TWO Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Repurchase Agreements

Repurchase Agreements

12 Months Ended

Dec. 31, 2021

Disclosure of Repurchase Agreements [Abstract]

As of December 31, 2021 and December 31, 2020, the Company had outstanding $7.7 billion and $15.1 billion, respectively, of repurchase agreements. Excluding the effect of the Company’s interest rate swaps, the repurchase agreements had a weighted average borrowing rate of 0.24% and 0.28% and weighted average remaining maturities of 67 and 58 days as of December 31, 2021 and December 31, 2020, respectively. The borrowing rates quoted by the Company’s repurchase agreement counterparties typically incorporate LIBOR or SOFR as the referenced rate, plus a spread. However, the trades are executed using the all-in rate with no reference to the index quoted. Additionally, all of the Company’s repurchase agreements mature prior to the phase out of LIBOR. See Note 2 - Basis of Presentation and Significant Accounting Policies for further discussion of the transition away from LIBOR.

At December 31, 2021 and December 31, 2020, the repurchase agreement balances were as follows:


(in thousands)	December 31, 2021		December 31, 2020
Short-term	$	7,656,445	$	15,143,898
Long-term	—		—
Total	$	7,656,445	$	15,143,898

At December 31, 2021 and December 31, 2020, the repurchase agreements had the following characteristics and remaining maturities:


	December 31, 2021
	Collateral Type
(in thousands)	Agency RMBS			Non-Agency Securities			Agency Derivatives			Mortgage Servicing Rights			Total Amount Outstanding
Within 30 days	$	1,617,186		$	—		$	10,097		$	—		$	1,627,283
30 to 59 days	1,807,544			—			—			—			1,807,544
60 to 89 days	1,979,717			171			1,168			—			1,981,056
90 to 119 days	1,240,915			—			8,520			—			1,249,435
120 to 364 days	849,868			—			16,259			125,000			991,127


Total	$	7,495,230		$	171		$	36,044		$	125,000		$	7,656,445
Weighted average borrowing rate	0.17		%	1.24		%	0.74		%	4.00		%	0.24		%


	December 31, 2020
	Collateral Type
(in thousands)	Agency RMBS			Non-Agency Securities			Agency Derivatives			Mortgage Servicing Rights			Total Amount Outstanding
Within 30 days	$	5,330,627		$	1,271		$	38,608		$	—		$	5,370,506
30 to 59 days	4,292,861			—			—			—			4,292,861
60 to 89 days	2,060,087			628			1,519			—			2,062,234
90 to 119 days	1,598,052			—			12,146			—			1,610,198
120 to 364 days	1,808,099			—			—			—			1,808,099


Total	$	15,089,726		$	1,899		$	52,273		$	—		$	15,143,898
Weighted average borrowing rate	0.28		%	2.33		%	0.89		%	—		%	0.28		%

The following table summarizes assets at carrying values that are pledged or restricted as collateral for the future payment obligations of repurchase agreements:


(in thousands)	December 31, 2021		December 31, 2020
Available-for-sale securities, at fair value	$	7,009,449	$	14,633,217


Mortgage servicing rights, at fair value (1)	725,985		—

Restricted cash	747,779		1,071,239
Due from counterparties	30,764		21,312
Derivative assets, at fair value	39,609		61,557

Total	$	8,553,586	$	15,787,325

____________________

(1)MSR repurchase agreements are secured by the VFN issued in connection with the 2019 MSR securitization transaction, which is collateralized by the Company’s MSR.

Although the transactions under repurchase agreements represent committed borrowings until maturity, the respective lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or fund margin calls.

The following table summarizes certain characteristics of the Company’s repurchase agreements and counterparty concentration at December 31, 2021 and December 31, 2020:


	December 31, 2021							December 31, 2020
(dollars in thousands)	Amount Outstanding		Net Counterparty Exposure (1)		Percent of Equity		Weighted Average Days to Maturity	Amount Outstanding		Net Counterparty Exposure (1)		Percent of Equity		Weighted Average Days to Maturity



Credit Suisse	$	125,000	$	353,975	13	%	181	$	—	$	—	—	%	0
All other counterparties (2)	7,531,445		314,258		11	%	65	15,143,898		527,045		17	%	58
Total	$	7,656,445	$	668,233				$	15,143,898	$	527,045

____________________

(1)Represents the net carrying value of the assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.

(2)Represents amounts outstanding with 19 and 20 counterparties at December 31, 2021 and December 31, 2020, respectively.

The Company does not anticipate any defaults by its repurchase agreement counterparties. There can be no assurance, however, that any such default or defaults will not occur.