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Our objective is to provide attractive risk-adjusted returns to our stockholders over the long-term, primarily through dividends and capital appreciation.
−Removed: During 2021, we determined to focus our investment activities primarily on acquiring and securitizing newly-originated residential mortgage loans within the growing non-agency segment of the housing market.
+Added: We focus our investment activities primarily on acquiring and securitizing newly-originated residential mortgage loans within the non-agency segment of the housing market.
We obtain our assets through Arc Home, LLC ("Arc Home"), our residential mortgage loan originator in which we own an approximate 44.6% interest, and through other third-party origination partners.
−Removed: We finance our acquired loans through various financing lines on a short-term basis and utilize Angelo, Gordon & Co., L.P.'s proprietary securitization platform to secure long-term, non-recourse, non-mark-to-market financing as market conditions permit.
+Added: We finance our acquired loans through various financing lines on a short-term basis and utilize Angelo, Gordon & Co., L.P.'s ("Angelo Gordon") proprietary securitization platform to secure long-term, non-recourse, non-mark-to-market financing as market conditions permit.
Through our ownership in Arc Home, we also have exposure to mortgage banking activities.
−Removed: Arc Home is a multi-channel licensed mortgage originator and servicer primarily engaged in the business of originating and selling residential mortgage loans while retaining the mortgage servicing rights associated with the loans that it originates.
+Added: Arc Home is a multi-channel licensed mortgage originator and servicer primarily engaged in the business of originating and selling residential mortgage loans while retaining the mortgage servicing rights associated with certain loans that it originates.
Our investment portfolio (which excludes our ownership in Arc Home) includes Residential Investments and Agency RMBS.
−Removed: Currently, our Residential Investments primarily consist of Non-QM Loans and GSE Non-Owner Occupied Loans.
−Removed: In addition to our Residential Investments, we may also invest in other types of residential mortgage loans and other mortgage related assets, which we collectively refer to as our target assets.
−Removed: As of December 31, 2021, the Company's investment portfolio consisted of the following:
+Added: Currently, our Residential Investments primarily consist of newly originated Non-Agency Loans and Agency-Eligible Loans, which we refer to as our target assets.
+Added: In addition, we may also invest in other types of residential mortgage loans and other mortgage related assets.
+Added: As of December 31, 2022, our investment portfolio consisted of the following:
Asset Class Description
−Removed: • Residential mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the Consumer Finance Protection Bureau.
−Removed: ◦ Non-QM Loans are either held directly by us or held indirectly through our investment in Mortgage Acquisition Trust I LLC ("MATT").
−Removed: ◦ Non-QM Loans held directly are included in the "Residential mortgage loans, at fair value" or the "Securitized residential mortgage loans, at fair value" line items on our consolidated balance sheets.
−Removed: ◦ Non-QM Loans held indirectly through MATT are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.
−Removed: ◦ Certain retained tranches from unconsolidated Non-QM Loan securitizations are included in the "Real estate securities, at fair value" line item on our consolidated balance sheets.
−Removed: GSE Non-Owner Occupied Loans
−Removed: • Residential mortgage loans that are underwritten in accordance with U.S.
−Removed: government-sponsored entity ("GSE") guidelines and are secured by investment properties.
−Removed: ◦ These investments are included in the "Residential mortgage loans, at fair value" line item on our consolidated balance sheets.
+Added: Target Assets
+Added: Non-Agency Loans (1)(2)
+Added: • Non-Agency Loans are loans that do not conform to the underwriting guidelines of a government-sponsored enterprise ("GSE").
+Added: Non-Agency Loans consist of Qualified mortgage loans ("QM Loans") and Non-Qualified mortgage loans ("Non-QM Loans").
+Added: QM Loans are residential mortgage loans that comply with the Ability-To-Repay rules and related guidelines of the Consumer Finance Protection Bureau ("CFPB").
+Added: Agency-Eligible Loans (1)
+Added: • Agency-Eligible Loans are loans that are underwritten in accordance with GSE guidelines and are primarily secured by investment properties, but are not guaranteed by a GSE.
+Added: Non-Agency Residential Mortgage-Backed Securities ("RMBS") (3)
+Added: • Non-Agency RMBS represent fixed- and floating-rate RMBS issued by entities other than U.S.
+Added: GSEs or agencies of the U.S.
+Added: The mortgage loan collateral consists of either Non-Agency Loans or Agency-Eligible Loans.
+Added: Other Residential Mortgage Related Assets
Re/Non-Performing Loans (1)(2)
−Removed: • Residential mortgage loans collateralized by a first lien mortgaged property.
−Removed: ◦ Re/Non-Performing Loans are primarily held through interests in certain consolidated trusts.
−Removed: These investments are included in the "Securitized residential mortgage loans, at fair value" line item on our consolidated balance sheets.
−Removed: ◦ Certain retained tranches from unconsolidated Re/Non-Performing Loan securitizations which we hold alongside other private funds under the management of Angelo Gordon are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.
+Added: • Performing, re-performing, and non-performing loans are residential mortgage loans collateralized by a first lien mortgaged property.
Land Related Financing (2)
• First mortgage loans originated to third-party land developers and home builders for purposes of the acquisition and horizontal development of land.
−Removed: ◦ These loans are held through our unconsolidated affiliates and are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.
+Added: Agency RMBS (3)
• Agency RMBS represent interests in pools of residential mortgage loans guaranteed by a GSE such as Fannie Mae or Freddie Mac, or an agency of the U.S.
Government such as Ginnie Mae.
−Removed: ◦ These investments are included in the "Real estate securities, at fair value" line item on our consolidated balance sheets.
+Added: (1) Loans held directly are included in the "Securitized residential mortgage loans, at fair value," the "Residential mortgage loans, at fair value," and the "Residential mortgage loans held for sale, at fair value" line items on our consolidated balance sheets.
+Added: (2) Investments held through our unconsolidated affiliates are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.
+Added: This includes certain retained tranches from unconsolidated Non-QM securitizations held indirectly through our investment in Mortgage Acquisition Trust I LLC ("MATT"), certain retained tranches from unconsolidated Re/Non-Performing Loan securitizations which we hold alongside other private funds under the management of Angelo Gordon, and Land Related Financing.
+Added: (3) Non-Agency RMBS, as well as Agency RMBS, are included in the "Real estate securities, at fair value" line item on our consolidated balance sheets
Our primary sources of income are net interest income from our investment portfolio, changes in the fair value of our investments, and income from our investment in Arc Home.
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Our Manager and Angelo Gordon
−Removed: We are externally managed by AG REIT Management, LLC (our "Manager"), a subsidiary of Angelo, Gordon & Co., L.P.
−Removed: ("Angelo Gordon"), pursuant to a management agreement.
+Added: We are externally managed by AG REIT Management, LLC (our "Manager"), a subsidiary of Angelo Gordon.
Pursuant to the terms of our management agreement, our Manager provides us with our management team, including our officers, along with appropriate support personnel.
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Our Manager has delegated to Angelo Gordon the overall responsibility with respect to our Manager’s day-to-day duties and obligations arising under our management agreement.
+Added: Angelo Gordon is a registered investment adviser under the Investment Advisers Act of 1940, as amended.
Through our relationship with our Manager, we benefit from the expertise and relationships that Angelo Gordon has established which provides us with resources to generate attractive risk-adjusted returns for our stockholders.
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Our financing strategy is designed to increase the size of our investment portfolio by borrowing against the fair value of the assets in our portfolio.
−Removed: When acquiring residential mortgage loans and other assets, we finance our investments using repurchase agreements or revolving facilities (collectively, "financing arrangements").
−Removed: Upon accumulating a targeted amount of residential mortgage loans, we finance these assets utilizing long-term, non-recourse, non-mark-to-market securitizations as market conditions permit.
−Removed: Repurchase agreements involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date and typically have a term 30 to 90 days.
+Added: When acquiring residential mortgage loans and other assets, we finance our investments using repurchase agreements or similar financing arrangements, which we refer to collectively as "financing arrangements." Upon accumulating a targeted amount of residential mortgage loans, we finance these assets utilizing long-term, non-recourse, non-mark-to-market securitizations as market conditions permit.
+Added: Repurchase agreements involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date.
The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." The size of the haircut reflects the perceived risk associated with the pledged asset.
Haircuts may change as our financing arrangements mature or roll and are sensitive to governmental regulations.
−Removed: Interest rates on borrowings are fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the borrowing at which time we may enter into a new borrowing arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty.
−Removed: We have also used revolving facilities, which are typically longer term in nature than repurchase agreements, to finance loans.
−Removed: Interest rates on these facilities are based on prevailing rates corresponding to the terms of the borrowings, and interest is paid on a monthly basis.
−Removed: Repurchase agreements and revolving facilities are generally mark-to-market with respect to margin calls and recourse to us.
+Added: Interest rates for our financing arrangements are determined based on prevailing rates (typically a spread over a base rate) corresponding to the terms of the borrowings, and interest is paid on a monthly basis or, for shorter term arrangements, at the end of the term.
+Added: Repurchase agreements typically have a term of up to one year for loans and a term of 30 to 90 days for securities.
+Added: Repurchase agreements are generally mark-to-market with respect to margin calls and recourse to us.
Our financing arrangements generally include customary representations, warranties, and covenants, but may also contain more restrictive supplemental terms and conditions.
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As of December 31, 2022, we are in compliance with all of our financial covenants.
−Removed: Subject to maintaining our qualification as a REIT and our Investment Company Act exemption, we may utilize derivative instruments in an effort to hedge the interest rate risk associated with the financing of our investment portfolio.
−Removed: Specifically, we may seek to hedge our exposure to potential interest rate mismatches between the interest we earn on our investments and our borrowing costs caused by fluctuations in short-term interest rates.
+Added: Subject to maintaining our qualification as a REIT and our Investment Company Act exemption, we utilize derivative instruments in an effort to hedge certain interest rate risk associated with the financing of our investment portfolio.
+Added: Specifically, we seek to hedge our exposure to potential interest rate mismatches between the interest we earn on our investments and our borrowing costs caused by fluctuations in short-term interest rates.
We may utilize interest rate swaps, swaption agreements, and other financial instruments such as short positions in to-be-announced securities.
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Investment policies
−Removed: We comply with investment policies and procedures and investment guidelines (our "Investment Policies") that are approved by our Board of Directors and implemented by our Manager.
+Added: We comply with investment policies and procedures and investment guidelines that are approved by our Board of Directors and implemented by our Manager.
Our Manager reports on our investment portfolio at each regularly scheduled meeting of our Board of Directors.
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Allocation policy
−Removed: Angelo Gordon has an investment allocation policy that governs the allocations of investment opportunities among itself and its clients, and this investment allocation policy also applies to our Manager and us.
+Added: Consistent with its duties as a registered investment adviser, Angelo Gordon has an investment allocation policy that governs the allocations of investment opportunities among itself and its clients, and this investment allocation policy also applies to our Manager and us.
Pursuant to this policy, Angelo Gordon and our Manager allocate investment opportunities among its clients in a manner which is fair and equitable over time and does not favor one client or group of clients.
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Our net income depends, in large part, on our ability to acquire assets at favorable spreads over our borrowing and hedging costs.
−Removed: In acquiring our investments, we compete with other REITs, specialty finance companies, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies, hedge funds, and other entities.
+Added: In acquiring our investments, we compete with other mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies, hedge funds, and other entities.
In addition, numerous REITs and specialty finance companies have similar asset acquisition objectives to ours.
These other REITs and specialty finance companies increase competition for the available supply of our target assets suitable for purchase.
−Removed: Many of our competitors are significantly larger than we are, have access to greater capital and other resources and may have other advantages over us.
+Added: Many of our competitors are significantly larger than we are, have greater access to capital and other resources and may have other advantages over us.
+Added: Our competitors may include other entities managed by affiliates of our Manager.
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 investments and establish more relationships than we can.
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• Health insurance, paid time off and leave programs
+Added: • Bright Horizons back-up care program
• 401(k) plan
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We are committed to good corporate governance practices that strengthen alignment of interests with our stockholders.
−Removed: • 2/3 of our Board members are independent and our Board establishes a lead independent director.
+Added: • 2/3 of our Board members are independent and our Board has an independent, Non-Executive Chair.
• 33% of our Board members are female.
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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.