Q2 2020 New York Mortgage Trust Inc Earnings Call
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This conference is being recorded on Thursday August 620 20.
A press release and supplemental financial presentation within New York Mortgage Trust second quarter 2020 result was released yesterday.
The press release on a supplemental financial presentation are available on the company's website at www dot in white Amtrust Dot com. Additionally, we're hosting a live webcast of today's call, which you can access and the events and presentations section of the company's website.
At this time management would like for me to informed me that certain statements made during the conference call, which are not historical maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Although the New York Mortgage Trust believes the expectations reflected in any forward looking statements are based on reasonable assumptions. It can give no assurance that is expectations will be attained factors and risks could cause actual results could differ materially from expectations are detailed in yesterday's press release from time to time in the company's filings with the Securities next.
James Commission.
I would like to turn the call introduce Mr., Steve Mumma.
Permanent CEO Steve. Please go ahead Sir.
Thank you operator.
Good morning, everyone and thank you for being on the call today, Jason Swanner or president will be speaking this morning, as we talk to our second quarter earnings presentation that was released yesterday after the market close and is available on our website.
I will be speaking to the company's overview and financial summary sections, well, Jason will be speaking to our marketing strategy update section.
The company rebounded strongly in the second quarter after experiencing the most challenging quarter in its history.
Generating 28 cents and GAAP earnings per share 50 cents per share a comprehensive earnings and increasing its book value.
For share to $4 in 35 cents at June Thirtyth 2020, a 12% increase from March 31st.
The company is focused significant efforts on stabilizing in improving its ability to fund our investment strategy, including reducing mark to market securities repo financing to one counterparty totaling $88 million.
Completing a non mark to market re securitization money agency securities for total proceeds of $109 million in closing on the $243 million residential loan securitization in July of 2020.
Our low leverage leading into the pandemic allowed us to retain a $1 billion or non agency credit assets that experience significant price appreciation in the second quarter.
As we look at a future we expect rely less on shorter term financings that are subject to mark to market fluctuations, which we believe will help us to remain opportunity opportunistic in the investment side.
I will begin on slide six with her over here.
As of June Thirtyth 2020, our investment portfolio totaled $3 billion largely unchanged from March 31st.
Our total market capitalization was $1.4 billion up over $600 million from the previous quarter in.
Continuing to focus our investment portfolio in credit strategies with 70% of our portfolio in single family credit and 21% in multifamily credit capitalizing on our strengths in asset management, and reducing our dependency on mark to market financial borrowings.
We have 57 professionals all working from home since March 13th without any significant disruptions from our day to day routines and are prepared to do so for the foreseeable future as our country in the world deal with the Cobot pandemic.
Slide seven has a second quarter key development.
Well, we declared a common stock dividend of five cents and reinstated or preferred dividends, declaring a second quarter and our first quarter dividends in arrears for all outstanding issues.
As I said earlier, we completed a non agency RMBS non mark to market re securitization totaling $109 million.
As well as increasing our residential loan borrowings on existing lines by $248 million.
Over the quarter, we continue to reduce our exposure to the securities repo decreasing it by another $626 million since March 31st.
Our investment activity was limited as we focus on stabilizing or funding.
However, we did sell $44 million in residential loans $38 million, the non agency RMBS securities at $24 million in CMBS Securities.
In July we completed the residential loan securitization for $243 million in proceeds and subsequently reduced our mark to market financing by $231 million.
On slide eight details our current liquidity in mark to market financing exposure.
The graph illustrates a change from the first quarter to the second quarter, where you can see that we've increased our cash position by approximately $200 million ending at $372 million as of June Thirtyth and today, we have over $500 million in cash or cash equivalents.
Already covered securities and residential loans still exceed $1 billion.
We've added $109 million and non mark to market financing and reduce our mark to market financing by over $465 billion.
In July we completed $243 million on Mark to market residential loan securitization further reducing our reliance on mark to market financing.
In the third quarter, we intend to convert a portion of our mark to market residential loan financings to non mark to market with our existing lenders as well as adding.
Well new Counterparties.
On slide nine.
We show a quarter over quarter comparison of both our portfolio financing position.
As you can see there was not material changes in our portfolio in terms of size or composition.
However portfolio leverage continued to decrease from 1.4 times at December 31st 2019, 2.7 times at March 31st and finally, a 0.4 times as of June Thirtyth 2020.
Real company leverage decreased 2.5 times at June Thirtyth from 1.5 times at December 31st 2019.
Now moving onto our financial summary section I will be using some of the information from the quarterly comparative financial information section included in slides 20 to 30 as support for my some of my explanation.
On slide 11 is a snapshot of our financial highlights.
Our GAAP earnings per share was 28 cents per common and our comprehensive earnings were 50 cents per common share we declared a five cents per common stock dividends for the quarter. Our book value added $4 in 35 cents per share an increase of 46 cents per share from the previous quarter, delivering a 13.1% economic return.
And for the quarter.
Our net margin was 2.43% decrease of 49 basis points from the previous quarter, primarily due to the sale of our entire portfolio of higher yielding Freddie Mac key series Peos at the end of the first quarter.
We had $2.3 million in single family credit investments and point $6 billion in multifamily credit resident as of June Thirtyth 2020.
A reduction in France financing costs during the quarter was largely attributable to the 100 basis point decrease in short rates on March 16th as a response to the pandemic by the fed.
Slide 12, as a summary of our second quarter activity, where we had no capital market activity as compared to raising $512 billion into first quarter. We had net investment sales activity of approximately $103 million.
We had net income of $108 million and comprehensive income of $190 million attributable to our common stockholders.
On slide 13 go through the components of our financial results, where we had net interest income of $28.5 million.
An 18.6 mean the decrease in the previous quarter.
This decrease is due to the previous quarters activity, where we sold approximately $2 billion in assets in the second half of March is part of an effort to improve the company's liquidity as reaction to this reps and caused by the covert pandemic.
We had noninterest income of 100, and <unk> hundred and $4.4 million.
Primary diver. These results was a $102.9 million and net unrealized gains.
Credit markets saw significant improvement in credit spreads in the second quarter, which translate into improved pricing across all our assets.
There's a company's low leverage carried in the first quarter, we were able to retain over $1 billion to non agency RMBS and CMBS.
Which experienced the most most improvement in pricing and contributed $61 million to the total one net realized gains.
We had total DNA expenses of $11.8 million, an increase of $1 million from the previous quarter.
Point $6 million. It this increase is related to our director stock compensation, which is awarded during the second quarter and fully expense.
We expect to go for gene expenses to run approximately $11 million per quarter.
Operating expenses of $2.3 million, a decrease of point $8 million from the first quarter due to limited purchase and sale activity in the second quarter.
We would expect these expenses increased in the coming quarters as we increase our investment activities in both residential loans indirect multifamily lending.
The graph on slide 13 illustrates a change in our book value overtime with the only five year to date last component for the first and second quarters of 2020.
But they increased 12% during the quarter recovering 49 cents per share of unrealized losses experienced in the first quarter or one third of the total leaving approximately 95 cents per share remaining.
We expect the unrealized portion of these assets to further improve as the economy in markets stabilize.
We've continued to see improvement in pricing in the third quarter and estimate that our book value is up approximately 10 cents per share or 2%.
Jason will now go over the market in strategy update Texans Jason.
Thank you Steve good morning.
As the fed I'm, starting on page 15 here on market conditions.
Paul long as the fed use the balance sheet about a significant economic contraction U.S. employment rate decrease towards the ended the quarter from high of 14.7% in April to 11.1% in June.
With showing improvements in on Nonfarm, payrolls, which which is a employment rose by 4.8 million at the end of June.
At this point all eyes are on the much needed second stimulus package, which has been protracted and delays between the white house in Congress.
On sector update the on the agency side of equation, we UBS, we're seeing full liquidity at a high premiums on agency assets.
With the conforming rate now near 3% and stabilizing around that level, a steep yards are on a really rhythm and and.
Origination efforts and origination volumes is expected to outpaced expectations from earlier in the year today, a 2.8 trillion, which has likely chance of you actually I'm, beating those expectations presented.
And single family.
The strength in the housing numbers continue to upside.
HP now being revised up by most iconic analysts to a positive 1.5% range from from negative range, just a few months ago.
The strength in the housing market is a function of the high supply and housing which is now 3.5 to four month. This low level of housing supply has never produced home price declines in a market.
Loan losses are tracking some level of the prequaled levels because of the the demand and supply ratio that exists in the market. The tight underwriting levels are produced throughout 2000 <unk> throughout 2018 1920 period.
In multifamily, we're seeing national ran collections about 90% from pre called me levels did you see is continue to provide backed off financing normalizing funding through the second quarter on senior financing levels.
Also lower constructions of alleviated overcapacity concerns and various markets.
That's the pausing on the negative side, we're seeing strains and low income housing, which is significant underperformed gateway cities, which prime prime markets are showing flat to declining rather growth and look to continue to show declines going forward from here.
Looking at page 16 on investment strategies.
General comment here is that our trade activity across the portfolio is a function of monetizing gains from the security portfolios that have.
Realized gain activity in a significant price growth since the co bid disruption prices and these asset classes have then we're as low as anywhere from 65 to 75 range today or in the mid Ninetys to depart in premium ranges for a number assets.
What's the so the activity in our portfolio as Steve mentioned has been monetizing those securities and Lucky in the gains where we see very little incremental value holding those assets with respect to pricing accretion and also potential stressing the line cash flows.
Now going through both single family multifamily starting from the bottom up here on single family Agency Securities.
We currently do not see this is a core portfolio.
Our core.
Tragedy for portfolio, we don't see as attractive.
Asset class Ross at the moment.
We see excess liquidity in this market when a six star prices with a significant CPR as were 70 more than 75% of the entire housing market is available for refinance or is in the money for refinance that negative negative conducted issue. We think we'll strain future earnings in the agency assets.
The MBS side.
On an agent decided just described that we were selling securities. We actually have recently just sold off for entire non agency RMBS portfolio mezzanine bonds and sub bonds. There we were able to see prices as mid to high ninetys uneven par pricing, which was a great to see given the fact these assets were in the.
Mid Sixtys back in end of March.
On the performing loan side, we are.
Investing in this asset class, we still expect we see opportunities looking at buying it scratching onset discounts scratching at loans, which are loans that are have technical underwriting issues that are we intend to be sold agencies with the high refinance volume that we're seeing there's a signal significantly more scratching at loans available.
That are produced.
In this area the buying at a discount.
In the 85 to 90 range and with high CP ours shorten duration enables us to capture back that discount faster, which is why we're involved in that market. My we're continue putting capital there.
Pipelines and also on the fixed and flip opportunity, where this is an asset class we have.
Kind of shied away from in previous quarters, certainly before coated we saw a lot of a lot of demand in that space, where you couldn't really carve your portfolios are carved or niches new strategies given the demand that was that was there. After cobot now we are seeing plenty of originators that are.
Available to us that will create portfolios or accrete certain underwriting standards that we find attractive and we're using our competitive position with our balance sheet to find new opportunities. There, we'll talk more about that in a second.
On the distressed loan side.
We're a hold we're not seeing opportunities in new portfolio trades.
We are spending time monetizing.
Our our current assets through a number of channels, which I'll talk about the minute.
Now on the multifamily side, starting from the bottom up once again, the multifamily agency Securities. We were holders of that security were overweighting that in our agency.
Core portfolio holdings, no not not a core portfolio holding simply because of the.
Hi remains you have to pay for these assets.
And after hedging costs, the and high leverage you need to obtain a double digit return, we don't see does an attractive opportunity relative basis.
On multifamily Securities we were a.
We had a secret position of Mezni case series, Freddie Mac bonds.
Those bonds, we have seen anywhere from 90 to one O $4 price in on those securities we have been a.
A better seller them buyer in this in the sector to take the the big gains that we've realized and.
Also given the repo is longer attractiveness market for security sectors in general we don't see this as a as a double digit go forward return without any significant price accretion from here. So we think we're pretty much countdown on prices, which is the reason why we're selling.
On the joint venture equity side, we're seeing opportunities here, we need the right mix between a sponsor a property management geography, and the concept of the actual of property.
Well talk more about that but we are seeing opportunities and are able to carve the REIT strategies for our portfolio.
Similar to the press the press equity Mezz loans continue seeing opportunities here less.
Competition.
And a building pipeline of a bridge loans, which we'll talk about the minute.
[noise] switch or the two single family on page 17.
There's a portfolio.
Has not changed materially as you see in the table on the left side. We've had significant CPR is with respect to performing loans was $73.3 million of Oh.
Portfolio decline that's related to.
Prepayments that we've seen in that portfolio.
On the security side, two thirds of all of our sales we've conducted in the quarter related to RMBS Securities.
Agency Security seller, which I described earlier was conducted just recently after the quarter end second quarter end, which we'll we'll see the results of that in the following quarter.
On the right side, you can see the change of assets a lot of the gains you're representative from the security side again from 65 to $70 pricing to 95 to par pricing on asset that recovery has been meaningful and we've been able to monetize locking those gains.
Flipping to page the 18.
On a more towards our distressed management on our loan portfolio and active management here.
As an update on bar performance through 632020, 31.7% of our portfolio distressed loan portfolio entered into Cobot 19 really plans. That's the entirety of the Koby 19 really plans, we have offered and have and bars have been available that avail themselves to it.
No not surprising here. This is a number that is.
Is it is far less than even our expectations.
Earlier in the cobot period simply because of the.
Not as stressed that the bars were experiencing with respect to the feds balance sheet and.
And all the different general leaf that's been applied to unemployment rate and PPP programs, we've seen that this.
Cobot really plans were.
Basically lower than our expectation today half of the loans that are that are in a cobot really plan were previously delinquent on their loan so roughly 15, 16% of the loans here in our portfolio.
At least plans, which it for a portfolio that has which was purchased with rolling delinquencies.
And unstable payment profiles.
Purchase. This is we think a great job that was conducted by our asinine team being proactive with our servicer and enacting belief plans quickly where borrowers can avail themselves to to it.
In in active servicing for distressed loans, you basically need the servicer to had monthly if not weekly conversations with the bar on there.
On their income status and ability to pay without these efforts on special servicing we would not be able teen these types of results.
Our portfolio as a reminder is in the higher.
Home values spectrum at $450000 not looking at the top right of the this graph. This table sorry, the average loan LTV is 73%.
We have purposely intentionally bought loans.
We're in a gray area of payments, which is a bar that has made payments recently or missed payments recently.
And focusing on portfolios with low LTV, which we traditionally would card portfolios of larger portfolio sales and by the lower LTB portion of those portfolios with other bidders in the market, which is why we're able to carve these portfolios of 73 Ltd.
Our coupon to 4.74% is.
It's very attractive relative to I guess that earlier in the agency conforming coupon of 3%.
With borrowers that continue to pay and a lot a FICO score improvement comes along with those payments, we see an attractive opportunity to refinance many of these borrowers into an agency loan.
And monetize that discount that currently is that available on the portfolio purchase. So if you look down at the right table.
630 performance you can see that in our loans that are more than six month current is more than 7% hires 7% higher than it was in March which was also higher than it was pre covenant in December 2019, the portfolio continues to.
Perform and two Accretes, we're performing status that allows us to also create the portfolio and pricing as you can see that the pricing on average went from 88.24 to 89.8.
Thats a function of a payment performance and also at tighter spread in this market that we've seen recently.
The tighter.
The improvement in the performance in tighter spreads, we think will persist in the third quarter, where are you seeing gains.
In through July in this portfolio.
Now Steve mentioned earlier that we did a securitization.
And with respect to our loan portfolio the type of loans that we chose for this year's Asian were more choppier pay less delinquent loans, where we know that the monetization period would be longer than a loan that is currently performing today and availing themselves potentially to a refinance or active.
Refinance campaigns that we'll be discussing what the bar.
So this end we've.
Enabled ourselves and preserve the the realized gain activity on our clean portfolio with having those on when you're repo and with respect to the distressed loans that have more protracted approach to refinance campiness or worry more of a term securitization. We've we've entered although most of those loans into our securitization channels.
We will continue to look at discrimination market.
And.
And to remove some of the repo risk off our balance sheet, especially with respect to more of the choppier pay loans as a duration of total monetization of that loan would be longer.
Thanks.
Now switch over to multifamily on page 19.
This now represents 21% of our portfolio, we have sold down a number of AR securitization.
Freddie Mac key series bonds, those bonds, which have which has lowered that total portfolio holdings.
However, this is a asset class that we are spending a lot of time on and do you expect to have segment pipelines building.
And the preferred Mezzanines base in particular now there is an opportunity that we've entered into where we are going to be 10% of the equity in a 90% JV partnership where New York Mortgage Trust sources investments manages.
The the fundings and.
Also the active asset management with a pref equity investment in multifamily this exciting opportunity for us because not only do we get to self select the assets, which are numerous given the many banks and other funds have stepped out of this market.
We also get to.
Collect a fee stream for our asset for us for our asset management efforts with respect to 90% of the capital that's going into these investments.
So Ernie management fees for the for the right.
It is something that we can definitely lever up given our deep management capability.
As well as potentially.
Looking at more distressed multifamily.
Properties in markets that we have not been involved in but we are seeing more opportunities for us to apply our asset management team to help others with their nine focus which is a fee stream possibility for for the right.
With respect to JV or we have one position was there.
Happy to say that this is a position that was recently.
Recent prepaid after efforts with our asset management team to work with the borrower that produced a 20% plus IR and over two times multiple so the that joint venture position is longer and a balance sheet today.
Thanks.
Now with respect to direct lending.
Looking at the right side of this table on page 20.
Our portfolios that we the properties that were that we have led to.
Or in the $43 million on average range, we've a senior loan in front of us typically us pretty creative pretty pretty series K series loan.
We also have a multifamily sorry, our mezzanine loan at $6.2 million, which is a.
Average loan at 68, LTB eight 2% to our loan.
The efforts of choosing loans with strong sponsors in markets that are most predominantly the south and southeast part in the United States has produced a outperformance summary, and trend that is highly attractive in this market. We have one loan that is delinquent also under covered related forbearance. This is.
Excellent performance for our team on our 50 loans we have.
And our portfolio this is a portfolio which weve.
I have never experienced a loss on these loans that from created since.
Starting the mezzanine loan activity back in early in 2014. This as an asset class that we can actively manage we now are seeing able to see more positions with the lack of demand thats in the market with people have stepped out post coated.
With banks in particular that stopped out and with respect to lower Ltvs that are that are being available offered by the senior part of the capital structure mezzanine loans are.
I mean, a and more attractive loan for many of the sponsors that are looking to.
Conducted tenthirty want to change or simply looking to do a lease up and looking for a bridge loan.
Rental demand in our markets have continued to pile in we have.
Was it migration.
It is still continuing even with cobot northeast in particular and moving down to the south southeast part of United States has kept rental collections.
Yes, so very close to 2019 levels as its early around 90%.
We also can easy rental growth rates and the in these markets upwards of 2%, which is exciting to see given the relative performance versus markets like the northeast and prime markets in gateway markets were experiencing flat to negative price growth.
Now the switching over to page 21, the outlook here I mean, our goal is to find assets that have downside protection.
Where we can produce double digit returns without the need to obtain or utilize leverage instead of using financial leverage we'd rather leverage our operational team or asset manager team and our deep experience in credit is what is which is where we're focused.
We don't intend on.
Looking at highly Levered highly levered strategies, especially within credit.
In today's market either look to lever.
As he guaranteed assets or you look to obtain a return with.
Within credit without leverage.
And as you as I've mentioned earlier, we do not find opportunity attractive opportunity to lever guaranteed loans or bonds within the scope is within the MBS or.
Freddie Mac or Fannie agency space, we simply see an opportunity to lever our team to focus on opportunities with the vast amounts of demand has left this market.
Where we no longer in a competitive position and have.
Ample room to create our own our own supply so with that and we run a a management strategy, where we're flexible we do not own in originator and we've not per.
Looked into operating platforms, which is really providing us an ability be flexible here, we do not originate loans to continue to paying for the fees or costs related to.
Did that entity instead, we can pick and choose originators, which are numerous both within the.
The single family loan space and also being direct in them in the mezzanine space. We can now talk to sponsors without having the risk of pick our team going way related to a bank this stuff into that space.
A simpler way of saying this is allowed the tourists that we're in this market are no longer there and now it's you need to have a deep management and expertise to investment in these spaces, which is what our DNA and what our background is all about.
With that I would like to open it up with questions. So operator, if you would mind.
Taking questions we can start there.
Absolutely.
Again, I would like to remind everyone. If you will like to ask a question. Please press star and the number one on your telephone keypad.
Your first question comes on line of ever taken with KBW.
Hey, good morning, guys.
Thanks for the helpful opening comments.
Well.
I was trying to keep up with the updates on the security side that you noted since quarter end, how much did you say you've sold since the ended June.
So how big are out of the resi.
Social security portfolios now.
And then within each of those portfolios how much credit subordination do you have.
What are the what are those loans, where those securities market on a dollar basis as a percentage of car.
Yeah I think.
What I think what Jay So is trying to talk about was just give it indicates generic.
Capital markets have come back and that we did sell out a our exposure as it relates to non QM.
RMBS securities that were support bonds.
But were at this point, we're not going to give details exactly what we've sold all over all we can say is that we've been active in selling securities and to the extent that they've recovered. What we think is their maximum price potential or closer to make some price potential we're going to sell those securities. It because we think we can reinvest and better opportunities.
Right.
How about the subordination piece I mean, what what does that mean look we sold in a non QM space, we sold a bunch of B, one and B two bonds that were that we felt had some some risks related to the activities that were going on in the marketplace.
Still hold we still own some other RMBS securities. They they typically are going to be they're probably not senior bonds that are going to be that be two bonds are the two bonds.
So there won't be senior in general, but that position you would expect as we go into 930 will be.
Substantially lower than it was at 630.
Got it okay.
And then as you guys think about the impact of.
Federal stimulus on on borrowers.
The impact of performance within the portfolio. How do you guys think about that and then the fair value of the loan portfolio at the ended the second quarter reflect any assumption.
For further stimulus.
Yes, so as relates to stimulus in the portfolio obviously.
The the trends in the market have been helped by the stimulus packages and produced.
It has been extraordinary amount of stainless that's been applied to the feds balanced from the fed balance sheet, which as expected.
You know.
We and the markets.
Generally expected the second stimulus package to be rolled out after some wrangling with the White House and Congress.
Theres no doubt that Thats been health that's been.
Helpful in making the rental payments and and mortgage payments.
Within the mortgage space again, the our loan portfolio or loans were borrowers.
Having this part payments before and the opportunity there is helping the bar align their priority and also managing down that risk. So.
Theres been a pretty large savings increase in the United States.
Roughly I think numbers about 20% or two trillion dollars of.
Of personal savings rate increase in this market and a lot of what our experience in the our distressed loan portfolio was a function of that is basically helping the bar with or with their finances. So our services are trained to basically be it a financial.
Analyst for that person's balance sheet, an income statement.
A lot of the performance has really is related to that and thats. The kind of the strategy that we design for them. So it's reprioritizing.
Their debt load.
You know.
More times than not what you see in our portfolio or borrowers they actually do not have a mortgage payment related problem. They have an auto payment related wrong in that they have an auto payment that was.
Similarly, higher and helping them manage down that.
Through a sale and taking a better karlan or refinancing or helping with their their core alone.
So that's more times and not Theres, a lot of chatter about student loans.
And others, but types of ours, we have are not more of the millennial generation mortgage nx and they doors, where it's more of an auto payment problem. So.
Thats exciting for us because our borrowers have.
At the 72% LTV, we're aligned with the bar on how to help the bar manage and saved the equity they have their own.
Many borrowers are choosing to.
Sacrifice that equity and monetize it to refinance which we can help them with and are happy to do so given.
Our price point of those loans.
So your question earlier is stimulus, helping absolutely it's helping the consumer in all aspects of the market, but I think the outperformance of our portfolio given delinquency trends. We bought these loans there continue to improve through cobot is a function of reprioritizing the bars.
But.
Payment and party.
Got it and then let me just had one thing if you think about you know we are tasked with valuing the portfolio at 630. So clearly we have to take into consideration what people are thinking at 630 as it relates to valuing the asset on a dollar price when we look at the risk of our ownership of the loans and Securities go on a go forward clearly we.
We're running scenarios, where differing amounts of fed support is going to come into the marketplace, which is why some of our decision on selling into RMBS securities has been to sell some of the more support type bonds that we see it could get hurt in the event. That's that's something comes unexpected sort of marketplace. So right extent that the current markets.
Not recognizing it we are willing to sell those bonds into the marketplace. Because we think that if you look at our loan portfolio 73 LTV.
And if you look the history of us managing borrowers, who don't make consistent payments as Jason said, we think we're well equipped from an asset management standpoint to deal with disruption some borrowers payments.
Right, Okay, one more from a mine.
Yes, you noted some likely rotation into additional non mark to market funding I'm, just trying to get a sense for the funding costs.
In the Mark to market facilities, now compared to where you think you might be able to fund.
Rotate some of that funding on a non parts market basis.
Yes, it's interesting we're in we're in the process and negotiating the final pricing in that pricing has come down probably if we did a non mark to market line in may versus doing it today, it's probably down 150 basis points from where it was being offered in may so.
It's become much more aggressive in pricing and more people are getting into that pricing. So.
This time, we're not at Liberty to talk about a bit it will be substantially less than what it costs us in may.
Okay, great. Thanks for the company three to 400 over.
Yes, I understand great. Thanks for the comments I appreciate it.
Mm.
Your next question comes on line of Christopher Nolan with Ladenburg Thalmann.
Hi, guys.
Jason for the fund that Youre, describing in your comments.
The results from the fund.
Solid in New York mortgage trust balance sheet financials.
Sorry.
What fund are you referring to the one where you have on the 10% equity.
Okay, there's not a fund this is a JV opportunity we're stepping into.
Our bridge loan, where we're providing 10% of the equity okay, and we have a spot we have a partner of ours, that's providing 90% of the funding.
We are managing that risk that loan.
And for the management of that loan were collecting management fees to manage the entirety of the of that risk.
This is it is more of a bridge loan where a particular sponsor as at lease up opportunity that is being delayed because of coated.
As a strong sponsor in a.
It fairly.
Very in a in a southeast healthy where our footprint is in United States.
And there's an opportunity that we would not be able to see over the last five years because of.
Because that would be heavily back.
So just want also point out that this is not yet closed but this is in our pipeline and we do expect to close it in the near term.
All right and then a follow up on the non mark to market funding.
The terms and conditions differences there are different haircut.
How is.
What's the.
Primary difference that we should be looking for in terms of.
Costs for this type of funding, yes. So.
The loan repo financing is generally run about 60%.
Of advance rate TBD.
And in that case, we're seeing opportunities, where we're taking into securitization space, we're actually getting out pretty much close to where we have we have the repo financing.
And the last deal, we actually were able to take out little slightly more cash than we had in the repo, but it's really on top and the markets is efficiently priced there.
Where banks are offering repo and where securitizations are.
Availing themselves on the senior stock.
And again again efficient markets of financing costs are are generally starting to run into each other where prior the repo markets was significantly better financing spreads as Steve mentioned through May and say, we're seeing that spread tightened with respect to repo and securitizations as repo get slightly more expensive and repo and securitization costs.
Our coming in.
On the market was disrupted people the analysts and bond investors had a hard time evaluating what delinquency trends look like now with the stabilization of cobot forbearance and with very little loss rate that the markets experienced we're seeing that this senior stock starting to tighten where a better seller of that weve.
Again, we sold.
Nonqm bonds, and we'll against Securities, where they're kind of kept from a price point of view given par.
Pricing.
And in that and we.
She has an attractive issue being attractive issuer to issue bonds in the market that is supported by similar assets.
That were loans on our portfolio.
Final question, given its all election year.
Given that you have a portfolio, which is pretty credit sensitive.
Any sort of.
Strategies that you guys are employing to hedge your bets in case.
Theres turnover in the White house.
I think this strategy.
That weve that we've always taken towards credit is being not afraid to take over the property in the event as a crisis and so.
LTV and underlying economics of what drive our decision and getting into an investment. So look we can't we're not predictors of the future and so what we do know is properties in how to asset management those properties and so I think that's what gives us comfort and as we go forward.
Great. That's it for me thank you.
Mm.
Thank you again I'll like to remind everyone. If you like to ask a question. Please press star and then the number one.
The other question was a line of David separate.
Pre tax.
Hey, Good morning, just had a question for you've been very disciplined through the quarter you de Levered you've raised a lot of cash you think about the uses of that cash there are three of them that come to mind. One is obviously portfolio itself, but also your preferred stock trades, where lady sometime dollar.
Equity trades below book value, how do you think about buying back equity or preferred stock.
Yes look I think.
There's no question, we're disappointed where the stock trades, a common stock trades as a discount.
We have a substantial amount of liquidity today, I mean to the extent that we believe that we can generate longer term double digit returns on the asset side. We've historically not bought back common stock and just yes, it's a onetime pop to book value in that quarter, but it's so expensive to raise capital overtime and what are the things that.
That we've done pretty judiciously is trying to make sure that we rate when we raised capital it's accretive to the existing shareholder base.
And if we get to a point, where we feel like there is no investments in a rising that makes sense to invest I mean, I think we entertain possibly looking to buy back those issues, but hopefully as we redeploy this capital and drive up our earnings were going to start closing the gap in some of those valuations that would not be priority, though to buyback preferred and common.
Understood and where do you think is it more toward multifamily or single family as most investment dollars will go.
I think its wherever we think we can get the best risk return on the asset class, we're not really marry to either one the multifamily tend to be larger opportunities.
For per investment and the the residential TV that was obviously many more units per dollar but.
We'd like to in both it just so it just so happens as we delivered the portfolio the equity sort of shifted around for multifamily to residential.
And when we saw the Freddie K first loss pieces, but I you know I would suspect overtime as the multifamily represents a growing percentage relative to the overall portfolio just because we have such a high percentage residential right now.
My last question is it sounds like does is the case in July it feels like these are the trend. It's continuing of your book value increasing its continue through July is that correct.
Yes, that's right.
Thank you, yes, I had mentioned 10 cents or about 2%.
At this time, Sir we have no further questions.
Okay, well, thank you operator, and thank everyone for being on the call. We look forward to talking about our third quarter earnings in November please be safe and be smart as you go forward. Thank you.
This does concludes todays conference you may now disconnect.