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Overview
Great Ajax Corp. is aMaryland corporation that is organized and operated in a manner intended to allow us to qualify as a REIT. We primarily target acquisitions of RPLs, which are residential mortgage loans on which at least five of the seven most recent payments have been made, or the most recent payment has been made and accepted pursuant to an agreement, or the full dollar amount to cover at least five payments has been paid in the last seven months. We may also acquire or 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. Additionally, we invest in single-family and smaller commercial properties directly either through a foreclosure event of a loan in our mortgage portfolio, or, less frequently, 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 our Manager and an 8.0% equity interest in the parent company of our Servicer through GA-TRS, a wholly owned subsidiary of theOperating Partnership . We have elected to treat GA-TRS as a taxable REIT subsidiary under the Code. Our mortgage loans and real properties are serviced by the Servicer, also an affiliated company. In 2014, we formedGreat Ajax Funding LLC , a wholly owned subsidiary of theOperating Partnership , to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts and any additional trusts we may form for additional secured borrowings.AJX Mortgage Trust I and AJX Mortgage Trust II are wholly owned subsidiaries of theOperating Partnership formed to hold mortgage loans used as collateral for financings under our repurchase agreements. OnFebruary 1, 2015 , we formedGAJX Real Estate Corp. , as a wholly owned subsidiary of theOperating Partnership , to own, maintain, improve and sell certain REOs purchased by us. We have elected to treatGAJX Real Estate Corp. as a TRS under the Code. OurOperating Partnership , through interests in certain entities as ofDecember 31, 2021 , owns 99.9% ofGreat Ajax II REIT Inc. which ownsGreat Ajax II Depositor LLC which then acts as the depositor of mortgage loans into securitization trusts and holds subordinated securities issued by such trusts. We have securitized mortgage loans through these 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 the VIEs. In 2018, we formed Gaea as a wholly owned subsidiary of theOperating Partnership . We elected to treat Gaea as a TRS under the Code for 2018, and we elected to treat Gaea as a REIT under the Code in 2019 and thereafter. Also during 2018, we formedGaea Real Estate Operating Partnership LP , a wholly owned subsidiary of Gaea, to hold investments in commercial real estate assets. We also formedBFLD Holdings LLC ,Gaea Commercial Properties LLC ,Gaea Commercial Finance LLC andGaea RE LLC as subsidiaries ofGaea Real Estate Operating Partnership . In 2019, we formedDG Brooklyn Holdings, LLC , also a subsidiary ofGaea Real Estate Operating Partnership LP , to hold investments in multi-family properties. OnNovember 22, 2019 , Gaea completed a private capital raise in which it raised$66.3 million from the issuance of 4,419,641 shares of its common stock to third parties to allow Gaea to continue to advance its investment strategy. We retained a 23.2% ownership interest in Gaea following the transaction. AtDecember 31, 2021 we own approximately 22.8% of Gaea with the dilution driven by Gaea's equity issuances. We elected to be taxed as a REIT forU.S. federal income tax purposes beginning with our taxable year endedDecember 31, 2014 . Our qualification as a REIT depends upon our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our capital stock. We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code, and that our current intended manner of operation enables us to meet the requirements for taxation as a REIT forU.S. federal income tax purposes. 45 --------------------------------------------------------------------------------
Our portfolio
The following table shows the book value of our portfolio of mortgages and smaller single-family and commercial property assets at
December 31, 2021 December 31, 2020
Residential RPLs $ 971.1 $ 1,057.5
Residential NPLs 119.5 38.7
SBC loans 19.3 23.2
Real estate owned properties, net 6.1
8.5
Investments in securities at fair value 355.2
273.8
Investment in beneficial interests 139.6
91.4
Total mortgage related assets $ 1,610.8 $
1,493.1
We closely monitor the status of our mortgages and, through our Servicer, work with our borrowers to improve their payment records.
Market trends and outlook
COVID-19[female[feminine
The COVID-19 pandemic that began during the first quarter of 2020 created a global public-health crisis that resulted in widespread volatility and deteriorations in household, business, and economic market conditions, including inthe United States , where we conduct all of our business. During 2020 many governmental and nongovernmental authorities directed their actions toward curtailing household and business activity in order to contain or mitigate the impact of the COVID-19 pandemic and deployed fiscal- and monetary-policy measures in order to seek to partially mitigate the adverse effects. These programs have had varying degrees of success and the extent of the long term impact on the mortgage market remains unknown. The COVID-19 pandemic began to meaningfully impact our operations in lateMarch 2020 and any continuing disruption was reflected in our results of operations for the year endedDecember 31, 2021 . The pandemic has continued to significantly and adversely impact certain areas ofthe United States . As a result, our forecast of macroeconomic conditions and expected lifetime credit losses on our mortgage loan and beneficial interest portfolios is subject to meaningful uncertainty and volatility. While the majority of our borrowers continued to make scheduled payments and we continued to receive payments in full, at the beginning of the pandemic we acted swiftly to support our borrowers with a mortgage forbearance program. Borrowers who requested COVID-19 related hardship assistance were asked to complete a standardized hardship questionnaire, including documentation to support the COVID-19 related hardship claim. The materials were reviewed, along with the borrower's monthly payment status, to determine if the borrower was eligible for a three-month forbearance plan. If the borrower was not eligible, they were encouraged to apply for loss mitigation. In the event the COVID-19 related hardship continued at the end of the forbearance period, it was extended for an additional period. At the end of the forbearance plan, the borrower was either required to repay the deferred amounts in a lump sum or was provided a repayment plan. Notwithstanding the foregoing, to the extent special rules applied to a mortgagor because of the jurisdiction or type of mortgage loan, the Servicer complied with those rules. Our Servicer has extensive experience dealing with delinquent borrowers and was well positioned to react on our behalf to any increase in mortgage delinquencies. Although requests for COVID-19 related hardship assistance have largely diminished, any assistance that may be provided on an ongoing basis is consistent with the foregoing. The following list shows the COVID-19 related forbearance activity in our mortgage loan portfolio as ofFebruary 28, 2022 :
• Current number of requests for COVID-19 forbearance relief: 1,237 • Total number of COVID-19 forbearance relief granted: 391
We expect continued volatility in the residential mortgage loan and securities
markets in the short term. 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.
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Through the end of the fourth quarter, the recent trends shown below 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; •higher prices, low inventory, tighter lending standards and increased down payment requirements are pricing first time homeowners out of the market •the flight to the suburbs during COVID has 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; and •historically low interest rates have increased prices for residential mortgage loans as investors search for yield in the market. The combination of these factors has also resulted in a significant number of families that cannot qualify to obtain new residential mortgage loans. We believe theU.S. federal regulations addressing "qualified mortgages" based on, among other factors such as employment status, debt-to-income level, impaired credit history or lack of savings, limit mortgage loan availability from traditional mortgage lenders. In addition, we believe that many homeowners displaced by foreclosure or who either cannot afford to own or cannot be approved for a mortgage will prefer to live in single-family rental properties with similar characteristics and amenities to owned homes as well as smaller multi-family residential properties. In certain demographic areas, new households are being formed at a rate that exceeds the new homes being added to the market, which we believe favors future demand for non-federally guaranteed mortgage financing for single-family and smaller multi-family rental properties. For all these reasons, we believe that demand for single-family and smaller multi-family rental properties will continue to 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 focused 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. 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 Results of Operations
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. 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.
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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
typically to cause the RPLs to continue to perform and NPLs to perform through
loan modification. Following 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. We expect the timelines for these 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.
Conversion to Rental Property. From time to time we may retain an REO property
as a rental property and may acquire rental properties through direct purchases
at attractive prices. We do not expect to retain a material number of single
family residential properties for use 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, 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. We typically concentrate our investments in specific
urban geographic locations in which we expect stable or better property markets.
However, when we analyze loan and property acquisitions we do not take home
price appreciation ("HPA") into account except for rural properties for which we
model negative HPA related to our expectation of worse than expected property
condition. While we initially expected the COVID-19 outbreak to have a material
downward effect on home prices, we are generally seeing increases in HPA in our
target markets. A significant decline in HPA could have an adverse impact on our
operating results.
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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.
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 COVID-19 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.
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 and its variants, 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.
Significant Accounting Policies and Estimates
(See also note 2 to the consolidated financial statements for a discussion of our significant accounting policies)
Critical accounting estimates
The preparation of financial statements in accordance with GAAP requires us to make a number of judgments and assumptions that affect estimates of the reported amounts within our consolidated financial statements. Critical accounting estimates are important to the presentation of our financial condition and results of operations and require management to make difficult, complex, or subjective judgments and estimates, often regarding matters that are inherently uncertain. Actual results could differ from our estimates, and the use of different judgments and assumptions related to these estimates could have a material impact on our consolidated financial statements. For additional information about our critical accounting estimates and significant accounting policies, see the notes accompanying our consolidated financial statements.
Provision for credit losses
The allowance for credit losses represents management's estimate of expected
credit losses over the contractual term of the mortgage loans and applies to all
of our loans classified as held for investment on our consolidated balance
sheets. Determining the appropriateness of the allowance for credit losses is a
complex process that is subject to estimates and assumptions requiring
significant management judgment about matters that involve a high degree of
subjectivity. This process involves the use of models that requires management
to make judgments about matters that are difficult to predict, the most
significant of which are the probability of default and the severity of expected
credit losses. Management regularly evaluates the
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the underlying estimates and models we use to determine the allowance for credit losses and updates our assumptions to reflect our historical experience and our current view of general market conditions.
To the extent actual loan performance differs from management's expectations, our allowance for credit losses could increase or decrease. While no single factor determines the level of our allowance for credit losses, expected borrower performance and underlying property value are two key drivers that factor into our scenario based cash flow projections. Our historical data has demonstrated the number of payments made by a borrower, either in succession or as an aggregate, to be a significant factor in predicting repayment. Additionally, we include an estimate of underlying property value. Accordingly, if our delinquency estimate is overstated and our valuation estimates are overstated, there could be a negative impact on our allowance for credit losses. Based on our review of the key inputs and our methodology used, we believe our current allowance for credit losses is properly stated atDecember 31, 2021 andDecember 31, 2020 . Critical Accounting Policies Mortgage Loans We adopted ASU 2016-13, Financial Instruments - Credit Losses, otherwise known as CECL using the prospective transition approach for PCD assets onJanuary 1, 2020 . At the time,$10.2 million of loan discount was reclassified to the allowance for expected credit losses with no net impact on the amortized cost basis of the portfolio. 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. 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 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.
Non-PCD Loans – While we generally acquire loans that have deteriorated in credit quality, we also acquire loans that have not experienced credit quality deterioration and issue SBC loans.
We account for our non-PCD loans by estimating any allowance for expected credit losses for our non-PCD loans based on the risk characteristics of the individual loans. If necessary, an allowance for expected credit losses is established through a provision for loan losses. The allowance is the difference between the net present value of the expected future cash flows from the loan and the contractual balance due. 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.
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 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 are
expected 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
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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. We account for each beneficial interest individually.
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 expense when
incurred.
Fair Value
Fair Value of Financial Instruments - A fair value hierarchy has been
established that requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. The standard
describes three levels of inputs that may be used to measure fair value:
•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Observable inputs other than Level 1 prices, such as quoted prices
for similar assets and liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
•Level 3 - Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or
liabilities.
The degree of judgment utilized in measuring fair value generally correlates to
the level of pricing observability. Assets and liabilities with readily
available actively quoted prices or for which fair value can be measured from
actively quoted prices generally will have a higher degree of pricing
observability and a lesser degree of judgment utilized in measuring fair value.
Conversely, assets and liabilities rarely traded or not quoted will generally
have little or no pricing observability and a higher degree of judgment utilized
in measuring fair value. Pricing observability is impacted by a number of
factors, including the type of asset or liability, whether it is new to the
market and not yet established, and the characteristics specific to the
transaction.
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Recent accounting pronouncements
See the accompanying notes to our consolidated financial statements for a description of relevant recent accounting pronouncements.
Operating results
For the year endedDecember 31, 2021 , we had net income attributable to common stockholders of$34.1 million , or$1.48 per share for basic and$1.41 per share for diluted common shares. For the year endedDecember 31, 2020 , we had net income attributable to common stockholders of$22.8 million or$1.00 per share for basic and diluted common shares. For the year endedDecember 31, 2019 , we had net income attributable to common stockholders of$34.7 million , or$1.74 per share for basic and$1.59 for diluted common shares. Key items for the year endedDecember 31, 2021 include: •Interest income of$93.4 million ; net interest income of$56.6 million •Net income attributable to common stockholders of$34.1 million •Basic earnings per share of$1.48 per share •Book value per share of$15.92 atDecember 31, 2021 •Taxable income of$1.55 per share •Formed six joint ventures that acquired$2.4 billion in UPB of mortgage loans with collateral values of$4.4 billion and retained$342.9 million of varying classes of securities. Of the$2.4 billion ,$1.3 billion of UPB relates to newly acquired joint ventures while$1.1 billion relates to joint ventures that were re-securitized •Purchased$185.7 million of RPLs, with UPB of$191.3 million and 54.8% of property value,$91.5 million of NPLs, with UPB of$94.8 million and 63.6% of property value, and$9.0 million of SBC loans, with UPB of$8.9 million and 40.5% of property value, to end the year with$1.1 billion in net mortgage loans •Collected total cash of$318.5 million , from loan payments, sales of REO and collections from investments in debt securities and beneficial interests •Held$84.4 million of cash and cash equivalents atDecember 31, 2021 ; average daily cash balance was$99.1 million •AtDecember 31, 2021 , 72.3% of our portfolio based on UPB had made at least the last 12 out of 12 payments Our consolidated net income attributable to common stockholders increased$11.3 million for the year endedDecember 31, 2021 compared to the year endedDecember 31, 2020 . The increase was primarily driven by a$12.0 million decrease in our interest expense and a net decrease in the net present value of expected credit losses of$5.7 million . Our net interest income increased$7.0 million for the year endedDecember 31, 2021 compared to the year endedDecember 31, 2020 primarily due to the same interest expense decrease of$12.0 million partially offset by a lower average balance and lower average yields of our mortgage loan portfolio. Comparatively, consolidated net income attributable to common stockholders decreased$11.9 million for the year endedDecember 31, 2020 compared to the year endedDecember 31, 2019 . The decrease was primarily due to lower other income as we sold 26 mortgage loans with a carrying value of$26.1 million and UPB of$26.2 million for a loss of$0.7 million during the year ended 2020 compared to 965 mortgage loans sold with a carrying value of$178.8 million and UPB of$202.1 million for a gain of$7.1 million during the year ended 2019. This was partially offset by a net decrease in the net present value of expected credit losses of$12.6 million during the year ended 2020 compared to a net increase in the net present value of expected credit losses of$0.8 million in 2019. Our net interest income decreased$3.4 million for the year endedDecember 31, 2020 compared to the year endedDecember 31, 2019 primarily due to a lower average balance of our mortgage loan portfolio offset by an increase in the average balance of our debt securities and beneficial interests. Our book value increased to$15.92 per common share from$15.59 atDecember 31, 2021 andDecember 31, 2020 , respectively, an increase of$0.33 . The increase is driven by our buyout of our joint venture partner's interest inAjax Mortgage Loan Trust 2018-C ("2018-C") in the first quarter of 2021 and the sale of the loans fromAjax Mortgage Loan Trust 2017-D ("2017-D"), both of which reduced our non-controlling interest. Net book value also increased due to the repurchase of$8.8 million of our convertible senior notes and an increase in common equity resulting from net fair value adjustments of$0.6 million on our portfolio of debt securities recorded to Other comprehensive income sinceDecember 31, 2020 . We recorded income from our investment in affiliates of$0.7 million for the year endedDecember 31, 2021 , a loss of$0.2 million for the year ended 2020 and income of$1.3 million for the year ended 2019. The primary driver of the change year over year is the flow-through impact of the mark to market on shares of our stock held by our Manager and our Servicer. We account for our investments in our Manager and our Servicer using the equity method of accounting. 52 -------------------------------------------------------------------------------- We recorded$0.3 million in impairments on our REO held-for-sale portfolio in real estate operating expense for the year endedDecember 31, 2021 compared to$1.4 million for the year ended 2020 and$2.1 million for the year ended 2019. Impairments during the year were driven primarily by the costs of holding the properties. We continue to liquidate our REO properties held-for-sale at a faster rate than we acquire properties, with 33 properties sold during the year endedDecember 31, 2021 while 26 were added to REO held-for-sale through foreclosures and direct purchase. During the year endedDecember 31, 2020 we sold 50 REO properties while adding 20 through foreclosures.
Table 1: Results of operations
For the year ended December 31, ($ in thousands) 2021 2020 2019 INCOME Interest income$ 93,383 $ 98,336 $ 112,416 Interest expense (36,742) (48,692) (59,325) Net interest income 56,641 49,644 53,091
Net decrease/(increase) in net present value of expected credit losses(1)
18,223 12,555 (803)
Net interest income after impact of changes in net present value of expected credit losses
74,864 62,199 52,288 Income/(loss) from investment in affiliates 699 (155) 1,332 Other income 2,385 1,567 11,299 Total revenue, net 77,948 63,611 64,919 EXPENSE Related party expense - loan servicing fees 7,433 7,678 9,133 Related party expense - management fee 9,116 8,456 7,356 Professional fees 2,940 2,834 2,550 Real estate operating expenses 328 1,482 3,685 Fair value adjustment on put option 9,462 4,733 - Other expense 5,221 4,284 4,553 Total expense 34,500 29,467 27,277 Loss on debt extinguishment 1,439 661 429 Income before provision for income taxes 42,009 33,483 37,213 Provision for income taxes (benefit) 234 (125) 124 Consolidated net income 41,775 33,608 37,089
Less: (net loss)/consolidated net income attributable to non-controlling interest
(80) 5,112 2,384 Consolidated net income attributable to Company 41,855 28,496 34,705 Less: dividends on preferred stock 7,798 5,740 - Consolidated net income attributable to common stockholders$ 34,057 $ 22,756 $ 34,705 (1)Net decrease in the net present value of expected credit losses represents the net decrease to the allowance resulting from changes in actual and expected cash flows during the years endedDecember 31, 2021 ,December 31, 2020 , andDecember 31, 2019 . It represents the net increase of the present value of the expected cash flows in excess of contractual cash flows offset by any incremental provision expense on the Mortgage loan pools and Beneficial interests. The decrease is calculated at the pool level for Mortgage loans and at the security level for Beneficial interests. To the extent a pool or Beneficial interest has an associated allowance, the decrease in expected credit losses is recorded in the period in which the change occurs, otherwise it is recognized prospectively as an increase in yield.
interest income
Our primary source of income is accretion earned on our mortgage loan portfolio offset by the interest expense incurred to fund and hold portfolio acquisitions. Net interest income after recording the impact of the net present value of decreases in expected credit losses increased to$74.9 million for the year endedDecember 31, 2021 from$62.2 million for the year endedDecember 31, 2020 and$52.3 million for the year endedDecember 31, 2019 primarily as a result of a net$18.2 million impact of the net decrease in the net present value of expected credit losses for the year endedDecember 31, 2021 compared to a$12.6 million decrease for the year endedDecember 31, 2020 and a net increase in the net present value of 53 -------------------------------------------------------------------------------- expected credit losses of$0.8 million for the year endedDecember 31, 2019 . Of the$18.2 million for the year endedDecember 31, 2021 ,$13.7 million relates to our mortgage loan portfolio and$4.6 million to our investments in beneficial interests. Comparatively, of the$12.6 million for the year endedDecember 31, 2020 ,$9.4 million relates to our mortgage loan portfolio and$3.2 million to our investments in beneficial interests. Of the$0.8 million for the year endedDecember 31, 2019 , all$0.8 million relates to our mortgage loan portfolio. To date, the COVID-19 pandemic has not had a significant negative impact on our expected cash flows due to the low interest rate environment and rising home prices. Our gross interest income before the effect of the net present value of decreases in expected credit losses decreased by$5.0 million to$93.4 million in the year endedDecember 31, 2021 from$98.3 million in the year ended 2020 primarily due to a lower average balance and lower average yields of our mortgage loan portfolio. This was offset by a decrease of$12.0 million in interest expense to$36.7 million in the year endedDecember 31, 2021 from$48.7 million in the year endedDecember 31, 2020 primarily due to decreases in the average interest rates applicable to our borrowings. Similarly, our gross interest income decreased by$14.1 million to$98.3 million in the year endedDecember 31, 2020 from$112.4 million in the year endedDecember 31, 2019 primarily due to a decrease in average yield. This was offset by a decrease in interest expense of$10.6 million to$48.7 million in the year endedDecember 31, 2020 from$59.3 million in the year endedDecember 31, 2019 similarly due to a decrease in the average interest rates applicable to our borrowings. During the year endedDecember 31, 2021 , we collected$318.5 million in cash payments and proceeds on our mortgage loans, securities and REO held-for-sale compared to$240.3 million in the year ended 2020 and$253.6 million in the year ended 2019. These amounts exclude any cash proceeds from sales of debt securities. The increase in cash collections in 2021 compared to 2020 is due to a higher volume of payoffs on mortgage loans as borrowers continued to refinance or sell the underlying property, while conversely the decrease in cash collections in 2020 compared to 2019 was driven by lower volumes of loan payoffs, partially offset by higher cash collections on securities.
Details of interest income for the years ended
Table 2: Detail of interest income
For the
year ended
2021 2020(1) 2019(1)
Accreditable return recognized on RPL, NPL and SBC loans
$ 76,769 $ 97,942 Accretable yield recognized on beneficial interests 15,540 11,091 6,426 Interest income on debt securities 10,963 9,852 6,655 Bank interest income 261 346 1,031 Other interest income 160 278 362 Interest income$ 93,383 $ 98,336 $ 112,416 Net decrease/(increase) in the present value of expected credit losses(2) 18,223 12,555 (803)
Interest income after impact of changes in net present value of expected credit losses
$ 111,606 $ 110,891 $ 111,613 (1)Includes reclass of loan and beneficial interest credit losses from net decrease in the present value of expected credit losses to accretable yield recognized on RPL, NPL and SBC loans and accretable yield recognized on beneficial interests, respectively. (2)Net decrease in the net present value of expected credit losses represents the net decrease to the allowance resulting from changes in actual and expected cash flows during the years endedDecember 31, 2021 , 2020 and 2019. It represents the net increase of the present value of the expected cash flows in excess of contractual cash flows offset by any incremental provision expense on the Mortgage loan pools and Beneficial interests. The decrease is calculated at the pool level for Mortgage loans and at the security level for Beneficial interests. To the extent a pool or Beneficial interest has an associated allowance, the decrease in expected credit losses is recorded in the period in which the change occurs, otherwise it is recognized prospectively as an increase in yield. The decrease in the accretable yield recognized on RPL, NPL and SBC loans is driven by decreases in the average yield and average balance of our mortgage loan portfolio. The average balance of our portfolio declined primarily as a result of significantly higher levels of prepayments on our mortgage loans and from the timing of loan acquisitions and sales during the year. The average carrying balances of our mortgage loan portfolio, debt securities, beneficial interests and debt outstanding for the years endedDecember 31, 2021 and 2020 are included in the table below ($ in thousands): 54 --------------------------------------------------------------------------------
Table 3: Average Balances
For the year ended December 31,
2021 2020
Mortgage loan portfolio $ 1,028,528 $ 1,103,472
Average carrying value of debt securities $ 325,543 $ 261,320
Average carrying value of beneficial interests $ 118,303 $ 71,195
Total average asset backed debt $
1,053,572
The average balance of our mortgages decreased primarily due to significantly higher levels of prepayments on our mortgages and the timing of loan acquisitions and sales during the year.
Other income
Other income increased for the year endedDecember 31, 2021 as compared to the year ended 2020 primarily due to increases in late fee income and a gain on sale of mortgage loans in 2021 versus a loss in 2020. Other income decreased for the year endedDecember 31, 2020 as compared to the year ended 2019 primarily as a result of a gain on sale of mortgage loans in 2019 versus a loss in 2020, decreased rental income in 2020 from the impact on our rental portfolio of our Gaea capital raise inNovember 2019 and lower income from the federal government's HAMP program as more loans reached the five-year threshold beyond which no additional fees are earned. This was partially offset by a larger gain on sales of property held-for-sale and gain on sale of securities in 2020 compared to 2019. A breakdown of Other income is provided in the table below ($ in thousands): Table 4: Other Income For the year ended December 31, 2021 2020 2019 Late fee income$ 1,046 $ 700 $ 779 Net gain on sale of Property held-for-sale 893 1,011 610 Gain on sale of securities 201 145 8 Gain/(loss) on sale of mortgage loans 122 (705) 7,123 HAMP fees 119 370 836 Rental Income 36 42 1,943 Other (loss)/income (32) 4 - Total Other Income$ 2,385 $ 1,567 $ 11,299 Expenses Total expenses for the year endedDecember 31, 2021 increased from the year ended 2020 primarily as a result of our put option expense on our outstanding common stock warrants. Similarly, the increase from 2019 to 2020 was a result of expense on the put option as well as an increase in management fees driven by an increase in our capital base as a result of our private placements of preferred stock and warrants completed during the second quarter of 2020. Our professional fees were higher in 2021 than 2020 and in 2020 from 2019 primarily from increases in fees for tax consulting and legal services. For the year endedDecember 31, 2021 as compared to the year ended 2020 and 2019 these increases were partially offset by lower loan servicing fees as a result of the lower average carrying balance of our mortgage loan portfolio due to increased investments in our joint ventures. Real estate operating expense decreased in 2021 by$1.2 million over 2020, due to lower impairment on our REO held-for-sale properties. Comparatively, real estate operating expense decreased by$2.2 million from 2019 to 2020 due to the carve out of Gaea and the related commercial property portfolio inNovember 2019 . A breakdown of our expenses is provided in the table below ($ in thousands): 55 --------------------------------------------------------------------------------
Table 5: Expenses
For the year ended December 31,
2021 2020 2019
Fair value adjustment of put option liability
4,733 $ - Related party expense - management fee 9,116 8,456 7,356 Related party expense - loan servicing fees 7,433 7,678 9,133 Other expense 5,221 4,284 4,553 Professional fees 2,940 2,834 2,550 Real estate operating expense 328 1,482 3,685 Total expenses$ 34,500 $ 29,467 $ 27,277 Other Expense Other expense for the year endedDecember 31, 2021 increased from the year ended 2020 primarily due to employee and service provider grants, and directors' fees and grants, offset by lower travel expense and borrowing related expense. Other expense for the year ended 2020 decreased from 2019 primarily due to a recovery of loan transaction expense and lower employee and service provider grant expense, partially offset by increases primarily in insurance and borrowing related expenses and other miscellaneous expenses. A breakdown of other expense is provided in the table below ($ in thousands): Table 6: Other Expense For the year ended December 31, 2021 2020 2019 Insurance$ 964 $ 835 $ 695 Employee and service provider share grants 900 728 839 Directors' fees and grants 746 427 423 Borrowing related expenses 727 802 554 Other expense 433 355 266 Taxes and regulatory expense 427 481 478 Software licenses and amortization 407 302 227 Travel, meals, entertainment 193 265 293 Internal audit services 180 144 197 Lien release non due diligence 167 156 253 Loan transaction expense 77 (211) 328 Total other expense$ 5,221 $ 4,284 $ 4,553
Equity and net book value per share
Our net book value per share was$15.92 and$15.59 atDecember 31, 2021 and 2020, respectively, an increase of$0.33 . The increase in book value was primarily driven by our buyout of our joint venture partner's interest in 2018-C in the first quarter of 2021 and the sale of mortgage loans from 2017-D, both of which reduced non-controlling interest. Net book value also increased due to the repurchase of$8.8 million of our convertible senior notes and an increase in common equity resulting from net fair value adjustments of$0.6 million on our portfolio of debt securities recorded to Other comprehensive income sinceDecember 31, 2020 . We believe our calculation is representative of our book value on a per share basis, and our Manager believes book value per share is a valuable metric for evaluating our business. The net book value per share is calculated by taking equity at the balance sheet date (i) less preferred stock and non-controlling interest, (ii) adjusted for any addition for potential conversion of our convertible senior notes, divided by outstanding shares at the balance sheet date adjusted to include (i) unvested restricted stock earned but unissued and (ii) any share equivalents for our convertible senior notes or our put option liability as determined by the dilution requirements for our EPS calculation. A breakdown of our book value per share is set forth in the table below ($ in thousands except per share amounts): 56 --------------------------------------------------------------------------------
Table 7: Book value per common share
As of December 31,
2021 2020
Outstanding shares 23,146,775 22,978,339
Adjustments for: Unvested awards of restricted stock and vested but unissued stock as of the date indicated
3,470 4,280
Conversion of Convertible Senior Notes into Common Shares
7,228,910 7,834,299 Settlement of put option in shares(1) - - Total adjusted shares outstanding 30,379,155 30,816,918 Equity at period end$ 500,473
Net increase in equity related to the expected conversion of senior convertible bonds
101,511 110,250 Adjustment for equity due to preferred shares (115,144) (115,144)
Net equity adjustment due to non-controlling interests (3,178)
(29,130) Adjusted equity$ 483,662 $ 480,467 Book value per share$ 15.92 $ 15.59 (1)The settlement of the put option in shares is not included in the book value calculation as ofDecember 31, 2021 or 2020 as it has an anti-dilutive effect on our earnings per share calculation.
Mortgage loan portfolio
For the years endedDecember 31, 2021 and 2020, we purchased$185.7 million and$55.1 million of RPLs with UPB of$191.3 million and$61.7 million , respectively, at 54.8% and 59.4% of the underlying property value, respectively, including loans acquired fromAjax Mortgage Loan Trust 2019-C ("2019-C") inDecember 2021 , wherein we acquired the outstanding equity certificate of 2019-C, resulting in recognition of the underlying loans on our consolidated balance sheet. For the years endedDecember 31, 2021 and 2020 we purchased$91.5 million and$14.1 million of NPLs with UPB of$94.8 million and$16.0 million , respectively, at 63.6% and 50.7% of the underlying property value, respectively. For the years endedDecember 31, 2021 andDecember 31, 2020 , we purchased$9.0 million and$19.8 million of SBC loans with UPB of$8.9 million and$20.3 million , respectively, at 40.5% and 52.8% of the underlying property value, respectively. We ended the period with$1.1 billion of mortgage loans with an aggregate UPB of$1.2 billion as ofDecember 31, 2021 and$1.1 billion of mortgage loans with an aggregate UPB of$1.2 billion as ofDecember 31, 2020 . 57 --------------------------------------------------------------------------------
The following table presents loan portfolio acquisitions for the years ended
Table 8: Loan Portfolio Acquisitions
For the year ended December 31,
2021(1) 2020
RPLs
Count 1,006 304
UPB $ 191,250 $ 61,704
Purchase price $ 185,654 $ 55,090
Purchase price % of UPB 97.1 % 89.3 %
NPLs
Count 387 65
UPB $ 94,781 $ 16,022
Purchase price $ 91,521 $ 14,075
Purchase price % of UPB 96.6 % 87.8 %
SBC loans
Count 16 14
UPB $ 8,917 $ 20,276
Purchase price $ 9,044 $ 19,800
Purchase price % of UPB 101.4 % 97.7 %
(1)During the fourth quarter of 2021, we acquired the remaining trust certificates of our unconsolidated joint venture, 2019-C, resulting in the addition of 772 loans to our loan portfolio. Our 34.0% investment was previously reflected in our investment in debt securities and beneficial interests.
During the year endedDecember 31, 2021 , 1,502 mortgage loans, representing 25.4% of our ending UPB, were liquidated. Comparatively, during the year ended 2020, 538 mortgage loans, representing 11.1% of our ending UPB, were liquidated. Our loan portfolio activity for the years endedDecember 31, 2021 and 2020 are presented below ($ in thousands):
Table 9: Loan portfolio activity
For the year ended December 31,
2021 2020
Mortgage loans Mortgage loans Mortgage loans Mortgage loans
held-for-investment, net held-for-sale, net held-for-investment, net held-for-sale, net
Beginning carrying value $ 1,119,372 $ - $ 1,151,469 $ -
Mortgage loans acquired 286,219 - 88,965 -
Draws on SBC loans 20,689 - 56 -
Accretion recognized 65,953 460 76,058 -
Payments received on loans, net (264,713) (1,851) (175,678)
–
Net reclassifications to mortgage loans held-for-sale, net (159,733) 159,733 - - Reclassifications to REO (3,511) - (4,764) - Sale of mortgage loans(1) - (128,770) (26,111) - Decrease in net present value of expected credit losses on mortgage loans 13,668 - 9,345 - Other 2,490 - 32 - Ending carrying value $ 1,080,434 $ 29,572 $ 1,119,372 $ -
(1)As of
58 --------------------------------------------------------------------------------
Table 10: Composition of the portfolio
From
December 31, 2021 December 31, 2020(1,2)
No. of Loans 5,941 No. of Loans 6,031
Total UPB(3) $ 1,165,841 Total UPB(3) $ 1,204,804
Interest-Bearing Balance $ 1,069,407 Interest-Bearing Balance $ 1,127,499
Deferred Balance(4) $ 96,434 Deferred Balance(4) $ 77,305
Market value of collateral(5)
Original Purchase Price/Total UPB
82.0 % Original Purchase Price/Total UPB 82.2 % Original Purchase Price/Market Value Original Purchase Price/Market Value of Collateral 47.1 % of Collateral 53.7 % Weighted Average Coupon 4.33 % Weighted Average Coupon 4.44 % Weighted Average LTV(6) 63.7 % Weighted Average LTV(6) 72.8 % Weighted Average Remaining Term Weighted Average Remaining Term (months) 295 (months) 297 No. of first liens 5,883 No. of first liens 5,973 No. of second liens 58 No. of second liens 58 RPLs 87.5 % RPLs 94.4 % NPLs 10.8 % NPLs 3.5 % SBC loans 1.7 % SBC loans 2.1 % No. of REO properties held-for-sale 31 No. of REO properties held-for-sale 38 Market Value of other REO(7)$ 6,611 Market Value of other REO(7)$ 8,105 Carrying value of debt securities and Carrying value of debt securities and beneficial interests in trusts$ 494,361 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) 72.3 % 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) 63.9 % 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 50.0% owned joint venture which we consolidate. (2)Includes the impact of 256 mortgage loans with a purchase price of$47.4 million , UPB of$52.8 million and collateral value of$68.1 million acquired in the third quarter of 2018 through a 63.0% owned joint venture which we consolidate. (3)AtDecember 31, 2021 and 2020, our loan portfolio consists of fixed rate (60.6% of UPB), ARM (7.5% of UPB) and Hybrid ARM (31.9% 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 the reporting date. (6)UPB as ofDecember 31, 2021 and 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. 59 --------------------------------------------------------------------------------
Table 11: Portfolio characteristics
The following tables present certain characteristics of our mortgage loans by year of issue at
Wallet to
Years of Origination
Mortgages held-for-investment After 2008 2006 - 2008 2005 and prior
Number of loans 638 3,258 1,868
Unpaid principal balance $ 144,418 $ 727,856 $ 261,101
Percent of mortgage loan portfolio by year of
origination 12.7 % 64.2 % 23.1 %
Loan Attributes:
Weighted average loan age (months) 105.0 178.8 217.9
Weighted average loan-to-value 60.6 % 67.1 % 54.2 %
Delinquency Performance:
Current 55.4 % 55.3 % 52.6 %
30 days delinquent 7.4 % 9.6 % 9.2 %
60 days delinquent 4.5 % 5.1 % 7.0 %
90+ days delinquent 27.2 % 23.7 % 27.1 %
Foreclosure 5.5 % 6.3 % 4.1 %
Years of Origination
Mortgages held-for-sale After 2008 2006 - 2008 2005 and prior
Number of loans 25 82 70
Unpaid principal balance $ 4,791 $ 17,464 $ 10,211
Percent of mortgage loan portfolio by year of
origination 14.8 % 53.8 % 31.4 %
Loan Attributes:
Weighted average loan age (months) 125.5 178.3 217.2
Weighted average loan-to-value 64.2 % 83.6 % 74.5 %
Delinquency Performance:
Current 45.0 % 44.0 % 48.8 %
30 days delinquent 5.5 % 15.7 % 12.0 %
60 days delinquent 3.6 % 8.4 % 9.4 %
90+ days delinquent 45.9 % 24.0 % 23.2 %
Foreclosure - % 7.9 % 6.6 %
60
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Wallet to
Years of Origination
Mortgages held-for-investment After 2008 2006 - 2008 2005 and prior
Number of loans 639 3,471 1,921
Unpaid principal balance $ 156,250 $ 780,956 $ 267,598
Percent of 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 December 31, 2021 and
December 31, 2020 ($ in thousands):
December 31, 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 774 $ 254,732 21.8 % $ 542,547 24.7 % CA 947 $ 329,725 27.4 % $ 589,225 30.0 %
FL 998 197,755 17.0 % 350,213 16.0 % FL 655 108,293 9.0 % 174,849 8.9 %
NY 370 115,297 10.0 % 209,610 9.6 % NY 329 103,475 8.6 % 177,524 9.0 %
NJ 311 72,179 6.3 % 109,171 5.0 % NJ 287 65,764 5.5 % 89,389 4.5 %
MD 240 57,412 4.9 % 88,757 4.0 % MD 248 60,082 5.0 % 77,693 4.0 %
VA 186 39,780 3.4 % 66,701 3.0 % GA 352 45,817 3.8 % 71,586 3.7 %
TX 372 37,838 3.2 % 88,631 4.0 % VA 205 43,563 3.6 % 63,132 3.2 %
IL 218 37,505 3.2 % 54,622 2.5 % TX 410 42,432 3.5 % 81,810 4.2 %
GA 301 36,733 3.2 % 73,635 3.4 % IL 227 41,410 3.5 % 54,379 2.8 %
MA 163 34,322 2.9 % 68,812 3.1 % MA 177 35,454 2.9 % 61,220 3.1 %
NC 227 32,371 2.8 % 67,322 3.1 % NC 240 33,146 2.8 % 52,217 2.7 %
AZ 119 23,270 2.0 % 47,579 2.2 % AZ 150 29,765 2.5 % 47,835 2.4 %
PA 193 21,302 1.8 % 35,222 1.6 % OR 70 24,303 2.0 % 46,279 2.4 %
WA 91 20,578 1.8 % 46,555 2.1 % WA 104 23,874 2.0 % 43,784 2.2 %
SC 127 14,381 1.2 % 25,379 1.2 % PA 185 21,294 1.8 % 31,248 1.6 %
NV 75 13,992 1.2 % 29,298 1.3 % NV 97 18,614 1.5 % 30,344 1.5 %
CT 75 12,980 1.1 % 20,634 0.9 % SC 129 14,206 1.2 % 22,213 1.1 %
OR 63 12,275 1.1 % 26,938 1.2 % CT 77 13,529 1.1 % 18,115 0.9 %
OH 106 12,109 1.0 % 19,242 0.9 % MI 97 13,103 1.1 % 19,832 1.0 %
TN 108 10,884 0.9 % 23,233 1.0 % OH 110 12,929 1.1 % 17,843 0.9 %
IN 99 9,414 0.8 % 16,833 0.8 % TN 115 12,721 1.1 % 22,690 1.2 %
MI 80 9,331 0.8 % 18,099 0.8 % CO 54 10,450 0.9 % 22,665 1.2 %
CO 43 8,127 0.7 % 21,188 1.0 % MO 75 9,383 0.8 % 12,545 0.6 %
MO 61 6,957 0.6 % 11,624 0.5 % IN 98 9,180 0.8 % 14,476 0.7 %
LA 71 6,885 0.6 % 11,573 0.5 % MN 49 9,121 0.8 % 13,242 0.7 %
UT 39 6,156 0.5 % 16,978 0.8 % LA 76 7,631 0.6 % 11,910 0.6 %
MN 35 5,881 0.5 % 10,205 0.5 % UT 44 6,895 0.6 % 14,932 0.8 %
WI 44 5,771 0.5 % 8,829 0.4 % DE 34 6,509 0.5 % 7,999 0.4 %
AL 49 5,613 0.5 % 7,872 0.4 % HI 16 6,456 0.5 % 9,305 0.5 %
DE 30 5,416 0.5 % 7,779 0.4 % DC 17 5,131 0.4 % 8,138 0.4 %
DC 16 5,039 0.4 % 9,182 0.4 % WI 37 4,696 0.4 % 6,385 0.3 %
61
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December 31, 2021 December 31, 2020
% of % of
Collateral Collateral Collateral Collateral
State Count UPB % UPB Value(1) Value State Count UPB % UPB Value(1) Value
HI 11 3,941 0.3 % 7,058 0.3 % NM 30 4,450 0.4 % 6,207 0.3 %
NM 24 3,784 0.3 % 6,143 0.3 % KY 36 4,158 0.3 % 6,032 0.3 %
KY 29 3,504 0.3 % 5,777 0.3 % AL 44 3,670 0.3 % 4,891 0.2 %
RI 15 3,236 0.3 % 5,203 0.2 % NH 18 3,223 0.3 % 5,087 0.3 %
NH 16 3,006 0.3 % 5,450 0.2 % RI 14 3,084 0.3 % 4,481 0.2 %
OK 22 2,104 0.2 % 3,768 0.2 % OK 27 2,511 0.2 % 3,827 0.2 %
MS 25 2,025 0.2 % 3,327 0.2 % MS 26 2,149 0.2 % 3,168 0.2 %
KS 22 1,593 0.1 % 3,713 0.2 % IA 18 1,736 0.1 % 2,267 0.1 %
ID 11 1,569 0.1 % 3,995 0.2 % ID 12 1,496 0.1 % 2,971 0.2 %
ME 9 1,296 0.1 % 2,118 0.1 % AR 20 1,447 0.1 % 2,016 0.1 %
WV 13 1,283 0.1 % 2,095 0.1 % KS 19 1,379 0.1 % 2,897 0.1 %
IA 14 1,137 0.1 % 1,837 0.1 % ME 10 1,372 0.1 % 1,801 0.1 %
MT 6 1,003 0.1 % 1,966 0.1 % WV 17 1,258 0.1 % 1,830 0.1 %
PR 6 884 0.1 % 929 - % MT 6 803 0.1 % 1,336 0.1 %
AR 15 863 0.1 % 1,592 0.1 % SD 4 537 - % 872 - %
SD 5 713 0.1 % 1,524 0.1 % NE 4 528 - % 603 - %
VT 3 520 - % 493 - % PR 5 518 - % 592 - %
NE 5 408 - % 886 - % VT 2 452 - % 518 - %
ND 3 388 - % 580 - % WY 3 438 - % 356 - %
WY 2 244 - % 257 - % ND 3 395 - % 472 - %
AK 1 55 - % 169 - % AK 2 249 - % 391 - %
5,941 $ 1,165,841 100.0 % $ 2,193,143 100.0 % 6,031 $ 1,204,804 100.0 % $ 1,967,419 100.0 %
(1)At the closing date.
Table 13:
The following table shows our debt securities and beneficial interest acquisitions for the years endedDecember 31, 2021 and 2020 ($ in thousands): For the year ended December 31, 2021 2020 Class A securities UPB$ 255,451 $ 116,952 Purchase price$ 254,210 $ 115,558 Purchase price % of UPB 99.5 % 98.8 % Class M securities UPB $ 1,943 $ - Purchase price $ 1,943 $ - Purchase price % of UPB 100.0 % - % Class B securities UPB$ 36,993 $ 9,923 Purchase price$ 33,663 $ 9,817 Purchase price % of UPB 91.0 % 98.9 % Beneficial interests Purchase price$ 53,118 $ 19,307 62
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Cash 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. 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 may 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 included on our consolidated balance sheet. As ofDecember 31, 2021 andDecember 31, 2020 , substantially all of our invested capital was in RPLs, NPLs, SBC loans, property held-for-sale, debt securities and beneficial interests. We also held approximately$84.4 million of cash and cash equivalents, a decrease of$22.7 million from our balance of$107.1 million atDecember 31, 2020 , which was an increase of$42.8 million from our balance of$64.3 million atDecember 31, 2019 . Our average daily cash balance during 2021 was$99.1 million , a decrease from our average daily cash balance of$110.5 million during the year endedDecember 31, 2020 and an increase from our average daily balance of$57.6 million atDecember 31, 2019 . 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$318.5 million ,$240.3 million and$253.6 million for the years endedDecember 31, 2021 , 2020 and 2019, respectively. Our operating cash outflows, including the effect of restricted cash, for the year endedDecember 31, 2021 , 2020 and 2019 were$15.3 million ,$13.9 million and$15.0 million , respectively. Our primary operating cash inflow is cash interest payments on our mortgage loan pools, which was$47.3 million ,$48.1 million and$57.0 million , respectively, for the years endedDecember 31, 2021 , 2020 and 2019, respectively. Non-cash interest income accretion was$19.5 million ,$29.0 million and$39.1 million for the years endedDecember 31, 2021 , 2020 and 2019, respectively. Interest income on beneficial interests was$16.0 million ,$11.8 million and$6.4 million during the years endedDecember 31, 2021 , 2020 and 2019, respectively. Interest income on debt securities was$11.0 million ,$9.9 million and$6.7 million during the years endedDecember 31, 2021 , 2020 and 2019, respectively. During the year endedDecember 31, 2021 we recognized a gain of$0.1 million for the 760 loans sold from 2017-D with a carrying value of$129.2 million and UPB of$133.8 million to a joint venture formed between us and a third party accredited institutional investor, and retained various classes of securities from the joint venture. During the year endedDecember 31, 2020 , we recognized a loss of$0.7 million from the sale of 26 mortgage loans to Gaea, an affiliated entity. During the year endedDecember 31, 2019 we recognized a gain of$7.1 million from the sale of 965 mortgage loans to a related party joint venture, 2019-C. Though the ownership of mortgage loans and other real estate assets is our business,U.S. GAAP requires that operating cash flows do not include the portion of principal payments that are allocable to the discount we recognize on our mortgage loans including proceeds from loans that pay in full or are liquidated in a short sale or third party sale at foreclosure or the proceeds on the sales of our property held-for-sale. These activities are all considered to be investing activities underU.S. GAAP, and the cash flows from these activities are included in the investing section of our consolidated statements of cash 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 year endedDecember 31, 2021 , our investing cash outflows of$50.2 million were driven primarily by the purchases of debt securities and beneficial interests of$341.8 million and acquisitions of mortgage loans of$286.2 million . This was offset by proceeds from principal payments on and payoffs of our mortgage loan portfolio of$218.8 million , principal payments on and payoffs of our debt securities and beneficial interests of$155.2 million , the sale of$90.2 million of debt securities held as investments and the proceeds from the sale of loans from our 2017-D mortgage loan trust of$126.0 million . For the year endedDecember 31, 2020 our investing cash inflows of$24.2 million were driven primarily by the proceeds from principal payments on and payoffs of our mortgage loan portfolio of$127.5 million , principal payments on and payoffs of our debt securities and beneficial interests of$53.5 million , the sale of$38.9 million of debt securities held as investments and the sale of our mortgage loans to Gaea in the amount of$25.4 million . This was offset by purchases of debt securities and 63 -------------------------------------------------------------------------------- beneficial interests of$144.7 million and acquisitions of mortgage loans of$89.0 million . For the year endedDecember 31, 2019 our investing cash inflows of$100.2 million were driven primarily by the proceeds from the sale of mortgage loans of$212.6 million to 2019-C, principal payments on and payoffs of our mortgage loan portfolio of$134.7 million , principal payments on and payoffs of our debt securities and beneficial interests of$42.4 million , and the sale of$39.6 million of debt securities held as investments. This was offset by purchases of debt securities and beneficial interests of$187.8 million and acquisitions of mortgage loans of$129.2 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 year endedDecember 31, 2021 , we had net financing cash inflows of$45.7 million due to the borrowings through repurchase transactions of$560.6 million and secured debt of$391.0 million , offset by repayments of$435.7 million on repurchase transactions and pay downs of existing debt obligations of$393.0 million on secured debt. We purchased the remaining 37% ownership of the Class B notes and trust certificates of 2018-C for a total of$17.2 million . We had net financing cash inflows for the year ended 2020 of$32.7 million due to the issuance of our preferred stock and warrants, net of any offering costs for$125.0 million in a series of private placements to institutional accredited investors. Financing cash flows were also impacted by additional borrowings through repurchase transactions of$315.4 million and secured debt of$114.5 million , offset by repayments of$308.3 million on repurchase transactions and pay downs of existing debt obligations of$183.5 million on secured debt. We had net financing cash outflows for the year ended 2019 of$76.0 million due to repayments on repurchase transactions of$444.4 million and secured debt of$241.1 million , offset by additional borrowings through repurchase transactions of$322.6 million , on secured debt of$283.9 million and proceeds of$34.3 million from the sale of our common stock under our At the Market program (see Financing Activities - Equity offerings below). For the years endedDecember 31, 2021 , 2020 and 2019 we paid$29.2 million ,$17.8 million and$27.1 million , respectively, in cash dividends and distributions.
Financing activities – Securities issues
OnFebruary 28, 2020 , our Board of Directors approved a stock repurchase of up to$25.0 million of our common shares. The amount and timing of any repurchases will depend on a number of factors, including but not limited to the price and availability of the common shares, trading volume and general circumstances and market conditions. As ofDecember 31, 2021 we held 147,370 shares of treasury stock consisting of 97,686 shares received through distributions of our shares previously held by our Manager and 49,684 shares acquired through open market purchases, of which 1,220 shares were acquired in the fourth quarter of 2021 under our approved stock buyback plan. As ofDecember 31, 2020 we held 107,243 shares of treasury stock consisting of 58,779 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 buyback plan. During 2020, we issued an aggregate of$130.0 million of preferred stock and warrants to institutional accredited investors in a series of private placements. We issued 2,307,400 shares of 7.25% Series A Fixed-to-Floating Rate Preferred Stock and 2,892,600 shares of 5.00% Series B Fixed-to-Floating Rate Preferred Stock, each at a purchase price per share of$25.00 and two series of five-year warrants to purchase an aggregate of 6,500,000 shares of our common stock at an exercise price of$10.00 per share. Each series of warrants includes a put option that allows the holder to sell the warrants to us at a specified put price on or afterJuly 6, 2023 . UnderU.S. GAAP, we are required to allocate the proceeds between the Preferred stock and warrants. The allocation of the proceeds, net of all offering costs, resulted in the Preferred series A shares receiving an allocation of$51.1 million , the Preferred series B shares receiving an allocation of$64.0 million and the warrants an allocation of$9.5 million . We mark the obligation for the warrants and future put liability to market though earnings. We are using the net proceeds from the private placement to acquire mortgage loans and mortgage-related assets consistent with our investment strategy. During the year endedDecember 31, 2021 , we sold 24,951 shares of common stock for proceeds, net of issuance costs of$0.3 million under our At the Market program, which we sell, through our agents, shares of common stock with an aggregate offering price of up to$100.0 million . During the year endedDecember 31, 2020 , we did not sell any shares of common stock under our At the Market program. During the year endedDecember 31, 2019 , we sold 2,278,518 shares of common stock for proceeds, net of issuance costs of$34.3 million under our At the Market program. 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. 64 --------------------------------------------------------------------------------
Financing Activities – Secured Borrowings and Senior Convertible Bonds
From our inception (January 30, 2014 ) toDecember 31, 2021 , we have completed 18 secured borrowings, not including borrowings we completed for our non-consolidated joint ventures (See Table 17: Investments in joint ventures), through securitization trusts pursuant to Rule 144A under the Securities Act, five of which were outstanding atDecember 31, 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 atDecember 31, 2021 . Our rated secured borrowings are generally structured as "REIT TMP" transactions which allow us to issue multiple classes of securities without using a REMIC structure or being subject to an entity level tax. Our rated secured borrowings generally issue classes of debt fromAAA through mezzanine. We generally retain the mezzanine and residual certificates in the transactions. We have retained the applicable mezzanine and residual certificates from the other four rated secured borrowings outstanding atDecember 31, 2021 . Our rated secured borrowings are designated in the table below. AtMarch 31, 2021 , our 2017-D secured borrowing contained Class A notes and Class B certificates representing the residual interests in the mortgages held within the securitization trusts subsequent to repayment of the Class A debt. We had retained 50.0% 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 sold intoAjax Mortgage Loan Trust 2021-C ("2021-C"). Based on the structure of the transaction we do not consolidate 2021-C underU.S. GAAP. Our 2018-C secured borrowing was structured with Class A notes, Class B notes and trust certificates representing the residual interest in the mortgages held within the securitization trusts subsequent to repayment of the Class A debt. We had retained 5.0% of the Class A notes and 63.0% of the Class B notes and trust certificates. During the first quarter of 2021 we acquired the remaining 37.0% ownership of the Class B notes and trust certificates and settled the remaining 95.0% of the outstanding Class A notes.
The following table shows the initial terms of all securitization notes outstanding at their respective deadlines as of
Table 14: Secured borrowings
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
65
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Interest Rate
Issuing Trust/Issue Date Step-up Date Security Original Principal Interest Rate
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 - %
(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
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
During 2017 and 2018, we completed the public offer and sale of $123.9 million
in aggregate principal amount of our convertible senior notes (the "notes") due
2024, in three separate offerings which 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 current conversion rate of 1.7279 shares of common stock per $25.00
principal amount of the notes, which represents a conversion
66
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price around
During the first, second and fourth quarters of 2021, we completed a series of convertible note repurchases for aggregate principal amounts of$2.5 million ,$5.0 million and$1.3 million , respectively, for total purchase prices of$2.4 million ,$5.1 million and$1.3 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 second quarters of 2021 were both zero and for the fourth quarter of 2021 was$8 thousand . There were no convertible note repurchases during the third quarter of 2021. During the first and third quarters 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. There were no convertible note repurchases during the second and fourth quarters of 2020. Repurchase Transactions We have two repurchase facilities whereby we, through two wholly ownedDelaware trusts (the "Trusts"), acquire pools of mortgage loans which are then sold by the Trusts, as "Seller" to two separate counterparties, the "buyer" or "buyers." One facility has a ceiling of$150.0 million and the other$400.0 million at any one time. Upon the time of the initial sale to the buyer, each Trust, with a simultaneous agreement, also agrees to repurchase the pools of mortgage loans from the buyer. Mortgage loans sold under these facilities carry interest calculated based on a spread to one-month LIBOR, which are fixed for the term of the borrowing. The purchase price that the Trust realizes upon the initial sale of the mortgage loans to the buyer can vary between 70% and 85% of the asset's acquisition price, depending upon the facility being utilized and/or the quality of the underlying collateral. The obligations of the Trust to repurchase these mortgage loans at a future date are guaranteed by theOperating Partnership . The difference between the market value of the asset and the amount of the repurchase agreement is generally the amount of equity we have in the position and is intended to provide the buyer with some protection against fluctuations in the value of the collateral, and/or a failure by us to repurchase the asset and repay the borrowing at maturity. We also have five repurchase facilities substantially similar to the mortgage loan repurchase facilities where the pledged assets are securities retained 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 pending buyout transactions at
Table 15: Buyback transactions by maturity date
December 31, 2021
Maximum
Borrowing Amount of Percentage of
Maturity Date Origination Date Capacity Amount Outstanding Collateral Collateral Coverage Interest Rate
January 6, 2022 October 6, 2021 $ 6,567 $ 6,567 $ 8,450 129 % 1.33 %
January 12, 2022 October 12, 2021 4,978 4,978 6,304 127 % 1.32 %
January 13, 2022 December 15, 2021 2,850 2,850 4,050 142 % 1.31 %
January 14, 2022 October 15, 2021 4,992 4,992 5,808 116 % 1.17 %
January 20, 2022 October 20, 2021 9,667 9,667 11,550 119 % 1.18 %
January 27, 2022 December 27, 2021 2,206 2,206 2,824 128 % 1.30 %
January 28, 2022 October 29, 2021 9,115 9,115 11,244 123 % 1.33 %
January 28, 2022 October 29, 2021 8,508 8,508 10,538 124 % 1.33 %
February 11, 2022 November 12, 2021 3,094 3,094 4,428 143 % 1.75 %
February 11, 2022 November 16, 2021 4,060 4,060 5,796 143 % 1.36 %
February 11, 2022 November 16, 2021 2,166 2,166 3,090 143 % 1.36 %
February 11, 2022 November 16, 2021 1,850 1,850 2,640 143 % 1.36 %
February 11, 2022 November 16, 2021 1,670 1,670 2,287 137 % 1.36 %
February 11, 2022 November 16, 2021 1,526 1,526 2,178 143 % 1.36 %
February 18, 2022 November 19, 2021 9,275 9,275 11,954 129 % 1.36 %
February 24, 2022 November 24, 2021 3,538 3,538 5,106 144 % 1.77 %
67
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December 31, 2021
Maximum
Borrowing Amount Amount of Percentage of
Maturity Date Origination Date Capacity Outstanding Collateral Collateral Coverage Interest Rate
March 8, 2022 December 8, 2021 5,363 5,363 6,970 130 % 1.19 %
March 8, 2022 December 8, 2021 1,955 1,955 2,496 128 % 1.19 %
March 16, 2022 December 16, 2021 40,956 40,956 54,424 133 % 1.21 %
March 16, 2022 December 16, 2021 4,258 4,258 6,232 146 % 1.46 %
March 17, 2022 December 17, 2021 6,425 6,425 8,093 126 % 1.42 %
March 17, 2022 December 17, 2021 5,904 5,904 7,573 128 % 1.42 %
March 17, 2022 December 17, 2021 1,177 1,177 1,687 143 % 1.82 %
March 21, 2022 December 20, 2021 30,850 30,850 41,473 134 % 1.26 %
March 21, 2022 December 20, 2021 2,629 2,629 3,770 143 % 1.56 %
March 22, 2022 December 22, 2021 33,201 33,201 35,956 108 % 0.66 %
March 22, 2022 December 22, 2021 2,892 2,892 3,421 118 % 0.96 %
March 22, 2022 December 22, 2021 1,541 1,541 1,943 126 % 1.16 %
March 22, 2022 December 22, 2021 1,369 1,369 2,047 150 % 1.56 %
March 22, 2022 December 22, 2021 1,330 1,330 1,788 134 % 1.41 %
March 25, 2022 December 27, 2021 15,443 15,443 20,367 132 % 1.41 %
March 25, 2022 December 27, 2021 4,444 4,444 6,413 144 % 1.81 %
April 1, 2022 October 5, 2021 28,482 28,482 36,200 127 % 1.36 %
April 19, 2022 October 22, 2021 7,909 7,909 9,279 117 % 1.02 %
April 19, 2022 October 22, 2021 6,215 6,215 7,276 117 % 1.02 %
April 19, 2022 October 22, 2021 5,090 5,090 6,063 119 % 1.02 %
June 10, 2022 December 13, 2021 13,992 13,992 20,151 144 % 1.49 %
June 10, 2022 December 13, 2021 6,220 6,220 8,203 132 % 1.29 %
July 8, 2022 July 9, 2021 150,000 13,824 20,856 151 % 2.60 %
September 22, 2022 September 23, 2021 400,000 228,523 300,324 131 % 2.36 %
Totals/weighted averages $ 853,707 $ 546,054 $ 711,252 130 % 1.74 %
December 31, 2020
Maximum
Borrowing Amount Amount of Percentage of
Maturity Date Origination Date Capacity Outstanding Collateral Collateral Coverage Interest Rate
January 6, 2021 October 9, 2020 $ 35,635 $ 35,635 $ 46,120 129 % 2.33 %
January 6, 2021 September 28, 2020 7,697 7,697 10,075 131 % 2.33 %
January 6, 2021 September 28, 2020 6,311 6,311 9,038 143 % 2.48 %
January 6, 2021 September 28, 2020 4,755 4,755 6,114 129 % 2.33 %
January 6, 2021 September 28, 2020 4,666 4,666 6,044 130 % 2.33 %
January 6, 2021 September 28, 2020 3,213 3,213 4,667 145 % 2.48 %
January 11, 2021 September 29, 2020 5,879 5,879 7,575 129 % 2.32 %
January 14, 2021 October 29, 2020 6,991 6,991 8,738 125 % 2.35 %
January 20, 2021 October 20, 2020 13,263 13,263 16,582 125 % 2.22 %
January 29, 2021 October 30, 2020 7,762 7,762 9,702 125 % 2.21 %
January 29, 2021 October 30, 2020 7,153 7,153 9,537 133 % 2.21 %
February 1, 2021 December 1, 2020 12,258 12,258 16,052 131 % 1.88 %
February 1, 2021 December 1, 2020 12,015 12,015 15,794 131 % 1.88 %
February 1, 2021 December 1, 2020 5,298 5,298 6,895 130 % 1.88 %
February 1, 2021 December 1, 2020 3,985 3,985 5,136 129 % 1.88 %
February 1, 2021 December 1, 2020 2,887 2,887 3,790 131 % 1.88 %
February 1, 2021 December 1, 2020 2,332 2,332 3,360 144 % 2.03 %
68
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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
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 December 31, 2021 , we had $546.1 million outstanding under our repurchase
transactions compared to $421.1 million as of December 31, 2020 . The maximum
month-end balance outstanding during the year ended December 31, 2021 was $563.0
million , compared to a maximum month-end balance for the year ended 2020 of
$467.3 million . The following table presents certain details of our repurchase
transactions for the years ended December 31, 2021 and 2020 ($ in thousands):
Table 16: Repurchase Balances
For the year ended December 31,
2021 2020
Balance at the end of year $ 546,054 $ 421,132
Maximum month-end balance outstanding during the year $ 562,999 $ 467,344
Average balance $ 369,858 $ 411,420
The decrease in our average balance of
From
Our investment guidelines do not require us to maintain a specific leverage ratio, and we believe that 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 stable and reliable financing conditions for these 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. OnDecember 30, 2021 , our Board of Directors declared a special cash dividend of$0.10 per share of our common stock due to our 2021 taxable income, which was paid onJanuary 25, 2022 to our common stockholders of record as ofJanuary 10, 2022 . OnMarch 3, 2022 , our Board of Directors declared a dividend of$0.26 per share, to be paid onMarch 31, 2022 to stockholders of record as ofMarch 18, 2022 . Our Management Agreement with our Manager requires the payment of an 69 -------------------------------------------------------------------------------- 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, plus distributions on our externally-held operating partnership units all paid out within the applicable calendar year, paid out of our taxable income, exceeds 8% (on an annualized basis) of our stock's book value. For the years endedDecember 31, 2021 and 2020 we recorded no expense for an incentive fee payable to the Manager. Comparatively, for the year endedDecember 31, 2019 we recorded an expense of$0.7 million for an incentive fee payable to the Manager. Our dividend payments are driven by the amount of our taxable income, subject toIRS rules for maintaining our status as a REIT. Our most recently declared quarterly dividend represents a payment of approximately 6.53% on an annualized basis of an adjusted book value of$15.92 per share atDecember 31, 2021 . If our taxable income increases we could exceed the threshold for paying an incentive fee to our Manager, and thereby trigger such payment. See Note 10 - Related party transactions.
Off-balance sheet arrangements
Other than our investments in debt securities and beneficial interests issued by joint ventures, which are summarized below by securitization trust, and our equity method investments discussed elsewhere in this report, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities. As such, we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships.
Table 17: Investments in joint ventures
We form joint ventures with third party institutional accredited investors to
purchase mortgage loans and other mortgage related assets. The debt securities
and beneficial interests we carry on our consolidated balance sheets are issued
by securitization trusts formed by these joint ventures, which are VIEs, that we
have either sponsored or contributed assets to, but which we do not consolidate
since we have determined we are not the primary beneficiary.
A summary of our investments in joint ventures is presented below ($ in
thousands):
Great Ajax Corp. Ownership
Current
Owned Stated
Original Stated or Notional
Total Original or Notional Principal
Outstanding Ownership Principal
Balance Balance
Issuing Trust/Issue Date Security Principal Coupon Percent Retained RetainedAjax Mortgage Loan Trust 2018-A/ April 2018 Class A notes due 2058$ 91,036 3.85 % - % $ - $ - Trust certificates$ 22,759 - % 9.36 %$ 2,130 $ 98 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 $ 2,683 Ajax Mortgage Loan Trust 2018-D/ September 2018 Class A notes due 2058$ 80,664 3.75 % 20.00 %$ 16,133 $ 11,274 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 % - % $ - $ - Class B notes due 2058 $ 8,035 5.25 % - % $ - $ - Trust certificates$ 20,662 - % 20.00 %$ 4,132 $ 902 70
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Great Ajax Corp. Ownership
Current
Owned Stated
Original Stated or Notional
Total Original or Notional Principal
Outstanding Ownership Principal Balance Balance
Issuing Trust/Issue Date Security Principal Coupon Percent Retained Retained
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 % $ 6,480 $ 3,995
Ajax Mortgage Loan Trust
2018-G/ December 2018 Class A notes due 2057 $ 173,562 4.38 % 25.00 % $ 43,390 $ 19,123
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 $ 10,538
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 $ 11,244
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-E/ September 2019 Class A notes due 2059 $ 181,101 3.00 % 6.55 % $ 11,862 $ 5,808
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 $ 6,304
Class B notes due 2059 $ 13,199 4.25 % 20.00 % $ 2,640 $ 2,640
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 $ 8,093
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 $ 36,200
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 $ 2,496
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
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Great Ajax Corp. Ownership
Current
Owned Stated
Original Stated or Notional
Total Original or Notional Principal
Outstanding Ownership Principal Balance Balance
Issuing Trust/Issue Date Security Principal Coupon Percent Retained Retained
Ajax Mortgage Loan Trust Class A notes due
2020-D/ September 2020 2060 $ 330,721 2.25 % 10.01 % $ 33,105 $ 6,970
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 Class A notes due
2021-C/ April 2021 2061 $ 194,673 2.12 % 5.01 % $ 9,753 $ 8,204
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 Class A notes due
2021-D/ May 2021 2060 $ 191,468 2.00 % 6.94 % $ 13,288 $ 11,954
Class B notes due
2060 $ 25,529 4.00 % 20.00 % $ 5,106 $ 5,106
Trust certificates $ 38,293 - % 20.00 % $ 7,659 $ 7,630
Ajax Mortgage Loan Trust Class A notes due
2021-E/ July 2021(1) 2060 $ 430,760 1.82 % (3) 10.01 % $ 43,119 $ 39,377
Class M notes due
2060(2) $ 19,415 2.94 % 10.01 % $ 1,943 $ 1,943
Class B-1 and B-2
notes due 2060 $ 38,313 3.73 % 10.01 % $ 3,835 $ 3,835
Class B-3 notes due
2060 $ 29,253 3.73 % 19.57 % $ 5,725 $ 5,726
Trust certificates $ 518,357 - % 19.57 % $ 101,471 (4) $ 4,334
Ajax Mortgage Loan Trust Class A notes due
2021-F/ June 2021 2061 $ 476,082 1.88 % 12.60 % $ 59,986 $ 54,424
Class B notes due
2061 $ 49,463 3.75 % 12.60 % $ 6,232 $ 6,232
Trust certificates $ 92,743 - % 12.60 % $ 11,686 $ 11,670
Ajax Mortgage Loan Trust Class A notes due
2021-G/ June 2021 2061 $ 317,573 1.88 % 7.26 % $ 23,056 $ 20,367
Class B notes due
2061 $ 32,995 3.75 % 20.00 % $ 6,599 $ 6,413
Trust certificates $ 61,864 - % 20.00 % $ 12,373 $ 11,838
Class A notes due
2021-NPL 1/ November 2021 2051 $ 253,970 2.00 % 16.33 % $ 41,482 $ 41,482
Class B notes due
2051 $ 23,088 4.63 % 16.33 % $ 3,771 $ 3,771
Trust certificates $ 52,773 - % 16.33 % $ 8,620 $ 8,620
(1)Ajax Mortgage Loan Trust 2021-E ("2021-E") was formed on July 19, 2021 which
was subsequent to completing Ajax Mortgage Loan Trust 2021-F and 2021-G. The
trust intends to make an election to be taxed as a REMIC however the residual
class was placed with an unrelated third party.
(2)2021-E includes Class M notes.
(3)Weighted average of Class A notes.
(4)The trust certificate has no stated principal balance and is tied to the
unpaid balances of the underlying mortgage loans.
72
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Contractual obligations
Our contractual obligations include obligations under repurchase agreements, our convertible senior notes, accrued interest on repurchase agreements and convertible senior notes and the obligation to sell on our outstanding warrants.
We use repurchase agreements to finance certain acquisitions of mortgage loans and certain debt securities we retain from our securitizations. AtDecember 31, 2021 , andDecember 31, 2020 , our repurchase obligations totaled$546.1 million and$421.1 million , respectively. Our repurchase financing is considered short term in nature as the underlying agreements generally renew within one year. (See "Repurchase Transactions" above.) Our convertible senior notes had outstanding principal balances of$104.6 million and$113.4 million atDecember 31, 2021 andDecember 31, 2020 , respectively. The notes will mature onApril 30, 2024 unless earlier repurchased, converted or redeemed. During certain periods and subject to certain conditions the notes will be convertible by their holders into shares of our common stock at a current 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. (See "Convertible Senior Notes" above.) Our accrued interest expense associated with our repurchase obligations atDecember 31, 2021 andDecember 31, 2020 , was$4.9 million and$3.3 million , respectively, and the accrued interest on our convertible senior notes atDecember 31, 2021 andDecember 31, 2020 , was$19.3 million and$29.1 million , respectively. Interest expense accrued on our repurchase financings is paid upon the maturity of a financing. Unless the repurchase financing is renewed, we are required to repay the borrowing and any accrued interest and we concurrently receive back our pledged collateral from the lender. Interest expense on our convertible senior notes is paid quarterly in arrears onJanuary 15 ,April 15 ,July 15 andOctober 15 of each year. We have two series of five-year warrants outstanding which allow the holders 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 back to us at a specified put price on or afterJuly 06, 2023 . We believe the most economically beneficial result for the holders will be to exercise the put, which we expect to settle for$50.7 million . Our secured borrowings are not included under our contractual obligations as such borrowings are non-recourse to us and principal and interest are only paid to the extent that cash flows from mortgage loans (in the securitization trust) collateralizing the debt are received. Accordingly, a projection of contractual maturities over the next five years is inapplicable.
Inflation
Virtually all of our assets and liabilities are interest-rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our activities and consolidated balance sheet are measured with reference to historical cost and/or fair market value without considering inflation. It is possible, however, that inflation that is not accompanied by a corresponding wage increase could drive a decrease in disposable household income and increase the credit risk of certain borrowers. Subsequent Events
Since the end of the year, we have acquired two residential RPLs with a total UPB of
We have also agreed to acquire, subject to due diligence, 23 residential RPLs and 39 NPLs with aggregate UPB of$5.6 million and$7.4 million , respectively, in five transactions and three transactions, respectively, from five sellers and three sellers, respectively. The purchase price of the residential RPLs equals 98.3% of UPB and 39.7% of the estimated market value of the underlying collateral value of$13.8 million . The purchase price of the NPLs equals 99.2% of UPB and 49.9% of the estimated market value of the underlying collateral of$14.7 million . InJanuary 2022 , Gaea, an affiliated company in which we hold an interest, completed a private capital raise through which it raised$30.0 million from the issuance of 1,828,153 shares of common stock and warrants. The purchase price per combined share and warrant was$16.41 . Each warrant is exercisable for a single share of common stock at an exercise price of$16.41 for 24 months beginning on the date on which the shares of common stock are tradable on an exchange. We acquired 73 --------------------------------------------------------------------------------
371,103 shares and an equal number of warrants. At the closing of the private placement, our ownership in Gaea was approximately 22.2%.
OnJanuary 25, 2022 , we the entered into an agreement to extend the interest rate step-up dates forAjax Mortgage Loan Trust 2018-D and Ajax Mortgage Loan Trust 2018-G, both of which are joint ventures, fromJanuary 2022 toApril 2022 . OnFebruary 22, 2022 , the Board authorized an increase in the annual compensation of our independent directors from$100,000 to$140,000 , 50% of which is payable in shares of our common stock and 50% in cash, and committee heads will receive an increase of$5,000 payable in cash. The increases are effective as ofJanuary 1, 2022 . The value of the common stock is determined in the same manner as the value of the common stock to be paid to our Manager as part of its base management fee.
At
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