Company: CHMI-PB
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0001140361-25-017536
Chunk: 33

Company: Cherry Hill Mortgage Investment Corp
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 3
Chunk 33
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 asset/liability composition at the time as well as the magnitude and duration of the interest rate increase. Further, an increase in short-term interest rates could also have a negative impact on the market value of our assets, other
            than our Servicing Related Assets. A decrease in interest rates could have a negative impact on the market value of our Servicing Related Assets. If any of these events happen, we could experience a decrease in net income or incur a net loss
            during these periods, which could adversely affect our liquidity and results of operations.

Hedging techniques are partly based on assumed levels of prepayments of our assets, specifically our RMBS. If prepayments are slower or faster than assumed, the life of the
            investment will be longer or shorter, which would reduce the effectiveness of any hedging strategies we may use and may cause losses on such transactions. Hedging strategies involving the use of derivatives are highly complex and may produce
            volatile returns.

Interest Rate Cap Risk

Any adjustable-rate RMBS that we acquire will generally be subject to interest rate caps, which potentially could cause such RMBS to acquire many of the characteristics of
            fixed-rate securities if interest rates were to rise above the cap levels. This issue will be magnified to the extent we acquire adjustable-rate and hybrid adjustable-rate RMBS that are not based on mortgages which are fully indexed. In
            addition, adjustable-rate and hybrid adjustable-rate RMBS may be subject to periodic payment caps that result in some portion of the interest being deferred and added to the principal outstanding. This could result in our receipt of less cash
            income on such assets than we would need to pay the interest cost on our related borrowings. To mitigate interest rate mismatches, we may utilize the hedging strategies discussed above under “—Interest Rate Risk.” Actual economic conditions or
            implementation of decisions by our management team may produce results that differ significantly from the estimates and assumptions used in our models.

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              Table of Contents

Prepayment Risk; Extension Risk

The following tables summarize the estimated change in fair value of our MSRs as of the dates indicated given several parallel shifts in the discount rate, voluntary prepayment
            rate and servicing cost (dollars in thousands):

MSR Fair Value Changes

As of March 31, 2025

                  (20)%

                  (10)%

                  -%

                  10%

                  20%

                  Discount Rate Shift in %

                  Estimated FV

                  $

                  249,784