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Co-CIO Mark Tecotzky stated that EFC likes both products and sees no material difference in their expected returns, though he noted Non-QM offers a broader set of strategic options like securitizations and call options. CEO Laurence Penn added that the Non-QM securitization market is highly developed and that EFC is now exploring a securitization structure for its RTL portfolio as well, highlighting the firm's focus on optimizing financing for all its assets.

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Co-Chief Investment Officer Mark Tecotzky explained that EFC's strategic focus is on credit and vertical integration, which offers a superior return profile for its permanent capital vehicle compared to the Agency strategy. Regarding delinquencies, he clarified there is no expectation for EFC to buy loans out of its securitization trusts. As a risk retainer, the company's strategy is to work out and resolve these loans while they remain within the securitization.

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Co-Chief Investment Officer Mark Tecotzky confirmed that retiring the high-cost floating-rate preferred stock was a clear-cut decision. He detailed their ample financing capacity from new secured facilities, unencumbered assets, and cash, suggesting recourse leverage could increase into the 'low 2s' in the near term. He added that using more unsecured debt would make them more comfortable with higher leverage and that a long-term goal is to replace short-term repo with longer-term financing to build a more robust company.

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Christopher Farrar, Co-Founder, CEO & Director, acknowledged receiving reverse inquiries from private credit sources and sees potential opportunities for private financing structures to supplement growth, though he doesn't expect whole loan sales to be a major component. Regarding prepayments, he explained they are driven by borrowers' unique situations, with activity split roughly 50/50 between property sales and refinancing, and noted that prepayment penalties protect the company's yields.

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President and CEO Christopher Farrar attributed the rise in commercial demand to the successful ramp-up of a new internal division focused on owner-occupied properties, rather than a broader market shift. He stated the current origination pace is sustainable for the year and that raised capital is deployed to fund new loans and grow the portfolio. CFO Mark Szczepaniak clarified that gains on REO sales are calculated after any previously accrued but uncollected interest has been reversed from earnings, making the gain relative to the cost basis.

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President and CEO Chris Farrar responded that Velocity's securitizations are not experiencing the volatility seen in larger CMBS deals, as they are more comparable to non-QM RMBS. He characterized NPL resolution gains as lumpy and hard to predict quarterly, but noted they have historically averaged a 2-3% gain over time due to the significant equity in the underlying properties. Farrar also confirmed that the REO portfolio is mostly liquid 1-to-4 family assets and that the ongoing shift to fair value accounting will diminish the need for CECL reserves.

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President and CEO Chris Farrar detailed that foreclosure timelines vary by state, with a weighted average of 9-10 months. He explained that for 1-to-4 unit properties, the end-buyer can be anyone from a family to an investor, while commercial properties are typically bought by other investors or owner-users. Regarding the October securitization, Farrar stated that strong executions can yield ROEs well north of 25%, though this level of return varies with market conditions for each deal.

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Chairman, CEO & President Mat Ishbia stated that AI investments would continue to improve closing speeds, creating a significant competitive advantage when rates fall and competitors slow down. On MSRs, he described the market as robust and confirmed UWM's approach remains opportunistic, selling when favorable but retaining the flexibility to hold.

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Chairman and CEO Mathew Ishbia explained that UWM aims to begin boarding loans in-house by early 2026, with the full transition completed by the end of that year. He noted there would be no significant one-time costs and highlighted benefits like cost savings, enhanced customer experience, and improved recapture rates. Regarding ARMs, Ishbia stated they are not a major focus, as consumer preference remains strongly with fixed-rate loans, and he does not foresee ARMs becoming a meaningful part of the market.

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CEO Mathew Ishbia explained that incentive success is measured through a complex set of analytics focused on broker retention, share of wallet, and adoption of UWM's broader products and services. Regarding Q1 guidance, he framed the numbers as strong, noting they are above the prior year's actuals and that Q1 is always the seasonally slowest quarter for the industry.

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Chairman and CEO Mathew Ishbia and CFO Andrew Hubacker clarified that adjusted EBITDA does not fully reflect cash flow from MSRs, as capitalization is not excluded, but sales are. Ishbia confirmed the 85-110 bps margin guidance accounts for the recent rate backup and that margin expansion is possible when rates move favorably, as demonstrated by the Q3 outperformance.

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President & CIO Bryan Wulfsohn stated they have not seen material pressure on developer exits and that risk has been 'vintage agnostic' due to low LTVs. CEO Craig Knutson and CFO Michael Roper explained that calling non-QM deals is a financial exercise where, in addition to lower rates, the deleveraging effect of a call can unlock capital and increase portfolio ROE, making it attractive even if not deeply 'in the money' for a simple reissue.

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President and CIO Bryan Wulfsohn explained that the negative convexity is driven by both the non-QM and agency portfolios and that their modeling is conservative. He detailed that BPL defaults stem from various factors like high interest costs and project delays, not a single cause. He added that tariffs are not expected to have a material impact on delinquencies, though contingencies are being increased.

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CEO Craig Knutson explained that calling deals, despite higher new coupon rates, can be highly accretive to ROE by increasing leverage. President & CIO Bryan Wulfsohn noted that higher prepays on loans held at a discount are economically positive for book value but can negatively impact distributable earnings. Executive Harold Schwartz estimated unfunded commitments at approximately $600 million, which are largely self-funding.

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President & CIO Bryan Wulfsohn stated that MFA and Lima One have ample capacity, with over $1 billion in potential borrowing available outside of securitization. He added that the agency portfolio could grow from $1 billion to $1.5-$2 billion if spreads remain attractive, as it serves as a complementary asset to the credit portfolio.

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CIO Jack Macdowell explained that Fed rate cuts would likely boost net interest margin and could make more securitizations economical to call. He noted that while home equity products exist, the seasoned borrower profile makes widespread adoption unlikely to significantly alter credit performance. He also emphasized that Chimera will continue to support Home Express's third-party sales channels while also retaining some production for its own balance sheet, without a specific target split at this time.

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CIO Jack Macdowell explained that while non-QM delinquencies are being monitored, the credit risk is manageable due to high borrower equity and active asset management. He noted RPL delinquencies are stable. Regarding the facilities, he confirmed they are structured repos with banking partners and feature non-mark-to-market or limited mark-to-market terms, which proved resilient during recent volatility. He declined to provide specific advance rates due to the complexity of the underlying collateral.

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President and CEO Phillip Kardis stated that any margin calls received were immaterial and not significant. An executive then elaborated on the securitization market, noting that tightening credit spreads create favorable conditions for exercising call rights and redeploying capital. They highlighted strong investor demand, evidenced by their first-ever sale of a BB tranche in a recent deal.

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President Nicholas Mah stated a preference for growing the BPL rental portfolio due to competitive pressures in the bridge space and noted that NYMT prioritizes high credit quality over chasing marginal yield on riskier loans. Mah and CEO Jason Serrano explained that rate cuts would benefit new financing execution and could create accretive opportunities to call and refinance existing fixed-rate securitizations.

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CEO Christopher Abate explained that margins could expand by supplementing strong daily flow volume with opportunistic bulk pool acquisitions from banks. President Dashiell Robinson added that a Fed cut would be helpful for the Bridge portfolio by recompressing cap rates and increasing transaction velocity, but noted the company remains selective in certain markets due to input costs.

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CEO Christopher Abate advocated for regulatory reforms like changes to Reg AB II to make public securitization more viable, noting ample private credit capital is available. President Dashiell Robinson addressed the CoreVest question, stating they prioritize adjusting credit policy (i.e., lowering leverage) over simply increasing price (spreads) in markets with perceived risk.

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President Dashiell Robinson identified the new Aspire platform, targeting the non-QM market, as the primary avenue for credit expansion, noting bulk pools often have pristine credit. He also explained that reducing unsecured debt provides flexibility to relever deleveraging secured assets, allowing capital to be efficiently redeployed into the operating businesses, including optimizing the bridge portfolio.

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CEO Christopher Abate stated that GSE limit increases are largely priced in and less impactful than in prior years, seeing bigger opportunities in non-QM products. On jumbo supply, he noted significant market capacity exists. He argued that higher rates could actually boost securitization volume by making it less attractive for banks to hold jumbo loans on their balance sheets, creating a major partnership opportunity for Redwood.

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Chairman, President & CEO Michael Nierenberg described a centralized capital allocation model, where earnings are funneled to segments with the highest potential returns, such as supporting the Sculptor CLO business. He noted that while lower rates help financing, they could also compress asset yields. He confirmed recent capital inflows at Sculptor were broad-based, with continued strength in its real estate and credit businesses.

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Michael Nierenberg, Chairman, President & CEO, described a "funnel" approach where corporate earnings are allocated to the highest-return opportunities, noting they are fairly agnostic but see potential in areas like consumer lending. He explained that while lower rates help financing costs, they could also compress asset yields. He clarified the recent capital inflows at Sculptor were broad-based, directed toward real estate, credit, and CLO strategies, with Rithm's balance sheet supporting the CLO business by taking equity stakes.

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Michael Nierenberg, Chairman, CEO, and President, noted the balance sheet is concentrated in MSRs, hedges, and Genesis loans, and while leverage could be increased, it's not currently necessary. Baron Silverstein, President of Newrez, added that demand for subservicing remains strong, particularly for non-QM assets, and that Newrez is gaining market share with a strong pipeline for 2025.

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Michael Nierenberg, Chairman, CEO, and President, explained that the balance sheet is primarily concentrated in MSRs, their hedges, and Genesis loans, and that while they could increase leverage, they don't see a need to currently. Baron Silverstein, President of Newrez, added that the subservicing business continues to see growth opportunities by taking market share with banks and existing relationships, especially given market dislocations, and that the pipeline for 2025 looks strong.

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CEO Michael Nierenberg confirmed Rithm has full flexibility to redeploy capital across its businesses, a key advantage of its unified structure. He stated that while delinquencies may rise slightly, the consumer remains resilient, and the company is fully hedged to minimize book value volatility. He clarified the excess MSR purchase was from a liquidated fund and is held in the investment portfolio.

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CEO Michael Nierenberg affirmed the company's flexibility to redeploy capital across the platform, noting its fully hedged position minimizes book value volatility. He stated that the consumer remains in reasonable shape and clarified the excess MSR purchase was from a liquidated fund Rithm previously managed.

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Robert Cauley, Chairman, President & CEO, confirmed the book value update was inclusive of the dividend accrual. He and Hunter Haas, CFO & CIO, discussed that while a credit-driven rally could cause spreads to widen, their house view is for a resilient economy. They believe mortgages are currently cheap and that various market scenarios would likely lead to more buyers, not fewer. Cauley used a metaphor of government deficits pushing the economy forward despite Fed braking to illustrate his view that the Fed will be challenged to cut rates, suggesting a steep curve could persist.

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Executive Robert Cauley and CIO/CFO George Haas addressed the questions. Cauley stated he sees no near-term catalyst for a material tightening of spreads. Haas added that ongoing volatility would likely keep spreads wider as investors demand a premium. Regarding hedging, both executives agreed that buying swaptions now would be very expensive. Haas explained their current risk management focuses on delta hedging and managing leverage, as it is difficult to put on a tail-risk hedge in the midst of a volatile period.

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Executive Robert Cauley estimated the widest historical duration gap was around 1.5 years but expressed hesitation to extend duration now without a meaningful return of bank demand for MBS. CIO George Haas clarified that their barbell strategy is designed for a rally scenario; while higher-coupon assets would lag due to negative convexity, their portfolio of lower-coupon, longer-duration assets would be expected to perform well and offset potential book value erosion.

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Executive Robert Cauley mentioned they are considering moving TBA shorts to higher coupons, which are more vulnerable in a bear steepener. Regarding derivatives, Cauley expressed hesitation with high-coupon IOs due to model uncertainty in a future refinancing wave but noted they are exploring opportunities. Executive George Haas added that they are always analyzing roll levels and implied funding to identify opportunities in the TBA market.

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Co-Chief Investment Officer Sergey Losyev responded that they express their view on the stable short end of the curve through a 'bull steepener' bias and do not currently use swaptions, preferring to express volatility views via the current coupon basis. He assured that they manage duration risk dynamically and would not allow it to extend to a level that would compromise liquidity, implying they would rebalance the portfolio as needed.

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Desmond Macauley, an executive, explained that ARMOUR maintains a diversified hedge book, having increased treasury-based hedges to 30% in Q1, and is comfortable with the current mix. He noted the firm expects swap spreads to normalize eventually. Scott Ulm, an executive, added that SLR relief would make high-quality, low-ROE assets like Agency MBS and repo more attractive for banks to hold, which should improve overall repo market conditions and liquidity.

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Executive Desmond Macauley explained that ARMOUR maintains a diversified hedge portfolio, having increased its treasury-based hedges to 30% in Q1. The company is comfortable with its current 70% allocation to swaps, anticipating an eventual normalization. Executive Scott Ulm added that SLR relief would make holding high-quality, low-ROE assets like Agency MBS and repo more attractive for banks, which should improve the overall availability of repo funding.

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Sergey Losyev responded that specified pool pay-ups have appreciated significantly, prompting the company to increase its use of TBA dollar rolls to diversify and await better entry points. He also noted that the repo market has been extremely well-behaved post-year-end, with competitively priced funding that is beneficial for Agency MBS returns.

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Head of MSR Ken Adler stated that the company has built the capability to participate in any coupon through strategic partnerships. CEO David Finkelstein clarified that while the MSR position is a powerful cash flow generator, it provides minimal duration hedging, accounting for less than 2% of the overall hedge portfolio.

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Head of MSR Ken Adler explained that Annaly has built capabilities and partnerships to participate in all coupon environments and is prepared to act as opportunities arise. CEO & Co-CIO David Finkelstein clarified that the MSR position provides a very small duration hedge, accounting for less than 2% of the overall hedge portfolio. He described it as a powerful carry generator with minimal structural leverage rather than a significant duration offset.

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Co-CIO Michael Fania described current housing price weakness as regional and a pullback from outsized gains, not systemic, citing strong long-term fundamentals like borrower equity. CEO David Finkelstein added that a potential release of the GSEs from conservatorship could create opportunities, as a smaller GSE footprint would benefit both Annaly's agency and residential credit businesses by opening up the market for non-core loans.

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Co-CIO Michael Fania characterized the housing price weakness as regional and not systemic, citing strong underlying fundamentals like high borrower equity and a long-term supply deficit. He also highlighted the resilience of the securitization market. CEO David Finkelstein added that a potential GSE exit from conservatorship would be a long-term net positive, creating opportunities for Annaly's residential credit and Agency businesses.

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CEO David Finkelstein stated that spreads are fair to inexpensive and that hedges remain positioned at the long end of the curve to protect against Treasury supply risk. He clarified that Annaly's stock valuation is a function of its own performance metrics—like economic return and EAD—rather than a proxy for the broader MBS market, where demand is currently widespread across many participants.

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CEO David Finkelstein stated that spreads are fair with some tightening potential, and they are maintaining hedges at the long end of the curve due to Treasury supply. He clarified that Annaly's valuation is a function of its own performance (return, EAD, leverage), not a proxy for the broader MBS market, which is driven by collective demand from all participants.

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CFO Daniel Perotti confirmed that both floating-rate debt and custodial deposit earnings are closely tied to the Fed funds rate. CEO David Spector addressed the margin question, stating that in a 'higher for longer' environment, they are seeing correspondent sellers sell whole loans rather than retain servicing, a trend he expects to continue, supporting PennyMac's market share growth.

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Executive David Spector confirmed most recaptures are rate-and-term refinances, with the new brand partnership aimed at boosting purchase recapture. Executive Daniel Perotti explained the debt proceeds paid down MSR financing lines, increasing flexibility. He noted that while all lines are mark-to-market, PFSI has significant excess collateral, preventing margin calls. Perotti also stated that overall margins in Q2-to-date have been slightly tighter than in Q1.

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Executive David Spector did not commit to a specific volume floor but addressed the competitive landscape. He explained that the GSE cash window is a less attractive alternative for sellers in high-rate environments because they are reluctant to retain unhedged servicing. He emphasized PFSI's strength as a leading aggregator and the importance of its relationships with sellers, particularly when market conditions shift.

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CEO David Spector stated he does not expect title insurance reform to significantly accelerate prepayment speeds on low-coupon loans. He believes the cost savings are modest and the primary benefit will be for home purchases. Spector noted that PMT's affiliate, PFSI, is seeing an increase in closed-end second liens, suggesting homeowners prefer tapping equity without refinancing their primary low-rate mortgage.

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EVP & CFO Daniel Perotti clarified that it depends on the specific tranche retained. The senior mezzanine portions of securitizations are viewed as substitutes for Agency MBS due to their similar interest rate sensitivity. However, he noted that the majority of recent retentions ($66 million last quarter) were in credit-sensitive subordinate bonds, which are not substitutes and are treated as credit investments similar to CRT, while a smaller portion ($29 million) was in the more senior, TBA-substitute bonds.

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Executive Daniel Perotti clarified that the funds to repay the debt will come from drawings on secured lines, a transaction that occurred after the quarter ended on September 30. He stated that this action would keep overall leverage relatively unchanged, as it effectively swaps secured debt for the retiring convertible notes.

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Peter Federico, President, CEO & CIO, stated he does not see the deficit as a near-term risk to the repo market, citing Fed support and potential enhancements to its standing repo facility. This stability provides confidence in funding. On credit scoring, he views the changes as having minimal impact on prepayments from an investor's perspective, noting it's a manageable adjustment once data is available.

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Peter Federico, President, CEO, and CIO, characterized significant prepayment risk as distant, noting that about 75% of AGNC's portfolio has favorable prepayment characteristics. He stated he has not seen any evidence of forced deleveraging from peers and believes recent selling pressure was driven by broader bond fund redemptions rather than distress within the mortgage REIT sector.

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Christopher Kuehl, EVP and CIO, explained that prepayment projections are based on the forward curve and that recent data shows a steep prepayment response to rate changes, though the risk is manageable via active management. Peter Federico, Director, President and CEO, addressed the repo market, stating that while there is some volatility at period ends, it is a manageable cost issue, not a capacity constraint, and is not expected to limit demand for Agency MBS.

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Peter Federico, President and CEO, responded that leverage decisions are primarily driven by market volatility; as spread volatility decreases, the company gains confidence to operate with higher leverage. Christopher Kuehl, CIO, added that from a deployment perspective, the best long-run risk-adjusted returns are currently in higher 'Production Coupons,' and that is where new capital would likely be allocated, despite their higher prepayment risk.

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CIO T.J. Connelly responded that with supply remaining low, he sees very little impact on spreads if the Fed cuts less than expected. He noted the team's base case is for 50 basis points of cuts. On portfolio allocation, he explained that repo financing for pools is currently more attractive than the implied financing on TBAs, favoring a larger position in specified pools.

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Chief Investment Officer Terrence Connelly explained that lower coupons offer valuable duration certainty and have a place in the portfolio, while current coupons offer significant yield spreads. He confirmed about two-thirds of the raised capital was deployed. Co-CEO Smriti Popenoe detailed their liquidity philosophy, which involves targeting a higher cash level during volatile times and maintaining liquidity equivalent to 60-70% of equity.

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Co-CEO Smriti Popenoe explained that with current spreads offering strong double-digit returns, the impetus to take on more risk is low unless the trade-off is compelling. CIO Terrence Connelly addressed prepayment risk by emphasizing the importance of security selection, specifically using specified pools to avoid highly refinanceable market segments and mitigate the impact of 'mini refi waves'.

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Co-CEO Smriti Popenoe and SVP Terrence Connelly explained that the wide variety of available mortgage coupons provides ample relative value opportunities, mitigating prepayment risk. They noted specified pool holdings have muted prepayment impacts and that they are opportunistic across the coupon stack and in Agency CMBS. Regarding repo markets, they distinguished between temporary quarter-end "traffic jams" causing price spikes and the structural decline in reserves from QT, noting financing availability remains healthy.

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Portfolio Manager Gregory Borenstein noted that yields on new CLOs varied and the portfolio mix shifted, making direct comparisons complex. CEO Laurence Penn confirmed the company retains significant dry powder, with deployment capacity linked to their dynamic risk management and hedging strategy. Executive Vice President Mark Tecotzky addressed the 401(k) topic, suggesting the initial impact would likely be on AAA ETFs, which could both compress yields and improve the securitization arbitrage for CLO equity.

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CEO T.J. Durkin explained that the company maintained its discipline during the recent macro-driven volatility, as there was little forced selling in their core assets. He clarified that the ROE presented for the non-QM portfolio reflects its current market return, not a historical cost basis, making it the best indicator of economic spread.

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CEO T.J. Durkin clarified that the 5.7% yield is a GAAP accounting figure reflecting older 2021-2022 originations with term financing and is unlikely to move significantly. He pointed to the ROE as a more relevant metric. Regarding financing, he noted that while warehouse terms are improving, the pricing in the securitization market is a more critical factor for overall investment activity than just the initial warehouse costs.

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CEO T.J. Durkin and CIO Nicholas Smith both expressed confidence in the credit quality of their non-QM book, citing significant home price appreciation, multiple loss remediation tactics, low delinquencies (1% 90+), and a sub-60% mark-to-market LTV. Regarding raising capital below book value, Durkin stated, "the short answer is probably, No," as the market is currently viewed as fairly orderly.

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CEO Sreeniwas Prabhu explained that while DSCR loans offer better returns, they are under more scrutiny due to their link to investment properties, though the current mix will be maintained. CFO Brandon Filson addressed resecuritizations, stating they would be a 'same-day' transaction to avoid market risk and primarily serve to relever older, deleveraged deals to free up capital. He also confirmed that warehouse funding costs are improving, with spreads tightening from over 210 basis points to as low as 165-190 basis points.

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Chief Financial Officer Brandon Filson stated that while economic book value is important, the company is increasingly focused on GAAP book value for evaluating opportunities. He explained that using capital for stock repurchases is not currently favored because deploying it into new loans generates a higher return on equity (15-20%) compared to the dividend yield (~13%), making new investments more accretive.

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CFO Brandon Filson explained that while stock buybacks are monitored daily, they are not currently planned due to recent stock volatility and overhang, though this could be reconsidered. CEO Sreeniwas Prabhu addressed delinquencies, noting that loan modification activity is very low. He explained that due to significant home price appreciation, borrowers are more likely to refinance than require a modification, which mitigates credit issues.

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President and CEO Bill Greenberg explained that with 65% of capital allocated to the hedged MSR strategy, the portfolio has inherently lower sensitivity to MBS spread movements. CIO Nick Letica added that a lower net mortgage exposure and a portfolio shift 'up-in-coupon' further reduced spread duration. Letica noted that while spreads are wider, a Fed rate cut would likely be positive for mortgages by steepening the yield curve and attracting investors.

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Chief Investment Officer Nicholas Letica clarified that the increased spread exposure was not from higher leverage but from the natural change in the MSR hedge requirements as rates rise. President and CEO Bill Greenberg added that leverage is just one of many risk metrics they monitor, alongside spread exposure and liquidity. Regarding the convertible debt, Greenberg noted it is due in early 2026 and is on the company's radar to be addressed.

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Chairman and CEO Mark Casale acknowledged that originator efficiency is 'brutally efficient' and is factored into their duration assumptions for pricing risk. However, he stressed that prepayment behavior remains highly rate-dependent. He noted that a drop in rates would likely accelerate refinancings but would also unlock significant new purchase activity, creating a new cycle of growth.

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CEO Terry Schmidt and CFO Amber Kramer addressed the MSR mark, attributing it to the Q3 interest rate decline and noting that the subsequent rate backup in October suggests a reversal of the impairment. Terry Schmidt stated that purchase-focused margins have remained steady, while Amber Kramer acknowledged potential Q4 volatility from long-term locks. Regarding the Academy acquisition, Amber Kramer stated they do not disclose specific contributions but noted it represented about 20% of their volume at the time of the deal.

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Desiree Elwell, Executive, stated that pull-through rates have remained stable within a tight range over the last 6-9 months, later clarifying the rate used is 88%. Terry Schmidt, Executive, explained that Guild relies on the 'natural hedge' of its retail production, which historically becomes more profitable in falling rate environments. He noted that 20% of the MSR portfolio has coupons over 6%, representing a significant recapture opportunity.

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