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
−Removed: debt capital markets to finance our business.
+Added: As a REIT, we are required to distribute at least 90% of our REIT-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.
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.
8 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, or other applicable index rates, such as SOFR, as we transition away from LIBOR (collectively referred to as the “Index Rates” below).
+Added: Most of our Structured Business loans and borrowings are variable-rate instruments, that are currently based on SOFR as we continue to 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.
8 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 hypothetical instantaneous increases of 50 basis points and 100 basis points in the Index Rates (in thousands).
−Removed: Since the Index Rates were close to zero at December 31, 2021, we have excluded the impact of a decrease in the Index Rates.
+Added: The following table projects the potential impact on interest (in thousands) for a 12-month period, assuming hypothetical instantaneous increases of 50 basis points and 100 basis points in the Index Rates.
+Added: Since it is unlikely that the Index Rates will decrease in the near future as a result of the current economic environment, we have excluded the impact of decreases in the Index Rates.
Assets (Liabilities)
Subject to Interest
+Added: 50 Basis Point
+Added: 100 Basis Point
Rate Sensitivity (1)
3 unchanged sentences
Represents the UPB of our loan portfolio and the principal balance of our debt.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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: The impact of hypothetical rate changes to net interest income are further benefited by interest income earned on our cash, restricted cash and escrow balances.
+Added: At December 31, 2022, we had $2.50 billion of cash, restricted cash and escrows, which is earning interest at a weighted average rate of approximately 3.75%, or approximately $94 million annually.
+Added: The interest rates on these balances are not indexed to an Index Rate and are negotiated periodically with each corresponding bank, therefore, the interest rates may not change in conjunction with changes in Index Rates.
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.
6 unchanged sentences
In addition, the fair value of our MSRs is subject to market risk since a significant driver of the fair value of these assets is the discount rates.
−Removed: A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $16.4 million as of December 31, 2021, while a 100 basis point decrease would increase the fair value by $17.4 million.
+Added: A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $18.0 million at December 31, 2022, while a 100 basis point decrease would increase the fair value by $19.1 million.
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.