Q3 2023 MFA Financial Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the MSA third quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If you'd like to ask a question. Please press one zero if you should require assistance during the call. Please.
Press Star then zero as a reminder, this conference is being recorded I would now like to turn the conference over to your host Hal Schwartz. Please go ahead.
Thank you operator, and good morning, everyone. The information discussed on this conference call today may contain or refer to forward looking statements regarding MFA financial Inc, which reflect management's beliefs expectations and assumptions as to Mfa's future performance and operations. When used statements that are not historical in nature, including those containing words such as.
Well believe expect anticipate estimate should could would or similar expressions are intended to identify forward looking statements. All forward looking statements speak only as of the date on which they are made these types of statements are subject to various known and unknown risks uncertainties assumptions and other factors, including those described in Mfa's annual.
Report on Form 10-K for the year ended December 31st 2022, and other reports that it may file from time to time with the Securities and Exchange Commission. These risks uncertainties and other factors could cause mfa's actual results to differ materially from those projected expressed or implied in any forward looking statements. It makes for additional information.
Regarding mfa's use of forward looking statements. Please see the relevant disclosure in the press release announcing Mfa's third quarter 2023 financial results. Thank you for your time I would now like to turn this call over to Mfa's, CEO and President Craig Knutson.
Thank you Hal good morning, everyone and thank you for joining US here today for MFA Financial's third quarter 2023 earnings call with me are good Monday, Christiansen and Brian Wilson, Our co chief investment officers and I would also like to welcome Mike Roper, who was appointed as our Chief Financial Officer in September Mike.
Served as our Chief accounting officer for the last two years was our controller for three years before that and has been with MFA. Since 2014, I look forward to introducing Mike to more of our shareholders and research coverage professionals during upcoming equity conferences and phone calls.
It's beginning to sound like a broken record, but once again the interest rate environment and the most recent quarter of this year was extremely volatile and certainly the most challenging quarter of 2023, and perhaps the most difficult quarter since the current fed tightening cycle began 20 months ago.
The fed does appear to be at or near the end of the tightening cycle, while the bond market continues to adjust to the notion of higher for longer. In addition, exploding budget deficits and a wall of anticipated treasury borrowings over the foreseeable future is weighed heavily on the market as these treasuries need to find a home.
World, where the fed foreign investors and domestic banks three of the largest buyers over the last 15 years are on the sidelines.
You are also no doubt heard on other earnings calls that agency MBS are at historical Wides, which is true at least prior to the end of last week, but again the absence of the major buyers over the last 15 years would suggest that the historical range needs to look back further than 2008 mortgage spreads R&D.
Very wide today, but they were at similar levels and 1980, 6%, 87% and 1990, 9% in 2000 and in 2008 before the fed began its first round of QE.
World is still a nervous place with two active wars, and a global and global economic uncertainty. So it's difficult to envision a completely mellow bond market anytime soon.
The third quarter of 2023 was notably characterized by the sharp increase in 10 year interest rates, which significantly flattened the curve, although still inverted. The 210 spread is now just over 30 basis points, which is as much as 65 to 75 basis points less inverted than it has been for much of the.
Last year, and while the less inverted yield curve should improve the outlook for Levered investor returns going forward. The rapid rise in long rates and heightened volatility mostly during the month of September punished market values of fixed income investments and of mortgage investments in particular MFA.
Mfa's GAAP book value was down six 5% and our economic book value was down eight 5% in the third quarter, we do not yet have loan marks for October month end, but given the rate rally in mortgage and credit tightening that occurred last week, our book value was probably flat or maybe up slightly a percent or two since September.
<unk>.
Despite the unrealized fair value losses on loans that are substantially performing we did have some bright spots in the third quarter.
Distributable earnings came in for the second consecutive quarter at <unk> 40 per share and comfortably covered our <unk> 35 dividend.
Our net interest spread increased again to 217 basis points and our net interest margin increased again to 302 basis points for reference a year ago. Our net interest spread was 164 basis points and our net interest margin was 243 basis points. So both of these measure.
<unk> have increased by more than 50 basis points over the last year and this during a period, where the fed raised the funds raised by 300 basis points going back to September 21 of last year we.
We continued to fortify our balance sheet, increasing non mark to market financing on our loan portfolio from 73% to 77%, while maintaining substantial liquidity ending the quarter with $300 million of unrestricted cash.
This was due in part to executing two securitizations during the quarter collateralized by $600 million of non QM and single family rental loans subsequent to quarter end, we executed another securitization in October of $225 million of transitional loans.
We acquired $800 million of loans and $150 million of agencies during the quarter with an average coupon on the loan purchases of nine 9% credit performance continues to be strong with only a very small increase in delinquencies in our purchase performing loan portfolio from two 8% in Q2 to three 1%.
In Q3.
Fortunately, we continue to benefit from the hard work we did in late 2021 in early 'twenty, two which effectively fixed our funding costs. While we now have attractive investment opportunities to add new assets at very accretive yields.
And as we show on page eight of our earnings deck very few of our three plus $1 billion of interest rate swaps matured before the fourth quarter of 2024 finally, our wholly owned business purpose loan originator Lima, one continues to produce successively higher volume levels of high yielding and high quality assets.
Lima deliver significant value to MFA shareholders as a substantial source of internally generated and serviced assets and I will now turn the call over to <unk> to discuss our portfolio activity in Lima, one in more details.
Thanks, Craig.
Similar to the last few quarters. We've continued to have success in sourcing high quality high yielding assets and acquired over $950 million of loans and securities in the third quarter growing our investment portfolio by 5% to $9 3 billion.
Business purpose of non QM loans accounted for majority of our acquisitions at over $800 million.
The new loan acquisitions had some of the highest coupon than <unk> seen in a long time with an average coupon of approximately nine 9% and a strong credit profile with average LTV of 66% and average FICO of 715.
We also continued to execute on our agency MBS strategy and added $152 million of agency MBS in the quarter growing that portfolio to about $525 million.
With agency MBS, yielding over six and a quarter and the spread remaining at historically wide levels. We believe that agency MBS attractive on a standalone basis, but they also provide risk management benefits to our credit focused portfolio by improving portfolio liquidity and having the potential to perform well during periods of economic softness.
You saw that thesis play out over the last two weeks when agency MBS spreads tightened by about 15% to 20 basis points as rates rallied sharply on modestly softer economic data and the prospect that the fed might be done with raising rates.
When we factor in financing levels and appropriate leverage we expect mid teens return on equity for our third quarter additions and see similar return levels for assets that we're adding in the fourth quarter.
Significantly higher rates and spreads in 2023 compared to the last 15 years combined with our unique ability to create our own credit assets through our wholly owned business purpose loan originated Lima, one has allowed us to add high yielding assets for our balance sheet throughout this year.
We have acquired over $2 1 billion of loans in 2023 with an average coupon of approximately nine 7% with Lima, one originated loans accounting for about 75% of that.
This has led to a significant increase in the yields on our interest, earning assets, which added $6 three 5% in the third quarter is up 25 basis points compared to the second quarter and up 111 basis points from a year ago.
As Craig mentioned in his opening remarks rates rose significantly in the quarter with a 10 year treasury rate up about 75 basis points. We continue to actively manage the interest rate risk in the quarter and reduced our net duration down to 105 basis points from 190, and 119 basis points at the end of the second quarter, we executed.
Two securitizations of longer duration, non QM and <unk> loans for a total of about $600 million UTP of loan securitized and adding about $130 million of mostly 10 year interest rate swaps.
Fourth quarter, and we continued to manage our interest rate risk of completing another securitization of $225 million of transitional loans and adding over $180 million of 10 year swaps, bringing our duration further down to about 100 basis points.
The economy remains resilient in the third quarter with the third quarter GDP coming in at four 9% significantly in excess of market expectations.
The labor market has cooled a bit from the Red Hot pace. It was on in late 2021, and 2022, but remains robust with three months average non farm payroll growth of 204000, and the unemployment rate of three 9%.
The housing market has performed well this year, despite higher mortgage rates and lower affordability.
Home prices are up about 5% year to date with low inventory and general lack of housing supply outweighing low affordability.
The ongoing strength and resilience of the labor and housing markets continue to provide support to our credit portfolio.
Turning to <unk>.
Lima, one originated $671 million of business purpose loans in the third quarter, a 15% increase over the second quarter and a record quarter for the company.
<unk> continues to demonstrate its value to our asset acquisition strategy accounting for over 80% of Mfa's loan acquisitions in the quarter.
Lima has originated about $5 billion of business purpose loans.
For our balance sheet since our acquisitions over two years ago, a great achievement and in excess of our expectations at the time.
The majority of lemurs origination in the third quarter was focused in the shorter term transitional loans, which accounted for about 85% of third quarter origination.
Demand for <unk> products and services remained strong with disruption in the private lending space and less competition from regional banks, providing opportunities to grow market share and attract talent in this space.
We expect fourth quarter origination volume to be modestly lower at around $550 million to $600 million and full year 2023 to be about $2 2 billion.
Credit quality remains fundamental to our BPL strategy and the credit statistics on Lemus third quarter originations remained strong with average LTV of 65% and average FICO score of 754 on loans originated.
The 60, plus day delinquency rate of our BPL loans originated by <unk> ticked up to three 2% in the quarter, but remains slow and well within our modeling expectations for this asset class.
The increase was mostly due to a very small subset of borrowers that became delinquent in the quarter, primarily on the longer term rental loans in that respect the increase was mostly idiosyncratic with overall delinquency levels in line with expectations.
As it relates to delinquency management and loss mitigation in general it is important to emphasize at Lima. One is a highly experienced BPL servicer, which was originated and serviced BPL loans since 2010.
With Lima, one we are all asset management servicing and construction management of our retail loans in house and we believe this combined with Msa's own extensive credit and asset management experience allows us to manage delinquencies efficiently and effectively.
Historically in the aggregate MFA has had no net losses and liquidations of ship seriously delinquent loans Oreo out of our BPL portfolio, which includes over $7 billion of acquisition and over 3 billion of payoffs since 2017.
We remain focused on liquidity and availability of financing to support our BPL origination.
We issued our seventh rental loan securitization in the quarter, we securitized over $200 million of Lima, one originated loans and also expanded our transitional loan financing capacity by $50 million in the quarter.
Fourth quarter, and reprice, our third revolving transitional loan securitization securitized over $200 million of Lima, one originated loans, bringing total outstanding securitization for that asset class to over $600 million.
The revolving nature of these securitizations means that we can efficiently finance new loans and construction draws in the transactions as older loans pay off.
And now I will turn the call over to Brian Wilson, who will discuss mfa's securitization activities portfolio credit performance in more detail.
Thanks, Good Monday.
In the third quarter securitization markets exhibited something resembling a roller coaster Orion as spreads rallied into August and subsequently widened out in September due to elevated supply combined with some sympathy widening along with agency spreads.
We were able to execute two securitizations in the quarter one of them back by $343 million of non QM collateral pricing at the end of August followed by a securitization of over $200 million in Lima, one originated <unk> loans in September locking in a six 7% and seven 2% cost of debt.
Respectively.
And as <unk> previously mentioned post quarter end, we issued a third revolving securitization backed by $225 million transitional loans originated by it anymore.
It's worth mentioning again that these structures provide immense value to MFA as we are able to substitute in new loans and subsequent draws with cash generated from payoffs of existing loans.
We have now issued securitizations backed by over $6 5 billion of MFS purchase performing loans since 2020, and the percentage of loans financed by Securitizations is now over 60%.
And although sometimes spread navy spreads may be wider than we would like we are committed to terming out more of our funding through securitization and expect to come to market again in the fourth quarter.
We continue to believe that mortgage securitization is an important part of our business strategy as it provides for nonrecourse non mark to market financing is further insulates us.
Insulate the portfolio from volatile markets.
Moving to our credit performance.
With the backdrop of a strong labor market and a continuing limited supply of homes for sale credit in our portfolio continues to do well.
During the quarter, we had a slight uptake in 60 plus day delinquencies in our purchase performing portfolio to three 1% from two 8% in the second quarter.
This increase remains well within our expectations when we modeled out our expected cash flows for the portfolio.
60, plus delinquencies in our legacy <unk> NPL portfolio improved again by one five points.
Over the quarter to 25, 9%.
Our in house expertise in asset management remains focused on working with our third party servicers to resolve remaining delinquent assets in that portfolio to the benefit of our investors.
And working through over $3 billion of distress loans, our asset management team has gained vast experience, which has not only benefited our legacy <unk> and NPL portfolio, but our newly originated portfolios as well as an example, our in house asset management group works well with our servicing team at Lima, one, which helps reduce risk when delinquencies horizon, our BPL portfolio.
Palio.
Prepayment speeds in our portfolio were relatively stable quarter over quarter.
<unk> remained in the mid to high single digits for our non QM SSR and legacy RPM NPL portfolios.
For the transitional loan portfolio, we had an annualized prepayment rate of 37%.
Total paydowns.
We're again over $400 million for the quarter, which were reinvested into loans carrying a coupon of approximately 250 basis points higher.
Lastly, we continue to take advantage of the lack of supply in the housing market selling properties out of our Oreo portfolio.
Over the quarter, we sold 77 properties for $26 million, resulting in over $3 million in gains.
We believe the low LTV of our portfolio combined with prudent credit underwriting of our portfolio well positioned for the current economic environment.
And with that I'll turn the call over to the operator for questions.
Thank you, ladies and gentlemen, if you'd like to ask a question. Please press one zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press one zero at this time.
And one moment. Please for your first question.
Your first question comes from the line of Bose George from <unk>. Please go ahead.
Hey, guys good morning.
Good morning Bose.
Terms of negative fair value Mark that you guys took this quarter.
Fully recoverable.
You usually have that slide or how much of your book value is sort of upside to book value is that can you just sort of jealous.
Tell us where that stands as well.
Hey, Bose this is Mike <unk>.
Ill, let Jim talk about the unrealized losses, but that number $4 57 and 930, okay. Great. Thank you.
And so as you know those boats.
The vast majority of that is on loans, which for the most part we get back at par so the.
The change in fair value was really due to market interest rate movement overwhelmingly.
But obviously it takes time to recoup part because things don't prepay as fast in the current interest rate environment as they once did.
Okay, great, yes that makes sense, thanks, and then actually.
Switching to the transitional loan portfolio.
The multifamily that 49% of that's multifamily is it take out for most of that.
<unk> permanent financing.
Yes.
This is <unk>, yes, that's correct the vast majority of that if not all.
<unk> small balance agency take out and if you think about the multifamily part of the transition of loans. These are small balance multifamily loans. The average loan size is about $3 2 million.
So these are really small loans in that context, and so and most of them are concentrated kind of in that.
The south and the southeast.
Where there is great demographic trends and things of that nature and yesterday when almost all qualified for the small balance hiccup.
Okay, great. Thank you.
Thanks Bose.
Your next question comes from the line of Steve Delaney from JMP Securities. Please go ahead.
Well good morning, everyone and Hello, Mike Robert Nice to meet you Rob on a call.
Absolutely I'd like to.
I'd like to start with with Lima.
<unk> I mean the numbers there.
Given the environment in particular that we're in.
The broader mortgage market in <unk> and CRE.
Just kind of remarkable and I'm just.
Curious like if Craig you had to attribute it to.
One or two things.
Are you recruiting there are you seeing competitors go out of business, maybe just strategically some color.
How and why Lima is performing.
So well as it clearly is thank you sure. So I'll start with Steve and then I'll, let good wonder.
I think.
The answer to your question is yes, and yes, <unk> has been hiring in may have been hiring experienced people from each.
Either former competitors or diminished competitors.
Thank you.
Lima, one has has continued to expand in and grab market share where others have had faded to some degree and I think.
That's for a lot of reasons right.
Very tight operation, which we knew long before we bought them.
But also the fact that.
The way that MFA and Lima, one interact as really one organization and so.
It's not an originator that's originating loans.
Wondering sort of what they're going to they're going to do with those loans.
Very integrated operation and we.
We price loans together.
We're obviously very involved in the securitization market and so we have an immediate feedback loop in terms of loan pricing.
So it's a lot of things, but obviously, it's worked extraordinarily well.
And how great yes.
Go ahead I'm sorry.
Sorry, if this has been at.
Craig brought up is a really important point so like.
As the organizations are fully aligned.
All moving in the same direction. So one of the things that we have that is quite unique is that we have a combination of skills that are that are both macro and micro and so usually originators are operating independently the refining borrower.
Loan buyers to buy loans and things of that nature, but what we have been able to do over the last two and a half years.
Lima learn from MFA and MFA to learn from Lima, and take all of those lessons is to create a more robust organization and I think especially in 2022 that was quite important because rates were rising rapidly in the securitization markets are changing quickly and it's getting harder to do deals people. They were active in the space before buying loans move.
The way so it was a tremendous amount of disruption in 2022 and with our combined effort, we were able to make sure that we had enough liquidity, but also the strategic focus on focus on high quality borrowers and what that allowed us to do is actually go upstream in terms of credit quality in 2022, when smaller originators were exiting the.
Business and so the credit quality of our transitional loan portfolio has improved tremendously over the last two years, but at the same time, we have increased volume and I think that could not happen unless you've combined our efforts.
<unk> expertise sourcing the borrowers underwriting closing and then mfa's expertise on the securitization front, but also on the kind of macro economic and housing front. So I think that is a really really important point. The other thing about <unk> is unique is that they are highly diversified and so on.
Austin.
Smaller lenders they will be specialized in a certain segment of the market with Lima is really well diversified across our products. So as demand shifts with real estate investors Lima is able to continue to maintain a sizable volumes of attractive credit and so they are diverse.
In terms of product geography distribution in terms of borrower concentration and that is a really really important concept in terms of growing the portfolio.
So means for the future is that we don't have to our concentration in any of these market isn't too big So there is tremendous upside for us in the years ahead as well.
Well congratulations on what you've accomplished they're all around Craig one quick one for you.
Are you looking at your valuation now trading around <unk> 70, a book and the yield up at 14.
What are your thoughts.
And anything you can share as far as the board's thinking on the balance between the dividend and share buybacks given your current market valuation. Thank you and that's it for me.
Sure Steve So I think it's actually probably closer to 15% given where it's trading but I think if you look at our dividend our annualized dividend.
Economic book value, it's about 10%.
That feels like about the right place right.
Good Monday mentioned that acquisitions in the third quarter are putting up sort of mid teens, maybe the high teens Roe.
So it feels like it feels like the right level.
And as you know as far as <unk>.
Dividend versus share buybacks.
I think at least and again. These are board decisions, we have a board meeting in December but at least more recently I think the feeling was that share buybacks.
We tried that it really hasnt seem to didn't seem to help all that much.
And with with just what's happened with book value around the world.
Not sure that necessarily it's a better thing to be a smaller company. So I think that's one of the things that goes into that whole thought process.
I appreciate those comments Greg thanks.
See you soon Steve.
Your next question comes from the line of Stephen Laws from Raymond James. Please go ahead.
Hi, good morning.
I wanted to follow up one morning, I wanted to follow up on your discussion.
First question.
Coupons have continued to move higher.
And you touched on this I believe in your answer around credit, but how do you think about.
Not pushing coupons as much looking for lower attachment points are finding other ways too.
To get a better credit loan and a lower.
Less competitive environment kind of what's the trade off there as you think about pushing coupons higher.
Sure So I assume.
We focus more on business purpose loans with that question.
I think it was maybe 10 five on the recent stop up from nine nine something like that.
So here's the thing and good Monday mentioned this right over the last two years, you've seen ltvs either go lower or certainly not go higher than <unk> seen FICO scores overall net portfolio increase so I think the.
The quality aspect of that sort of speaks to itself and in terms of rate.
People forget because before wall Street discovered.
The business purpose loans, specifically fix and flip loans back in 2019 or so.
<unk> business has been around for decades, Steven and it was always a hard money business and so for most of the operators that operate in this space the profitability of their of the typical fixed and flip type project has never really been much of a function of interest rates right. It's really knowing what worked with buying the property right knowing what work to.
Do not doing too much work pricing it appropriately.
It Hasnt it Hasnt has never really been about right.
So.
Yes. There are obviously there are some some deals where you have to be more competitive on rate, but it's not the same.
<unk> that you would expect.
The other thing I would just add also as you said in the opening remarks.
The average LTV of the acquisitions were about 65% and the FICO is around $7 50, and so just so simple statistics.
We're clearly pushing the boundaries on LTV or FICO scores and Thats really the same position that we had for the last year or so.
Great and I wanted to switch southern side of the balance now with the financing of these in the recent <unk>.
Securitization can you talk about the terms of that I mean, what are the typical asset light versus how long the revolving period is how many turns might you get in and and how did the most recent.
Deal price compared to your previous deals and can you remind me if those had a revolving period associated with them as well.
Right. So on the transitional loans all the securitization that we've done are revolving.
So on average the revolving period tends to be about two years.
And so would that effectively means that.
For a period of two years.
You can replace loans to pay off in a transaction and add new loans over the course of those two years that tends to be followed by a six months period, where things tend to advertise and then there is a step up in coupon after that which is incentivizing the borrower to call the transaction.
<unk>.
The execution.
As I mentioned, we have about $600 million of those securitization outstanding.
The execution, usually such that like youre selling anywhere from 80% to 90% of the of the bonds that are issued so the advanced rate is about 80%, 90% to <unk> depending.
Depending on depending on what we sell.
The coupon on the one that we sold which was 80% of the transaction in this deal was about eight 5%.
Prepaid all of that.
Sir Thank you very much.
Sure Steven.
Your next question comes from the line of Eric Hagen from BTG. Please go ahead.
Hey, Thanks, Good morning, guys hope you're well.
So how much of the retained interests from securitization are pledged for repo financing.
At this point.
I'm not sure we have an exact answer but.
I would say.
Yes.
As far as I know, we don't have any of the first loss pieces pledged.
We've pledged some investment grade assets.
But we could we can pull that together for you.
Talk to you offline.
Okay.
Yeah, just trying to get a flavor for the structure of the leverage.
And kind of to that point I mean, we've got the unsecured debt that's coming due next June.
Get a sense of the plan.
Potentially refinance at what levels you might be looking at.
How attractive even kind of the current market looks and whether you would go.
The convertible route again or are you just kind of how youre thinking about that piece of your liability structure for sure.
So I mean again, it's a little bit it's a little bit early to tell but suffice to say.
The convertible market, given where the stock is trading relative to book is probably not all that viable because we've been even a high conversion premium call. It 15% would still be well below book value.
So it's on the radar screen you will see in the Q that we bought back a little over $10 million of that in the secondary market during the third quarter or so.
There are opportunities from time to time to buy that in the secondary market, it's not as it's not at a big discount, but it chips away at it but I.
Don't think Theres a month that goes by Eric We don't take a meeting with some with bankers that have.
One idea or another as to as to how to approach that so it's definitely on the radar screen.
We definitely got plan to default on it but.
But how exactly we're going to fund that and pay it off it's it's too early to tell.
Yes.
Alright fair enough.
And the last question I mean, if youre, an investor that was looking for.
Call it a differentiation in the non QM and the business purpose.
Portfolio is across the.
The mortgage REIT space, if you will like what kinds of.
Characteristics, which you highlighted I'd like to turn to.
For investors to kind of tease apart that.
That differentiation potentially.
So sure so I'll start and let Brian and good motor chime in.
I would say number one you can look at the quality of the portfolio right.
I mentioned it Brian.
Brian mentioned that good motor mentioned that delinquencies continue to be very low we have a lot of experience from our history of buying re performing and nonperforming loans at working out assets that do go delinquent to optimize outcomes and a proven track record of doing that.
So I would highlight the quality and you haven't seen the spike in delinquencies that you've seen elsewhere.
<unk>.
You guys want to add anything yes, I think I would just add a couple of things to that.
Our recourse leverage was two times and I think it's important to keep that in mind as we think about kind of.
The inherent leverage in.
In the organization, we've pointed out that a substantial amount I think it was 77% of our whole loan portfolio has a non mark to market for them. So that is a very strong liability structure. One of the things you mentioned also.
From a rate perspective, we've got $3 billion of soft roughly against.
$2 8 billion of assets of a mark to market financing so from a rate liquidity perspective.
That's a good balance as it relates to kind of the credit assets themselves.
We've touched on.
On an important item here throughout the call which is.
Our wholly owned subsidiary Lima, One is one of the elite best BP.
BPL originator in the space, we have the ability to create our own credit assets in an environment where.
Coupons and return profiles are probably one of the best they've been in the last 15 to 20 years and so when you look at the coupons that we can create with the attachment point to the property quality of the borrower I don't think youll find that in many other places and so I would think thats, a really really differentiating factor.
As it relates to the non QM.
Sourcing right we have.
Several relationships very deep relationships, we never really going out there to try to be a conduit to serve.
50 to 100 sellers, we believe there is a benefit to us of really getting to know the principles of the shops.
So we know the credit is that is getting originated there.
Or is it just spamming guidelines out across the country and just taking in any any loan that happens to fit those guidelines.
When we're aggregating loans, we really have a comfort that.
65, LTV 730, FICO is going to a pro forma way, we would expect thats not there aren't really any surprises in our portfolio.
Great.
I appreciate the response, thank you guys.
Thank you Sir.
Operator, any more any more questions.
At this time there are no further questions.
Okay, well. Thank you everyone for your interest in MFA financial we look forward to speaking with you again early next year, when we announced full year 2023 results.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.