4 unchanged sentences
We are exposed to the risks related to the equity and debt capital markets and our ability to raise capital or finance our business operations through these markets.
−Removed: As a REIT, we are required to distribute at least 90% of our taxable income annually, which significantly limits our ability to accumulate operating cash flow and, therefore, requires us to utilize the equity and debt capital markets to finance our business.
+Added: As a REIT, we are required to distribute at least 90% of our taxable income annually, which significantly limits our ability to accumulate operating cash flow and, therefore, requires us to utilize the equity and
+Added: debt capital markets to finance our business.
To mitigate this risk, we monitor both the equity and debt capital markets to make informed decisions on the amount, timing, type and terms of the capital we raise.
1 unchanged sentence
Commercial mortgage assets may be viewed as exposing an investor to greater risk of loss than residential mortgage assets since such assets are typically secured by larger loans to fewer obligors than residential mortgage assets.
−Removed: Multifamily and commercial property values, net operating income derived from such properties, and borrowers’ credit ratings are subject to volatility and may be negatively affected by a number of factors, including, but not limited to, events such as natural disasters, acts of war, terrorism, local economic and/or real estate conditions (such as industry slowdowns, oversupply of real estate space, occupancy rates, construction delays and costs) and other macroeconomic factors beyond our control.
+Added: Multifamily and commercial property values, net operating income derived from such properties, and borrowers’ credit ratings are subject to volatility and may be negatively affected by a number of factors, including, but not limited to, events such as natural disasters and pandemics, acts of war, terrorism, local economic and/or real estate conditions (such as industry slowdowns, oversupply of real estate space, occupancy rates, construction delays and costs) and other macroeconomic factors beyond our control.
The performance and value of our loan and investment and servicing portfolios depend on the borrowers’ ability to operate the properties that serve as collateral so that they produce adequate cash flow to pay their loans.
4 unchanged sentences
The operating results of our Structured Business depend in large part on differences between the income from our loans and our borrowing costs.
−Removed: Most of our Structured Business loans and borrowings are variable-rate instruments, based on LIBOR.
+Added: Most of our Structured Business loans and borrowings are variable-rate instruments, based on LIBOR, or other applicable index rates, such as SOFR, as we transition away from LIBOR (collectively referred to as the “Index Rates” below).
The objective of this strategy is to minimize the impact of interest rate changes on our net interest income.
−Removed: We also have various fixed rate loans in our portfolio that are financed with variable rate LIBOR borrowings.
+Added: We also have various fixed rate loans in our portfolio that are financed with variable rate borrowings.
Additionally, loans are sometimes extended and, consequently, do not pay off on their original maturity dates.
6 unchanged sentences
We do not enter into financial instruments for trading purposes.
−Removed: The following table projects the potential impact on interest for a 12-month period, assuming an instantaneous increase or decrease of 15 basis points and an increase of 25 basis points in LIBOR (in thousands).
−Removed: Because LIBOR rates were close to zero at December 31, 2020, we have excluded the impact of a 25 basis point decrease in LIBOR.
+Added: The following table projects the potential impact on interest for a 12-month period, assuming hypothetical instantaneous increases of 50 basis points and 100 basis points in the Index Rates (in thousands).
+Added: Since the Index Rates were close to zero at December 31, 2021, we have excluded the impact of a decrease in the Index Rates.
Assets (Liabilities)
3 unchanged sentences
Interest expense from debt obligations
−Removed: Net interest income
−Removed: Interest from cash, restricted cash and escrows (2)
−Removed: Net change to interest
+Added: Impact to net interest income (3)
Represents the UPB of our loan portfolio and the principal balance of our debt.
−Removed: The interest rates on these balances are not indexed to LIBOR, they are negotiated periodically with each corresponding bank based on certain benchmark rates.
−Removed: Based on our structured loans and investments and corresponding debt as of December 31, 2020, increases in LIBOR of 0.15% and 0.25% would decrease our annual net interest income as a result of LIBOR floors on a portion of our loan portfolio that are above LIBOR as of December 31, 2020, which would limit the effect of an increase on interest income.
−Removed: Conversely, these LIBOR floors would reduce the impact on interest income from decreases in LIBOR, which would result in increases to net interest income.
−Removed: We enter into Swap Futures to hedge our exposure to changes in interest rates inherent in (1) our Structured Business SFR loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt, and (2) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization.
−Removed: Our Swap Futures are tied to the five-year and ten-year swap rates and hedge our exposure to changes in the fair value of our Structured Business SFR loans and held-for-sale Agency Business Private Label loans until the time they are securitized.
−Removed: A 25 basis point and a 50 basis point increase to the five-year and ten-year swap rates on our Swap Futures held at December 31, 2020 would have resulted in a gain of $1.1 million and $2.2 million, respectively, in 2020, while a 25 basis point and a 50 basis point decrease in the rates would have resulted in a loss of $1.1 million and $2.3 million, respectively.
+Added: Based on our structured loans and investments and corresponding debt as of December 31, 2021, increases in the Index Rates of 0.50% and 1.00% would decrease our annual net interest income as a result of floors on a portion of our loan portfolio that are above Index Rates as of December 31, 2021, which would limit the effect of an increase on interest income.
+Added: Conversely, these floors would reduce the impact on interest income from decreases in the Index Rates, which would result in increases to net interest income.
+Added: The impact of hypothetical rate changes to net interest income are partially offset by interest income earned on our cash, restricted cash and escrow balances.
+Added: At December 31, 2021, we had $2.88 billion of cash, restricted cash and escrows, which is earning interest at a weighted average rate of 0.18%, or approximately $5.1 million annually.
+Added: The interest rates on these balances are not indexed to a benchmark rate and are negotiated periodically with each corresponding bank, therefore, the interest rates may not change in conjunction with changes in Index Rates.
+Added: We enter into interest rate swaps to hedge our exposure to changes in interest rates inherent in (1) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization, and (2) our Agency Business SFR – fixed rate loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt.
+Added: Our interest rate swaps are tied to the five-year and ten-year swap rates and hedge our exposure to Private Label loans until the time they are securitized and changes in the fair value of our held-for-sale Agency Business SFR – fixed rate loans.
+Added: A 50 basis point and a 100 basis point increase to the five-year and ten-year swap rates on our interest rate swaps held at December 31, 2021 would have resulted in a gain of $19.6 million and $38.2 million, respectively, in 2021, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a loss of $20.6 million and $42.3 million, respectively.
Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD.
5 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.