ARBOR REALTY TRUST INC
For the period ended Dec 31, 2025. Filed Feb 27, 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 Feb 27, 2026
ABR$1.60-0.6%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-21.
0001628280-25-007183
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-27.
0001253986-26-000019
Item 1A. Risk FactorsThe 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 225 previous paragraphs and 233 current paragraphs.
174 unchanged; 37 reworded; 21 added; 13 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 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 (21)
Current report
Our growing SFR and construction/build‑to‑rent (“BTR”) lending exposes us to higher credit, development and concentration risks than stabilized multifamily loans. Cost overruns, delays, permitting and contractor issues, and weaker lease-up or operating performance could increase delinquencies, defaults, modifications and foreclosures.
Current report
If we are unable to invest excess capital on acceptable terms, or at all, it would likely result in a declining portfolio and would adversely affect the returns from our investments and our operating results. Our ability to accurately estimate current expected credit loss ("CECL") allowances is increasingly complex due to market volatility, commercial real estate prices and the impact of interest rates, and our actual credit losses may differ materially from estimates.
Current report
Our increasing use of loan modifications for borrowers experiencing financial difficulty could adversely affect our operating results, financial condition, liquidity and our ability to achieve expected recoveries.
Current report
In recent periods, we have increasingly addressed borrower stress through loan modifications, including payment deferrals, term extensions, interest‑rate reductions and other concessions. While these modifications may improve our ultimate recovery and avoid immediate foreclosure, they can also reduce our current interest income, delay the timing of expected repayments and increase the complexity of estimating credit losses. There is no assurance that our borrowers will perform under modified loans or that we will achieve the recoveries we anticipate. If economic and market conditions worsen, the performance of modified loans could deteriorate further, which would likely increase our level of non‑performing loans, REO and credit‑loss provisions and could adversely affect our results of operations, liquidity and financial condition.
Current report
We are increasingly exposed to risks associated with owning and operating real estate acquired through foreclosure, which could subject us to losses and liabilities in excess of those associated with our loans.
Current report
When a loan defaults, we may seek to protect our investment by foreclosing and operating it as REO until it can be sold or otherwise resolved. In recent periods, we have acquired a growing number of properties as REO, and our REO balance has increased. Owning and operating REO subjects us to many of the risks associated with direct real estate ownership, including, among others, risks related to leasing, property management, insurance, real estate taxes, utilities and other operating costs, capital expenditures, environmental liabilities, zoning and other regulatory compliance, casualty events and litigation.
Current report
We may not be able to sell REO assets at prices or within time frames that are attractive to us, particularly in markets or property types that are experiencing declining values or weak demand. In addition, REO properties may require significant additional investment to stabilize operations or comply with regulatory requirements, which may not be fully recoverable. While we may obtain mortgage financing secured by REO properties, we may also choose or be required to fund operating deficits, capital expenditures or debt service shortfalls from our own capital. Any failure to effectively manage, finance and dispose of REO assets could result in losses that are greater than those we would have incurred had we not foreclosed.
Current report
Our growing single‑family rental BTR and construction lending activities expose us to higher credit, development and concentration risks that could increase losses and volatility of earnings.
Current report
A growing portion of our Structured Business consists of loans secured by SFR and construction or BTR properties. These loans generally involve greater risk than loans on stabilized multifamily properties because repayment often depends on successful completion, lease‑up and ongoing performance of the underlying projects, as well as the financial strength and execution capability of the sponsors. Construction and BTR loans are particularly sensitive to cost overruns, delays, entitlement and permitting risks, contractor performance, and changes in labor, materials and insurance costs. If interest reserves or borrower equity are insufficient to absorb these pressures, or if rent growth or occupancy is weaker than expected, borrowers may be unable to service or refinance their loans, leading to increased delinquencies, defaults, loan modifications, extensions and foreclosures.
Current report
In addition, our SFR and construction lending may result in greater geographic or sponsor concentration and may be disproportionately affected by local economic conditions, housing supply‑demand imbalances, regulatory and zoning changes, and shifts in homeownership or rental demand. Deterioration in the performance or valuations of these assets, or in the ability to finance or securitize them on acceptable terms, could require us to increase our allowances for credit losses, recognize charge‑offs, or take title to additional SFR or development assets as REO, which may require active property‑level management and additional capital expenditures. Any of these events could increase the volatility of our results of operations and liquidity and could adversely affect our business, financial condition and ability to make distributions to our stockholders.
Current report
We are subject to risks of fraud, misrepresentation and other misconduct by borrowers, brokers, guarantors and other third parties, which could result in credit losses and litigation and may not be fully covered by contractual remedies or insurance.
Current report
Our lending and investment activities expose us to the risk that borrowers, brokers, guarantors and other third parties may engage in fraud, intentional misrepresentation, collusion or other misconduct. Such conduct may include, among other things; (1) providing inaccurate or falsified financial statements, rent rolls, leases, draw requests, budgets or project status reports; (2) misrepresenting the condition, occupancy or value of collateral; (3) diverting construction proceeds; (4) submitting forged or altered documents; or (5) engaging in undisclosed conflicts of interest or kickback arrangements.
Current report
If fraud or other misconduct occurs, we may experience delays in detecting problems, increased delinquencies, defaults, restructurings and foreclosures, reduced recoveries on collateral and higher costs to service or resolve affected loans. We may also incur expenses and management time associated with investigations, workout activities and litigation or other proceedings, and we could suffer reputational harm. Although we may have recourse, such parties may be unable to satisfy judgments or indemnification obligations, and our recoveries, if any, may not be sufficient to fully compensate us for losses and related costs. In addition, in certain circumstances (including in connection with loans sold or securitized), fraud or other misconduct may trigger repurchase, indemnification or other obligations that could require us to take back loans and hold them on our balance sheet. If we are required to repurchase or otherwise reacquire a loan that is impaired, non-performing or otherwise viewed as ineligible collateral, we may be unable to finance it through our existing facilities or securitizations or may only be able to do so on unfavorable terms, which could increase costs, reduce liquidity and result in additional credit loss provisions or write-downs. As a result, any significant fraud or misconduct involving our counterparties could materially and adversely affect our business, results of operations, financial condition and liquidity.
Current report
Our results of operations, cash flows and liquidity could be adversely affected if we are unable to reinvest CLO collateral proceeds in eligible assets during reinvestment periods or if reinvestment periods expire without capacity in existing CLOs or access to new CLO issuance on acceptable terms.
Current report
Furthermore, if reinvestment periods expire and we do not have capacity in other existing CLOs or are unable to establish or issue new CLOs on acceptable terms, we may be required to hold additional assets outside of CLO structures or finance them through alternative facilities, which may be more expensive or less available. This could result in liquidity constraints, reduced investment flexibility, higher borrowing costs and less cash available for distribution to our stockholders, any of which could materially and adversely affect our results of operations, cash flows and financial condition.
Current report
If our Agency Business fails to comply with GSE and HUD program requirements, guidelines or oversight or is adversely affected by changes in applicable regulations or program standards, our costs could increase and our ability to conduct the Agency Business could be restricted, which could materially and adversely affect our results.
Current report
Our Agency Business is subject to the requirements, guidelines and oversight of the GSEs and HUD. These requirements include, among other things, minimum net worth, operational liquidity and collateral standards and quality control, reporting and recordkeeping obligations, and our compliance is subject to review and inspection by the GSEs, HUD and other regulatory authorities. These program requirements and regulations are subject to change and may impose additional capital, liquidity, reserve or collateral requirements, or otherwise increase the costs and operational burdens of originating, selling and servicing loans. If we fail to satisfy, or are unable to continue to satisfy, these requirements, we could be subject to heightened supervisory scrutiny, remedial actions, operational restrictions, sanctions or other enforcement measures, any of which could limit our ability to conduct Agency Business and could materially and adversely affect our business and financial results.
Current report
We have not experienced any material misappropriation, loss or unauthorized disclosure of confidential or personally identifiable information as a result of a cybersecurity breach or other act, however, a cybersecurity breach or other act and/or disruption to our information technology systems or to the information technology systems of our third-party providers could have a material adverse effect on our business, financial condition or results of operations. Our ability to monitor and influence the cybersecurity practices of third-party providers is limited, and while we seek to influence their practices through cybersecurity requirements and protocols in our contracts with such third-party providers, their security measures may not be sufficient to prevent or mitigate incidents that could adversely affect us. Additionally, the regulatory and disclosure landscape related to cybersecurity continues to evolve. Recently adopted rules require additional disclosures in our periodic reports about our cybersecurity risk management, strategy and governance and about material cybersecurity incidents. Failure to maintain effective cybersecurity controls, to properly assess and manage cyber risks, or to timely detect, respond to and disclose cybersecurity incidents in accordance with applicable laws and regulations could subject us to regulatory investigations or enforcement actions, stockholder or other litigation, and reputational damage, any of which could have a material adverse effect on our business, financial condition and results of operations.
Current report
The U.S. Congress has enacted, and may continue to enact, significant tax legislation that could affect REITs, their stockholders and our TRS. The Tax Cuts and Jobs Act enacted in 2017 (the “TCJA”) made substantial changes to the Internal Revenue Code, including reducing the corporate federal income tax rate (which impacts our TRSs) from 35% to 21%, limiting the deductibility of business interest expense and net operating losses, and providing a deduction generally equal to 20% of ordinary REIT dividends (other than capital gain dividends or “qualified dividend income”), which reduced the top marginal federal income tax rate on such dividends for individual U.S. stockholders. A portion of our dividends (including dividends attributable to our TRSs) may also qualify as “qualified dividend income,” which is currently subject to preferential tax rates, and certain U.S. stockholders may be subject to an additional 3.8% Medicare tax on dividends and gains from the sale of our common stock.
Current report
Subsequent legislation has introduced additional complexity and uncertainty. The Inflation Reduction Act of 2022 (the “IRA”) added, among other provisions, a corporate alternative minimum tax based on book income and an excise tax on certain stock repurchases, effective beginning in 2023. In addition, the American Rescue Plan Act of 2021 (the “ARPA”) expanded the scope of Section 162(m) of the Internal Revenue Code to include five additional covered employees, with such expansion scheduled to take effect beginning in 2027. Although these limitations were not applicable to us in prior periods, changes to the definition of a controlled group under the One Big Beautiful Bill Act enacted in July 2025 (the “OBBBA”) will subject both the REIT and our TRSs to the compensation deduction limitations under Section 162(m) of the Internal Revenue Code, including the expanded group of covered employees. As a result, these provisions could increase our effective tax rate and adversely affect the overall tax efficiency of our corporate structure. The OBBBA also permanently extended certain provisions of the TCJA, modified and reinstated favorable tax treatment for certain business-related items, and imposed new limitations and conditions on various tax deductions, with key provisions becoming effective beginning in 2026.
Current report
Future legislative, regulatory or administrative changes, including amendments to or reinterpretations of the TCJA, IRA, ARPA, OBBBA and Section 162(m), or other tax laws, could alter the tax treatment of REITs, our TRSs or our stockholders. Any such changes could increase our tax liability, reduce cash available for distribution, adversely affect the after-tax return to our stockholders, or otherwise negatively impact our business, financial condition, results of operations and the market price of our common stock.
Removed paragraphs (13)
Previous report
We may not be able to find suitable replacement investments during CLO reinvestment periods.
Previous report
Our results of operations and cash flows could be adversely affected if the reinvestment period of our CLOs expire without available capacity in existing CLOs, or the issuance of new CLOs.
Previous report
CLO reinvestment periods provide us with the flexibility to manage our structured loan portfolio effectively as we are able to replace loans that have matured or paid off with newly originated loans and existing loans in our portfolio. If our CLO reinvestment periods end without availability in other existing CLOs, or the establishment of new CLOs, we may face liquidity constraints, reduced investment opportunities, higher borrowing costs, and limited cash available for distribution to our stockholders.
Previous report
Our investments financed in foreign locations may involve significant risks.
Previous report
We have financed, and, if the opportunities exist in the future, we may continue to finance, certain investments outside of the U.S. Financing investments in foreign locations may expose us to additional risks not typically inherent in the U.S. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets, the lack of available information, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
Previous report
Transactions may be denominated in a foreign currency, which would subject us to the risk that the value of a particular currency may change in relation to the U.S. dollar. We may employ hedging techniques to minimize such risk, but we can offer no assurance that we will, in fact, hedge currency risk or, that if we do, such strategies will be effective. As a result, a change in currency exchange rates may adversely affect our profitability if future transactions outside the U.S. are denominated in a foreign currency.
Previous report
Our Agency Business is subject to federal, state and local laws and regulations, and the regulations and policies of the GSEs and HUD. These laws, regulations, rules and policies impose, among other things, minimum net worth, operational liquidity and collateral requirements. Fannie Mae requires the Agency Business to maintain operational liquidity based on a formula that considers the balance of the loan and the level of credit loss exposure (level of risk sharing). Fannie Mae also requires its DUS lenders to maintain collateral, which may include pledged securities, for their risk-sharing obligations. The amount of collateral required under the Fannie Mae DUS program is calculated at the loan level and is based on the balance of the loan, the level of risk-sharing, the seasoning of the loans and the rating of the Fannie Mae DUS lender.
Previous report
Regulatory authorities also require the Agency Business to submit financial reports and to maintain a quality control plan for the underwriting, origination and servicing of loans. The Agency Business is also subject to inspection by the GSEs, HUD, and regulatory authorities. Any failure to comply with these requirements could lead to, among other things, the loss of a license as an approved GSE or HUD lender, the inability to gain additional approvals or licenses, the termination of contractual rights without compensation, demands for indemnification or loan repurchases, class action lawsuits and administrative enforcement actions.
Previous report
The present U.S. federal income tax treatment of REITs and their stockholders may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the U.S. federal income tax treatment of an investment in our shares. The U.S. federal income tax rules, including those dealing with REITs, are constantly under review by persons involved in the legislative process, the Internal Revenue Service and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations.
Previous report
The Tax Cuts and Jobs Act enacted in 2017 made substantial changes to the Internal Revenue Code. Among those changes for corporations, beginning in 2018, the corporate federal tax rate (which impacts our TRS) was reduced from 35% to 21%; various deductions were eliminated or modified, including substantial limitations on the deductibility of interest; and the deductions of net operating losses became subject to certain additional limitations. Ordinary dividends paid by a REIT (including dividends that we pay that are not capital gain dividends or “qualified dividend income”) are generally eligible for a 20% deduction from the applicable marginal rate. Therefore, the top marginal rate on such dividends is generally 29.6% (80% of the top marginal rate of 37%).
Previous report
A portion of our dividends (including dividends received from our TRS) may be eligible for preferential rates as “qualified dividend income,” which has a top individual tax rate of 20% to U.S. stockholders. In addition, certain U.S. stockholders who are individuals, trusts or estates, and whose income exceeds certain thresholds, are required to pay a 3.8% medicare tax on our dividends and gain from the sale of our stock.
Previous report
The Inflation Reduction Act of 2022 (“IRA”) enacted in August 2022 introduced various new provisions to the Internal Revenue Code. Among those new provisions affecting corporations include the corporate book minimum tax and an excise tax on net stock repurchases effective January 1, 2023. As REITs, we and our subsidiary, ARSR are exempt from these provisions. While such provisions may be applicable to our TRSs, as of the date of this Annual Report, we do not expect the IRA to have a material impact on our consolidated financial statements.
Previous report
The Trump Administration and certain members of the U.S. Congress have stated that one of their top legislative priorities is significant reform of the Internal Revenue Code and other federal tax laws. Among other things, the new administration and the U.S. Congress may pursue tax policies seeking to alter the income tax rates and brackets applicable to individuals and corporations, exempt certain types of income from taxation, eliminate clean energy subsidies enacted by the Inflation Reduction Act of 2022, provide tax incentives for domestic production and impose significant new tariffs on foreign goods. Both the timing and the details of any such tax reform are unclear. The impact of any potential tax reform on us and our investments is uncertain and could be adverse.
Reworded paragraphs (37)
Previous wording
The commercial real estate markets have experienced a prolonged dislocation due to inflation and high interest rates, which has resulted in decreased real estate values, increased delinquencies and defaults, and a disruption in the capital markets. This environment has had a material adverse effect on our business, results of operations, financial condition, and liquidity. If this environment persists, it is likely we will continue to experience an adverse impact on our business. The risks associated with these types of markets, and other risks related to our business, are described below. The risk factors listed below should not be considered an all-inclusive list. New risk factors emerge periodically, and we cannot guarantee that the factors described below list all risks that may become material to us at any later time. Some of the risk factors discussed below may have different impacts on our Structured and Agency Businesses. Additionally, you should review “Current Market Conditions, Risks and Recent Trends” located in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the current adverse market conditions that we are currently experiencing, and may continue to experience in the future, that are having an adverse impact on our business.
Current wording
The risks associated with these types of markets, along with other risks related to our business, are described below. The risk factors presented should not be considered an all-inclusive list. New risks emerge periodically, and we cannot guarantee that the factors described below list all risks that may become material to us in the future. Certain risk factors may also affect our Structured and Agency Businesses differently. Additionally, you should review “Current Market Conditions, Risks and Recent Trends” located in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussions of the adverse market conditions we are currently experiencing, and may continue to experience in the future, that are having an adverse impact on our business.
Previous wording
Risks Related to Our Business. An economic slowdown, a lengthy or severe recession, declining real estate values, or changes in short and/or long term interest rates could harm our operations, affect our ability to obtain financing on reasonable terms and have other adverse effects on us. If economic conditions deteriorate and/or we experience a turbulent economic environment, we will likely: (1) experience increases in loan loss reserves and other impairments; (2) encounter difficulty estimating loan loss reserves; and (3) experience an increase in loan delinquencies and loan modifications. If we are unable to invest excess capital on acceptable terms, or at all, it would likely result in a declining portfolio and would adversely affect the returns from our investments and our operating results.
Current wording
Risks Related to Our Business. An economic slowdown, a lengthy or severe recession, declining real estate values, or changes in short and/or long-term interest rates could harm our operations, affect our ability to obtain financing on reasonable terms and have other adverse effects on us. If economic conditions deteriorate, interest rates remain elevated and/or we experience a turbulent economic environment, we will likely: (1) experience increases in loan loss reserves and other impairments; (2) encounter difficulty estimating loan loss reserves; (3) experience increases in loan delinquencies, loan modifications and nonperforming loans and foreclosures; (4) experience increased costs and risks associated with operating, managing and disposing of real estate owned (“REO”) assets; and (5) experience evolving climate-related, environmental and cybersecurity risks affecting us, our borrowers, collateral properties and key third-party service providers. In addition, such conditions may continue to negatively affect our liquidity, operating results and credit performance and may negatively impact expected recoveries on modified loans, and modified loans may continue to underperform, potentially increasing nonperforming assets, REO, and credit loss provisions.
Previous wording
Our business is subject to risk of loss in connection with defaults on loans, failed loan deliveries to GSEs and potential requirements to repurchase loans already sold to GSEs or other issuers of securitizations for a breach of representations or warranties. If we fail to act proactively with delinquent borrowers in an effort to avoid defaults, the number of delinquent loans could increase, which could have a material adverse effect on our business.
Current wording
Our business is subject to risk of loss in connection with defaults on loans, failed loan deliveries to GSEs and potential requirements to repurchase loans already sold to GSEs or other issuers of securitizations for a breach of representations or warranties. We are subject to risks of fraud, misrepresentation and other misconduct by borrowers, brokers, guarantors and other third parties, which could increase delinquencies, defaults, restructurings and foreclosures, reduce recoveries on collateral and result in increased costs, repurchase or indemnification obligations, litigation and reputational harm. Certain investments we make, including preferred equity and mezzanine loans, involve a greater risk of loss than traditional mortgage financing and may result in reduced recoveries in the event of borrower distress, bankruptcy or other defaults. If we fail to act proactively with delinquent borrowers in an effort to avoid defaults, the number of delinquent loans could increase, which could have a material adverse effect on our business.
Previous wording
A significant portion of our Agency Business’s revenue is derived from loan servicing fees. Any declines in the value of our servicing portfolio, including agreement terminations from breaches of servicing agreements, or a reduction in the fees paid for servicing the loans could have a material adverse effect on our results of operations and liquidity.
Current wording
A significant portion of our Agency Business’s revenue is derived from loan servicing fees. Any declines in the value of our servicing portfolio, including agreement terminations from breaches of servicing agreements, or a reduction in the fees paid for servicing the loans could have a material adverse effect on our results of operations and liquidity. Increased loss-sharing obligations under the Fannie Mae DUS program, or changes to required collateral levels, could further adversely affect our liquidity and results of operations.
Previous wording
For most loans we service under the Fannie Mae and HUD programs, we are required to advance payments due to investors if the borrower is delinquent in making such payments, which requirement could adversely impact our liquidity and harm our results of operations.
Current wording
For most loans we service under the Fannie Mae and HUD programs, we are required to advance payments due to investors if the borrower is delinquent in making such payments, which may adversely impact our liquidity and harm our results of operations.
Previous wording
Risks Related to Our Financing and Hedging Activities. We finance a significant amount of our loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, senior and convertible debt instruments, and other structured financings. These vehicles may contain restrictive covenants and may require us to provide additional collateral or repurchase assets if the value of pledged assets, some of which we guarantee, decline in value. If we are unable to acquire eligible investments, find suitable replacement investments and access financing sources on favorable terms, or at all, we may not be able to obtain the level of leverage necessary to optimize our return on investment and cash available for distribution to our stockholders may decline.
Current wording
Risks Related to Our Financing and Hedging Activities. We finance a significant amount of our loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, senior and convertible debt instruments, and other structured financings, some of which we guarantee. These vehicles may contain restrictive covenants and may require us to provide additional collateral or repurchase assets if the value of pledged assets decline in value. If we are unable to acquire eligible investments, find suitable replacement investments and access financing sources on favorable terms, or at all, we may not be able to obtain the level of leverage necessary to optimize our return on investment and cash available for distribution to our stockholders may decline.
Previous wording
Cybersecurity Risks. If we are unable to safeguard against cybersecurity breaches and cyberattacks with respect to our information systems, our business may be adversely affected. With cyber threats increasing in frequency and severity, potential breaches pose a significant threat to our operations, potentially leading to reputational damage, financial losses, and legal repercussions.
Current wording
Cybersecurity Risks. If we are unable to safeguard against cybersecurity breaches and cyberattacks with respect to our information systems, our business may be adversely affected. With cyber threats increasing in frequency and severity, potential breaches pose a significant threat to our operations, potentially leading to reputational damage, financial losses, and legal repercussions. Our ability to monitor and influence the cybersecurity practices of third-party providers is limited, and while we seek to influence their practices through cybersecurity requirements and protocols in our contracts with such third-party providers, their security measures may not be sufficient to prevent or mitigate incidents, increasing operational risk. Newly adopted regulatory disclosure requirements may subject us to additional liability in the event of a cybersecurity incident.
Previous wording
Risks Related to Our Status as a REIT. We conduct our operations to qualify as a REIT under the Internal Revenue Code. If we fail to remain qualified as a REIT, we will be subject to corporate tax and could face a substantial tax liability, including taxable mortgage pools resulting from certain of our securitizations. Even if we remain qualified as a REIT, we may face other tax liabilities, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, all of which could reduce our cash flow and our distributions to stockholders. Complying with REIT requirements may cause us to forego or liquidate otherwise attractive opportunities and investments.
Current wording
Risks Related to Our Status as a REIT. We conduct a substantial portion of our operations to qualify as a REIT under the Internal Revenue Code. If we fail to remain qualified as a REIT, a greater proportion of our income will be subject to corporate tax and we could face a substantial increase in our tax liability, including taxable mortgage pools resulting from certain of our securitizations. Even if we remain qualified as a REIT, we may face other tax liabilities, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, all of which could reduce our cash flow and our distributions to stockholders. Complying with REIT requirements may cause us to forego or liquidate otherwise attractive opportunities and investments.
Previous wording
We may be unable to generate sufficient revenue from operations to pay our operating expenses and to pay dividends to our stockholders, resulting in the need to borrow funds to satisfy our REIT distribution requirements, which could cause a portion of our distributions to be treated as a return of capital.
Current wording
We may be unable to generate sufficient cash flow from operations to pay our operating expenses and to pay dividends to our stockholders, resulting in the need to borrow funds to satisfy our REIT distribution requirements, which could cause a portion of our distributions to be treated as a return of capital.
Previous wording
General Risks. We are subject to certain general risks, all of which could have an adverse effect on our business, financial condition and results of operations, such as: (1) volatility in our stock price; (2) major public health crisis; (3) global economic and political conditions; (4) major bank failures; (5) losses of key personnel with long standing business relationships; (6) adverse resolutions of lawsuits; (7) terrorist attacks; (8) military conflict; (9) changes to laws and regulations, including environmental, social and governance matters; and (10) the effective development of artificial intelligence ("AI").
Current wording
General Risks. We are subject to certain general risks, all of which could have an adverse effect on our business, financial condition and results of operations, such as: (1) volatility in our stock price; (2) major public health crisis; (3) global economic and political conditions; (4) major bank failures; (5) losses of key personnel with long standing business relationships; (6) adverse resolutions of lawsuits; (7) terrorist attacks; (8) military conflict; (9) changes to laws and regulations, including environmental, social and governance matters; and (10) the impact of the continuing development of artificial intelligence ("AI").
Previous wording
Prolonged disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.
Current wording
A prolonged disruption in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.
Previous wording
Commercial real estate can be adversely affected by a lack of liquidity caused by a prolonged economic downturn, which may limit our ability to raise equity or debt in the capital markets or obtain financing on favorable terms, if at all. If we do issue equity, it may be dilutive to our existing stockholders or could result in the issuance of securities that have rights, preferences and privileges that are senior to those of our existing securities. If economic or market conditions deteriorate, lending institutions may choose to exit markets such as repurchase lending, become insolvent, further tighten their lending standards or increase the amount of equity capital required to obtain financing, and such events could make it more difficult for us to obtain financing on favorable terms or at all, in which event our profitability will be adversely affected. These factors may also make it more difficult for our borrowers to repay our loans as they may experience difficulties in selling assets, obtaining other financing or realize increased costs of financing. Disruptions in the financial markets also may have a material adverse effect on the market price of our common stock.
Current wording
Commercial real estate can be adversely affected by a lack of liquidity caused by a prolonged economic downturn, which may limit our ability to raise equity or debt in the capital markets or obtain financing on favorable terms, if at all. If we issue equity, it may be dilutive to our existing stockholders or could result in the issuance of securities that have rights, preferences and privileges that are senior to those of our existing securities. If economic or market conditions deteriorate, lending institutions may choose to exit markets such as repurchase lending, become insolvent, further tighten their lending standards or increase the amount of equity capital required to obtain financing, and such events could make it more difficult for us to obtain financing on favorable terms or at all, in which event our profitability will be adversely affected. These factors may also make it more difficult for our borrowers to repay our loans as they may experience difficulties in selling assets, obtaining other financing or realize increased costs of financing. Disruptions in the financial markets also may have a material adverse effect on the market price of our common stock.
Previous wording
We estimate allowances for credit losses on our loans and investments under the current expected credit loss (“CECL”) methodology based on current expected credit losses for the life of the loan and investment. This process utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future and requires certain estimates and judgments, which are more difficult to make during a period in which available commercial real estate credit is limited and commercial real estate transactions have decreased. Our estimates and judgments are based on several factors, including projected cash flows from the collateral securing our loans, debt structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at loan maturity, potential for refinancing by other lenders and expected market discount rates for varying property types. If our estimates and judgments are not correct, our results of operations and financial condition could be severely impacted.
Current wording
We estimate allowances for credit losses on our loans and investments under the CECL methodology based on current expected credit losses for the life of the loan and investment. This process utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future and requires certain estimates and judgments, which are more difficult to make during a period in which available commercial real estate credit is limited and commercial real estate transactions have decreased. Our estimates and judgments are based on several factors, including projected cash flows from the collateral securing our loans, debt structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at loan maturity, potential for refinancing by other lenders and expected market discount rates for varying property types. Our CECL methodology may not fully capture the severity or duration of adverse economic conditions and actual losses could exceed our allowance, particularly if commercial real estate values decline further, interest rates remain elevated, or our borrowers’ business plans fail to stabilize underlying properties. If our estimates and judgments are not correct, our results of operations and financial condition could be severely impacted.
Previous wording
Our financial performance is significantly influenced by movements in both short term and long term interest rates. Since the vast majority of our structured loan portfolio is floating rate based on SOFR and a greater portion of our debt balances consist of fixed-rate instruments (such as convertible and senior unsecured notes), a rising interest rate environment generally has a positive impact on our net interest income from our structured loan portfolio. Furthermore, our earnings on escrows and cash balances also benefit from an elevated short term rate environment. However, a prolonged period of elevated short and long term interest rates may result in: (1) increased payment delinquencies and defaults; (2) increased loan modifications and foreclosures; (3) an increase in real estate owned ("REO") assets; (4) declining real estate values of certain asset classes; and (5) a dislocation in capital markets, all of which would adversely impact our results of operations, financial condition, business prospects and our ability to make distributions to our stockholders. Conversely, a high long term interest rate environment would likely have an adverse impact on our fixed rate GSE/Agency business, as it will likely increase delinquencies and make it more costly for borrowers to refinance their balance sheet loans with fixed rate agency product.
Current wording
Our financial performance is significantly influenced by movements in both short-term and long-term interest rates. Since the vast majority of our structured loan portfolio is floating rate based on the Secured Overnight Financing Rate ("SOFR") and a significant portion of our debt balances consist of fixed-rate instruments (such as convertible and senior unsecured notes), a rising interest rate environment generally has a positive impact on our net interest income from our structured loan portfolio. Furthermore, our earnings on escrows and cash balances also benefit from an elevated short-term rate environment. However, a prolonged period of elevated short and long-term interest rates may result in: (1) increased payment delinquencies and defaults; (2) increased loan modifications and foreclosures; (3) an increase in REO assets; (4) declining real estate values of certain asset classes; and (5) a dislocation in capital markets, all of which would adversely impact our results of operations, financial condition, business prospects and our ability to make distributions to our stockholders. Conversely, a high long-term interest rate environment would likely have an adverse impact on our fixed rate GSE/Agency business, as it will likely increase delinquencies and make it more costly for borrowers to refinance their balance sheet loans with fixed rate agency product.
Previous wording
In our Structured Business, we may invest in preferred equity investments, which involve a higher degree of risk than traditional mortgage financing. Such investments are usually subordinate to other loans and are not secured by the property underlying the investment. Should the issuer default on our investment, we can only proceed against the entity in which we have an interest, and not the underlying property. As a result, we may not recover some or all of our investment.
Current wording
In our Structured Business, we invest in preferred equity investments, which involve a higher degree of risk than traditional mortgage financing. Such investments are usually subordinate to other loans and are not secured by the property underlying the investment. Should the issuer default on our investment, we can only proceed against the entity in which we have an interest, and not the underlying property. As a result, we may not recover some or all of our investment.
Previous wording
Multifamily and commercial property values and net operating income derived from such properties are subject to volatility and may be affected adversely by a number of factors, including fires and other casualties, natural disasters, acts of war and/or terrorism, adverse economic conditions, local real estate conditions (such as an oversupply of similar properties), changes or continued weakness in specific industry segments, construction quality, construction cost, age and design, demographic factors, retroactive changes to building or similar codes, increases in operating expenses (such as insurance, energy costs and real estate tax increases) and other factors that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investment. In the event a property’s net operating income decreases, a borrower may have difficulty repaying our loan, which could result in losses to us. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could negatively impact our operating results.
Current wording
Multifamily and commercial property values and net operating income derived from such properties are subject to volatility and may be affected adversely by a number of factors, including fires and other casualties, natural disasters, acts of war and/or terrorism, adverse economic conditions, adoption of, or changes in, rent control or rent stabilization laws, local real estate conditions (such as an oversupply of similar properties), changes or continued weakness in specific industry segments, construction quality, construction cost, age and design, demographic factors, retroactive changes to building or similar codes, increases in operating expenses (such as insurance, energy costs and real estate tax increases) and other factors that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investment. In the event a property’s net operating income decreases, a borrower may have difficulty repaying our loan, which could result in losses to us. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could negatively impact our operating results.
Previous wording
Under the Fannie Mae DUS program, our Agency Business originates and services multifamily loans for Fannie Mae without needing Fannie Mae’s prior approval, as long as the loans meet the underwriting guidelines set forth by Fannie Mae. In return for such delegated authority and the commitment to purchase loans by Fannie Mae, we are required to share risk of loss on loans sold through Fannie Mae and we must provide collateral to Fannie Mae to secure any potential losses. Under the full risk-sharing formula, we absorb the first 5% of any losses on the UPB of a loan at the time of loss settlement, and above 5% we share the loss with Fannie Mae, with our maximum loss capped at 20% of the original UPB of a loan. Our Agency Business has modified its risk-sharing obligations on some Fannie Mae DUS loans to reduce potential loss exposure on those loans. In addition, Fannie Mae can increase our risk-sharing obligations if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae. At December 31, 2024, the Agency Business had pledged $91.5 million in restricted liquidity as collateral against future losses under $22.73 billion of loans outstanding that are subject to risk-sharing obligations. Fannie Mae collateral requirements may change in the future. At December 31, 2024, the Agency Business’s allowance for loss-sharing balance was $83.2 million, which may not be sufficient to cover future loss sharing obligations. While our Agency Business originates loans that meet the underwriting guidelines defined by Fannie Mae, in addition to our own internal underwriting guidelines, underwriting criteria may not always protect against loan defaults. Other factors can lead to a default on a loan, such as a decline in property value, cash flow, occupancy, maintenance needs and other financing obligations. If loan defaults increase, our risk-sharing obligation payments under the Fannie Mae DUS program may increase which could have a material adverse effect on our results of operations and liquidity. In addition, any failure to pay our share of losses under the Fannie Mae DUS program could result in the revocation of our Fannie Mae license and in the exercise of various remedies available to Fannie Mae under the Fannie Mae DUS program, including the transfer of our servicing portfolio to another Fannie Mae approved servicer.
Current wording
Under the Fannie Mae DUS program, our Agency Business originates and services multifamily loans for Fannie Mae without needing Fannie Mae’s prior approval, as long as the loans meet the underwriting guidelines set forth by Fannie Mae. In return for such delegated authority and the commitment to purchase loans by Fannie Mae, we are required to share risk of loss on loans sold through Fannie Mae and we must provide collateral to Fannie Mae to secure any potential losses. Under the full risk-sharing formula, we absorb the first 5% of any losses on the UPB of a loan at the time of loss settlement, and above 5% we share the loss with Fannie Mae, with our maximum loss capped at 20% of the original UPB of a loan. Our Agency Business has modified its risk-sharing obligations on some Fannie Mae DUS loans to reduce potential loss exposure on those loans, which, in turn, results in a lower servicing fee. In addition, Fannie Mae can increase our risk-sharing obligations or require us to repurchase loans if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae. At December 31, 2025, the Agency Business had pledged $100.9 million in restricted liquidity as collateral against future losses under $24.09 billion of loans outstanding that are subject to risk-sharing obligations. Fannie Mae collateral requirements may change in the future. At December 31, 2025, the Agency Business’s allowance for loss-sharing balance was $97.6 million, which may not be sufficient to cover future loss sharing obligations. While our Agency Business originates loans that meet the underwriting guidelines defined by Fannie Mae, in addition to our own internal underwriting guidelines, underwriting criteria may not always protect against loan defaults. Other factors can lead to a default on a loan, such as a decline in property value, cash flow, occupancy, maintenance needs and other financing obligations. If loan defaults increase, our risk-sharing obligation payments under the Fannie Mae DUS program may increase which could have a material adverse effect on our results of operations and liquidity. In addition, any failure to pay our share of losses under the Fannie Mae DUS program could result in the revocation of our Fannie Mae license and in the exercise of various remedies available to Fannie Mae under the Fannie Mae DUS program, including the transfer of our servicing portfolio to another Fannie Mae approved servicer.
Previous wording
Our Agency Business is required to pledge restricted cash as collateral for our loss sharing obligations. At December 31, 2024, this requirement totaled $91.5 million and was satisfied with a $70.0 million letter of credit and cash issued to Fannie Mae. Our current letter of credit facility expires in September 2025. The facility is collateralized by the cash flow generated from the Agency Business’s Fannie Mae servicing portfolio and contains certain financial and other covenants. If we were to default on the letter of credit facility, or we are unable to renew or replace this facility on favorable terms, or at all, it could have a material adverse effect on our cash flow and our financial condition. If we were unable to replace the letter of credit facility with either a similar facility or cash, we would be in breach of our obligations to Fannie Mae, which would have a material adverse effect on our business and operations.
Current wording
Our Agency Business is required to pledge restricted cash as collateral for our loss sharing obligations. At December 31, 2025, this requirement totaled $100.9 million and was satisfied with a $70.0 million letter of credit and cash issued to Fannie Mae. Our current letter of credit facility expires in September 2027. The facility is collateralized by the cash flow generated from the Agency Business’s Fannie Mae servicing portfolio and contains certain financial and other covenants. If we were to default on the letter of credit facility, or we are unable to renew or replace this facility on favorable terms, or at all, it could have a material adverse effect on our cash flow and our financial condition. If we were unable to replace the letter of credit facility with either a similar facility or cash, we would be in breach of our obligations to Fannie Mae, which would have a material adverse effect on our business and operations.
Previous wording
We must make certain representations and warranties concerning each loan we originate for the GSE or HUD programs. The representations and warranties relate to our practices in the origination and servicing of the loans and the accuracy of the information being provided by us. For example, we are generally required to provide the following, among other, representations and warranties: we are authorized to do business and to sell or assign the loan; the loan conforms to the requirements of the GSEs or HUD and certain laws and regulations; the underlying mortgage represents a valid first lien on the property and there are no other liens on the property; the loan documents are valid and enforceable; taxes, assessments, insurance premiums, rents and similar other payments have been paid or escrowed; the property is insured, conforms to zoning laws and remains intact; and we do not know of any issues regarding the loan that are reasonably expected to cause the loan to be delinquent or unacceptable for investment or adversely affect its value.
Current wording
We must make certain representations and warranties concerning each loan we originate for the GSE or HUD programs. The representations and warranties relate to our practices in the origination, underwriting and servicing of the loans and the accuracy of the information being provided by us. For example, we are generally required to provide the following, among other, representations and warranties: we are authorized to do business and to sell or assign the loan; the loan conforms to the requirements of the GSEs or HUD and certain laws and regulations; the underlying mortgage represents a valid first lien on the property and there are no other liens on the property; the loan documents are valid and enforceable; taxes, assessments, insurance premiums, rents and similar other payments have been paid or escrowed; the property is insured, conforms to zoning laws and remains intact; and we do not know of any issues regarding the loan that are reasonably expected to cause the loan to be delinquent or unacceptable for investment or adversely affect its value.
Previous wording
In the event of a breach of any representation or warranty, investors could, among other things, require us to repurchase the loan or seek indemnification for losses or, in the case of Fannie Mae, increase the level of risk-sharing on the loan. Our obligation to repurchase the loan is independent of our risk-sharing obligations. The GSEs or HUD could require us to repurchase a loan if representations and warranties are breached, even if the loan is not in default. Because many such representations and warranties are based on third party reports, such as title reports and environmental reports, we may not receive similar representations and warranties from such third parties that would serve as a claim against them. Even if we receive representations and warranties from such third parties or the borrower, our ability to recover on any such claim may be dependent, in part, upon the financial condition and liquidity of such third party or the borrower. Although we believe that we have capable personnel at all levels, use qualified third parties and have established controls to ensure that all loans are originated pursuant to requirements established by the GSEs and HUD, in addition to our own internal requirements, there can be no assurance that we, our employees or third parties will not make mistakes. Any significant repurchase or indemnification obligations imposed on us could have a material adverse effect on the Agency Business.
Current wording
In the event of a breach of any representation or warranty, whether because of fraud or negligence, investors could, among other things, require us to repurchase the loan or seek indemnification for losses or, in the case of Fannie Mae, increase the level of risk-sharing on the loan. Our obligation to repurchase the loan is independent of our risk-sharing obligations. The GSEs or HUD could require us to repurchase a loan if representations and warranties are breached, even if the loan is not in default. Because many such representations and warranties are based on third-party reports, such as title reports and environmental reports, we may not receive similar representations and warranties from such third parties that would serve as a claim against them. Even if we receive representations and warranties from such third parties or the borrower, our ability to recover on any such claim may be dependent, in part, upon the financial condition and liquidity of such third party or the borrower. Although we believe that we have capable personnel at all levels, use qualified third parties and have established controls to ensure that all loans are originated pursuant to requirements established by the GSEs and HUD, in addition to our own internal requirements, there can be no assurance that we, our employees or third parties will not make mistakes. Any significant repurchase or indemnification obligations imposed on us could have a material adverse effect on the Agency Business.
Previous wording
We finance our Structured Business loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, and senior and convertible debt instruments. We finance our Agency Business loan originations, prior to sale to, or securitization by, an agency, through credit facilities provided by commercial banks. Our access to these sources of funding can be impacted by conditions in the financing markets that are beyond our control, including lack of liquidity and wider credit spreads, which we have experienced in the past. If these conditions deteriorate, there can be no assurance that any existing agreements will be renewed or extended at expiration and alternative sources of financing may not be available or may not accommodate our needs. This could subject us to an increase in our recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders, funds available for operations as well as for future business opportunities.
Current wording
We finance our Structured Business loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, and senior and convertible debt instruments. We finance our Agency Business loan originations, prior to sale to, or securitization by, an agency, through credit facilities provided by commercial banks, as well as the As Soon as Pooled ® Plus ("ASAP") agreement we have with Fannie Mae. Our access to these sources of funding can be impacted by conditions in the financing markets that are beyond our control, including lack of liquidity and wider credit spreads, which we have experienced in the past. If these conditions deteriorate, there can be no assurance that any existing agreements will be renewed or extended at expiration and alternative sources of financing may not be available or may not accommodate our needs. This could subject us to an increase in our recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders, funds available for operations as well as for future business opportunities.
Previous wording
If the market value of the loans or investments pledged or sold by us to a funding source decline in value, we may be required by the lender to provide additional collateral or pay down a portion of the funds advanced. We may not have the funds available to pay down such future debt, which could result in defaults. Posting additional collateral to support these credit facilities would reduce our liquidity and limit our ability to leverage our assets. In the event we do not have sufficient liquidity to meet such requirements, lenders can accelerate the indebtedness, increase interest rates and terminate our ability to borrow. Further, lenders may require us to maintain a certain amount of uninvested cash or set aside unlevered assets sufficient to maintain a specified liquidity position. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on assets. In the event that we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.
Current wording
If the market value of the loans or investments pledged or sold by us to a funding source decline in value, we may be required by the lender to provide additional collateral or pay down a portion of the funds advanced. We may not have the funds available to pay down such future debt, which could result in defaults. Posting additional collateral to support these credit facilities would reduce our liquidity and limit our ability to leverage our assets. In the event we do not have sufficient liquidity to meet such requirements, lenders can accelerate the indebtedness, increase interest rates and terminate our ability to borrow. Further, lenders may require us to maintain a certain amount of uninvested cash or set aside unlevered assets sufficient to maintain a specified liquidity position. As a result, we may not be able to leverage our assets as effectively as we would choose, which could reduce our return on assets. In the event that we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.
Previous wording
If any of the loans we originate or acquire and sell or securitize through CLOs do not comply with representations and warranties we make about the loans, the borrowers and the underlying properties, we may be required to repurchase those loans, replace them with substitute loans or indemnify persons for losses or expenses incurred as a result of a breach of a representation or warranty. Repurchased loans typically require a significant allocation of working capital to carry on our books, and our ability to borrow against such assets is limited. Any significant repurchases or indemnification payments could adversely affect our financial condition and operating results.
Current wording
If any of the loans we originate or acquire and sell or securitize through CLOs do not comply with representations and warranties we make about the loans, the borrowers and the underlying properties, we may be required to repurchase those loans, replace them with substitute loans or indemnify persons for losses or expenses incurred as a result of a breach of a representation or warranty. Repurchased loans typically require a significant allocation of working capital to carry on our books, and our ability to borrow against such assets may be limited. Any significant repurchases or indemnification payments could adversely affect our financial condition and operating results.
Previous wording
CLOs have defined periods during which principal payments on assets held in the CLO can be reinvested, commonly referred to as a reinvestment period. Our ability to find investments during the reinvestment period that meet the criteria set forth in the CLO governing documents may determine the success of our CLOs. Our potential inability to find suitable investments may cause, among other things, lower returns, interest deficiencies, hyper-amortization of the senior CLO liabilities and may cause us to reduce the life of the CLO and accelerate the amortization of certain fees and expenses.
Current wording
Our CLOs have defined periods during which principal payments and other collections on assets held in the CLO may be reinvested in new eligible collateral, commonly referred to as a reinvestment period. Our ability to identify and acquire or originate investments during these reinvestment periods that satisfy the eligibility criteria, concentration limits and other requirements set forth in the applicable CLO governing documents is an important determinant of the performance of our CLOs and our ability to manage our structured loan portfolio. If we are unable to find sufficient suitable investments, or if market conditions, underwriting standards, asset supply or CLO eligibility constraints limit our reinvestment opportunities, our CLOs may experience lower returns, interest shortfalls or interest deficiencies, reduced excess cash flow and, in certain circumstances, accelerated amortization or “hyper-amortization” of senior CLO liabilities. In addition, our inability to reinvest collateral proceeds may shorten the effective life of a CLO and may require us to accelerate the amortization or recognition of certain fees and expenses.
Previous wording
As a result of past dislocation of the credit markets, the securitization market has become subject to additional regulation. In particular, pursuant to the Dodd-Frank Act, various federal agencies have promulgated rules that require issuers in securitizations to retain at least 5% of the risk associated with the securities. To the extent we utilize the securitization market and retain this risk of loss through subordinate interests or B Piece bonds in our securitized debt transactions, this could reduce our returns on these transactions.
Current wording
As a result of past dislocation of the credit markets, the securitization market is subject to regulation. In particular, pursuant to the Dodd-Frank Act, various federal agencies have promulgated rules that require issuers in securitizations to retain at least 5% of the risk associated with the securities. To the extent we utilize the securitization market and retain this risk of loss through subordinate interests or B Piece bonds in our securitized debt transactions, we are exposed to losses earlier and to a greater extent than holders of more senior interests, which could reduce our returns on these transactions.
Previous wording
One of our subsidiaries is required to register under the Investment Advisers Act, and is subject to regulation under that Act.
Current wording
One of our subsidiaries is required to register, and is subject to regulation, under the Investment Advisers Act.
Previous wording
One of our subsidiaries is subject to the extensive regulation prescribed by the Investment Advisers Act of 1940 (the “Advisers Act”). The SEC oversees our activities as a registered investment adviser under this regulatory regime. A failure to comply with the obligations imposed by the Advisers Act, including recordkeeping, advertising, operating requirements, disclosure obligations and prohibitions on fraudulent activities, could result in fines, censure, suspensions of personnel or investing activities or other sanctions, including revocation of our registration as an investment adviser. The regulations under the Advisers Act are designed to protect investors and other clients, and are not designed to protect holders of our publicly traded stock. Even if a sanction imposed against our subsidiary or its personnel involves a small monetary amount, the adverse publicity related to such sanction could harm our reputation and our relationship with our investors and impede our ability to raise additional capital. In addition, compliance with the Advisers Act may require us to incur additional costs, and these costs may be material.
Current wording
One of our subsidiaries is subject to the extensive regulation prescribed by the Investment Advisers Act of 1940 (the “Advisers Act”). The SEC oversees our activities as a registered investment adviser under this regulatory regime. A failure to comply with the obligations imposed by the Advisers Act, including recordkeeping, advertising, operating requirements, disclosure obligations and prohibitions on fraudulent activities, could result in fines, censure, suspensions of personnel or investing activities or other sanctions, including revocation of our registration as an investment adviser. The regulations under the Advisers Act are designed to protect investors and other clients, and are not designed to protect holders of our publicly traded stock. Even if a sanction imposed against our subsidiary or its personnel involves a small monetary amount, the adverse publicity related to such sanction could harm our reputation and our relationship with our investors and impede our ability to raise additional capital. In addition, compliance with the Advisers Act requires us to incur additional costs, and these costs may be material.
Previous wording
In the past, federal legislation has been proposed to reform the housing finance system, including the GSEs. Several of the bills require the wind down or receivership of the GSEs within a specified period of enactment and place certain restrictions on the GSEs’ activities prior to being wound down or placed into receivership. The Trump Administration has made recent comments indicating that housing finance reform may be on its agenda, however, it is unclear at this time what the Trump Administration’s views are with respect to the future of the GSEs.
Current wording
In the past, federal legislation has been proposed to reform the housing finance system, including the GSEs. Several of the bills require the wind down or receivership of the GSEs within a specified period of enactment and place certain restrictions on the GSEs’ activities prior to being wound down or placed into receivership. The Trump Administration has made comments indicating that housing finance reform may be on its agenda, however, it is unclear at this time what the Trump Administration’s views are with respect to the future of the GSEs.
Previous wording
FHFA set its 2025 loan origination caps for Fannie Mae and Freddie Mac at $73 billion for each enterprise for a total opportunity of $146 billion (the “2025 Caps”), which is an increase from its 2024 Caps of $70 billion for each enterprise. FHFA stated they will continue to monitor the market and reserves the right to increase the 2025 Caps if warranted, however, they will not reduce the 2025 Caps if the market is smaller than initially projected. To promote affordable housing preservation, loans classified as supporting workforce housing properties will be exempt from the 2025 Caps. Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2025 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market. Our originations with the GSEs are highly profitable executions as they provide significant gains from the sale of our loans, non-cash gains related to MSRs and servicing revenues. Therefore, a decline in our GSE originations could negatively impact our financial results. We are unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future.
Current wording
FHFA set its 2026 loan origination caps for Fannie Mae and Freddie Mac at $88 billion for each enterprise for a total opportunity of $176 billion (the “2026 Caps”), which is an increase from its 2025 Caps of $73 billion for each enterprise. FHFA stated they will continue to monitor the market and reserves the right to increase the 2026 Caps if warranted, however, they will not reduce the 2026 Caps if the market is smaller than initially projected. To promote affordable housing preservation, loans classified as supporting workforce housing properties will be exempt from the 2026 Caps. Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2026 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market. Our originations with the GSEs are highly profitable executions as they provide significant gains from the sale of our loans, non-cash gains related to MSRs and servicing revenues. Therefore, a decline in our GSE originations could negatively impact our financial results. We are unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future.
Previous wording
Cybersecurity incidents and cyberattacks, which include malicious software, ransomware or terrorists attacks, unauthorized attempts to gain access to sensitive, confidential or otherwise protected information related to us and our customers, have been occurring globally at a more frequent and severe level and are expected to continue to increase in frequency and severity in the future. In the course of our business, we gather, transmit and retain confidential information through our information systems. Although we endeavor to protect confidential information through the implementation of security technologies, processes and procedures, it is possible that an individual or group could penetrate our security systems and access sensitive information about our business, borrowers and employees. Any misappropriation, loss or unauthorized disclosure of confidential information gathered, stored or used by us could have a material impact on the operation of our business, including damaging our reputation with our borrowers, employees, third parties and investors. We could also incur significant costs in implementing additional security measures and organizational changes, implementing additional protection technologies, training employees or engaging consultants. In addition, we could become subject to litigation from any cybersecurity breach. We have not experienced any material misappropriation, loss or unauthorized disclosure of confidential or personally identifiable information as a result of a cybersecurity breach or other act, however, a cybersecurity breach or other act and/or disruption to our information technology systems could have a material adverse effect on our business, financial condition or results of operations.
Current wording
Cybersecurity incidents and cyberattacks, which include malicious software, ransomware or terrorists attacks, unauthorized attempts to gain access to sensitive, confidential or otherwise protected information related to us and our customers, have been occurring globally at a more frequent and severe level and are expected to continue to increase in frequency and severity in the future. In the course of our business, we gather, transmit and retain confidential information through our information systems and through the systems of various third-party vendors and service providers on whom we rely, including cloud-based technology providers, data processors, property managers, servicers and other counterparties. Although we endeavor to protect confidential information through the implementation of security technologies, processes and procedures, it is possible that an individual or group could penetrate our security systems or those of our third-party providers and access sensitive information about our business, borrowers and employees. Any misappropriation, loss or unauthorized disclosure of confidential information gathered, stored or used by us or by our third-party providers could have a material impact on the operation of our business, including damaging our reputation with our borrowers, employees, third parties and investors. We could also incur significant costs in implementing additional security measures and organizational changes, implementing additional protection technologies, training employees or engaging consultants and addressing disruptions to critical services, loan closings or servicing activities resulting from cybersecurity incidents involving third-party providers. In addition, we could become subject to litigation from any cybersecurity breach or from disruptions caused by third-party cybersecurity incidents.
Previous wording
Our Board of Directors is divided into three classes of directors. The current terms of the Class I, Class II and Class III directors will expire in 2025, 2026 and 2027, respectively. Directors of each class are chosen for three-year terms upon the expiration of their current terms, and each year one class of directors is elected by the stockholders. The staggered terms of our directors may reduce the possibility of a tender offer or an attempt at a change in control, even though a tender offer or change in control might be in the best interest of our stockholders. In addition, our charter and bylaws also contain other provisions that may delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.
Current wording
Our Board of Directors is divided into three classes of directors. The current terms of the Class II, Class III and Class I directors will expire in 2026, 2027 and 2028, respectively. Directors of each class are chosen for three-year terms upon the expiration of their current terms, and each year one class of directors is elected by the stockholders. The staggered terms of our directors may reduce the possibility of a tender offer or an attempt at a change in control, even though a tender offer or change in control might be in the best interest of our stockholders. In addition, our charter and bylaws also contain other provisions that may delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.
Previous wording
A major public health crisis, including a pandemic, could cause significant disruptions to the U.S. and global economies. For example, the COVID-19 pandemic, resulted in travel bans, quarantines, layoffs and shutdowns, causing negative long-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains, which had an adverse impact on our business, results of operations and financial condition. Depending on the severity and duration, any such major public health crisis, including any consequential adverse macroeconomic effects, has caused, and may in the future, cause the following:
Current wording
A major public health crisis, including a pandemic, could cause significant disruptions to the U.S. and global economies. For example, the COVID-19 pandemic resulted in travel bans, quarantines, layoffs and business shutdowns, causing negative long-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains, which had an adverse impact on our business, results of operations and financial condition. Depending on the severity and duration, any such major public health crisis, including any consequential adverse macroeconomic effects, has caused, and may in the future, cause the following:
Previous wording
Our results of operations could be adversely affected by general conditions in the global economy, the global financial markets and the global political conditions. Such conditions could include political unrest, war, such as the ongoing war with Russia and Ukraine or the ongoing war and tensions in the Middle East, natural disasters or global pandemics. The U.S. and global economies are facing higher inflation and interest rates and potential recession. A weak or declining economy or political disruption, including any international trade disputes, could exacerbate supply chain constraints that could ultimately harm our business.
Current wording
Our results of operations could be adversely affected by general conditions in the global economy, the global financial markets and global political conditions. Such conditions could include, among others, political unrest, war, such as the ongoing war with Russia and Ukraine, ongoing tensions in the Middle East, and tensions between the U.S. and Venezuela, among others, tariff and trade disputes, or natural disasters or global pandemics. The U.S. and global economies are facing higher inflation and interest rates and recession risks. Such factors include a weak or declining economy or political disruption, including any international trade disputes, could exacerbate constraints that could adversely affect our business.
Previous wording
Shareholder, public and governmental expectations and pressure have been increasing with respect to corporate responsibility, sustainability and other environmental, social and governance (“ESG”) matters. Shareholder advisory services and other organizations have developed and published, and others may in the future develop and publish, rating systems and other scoring and reporting mechanisms to evaluate and compare our ESG performance with that of others in our industry. These ratings systems frequently change, and scores are often based on a relative ranking which may cause our scores to deteriorate if peer rankings improve. In addition, current shareholders and prospective investors may use these ratings, and/or their own internal ESG benchmarks, to determine whether, and to what extent, they may choose to invest in our securities, engage with us to advocate for improved ESG performance or disclosure, make voting decisions as shareholders, or take other actions to hold us and our Board of Directors accountable with respect to ESG matters.
Current wording
Stockholder, public and governmental expectations and pressure have been increasing with respect to corporate responsibility, sustainability and other environmental, social and governance (“ESG”) matters. Stockholder advisory services and other organizations have developed and published, and others may in the future develop and publish, rating systems and other scoring and reporting mechanisms to evaluate and compare our ESG performance with that of others in our industry. These ratings systems frequently change, and scores are often based on a relative ranking which may cause our scores to deteriorate if peer rankings improve. In addition, current stockholders and prospective investors may use these ratings, and/or their own internal ESG benchmarks, to determine whether, and to what extent, they may choose to invest in our securities, engage with us to advocate for improved ESG performance or disclosure, make voting decisions as stockholders, or take other actions to hold us and our Board of Directors accountable with respect to ESG matters.
Previous wording
Some legislatures, government agencies and listing exchanges have mandated or proposed, and others may in the future further mandate, certain ESG disclosure or performance. The standards for tracking and reporting on ESG matters are relatively new, have not been harmonized, and continue to evolve. In addition, there is growing anti-ESG sentiment in the U.S. that may conflict with other regulatory requirements, resulting in regulatory uncertainty. As a result, our selection of ESG disclosure frameworks and topics may change from time to time, may result in a lack of comparative data from period to period, or differ from the expectations of our shareholders and other stakeholders. We may also face reputational damage in the event our corporate responsibility initiatives or objectives do not meet the standards or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other stakeholders, including third party rating services. Failure to comply with ESG-related or anti-ESG-related laws, exchange policies or stakeholder expectations could materially and adversely impact the value of our stock and related cost of capital, and limit our ability to fund future growth, or result in increased investigations and litigation or threats thereof.
Current wording
Some legislatures, government agencies and listing exchanges have mandated or proposed, and others may in the future further mandate, certain ESG disclosure or performance. The standards for tracking and reporting on ESG matters are relatively new, have not been harmonized, and continue to evolve. In addition, there is growing anti-ESG sentiment in the U.S. that may conflict with other regulatory requirements, resulting in regulatory uncertainty. As a result, our selection of ESG disclosure frameworks and topics may change from time to time, may result in a lack of comparative data from period to period, or differ from the expectations of our stockholders and other stakeholders. We may also face reputational damage in the event our corporate responsibility initiatives or objectives do not meet the standards or expectations of stockholders, prospective investors, lawmakers, listing exchanges or other stakeholders, including third-party rating services, and our actions or disclosures that are intended to address the expectations of certain stakeholders may be viewed by others as insufficient, excessive or misaligned with their views. Failure to comply with ESG-related or anti-ESG-related laws, exchange policies or stakeholder expectations could materially and adversely impact the value of our stock and related cost of capital, and limit our ability to fund future growth, or result in increased investigations and litigation or threats thereof.
Previous wording
We are incorporating AI into some of our computer systems, and challenges with properly managing its use and failing to effectively develop AI, could result in reputational harm, competitive harm and legal liability, and adversely affect our results of operations.
Current wording
We continue to incorporate AI solutions, and challenges with properly managing its use and failing to effectively develop AI, could result in reputational harm, competitive harm and legal liability, and adversely affect our results of operations.
Previous wording
Some of our computer systems currently, and may in the future, incorporate AI solutions, including machine learning and generative AI tools that collect, aggregate, and analyze data to assist in the development of our services and products and in the use of internal tools that support our business. AI is still in its early stages, and the introduction and incorporation of AI technologies may result in unintended consequences or other new or expanded risks and liabilities. If the content, analyses or recommendations that AI applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected. Furthermore, if we are unable to remain competitive by continuing to develop and provide enhancements, new features, and integrations for our existing technology offerings and platform, our business could be harmed. Additionally, AI technology is continuously evolving, and we may incur costs to adopt and deploy AI technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI. Also, our competitors or other third parties may incorporate AI into their products and services more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
Current wording
We continue to incorporate AI solutions, including machine learning and generative AI tools that collect, aggregate, and analyze data to assist in the development of our services and products and in the use of internal tools that support our business. The introduction and incorporation of AI technologies may result in unintended consequences or other new or expanded risks and liabilities. If the content, analyses or recommendations that AI applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected. Furthermore, if we are unable to remain competitive by continuing to develop and provide enhancements, new features, and integrations for our existing technology offerings and platform, our business could be harmed. Additionally, AI technology is continuously evolving, and we may incur costs to adopt and deploy AI technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI. Also, our competitors or other third parties may incorporate AI into their products and services more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The commercial real estate markets have experienced a prolonged dislocation driven by inflation and high interest rates, which has persisted longer than anticipated. The elevated and unpredictable interest rate environment has resulted in, and may continue to result in, decreased real estate values, increased delinquencies and defaults, and a disruption in the capital markets. This environment has had a material adverse effect on our business, results of operations, financial condition, and liquidity through increases in nonperforming loans, loan modifications, credit loss reserves and foreclosures. If this environment persists, we are likely to continue experiencing adverse effects on our business.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
If our Agency Business fails to comply with the regulations and program requirements of the GSEs and HUD, we may lose our approved lender status with these entities and fail to gain additional approvals or licenses for our business. We are also subject to changes in laws, regulations and existing GSE and HUD program requirements, including potential increases in reserve and risk retention requirements that could increase our costs and affect the way we conduct the Agency Business, which could materially and adversely affect our financial results.