GREAT AJAX CORP.
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 aMaryland 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 our 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 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 theOperating 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 formedGreat Ajax Funding LLC , a wholly owned subsidiary of theOperating 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 theOperating Partnership formed to hold mortgage loans used as collateral for financings under our repurchase agreements. OnFebruary 1, 2015 , we formedGAJX Real Estate Corp. , as a wholly owned subsidiary of theOperating Partnership , to own, maintain, improve and sell certain REOs purchased by us. We have elected to treatGAJX Real Estate Corp. as a TRS under the Code. OurOperating Partnership , through interests in certain entities as ofJune 30, 2021 andDecember 31, 2020 , holds 99.9% ofGreat Ajax II REIT Inc. which holds an interest inGreat Ajax II Depositor LLC which acts as the depositor of mortgage loans into securitization trusts and holds the subordinated securities issued by such trusts and any additional trusts we may form for additional secured borrowings. We have securitized mortgage loans through securitization trusts and retained subordinated securities from the secured borrowings. These trusts are considered to be VIEs, and we have determined that we are the primary beneficiary of the VIEs. In 2018, we formed Gaea as a wholly owned subsidiary of theOperating Partnership . We elected to treat Gaea as a TRS under the Code for 2018, and we elected to treat Gaea as a REIT under the Code in 2019 and thereafter. Also during 2018, we formedGaea Real Estate Operating Partnership LP , a wholly owned subsidiary of Gaea, to hold investments in commercial real estate assets. We also formedBFLD Holdings LLC ,Gaea Commercial Properties LLC ,Gaea Commercial Finance LLC andGaea RE LLC as subsidiaries ofGaea Real Estate Operating Partnership . In 2019, we formedDG Brooklyn Holdings, LLC , also a subsidiary ofGaea Real Estate Operating Partnership LP , to hold investments in multi-family properties. OnNovember 22, 2019 , Gaea completed a private capital raise in which it raised$66.3 million from the issuance of 4,419,641 shares of its common stock to third parties to allow Gaea to continue to advance its investment strategy. We retained a 23.2% ownership interest in Gaea following the transaction. AtJune 30, 2021 , we owned approximately 22.9% of Gaea. 50 -------------------------------------------------------------------------------- We elected to be taxed as a REIT forU.S. federal income tax purposes beginning with our taxable year endedDecember 31, 2014 . Our qualification as a REIT depends upon our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our capital stock. We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code, and that our current intended manner of operation enables us to meet the requirements for taxation as a REIT forU.S. federal income tax purposes.
Our Portfolio
The following table outlines the carrying value of our portfolio of mortgage loan assets and single-family and smaller commercial properties as ofJune 30, 2021 andDecember 31, 2020 ($ in millions): June 30, 2021 December 31, 2020 Residential RPLs$ 897.5 $ 1,057.5 Residential NPLs 36.8 38.7 SBC loans 21.3 23.2 Real estate owned properties, net 4.8
8.5
Investments in securities at fair value 424.6
273.8
Investment in beneficial interests 133.5
91.4
Total mortgage related assets$ 1,518.5 $
1,493.1
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 COVID-19 pandemic that began during the first quarter of 2020 created a global public-health crisis that resulted in widespread volatility and deteriorations in household, business, and economic market conditions, including inthe United States , where we conduct all of our business. During 2020 many governmental and nongovernmental authorities directed their actions toward curtailing household and business activity in order to contain or mitigate the impact of the COVID-19 pandemic and deployed fiscal- and monetary-policy measures in order to seek to partially mitigate the adverse effects. These programs have had varying degrees of success and the extent of the long term impact on the mortgage market remains unknown. The COVID-19 pandemic began to meaningfully impact our operations in lateMarch 2020 and any continuing disruption was reflected in our results of operations for the quarter endedJune 30, 2021 . The pandemic has continued and continues to significantly and adversely impact certain areas ofthe United States . 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 the majority of 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 terms similar to those required for GSE loans. Borrowers who request COVID-19 related hardship assistance are asked to complete a standardized hardship questionnaire, including documentation to support the COVID-19 related hardship claim. The materials are reviewed, along with the borrower's monthly payment status, to determine if the borrower is eligible for the three-month forbearance plan. If the borrower is not eligible, they are encouraged to apply for loss mitigation. In the event the COVID-19 related hardship is continuing at the end of the forbearance period, it may be extended for an additional period. At the end of the forbearance plan, the borrower may repay the amounts in a lump sum, or our Servicer will work with the borrower on repayment options or traditional loan modification options. Notwithstanding the foregoing, to the extent special rules apply to a mortgagor because of the jurisdiction or type of the Mortgage Loan, the Servicer will comply with those rules. 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 mortgage loan portfolio as ofJuly 31, 2021 :
•Number of COVID-19 forbearance relief inquiries: 1,044 •Number of COVID-19 forbearance relief granted: 297
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We expect continued volatility in the residential mortgage securities market in
the short term and increased acquisition opportunities. 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
margin calls from our financing counterparties and additional mark downs on our
Investments in debt securities, beneficial interests and mortgage loans.
We believe that certain cyclical trends continue to drive a significant realignment within the mortgage sector notwithstanding the impact of the pandemic. Through the end of the second 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 in certain areas 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; •rising home prices are increasing homeowner equity and reducing the incidence of strategic default; •rising prices have resulted in millions of homeowners being in the money to refinance; •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 the COVID-19 pandemic; and The origination of subprime and alternative residential mortgage loans remains 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 the pandemic 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 theU.S. federal regulations addressing "qualified mortgages" based on, among other factors such as 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. 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, particularly in urban areas where there is a sustainable trend of young adults desiring to live near where they work. We focus on densely populated urban areas where we expect positive economic change based on certain demographic, economic and social statistical data. 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 primary banks, lenders and portfolio acquirers typically desire. We continually monitor opportunities to increase our holdings of these SBC loans and properties. 52 -------------------------------------------------------------------------------- We also believe that banks and other mortgage lenders have strengthened their capital bases and are more aggressively foreclosing on delinquent borrowers or selling these loans to dispose of their inventory. Additionally, many NPL buyers are now interested in reducing their investment duration and are selling RPLs.
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. However, 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 the pandemic. 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 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.
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
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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 the pandemic. 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 HPA into account except for rural
properties for which we model negative HPA related to our expectation of worse
than expected property condition. The COVID-19 outbreak has not had as material
of an impact on HPA on our markets as we initially expected. 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 portfolio to decline; (2) coupons on our 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 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 strength of the real estate markets including as a
result of the pandemic, 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.
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We believe that in spite of the continuing uncertain market environment for
mortgage-related assets, including as a result of the pandemic 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 Pandemic. The pandemic 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 the
pandemic 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
Purchased Credit Deteriorated Loans ("PCD Loans") - As of their acquisition
date, the loans we acquired have generally suffered some credit deterioration
subsequent to origination. As a result, our recognition of interest income for
PCD loans is based upon our 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. We
adopted ASU 2016-13, Financial Instruments - Credit Losses, otherwise known as
CECL using the prospective transition approach for PCD assets on January 1,
2020 . At the time, $10.2 million of loan discount was reclassified to the
allowance for credit losses with no net impact on the amortized cost basis of
the portfolio.
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. We may adjust our loan pools as the underlying risk factors change over
time. We have re-aggregated our mortgage loan portfolio into loan pools based on
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.
Our accounting for PCD loans gives rise to an accretable yield and an allowance
for credit losses. 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. Our
expectation of the amount of undiscounted cash flows to be collected is
evaluated at the end of each calendar quarter. The net present value of changes
in expected cash flows, whether caused by timing or loan performance, are
reported in the period in which they arise and are reflected as an increase or
decrease in the provision for losses even if no provision expense was previously
recorded due to the establishment of loss reserves upon loan acquisitions.
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 our
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 evaluate whether and when it
becomes probable that all amounts contractually due will not be collected.
Borrower payments on our 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
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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. Generally Accepted Accounting Principles ("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.
Non-PCD Loans - 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.
We account for our non-PCD loans by estimating any allowance for credit losses for our non-PCD loans based on historical experience and the risk characteristics of the individual loans. 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
Real estate owned Property - We acquire real estate properties directly through
purchases, when we foreclose on the borrower and take title to the underlying
property, or the borrower surrenders the deed in lieu of foreclosure. Property
is recorded at cost if purchased, or at the present value of future cash flows
if obtained through foreclosure. Property that we expect to actively market for
sale is classified as held-for-sale. Property held-for-sale is carried at the
lower of its acquisition basis or net realizable value (fair market value less
expected selling costs, and any additional costs necessary to prepare the
property for sale). Fair market value is determined based on broker price
opinions ("BPOs"), appraisals, or other market indicators of fair value
including list price or contract price, if listed or under contract for sale at
the balance sheet date. Net unrealized losses due to changes in market value are
recognized through a valuation allowance by charges to income through real
estate operating expenses. No depreciation or amortization expense is recognized
on properties held-for-sale. Holding costs are generally incurred by the
Servicer and are subtracted from the Servicer's remittance of sale proceeds upon
ultimate disposition of properties held-for-sale.
Rental property is property not held-for-sale. Rental properties are intended to
be held as long-term investments but may eventually be reclassified as
held-for-sale. Property that arose through conversions of mortgage loans in our
portfolio such as when a mortgage loan is foreclosed upon and we take title to
the property or the borrower surrenders the deed in lieu of foreclosure is
generally held for investment as rental property if the cash flows from use as a
rental exceed the present value of expected cash flows from a sale. We also
acquire rental properties through direct purchases of properties for our rental
portfolio. 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 rental property 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.
Renovations are performed by the Servicer, and those costs are then reimbursed
to the Servicer. Any renovations on properties which we elect to hold as rental
properties are capitalized as part of the property's basis and depreciated over
the remaining estimated useful life of the property. We may perform property
renovations to maximize the value of a property for either its rental strategy
or for resale.
Investments in Securities at Fair Value
Our Investments in Securities at Fair Value consist of investments in senior and
subordinated notes issued by joint ventures, which we form with third party
institutional accredited investors. We recognize income on the debt securities
using
56
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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 pandemic, and
damage to or delay in realizing the value of the underlying collateral. We
monitor the credit quality of the mortgage loans underlying our 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.
Investments in Beneficial Interests
Our Investments in beneficial interests 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 certain
investments. We account for our Investments in beneficial interests under CECL,
as discussed under Mortgage Loans. The methodology is similar to that described
in "Mortgage Loans" except that we only recognize the ratable share of gain,
loss income or expense.
Debt
Secured Borrowings - Through securitization trusts which are VIEs, we issue
callable debt secured by our mortgage loans in the ordinary course of
business. The secured borrowings facilitated by the trusts are structured as
debt financings, and the mortgage loans used as collateral remain on our
consolidated balance sheet as we are the primary beneficiary of the
securitization trusts. 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 our investments in the entities;
the creditors do not have recourse to the primary beneficiary. Coupon interest
expense on the debt is recognized using the accrual method of accounting.
Deferred issuance costs, including original issue discount and debt issuance
costs, are carried on our consolidated balance sheets as a deduction from
Secured borrowings, and are amortized to interest expense on an effective yield
basis based on the underlying cash flow of the mortgage loans serving as
collateral. We assume the debt will be called at the specified call date for
purposes of amortizing discount and issuance costs because we believe it 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.
57
--------------------------------------------------------------------------------•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 loans. The value of transfers of mortgage loans to REO is based upon the present value of future expected cash flows of the loans being transferred. We value our investments in debt securities using estimates provided by our financing counterparties. We also rely on our Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on these investments as a comparison to the estimates received from financing counterparties. We also rely on our Manager's proprietary pricing model to estimate the underlying cash flows expected to be collected on our investments in beneficial interests.
Our investment in the Manager is valued by applying an earnings multiple to base fee revenue.
Our investments in
The fair value of our investment in GAFS, including warrants, is determined by applying an earnings multiple to expected earnings.
The fair value of our investment in Gaea is estimated using a projected net operating income for its property portfolio.
The fair value of our investment in the loan pool LLCs is determined by using estimates of underlying assets and liabilities taken from our Manager's pricing model. The fair value of secured borrowings is estimated using estimates provided by our financing counterparties, which are compared for reasonableness to our Manager's proprietary pricing model which estimates expected cash flows of the underlying mortgage loans collateralizing the debt. We are able to call the bonds issued in our secured borrowings at par value plus accrued interest pursuant to the terms of the offering document. We carry our secured borrowings net of deferred issuance cost. Accordingly, the difference between fair value and carrying value is largely driven by the deferred issuance costs. Our put option liability is adjusted to approximate market value through earnings. The put obligation is a fixed amount that may be settled in cash or shares of our common stock at our option. Fair value is determined using the discounted cash flow method using a rate to accrete the initial basis of$9.5 million to the future put obligation of$50.7 million over the 39-month term of the put option liability.
Our borrowings under repurchase agreements are short-term in nature, and our Manager believes it can renew the current borrowing arrangements on similar terms in the future. Accordingly, the carrying value of these borrowings approximates fair value.
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. The Convertible debt may be redeemable at par plus accrued interest beginning onApril 30, 2022 subject to satisfying the conversion price trigger. We carry the Convertible debt net of deferred issuance cost. Accordingly, the difference between fair value and carrying value is partially driven by the deferred issuance costs. Property held-for-sale is carried at the lower of its acquisition basis or net realizable value. Net realizable value is determined based on broker price opinions, appraisals, or other market indicators of fair value, which are then reduced by anticipated selling costs. Net unrealized losses due to changes in market value are recognized through a valuation allowance by charges to income. 58 --------------------------------------------------------------------------------
The carrying values of our Cash and cash equivalents, Cash held in trust, Receivable from Servicer, Prepaid expenses and other assets, Management fee payable and Accrued expenses and other liabilities are equal to or approximate fair value.
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 endedJune 30, 2021 , we had net income attributable to common stockholders of$10.4 million , or$0.45 per share for basic and$0.42 per share for diluted common shares. For the three months endedJune 30, 2020 , we had net income attributable to common stockholders of$6.2 million , or$0.27 per share for basic and diluted common shares. Key items for the three months endedJune 30, 2021 include: •Interest income of$23.0 million ; net interest income of$14.2 million •Net income attributable to common stockholders of$10.4 million •Basic earnings per common share of$0.45 •Book value per common share of$15.86 atJune 30, 2021 •Taxable income of$0.34 per common share •Formed four joint ventures that acquired$1.4 billion in UPB of mortgage loans with collateral values of$2.4 billion and retained$232.9 million of varying classes of related securities issued by the joint ventures to end the quarter with$558.1 million of investments in debt securities and beneficial interests •Purchased$4.8 million RPLs, with UPB of$5.2 million at 60.7% of property value, to end the quarter with$955.6 million in net mortgage loans •Collected total cash of$78.9 million , from loan payments, sales of REO and collections from investments in debt securities and beneficial interests •Held$88.1 million of cash and cash equivalents atJune 30, 2021 ; average daily cash balance for the quarter was$113.0 million •AtJune 30, 2021 , approximately 74.2% of portfolio based on UPB made at least 12 out of the last 12 payments Our consolidated net income attributable to common stockholders increased$4.1 million for the quarter endedJune 30, 2021 compared to the quarter endedJune 30, 2020 . The increase in our earnings compared to the quarter endedJune 30, 2020 was primarily driven by a$4.2 million decrease in our interest expense. The increase in net interest income was primarily driven by the same decrease of$4.2 million in our interest expense of$8.8 million versus interest expense of$13.1 million in the second quarter of 2020. Our book value increased to$15.86 per common share from$15.59 atDecember 31, 2020 . We recorded$0.1 million in impairments on our REO held-for-sale portfolio in real estate operating expense for the quarter endedJune 30, 2021 compared to$0.1 million for the quarter endedJune 30, 2020 . Impairments for the quarter were driven primarily by additional costs of holding the properties. We continue to liquidate our REO properties held-for-sale at a faster rate than we acquire properties, with 11 properties sold in the second quarter of 2021 while five were added to REO held-for-sale through foreclosures. Limited housing inventory has accelerated our REO liquidation timelines while we are continuing to experience some COVID-19 related delays in foreclosure proceedings. During the quarter endedJune 30, 2020 we sold 14 REO properties while adding two through foreclosures. 59 --------------------------------------------------------------------------------
Table 1: Results of Operations
Three months ended June 30, Six months ended June 30,
($ in thousands) 2021 2020 2021 2020
INCOME
Interest income $ 23,048 $ 23,171 $ 47,083 $ 50,059
Interest expense (8,830) (13,058) (19,134) (26,128)
Net interest income 14,218 10,113 27,949 23,931
Net increase in the net present value of
expected cash flows(1) 4,733 4,862 10,249 151
Net interest income after the impact of
changes in the net present value of
expected cash flows 18,951 14,975 38,198 24,082
Income/(loss) from investments in
affiliates 357 672 520 (440)
Other income 486 680 842 722
Total revenue, net 19,794 16,327 39,560 24,364
EXPENSE
Related party expense - loan servicing fees 1,699 1,936 3,532 3,950
Related party expense - management fee 2,270 2,143 4,543 3,942
Professional fees 763 732 1,403 1,537
Real estate operating expenses 88 188 273 1,100
Fair value adjustment on put option
liability 2,201 1,250 4,145 1,250
Other expense 1,375 1,140 2,679 2,062
Total expense 8,396 7,389 16,575 13,841
Loss on debt extinguishment 161 - 1,072 408
Income before provision for income taxes 11,237 8,938 21,913 10,115
Provision for income taxes (benefit) 67 120 101 (199)
Consolidated net income 11,170 8,818 21,812 10,314
Less: consolidated net (loss)/income
attributable to the non-controlling
interest (1,158) 735 531 1,831
Consolidated net income attributable to
Company 12,328 8,083 21,281 8,483
Less: dividends on preferred stock 1,950 1,841 3,899 1,841
Consolidated net income attributable to
common stockholders $ 10,378 $ 6,242 $ 17,382 $ 6,642
(1)Net increase in the net present value of expected cash flows represents the
net decrease to the allowance for losses resulting from changes in actual and
expected cash flows during the quarter. It represents the net present value of
cash flow increases over incremental provision expense on the Mortgage loan and
Beneficial interest portfolios. Such amounts are calculated at the pool level
for Mortgage loans and at the security level for Beneficial interests, and are
recorded in the period in which the change occurs.
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. For the three months endedJune 30, 2021 and 2020 net interest income after recording the impact of the net increase in the net present value of expected cash flows increased to$19.0 million from$15.0 million , respectively, primarily as a result of a$4.2 million decrease in interest expense as we have secured lower funding costs for our loan and debt security portfolios. Additionally, for the three months endedJune 30, 2021 and 2020, we recorded income of$4.7 million and$4.9 million as a result of a net increase in the net present value of expected cash flows. Of the$4.7 million for the three months endedJune 30, 2021 ,$2.7 million relates to our mortgage loan portfolio and$2.0 million to our investments in beneficial interests. Comparatively during the three months endedJune 30, 2020 , of the$4.9 million ,$1.8 million relates to our mortgage loan portfolio and$3.1 million to our investments in beneficial interests. For the six months endedJune 30, 2021 and 2020 net interest income after recording the impact of the net increase in the net present value of expected cash flows increased to$38.2 million from$24.1 million , respectively, primarily as a result of a net$10.2 million impact of the net increase in the net present value of expected cash flows for the six months endedJune 30, 2021 compared to a$0.2 million impact of the net increase in the net present value of expected cash flows for the six months endedJune 30, 2020 . 60 -------------------------------------------------------------------------------- Of the$10.2 million for the six months endedJune 30, 2021 ,$8.2 million relates to our mortgage loan portfolio and$2.0 million to our investments in beneficial interests. Comparatively during the six months endedJune 30, 2020 , the entire amount of$0.2 million relates to our investments in beneficial interests. To date, the COVID-19 impact on cash flow extensions have not been as material as we initially expected. Our gross interest income decreased by$0.2 million to$23.0 million in the quarter endedJune 30, 2021 from$23.2 million in the quarter endedJune 30, 2020 primarily due to a decrease in the average balance of our mortgage loan portfolio as paydowns and payoffs exceeded loan purchases. This was offset by a decrease in interest expense of$4.2 million to$8.8 million in the quarter endedJune 30, 2021 from$13.1 million in the quarter endedJune 30, 2020 primarily due to decreases in the average interest rates applicable to our borrowings. We expect our cost of funds to continue to remain low in the current interest rate and credit environment. Similarly, our gross interest income decreased by$3.0 million to$47.1 million in the six months endedJune 30, 2021 from$50.1 million in the six months endedJune 30, 2020 primarily due to a decrease in the average balance of our mortgage loan portfolio as paydowns and payoffs exceeded loan purchases. This was offset by a decrease in interest expense of$7.0 million to$19.1 million in the six months endedJune 30, 2021 from$26.1 million in the six months endedJune 30, 2020 similarly due to decreases in the average interest rates applicable to our borrowings. During the second quarter of 2021, we collected$78.9 million in cash payments and proceeds on our mortgage loans, securities and REO held-for-sale compared to$57.8 million for the second quarter of 2020. The increase in cash collections in 2021 is due to a higher volume of payoffs as borrowers continued to refinance or sell the underlying property.
The interest income detail for the three and six months ended
Table 2: Interest income detail
Three months ended June 30, Six months ended June 30,
2021 2020(1,2) 2021 2020(1,2)
Accretable yield recognized on RPL, NPL
and SBC loans $ 15,788 $
18,458
4,397 2,172 7,856 4,676
Interest income on debt securities 2,597 2,596 5,074 4,929
Other interest income/(loss) 153 (130) 5 (92)
Bank interest income 113 75 179 196
Interest income $ 23,048 $
23,171
4,733 4,862 10,249 151
Interest income after the impact of
changes in the net present value of
expected cash flows $ 27,781 $ 28,033 $ 57,332 $ 50,210
(1)Includes reclass of loan and beneficial interest credit losses from net
increase in the present value of cash flows to accretable yield recognized on
RPL, NPL and SBC loans and interest income on beneficial interests,
respectively.
(2)Previously presented combination of interest income on securities and
interest income on beneficial interests has been bifurcated to show each
separately.
(3)Increases and decreases in the net present value of expected cash flows are
recorded in the period in which the change occurs as a reduction or increase to
the allowance for losses, respectively.
The average balance of our mortgage loan portfolio, debt securities, beneficial
interests and debt outstanding for the three months ended June 30, 2021 and 2020
are included in the table below ($ in thousands). The decrease in the average
mortgage loan portfolio is primarily driven by the refinancing of our loans in
Ajax Mortgage Trust 2017-D ("2017-D") in Ajax Mortgage Trust 2021-C ("2021-C").
2017-D was consolidated on our Balance sheet and all items of income, expense,
gain or loss were included in our Results of Operations. 2021-C is not
consolidated in our financial statements. As a result, we reflected 100% of the
loans offset by 50% of the senior bond outstanding in our consolidated financial
statements. Accordingly, the loans subject to the refinancing, net of the senior
bond that was retired, are now reflected in the Average carrying value of debt
securities and the Average carrying value of beneficial interests.
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Table 3: Average Balances
Three months ended June 30,
2021 2020(1)
Average mortgage loan portfolio $ 967,671 $ 1,087,800
Average carrying value of debt securities $ 296,034 $ 267,947
Average carrying value of beneficial interests $ 109,578 $ 65,412
Total average asset level debt $ 992,122 $ 1,041,673
(1)Previously presented combination of average carrying value of debt securities
and beneficial interests has been bifurcated to show to average carrying value
of debt securities and average carrying value of beneficial interests
separately.
Other Income
Other income decreased for the three months endedJune 30, 2021 over the comparable period in 2020 due to lower gain on sale for property held-for-sale and lower income from the federal government's Home Affordable Modification Program ("HAMP") as more loans reached the five-year threshold and no additional fees are earned. Other income increased for the six months endedJune 30, 2021 over the comparable period in 2020 primarily a result of a loss on the sale of mortgage loans during the first quarter of 2020, combined with both an increase in late fee income and a gain on the refinancing of our 2017-D securitization trust in the second quarter of 2021. A breakdown of Other income is provided in the table below ($ in thousands):
Table 4: Other Income
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Late fee income $ 236 $ 163 $ 426 $ 348
Other income 114 - 114 -
Net gain on sale of property
held-for-sale 92 394 197 807
HAMP fees 31 114 79 252
Rental income 13 9 26 20
Loss on sale of mortgage loans - - - (705)
Total other income $ 486 $ 680 $ 842 $ 722
Expenses
Total expenses increased for the three and six months ended June 30, 2021 over
the comparable period in 2020 as a result of our put option amortization
expense, and an increase in the Other expense category by an increase from a
stock grant to certain members of our Board during the current quarter as well
as an increase in insurance expense. These were partially offset by lower loan
servicing fees, loan transaction expense driven by cost recoveries from joint
venture partners and real estate operating expense due to lower REO impairments.
A breakdown of expenses is provided in the table below ($ in thousands):
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Table 5: Expenses
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Related party expense - management
fee $ 2,270 $ 2,143 $ 4,543 $ 3,942
Fair value adjustment on put option
liability 2,201 1,250 4,145 1,250
Related party expense - loan
servicing fees 1,699 1,936 3,532 3,950
Other expense 1,375 1,140 2,679 2,062
Professional fees 763 732 1,403 1,537
Real estate operating expenses 88 188 273 1,100
Total expenses $ 8,396 $ 7,389 $ 16,575 $ 13,841
Other expense increased for the three and six months ended June 30, 2021 over
the comparable period in 2020 primarily due to higher directors' fees and grants
associated with an additional grant to certain members of our Board completed
during the current quarter and insurance expense, offset by lower borrowing
related expense. A breakdown of other expense is provided in the table below ($
in thousands):
Table 6: Other Expense
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Directors' fees and grants $ 251 $ 109 $ 420 $ 218
Insurance 229 184 458 368
Employee and service provider share
grants 207 174 414 348
Taxes and regulatory expense 183 151 244 197
Borrowing related expenses 146 218 333 388
Other expense 116 94 217 158
Lien release non due diligence 94 58 103 91
Software licenses and amortization 90 64 175 134
Travel, meals, entertainment 67 (12) 98 126
Internal audit services 39 35 77 72
Loan transaction expense (47) 65 140 (38)
Total other expense $ 1,375 $ 1,140 $ 2,679 $ 2,062 Equity and Net Book Value per Share
Our net book value per common share was$15.86 and$15.59 atJune 30, 2021 andDecember 31, 2020 , respectively. The increase in book value was primarily driven by our buyout of our joint venture partner's interest in 2018-C, and the repurchase of$7.5 million of our convertible senior notes and a recovery in common equity that resulted from net fair value adjustments of$1.3 million taken on our portfolio of debt securities recorded to Other comprehensive income sinceDecember 31, 2020 . WhileU.S. GAAP does not specifically define the parameters for calculating book value, we believe our calculation is representative of our book value on a per share basis, and our Manager believes book value per share is a valuable metric for evaluating our business. The net book value per share is calculated by dividing equity, after adjusting for the anticipated conversion of the senior convertible notes into shares of common stock, the subtraction of non-controlling interests and preferred shares classified in equity, and shares for Manager and director fees that were approved but still unissued as of the date indicated, unvested employee and service provider stock grants and the common shares from assumed conversion of our senior convertible notes. A breakdown of our book value per share is set forth in the table below ($ in thousands except per share amounts): 63 --------------------------------------------------------------------------------
Table 7: Book Value per Common Share
December 31,
June 30, 2021 2020
Outstanding shares 22,993,246 22,978,339
Adjustments for: Unvested grants of restricted stock, and Manager and director shares earned but not issued as of the date indicated
4,025 4,280
Conversion of convertible senior notes into shares of common stock
7,315,929 7,834,299
Settlement of put option in shares(1) - -
Total adjusted shares outstanding 30,313,200 30,816,918
Equity at period end $
497,492
102,762 110,250
Adjustment for equity due to preferred shares (115,144) (115,144)
Net adjustment for equity due to non-controlling interests (4,238) (29,130)
Adjusted equity $ 480,872 $ 480,467
Book value per share $ 15.86 $ 15.59 (1)The settlement of the put option in shares is not included in the calculation as it has an anti-dilutive effect on our earnings per share calculation.
Mortgage Loan Portfolio
For the three and six months endedJune 30, 2021 , we purchased$4.8 million and$36.4 million RPLs with UPB of$5.2 million and$41.2 million , respectively, at 60.7% and 57.7% of property value, respectively. Comparatively, for the three months endedJune 30, 2020 we purchased no RPLs, however, for the six months endedJune 30, 2020 we purchased$1.2 million RPLs with UPB of$2.0 million , at 38.6% of property value. For the three months endedJune 30, 2021 we purchased no NPLs, however, for the six months endedJune 30, 2021 we purchased$0.4 million NPLs with UPB of$0.7 million at 50.1% of property value. Comparatively, for the three months endedJune 30, 2020 we purchased no NPLs, however, for the six months endedJune 30, 2020 we purchased$0.2 million NPLs with UPB of$0.2 million , at 62.9% of property value. For the three months endedJune 30, 2021 we purchased no SBC loans, however, for the six months endedJune 30, 2021 we purchased$3.6 million SBC loans with UPB of$3.6 million at 36.5% of property value. Comparatively, for the three and six months endedJune 30, 2020 , we purchased no SBC loans. We ended the period with$955.6 million of net mortgage loans with an aggregate UPB of$1.0 billion as ofJune 30, 2021 and$1.1 billion of net mortgage loans with an aggregate UPB of$1.2 billion as ofJune 30, 2020 .
The following table shows loan portfolio acquisitions for the three and six
months ended
Table 8: Loan Portfolio Acquisitions
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Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
RPLs
Count 38 - 237 26
UPB $ 5,157 $ - $ 41,188 $ 1,952
Purchase price $ 4,773 $ - $ 36,360 $ 1,205
Purchase price % of UPB 92.6 % - % 88.3 % 61.7 %
NPLs
Count - - 3 1
UPB $ - $ - $ 665 $ 227
Purchase price $ - $ - $ 447 $ 185
Purchase price % of UPB - % - % 67.2 % 81.5 %
SBC loans
Count - - 1 -
UPB $ - $ - $ 3,611 $ -
Purchase price $ - $ - $ 3,603 $ -
Purchase price % of UPB - % - % 99.8 % - %
During the three and six months ended June 30, 2021 , 947 and 1,109 mortgage
loans, respectively, representing 16.6% and 20.3% of our ending UPB,
respectively, were liquidated. Comparatively, during the three and six months
ended June 30, 2020 , 112 and 263 mortgage loans, respectively, representing 1.7%
and 6.3%, respectively, of our ending UPB, were liquidated. Our loan portfolio
activity for the three and six months ended June 30, 2021 and 2020 is presented
below ($ in thousands):
Table 9: Loan Portfolio Activity
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Beginning carrying value $ 1,123,530
4,773 - 40,410 1,391
Draws on SBC loans 7,259 - 7,344 -
Accretion recognized 15,914 18,695 34,435 40,440
Payments received on loans, net (69,803) (38,138) (126,024) (85,098)
Reclassifications to REO (1,046) (98) (1,274) (912)
Sale of mortgage loans - - - (26,111)
Refinancing of 2017-D (128,770) - (128,770) -
Increase (decrease) in net present
value of expected cash flows on
mortgage loans 2,740 1,799 8,240 (94)
Mortgage loans credit loss expense (139) (274) (593) (503)
Other 1,170 4 2,488 35
Ending carrying value $ 955,628 $ 1,080,617 $ 955,628 $ 1,080,617 Table 10: Portfolio Composition
As of
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June 30, 2021 December 31, 2020(1,2)
No. of Loans 5,168 No. of Loans 6,031
Total UPB(3) $ 1,020,819 Total UPB(3) $ 1,204,804
Interest-Bearing Balance $ 947,523 Interest-Bearing Balance $ 1,127,499
Deferred Balance(4) $ 73,296 Deferred Balance(4) $ 77,305 Market Value of Collateral(5)
81.6 % Original Purchase Price/Total UPB 82.2 %
Original Purchase Price/Market Value Original Purchase Price/Market Value
of Collateral 50.6 % of Collateral 53.7 %
Weighted Average Coupon 4.39 % Weighted Average Coupon 4.44 %
Weighted Average LTV(6) 68.6 % Weighted Average LTV(6) 72.8 %
Weighted Average Remaining Term Weighted Average Remaining Term
(months) 291 (months) 297
No. of first liens 5,106 No. of first liens 5,973
No. of second liens 62 No. of second liens 58
No. of Rental Properties 5 No. of Rental Properties 6
Capital Invested in Rental Properties $ 408 Capital Invested in Rental Properties $ 710
RPLs 93.9 % RPLs 94.4 %
NPLs 3.9 % NPLs 3.5 %
SBC loans 2.2 % SBC loans 2.1 %
No. of REO properties held-for-sale 20 No. of REO properties held-for-sale 32
Market Value of Other REO(7) $ 5,218 Market Value of Other REO(7) $ 8,105
Carrying value of debt securities and Carrying value of debt securities and
beneficial interests in trusts $ 559,424 beneficial interests in trusts $ 369,330
Loans with 12 for 12 payments as an Loans with 12 for 12 payments as an
approximate percentage of UPB (8) 74.2 % approximate percentage of UPB (8) 71.9 %
Loans with 24 for 24 payments as an Loans with 24 for 24 payments as an
approximate percentage of UPB (9) 66.8 % approximate percentage of UPB (9) 65.1 %
(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 $68.1 million acquired in
the third quarter of 2018 through a 63% owned joint venture which we
consolidated as of December 31, 2020 .
(3)At June 30, 2021 and December 31, 2020 , our loan portfolio consists of fixed
rate (56.1% of UPB), ARM (8.5% of UPB) and Hybrid ARM (35.4% of UPB); and fixed
rate (53.5% of UPB), ARM (8.9% of UPB) and Hybrid ARM (37.6% of UPB),
respectively.
(4)Amounts that have been deferred in connection with a loan modification on
which interest does not accrue. These amounts generally become payable at the
time of maturity.
(5)As of date of acquisition.
(6)UPB as of June 30, 2021 and December 31, 2020 , divided by market value of
collateral and weighted by the UPB of the loan.
(7)Market value of REO is based on net realizable value. Fair market value is
determined based on appraisals, BPOs, or other market indicators of fair value
including list price or contract price.
(8)Loans that have made at least 12 of the last 12 payments, or for which the
full dollar amount to cover at least 12 payments has been made in the last 12
months.
(9)Loans that have made at least 24 of the last 24 payments, or for which the
full dollar amount to cover at least 24 payments has been made in the last 24
months.
Table 11: Portfolio Characteristics
The following tables present certain characteristics about our mortgage loans by year of origination as ofJune 30, 2021 andDecember 31, 2020 , respectively ($ in thousands): Portfolio atJune 30, 2021 66
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Years of Origination
After 2008 2006 - 2008 2005 and prior
Number of loans 603 2,907 1,658
Unpaid principal balance $ 144,992 $ 645,918 $ 229,909
Mortgage loan portfolio by year of origination 14.2 % 63.3 % 22.5 %
Loan Attributes:
Weighted average loan age (months) 96.7 172.7 212.6
Weighted average loan-to-value 65.0 % 72.8 % 59.0 %
Delinquency Performance:
Current 67.3 % 66.9 % 66.9 %
30 days delinquent 4.8 % 5.7 % 5.1 %
60 days delinquent 2.9 % 2.9 % 5.5 %
90+ days delinquent 20.1 % 18.8 % 17.8 %
Foreclosure 4.9 % 5.7 % 4.7 %
Portfolio at
Years of Origination
After 2008 2006 - 2008 2005 and prior
Number of loans 639 3,471 1,921
Unpaid principal balance $ 156,250 $ 780,956 $ 267,598
Mortgage loan portfolio by year of origination 13.0 % 64.8 % 22.2 %
Loan Attributes:
Weighted average loan age (months) 91.0 166.7 205.8
Weighted average loan-to-value 69.4 % 77.0 % 62.6 %
Delinquency Performance:
Current 53.0 % 51.9 % 53.3 %
30 days delinquent 13.6 % 11.4 % 10.9 %
60 days delinquent 3.8 % 6.7 % 6.8 %
90+ days delinquent 25.3 % 25.1 % 25.4 %
Foreclosure 4.3 % 4.9 % 3.6 %
Table 12: Loans by State
The following table identifies our mortgage loans by state, number of loans,
loan value, collateral value and percentages thereof at
June 30, 2021 December 31, 2020
% of % of
Collateral Collateral Collateral Collateral
State Count UPB % UPB Value(1) Value State Count UPB % UPB Value(1) Value
CA 769 $ 259,824 25.5 % $ 501,908 28.3 % CA 947 $ 329,725 27.4 % $ 589,225 30.0 %
FL 588 99,271 9.7 % 170,258 9.6 % FL 655 108,293 9.0 % 174,849 8.9 %
TX 339 35,830 3.5 % 73,737 4.2 % TX 410 42,432 3.5 % 81,810 4.2 %
NY 328 103,611 10.2 % 178,383 10.1 % GA 352 45,817 3.8 % 71,586 3.7 %
NJ 289 66,670 6.5 % 93,230 5.3 % NY 329 103,475 8.6 % 177,524 9.0 %
GA 265 32,668 3.2 % 58,387 3.2 % NJ 287 65,764 5.5 % 89,389 4.5 %
MD 211 51,276 5.0 % 71,369 4.0 % MD 248 60,082 5.0 % 77,693 4.0 %
IL 207 36,993 3.5 % 49,961 2.8 % NC 240 33,146 2.8 % 52,217 2.7 %
NC 204 29,192 2.9 % 54,564 3.1 % IL 227 41,410 3.5 % 54,379 2.8 %
PA 174 20,171 2.0 % 30,496 1.7 % VA 205 43,563 3.6 % 63,132 3.2 %
VA 169 37,058 3.6 % 57,758 3.3 % PA 185 21,294 1.8 % 31,248 1.6 %
MA 145 29,311 2.9 % 52,403 3.0 % MA 177 35,454 2.9 % 61,220 3.1 %
67--------------------------------------------------------------------------------
AZ 116 22,268 2.2 % 39,356 2.2 % AZ 150 29,765 2.5 % 47,835 2.4 %
SC 112 12,176 1.2 % 18,974 1.1 % SC 129 14,206 1.2 % 22,213 1.1 %
TN 101 10,469 1.0 % 19,449 1.1 % TN 115 12,721 1.1 % 22,690 1.2 %
OH 96 11,270 1.1 % 15,876 0.9 % OH 110 12,929 1.1 % 17,843 0.9 %
IN 92 8,278 0.8 % 14,215 0.8 % WA 104 23,874 2.0 % 43,784 2.2 %
WA 87 19,998 2.0 % 39,848 2.2 % IN 98 9,180 0.8 % 14,476 0.7 %
NV 75 13,863 1.4 % 25,707 1.4 % NV 97 18,614 1.5 % 30,344 1.5 %
MI 73 8,750 0.9 % 14,485 0.8 % MI 97 13,103 1.1 % 19,832 1.0 %
CT 70 12,252 1.2 % 17,595 1.0 % CT 77 13,529 1.1 % 18,115 0.9 %
LA 65 6,523 0.7 % 10,196 0.6 % LA 76 7,631 0.6 % 11,910 0.6 %
MO 62 7,044 0.7 % 10,593 0.6 % MO 75 9,383 0.8 % 12,545 0.6 %
OR 61 18,539 1.8 % 39,641 2.2 % OR 70 24,303 2.0 % 46,279 2.4 %
AL 41 3,405 0.3 % 4,644 0.3 % CO 54 10,450 0.9 % 22,665 1.2 %
CO 39 7,748 0.8 % 18,198 1.0 % MN 49 9,121 0.8 % 13,242 0.7 %
WI 38 4,873 0.5 % 7,101 0.4 % UT 44 6,895 0.6 % 14,932 0.8 %
MN 35 6,371 0.6 % 10,256 0.6 % AL 44 3,670 0.3 % 4,891 0.2 %
UT 35 5,271 0.5 % 13,362 0.8 % WI 37 4,696 0.4 % 6,385 0.3 %
KY 29 3,474 0.3 % 5,317 0.3 % KY 36 4,158 0.3 % 6,032 0.3 %
DE 26 4,849 0.5 % 6,283 0.4 % DE 34 6,509 0.5 % 7,999 0.4 %
NM 25 3,941 0.4 % 6,204 0.3 % NM 30 4,450 0.4 % 6,207 0.3 %
MS 24 1,858 0.2 % 2,829 0.2 % OK 27 2,511 0.2 % 3,827 0.2 %
OK 23 2,132 0.2 % 3,458 0.2 % MS 26 2,149 0.2 % 3,168 0.2 %
KS 19 1,390 0.1 % 3,024 0.2 % AR 20 1,447 0.1 % 2,016 0.1 %
AR 17 1,102 0.1 % 1,687 0.1 % KS 19 1,379 0.1 % 2,897 0.1 %
NH 14 2,693 0.3 % 4,177 0.2 % NH 18 3,223 0.3 % 5,087 0.3 %
WV 14 1,080 0.1 % 1,620 0.1 % IA 18 1,736 0.1 % 2,267 0.1 %
DC 13 4,384 0.4 % 6,820 0.4 % DC 17 5,131 0.4 % 8,138 0.4 %
IA 13 1,096 0.1 % 1,618 0.1 % WV 17 1,258 0.1 % 1,830 0.1 %
HI 10 3,618 0.4 % 6,172 0.3 % HI 16 6,456 0.5 % 9,305 0.5 %
RI 10 2,256 0.2 % 3,292 0.2 % RI 14 3,084 0.3 % 4,481 0.2 %
ID 10 1,184 0.1 % 2,619 0.1 % ID 12 1,496 0.1 % 2,971 0.2 %
ME 9 1,310 0.1 % 1,905 0.1 % ME 10 1,372 0.1 % 1,801 0.1 %
MT 6 1,014 0.1 % 1,678 0.1 % MT 6 803 0.1 % 1,336 0.1 %
PR 5 593 0.1 % 552 - % PR 5 518 - % 592 - %
SD 4 531 0.1 % 917 0.1 % SD 4 537 - % 872 - %
ND 3 391 - % 479 - % NE 4 528 - % 603 - %
NE 3 247 - % 308 - % WY 3 438 - % 356 - %
VT 2 400 - % 316 - % ND 3 395 - % 472 - %
WY 2 247 - % 238 - % VT 2 452 - % 518 - %
AK 1 56 - % 157 - % AK 2 249 - % 391 - %
5,168 $ 1,020,819 100.0 % $ 1,773,620 100.0 % 6,031 $ 1,204,804 100.0 % $ 1,967,419 100.0 %
(1)As of date of acquisition.
68--------------------------------------------------------------------------------
Table 13:
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Class A securities
UPB $ 170,849 $ - $ 170,849 $ 49,876
Purchase price $ 169,962 $ - $ 169,962 $ 49,602
Purchase price % of UPB 99.5 % - % 99.5 % 99.5 %
Class B securities
UPB $ 23,661 $ - $ 23,661 $ 4,656
Purchase price $ 23,508 $ - $ 23,508 $ 4,623
Purchase price % of UPB 99.4 % - % 99.4 % 99.3 %
Beneficial interests
Purchase price $ 39,467 $ - $ 39,467 $ 7,082 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. As the local and global economies have weakened as a result of the COVID-19 pandemic, 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. 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 ofJune 30, 2021 andDecember 31, 2020 , 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$88.1 million of cash and cash equivalents, a decrease of$19.0 million from our balance of$107.1 million atDecember 31, 2020 . Our average daily cash balance during the quarter was$113.0 million , a decrease of$15.7 million from our average daily cash balance of$128.7 million during the three months endedDecember 31, 2020 . Our collections of principal and interest payments on mortgages and securities, payoffs and proceeds and on the sale of our property held-for-sale were$78.9 million and$149.1 million , respectively, for the three and six months endedJune 30, 2021 and$57.8 million and$120.2 million , respectively, for the three and six months endedJune 30, 2020 . Our operating cash outflows, including the effect of restricted cash, for the six months endedJune 30, 2021 and 2020 were$22.9 million and$10.2 million , respectively. Our primary operating cash inflow is cash interest payments on our mortgage loan pools of$23.8 million and$24.2 million for the six months endedJune 30, 2021 and 2020, respectively. Non-cash interest income accretion was$10.6 million and$16.2 million for the six months endedJune 30, 2021 and 2020, respectively. Interest income on beneficial interests was$8.2 million and$5.1 million during the six months endedJune 30, 2021 and 2020, respectively. Interest income on debt securities was$5.1 million and$2.3 million during the six months endedJune 30, 2021 and 2020, respectively. Though the ownership of mortgage loans and other real estate assets is our business,U.S. 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 underU.S. GAAP, and the cash flows from these activities are included in the investing section of our consolidated statements of cash 69 -------------------------------------------------------------------------------- flows. We expect 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. For the six months endedJune 30, 2021 , our investing cash inflows of$10.9 million were driven by proceeds from the refinancing of our 2017-D mortgage loan trust of$126.0 million , principal payments on and payoffs of our mortgage loan portfolio of$102.2 million , principal payments on and payoffs of our debt securities and beneficial interests of$35.5 million and sale of our securities of$20.6 million , partially offset by the acquisitions of our debt securities and beneficial interests of$231.6 million and acquisitions of our mortgage loans of$40.4 million . For the six months endedJune 30, 2020 our investing cash inflow of$57.0 million was primarily driven by principal payments on and payoffs of our mortgage loan portfolio of$60.8 million , principal payments on and payoffs on debt securities and beneficial interests held as investments of$25.5 million and the sale of 26 mortgage loans to Gaea, an affiliated entity, in the amount of$25.4 million , partially offset by the acquisitions of our debt securities and beneficial interests of$61.3 million . 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 six months endedJune 30, 2021 , we had net financing cash outflows of$7.0 million primarily driven by pay downs of existing debt obligations of$312.5 million on secured borrowings, and repayments of$270.4 million on repurchase transaction. We purchased the remaining 37% ownership of the Class B notes and trust certificates of 2018-C for a total of$17.2 million , and repurchased our senior convertible notes of$7.5 million , partially offset by additional borrowing through secured borrowings of$391.0 million and repurchase transactions of$243.6 million . For the six months endedJune 30, 2020 , we had net cash inflows from financing activities of$52.5 million primarily driven from our issuance of preferred stock and warrants, net of any offering costs, for$125.0 million in a series of private placements to institutional accredited investors as well as from additional borrowing through repurchase transactions of$145.3 million , partially offset by repayments of$159.3 million on repurchase transactions, pay downs of existing debt obligations of$44.5 million on secured borrowings and repurchased our senior convertible notes of$8.2 million . For the six months endedJune 30, 2021 and 2020 we paid$12.4 million and$5.9 million , respectively, in combined dividends and distributions.
Financing Activities - Equity offerings
OnFebruary 28, 2020 , our Board of Directors approved a stock repurchase of up to$25.0 million of our common shares. The amount and timing of any repurchases will depend on a number of factors, including but not limited to the price and availability of the common shares, trading volume and general circumstances and market conditions. As ofJune 30, 2021 we held 126,609 shares of treasury stock consisting of 78,145 shares received through distributions of our shares previously held by our Manager and 48,464 shares acquired through open market purchases in the fourth quarter of 2020 under our approved stock repurchase plan. As ofJune 30, 2020 we held 37,278 shares of treasury stock received through distributions of our shares previously held by our Manager. During 2020, we issued an aggregate of$130.0 million of preferred stock and warrants to institutional accredited investors in a series of private placements. We issued 2,307,400 shares of 7.25% Series A Fixed-to-Floating Rate Preferred Stock and 2,892,600 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 6,500,000 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 afterJuly 6, 2023 . UnderU.S. GAAP, we are required to allocate the proceeds between the Preferred stock and warrants. The allocation of the proceeds, net of all offering costs, resulted in the Preferred series A shares receiving an allocation of$51.1 million , the Preferred series B shares receiving an allocation of$64.0 million and the warrants an allocation of$9.5 million . We mark the obligation for the warrants and future put liability to market though earnings. We expect to use the net proceeds from the private placement to acquire mortgage loans and mortgage-related assets consistent with our investment strategy. During the six months endedJune 30, 2021 andJune 30, 2020 , we did not sell any shares of common stock under our At the Market program which we established inOctober 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 NYSE 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 ) toJune 30, 2021 , we have completed 18 secured borrowings, not including borrowings we completed for our non-consolidated joint ventures (See Table 18: Investments in joint ventures), through 70 -------------------------------------------------------------------------------- securitization trusts pursuant to Rule 144A under the Securities Act, five of which were outstanding atJune 30, 2021 . 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 non-rated secured borrowings are generally structured with Class A notes, subordinated notes, and trust certificates, which have rights to the residual interests in the mortgages once the notes are repaid. We have retained the subordinate notes and the applicable trust certificates from one non-rated secured borrowing outstanding atJune 30, 2021 . Our rated secured borrowings are generally structured as "REIT TMP" transactions which allow the Company to issue multiple classes of securities without using a REMIC structure or being subject to an entity level tax. Our rated secured borrowings generally issue classes of debt fromAAA through mezzanine. We generally retain the mezzanine and residual certificates in the transactions. We have retained the applicable mezzanine and residual certificates from the other four rated secured borrowings outstanding atJune 30, 2021 . Our rated secured borrowings are designated in the table below. AtMarch 31, 2021 , our 2017-D secured borrowing contained Class A notes and Class B certificates representing the residual interests in the mortgages held within the securitization trusts subsequent to repayment of the Class A debt. We had retained 50% of both the Class A notes and Class B certificates from 2017-D; and the assets and liabilities were included on our consolidated balance sheets. During the second quarter of 2021, the majority of the loans in 2017-D were refinanced in 2021-C. Based on the structure of the transaction we do not consolidate 2021-C underU.S. GAAP. Our 2018-C secured borrowing was structured with Class A notes, Class B notes and trust certificates representing the residual interest in the mortgages held within the securitization trusts subsequent to repayment of the Class A debt. We had retained 5% of the Class A notes and 63% of the Class B notes and trust certificates. During the first quarter of 2021 we acquired the remaining 37% ownership of the Class B notes and trust certificates and settled the remaining 95% of the outstanding Class A notes. The following table sets forth the original terms of all outstanding notes from our secured borrowings outstanding atJune 30, 2021 at their respective cutoff dates: Table 14: Secured Borrowings 71
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Interest Rate
Issuing Trust/Issue Date Step-up Date Security Original Principal Interest Rate
Rated
Ajax Mortgage Loan Trust
2019-D/ July 2019 July 25, 2027 Class A-1 notes due 2065 $140.4 million 2.96 %
July 25, 2027 Class A-2 notes due 2065 $6.1 million 3.50 %
July 25, 2027 Class A-3 notes due 2065 $10.1 million 3.50 %
Class M-1 notes due
July 25, 2027 2065(1) $9.3 million 3.50 %
Class B-1 notes due
None 2065(2) $7.5 million 3.50 %
Class B-2 notes due
None 2065(2) $7.1 million variable(3)
Class B-3 notes due
None 2065(2) $12.8 million variable(3)
Deferred issuance costs $(2.7) million - %
Rated
Ajax Mortgage Loan Trust
2019-F/ November 2019 November 25, 2026 Class A-1 notes due 2059 $110.1 million 2.86 %
November 25, 2026 Class A-2 notes due 2059 $12.5 million 3.50 %
November 25, 2026 Class A-3 notes due 2059 $5.1 million 3.50 %
Class M-1 notes due
November 25, 2026 2059(1) $6.1 million 3.50 %
Class B-1 notes due
None 2059(2) $11.5 million 3.50 %
Class B-2 notes due
None 2059(2) $10.4 million variable(3)
Class B-3 notes due
None 2059(2) $15.1 million variable(3)
Deferred issuance costs $(1.8) million - %
Rated
Ajax Mortgage Loan Trust
2020-B/ August 2020 July 25, 2027 Class A-1 notes due 2059 $97.2 million 1.70 %
July 25, 2027 Class A-2 notes due 2059 $17.3 million 2.86 %
Class M-1 notes due
July 25, 2027 2059(1) $7.3 million 3.70 %
Class B-1 notes due
None 2059(2) $5.9 million 3.70 %
Class B-2 notes due
None 2059(2) $5.1 million variable(3)
Class B-3 notes due
None 2059(2) $23.6 million variable(3)
Deferred issuance costs $(1.8) million - %
Rated
Ajax Mortgage Loan Trust
2021-A/ January 2021 January 25, 2029 Class A-1 notes due 2065 $146.2 million 1.07 %
January 25, 2029 Class A-2 notes due 2065 $21.1 million 2.35 %
Class M-1 notes due
January 25, 2029 2065(1) $7.8 million 3.15 %
Class B-1 notes due
None 2065(2) $5.0 million 3.80 %
Class B-2 notes due
None 2065(2) $5.0 million variable(3)
Class B-3 notes due
None 2065(2) $21.5 million variable(3)
Deferred issuance costs $(2.5) million - %
Non-rated
Ajax Mortgage Loan Trust
2021-B/ February 2021 August 25, 2024 Class A notes due 2066 $215.9 million 2.24 %
February 25, 2025 Class B notes due 2066(2) $20.2 million 4.00 %
Deferred issuance costs $(4.3) million - %
72-------------------------------------------------------------------------------- (1)The Class M notes are subordinated, sequential pay, fixed rate notes. We have retained the Class M notes, with the exception ofAjax Mortgage Loan Trust ("AJAXM") 2021-A. (2)The Class B notes are subordinated, sequential pay, with B-2 and B-3 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. (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. Convertible Senior Notes OnApril 25, 2017 , we completed the public offer and sale of$87.5 million in aggregate principal amount of our convertible senior notes (the "notes") due 2024, with follow-on offerings of an additional$20.5 million and$15.9 million , respectively, in aggregate principal amount completed onAugust 18, 2017 andNovember 19, 2018 , respectively, which, combined with the notes from our April offering form a single series of fungible securities. The notes bear interest at a rate of 7.25% per annum, payable quarterly in arrears onJanuary 15 ,April 15 ,July 15 andOctober 15 of each year. The notes will mature onApril 30, 2024 , unless earlier repurchased, converted or redeemed. During certain periods and subject to certain conditions the notes will be convertible by their holders into shares of our common stock at a conversion rate of 1.7279 shares of common stock per$25.00 principal amount of the notes, which represents a conversion price of approximately$14.47 per share of common stock. The conversion rate, and thus the conversion price, may be subject to adjustment under certain circumstances. During the first and second quarter of 2021, we completed a series of convertible note repurchases for aggregate principal amounts of$2.5 million and$5.0 million , respectively, for total purchase prices of$2.4 million and$5.1 million , respectively. The carrying amounts of the equity component representing the embedded conversion feature reversed from Additional paid-in capital due to the first and second quarter of 2021 transactions were both zero. During the first and third quarter of 2020, we completed a series of convertible note repurchases for aggregate principal amounts of$8.0 million and$2.5 million , respectively, for total purchase prices of$8.2 million and$2.3 million , respectively. The carrying amounts of the equity component representing the embedded conversion feature reversed from Additional paid-in capital due to the first and third quarter of 2020 transactions were$0.1 million and zero, respectively.
Repurchase Transactions
We have two repurchase facilities whereby we, through two wholly ownedDelaware 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 theOperating 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 five 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.
A summary of our outstanding repurchase transactions at
Table 15: Repurchase Transactions by Maturity Date
73
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June 30, 2021
Maximum
Borrowing Amount Amount of Percentage of
Maturity Date Origination date Capacity Outstanding Collateral Collateral Coverage Interest Rate
July 6, 2021 April 6, 2021 $ 7,267 $ 7,267 $ 9,419 130 % 1.40 %
July 6, 2021 April 6, 2021 4,420 4,420 5,531 125 % 1.40 %
July 6, 2021 April 6, 2021 3,336 3,336 4,667 140 % 1.80 %
July 9, 2021 July 10, 2020 250,000 14,688 22,228 151 % 2.59 %
July 12, 2021 April 12, 2021 5,535 5,535 6,938 125 % 1.39 %
July 15, 2021 April 15, 2021 6,135 6,135 7,372 120 % 1.23 %
July 20, 2021 April 20, 2021 11,629 11,629 14,505 125 % 1.24 %
July 30, 2021 April 30, 2021 11,123 11,123 13,635 123 % 1.39 %
July 30, 2021 April 30, 2021 10,997 10,997 13,532 123 % 1.39 %
July 30, 2021 April 30, 2021 2,754 2,754 3,541 129 % 1.39 %
July 30, 2021 April 30, 2021 1,133 1,133 1,607 142 % 1.79 %
August 12, 2021 May 12, 2021 3,108 3,108 4,428 142 % 1.77 %
August 24, 2021 May 24, 2021 28,635 28,635 38,294 134 % 1.35 %
August 24, 2021 May 24, 2021 3,532 3,532 5,106 145 % 1.75 %
September 3, 2021 June 4, 2021 23,554 23,554 30,884 131 % 1.13 %
September 3, 2021 June 4, 2021 23,042 23,042 30,303 132 % 1.13 %
September 17, 2021 June 17, 2021 44,701 44,701 59,986 134 % 1.13 %
September 17, 2021 June 17, 2021 8,236 8,236 10,322 125 % 1.32 %
September 17, 2021 June 17, 2021 7,229 7,229 9,510 132 % 1.32 %
September 17, 2021 June 17, 2021 4,331 4,331 6,232 144 % 1.38 %
September 17, 2021 June 17, 2021 1,176 1,176 1,687 143 % 1.72 %
September 23, 2021 September 24, 2020 400,000 42,153 63,220 150 % 2.60 %
September 24, 2021 June 24, 2021 46,819 46,819 62,815 134 % 1.33 %
September 24, 2021 June 24, 2021 4,535 4,535 6,526 144 % 1.73 %
September 24, 2021 June 24, 2021 2,431 2,431 3,148 129 % 1.33 %
October 5, 2021 April 9, 2021 31,326 31,326 39,811 127 % 1.41 %
October 22, 2021 April 26, 2021 7,899 7,899 9,279 117 % 1.11 %
October 22, 2021 April 26, 2021 6,231 6,231 7,276 117 % 1.11 %
October 22, 2021 April 26, 2021 5,123 5,123 6,063 118 % 1.11 %
December 13, 2021 June 15, 2021 14,148 14,148 20,151 142 % 1.35 %
December 13, 2021 June 15, 2021 7,160 7,160 9,409 131 % 1.15 %
Totals/weighted averages $ 987,545 $ 394,386 $ 527,425 134 % 1.48 %
74--------------------------------------------------------------------------------
December 31, 2020
Maximum
Borrowing Amount Amount of Percentage of
Maturity Date Origination date Capacity Outstanding Collateral Collateral Coverage Interest Rate
January 6, 2021 October 9, 2020 $ 35,635 $ 35,635 $ 46,120 129 % 2.33 %
January 6, 2021 September 28, 2020 7,697 7,697 10,075 131 % 2.33 %
January 6, 2021 September 28, 2020 6,311 6,311 9,038 143 % 2.48 %
January 6, 2021 September 28, 2020 4,755 4,755 6,114 129 % 2.33 %
January 6, 2021 September 28, 2020 4,666 4,666 6,044 130 % 2.33 %
January 6, 2021 September 28, 2020 3,213 3,213 4,667 145 % 2.48 %
January 11, 2021 September 29, 2020 5,879 5,879 7,575 129 % 2.32 %
January 14, 2021 October 29, 2020 6,991 6,991 8,738 125 % 2.35 %
January 20, 2021 October 20, 2020 13,263 13,263 16,582 125 % 2.22 %
January 29, 2021 October 30, 2020 7,762 7,762 9,702 125 % 2.21 %
January 29, 2021 October 30, 2020 7,153 7,153 9,537 133 % 2.21 %
February 1, 2021 December 1, 2020 12,258 12,258 16,052 131 % 1.88 %
February 1, 2021 December 1, 2020 12,015 12,015 15,794 131 % 1.88 %
February 1, 2021 December 1, 2020 5,298 5,298 6,895 130 % 1.88 %
February 1, 2021 December 1, 2020 3,985 3,985 5,136 129 % 1.88 %
February 1, 2021 December 1, 2020 2,887 2,887 3,790 131 % 1.88 %
February 1, 2021 December 1, 2020 2,332 2,332 3,360 144 % 2.03 %
February 1, 2021 December 1, 2020 1,132 1,132 1,607 142 % 2.03 %
February 12, 2021 November 13, 2020 2,945 2,945 4,428 150 % 2.02 %
March 5, 2021 December 7, 2020 24,946 24,946 33,348 134 % 1.78 %
March 5, 2021 December 7, 2020 24,312 24,312 32,571 134 % 1.78 %
March 17, 2021 December 17, 2020 10,219 10,219 13,172 129 % 1.78 %
March 17, 2021 December 17, 2020 8,381 8,381 10,872 130 % 1.78 %
March 17, 2021 December 17, 2020 3,894 3,894 5,193 133 % 1.78 %
March 17, 2021 December 17, 2020 1,145 1,145 1,687 147 % 1.93 %
March 24, 2021 December 24, 2020 7,016 7,016 10,024 143 % 1.94 %
March 24, 2021 December 24, 2020 5,008 5,008 6,637 133 % 1.79 %
March 24, 2021 December 24, 2020 2,577 2,577 3,367 131 % 1.79 %
April 9, 2021 October 13, 2020 33,084 33,084 43,069 130 % 2.35 %
July 9, 2021 July 10, 2020 250,000 53,256 84,337 158 % 2.64 %
September 23, 2021 September 24, 2020 400,000 101,117 160,068 158 % 2.65 %
Totals/weighted averages $ 916,759 $ 421,132 $ 595,599 141 % 2.29 %
As of June 30, 2021 , we had $394.4 million outstanding under our repurchase
transactions compared to $421.1 million as of December 31, 2020 . The maximum
month-end balance outstanding during the three months ended June 30, 2021 was
$394.6 million , compared to a maximum month-end balance for the three months
ended December 31, 2020 , of $422.3 million . The following table presents certain
details of our repurchase transactions for the three months ended June 30, 2021
and December 31, 2020 ($ in thousands):
Table 16: Repurchase Balances
Three months ended
December 31,
June 30, 2021 2020
Balance at the end of period $ 394,386 $ 421,132
Maximum outstanding balance during the quarter $ 394,589 $ 422,322
Average balance $ 290,670 $ 417,973
75-------------------------------------------------------------------------------- The decrease in our average balance from$418.0 million for the three months endedDecember 31, 2020 to our average balance of$290.7 million for the three months endedJune 30, 2021 was due to a net decrease in repurchase financing during the three months endedJune 30, 2021 .
As of
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. OnAugust 5, 2021 , our Board of Directors declared a dividend of$0.21 per share, to be paid onAugust 31, 2021 to stockholders of record as ofAugust 16, 2021 . 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 any quarterly increase in book value, all calculated on an annualized basis, exceed 8% of our book value, or (2) for any annual incentive fee, the value of quarterly cash dividends on our common stock plus cash special dividends on our common stock, 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 and six months endedJune 30, 2021 andJune 30, 2020 , we recorded no incentive fee payable to the Manager. Our dividend payments are driven by the amount of our taxable income, subject toIRS rules for maintaining our status as a REIT. Our most recently declared quarterly dividend represents a payment of approximately 5.30% on an annualized basis of our book value of$15.86 per share atJune 30, 2021 . If our taxable income increases to the levels we experienced during 2019, we could exceed the threshold for paying an incentive fee to our Manager, and thereby trigger such payments. See Note 10 - Related party transactions.
Off-Balance Sheet Arrangements
Other than our investments in debt securities and beneficial interests issued by joint ventures, which are summarized below by securitization trust and our equity method investments discussed elsewhere in this report, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities. As such, we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships.
Table 17: Investments in joint ventures
We form joint ventures with third party institutional accredited investors to
purchase mortgage loans and other mortgage related assets. The debt securities
and beneficial interests we carry on our consolidated balance sheets are issued
by securitization trusts formed by these joint ventures, which are VIEs, that we
have sponsored but which we do not consolidate since we have determined we are
not the primary beneficiary.
A summary of our investments in joint ventures is presented below(1) ($ in
thousands):
Great Ajax Corp. Ownership
Original Current
Stated or Owned Stated
Notional or Notional
Total Original Principal Principal
Outstanding Ownership Balance Balance
Issuing Trust/Issue Date Security Principal Coupon Percent Retained Retained
Ajax Mortgage Loan Trust
2018-A/ April 2018 Class A notes due 2058 $ 91,036 3.85 % - % $ - $ -
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Trust certificates $ 22,759 - % 9.36 % $ 2,130 $ 149
Ajax Mortgage Loan Trust
2018-B/ June 2018 Class A notes due 2057 $ 66,374 3.75 % - % $ - $ -
Trust certificates $ 28,447 - % 20.00 % $ 5,689 $ 3,125
Ajax Mortgage Loan Trust
2018-D/ September 2018 Class A notes due 2058 $ 80,664 3.75 % 20.00 % $ 16,133 $ 12,567
Trust certificates $ 20,166 - % 20.00 % $ 4,033 $ 3,915
Ajax Mortgage Loan Trust
2018-E/ December 2018 Class A notes due 2058 $ 86,089 4.38 % 5.01 % $ 4,313 $ 3,544
Class B notes due 2058 $ 8,035 5.25 % 20.00 % $ 1,607 $ 1,605
Trust certificates $ 20,662 - % 20.00 % $ 4,132 $ 4,130
Ajax Mortgage Loan Trust
2018-F/ December 2018 Class A notes due 2058 $ 180,002 4.38 % - % $ - $ -
Class B notes due 2058 $ 16,800 5.25 % - % $ - $ -
Trust certificates $ 43,201 - % 20.00 % $ 8,640 $ 3,997
Ajax Mortgage Loan Trust
2018-G/ December 2018 Class A notes due 2057 $ 173,562 4.38 % 25.00 % $ 43,390 $ 24,015
Class B notes due 2057 $ 16,199 5.25 % 25.00 % $ 4,050 $ 4,050
Trust certificates $ 41,655 - % 25.00 % $ 10,414 $ 10,585
Ajax Mortgage Loan Trust
2019-A/ March 2019 Class A notes due 2057 $ 127,801 3.75 % 20.00 % $ 25,560 $ 13,532
Class B notes due 2057 $ 11,928 5.25 % 20.00 % $ 2,386 $ 2,388
Trust certificates $ 30,672 - % 20.00 % $ 6,134 $ 6,137
Ajax Mortgage Loan Trust
2019-B/ March 2019 Class A notes due 2059 $ 163,325 3.75 % 15.00 % $ 24,499 $ 13,635
Class B notes due 2059 $ 15,244 5.25 % 15.00 % $ 2,287 $ 2,287
Trust certificates $ 39,198 - % 15.00 % $ 5,880 $ 5,976
Ajax Mortgage Loan Trust
2019-C/ May 2019 Class A notes due 2058 $ 150,037 3.95 % 5.00 % $ 7,502 $ 5,520
Class B notes due 2058 $ 14,003 5.25 % 34.00 % $ 4,761 $ 4,761
Trust certificates $ 36,009 - % 34.00 % $ 12,243 $ 12,417
Ajax Mortgage Loan Trust
2019-E/ September 2019 Class A notes due 2059 $ 181,101 3.00 % 6.55 % $ 11,862 $ 7,372
Class B notes due 2059 $ 16,903 4.88 % 20.00 % $ 3,381 $ 3,381
Trust certificates $ 43,464 - % 20.00 % $ 8,693 $ 8,558
Ajax Mortgage Loan Trust
2019-G/ December 2019 Class A notes due 2059 $ 141,420 3.00 % 5.86 % $ 8,287 $ 6,938
Class B notes due 2059 $ 13,199 4.25 % 20.00 % $ 2,640 $ 2,640
77--------------------------------------------------------------------------------
Trust certificates $ 33,941 - % 20.00 % $ 6,788 $ 6,820
Ajax Mortgage Loan Trust
2019-H/ December 2019 Class A notes due 2059 $ 90,381 3.00 % 20.00 % $ 18,076 $ 10,321
Class B notes due 2059 $ 8,435 4.25 % 20.00 % $ 1,687 $ 1,687
Trust certificates $ 21,692 - % 20.00 % $ 4,338 $ 4,375
Ajax Mortgage Loan Trust
2020-A/ March 2020 Class A notes due 2059 $ 249,384 2.38 % 20.00 % $ 49,877 $ 39,811
Class B notes due 2059 $ 23,276 3.50 % 20.00 % $ 4,655 $ 4,428
Trust certificates $ 59,852 - % 20.00 % $ 11,970 $ 11,934
Ajax Mortgage Loan Trust
2020-C/ September 2020 Class A notes due 2060 $ 339,365 2.25 % 10.01 % $ 33,970 $ 30,884
Class B notes due 2060 $ 21,754 5.00 % 10.01 % $ 2,178 $ 2,178
Trust certificates $ 73,964 - % 10.01 % $ 7,404 $ 7,393
Ajax Mortgage Loan Trust
2020-D/ September 2020 Class A notes due 2060 $ 330,721 2.25 % 10.01 % $ 33,105 $ 30,303
Class B notes due 2060 $ 30,867 5.00 % 10.01 % $ 3,090 $ 3,090
Trust certificates $ 79,373 - % 10.01 % $ 7,945 $ 7,934
Ajax Mortgage Loan Trust
2021-C/ April 2021 Class A notes due 2061 $ 194,673 2.12 % 5.01 % $ 9,753 $ 9,410
Class B notes due 2061 $ 18,170 3.72 % 31.90 % $ 5,796 $ 5,796
Trust certificates $ 46,722 - % 31.90 % $ 14,904 $ 14,860
Ajax Mortgage Loan Trust
2021-D/ May 2021 Class A notes due 2060 $ 191,468 2.00 % 20.00 % $ 38,294 $ 38,294
Class B notes due 2060 $ 25,529 4.00 % 20.00 % $ 5,106 $ 5,106
Trust certificates $ 38,293 - % 20.00 % $ 7,659 $ 7,659
Ajax Mortgage Loan Trust
2021-F/ June 2021 Class A notes due 2061 $ 476,082 1.88 % 12.60 % $ 59,986 $ 59,986
Class B notes due 2061 $ 49,463 3.75 % 12.60 % $ 6,232 $ 6,232
Trust certificates $ 92,743 - % 12.60 % $ 11,686 $ 11,686
Ajax Mortgage Loan Trust
2021-G/ June 2021 Class A notes due 2061 $ 317,573 1.88 % 20.00 % $ 63,515 $ 62,815
Class B notes due 2061 $ 32,995 3.75 % 20.00 % $ 6,599 $ 6,526
Trust certificates $ 61,864 - % 20.00 % $ 12,373 $ 12,237
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Table 18: Contractual Obligations
A summary of our contractual obligations as of
June 30, 2021 Payments Due by Period
Less than 1 More than 5
Total Year 1 - 3 Years 3 - 5 Years Years
Convertible senior notes $ 105,850 $ -
394,386 394,386 - - -
Interest on convertible senior notes 23,342 7,674 15,668 - -
Interest on repurchase agreements 1,132 1,132 - - -
Put obligation on outstanding common
stock warrants 50,707 - 50,707 - -
Total $ 575,417 $ 403,192 $ 172,225 $ - $ -
December 31, 2020 Payments Due by Period
Less than 1 More than 5
Total Year 1 - 3 Years 3 - 5 Years Years
Convertible senior notes $ 113,350 $ -
$ -
421,132 421,132 - - -
Interest on convertible senior notes 29,105 8,218 16,436 4,451 -
Interest on repurchase agreements 3,345 3,345 - - -
Put obligation on outstanding common
stock warrants 50,707 - - 50,707 -
Total $ 617,639 $ 432,695 $ 16,436 $ 168,508 $ -
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.
Subsequent Events
Since quarter end, we have acquired 1,016 residential NPLs with aggregate UPB of$173.0 million in two transactions from two different sellers. The purchase price equaled 97.9% of UPB and 54.2% of the estimated market value of the underlying collateral of$312.1 million . Some of these loans were acquired into the joint venture formed inJune 2021 with proceeds from the established prefunding account. We have agreed to acquire, subject to due diligence, 31 residential RPLs in six transactions, and 412 NPLs in six transactions, with aggregate UPB of$4.7 million and$103.3 million , respectively. The purchase price of the residential RPLs equals 80.9% of UPB and 55.1% of the estimated market value of the underlying collateral of$6.9 million . The purchase price of the NPLs equals 97.1% of UPB and 64.4% of the estimated market value of the underlying collateral of$155.8 million . OnJuly 19, 2021 , we co-invested with third-party institutional investors to formAjax Mortgage Loan Trust 2021-E ("2021-E") and retained$53.1 million of varying classes of related securities. We acquired 10.01% of the class A securities, class B securities and class M securities from the trust, which acquired 3,142 RPLs and NPLs with UPB of$517.7 million and an aggregate property value of$968.6 million . The senior securities represent 83% of the UPB of the underlying mortgage loans and carry a weighted average coupon of 1.82% coupon, respectively. Based on the structure of the transaction we will not consolidate 2021-E underU.S. GAAP. The assets included in the 2021-E securitization came from loan sales associated with our 2020-C and 2020-D securitizations, all of which were joint ventures with third party institutional accredited investors. OnJuly 26, 2021 , our Board of Directors approved a grant of 152,700 shares of restricted stock to employees of our Manager and Servicer with a grant date ofAugust 2, 2021 . The shares will vest over four years, with one fourth of the shares vesting on each of the first, second, third and fourth anniversaries of the grant date. OnAugust 5, 2021 , our Board of Directors declared a cash dividend of$0.21 per share to be paid onAugust 31, 2021 to stockholders of record as ofAugust 16, 2021 . 79
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