | 17,200,000 | 2.72 | % | 0.23 | % | 8.6 | ||||||||||
Total/Weighted average | $ | 17,200,000 | 2.72 | % | 0.23 | % | 8.6 | ||||||||||
31-Dec-13 | |||||||||||||||||
Maturity | Notional Amount | Weighted Average Pay Rate | Weighted Average Receive Rate | Weighted Average Years to Maturity | |||||||||||||
2023 | $ | 17,200,000 | 2.72 | % | 0.24 | % | 9.6 | ||||||||||
Total/Weighted average | $ | 17,200,000 | 2.72 | % | 0.24 | % | 9.6 | ||||||||||
The Company's interest rate swap agreements contain legally enforceable provisions that allow for netting or setting off of all individual interest rate swap receivables and payables with each respective counterparty and, therefore, the fair value of those interest rate swap agreements are netted. The credit support annex provisions of the Company's interest rate swap agreements allow the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. | |||||||||||||||||
Restricted cash included $1.6 million and $0.8 million, respectively, of cash pledged as collateral against interest rate swap agreements. At December 31, 2014 and December 31, 2013, all collateral provided under these agreements consisted of cash collateral. | |||||||||||||||||
Mortgage_Banking_Activities
Mortgage Banking Activities | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Mortgage Banking Activities [Abstract] | |||||
Mortgage Banking Activities | 14. Mortgage Banking Activities | ||||
The following table presents the components of mortgage banking activities, net, recorded in the Company's consolidated statement of operations for the year ended December 31, 2014: | |||||
Gain on sale of mortgage loans held for sale, net of direct costs | $ | 5,344,361 | |||
Provision for loan indemnification | (118,895 | ) | |||
Loan origination fee income | 213,540 | ||||
Total | $ | 5,439,006 | |||
Loan_Indemnification_Reserve
Loan Indemnification Reserve | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Loan Indemnification Reserve [Abstract] | |||||
Loan Indemnification Reserve | 15. Loan Indemnification Reserve | ||||
The Company has established a liability for potential losses related to these representations and warranties with a corresponding provision recorded for loan losses. The liability is included in accounts payable and other liabilities in the Company's consolidated balance sheets and the provision is included in mortgage banking activities, net in the Company's consolidated statements of operations. In assessing the adequacy of the liability, management evaluates various factors including actual losses on repurchases and indemnifications during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry. Actual losses incurred are reflected as charge-offs against the reserve liability. | |||||
The activity in the loan indemnification reserve is as follows for the year ended December 31, 2014 is as follows: | |||||
Balance at the date of acquisition | $ | 2,560,907 | |||
Loan losses incurred | — | ||||
Provision for losses | 101,255 | ||||
Balance at end of year | $ | 2,662,162 | |||
Because of the uncertainty in the various estimates underlying the loan indemnification reserve, there is a range of losses in excess of the recorded loan indemnification reserve that is reasonably possible. The estimate of the range of possible losses for representations and warranties does not represent a probable loss, and is based on current available information, significant judgment, and a number of assumptions that are subject to change. At December 31, 2014, the reasonably possible loss above our recorded loan indemnification reserve was not considered material. | |||||
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Taxes [Abstract] | |||||||||
Income Taxes | 16. Income Taxes | ||||||||
For the years ended December 31, 2014, 2013, 2012 and 2011, the Company qualified to be taxed as a REIT under the Code for U.S. federal income tax purposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes its net taxable income to stockholders, does not engage in prohibited transactions, and maintains its intended qualification as a REIT. The majority of States also recognize the Company's REIT status. | |||||||||
The Company has made separate joint elections with three of its subsidiaries, ZFC Funding TRS, ZFC Trust TRS and Honeybee TRS to treat such subsidiaries as taxable REIT subsidiaries (the “TRS entities”). The Company's TRS entities file separate tax returns and are taxed as standalone U.S. C-Corporations for U.S. income tax purposes. | |||||||||
The following table summarizes the tax provision (benefit) recorded at the TRS entity level for the year ended December 31, 2014 and December 31, 2013. For the year ended December 31, 2013, the Company did not have any significant activity in the TRS entities which generated taxable income; therefore no provision for federal income taxes has been made in the accompanying consolidated financial statements. | |||||||||
Provision for Income Taxes | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Current provision for income taxes | |||||||||
Federal | $ | — | $ | — | |||||
State | — | — | |||||||
Total current provision (benefit) for income taxes | — | — | |||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Deferred provision for income taxes | |||||||||
Federal | (677,780 | ) | — | ||||||
State | (173,216 | ) | — | ||||||
Total deferred provision (benefit) for income taxes | (850,996 | ) | — | ||||||
Total provision (benefit) for income taxes | $ | (850,996 | ) | $ | — | ||||
The following is a reconciliation of the statutory federal and state rates to the effective rates for the year ended December 31, 2014 and December 31, 2013. | |||||||||
Reconciliation of Statutory Tax Rate to Effective Tax Rate | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Tax expense (benefit) at statutory rate | 35 | % | 35 | % | |||||
State Tax (Net of Federal Benefit) | (0.82 | %) | 0 | % | |||||
Permanent differences | 0.03 | % | 0 | % | |||||
Valuation Allowance | 2.31 | % | 0 | % | |||||
Benefit of REIT Dividend paid deduction | (39.46 | %) | (35.00 | %) | |||||
Effective Tax Rate | (2.94 | %) | 0 | % | |||||
The Company's effective tax rate differs from its statutory tax rate primarily due to the deduction of dividend distributions required to be paid under Code section 857(a). | |||||||||
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. The Company determines the extent to which realization of the deferred assets is not assured and establish a valuation allowance accordingly. The Company's estimate of net deferred tax assets could change in future periods to the extent that actual or revised estimates of future taxable income during the carryforward periods change from current expectations. The deferred tax assets and liabilities reported below relate solely to the TRS entities. | |||||||||
For the year ended December 31, 2014, the Company had activity in the TRS entities which resulted in a deferred tax asset of $850,996 (after establishing a partial valuation allowance), related to net operating losses and future deductible amounts for tax purposes. Realization of the Company's deferred tax assets at December 31, 2014, is dependent on many factors, including generating sufficient taxable income prior to the expiration of NOL carryforwards and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards. Such amount is included in other assets in the Company's consolidated balance sheets. | |||||||||
For the year ended December 31, 2013, the Company had activity in the TRS entities which resulted in a deferred tax asset of $43,473, related to net operating losses and future deductible amounts for tax purposes. A full valuation allowance had been established with respect to taxes at the date of the consolidated balance sheet for the year ended December 31, 2013 for the deferred tax asset. | |||||||||
Components of the Company's net deferred tax assets and liabilities at December 31, 2014 and December 31, 2013 are presented in the following table: | |||||||||
Deferred Tax Assets (Liabilities) | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Deferred tax assets | |||||||||
Tax effect of unrealized losses and other temporary differences | $ | 1,207,520 | $ | — | |||||
Net operating loss carryforward | 673,052 | 43,473 | |||||||
Total deferred tax assets | 1,880,572 | 43,473 | |||||||
Deferred tax liabilities | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Tax effect of unrealized gains and other temporary differences | (357,663 | ) | — | ||||||
Total deferred tax liabilities | (357,663 | ) | — | ||||||
Valuation allowance | 671,913 | 43,473 | |||||||
Total Deferred Tax Assets, net of Valuation Allowance | $ | 850,996 | $ | — | |||||
The Company evaluates uncertain income tax positions when applicable. Based upon its analysis of tax positions, the Company concluded that there are no significant uncertain tax positions that meet the recognition or measurement criteria at either December 31, 2014 or December 31, 2013. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in the Company's consolidated financial statements. | |||||||||
Earnings_Per_Share
Earnings Per Share | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Earnings Per Share [Abstract] | |||||||||||||
Earnings Per Share | 17. Earnings Per Share | ||||||||||||
The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share: | |||||||||||||
Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | |||||||||||
Numerator: | |||||||||||||
Net income/(loss) attributable to ZAIS Financial Corp. common stockholders (Basic) | $ | 26,741,970 | $ | 6,657,728 | $ | 19,433,802 | |||||||
Effect of dilutive securities: | |||||||||||||
Net income allocated to non-controlling interests | 3,109,760 | 880,358 | 362,324 | ||||||||||
Exchangeable Senior Notes | |||||||||||||
Interest expense | 3,240,561 | — | — | ||||||||||
Gain on derivative instruments | (256,068 | ) | — | — | |||||||||
Total – Exchangeable Senior Notes | 2,984,493 | — | — | ||||||||||
Net income/(loss) available to stockholders, after effect of dilutive securities | $ | 32,836,223 | $ | 7,538,086 | $ | 19,796,126 | |||||||
Denominator: | |||||||||||||
Weighted average number of shares of common stock | 7,970,886 | 7,273,366 | 2,724,252 | ||||||||||
Effect of dilutive securities: | |||||||||||||
Weighted average number of OP units | 926,914 | 926,914 | 49,593 | ||||||||||
Weighted average number of shares convertible under Exchangeable Senior Notes | 1,779,560 | — | — | ||||||||||
Diluted weighted average shares outstanding | 10,677,360 | 8,200,280 | 2,773,845 | ||||||||||
Net income per share applicable to ZAIS Financial Corp. common stockholders – Basic | $ | 3.35 | $ | 0.92 | $ | 7.13 | |||||||
Net income per share applicable to ZAIS Financial Corp. common stockholders – Diluted | $ | 3.08 | $ | 0.92 | $ | 7.13 | |||||||
Related_Party_Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 18. Related Party Transactions |
ZAIS REIT Management, LLC | |
The Company is externally managed and advised by the Advisor, a subsidiary of ZAIS. Subject to certain restrictions and limitations, the Advisor is responsible for managing the Company's affairs on a day-to-day basis including, among other responsibilities, (i) the origination, selection, purchase and sale of the Company's portfolio of assets, (ii) arranging the Company's financing activities and (iii) providing the Company with advisory services. | |
The Company pays to its Advisor an advisory fee, calculated and payable quarterly in arrears, equal to 1.5% per annum of the Company's stockholders' equity, as defined in the amended and restated investment advisory agreement between the Company and the Advisor, as amended from time to time (the "Investment Advisory Agreement"). Prior to the Company's IPO, the advisory fee paid to the Advisor was calculated based on the Company's net asset value, as set forth in the Investment Advisory Agreement. The Advisor may be paid or reimbursed for the documented cost of its performing certain services for the Company, which may include legal, accounting, due diligence tasks and other services, that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm's-length basis. In addition, the Company may be required to pay its portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Advisor and its affiliates required for the Company's operations. To date, the Advisor has not sought reimbursement for the services and expenses described in the two preceding sentences. The Company is also required to pay directly, or reimburse the Advisor for, products and services, including hardware and software, provided by third parties, other than those operating expenses required to be borne by the Advisor under the Investment Advisory Agreement. The Advisor has in the past also declined full reimbursement for the costs of such products and services. In the future, however, the Advisor may seek reimbursement for all of the services, cost and expenses described in this paragraph, as a result of which the total expenses and the expense ratio of the Company may increase. | |
After an initial three-year term, the Advisor may be terminated annually upon the affirmative vote of at least two-thirds of the Company's independent directors or by a vote of the holders of at least two-thirds of the outstanding shares of the Company's common stock based upon (i) unsatisfactory performance by the Advisor that is materially detrimental to the Company or (ii) a determination that the advisory fees payable to the Advisor are not fair, subject to the Advisor's right to prevent such termination due to unfair fees by accepting a reduction of advisory fees agreed to by at least two-thirds of the Company's independent directors. Additionally, upon such a termination without cause, the Investment Advisory Agreement provides that the Company will pay the Advisor a termination fee equal to three times the average annual advisory fee earned by the Advisor during the prior 24-month period immediately preceding such termination, calculated as of the end of the most recently completed fiscal year before the date of termination. | |
For the years ended December 31, 2014, 2013 and 2012, the Company incurred $2.9 million, $2.6 million and $0.9 million in advisory fee expense, respectively. At December 31, 2014, $0.7 million in advisory fee expense was included in accounts payable and other liabilities in the Company's consolidated balance sheet. The advisory fee was calculated and payable as set forth above. | |
On August 11, 2014, the Company amended its Investment Advisory Agreement to provide that the Company shall pay its Advisor a loan sourcing fee quarterly in arrears in lieu of any payments or reimbursements that would otherwise be due to the Advisor or its affiliates pursuant to Investment Advisory Agreement for loan sourcing services provided. The loan sourcing fee is equal to 0.50% of the principal balance of newly originated residential mortgage loans sourced by the Advisor or its affiliates through its conduit program and acquired by the Company's subsidiaries. For the year ended December 31, 2014, the Company incurred loan sourcing fees of $3,835. Such amount is included in "Advisory fee – related party" in the Company's consolidated statements of operations. | |
On September 17, 2014, HF2 Financial Management Inc. ("HF2 Financial"), a special purpose acquisition company, announced that it entered into a definitive agreement to acquire a majority equity interest in ZAIS Group Parent, LLC ("ZGP"). ZGP is the sole member of ZAIS. The HF2 Financial transaction is scheduled to close on March 17, 2015. The current owners of ZGP will not receive any proceeds at the closing of the transaction and will retain a significant equity stake in ZGP. Following the transaction, ZAIS's current management team will continue to lead the combined organization. | |
During the normal course of business GMFS provides a variety of services to related parties including accounting, technology and due diligence services. For the period from the date of acquisition to December 31, 2014, GMFS received $1,200, from the related parties, which are included in other income in the Company's consolidated statements of operations. GMFS has $1,200 due from related parties at December 31, 2014 which are included in other assets in the Company's consolidated balance sheets. | |
Stockholders_Equity
Stockholders' Equity | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
Stockholders' Equity [Abstract] | |||||||
Stockholders' Equity | 19. Stockholders' Equity | ||||||
Common Stock | |||||||
The holders of shares of the Company's common stock are entitled to one vote per share on all matters voted on by common stockholders, including election of the Company's directors. The Company's charter does not provide for cumulative voting in the election of directors. Therefore, the holders of a majority of the outstanding shares of the Company's common stock can elect its entire board of directors. Subject to any preferential rights of any outstanding series of preferred stock, the holders of shares of the Company's common stock are entitled to such distributions as may be authorized from time to time by the Company's board of directors out of legally available funds and declared by the Company and, upon liquidation, are entitled to receive all assets available for distribution to stockholders. Holders of shares of the Company's common stock do not have preemptive rights. This means that stockholders do not have an automatic option to purchase any new shares of common stock that the Company issues. In addition, stockholders only have appraisal rights under circumstances specified by the Company's board of directors or where mandated by law. | |||||||
Initial Public Offering | |||||||
On February 13, 2013, the Company completed its IPO, pursuant to which the Company sold 5,650,000 shares of its common stock to the public at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of approximately $1.2 million were $118.9 million. In connection with the IPO, the Advisor paid $6.3 million in underwriting fees. The Company did not pay any underwriting fees, discounts or commissions in connection with the IPO above those paid by the Advisor. | |||||||
Common Stock Repurchase | |||||||
In January 2013, the Company's agreement with one of its stockholders to repurchase 515,035 shares of common stock was amended to require the Company to repurchase only 265,245 shares of the Company's common stock. The amended repurchase amount was approximately $5.8 million which was predominantly paid to such stockholder during the three months ended March 31, 2013 with the remaining amount paid during the three months ended June 30, 2013. | |||||||
Private Placements | |||||||
In October 2012, the Company completed a private placement in which it sold 195,458 shares of common stock and the Operating Partnership sold 22,492 OP units. In December 2012, the Company completed a private placement in which it sold 36,581 shares of common stock and the Operating Partnership sold 904,422 OP units. Net proceeds from the two private placements were $25,151,174, net of approximately $763,000 in offering costs. | |||||||
Dividends and Distributions | |||||||
During the years ended December 31, 2012, 2013 and 2014, the Company declared the following dividends: | |||||||
Declaration Date | Record Date | Payment Date | Amount per Share | ||||
Year ended December 31, 2012: | |||||||
1-May-12 | 1-May-12 | 15-May-12 | $ | 0.51 | |||
5-Jun-12 | 5-Jun-12 | 21-Jun-12 | $ | 0.57 | |||
October 22, 2012 | 22-Oct-12 | 29-Oct-12 | $ | 0.89 | |||
November 29, 2012 | 29-Nov-12 | 6-Dec-12 | $ | 0.98 | |||
December 19, 2012 | 19-Dec-12 | 26-Dec-12 | $ | 1.16 | |||
Year ended December 31, 2013: | |||||||
May 14, 2013 | 24-May-13 | 31-May-13 | $ | 0.22 | |||
June 25, 2013 | 9-Jul-13 | 23-Jul-13 | $ | 0.45 | |||
September 18, 2013 | 30-Sep-13 | 11-Oct-13 | $ | 0.5 | |||
December 19, 2013(1) | 31-Dec-13 | 15-Jan-14 | $ | 0.95 | |||
Year ended December 31, 2014: | |||||||
March 20, 2014 | 31-Mar-14 | 14-Apr-14 | $ | 0.4 | |||
June 18, 2014 | 30-Jun-14 | 15-Jul-14 | $ | 0.4 | |||
September 18, 2014 | 30-Sep-14 | 15-Oct-14 | $ | 0.4 | |||
December 19, 2014 | 31-Dec-14 | 15-Jan-15 | $ | 0.4 | |||
(1) | |||||||
Comprised of a regular cash dividend of $0.40 per share of common stock and OP unit for the quarter ending December 31, 2013, and an additional special cash dividend of $0.55 per share of its common stock and OP unit. The Company declared the special cash dividend to distribute taxable income from 2013 attributable to the termination of interest rate swap contracts. | |||||||
Preferred Shares | |||||||
The Company's charter authorizes its board of directors to classify and reclassify any unissued shares of its common stock and preferred stock into other classes or series of stock. Prior to issuance of shares of each class or series, the board of directors is required by the Company's charter to set, subject to the charter restrictions on transfer of its stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of common stock or preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or change in control that might involve a premium price for holders of the Company's common stock or otherwise be in their best interest. | |||||||
On January 18, 2012 the Company completed a private placement of 133 shares of its 12.5% Series A Cumulative Non-Voting Preferred Stock (the "Series A Preferred Stock") raising net proceeds of $115,499, net of $17,501 in offering fees. | |||||||
On February 15, 2013, the Company redeemed all 133 shares of its 12.5% Series A Preferred Stock outstanding for an aggregate redemption price, including preferred dividend, of $148,379. | |||||||
Noncontrolling_Interests
Non-controlling Interests | 12 Months Ended |
Dec. 31, 2014 | |
Non-controlling Interests [Abstract] | |
Non-controlling Interests | 20. Non-controlling Interests |
Non-controlling interests included in the Company's consolidated financial statements consist of the following: | |
Operating Partnership | |
Non-controlling interests in the Operating Partnership relate to OP units in the Operating Partnership held by parties other than the Company. | |
Certain investors own OP units in the Operating Partnership. An OP unit and a share of common stock of the Company have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership. OP unit holders have the right to redeem their OP units, subject to certain restrictions. The redemption is required to be satisfied in shares of common stock or cash at the Company's option, calculated as follows: one share of the Company's common stock, or cash equal to the fair value of a share of the Company's common stock at the time of redemption, for each OP unit. When an OP unit holder redeems an OP unit, non-controlling interest in the Operating Partnership is reduced and the Company's equity is increased. At December 31, 2014 and December 31, 2013, the non-controlling interest OP unit holders owned 926,914 OP units, or 10.4% of the OP Units issued by the Operating Partnership. | |
Commitments_and_Contingencies
Commitments and Contingencies | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Commitments and Contingencies [Abstract] | |||||
Commitments and Contingencies | 21. Commitments and Contingencies | ||||
Advisor Services | |||||
The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company's investment portfolio including determination of fair value; and other general and administrative responsibilities. In the event that the Advisor is unable to provide the respective services, the Company will be required to obtain such services from an alternative source. | |||||
Litigation | |||||
From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any contingencies that would require accrual or disclosure in the consolidated financial statements at December 31, 2014 or December 31, 2013. | |||||
Commitments to Originate Loans | |||||
The Company enters into IRLCs with customers who have applied for residential mortgage loans and meet certain credit and underwriting criteria. These commitments expose the Company to market risk if interest rates change, and the loan is not economically hedged or committed to an investor. The Company is also exposed to credit loss if the loan is originated and not sold to an investor and the mortgagor does not perform. The collateral upon extension of credit typically consists of a first deed of trust in the mortgagor's residential property. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon. Total commitments to originate loans approximated $117.7 million for the year ended December 31, 2014. | |||||
Leases | |||||
The Company leases office space for use in its mortgage banking operations in connection under a non-cancelable operating lease. The lease provides that the Company pays taxes, maintenance, insurance, and other occupancy expenses applicable to the leased premises. The lease contains three five-year renewal options at the then existing market rates. The Company also leases equipment under various short-term rental agreements. The Company incurred rent expense for the year ended December 31, 2014 of $122,986. Such amount is included in operating expenses in the Company's consolidated statements of operations. The Company did not incur any rent expense for the years ended December 31, 2013 or December 31, 2012. | |||||
The Company sub-leases a portion of its office space and furniture and fixtures contained therein to two entities (one related and one unrelated). The Company received total sub-lease income for the year ended December 31, 2014 of $45,861. Such amount is included in other income in the Company's consolidated statements of operations. The Company did not have any sublease income for the years ended December 31, 2013 or December 31, 2012. | |||||
At December 31, 2014, the future minimum rental payments for the next five years and thereafter are as follows: | |||||
2015 | $ | 639,523 | |||
2016 | 455,351 | ||||
2017 | 385,075 | ||||
2018 | 385,075 | ||||
2019 | 410,515 | ||||
Thereafter | $ | 2,275,539 | |||
Regulatory Net Worth Requirements | |||||
The Company is subject to various regulatory capital requirements administered by HUD, which governs non-supervised, direct endorsement mortgagees, and Ginnie Mae, which governs issuers of Ginnie Mae securities. Additionally, the Company is required to maintain minimum net worth requirements for many of the states in which it sells and services loans. Each state has its own minimum net worth requirements, up to $1 million, depending on the state. | |||||
Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary remedial actions by regulators that, if undertaken, could (i) remove the Company's ability to sell and service loans to or on behalf of the GSEs and (ii) have a direct material effect on the Company's consolidated financial statements. In accordance with the regulatory capital guidelines, the Company must meet specific quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. Further, changes in regulatory and accounting standards, as well as the impact of future events on the Company's results, may significantly affect the Company's net worth adequacy. | |||||
The Company met all minimum net worth requirements to which it was subject for the year ended December 31, 2014. The Company's required and actual net worth amounts at December 31, 2014 are presented in the following table: | |||||
Net Worth | Net Worth Required | ||||
HUD | $52,545,673 | $2,500,000 | |||
Ginnie Mae | 52,545,673 | 5,007,700 | |||
Fannie Mae | 52,548,259 | 6,577,547 | |||
Freddie Mac | 52,548,259 | 3,143,262 | |||
Various States | 52,548,259 | 0 - 1,000,000 | |||
Counterparty_Risk_and_Concentr
Counterparty Risk and Concentration | 12 Months Ended |
Dec. 31, 2014 | |
Counterparty Risk and Concentration [Abstract] | |
Counterparty Risk and Concentration | 22. Counterparty Risk and Concentration |
Counterparty risk is the risk that counterparties may fail to fulfill their obligations, including their inability to post additional collateral in circumstances where their pledged collateral value becomes inadequate. The Company attempts to manage its exposure to counterparty risk through diversification, use of financial instruments and monitoring the creditworthiness of counterparties. | |
The Company finances the acquisition of a significant portion of its residential mortgage loans held for investment, RMBS and Other Investment Securities with repurchase agreements. Additionally, the Company finances a significant portion of its mortgages held for sale with its warehouse lines of credit and repurchase agreements. In connection with these financing arrangements, the Company pledges its residential mortgage loans and securities as collateral to secure the borrowings. The amount of collateral pledged will typically exceed the amount of the borrowings (i.e., the haircut) such that the borrowings will be over-collateralized. As a result, the Company is exposed to the counterparty if, during the term of the repurchase agreement financing, a lender should default on its obligation and the Company is not able to recover its pledged assets. The amount of this exposure is the difference between the amount loaned to the Company plus interest due to the counterparty and the fair value of the collateral pledged by the Company to the lender including accrued interest receivable on such collateral. | |
As explained in the notes above, while the Company engages in warehouse and repurchase financing activities with several financial institutions, the Company maintains custody accounts with two custodians which hold operating cash accounts and also maintains separate cash accounts with each of its warehouse lenders at December 31, 2014. There is no guarantee that these custodians will not become insolvent. While there are certain regulations that seek to protect customer property in the event of a failure, insolvency or liquidation of a custodian, there is no certainty that the Company would not incur losses due to its assets being unavailable for a period of time in the event of a failure of a custodian that has custody of the Company's assets. Although management monitors the credit worthiness of its custodians, such losses could be significant and could materially impair the ability of the Company to achieve its investment objective. | |
In the normal course of business, companies in the mortgage banking industry encounter certain economic and regulatory risks. Economic risks include interest rate risk and credit risk. The Company is subject to interest rate risk to the extent that in a rising interest rate environment, the Company may experience a decrease in loan production, as well as decreases in the value of mortgage loans held for sale and in commitments to originate loans, which may negatively impact the Company's operations. Credit risk is the risk of default that may result from the borrowers' inability or unwillingness to make contractually required payments during the period in which loans are being held for sale. | |
The Company sells loans to investors without recourse. As such, the investors have assumed the risk of loss or default by the borrower. However, the Company is usually required by these investors to make certain standard representations and warranties relating to credit information, loan documentation and collateral. To the extent that the Company does not comply with such representations, or there are early payment defaults, the Company may be required to repurchase the loans or indemnify these investors for any losses from borrower defaults. In addition, if loans pay-off within a specified time frame, the Company may be required to refund a portion of the sales proceeds to the investors. | |
The Company's business requires substantial cash to support its operating and investing activities. As a result, the Company is dependent on its warehouse lines of credit, repurchase facilities and other financing facilities in order to finance its continued operations and investments. If the Company's principal lenders decided to terminate or not to renew any of these credit facilities with the Company, the loss of borrowing capacity could have a material adverse impact on the Company's consolidated financial statements unless the Company found a suitable alternative source. | |
MSRs are subject to substantial interest rate risk and the value of MSRs generally tend to diminish in periods of declining interest rates as borrowers can prepay the mortgage notes underlying the MSRs. MSRs increase in periods of rising interest rates (as prepayments decrease). Although the level of interest rates is a key driver of prepayment activity, there are other factors that influence prepayments, including home prices, underwriting standards and product characteristics. | |
Offsetting_Assets_and_Liabilit
Offsetting Assets and Liabilities | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Offsetting Assets and Liabilities [Abstract] | |||||||||||||||||||||||||
Offsetting Assets and Liabilities | 23. Offsetting Assets and Liabilities | ||||||||||||||||||||||||
The following tables present information about certain assets and liabilities that are subject to master netting arrangements (or similar agreements) and can potentially be offset in the Company's consolidated balance sheets at December 31, 2014 and December 31, 2013: | |||||||||||||||||||||||||
Offsetting of Assets | |||||||||||||||||||||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets Presented in the Consolidated Balance Sheets | Gross Amounts | ||||||||||||||||||||||
Not Offset in the Consolidated Balance Sheets | |||||||||||||||||||||||||
Financial Instruments | Cash Collateral Received(1) | Net Amount | |||||||||||||||||||||||
31-Dec-14 | |||||||||||||||||||||||||
Interest rate swaption | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
31-Dec-13 | |||||||||||||||||||||||||
Interest rate swap agreements | $ | 396,068 | $ | (111,614 | ) | $ | 284,454 | $ | — | $ | — | $ | 284,454 | ||||||||||||
Total | $ | 396,068 | $ | (111,614 | ) | $ | 284,454 | $ | — | $ | — | $ | 284,454 | ||||||||||||
(1) | |||||||||||||||||||||||||
At December 31, 2014, the Company pledged $4,886,011 of cash collateral in relation to its interest rate swaption; with the total net counterparty exposure for this position totaling $4,886,011. At December 31, 2013, the Company pledged $767,708 of cash collateral in relation to its interest rate swap agreements; with the total net counterparty exposure for this position totaling $1,052,162. | |||||||||||||||||||||||||
Offsetting of Liabilities | |||||||||||||||||||||||||
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | Gross Amounts Not | Net Amount | |||||||||||||||||||||
Offset in the | |||||||||||||||||||||||||
Consolidated Balance Sheets | |||||||||||||||||||||||||
Financial Instruments | Cash Collateral Pledged | ||||||||||||||||||||||||
31-Dec-14 | |||||||||||||||||||||||||
Loan Repurchase Facilities | $ | 300,092,293 | $ | — | $ | 300,092,293 | $ | (300,092,293 | ) | $ | — | $ | — | ||||||||||||
Securities repurchase agreements | 103,014,105 | — | 103,014,105 | (102,329,849 | ) | (684,256 | ) | — | |||||||||||||||||
Warehouse lines of credit | 89,417,564 | — | 89,417,564 | (89,417,564 | ) | — | — | ||||||||||||||||||
Interest rate swap agreements | 860,553 | — | 860,553 | (860,553 | ) | — | — | ||||||||||||||||||
Total | $ | 493,384,515 | $ | — | $ | 493,384,515 | $ | (492,700,259 | ) | $ | (684,256 | ) | $ | — | |||||||||||
31-Dec-13 | |||||||||||||||||||||||||
Loan Repurchase Facilities | $ | 236,058,976 | $ | — | $ | 236,058,976 | $ | -236,058,976 | $ | — | $ | — | |||||||||||||
Securities repurchase agreements | 138,591,678 | — | 138,591,678 | (137,231,150 | ) | (1,360,528 | ) | — | |||||||||||||||||
$ | 374,650,654 | $ | — | $ | 374,650,654 | $ | -373,290,126 | $ | -1,360,528 | $ | — | ||||||||||||||
Employee_Benefit_Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2014 | |
Employee Benefit Plan [Abstract] | |
Employee Benefit Plan | 24. Employee Benefit Plan |
The Company has a 401(k) profit sharing plan covering substantially all GMFS employees. Employees may contribute amounts as allowable by IRS and plan limitations. The Company may make discretionary matching and non-elective contributions. The Company made contributions to the plan totaling $69,719 for the year ended December 31, 2014. Such amount is included in salaries, commissions and benefits in the Company's consolidated statements of operations. | |
Segment_Information
Segment Information | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Segment Information [Abstract] | |||||||||||||||||
Segment Information | 25. Segment Information | ||||||||||||||||
In 2013 and 2012 the Company operated as one operating segment. Subsequent to the acquisition of GMFS, the Company operates in two operating segments: residential mortgage loan investments and residential mortgage banking. These business segments have been identified based on the Company's organizational and management structure. These segments are based on an internally-aligned segment structure, which is how the Company's results are monitored and performance is assessed. | |||||||||||||||||
The residential mortgage loan investment segment includes a portfolio of mortgage loans which were either distressed, re-performing or newly originated. The residential mortgage loan investment segment's financial items consist primarily of net interest income from whole loans and RMBS, changes in unrealized gains and losses from the valuation of the portfolio and realized gains and losses recognized upon the paydowns of mortgage loans and sales of RMBS. | |||||||||||||||||
The residential mortgage banking segment relates to the operations of the Company's GMFS subsidiary which originates mortgage loans for subsequent sale as whole loans either servicing retained or released. | |||||||||||||||||
Each segment includes the operating and other expenses associated with the respective activities. | |||||||||||||||||
Segment contribution represents the measure of profit that management uses to assess the performance of its business segments and make resource allocation and operating decisions. Certain expenses not directly assigned or allocated to one of the two primary segments are included in the Corporate/Other column as reconciling items to the Company's consolidated financial statements. These unallocated expenses primarily include interest expense on the Company's Exchangeable Senior Notes and corporate operating expenses such as insurance, public company expenses, advisory fees, transaction costs and general and administrative expenses. | |||||||||||||||||
Mortgage Loans | Mortgage | Corporate/Other | Total | ||||||||||||||
Held for Investments | Banking | ||||||||||||||||
Interest income | $ | 40,998,530 | $ | 594,217 | $ | — | $ | 41,592,747 | |||||||||
Interest expense | 11,451,687 | 121,194 | 5,686,664 | 17,259,545 | |||||||||||||
Net interest income (expense) | 29,546,843 | 473,023 | (5,686,664 | ) | 24,333,202 | ||||||||||||
Non-interest income | — | 4,730,212 | — | 4,730,212 | |||||||||||||
Change in unrealized gain or loss | 19,090,520 | — | — | 19,090,520 | |||||||||||||
Realized gain | 5,762,254 | — | — | 5,762,254 | |||||||||||||
Gain or (loss) on derivative instruments | (5,921,725 | ) | — | — | (5,921,725 | ) | |||||||||||
Advisory fee – related party | 3,835 | 143,674 | 2,706,387 | 2,853,896 | |||||||||||||
Salaries, commissions and benefits | — | 3,765,784 | — | 3,765,784 | |||||||||||||
Operating expenses | 251,305 | 1,089,640 | 6,521,363 | 7,862,308 | |||||||||||||
Other expenses: | |||||||||||||||||
Expenses | 2,180,113 | — | — | 2,180,113 | |||||||||||||
Transaction costs relating to acquisition of GMFS | — | 2,177,617 | — | 2,177,617 | |||||||||||||
Depreciation and amortization | — | 154,011 | — | 154,011 | |||||||||||||
Total other expenses | 2,180,113 | 2,331,628 | — | 4,511,741 | |||||||||||||
Net income/(loss) before income taxes | 46,042,639 | (2,127,491 | ) | (14,914,414 | ) | 29,000,734 | |||||||||||
Income tax benefit | — | 850,996 | — | 850,996 | |||||||||||||
Segment contribution / net income | $ | 46,042,639 | $ | (1,276,495 | ) | $ | (14,914,414 | ) | $ | 29,851,730 | |||||||
Supplemental Disclosures: | |||||||||||||||||
Mortgage loans held for investment, at fair value | $ | 415,959,838 | $ | — | $ | — | $ | 415,959,838 | |||||||||
Mortgage loans held for investment, at cost | — | 1,338,935 | — | 1,338,935 | |||||||||||||
Mortgage loans held for sale | — | 97,690,960 | — | 97,690,960 | |||||||||||||
Real estate securities | 148,585,733 | — | — | 148,585,733 | |||||||||||||
Other investment securities | 2,040,532 | — | — | 2,040,532 | |||||||||||||
Mortgage servicing rights | — | 33,378,978 | — | 33,378,978 | |||||||||||||
Goodwill | — | 16,512,680 | — | 16,512,680 | |||||||||||||
Intangible assets | — | 5,668,611 | — | 5,668,611 | |||||||||||||
Total assets | 596,553,227 | 194,700,643 | 1,144,735 | 792,398,605 | |||||||||||||
Quarterly_Results
Quarterly Results | 12 Months Ended | ||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||
Quarterly Results [Abstract] | |||||||||||||||||||||||||||||
Quarterly Results | 26. Quarterly Results (Unaudited) | ||||||||||||||||||||||||||||
The following is a presentation of the quarterly results of operations for the years ended December 31, 2014 and 2013: | |||||||||||||||||||||||||||||
For the Three Months Ended | |||||||||||||||||||||||||||||
December 31, 2014 (1) | 30-Sep-14 | June 30, | March 31, | ||||||||||||||||||||||||||
2014 | 2014 | ||||||||||||||||||||||||||||
Total interest income | $ | 10,267,875 | $ | 11,000,619 | $ | 10,831,220 | $ | 9,493,033 | |||||||||||||||||||||
Total interest expense | 4,447,530 | 4,491,678 | 4,416,385 | 3,903,952 | |||||||||||||||||||||||||
Net interest income | 5,820,345 | 6,508,941 | 6,414,835 | 5,589,081 | |||||||||||||||||||||||||
Non-interest income | 4,730,212 | — | — | — | |||||||||||||||||||||||||
Total other gain/(loss) | (2,944,631 | ) | (1,805,117 | ) | 22,688,696 | 992,101 | |||||||||||||||||||||||
Total expenses | 8,239,984 | 3,424,026 | 3,231,396 | 4,098,323 | |||||||||||||||||||||||||
Income tax benefit | 850,996 | — | — | — | |||||||||||||||||||||||||
Net income/(loss) | 216,938 | 1,279,798 | 25,872,135 | 2,482,859 | |||||||||||||||||||||||||
Net income/(loss) attributable to ZAIS Financial Corp. common stockholders | $ | 194,337 | $ | 1,149,497 | $ | 23,173,931 | $ | 2,224,205 | |||||||||||||||||||||
Net income/(loss) per share applicable to common stockholders – basic | $ | 0.02 | $ | 0.14 | $ | 2.91 | $ | 0.28 | |||||||||||||||||||||
Net income/(loss) per share applicable to common stockholders – diluted | $ | 0.02 | $ | 0.14 | $ | 2.47 | $ | 0.28 | |||||||||||||||||||||
Weighted average number of shares Basic | 7,970,886 | 7,970,886 | 7,970,886 | 7,970,886 | |||||||||||||||||||||||||
Diluted | 8,897,800 | 8,897,800 | 10,677,360 | 8,897,800 | |||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||
On October 31, 2014 the Company, completed the acquisition of GMFS. The Company has recognized the revenues and earnings related to its investment in GMFS for the period from the acquisition date to December 31, 2014 which are reflected in its consolidated statements of operations. | |||||||||||||||||||||||||||||
For the Three Months Ended | |||||||||||||||||||||||||||||
31-Dec-13 | 30-Sep-13 | June 30, | March 31, | ||||||||||||||||||||||||||
2013 | 2013 | ||||||||||||||||||||||||||||
Total interest income | $ | 8,773,339 | $ | 8,273,444 | $ | 5,935,511 | $ | 3,436,033 | |||||||||||||||||||||
Total interest expense | 3,090,565 | 2,333,139 | 1,156,780 | 514,035 | |||||||||||||||||||||||||
Net interest income | 5,682,774 | 5,940,305 | 4,778,731 | 2,921,998 | |||||||||||||||||||||||||
Total other gain/(loss) | 6,033,137 | 1,172,969 | (10,527,875 | ) | 1,155,515 | ||||||||||||||||||||||||
Total expenses | 2,715,456 | 2,965,082 | 1,819,733 | 2,103,818 | |||||||||||||||||||||||||
Net income/(loss) | 9,000,455 | 4,148,192 | (7,568,877 | ) | 1,973,695 | ||||||||||||||||||||||||
Net income/(loss) attributable to ZAIS Financial Corp. common stockholders | $ | 8,062,847 | $ | 3,716,061 | $ | -6,780,401 | $ | 1,659,222 | |||||||||||||||||||||
Net income/(loss) per share applicable to common stockholders – basic | $ | 1.01 | $ | 0.47 | $ | (.85 | ) | $ | 0.32 | ||||||||||||||||||||
Net income/(loss) per share applicable to common stockholders – diluted | $ | 0.98 | $ | 0.47 | $ | (.85 | ) | $ | 0.32 | ||||||||||||||||||||
Weighted average number of shares Basic | 7,970,886 | 7,970,886 | 7,970,886 | 5,142,053 | |||||||||||||||||||||||||
Diluted | 9,594,150 | 8,897,800 | 8,897,800 | 6,068,967 | |||||||||||||||||||||||||
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events [Abstract] | |
Subsequent Events | 27. Subsequent Events |
In February 2015, the Company amended its $45,000,000 master repurchase agreement, which provides financing for the Company's origination of mortgage loans held for sale to extend the maturity to March 31, 2015. | |
In February 2015, the Company Amended its $35,000,000 warehouse line of credit, which provides financing for the Company's acquisition of mortgage loans held for sale to increase the available borrowings to $50,000,000. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Summary of Significant Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation |
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Professional fees, transaction costs, loan servicing fees and general and administrative expenses reported in prior years have been reclassified to operating expenses and other expenses to conform to the current period's presentation. The Company operates in the following two business segments: residential mortgage loan investments and residential mortgage banking. | |
Estimates | Estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates. | |
Principles of Consolidation | Principles of Consolidation |
The consolidated financial statements include the accounts of the Company and all of the wholly owned subsidiaries of the Operating Partnership. All intercompany balances have been eliminated in consolidation. | |
The Company, which serves as the sole general partner of and conducts substantially all of its business through the Operating Partnership, holds approximately 89.6% of the operating partnership units ("OP units") in the Operating Partnership at December 31, 2014 and December 31, 2013. The Operating Partnership in turn holds directly or indirectly all of the equity interests in its subsidiaries. Changes in the Company's ownership interest (and transactions with non-controlling interest unit holders in its consolidated subsidiaries) while the Company retains its controlling interest in the subsidiary, are accounted for as equity transactions. The carrying amount of the non-controlling interest is adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the Company. | |
Variable Interest Entities | Variable Interest Entities |
A variable interest entity ("VIE") is an entity that lacks one or more of the characteristics of a voting interest entity. The Company evaluates each of its investments to determine whether it is a VIE based on: (1) the sufficiency of the entity's equity investment at risk to finance its activities without additional subordinated financial support provided by any parties, including the equity holders; (2) whether as a group the holders of the equity investment at risk have (a) the power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impacts the entity's economic performance, (b) the obligation to absorb the expected losses of the legal entity and (c) the right to receive the expected residual returns of the legal entity; and (3) whether the voting rights of these investors are proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected returns of their equity, or both, and whether substantially all of the entity's activities involve or are conducted on behalf of an investor that has disproportionately fewer voting rights. An investment that lacks one or more of the above three characteristics is considered to be a VIE. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. | |
A VIE is subject to consolidation if the equity investors either do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, are unable to direct the entity's activities, or are not exposed to the entity's losses or entitled to its residual returns. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses. | |
The Company's mortgage loans held for sale are sold predominantly to Fannie Mae and Freddie Mac, which are government sponsored enterprises (“GSEs” or “Agencies”). The Company also issues Ginnie Mae securities by pooling eligible loans through a pool custodian and assigning rights to the loans to Ginnie Mae. Fannie Mae, Freddie Mac and Ginnie Mae provide credit enhancement of the loans through certain guarantee provisions. The Company also purchases RMBS from securitization trusts or similar vehicles. These securitizations involve VIEs as the trusts or similar vehicles, by design, have the characteristics of a VIE. | |
The Company has evaluated its interests in its real estate investment securities and its interests in the securitizations discussed in the preceding paragraph to determine if each represents a variable interest in a VIE. The Company monitors these investments and analyzes them for potential consolidation. The Company determined that it was not the primary beneficiary of the VIEs and therefore none of the VIEs were consolidated at December 31, 2014 and December 31, 2013. The maximum exposure of the Company to VIEs is limited to the fair value of its investments in real estate securities and MSRs as disclosed in the Company's consolidated balance sheets. | |
Cash and Cash Equivalents | Cash and Cash Equivalents |
The Company considers highly liquid short-term interest bearing instruments with original maturities of three months or less and other instruments readily convertible into cash to be cash equivalents. The Company's deposits with financial institutions may exceed federally insurable limits of $250,000 per institution. The Company mitigates this risk by depositing funds with major financial institutions. At December 31, 2014, a portion of the Company's operating cash was held with two custodians. Additionally, at December 31, 2014, a portion of the Company's operating cash was held with two other financial institutions and the Company maintains separate cash accounts for each of its warehouse lines of credit and repurchase agreements related to its GMFS origination platform pursuant to such agreements. | |
Restricted Cash | Restricted Cash |
Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or securities repurchase agreements. Cash held by counterparties as collateral is not available to the Company for general corporate purposes, but may be applied against amounts due to derivative or securities repurchase agreement counterparties or returned to the Company when the collateral requirements are exceeded or at the maturity of the derivatives or securities repurchase agreements. | |
Fair Value Election and Determination of Fair Value Measurement | Other Investment Securities |
Other investment securities are comprised of investments in Freddie Mac Structured Agency Credit Risk Notes ("FMSA Notes") at December 31, 2014. During 2014, the Company also held Fannie Mae's Risk Transfer Notes ("FMRT Notes" and together with the FMSA Notes, the "Other Investment Securities"). The Other Investment Securities represent unsecured general obligations of Fannie Mae and Freddie Mac, respectively, and are structured to be subject to the performance of a certain pool of residential mortgage loans. | |
Mortgage Loans Held for Investment, Mortgage Loans Held for Sale, Real Estate Securities, Other Investment Securities and MSRs — Fair Value Election | |
U.S. GAAP permits entities to choose to measure certain eligible financial instruments at fair value. The Company has elected the fair value option for some of its mortgage loans held for investment, and each of its mortgage loans held for sale, real estate securities, Other Investment Securities and MSRs at the date of purchase. The fair value option election is irrevocable and requires the Company to measure these mortgage loans, real estate securities and Other Investment Securities at estimated fair value with the change in estimated fair value recognized in earnings. The Company has established a policy for these assets to separate interest income from the full change in fair value in the consolidated statements of operations. The interest income component is presented as interest income on mortgage loans held for investment, mortgage loans held for sale, real estate securities and Other Investment Securities and the remainder of the change in fair value is presented separately as change in unrealized gain or loss in the Company's consolidated statements of operations. | |
Determination of Fair Value Measurement | |
The "Fair Value Measurements and Disclosures" Topic of the FASB ASC defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. | |
Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values. Furthermore, the analysis of whether it is more likely than not that the Company will be required to sell securities in an unrealized loss position prior to an expected recovery in fair value (if any), the amount of such expected required sales, and the projected identification of which securities would be sold is also subject to significant judgment. | |
Any proposed changes to the valuation methodology will be reviewed by the Advisor to ensure changes are consistent with the applicable accounting guidance and approved as appropriate. The fair value methodology may produce a fair value calculation that may not be indicative of net realizable value. Furthermore, while the Company anticipates that the Advisor's valuation methods will be appropriate and consistent with other market participants, the use of different methodologies, or assumptions by other market participants, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. | |
The Company categorizes its financial instruments in accordance with U.S. GAAP, based on the priority of the inputs to the valuation, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. | |
Financial assets and liabilities recorded in the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: | |
Level 1 Quoted prices for identical assets or liabilities in an active market. | |
Level 2 Financial assets and liabilities whose values are based on the following: | |
Quoted prices for similar assets or liabilities in active markets | |
Quoted prices for identical or similar assets or liabilities in nonactive markets. | |
Pricing models whose inputs are observable for substantially the full term of the asset or liability. | |
Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability. | |
Level 3 Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement. | |
The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment. The Company utilizes proprietary modeling analysis to support the independent third party broker quotes selected to determine the fair value of its real estate securities, Other Investment Securities and derivative instruments. | |
The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy. | |
Mortgage Loans Held for Investment | |
The fair value of the Company's mortgage loans held for investment considers data such as loan origination information and additional updated borrower and loan servicing data, as available, forward interest rates, general economic conditions, home price index forecasts and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans held for investment include market-implied discount rates, projections of default rates, delinquency rates, loss severity (considering mortgage insurance) and prepayment rates. The Company uses loan level data, macro-economic inputs and forward interest rates to generate loss adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair values established for mortgage loans held for investment by the Company may differ from the fair values that would have been established if a ready market existed for these mortgage loans held for investment. Accordingly, mortgage loans held for investment are classified as Level 3 in the fair value hierarchy. | |
At December 31, 2014, approximately 10.3% in unpaid principal balance of the Company's mortgage loans carries mortgage insurance. | |
Mortgage Loans Held for Sale | |
The fair value of mortgage loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan. Accordingly, mortgage loans held for sale are classified as Level 2 in the fair value hierarchy. | |
Real Estate Securities and Other Investment Securities | |
The fair value of the Company's real estate securities and Other Investment Securities considers the underlying characteristics of each security including coupon, maturity date and collateral. The Company estimates the fair value of its RMBS and Other Investment Securities based upon a combination of observable prices in active markets, multiple indicative quotes from brokers and executable bids. In evaluating broker quotes the Company also considers additional observable market data points including recent observed trading activity for identical and similar securities, back-testing, broker challenges and other interactions with market participants, as well as yield levels generated by model-based valuation techniques. In the absence of observable quotes, the Company utilizes model-based valuation techniques that may contain unobservable valuation inputs. | |
When available, the fair value of real estate securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from either broker quotes, observed traded levels or model-based valuation techniques using observable inputs such as benchmark yields or issuer spreads. | |
While the Company's non-Agency RMBS and Other Investment Securities are valued using the same process with similar inputs as the Agency RMBS as described below, a significant amount of inputs are unobservable due to relatively low levels of market activity. The fair value of these securities is typically based on broker quotes or the Company's model-based valuation. Accordingly, the Company's non-Agency RMBS and Other Investment Securities are classified as Level 3 in the fair value hierarchy. Model-based valuation consists primarily of discounted cash flow and yield analyses. Significant model inputs and assumptions include constant voluntary prepayment rates, constant default rates, delinquency rates, loss severity, market-implied discount rates, default rates, expected loss severity, weighted average life, collateral composition, borrower characteristics and prepayment rates, and may also include general economic conditions, including home price index forecasts, servicing data and other relevant information. Where possible, collateral-related assumptions are determined on an individual loan level basis. | |
The Company's Agency RMBS, if any, are valued using the market data described above, which includes inputs determined to be observable or whose significant fair value drivers are observable. Accordingly, Agency RMBS securities are classified as Level 2 in the fair value hierarchy. | |
MSRs | |
The Company uses a third party vendor to estimate the fair value of MSRs. The third party vendor uses a discounted cash flow approach which consists of projecting servicing cash flows discounted at a rate that management believes market participants would use in their determinations of fair value. The key assumptions used in the estimation of the fair value of MSRs include prepayment speeds, discount rates, default rates, cost to service, contractual servicing fees, escrow earnings and ancillary income. MSRs are classified as Level 3 in the fair value hierarchy. | |
Derivative Instruments | |
Interest Rate Swaption Agreements | |
An interest rate swaption agreement represents an option that gives the Company the right, but not the obligation, to enter into a previously agreed upon interest rate swap agreement on a future date. If exercised the Company will enter into an interest rate swap agreement and is obligated to pay a fixed rate of interest and receive a floating rate of interest. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations received for interest rate swaption agreements. These counterparty valuations are generally based on models with observable market inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's interest rate swaption agreements are governed by International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. At December 31, 2014, no credit valuation adjustment was made in determining the fair value of the derivative. | |
Interest Rate Swap Agreements | |
An interest rate swap is an agreement between the Company and a counterparty to exchange periodic interest payments where one party to the contract makes a fixed rate payment in exchange for a floating rate payment from the other party. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations received for interest rate swap agreements. These counterparty valuations are generally based on models with observable market inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's interest rate swap agreements are governed by International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. At December 31, 2014 and December 31, 2013, no credit valuation adjustment was made in determining the fair value of the derivative. | |
Loan Purchase Commitments (“LPCs”) | |
LPCs are agreements with approved third-party residential loan originators to purchase residential loans at a future date. LPCs that qualify as derivatives are recorded at their estimated fair values in the Company's consolidated balance sheets. The fair value of the Company's LPC's are based on the prices the underlying loans can be purchased for in the secondary market, adjusted for an estimated pull through rate. Changes in fair value are reported in the statement of operations. LPCs are classified as Level 3 in the fair value hierarchy. | |
Interest Rate Lock Commitments (“IRLCs”) | |
IRLCs are agreements under which the Company agrees to extend credit to a borrower under certain specified terms and conditions in which the interest rate and the maximum amount of the loan are set prior to funding. Unrealized gains and losses on the IRLCs, reflected as derivative assets and derivative liabilities, respectively, are measured based on the value of the underlying mortgage loan, quoted GSE mortgage backed security (“MBS”) prices, estimates of the fair value of the MSRs and the probability that the mortgage loan will fund within the terms of the IRLC, net of commission expense and broker fees. IRLCs are classified as Level 3 in the fair value hierarchy. | |
MBS Forward Sales Contracts and TBA Securities | |
MBS forward sales contracts and TBA securities are forward contracts for the purchase or sale of MBS at a predetermined price with a stated face amount, coupon and stated maturity at a agreed upon future date. The specific MBS delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association (“SIFMA”), are not known at the time of the transaction. The Company estimates the fair value of MBS forward sales contracts and TBA securities based on third party vendor prices and quoted MBS prices. MBS forward sales contracts and TBA securities are classified as Level 2 in the fair value hierarchy. | |
Mortgage Loans Held for Investment, at Cost | |
Mortgage loans held for investment related to the Company's mortgage banking activities includes loans which, due to various reasons, are unable to be sold to a third party. Such loans are performing loans which the Company carries at amortized cost, less a valuation allowance for estimated credit losses, if applicable. | |
Revenue Recognition | Revenue Recognition |
Mortgage Loans Held for Investment, at fair value | |
Pursuant to the Company's policy for separately presenting interest income on mortgage loans, the Company follows acceptable methods under U.S. GAAP for allocating a portion of the change in fair value of certain mortgage loans held for investment to interest income. | |
When the Company purchases mortgage loans which are held for investment and which have shown evidence of credit deterioration since origination and management determines that it is probable the Company will not collect all contractual cash flows on those loans, the Company applies the guidance that addresses accounting for differences between contractual cash flows and cash flows expected to be collected if those differences are attributable to, at least in part, credit quality. | |
Interest income is recognized on a level-yield basis over the life of the loan as long as cash flows can be reasonably estimated. The level-yield is determined by the excess of the Company's initial estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the Company's initial investment in the mortgage loan (accretable yield). The amount of interest income to be recognized cannot result in a carrying amount that exceeds the payoff amount of the loan. The excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) will not be recognized as an adjustment of yield. | |
On a quarterly basis, the Company updates its estimate of the cash flows expected to be collected. For purposes of interest income recognition, any subsequent increases in cash flows expected to be collected are generally recognized as prospective yield adjustments (which establishes a new level yield) and any subsequent decreases in cash flows expected to be collected are recognized as an impairment to be recorded through change in unrealized gain or loss in the consolidated statements of operations. | |
Income recognition is suspended for a loan when cash flows cannot be reasonably estimated. | |
Interest income on newly originated mortgage loans which are purchased by the Company and held for investment, is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with these mortgage loans at the time of purchase are amortized into interest income over the life of such loan using the effective yield method and adjusted for actual prepayments. | |
Real Estate Securities and Other Investment Securities | |
Pursuant to the Company's policy for separately presenting interest income on real estate securities and Other Investment Securities, the Company follows acceptable methods under U.S. GAAP for allocating a portion of the change in fair value of real estate securities and Other Investment Securities to interest income. | |
Interest income on Agency RMBS, if any, is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency RMBS at the time of purchase are amortized into interest income over the life of such securities using the effective yield method and adjusted for actual prepayments. | |
Interest income on the non-Agency RMBS and Other Investment Securities, which were purchased at a discount to par value and/or were rated below AA at the time of purchase, is recognized based on the effective yield method. The effective yield on these securities is based on the projected cash flows from each security, which are estimated based on the Company's observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On a monthly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. Therefore, actual maturities of the securities are generally shorter than stated contractual maturities. | |
Based on the projected cash flows from the Company's non-Agency RMBS purchased at a discount to par value, a portion of the purchase discount may be designated as credit protection against future credit losses and, therefore, not accreted into interest income. The amount designated as credit discount is determined, and may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively. | |
RMBS and Other Investment Securities are evaluated for other-than-temporary impairment ("OTTI") each quarter. A security with a fair value that is less than amortized cost is considered impaired. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a security has been deemed to be other-than-temporarily impaired, the amount of OTTI is bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses is recognized in the consolidated statements of operations as a realized loss on real estate securities and realized loss on Other Investment Securities. The remaining OTTI related to the valuation adjustment is recognized as a component of change in unrealized gain or loss in the consolidated statements of operations. Realized gains and losses on sale of real estate securities and Other Investment Securities are determined using the specific identification method. Real estate securities and Other Investment Securities transactions are recorded on the trade date. | |
Mortgage Loans Held for Investment, at Cost and Mortgage Loans Held for Sale | |
Interest income on mortgage loans is accrued to income based upon the principal amount outstanding and contractual interest rates and is included in interest income on mortgage loans held for sale in the consolidated statements of operations. Income recognition is discontinued when loans become 90 days delinquent or when in management's opinion, the collectability of principal and income becomes doubtful and the mortgage loans held for sale or investment are put on nonaccrual status. | |
Mortgage Banking Activities | |
Gain on Sale of Mortgage Loans Held for Sale | |
Mortgage loans held for sale are considered sold when the Company surrenders control over the financial assets. Control is considered to have been surrendered when the transferred assets have been isolated from the Company, beyond the reach of the Company and its creditors; the purchaser obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and the Company does not maintain effective control over the transferred assets through an agreement that both entitles and obligates the Company to repurchase or redeem the transferred assets before their maturity or the ability to unilaterally cause the holder to return specific assets. Such transfers may involve securitizations, participation agreements or repurchase agreements. If the criteria above are not met, such transfers are accounted for as secured borrowings, in which the assets remain on the consolidated balance sheets, the proceeds from the transaction are recognized as a liability and no MSRs are recorded for the transferred loans. | |
Gains and losses from the sale of mortgages are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale and is included in Mortgage banking activities, net in the consolidated statements of operations. The sales proceeds reflect the cash received and the initial fair value of the separately recognized MSRs less the fair value of the incurred liability for mortgage repurchases and indemnifications. Gains and losses also includes the unrealized gains and losses associated with the mortgage loans held for sale and the realized and unrealized gains and losses from MBS forward sales contracts and IRLCs. | |
Loan Origination Fee Income | |
Loan origination fee income represents revenue earned from originating mortgage loans and is included in Mortgage banking activities, net in the Company's consolidated statements of operations. Loan origination fees and related direct loan origination costs are reflected in Mortgage banking activities, net when loans are sold and deferred and amortized over the life of the loan as an adjustment of yield. | |
Loan Servicing Fee Income | |
Loan servicing fee income represents revenue earned for servicing loans for various investors and is included in the consolidated statements of operations. The servicing fees are based on a contractual percentage of the outstanding principal balance and recognized into revenue as the related mortgage payments are received. Loan servicing expenses offset against loan servicing fee income as incurred. | |
Expense Recognition | Expense Recognition |
Expenses are recognized when incurred. Expenses include, but are not limited to, loan servicing fees, advisory fees, professional fees for legal, accounting and consulting services, and general and administrative expenses such as insurance, custodial and miscellaneous fees. | |
Servicing Advances | Servicing Advances |
Servicing advances represent escrows and advances on behalf of borrowers and investors to cover delinquent balances for property taxes, insurance premiums and other out-of-pocket costs. Advances are made in accordance with the servicing agreements and are recoverable upon liquidation. The Company periodically reviews the advances for collectability and amounts are written off when they are deemed uncollectible. At December 31, 2014, the Company had servicing advances of $2.0 million. Such amount is included in other assets on the Company's consolidated balance sheets. | |
Offering Costs | Offering Costs |
Offering costs are accounted for as a reduction of additional paid-in capital. Offering costs in connection with the Company's IPO were paid out of the proceeds of the IPO. Costs incurred to organize the Company were expensed as incurred. The Company's obligation to pay for organization and offering expenses directly related to the IPO was capped at $1.2 million and the Advisor paid for expenses incurred above the cap. | |
Repurchase Facilities | Repurchase Facilities |
Loan Repurchase Facilities | |
The Company finances a portion of its mortgage loans held for investment through the use of repurchase agreements entered into under master repurchase agreements with certain lenders (the “Loan Repurchase Facilities”). Under the Loan Repurchase Facilities, the Company may sell, and later repurchase trust certificates representing interests in residential mortgage loans (the “Trust Certificates”). The borrowings under the Loan Repurchase Facilities are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreement. The borrowings under the Loan Repurchase Facilities are recorded on the trade date at the contract amount. | |
The Company pledges cash and certain of its Trust Certificates as collateral under the Loan Repurchase Facilities. The amounts available to be borrowed are dependent upon the fair value of the Trust Certificates pledged as collateral, which fluctuates with changes in interest rates, type of underlying mortgage loans and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in the fair value of pledged Trust Certificates, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. At December 31, 2014 and December 31, 2013, the Company has met all margin call requirements related to any outstanding balances under its Loan Repurchase Facilities. | |
Securities Repurchase Agreements | |
The Company finances a portion of its RMBS portfolio and Other Investment Securities through the use of securities repurchase agreements entered into under master repurchase agreements with four financial institutions at December 31, 2014. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Repurchase agreements are recorded on trade date at the contract amount. | |
The Company pledges cash and certain of its RMBS and Other Investment Securities as collateral under these securities repurchase agreements. The amounts available to be borrowed are dependent upon the fair value of the RMBS and Other Investment Securities pledged as collateral, which fluctuates with changes in interest rates, type of securities and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in the fair value of pledged RMBS and Other Investment Securities, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. At December 31, 2014 and December 31, 2013, the Company has met all margin call requirements under its securities repurchase agreements. | |
Derivatives and Hedging Activities | Derivatives and Hedging Activities |
The Company accounts for its derivative financial instruments in accordance with derivative accounting guidance, which requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and to measure those instruments at fair value. The Company has not designated any of its derivative agreements as hedging instruments for accounting purposes. As a result, changes in the fair value of derivatives are recorded through current period earnings. | |
Real Estate Owned | Real Estate Owned |
The Company records its real estate owned at the properties fair value, less costs to sell. All legal fees and direct costs relating to real estate owned are expensed as incurred. At December 31, 2014, the Company had real estate owned of $1.3 million. Such amounts are included in other assets in the Company's consolidated balance sheets. | |
Loans Eligible for Repurchase from Ginnie Mae | Loans Eligible for Repurchase from Ginnie Mae |
When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company then records the right to repurchase the loan as an asset and liability on its consolidated balance sheets. There were no actual repurchases of Ginnie Mae delinquent or defaulted mortgage loans during the year ended December 31, 2014. | |
8% Exchangeable Senior Notes Due 2016 | 8% Exchangeable Senior Notes Due 2016 |
On November 25, 2013, the Operating Partnership issued $57.5 million aggregate principal amount of unsecured 8.00% Exchangeable Senior Notes due 2016 (the "Exchangeable Senior Notes"). The Exchangeable Senior Notes are carried at amortized cost. Interest expense on the Exchangeable Senior Notes is computed using the effective interest method. The conversion features of the Exchangeable Senior Notes are deemed to be an embedded derivative. Accordingly, the Company is required to bifurcate the embedded derivative related to the conversion features of the Exchangeable Senior Notes. The Company recognized the embedded derivative as a liability in its consolidated balance sheets at December 31, 2014 and December 31, 2013, measured it at its estimated fair value and recognized changes in its estimated fair value in gain/(loss) on derivative instruments in the Company's consolidated statements of operations. | |
Liability for Loan Repurchases and Indemnifications | Liability for Loan Repurchases and Indemnifications |
Loans sold to investors by the Company and which met investor and agency underwriting guidelines at the time of sale may be subject to repurchase or indemnification in the event of specific default by the borrower or subsequent discovery that underwriting standards were not met. The Company may, upon mutual agreement, agree to repurchase the loans or indemnify the investor against future losses on such loans. In such cases, the Company bears any subsequent credit loss on the loans. The Company has established a liability for potential losses related to these representations and warranties with a corresponding provision recorded for loan losses. The liability is included in accounts payable and other liabilities in the Company's consolidated balance sheets and the provision is included in mortgage banking activities, net in the Company's consolidated statements of operations. In assessing the adequacy of the liability, management evaluates various factors including actual losses on repurchases and indemnifications during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry. Actual losses incurred are reflected as charge-offs against the reserve liability. | |
Because of the uncertainty in the various estimates underlying the loan indemnification reserve, there is a range of losses in excess of the recorded loan indemnification reserve that is reasonably possible. The estimate of the range of possible losses for representations and warranties does not represent a probable loss, and is based on current available information, significant judgment, and a number of assumptions that are subject to change. | |
Escrow and Fiduciary Funds | Escrow and Fiduciary Funds |
The Company maintains segregated bank accounts in trust for investors and escrow balances for mortgagors. The balances of these accounts were $23.6 million at December 31, 2014 and are excluded from the Company's consolidated balance sheets. The Company did not have any segregated bank accounts in trust for investors or escrow balances for mortgagors at December 31, 2013. | |
Net Income (Loss) Per Share | Net Income (Loss) Per Share |
The Company's basic earnings per share ("EPS") is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding OP units and Exchangeable Senior Notes were converted to common stock, where such exercise or conversion would result in a lower EPS. The dilutive effect of OP units is computed assuming all units are converted to common stock. The dilutive effect of the Exchangeable Senior Notes is computed assuming shares converted are limited to 1,779,560 pursuant to New York Stock Exchange ("NYSE") restrictions. The 1,779,560 shares of common stock were included in the calculation of diluted EPS as such inclusion was dilutive for the year ended December 31, 2014. | |
Income Taxes | Income Taxes |
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2011. The Company was organized and has operated and intends to continue to operate in a manner that will enable it to qualify to be taxed as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company's annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. GAAP). As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes its net taxable income to stockholders, does not engage in prohibited transactions, and maintains its intended qualification as a REIT. The majority of States also recognize the Company's REIT status. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service (“IRS”) grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. However, it is assumed that the Company will retain its REIT status and will incur no REIT level taxation as it intends to comply with the REIT regulations and annual distribution requirements. | |
The Company has made separate joint elections with three of its subsidiaries, ZFC Funding TRS, ZFC Trust TRS and Honeybee TRS, to treat such subsidiaries as taxable REIT subsidiaries (the “TRS entities”). The Company may perform certain activities through these TRS entities that could adversely impact the Company's REIT qualification if performed other than through a TRS entity. The Company's TRS entities file separate tax returns and are taxed as standalone U.S. C-Corporations irrespective of the dividends-paid deduction available to REITs for federal income tax purposes. | |
The Company assesses its tax positions for all open tax years and records tax benefits only if tax positions meet a more-likely-than-not threshold in accordance with U.S. GAAP for guidance on accounting for uncertainty in income taxes. | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets |
The purchase price of GMFS was allocated to the assets acquired, including identifiable intangible assets (trade name, customer relationships, licenses and favorable leases), and the liabilities assumed based on their estimated fair values at the date of acquisition. The excess of purchase price over the fair value of the net assets acquired was recognized as goodwill. Goodwill is carried at cost, net of impairment charges, and reflected on the Company's consolidated balance sheets. | |
Goodwill is not amortized but is tested for impairment on an annual basis, or frequently if events or changes in circumstances indicate that a potential impairment may have occurred. The testing of goodwill for impairment is initially based on a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill. If the facts indicate that it is more likely than not that that an impairment may exist, a two-step quantitative assessment is conducted to (a) calculate the fair value of the reporting unit and compare to its carrying value including goodwill and (b) if the carrying value of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss equal to the amount by which the carrying value of the goodwill exceeds the implied fair value of that goodwill. The impairment is recognized as an expense in the period in which the impairment occurs. | |
The Company does not amortize intangible assets with indefinite lives. The Company amortizes intangible assets with identified estimated useful lives on a straight-line basis over their estimated useful lives. | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements |
In January 2014, the FASB issued ASU 2014-04: Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (“ASU 2014-04”), to reduce diversity in practice by clarifying when an in substance repossession or foreclosure has occurred and when a creditor should derecognize the associated loan receivable and recognize the real estate property. ASU 2014-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Adoption of ASU 2014-04 is not expected to have a material effect on the Company's consolidated financial statements. | |
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The objective of the guidance is to clarify the principles for recognizing revenue. ASU 2014-09 supersedes most current revenue recognition guidance, including industry-specific guidance, and also enhances disclosure requirements around revenue recognition and the related cash flows. The guidance is to be applied retrospectively to all prior periods presented or through a cumulative adjustment in the year of adoption, for interim and annual periods beginning after December 15, 2016. Early adoption is not permitted. The Company is currently evaluating the impact of adopting this new standard. | |
In June 2014, the FASB issued Accounting Standards Update No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”) which amends the accounting guidance for repo-to-maturity (“RTM”) transactions and repurchase agreements executed as repurchase financings. Under this new accounting guidance, RTMs will be accounted for as secured borrowings rather than sales of an asset, and transfers of financial assets with a contemporaneous repurchase agreement will no longer be evaluated to determine whether they should be accounted for on a combined basis as forward contracts. The new guidance also prescribes additional disclosures particularly on the nature of collateral pledged in repurchase agreements accounted for as secured borrowings. ASU 2014-11 is effective for the first interim or annual reporting periods beginning after December 15, 2014. Adoption of ASU 2014-11 is not expected to have a material effect on the Company's consolidated financial statements. | |
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued. If conditions or events indicate it is probable that an entity will be unable to meet its obligations as they become due within one year after the financial statements are issued, the update requires additional disclosures. The update is effective for periods beginning after December 15, 2016 with early adoption permitted. Adoption of ASU 2014-15 is not expected to have a material effect on the Company's consolidated financial statements. | |
In February 2015, the FASB issued ASU 2015-02, “Consolidation: Amendments to the Consolidation Analysis” (“ASU 2015-02”). ASU 2015-02 makes changes to both the variable interest model and the voting model. The guidance is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of adopting this new standard. | |
GMFS_Transaction_Tables
GMFS Transaction (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
GMFS Transaction [Abstract] | |||||||||||||
Schedule of Business Acquisition | |||||||||||||
Total consideration is as follows: | |||||||||||||
Cash paid to owners of GMFS | $ | 62,847,452 | |||||||||||
Contingent consideration | 11,430,413 | ||||||||||||
Total consideration | $ | 74,277,865 | |||||||||||
Schedule of Net Assets Acquired | |||||||||||||
Fair value of Assets: | |||||||||||||
Cash and cash equivalents | $ | 13,304,612 | |||||||||||
Mortgage loans held for sale | 92,512,390 | ||||||||||||
Mortgage loans held for investment | 1,098,897 | ||||||||||||
Derivative assets | 1,590,160 | ||||||||||||
Other assets | 2,713,950 | ||||||||||||
MSRs | 32,300,337 | ||||||||||||
Goodwill | 16,512,680 | ||||||||||||
Intangible Assets | 5,800,000 | ||||||||||||
Loans eligible for repurchase from Ginnie Mae | 21,169,329 | ||||||||||||
Total assets acquired | 187,002,355 | ||||||||||||
Fair value of Liabilities: | |||||||||||||
Warehouse lines of credit | 85,840,705 | ||||||||||||
Accounts payable and other liabilities | 5,714,456 | ||||||||||||
Liability for loans eligible for repurchase from Ginnie Mae | 21,169,329 | ||||||||||||
Total liabilities assumed | 112,724,490 | ||||||||||||
Fair value of net assets acquired | $ | 74,277,865 | |||||||||||
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired and liabilities assumed and is primarily made up of expected synergies and the assembled workforce of GMFS. This determination of goodwill is preliminary, and is subject to change when the valuation is complete. A preliminary determination of the goodwill is as follows: | |||||||||||||
Total purchase price | $ | 74,277,865 | |||||||||||
Less: Preliminary estimate of the fair value of the net assets acquired | (57,765,185 | ) | |||||||||||
Goodwill | $ | 16,512,680 | |||||||||||
Schedule of Intangible Assets Acquired | |||||||||||||
Estimated Fair Value | Estimated Useful Life | ||||||||||||
Trade name | $ | 2.0 million | 10 years | ||||||||||
Customer relationships | 1.3 million | 10 years | |||||||||||
Licenses | 1.0 million | 3 years | |||||||||||
Favorable lease | 1.5 million | 12 years | |||||||||||
Total Intangible assets | $ | 5.8 million | |||||||||||
Schedule of Revenues, Earnings, and Net Income | |||||||||||||
Year Ended | Year Ended | ||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||
Net interest income | $ | 21,623,473 | $ | 15,737,131 | |||||||||
Noninterest Income | |||||||||||||
Mortgage banking activities, net | 41,047,510 | 46,354,596 | |||||||||||
Loan servicing fees, net of direct costs | 5,239,010 | 3,022,447 | |||||||||||
Other income | 673,270 | 709,369 | |||||||||||
Net income | 35,213,626 | 11,465,008 | |||||||||||
Interest income – mortgage loans held for sale | $ | 594,217 | |||||||||||
Mortgage banking activities, net: | |||||||||||||
Gain on sale of mortgage loans, net of direct costs | 5,344,361 | ||||||||||||
Loan origination fee income | 213,540 | ||||||||||||
Provision for loan indemnification | (118,895 | ) | |||||||||||
5,439,006 | |||||||||||||
Loan servicing fee income, net of direct costs | 929,718 | ||||||||||||
Change in fair value of mortgage servicing rights | (1,684,373 | ) | |||||||||||
Other income | 45,861 | ||||||||||||
Total non interest income | 4,730,212 | ||||||||||||
Net income before expenses and taxes relating to Honeybee TRS | $ | 583,073 | |||||||||||
Expenses of Honeybee TRS | (2,710,564 | ) | |||||||||||
Net loss after expenses of Honeybee TRS, before tax | (2,127,491 | ) | |||||||||||
Tax benefit | 850,996 | ||||||||||||
Net loss after expenses of Honeybee TRS, after tax | $ | (1,276,495 | ) | ||||||||||
Schedule of Future Amortization Expense | |||||||||||||
2015 | $ | 788,340 | |||||||||||
2016 | $ | 788,340 | |||||||||||
2017 | $ | 732,776 | |||||||||||
2018 | $ | 455,004 | |||||||||||
2019 | $ | 455,004 |
Fair_Value_Tables
Fair Value (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||||||||||
Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Financial Instruments Accounted for at Fair Value on a Recurring Basis | The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis at December 31, 2014, by level within the fair value hierarchy: | ||||||||||||||||||||||||||||||||||||
Assets and Liabilities at Fair Value | |||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||
Mortgage loans held for investment | $ | — | $ | — | $ | 415,959,838 | $ | 415,959,838 | |||||||||||||||||||||||||||||
Mortgage loans held for sale | — | 97,690,960 | — | 97,690,960 | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | — | — | 148,585,733 | 148,585,733 | |||||||||||||||||||||||||||||||||
Other Investment Securities | — | — | 2,040,532 | 2,040,532 | |||||||||||||||||||||||||||||||||
MSRs | — | — | 33,378,978 | 33,378,978 | |||||||||||||||||||||||||||||||||
Derivative assets | — | — | 2,485,100 | 2,485,100 | |||||||||||||||||||||||||||||||||
Total | $ | — | $ | 97,690,960 | $ | 602,450,181 | $ | 700,141,141 | |||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||
Derivative liabilities | $ | — | $ | 2,585,184 | $ | — | $ | 2,585,184 | |||||||||||||||||||||||||||||
Total | $ | — | $ | 2,585,184 | $ | — | $ | 2,585,184 | |||||||||||||||||||||||||||||
The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis at December 31, 2013, by level within the fair value hierarchy: | |||||||||||||||||||||||||||||||||||||
Assets and Liabilities at Fair Value | |||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||
Mortgage loans held for investment | $ | — | $ | — | $ | 331,785,542 | $ | 331,785,542 | |||||||||||||||||||||||||||||
Non-Agency RMBS | — | — | 226,155,221 | 226,155,221 | |||||||||||||||||||||||||||||||||
Derivative assets | — | 284,454 | — | 284,454 | |||||||||||||||||||||||||||||||||
Total | $ | — | $ | 284,454 | $ | 557,940,763 | $ | 558,225,217 | |||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||
Derivative liabilities | — | 1,471,607 | $ | — | $ | 1,471,607 | |||||||||||||||||||||||||||||||
Total | $ | — | $ | 1,471,607 | $ | — | $ | 1,471,607 | |||||||||||||||||||||||||||||
Schedule of Financial Instruments Utilizing Level 3 Inputs | The following table presents additional information about the Company's financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | ||||||||||||||||||||||||||||||||||||
Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||||||||||||||||||
Mortgage | RMBS | Other | Mortgage | RMBS | |||||||||||||||||||||||||||||||||
Loans held for | Investment | Loans held for | |||||||||||||||||||||||||||||||||||
investment | Securities | investment | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | 331,785,542 | $ | 226,155,221 | $ | — | $ | — | $ | 100,911,651 | |||||||||||||||||||||||||||
Total net transfers into/out of Level 3 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Acquisitions | 85,579,169 | 47,034,327 | 12,926,953 | 334,162,044 | 234,397,506 | ||||||||||||||||||||||||||||||||
Proceeds from sales | — | (102,635,229 | ) | (11,067,378 | ) | — | (68,190,593 | ) | |||||||||||||||||||||||||||||
Net accretion of discounts | 7,497,341 | 5,528,538 | 180,438 | 3,059,231 | 3,727,702 | ||||||||||||||||||||||||||||||||
Proceeds from principal repayments | (31,759,326 | ) | (28,197,740 | ) | — | (13,871,059 | ) | (39,338,730 | ) | ||||||||||||||||||||||||||||
Conversion of mortgage loans to REO | (1,796,028 | ) | — | — | — | — | |||||||||||||||||||||||||||||||
Total losses (realized/unrealized) included in earnings | (8,250,003 | ) | (6,694,487 | ) | (226,224 | ) | (6,344,877 | ) | (9,138,009 | ) | |||||||||||||||||||||||||||
Total gains (realized/unrealized) included in earnings | 32,903,143 | 7,395,103 | 226,743 | 14,780,203 | 3,785,694 | ||||||||||||||||||||||||||||||||
Ending balance | $ | 415,959,838 | $ | 148,585,733 | $ | 2,040,532 | $ | 331,785,542 | $ | 226,155,221 | |||||||||||||||||||||||||||
Year Ended December 31, 2014 | |||||||||||||||||||||||||||||||||||||
LPCs | IRLCs | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | — | $ | — | |||||||||||||||||||||||||||||||||
Acquisition of GMFS | — | 2,702,954 | |||||||||||||||||||||||||||||||||||
Change in unrealized gain or loss | 4,037 | (221,891 | ) | ||||||||||||||||||||||||||||||||||
Ending balance | $ | 4,037 | $ | 2,481,063 | |||||||||||||||||||||||||||||||||
Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||||||||||||||||||
Mortgage | RMBS | Other | Mortgage | RMBS | |||||||||||||||||||||||||||||||||
Loans held for | Investment | Loans held for | |||||||||||||||||||||||||||||||||||
investment | Securities | investment | |||||||||||||||||||||||||||||||||||
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | $ | 22,957,500 | $ | (1,039,499 | ) | $ | (226,224 | ) | $ | 7,136,482 | $ | (2,822,969 | ) | ||||||||||||||||||||||||
The following table presents additional information about the Company's MSRs which are also financial instruments that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||||||||||||||||||
Year Ended | |||||||||||||||||||||||||||||||||||||
31-Dec-14 | |||||||||||||||||||||||||||||||||||||
Balance at beginning of year | $ | — | |||||||||||||||||||||||||||||||||||
Acquisition of MSRs in connection with purchase of GMFS | 32,300,337 | ||||||||||||||||||||||||||||||||||||
Additions due to loans sold, servicing retained | 2,763,014 | ||||||||||||||||||||||||||||||||||||
Fair value adjustment:(1) | |||||||||||||||||||||||||||||||||||||
Changes in assumptions(2) | (1,420,925 | ) | |||||||||||||||||||||||||||||||||||
Other changes(3) | (263,448 | ) | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2014 | $ | 33,378,978 | |||||||||||||||||||||||||||||||||||
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | $ | (1,420,925 | ) | ||||||||||||||||||||||||||||||||||
-1 | Included in change in fair value of MSRs on the consolidated statements of operations. | ||||||||||||||||||||||||||||||||||||
-2 | Primarily reflects changes in prepayment assumptions due to changes in interest rates and discount rates. | ||||||||||||||||||||||||||||||||||||
-3 | |||||||||||||||||||||||||||||||||||||
Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period. | |||||||||||||||||||||||||||||||||||||
Schedule of Quantitative Information about Level 3 Fair Value Measurements | The following tables present quantitative information about the Company's mortgage loans held for investment, real estate securities and Other Investment Securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | ||||||||||||||||||||||||||||||||||||
Fair Value at | Valuation | Unobservable Input | Min/Max | Weighted | |||||||||||||||||||||||||||||||||
December 31, | Technique(s) | Average | |||||||||||||||||||||||||||||||||||
2014 | |||||||||||||||||||||||||||||||||||||
Mortgage loans held for investment | $ | 415,959,838 | Discounted cash flow model | Constant voluntary prepayment | 1.4 | % | 27.1 | % | 3.9 | % | |||||||||||||||||||||||||||
Constant default rate | 0 | % | 4 | % | 2.9 | % | |||||||||||||||||||||||||||||||
Loss severity | 0 | % | 40.5 | % | 23.8 | % | |||||||||||||||||||||||||||||||
Delinquency | 0.1 | % | 13.6 | % | 10.6 | % | |||||||||||||||||||||||||||||||
Fair Value at | Valuation | Unobservable Input | Min/ Max | Weighted | |||||||||||||||||||||||||||||||||
December 31, | Technique(s) | Average | |||||||||||||||||||||||||||||||||||
2014 | |||||||||||||||||||||||||||||||||||||
Non-Agency RMBS(1) | |||||||||||||||||||||||||||||||||||||
Alternative – A | $ | 61,296,540 | Broker quotes/ comparable trades | Constant voluntary prepayment | 1.6 | % | 24.8 | % | 13.6 | % | |||||||||||||||||||||||||||
Constant default rate | 0.1 | % | 8.4 | % | 3.1 | % | |||||||||||||||||||||||||||||||
Loss severity | 0 | % | 81.1 | % | 20.5 | % | |||||||||||||||||||||||||||||||
Delinquency | 1.3 | % | 25.9 | % | 10.1 | % | |||||||||||||||||||||||||||||||
Pay option adjustable rate | $ | 45,541,325 | Broker quotes/ comparable trades | Constant voluntary prepayment | 1.7 | % | 20.1 | % | 8.9 | % | |||||||||||||||||||||||||||
Constant default rate | 1.6 | % | 19.4 | % | 4.3 | % | |||||||||||||||||||||||||||||||
Loss severity | 0 | % | 66.2 | % | 38 | % | |||||||||||||||||||||||||||||||
Delinquency | 6.8 | % | 29.1 | % | 15.2 | % | |||||||||||||||||||||||||||||||
Prime | $ | 39,065,076 | Broker quotes/ comparable trades | Constant voluntary prepayment | 2.6 | % | 17.3 | % | 9.2 | % | |||||||||||||||||||||||||||
Constant default rate | 0.2 | % | 9.2 | % | 4.1 | % | |||||||||||||||||||||||||||||||
Loss severity | 0 | % | 78.3 | % | 28.2 | % | |||||||||||||||||||||||||||||||
Delinquency | 5 | % | 24.8 | % | 13 | % | |||||||||||||||||||||||||||||||
Subprime | $ | 2,682,792 | Broker quotes/ comparable trades | Constant voluntary prepayment | 2.4 | % | 7.4 | % | 4.7 | % | |||||||||||||||||||||||||||
Constant default rate | 6 | % | 8 | % | 7.7 | % | |||||||||||||||||||||||||||||||
Loss severity | 65 | % | 85 | % | 72 | % | |||||||||||||||||||||||||||||||
Delinquency | 25.5 | % | 27.7 | % | 26.8 | % | |||||||||||||||||||||||||||||||
Total Non-Agency RMBS | $ | 148,585,733 | |||||||||||||||||||||||||||||||||||
-1 | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. | ||||||||||||||||||||||||||||||||||||
Fair Value at | Valuation | Unobservable Input | Weighted | ||||||||||||||||||||||||||||||||||
31-Dec-14 | Technique(s) | Average | |||||||||||||||||||||||||||||||||||
Other Investment Securities(1) | $ | 2,040,532 | Broker quotes/ | Constant voluntary prepayment | 7.5 | % | |||||||||||||||||||||||||||||||
comparable trades | |||||||||||||||||||||||||||||||||||||
-1 | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. | ||||||||||||||||||||||||||||||||||||
The following table presents quantitative information about the Company's MSRs which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: | |||||||||||||||||||||||||||||||||||||
Fair Value at | Valuation | Unobservable Input | Min/Max | Weighted | |||||||||||||||||||||||||||||||||
Year Ended, | Technique(s) | Average | |||||||||||||||||||||||||||||||||||
2014 | |||||||||||||||||||||||||||||||||||||
MSRs | $ | 33,378,978 | Discounted cash flow model | Constant prepayment rate | 7.6 | % | 58.2 | % | 10.6 | % | |||||||||||||||||||||||||||
Cost of servicing | $ | 76 | $ | 533 | $ | 91 | |||||||||||||||||||||||||||||||
Discount rate | 9 | % | 10 | % | 9.4 | % | |||||||||||||||||||||||||||||||
Key inputs | 31-Dec-14 | ||||||||||||||||||||||||||||||||||||
Pull-through rate | |||||||||||||||||||||||||||||||||||||
Range | 55.7% – 100.0% | ||||||||||||||||||||||||||||||||||||
Weighted average | 85.00% | ||||||||||||||||||||||||||||||||||||
MSR value expressed as: | |||||||||||||||||||||||||||||||||||||
Servicing fee multiple | |||||||||||||||||||||||||||||||||||||
Range | 0.4 – 6.0 | ||||||||||||||||||||||||||||||||||||
Weighted average | 4.4 | ||||||||||||||||||||||||||||||||||||
Percentage of unpaid principal balance | |||||||||||||||||||||||||||||||||||||
Range | 0.2% – 1.9% | ||||||||||||||||||||||||||||||||||||
Weighted average | 1.10% | ||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Option | |||||||||||||||||||||||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||||||||||||||||||||||
Unpaid | Unpaid Principal | ||||||||||||||||||||||||||||||||||||
Principal and/or | and/or Notional | ||||||||||||||||||||||||||||||||||||
Notional | |||||||||||||||||||||||||||||||||||||
Fair Value | Balance(1) | Difference | Fair Value | Balance(1) | Difference | ||||||||||||||||||||||||||||||||
Financial instruments, at fair value Assets | |||||||||||||||||||||||||||||||||||||
Mortgage loans held for investment | $ | 415,959,838 | $ | 464,877,028 | $ | (48,917,190 | ) | $ | 331,785,542 | $ | 398,828,497 | $ | (67,042,955 | ) | |||||||||||||||||||||||
Mortgage loans held for sale | 97,690,960 | 92,917,659 | 4,773,301 | — | — | — | |||||||||||||||||||||||||||||||
Non-Agency RMBS | 148,585,733 | 226,501,915 | (77,916,182 | ) | 226,155,221 | 324,241,597 | (98,086,376 | ) | |||||||||||||||||||||||||||||
Other Investment Securities | 2,040,532 | 2,250,000 | (209,468 | ) | — | — | — | ||||||||||||||||||||||||||||||
MSRs | 33,378,978 | 3,078,974,342 | (3,045,595,364 | ) | — | — | — | ||||||||||||||||||||||||||||||
Total financial instruments, at fair value | $ | 697,656,041 | $ | 3,865,520,944 | $ | (3,167,864,903 | ) | $ | 557,940,763 | $ | 723,070,094 | $ | (165,129,331 | ) | |||||||||||||||||||||||
-1 | Non-Agency RMBS includes an IO with a notional balance of $48.6 million and $64.3 million at December 31, 2014 and December 31, 2013, respectively. | ||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Other Financial Instruments | |||||||||||||||||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||
Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||||||||||||||||||||||||
Other financial instruments | |||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||
Cash | $ | 33,791,013 | $ | 33,791,013 | $ | 57,060,806 | $ | 57,060,806 | |||||||||||||||||||||||||||||
Restricted cash | 7,143,078 | 7,143,078 | 2,128,236 | 2,128,236 | |||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||
Warehouse lines of credit | $ | 89,417,564 | $ | 89,417,564 | $ | — | — | ||||||||||||||||||||||||||||||
Loan Repurchase Facilities | 300,092,293 | 300,092,293 | 236,727,512 | 236,058,976 | |||||||||||||||||||||||||||||||||
Securities repurchase agreements | 103,014,105 | 103,014,105 | 138,790,158 | 138,591,678 | |||||||||||||||||||||||||||||||||
Exchangeable Senior Notes | 59,933,400 | 55,474,741 | 54,737,573 | 54,539,057 | |||||||||||||||||||||||||||||||||
Schedule of Quantitative Summary Pertaining to MSRs | |||||||||||||||||||||||||||||||||||||
31-Dec-14 | |||||||||||||||||||||||||||||||||||||
Range | |||||||||||||||||||||||||||||||||||||
(Weighted average) | |||||||||||||||||||||||||||||||||||||
Fair value | |||||||||||||||||||||||||||||||||||||
Discount rate | 9.0% - 10.0 | % | |||||||||||||||||||||||||||||||||||
(9.4 | %) | ||||||||||||||||||||||||||||||||||||
Effect on fair value of adverse change of: | |||||||||||||||||||||||||||||||||||||
5% | $ | (683,406 | ) | ||||||||||||||||||||||||||||||||||
10% | $ | (1,366,812 | ) | ||||||||||||||||||||||||||||||||||
20% | $ | (2,655,493 | ) | ||||||||||||||||||||||||||||||||||
Prepayment speed(1) | 7.6% - 58.2 | % | |||||||||||||||||||||||||||||||||||
(10.6 | %) | ||||||||||||||||||||||||||||||||||||
Effect on fair value of adverse change of: | |||||||||||||||||||||||||||||||||||||
5% | $ | (639,594 | ) | ||||||||||||||||||||||||||||||||||
10% | $ | (1,279,187 | ) | ||||||||||||||||||||||||||||||||||
20% | $ | (2,468,154 | ) | ||||||||||||||||||||||||||||||||||
Per-loan annual cost of servicing | $76 - $533 | ||||||||||||||||||||||||||||||||||||
$ | (91 | ) | |||||||||||||||||||||||||||||||||||
Effect on fair value of adverse change of: | |||||||||||||||||||||||||||||||||||||
5% | $ | (389,384 | ) | ||||||||||||||||||||||||||||||||||
10% | $ | (778,768 | ) | ||||||||||||||||||||||||||||||||||
20% | $ | (1,557,561 | ) | ||||||||||||||||||||||||||||||||||
-1 | Prepayment speed is measured using CPR. | ||||||||||||||||||||||||||||||||||||
Mortgage_Loans_Held_for_Invest1
Mortgage Loans Held for Investment, at Fair Value (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Investment, at Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Mortgage Loan Acquisitions | Acquisition Date | Aggregate Unpaid Principal Balance | Loan Repurchase Facilities Used | ||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, 2013: | |||||||||||||||||||||||||||||||||||||||||||||||||
22-Mar-13 | $ | 17.7 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||
May 30, 2013 | — | — | -1 | ||||||||||||||||||||||||||||||||||||||||||||||
May 31, 2013 | 134.5 | 78.5 | |||||||||||||||||||||||||||||||||||||||||||||||
July 25, 2013 | 162.4 | 98.7 | |||||||||||||||||||||||||||||||||||||||||||||||
August 28, 2013 | 98.2 | 54.8 | |||||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, 2014: | |||||||||||||||||||||||||||||||||||||||||||||||||
March 27, 2014 | 100.4 | 60.6 | |||||||||||||||||||||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
On May 30, 2013, the Company entered into the Citi Loan Repurchase Facility and utilized $10.6 million of the Citi Loan Repurchase Facility to finance its then existing residential mortgage loan portfolio. | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Information about Investments in Mortgage Loans | 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid Principal Balance | Premium (Discount) | Amortized Cost | Gross Unrealized(1) | Fair Value | Weighted Average | ||||||||||||||||||||||||||||||||||||||||||||
Gains | Losses | Coupon | Yield(2) | ||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Investment | |||||||||||||||||||||||||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 265,306,697 | $ | -51,501,092 | $ | 213,805,605 | $ | 26,732,362 | $ | (1,383,524 | $ | 239,154,443 | 4.5 | % | 7.28 | % | |||||||||||||||||||||||||||||||||
ARM | 162,858,201 | (21,343,046 | ) | 141,515,155 | 9,568,296 | (1,441,035 | ) | 149,642,416 | 3.59 | 7.1 | |||||||||||||||||||||||||||||||||||||||
Total performing | 428,164,898 | (72,844,138 | ) | 355,320,760 | 36,300,658 | (2,824,559 | ) | 388,796,859 | 4.15 | 7.21 | |||||||||||||||||||||||||||||||||||||||
Non-performing(3) | 35,945,165 | (6,039,073 | ) | 29,906,092 | 840,097 | (4,369,886 | ) | 26,376,303 | 5.48 | 7.13 | |||||||||||||||||||||||||||||||||||||||
Total Mortgage Loans Held for Investment | $ | 464,110,063 | $ | -78,883,211 | $ | 385,226,852 | $ | 37,140,755 | $ | (7,194,445 | $ | 415,173,162 | 4.26 | % | 7.2 | % | |||||||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for these mortgage loans held for investment. The Company recorded a gain of $22.8 million for the year ended December 31, 2014 as change in unrealized gain or loss on mortgage loans held for investment in the consolidated statements of operations. | |||||||||||||||||||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||||||||||||||||||
(3) | |||||||||||||||||||||||||||||||||||||||||||||||||
Loans that are delinquent for 60 days or more are considered non-performing. | |||||||||||||||||||||||||||||||||||||||||||||||||
2013 | |||||||||||||||||||||||||||||||||||||||||||||||||
Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid Principal Balance | Premium (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Investment | |||||||||||||||||||||||||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 212,701,494 | $ | -43,530,581 | $ | 169,170,913 | $ | 7,842,598 | $ | -3,558,171 | $ | 173,455,340 | 4.56 | % | 7.05 | % | |||||||||||||||||||||||||||||||||
ARM | 170,178,466 | (25,617,563 | ) | 144,560,903 | 5,088,302 | (1,556,430 | ) | 148,092,775 | 3.76 | 6.67 | |||||||||||||||||||||||||||||||||||||||
Total performing | 382,879,960 | (69,148,144 | ) | 313,731,816 | 12,930,900 | (5,114,601 | ) | 321,548,115 | 4.2 | 6.88 | |||||||||||||||||||||||||||||||||||||||
Non-performing(3) | 15,948,537 | (5,031,293 | ) | 10,917,244 | 456,024 | (1,135,841 | ) | 10,237,427 | 5.06 | 8.03 | |||||||||||||||||||||||||||||||||||||||
Total Mortgage Loans Held for Investment | $ | 398,828,497 | $ | -74,179,437 | $ | 324,649,060 | $ | 13,386,924 | $ | -6,250,442 | $ | 331,785,542 | 4.24 | % | 6.91 | % | |||||||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans held for investment. The Company recorded a gain of $7.1 million for the year ended December 31, 2013, as change in unrealized gain or loss on mortgage loans in the consolidated statements of operations. | |||||||||||||||||||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||||||||||||||||||
(3) | |||||||||||||||||||||||||||||||||||||||||||||||||
Loans that are delinquent for 60 days or more are considered non-performing. | |||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid Principal Balance | Premium (Discount) | Amortized Cost | Gross Unrealized(1) | Fair Value | Weighted Average | ||||||||||||||||||||||||||||||||||||||||||||
Gains | Losses | Coupon | Yield(2) | ||||||||||||||||||||||||||||||||||||||||||||||
Performing | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 766,965 | $ | 16,173 | $ | 783,138 | $ | 3,538 | $ | — | $ | 786,676 | 4.38 | % | 4.2 | % | |||||||||||||||||||||||||||||||||
Total Mortgage Loans Held for Investment | $ | 766,965 | $ | 16,173 | $ | 783,138 | $ | 3,538 | $ | — | $ | 786,676 | 4.38 | % | 4.2 | % | |||||||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for these mortgage loans held for investment. The Company recorded a gain of $3,538 as change in unrealized gain or loss on mortgage loans held for investment in the consolidated statements of operations. | |||||||||||||||||||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Difference Between Fair Value and Aggregate Unpaid Principal Balance | 31-Dec-14 | 31-Dec-13 | |||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Unpaid Principal Balance | Difference | Fair Value | Unpaid Principal Balance | Difference | ||||||||||||||||||||||||||||||||||||||||||||
Loan Type | |||||||||||||||||||||||||||||||||||||||||||||||||
Performing loans: | |||||||||||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 239,154,443 | $ | 265,306,697 | $ | -26,152,254 | $ | 173,455,340 | $ | 212,701,494 | $ | -39,246,154 | |||||||||||||||||||||||||||||||||||||
ARM | 149,642,416 | 162,858,201 | (13,215,785 | ) | 148,092,775 | 170,178,466 | (22,085,691 | ) | |||||||||||||||||||||||||||||||||||||||||
Total performing loans | 388,796,859 | 428,164,898 | (39,368,039 | ) | 321,548,115 | 382,879,960 | (61,331,845 | ) | |||||||||||||||||||||||||||||||||||||||||
Non-performing loans | 26,376,303 | 35,945,165 | (9,568,862 | ) | 10,237,427 | 15,948,537 | (5,711,110 | ) | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 415,173,162 | $ | 464,110,063 | $ | -48,936,901 | $ | 331,785,542 | $ | 398,828,497 | $ | -67,042,955 | |||||||||||||||||||||||||||||||||||||
Schedule of Change in Accretable Yield | December 31, | December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accretable yield, beginning of year | $223,401,697 | $ — | |||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | 55,532,098 | 222,899,189 | |||||||||||||||||||||||||||||||||||||||||||||||
Accretion | -26,137,006 | -10,470,435 | |||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications from nonaccretable difference | 14,713,116 | 10,972,942 | |||||||||||||||||||||||||||||||||||||||||||||||
Accretable yield, end of year | $ 267,509,905 | $ 223,401,697 | |||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Concentrations of Credit Risk | December 31, | December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||
Concentration | |||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of fair value of mortgage loans with unpaid principal balance to current property value in excess of 100% | 55.7 | % | 73.6 | % | |||||||||||||||||||||||||||||||||||||||||||||
Percentage of fair value of mortgage loans secured by properties in the following states: | |||||||||||||||||||||||||||||||||||||||||||||||||
Each representing 10% or more of fair value: | |||||||||||||||||||||||||||||||||||||||||||||||||
California | 26.2 | % | 25.6 | % | |||||||||||||||||||||||||||||||||||||||||||||
Florida | 16.6 | % | 17.8 | % | |||||||||||||||||||||||||||||||||||||||||||||
Additional state representing more than 5% of fair value: | |||||||||||||||||||||||||||||||||||||||||||||||||
Georgia | 5.7 | % | 6.8 | % | |||||||||||||||||||||||||||||||||||||||||||||
New York | 5.1 | % | — |
Mortgage_Loans_Held_for_Sale_T
Mortgage Loans Held for Sale (Tables) | 12 Months Ended | ||
Dec. 31, 2014 | |||
Mortgage Loans Held for Sale [Abstract] | |||
Schedule of Mortgage Loans Held for Sale | Unpaid Principal Balance | Fair Value | |
Conventional | $55,073,645 | $57,058,195 | |
Governmental | 13,407,781 | 14,601,797 | |
Reverse mortgage | 1,600,449 | 1,765,552 | |
United States Department of Agriculture loans | 16,105,088 | 17,069,138 | |
United States Department of Veteran Affairs loan | 6,730,696 | 7,196,278 | |
Total | $92,917,659 | $97,690,960 |
Real_Estate_Securities_and_Oth1
Real Estate Securities and Other Investment Securities (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||||||
Real Estate Securities and Other Investment Securities [Abstract] | |||||||||||||||||||||||||||||||||
Schedule of Information Regarding Real Estate Securities | The following table sets forth certain information regarding the Company's RMBS and Other Investment Securities at December 31, 2014: | ||||||||||||||||||||||||||||||||
Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||||||||||
Principal or Notional Balance | Premium (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||||||||
Real estate securities | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||||||||
Alternative – A(3) | $ | 118,547,109 | $ | (58,583,222 | $ | 59,963,887 | $ | 1,916,611 | $ | (583,958 | ) | $ | 61,296,540 | 3.44 | % | 7.03 | % | ||||||||||||||||
Pay option adjustable rate | 58,122,808 | (11,491,663 | ) | 46,631,145 | 80,848 | (1,170,668 | ) | 45,541,325 | 0.93 | 6.12 | |||||||||||||||||||||||
Prime | 43,803,995 | (6,219,091 | ) | 37,584,904 | 1,545,452 | (65,280 | ) | 39,065,076 | 3.6 | 6.79 | |||||||||||||||||||||||
Subprime | 6,028,003 | (3,290,867 | ) | 2,737,136 | - | (54,344 | ) | 2,682,792 | 0.33 | 16.98 | |||||||||||||||||||||||
Total RMBS | $ | 226,501,915 | $ | (79,584,843 | ) | $ | 146,917,072 | $ | 3,542,911 | $ | (1,874,250 | $ | 148,585,733 | 2.62 | % | 6.96 | % | ||||||||||||||||
Other Investment Securities | $ | 2,250,000 | $ | 16,756 | $ | 2,266,756 | $ | - | $ | (226,224 | ) | $ | 2,040,532 | 3.92 | % | 5.9 | % | ||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for its real estate securities and Other Investment Securities. The Company recorded a loss of $3.0 million for the year ended December 31, 2014, as change in unrealized gain or loss on real estate securities in the consolidated statements of operations. The Company also recorded a loss of $0.2 million for the year ended December 31, 2014, as change in unrealized gain or loss on Other Investment Securities in the consolidated statements of operations. | |||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||
(3) | |||||||||||||||||||||||||||||||||
Alternative – A RMBS includes an IO with a notional balance of $48.6 million. | |||||||||||||||||||||||||||||||||
The following table sets forth certain information regarding the Company's RMBS at December 31, 2013: | |||||||||||||||||||||||||||||||||
Gross Unrealized(1) | Weighted Average | ||||||||||||||||||||||||||||||||
Principal or Notional Balance | Premium (Discount) | Amortized Cost | Gains | Losses | Fair Value | Coupon | Yield(2) | ||||||||||||||||||||||||||
Real estate securities | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||||||||
Alternative – A(3) | $ | 160,590,487 | $ | -80,206,745 | $ | 80,383,742 | $ | 2,414,864 | $ | -1,112,077 | $ | 81,686,529 | 4.26 | 6.77 | |||||||||||||||||||
Pay option adjustable rate | 34,374,028 | (7,057,026 | ) | 27,317,002 | 464,756 | (345,915 | ) | 27,435,843 | 0.76 | 6.8 | |||||||||||||||||||||||
Prime | 109,136,108 | (13,590,489 | ) | 95,545,619 | 3,751,248 | (767,825 | ) | 98,529,042 | 4.77 | 6.45 | |||||||||||||||||||||||
Subprime | 20,140,974 | (1,894,417 | ) | 18,246,557 | 536,407 | (279,157 | ) | 18,503,807 | 1.07 | 5.97 | |||||||||||||||||||||||
Total RMBS | $ | 324,241,597 | $ | -102,748,677 | $ | 221,492,920 | $ | 7,167,275 | $ | -2,504,974 | $ | 226,155,221 | 3.8 | % | 6.57 | % | |||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. | |||||||||||||||||||||||||||||||||
(2) | |||||||||||||||||||||||||||||||||
Unleveraged yield. | |||||||||||||||||||||||||||||||||
(3) | |||||||||||||||||||||||||||||||||
Alternative – A RMBS includes an IO with a notional balance of $64.3 million. | |||||||||||||||||||||||||||||||||
The following table presents certain information regarding the Company's non-Agency RMBS at December 31, 2014 by weighted average life: | |||||||||||||||||||||||||||||||||
Schedule of Information Regarding Gains and Losses on Securities | Year Ended | ||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | |||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||||||||||||||||||
Proceeds from the sale of real estate securities | $ | 102,635,229 | $ | 291,348,906 | $ | 74,216,314 | |||||||||||||||||||||||||||
Proceeds from the sale of other investment securities | 11,067,378 | — | — | ||||||||||||||||||||||||||||||
Realized gain (loss) on the sale of real estate securities | 3,694,255 | (7,937,665 | ) | 28,858 | |||||||||||||||||||||||||||||
Realized gain (loss) on the sale of other investment securities | 226,743 | — | — | ||||||||||||||||||||||||||||||
Realized loss on OTTI | — | (1,108,024 | ) | (215,345 | ) | ||||||||||||||||||||||||||||
Schedule of Information Regarding Real Estate Securities by Weighted Average Life | Non-Agency RMBS | ||||||||||||||||||||||||||||||||
Fair Value | Amortized Cost | Weighted Average Yield | |||||||||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||||||||
Greater than 5 years | $ | 226,155,221 | $ | 221,492,920 | 6.57 | % | |||||||||||||||||||||||||||
$ | 226,155,221 | $ | 221,492,920 | 6.57 | % | ||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||||||||||||||||||||||||||||||||
Other Investment Securities | |||||||||||||||||||||||||||||||||
Fair Value | Amortized Cost | Weighted Average Yield | |||||||||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||||||||
Greater than 5 years | $ | 2,040,532 | $ | 2,266,756 | 5.9 | % | |||||||||||||||||||||||||||
$ | 2,040,532 | $ | 2,266,756 | 5.9 | % | ||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
Actual maturities of Other Investment Securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||||||||||||||||||||||||||||||||
Non-Agency RMBS | |||||||||||||||||||||||||||||||||
Fair Value | Amortized Cost | Weighted Average Yield | |||||||||||||||||||||||||||||||
Weighted average life(1) | |||||||||||||||||||||||||||||||||
Greater than 5 years | $ | 148,585,733 | $ | 146,917,072 | 6.96 | % | |||||||||||||||||||||||||||
$ | 148,585,733 | $ | 146,917,072 | 6.96 | % | ||||||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||||||
Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||||||||||||||||||||||||||||||||
Mortgage_Servicing_Rights_Tabl
Mortgage Servicing Rights (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Mortgage Servicing Rights [Abstract] | |||||||||||||
Schedule of Mortgage Servicing Rights | The activity of MSRs for the year ended December 31, 2014 is as follows: | ||||||||||||
Balance at beginning of year | $ | — | |||||||||||
Acquisition of MSRs in connection with purchase of GMFS | 32,300,337 | ||||||||||||
Additions due to loans sold, servicing retained | 2,763,014 | ||||||||||||
Fair value adjustment:(1) | |||||||||||||
Changes in assumptions(2) | (1,420,925 | ) | |||||||||||
Other changes(3) | (263,448 | ) | |||||||||||
Balance at December 31, 2014 | $ | 33,378,978 | |||||||||||
-1 | Included in change in fair value of MSRs in the Company's consolidated statements of operations. | ||||||||||||
-2 | Primarily reflects changes in prepayment assumptions due to changes in interest rates and discount rates. | ||||||||||||
-3 | Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid off during the period. | ||||||||||||
The Company's MSR portfolio at December 31, 2014 is summarized as follows: | |||||||||||||
Unpaid Principal Balance | Fair Value | ||||||||||||
Fannie Mae | $ | 1,640,799,719 | $ | 17,078,181 | |||||||||
Ginnie Mae | 1,146,234,768 | 13,102,076 | |||||||||||
Freddie Mac | 291,939,855 | 3,198,721 | |||||||||||
Total | $ | 3,078,974,342 | $ | 33,378,978 | |||||||||
The Company contracts with licensed sub-servicers to perform all servicing functions for these loans. The following table presents the loan servicing fee income, net of direct costs: | |||||||||||||
Income | $ | 1,412,583 | |||||||||||
Late charges | 60 | ||||||||||||
Cost of sub-servicer | (482,925 | ) | |||||||||||
Loan servicing fees, net of direct costs | $ | 929,718 | |||||||||||
Warehouse_Lines_of_Credit_Tabl
Warehouse Lines of Credit (Tables) (Warehouse Agreement Borrowings [Member]) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Warehouse Agreement Borrowings [Member] | |||||||||||||
Short-term Debt [Line Items] | |||||||||||||
Schedule of debt | |||||||||||||
31-Dec-14 | |||||||||||||
Balance | Weighted Average | ||||||||||||
Rate | |||||||||||||
Warehouse lines of credit maturing within | |||||||||||||
30 days or less | $ | 21,210,431 | 2.47 | % | |||||||||
Greater than 180 days to 1 year | 57,118,533 | 2.46 | |||||||||||
Greater than 1 year | 11,088,600 | 2.92 | |||||||||||
Total/weighted average | $ | 89,417,564 | 2.52 | % | |||||||||
Loan_Repurchase_Facility_Table
Loan Repurchase Facility (Tables) (Line of Credit [Member]) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Line of Credit [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Schedule of Information Regarding Repurchase Agreements | 31-Dec-14 | 31-Dec-13 | |||||||||||||||
Balance | Weighted Average Rate | Balance | Weighted Average Rate | ||||||||||||||
Loan Repurchase Facilities borrowings maturing within | |||||||||||||||||
91-180 days | $ | 299,402,024 | 2.92 | % | $ | 236,058,976 | 2.92 | % | |||||||||
Greater than 180 days to 1 year | 690,269 | 2.46 | % | — | — | ||||||||||||
Total/weighted average | $ | 300,092,293 | 2.92 | % | $ | 236,058,976 | 2.92 | % | |||||||||
Schedule of Information Regarding Posting of Collateral | |||||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||
Loan Repurchase Facilities secured by mortgage loans held for investment | $ | 300,092,293 | $ | 236,058,976 | |||||||||||||
Fair value of Trust Certificates pledged as collateral under Loan Repurchase Facilities | 415,814,067 | 331,522,165 | |||||||||||||||
Fair value of mortgage loans not pledged as collateral under Loan Repurchase Facilities | 145,771 | 263,377 | |||||||||||||||
Cash pledged as collateral under Loan Repurchase Facilities | — | — | |||||||||||||||
Unused Amount(1) | 124,907,707 | 13,941,024 | |||||||||||||||
-1 | The amount the Company is able to borrow under the Loan Repurchase Facilities is tied to the fair value of unencumbered Trust Certificates eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold. | ||||||||||||||||
Schedule of Financial Information | Year Ended | Year Ended | |||||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||||||
Weighted average interest rate | 3.11 | % | 2.92 | % | |||||||||||||
Average unpaid principal balance of loans sold under agreements to repurchase | $ | 193,332 | $ | 273,786 | |||||||||||||
Maximum daily amount outstanding | $ | 310,575,669 | $ | 242,099,994 | |||||||||||||
Total interest expense | $ | 8,906,849 | $ | 3,612,167 |
Securities_Repurchase_Agreemen1
Securities Repurchase Agreements (Tables) (Securities Sold under Agreements to Repurchase [Member]) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Securities Sold under Agreements to Repurchase [Member] | |||||||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||||||
Schedule of Information Regarding Repurchase Agreements | 31-Dec-14 | 31-Dec-13 | |||||||||||||||||||||||
Non-Agency RMBS | Other Investment Securities | Non-Agency RMBS | |||||||||||||||||||||||
Balance | Weighted Average Rate | Balance | Weighted Average Rate | Balance | Weighted Average Rate | ||||||||||||||||||||
Securities repurchase agreements maturing within | |||||||||||||||||||||||||
30 days or less | $ | 101,553,292 | 1.57 | % | $ | 1,460,813 | 1.66 | % | $ | 121,913,678 | 1.9 | % | |||||||||||||
31-60 days | — | — | — | — | 6,415,000 | 1.84 | |||||||||||||||||||
61-90 days | — | — | — | — | 10,263,000 | 1.85 | |||||||||||||||||||
Total/weighted average | $ | 101,553,292 | 1.57 | % | $ | 1,460,813 | 1.66 | % | $ | 138,591,678 | 1.89 | % | |||||||||||||
Schedule of Information Regarding Posting of Collateral | 31-Dec-14 | 31-Dec-13 | |||||||||||||||||||||||
Securities repurchase agreements secured by non-Agency RMBS | $ | 101,553,292 | $ | 138,591,678 | |||||||||||||||||||||
Securities repurchase agreements secured by Other Investment Securities | 1,460,813 | — | |||||||||||||||||||||||
Fair value of non-Agency RMBS pledged as collateral | 135,779,193 | 183,722,511 | |||||||||||||||||||||||
Fair value of Other Investment Securities pledged as collateral | 2,040,532 | — | |||||||||||||||||||||||
Fair value of non-Agency RMBS not pledged as collateral | 12,806,540 | 42,432,710 | |||||||||||||||||||||||
Fair value of Other Investment Securities not pledged as collateral | — | — | |||||||||||||||||||||||
Cash pledged as collateral | 684,256 | 1,360,528 |
Derivative_Instruments_Tables
Derivative Instruments (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Derivative Instruments [Abstract] | |||||||||||||||||
Schedule of Notional Amounts of Derivative Instruments | Non-hedge derivatives | 31-Dec-14 | December 31, 2013 | ||||||||||||||
Notional amount of interest rate swaption | $ | 225,000,000 | $ | — | |||||||||||||
Notional amount of interest rate swaps | 17,200,000 | 17,200,000 | |||||||||||||||
LPCs (Principal balance of underlying loans) | 1,905,700 | — | |||||||||||||||
IRLCs (Principal balance of underlying loans) | 118,486,590 | — | |||||||||||||||
MBS forward sales contracts | 154,000,000 | — | |||||||||||||||
Schedule of Fair Value of Derivative Instruments | Derivative instruments | Designation | Balance Sheet Location | December 31, 2014 | 31-Dec-13 | ||||||||||||
Interest rate swaption | Non-hedge | Derivative assets, at fair value | $ | — | $ | — | |||||||||||
Interest rate swaps | Non-hedge | Derivative (liabilities)/assets, at fair value | (860,553 | ) | 284,454 | ||||||||||||
Exchangeable Senior Notes conversion option | Non-hedge | Derivative liabilities, at fair value | (1,022,248 | ) | (1,471,607 | ) | |||||||||||
LPCs | Non-hedge | Derivative assets, at fair value | 4,037 | — | |||||||||||||
IRLCs | Non-hedge | Derivative assets, at fair value | 2,481,063 | — | |||||||||||||
MBS forward sales contracts | Non-hedge | Derivative liabilities, at fair value | (702,383 | ) | — | ||||||||||||
Schedule of Gains / (Losses) Related to Derivatives | Non-hedge derivatives | Income Statement Location | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | ||||||||||||
Interest rate swaption | Gain/(loss) on derivative instruments | $ | (4,803,750 | $ | — | $ | — | ||||||||||
Interest rate swaps | Gain/(loss) on derivative instruments | (1,571,371 | ) | 10,548,012 | (1,171,219 | ) | |||||||||||
Exchangeable Senior Notes conversion option | Gain/(loss) on derivative instruments | 449,359 | (147,201 | ) | — | ||||||||||||
TBAs | Gain/(loss) on derivative instruments | — | (4,785,996 | ) | — | ||||||||||||
LPCs | Gain/(loss) on derivative instruments | 4,037 | — | — | |||||||||||||
IRLCs | Mortgage banking activities, net | (221,891 | ) | — | — | ||||||||||||
MBS forward sales contracts | Mortgage banking activities, net | 410,411 | — | — | |||||||||||||
Schedule of Information Related to Derivative Instruments, by Maturity | Swaption Expiration | Notional Amount | Strike Rate | Swap Maturity | |||||||||||||
2015 | $ | 225,000,000 | 3.64 | % | 2025 | ||||||||||||
31-Dec-14 | |||||||||||||||||
Maturity | Notional Amount | Weighted Average Pay Rate | Weighted Average Receive Rate | Weighted Average Years to Maturity | |||||||||||||
2023 | $ | 17,200,000 | 2.72 | % | 0.23 | % | 8.6 | ||||||||||
Total/Weighted average | $ | 17,200,000 | 2.72 | % | 0.23 | % | 8.6 | ||||||||||
31-Dec-13 | |||||||||||||||||
Maturity | Notional Amount | Weighted Average Pay Rate | Weighted Average Receive Rate | Weighted Average Years to Maturity | |||||||||||||
2023 | $ | 17,200,000 | 2.72 | % | 0.24 | % | 9.6 | ||||||||||
Total/Weighted average | $ | 17,200,000 | 2.72 | % | 0.24 | % | 9.6 |
Mortgage_Banking_Activities_Ta
Mortgage Banking Activities (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Mortgage Banking Activities [Abstract] | |||||
Schedule of Mortgage Banking Activities | Gain on sale of mortgage loans held for sale, net of direct costs | $ | 5,344,361 | ||
Provision for loan indemnification | (118,895 | ) | |||
Loan origination fee income | 213,540 | ||||
Total | $ | 5,439,006 |
Loan_Indemnification_Reserve_T
Loan Indemnification Reserve (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Loan Indemnification Reserve [Abstract] | |||||
Schedule of Activity in Loan Indemnification Reserve | Balance at the date of acquisition | $ | 2,560,907 | ||
Loan losses incurred | — | ||||
Provision for losses | 101,255 | ||||
Balance at end of year | $ | 2,662,162 |
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Taxes [Abstract] | |||||||||
Schedule of Provision for Income Taxes | Year ended December 31, | ||||||||
2014 | 2013 | ||||||||
Current provision for income taxes | |||||||||
Federal | $ | — | $ | — | |||||
State | — | — | |||||||
Total current provision (benefit) for income taxes | — | — | |||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Deferred provision for income taxes | |||||||||
Federal | (677,780 | ) | — | ||||||
State | (173,216 | ) | — | ||||||
Total deferred provision (benefit) for income taxes | (850,996 | ) | — | ||||||
Total provision (benefit) for income taxes | $ | (850,996 | ) | $ | — | ||||
Schedule of Reconciliation of Statutory Tax Rate to Effective Tax Rate | Year ended December 31, | ||||||||
2014 | 2013 | ||||||||
Tax expense (benefit) at statutory rate | 35 | % | 35 | % | |||||
State Tax (Net of Federal Benefit) | (0.82 | %) | 0 | % | |||||
Permanent differences | 0.03 | % | 0 | % | |||||
Valuation Allowance | 2.31 | % | 0 | % | |||||
Benefit of REIT Dividend paid deduction | (39.46 | %) | (35.00 | %) | |||||
Effective Tax Rate | (2.94 | %) | 0 | % | |||||
Schedule of Deferred Tax Assets (Liabilities) | Year ended December 31, | ||||||||
2014 | 2013 | ||||||||
Deferred tax assets | |||||||||
Tax effect of unrealized losses and other temporary differences | $ | 1,207,520 | $ | — | |||||
Net operating loss carryforward | 673,052 | 43,473 | |||||||
Total deferred tax assets | 1,880,572 | 43,473 | |||||||
Deferred tax liabilities | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Tax effect of unrealized gains and other temporary differences | (357,663 | ) | — | ||||||
Total deferred tax liabilities | (357,663 | ) | — | ||||||
Valuation allowance | 671,913 | 43,473 | |||||||
Total Deferred Tax Assets, net of Valuation Allowance | $ | 850,996 | $ | — | |||||
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Earnings Per Share [Abstract] | |||||||||||||
Reconciliation of Earnings and Shares Used in Calculating Basic and Diluted Earnings Per Share | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | ||||||||||
Numerator: | |||||||||||||
Net income/(loss) attributable to ZAIS Financial Corp. common stockholders (Basic) | $ | 26,741,970 | $ | 6,657,728 | $ | 19,433,802 | |||||||
Effect of dilutive securities: | |||||||||||||
Net income allocated to non-controlling interests | 3,109,760 | 880,358 | 362,324 | ||||||||||
Exchangeable Senior Notes | |||||||||||||
Interest expense | 3,240,561 | — | — | ||||||||||
Gain on derivative instruments | (256,068 | ) | — | — | |||||||||
Total – Exchangeable Senior Notes | 2,984,493 | — | — | ||||||||||
Net income/(loss) available to stockholders, after effect of dilutive securities | $ | 32,836,223 | $ | 7,538,086 | $ | 19,796,126 | |||||||
Denominator: | |||||||||||||
Weighted average number of shares of common stock | 7,970,886 | 7,273,366 | 2,724,252 | ||||||||||
Effect of dilutive securities: | |||||||||||||
Weighted average number of OP units | 926,914 | 926,914 | 49,593 | ||||||||||
Weighted average number of shares convertible under Exchangeable Senior Notes | 1,779,560 | — | — | ||||||||||
Diluted weighted average shares outstanding | 10,677,360 | 8,200,280 | 2,773,845 | ||||||||||
Net income per share applicable to ZAIS Financial Corp. common stockholders – Basic | $ | 3.35 | $ | 0.92 | $ | 7.13 | |||||||
Net income per share applicable to ZAIS Financial Corp. common stockholders – Diluted | $ | 3.08 | $ | 0.92 | $ | 7.13 |
Stockholders_Equity_Tables
Stockholders' Equity (Tables) | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
Stockholders' Equity [Abstract] | |||||||
Schedule of Dividends Declared | Declaration Date | Record Date | Payment Date | Amount per Share | |||
Year ended December 31, 2012: | |||||||
1-May-12 | 1-May-12 | 15-May-12 | $ | 0.51 | |||
5-Jun-12 | 5-Jun-12 | 21-Jun-12 | $ | 0.57 | |||
October 22, 2012 | 22-Oct-12 | 29-Oct-12 | $ | 0.89 | |||
November 29, 2012 | 29-Nov-12 | 6-Dec-12 | $ | 0.98 | |||
December 19, 2012 | 19-Dec-12 | 26-Dec-12 | $ | 1.16 | |||
Year ended December 31, 2013: | |||||||
May 14, 2013 | 24-May-13 | 31-May-13 | $ | 0.22 | |||
June 25, 2013 | 9-Jul-13 | 23-Jul-13 | $ | 0.45 | |||
September 18, 2013 | 30-Sep-13 | 11-Oct-13 | $ | 0.5 | |||
December 19, 2013(1) | 31-Dec-13 | 15-Jan-14 | $ | 0.95 | |||
Year ended December 31, 2014: | |||||||
March 20, 2014 | 31-Mar-14 | 14-Apr-14 | $ | 0.4 | |||
June 18, 2014 | 30-Jun-14 | 15-Jul-14 | $ | 0.4 | |||
September 18, 2014 | 30-Sep-14 | 15-Oct-14 | $ | 0.4 | |||
December 19, 2014 | 31-Dec-14 | 15-Jan-15 | $ | 0.4 | |||
(1) | |||||||
Comprised of a regular cash dividend of $0.40 per share of common stock and OP unit for the quarter ending December 31, 2013, and an additional special cash dividend of $0.55 per share of its common stock and OP unit. The Company declared the special cash dividend to distribute taxable income from 2013 attributable to the termination of interest rate swap contracts. | |||||||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Commitments and Contingencies [Abstract] | |||||
Schedule of Future Minimum Payments | 2015 | $ | 639,523 | ||
2016 | 455,351 | ||||
2017 | 385,075 | ||||
2018 | 385,075 | ||||
2019 | 410,515 | ||||
Thereafter | $ | 2,275,539 | |||
Schedule of Compliance with Regulatory Capital Requirements | Net Worth | Net Worth Required | |||
HUD | $52,545,673 | $2,500,000 | |||
Ginnie Mae | 52,545,673 | 5,007,700 | |||
Fannie Mae | 52,548,259 | 6,577,547 | |||
Freddie Mac | 52,548,259 | 3,143,262 | |||
Various States | 52,548,259 | 0 - 1,000,000 |
Offsetting_Assets_and_Liabilit1
Offsetting Assets and Liabilities (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Offsetting Assets and Liabilities [Abstract] | |||||||||||||||||||||||||
Schedule of Offsetting of Assets | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets Presented in the Consolidated Balance Sheets | Gross Amounts | |||||||||||||||||||||
Not Offset in the Consolidated Balance Sheets | |||||||||||||||||||||||||
Financial Instruments | Cash Collateral Received(1) | Net Amount | |||||||||||||||||||||||
31-Dec-14 | |||||||||||||||||||||||||
Interest rate swaption | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
31-Dec-13 | |||||||||||||||||||||||||
Interest rate swap agreements | $ | 396,068 | $ | (111,614 | ) | $ | 284,454 | $ | — | $ | — | $ | 284,454 | ||||||||||||
Total | $ | 396,068 | $ | (111,614 | ) | $ | 284,454 | $ | — | $ | — | $ | 284,454 | ||||||||||||
(1) | |||||||||||||||||||||||||
At December 31, 2014, the Company pledged $4,886,011 of cash collateral in relation to its interest rate swaption; with the total net counterparty exposure for this position totaling $4,886,011. At December 31, 2013, the Company pledged $767,708 of cash collateral in relation to its interest rate swap agreements; with the total net counterparty exposure for this position totaling $1,052,162. | |||||||||||||||||||||||||
Schedule of Offsetting of Liabilities | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | Gross Amounts Not | Net Amount | ||||||||||||||||||||
Offset in the | |||||||||||||||||||||||||
Consolidated Balance Sheets | |||||||||||||||||||||||||
Financial Instruments | Cash Collateral Pledged | ||||||||||||||||||||||||
31-Dec-14 | |||||||||||||||||||||||||
Loan Repurchase Facilities | $ | 300,092,293 | $ | — | $ | 300,092,293 | $ | (300,092,293 | ) | $ | — | $ | — | ||||||||||||
Securities repurchase agreements | 103,014,105 | — | 103,014,105 | (102,329,849 | ) | (684,256 | ) | — | |||||||||||||||||
Warehouse lines of credit | 89,417,564 | — | 89,417,564 | (89,417,564 | ) | — | — | ||||||||||||||||||
Interest rate swap agreements | 860,553 | — | 860,553 | (860,553 | ) | — | — | ||||||||||||||||||
Total | $ | 493,384,515 | $ | — | $ | 493,384,515 | $ | (492,700,259 | ) | $ | (684,256 | ) | $ | — | |||||||||||
31-Dec-13 | |||||||||||||||||||||||||
Loan Repurchase Facilities | $ | 236,058,976 | $ | — | $ | 236,058,976 | $ | -236,058,976 | $ | — | $ | — | |||||||||||||
Securities repurchase agreements | 138,591,678 | — | 138,591,678 | (137,231,150 | ) | (1,360,528 | ) | — | |||||||||||||||||
$ | 374,650,654 | $ | — | $ | 374,650,654 | $ | -373,290,126 | $ | -1,360,528 | $ | — |
Segment_Information_Tables
Segment Information (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Segment Information [Abstract] | |||||||||||||||||
Schedule of Segment Information | Mortgage Loans | Mortgage | Corporate/Other | Total | |||||||||||||
Held for Investments | Banking | ||||||||||||||||
Interest income | $ | 40,998,530 | $ | 594,217 | $ | — | $ | 41,592,747 | |||||||||
Interest expense | 11,451,687 | 121,194 | 5,686,664 | 17,259,545 | |||||||||||||
Net interest income (expense) | 29,546,843 | 473,023 | (5,686,664 | ) | 24,333,202 | ||||||||||||
Non-interest income | — | 4,730,212 | — | 4,730,212 | |||||||||||||
Change in unrealized gain or loss | 19,090,520 | — | — | 19,090,520 | |||||||||||||
Realized gain | 5,762,254 | — | — | 5,762,254 | |||||||||||||
Gain or (loss) on derivative instruments | (5,921,725 | ) | — | — | (5,921,725 | ) | |||||||||||
Advisory fee – related party | 3,835 | 143,674 | 2,706,387 | 2,853,896 | |||||||||||||
Salaries, commissions and benefits | — | 3,765,784 | — | 3,765,784 | |||||||||||||
Operating expenses | 251,305 | 1,089,640 | 6,521,363 | 7,862,308 | |||||||||||||
Other expenses: | |||||||||||||||||
Expenses | 2,180,113 | — | — | 2,180,113 | |||||||||||||
Transaction costs relating to acquisition of GMFS | — | 2,177,617 | — | 2,177,617 | |||||||||||||
Depreciation and amortization | — | 154,011 | — | 154,011 | |||||||||||||
Total other expenses | 2,180,113 | 2,331,628 | — | 4,511,741 | |||||||||||||
Net income/(loss) before income taxes | 46,042,639 | (2,127,491 | ) | (14,914,414 | ) | 29,000,734 | |||||||||||
Income tax benefit | — | 850,996 | — | 850,996 | |||||||||||||
Segment contribution / net income | $ | 46,042,639 | $ | (1,276,495 | ) | $ | (14,914,414 | ) | $ | 29,851,730 | |||||||
Supplemental Disclosures: | |||||||||||||||||
Mortgage loans held for investment, at fair value | $ | 415,959,838 | $ | — | $ | — | $ | 415,959,838 | |||||||||
Mortgage loans held for investment, at cost | — | 1,338,935 | — | 1,338,935 | |||||||||||||
Mortgage loans held for sale | — | 97,690,960 | — | 97,690,960 | |||||||||||||
Real estate securities | 148,585,733 | — | — | 148,585,733 | |||||||||||||
Other investment securities | 2,040,532 | — | — | 2,040,532 | |||||||||||||
Mortgage servicing rights | — | 33,378,978 | — | 33,378,978 | |||||||||||||
Goodwill | — | 16,512,680 | — | 16,512,680 | |||||||||||||
Intangible assets | — | 5,668,611 | — | 5,668,611 | |||||||||||||
Total assets | 596,553,227 | 194,700,643 | 1,144,735 | 792,398,605 | |||||||||||||
Quarterly_Results_Tables
Quarterly Results (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||||||
Quarterly Results [Abstract] | |||||||||||||||||||||||||||||
Schedule of Quarterly Results of Operations | For the Three Months Ended | ||||||||||||||||||||||||||||
December 31, 2014 (1) | 30-Sep-14 | June 30, | March 31, | ||||||||||||||||||||||||||
2014 | 2014 | ||||||||||||||||||||||||||||
Total interest income | $ | 10,267,875 | $ | 11,000,619 | $ | 10,831,220 | $ | 9,493,033 | |||||||||||||||||||||
Total interest expense | 4,447,530 | 4,491,678 | 4,416,385 | 3,903,952 | |||||||||||||||||||||||||
Net interest income | 5,820,345 | 6,508,941 | 6,414,835 | 5,589,081 | |||||||||||||||||||||||||
Non-interest income | 4,730,212 | — | — | — | |||||||||||||||||||||||||
Total other gain/(loss) | (2,944,631 | ) | (1,805,117 | ) | 22,688,696 | 992,101 | |||||||||||||||||||||||
Total expenses | 8,239,984 | 3,424,026 | 3,231,396 | 4,098,323 | |||||||||||||||||||||||||
Income tax benefit | 850,996 | — | — | — | |||||||||||||||||||||||||
Net income/(loss) | 216,938 | 1,279,798 | 25,872,135 | 2,482,859 | |||||||||||||||||||||||||
Net income/(loss) attributable to ZAIS Financial Corp. common stockholders | $ | 194,337 | $ | 1,149,497 | $ | 23,173,931 | $ | 2,224,205 | |||||||||||||||||||||
Net income/(loss) per share applicable to common stockholders – basic | $ | 0.02 | $ | 0.14 | $ | 2.91 | $ | 0.28 | |||||||||||||||||||||
Net income/(loss) per share applicable to common stockholders – diluted | $ | 0.02 | $ | 0.14 | $ | 2.47 | $ | 0.28 | |||||||||||||||||||||
Weighted average number of shares Basic | 7,970,886 | 7,970,886 | 7,970,886 | 7,970,886 | |||||||||||||||||||||||||
Diluted | 8,897,800 | 8,897,800 | 10,677,360 | 8,897,800 | |||||||||||||||||||||||||
(1) | |||||||||||||||||||||||||||||
On October 31, 2014 the Company, completed the acquisition of GMFS. The Company has recognized the revenues and earnings related to its investment in GMFS for the period from the acquisition date to December 31, 2014 which are reflected in its consolidated statements of operations. | |||||||||||||||||||||||||||||
For the Three Months Ended | |||||||||||||||||||||||||||||
31-Dec-13 | 30-Sep-13 | June 30, | March 31, | ||||||||||||||||||||||||||
2013 | 2013 | ||||||||||||||||||||||||||||
Total interest income | $ | 8,773,339 | $ | 8,273,444 | $ | 5,935,511 | $ | 3,436,033 | |||||||||||||||||||||
Total interest expense | 3,090,565 | 2,333,139 | 1,156,780 | 514,035 | |||||||||||||||||||||||||
Net interest income | 5,682,774 | 5,940,305 | 4,778,731 | 2,921,998 | |||||||||||||||||||||||||
Total other gain/(loss) | 6,033,137 | 1,172,969 | (10,527,875 | ) | 1,155,515 | ||||||||||||||||||||||||
Total expenses | 2,715,456 | 2,965,082 | 1,819,733 | 2,103,818 | |||||||||||||||||||||||||
Net income/(loss) | 9,000,455 | 4,148,192 | (7,568,877 | ) | 1,973,695 | ||||||||||||||||||||||||
Net income/(loss) attributable to ZAIS Financial Corp. common stockholders | $ | 8,062,847 | $ | 3,716,061 | $ | -6,780,401 | $ | 1,659,222 | |||||||||||||||||||||
Net income/(loss) per share applicable to common stockholders – basic | $ | 1.01 | $ | 0.47 | $ | (.85 | ) | $ | 0.32 | ||||||||||||||||||||
Net income/(loss) per share applicable to common stockholders – diluted | $ | 0.98 | $ | 0.47 | $ | (.85 | ) | $ | 0.32 | ||||||||||||||||||||
Weighted average number of shares Basic | 7,970,886 | 7,970,886 | 7,970,886 | 5,142,053 | |||||||||||||||||||||||||
Diluted | 9,594,150 | 8,897,800 | 8,897,800 | 6,068,967 | |||||||||||||||||||||||||
Formation_and_Organization_Det
Formation and Organization (Details) (USD $) | 3 Months Ended | 12 Months Ended | 0 Months Ended | 1 Months Ended | |||
Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Feb. 13, 2013 | Dec. 31, 2012 | Oct. 31, 2012 | |
Formation and Organization [Abstract] | |||||||
Exchange offer contribution - cash | |||||||
Common stock, shares authorized | 500,000,000 | 500,000,000 | |||||
Common stock, par value per share | $0.00 | $0.00 | |||||
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 | |||||
Preferred Stock, Par or Stated Value Per Share | $0.00 | $0.00 | |||||
Class of Stock [Line Items] | |||||||
Offering fees | 763,000 | 216,658 | |||||
Value of stock issued | 118,862,500 | 4,757,470 | |||||
Common Stock [Member] | |||||||
Class of Stock [Line Items] | |||||||
Shares of stock issued | 5,650,000 | 36,581 | 195,458 | ||||
Common stock issued, price per share | $21.25 | ||||||
Gross proceeds from issuance initial public offering | 120,100,000 | ||||||
Offering fees | 1,200,000 | ||||||
Value of stock issued | $118,900,000 |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | 12 Months Ended | ||
In Millions, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
segments | |||
Summary of Significant Accounting Policies [Abstract] | |||
Number of business segments | 2 | ||
Servicing Advances | |||
Servicing advances | $2 | ||
Offering Costs | |||
Deferred offering costs | 1.2 | ||
Real Estate Owned | |||
Real estate owned, at fair value | 1.3 | ||
Escrow and Fiduciary Funds | |||
Segregated bank accounts | 23.6 | ||
Net Income (Loss) Per Share | |||
Dilutive effect of the Exchangeable Senior Notes | 1,779,560 | ||
Exchangeable Senior Notes [Member] | |||
Debt Instrument [Line Items] | |||
Principal amount | $57.50 | ||
Mortgage Loans [Member] | Insured Loans, Credit Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 10.30% | ||
Mortgage Loans [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Threshold period past due after which loans are considered considered non-performing | 90 days | ||
ZAIS Financial Partners, LP. [Member] | |||
Noncontrolling Interest [Line Items] | |||
Equity interest held | 89.60% | 89.60% |
GMFS_Transaction_Narrative_Det
GMFS Transaction (Narrative) (Details) (USD $) | 12 Months Ended | 0 Months Ended |
Dec. 31, 2014 | Oct. 31, 2014 | |
Business Acquisition [Line Items] | ||
Amortization expense related to intangible assets | $131,389 | |
Goodwill, Tax Deductible Period | 15 years | |
GMFS, LLC [Member] | ||
Business Acquisition [Line Items] | ||
Cash payments to acquire entity | 62,847,452 | |
Percentage of price which may be paid in stock | 50.00% | |
Contingent consideration | 11,430,413 | |
Maximum contingent consideration | 20,000,000 | |
GMFS, LLC [Member] | Each Discrete Payment [Member] | ||
Business Acquisition [Line Items] | ||
Contingent consideration | 1,000,000 | |
GMFS, LLC [Member] | Deferred Premium Payments [Member] | ||
Business Acquisition [Line Items] | ||
Contingent consideration | $2,000,000 |
GMFS_Transaction_Schedule_of_C
GMFS Transaction (Schedule of Consideration) (Details) (GMFS, LLC [Member], USD $) | 0 Months Ended |
Oct. 31, 2014 | |
GMFS, LLC [Member] | |
Business Acquisition [Line Items] | |
Cash paid to owners of GMFS | $62,847,452 |
Contingent consideration | 11,430,413 |
Total consideration | $74,277,865 |
GMFS_Transaction_Schedule_of_N
GMFS Transaction (Schedule of Net Assets Acquired) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Oct. 31, 2014 |
Fair value of Assets: | |||
Goodwill | $16,512,680 | ||
GMFS, LLC [Member] | |||
Fair value of Assets: | |||
Cash and cash equivalents | 13,304,612 | ||
Other assets | 2,713,950 | ||
Goodwill | 16,512,680 | ||
Intangible Assets | 5,800,000 | ||
Total assets acquired | 187,002,355 | ||
Fair value of Liabilities: | |||
Warehouse lines of credit | 85,840,705 | ||
Accounts payable and other liabilities | 5,714,456 | ||
Liability for loans eligible for repurchase from Ginnie Mae | 21,169,329 | ||
Total liabilities assumed | 112,724,490 | ||
Fair value of net assets acquired | 74,277,865 | ||
GMFS, LLC [Member] | Mortgage Loans Held for Sale [Member] | |||
Fair value of Assets: | |||
Financial assets | 92,512,390 | ||
GMFS, LLC [Member] | Mortgage Loans Held for Investment [Member] | |||
Fair value of Assets: | |||
Financial assets | 1,098,897 | ||
GMFS, LLC [Member] | Derivative Assets [Member] | |||
Fair value of Assets: | |||
Financial assets | 1,590,160 | ||
GMFS, LLC [Member] | MSRs [Member] | |||
Fair value of Assets: | |||
Financial assets | 32,300,337 | ||
GMFS, LLC [Member] | Loans Eligible for Repurchase from Ginnie Mae [Member] | |||
Fair value of Assets: | |||
Financial assets | $21,169,329 |
GMFS_Transaction_Schedule_of_P
GMFS Transaction (Schedule of Preliminary Determination of Goodwil) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Oct. 31, 2014 |
Business Acquisition [Line Items] | |||
Goodwill | $16,512,680 | ||
GMFS, LLC [Member] | |||
Business Acquisition [Line Items] | |||
Fair value of net assets acquired | 74,277,865 | ||
Less: Preliminary estimate of the fair value of the net assets acquired | -57,765,185 | ||
Goodwill | $16,512,680 |
GMFS_Transaction_Schedule_of_I
GMFS Transaction (Schedule of Intangible Assets Acquired) (Details) (GMFS, LLC [Member], USD $) | 12 Months Ended |
In Millions, unless otherwise specified | Dec. 31, 2014 |
Business Acquisition [Line Items] | |
Estimated Fair Value | $5.80 |
Trade Name [Member] | |
Business Acquisition [Line Items] | |
Estimated Fair Value | 2 |
Estimated Useful Life | 10 years |
Customer Relationships [Member] | |
Business Acquisition [Line Items] | |
Estimated Fair Value | 1.3 |
Estimated Useful Life | 10 years |
Licenses [Member] | |
Business Acquisition [Line Items] | |
Estimated Fair Value | 1 |
Estimated Useful Life | 3 years |
Favorable Lease [Member] | |
Business Acquisition [Line Items] | |
Estimated Fair Value | $1.50 |
Estimated Useful Life | 12 years |
GMFS_Transaction_Schedule_of_R
GMFS Transaction (Schedule of Revenues and Earnings) (Details) (USD $) | 3 Months Ended | 12 Months Ended | 2 Months Ended | ||||||||||
Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | ||
Business Acquisition [Line Items] | |||||||||||||
Interest income - mortgage loans held for sale | $594,217 | ||||||||||||
Net interest income | 5,820,345 | [1] | 6,508,941 | 6,414,835 | 5,589,081 | 5,682,774 | 5,940,305 | 4,778,731 | 2,921,998 | 24,333,202 | 19,323,808 | 8,010,868 | |
Gain on sale of mortgage loans held for sale, net of direct costs | 5,344,361 | ||||||||||||
Loan origination fee income | 213,540 | ||||||||||||
Provision for loan indemnification | -118,895 | ||||||||||||
Total | 5,439,006 | ||||||||||||
Loan servicing fee income, net of direct costs | 929,718 | ||||||||||||
Change in fair value of mortgage servicing rights | -1,684,373 | ||||||||||||
Other income | 45,861 | ||||||||||||
Total non interest income | 4,730,212 | [1] | |||||||||||
Net loss after expenses of Honeybee TRS, before tax | 29,000,734 | 7,553,465 | 20,265,597 | ||||||||||
Income tax benefit | 850,996 | [1] | 850,996 | ||||||||||
Net income | 216,938 | [1] | 1,279,798 | 25,872,135 | 2,482,859 | 9,000,455 | 4,148,192 | -7,568,877 | 1,973,695 | 29,851,730 | 7,553,465 | 20,265,597 | |
GMFS, LLC [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Interest income - mortgage loans held for sale | 594,217 | ||||||||||||
Gain on sale of mortgage loans held for sale, net of direct costs | 5,344,361 | ||||||||||||
Loan origination fee income | 213,540 | ||||||||||||
Provision for loan indemnification | -118,895 | ||||||||||||
Total | 5,439,006 | ||||||||||||
Loan servicing fee income, net of direct costs | 929,718 | ||||||||||||
Change in fair value of mortgage servicing rights | -1,684,373 | ||||||||||||
Other income | 45,861 | ||||||||||||
Total non interest income | 4,730,212 | ||||||||||||
Net income before expenses and taxes relating to Honeybee TRS | 583,073 | ||||||||||||
Expenses of Honeybee TRS | 2,710,564 | ||||||||||||
Net loss after expenses of Honeybee TRS, before tax | -2,127,491 | ||||||||||||
Income tax benefit | 850,996 | ||||||||||||
Net income | -1,276,495 | ||||||||||||
GMFS, LLC [Member] | Pro Forma [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Net interest income | 21,623,473 | 15,737,131 | |||||||||||
Total | 41,047,510 | 46,354,596 | |||||||||||
Loan servicing fee income, net of direct costs | 5,239,010 | 3,022,447 | |||||||||||
Other income | 673,270 | 709,369 | |||||||||||
Net income | $35,213,626 | $11,465,008 | |||||||||||
[1] | On October 31, 2014 the Company, completed the acquisition of GMFS. The Company has recognized the revenues and earnings related to its investment in GMFS for the period from the acquisition date to December 31, 2014 which are reflected in its consolidated statements of operations. |
GMFS_Transaction_Schedule_of_F
GMFS Transaction (Schedule of Future Amortization Expense) (Details) (USD $) | Dec. 31, 2014 |
GMFS Transaction [Abstract] | |
2015 | $788,340 |
2016 | 788,340 |
2017 | 732,776 |
2018 | 455,004 |
2019 | $455,004 |
Fair_Value_Schedule_of_Financi
Fair Value (Schedule of Financial Instruments Accounted for at Fair Value on a Recurring Basis) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Assets | ||
Mortgage loans held for sale | $97,690,960 | |
MSRs | 33,378,978 | |
Derivative assets | 2,485,100 | 284,454 |
Liabilities | ||
Derivative liabilities | 2,585,184 | 1,471,607 |
Fair Value, Measurements, Recurring [Member] | ||
Assets | ||
Mortgage loans held for investment | 415,959,838 | 331,785,542 |
Mortgage loans held for sale | 97,690,960 | |
MSRs | 33,378,978 | |
Derivative assets | 2,485,100 | 284,454 |
Total | 700,141,141 | 558,225,217 |
Liabilities | ||
Derivative liabilities | 2,585,184 | 1,471,607 |
Total | 2,585,184 | 1,471,607 |
Fair Value, Measurements, Recurring [Member] | Non-Agency RMBS [Member] | ||
Assets | ||
Investment securities | 148,585,733 | 226,155,221 |
Fair Value, Measurements, Recurring [Member] | Other Investment Securities [Member] | ||
Assets | ||
Investment securities | 2,040,532 | |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | ||
Assets | ||
Mortgage loans held for investment | ||
Mortgage loans held for sale | ||
MSRs | ||
Derivative assets | ||
Total | ||
Liabilities | ||
Derivative liabilities | ||
Total | ||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Non-Agency RMBS [Member] | ||
Assets | ||
Investment securities | ||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Other Investment Securities [Member] | ||
Assets | ||
Investment securities | ||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | ||
Assets | ||
Mortgage loans held for investment | ||
Mortgage loans held for sale | 97,690,960 | |
MSRs | ||
Derivative assets | 284,454 | |
Total | 97,690,960 | 284,454 |
Liabilities | ||
Derivative liabilities | 2,585,184 | 1,471,607 |
Total | 2,585,184 | 1,471,607 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Non-Agency RMBS [Member] | ||
Assets | ||
Investment securities | ||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Other Investment Securities [Member] | ||
Assets | ||
Investment securities | ||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | ||
Assets | ||
Mortgage loans held for investment | 415,959,838 | 331,785,542 |
Mortgage loans held for sale | ||
MSRs | 33,378,978 | |
Derivative assets | ||
Total | 602,450,181 | 557,940,763 |
Liabilities | ||
Derivative liabilities | ||
Total | ||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Non-Agency RMBS [Member] | ||
Assets | ||
Investment securities | 148,585,733 | 226,155,221 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Other Investment Securities [Member] | ||
Assets | ||
Investment securities | $2,040,532 |
Fair_Value_Schedule_of_Financi1
Fair Value (Schedule of Financial Instruments Utilizing Level 3 Inputs) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | ||
Servicing Asset at Fair Value, Amount [Roll Forward] | |||
Balance at beginning of year | |||
Acquisition of MSRs in connection with purchase of GMFS | 32,300,337 | ||
Additions due to loans sold, servicing retained | 2,763,014 | ||
Fair value adjustment: | |||
Changes in assumptions | -1,420,925 | [1],[2] | |
Other changes | -263,448 | [2],[3] | |
Balance at December 31, 2014 | 33,378,978 | ||
Loan Purchase Commitments [Member] | |||
Derivatives: | |||
Beginning balance | |||
Acquisition of GMFS | |||
Change in unrealized gain or loss | 4,037 | ||
Ending balance | 4,037 | ||
Interest Rate Lock Commitments [Member] | |||
Derivatives: | |||
Beginning balance | |||
Acquisition of GMFS | 2,702,954 | ||
Change in unrealized gain or loss | -221,891 | ||
Ending balance | 2,481,063 | ||
Mortgage Loans Held for Investment [Member] | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | 331,785,542 | ||
Total net transfers into/out of Level 3 | |||
Acquisitions | 85,579,169 | 334,162,044 | |
Proceeds from sales | |||
Net accretion of discounts | 7,497,341 | 3,059,231 | |
Proceeds from principal repayments | -31,759,326 | -13,871,059 | |
Conversion of mortgage loans to REO | -1,796,028 | ||
Total losses (realized / unrealized) included in earnings | -8,250,003 | -6,344,877 | |
Total gains (realized / unrealized) included in earnings | 32,903,143 | 14,780,203 | |
Ending balance | 415,959,838 | 331,785,542 | |
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | 22,957,500 | 7,136,482 | |
Real Estate Securities [Member] | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | 226,155,221 | 100,911,651 | |
Total net transfers into/out of Level 3 | |||
Acquisitions | 47,034,327 | 234,397,506 | |
Proceeds from sales | -102,635,229 | -68,190,593 | |
Net accretion of discounts | 5,528,538 | 3,727,702 | |
Proceeds from principal repayments | -28,197,740 | -39,338,730 | |
Conversion of mortgage loans to REO | |||
Total losses (realized / unrealized) included in earnings | -6,694,487 | -9,138,009 | |
Total gains (realized / unrealized) included in earnings | 7,395,103 | 3,785,694 | |
Ending balance | 148,585,733 | 226,155,221 | |
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | -1,039,499 | -2,822,969 | |
Other Investment Securities [Member] | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | |||
Total net transfers into/out of Level 3 | |||
Acquisitions | 12,926,953 | ||
Proceeds from sales | -11,067,378 | ||
Net accretion of discounts | 180,438 | ||
Proceeds from principal repayments | |||
Conversion of mortgage loans to REO | |||
Total losses (realized / unrealized) included in earnings | -226,224 | ||
Total gains (realized / unrealized) included in earnings | 226,743 | ||
Ending balance | 2,040,532 | ||
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | -226,224 | ||
Mortgage Servicing Rights [Member] | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date | -1,420,925 | ||
Servicing Asset at Fair Value, Amount [Roll Forward] | |||
Balance at beginning of year | |||
Acquisition of MSRs in connection with purchase of GMFS | 32,300,337 | ||
Additions due to loans sold, servicing retained | 2,763,014 | ||
Fair value adjustment: | |||
Changes in assumptions | -1,420,925 | [1],[4] | |
Other changes | -263,448 | [4],[5] | |
Balance at December 31, 2014 | $33,378,978 | ||
[1] | Primarily reflects changes in prepayment assumptions due to changes in interest rates and discount rates. | ||
[2] | Included in change in fair value of MSRs in the Company's consolidated statements of operations. | ||
[3] | Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid off during the period. | ||
[4] | Included in change in fair value of MSRs on the consolidated statements of operations. | ||
[5] | Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period. |
Fair_Value_Schedule_of_Quantit
Fair Value (Schedule of Quantitative Information about Level 3 Fair Value Measurements) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | ||
Minimum [Member] | Interest Rate Lock Commitments [Member] | ||
Unobservable Input | ||
Pull-through rate | 55.70% | |
Servicing fee multiple | 0.4 | |
Percentage of unpaid principal balance | 0.20% | |
Maximum [Member] | Interest Rate Lock Commitments [Member] | ||
Unobservable Input | ||
Pull-through rate | 100.00% | |
Servicing fee multiple | 6 | |
Percentage of unpaid principal balance | 1.90% | |
Weighted Average [Member] | Interest Rate Lock Commitments [Member] | ||
Unobservable Input | ||
Pull-through rate | 85.00% | |
Servicing fee multiple | 4.4 | |
Percentage of unpaid principal balance | 1.10% | |
Mortgage Loans Held for Investment [Member] | Level 3 [Member] | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair Value | 415,959,838 | |
Mortgage Loans Held for Investment [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 1.40% | |
Constant default rate | 0.00% | |
Loss severity | 0.00% | |
Delinquency | 0.10% | |
Mortgage Loans Held for Investment [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 27.10% | |
Constant default rate | 4.00% | |
Loss severity | 40.50% | |
Delinquency | 13.60% | |
Mortgage Loans Held for Investment [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 3.90% | |
Constant default rate | 2.90% | |
Loss severity | 23.80% | |
Delinquency | 10.60% | |
Mortgage Servicing Rights [Member] | Level 3 [Member] | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair Value | 33,378,978 | |
Mortgage Servicing Rights [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 7.60% | |
Cost of servicing | 76 | |
Discount rate | 9.00% | |
Mortgage Servicing Rights [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 58.20% | |
Cost of servicing | 533 | |
Discount rate | 10.00% | |
Mortgage Servicing Rights [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 10.60% | |
Cost of servicing | 91 | |
Discount rate | 9.40% | |
Non-Agency RMBS [Member] | Level 3 [Member] | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair Value | 148,585,733 | [1] |
Alternative - A [Member] | Level 3 [Member] | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair Value | 61,296,540 | [1] |
Alternative - A [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 1.60% | [1] |
Constant default rate | 0.10% | [1] |
Loss severity | 0.00% | [1] |
Delinquency | 1.30% | [1] |
Alternative - A [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 24.80% | [1] |
Constant default rate | 8.40% | [1] |
Loss severity | 81.10% | [1] |
Delinquency | 25.90% | [1] |
Alternative - A [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 13.60% | [1] |
Constant default rate | 3.10% | [1] |
Loss severity | 20.50% | [1] |
Delinquency | 10.10% | [1] |
Pay Option Adjustable Rate [Member] | Level 3 [Member] | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair Value | 45,541,325 | [1] |
Pay Option Adjustable Rate [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 1.70% | [1] |
Constant default rate | 1.60% | [1] |
Loss severity | 0.00% | [1] |
Delinquency | 6.80% | [1] |
Pay Option Adjustable Rate [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 20.10% | [1] |
Constant default rate | 19.40% | [1] |
Loss severity | 66.20% | [1] |
Delinquency | 29.10% | [1] |
Pay Option Adjustable Rate [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 8.90% | [1] |
Constant default rate | 4.30% | [1] |
Loss severity | 38.00% | [1] |
Delinquency | 15.20% | [1] |
Prime [Member] | Level 3 [Member] | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair Value | 39,065,076 | [1] |
Prime [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 2.60% | [1] |
Constant default rate | 0.20% | [1] |
Loss severity | 0.00% | [1] |
Delinquency | 5.00% | [1] |
Prime [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 17.30% | [1] |
Constant default rate | 9.20% | [1] |
Loss severity | 78.30% | [1] |
Delinquency | 24.80% | [1] |
Prime [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 9.20% | [1] |
Constant default rate | 4.10% | [1] |
Loss severity | 28.20% | [1] |
Delinquency | 13.00% | [1] |
Subprime [Member] | Level 3 [Member] | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair Value | 2,682,792 | [1] |
Subprime [Member] | Minimum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 2.40% | [1] |
Constant default rate | 6.00% | [1] |
Loss severity | 65.00% | [1] |
Delinquency | 25.50% | [1] |
Subprime [Member] | Maximum [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 7.40% | [1] |
Constant default rate | 8.00% | [1] |
Loss severity | 85.00% | [1] |
Delinquency | 27.70% | [1] |
Subprime [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 4.70% | [1] |
Constant default rate | 7.70% | [1] |
Loss severity | 72.00% | [1] |
Delinquency | 26.80% | [1] |
Other Investment Securities [Member] | Level 3 [Member] | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair Value | 2,040,532 | [1] |
Other Investment Securities [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member] | ||
Unobservable Input | ||
Constant voluntary prepayment | 7.50% | [1] |
[1] | The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level. |
Fair_Value_Schedule_of_Quantit1
Fair Value (Schedule of Quantitative Summary Pertaining to MSRs) (Details) (Residential Mortgage [Member], USD $) | 12 Months Ended | |
Dec. 31, 2014 | ||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Discount rate - Effect on fair value of adverse change of: 5% (percentage) | 5.00% | |
Discount rate - Effect on fair value of adverse change of: 5% | ($683,406) | |
Discount rate - Effect on fair value of adverse change of: 10% | -1,366,812 | |
Discount rate - Effect on fair value of adverse change of: 20% | -2,655,493 | |
Prepayment Speed - Effect on fair value of adverse change of: 5% (percentage) | 5.00% | |
Prepayment Speed - Effect on fair value of adverse change of: 5% | -639,594 | |
Prepayment Speed - Effect on fair value of adverse change of: 10% | -1,279,187 | |
Prepayment Speed - Effect on fair value of adverse change of: 20% | -2,468,154 | |
Per-loan annual cost of servicing - Effect on fair value of adverse change of: 5% (percentage) | 5.00% | |
Per-loan annual cost of servicing - Effect on fair value of adverse change of: 5% | 389,384 | |
Per-loan annual cost of servicing - Effect on fair value of adverse change of: 10% | -778,768 | |
Per-loan annual cost of servicing - Effect on fair value of adverse change of: 20% | -1,557,561 | |
Minimum [Member] | ||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Discount rate | 9.00% | |
Prepayment speed | 7.60% | [1] |
Per-loan annual cost of servicing | 76 | |
Maximum [Member] | ||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Discount rate | 10.00% | |
Prepayment speed | 58.20% | [1] |
Per-loan annual cost of servicing | 533 | |
Weighted Average [Member] | ||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Discount rate | 9.40% | |
Prepayment speed | 10.60% | [1] |
Per-loan annual cost of servicing | $91 | |
[1] | Prepayment speed is measured using CPR. |
Fair_Value_Schedule_of_Fair_Va
Fair Value (Schedule of Fair Value Option) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | ||
Mortgage Loans Held for Investment [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | $415,959,838 | $331,785,542 | ||
Unpaid Principal and/or Notional Balance | 464,877,028 | 398,828,497 | ||
Difference | -48,917,190 | -67,042,955 | ||
Mortgage Loans Held for Sale [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 97,690,960 | |||
Unpaid Principal and/or Notional Balance | 92,917,659 | |||
Difference | 4,773,301 | |||
Non-Agency RMBS [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 148,585,733 | 226,155,221 | ||
Unpaid Principal and/or Notional Balance | 226,501,915 | [1] | 324,241,597 | [1] |
Difference | -77,916,182 | -98,086,376 | ||
Other Investment Securities [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 2,040,532 | |||
Unpaid Principal and/or Notional Balance | 2,250,000 | |||
Difference | -209,468 | |||
MSRs [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 33,378,978 | |||
Unpaid Principal and/or Notional Balance | 3,078,974,342 | |||
Difference | -3,045,595,364 | |||
Financial Instruments [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 697,656,041 | 557,940,763 | ||
Unpaid Principal and/or Notional Balance | 3,865,520,944 | 723,070,094 | ||
Difference | -3,167,864,903 | -165,129,331 | ||
Interest-Only Securities [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Unpaid Principal and/or Notional Balance | $48,600,000 | $64,300,000 | ||
[1] | Non-Agency RMBS includes an IO with a notional balance of $48.6 million and $64.3 million at December 31, 2014 and December 31, 2013, respectively. |
Fair_Value_Schedule_of_Fair_Va1
Fair Value (Schedule of Fair Value of Other Financial Instruments) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Assets | ||
Restricted cash | $7,143,078 | $2,128,236 |
Fair Value [Member] | ||
Assets | ||
Cash | 33,791,013 | 57,060,806 |
Restricted cash | 7,143,078 | 2,128,236 |
Liabilities | ||
Securities repurchase agreements | 103,014,105 | 138,790,158 |
Exchangeable Senior Notes | 59,933,400 | 54,737,573 |
Fair Value [Member] | Warehouse Agreement Borrowings [Member] | ||
Liabilities | ||
Credit facilities | 89,417,564 | |
Fair Value [Member] | Loan Repurchase Facility [Member] | ||
Liabilities | ||
Credit facilities | 300,092,293 | 236,727,512 |
Carrying Value [Member] | ||
Assets | ||
Cash | 33,791,013 | 57,060,806 |
Restricted cash | 7,143,078 | 2,128,236 |
Liabilities | ||
Securities repurchase agreements | 103,014,105 | 138,591,678 |
Exchangeable Senior Notes | 55,474,741 | 54,539,057 |
Carrying Value [Member] | Warehouse Agreement Borrowings [Member] | ||
Liabilities | ||
Credit facilities | 89,417,564 | |
Carrying Value [Member] | Loan Repurchase Facility [Member] | ||
Liabilities | ||
Credit facilities | $300,092,293 | $236,058,976 |
Mortgage_Loans_Held_for_Invest2
Mortgage Loans Held for Investment, at Fair Value (Schedule of Acquisition of Mortgage Loans) (Details) (USD $) | 0 Months Ended | 12 Months Ended | ||||||
Mar. 27, 2014 | Aug. 28, 2013 | Jul. 25, 2013 | 30-May-13 | 31-May-13 | Mar. 22, 2013 | Dec. 31, 2014 | ||
Mortgage Loans on Real Estate [Line Items] | ||||||||
Unpaid principal balance of loans acquired | $100,400,000 | $98,200,000 | $162,400,000 | $134,500,000 | $17,700,000 | |||
Utilization of facility | 10,600,000 | |||||||
Newly Originated Mortgage Loans [Member] | ||||||||
Mortgage Loans on Real Estate [Line Items] | ||||||||
Unpaid principal balance of loans acquired | 767,000 | |||||||
Loan Repurchase Facility [Member] | ||||||||
Mortgage Loans on Real Estate [Line Items] | ||||||||
Utilization of facility | 60,600,000 | 54,800,000 | 98,700,000 | [1] | 78,500,000 | |||
Loan Repurchase Facility [Member] | Newly Originated Mortgage Loans [Member] | ||||||||
Mortgage Loans on Real Estate [Line Items] | ||||||||
Utilization of facility | $690,000 | |||||||
[1] | On May 30, 2013, the Company entered into the Citi Loan Repurchase Facility and utilized $10.6 million of the Citi Loan Repurchase Facility to finance its then existing residential mortgage loan portfolio. |
Mortgage_Loans_Held_for_Invest3
Mortgage Loans Held for Investment, at Fair Value (Schedule of Fair Value, Principal Balance and Weighted Average Coupon and Yield) (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Distressed and Re-performing Loans [Member] | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Unpaid Principal Balance | $464,110,063 | $398,828,497 | ||
Premium (Discount) | -78,883,211 | -74,179,437 | ||
Amortized Cost | 385,226,852 | 324,649,060 | ||
Gross Unrealized | ||||
Gains | 37,140,755 | [1] | 13,386,924 | [2] |
Losses | -7,194,445 | [1] | -6,250,442 | [2] |
Fair Value | 415,173,162 | 331,785,542 | ||
Weighted Average Coupon | 4.26% | 4.24% | ||
Weighted Average Yield | 7.20% | [3] | 6.91% | [3] |
Distressed and Re-performing Loans [Member] | Fixed [Member] | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Unpaid Principal Balance | 265,306,697 | 212,701,494 | ||
Premium (Discount) | -51,501,092 | -43,530,581 | ||
Amortized Cost | 213,805,605 | 169,170,913 | ||
Gross Unrealized | ||||
Gains | 26,732,362 | [1] | 7,842,598 | [2] |
Losses | -1,383,524 | [1] | -3,558,171 | [2] |
Fair Value | 239,154,443 | 173,455,340 | ||
Weighted Average Coupon | 4.50% | 4.56% | ||
Weighted Average Yield | 7.28% | [3] | 7.05% | [3] |
Distressed and Re-performing Loans [Member] | ARM [Member] | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Unpaid Principal Balance | 162,858,201 | 170,178,466 | ||
Premium (Discount) | -21,343,046 | -25,617,563 | ||
Amortized Cost | 141,515,155 | 144,560,903 | ||
Gross Unrealized | ||||
Gains | 9,568,296 | [1] | 5,088,302 | [2] |
Losses | -1,441,035 | [1] | -1,556,430 | [2] |
Fair Value | 149,642,416 | 148,092,775 | ||
Weighted Average Coupon | 3.59% | 3.76% | ||
Weighted Average Yield | 7.10% | [3] | 6.67% | [3] |
Distressed and Re-performing Loans [Member] | Performing Loans [Member] | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Unpaid Principal Balance | 428,164,898 | 382,879,960 | ||
Premium (Discount) | -72,844,138 | -69,148,144 | ||
Amortized Cost | 355,320,760 | 313,731,816 | ||
Gross Unrealized | ||||
Gains | 36,300,658 | [1] | 12,930,900 | [2] |
Losses | -2,824,559 | [1] | -5,114,601 | [2] |
Fair Value | 388,796,859 | 321,548,115 | ||
Weighted Average Coupon | 4.15% | 4.20% | ||
Weighted Average Yield | 7.21% | [3] | 6.88% | [3] |
Distressed and Re-performing Loans [Member] | Nonperforming Loans [Member] | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Unpaid Principal Balance | 35,945,165 | [2] | 15,948,537 | [2] |
Premium (Discount) | -6,039,073 | [2] | -5,031,293 | [2] |
Amortized Cost | 29,906,092 | [2] | 10,917,244 | [2] |
Gross Unrealized | ||||
Gains | 840,097 | [1],[2] | 456,024 | [2],[4] |
Losses | -4,369,886 | [1],[2] | -1,135,841 | [2],[4] |
Fair Value | 26,376,303 | [2] | 10,237,427 | [4] |
Weighted Average Coupon | 5.48% | [2] | 5.06% | [4] |
Weighted Average Yield | 7.13% | [2],[3] | 8.03% | [3],[4] |
Mortgage Loans [Member] | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Unpaid Principal Balance | 464,877,028 | 398,828,497 | ||
Gross Unrealized | ||||
Fair Value | 415,959,838 | 331,785,542 | ||
Newly Originated Mortgage Loans [Member] | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Unpaid Principal Balance | 766,965 | |||
Premium (Discount) | 16,173 | |||
Amortized Cost | 783,138 | |||
Gross Unrealized | ||||
Gains | 3,538 | [5] | ||
Losses | [5] | |||
Fair Value | 786,676 | |||
Weighted Average Coupon | 4.38% | |||
Weighted Average Yield | 4.20% | [3] | ||
Newly Originated Mortgage Loans [Member] | Fixed [Member] | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Unpaid Principal Balance | 766,965 | |||
Premium (Discount) | 16,173 | |||
Amortized Cost | 783,138 | |||
Gross Unrealized | ||||
Gains | 3,538 | [5] | ||
Losses | [5] | |||
Fair Value | $786,676 | |||
Weighted Average Coupon | 4.38% | |||
Weighted Average Yield | 4.20% | [3] | ||
[1] | The Company has elected the fair value option pursuant to ASC 825 for these mortgage loans held for investment. The Company recorded a gain of $22.8 million for the year ended December 31, 2014 as change in unrealized gain or loss on mortgage loans held for investment in the consolidated statements of operations. | |||
[2] | The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans held for investment. The Company recorded a gain of $7.1 million for the year ended December 31, 2013, as change in unrealized gain or loss on mortgage loans in the consolidated statements of operations. | |||
[3] | Unleveraged yield. | |||
[4] | Loans that are delinquent for 60 days or more are considered non-performing. | |||
[5] | The Company has elected the fair value option pursuant to ASC 825 for these mortgage loans held for investment. The Company recorded a gain of $3,538 as change in unrealized gain or loss on mortgage loans held for investment in the consolidated statements of operations. |
Mortgage_Loans_Held_for_Invest4
Mortgage Loans Held for Investment, at Fair Value (Parenthetical Information) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Distressed and Re-performing Loans [Member] | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Change in unrealized gain or loss on investments | $22,800,000 | $7,100,000 |
Threshold period past due after which loans are considered considered non-performing | 60 days | |
Newly Originated Mortgage Loans [Member] | ||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Change in unrealized gain or loss on investments | $3,538 |
Mortgage_Loans_Held_for_Invest5
Mortgage Loans Held for Investment, at Fair Value (Schedule of Mortgage Loans at Fair Value) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | ||
Mortgage Loans [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | $415,959,838 | $331,785,542 | ||
Unpaid Principal Balance | 464,877,028 | 398,828,497 | ||
Difference | -48,917,190 | -67,042,955 | ||
Distressed and Re-performing Loans [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 415,173,162 | 331,785,542 | ||
Unpaid Principal Balance | 464,110,063 | 398,828,497 | ||
Difference | -48,936,901 | -67,042,955 | ||
Distressed and Re-performing Loans [Member] | Fixed [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 239,154,443 | 173,455,340 | ||
Unpaid Principal Balance | 265,306,697 | 212,701,494 | ||
Difference | -26,152,254 | -39,246,154 | ||
Distressed and Re-performing Loans [Member] | ARM [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 149,642,416 | 148,092,775 | ||
Unpaid Principal Balance | 162,858,201 | 170,178,466 | ||
Difference | -13,215,785 | -22,085,691 | ||
Distressed and Re-performing Loans [Member] | Performing Loans [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 388,796,859 | 321,548,115 | ||
Unpaid Principal Balance | 428,164,898 | 382,879,960 | ||
Difference | -39,368,039 | -61,331,845 | ||
Distressed and Re-performing Loans [Member] | Nonperforming Loans [Member] | ||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Fair Value | 26,376,303 | [1] | 10,237,427 | [2] |
Unpaid Principal Balance | 35,945,165 | [1] | 15,948,537 | [1] |
Difference | ($9,568,862) | ($5,711,110) | ||
[1] | The Company has elected the fair value option pursuant to ASC 825 for its mortgage loans held for investment. The Company recorded a gain of $7.1 million for the year ended December 31, 2013, as change in unrealized gain or loss on mortgage loans in the consolidated statements of operations. | |||
[2] | Loans that are delinquent for 60 days or more are considered non-performing. |
Mortgage_Loans_Held_for_Invest6
Mortgage Loans Held for Investment, at Fair Value (Schedule of Change in Accretable Yield) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Change in accretable yield: | ||
Accretable yield, beginning balance | $223,401,697 | |
Acquisitions | 55,532,098 | 222,899,189 |
Accretion | -26,137,006 | -10,470,435 |
Reclassifications from nonaccretable difference | 14,713,116 | 10,972,942 |
Accretable yield, ending balance | $267,509,905 | $223,401,697 |
Mortgage_Loans_Held_for_Invest7
Mortgage Loans Held for Investment, at Fair Value (Schedule of Concentrations of Credit Risk) (Details) (Mortgage Loans [Member]) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Loans with Unpaid Principal Balance in Excess of Fair Value of Collateral [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 55.70% | 73.60% |
Geographic Concentration Risk [Member] | California [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 26.20% | 25.60% |
Geographic Concentration Risk [Member] | Florida [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 16.60% | 17.80% |
Geographic Concentration Risk [Member] | Georgia [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 5.70% | 6.80% |
Geographic Concentration Risk [Member] | New York [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 5.10% |
Mortgage_Loans_Held_for_Invest8
Mortgage Loans Held for Investment, at Fair Value (Narrative) (Details) (USD $) | 12 Months Ended |
In Millions, unless otherwise specified | Dec. 31, 2014 |
Mortgage Loans Held for Investment, at Fair Value [Abstract] | |
Contractually required payments receivable | $187.50 |
Cash flows expected to be collected | $140.30 |
Mortgage Loans on Real Estate [Line Items] | |
Mortgage loan interest rate, minimum | 1.75% |
Mortgage loan interest rate, maximum | 12.20% |
Minimum [Member] | |
Mortgage Loans on Real Estate [Line Items] | |
Mortgage loan interest rate maturity | 1 year |
Maximum [Member] | |
Mortgage Loans on Real Estate [Line Items] | |
Mortgage loan interest rate maturity | 46 years |
Mortgage_Loans_Held_for_Sale_D
Mortgage Loans Held for Sale (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Mortgage Loans on Real Estate [Line Items] | ||
Unpaid Principal Balance | $92,917,659 | |
Fair Value | 97,690,960 | |
Conventional [Member] | ||
Mortgage Loans on Real Estate [Line Items] | ||
Unpaid Principal Balance | 55,073,645 | |
Fair Value | 57,058,195 | |
Governmental [Member] | ||
Mortgage Loans on Real Estate [Line Items] | ||
Unpaid Principal Balance | 13,407,781 | |
Fair Value | 14,601,797 | |
Reverse Mortgage [Member] | ||
Mortgage Loans on Real Estate [Line Items] | ||
Unpaid Principal Balance | 1,600,449 | |
Fair Value | 1,765,552 | |
United States Department of Agriculture Loans [Member] | ||
Mortgage Loans on Real Estate [Line Items] | ||
Unpaid Principal Balance | 16,105,088 | |
Fair Value | 17,069,138 | |
United States Department of Veteran Affairs Loan [Member] | ||
Mortgage Loans on Real Estate [Line Items] | ||
Unpaid Principal Balance | 6,730,696 | |
Fair Value | $7,196,278 |
Real_Estate_Securities_and_Oth2
Real Estate Securities and Other Investment Securities (Schedule of Information Regarding Real Estate Securities) (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Alternative - A [Member] | ||||
Investment Holdings [Line Items] | ||||
Principal or Notional Balance | $118,547,109 | [1] | $160,590,487 | [2] |
Premium (Discount) | -58,583,222 | [1] | -80,206,745 | [2] |
Amortized Cost | 59,963,887 | [1] | 80,383,742 | [2] |
Gross Unrealized | ||||
Gains | 1,916,611 | [1],[3] | 2,414,864 | [2],[4] |
Losses | -583,958 | [1],[3] | -1,112,077 | [2],[4] |
Fair Value | 61,296,540 | [1] | 81,686,529 | [2] |
Weighted Average Coupon | 3.44% | [1] | 4.26% | [2] |
Weighted Average Yield | 7.03% | [1],[5] | 6.77% | [2],[5] |
Pay Option Adjustable Rate [Member] | ||||
Investment Holdings [Line Items] | ||||
Principal or Notional Balance | 58,122,808 | 34,374,028 | ||
Premium (Discount) | -11,491,663 | -7,057,026 | ||
Amortized Cost | 46,631,145 | 27,317,002 | ||
Gross Unrealized | ||||
Gains | 80,848 | [3] | 464,756 | [4] |
Losses | -1,170,668 | [3] | -345,915 | [4] |
Fair Value | 45,541,325 | 27,435,843 | ||
Weighted Average Coupon | 0.93% | 0.76% | ||
Weighted Average Yield | 6.12% | [5] | 6.80% | [5] |
Prime [Member] | ||||
Investment Holdings [Line Items] | ||||
Principal or Notional Balance | 43,803,995 | 109,136,108 | ||
Premium (Discount) | -6,219,091 | -13,590,489 | ||
Amortized Cost | 37,584,904 | 95,545,619 | ||
Gross Unrealized | ||||
Gains | 1,545,452 | [3] | 3,751,248 | [4] |
Losses | -65,280 | [3] | -767,825 | [4] |
Fair Value | 39,065,076 | 98,529,042 | ||
Weighted Average Coupon | 3.60% | 4.77% | ||
Weighted Average Yield | 6.79% | [5] | 6.45% | [5] |
Subprime [Member] | ||||
Investment Holdings [Line Items] | ||||
Principal or Notional Balance | 6,028,003 | 20,140,974 | ||
Premium (Discount) | -3,290,867 | -1,894,417 | ||
Amortized Cost | 2,737,136 | 18,246,557 | ||
Gross Unrealized | ||||
Gains | [3] | 536,407 | [4] | |
Losses | -54,344 | [3] | -279,157 | [4] |
Fair Value | 2,682,792 | 18,503,807 | ||
Weighted Average Coupon | 0.33% | 1.07% | ||
Weighted Average Yield | 16.98% | [5] | 5.97% | [5] |
Total RMBS [Member] | ||||
Investment Holdings [Line Items] | ||||
Principal or Notional Balance | 226,501,915 | 324,241,597 | ||
Premium (Discount) | -79,584,843 | -102,748,677 | ||
Amortized Cost | 146,917,072 | 221,492,920 | ||
Gross Unrealized | ||||
Gains | 3,542,911 | [3] | 7,167,275 | [4] |
Losses | -1,874,250 | [3] | -2,504,974 | [4] |
Fair Value | 148,585,733 | 226,155,221 | ||
Weighted Average Coupon | 2.62% | 3.80% | ||
Weighted Average Yield | 6.96% | [5] | 6.57% | [5] |
Other Investment Securities [Member] | ||||
Investment Holdings [Line Items] | ||||
Principal or Notional Balance | 2,250,000 | |||
Premium (Discount) | 16,756 | |||
Amortized Cost | 2,266,756 | [6] | ||
Gross Unrealized | ||||
Gains | [3] | |||
Losses | -226,224 | [3] | ||
Fair Value | $2,040,532 | [6] | ||
Weighted Average Coupon | 3.92% | |||
Weighted Average Yield | 5.90% | [5] | ||
[1] | Alternative b A RMBS includes an IO with a notional balance of $48.6 million. | |||
[2] | Alternative b A RMBS includes an IO with a notional balance of $64.3 million. | |||
[3] | The Company has elected the fair value option pursuant to ASC 825 for its real estate securities and Other Investment Securities. The Company recorded a loss of $3.0 million for the year ended December 31, 2014, as change in unrealized gain or loss on real estate securities in the consolidated statements of operations. The Company also recorded a loss of $0.2 million for the year ended December 31, 2014, as change in unrealized gain or loss on Other Investment Securities in the consolidated statements of operations. | |||
[4] | The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. | |||
[5] | Unleveraged yield. | |||
[6] | Actual maturities of Other Investment Securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. |
Real_Estate_Securities_and_Oth3
Real Estate Securities and Other Investment Securities (Parenthetical Information Regarding Real Estate Securities) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Real Estate Securities [Member] | ||
Investment Holdings [Line Items] | ||
Change in unrealized gain or loss on investments | ($3,000,000) | |
Other Investment Securities [Member] | ||
Investment Holdings [Line Items] | ||
Change in unrealized gain or loss on investments | -200,000 | |
Interest-Only Securities [Member] | ||
Investment Holdings [Line Items] | ||
Principal or Notional Balance | $48,600,000 | $64,300,000 |
Real_Estate_Securities_and_Oth4
Real Estate Securities and Other Investment Securities (Schedule of Certain Information Regarding Real Estate Securities) (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Non-Agency RMBS [Member] | ||||
Greater than 5 years | ||||
Fair Value | $148,585,733 | [1] | $226,155,221 | [1] |
Amortized Cost | 146,917,072 | [1] | 221,492,920 | [1] |
Weighted Average Yield | 6.96% | [1] | 6.57% | [1] |
Fair Value | 148,585,733 | [1] | 226,155,221 | [1] |
Amortized Cost | 146,917,072 | [1] | 221,492,920 | [1] |
Weighted Average Yield | 6.96% | [1] | 6.57% | [1] |
Other Investment Securities [Member] | ||||
Greater than 5 years | ||||
Fair Value | 2,040,532 | [2] | ||
Amortized Cost | 2,266,756 | [2] | ||
Weighted Average Yield | 5.90% | [2] | ||
Fair Value | 2,040,532 | [2] | ||
Amortized Cost | $2,266,756 | [2] | ||
Weighted Average Yield | 5.90% | [3] | ||
[1] | Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||
[2] | Actual maturities of Other Investment Securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. | |||
[3] | Unleveraged yield. |
Real_Estate_Securities_and_Oth5
Real Estate Securities and Other Investment Securities (Narrative) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Investment Holdings [Line Items] | |||
Proceeds from the sale of real estate securities | $102,635,229 | $291,348,906 | $74,216,314 |
Proceeds from the sale of other investment securities | 11,067,378 | ||
Realized gain/(loss) on investments | 5,762,254 | ||
Realized loss on OTTI | -1,108,024 | -215,345 | |
Real Estate Securities [Member] | |||
Investment Holdings [Line Items] | |||
Realized gain/(loss) on investments | 3,694,255 | -7,937,665 | 28,858 |
Real Estate Securities [Member] | Minimum [Member] | |||
Investment Holdings [Line Items] | |||
Contractual maturities | 20 years 3 months 18 days | 7 years 8 months 12 days | |
Real Estate Securities [Member] | Maximum [Member] | |||
Investment Holdings [Line Items] | |||
Contractual maturities | 32 years 3 months 18 days | 33 years | |
Real Estate Securities [Member] | Weighted Average [Member] | |||
Investment Holdings [Line Items] | |||
Contractual maturities | 24 years 10 months 24 days | 24 years | |
Other Investment Securities [Member] | |||
Investment Holdings [Line Items] | |||
Realized gain/(loss) on investments | $226,743 | ||
Other Investment Securities [Member] | Weighted Average [Member] | |||
Investment Holdings [Line Items] | |||
Contractual maturities | 9 years 8 months 12 days |
Mortgage_Servicing_Rights_Sche
Mortgage Servicing Rights (Schedule of MSR Activity) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | ||
Servicing Asset at Fair Value, Amount [Roll Forward] | ||
Balance at beginning of year | ||
Acquisition of MSRs in connection with purchase of GMFS | 32,300,337 | |
Additions due to loans sold, servicing retained | 2,763,014 | |
Fair value adjustment: | ||
Changes in assumptions | -1,420,925 | [1],[2] |
Other changes | -263,448 | [1],[3] |
Balance at December 31, 2014 | $33,378,978 | |
[1] | Included in change in fair value of MSRs in the Company's consolidated statements of operations. | |
[2] | Primarily reflects changes in prepayment assumptions due to changes in interest rates and discount rates. | |
[3] | Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid off during the period. |
Mortgage_Servicing_Rights_Sche1
Mortgage Servicing Rights (Schedule of MSR Portfolio) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Servicing Assets at Fair Value [Line Items] | ||
Fair Value | $33,378,978 | |
Residential Mortgage [Member] | ||
Servicing Assets at Fair Value [Line Items] | ||
Unpaid Principal Balance | 3,078,974,342 | |
Fair Value | 33,378,978 | |
Residential Mortgage [Member] | Fannie Mae [Member] | ||
Servicing Assets at Fair Value [Line Items] | ||
Unpaid Principal Balance | 1,640,799,719 | |
Fair Value | 17,078,181 | |
Residential Mortgage [Member] | Ginnie Mae [Member] | ||
Servicing Assets at Fair Value [Line Items] | ||
Unpaid Principal Balance | 1,146,234,768 | |
Fair Value | 13,102,076 | |
Residential Mortgage [Member] | Freddie Mac [Member] | ||
Servicing Assets at Fair Value [Line Items] | ||
Unpaid Principal Balance | 291,939,855 | |
Fair Value | $3,198,721 |
Mortgage_Servicing_Rights_Sche2
Mortgage Servicing Rights (Schedule of Loan Servicing Fees) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Servicing Assets at Fair Value [Line Items] | |
Income | $1,412,583 |
Late charges | 60 |
Cost of sub-servicer | -482,925 |
Net servicing income | $929,718 |
Warehouse_Lines_of_Credit_Narr
Warehouse Lines of Credit (Narrative) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Short-term Debt [Line Items] | ||
Amount outstanding | $300,092,293 | $236,058,976 |
Warehouse Agreement Borrowings [Member] | ||
Short-term Debt [Line Items] | ||
Amount outstanding | 89,417,564 | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit One [Member] | ||
Short-term Debt [Line Items] | ||
Amount of agreement | 45,000,000 | |
Expiration date | 15-Jan-15 | |
Amount outstanding | 21,210,431 | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit One [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||
Short-term Debt [Line Items] | ||
Interest rate spread | 2.30% | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit Two [Member] | ||
Short-term Debt [Line Items] | ||
Amount of agreement | 35,000,000 | |
Expiration date | 28-Sep-15 | |
Amount outstanding | 27,499,080 | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit Two [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||
Short-term Debt [Line Items] | ||
Interest rate spread | 2.25% | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit Two [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member] | ||
Short-term Debt [Line Items] | ||
Interest rate spread | 2.50% | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit Three [Member] | ||
Short-term Debt [Line Items] | ||
Amount of agreement | 30,000,000 | |
Expiration date | 26-Oct-15 | |
Amount outstanding | 29,619,453 | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit Three [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||
Short-term Debt [Line Items] | ||
Interest rate spread | 2.25% | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit Three [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member] | ||
Short-term Debt [Line Items] | ||
Interest rate spread | 2.75% | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit Four [Member] | ||
Short-term Debt [Line Items] | ||
Amount of agreement | 20,000,000 | |
Expiration date | 30-Jun-16 | |
Amount outstanding | $11,088,600 | |
Warehouse Agreement Borrowings [Member] | Warehouse Line of Credit Four [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||
Short-term Debt [Line Items] | ||
Interest rate spread | 2.75% |
Warehouse_Lines_of_Credit_Sche
Warehouse Lines of Credit (Schedule of Lines of Credit) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Short-term Debt [Line Items] | ||
Balance | $300,092,293 | $236,058,976 |
Warehouse Agreement Borrowings [Member] | ||
Short-term Debt [Line Items] | ||
Balance | 89,417,564 | |
Weighted Average Rate | 2.52% | |
Warehouse Agreement Borrowings [Member] | 30 Days or Less [Member] | ||
Short-term Debt [Line Items] | ||
Balance | 21,210,431 | |
Weighted Average Rate | 2.47% | |
Warehouse Agreement Borrowings [Member] | Greater than 180 Days to 1 Year [Member] | ||
Short-term Debt [Line Items] | ||
Balance | 57,118,533 | |
Weighted Average Rate | 2.46% | |
Warehouse Agreement Borrowings [Member] | Maturity Greater than 1 Year [Member] | ||
Short-term Debt [Line Items] | ||
Balance | $11,088,600 | |
Weighted Average Rate | 2.92% |
Loan_Repurchase_Facilities_Nar
Loan Repurchase Facilities (Narrative) (Details) (USD $) | 0 Months Ended | 12 Months Ended | ||||||
Mar. 27, 2014 | Aug. 28, 2013 | Jul. 25, 2013 | 30-May-13 | 31-May-13 | Mar. 22, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Line of Credit Facility [Line Items] | ||||||||
Unpaid principal balance of loans acquired | $100,400,000 | $98,200,000 | $162,400,000 | $134,500,000 | $17,700,000 | |||
Amount outstanding | 300,092,293 | 236,058,976 | ||||||
Loan Repurchase Facility [Member] | Citi [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Term of facility | 364 days | |||||||
Increase in borrowing capacity | 75,000,000 | |||||||
Maximum amount of facility | 250,000,000 | 325,000,000 | ||||||
Amount outstanding | 299,402,024 | 236,058,976 | ||||||
Loan Repurchase Facility [Member] | Credit Suisse [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Term of facility | 364 days | |||||||
Maximum amount of facility | 100,000,000 | |||||||
Amount outstanding | $690,269 |
Loan_Repurchase_Facilities_Sch
Loan Repurchase Facilities (Schedule of Certain Information Regarding Loan Repo Facility) (Details) (Mortgage Loans [Member], USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | $300,092,293 | $236,058,976 |
Weighted Average Rate | 2.92% | 2.92% |
91-180 Days [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | 299,402,024 | 236,058,976 |
Weighted Average Rate | 2.92% | 2.92% |
Greater than 180 Days to 1 Year [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | $690,269 | |
Weighted Average Rate | 2.46% |
Loan_Repurchase_Facilities_Sch1
Loan Repurchase Facilities (Schedule of Information Regarding Posting of Mortgage Loan Collateral) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||||
Fair value of Trust Certificates pledged as collateral under Loan Repurchase Facilities | $415,814,067 | $331,522,165 | ||
Cash pledged as collateral under Loan Repurchase Facilities | 684,256 | 1,360,528 | ||
Loan Repurchase Facility [Member] | ||||
Assets Sold under Agreements to Repurchase [Line Items] | ||||
Unused Amount | 124,907,707 | [1] | 13,941,024 | [1] |
Mortgage Loans [Member] | ||||
Assets Sold under Agreements to Repurchase [Line Items] | ||||
Repurchase agreements secured by mortgage loans | 300,092,293 | 236,058,976 | ||
Fair value of Trust Certificates pledged as collateral under Loan Repurchase Facilities | 415,814,067 | 331,522,165 | ||
Fair value of mortgage loans not pledged as collateral under Loan Repurchase Facilities | 145,771 | 263,377 | ||
Cash pledged as collateral under Loan Repurchase Facilities | ||||
[1] | The amount the Company is able to borrow under the Loan Repurchase Facilities is tied to the fair value of unencumbered Trust Certificates eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold. |
Loan_Repurchase_Facilities_Sch2
Loan Repurchase Facilities (Schedule of Financial Information) (Details) (Loan Repurchase Facility [Member], USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Loan Repurchase Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Weighted-average interest rate | 3.11% | 2.92% |
Average balance of loans sold under the agreements to repurchase | $193,332 | $273,786 |
Maximum daily amount outstanding | 310,575,669 | 242,099,994 |
Total interest expense | $8,906,849 | $3,612,167 |
Securities_Repurchase_Agreemen2
Securities Repurchase Agreements (Schedule of Certain Information Regarding Repurchase Agreements) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Non-Agency RMBS [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | $101,553,292 | $138,591,678 |
Weighted Average Rate | 1.57% | 1.89% |
Other Investment Securities [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | 1,460,813 | |
Weighted Average Rate | 1.66% | |
30 Days or Less [Member] | Non-Agency RMBS [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | 101,553,292 | 121,913,678 |
Weighted Average Rate | 1.57% | 1.90% |
30 Days or Less [Member] | Other Investment Securities [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | 1,460,813 | |
Weighted Average Rate | 1.66% | |
31-60 Days [Member] | Non-Agency RMBS [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | 6,415,000 | |
Weighted Average Rate | 1.84% | |
31-60 Days [Member] | Other Investment Securities [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | ||
Weighted Average Rate | ||
61-90 Days [Member] | Non-Agency RMBS [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | 10,263,000 | |
Weighted Average Rate | 1.85% | |
61-90 Days [Member] | Other Investment Securities [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Balance | ||
Weighted Average Rate |
Securities_Repurchase_Agreemen3
Securities Repurchase Agreements (Schedule of Information Regarding Posting of Collateral) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Assets Sold under Agreements to Repurchase [Line Items] | ||
Fair value of investment securities pledged as collateral | $135,779,193 | $183,722,511 |
Cash pledged as collateral | 684,256 | 1,360,528 |
Non-Agency RMBS [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Securities repurchase agreements secured by investment securities | 101,553,292 | 138,591,678 |
Fair value of investment securities pledged as collateral | 135,779,193 | 183,722,511 |
Fair value of investment securities not pledged as collateral | 12,806,540 | 42,432,710 |
Other Investment Securities [Member] | ||
Assets Sold under Agreements to Repurchase [Line Items] | ||
Securities repurchase agreements secured by investment securities | 1,460,813 | |
Fair value of investment securities pledged as collateral | 2,040,532 | |
Fair value of investment securities not pledged as collateral |
80_Exchangeable_Senior_Notes_d1
8.0% Exchangeable Senior Notes due 2016 (Details) (USD $) | 12 Months Ended | 0 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 27, 2013 | Nov. 25, 2013 | Dec. 19, 2014 | Sep. 18, 2014 | Jun. 18, 2014 | Mar. 20, 2014 | Dec. 19, 2013 | Sep. 18, 2013 | Jun. 25, 2013 | 14-May-13 | Dec. 19, 2012 | Nov. 29, 2012 | Oct. 22, 2012 | Jun. 05, 2012 | 1-May-12 | ||
Debt Instrument [Line Items] | |||||||||||||||||||
Interest expense on notes | $5,686,664 | $563,539 | |||||||||||||||||
Derivative liabilities, at fair value | 2,585,184 | 1,471,607 | |||||||||||||||||
Dividend declared, amount per share | $0.40 | $0.40 | $0.40 | $0.40 | $0.95 | [1] | $0.50 | $0.45 | $0.22 | $1.16 | $0.98 | $0.89 | $0.57 | $0.51 | |||||
Special Cash Dividend [Member] | |||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||
Dividend declared, amount per share | $0.55 | ||||||||||||||||||
Exchangeable Senior Notes Conversion Option [Member] | |||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||
Derivative liabilities, at fair value | 1,000,000 | 1,500,000 | 1,300,000 | ||||||||||||||||
Exchangeable Senior Notes [Member] | |||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||
Principal amount | 57,500,000 | ||||||||||||||||||
Proceeds from sale of debt | 55,300,000 | ||||||||||||||||||
Initial purchasers' discount | 2,000,000 | 3,000,000 | 1,700,000 | ||||||||||||||||
Aggregate estimated offering expenses | 2,200,000 | ||||||||||||||||||
Stated interest rate | 8.00% | ||||||||||||||||||
Effective annual rate | 10.20% | ||||||||||||||||||
Interest expense on notes | $5,700,000 | $600,000 | |||||||||||||||||
Maturity date | 15-Nov-16 | ||||||||||||||||||
Percentage of shares outstanding issuable upon exchange | 20.00% | ||||||||||||||||||
Number of shares issuable upon exchange | 1,779,560 | ||||||||||||||||||
Conversion ratio | 54.3103 | 52.5417 | |||||||||||||||||
Exchange price | $19.03 | ||||||||||||||||||
Dividend threshold requiring adjustment to exchange rate | $0.50 | ||||||||||||||||||
Repurchase price | 100.00% | ||||||||||||||||||
Exchangeable Senior Notes [Member] | Maximum [Member] | |||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||
Conversion ratio | 60.4229 | ||||||||||||||||||
[1] | Comprised of a regular cash dividend of $0.40 per share of common stock and OP unit for the quarter ending December 31, 2013, and an additional special cash dividend of $0.55 per share of its common stock and OP unit. The Company declared the special cash dividend to distribute taxable income from 2013 attributable to the termination of interest rate swap contracts. |
Derivative_Instruments_Narrati
Derivative Instruments (Narrative) (Details) (USD $) | 12 Months Ended | |
In Millions, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2014 |
Interest Rate Swaps [Member] | ||
Derivative [Line Items] | ||
Cash pledged as collateral | $0.80 | $1.60 |
TBAs [Member] | Short [Member] | ||
Derivative [Line Items] | ||
Notional amount of contracts paired off and sold | 643 | |
Realized gains (losses) on sale of derivative | -4.2 | |
Unrealized gains (losses) recognized | 0.5 | |
Interest Rate Swaption [Member] | ||
Derivative [Line Items] | ||
Cash pledged as collateral | $4.90 |
Derivative_Instruments_Schedul
Derivative Instruments (Schedule of Information Related to Derivative Instruments) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Interest Rate Swaption [Member] | ||
Derivative [Line Items] | ||
Notional amount | $225,000,000 | |
Interest Rate Swaps [Member] | ||
Derivative [Line Items] | ||
Notional amount | 17,200,000 | 17,200,000 |
Loan Purchase Commitments [Member] | ||
Derivative [Line Items] | ||
Notional amount | 1,905,700 | |
Interest Rate Lock Commitments [Member] | ||
Derivative [Line Items] | ||
Notional amount | 118,486,590 | |
MBS Forward Sales Contracts [Member] | ||
Derivative [Line Items] | ||
Notional amount | $154,000,000 |
Derivative_Instruments_Schedul1
Derivative Instruments (Schedule of Fair Value of Derivative Instruments) (Details) (Not Designated as Hedging Instrument [Member], USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Interest Rate Swaption [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets (liabilities), at fair value | ||
Interest Rate Swap [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets (liabilities), at fair value | -860,553 | 284,454 |
Exchangeable Senior Notes Conversion Option [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets (liabilities), at fair value | -1,022,248 | -1,471,607 |
Loan Purchase Commitments [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets (liabilities), at fair value | 4,037 | |
Interest Rate Lock Commitments [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets (liabilities), at fair value | 2,481,063 | |
MBS Forward Sales Contracts [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets (liabilities), at fair value | ($702,383) |
Derivative_Instruments_Schedul2
Derivative Instruments (Schedule of Losses and Gains of Derivative Instruments) (Details) (Not Designated as Hedging Instrument [Member], USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Interest Rate Swaption [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (loss) on derivative instruments | ($4,803,750) | ||
Interest Rate Swap [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (loss) on derivative instruments | -1,571,371 | 10,548,012 | -1,171,219 |
Exchangeable Senior Notes Conversion Option [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (loss) on derivative instruments | 449,359 | -147,201 | |
TBAs [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (loss) on derivative instruments | -4,785,996 | ||
Loan Purchase Commitments [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (loss) on derivative instruments | 4,037 | ||
Interest Rate Lock Commitments [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (loss) on derivative instruments | -221,891 | ||
MBS Forward Sales Contracts [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (loss) on derivative instruments | $410,411 |
Derivative_Instruments_Schedul3
Derivative Instruments (Schedule of Information About Interest Rate Swaps) (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Swap [Member] | ||
Derivative [Line Items] | ||
Notional Amount | $17,200,000 | $17,200,000 |
Weighted Average Pay Rate | 2.72% | 2.72% |
Weighted Average Receive Rate | 0.23% | 0.24% |
Weighted Average Years to Maturity | 8 years 7 months 6 days | 9 years 7 months 6 days |
Swap [Member] | Derivative - Maturity Date Five [Member] | ||
Derivative [Line Items] | ||
Maturity | 31-Dec-23 | 31-Dec-23 |
Notional Amount | 17,200,000 | 17,200,000 |
Weighted Average Pay Rate | 2.72% | 2.72% |
Weighted Average Receive Rate | 0.23% | 0.24% |
Weighted Average Years to Maturity | 8 years 7 months 6 days | 9 years 7 months 6 days |
Interest Rate Swaption [Member] | ||
Derivative [Line Items] | ||
Notional Amount | 225,000,000 | |
Interest Rate Swaption [Member] | Derivative - Maturity Date Four [Member] | ||
Derivative [Line Items] | ||
Swaption Expiration | 31-Dec-15 | |
Maturity | 31-Dec-25 | |
Notional Amount | $225,000,000 | |
Strike Rate | 3.64% |
Mortgage_Banking_Activities_De
Mortgage Banking Activities (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Mortgage Banking Activities [Abstract] | |||
Gain on sale of mortgage loans held for sale, net of direct costs | $5,344,361 | ||
Provision for loan indemnification | -118,895 | ||
Loan origination fee income | 213,540 | ||
Total | $5,439,006 |
Loan_Indemnification_Reserve_D
Loan Indemnification Reserve (Details) (Indemnification Agreement [Member], USD $) | 2 Months Ended |
Dec. 31, 2014 | |
Indemnification Agreement [Member] | |
Loss Contingency Accrual [Roll Forward] | |
Balance at the date of acquisition | $2,560,907 |
Loan losses incurred | |
Provision for losses | 101,255 |
Balance at end of year | $2,662,162 |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||||||
Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||
Current provision for income taxes | ||||||||
Federal | ||||||||
State | ||||||||
Total current provision (benefit) for income taxes | ||||||||
Deferred provision for income taxes | ||||||||
Federal | -677,780 | |||||||
State | -173,216 | |||||||
Total deferred provision (benefit) for income taxes | -850,996 | |||||||
Total provision (benefit) for income taxes | -850,996 | [1] | -850,996 | |||||
Reconciliation of Statutory Tax Rate to Effective Tax Rate | ||||||||
Tax expense (benefit) at statutory rate | 35.00% | 35.00% | ||||||
State Tax (Net of Federal Benefit) | -0.82% | 0.00% | ||||||
Permanent differences | 0.03% | 0.00% | ||||||
Valuation Allowance | 2.31% | 0.00% | ||||||
Benefit of REIT Dividend paid deduction | -39.46% | -35.00% | ||||||
Effective Tax Rate | -2.94% | 0.00% | ||||||
Deferred tax assets | ||||||||
Tax effect of unrealized losses and other temporary differences | 1,207,520 | 1,207,520 | ||||||
Net operating loss carryforward | 673,052 | 673,052 | 43,473 | |||||
Total deferred tax assets | 1,880,572 | 1,880,572 | 43,473 | |||||
Deferred tax liabilities | ||||||||
Tax effect of unrealized gains and other temporary differences | -357,663 | -357,663 | ||||||
Total deferred tax liabilities | -357,663 | -357,663 | ||||||
Valuation allowance | 671,913 | 671,913 | 43,473 | |||||
Total Deferred Tax Assets, net of Valuation Allowance | $850,996 | $850,996 | ||||||
[1] | On October 31, 2014 the Company, completed the acquisition of GMFS. The Company has recognized the revenues and earnings related to its investment in GMFS for the period from the acquisition date to December 31, 2014 which are reflected in its consolidated statements of operations. |
Earnings_Per_Share_Details
Earnings Per Share (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||
Numerator: | ||||||||||||
Net income/(loss) attributable to ZAIS Financial Corp. common stockholders (Basic) | $194,337 | [1] | $1,149,497 | $23,173,931 | $2,224,205 | $8,062,847 | $3,716,061 | ($6,780,401) | $1,659,222 | $26,741,970 | $6,657,728 | $19,433,802 |
Effect of dilutive securities: | ||||||||||||
Net income allocated to non controlling interests | 3,109,760 | 880,358 | 362,324 | |||||||||
Exchangeable Senior Notes | ||||||||||||
Interest expense | 3,240,561 | |||||||||||
Gain on derivative instruments | -256,068 | |||||||||||
Total - Exchangeable Senior Notes | 2,984,493 | |||||||||||
Net income/(loss) available to stockholders, after effect of dilutive securities | $32,836,223 | $7,538,086 | $19,796,126 | |||||||||
Denominator: | ||||||||||||
Weighted average number of shares of common stock | 7,970,886 | [1] | 7,970,886 | 7,970,886 | 7,970,886 | 7,970,886 | 7,970,886 | 7,970,886 | 5,142,053 | 7,970,886 | 7,273,366 | 2,724,252 |
Effect of dilutive securities: | ||||||||||||
Weighted average number of OP units | 926,914 | 926,914 | 49,593 | |||||||||
Weighted average number of shares convertible under Exchangeable Senior Notes | 1,779,560 | |||||||||||
Diluted weighted average shares outstanding | 8,897,800 | [1] | 8,897,800 | 10,677,360 | 8,897,800 | 9,594,150 | 8,897,800 | 8,897,800 | 6,068,967 | 10,677,360 | 8,200,280 | 2,773,845 |
Net income per share applicable to ZAIS Financial Corp. common stockholders - Basic | $0.02 | [1] | $0.14 | $2.91 | $0.28 | $1.01 | $0.47 | ($0.85) | $0.32 | $3.35 | $0.92 | $7.13 |
Net income per share applicable to ZAIS Financial Corp. common stockholders - Diluted | $0.02 | [1] | $0.14 | $2.47 | $0.28 | $0.98 | $0.47 | ($0.85) | $0.32 | $3.08 | $0.92 | $7.13 |
[1] | On October 31, 2014 the Company, completed the acquisition of GMFS. The Company has recognized the revenues and earnings related to its investment in GMFS for the period from the acquisition date to December 31, 2014 which are reflected in its consolidated statements of operations. |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Related Party Transaction [Line Items] | |||
Advisory fee - related party | $2,853,896 | $2,629,815 | $877,825 |
GMFS, LLC [Member] | |||
Related Party Transaction [Line Items] | |||
Related party revenue | 1,200 | ||
Related party receivables | 1,200 | ||
ZAIS REIT Management, LLC [Member] | Advisory Fee [Member] | |||
Related Party Transaction [Line Items] | |||
Advisory fee, rate | 1.50% | ||
Advisory fee - related party | 2,900,000 | 2,600,000 | 900,000 |
Advisory fees due to related party | 700,000 | ||
ZAIS REIT Management, LLC [Member] | Loan Sourcing Fee [Member] | |||
Related Party Transaction [Line Items] | |||
Advisory fee, rate | 0.50% | ||
Advisory fee - related party | $3,835 |
Stockholders_Equity_Narrative_
Stockholders' Equity (Narrative) (Details) (USD $) | 3 Months Ended | 12 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | |||||
Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Oct. 31, 2012 | Feb. 13, 2013 | Feb. 15, 2013 | Jan. 18, 2012 | Jan. 31, 2013 | |
Class of Stock [Line Items] | ||||||||||
Value of stock issued | $118,862,500 | $4,757,470 | ||||||||
Value of OP units and common stock issued | 25,151,174 | |||||||||
Offering fees | 763,000 | 216,658 | ||||||||
Common stock repurchase liability, common shares | 515,035 | 515,035 | 515,035 | 265,245 | ||||||
Other liabilities | 5,800,000 | |||||||||
Payment of common stock repurchase liability | 5,750,512 | |||||||||
Common stock, shares outstanding | 7,970,886 | 7,970,886 | ||||||||
Payments for Repurchase of Preferred Stock and Preference Stock | 148,379 | 15,424 | ||||||||
ZAIS Financial Partners, L.P. [Member] | ||||||||||
Limited Partners' Capital Account [Line Items] | ||||||||||
Issuance of OP units | 904,422 | 22,492 | ||||||||
ZAIS REIT Management, LLC [Member] | ||||||||||
Class of Stock [Line Items] | ||||||||||
Offering fees | 6,300,000 | |||||||||
Common Stock [Member] | ||||||||||
Class of Stock [Line Items] | ||||||||||
Shares of stock issued | 36,581 | 195,458 | 5,650,000 | |||||||
Common stock issued, price per share | $21.25 | |||||||||
Gross proceeds from issuance initial public offering | 120,100,000 | |||||||||
Value of stock issued | 118,900,000 | |||||||||
Offering fees | 1,200,000 | |||||||||
Series A Preferred Stock [Member] | ||||||||||
Class of Stock [Line Items] | ||||||||||
Shares of stock issued | 133 | |||||||||
Value of stock issued | 115,499 | |||||||||
Offering fees | 17,501 | |||||||||
Number of shares repurchased | 133 | |||||||||
Payments for Repurchase of Preferred Stock and Preference Stock | $148,379 |
Stockholders_Equity_Dividends_
Stockholders' Equity (Dividends and Distributions) (Details) (USD $) | Dec. 19, 2014 | Sep. 18, 2014 | Jun. 18, 2014 | Mar. 20, 2014 | Dec. 19, 2013 | Sep. 18, 2013 | Jun. 25, 2013 | 14-May-13 | Dec. 19, 2012 | Nov. 29, 2012 | Oct. 22, 2012 | Jun. 05, 2012 | 1-May-12 | |
Dividends Payable [Line Items] | ||||||||||||||
Dividend declared, amount per share | $0.40 | $0.40 | $0.40 | $0.40 | $0.95 | [1] | $0.50 | $0.45 | $0.22 | $1.16 | $0.98 | $0.89 | $0.57 | $0.51 |
Regular Cash Dividend [Member] | ||||||||||||||
Dividends Payable [Line Items] | ||||||||||||||
Dividend declared, amount per share | $0.40 | |||||||||||||
Special Cash Dividend [Member] | ||||||||||||||
Dividends Payable [Line Items] | ||||||||||||||
Dividend declared, amount per share | $0.55 | |||||||||||||
[1] | Comprised of a regular cash dividend of $0.40 per share of common stock and OP unit for the quarter ending December 31, 2013, and an additional special cash dividend of $0.55 per share of its common stock and OP unit. The Company declared the special cash dividend to distribute taxable income from 2013 attributable to the termination of interest rate swap contracts. |
Noncontrolling_Interests_Detai
Non-controlling Interests (Details) (ZAIS Financial Partners, L.P. [Member]) | Dec. 31, 2014 | Dec. 31, 2013 |
ZAIS Financial Partners, L.P. [Member] | ||
Noncontrolling Interest [Line Items] | ||
Units issued and outstanding | 926,914 | 926,914 |
Non-controlling interest equity interest | 10.40% | 10.40% |
Commitments_and_Contingencies_1
Commitments and Contingencies (Narrative) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | |
Lease renewal term | 5 years |
Rent expense | $122,986 |
Sublease income | 45,861 |
Loan Origination Commitments [Member] | |
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | |
Commitments to originate loans | $117,700,000 |
Commitments_and_Contingencies_2
Commitments and Contingencies (Schedule of Future Minimum Payments) (Details) (USD $) | Dec. 31, 2014 |
Commitments and Contingencies [Abstract] | |
2015 | $639,523 |
2016 | 455,351 |
2017 | 385,075 |
2018 | 385,075 |
2019 | 410,515 |
Thereafter | $2,275,539 |
Commitments_and_Contingencies_3
Commitments and Contingencies (Schedule of Required and Actual Net Worth Amounts) (Details) (USD $) | Dec. 31, 2014 |
HUD [Member] | |
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items] | |
Net Worth | $52,545,673 |
Net Worth Required | 2,500,000 |
Ginnie Mae [Member] | |
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items] | |
Net Worth | 52,545,673 |
Net Worth Required | 5,007,700 |
Fannie Mae [Member] | |
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items] | |
Net Worth | 52,548,259 |
Net Worth Required | 6,577,547 |
Freddie Mac [Member] | |
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items] | |
Net Worth | 52,548,259 |
Net Worth Required | 3,143,262 |
Various States [Member] | |
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items] | |
Net Worth | 52,548,259 |
Various States [Member] | Minimum [Member] | |
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items] | |
Net Worth Required | 0 |
Various States [Member] | Maximum [Member] | |
Compliance with Regulatory Capital Requirements for Mortgage Companies [Line Items] | |
Net Worth Required | $1,000,000 |
Offsetting_Assets_and_Liabilit2
Offsetting Assets and Liabilities (Schedule of Offsetting of Assets) (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2014 | |||
Derivatives | ||||
Gross Amounts of Recognized Assets | $396,068 | |||
Gross Amounts Offset in the Consolidated Balance Sheets | -111,614 | |||
Net Amounts of Assets Presented in the Consolidated Balance Sheets | 284,454 | |||
Gross Amounts Not Offset in the Consolidated Balance Sheets | ||||
Financial Instruments | ||||
Cash Collateral Received | [1] | [1] | ||
Net Amount | 284,454 | |||
Interest Rate Swap [Member] | ||||
Derivatives | ||||
Gross Amounts of Recognized Assets | 396,068 | |||
Gross Amounts Offset in the Consolidated Balance Sheets | -111,614 | |||
Net Amounts of Assets Presented in the Consolidated Balance Sheets | 284,454 | |||
Gross Amounts Not Offset in the Consolidated Balance Sheets | ||||
Financial Instruments | ||||
Cash Collateral Received | [1] | |||
Net Amount | 284,454 | |||
Cash collateral pledged | 767,708 | |||
Derivative, maximum exposure | 1,052,162 | |||
Interest Rate Swaption [Member] | ||||
Derivatives | ||||
Gross Amounts of Recognized Assets | ||||
Gross Amounts Offset in the Consolidated Balance Sheets | ||||
Net Amounts of Assets Presented in the Consolidated Balance Sheets | ||||
Gross Amounts Not Offset in the Consolidated Balance Sheets | ||||
Financial Instruments | ||||
Cash Collateral Received | [1] | |||
Net Amount | ||||
Cash collateral pledged | 4,886,011 | |||
Derivative, maximum exposure | $4,886,011 | |||
[1] | At December 31, 2014, the Company pledged $4,886,011 of cash collateral in relation to its interest rate swaption; with the total net counterparty exposure for this position totaling $4,886,011. At December 31, 2013, the Company pledged $767,708 of cash collateral in relation to its interest rate swap agreements; with the total net counterparty exposure for this position totaling $1,052,162. |
Offsetting_Assets_and_Liabilit3
Offsetting Assets and Liabilities (Schedule of Offsetting of Liabilities) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Repurchase agreements | ||
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | $103,014,105 | $138,591,678 |
Total | ||
Gross Amounts of Recognized Liabilities | 493,384,515 | 374,650,654 |
Gross Amounts Offset in the Consolidated Balance Sheets | ||
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 493,384,515 | 374,650,654 |
Gross Amounts Not Offset in the Consolidated Balance Sheets | ||
Financial Instruments | -492,700,259 | -373,290,126 |
Cash Collateral Pledged | -684,256 | -1,360,528 |
Net Amount | ||
Mortgage Loans [Member] | ||
Repurchase agreements | ||
Gross Amounts of Recognized Liabilities | 300,092,293 | 236,058,976 |
Gross Amounts Offset in the Consolidated Balance Sheets | ||
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 300,092,293 | 236,058,976 |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ||
Financial Instruments | -300,092,293 | -236,058,976 |
Cash Collateral Pledged | ||
Net Amount | ||
Agency and Non-Agency Securities [Member] | ||
Repurchase agreements | ||
Gross Amounts of Recognized Liabilities | 103,014,105 | 138,591,678 |
Gross Amounts Offset in the Consolidated Balance Sheets | ||
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 103,014,105 | 138,591,678 |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ||
Financial Instruments | -102,329,849 | -137,231,150 |
Cash Collateral Pledged | -684,256 | -1,360,528 |
Net Amount | ||
Newly Originated Mortgage Loans [Member] | ||
Repurchase agreements | ||
Gross Amounts of Recognized Liabilities | 89,417,564 | |
Gross Amounts Offset in the Consolidated Balance Sheets | ||
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 89,417,564 | |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ||
Financial Instruments | -89,417,564 | |
Cash Collateral Pledged | ||
Net Amount | ||
Interest Rate Swap [Member] | ||
Derivatives | ||
Gross Amounts of Recognized Liabilities | 860,553 | |
Gross Amounts Offset in the Consolidated Balance Sheet | ||
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 860,553 | |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ||
Financial Instruments | 860,553 | |
Cash Collateral Pledged | ||
Net Amount |
Employee_Benefit_Plan_Details
Employee Benefit Plan (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Employee Benefit Plan [Abstract] | |
Contributions to the plan | $69,719 |
Segment_Information_Details
Segment Information (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||
segments | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Number of Operating Segments | 2 | |||||||||||
Total interest income | $10,267,875 | [1] | $11,000,619 | $10,831,220 | $9,493,033 | $8,773,339 | $8,273,444 | $5,935,511 | $3,436,033 | $41,592,747 | $26,418,327 | $9,398,319 |
Total interest expense | 4,447,530 | [1] | 4,491,678 | 4,416,385 | 3,903,952 | 3,090,565 | 2,333,139 | 1,156,780 | 514,035 | 17,259,545 | 7,094,519 | 1,387,451 |
Net interest income | 5,820,345 | [1] | 6,508,941 | 6,414,835 | 5,589,081 | 5,682,774 | 5,940,305 | 4,778,731 | 2,921,998 | 24,333,202 | 19,323,808 | 8,010,868 |
Non-interest income | 4,730,212 | |||||||||||
Change in unrealized gain or loss | 19,090,520 | |||||||||||
Realized gain | 5,762,254 | |||||||||||
Gain or (loss) on derivative instruments | -5,921,725 | 5,614,815 | -1,171,219 | |||||||||
Advisory fee - related party | 2,853,896 | 2,629,815 | 877,825 | |||||||||
Salaries, commissions and benefits | 3,765,784 | |||||||||||
Operating expenses | 7,862,308 | 5,473,915 | 1,475,729 | |||||||||
Expense | 2,180,113 | |||||||||||
Transaction costs relating to acquisition of GMFS | 2,177,617 | |||||||||||
Depreciation and amortization | 154,010 | |||||||||||
Total other expenses | 4,511,741 | 1,500,359 | 1,827,350 | |||||||||
Net income/(loss) before income taxes | 29,000,734 | 7,553,465 | 20,265,597 | |||||||||
Income tax benefit | 850,996 | [1] | 850,996 | |||||||||
Net income/(loss) after income taxes | 216,938 | [1] | 1,279,798 | 25,872,135 | 2,482,859 | 9,000,455 | 4,148,192 | -7,568,877 | 1,973,695 | 29,851,730 | 7,553,465 | 20,265,597 |
Mortgage loans held for investment | 415,959,838 | 331,785,542 | 415,959,838 | 331,785,542 | ||||||||
Mortgage loans held for investment, at cost | 1,338,935 | 1,338,935 | ||||||||||
Mortgage loans held for sale | 97,690,960 | 97,690,960 | ||||||||||
Real estate securities | 148,585,733 | 226,155,221 | 148,585,733 | 226,155,221 | ||||||||
Other investment securities | 2,040,532 | 2,040,532 | ||||||||||
Mortgage servicing rights, at fair value | 33,378,978 | 33,378,978 | ||||||||||
Goodwill | 16,512,680 | 16,512,680 | ||||||||||
Intangible assets | 5,668,611 | 5,668,611 | ||||||||||
Total assets | 792,398,605 | 620,081,058 | 792,398,605 | 620,081,058 | ||||||||
Residential Mortgage Loan Investments [Member] | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Total interest income | 40,998,530 | |||||||||||
Total interest expense | 11,451,687 | |||||||||||
Net interest income | 29,546,843 | |||||||||||
Non-interest income | ||||||||||||
Change in unrealized gain or loss | 19,090,520 | |||||||||||
Realized gain | 5,762,254 | |||||||||||
Gain or (loss) on derivative instruments | -5,921,725 | |||||||||||
Advisory fee - related party | 3,835 | |||||||||||
Salaries, commissions and benefits | ||||||||||||
Operating expenses | 251,305 | |||||||||||
Expense | 2,180,113 | |||||||||||
Transaction costs relating to acquisition of GMFS | ||||||||||||
Depreciation and amortization | ||||||||||||
Total other expenses | 2,180,113 | |||||||||||
Net income/(loss) before income taxes | 46,042,639 | |||||||||||
Income tax benefit | ||||||||||||
Net income/(loss) after income taxes | 46,042,639 | |||||||||||
Mortgage loans held for investment | 415,959,838 | 415,959,838 | ||||||||||
Mortgage loans held for investment, at cost | ||||||||||||
Mortgage loans held for sale | ||||||||||||
Real estate securities | 148,585,733 | 148,585,733 | ||||||||||
Other investment securities | 2,040,532 | 2,040,532 | ||||||||||
Mortgage servicing rights, at fair value | ||||||||||||
Goodwill | ||||||||||||
Intangible assets | ||||||||||||
Total assets | 596,553,227 | 596,553,227 | ||||||||||
Residential Mortgage Banking [Member] | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Total interest income | 594,217 | |||||||||||
Total interest expense | 121,194 | |||||||||||
Net interest income | 473,023 | |||||||||||
Non-interest income | 4,730,212 | |||||||||||
Change in unrealized gain or loss | ||||||||||||
Realized gain | ||||||||||||
Gain or (loss) on derivative instruments | ||||||||||||
Advisory fee - related party | 143,674 | |||||||||||
Salaries, commissions and benefits | 3,765,784 | |||||||||||
Operating expenses | 1,089,640 | |||||||||||
Expense | ||||||||||||
Transaction costs relating to acquisition of GMFS | 2,177,617 | |||||||||||
Depreciation and amortization | 154,011 | |||||||||||
Total other expenses | 2,331,628 | |||||||||||
Net income/(loss) before income taxes | -2,127,491 | |||||||||||
Income tax benefit | 850,996 | |||||||||||
Net income/(loss) after income taxes | -1,276,495 | |||||||||||
Mortgage loans held for investment | ||||||||||||
Mortgage loans held for investment, at cost | 1,338,935 | 1,338,935 | ||||||||||
Mortgage loans held for sale | 97,690,960 | 97,690,960 | ||||||||||
Real estate securities | ||||||||||||
Other investment securities | ||||||||||||
Mortgage servicing rights, at fair value | 33,378,978 | 33,378,978 | ||||||||||
Goodwill | 16,512,680 | 16,512,680 | ||||||||||
Intangible assets | 5,668,611 | 5,668,611 | ||||||||||
Total assets | 194,700,643 | 194,700,643 | ||||||||||
Corporate, Non-Segment [Member] | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Total interest income | ||||||||||||
Total interest expense | 5,686,664 | |||||||||||
Net interest income | -5,686,664 | |||||||||||
Non-interest income | ||||||||||||
Change in unrealized gain or loss | ||||||||||||
Realized gain | ||||||||||||
Gain or (loss) on derivative instruments | ||||||||||||
Advisory fee - related party | 2,706,387 | |||||||||||
Salaries, commissions and benefits | ||||||||||||
Operating expenses | 6,521,363 | |||||||||||
Expense | ||||||||||||
Transaction costs relating to acquisition of GMFS | ||||||||||||
Depreciation and amortization | ||||||||||||
Total other expenses | ||||||||||||
Net income/(loss) before income taxes | -14,914,414 | |||||||||||
Income tax benefit | ||||||||||||
Net income/(loss) after income taxes | -14,914,414 | |||||||||||
Mortgage loans held for investment | ||||||||||||
Mortgage loans held for investment, at cost | ||||||||||||
Mortgage loans held for sale | ||||||||||||
Real estate securities | ||||||||||||
Other investment securities | ||||||||||||
Mortgage servicing rights, at fair value | ||||||||||||
Goodwill | ||||||||||||
Intangible assets | ||||||||||||
Total assets | $1,144,735 | $1,144,735 | ||||||||||
[1] | On October 31, 2014 the Company, completed the acquisition of GMFS. The Company has recognized the revenues and earnings related to its investment in GMFS for the period from the acquisition date to December 31, 2014 which are reflected in its consolidated statements of operations. |
Quarterly_Results_Details
Quarterly Results (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||
Quarterly Results [Abstract] | ||||||||||||
Total interest income | $10,267,875 | [1] | $11,000,619 | $10,831,220 | $9,493,033 | $8,773,339 | $8,273,444 | $5,935,511 | $3,436,033 | $41,592,747 | $26,418,327 | $9,398,319 |
Total interest expense | 4,447,530 | [1] | 4,491,678 | 4,416,385 | 3,903,952 | 3,090,565 | 2,333,139 | 1,156,780 | 514,035 | 17,259,545 | 7,094,519 | 1,387,451 |
Net interest income | 5,820,345 | [1] | 6,508,941 | 6,414,835 | 5,589,081 | 5,682,774 | 5,940,305 | 4,778,731 | 2,921,998 | 24,333,202 | 19,323,808 | 8,010,868 |
Non-interest income | 4,730,212 | [1] | ||||||||||
Total other gain/(loss) | -2,944,631 | [1] | -1,805,117 | 22,688,696 | 992,101 | 6,033,137 | 1,172,969 | -10,527,875 | 1,155,515 | 18,931,049 | -2,166,254 | 16,435,633 |
Total expenses | 8,239,984 | [1] | 3,424,026 | 3,231,396 | 4,098,323 | 2,715,456 | 2,965,082 | 1,819,733 | 2,103,818 | 18,993,729 | 9,604,089 | 4,180,904 |
Income tax benefit | 850,996 | [1] | 850,996 | |||||||||
Net income/(loss) after income taxes | 216,938 | [1] | 1,279,798 | 25,872,135 | 2,482,859 | 9,000,455 | 4,148,192 | -7,568,877 | 1,973,695 | 29,851,730 | 7,553,465 | 20,265,597 |
Net income/(loss) attributable to ZAIS Financial Corp. common stockholders | $194,337 | [1] | $1,149,497 | $23,173,931 | $2,224,205 | $8,062,847 | $3,716,061 | ($6,780,401) | $1,659,222 | $26,741,970 | $6,657,728 | $19,433,802 |
Net income per share applicable to common stockholders - basic | $0.02 | [1] | $0.14 | $2.91 | $0.28 | $1.01 | $0.47 | ($0.85) | $0.32 | $3.35 | $0.92 | $7.13 |
Net income per share applicable to common stockholders - diluted | $0.02 | [1] | $0.14 | $2.47 | $0.28 | $0.98 | $0.47 | ($0.85) | $0.32 | $3.08 | $0.92 | $7.13 |
Weighted average number of shares | ||||||||||||
Basic | 7,970,886 | [1] | 7,970,886 | 7,970,886 | 7,970,886 | 7,970,886 | 7,970,886 | 7,970,886 | 5,142,053 | 7,970,886 | 7,273,366 | 2,724,252 |
Diluted | 8,897,800 | [1] | 8,897,800 | 10,677,360 | 8,897,800 | 9,594,150 | 8,897,800 | 8,897,800 | 6,068,967 | 10,677,360 | 8,200,280 | 2,773,845 |
[1] | On October 31, 2014 the Company, completed the acquisition of GMFS. The Company has recognized the revenues and earnings related to its investment in GMFS for the period from the acquisition date to December 31, 2014 which are reflected in its consolidated statements of operations. |
Subsequent_Events_Details
Subsequent Events (Details) (Warehouse Agreement Borrowings [Member], Warehouse Line of Credit Two [Member], USD $) | Dec. 31, 2014 | Feb. 28, 2015 |
Subsequent Event [Line Items] | ||
Maximum amount of facility | $35,000,000 | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Maximum amount of facility | $50,000,000 |