MFA Financial (MFA) 6 Aug 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the MFA Financial, Inc.

Second Quarter Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. to conference like host, to now Schwartz. Hal would turn over the your I ahead. go Please

file regarding and operator. performance you, this contain statements forward-looking as reflect today risks, any on to everyone. and including expectations When materially conference estimate, subject December statements described may types are those and that expressions projected, Inc. time that it known from on identify to assumptions statements differ used, management's other expect, to beliefs, or refer such MFA's in Thank anticipate, or morning, should, operations. as These call statements as would MFA's Good with from words it statements. other they annual future The assumptions to speak Financial, and XX-K to MFA's XXXX, to makes. ended factors, results statements are which year are and Securities MFA made. information are not for cause on in of implied the forward-looking report and intended those including historical forward-looking All and of could uncertainties reports expressed various the will, other Form containing in which the XX, time actual may similar These could, nature, or only uncertainties, forward-looking those believe, unknown risks, discussed Commission. Exchange factors date

call MFA's like time. For forward-looking Knutson. quarter now President, announcing MFA's results. second for Thank and would to financial relevant turn to additional please release I information press MFA's CEO the disclosure regarding use of Craig your in the statements, over XXXX this see you

and Quarter interest Wulfsohn, Steve Kristjansson; everyone. me thank management. senior Financial Officers; I'd are XXXX with other today MFA Co-Chief Hal. in Results Yarad, Second like Financial's our you, your Gudmundur and our to Thank Also Bryan welcome members in Webcast. you of and dialed to for Investment Good you morning, CFO;

The Before months that out our give obviously exponentially March. remote effort extremely like team. been the efforts all a plan X last fact we MFA the and by their by during have commitment made forth our entire of I'd have business been The shout have last has and the so continuity team our over and as week begin, to been of been by more to implemented our I put third fully awed company X months dedication. extraordinary, the entire challenging

earnings of glance, bottom the the appear first Although line XXXX return normal to quarter per to results share be might, at a MFA. second for for

quarter was second were quarter agreement into with anything meltdown our which began. COVID-XX-induced XX. were The first of we this in who resulted essentially in our as days negotiations a After middle mid-March, March the XX took since agreement that quarter negotiating forbearance party to on market a the effect although but These the began been April XX, us lenders in second agreement, forbearance forbearance lenders mortgage granting significant normal. had our

we again to us XX, massive X. to a were conduct agreements these the and we the to balance and X, manage, turn Please XX on and Page third-party and June Forbearance exited expensive required April were did thorough effort agreements June they a forbearance our while forbearance source spent sheet, quarter on second on liquidity afford to process so generate time And delever forbearance. capital. extended and necessary competitive under entire nearly

The realized a generated loan March dominated of events generated overwhelmingly by sale were Sales loss pool XX whole their gains million large residential securities million. of results unusual financial and quarter mortgage-backed marks. $XXX.X transactions. $XXX.X of quarter in net a the second Our second of Non-QM versus

generated first the this loss related of million second million We in of this $XX.X in quarter terminated a $XX.X quarter recognized to of net for resulted quarter. interest were an losses booked million impairment during income hedges expense high that million. interest the was so first that very million the $XX.X booked loss However, High and the expense period $XX interest of anticipation loss in swap quarter. sale, swap the was amortized forbearance as no for $XX.X

forbearance We also of related and million expenses $XX recorded restructuring. to portfolio

saw upfront value to carrying due we share up we not paid the was We GAAP of was per us financing earnings result improvement these our to book dividends. with second price that and value the all expense as allowing associated GAAP in items. present up was us large costs allows to new true these to of unusual Thereby arrangements. loans. earned financing. out fees value the transactions. account additionally elected many more economic and although and $X.XX in a option this whole fair reinstated go-forward primarily other for This cost value continued quarter, So were in book Economic

Our X of leverage June at was whole consisted mortgage-backed and $XXX Page billion residential investment approximately assets of million Please our X. ratio securities. mortgage was X:X. to loans -- And of XX $X.X turn

a by we our and X.X% of transaction stock, together a warrant common package over Athene, of new capital and As with included closed and Apollo with transaction billion Athene $XXX million provided secured Apollo financing This Credit senior XX. term MFA Barclays to non-mark-to-market announced, on previously June $X loan, purchase Suisse.

to Athene or stock year. that about $XXX and And check. a of holistic very committed a It in purchase and X.X% market lesser Apollo has much is the enough next a turn $XX I was million X. Athene over strategic have MFA of committed purchase of addition, In MFA's solution securitization. and collaborative partnership. Page a common million to open than to Please transaction the this Non-QM portion a more first the stress lot cannot

and much Of liabilities durable afforded to X and points. secured, Athene, non-mark-to-market another $X.X restructure through million a is or more margin been and With $XX intentionally $XXX of is approximately assistance of profoundly with million, Apollo to and that a X-year financing. billion creating also by we $X is underlevered thus pause cushion forbearance to from the us borrowing approximately have term, of form billion able our asset-based the

we addition, debt our with convertible $XXX In of and have note senior bond. unsecured million

all So non-mark-to-market or XX% under either of is borrowing told, levered. our over

to particularly for the can loans deep XXX capital this cost X. current see new aggregate debt in X.X%. could issue on last the lower turn of you borrowing sell. we about approximately away senior at As the the securitization, securitized how Athene with points loan from stack Apollo, point depending bullet page, existing by financing in secured some this levels is of Non-QM on Replacing and basis this Page the our cost Please

and mentioned, all repaid XX, on exited we previously in margin outstanding June As no liquidity, substantial lenders forbearance with full. calls

and and assets value through we Although orderly that X in able an we during by were of a fashion sale an time-consuming last rather expensive of believe book of than liquidating to fire weeks protect of process, hundreds March. dollars negotiated millions the liquidation

able achieved turn rushed were a believe, to led process conduct third-party Page to have we transaction compressed robust time much we a capital competitive and to could frame. and which, than better in Please addition, In a X. again, we

company that also we have market have solid only but improve securitization on us offering realize than smaller a we is uncertain durable savings. liquidity. we what remains were economic continues environment. dwindling during the very very financing, we footing do ability cost we substantial are MFA very admittedly While in supply, The a to February, believe Not to amidst considerable

$X.XX C dividends Series our preferred stock to of have but we X. accumulated Series share B per and October reinstated the stockholders and dividend a to on September unpaid XX. turn we of Additionally, XX, on record payment on have payable declared of Please stock all issues, Page XXXX, common

and know, pay both required XX% that distributions to as income more, XXX% we less which dividend short taxable but the the than amount XX% dividends are XXX% taxable are or taxable we a can by pay taxes you our those income, extent REIT, our income. preferred fall pay of of on form of to common of stock. be our of on income the most our required To of dividends, we and in stock As

what pay of are make is distributions, Finally, that The at of following to excise the declare extent of generally the the these we current tax during distribution tax to tax XX%. not paid the year we required least XX% the amount until excise October do the have an year. required we on year below to the shortfall

for dividends the per $XX.X at preferred will So contractual million share. rate about dividend or total common year $X.XXX the

to preferred during the satisfy income the taxable of will dividends second excise XX% an the is distribution requirement our taxable income composition through preferred the excess how distribution avoid income. -- $X.XX to apply and to $X.XXX approximately and charts of taxable dividends. the XX estimated present portfolio $X.XX required the to With on the or after with pie the XX, XX tax XXXX illustrate liability secured June So $X.XX Pages about structure changed our $X.XXX how quarter. tax XXXX

March up portfolio. Bryan investment and is the March more of will on Wulfsohn I XX, nearly nearly at by to and XX% turn call lower XX. Our are loans, details are now is lower from liabilities portfolio versus whole our now X/X to by XX% at mark-to-market comprised and investment X/X XXX% over secured provide the non-mark-to-market XX%

Thank Craig. you,

sheet, in the a The by to dramatic. originators sold points. pre-COVID, second of gradually have production, already LTVs. the increasing our remaining on that at the the ground loans. quarter. process pandemic conservative of rightsize bit has market the the with generally. $X halt markets reduction change standards to material Part on relationships deleveraging our on Non-QM XX. Turning into sale portfolio our loans impact in Underwriting more the stabilization at second end tightened we with average executed higher standards gradually pandemic strong. of LTV a basically been billion but in approximately given securitization quarter has balance a quarter loans but the hasn't -- the a the is second Page and to This Through new the remain were resulted been coming of The the portfolio weighted had of X of a origination Production of

non-mark-to-market We be lowering expect Approximately we financed of source leverage. in to with of funds. the non-mark-to-market are stable liquidity to our And our be further moving the programmatic forward. partners working to of with increase funding cost issuer of will a addition is percentage which portfolio a of securitizations, now half

March, portfolio by Page the our were in to We shutdowns with effort borrowers borrowers an that our of Significant Any period. across program a that borrowers April and for in shareholders. the raised impacted leading while current through through maintaining help Turning to a affected small borrower payment hand businesses reported until of granted value owners deferral the been was our and crisis nation. and to were servicers of were current pandemic impacted percentage time that deferral are months our Many that saying instituted our of XX. the their were May, Non-QM the X pandemic. their have they as in during March by up June manage

you on page, of increased cumulative impacted Looking the right-hand at XX%. can of the see over the the COVID table side by percentage loans

June have related deferrals of of or are happy As report post that payments over the to X/X that COVID to conclusion be more XX, made and borrowers current. continue one deferral we received

Page XX. Turning to

portfolio portfolio days than continues to well. RPL delinquent. of the been but has impacted XX of Our our XX or days XX% pandemic, $X.X by billion less remains perform

continue over a portfolio XX% elevated previously. XX and Although in XX%, bit make was seen of payments. from quarter to percentage Prepay slowed second the the borrowers down days of of speeds speeds those delinquent the status

post have exhibited we rate are with see in a maintained bit landscape. mortgage our a up by coming they non-QM could them we portfolio portfolio, COVID and working a positive expectation to outcomes ensure However, the within months similar impacted our percentage given servicers This the tick as forbearance.

Page Turning XX. to

prior nonperforming have to exceptional for quarter owned maximize pandemic outcomes manage therefore, This shows to of has an to portfolio. loans X selling or in now that performing servicing were worked second either loans more to on or XX% year. loans second liquidating that the are REO than liquidated. either lucky to in team management The outcomes significantly purchase more the through asset liquidated XX% quarter were XXXX, through be delinquent our nonperforming And ago. activity, the team paid of concert properties, in our of we are at We our for of full. XX% purchased slide ended properties year REO are have increased our the a versus partners have portfolio loans. with still XX% status.

performing or quarters have been either are as paid Our modifications in effective full. X

continue loans. they call And turn as to with the like over outperform business purpose time these pleased I'd Gudmundur through to are We purchase. our the to of our results walk you assumptions to at now

Thanks, Bryan.

Turning in and flip pandemic. borrowers COVID-XX and in May, slowed economic general The to as sales April fix caused contraction affected Page completion activity COVID-XX home by and and impacted pandemic were negatively XX. borrowers project negatively in the down dramatically by the severe

basis. about We're end in of in of April but equivalent of As in XX% flip June the the in and April slowed principal about a recovering in levels CPR and/or for million $XXX were and a down June. result, recovered MFA's portfolio total to declined XX% principal stabilizing and increased Fix May, portfolio second UPB to $XXX approximately almost annualized delinquencies quarter. Principal slightly pre-COVID on paydowns paydowns of in months of paydowns. $XXX and the our million at an May, fully million for

looks July exceeding new draws paydowns and The X.XX%. with million. advanced the investments track in of and flip The in the $XX third this continue in We yield portfolio million quarter the principal on fix was made to quarter quarter. $XX about on trend rehab no average

against forbearance, exit and part refinanced existing financing loans. borrowed from our untouched we previous As our of secured

loans borrowers We the and of COVID-XX with struggle in around our project. a our quarter. X.X% case-by-case profits to the delays program where document confessed will deferral granted at X rehab on Borrowers loans of fix Delinquencies the were the about increased borrowers financed with impact currently deferrals cost funds basis financial due The costly the with work of as conditions payment X-year to debt would from require and short-term non-mark-to-market deferral loan assessed payment be outstanding of borrower payment personal our All the services, are impaired months beneficial of outcome. the COVID-XX flip transactions, of portfolio in down and usually negative slow of pandemic. with on multiple term implemented for X%. in to the

to XX. Turning Page

approximately decent asset for mitigation loss the was our of we outcomes increase delinquencies paydowns. the balance previously day end team As work due management bridge have delinquent confident condition. X/X $XXX that no in or increase portfolio. expected is a delinquent and noted, work and lead million with loan meaning loans, experience XX% consists second XX% in the with to loss are of team XX-plus nonperforming UPB hard other consistently by and or dealing at emerge our or increase with these our The caused bankruptcy improved particular, our be to Approximately of $XX acceptable X.X% of by to can be properties seriously of quarter. the people increasing work seriously saw the with quarter services in loans. at issues outcomes. closely to the dealing approximately million project that issues, loans, delinquencies, to lower while in strategies of whole loans extensive X.X% was and a to is delinquent completed MFA We common title mitigation has where portfolio fortunate due will residential should years, were highly are on done, limited designing experienced in loans filings in with talented new efforts

expected for addition, June of the second earnings, recorded for already of earnings. of delinquent reserves quarter. numbers were our down first first the to is in modestly reflected as million are of are sale. This million quarter therefore credit at recorded $XX the end XX bonds these In have These and in seriously $XX listed been approximately reserves Loss and already X/X losses.

mitigation. believe provides huge a asset advantage our mentioned with loss us management in previously, we team As

An it's of where to lower delinquent entire and have believe that level factor $X of In on over at loans, we be to mitigating claims fix purchased be time originators made will our and portfolio, secured loans X we delinquent agreed services currently non-mark-to-market work outstanding warranties our these We by purchased have we financing million reps term will with outcomes. flip addition, purchase. time. the loan loss achieve we loans seriously because able patiently through additional is acceptable

on massive of are the Finally, level, we monetary fiscal and a home prices. supportive do policy

rates low rates depressed all-time are the As lowered levels an will and and in has and April recover Fed home May. assets, through mortgage sales purchase

XX. Turning to Page

and tough relatively single-family we Our made size million a well post June, portfolio a seen portfolio, The the remained relatively loan and have the quarter reasonably end. to implement rental flip in with in was portfolio $XXX services protection, worked trends quarter. due to our we at quarter. strong that quarter. the fix to a case-by-case saw held X.X%. basis delinquency prepayment up April, of delinquencies forbearance of brands. were yield payment in some we month deferral closely as to prepayments payment forbearance program no unchanged and for stabilizing positive we low of loans Similarly granted a in of about the the months portfolio quarter usually X% X% benefit increase deferrals at deferral unchanged The was will XX-plus outstanding quarter. assess in for primarily May, and the increased on in in of delinquencies to We X We the investments the assess to the borrowers new

mentioned our a from loans. has credit been for As monetary the helpful business and we perspective believe fiscal policy purpose before,

to ratable for I more long-term space In apartments over addition, homes in will our rentals as assets. it SFR turn now borrowers short-term single-family single-family push comments. toward increased for supportive Craig cities as densely some final well to trends And new to populated to is to

Thank Gudmundur. you,

on effort value once and restructured for all we of so It we our can part our our the MFA an so company that quarter team shareholders. that again, on creating through have was focus many herculean ways. a unprecedented determination dedicated in XXXX second of and repositioned was The unwavering for of

still we for the cautious please while you evaluate are open structure up questions? we and today macroeconomic we investment line world, still While and grow to positioned future weather earnings. post believe COVID-XX would our that the somewhat the Greg, storms environment about capital manage are we look unknown to opportunities,

[Operator Instructions].

first Securities. question Your line comes JMP Steve the of from Delaney from

of Athene all -- and congratulations able hearing move now you first, with the $XXX like last And to And to work. sounds loan cash if financing, X going to kind product to MFA right, an it put NQM work and some exciting it's just forward. bit of to that hearing to probably given package million And with hear on guys chomping your with position Apollo that I'm be over the and of at your are I'm be you everything, and so eye securitizing months towards it's that. your to the

this of First, correct you update? you actually just effort is an I which And And I that kind underway? existing give any to us attached billion August? you started loans got can you'll already And securitization to those as that I hearing Should be buying have here you securitizations am $X well of well? structure that guess, on you've we almost some that question, working on loans. Have focus guess, of in expect then that loans that? on

for Steve. Thanks Sure. the question,

would feel as to guess we need invest high So go it a say tomorrow. the wouldn't having pocket, good and first it's a say much balance. necessarily burning that hole as thing cash I I about in our we I is

months, started to because some didn't time. of probably they the and closed loans originate another But see before if down purchase I for volume takes they've month process any the of most said, again. Bryan so of just we As think shut they it'll to underwriting down, several shut be sort or originators, almost

yet, certainly but it's close certainly agenda, on think on I it that. but the we're happened So hasn't

low as or in price the close, XXX week. as securitization were they're over with spreads, March, pretty quite And back they're AAAs deal but in securitization, of terms I right a now. there's not In Swaps swaps. early they were tight are of this still think maybe

months And originators or so. because over existing last is compelling. execution active that few portfolio, because about not the question the or ironically, So been to really securitization have your the active

active you volume where worried come their in securitizations, X from to they're next talk everybody over little of that or up. back some the month a ramps If are the dealers will while

down non-mark-to-market a securitize is have little portfolio. be the a the XXX more substantially on through execution opportunity I the as order during or think more, amount A. provides as it leverage to remarks, to as probably was and So financing, of almost much And double said of if It even points basis able attractive we I probably it's securitization. my great selling the single bit existing than only

not lot of it's supply. right There's compelling very So a now.

dynamics I So the good. are think supply demand

of Athene of so a of make, note look I -- terms obvious think is And balance, on to we think variety securitization. from is cash we in we I are a that's rate. those at have the considerations at stand Apollo one can where that fairly there obviously but interest the Also and that investment one high

investments So is what a of the return pretty where other if pay easy control depends on figure unlike interest and ROE the simple and ultimate to and forth. so that it's pretty that so rates note don't our things and you the portion calculate ROE on we prepayments like on It's really that. down to of most out

on, spectrum. have things deploying we think an the that but cash of we'll consider across I it's So array

paydown, it's that you that. And interesting Great. say would

to -- the more where over for going we've into interest Am Some sounds have amount flexibility financing a a X have like facilities locked minimum I'm It right the payment or period. that rescue that? you you on use might of seen, you're certain had a I not required the term years. having hearing X outstanding

the broke away, right getting callable on I'd was It's correct. there callable someone like but that, debt. else and actually take in ground that credit to You're that for

were to that as advantage well. we take of able So

Coffey from question Henry comes next from Our the of line Wedbush.

An congratulations. been amount value and preserved. has enormous of lot a my of add me done work let And

if but had code up code fairly through actually what your to that to like recover look Would basis the manageable on avenue? you a if on go loss? outcome that's to are. would well, Would they to be be these you Maybe If a on but the you zip obviously are I basis, par? what -- know assets to did holding would What by a existing national lot is zip which you able the home pursue, a don't create foreclosure solution of look properties? values, it you want it not pursue

Sure.

sort the I'll of did the some Gudmundur quarter. end some an Bryan give for talk slightly So of I of -- about the in of the let But guess, some we quarter. end overview at and credit And reversed specifics. the obviously, those losses take at and allowances of second the first we

flip are of then portfolio, you're hard at those also LTVs, fix So home are the mid allowances XXs. to on say those it's we've all-time historic And have for XXs for well. and on we're the Non-QM me or And because par right? But that the rates loans, pretty again, to LTV held there in consider everything what prices Mortgage typically lows. loss high going So reserves. taken was in get the generally. in portfolio, the LTVs are the mid-high right,

because we've good fix some are and through loans, probably cushion. takes on said, as think virtually to It occupied. with what financed is that's not financing entire Gudmundur part this and But is So flip so pretty they're those owner flip portfolio well. about purpose More our X-year those. fix financing. Non-QM non-mark-to-market solidified of a than we work business time got time only

get asset pointed as So those team a that's out, to also outcomes. we management work Gudmundur this X through we to And time X years. good doing been very for or have experienced the have

So we financing that the get outcomes we I we the ability, the given to think the can. have best flexibility have

When at to a we've distress when option, it resulting We expected borrower that, process. to unfortunately, get through if, as think that of And the really to won't and X right? we've you loans it sale had really of X LTV the a outcome in average likely to you that we XX.X%, just their property right? as most property you're go take or a not so to the is loss. most the foreclosure years have likely, right? the third weighted a gone to portfolio, gets I about to necessarily loan go to on loss. in loans, which And And The is really X of look going would relates be REO, even Non-QM talking held no party, Right. borrower own, has far taken into

when looking So project think good. so of but you Obviously, so you good. things far, downside well, scenarios to as far, about out, have to sort so

sounds it and time. mainly, you issue is the time mean, I have like

right. That's

exactly right, Henry. That's

and could mortgage and home costs, mean, has delinquent day, sell I rates, right, early fiscal well. have expected agent throughout help better the end we you're home forth. cost so there's Obviously, you reality so might would is and the that process, low, we right? on than the expect certainly would I property, look, it add, as see the take foreclosure expensive. more is you That probably of March, just overall price better to do Probably don't to people of April. headline than insurance, where very that late with and still [indiscernible] rates But entire when taxes, other it, things. with foreclosure prices. the At basically, over we supports It's deal also are

to get solutions our you're that's in in positive, most is costs to things accessible a to think take for and foreclosure, I before to outcome we're of to preferred up well, that. confident cases. still our right, But have prices solution get ability So held these money it's home but so so

Your of comes line the next Doug question from Harter from Suisse. Credit

saves talked you forbearance? where to us be you the in that drag expensive of paying on of also forbearance just the just talked second about and pacing financing achieve new could a about were that? that talk the was kind Can You quarter. relative more to understand are cost then how they about the financing you on what And help what securitization levels

Sure.

So forbearance bit little was even I plus a say say maybe very interest, XXX, would more. to LIBOR suffice expensive.

places asked X.X%. and cost of will secured loan and forward. Apollo, a not LIBOR really I generally the securitization. about But vicinity in We average do, product mentioned Doug, say type. going from my LIBOR securitizations, it's So but And XXX. of the large out comments, would XXX where probably And in vary that I plus Athene, we the is maybe to, plus we away it it's bit this laid by in indicative the speaking, couple the actually a in you press release some product by have cases, financing little type, about

away So securitization one not many from on people Non-QM probably a pricing remember March this, day we but XX. were

to said say, our that's good biggest on and continued improve. And to think of probably the because I lot before, single very now forward aren't the is move I suffice as to priority right there market timing executions in deals have the So securitization. is a

I of the for can to we of mean, potential do that how bigger? think right Could I size? that think we the should kind about is sizing? loans. Obviously, sizing? size about you you lot before looking have do how of the guess kind a were Just you

Sure.

it Obviously, question. first-time good a not first loans, for we're securitizer. will be our But a it's So Non-QM securitization.

want don't much. the that at probably And bite to least we so do deal I first we off too think

could and the deal we orderly gets that execution. grow You time, deal is good to sure I want to over But think make a an look those.

$XXX -- or so. think, close to So we in was back the doing were we that March, million when I I odd think deal

sort a of that. to grow probably But good demand, safe place we depending assume could I to think start. that's on it's

portfolio billion. is existing I about think the $X Non-QM

do. there's lot a So securitization of to

from line comes question Rick next Shane the JPMorgan. from of Your

you Can me? hear

you, hear Rick. can We

sales, to to comment understandably, we curious there of portfolio. comparing the for from the But the the there's a the reserve I I'm when first know reduction sense. discrepancy about June and significant a sort and which quarter. But And FICO, like I look not coupon. allowance what of the the December to the you're makes on It sort Non-QM portfolio at slides close normal versus XX X/XX terms weren't little at that Non-QM in on XX of portfolio we what reduction XX I'm related curious change look Yet doesn't we XX%, also there in talk wanted there's about the when huge a there's if the of portfolio in metrics look outlook characteristics, time a bit was change. -- XX%. the reduction reserves? the the that realized to related compare the terms to frame quality LTV, outlook. is a of March drives economic of economic big footnotes I was net

about Okay. out if implemented want don't that that. I point XXXX. to we know you Rick, talk in CECL would Steve, I

XX, and December accounting back So you that about want a was compare talk it But Steve standard it? anything different you then. to to

reserve. figure decline in I don't no. No, changed if looking like something December, since back sold characteristics quality June allowance you to quarter the XX looking understand. was data, have it I to I'm at by I March the portfolio to explain lower the understand. just doesn't would have out trying but I XX. March the if look second the to in

Steve. it's Rick, So

the we X the in million XX reversal X-month press made at, for million reserve think backing that have not press the Slide a were you're -- the X. Non-QM product, The and $X.X at deck, looking Table But that roll you're sure a about The the the adjustment on period. I And was whether a you being that I'm it's the can have loans in which of March the And out you if adjustment. on deck. a maybe right? entirely look the you on sold, of right. bit of see we if the table Page release, statistics, in look $XX.X by release at XX forward numbers reduction

aren't certainly LTV statistics levels, Non-QM on the on FICO and statistics different. delinquency at and the If the the the even portfolio look that you

So and future and what's April modified driving that And and that's around those we've March the that CECL in in CECL back between primarily some unemployment. made we really is June the reduction reserve. driving slightly, assumptions unemployment

end we say, the first bigger banks were more CECL of we a had outlook earnings So quarter, some we back you the did time when our we the -- and did. think announcing before in reserves reserves about of economic to bit than little doing -- who their CECL

the in But had at there's that with sort did still states for of example, feel And conservative some if the appropriate reserve. whatnot. the reduction of but CECL the around that and the assumptions lot slowdown uncertainty a happen Non-QM -- end we a thought double that but what unemployment, and a for are dip were of the with second I fairly assumptions closing appropriate, unemployment drive second little our those into there's in quarter, the might what bit so still we've Obviously, back dialed just we of quarter.

to Just be clear.

pool we our just a X/XX. bit that a at not a about would it's that presentation. on sold million the may had that credit was That It -- total valuation with was million was think referenced loss adjustment on. that confusing loans large March had $XX for $XX.X I those. adjustment million XX in a We comments We that on That we loans adjustment. held knew of we I $XXX be sale. little it little Non-QM at valuation a be my selling a

$XX that basically, down then was write-down mark March it So out. on million to And sale occurred, to XX. reversed that gets the where take the was so

was of you part it credit will. a really if never allowance, loss So

it. Got

Okay.

understand basically the all So fact, CECL that and the sense. the this, the geography for portfolio. greater in was, you're that saying than reserve remaining value What we makes mark fair on

the from look a The is you When a migration and So the delinquency. that's cascade or we by as as expect of with of at into XX to to a delinquencies -- July, large, metrics. low follow-up Should and appreciate XX the really to as driving build this actually, look number what's time at differential. you or we percentage of loans CECL to we forbearance a relatively question have high those a those that XX-day migration XX-day conversation, this XX off continue next reserve loans the come relatively relative days? XXX

Sure.

that? for for loans in reserves than you just do a do have about delinquent separate Steve, CECL want to Because general. process So we we talk

go we -- certain them foreclosure. delinquent, -- at Yes. When on loans are so somewhat loans when XX-plus we looks we how our those looks into going look we -- separate, process at and depending when

the peer versus and drive look underlying peer as estimates balance. the reserve think they're we position, will reserve. be inside loan level, it individualized are that basis, collateral to of look going CECL we the value that of foreclosure, at more security at the macroeconomic more into are historical assumptions an data, and loans But them from where when season an we'll will a of data and look on So analysis at loss

over the as delinquent. So flips seriously of get sort loans more process

to going challenging And it. let's are loan to but different be pointed, Got all recognize the that loan look, from XX need I acknowledge little and going my I bit forward. or XX-day very it's questions is defaulting realize that XX to and of a -- a probabilities going as normal well.

be provide to -- just just try to And to some additional Right. color.

in So we're now August.

XX-day portfolio population between So piece in the a So at that in July, it so X% XX, was XX and like for you're right? Non-QM rolls delinquent X% X% somewhere of July. to

of of piece of of or bucket, guys current. the sort stayed were, went to -- that to them where the So from XX that half another them you X/X then guys they and had half basically XX went

of guys that the impact. of seeing So item, who build. continue sort had to that COVID bucket It's sort you're not onetime the a XX-day experienced

COVID, the XX no, much have XX, then So lower portfolio case. but going you of was that's the impacted that's there's not really, XX% concern and XX% by number. your a be It's to

here. that's sort explain to what we're of And of trying sort

for -- said update when Got at July. many so it. thank the on looking slides. I I And misspoke you

[Operator Instructions].

a of Eric Hagen have from KBW. We question the from line

had I question Rick. a similar as

a that last But a a we or your earnings the don't as earnings What's outlook net just -- then potential portfolio, the of I essentially returns I funding collateral typically pledged for -- it that, the gave for is through the think million good portfolio, on any -- yield And you loan a equity? think as quarter. You should REO to to loans tap guys your reported with there? of there? result know as but ascribe any answer. held how to nonperforming about as was $XX portfolio it's

of sort the I'll let portfolio, about that Bryan -- so at FBO loans Eric, a REO not encumbered little the talk present the time. is bit

those all own we with equity. So

to we that, our said, point. time think nonperforming really I that of a value loans. are we over said time that's it X%. We've know range our have changed at fair X% loans returns And quarter-by-quarter. over I see on Obviously, generally this varies expected don't

Because value that fair purchased say million. now value, them show been accounting loan able fair they're change But we value once the loans about change loans fair we but performing on in and of that income -- $X mark those only they're nonperforming those to the the on as cash modify mark we've I many loans value the on, quarter not fair nonperforming that change was the received. the the second that loans. and value fair for know, we designate as forever. fair will portfolio value we also is it's just you mark, As elected

of that cash. of think I So was million, $XX about $XX million that

that change very in So little mark. there was

there's June room market in much speculate it higher March. not happens than but side. some The the really future, probably the So was in what XX to again, not in valuation was that

question, maybe to to later. -- status shored similar Steve I up Or might reinvest of What's the liquidity Delaney of the like quarter? guys in to think reinvest And that really the, any able clarify current paydowns? Have kind runoff you I a Great. third for that asked of any been near reinvested just guess, you retaining future? just are feel around kind be or potentially I then but kind is

Sure.

with conversations in we're originators. So

think another We see again. for know out know the I we we're We some to don't So COVID I won't downturn. we're cautiously. would certain mean proceeding money say don't world looks in I that -- world. But putting post what don't somewhat close a we start like

term. we says, understandable a similar much what least deploy you've that cash. think through so, sheet balance about don't And cash, to where going on from standpoint, I short much I really it's a other feel have well, I a have I it's conservatively, liability a all and drag Obviously, So think the cash. X for we're liquidity of heard mortgage maybe I months from over a But to lived last standpoint from or standpoint. think good recall lot at that we've every probably too a the theme pretty much have cash. I that somewhat we think are anybody given

how of I think guys And -- you a entertain could gets mark loan to Right. portion value you should it portfolio the where fair you be. sales, mean, recover your Craig, continues to market Non-QM here? about back selling and as the from Could

I suppose we could.

I'll in never our I some this don't I sense. I sales point, We do our that in closed probably thinking loan that intention. think sell not we're at I April, that's think -- make really say that we'll really it, on But never think it's did all May. guess certainly but don't much that

of sense, right I given rates are a particularly lot where think where and securitization spreads makes now are.

likely So I the think to route that's go. probably more

this at are further no And questions. time, there

to third forward everyone, our early interest We in your MFA the thanks, quarter after update for Well, in All right. Financial. next look November.

conference participation and gentlemen, and Ladies for for teleconference. does using AT&T that for today. your your Thank you conclude

disconnect. may now You