New York Mortgage Trust Inc (NYMT) 2007 Q2 法說會逐字稿

Good morning, ladies and gentlemen and thank you for standing by.

Welcome to the New York Mortgage Trust Second Quarter Conference Call.

(OPERATOR INSTRUCTIONS)

And before beginning today's presentation, I'd like to turn the conference over to our moderator, Scott Eckstein with the Financial Relations Board.

Please go ahead, sir.

Thank you.

Good morning, everyone and welcome to New York Mortgage Trust Conference Call to discuss its second quarter operating results.

A press release was distributed yesterday after the close of market.

If you did not receive a copy, the release is available on the Company's website at www.nymtrust.com in the Investor Relations section.

Additionally, we are hosting a live webcast of today's call, which you can access in the same section or through www.earnings.com.

Finally, to be added to the Company's quarterly distribution list, please contact Samantha Alphonso at 212-827-3746.

At this time, management would like me to inform you that certain statements made during the conference call which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although New York Mortgage Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that expectations will be attained.

Factors and risks that could cause actual results to differ material from expectations are detailed in yesterday's press release and from time to time in the Company's filings with the SEC.

Now at this time, for opening remarks, I would like to introduce David Akre, Vice Chairman, Co-Chief Executive Officer, and President.

David, please go ahead.

Thank you very much, Scott.

Good morning, everyone.

Let me introduce with me today, Steve Mumma, our Co-CEO, President, and CFO and Brad Howe, our Senior Vice President and General Counsel.

It's been an entire quarter since we exited the mortgage lending business and started a transition into a passive REIT.

As a passive REIT, we no longer originate mortgage loans, we no longer are subject to mortgage regulatory oversight, and no longer have warehouse lending lines to be concerned with.

Right now, that is a very good thing.

On the first quarter conference call, we said the second quarter would be a transition period.

It was and it marked a substantial completion of our transition.

Most of the second quarter results are attributable to one time charges or reserves related to our discontinued mortgage lending operation.

The mortgage environment was a contributing factor in these results as well.

Let me talk about that briefly.

In the second quarter, the fixed income universe had a marked deterioration in its appetite for mortgage assets due primarily to increasing delinquencies concentrated in sub-prime loans, downgrades of billions of dollars of existing mortgage and asset backed securities, primarily collateralized with those same sub-prime loans, further lender failures continuing from the first quarter, and many hedge fund issues.

The market for loan sales, which was challenging in the first quarter got increasingly difficult in the second quarter as lenders withdrew many programs that were in the mainstream in 2006.

In addition, pricing for loans worsened significantly across the board and there were dramatic increases in credit review and due diligence standards by many loan purchasers.

One only has to look at daily headlines for confirmation of this.

Our loss of $14.2 million in the quarter principally breaks down to a $9 million loss from our discontinued mortgage lending operation and a $3.8 million loss from our portfolio restructuring.

The restructuring enabled us to improve our overall portfolio margin by 30 basis points and bodes well for future earnings.

The restructuring was done with no change to book value as the $231 million we sold was already marked on the balance sheet in OCI.

The restructuring also helped us from a credit perspective in that we sold $231 million of non-agency MBS and subsequently purchased predominantly agency backed floaters.

Thus, the portfolio today is comprised of 98% agency or AAA rated mortgage backed securities.

We have no subprime exposure in our portfolio period.

Going forward, of the items pertaining to our discontinued mortgage lending operation, the one we believe most important is repurchase requests.

Let me discuss that briefly right now.

Repurchase requests occur as a result of early payment defaults or EPDs on loans that were sold and originated by our discontinued mortgage lending operation.

The amount of repurchase requests grew from $14 million at the end of the first quarter to $25 million during the second quarter.

However, subsequent to the end of the second quarter we have negotiated settlements on $13 million of the $25 million.

The market environment has helped us do this quite honestly.

Of the $12 million in repurchase requests remaining, we are in active negotiations on $10.5 million of the $12 million.

The settlements we've reached to date include relief from substantially all future claims.

And this is a very, very critical item in my mind.

Also very important to remember is that the industry norm for EPD protection given to loan purchasers is three months, and it's been four months since we've sold any loans to our standard investors via normal purchase and sale agreements.

Finally, let me discuss our increase in reserves during the second quarter before I turn it over to Steve Mumma.

As of June 30th, we had a total of $6.9 million in reserves on the books against loans held for sale, repurchase requests, and indemnifications, plus an additional $940,000 in reserves for loans held in securitization trusts.

This proactive approach to reserves is reflective of current market conditions.

More specifically, it addresses current issues with declining real estate markets, increasing numbers of homes listed for sale, and increasing loan delinquencies.

Now let me turn it over to Steve Mumma.

Thank you, Dave.

Good morning, everyone.

Before I begin, I would like to say that the last 90 days was probably one of the most difficult mortgage environments that I've seen in my over 20 years of experience.

Today, first I will speak about the overall performance of the Company, then get in some detailed information about our discontinued operations, and finally finish with our continuing operations or mortgage portfolio business.

For the quarter ended June 30, 2007, the Company had a consolidated net loss of $14.2 million, or $0.79 per share as compared to net income of $200,000 or $0.01 per share for the quarter ended June 30, 2006.

The Company had total assets of $1 billion as of June 30, 2007, as compared to $1.3 billion as of December 31, 2006.

Included in our assets for the current period were $454 million of mortgage backed securities, 98% of which are either rated AAA or agency securities, and $504.5 million of prime, hybrid ARM loans that are included in our loans held in securitization trusts.

Also included in the balance sheet as of June 30, 2007, was $11.7 million in assets related to our discontinued operations, primarily loans held for sale of $10 million.

The Company had liabilities of $949 million as of June 30, 2007, as compared to $1.25 billion as of December 31, 2006.

Included in these liabilities were $423.7 million of repurchase agreements, $465 million of consolidated debt obligations or permanent financing, and $45 million of subordinated debentures or trust preferred securities.

We had no warehouse facilities outstanding at the end of the quarter for our discontinued operations.

The Company's book value of June 30, 2007, was $3.07 per share, including $1.01 per share related to the net deferred tax assets.

The loss from discontinued operations for the quarter ended June 30, 2007, totaled $9 million.

Included in the loss a $5.1 million charge for loan losses, $1.8 million reserve for additional expenses for residual liabilities, and an operating loss of $2.1 million for the period for the discontinued operations.

As Dave noted previously, going forward, the Company should incur minimal additional expenses related to these activities.

The discontinued operation includes $10.2 million of loans held for sale with no outstanding corresponding warehouse lines.

The discontinued operation closed its last loan in March of 2007.

The Company has total reserves on the books of $6.9 million, including $1.6 million for loans held for sale and $5.3 million for loan repurchase requests and indemnification.

Our continuing operations or mortgage portfolio business had a loss $5.2 million for the quarter ending June 30, 2007, as compared to net income of $1.5 million for the quarter ending June 30, 2006.

The Company incurred a $3.8 million impairment charge for certain lower yielding private label ARMs during the quarter.

These securities are comprised mostly of seasoned 5-1 hybrid ARMs with an average coupon of 4.78%.

The impairment charge did not have any impact on book value as a security evaluation was previously reflected in the other comprehensive income or OCI in the equity section of the balance sheet.

Subsequent to quarter end, the Company sold these securities, or $238 million worth.

The Company had delinquencies totaling 1.6% with 1.38% greater than 90 days.

The Company has taken a $940,000 reserve during the period to cover such potential loan losses for these delinquencies.

The Company's average earning at this for the quarter ending June 30, 2007, were $948.6 million as compared to $1 billion in the previous quarter and $1.2 billion for the quarter ended June 30, 2006.

The average cash yield on a portfolio totaled 5.55%, up from 5.36% for the previous quarter.

Liability costs for the same period were 5.3%, up from 5.34% the previous quarter.

The average net interest paid for the quarter ending June 30, 2007, increased to 12 basis points from two basis points from the previous quarter.

The increase was due mainly to our 3-1 hybrid ARM securities and loans held in securitization trusts re-pricing after going through their first 36 months.

As previously stated, the Company sold $231.8 million of securities subsequent to June 30th.

In addition, the Company purchased $182 million of floating rate MBS securities, of which $157 million were agency backed [remics].

It ended back that this transaction raised the weighted average coupon of the MBS securities portfolio by 60 basis points, or the overall investment portfolio by 30 basis points.

The net duration at the end of the quarter was approximately five months after giving.

And after giving effect for the sales and purchase transactions subsequent to year-end, the actual duration is lowered to approximately three months.

The sales and repurchase transactions has reduced our pricing sensitivity as all the securities purchased were floating rate securities off one month LIBOR.

The Company's portfolio constant repayment rate or CPR paid at a rate of 19.8% during the second quarter, up slightly from 18.7% for the first quarter.

The increase was mainly due to increased speeds in our loans held securitization trusts related to the 3-1 hybrids resetting.

The Company ended the quarter with 12 employees and is currently down to nine employees.

Going forward, the Company's now right sized to implement its portfolio strategy.

Ongoing operational expenses should approximate between $700,000 and $750,000 per quarter, with compensation representing 40% of the total, 40% of the total going towards professional fees and B&O insurance, and the remaining 20% going for a general administrative type expenses.

For additional information you can access our 10-Q, which will be filed later this week with the SEC.

And our website is www.nymtrust.com or at the SEC website, www.sec.gov.

This concludes our comments and we are now ready to open the call to questions.

Operator?

(OPERATOR INSTRUCTIONS)

One moment please for our first question.

Our first question will come from the line of Mark Patterson with NWQ Investment Management.

Please go ahead.

Hey guys.

Good morning, Mark.

Yes, I think the moves you guys have made, obviously have been, it's been tough.

But you've made the right moves.

Can't say it hasn't been hard to go through these things, but given the alternatives, this is exactly what needed to happen.

I just have a few questions and maybe a couple of comments if you don't mind.

The $14.2 million loss, $9 million was the discontinued ops and the $3.8 was the portfolio repositioning, so that puts us down to $1.4 million of a loss, maybe adjusted loss from continuing ops.

And then you had a $900,000 provision for the loans held in the securitization trust.

So I don't know the aspects of where there that should go going forward.

But I'm just trying to figure out.

You did this portfolio repositioning.

You talk about 30 basis points higher yield, does that position you ex having other losses on the loans held in the securitization trust to be profitable Q3?

Yes.

I mean, we tried to reposition the portfolio.

And keep in mind, as we've transitioned out of the mortgage Company business, we still have some capital that we can deploy.

But given the market environment, we've sort of kept our gun powder to try to get through these times.

The securities that we put the money into, the floating rate securities are securities that we feel that we can exit out of when better opportunity exists going forward.

But we wanted to put the Company at least in the position where we can start to turn profitable and be significantly more profitable as we go forward into the coming quarters.

Okay.

The loans held for sale, the $10 million that you guys, I think you mentioned in the release that $3.8 million of is -- only $6.2 million of it's going to be kept.

Correct.

The $3.8 million, you've got 42% it looks like reserves on that with the $1.6 million.

Correct.

So the $6.2 million, what is the, that's the high quality, as you termed it, stuff, that's stuff that you expect to maintain for a long time then?

(inaudible).

Correct.

Yes, we talked about on our last call the re-implementing our portfolio strategy, one of the two prongs of which is to go out and buy loans for securitization in order to build a credit position.

So we decided with those loans, they're very high quality 5-1 ARMs, much like we have in our portfolio.

We decided to keep them as opposed to selling them out into the market into a market that has a pretty bad bid right now.

Right.

I think Jeff --

So we have not decided yet, and I think given like Steve was just saying, given market conditions, now is not the time to go out and load up on a big whole loan position.

So we're going to wait for the market to settle down here a little bit, spreads have widened, one good thing about what's going here, spreads have widened across the entire mortgage spectrum.

So at some point after the smoke is cleared, we'll step in a start buying loans.

Two things have to happen.

One, the market needs to calm down and two, we need to get a better understanding of where the rating agencies are happening for future securitizations.

Right.

And that's one of the things that's paralyzing the market today.

Yes, that's a major problem with the market right now, rating agencies.

Okay, just a couple clean up things, moving out of the offices, the deal with Lehman, remind me again of the gap that would have been included in Q2 for that.

Well actually as it stands right now, the gap would have been $200,000 for the month of July, in the event we did leave, which we have not, and then going forward from August forward, IndyMac would reimburse of us any penalty incurred.

We feel confident right now that we're actually not going to incur any cost.

We'll probably be out of the space by the end of this quarter.

Okay, but the benefit on the sale to Lehman is, what was the number per quarter again?

Well, the benefit would be a payment of $3 million to be reduced by $200,000 a month.

The first reduction was going to be in July.

Okay.

And then the IndyMac transaction, that two and change million dollar escrow balance.

Right.

That was all cleared out or -

Right.

What's going on with that is right now I actually ended up taking a $600,000 reserve for certain items that were in discussion.

And you can understand, going through the transition, we put some dates when certain items would be settled by and we've gone through those dates because the market has been pretty hectic and energies have been focused elsewhere.

So we're planning on cleaning up that this quarter and get to a resolution.

Okay, but that's not downside, that's upside.

Well we took it, we had a two -- yes, exactly.

We took a $600,000 reserve this quarter as a (inaudible).

In terms of cash.

Yes, but we have the cash, yes.

Right.

Okay.

The last thing I'd say is, really, this deferred tax asset of a $1.00, you're not getting credit for it.

You obviously must think that you're able to utilize it.

Right.

The book is more than $2.00 a share if you completely wipe it out.

So you're just not getting credit for it.

So, sure, it would be nice obviously to get something kind of put together with that or some kind of direction on how that's going to be used because again, you're just not getting credit for it.

And with respect to the dividend, I know that you guys are kind of going to go by a wait and see policy here it looks like.

But I don't need a dividend from this Company.

If the stock's going to trade anywhere close to where it's trading right now based on what you've done to clean up all the risk of the book value, you ought to be buying your shares back if you can, if you can make that work with the REIT rules.

It's just a much better transaction.

And then I would also say that you guys ought to entertain further strategic transaction to realize this value.

I mean you have an NYSE listing.

You've taken away liquidity issues, which is just paramount in the mortgage space right now.

It looks like you've pretty much ring sensed all your EPD issues.

This thing's worth a lot more than what it trades for.

And you ought to work on some things to realize that.

Well, Mark, the strategic review process potentially incorporates some use of that tax asset.

Is that something that you guys think you're well on the road to or -

Well part of the reason that all of this, some of the things that you've mentioned such as buying back shares, all those things get wound into our strategic review.

And unfortunately we've been in a strategic review process since last October, which not only included selling a mortgage business in the early part of this year but also continuing with possibly partnering up for people with the trust itself and or working with strategic partners to utilize a deferred tax asset.

So believe me, our energies have been dual spent on remedying and reducing and exiting the mortgage business, and then going looking at the portfolio business.

Which part of the portfolio business is how do we best utilize a deferred tax asset and get that liquefied into good book value.

Right.

Okay.

Thanks a lot you guys.

Okay.

Thank you.

Our next question will come from the line of Larry Callahan with Huntleigh Securities.

Please go ahead.

Yes, good morning.

I just wanted to see if you could clarify a little better.

The way I understand it, subsequent to June 30th, you would have a portfolio of about $350 million of agency security, maybe 20 of private label ARMS.

Is that about right, or --

It's about - we have approximately $340 million in agency and $50 million in non-agency.

$50 million?

Yes, $50 million.

And that --

AAA rated.

I'm sorry, Larry.

I'm sorry, what?

AAA rated non-agency.

That includes your retained securities in there?

The retained --

When you say the $50 million?

Yes, it's a --

So the $50 million --

The $50 million does include approximately $12 million of retained securities.

If you look at our overall components of our retained securities of about $20 million at the end of the quarter.

Yes.

The majority of those retained securities are AAA.

Okay.

Okay, you know the bottom, we have approximately $2 million of BB and lower retained securities related to our fourth securitization.

The remaining securities are AAA, a small piece of AA, and a small piece of A and BBB, but the majority of the $20 million is AAA rated.

And we only own the credit of four pieces at one securitization as it relates to the securities in our portfolio.

And would that be what the reserve was, $948,000 (inaudible).

No, because the retained securities in our portfolio are marked-to-market, where we used --

Okay.

-- we go through.

So those security's market values reflect any potential loan losses that would be in that securitization.

Okay?

The actual loan reserve itself is for the loans held in securitization trust of the $500 million.

Those are related to our first three securitizations.

First three securitizations.

Okay.

And when you sold the $238 (technical difficulty) label ARMs -

Yes.

-- (technical difficulty) about 180 something.

Was the remaining 50 just deleveraging?

The remaining 50 was just keeping the power dry and trying to position yourself to get through the markets that we're in today.

So could you give us some idea of what you consider your leverage to be, because I think last time you left out (technical difficulty)

Yes, I think as it stands today, our leverage is approximately nine to one.

And is that - would that nine to one be leaving out this deferred tax asset or not?

Well, the leverage is really calculated based on taking your liabilities and dividing it by your equity.

And if you look at the complete, if you really truly look at the floating rate debt of the Company, it's really the reverse repurchase agreements.

And currently they're approximately $395 million.

Okay.

But I'm just saying when you say your equity, are you including your deferred tax asset in your equity?

Yes.

Okay.

And is it any use to you in perhaps some NYSE rule or any other reason why you keep balance sheet because it does sort of give the appearance of you being willing to hold the assets or shareholder equity of somewhat be as value.

So I want to make sure that (technical difficulty)

No, no, the NYSE rule is driven by market cap.

And as far as we're governed by the US accounting rules GAAP.

And to the extent that we feel that we can use the deferred tax asset over a period of time that's it available to us, which is over 20 years, we would keep the asset on the balance sheet to the extent that we can.

Now one thing we have done is we've started to reserve against, we're not increasing the deferred tax assets.

For instance, the operating loss that we incurred this quarter, we did not increase the deferred tax asset benefit.

It's remained constant since 9/30 of '06.

Right.

So that would lead someone to wonder is the burden of proof on you to prove that you have some plans for that deferred cap asset as time goes by or --

The burden of proof is constant.

Every quarter we have to go through some assumptions and analysis of the deferred, of all tax issues, not only the deferred tax issue but any other potential tax issues that we have.

And we go through at great lengths with our accounting firm to discuss those issues.

So would any strategic alternative further along been used to buttress your argument?

I mean clearly one of the issue that we have when we look to partner with somebody is how can we use this deferred tax asset the most sufficient way?

Right, but I'm saying in order to justify still caring that deferred tax asset on your balance sheet --

No.

-- you'd have to show your accounting firm that you've made some progress in identifying ways to use it.

We can use it without the strategic partner.

Right.

You couldn't rely on our strategic partner to justify the tax asset.

Okay.

And with this dry power that you have, have you given priority to redeploying that in the taxable REIT subsidiary as opposed to the mortgage REIT?

At this point we're just looking at what -- we're just monitoring the best opportunities in marketplace and the best use of the capital.

And that's how we deploy it.

And the last question would be, would the re-deployment from the private label ARMs into the agency securities, or at least in large part be related to liquidity issues?

Would that have been in an early part of July or the later part of July?

We did it actually in the early part of July.

Oh, okay, good.

And part of the reason of doing that was two fold.

One, we wanted to get into more -- I wanted to get into more floating rate type securities given the environment that we're in.

The floating rate security allows us to enter in or exit out if there's better opportunities that exist.

It generates a positive spread and in fact, the non-agencies typically have repo haircut of 5% where agency securities typically have a repo of 3%.

So it did improve our liquidity overall.

And, Larry, it was done more to improve the portfolio margin.

But as it turns out, it was from a timing perspective it turned out to be a very good time to do what we did.

It sounds like it.

And would you be able to give people any idea of what kind of dry power you're talking about if you were to redeploy this dry powder in say agency securities?

I mean, would you be able to expand the portfolio by over $100 million or $200 million?

You know, we typically don't make those kind of predictions, especially in the market that we're in now it's very difficult.

I think as we get through this current market environment, we'll be better able to estimate where our portfolio is going.

We have to let the dust settle here a little bit.

Okay.

But suffice to say there is dry power is what I guess I'm I asking.

Correct.

Correct.

Yes.

There is definitely.

Yes.

Thank you very much.

Good.

Thank you.

Thank you.

Our next question will come from Allan Young with Raging Capital Management.

Please go ahead.

Good morning.

I wonder if we could just touch a little bit more on liquidity, warehouse lines are gone and I not yet anyway seen anyone fail to rollover a repo line.

But we're here trying to focus on that.

Can you talk about where your lenders stand?

I know you have about five of them, Countrywide and West LB, I think were the largest providers.

Any color on that end of the business?

And I know Countrywide came out with a statement yesterday saying that some of the repos that they employ are of "moderate to low reliability."

And I'm just trying to get a sense of what the environment is in the repo business in terms of lenders willing to roll them over.

There's no question, the overall repo market has changed in the last 30 days.

The whole market has got its skittish with mortgage products.

We currently are at the end of the quarter, we had repossessed any, I believe in five different - actually seven different counterparties at the end of June.

And we have over 20 counterparties, actually 21 counterparties that we maintain repo lines with.

Those lines are not committed lines.

Those lines, we monitor.

We come up with our counterparties.

Those are changing daily given what's going on in the marketplace.

To date, we've rolled all of our repos.

We have no anticipation that we're not going to roll that repos.

Okay.

I know they tend to focus very much on the collateral that is securing the repo line, but I'm trying to get a sense of whether it goes beyond that.

It might be possible to envision a scenario where the loans held in securitization, there's a dramatic increase in the allowance for loan losses that flows through your financials and book value at that point might not be what it is today.

Would a repo lender look at that or would they focus specifically on the agency collateral?

First, an assumption you're making about the loans we held, the loans we have in securitization trust are high quality, prime, hybrid ARMs.

These are not the type of loans that are going to have dramatic increases in delinquency rates.

This is not all day product.

This is not sub-prime product.

So we should have a fairly stable delinquency number going forward.

Okay.

It will change but it's not going to double, quadruple as we've seen sub-prime paper for example do in the last six months.

Right.

So just as a base to answer that question, I'll turn it over to Steve.

And I think as any lender of credit, be it reverse repurchase agreements or warehouse lending facilities, they're going to look at the overall financial stability of the Company.

One of the goals Dave and I had over this quarter as we go through this transition is to stabilize the Company and get a solid book value where they can look to the Company and say, okay, I understand where you're at but the liabilities are coming from, I understand what risk you're taking, I see what assets you have on your balance sheet.

Currently 85% of the securities that we're repoing are agency securities, either Fannie or Freddie.

They're not, then $50 million of AAA rated, private label ARMs.

So we have high quality ARMs that we're putting out on the repo market.

They need to get comfortable.

They know the collateral.

I've been doing this for many years.

They know me, and they know Dave.

So all those factors assist us in getting these repurchase agreements done and the market has been difficult for many players in our space.

I think a lot of the issues relate around more towards the esoteric or the lower rated securities are probably the most difficulty.

Again, I think goes back to what collateral, what specific loan collateral is used to create the securitizations.

The issues that cropped up, what, a month or so ago with all the downgrades, you know, 99% of that, or 90% of that rather was sub-prime backed, asset backed securities or sub-prime loans that went into securitization.

So the ratings, the problem right now in the market with the rating agencies is nobody knowing what their ratings really mean really pertains to the asset backed deals that have sub-prime loans in them as opposed to the - you know, you haven't seen any downgrades of prime deals.

Okay.

And if you could just give me a quick education on the liquidity of your assets, the agency market, I assume, very large, very liquid.

I know you mark-to-market.

Can you give us a sense of where in relation to PAR the agency securities are currently carried on the books?

Let's see, they're carried approximately between 99 and three-quarters in PAR.

They're floating rate securities.

I mean, they probably can gyrate in price between 98.5 to PAR.

98.5 would be an extreme price in a difficult market, which is where we've gone through.

But as we've gone through marks from July to June, you're not seeing significant deterioration in majority of our products.

If you had to institute for whatever reason a bulk liquidation of your agencies, there should be no reason why the market couldn't handle that size and still get that price?

You're seeing bid lists, I'm seeing bid lists, you know, five bid lists a morning coming out between $500 million to $1 billion dollars.

And we have $350 million, we have $400 million in total securities.

Right.

So I mean out bid list is an odd lot.

One benefit of us at the moment is the fact that we're kind of small.

Right.

It should be enough.

It's not to say that if you had to go out into the, if anybody has to go into the marketplace and has to sell, you're not going to get the best execution.

Right.

Typically what you want to try to do is have an organized selling process.

When we sold the agencies at the beginning of the month, we went out and made it clear that we're not selling these because we have to sell them.

But, you know, you don't want to put yourself, you try to avoid putting yourself in a position where you have to sell.

So, perhaps someone with a $4 billion to $5 billion portfolio that had to liquidate might have some more difficulty than you would?

Correct.

Correct.

Anybody who depends on leverage, no matter what your size is, if it changes, if the rules change dramatically and you have certain types of collateral, it's going to put pressure on you, no question.

Yes.

And on the private label securities, where are they in relation to PAR and how liquid would --

The majority of the private labels that we have now, there's two components.

One are season three ones, which have just gone through the resets so they're essentially one year ARMs.

And the other ones that we hold are floating rate off LIBOR.

So they tend to gyrate around PAR.

Really, okay.

And that could handle a bulk liquidation or is the market not as large of course as the agency market?

It's not as large.

But I mean again, we're talking about $50 million in securities.

Exactly.

I mean so we're not talking about losing hundreds of millions of dollars.

Not talking that.

So really at this point the downside for you is keeping your repos in place and generating some stability.

Is that pretty much a way of summing it.

Absolutely.

Okay.

Absolutely.

Fair enough.

Thank you.

Okay.

Thank you.

(OPERATOR INSTRUCTIONS).

One moment please for our next question.

Management, at this time we have no additional questions in the queue and we'd like to turn the conference over to you for any closing remarks.

Okay, as we have said, the second quarter was a difficult but necessary transition period for New York Mortgage Trust.

We have taken the required steps to best position ourselves going forward.

Thank you very much and we look forward to talking to you next time.

Thank you, management.

Ladies and gentlemen at this time we will conclude today's teleconference.

We do thank you for your participation on the program.

If you would like to listen to a replay of today's conference call, please dial 1-800-405-2236 or 303-590-3000 with an access code of 11094795.

Once again, if you'd like listen to a replay of today's conference, please dial 1-800-405-2236 or 303-590-3000 and enter an access code of 11094795 followed by the pound sign.

Ladies and gentlemen, we thank you for your participation on the conference.

At this time we will conclude.

You may now disconnect and please have a pleasant day.