Cherry Hill Mortgage Investment Corp
For the period ended Dec 31, 2025. Filed Mar 5, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 5, 2026
CHMI$2.34-4.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-06.
0001140361-25-007454
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-05.
0001140361-26-008094
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 148 previous paragraphs and 143 current paragraphs.
100 unchanged; 36 reworded; 7 added; 11 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 50 previous and 51 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Since September 2025, the Federal Reserve has reduced its federal funds rate target by 75 basis points to a range of 3.50% to 3.75% due to slowing job growth and increased unemployment. Even though inflation remains above its 2 percent target, the Federal Reserve has determined that in evaluating its dual mandate the downside risks to employment have risen.
Current report
As of December 1, 2025, the Federal Reserve has also ceased reducing its balance sheet. Since 2022, the Federal Reserve had been allowing a set amount of Treasury securities and Agency RMBS on its balance sheet to roll off each month without reinvestment. Prior to December 1, 2025, the Federal Reserve’s monthly redemption cap on U.S. Treasury Securities was $5 billion and its redemption cap on agency debt/MBS was $35 billion with excess principal payments reinvested in U.S. Treasury securities.
Current report
In addition, on January 11, 2026, it was reported that the U.S. Attorney’s Office in the District of Columbia is investigating the Federal Reserve’s renovation of its headquarters and whether Federal Reserve Chairman Jerome Powell lied to Congress about the project. In response, Chairman Powell made a public statement that he believed the investigation was initiated because the Federal Reserve would not set interest rates as the President preferred. It is unclear what impact the investigation will have on the future course of U.S. monetary policy.
Current report
Interest expense for the year ended December 31, 2025 was $49.8 million as compared to $55.8 million for the year ended December 31, 2024. The $6.0 million decrease in interest expense for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to a decrease in financing rates combined with a decrease in notes payable.
Current report
Management Fee to Affiliate
Current report
Management fee to affiliate for the year ended December 31, 2025 was $0 as compared to $6.0 million for the year ended December 31, 2024. The $6.0 million decrease in management fee to affiliate for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to the Internalization of the Company.
Current report
EAD for the year ended December 31, 2025 as compared to the year ended December 31, 2024, increased by approximately $3.7 million or $0.06 per average common share due primarily to a decrease in Internalization expenses as well as a decrease in borrowing costs offset by an increase in common share count resulting from issuances under the Common Stock ATM program.
Removed paragraphs (11)
Previous report
Prior to November 14, 2024, we were externally managed and advised by Cherry Hill Mortgage Management, LLC which was responsible for our investment strategies and decisions and our day-to-day operations, subject to the supervision and oversight of our board of directors. Effective as of November 14, 2024, we completed an “Internalization Event” within the meaning of the management agreement with CHMM by, among other things, directly hiring the senior management team and other personnel who had historically provided services to us through CHMM. Upon consummation of the Internalization Event, the management agreement terminated in accordance with its terms without payment of a termination fee and we ceased being externally managed (the “Internalization”). As a result of the Internalization, we began operating as a fully integrated, internally managed company.
Previous report
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 2.7% on a year-over-year basis in November 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, though the timing will depend on future inflation data. 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 U.S. 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 U.S. Treasury securities in a manner that approximates the maturity composition of outstanding U.S. Treasury securities outstanding.
Previous report
Results of Operations
Previous report
Results of Operations
Previous report
Interest expense for the year ended December 31, 2024 was $55.7 million as compared to $51.6 million for the year ended December 31, 2023. The $4.1 million increase in interest expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023, was primarily due to a rise in repurchase obligations.
Previous report
EAD for the year ended December 31, 2024 as compared to the year ended December 31, 2023, decreased by approximately $6.3 million or $0.30 per average common share. Approximately $3.9 million of this or $0.13 per average common share was due to internalization costs. The remaining variance was primarily due to changes in interest rates.
Previous report
Management Agreement
Previous report
The Management Agreement with CHMM, which was terminated on November 14, 2024, provided that CHMM was entitled to receive a management fee, the reimbursement of certain expenses and, in certain circumstances, a termination fee. The management fee was an amount equal to 1.5% per annum of stockholders’ equity, adjusted as set forth in the Management Agreement, and calculated and payable quarterly in arrears. In certain circumstances, we were required to pay CHMM a termination fee equal to three times the average annual management fee earned by CHMM during the two four-quarter periods ending as of the end of the most recently completed fiscal quarter prior to the effective date of the termination. Such termination fee was required to be paid upon termination or non-renewal of the Management Agreement by us without cause or by CHMM if we materially breached the Management Agreement. The Management Agreement was terminated without payment of any termination fee in connection with our consummation of an internalization event (as defined in the Management Agreement), effective as of November 14, 2024.
Previous report
We paid all of our direct operating expenses, except those specifically required to be borne by CHMM under the Management Agreement. CHMM was responsible for all costs incident to the performance of its duties under the Management Agreement. We believe that CHMM used the proceeds from its management fee in part to pay the Services Provider for services provided under the Services Agreement. Our officers received no cash compensation directly from us. CHMM provided us with our officers. CHMM was entitled to be reimbursed for an agreed upon portion of the costs of the wages, salary and other benefits with respect to our CFO, and, prior to January 1, 2022, our general counsel, originally based on the percentages of their working time and efforts spent on matters related to the Company. The amount of the wages, salary and benefits reimbursed with respect to the officers CHMM provided to us was subject to the approval of the compensation committee of our board of directors.
Previous report
Joint Marketing Recapture Agreement
Previous report
In May 2018, Aurora entered into a recapture purchase and sale agreement with RoundPoint, one of Aurora’s subservicers and from August 2020 to September 2023, a wholly-owned subsidiary of Freedom Mortgage. Pursuant to this agreement, RoundPoint attempts to refinance certain mortgage loans underlying Aurora’s MSR portfolio subserviced by RoundPoint as directed by Aurora. If a loan is refinanced, RoundPoint will sell the loan to Fannie Mae or Freddie Mac, as applicable, retain the sale proceeds and transfer the related MSR to Aurora. During the period where RoundPoint was a wholly-owned subsidiary of Freedom Mortgage, RoundPoint outsourced such recapture services to Freedom Mortgage on RoundPoint’s behalf.
Reworded paragraphs (36)
Previous wording
We are a fully integrated, internally managed residential real estate finance company focused on acquiring, investing in and managing residential mortgage assets in the United States. We were incorporated in Maryland on October 31, 2012, and we commenced operations on or about October 9, 2013, following the completion of our initial public offering and a concurrent private placement. Our common stock, our Series A Preferred Stock and our Series B Preferred Stock are listed and traded on the NYSE under the symbols “CHMI”, “CHMI-PRA” and “CHMI-PRB”, respectively. As of November 14, 2024, we are a fully integrated, internally managed mortgage REIT. Prior to November 14, 2024, we were externally managed by Cherry Hill Mortgage Management, LLC, an SEC-registered investment adviser.
Current wording
On November 14, 2024, we became a fully integrated, internally managed residential real estate finance company focused on acquiring, investing in and managing residential mortgage assets in the United States. We were incorporated in Maryland on October 31, 2012, and we commenced operations on or about October 9, 2013, following the completion of our initial public offering and a concurrent private placement. Our common stock, our Series A Preferred Stock and our Series B Preferred Stock are listed and traded on the NYSE under the symbols “CHMI”, “CHMI-PRA” and “CHMI-PRB”, respectively.
Previous wording
We conduct substantially all of our operations and own substantially all of our assets through our Operating Partnership. We are the sole general partner of our Operating Partnership. As of December 31, 2024, we owned 98.0% of our Operating Partnership. Our Operating Partnership, in turn, owns all of the outstanding common stock of CHMI Sub-REIT, Inc. (the “Sub-REIT”). The Sub-REIT has elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2020.
Current wording
We conduct substantially all of our operations and own substantially all of our assets through our Operating Partnership. We are the sole general partner of our Operating Partnership. As of December 31, 2025, we owned 98.4% of our Operating Partnership. Our Operating Partnership, in turn, owns all of the outstanding common stock of CHMI Sub-REIT, Inc. (the “Sub-REIT”). The Sub-REIT has elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2020.
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 $150.0 million in shares of its common stock at prices prevailing at the time, subject to volume and other regulatory limitations. As of December 31, 2024, approximately $49.2 million was remaining pursuant to the Common Stock ATM Program. During the year ended December 31, 2024, the Company issued and sold 1,544,917 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 $5.6 million before fees of approximately $111,000. 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.
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 December 31, 2025, approximately $34.6 million was remaining pursuant to the Common Stock ATM Program. During the year ended December 31, 2025, the Company issued and sold 4,909,053 shares of common stock under the Common Stock ATM Program. The shares were sold at a weighted average price of $3.00 per share for aggregate gross proceeds of approximately $14.7 million before fees of approximately $293,000. During the year ended December 31, 2024, the Company issued and sold 1,544,917 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 $5.6 million before fees of approximately $111,000.
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 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 year ended December 31, 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 year ended December 30, 2024. During the year ended December 31, 2023, the Company did not repurchase any 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 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 year ended December 31, 2025, the Company did not repurchase any Preferred Stock pursuant to the repurchase program. During the year ended December 31, 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 year ended December 30, 2024. 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’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.
Current wording
To the extent the Federal Reserve takes future action to ease monetary policy by reducing its federal funds rate and/or purchasing securities and increasing its balance sheet, it 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 selling securities and reducing 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
The value of our assets may be affected by prepayment speeds on mortgage loans. Prepayment speed is the measurement of how quickly borrowers pay down the UPB of their loans or how quickly loans are otherwise liquidated or charged off. Generally, in a declining interest rate environment, prepayment speeds tend to increase. Conversely, in an increasing interest rate environment, prepayment speeds tend to decrease. When we acquire Servicing Related Assets or RMBS, we anticipate that the underlying mortgage loans will prepay at a projected rate generating an expected cash flow (in the case of Servicing Related Assets) and yield. If we purchase assets at a premium to par value and borrowers prepay their mortgage loans faster than expected, the corresponding prepayments on our assets may reduce the expected yield on such assets because we will have to amortize the related premium on an accelerated basis. In addition, we will have to reinvest the greater amounts of prepayments in that lower rate environment, thereby affecting future yields on our assets. If we purchase assets at a discount to par value, and borrowers prepay their mortgage loans slower than expected, the decrease in corresponding prepayments may reduce the expected yield on assets because we will not be able to accrete the related discount as quickly as originally anticipated.
Current wording
The value of our assets may be affected by prepayment speeds on mortgage loans. Prepayment speed is the measurement of how quickly borrowers pay down the unpaid principal balance of their loans or how quickly loans are otherwise liquidated or charged off. Generally, in a declining interest rate environment, prepayment speeds tend to increase. Conversely, in an increasing interest rate environment, prepayment speeds tend to decrease. When we acquire Servicing Related Assets or RMBS, we anticipate that the underlying mortgage loans will prepay at a projected rate generating an expected cash flow (in the case of Servicing Related Assets) and yield. If we purchase assets at a premium to par value and borrowers prepay their mortgage loans faster than expected, the corresponding prepayments on our assets may reduce the expected yield on such assets because we will have to amortize the related premium on an accelerated basis. In addition, we will have to reinvest the greater amounts of prepayments in that lower rate environment, thereby affecting future yields on our assets. If we purchase assets at a discount to par value, and borrowers prepay their mortgage loans slower than expected, the decrease in corresponding prepayments may reduce the expected yield on assets because we will not be able to accrete the related discount as quickly as originally anticipated.
Previous wording
We attempt to reduce the exposure of our MSRs to voluntary prepayments through the structuring of recapture agreements with Aurora’s subservicers. Under these agreements, the subservicer attempts to refinance specified mortgage loans. The subservicer sells the new mortgage loan to the applicable Agency, transfers the related MSR to Aurora and then subservices the new mortgage loan on behalf of Aurora. See “Item 8. Consolidated Financial Statements and Supplementary Data—Note 7. Transactions with Related Parties” for information regarding Aurora’s recapture agreements.
Current wording
We attempt to reduce the exposure of our MSRs to voluntary prepayments through the structuring of recapture agreements with Aurora’s subservicers. Under these agreements, the subservicer attempts to refinance specified mortgage loans. The subservicer sells the new mortgage loan to the applicable Agency, transfers the related MSR to Aurora and then subservices the new mortgage loan on behalf of Aurora.
Previous wording
We have elected the fair value option to record our investments in MSRs in order to provide users of our consolidated financial statements with better information regarding the effects of prepayment risk and other market factors on the MSRs. Under this election, we record a valuation adjustment on our investments in MSRs on a quarterly basis to recognize the changes in fair value of our MSRs in net income as described below. Although transactions in MSRs are observable in the marketplace, the valuation includes unobservable market data inputs (prepayment speeds, delinquency levels, costs to service and discount rates). The change in fair value of MSRs is recorded within “Unrealized gain (loss) on investments in Servicing Related Assets” on the consolidated statements of income (loss). Fair value is generally determined by discounting the expected future cash flows using discount rates that incorporate the market risks and liquidity premium specific to the MSRs and, therefore, may differ from their effective yields. In determining the valuation of MSRs, management uses internally developed pricing models that are based on certain unobservable market-based inputs. The Company classifies these valuations as Level 3 in the fair value hierarchy. For additional information on our fair value methodology, see “Item 8. Consolidated Financial Statements and Supplementary Data—Note 9. Fair Value.”
Current wording
We have elected the fair value option to record our investments in MSRs in order to provide users of our consolidated financial statements with better information regarding the effects of prepayment risk and other market factors on the MSRs. Under this election, we record a valuation adjustment on our investments in MSRs on a quarterly basis to recognize the changes in fair value of our MSRs in net income as described below. Although transactions in MSRs are observable in the marketplace, the valuation includes unobservable market data inputs (prepayment speeds, costs to service and discount rates). The change in fair value of MSRs is recorded within “Unrealized gain (loss) on investments in Servicing Related Assets” on the consolidated statements of income (loss). Fair value is generally determined by discounting the expected future cash flows using discount rates that incorporate the market risks and liquidity premium specific to the MSRs and, therefore, may differ from their effective yields. In determining the valuation of MSRs, management uses internally developed pricing models that are based on certain unobservable market-based inputs. The Company classifies these valuations as Level 3 in the fair value hierarchy. For additional information on our fair value methodology, see “Item 8. Consolidated Financial Statements and Supplementary Data—Note 9. Fair Value.”
Previous wording
We finance the acquisition of our RMBS for our portfolio through repurchase transactions under master repurchase agreements. Repurchase transactions are treated as collateralized financing transactions and are carried at their contractual amounts as specified in the respective transactions. Accrued interest payable is included in “Accrued expenses and other liabilities” on the consolidated balance sheets. Securities financed through repurchase transactions remain on our consolidated balance sheet as an asset and cash received from the purchaser is recorded on our consolidated balance sheet as a liability. Interest paid in accordance with repurchase transactions is recorded in interest expense on the consolidated statements of income (loss).
Current wording
We finance the acquisition of our RMBS for our portfolio through repurchase transactions under master repurchase agreements. Repurchase transactions are treated as collateralized financing transactions and are carried at their contractual amounts as specified in the respective transactions. Accrued interest payable is included in “Accrued expenses and other liabilities” on the consolidated balance sheets. Securities financed through repurchase transactions remain on our consolidated balance sheet as an asset and cash received from the purchaser is recorded on our consolidated balance sheets as a liability. Interest paid in accordance with repurchase transactions is recorded in interest expense on the consolidated statements of income (loss).
Previous wording
Interest income for the year ended December 31, 2024 was $55.8 million as compared to $50.0 million for the year ended December 31, 2023. The $5.8 million increase in interest income for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to purchases of new securities, as well as replacing lower yielding securities with higher yielding securities coupled with portfolio positioning.
Current wording
Interest income for the year ended December 31, 2025 was $61.1 million as compared to $55.8 million for the year ended December 31, 2024. The $5.3 million increase in interest income for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to purchases of new securities, an increase in price premium amortization as well as replacing lower yielding securities with higher yielding securities.
Previous wording
Servicing fee income for the year ended December 31, 2024 was $48.5 million as compared to $53.4 million for the year ended December 31, 2023. The $4.9 million decrease in servicing fee income for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to changes in the size of the portfolio.
Current wording
Servicing fee income for the year ended December 31, 2025 was $43.3 million as compared to $48.5 million for the year ended December 31, 2024. The $5.2 million decrease in servicing fee income for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to changes in the size of the portfolio.
Previous wording
Servicing costs for the year ended December 31, 2024 were $12.4 million as compared to $11.2 million for the year ended December 31, 2023. The $1.2 million increase in servicing costs for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to one-time loan level adjustments as well as de-boarding fees related to the MSR sale.
Current wording
Servicing costs for the year ended December 31, 2025 were $9.3 million as compared to $12.4 million for the year ended December 31, 2024. The $3.1 million decrease in servicing costs for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to changes in the portfolio and a one-time loan level adjustment as well as de-boarding fees related to the MSR sale during the year ended December 31, 2024.
Previous wording
Realized loss on RMBS for the year ended December 31, 2024 was $6.6 million as compared to $36.3 million for the year ended December 31, 2023. The $29.7 million decrease in realized loss on RMBS for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to a decline in the number of RMBS securities sold during the year ended December 31, 2024.
Current wording
Realized loss on RMBS for the year ended December 31, 2025 was $6.0 million as compared to $6.6 million for the year ended December 31, 2024. The $0.6 million decrease in realized loss on RMBS for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to a decline in the number of RMBS securities sold during the year ended December 31, 2025.
Previous wording
Realized gain on investments in MSRs for the year ended December 31, 2024 was approximately $504,000 as compared to $0 for the year ended December 31, 2023. The increase of $504,000 in realized gain on MSRs was because no MSRs were sold during the year ended December 31, 2023.
Current wording
Realized gain on investments in MSRs for the year ended December 31, 2025 was $0 as compared to $0.5 million for the year ended December 31, 2024. The decrease of $0.5 million in realized gain on MSRs was because no MSRs were sold during the year ended December 31, 2025.
Previous wording
Realized gain on derivatives for the year ended December 31, 2024 was $21.3 million as compared to $33.8 million for the year ended December 31, 2023. The $12.5 million decrease in realized gain on derivatives for the year ended December 31, 2024 as compared to December 31, 2023 was substantially comprised of an increase of $24.7 million in losses on TBAs and a decrease of $1.4 million in interest income on interest rate swaps, offset by a decrease of $9.2 million in losses on interest rate swaps and a decrease of $4.3 million in losses on U.S. Treasury futures.
Current wording
Realized gain on derivatives for the year ended December 31, 2025 was $7.0 million as compared to $21.3 million for the year ended December 31, 2024. The $14.3 million decrease in realized gain on derivatives for the year ended December 31, 2025 as compared to December 31, 2024 was substantially comprised of a decrease of $13.4 million in interest income on interest rate swaps and an increase of $5.5 million in losses on interest rate swaps, offset by a decrease of $1.8 million in losses on TBAs and a decrease of $2.8 million in losses on U.S. Treasury futures due to changes in interest rates as well as composition of derivatives.
Previous wording
Unrealized loss on RMBS measured at fair value through earnings for the year ended December 31, 2024 was $19.4 million as compared to a gain of $9.8 million for the year ended December 31, 2023. The increase of $29.2 million in unrealized loss on RMBS measured at fair value through earnings was due to a rise in interest rates during the year.
Current wording
Unrealized gain on RMBS measured at fair value through earnings for the year ended December 31, 2025 was $35.6 million as compared to a loss of $19.4 million for the year ended December 31, 2024. The increase of $55.0 million in unrealized gain on RMBS measured at fair value through earnings was due to a drop in interest rates during the period combined with spread tightening.
Previous wording
Unrealized gain on derivatives for the year ended December 31, 2024 was $9.8 million as compared to a loss of $43.1 million for the year ended December 31, 2023. The $52.9 million decrease in unrealized loss on derivatives for the year ended December 31, 2024 as compared to December 31, 2023 was primarily due to changes in interest rates and the composition of our derivatives relative to the prior year.
Current wording
Unrealized loss on derivatives for the year ended December 31, 2025 was $39.8 million as compared to a gain of $9.8 million for the year ended December 31, 2024. The $49.6 million increase in unrealized loss on derivatives for the year ended December 31, 2025 as compared to December 31, 2024 was primarily due to changes in interest rates and the composition of our derivatives relative to the prior year.
Previous wording
Unrealized loss on our investments in Servicing Related Assets for the year ended December 31, 2024 was $7.2 million as compared to $25.9 million for the year ended December 31, 2023. The $18.7 million decrease in unrealized loss on our investments in Servicing Related Assets for December 31, 2024 as compared to December 31, 2023 was primarily due to changes in valuation inputs or assumptions.
Current wording
Unrealized loss on our investments in Servicing Related Assets for the year ended December 31, 2025 was $18.8 million as compared to $7.2 million for the year ended December 31, 2024. The $11.6 million increase in unrealized loss on our investments in Servicing Related Assets for December 31, 2025 as compared to December 31, 2024 was primarily due to changes in valuation inputs or assumptions and paydown of underlying loans.
Previous wording
General and administrative expense for the year ended December 31, 2024 was $10.7 million as compared to $6.4 million for the year ended December 31, 2023. The $4.3 million increase in general and administrative expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to an increase in professional fees relating to the Internalization.
Current wording
General and administrative expense for the year ended December 31, 2025 was $7.7 million as compared to $10.7 million for the year ended December 31, 2024. The $3.0 million decrease in general and administrative expense for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to a decrease in professional fees related to the Internalization.
Previous wording
Compensation and benefits expense for the year ended December 31, 2024 was $1.6 million as compared to $466,000 for the year ended December 31, 2023. The $1.1 million increase in compensation and benefits expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was because, effective as of November 14, 2024, the Company started operating as an internally managed Company.
Current wording
Compensation and benefits expense for the year ended December 31, 2025 was $6.5 million as compared to $1.6 million for the year ended December 31, 2024. The $4.9 million increase in compensation and benefits expense for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was because, effective as of November 14, 2024, the Company started operating as an internally managed Company.
Previous wording
Net income allocated to noncontrolling interests in the Operating Partnership, which are LTIP-OP Units owned by our directors, officers and employees represented approximately 2.0% and 1.9% of net income for the years ended December 31, 2024 and December 31, 2023, respectively.
Current wording
Net income allocated to noncontrolling interests in the Operating Partnership, which are LTIP-OP Units owned by our directors, officers and employees represented approximately 1.6% and 2.0% of net income for the years ended December 31, 2025 and December 31, 2024, 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 year ended December 31, 2024, a rise in interest rates caused a net unrealized loss on our available-for-sale RMBS. During the year ended December 31, 2023, tightening of credit spreads and an interest rate rally in the 5-year U.S. Treasury rate caused a net unrealized gain on our available-for-sale RMBS, which was chiefly driven by the interest and mortgage rate rally that occurred in the fourth quarter of the year and positioning of securities. 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 year ended December 31, 2025, a drop in interest rates caused a net unrealized gain on our available-for-sale RMBS. During the year ended December 31, 2024, a rise in interest rates 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).
Previous wording
Aurora’s MSR portfolio of Fannie Mae and Freddie Mac MSRs have an aggregate UPB of approximately $17.3 billion as of December 31, 2024.
Current wording
Aurora’s MSR portfolio of Fannie Mae and Freddie Mac MSRs have an aggregate UPB of approximately $15.9 billion as of December 31, 2025.
Previous wording
Our primary uses of funds are the payment of interest, management fees, outstanding commitments, other operating expenses, investments in new or replacement assets, margin calls and the repayment of borrowings, as well as dividends. Although we continue to maintain a higher level of unrestricted cash than prior to the pandemic, we expect to invest more of that unrestricted cash in our targeted assets if normalization of the economy continues. We may also use capital resources to repurchase additional shares of common stock under our stock repurchase program when we believe such repurchases are appropriate and/or the stock is trading at a significant discount to net asset value. We seek to maintain adequate cash reserves and other sources of available liquidity to meet any margin calls resulting from decreases in value related to a reasonably possible (in the opinion of management) change in interest rates.
Current wording
Our primary uses of funds are the payment of interest, compensation and benefits, outstanding commitments, operating expenses, investments in new or replacement assets, margin calls and the repayment of borrowings, as well as dividends. Although we continue to maintain a higher level of unrestricted cash than prior to the pandemic, we expect to invest more of that unrestricted cash in our targeted assets if normalization of the economy continues. We may also use capital resources to repurchase additional shares of common stock under our stock repurchase program when we believe such repurchases are appropriate and/or the stock is trading at a significant discount to net asset value. We seek to maintain adequate cash reserves and other sources of available liquidity to meet any margin calls resulting from decreases in value related to a reasonably possible (in the opinion of management) change in interest rates.
Previous wording
As of December 31, 2024, we had repurchase agreements with 35 counterparties and approximately $1,077.3 million of outstanding repurchase agreement borrowings from 12 of those counterparties, which were used to finance RMBS. As of December 31, 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 December 31, 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 December 31, 2025, we had repurchase agreements with multiple counterparties and approximately $1,137.2 million of outstanding repurchase agreement borrowings from 16 of those counterparties, which were used to finance RMBS. As of December 31, 2025, 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 December 31, 2025 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
These short-term borrowings were used to finance certain of our investments in RMBS. The RMBS repurchase agreements are guaranteed by the Company. The weighted average difference between the market value of the assets and the face amount of available financing for the RMBS repurchase agreements, or the haircut, was 4.4% as of December 31, 2024 and 4.3% December 31, 2023. The following tables provide additional information regarding borrowings under our repurchase agreements (dollars in thousands):
Current wording
These short-term borrowings were used to finance certain of our investments in RMBS. The RMBS repurchase agreements are guaranteed by the Company. The weighted average difference between the market value of the assets and the face amount of available financing for the RMBS repurchase agreements, or the haircut, was 4.4% as of December 31, 2025 and December 31, 2024. The following tables provide additional information regarding borrowings under our repurchase agreements (dollars in thousands):
Previous wording
The amount of collateral as of December 31, 2024 and December 31, 2023, including cash, was $1,123.7 million and $984.2 million, respectively.
Current wording
The amount of collateral as of December 31, 2025 and December 31, 2024, including cash, was $1,192.6 million and $1,123.7 million, respectively.
Previous wording
The weighted average term to maturity of our borrowings under repurchase agreements as of December 31, 2024 and December 31, 2023 was 18 days and 21 days, respectively.
Current wording
The weighted average term to maturity of our borrowings under repurchase agreements as of December 31, 2025 and December 31, 2024 was 16 days and 18 days, respectively.
Previous wording
As of December 31, 2024, the Company had two separate MSR financing facilities: (i) the Freddie Mac MSR Revolver, which is a revolving credit facility for up to $100.0 million that is secured by all Freddie Mac MSRs owned by Aurora; and (ii) the Fannie Mae MSR Revolving Facility, which is a revolving credit facility for up to $150.0 million, that is secured by all Fannie Mae MSRs owned by Aurora. Both financing facilities are available for MSRs as well as certain servicing related advances associated with MSRs.
Current wording
As of December 31, 2025, the Company had two separate MSR financing facilities: (i) the Freddie Mac MSR Revolver, which is a revolving credit facility for up to $100.0 million that is secured by all Freddie Mac MSRs owned by Aurora; and (ii) the Fannie Mae MSR Revolving Facility, which is a revolving credit facility for up to $100.0 million, that is secured by all Fannie Mae MSRs owned by Aurora. Both financing facilities are available for MSRs as well as certain servicing related advances associated with MSRs.
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. 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 8.1%. At December 31, 2024 and December 31, 2023, approximately $56.5 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 June 2025, 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 7.1%. At December 31, 2025 and December 31, 2024, approximately $55.5 million and $56.5 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 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 7.9%. 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 December 31, 2024 and December 31, 2023, approximately $95.6 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 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 original maximum credit amount outstanding at any one time under the Fannie Mae MSR Revolving Facility was $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. In October 2025, Aurora and QRS III entered into an amendment to the Fannie Mae MSR which (i) extended the revolving period by an additional 24 months, and (ii) reduced the credit amount to $100 million, with the option for Aurora and QRS III to increase the maximum credit to $150 million at any time during the extended 24-month revolving period. The revolving period may be further extended by a period of 1-year by agreement with the lender. Amounts borrowed bear interest at a weighted average borrowing rate of 7.0%. 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 December 31, 2025 and December 31, 2024, approximately $90.8 million and $95.6 million, respectively, was outstanding under the Fannie Mae MSR Revolving Facility.
Previous wording
Our operating activities used cash of approximately $4.7 million and provided cash of approximately $40.7 million for the years ended December 31, 2024 and December 31, 2023, respectively. Our investing activities used cash of approximately $141.3 million and $104.1 million for the years ended December 31, 2024 and December 31, 2023, respectively. The cash used by our investing activities during the years ended December 31, 2024 and December 31, 2023 primarily resulted from RMBS purchases offset by RMBS sales and principal paydowns of RMBS.
Current wording
Our operating activities provided cash of approximately $19.1 million and used cash of approximately $4.7 million for the years ended December 31, 2025 and December 31, 2024, respectively. Our investing activities used cash of approximately $66.7 million and $141.3 million for the years ended December 31, 2025 and December 31, 2024, respectively. The cash used by our investing activities during the years ended December 31, 2025 and December 31, 2024 primarily resulted from RMBS purchases offset by RMBS sales and principal paydowns of RMBS and payments for settlements of derivatives.
Previous wording
We make distributions based on a number of factors, including an estimate of taxable earnings. Dividends distributed and taxable income will typically differ from GAAP earnings due to items such as fair value adjustments, differences in premium amortization and discount accretion, and nondeductible general and administrative expenses. Our common dividend per share may be substantially different than our taxable earnings and GAAP earnings per share. Our GAAP income per diluted share for the year ended December 31, 2024 was $0.07 and our GAAP loss per diluted share for the year ended December 31, 2023 was $1.70.
Current wording
We make distributions based on a number of factors, including an estimate of taxable earnings. Dividends distributed and taxable income will typically differ from GAAP earnings due to items such as fair value adjustments, differences in premium amortization and discount accretion, and nondeductible general and administrative expenses. Our common dividend per share may be substantially different than our taxable earnings and GAAP earnings per share. Our GAAP loss per diluted share for the year ended December 31, 2025 was $0.09 and our GAAP income per diluted share for the year ended December 31, 2024 was $0.07.
Previous wording
Our contractual obligations as of December 31, 2024 and December 31, 2023 included repurchase agreements, borrowings under our MSR financing arrangements, our Management Agreement with our Manager, and our subservicing agreements.
Current wording
Our contractual obligations as of December 31, 2025 and December 31, 2024 included repurchase agreements, borrowings under our MSR financing arrangements, and our subservicing agreements.
Previous wording
As of December 31, 2024, Aurora had four subservicing agreements in place, one of which is with Freedom Mortgage. Following the sale of the Ginnie Mae MSRs to Freedom Mortgage in June 2020, Freedom Mortgage continued to subservice certain loans that had been purchased from Ginnie Mae pools due to delinquency or default. Freedom Mortgage ceased subservicing these loans during 2021 because these loans and any related advance claims had been rehabilitated or liquidated. One of the other subservicing agreements is with RoundPoint Mortgage Servicing Corporation (“RoundPoint”). Freedom Mortgage acquired RoundPoint and it became a wholly-owned subsidiary of Freedom Mortgage in August 2020. On September 30, 2023, RoundPoint ceased being a wholly owned subsidiary of Freedom Mortgage when it was acquired by an unaffiliated entity, Matrix Financial Services Corporation. The agreements have varying initial terms (three years, for Freedom Mortgage, and two years for the other three sub-servicers) and are subject to automatic renewal for additional terms equal to the applicable initial term unless either party chooses not to renew. Each agreement may be terminated without cause by either party by giving notice as specified in the agreement. If an agreement is not renewed by the Company or terminated by the Company without cause, de-boarding fees will be due to the subservicer. Under each agreement, the subservicer agrees to service the applicable mortgage loans in accordance with applicable law and the requirements of the applicable Agency and the Company pays customary fees to the applicable subservicer for specified services. All expiring agreements to date have been automatically renewed for the extended terms.
Current wording
As of December 31, 2025, Aurora had four subservicing agreements in place. The agreements each have two-year initial terms and are subject to automatic renewal for additional terms equal to the applicable initial term unless either party chooses not to renew. Each agreement may be terminated without cause by either party by giving notice as specified in the agreement. If an agreement is not renewed by the Company or terminated by the Company without cause, de-boarding fees will be due to the subservicer. Under each agreement, the subservicer agrees to service the applicable mortgage loans in accordance with applicable law and the requirements of the applicable Agency and the Company pays customary fees to the applicable subservicer for specified services. All expiring agreements to date have been automatically renewed for the extended terms.
Previous wording
Substantially all of our assets and liabilities are financial in nature. As a result, interest rates and other factors affect our performance more so than inflation, although inflation rates can often have a meaningful influence over the direction of interest rates. As discussed above under “—Effects of Federal Reserve Policy on the Company”, the Federal Reserve has been reducing its federal funds rate target and otherwise easing monetary policy based on improved inflation data. The Federal Reserve’s actions may decrease interest rates across asset classes and our interest expense and, thereby, increase our interest income. If the Federal Reserve decides to tighten monetary policy in the future, it may increase our interest expense, which expense may not be fully offset by any resulting increase in our interest income. Furthermore, our financial statements are prepared in accordance with GAAP and our distributions are determined by our board of directors primarily based on our REIT taxable income, and, in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.
Current wording
Substantially all of our assets and liabilities are financial in nature. As a result, interest rates and other factors affect our performance more so than inflation, although inflation rates can often have a meaningful influence over the direction of interest rates. As discussed above under “—Effects of Federal Reserve Policy on the Company”, since September 2025, the Federal Reserve has reduced its federal funds rate target by 75 basis points to a range of 3.50% to 3.75% due to slowing job growth and increased unemployment. To the extent the Federal Reserve decides to further ease monetary policy, its actions may decrease interest rates across asset classes and our interest expense and, thereby, increase our interest income. If the Federal Reserve decides to tighten monetary policy however, it may increase our interest expense, which expense may not be fully offset by any resulting increase in our interest income. Furthermore, our financial statements are prepared in accordance with GAAP and our distributions are determined by our board of directors primarily based on our REIT taxable income, and, in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We attempt to reduce the exposure of our MSRs to voluntary prepayments through the structuring of recapture agreements with Aurora’s subservicers.