Company Information

About the Business

We are a self-advised real estate investment trust (REIT) primarily engaged in the business of investing, on a leveraged basis, in residential mortgage-backed securities (MBS). Our principal business objective is to generate net income for distribution to our stockholders resulting from the difference between the interest and other income we earn on our investments and the interest expense we pay on the borrowings that we use to finance our leveraged investments and our operating costs. We were incorporated in Maryland on July 24, 1997, began operations on April 10, 1998 and have elected to be treated as a REIT for U.S. federal income tax purposes. One of the requirements of maintaining our qualification as a REIT is that we must distribute at least 90% of our annual REIT taxable income to our stockholders. Our common stock and preferred stock are listed on the New York Stock Exchange under the symbols "MFA" and "MFA-A," respectively. Our senior notes due 2042 are listed on the NYSE under the symbol "MFO."

Investment Strategy

We invest in residential MBS that are issued or guaranteed as to principal and/or interest by a federally chartered corporation or agency of the U.S. government (e.g., Fannie Mae, Freddie Mac or Ginnie Mae), which we refer to as Agency MBS, and residential MBS that are not guaranteed by any U.S. government agency or any federally-chartered corporation, which we refer to as Non-Agency MBS. Our MBS are primarily secured by pools of hybrid and adjustable-rate mortgage loans (ARMs) on single family residences.

The mortgages collateralizing our MBS portfolio are predominantly Hybrids, ARMs and 15-year fixed-rate mortgages. The Hybrids collateralizing our MBS typically have initial fixed-rate periods generally ranging from three to ten years. Interest rates on the mortgage loans collateralizing our ARM-MBS reset based on specific index rates, generally London Interbank Offered Rate (LIBOR) or the one-year constant maturity treasury (CMT) rate. The mortgages collateralizing our ARM-MBS typically have interim and lifetime caps on interest rate adjustments.

Because the coupons earned on hybrid and adjustable-rate MBS adjust over time as interest rates change (typically after a fixed-rate period), the market values of these assets are generally less sensitive to changes in interest rates than are fixed-rate MBS. In order to mitigate our interest rate risks, our strategy is to maintain a majority of our portfolio in ARM-MBS.

While the majority of our portfolio holdings remain in Agency MBS, as part of our investment strategy a significant portion of our portfolio is invested in Non-Agency MBS. By blending Non-Agency MBS with Agency MBS, we seek to generate attractive returns with less sensitivity to changes in the yield curve, interest rate cycles and prepayments.

Our financing strategy is designed to increase the size of our MBS portfolio by borrowing against a substantial portion of the market value of the MBS in our portfolio. We primarily use repurchase agreements to finance the acquisition of our Agency MBS and repurchase agreements and securitized debt to finance the acquisition of our Non-Agency MBS. We enter into interest rate swap agreements and interest rate swaptions, to hedge the interest rate risk associated with a portion of our repurchase agreement borrowings and securitized debt. In addition to repurchase agreements and securitized debt, we may also use other sources of funding in the future to finance our MBS portfolio, including, but not limited to, other types of collateralized borrowings, loan agreements, lines of credit, commercial paper or the issuance of debt securities.

Stockholder Information

Stockholders interested in participating in our Discount Waiver, Direct Stock Purchase and Dividend Reinvestment Plan or receiving a plan prospectus may do so by contacting Computershare, (the plan) administrator, at 1-866-249-2610 (toll free). For more information about the plan, interested stockholders may also go to the website established for the plan at http://www.bnymellon.com/shareowner/equityaccess. This website and the information contained herein (including any links to other websites or wed pages) shall not constitute an offer to sell or the solicitation of an offer to buy any securities pursuant to the plan, and any offer and/or sale of such securities will be made only pursuant to a plan prospectus described above.

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