TWO Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Variable Interest Entities

Variable Interest Entities

12 Months Ended

Dec. 31, 2017

Variable Interest Entities [Abstract]

The Company retains debt securities and excess servicing rights purchased from securitization trusts sponsored by either third parties or the Company’s subsidiaries. All of these trusts are considered VIEs for financial reporting purposes and, thus, were reviewed for consolidation under the applicable consolidation guidance. Because the Company had both the power to direct the activities of the trusts that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant, the Company consolidated all of the trusts as of December 31, 2016. During the fourth quarter of 2017, the Company sold all of the retained subordinated securities thereby causing the deconsolidation of the securitization trusts from the Company’s consolidated balance sheet. As the Company is required to reassess VIE consolidation guidance each quarter, new facts and circumstances may change the Company’s determination. A change in the Company’s determination could result in a material impact to the Company’s consolidated financial statements during subsequent reporting periods.

The following table presents a summary of the assets and liabilities of all consolidated trusts as reported on the consolidated balance sheets as of December 31, 2017 and December 31, 2016:



(in thousands)	December 31, 2017		December 31, 2016
Residential mortgage loans held-for-investment in securitization trusts	$	—	$	3,271,317
Accrued interest receivable	—		18,928
Total Assets	$	—	$	3,290,245
Collateralized borrowings in securitization trusts	$	—	$	3,037,196
Accrued interest payable	—		8,708
Other liabilities	—		12,374
Total Liabilities	$	—	$	3,058,278

The Company is not required to consolidate VIEs for which it has concluded it does not have both the power to direct the activities of the VIEs that most significantly impact the entities’ performance, and the obligation to absorb losses or the right to receive benefits of the entities that could be significant. The Company’s investments in these unconsolidated VIEs include all non-Agency securities, which are classified within available-for-sale securities, at fair value on the consolidated balance sheets. As of December 31, 2017 and December 31, 2016, the carrying value, which also represents the maximum exposure to loss, of all non-Agency securities in unconsolidated VIEs was $3.0 billion and $1.9 billion, respectively.