Company: MFAN
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0001055160-25-000007
Chunk: 205

Company: MFA FINANCIAL, INC.
Filing Date: 2025-05-06
Form: 10-Q
Item: Part I, Item 3
Chunk 205
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.  Should the value of our residential mortgage assets pledged as collateral suddenly decrease, margin calls under our repurchase agreements would likely increase, causing an adverse change in our liquidity position.  Additionally, if one or more of our financing counterparties chose not to provide ongoing funding, our ability to finance our long-maturity assets would decline or be available on possibly less advantageous terms.  Further, when liquidity tightens, our repurchase agreement counterparties may increase our collateral cushion (or margin) requirements on new financings, including repurchase agreement borrowings that we roll with the same counterparty, reducing our ability to use leverage.

At March 31, 2025, we had access to various sources of liquidity, including $253.7 million of cash and cash equivalents.  Our sources of liquidity do not include restricted cash.  In addition, at March 31, 2025, we had unencumbered residential whole loans and Agency MBS of $74.1 million and $81.9 million, respectively.  

Prepayment Risk

Premiums arise when we acquire an MBS or loan at a price in excess of their unpaid principal balance.  Conversely, discounts arise when we acquire an MBS or loan at a price below their unpaid principal balance.  Premiums paid are amortized against interest income and accretable purchase discounts on these investments are accreted to interest income.  Purchase premiums, which are primarily carried on our Single-family rental and Non-QM loans, are amortized against interest income over the life of the investment using the effective yield method, adjusted for actual prepayment activity.  An increase in the prepayment rate, as measured by the CPR, will typically accelerate the amortization of purchase premiums, thereby reducing the interest income earned on these assets.  Fees payable by borrowers on the early repayment of certain of our Business purpose and Non-QM loans serve to mitigate the impact on our income of higher prepayment rates.  

In addition, increased prepayments are generally associated with decreasing market interest rates as borrowers are able to refinance their mortgages at lower rates.  Therefore, increased prepayments on our investments may accelerate the redeployment of our capital to generally lower yielding investments.  Similarly, decreased prepayments are generally associated with increasing market interest rates and may slow our ability to redeploy capital to generally higher-yielding investments.

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Item 4.  Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Management, under the direction of its Chief Executive Officer