Cherry Hill Mortgage Investment Corp

Except as set forth below, there have been no material changes to the risk factors set forth under the heading “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, or the Form 10-K.

Risks Related to the Termination of our Management Agreement with our Manager

We may not be able to fully realize the expected benefits of our planned transition to a self-managed company or the ability to realize such benefits may take longer than anticipated.

On July 9, 2024, we announced that the special committee of the Company’s board of directors, which committee is comprised entirely of independent and disinterested members of the board, after consultation with its independent legal and financial advisors and as part of the special committee’s previously announced exploration of strategic alternatives, determined and recommended to the board of directors that it is advisable and in the best interests of the Company and its stockholders to internalize management of the Company, terminate the Management Agreement and take all steps necessary to begin operating the Company as a fully integrated, internally managed mortgage REIT. Following such recommendation from the special committee, our board of directors authorized and approved the Internalization and authorized and directed our officers to take all actions necessary to cause us to effect the Internalization. As a result, we expect to terminate the Management Agreement and become a self-managed company that is no longer reliant on the Manager and its relationship with the Services Provider. We believe that the termination of the Management Agreement, elimination of the annual management fee, and the transition to a self-management structure will result in material benefits to our stockholders, including substantial cost savings, the potential for enhanced returns on future capital growth, strengthened alignment of interests between management and stockholders and the potential to attract new institutional investors.

On July 11, 2024, we received a letter from counsel to the Manager informing us that it is the Manager's position that no termination of the Management Agreement may be declared based on an Internalization Event absent the agreement of the Manager, no Internalization Event has occurred and, as a result of our July 9, 2024 announcement, the contractual termination fee in the amount of approximately $18.4 million is due. On July 17, 2024, counsel to the special committee responded to the Manager and denied the assertions made by the Manager's counsel and explained that the Internalization Event would not require the payment of a termination fee pursuant to the plain terms of the Management Agreement. The Manager has not responded to the July 17, 2024 letter sent by counsel to the special committee and, at this time, it is not known whether this matter will result in litigation. Should this matter result in litigation, the Company intends to vigorously contest this matter.

Our ability to execute the smooth and timely transition of all functions necessary to operate our business and to fully and timely realize the anticipated benefits of the Internalization is subject to various risks. Certain risks that may adversely impact the process include: the inability to successfully retain our senior management team and other personnel who currently support our business and operations; unforeseen or higher than anticipated expenses following the transition; potential disruptions to our ordinary course operations, financing relationships and internal procedures; and the diversion of management’s attention caused by the Internalization and the transition process. The failure to manage the transition process efficiently and effectively, including the failure to transition services or retain our dedicated personnel, could result in the anticipated benefits of the Internalization not being realized.

The Management Agreement requires the Company and the Manager to terminate the Management Agreement without payment of any termination fee pursuant to the consummation of an Internalization Event (as defined in the Management Agreement). Disputes, if any, between the Company and the Manager over the express terms of the Management Agreement could divert management’s attention from operating the Company’s business, impact the timing of the Company’s plan to internalize management and become a self-managed company and result in the Company’s payment of a termination fee to the Manager if we are required to pay a termination fee. Payment of a termination fee to the Manager could have a material and adverse impact on our liquidity position and our ability to make distributions to our stockholders.

There is no guarantee that members of our senior management team and other personnel will be employed by us following the termination of the Management Agreement.

We currently depend on our Manager through the Services Provider to provide us with our executives and employees to administer our business activities and day-to-day operations. Following the termination of the Management Agreement, we expect to retain and continue to be managed by our senior management team along with the other personnel currently providing services to us. While we intend to extend offers of employment to our current personnel, there can be no assurance that all such personnel will accept employment with us. As is presently the case under the Management Agreement, the departure or the loss of the services of members of our senior management team or other personnel, whether as a result of or following the Internalization and our transition to a self-managed company, could have a material adverse effect on our financial condition and results of operations and our ability to effectively operate our business and make distributions to our stockholders.

We may be exposed to risks to which we have not historically been exposed.

Our transition to a self-managed company will expose us to risks to which we have not historically been exposed. As a result of the Internalization, we will become a direct employer, and we will be subject to potential liabilities commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances. We will also bear the responsibility for implementing and maintaining health, retirement, and similar benefit plans for our employees. There may also be other unforeseen costs, expenses, responsibilities and difficulties associated with operating as a self-managed company.