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OFFON

GREAT AJAX CORP.

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

08/06/2021 | 06:15am EDT
In this quarterly report on Form 10-Q ("report"), unless the context indicates
otherwise, references to "Great Ajax," "we," "the company," "our" and "us" refer
to the activities of and the assets and liabilities of the business and
operations of Great Ajax Corp.; "operating partnership" refers to Great Ajax
Operating Partnership L.P., a Delaware limited partnership; "our Manager" refers
to Thetis Asset Management LLC, a Delaware limited liability company; "Aspen
Capital" refers to the Aspen Capital group of companies; "Aspen" and "Aspen Yo"
refers to Aspen Yo LLC, an Oregon limited liability company that is part of
Aspen Capital; and "the Servicer" and "Gregory" refer to Gregory Funding LLC, an
Oregon limited liability company and our affiliate, and an indirect subsidiary
of Aspen Yo.

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

Overview


Great Ajax Corp. is a Maryland corporation that is organized and operated in a
manner intended to allow us to qualify as a REIT. We primarily target
acquisitions of RPLs, which are residential mortgage loans on which at least
five of the seven most recent payments have been made, or the most recent
payment has been made and accepted pursuant to an agreement, or the full dollar
amount, to cover at least five payments has been paid in the last seven months.
We also acquire and originate SBC loans. The SBC loans that we target through
acquisitions generally have a principal balance of up to $5.0 million and are
secured by multi-family residential and commercial mixed use retail/residential
properties on which at least five of the seven most recent payments have been
made, or the most recent payment has been made and accepted pursuant to an
agreement, or the full dollar amount, to cover at least five payments has been
paid in the last seven months. We also originate SBC loans that we believe will
provide an appropriate risk-adjusted total return. Additionally, we invest in
single-family and smaller commercial properties directly either through a
foreclosure event of a loan in 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 the Operating Partnership that owns the equity interest in the
Manager and the Servicer. We have elected to treat GA-TRS as a taxable REIT
subsidiary under the Code. Our mortgage loans and real properties are serviced
by the Servicer, also an affiliated company.

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

Our Operating Partnership, through interests in certain entities as of June 30,
2021 and December 31, 2020, holds 99.9% of Great Ajax II REIT Inc. which holds
an interest in Great 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 the Operating
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 formed Gaea Real Estate Operating Partnership LP, a wholly owned
subsidiary of Gaea, to hold investments in commercial real estate assets. We
also formed BFLD Holdings LLC, Gaea Commercial Properties LLC, Gaea Commercial
Finance LLC and Gaea RE LLC as subsidiaries of Gaea Real Estate Operating
Partnership. In 2019, we formed DG Brooklyn Holdings, LLC, also a subsidiary of
Gaea Real Estate Operating Partnership LP, to hold investments in multi-family
properties. On November 22, 2019, Gaea completed a private capital raise in
which it raised $66.3 million from the issuance of 4,419,641 shares of its
common stock to third parties to allow Gaea to continue to advance its
investment strategy. We retained a 23.2% ownership interest in Gaea following
the transaction. At June 30, 2021, we owned approximately 22.9% of Gaea.

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We elected to be taxed as a REIT for U.S. federal income tax purposes beginning
with our taxable year ended December 31, 2014. Our qualification as a REIT
depends upon our ability to meet, on a continuing basis, various complex
requirements under the Code relating to, among other things, the sources of our
gross income, the composition and values of our assets, our distribution levels
and the diversity of ownership of our capital stock. We believe that we are
organized in conformity with the requirements for qualification as a REIT under
the Code, and that our current intended manner of operation enables us to meet
the requirements for taxation as a REIT for U.S. federal income tax purposes.

Our Portfolio


The following table outlines the carrying value of our portfolio of mortgage
loan assets and single-family and smaller commercial properties as of June 30,
2021 and December 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
in the 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 late March
2020 and any continuing disruption was reflected in our results of operations
for the quarter ended June 30, 2021. The pandemic has continued and continues to
significantly and adversely impact certain areas of the 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 of
July 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 the U.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.

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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.
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•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 AS Ajax E LLC and AS Ajax E II LLC are valued using estimates provided by financing counterparties and other publicly available information.

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 on
April 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.
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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 ended June 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 ended June 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 ended
June 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 at June 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 at June 30, 2021; average daily
cash balance for the quarter was $113.0 million
•At June 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 ended June 30, 2021 compared to the quarter ended
June 30, 2020. The increase in our earnings compared to the quarter ended
June 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 at December 31, 2020.

We recorded $0.1 million in impairments on our REO held-for-sale portfolio in
real estate operating expense for the quarter ended June 30, 2021 compared to
$0.1 million for the quarter ended June 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 ended June 30, 2020 we sold 14 REO properties while adding two through
foreclosures.

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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 ended June 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 ended June 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
ended June 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 ended June 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 ended June 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 ended June 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 ended June 30, 2020.
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Of the $10.2 million for the six months ended June 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 ended June 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 ended June 30, 2021 from $23.2 million in the quarter ended June 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
ended June 30, 2021 from $13.1 million in the quarter ended June 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 ended June 30, 2021
from $50.1 million in the six months ended June 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 ended June 30, 2021
from $26.1 million in the six months ended June 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 June 30, 2021 and 2020 are included in the table below ($ in thousands):

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 $ 33,969 $ 40,350 Interest income on beneficial interests

             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 $ 47,083 $ 50,059 Net increase in the present value of expected cash flows(3)

                              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 ended June 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 ended June 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 at June 30, 2021 and
December 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 $1.3 million
taken on our portfolio of debt securities recorded to Other comprehensive income
since December 31, 2020. While U.S. GAAP does not specifically define the
parameters for calculating book value, we believe our calculation is
representative of our book value on a per share basis, and our Manager believes
book value per share is a valuable metric for evaluating our business. The net
book value per share is calculated by dividing equity, after adjusting for the
anticipated conversion of the senior convertible notes into shares of common
stock, the subtraction of non-controlling interests and preferred shares
classified in equity, and shares for Manager and director fees that were
approved but still unissued as of the date indicated, unvested employee and
service provider stock grants and the common shares from assumed conversion of
our senior convertible notes. A breakdown of our book value per share is set
forth in the table below ($ in thousands except per share amounts):

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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 $ 514,491 Net increase in equity from expected conversion of convertible senior notes(1)

                                                         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 ended June 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 ended June 30, 2020 we purchased no RPLs, however, for the six months
ended June 30, 2020 we purchased $1.2 million RPLs with UPB of $2.0 million, at
38.6% of property value. For the three months ended June 30, 2021 we purchased
no NPLs, however, for the six months ended June 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 ended June 30, 2020 we purchased no NPLs, however, for the
six months ended June 30, 2020 we purchased $0.2 million NPLs with UPB of $0.2
million, at 62.9% of property value. For the three months ended June 30, 2021 we
purchased no SBC loans, however, for the six months ended June 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 ended June 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 of June 30, 2021 and $1.1 billion
of net mortgage loans with an aggregate UPB of $1.2 billion as of June 30, 2020.

The following table shows loan portfolio acquisitions for the three and six months ended June 30, 2021, and 2020 ($ in thousands):

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             

$ 1,098,629 $ 1,119,372 $ 1,151,469 RPL, NPL and SBC portfolio acquisitions, net cost basis

                            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 June 30, 2021 and December 31, 2020, our portfolios consisted of the following ($ in thousands):

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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) $ 1,773,620 Market Value of Collateral(5) $ 1,967,419 Original Purchase Price/Total UPB

             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 of June 30, 2021 and December 31, 2020, respectively ($
in thousands):

Portfolio at June 30, 2021
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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 December 31, 2020

                                                                             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 and December 31, 2020 ($ in thousands):


                                 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  %


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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.

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Table 13: Debt Securities and Beneficial Interest Acquisitions

                                                        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 of June 30, 2021 and December 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 at December 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 ended
December 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 ended
June 30, 2021 and $57.8 million and $120.2 million, respectively, for the three
and six months ended June 30, 2020.

Our operating cash outflows, including the effect of restricted cash, for the
six months ended June 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 ended
June 30, 2021 and 2020, respectively. Non-cash interest income accretion was
$10.6 million and $16.2 million for the six months ended June 30, 2021 and 2020,
respectively. Interest income on beneficial interests was $8.2 million and $5.1
million during the six months ended June 30, 2021 and 2020, respectively.
Interest income on debt securities was $5.1 million and $2.3 million during the
six months ended June 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 under U.S. GAAP, and the cash flows from these
activities are included in the investing section of our consolidated statements
of cash
                                       69
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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 ended June 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 ended June 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 ended June 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 ended June 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
ended June 30, 2021 and 2020 we paid $12.4 million and $5.9 million,
respectively, in combined dividends and distributions.

Financing Activities - Equity offerings


On February 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 of June 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 of June 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 after July 6, 2023. Under U.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 ended June 30, 2021 and June 30, 2020, we did not sell any
shares of common stock under our At the Market program which we established in
October 2016, to sell, through our agents, shares of common stock with an
aggregate offering price of up to $50.0 million. In accordance with the terms of
the agreements, we may offer and sell shares of our common stock at any time and
from time to time through the sales agents. Sales of the shares, if any, will be
made by means of ordinary brokers' transactions on the 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) to June 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
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securitization trusts pursuant to Rule 144A under the Securities Act, five of
which were outstanding at June 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 at June 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 from AAA 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 at June 30, 2021. Our rated secured
borrowings are designated in the table below.

At March 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 under U.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 at June 30, 2021 at their respective cutoff
dates:

Table 14: Secured Borrowings

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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                                -  %


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(1)The Class M notes are subordinated, sequential pay, fixed rate notes. We have
retained the Class M notes, with the exception of Ajax 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

On April 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 on August 18, 2017 and
November 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 on January 15, April 15,
July 15 and October 15 of each year. The notes will mature on April 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 owned Delaware
trusts (the "Trusts"), acquire pools of mortgage loans, which are then sold by
the Trusts, as "Seller" to two separate counterparties, the "buyer" or "buyers."
One facility has a ceiling of $250.0 million and the other $400.0 million at any
one time. Upon the time of the initial sale to the buyer, each Trust, with a
simultaneous agreement, also agrees to repurchase the pools of mortgage loans
from the buyer. Mortgage loans sold under these facilities carry interest
calculated based on a spread to one-month LIBOR, which are fixed for the term of
the borrowing. The purchase price that the Trust realizes upon the initial sale
of the mortgage loans to the buyer can vary between 70% and 85% of the asset's
acquisition price, depending upon the facility being utilized and/or the quality
of the underlying collateral. The obligations of the Trust to repurchase these
mortgage loans at a future date are guaranteed by the Operating Partnership. The
difference between the market value of the asset and the amount of the
repurchase agreement is generally the amount of equity we have in the position
and is intended to provide the buyer with some protection against fluctuations
in the value of the collateral, and/or a failure by us to repurchase the asset
and repay the borrowing at maturity. We also have 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 June 30, 2021 and December 31, 2020 is as follows ($ in thousands):

Table 15: Repurchase Transactions by Maturity Date

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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  %


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                                                                                                                           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



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The decrease in our average balance from $418.0 million for the three months
ended December 31, 2020 to our average balance of $290.7 million for the three
months ended June 30, 2021 was due to a net decrease in repurchase financing
during the three months ended June 30, 2021.

As of June 30, 2021 and December 31, 2020, we did not have any credit facilities or other outstanding debt obligations other than the repurchase facilities, secured borrowings, put option liability and our senior convertible notes.

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


Dividends

We may declare dividends based on, among other things, our earnings, our
financial condition, our working capital needs, new opportunities, and
distribution requirements imposed on REITs. The declaration of dividends to our
stockholders and the amount of such dividends are at the discretion of our Board
of Directors.

On August 5, 2021, our Board of Directors declared a dividend of $0.21 per
share, to be paid on August 31, 2021 to stockholders of record as of August 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 ended June 30, 2021 and
June 30, 2020, we recorded no incentive fee payable to the Manager. Our dividend
payments are driven by the amount of our taxable income, subject to IRS rules
for maintaining our status as a REIT.

Our most recently declared quarterly dividend represents a payment of
approximately 5.30% on an annualized basis of our book value of $15.86 per share
at June 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


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                               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



                                       78
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Table 18: Contractual Obligations

A summary of our contractual obligations as of June 30, 2021 and December 31, 2020 is as follows ($ in thousands):


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          $        -   

$ 105,850 $ - $ - Borrowings under repurchase agreements

                                   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          $        -   

$ - $ 113,350 $ - Borrowings under repurchase agreements

                                   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 in June 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.

On July 19, 2021, we co-invested with third-party institutional investors to
form Ajax 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 under U.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.

On July 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 of
August 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.

On August 5, 2021, our Board of Directors declared a cash dividend of $0.21 per
share to be paid on August 31, 2021 to stockholders of record as of August 16,
2021.
                                       79

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© Edgar Online, source Glimpses

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