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, 2015

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, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale securities	$	—	$	14,342,845	$	—	$	14,342,845
Trading securities	2,010,000		—		—		2,010,000
Residential mortgage loans held-for-sale	—		498,433		70,149		568,582
Residential mortgage loans held-for-investment in securitization trusts	—		2,170,206		—		2,170,206
Mortgage servicing rights	—		—		410,229		410,229
Derivative assets	—		362,646		—		362,646
Total assets	$	2,010,000	$	17,374,130	$	480,378	$	19,864,508
Liabilities
Collateralized borrowings in securitization trusts	$	—	$	1,400,571	$	—	$	1,400,571
Derivative liabilities	17,931		137,218		—		155,149
Total liabilities	$	17,931	$	1,537,789	$	—	$	1,555,720



	Recurring Fair Value Measurements
	At December 31, 2014
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale securities	$	—	$	14,341,102	$	—	$	14,341,102
Trading securities	1,997,656		—		—		1,997,656
Residential mortgage loans held-for-sale	—		500,159		35,553		535,712
Residential mortgage loans held-for-investment in securitization trusts	—		1,744,746		—		1,744,746
Mortgage servicing rights	—		—		452,006		452,006
Derivative assets	10,350		370,441		—		380,791
Total assets	$	2,008,006	$	16,956,448	$	487,559	$	19,452,013
Liabilities
Collateralized borrowings in securitization trusts	$	—	$	1,209,663	$	—	$	1,209,663
Derivative liabilities	17,687		72,546		—		90,233
Total liabilities	$	17,687	$	1,282,209	$	—	$	1,299,896

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

The following table presents the reconciliation for all of the Company’s Level 3 assets measured at fair value on a recurring basis:



	Level 3 Recurring Fair Value Measurements
	Three Months Ended
	March 31, 2015
(in thousands)	Residential Mortgage Loans Held-For-Sale				Mortgage Servicing Rights
Beginning of period level 3 fair value	$	35,553			$	452,006
Gains (losses) included in net income (loss):
Realized gains (losses)	5,121				(9,314		)
Unrealized gains (losses)	747			⁽¹⁾	(43,089		)	⁽³⁾
Total net gains (losses) included in net income (loss)	5,868				(52,403		)
Other comprehensive income	—				—
Purchases	70,666				4,551
Sales	(23,909		)		—
Settlements	(18,029		)		6,075
Gross transfers into level 3	—				—
Gross transfers out of level 3	—				—
End of period level 3 fair value	$	70,149			$	410,229
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	900		⁽²⁾	$	(43,089	)	⁽⁴⁾

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(1)	For the three months ended March 31, 2015, the change in unrealized gains or losses on residential mortgage loans held-for-sale was recorded in gain (loss) on residential mortgage loans held-for-sale on the condensed consolidated statements of comprehensive income.


(2)	For the three months ended March 31, 2015, the change in unrealized gains or losses on residential mortgage loans held-for-sale that were held at the end of the reporting period was recorded in gain (loss) on residential mortgage loans held-for-sale on the condensed consolidated statements of comprehensive income.


(3)	For the three months ended March 31, 2015, the change in unrealized gains or losses on MSR was recorded in loss on servicing asset on the condensed consolidated statements of comprehensive income.


(4)	For the three months ended March 31, 2015, the change in unrealized gains or losses on MSR that were held at the end of the reporting period was 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, 2015. 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 by the third-party pricing provider in the fair value measurement of the Company’s MSR classified as Level 3 fair value assets at March 31, 2015:



As of March 31, 2015
Valuation Technique	Unobservable Input ⁽¹⁾	Range				Weighted Average
Discounted cash flow	Constant prepayment speed	11.0	-	15.0	%	13.1%
	Delinquency	4.4	-	5.0	%	4.6%
	Discount rate	8.5	-	11.2	%	9.9%

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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)				Gain (loss) on residential mortgage loans held-for-sale			Other (loss) income			Total included in net income (loss)			Change in fair value due to credit risk
2015
Assets
Residential mortgage loans held-for-sale	$	4,271		⁽¹⁾	$	9,066		$	—		$	13,337		$	(242	)	⁽²⁾
Residential mortgage loans held-for-investment in securitization trusts	18,236			⁽¹⁾	—			49			18,285			—			⁽³⁾
Liabilities
Collateralized borrowings in securitization trusts	(10,708		)		—			(2,967		)	(13,675		)	—			⁽³⁾
Total	$	11,799			$	9,066		$	(2,918	)	$	17,947		$	(242	)
2014
Assets
Residential mortgage loans held-for-sale	$	4,586		⁽¹⁾	$	(2,764	)	$	—		$	1,822		$	33		⁽²⁾
Residential mortgage loans held-for-investment in securitization trusts	7,893			⁽¹⁾	—			1,975			9,868			—			⁽³⁾
Liabilities
Collateralized borrowings in securitization trusts	(5,353		)		—			(1,662		)	(7,015		)	—			⁽³⁾
Total	$	7,126			$	(2,764	)	$	313		$	4,675		$	33

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(1)	Interest income on residential mortgage loans held-for-sale and residential 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 due to credit risk on residential mortgage loans held-for-sale was quantified by holding yield constant in the cash flow model in order to isolate credit risk component.


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

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, 2015				December 31, 2014
(in thousands)	Unpaid Principal Balance		Fair Value ⁽¹⁾		Unpaid Principal Balance		Fair Value ⁽¹⁾
Residential mortgage loans held-for-sale
Total loans	$	569,553	$	568,582	$	534,101	$	535,712
Nonaccrual loans	$	63,171	$	55,079	$	26,405	$	20,574
Loans 90+ days past due	$	60,030	$	52,165	$	25,263	$	19,675
Residential mortgage loans held-for-investment in securitization trusts
Total loans	$	2,112,775	$	2,170,206	$	1,699,748	$	1,744,746
Nonaccrual loans	$	—	$	—	$	—	$	—
Loans 90+ days past due	$	—	$	—	$	—	$	—
Collateralized borrowings in securitization trusts
Total borrowings	$	1,402,939	$	1,400,571	$	1,218,589	$	1,209,663

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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, 2015 and December 31, 2014.



	March 31, 2015				December 31, 2014
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Available-for-sale securities	$	14,342,845	$	14,342,845	$	14,341,102	$	14,341,102
Trading securities	$	2,010,000	$	2,010,000	$	1,997,656	$	1,997,656
Residential mortgage loans held-for-sale	$	568,582	$	568,582	$	535,712	$	535,712
Residential mortgage loans held-for-investment in securitization trusts	$	2,170,206	$	2,170,206	$	1,744,746	$	1,744,746
Commercial real estate loans held-for-investment	$	45,556	$	45,556	$	—	$	—
Mortgage servicing rights	$	410,229	$	410,229	$	452,006	$	452,006
Cash and cash equivalents	$	1,020,338	$	1,020,338	$	1,005,792	$	1,005,792
Restricted cash	$	441,158	$	441,158	$	336,771	$	336,771
Derivative assets	$	362,646	$	362,646	$	380,791	$	380,791
Federal Home Loan Bank stock	$	110,250	$	110,250	$	100,010	$	100,010
Equity investments	$	3,000	$	3,000	$	3,000	$	3,000
Liabilities
Repurchase agreements	$	13,094,878	$	13,094,878	$	12,932,463	$	12,932,463
Collateralized borrowings in securitization trusts	$	1,400,571	$	1,400,571	$	1,209,663	$	1,209,663
Federal Home Loan Bank advances	$	2,625,000	$	2,625,000	$	2,500,000	$	2,500,000
Derivative liabilities	$	155,149	$	155,149	$	90,233	$	90,233

- 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