MFA Financial, Inc.

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Ladies and gentlemen, thank you for standing by. Welcome to the MFA Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you'd like to ask a question, please press 1, then 0. If you should require assistance during the call, please press star, then 0. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Hal Schwartz. Please go ahead.

Thank you, Operator, and good morning, everyone. The information discussed on this conference call today may contain or refer to forward-looking statements regarding MFA Financial Inc., which reflect management's beliefs, expectations, and assumptions as to MFA's future performance and operations. When used, statements that are not historical in nature, including those containing words such as will, believe, expect, anticipate, estimate, should, could, would, or similar expressions, are intended to identify forward-looking statements. All forward-looking statements speak only as of the date on which they are made. These types of statements are subject to various known and unknown risks, uncertainties, assumptions, and other factors, including those described in MFA's annual report on Form 10-K for the year ended December 31st, 2022, and other reports that it may file from time to time with the Securities and Exchange Commission. These risks, uncertainties, and other factors could cause MFA's actual results to differ materially from those projected, expressed, or implied in any forward-looking statements it makes. For additional information regarding MFA's use of forward-looking statements, please see the relevant disclosure in the press release announcing MFA's third quarter 2023 financial results. Thank you for your time. I would now like to turn this call over to MFA's CEO and President, Craig Knudson.

Thank you, Hal. Good morning, everyone, and thank you for joining us here today for MFA Financial's third quarter 2023 earnings call. With me are Gudmundur Christensen and Brian Wilson, our co-chief investment officers. And I would also like to welcome Mike Roper, who was appointed as our chief financial officer in September. Mike has served as our chief accounting officer for the last two years, was our controller for three years before that, and has been with MFA since 2014. I look forward to introducing Mike to more of our shareholders and research coverage professionals during upcoming equity conferences and phone calls. It's beginning to sound like a broken record, but once again, the interest rate environment in the most recent quarter of this year was extremely volatile, certainly the most challenging quarter of 2023 and perhaps the most difficult quarter since the current Fed tightening cycle began 20 months ago. The Fed does appear to be at or near the end of the tightening cycle, while the bond market continues to adjust to the notion of higher for longer. In addition, Exploding budget deficits and a wall of anticipated Treasury borrowings over the foreseeable future has weighed heavily on the market, as these Treasuries need to find a home in a world where the Fed, foreign investors, and domestic banks, three of the largest buyers over the last 15 years, are on the sidelines. You have also no doubt heard on other earnings calls that agency MBS are at historical wads which is true, at least prior to the end of last week. But again, the absence of the major buyers over the last 15 years would suggest that the historical range needs to look back further than 2008. Mortgage spreads are indeed very wide today, but they were at similar levels in 1986 and 87, in 1999 and 2000, and in 2008 before the Fed began its first round of QE. The world is still a nervous place with two active wars and global economic uncertainty. So it's difficult to envision a completely mellow bond market anytime soon. The third quarter of 2023 was notably characterized by the sharp increase in 10-year interest rates, which significantly flattened the curve. Although still inverted, the 2-10 spread is now just over 30 basis points, which is as much as 65 to 75 basis points less inverted than it has been for much of the last year. And while a less inverted yield curve should improve the outlook for levered investor returns going forward, the rapid rise in long rates and heightened volatility, mostly during the month of September, punished market values of fixed income investments and of mortgage investments in particular. MFA's gap book value was down 6.5%, and our economic book value was down 8.5% in the third quarter. We do not yet have loan marks for October month end, but given the rate rally and mortgage and credit tightening that occurred last week, our book value is probably flat or maybe up slightly a percent or two since September 30. Despite the unrealized fair value losses on loans that are substantially performing, we did have some bright spots in the third quarter. Distributable earnings came in for the second consecutive quarter at 40 cents per share and comfortably covered our 35-cent dividend. Our net interest spread increased again to 217 basis points, and our net interest margin increased again to 302 basis points. For reference, a year ago, our net interest spread was 164 basis points, and our net interest margin was 243 basis points. So both of these measures have increased by more than 50 basis points over the last year. And this during a period where the Fed raised the funds rate by 300 basis points going back to September 21st of last year. We continue to fortify our balance sheet, increasing non-mark to market financing on our loan portfolio from 73% to 77% while maintaining substantial liquidity, ending the quarter with 300 million of unrestricted cash. This was due in part to executing two securitizations during the quarter, collateralized by $600 million of non-QM and single-family rental loans. Subsequent to quarter end, we executed another securitization in October of $225 million of transitional loans. We acquired $800 million of loans and $150 million of agencies during the quarter, with an average coupon on the loan purchases of 9.9%. Credit performance continues to be strong with only a very small increase in delinquencies in our purchase-performing loan portfolio, from 2.8% in Q2 to 3.1% in Q3. Fortunately, we continue to benefit from the hard work we did in late 2021 and early 2022, which effectively fixed our funding costs, while we now have attractive investment opportunities to add new assets at very accretive yields. And as we show on page eight of our earnings deck, very few of our three plus billion dollars of interest rate swaps mature before the fourth quarter of 2024. Finally, our wholly owned business purpose loan originator, Lima One, continues to produce successively higher volume levels of high yielding and high quality assets. Lima delivers significant value to MFA shareholders as a substantial source of internally generated and serviced assets. And I will now turn the call over to Gudmundur to discuss our portfolio activity and Lima One in more detail.

Thanks, Greg. Similar to the last few quarters, we continue to have success in sourcing high-quality, high-yielding assets and acquired over $950 million of loans and securities in the third quarter, growing our investment portfolio by 5% to $9.3 billion. Business purpose and non-QM loans accounted for a majority of our acquisitions at over $800 million. The new loan acquisitions had some of the highest coupons we've seen in a long time, with an average coupon of approximately 9.9% and a strong credit profile with average LTV of 66% and average FICO of 750. We also continued to execute on our agency MPS strategy and added $152 million of agency MPS in the quarter, growing that portfolio to about $525 million. With agency MPS yielding over six and a quarter and the spread remaining at historically wide levels, we believe that agency MPS are attractive on a standalone basis, but that they also provide risk management benefits to our credit-focused portfolio by improving portfolio liquidity and having the potential to perform well during periods of economic softness. We saw that thesis play out over the last two weeks when agency MPS spreads tightened by about 15 to 20 basis points, as rates rallied sharply on modestly softer economic data and the prospect that the Fed might be done with raising rates. When we factor in financing levels and appropriate leverage, we expect mid-teens return on equity for our third quarter additions and see similar return levels for assets that we're adding in the fourth quarter. Significantly higher rates and spreads in 2023 compared to the last 15 years, combined with our unique ability to create our own credit assets through our wholly-owned business-purpose loan originator, Lima One, has allowed us to add high-yielding assets to our balance sheet throughout this year. We have acquired over $2.1 billion of loans in 2023, with an average coupon of approximately 9.7%, with Lima One-originated loans accounting for about 75% of that. This has led to a significant increase in the yield in our interest-earning assets. which at 6.35% in the third quarter is up 25 basis points compared to the second quarter and up 111 basis points from a year ago. As Craig mentioned in his opening remarks, rates rose significantly in the quarter with a 10-year Treasury rate up about 75 basis points. You continue to actively manage interest rate risk in the quarter and reduce their net duration down to 105 basis points from 119 basis points at the end of the second quarter We're executing two securitizations of longer-duration non-QM and SFR loans for a total of about 600 million UPB of loans securitized and adding about 130 million of mostly 10-year interest rate swaps. Post-quarter end, we continue to manage our interest rate risk by completing another securitization of 225 million of transitional loans and adding over 180 million of 10-year swaps, bringing our duration further down to about 100 basis points. The economy remained resilient in the third quarter with the third quarter GDP coming in at 4.9%, significantly in excess of market expectations. The labor market has cooled a bit from the red hot pace it was on in late 2021 and 2022, but remains robust with three month average non-farm payroll growth of 204,000 and the unemployment rate at 3.9%. The housing market has performed well this year despite high mortgage rates and low affordability. Home prices are up about 5% year-to-date, with low inventory and general lack of housing supply outweighing low affordability. The ongoing strength and resilience of the labor and housing markets continue to provide support to our credit portfolio. Turning to Lima One. Lima One originated $671 million of business purpose loans in the third quarter, a 15% increase over the second quarter and a record quarter for the company. Lima continues to demonstrate its value to our asset acquisition strategy, accounting for over 80% of MFA's loan acquisitions in the quarter. Lima has originated about $5 billion of business purpose loans for our balance sheet since our acquisitions over two years ago, a great achievement and in excess of our expectations at the time. The majority of Lima's origination in the third quarter was focused in the shorter term transitional loans, which accounted for about 85% of third quarter origination. Demand for Lima's products and services remain strong with disruption in the private lending space and less competition from regional banks, providing opportunities to grow market share and attract talent in the space. We expect fourth quarter origination volume to be modestly lower at around 550 to 600 million and full year 2023 to be about 2.2 billion. Credit quality remains fundamental to our BPL strategy, and the credit statistics on Lima's third quarter origination remain strong, with average LTV of 65% and average FICO score of 754 on loans originated. The 60-plus-day delinquency rate on our BPL loans originated by Lima 1 ticked up to 3.2% in the quarter, but remains low and well within our modeling expectations for this asset class. The increase was mostly due to a very small subset of borrowers that became delinquent in the quarter, primarily on the longer-term rental loans. In that respect, the increase was mostly idiosyncratic with overall delinquency levels in line with expectations. As it relates to delinquency management and loss mitigation in general, it is important to emphasize that Lima One is a highly experienced BPL servicer which has originated and serviced BPL loans since 2010. With Lima One, we have all asset management, servicing, and construction management of our BPL loans in-house, and we believe this, combined with MFA's own extensive credit and asset management experience, allows us to manage delinquencies efficiently and effectively. Historically in the aggregate, MFA has had no net losses on liquidations of seriously delinquent loans, REO, out of our BPL portfolio, which includes over $7 billion of acquisition and over $3 billion of payoffs since 2017. We remain focused on liquidity and availability of financing to support our BPL origination. We issued our seventh rental loan securitization in the quarter, where we securitized over $200 million of Lima One originated loans and also expanded our transitional loan financing capacity by $50 million in the quarter. Post-Quadrant, we priced our third revolving transitional loan securitization, where we securitized over $200 million of Lima One originated loans, bringing total outstanding securitization for that asset class to over $600 million. The revolving nature of these securitizations means that we can efficiently finance new loans and construction trusts in the transactions as older loans pay off. And now I will turn the call over to Brian Wilson, who will discuss MFA securitization activities and portfolio credit performance in more detail.

Thanks, Gudmundur. In the third quarter, securitization markets exhibited something resembling a rollercoaster ride as spreads rallied into August, and subsequently widened out in September due to elevated supply combined with some sympathy widening along with agency spread movement. We were able to execute two securitizations in the quarter, one of them backed by $343 million of non-QM collateral pricing at the end of August, followed by a securitization of over $200 million of Lima One-originated SFR loans in September, locking in a 6.7% and 7.2% cost of debt, respectively. And as Gudmundur previously mentioned, post-quarter end, we issued a third revolving securitization backed by 225 million transitional loans originated by Lima I. It's worth mentioning again that these structures provide immense value to MFA as we are able to substitute in new loans and subsequent draws with the cash generated from payoffs of existing loans. We have now issued securitizations backed by over $6.5 billion of MFA's purchase performing loans since 2020, and the percentage of loans financed by securitizations is now over 60%. And although sometimes spreads may be wider than we would like, we are committed to terming out more of our funding through securitization and expect to come to market again in the fourth quarter. We continue to believe that mortgage securitization is an important part of our business strategy as it provides for non-recourse, non-marked market financing, which further insulates the portfolio from volatile markets. Moving to our credit performance. With the backdrop of a strong labor market and a continuing limited supply of homes for sale, credit in our portfolio continues to do well. Over the quarter, we had a slight uptick in 60-plus-day delinquencies in our purchase-performing portfolio to 3.1% from 2.8% in the second quarter, This increase remains well within our expectations when we modeled out our expected cash flows for the portfolio. 60-plus delinquencies in our legacy RPL NPL portfolio improved again by 1.5 points over the quarter to 25.9%. Our in-house expertise in asset management remains focused on working with our third-party servicers to resolve the remaining delinquent assets in that portfolio to the benefit of our investors. In working through over $3 billion of distressed loans, our asset management team has gained vast experience, which has not only benefited our legacy RPL and MPL portfolio, but our newly originated portfolios as well. As an example, our in-house asset management group works well with our servicing team at Lima One, which helps reduce risk when delinquencies arise in our BPL portfolio. Prepayment speeds in our portfolio were relatively stable quarter over quarter. CPRs remained in the mid to high single digits for our non-QM, SFR, and legacy RPL and MPL portfolios. For the transitional loan portfolio, we had an annualized repayment rate of 37%. Total paydowns were, again, over $400 million for the quarter, which were reinvested into loans carrying a coupon of approximately 250 basis points higher. Lastly, we continue to take advantage the lack of supply in the housing market, selling properties out of our REO portfolio. Over the quarter, we sold 77 properties for $26 million, resulting in over $3 million in gains. We believe the low LTV of our portfolio, combined with prudent credit underwriting, have our portfolio well positioned for the current economic environment. And with that, we'll turn the call over to the operator for questions.

Thank you, ladies and gentlemen, if you'd like to ask a question, please press one and zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command. If you're using a speakerphone please pick up the handset before pressing the numbers, once again, if you have a question, please press one then zero at this time and one moment, please for your first question. Your first question comes from the line of Bose George from KBW. Please go ahead.

Hey, guys. Good morning. Good morning, Bose. In terms of the negative fair value mark that you guys took this quarter, is that fully recoverable? And you usually have that slide for, you know, how much of the book value is sort of upside the book value. Is that, can you just sort of tell us where that stands as well?

Mike Roper Hey, Boze. This is Mike Roper. I'll let the team talk about the unrealized losses, but that number is 457 at 930. Boze Yates Oh, great. Thank you.

Mike Roper And so, you know, as you know, Boze, you know, the vast majority of that is on loans, which, you know, for the most part, we get back at par. So, you know, the change in fair value is really due to market interest rate movement overwhelmingly. But obviously, you know, it takes time to recoup par because things don't prepay as fast in the current industry environment as they once did.

Okay, great. Yes, that makes sense. Thanks. And then actually switching to just the transitional loan portfolio, you know, the multifamily, the 49% of that that's multifamily, is it takeout for most of that, you know, GSE permanent financing?

Yeah, that's correct. The vast majority of that, if not all, qualify for small-balance agency takeout. And if you think about the multifamily part of the transition loans, these are small-balance multifamily loans. The average loan size is about $3.2 million. So these are really small loans in that context. And most of them are concentrated kind of in the south and the southeast areas. where there's great demographic trends and things of that nature. And yes, they would almost all qualify for the small balance take-up.

Okay, great. Thank you.

Thanks, Boze.

Your next question comes from the line of Steve Delaney from JMP Securities. Please go ahead.

Well, good morning, everyone, and hello, Mike Roper. Nice to meet you live on a call. I'd like to start with Lima broadly. I mean, the numbers there, kind of given the environment in particular that we're in for the broader mortgage market and CRE, are just kind of remarkable. And I'm just curious, like, Craig, you had to attribute it to, you know, one or two things. Are you recruiting there? Are you seeing competitors go out of business? Maybe just strategically some color about that. how and why Lima is performing so well, as it clearly is. Thank you.

Sure. So I'll start, Steve, and then I'll let Gudmundur add. I think in answer to your question, yes and yes, Lima has been hiring and they have been hiring experienced people from either former competitors or diminished competitors. I think Lima One has has continued to expand and grab market share where others have faded to some degree. And I think that's for a lot of reasons, right? It's a very tight operation, which we knew long before we bought them. But also the fact that you know, the way that MFA and Lima One interact is really one organization. And so, you know, it's not an originator that's originating loans and wondering sort of what they're going to do with those loans. It's a very integrated operation. And we, you know, we price loans together. we're obviously very involved in the securitization market. And so, you know, we have an immediate feedback loop in terms of loan pricing. So it's, you know, it's a lot of things. But obviously, it's, you know, it's worked extraordinarily well.

And how great it is. Go ahead. I'm sorry.

Yeah, I was just going to add, I mean, what Craig brought up is a really important point. So like, The thing is the organizations are fully aligned. We're all moving in the same direction. So one of the things that we have that is quite unique is that we have a combination of skills that are both macro and micro. And so usually originators are operating independently. They're finding loan buyers to buy loans and things of that nature. what we have been able to do over the last two and a half years is is you know lima learned from mfa and mfa to learn from lima and take all those lessons to create a more robust organization and i think especially in 2022 that was quite important because the rates were rising rapidly the securitization markets were changing quickly it was getting harder to do deals you know, people that were active in the space before buying loans, you know, moved away. So it was a tremendous amount of disruption in 2022. And, you know, with our combined effort, we were able to make sure that we had enough liquidity, but also the strategic focus on, you know, focus on high quality borrowers. And what that allowed us to do was actually go upstream in terms of credit quality in 2022, when smaller originators were exiting the business. And so, The credit quality of our transitional loan portfolio has improved tremendously over the last two years, but at the same time, we've increased volume. And I think that could not have happened unless you combined our efforts, you know, Lima's expertise sourcing the borrowers, underwriting and closing, and then MFA's expertise on the securitization front, but also on the kind of macroeconomic and housing front. So I think that is a really, really important point. The other thing about Lima, one, which is unique, is that they are highly diversified. And so, you know, often smaller lenders, they will be, you know, specialized in a certain segment of the market, but Lima is really well diversified across their products. So as demand shifts with real estate investors, Lima is able to continue to maintain sizable volumes of attractive credit. And so they are diversified in terms of product, geography distribution, in terms of borrower concentration. And that's a really, really important concept in terms of, you know, growing the portfolio. What it also means, you know, for the future is that, you know, we don't have to, like, our concentration in any of these markets isn't too big. So there's a tremendous upside for us, you know, in the years ahead as well.

Well, congratulations on what you've accomplished there all around. Craig, one quick one for you. Looking at your valuation now, trading around $70 a book and the yield up at $14, what are your thoughts and anything you can share as far as the board's thinking on the balance between the dividend and share buybacks given your current market valuation? Thank you, and that's it for me.

Sure, Steve. So I think it's actually probably closer to 15% given where it's trading. But I think if you look at our dividend, our annualized dividend on economic book value, it's about 10%. And that feels like about the right place, right? I think, you know, Gudmundur mentioned that acquisitions in the third quarter are putting up sort of mid-teen, maybe to high-teen ROEs. So it feels like the right level. And as far as dividend versus share buybacks, You know, I think at least, and again, these are board decisions. We have a board meeting in December. But at least more recently, I think the feeling was that, you know, share buybacks, I mean, we tried that. It really didn't seem to help all that much. And, you know, with just what's happened with book value around the world, you know, I'm not sure that necessarily it's a better thing to be a smaller company. So I think that's one of the things that goes into that whole thought process.

Appreciate those comments, Greg. Thanks. We'll see you soon, Steve.

Your next question comes from the line of Stephen Laws from Raymond James. Please go ahead.

Hi, good morning. I wanted to follow up on your discussion with the first question. You know, as coupons have continued to move higher, you know, and you touched on this, I believe, in your answer around credit, but You know, how do you think about, you know, not pushing coupons as much, looking for lower attachment points or finding other ways to, you know, to get a better credit loan in a lower, you know, less competitive environment? Kind of what's the tradeoff there as you think about pushing coupons higher?

Sure. So I assume you're probably focused more on business purpose loans with that question.

Yeah. Yeah. I think it was maybe 10.5 on the recent stuff up from 9.9, something like that.

Yep. So here's the thing, and Gudmundur mentioned this, right, over the last two years, you've seen, you know, LTVs either go lower or certainly not go higher, and you've seen FICO scores overall on that portfolio increase. So I think, you know, the quality aspect of that sort of speaks to itself. And in terms of rate, you know, people forget, because before Wall Street discovered the the business purpose loan or specifically fix and flip loans back in 2019 or so. This business has been around for decades, Steven, and it was always a hard money business. And so for most of the operators that operate in this space, The profitability of the typical fix and flip type project has never really been much of a function of interest rate. It's really buying the property right, knowing what work to do, not doing too much work, pricing it appropriately, and it's never really been about rate. Yes, obviously there are some deals where you have to be more competitive on rate, but it's not the same sensitivity that you would expect.

The other thing I would just add also, as you said in the opening remarks, the average LTV of the acquisitions were about 65%, and the FICO is around 750%. And so with just those simple statistics, we're clearly not pushing the boundaries on LTV or FICO scores. And that's really the same position we had for the last year or so.

Great. And I want to switch to the other side of the balance now with the financing of these and the recent securitization. You know, can you talk about the terms of that? I mean, what are the typical asset life versus how long the revolving period is and how many turns might you get in? And And how did the most recent deal price compare to your previous deals? And can you remind me if those had a revolving period associated with them as well?

Right. So on the transitional loans, all the securitization we've done are revolving. And so on average, the revolving period tends to be about two years. And so what that effectively means is that for a period of two years, you can replace loans to pay off in the transaction and add new loans over the course of those two years. That tends to be followed by a six-month period where things tend to amortize, and then there's a step up in the coupon after that, which is incentivizing the borrower to call the transaction. The execution, and as I mentioned, we have about 600 million of those securitization outstanding. The execution usually such that you're selling anywhere from you know, 80% to 90% of the bonds that are issued. So the advance rate is about 80% to 90% to UPB, depending on what we sell. And, you know, the coupon on the A1 that we sold, which was 80% of the transaction in this deal, was about 8.5%.

Appreciate all the details there. Thank you very much. Sure, Stephen.

Your next question comes from the line of Eric Hagan from BTIG. Please go ahead.

Hey, thanks. Good morning, guys. Hope you're well. So how much of the retained interests from securitization are pledged for repo financing at this point?

I'm not sure we have an exact answer, but, you know, I would say You know, as far as I know, we don't have any of the first loss pieces pledged. We've pledged some investment-grade assets, but we could pull that together for you and talk to you offline.

Okay. Yeah, just trying to get a flavor for the structure of the leverage. And kind of to that point, I mean, we've got the unsecured debt that's coming due next June. I want to get a sense for the plan to, you know, potentially refinance that, what levels you might be looking at. how attractive even kind of the current market looks and whether you'd go the convertible route again or just kind of how you're thinking about that piece of your liability structure?

So, I mean, again, it's a little bit early to tell, but suffice to say that, you know, the convertible market given where the stock is trading relative to book is probably not all that viable because, you know, even a high conversion premium, call it 15%, would still be well below book value. So, you know, it's on the radar screen. You'll see in the queue that we bought back a little over 10 million of that in the secondary market during the third quarter or so. And there are opportunities from time to time to buy that in the secondary market. It's not at a big discount, but it chips away at it. But I don't think there's a month that goes by, Eric, that we don't take a meeting with bankers that have one idea or another as to how to approach that. So it's definitely on the radar screen. We definitely don't plan to default on it, but how exactly we're going to fund that and pay it off, it's too early to tell. Yep.

All right. Fair enough. Last question. I mean, if you were an investor that was looking for, call it differentiation in the non-QM and the business purpose portfolios across the mortgage REIT space, if you will, what kinds of characteristics would you highlight or turn to? you know, for investors to kind of tease apart that differentiation potentially?

So sure. So I'll start and let, you know, Brian and Gudmundur chime in. You know, I would say number one, you can look at the quality of the portfolio, right? And, you know, I mentioned it. Brian mentioned it. Gudmundur mentioned it. You know, delinquencies continue to be very low. We have a lot of experience from our history of buying, re-performing, and non-performing loans at working out assets that do go delinquent to optimize outcomes and a proven track record of doing that. So, you know, I would highlight the quality. And, you know, if you haven't seen the spike in delinquencies that you've seen elsewhere, You guys want to add anything?

Yeah, I think I would just add a couple of things to that. I mean, you know, our recourse leverage is two times, and I think it's important to keep that in mind as we think about kind of, you know, the inherent leverage in the organization. And, you know, we pointed out that a substantial amount, I think of 77% of our whole portfolio is in non-market-to-market form. So, you know, that is a very, you know, strong liability structure. You know, one of the things you mentioned also is you know, from a rate perspective, you know, we got, you know, 3 billion of slots roughly against, you know, 2.8 billion of assets that were mark-to-market financing. So from a rate liquidity perspective, that's a good balance. As it relates to kind of the credit assets themselves, I mean, we've touched on an important item here throughout the call, which is, you know, our wholly-owned subsidiary, Lima One. I mean, it is one of the elite, best BPL originator in the space. we have the ability to create our own credit assets in an environment where, you know, coupons and return profiles are probably one of the best they've been in the last 15 to 20 years. And so when you look at the coupons that we can create with the attachment point to the property, the quality of the borrower, I don't think you'll find that in many other places. And so I would think that's a really, really differentiating factor.

As it relates to the non-QM sourcing, we have several relationships, but very deep relationships. We never really went out there to try to be a conduit to serve 50 to 100 sellers. We believe there's a benefit to us of really getting to know the principles of the shops so we know the credit that is getting originated there versus just spamming guidelines out across the country and and just you know taking in any you know any loan that happens to fit those guidelines so you know when we're aggregating loans we really have a comfort that you know a 65 ltv 730 fico is going to perform a way we would expect it's not you know there aren't really any surprises in our portfolio right hey i appreciate the response thank you guys thanks sir

Operator, any more questions?

At this time, there are no further questions.

Okay. Well, thank you, everyone, for your interest in MFA Financial. We look forward to speaking with you again early next year when we announce full year 2023 results.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.