Company: TWO-PC
Filing Date: 2025-04-29
Form Type: 10-Q
Source: 0001465740-25-000104
Chunk: 177

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-04-29
Form: 10-Q
Item: Item 8
Chunk 177
---
 among other macroeconomic factors, can affect prepayment speeds. We believe our active portfolio management approach, including our asset selection process, positions us to respond to a variety of market scenarios. Although we are unable to predict future interest rate movements, our strategy of pairing MSR with Agency RMBS, with a focus on managing various associated risks, including interest rate, prepayment, credit, mortgage spread and financing risk, is intended to generate stable performance, relative to RMBS portfolios without MSR, with a low level of sensitivity to changes in the yield curve, prepayments and interest rate cycles. 

The following table provides the three-month average CPR experienced by our Agency RMBS and MSR during the three months ended March 31, 2025, and the four immediately preceding quarters:

Three Months EndedMarch 31,2025December 31,2024September 30,2024June 30,2024March 31,2024Agency RMBS7.0 %7.5 %7.2 %7.3 %4.8 %Mortgage servicing rights4.2 %4.9 %5.3 %5.3 %3.9 %

Our Agency RMBS are primarily collateralized by pools of fixed-rate mortgage loans. Our Agency portfolio also includes securities with implicit prepayment protection, including lower loan balances (securities collateralized by loans of less than $300,000 in initial principal balance), higher LTVs (securities collateralized by loans with LTVs greater than or equal to 80%), certain geographic concentrations, loans secured by investor-owned properties and lower FICO scores. Our overall allocation of Agency RMBS and holdings of pools with specific characteristics are viewed in the context of our aggregate portfolio strategy, including MSR and related derivative hedging instruments. Additionally, the selection of securities with certain attributes is driven by the perceived relative value of the securities, which factors in the opportunities in the marketplace, the cost of financing and the cost of hedging interest rate, prepayment, credit and other portfolio risks. Accordingly, our Agency RMBS capital allocation reflects management’s flexible approach to investing in the marketplace.

45

The following tables provide the carrying value of our Agency RMBS portfolio by underlying mortgage loan rate type:

March 31, 2025(dollars in thousands)Principal/ Current FaceCarrying ValueWeighted Average CPR (1)% Prepayment ProtectedGross Weighted Average Coupon RateAmortized CostAllowance for Credit LossesWeighted Average Loan