MFA Financial Inc (MFA) 2008 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the first-quarter 2008 earnings MFA Mortgage Investments conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, April 30th, 2008. I would now like to turn the conference over to our host, [Stephanie Coyle]. Please go ahead.

Good morning. The information discussed in this conference call today may contain or refer to forward-looking statements regarding MFA that reflect management's beliefs, expectations and assumptions as to MFA's future performance and operations. Many of these statements which are not historical in nature, including those containing words such as anticipate, estimate, should, expect, believe, intend and similar expressions are intended to identify forward-looking statements. All forward-looking statements speak only as of the data on which they are made. These types of statements are subject to various known and unknown risks, uncertainties, assumptions and other factors including but not limited to those relating to changes in interest rates and the market value of MFA's investment securities, changes in the prepayment rates on the mortgage loans securing MFA's investment securities, MFA's ability to borrow to finance its assets, changes in government regulations affecting MFA's business, MFA's ability to maintain its qualification as a real estate investment trust for federal income tax purposes, MFA's ability to maintain its exemption from registration under the Investment Company Act of 1940 and risks associated with investing in real estate-related assets including changes in business conditions and the general economy.

These and other risks, uncertainties and factors, including those described in MFA's annual report on Form 10-Q -- 10-K, excuse me -- for the year ended December 31, 2007 and other reports that it may file from time to time with the Securities and Exchange Commission could cause MFA's actual results, performance and achievements to differ materially from those projected, expressed or implied in any forward-looking statements it makes. For additional information regarding MFA's use of forward-looking statements, please see the relevant disclosure in MFA's quarterly report on Form 10-Q for the quarter ended March 31, 2008, and/or the press release announcing MFA's first quarter 2008 financial results.

Thank you for your time. I would now like to turn this call over to Stewart Zimmerman, MFA's Chief Executive Officer and its President.

Good morning and I welcome you to the MFA investor call announcing MFA's first quarter 2008 financial results. Joining this morning are more Bill Gorin, Executive Vice President and Chief Financial Officer; Ron Freydberg, Executive Vice President and Chief Portfolio Officer; Teresa Covello, Chief Accounting Officer; Tim Korth, General Counsel; Craig Knutson, Vice President and Deborah Yang, Vice President.

MFA Mortgage Investments today reported a net loss of $88 million or a loss of $0.61 per share of common stock for the first quarter, ended March 31st, 2008. For the first quarter, net income excluding items not impacting distributable income, was $28.9 million or $0.20 per share of common stock. On April 1, 2008 we announced our first-quarter dividend of $0.18 per share. The dividend is being paid today, April 30th, 2008, to stockholders of record as of April 14, 2008.

As of March 31st, 2008, our book value per share was $6.30. During the quarter in light of the significant disruptions in the credit markets, we took proactive and definitive steps to adjust our leverage strategy and reduce liquidity risk by decreasing our target debt-to-equity multiple to seven to nine times from an historical norm of eight to nine times. We sold approximately $1.85 billion in mortgage-backed securities in March, 2008, consisting of $1.8 billion of agency and $50 million of AAA-rated mortgage-backed securities, at an average realized loss of $25 million.

Related to these asset sales, we repaid associated repurchase agreements and terminated $1.6 billion of associated interest rate swap agreements, realizing a loss of $91 million. As a result, as of March 31st, 2008, our debt-to-equity multiple was reduced to approximately seven times. As an update, leverage currently is approximately 7.5 times.

We remain focused on high-quality agency assets, and our portfolio spread has trended up in each of the last five quarters. We're currently acquiring additional agency mortgage-backed securities at incrementally higher spreads than last quarter and expect that our overall portfolio spread will increase again in the second quarter of 2008.

On March 31st, 2008, approximately 99% of our assets consisted of mortgage-backed securities issued or guaranteed by the agency of United States government or a federally chartered corporation, other mortgage-backed securities rated AAA by Standard & Poor's, mortgage-backed security-related receivables and cash.

On March 31st, 2008, agency mortgage-backed securities and related receivables constituted approximately 91.6% of our assets or approximately $7.8 billion. AAA mortgage-backed securities and related receivables were approximately 3.7% or approximately $317 million, and total cash was approximately 4.4% or approximately $373 million. The weighted average cost basis of our MBS portfolio was 101.4% of par as of March 31st, 2008.

Our MBS assets are liquid and continue to be financed with multiple funding providers through repurchase agreements. As of March 31st, 2008 we financed our portfolio with 15 repurchase agreement counterparties, and as of April 30th, 2008 we're financing with 16 counterparties.

During the first quarter of 2008 our portfolio spread, which is the difference between our interest-earning asset portfolio net yield of 5.54% and our 4.64% cost of funds, was 90 basis points. By comparison, the portfolio spread for the fourth quarter of 2007 was 65 basis points. Our cost of compensation and benefits and other G&A expense was $3.8 million, or 16 basis points of average assets for the quarter ended March 31st, 2008.

Our primary focus is high-quality, [higher coupon] agency hybrid and adjustable-rate mortgage-backed security assets. The MBS in our portfolio are primarily adjustable rate or hybrids, which have an initial fixed interest rates for a specified period of time, and thereafter generally reset annually. Assuming the 20% CPR, approximately 29% of the mortgage-backed securities in our portfolio are expected to prepay or have the interest rates reset within the next 12 months with a total of 83% expected to reset or prepay during the next 60 months.

We take into account both coupon reset and expected prepayments are measuring the sensitivity of our mortgage-backed security portfolio with the changing interest rates. In measuring our assets to pricing -- to repricing gap or repricing gap, we measure the difference between the weighted average months until coupon adjustment or projected prepayments on our mortgage-backed security portfolio and the months remaining on our repurchase agreements including the impact of interest rate swaps. Assuming a 20% CPR, the weighted average time to repricing or assumed prepayment for our mortgage-backed securities portfolio as of March 31st, 2008 was approximately 33 months, and the average remaining term on our repurchase agreements including the impact of interest rate swaps was approximately 21 months, resulting in a new repricing gap of approximately 12 months.

The repayment speed on our MBS portfolio averaged 14% CPR during the first quarter of 2008.

A major initiative for 2008 is the expected initial public offering of MF Residential Investments, Inc., or MFR. An initial registration statement relating to a proposed initial public offering of stock was filed with the SEC on February 12, 2008. This new company will employ a different investment strategy than MFA by primarily investing in non-agency residential mortgage-backed securities, residential mortgage loans and other real estate-related assets. MF Residential will be externally managed by a subsidiary of MFA and it's expected to generate investment and management fee income for MFA and additional value for MFA stockholders.

I thank you for your continued interest in MFA. At this time I'd like to open floor for questions.

(OPERATOR INSTRUCTIONS) Steven Delaney, JMP Securities.

Stewart, I was wondering if maybe you could start off with just sharing your general comments and view on how conditions in the agency repo and MBS markets have changed since March 31. I think we have a sense that things are a little more stable now, but I'd like to hear that in your words.

And also, if you could add where -- bring us up to where we are today and where you think those financing trends may go over the next couple of months.

You're in a market, Steve, that really has not existed before. To look back historically and say that you can look back to '78 or '87 or some of the other times of crisis within the fixed income and capital markets and use that looking forward is kind of difficult today. Again, we have not had a situation in fixed income, certainly, or in the capital markets that even comes close to what we have experienced over the last, let's call it 30 to 60 days.

Having said that, you used the word stable, and it's probably a good adjective. But the capital markets are a little more stable today than they certainly were going back to the middle of March. For that, we feel quite good about that.

Having said that, it's also a time to continue to be cautious. It's a time to continue to run a company such as MFA with a little bit lower leverage ratio than we have used in the past, which is basically what we had said on our press release of March 10. And we're going to continue in that vein.

Having said that, are there opportunities for us? The answer is yes, there are. As we get into the call and I assume other questions and some of the other folks here can give you some detail, there are very, very positive opportunities for us.

In terms of, is financing stable? The answer is yes, it has been. We've actually picked up an additional counterparty that has been very significant to us. We feel very good about that. For that credit, I'd certainly give Ron [and Ron] and his crew, and thanking them for that.

So we continue to have the ability to finance ourselves. We have the ability to pick up additional counterparties. Again, I'm looking very positively at the balance of this quarter and certainly the balance of 2008. I think the opportunities for us are right in front of us, and those are opportunities we want to take advantage of.

Having said that, what I have said in my prepared remarks is that our leverage at the end of the quarter was about seven times, and right now we are at about 7.5 times and we continue to see very, very positive opportunities.

That's very helpful, Stewart. Is there anything that we could watch for in the market, whether it's haircuts, maybe coming in a touch on pass-throughs, or anything that would -- specific, that would give you the comfort to say, take that leverage figure from -- you obviously have a little more comfort today because you have gone up by 0.5 of a multiple on your leverage since March 31. But --

Steve? Hello?

Operator, we seem to have lost the question.

Jason Arnold, RBC Capital Markets.

To follow up with what Steve was getting on there, on the leverage side, where would you guys really feel comfortable at this point in time taking leverage for this quarter? I know it's kind of a changing circumstances (multiple speakers) --

It is; it's a changing environment, sometimes by the moment. But again, as I said -- and I guess Steve got cut off, and hopefully Steve can circle back and we can further answer his question. But we've gone up about a half a multiple. And if we continue to see these types of opportunities that we can discuss with you, I don't mind going up another half a multiple, and that would be fine.

But again, it's not a situation where you can say that we're going back to where we were, to where the market was, the capital markets -- not just FMA -- before August of '07. I think that was a seminal event. I think that the whole nature of things is such that companies such as us will run at lower leverage than they had run at previously.

But having said that, that's one side of the coin. The other side of the equation is that the opportunities are better. The spreads are greater. So again, as I said in answering Steve's question and how I can answer yours is that we're very, very optimistic about the balance of this quarter, meaning the second quarter, and certainly 2008.

Very helpful. I guess on the non-agency side of your portfolio, as that prepays over time, would you consider replacing those assets with more non-agency, or would you guys tend to try to stick with more agency side going forward?

We are, again, the portfolio is plus or minus call it $8 billion, for a round number, and the Q will come out later today, I believe. When you look at MFA, you can really assume that the A stands for agency. We made the announcement and we filed with the Securities and Exchange Commission the idea of creating a sister company called MF Residential. And that would be involved in the non-agency product. But MFA is going to remain and stay with agency, agency paper.

Do you have the notional value on the remaining swaps available at hand, and maybe the average [paid fixed] rate?

As of quarter end, it's a little over $4.2 billion. The weighted average pay rate is 4.175.

Mike Widner, Stifel Nicolaus.

You hit on the major questions that I had as well. Let me just ask for one point of clarity, if I will. You mentioned leverage going up by about half a multiple since the quarter. Are you including in there the effect of the dividends, which, by my math, takes you up about 0.2, in itself.

The second a question is, if you could maybe just comment on what your expectations are for the degree of hedging, interest rate hedging, you might have from here out. You just mentioned the amount of swaps left on the books, but you guys were pretty heavily hedged going into the quarter, clearly dumped a lot of swaps in the quarter. We got a lot of cuts from the Fed, and now we are getting at a point where the market is expecting that the Fed is pretty close to done and, getting out toward the end of the year, we might look at the Fed raising rates again.

So I was just wondering if you could provide any color on your thoughts with regard to hedging from here. Do you have a preference for more sensitivity to floating rates, or are you looking to get back to where you were in Q4 in terms of very heavily hedged portfolio?

The point that Stewart was making is that April, we are acquiring more assets than are running off. So yes, the equity number changes, but that's not what drove the increase. The increases, we're acquiring assets at higher spreads. Does that answer the first part of your question?

Yes, I think so.

Yes, you could have your dividend; but yes, you also earn money in April that you haven't paid out in dividend.

I guess at the end of the day, your numbers at the end of the quarter as published are about 6.95% leverage. If you add the dividend back in, it takes you to about 7.14%. It's a little bit of nit-picking, but when you say you are up half a point or half a multiple from there, that could either put you at 7.6% or 7.4%, depending on what your starting point is. It's kind of picking nits, but just wondering if --

I guess the larger point is, whether it's 7.4% or 7.6%, the larger point is that we continue to see very, very positive opportunities in agencies, and hybrid agencies, at spreads that are very attractive. So, whether the absolute number is 7.4%, 7.5% or 7.6%, what I am also saying is that, as we continue to see these opportunities and we continue to have adequate funding, which we do have -- I'll make that a declarative statement -- we will continue to put on additional assets.

In terms of hedging, our strategy is fairly consistent, that we want to be about 50% hedged, which is about where we are now. Ron had mentioned, we had about $4.2 billion of swaps versus $8.1 billion of mortgage-backed securities. Swaps work less well when interest rates decline and spreads widen, as they did in March. They work a lot better when interest rates go up and spreads tighten, as they are in April. So approximately at the 50% level, we are comfortable. Some months it works better than others, and April is a month where it's going to work well.

Swaps are one way that you can effectively extend the duration of your funding. As you mentioned, you are about 50% swapped. The other way is, obviously, entering into sort of long-dated repo. Do you guys have any multi-year repo at this point?

We do have some, but it's no surprise to us with what has gone on in the liquidity market since August, a lot of people have backed away from doing a longer-dated repo, at least for the time being.

For utter candor, is much more difficult today to get longer-dated repo than it was. I'll give you an example. If you go back just a couple of years ago, if you go back 12 months ago, if you bought a 5.1, you might do a three-year repo, get a three-year repo against it, and then you had a pretty nice piece of paper sitting there.

Today that is much more difficult to do. So when you're utilizing that, to have other companies in our space, you utilize interest rate swaps.

Well, thanks, guys. I definitely appreciate the clarity. I didn't mean to nit-pick you there on the leverage point. But I agree with everything you said. This looks like a fantastic opportunity to put money to work. And I ask just from the standpoint of, I think a lot of us would like to see comfortable but higher leverage rather than lower. But thanks for the clarity.

Stephen Laws, Deutsche Bank.

Could you guys maybe quantify where the repo that is resetting, is resetting to? We see LIBOR up here at 280, and that has historically been a pretty good indicator of where funding costs are going, although I think at this point maybe it's resetting to lower than LIBOR. So can you codify where you are seeing those new levels?

We are seeing, for the last couple of weeks, we've seen the repo at LIBOR minus and LIBOR minus a fairly significant amount. But history will tell us that using LIBOR plus or minus 5 is probably the way to go for the long-term. But for the month of April, it has been significantly below LIBOR.

With that said, maybe quantify spreads on new capital as you are reinvesting, say, prepayment proceeds or as you're growing the portfolio from a leverage standpoint. What are the new spreads coming on?

Sure. The assets that we have been buying, which Stewart talked about, to bring the leverage up, we're seeing in the neighborhood of 200 basis points of spreads. And use a 5.1-7.1 as your average type of security.

With that said, given that's clearly significantly accretive to current spreads, is there anything with MFR being a focus for 2008 -- is there anything with that on file that would prevent MFA from raising additional capital?

No, one really will not affect the other.

Bose George, KBW.

Just to follow up on the last question, on spreads, the 200 basis points -- is that a spread on -- is that a fully hedged, like a deep spread? Or is that a spread for the stuff you are funding with swaps, or is that -- I mean, with repo? Or, is that a blend of the two? How does that number work?

Bose, very good question. It's a blend. It's between 25% and 30% swapped.

David Hochstim, Bear Stearns.

Just another variant to that -- so if you were roughly 50% swapped and financing the way you would on the overall portfolio, what would the marginal spread be?

We're looking at a 4.80 coupon. If you take a lot -- we're in a conference room, so I don't have the Bloomberg in front of me, but we're looking at 4.80% to 5% as our yield. We've been funding -- we have been using 2.35 to 2.45, so call it 2.40, as our funding number. Right now, a five-year swap would be a little bit less than 4%. So you blend the two, and I guess you'd probably lose -- I've got to do it in my head -- 20 to 30 basis points.

It would be about 175 basis points.

How much could we think leverage would increase over the next -- besides the half turn, at what point would you feel comfortable that the market is stable enough that you could re-lever further? What can we watch that (multiple speakers) --

I think the best answer I can give you there without me sounding glib is simply that when we pick up the Wall Street Journal and pick up the New York Times, not reading about write-downs in the billions of billions of dollars. I think it's very, very important for us to be the custodians of the equity of this Company, and you have to do that on a real-time basis. So my best answer to you would be, when we pick up the paper and there's a much more positive tone and we can consider in terms of leverage, we can consider going back or potentially going back to or approaching levels that we maybe were at before. That's not the case today. The fact is, we've seen opportunities, and we feel very comfortable with our funding ability and we've gone up a half a turn. Can we go up another half a turn or whatever the absolute number might be? The answer is yes. Would we want to continue to see a certain stability? That's the first question that was asked today. We want to continue to see a stability in the marketplace where we continue to have this level of comfort and not just for now or for a day or for a week.

In terms of the new repo relationship you added, were the terms on that or the size very different than what you had on the other 14 or 15? I guess you may have replaced one this time?

The terms were liberal, they were fair. Haircuts were right in line, and the size was relevant to the counterparty and relevant to us. So it was a win-win situation. The only people that we have seen since the beginning, going back to last August, who we don't have the ability to repo with anymore, didn't exit MFA, they basically exited the business. So we have not had a counterparty that was limited to MFA and say, we don't want to do business with MFA on agency paper.

And have there been any adjustments in the amount of repo available by individual people you are still able to borrow from?

Nobody has come to us and said that our credit line has changed. Nobody has come to us and said that you can't roll us because we've reached any credit limits.

Dave, don't take it the wrong way, but one place we've cut is there.

I would assume that would be --

Well, that was our decision. But again, we have tried to run the shop as prudently as we know how. I know I've taken some heat on some earnings calls in the past. Maybe we are a little too conservative, a little too this, a little too that. I haven't gotten any of those calls in the last 45 days. So we're going to continue to be, I'll call it prudent. Again, will we take advantage of situations? The answer is yes. We definitely, absolutely will. But we're going to continue to do that in the manner that we've done things before. And I think that's the way that our shareholders would want us to run the company.

Finally -- I think you're absolutely right. Finally, what -- with the non-agency securities you still have, would there be any opportunity to sell those to MFR, or to do something --

Let me just answer that. The answer is no. MFA is a separate company, a separate vehicle. MF Residential will be its own vehicle with its own operating policies, so the answer is no.

Tayo Okusanya, UBS.

What were spreads at the end of the quarter?

They were slightly higher than the 90, but what we need to take into account is, typically February is a very high spread month. You have less prepaids in February, and you have less days.

In the liabilities.

But that's more towards higher (inaudible).

Could you give an indication of how much higher?

Sure, it was [95].

Average cost of funds, 4.64% in first quarter versus 5.05% in fourth quarter -- given how much LIBOR came down during -- well, not necessarily, though. But I guess, just given how much Fed funds came down and how much LIBOR came down, I would have thought that funding costs would have come down much more than the 41 basis points, even though you were 50% hedged.

You also have -- some of the hedges are against three-month repos, so you don't see them right away. What we have, for example, in the next 30 days, going back to March 30, the month of April we have about $3.4 billion of repos rolling, which had an average cost of [305]. So again, you see it, but with the quarter lag.

Okay, so this is a typical quarter lag that you have because of the hedges that are against three-month repo?

That's right. Our repos aren't overnight.

Then, Stewart, back to this issue of when you could potentially take leverage up, and what -- because some of your current concerns are about taking leverage up slightly higher. Could you create a scenario in your mind where you think we may go back to a lot of the chaos that we saw in March? Do you see anything on the horizon that you think could create that kind of anxiety again?

There's always an unknown. If one of the foreign banks or all of a sudden wakes up and says, gee, we have $100 billion of mortgage paper we didn't even understand that we had -- I don't think that's going to happen. I don't think we go back to where we were with the market being as unstable as it was, again. I've done this for a long time. I've never seen a market like that. I never saw a lock-up in liquidity, in the 40 years or so that I've been involved in mortgages and capital markets. So I don't see that occurring.

Having said that, I think it's very, very important, with the market being more stable than it was, to continue to be cautious.

What's important is, in October you could have asked us if we'd ever see August again. And, yes, we'll see August again; it's the eighth month of every year. But it's a difficult question to answer, and what we can't tell you is we can't rule out the probability of zero that you don't see March again. We need to keep the [mindset] that the possibility exists.

Jim Delisle, Cambridge Place.

Congratulate you on a good quarter from a different angle, catching a -- gaining a new repo counterparty, when obviously, you lost another one.

If I were to divide repo counterparties into one of four categories, like you have broker-dealers, you have domestic depositories that are non-broker dealers, foreign depository is the same and fund companies, mutual funds and the like, are you seeing any change in the composition or the distribution amongst those categories in terms of your repo funding?

No. Really, it has been very consistent. I haven't seen where one group has come forward, another one has backed off. It has really been -- I've found it to be very consistent.

Are you seeing or hearing of entrances of, say, fund companies and the like that would do direct repos, kind of a disintermediation, if you will, the broker-dealers? Is that a trend we can look for?

We haven't seen it.

Barry Cohen, Knott Partners.

Could you just give us a sense of what you may be thinking about the spread margin is going to be in the second quarter, just because you have a lot of moving parts?

The best I can tell you is really what it says in the press release, which is, it should continue to be very positive, continue to increase. I really can't give you any kind of color on what those absolute numbers are. We are continuing to see opportunities, and with the opportunities that we're seeing in the market and what we have been able to put on, which we just mentioned to you, they should continue to be in a very positive mode.

[Hemen Surani], [Litchfield] Capital.

I'd just like to seek clarification. You said the coupon or the [yield] on the new investment is 4.85%?

I said the yield was --

You said (multiple speakers)

I said coupon, I misspoke; I meant yield.

So, why don't we clarify it, then.

The coupon is business -- I'm sorry -- the yield is between 4.80% and 5%.

And what kind of coupons did we say?

And the yield for the average for the quarter was 5.50% or something, average? Roughly?

[Yes].

So, given that we would assume that the value of the MBS is relatively up versus March, is my thinking right?

It's not from what he said, because he was telling you the yield, he's not telling you the purchase price.

What would you think your book value is, right now, around 30th April?

The book value was in the press release; it was (multiple speakers) --

It's [630]. Your question is, what has happened since March 30?

Yes.

I would say, generally, the swaps have gained value, substantial value. And the mortgage-backed securities, because of the change in the two-year and because of the fact those hybrids have probably declined somewhat in value. So it's not a large change, either way.

(OPERATOR INSTRUCTIONS) Matthew Howlett, Fox-Pitt Kelton.

Just on a broader outlook, hybrid agencies -- clearly, they are cheap now. There's a lot of spreads in the market. What is your outlook two, three, four quarters down the road? My sense is, hybrid ARMs, the supply has got to come down. There's talk of the GSE's going in and buying those type of assets; that's the first ones they will go after. Is there a sense of urgency on your part to maybe acquire as much as you can in the next few quarters, or do you think, with 5% haircuts across the board, spreads aren't really going to go anywhere for some time?

I think, the latter. I think that spreads will continue to be very attractive, whether they are absolutely at this level or they are a couple of basis points higher or lower, I don't think is terribly significant. But we do not have a gun to our head where we feel, my God, if we don't invest now, we're never going to have the opportunity. That is not the feeling that we have. The feeling that we have is that we always do things on a considered basis and we're going to continue to do that. But we are seeing opportunities. We did go up a half a turn, and if we continue to see those opportunities we'll continue to buy assets.

And in terms of just maybe keeping the leverage where it is and raising additional capital, clearly, it's not as accretive to book as you're last yield. But, clearly, it would be to earnings. Is there any sort of guidance you can give us on that?

No. Right now, with leverage the way it is, basically we can buy and we don't have to raise capital. So we have dry powder. But having said that, we would love to see the stock price a little more robust; and if the opportunities continue there, that's something we would certainly consider.

[Richard Sloan], [HNR Realty].

Could you tell me whether your repo costs are more sensitive to Fed fund rate or to LIBOR?

When LIBOR spikes relative to Fed funds, as they have now, because we're borrowing, we're using collateral, in some ways we become a better credit than other banks. So usually, the repo rates are highly correlated with LIBOR. But right now, they have separated. As Ron mentioned, we're borrowing below LIBOR. It's because we're not just a bank, we're providing collateral.

[Amru Almenasir], [36 Capital Group].

I just had a couple of questions about MF Residential. I know it's a little bit early, but I was wondering what kind of leverage are you thinking about running for that strategy, and what is your sense of the financing markets for that kind of asset?

We're currently in registration with the SEC. But if you did pull up that draft, and my general counsel wants to make sure I don't advertise a deal, but if you did pull up the draft, you would see that we're looking at three times leverage on AAA's, up to three times leverage on AAA's, which we believe is available based on the fact that we are able to borrow at a higher percentage for the AAA's that we own in MFA.

I'm showing that we have no further questions. Do you have any closing comments?

I just wanted to thank everybody for taking the time and posing some very, very good questions this morning. We look forward to speaking with you again next quarter, and thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.