Code of Business Conduct & Ethics


About the Business

We are a specialty finance company that invests in and finances residential mortgage assets. Our targeted investments include principally the following:

  1. Residential whole loans, including Purchased Performing Loans, Purchased Credit Deteriorated and Purchased Non-performing Loans. Through certain of our subsidiaries, we also originate and service business purpose loans for real estate investors. We also own residential real estate (or REO), which is typically acquired as a result of the foreclosure or other liquidation of delinquent whole loans in connection with our loan investment activities;
  2. Residential mortgage securities, including CRT securities; and
  3. MSR-related assets, which include term notes backed directly or indirectly by MSRs.

Our principal business objective is to deliver shareholder value through the generation of distributable income and through asset performance linked to residential mortgage credit fundamentals. We selectively invest in residential mortgage assets with a focus on credit analysis, projected prepayment rates, interest rate sensitivity and expected return. We are an internally-managed real estate investment trust (or REIT).

Investment Strategy

We primarily invest, through our various subsidiaries, in residential mortgage assets. During 2021 we successfully executed on our asset acquisition strategy. Specifically, we acquired more than $4.5 billion of residential whole loans. We also completed the acquisition of the remaining 57% of the common equity interests of Lima One, the first time that we completed the acquisition of a controlling stake in a third party entity. We are particularly pleased with the results of the business combination to date, as Lima One has achieved consecutive record quarters for origination volumes since the acquisition closed on July 1, 2021. The execution of our strategy has resulted in a 49% year-over-year increase in our residential whole loans and 39% year-over-year increase in our overall investment portfolio. At the end of 2021, residential whole loan investments comprised approximately 87% of our assets and more than 75% of our allocated net equity. During 2022, assuming economic conditions continue to support markets for residential mortgage assets, we expect to continue pursuing investment opportunities primarily focused on residential whole loans as market opportunities arise. We expect that our investment activities will continue to be financed through a combination of term loan warehouse financing, repurchase agreement financing and securitization transactions.

At December 31, 2021, our total investment-related assets were comprised of the following: $7.9 billion, or 93%, of residential whole loans (compared to $5.3 billion, or 88%, at December 31, 2020); $256.7 million, or 3%, of residential mortgage securities and MSR-related assets (compared to $400.0 million, or 7%, at December 31, 2020); and $369.8 million, or 4%, of remaining investment-related assets, comprised primarily of REO, capital contributions made to loan origination partners, other interest-earning assets, and loan-related receivables (compared to $352.4 million, or 6% at December 31, 2020).

Residential Whole Loans

During 2021, we continued to increase our residential whole loan portfolio primarily through acquisitions of Purchased Performing Loans and loans originated by Lima One. Our Purchased Performing Loan portfolio includes: (i) loans to finance (or refinance) one-to-four family residential properties that are not considered to meet the definition of a “Qualified Mortgage” in accordance with guidelines adopted by the Consumer Financial Protection Bureau (“Non-QM loans”), (ii) short-term business purpose loans collateralized by residential properties made to non-occupant borrowers who intend to rehabilitate nd sell the property for a profit (“Rehabilitation loans” or “Fix and Flip loans”), (iii) loans to finance (or refinance) non-owner occupied one-to four-family residential properties that are rented to one or more tenants (“Single-family rental loans”), (iv) loans on investor properties that conform to the standards for purchase by a federally chartered corporation, such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (“Agency eligible investor loans”), and (v) previously originated loans secured by residential real estate that is generally owner occupied (“Seasoned performing loans”).

In addition, during 2021, we continued to manage our Purchased Non-performing residential whole loan and Purchased Credit Deteriorated Loan portfolios. Purchased Credit Deteriorated Loans are typically characterized by borrowers who had previously experienced payment delinquencies and the amount owed may have exceeded the value of the property pledged as collateral at the time of acquisition. The majority of these loans were also acquired at purchase prices that were discounted (often substantially so) to their contractual loan balance to reflect the impaired credit history of the borrower, the loan-to-value ratio (or LTV) of the loan and the coupon rate. Purchased Non-performing Loans are typically characterized by borrowers who have defaulted on their obligations and/or have payment delinquencies of 60 days or more at the time we acquire the loan. These loans were typically purchased at significantly discounted prices to the contractual loan balance. We also own REO property as a result of managing the resolution of non-performing loans. A combination of strong loan portfolio performance, continued lower levels of foreclosure activity and the efforts of our asset management team, has resulted in a substantial decline in balances of REO property held during 2021.

Securities, at Fair Value

Prior to the onset of the COVID-19 pandemic, we owned significantly higher balances of residential mortgage securities (primarily investments in Agency MBS, Non-Agency MBS and CRT securities). During 2020, we sold our Agency and Legacy Non-Agency MBS portfolios and significantly reduced our CRT securities, RPL/NPL MBS and MSR-related assets. Going forward, we may invest selectively in residential mortgage securities and MSR-related assets as market opportunities arise, and we discuss the general features of our currently held portfolio below.

MSR-Related Assets

We have made investments in term notes backed directly or indirectly by MSRs. We believe the credit risk on these investments is mitigated by structural credit support in the form of over-collateralization as well as a corporate guarantee from the ultimate parent or sponsor of the related special purpose vehicle issuing the note, that is intended to provide for payment of interest and principal to the holders of the term notes should cash flows generated by the underlying MSRs be insufficient.

Residential Mortgage Securities

CRT securities are debt obligations issued by or sponsored by Fannie Mae and Freddie Mac. The coupon payments on CRT securities are paid by the issuer and the principal payments received are dependent on the performance of loans in either a reference pool or an actual pool of loans. As an investor in a CRT security, we 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 on the security owned by us. We assess the credit risk associated with our investments in CRT securities by assessing the current and expected future performance of the associated loan pool.

MBS investments held during the year ended December 31, 2020 and in prior periods included Agency MBS and Non-Agency MBS, which included MBS issued prior to 2008. Until the second quarter of 2021, we also owned RPL/NPL MBS purchased primarily at prices around par and representing the senior and mezzanine tranches of the related securitizations.

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.computershare.com/investor. This website and the information contained herein (including any links to other websites or web 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.