Q1 2022 New York Mortgage Trust Inc Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by welcome to the New York Mortgage Trust first quarter 'twenty to 'twenty two results conference call. During today's presentation, all parties will be in a listen only mode.
Following the presentation. The conference will be opened for questions. If you have a question. Please press the star followed by the wanted to Touchtone phone if he would like to withdraw your question. Please press the pound key if you are using speaker equipment. We do ask that you. Please lift the handset before making your selection. This conference is being recorded on Wednesday may four 2020.
Sure.
Especially release and supplemental financial presentation with New York.
Mortgage test, Chris Quango 2022 results was released yesterday.
Both the press release and supplemental financial presentation are available on the company's website at cheap hold W. N Y Amtrust dotcom. Additionally, we are hosting a live webcast of todays call, which you can access in the events and presentations section of the company's website.
At this time management would like to me to inform you that the 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 New York Mortgage Trust believes the expectations reflected in any forward looking statements are based are reasonable.
All assumptions it can give no assurance that its expectation will be attained.
Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in company's filings with the Securities and Exchange Commission now at this time I would like to introduce Jason Serrano CEO and President Jason. Please go ahead.
Thank you very much welcome to our 2022 first quarter call I'm joined here in the room by Christine Arnold who will be touching on our financial results I don't speaking I'll be speaking from our supplemental that's available on our website starting on on page seven.
After a turbulent period with fed wrestling with inflation by taken an aggressive stance on rate increases fixed income market suffered a significant setback, which drove our unappreciated book value down by 6% after declared dividend of 10 cents a share providing 11% yield at the share price at quarter end, we finished the quarter with 80 basis points of total rate of return.
Despite a setback on our portfolio and asset pricing, we were able to grow our our book by record amount primarily in short duration high coupon residential industrial loans, given the high rate of redemption activity of the one in that one half year maturity alone.
We increased our portfolio by $645 million in the quarter nearly doubling last quarter's portfolio growth also we were active early in the securitization space and was able to lock in an a rated loan securitization against our longer duration, our appeal and scratch and dent loans with a two 3% weighted average cost of funds. Additionally, we locked.
We locked in our secondary Robert Bridge loan securitization at a 4.1% weighted average cost of funds both deals provide for double digit equity returns.
In the case of the BPL deal, we can now add additional leverage.
We can now add additional investor bridge loans, and our pipeline with loan payoffs in the portfolio for three years, we prepared for these deals over the holidays at year end, which enable us to quickly get these deals to the market in the quarter. We are pleased with the execution. Here Lastly, we also redeemed $138 million six in a quarter converts at par last year.
We issued a five and three quarter senior unsecured.
Note in anticipation of this redemption, which ultimately lowered our bond debt costs by 50 basis points, given our focus of nonrecourse non mark to market financing structures, we are still well below one times leverage and expect to continue with this low rate of utilization of recourse leverage.
At this time I'll pass over to our CFO Christine to provide more details on our financial results Christine. Thank you Jason Good morning, everyone and thank you again for being on the call and discussing the financial results for the quarter I will be using some of the information from the quarterly comparative financial information section included in slides 25 to 35 of the.
A supplemental presentation.
I wanted to start off on slide 11 to reiterate what Jason mentioned earlier in the first quarter of 'twenty 'twenty. Two we funded the acquisition and origination of 985 million of investments a record quarter for the company, which included $828 million and $157 million in single family and multifamily investments respect.
<unk>.
Net basis investments increased by approximately 645 million during the quarter with prepayments and redemptions fueled by repayments received on our short duration loan, but this acquisition activity. He follows on the heels of a very active fourth quarter of 2021 when we added $325 million of investments on a net base.
Yes.
Our financial snapshot on slide nine covers key portfolio metrics on a quarter over quarter comparison, the company had GAAP loss per share of <unk> 22 cents and underappreciated in loss per share of <unk> 17 cents GAAP book value was $44 36, an unappreciated book value ended at $4 45.
Down 6% from the previous quarter.
Notably despite the decline in underappreciated book value, our net interest margin for the first quarter was three point 87, an increase of 24 basis points from the previous quarter, our portfolio yield on average interest, earning assets was six point, 80% a quarterly improvement of 23 basis points the.
Increase was largely largely attributable to our continued investment in higher yielding business purpose bridge loans, our funding costs improved slightly ending at two point, 93% largely due to the two loan securitization that we completed early in the quarter that were issued at a lower cost the company's recourse leverage ratio and.
Palio recourse leverage ratio remained low at 0.5 times and 0.4 times.
Slide 10 details our financial results and slide 26 details the components of net interest income we had portfolio interest income of $52 5 million, an increase of 7 million as compared to the previous quarter. Our continued investment in residential loans, particularly higher yielding business purpose loans contributed.
Two the $6 8 million increase in single family interest income, partially offset by a point 5 million decrease in multifamily interest income due to redemptions of our mezzanine lending investments accounted for as loans.
Interest expense on our portfolio increased by $5 2 million, primarily due to increased utilization of our financing arrangements, which would include securitization and non mark to market repurchase agreements. The cash generated from these financing activities can be redeployed into our targeted assets, which will generate additional earnings for the company.
Total net interest income, which includes interest expense related to our corporate debt and mortgages mortgages payable on real estate decreased to $29 9 million as compared to the previous quarter. The increase in portfolio net interest income of $1 8 million was offset by the increase in non portfolio related interest expenses of $2 7 million.
The increase in non portfolio related interest expenses can be attributed to the increase in interest expense related to our mortgages payable on real estate.
By $5 1 million from the.
From the previous quarter as a result of the full quarter impact of the multifamily JV investments consolidated in the previous quarter as well as additional multifamily JV investments entered into and consolidated in the current quarter.
This was partially offset by a decrease of $2 4 million in expense related to the company's convertible notes, which were fully redeemed in January .
We had non interest related losses totaling $46 8 million, mostly from net unrealized losses of $83 7 million as a result of increases in rates and credit spread widening in the first quarter.
This loss was partially offset by a $3 8 million of net realized gains from residential loan prepayment activity and non agency RMB S sales of $5 7 million of preferred return generated by our mezzanine lending investments accounted for as equity and 1.8 million of other income primarily comprised of redemption.
<unk> premiums recognized from early repayment of mezzanine lending investments during the quarter.
In addition, we also generated $25 6 million of income from real estate. This income is related to multifamily apartment properties in which the company has equity investments and in the form of preferred equity or joint venture equity as mentioned in prior quarters because of certain control provisions we consolidate these property.
As in our financial statements in accordance with GAAP. These properties also incur occurred interest expense and other expenses of $7 2 million and $48 million respectively. The expenses incurred by these properties during the quarter is primarily related to depreciation expense and amortization of lease intangibles totaling 30.
$5 6 million.
After reflecting the share in the losses to the minority partners of $14 9 million in total these multifamily apartment properties incurred a GAAP net loss of $14 7 million for the quarter.
But excluding the companys share and depreciation and lease intangible amortization expenses. These multifamily apartment properties generated $5 5 million of underappreciated earnings as detailed on slide 29, both income from an expenses related to real estate increase in the first quarter and this is primarily related to the full.
Quarter impact or multifamily JV investments made in the previous quarter as well as additional multifamily joint venture investments made during the quarter, which required consolidation in our financial statements statements. We had total G&A expenses of $14 5 million, which increased compared to the previous quarter due to increase in commission salary and stock.
Talk based comp we had portfolio operating expenses of $9 5 million, which increased primarily due to the growth of our investment portfolio Chase.
Jason will now go over the Mark the market and strategy update Jason Thank you Christine.
I was speaking from page 13 for a quick update to the market and where we see opportunity.
In the BPL bridge space. The U S housing market continues to have stubbornly low inventories per cell 1 million units is 50% below historical averages.
<unk> rate approaching 6% in the mortgage will be closely looking for the evidence of supply side increases, but we don't expect another year over year Prince of 20% through National home price appreciation, we do expect prices to be range bound and a lower single digit area with this backdrop, we continue to see heightened demand to bring recently updated homing tiers of the market cash flows from.
Short duration loans provide excellent risk adjusted returns in the market.
Now switching over to scratch and dent space with higher rates bring lower origination profitability in fact, 21% lower year over year and 61% from peak profits in 2020, we're seeing originators reach back to more seasoned scratching out loans as one way to increase cash liquidity with increased volumes in the scratching at market.
Larger price discounts are available we are being selective here as mortgage rates are not quite settled we feel the best deals are yet to come and excited about the opportunity in the near future.
Switching over to multifamily we continue to see heavy migrations to lower cost markets, whereby employment opportunities, whether in Texas or better rental demand is strong as we experienced 8% year over year rental increases on our properties year over year property values are higher alongside investor ban, providing a strong market supporting our.
$671 million book.
Now turning to page 14.
Today, our portfolio is over $4 billion and we added nearly 1 billion of new investments to our balance sheet as Christine touched on earlier, we nearly doubled investment on a net basis or after pay downs and sales from last quarter $715 million of BPL alone. That's been set a new high for any quarter as discussed on previous calls.
We help to bridge operational barriers with our origination partners. While this service requires more work on our side to settle and serviced loan pools were situated as a preferred partner, allowing new channels to be built without competitive pressures.
Turning to page 15.
On financing, we believe our debt structure today is at the strongest point in the company's history evidenced by our activity in the quarter. We completed two securitizations by issuing $513 million of term debt at a weighted average cost of 3.7%.
We took a patient approach approach to transition unencumbered loans to non mark to market structures, which we believe will add value in subsequent quarters, particularly as it relates to ongoing cashman requirements such as reserves for potential margin calls.
Turning to page 16.
As shown last quarter, we continue to believe these three graphs validate the success of our strategic plan launched in 2021st chart to the left we focused on non mark to market financing, while also bringing down the overall cost to provide stable go forward return casual returns this financing.
And the second graph.
The proceeds generated from these financings, particularly in unencumbered loans portfolios drove cash.
Balances higher we timed the securitization with our portfolio growth to keep excess cash at manageable levels, which takes us to our last graph on asset rotation, we were able to increase our portfolio yield to the highest level in nearly 10 years by rotating out of securities securitization bond holdings and into higher return.
Assets.
With a short duration book predominant invested in bridge loans, we are excited about our ability to raise asset yields improve EPS in the higher rate environment.
Turning to page 17.
The single family.
The single family overview illustrates this point, where 63% of capital is allocated as discussed earlier, we expect outperformance to continue in bridge laws. Thus allocations to this sector. We remain elevated in the near term we will continue to fund new loans into our two revolvers structures, which provide an average funding costs of three 3% fixed with a.
853% average coupon that is rising given new origination trends, we expect a solid equity returns to be generated here on BPL rental we previously discussed launching this loan investment strategy at the end of last year.
Where we locked in 50% for pipelines of originators in this space we are.
Actively.
Adding to this portfolio and locking in a high 6% note rates, which is vastly improved from the 8.81% in Q1. Our goal is to achieve 100 basis points NIM under Securities Asian to pave the way for a double digit go forward equity returns in discretionary market, we are seeing increased loan pool offerings.
Which can be purchased at 10% plus discounts large pools originated a year ago. They have note rates are less than three and three fours are particularly illiquid, we feel prices made cheapen up here. So we are being very selective on new acquisitions for better opportunities Lastly, as a quick note. We added total portfolio leverage this slide to pick up.
Nonrecourse portfolio financing such as Securitizations the data.
The data point is most meaningful for our RPM portfolio.
As we have three securitization outstanding and a total portfolio leverage of six times versus recourse leverage of two times.
With this low cost of debt against a stable asset pool of 64% LTV. We can also generate equity returns. Unfortunately, we don't see opportunities to add exposure here in this market.
Turning to page 18, just as a backdrop on our BPL strategy. We are pleased on how our PPO portfolio has performed and improved new pipelines that we are seeing borrower credit profile is strong and experienced we focus on transition plans that are not complicated to help manage extension risks of repayment ltvs are low.
So and this is without considering the 20% national HPA pick up in the last 12 months today, we generate about $120 million to $150 million per quarter in pay offs and this book, thus with modestly higher Norte rates that are available in this market, we expect it to improve our interest income after the reinvestment.
Turning to page 19, now switching over to the multifamily portfolio, where we have 30% of our capital allocated our portfolio is now weighted towards JV equity investments. The portfolio continues to exhibit solid performance with low LTV and high coverage ratios, we expect to produce 12 to 17 Rovs on this portfolio.
As many of our properties produced elevated cash flows under high occupancy and improved rents, however, and mezzanine or JV.
Investment has vastly different paths to recognition of return, which I'm going to describe in some detail over the next few minutes.
Turning to page 21st our focus in the multifamily is in secondary tertiary markets, primarily in the south and South East, which is a continuation of our strategies from previous quarters.
<unk> B minus three class a garden is doomed rise that contained 200 4200 to 400 units.
Average rents about 12 to $150 is what we're focused on we look for properties, where a solid business plan can be conducted across acquisition renovation asset management and disposition, we target a transition plan, which typically includes updated interior units or common areas due to deferred maintenance and.
Poor management, we generally find slightly improved local competitive product offering more amenities at higher price points. Thus, we look to offer tenants good value at a desirable location, particularly with the rent freezes on that had been experienced in these markets.
Now turning to page 21 on the cash flows starting with mezzanine, we fit in we fit in the mezzanine just below the senior loan up to a 19, 95% LTV before transition and 80%, 85%. After the effect of the transition plan restructure a coupon 11, 12%.
And collect an origination fee on this product payments.
Payments are structured as a component of harp pay and pick to support asset transition plan.
After transition is complete we are typically paid off in either a sale of a property or a recapitalization. The loan is subject to minimum return hurdles of one three to 1.5 times loan amount at pay off. This is a this is fairly straightforward in this table turning to page 22 on the JV side.
J B the JV equity contains a lot of noise in reporting.
We are honored the capital stack in a common equity position shared by our sponsor who is the operating partner at a 70 525 split or up to a 95, 5% split.
We targeted a 13% to 17% total return after collecting as management fees have zero about 50 basis points to 100 basis points of rent collections and work with partners under a promote arrangement, which creates great alignment between us and our sponsor we receive and report in our financials rents less calls.
<unk> and consolidate property level debt expenses typically from a senior mortgage loan. Additionally, and according to GAAP, we fully depreciate the property on a straight line basis over a 30 year period and book expenses related to amortization of lease intangibles also a noncash GAAP measure consequently, both GAAP measures lower our properties original.
In each period until the asset sold these expenses do reduce our earnings on a GAAP basis until the property sold thus the balance of earnings.
Is booked in the tail end of the investment. However, we do see opportunities to pull forward returned projected returns under new disposition plans, which is which is currently being evaluated.
Yeah.
Turning to page 23 in summary, we have built a significant channel deploy our cash generated organically through portfolio of cash flows shortening the duration under alone.
Investments has cleared a challenge to reinvest to raise the company's earnings we want to remain flexible in doing so as we expect the ability to as.
As we expect the ability to be flexible, we'll provide certain key advantages. Our goal is to just demonstrate the advantage to you over the coming quarters at this time I'd like to pass the call back to operator for questions. Thank you.
Thank you ladies and gentlemen, if you have a question at this time. Please press the star and then the number one can you touch tone telephone. If your question has been answered or you wish to remove.
Get yourself from the queue. Please press the pound key.
Our first question comes from the line of Doug Harter of Credit Suisse. Your line is now open you may ask your question.
Thanks, I was hoping you could talk about the opportunity you see to continue to access our securitization financing kind of given the volatility in that market and kind of how you see total portfolio leverage total portfolio size continued to trend.
Yeah, obviously securitization financing is more expensive.
And there's a.
A lot of season loans are being cleared in the securitization market off warehouse lines with producing higher issuance in the calendar.
We completed our securitization on our RPM pool and subscribe to net loans at the early part of the year.
We really have little financing needs as it relates to that part of book is we're not adding to our pls.
And in our in the foreseeable future.
As it relates to our growth in our portfolio. It's in it's within the bridge loan space.
And in that area, we're doing a combination of a.
Securitizations, which we've completed two and have revolve restructures against those for payoffs I discussed the $150 million of.
Payoffs that we get on our portfolio to reinvest that cash which will be doing and financing in the form of those two securitizations as well as.
Non mark to market nonrecourse repo structures, as well, which we completed and closed in the quarter.
So we feel we're set there on the financing side as it relates to Securitizations and the only other space that we know that.
<unk> does come up is in the <unk> channel. These are loans to investors that are renting homes.
In that case, we just started our acquisition process, we are seeing an ability to raise.
Coupons pretty dramatically given the rate changes in the market and the demand that continues to come spilling in from the rental investors in the market so in that space.
But we do have a non bulk nomarch market and mark to market structures for repo with one year.
Terms with evergreen structures as well.
And in that space, we do believe with respect. The fact that we have just started the acquisition process that we could blend in the higher coupons to generate a 100 basis points of NIM on it on a future securitization.
No that would be in the form of a let's call. It a $500 million deal, where we're pulling down about $50 million of equity in that transaction. So it's not a lot of issuance from MMP and the go forward future.
Okay. Thank you and then last quarter you the board put in place a share repurchase share repurchase authorization.
Could you just talk about you know kind of how are you with the board or are thinking about utilize or not.
Yeah, we put it in place last quarter, we're evaluating it alongside of our share price with respect to opportunities and cash needs.
You know that that's something that is discussed on a quarterly basis, and we will continue evaluating the opportunity there to purchase shares.
Okay. Thank you.
Thank you. The next question comes from the lineup Bose George of <unk> Double Your line is now open you may ask your question.
Again your line is open.
Hey, good afternoon, sorry, I was muted.
Actually when I try and calculate sort of an operating number for this quarter and they pull out that $83 7 million unrealized gain you said a way to do it. So then that would be like 19 5 million so five ish.
Kind of operating earnings.
You can look at it that way yes.
It will be five cents backing out.
Unrealized losses.
And part of the.
Part of the reason, we went through and describe the closely.
The JV opportunity, we have we believe delayed recognition of gains in that book in that it produces roughly anywhere from five to anywhere from 5% to 6% kind of annualized return, but we do expect a north of 15% return on that book.
So the difference.
And there is just that the choppiness of how that return will be recognized in the fact that the sale that part of the <unk>.
The reason why our EPS is.
Is a bit lower in that we switched our book to focus on <unk>.
The middle part of the early part of last year, and we recognize that book would have a wouldn't have linear level yield accounting, we hold it as well.
Ed.
Acquisition price minus depreciation amortization and would recognize the gain at point of sale and.
We feel very strongly that there are some there are gains to be had and we are evaluating.
And approached disposition related some of those assets.
Okay. Great. That's helpful. Thanks, and then can you just get a book value quarter to date, just an update.
Yeah I'm looking at the.
The markets, we believe were roughly down two and a half or 3%.
As of this week.
On book value.
Okay, great. Thanks.
Thank you. The next question comes from the line of Jason's too wide of Jones trading. Your line is now open you may ask your question.
Alright, great. Thank.
Thank you.
Could you give us an update on the 45 million <unk> rental properties that she bought and sort of where do you think that strategy goes.
Yeah that is a new strategy that we have started deploying.
It's related to assets that have.
Cooper rental rates that are fixed and adjust with government.
Pricing levels, we feel that in a in a down turn market. This is a asset that will outperform and has kind of been forgotten about for from a lot of the <unk> rental investors in the market. So we've been accumulating assets that have these rents that.
No very much.
Guaranteed by the housing authority.
And it's a small portfolio, where we're looking for opportunities to continue growing and do you expect to do so.
In the coming quarters.
Great any idea of sort of geographic location or maybe you could give us a price point for the homes.
Yeah. So I mean the strategy here is that we're we're not focusing necessarily on the markets with the strongest HPA.
Backbone quite the opposite way, we're looking at markets, where HPA has not been.
As prevalent and where you do not have to pay.
Raise prices too.
To counteract or to take in account some each day or rental rate increases that the market has seen.
So our markets are typically in.
Markets were flattish.
Even with the positive 20% HVA market we've seen.
Call it anywhere from 5% to 10% HVA markets.
Where we can buy high cap rates and not necessarily pay for each day. So it's a different type of strategy, where you know HP has been a big part of the <unk> investment landscape, we're focused on the.
The annualized returns on a capital basis.
And giving up the HPA upside by not going to those markets with a lot of that.
As presented with what HPA recently.
Gotcha, and then could you just give us some help on who's operating that portfolio of third party internal any color there.
Yeah, I mean, the acquisitions are made on our side, we have hard property managers to work through the.
Do the assets.
We are.
Likely not going to be in 20% to 30 different markets, we're focused on probably closer to $10 15.
And we have you know.
Operators with boots on the ground those markets too.
Worked through our assets.
<unk> asset management.
Gotcha, Okay, great. That's it for me thanks.
Yep.
Thank you. The next question comes from the line of Christopher Nolan of Ladenburg Thalmann. Your line is now open you may ask a question.
Christine multi.
Multi the increase in multifamily interest expenses I E.
Discuss sterling can you give a little color on that why it jumped so much.
If you remember we described that transaction in the fourth quarter. We're in we consolidated a chunk of our multifamily investments and that happened really latter part of December . So if you look at fourth quarter, there's barely any P&L pick up in terms of interest expense and rental revenue as it relates to those JV consolidation.
And so in the first quarter, you'll see the full quarter impact there Chris.
Okay.
Follow up on both his question in terms of the operating EPS I mean, it seems to be comprehensive.
The EPS and the deprecated EPS seem not to fully capture what the earning foods rolled to supporting the common dividend.
Should we expect some sort of new EPS measure, which excludes unrealized gains or losses and excludes non cash charges from you'll see jv's.
Well, we did show on depreciated.
Earnings, which already backs out depreciation and amortization as it relates to these consolidations, but I think we how we view the company is more from a book value perspective, which you should consider you know mark to market changes and I don't foresee and something we have to evaluate obviously going forward. If we weren't to show another metric is backing out any unrealized.
<unk> gains or losses in the future.
Another component too.
Through our earnings.
We've always had two components. The first is our interest income. The second is gains recognized from realizations of assets either bought or discounts or that have appreciated that is.
Ben and a part of our story for the last two years.
In that case, we have one particular strategy, obviously within the multifamily sector that we do not recognize gains of appreciation for.
28 out of 32008 out of 30 of our assets that we have in the balance sheet. So.
When we look at our earnings and support earnings for our dividend. We look at two things look really three things our current interest income our ability to generate additional returns on the assets that have a more medium term back ended.
Profitability, our proposition and the third is we have.
<unk> been able to increase our asset growth and portfolio growth through unencumbered.
Encumbered assets that we've been financing and we're doing two things there, we're putting more loans to market at higher coupons.
And we're also able to reinvest the assets we have in our balance sheet at higher coupons as well so we do expect.
As it relates to the interest income component to our plan to increase due to the fact that we are able to rotate our short duration book into higher coupon assets.
Relatively quickly and we also do expect to put more assets to work and the cash that we have generated from some of the unencumbered financings.
Okay I'll get back in the queue. Thank you.
Thank you again, ladies and gentlemen, if you had a question at this time. Please press the star and the number one key on your Touchtone telephone again, there will be no star wanted your telephone keypad.
The next question comes from the line of Eric Hagen of <unk>. Your line is now open you may ask your question.
Hey, Thanks, Good morning, just a follow up on the scratch and Dent can you talk about the modification that's being given to the borrowers there in most cases like what kind of mortgage rate.
Or term or are they getting relative to what they had.
And then I think you also mentioned holding liquidity to meet margin calls.
At this point would you say the potential for a margin call.
It's more likely to come from the mark to market or is it more.
More sensitive to the kind of haircut or advance rate is.
As the debt rolls over or is it both.
Yeah, I'll start with that question.
My comment on the Herrick the cash for margin calls.
That's something that we believe we have been.
It is more of a limited situation to us given the securitizations that we've completed so the point was that we can be more active with our cash.
Because we don't have to hold back.
Excess casualty the potential margin calls on mark to market lines, our focus as you see in our financing graph we've.
Focused on non mark to market or.
And securitization financings so.
Back in 2020 that was that was obviously quite the opposite where the financing was mostly focused on mark to market financing short term repo. So we can be more.
We believe we can be more efficient with our cash given that we do not have to hold back for potential risks there.
Obviously as much as we did in 2020.
And we're also excited about the ability to put that cash to work in the higher coupon assets. So as it relates to your second question. So the scratching in a portfolio that we buy is our loans that have.
That are current and have made payments since origination on the loan for the Peru.
The supermajority of portion of the portfolio very limited cases, where borrowers has failed that make a payment and the reason why we're able to get this loan at a discount is because the originator had a origination deficit that was caught by Fannie and Freddie typically which is typically a reporting issue.
Or a another measure that wasn't accounted for so.
If the borrowers it needs to receive their coupon in debt service payments by a certain day and that data has been delayed and in return then that loan is not deliverable to the Gse's. As an example, so thats loan disclosure language that need to be received at a certain time.
We typically see that as issues, we were able to buy these loans, which we believe are just technical.
Have technical origination issues, but you know that the.
Did you see as a very tight restrictions on.
All these measures for QM and therefore, we were able to buy those onto discount. So it's not in the form of modifications that we're buying and that's the scratch and dent that's a different type of loans that were not involved in from the new origination perspective.
That's helpful and on the Mark to market component.
Wasn't referring so much to the current mark to market, but can you address the change in haircut or the potential for.
Our loan warehouse haircuts to change as that rolls over.
Yeah, I mean, we obviously in our our mark to market lines, which are limited.
There has been some margin calls very well.
Obviously able to meet all of those and.
It is a very small piece of our puzzle right now so we have to comment on what haircuts are across the market is.
It would be.
Relevant for us given the low exposure, we have to that sector.
Gotcha, Thanks, a lot.
Thank you I am no showing no further questions at this time I would now like to turn the conference back to Mr. Jason Serrano, CEO and President Sir.
Yes. Thank you all for joining the call.
We look forward to our second quarter 2022 discussion I have a great day.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect.
Yes.
Yeah.
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Yeah.