Company: ADAMM
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001273685-25-000028
Chunk: 75

Company: ADAMAS TRUST, INC.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 16
Chunk 75
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 as a legal settlement of the exposure under these contracts, as opposed to pledged collateral. Accordingly, the Company accounts for the receipt or payment of variation margin as a direct reduction of or increase in the carrying value of the related asset or liability. The receipt or payment of initial margin is accounted for separate from the derivative asset or liability, classified within restricted cash and included in other assets on the accompanying consolidated balance sheets. Any additional amounts due from or due to counterparties in connection with the Company's derivatives, are included in other assets or other liabilities, respectively, on the accompanying consolidated balance sheets.The Company and Consolidated Real Estate VIEs may be required by lenders on certain repurchase agreement financing and variable-rate mortgages payable on real estate to enter into interest rate cap contracts that limit the indexed portion of the interest rate on the respective related financing to a strike rate based upon various SOFR tenors. Cash flow activity related to derivative instruments is reflected within the operating activities and investing activities sections of the Company's consolidated statements of cash flows. Realized gains or losses, if any, and unrealized gains or losses, if any, on the Company's derivative instruments are included in the gains (losses) on derivative instruments, net line item within the operating activities section of the accompanying consolidated statements of cash flows. The remaining cash flow activity related to derivative instruments is reflected within the net payments received from (made on) derivative instruments and net variation margin received (paid) for derivative instruments line items within the investing activities section of the accompanying consolidated statements of cash flows.Mortgage Servicing Rights – The Company records MSRs at fair value upon initial recognition. The Company does not originate or directly service residential loans. Rather, servicing activities are carried out by duly licensed third-party subservicers who perform substantially all servicing functions for the loans underlying MSRs.  

F-20

The Company has elected the fair value option for all of its MSRs because the Company determined that such presentation provides users of its consolidated financial statements with relevant information regarding the effects of prepayment risk and other market factors on MSRs.  Changes in the fair value of MSRs are recorded in current period earnings in unrealized gains (losses), net on the accompanying consolidated statements of operations.  Servicing fee income is earned based upon a contractual percentage of the outstanding principal balance of the underlying residential loan and is recognized as revenue as the related loan payments are collected.  Servicing fee income and other servicing-related income are included in other income (loss) on the accompanying consolidated statements of operations.