15 unchanged sentences
Our hedging techniques are highly complex and are partly based on assumed levels of prepayments of our assets.
−Removed: If prepayments are slower or faster than assumed, the maturity our investments will also differ from our expectations, which could reduce the effectiveness of our hedging strategies and may cause losses on such transactions and adversely affect our cash flow.
+Added: If prepayments are slower or faster than assumed, the maturity of our investments will also differ from our expectations, which could reduce the effectiveness of our hedging strategies and may cause losses on such transactions and adversely affect our cash flow.
The severity of potential declines in our tangible net book value due to fluctuations in interest rates would depend on our asset, liability, and hedge composition at the time, as well as the magnitude and duration of the interest rate change.
5 unchanged sentences
We review the duration estimates from the third-party model and may make adjustments based on our judgment to better reflect any unique characteristics and market trading conventions associated with certain types of securities.
−Removed: The table below quantifies the estimated changes in the fair value of our investment portfolio (including derivatives and other securities used for hedging purposes) and in our tangible net book value per common share as of September 30, 2020 and December 31, 2019 should interest rates go up or down by 50, 75 and 100 basis points, assuming instantaneous parallel shifts in the yield curve and including the impact of both duration and convexity.
−Removed: All values in the table below are measured as
−Removed: percentage changes from the base interest rate scenario.
−Removed: The base interest rate scenario assumes interest rates and prepayment projections as of September 30, 2020 and December 31, 2019.
+Added: The table below quantifies the estimated changes in the fair value of our investment portfolio (including derivatives and other securities used for hedging purposes) and in our tangible net book value per common share as of March 31, 2021 and December 31, 2020 should interest rates go up or down by 50, 75 and 100 basis points, assuming instantaneous parallel shifts in the yield curve and including the impact of both duration and convexity.
+Added: All values in the table below are measured as percentage changes from the base interest rate scenario.
+Added: The base interest rate scenario assumes interest rates and prepayment projections as of March 31, 2021 and December 31, 2020.
To the extent that these estimates or other assumptions do not hold true, which is likely in a period of high volatility, actual results could differ materially from our projections.
2 unchanged sentences
Interest Rate Sensitivity 1,2
−Removed: September 30, 2020 December 31, 2019
+Added: March 31, 2021 December 31, 2020
Change in Interest Rate Estimated Change in Portfolio Market Value Estimated Change in Tangible Net Book Value Per Common Share Estimated Change in Portfolio Market Value Estimated Change in Tangible Net Book Value Per Common Share
12 unchanged sentences
Prepayment risk is the risk that our assets will be repaid at a faster rate than anticipated.
−Removed: Interest rates and numerous other factors affect the rate of prepayments, such as housing prices, general economic conditions, loan age, size and loan-to-value ratios, and GSE buyouts of delinquent loans underlying our securities among.
+Added: Interest rates and numerous other factors affect the rate of prepayments, such as housing prices, general economic conditions, loan age, size and loan-to-value ratios, and GSE buyouts of delinquent loans underlying our securities.
Generally, prepayments increase during periods of falling mortgage interest rates and decrease during periods of rising mortgage interest rates.
6 unchanged sentences
Extension risk is the risk that our assets will be repaid at a slower rate than anticipated and generally increases when interest rates rise.
−Removed: In which case, we may have to finance our investments at potentially higher costs without the ability to reinvest principal into higher yielding securities because borrowers prepay their mortgages at a slower pace than originally expected, adversely impacting our net interest spread, and thus our net interest income.
−Removed: As of September 30, 2020 and December 31, 2019, our investment securities (excluding TBAs) had a weighted average projected CPR of 15.9% and 10.8%, respectively, and a weighted average yield of 2.56% and 3.07%, respectively.
+Added: In a rising or higher interest rate environment, we may be required to finance our investments at potentially higher costs without the ability to reinvest principal into higher yielding securities as a result of borrowers prepaying their mortgages at a slower pace than originally anticipated, adversely impacting our net interest spread, and thus our net interest income.
+Added: As of March 31, 2021 and December 31, 2020, our investment securities (excluding TBAs) had a weighted average projected CPR of 11.3% and 17.6%, respectively, and a weighted average yield of 2.39% and 2.33%, respectively.
The table below presents estimated weighted average projected CPRs and yields for our investment securities should interest rates go up or down instantaneously by 50, 75 and 100 basis points.
−Removed: Estimated yields exclude the impact of retroactive "catch-up" premium amortization adjustments from prior periods due to changes in the projected CPR assumption.
+Added: Estimated yields exclude the impact of retroactive "catch-up" premium amortization adjustments for prior periods due to changes in the projected CPR assumption.
Interest Rate Sensitivity 1
−Removed: September 30, 2020 December 31, 2019
+Added: March 31, 2021 December 31, 2020
Change in Interest Rate Weighted Average Projected CPR Weighted Average Asset Yield 2
18 unchanged sentences
and foreign central banks, liquidity conditions, required rates of returns on different assets and other market supply and demand factors.
−Removed: The table below quantifies the estimated changes in the fair value of our assets, net of hedges, and our tangible net book value per common share as of September 30, 2020 and December 31, 2019 should spreads widen or tighten by 10, 25 and 50 basis points.
+Added: The table below quantifies the estimated changes in the fair value of our assets, net of hedges, and our tangible net book value per common share as of March 31, 2021 and December 31, 2020 should spreads widen or tighten by 10, 25 and 50 basis points.
The estimated impact of changes in spreads is in addition to our interest rate shock sensitivity included in the interest rate shock table above.
−Removed: The table below assumes a spread duration of 4.5 and 5.0 years as of September 30, 2020 and December 31, 2019, respectively, based on interest rates and prices as of such dates;
+Added: The table below assumes a spread duration of 5.6 and 4.4 years as of March 31, 2021 and December 31, 2020, respectively, based on interest rates and prices as of such dates;
however, our portfolio's sensitivity to mortgage spread changes will vary with changes in interest rates and in the size and composition of our portfolio.
1 unchanged sentence
Spread Sensitivity 1,2
−Removed: September 30, 2020 December 31, 2019
+Added: March 31, 2021 December 31, 2020
Change in MBS Spread Estimated Change in Portfolio Market Value Estimated Change in Tangible Net Book Value Per Common Share Estimated Change in Portfolio Market Value Estimated Change in Tangible Net Book Value Per Common Share
11 unchanged sentences
Our liquidity risk principally arises from financing long-term fixed rate assets with shorter-term variable rate borrowings.
−Removed: Future borrowings are dependent upon the willingness of lenders to finance our investments, lender collateral requirements and
−Removed: the lenders’ determination of the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates and liquidity conditions within the commercial banking and mortgage finance industries.
−Removed: As of September 30, 2020, we believe that we have sufficient liquidity and capital resources available to execute our business strategy (see Liquidity and Capital Resources in this Form 10-Q for additional details).
+Added: Future borrowings are dependent upon the willingness of lenders to finance our investments, lender collateral
+Added: requirements and the lenders’ determination of the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates and liquidity conditions within the commercial banking and mortgage finance industries.
+Added: As of March 31, 2021, we believe that we have sufficient liquidity and capital resources available to execute our business strategy (see Liquidity and Capital Resources in this Form 10-Q for additional details).
However, should the value of our collateral or the value of our derivative instruments suddenly decrease, margin calls relating to our funding liabilities and derivative agreements could increase, causing an adverse change in our liquidity position.
1 unchanged sentence
In addition, our counterparties have the option to increase our haircuts (margin requirements) on the assets we pledge against our funding liabilities, thereby reducing the amount that can be borrowed against an asset even if they agree to renew or roll our funding liabilities.
−Removed: Significantly higher haircuts can reduce our ability to leverage our portfolio or even force us to sell assets, especially if correlated with asset price declines or faster prepayment rates on our assets.
+Added: Significantly higher haircuts can reduce our ability to leverage our portfolio or may even force us to sell assets, especially if correlated with asset price declines or faster prepayment rates on our assets.
Our credit sensitive investments, such as CRT and non-Agency securities, expose us to the risk of nonpayment of principal, interest or other remuneration we are contractually entitled to.
We are also exposed to credit risk in the event our repurchase agreement counterparties default on their obligations to resell the underlying collateral back to us at the end of the repo term or in the event our derivative counterparties do not perform under the terms of our derivative agreements.
−Removed: We accept credit exposure related to our credit sensitive assets at levels we deem to be prudent within the context of our overall investment strategy.
+Added: We accept credit exposure related to our credit sensitive assets at levels we deem prudent within the context of our overall investment strategy.
We attempt to manage this risk through careful asset selection, pre-acquisition due diligence, post-acquisition performance monitoring, and the sale of assets where we identify negative credit trends.
4 unchanged sentences
There is no guarantee that our efforts to manage credit risk will be successful and we could suffer losses if credit performance is worse than our expectations or our counterparties default on their obligations.
−Removed: Excluding central clearing exchanges, as of September 30, 2020, our maximum amount at risk with any counterparty related to our repurchase agreements was less than 2% of tangible stockholders' equity and related to our derivative agreements was less than 1% of tangible stockholders' equity.
+Added: Excluding central clearing exchanges, as of March 31, 2021, our maximum amount at risk with any counterparty related to our repurchase agreements was less than 2% of tangible stockholders' equity and related to our derivative agreements was less than 1% of tangible stockholders' equity.
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.