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)

3 Months Ended

Mar. 31, 2014

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 March 31, 2014
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale securities	$	—	$	12,634,056	$	—	$	12,634,056
Trading securities	1,000,312		—		—		1,000,312
Mortgage loans held-for-sale	—		140,924		20,097		161,021
Mortgage loans held-for-investment in securitization trusts	—		781,085		—		781,085
Mortgage servicing rights	—		—		476,663		476,663
Derivative assets	4,331		425,088		—		429,419
Total assets	$	1,004,643	$	13,981,153	$	496,760	$	15,482,556
Liabilities
Collateralized borrowings in securitization trusts	$	—	$	658,953	$	—	$	658,953
Derivative liabilities	5,487		2,908		—		8,395
Total liabilities	$	5,487	$	661,861	$	—	$	667,348



	Recurring Fair Value Measurements
	At December 31, 2013
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale securities	$	—	$	12,256,727	$	—	$	12,256,727
Trading securities	1,000,180		—		—		1,000,180
Mortgage loans held-for-sale	—		119,855		424,726		544,581
Mortgage loans held-for-investment in securitization trusts	—		792,390		—		792,390
Mortgage servicing rights	—		—		514,402		514,402
Derivative assets	33,425		516,434		—		549,859
Total assets	$	1,033,605	$	13,685,406	$	939,128	$	15,658,139
Liabilities
Collateralized borrowings in securitization trusts	$	—	$	639,731	$	—	$	639,731
Derivative liabilities	125		21,956		—		22,081
Total liabilities	$	125	$	661,687	$	—	$	661,812

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 March 31, 2014
	Assets
(in thousands)	Mortgage Loans Held-For-Sale				Mortgage Servicing Rights
Beginning of period level 3 fair value	$	424,726			$	514,402
Gains/(losses) included in net income:
Realized gains (losses)	3,434				(12,510		)
Unrealized gains (losses)	(2,683		)	⁽¹⁾	(20,250		)	⁽³⁾
Total net gains/(losses) included in net income	751				(32,760		)
Other comprehensive income	—				—
Purchases	6,964				1,280
Sales	(406,622		)		—
Settlements	(5,722		)		(6,259		)
Gross transfers into level 3	—				—
Gross transfers out of level 3	—				—
End of period level 3 fair value	$	20,097			$	476,663
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	(3,872	)	⁽²⁾	$	(20,250	)	⁽⁴⁾

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(1)	For the three months ended March 31, 2014, 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 income.


(2)	For the three months ended March 31, 2014, 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 income.


(3)	For the three months ended March 31, 2014, the change in unrealized gains or losses on MSR were recorded in loss on servicing asset on the condensed consolidated statements of comprehensive income.


(4)	For the three months ended March 31, 2014, the change in unrealized gains or losses on MSR that were held at the end of the reporting period were recorded in loss on servicing asset on the condensed consolidated statements of comprehensive income.

The Company did not incur transfers between Level 1, Level 2 or Level 3 for the three months ended March 31, 2014. 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 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 MSR classified as Level 3 fair value assets at March 31, 2014:



	As of March 31, 2014
(in thousands)	Fair Value		Valuation Technique	Unobservable Input ⁽¹⁾	Range				Weighted Average
Mortgage servicing rights	$	476,663	Discounted cash flow	Constant prepayment speed	9	-	12	%	10.5	%
				Delinquency	1	-	7	%	4.0	%
				Discount rate	7	-	12	%	9.0	%

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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 discount rates may be accompanied by a directionally similar change in the assumption used for the probability of delinquency and a directionally opposite change in the assumption used for prepayment rates.

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.



(in thousands)	Changes included in the Condensed Consolidated Statements of Comprehensive Income
Three Months Ended March 31,	Interest income (expense)				(Loss) gain on investment securities		(Loss) gain on mortgage loans held-for-sale			Other income			Total included in net (loss) income			Change in fair value due to credit risk
2014
Assets
Mortgage loans held-for-sale	4,586			⁽¹⁾	—		(3,181		)	—			1,405			33		⁽³⁾
Mortgage loans held-for-investment in securitization trusts	7,893			⁽¹⁾	—		—			1,975			9,868			—		⁽²⁾
Liabilities
Collateralized borrowings in securitization trusts	(5,353		)		—		—			(1,662		)	(7,015		)	—		⁽²⁾
Total	$	7,126			$	—	$	(3,181	)	$	313		$	4,258		$	33
2013
Assets
Equity securities	$	—			$	7,843	$	—		$	—		$	7,843		$	—	⁽²⁾
Mortgage loans held-for-sale	1,318			⁽¹⁾	—		14,036			—			15,354			—		⁽³⁾
Mortgage loans held-for-investment in securitization trusts	1,654			⁽¹⁾	—		—			(8,002		)	(6,348		)	—		⁽²⁾
Liabilities
Collateralized borrowings in securitization trusts	(818		)		—		—			14,291			13,473			—		⁽²⁾
Total	$	2,154			$	7,843	$	14,036		$	6,289		$	30,322		$	—

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


(2)	The change in fair value on equity securities, mortgage loans held-for-investment in securitization trusts and collateralized borrowings in securitization trusts was due entirely to changes in market interest rates.


(3)	The change in fair value due to credit risk on mortgage loans held-for-sale was quantified by holding yield constant in the cash flow model in order to isolate credit risk component.

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

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



	March 31, 2014				December 31, 2013
(in thousands)	Unpaid Principal Balance		Fair Value ⁽¹⁾		Unpaid Principal Balance		Fair Value ⁽¹⁾
Mortgage loans held-for-sale
Total loans	$	173,293	$	161,021	$	680,840	$	544,581
Nonaccrual loans	$	16,753	$	12,038	$	80,486	$	62,185
Loans 90+ days past due	$	1,033	$	826	$	63,152	$	48,786
Mortgage loans held-for-investment in securitization trusts
Total loans	$	799,258	$	781,085	$	812,538	$	792,390
Nonaccrual loans	$	—	$	—	$	—	$	—
Loans 90+ days past due	$	—	$	—	$	—	$	—
Collateralized borrowings in securitization trusts
Total borrowings	$	703,259	$	658,953	$	686,233	$	639,731

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(1)	Excludes accrued interest receivable.

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 March 31, 2014 and December 31, 2013.



	March 31, 2014				December 31, 2013
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Available-for-sale securities	$	12,634,056	$	12,634,056	$	12,256,727	$	12,256,727
Trading securities	$	1,000,312	$	1,000,312	$	1,000,180	$	1,000,180
Mortgage loans held-for-sale	$	161,021	$	161,021	$	544,581	$	544,581
Mortgage loans held-for-investment in securitization trusts	$	781,085	$	781,085	$	792,390	$	792,390
Mortgage servicing rights	$	476,663	$	476,663	$	514,402	$	514,402
Cash and cash equivalents	$	1,540,431	$	1,540,431	$	1,025,487	$	1,025,487
Restricted cash	$	220,202	$	220,202	$	401,647	$	401,647
Derivative assets	$	429,419	$	429,419	$	549,859	$	549,859
Equity investments	$	3,000	$	3,000	$	—	$	—
Liabilities
Repurchase agreements	$	12,021,177	$	12,021,177	$	12,250,450	$	12,250,450
Collateralized borrowings in securitization trusts	$	658,953	$	658,953	$	639,731	$	639,731
Federal Home Loan Bank advances	$	464,476	$	464,476	$	—	$	—
Derivative liabilities	$	8,395	$	8,395	$	22,081	$	22,081

- 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.

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