Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 07, 2018 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Cherry Hill Mortgage Investment Corporation | |
Entity Central Index Key | 1,571,776 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 15,818,577 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Assets | ||
RMBS, available-for-sale (including pledged assets of $1,765,246 and $1,728,564, respectively) | $ 1,861,180 | $ 1,840,912 |
Investments in Servicing Related Assets at fair value (including pledged assets of $231,548 and $122,806, respectively) | 231,548 | 122,806 |
Cash and cash equivalents | 23,942 | 27,327 |
Restricted cash | 23,573 | 29,168 |
Derivative assets | 26,016 | 13,830 |
Receivables and other assets | 18,657 | 16,642 |
Total Assets | 2,184,916 | 2,050,685 |
Liabilities | ||
Repurchase agreements | 1,693,309 | 1,666,537 |
Derivative liabilities | 1,117 | 344 |
Notes payable | 79,282 | 39,025 |
Dividends payable | 8,859 | 7,273 |
Due to affiliates | 3,706 | 3,035 |
Accrued expenses and other liabilities | 24,905 | 12,014 |
Total Liabilities | 1,811,178 | 1,728,228 |
Stockholders' Equity | ||
Common stock, $0.01 par value, 500,000,000 shares authorized and 15,818,577 shares issued and outstanding as of June 30, 2018 and 500,000,000 shares authorized and 12,721,464 shares issued and outstanding as of December 31, 2017 | 158 | 127 |
Additional paid-in capital | 283,230 | 229,642 |
Retained earnings | 67,169 | 35,238 |
Accumulated other comprehensive income (loss) | (41,966) | (2,942) |
Total Cherry Hill Mortgage Investment Corporation Stockholders' Equity | 370,489 | 319,982 |
Non-controlling interests in Operating Partnership | 3,249 | 2,475 |
Total Stockholders' Equity | 373,738 | 322,457 |
Total Liabilities and Stockholders' Equity | 2,184,916 | 2,050,685 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity | ||
Series A Preferred stock, $0.01 par value, 100,000,000 shares authorized and 2,568,212 shares issued and outstanding as of June 30, 2018 and 100,000,000 shares authorized and 2,400,000 shares issued and outstanding as of December 31, 2017, liquidation preference of $64,205 as of June 30, 2018 and liquidation preference of $60,000 as of December 31, 2017 | $ 61,898 | $ 57,917 |
Consolidated Balance Sheets (U3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Assets | ||
RMBS, pledged assets available-for-sale | $ 1,765,246 | $ 1,728,564 |
Investments in Servicing Related pledged assets at fair value | $ 231,548 | $ 122,806 |
Stockholders' Equity | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 15,818,577 | 12,721,464 |
Common stock, shares outstanding (in shares) | 15,818,577 | 12,721,464 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred stock, shares issued (in shares) | 2,568,212 | 2,400,000 |
Preferred stock, shares outstanding (in shares) | 2,568,212 | 2,400,000 |
Preferred stock, liquidation preference | $ 64,205 | $ 60,000 |
Consolidated Statements of Inco
Consolidated Statements of Income (Loss) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |||
Income | ||||||
Interest income | $ 12,019 | $ 10,002 | $ 25,434 | $ 16,080 | ||
Interest expense | 7,324 | 4,292 | 14,867 | 6,723 | ||
Net interest income | 4,695 | 5,710 | 10,567 | 9,357 | ||
Servicing fee income | 11,535 | 5,493 | 20,185 | 10,067 | ||
Servicing costs | 2,394 | 991 | 4,106 | 2,218 | ||
Net servicing income | 9,141 | 4,502 | 16,079 | 7,849 | ||
Other income (loss) | ||||||
Realized loss on RMBS, net | (121) | (77) | (5,002) | (333) | ||
Realized gain on investments in Excess MSRs, net | 0 | 0 | 0 | 6,678 | ||
Realized loss on derivatives, net | (2,033) | (1,797) | (2,020) | (2,814) | ||
Unrealized gain (loss) on derivatives, net | 6,009 | (4,633) | 25,635 | (3,551) | ||
Unrealized gain (loss) on investments in MSRs | (365) | (4,507) | 12,133 | 7,805 | ||
Total Income | 17,326 | (802) | 57,392 | 24,991 | ||
Expenses | ||||||
General and administrative expense | 937 | 1,045 | 1,814 | 2,020 | ||
Management fee to affiliate | 1,383 | 1,162 | 2,698 | 2,054 | ||
Total Expenses | 2,320 | 2,207 | 4,512 | 4,074 | ||
Income (Loss) Before Income Taxes | 15,006 | (3,009) | 52,880 | 20,917 | ||
Provision for (Benefit from) corporate business taxes | 1,161 | (1,344) | 3,796 | [1] | (5) | [1] |
Net Income (Loss) | 13,845 | (1,665) | 49,084 | 20,922 | ||
Net (income) loss allocated to noncontrolling interests in Operating Partnership | (173) | 116 | (629) | (293) | ||
Dividends on preferred stock | 1,317 | 0 | 2,530 | 0 | ||
Net Income (Loss) Applicable to Common Stockholders | $ 12,355 | $ (1,549) | $ 45,925 | $ 20,629 | ||
Net Income (Loss) Per Share of Common Stock | ||||||
Basic (in dollars per share) | $ 0.91 | $ (0.12) | $ 3.49 | $ 2.03 | ||
Diluted (in dollars per share) | $ 0.91 | $ (0.12) | $ 3.49 | $ 2.03 | ||
Weighted Average Number of Shares of Common Stock Outstanding | ||||||
Basic (in shares) | 13,616,461 | 12,695,090 | 13,164,863 | 10,164,564 | ||
Diluted (in shares) | 13,624,676 | 12,701,715 | 13,173,070 | 10,171,031 | ||
[1] | The provision for income taxes is recorded at the TRS level. |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) [Abstract] | ||||
Net income (loss) | $ 13,845 | $ (1,665) | $ 49,084 | $ 20,922 |
Other comprehensive income (loss): | ||||
Net unrealized gain (loss) on RMBS | (8,102) | 5,810 | (44,026) | 7,226 |
Reclassification of net realized gain on RMBS included in earnings | 121 | 77 | 5,002 | 333 |
Other comprehensive income (loss) | (7,981) | 5,887 | (39,024) | 7,559 |
Comprehensive income | 5,864 | 4,222 | 10,060 | 28,481 |
Comprehensive income (loss) attributable to noncontrolling interests in Operating Partnership | 75 | (40) | 129 | 399 |
Dividends on preferred stock | 1,317 | 0 | 2,530 | 0 |
Comprehensive income attributable to common stockholders | $ 4,472 | $ 4,262 | $ 7,401 | $ 28,082 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands | Common Stock [Member] | Preferred Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Retained Earnings (Deficit) [Member] | Non-Controlling Interest in Operating Partnership [Member] | Total |
Beginning balance at Dec. 31, 2016 | $ 75 | $ 0 | $ 148,457 | $ (6,393) | $ 12,093 | $ 1,777 | $ 156,009 |
Beginning balance (in shares) at Dec. 31, 2016 | 7,525,348 | 0 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock | $ 52 | $ 0 | 80,888 | 0 | 0 | 0 | 80,940 |
Issuance of common stock (in shares) | 5,183,199 | 0 | |||||
Net Income before dividends on preferred stock | $ 0 | $ 0 | 0 | 0 | 20,629 | 293 | 20,922 |
Other Comprehensive Income (Loss) | 0 | 0 | 0 | 7,559 | 0 | 0 | 7,559 |
LTIP-OP Unit awards | 0 | 0 | 0 | 0 | 0 | 281 | 281 |
Distribution paid on LTIP-OP Units | 0 | 0 | 0 | 0 | 0 | (169) | (169) |
Common dividends declared | 0 | 0 | 0 | 0 | (9,915) | 0 | (9,915) |
Ending balance at Jun. 30, 2017 | $ 127 | $ 0 | 229,345 | 1,166 | 22,807 | 2,182 | 255,627 |
Ending balance (in shares) at Jun. 30, 2017 | 12,708,547 | 0 | |||||
Beginning balance at Dec. 31, 2017 | $ 127 | $ 57,917 | 229,642 | (2,942) | 35,238 | 2,475 | $ 322,457 |
Beginning balance (in shares) at Dec. 31, 2017 | 12,721,464 | 2,400,000 | 12,721,464 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock | $ 31 | $ 0 | 53,588 | 0 | 0 | 0 | $ 53,619 |
Issuance of common stock (in shares) | 3,097,113 | 0 | |||||
Issuance of preferred stock | $ 0 | $ 3,981 | 0 | 0 | 0 | 0 | 3,981 |
Issuance of preferred stock (in shares) | 0 | 168,212 | |||||
Net Income before dividends on preferred stock | $ 0 | $ 0 | 0 | 0 | 48,455 | 629 | 49,084 |
Other Comprehensive Income (Loss) | 0 | 0 | 0 | (39,024) | 0 | 0 | (39,024) |
LTIP-OP Unit awards | 0 | 0 | 0 | 0 | 0 | 300 | 300 |
Distribution paid on LTIP-OP Units | 0 | 0 | 0 | 0 | 0 | (155) | (155) |
Common dividends declared | 0 | 0 | 0 | 0 | (13,994) | 0 | (13,994) |
Preferred dividends declared | 0 | 0 | 0 | 0 | (2,530) | 0 | (2,530) |
Ending balance at Jun. 30, 2018 | $ 158 | $ 61,898 | $ 283,230 | $ (41,966) | $ 67,169 | $ 3,249 | $ 373,738 |
Ending balance (in shares) at Jun. 30, 2018 | 15,818,577 | 2,568,212 | 15,818,577 |
Consolidated Statements of Cha7
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) [Abstract] | ||
Common dividends declared (in dollars per share) | $ 0.98 | $ 0.98 |
Preferred dividends declared (in dollars per share) | $ 1.0250 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash Flows From Operating Activities | ||
Net income (loss) | $ 49,084 | $ 20,922 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Realized loss on RMBS, net | 5,002 | 333 |
Realized gain on investments in Excess MSRs, net | 0 | (6,678) |
Amortization of premiums on investment securities | 7,819 | 3,268 |
Change in fair value of investments in Servicing Related Assets | (12,133) | (7,805) |
Unrealized (gain) loss on derivatives, net | (25,635) | 3,551 |
Realized loss on derivatives, net | 2,020 | 2,814 |
LTIP-OP Unit awards | 300 | 281 |
Changes in: | ||
Receivables and other assets | (2,015) | (368) |
Due to affiliates | 671 | 639 |
Payables for unsettled trades | 0 | 8,670 |
Accrued expenses and other liabilities | 14,477 | 2,812 |
Net cash provided by operating activities | 39,590 | 28,439 |
Cash Flows From Investing Activities | ||
Purchase of RMBS | (342,612) | (749,246) |
Principal paydown of RMBS | 84,238 | 39,064 |
Proceeds from sale of RMBS | 186,262 | 7,610 |
Proceeds from sale of Excess MSRs | 0 | 35,905 |
Acquisition of MSRs | (96,609) | (34,779) |
Purchase of derivatives | (2,783) | (1,779) |
Sale of derivatives | 32 | 0 |
Net cash used in investing activities | (171,472) | (703,225) |
Cash Flows From Financing Activities | ||
Changes in restricted cash | 5,595 | 3,187 |
Borrowings under repurchase agreements | 3,603,964 | 1,697,683 |
Repayments of repurchase agreements | (3,577,192) | (1,094,858) |
Proceeds from derivative financing | 14,952 | 0 |
Proceeds from bank loans | 41,195 | 22,000 |
Principal paydown of bank loans | (938) | (9,386) |
Dividends paid | (16,524) | (9,915) |
LTIP-OP Units distributions paid | (155) | (169) |
Issuance of common stock, net of offering costs | 53,619 | 80,940 |
Issuance of preferred stock, net of offering costs | 3,981 | 0 |
Net cash provided by financing activities | 128,497 | 689,482 |
Net Increase (Decrease) in Cash and Cash Equivalents | (3,385) | 14,696 |
Cash and Cash Equivalents, Beginning of Period | 27,327 | 15,824 |
Cash and Cash Equivalents, End of Period | 23,942 | 30,520 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid during the period for interest expense | 15,290 | 3,550 |
Dividends declared but not paid | $ 8,859 | $ 6,228 |
Organization and Operations
Organization and Operations | 6 Months Ended |
Jun. 30, 2018 | |
Organization and Operations [Abstract] | |
Organization and Operations | Note 1 — Organization and Operations Cherry Hill Mortgage Investment Corporation (together with its consolidated subsidiaries, the “Company”) was organized in the state of Maryland on October 31, 2012 to invest in residential mortgage assets in the United States. Under the Company’s charter, the Company is authorized to issue up to 500,000,000 shares of common stock and 100,000,000 shares of preferred stock, each with a par value of $0.01 per share. The accompanying interim consolidated financial statements include the accounts of the Company’s subsidiaries, Cherry Hill Operating Partnership, LP (the “Operating Partnership”), Cherry Hill QRS I, LLC, Cherry Hill QRS II, LLC, Cherry Hill QRS III, LLC (“QRS III”), Cherry Hill QRS IV, LLC (“QRS IV”), Cherry Hill QRS V, LLC ("QRS V"), CHMI Solutions, Inc. (“CHMI Solutions”) and Aurora Financial Group, Inc. (“Aurora”). On October 9, 2013, the Company completed an initial public offering (the “IPO”) and a concurrent private placement of its common stock. The Company did not conduct any activity prior to the IPO and the concurrent private placement. Substantially all of the net proceeds from the IPO and the concurrent private placement were used to invest in excess mortgage servicing rights on residential mortgage loans (“Excess MSRs”) and residential mortgage-backed securities (“RMBS” or “securities”). RMBS on which the payment of principal and interest is guaranteed by a U.S. government agency or a U.S. government sponsored enterprise are referred to as “Agency RMBS.” On March 29, 2017, the Company issued and sold 5,175,000 shares of its common stock, par value $0.01 per share, raising approximately $81.1 million after underwriting discounts and commissions but before expenses of approximately $229,000. All of the net proceeds were invested in RMBS. On August 17, 2017, the Company issued and sold 2,400,000 shares of its 8.20% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), raising approximately $58.1 million after underwriting discounts and commissions but before expenses of approximately $193,000. All of the net proceeds from the Series A Preferred Stock offering were also invested in RMBS. The Company anticipates that a significant portion of the net proceeds received from paydowns of these RMBS will be deployed into the acquisition of mortgage servicing rights (“MSRs”). The Company may also sell certain of these RMBS and deploy the net proceeds from such sales to the extent necessary to fund the purchase price of MSRs. On June 4, 2018, the Company issued and sold 2,750,000 shares of its common stock, par value $0.01 per share. The underwriters subsequently exercised their option to purchase an additional 338,857 shares for total proceeds of approximately $53.8 million after underwriting discounts and commissions but before expenses of approximately $265,000. All of the net proceeds were invested in RMBS. The Company is party to a management agreement (the “Management Agreement”) with Cherry Hill Mortgage Management, LLC (the “Manager”), a Delaware limited liability company established by Mr. Stanley Middleman. The Manager is a party to a Services Agreement with Freedom Mortgage Corporation (“Freedom Mortgage”), which is owned and controlled by Mr. Middleman. The Manager is owned by a “blind trust” for the benefit of Mr. Middleman. For a further discussion of the Management Agreement, see Note 7. The Company has elected to be taxed as a real estate investment trust (“REIT”), as defined under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its short taxable year ended December 31, 2013. As long as the Company continues to comply with a number of requirements under federal tax law and maintains its qualification as a REIT, the Company generally will not be subject to U.S. federal income taxes to the extent that the Company distributes its taxable income to its stockholders on an annual basis and does not engage in prohibited transactions. However, certain activities that the Company may perform may cause it to earn income that will not be qualifying income for REIT purposes. |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Basis of Presentation and Significant Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | Note 2 — Basis of Presentation and Significant Accounting Policies Basis of Accounting The accompanying interim consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The interim consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company consolidates those entities in which it has an investment of 50% or more and has control over significant operating, financial and investing decisions of the entity. The interim consolidated financial statements reflect all necessary and recurring adjustments for fair presentation of the results for the interim periods presented herein. Emerging Growth Company Status On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. Because the Company qualifies as an “emerging growth company,” it may, under Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period until the first to occur of the date that it (i) is no longer an “emerging growth company” or (ii) affirmatively and irrevocably opts out of this extended transition period. As a result, the consolidated interim financial statements may not be comparable to those of other public companies that comply with such new or revised accounting standards. Until the date that the Company is no longer an “emerging growth company” (expected to occur as of December 31, 2018) or affirmatively and irrevocably opts out of the extended transition period, upon issuance of a new or revised accounting standard that applies to the consolidated interim financial statements and that has a different effective date for public and private companies, the Company will disclose the date on which adoption is required for non-emerging growth public companies and the date on which it will adopt the new or revised accounting standard. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of significant estimates and assumptions. These include estimates of: the fair value of Excess MSRs and MSRs (collectively, “Servicing Related Assets”); RMBS and derivatives; credit losses, including the period of time during which the Company anticipates an increase in the fair values of RMBS sufficient to recover unrealized losses on those RMBS; and other estimates that affect the reported amounts of certain assets, revenues, liabilities and expenses as of the date of, and for the periods covered by, the consolidated interim financial statements. It is likely that changes in these estimates will occur in the near term. The Company’s estimates are inherently subjective in nature. Actual results could differ from the Company’s estimates, and the differences may be material. Risks and Uncertainties In the normal course of business, the Company encounters primarily two significant types of economic risk: credit and market. Credit risk is the risk of default on the Company’s investments in RMBS, Servicing Related Assets and derivatives that results from a borrower’s or derivative counterparty’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of investments in RMBS, Servicing Related Assets and derivatives due to changes in interest rates, spreads or other market factors, including prepayment speeds on the Company’s RMBS and Servicing Related Assets. The Company is subject to the risks involved with real estate and real estate-related debt instruments. These include, among others, the risks normally associated with changes in the general economic climate, changes in the mortgage market, changes in tax laws, interest rate levels, and the availability of financing. The Company also is subject to certain risks relating to its status as a REIT for U.S. federal income tax purposes. If the Company were to fail to qualify as a REIT in any taxable year, the Company would be subject to U.S. federal income tax on its REIT income, which could be material. Unless entitled to relief under certain statutory provisions, the Company would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. Investments in RMBS Classification Fair value is determined under the guidance of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures Investment securities transactions are recorded on the trade date. At disposition, the net realized gain or loss is determined on the basis of the cost of the specific investment and is included in earnings. All RMBS purchased and sold in the three month and six month periods ended June 30, 2018 were settled prior to period-end. All RMBS purchased and sold in the year ended December 31, 2017 were settled prior to year-end. Revenue Recognition – Impairment – Investments in Excess MSRs As a result of the Company’s sale of its remaining Excess MSRs in February 2017, there were no Excess MSRs at June 30, 2018 or June 30, 2017. Classification Revenue Recognition In connection with the sale of its Excess MSRs, the Company elected a settlement date accounting policy to account for the gain on sale from that transaction. For a further discussion of the Company’s sale of its Excess MSRs, see Note 7. Investments in MSRs Classification Revenue Recognition the related loans underlying Servicing fee income received and servicing expenses incurred are reported on the consolidated statements of income (loss). The difference between the fair value of MSRs and their amortized cost basis is recorded on the consolidated statements of income (loss) as “Unrealized gain (loss) on investments in MSRs.” Fair value is generally determined by discounting the expected future cash flows using discount rates that incorporate the market risks and liquidity premium specific to the MSRs and, therefore, may differ from their effective yields. As a result of the Company’s investments in MSRs, it is obligated from time to time to repurchase an underlying loan from the applicable agency for which it is being serviced due to an alleged breach of a representation or warranty. Loans acquired in this manner are recorded at the purchase price less any principal recoveries and are then offered for sale in the scratch and dent market. Derivatives and Hedging Activities Derivative transactions include swaps, swaptions, Treasury futures and “to-be-announced” securities (“TBAs”). Swaps and swaptions are entered into by the Company solely for interest rate risk management purposes. TBAs and Treasury futures are used for duration risk and basis risk management purposes. The decision as to whether or not a given transaction/position (or portion thereof) is economically hedged is made on a case-by-case basis, based on the risks involved and other factors as determined by senior management, including restrictions imposed by the Code on REITs. In determining whether to economically hedge a risk, the Company may consider whether other assets, liabilities, firm commitments and anticipated transactions already offset or reduce the risk. All transactions undertaken as economic hedges are entered into with a view towards minimizing the potential for economic losses that could be incurred by the Company. Generally, derivatives entered into are not intended to qualify as hedges under GAAP, unless specifically stated otherwise. The Company’s bi-lateral derivative financial instruments contain credit risk to the extent that its bank counterparties may be unable to meet the terms of the agreements. The Company reduces such risk by limiting its exposure to any one counterparty. In addition, the potential risk of loss with any one party resulting from this type of credit risk is monitored. The Company’s interest rate swaps are required to be cleared on an exchange, which further mitigates, but does not eliminate, credit risk. Management does not expect any material losses as a result of default by other parties to its derivative financial instruments. Classification Revenue Recognition Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid short-term investments with maturities of 90 days or less when purchased to be cash equivalents. Substantially all amounts on deposit with major financial institutions exceed insured limits. Restricted cash represents the Company’s cash held by counterparties (i) as collateral against the Company’s derivatives ($1.6 million and $549,000 at June 30, 2018 and December 31, 2017, respectively) and (ii) as collateral for borrowings under its repurchase agreements (approximately $22.0 million and $28.6 million at June 30, 2018 and December 31, 2017, respectively). The Company’s centrally cleared interest rate swaps require that the Company posts an “initial margin” amount determined by the clearing exchange, which is generally intended to be set at a level sufficient to protect the exchange from the interest rate swap’s maximum estimated single-day price movement. The Company also exchanges “variation margin” based upon daily changes in fair value, as measured by the exchange. As a result of amendments to rules governing certain central clearing activities, the exchange of variation margin is a settlement of the interest rate swap, as opposed to pledged collateral. Accordingly, beginning in the first quarter of 2018 and in subsequent periods, the Company will account for the receipt or payment of variation margin as a direct reduction to the carrying value of the interest rate swap asset or liability. At June 30, 2018, $15.8 million of variation margin was reported as a reduction to interest rate swaps, at fair value. As of December 31, 2017, variation margin pledged or received is netted on a counterparty basis and classified within restricted cash, due from counterparties, or due to counterparties on the Company’s consolidated balance sheets. Due to Affiliates The sum under “Due to affiliates” on the consolidated balance sheets represents amounts due to the Manager pursuant to the Management Agreement. For further information on the Management Agreement, see Note 7. Income Taxes The Company elected to be taxed as a REIT under Code Sections 856 through 860 beginning with its short taxable year ended December 31, 2013. As a REIT, the Company generally will not be subject to U.S. federal income tax to the extent that it distributes its taxable income to its stockholders and does not engage in prohibited transactions. The Company’s taxable REIT subsidiary (“TRS”), CHMI Solutions, is subject to U.S. federal income taxes on its taxable income. To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income to its stockholders and meet certain other requirements such as assets it may hold, income it may generate and its stockholder composition. The Company accounts for income taxes in accordance with ASC 740, Income Taxes Realized Gain (Loss) on Investments, Net The following table presents gains and losses on sales of the specified categories of investments for the periods indicated (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Realized gain (loss) on RMBS, net Gain on RMBS $ 104 $ - $ 104 $ - Loss on RMBS (225 ) (77 ) (5,106 ) (333 ) Net realized loss on RMBS (121 ) (77 ) (5,002 ) (333 ) Realized loss on derivatives, net (2,033 ) (1,797 ) (2,020 ) (2,814 ) Unrealized gain (loss) on derivatives, net 6,009 (4,633 ) 25,635 (3,551 ) Realized gain on Excess MSRs, net - - - 6,678 Unrealized gain (loss) on MSRs, net (365 ) (4,507 ) 12,133 7,805 Total $ 3,490 $ (11,014 ) $ 30,746 $ 7,785 Repurchase Agreements and Interest Expense The Company finances its investments in RMBS with short-term borrowings under master repurchase agreements. Borrowings under the repurchase agreements are generally short-term debt due within one year. These borrowings generally bear interest rates of a specified margin over one-month LIBOR. The repurchase agreements represent uncommitted financing. Borrowings under these agreements are treated as collateralized financing transactions and are carried at their contractual amounts, as specified in the respective agreements. Interest is recorded at the contractual amount on an accrual basis. Dividends Payable Because the Company is organized as a REIT under the Code, it is required by law to distribute annually at least 90% of its REIT taxable income, which it does in the form of quarterly dividend payments. The Company accrues the dividend payable on the accounting date, which causes an offsetting reduction in retained earnings. Comprehensive Income Comprehensive income is defined as the change in equity of a business enterprise during a period resulting from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. For the Company’s purposes, comprehensive income represents net income, as presented in the consolidated statements of income (loss), adjusted for unrealized gains or losses on RMBS, which are designated as available for sale. Recent Accounting Pronouncements Leases Revenue Recognition Revenue from Contracts with Customers Revenue Recognition Transfers and Servicing Credit Losses Financial Instruments—Credit Losses Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments Income Taxes Income Taxes Restricted Cash Restricted Cash |
Segment Reporting
Segment Reporting | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting | Note 3 — Segment Reporting The Company conducts its business through the following segments: (i) investments in RMBS; (ii) investments in Servicing Related Assets; and (iii) “All Other,” which consists primarily of general and administrative expenses, including fees paid to the Company’s directors and management fees and reimbursements paid to the Manager pursuant to the Management Agreement (See Note 7). For segment reporting purposes, the Company does not allocate interest income on short-term investments or general and administrative expenses. Summary financial data with respect to the Company’s segments is given below, together with a reconciliation to the same data for the Company as a whole (dollars in thousands): Servicing Related Assets RMBS All Other Total Income Statement Three Months Ended June 30, 2018 Interest income $ - $ 12,019 $ - $ 12,019 Interest expense 424 6,900 - 7,324 Net interest income (expense) (424 ) 5,119 - 4,695 Servicing fee income 11,535 - - 11,535 Servicing costs 2,394 - - 2,394 Net servicing income 9,141 - - 9,141 Other income (expense) (365 ) 3,855 - 3,490 Other operating expenses - - 2,320 2,320 (Benefit from) provision for corporate business taxes 1,161 - - 1,161 Net income (loss) $ 7,191 $ 8,974 $ (2,320 ) $ 13,845 Three Months Ended June 30, 2017 Interest income $ - $ 10,002 $ - $ 10,002 Interest expense 123 4,169 - 4,292 Net interest income (expense) (123 ) 5,833 - 5,710 Servicing fee income 5,493 - - 5,493 Servicing costs 991 - - 991 Net servicing income 4,502 - - 4,502 Other income (expense) (4,507 ) (6,507 ) - (11,014 ) Other operating expenses - - 2,207 2,207 (Benefit from) provision for corporate business taxes (1,344 ) - - (1,344 ) Net income (loss) $ 1,216 $ (674 ) $ (2,207 ) $ (1,665 ) Six Months Ended June 30, 2018 Interest income $ - $ 25,434 $ - $ 25,434 Interest expense 637 14,230 - 14,867 Net interest income (expense) (637 ) 11,204 - 10,567 Servicing fee income 20,185 - - 20,185 Servicing costs 4,106 - - 4,106 Net servicing income 16,079 - - 16,079 Other income (expense) 12,133 18,613 - 30,746 Other operating expenses - - 4,512 4,512 (Benefit from) provision for corporate business taxes 3,796 - - 3,796 Net income (loss) $ 23,779 $ 29,817 $ (4,512 ) $ 49,084 Six Months Ended June 30, 2017 Interest income $ 523 $ 15,557 $ - $ 16,080 Interest expense 237 6,486 - 6,723 Net interest income 286 9,071 - 9,357 Servicing fee income 10,067 - - 10,067 Servicing costs 2,218 - - 2,218 Net servicing income 7,849 - - 7,849 Other income (expense) 14,483 (6,698 ) - 7,785 Other operating expenses - - 4,074 4,074 (Benefit from) provision for corporate business taxes (5 ) - - (5 ) Net income (loss) $ 22,623 $ 2,373 $ (4,074 ) $ 20,922 Balance Sheet June 30, 2018 Investments $ 231,548 $ 1,861,180 $ - $ 2,092,728 Other assets 12,609 55,481 24,098 92,188 Total assets 244,157 1,916,661 24,098 2,184,916 Debt 79,282 1,693,309 - 1,772,591 Other liabilities 19,390 5,235 13,962 38,587 Total liabilities 98,672 1,698,544 13,962 1,811,178 Book value $ 145,485 $ 218,117 $ 10,136 $ 373,738 December 31, 2017 Investments $ 122,806 $ 1,840,912 $ - $ 1,963,718 Other assets 8,281 48,631 30,055 86,967 Total assets 131,087 1,889,543 30,055 2,050,685 Debt 39,025 1,666,537 - 1,705,562 Other liabilities 6,575 4,385 11,706 22,666 Total liabilities 45,600 1,670,922 11,706 1,728,228 Book value $ 85,487 $ 218,621 $ 18,349 $ 322,457 |
Investments in RMBS
Investments in RMBS | 6 Months Ended |
Jun. 30, 2018 | |
Investments in RMBS [Abstract] | |
Investments in RMBS | Note 4 — Investments in RMBS All of the Company’s RMBS are classified as available for sale and are, therefore, reported at fair value with changes in fair value recorded in other comprehensive income (loss) except for securities that are OTTI (dollars in thousands): Summary of RMBS Assets As of June 30, 2018 Original Gross Unrealized Number Weighted Average Asset Type Face Value Book Value Gains Losses Carrying Value (A) of Securities Rating Coupon Yield (C) Maturity (Years) (D) RMBS Fannie Mae $ 1,409,569 $ 1,298,953 $ 196 $ (34,641 ) $ 1,264,508 160 (B) 3.84 % 3.67 % 25 Freddie Mac 566,251 506,755 141 (14,197 ) 492,699 65 (B) 3.74 % 3.59 % 28 CMOs 108,075 96,739 7,376 (142 ) 103,973 22 (B) 5.85 % 5.33 % 12 Total/Weighted Average $ 2,083,895 $ 1,902,447 $ 7,713 $ (48,980 ) $ 1,861,180 247 3.93 % 3.74 % 25 As of December 31, 2017 Original Face Value Gross Unrealized Number of Securities Weighted Average Asset Type Book Value Gains Losses Carrying Value (A) Rating Coupon Yield (C) Maturity (Years) (D) RMBS Fannie Mae $ 1,306,823 $ 1,241,027 $ 1,427 $ (8,755 ) $ 1,233,699 154 (B) 3.80 % 3.61 % 26 Freddie Mac 556,204 515,475 864 (2,795 ) 513,544 64 (B) 3.74 % 3.57 % 27 CMOs 98,325 87,353 6,343 (27 ) 93,669 20 (B) 5.26 % 4.88 % 12 Total/Weighted Average $ 1,961,352 $ 1,843,855 $ 8,634 $ (11,577 ) $ 1,840,912 238 3.86 % 3.66 % 25 (A) See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. (B) The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization (“NRSRO”). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. (C) The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. (D) The weighted average maturity is based on the timing of expected principal reduction on the assets. Summary of RMBS Assets by Maturity As of June 30, 2018 Original Face Value Gross Unrealized Number of Securities Weighted Average Years to Maturity Book Value Gains Losses Carrying Value (A) Rating Coupon Yield (C) Maturity (Years) (D) 5-10 Years $ 25,712 $ 19,270 $ 313 $ (545 ) $ 19,038 4 (B) 4.12 % 3.94 % 7 Over 10 Years 2,058,183 1,883,177 7,400 (48,435 ) 1,842,142 243 (B) 3.93 % 3.74 % 25 Total/Weighted Average $ 2,083,895 $ 1,902,447 $ 7,713 $ (48,980 ) $ 1,861,180 247 3.93 % 3.74 % 25 As of December 31, 2017 Original Face Value Gross Unrealized Number of Securities Weighted Average Years to Maturity Book Value Gains Losses Carrying Value (A) Rating Coupon Yield (C) Maturity (Years) (D) 5-10 Years $ 16,069 $ 15,483 $ 324 $ (312 ) $ 15,495 3 (B) 4.33 % 4.06 % 7 Over 10 Years 1,945,283 1,828,372 8,310 (11,265 ) 1,825,417 235 (B) 3.85 % 3.65 % 26 Total/Weighted Average $ 1,961,352 $ 1,843,855 $ 8,634 $ (11,577 ) $ 1,840,912 238 3.86 % 3.66 % 25 (A) See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. (B) The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization (“NRSRO”). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. (C) The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. (D) The weighted average maturity is based on the timing of expected principal reduction on the assets. At June 30, 2018 and December 31, 2017, the Company pledged Agency RMBS with a carrying value of approximately $1,765.2 million and $1,728.6 million, respectively, as collateral for borrowings under repurchase agreements. At June 30, 2018 and December 31, 2017, the Company did not have any securities purchased from and financed with the same counterparty that did not meet the conditions of ASC 860 to be considered linked transactions and, therefore, classified as derivatives. Based on management’s analysis of the Company’s securities, the performance of the underlying loans and changes in market factors, management determined that unrealized losses as of the balance sheet date on the Company’s securities were primarily the result of changes in market factors, rather than issuer-specific credit impairment, and such losses were considered temporary. The Company performed analyses in relation to such securities, using management’s best estimate of their cash flows, which support its belief that the carrying values of such securities were fully recoverable over their expected holding periods. Such market factors include changes in market interest rates and credit spreads and certain macroeconomic events, none of which will directly impact the Company’s ability to collect amounts contractually due. Management continually evaluates the credit status of each of the Company’s securities and the collateral supporting those securities. This evaluation includes a review of the credit of the issuer of the security (if applicable), the credit rating of the security (if applicable), the key terms of the security (including credit support), debt service coverage and loan to value ratios, the performance of the pool of underlying loans and the estimated value of the collateral supporting such loans, including the effect of local, industry and broader economic trends and factors. Significant judgment is required in this analysis. In connection with the above, the Company weighs the fact that substantially all of its investments in RMBS are guaranteed by U.S. government agencies or U.S. government sponsored enterprises. Unrealized losses that are considered OTTI are recognized in earnings. The Company did not record any OTTI during the three month period ended June 30, 2018. The Company recorded approximately $45,000 of OTTI during the six month period ended June 30, 2018. The Company recorded approximately $77,000 of OTTI during the three month and six month periods ended June 30, 2017. The following tables summarize the Company’s securities in an unrealized loss position as of the dates indicated (dollars in thousands): RMBS Unrealized Loss Positions As of June 30, 2018 Original Gross Weighted Average Duration in Loss Position Face Value Book Value Unrealized Losses Carrying Value (A) Number of Securities Rating Coupon Yield (C) Maturity (Years) (D) Less than Twelve Months $ 1,544,820 $ 1,405,351 $ (38,930 ) $ 1,366,421 176 (B) 3.84 % 3.67 % 26 Twelve or More Months 244,480 211,428 (10,050 ) 201,378 35 (B) 3.57 % 3.38 % 24 Total/Weighted Average $ 1,789,300 $ 1,616,779 $ (48,980 ) $ 1,567,799 211 3.80 % 3.63 % 26 As of December 31, 2017 Original Gross Weighted Average Duration in Loss Position Face Value Book Value Unrealized Losses Carrying Value (A) Number of Securities Rating Coupon Yield (C) Maturity (Years) (D) Less than Twelve Months $ 1,026,911 $ 1,005,352 $ (5,378 ) $ 999,974 111 (B) 3.81 % 3.63 % 26 Twelve or More Months 323,858 289,599 (6,199 ) 283,400 45 (B) 3.61 % 3.40 % 25 Total/Weighted Average $ 1,350,769 $ 1,294,951 $ (11,577 ) $ 1,283,374 156 3.76 % 3.58 % 26 (A) See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. (B) The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization (“NRSRO”). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. (C) The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. (D) The weighted average maturity is based on the timing of expected principal reduction on the assets. Except for the security for which the Company has recognized OTTI, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases which may be maturity. |
Investments in Servicing Relate
Investments in Servicing Related Assets | 6 Months Ended |
Jun. 30, 2018 | |
Investments in Servicing Related Assets [Abstract] | |
Investments in Servicing Related Assets | Note 5 — Investments in Servicing Related Assets Excess MSRs In 2013 and 2014, the Company acquired Excess MSRs from Freedom Mortgage and entered into recapture agreements with Freedom Mortgage. For reporting purposes, these Excess MSRs were aggregated into three pools: Excess MSR Pool 1, Excess MSR Pool 2 and Excess MSR Pool 2014. Excess MSR Pool 1 and Excess MSR Pool 2014 were sold to Freedom Mortgage on November 15, 2016, and Excess MSR Pool 2 was sold to Freedom Mortgage on February 1, 2017. Each recapture agreement between the Company and Freedom Mortgage was terminated at the time the related pool was sold. See Note 7. MSRs On May 29, 2015, in conjunction with the acquisition of Aurora, the Company acquired MSRs on conventional mortgage loans with an aggregate unpaid principal balance (“UPB”) of approximately $718.4 million at the time of acquisition. Subsequently, Aurora acquired portfolios of Fannie Mae, Freddie Mac and Ginnie Mae MSRs with an aggregate UPB of approximately $20.8 billion as of the respective acquisition dates. See Note 7 for a description of the Company’s acquisition of MSRs from Freedom Mortgage in connection with the sale by the Company of its Excess MSRs to Freedom Mortgage. In June 2016, Aurora entered into a joint marketing recapture agreement with Freedom Mortgage. Pursuant to this agreement, Freedom Mortgage attempts to refinance certain mortgage loans underlying Aurora’s MSR portfolio as directed by Aurora. See Note 7. The following is a summary of the Company’s Servicing Related Assets as of the dates indicated (dollars in thousands): Servicing Related Assets Summary As of June 30, 2018 Unpaid Principal Balance Cost Basis Carrying Value (A) Weighted Average Coupon Weighted Average Maturity (Years) (B) Changes in Fair Value Recorded in Other Income (Loss) MSRs Conventional $ 15,378,216 $ 178,759 (C) $ 188,644 4.16 % 27.0 $ 9,885 Government 3,727,194 40,656 (C) 42,904 3.36 % 27.3 2,248 Total / Weighted Average $ 19,105,410 $ 219,415 $ 231,548 4.00 % 27.0 $ 12,133 As of December 31, 2017 Unpaid Principal Balance Cost Basis Carrying Value (A) Weighted Average Coupon Weighted Average Maturity (Years) (B) Changes in Fair Value Recorded in Other Income (Loss) MSRs Conventional $ 7,724,397 $ 81,499 (C) $ 82,150 3.89 % 25.2 $ 651 Government 3,986,254 32,148 (C) 40,656 3.36 % 27.8 8,508 Total / Weighted Average $ 11,710,651 $ 113,647 $ 122,806 3.71 % 26.1 $ 9,159 (A) Carrying value represents the fair value of the pools (see Note 9). (B) The weighted average maturity represents the weighted average expected timing of the receipt of cash flows of each investment. (C) MSR cost basis consists of the carrying value of the prior period, adjusted for any purchases, sales and principal paydowns of the underlying mortgage loans. The tables below summarize the geographic distribution for the states representing 5% or greater of the aggregate UPB of the residential mortgage loans underlying the Servicing Related Assets as of the dates indicated: Geographic Concentration of Servicing Related Assets As of June 30, 2018 Percentage of Total Outstanding Unpaid Principal Balance California 15.2 % Texas 5.5 % Florida 5.4 % New York 5.1 % All other 68.8 % Total 100.0 % As of December 31, 2017 Percentage of Total Outstanding Unpaid Principal Balance California 13.7 % New Jersey 7.2 % Florida 5.3 % All other 73.8 % Total 100.0 % Geographic concentrations of investments expose the Company to the risk of economic downturns within the relevant states. Any such downturn in a state where the Company holds significant investments could affect the underlying borrower’s ability to make the mortgage payment and, therefore, could have a meaningful, negative impact on the Company’s Servicing Related Assets. |
Equity and Earnings per Common
Equity and Earnings per Common Share | 6 Months Ended |
Jun. 30, 2018 | |
Equity and Earnings per Common Share [Abstract] | |
Equity and Earnings per Common Share | Note 6 — Equity and Earnings per Common Share Equity Incentive Plan During 2013, the board of directors approved and the Company adopted the Cherry Hill Mortgage Investment Corporation 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan provides for the grant of options to purchase shares of the Company’s common stock, stock awards, stock appreciation rights, performance units, incentive awards and other equity-based awards, including long term incentive plan units (“LTIP-OP Units”) of the Operating Partnership. LTIP-OP Units are a special class of partnership interest in the Operating Partnership. LTIP-OP Units may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. Initially, LTIP-OP Units do not have full parity with the Operating Partnership’s common units of limited partnership interest (“OP Units”) with respect to liquidating distributions; however, LTIP-OP Units receive, whether vested or not, the same per-unit distributions as OP Units and are allocated their pro-rata share of the Operating Partnership’s net income or loss. Under the terms of the LTIP-OP Units, the Operating Partnership will revalue its assets upon the occurrence of certain specified events, and any increase in the Operating Partnership’s valuation from the time of grant of the LTIP-OP Units until such event will be allocated first to the holders of LTIP-OP Units to equalize the capital accounts of such holders with the capital accounts of the holders of OP Units. Upon equalization of the capital accounts of the holders of LTIP-OP Units with the other holders of OP Units, the LTIP-OP Units will achieve full parity with OP Units for all purposes, including with respect to liquidating distributions. If such parity is reached, vested LTIP-OP Units may be converted into an equal number of OP Units at any time and, thereafter, enjoy all the rights of OP Units, including redemption rights. Each LTIP-OP Unit awarded is deemed equivalent to an award of one share of the Company’s common stock under the 2013 Plan and reduces the 2013 Plan’s share authorization for other awards on a one-for-one basis. An LTIP-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. Holders of LTIP-OP Units that have reached parity with OP Units have the right to redeem their LTIP-OP Units, subject to certain restrictions. The redemption is required to be satisfied in cash, or at the Company’s option, the Company may purchase the OP Units for common stock, 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 LTIP-OP Unit. When an LTIP-OP Unit holder redeems an OP Unit (as described above), non-controlling interest in the Operating Partnership is reduced and the Company’s equity is increased. LTIP-OP Units vest ratably over the first three annual anniversaries of the grant date. The fair value of each LTIP-OP Unit was determined based on the closing price of the Company’s common stock on the applicable grant date in all other cases. The following table sets forth the number of shares of the Company’s common stock and the values thereof (based on the closing prices on the respective dates of grant) granted to the Company’s independent directors under the 2013 Plan. Except as otherwise indicated, all shares are fully vested. The following tables present certain information about the 2013 Plan as of the dates indicated: Equity Incentive Plan Information LTIP-OP Units Shares of Common Stock Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans Issued Forfeited Converted Issued Forfeited Issuance Price December 31, 2016 (140,350 ) 916 - (28,503 ) 3,155 1,335,218 Number of securities issued or to be issued upon exercise - - - - - - March 31, 2017 (140,350 ) 916 - (28,503 ) 3,155 1,335,218 Number of securities issued or to be issued upon exercise (38,150 ) - - (8,199 ) - (46,349 ) $ 18.30 June 30, 2017 (178,500 ) 916 - (36,702 ) 3,155 1,288,869 Number of securities issued or to be issued upon exercise - - 12,917 (12,917 ) - - $ 18.44 September 30, 2017 (178,500 ) 916 12,917 (49,619 ) 3,155 1,288,869 Number of securities issued or to be issued upon exercise - - - - - - December 31, 2017 (178,500 ) 916 12,917 (49,619 ) 3,155 1,288,869 Number of securities issued or to be issued upon exercise - - - - - - March 31, 2018 (178,500 ) 916 12,917 (49,619 ) 3,155 1,288,869 Number of securities issued or to be issued upon exercise (45,400 ) - - (8,256 ) - (53,656 ) $ 18.17 June 30, 2018 (223,900 ) 916 12,917 (57,875 ) 3,155 1,235,213 The Company recognized approximately $161,000 and $146,000 in share-based compensation expense in the three month periods ended June 30, 2018 and June 30, 2017, respectively. The Company recognized approximately $299,000 and $281,000 in share-based compensation expense in the six month periods ended June 30, 2018 and June 30, 2017, respectively. There was approximately $1.4 million and $1.3 million of total unrecognized share-based compensation expense as of June 30, 2018 and December 31, 2017, respectively, all of which was related to unvested LTIP-OP Units. This unrecognized share-based compensation expense is expected to be recognized ratably over the remaining vesting period of up to three years. The aggregate expense related to the LTIP-OP Unit grants is presented as “General and administrative expense” in the Company’s consolidated statements of income (loss). Non-Controlling Interests in Operating Partnership Non-controlling interests in the Operating Partnership in the accompanying consolidated financial statements relate to LTIP-OP Units and OP Units issued upon conversion of LTIP-OP Units, in either case, held by parties other than the Company. As of June 30, 2018, the non-controlling interest holders in the Operating Partnership owned 210,067 LTIP-OP Units, or approximately 1.3% of the units of the Operating Partnership. Pursuant to ASC 810, Consolidation Preferred Stock The Company is authorized to issue up to 100,000,000 shares of preferred stock, $0.01 par value per share, of which 96,200,000 shares were undesignated and 3,800,000 shares were designated as Series A Preferred Stock as of June 30, 2018. On August 17, 2017, the Company completed an offering of 2,400,000 shares of Series A Preferred Stock for net proceeds of $58.1 million after underwriting discounts and commissions but before expenses of approximately $193,000. In April 2018, the Company instituted an at-the-market offering (the “ATM Program”) of up to $35,000,000 of its Series A Preferred Stock. Under the ATM Program, the Company may, but is not obligated to, sell shares of Series A Preferred Stock from time to time through one or more selling agents. The ATM Program has no set expiration date and may be renewed or terminated by the Company at any time. During the three month period ended June 30, 2018, the Company issued and sold 168,212 shares of Series A Preferred Stock under the ATM Program. The shares were sold at a weighted average price of $25.28 per share for gross proceeds of approximately $4.3 million before fees of approximately $67,000 and expenses of approximately $200,000. The Series A Preferred Stock ranks senior to the Company’s common stock with respect to rights to the payment of dividends and the distribution of assets upon the Company’s liquidation, dissolution or winding up. The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless repurchased or redeemed by the Company or converted by the holders of the Series A Preferred Stock into the Company’s common stock in connection with certain changes of control. The Series A Preferred Stock is not redeemable by the Company prior to August 17, 2022, except under circumstances intended to preserve the Company’s qualification as a REIT for U.S. federal income tax purposes and except upon the occurrence of certain changes of control. On and after August 17, 2022, the Company may, at its option, redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price equal to $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date fixed for redemption. If the Company does not exercise its rights to redeem the Series A Preferred Stock upon certain changes in control, the holders of the Series A Preferred Stock have the right to convert some or all of their shares of Series A Preferred Stock into a number of shares of the Company’s common stock based on a defined formula, subject to a share cap, or alternative consideration. The share cap on each share of Series A Preferred Stock is 2.62881 shares of common stock, subject to certain adjustments. The Company pays cumulative cash dividends at the rate of 8.20% per annum of the $25.00 per share liquidation preference (equivalent to $2.05 per annum per share) on the Series A Preferred Stock, in arrears, on or about the 15 th Earnings per Common Share The Company is required to present both basic and diluted earnings per common share (“EPS”). Basic EPS is calculated by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted EPS is calculated by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding plus the additional dilutive effect of common stock equivalents during each period. In accordance with ASC 260, Earnings Per Share The following table presents basic earnings per share of common stock for the periods indicated (dollars in thousands, except per share data): Earnings per Common Share Information Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Numerator: Net income (loss) allocable to common stockholders $ 13,845 $ (1,665 ) $ 49,084 $ 20,922 Net (income) loss allocated to noncontrolling interests in Operating Partnership (173 ) 116 (629 ) (293 ) Dividends on preferred stock 1,317 - 2,530 - Net income (loss) attributable to common stockholders $ 12,355 $ (1,549 ) $ 45,925 $ 20,629 Denominator: Weighted average common shares outstanding 13,616,461 12,695,090 13,164,863 10,164,564 Weighted average diluted shares outstanding 13,624,676 12,701,715 13,173,070 10,171,031 Basic and Diluted: Basic $ 0.91 $ (0.12 ) $ 3.49 $ 2.03 Diluted $ 0.91 $ (0.12 ) $ 3.49 $ 2.03 There were no participating securities or equity instruments outstanding that were anti-dilutive for purposes of calculating EPS for the periods presented. |
Transactions with Affiliates an
Transactions with Affiliates and Affiliated Entities | 6 Months Ended |
Jun. 30, 2018 | |
Transactions with Affiliates and Affiliated Entities [Abstract] | |
Transactions with Affiliates and Affiliated Entities | Note 7 — Transactions with Affiliates and Affiliated Entities Manager The Company has entered into the Management Agreement with the Manager, pursuant to which the Manager provides for the day-to-day management of the Company’s operations. The Management Agreement requires the Manager to manage the Company’s business affairs in conformity with the policies that are approved and monitored by the Company’s board of directors. The term of the Management Agreement will expire on October 22, 2020 and will be automatically renewed for a one-year term on such date and on each anniversary of such date thereafter unless terminated or not renewed as described below. Either we or our Manager may elect not to renew the Management Agreement upon expiration of its initial term or any renewal term by providing written notice of non-renewal at least 180 days, but not more than 270 days, before expiration. In the event we elect not to renew the term, we will be required to pay our Manager a termination fee equal to three times the average annual management fee amount earned by the Manager during the two four-quarter periods ending as of the end of the most recently completed fiscal quarter prior to the non-renewal. We may terminate the Management Agreement at any time for cause effective upon 30 days prior written notice of termination from us to our Manager, in which case no termination fee would be due. Our board of directors will review our Manager’s performance prior to the automatic renewal thereof and, as a result of such review, upon the affirmative vote of at least two-thirds of the members of our board of directors or of the holders of a majority of our outstanding common stock, we may terminate the Management Agreement based upon unsatisfactory performance by our Manager that is materially detrimental to us or a determination by our independent directors that the management fees payable to our Manager are not fair, subject to the right of our Manager to prevent such a termination by agreeing to a reduction of the management fees payable to our Manager. Upon any termination of the Management Agreement based on unsatisfactory performance or unfair management fees, we are required to pay our Manager the termination fee described above. Our Manager may terminate the Management Agreement, without payment of the termination fee, in the event we become regulated as an investment company under the Investment Company Act of 1940, as amended. Our Manager may also terminate the Management Agreement upon 60 days’ written notice if we default in the performance of any material term of the Management Agreement and the default continues for a period of 30 days after written notice to us, whereupon we would be required to pay our Manager the termination fee described above. Pursuant to the Management Agreement, the Manager, under the supervision of the Company’s board of directors, formulates investment strategies, arranges for the acquisition of assets, arranges for financing, monitors the performance of the Company’s assets and provides certain advisory, administrative and managerial services in connection with the operations of the Company. For performing these services, the Company pays the Manager the management fee which is payable in cash quarterly in arrears, in an amount equal to 1.5% per annum of the Company’s stockholders’ equity (as defined in the Management Agreement). The Manager is a party to a services agreement (the “Services Agreement”) with Freedom Mortgage, pursuant to which Freedom Mortgage provides to the Manager the personnel, services and resources needed by the Manager to carry out its obligations and responsibilities under the Management Agreement. The Company is a named third-party beneficiary to the Services Agreement and, as a result, has, as a non-exclusive remedy, a direct right of action against Freedom Mortgage in the event of any breach by the Manager of any of its duties, obligations or agreements under the Management Agreement that arise out of or result from any breach by Freedom Mortgage of its obligations under the Services Agreement. The Services Agreement will terminate upon the termination of the Management Agreement. Pursuant to the Services Agreement, the Manager will make certain payments to Freedom Mortgage in connection with the services provided. The Management Agreement between the Company and the Manager was negotiated between related parties, and the terms, including fees payable, may not be as favorable to the Company as if it had been negotiated with an unaffiliated third party. At the time the Management Agreement was negotiated, both the Manager and Freedom Mortgage were controlled by Mr. Stanley Middleman, who is also a shareholder of the Company. Ownership of the Manager has been transferred to CHMM Blind Trust, a grantor trust for the benefit of Mr. Middleman. The Management Agreement provides that the Company will reimburse the Manager for (i) various expenses incurred by the Manager or its officers, and agents on the Company’s behalf, including costs of software, legal, accounting, tax, administrative and other similar services rendered for the Company by providers retained by the Manager and (ii) the allocable portion of the compensation paid to specified officers dedicated to the Company. The amounts under “Due to affiliates” on the consolidated balance sheets consisted of the following for the periods indicated (dollars in thousands): Management Fees and Compensation Reimbursement to Affiliate Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Management fees $ 1,192 $ 971 $ 2,316 $ 1,672 Compensation reimbursement 191 191 382 382 Total $ 1,383 $ 1,162 $ 2,698 $ 2,054 Subservicing Agreement Freedom Mortgage is directly servicing a portion of the Company’s portfolio of Fannie Mae and Freddie Mac MSRs and all of its Ginnie Mae MSRs pursuant to a subservicing agreement entered into on June 10, 2015. The agreement has an initial term of three years, expiring on September 1, 2018, and is subject to automatic renewal for additional three year terms unless either party chooses not to renew. The agreement may be terminated without cause by either party by giving notice as specified in the agreement. Under that agreement, Freedom Mortgage agrees to service the applicable mortgage loans in accordance with applicable law and the requirements of the applicable agency and the Company pays customary fees to Freedom Mortgage for specified services. Joint Marketing Recapture Agreement In June 2016, Aurora entered into a joint marketing recapture agreement with Freedom Mortgage. Pursuant to this agreement, Freedom Mortgage attempts to refinance certain mortgage loans underlying Aurora’s MSR portfolio subserviced by Freedom Mortgage as directed by Aurora. If a loan is refinanced, Aurora will pay Freedom Mortgage a fee for its origination services. Freedom Mortgage will be entitled to sell the loan for its own benefit and will transfer the related MSR to Aurora. The agreement had an initial term of one year, subject to automatic renewals of one year each and subject to termination by either party upon 60 days prior notice. All new loans must qualify for sale to Fannie Mae or Freddie Mac or be eligible for pooling with Ginnie Mae, as applicable, and meet other conditions set forth in the agreement. During the three month period ended June 30, 2018, MSRs on 20 loans with an aggregate UPB of approximately $3.9 million had been received from Freedom Mortgage which generated approximately $5,300 in fees due to Freedom Mortgage. During the six month period ended June 30, 2018, MSRs on 68 loans with an aggregate UPB of approximately $14.2 million had been received from Freedom Mortgage which generated approximately $20,600 in fees due to Freedom Mortgage. During the year ended December 31, 2017, MSRs on 116 loans with an aggregate UPB of approximately $27.6 million had been received from Freedom Mortgage which generated approximately $43,000 in fees due to Freedom Mortgage. Sale of Excess MSRs On November 15, 2016, the Company sold the Excess MSRs in Excess MSR Pool 1 and the Excess MSRs in Excess MSR Pool 2014 to Freedom Mortgage. At the closing, the Company received cash proceeds of approximately $38.0 million, repaid $12.0 million of outstanding borrowings drawn on the Company’s $25 million term loan facility with NexBank SSB (the “NexBank term loan”) with a portion of the cash proceeds and released the Company’s security interests in the underlying MSRs. The Company invested the remaining cash proceeds in Agency RMBS. The Company sold the Excess MSRs in Excess MSR Pool 2 to Freedom Mortgage on February 1, 2017. In connection with the sale of the Excess MSRs in Excess MSR Pool 2 to Freedom Mortgage, Freedom Mortgage transferred to Aurora Ginnie Mae MSRs with a weighted average servicing fee of approximately 30 basis points at the time of acquisition. The Ginnie Mae MSRs relate to a pool consisting primarily of newly originated Ginnie Mae conforming mortgage loans that had an aggregate UPB of approximately $4.5 billion as of January 31, 2017. At the closing of the sale of the Excess MSRs in Excess MSR Pool 2, the Company repaid the remaining outstanding borrowings drawn on the NexBank term loan with cash on hand. In addition, the acknowledgment agreement that the Company and Freedom Mortgage entered into with Ginnie Mae at the time of the IPO was terminated. In connection with the sale transactions, Freedom Mortgage made 12 monthly yield maintenance payments to the Company from December 2016 to November 2017 aggregating $3.0 million. See Note 10 for a discussion of the now terminated acknowledgment agreement among the Company, Freedom Mortgage and Ginnie Mae. Other Transactions with Affiliated Persons In March 2017, the Company waived the forfeiture provisions of LTIP-OP Units previously granted to Mr. Middleman that otherwise would have been triggered once he no longer was a member of the Company’s board of directors. |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments [Abstract] | |
Derivative Instruments | Note 8 — Derivative Instruments Interest Rate Swap Agreements, Swaptions, TBAs and Treasury Futures In order to help mitigate exposure to higher short-term interest rates in connection with borrowings under its repurchase agreements, the Company enters into interest rate swap agreements and swaption agreements. Interest rate 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. A swaption is an option granting its owner the right but not the obligation to enter into an underlying swap. The Company’s interest rate swap agreements and swaptions have not been designated as qualifying hedging instruments for GAAP purposes. In order to help mitigate duration risk and manage basis risk, the Company utilizes Treasury futures and forward-settling purchases and sales of RMBS where the underlying pools of mortgage loans are TBAs. Pursuant to these TBA transactions, the Company agrees to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. Unless otherwise indicated, references to Treasury futures include options on Treasury futures. The following table summarizes the outstanding notional amounts of derivative instruments as of the dates indicated (dollars in thousands): Derivatives June 30, 2018 December 31, 2017 Notional amount of interest rate swaps $ 1,324,500 $ 1,067,950 Notional amount of swaptions 195,000 155,000 Notional amount of TBAs, net (22,800 ) 26,900 Notional amount of Treasury futures (136,600 ) - Total notional amount $ 1,360,100 $ 1,249,850 The following table presents information about the Company’s interest rate swap agreements as of the dates indicated (dollars in thousands): Notional Amount Weighted Average Pay Rate Weighted Average Receive Rate Weighted Average Years to Maturity June 30, 2018 $ 1,324,500 2.05 % 2.34 % 4.9 March 31, 2018 $ 1,141,750 1.90 % 1.89 % 4.9 December 31, 2017 $ 1,067,950 1.83 % 1.44 % 4.9 The following table presents information about the Company’s interest rate swaption agreements as of the dates indicated (dollars in thousands): Notional Amount Weighted Average Pay Rate Weighted Average Receive Rate (A) Weighted Average Years to Maturity June 30, 2018 $ 195,000 2.98 % LIBOR-BBA % 10.3 March 31, 2018 $ 180,000 2.93 % LIBOR-BBA % 10.5 December 31, 2017 $ 155,000 2.88 % LIBOR-BBA % 10.8 (A) Floats in accordance with LIBOR. The following table presents information about realized gain (loss) on derivatives, which is included on the consolidated statements of income (loss) for the periods indicated (dollars in thousands): Realized Gains (Losses) on Derivatives Consolidated Statements of Income Three Months Ended June 30, Six Months Ended June 30, Derivatives (Loss) Location 2018 2017 2018 2017 Interest rate swaps Realized gain (loss) on derivatives, net $ (162 ) $ (436 ) $ (584 ) $ (595 ) Swaptions Realized gain (loss) on derivatives, net (101 ) - (375 ) (69 ) TBAs Realized gain (loss) on derivatives, net (549 ) (402 ) (578 ) (514 ) Treasury futures Realized gain (loss) on derivatives, net (1,221 ) (959 ) (483 ) (1,636 ) Total $ (2,033 ) $ (1,797 ) $ (2,020 ) $ (2,814 ) Offsetting Assets and Liabilities The Company has netting arrangements in place with all of its derivative counterparties pursuant to standard documentation developed by the International Swap and Derivatives Association. Under GAAP, if the Company has a valid right of offset, it may offset the related asset and liability and report the net amount. The Company presents interest rate swaps, swaptions and Treasury futures assets and liabilities on a gross basis in its consolidated balance sheets. The Company presents TBA assets and liabilities on a net basis in its consolidated balance sheets. The Company presents repurchase agreements in this section even though they are not derivatives because they are subject to master netting arrangements. However, repurchase agreements are presented on a gross basis. Additionally, the Company does not offset financial assets and liabilities with the associated cash collateral on the consolidated balance sheets. The following tables present information about the Company’s assets and liabilities that are subject to master netting arrangements or similar agreements and can potentially be offset on the Company’s consolidated balance sheets as of the dates indicated (dollars in thousands): Offsetting Assets and Liabilities As of June 30, 2018 Gross Gross Net Amounts of Assets Gross Amounts Not Offset in the Consolidated Balance Sheet Amounts of Recognized Assets or Liabilities Amounts Offset in the Consolidated Balance Sheet Presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Received (Pledged) Net Amount Assets Interest rate swaps $ 23,020 $ - $ 23,020 $ (23,020 ) $ - $ - Swaptions 2,683 - 2,683 (2,683 ) - - TBAs 319 (319 ) - - - - Treasury futures 313 - 313 1,282 (1,595 ) - Total Assets $ 26,335 $ (319 ) $ 26,016 $ (24,421 ) $ (1,595 ) $ - Liabilities Repurchase agreements $ 1,693,309 $ - $ 1,693,309 $ (1,671,331 ) $ (21,978 ) $ - Interest rate swaps 726 - 726 (726 ) - - TBAs 710 (319 ) 391 (391 ) - - Total Liabilities $ 1,694,745 $ (319 ) $ 1,694,426 $ (1,672,448 ) $ (21,978 ) $ - As of December 31, 2017 Gross Gross Net Amounts of Assets Gross Amounts Not Offset in the Consolidated Balance Sheet Amounts of Recognized Assets or Liabilities Amounts Offset in the Consolidated Balance Sheet Presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Received (Pledged) Net Amount Assets Interest rate swaps $ 12,994 $ - $ 12,994 $ (12,994 ) $ - $ - Swaptions 802 - 802 (802 ) - - TBAs 34 - 34 (34 ) - - Total Assets $ 13,830 $ - $ 13,830 $ (13,830 ) $ - $ - Liabilities Repurchase agreements $ 1,666,537 $ - $ 1,666,537 $ (1,637,922 ) $ (28,615 ) $ - Interest rate swaps 342 - 342 32 (374 ) - Treasury futures 2 - 2 177 (179 ) - Total Liabilities $ 1,666,881 $ - $ 1,666,881 $ (1,637,713 ) $ (29,168 ) $ - |
Fair Value
Fair Value | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value [Abstract] | |
Fair Value | Note 9 – Fair Value Fair Value Measurements ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). Additionally, ASC 820 requires an entity to consider all aspects of nonperformance risk, including the entity’s own credit standing, when measuring the fair value of a liability. ASC 820 establishes a three level hierarchy to be used when measuring and disclosing fair value. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. Following is a description of the three levels: Level 1 inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date under current market conditions. Additionally, the entity must have the ability to access the active market and the quoted prices cannot be adjusted by the entity. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full-term of the assets or liabilities. Level 3 unobservable inputs are supported by little or no market activity. The unobservable inputs represent the assumptions that management believes market participants would use to price the assets and liabilities, including risk. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation. Recurring Fair Value Measurements The following is a description of the methods used to estimate the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis, as well as the basis for classifying these assets and liabilities as Level 2 or 3 within the fair value hierarchy. The Company’s valuations consider assumptions that it believes a market participant would consider in valuing the assets and liabilities, the most significant of which are disclosed below. The Company reassesses and periodically adjusts the underlying inputs and assumptions used in the valuations for recent historical experience, as well as for current and expected relevant market conditions. RMBS The Company holds a portfolio of RMBS that are classified as available for sale and are carried at fair value in the consolidated balance sheets. The Company determines the fair value of its RMBS based upon prices obtained from third-party pricing providers. The third-party pricing providers use pricing models that generally incorporate such factors as coupons, primary and secondary mortgage rates, rate reset period, issuer, prepayment speeds, credit enhancements and expected life of the security. As a result, the Company classified 100% of its RMBS as Level 2 fair value assets at June 30, 2018 and December 31, 2017. Excess MSRs The Company held a portfolio of Excess MSRs that were reported at fair value in the consolidated balance sheet at December 31, 2016. The Company used a discounted cash flow model to estimate the fair value of these assets. Although Excess MSR transactions are observable in the marketplace, the valuation includes unobservable market data inputs (prepayment speeds, delinquency levels and discount rates). As a result, the Company classified 100% of its Excess MSRs as Level 3 fair value assets at December 31, 2016. The Company did not hold any Excess MSRs at June 30, 2018 or December 31, 2017. MSRs The Company holds a portfolio of MSRs that are reported at fair value in the consolidated balance sheets. The Company uses a discounted cash flow model to estimate the fair value of these assets. Although MSR transactions are observable in the marketplace, the valuation includes unobservable market data inputs (prepayment speeds, delinquency levels, costs to service and discount rates). As a result, the Company classified 100% of its MSRs as Level 3 fair value assets at June 30, 2018 and December 31, 2017. Derivative Instruments The Company enters into a variety of derivative instruments as part of its economic hedging strategies. The Company executes interest rate swaps, swaptions, TBAs and treasury futures. The Company utilizes third-party pricing providers to value its derivative instruments. As a result, the Company classified 100% of its derivative instruments as Level 2 fair value assets and liabilities at June 30, 2018 and December 31, 2017. Both the Company and the derivative counterparties under their netting arrangements are required to post cash collateral based upon the net underlying market value of the Company’s open positions with the counterparties. Posting of cash collateral typically occurs daily, subject to certain dollar thresholds. Due to the existence of netting arrangements, as well as frequent cash collateral posting at low posting thresholds, credit exposure to the Company and/or counterparties is considered materially mitigated. The Company’s interest rate swaps are required to be cleared on an exchange, which further mitigates, but does not eliminate, credit risk. Based on the Company’s assessment, there is no requirement for any additional adjustment to derivative valuations specifically for credit. The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis as of the dates indicated (dollars in thousands). Recurring Fair Value Measurements As of June 30, 2018 Level 1 Level 2 Level 3 Carrying Value Assets RMBS Fannie Mae $ - $ 1,264,508 $ - $ 1,264,508 Freddie Mac - 492,699 - 492,699 CMOs - 103,973 - 103,973 RMBS total - 1,861,180 - 1,861,180 Derivative assets Interest rate swaps - 23,020 - 23,020 Interest rate swaptions - 2,683 - 2,683 TBAs - - - - Treasury futures - 313 - 313 Derivative assets total - 26,016 - 26,016 Servicing Related Assets - - 231,548 231,548 Total Assets $ - $ 1,887,196 $ 231,548 $ 2,118,744 Liabilities Derivative liabilities Interest rate swaps - 726 - 726 TBAs - 391 - 391 Treasury futures - - - - Derivative liabilities total - 1,117 - 1,117 Total Liabilities $ - $ 1,117 $ - $ 1,117 As of December 31, 2017 Level 1 Level 2 Level 3 Carrying Value Assets RMBS Fannie Mae $ - $ 1,233,699 $ - $ 1,233,699 Freddie Mac - 513,544 - 513,544 CMOs - 93,669 - 93,669 RMBS total - 1,840,912 - 1,840,912 Derivative assets Interest rate swaps - 12,994 - 12,994 Interest rate swaptions - 802 - 802 TBAs - 34 - 34 Derivative assets total - 13,830 - 13,830 Servicing related assets - - 122,806 122,806 Total Assets $ - $ 1,854,742 $ 122,806 $ 1,977,548 Liabilities Derivative liabilities Interest rate swaps - 342 - 342 Treasury futures - 2 - 2 Derivative liabilities total - 344 - 344 Total Liabilities $ - $ 344 $ - $ 344 The Company may be required to measure certain assets or liabilities at fair value from time to time. These periodic fair value measures typically result from application of certain impairment measures under GAAP. These items would constitute nonrecurring fair value measures under ASC 820. As of June 30, 2018 and December 31, 2017, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis in the periods presented. Level 3 Assets and Liabilities The valuation of Level 3 assets and liabilities requires significant judgment by the third-party pricing providers and management. The third-party pricing providers and management rely on inputs such as market price quotations from market makers (either market or indicative levels), original transaction price, recent transactions in the same or similar instruments, and changes in financial ratios or cash flows to determine fair value. Level 3 instruments may also be discounted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by third-party pricing providers and management in the absence of market information. Assumptions used by third-party pricing providers and management due to lack of observable inputs may significantly impact the resulting fair value and, therefore, the Company’s consolidated financial statements. The Company’s management reviews all valuations that are based on pricing information received from third-party pricing providers. As part of this review, prices are compared against other pricing or input data points in the marketplace, along with internal valuation expertise, to ensure the pricing is reasonable. In connection with the above, the Company estimates the fair value of its Servicing Related Assets based on internal pricing models rather than quotations, and compares the results of these internal models against the results from models generated by third-party valuation specialists. The determination of estimated cash flows used in pricing models is inherently subjective and imprecise. Changes in market conditions, as well as changes in the assumptions or methodology used to determine fair value, could result in a significant change to estimated fair values. It should be noted that minor changes in assumptions or estimation methodologies can have a material effect on these derived or estimated fair values, and that the fair values reflected below are indicative of the interest rate and credit spread environments as of June 30, 2018 and December 31, 2017 and do not take into consideration the effects of subsequent changes in market or other factors. The tables below present the reconciliation for the Company’s Level 3 assets (Servicing Related Assets) measured at fair value on a recurring basis as of the dates indicated (dollars in thousands): Level 3 Fair Value Measurements As of June 30, 2018 Level 3 MSRs Balance at December 31, 2017 $ 122,806 Purchases, sales and principal paydowns: Purchases 97,988 Other changes (B) (1,379 ) Purchases, sales and principal paydowns: $ 96,609 Changes in Fair Value due to: Changes in valuation inputs or assumptions used in valuation model 17,889 Other changes in fair value (C) (5,756 ) Unrealized gain (loss) included in Net Income $ 12,133 Balance at June 30, 2018 $ 231,548 As of December 31, 2017 Level 3 (A) Excess MSRs Pool 2 MSRs Total Balance at December 31, 2016 $ 29,392 $ 31,871 $ 61,263 Purchases, sales and principal paydowns: Purchases - 83,586 83,586 Sales (35,905 ) - (35,905 ) Other changes (B) 6,513 (1,810 ) 4,703 Purchases, sales and principal paydowns: $ (29,392 ) $ 81,776 $ 52,384 Changes in Fair Value due to: Changes in valuation inputs or assumptions used in valuation model - 16,375 16,375 Other changes in fair value (C) - (7,216 ) (7,216 ) Unrealized gain (loss) included in Net Income $ - $ 9,159 $ 9,159 Balance at December 31, 2017 $ - $ 122,806 $ 122,806 (A) Includes the recapture agreement for each respective pool. (B) Represents purchase price adjustments, principally contractual prepayment protection, and changes due to the Company’s repurchase of the underlying collateral. (C) Represents changes due to realization of expected cash flows. The tables below present information about the significant unobservable inputs used in the fair value measurement of the Company’s Servicing Related Assets classified as Level 3 fair value assets as of the dates indicated (dollars in thousands): Fair Value Measurements As of June 30, 2018 Fair Value Valuation Technique Unobservable Input (A) Range Weighted Average MSRs Conventional $ 188,644 Discounted cash flow Constant prepayment speed 5.2% - 20.7 % 8.9 % Uncollected payments 0.2% - 1.8 % 0.9 % Discount rate 9.3 % Annual cost to service, per loan $ 71 Government $ 42,904 Discounted cash flow Constant prepayment speed 6.0% - 18.8 % 9.0 % Uncollected payments 0.4% - 4.2 % 3.3 % Discount rate 12.0 % Annual cost to service, per loan $ 105 TOTAL $ 231,548 Discounted cash flow As of December 31, 2017 Fair Value Valuation Technique Unobservable Input (A) Range Weighted Average MSRs Conventional $ 82,150 Discounted cash flow Constant prepayment speed 6.5% - 23.5 % 10.5 % Uncollected payments 0.2% - 1.8 % 0.8 % Discount rate 9.3 % Annual cost to service, per loan $ 70 Government $ 40,656 Discounted cash flow Constant prepayment speed 6.0% - 14.2 % 8.1 % Uncollected payments 0.4% - 5.2 % 3.3 % Discount rate 12.0 % Annual cost to service, per loan $ 96 TOTAL $ 122,806 Discounted cash flow (A) Significant increases (decreases) in any of the inputs in isolation may result in significantly lower (higher) fair value measurements. A change in the assumption used for discount rates may be accompanied by a directionally similar change in the assumption used for the probability of uncollected payments and a directionally opposite change in the assumption used for prepayment rates. Fair Value of Financial Instruments In accordance with ASC 820, the Company is required to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the consolidated balance sheets, for which fair value can be estimated. The following describes the Company’s methods for estimating the fair value for financial instruments. • RMBS available for sale securities, Servicing Related Assets, derivative assets and derivative liabilities are recurring fair value measurements; carrying value equals fair value. See discussion of valuation methods and assumptions within the “Fair Value Measurements” section of this footnote. • Cash and cash equivalents and restricted cash have a carrying value which approximates fair value because of the short maturities of these instruments. • The carrying value of repurchase agreements and corporate debt that mature in less than one year generally approximates fair value due to the short maturities. The Company does not hold any repurchase agreements that are considered long-term. Corporate debt that matures in more than one year generally approximates fair value. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 10 — Commitments and Contingencies The commitments and contingencies of the Company as of June 30, 2018 and December 31, 2017 are described below. Management Agreement The Company pays the Manager a quarterly management fee, calculated and payable quarterly in arrears, equal to the product of one quarter of the 1.5% management fee annual rate and the stockholders’ equity, adjusted as set forth in the Management Agreement as of the end of such fiscal quarter. The Manager relies on resources of Freedom Mortgage to provide the Manager with the necessary resources to conduct the Company’s operations. For further discussion regarding the management fee, see Note 7. Legal and Regulatory From time to time, the Company may be subject to potential liability under laws and government regulations and various claims and legal actions arising in the ordinary course of business. Liabilities are established for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts established for those claims. Based on information currently available, management is not aware of any legal or regulatory claims that would have a material effect on the Company’s consolidated financial statements, and, therefore, no accrual is required as of June 30, 2018 and December 31, 2017. Commitments to Purchase/Sell RMBS As of June 30, 2018 and December 31, 2017, the Company held forward TBA purchase and sale commitments, respectively, with counterparties, which are forward Agency RMBS trades, whereby the Company committed to purchasing or selling a pool of securities at a particular interest rate. As of the date of the trade, the mortgage-backed securities underlying the pool that will be delivered to fulfill a TBA trade are not yet designated. The securities are typically “to be announced” 48 hours prior to the established trade settlement date. As of June 30, 2018, the Company (i) was not obligated to purchase any Agency RMBS securities and (ii) was not obligated to sell any Agency RMBS securities. As of December 31, 2017, the Company (i) was not obligated to purchase any Agency RMBS securities and (ii) was not obligated to sell any Agency RMBS securities. Acknowledgment Agreements In order to have Ginnie Mae acknowledge the Company’s interest in Excess MSRs related to FHA and VA mortgage loans that were pooled into securities guaranteed by Ginnie Mae, the Company entered into an acknowledgment agreement with Ginnie Mae and Freedom Mortgage. Under that agreement, if Freedom Mortgage failed to make a required payment to the holders of the Ginnie Mae-guaranteed RMBS, the Company would have been obligated to make that payment even though the payment may have related to loans for which the Company did not own any Excess MSRs. The Company’s failure to make that payment would have resulted in liability to Ginnie Mae for any losses or claims that Ginnie Mae suffered as a result. This agreement was terminated in February 2017 in connection with the sale of the Company’s remaining Excess MSRs back to Freedom Mortgage. In connection with the MSR Financing Facility (as defined below) entered into by Aurora and QRS III, those parties also entered into an acknowledgment agreement with Fannie Mae. Pursuant to that agreement, Fannie Mae consented to the pledge by Aurora and QRS III of their respective interests in MSRs for loans owned or securitized by Fannie Mae, and acknowledged the security interest of the lender in those MSRs. See Note 12—Notes Payable for a description of the MSR Financing Facility. |
Repurchase Agreements
Repurchase Agreements | 6 Months Ended |
Jun. 30, 2018 | |
Repurchase Agreements [Abstract] | |
Repurchase Agreements | Note 11 – Repurchase Agreements The Company had outstanding approximately $1,693.3 million and $1,666.5 million of borrowings under its repurchase agreements as of June 30, 2018 and December 31, 2017, respectively. The Company’s obligations under these agreements had weighted average remaining maturities of 57 days and 46 days as of June 30, 2018 and December 31, 2017, respectively. RMBS and cash have been pledged as collateral under these repurchase agreements (see Note 4). The repurchase agreements had the following remaining maturities and weighted average rates as of the dates indicated (dollars in thousands): Repurchase Agreement Characteristics As of June 30, 2018 Repurchase Agreements Weighted Average Rate Less than one month $ 547,663 2.04 % One to three months 734,276 2.13 % Greater than three months 411,370 2.19 % Total/Weighted Average $ 1,693,309 2.12 % As of December 31, 2017 Repurchase Agreements Weighted Average Rate Less than one month $ 429,573 1.44 % One to three months 1,231,687 1.48 % Greater than three months 5,277 1.52 % Total/Weighted Average $ 1,666,537 1.47 % There were no overnight or demand securities as of June 30, 2018 or December 31, 2017. |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2018 | |
Notes Payable [Abstract] | |
Notes Payable | Note 12 – Notes Payable In September 2016, Aurora and QRS III entered into a loan and security agreement (the “MSR Financing Facility”), pursuant to which Aurora and QRS III pledged their respective rights in all existing and future MSRs for loans owned or securitized by Fannie Mae to secure borrowings up to a maximum of $25.0 million outstanding at any one time. On March 20, 2018, Aurora and QRS III entered into an amendment that increased the maximum amount of the MSR Financing Facility from $25 million to $75 million and extended the revolving period, during which only interest payments are due, to March 2020. The revolving period may be further extended by agreement. During the revolving period, borrowings bear interest at a rate equal to a spread over one-month LIBOR subject to a floor. At the end of the revolving period, the outstanding amount will be converted to a three-year term loan that will bear interest at a rate calculated at a spread over the rate for one-year interest rate swaps. The Company has previously guaranteed repayment of all indebtedness under the MSR Financing Facility. Approximately $61.7 million and $20.5 million was outstanding under the MSR Financing Facility at June 30, 2018 and December 31, 2017, respectively. In May 2017, the Company, Aurora and QRS IV obtained a $20.0 million loan (the “MSR Term Facility”) secured by the pledge of Aurora’s Ginnie Mae MSRs and the Company’s ownership interest in QRS IV. The loan bears interest at a fixed rate of 6.18% per annum, amortizes on a ten-year amortization schedule and is due on May 18, 2022. The outstanding long-term borrowings had the following remaining maturities as of the dates indicated (dollars in thousands): Long-Term Borrowings Repayment Characteristics As of June 30, 2018 2018 2019 2020 2021 2022 2023 Total MSR Term Facility Borrowings under MSR Term Facility $ 1,000 $ 2,000 $ 2,000 $ 2,000 $ 10,996 $ - $ 17,996 MSR Financing Facility Borrowings under MSR Financing Facility $ 1,169 $ 4,839 $ 5,109 $ 50,577 $ - $ - $ 61,694 Total $ 2,169 $ 6,839 $ 7,109 $ 52,577 $ 10,996 $ - $ 79,690 As of December 31, 2017 2018 2019 2020 2021 2022 2023 Total MSR Term Facility Borrowings under MSR Term Facility $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 11,000 $ - $ 19,000 MSR Financing Facility Borrowings under MSR Financing Facility $ - $ 389 $ 1,608 $ 1,697 $ 16,806 $ - $ 20,500 Total $ 2,000 $ 2,389 $ 3,608 $ 3,697 $ 27,806 $ - $ 39,500 |
Receivables and Other Assets
Receivables and Other Assets | 6 Months Ended |
Jun. 30, 2018 | |
Receivables and Other Assets [Abstract] | |
Receivables and Other Assets | Note 13 – Receivables and Other Assets The assets comprising “Receivables and other assets” as of June 30, 2018 and December 31, 2017 are summarized in the following table (dollars in thousands): Receivables and Other Assets June 30, 2018 December 31, 2017 Servicing advances $ 4,555 $ 5,901 Interest receivable 6,392 5,804 Repurchased loans held for sale 3,647 2,160 Other receivables 4,063 2,777 Total other assets $ 18,657 $ 16,642 The Company only records as an asset those servicing advances that the Company deems recoverable. |
Accrued Expenses and Other Liab
Accrued Expenses and Other Liabilities | 6 Months Ended |
Jun. 30, 2018 | |
Accrued Expenses and Other Liabilities [Abstract] | |
Accrued Expenses and Other Liabilities | Note 14 – Accrued Expenses and Other Liabilities The liabilities comprising “Accrued expenses and other liabilities” as of June 30, 2018 and December 31, 2017 are summarized in the following table (dollars in thousands): Accrued Expenses and Other Liabilities June 30, 2018 December 31, 2017 Accrued interest payable $ 4,531 $ 4,252 Escrow funds held 37 37 Net deferred tax payable 4,550 843 Accrued expenses 15,787 6,882 Total accrued expenses and other liabilities $ 24,905 $ 12,014 |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes [Abstract] | |
Income Taxes | Note 15 – Income Taxes The Company elected to be taxed as a REIT under Code Sections 856 through 860 beginning with its short taxable year ended December 31, 2013. As a REIT, the Company generally will not be subject to U.S. federal income tax to the extent that it distributes its taxable income to its stockholders. To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income to its stockholders and meet certain other requirements such as assets it may hold, income it may generate and its stockholder composition. It is the Company’s policy to distribute all or substantially all of its REIT taxable income. To the extent there is any undistributed REIT taxable income at the end of a year, the Company can elect to distribute such shortfall within the next year as permitted by the Code. Effective January 1, 2014, CHMI Solutions elected to be taxed as a corporation for U.S. federal income tax purposes; prior to this date, CHMI Solutions was a disregarded entity for U.S. federal income tax purposes. CHMI Solutions has jointly elected with the Company, the ultimate beneficial owner of CHMI Solutions, to be treated as a TRS of the Company, and all activities conducted through CHMI Solutions and its wholly-owned subsidiary Aurora, are subject to federal and state income taxes. CHMI Solutions files a consolidated tax return with Aurora and is fully taxed as a U.S. C-Corporation. The state and local tax jurisdictions for which the Company is subject to tax filing obligations recognize the Company’s status as a REIT, and therefore, the Company generally does not pay income tax in such jurisdictions. CHMI Solutions and Aurora are subject to U.S. federal, state and local income taxes. The components of the Company’s income tax expense (benefit) are as follows for the periods indicated below (dollars in thousands): Six Months Ended June 30, 2018 2017 Current federal income tax expense $ 68 $ 112 Current state income tax expense 21 21 Deferred federal income tax expense (benefit) 3,024 (134 ) Deferred state income tax expense (benefit) 683 (4 ) Provision for (Benefit from) Corporate Business Taxes $ 3,796 $ (5 ) The following is a reconciliation of the statutory federal rate to the effective rate, for the periods indicated below (dollars in thousands): Six Months Ended June 30, 2018 2017 Computed income tax (benefit) expense at federal rate $ 11,106 21.0 % $ 7,321 35.0 % State taxes, net of federal benefit, if applicable 699 1.3 % - - % REIT income not subject to tax (8,009 ) (15.1 )% (7,326 ) (35.0 )% Provision for (Benefit from) Corporate Business Taxes/Effective Tax Rate (A) $ 3,796 7.2 % $ (5 ) 0.0 % (A) The provision for income taxes is recorded at the TRS level. The Company’s consolidated balance sheets, at June 30, 2018 and December 31, 2017, contain the following current and deferred tax liabilities and assets, which are recorded at the TRS level (dollars in thousands): Six Months Ended June 30, 2018 2017 Income taxes payable Federal income taxes payable $ 68 $ 650 State and local income taxes payable 21 82 Income taxes payable $ 89 $ 732 June 30, 2018 December 31, 2017 Deferred tax (assets) liabilities Deferred tax - organizational expenses $ (7 ) $ (10 ) Deferred tax - mortgage servicing rights 4,557 909 Deferred tax - net operating loss - (56 ) Total net deferred tax (assets) liabilities $ 4,550 $ 843 The deferred tax liability as of June 30, 2018 was primarily related to MSRs. The deferred tax liability as of December 31, 2017 was primarily related to MSRs. No valuation allowance has been established at June 30, 2018 and December 31, 2017. As of June 30, 2018 and December 31, 2017, the deferred tax liability is included in “Accrued expenses and other liabilities” in the consolidated balance sheets. On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. The TCJA includes a number of significant changes to existing U.S. corporate income tax laws, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate, resulting in a $459,000 decrease in income tax expense for the year ended December 31, 2017 and a corresponding decrease of the same amount in the Company’s deferred tax liabilities as of December 31, 2017. The Company is still analyzing certain aspects of the TCJA, which could potentially give rise to new deferred tax amounts in the future. Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in these consolidated financial statements. The Company’s 2016, 2015, 2014, 2013 and 2012 federal, state and local income tax returns remain open for examination by the relevant authorities. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 16 – Subsequent Events On July 31, 2018, the Company, Aurora and Cherry Hill QRS V, LLC (“QRS V,” and collectively with Aurora and the Company, the “Borrowers”) entered into a $25 million revolving credit facility (the “MSR Revolver”) pursuant to which Aurora pledged all of its existing and future MSRs on loans owned or securitized by Freddie Mac. The term of the MSR Revolver is 364 days with the Borrowers’ option for two renewals for similar terms followed by a one-year term out feature with a 24-month amortization schedule. The MSR Revolver includes the ability to request up to an additional $25 million of borrowings. Amounts borrowed bear interest at an adjustable rate equal to a spread above one-month LIBOR. The Borrowers borrowed $25 million at the signing. In connection with the MSR Revolver, Aurora, QRS V, and the lender, with a limited joinder by the Company, entered into an Acknowledgement Agreement with Freddie Mac pursuant to which Freddie Mac consented to the pledge of the MSRs, Aurora and the lender also entered into a Consent Agreement with Freddie Mac pursuant to which Freddie Mac consented to the pledge of Aurora’s rights to reimbursement for advances on the underlying loans. |
Basis of Presentation and Sig25
Basis of Presentation and Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Basis of Presentation and Significant Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting The accompanying interim consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The interim consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company consolidates those entities in which it has an investment of 50% or more and has control over significant operating, financial and investing decisions of the entity. The interim consolidated financial statements reflect all necessary and recurring adjustments for fair presentation of the results for the interim periods presented herein. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of significant estimates and assumptions. These include estimates of: the fair value of Excess MSRs and MSRs (collectively, “Servicing Related Assets”); RMBS and derivatives; credit losses, including the period of time during which the Company anticipates an increase in the fair values of RMBS sufficient to recover unrealized losses on those RMBS; and other estimates that affect the reported amounts of certain assets, revenues, liabilities and expenses as of the date of, and for the periods covered by, the consolidated interim financial statements. It is likely that changes in these estimates will occur in the near term. The Company’s estimates are inherently subjective in nature. Actual results could differ from the Company’s estimates, and the differences may be material. |
Risks and Uncertainties | Risks and Uncertainties In the normal course of business, the Company encounters primarily two significant types of economic risk: credit and market. Credit risk is the risk of default on the Company’s investments in RMBS, Servicing Related Assets and derivatives that results from a borrower’s or derivative counterparty’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of investments in RMBS, Servicing Related Assets and derivatives due to changes in interest rates, spreads or other market factors, including prepayment speeds on the Company’s RMBS and Servicing Related Assets. The Company is subject to the risks involved with real estate and real estate-related debt instruments. These include, among others, the risks normally associated with changes in the general economic climate, changes in the mortgage market, changes in tax laws, interest rate levels, and the availability of financing. The Company also is subject to certain risks relating to its status as a REIT for U.S. federal income tax purposes. If the Company were to fail to qualify as a REIT in any taxable year, the Company would be subject to U.S. federal income tax on its REIT income, which could be material. Unless entitled to relief under certain statutory provisions, the Company would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. |
Investments in RMBS | Investments in RMBS Classification Fair value is determined under the guidance of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures Investment securities transactions are recorded on the trade date. At disposition, the net realized gain or loss is determined on the basis of the cost of the specific investment and is included in earnings. All RMBS purchased and sold in the three month and six month periods ended June 30, 2018 were settled prior to period-end. All RMBS purchased and sold in the year ended December 31, 2017 were settled prior to year-end. Revenue Recognition – Impairment – |
Investments in Excess MSRs | Investments in Excess MSRs As a result of the Company’s sale of its remaining Excess MSRs in February 2017, there were no Excess MSRs at June 30, 2018 or June 30, 2017. Classification Revenue Recognition In connection with the sale of its Excess MSRs, the Company elected a settlement date accounting policy to account for the gain on sale from that transaction. For a further discussion of the Company’s sale of its Excess MSRs, see Note 7. |
Investments in MSRs | Investments in MSRs Classification Revenue Recognition the related loans underlying Servicing fee income received and servicing expenses incurred are reported on the consolidated statements of income (loss). The difference between the fair value of MSRs and their amortized cost basis is recorded on the consolidated statements of income (loss) as “Unrealized gain (loss) on investments in MSRs.” Fair value is generally determined by discounting the expected future cash flows using discount rates that incorporate the market risks and liquidity premium specific to the MSRs and, therefore, may differ from their effective yields. As a result of the Company’s investments in MSRs, it is obligated from time to time to repurchase an underlying loan from the applicable agency for which it is being serviced due to an alleged breach of a representation or warranty. Loans acquired in this manner are recorded at the purchase price less any principal recoveries and are then offered for sale in the scratch and dent market. |
Derivatives and Hedging Activities | Derivatives and Hedging Activities Derivative transactions include swaps, swaptions, Treasury futures and “to-be-announced” securities (“TBAs”). Swaps and swaptions are entered into by the Company solely for interest rate risk management purposes. TBAs and Treasury futures are used for duration risk and basis risk management purposes. The decision as to whether or not a given transaction/position (or portion thereof) is economically hedged is made on a case-by-case basis, based on the risks involved and other factors as determined by senior management, including restrictions imposed by the Code on REITs. In determining whether to economically hedge a risk, the Company may consider whether other assets, liabilities, firm commitments and anticipated transactions already offset or reduce the risk. All transactions undertaken as economic hedges are entered into with a view towards minimizing the potential for economic losses that could be incurred by the Company. Generally, derivatives entered into are not intended to qualify as hedges under GAAP, unless specifically stated otherwise. The Company’s bi-lateral derivative financial instruments contain credit risk to the extent that its bank counterparties may be unable to meet the terms of the agreements. The Company reduces such risk by limiting its exposure to any one counterparty. In addition, the potential risk of loss with any one party resulting from this type of credit risk is monitored. The Company’s interest rate swaps are required to be cleared on an exchange, which further mitigates, but does not eliminate, credit risk. Management does not expect any material losses as a result of default by other parties to its derivative financial instruments. Classification Revenue Recognition |
Cash and Cash Equivalents and Restricted Cash | Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid short-term investments with maturities of 90 days or less when purchased to be cash equivalents. Substantially all amounts on deposit with major financial institutions exceed insured limits. Restricted cash represents the Company’s cash held by counterparties (i) as collateral against the Company’s derivatives ($1.6 million and $549,000 at June 30, 2018 and December 31, 2017, respectively) and (ii) as collateral for borrowings under its repurchase agreements (approximately $22.0 million and $28.6 million at June 30, 2018 and December 31, 2017, respectively). The Company’s centrally cleared interest rate swaps require that the Company posts an “initial margin” amount determined by the clearing exchange, which is generally intended to be set at a level sufficient to protect the exchange from the interest rate swap’s maximum estimated single-day price movement. The Company also exchanges “variation margin” based upon daily changes in fair value, as measured by the exchange. As a result of amendments to rules governing certain central clearing activities, the exchange of variation margin is a settlement of the interest rate swap, as opposed to pledged collateral. Accordingly, beginning in the first quarter of 2018 and in subsequent periods, the Company will account for the receipt or payment of variation margin as a direct reduction to the carrying value of the interest rate swap asset or liability. At June 30, 2018, $15.8 million of variation margin was reported as a reduction to interest rate swaps, at fair value. As of December 31, 2017, variation margin pledged or received is netted on a counterparty basis and classified within restricted cash, due from counterparties, or due to counterparties on the Company’s consolidated balance sheets. |
Due to Affiliates | Due to Affiliates The sum under “Due to affiliates” on the consolidated balance sheets represents amounts due to the Manager pursuant to the Management Agreement. For further information on the Management Agreement, see Note 7. |
Income Taxes | Income Taxes The Company elected to be taxed as a REIT under Code Sections 856 through 860 beginning with its short taxable year ended December 31, 2013. As a REIT, the Company generally will not be subject to U.S. federal income tax to the extent that it distributes its taxable income to its stockholders and does not engage in prohibited transactions. The Company’s taxable REIT subsidiary (“TRS”), CHMI Solutions, is subject to U.S. federal income taxes on its taxable income. To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income to its stockholders and meet certain other requirements such as assets it may hold, income it may generate and its stockholder composition. The Company accounts for income taxes in accordance with ASC 740, Income Taxes |
Realized Gain (Loss) on Investments, Net | Realized Gain (Loss) on Investments, Net The following table presents gains and losses on sales of the specified categories of investments for the periods indicated (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Realized gain (loss) on RMBS, net Gain on RMBS $ 104 $ - $ 104 $ - Loss on RMBS (225 ) (77 ) (5,106 ) (333 ) Net realized loss on RMBS (121 ) (77 ) (5,002 ) (333 ) Realized loss on derivatives, net (2,033 ) (1,797 ) (2,020 ) (2,814 ) Unrealized gain (loss) on derivatives, net 6,009 (4,633 ) 25,635 (3,551 ) Realized gain on Excess MSRs, net - - - 6,678 Unrealized gain (loss) on MSRs, net (365 ) (4,507 ) 12,133 7,805 Total $ 3,490 $ (11,014 ) $ 30,746 $ 7,785 |
Repurchase Agreements and Interest Expense | Repurchase Agreements and Interest Expense The Company finances its investments in RMBS with short-term borrowings under master repurchase agreements. Borrowings under the repurchase agreements are generally short-term debt due within one year. These borrowings generally bear interest rates of a specified margin over one-month LIBOR. The repurchase agreements represent uncommitted financing. Borrowings under these agreements are treated as collateralized financing transactions and are carried at their contractual amounts, as specified in the respective agreements. Interest is recorded at the contractual amount on an accrual basis. |
Dividends Payable | Dividends Payable Because the Company is organized as a REIT under the Code, it is required by law to distribute annually at least 90% of its REIT taxable income, which it does in the form of quarterly dividend payments. The Company accrues the dividend payable on the accounting date, which causes an offsetting reduction in retained earnings. |
Comprehensive Income | Comprehensive Income Comprehensive income is defined as the change in equity of a business enterprise during a period resulting from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. For the Company’s purposes, comprehensive income represents net income, as presented in the consolidated statements of income (loss), adjusted for unrealized gains or losses on RMBS, which are designated as available for sale. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Leases Revenue Recognition Revenue from Contracts with Customers Revenue Recognition Transfers and Servicing Credit Losses Financial Instruments—Credit Losses Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments Income Taxes Income Taxes Restricted Cash Restricted Cash |
Basis of Presentation and Sig26
Basis of Presentation and Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Basis of Presentation and Significant Accounting Policies [Abstract] | |
Gains and Losses on Sale of Specified Categories of Investments | The following table presents gains and losses on sales of the specified categories of investments for the periods indicated (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Realized gain (loss) on RMBS, net Gain on RMBS $ 104 $ - $ 104 $ - Loss on RMBS (225 ) (77 ) (5,106 ) (333 ) Net realized loss on RMBS (121 ) (77 ) (5,002 ) (333 ) Realized loss on derivatives, net (2,033 ) (1,797 ) (2,020 ) (2,814 ) Unrealized gain (loss) on derivatives, net 6,009 (4,633 ) 25,635 (3,551 ) Realized gain on Excess MSRs, net - - - 6,678 Unrealized gain (loss) on MSRs, net (365 ) (4,507 ) 12,133 7,805 Total $ 3,490 $ (11,014 ) $ 30,746 $ 7,785 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Financial Data on CHMI's Segments with Reconciliation | Summary financial data with respect to the Company’s segments is given below, together with a reconciliation to the same data for the Company as a whole (dollars in thousands): Servicing Related Assets RMBS All Other Total Income Statement Three Months Ended June 30, 2018 Interest income $ - $ 12,019 $ - $ 12,019 Interest expense 424 6,900 - 7,324 Net interest income (expense) (424 ) 5,119 - 4,695 Servicing fee income 11,535 - - 11,535 Servicing costs 2,394 - - 2,394 Net servicing income 9,141 - - 9,141 Other income (expense) (365 ) 3,855 - 3,490 Other operating expenses - - 2,320 2,320 (Benefit from) provision for corporate business taxes 1,161 - - 1,161 Net income (loss) $ 7,191 $ 8,974 $ (2,320 ) $ 13,845 Three Months Ended June 30, 2017 Interest income $ - $ 10,002 $ - $ 10,002 Interest expense 123 4,169 - 4,292 Net interest income (expense) (123 ) 5,833 - 5,710 Servicing fee income 5,493 - - 5,493 Servicing costs 991 - - 991 Net servicing income 4,502 - - 4,502 Other income (expense) (4,507 ) (6,507 ) - (11,014 ) Other operating expenses - - 2,207 2,207 (Benefit from) provision for corporate business taxes (1,344 ) - - (1,344 ) Net income (loss) $ 1,216 $ (674 ) $ (2,207 ) $ (1,665 ) Six Months Ended June 30, 2018 Interest income $ - $ 25,434 $ - $ 25,434 Interest expense 637 14,230 - 14,867 Net interest income (expense) (637 ) 11,204 - 10,567 Servicing fee income 20,185 - - 20,185 Servicing costs 4,106 - - 4,106 Net servicing income 16,079 - - 16,079 Other income (expense) 12,133 18,613 - 30,746 Other operating expenses - - 4,512 4,512 (Benefit from) provision for corporate business taxes 3,796 - - 3,796 Net income (loss) $ 23,779 $ 29,817 $ (4,512 ) $ 49,084 Six Months Ended June 30, 2017 Interest income $ 523 $ 15,557 $ - $ 16,080 Interest expense 237 6,486 - 6,723 Net interest income 286 9,071 - 9,357 Servicing fee income 10,067 - - 10,067 Servicing costs 2,218 - - 2,218 Net servicing income 7,849 - - 7,849 Other income (expense) 14,483 (6,698 ) - 7,785 Other operating expenses - - 4,074 4,074 (Benefit from) provision for corporate business taxes (5 ) - - (5 ) Net income (loss) $ 22,623 $ 2,373 $ (4,074 ) $ 20,922 Balance Sheet June 30, 2018 Investments $ 231,548 $ 1,861,180 $ - $ 2,092,728 Other assets 12,609 55,481 24,098 92,188 Total assets 244,157 1,916,661 24,098 2,184,916 Debt 79,282 1,693,309 - 1,772,591 Other liabilities 19,390 5,235 13,962 38,587 Total liabilities 98,672 1,698,544 13,962 1,811,178 Book value $ 145,485 $ 218,117 $ 10,136 $ 373,738 December 31, 2017 Investments $ 122,806 $ 1,840,912 $ - $ 1,963,718 Other assets 8,281 48,631 30,055 86,967 Total assets 131,087 1,889,543 30,055 2,050,685 Debt 39,025 1,666,537 - 1,705,562 Other liabilities 6,575 4,385 11,706 22,666 Total liabilities 45,600 1,670,922 11,706 1,728,228 Book value $ 85,487 $ 218,621 $ 18,349 $ 322,457 |
Investments in RMBS (Tables)
Investments in RMBS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Investments in RMBS [Abstract] | |
Summary of RMBS Investments | All of the Company’s RMBS are classified as available for sale and are, therefore, reported at fair value with changes in fair value recorded in other comprehensive income (loss) except for securities that are OTTI (dollars in thousands): Summary of RMBS Assets As of June 30, 2018 Original Gross Unrealized Number Weighted Average Asset Type Face Value Book Value Gains Losses Carrying Value (A) of Securities Rating Coupon Yield (C) Maturity (Years) (D) RMBS Fannie Mae $ 1,409,569 $ 1,298,953 $ 196 $ (34,641 ) $ 1,264,508 160 (B) 3.84 % 3.67 % 25 Freddie Mac 566,251 506,755 141 (14,197 ) 492,699 65 (B) 3.74 % 3.59 % 28 CMOs 108,075 96,739 7,376 (142 ) 103,973 22 (B) 5.85 % 5.33 % 12 Total/Weighted Average $ 2,083,895 $ 1,902,447 $ 7,713 $ (48,980 ) $ 1,861,180 247 3.93 % 3.74 % 25 As of December 31, 2017 Original Face Value Gross Unrealized Number of Securities Weighted Average Asset Type Book Value Gains Losses Carrying Value (A) Rating Coupon Yield (C) Maturity (Years) (D) RMBS Fannie Mae $ 1,306,823 $ 1,241,027 $ 1,427 $ (8,755 ) $ 1,233,699 154 (B) 3.80 % 3.61 % 26 Freddie Mac 556,204 515,475 864 (2,795 ) 513,544 64 (B) 3.74 % 3.57 % 27 CMOs 98,325 87,353 6,343 (27 ) 93,669 20 (B) 5.26 % 4.88 % 12 Total/Weighted Average $ 1,961,352 $ 1,843,855 $ 8,634 $ (11,577 ) $ 1,840,912 238 3.86 % 3.66 % 25 (A) See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. (B) The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization (“NRSRO”). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. (C) The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. (D) The weighted average maturity is based on the timing of expected principal reduction on the assets. |
Summary of RMBS Investments by Maturity | Summary of RMBS Assets by Maturity As of June 30, 2018 Original Face Value Gross Unrealized Number of Securities Weighted Average Years to Maturity Book Value Gains Losses Carrying Value (A) Rating Coupon Yield (C) Maturity (Years) (D) 5-10 Years $ 25,712 $ 19,270 $ 313 $ (545 ) $ 19,038 4 (B) 4.12 % 3.94 % 7 Over 10 Years 2,058,183 1,883,177 7,400 (48,435 ) 1,842,142 243 (B) 3.93 % 3.74 % 25 Total/Weighted Average $ 2,083,895 $ 1,902,447 $ 7,713 $ (48,980 ) $ 1,861,180 247 3.93 % 3.74 % 25 As of December 31, 2017 Original Face Value Gross Unrealized Number of Securities Weighted Average Years to Maturity Book Value Gains Losses Carrying Value (A) Rating Coupon Yield (C) Maturity (Years) (D) 5-10 Years $ 16,069 $ 15,483 $ 324 $ (312 ) $ 15,495 3 (B) 4.33 % 4.06 % 7 Over 10 Years 1,945,283 1,828,372 8,310 (11,265 ) 1,825,417 235 (B) 3.85 % 3.65 % 26 Total/Weighted Average $ 1,961,352 $ 1,843,855 $ 8,634 $ (11,577 ) $ 1,840,912 238 3.86 % 3.66 % 25 (A) See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. (B) The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization (“NRSRO”). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. (C) The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. (D) The weighted average maturity is based on the timing of expected principal reduction on the assets. |
Summary of RMBS Securities in an Unrealized Loss Position | The following tables summarize the Company’s securities in an unrealized loss position as of the dates indicated (dollars in thousands): RMBS Unrealized Loss Positions As of June 30, 2018 Original Gross Weighted Average Duration in Loss Position Face Value Book Value Unrealized Losses Carrying Value (A) Number of Securities Rating Coupon Yield (C) Maturity (Years) (D) Less than Twelve Months $ 1,544,820 $ 1,405,351 $ (38,930 ) $ 1,366,421 176 (B) 3.84 % 3.67 % 26 Twelve or More Months 244,480 211,428 (10,050 ) 201,378 35 (B) 3.57 % 3.38 % 24 Total/Weighted Average $ 1,789,300 $ 1,616,779 $ (48,980 ) $ 1,567,799 211 3.80 % 3.63 % 26 As of December 31, 2017 Original Gross Weighted Average Duration in Loss Position Face Value Book Value Unrealized Losses Carrying Value (A) Number of Securities Rating Coupon Yield (C) Maturity (Years) (D) Less than Twelve Months $ 1,026,911 $ 1,005,352 $ (5,378 ) $ 999,974 111 (B) 3.81 % 3.63 % 26 Twelve or More Months 323,858 289,599 (6,199 ) 283,400 45 (B) 3.61 % 3.40 % 25 Total/Weighted Average $ 1,350,769 $ 1,294,951 $ (11,577 ) $ 1,283,374 156 3.76 % 3.58 % 26 (A) See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. (B) The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization (“NRSRO”). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. (C) The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. (D) The weighted average maturity is based on the timing of expected principal reduction on the assets. Except for the security for which the Company has recognized OTTI, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases which may be maturity. |
Investments in Servicing Rela29
Investments in Servicing Related Assets (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Investments in Servicing Related Assets [Abstract] | |
Servicing Related Assets | The following is a summary of the Company’s Servicing Related Assets as of the dates indicated (dollars in thousands): Servicing Related Assets Summary As of June 30, 2018 Unpaid Principal Balance Cost Basis Carrying Value (A) Weighted Average Coupon Weighted Average Maturity (Years) (B) Changes in Fair Value Recorded in Other Income (Loss) MSRs Conventional $ 15,378,216 $ 178,759 (C) $ 188,644 4.16 % 27.0 $ 9,885 Government 3,727,194 40,656 (C) 42,904 3.36 % 27.3 2,248 Total / Weighted Average $ 19,105,410 $ 219,415 $ 231,548 4.00 % 27.0 $ 12,133 As of December 31, 2017 Unpaid Principal Balance Cost Basis Carrying Value (A) Weighted Average Coupon Weighted Average Maturity (Years) (B) Changes in Fair Value Recorded in Other Income (Loss) MSRs Conventional $ 7,724,397 $ 81,499 (C) $ 82,150 3.89 % 25.2 $ 651 Government 3,986,254 32,148 (C) 40,656 3.36 % 27.8 8,508 Total / Weighted Average $ 11,710,651 $ 113,647 $ 122,806 3.71 % 26.1 $ 9,159 (A) Carrying value represents the fair value of the pools (see Note 9). (B) The weighted average maturity represents the weighted average expected timing of the receipt of cash flows of each investment. (C) MSR cost basis consists of the carrying value of the prior period, adjusted for any purchases, sales and principal paydowns of the underlying mortgage loans. |
Geographic Concentration of Servicing Related Assets | The tables below summarize the geographic distribution for the states representing 5% or greater of the aggregate UPB of the residential mortgage loans underlying the Servicing Related Assets as of the dates indicated: Geographic Concentration of Servicing Related Assets As of June 30, 2018 Percentage of Total Outstanding Unpaid Principal Balance California 15.2 % Texas 5.5 % Florida 5.4 % New York 5.1 % All other 68.8 % Total 100.0 % As of December 31, 2017 Percentage of Total Outstanding Unpaid Principal Balance California 13.7 % New Jersey 7.2 % Florida 5.3 % All other 73.8 % Total 100.0 % |
Equity and Earnings per Commo30
Equity and Earnings per Common Share (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity and Earnings per Common Share [Abstract] | |
Information about Company's 2013 Plan | The following tables present certain information about the 2013 Plan as of the dates indicated: Equity Incentive Plan Information LTIP-OP Units Shares of Common Stock Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans Issued Forfeited Converted Issued Forfeited Issuance Price December 31, 2016 (140,350 ) 916 - (28,503 ) 3,155 1,335,218 Number of securities issued or to be issued upon exercise - - - - - - March 31, 2017 (140,350 ) 916 - (28,503 ) 3,155 1,335,218 Number of securities issued or to be issued upon exercise (38,150 ) - - (8,199 ) - (46,349 ) $ 18.30 June 30, 2017 (178,500 ) 916 - (36,702 ) 3,155 1,288,869 Number of securities issued or to be issued upon exercise - - 12,917 (12,917 ) - - $ 18.44 September 30, 2017 (178,500 ) 916 12,917 (49,619 ) 3,155 1,288,869 Number of securities issued or to be issued upon exercise - - - - - - December 31, 2017 (178,500 ) 916 12,917 (49,619 ) 3,155 1,288,869 Number of securities issued or to be issued upon exercise - - - - - - March 31, 2018 (178,500 ) 916 12,917 (49,619 ) 3,155 1,288,869 Number of securities issued or to be issued upon exercise (45,400 ) - - (8,256 ) - (53,656 ) $ 18.17 June 30, 2018 (223,900 ) 916 12,917 (57,875 ) 3,155 1,235,213 |
Basic Earnings per Share of Common Stock | The following table presents basic earnings per share of common stock for the periods indicated (dollars in thousands, except per share data): Earnings per Common Share Information Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Numerator: Net income (loss) allocable to common stockholders $ 13,845 $ (1,665 ) $ 49,084 $ 20,922 Net (income) loss allocated to noncontrolling interests in Operating Partnership (173 ) 116 (629 ) (293 ) Dividends on preferred stock 1,317 - 2,530 - Net income (loss) attributable to common stockholders $ 12,355 $ (1,549 ) $ 45,925 $ 20,629 Denominator: Weighted average common shares outstanding 13,616,461 12,695,090 13,164,863 10,164,564 Weighted average diluted shares outstanding 13,624,676 12,701,715 13,173,070 10,171,031 Basic and Diluted: Basic $ 0.91 $ (0.12 ) $ 3.49 $ 2.03 Diluted $ 0.91 $ (0.12 ) $ 3.49 $ 2.03 |
Transactions with Affiliates 31
Transactions with Affiliates and Affiliated Entities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Transactions with Affiliates and Affiliated Entities [Abstract] | |
Management Fees and Compensation Reimbursement to Affiliate | The Management Agreement provides that the Company will reimburse the Manager for (i) various expenses incurred by the Manager or its officers, and agents on the Company’s behalf, including costs of software, legal, accounting, tax, administrative and other similar services rendered for the Company by providers retained by the Manager and (ii) the allocable portion of the compensation paid to specified officers dedicated to the Company. The amounts under “Due to affiliates” on the consolidated balance sheets consisted of the following for the periods indicated (dollars in thousands): Management Fees and Compensation Reimbursement to Affiliate Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Management fees $ 1,192 $ 971 $ 2,316 $ 1,672 Compensation reimbursement 191 191 382 382 Total $ 1,383 $ 1,162 $ 2,698 $ 2,054 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments [Abstract] | |
Outstanding Notional Amounts of Derivative Instruments | The following table summarizes the outstanding notional amounts of derivative instruments as of the dates indicated (dollars in thousands): Derivatives June 30, 2018 December 31, 2017 Notional amount of interest rate swaps $ 1,324,500 $ 1,067,950 Notional amount of swaptions 195,000 155,000 Notional amount of TBAs, net (22,800 ) 26,900 Notional amount of Treasury futures (136,600 ) - Total notional amount $ 1,360,100 $ 1,249,850 |
Information about Company's Interest Rate Swap Agreements | The following table presents information about the Company’s interest rate swap agreements as of the dates indicated (dollars in thousands): Notional Amount Weighted Average Pay Rate Weighted Average Receive Rate Weighted Average Years to Maturity June 30, 2018 $ 1,324,500 2.05 % 2.34 % 4.9 March 31, 2018 $ 1,141,750 1.90 % 1.89 % 4.9 December 31, 2017 $ 1,067,950 1.83 % 1.44 % 4.9 |
Information about Company's Interest Rate Swaption Agreements | The following table presents information about the Company’s interest rate swaption agreements as of the dates indicated (dollars in thousands): Notional Amount Weighted Average Pay Rate Weighted Average Receive Rate (A) Weighted Average Years to Maturity June 30, 2018 $ 195,000 2.98 % LIBOR-BBA % 10.3 March 31, 2018 $ 180,000 2.93 % LIBOR-BBA % 10.5 December 31, 2017 $ 155,000 2.88 % LIBOR-BBA % 10.8 (A) Floats in accordance with LIBOR. |
Realized Gain (Loss) Related to Derivatives | The following table presents information about realized gain (loss) on derivatives, which is included on the consolidated statements of income (loss) for the periods indicated (dollars in thousands): Realized Gains (Losses) on Derivatives Consolidated Statements of Income Three Months Ended June 30, Six Months Ended June 30, Derivatives (Loss) Location 2018 2017 2018 2017 Interest rate swaps Realized gain (loss) on derivatives, net $ (162 ) $ (436 ) $ (584 ) $ (595 ) Swaptions Realized gain (loss) on derivatives, net (101 ) - (375 ) (69 ) TBAs Realized gain (loss) on derivatives, net (549 ) (402 ) (578 ) (514 ) Treasury futures Realized gain (loss) on derivatives, net (1,221 ) (959 ) (483 ) (1,636 ) Total $ (2,033 ) $ (1,797 ) $ (2,020 ) $ (2,814 ) |
Offsetting Assets | The following tables present information about the Company’s assets and liabilities that are subject to master netting arrangements or similar agreements and can potentially be offset on the Company’s consolidated balance sheets as of the dates indicated (dollars in thousands): Offsetting Assets and Liabilities As of June 30, 2018 Gross Gross Net Amounts of Assets Gross Amounts Not Offset in the Consolidated Balance Sheet Amounts of Recognized Assets or Liabilities Amounts Offset in the Consolidated Balance Sheet Presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Received (Pledged) Net Amount Assets Interest rate swaps $ 23,020 $ - $ 23,020 $ (23,020 ) $ - $ - Swaptions 2,683 - 2,683 (2,683 ) - - TBAs 319 (319 ) - - - - Treasury futures 313 - 313 1,282 (1,595 ) - Total Assets $ 26,335 $ (319 ) $ 26,016 $ (24,421 ) $ (1,595 ) $ - As of December 31, 2017 Gross Gross Net Amounts of Assets Gross Amounts Not Offset in the Consolidated Balance Sheet Amounts of Recognized Assets or Liabilities Amounts Offset in the Consolidated Balance Sheet Presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Received (Pledged) Net Amount Assets Interest rate swaps $ 12,994 $ - $ 12,994 $ (12,994 ) $ - $ - Swaptions 802 - 802 (802 ) - - TBAs 34 - 34 (34 ) - - Total Assets $ 13,830 $ - $ 13,830 $ (13,830 ) $ - $ - |
Offsetting Liabilities | The following tables present information about the Company’s assets and liabilities that are subject to master netting arrangements or similar agreements and can potentially be offset on the Company’s consolidated balance sheets as of the dates indicated (dollars in thousands): Offsetting Assets and Liabilities As of June 30, 2018 Liabilities Repurchase agreements $ 1,693,309 $ - $ 1,693,309 $ (1,671,331 ) $ (21,978 ) $ - Interest rate swaps 726 - 726 (726 ) - - TBAs 710 (319 ) 391 (391 ) - - Total Liabilities $ 1,694,745 $ (319 ) $ 1,694,426 $ (1,672,448 ) $ (21,978 ) $ - As of December 31, 2017 Liabilities Repurchase agreements $ 1,666,537 $ - $ 1,666,537 $ (1,637,922 ) $ (28,615 ) $ - Interest rate swaps 342 - 342 32 (374 ) - Treasury futures 2 - 2 177 (179 ) - Total Liabilities $ 1,666,881 $ - $ 1,666,881 $ (1,637,713 ) $ (29,168 ) $ - |
Fair Value (Tables)
Fair Value (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value [Abstract] | |
Company's Assets and Liabilities Measured at Fair Value on Recurring Basis | The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis as of the dates indicated (dollars in thousands). Recurring Fair Value Measurements As of June 30, 2018 Level 1 Level 2 Level 3 Carrying Value Assets RMBS Fannie Mae $ - $ 1,264,508 $ - $ 1,264,508 Freddie Mac - 492,699 - 492,699 CMOs - 103,973 - 103,973 RMBS total - 1,861,180 - 1,861,180 Derivative assets Interest rate swaps - 23,020 - 23,020 Interest rate swaptions - 2,683 - 2,683 TBAs - - - - Treasury futures - 313 - 313 Derivative assets total - 26,016 - 26,016 Servicing Related Assets - - 231,548 231,548 Total Assets $ - $ 1,887,196 $ 231,548 $ 2,118,744 Liabilities Derivative liabilities Interest rate swaps - 726 - 726 TBAs - 391 - 391 Treasury futures - - - - Derivative liabilities total - 1,117 - 1,117 Total Liabilities $ - $ 1,117 $ - $ 1,117 As of December 31, 2017 Level 1 Level 2 Level 3 Carrying Value Assets RMBS Fannie Mae $ - $ 1,233,699 $ - $ 1,233,699 Freddie Mac - 513,544 - 513,544 CMOs - 93,669 - 93,669 RMBS total - 1,840,912 - 1,840,912 Derivative assets Interest rate swaps - 12,994 - 12,994 Interest rate swaptions - 802 - 802 TBAs - 34 - 34 Derivative assets total - 13,830 - 13,830 Servicing related assets - - 122,806 122,806 Total Assets $ - $ 1,854,742 $ 122,806 $ 1,977,548 Liabilities Derivative liabilities Interest rate swaps - 342 - 342 Treasury futures - 2 - 2 Derivative liabilities total - 344 - 344 Total Liabilities $ - $ 344 $ - $ 344 |
Company's Level 3 Assets (Servicing Related Assets) Measured at Fair Value on Recurring Basis | The tables below present the reconciliation for the Company’s Level 3 assets (Servicing Related Assets) measured at fair value on a recurring basis as of the dates indicated (dollars in thousands): Level 3 Fair Value Measurements As of June 30, 2018 Level 3 MSRs Balance at December 31, 2017 $ 122,806 Purchases, sales and principal paydowns: Purchases 97,988 Other changes (B) (1,379 ) Purchases, sales and principal paydowns: $ 96,609 Changes in Fair Value due to: Changes in valuation inputs or assumptions used in valuation model 17,889 Other changes in fair value (C) (5,756 ) Unrealized gain (loss) included in Net Income $ 12,133 Balance at June 30, 2018 $ 231,548 As of December 31, 2017 Level 3 (A) Excess MSRs Pool 2 MSRs Total Balance at December 31, 2016 $ 29,392 $ 31,871 $ 61,263 Purchases, sales and principal paydowns: Purchases - 83,586 83,586 Sales (35,905 ) - (35,905 ) Other changes (B) 6,513 (1,810 ) 4,703 Purchases, sales and principal paydowns: $ (29,392 ) $ 81,776 $ 52,384 Changes in Fair Value due to: Changes in valuation inputs or assumptions used in valuation model - 16,375 16,375 Other changes in fair value (C) - (7,216 ) (7,216 ) Unrealized gain (loss) included in Net Income $ - $ 9,159 $ 9,159 Balance at December 31, 2017 $ - $ 122,806 $ 122,806 (A) Includes the recapture agreement for each respective pool. (B) Represents purchase price adjustments, principally contractual prepayment protection, and changes due to the Company’s repurchase of the underlying collateral. (C) Represents changes due to realization of expected cash flows. |
Significant Unobservable Inputs Used in Fair Value Measurement | The tables below present information about the significant unobservable inputs used in the fair value measurement of the Company’s Servicing Related Assets classified as Level 3 fair value assets as of the dates indicated (dollars in thousands): Fair Value Measurements As of June 30, 2018 Fair Value Valuation Technique Unobservable Input (A) Range Weighted Average MSRs Conventional $ 188,644 Discounted cash flow Constant prepayment speed 5.2% - 20.7 % 8.9 % Uncollected payments 0.2% - 1.8 % 0.9 % Discount rate 9.3 % Annual cost to service, per loan $ 71 Government $ 42,904 Discounted cash flow Constant prepayment speed 6.0% - 18.8 % 9.0 % Uncollected payments 0.4% - 4.2 % 3.3 % Discount rate 12.0 % Annual cost to service, per loan $ 105 TOTAL $ 231,548 Discounted cash flow As of December 31, 2017 Fair Value Valuation Technique Unobservable Input (A) Range Weighted Average MSRs Conventional $ 82,150 Discounted cash flow Constant prepayment speed 6.5% - 23.5 % 10.5 % Uncollected payments 0.2% - 1.8 % 0.8 % Discount rate 9.3 % Annual cost to service, per loan $ 70 Government $ 40,656 Discounted cash flow Constant prepayment speed 6.0% - 14.2 % 8.1 % Uncollected payments 0.4% - 5.2 % 3.3 % Discount rate 12.0 % Annual cost to service, per loan $ 96 TOTAL $ 122,806 Discounted cash flow (A) Significant increases (decreases) in any of the inputs in isolation may result in significantly lower (higher) fair value measurements. A change in the assumption used for discount rates may be accompanied by a directionally similar change in the assumption used for the probability of uncollected payments and a directionally opposite change in the assumption used for prepayment rates. |
Repurchase Agreements (Tables)
Repurchase Agreements (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Repurchase Agreements [Abstract] | |
Repurchase Agreements Remaining Maturities and Weighted Average Rates | The repurchase agreements had the following remaining maturities and weighted average rates as of the dates indicated (dollars in thousands): Repurchase Agreement Characteristics As of June 30, 2018 Repurchase Agreements Weighted Average Rate Less than one month $ 547,663 2.04 % One to three months 734,276 2.13 % Greater than three months 411,370 2.19 % Total/Weighted Average $ 1,693,309 2.12 % As of December 31, 2017 Repurchase Agreements Weighted Average Rate Less than one month $ 429,573 1.44 % One to three months 1,231,687 1.48 % Greater than three months 5,277 1.52 % Total/Weighted Average $ 1,666,537 1.47 % |
Notes Payable (Tables)
Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Notes Payable [Abstract] | |
Outstanding Long-Term Borrowings Remaining Maturities | The outstanding long-term borrowings had the following remaining maturities as of the dates indicated (dollars in thousands): Long-Term Borrowings Repayment Characteristics As of June 30, 2018 2018 2019 2020 2021 2022 2023 Total MSR Term Facility Borrowings under MSR Term Facility $ 1,000 $ 2,000 $ 2,000 $ 2,000 $ 10,996 $ - $ 17,996 MSR Financing Facility Borrowings under MSR Financing Facility $ 1,169 $ 4,839 $ 5,109 $ 50,577 $ - $ - $ 61,694 Total $ 2,169 $ 6,839 $ 7,109 $ 52,577 $ 10,996 $ - $ 79,690 As of December 31, 2017 2018 2019 2020 2021 2022 2023 Total MSR Term Facility Borrowings under MSR Term Facility $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 11,000 $ - $ 19,000 MSR Financing Facility Borrowings under MSR Financing Facility $ - $ 389 $ 1,608 $ 1,697 $ 16,806 $ - $ 20,500 Total $ 2,000 $ 2,389 $ 3,608 $ 3,697 $ 27,806 $ - $ 39,500 |
Receivables and Other Assets (T
Receivables and Other Assets (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Receivables and Other Assets [Abstract] | |
Receivables and Other Assets | The assets comprising “Receivables and other assets” as of June 30, 2018 and December 31, 2017 are summarized in the following table (dollars in thousands): Receivables and Other Assets June 30, 2018 December 31, 2017 Servicing advances $ 4,555 $ 5,901 Interest receivable 6,392 5,804 Repurchased loans held for sale 3,647 2,160 Other receivables 4,063 2,777 Total other assets $ 18,657 $ 16,642 |
Accrued Expenses and Other Li37
Accrued Expenses and Other Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accrued Expenses and Other Liabilities [Abstract] | |
Accrued Expenses and Other Liabilities | The liabilities comprising “Accrued expenses and other liabilities” as of June 30, 2018 and December 31, 2017 are summarized in the following table (dollars in thousands): Accrued Expenses and Other Liabilities June 30, 2018 December 31, 2017 Accrued interest payable $ 4,531 $ 4,252 Escrow funds held 37 37 Net deferred tax payable 4,550 843 Accrued expenses 15,787 6,882 Total accrued expenses and other liabilities $ 24,905 $ 12,014 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes [Abstract] | |
Income Tax Expense (Benefit) | The components of the Company’s income tax expense (benefit) are as follows for the periods indicated below (dollars in thousands): Six Months Ended June 30, 2018 2017 Current federal income tax expense $ 68 $ 112 Current state income tax expense 21 21 Deferred federal income tax expense (benefit) 3,024 (134 ) Deferred state income tax expense (benefit) 683 (4 ) Provision for (Benefit from) Corporate Business Taxes $ 3,796 $ (5 ) |
Reconciliation of Statutory Federal Rate to Effective Rate | The following is a reconciliation of the statutory federal rate to the effective rate, for the periods indicated below (dollars in thousands): Six Months Ended June 30, 2018 2017 Computed income tax (benefit) expense at federal rate $ 11,106 21.0 % $ 7,321 35.0 % State taxes, net of federal benefit, if applicable 699 1.3 % - - % REIT income not subject to tax (8,009 ) (15.1 )% (7,326 ) (35.0 )% Provision for (Benefit from) Corporate Business Taxes/Effective Tax Rate (A) $ 3,796 7.2 % $ (5 ) 0.0 % (A) The provision for income taxes is recorded at the TRS level. |
Current and Deferred Tax Liabilities and Assets | The Company’s consolidated balance sheets, at June 30, 2018 and December 31, 2017, contain the following current and deferred tax liabilities and assets, which are recorded at the TRS level (dollars in thousands): Six Months Ended June 30, 2018 2017 Income taxes payable Federal income taxes payable $ 68 $ 650 State and local income taxes payable 21 82 Income taxes payable $ 89 $ 732 June 30, 2018 December 31, 2017 Deferred tax (assets) liabilities Deferred tax - organizational expenses $ (7 ) $ (10 ) Deferred tax - mortgage servicing rights 4,557 909 Deferred tax - net operating loss - (56 ) Total net deferred tax (assets) liabilities $ 4,550 $ 843 |
Organization and Operations (De
Organization and Operations (Details) - USD ($) | Jun. 04, 2018 | Aug. 17, 2017 | Mar. 29, 2017 | Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Sep. 30, 2017 |
Class of Stock Disclosures [Abstract] | ||||||||
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 | 500,000,000 | |||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | |||||
Common stock issued and sold (in shares) | 2,750,000 | 5,175,000 | ||||||
Common stock issued, price per share (in dollars per share) | $ 0.01 | $ 0.01 | $ 18.17 | $ 18.17 | $ 18.30 | $ 18.44 | ||
Common stock issued and sold, value | $ 81,100,000 | $ 53,619,000 | $ 80,940,000 | |||||
Stock issuance expense | $ 265,000 | $ 229,000 | ||||||
Date of conducting IPO and concurrent private placement of common stock | Oct. 9, 2013 | |||||||
Proceeds from issuance of preferred stock | $ 3,981,000 | 0 | ||||||
Stock exercised to purchase additional shares (in shares) | 338,857 | |||||||
Proceeds from issuance of common stock | $ 53,800,000 | $ 53,619,000 | $ 80,940,000 | |||||
Series A Preferred Stock [Member] | ||||||||
Class of Stock Disclosures [Abstract] | ||||||||
Preferred stock, shares authorized (in shares) | 100,000,000 | 100,000,000 | 100,000,000 | |||||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | ||||
Common stock issued and sold (in shares) | 168,212 | |||||||
Stock issuance expense | $ 193,000 | $ 200,000 | ||||||
Preferred stock issued (in shares) | 2,400,000 | 2,568,212 | 2,568,212 | 2,400,000 | ||||
Preferred stock dividend rate | 8.20% | 8.20% | ||||||
Proceeds from issuance of preferred stock | $ 58,100,000 | $ 4,300,000 |
Basis of Presentation and Sig40
Basis of Presentation and Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Cash and Cash Equivalents and Restricted Cash [Abstract] | |||||
Restricted cash | $ 23,573 | $ 23,573 | $ 29,168 | ||
Variation margin | 15,800 | 15,800 | |||
Realized gain (loss) on RMBS, net [Abstract] | |||||
Gain on RMBS | 104 | $ 0 | 104 | $ 0 | |
Loss on RMBS | (225) | (77) | (5,106) | (333) | |
Net realized loss on RMBS | (121) | (77) | (5,002) | (333) | |
Realized loss on derivatives, net | (2,033) | (1,797) | (2,020) | (2,814) | |
Unrealized gain (loss) on derivatives, net | 6,009 | (4,633) | 25,635 | (3,551) | |
Realized gain on Excess MSRs, net | 0 | 0 | 0 | 6,678 | |
Unrealized gain (loss) on MSRs, net | (365) | (4,507) | 12,133 | 7,805 | |
Total | 3,490 | (11,014) | 30,746 | 7,785 | |
RMBS [Member] | |||||
Investments in RMBS [Abstract] | |||||
OTTI securities | 0 | 77 | 45 | 77 | |
Derivatives [Member] | |||||
Cash and Cash Equivalents and Restricted Cash [Abstract] | |||||
Restricted cash | 1,600 | 1,600 | 549 | ||
Repurchase Agreements [Member] | |||||
Cash and Cash Equivalents and Restricted Cash [Abstract] | |||||
Restricted cash | 22,000 | 22,000 | 28,600 | ||
Receivables and Other Assets [Member] | RMBS [Member] | |||||
Investments in RMBS [Abstract] | |||||
Income receivable | 5,900 | 5,900 | 5,700 | ||
Receivables and Other Assets [Member] | Excess Mortgage Service Right [Member] | |||||
Investments in RMBS [Abstract] | |||||
Income receivable | 0 | $ 0 | 0 | $ 0 | 0 |
Receivables and Other Assets [Member] | Reimbursable Servicing Advances [Member] | |||||
Investments in RMBS [Abstract] | |||||
Income receivable | $ 4,600 | $ 4,600 | $ 5,900 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |||
Segment Reporting Profit (Loss) and Other Information [Abstract] | |||||||
Interest income | $ 12,019 | $ 10,002 | $ 25,434 | $ 16,080 | |||
Interest expense | 7,324 | 4,292 | 14,867 | 6,723 | |||
Net interest income (expense) | 4,695 | 5,710 | 10,567 | 9,357 | |||
Servicing fee income | 11,535 | 5,493 | 20,185 | 10,067 | |||
Servicing costs | 2,394 | 991 | 4,106 | 2,218 | |||
Net servicing income | 9,141 | 4,502 | 16,079 | 7,849 | |||
Other income (expense) | 3,490 | (11,014) | 30,746 | 7,785 | |||
Other operating expenses | 2,320 | 2,207 | 4,512 | 4,074 | |||
(Benefit from) provision for corporate business taxes | 1,161 | (1,344) | 3,796 | [1] | (5) | [1] | |
Net Income (Loss) | 13,845 | (1,665) | 49,084 | 20,922 | |||
Investments | 2,092,728 | 2,092,728 | $ 1,963,718 | ||||
Other assets | 92,188 | 92,188 | 86,967 | ||||
Total Assets | 2,184,916 | 2,184,916 | 2,050,685 | ||||
Debt | 1,772,591 | 1,772,591 | 1,705,562 | ||||
Other liabilities | 38,587 | 38,587 | 22,666 | ||||
Total Liabilities | 1,811,178 | 1,811,178 | 1,728,228 | ||||
Book value | 373,738 | 373,738 | 322,457 | ||||
Servicing Related Assets [Member] | Operating Segments [Member] | |||||||
Segment Reporting Profit (Loss) and Other Information [Abstract] | |||||||
Interest income | 0 | 0 | 0 | 523 | |||
Interest expense | 424 | 123 | 637 | 237 | |||
Net interest income (expense) | (424) | (123) | (637) | 286 | |||
Servicing fee income | 11,535 | 5,493 | 20,185 | 10,067 | |||
Servicing costs | 2,394 | 991 | 4,106 | 2,218 | |||
Net servicing income | 9,141 | 4,502 | 16,079 | 7,849 | |||
Other income (expense) | (365) | (4,507) | 12,133 | 14,483 | |||
Other operating expenses | 0 | 0 | 0 | 0 | |||
(Benefit from) provision for corporate business taxes | 1,161 | (1,344) | 3,796 | (5) | |||
Net Income (Loss) | 7,191 | 1,216 | 23,779 | 22,623 | |||
Investments | 231,548 | 231,548 | 122,806 | ||||
Other assets | 12,609 | 12,609 | 8,281 | ||||
Total Assets | 244,157 | 244,157 | 131,087 | ||||
Debt | 79,282 | 79,282 | 39,025 | ||||
Other liabilities | 19,390 | 19,390 | 6,575 | ||||
Total Liabilities | 98,672 | 98,672 | 45,600 | ||||
Book value | 145,485 | 145,485 | 85,487 | ||||
RMBS [Member] | Operating Segments [Member] | |||||||
Segment Reporting Profit (Loss) and Other Information [Abstract] | |||||||
Interest income | 12,019 | 10,002 | 25,434 | 15,557 | |||
Interest expense | 6,900 | 4,169 | 14,230 | 6,486 | |||
Net interest income (expense) | 5,119 | 5,833 | 11,204 | 9,071 | |||
Servicing fee income | 0 | 0 | 0 | 0 | |||
Servicing costs | 0 | 0 | 0 | 0 | |||
Net servicing income | 0 | 0 | 0 | 0 | |||
Other income (expense) | 3,855 | (6,507) | 18,613 | (6,698) | |||
Other operating expenses | 0 | 0 | 0 | 0 | |||
(Benefit from) provision for corporate business taxes | 0 | 0 | 0 | 0 | |||
Net Income (Loss) | 8,974 | (674) | 29,817 | 2,373 | |||
Investments | 1,861,180 | 1,861,180 | 1,840,912 | ||||
Other assets | 55,481 | 55,481 | 48,631 | ||||
Total Assets | 1,916,661 | 1,916,661 | 1,889,543 | ||||
Debt | 1,693,309 | 1,693,309 | 1,666,537 | ||||
Other liabilities | 5,235 | 5,235 | 4,385 | ||||
Total Liabilities | 1,698,544 | 1,698,544 | 1,670,922 | ||||
Book value | 218,117 | 218,117 | 218,621 | ||||
All Other [Member] | |||||||
Segment Reporting Profit (Loss) and Other Information [Abstract] | |||||||
Interest income | 0 | 0 | 0 | 0 | |||
Interest expense | 0 | 0 | 0 | 0 | |||
Net interest income (expense) | 0 | 0 | 0 | 0 | |||
Servicing fee income | 0 | 0 | 0 | 0 | |||
Servicing costs | 0 | 0 | 0 | 0 | |||
Net servicing income | 0 | 0 | 0 | 0 | |||
Other income (expense) | 0 | 0 | 0 | 0 | |||
Other operating expenses | 2,320 | 2,207 | 4,512 | 4,074 | |||
(Benefit from) provision for corporate business taxes | 0 | 0 | 0 | 0 | |||
Net Income (Loss) | (2,320) | $ (2,207) | (4,512) | $ (4,074) | |||
Investments | 0 | 0 | 0 | ||||
Other assets | 24,098 | 24,098 | 30,055 | ||||
Total Assets | 24,098 | 24,098 | 30,055 | ||||
Debt | 0 | 0 | 0 | ||||
Other liabilities | 13,962 | 13,962 | 11,706 | ||||
Total Liabilities | 13,962 | 13,962 | 11,706 | ||||
Book value | $ 10,136 | $ 10,136 | $ 18,349 | ||||
[1] | The provision for income taxes is recorded at the TRS level. |
Investments in RMBS (Details)
Investments in RMBS (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)Security | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($)Security | ||
Residential Mortgage-Backed Securities [Abstract] | ||||||
Carrying value | $ 1,861,180,000 | $ 1,861,180,000 | $ 1,840,912,000 | |||
Carrying value of collateral for repurchase agreements | 1,765,246,000 | 1,765,246,000 | 1,728,564,000 | |||
OTTI charges recognized in earnings | 0 | $ 77 | 45,000 | $ 77 | ||
RMBS [Member] | ||||||
Residential Mortgage-Backed Securities [Abstract] | ||||||
Original face value | 2,083,895,000 | 2,083,895,000 | 1,961,352,000 | |||
Book value | 1,902,447,000 | 1,902,447,000 | 1,843,855,000 | |||
Gross unrealized gains | 7,713,000 | 7,713,000 | 8,634,000 | |||
Gross unrealized losses | (48,980,000) | (48,980,000) | (11,577,000) | |||
Carrying value | [1] | $ 1,861,180,000 | $ 1,861,180,000 | $ 1,840,912,000 | ||
Number of securities | Security | 247 | 238 | ||||
Weighted average coupon | 3.93% | 3.86% | ||||
Weighted average yield | [2] | 3.74% | 3.74% | 3.66% | ||
Weighted average maturity | [3] | 25 years | 25 years | |||
Carrying value of collateral for repurchase agreements | $ 1,765,200,000 | $ 1,765,200,000 | $ 1,728,600,000 | |||
RMBS [Member] | Fannie Mae [Member] | ||||||
Residential Mortgage-Backed Securities [Abstract] | ||||||
Original face value | 1,409,569,000 | 1,409,569,000 | 1,306,823,000 | |||
Book value | 1,298,953,000 | 1,298,953,000 | 1,241,027,000 | |||
Gross unrealized gains | 196,000 | 196,000 | 1,427,000 | |||
Gross unrealized losses | (34,641,000) | (34,641,000) | (8,755,000) | |||
Carrying value | [1] | $ 1,264,508,000 | $ 1,264,508,000 | $ 1,233,699,000 | ||
Number of securities | Security | 160 | 154 | ||||
Weighted average rating | [4] | |||||
Weighted average coupon | 3.84% | 3.80% | ||||
Weighted average yield | [2] | 3.67% | 3.67% | 3.61% | ||
Weighted average maturity | [3] | 25 years | 26 years | |||
RMBS [Member] | Freddie Mac [Member] | ||||||
Residential Mortgage-Backed Securities [Abstract] | ||||||
Original face value | $ 566,251,000 | $ 566,251,000 | $ 556,204,000 | |||
Book value | 506,755,000 | 506,755,000 | 515,475,000 | |||
Gross unrealized gains | 141,000 | 141,000 | 864,000 | |||
Gross unrealized losses | (14,197,000) | (14,197,000) | (2,795,000) | |||
Carrying value | [1] | $ 492,699,000 | $ 492,699,000 | $ 513,544,000 | ||
Number of securities | Security | 65 | 64 | ||||
Weighted average rating | [4] | |||||
Weighted average coupon | 3.74% | 3.74% | ||||
Weighted average yield | [2] | 3.59% | 3.59% | 3.57% | ||
Weighted average maturity | [3] | 28 years | 27 years | |||
RMBS [Member] | CMOs [Member] | ||||||
Residential Mortgage-Backed Securities [Abstract] | ||||||
Original face value | $ 108,075,000 | $ 108,075,000 | $ 98,325,000 | |||
Book value | 96,739,000 | 96,739,000 | 87,353,000 | |||
Gross unrealized gains | 7,376,000 | 7,376,000 | 6,343,000 | |||
Gross unrealized losses | (142,000) | (142,000) | (27,000) | |||
Carrying value | [1] | $ 103,973,000 | $ 103,973,000 | $ 93,669,000 | ||
Number of securities | Security | 22 | 20 | ||||
Weighted average rating | [4] | |||||
Weighted average coupon | 5.85% | 5.26% | ||||
Weighted average yield | [2] | 5.33% | 5.33% | 4.88% | ||
Weighted average maturity | [3] | 12 years | 12 years | |||
[1] | See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. | |||||
[2] | The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. | |||||
[3] | The weighted average maturity is based on the timing of expected principal reduction on the assets. | |||||
[4] | The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization ("NRSRO"). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. |
Investments in RMBS, Assets by
Investments in RMBS, Assets by Maturity (Details) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018USD ($)Security | Dec. 31, 2017USD ($)Security | ||
RMBS, Assets by Maturity [Abstract] | |||
Carrying value | $ 1,861,180 | $ 1,840,912 | |
RMBS [Member] | |||
RMBS, Assets by Maturity [Abstract] | |||
Original face value | 2,083,895 | 1,961,352 | |
Book value | 1,902,447 | 1,843,855 | |
Gross unrealized gains | 7,713 | 8,634 | |
Gross unrealized losses | (48,980) | (11,577) | |
Carrying value | [1] | $ 1,861,180 | $ 1,840,912 |
Number of securities | Security | 247 | 238 | |
Weighted average coupon | 3.93% | 3.86% | |
Weighted average yield | [2] | 3.74% | 3.66% |
Weighted average maturity | [3] | 25 years | 25 years |
RMBS [Member] | 5-10 Years [Member] | |||
RMBS, Assets by Maturity [Abstract] | |||
Original face value | $ 25,712 | $ 16,069 | |
Book value | 19,270 | 15,483 | |
Gross unrealized gains | 313 | 324 | |
Gross unrealized losses | (545) | (312) | |
Carrying value | [1] | $ 19,038 | $ 15,495 |
Number of securities | Security | 4 | 3 | |
Weighted average rating | [4] | ||
Weighted average coupon | 4.12% | 4.33% | |
Weighted average yield | [2] | 3.94% | 4.06% |
Weighted average maturity | [3] | 7 years | 7 years |
RMBS [Member] | Over 10 Years [Member] | |||
RMBS, Assets by Maturity [Abstract] | |||
Original face value | $ 2,058,183 | $ 1,945,283 | |
Book value | 1,883,177 | 1,828,372 | |
Gross unrealized gains | 7,400 | 8,310 | |
Gross unrealized losses | (48,435) | (11,265) | |
Carrying value | [1] | $ 1,842,142 | $ 1,825,417 |
Number of securities | Security | 243 | 235 | |
Weighted average rating | [4] | ||
Weighted average coupon | 3.93% | 3.85% | |
Weighted average yield | [2] | 3.74% | 3.65% |
Weighted average maturity | [3] | 25 years | 26 years |
[1] | See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. | ||
[2] | The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. | ||
[3] | The weighted average maturity is based on the timing of expected principal reduction on the assets. | ||
[4] | The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization ("NRSRO"). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. |
Investments in RMBS, Unrealized
Investments in RMBS, Unrealized Loss Positions (Details) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018USD ($)Security | Dec. 31, 2017USD ($)Security | ||
RMBS, Unrealized Loss Positions [Abstract] | |||
Carrying value | $ 1,861,180 | $ 1,840,912 | |
RMBS [Member] | |||
RMBS, Unrealized Loss Positions [Abstract] | |||
Original face value | 2,083,895 | 1,961,352 | |
Book value | 1,902,447 | 1,843,855 | |
Gross unrealized losses | (48,980) | (11,577) | |
Carrying value | [1] | $ 1,861,180 | $ 1,840,912 |
Number of securities | Security | 247 | 238 | |
Weighted average coupon | 3.93% | 3.86% | |
Weighted average yield | [2] | 3.74% | 3.66% |
Weighted average maturity | [3] | 25 years | 25 years |
RMBS [Member] | Unrealized Loss Positions [Member] | |||
RMBS, Unrealized Loss Positions [Abstract] | |||
Original face value | $ 1,789,300 | $ 1,350,769 | |
Book value | 1,616,779 | 1,294,951 | |
Gross unrealized losses | (48,980) | (11,577) | |
Carrying value | [1] | $ 1,567,799 | $ 1,283,374 |
Number of securities | Security | 211 | 156 | |
Weighted average coupon | 3.80% | 3.76% | |
Weighted average yield | [2] | 3.63% | 3.58% |
Weighted average maturity | [4] | 26 years | 26 years |
RMBS [Member] | Less than Twelve Months [Member] | Unrealized Loss Positions [Member] | |||
RMBS, Unrealized Loss Positions [Abstract] | |||
Original face value | $ 1,544,820 | $ 1,026,911 | |
Book value | 1,405,351 | 1,005,352 | |
Gross unrealized losses | (38,930) | (5,378) | |
Carrying value | [1] | $ 1,366,421 | $ 999,974 |
Number of securities | Security | 176 | 111 | |
Weighted average rating | [5] | ||
Weighted average coupon | 3.84% | 3.81% | |
Weighted average yield | [2] | 3.67% | 3.63% |
Weighted average maturity | [4] | 26 years | 26 years |
RMBS [Member] | Twelve or More Months [Member] | Unrealized Loss Positions [Member] | |||
RMBS, Unrealized Loss Positions [Abstract] | |||
Original face value | $ 244,480 | $ 323,858 | |
Book value | 211,428 | 289,599 | |
Gross unrealized losses | (10,050) | (6,199) | |
Carrying value | [1] | $ 201,378 | $ 283,400 |
Number of securities | Security | 35 | 45 | |
Weighted average rating | [5] | ||
Weighted average coupon | 3.57% | 3.61% | |
Weighted average yield | [2] | 3.38% | 3.40% |
Weighted average maturity | [4] | 24 years | 25 years |
[1] | See Note 9 regarding the estimation of fair value, which approximates carrying value for all securities. | ||
[2] | The weighted average yield is based on the most recent annualized monthly interest income, divided by the book value of settled securities. | ||
[3] | The weighted average maturity is based on the timing of expected principal reduction on the assets. | ||
[4] | The weighted average maturity is based on the timing of expected principal reduction on the assets. Except for the security for which the Company has recognized OTTI, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases which may be maturity. | ||
[5] | The Company used an implied AAA rating for the Agency RMBS. CMOs issued by Fannie Mae or Freddie Mac consist of loss share securities, the majority of which, by UPB, are unrated or rated below investment grade at June 30, 2018 by at least one nationally recognized statistical rating organization ("NRSRO"). Private label securities are rated investment grade or better by at least one NRSRO as of June 30, 2018. |
Investments in Servicing Rela45
Investments in Servicing Related Assets (Details) - Aurora Financial Group, Inc [Member] - USD ($) $ in Millions | Jun. 30, 2018 | May 29, 2015 |
Mortgage Loans on Real Estate [Abstract] | ||
Aggregate unpaid principal balance | $ 718.4 | |
Mortgage Servicing Rights (MSRs) [Member] | ||
Mortgage Loans on Real Estate [Abstract] | ||
Aggregate unpaid principal balance | $ 20,800 |
Investments in Servicing Rela46
Investments in Servicing Related Assets, Summary (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | ||
Servicing Asset [Abstract] | |||
Unpaid principal balance | $ 19,105,410 | $ 11,710,651 | |
Cost basis | 219,415 | 113,647 | |
Carrying value | [1] | $ 231,548 | $ 122,806 |
Weighted average coupon | 4.00% | 3.71% | |
Weighted average maturity | [2] | 27 years | 26 years 1 month 6 days |
Changes in fair value recorded in other income (loss) | $ 12,133 | $ 9,159 | |
Mortgage Service Right Conventional [Member] | |||
Servicing Asset [Abstract] | |||
Unpaid principal balance | 15,378,216 | 7,724,397 | |
Cost basis | [3] | 178,759 | 81,499 |
Carrying value | [1] | $ 188,644 | $ 82,150 |
Weighted average coupon | 4.16% | 3.98% | |
Weighted average maturity | [2] | 27 years | 25 years 2 months 12 days |
Changes in fair value recorded in other income (loss) | $ 9,885 | $ 651 | |
Mortgage Service Right Government [Member] | |||
Servicing Asset [Abstract] | |||
Unpaid principal balance | 3,727,194 | 3,986,254 | |
Cost basis | [3] | 40,656 | 32,148 |
Carrying value | [1] | $ 42,904 | $ 40,656 |
Weighted average coupon | 3.36% | 3.36% | |
Weighted average maturity | [2] | 27 years 3 months 18 days | 27 years 9 months 18 days |
Changes in fair value recorded in other income (loss) | $ 2,248 | $ 8,508 | |
[1] | Carrying value represents the fair value of the pools (see Note 9). | ||
[2] | The weighted average maturity represents the weighted average expected timing of the receipt of cash flows of each investment. | ||
[3] | MSR cost basis consists of the carrying value of the prior period, adjusted for any purchases, sales and principal paydowns of the underlying mortgage loans. |
Investments in Servicing Rela47
Investments in Servicing Related Assets, Geographic Concentration (Details) | Jun. 30, 2018 | Dec. 31, 2017 |
Servicing Related Assets, Geographic Concentration [Abstract] | ||
Outstanding unpaid principal balance | 100.00% | 100.00% |
California [Member] | ||
Servicing Related Assets, Geographic Concentration [Abstract] | ||
Outstanding unpaid principal balance | 15.20% | 13.70% |
Texas [Member] | ||
Servicing Related Assets, Geographic Concentration [Abstract] | ||
Outstanding unpaid principal balance | 5.50% | |
Florida [Member] | ||
Servicing Related Assets, Geographic Concentration [Abstract] | ||
Outstanding unpaid principal balance | 5.40% | 5.30% |
New Jersey [Member] | ||
Servicing Related Assets, Geographic Concentration [Abstract] | ||
Outstanding unpaid principal balance | 7.20% | |
New York [Member] | ||
Servicing Related Assets, Geographic Concentration [Abstract] | ||
Outstanding unpaid principal balance | 5.10% | |
All Other [Member] | ||
Servicing Related Assets, Geographic Concentration [Abstract] | ||
Outstanding unpaid principal balance | 68.80% | 73.80% |
Equity and Earnings per Commo48
Equity and Earnings per Common Share, Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 04, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Mar. 29, 2017 |
Equity Incentive Plan Information [Abstract] | ||||||||||
Shares of Common Stock Issued, number of securities issued or to be issued upon exercise (in shares) | (338,857) | |||||||||
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans, Beginning Balance (in shares) | 1,288,869 | 1,288,869 | 1,288,869 | 1,288,869 | 1,335,218 | 1,335,218 | 1,288,869 | 1,335,218 | ||
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans During the Period (in shares) | (53,656) | 0 | 0 | 0 | (46,349) | 0 | ||||
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans, Ending Balance (in shares) | 1,235,213 | 1,288,869 | 1,288,869 | 1,288,869 | 1,288,869 | 1,335,218 | 1,235,213 | 1,288,869 | ||
Issuance Price (in dollars per share) | $ 0.01 | $ 18.17 | $ 18.44 | $ 18.30 | $ 18.17 | $ 18.30 | $ 0.01 | |||
LTIP-OP Units [Member] | ||||||||||
Equity Incentive Plan Information [Abstract] | ||||||||||
LTIP-OP Units, Beginning Balance (in shares) | (178,500) | (178,500) | (178,500) | (178,500) | (140,350) | (140,350) | (178,500) | (140,350) | ||
LTIP-OP Units, number of securities issued or to be issued upon exercise (in shares) | (45,400) | 0 | 0 | 0 | (38,150) | 0 | ||||
LTIP-OP Units, Ending Balance (in shares) | (223,900) | (178,500) | (178,500) | (178,500) | (178,500) | (140,350) | (223,900) | (178,500) | ||
LTIP-OP Units Forfeited, Beginning Balance (in shares) | 916 | 916 | 916 | 916 | 916 | 916 | 916 | 916 | ||
LTIP-OP Units Forfeited, number of securities issued or to be issued upon exercise (in shares) | 0 | 0 | 0 | 0 | 0 | 0 | ||||
LTIP-OP Units Forfeited, Ending Balance (in shares) | 916 | 916 | 916 | 916 | 916 | 916 | 916 | 916 | ||
LTIP-OP Units Converted, Beginning Balance (in shares) | 12,917 | 12,917 | 12,917 | 0 | 0 | 0 | 12,917 | 0 | ||
LTIP-OP Units Converted, number of securities issued or to be issued upon exercise (in shares) | 0 | 0 | 0 | 12,917 | 0 | 0 | ||||
LTIP-OP Units Converted, Ending Balance (in shares) | 12,917 | 12,917 | 12,917 | 12,917 | 0 | 0 | 12,917 | 0 | ||
LTIP-OP unit vesting period | 3 years | |||||||||
Share-based compensation expense recognized | $ 161 | $ 146 | $ 299 | $ 281 | ||||||
Unrecognized share-based compensation expense | $ 1,400 | $ 1,300 | $ 1,400 | |||||||
LTIP-OP Units [Member] | Maximum [Member] | ||||||||||
Equity Incentive Plan Information [Abstract] | ||||||||||
Period of recognition of unrecognized share-based compensation expense | 3 years | |||||||||
Common Stock [Member] | ||||||||||
Equity Incentive Plan Information [Abstract] | ||||||||||
Shares of Common Stock Issued, Beginning Balance (in shares) | (49,619) | (49,619) | (49,619) | (36,702) | (28,503) | (28,503) | (49,619) | (28,503) | ||
Shares of Common Stock Issued, number of securities issued or to be issued upon exercise (in shares) | (8,256) | 0 | 0 | (12,917) | (8,199) | 0 | ||||
Shares of Common Stock Issued, Ending Balance (in shares) | (57,875) | (49,619) | (49,619) | (49,619) | (36,702) | (28,503) | (57,875) | (36,702) | ||
Shares of Common Stock Forfeited, Beginning Balance (in shares) | 3,155 | 3,155 | 3,155 | 3,155 | 3,155 | 3,155 | 3,155 | 3,155 | ||
Shares of Common Stock Forfeited, number of securities issued or to be issued upon exercise (in shares) | 0 | 0 | 0 | 0 | 0 | 0 | ||||
Shares of Common Stock Forfeited, Ending Balance (in shares) | 3,155 | 3,155 | 3,155 | 3,155 | 3,155 | 3,155 | 3,155 | 3,155 | ||
2013 Plan [Member] | ||||||||||
Equity Incentive Plan Information [Abstract] | ||||||||||
Number of share equivalent to unit awarded (in shares) | 1 |
Equity and Earnings per Commo49
Equity and Earnings per Common Share, Non-Controlling Interests, Preferred Stock (Details) - USD ($) | Jun. 04, 2018 | Aug. 17, 2017 | Mar. 29, 2017 | Apr. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 |
Class of Stock Disclosures [Abstract] | ||||||||
Issuance of preferred stock, net of offering costs | $ 3,981,000 | $ 0 | ||||||
Stock issuance expense | $ 265,000 | $ 229,000 | ||||||
Stock issued and sold (in shares) | 2,750,000 | 5,175,000 | ||||||
Series A Preferred Stock [Member] | ||||||||
Class of Stock Disclosures [Abstract] | ||||||||
Number of shares authorized (in shares) | 100,000,000 | 100,000,000 | 100,000,000 | |||||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | ||||
Number of shares undesignated (in shares) | 96,200,000 | 96,200,000 | ||||||
Number of shares designated (in shares) | 3,800,000 | 3,800,000 | ||||||
Number of shares issued (in shares) | 2,400,000 | 2,568,212 | 2,568,212 | 2,400,000 | ||||
Issuance of preferred stock, net of offering costs | $ 58,100,000 | $ 4,300,000 | ||||||
Stock issuance expense | $ 193,000 | $ 200,000 | ||||||
Value of shares authorized | $ 35,000,000 | |||||||
Stock issued and sold (in shares) | 168,212 | |||||||
Weighted average price (in dollars per share) | $ 25.28 | |||||||
Stock issuance fee | $ 67,000 | |||||||
Cash redemption price (in dollars per share) | $ 25 | $ 25 | ||||||
Shares issued upon conversion, preferred stock (in shares) | 2.62881 | 2.62881 | ||||||
Percentage of cash dividends rate | 8.20% | 8.20% | ||||||
Liquidation preference per share (in dollars per share) | $ 25 | $ 25 | ||||||
Cumulative cash dividends (in dollars per share) | $ 2.05 | |||||||
LTIP-OP Units [Member] | ||||||||
Non-Controlling Interests in Operating Partnership [Abstract] | ||||||||
Number of LTIP units owned by non-controlling interest holders in Operating Partnership (in shares) | 210,067 | 210,067 | ||||||
Percentage of operating partnership | 1.30% | 1.30% |
Equity and Earnings per Commo50
Equity and Earnings per Common Share, Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Numerator [Abstract] | ||||
Net income (loss) allocable to common stockholders | $ 13,845 | $ (1,665) | $ 49,084 | $ 20,922 |
Net (income) loss allocated to noncontrolling interests in Operating Partnership | (173) | 116 | (629) | (293) |
Dividends on preferred stock | 1,317 | 0 | 2,530 | 0 |
Net income (loss) attributable to common stockholders | $ 12,355 | $ (1,549) | $ 45,925 | $ 20,629 |
Denominator [Abstract] | ||||
Weighted average common shares outstanding (in shares) | 13,616,461 | 12,695,090 | 13,164,863 | 10,164,564 |
Weighted average diluted shares outstanding (in shares) | 13,624,676 | 12,701,715 | 13,173,070 | 10,171,031 |
Basic and Diluted [Abstract] | ||||
Basic (in dollars per share) | $ 0.91 | $ (0.12) | $ 3.49 | $ 2.03 |
Diluted (in dollars per share) | $ 0.91 | $ (0.12) | $ 3.49 | $ 2.03 |
Anti-dilutive securities (in shares) | 0 | 0 | 0 | 0 |
Transactions with Affiliates 51
Transactions with Affiliates and Affiliated Entities (Details) | Nov. 15, 2016USD ($) | Jun. 30, 2018USD ($)Loan | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)Loan | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($)Loan | Jan. 31, 2017USD ($) |
Information about Related Party [Abstract] | |||||||
Renew of management agreement subject to termination | 1 year | ||||||
Management agreement subject to termination, notice period for termination to manager | 30 days | ||||||
Management agreement subject to termination, period of notice by manager in the event of default | 60 days | ||||||
Management agreement subject to termination, period of termination fee payment in the event of default | 30 days | ||||||
Percentage of annual management fee paid equal to gross equity | 1.50% | ||||||
Subservicing agreement initial term | 3 years | ||||||
Subservicing agreement additional term | 3 years | ||||||
Management fees | $ 1,192,000 | $ 971,000 | $ 2,316,000 | $ 1,672,000 | |||
Compensation reimbursement | 191,000 | 191,000 | 382,000 | 382,000 | |||
Total | $ 1,383,000 | $ 1,162,000 | $ 2,698,000 | $ 2,054,000 | |||
Minimum [Member] | |||||||
Information about Related Party [Abstract] | |||||||
Management agreement subject to non-renewal, notice period | 180 days | ||||||
Maximum [Member] | |||||||
Information about Related Party [Abstract] | |||||||
Management agreement subject to non-renewal, notice period | 270 days | ||||||
Freedom Mortgage Excess Service Right [Member] | |||||||
Information about Related Party [Abstract] | |||||||
Joint marketing recapture agreement initial term | 1 year | ||||||
Joint marketing recapture agreement automatic renewals term | 1 year | ||||||
Joint marketing recapture agreement termination notice period | 60 days | ||||||
Number of MSRs loans | Loan | 20 | 68 | 116 | ||||
Aggregate unpaid principal balance | $ 3,900,000 | $ 14,200,000 | $ 27,600,000 | ||||
Amount due to affiliated entity | 5,300 | $ 20,600 | $ 43,000 | ||||
Cash proceeds from sale of mortgage loans | $ 38,000,000 | ||||||
Period of monthly yield maintenance payment | 12 months | ||||||
Yield maintenance payment | $ 3,000,000 | $ 3,000,000 | |||||
Freedom Mortgage Excess Service Right [Member] | NexBank Term Loan [Member] | |||||||
Information about Related Party [Abstract] | |||||||
Repayment of outstanding borrowings | 12,000,000 | ||||||
Outstanding borrowings | $ 25,000,000 | ||||||
Ginnie Mae MSRs [Member] | Aurora Financial Group Inc [Member] | |||||||
Information about Related Party [Abstract] | |||||||
Weighted average servicing fee | 0.30% | ||||||
Aggregate unpaid principal balance | $ 4,500,000,000 |
Derivative Instruments, Summary
Derivative Instruments, Summary of Outstanding Notional Amounts and Interest Rate Swap Agreements of Derivative Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Jun. 30, 2018 | Dec. 31, 2017 | ||
Notional Amount of Interest Rate Swaps [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | $ 1,141,750 | $ 1,324,500 | $ 1,067,950 | |
Weighted average pay rate | 1.90% | 2.05% | 1.83% | |
Weighted average receive rate | 1.89% | 2.34% | 1.44% | |
Weighted average years to maturity | 4 years 10 months 24 days | 4 years 10 months 24 days | 4 years 10 months 24 days | |
Notional Amount of Swaptions [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | $ 180,000 | $ 195,000 | $ 155,000 | |
Weighted average pay rate | 2.93% | 2.98% | 2.88% | |
Weighted average receive rate type | [1] | LIBOR-BBA% | LIBOR-BBA% | LIBOR-BBA% |
Weighted average years to maturity | 10 years 6 months | 10 years 3 months 18 days | 10 years 9 months 18 days | |
Not Designated as Hedging Instrument [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | $ 1,360,100 | $ 1,249,850 | ||
Not Designated as Hedging Instrument [Member] | Notional Amount of Interest Rate Swaps [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | 1,324,500 | 1,067,950 | ||
Not Designated as Hedging Instrument [Member] | Notional Amount of Swaptions [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | 195,000 | 155,000 | ||
Not Designated as Hedging Instrument [Member] | Notional Amount of TBAs, Net [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | 26,900 | |||
Not Designated as Hedging Instrument [Member] | Notional Amount of TBAs, Net [Member] | Short [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | 22,800 | |||
Not Designated as Hedging Instrument [Member] | Notional Amount of Treasury Futures [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | $ 0 | |||
Not Designated as Hedging Instrument [Member] | Notional Amount of Treasury Futures [Member] | Short [Member] | ||||
Outstanding Notional Amounts and Interest Rate Swap Agreements [Abstract] | ||||
Total notional amount | $ 136,600 | |||
[1] | Floats in accordance with LIBOR. |
Derivative Instruments, Summa53
Derivative Instruments, Summary of Realized Gain (Loss) Related to Derivatives (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||||
Gain/(loss) on derivatives | $ (2,033) | $ (1,797) | $ (2,020) | $ (2,814) |
Not Designated as Hedging Instrument [Member] | ||||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||||
Gain/(loss) on derivatives | (2,033) | (1,797) | (2,020) | (2,814) |
Not Designated as Hedging Instrument [Member] | Realized Gain (Loss) on Derivatives, Net [Member] | Interest Rate Swaps [Member] | ||||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||||
Gain/(loss) on derivatives | (162) | (436) | (584) | (595) |
Not Designated as Hedging Instrument [Member] | Realized Gain (Loss) on Derivatives, Net [Member] | Swaptions [Member] | ||||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||||
Gain/(loss) on derivatives | (101) | 0 | (375) | (69) |
Not Designated as Hedging Instrument [Member] | Realized Gain (Loss) on Derivatives, Net [Member] | TBAs [Member] | ||||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||||
Gain/(loss) on derivatives | (549) | (402) | (578) | (514) |
Not Designated as Hedging Instrument [Member] | Realized Gain (Loss) on Derivatives, Net [Member] | Treasury Futures [Member] | ||||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||||
Gain/(loss) on derivatives | $ (1,221) | $ (959) | $ (483) | $ (1,636) |
Derivative Instruments, Offsett
Derivative Instruments, Offsetting Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Offsetting Derivative Assets [Abstract] | ||
Gross amounts of recognized assets or liabilities | $ 26,335 | $ 13,830 |
Gross amounts offset in the consolidated balance sheet | (319) | 0 |
Net amounts of assets presented in the consolidated balance sheet | 26,016 | 13,830 |
Gross amounts not offset in the consolidated balance sheet in financial instruments | (24,421) | (13,830) |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | (1,595) | 0 |
Net amount | 0 | 0 |
Interest Rate Swaps [Member] | ||
Offsetting Derivative Assets [Abstract] | ||
Gross amounts of recognized assets or liabilities | 23,020 | 12,994 |
Gross amounts offset in the consolidated balance sheet | 0 | 0 |
Net amounts of assets presented in the consolidated balance sheet | 23,020 | 12,994 |
Gross amounts not offset in the consolidated balance sheet in financial instruments | (23,020) | (12,994) |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | 0 | 0 |
Net amount | 0 | 0 |
Swaptions [Member] | ||
Offsetting Derivative Assets [Abstract] | ||
Gross amounts of recognized assets or liabilities | 2,683 | 802 |
Gross amounts offset in the consolidated balance sheet | 0 | 0 |
Net amounts of assets presented in the consolidated balance sheet | 2,683 | 802 |
Gross amounts not offset in the consolidated balance sheet in financial instruments | (2,683) | (802) |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | 0 | 0 |
Net amount | 0 | 0 |
TBAs [Member] | ||
Offsetting Derivative Assets [Abstract] | ||
Gross amounts of recognized assets or liabilities | 319 | 34 |
Gross amounts offset in the consolidated balance sheet | (319) | 0 |
Net amounts of assets presented in the consolidated balance sheet | 0 | 34 |
Gross amounts not offset in the consolidated balance sheet in financial instruments | 0 | (34) |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | 0 | 0 |
Net amount | 0 | $ 0 |
Treasury Futures [Member] | ||
Offsetting Derivative Assets [Abstract] | ||
Gross amounts of recognized assets or liabilities | 313 | |
Gross amounts offset in the consolidated balance sheet | 0 | |
Net amounts of assets presented in the consolidated balance sheet | 313 | |
Gross amounts not offset in the consolidated balance sheet in financial instruments | 1,282 | |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | (1,595) | |
Net amount | $ 0 |
Derivative Instruments, Offse55
Derivative Instruments, Offsetting Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Offsetting Derivative Liabilities [Abstract] | ||
Gross amounts of recognized assets or liabilities | $ 1,694,745 | $ 1,666,881 |
Gross amounts offset in the consolidated balance sheet | (319) | 0 |
Net amounts of assets presented in the consolidated balance sheet | 1,694,426 | 1,666,881 |
Gross amounts not offset in the consolidated balance sheet in financial instruments | (1,672,448) | (1,637,713) |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | (21,978) | (29,168) |
Net amount | 0 | 0 |
Repurchase Agreements [Member] | ||
Offsetting Derivative Liabilities [Abstract] | ||
Gross amounts of recognized assets or liabilities | 1,693,309 | 1,666,537 |
Gross amounts offset in the consolidated balance sheet | 0 | 0 |
Net amounts of assets presented in the consolidated balance sheet | 1,693,309 | 1,666,537 |
Gross amounts not offset in the consolidated balance sheet in financial instruments | (1,671,331) | (1,637,922) |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | (21,978) | (28,615) |
Net amount | 0 | 0 |
Interest Rate Swaps [Member] | ||
Offsetting Derivative Liabilities [Abstract] | ||
Gross amounts of recognized assets or liabilities | 726 | 342 |
Gross amounts offset in the consolidated balance sheet | 0 | 0 |
Net amounts of assets presented in the consolidated balance sheet | 726 | 342 |
Gross amounts not offset in the consolidated balance sheet in financial instruments | (726) | 32 |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | 0 | (374) |
Net amount | 0 | 0 |
TBAs [Member] | ||
Offsetting Derivative Liabilities [Abstract] | ||
Gross amounts of recognized assets or liabilities | 710 | |
Gross amounts offset in the consolidated balance sheet | (319) | |
Net amounts of assets presented in the consolidated balance sheet | 391 | |
Gross amounts not offset in the consolidated balance sheet in financial instruments | (391) | |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | 0 | |
Net amount | $ 0 | |
Treasury Futures [Member] | ||
Offsetting Derivative Liabilities [Abstract] | ||
Gross amounts of recognized assets or liabilities | 2 | |
Gross amounts offset in the consolidated balance sheet | 0 | |
Net amounts of assets presented in the consolidated balance sheet | 2 | |
Gross amounts not offset in the consolidated balance sheet in financial instruments | 177 | |
Gross amounts not offset in the consolidated balance sheet in cash collateral received (pledged) | (179) | |
Net amount | $ 0 |
Fair Value, Company's Assets an
Fair Value, Company's Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Assets [Abstract] | |||||
Derivative assets total | $ 26,016 | $ 13,830 | |||
Servicing related assets | 231,548 | 122,806 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 1,117 | 344 | |||
Interest Rate Swaps [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 23,020 | 12,994 | |||
Interest Rate Swaptions [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 2,683 | 802 | |||
TBAs [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 34 | |||
Treasury Futures [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 313 | ||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 0 | |||
Servicing related assets | 0 | 0 | |||
Total Assets | 0 | 0 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | 0 | |||
Total Liabilities | 0 | 0 | |||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 26,016 | 13,830 | |||
Servicing related assets | 0 | 0 | |||
Total Assets | 1,887,196 | 1,854,742 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 1,117 | 344 | |||
Total Liabilities | 1,117 | 344 | |||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 0 | |||
Servicing related assets | 231,548 | 122,806 | [1] | $ 61,263 | [1] |
Total Assets | 231,548 | 122,806 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | 0 | |||
Total Liabilities | 0 | 0 | |||
Fair Value, Measurements, Recurring [Member] | Interest Rate Swaps [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 0 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | 0 | |||
Fair Value, Measurements, Recurring [Member] | Interest Rate Swaps [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 23,020 | 12,994 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 726 | 342 | |||
Fair Value, Measurements, Recurring [Member] | Interest Rate Swaps [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 0 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | 0 | |||
Fair Value, Measurements, Recurring [Member] | Interest Rate Swaptions [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 0 | |||
Fair Value, Measurements, Recurring [Member] | Interest Rate Swaptions [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 2,683 | 802 | |||
Fair Value, Measurements, Recurring [Member] | Interest Rate Swaptions [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 0 | |||
Fair Value, Measurements, Recurring [Member] | TBAs [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 0 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | ||||
Fair Value, Measurements, Recurring [Member] | TBAs [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 34 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 391 | ||||
Fair Value, Measurements, Recurring [Member] | TBAs [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 0 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | ||||
Fair Value, Measurements, Recurring [Member] | Treasury Futures [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | ||||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | 0 | |||
Fair Value, Measurements, Recurring [Member] | Treasury Futures [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 313 | ||||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | 2 | |||
Fair Value, Measurements, Recurring [Member] | Treasury Futures [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | ||||
Liabilities [Abstract] | |||||
Derivative liabilities total | 0 | 0 | |||
Fair Value, Measurements, Recurring [Member] | Carrying Value [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 26,016 | 13,830 | |||
Servicing related assets | 231,548 | 122,806 | |||
Total Assets | 2,118,744 | 1,977,548 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 1,117 | 344 | |||
Total Liabilities | 1,117 | 344 | |||
Fair Value, Measurements, Recurring [Member] | Carrying Value [Member] | Interest Rate Swaps [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 23,020 | 12,994 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 726 | 342 | |||
Fair Value, Measurements, Recurring [Member] | Carrying Value [Member] | Interest Rate Swaptions [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 2,683 | 802 | |||
Fair Value, Measurements, Recurring [Member] | Carrying Value [Member] | TBAs [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 0 | 34 | |||
Liabilities [Abstract] | |||||
Derivative liabilities total | 391 | ||||
Fair Value, Measurements, Recurring [Member] | Carrying Value [Member] | Treasury Futures [Member] | |||||
Assets [Abstract] | |||||
Derivative assets total | 313 | ||||
Liabilities [Abstract] | |||||
Derivative liabilities total | $ 0 | $ 2 | |||
RMBS [Member] | Level 2 [Member] | |||||
Derivative Instruments Classified as Fair Value Assets and Liabilities [Abstract] | |||||
Percentage of derivative instruments classified as fair value assets and liabilities | 100.00% | 100.00% | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | $ 0 | $ 0 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 1,861,180 | 1,840,912 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 0 | 0 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | CMOs [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 0 | 0 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | CMOs [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 103,973 | 93,669 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | CMOs [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 0 | 0 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Carrying Value [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 1,861,180 | 1,840,912 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Carrying Value [Member] | CMOs [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 103,973 | 93,669 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Fannie Mae [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 0 | 0 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Fannie Mae [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 1,264,508 | 1,233,699 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Fannie Mae [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 0 | 0 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Fannie Mae [Member] | Carrying Value [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 1,264,508 | 1,233,699 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Freddie Mac [Member] | Level 1 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 0 | 0 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Freddie Mac [Member] | Level 2 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 492,699 | 513,544 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Freddie Mac [Member] | Level 3 [Member] | |||||
Assets [Abstract] | |||||
RMBS total | 0 | 0 | |||
RMBS [Member] | Fair Value, Measurements, Recurring [Member] | Freddie Mac [Member] | Carrying Value [Member] | |||||
Assets [Abstract] | |||||
RMBS total | $ 492,699 | $ 513,544 | |||
Excess MSRs [Member] | Level 3 [Member] | |||||
Derivative Instruments Classified as Fair Value Assets and Liabilities [Abstract] | |||||
Percentage of derivative instruments classified as fair value assets and liabilities | 0.00% | 0.00% | 100.00% | ||
MSRs [Member] | Level 3 [Member] | |||||
Derivative Instruments Classified as Fair Value Assets and Liabilities [Abstract] | |||||
Percentage of derivative instruments classified as fair value assets and liabilities | 100.00% | 100.00% | |||
Derivative Instruments [Member] | Level 2 [Member] | |||||
Derivative Instruments Classified as Fair Value Assets and Liabilities [Abstract] | |||||
Percentage of derivative instruments classified as fair value assets and liabilities | 100.00% | 100.00% | |||
[1] | Includes the recapture agreement for each respective pool. |
Fair Value, Company's Level 3 A
Fair Value, Company's Level 3 Assets (Servicing Related Assets) Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |||
Servicing Related Assets [Abstract] | |||||
Beginning balance | $ 122,806 | ||||
Changes in Fair Value due to [Abstract] | |||||
Unrealized gain (loss) included in Net Income | 12,133 | $ 7,805 | |||
Ending balance | 231,548 | $ 122,806 | |||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | |||||
Servicing Related Assets [Abstract] | |||||
Beginning balance | [1] | 122,806 | 61,263 | 61,263 | |
Purchases, sales and principal paydowns [Abstract] | |||||
Purchases | [1] | 83,586 | |||
Sales | [1] | (35,905) | |||
Other changes | [1],[2] | 4,703 | |||
Purchases, sales and principal paydowns | [1] | 52,384 | |||
Changes in Fair Value due to [Abstract] | |||||
Changes in valuation inputs or assumptions used in valuation model | [1] | 16,375 | |||
Other changes in fair value | [1],[3] | (7,216) | |||
Unrealized gain (loss) included in Net Income | [1] | 9,159 | |||
Ending balance | 231,548 | 122,806 | [1] | ||
Excess MSR Pool 2 [Member] | Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | |||||
Servicing Related Assets [Abstract] | |||||
Beginning balance | [1] | 0 | 29,392 | 29,392 | |
Purchases, sales and principal paydowns [Abstract] | |||||
Purchases | [1] | 0 | |||
Sales | [1] | (35,905) | |||
Other changes | [1],[2] | 6,513 | |||
Purchases, sales and principal paydowns | [1] | (29,392) | |||
Changes in Fair Value due to [Abstract] | |||||
Changes in valuation inputs or assumptions used in valuation model | [1] | 0 | |||
Other changes in fair value | [1],[3] | 0 | |||
Unrealized gain (loss) included in Net Income | [1] | 0 | |||
Ending balance | [1] | 0 | |||
MSRs [Member] | Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | |||||
Servicing Related Assets [Abstract] | |||||
Beginning balance | [1] | 122,806 | $ 31,871 | 31,871 | |
Purchases, sales and principal paydowns [Abstract] | |||||
Purchases | 97,988 | 83,586 | [1] | ||
Sales | [1] | 0 | |||
Other changes | [2] | (1,379) | (1,810) | [1] | |
Purchases, sales and principal paydowns | 96,609 | 81,776 | [1] | ||
Changes in Fair Value due to [Abstract] | |||||
Changes in valuation inputs or assumptions used in valuation model | 17,889 | 16,375 | [1] | ||
Other changes in fair value | [3] | (5,756) | (7,216) | [1] | |
Unrealized gain (loss) included in Net Income | 12,133 | 9,159 | [1] | ||
Ending balance | $ 231,548 | $ 122,806 | [1] | ||
[1] | Includes the recapture agreement for each respective pool. | ||||
[2] | Represents purchase price adjustments, principally contractual prepayment protection, and changes due to the Company's repurchase of the underlying collateral. | ||||
[3] | Represents changes due to realization of expected cash flows. |
Fair Value, Significant Unobser
Fair Value, Significant Unobservable Inputs Used in Fair Value Measurement (Details) - Level 3 [Member] - Discounted Cash Flow [Member] - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | ||
Valuation Technique and Input, Description [Abstract] | |||
Fair Value | $ 231,548 | $ 122,806 | |
MSRs Conventional [Member] | |||
Valuation Technique and Input, Description [Abstract] | |||
Fair Value | 188,644 | 82,150 | |
Annual cost to service, per loan | [1] | $ 71 | $ 70 |
MSRs Conventional [Member] | Minimum [Member] | |||
Valuation Technique and Input, Description [Abstract] | |||
Constant prepayment speed | [1] | 5.20% | 6.50% |
Uncollected Payments | [1] | 0.20% | 0.20% |
MSRs Conventional [Member] | Maximum [Member] | |||
Valuation Technique and Input, Description [Abstract] | |||
Constant prepayment speed | [1] | 20.70% | 23.50% |
Uncollected Payments | [1] | 1.80% | 1.80% |
MSRs Conventional [Member] | Weighted Average [Member] | |||
Valuation Technique and Input, Description [Abstract] | |||
Constant prepayment speed | [1] | 8.90% | 10.50% |
Uncollected Payments | [1] | 0.90% | 0.80% |
Discount rate | [1] | 9.30% | 9.30% |
MSRs Government [Member] | |||
Valuation Technique and Input, Description [Abstract] | |||
Fair Value | $ 42,904 | $ 40,656 | |
Annual cost to service, per loan | [1] | $ 105 | $ 96 |
MSRs Government [Member] | Minimum [Member] | |||
Valuation Technique and Input, Description [Abstract] | |||
Constant prepayment speed | [1] | 6.00% | 6.00% |
Uncollected Payments | [1] | 0.40% | 0.40% |
MSRs Government [Member] | Maximum [Member] | |||
Valuation Technique and Input, Description [Abstract] | |||
Constant prepayment speed | [1] | 18.80% | 14.20% |
Uncollected Payments | [1] | 4.20% | 5.20% |
MSRs Government [Member] | Weighted Average [Member] | |||
Valuation Technique and Input, Description [Abstract] | |||
Constant prepayment speed | [1] | 9.00% | 8.10% |
Uncollected Payments | [1] | 3.30% | 3.30% |
Discount rate | [1] | 12.00% | 12.00% |
[1] | Significant increases (decreases) in any of the inputs in isolation may result in significantly lower (higher) fair value measurements. A change in the assumption used for discount rates may be accompanied by a directionally similar change in the assumption used for the probability of uncollected payments and a directionally opposite change in the assumption used for prepayment rates. |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies [Abstract] | ||
Percentage of annual management fee paid equal to gross equity | 1.50% | |
Accruals of legal and regulatory claims | $ 0 | $ 0 |
Securities obligated to purchase | 0 | 0 |
Securities obligated to sell | $ 0 | $ 0 |
Repurchase Agreements (Details)
Repurchase Agreements (Details) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018USD ($)Security | Dec. 31, 2017USD ($)Security | |
Repurchase Agreements [Abstract] | ||
Weighted average of remaining maturities days | 57 days | 46 days |
Repurchase Agreement Characteristics Remaining Maturities [Abstract] | ||
Less than one month, repurchase agreements | $ 547,663 | $ 429,573 |
One to three months, repurchase agreements | 734,276 | 1,231,687 |
Greater than three months, repurchase agreements | 411,370 | 5,277 |
Total repurchase agreements | $ 1,693,309 | $ 1,666,537 |
Repurchase Agreement Characteristics, Weighted Average Rates [Abstract] | ||
Less than one month, weighted average rate | 2.04% | 1.44% |
One to three months, weighted average rate | 2.13% | 1.48% |
Greater than three months, weighted average rate | 2.19% | 1.52% |
Weighted average rate | 2.12% | 1.47% |
Number of overnight or demand securities | Security | 0 | 0 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) $ in Thousands | 6 Months Ended | ||||
Jun. 30, 2018 | Mar. 20, 2018 | Dec. 31, 2017 | May 31, 2017 | Sep. 30, 2016 | |
Maturities of Long-Term Borrowings [Abstract] | |||||
2,018 | $ 2,169 | $ 2,000 | |||
2,019 | 6,839 | 2,389 | |||
2,020 | 7,109 | 3,608 | |||
2,021 | 52,577 | 3,697 | |||
2,022 | 10,996 | 27,806 | |||
2,023 | 0 | 0 | |||
Long-term borrowings | $ 79,690 | 39,500 | |||
MSR Financing Facility [Member] | |||||
Debt Instruments [Abstract] | |||||
Maximum borrowing amount | $ 75,000 | $ 25,000 | |||
Debt instrument term of variable rate | 1 month | ||||
Debt instrument conversion term | 3 years | ||||
Period of variable spread rate basis on interest rate swap | 1 year | ||||
Debt instrument maturity date | Mar. 31, 2020 | ||||
Maturities of Long-Term Borrowings [Abstract] | |||||
2,018 | $ 1,169 | 0 | |||
2,019 | 4,839 | 389 | |||
2,020 | 5,109 | 1,608 | |||
2,021 | 50,577 | 1,697 | |||
2,022 | 0 | 16,806 | |||
2,023 | 0 | 0 | |||
Long-term borrowings | $ 61,694 | 20,500 | |||
MSR Term Facility [Member] | |||||
Debt Instruments [Abstract] | |||||
Maximum borrowing amount | $ 20,000 | ||||
Interest rate on loans payable | 6.18% | ||||
Debt instrument, amortization period | 10 years | ||||
Debt instrument maturity date | May 18, 2022 | ||||
Maturities of Long-Term Borrowings [Abstract] | |||||
2,018 | $ 1,000 | 2,000 | |||
2,019 | 2,000 | 2,000 | |||
2,020 | 2,000 | 2,000 | |||
2,021 | 2,000 | 2,000 | |||
2,022 | 10,996 | 11,000 | |||
2,023 | 0 | 0 | |||
Long-term borrowings | $ 17,996 | $ 19,000 |
Receivables and Other Assets (D
Receivables and Other Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Receivables and Other Assets [Abstract] | ||
Servicing advances | $ 4,555 | $ 5,901 |
Interest receivable | 6,392 | 5,804 |
Repurchased loans held for sale | 3,647 | 2,160 |
Other receivables | 4,063 | 2,777 |
Total other assets | $ 18,657 | $ 16,642 |
Accrued Expenses and Other Li63
Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Accrued Expenses and Other Liabilities [Abstract] | ||
Accrued interest payable | $ 4,531 | $ 4,252 |
Escrow funds held | 37 | 37 |
Net deferred tax payable | 4,550 | 843 |
Accrued expenses | 15,787 | 6,882 |
Total accrued expenses and other liabilities | $ 24,905 | $ 12,014 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | ||||
Components of Income Tax Expense (Benefit) [Abstract] | ||||||||
Current federal income tax expense | $ 68 | $ 112 | ||||||
Current state income tax expense | 21 | 21 | ||||||
Deferred federal income tax expense (benefit) | 3,024 | (134) | ||||||
Deferred state income tax expense (benefit) | 683 | (4) | ||||||
Provision for (Benefit from) Corporate Business Taxes | $ 1,161 | $ (1,344) | 3,796 | [1] | (5) | [1] | ||
Effective Income Tax Rate Reconciliation, Amount [Abstract] | ||||||||
Computed income tax (benefit) expense at federal rate | 11,106 | 7,321 | ||||||
State taxes, net of federal benefit, if applicable | 699 | 0 | ||||||
REIT income not subject to tax | (8,009) | (7,326) | ||||||
Provision for (Benefit from) Corporate Business Taxes | 1,161 | $ (1,344) | $ 3,796 | [1] | $ (5) | [1] | ||
Effective Income Tax Rate Reconciliation, Percent [Abstract] | ||||||||
Computed income tax (benefit) expense at federal rate | 21.00% | 35.00% | ||||||
State taxes, net of federal benefit, if applicable | 1.30% | 0.00% | ||||||
REIT income not subject to tax | (15.10%) | (35.00%) | ||||||
Provision for (Benefit from) Corporate Business Taxes/Effective Tax Rate | [1] | 7.20% | 0.00% | |||||
Income taxes payable [Abstract] | ||||||||
Federal income taxes payable | $ 68 | $ 650 | ||||||
State and local income taxes payable | 21 | 82 | ||||||
Income taxes payable | 89 | $ 732 | ||||||
Deferred tax (assets) liabilities [Abstract] | ||||||||
Deferred tax - organizational expenses | (7) | (7) | $ (10) | |||||
Deferred tax - mortgage servicing rights | 4,557 | 4,557 | 909 | |||||
Deferred tax - net operating loss | 0 | 0 | (56) | |||||
Total net deferred tax (assets) liabilities | 4,550 | 4,550 | 843 | |||||
Valuation allowance | $ 0 | $ 0 | 0 | |||||
Decrease in income tax expense | $ (459) | |||||||
[1] | The provision for income taxes is recorded at the TRS level. |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] - MSR Revolver [Member] $ in Millions | Jul. 31, 2018USD ($)RenewalOption |
Debt Instruments [Abstract] | |
Maximum borrowing amount | $ 25 |
Term of credit facility | 364 days |
Number of Borrowers' option renewals | RenewalOption | 2 |
Term out feature of credit facility | 1 year |
Amortization schedule period | 24 months |
Additional borrowing capacity | $ 25 |
Debt instrument term of variable rate | 1 month |
Borrowed amount under credit facility | $ 25 |