2 unchanged sentences
While we do not seek to avoid risk completely, we seek to assume risk that can be reasonably quantified from historical experience and to actively manage that risk, to earn sufficient returns to justify taking those risks and to maintain capital levels consistent with the risks we undertake.
−Removed: Many of these risks have become particularly heightened due to sustained inflation, rising mortgage rates, the Federal Reserve's monetary policy actions, and the COVID-19 pandemic.
+Added: Many of these risks have become particularly heightened due to sustained inflation, rising mortgage rates, the Federal Reserve's monetary policy actions, and market uncertainty from geopolitical risks.
Interest rate risk
30 unchanged sentences
We allocate the net duration by asset type based on the interest rate sensitivity.
−Removed: The following chart details information about our duration gap as of June 30, 2023.
+Added: The following chart details information about our duration gap as of September 30, 2023.
Duration (1)(2) Years
Agency RMBS 0.29
−Removed: Residential Investments (3) 4.30
−Removed: Hedges (2.01)
−Removed: Duration Gap 2.83
+Added: Hedges on Agency RMBS (0.29)
+Added: Agency RMBS subtotal —
+Added: Securitized Residential Mortgage Loans and Non-Agency RMBS 4.66
+Added: Hedges on securitized products (0.54)
+Added: Securitized product subtotal 4.12
+Added: Residential Mortgage Loans (3) 0.98
+Added: Hedges on Residential Mortgage Loans (0.80)
+Added: Residential Mortgage Loans subtotal 0.18
(1) Duration related to financing arrangements is netted within its respective line items.
(2) Duration does not include our investment in AG Arc LLC.
−Removed: (3) Residential Investments are inclusive of forward purchase commitments to acquire Non-Agency Loans and Agency-Eligible Loans as of June 30, 2023.
+Added: (3) Residential Mortgage Loans are inclusive of forward purchase commitments to acquire Non-Agency Loans and Agency-Eligible Loans as of September 30, 2023.
The following table quantifies the estimated percent change in GAAP equity, the fair value of our assets, and projected net interest income should interest rates go up or down instantaneously by 25, 50, and 75 basis points, assuming (i) the yield curves of the rate shocks will be parallel to each other and the current yield curve and (ii) all other market risk factors remain constant.
1 unchanged sentence
All changes in equity, assets, and income are measured as percentage changes from the GAAP equity, assets, and projected net interest income from our base interest rate scenario.
−Removed: The base interest rate scenario assumes spot and forward interest rates existing as of June 30, 2023.
+Added: The base interest rate scenario assumes spot and forward interest rates existing as of September 30, 2023.
Actual results could differ materially from these estimates.
2 unchanged sentences
Moreover, if different models were employed in the analysis, materially different projections could result.
−Removed: In addition, while the table below reflects the estimated impact of interest rate increases and decreases on a static portfolio as of June 30, 2023, our Manager may from time to time sell any of our investments as a part of the overall management of our investment portfolio.
+Added: In addition, while the table below reflects the estimated impact of interest rate increases and decreases on a static portfolio as of September 30, 2023, our Manager may from time to time sell any of our investments as a part of the overall management of our investment portfolio.
Change in Interest Rates (basis
12 unchanged sentences
(2) Does not include cash investments, which typically have overnight maturities and are not expected to change in value as interest rates change.
−Removed: (3) Changes in fair value as a percentage of GAAP equity and assets are inclusive of forward purchase commitments to acquire Non-Agency Loans and Agency-Eligible Loans as of June 30, 2023.
−Removed: (4) Interest income includes trades settled as of June 30, 2023.
+Added: (3) Changes in fair value as a percentage of GAAP equity and assets are inclusive of forward purchase commitments to acquire Non-Agency Loans and Agency-Eligible Loans as of September 30, 2023.
+Added: (4) Interest income includes trades settled as of September 30, 2023.
The information set forth in the interest rate sensitivity table above and all related disclosures constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.
4 unchanged sentences
Our Manager seeks to mitigate our liquidity risks by maintaining a prudent level of leverage, monitoring our liquidity position on a daily basis and maintaining a reasonable cushion of cash and unpledged real estate securities and loans in our portfolio in order to meet future margin calls.
−Removed: In addition, our Manager seeks to further mitigate our
−Removed: liquidity risk by (i) maintaining relationships with a carefully selected group of financing counterparties and (ii) monitoring the ongoing financial stability and future business plans of our financing counterparties.
+Added: In addition, our Manager seeks to further mitigate our liquidity risk by (i) maintaining relationships with a carefully selected group of financing counterparties and (ii) monitoring the ongoing financial stability and future business plans of our financing counterparties.
Liquidity risk – financing arrangements
26 unchanged sentences
and retroactive changes to building or similar codes.
−Removed: Decreases in property values could cause us to suffer losses and reduce the value of the collateral underlying our investment portfolio as well as the potential sale proceeds available to repay our loans in the event of a default.
+Added: Decreases in property values could cause us to suffer losses and reduce the value of the collateral underlying our investment portfolio as well as the potential sale proceeds available
+Added: to repay our loans in the event of a default.
In addition, substantial decreases in property values can increase the rate of strategic defaults by residential mortgage borrowers which can impact and create significant uncertainty in the recovery of principal and interest on our investments.
1 unchanged sentence
We seek to manage this risk through our Manager’s pre-acquisition due diligence process and, if available, through the use of non-recourse financing, which limits our exposure to credit losses to the specific pool of collateral which is the subject of the non-recourse financing.
−Removed: Our Manager’s pre-acquisition
−Removed: due diligence process includes the evaluation of, among other things, relative valuation, supply and demand trends, the shape of various yield curves, prepayment rates, delinquency and default rates, recovery of various sectors and vintage of collateral.
+Added: Our Manager’s pre-acquisition due diligence process includes the evaluation of, among other things, relative valuation, supply and demand trends, the shape of various yield curves, prepayment rates, delinquency and default rates, recovery of various sectors and vintage of collateral.
The potential effects of sustained inflation, rising mortgage rates, the Federal Reserve's monetary policy actions, and the ongoing COVID-19 pandemic may cause an increase in credit risk of our credit sensitive assets.
22 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.