Company: MFAN
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0001055160-25-000007
Chunk: 147

Company: MFA FINANCIAL, INC.
Filing Date: 2025-05-06
Form: 10-Q
Item: Part I, Item 1
Chunk 147
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 delinquency, default and foreclosure on the underlying real estate collateral.  Our investment process for credit sensitive assets focuses primarily on quantifying and pricing credit risk.  With respect to investments in Business purpose and Non-QM loans, we believe that sound underwriting standards, including low LTVs at origination, significantly mitigate our risk of loss.  Further, we believe the discounted purchase prices paid on Legacy RPL/NPL loans mitigate our risk of loss in the event that we receive less than 100% of the unpaid principal balance of these investments.

Premiums arise when we acquire an MBS or loan at a price in excess of the aggregate principal balance of the mortgages securing the MBS (i.e., par value) or when we acquire residential whole loans at a price in excess of their unpaid principal balance.  Conversely, discounts arise when we acquire an MBS or loan at a price below the aggregate principal balance of the mortgages securing the MBS or when we acquire residential whole loans at a price below their unpaid principal balance.  Accretable purchase discounts on these investments are accreted to interest income.  Premiums paid to purchase loans are amortized against interest income over the life of the investment using the effective yield method, adjusted for actual prepayment activity.  An increase in the prepayment rate, as measured by the CPR, will typically accelerate the amortization of purchase premiums, thereby reducing the interest income earned on these assets.

CPR levels are impacted by, among other things, conditions in the housing market, new regulations, government and private sector initiatives, interest rates, availability of credit to home borrowers, underwriting standards and the economy in general.  In particular, CPR presents the annualized constant rate of principal repayment in excess of scheduled principal amortization.  CPRs on our residential mortgage securities and whole loans may differ significantly.  For the three months ended March 31, 2025, the average CPRs on certain of our loan portfolios were: 13.1% for Non-QM loans, 11.0% for Single-family rental loans, and 6.4% for Legacy RPL/NPL loans.  In addition, for the three months ended March 31, 2025, the repayment rate (which includes both scheduled and unscheduled repayments of principal) was 63.0% for our Single-family transitional loans and 36.9% for our Multifamily transitional loans.

It is generally our business strategy to hold our residential mortgage assets as long-term investments