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MarketScreener Homepage  >  Equities  >  Nyse  >  Great Ajax Corp.    AJX

GREAT AJAX CORP.

(AJX)
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GREAT AJAX : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/06/2020 | 06:06am EST
In this quarterly report on Form 10-Q ("report"), unless the context indicates
otherwise, references to "Great Ajax," "we," "the company," "our" and "us" refer
to the activities of and the assets and liabilities of the business and
operations of Great Ajax Corp.; "operating partnership" refers to Great Ajax
Operating Partnership L.P., a Delaware limited partnership; "our Manager" refers
to Thetis Asset Management LLC, a Delaware limited liability company; "Aspen
Capital" refers to the Aspen Capital group of companies; "Aspen" and "Aspen Yo"
refers to Aspen Yo LLC, an Oregon limited liability company that is part of
Aspen Capital; and "the Servicer" and "Gregory" refer to Gregory Funding LLC, an
Oregon limited liability company and our affiliate, and an indirect subsidiary
of Aspen Yo.

Our Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the unaudited interim consolidated
financial statements and related notes included in Item 1. Consolidated interim
financial statements of this report and in Item 8. Financial statements and
supplementary data in our most recent Annual Report on Form 10-K, as well as the
section entitled "Risk Factors" in Part II, Item 1A. of this report, as well as
other cautionary statements and risks described elsewhere in this report and our
most recent Annual Report on Form 10-K.

Overview


Great Ajax Corp. is a Maryland corporation that is organized and operated in a
manner intended to allow us to qualify as a REIT. We primarily target
acquisitions of RPLs, which are residential mortgage loans on which at least
five of the seven most recent payments have been made, or the most recent
payment has been made and accepted pursuant to an agreement, or the full dollar
amount, to cover at least five payments has been paid in the last seven months.
We also acquire and originate SBC loans. The SBC loans that we target through
acquisitions generally have a principal balance of up to $5.0 million and are
secured by multi-family residential and commercial mixed use retail/residential
properties on which at least five of the seven most recent payments have been
made, or the most recent payment has been made and accepted pursuant to an
agreement, or the full dollar amount, to cover at least five payments has been
paid in the last seven months. We also originate SBC loans that we believe will
provide an appropriate risk-adjusted total return. Additionally, we invest in
single-family and smaller commercial properties directly either through a
foreclosure event of a loan in its mortgage portfolio or through a direct
acquisition. We may also target investments in NPLs either directly or with
joint venture partners. NPLs are loans on which the most recent three payments
have not been made. We may acquire NPLs either directly or with joint venture
partners. We own a 19.8% equity interest in the Manager and an 8.0% equity
interest in the parent company of our Servicer. GA-TRS is a wholly-owned
subsidiary of the Operating Partnership that owns the equity interest in the
Manager and the Servicer. We have elected to treat GA-TRS as a taxable REIT
subsidiary under the Code. Our mortgage loans and real properties are serviced
by the Servicer, also an affiliated company.

In 2014, we formed Great Ajax Funding LLC, a wholly-owned subsidiary of the
Operating Partnership, to act as the depositor of mortgage loans into
securitization trusts and to hold the subordinated securities issued by such
trusts and any additional trusts we may form for additional secured borrowings.
AJX Mortgage Trust I and AJX Mortgage Trust II are wholly-owned subsidiaries of
the Operating Partnership formed to hold mortgage loans used as collateral for
financings under our repurchase agreements. On February 1, 2015, we formed GAJX
Real Estate Corp., as a wholly-owned subsidiary of the Operating Partnership, to
own, maintain, improve and sell certain REO purchased by us. We have elected to
treat GAJX Real Estate Corp. as a TRS under the Code.

Our Operating Partnership, through interests in certain entities, holds 100% of
Great Ajax II REIT Inc. which holds an interest in Great Ajax II Depositor LLC
which was formed to act as the depositor of mortgage loans into securitization
trusts and to hold the subordinated securities issued by such trusts and any
additional trusts we may form for additional secured borrowings. We have
securitized mortgage loans through a securitization trust and retained
subordinated securities from the secured borrowings. This trust is considered to
be a VIE, and the we have determined that we are the primary beneficiary of this
VIE.

In 2018, we formed Gaea Real Estate Corp. ("Gaea"), a wholly-owned subsidiary of
the Operating Partnership. We have elected to treat Gaea as a TRS under the
Code. Also during 2018, we formed Gaea Real Estate Operating Partnership LP, a
wholly-owned subsidiary of Gaea, to hold investments in commercial real estate
assets. We also formed BFLD Holdings LLC ("BFLD"), Gaea Commercial Properties
LLC, Gaea Commercial Finance LLC and Gaea RE LLC as subsidiaries of Gaea Real
Estate Operating Partnership. In 2019, we formed DG Brooklyn Holdings ("DG
Brooklyn Holdings"), also a subsidiary of Gaea Real Estate Operating Partnership
LP, to hold investments in multi-family properties. On November 22, 2019, Gaea
completed a private capital raise in which it raised $66.3 million from the
issuance of 4,419,641 shares of its common stock to third parties to allow Gaea
to continue to advance its investment strategy. We retained a 23.2% ownership
interest in Gaea following the transaction.
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We elected to be taxed as a REIT for U.S. federal income tax purposes beginning
with our taxable year ended December 31, 2014. Our qualification as a REIT
depends upon our ability to meet, on a continuing basis, various complex
requirements under the Code relating to, among other things, the sources of our
gross income, the composition and values of our assets, our distribution levels
and the diversity of ownership of our capital stock. We believe that we are
organized in conformity with the requirements for qualification as a REIT under
the Code, and that our current intended manner of operation enables us to meet
the requirements for taxation as a REIT for U.S. federal income tax purposes.

Our Portfolio


The following table outlines the carrying value of our portfolio of mortgage
loan assets and single-family and smaller commercial properties as of March 31,
2020 and December 31, 2019 ($ in millions):

                                           March 31, 2020       December 31, 2019
Residential RPL loan pools                $      1,066.6$        1,085.5
SBC loan pools                                         -                   11.7
Other mortgage loans non-pooled(1)                   4.2                   23.4
Residential NPL loan pools                          27.9                   30.9
Property held-for-sale, net                         10.9                   13.5
Rental property, net                                 1.3                    1.5
Investment in debt securities                      247.4                  231.7
Investment in beneficial interests                  64.7                   58.0
Total Real Estate Assets                  $      1,423.0$        1,456.2

(1)Other mortgage loans non-pooled are accounted for as non-PCD loans under CECL.

We closely monitor the status of our mortgage loans and, through our Servicer, work with our borrowers to improve their payment records.

Market Trends and Outlook

COVID-19


The spread of COVID-19 has created a global public-health crisis that has
resulted in widespread volatility and deteriorations in household, business, and
economic market conditions, including in the United States, where we conduct all
of our business. COVID-19 has not yet been contained and could affect
significantly more households and businesses in the coming months. While the
duration and severity of the pandemic has yet to be identified, many
governmental and nongovernmental authorities have directed their actions toward
curtailing household and business activity in order to contain COVID-19 while
simultaneously deploying fiscal- and monetary-policy measures in order to
partially mitigate the adverse effects. Whether these programs and policies will
be successful in mitigating the adverse of COVID-19 is unclear. Many of the
government measures have impacted the mortgage market.

COVID-19 began to meaningfully impact our operations in late March 2020 and this disruption is reflected in our results of operations for the quarter ended March 31, 2020 as follows:


•We recorded total provisions expense of $5.1 million on our Mortgage loan
portfolio and Investments in beneficial interests as a result of expectations of
extended portfolio durations and longer foreclosure and eviction timelines,
•We recorded a $28.4 million unrealized loss on our Investments in debt
securities to Other comprehensive income as counterparty marks at March 31, 2020
reflecting the extreme disruption in the residential mortgage securities market.
•We recorded impairments on our REO portfolio as extended eviction timelines
will reduce our estimated net liquidation proceeds due to higher holding period
costs and higher rehabilitation costs.
•We settled margin calls in the amount of $28.2 million with our repurchase
financing counterparties due to the extreme disruption in the residential
mortgage securities market.

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The spread of COVID-19 has continued into April and May 2020. As a result, our
forecast of macroeconomic conditions and expected lifetime credit losses on our
mortgage loan and beneficial interest portfolios is subject to meaningful
uncertainty. While our borrowers continue to make scheduled payments and we
continue to receive payments in full, we have acted swiftly to support our
borrowers with a mortgage forbearance program. While we generally do not hold
loans guaranteed by GSEs or the US Government, we, through our Servicer, are
nonetheless offering a forbearance program under similar terms. Borrowers that
are able to provide documentation of a negative impact of COVID-19 are entitled
to three months of forbearance. The three monthly payments may then be repaid
over 12 months. HAMP loans, FHA loans and borrowers in certain states do not
have to provide evidence that they are impacted by COVID-19. Our Servicer has
extensive experience dealing with delinquent borrowers and we believe it is well
positioned to react on our behalf to any increase in mortgage delinquencies. The
following list shows the COVID-19 forbearance activity in our portfolio as of
April 30, 2020(1):

•Number of COVID-19 forbearance relief inquires: 920 •Number of COVID-19 forbearance relief granted: 115 •Number of COVID-19 related forbearance under review: 146



(1)Statistics are for loans carried on our balance sheet including loans held in
Ajax 2017-D and Ajax 2018-C where third parties own 50% and 37%, respectively.
Statistics do not include non-consolidated joint ventures where we own bonds and
beneficial interests issued by the joint ventures.

In response to the disruption in the financial markets caused by COVID-19, we
raised preferred equity in the first week of April 2020. We expect this
additional capital to allow us to maintain liquidity in the short term and take
advantage of favorable investment opportunities. Not withstanding this
additional capital and liquidity, we expect continued volatility in the
residential mortgage securities market in the short term and increased
acquisition opportunities later in the year. Extended forbearance, foreclosure
timelines and eviction timelines could result in lower yields and losses on our
mortgage loan and beneficial interest portfolios and losses on our REO
held-for-sale. Ongoing disruption in the credit markets could result in
additional margin calls from our financing counterparties and additional mark
downs on our Investments in debt securities.

We believe that certain cyclical trends continue to drive a significant realignment within the mortgage sector notwithstanding the impact of COVID-19. Through the end of the first quarter, the recent trends noted below have continued, including:


•historically low interest rates and elevated operating costs resulting from new
regulatory requirements continue to drive sales of residential mortgage assets
by banks and other mortgage lenders;
•declining home ownership due to rising prices, low inventory, tighter lending
standards and increased down payment requirements that have increased the demand
for single-family and multi-family residential rental properties;
•the Dodd-Frank risk retention rules for asset backed securities have reduced
the universe of participants in the securitization markets;
•the lack of a robust market for non-conforming mortgage loans will reduce the
pool of buyers due to tighter credit standards as a result of COVID-19; and
•the current market landscape and decrease in the price of residential mortgage
loans as a result of the COVID-19 outbreak we believe will generate new
opportunities in residential mortgage-related whole loan strategies.

The origination of subprime and alternative residential mortgage loans remain
substantially below 2008 levels and the qualified mortgage and ability-to-repay
rule requirements have put pressure on new originations. Additionally, many
banks and other mortgage lenders have increased their credit standards and down
payment requirements for originating new loans. Recent market disruption from
COVID-19 has sharply reduced financing alternatives for borrowers not eligible
for financing programs underwritten by the GSEs or the Federal government.

The combination of these factors has also resulted in a significant number of
families that cannot qualify to obtain new residential mortgage loans. We
believe the U.S. federal regulations addressing "qualified mortgages" based,
among other factors on employment status, debt-to-income level, impaired credit
history or lack of savings, limit mortgage loan availability from traditional
mortgage lenders. In addition, we believe that many homeowners displaced by
foreclosure or who either cannot afford to own or cannot be approved for a
mortgage will prefer to live in single-family rental properties with similar
characteristics and amenities to owned homes as well as smaller multi-family
residential properties. In certain demographic areas, new households are being
formed at a rate that exceeds the new homes being added to the market, which we
believe favors future demand for non-federally guaranteed mortgage financing for
single-family and smaller multi-family rental properties. For all these reasons,
we believe that demand for single-family and smaller multi-family rental
properties will increase in the near term and remain at heightened levels for
the foreseeable future.

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We believe that investments in residential RPLs with positive equity provide an
optimal investment value. As a result, we are currently focusing on acquiring
pools of RPLs, though we may acquire NPLs, either directly or with joint venture
partners, if attractive opportunities exist. Through our Servicer, we work with
our borrowers to improve their payment records. Once there is a period of
continued performance, we expect that borrowers will typically refinance these
loans at or near the estimated value of the underlying property.

We also believe there are significant attractive investment opportunities in the
SBC loan and property markets and originate as well as purchase these loans. The
primary lenders for smaller multi-family and mixed retail/residential properties
are community banks and not regional and national banks and large institutional
lenders. We believe the primary lenders and loan purchasers are less interested
in these assets because they typically require significant commercial and
residential mortgage credit and underwriting expertise, special servicing
capability and active property management. It is also more difficult to create
the large pools of these loans that banks, other lenders and portfolio acquirers
typically desire. We continually monitor opportunities to increase our holdings
of these SBC loans and properties.

Factors That May Affect Our Operating Results


Acquisitions. Our operating results depend heavily on sourcing residential RPLs
and SBC loans and, when attractive opportunities are identified, NPLs. We
believe that there is generally a large supply of RPLs available to us for
acquisition and we believe the available supply provides for a steady
acquisition pipeline of assets since large institutions are active sellers in
the market. We expect that our residential mortgage loan portfolio may grow at
an uneven pace, as opportunities to acquire distressed residential mortgage
loans may be irregularly timed and may involve large portfolios of loans, and
the timing and extent of our success in acquiring such loans cannot be
predicted. We also believe there may be increased opportunities to acquire NPLs
due to COVID-19. In addition, for any given portfolio of loans that we agree to
acquire, we typically acquire fewer loans than originally expected, as certain
loans may be resolved prior to the closing date or may fail to meet our
diligence standards. The number of loans not acquired typically constitutes a
small portion of a particular portfolio. In any case where we do not acquire the
full portfolio, we make appropriate adjustments to the applicable purchase
price.

Financing. Our ability to grow our business by acquiring residential RPLs and
SBC loans depends on the availability of adequate financing, including
additional equity financing, debt financing or both in order to meet our
objectives. We intend to leverage our investments with debt, the level of which
may vary based upon the particular characteristics of our portfolio and on
market conditions. We have funded and intend to continue to fund our asset
acquisitions with non-recourse secured borrowings in which the underlying
collateral is not marked-to-market and employ repurchase agreements without the
obligation to mark-to-market the underlying collateral to the extent available.
We securitize our whole loan portfolios, primarily as a financing tool, when
economically efficient to create long-term, fixed rate, non-recourse financing
with moderate leverage, while retaining one or more tranches of the subordinate
MBS so created. The secured borrowings are structured as debt financings and not
real estate investment conduit ("REMIC") sales. We completed the securitization
transactions pursuant to Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), in which we issued notes primarily secured by seasoned,
performing and non-performing mortgage loans primarily secured by first liens on
one-to-four family residential properties. Currently there is substantial
uncertainty in the securitization markets which could limit our access to
financing.

To qualify as a REIT under the Code, we generally will need to distribute at
least 90% of our taxable income each year (subject to certain adjustments) to
our stockholders. This distribution requirement limits our ability to retain
earnings and thereby replenish or increase capital to support our activities.

Resolution Methodologies. We, through the Servicer, or our affiliates, employ
various loan resolution methodologies with respect to our residential mortgage
loans, including loan modification, collateral resolution and collateral
disposition. The manner in which an NPL is resolved will affect the amount and
timing of revenue we will receive. Our preferred resolution methodology is to
modify NPLs. Once successfully modified and there is a period of continued
performance, we expect that borrowers will typically refinance these loans at or
near the estimated value of the underlying property. We believe modification
followed by refinancing generates near-term cash flows, provides the highest
possible economic outcome for us and is a socially responsible business strategy
because it keeps more families in their homes. In certain circumstances, we may
also consider selling these modified loans. Through historical experience, we
expect that many of our NPLs will enter into foreclosure or similar proceedings,
ultimately becoming REO that we can sell or convert into single-family rental
properties that we believe will generate long-term returns for our stockholders.
Our REO properties may be converted into single-family rental properties or they
may be sold through REO liquidation and short sale processes. We expect the
timelines for each of the different processes to vary significantly. The exact
nature of resolution will depend on a number of factors that are beyond our
control, including borrower willingness, property value, availability of
refinancing, interest rates, conditions in the financial markets, regulatory
environment and other factors. To avoid the 100% prohibited transaction tax on
the sale of dealer property
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by a REIT, we may dispose of assets that may be treated as held "primarily for
sale to customers in the ordinary course of a trade or business" by contributing
or selling the asset to a TRS prior to marketing the asset for sale.

The state of the real estate market and home prices will determine proceeds from
any sale of real estate. We will opportunistically and on an asset-by-asset
basis determine whether to rent any REO we acquire, whether upon foreclosure or
otherwise, we may determine to sell such assets if they do not meet our
investment criteria. In addition, while we seek to track real estate price
trends and estimate the effects of those trends on the valuations of our
portfolios of residential mortgage loans, future real estate values are subject
to influences beyond our control. Declining real estate prices, including as a
result of COVID-19, are expected to negatively affect our results. We also
expect that extended eviction timelines resulting from COVID-19 will negatively
impact sales of our REO held-for-sale.

Conversion to Rental Property. From time to time we will retain an REO property
as a rental property and may acquire rental properties through direct purchases
at attractive prices. The key variables that will affect our residential rental
revenues over the long-term will be the extent to which we acquire properties,
which, in turn, will depend on the amount of our capital invested, average
occupancy and rental rates in our owned rental properties. We expect the
timeline to convert multi-family and single-family loans, into rental properties
will vary significantly by loan, which could result in variations in our revenue
and our operating performance from period to period. There are a variety of
factors that may inhibit our ability, through the Servicer, to foreclose upon a
residential mortgage loan and get access to the real property within the time
frames we model as part of our valuation process. These factors include, without
limitation: state foreclosure timelines and the associated deferrals (including
from litigation); unauthorized occupants of the property; U.S. federal, state or
local legislative action or initiatives designed to provide homeowners with
assistance in avoiding residential mortgage loan foreclosures that may delay the
foreclosure process; U.S. federal government programs that require specific
procedures to be followed to explore the non-foreclosure outcome of a
residential mortgage loan prior to the commencement of a foreclosure proceeding;
and declines in real estate values and high levels of unemployment and
underemployment that increase the number of foreclosures and place additional
pressure on the already overburdened judicial and administrative systems. We do
not expect to retain a material number of single family residential properties
for use as rentals. We do, however, intend to focus on retaining multi-unit
residences derived from foreclosures or acquired through outright purchases as
rentals.

Expenses. Our expenses primarily consist of the fees and expenses payable by us
under the Management Agreement and the Servicing Agreement. Additionally, our
Manager incurs direct, out-of-pocket costs related to managing our business,
which are contractually reimbursable by us. Loan transaction expense is the cost
of performing due diligence on pools of mortgage loans under consideration for
purchase. Professional fees are primarily for legal, accounting and tax
services. Real estate operating expense consists of the ownership and operating
costs of our REO properties, both held-for-sale and as rentals, and includes any
charges for impairments to the carrying value of these assets, which may be
significant. Those expenses may increase due to extended eviction timelines
caused by COVID-19. Interest expense, which is subtracted from our Interest
income to arrive at Net interest income, consists of the costs to borrow money.

Changes in Home Prices. As discussed above, generally, rising home prices are
expected to positively affect our results, particularly as this should result in
greater levels of re-performance of mortgage loans, faster refinancing of those
mortgage loans, more re-capture of principal on greater than 100% LTV
(loan-to-value) mortgage loans and increased recovery of the principal of the
mortgage loans upon sale of any REO. Conversely, declining real estate prices
are expected to negatively affect our results, particularly if the home prices
should decline below our purchase price for the loans and especially if
borrowers determine that it is better to strategically default as their equity
in their homes decline. While home prices have risen to, or in some cases
beyond, pre-Great Recession levels in many parts of the United States, there are
still significant regions where values have not materially increased. We
typically concentrate our investments in specific urban geographic locations in
which we expect stable or better property markets. However, when we analyze loan
and property acquisitions we do not take home price appreciation HPA into
account except for rural properties for which we model negative HPA related to
our expectation of worse than expected property condition. It is too early to
determine the impact of the COVID-19 outbreak on HPA and the resulting impact on
our markets.

We typically concentrate our investments in specific urban geographic locations
in which we expect stable or better property markets, although we do not use any
appreciation expectation in the acquisition price evaluation. To date, there has
been no measurable data on the impact of COVID-19 on HPA and it is unclear what
the short and long term impact will be. A significant decline in HPA will have
an adverse impact on our operating results.

Changes in Market Interest Rates. With respect to our business operations,
increases in existing interest rates, in general, may over time cause: (1) the
value of our mortgage loan and MBS (retained from our secured borrowings)
portfolio to decline; (2) coupons on our adjustable rate mortgages ("ARM") and
hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to
higher interest rates; (3) prepayments on our mortgage loans and MBS portfolio
to slow, thereby slowing
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the amortization of our purchase premiums and the accretion of our purchase
discounts; (4) the interest expense associated with our borrowings to increase;
and (5) to the extent we enter into interest rate swap agreements as part of our
hedging strategy, the value of these agreements to increase. Conversely,
decreases in interest rates, in general, may over time cause: (a) prepayments on
our mortgage loan and MBS portfolio to increase, thereby accelerating the
accretion of our purchase discounts; (b) the value of our mortgage loan and MBS
portfolio to increase; (c) coupons on our ARM and hybrid ARM mortgage loans and
MBS to reset, although on a delayed basis, to lower interest rates; (d) the
interest expense associated with our borrowings to decrease; and (e) to the
extent we enter into interest rate swap agreements as part of our hedging
strategy, the value of these agreements to decrease. We currently expect the
pace of loan prepayments to slow due to the COVID-19 outbreak.

Market Conditions. Due to the dramatic repricing of real estate assets that
occurred during the 2008 financial crisis and the continuing uncertainty
regarding the direction and continuing strength of the real estate markets
including as a result of the COVID-19 outbreak, we believe a void in the debt
and equity capital available for investing in real estate exists as many
financial institutions, insurance companies, finance companies and fund managers
have determined to reduce or discontinue investment in debt or equity related to
real estate. We believe the dislocations in the residential real estate market
have resulted or will result in an "over-correction" in the repricing of real
estate assets, creating a potential opportunity for us to capitalize on these
market dislocations and capital void to the extent we are able to obtain
financing for additional purchases.

We believe that in spite of the continuing uncertain market environment for
mortgage-related assets, including as a result of the COVID-19 outbreak, current
market conditions offer potentially attractive investment opportunities for us,
even in the face of a riskier and more volatile market environment. We expect
that market conditions will continue to impact our operating results and will
cause us to adjust our investment and financing strategies over time as new
opportunities emerge and risk profiles of our business change.

COVID-19. The current outbreak of COVID-19 has also impacted, and is likely to
continue to impact, directly or indirectly, many of the other factors discussed
above, as well as other aspects of our business. New developments continue to
emerge and it is not possible for us to predict with certainty which factors
will impact our business. In addition, we cannot assess the impact of each
factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. In particular, it is difficult to fully assess
the impact of COVID-19 at this time due to, among other things, uncertainty
regarding the severity and duration of the outbreak domestically and
internationally and the effectiveness of federal, state and local government
efforts to contain the spread of COVID-19, the effects of those efforts on our
business, the indirect impact on the U.S. economy and economic activity and the
impact on the mortgage markets and capital markets.

Critical Accounting Policies and Estimates

Mortgage Loans


Loans acquired with deterioration in credit quality - As of their acquisition
date the loans we acquire have generally suffered some credit deterioration
subsequent to origination. As a result, prior to the adoption of ASU 2016-13,
Financial Instruments - Credit Losses, otherwise known as CECL, on January 1,
2020, we were required to account for the mortgage loans pursuant to ASC 310-30,
Accounting for Loans with Deterioration in Credit Quality. Under both standards,
our recognition of interest income for loans with deteriorated credit quality
("PCD loans") is based upon its having a reasonable expectation of the amount
and timing of the cash flows expected to be collected. When the timing and
amount of cash flows expected to be collected are reasonably estimable, we use
expected cash flows to apply the effective interest method of income
recognition.

Under both CECL and ASC 310-30, acquired loans may be aggregated and accounted
for as a pool of loans if the loans have common risk characteristics. A pool is
accounted for as a single asset with a single composite interest rate and an
aggregate expectation of cash flows. However, CECL allows more flexibility to
adjust the loan pools as the underlying risk factors change over time. Under ASC
310-30, we determined RPLs to have common risk characteristics and accounted for
them as a single loan pool for loans acquired within each three-month calendar
quarter. Similarly, we determined NPLs to have common risk characteristics and
accounted for them as a single non-performing pool for loans acquired within
each three-month calendar quarter. The result was generally two additional pools
(RPLs and NPLs) each quarter. Under CECL, we re-aggregated our loan pools around
similar risk factors, while eliminating the previous distinction for the quarter
in which loans were acquired. This resulted in reducing the number of loan pools
to four, each of which is oriented around similar risk factors. Excluded from
the aggregate pools are loans that pay in full subsequent to the acquisition
closing date but prior to pooling. Any gain or loss on these loans is recognized
as Interest income in the period the loan pays in full.

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Our accounting for PCD loans gives rise to an accretable yield and an allowance
for credit losses. Under CECL, upon the acquisition of PCD loans we record the
acquisition as three separate elements for 1) the amount of purchase discount
which we expect to recover through eventual repayment by the borrower, 2) an
allowance for future expected credit loss and 3) the UPB of the loan. The
purchase price discount which we expect at the time of acquisition to collect
over the life of the loans is the accretable yield. Cash flows expected at
acquisition include all cash flows directly related to the acquired loan,
including those expected from the underlying collateral. We recognize the
accretable yield as Interest income on a prospective level yield basis over the
life of the pool. The expectation of the amount of undiscounted cash flows to be
collected is evaluated at the end of each calendar quarter. If we expect to
collect greater cash flows over the life of the pool, any prior allowance is
reversed to the extent of the increase and the expected yield to maturity is
adjusted on a prospective basis. The allowance for credit losses is increased
when we estimate we will not collect all amounts previously estimated to be
collectible, and reduced when the underlying asset has been liquidated and all
expected underlying cash flows have been realized. Management assesses the
credit quality of the portfolio and the adequacy of loan loss reserves on a
quarterly basis, or more frequently as necessary. Significant judgment is
required in this analysis. Depending on the expected recovery of its investment,
we consider the estimated net recoverable value of the loan pools as well as
other factors, such as the fair value of the underlying collateral. Because
these determinations are based upon projections of future economic events, which
are inherently subjective, the amounts ultimately realized may differ materially
from the carrying value as of the reporting date.

Our mortgage loans are secured by real estate. We monitor the credit quality of
the mortgage loans in our portfolio on an ongoing basis, principally by
considering loan payment activity or delinquency status. In addition, we assess
the expected cash flows from the mortgage loans, the fair value of the
underlying collateral and other factors, and evaluates whether and when it
becomes probable that all amounts contractually due will not be collected.

Borrower payments on the mortgage loans are classified as principal, interest,
payments of fees, or escrow deposits. Amounts applied as interest on the
borrower account are similarly classified as interest for accounting purposes
and are classified as operating cash flows in our consolidated Statement of Cash
Flows. Amounts applied as principal on the borrower account including amounts
contractually due from borrowers that exceed our basis in loans purchased at a
discount, are similarly classified as principal for accounting purposes and are
classified as investing cash flows in the consolidated Statement of Cash Flows
as required under U.S. GAAP. Amounts received as payments of fees are recorded
in Other income and classified as operating cash flows in the consolidated
Statement of Cash Flows. Escrow deposits are recorded on the Servicer's balance
sheet and do not impact our cash flow.

Loans acquired or originated that have not experienced a deterioration in credit
quality - while we generally acquire loans that have experienced deterioration
in credit quality, we also acquire loans that have not experienced a
deterioration in credit quality and originate SBC loans.

Accrual of interest on individual loans is discontinued when management believes
that, after considering economic and business conditions and collection efforts,
the borrower's financial condition is such that collection of interest is
doubtful. Our policy is to stop accruing interest when a loan's delinquency
exceeds 90 days. All interest accrued but not collected for loans that are
placed on non-accrual status or subsequently charged-off are reversed against
Interest income. Income is subsequently recognized on the cash basis until, in
management's judgment, the borrower's ability to make periodic principal and
interest payments returns and future payments are reasonably assured, in which
case the loan is returned to accrual status.

An individual loan is considered to be impaired when, based on current events
and conditions, it is probable we will be unable to collect all amounts due
(both principal and interest) according to the contractual terms of the loan
agreement. Impaired loans are carried at the present value of expected future
cash flows discounted at the loan's effective interest rate, the loan's market
price, or the fair value of the collateral if the loan is collateral dependent.
For individual loans, a troubled debt restructuring is a formal restructuring of
a loan where, for economic or legal reasons related to the borrower's financial
difficulties, a concession that would not otherwise be considered is granted to
the borrower. The concession may be granted in various forms, including
providing a below-market interest rate, a reduction in the loan balance or
accrued interest, an extension of the maturity date, or a combination of these.
An individual loan that has had a troubled debt restructuring is considered to
be impaired and is subject to the relevant accounting for impaired loans.

If necessary, an allowance for loan losses is established through a provision
for loan losses charged to expenses. The allowance is the difference between the
expected future cash flows from the loan and the contractual balance due.

Real Estate

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REO Property - we acquire real estate properties directly from sellers and when
we foreclose on a borrower and take title to the underlying property (REO). REO
is recorded at cost if purchased, or at the present value of future cash flows
if obtained through foreclosure. REO we expect to actively market for sale is
classified as held-for-sale. REO held-for-sale is carried at the lower of its
acquisition basis, or its net realizable value (estimated fair market value less
expected selling costs). We estimate fair market value using a combination of
BPOs, comparable sales, appraisals, and competitive market analyses provided by
local realtors subject to our judgment. Net unrealized losses due to changes in
market value are recognized through a valuation allowance by charges to income.
No depreciation or amortization expense is recognized on properties
held-for-sale, while holding costs are expensed as incurred. Foreclosed property
that is sold to a third party at the foreclosure sale ("Third Party Sales") is
not considered REO and proceeds on these third party sales are treated as
payment in satisfaction of the underlying loan. See Mortgage Loans, above.

Rental property is real estate property not held-for-sale. Rental property is
intended to be held as long-term investments but may eventually be
held-for-sale. Property is held for investment as rental property if the modeled
present value of the future expected cash flows from use as a rental exceed the
present value of expected cash flows from a sale. Depreciation is provided for
using the straight-line method over the estimated useful lives of the assets of
27.5 years. We perform an impairment analysis for all rental property not
held-for-sale using estimated cash flows if events or changes in circumstances
indicate that the carrying value may be impaired, such as prolonged vacancy,
identification of materially adverse legal or environmental factors, changes in
expected ownership period or a decline in market value to an amount less than
cost. This analysis is performed at the property level. The cash flows are
estimated based on a number of assumptions that are subject to economic and
market uncertainties including, among others, demand for rental properties,
competition for customers, changes in market rental rates, costs to operate each
property and expected ownership periods.

If the carrying amount of a held for investment asset exceeds the sum of its
undiscounted future operating and residual cash flows, an impairment loss is
recorded for the difference between estimated fair value of the asset and the
carrying amount. We generally estimate the fair value of assets held for use by
using BPOs, comparable sales or realtor competitive market analysis. In some
instances, appraisal information may be available and is used in addition to
other measures of fair value.

From time to time, we perform property renovations to maximize the value of REO
held-for-sale and held for investment. Such expenditures are generally advanced
by our Servicer and recovered by our Servicer when the property is liquidated
(for REO property held-for-sale) or upon completion of the renovations (for REO
property held for investment). For residential and commercial properties that
are not held-for-sale, the carrying value, including any renovations that
improve or extend the life of the asset, are accounted for at cost. The cost
basis is depreciated using the straight-line method over an estimated useful
life of 27.5 years. Interest and other carrying costs incurred during the
renovation period are capitalized until the property is ready for its intended
use. Expenditures for ordinary maintenance and repairs are charged to expense as
incurred. We generally intend to limit rental activity to multifamily or
multi-unit single family properties.

Investments at fair value


Our Investments at Fair Value as of March 31, 2020 and December 31, 2019 consist
of investments in senior and subordinate notes issued by joint ventures which we
form with third party institutional accredited investors. We recognize income on
the debt securities using the effective interest method. Additionally, the notes
are classified as available for sale and are carried at fair value with changes
in fair value reflected in our consolidated statements of comprehensive income.
We mark our investments to fair value using prices received from our financing
counterparties and believe any unrealized losses on our debt securities to be
temporary. Any other-than-temporary losses, which represent the excess of the
amortized cost basis over the present value of expected future cash flows, are
recognized in the period identified in our consolidated statements of income.
Risks inherent in our debt securities portfolio, affecting both the valuation of
the securities as well as the portfolio's interest income include the risk of
default, delays and inconsistency in the frequency and amount of payments, risks
affecting borrowers such as man-made or natural disasters, or the COVID-19
outbreak, and damage to or delay in realizing the value of the underlying
collateral. We monitor the credit quality of the mortgage loans in underlying
its debt securities on an ongoing basis, principally by considering loan payment
activity or delinquency status. In addition, we assess the expected cash flows
from the mortgage loans, the fair value of the underlying collateral and other
factors, and evaluate whether and when it becomes probable that all amounts
contractually due will not be collected.

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Investments in Beneficial Interests


Our Investments in beneficial interests as of March 31, 2020 and December 31,
2019 consist of investments in the trust certificates issued by joint ventures
which we form with third party institutional accredited investors. The trust
certificates represent the residual interest of any special purpose entity
formed to facilitate the investment. We account for our Investments in
beneficial interests under CECL, as discussed under Mortgage Loans.

Debt


Secured Borrowings - We issue, through securitization trusts, callable debt
secured by our mortgage loans in the ordinary course of business. The secured
borrowings are structured as debt financings, and the loans remain on our
balance sheet as we are the primary beneficiary of many of these securitization
trusts, which are variable interest entities ("VIEs"). These secured borrowing
VIEs are structured as pass-through entities that receive principal and interest
on the underlying mortgages and distribute those payments to the holders of the
notes. Our exposure to the obligations of the VIEs is generally limited to the
amount of our investments in the VIE entities; the creditors do not have
recourse to the primary beneficiary. Coupon interest on the debt is recognized
using the accrual method of accounting. Deferred issuance costs, including
original issue discount and debt issuance costs, are amortized on an effective
yield basis based on the underlying cash flow of the mortgage loans. We assume
the debt will be called at the specified call date for purposes of amortizing
discount and issuance costs because we believe we will have the intent and
ability to call the debt on the call date. Changes in the actual or projected
underlying cash flows are reflected in the timing and amount of deferred
issuance cost amortization.

Repurchase Facilities - We enter into repurchase financing facilities under
which we nominally sell assets to a counterparty and simultaneously enter into
an agreement to repurchase the sold assets at a price equal to the sold amount
plus an interest factor. Despite being legally structured as sales and
subsequent repurchases, repurchase transactions are generally accounted for as
debt secured by the underlying assets. At the maturity of a repurchase
financing, unless the repurchase financing is renewed, we are required to repay
the borrowing including any accrued interest and concurrently receive back our
pledged collateral from the lender. The repurchase financings are treated as
collateralized financing transactions; pledged assets are recorded as assets in
our consolidated balance sheets, and debt is recognized at the contractual
amount. Interest is recorded at the contractual amount on an accrual basis.
Costs associated with the set-up of a repurchasing contract are recorded as
deferred expense at inception and amortized over the contractual life of the
agreement. Any draw fees associated with individual transactions and any
facility fees assessed on the amounts outstanding are recorded as deferred
expense when incurred and amortized over the contractual life of the related
borrowing.

Fair Value

Fair Value of Financial Instruments - Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. A fair value
hierarchy has been established that requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. The standard describes three levels of inputs that may be used to
measure fair value:

•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Observable inputs other than Level 1 prices, such as quoted prices
for similar assets and liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
•Level 3 - Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or
liabilities.

The degree of judgment utilized in measuring fair value generally correlates to
the level of pricing observability. Assets and liabilities with readily
available actively quoted prices or for which fair value can be measured from
actively quoted prices generally will have a higher degree of pricing
observability and a lesser degree of judgment utilized in measuring fair value.
Conversely, assets and liabilities rarely traded or not quoted will generally
have little or no pricing observability and a higher degree of judgment utilized
in measuring fair value. Pricing observability is impacted by a number of
factors, including the type of asset or liability, whether it is new to the
market and not yet established, and the characteristics specific to the
transaction.

The fair value of mortgage loans is estimated using the Manager's proprietary
pricing model which estimates expected cash flows with the discount rate used in
the present value calculation representing the estimated effective yield of the
loan. For valuation purposes, we disclose the fair value of REO at the lower of
its acquisition basis, or its net realizable value (estimated fair market value
less expected selling costs). We estimate fair market value using BPOs,
comparable sales and competitive
                                       53
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market analyses provided by local realtors. We use net realizable value as a
proxy for fair value as it represent the liquidation proceeds to us and is most
comparable to the fair value disclosure for loans.

We calculate the fair value for the senior debt consolidated on our balance
sheet from securitization trusts by using our Manager's proprietary pricing
model to estimate the cash flows expected to be generated from the underlying
collateral with the discount rate used in the present value calculation
representing an estimate of the average rate for debt instruments with similar
durations and risk factors.

Our convertible senior notes are traded on the NYSE; the debt's fair value is determined from the NYSE closing price on the balance sheet date.

Recent Accounting Pronouncements

Refer to the notes to our interim financial statements for a description of relevant recent accounting pronouncements.

Results of Operations


For the three months ended March 31, 2020, we had net income attributable to
common stockholders of $0.4 million, or $0.02 per share, for basic and diluted
common shares. For the three months ended March 31, 2019, we had net income
attributable to common stockholders of $7.3 million, or $0.39 per share, for
basic and $0.36 for diluted common shares. Key items for the three months ended
March 31, 2020 include:

•Formed a joint venture that acquired $184.8 million in unpaid principal balance
("UPB") of mortgage loans with collateral values of $292.9 million and an
aggregate purchase price of $170.4 million. As of March 31, 2020, the joint
venture was prefunded with $132.6 million of cash for additional loan purchases
of which 677 RPLs with UPB of $123.2 million closed in April for a purchase
price of $114.0 million. We retained $61.3 million of varying classes of related
securities issued by the joint venture to end the quarter with $312.1 million of
investments in debt securities and beneficial interests
•Purchased $0.2 million of NPLs with UPB of $0.2 million and underlying
collateral values of $0.3 million, and 26 RPLs for $1.2 million, with UPB of
$2.0 million and collateral values of $3.1 million to end the quarter with
$1.1 billion in net mortgage loans
•Interest income of $27.3 million; net interest income after provision for
credit losses of $9.1 million
•Overall cost of funds decreased approximately 21 basis points
•Net income attributable to common stockholders of $0.4 million
•Basic earnings per share ("EPS") of $0.02
•Taxable income of $0.05 per share
•Book value per share of $14.37 at March 31, 2020
•Collected total cash of $62.4 million, from loan payments, sales of real estate
owned ("REO") and investments in debt securities and beneficial interests
•Held $31.2 million of cash and cash equivalents at March 31, 2020; average
daily cash balance for the quarter was $58.6 million
•At March 31, 2020, approximately 74% of our portfolio based on UPB had made at
least the last 12 out of 12 payments

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Table 1: Results of Operations

                                                                 Three months ended March 31,
($ in thousands)                                                 2020                      2019
INCOME
Interest income                                          $         27,286           $        29,452
Interest expense                                                  (13,070)                  (15,685)
Net interest income                                                14,216                    13,767
Provision for credit losses                                        (5,109)                     (154)
Net interest income after provision for credit losses               9,107                    13,613
Income/(Loss) from investments in affiliates                       (1,112)                      461
Loss on sale of mortgage loans                                       (705)                        -
Other income                                                          747                     1,110
Total income                                                        8,037                    15,184
EXPENSE
Related party expense - loan servicing fees                         2,014                     2,506
Related party expense - management fee                              1,799                     1,688
Loan transaction expense                                             (103)                       69
Professional fees                                                     805                       862
Real estate operating expenses                                        912                       786
Other expense                                                       1,025                     1,081
Total expense                                                       6,452                     6,992
Loss on debt extinguishment                                           408                         -
Income before provision for income taxes                            1,177                     8,192
Provision for income taxes (benefit)                                 (319)                       71
Consolidated net income                                             1,496                     8,121
Less: consolidated net income attributable to the
non-controlling interest                                            1,096                       791
Consolidated net income attributable to common
stockholders                                             $            400           $         7,330



Our consolidated net income attributable to common stockholders decreased $6.9
million for the quarter ended March 31, 2020 compared to the quarter ended
March 31, 2019 primarily as a result of a $5.1 million provision for losses on
our loan and investments in beneficial interest portfolios driven primarily by
the expectation of deferrals of borrower payments, extended duration on loans
and extensions of foreclosure timelines as a result of the relief provisions for
the global pandemic caused by COVID-19. This reserve reflects the macroeconomic
impact of the COVID-19 outbreak on mortgage loan and residential real estate
markets generally and is not specific to any loan losses or impairments in our
portfolio. We recorded a provision for losses in the amount of $0.2 million for
the quarter ended March 31, 2019. Our book value declined to $14.37 per share
from $15.80 at December 31, 2019 primarily from the effects of a $28.4 million
non-cash mark-to-market adjustment to the fair value of our debt securities as
generally determined by marks provided by our financing counterparties.

On January 1, 2020 we adopted Accounting Standards Update (ASU) No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments ("CECL"). Under CECL, we are required to record the net
present value of the expected life of loan losses on our Mortgage loans and our
Investments in beneficial interests. Our transition adjustment on January 1,
2020 resulted in a reclassification from discount to the allowance for losses in
the amount of $14.4 million with no impact on Shareholder equity. On March 31,
2020, we recorded a charge to accrete $0.4 million of credit loss expense
resulting from the January 1 transition adjustment and a $4.7 million increase
in the allowance for losses driven by expectations derived from the COVID-19
outbreak, as described above. This resulted in a total provision for loss
expense of $5.1 million for the first quarter of 2020.

We recorded a loss from our investments in affiliates of $1.1 million for the
quarter ended March 31, 2020 compared to a gain of $0.5 million for the quarter
ended March 31, 2019. The loss is primarily due to the flow through impact of
mark-to-market losses on shares of our stock held by our Manager and our
Servicer. We account for our investments in our Manager
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and our Servicer using the equity method of accounting and all elements of
income, expense, gain and loss are picked up in proportion to our investment.
Additionally, during the quarter ended March 31, 2020 we sold 26 SBC mortgage
loans with a carrying value of $26.1 million and UPB of $26.2 million for a loss
of $0.7 million. We sold no loans in the quarter ended March 31, 2019.

We recorded $0.9 million in impairments on our REO held-for-sale portfolio in
real estate operating expense for the quarter ended March 31, 2020 compared to
$0.5 million for the quarter ended March 31, 2019. We continue to liquidate our
REO properties held-for-sale at a faster rate than we acquire properties, with
19 properties sold in the first quarter while five were added to REO
held-for-sale through foreclosures. The impairment was driven primarily by an
extension of expected liquidation timelines based on state and local eviction
moratoriums, and additional related expenses, and an overall slow-down in real
estate sales due to the impact of the COVID-19 outbreak. We expect the rate of
new foreclosures to slow due to the current moratorium in many states.

Interest Income


Our primary source of income is accretion earned on our mortgage loan portfolio
offset by the interest expense incurred to fund and hold portfolio acquisitions.
Net interest income after provision for loan losses decreased to $9.1 million
for the three months ended March 31, 2020 from $13.6 million for the three
months ended March 31, 2019 primarily as a result of $5.1 million in provisions
for credit losses from across various aspects of our portfolio. The increase in
the provision for credit losses is the result of losses driven by expectations
derived from the COVID-19 outbreak, including the potential effect of Government
mandated forbearance arrangements. As a result, for the three months ended
March 31, 2020 we recorded provisions for credit losses of $2.1 million on our
mortgage loan portfolio and $3.0 million on our investments in debt securities.
Comparatively during the three months ended March 31, 2019 we recorded
provisions for credit losses of $0.2 million on our mortgage loan portfolio and
no provisions for credit losses on our investments in debt securities.

Our gross interest income decreased by $2.2 million to $27.3 million in the
quarter ended March 31, 2020 from $29.5 million in the quarter ended March 31,
2019 due primarily to a decrease in the average balance of our mortgage loan
portfolio driven partly by sales of mortgage loans, including the sale of loans
to our 2019-C securitization on May 1, 2019, as well as from payoff of mortgage
loans by borrowers. The volume of payoffs on the portfolio remained robust
during the first quarter of 2020, with $47.0 million collected on our loan
portfolio for the first quarter as compared to $44.7 million for the first
quarter of 2019, as borrowers refinance or sell the underlying property.

Our interest expense decreased $2.6 million to $13.1 million in the quarter ended March 31, 2020 from $15.7 million in the quarter ended March 31, 2019 primarily due to a full quarter's impact of our rated secured borrowing that closed in November 2019.


The weighted average balance of our mortgage loan portfolio was $1.1 billion for
the three months ended March 31, 2020 compared to $1.3 billion for the three
months ended March 31, 2019. Additionally, we collected $62.4 million, excluding
the loan sales proceeds, in cash payments and proceeds on our mortgage loans,
our REO held-for-sale and our investments in securities for the three months
ended March 31, 2020 compared to collections of $63.2 million for the three
months ended March 31, 2019.

The interest income detail for the three months ended March 31, 2020 and 2019 are included in the table below ($ in thousands):

Table 2: Interest income detail

                                                                 Three 

months ended March 31,

                                                                  2020                    2019

Accretable yield recognized on RPLs, NPLs and SBC loans, pooled

                                                     $       21,737$      26,553
Interest income on securities                                       5,006                   2,416
Interest income earned on other loans                                 384                     158
Bank interest income                                                  121                     320
Other interest income                                                  38                       5
Interest income                                            $       27,286$      29,452
Provision for credit losses                                        (5,109)                   (154)

Interest income after provision for credit losses $ 22,177

$ 29,298

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The average balance of our mortgage loan portfolio, investment in securities and
debt outstanding for the three months ended March 31, 2020 and 2019 are included
in the table below ($ in thousands):

Table 3: Average Balances
                                                                      Three months ended March 31,
                                                                        2020                   2019
Average mortgage loan portfolio                                  $    1,135,336$ 1,306,500

Average carrying value of debt securities and beneficial interests

                                                        $      298,304$   135,449
Total average asset level debt                                   $    1,067,983$ 1,127,673



Other Income

Other income decreased for the three months ended March 31, 2020 as compared to
the three months ended March 31, 2019 due to decreased rental income from the
impact on our rental portfolio as a result our Gaea capital raise in November
2019 and lower income from the federal government's Home Affordable Modification
Program ("HAMP") as more loans reach the five-year threshold for where any
additional fees will have been earned. This was offset by increased net gain on
sale of property held-for-sale. A breakdown of Other income is provided in the
table below ($ in thousands):

Table 4: Other Income
                                                       Three months ended March 31,
                                                     2020                          2019
Net gain on sale of Property held-for-sale      $      413$   103
Late fee income                                        185                          230
HAMP fees                                              138                          384
Rental Income                                           11                          385
Other income                                             -                            8
Total Other Income                              $      747$ 1,110




Expenses

Total expenses for the three months ended March 31, 2020 decreased from the
three months ended March 31, 2019 due to a decrease in loan servicing fees as a
result of a lower average balance of our mortgage loan portfolio and because our
interest income from debt securities and beneficial interests is recorded net of
servicing fees. This was offset by REO impairments, an element of our real
estate operating expenses, which increased from $0.5 million for the three
months ended March 31, 2019 to $0.9 million for the three months ended March 31,
2020. A breakdown of expenses is provided in the table below ($ in thousands):

Table 5: Expenses
                                                                    Three months ended March 31,
                                                                     2020                   2019
Related party expense - loan servicing fees                    $       2,014$      2,506
Related party expense - management fee                                 1,799                  1,688
Other expense                                                          1,025                  1,081
Real estate operating expenses                                           912                    786
Professional fees                                                        805                    862
Loan transaction expense                                                (103)                    69
Total expenses                                                 $       6,452$      6,992



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Other expense decreased for the three months ended March 31, 2020 over the
comparable period in 2019 primarily due to a decrease in employee and service
provider share grants and taxes and regulatory expense offset by lower travel
expense. Travel expense is primarily incurred during due diligence prior to and
subsequent to portfolio acquisition. A breakdown of other expense is provided in
the table below ($ in thousands):

Table 6: Other Expense
                                                       Three months ended March 31,
                                                      2020                          2019
Insurance                                       $         184                    $   159
Employee and service provider share grants                174               

250

Borrowing related expenses                                170               

197

Travel, meals, entertainment                              138                        101
Directors' fees and grants                                109                         97
Other expense                                              97                         67
Software licenses and amortization                         70               

47

Taxes and regulatory expense                               46                        112
Internal audit services                                    37                         51
Total Other expense                             $       1,025$ 1,081

Equity and Net Book Value per Share


Our net book value per share was $14.37 and $15.80 at March 31, 2020 and
December 31, 2019, respectively. Our decrease in book value was driven primarily
by the reduction in equity that resulted from the fair value adjustments of
$28.4 million taken on our portfolio of debt securities recorded to Other
comprehensive income. While GAAP does not specifically define the parameters for
calculating book value, we believe our calculation is representative of our book
value on a per share basis, and our Manager believes book value per share is a
valuable metric for evaluating our business. The net book value per share is
calculated by dividing equity, after adjusting for the anticipated conversion of
the senior convertible notes into shares of common stock, the subtraction of
non-controlling interests classified in equity, and shares for Manager and
director fees that were approved but still unissued as of the date indicated,
unvested employee and service provider stock grants and the common shares from
assumed conversion of our Senior convertible notes. A breakdown of our book
value per share is set forth in the table below ($ in thousands except per share
amounts):

Table 7: Book Value per Share
                                                                March 31, 2020          December 31, 2019
Outstanding shares                                                 22,921,935                22,142,143

Adjustments for: Unvested grants of restricted stock, and Manager and director shares earned but not issued as of the date indicated

                   3,468                     2,600

Conversion of convertible senior notes into shares of common stock

                                                               8,007,089                 8,270,208
Total adjusted shares outstanding                                  30,932,492                30,414,951

Equity at period end                                           $      

357,274 $ 384,084 Net increase in equity from expected conversion of convertible senior notes

                                                          112,750                   120,669
Adjustment for equity due to non-controlling interests                (25,414)                  (24,257)
Adjusted equity                                                $      444,610$        480,496
Book value per share                                           $        14.37          $          15.80



Mortgage Loan Portfolio

For the three months ended March 31, 2020, we acquired 26 RPLs with an
aggregated acquisition price of $1.2 million, representing 61.7% of UPB.
Comparatively, for the three months ended March 31, 2019, we acquired 38 RPLs
with an aggregate acquisition price of $7.2 million, representing 84.8% of UPB.
We acquired one NPL loan for an acquisition price of
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$0.2 million, representing 81.5% of UPB for the three month periods ended March 31, 2020. Comparatively, during the three months ended March 31, 2019 we acquired no NPLs.

For the three months ended March 31, 2020, we acquired no SBC loans. Comparatively, for the three months ended March 31, 2019 we acquired 19 SBC loans, with UPB of $17.8 million that represented 62.0% of the underlying collateral value of $28.7 million. We ended the period with $1.1 billion of mortgage loans with an aggregate UPB of $1.2 billion as of March 31, 2020 and $1.3 billion of mortgage loans with an aggregate UPB of $1.5 billion as of March 31, 2019.

The following table shows loan portfolio acquisitions that includes paid in full loans after acquisition but before boarding by the Servicer, for the three months ended March 31, 2020, and 2019 ($ in thousands):

Table 8: Loan Portfolio Acquisitions

                                     Three months ended March 31,
                                    2020                          2019
RPLs
Count                                    26                         38
UPB                           $       1,952$ 8,495
Purchase price                $       1,205$ 7,205
Purchase price % of UPB                61.7   %                   84.8  %
NPLs
Count                                     1                          -
UPB                           $         227                    $     -
Purchase price                $         185                    $     -
Purchase price % of UPB                81.5   %                      -  %


Table 9: Commercial loans non-pooled

                                              Three months ended March 31,
                                           2020                           2019
SBC loans non-pooled
Count                                         -                              19
UPB                                    $      -                        $ 17,776
Undrawn UPB at acquisition             $      -                        $    469
Issue price % of collateral value             -    %                       

62.0 %




During the three months ended March 31, 2020, 151 mortgage loans, representing
4.5% of our ending UPB, were liquidated. Comparatively, during the three months
ended March 31, 2019, 151 mortgage loans, representing 1.7% of our ending UPB,
were liquidated. Our loan portfolio activity for the three months ended
March 31, 2020 and 2019 are presented below ($ in thousands):

Table 10: Loan Portfolio Activity

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                                                                       Three months ended March 31,
                                                                        2020                   2019
Beginning carrying value                                         $    1,151,469$  1,310,873

RPL, NPL and SBC pool portfolio acquisitions, net cost basis

                                                                       185                  7,205
Other non-pooled portfolio acquisitions, net cost basis                   1,206                 17,793
Accretion recognized                                                     21,745                 26,586
Payments received, net                                                  (46,960)               (44,460)
Reclassifications to REO                                                   (814)                (4,171)
Sale of mortgage loans                                                  (26,111)                     -
Provision for credit losses on mortgage loans                            (2,122)                  (154)
Other                                                                        31                      5
Ending carrying value                                            $    1,098,629$  1,313,677



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Table 11: Portfolio Composition

As of March 31, 2020 and December 31, 2019, our portfolios consisted of the following ($ in thousands):

                                                                                                        December 31,
                 March 31, 2020(1,2)                                                                     2019(1,2)
No. of Loans                                  6,060          No. of Loans                                   6,184
Total UPB                               $ 1,207,885          Total UPB                               $  1,268,126
Interest-Bearing Balance                $ 1,131,370          Interest-Bearing Balance                $  1,190,917
Deferred Balance(3)                     $    76,515          Deferred Balance(3)                     $     77,209
Market Value of Collateral(4)           $ 1,917,331          Market Value of Collateral(4)           $  1,783,856
Price/Total UPB(5)                             82.4  %       Price/Total UPB(5)                              82.9  %
Price/Market Value of Collateral               54.8  %       Price/Market Value of Collateral                61.9  %
Weighted Average Coupon                        4.52  %       Weighted Average Coupon                         4.55  %
Weighted Average LTV(6)                        74.5  %       Weighted Average LTV(6)                         83.5  %
Weighted Average Remaining Term                              Weighted Average Remaining Term
(months)                                        304          (months)                                         311
No. of first liens                            6,001          No. of first liens                             6,124
No. of second liens                              59          No. of second liens                               60
No. of Rental Properties                          9          No. of Rental Properties                          10

Capital Invested in Rental Properties$ 1,394 Capital Invested in Rental Properties$ 1,591 RPLs loans

                                     97.1  %       RPLs loans                                      95.3  %
NPLs loans                                      2.5  %       NPLs loans                                       2.7  %
Small-balance commercial loans                  0.4  %       Small-balance commercial loans                   2.0  %
No. of Other REO                                 45          No. of Other REO                                  58
Market Value of Other REO(7)            $    11,329          Market Value of Other REO(7)            $     13,987
Carrying value of debt securities and                        Carrying value of debt securities and
beneficial interests in trusts          $   346,450          beneficial interests in trusts          $    288,362
Loans with 12 for 12 payments as an                          Loans with 12 for 12 payments as an
approximate percentage of UPB (8)              74.0  %       approximate percentage of UPB (8)               76.0  %
Loans with 24 for 24 payments as an                          Loans with 24 for 24 payments as an
approximate percentage of UPB (9)              67.0  %       approximate percentage of UPB (9)               64.0  %





(1)Includes the impact of 1,003 mortgage loans with a purchase price of $177.3
million, UPB of $194.3 million and collateral value of $295.3 million acquired
in the fourth quarter of 2017 through a 50% owned joint venture which we
consolidate.
(2)Includes the impact of 256 mortgage loans with a purchase price of $47.4
million, UPB of $52.8 million and collateral value of $68.1 million acquired in
the third quarter of 2018 through a 63.0% owned joint venture which we
consolidate.
(3)Amounts that have been deferred in connection with a loan modification on
which interest does not accrue. These amounts generally become payable at the
time of maturity.
(4)As of date of acquisition.
(5)At March 31, 2020 and December 31, 2019, our loan portfolio consists of fixed
rate (52.1% of UPB), ARM (9.4% of UPB) and Hybrid ARM (38.5% of UPB); and fixed
rate (52.8% of UPB), ARM (9.5% of UPB) and Hybrid ARM (37.7% of UPB),
respectively.
(6)UPB as of March 31, 2020 and December 31, 2019, divided by market value of
collateral and weighted by the UPB of the loan.
(7)Market value of REO is based on net realizable value. Fair market value is
determined based on appraisals, BPOs, or other market indicators of fair value
including list price or contract price.
(8)Loans that have made at least 12 of the last 12 payments, or for which the
full dollar amount to cover at least 12 payments has been made in the last 12
months.
(9)Loans that have made at least 24 of the last 24 payments, or for which the
full dollar amount to cover at least 24 payments has been made in the last 24
months.

Table 12: Portfolio Characteristics


The following tables present certain characteristics of our mortgage loans by
year of origination as of March 31, 2020 and December 31, 2019, respectively ($
in thousands):

Portfolio at March 31, 2020
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                                                                     Years 

of Origination

                                                   After 2008          2006 - 2008          2005 and prior
Number of loans                                          612                3,516                   1,932
Unpaid principal balance                          $  123,662$   806,805$      277,418
Mortgage loan portfolio by year of origination          10.2  %              66.8  %                 23.0  %
Loan Attributes:
Weighted average loan age (months)                     107.3                157.6                   196.5
Weighted Average loan-to-value                          72.4  %              78.8  %                 64.8  %
Delinquency Performance:
Current                                                 51.4  %              55.1  %                 54.0  %
30 days delinquent                                      13.1  %              12.6  %                 13.9  %
60 days delinquent                                       9.1  %               8.4  %                 10.1  %
90+ days delinquent                                     22.7  %              19.1  %                 18.3  %
Foreclosure                                              3.7  %               4.8  %                  3.7  %


Portfolio at December 31, 2019

Years of Origination

                                                         After 2008          2006 - 2008          2005 and prior
Number of loans                                                625                3,576                   1,983
Unpaid principal balance                                $  153,923$   826,684$      287,519
Mortgage loan portfolio by year of origination                12.1  %              65.2  %                 22.7  %
Loan Attributes:
Weighted average loan age (months)                            88.0                154.5                   193.3
Weighted Average loan-to-value                                72.7  %              81.2  %                 66.5  %
Delinquency Performance:
Current                                                       61.9  %              56.9  %                 58.8  %
30 days delinquent                                             9.5  %              13.0  %                 12.6  %
60 days delinquent                                             6.5  %               8.4  %                  8.2  %
90+ days delinquent                                           20.5  %              17.3  %                 17.3  %
Foreclosure                                                    1.6  %               4.4  %                  3.1  %



Table 13: Loans by State

The following table identifies our mortgage loans by state, number of loans, loan value, collateral value and percentages thereof at March 31, 2020 and December 31, 2019 ($ in thousands):

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                                                   March 31, 2020December 31, 2019
                                                                                                          % of                                                                                                                        % of
                                                                                 Collateral            Collateral                                                                                            Collateral            Collateral
  State             Count                 UPB                 % UPB               Value(1)                Value               State             Count                 UPB                 % UPB               Value(1)                Value
CA(2)                   962          $   330,994                 27.4  %       $   575,714                    30.0  %       CA                    1,010          $   370,838                 29.2  %       $   564,169                    31.6  %
FL                      676              117,008                  9.7  %           183,163                     9.6  %       FL                      689              119,728                  9.4  %           156,967                     8.8  %
NY(2)                   327              103,473                  8.6  %           175,429                     9.1  %       NY                      331              105,853                  8.3  %           161,646                     9.1  %
NJ (2)                  295               66,828                  5.5  %            88,579                     4.6  %       NJ                      290               66,762                  5.3  %            80,472                     4.5  %
MD                      253               61,581                  5.1  %            78,503                     4.1  %       MD                      257               63,349                  5.0  %            74,027                     4.2  %
GA                      355               47,694                  4.0  %            71,522                     3.7  %       GA                      363               48,969                  3.9  %            62,960                     3.5  %
VA                      201               43,217                  3.6  %            60,873                     3.2  %       VA                      206               44,193                  3.5  %            57,678                     3.2  %
IL                      223               41,929                  3.5  %            53,587                     2.8  %       IL                      228               42,962                  3.4  %            49,586                     2.8  %
TX                      392               38,310                  3.2  %            75,244                     3.9  %       TX                      399               39,689                  3.1  %            69,874                     3.9  %
MA                      177               36,146                  3.0  %            59,155                     3.1  %       MA                      181               37,596                  3.0  %            53,785                     3.0  %
NC                      244               31,259                  2.6  %            46,895                     2.5  %       NC                      240               31,402                  2.5  %            42,977                     2.4  %
WA                      109               27,364                  2.3  %            48,364                     2.5  %       WA                      114               28,489                  2.2  %            43,372                     2.4  %
AZ                      152               25,884                  2.2  %            40,914                     2.1  %       AZ                      154               26,321                  2.1  %            34,277                     1.9  %
NV                      106               20,989                  1.8  %            33,355                     1.7  %       NV                      107               21,384                  1.7  %            27,540                     1.5  %
PA                      175               20,287                  1.7  %            28,736                     1.5  %       PA                      180               20,978                  1.7  %            26,936                     1.5  %
SC                      127               14,855                  1.2  %            22,757                     1.2  %       SC                      129               15,282                  1.2  %            21,263                     1.2  %
MI                       95               13,283                  1.1  %            22,704                     1.2  %       MI                       98               14,339                  1.1  %            21,876                     1.2  %
OH                      109               13,271                  1.1  %            17,030                     0.9  %       OH                      110               13,515                  1.1  %            15,451                     0.9  %
OR                       64               12,678                  1.1  %            21,749                     1.1  %       OR                       66               12,991                  1.0  %            19,519                     1.1  %
CT                       72               12,521                  1.0  %            16,224                     0.8  %       CT                       72               12,594                  1.0  %            15,832                     0.9  %
TN                      112               11,960                  1.0  %            21,090                     1.1  %       TN                      115               12,566                  1.0  %            19,203                     1.1  %
CO                       59               11,633                  1.0  %            23,735                     1.2  %       CO                       63               12,368                  1.0  %            22,471                     1.3  %
MO                       80                9,951                  0.8  %            13,275                     0.7  %       MN                       54               10,200                  0.8  %            12,753                     0.7  %
MN                       53                9,839                  0.8  %            13,651                     0.7  %       MO                       80               10,003                  0.8  %            12,427                     0.7  %
IN                       98                9,407                  0.8  %            13,789                     0.7  %       IN                      100                9,521                  0.8  %            12,545                     0.7  %
UT                       51                8,705                  0.7  %            17,196                     0.9  %       UT                       52                8,923                  0.7  %            13,957                     0.8  %
LA                       72                7,531                  0.6  %            11,259                     0.6  %       LA                       74                7,585                  0.6  %            11,389                     0.6  %
HI                       17                7,207                  0.6  %            10,444                     0.6  %       HI                       17                7,229                  0.6  %            10,093                     0.6  %
DE                       33                6,540                  0.5  %             7,702                     0.4  %       DE                       33                6,566                  0.5  %             7,626                     0.4  %
WI                       37                4,738                  0.4  %             6,126                     0.3  %       WI                       37                4,772                  0.4  %             5,827                     0.3  %
DC                       16                4,525                  0.4  %             7,180                     0.4  %       DC                       16                4,542                  0.4  %             6,368                     0.4  %
NM                       30                4,498                  0.4  %             5,985                     0.3  %       NM                       30                4,525                  0.4  %             5,407                     0.3  %
KY                       34                3,951                  0.3  %             5,551                     0.3  %       KY                       34                3,969                  0.3  %             5,213                     0.3  %
AL                       42                3,435                  0.3  %             4,303                     0.2  %       AL                       43                3,569                  0.3  %             4,480                     0.3  %
RI                       15                3,220                  0.3  %             4,700                     0.3  %       RI                       15                3,232                  0.3  %             4,188                     0.2  %
NH                       17                3,003                  0.3  %             4,608                     0.3  %       NH                       17                3,016                  0.2  %             4,290                     0.3  %
OK                       29                2,610                  0.2  %             4,048                     0.2  %       OK                       30                2,631                  0.2  %             3,948                     0.2  %
MS                       28                2,525                  0.2  %             3,435                     0.2  %       MS                       25                2,389                  0.2  %             3,062                     0.2  %
ID                       14                1,717                  0.1  %             3,311                     0.2  %       ID                       14                1,723                  0.1  %             2,755                     0.2  %
IA                       16                1,588                  0.1  %             2,028                     0.1  %       IA                       16                1,599                  0.1  %             2,011                     0.1  %
WV                       17                1,585                  0.1  %             2,014                     0.1  %       WV                       17                1,595                  0.1  %             2,208                     0.1  %
ME                       11                1,553                  0.1  %             1,903                     0.1  %       ME                       11                1,564                  0.1  %             1,829                     0.1  %
KS                       18                1,375                  0.1  %             2,736                     0.2  %       KS                       18                1,391                  0.1  %             2,435                     0.1  %
AR                       18                1,313                  0.1  %             1,814                     0.1  %       AR                       18                1,318                  0.1  %             1,777                     0.1  %
MT                        5                  692                  0.1  %             1,076                     0.1  %       NE                        6                  702                  0.1  %               836                     0.1  %
PR                        6                  541                    -  %               629                       -  %       MT                        5                  697                  0.1  %             1,005                     0.1  %
NE                        4                  532                    -  %               581                       -  %       PR                        6                  546                    -  %               838                     0.1  %
WY                        4                  517                    -  %               589                       -  %       WY                        4                  519                    -  %               593                       -  %
SD                        3                  508                    -  %               701                     0.1  %       SD                        3                  509                    -  %               678                       -  %
VT                        2                  462                    -  %               505                       -  %       VT                        2                  467                    -  %               470                       -  %
ND                        3                  401                    -  %               481                       -  %       ND                        3                  403                    -  %               595                       -  %
AK                        2                  252                    -  %               389                       -  %       AK                        2                  253                    -  %               372                       -  %
                      6,060          $ 1,207,885                100.0  %       $ 1,917,331                   100.0  %                             6,184          $ 1,268,126                100.0  %       $ 1,783,856                   100.0  %






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(1) As of date of acquisition.
(2) State significantly impacted by the COVID-19 pandemic.

Liquidity and Capital Resources

Source and Uses of Cash


Our primary sources of cash have consisted of proceeds from our securities
offerings, our secured borrowings, repurchase agreements, principal and interest
payments on our loan portfolio, principal paydowns on securities, and sales of
properties held-for-sale. Depending on market conditions, we expect that our
primary financing sources will continue to include secured borrowings,
repurchase agreements, and securities offerings in addition to transaction or
asset specific funding arrangements and credit facilities (including term loans
and revolving facilities). We expect that these sources of funds will be
sufficient to meet our short-term and long-term liquidity needs. From time to
time, we may invest with third parties and acquire interests in loans and other
real estate assets through investments in joint ventures using special purpose
entities that can result in investments at fair value and investments in
beneficial interests, which are reflected on our consolidated balance sheet.

As of March 31, 2020 and December 31, 2019, substantially all of our invested
capital was in RPLs, NPLs, SBC loans, property held-for-sale, debt securities,
beneficial interests and rental properties. We also held approximately $31.2
million of cash and cash equivalents, a decrease of $33.2 million from our
balance of $64.3 million at December 31, 2019. Our average daily cash balance
during the quarter was $58.6 million, a decrease of $7.5 million from our
average daily cash balance of $66.1 million during the three months ended
December 31, 2019.

Our collections of principal and interest payments on mortgage loans and
securities, payoffs of mortgage loans and proceeds on the sale of our property
held-for-sale and sale of debt securities held as investments were $62.4 million
and $63.2 million for the three months ended March 31, 2020 and 2019,
respectively. We currently expect the pace of loan prepayments to slow due to
COVID-19.

Our operating cash outflows, including the effect of restricted cash, for the
three months ended March 31, 2020 and 2019 were $30.4 million and $5.0 million,
respectively. Our primary operating cash inflow is cash interest payments on our
mortgage loan pools of $12.3 million and $15.7 million for the three months
ended March 31, 2020 and 2019, respectively. Non-cash interest income accretion
was $9.5 million and $10.9 million for the three months ended March 31, 2020 and
2019, respectively. We also recognized a loss of $0.7 million from the sale of
26 mortgage loans during the quarter to Gaea, an affiliated entity. No loans
were sold during the three months ended March 31, 2019. We expect, however, that
the impact of the COVID-19 outbreak will put pressure on our cash flow from
operations as we enter into loan modifications on certain of our loans
permitting interest payments to be deferred. Though the ownership of mortgage
loans and other real estate assets is our business, GAAP requires that operating
cash flows do not include the portion of principal payments that are allocable
to the discount we recognize on our mortgage loans including proceeds from loans
that pay in full or are liquidated in a short sale or third party sale at
foreclosure or the proceeds on the sales of our property held-for-sale. These
activities are all considered to be Investing activities under GAAP, and the
cash flows from these activities are included in the investing section of our
consolidated statements of cash flows.

For the three months ended March 31, 2020 our investing cash inflow of $11.0
million was primarily driven by the sale of mortgage loans to Gaea in the amount
of $25.4 million and principal payments on and payoffs of our mortgage loan
portfolio of $34.6 million, principal payments on and payoffs of our debt
securities and beneficial interests of $10.2 million, offset by purchases of
debt securities and beneficial interests of $61.3 million and acquisitions of
mortgage loans of $1.4 million. For the three months ended March 31, 2019 our
investing cash outflow of $5.6 million was primarily driven by the acquisitions
of our mortgage loans of $25.0 million and purchases of debt securities,
beneficial interests and equity securities of $64.0 million offset by principal
payments on and payoffs of our mortgage loan portfolio of $28.8 million,
principal payments on and payoffs of our debt securities and beneficial
interests of $11.9 million, sale of our debt securities of $39.6 million and
sale of our property held-for-sale.

Our financing cash flows are driven primarily by funding used to acquire
mortgage loan pools. We fund our mortgage loan pool acquisitions primarily
through secured borrowings, repurchase agreements and the proceeds from our
convertible debt and equity offerings. For the three months ended March 31,
2020, we had net financing cash outflows of $13.8 million from our pay down of
existing debt obligations, primarily driven by repayments of $55.4 million on
repurchase transactions, $22.6 million on secured debt and the repurchase of our
senior convertible notes for a net cash impact of $8.2 million, partially offset
by additional borrowing through repurchase transactions of $72.4 million. For
the three months ended March 31, 2019, we had net cash outflows from financing
activities of $3.0 million primarily driven by our pay down of existing debt
obligations of $45.5 million on repurchase transactions and $17.8 million on
secured debt offset by proceeds from our
                                       64
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repurchase transactions of $67.5 million. For the three months ended March 31,
2020 and 2019 we paid $0.1 million and $7.2 million, respectively, in combined
dividends and distributions.

Financing Activities - Equity offerings


During the three months ended March 31, 2020, we did not sell any shares of
common stock under our at-the-market program which we established in October
2016, to sell, through our agents, shares of common stock with an aggregate
offering price of up to $50.0 million. In accordance with the terms of the
agreements, we may offer and sell shares of our common stock at any time and
from time to time through the sales agents. Sales of the shares, if any, will be
made by means of ordinary brokers' transactions on the New York Stock Exchange
or otherwise at market prices prevailing at the time of the sale.

Financing Activities - Secured Borrowings and Convertible Senior Notes


From inception (January 30, 2014) to March 31, 2020, we have completed 15
secured borrowings, not including borrowings we completed for our
non-consolidated joint ventures (See Table 17: Investments in joint ventures),
through securtiziation trusts pursuant to Rule 144A under the Securities Act,
six of which were outstanding at March 31, 2020. The secured borrowings are
structured as debt financings and not REMIC sales, and the loans included in the
secured borrowings remain on our consolidated balance sheet as we are the
primary beneficiary of the secured borrowing trusts, which are VIEs. The secured
borrowing VIEs are structured as pass through entities that receive principal
and interest on the underlying mortgages and distribute those payments to the
holders of the notes. Our exposure to the obligations of the VIEs is generally
limited to our investments in the entities. The notes that are issued by the
secured borrowing trusts are secured solely by the mortgages held by the
applicable trusts and not by any of our other assets. The mortgage loans of the
applicable trusts are the only source of repayment and interest on the notes
issued by such trusts. We do not guarantee any of the obligations of the trusts
under the terms of the agreement governing the notes or otherwise.

Our secured borrowings are generally structured with Class A notes, subordinate
notes, and trust certificates, which have rights to the residual interests in
the mortgages once the notes are repaid. With the exception of our Ajax Mortgage
Loan Trusts 2017-D ("2017-D") secured borrowings, from which we sold a 50%
interest in the Class A notes and a 50% interest in the residual equity to third
parties and 2018-C secured borrowings, from which we sold a 95% interest in the
Class A notes and 37% in the Class B and trust certificates, we have retained
the subordinate notes and the applicable trust certificates from the other six
secured borrowings outstanding at March 31, 2020.

For all of our secured borrowings the Class A notes are senior, sequential pay,
fixed rate notes, and with the exception of 2017-D and 2018-C as noted above,
the Class B notes are subordinate, sequential pay, fixed rate notes with the
exception of 2019-D which are subordinate, sequential pay, fixed rate notes for
Class B-1 and variable rate notes for Class B-2 and Class B-3. The interest rate
is effectively the rate equal to the spread between the gross average rate of
interest the trust collects on its mortgage loan portfolio minus the rate
derived from the sum of the servicing fee and other expenses of the trust. The
Class M notes issued under 2017-B, 2019-D and 2019-F are also mezzanine,
sequential pay, fixed rate notes.

For all of our secured borrowings, except 2017-B, 2019-D and 2019-F, which
contains no interest rate step-up, if the Class A notes have not been redeemed
by the payment date or otherwise paid in full 36 months after issue, or in the
case of 2017-C, 48 months after issue, an interest rate step-up of 300 basis
points is triggered. Twelve months after the 300 basis point step up is
triggered, an additional 100 basis point step up will be triggered, and an
amount equal to the aggregate interest payment amount that accrued and would
otherwise be paid to the subordinate notes will be paid as principal to the
Class A notes on that date and each subsequent payment date until the Class A
notes are paid in full. After the Class A notes are paid in full, the
subordinate notes will resume receiving their respective interest payment
amounts and any interest that accrued but was not paid while the Class A notes
were outstanding. As the holder of the trust certificates, we are entitled to
receive any remaining amounts in the trusts after the Class A notes and
subordinate notes have been paid in full.

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The following table sets forth the original terms of all outstanding notes from
our secured borrowings outstanding at March 31, 2020 at their respective cutoff
dates:

Table 14: Secured Borrowings
                                        Interest Rate
   Issuing Trust/Issue Date             Step-up Date                         Security                      Original Principal            Interest Rate
Ajax Mortgage Loan Trust
2017-B/ December 2017                None                      Class A notes due 2056                     $115.8 million                          3.16  %
                                     None                      Class M-1 notes due 2056(3)                $9.7 million                            3.50  %
                                     None                      Class M-2 notes due 2056(3)                $9.5 million                            3.50  %
                                     None                      Class B-1 notes due 2056(1)                $9.0 million                            3.75  %
                                     None                      Class B-2 notes due 2056(1)                $7.5 million                            3.75  %
                                                               Trust certificates(2)                      $14.3 million                              -  %
                                                               Deferred issuance costs                    $(1.8) million                             -  %

Ajax Mortgage Loan Trust
2017-C/ November 2017                November 25, 2021         Class A notes due 2060                     $130.2 million                          3.75  %
                                     May 25, 2022              Class B-1 notes due 2060(1)                $13.0 million                           5.25  %
                                                               Trust certificates(2)                      $42.8 million                              -  %
                                                               Deferred issuance costs                    $(1.7) million                             -  %

Ajax Mortgage Loan Trust
2017-D/ December 2017                April 25, 2021            Class A notes due 2057(4)                  $177.8 million                          3.75  %
                                     None                      Class B certificates(4)                    $44.5 million                              -  %
                                                               Deferred issuance costs                    $(1.1) million                             -  %

Ajax Mortgage Loan Trust
2018-C/ September 2018               October 25, 2021          Class A notes due 2065(5)                  $170.5 million                          4.36  %
                                     April 25, 2022            Class B notes due 2065(5)                  $15.9 million                           5.25  %
                                                               Trust certificates(5)                      $40.9 million                              -  %
                                                               Deferred issuance costs                    $(2.0) million                             -  %

Ajax Mortgage Loan Trust
2019-D/ July 2019                    None                      Class A-1 notes due 2065                   $140.4 million                          2.96  %
                                     None                      Class A-2 notes due 2065                   $6.1 million                            3.50  %
                                     None                      Class A-3 notes due 2065                   $10.1 million                           3.50  %
                                     None                      Class M-1 notes due 2065(3)                $9.3 million                            3.50  %
                                     None                      Class B-1 notes due 2065(6)                $7.5 million                            3.50  %
                                     None                      Class B-2 notes due 2065(6)                $7.1 million                        variable(7)
                                     None                      Class B-3 notes due 2065(6)                $12.8 million                       variable(7)
                                                               Deferred issuance costs                    $(2.7) million                             -  %

Ajax Mortgage Loan Trust
2019-F/ November 2019                None                      Class A-1 notes due 2059                   $110.1 million                          2.86  %
                                     None                      Class A-2 notes due 2059                   $12.5 million                           3.50  %
                                     None                      Class A-3 notes due 2059                   $5.1 million                            3.50  %
                                     None                      Class M-1 notes due 2059(1)                $6.1 million                            3.50  %
                                     None                      Class B-1 notes due 2059(6)                $11.5 million                           3.50  %
                                     None                      Class B-2 notes due 2059(6)                $10.4 million                       variable(7)
                                     None                      Class B-3 notes due 2059(6)                $15.1 million                       variable(7)
                                                               Deferred issuance costs                    $(1.8) million                             -  %





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(1)The Class B notes are subordinate, sequential pay, fixed rate notes with
Class B-2 notes subordinate to the Class B-1 notes. We have retained the Class B
notes.
(2)The trust certificates issued by the trusts and the beneficial ownership of
the trusts are retained by Great Ajax Funding LLC as the depositor. As the
holder of the trust certificates, we are entitled to receive any remaining
amounts in the trusts after the Class A notes, Class M notes, where present, and
Class B notes have been paid in full.
(3)The Class M notes are subordinate, sequential pay, fixed rate notes with
Class M-2 notes subordinate to the Class M-1 notes. We retained the Class M
notes.
(4)AJAXM 2017-D is a joint venture in which a third party owns 50% of the Class
A notes and 50% of the Class B certificates. We are required to consolidate
2017-D and are reflecting 100% of the mortgage loans, in Mortgage loans, net.
50% of the Class A notes, which are held by the third party, are included in
Secured borrowings, net. The 50% portion of the Class A notes retained by us
have been encumbered under a repurchase agreement. 50% of the Class B
certificates are recognized as Non-controlling interest.
(5)AJAXM 2018-C is a joint venture in which a third party owns 95% of the Class
A notes and 37% of the Class B notes and certificates. We are required to
consolidate 2018-C and are reflecting 100% of the mortgage loans, in Mortgage
loans, net. 95% of the Class A notes and 37% of the Class B notes, which are
held by the third party, are included in Secured borrowings, net. The 5% portion
of the Class A notes retained by us have been encumbered under the repurchase
agreement. 37% percent of the Class C certificates are recognized as
Non-controlling interest.
(6)The Class B notes are subordinate, sequential pay, with B-2 and B-2 notes
having variable interest rates and subordinate to the Class B-1 notes. The Class
B-1 notes are fixed rate notes. We have retained the Class B notes.
(7)The interest rate is effectively the rate equal to the spread between the
gross average rate of interest the trust collects on its mortgage loan portfolio
minus the rate derived from the sum of the servicing fee and other expenses of
the trust.

Repurchase Transactions

We have two repurchase facilities whereby we, through two wholly-owned Delaware
trusts (the "Trusts"), acquire pools of mortgage loans which are then sold by
the Trusts, as "Seller" to two separate counterparties, the "buyer" or "buyers."
One facility has a ceiling of $250.0 million and the other $400.0 million at any
one time. Upon the time of the initial sale to the buyer, each Trust, with a
simultaneous agreement, also agrees to repurchase the pools of mortgage loans
from the buyer. Mortgage loans sold under these facilities carry interest
calculated based on a spread to one-month LIBOR, which are fixed for the term of
the borrowing. The purchase price that the Trust realizes upon the initial sale
of the mortgage loans to the buyer can vary between 70% and 85% of the asset's
acquisition price, depending upon the facility being utilized and/or the quality
of the underlying collateral. The obligations of the Trust to repurchase these
mortgage loans at a future date are guaranteed by the Operating Partnership. The
difference between the market value of the asset and the amount of the
repurchase agreement is generally the amount of equity we have in the position
and is intended to provide the buyer with some protection against fluctuations
in the value of the collateral, and/or a failure by us to repurchase the asset
and repay the borrowing at maturity. We also have three repurchase facilities
substantially similar to the mortgage loan repurchase facilities where the
pledged assets are the class B bonds and certificates from our securitization
transactions. These facilities have no effective ceilings. Each repurchase
transaction represents its own borrowing. As such, the ceilings associated with
these transactions are the amounts currently borrowed at any one time. We have
effective control over the assets subject to all of these transactions;
therefore, our repurchase transactions are accounted for as financing
arrangements.

During the last two weeks of March 2020, we received margin calls from financing
counterparties in the amount of $28.2 million due to the turmoil in the
financial markets resulting from the COVID-19 outbreak. As of March 31, 2020, we
had $32.4 million of cash collateral on deposit with financing counterparties.
This cash is included in Prepaid expenses and other assets on our consolidated
balance sheet at March 31, 2020 and is not netted against our Borrowings under
repurchase agreements

A summary of our outstanding repurchase transactions at March 31, 2020 and December 31, 2019 is as follows ($ in thousands):

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Table 15: Repurchase Transactions by Maturity Date

                                                                                                                                                           March 31, 2020
                                                                Maximum
                                                               Borrowing            Amount            Amount of            Percentage of
     Maturity Date                 Origination date             Capacity          Outstanding         Collateral        Collateral Coverage              Interest Rate
April 2, 2020                  January 3, 2020                $   1,758$    1,758$   2,388                       136  %                        2.96  %
April 2, 2020                  January 3, 2020                    1,684               1,684              2,287                       136  %                        2.96  %
April 13, 2020                 March 12, 2020                    37,201              37,201             49,877                       134  %                        2.46  %
April 13, 2020                 March 12, 2020                     3,236               3,236              4,655                       144  %                        2.56  %
April 22, 2020                 March 24, 2020                    35,381              35,381             51,679                       146  %                        5.00  %
April 27, 2020                 January 28, 2020                   5,749               5,749              7,464                       130  %                        3.00  %
April 27, 2020                 March 27, 2020                     4,811               4,811             10,024                       208  %                        3.71  %
April 27, 2020                 March 27, 2020                     4,108               4,108              7,101                       173  %                        3.71  %
April 27, 2020                 January 28, 2020                   2,522               2,522              3,381                       134  %                        2.80  %
April 27, 2020                 March 27, 2020                     2,153               2,153             10,938                       508  %                        3.86  %
June 3, 2020                   March 3, 2020                     20,987              20,987             27,814                       133  %                        3.11  %
June 3, 2020                   March 3, 2020                     11,181              11,181             14,682                       131  %                        3.11  %
June 3, 2020                   March 3, 2020                     10,019              10,019             13,192                       132  %                        3.11  %
June 3, 2020                   December 6, 2019                   6,097               6,097              7,565                       124  %                        3.64  %
June 3, 2020                   March 3, 2020                      5,161               5,161              6,616                       128  %                        3.11  %
June 3, 2020                   December 6, 2019                   4,704               4,704              5,755                       122  %                        3.64  %
June 3, 2020                   March 3, 2020                      3,827               3,827              4,907                       128  %                        3.11  %
June 3, 2020                   December 6, 2019                   3,053               3,053              3,959                       130  %                        3.64  %
June 3, 2020                   December 6, 2019                   2,332               2,332              3,360                       144  %                        3.79  %
June 3, 2020                   March 3, 2020                      1,848               1,848              2,640                       143  %                        3.21  %
June 3, 2020                   December 6, 2019                   1,132               1,132              1,607                       142  %                        3.79  %
June 19, 2020                  March 20, 2020                    14,599              14,599             19,893                       136  %                        6.22  %
June 19, 2020                  December 19, 2019                 13,447              13,447             17,077                       127  %                        3.55  %
June 19, 2020                  March 20, 2020                     9,571               9,571             13,043                       136  %                        6.22  %
June 19, 2020                  March 20, 2020                     4,691               4,691              6,089                       130  %                        6.22  %
June 19, 2020                  March 20, 2020                     2,665               2,665              4,050                       152  %                        6.72  %
June 19, 2020                  December 19, 2019                  1,155               1,155              1,687                       146  %                        3.70  %
June 26, 2020                  March 26, 2020                    20,906              20,906             31,930                       153  %                        9.23  %
June 30, 2020                  January 3, 2020                    8,328               8,328              3,656                        44  %                        3.56  %
June 30, 2020                  January 3, 2020                    6,099               6,099              9,038                       148  %                        3.56  %
June 30, 2020                  December 30, 2019                  5,286               5,286              6,850                       130  %                        3.57  %
June 30, 2020                  January 3, 2020                    5,116               5,116              6,721                       131  %                        3.56  %
June 30, 2020                  December 30, 2019                  3,324               3,324              4,667                       140  %                        3.72  %
July 10, 2020                  January 13, 2020                   9,020               9,020             13,016                       144  %                        3.67  %
July 31, 2020                  February 3, 2020                   7,763               7,763              9,702                       125  %                        3.56  %
July 31, 2020                  February 3, 2020                   7,151               7,151              9,537                       133  %                        3.56  %
July 10, 2020                  July 15, 2016                    250,000              30,141             44,217                       147  %                        3.38  %
September 24, 2020             September 25, 2019               400,000             112,885            164,103                       145  %                        3.11  %
Totals                                                        $ 938,065$  431,091$ 607,167                       141  %                        3.86  %



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                                                                                                                    December 31, 2019
                                                                 Maximum
                                                                Borrowing            Amount            Amount of            Percentage of
      Maturity Date                 Origination date             Capacity          Outstanding         Collateral        Collateral Coverage           Interest Rate
January 3, 2020                 November 26, 2019              $   8,411$    8,411$  11,098                       132  %                     3.45  %
January 3, 2020                 November 26, 2019                  6,093               6,093              9,038                       148  %                     3.45  %
January 3, 2020                 November 26, 2019                  5,175               5,175              6,855                       132  %                     3.45  %
January 3, 2020                 December 2, 2019                  11,966              11,966             15,742                       132  %                     3.45  %
January 3, 2020                 December 2, 2019                  10,648              10,648             14,058                       132  %                     3.45  %
January 3, 2020                 December 2, 2019                   5,485               5,485              7,050                       129  %                     3.45  %
January 3, 2020                 December 2, 2019                   4,096               4,096              5,261                       128  %                     3.45  %
January 3, 2020                 December 2, 2019                   1,644               1,644              2,388                       145  %                     3.55  %
January 3, 2020                 December 2, 2019                   1,576               1,576              2,287                       145  %                     3.55  %
January 10, 2020                December 11, 2019                 21,088              21,088             28,284                       134  %                     3.47  %
January 10, 2020                December 11, 2019                  1,808               1,808              2,640                       146  %                     3.57  %
January 13, 2020                July 11, 2019                      8,956               8,956             13,016                       145  %                     4.16  %
January 21, 2020                December 20, 2019                 15,718              15,718             20,623                       131  %                     3.41  %
January 21, 2020                December 20, 2019                 10,305              10,305             13,521                       131  %                     3.41  %
January 21, 2020                December 20, 2019                  5,840               5,840              7,324                       125  %                     3.41  %
January 21, 2020                December 20, 2019                  2,784               2,784              4,050                       145  %                     3.51  %
January 28, 2020                October 30, 2019                   5,318               5,318              7,464                       140  %                     3.19  %
January 28, 2020                October 30, 2019                   2,520               2,520              3,381                       134  %                     2.99  %
February 3, 2020                August 1, 2019                     7,568               7,568              9,702                       128  %                     4.19  %
February 3, 2020                August 1, 2019                     6,664               6,664              9,537                       143  %                     4.19  %
February 24, 2020               November 26, 2019                 41,412              41,412             54,828                       132  %                     2.92  %
March 25, 2020                  September 25, 2019                 7,075               7,075             10,024                       142  %                     3.96  %
March 25, 2020                  September 25, 2019                 5,851               5,851              7,423                       127  %                     3.81  %
March 26, 2020                  September 26, 2019                27,075              27,075             34,591                       128  %                     3.81  %
March 27, 2020                  September 27, 2019                 2,915               2,915              3,709                       127  %                     3.79  %
June 3, 2020                    December 6, 2019                   6,097               6,097              7,891                       129  %                     3.64  %
June 3, 2020                    December 6, 2019                   4,704               4,704              6,106                       130  %                     3.64  %
June 3, 2020                    December 6, 2019                   3,053               3,053              4,035                       132  %                     3.64  %
June 3, 2020                    December 6, 2019                   2,332               2,332              3,360                       144  %                     3.79  %
June 3, 2020                    December 6, 2019                   1,132               1,132              1,607                       142  %                     3.79  %
June 19, 2020                   December 19, 2019                 13,447              13,447             18,076                       134  %                     3.55  %
June 19, 2020                   December 19, 2019                  1,155               1,155              1,687                       146  %                     3.70  %
June 30, 2020                   December 30, 2019                  5,286               5,286              7,044                       133  %                     3.57  %
June 30, 2020                   December 30, 2019                  3,324               3,324              4,667                       140  %                     3.72  %
July 10, 2020                   July 15, 2016                    250,000              28,931             57,397                       198  %                     4.28  %
September 24, 2020              September 25, 2019               400,000             116,662            164,403                       141  %                     4.24  %
Totals                                                         $ 918,521$  414,114$ 580,167                       140  %                     3.77  %



As of March 31, 2020, we had $431.1 million outstanding under our repurchase
transactions compared to $414.1 million as of December 31, 2019. The maximum
month-end balance outstanding during the three months ended March 31, 2020 was
$467.3 million, compared to a maximum month-end balance for the three months
ended December 31, 2019, of $438.4 million. The following table presents certain
details of our repurchase transactions for the three months ended March 31, 2020
and December 31, 2019 ($ in thousands):

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Table 16: Repurchase Balances

Three months ended

                                                                   March 31, 2020          December 31, 2019
Balance at the end of period                                      $      431,091$        414,114
Maximum month-end balance outstanding during the quarter          $      467,344$        438,388
Average balance                                                   $      417,379$        422,837



The decrease in our average balance from $422.8 million for the three months
ended December 31, 2019 to our average balance of $417.4 million for the three
months ended March 31, 2020 was due to a net decrease in repurchase financing
during the three months ended March 31, 2020, as a result of decreased
investments in mortgage loans and debt securities.

As of March 31, 2020 and December 31, 2019, we did not have any credit facilities or other outstanding debt obligations other than the repurchase facilities, secured borrowings and our Senior convertible notes.

We are not required by our investment guidelines to maintain any specific debt-to-equity ratio, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets.


Dividends

We may declare dividends based on, among other things, our earnings, our
financial condition, our working capital needs, new opportunities, and
distribution requirements imposed on REITs. The declaration of dividends to our
stockholders and the amount of such dividends are at the discretion of our Board
of Directors. On March 25, 2020 we announced that we would pay our previously
declared cash dividend of $0.32 per share in shares of our common stock. The
value was based on the $9.14 per share closing price on the record date. As a
result, on March 27, 2020, we issued 781,222 shares of our common stock in
fulfillment of the dividend.

On May 3, 2020, our Board of Directors declared a cash dividend of $0.17 per
share, paid on May 29, 2020 to stockholders of record as of May 15, 2020. Our
Management Agreement with our Manager requires the payment of an incentive
management fee above the amount of the base management fee if either, (1) for
any quarterly incentive fee, the sum of cash dividends on our common stock, plus
distributions on our externally-held operating partnership units, plus any
quarterly increase in book value, all calculated on an annualized basis, exceed
8% of our book, or (2) for any annual incentive fee, the value of quarterly cash
dividends on our common stock, plus cash special dividends on our commons stock,
plus distributions on our externally-held operating partnership units all paid
out within the applicable calendar year, paid out of our taxable income, exceeds
of 8% (on an annualized basis) of our stock's book value. During the three
months ended of March 31, 2020 and 2019, we recorded $0 and $0.2 million,
respectively, in expense for incentive fees payable to our Manager. Our dividend
payments are driven by the amount of our taxable income, subject to IRS rules
for maintaining our status as a REIT.

Our most recently declared quarterly dividend represents a payment of
approximately 4.73% on an annualized basis of our book value of $14.37 per share
at March 31, 2020. However, if our taxable income increases to the levels we
experienced during 2019, we could continue to exceed the threshold for paying an
incentive fee to our Manager, and thereby trigger such payments. See Note 10 -
Related party transactions.

Capital resources


Subsequent to the end of the March 31, 2020 quarter, we closed on a private
placement of $80.0 million of our preferred stock and warrants to institutional
accredited investors pursuant to a securities purchase agreement dated April 3,
2020. We issued 820,000 shares of 7.25% Series A Fixed-to-Floating Rate
Preferred Stock and 2,380,000 shares of 5.00% Series B Fixed-to-Floating Rate
Preferred Stock, each at a purchase price per share of $25.00 and two series of
five-year warrants to purchase an aggregate of 4,000,000 shares of our common
stock at an exercise price of $10.00 per share. Each series of warrants includes
a put option that allows the holder to sell the warrants to us at a specified
put price on or after July 6, 2023. In addition, we granted the purchasers an
option to purchase up to an additional 800,000 shares of Series A Preferred
Stock and Series B Preferred Stock and warrants to purchase an aggregate of
1,000,000 shares of our common stock on the same terms. We expect to use the net
proceeds from the private placement to acquire mortgage loans and
mortgage-related assets.

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We believe that our capital resources will be sufficient to enable us to meet
anticipated short-term and long-term liquidity requirements. As the local and
global economies have weakened as a result of COVID-19, ensuring adequate
liquidity is critical. We believe we have access to adequate resources to meet
the needs of our existing operations, mandatory capital expenditures, dividend
payments, and working capital, to the extent not funded by cash provided by
operating activities. However, we expect the COVID-19 pandemic to adversely
impact our future operating cash flows due to the inability of some of our
borrowers to make scheduled payments on time or at all, and the potential for
HPA decline.

Off-Balance Sheet Arrangements


Other than our investments in debt securities and beneficial interests issued by
joint ventures which are summarized below by securitization trust and our equity
method investments discussed elsewhere in this report, we do not have any
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities,
which would have been established for the purpose of facilitating off-balance
sheet arrangements or other contractually narrow or limited purposes. Further,
we have not guaranteed any obligations of unconsolidated entities nor do we have
any commitment or intent to provide funding to any such entities. As such, we
are not materially exposed to any market, credit, liquidity or financing risk
that could arise if we had engaged in such relationships.

Table 17: Investments in joint ventures


We form joint ventures with third party institutional accredited investors to
purchase mortgage loans and other mortgage related assets. The debt securities
and beneficial interests we carry on our consolidated balance sheets are issued
by securitization trusts formed by these joint ventures, which are VIEs, that we
have sponsored but which we do not consolidate since we have determined we are
not the primary beneficiary.

A summary of our investments in joint ventures is presented below(1) ($ in
thousands):

                                                                                                                                  Great Ajax Corp. Ownership
                                                                                                                                                                       Current
                                                                                                                                                                        Owned
                                                                                                                                                                      Stated or
                                                                                                                                                                      Notional
                                                                     Total Original                                                       Original Stated or          Principal
                                                                      Outstanding                                                         Notional Principal           Balance
 Issuing Trust/Issue Date                 Security                     Principal              Coupon           Ownership Percent           Balance Retained           Retained
Ajax Mortgage Loan Trust
2018-A/ April 2018               Class A notes due 2058            $     91,036                 3.85  %                    9.36  %       $       8,521$  6,721
                                 Trust certificates                $     22,759                    -                       9.36  %       $       2,130$  2,144Ajax Mortgage Loan Trust
2018-B/ June 2018                Class A notes due 2057            $     66,374                 3.75  %                   20.00  %       $      13,275$  6,089
                                 Trust certificates                $     28,447                    -                      20.00  %       $       5,689$  4,109Ajax Mortgage Loan Trust
2018-D/ September 2018           Class A notes due 2058            $     80,664                 3.75  %                   20.00  %       $      16,133$ 14,594
                                 Trust certificates                $     20,166                    -                      20.00  %       $       4,033$  3,915Ajax Mortgage Loan Trust
2018-E/ December 2018            Class A notes due 2058            $     86,089                 4.38  %                    5.01  %       $       4,313$  3,963
                                 Class B notes due 2058            $      8,035                 5.25  %                   20.00  %       $       1,607$  1,605
                                 Trust certificates                $     20,662                    -                      20.00  %       $       4,132$  4,130Ajax Mortgage Loan Trust
2018-F/ December 2018            Class A notes due 2058            $    180,002                 4.38  %                    5.01  %       $       9,018$  7,565
                                 Class B notes due 2058            $     16,800                 5.25  %                   20.00  %       $       2,520$  3,360
                                 Trust certificates                $     43,201                    -                      20.00  %       $       6,480$  8,252


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Ajax Mortgage Loan Trust
2018-G/ December 2018                Class A notes due 2057            $ 173,562            4.38  %          25.00  %       $ 43,390$ 32,936
                                     Class B notes due 2057            $  16,199            5.25  %          25.00  %       $  4,050$  4,050
                                     Trust certificates                $  41,655               -             25.00  %       $ 10,414$ 10,585Ajax Mortgage Loan Trust
2019-A/ March 2019                   Class A notes due 2057            $ 127,801            3.75  %          20.00  %       $ 25,560$ 19,588
                                     Class B notes due 2057            $  11,928            5.25  %          20.00  %       $  2,386$  2,388
                                     Trust certificates                $  30,672               -             20.00  %       $  6,134$  6,137Ajax Mortgage Loan Trust
2019-B/ March 2019                   Class A notes due 2059            $ 163,325            3.75  %          15.00  %       $ 24,499$ 19,807
                                     Class B notes due 2059            $  15,244            5.25  %          15.00  %       $  2,287$  2,287
                                     Trust certificates                $  39,198               -             15.00  %       $  5,880$  5,976Ajax Mortgage Loan Trust
2019-C/ May 2019                     Class A notes due 2058            $ 150,037            3.95  %           5.00  %       $  7,502$  6,836
                                     Class B notes due 2058            $  14,003            5.25  %          34.00  %       $  4,761$  4,761
                                     Trust certificates                $  36,009               -             34.00  %       $ 12,243$ 12,417Ajax Mortgage Loan Trust
2019-E/September 2019                Class A notes due 2059            $ 181,101            3.00  %          20.00  %       $ 36,220$ 31,930
                                     Class B notes due 2059            $  16,903            4.88  %          20.00  %       $  3,381$  3,381
                                     Trust certificates                $  43,464               -             20.00  %       $  8,693$  8,558Ajax Mortgage Loan Trust
2019-G/ December 2019                Class A notes due 2059            $ 141,420            3.00  %          20.00  %       $ 28,284$ 27,814
                                     Class B notes due 2059            $  13,199            4.25  %          20.00  %       $  2,640$  2,640
                                     Trust certificates                $  33,941               -  %          20.00  %       $  6,788$  6,858Ajax Mortgage Loan Trust
2019-H/ December 2019                Class A notes due 2059            $  90,381            3.00  %          20.00  %       $ 18,076$ 17,077
                                     Class B notes due 2059            $   8,435            4.25  %          20.00  %       $  1,687$  1,687
                                     Trust certificates                $  21,692               -  %          20.00  %       $  4,338$  4,393Ajax Mortgage Loan Trust
2020-A/ March 2020                   Class A notes due 2059            $ 249,384            2.38  %          20.00  %       $ 49,877$ 49,877
                                     Class B notes due 2059            $  23,276            3.50  %          20.00  %       $  4,655$  4,655
                                     Trust certificates                $  59,852               -  %          20.00  %       $ 11,970$ 11,970

(1)Table does not include our 2017-D and 2018-C securitizations with total original outstanding principal of $222.3 million and $227.3 million, respectively, as these trusts are included in our consolidated financial statements.

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Table 18: Contractual Obligations

A summary of our contractual obligations as of March 31, 2020 and December 31, 2019 is as follows ($ in thousands):

March 31, 2020                                                                    Payments Due by Period
                                                                    Less than                                                   More than
($ in thousands)                                   Total              1 Year           1 - 3 Years          3 - 5 Years          5 Years
Convertible senior notes                        $ 115,850          $      

- $ - $ 115,850 $ - Borrowings under repurchase agreements

            431,091            431,091                    -                   -                 -
Interest on convertible senior notes               36,046              8,399               16,798              10,849                 -
Interest on repurchase agreements                   4,086              4,086                    -                   -                 -
Total                                           $ 587,073$ 443,576$    16,798$  126,699          $      -



December 31, 2019                                                                  Payments Due by Period
                                                                     Less than                                                   More than
($ in thousands)                                    Total              1 Year           1 - 3 Years          3 - 5 Years          5 Years
Convertible senior notes                         $ 123,850          $      

- $ - $ 123,850 $ - Borrowings under repurchase agreements

             414,114            414,114                    -                   -                 -
Interest on convertible senior notes                40,780              8,979               17,958              13,843                 -
Interest on repurchase agreements                    5,699              5,699                    -                   -                 -
Total                                            $ 584,443$ 428,792$    17,958$  137,693          $      -



Our secured borrowings are not included in the table above as such borrowings
are non-recourse to us and principal and interest are only paid to the extent
that cash flows from mortgage loans (in the securitization trust)
collateralizing the debt are received. Accordingly, a projection of contractual
maturities over the next five years is inapplicable.

Inflation


Virtually all of our assets and liabilities are interest-rate sensitive in
nature. As a result, interest rates and other factors influence our performance
far more so than does inflation. Changes in interest rates do not necessarily
correlate with inflation rates or changes in inflation rates. Our activities and
consolidated balance sheet are measured with reference to historical cost and/or
fair market value without considering inflation.

Subsequent Events


Since quarter end, we have acquired 677 residential RPLs with aggregate UPB of
$123.2 million in one transaction from a single seller. The purchase price
equaled 92.5% of UPB and 60.0% of the estimated market value of the underlying
collateral of $189.9 million. The loans were acquired into the joint venture
formed in March 2020 with proceeds from the established prefunding account.

On April 6, 2020 we closed a private placement of $80.0 million of preferred
stock and warrants to institutional accredited investors pursuant to a
securities purchase agreement dated April 3, 2020. We issued 820,000 shares of
7.25% Series A Fixed-to-Floating Rate Preferred Stock and 2,380,000 shares of
5.00% Series B Fixed-to-Floating Rate Preferred Stock, each at a purchase price
per share of $25.00 and two series of five-year warrants to purchase an
aggregate of 4,000,000 shares of our common stock at an exercise price of $10.00
per share. Each series of warrants includes a put option that allows the holder
to sell the warrants to us at a specified put price on or after July 6, 2023. In
addition, we granted the purchasers an option to purchase up to an additional
800,000 shares of Series A Preferred Stock and Series B Preferred Stock and
warrants to purchase an aggregate of 1,000,000 shares of our common stock on the
same terms. We expect to use the net proceeds from the private placement to
acquire mortgage loans and mortgage-related assets consistent with our
investment strategy.

On April 28, 2020, our Board of Directors approved the Third Amended and Restated Management Agreement with our Manager, which provides us with the option to pay our management fee with between 50% to 100% cash at our discretion, and pay the remainder in shares of our common stock.

                                       73
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On May 3, 2020, our Board of Directors declared a cash dividend of $0.17 per share to be paid on May 29, 2020 to our common stockholders of record as of May 15, 2020. On March 27, 2020, we paid the dividend of $0.32 per share we previously announced in February 2020 in shares of our common stock (valued based upon the closing price on the record date) in lieu of cash.

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