Company: MFAN
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0001055160-25-000004
Chunk: 446

Company: MFA FINANCIAL, INC.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 7A
Chunk 446
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 loans and certain of our securities investments. We do not believe we are exposed to credit risk in our Agency MBS portfolio.

Our exposure to credit risk from our credit sensitive investments is discussed in more detail below:

Residential Whole Loans

We are exposed to credit risk from our investments in residential whole loans. Credit risk on our residential whole loans is mitigated through our process to underwrite the loan before it is acquired and/or originated and includes an assessment of the borrower’s financial condition and ability to repay the loan, nature of the collateral and relatively low LTV, including after-repair LTV for the majority of our Single-family and Multifamily transitional loans. Given the extent of home price appreciation that has occurred since the majority of our loans collateralized by single-family homes were acquired or originated, we estimate that current LTVs have decreased significantly, further mitigating the risk of material credit losses on this portfolio. As a result of higher capitalization rates and an increasing supply of multifamily units in certain markets, we estimate that current LTVs on certain of our Multifamily transitional loans may have increased since origination, increasing the risk of credit losses on this portfolio.

Our investment process for Legacy RPL/NPL loans is focused on quantifying and pricing credit risk. Legacy RPL/NPL loans are acquired at purchase prices that are generally discounted to the contractual loan balances based on a number of factors, including the impaired credit history of the borrower and the value of the collateral securing the loan.  In addition, as we generally own the mortgage-servicing rights associated with these loans, our process is also focused on selecting a sub-servicer with the appropriate expertise to mitigate losses and maximize our overall return.  This involves, among other things, performing due diligence on the sub-servicer prior to their engagement as well as ongoing oversight and surveillance.  To the extent that delinquencies and defaults on these loans are higher than our expectation at the time the loans were purchased, the discounted purchase price at which the asset is acquired is intended to provide a level of protection against financial loss. 

The following table presents certain information about our Residential whole loans at December 31, 2024:

Single-family transitional loansMultifamily transitional loansSingle-family rental loansNon-QM loansLegacy RPL/NPL loans Loans with an LTV:Loans with an LTV:Loans with an LTV:Loans with an LTV:Loans with an LTV:(Dollars in Thousands)80%