Company: MFAN
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001055160-25-000018
Chunk: 213

Company: MFA FINANCIAL, INC.
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 1
Chunk 213
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 Risk

Credit spreads measure the additional yield demanded by investors in financial instruments based on the credit risk associated with an instrument relative to benchmark interest rates.  They are impacted by the available supply and demand for instruments with various levels of credit risk.  Widening credit spreads would result in higher yields being required by investors in financial instruments.  Credit spread widening generally results in lower values of the financial instruments we hold at that time, but will generally result in a higher yield on future investments with similar credit risk.  It is possible that the credit spreads on our assets and liabilities, including hedges, will not always move in tandem.  Consequently, changes in credit spreads can result in volatility in our financial results and reported book value.

Liquidity Risk

The primary liquidity risk we face arises from financing long-maturity assets with shorter-term borrowings primarily in the form of repurchase agreement financings.  We pledge residential mortgage assets and cash to secure our financing agreements.  Our financing agreements with mark-to-market collateral provisions require us to pledge additional collateral in the event the market value of the assets pledged decreases, in order to maintain the lenders contractually specified collateral cushion, which is measured as the difference between the amount borrowed and the market value of the asset pledged as collateral.  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.

As of September 30, 2025, we had access to various sources of liquidity, including $305.2 million of cash and cash equivalents.  Our sources of liquidity do not include restricted cash.  In addition, as of September 30, 2025, we had unencumbered residential whole loans and Agency MBS of $75.9 million and $147.1 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