Content analysis
?Positive | ||
Negative | ||
Uncertain | ||
Constraining | ||
Legalese | ||
Litigous | ||
Readability |
H.S. junior Avg
|
New words:
abrupt, accusation, accused, anxiety, architecture, attack, backup, basket, begun, bespoke, broadly, categorized, CCC, CDS, CODM, collaborate, Collaborative, compromise, conclusion, concurrent, coverage, creation, creditor, CTO, cushion, cut, cyber, cycle, daily, database, deepened, denominated, deployment, disaggregated, disaster, diverted, domiciled, dovish, downgrade, downgraded, DPI, education, email, endpoint, engineering, equivalent, erosion, escalation, escrow, exhibiting, expend, expropriation, feasible, fiduciary, Fitch, fulfill, greenwashing, hamper, handling, hardware, hereinafter, imposition, impracticable, indemnity, infrequently, instability, insufficient, integrated, integration, intermediate, ISO, joining, landscape, legacy, lengthier, likelihood, loosely, merger, mezzanine, micro, middle, migration, Moody, MSR, networking, nonperforming, obligor, obsolete, older, outsourced, overcollateralization, overhaul, overseeing, overview, patch, paused, PC, penetration, posture, prominent, pronounced, recasting, redeem, redundancy, refuse, Relatedly, repaid, resign, resignation, resilient, retrospective, retrospectively, revitalization, roadmap, seemingly, segment, Shilleh, shut, Signature, Silicon, smallest, SOC, software, solvency, sound, spurred, SSA, stakeholder, stance, statistical, strain, subservicer, suddenly, Suisse, surpassed, surpassing, susceptible, syndicated, telecommunication, tenure, thought, threat, traditional, transmission, turmoil, UBS, unaffected, underpinned, unexpected, unpledged, unsuitable, user, Valley, vehicle, vendor, voluntarily, weaker, weekly, workout
Removed:
ameliorate, anticipation, ARRC, assemble, comprised, convened, Core, correlate, country, discontinuation, discontinued, disease, diversify, drastically, dropped, fallback, formulate, globally, IBA, ICE, language, lessen, linked, lost, nationwide, outbreak, passed, permanent, publishing, rapidly, remote, remotely, travel, USD, week
Financial report summary
?Competition
Ellington FinancialRisks
- The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae, Freddie Mac, and Ginnie Mae and the U.S. Government, could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.
- Certain actions by the Federal Reserve could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.
- Prepayment rates can change, adversely affecting the performance of our assets.
- Interest rate mismatches between our assets and our borrowings may reduce our income during periods of changing interest rates, and increases in interest rates could adversely affect the value of our assets.
- Interest rate caps on ARMs and hybrid ARMs, including those that back our RMBS, may reduce our net interest margin during periods of rising or high interest rates.
- Mortgage loan modification programs and future legislative action may adversely affect the value of, and the returns on, our targeted assets.
- Difficult conditions in the mortgage and residential real estate markets as well as general market concerns may adversely affect the value of the assets in which we invest.
- Our assets include subordinated and lower-rated securities that generally have greater risks of loss than senior and higher-rated securities.
- Less stringent underwriting guidelines and the resultant potential for delinquencies or defaults on certain mortgage loans could lead to losses on many of the non-Agency RMBS we hold, as well as other mortgage-related investments that we currently hold and/or may hold in the future.
- The principal and interest payments on our non-Agency RMBS and CRTs are not guaranteed by any entity, including any government entity or GSE, and therefore are subject to increased risks, including credit risk.
- Non-government guaranteed residential mortgage loans, including subprime, non-performing, and sub-performing residential mortgage loans, are subject to increased risks.
- To the extent that due diligence is conducted on potential assets, such due diligence may not reveal all of the risks associated with such assets and may not reveal other weaknesses in such assets, which could lead to losses.
- We rely on mortgage servicers to service effectively, including loss mitigation efforts, and we also may engage in our own loss mitigation efforts with respect to whole mortgage loans and loan pools that we may purchase and such loss mitigation efforts may be unsuccessful or not cost effective.
- We may be affected by deficiencies in foreclosure practices of third parties, as well as related delays in the foreclosure process.
- Sellers of the mortgage loans that underlie the non-Agency RMBS in which we invest may be unable to repurchase defective mortgage loans, which could have a material adverse effect on the value of the loans held by the trust that issued the RMBS and could cause shortfalls in the payments due on the RMBS.
- If we acquire and subsequently resell any whole mortgage loans, we may be required to repurchase such loans or indemnify purchasers if we breach representations and warranties.
- We could be subject to liability for potential violations of various federal, state and local laws and regulations, including predatory lending laws, which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.
- Our real estate-related assets are subject to the risks associated with real property.
- We may be exposed to environmental liabilities with respect to properties in which we have an interest.
- We rely on analytical models and other data to analyze potential asset acquisition and disposition opportunities and to manage our portfolio. Such models and other data may be incorrect, misleading or incomplete, which could cause us to purchase assets that do not meet our expectations or to make asset management decisions that are not in line with our strategy.
- Valuations of some of our assets are inherently uncertain, may be based on estimates, may fluctuate over short periods of time, and may differ from the values that would have been used if a ready market for these assets existed.
- The lack of liquidity in our assets may materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.
- We are highly dependent on Ellington's information systems and those of third-party service providers, including mortgage servicers, and system failures could significantly disrupt our business, which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.
- Our access to financing sources may not be available on favorable terms, may be limited or completely shut off, and our lenders and derivative counterparties may require us to post additional collateral. These circumstances may materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.
- Increases in interest rates could adversely affect the value of our assets and cause our interest expense to increase, and increase the risk of default on our assets, which could result in reduced earnings or losses and negatively affect our profitability as well as the cash available for distribution to shareholders.
- We use leverage in executing our business strategy, which may adversely affect the return on our assets and may reduce cash available for distribution to our shareholders, as well as increase losses when economic conditions are unfavorable.
- Our rights under repo agreements are subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders.
- Hedging against interest rate changes and other risks could materially adversely affect our business, financial condition and results of operations and our ability to pay dividends to our shareholders.
- Hedging instruments and other derivatives, including some credit default swaps, may not, in many cases, be traded on exchanges, or may not be guaranteed or regulated by any U.S. or foreign governmental authority and involve risks and costs that could result in material losses.
- Our use of derivatives may expose us to counterparty risk.
- We engage in short selling transactions, which may subject us to additional risks.
- We may change our investment strategy, investment guidelines, hedging strategy, and asset allocation, operational, and management policies without notice or shareholder consent, which could materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders. In addition, our declaration of trust provides that our Board of Trustees may authorize us to revoke or otherwise terminate our REIT election without the approval of our shareholders.
- We operate in a highly competitive market.
- An increase in interest rates may cause a decrease in the issuance volumes of certain of our targeted assets, which could adversely affect our ability to acquire targeted assets that satisfy our investment objectives and to generate income and pay dividends.
- Lack of diversification in the number of assets we acquire would increase our dependence on relatively few individual assets.
- Our ability to pay dividends will depend on our operating results, our financial condition and other factors, and we may not be able to pay dividends at a fixed rate or at all under certain circumstances.
- Investments in second lien mortgage loans could subject us to increased risk of losses.
- We may invest in securities in the developing CRT sector that are subject to mortgage credit risk.
- Our investments in corporate CLOs involve certain risks.
- The underlying assets held by the CLOs in which we invest generally have lower credit ratings and are subject to significant credit risk.
- Our CLO investments are exposed to changes in interest rates.
- Our corporate CLO investments may include “middle market” and/or “covenant-lite” loans.
- The CLOs in which we invest are subject to risks associated with loan participations.
- Our investments in the primary corporate CLO market involve certain additional risks.
- We and our investments are subject to prepayment and reinvestment risk.
- Our portfolio of corporate CLO investments may lack diversification, which may subject us to a risk of significant loss if one or more of these corporate CLOs experience a high level of defaults on collateral.
- Failure by a CLO to satisfy certain tests, including as a result of loan defaults and/or negative loan ratings migration, may place pressure on the performance of our investments in such CLO.
- Our CLO debt investments are subject to credit rating changes.
- CLO investments involve complex documentation.
- We are dependent on the collateral managers of the corporate CLOs in which we invest, and those corporate CLOs are generally not registered under the Investment Company Act.
- Our CLO investments often have limited liquidity.
- The CLOs in which we invest incur significant operating expenses.
- We and our corporate CLO investments are subject to risks associated with non-U.S. investing, including in some cases foreign currency risk.
- Our investments in corporate CLOs may result in our recognizing taxable income prior to receiving cash distributions related to such income.
- CLOs in which we invest could become subject to U.S. federal income tax or withholding requirements.
- Our manager has significant latitude in determining the types of assets we acquire, and there is no specific prohibition in our investment strategy, investment guidelines and/or the REIT qualification requirements against investing in corporate CLOs or other corporate investments.
- We are dependent on our Manager and certain key personnel of Ellington that are provided to us through our Manager and may not find a suitable replacement if our Manager terminates the management agreement or such key personnel are no longer available to us.
- The management fees payable to our Manager are payable regardless of the performance of our portfolio, which may reduce our Manager's incentive to devote the time and effort to seeking profitable opportunities for our portfolio.
- Our Board of Trustees has approved very broad investment guidelines for our Manager and will not approve each decision made by our Manager to acquire, dispose of, or otherwise manage an asset.
- We compete with Ellington's other accounts for access to Ellington and for opportunities to acquire assets.
- There are conflicts of interest in our relationships with our Manager and Ellington, which could result in decisions that are not in the best interests of our shareholders.
- The management agreement with our Manager was not negotiated on an arm's-length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third party and may be costly and difficult to terminate.
- Our Manager's failure to identify and acquire assets that meet our asset criteria or perform its responsibilities under the management agreement could materially adversely affect our business, financial condition and results of operations, our ability to pay dividends to our shareholders, and our ability to maintain our qualification as a REIT.
- If our Manager ceases to be our Manager or one or more of our Manager's key personnel ceases to provide services to us, our lenders and our derivative counterparties may cease doing business with us.
- We do not own the Ellington brand or trademark, but may use the brand and trademark as well as our logo pursuant to the terms of a license granted by Ellington.
- Our shareholders may not receive dividends or dividends may not grow over time.
- An increase in interest rates may have an adverse effect on the market price of our common shares and our ability to pay dividends to our shareholders.
- Investing in our common shares involves a high degree of risk.
- Maintenance of our exclusion from registration as an investment company under the Investment Company Act imposes significant limitations on our operations. If we were required to register as an investment company under the Investment Company Act, we would be subject to the restrictions imposed by the Investment Company Act, which would require us to make material changes to our strategy.
- The ownership limits in our declaration of trust may discourage a takeover or business combination that may have benefited our shareholders.
- Our shareholders' ability to control our operations is severely limited.
- Certain provisions of Maryland law could inhibit a change in our control.
- Our authorized but unissued common and preferred shares may prevent a change in our control.
- Our rights and the rights of our shareholders to take action against our trustees and officers or against our Manager or Ellington are limited, which could limit your recourse in the event actions are taken that are not in your best interests.
- Our declaration of trust contains provisions that make removal of our trustees difficult, which could make it difficult for our shareholders to effect changes to our management.
- Our declaration of trust generally does not permit ownership in excess of 9.8% of any class or series of our shares of beneficial interest, and attempts to acquire our shares in excess of the share ownership limits will be ineffective unless an exemption is granted by our Board of Trustees.
- Your investment has various U.S. federal, state, and local income tax risks.
- Our failure to maintain our qualification as a REIT would subject us to U.S. federal, state and local income taxes, which could adversely affect the value of our common shares and could substantially reduce the cash available for distribution to our shareholders.
- Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments.
- Failure to make required distributions would subject us to tax, which would reduce the cash available for distribution to our shareholders.
- Even if we maintain our qualification as a REIT, we may face other tax liabilities that reduce our cash flows.
- The failure of RMBS subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to maintain our qualification as a REIT.
- Uncertainty exists with respect to the treatment of our TBAs for purposes of the REIT asset and income tests.
- Complying with REIT requirements may limit our ability to hedge effectively.
- Our investments in corporate CLOs may result in our recognizing taxable income prior to receiving cash distributions related to such income.
- CLOs in which we invest could become subject to U.S. federal income tax or withholding requirements.
- Our ownership limitation may restrict change of control or business combination opportunities in which our shareholders might receive a premium for their common shares.
- Dividends payable by REITs do not qualify for the reduced tax rates available for "qualified dividend income."
- We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares.
- Certain financing activities may subject us to U.S. federal income tax and could have negative tax consequences for our shareholders.
- Our recognition of "phantom" income may reduce a shareholder's after-tax return on an investment in our common shares.
- Liquidation of our assets may jeopardize our REIT qualification or may be subject to a 100% tax.
- The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing RMBS, that would be treated as sales of dealer property for U.S. federal income tax purposes.
- We have made a mark-to-market election under Section 475(f) of the Code. If the IRS challenges our application of that election, it may jeopardize our REIT qualification.
- Our qualification as a REIT and exemption from U.S. federal income tax with respect to certain assets may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that we acquire, and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.
- We, Ellington, or its affiliates may be subject to adverse legislative or regulatory changes.
- Failure to procure adequate funding and capital would adversely affect our results and may, in turn, negatively affect the value of our common shares and our ability to pay dividends to our shareholders.
- We, Ellington, or its affiliates may be subject to regulatory inquiries and proceedings, or other legal proceedings.
- The market for our common shares may be limited, and the price and trading volume of our common shares may be volatile.
- Future offerings of debt securities, which would rank senior to our common shares upon our bankruptcy liquidation, and future offerings of equity securities which could dilute the common share holdings of our existing shareholders and may be senior to our common shares for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common shares.
- Future sales of our common shares or other securities convertible into our common shares could cause the market value of our common shares to decline and could result in dilution of your shares.
- Climate change has the potential to impact the properties underlying our investments.
- We are subject to risks related to corporate social responsibility.
- We are largely dependent on external sources of capital in order to grow.
- Periods of heightened inflation could adversely impact our financial results.
Management Discussion
- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
- We are a Maryland real estate investment trust, or "REIT," formed in August 2012 that specializes in acquiring, investing in, and managing residential mortgage- and real estate-related and other assets. Our primary objective is to generate attractive current yields and risk-adjusted total returns for our shareholders by making investments that we believe compensate us appropriately for the risks associated with them. We seek to attain this objective by constructing and actively managing a portfolio consisting primarily of residential mortgage-backed securities, or "RMBS," for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "Agency RMBS," and RMBS that do not carry such guarantees, or "non-Agency RMBS," such as RMBS backed by prime jumbo, Alternative A-paper, mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the Consumer Financial Protection Bureau, or "non-QM loans," mortgages on single-family-rental properties, manufactured housing, and subprime residential mortgage loans. We also acquire and manage corporate collateralized loan obligations, or "CLOs." We also may opportunistically acquire other types of mortgage- and real estate-related asset classes, such as commercial mortgage-backed securities, or "CMBS," residential mortgage loans, mortgage servicing rights and credit risk transfer securities. We believe that being able to combine Agency RMBS with non-Agency RMBS and other mortgage- and real estate-related asset classes, along with opportunistic investments in CLOs, enables us to balance a range of risks.
- We were initially formed through a strategic venture among affiliates of Ellington Management Group, L.L.C., an investment management firm and registered investment adviser with a 29-year history of investing in a broad spectrum of residential and commercial mortgage-backed securities, or "MBS," and related derivatives, with an emphasis on the RMBS market, and the Blackstone Tactical Opportunity Funds, or the "Blackstone Funds." We are externally managed and advised by our Manager, an affiliate of Ellington. From our inception until August 2021, the Blackstone Funds had held special non-voting membership interests in the holding company that owns our Manager. In August 2021, an Ellington affiliate purchased these