What changed in this filing

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Item 1A. Risk Factors

2026-02-25 compared with 2025-02-26 · 90 added, 59 removed, 436 unchanged (25% of the section changed)

19 unchanged sentences

We may be unable to obtain additional financing on favorable terms or, with respect to our debt and other investments, on terms that match the maturities of the debt originated or other investments acquired, if we are able to obtain additional financing at all.

We rely on the availability of collateralized debt and loan obligation securitization markets to provide long-term financing for our loans and investments.

We may use collateralized debt and loan obligation securitization markets to provide long-term financing for our loans and investments which may not be available.

We rely on short-term borrowings, such as repurchase agreements and our secured revolving credit facilities, to initially fund our investments.

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These limitations decrease our operating flexibility and may impact our ability to achieve our operating objectives, including making distributions.

During periods of rising interest rates, our interest expense increases may outpace any increases in interest we earn on our assets, and the value of our assets may decrease.

Changes in interest rates, particularly short-term interest rates, may significantly influence our net income.

Our operating results depend in large part on the income from our assets, reduced by any credit losses and financing costs.

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If we are unable to provide such collateral or cash repayments, the lender may accelerate the loan and we may be required to liquidate the collateral.

In a weakening economic environment, or in an environment of widening credit spreads, we would generally expect the value of the commercial real estate debt or securities that serve as collateral for our short-term borrowings to decline, and in such a scenario, it is likely that the terms of our short-term borrowings would require us to provide additional collateral or to make partial repayment, which amounts could be substantial.

short-term borrowings to decline, and in such a scenario, it is likely that the terms of our short-term borrowings would require us to provide additional collateral or to make partial repayment, which amounts could be substantial.

Further, such borrowings may require us to maintain a certain amount of cash reserves or to set aside unleveraged assets sufficient to maintain a specified liquidity position that would allow us to satisfy our collateral obligations.

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If the values of the properties drop or are discovered to have been fraudulently inflated, the lower value of the security and reduction in borrower equity associated with such loans will increase our risk.

In this manner, reduced real estate values could impact the values of our debt and security investments, making them subject to the risks typically associated with real estate ownership.

In this manner, reduced real estate values could impact the values of our debt and real estate securities investments, making them subject to the risks typically associated with real estate ownership.

Our operating results may be adversely affected by a number of risks generally incident to holding real estate and real estate debt, including, without limitation:

• natural disasters, such as hurricanes, earthquakes and floods, which we expect to increase in strength and frequency due to climate change;

• acts of war or terrorism, or criminal violence, including the consequences of terrorist attacks and other such acts;

• acts of war or terrorism, or criminal violence, including the consequences of terrorist attacks, civil unrest and other such acts;

• adverse changes in national and local economic and real estate conditions;

• adverse changes in economic and market conditions related to pandemics and health crises, such as COVID-19;

• adverse changes in economic and market conditions related to pandemics and health crises;

• an oversupply of (or a reduction in demand for) space in the areas where properties securing our loans are located and the attractiveness of particular properties to prospective tenants;

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• costs of remediation and liabilities associated with environmental conditions affecting properties;

• reduced demand for office space, including as a result of changes in work habits, including remote or hybrid work schedules which allow work from remote locations other than the employer’s office premises;

• reduced demand for office space, including as a result of changes in work habits, including remote or hybrid work schedules, or reductions in employee headcount due to artificial intelligence technologies;

• the potential for uninsured or underinsured property losses;

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Loans on properties in transition will involve a greater risk of loss than conventional mortgage loans.

We primarily invest in transitional loans to borrowers who are typically seeking short-term capital to be used in an

The Commercial Real Estate Financing business unit primarily invests in transitional loans to borrowers who are typically seeking short-term capital to be used in an

acquisition or rehabilitation of a property.

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Our success depends on the availability of attractive investment opportunities.

Our loans typically have a term of about three to five years.

Our loans typically have a term of about three to ten years.

As a result, a significant amount of our invested capital is repaid at loan maturity each year.

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At any time during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure action and further delaying the foreclosure process.

The resulting time delay could reduce the value of the assets under the defaulted loans.

The resulting time delay could reduce the value of the assets under the defaulted loans and delay us in reinvesting the principal associated with such investments in higher yielding assets.

Furthermore, an action to foreclose on a property securing a loan is regulated by state statutes and regulations and is subject to the delays and expenses associated with lawsuits if the borrower raises defenses or counterclaims.

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Furthermore, any costs or delays involved in the maintenance or liquidation of the underlying property will further reduce the net proceeds and, thus, increase the loss.

Subordinate commercial real estate debt that we originate or acquire could expose us to greater losses.

Subordinate commercial real estate debt that we originate or acquire could expose us to greater losses than primary mortgage loans do.

We acquire and originate subordinate commercial real estate debt, including subordinate mortgage and mezzanine loans and participations in such loans.

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Our commercial real estate debt portfolio may include loans made to developers to construct prospective projects.

The primary risks to us of construction loans are the potential for cost overruns, the developer’s failing to meet a project delivery schedule and the inability of a developer to sell or refinance the project at completion in accordance with its business plan and repay our commercial real estate loan due to declining real estate values.

The primary risks to us of construction loans are the potential for cost overruns, the developer’s failing to meet a project delivery

schedule and the inability of a developer to sell or refinance the project at completion in accordance with its business plan and repay our commercial real estate loan due to declining real estate values.

These risks could cause us to have to fund more money than we originally anticipated to complete the project.

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Under such circumstances, the insurance proceeds, if any, might not be adequate to restore the economic value of the property, which might impair our security interest and decrease the value of the property.

We invest in CMBS and CMBS bonds, which may include subordinate securities, which entails certain risks.

We invest in CMBS and CMBS bonds, which entails certain risks, including those related to subordinate securities.

We invest in a variety of CMBS and CMBS bonds, which may include subordinate securities that are subject to the first risk of loss if any losses are realized on the underlying mortgage loans.

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Additional risks may be presented by the type and use of a particular commercial property.

For example, special risks are presented by hospitals, nursing

homes, hospitality properties and certain other property types.

For example, special risks are presented by hospitals, nursing homes, hospitality properties and certain other property types.

Commercial property values and net operating income are subject to volatility, which may result in net operating income becoming insufficient to cover debt service on the related commercial real estate loan, particularly if the current economic environment deteriorates.

The repayment of loans secured by income-producing properties is typically dependent upon the successful operation of the related real estate project rather than upon the liquidation value of the underlying real estate.

Furthermore, the net operating income from and value of any commercial property are subject to various risks.

Furthermore, the net operating income from and the value of any commercial property are each subject to various risks.

The exercise of remedies and successful realization of liquidation proceeds relating to CMBS and CMBS bonds may be highly dependent upon the performance of the servicer or special servicer.

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We ordinarily do not have the right to appoint the directing certificate holder.

In connection with the servicing of the specially serviced mortgage loans, the related special servicer may, at the direction of the directing certificate holder, take actions that could adversely affect our interests.

In connection with the servicing of the specially

serviced mortgage loans, the related special servicer may, at the direction of the directing certificate holder, take actions that could adversely affect our interests.

We invest in CDOs and such investments involve significant risks.

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As a result, our ability to vary our portfolio in response to further changes in economic and other conditions may be relatively limited, which may result in losses to us.

Some of our investments will be carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.

Some of our investments will be in the form of securities that are recorded at fair value but have limited liquidity or are not publicly-traded.

Some of our investments are carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.

Some of our investments are in the form of securities that are recorded at fair value but have limited liquidity or are not publicly-traded.

The fair value of these securities and potentially other investments that have limited liquidity or are not publicly-traded may not be readily determinable.

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Competition with third parties for originating and acquiring investments may reduce our profitability.

We have significant competition with respect to our origination and acquisition of assets with many other companies, including other REITs, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies and other investors, many of which have greater resources than we, and may not be able to compete successfully for investments.

We have significant competition with respect to our origination and acquisition of assets with many other companies, including other REITs, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies and other investors, many of which have greater resources than us, and we may not be able to compete successfully for investments.

In addition, the number of entities and the amount of funds competing for suitable investments may increase.

Many of our competitors are not subject to the operating constraints associated with REIT rule compliance or maintenance of an

exclusion from registration under the Investment Company Act.

Many of our competitors are not subject to the operating constraints associated with REIT rule compliance or maintenance of an exclusion from registration under the Investment Company Act.

In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments, offer more attractive pricing or other terms and establish more relationships than us.

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However, even if we conduct extensive due diligence on a particular investment, there can be no assurance that this diligence will uncover all material issues relating to such investment, that the information provided by the borrower is truthful or accurate, or that factors outside of our control will not later arise.

If our due diligence fails to identify material issues, we have had to in the past and may in the future have to write-down or write-off assets, restructure our investment or incur impairment or other charges that could result in our reporting losses.

diligence fails to identify material issues or fraudulent inflation of asset values, we have had to in the past and may in the future have to write-down or write-off assets, restructure our investment or incur impairment or other charges that could result in our reporting losses.

Charges of this nature could contribute to negative market perceptions about us or our shares of common stock.

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Our estimates and judgments may not be correct and, therefore, our results of operations and financial condition could be severely impacted.

Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments (Topic 326),” which replaced the “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss model (“CECL”) became effective for us on January 1, 2020.

Under the CECL model, we are required to provide allowances for credit losses on certain financial assets carried at amortized cost, such as loans held-for-investment and held-to-maturity debt securities, including related future funding commitments and accrued interest receivable.

Under the Current Expected Credit Loss model (“CECL”) model for recognizing credit losses, we are required to provide allowances for credit losses on certain financial assets carried at amortized cost, such as loans held-for-investment and held-to-maturity debt securities, including related future funding commitments and accrued interest receivable.

The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and forward looking information through the use of projected macroeconomic scenarios over the reasonable and supportable forecasts.

This measurement takes place at the time the financial asset is first added to the balance sheet and updated quarterly thereafter.

This differs significantly from the “incurred loss” model previously required under GAAP, which delayed recognition until it was probable a loss had been incurred.

Accordingly, the adoption of the CECL model has materially affected how we determine our credit loss provision and required us to significantly increase our allowance and recognize provisions for credit losses earlier in the lending cycle.

Moreover, the CECL model created more volatility in the level of our credit loss provisions.

This measurement takes place at the time the financial asset is first added to the balance sheet and updated quarterly thereafter, which creates volatility in the level of our credit loss provisions.

If we are required to materially increase our future level of credit loss allowances for any reason, such increase could adversely affect our business, results of operations, liquidity and financial conditions.

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Any credit ratings on our investments are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be downgraded or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant.

If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value and liquidity of those investments could significantly decline, which would adversely affect the value of our investment portfolio.

If rating agencies assign a lower-than-expected rating or

reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value and liquidity of those investments could significantly decline, which would adversely affect the value of our investment portfolio.

When we acquire companies, we face risks related to integrating the acquired company in a manner that allows us to achieve the synergies and other benefits of the acquisition or do so within the anticipated time frame.

From time to time, we may acquire other companies, such as our 2021 acquisition of Capstead Mortgage Corp.

Our acquisition of companies can create significant risks, including:

and 2025 acquisition of NewPoint.

Our acquisition of companies creates significant risks, including:

• issues related to the acquired business that were not identified in our diligence review prior to acquisition;

• the significant management attention and resources we would need to devote to integrating the acquired business, including any employees of the acquired company;

• the significant management attention and resources needed to devote to integrating the acquired business, including any employees of the acquired company;

• costs associated with retaining key employees of the acquired business;

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We utilize warehouse facilities pursuant to which we accumulate mortgage loans in anticipation of a securitization financing, which assets are pledged as collateral for such facilities until the securitization transaction is consummated.

In order to borrow funds to acquire assets under any additional warehouse facilities, we expect that our lenders thereunder would have the right to review the potential assets for which we are seeking financing.

In order to borrow funds to acquire assets under any additional warehouse facilities, our lenders thereunder would have the right to review the potential assets for which we are seeking financing.

We may be unable to obtain the consent of a lender to acquire assets that we believe would be beneficial to us and we may be unable to obtain alternate financing for such assets.

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In some sale transactions, we also retain a subordinated interest in the loans sold.

The securitization of our portfolio investments might magnify our exposure to losses on those portfolio investments because the subordinated interest we retain in the loans sold would be subordinate to the senior interest in the loans sold, and we would, therefore, absorb all of the losses sustained with respect to a loan sold before the owners of the senior interest experience any

Moreover, we cannot be assured that we will be able to access the securitization market in the future, or be able to do so at favorable rates.

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We enter into hedging transactions that could expose us to contingent liabilities in the future.

Subject to maintaining our qualification as a REIT, part of our investment strategy involves entering into hedging transactions that require us to fund cash payments in certain circumstances (such as the early termination of the hedging instrument caused by an event of default or other early termination event, or the decision by a counterparty to request margin securities it is contractually owed under the terms of the hedging instrument).

securities it is contractually owed under the terms of the hedging instrument).

The amount due would be equal to the unrealized loss of the open swap positions with the respective counterparty and could also include other fees and charges.

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Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss.

Risks Related to NewPoint and our Agency Business

The acquisition of NewPoint and the operation of our Agency Business exposes us to a variety of additional risks that could materially and adversely affect our financial condition and results of operations.

The acquisition of NewPoint and the operation of our Agency Business has and will expose us to a variety of additional risks that could materially and adversely affect our financial condition and results of operations, including the following risks:

• an adverse change in our relationships with government sponsored entities (GSE’s) associated with agency mortgages (Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association and U.S.

Department of Housing and Urban Development) could adversely affect our ability to originate and service agency mortgage loans;

• we are subject to risk sharing requirements on some agency mortgage loans and associated loan losses could materially and adversely affect us;

• we are subject to liquidity requirements by the GSE’s and our failure to satisfy these requirements could materially and adversely affect our ability to operate our agency business;

• our Agency Business could be adversely impacted by GSE changes in prices they are willing to pay for mortgage loans, changes in loan servicing fees or changes in other GSE arrangements with us;

• terminations of servicing engagements or breaches of servicing agreements could have a material adverse effect on us;

• changes in the conservatorship of Fannie Mae and Freddie Mac or in any laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S.

federal government, could materially and adversely affect our agency business;

• our agency business will generally be operated through one or more of our taxable REIT subsidiaries and therefore will be subject to the limitations generally imposed on taxable REIT subsidiaries and will be subject to corporate income tax.

Risks Related to Conflicts of Interest

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The Advisor and its employees are subject to very limited restrictions on engaging in investment and investment management activities that are unrelated to us and compete with us.

The Advisor currently manages other investment programs that share similar investment objectives with us and target similar investments as us, including Franklin BSP Real Estate Debt, Inc.

(a non-traded REIT) and two private funds, and may in the future advise additional competing investment programs (together, the “Other Funds”).

Some investment opportunities that are suitable for the Other Funds.

Thus, the executive officers and real estate professionals of the Advisor could direct attractive investment

opportunities to other entities or investors, including the Other Funds.

currently manages other investment programs that share similar investment objectives with us and target similar investments as us, including Franklin BSP Real Estate Debt, Inc.

(a non-traded REIT) and three private funds, and the Advisor may in the future advise additional competing investment programs (together, the “Other Funds”).

Some investment opportunities that are suitable for the Other Funds are also suitable for us.

The executive officers and real estate professionals of the Advisor could direct attractive investment opportunities to other entities or investors, including the Other Funds.

In addition, we have in the past and expect in the future to engage in transactions with the Other Funds, including co-investment transactions, and these transactions may not be on terms as favorable as transactions with unaffiliated third parties.

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Termination of our Advisory Agreement without cause would be difficult and costly.

The Advisory Agreement

may be terminated each year without cause upon the affirmative vote of at least two-thirds of our independent directors, based upon a determination that (i) our Advisor’s performance is unsatisfactory and materially detrimental to us or (ii) the base management fee and annual incentive fee payable to our Advisor are not fair (provided that in this instance, our Advisor will be afforded the opportunity to renegotiate the management fee and incentive fees prior to termination).

The Advisory Agreement may be terminated each year without cause upon the affirmative vote of at least two-thirds of our independent directors, based upon a determination that (i) our Advisor’s performance is unsatisfactory and materially detrimental to us or (ii) the base management fee and annual incentive fee payable to our Advisor are not fair (provided that in this instance, our Advisor will be afforded the opportunity to renegotiate the management fee and incentive fees prior to termination).

We are required to provide our Advisor with 180 days prior notice of any such termination.

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federal income tax purposes commencing with our taxable year ended December 31, 2013.

We intend to continue to meet the requirements for qualification and taxation as a REIT, but we

cannot assure stockholders that we qualify as a REIT.

We intend to continue to meet the requirements for qualification and taxation as a REIT, but we cannot assure stockholders that we qualify as a REIT.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial and administrative interpretations exist.

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If the Internal Revenue Service (“IRS”) challenged our treatment of investments for purposes of the REIT asset and income tests, and if such a challenge were sustained, we could fail to qualify as a REIT.

• The fact that we own direct or indirect interests in an entity that will elect to be taxed as a REIT under the U.S.

• The fact that we own direct or indirect interests in an entity that has elected to be taxed as a REIT under the U.S.

federal income tax laws (a “Subsidiary REIT”), further complicates the application of the REIT requirements for us.

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Additionally, we may be subject to the prohibited transaction tax upon a disposition of real property.

Although a safe-harbor exception to prohibited transaction treatment is available, there can be no assurance that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business.

Although a safe-harbor exception to prohibited transaction treatment is available, there can be no assurance that we can comply with the safe harbor or

that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business.

It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through a TRS.

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Unless we qualified for relief under certain Internal Revenue Code cure provisions, such failures could cause us to fail to continue to qualify as a REIT.

If the OP fails to qualify as a partnership for U.S.

federal income tax purposes, we could fail to qualify as a REIT and suffer other adverse consequences.

We believe that our OP is organized and operated in a manner so as to be treated as a partnership and not an association or a publicly traded partnership taxable as a corporation for U.S.

federal income tax purposes.

As an entity taxed as a partnership, our OP is not subject to U.S.

federal income tax on its income.

Instead, each of the partners is allocated its share of our OP’s income.

No assurance can be provided, however, that the IRS will not challenge our OP’s status as a partnership for U.S.

federal income tax purposes or that a court would not sustain such a challenge.

If the IRS were successful in treating our OP as an association or publicly traded partnership taxable as a corporation for U.S.

federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, would cease to qualify as a REIT.

Also, the failure of the OP to qualify as a partnership would cause it to become subject to U.S.

federal corporate income tax, which would reduce significantly the amount of cash available for distribution to its partners, including us.

Changes to the U.S.

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Changes to the U.S.

federal income tax laws, including the possibility of major tax legislation, could have a material and adverse effect on us or our stockholders.

federal income tax laws could have a material and adverse effect on us or our stockholders.

We cannot predict whether, when, to what extent or with what effective dates new U.S.

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Risks Related to an Investment in Franklin BSP Realty Trust, Inc.

Public health crises have adversely impacted, and may in the future adversely impact, our business and the business of many of our borrowers.

Public health crises can have repercussions across domestic and global economies and financial markets.

For example, the COVID-19 pandemic resulted in many governmental authorities imposing significant restrictions on businesses and individuals that triggered economic consequences, including high unemployment, then high inflation, that resulted in challenging operating conditions for many businesses, particularly in the retail (including restaurants), office and hospitality sectors.

These actions directly and indirectly adversely affected the financing markets and resulted in margin calls from our lenders, which we satisfied.

The extent to which pandemics and similar health crises impact our or our borrowers’ operations will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the crises, treatment developments and government responses to the events.

The inability of our borrowers to meet their loan obligations and/or borrowers filing for bankruptcy protection as a result of these events would reduce our cash flows, which would impact our ability to pay dividends to our stockholders.

We may be unable to maintain or increase cash distributions over time, or may decide to reduce the amount of distributions for business reasons.

There are many factors that can affect the amount and timing of cash distributions to stockholders.

There are many factors that can affect the amount and timing of cash distributions to stockholders and our board of directors can decide to reduce or eliminate our cash distributions at any time and without prior notice to our stockholders.

The amount of cash available for distributions is affected by many factors, such as the cash provided by the Company's investments and obligations to repay indebtedness as well as many other variables.

There is no assurance that the Company will be able to pay or maintain the current level of distributions or that distributions will increase over time.

In certain prior periods, quarterly distributions have been in excess of our quarterly earnings.

In certain prior periods, including the last ten quarters, quarterly distributions have been in excess of our quarterly GAAP net income.

Distributions in excess of earnings decrease the book value per share of common stock.

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The Company may not have sufficient cash from operations to make a distribution required to qualify for or maintain our REIT status, which may materially adversely affect the value of our securities.

There is no assurance that the Company will be able to pay or maintain the current level of distributions or that distributions will increase over time.

Our business could suffer in the event our Advisor or any other party that provides us with services essential to our operations experiences system failures or cyber-incidents or a deficiency in cybersecurity.

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In addition, the risk of a cyber-incident, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

The rapid evolution and increased adoption of artificial intelligence technologies may also heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain, and mitigate.

Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted attacks and intrusions evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.

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“Cybersecurity” in this report.

Our use of or failure to adopt advancements in information technology, such as artificial intelligence, may hinder or prevent us from achieving strategic objectives or otherwise harm our business.

Our use of or inability to safely and effectively adopt and deliver new technological capabilities and enhancements in line with strategic objectives, including artificial intelligence, may put us at a competitive disadvantage, including by failure to achieve efficiencies achieved by our competitors, or by misusing such technologies in ways that result in operational disruptions, reputation damage or legal liability exposure.

Although our Advisor has adopted policies with respect to these risks, including related to the development, deployment and monitoring of artificial intelligence tools, we cannot be certain that such policies will be effective.

We are subject to risks from natural disasters such as earthquakes and severe weather, including as the result of global climate changes, which may result in damage to the properties securing our loans.

Natural disasters and severe weather such as earthquakes, tornadoes, hurricanes or floods may result in significant damage to the properties securing our loans or in which we invest.

In addition, our investments may be exposed to new or

increased risks and liabilities associated with global climate change, such as increased frequency or intensity of adverse weather and natural disasters, which could negatively impact our and our borrowers’ businesses and the value of the properties securing our loans or in which we invest.

In addition, our investments may be exposed to new or increased risks and liabilities associated with global climate change, such as increased frequency or intensity of adverse weather and natural disasters, which could negatively impact our and our borrowers’ businesses and the value of the properties securing our loans or in which we invest.

The extent of our or our borrowers' casualty losses and loss in operating income in connection with such events is a function of the severity of the event and the total amount of exposure in the affected area.

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We may be materially and adversely affected by our exposure to losses arising from natural disasters or severe weather, including those associated with global climate change.

In addition, global climate change concerns could result in additional legislation and regulatory requirements, including those associated with the transition to a low-carbon economy, which could increase expenses or otherwise adversely impact our business, results of operations and financial condition, or the business, results of operations and financial condition of our borrowers.

In addition, global climate change concerns could result in additional legislation and regulatory requirements which could increase expenses or otherwise adversely impact our business, results of operations and financial condition, or the business, results of operations and financial condition of our borrowers.

Risks Relating to Regulatory Matters

Failure to maintain certain qualifications and licenses could adversely affect our results of operations.

Current laws and regulations impose qualification and licensing obligations on our business, in addition to imposing requirements and restrictions affecting, among other things:

loan originations, interest rates, finance and other fees that we may charge, disclosures to borrowers, the terms of secured transactions, collection, repossession and claims handling procedures, personnel qualifications and other trade practices.

Our business is also subject to inspection by certain state regulatory authorities.

Any failure to comply with these requirements could result in a variety of consequences, including, but not limited to, the loss of the licensure required to originate, sell, or service loans, the inability to procure additional approvals or licenses, the inability to enforce our contracts, and administrative enforcement actions.

In addition, to maintain our status as an approved lender for Fannie Mae and Freddie Mac and as a HUD-approved mortgagee and issuer of Ginnie Mae securities, we are required to meet and maintain various eligibility criteria established by these entities, such as minimum net worth, operational liquidity and collateral requirements and compliance with reporting requirements.

We are required to originate loans and perform our loan servicing functions in accordance with the applicable program requirements and guidelines established by these agencies.

If we fail to comply with the requirements of any of these programs, the agencies may terminate or withdraw our licenses and approvals to participate in the GSE or HUD programs.

In addition, the agencies have the authority under their guidelines to terminate a lender’s authorization to sell loans to them and service their loans.

The loss of one or more of these approvals would have a material adverse impact on our operations and could result in further disqualification with other counterparties.

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.

What changed 10-K

Item 1A. Risk Factors