VARIABLE INTEREST ENTITIES |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| VARIABLE INTEREST ENTITIES |
Residential Securitizations The Company also invests in residential mortgage-backed securities issued by entities that are VIEs because they do not have sufficient equity at risk for the entities to finance their activities without additional subordinated financial support from other parties. The Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIEs’ economic performance. For these entities, the Company’s maximum exposure to loss is the amortized cost basis of the securities it owns and it does not provide any liquidity arrangements, guarantees or other commitments to these VIEs. Refer to the “Securities” Note for further information on Residential Securities. OBX Trusts Residential securitizations are issued by entities generally referred to collectively as the “OBX Trusts.” These securitizations represent financing transactions that provide non-recourse financing to the Company and are collateralized by residential mortgage loans purchased by the Company. Residential securitizations closed during the six months ended June 30, 2026 are included in the following table:
The Company is deemed to be the primary beneficiary and consolidates the OBX Trusts because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs. Although the residential mortgage loans have been sold for bankruptcy and state law purposes, the transfers of the residential mortgage loans to the OBX Trusts did not qualify for sale accounting and are reflected as intercompany secured borrowings that are eliminated upon consolidation. Effective August 1, 2022, upon initial consolidation of new securitization entities, the Company elected to apply the measurement alternative for consolidated collateralized financing entities in order to simplify the accounting and valuation processes. The liabilities of these securitization entities are deemed to be more observable and are used to measure the fair value of the assets. As of June 30, 2026 and December 31, 2025, a total carrying value of $34.1 billion and $28.7 billion, respectively, of bonds were held by third parties and the Company retained $3.9 billion and $3.2 billion, respectively, of MBS, which were eliminated in consolidation. The contractual principal amount of the OBX Trusts’ debt held by third parties was $34.6 billion and $29.0 billion at June 30, 2026 and December 31, 2025, respectively. During the three months ended June 30, 2026 and 2025, the Company recorded $148.0 million and ($59.1) million, respectively, and $270.3 million and ($230.0) million during the six months ended June 30, 2026 and 2025, respectively, of unrealized gains (losses) on debt held by third parties issued by OBX Trusts, which is reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss). The Company exercised its optional redemption on two securitization trusts in March 2026 and two securitization trusts in June 2026 which liquidated the corresponding securitization trusts. Upon deconsolidation, for the three months ended June 30, 2026, there was a net $0.9 million gain and for the six months ended June 30, 2026, there was a net $1.1 million gain recognized in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). Structured Repurchase Transaction The Company pledged securities retained from its OBX Trusts to a structured repurchase transaction, OBX 2025-SR1, to diversify its financing sources. The OBX 2025-SR1 Trust is deemed to be a VIE because the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support. The Company is deemed to be the primary beneficiary and consolidates the OBX 2025-SR1 Trust because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs. The securities issued by the OBX 2025-SR1 Trust are recognized as Debt issued by securitization vehicles in the Consolidated Statements of Financial Condition with changes in estimated fair value recognized within Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). This transaction provides recourse financing to the Company, a subsidiary and a fund it manages for their obligations as sellers under repurchase agreements. The Company incurred $10.2 million and $5.7 million of costs during the three months ended June 30, 2026 and 2025, respectively, and $18.2 million and $12.5 million of costs during the six months ended June 30, 2026 and 2025, respectively, in connection with these OBX Trust securitizations that were expensed as incurred. Residential Credit Fund The Company manages a fund investing in participations in residential mortgage loans and mortgage-backed securities. The residential credit fund is deemed to be a VIE because the entity does not have sufficient equity at risk to permit the legal entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders, as capital commitments are not considered equity at risk. The Company is not the primary beneficiary and does not consolidate the residential credit fund as its only interest in the fund is the management and performance fees that it earns, which are not considered variable interests in the entity. As of June 30, 2026 and December 31, 2025, the Company had outstanding participations issued in residential mortgage loans of $2.6 billion and $1.9 billion, respectively. These transfers do not meet the criteria for sale accounting and are accounted for as secured borrowings, thus the residential loans are reported as Loans, net and the associated liability is reported as Participations issued in the Consolidated Statements of Financial Condition. The Company elected the fair value option for participations issued with changes in fair value reflected in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss) to more accurately reflect the economics of the transfers as the underlying loans are carried at fair value through earnings.
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