Secured Financing Agreements

6 Months Ended

Jun. 30, 2023

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.

At June 30, 2023, the repurchase agreements are collateralized by Agency and Non-Agency mortgage-backed securities with interest rates generally indexed to the Secured Overnight Financing Rate (“SOFR”). At December 31, 2022, the repurchase agreements are collateralized by Agency and Non-Agency mortgage-backed securities with interest rates generally indexed to either the one-month LIBOR rates, the three-month LIBOR rates, or the SOFR. 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 bonds issued by consolidated VIEs, which are eliminated in consolidation.

The long-term financing agreements include secured financing arrangements with an original term of one year or greater which is secured by Non-Agency RMBS pledged as collateral. These long-term secured financing agreements have a maturity date of February 2025. The collateral pledged as security on the long-term financing agreements may include the Company’s investments in bonds issued by consolidated VIEs, which are eliminated in consolidation.

The warehouse credit facilities collateralized by loans are repurchase agreements intended to finance loans 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 SOFR.

The secured financing agreements generally 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, 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 or until the drop is greater than a threshold. At June 30, 2023 and December 31, 2022, the Company has $1.2 billion and $1.2 billion, respectively, of secured financing agreements which are not subject to additional margin requirements upon a change in the fair value of the collateral pledged. At June 30, 2023 and December 31, 2022, the Company has $316 million and $365 million, respectively, of secured financing agreements which are not subject to additional margin requirements until the drop in the fair value of collateral is greater than a threshold. 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.

At June 30, 2023 and December 31, 2022, we pledged $15 million and $33 million respectively, of margin cash collateral to the Company's secured financing agreement counterparties. At June 30, 2023, the weighted average haircut on the Company's secured financing agreements collateralized by Agency CMBS was 5.1% and Non-Agency RMBS and Loans held for investment was 25.1%. At December 31, 2022, the weighted average haircut on the Company's secured financing agreements collateralized by Agency RMBS IOs was 20.0%, Agency CMBS was 7.8% and Non-Agency RMBS and Loans held for investment was 25.7%.

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 a certain level. 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 $2.1 billion unused uncommitted warehouse credit facilities as of June 30, 2023.

At June 30, 2023, the Company had amounts at risk with Nomura Securities International, Inc., or Nomura, of 12% of its equity related to the collateral posted on secured financing agreements. The weighted average maturities of the secured financing agreements with Nomura were 454 days. The amount at risk with Nomura was $304 million. At December 31, 2022, the Company had amounts at risk with Nomura of 12% of its equity related to the collateral posted on secured financing agreements. The weighted average maturities of the secured financing agreements with Nomura were 582 days. The amount at risk with Nomura was $308 million.

The secured financing agreements principal outstanding, weighted average borrowing rates, weighted average remaining maturities, average balances and the fair value of the collateral pledged as of June 30, 2023 and December 31, 2022 were:


	June 30, 2023			December 31, 2022
Secured financing agreements outstanding principal secured by:
Agency RMBS (in thousands)	$	—		$	3,946
Agency CMBS (in thousands)	100,899			355,934
Non-Agency RMBS and Loans held for investment (in thousands) (1)	2,606,735			3,083,551
Total:	$	2,707,634		$	3,443,431

MBS pledged as collateral at fair value on Secured financing agreements:
Agency RMBS (in thousands)	$	—		$	6,662
Agency CMBS (in thousands)	103,135			382,547
Non-Agency RMBS and Loans held for investment (in thousands)	3,795,496			4,310,513
Total:	$	3,898,631		$	4,699,722

Average balance of Secured financing agreements secured by:
Agency RMBS (in thousands)	$	2,881		$	11,714
Agency CMBS (in thousands)	190,448			376,551
Non-Agency RMBS and Loans held for investment (in thousands)	2,858,122			2,819,871
Total:	$	3,051,451		$	3,208,136

Average borrowing rate of Secured financing agreements secured by:
Agency RMBS	—		%	4.70		%
Agency CMBS	5.23		%	4.49		%
Non-Agency RMBS and Loans held for investment	7.34		%	6.86		%

Average remaining maturity of Secured financing agreements secured by:
Agency RMBS	—			17 Days
Agency CMBS	26 Days			25 Days
Non-Agency RMBS and Loans held for investment	479 Days			474 Days

Average original maturity of Secured financing agreements secured by:
Agency RMBS	—			60 Days
Agency CMBS	121 Days			42 Days
Non-Agency RMBS and Loans held for investment	585 Days			499 Days

(1) The outstanding balance for secured financing agreements in the table above is net of $2 million and $1 million of deferred financing cost as of June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023 and December 31, 2022, the secured financing agreements collateralized by MBS and Loans held for investment had the following remaining maturities and borrowing rates.


	June 30, 2023				December 31, 2022
	(dollars in thousands)
	Principal (1)		Weighted Average Borrowing Rates	Range of Borrowing Rates	Principal (1)		Weighted Average Borrowing Rates	Range of Borrowing Rates
Overnight	—		N/A	N/A	—		N/A	NA
1 to 29 days	$	336,274	6.44%	5.22% - 7.93%	$	493,918	4.66%	3.63% - 6.16%
30 to 59 days	330,198		6.53%	6.01% - 7.57%	762,768		6.14%	4.60% - 7.34%
60 to 89 days	194,857		6.42%	6.11% - 7.72%	225,497		6.04%	4.70% - 7.12%
90 to 119 days	55,989		7.05%	6.36% - 7.37%	43,180		6.54%	5.50% - 6.70%
120 to 180 days	182,352		6.81%	6.38% - 7.43%	401,638		5.88%	5.57% - 6.92%
180 days to 1 year	389,290		6.92%	6.41% - 7.41%	402,283		6.06%	5.63% - 6.64%
1 to 2 years	843,745		9.27%	7.00% - 13.98%	251,286		13.98%	13.98% - 13.98%
2 to 3 years	—		—%	0.00% - 0.00%	480,022		8.07%	8.07% - 8.07%
Greater than 3 years	374,929		5.14%	5.10% - 6.80%	382,839		5.14%	5.10% - 6.07%
Total	$	2,707,634	7.26%		$	3,443,431	6.61%

(1) The outstanding balance for secured financing agreements in the table above is net of $2 million and $1 million of deferred financing cost as of June 30, 2023 and December 31, 2022, respectively.

Secured Financing Agreements at fair value

The Company entered into a secured financing agreement during fourth quarter of 2022 for which the Company has elected fair value option. The Company believes electing fair value for this financial instrument better reflect the transactional economics. The total principal balance outstanding on this secured financing at June 30, 2023 and December 31, 2022 was $375 million and $383 million, respectively. The fair value of collateral pledged was $414 million and $418 million as of June 30, 2023 and December 31, 2022, respectively. The Company carries this secured financing instrument at fair value of $354 million and $374 million as of June 30, 2023 and December 31, 2022, respectively. At June 30, 2023 and December 31, 2022, the weighted average borrowing rate on secured financing agreements at fair value was 5.14%. At June 30, 2023 and December 31, 2022, the haircut for the secured financing agreements at fair value was 7.5%. At June 30, 2023, the maturity on the secured financing agreements at fair value was five years.