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What changed in Cherry Hill Mortgage Investment Corp's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Cherry Hill Mortgage Investment Corp's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+166 added−185 removedSource: 10-K (2026-03-05) vs 10-K (2025-03-06)

Top changes in Cherry Hill Mortgage Investment Corp's 2025 10-K

166 paragraphs added · 185 removed · 144 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAs a result, our acquisition and management decisions will depend on prevailing market conditions, and our targeted asset classes and strategy may vary over time in response to market conditions and may be limited by such compliance. 9 Table of Contents Our senior management team, comprised of Jay Lown, our President and Chief Executive Officer, Julian Evans, our Chief Investment Officer, Michael Hutchby, our Chief Financial Officer, Treasurer and Secretary, and our MSR portfolio manager, makes the determinations as to the percentage of assets that are invested in each of our targeted asset classes.
Biggest changeOur senior management team, comprised of Jeffrey Lown II, our President and Chief Executive Officer, Julian Evans, our Chief Investment Officer, Apeksha Patel, our Chief Financial Officer and Treasurer, and our MSR portfolio manager, makes the determinations as to the percentage of assets that are invested in each of our targeted asset classes.
Aurora has two separate MSR financing facilities: (i) the Freddie Mac MSR Revolver, which is revolving credit facility for up to $100.0 million that is secured by all Freddie Mac MSRs owned by Aurora (the “Freddie Mac MSR Revolver”); and (ii) the Fannie Mae MSR Revolving Facility, which is a revolving credit facility for up to $150.0 million, that is secured by all Fannie Mae MSRs owned by Aurora (the “Fannie Mac MSR Revolving Facility”).
Aurora has two separate MSR financing facilities: (i) the Freddie Mac MSR Revolver, which is a revolving credit facility for up to $100.0 million that is secured by all Freddie Mac MSRs owned by Aurora (the “Freddie Mac MSR Revolver”); and (ii) the Fannie Mae MSR Revolving Facility, which is a revolving credit facility for up to $100.0 million, that is secured by all Fannie Mae MSRs owned by Aurora (the “Fannie Mac MSR Revolving Facility”).
We also attempt to mitigate duration and basis risk arising from our RMBS portfolio. The hedging instruments that we currently use include interest rate swaps, TBAs, swaptions and U.S. Treasury futures. We may also use financial futures, options, interest rate cap agreements, and forward sales.
We also attempt to mitigate duration and basis risk arising from our RMBS portfolio. The hedging instruments that we currently use include interest rate swaps, TBAs, Eris SOFR swap futures, swaptions and U.S. Treasury futures. We may also use financial futures, options, interest rate cap agreements, and forward sales.
We have entered into repurchase agreements with 35 counterparties as of December 31, 2024. From time to time, we expect to negotiate and enter into additional master repurchase agreements with other counterparties that could produce opportunities to acquire certain RMBS that may not be available from our existing counterparties. See “Item 7.
We have entered into repurchase agreements with multiple counterparties as of December 31, 2025. From time to time, we expect to negotiate and enter into additional master repurchase agreements with other counterparties that could produce opportunities to acquire certain RMBS that may not be available from our existing counterparties. See “Item 7.
Our principal objective is to generate attractive current yields and risk-adjusted total returns for our stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation. We attempt to attain this objective by selectively constructing and actively managing a portfolio of Servicing Related Assets and RMBS.
Our principal objective is to generate attractive current yields and risk-adjusted total returns for our stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation. We attempt to attain this objective by selectively constructing and actively managing a portfolio of Servicing Related Assets and residential mortgage-backed securities (“RMBS”).
These agreements represent uncommitted financing provided by the counterparties. Our repurchase transactions are collateralized by our RMBS. In a repurchase transaction, we sell an asset to a counterparty at a discounted value, or the loan amount, and simultaneously agree to repurchase the same asset from such counterparty at a price equal to the loan amount plus an interest factor.
In a repurchase transaction, we sell an asset to a counterparty at a discounted value, or the loan amount, and simultaneously agree to repurchase the same asset from such counterparty at a price equal to the loan amount plus an interest factor.
Specifically, we endeavor to minimize our environmental impact by (1) reducing waste that is generated by our Company and sent to landfills, (2) purchasing, to the extent practicable, environmentally responsible products, and (3) reducing internal paper usage. We believe that the Company’s corporate footprint and business operations have a relatively modest impact on the environment.
Environmental Considerations Our environmental strategy is based on simplicity and transparency. Specifically, we endeavor to minimize our environmental impact by (1) reducing waste that is generated by our Company and sent to landfills, (2) purchasing, to the extent practicable, environmentally responsible products, and (3) reducing internal paper usage.
We believe that every individual on our team brings a unique perspective and experience that contributes to our success and seek to have a well-rounded, inclusive workplace that reflects the communities in which we live and conduct our business and our stockholders. Environmental Considerations Our environmental strategy is based on simplicity and transparency.
We believe that every individual on our team brings a unique perspective and experience that contributes to our success and seek to have a well-rounded, inclusive workplace that reflects the communities in which we live and conduct our business and our stockholders. As of December 31, 2025, we had 14 full-time employees.
Our Financing Strategies and Use of Leverage We finance our RMBS with what we believe to be a prudent amount of leverage, which will vary from time to time based upon the particular characteristics of our portfolio, availability of financing and market conditions. Our borrowings for RMBS consist of repurchase transactions under master repurchase agreements.
Changes to our investment strategy may include, without limitation, modification or expansion of the types of assets which we may acquire for our investment portfolio. 9 Table of Contents Our Financing Strategies and Use of Leverage We finance our RMBS with what we believe to be a prudent amount of leverage, which will vary from time to time based upon the particular characteristics of our portfolio, availability of financing and market conditions.
Nevertheless, we believe in promoting a sustainable environment by using resources as efficiently and responsibly as practicable.
We believe that the Company’s corporate footprint and business operations have a relatively modest impact on the environment. Nevertheless, we believe in promoting a sustainable environment by using resources as efficiently and responsibly as practicable.
Our employees are provided, among others, with the following benefits: medical insurance, dental insurance, 401(k) plan with company match incentive and Health Savings Account. We invest in professional training and development, to further enhance employees capabilities and personal development. Since the Internalization, we began focusing our efforts on ensuring that our policies and plans align with our goals.
We invest in professional training and development to further enhance employees capabilities and personal development. Since the Internalization, we have focused our efforts on ensuring that our policies and plans align with our goals.
We strive to create a workplace environment where employees thrive both professionally and personally. Our primary goal in human capital management is to attract, develop and retain talent by providing competitive wages and benefits and investing in professional development and well being.
Risk Factors—We operate in a highly competitive market.” Human Capital Resources Our primary goal in human capital management is to attract, develop and retain talent by providing competitive wages and benefits and investing in professional development and well-being. Employee compensation packages are designed to align employee and stockholder interests and to provide incentives to attract, retain and motivate talented employees.
Employee compensation packages are designed to align employee and stockholder interests and to provide incentives to attract, retain and motivate talented employees. We are committed to continuously evaluating and ensuring the competitiveness of our benefits offerings to meet the needs of our employees and their families.
We are committed to continuously evaluating and ensuring the competitiveness of our benefits offerings to meet the needs of our employees and their families. Our employees are provided, among others, with the following benefits: medical insurance, dental insurance, 401(k) plan with company match incentive and Health Savings Account.
Removed
Changes to our investment strategy may include, without limitation, modification or expansion of the types of assets which we may acquire for our investment portfolio.
Added
As a result, our acquisition and management decisions will depend on prevailing market conditions, and our targeted asset classes and strategy may vary over time in response to market conditions and may be limited by such compliance.
Removed
Risk Factors—We operate in a highly competitive market.” Human Capital Resources On November 14, 2024, we completed the Internalization and we began operating as a fully integrated, internally managed company.
Added
Our borrowings for RMBS consist of repurchase transactions under master repurchase agreements. These agreements represent uncommitted financing provided by the counterparties. Our repurchase transactions are collateralized by our RMBS.
Removed
Prior to November 14, 2024, we were externally managed by CHMM, and, with the exception of Aurora, our licensed mortgage servicing subsidiary, which had three leased employees, we had no employees. As of December 31, 2024 we had 12 full-time employees.
Removed
We maintained management continuity and team expertise by directly hiring the senior management team and other personnel who had historically provided services to us through CHMM. We believe our team is the key to our success and we proactively review human capital best practices to continually enhance our performance and company culture.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile we would dispute and intend to vigorously defend against any claims made by CHMM that we breached the terms of the management agreement, it is possible that the results of any potential litigation with CHMM could adversely affect our business, results of operations, and our financial condition. 24 Table of Contents Risks Related to Our Organizational Structure Maintenance of certain exceptions from (or otherwise not falling within) the definitions of “investment company” under the Investment Company Act imposes significant limitations on our operations.
Biggest changeAI-related challenges, including potential government regulations, flaws, or other deficiencies, could expose us to further risks. 25 Table of Contents Risks Related to Our Organizational Structure Maintenance of certain exceptions from (or otherwise not falling within) the definitions of “investment company” under the Investment Company Act imposes significant limitations on our operations.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: • the uncertainty and economic impact of global pandemics, and the resulting impact on market liquidity, the value of assets and availability of financing; • actual or anticipated variations in our quarterly operating results; • increases in market interest rates that lead purchasers of our common stock to demand a higher yield or to seek alternative investments; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key personnel; • actions by stockholders; • speculation in the press or investment community; • general market, economic and political conditions and the impact of these conditions on the global credit markets; • the operating performance of other similar companies; • changes in accounting principles; and • passage of legislation, changes in monetary policy or other regulatory developments that adversely affect us or our industry. 27 Table of Contents Future sales of our common stock or securities convertible into or exercisable as exchangeable for our common stock could cause the market value of our common stock to decline and could result in dilution of your shares.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: • the uncertainty and economic impact of global pandemics, and the resulting impact on market liquidity, the value of assets and availability of financing; • actual or anticipated variations in our quarterly operating results; • increases in market interest rates that lead purchasers of our common stock to demand a higher yield or to seek alternative investments; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key personnel; • actions by stockholders; • speculation in the press or investment community; • general market, economic and political conditions and the impact of these conditions on the global credit markets; • the operating performance of other similar companies; • changes in accounting principles; and • passage of legislation, changes in monetary policy or other regulatory developments that adversely affect us or our industry. 28 Table of Contents Future sales of our common stock or securities convertible into or exercisable as exchangeable for our common stock could cause the market value of our common stock to decline and could result in dilution of your shares.
Under current Maryland law, our present and former directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or • active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action. 26 Table of Contents In addition, our charter authorizes us to indemnify our present and former directors and officers for actions taken by them in those and other capacities to the maximum extent permitted by Maryland law, and our bylaws require us to indemnify our present and former directors and officers, to the maximum extent permitted by Maryland law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us as a director or officer in those and other capacities.
Under current Maryland law, our present and former directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or • active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action. 27 Table of Contents In addition, our charter authorizes us to indemnify our present and former directors and officers for actions taken by them in those and other capacities to the maximum extent permitted by Maryland law, and our bylaws require us to indemnify our present and former directors and officers, to the maximum extent permitted by Maryland law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us as a director or officer in those and other capacities.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than the sum of: • 85% of our REIT ordinary income for that year; • 95% of our REIT capital gain net income for that year; and • any undistributed taxable income from prior years. 29 Table of Contents We intend to distribute our taxable income to our stockholders in a manner intended to satisfy the 90% distribution requirement and to avoid both corporate income tax and the 4% nondeductible excise tax.
In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than the sum of: • 85% of our REIT ordinary income for that year; • 95% of our REIT capital gain net income for that year; and • any undistributed taxable income from prior years. 30 Table of Contents We intend to distribute our taxable income to our stockholders in a manner intended to satisfy the 90% distribution requirement and to avoid both corporate income tax and the 4% nondeductible excise tax.
Although REITs generally receive certain tax advantages compared to entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a corporation. 32 Table of Contents Liquidation of our assets may jeopardize our REIT qualification.
Although REITs generally receive certain tax advantages compared to entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a corporation. 33 Table of Contents Liquidation of our assets may jeopardize our REIT qualification.
Further, the REIT rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. 31 Table of Contents Our ownership limitation may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their common stock.
Further, the REIT rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. 32 Table of Contents Our ownership limitation may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their common stock.
If we failed one of those tests, we would either be required to pay a penalty tax, which could be material, to maintain REIT status, or we would fail to qualify as a REIT. 30 Table of Contents The failure of RMBS subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
If we failed one of those tests, we would either be required to pay a penalty tax, which could be material, to maintain REIT status, or we would fail to qualify as a REIT. 31 Table of Contents The failure of RMBS subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
Our board of directors approves our major strategies, including our strategies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other strategies without a vote of our stockholders. 25 Table of Contents Certain provisions of Maryland law could inhibit a change in our control.
Our board of directors approves our major strategies, including our strategies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other strategies without a vote of our stockholders. 26 Table of Contents Certain provisions of Maryland law could inhibit a change in our control.
Unfavorable ESG ratings may lead to increased negative sentiment toward us or the assets in which we invest and to the diversion of investments more in line with environmental sustainability, which could have a negative impact on our access to and costs of capital. Our risk management policies and procedures may not be effective.
Unfavorable ESG ratings may lead to increased negative sentiment toward us or the assets in which we invest and to the diversion of investments more in line with environmental sustainability, which could have a negative impact on our access to and costs of capital. 24 Table of Contents Our risk management policies and procedures may not be effective.
A return of capital is not taxable, but has the effect of reducing the tax basis of a stockholder’s investment in our common stock. 28 Table of Contents Risks Related to U.S.
A return of capital is not taxable, but has the effect of reducing the tax basis of a stockholder’s investment in our common stock. 29 Table of Contents Risks Related to U.S.
If incorrect market data is entered into even a well-founded valuation model, the resulting valuations will be incorrect. However, even if market data is input correctly, “model prices” will often differ substantially from market prices, especially for securities with complex characteristics or whose values are particularly sensitive to various factors.
All valuation models rely on correct market data inputs. If incorrect market data is entered into even a well-founded valuation model, the resulting valuations will be incorrect. However, even if market data is input correctly, “model prices” will often differ substantially from market prices, especially for securities with complex characteristics or whose values are particularly sensitive to various factors.
Furthermore, because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data, and, in the case of predicting performance in scenarios with little or no historical precedent (such as extreme broad-based declines in home prices, or deep economic recessions or depressions), such models must employ greater degrees of extrapolation, and are therefore more speculative and of more limited reliability. 18 Table of Contents All valuation models rely on correct market data inputs.
Furthermore, because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data, and, in the case of predicting performance in scenarios with little or no historical precedent (such as extreme broad-based declines in home prices, or deep economic recessions or depressions), such models must employ greater degrees of extrapolation, and are therefore more speculative and of more limited reliability.
The value of our Servicing Related Assets may vary substantially with changes in interest rates. The values of Servicing Related Assets are highly sensitive to changes in interest rates. The value of Servicing Related Assets typically increases when interest rates rise and decreases when interest rates decline due to the effect those changes in interest rates have on prepayment estimates.
The values of Servicing Related Assets are highly sensitive to changes in interest rates. The value of Servicing Related Assets typically increases when interest rates rise and decreases when interest rates decline due to the effect those changes in interest rates have on prepayment estimates.
We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations. We operate in a highly regulated environment and are subject to the rules, regulations, approvals, licensing, reporting and examination requirements of various federal, state and local authorities.
We operate in a highly regulated environment and are subject to the rules, regulations, approvals, licensing, reporting and examination requirements of various federal, state and local authorities.
However, our ability to make distributions will depend on our earnings, applicable law, our financial condition and such other factors as our board of directors may deem relevant from time to time.
However, our ability to make distributions will depend on our earnings, applicable law, our financial condition and such other factors as our board of directors may deem relevant from time to time. We will declare and make distributions to our stockholders only to the extent approved by our board of directors.
To the extent we do not utilize derivatives to hedge against changes in the fair value of our Servicing Related Assets, our balance sheet, results of operations and cash flows would be susceptible to significant volatility due to changes in the fair value of, or cash flows from, those assets as interest rates change. 16 Table of Contents If delinquencies on mortgage loans increase, the value of our Servicing Related Assets may decline significantly.
To the extent we do not utilize derivatives to hedge against changes in the fair value of our Servicing Related Assets, our balance sheet, results of operations and cash flows would be susceptible to significant volatility due to changes in the fair value of, or cash flows from, those assets as interest rates change.
Delinquency rates have a significant impact on the value of our Servicing Related Assets. An increase in delinquencies on the mortgage loans underlying the Servicing Related Assets will generally result in lower net revenue because, typically, servicers will only collect servicing fees from GSEs or mortgage owners for performing loans.
An increase in delinquencies on the mortgage loans underlying the Servicing Related Assets will generally result in lower net revenue because, typically, servicers will only collect servicing fees from GSEs or mortgage owners for performing loans. Our expectation of delinquencies is a significant assumption underlying the cash flow projections on the related pools of mortgage loans.
Our use of models and data may induce us to purchase certain assets at prices that are too high, sell certain other assets at prices that are too low or miss favorable opportunities altogether. Similarly, any hedging activities that are based on faulty models and data may prove to be unsuccessful.
Our use of models and data may induce us to purchase certain assets at prices that are too high, sell certain other assets at prices that are too low or miss favorable opportunities altogether.
Our expectation of delinquencies is a significant assumption underlying the cash flow projections on the related pools of mortgage loans. If delinquencies are significantly greater than expected, the actual fair value of the Servicing Related Assets could be diminished. As a result, we could suffer a loss. Prepayment rates can change, adversely affecting the performance of our assets.
If delinquencies are significantly greater than expected, the actual fair value of the Servicing Related Assets could be diminished. As a result, we could suffer a loss. Prepayment rates can change, adversely affecting the performance of our assets.
Additionally, the complexity and fast-paced evolution of AI present significant challenges, especially as we compete with other companies in this space. We may not always succeed in identifying or resolving problems before they emerge. AI-related challenges, including potential government regulations, flaws, or other deficiencies, could expose us to further risks.
Additionally, the complexity and fast-paced evolution of AI present significant challenges, especially as we compete with other companies in this space. We may not always succeed in identifying or resolving problems before they emerge.
Some models, such as prepayment models or mortgage default models, may be predictive in nature. The use of predictive models has inherent risks. For example, such models may incorrectly forecast future behavior, leading to potential losses.
Similarly, any hedging activities that are based on faulty models and data may prove to be unsuccessful. 18 Table of Contents Some models, such as prepayment models or mortgage default models, may be predictive in nature. The use of predictive models has inherent risks. For example, such models may incorrectly forecast future behavior, leading to potential losses.
We cannot predict or control the impact future actions by the Federal Reserve will have on the overall economy or on our business. Accordingly, future actions by the Federal Reserve could have a material and adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
Accordingly, future actions by the Federal Reserve could have a material and adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders. 16 Table of Contents The value of our Servicing Related Assets may vary substantially with changes in interest rates.
Furthermore, competition for assets in our targeted asset classes may lead to the price of such assets increasing, which may further limit our ability to generate desired returns. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations.
Furthermore, competition for assets in our targeted asset classes may lead to the price of such assets increasing, which may further limit our ability to generate desired returns.
We will declare and make distributions to our stockholders only to the extent approved by our board of directors. 23 Table of Contents We face possible risks associated with the effects of climate change and severe weather.
We face possible risks associated with the effects of climate change and severe weather.
Removed
Risks Related to the Termination of our Management Agreement with CHMM We may not be able to fully realize the expected benefits of our transition to a self-managed company or the ability to realize such benefits may take longer than anticipated. On November 14, 2024, the management agreement with CHMM terminated and we thereafter became a self-managed company.
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We cannot predict or control the impact future actions by the Federal Reserve will have on the overall economy or on our business.
Removed
We believe that the termination of the management agreement, the elimination of the quarterly management fee payment and the transition to a self-management structure will result in material benefits to our stockholders, including substantial cost savings, the potential for enhanced returns on future capital growth, the elimination of conflicts of interest and strengthened alignment of interests between management and stockholders, and the potential to attract new institutional investors.
Added
If delinquencies on mortgage loans increase, the value of our Servicing Related Assets may decline significantly. Delinquency rates have a significant impact on the value of our Servicing Related Assets.
Removed
Our ability to fully and timely realize the anticipated benefits of this transition is subject to various risks.
Added
We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. 23 Table of Contents Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition and results of operations.
Removed
Certain risks that may adversely impact the process include: any adverse impacts resulting from litigation with CHMM related to the termination of the management agreement; unforeseen or higher than anticipated expenses following the transition; and other unforeseen developments resulting from the change in our management structure.
Added
Recently, there have been significant changes to trade policies, export control laws, sanctions, legislation, treaties, and tariffs in the United States and other countries. The future of global trade relationships remains uncertain, including with respect to potential changes in trade laws, regulations, policies, and tariffs.
Removed
The failure to manage the transition process efficiently and effectively could result in the anticipated benefits of the transition not being realized in the timeframe currently anticipated or at all.
Added
While we are not directly engaged in international trade, such developments can indirectly affect macroeconomic conditions in the United States, including inflation and interest rates-both of which have a significant impact on the residential real estate and mortgage markets.
Removed
Following our internalization, we are responsible for functions previously performed by our external manager, which may result in additional costs, including, among other things, expenses related to hiring and retaining employees, compensation and benefits, and other operational and administrative costs.
Added
For example, heightened tariffs or ongoing trade disputes may lead to increased input costs, contributing to inflationary pressures and potentially influencing monetary policy decisions by the Federal Reserve. Fluctuating interest rates could, in turn, reduce housing affordability, slow home price appreciation, increase mortgage delinquency rates, and adversely impact the performance of the residential mortgage assets in which we invest.
Removed
We are also subject to potential liabilities commonly faced by employers, such as workers’ compensation claims, labor disputes, and other employee-related matters. If the ongoing costs of operating as an internally managed company exceed the expenses we previously incurred under our external management structure, our financial condition and results of operations could be adversely affected.
Added
We cannot predict what additional actions may be taken by the United States or other governments, what sectors may be affected, or how financial markets may respond.
Removed
Potential legal matters related to the termination of the management agreement with CHMM could adversely affect our business, results of operations, and our financial condition. As of the date of filing this Annual Report on Form 10-K, no litigation relating to our termination of the management agreement without payment of a termination fee is pending.
Added
To the extent that trade policy changes or broader geopolitical developments adversely affect inflation, interest rates, or the housing and mortgage markets more generally, our business, financial condition, and results of operations could be materially and adversely affected. We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations.
Removed
While we are not aware of any plans by CHMM, our former external manager, to file a complaint against us relating to our termination of the management agreement, it is possible that CHMM could file a complaint against us alleging, among other things, breach of contract.
Removed
Our board of directors believes that we complied with the terms of the management agreement and that any complaint filed by CHMM would be without merit.
Removed
However, the results of litigation are inherently uncertain and we are unable to predict the outcome of any litigation relating to termination of the management agreement if it is commenced by CHMM or by us.
Removed
It is possible that a court could find that we breached the management agreement and any damages or costs and fees that may be awarded to CHMM could be significant.
Removed
Unless Congress takes action, the 20% deduction applicable to REIT dividends will expire on January 1, 2026.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur current CFO is Michael Hutchby. Mr. Hutchby has a B.A. in Economics from The Johns Hopkins University and an M.B.A. from the Stern School of Business at New York University. Mr. Hutchby was appointed the Company’s CFO, Treasurer and Secretary in June 2019 and previously served as the Company’s Controller from October 2013 to June 2019.
Biggest changeOur current CEO is Jeffrey Lown II. Mr. Lown has a B.S. in Finance from Lehigh University and an M.B.A. from the D’Amore-McKim School of Business at Northeastern University. Mr. Lown was appointed the Company’s President and CEO in October 2013. As mentioned above, the CEO is responsible for the initial assessment and management of potential incidents.
The board is also tasked with developing and advancing our cybersecurity strategy, as well as evaluating the adequacy of our programs and policies. The CFO is responsible for ensuring that the board of directors comprehends the Company’s cybersecurity risk profile and receives updates on the program and its policies on a quarterly basis or as necessary.
The board is also tasked with developing and advancing our cybersecurity strategy, as well as evaluating the adequacy of our programs and policies. The CEO is responsible for ensuring that the board of directors comprehends the Company’s cybersecurity risk profile and receives updates on the program and its policies on a quarterly basis or as necessary.
The MIT assumes a crucial role in overseeing and managing the technical facets of the CRT while the CFO provides strategic direction and decision-making, facilitating communication with other members of senior management, and disseminating pertinent information to the board of directors.
The MIT assumes a crucial role in overseeing and managing the technical facets of the CRT while the CEO provides strategic direction and decision-making, facilitating communication with other members of senior management, and disseminating pertinent information to the board of directors.
In the event of a critical cybersecurity business disruption, the President of the Company may activate the business continuity plan to implement risk-based strategies devised to maintain business continuity against distributed denial of service attacks or malware.
In the event of a critical cybersecurity business disruption, the CEO of the Company may activate the business continuity plan to implement risk-based strategies devised to maintain business continuity against distributed denial of service attacks or malware.
The Cybersecurity Response Team (“CRT”), comprised of the CFO, Manager of Information Technology (“MIT”) and other personnel, as each may designate, are responsible for leading all incident management and response activities.
Furthermore, the Company has established a response plan that serves as the foundation for addressing unauthorized cybersecurity occurrences from both a technical and regulatory perspective. The Cybersecurity Response Team (“CRT”), comprised of the CEO, General Counsel, Manager of Information Technology (“MIT”) and other personnel as each may designate, are responsible for leading all incident management and response activities.
Removed
As mentioned above, the CFO is responsible for the initial assessment and management of potential incidents. Furthermore, the Company has established a response plan that serves as the foundation for addressing unauthorized cybersecurity occurrences from both a technical and regulatory perspective.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, the Company may be involved in various claims and legal actions in the ordinary course of business. As of December 31, 2024, the Company is not aware of any material legal or regulatory claims or proceedings.
Biggest changeItem 3. Legal Proceedings From time to time, the Company may be involved in various claims and legal actions in the ordinary course of business. As of December 31, 2025, the Company is not aware of any material legal or regulatory claims or proceedings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth the dividends declared on our common stock during each calendar quarter for 2024 and 2023: Declaration Date Record Date Payment Date Amount per Share 2024 Fourth Quarter 12/12/2024 12/31/2024 1/31/2025 $ 0.15 Third Quarter 9/13/2024 9/30/2024 10/31/2024 $ 0.15 Second Quarter 6/13/2024 6/28/2024 7/31/2024 $ 0.15 First Quarter 3/14/2024 3/28/2024 4/30/2024 $ 0.15 2023 Fourth Quarter 12/8/2023 12/29/2023 1/31/2024 $ 0.15 Third Quarter 9/14/2023 9/29/2023 10/31/2023 $ 0.15 Second Quarter 6/15/2023 6/30/2023 7/31/2023 $ 0.15 First Quarter 3/16/2023 3/31/2023 4/25/2023 $ 0.27 35 Table of Contents Stockholder Return Performance The following graph is a comparison of the cumulative total stockholder return on our common stock, the S&P 500 Index, the Russell 2000 Index and the S&P U.S.
Biggest changeThe following table sets forth the dividends declared on our common stock during each calendar quarter for 2025 and 2024: Declaration Date Record Date Payment Date Amount per Share 2025 Fourth Quarter 12/12/2025 12/31/2025 1/30/2026 $ 0.10 Third Quarter 9/15/2025 9/30/2025 10/31/2025 $ 0.10 Second Quarter 6/12/2025 6/30/2025 7/31/2025 $ 0.15 First Quarter 3/12/2025 3/31/2025 4/30/2025 $ 0.15 2024 Fourth Quarter 12/12/2024 12/31/2024 1/31/2025 $ 0.15 Third Quarter 9/13/2024 9/30/2024 10/31/2024 $ 0.15 Second Quarter 6/13/2024 6/28/2024 7/31/2024 $ 0.15 First Quarter 3/14/2024 3/28/2024 4/30/2024 $ 0.15 36 Table of Contents Stockholder Return Performance The following graph is a comparison of the cumulative total stockholder return on our common stock, the S&P 500 Index, the Russell 2000 Index and the S&P U.S.
Dividends U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income.
Dividends U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate income tax rates to the extent that it annually distributes less than 100% of its taxable income.
BMI Mortgage REITs Index comprised the following companies: AFC Gamma Inc., AG Mortgage Investment Trust, Inc., AGNC Investment Corp., Angel Oak Mortgage, Inc., Apollo Commercial Real Estate Finance, Inc., Arbor Realty Trust, Inc., Ares Commercial RE Corporation, Arlington Asset Invt Corp., ARMOUR Residential REIT, Inc., Blackstone Mortgage Trust, Inc., BrightSpire Capital, Inc., Broadmark Realty Capital Inc., Chimera Investment Corporation, Claros Mortgage Trust, Inc., Dynex Capital, Inc., Ellington Financial Inc., Ellington Residential Mortgage REIT, Franklin BSP Realty Trust, Inc., Granite Point Mortgage Trust, Inc., Great Ajax Corp., Hannon Armstrong Sustainable Infrastructure Capital, Inc., Invesco Mortgage Capital Inc., KKR Real Estate Finance Trust Inc., Ladder Capital Corp, Lument Finance Trust, Inc., MFA Financial, Inc., New York Mortgage Trust, Inc., NexPoint Real Estate Finance, Inc., Orchid Island Capital, Inc., PennyMac Mortgage Investment Trust, Ready Capital Corporation, Redwood Trust, Inc., Rithm Capital Corp., Sachem Capital Corp., Seven Hills Realty Trust, Starwood Property Trust, Inc., TPG RE Finance Trust, Inc, and Western Asset Mortgage Capital Corporation. 36 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans During 2013, the board of directors approved, and the Company adopted, the Cherry Hill Mortgage Investment Corporation 2013 Equity Incentive Plan (the “2013 Plan”).
BMI Mortgage REITs Index comprised the following companies: AFC Gamma Inc., AG Mortgage Investment Trust, Inc., AGNC Investment Corp., Angel Oak Mortgage, Inc., Apollo Commercial Real Estate Finance, Inc., Arbor Realty Trust, Inc., Ares Commercial RE Corporation, Arlington Asset Invt Corp., ARMOUR Residential REIT, Inc., Blackstone Mortgage Trust, Inc., BrightSpire Capital, Inc., Broadmark Realty Capital Inc., Chimera Investment Corporation, Claros Mortgage Trust, Inc., Dynex Capital, Inc., Ellington Financial Inc., Ellington Residential Mortgage REIT, Franklin BSP Realty Trust, Inc., Granite Point Mortgage Trust, Inc., Great Ajax Corp., Hannon Armstrong Sustainable Infrastructure Capital, Inc., Invesco Mortgage Capital Inc., KKR Real Estate Finance Trust Inc., Ladder Capital Corp, Lument Finance Trust, Inc., MFA Financial, Inc., New York Mortgage Trust, Inc., NexPoint Real Estate Finance, Inc., Orchid Island Capital, Inc., PennyMac Mortgage Investment Trust, Ready Capital Corporation, Redwood Trust, Inc., Rithm Capital Corp., Sachem Capital Corp., Seven Hills Realty Trust, Starwood Property Trust, Inc., TPG RE Finance Trust, Inc, and Western Asset Mortgage Capital Corporation. 37 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans During 2013, the board of directors approved, and the Company adopted, the Cherry Hill Mortgage Investment Corporation 2013 Equity Incentive Plan (the “2013 Plan”).
No assurance can be given that we will be able to make any other distributions to our stockholders at any time in the future or that the level of any distributions we do make to our stockholders will achieve a market yield or increase or even be maintained over time. 34 Table of Contents We make distributions based on a number of factors, including an estimate of taxable earnings.
No assurance can be given that we will be able to make any other distributions to our stockholders at any time in the future or that the level of any distributions we do make to our stockholders will achieve a market yield or increase or even be maintained over time. 35 Table of Contents We make distributions based on a number of factors, including an estimate of taxable earnings.
BMI Mortgage REITs Index, a peer group index, from December 31, 2019, to December 31, 2024. The graph assumes that $100 was invested on December 31, 2019, in our common stock, the S&P 500 Index, the Russell 2000 Index and the S&P U.S. BMI Mortgage REITs Index and that all dividends were reinvested without the payment of any commissions.
BMI Mortgage REITs Index, a peer group index, from December 31, 2020 to December 31, 2025. The graph assumes that $100 was invested on December 31, 2020, in our common stock, the S&P 500 Index, the Russell 2000 Index and the S&P U.S. BMI Mortgage REITs Index and that all dividends were reinvested without the payment of any commissions.
Holders As of March 6, 2025, we had six holders of record of our common stock. The six holders of record include Cede & Co., which holds shares as nominee for The Depository Trust Company, which itself holds shares on behalf of the beneficial owners of our common stock. Such information was obtained from our registrar and transfer agent.
Holders As of March 5, 2026, we had eight holders of record of our common stock. The eight holders of record include Cede & Co., which holds shares as nominee for The Depository Trust Company, which itself holds shares on behalf of the beneficial owners of our common stock. Such information was obtained from our registrar and transfer agent.
In April 2023, the Company’s board of directors adopted the Cherry Hill Mortgage Investment Corporation 2023 Equity Incentive Plan (the “2023 Plan”). In June 2023, at the Company’s annual meeting of stockholders, the 2023 Plan was approved.
In April 2023, the Company’s board of directors adopted the Cherry Hill Mortgage Investment Corporation 2023 Equity Incentive Plan (the “2023 Plan”).
The following table presents information with respect to the Company’s equity compensation plans as of December 31, 2024: Equity Incentive Plan Information As of December 31, 2024 Number of Securities Issued or to be Issued Upon Exercise Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans Equity compensation Plans Approved By Shareholders 2,434,072 Issued LTIP-OP Units 663,492 Forfeited/Redeemed LTIP-OP Units (8,492 ) Converted LTIP-OP Units (44,795 ) Issued Shares of Common Stock 283,672 Forfeited Shares of Common Stock (3,155 ) Withheld Shares of Common Stock (3,229 ) Issued Restricted Stock Units 181,942 Forfeited Restricted Stock Units - Settled Restricted Stock Units - Withheld Restricted Stock Units - Equity Compensation Plans Not Approved By Shareholders - LTIP-OP Units are a special class of partnership interest in the Operating Partnership.
The following table presents information with respect to the Company’s equity compensation plans as of December 31, 2025: Equity Incentive Plan Information As of December 31, 2025 Number of Securities Issued or to be Issued Upon Exercise Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans Equity compensation Plans Approved By Shareholders 2,336,749 LTIP-OP Units 663,492 Forfeited/Redeemed LTIP-OP Units (57,689 ) Converted LTIP-OP Units (65,037 ) Issued Shares of Common Stock 510,475 Forfeited Shares of Common Stock (3,155 ) Witheld Shares of Common Stock (24,620 ) Issued Restricted Stock Units 181,942 Forfeited Restricted Stock Units - Settled Restricted Stock Units (60,041 ) Witheld Restricted Stock Units Equity Compensation Plans Not Approved By Shareholders - LTIP-OP Units are a special class of partnership interest in the Operating Partnership.
There can be no assurance that the performance of our common stock will continue in line with the same or similar trends depicted in the graph below: Year Ended December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Cherry Hill Mortgage Investment Corporation $ 72.48 $ 73.65 $ 61.42 $ 49.84 $ 38.94 Russel 2000 $ 119.96 $ 137.74 $ 109.59 $ 128.14 $ 142.93 S&P U.S.
There can be no assurance that the performance of our common stock will continue in line with the same or similar trends depicted in the graph below: Year Ended December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 Cherry Hill Mortgage Investment Corporation $ 101.61 $ 84.75 $ 68.76 $ 53.72 $ 61.96 Russel 2000 $ 114.82 $ 91.35 $ 106.82 $ 119.14 $ 134.40 S&P U.S.
The 2023 Plan replaced the 2013 Plan upon the 2023 Plan’s approval by stockholders and no further awards will be made by the Company under the 2013 Plan. Currently outstanding awards granted under the 2013 Plan will remain effective in accordance with their terms.
The 2023 Plan replaced the 2013 Plan upon the 2023 Plan’s approval by stockholders and no further awards will be made by the Company under the 2013 Plan. While the Company currently grants equity awards under the 2023 Plan, the Company has awards outstanding that were granted under the 2013 Plan.
BMI Mortgage REITs (A) $ 79.16 $ 90.84 $ 67.58 $ 78.00 $ 78.44 S&P 500 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 Source: S&P Capital IQ Pro (A) In addition to the Company, as of December 31, 2024, the S&P U.S.
BMI Mortgage REITs (A) $ 114.76 $ 85.37 $ 98.54 $ 99.09 $ 114.62 S&P 500 $ 128.71 $ 105.40 $ 133.10 $ 166.40 $ 196.16 Source: S&P Capital IQ Pro (A) In addition to the Company, as of December 31, 2025, the S&P U.S.
Added
No further awards can be granted under the 2013 Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeInterest paid in accordance with repurchase transactions is recorded in interest expense on the consolidated statements of income (loss). 45 Table of Contents Results of Operations Presented below is a comparison of the Company’s results of operations for the periods indicated (dollars in thousands): Results of Operations Year Ended December 31, 2024 2023 Income Interest income $ 55,798 $ 49,985 Interest expense 55,769 51,642 Net interest income (expense) 29 (1,657 ) Servicing fee income 48,527 53,427 Servicing costs 12,418 11,248 Net servicing income 36,109 42,179 Other income (loss) Realized loss on RMBS, net (6,595 ) (36,315 ) Realized gain on investments in MSRs, net 504 - Realized gain on derivatives, net 21,322 33,821 Realized gain on acquired assets, net 2 23 Unrealized gain (loss) on RMBS, measured at fair value through earnings, net (19,445 ) 9,755 Unrealized gain (loss) on derivatives, net 9,809 (43,071 ) Unrealized loss on investments in Servicing Related Assets (7,160 ) (25,937 ) Total Income (Loss) 34,575 (21,202 ) Expenses General and administrative expense 10,654 6,434 Compensation and benefits 1,572 466 Management fee to affiliate 6,037 6,830 Total Expenses 18,263 13,730 Income (Loss) Before Income Taxes 16,312 (34,932 ) Provision for corporate business taxes 4,102 523 Net Income (Loss) 12,210 (35,455 ) Net (income) loss allocated to noncontrolling interests in Operating Partnership (240 ) 661 Dividends on preferred stock (9,969 ) (9,853 ) Gain on repurchase and retirement of preferred stock 78 - Net Income (Loss) Applicable to Common Stockholders $ 2,079 $ (44,647 ) 46 Table of Contents Presented below is summary financial data on our segments together with the data for the Company as a whole, for the periods indicated (dollars in thousands): Segment Summary Data Servicing Related Assets RMBS All Other Total Income Statement Year Ended December 31, 2024 Interest income $ 5 $ 55,793 $ - $ 55,798 Interest expense 1,404 54,365 - 55,769 Net interest income (expense) (1,399 ) 1,428 - 29 Servicing fee income 48,527 - - 48,527 Servicing costs 12,418 - - 12,418 Net servicing income 36,109 - - 36,109 Other income (expense) (A) (8,117 ) 6,554 - (1,563 ) Other operating expenses (B) (3,910 ) (1,141 ) (13,212 ) (18,263 ) Provision for corporate business taxes (4,102 ) - - (4,102 ) Net other comprehensive income (loss) - (4,725 ) - (4,725 ) Comprehensive income (loss) $ 18,581 $ 2,116 $ (13,212 ) $ 7,485 Year Ended December 31, 2023 Interest income $ - $ 49,985 $ - $ 49,985 Interest expense 1,572 50,070 - 51,642 Net interest expense (1,572 ) (85 ) - (1,657 ) Servicing fee income 53,427 - - 53,427 Servicing costs 11,248 - - 11,248 Net servicing income 42,179 - - 42,179 Other expense (A) (29,443 ) (32,281 ) - (61,724 ) Other operating expenses (B) (3,004 ) (664 ) (10,062 ) (13,730 ) Provision for corporate business taxes (523 ) - - (523 ) Net other comprehensive income (loss) - 26,559 - 26,559 Comprehensive income (loss) $ 7,637 $ (6,471 ) $ (10,062 ) $ (8,896 ) (A) Included in other income (expense) are realized and unrealized gains (losses) on Servicing Related Assets, RMBS and derivatives.
Biggest changeInterest paid in accordance with repurchase transactions is recorded in interest expense on the consolidated statements of income (loss). 46 Table of Contents Results of Operations Presented below is a comparison of the Company’s results of operations for the periods indicated (dollars in thousands): Results of Operations Year Ended December 31, 2025 2024 Income Interest income $ 61,095 $ 55,798 Interest expense 49,778 55,769 Net interest income 11,317 29 Servicing fee income 43,299 48,527 Servicing costs 9,275 12,418 Net servicing income 34,024 36,109 Other income (loss) Realized loss on RMBS, net (6,045 ) (6,595 ) Realized gain on investments in MSRs, net - 504 Realized gain on derivatives, net 7,037 21,322 Realized gain on acquired assets, net 2 2 Unrealized gain (loss) on RMBS, measured at fair value through earnings, net 35,578 (19,445 ) Unrealized gain (loss) on derivatives, net (39,767 ) 9,809 Unrealized loss on investments in Servicing Related Assets (18,825 ) (7,160 ) Total Income 23,321 34,575 Expenses General and administrative expense 7,704 10,654 Compensation and benefits 6,478 1,572 Management fee to affiliate - 6,037 Total Expenses 14,182 18,263 Income Before Income Taxes 9,139 16,312 Provision for corporate business taxes 2,197 4,102 Net Income 6,942 12,210 Net income allocated to noncontrolling interests in Operating Partnership (114 ) (240 ) Dividends on preferred stock (9,829 ) (9,969 ) Gain on repurchase and retirement of preferred stock - 78 Net Income (Loss) Applicable to Common Stockholders $ (3,001 ) $ 2,079 47 Table of Contents Presented below is summary financial data on our segments together with the data for the Company as a whole, for the periods indicated (dollars in thousands): Segment Summary Data Servicing Related Assets RMBS All Other Total Income Statement Year Ended December 31, 2025 Interest income $ 134 $ 60,961 $ - $ 61,095 Interest expense 1,487 48,291 - 49,778 Net interest income (expense) (1,353 ) 12,670 - 11,317 Servicing fee income 43,299 - - 43,299 Servicing costs 9,275 - - 9,275 Net servicing income 34,024 - - 34,024 Other expense (A) (18,121 ) (3,899 ) - (22,020 ) Other operating expenses (B) (3,513 ) (2,810 ) (7,859 ) (14,182 ) Provision for corporate business taxes (2,197 ) - - (2,197 ) Net other comprehensive income - 10,904 - 10,904 Comprehensive income (loss) $ 8,840 $ 16,865 $ (7,859 ) $ 17,846 Year Ended December 31, 2024 Interest income $ 5 $ 55,793 $ - $ 55,798 Interest expense 1,404 54,365 - 55,769 Net interest income (expense) (1,399 ) 1,428 - 29 Servicing fee income 48,527 - - 48,527 Servicing costs 12,418 - - 12,418 Net servicing income 36,109 - - 36,109 Other income (expense) (A) (8,117 ) 6,554 - (1,563 ) Other operating expenses (B) (3,910 ) (1,141 ) (13,212 ) (18,263 ) Provision for corporate business taxes (4,102 ) - - (4,102 ) Net other comprehensive loss - (4,725 ) - (4,725 ) Comprehensive income (loss) $ 18,581 $ 2,116 $ (13,212 ) $ 7,485 (A) Included in other income (expense) are realized and unrealized gains (losses) on Servicing Related Assets, RMBS and derivatives.
Aurora has or is in the process of obtaining the licenses necessary to invest in MSRs on a nationwide basis and is an approved seller/servicer for Fannie Mae and Freddie Mac. 38 Table of Contents In addition to Servicing Related Assets, we invest in RMBS, primarily those backed by 30-, 20- and 15-year fixed rate mortgages that offer what we believe to be favorable prepayment and duration characteristics.
Aurora has or is in the process of obtaining the licenses necessary to invest in MSRs on a nationwide basis and is an approved seller/servicer for Fannie Mae and Freddie Mac. 39 Table of Contents In addition to Servicing Related Assets, we invest in RMBS, primarily those backed by 30-, 20- and 15-year fixed rate mortgages that offer what we believe to be favorable prepayment and duration characteristics.
Securities financed through repurchase transactions remain on our consolidated balance sheet as an asset and cash received from the purchaser is recorded on our consolidated balance sheet as a liability.
Securities financed through repurchase transactions remain on our consolidated balance sheet as an asset and cash received from the purchaser is recorded on our consolidated balance sheets as a liability.
Unrealized gains and losses on RMBS classified as available-for-sale are reported in accumulated other comprehensive income, whereas unrealized gains and losses on RMBS for which we elected the fair value option are reported in the consolidated statements of income (loss). 41 Table of Contents We evaluate the cost basis of our available-for-sale RMBS on a quarterly basis under ASC 326-30, Financial Instruments-Credit Losses: Available-for-Sale Debt Securities.
Unrealized gains and losses on RMBS classified as available-for-sale are reported in accumulated other comprehensive income, whereas unrealized gains and losses on RMBS for which we elected the fair value option are reported in the consolidated statements of income (loss). 42 Table of Contents We evaluate the cost basis of our available-for-sale RMBS on a quarterly basis under ASC 326-30, Financial Instruments-Credit Losses: Available-for-Sale Debt Securities.
Under this election, we record a valuation adjustment on our investments in MSRs on a quarterly basis to recognize the changes in fair value of our MSRs in net income as described below. Although transactions in MSRs are observable in the marketplace, the valuation includes unobservable market data inputs (prepayment speeds, delinquency levels, costs to service and discount rates).
Under this election, we record a valuation adjustment on our investments in MSRs on a quarterly basis to recognize the changes in fair value of our MSRs in net income as described below. Although transactions in MSRs are observable in the marketplace, the valuation includes unobservable market data inputs (prepayment speeds, costs to service and discount rates).
Nevertheless, unanticipated credit losses could occur which could adversely impact our operating results. 43 Table of Contents Critical Accounting Policies and Use of Estimates Our financial statements are prepared in accordance with US GAAP, which requires the use of estimates that involve the exercise of judgment and the use of assumptions as to future uncertainties.
Nevertheless, unanticipated credit losses could occur which could adversely impact our operating results. 44 Table of Contents Critical Accounting Policies and Use of Estimates Our financial statements are prepared in accordance with US GAAP, which requires the use of estimates that involve the exercise of judgment and the use of assumptions as to future uncertainties.
See “Factors Impacting our Operating Results.” 40 Table of Contents Factors Impacting our Operating Results Our income is generated primarily by the net spread between the income we earn on our assets and the cost of our financing and hedging activities as well as the amortization of any purchase premiums or the accretion of discounts.
See “Factors Impacting our Operating Results.” 41 Table of Contents Factors Impacting our Operating Results Our income is generated primarily by the net spread between the income we earn on our assets and the cost of our financing and hedging activities as well as the amortization of any purchase premiums or the accretion of discounts.
In September 2019, the Company initiated a share repurchase program that allows for the repurchase of up to an aggregate of $10.0 million of its common stock. As of December 31, 2024, approximately $4.7 million was remaining under the share repurchase program.
In September 2019, the Company initiated a share repurchase program that allows for the repurchase of up to an aggregate of $10.0 million of its common stock. As of December 31, 2025, approximately $4.7 million was remaining under the share repurchase program.
We have not incurred any interest or penalties. 44 Table of Contents Investments in Securities Prior to fiscal year 2023, we designated all our investments in RMBS as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities .
We have not incurred any interest or penalties. 45 Table of Contents Investments in Securities Prior to fiscal year 2023, we designated all our investments in RMBS as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities .
As of December 31, 2024, our exposure (defined as the amount of cash and securities pledged as collateral, less the borrowing under the repurchase agreement) to any of the counterparties under the repurchase agreements did not exceed five percent of the Company’s equity.
As of December 31, 2025, our exposure (defined as the amount of cash and securities pledged as collateral, less the borrowing under the repurchase agreement) to any of the counterparties under the repurchase agreements did not exceed five percent of the Company’s equity.
The price at which the security is sold generally represents the market value of the security less a discount or “haircut.” The weighted average haircut on our repurchase debt at December 31, 2024 was approximately 4.4%.
The price at which the security is sold generally represents the market value of the security less a discount or “haircut.” The weighted average haircut on our repurchase debt at December 31, 2025 was approximately 4.4%.
The maximum credit amount outstanding at any one time under the Fannie Mae MSR Revolving Facility is $150.0 million. The revolving period is 24 months which may be extended by agreement with the lender.
The original maximum credit amount outstanding at any one time under the Fannie Mae MSR Revolving Facility was $150.0 million. The revolving period is 24 months which may be extended by agreement with the lender.
During the years ended December 31, 2024 and December 31, 2023, the Company did not issue and sell any shares of Series A Preferred Stock pursuant to the Preferred Series A ATM Program. The Company terminated the Preferred Series A ATM Program effective as of January 29, 2024.
During the years ended December 31, 2025 and December 31, 2024, the Company did not issue and sell any shares of Series A Preferred Stock pursuant to the Preferred Series A ATM Program. The Company terminated the Preferred Series A ATM Program effective as of January 29, 2024.
Consolidated Financial Statements and Supplementary Data—Note 9. Fair Value” regarding the estimation of fair value, which approximates carrying value for all securities. (B) The Company used an implied AAA rating for the Agency RMBS.
Consolidated Financial Statements and Supplementary Data—Note 9. Fair Value” regarding the estimation of fair value, which approximates carrying value for all securities. (B) The Company used an implied AA+ rating for the Agency RMBS.
These short-term borrowings were used to finance certain of our investments in RMBS. The RMBS repurchase agreements are guaranteed by the Company. The weighted average difference between the market value of the assets and the face amount of available financing for the RMBS repurchase agreements, or the haircut, was 4.4% as of December 31, 2024 and 4.3% December 31, 2023.
These short-term borrowings were used to finance certain of our investments in RMBS. The RMBS repurchase agreements are guaranteed by the Company. The weighted average difference between the market value of the assets and the face amount of available financing for the RMBS repurchase agreements, or the haircut, was 4.4% as of December 31, 2025 and December 31, 2024.
If the Federal Reserve decides to tighten monetary policy in the future, it may increase our interest expense, which expense may not be fully offset by any resulting increase in our interest income.
If the Federal Reserve decides to tighten monetary policy however, it may increase our interest expense, which expense may not be fully offset by any resulting increase in our interest income.
During the years ended December 31, 2024, and December 31, 2023, the Company did not repurchase any common stock pursuant to the repurchase program. 39 Table of Contents In December 2023, the Company initiated a preferred stock repurchase program that allows for the repurchase of up to an aggregate of $50.0 million of its shares of Preferred Stock.
During the years ended December 31, 2025 and December 31, 2024, the Company did not repurchase any common stock pursuant to the repurchase program. 40 Table of Contents In December 2023, the Company initiated a preferred stock repurchase program that allows for the repurchase of up to an aggregate of $50.0 million of its shares of preferred stock.
As of December 31, 2024, we owned 98.0% of our Operating Partnership. Our Operating Partnership, in turn, owns all of the outstanding common stock of CHMI Sub-REIT, Inc. (the “Sub-REIT”). The Sub-REIT has elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2020.
As of December 31, 2025, we owned 98.4% of our Operating Partnership. Our Operating Partnership, in turn, owns all of the outstanding common stock of CHMI Sub-REIT, Inc. (the “Sub-REIT”). The Sub-REIT has elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2020.
The cash used by our investing activities during the years ended December 31, 2024 and December 31, 2023 primarily resulted from RMBS purchases offset by RMBS sales and principal paydowns of RMBS. 56 Table of Contents Dividends U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income.
The cash used by our investing activities during the years ended December 31, 2025 and December 31, 2024 primarily resulted from RMBS purchases offset by RMBS sales and principal paydowns of RMBS and payments for settlements of derivatives. 57 Table of Contents Dividends U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income.
All currency amounts are presented in thousands, except per share amounts or as otherwise noted. General We are a fully integrated, internally managed residential real estate finance company focused on acquiring, investing in and managing residential mortgage assets in the United States.
All currency amounts are presented in thousands, except per share amounts or as otherwise noted. General On November 14, 2024, we became a fully integrated, internally managed residential real estate finance company focused on acquiring, investing in and managing residential mortgage assets in the United States.
We may also sell certain RMBS and deploy the net proceeds from such sales to the extent necessary to fund the purchase price of MSRs. Our primary uses of funds are the payment of interest, management fees, outstanding commitments, other operating expenses, investments in new or replacement assets, margin calls and the repayment of borrowings, as well as dividends.
We may also sell certain RMBS and deploy the net proceeds from such sales to the extent necessary to fund the purchase price of MSRs. Our primary uses of funds are the payment of interest, compensation and benefits, outstanding commitments, operating expenses, investments in new or replacement assets, margin calls and the repayment of borrowings, as well as dividends.
Net Income Allocated to Noncontrolling Interests in Operating Partnership Net income allocated to noncontrolling interests in the Operating Partnership, which are LTIP-OP Units owned by our directors, officers and employees represented approximately 2.0% and 1.9% of net income for the years ended December 31, 2024 and December 31, 2023, respectively.
Net Income Allocated to Noncontrolling Interests in Operating Partnership Net income allocated to noncontrolling interests in the Operating Partnership, which are LTIP-OP Units owned by our directors, officers and employees represented approximately 1.6% and 2.0% of net income for the years ended December 31, 2025 and December 31, 2024, respectively.
Prepayment speed is the measurement of how quickly borrowers pay down the UPB of their loans or how quickly loans are otherwise liquidated or charged off. Generally, in a declining interest rate environment, prepayment speeds tend to increase. Conversely, in an increasing interest rate environment, prepayment speeds tend to decrease.
Prepayment speed is the measurement of how quickly borrowers pay down the unpaid principal balance of their loans or how quickly loans are otherwise liquidated or charged off. Generally, in a declining interest rate environment, prepayment speeds tend to increase. Conversely, in an increasing interest rate environment, prepayment speeds tend to decrease.
In the event that the Federal Reserve reverses course and tightens monetary policy in the future by increasing the federal funds rate and/or the rate of its run off of its balance sheet, these actions could result in higher interest rates, including for Agency RMBS, and reduce economic activity in the United States, as well as decrease spreads on interest rates, which can reduce our net interest income and increase our funding costs.
In the event that the Federal Reserve reverses course and tightens monetary policy in the future by increasing the federal funds rate and/or selling securities and reducing its balance sheet, these actions could result in higher interest rates, including for Agency RMBS, and reduce economic activity in the United States, as well as decrease spreads on interest rates, which can reduce our net interest income and increase our funding costs.
The weighted average term to maturity of our borrowings under repurchase agreements as of December 31, 2024 and December 31, 2023 was 18 days and 21 days, respectively. 55 Table of Contents MSR Financing As of December 31, 2024, the Company had two separate MSR financing facilities: (i) the Freddie Mac MSR Revolver, which is a revolving credit facility for up to $100.0 million that is secured by all Freddie Mac MSRs owned by Aurora; and (ii) the Fannie Mae MSR Revolving Facility, which is a revolving credit facility for up to $150.0 million, that is secured by all Fannie Mae MSRs owned by Aurora.
The weighted average term to maturity of our borrowings under repurchase agreements as of December 31, 2025 and December 31, 2024 was 16 days and 18 days, respectively. 56 Table of Contents MSR Financing As of December 31, 2025, the Company had two separate MSR financing facilities: (i) the Freddie Mac MSR Revolver, which is a revolving credit facility for up to $100.0 million that is secured by all Freddie Mac MSRs owned by Aurora; and (ii) the Fannie Mae MSR Revolving Facility, which is a revolving credit facility for up to $100.0 million, that is secured by all Fannie Mae MSRs owned by Aurora.
In July 2024, the Borrowers entered into an amendment that extended the revolving period for an additional 364 days with the Borrowers’ option for two renewals for similar terms followed by a one-year term out feature with a 24-month amortization schedule. Amounts borrowed bear interest at a weighted average borrowing rate of 8.1%.
In June 2025, the Borrowers entered into an amendment that extended the revolving period for an additional 364 days with the Borrowers’ option for two renewals for similar terms followed by a one-year term out feature with a 24-month amortization schedule. Amounts borrowed bear interest at a weighted average borrowing rate of 7.1%.
The $1.1 million increase in compensation and benefits expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was because, effective as of November 14, 2024, the Company started operating as an internally managed Company.
The $4.9 million increase in compensation and benefits expense for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was because, effective as of November 14, 2024, the Company started operating as an internally managed Company.
The $4.9 million decrease in servicing fee income for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to changes in the size of the portfolio. Servicing Costs Servicing costs for the year ended December 31, 2024 were $12.4 million as compared to $11.2 million for the year ended December 31, 2023.
The $5.2 million decrease in servicing fee income for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to changes in the size of the portfolio. Servicing Costs Servicing costs for the year ended December 31, 2025 were $9.3 million as compared to $12.4 million for the year ended December 31, 2024.
At December 31, 2024 and December 31, 2023, approximately $56.5 million and $64.5 million, respectively, was outstanding under the Freddie Mac MSR Revolver. Fannie Mae MSR Revolving Facility .
At December 31, 2025 and December 31, 2024, approximately $55.5 million and $56.5 million, respectively, was outstanding under the Freddie Mac MSR Revolver. Fannie Mae MSR Revolving Facility .
Transactions with Related Parties” for information regarding Aurora’s recapture agreements. 42 Table of Contents With respect to our business operations, increases in interest rates, in general, may over time cause: • the interest expense associated with our borrowings to increase; • the value of our assets to fluctuate; • the coupons on any adjustable-rate and hybrid RMBS we may own to reset, although on a delayed basis, to higher interest rates; • prepayments on our RMBS to slow, thereby slowing the amortization of our purchase premiums and the accretion of our purchase discounts; and • an increase in the value of any interest rate swap agreements we may enter into as part of our hedging strategy.
With respect to our business operations, increases in interest rates, in general, may over time cause: • the interest expense associated with our borrowings to increase; • the value of our assets to fluctuate; • the coupons on any adjustable-rate and hybrid RMBS we may own to reset, although on a delayed basis, to higher interest rates; • prepayments on our RMBS to slow, thereby slowing the amortization of our purchase premiums and the accretion of our purchase discounts; and • an increase in the value of any interest rate swap agreements we may enter into as part of our hedging strategy.
The following table summarizes the net interest spread of our RMBS portfolio as of the dates indicated: Net Interest Spread December 31, 2024 December 31, 2023 Weighted Average Asset Yield 4.93 % 5.33 % Weighted Average Interest Expense (A) 2.03 % 1.51 % Net Interest Spread 2.90 % 3.82 % (A) Weighted average interest expense includes the benefits of related swaps. 53 Table of Contents Liquidity and Capital Resources Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments and other general business needs.
The following table summarizes the net interest spread of our RMBS portfolio as of the dates indicated: Net Interest Spread December 31, 2025 December 31, 2024 Weighted Average Asset Yield 5.24 % 4.93 % Weighted Average Interest Expense (A) 2.72 % 2.03 % Net Interest Spread 2.52 % 2.90 % (A) Weighted average interest expense includes the benefits of related swaps. 54 Table of Contents Liquidity and Capital Resources Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments and other general business needs.
General and Administrative Expense General and administrative expense for the year ended December 31, 2024 was $10.7 million as compared to $6.4 million for the year ended December 31, 2023.
General and Administrative Expense General and administrative expense for the year ended December 31, 2025 was $7.7 million as compared to $10.7 million for the year ended December 31, 2024.
Our operating cash flow differs from our net income due primarily to: (i) accretion of discount or premium on our RMBS, (ii) unrealized gains or losses on our RMBS and Servicing Related Assets, and (iii) impairment on our securities, if any. 54 Table of Contents Repurchase Agreements As of December 31, 2024, we had repurchase agreements with 35 counterparties and approximately $1,077.3 million of outstanding repurchase agreement borrowings from 12 of those counterparties, which were used to finance RMBS.
Our operating cash flow differs from our net income due primarily to: (i) accretion of discount or premium on our RMBS, (ii) unrealized gains or losses on our RMBS and Servicing Related Assets, and (iii) impairment on our securities, if any. 55 Table of Contents Repurchase Agreements As of December 31, 2025, we had repurchase agreements with multiple counterparties and approximately $1,137.2 million of outstanding repurchase agreement borrowings from 16 of those counterparties, which were used to finance RMBS.
The $12.5 million decrease in realized gain on derivatives for the year ended December 31, 2024 as compared to December 31, 2023 was substantially comprised of an increase of $24.7 million in losses on TBAs and a decrease of $1.4 million in interest income on interest rate swaps, offset by a decrease of $9.2 million in losses on interest rate swaps and a decrease of $4.3 million in losses on U.S.
The $14.3 million decrease in realized gain on derivatives for the year ended December 31, 2025 as compared to December 31, 2024 was substantially comprised of a decrease of $13.4 million in interest income on interest rate swaps and an increase of $5.5 million in losses on interest rate swaps, offset by a decrease of $1.8 million in losses on TBAs and a decrease of $2.8 million in losses on U.S.
For the period indicated below, our accumulated other comprehensive income (loss) changed as a result of the indicated gains and losses (dollars in thousands): Accumulated Other Comprehensive Income (Loss) Year Ended December 31, 2024 Accumulated other comprehensive loss, December 31, 2023 $ (2,545 ) Other comprehensive loss (4,725 ) Accumulated other comprehensive loss, December 31, 2024 $ (7,270 ) Year Ended December 31, 2023 Accumulated other comprehensive loss, December 31, 2022 $ (29,104 ) Other comprehensive income 26,559 Accumulated other comprehensive loss, December 31, 2023 $ (2,545 ) 49 Table of Contents Our GAAP equity changes as the values of our RMBS are marked to market each quarter, among other factors.
For the period indicated below, our accumulated other comprehensive income (loss) changed as a result of the indicated gains and losses (dollars in thousands): Accumulated Other Comprehensive Income (Loss) Year Ended December 31, 2025 Accumulated other comprehensive loss, December 31, 2024 $ (7,270 ) Other comprehensive income 10,939 Accumulated other comprehensive income, December 31, 2025 $ 3,669 Year Ended December 31, 2024 Accumulated other comprehensive loss, December 31, 2023 $ (2,545 ) Other comprehensive loss (4,725 ) Accumulated other comprehensive loss, December 31, 2024 $ (7,270 ) 50 Table of Contents Our GAAP equity changes as the values of our RMBS are marked to market each quarter, among other factors.
Unrealized Loss on Investments in Servicing Related Assets Unrealized loss on our investments in Servicing Related Assets for the year ended December 31, 2024 was $7.2 million as compared to $25.9 million for the year ended December 31, 2023.
Unrealized Loss on Investments in Servicing Related Assets Unrealized loss on our investments in Servicing Related Assets for the year ended December 31, 2025 was $18.8 million as compared to $7.2 million for the year ended December 31, 2024.
At December 31, 2024 and December 31, 2023, approximately $95.6 million and $106.0 million, respectively, was outstanding under the Fannie Mae MSR Revolving Facility. Cash Flows Operating and Investing Activities Our operating activities used cash of approximately $4.7 million and provided cash of approximately $40.7 million for the years ended December 31, 2024 and December 31, 2023, respectively.
At December 31, 2025 and December 31, 2024, approximately $90.8 million and $95.6 million, respectively, was outstanding under the Fannie Mae MSR Revolving Facility. Cash Flows Operating and Investing Activities Our operating activities provided cash of approximately $19.1 million and used cash of approximately $4.7 million for the years ended December 31, 2025 and December 31, 2024, respectively.
Voluntary and involuntary prepayment rates may be affected by a number of factors including, but not limited to, the availability of mortgage credit, the relative economic vitality of, or natural disasters affecting, the area in which the related properties are located, the servicing of the mortgage loans, possible changes in tax laws, other opportunities for investment, homeowner mobility and other economic, social, geographic, demographic and legal factors, none of which can be predicted with any certainty.
Voluntary and involuntary prepayment rates may be affected by a number of factors including, but not limited to, the availability of mortgage credit, the relative economic vitality of, or natural disasters affecting, the area in which the related properties are located, the servicing of the mortgage loans, possible changes in tax laws, other opportunities for investment, homeowner mobility and other economic, social, geographic, demographic and legal factors, none of which can be predicted with any certainty. 43 Table of Contents We attempt to reduce the exposure of our MSRs to voluntary prepayments through the structuring of recapture agreements with Aurora’s subservicers.
Realized Loss on RMBS, Net Realized loss on RMBS for the year ended December 31, 2024 was $6.6 million as compared to $36.3 million for the year ended December 31, 2023.
Realized Loss on RMBS, Net Realized loss on RMBS for the year ended December 31, 2025 was $6.0 million as compared to $6.6 million for the year ended December 31, 2024.
Compensation and Benefits Compensation and benefits expense for the year ended December 31, 2024 was $1.6 million as compared to $466,000 for the year ended December 31, 2023.
Compensation and Benefits Compensation and benefits expense for the year ended December 31, 2025 was $6.5 million as compared to $1.6 million for the year ended December 31, 2024.
Treasury futures. Unrealized Gain (Loss) on RMBS, Measured at Fair Value through Earnings, Net Unrealized loss on RMBS measured at fair value through earnings for the year ended December 31, 2024 was $19.4 million as compared to a gain of $9.8 million for the year ended December 31, 2023.
Unrealized Gain (Loss) on RMBS, Measured at Fair Value through Earnings, Net Unrealized gain on RMBS measured at fair value through earnings for the year ended December 31, 2025 was $35.6 million as compared to a loss of $19.4 million for the year ended December 31, 2024.
The $52.9 million decrease in unrealized loss on derivatives for the year ended December 31, 2024 as compared to December 31, 2023 was primarily due to changes in interest rates and the composition of our derivatives relative to the prior year.
The $49.6 million increase in unrealized loss on derivatives for the year ended December 31, 2025 as compared to December 31, 2024 was primarily due to changes in interest rates and the composition of our derivatives relative to the prior year.
Set forth below is the positive net spread between the yield on RMBS and our costs of funding those assets at the end of each of the quarters indicated below: Average Net Yield Spread at Period End Quarter Ended Average Asset Yield Average Cost of Funds (A) Average Net Interest Rate Spread December 31, 2024 4.91 % 1.12 % 3.79 % September 30, 2024 4.93 % 1.00 % 3.92 % June 30, 2024 4.88 % 1.13 % 3.74 % March 31, 2024 4.83 % 1.07 % 3.75 % December 31, 2023 4.77 % 0.96 % 3.81 % September 30, 2023 4.66 % 0.87 % 3.79 % June 30, 2023 4.49 % 0.53 % 3.96 % March 31, 2023 4.40 % 0.73 % 3.68 % (A) Average Cost of Funds also includes the benefits of related swaps.
Set forth below is the positive net spread between the yield on RMBS and our costs of funding those assets at the end of each of the quarters indicated below: Average Net Yield Spread at Period End Quarter Ended Average Asset Yield Average Cost of Funds (A) Average Net Interest Rate Spread December 31, 2025 5.08 % 1.62 % 3.46 % September 30, 2025 5.08 % 1.31 % 3.77 % June 30, 2025 5.08 % 1.17 % 3.91 % March 31, 2025 5.00 % 1.30 % 3.70 % December 31, 2024 4.91 % 1.12 % 3.79 % September 30, 2024 4.93 % 1.00 % 3.92 % June 30, 2024 4.88 % 1.13 % 3.74 % March 31, 2024 4.83 % 1.07 % 3.75 % (A) Average Cost of Funds also includes the benefits of related swaps.
The preferred stock repurchase program does not require the purchase of any minimum number of shares of preferred stock, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice.
The preferred stock repurchase program does not require the purchase of any minimum number of shares of preferred stock, and, subject to SEC rules, purchases may be commenced or suspended at any time without prior notice. During the year ended December 31, 2025, the Company did not repurchase any Preferred Stock pursuant to the repurchase program.
The following tables set forth certain characteristics of the mortgage loans underlying those MSRs as of the dates indicated (dollars in thousands): MSR Collateral Characteristics As of December 31, 2024 Collateral Characteristics Current arrying Amount Current Principal Balance WA Coupon (A) WA Servicing Fee (A) WA Maturity (months) (A) WA Loan Age (months) (A) ARMs % (B) MSRs $ 233,658 $ 17,304,133 3.50 % 0.25 % 294 53 0.1 % MSR Total/Weighted Average $ 233,658 $ 17,304,133 3.50 % 0.25 % 294 53 0.1 % As of December 31, 2023 Collateral Characteristics Current Carrying Amount Current Principal Balance WA Coupon (A) WA Servicing Fee (A) WA Maturity (months) (A) WA Loan Age (months) (A) ARMs % (B) MSRs $ 253,629 $ 19,972,994 3.48 % 0.25 % 300 42 0.1 % MSR Total/Weighted Average $ 253,629 $ 19,972,994 3.48 % 0.25 % 300 42 0.1 % (A) Weighted average coupon, servicing fee, maturity and loan age of the underlying residential mortgage loans in the pool are based on the unpaid principal balance.
The following tables set forth certain characteristics of the mortgage loans underlying those MSRs as of the dates indicated (dollars in thousands): MSR Collateral Characteristics As of December 31, 2025 Collateral Characteristics Current Carrying Amount Current Principal Balance WA Coupon (A) WA Servicing Fee (A) WA Maturity (months) (A) WA Loan Age (months) (A) ARMs % (B) MSRs $ 214,831 $ 15,891,266 3.49 % 0.25 % 283 63 0.0 % MSR Total/Weighted Average $ 214,831 $ 15,891,266 3.49 % 0.25 % 283 63 0.0 % As of December 31, 2024 Collateral Characteristics Current Carrying Amount Current Principal Balance WA Coupon (A) WA Servicing Fee (A) WA Maturity (months) (A) WA Loan Age (months) (A) ARMs % (B) MSRs $ 233,658 $ 17,304,133 3.50 % 0.25 % 294 53 0.1 % MSR Total/Weighted Average $ 233,658 $ 17,304,133 3.50 % 0.25 % 294 53 0.1 % (A) Weighted average coupon, servicing fee, maturity and loan age of the underlying residential mortgage loans in the pool are based on the unpaid principal balance.
Our investing activities used cash of approximately $141.3 million and $104.1 million for the years ended December 31, 2024 and December 31, 2023, respectively.
Our investing activities used cash of approximately $66.7 million and $141.3 million for the years ended December 31, 2025 and December 31, 2024, respectively.
Our GAAP income per diluted share for the year ended December 31, 2024 was $0.07 and our GAAP loss per diluted share for the year ended December 31, 2023 was $1.70. 57 Table of Contents Contractual Obligations Our contractual obligations as of December 31, 2024 and December 31, 2023 included repurchase agreements, borrowings under our MSR financing arrangements, our Management Agreement with our Manager, and our subservicing agreements.
Our GAAP loss per diluted share for the year ended December 31, 2025 was $0.09 and our GAAP income per diluted share for the year ended December 31, 2024 was $0.07. 58 Table of Contents Contractual Obligations Our contractual obligations as of December 31, 2025 and December 31, 2024 included repurchase agreements, borrowings under our MSR financing arrangements, and our subservicing agreements.
Servicing Fee Income Servicing fee income for the year ended December 31, 2024 was $48.5 million as compared to $53.4 million for the year ended December 31, 2023.
Servicing Fee Income Servicing fee income for the year ended December 31, 2025 was $43.3 million as compared to $48.5 million for the year ended December 31, 2024.
The following table reconciles the GAAP measure of net income (loss) to EAD and related per average common share amounts, for the periods indicated (dollars in thousands): Year Ended December 31, 2024 2023 Net Income (Loss) $ 12,210 $ (35,455 ) Realized loss on RMBS, net 6,595 36,315 Realized loss on derivatives, net (A) 14,687 4,377 Realized gain on investments in MSRs, net (504 ) - Realized gain on acquired assets, net (2 ) (23 ) Unrealized loss (gain) on RMBS measured at fair value through earnings, net 19,445 (9,755 ) Unrealized loss (gain) on derivatives, net (9,809 ) 43,071 Unrealized gain on investments in MSRs, net of estimated MSR amortization (26,796 ) (12,593 ) Tax expense on realized and unrealized gain on MSRs 6,716 2,876 Total EAD: $ 22,542 $ 28,813 EAD attributable to noncontrolling interests in Operating Partnership (442 ) (537 ) Dividends on preferred stock (9,969 ) (9,853 ) EAD Attributable to Common Stockholders $ 12,131 $ 18,423 EAD Attributable to Common Stockholders, per Diluted Share $ 0.40 $ 0.70 GAAP Net Income (Loss) Per Share of Common Stock, per Diluted Share $ 0.07 $ (1.70 ) (A) Excludes drop income on TBA dollar rolls of $2.4 million and $3.2 million and interest rate swap periodic interest income of $33.6 million and $35.0 million for the years ended December 31, 2024 and December 31, 2023, respectively. 51 Table of Contents Our Portfolio MSRs Aurora’s MSR portfolio of Fannie Mae and Freddie Mac MSRs have an aggregate UPB of approximately $17.3 billion as of December 31, 2024.
The following table reconciles the GAAP measure of net income (loss) to EAD and related per average common share amounts, for the periods indicated (dollars in thousands): Year Ended December 31, 2025 2024 Net Income $ 6,942 $ 12,210 Realized loss on RMBS, net 6,045 6,595 Realized loss on derivatives, net (A) 15,546 14,687 Realized gain on investments in MSRs, net - (504 ) Realized gain on acquired assets, net (2 ) (2 ) Unrealized loss (gain) on RMBS measured at fair value through earnings, net (35,578 ) 19,445 Unrealized loss (gain) on derivatives, net 39,767 (9,809 ) Unrealized gain on investments in MSRs, net of estimated MSR amortization (11,325 ) (26,796 ) Tax expense on realized and unrealized gain on MSRs 4,672 6,716 Total EAD: $ 26,067 $ 22,542 EAD attributable to noncontrolling interests in Operating Partnership (428 ) (442 ) Dividends on preferred stock (9,829 ) (9,969 ) EAD Attributable to Common Stockholders $ 15,810 $ 12,131 EAD Attributable to Common Stockholders, per Diluted Share $ 0.46 $ 0.40 GAAP Net Income (Loss) Per Share of Common Stock, per Diluted Share $ (0.09 ) $ 0.07 (A) Excludes drop income on TBA dollar rolls of $2.4 million and $2.4 million and interest rate swap periodic interest income of $20.2 million and $33.6 million for the years ended December 31, 2025 and December 31, 2024, respectively. 52 Table of Contents Our Portfolio MSRs Aurora’s MSR portfolio of Fannie Mae and Freddie Mac MSRs have an aggregate UPB of approximately $15.9 billion as of December 31, 2025.
The shares were sold at a weighted average price of $4.87 per share for aggregate gross proceeds of approximately $31.5 million before fees of approximately $631,000.
The shares were sold at a weighted average price of $3.59 per share for aggregate gross proceeds of approximately $5.6 million before fees of approximately $111,000.
The primary causes of mark to market changes are changes in interest rates and nominal spreads. During the year ended December 31, 2024, a rise in interest rates caused a net unrealized loss on our available-for-sale RMBS. During the year ended December 31, 2023, tightening of credit spreads and an interest rate rally in the 5-year U.S.
The primary causes of mark to market changes are changes in interest rates and nominal spreads. During the year ended December 31, 2025, a drop in interest rates caused a net unrealized gain on our available-for-sale RMBS. During the year ended December 31, 2024, a rise in interest rates caused a net unrealized loss on our available-for-sale RMBS.
Our asset acquisition strategy focuses on acquiring a diversified portfolio of residential mortgage assets that balances the risk and reward opportunities our internal management team observes in the marketplace.
We operate so as to continue to qualify to be taxed as a REIT. Our asset acquisition strategy focuses on acquiring a diversified portfolio of residential mortgage assets that balances the risk and reward opportunities our internal management team observes in the marketplace.
Under each agreement, the subservicer agrees to service the applicable mortgage loans in accordance with applicable law and the requirements of the applicable Agency and the Company pays customary fees to the applicable subservicer for specified services. All expiring agreements to date have been automatically renewed for the extended terms.
Under each agreement, the subservicer agrees to service the applicable mortgage loans in accordance with applicable law and the requirements of the applicable Agency and the Company pays customary fees to the applicable subservicer for specified services.
The $5.8 million increase in interest income for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to purchases of new securities, as well as replacing lower yielding securities with higher yielding securities coupled with portfolio positioning.
The $5.3 million increase in interest income for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to purchases of new securities, an increase in price premium amortization as well as replacing lower yielding securities with higher yielding securities.
The following tables provide additional information regarding borrowings under our repurchase agreements (dollars in thousands): Repurchase Agreement Characteristics As of December 31, 2024 RMBS Market Value Repurchase Agreements Weighted Average Rate Less than one month $ 1,029,996 $ 1,005,685 4.75 % One to three months 73,626 71,572 4.72 % Total/Weighted Average $ 1,103,622 $ 1,077,257 4.75 % As of December 31, 2023 RMBS Market Value Repurchase Agreements Weighted Average Rate Less than one month $ 833,443 $ 772,466 5.55 % One to three months 139,778 131,023 5.55 % Total/Weighted Average $ 973,221 $ 903,489 5.55 % The amount of collateral as of December 31, 2024 and December 31, 2023, including cash, was $1,123.7 million and $984.2 million, respectively.
The following tables provide additional information regarding borrowings under our repurchase agreements (dollars in thousands): Repurchase Agreement Characteristics As of December 31, 2025 RMBS Market Value Repurchase Agreements Weighted Average Rate Less than one month $ 1,189,714 $ 1,137,200 3.99 % Total/Weighted Average $ 1,189,714 $ 1,137,200 3.99 % As of December 31, 2024 RMBS Market Value Repurchase Agreements Weighted Average Rate Less than one month $ 1,029,996 $ 1,005,685 4.75 % One to three months 73,626 71,572 4.72 % Total/Weighted Average $ 1,103,622 $ 1,077,257 4.75 % The amount of collateral as of December 31, 2025 and December 31, 2024, including cash, was $1,192.6 million and $1,123.7 million, respectively.
The shares were sold at a weighted average price of $3.59 per share for aggregate gross proceeds of approximately $5.6 million before fees of approximately $111,000. During the year ended December 31, 2023, the Company issued and sold 6,470,004 shares of common stock under the Common Stock ATM Program.
The shares were sold at a weighted average price of $3.00 per share for aggregate gross proceeds of approximately $14.7 million before fees of approximately $293,000. During the year ended December 31, 2024, the Company issued and sold 1,544,917 shares of common stock under the Common Stock ATM Program.
If an agreement is not renewed by the Company or terminated by the Company without cause, de-boarding fees will be due to the subservicer.
Each agreement may be terminated without cause by either party by giving notice as specified in the agreement. If an agreement is not renewed by the Company or terminated by the Company without cause, de-boarding fees will be due to the subservicer.
Set forth below is the average aggregate balance of borrowings under the Company’s repurchase agreements for each of the periods shown and the aggregate balance as of the end of each such period (dollars in thousands): Repurchase Agreement Average and Maximum Amounts Quarter Ended Average Monthly Amount Maximum Month-End Amount Quarter Ending Amount December 31, 2024 $ 1,092,320 $ 1,132,004 $ 1,077,257 September 30, 2024 $ 1,051,750 $ 1,108,496 $ 1,108,496 June 30, 2024 $ 972,701 $ 994,764 $ 994,764 March 31, 2024 $ 937,193 $ 965,005 $ 965,005 December 31, 2023 $ 897,547 $ 903,489 $ 903,489 September 30, 2023 $ 972,935 $ 984,931 $ 967,289 June 30, 2023 $ 992,631 $ 1,010,934 $ 979,907 March 31, 2023 $ 972,138 $ 991,618 $ 991,618 The increase in the Company’s borrowings under its repurchase agreements for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to the purchase of new RMBS securities, a large portion of which are financed through repurchase agreements.
Set forth below is the average aggregate balance of borrowings under the Company’s repurchase agreements for each of the periods shown and the aggregate balance as of the end of each such period (dollars in thousands): Repurchase Agreement Average and Maximum Amounts Quarter Ended Average Monthly Amount Maximum Month-End Amount Quarter Ending Amount December 31, 2025 $ 1,135,331 $ 1,137,200 $ 1,137,200 September 30, 2025 $ 1,086,896 $ 1,107,141 $ 1,107,141 June 30, 2025 $ 1,049,729 $ 1,072,294 $ 1,072,294 March 31, 2025 $ 1,047,203 $ 1,049,867 $ 1,049,867 December 31, 2024 $ 1,092,320 $ 1,132,004 $ 1,077,257 September 30, 2024 $ 1,051,750 $ 1,108,496 $ 1,108,496 June 30, 2024 $ 972,701 $ 994,764 $ 994,764 March 31, 2024 $ 937,193 $ 965,005 $ 965,005 The increase in the Company’s borrowings under its repurchase agreements for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to the purchase of new RMBS securities, a large portion of which are financed through repurchase agreements.
The $1.2 million increase in servicing costs for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to one-time loan level adjustments as well as de-boarding fees related to the MSR sale.
The $3.1 million decrease in servicing costs for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to changes in the portfolio and a one-time loan level adjustment as well as de-boarding fees related to the MSR sale during the year ended December 31, 2024.
As of December 31, 2024, approximately $49.2 million was remaining pursuant to the Common Stock ATM Program. During the year ended December 31, 2024, the Company issued and sold 1,544,917 shares of common stock under the Common Stock ATM Program.
As of December 31, 2025, approximately $34.6 million was remaining pursuant to the Common Stock ATM Program. During the year ended December 31, 2025, the Company issued and sold 4,909,053 shares of common stock under the Common Stock ATM Program.
The $18.7 million decrease in unrealized loss on our investments in Servicing Related Assets for December 31, 2024 as compared to December 31, 2023 was primarily due to changes in valuation inputs or assumptions.
The $11.6 million increase in unrealized loss on our investments in Servicing Related Assets for December 31, 2025 as compared to December 31, 2024 was primarily due to changes in valuation inputs or assumptions and paydown of underlying loans.
The $4.3 million increase in general and administrative expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to an increase in professional fees relating to the Internalization.
The $3.0 million decrease in general and administrative expense for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to a decrease in professional fees related to the Internalization.
In October 2023, Aurora and QRS III entered into an amendment to the Fannie Mae MSR Revolving Facility that extended the revolving period for an additional 24 months. Amounts borrowed bear interest at a weighted average borrowing rate of 7.9%.
In October 2023, Aurora and QRS III entered into an amendment to the Fannie Mae MSR Revolving Facility that extended the revolving period for an additional 24 months.
We attempt to reduce the exposure of our MSRs to voluntary prepayments through the structuring of recapture agreements with Aurora’s subservicers. Under these agreements, the subservicer attempts to refinance specified mortgage loans. The subservicer sells the new mortgage loan to the applicable Agency, transfers the related MSR to Aurora and then subservices the new mortgage loan on behalf of Aurora.
Under these agreements, the subservicer attempts to refinance specified mortgage loans. The subservicer sells the new mortgage loan to the applicable Agency, transfers the related MSR to Aurora and then subservices the new mortgage loan on behalf of Aurora.
The $29.7 million decrease in realized loss on RMBS for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to a decline in the number of RMBS securities sold during the year ended December 31, 2024.
The $0.6 million decrease in realized loss on RMBS for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to a decline in the number of RMBS securities sold during the year ended December 31, 2025. 49 Table of Contents Realized Gain on Investments in MSRs, Net Realized gain on investments in MSRs for the year ended December 31, 2025 was $0 as compared to $0.5 million for the year ended December 31, 2024.
Non-GAAP Financial Measures This Management’s Discussion and Analysis of Financial Condition and Results of Operations section contains analysis and discussion of non-GAAP financial measures, including: • earnings available for distribution; and • earnings available for distribution per average common share.
Unrealized gain (loss) on available-for-sale RMBS is recorded in accumulated other comprehensive income (loss). Non-GAAP Financial Measures This Management’s Discussion and Analysis of Financial Condition and Results of Operations section contains analysis and discussion of non-GAAP financial measures, including: • earnings available for distribution; and • earnings available for distribution per average common share.
While EAD is one indicia of the Company’s earnings capacity, it is not the only factor considered in setting a dividend and is not the same as REIT taxable income which is calculated in accordance with the rules of the IRS. 50 Table of Contents Earnings Available for Distribution EAD for the year ended December 31, 2024 as compared to the year ended December 31, 2023, decreased by approximately $6.3 million or $0.30 per average common share.
While EAD is one indicia of the Company’s earnings capacity, it is not the only factor considered in setting a dividend and is not the same as REIT taxable income which is calculated in accordance with the rules of the IRS. 51 Table of Contents Earnings Available for Distribution EAD for the year ended December 31, 2025 as compared to the year ended December 31, 2024, increased by approximately $3.7 million or $0.06 per average common share due primarily to a decrease in Internalization expenses as well as a decrease in borrowing costs offset by an increase in common share count resulting from issuances under the Common Stock ATM program.
Realized Gain on Investments in MSRs, Net Realized gain on investments in MSRs for the year ended December 31, 2024 was approximately $504,000 as compared to $0 for the year ended December 31, 2023. The increase of $504,000 in realized gain on MSRs was because no MSRs were sold during the year ended December 31, 2023.
The decrease of $0.5 million in realized gain on MSRs was because no MSRs were sold during the year ended December 31, 2025. Realized Gain on Derivatives, Net Realized gain on derivatives for the year ended December 31, 2025 was $7.0 million as compared to $21.3 million for the year ended December 31, 2024.
The following table summarizes our contractual obligations for borrowed money as of the dates indicated (dollars in thousands): Contractual Obligations Characteristics As of December 31, 2024 Less than 1 year 1 to 3 years 3 to 5 years More than 5 years Total Repurchase agreements Borrowings under repurchase agreements $ 1,077,257 $ - $ - $ - $ 1,077,257 Interest on repurchase agreement borrowings (A) $ 4,112 $ - $ - $ - $ 4,112 Freddie Mac MSR Revolver Borrowings under Freddie Mac MSR Revolver $ 56,500 $ - $ - $ - $ 56,500 Interest on Freddie Mac MSR Revolver borrowings $ 1,098 $ - $ - $ - $ 1,098 Fannie Mae MSR Revolving Facility Borrowings under Fannie Mae MSR Revolving Facility $ 555 $ 14,323 $ 80,722 $ - $ 95,600 Interest on Fannie Mae MSR Revolving Facility $ 603 $ - $ - $ - $ 603 As of December 31, 2023 Less than 1 year 1 to 3 years 3 to 5 years More than 5 years Total Repurchase agreements Borrowings under repurchase agreements $ 903,489 $ - $ - $ - $ 903,489 Interest on repurchase agreement borrowings (A) $ 3,930 $ - $ - $ - $ 3,930 Freddie Mac MSR Revolver Borrowings under Freddie Mac MSR Revolver $ 64,500 $ - $ - $ - $ 64,500 Interest on Freddie Mac MSR Revolver borrowings $ 1,329 $ - $ - $ - $ 1,329 Fannie Mae MSR Revolving Facility Borrowings under Fannie Mae MSR Revolving Facility $ - $ 8,679 $ 97,321 $ - $ 106,000 Interest on Fannie Mae MSR Revolving Facility $ 747 $ - $ - $ - $ 747 (A) Interest expense is calculated based on the interest rate in effect at December 31, 2024 and December 31, 2023, respectively, and includes all interest expense incurred through those dates. 58 Table of Contents Management Agreement The Management Agreement with CHMM, which was terminated on November 14, 2024, provided that CHMM was entitled to receive a management fee, the reimbursement of certain expenses and, in certain circumstances, a termination fee.
The following table summarizes our contractual obligations for borrowed money as of the dates indicated (dollars in thousands): Contractual Obligations Characteristics As of December 31, 2025 Less than 1 year 1 to 3 years 3 to 5 years More than 5 years Total Repurchase agreements Borrowings under repurchase agreements $ 1,137,200 $ - $ - $ - $ 1,137,200 Interest on repurchase agreement borrowings (A) $ 3,526 $ - $ - $ - $ 3,526 Freddie Mac MSR Revolver Borrowings under Freddie Mac MSR Revolver $ 55,500 $ - $ - $ - $ 55,500 Interest on Freddie Mac MSR Revolver borrowings $ 973 $ - $ - $ - $ 973 Fannie Mae MSR Revolving Facility Borrowings under Fannie Mae MSR Revolving Facility $ - $ 7,355 $ 83,395 $ - $ 90,750 Interest on Fannie Mae MSR Revolving Facility $ 518 $ - $ - $ - $ 518 As of December 31, 2024 Less than 1 year 1 to 3 years 3 to 5 years More than 5 years Total Repurchase agreements Borrowings under repurchase agreements $ 1,077,257 $ - $ - $ - $ 1,077,257 Interest on repurchase agreement borrowings (A) $ 4,112 $ - $ - $ - $ 4,112 Freddie Mac MSR Revolver Borrowings under Freddie Mac MSR Revolver $ 56,500 $ - $ - $ - $ 56,500 Interest on Freddie Mac MSR Revolver borrowings $ 1,098 $ - $ - $ - $ 1,098 Fannie Mae MSR Revolving Facility Borrowings under Fannie Mae MSR Revolving Facility $ 555 $ 14,323 $ 80,722 $ - $ 95,600 Interest on Fannie Mae MSR Revolving Facility $ 603 $ - $ - $ - $ 603 (A) Interest expense is calculated based on the interest rate in effect at December 31, 2025 and December 31, 2024, respectively, and includes all interest expense incurred through those dates.
Higher prepayment could reduce the length of cash flows from the MSRs and accelerate the premium amortization on the RMBS portfolio.
Lower rates could reduce our funding costs and spur economic activity, increasing our net interest income. Higher prepayment could reduce the length of cash flows from the MSRs and accelerate the premium amortization on the RMBS portfolio.
The difference between the consideration transferred and the carrying value of the preferred stock repurchased resulted in a gain attributable to common stockholders of $78,000 for the year ended December 30, 2024. During the year ended December 31, 2023, the Company did not repurchase any Preferred Stock pursuant to the repurchase program.
The difference between the consideration transferred and the carrying value of the preferred stock repurchased resulted in a gain attributable to common stockholders of $78,000 for the year ended December 30, 2024. Shares of preferred stock that are repurchased by the Company cease to be outstanding but remain authorized for future issuance.
(B) ARMs % represents the percentage of the total principal balance of the pool that corresponds to ARMs and hybrid ARMs. 52 Table of Contents RMBS The following tables summarize the characteristics of our RMBS portfolio and certain characteristics of the collateral underlying our RMBS as of the dates indicated (dollars in thousands): RMBS Characteristics As of December 31, 2024 Gross Unrealized Weighted Average Asset Type Original Face Value Book Value Gains Losses Carrying Value (A) Number of Securities Rating Coupon Yield (C) Maturity (Years) RMBS, available-for-sale, measured at fair value through OCI Fannie Mae $ 160,092 $ 131,441 $ 492 $ (2,282 ) $ 129,651 11 (B) 4.62 % 4.79 % 27 Freddie Mac 157,618 127,839 - (5,362 ) 122,477 12 (B) 4.34 % 4.44 % 27 RMBS, measured at fair value through earnings Fannie Mae 335,927 299,453 1,870 (5,375 ) 295,948 24 (B) 4.81 % 4.94 % 28 Freddie Mac 648,523 580,529 3,134 (9,319 ) 574,344 48 (B) 4.93 % 5.03 % 28 Total/weighted average RMBS $ 1,302,160 $ 1,139,262 $ 5,496 $ (22,338 ) $ 1,122,420 95 4.80 % 4.91 % 28 As of December 31, 2023 Gross Unrealized Weighted Average Asset Type Original Face Value Book Value Gains Losses Carrying Value (A) Number of Securities Rating Coupon Yield (C) Maturity (Years) RMBS, available-for-sale, measured at fair value through OCI Fannie Mae $ 211,773 $ 187,746 $ 2,970 $ (1,607 ) $ 189,109 15 (B) 4.55 % 4.70 % 28 Freddie Mac 262,695 235,260 1,075 (4,865 ) 231,470 19 (B) 4.45 % 4.50 % 28 RMBS, measured at fair value through earnings Fannie Mae 221,965 208,487 4,606 (1,076 ) 212,017 17 (B) 4.78 % 4.94 % 28 Freddie Mac 401,287 373,310 7,515 (1,291 ) 379,534 29 (B) 4.72 % 4.88 % 29 Total/weighted average RMBS $ 1,097,720 $ 1,004,803 $ 16,166 $ (8,839 ) $ 1,012,130 80 4.64 % 4.77 % 28 (A) See “Item 8.
(B) ARMs % represents the percentage of the total principal balance of the pool that corresponds to ARMs and hybrid ARMs. 53 Table of Contents RMBS The following tables summarize the characteristics of our RMBS portfolio and certain characteristics of the collateral underlying our RMBS as of the dates indicated (dollars in thousands): RMBS Characteristics As of December 31, 2025 Asset Type Gross Unrealized Weighted Average Original Face Value Book Value Gains Losses Carrying Value (A) Number of Securities Rating Coupon Yield (C) Maturity (Years) RMBS, available-for-sale, measured at fair value through OCI Fannie Mae $ 150,782 $ 110,321 $ 3,094 $ (232 ) $ 113,183 10 (B) 4.67 % 4.83 % 26 Freddie Mac 125,240 92,829 1,149 (259 ) 93,719 10 (B) 4.67 % 4.76 % 26 RMBS, measured at fair value through earnings Fannie Mae 469,667 408,260 10,506 (121 ) 418,645 35 (B) 5.04 % 5.14 % 28 Freddie Mac 676,854 572,802 15,578 (76 ) 588,304 52 (B) 5.05 % 5.14 % 27 Total/weighted average RMBS $ 1,422,543 $ 1,184,212 $ 30,327 $ (688 ) $ 1,213,851 107 4.98 % 5.08 % 27 As of December 31, 2024 Gross Unrealized Weighted Average Asset Type Original Face Value Book Value Gains Losses Carrying Value (A) Number of Securities Rating Coupon Yield (C) Maturity (Years) RMBS, available-for-sale, measured at fair value through OCI Fannie Mae $ 160,092 $ 131,441 $ 492 $ (2,282 ) $ 129,651 11 (B) 4.62 % 4.79 % 27 Freddie Mac 157,618 127,839 - (5,362 ) 122,477 12 (B) 4.34 % 4.44 % 27 RMBS, measured at fair value through earnings Fannie Mae 335,927 299,453 1,870 (5,375 ) 295,948 24 (B) 4.81 % 4.94 % 28 Freddie Mac 648,523 580,529 3,134 (9,319 ) 574,344 48 (B) 4.93 % 5.03 % 28 Total/weighted average RMBS $ 1,302,160 $ 1,139,262 $ 5,496 $ (22,338 ) $ 1,122,420 95 4.80 % 4.91 % 28 (A) See “Item 8.
Realized Gain on Derivatives, Net Realized gain on derivatives for the year ended December 31, 2024 was $21.3 million as compared to $33.8 million for the year ended December 31, 2023.
Unrealized Gain (Loss) on Derivatives Unrealized loss on derivatives for the year ended December 31, 2025 was $39.8 million as compared to a gain of $9.8 million for the year ended December 31, 2024.
As a result, interest rates and other factors affect our performance more so than inflation, although inflation rates can often have a meaningful influence over the direction of interest rates.
All expiring agreements to date have been automatically renewed for the extended terms. 59 Table of Contents Inflation Substantially all of our assets and liabilities are financial in nature. As a result, interest rates and other factors affect our performance more so than inflation, although inflation rates can often have a meaningful influence over the direction of interest rates.
We are subject to the risks involved with real estate and real estate-related debt instruments. These include, among others, the risks normally associated with changes in the general economic climate, changes in the mortgage market, changes in tax laws, interest rate levels, and the availability of financing.
These include, among others, the risks normally associated with changes in the general economic climate, changes in the mortgage market, changes in tax laws, interest rate levels, and the availability of financing. We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our short taxable year ended December 31, 2013.
The agreements have varying initial terms (three years, for Freedom Mortgage, and two years for the other three sub-servicers) and are subject to automatic renewal for additional terms equal to the applicable initial term unless either party chooses not to renew. Each agreement may be terminated without cause by either party by giving notice as specified in the agreement.
Subservicing Agreements As of December 31, 2025, Aurora had four subservicing agreements in place. The agreements each have two-year initial terms and are subject to automatic renewal for additional terms equal to the applicable initial term unless either party chooses not to renew.
Our principal objective is to generate attractive current yields and risk-adjusted total returns for our stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation. We attempt to attain this objective by selectively constructing and actively managing a portfolio of Servicing Related Assets and RMBS and, subject to market conditions, other cash flowing residential mortgage assets.
We attempt to attain this objective by selectively constructing and actively managing a portfolio of Servicing Related Assets and RMBS and, subject to market conditions, other cash flowing residential mortgage assets. We are subject to the risks involved with real estate and real estate-related debt instruments.
Interest Expense Interest expense for the year ended December 31, 2024 was $55.7 million as compared to $51.6 million for the year ended December 31, 2023. The $4.1 million increase in interest expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023, was primarily due to a rise in repurchase obligations.
The $6.0 million decrease in interest expense for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was due to a decrease in financing rates combined with a decrease in notes payable.
Treasury securities outstanding. The Federal Reserve’s actions to ease monetary policy by reducing its federal funds rate and reduce the speed at which it is decreasing its balance sheet will generally lower interest rates across asset classes, including for Agency RMBS. Lower rates could reduce our funding costs and spur economic activity, increasing our net interest income.
It is unclear what impact the investigation will have on the future course of U.S. monetary policy. To the extent the Federal Reserve takes future action to ease monetary policy by reducing its federal funds rate and/or purchasing securities and increasing its balance sheet, it will generally lower interest rates across asset classes, including for Agency RMBS.
Servicing Related Assets RMBS All Other Total Balance Sheet December 31, 2024 Investments $ 233,658 $ 1,122,420 $ - $ 1,356,078 Other assets 28,874 59,159 47,064 135,097 Total assets 262,532 1,181,579 47,064 1,491,175 Debt 151,226 1,077,257 - 1,228,483 Other liabilities 4,290 15,010 9,770 29,070 Total liabilities 155,516 1,092,267 9,770 1,257,553 Net Assets $ 107,016 $ 89,312 $ 37,294 $ 233,622 December 31, 2023 Investments $ 253,629 $ 1,012,130 $ - $ 1,265,759 Other assets 33,785 39,939 53,509 127,233 Total assets 287,414 1,052,069 53,509 1,392,992 Debt 169,314 903,489 - 1,072,803 Other liabilities 4,240 47,990 9,584 61,814 Total liabilities 173,554 951,479 9,584 1,134,617 Net Assets $ 113,860 $ 100,590 $ 43,925 $ 258,375 47 Table of Contents Interest Income Interest income for the year ended December 31, 2024 was $55.8 million as compared to $50.0 million for the year ended December 31, 2023.
(B) Included in other operating expenses are general and administrative expenses, compensation and benefits and management fee to affiliate. 48 Table of Contents Servicing Related Assets RMBS All Other Total Balance Sheet December 31, 2025 Investments $ 214,831 $ 1,213,851 $ - $ 1,428,682 Other assets 28,904 27,293 55,677 111,874 Total assets 243,735 1,241,144 55,677 1,540,556 Debt 145,191 1,137,200 - 1,282,391 Other liabilities 2,575 9,504 7,554 19,633 Total liabilities 147,766 1,146,704 7,554 1,302,024 Net Assets $ 95,969 $ 94,440 $ 48,123 $ 238,532 December 31, 2024 Investments $ 233,658 $ 1,122,420 $ - $ 1,356,078 Other assets 28,874 59,159 47,064 135,097 Total assets 262,532 1,181,579 47,064 1,491,175 Debt 151,226 1,077,257 - 1,228,483 Other liabilities 4,290 15,010 9,770 29,070 Total liabilities 155,516 1,092,267 9,770 1,257,553 Net Assets $ 107,016 $ 89,312 $ 37,294 $ 233,622 Interest Income Interest income for the year ended December 31, 2025 was $61.1 million as compared to $55.8 million for the year ended December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changePrepayment Risk; Extension Risk The following tables summarize the estimated change in fair value of our MSRs as of the dates indicated given several parallel shifts in the discount rate, voluntary prepayment rate and servicing cost (dollars in thousands): MSR Fair Value Changes As of December 31, 2024 (20)% (10)% -% 10% 20% Discount Rate Shift in % Estimated FV $ 257,269 $ 244,952 $ 233,658 $ 223,276 $ 213,708 Change in FV $ 23,611 $ 11,294 $ - $ (10,382 ) $ (19,950 ) % Change in FV 10 % 5 % - (4 )% (9 )% Voluntary Prepayment Rate Shift in % Estimated FV $ 240,653 $ 237,709 $ 233,658 $ 228,942 $ 223,862 Change in FV $ 6,995 $ 4,051 $ - $ (4,716 ) $ (9,796 ) % Change in FV 3 % 2 % - (2 )% (4 )% Servicing Cost Shift in % Estimated FV $ 241,240 $ 237,449 $ 233,658 $ 229,867 $ 226,076 Change in FV $ 7,582 $ 3,791 $ - $ (3,791 ) $ (7,582 ) % Change in FV 3 % 2 % - (2 )% (3 )% As of December 31, 2023 (20)% (10)% -% 10% 20% Discount Rate Shift in % Estimated FV $ 278,018 $ 265,310 $ 253,629 $ 242,863 $ 232,917 Change in FV $ 24,389 $ 11,682 $ - $ (10,766 ) $ (20,712 ) % Change in FV 10 % 5 % - (4 )% (8 )% Voluntary Prepayment Rate Shift in % Estimated FV $ 265,422 $ 259,981 $ 253,629 $ 246,972 $ 240,306 Change in FV $ 11,793 $ 6,352 $ - $ (6,657 ) $ (13,322 ) % Change in FV 5 % 3 % - (3 )% (5 )% Servicing Cost Shift in % Estimated FV $ 262,597 $ 258,113 $ 253,629 $ 249,144 $ 244,660 Change in FV $ 8,968 $ 4,484 $ - $ (4,484 ) $ (8,968 ) % Change in FV 4 % 2 % - (2 )% (4 )% 61 Table of Contents The following tables summarize the estimated change in fair value of our RMBS as of the dates indicated given several parallel shifts in interest rates (dollars in thousands): RMBS Fair Value Changes As of December 31, 2024 December 31, 2024 (0.75)% (0.50)% (0.25)% 0.25% 0.50% 0.75% RMBS Portfolio RMBS, net of swaps $ 800,308 Estimated FV $ 803,881 $ 803,288 $ 802,088 $ 798,050 $ 795,322 $ 792,144 Change in FV $ 3,574 $ 2,980 $ 1,781 $ (2,258 ) $ (4,986 ) $ (8,164 ) % Change in FV 0.45 % 0.37 % 0.22 % (0.28 )% (0.62 )% (1.02 )% As of December 31, 2023 December 31, 2023 (0.75)% (0.50)% (0.25)% 0.25% 0.50% 0.75% RMBS Portfolio RMBS, net of swaps $ 749,491 Estimated FV $ 753,297 $ 752,391 $ 751,103 $ 747,569 $ 745,369 $ 742,833 Change in FV $ 3,806 $ 2,900 $ 1,612 $ (1,922 ) $ (4,122 ) $ (6,658 ) % Change in FV 0.51 % 0.39 % 0.22 % (0.26 )% (0.55 )% (0.89 )% The sensitivity analysis is hypothetical and is presented solely to assist an analysis of the possible effects on the fair value under various scenarios.
Biggest changePrepayment Risk; Extension Risk The following tables summarize the estimated change in fair value of our MSRs as of the dates indicated given several parallel shifts in the discount rate, voluntary prepayment rate and servicing cost (dollars in thousands): MSR Fair Value Changes As of December 31, 2025 (20)% (10)% -% 10% 20% Discount Rate Shift in % Estimated FV $ 236,121 $ 225,027 $ 214,831 $ 205,437 $ 196,764 Change in FV $ 21,290 $ 10,196 $ - $ (9,393 ) $ (18,067 ) % Change in FV 10 % 5 % - (4 )% (8 )% Voluntary Prepayment Rate Shift in % Estimated FV $ 227,465 $ 221,154 $ 214,831 $ 208,694 $ 202,804 Change in FV $ 12,634 $ 6,323 $ - $ (6,137 ) $ (12,027 ) % Change in FV 6 % 3 % - (3 )% (6 )% Servicing Cost Shift in % Estimated FV $ 222,038 $ 218,434 $ 214,831 $ 211,227 $ 207,624 Change in FV $ 7,207 $ 3,603 $ - $ (3,603 ) $ (7,207 ) % Change in FV 3 % 2 % - (2 )% (3 )% As of December 31, 2024 (20)% (10)% -% 10% 20% Discount Rate Shift in % Estimated FV $ 257,269 $ 244,952 $ 233,658 $ 223,276 $ 213,708 Change in FV $ 23,611 $ 11,294 $ - $ (10,382 ) $ (19,950 ) % Change in FV 10 % 5 % - (4 )% (9 )% Voluntary Prepayment Rate Shift in % Estimated FV $ 240,653 $ 237,709 $ 233,658 $ 228,942 $ 223,862 Change in FV $ 6,995 $ 4,051 $ - $ (4,716 ) $ (9,796 ) % Change in FV 3 % 2 % - (2 )% (4 )% Servicing Cost Shift in % Estimated FV $ 241,240 $ 237,449 $ 233,658 $ 229,867 $ 226,076 Change in FV $ 7,582 $ 3,791 $ - $ (3,791 ) $ (7,582 ) % Change in FV 3 % 2 % - (2 )% (3 )% 61 Table of Contents The following tables summarize the estimated change in fair value of our RMBS as of the dates indicated given several parallel shifts in interest rates (dollars in thousands): RMBS Fair Value Changes As of December 31, 2025 December 31, 2025 (0.75)% (0.50)% (0.25)% 0.25% 0.50% 0.75% RMBS Portfolio RMBS, net of swaps $ 852,643 Estimated FV $ 860,338 $ 858,665 $ 856,037 $ 848,686 $ 844,234 $ 839,359 Change in FV $ 7,695 $ 6,022 $ 3,394 $ (3,957 ) $ (8,409 ) $ (13,284 ) % Change in FV 0.90 % 0.71 % 0.40 % (0.46 )% (0.99 )% (1.56 )% As of December 31, 2024 December 31, 2024 (0.75)% (0.50)% (0.25)% 0.25% 0.50% 0.75% RMBS Portfolio RMBS, net of swaps $ 800,308 Estimated FV $ 803,881 $ 803,288 $ 802,088 $ 798,050 $ 795,322 $ 792,144 Change in FV $ 3,574 $ 2,980 $ 1,781 $ (2,258 ) $ (4,986 ) $ (8,164 ) % Change in FV 0.45 % 0.37 % 0.22 % (0.28 )% (0.62 )% (1.02 )% The sensitivity analysis is hypothetical and is presented solely to assist an analysis of the possible effects on the fair value under various scenarios.
As of December 31, 2024, the Company’s exposure (defined as the amount of cash and securities pledged as collateral, less the borrowing under the repurchase agreement) to any of the counterparties under the repurchase agreements did not exceed five percent of the Company’s equity. Our interest rate swaps and U.S.
As of December 31, 2025, the Company’s exposure (defined as the amount of cash and securities pledged as collateral, less the borrowing under the repurchase agreement) to any of the counterparties under the repurchase agreements did not exceed five percent of the Company’s equity. Our interest rate swaps, Eris SOFR swap futures and U.S.
Interest Rate Effect on Net Interest Income Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing and hedging activities. The costs of our borrowings are generally based on prevailing market interest rates.
These instruments are intended to serve as a hedge against future interest rate or pricing changes on our borrowings. Interest Rate Effect on Net Interest Income Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing and hedging activities.
In addition, the values of our Servicing Related Assets are highly sensitive to changes in interest rates, historically increasing when rates rise and decreasing when rates decline. Subject to maintaining our qualification as a REIT, we attempt to mitigate interest rate risk and financing pricing risk through utilization of hedging instruments, primarily interest rate swap agreements and U.S.
In addition, the values of our Servicing Related Assets are highly sensitive to changes in interest rates, historically increasing when rates rise and decreasing when rates decline.
Treasury futures, respectively. We may also use financial futures, options, interest rate cap agreements, and forward sales. These instruments are intended to serve as a hedge against future interest rate or pricing changes on our borrowings.
Subject to maintaining our qualification as a REIT, we attempt to mitigate interest rate risk and financing pricing risk through utilization of hedging instruments, primarily interest rate swap agreements, Eris SOFR swap futures and U.S. Treasury futures, respectively. We may also use financial futures, options, interest rate cap agreements, and forward sales.
Added
The costs of our borrowings are generally based on prevailing market interest rates.

Other CHMI 10-K year-over-year comparisons