Company: MFAN
Filing Date: 2025-08-06
Form Type: 10-Q
Source: 0001055160-25-000013
Chunk: 73

Company: MFA FINANCIAL, INC.
Filing Date: 2025-08-06
Form: 10-Q
Item: Part I, Item 1
Chunk 73
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 one that it believes results in the most reasonable estimate of expected losses.  The Company may apply qualitative adjustments to these results as further described in Note 3.  For certain loans where foreclosure has been deemed to be probable, loss estimates are based on whether the value of the underlying collateral is sufficient to recover the carrying value of the loan.  This methodology has not changed significantly from the calculation of the allowance for credit losses in prior periods, although certain modeling factors have been refined over time and the data utilized has, in some cases, been updated to better align with actual and expected loss experiences.Certain Legacy RPL/NPL loans acquired by the Company for which the Company did not elect the fair value option are accounted for as credit deteriorated as they have experienced a deterioration in credit quality since origination and prior to our purchase and were acquired at discounted prices that reflect, in part, the impaired credit history of the borrower.  Substantially all of these loans have previously experienced payment delinquencies and the amount owed may exceed the value of the property pledged as collateral.  Consequently, these loans generally have a higher likelihood of default than newly originated mortgage loans with loan-to-value ratios (“LTVs”) of 80% or less to creditworthy borrowers.  The Company believes that amounts paid to acquire these loans represent fair market value at the date of acquisition.  Loans considered credit deteriorated are initially recorded at their purchase price on a net basis, after establishing an initial allowance for credit losses (their initial cost basis is equal to their purchase price plus the initial allowance for credit losses).  Subsequent to acquisition, the gross recorded amount for these loans reflects the initial cost basis, plus accretion/amortization of interest income, less principal and interest cash flows received.  These credit deteriorated loans are presented on the Company’s consolidated balance sheets at carrying value, which reflects the recorded cost basis reduced by any allowance for credit losses.  Interest income on such loans purchased is recorded each period based on the contractual coupon net of accretion/amortization of the difference between their cost basis and unpaid principal balance (“UPB”), subject to the Company’s nonaccrual policy.Loans Held-for-SaleFor loans for which the fair value option was not elected, once a decision has been made to sell loans previously classified as held for investment, such loans are considered held-for-sale and are carried at the lower of cost or fair value. Residential Whole Loans at Fair ValueCertain of the Company’s residential whole loans are presented at fair value on