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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2026-02-20 compared with 2025-02-20 · 26 added, 36 removed, 121 unchanged (34% of the section changed)

29 unchanged sentences

While use of such derivatives does not extend the maturities of our borrowings under repurchase agreements, they do, in effect, lock in a fixed rate of interest over their term for a corresponding amount of our repurchase agreement financings that are hedged, or otherwise act as a hedge against changes in interest rates.

The information presented in the following “Shock Table” projects the potential impact of sudden parallel changes in interest rates on our portfolio value, including the impact of Swaps and securitized debt and other fixed rate debt, based on the assets in our investment portfolio at December 31, 2024 and 2023.

All changes in value are measured as the percentage change from the projected portfolio value under the base interest rate scenario at December 31, 2024 and 2023.

All changes in value are measured as the percentage change from the projected portfolio value under the base interest rate scenario as of December 31, 2025 and 2024.

December 31, 2025

Change in Interest Rates Change in Estimated Net Portfolio Value (1)(2)

Percentage Change in Net Portfolio Value

Percentage Change in Total Stockholders’ Equity

Percentage Change in Net Portfolio Value Percentage Change in Total Stockholders' Equity

(Dollars in Thousands)

1 unchanged sentence

+ 50 Basis Point Increase $ (75,763) (0.58) % (4.15) %

Actual at December 31, 2024 $ — — % — %

Actual as of December 31, 2025 $ — — % — %

- 50 Basis Point Decrease $ 52,179 0.40 % 2.85 %

2 unchanged sentences

Change in Interest Rates Change in Estimated Net Portfolio Value (1)(2)

Percentage Change in Net Portfolio Value

Percentage Change in Total Stockholders’ Equity

Percentage Change in Net Portfolio Value Percentage Change in Total Stockholders' Equity

(Dollars in Thousands)

1 unchanged sentence

+ 50 Basis Point Increase $ (65,291) (0.57) % (3.54) %

Actual at December 31, 2023 $ — — % — %

Actual as of December 31, 2024 $ — — % — %

- 50 Basis Point Decrease $ 50,113 0.44 % 2.72 %

1 unchanged sentence

(1) Assets in our portfolio include residential whole loans and REO, securities, other portfolio investments, goodwill, intangibles, receivables, and cash and cash equivalents and restricted cash.

(2) Change in estimated net portfolio value includes the effect of our interest rate swaps, securitized debt, and other fixed rate debt.

(2) Change in estimated net portfolio value includes the effect of our Swaps, securitized debt, and other fixed rate debt.

Certain assumptions have been made in connection with the calculation of the information set forth in the Shock Table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes.

The base interest rate scenario assumes interest rates at December 31, 2024 and 2023.

The base interest rate scenario assumes interest rates as of December 31, 2025 and 2024.

The analysis presented utilizes assumptions and estimates based on management’s judgment and experience.

4 unchanged sentences

The Shock Table presents the estimated impact of interest rates instantaneously rising 50 and 100 basis points, and falling 50 and 100 basis points.

At December 31, 2024, the impact on portfolio value was approximated using estimated net effective duration (i.e., the price sensitivity to changes in interest rates), including the effect of securitized and other fixed rate debt, of 1.02, which is the weighted average of 3.48 for our Residential whole loans, 3.72 for our Securities investments, (2.66) for our derivative and other hedging transactions and securitized and other fixed rate debt, and 0.00 for our Other assets and cash and cash equivalents.

As of December 31, 2025, the impact on portfolio value was approximated using estimated net effective duration (i.e., the price sensitivity to changes in interest rates), including the effect of securitized and other fixed rate debt, of 0.98, which is the weighted average of 3.23 for our Residential whole loans, 3.32 for our Securities investments, (2.49) for our derivative and other hedging transactions and securitized and other fixed rate debt, and zero for our Other assets and cash and cash equivalents.

Estimated convexity (i.e., the approximate change in duration relative to the change in interest rates) of the portfolio was (0.72), which is the weighted average of (0.32) for our Residential whole loans, zero for our derivative and other hedging transactions and securitized and other fixed rate debt, (1.97) for our Securities and zero for our Other assets and cash and cash equivalents.

At December 31, 2023, the impact on portfolio value was approximated using estimated net effective duration (i.e., the price sensitivity to changes in interest rates), including the effect of securitized and other fixed rate debt, of 0.91, which is the weighted average of 3.36 for our Residential whole loans, 2.45 for our Securities investments, (2.70) for our derivative and other hedging transactions and securitized and other fixed rate debt, and 0.01 for our Other assets and cash and cash equivalents.

As of December 31, 2024, the impact on portfolio value was approximated using estimated net effective duration (i.e., the price sensitivity to changes in interest rates), including the effect of securitized and other fixed rate debt, of 1.02, which is the weighted average of 3.48 for our Residential whole loans, 3.72 for our Securities investments, (2.66) for our derivative and other hedging transactions and securitized and other fixed rate debt, and zero for our Other assets and cash and cash equivalents.

Estimated convexity (i.e., the approximate change in duration relative to the change in interest rates) of the portfolio was (0.53), which is the weighted average of (0.53) for our Residential whole loans, zero for our derivative and other hedging transactions and securitized and other fixed rate debt, (0.93) for our Securities investments, and zero for our Other assets and cash and cash equivalents.

12 unchanged sentences

To the extent that delinquencies and defaults on these loans are higher than our expectation at the time the loans were purchased, the discounted purchase price at which the asset is acquired is intended to provide a level of protection against financial loss.

The following table presents certain information about our Residential whole loans at December 31, 2024:

Single-family transitional loans

Multifamily transitional loans

Single-family rental loans

Legacy RPL/NPL loans

The following table presents certain information about our Residential whole loans as of December 31, 2025:

Non-QM loans Single-family rental loans Single-family transitional loans Multifamily transitional loans Legacy RPL/NPL loans

Loans with an LTV:

4 unchanged sentences

(Dollars in Thousands) 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80% 80% or Below Above 80%

Amortized cost $ 1,028,009 $ 80,179 $ 922,736 $ 55,326 $ 1,400,054 $ 23,277 $ 4,297,995 $ 223,090 $ 881,384 $ 119,911

Amortized cost basis $ 5,207,703 $ 249,274 $ 1,240,640 $ 11,538 $ 680,933 $ 55,803 $ 510,591 $ 25,785 $ 794,943 $ 103,850

Unpaid principal balance (UPB) $ 5,077,245 $ 245,076 $ 1,235,000 $ 11,746 $ 677,325 $ 54,735 $ 506,504 $ 25,300 $ 934,549 $ 163,149

5 unchanged sentences

Loans 90+ days delinquent UPB $ 161,231 $ 13,942 $ 20,546 $ 6,685 $ 56,982 $ 24,564 $ 51,708 $ 2,982 $ 132,832 $ 33,799

$ 69,044 $ 30,963 $ 53,613 $ 32,011 $ 29,872 $ 19,415 $ 103,638 $ 15,202 $ 165,673 $ 50,587

(1) Weighted average is calculated based on the interest bearing principal balance of each loan within the related category.

4 unchanged sentences

For certain Single-family transitional loans, totaling $270.9 million, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation.

The LTV of these loans based on the current unpaid principal balance and the valuation obtained during underwriting, is 73%.

The LTV of these loans.

based on the current unpaid principal balance and the valuation obtained during underwriting, is 78%.

For certain Multifamily transitional loans, totaling $121.1 million, an after repaired valuation was not obtained and the loan was underwritten based on an “as is” valuation.

1 unchanged sentence

Excluded from the calculation of weighted average LTV are certain low value loans secured by vacant lots for which the LTV ratio is not meaningful.

The following table presents the five largest geographic concentrations by state of certain of our residential whole loan portfolio and in total at December 31, 2024:

Business purpose loans Non-QM loans Legacy RPL/NPL loans All Loans

The following table presents the five largest geographic concentrations by state of certain of our residential whole loan portfolio and in total as of December 31, 2025:

Non-QM loans Business purpose loans Legacy RPL/NPL loans All Loans

Rank State Percent of UPB

2 unchanged sentences

State Percent of UPB

1 FL 11.4% CA 48.3% CA 22.1% CA 27.5%

2 TX 10.8% FL 17.5% NY 16.4% FL 13.7%

3 GA 9.0% TX 5.2% FL 7.4% TX 7.0%

4 NY 6.4% AZ 3.1% NJ 7.1% NY 5.4%

5 NC 5.9% WA 2.5% MD 5.1% GA 4.5%

1 CA 44.9% FL 11.7% CA 22.7% CA 30.3%

2 FL 17.8% TX 9.4% NY 16.2% FL 14.7%

3 TX 5.3% GA 9.3% FL 7.3% TX 6.1%

4 AZ 3.1% NC 6.3% NJ 6.8% NY 4.5%

5 GA 2.3% OH 5.3% MD 5.1% GA 4.2%

CRT Securities

3 unchanged sentences

We assess the credit risk associated with our investments in CRT securities by assessing the current and expected future performance of the associated loan pool.

Term Notes Backed by MSR Collateral

We have invested in certain term notes that are issued by special purpose vehicles (or SPVs) that have acquired rights to receive cash flows representing the servicing fees and/or excess servicing spread associated with certain MSRs.

Payment of principal and interest on these term notes is considered by us to be largely dependent on the cash flows generated by the underlying MSRs as this impacts the cash flows available to the SPV that issued the term notes.

Credit risk borne by the holders of the term notes is also mitigated by structural credit support in the form of over-collateralization.

In addition, credit support is also provided by a corporate guarantee from the ultimate parent or sponsor of the SPV that is intended to provide for payment of interest and principal to the holders of the term notes if cash flows generated by the underlying MSRs are insufficient.

Credit Spread Risk

8 unchanged sentences

We pledge residential mortgage assets and cash to secure our financing agreements.

Our financing agreements with mark-to-market collateral provisions require us to pledge additional collateral in the event the market value of the assets pledged decreases, in order to maintain the lenders contractually specified collateral cushion, which is measured as the difference between the loan amount and the market value of the asset pledged as collateral.

Our financing agreements with mark-to-market collateral provisions require us to pledge additional collateral in the event the market value of the assets pledged decreases, in order to maintain the lenders’ contractually specified collateral cushion, which is measured as the difference between the amount borrowed and the market value of the asset pledged as collateral.

Should the value of our residential mortgage assets pledged as collateral suddenly decrease, margin calls under our repurchase agreements would likely increase, causing an adverse change in our liquidity position.

1 unchanged sentence

Further, when liquidity tightens, our repurchase agreement counterparties may increase our collateral cushion (or margin) requirements on new financings, including repurchase agreement borrowings that we roll with the same counterparty, reducing our ability to use leverage.

At December 31, 2024, we had access to various sources of liquidity, including $338.9 million of cash and cash equivalents.

As of December 31, 2025, we had access to various sources of liquidity, including $213.2 million of cash and cash equivalents.

Our sources of liquidity do not include restricted cash.

In addition, at December 31, 2024, we had unencumbered residential whole loans and Agency MBS of $87.8 million and $75.0 million, respectively.

In addition, as of December 31, 2025, we had unencumbered residential whole loans and Agency MBS of $55.7 million and $218.6 million, respectively.

PREPAYMENT RISK

Premiums arise when we acquire an MBS or loan at a price in excess of their unpaid principal balance.

Conversely, discounts arise when we acquire an MBS or loan at a price below below their unpaid principal balance.

Conversely, discounts arise when we acquire an MBS or loan at a price below their unpaid principal balance.

Premiums paid are amortized against interest income and accretable purchase discounts on these investments are accreted to interest income.

6 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.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk