New York Mortgage Trust Inc (NYMT) 2020 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the New York Mortgage Trust's Second Quarter 2020 Results Conference Call. (Operator Instructions) This conference is being recorded on Thursday, August 6, 2020.

Our press release and supplemental financial presentation with the New York Mortgage Trust second quarter 2020 results was released yesterday. Both the press release and the supplemental financial presentation are available on the company's website at www.nymtrust.com. Additionally, we are hosting a live webcast of today's call, which you can access in the Events and Presentations section of the company's website.

At this time, management would like for 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 the New York Mortgage Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's filings with the Securities and Exchange Commission.

Now I would like to turn the conference -- introduce Mr. Steve Mumma, Chairman and CEO. Steve, please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for being on the call today. Jason Serrano, our President, will be speaking this morning as we talk through our second quarter earnings presentation that was released yesterday after the market closed and is available on our website. I will be speaking to the company's overview and financial summary sections, while Jason will be speaking to our market and strategy update sections.

The company rebounded strongly in the second quarter after experiencing the most challenging quarter in its history, generating $0.28 in GAAP earnings per share, $0.50 per share in comprehensive earnings and increasing its book value per share to $4.35 at June 30, 2020, a 12% increase from March 31. The company has focused significant efforts on stabilizing and improving its ability to fund our investment strategy, including reducing mark-to-market securities repo financing to one counterparty, totaling $88 million, completing a non mark-to-market resecuritization of non-Agency securities for total proceeds of $109 million and closing on the $243 million residential loan securitization in July of 2020.

Our low leverage leading into the pandemic allowed us to retain over $1 billion of non-Agency credit assets that experienced significant price appreciation in the second quarter. As we look to the future, we expect to rely less on shorter-term financings that are subject to mark-to-market fluctuations, which we believe will help us to remain opportunistic in the investment side.

I will begin on Slide 6 with our overview. As of June 30, 2020, our investment portfolio totaled $3 billion, largely unchanged from March 31. Our total market capitalization was $1.4 billion, up over $600 million from the previous quarter end -- continuing to focus our investment portfolio on credit strategies, with 78% of our portfolio on single-family credit and 21% in multifamily credit, capitalizing on our strengths in asset management and reducing our dependency on mark-to-market financial borrowings.

We have 57 professionals, all working from home since March 13 without any significant disruptions from our day-to-day routines and are prepared to do so for the foreseeable future as our country and the world deal with the COVID pandemic.

Slide 7 has our second quarter key developments. When we declared a common stock dividend of $0.05 and reinstated our preferred dividends, declaring a second quarter and our first quarter dividends in arrears for all outstanding issues. As I said earlier, we completed a non-Agency RMBS, non mark-to-market resecuritization, totaling $109 million as well as increasing our residential loan borrowings on existing lines by $248 million. Over the quarter, we continued to reduce our exposure to the securities repo, decreasing it by another $626 million since March 31. Our investment activity was limited as we focused on stabilizing our funding. However, we did sell $44 million in residential loans, $38 million in non-Agency RMBS securities and $24 million in CMBS securities.

In July, we completed a residential loan securitization for $243 million in proceeds and subsequently reduced our mark-to-market financing by $231 million.

On Slide 8, details our current liquidity and mark-to-market financing exposure. The graph illustrates the change from the first quarter to the second quarter, where you can see that we have increased our cash position by approximately $200 million, ending at $372 million as of June 30. And today, we have over $500 million in cash or cash equivalents. Our unencumbered securities and residential loans still exceed $1 billion. We've added $109 million in non mark-to-market financing and reduced our mark-to-market financing by over $465 million. In July, we completed $243 million non mark-to-market residential loan securitization, further reducing our reliance on mark-to-market financing.

In the third quarter, we intend to convert a portion of our mark-to-market residential loan financing to non mark-to-market with our existing lenders as well as adding possible new counterparties.

On Slide 9, we show a quarter-over-quarter comparison of both our portfolio and financing positions. As you can see, there was not material changes in our portfolio in terms of size or composition. However, portfolio leverage continued to decrease from 1.4x at December 31, 2019, to 0.7x at March 31 and finally, at 0.4x as of June 30, 2020. The overall company leverage decreased to 0.5x at June 30 from 1.5x at December 31, 2019.

Now moving on to our financial summary section. I will be using some of the information from the quarterly comparative Financial Information section included in Slides 22 through 30 as support for my -- some of my explanations. On Slide 11 is a snapshot of our financial highlights. Our GAAP earnings per share was $0.28 per common and our comprehensive earnings were $0.50 per common share. We declared a $0.05 per common stock dividend for the quarter. Our book value ended at $4.35 per share, an increase of $0.46 per share from the previous quarter, delivering a 13.1% economic return for the quarter.

Our net margin was 2.43%, a decrease of 49 basis points from the previous quarter, primarily due to the sale of our entire portfolio of higher-yielding Freddie Mac K-Series POs at the end of the first quarter. We had $2.3 million (sic) [$2.3 billion] in single-family credit investments and $600 million in multifamily credit investment as of June 30, 2020.

Our reduction in financing costs during the quarter was largely attributable to the 100 basis point decrease in short rates on March 16 as a response to the pandemic by the Fed.

Slide 12 is a summary of our second quarter activity, where we had no capital market activity as compared to raising $512 billion in the first quarter. We had net investment sales activity of approximately $103 million. We had net income of $108 million and comprehensive income of $190 million attributable to our common stockholders.

On Slide 13, go see the components of our financial results, where we had net interest income of $28.5 million, an $18.6 million decrease from the previous quarter. This decrease is due to the previous quarter's activity, where we sold approximately $2 billion in assets in the second half of March as part of our effort to improve the company's liquidity as a reaction to the disruption caused by the COVID pandemic. We had noninterest income of $104.4 million. Primary drivers of these results was $102.9 million in net unrealized gains.

Credit markets saw significant improvement in credit spreads in the second quarter, which translated to improved pricing across all our assets. Due to the company's low leverage carried in the first quarter, we were able to retain over $1 billion in non-Agency RMBS and CMBS, which experienced the most improvement in pricing and contributed $61 million to the total on net realized gains.

We had total G&A expenses of $11.8 million, an increase of $1 million from the previous quarter. $0.6 million of this increase is related to our director stock compensation, which is awarded during the second quarter and fully expensed. We would expect to go for G&A expenses to run approximately $11 million per quarter.

We had operating expenses of $2.3 million, a decrease of $0.8 million from the first quarter due to limited purchase and sale activity in the second quarter. We would expect these expenses to increase in the coming quarters as we increase our investment activities in both residential loans and direct multifamily lending.

The graph on Slide 13 illustrates the change in our book value over time with the unrealized year-to-date loss component for the first and second quarters of 2020. Our book value increased 12% during the quarter, recovering $0.49 per share of unrealized losses experienced in the first quarter or 1/3 of the total, leaving approximately $0.95 per share remaining. We expect the unrealized portion of these assets to further improve as the economy and markets stabilize. We've continued to see improvement in pricing in the third quarter and estimate that our book value is up approximately $0.10 per share or 2%.

Jason will now go over the market and strategy update sections. Jason?

Thank you, Steve. Good morning. As the Fed -- I'm starting on Page 15 here on Marketing Conditions. You can follow along. As the Fed uses the balance sheet to combat a significant economic contraction, the U.S. unemployment rate decreased towards the end of the quarter from a high of 14.7% in April to 11.1% in June, with showing improvements in nonfarm payrolls, which -- employment rose by 4.8 million at the end of June. At this point, all eyes are on the much-needed second stimulus package, which has been protracted in delays between the White House and Congress.

On sector update, the -- on the Agency side of the equation, we are seeing full liquidity at high premiums on Agency assets. With the conforming rate now near 3% and stabilizing around that level, CPRs are -- have really risen. And origination efforts and origination volumes is expected to outpace expectations from earlier in the year. Today, at $2.8 trillion -- which has a likely chance of actually beating those expectations presented. In single family, the strength in the housing numbers continues to upside, with HPA now being revised up by most economic analysts to a positive 1.5% range from negative range just a few months ago. The strength in the housing market is a function of the tight supply in housing, which is now 3.5 to 4 months. This level of housing supply has never produced home price declines in a market. Loan losses are tracking similar levels to pre-COVID levels because of the demand and supply ratio that exists in the market and the tight underwriting levels that were produced throughout 2018, '19, '20 periods.

In multifamily, we're seeing national rent collections about 98% from pre-COVID levels. The GSEs continue to provide backstop financing, normalizing funding through the second quarter and senior financing levels. Also, lower construction has alleviated over capacity concerns in various markets. That's the positive.

On the negative side, we are seeing strains in low income housing, which has significantly underperformed; gateway cities, which prime markets are showing flat to declining rental growth and look to continue to show declines going forward from here.

Looking at Page 16 on Investment Strategies. A general comment here is that our trading activity across the portfolio is a function of monetizing gains from the security portfolios that have realized gain activity and a significant price growth since the COVID disruption. Prices in these asset classes have been -- were as low as anywhere from $65 to $75 range today or in the mid-90s to par in premium ranges for a number of assets. So the activity in our portfolio, as Steve mentioned, has been monetizing those securities and locking in the gains where we see very little incremental value in holding those assets with respect to price accretion and also potential stress in the line cash flows.

Now going through both single-family, multifamily, starting from the bottom-up here on single-family Agency securities. We currently do not see this as a core portfolio -- or a core strategy for our portfolio. We don't see this as an attractive asset class for us at the moment. We see excess liquidity in this market, 1 to 6 dollar prices with significant CPRs where 70 -- more than 75% of the entire housing market is available for a refinance or in the money for refinance. That negative convexity issue, we think, will strain future earnings in the Agency assets in the MBS side.

On the non-Agency side, I just described that we were selling securities. We actually have recently just sold off our entire non-Agency RMBS portfolio of mezzanine bonds and sub bonds there. We were able to see prices as mid- to high 90s and even par pricing, which was great to see, given the fact that these assets were in the mid-60s back in end of March.

On the performing loan side, we are investing in this asset class. We still -- we see opportunities looking at buying at Scratch & Dent discounts. Scratch & Dent loans, which are loans that have technical underwriting issues that were intended to be sold to the agencies. With the high refinance volume that we're seeing, there is significantly more Scratch & Dent loans available that are produced. In this area, the buying at a discount in the 85 to 90 range. And with high CPRS, shortened duration enables us to capture back that discount faster, which is why we're involved in that market and why we're continuing putting capital there, in our pipelines. And also on the fix and flip opportunity, where this is an asset class we have kind of shied away from in previous quarters, certainly before COVID. We saw a lot of demand in that space, where you couldn't really carve your portfolio or carve your niche strategies, given the demand that was there.

After COVID now, we are seeing plenty of originators that are available to us that will create portfolios or create certain underwriting standards that we find attractive. And we're using our competitive position with our balance sheet to find new opportunities there. We'll talk more about that in a second.

On the distressed loan side, it -- we're a hold. We're not seeing opportunities in new portfolio trades. We are spending time monetizing our current assets through a number of channels, which I'll talk about in a minute. Now on the multifamily side, starting from the bottom up, once again, the multifamily agent securities. We were holders of that security. We were overweighting that in our agency core portfolio holdings. Now, not a core portfolio holding simply because of the high premiums you have to pay for these assets. And after hedging costs, the -- and high leverage you need to obtain a double digit return, we don't see that as an attractive opportunity on a relative basis.

On multifamily securities, we were a -- we had a significant position of mezzanine K-Series Freddie Mac bonds. Those bonds, we have seen anywhere from 98 to 104 dollar pricing on those securities. We have been a better seller than buyer in this sector to take the gains that we've realized. And also given the repo is no longer attractive in this market for security sectors, in general, we don't see this as a double-digit go-forward return without any significant price accretion from here. So we think we're pretty much capped on prices, which is the reason why we're selling. On the joint venture equity side, we're seeing opportunities here. We need the right mix between a sponsor, property management, geography and the concept of the actual property. We'll talk more about that, but we are seeing opportunities and able to carve the right strategies for our portfolio. Similar to the pref equity mezz loans, continue seeing opportunities here, less competition and a building pipeline of bridge loans, which we'll talk about in a minute.

Switching over to single-family on Page 17. This is a portfolio that has not changed materially. As you see in the table on the left side, we've had significant CPRs with respect to performing loans with $73.3 million of portfolio decline that's related to prepayments that we've seen in that portfolio. On the security side, 2/3 of all of our sales we've conducted in the quarter related to RMBS securities. The non-Agency security sale, which I described earlier, was conducted just recently after the quarter end, the second quarter end. We'll see the results of that in the following quarter.

On the right side, you can see the change of assets. A lot of the gains here were represented from the security side. Again, from [$65 to $70] pricing to [$95] to par pricing on asset. That recovery has been meaningful, and we've been able to monetize and lock in those gains.

Flipping to Page 18, more towards our distressed management on our loan portfolio and active management here. As an update on borrower performance through 6/30/2020, 31.7% of our portfolio, which is distressed loan portfolio, entered to COVID-19 relief plans. That's the entirety of the COVID-19 relief plans we have offered and borrowers have been available -- have availed themselves to it. Not surprising here. This is a number that is far less than even our expectations earlier in the COVID period, simply because of the amount of stress that the borrowers were experiencing. With respect to the Fed's balance sheet and all the general relief that's been applied to unemployment rates and PPP programs we've seen that this -- the COVID relief plans were basically lower than our expectation. Today, half of the loans that are in a COVID relief plan were previously delinquent on their loan. So roughly 15%, 16% of the loans here in our portfolio have COVID relief plans, which for a portfolio that has -- which was purchased with rolling delinquencies and unstable payment profiles at purchase this is, we think, a great job that was conducted by our asset management team, being proactive with our servicer and enacting relief plans quickly where borrowers could avail themselves to it. In active servicing for distressed loans, you basically need the servicer to have monthly, if not weekly conversations with the borrower on their income status and their ability to pay. Without these efforts on special servicing, we've not have been able to attain these types of results.

Our portfolio, as a reminder, is in a higher home value spectrum at $450,000, not -- looking at the top right of this graph -- this table, sorry. The average loan LTV is 73%. We have purposely intentionally bought loans that were in a gray area of payments, which is a borrower that has made payments recently or missed payments recently and focusing on portfolios with low LTV. We traditionally would carve portfolios of larger portfolio sales and buy the lower LTV portion of those portfolios with other bidders in the market, which is how we're able to carve these portfolios with 73% LTV.

Our coupons of 4.74% is very attractive relative to, I said earlier, an agency conforming coupon of 3%. With borrowers that continue to pay and a FICO score improvement that comes along with those payments, we see an attractive opportunity to refinance many of these borrowers into an agency loan and monetize that discount that currently is available on the portfolio and at purchase. So if you look down at the right table, 6/30 performance, you can see that our loans that are more than 6 month current is more than 7%. It's 7% higher than it was in March, which was also higher than it was pre-COVID in December 2019. The portfolio continues to perform and to accrete to a performing status. That allows us to also accrete the portfolio on pricing. As you can see that the pricing on average went from $88.24 to $89.80. That's a function of payment performance and also a tighter spread in this market that we've seen recently. The tighter -- the improvement in the performance in tighter spreads, we think, will persist in the third quarter, where we're already seeing gains through July in this portfolio.

Now Steve mentioned earlier that we did a securitization with respect to our loan portfolio. The type of loans that we chose for the securitization were more choppier pay, less delinquent loans, where we know that the monetization period would be longer than a loan that is currently performing today and availing themselves potentially to a refinance or our active management refinance campaigns that we'll be discussing with the borrower. So in this end, we've enabled ourselves and preserved the realized gain activity on our clean portfolio with having those on 1-year repo. And with respect to the distressed loans that have more of a protracted approach to refinance campaign or a more of a term securitization, we've entered most of those loans into our securitization channels.

We'll continue to look at the securitization market and to remove some of the repo risk off our balance sheet, especially with respect to more of the choppier pay loans as the duration of total monetization of that loan would be longer.

Now switching over to multifamily on Page 19. This now represents 21% of our portfolio. We have sold down a number of our securitization Freddie Mac K-Series bonds, the mezz bonds, which has lowered the total portfolio holdings. However, this is an asset class that we are spending a lot of time on and do expect to have significant pipelines building, in the preferred mezzanine base in particular.

Now there's an opportunity that we've entered into where we are going to be 10% of equity in a 90% JV partnership, where New York Mortgage Trust sources investments, manages the fundings and the -- also the active asset management with a pref equity investment in multifamily. This is an exciting opportunity for us because not only do we get to self-select the assets, which are numerous, given the many banks and other funds have stepped out of this market. We also get to collect a fee stream for our asset management efforts with respect to the 90% of the capital that's going into these investments.

So earning management fees for the REIT is something that we can definitely lever on given our deep management capability as well as potentially looking at more distressed multifamily properties in markets that we have not been involved in. But we are seeing more opportunities for us to apply our asset management team to help others with their management focus, which is a fee stream possibility for the REIT. With respect to JV, we have one position that was there. Happy to say that this is a position that recently prepaid after efforts with our asset management team to work with the borrower. That produced a 20%-plus IRR and over a 2x multiple. So that joint venture position is no longer on our balance sheet today.

Now with respect to direct lending. Looking at the right side of this table on Page 20, our portfolio is that we -- the properties that we have lent to are in the $43 million on average range. We have a senior loan in front of us, typically a Freddie Series K-Series long. We also have a multifamily -- sorry, our mezzanine loan at $6.2 million, which is a -- the average loan at 68% LTV and 82% to our loan.

The efforts of choosing loans with strong sponsors in markets that are most predominantly in the South and Southeast part in the United States has produced a performance summary and trend that is highly attractive in this market. We have one loan that is delinquent also under COVID-related forbearance. This is excellent performance for our team on our 50 loans we have in our portfolio. This is a portfolio which we have never experienced a loss on these loans that have been created since starting the mezzanine loan activity back in early in 2014. This is an asset class that we can actively manage. We now are seeing -- able to see more positions with the lack of demand that's in the market, where people have stepped out post COVID, with banks in particular that have stepped out. And with respect to lower LTVs that are being available -- offered by the senior part of the capital structure, mezzanine loans are becoming a more attractive loan for many of the sponsors that are looking to conduct a 1031 exchange or simply looking to do a lease-up and looking for a bridge loan.

Rental demand in our markets have continued to pile in. We have positive migration, which is still continuing even with COVID, Northeast, in particular, moving down to the Southeast part of the United States, has kept rental collections very close to 2019 levels, as I said earlier, around 98%. We also continue to see rental growth rates in these markets of upwards of 2%, which is exciting to see, given the relative performance versus markets like the Northeast and prime markets and gateway markets, where -- experiencing flat to negative price growth.

Now the -- switching over to Page 21. The outlook here. I mean, our goal is to find assets that have downside protection where we can produce double-digit returns without the need to obtain or utilize leverage. Instead of using financial leverage, we'd rather leverage our operational team, our asset management team and our deep experience in credit, which is where we're focused. We don't intend on looking at high leverage strategies, especially within credit. In today's market, you either look to lever basically guaranteed assets or you look to obtain a return within credit without leverage. And as I've mentioned earlier, we do not find opportunity -- attractive opportunity to lever guaranteed loans or bonds within the MBS or Freddie Mac or a Fannie agency space. We simply see an opportunity to lever our team to focus on opportunities with the vast amounts of demand that has left this market, where we are no longer in a competitive position and have ample room to create our own supply.

So with that end, we run a management strategy where we're flexible. We do not own an originator, and we've not looked into operating platforms, which is really providing us an ability to be flexible here. We do not have to originate loans to continue to -- paying for the fees or costs related to that entity. Instead, we can pick and choose our originators, which are numerous, both within the single-family loan space. And also being direct in the mezzanine space, we can now talk to sponsors without having the risk of a particular opportunity going away related to a bank who has stepped into that space. And a simpler way of saying this is a lot of the tourists that were in this market are no longer there. And now you need to have a deep management and expertise to invest in these spaces, which is what our DNA and what our background is all about.

With that, I would like to open it up with questions. So operator, if you wouldn't mind taking questions, well, you can start from there.

(Operator Instructions) Your first question comes from the line of Eric Hagen with KBW.

Helpful opening comments, and hope you're well. I was trying to keep up with the updates on the security side that you noted since quarter end. How much did you say you've sold since the end of June? And so how big are the resi and commercial securities portfolios now?

And then within each of those portfolios, how much credit subordination do you have? And where are those loans -- where are those securities marked on a dollar basis as a percentage of par?

Yes. I think -- what I think what Jason was trying to talk about was just give an indication, Eric, of how the markets have come back, and that we did sell-out our exposure as it relates to non-QM RMBS securities that were support bonds. But we're -- at this point, we're not going to give details exactly of what we've sold. All we can say is that we've been active in selling securities. And to the extent that they've recovered what we think is their maximum price potential or close to the maximum price potential, we're going to sell those securities because we think we can reinvest in better opportunities.

Right. How about the subordination piece? I mean, what does that look?

Yes. I mean, look, we sold -- in a non-QM space, we sold a bunch of B1 and B2 bonds that we felt had some risk related to the activities that were going on in the marketplace. We still own some other RMBS securities. They typically are going to be -- they're probably not senior bonds. They're going to be the B2 bonds or the A2 bonds. So they won't be senior in general. But that position, you would expect, as we go into 9/30 will be substantially lower than it was at 6/30.

Got it. Okay. And then as you guys think about the impact of federal stimulus on borrowers and the impact of performance within the portfolio, how do you guys think about that? And then did the fair value of the loan portfolio at the end of the second quarter reflect any assumption for further stimulus?

Yes. So as it relates to stimulus in the portfolio, obviously, the trends in the market have been helped by the stimulus packages that ha e been produced. It's been an extraordinary amount of stimulus that's been applied to the Fed's balance -- from the Fed's balance sheet, which is expected. We and the markets generally expect that the second stimulus package -- to be rolled out after some wrangling with the White House and Congress. There's no doubt that that's been helpful in making the rental payments and mortgage payments. Within the mortgage space, again, our loan portfolio, our loans where borrowers had missed payments before. And the opportunity there is helping the borrower align their priority and also managing down their risk. So there's been a pretty large savings increase in the United States, roughly -- I think the number is about 20% or $2 trillion of personal savings rate increase in this market. And a lot of what our experience in the -- our distressed loan portfolio as a function of that is basically helping the borrower with their finances. So our services are trained to basically be a financial analyst for that person's balance sheet and income statement. And a lot of the performance has -- is related to that. And that's the kind of the strategy that we designed for them. So it's reprioritizing their debt load. More times than not, what you see in our portfolio are borrowers that actually do not have a mortgage payment related problem. They have an auto payment related problem, in that they have an auto payment that was significantly higher and helping them manage down that through a sale and taking a better car loan or refinancing or helping with their car loan.

So that's -- and more times than not, there's a lot of chatter about student loans and others. But types of borrowers that we have are not more of the millennial generation more GenX and baby boomers, where it's more of an auto payment problems. So that's exciting for us because our borrowers have -- at the 73% LTV, we're aligned with the borrower on how to help the borrower manage and save the equity they have in their own. Many borrowers are choosing to equify that equity and monetize it through a refinance, which we can help them with and they're happy to do so, given our price point on those loans.

So your question earlier is stimulus helping. Absolutely, it's helping the consumer in all aspects of the market. But I think the outperformance of our portfolio, given delinquency trends that we bought these loans that are continuing to improve through COVID is a function of reprioritizing the borrowers' payment and priority.

And Eric, let me just add 1 thing. If you think about -- we're tasked with valuing the portfolio at 6/30. So clearly, we have to take into consideration what people are thinking at 6/30 as it relates to valuing the asset on a dollar price. When we look at the risk of our ownership of the loans and securities going -- on the go-forward, clearly, we're running scenarios where differing amounts of Fed support is going to come into the marketplace, which is why some of our decisioning on selling of the RMBS securities has been to sell some of the more support type bonds that we think could get hurt in the event that something comes unexpected to the marketplace. And so to the extent that the current market is not recognizing it, we're willing to sell those bonds into the marketplace. Because we think that, if you look at our loan portfolio at 73% LTV and if you look at the history of us managing borrowers who don't make consistent payments, as Jason said, we think we're well equipped from an asset management standpoint to deal with disruptions in borrowers' payments.

Right. One more from me, if you don't mind. You noted some lightly rotation into additional non mark-to-market funding. I'm just trying to get a sense for the funding costs in the mark-to-market facilities now compared to where you think you might be able to fund that and rotate some of that funding on a non mark-to-market basis?

Yes. It's interesting. We're in the process of negotiating the final pricing, and that pricing has come down probably -- if you did a non mark-to-market line in May versus doing it today, it's probably down 150 basis points from where it was being offered in May. So it's become much more aggressive in pricing and more people are getting into that pricing. So at this time, we're not at liberty to talk about it, but it will be substantially less than what it cost us in May. It should have been 300 to 400 over.

Your next question comes from the line of Christopher Nolan with Ladenburg Thalmann.

Jason, for the fund that you were describing in your comments, would the results from that fund be consolidated onto New York Mortgage Trust's balance sheet and financials?

I'm sorry. What fund are you referring to?

The one where you have on the 10% equity.

Oh, okay. This is not a fund. This is a JV opportunity where we're stepping into a bridge loan, where we're providing 10% of the equity. And we have a partner of ours that's providing 90% of the funding. We are managing that risk, that loan. And for the management of that loan, we're collecting management fees to manage the entirety of that risk. This is more of a bridge loan where a particular sponsor has a lease-up opportunity that is being delayed because of COVID, is a strong sponsor in a fairly very -- in a Southeast, South where our footprint is in the United States. And this is an opportunity that we would not have been able to see over the last 5 years because it would be heavily banked.

So I just want to also point out that this is not yet closed, but this is in our pipeline, and we do expect to close it in the near term.

All right. And then a follow-up on the non mark-to-market funding. Is -- are the terms and conditions different? Is there a different haircut? I mean, how is -- I mean, what's the primary difference that we should be looking for in terms of the cost for this type of funding relative to...?

Yes. So our -- the loan repo financing is generally around about 60% of advance rate to EBB. And in that case, we're seeing opportunities. When we're taking it to the securitization space, we're actually getting out pretty much close to where we have the repo financing. In fact, in the last deal, we actually were able to take out a little -- slightly more cash than we had in the repo. But it's really on top. And the market is efficiently priced there, where banks are offering repo and where securitizations are availing themselves on the senior stack. And again, efficient markets, the financing costs are generally starting to run into each other, where prior the repo markets was significantly better financing spreads, as Steve mentioned, through May. And today, we're seeing that spread tighten with respect to repo and securitizations as repo gets slightly more expensive and repo -- and securitization costs are coming in. The market was disrupted the analysts and bond investors had a hard time evaluating what delinquency trends look like now with the stabilization of COVID forbearance and with very little loss rates that the market has experienced. We're seeing that this senior stack starting to tighten. We're a better seller of that. We've -- again, we sold non-QM bonds, and we're looking at securities where they're kind of capped from a price point of view, given par pricing. And in that end, we see it as an attractive -- being an attractive issuer to issue bonds in the market that are supported by similar assets that were loans in our portfolio.

Final question. Given it's an election year and given that you have a portfolio which is pretty credit-sensitive, any sort of strategies that you guys are employing to hedge your bets in case there's turnover in the White House?

I think the strategy that we've always taken towards credit is being not afraid to take over the property in the event there's a crisis. And so LTV and underlying economics are what drive our decision in getting into an investment. So look, we can't -- we're not predictors of the future. And so what we do know is properties and how to asset management those properties. So I think that's what gives us comfort and -- as we go forward.

(Operator Instructions) We have a question from the line of [David Sebit] with [Pritam].

I just had a question for you. You've been very disciplined through the quarter. You've delevered. You've raised a lot of cash. As you think about the uses of that cash, there are 3 of them that come to mind. One is obviously the portfolio itself. But also your preferred stock trades below $0.80 on $1 and your equity trades below book value. How do you think about buying back equity or preferred stock?

Yes, look, I think there's no question we're disappointed where the stock trades. The common stock trades at a discount. We have a substantial amount of liquidity today. I mean, to the extent that we believe that we can generate longer-term double-digit returns on the asset side, we've historically not bought back common stock. Just -- yes, it's a onetime pop to book value in that quarter, but it's so expensive to raise capital over time. And one of the things I think that we've done pretty judiciously is trying to make sure that we -- when we raise capital, it's accretive to the existing shareholder base. And if we get to a point where we feel like there's no investments in the horizon that makes sense to invest, I mean, I think we'd entertain possibly looking to buy back those issues. But hopefully, as we redeploy this capital and drive up our earnings, we're going to start closing the gap in some of those valuations. That would not be a priority though to buy back preferred in common today.

Got it. Understood. And where do you think is it more toward multifamily or single-family is where you think most investment dollars will go?

I think it's wherever we think we can get the best risk return on the asset class. We're not really married to either one. The multifamily tend to be larger opportunities per investment, and the residential team is -- it's obviously many more units per dollar. But we like them both. It just so happens as we delevered the portfolio, the equity sort of shifted around from multifamily to residential and when we sold the Freddie K first loss pieces. But I would suspect over time that the multifamily represents a growing percentage relative to the overall portfolio, just because we have such a high percentage of residential right now.

Got it. My last question is, and it sounds like this is the case. In July, it feels like things are -- the trend that's continuing of your book value increasing, is continuing through July. Is that correct?

Yes, that's right. Yes. I had mentioned $0.10 or about 2%.

At this time, sir, we have no further questions.

Okay. Well, thank you, operator, and thank, everyone, for being on the call. We look forward to talking about our third quarter earnings in November. Please be safe and be smart as you go forward. Thank you.

This does conclude today's conference. You may now disconnect.