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• We may be adversely affected by risks affecting borrowers or the asset or property types in which our investments may be concentrated at any given time, as well as from climate change or other unfavorable changes in the related geographic regions.
−Removed: • Climate change, climate change-related initiatives and regulation and environmental, social and governance (ESG) issues, may adversely affect our business and financial results and damage our reputation.
+Added: • Climate change, climate change-related initiatives and regulation and sustainability-related issues, may adversely affect our business and financial results and damage our reputation.
• Cybersecurity risks may cause a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our business.
3 unchanged sentences
• An economic slowdown or a deterioration of the housing market could negatively impact Arc Home's lending and servicing businesses.
+Added: • We may utilize artificial intelligence, which could expose us to liability and affect our business.
Risks Related to our Investments
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Our investment strategy is focused on acquiring and securitizing newly-originated residential mortgage loans.
−Removed: Our ability to successfully execute this strategy, grow our business, and achieve attractive risk-adjusted returns for our stockholders are dependent upon our Manager's ability to source, acquire and finance on our behalf a large volume of desirable residential mortgage loans and other target assets on attractive terms, and our Manager may be unable to do so for many reasons.
+Added: Our ability to successfully execute this strategy, grow our business, and achieve attractive risk-adjusted returns for our stockholders is dependent upon our Manager's ability to source, acquire and finance on our behalf a large volume of desirable residential mortgage loans and other target assets on attractive terms, and our Manager may be unable to do so for many reasons.
We derive a portion of our residential mortgage loans through Arc Home.
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Such acts of war may cause widespread and lingering damage on a global scale, including, but not limited to, (i) safety and cybersecurity, (ii) the economy, and (iii) global relations.
−Removed: The wars between Russia and Ukraine and the Middle East conflict have and will continue to result in instability and adversely affect the global economy or specific markets.
−Removed: In addition, these geopolitical tensions can cause an increase in volatility in commodity and energy prices, creating supply chain issues, and causing instability in financial markets.
−Removed: Sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others, could exacerbate market and economic instability.
−Removed: Further, Russia has launched an onslaught of cyberwarfare against Ukraine as part of its ongoing invasion, targeting the country’s critical infrastructure, government agencies, media organizations, and related think tanks in the U.S.
−Removed: federal government has cautioned Americans on the possibility of Russia targeting the U.S.
−Removed: with cyber attacks in retaliation for sanctions that the U.S.
−Removed: has imposed and has urged both the public and private sectors to strengthen their cyber defenses and protect critical services and infrastructure.
−Removed: Additionally, President Biden directed government bodies to mandate cybersecurity and network defense measures within their respective jurisdictions and has initiated action plans to reinforce cybersecurity within the electricity, pipeline, and water sectors.
−Removed: The Biden administration also launched joint efforts with Cybersecurity and Infrastructure Security Agency (CISA) through its “Shields Up” campaign to defend the U.S.
−Removed: against possible cyber attacks.
−Removed: CISA published advisories warning of Russian state-sponsored threat actors targeting “COVID-19 research, governments, election organizations, healthcare and pharmaceutical, defense, energy, video gaming, nuclear, commercial facilities, water, aviation, and critical manufacturing” sectors in the U.S.
−Removed: and other Western nations.
−Removed: While we have not experienced such cyber attacks and have not detected activity that would indicate a planned cyber attack, to date, it is yet unknown whether Russia would be successful in breaching our network defenses or, more broadly, those within the areas listed above, which, if successful, may cause disruptions to critical infrastructure required for our operations and livelihoods, or those of borrowers of our loans or underlying our investments and service providers.
Disruption, instability, volatility, and decline in economic activity, regardless of where it occurs, whether caused by acts of war, other acts of aggression, or terrorism, could in turn also cause higher interest rates, inflation, tariffs or general economic uncertainty, which could negatively impact borrowers of our loans or underlying our investments , service providers, or otherwise adversely impact the value of our assets .
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In some cases, these claims may lead to losses exceeding the purchase price of the related mortgage or property.
+Added: Enhanced Second Lien Loan Risks .
+Added: A majority of our residential loan portfolio is comprised of Home Equity Loans, which are primarily secured by a second lien on a residential property and as a result, generally entail greater risk than residential mortgage loans where are in the first lien position.
+Added: Additional risks for Home Equity Loans include lien perfection deficiencies and the inherent risk that the borrower may draw on the lines in excess of their collateral value, particularly in a deteriorating real estate market.
+Added: Home Equity Loans are also more susceptible to deterioration in residential real estate values and we are less likely to be successful in recovering all of our loan proceeds in the event of default.
+Added: See the Risk Factor captioned “— Risks Related to our Investments — We invest in Home Equity Loans and may invest in other second lien mortgage loans, which expose us to an increased risk of loss” in this Annual Report for more details.
Enhanced Non-QM Loan Risks .
−Removed: The majority of our residential loan portfolio is comprised of Non-QM Loans.
−Removed: Non-QM Loans are generally loans to finance (or refinance) one- to four-family residential properties that are not considered to meet the definition of a "Qualified Mortgage" in accordance with guidelines adopted by the Consumer Financial Protection Bureau, or CFPB, and may be considered to be lower credit quality.
+Added: A significant portion of our residential loan portfolio is comprised of Non-QM Loans.
+Added: Non-QM Loans are generally loans to finance (or refinance) one- to four-family residential properties that are not considered to meet the definition of a "Qualified Mortgage" in accordance with guidelines adopted by the Consumer Financial Protection
+Added: Bureau, or CFPB, and may be considered to be lower credit quality.
The ownership of Non-QM Loans will also subject us to legal, regulatory and other risks, including those arising under federal consumer protection laws and regulations designed to regulate residential mortgage loan underwriting and originators’ lending processes, standards, and disclosures to borrowers.
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Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and related laws and regulations relating to credit risk retention for securitizations (the "Risk Retention Rules"), when we sponsor a residential mortgage loan securitization, we are required to retain at least 5% of the fair value of the mortgage-backed securities issued in the securitization.
−Removed: We may also co-sponsor a securitization where we are the party obligated to comply with the Risk Retention Rules.
+Added: We may also co-sponsor a securitization where we believe we are the party obligated to comply with the Risk Retention Rules.
+Added: Our process for ensuring we comply with the Risk Retention Rules applicable to securitizations we sponsor or co-sponsor may not correctly identify loans that do not meet the applicable criteria, including due to data entry or calculation errors during the review of these criteria for specific loans or due to errors in our interpretation of these requirements.
+Added: In addition, we may face regulatory scrutiny regarding whether we are the appropriate party to comply with the Risk Retention Rules.
+Added: Failure to comply with the Risk Retention Rules could expose us to losses, including, for example, as a result of a requirement to repurchase securitized loans or assets that did not meet these criteria, regulatory enforcement actions and/or reputational damages.
We can retain either an “eligible vertical interest” (which consists of at least 5% of each class of securities issued in the securitization), an “eligible horizontal residual interest” (which is the most subordinate class of securities with a fair value of at least 5% of the aggregate credit risk) or a combination of both totaling 5% (the "Required Credit Risk").
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If we pledge our interest in Required Credit Risk as collateral on financing that is full recourse to us, which we generally seek to do, and the lender takes possession of the underlying collateral, we may not be in compliance with the Risk Retention Rules and it is uncertain as to what the consequences may be.
−Removed: Our Required Credit Risk could subject us to the first losses on our securitizations and is illiquid, which may make it more difficult to meet our liquidity needs, which may materially and adversely affect our business and financing condition.
+Added: Our Required Credit Risk could subject us to the first losses on our securitizations and is illiquid, which may make it more difficult to meet our liquidity needs, which may materially and adversely affect our business and financing
Thus, the Risk Retention Rules materially limit our ability to sell and hedge a portion of our RMBS that we acquire through our securitizations and subjects us to the credit risk related to the retained RMBS that we otherwise may have sold.
+Added: In addition, in certain cases, we have and may also in the future covenant to retain an interest, and to take certain other action, with respect to such securitizations for purposes of the EU/UK Securitization Rules, which subjects us to certain risks, including risks similar to those that arise under the U.S.
+Added: Risk Retention Rules.
Additional risks include:
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Our profitability depends, in large part, on our ability to acquire our target assets at favorable prices.
−Removed: Although we expect to acquire a portion of our loans from our mortgage originator, Arc Home, in which we own a 44.6% interest, Arc Home has no obligation to sell residential mortgage loans and other target assets to us.
+Added: Although we expect to acquire a portion of our loans from our mortgage originator, Arc Home, in which we own an approximate 66.0% interest, Arc Home has no obligation to sell residential mortgage loans and other target assets to us.
In addition, residential mortgage loans originated by Arc Home are generally allocated among us and other funds managed by affiliates of our Manager with substantially similar investment strategies to us.
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In particular, the outbreak or spread of any highly infectious or contagious disease may impact our financing strategy and liquidity.
−Removed: We finance many of the mortgage loans and real estate related securities we acquire with borrowings under
−Removed: repurchase facilities and other financing arrangements and, as market conditions permit, refinance these assets through securitization transactions.
+Added: We finance many of the mortgage loans and real estate related securities we acquire with borrowings under repurchase facilities and other financing arrangements and, as market conditions permit, refinance these assets through securitization transactions.
If as a result of an outbreak or pandemic, the financing markets were to experience another period of extreme volatility and illiquidity, we may be forced to sell our mortgage loans, real estate related securities and other assets that secure our repurchase facilities and other financing arrangements on less favorable terms to us than might otherwise be available in a regularly functioning market and such actions could result in deficiency judgments and other claims against us.
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An investment in such assets will generally decline in value if interest rates increase, particularly long-term interest rates.
−Removed: Declines in market value may ultimately reduce earnings or result in losses to us, which may negatively affect cash available for distribution to our stockholders.
+Added: Declines in market value may
+Added: ultimately reduce earnings or result in losses to us, which may negatively affect cash available for distribution to our stockholders.
The relationship between short-term and longer-term interest rates is often referred to as the "yield curve." Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.
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In addition, adverse economic conditions in the areas where the properties securing or otherwise underlying our investments are located (including business layoffs or downsizing, industry slowdowns, changing demographics and other factors) and local real estate conditions (such as oversupply or reduced demand) may have an adverse effect on the value of our investments.
−Removed: Moreover, a geographic concentration of our investments in an area which has been or may become adversely impacted by climate change (including flooding, drought, wildfire, tornados, and other severe weather) may negatively impact the performance of those investments.
+Added: Moreover, a geographic concentration of our investments in an area which has been or may become adversely impacted by climate change (including flooding, drought, wildfire, tornadoes, and other severe weather) may negatively impact the performance of those investments.
As of December 31, 2025, 30% of the total fair value of our residential mortgage loan portfolio was secured by properties located in California, which are particularly susceptible to natural disasters such as fires, earthquakes and mudslides.
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Further, the effects of climate change have made, and may continue to make, certain types of insurance, such as flood insurance, increasingly difficult and/or expensive to obtain in these and certain other areas.
−Removed: If potential homeowners are unable to obtain affordable homeowner insurance coverage in these areas, which became more widespread during 2024 and is expected to be exacerbated by the recent Los Angeles County wildfires, demand for real estate in these areas may be materially and adversely affected.
+Added: If potential homeowners are unable to obtain affordable homeowner insurance coverage in these areas, which has become more widespread in recent years and exacerbated
+Added: by climate events, such as the Los Angeles County wildfires in 2025, demand for real estate in these areas may be materially and adversely affected.
A material decline in the demand for and value of real estate in these areas may materially and adversely affect us.
Lack of diversification can further increase the correlation of non-performance and foreclosure risks among our investments.
−Removed: Climate change, climate change-related initiatives and regulation and environmental, social and governance (ESG) issues, may adversely affect our business and financial results and damage our reputation.
+Added: Climate change, climate change-related initiatives and regulation and sustainability-related issues, may adversely affect our business and financial results and damage our reputation.
There has been and continues to be concern from advocacy groups and the general public over the effects of climate change on the environment.
Government mandates, standards and regulations enacted in response to these projected impacts of climate change could result in restrictions on land development in certain areas or increased energy, transportation and raw material costs.
−Removed: These concerns have also resulted in increasing governmental and societal attention to ESG matters, including attempts to expand mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, waste production, water usage, human capital, labor, and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess, and report.
−Removed: More recently, anti-ESG sentiment has gained momentum in the United States, with the Federal government and many states having enacted or proposed "anti-ESG" policies, legislation or issue related legal opinion.
+Added: These concerns have also resulted in increasing governmental and societal attention to sustainability matters, including attempts to expand mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, waste production, water usage, human capital, labor, and risk oversight, that could expand the nature, scope, and complexity of matters that we are required to control, assess, and report.
+Added: More recently, anti-ESG sentiment has gained momentum in the United States, with the Federal government and many states having enacted or proposed "anti-ESG" policies, legislation or issue related legal opinions.
These and other rapidly changing, and sometimes conflicting, laws, regulations, policies and related interpretations, as well as increased enforcement actions by various governmental and regulatory agencies, may create challenges for us, including our compliance and ethics programs, may alter the environment in which we do business and may increase the ongoing costs of compliance, which could adversely impact our results of operations and cash flows.
−Removed: If we are unable to adequately address such ESG matters or we fail or are perceived to fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.
−Removed: Further, significant physical effects of climate change including extreme weather events such as drought, wildfire, tornados, hurricanes or floods can also have an adverse impact on real estate assets that secure our residential mortgage loans.
+Added: If we are unable to adequately address such climate and sustainability matters or we fail or are perceived to fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.
+Added: Further, significant physical effects of climate change including extreme weather events such as drought, wildfire, tornadoes, hurricanes or floods can also have an adverse impact on real estate assets that secure our residential mortgage loans.
See "—We may be adversely affected by risks affecting borrowers or the asset or property types in which our investments may be concentrated at any given time, as well as from climate change or other unfavorable changes in the related geographic regions."
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System breaches in particular are evolving.
−Removed: Computer malware, viruses, computer hacking, phishing
−Removed: attacks, ransomware attacks, attacks enhanced or facilitated by artificial intelligence and other machine learning techniques, and other electronic security breaches have become more frequent and more sophisticated.
+Added: Computer malware, viruses, computer hacking, phishing attacks, ransomware attacks, attacks enhanced or facilitated by artificial intelligence and other machine learning techniques, and other electronic security breaches have become more frequent and more sophisticated.
The result of these incidents may include disrupted operations, delays or other problems in our securities trading activities, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our investor relationships and reputation, any or all of which could have a material adverse effect on our results of operations and cash flows and negatively affect the market price of our common stock and our ability to make distributions to our stockholders.
−Removed: As our reliance on technology has increased, so have the risks posed to our information systems, including those provided by the Manager and third-party service providers (including, without limitation, affiliates and third parties with which we and our Manager do business, such as Arc Home and other mortgage originators, due diligence firms, pricing vendors and servicers, or that facilitate our business activities, including clearing agents or other financial intermediaries we use to facilitate our securitization transactions).
+Added: As our reliance on technology has increased, so have the risks posed to our information systems, including those provided by the Manager and third-party service providers (including, without limitation, affiliates and third parties with which we and our Manager do business, such as Arc Home and other mortgage originators, due diligence firms, pricing vendors and servicers, or that facilitate our business activities, including clearing agents or other financial intermediaries we use to facilitate our securitization transactions, valuation firms and law firms).
If such parties' respective systems experience failure, interruption, cyber-attacks, or security breaches, we may in turn face risks of operational failure, termination or capacity constraints.
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Our Manager, its affiliates and third-party service providers have experienced and are and will continue to be from time to time the target of attempted cyber attacks, breaches and other security threats.
−Removed: We rely on our Manager to continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact, and our Manager's ability to monitor our service providers' information systems may be limited or more difficult because our Manager may not have direct access.
+Added: We rely on our Manager to continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized
+Added: access, misuse, computer viruses and other events that could have a security impact, and our Manager's ability to monitor our service providers' information systems may be limited or more difficult because our Manager may not have direct access.
There is no guarantee that these efforts, or similar efforts by affiliates of our Manager and third-party service providers, will be successful.
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The servicer has a fiduciary obligation to act in the best interest of the securitization trust, but significant latitude exists with respect to its servicing activities.
−Removed: The servicer also has a contractual obligation to obey all laws and regulations (including federal, state, and local laws and regulations) and to act in accordance with applicable servicing
+Added: The servicer also has a contractual obligation to obey all laws and regulations (including federal, state, and local laws and regulations) and to act in accordance with applicable servicing standards;
however, as we do not control these servicers, we cannot be sure that they are acting in accordance with their contractual and legal obligations or applicable law.
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Any such servicing failures and resulting delinquencies or losses may impact the value of the RMBS, mortgage loans or MSRs, and we may incur losses on our investment.
−Removed: If a third-party servicer fails to perform its contractual duties to us, this may result in fines or adverse action from a regulatory authority if the ownership of loans is tied to the servicing of those loans.
Transfer of Servicing .
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In addition, many loan servicing activities are not permitted to be done through a remote work setting.
−Removed: To the extent that shelter-in-place orders and remote work arrangements for non-essential businesses continue in the future, loan servicers may be materially adversely impacted.
+Added: To the extent that shelter-in-place orders and remote work arrangements for non-essential businesses
+Added: continue in the future, loan servicers may be materially adversely impacted.
As a result, we could be materially and adversely affected if a mortgage servicer is unable to adequately or successfully service our residential mortgage loans and the loans that underlie our RMBS or if any such servicer experiences financial distress.
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Arc Home is subject to extensive licensing requirements and regulation, which could materially and adversely affect us.
−Removed: Arc Home's lending and servicing business activities is subject to extensive regulation by federal, state and local governmental and regulatory authorities, including the CFPB, the Federal Trade Commission, the U.S.
+Added: Arc Home's lending and servicing business activities are subject to extensive regulation by federal, state and local governmental and regulatory authorities, including the CFPB, the Federal Trade Commission, the U.S.
Department of Housing and Urban Development, the U.S.
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Adverse economic conditions or a deterioration of the housing market could negatively impact Arc Home's lending businesses.
−Removed: For example, since 2022 following the Federal Reserve's rapid interest rate hikes, total U.S.
−Removed: residential mortgage originations volume, including origination volumes at Arc Home, decreased substantially and has continued to remain low as interest rates continued to rise in 2023.
−Removed: While there were modest interest rate decreases in 2024 and volume origination has been increasing, the Federal Reserve could determine to leave rates at current levels or even increase rates further should inflation become elevated.
+Added: For example, in 2022, following the Federal Reserve's rapid interest rate hikes, total U.S.
+Added: residential mortgage origination volume, including origination volume at Arc Home, decreased substantially and remained low as interest rates continued to rise in 2023.
+Added: While there were modest interest rate decreases in 2024 and 2025 and origination volume has been increasing, the Federal Reserve could determine to leave rates at current levels or even increase rates further should inflation become elevated.
Moreover, adverse economic conditions accompanied by declining home prices generally reduce the level of new mortgage loan originations and refinancing activity, since borrowers often use increases in the value of their existing properties to support the purchase of, or investment in, additional properties.
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We are required to comply with numerous federal and state laws.
−Removed: The laws, rules and regulations
−Removed: comprising this regulatory framework change frequently, as can the interpretation and enforcement of existing laws, rules, and regulations.
+Added: The laws, rules and regulations comprising this regulatory framework change frequently, as can the interpretation and enforcement of existing laws, rules, and regulations.
We may receive requests from federal and state agencies for records, documents, and information regarding our policies, procedures, and practices regarding our business activities.
We may incur significant ongoing costs to comply with these government regulations.
−Removed: These requirements can and do change as statutes and regulations are enacted, promulgated, amended, and interpreted, and the recent trends among federal and state lawmakers and regulators have been toward increasing laws, regulations, and investigative proceedings concerning the mortgage industry generally;
−Removed: however, the current administration may implement changes in regulatory oversight.
+Added: These requirements can and do change as statutes and regulations are enacted, promulgated, amended, and interpreted, and trends among federal and state lawmakers and regulators historically have been toward increasing laws, regulations, and investigative proceedings concerning the mortgage industry generally;
+Added: however, the current administration has sought to and may implement changes in regulatory oversight.
The implications and any actual changes to current regulatory processes are currently unknown.
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Congress to pass spending bills or address the debt ceiling at any point in the future would increase the risk of default by the U.S.
−Removed: on its obligations, the risk of a lowering of the U.S.
+Added: on its obligations, the risk of a lowering of the
federal government's credit rating, and the risk of other economic dislocations.
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and globally.
−Removed: Twice in the past decade, by the appropriations legislation deadline Congress failed to pass a new appropriations bill or continuing resolution to temporarily extend funding, resulting in U.S.
+Added: For several times in the past decade, including as recently as October 2025, by the appropriations legislation deadline Congress failed to pass a new appropriations bill or continuing resolution to temporarily extend funding, resulting in U.S.
government shutdowns that caused federal agencies to halt non-essential operations.
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These risks may also impact our overall liquidity, our borrowing costs, or the market price of our common stock.
−Removed: We have incurred, and may continue to incur, direct and indirect costs as a result of the WMC acquisition.
−Removed: We incurred substantial expenses in connection with and as a result of completing the WMC acquisition, and we may incur additional expenses resulting from combining the businesses, operations, policies and procedures of the two companies, including expenses related to litigation that may result in significant costs and divert management's attention and resources.
−Removed: Factors beyond our control could affect the total amount or timing of these expenses, many of which, by their nature, are difficult to estimate accurately.
+Added: Future acquisitions or strategic investments could be difficult to identify and integrate with our business, disrupt our business, and adversely affect our financial condition and results of operations.
+Added: We may seek to acquire or invest in businesses and asset classes that we believe could complement or expand our investment strategy or otherwise offer growth opportunities.
+Added: The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not the acquisitions are completed.
+Added: Certain of our acquisitions have and future acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our financial position and results of operations.
+Added: In addition, if an acquired business or portfolio fails to meet our performance expectations, our business, financial condition, and results of operations may be adversely affected.
+Added: If we are unable to successfully integrate acquisitions into our business, we may never realize their expected benefits.
+Added: With each acquisition, we may discover unexpected costs, liabilities for which we are not indemnified, delays, lower than expected cost savings or synergies, or incurrence of other significant charges such as impairment of goodwill or other intangible assets and asset devaluation.
+Added: Our Manager also may be unable to successfully integrate company cultures, retain key personnel, apply its expertise to new competencies, or react to adverse changes in industry conditions.
+Added: We may utilize artificial intelligence, which could expose us to liability and affect our business.
+Added: We use, or may in the future use, artificial intelligence, generative artificial intelligence, machine learning and similar tools and technologies (collectively, “AI”) in connection with our business.
+Added: In addition, Arc Home and certain of our third party service providers use, or may in the future use, AI.
+Added: The use of AI is still a relatively new and emerging technology, and the introduction and incorporation of AI by us, Arc Home or our third party service providers may expose us to additional risks, such as damage to our reputation, competitive position, and business, legal and regulatory risks and additional costs.
+Added: For example, AI algorithms and machine learning methods may contain flaws, raising ethical and legal concerns, such as unintentional bias in credit decisions.
+Added: Additionally, the complexity and fast-paced evolution of AI present significant challenges, especially as we and Arc Home compete with other companies in our respective spaces.
+Added: We may not always succeed in identifying or resolving problems before they emerge.
+Added: AI-related challenges, including potential government regulations, flaws, or other deficiencies, could further complicate our efforts and adversely affect our business.
Risks Related to our Investments
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These rules generally focus on consumer protection and include, among others, rules promulgated under the Dodd-Frank Act, the Truth in Lending Act of 1968 (“Truth-in-Lending Act”), the Gramm-Leach-Bliley Financial Modernization Act of 1999 (“Gramm-Leach-Bliley”).
−Removed: The Dodd-Frank
−Removed: Act grants enforcement authority and broad discretionary regulatory authority to the CFPB to prohibit or condition terms, acts or practices relating to mortgage loans that the CFPB finds abusive, unfair, deceptive or predatory, as well as to take other actions that the CFPB finds are necessary or proper to ensure responsible affordable mortgage credit remains available to consumers.
+Added: The Dodd-Frank Act grants enforcement authority and broad discretionary regulatory authority to the CFPB to prohibit or condition terms, acts or practices relating to mortgage loans that the CFPB finds abusive, unfair, deceptive or predatory, as well as to take other
+Added: actions that the CFPB finds are necessary or proper to ensure responsible affordable mortgage credit remains available to consumers.
These laws and regulations include the "ability-to-repay" rules ("ATR Rules") under the Truth-in-Lending Act and "qualified mortgage" regulations.
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As a result, we are unable to fully predict at this time how these, or other laws or regulations that may be adopted in the future, will affect our business and the results of operations and financial condition.
−Removed: Recent trends among federal and state lawmakers and regulators have been toward increasing laws, regulations, and investigative procedures concerning the mortgage industry generally;
−Removed: however, the current administration may implement changes in regulatory oversight.
−Removed: While the implications and any actual changes to current regulatory regimes are currently unknown, such uncertainty may result in increasing the economic and compliance costs for participants in the mortgage origination and securitization industries, including us.
+Added: See "—Our business is subject to extensive regulation." While the implications and any actual changes to current regulatory regimes are currently unknown, such uncertainty may result in increasing the economic and compliance costs for participants in the mortgage origination and securitization industries, including us.
We invest in Agency-Eligible Loans, which expose us to an increased risk of loss.
2 unchanged sentences
If the property owner is unable to find or retain a tenant for the rental property, the property owner would cease to have a continuous rental income stream with respect to the property and, as a result, the property owner's ability to repay the loan on a timely basis or at all could be adversely affected.
−Removed: In addition, the physical condition of non-owner-occupied properties can be below that of owner-occupied properties due to lax property maintenance standards, which can have a negative impact on the value of the collateral
+Added: In addition, the physical condition of non-owner-occupied properties can be below that of owner-occupied properties due to lax property maintenance standards, which can have a negative impact on the value of the collateral properties.
Moreover, loans on non-owner-occupied residential properties generally involve larger principal amounts and a greater degree of risk than owner-occupied residential mortgage loans, resulting in a higher likelihood that we will be subject to losses on such investment property loans.
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Additionally, the principal and interest payments on Non-Agency RMBS are not guaranteed by any entity, including any government entity or GSE, and therefore are subject to increased risks, including credit risk.
−Removed: Our investments include Non-Agency RMBS which are backed by non-QM and other residential mortgage loans that are not issued or guaranteed by a GSE or the U.S.
+Added: Our investments include Non-Agency RMBS which are backed by non-QM, Home Equity and other residential mortgage loans that are not issued or guaranteed by a GSE or the U.S.
Within a securitization of residential mortgage loans, various securities are created, each of which has varying degrees of credit risk.
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A residential mortgage loan is typically secured by a single-family residential property and is subject to risks of delinquency and foreclosure and risk of loss.
+Added: The Home Equity Loans backing certain of our Non-Agency RMBS are primarily second lien loans and as a result risks of delinquency and foreclosure and risk of loss of such loans are heightened.
The ability of a borrower to repay a loan secured by a residential property is dependent upon the income or assets of the borrower.
A number of factors, including, but not limited to, a general economic downturn, unemployment, energy costs, acts of God, war or other geopolitical conflict, terrorism, inflation, social unrest and civil disturbances, may impair the borrower's ability to repay its mortgage loan.
−Removed: In addition, recent increases in mortgage rates have generally not led to lower housing costs (including due to a possible "lock-in" effect), which has led to significantly lower home affordability and thus adversely impacted the cost of owning a home, which could lead to an increase in defaults on the mortgage loans underlying many of our investments.
+Added: In addition, the current elevated mortgage rates have generally not led to lower housing costs (including due to a possible "lock-in" effect), which has led to significantly lower home affordability and thus adversely impacted the cost of owning a home, which could lead to an increase in defaults on the mortgage loans underlying many of our investments.
In periods following home price declines, "strategic defaults" (decisions by borrowers to default on their mortgage loans despite having the ability to pay) also may become more prevalent.
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Commercial real estate debt instruments (e.g., mortgages and mezzanine loans) that are secured by commercial property are subject to risks of delinquency and foreclosure and risks of loss that are arguably greater than similar risks associated with a pool of loans secured by single-family residential properties.
−Removed: The ability of a borrower to repay a loan secured
−Removed: by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower.
−Removed: If the net operating income of the property is reduced, the borrower's ability to repay the loan may be impaired.
+Added: The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower.
+Added: If the net operating income of the property is reduced, the
+Added: borrower's ability to repay the loan may be impaired.
Net operating income of an income-producing property can be affected by a number of factors that include:
6 unchanged sentences
In the event that any of the properties or entities underlying or collateralizing our loans or investments experiences any of the foregoing events or occurrences, the value of, and return on, such investments could be reduced, which would adversely affect our results of operations and financial condition.
+Added: As of the date of this Annual Report, all of the Company's Legacy WMC Commercial Loans, with an aggregate fair value of $55.4 million as of December 31, 2025, are either on non-accrual or cost recovery status.
+Added: While we and the other lender parties along with the borrowers are pursuing consensual sales of the properties underlying such loans, there are no assurances that such sales will be completed on the terms anticipated or at all.
+Added: To the extent we and the other lender parties acquire ownership of properties securing the Legacy WMC Commercial Loans through foreclosure or deed-in-lieu of foreclosure and own real estate directly without completing a sale of such properties, we are subject to risks particular to owning real property.
+Added: The costs associated with operating and redeveloping the property, including any operating shortfalls, the costs of financings, and significant capital expenditures, could materially and adversely affect our results of operations, financial condition and liquidity.
+Added: In addition, if and when the property is sold, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis, resulting in a loss to us.
+Added: 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.
If our Manager overestimates the loss-adjusted yields of our CMBS investments, we may experience losses.
33 unchanged sentences
All of the foregoing could materially adversely affect the pricing, supply, liquidity and value of our target assets and otherwise materially adversely affect our business, operations and financial condition.
−Removed: It remains uncertain whether the current presidential administration will address the GSE conservatorship, and if so on what timeline and how any potential action would be structured.
+Added: It remains uncertain whether Congress and the current presidential administration will address the GSE conservatorship through legislative or administrative actions, and if so on what timeline and how any potential action would be structured.
+Added: On January 2, 2025, the FHFA and the U.S.
+Added: Treasury Department agreed to again amend the preferred stock purchase agreements between the U.S.
+Added: Treasury Department and each of the GSEs to establish a methodical process for eventual public input on the termination of conservatorship to minimize disruption to the housing and financial markets.
Moreover, personnel changes at the applicable regulatory agencies may alter the nature and scope of oversight affecting the mortgage finance industry generally (particularly with respect to the future role of Fannie Mae and Freddie Mac).
−Removed: The several intended reforms announced by President Trump may increase the level of uncertainty in the overall federal regulatory environment, which could adversely affect our business.
+Added: While the likelihood that major mortgage finance system reform will be enacted in the short term remains uncertain, the adoption of any such reform may increase the level of uncertainty in the overall federal regulatory environment, which could adversely affect our business.
We are subject to the risk that agencies of and entities sponsored by the U.S.
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Any refinancing of our corporate unsecured indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
−Removed: Our inability to generate sufficient cash flow to satisfy our debt service requirements or to refinance our obligations on commercially reasonable terms may adversely affect our cash flows, ability to make distributions to our stockholders, financial condition, and results of operations.
+Added: Our inability to generate sufficient cash flow to satisfy our debt service requirements or to refinance our
+Added: obligations on commercially reasonable terms may adversely affect our cash flows, ability to make distributions to our stockholders, financial condition, and results of operations.
In addition, we may consider making strategic investments, and we may elect to finance these endeavors by incurring additional indebtedness.
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Our ability to fund our purchases of target assets may be impacted by our ability to secure financing arrangements on acceptable terms and renew or roll these financing arrangements.
−Removed: The terms we receive on such financings are influenced by the demand for similar funding by our competitors, including other REITs, specialty finance companies and other financial entities.
+Added: The terms we receive on such financings are influenced by the demand for similar funding by our competitors, including other REITs, specialty finance companies and other
+Added: financial entities.
Many of our competitors are significantly larger than us, have greater financial resources and significantly larger balance sheets than we do.
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Such counterparties have and may continue to impose more onerous conditions when rolling such financings.
−Removed: If major lenders stop financing our
−Removed: target assets, the value of our target assets could be negatively impacted, thus reducing net stockholders’ equity, or book value.
+Added: If major lenders stop financing our target assets, the value of our target assets could be negatively impacted, thus reducing net stockholders’ equity, or book value.
If we are faced with a larger haircut in order to roll a financing with a particular counterparty, or in order to move a financing from one counterparty to another, then we would need to make up the difference between the two haircuts in the form of cash, which could similarly require us to dispose of assets at significantly depressed prices and at inopportune times, which could cause significant losses.
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In the event of a breach of a representation or warranty, we may be required to repurchase affected loans, make indemnification payments to certain indemnified parties or address any claims associated with such breach.
−Removed: Further, we may have limited or no recourse against the seller from whom we purchased the loans.
+Added: Further, we may have limited or no recourse against the
+Added: seller from whom we purchased the loans.
Such recourse may be limited due to a variety of factors, including the absence of a representation or warranty from the seller corresponding to the representation provided by us or the contractual expiration thereof.
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The related agency or rating agencies may suspend rating notes at any time.
−Removed: Rating agency delays may result in our inability to obtain timely ratings on new notes, which could adversely impact the availability of
−Removed: borrowings or the interest rates, advance rates or other financing terms and adversely affect our results of operations and liquidity.
+Added: Rating agency delays may result in our inability to obtain timely ratings on new notes, which could adversely impact the availability of borrowings or the interest rates, advance rates or other financing terms and adversely affect our results of operations and liquidity.
Further, if we are unable to secure ratings from other agencies, limited investor demand for unrated notes could result in further adverse changes to our liquidity and profitability.
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Because the cash we receive from lenders when we initially sell or deliver the assets to the lender is less than the value of those assets (this difference is the haircut), if the lender defaults on its obligation to resell or return the same assets back to us (whether due to insolvency of the lender or otherwise) we may incur a loss on the transaction equal to the amount of the haircut (assuming there was no change in the value of the securities).
−Removed: On December 31, 2024, we had greater than 5% stockholders' equity at risk on a GAAP basis and non-GAAP basis with three repurchase agreement counterparties:
−Removed: BofA Securities, Inc., Goldman Sachs Bank USA, and Barclays Capital Inc.
−Removed: Additionally, the Company had greater than 5% stockholders' equity at risk related to financing arrangements obtained on certain retained interests in securitizations held in a trust that issued certificates to various third-party investors.
+Added: On December 31, 2025, we had greater than 5% stockholders' equity at risk on a GAAP basis and non-GAAP basis with four repurchase agreement counterparties:
+Added: Goldman Sachs Bank USA, BofA Securities, Inc., Barclays Capital Inc., and JP Morgan Securities, LLC,.
Our rights under our repurchase agreements may be subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders under the financing arrangements, which may allow our lenders to repudiate our financing arrangements.
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The Federal Reserve kept the target range at this level until September 2024, stating in 2024 Federal Open Market Committee meetings that the risks to achieving its employment and inflation goals continue to move into better balance.
−Removed: In September 2024, the Federal Reserve started reducing its target range, decreasing it by 0.50% to 4.75% to 5.00%, and stating that the risks to achieving its employment and inflation goals were then roughly in balance.
−Removed: The Federal Reserve subsequently reduced the target range by 0.25% each in November and December 2024, bringing the target range down to 4.25% from 4.50%.
+Added: Since then, the Federal Reserve delivered three rate cuts in each of 2024 and 2025, the latest one in December 2025, bringing the target range down to 3.50% from 3.75%.
To the extent benchmark interest rates remain at high levels or rise or the yield curve flattens as a result of the Federal Reserve’s policy actions or statements, one of the immediate potential impacts on our business would be a reduction in the overall value of the pool of mortgage loans that we own and the overall value of the pipeline of mortgage loans that we have identified for origination or purchase.
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Further, as of December 31, 2025, we have $93.2 million of 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock"), which transitioned to a floating rate on September 17, 2024.
−Removed: An increase in
−Removed: interest rates will increase the cost of the Series C Preferred Stock, refinancing of our existing borrowings or the issuance of new variable rate debt.
+Added: An increase in interest rates will increase the cost of the Series C Preferred Stock, refinancing of our existing borrowings or the issuance of new variable rate debt.
Risks Related to our Management and our Relationship with our Manager and its Affiliates
We are dependent upon our Manager, its affiliates and their key personnel and may not find a suitable replacement if the management agreement with our Manager is terminated or such key personnel are no longer available to us, which would materially and adversely affect us.
−Removed: In accordance with our management agreement, we are externally managed and advised by our Manager, and all of our officers are employees of TPG Angelo Gordon or its affiliates.
+Added: In accordance with our management agreement, we are externally managed and advised by our Manager, and all of our officers are employees of TPG or its affiliates.
We have no separate facilities, and we have no employees.
−Removed: Pursuant to our management agreement, our Manager is obligated to supply us with our senior management team, and the members of that team may have conflicts in allocating their time and services between us and other entities or accounts managed by our Manager and its affiliates, now or in the future, including other TPG Angelo Gordon funds.
+Added: Pursuant to our management agreement, our Manager is obligated to supply us with our senior management team, and the members of that team may have conflicts in allocating their time and services between us and other entities or accounts managed by our Manager and its affiliates, now or in the future, including other TPG funds.
Substantially all of our investment, financing and risk management decisions are made by our Manager and not by us, and our Manager also has significant discretion as to the implementation of our operating policies and strategies.
−Removed: Furthermore, our Manager has the sole discretion to hire and fire employees, and our Board of Directors and stockholders have no authority over the individual employees of our Manager or TPG Angelo Gordon, although our Board of Directors does have direct authority over our officers who are supplied by our Manager.
+Added: Furthermore, TPG has the sole discretion to hire and fire employees, and our Board of Directors and stockholders have no authority over the individual employees of our Manager, TPG or its affiliates, although our Board of Directors does have direct authority over our officers who are supplied by our Manager.
Accordingly, we are completely reliant upon, and our success depends exclusively on, our Manager’s personnel, services, resources, facilities, relationships and contacts.
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The failure of any of our Manager’s key personnel to service our business with the requisite time and dedication, or the departure of such personnel from our Manager, or the failure of our Manager to attract and retain key personnel, would materially and adversely affect our ability to execute our business plan.
−Removed: Further, when there are turbulent conditions in the real estate industry, distress in the credit markets or other times when we will need focused support and assistance from our Manager, the attention of our Manager’s personnel and executive officers and the resources of TPG Angelo Gordon will also be required by the other funds and accounts managed by our Manager and its affiliates, placing our Manager’s resources in high demand.
+Added: Further, when there are turbulent conditions in the real estate industry, distress in the credit markets or other times when we will need focused support and assistance from our Manager, the attention of our Manager’s personnel and executive officers and the resources of TPG will also be required by the other funds and accounts managed by our Manager and its affiliates, placing our Manager’s resources in high demand.
In such situations, we may not receive the level of support and assistance that we may receive if we were internally managed or if our Manager and its affiliates did not act as a manager for other entities.
If the management agreement is terminated and a suitable replacement for our Manager is not secured in a timely manner or at all, we would likely be unable to execute our business plan, which would materially and adversely affect us.
−Removed: Moreover, in November 2023, TPG completed its acquisition of TPG Angelo Gordon, the direct parent company of our Manager.
−Removed: As a result of the acquisition, TPG Angelo Gordon operates its business as a new platform within TPG, which is a publicly traded company.
−Removed: In addition, as a result of the acquisition, our Manager became an indirect subsidiary of TPG.
−Removed: Uncertainty about the effect of the acquisition of TPG Angelo Gordon with TPG on employees, clients and business of TPG Angelo Gordon, as well as time and attention required by our management team and other personnel of our Manager to integration and other matters related to the acquisition or TPG, may have an adverse effect on TPG Angelo Gordon and subsequently on us and the other funds managed by TPG Angelo Gordon.
+Added: Moreover, as a result of TPG's acquisition of TPG Angelo Gordon in 2023, our Manager became an indirect subsidiary of TPG.
+Added: Uncertainty about the effect of such acquisition on employees, clients and business of TPG Angelo Gordon, as well as time and attention required by our management team and other personnel of our Manager to integration and other matters related to the acquisition or TPG, may have an adverse effect on our Manager and subsequently on us and the other funds managed by our Manager and its affiliates, including TPG Credit funds.
Retention and motivation of certain employees may be challenging due to the uncertainty and difficulty of integration or a desire not to remain with TPG Angelo Gordon.
2 unchanged sentences
The management agreement was not negotiated on an arm’s length basis and the terms, including the fees payable to our Manager, may not be as favorable to us as if the agreement was negotiated with unaffiliated third-parties.
−Removed: All of our officers and our non-independent directors are employees of TPG Angelo Gordon or its affiliates.
+Added: All of our officers and our non-independent directors are employees of TPG or its affiliates.
The management agreement was negotiated between related parties, and we did not have the benefit of arm’s length negotiations of the type normally conducted with an unaffiliated third-party and the terms, including the fees payable to our Manager, may not be as favorable to us.
1 unchanged sentence
Our governance and operational structure could result in conflicts of interest.
−Removed: Our Manager is managed by TPG Angelo Gordon, whose interests may not always be aligned with ours or our Manager’s.
−Removed: The employees of TPG Angelo Gordon that devote time to managing our business may have conflicting interests between us and TPG Angelo Gordon when managing our business.
−Removed: TPG Angelo Gordon may decide to sell or transfer an equity interest in the Manager, which could increase the potential conflicts.
−Removed: For example, TPG Angelo Gordon, including our Manager, was acquired by TPG in November 2023.
+Added: Our Manager is managed by TPG, whose interests may not always be aligned with ours or our Manager’s.
+Added: The employees of TPG and its affiliates that devote time to managing our business may have conflicting interests between us and TPG when managing our business.
+Added: TPG may decide to sell or transfer an equity interest in our Manager, which could increase the potential conflicts.
+Added: For example, TPG Angelo Gordon, the direct parent company of our Manager, was acquired by TPG in November 2023.
Following the acquisition, an information barrier was created between the historical TPG business and TPG Angelo Gordon, including our Manager.
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To the extent such other investment vehicles acquire or divest of the same target assets as us, the scope of opportunities otherwise available to us may be adversely affected and/or reduced.
−Removed: We have broad investment guidelines, and we have co-invested and may co-invest with TPG Angelo Gordon funds in a variety of investments.
+Added: We have broad investment guidelines, and we have co-invested and may co-invest with funds managed by TPG and its affiliates in a variety of investments.
We also may invest in securities that are senior or junior to securities owned by funds managed by our Manager or its affiliates.
2 unchanged sentences
However, there is no assurance that this policy will be adequate to address all of the conflicts that may arise, or address such conflicts in a manner that results in the allocation of a particular investment opportunity to us or is otherwise favorable to us.
−Removed: Our Manager and TPG Angelo Gordon and their respective employees also may have ongoing relationships with the obligors of investments or the clients’ counterparties and they or their clients may own equity or other securities or obligations issued by such parties.
−Removed: In addition, TPG Angelo Gordon, either for its own accounts or for the accounts of other clients, may hold securities or obligations that are senior to, or have interests different from or adverse to, the securities or obligations that are acquired for us.
−Removed: Employees of our Manager and its affiliates may also invest in other entities managed by other TPG Angelo Gordon entities which are eligible to purchase target assets.
+Added: Our Manager, TPG and TPG Angelo Gordon and their respective employees also may have ongoing relationships with the obligors of investments or the clients’ counterparties and they or their clients may own equity or other securities or obligations issued by such parties.
+Added: In addition, TPG and TPG Angelo Gordon, either for its respective own accounts or for the accounts of other clients, may hold securities or obligations that are senior to, or have interests different from or adverse to, the securities or obligations that are acquired for us.
+Added: Employees of our Manager and its affiliates may also invest in other entities managed by other TPG entities which are eligible to purchase target assets.
See Part I, Item 1 "Business - Investment Policies" for additional information related to target assets.
−Removed: TPG Angelo Gordon or our Manager and their respective employees may make investment decisions for us that may be different from those undertaken for their personal accounts or on behalf of other clients (including the timing and nature of the action taken).
−Removed: TPG Angelo Gordon and its affiliates may at certain times simultaneously seek to purchase or sell the same or similar investments for clients or for themselves.
−Removed: Likewise, our Manager may on our behalf purchase or sell an investment in which another TPG Angelo Gordon client or affiliate is already invested or has co-invested.
−Removed: Such transactions may differ across TPG Angelo Gordon clients or affiliates.
+Added: TPG, TPG Angelo Gordon or our Manager and their respective employees may make investment decisions for us that may be different from those undertaken for their personal accounts or on behalf of other clients (including the timing and nature of the action taken).
+Added: TPG and its affiliates may at certain times simultaneously seek to purchase or sell the same or similar investments for clients or for themselves.
+Added: Likewise, our Manager may on our behalf purchase or sell an investment in which another TPG client or affiliate is already invested or has co-invested.
+Added: Such transactions may differ across TPG clients or affiliates.
These instances may result in conflicts of interest, which may adversely affect our operations.
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There is no assurance that the terms of such transactions would be as favorable to us as transacting in the open market with unaffiliated third-parties.
−Removed: As the investment programs of the various entities and accounts managed by our Manager and its
−Removed: affiliates change over time, additional issues and considerations may affect our Affiliated Transactions Policy and our Manager’s expectations with respect to such transactions, which could adversely affect our operations.
+Added: As the investment programs of the various entities and accounts managed by our Manager and its affiliates change over time, additional issues and considerations may affect our Affiliated Transactions Policy and our Manager’s expectations with respect to such transactions, which could adversely affect our operations.
Our Board of Directors has approved very broad investment policies for our Manager, may change such policies without stockholder consent, and does not review or approve each investment or financing decision made by our Manager.
Our Board of Directors determines our operational policies and may amend or revise such policies, including our policies with respect to our REIT qualification, acquisitions, dispositions, operations, indebtedness and distributions, or approve transactions that deviate from these policies, without a vote of, or notice to, our stockholders.
−Removed: Operational policy changes could adversely affect the market value of our common stock and our ability to make distributions to our stockholders, such as reduction in the size of our GAAP investment portfolio.
+Added: Operational policy changes could adversely affect the market value of our common stock and our ability to make distributions to our stockholders, such as reduction in the size of our investment portfolio.
For example, 2020 was marked by unprecedented conditions caused by the COVID-19 pandemic, and as a result of and in response to these conditions, the size and composition of our investment portfolio was significantly reduced during 2020.
13 unchanged sentences
In addition, our Manager has the ability to earn an incentive fee that is based, in large part, upon our achievement of targeted levels of adjusted net income, as calculated in accordance with the management agreement.
−Removed: In evaluating asset acquisition and other management strategies, the opportunity to earn an incentive fee based on adjusted net income may lead our Manager to place undue emphasis on the maximization of adjusted net income at the expense of other criteria, such as preservation of capital, maintaining liquidity, and/or management of credit risk or market risk, in order to achieve a higher incentive fee.
+Added: In evaluating asset acquisition and
+Added: other management strategies, the opportunity to earn an incentive fee based on adjusted net income may lead our Manager to place undue emphasis on the maximization of adjusted net income at the expense of other criteria, such as preservation of capital, maintaining liquidity, and/or management of credit risk or market risk, in order to achieve a higher incentive fee.
Assets with higher yield potential are generally riskier or more speculative.
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Depository institutions that finance our investments may require that AG REIT Management, LLC remain as our Manager under the management agreement and that certain key personnel of our Manager continue to service our business.
−Removed: If AG REIT Management, LLC ceases to be our Manager or one or more of our Manager’s key personnel are no longer servicing our business, it may constitute an event of default, and the depository institution providing the arrangement may have acceleration rights with respect to outstanding borrowings and termination rights with respect to our ability to finance our future investments with that institution.
+Added: Management, LLC ceases to be our Manager or one or more of our Manager’s key personnel are no longer servicing our business, it may constitute an event of default, and the depository institution providing the arrangement may have acceleration rights with respect to outstanding borrowings and termination rights with respect to our ability to finance our future investments with that institution.
If we are unable to obtain financing for our accelerated borrowings and for our future investments under such circumstances, we may be required to curtail our asset acquisitions and/or dispose of assets at an inopportune time.
1 unchanged sentence
The terms of the asset management agreement with the Asset Manager may not be as favorable to us as if the agreement was negotiated with unaffiliated third-parties.
−Removed: In connection with our investments in Non-QM Loans, Agency-Eligible Loans, residential mortgage loans, and Re/Non-Performing Loans, we engage asset managers to provide advisory, consultation, asset management and other services to help our third-party servicers formulate and implement strategic plans to manage, collect and dispose of loans in a manner that is reasonably expected to maximize the amount of proceeds from each loan.
−Removed: We engaged the Asset Manager, an affiliate of the Manager and direct subsidiary of TPG Angelo Gordon, as the asset manager for certain of our non-agency loans, agency loans, residential mortgage loans and Re/Non-Performing Loans.
−Removed: We pay separate asset management fees as assessed and confirmed by a third-party valuation firm for certain of our Non-Agency Loans, NPL/RPL and other residential loan products to the Asset Manager.
+Added: In connection with certain of our residential mortgage loan investments, we engage asset managers to provide advisory, consultation, asset management and other services to help our third-party servicers formulate and implement strategic plans to manage, collect and dispose of loans in a manner that is reasonably expected to maximize the amount of proceeds from each loan.
+Added: We engaged the Asset Manager, an affiliate of the Manager and TPG, as the asset manager for the majority of our residential mortgage loans.
+Added: We pay separate asset management fees to the Asset Manager based on the residential loan product type, which fees are assessed by a third-party valuation firm to be commercially reasonable.
The asset management agreement was negotiated between related parties, and we did not have the benefit of arm’s length negotiations as we normally would with unaffiliated third-parties.
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If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.
−Removed: We may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution, and may be unable to pursue otherwise attractive investments in order to satisfy the source-of-income or asset-diversification requirements for
−Removed: qualifying as a REIT.
+Added: We may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution, and may be unable to pursue otherwise attractive investments in order to satisfy the source-of-income or asset-diversification requirements for qualifying as a REIT.
Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
28 unchanged sentences
We believe that we are treated for REIT asset and income test purposes as the owner of the assets that are the subject of any such sale and repurchase agreement notwithstanding that such agreements may transfer record ownership of the assets to the counterparty during the term of the agreement.
−Removed: It is possible, however, that the
−Removed: IRS could assert that we did not own the assets during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT.
+Added: It is possible, however, that the IRS could assert that we did not own the assets during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT.
Our ownership of and relationship with our TRSs will be limited, and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.
3 unchanged sentences
A corporation (other than a REIT) of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS.
−Removed: Overall, no more than 20% of the value of a REIT's total assets may consist of stock or securities of one or more TRSs.
+Added: Overall, no more than 25% (20% for taxable years beginning before January 1, 2026) of the value of a REIT's total assets may consist of stock or securities of one or more TRSs.
A domestic TRS will pay federal, state and local income tax at regular corporate rates on any income that it earns.
41 unchanged sentences
We could face adverse tax consequences if WMC failed to qualify as a REIT prior to the Merger.
−Removed: In connection with the closing of the Merger, we received an opinion of counsel to the effect that WMC qualified as a REIT for U.S.
−Removed: federal income tax purposes through the time of the Merger.
−Removed: However, we did not request a ruling from the IRS that WMC qualified as a REIT.
−Removed: Notwithstanding the opinion of counsel, if the IRS successfully challenged WMC's REIT status prior to the Merger, we could face adverse tax consequences, including:
+Added: In connection with the closing of our acquisition of WMC in 2023, we received an opinion of counsel to the effect that WMC qualified as a REIT for U.S.
+Added: federal income tax purposes through the time of the acquisition.
+Added: However, we did not request a
+Added: ruling from the IRS that WMC qualified as a REIT.
+Added: Notwithstanding the opinion of counsel, if the IRS successfully challenged WMC's REIT status prior to the acquisition, we could face adverse tax consequences, including:
• succeeding to WMC's liability for U.S.
9 unchanged sentences
In general, an "ownership change" occurs if 5% stockholders increase their collective ownership of the aggregate amount of the outstanding shares of our company by more than 50 percentage points looking back over the relevant testing period.
−Removed: Our ability to use WMC's historic NOL carryforwards is limited by a Section 382 ownership change that occurred with respect to WMC at the time of the Merger.
+Added: Our ability to use WMC's NOL carryforwards is limited by a Section 382 ownership change that occurred with respect to WMC at the time of the WMC Acquisition.
No assurance can be provided as to whether we or our TRS may experience an ownership change that could limit our ability or our TRS's ability to utilize the respective NOL or NCL carryforwards.
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No assurance can be given that the SEC or its staff will concur with our classification of our or our subsidiaries’ assets.
−Removed: In August 2011, the SEC solicited public comment on a wide range of issues relating to Section 3(c)(5)(C), including the nature of the assets that qualify for purposes of the exemption and leverage used by mortgage-related vehicles.
There can be no assurance that the laws and regulations governing the Investment Company Act status of companies primarily owning real estate-related assets, including more specific or different guidance regarding these exemptions from the SEC, will not change in a manner that adversely affects our operations.
1 unchanged sentence
Qualification for exemption from the definition of an investment company under the Investment Company Act limits our ability to make certain investments.
−Removed: For example, these restrictions limit our and our subsidiaries’ ability to invest directly in
−Removed: mortgage-related securities that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations, certain real estate companies or assets not related to real estate.
+Added: For example, these restrictions limit our and our subsidiaries’ ability to invest directly in mortgage-related securities that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations, certain real estate companies or assets not related to real estate.
If we fail to qualify for these exemptions, or the SEC determines that companies that invest in RMBS are no longer able to rely on these exemptions, we could be required to (a) restructure our activities to avoid being required to register as an investment company, (b) effect sales of certain assets in a manner that, or at a time when, we would not otherwise choose to do so or (c) register as an investment company under the Investment Company Act.
13 unchanged sentences
This resolution, however, may be altered or repealed in whole or in part at any time.
−Removed: • The "control share" provisions of the MGCL provide that a holder of "control shares" of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in the election of directors) acquired in a "control share acquisition" (defined as the acquisition of "control shares," subject to certain exceptions) has no voting rights with respect to those shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, and by our officers and our directors who are also our employees.
+Added: • The "control share" provisions of the MGCL provide that a holder of "control shares" of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in the election of directors) acquired in a "control share acquisition" (defined as the acquisition of "control shares," subject to certain exceptions) has no voting rights with respect to those shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds
+Added: of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, and by our officers and our directors who are also our employees.
Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our shares.
24 unchanged sentences
Future sales of our common stock by us or by our officers and directors may have adverse consequences for investors.
−Removed: We may issue additional shares of common stock, or securities convertible into, or exchangeable for, shares of common stock, in public offerings or private placements, and holders of our outstanding convertible notes or exchangeable securities may convert those securities into shares of common stock.
−Removed: In addition, we may issue additional shares of common stock to participants in any direct stock purchase and dividend reinvestment plan we may establish and to our directors, officers, and employees of our Manager under any employee stock purchase plan we may establish, our equity incentive plan, or other similar plans, including upon the exercise of, or in respect of, distributions on equity awards previously granted thereunder.
+Added: We may issue additional shares of common stock, or securities convertible into, or exchangeable for, shares of common stock, in public offerings or private placements, and holders of any convertible notes or exchangeable securities that we may issue in the future may convert those securities into shares of common stock.
+Added: In addition, we may issue additional shares of common stock to participants in any direct stock purchase and dividend reinvestment plan we may establish and to our directors, officers, and employees of our Manager and its affiliates under any employee stock purchase plan we may establish, our equity incentive plan, or other similar plans, including upon the exercise of, or in respect of, distributions on equity awards previously granted thereunder.
We are not required to offer any such shares to existing stockholders on a preemptive basis.
−Removed: Therefore, it may not be possible for existing stockholders to participate in future share issuances, which may dilute existing stockholders’ interests in us.
+Added: Therefore, it may not
+Added: be possible for existing stockholders to participate in future share issuances, which may dilute existing stockholders’ interests in us.
In addition, if market participants buy shares of common stock, or securities convertible into, or exchangeable for, shares of common stock, in issuances by us in the future, it may reduce or eliminate any purchases of our common stock they might otherwise make in the open market, which in turn could have the effect of reducing the volume of shares of our common stock traded in the marketplace, which could have the effect of reducing the market price and liquidity of our common stock.
−Removed: As of March 3, 2025, our directors, executive officers and our Manager beneficially owned, in the aggregate, approximately 4.8% of our common stock (including approximately 3.8% held by our directors and executive officers).
−Removed: Sales of shares of our common stock by our directors and officers are generally required to be publicly reported and are tracked by many market participants as a factor in making their own investment decisions.
−Removed: As a result, future sales by these individuals or our Manager could negatively affect the market price of our common stock.
+Added: As of February 17, 2026, our directors, executive officers and our Manager beneficially owned, in the aggregate, approximately 4.1% of our common stock (including approximately 3.2% held by our directors and executive officers).
+Added: In addition, in August 2025, as consideration for acquiring additional interests in Arc Home, the Company issued an aggregate of 2,027,676 shares of our common stock (then representing approximately 6.4% of our common stock) to certain private funds managed by an affiliate of TPG (the "Holders").
+Added: Pursuant to registration rights, we filed an S-3 registration statement registering the resale of all the shares held by the Holders.
+Added: As of February 18, 2026, the Holders held 1,170,643 shares of our common stock, representing approximately 3.7% of our common stock.
+Added: Sales of shares of our common stock by our directors and officers, and greater than 5% stockholders, are generally required to be publicly reported and are tracked by many market participants as a factor in making their own investment decisions.
+Added: As a result, future sales by these individuals, our Manager or the Holders could negatively affect the market price of our common stock.
We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future.
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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.