Company: MFAN
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0001055160-25-000004
Chunk: 258

Company: MFA FINANCIAL, INC.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 1A
Chunk 258
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, our ability to influence the business and operations of the originators is limited, in some instances significantly so.  Also, because these loan originators are private closely-held enterprises, there are significant restrictions on our ability to sell or otherwise transfer our investments (which are generally illiquid).  In the event Lima One or one or more of the loan originators in which we have made investments should experience a significant decline in its business and operations or otherwise not be able to respond adequately to managerial, compliance or operational challenges that it may encounter, we may be required to write-down all or a portion of the goodwill relating to Lima One or write down all or a portion of the applicable non-controlling investment, which could have a material adverse impact on our results of operations.

15  

Business purpose loans involve a high degree of business and financial risk.

Our operations and activities include Business purpose loans originated and serviced by Lima One.  These Business purpose loans include short-term loans that are collateralized by residential and multi-family properties made to non-occupant borrowers that intend to rehabilitate and refinance or sell the property for a profit (Transitional loans), as well as long-term mortgage loans made to investors who intend to rent such properties to generate income.  Such a borrower’s ability to repay its loan may be adversely impacted by numerous factors, including negative local or more general economic conditions and, in the case of Transitional loans, the borrower’s ability to complete the rehabilitation successfully, on budget and on time.  

In addition, in the case of mortgage loans secured by rental properties, if tenants who rent their residence from a business purpose loan borrower are unable to make rental payments, are unwilling to make rental payments, or a waiver of the requirement to make rental payments on a timely basis, or at all, is available under the terms of any applicable forbearance or waiver agreement or program (which rental payment forbearance or waiver program may be available as a result of a government-sponsored or government-imposed program or under any such agreement or program a landlord may otherwise offer to tenants), then the value of Business purpose loans we own will likely be impaired, potentially materially.  Accordingly, deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in the collateral for the loan.  

Additionally, as Transitional loans involve properties in transition, they may involve a greater risk of loss than traditional mortgage loans. This type of loan is typically used for acquiring and rehabilitating or improving the quality of single-family residential investment properties and generally serves as an interim financing