Company: ADAMM
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001273685-25-000088
Chunk: 370

Company: ADAMAS TRUST, INC.
Filing Date: 2025-11-04
Form: 10-Q
Item: Part I, Item 8
Chunk 370
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 related to derivative instruments is reflected within the net payments received from (made on) derivative instruments and net variation margin received (paid) for derivative instruments line items within the investing activities section of the accompanying condensed consolidated statements of cash flows.Derivative Financial Instruments – Interest Rate Lock Commitments – Constructive may enter into certain interest rate lock commitments (“IRLCs”) which represent a commitment to a particular interest rate provided the borrower is able to close the respective loan within a specified period. IRLCs are accounted for as derivatives at fair value and changes in fair value are included in Mortgage banking activities, net on the accompanying condensed consolidated statements of operations.Mortgage Servicing Rights – The Company records MSRs, whether acquired or as a result of the sale of loans Constructive originates with servicing retained, at fair value upon initial recognition. The Company does not directly service residential loans. Rather, servicing activities are carried out by duly licensed third-party subservicers who perform substantially all servicing functions for the loans underlying MSRs.  The Company has elected the fair value option for all of its MSRs because the Company determined that such presentation provides users of its consolidated financial statements with relevant information regarding the effects of prepayment risk and other market factors on MSRs.  Changes in the fair value of MSRs are recorded in current period earnings in unrealized gains (losses), net on the accompanying consolidated statements of operations.  Servicing fee income is earned based upon a contractual percentage of the outstanding principal balance of the underlying residential loan and is recognized as revenue as the related loan payments are collected.  Servicing fee income and other servicing-related income are included in other income (loss) on the accompanying consolidated statements of operations.  Corresponding costs to service (including subservicing fees) are charged to expense as incurred and included in portfolio operating expenses on the accompanying consolidated statements of operations.Repurchase Reserves for Origination Activity – Constructive routinely sells business purpose loans to secondary market investors. Under customary representations and warranties clauses in the business purpose loan sale agreements, Constructive may be required to repurchase business purpose loans sold or reimburse the investors for credit losses incurred on those loans if a breach of the contractual representations and warranties occurred. Constructive establishes a loan repurchase reserve liability in an amount equal to management’s estimate of losses on loans for which it could have a repurchase obligation or loss reimbursement. The estimated liability incorporates historical loss experience, identification of delinquencies, economic trends and market conditions and is included in other liabilities on the accompanying condensed consolidated balance sheets. Pro