Company: MFAN
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0001055160-25-000004
Chunk: 469

Company: MFA FINANCIAL, INC.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 7A
Chunk 469
---
 the CRT securities is paid.  As an investor in a CRT security, the Company may incur a principal loss if the performance of the actual or reference pool loans results in either an actual or calculated loss that exceeds the credit enhancement of the security owned by the Company. Term Notes Backed by Mortgage Servicing Rights (“MSR”) CollateralThe Company has invested in term notes that are issued by special purpose vehicles (“SPV”) that have acquired rights to receive cash flows representing the servicing fees and/or excess servicing spread associated with certain MSRs.  The Company 

76  

Table of ContentsMFA FINANCIAL, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2024

considers payment of principal and interest on these term notes to be largely dependent on the cash flows generated by the underlying MSRs as this impacts the cash flows available to the SPV that issued the term notes.  Credit risk borne by the holders of the term notes is also mitigated by structural credit support in the form of over-collateralization.  Credit support is also provided by a corporate guarantee from the ultimate parent or sponsor of the SPV that is intended to provide for payment of interest and principal to the holders of the term notes if cash flows generated by the underlying MSRs are insufficient.DesignationSecurities that the Company generally intends to hold until maturity, but that it may sell from time to time as part of the overall management of its business, are designated as AFS.  Such securities, which include term notes backed by MSR collateral and certain CRT securities, are carried at their fair value with unrealized gains and losses excluded from earnings (except when an allowance for loan losses is recognized, as discussed below) and reported in accumulated other comprehensive income/(loss) (“AOCI”), a component of Stockholders’ Equity.Upon the sale of an AFS security, any unrealized gain or loss is reclassified out of AOCI to earnings as a realized gain or loss using the specific identification method.The Company has elected the fair value option for its Agency and Non-Agency MBS and certain of its CRT securities.  These securities are carried at their fair value with changes in fair value included in earnings for the period and reported in Other Income/(Loss), net on the Company’s consolidated statements of operations.Revenue Recognition, Premium Amortization and Discount AccretionInterest income on securities is accrued based on their outstanding principal balance and their contractual terms.  Premiums and discounts associated with MBS assessed as