TWO Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value (Tables)

Fair Value (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Inputs, Assets, Quantitative Information [Line Items]

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

The table below presents information about the significant unobservable inputs used in the fair value measurement of the Company's MSRs classified as Level 3 fair value assets at June 30, 2013:



	As of June 30, 2013
(in thousands)	Fair Value		Valuation Technique	Unobservable Input ⁽¹⁾	Input Range
Mortgage servicing rights:
	$	1,452	Discounted cash flow	Constant prepayment speed	3	-	6	%
				Delinquency	8	-	15	%
				Discount rate	10	-	15	%

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(1)	Significant increases/(decreases) in any of the inputs in isolation may result in significantly lower/(higher) fair value measurement. A change in the assumption used for the probability of default may be accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

Fair Value, by Balance Sheet Grouping [Table Text Block]

The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at June 30, 2013 and December 31, 2012.



	June 30, 2013				December 31, 2012
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Available-for-sale securities	$	14,892,315	$	14,892,315	$	13,666,954	$	13,666,954
Trading securities	1,001,172		1,001,172		1,002,062		1,002,062
Equity securities	—		—		335,638		335,638
Mortgage loans held-for-sale	958,201		958,201		58,607		58,607
Mortgage loans held-for-investment in securitization trust	401,347		401,347		—		—
Cash and cash equivalents	917,224		917,224		821,108		821,108
Restricted cash	685,965		685,965		302,322		302,322
Derivative assets	699,351		699,351		462,080		462,080
Mortgage servicing rights	1,452		1,452		—		—
Liabilities
Repurchase agreements	$	14,903,155	$	14,903,155	$	12,624,510	$	12,624,510
Collateralized borrowings in securitization trust	363,012		363,012		—		—
Derivative liabilities	46,028		46,028		129,294		129,294

Fair Value, Measurement Inputs, Disclosure [Text Block]

The following tables display the Company's assets and liabilities measured at fair value on a recurring basis. The Company often economically hedges the fair value change of its assets or liabilities with derivatives and other financial instruments. The tables below display the hedges separately from the hedged items, and therefore do not directly display the impact of the Company's risk management activities.



	Recurring Fair Value Measurements
	At June 30, 2013
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale securities	$	—	$	14,892,315	$	—	$	14,892,315
Trading securities	1,001,172		—		—		1,001,172
Mortgage loans held-for-sale	—		520,008		438,193		958,201
Mortgage loans held-for-investment in securitization trust	—		401,347		—		401,347
Derivative assets	61,156		638,195		—		699,351
Mortgage servicing rights	—		—		1,452		1,452
Total assets	$	1,062,328	$	16,451,865	$	439,645	$	17,953,838
Liabilities
Collateralized borrowings in securitization trust	$	—	$	363,012	$	—	$	363,012
Derivative liabilities	22,568		23,460		—		46,028
Total liabilities	$	22,568	$	386,472	$	—	$	409,040



	Recurring Fair Value Measurements
	At December 31, 2012
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale securities	$	—	$	13,665,083	$	1,871	$	13,666,954
Trading securities	1,002,062		—		—		1,002,062
Equity securities	335,638		—		—		335,638
Mortgage loans held-for-sale	—		58,607		—		58,607
Derivative assets	1,917		460,163		—		462,080
Total assets	$	1,339,617	$	14,183,853	$	1,871	$	15,525,341
Liabilities
Derivative liabilities	$	239	$	129,055	$	—	$	129,294
Total liabilities	$	239	$	129,055	$	—	$	129,294

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The table below presents the reconciliation for all of the Company's Level 3 assets and liabilities measured at fair value on a recurring basis. The Level 3 items presented below may be hedged by derivatives and other financial instruments that are classified as Level 1 or Level 2. Thus, the tables below do not fully reflect the impact of the Company's risk management activities.



	Level 3 Recurring Fair Value Measurements
	Three Months Ended June 30, 2013
	Assets
(in thousands)	Available-For-Sale Securities				Mortgage Loans Held-For-Sale				Mortgage Servicing Rights
Beginning of period level 3 fair value	$	4,500			$	123,235			$	—
Gains/(losses) included in net income:
Realized gains (losses)	—			⁽¹⁾	422				—
Unrealized gains (losses)	—				(12,749		)	⁽²⁾	(45		)
Total net gains/(losses) included in net income	—				(12,327		)		(45		)
Other comprehensive income	—				—				—
Purchases	—				330,583				1,497
Sales	—				—				—
Settlements	—				(3,298		)		—
Gross transfers into level 3	—				—				—
Gross transfers out of level 3	(4,500		)		—				—
End of period level 3 fair value	$	—			$	438,193			$	1,452
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—			$	(12,749	)	⁽³⁾	$	—



	Level 3 Recurring Fair Value Measurements
	Six Months Ended June 30, 2013
	Assets
(in thousands)	Available-For-Sale Securities				Mortgage Loans Held-For-Sale				Mortgage Servicing Rights
Beginning of period level 3 fair value	$	1,871			$	—			$	—
Gains/(losses) included in net income:
Realized gains (losses)	74			⁽¹⁾	422				—
Unrealized gains (losses)	—				1,174			⁽²⁾	(45		)
Total net gains/(losses) included in net income	74				1,596				(45		)
Other comprehensive income	1,426				—				—
Purchases	—				440,067				1,497
Sales	—				—				—
Settlements	—				(3,470		)		—
Gross transfers into level 3	3,000				—				—
Gross transfers out of level 3	(6,371		)		—				—
End of period level 3 fair value	$	—			$	438,193			$	1,452
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—			$	1,174		⁽³⁾	$	—

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(1)	For the three and six months ended June 30, 2013, the realized gains on available-for-sale securities represent net (premium amortization)/discount accretion recorded in interest income on the condensed consolidated statements of comprehensive (loss) income.


(2)	For the three and six months ended June 30, 2013, the change in unrealized gains or losses on mortgage loans held-for-sale was recorded in (loss) gain on mortgage loans held-for-sale on the condensed consolidated statements of comprehensive (loss) income.


(3)	For the three and six months ended June 30, 2013, the change in unrealized gains or losses on mortgage loans held-for-sale that were held at the end of the reporting period were recorded in (loss) gain on mortgage loans held-for-sale on the condensed consolidated statements of comprehensive (loss) income.

The Company transferred one Level 2 asset in the amount of $3.0 million into Level 3 during the three months ended March 31, 2013. The asset was deemed to be Level 3 based on the limited availability of third-party pricing. However, during the six months ended June 30, 2013, the Company transferred this asset along with two other Level 3 assets in the amount of $6.4 million into Level 2. The assets were deemed to be Level 2 based on the availability of third-party pricing and corroborating market data. The Company did not incur transfers between Level 1 and Level 2 for the six months ended June 30, 2013. Transfers between Levels are deemed to take place on the first day of the reporting period in which the transfer has taken place.

Fair Value, Measurement Inputs, Disclosure [Text Block]



	Recurring Fair Value Measurements
	At June 30, 2013
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale securities	$	—	$	14,892,315	$	—	$	14,892,315
Trading securities	1,001,172		—		—		1,001,172
Mortgage loans held-for-sale	—		520,008		438,193		958,201
Mortgage loans held-for-investment in securitization trust	—		401,347		—		401,347
Derivative assets	61,156		638,195		—		699,351
Mortgage servicing rights	—		—		1,452		1,452
Total assets	$	1,062,328	$	16,451,865	$	439,645	$	17,953,838
Liabilities
Collateralized borrowings in securitization trust	$	—	$	363,012	$	—	$	363,012
Derivative liabilities	22,568		23,460		—		46,028
Total liabilities	$	22,568	$	386,472	$	—	$	409,040



	Recurring Fair Value Measurements
	At December 31, 2012
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale securities	$	—	$	13,665,083	$	1,871	$	13,666,954
Trading securities	1,002,062		—		—		1,002,062
Equity securities	335,638		—		—		335,638
Mortgage loans held-for-sale	—		58,607		—		58,607
Derivative assets	1,917		460,163		—		462,080
Total assets	$	1,339,617	$	14,183,853	$	1,871	$	15,525,341
Liabilities
Derivative liabilities	$	239	$	129,055	$	—	$	129,294
Total liabilities	$	239	$	129,055	$	—	$	129,294

Fair Value, Option, Quantitative Disclosures [Table Text Block]

The following table summarizes the fair value option elections and information regarding the amounts recognized in earnings for each fair value option-elected item.



	Changes included in the Condensed Consolidated Statements of Comprehensive (Loss) Income
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
(in thousands)
Interest income:
Interest income on mortgage loans held-for-sale ⁽¹⁾	$	4,794		$	126		$	6,112		$	195
Interest income on mortgage loans held-for-investment in securitization trust ⁽¹⁾	4,369			—			6,023			—
Interest expense:
Interest expense on collateralized borrowings in securitization trust	(2,169		)	—			(2,987		)	—
Other income:
Realized gain (loss) on mortgage loans held-for-sale⁽²⁾	297			(22		)	235			(22		)
Unrealized gain (loss) on mortgage loans held-for-sale ⁽²⁾	(15,137		)	70			(1,039		)	26
Unrealized loss on mortgage loans held-for-investment in securitization trust ⁽³⁾	(16,755		)	—			(24,757		)	—
Unrealized gain on collateralized borrowings in securitization trust ⁽³⁾	18,313			—			32,604			—
Realized gain on equity securities ⁽⁴⁾	13,725			—			13,725			—
Unrealized loss on equity securities ⁽⁴⁾	(13,725		)	—			(5,882		)	—
Total included in net income	$	(6,288	)	$	174		$	24,034		$	199
Change in fair value due to credit risk	$	—		$	—		$	—		$	—

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(1)	Interest income on mortgage loans held-for-sale and mortgage loans held-for-investment in securitization trust is measured by multiplying the unpaid principal balance on the loans by the coupon rate and the number of days of interest due.


(2)	Realized gain (loss) and unrealized (loss) gain on mortgage loans held-for-sale is recorded in (loss) gain on mortgage loans held-for-sale on the condensed consolidated statements of comprehensive (loss) income.


(3)	Unrealized losses on mortgage loans held-for-investment in securitization trust and unrealized gains on collateralized borrowings in securitization trust are recorded in other income on the condensed consolidated statements of comprehensive (loss) income.


(4)	Realized gains and unrealized losses on equity securities are recorded in gain on investment securities on the condensed consolidated statements of comprehensive (loss) income.

The table below provides the fair value and the unpaid principal balance for the Company's fair value option-elected loans and collateralized borrowings.



	June 30, 2013				December 31, 2012
(in thousands)	Unpaid Principal Balance		Fair Value ⁽¹⁾		Unpaid Principal Balance		Fair Value ⁽¹⁾
Mortgage loans held-for-sale
Total loans	$	1,101,388	$	958,201	$	56,976	$	58,607
Nonaccrual loans	$	49,468	$	28,889	$	—	$	—
Loans 90+ days past due	$	30,408	$	18,090	$	—	$	—
Mortgage loans held-for-investment in securitization trust
Total loans	$	405,519	$	401,347	$	—	$	—
Nonaccrual loans	$	—	$	—	$	—	$	—
Loans 90+ days past due	$	—	$	—	$	—	$	—
Collateralized borrowings in securitization trust
Total borrowings	$	391,458	$	363,012	$	—	$	—

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(1)	Excludes accrued interest receivable.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References + Details

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

+ References + Details