Secured Financing Agreements

6 Months Ended

Jun. 30, 2020

Disclosure of Repurchase Agreements [Abstract]

Secured financing agreements include short term repurchase agreements with original maturity dates of less than one-year, long-term financing agreements with original maturity dates of more than one year and loan warehouse credit facilities collateralized by loans acquired by the Company.

The repurchase agreements are collateralized by Agency and non-agency mortgage backed securities with interest rates generally indexed to the one-month and three-month LIBOR rates and re-price accordingly. The maturity dates on the repurchase agreements are all less than one year and generally are less than 180 days. The collateral pledged as security on the repurchase agreements may include the Company’s investments in consolidated VIEs, which are eliminated in consolidation.

The long-term financing agreements include long-term repurchase agreements and secured financing arrangements with an original term of greater than one year which are secured by non-agency RMBS pledged as collateral. Maturity dates on these long-term financing agreements range from April 2021 through April 2025. The collateral pledged as security on the long-term financing agreements may include the Company’s investments in consolidated VIEs, which are eliminated in consolidation. $400 million of the long-term financing agreements has a fixed interest rate of 7% and include an attached equity warrant. See footnote 11 for details of the equity warrants issued. Maturity dates on these long-term financing agreements range from April 2021 through April 2025. The interest rates on the remaining long-term financing agreements are generally indexed to one-month and three-month LIBOR rates. During the quarter and six months ended June 30, 2020, the Company has significantly increased its long-term financing agreements.

The warehouse credit facilities collateralized by loans are repurchase agreements intended to hold loans acquired by the Company. These loans are generally held in the warehouse credit facilities until they can be sold into a longer-term securitization structure. The maturity dates on the warehouse credit facilities range from 30 days to one year with interest rates indexed to the one-month and three-month LIBOR rates.

The Secured financing agreements require the Company to post collateral at a specific rate in excess of the unpaid principal balance of the Agreement. For certain Secured financing agreements, this may require the Company to post additional margin if the fair value of the assets were to drop. To mitigate this risk, during the first half of 2020, the Company has negotiated several long-term financing agreements which are not subject to additional margin requirements upon a drop in the fair value of the collateral pledged. At June 30, 2020, the Company has $1.3 billion of Secured financing agreements which are not subject to additional margin requirements upon a change in the fair value of the collateral pledged. Repurchase agreements may allow the credit counterparty to avoid the automatic stay provisions of the Bankruptcy Code, in the event of a bankruptcy of the Company, and take possession of, and liquidate, the collateral under such repurchase agreements without delay. $860 million of the long-term financing agreements are secured borrowing arrangements which are subject to the automatic stay provisions of the Bankruptcy Code.

The Secured financing agreements outstanding, weighted average borrowing rates, weighted average remaining maturities, average balances and the fair value of the collateral pledged as of June 30, 2020 and December 31, 2019 were:



	June 30, 2020 ⁽¹⁾			December 31, 2019
Secured financing agreements outstanding secured by:
Agency RMBS (in thousands)	$	77,008		$	6,247,275
Agency CMBS (in thousands)	2,046,782			2,013,515
Non-agency RMBS and Loans held for investment (in thousands)	3,619,627			5,166,755
Total:	$	5,743,417		$	13,427,545

MBS pledged as collateral at fair value on Secured financing agreements:
Agency RMBS (in thousands)	$	99,938		$	6,602,039
Agency CMBS (in thousands)	2,158,413			2,102,520
Non-agency RMBS and Loans held for investment (in thousands)	5,181,023			6,694,685
Total:	$	7,439,374		$	15,399,244

Average balance of Secured financing agreements secured by:
Agency RMBS (in thousands)	$	2,551,002		$	8,062,881
Agency CMBS (in thousands)	2,142,221			1,993,372
Non-agency RMBS and Loans held for investment (in thousands)	4,737,808			4,436,133
Total:	$	9,431,031		$	14,492,386

Average borrowing rate of Secured financing agreements secured by:
Agency RMBS (in thousands)	1.15		%	2.10		%
Agency CMBS (in thousands)	0.28		%	2.10		%
Non-agency RMBS and Loans held for investment (in thousands)	4.47		%	3.19		%

Average remaining maturity of Secured financing agreements secured by:
Agency RMBS (in thousands)	6 Days			14 Days
Agency CMBS (in thousands)	15 Days			13 Days
Non-agency RMBS and Loans held for investment (in thousands)	606 Days			255 Days

Average original maturity of Secured financing agreements secured by:
Agency RMBS (in thousands)	12 Days			38 Days
Agency CMBS (in thousands)	30 Days			34 Days
Non-agency RMBS and Loans held for investment (in thousands)	628 Days			279 Days

(1) June 30, 2020 balance excludes $201 million principal related to a secured borrowing which will terminate during third quarter of 2020. The fair value of the collateral on this secured borrowing was $330 million and the interest rate was 18.7%.

At June 30, 2020 and December 31, 2019, we pledged $60 million and $20 million, respectively, of margin cash collateral to our secured financing agreement counterparties. At June 30, 2020 and December 31, 2019, the secured financing agreements collateralized by MBS and Loans held for investment had the following remaining maturities and borrowing rates.



	June 30, 2020				December 31, 2019
	(dollars in thousands)
	Principal		Weighted Average Borrowing Rates	Range of Borrowing Rates	Principal		Weighted Average Borrowing Rates	Range of Borrowing Rates
Overnight	$	—	NA	NA	$	—	NA	NA
1 to 29 days	2,311,122		0.48%	0.21% - 2.74%	9,709,387		2.26%	1.90% - 3.62%
30 to 59 days	296,041		2.55%	1.97% - 2.67%	800,648		2.96%	2.15% - 3.52%
60 to 89 days⁽¹⁾	65,390		2.37%	2.15% - 2.43%	608,520		3.00%	2.59% - 3.35%
90 to 119 days	—		NA	NA	—		NA	NA
120 to 180 days	191,904		1.96%	1.66% - 2.93%	809,077		3.38%	3.06% - 3.46%
180 days to 1 year	1,497,192		5.34%	1.68% - 8.74%	580,886		3.42%	3.26% - 3.51%
1 to 2 years	187,187		2.92%	1.68% - 4.50 %	427,981		3.28%	3.19% - 3.30%
2 to 3 years	400,000		7.00%	7.00% - 7.00%	—		NA	NA
Greater than 3 years	794,581		3.91%	1.58% - 5.56 %	491,046		3.20%	3.19% - 3.20%
Total	$	5,743,417	2.93%		$	13,427,545	2.52%

Certain of the long-term financing agreements and warehouse credit facilities are subject to certain covenants. These covenants include that the Company maintain its REIT status as well as maintain a net asset value or GAAP equity greater than $1.6 billion to $1.75 billion. If the Company fails to comply with these covenants at any time, the financing may become immediately due in full. Additionally, certain financing agreements become immediately due if the total stockholders' equity of the Company drops by 50% from the most recent year end. Currently, the Company is in compliance with all covenants and does not expect to fail to comply with any of these covenants within the next twelve months. The Company has a total of $1.1 billion unused warehouse credit facilities.

At June 30, 2020 the Company had an amount at risk with Goldman Sachs of 16% of its equity related to the collateral posted on secured financing agreements, the weighted average maturity of the secured financing agreements with Goldman Sachs was 1128 days and the amount at risk was $535 million. There were no other amounts at risk with any other counterparties greater than 10% of the Company’s equity as of June 30, 2020. At December 31, 2019, there was no amount at risk with any counterparty greater than 10% of the Company's equity.