Cherry Hill Mortgage Investment Corp

Previous wording

The Company has an at-the-market offering program for its common stock (the “Common Stock ATM Program”) pursuant to which it may offer and sell through one or more sales agents, up to $100.0 million in shares of its common stock at prices prevailing at the time, subject to volume and other regulatory limitations. As of June 30, 2024, approximately $4.8 million was remaining pursuant to the Common Stock ATM Program. The Company did not issue and sell any shares of common stock pursuant to the Common Stock ATM Program during the three and six-month periods ended June 30, 2024. During the year ended December 31, 2023, the Company issued and sold 6,470,004 shares of common stock under the Common Stock ATM Program. The shares were sold at a weighted average price of $4.87 per share for aggregate gross proceeds of approximately $31.5 million before fees of approximately $631,000.

Current wording

The Company has an at-the-market offering program for its common stock (the “Common Stock ATM Program”) pursuant to which it may offer and sell through one or more sales agents, up to $150.0 million in shares of its common stock at prices prevailing at the time, subject to volume and other regulatory limitations. As of September 30, 2024, approximately $49.3 million was remaining pursuant to the Common Stock ATM Program. During the three and nine-month period ended September 30, 2024, the Company issued and sold 1,530,917 shares of common stock under the Common Stock ATM Program. The shares were sold at a weighted average price of $3.59 per share for aggregate gross proceeds of approximately $5.5 million before fees of approximately $110,000. During the year ended December 31, 2023, the Company issued and sold 6,470,004 shares of common stock under the Common Stock ATM Program. The shares were sold at a weighted average price of $4.87 per share for aggregate gross proceeds of approximately $31.5 million before fees of approximately $631,000.

Previous wording

In September 2019, the Company initiated a share repurchase program that allows for the repurchase of up to an aggregate of $10.0 million of its common stock. As of June 30, 2024, approximately $4.7 million was remaining under the share repurchase program. Shares of common stock may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act or by any combination of such methods. The manner, price, number and timing of share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. The common stock repurchase program does not require the purchase of any minimum number of shares of common stock, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice. During the three and six-month periods ended June 30, 2024 and the year ended December 31, 2023, the Company did not repurchase any shares of its common stock pursuant to the common stock repurchase program.

Current wording

In September 2019, the Company initiated a share repurchase program that allows for the repurchase of up to an aggregate of $10.0 million of its common stock. As of September 30, 2024, approximately $4.7 million was remaining under the share repurchase program. Shares of common stock may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to a trading plan in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act or by any combination of such methods. The manner, price, number and timing of share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. The common stock repurchase program does not require the purchase of any minimum number of shares of common stock, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice. During the three and nine-month periods ended September 30, 2024 and the year ended December 31, 2023, the Company did not repurchase any shares of its common stock pursuant to the common stock repurchase program.

Previous wording

In December 2023, the Company initiated a preferred stock repurchase program that allows for the repurchase of up to an aggregate of $50.0 million of its shares of Series A Preferred Stock and Series B Preferred Stock. Shares of preferred stock may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to a trading plan in accordance with Rules 10b5-1 under the Exchange Act. The manner, price, number and timing of share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. The preferred stock repurchase program does not require the purchase of any minimum number of shares of preferred stock, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice. During the three-month period ended June 30, 2024, the Company repurchased 98,925 shares of its Series B Preferred Stock at a weighted average purchase price of $24.76 per share and paid aggregate brokerage commissions of approximately $3,000 on such repurchases. During the six-month period ended June 30, 2024, the Company repurchased 395,897 shares of its Series B Preferred Stock at a weighted average purchase price of $23.77 per share and paid aggregate brokerage commissions of approximately $11,900 on such repurchases. The difference between the consideration transferred and the carrying value of the preferred stock repurchased resulted in a loss attributable to common stockholders of $74,000 for the three-month period ended June 30, 2024 and a gain attributable to common stockholders of $78,000 for the six-month period ended June 30, 2024. During the year ended December 31, 2023, the Company did not repurchase any shares of its preferred stock pursuant to the repurchase program. Shares of preferred stock that are repurchased by the Company cease to be outstanding but remain authorized for future issuance.

Current wording

In December 2023, the Company initiated a preferred stock repurchase program that allows for the repurchase of up to an aggregate of $50.0 million of its shares of Series A Preferred Stock and Series B Preferred Stock. Shares of preferred stock may be repurchased from time to time through privately negotiated transactions or open market transactions, pursuant to a trading plan in accordance with Rules 10b5-1 under the Exchange Act. The manner, price, number and timing of share repurchases are subject to a variety of factors, including market conditions and applicable SEC rules. The preferred stock repurchase program does not require the purchase of any minimum number of shares of preferred stock, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice. During the three-month period ended September 30, 2024, the Company did not repurchase any shares of its preferred stock pursuant to the repurchase program. During the nine-month period ended September 30, 2024, the Company repurchased 395,897 shares of its Series B Preferred Stock at a weighted average purchase price of $23.77 per share and paid aggregate brokerage commissions of approximately $11,900 on such repurchases. The difference between the consideration transferred and the carrying value of the preferred stock repurchased resulted in a gain attributable to common stockholders of $78,000 for the nine-month period ended September 30, 2024. During the year ended December 31, 2023, the Company did not repurchase any shares of its preferred stock pursuant to the repurchase program. Shares of preferred stock that are repurchased by the Company cease to be outstanding but remain authorized for future issuance.

Previous wording

The Federal Reserve has signaled that it is likely to begin to lower its federal funds rate target or otherwise ease monetary policy as soon as this September. Over the past year, the Federal Reserve has kept constant its federal funds rate target after sharply increasing the federal funds rate and otherwise tightening monetary policy in 2022 and 2023 to combat an increase in U.S. inflation. Starting March 2022, the Federal Reserve increased its federal funds rate target from 0.0% - 0.25% to the current target of 5.25 – 5.50%. In March 2022, the Federal Reserve also ended its net purchases of Treasury and agency securities (a policy known as quantitative easing) and then in June 2022 began reducing the size of its balance sheet by no longer reinvesting proceeds of up to $60.0 billion (initially $30.0 billion) of maturing Treasury securities and up to $35.0 billion (initially $17.5 billion) in maturing agency debt and mortgage-backed securities per month. Inflation peaked in June of 2022 with consumer prices rising at a rate of 9.1% on a year-over-year basis, but has subsequently declined to 3.0% on a year-over-year basis in June of 2024. In June of 2024, the consumer price index fell by 0.1 percent, raising expectations that inflation is on a path to hit the Federal Reserve's 2 percent inflation target. Based on this and other data, the Federal Reserve has indicated that an easing of monetary policy will soon be appropriate.

Current wording

Since September 18, 2024, the Federal Reserve has lowered its federal funds rate target by 0.75% to between 4.50% to 4.75%. Over the past year, the Federal Reserve had kept constant its federal funds rate target after sharply increasing the target and otherwise tightening monetary policy in 2022 and 2023 to combat an increase in U.S. inflation. Inflation peaked in June of 2022 with consumer prices rising at a rate of 9.1% on a year-over-year basis, but has subsequently declined to 2.4% on a year-over-year basis in September of 2024. Based on this decline in inflation and other data, the Federal Reserve has stated that an easing of monetary policy is appropriate and that future rate cuts are likely. The Federal Reserve has also reduced the speed of the runoff of its balance sheet. On June 1, 2024, the Federal Reserve lowered its a monthly redemption cap on Treasury securities to $25 billion from $60 billion and maintained its $35 billion redemption cap on agency debt/MBS. The Federal Reserve reinvests principle payments in excess of these caps into Treasury securities in a manner that approximates the maturity composition of outstanding Treasury securities outstanding.

Previous wording

The Federal Reserve’s federal funds rate increases and reductions in the size of its balance sheet resulted in higher interest rates across asset classes, including for Agency RMBS. These actions also generally reduce economic activity in the United States, as well as decrease spreads on interest rates, which can reduce our net interest income and increase our funding costs. They may also negatively impact our results as we have certain assets and liabilities that are sensitive to changes in interest rates. In addition, lower net interest income resulting from higher rates is partially offset by lower prepayments which extends the length of cash flows from the MSRs and slows the premium amortization on the RMBS portfolio. To the extent the Federal Reserve now decides to reduce the federal funds rate or otherwise ease monetary policy, the converse results could be expected. Lower rates could reduce our funding costs and spur economic activity, increasing our net interest income. Higher prepayment could reduce the length of cash flows from the MSRs and accelerate the premium amortization on the RMBS portfolio. The impact on our operating results of future actions by the Federal Reserve that change market interest rates is discussed further below. See “Factors Impacting our Operating Results”.

Current wording

The Federal Reserve’s actions to ease monetary policy by reducing its federal funds rate and reduce the speed at which it is decreasing its balance sheet will generally lower interest rates across asset classes, including for Agency RMBS. Lower rates could reduce our funding costs and spur economic activity, increasing our net interest income. Higher prepayment could reduce the length of cash flows from the MSRs and accelerate the premium amortization on the RMBS portfolio. In the event that the Federal Reserve reverses course and tightens monetary policy in the future by increasing the federal funds rate and/or the rate of its run off of its balance sheet, these actions could result in higher interest rates, including for Agency RMBS, and reduce economic activity in the United States, as well as decrease spreads on interest rates, which can reduce our net interest income and increase our funding costs. They may also negatively impact our results as we have certain assets and liabilities that are sensitive to changes in interest rates. In addition, lower net interest income resulting from higher rates is partially offset by lower prepayments which extends the length of cash flows from the MSRs and slows the premium amortization on the RMBS portfolio.

Previous wording

Interest income for the three-month period ended June 30, 2024 was $13.7 million as compared to $12.7 million for the three-month period ended March 31, 2024. The increase of $1.0 million in interest income was due to purchases of new securities as well as replacing lower yielding securities with higher yielding securities.

Current wording

Interest income for the three-month period ended September 30, 2024 was $14.3 million as compared to $13.7 million for the three-month period ended June 30, 2024. The increase of $650,000 in interest income was due to purchases of new securities as well as replacing lower yielding securities with higher yielding securities.

Previous wording

Interest income for the six-month period ended June 30, 2024 was $26.4 million as compared to $24.3 million for the six-month period ended June 30, 2023. The increase of $2.1 million in interest income was due to purchases of new securities as well as replacing lower yielding securities with higher yielding securities coupled with portfolio positioning, which resulted in a decrease in price premium amortization driven by lower prepayment speeds.

Current wording

Interest income for the nine-month period ended September 30, 2024 was $40.7 million as compared to $37.2 million for the nine-month period ended September 30, 2023. The increase of $3.5 million in interest income was due to purchases of new securities as well as replacing lower yielding securities with higher yielding securities coupled with portfolio positioning.

Previous wording

Interest expense for the three-month period ended June 30, 2024 was $13.5 million as compared to $13.6 million for the three-month period ended March 31, 2024. The change in interest expense was nominal.

Current wording

Interest expense for the three-month period ended September 30, 2024 was $14.2 million as compared to $13.5 million for the three-month period ended June 30, 2024. The increase of $700,000 in interest expense was due to an increase in repurchase agreement borrowings.

Previous wording

Interest expense for the six-month period ended June 30, 2024 was $27.2 million as compared to $25.1 million for the six-month period ended June 30, 2023. The increase of $2.1 million in interest expense was due to a rise in financing rates.

Current wording

Interest expense for the nine-month period ended September 30, 2024 was $41.4 million as compared to $38.5 million for the nine-month period ended September 30, 2023. The increase of $2.9 million in interest expense was due to an increase in repurchase agreement borrowings.

Previous wording

Servicing fee income for the three-month period ended June 30, 2024 was $12.4 million as compared to $12.9 million for the three-month period ended March 31, 2024. The decrease of $500,000 in servicing fee income was due to changes in the size of the portfolio.

Current wording

Servicing fee income for the three-month period ended September 30, 2024 was $11.7 million as compared to $12.4 million for the three-month period ended June 30, 2024. The decrease of $670,000 in servicing fee income was due to changes in the size of the portfolio.

Previous wording

Servicing fee income for the six-month period ended June 30, 2024 was $25.3 million as compared to $27.3 million for the six-month period ended June 30, 2023. The decrease of $2.0 million in servicing fee income was due to changes in the size of the portfolio.

Current wording

Servicing fee income for the nine-month period ended September 30, 2024 was $36.9 million as compared to $40.5 million for the nine-month period ended September 30, 2023. The decrease of $3.6 million in servicing fee income was due to changes in the size of the portfolio.

Previous wording

Servicing costs for the six-month period ended June 30, 2024 were $6.1 million as compared to $5.2 million for the six-month period ended June 30, 2023. The increase of $900,000 in servicing costs due to one-time loan level interest adjustments and de-boarding fees related to the MSR sale.

Current wording

Servicing costs for the three-month period ended September 30, 2024 were $3.2 million as compared to $3.5 million for the three-month period ended June 30, 2024. The decrease of $250,000 in servicing costs was due to changes in the size of the portfolio.

Previous wording

Servicing costs for the three-month period ended June 30, 2024 were $3.5 million as compared to $2.6 million for the three-month period ended March 31, 2024. The increase of $900,000 in servicing costs was due to one-time loan level interest adjustments and de-boarding fees related to the MSR sale.

Current wording

Servicing costs for the nine-month period ended September 30, 2024 were $9.3 million as compared to $8.1 million for the nine-month period ended September 30, 2023. The increase of $1.2 million in servicing costs was due to one-time loan level interest adjustments and de-boarding fees related to the MSR sale.

Previous wording

Realized loss on RMBS for the three-month period ended June 30, 2024 was approximately $1.9 million as compared to $0 for the three-month period ended March 31, 2024. The increase of $1.9 million in realized loss on RMBS was because no RMBS securities were sold during the three-month period ended March 31, 2024.

Current wording

Realized loss on RMBS for the three-month period ended September 30, 2024 was approximately $3.7 million as compared to $1.9 million for the three-month period ended June 30, 2024. The increase of $1.8 million in realized loss on RMBS was because more RMBS securities were sold during the three-month period ended September 30, 2024.

Previous wording

Realized loss on RMBS for the six-month period ended June 30, 2024 was approximately $1.9 million as compared to $11.3 million for the six-month period ended June 30, 2023. The decrease of $9.4 million in realized loss on RMBS was because fewer RMBS securities were sold during the six-month period ended June 30, 2024.

Current wording

Realized loss on RMBS for the nine-month period ended September 30, 2024 was approximately $5.5 million as compared to $21.5 million for the nine-month period ended September 30, 2023. The decrease of $16.0 million in realized loss on RMBS was because fewer RMBS securities were sold during the nine-month period ended September 30, 2024.

Previous wording

Realized Gain on Investments in MSRs, Net

Current wording

Realized Gain (Loss) on Investments in MSRs, Net

Previous wording

Realized gain on investments in MSRs for the six-month period ended June 30, 2024 was approximately $741,000 as compared to $0 for the six-month period ended June 30, 2023. The increase of $741,000 in realized gain on MSRs was because no MSRs were sold during the six-month period ended June 30, 2023.

Current wording

Realized loss on investments in MSRs for the three-month period ended September 30, 2024 was approximately $200,000 as compared to a gain of $741,000 for the three-month period ended June 30, 2024. The loss of $200,000 represents early pay off adjustments on the loans that were sold during the three-month period ended June 30, 2024.

Previous wording

Realized gain on investments in MSRs for the three-month period ended June 30, 2024 was approximately $741,000 as compared to $0 for the three-month period ended March 31, 2024. The increase of $741,000 in realized gain on MSRs was because no MSRs were sold during the three-month period ended March 31, 2024.

Current wording

Realized gain on investments in MSRs for the nine-month period ended September 30, 2024 was approximately $500,000 as compared to $0 for the nine-month period ended September 30, 2023. The increase of $500,000 in realized gain on MSRs was because no MSRs were sold during the nine-month period ended September 30, 2023.

Previous wording

Realized Gain on Derivatives, Net

Current wording

Realized Gain (Loss) on Derivatives, Net

Previous wording

Realized gain on derivatives for the three-month period ended June 30, 2024 was approximately $9.4 million as compared to $6.3 million for the three-month period ended March 31, 2024. The increase of $3.1 million in realized gain on derivatives was substantially comprised of an increase of $7.5 million in gains on TBAs and $430,000 in gains on U.S. Treasury futures offset by a decrease of $4.3 million in gains on interest rate swaps and a decrease of $400,000 in interest rate swaps periodic interest income due to changes in interest rates.

Current wording

Realized loss on derivatives for the three-month period ended September 30, 2024 was approximately $8.0 million as compared to gain of $9.4 million for the three-month period ended June 30, 2024. The increase of $17.4 million in realized loss on derivatives was substantially comprised of an increase of $21.8 million in losses on TBAs offset by $3.8 million in gains on U.S. Treasury futures and an increase of $560,000 in interest rate swaps periodic interest income due to changes in interest rates.

Previous wording

Realized gain on derivatives for the six-month period ended June 30, 2024 was approximately $15.7 million as compared to $6.0 million for the six-month period ended June 30, 2023. The increase of $9.7 million in realized gain on derivatives was substantially comprised of a decrease of $9.5 million in losses on interest rate swaps and a decrease of $3.8 million in losses on U.S. Treasury futures offset by an increase of $3.9 million in losses on TBAs due to changes in interest rates.

Current wording

Realized gain on derivatives for the nine-month period ended September 30, 2024 was approximately $7.7 million as compared to $26.7 million for the nine-month period ended September 30, 2023. The decrease of $19.0 million in realized gain on derivatives was substantially comprised of an increase of $36.3 million in losses on TBAs offset by a decrease of $9.0 million in losses on interest rate swaps and a decrease of $8.5 million in losses on U.S. Treasury futures due to changes in interest rates.

Previous wording

Unrealized Loss on RMBS, Measured at Fair Value through Earnings, Net

Current wording

Unrealized Gain (Loss) on RMBS, Measured at Fair Value through Earnings, Net

Previous wording

Unrealized loss on RMBS measured at fair value through earnings for the three-month period ended June 30, 2024 was $4.4 million as compared to a loss of $8.3 million for the three-month period ended March 31, 2024. The decrease of $3.9 million in unrealized loss on RMBS measured at fair value through earnings was due to a smaller rise in interest rates as compared to the three-month period ended March 31, 2024.

Current wording

Unrealized gain on RMBS measured at fair value through earnings for the three-month period ended September 30, 2024 was $25.0 million as compared to a loss of $4.4 million for the three-month period ended June 30, 2024. The increase of $29.4 million in unrealized gain on RMBS measured at fair value through earnings was due to a drop in interest rates during the quarter.

Previous wording

Unrealized loss on RMBS measured at fair value through earnings for the six-month period ended June 30, 2024 was $12.8 million as compared to $6.8 million for the six-month period ended June 30, 2023. The increase of $6.0 million in unrealized loss on RMBS measured at fair value through earnings was due to a rise in interest rates combined with marginal widening of nominal spreads.

Current wording

Unrealized gain on RMBS measured at fair value through earnings for the nine-month period ended September 30, 2024 was $12.2 million as compared to a loss of $26.6 million for the nine-month period ended September 30, 2023. The increase of $38.8 million in unrealized gain on RMBS measured at fair value through earnings was due to a drop in interest rates during the period.

Previous wording

Unrealized loss on derivatives for the three-month period ended June 30, 2024 was approximately $3.0 million as compared to a gain of $12.3 million for the three-month period ended March 31, 2024. The increase of $15.3 million in unrealized loss on derivatives was primarily due to changes in interest rates and the composition of our derivatives relative to the prior period.

Current wording

Unrealized loss on derivatives for the three-month period ended September 30, 2024 was approximately $21.3 million as compared to $3.0 million for the three-month period ended June 30, 2024. The increase of $18.3 million in unrealized loss on derivatives was primarily due to changes in interest rates and the composition of our derivatives relative to the prior period.

Previous wording

Unrealized gain on derivatives for the six-month period ended June 30, 2024 was approximately $9.3 million as compared to a loss of $5.4 million for the six-month period ended June 30, 2023. The increase of $14.7 million in unrealized gain on derivatives was primarily due to changes in interest rates and the composition of our derivatives relative to the prior period.

Current wording

Unrealized loss on derivatives for the nine-month period ended September 30, 2024 was approximately $12.0 million as compared to a gain of $12.9 million for the nine-month period ended September 30, 2023. The increase of $24.9 million in unrealized loss on derivatives was primarily due to changes in interest rates and the composition of our derivatives relative to the prior period.

Previous wording

Unrealized loss on our investments in Servicing Related Assets for the six-month period ended June 30, 2024 was approximately $6.6 million as compared to $14.7 million for the six-month period ended June 30, 2023. The decrease of $8.1 million in unrealized loss on our investments in Servicing Related Assets was primarily due to changes in valuation inputs or assumptions and paydown of underlying loans.

Current wording

Unrealized loss on our investments in Servicing Related Assets for the three-month period ended September 30, 2024 was approximately $7.5 million as compared to $3.3 million for the three-month period ended June 30, 2024. The increase of $4.2 million in unrealized loss on our investments in Servicing Related Assets was primarily due to changes in valuation inputs or assumptions and paydown of underlying loans.

Previous wording

Unrealized loss on our investments in Servicing Related Assets was approximately $3.3 million for each of the three-month periods ended June 30, 2024 and March 31, 2024.

Current wording

General and administrative expense for was $3.4 million for each of the three-month periods ended September 30, 2024 and June 30, 2024.

Previous wording

General and administrative expense for the six-month period ended June 30, 2024 was $5.2 million as compared to $3.5 million for the six-month period ended June 30, 2023. The increase of $1.7 million in general and administrative expense was due to an increase in professional fees.

Current wording

General and administrative expense for the nine-month period ended September 30, 2024 was $8.6 million as compared to $5.1 million for the nine-month period ended September 30, 2023. The increase of $3.5 million in general and administrative expense was due to an increase in professional fees.

Previous wording

Net income allocated to noncontrolling interests in the Operating Partnership, which are LTIP-OP Units owned by directors and officers of the Company and by certain other individuals who provide services to us through the Manager, represented approximately 2.4% and 1.9% of net income for the three-month periods ended June 30, 2024 and March 31, 2024, respectively, and 2.0% and 1.9% of net income for the six-month periods ended June 30, 2024 and June 30, 2023, respectively.

Current wording

Net income allocated to noncontrolling interests in the Operating Partnership, which are LTIP-OP Units owned by directors and officers of the Company and by certain other individuals who provide services to us through the Manager, represented approximately 2.0% and 2.4% of net income for the three-month periods ended September 30, 2024 and June 30, 2024, respectively, and 2.0% and 1.9% of net income for the nine-month periods ended September 30, 2024 and September 30, 2023, respectively.

Previous wording

Our GAAP equity changes as the values of our RMBS are marked to market each quarter, among other factors. The primary causes of mark to market changes are changes in interest rates and nominal spreads. During the three and six-month periods ended June 30, 2024, a rise in interest rates combined with marginal widening of credit spreads caused a net unrealized loss on our available-for-sale RMBS. Unrealized gain (loss) on available-for-sale RMBS is recorded in accumulated other comprehensive income (loss).

Current wording

Our GAAP equity changes as the values of our RMBS are marked to market each quarter, among other factors. The primary causes of mark to market changes are changes in interest rates and nominal spreads. During the three and nine-month periods ended September 30, 2024, a drop in interest rates caused a net unrealized gain on our available-for-sale RMBS. Unrealized gain (loss) on available-for-sale RMBS is recorded in accumulated other comprehensive income (loss).

Previous wording

EAD for the six-month period ended June 30, 2024 as compared to the six month period ended June 30, 2023 decreased by approximately $3.2 million, or $0.16 per average common share due to changes in interest rates and increase in expenses.

Current wording

EAD for the three-month period ended September 30, 2024 as compared to the three month period ended June 30, 2024 increased by approximately $248,000, or $0.00 per average common share.

Previous wording

EAD for the three-month period ended June 30, 2024 as compared to the three month period ended March 31, 2024 decreased by approximately $1.7 million, or $0.05 per average common share due to changes in interest rates and increase in expenses.

Current wording

EAD for the nine-month period ended September 30, 2024 as compared to the nine-month period ended September 30, 2023 decreased by approximately $5.1 million, or $0.25 per average common share due to changes in interest rates and an increase in expenses.

Previous wording

Aurora’s portfolio of Fannie Mae and Freddie Mac MSRs have an aggregate UPB of approximately $18.0 billion as of June 30, 2024.

Current wording

Aurora’s portfolio of Fannie Mae and Freddie Mac MSRs have an aggregate UPB of approximately $17.6 billion as of September 30, 2024.

Previous wording

As of June 30, 2024, we had repurchase agreements with 35 counterparties and approximately $994.8 million of outstanding repurchase agreement borrowings from 11 of those counterparties, which were used to finance RMBS. As of June 30, 2024, our exposure (defined as the amount of cash and securities pledged as collateral, less the borrowing under the repurchase agreement) to any of the counterparties under the repurchase agreements did not exceed five percent of the Company’s equity. Under these agreements, which are uncommitted facilities, we sell a security to a counterparty and concurrently agree to repurchase the same security at a later date at the same price that we initially sold the security plus the interest charged. The sale price represents financing proceeds and the difference between the sale and repurchase prices represents interest on the financing. The price at which the security is sold generally represents the market value of the security less a discount or “haircut”. The weighted average haircut on our repurchase debt at June 30, 2024 was approximately 4.4%. During the term of the repurchase transaction, which can be as short as a few days, the counterparty holds the security and posts margin as collateral. The counterparty monitors and calculates what it estimates to be the value of the collateral during the term of the transaction. If this value declines by more than a de minimis threshold, the counterparty requires us to post additional collateral (or “margin”) in order to maintain the initial haircut on the collateral. This margin is typically required to be posted in the form of cash and cash equivalents. Furthermore, we are, from time to time, a party to derivative agreements or financing arrangements that may be subject to margin calls based on the value of such instruments.

Current wording

As of September 30, 2024, we had repurchase agreements with 35 counterparties and approximately $1,108.5 million of outstanding repurchase agreement borrowings from 13 of those counterparties, which were used to finance RMBS. As of September 30, 2024, our exposure (defined as the amount of cash and securities pledged as collateral, less the borrowing under the repurchase agreement) to any of the counterparties under the repurchase agreements did not exceed five percent of the Company’s equity. Under these agreements, which are uncommitted facilities, we sell a security to a counterparty and concurrently agree to repurchase the same security at a later date at the same price that we initially sold the security plus the interest charged. The sale price represents financing proceeds and the difference between the sale and repurchase prices represents interest on the financing. The price at which the security is sold generally represents the market value of the security less a discount or “haircut”. The weighted average haircut on our repurchase debt at September 30, 2024 was approximately 4.4%. During the term of the repurchase transaction, which can be as short as a few days, the counterparty holds the security and posts margin as collateral. The counterparty monitors and calculates what it estimates to be the value of the collateral during the term of the transaction. If this value declines by more than a de minimis threshold, the counterparty requires us to post additional collateral (or “margin”) in order to maintain the initial haircut on the collateral. This margin is typically required to be posted in the form of cash and cash equivalents. Furthermore, we are, from time to time, a party to derivative agreements or financing arrangements that may be subject to margin calls based on the value of such instruments.

Previous wording

The increase in the Company’s borrowings under its repurchase agreements as of June 30, 2024 as compared December 31, 2023 was primarily due to the purchase of new RMBS securities, a large portion of which are financed through repurchase agreements.

Current wording

The increase in the Company’s borrowings under its repurchase agreements as of September 30, 2024 as compared to June 30, 2024 was primarily due to the purchase of new RMBS securities, a large portion of which are financed through repurchase agreements.

Previous wording

The amount of collateral as of June 30, 2024 and December 31, 2023, including cash, was $1.0 billion and $984.2 million, respectively.

Current wording

The amount of collateral as of September 30, 2024 and December 31, 2023, including cash, was $1.2 billion and $984.2 million, respectively.

Previous wording

The weighted average term to maturity of our borrowings under repurchase agreements as of June 30, 2024 and December 31, 2023 was 26 days and 21 days, respectively.

Current wording

The weighted average term to maturity of our borrowings under repurchase agreements as of September 30, 2024 and December 31, 2023 was 30 days and 21 days, respectively.

Previous wording

Freddie Mac MSR Revolver. In July 2018, the Company, Aurora and QRS V (collectively with Aurora and the Company, the “Borrowers”) entered into a $25.0 million revolving credit facility (the “Freddie Mac MSR Revolver”) pursuant to which Aurora pledged all of its existing and future MSRs on loans owned or securitized by Freddie Mac. The term of the Freddie Mac MSR Revolver is 364 days with the Borrowers’ option for two renewals for similar terms followed by a one-year term out feature with a 24-month amortization schedule. The Freddie Mac MSR Revolver was upsized to $45.0 million in September 2018. The Company also has the ability to request up to an additional $5.0 million of borrowings. On April 2, 2019, Aurora and QRS V entered into an amendment that increased the maximum amount of the Freddie Mac MSR Revolver to $100.0 million. In July 2024, the Borrowers entered into an amendment that extended the revolving period for an additional 364 days subject to renewal of the acknowledgment agreement with Freddie Mac on or before October 25, 2024. If such renewal does not occur, absent some other agreement between the parties, the Borrowers would need to pay down the outstanding amount under the Freddie Mac MSR Revolver by February 28, 2025. Amounts borrowed bear interest at a weighted average borrowing rate of 8.2%. At June 30, 2024 and December 31, 2023, approximately $62.5 million and $64.5 million, respectively, was outstanding under the Freddie Mac MSR Revolver.

Current wording

Freddie Mac MSR Revolver. In July 2018, the Company, Aurora and QRS V (collectively with Aurora and the Company, the “Borrowers”) entered into a $25.0 million revolving credit facility (the “Freddie Mac MSR Revolver”) pursuant to which Aurora pledged all of its existing and future MSRs on loans owned or securitized by Freddie Mac. On April 2, 2019, Aurora and QRS V entered into an amendment that increased the maximum amount of the Freddie Mac MSR Revolver to $100.0 million. In July 2024, the Borrowers entered into an amendment that extended the revolving period for an additional 364 days with the Borrowers’ option for two renewals for similar terms followed by a one-year term out feature with a 24-month amortization schedule. Amounts borrowed bear interest at a weighted average borrowing rate of 8.2%. At September 30, 2024 and December 31, 2023, approximately $57.7 million and $64.5 million, respectively, was outstanding under the Freddie Mac MSR Revolver.

Previous wording

Fannie Mae MSR Revolving Facility. In October 2021, Aurora and QRS III entered into a loan and security agreement (the “Fannie Mae MSR Revolving Facility”), pursuant to which Aurora and QRS III pledged their respective rights in all existing and future MSRs for loans owned or securitized by Fannie Mae to secure borrowings outstanding from time to time. The maximum credit amount outstanding at any one time under the Fannie Mae MSR Revolving Facility is $150.0 million. The revolving period is 24 months which may be extended by agreement with the lender. In October 2023, Aurora and QRS III entered into an amendment to the Fannie Mae MSR Revolving Facility that extended the revolving period for an additional 24 months. Amounts borrowed bear interest at a weighted average borrowing rate of 8.1%. At the end of the revolving period, the outstanding amount will be converted to a three-year term loan that will bear interest at a rate calculated at a spread over the rate for one-year interest rate swaps. The Company has guaranteed repayment of all indebtedness under the Fannie Mae MSR Revolving Facility. At June 30, 2024 and December 31, 2023, approximately $98.0 million and $106.0 million, respectively, was outstanding under the Fannie Mae MSR Revolving Facility.

Current wording

Fannie Mae MSR Revolving Facility. In October 2021, Aurora and QRS III entered into a loan and security agreement (the “Fannie Mae MSR Revolving Facility”), pursuant to which Aurora and QRS III pledged their respective rights in all existing and future MSRs for loans owned or securitized by Fannie Mae to secure borrowings outstanding from time to time. The maximum credit amount outstanding at any one time under the Fannie Mae MSR Revolving Facility is $150.0 million. The revolving period is 24 months which may be extended by agreement with the lender. In October 2023, Aurora and QRS III entered into an amendment to the Fannie Mae MSR Revolving Facility that extended the revolving period for an additional 24 months. Amounts borrowed bear interest at a weighted average borrowing rate of 8.1%. At the end of the revolving period, the outstanding amount will be converted to a three-year term loan that will bear interest at a rate calculated at a spread over the rate for one-year interest rate swaps. The Company has guaranteed repayment of all indebtedness under the Fannie Mae MSR Revolving Facility. At September 30, 2024 and December 31, 2023, approximately $94.1 million and $106.0 million, respectively, was outstanding under the Fannie Mae MSR Revolving Facility.