MFA Financial Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Mortgage credit market continues to deepen with increasing liquidity and non-QM securitizations priced orderly, underpinning stable financing for over 80% of MFA’s portfolio.
  • Neutral Sentiment: MFA delivered a 1.5% total economic return in Q2 (3.4% YTD), with distributable earnings of $0.24 per share ($0.35 excluding realized credit losses) despite a modest 1% economic book value decline.
  • Negative Sentiment: Realized credit losses on certain business purpose loans reduced Q2 distributable earnings by $0.10 per share, though these losses were fully marked in prior periods.
  • Neutral Sentiment: In Q2, MFA sourced $876 million of new loans and securities—including non-QM, agency MBS and Lima One business purpose loans—maintaining overall leverage at 5.2x and recourse leverage at 1.8x.
  • Positive Sentiment: Cost-cutting initiatives, including $1.2 million in severance charges and 15 new Lima One loan officer hires, are expected to reduce G&A by 7–10% annually and support dividend coverage convergence by 2026.
AI Generated. May Contain Errors.
Earnings Conference Call
MFA Financial Q2 2025
00:00 / 00:00

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Operator

Greetings, and welcome to the MFA Financial, Inc. Second Quarter twenty twenty five Financial Results Conference Call and Webcast. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Operator

It's now my pleasure to turn the call over to Al Schwartz, General Counsel. Please go ahead, sir.

Harold Schwartz
Harold Schwartz
Senior VP, General Counsel & Secretary at MFA Financial

Thank you, Kevin, and good morning, everyone. The information discussed on this conference call today may contain refer to forward looking statements regarding MFA Financial Inc, which reflect management's beliefs, expectations and assumptions as to MFA's future performance and operations. When used, statements that are not historical in nature, including those containing words such as will, believe, expect, anticipate, estimate, should, could, would or similar expressions are intended to identify forward looking statements. All forward looking statements speak only as of the date on which they are made. These types of statements are subject to various known and unknown risks, uncertainties, assumptions and other factors, including those described in MFA's annual report on Form 10 ks for the year ended 12/31/2024 and other reports that it may file from time to time with the Securities and Exchange Commission.

Harold Schwartz
Harold Schwartz
Senior VP, General Counsel & Secretary at MFA Financial

These risks, uncertainties and other factors could cause MFA's actual results 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 the press release announcing MFA's second quarter twenty twenty five financial results. Thank you for your time. I would now like to turn this call over to MFA's CEO, Craig Knutson.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

Thank you, Hal. Good morning, everyone, and thank you for joining us for MFA Financial's second quarter twenty twenty five earnings call. With me today are Brian Wilson, our President and Chief Investment Officer Mike Roper, our CFO and other members of our senior management team. I'll begin with a high level review of the second quarter market environment and then touch on some of our results, activities and opportunities. Then I'll turn the call over to Mike to review our financial results in more detail followed by Brian, who will review our portfolio financing Lima One and risk management before we open up the call for questions.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

I'm sure you will all remember the market turmoil that rang in the second quarter with Liberation Day on April 2. Two year treasuries ended the first quarter at $3.88 rallied to $3.65 by April 4, sold off to $396 on April 11 and rallied again to $360 on April 30 and then subsequently sold off to $4.00 $5 on May 14. Ten year treasuries followed a similar trajectory rallying 20 basis points to $3.99 on April 4, selling off 50 basis points to $4.49 on April 11, closing the month of April at $4.16 and then selling off to four sixty by May 21. Fortunately, cooler heads appear to have prevailed since then both in Washington DC and in bond and equity markets. At least until last Friday's employment report revisions, 2s intend to generally each settled into their own 25 basis point ranges since mid May and equity markets have continued to grind higher, again last Friday notwithstanding. Mortgage spreads mortgage credit spreads tracked other risk assets widening somewhat in April and then retracing back to or near levels seen at the end of Q1 by the end of the second quarter. Importantly, the market for securitized mortgage credit assets and non QM securitizations in particular continues to deepen as liquidity increases and investor appetites remain strong.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

Spreads widen and tighten along with other risk assets, but deals get done and priced in a very orderly fashion. This was decidedly not the case as recently as 2023 when at times demand was weak, spreads were much more volatile and some deals were pulled from the market. The depth and reliability of this market is a powerful testament to this durable source of financing that we utilize to finance over 80% of our loan portfolio. The economic and macro environments, while never certain, seem a bit more clear as the year progresses. Growth though slower than originally expected is remarkably resilient.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

The passage of the tax and spending bill has removed the market uncertainty that had been associated with that. Inflation fears have moderated particularly as tariff negotiations begin to get resolved at less draconian levels than originally feared. Employment continues to grow, albeit at a reduced pace, although with the substantial revisions in last Friday's jobs report, a strong case can be made that the jobs market is not as healthy as previously believed. Amidst the drama between the President and the Fed chair, consensus now seems to be for two rate cuts later this year and lower short rates is always a helpful tonic for mortgage REITs. Finally, housing is languishing somewhat as demand continues to fall off due to interest rate and affordability challenges.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

Actual home price declines have for the most part been concentrated in specific geographies where new supply has saturated these local markets. There's still a fundamental nationwide supply shortage. So it's hard to envision more than a very modest weakness in home prices nationwide. Homeowners with existing mortgages today are generally not over levered and years of substantial HPA coupled with prudent and sensible underwriting practices means that LTVs are low enough that even in the event of a job loss, death or divorce borrowers have substantial equity and will sell their property to extract their equity and pay off the lender. In the midst of this environment, our portfolio delivered a total economic return of 1.5% for the second quarter and 3.4% year to date, which includes our first two quarterly dividends, which we increased to $0.36 in the first quarter.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

Our economic book value in the second quarter was down very modestly by 1%. Our distributable earnings for the quarter was $0.24 per share and were negatively affected by credit losses incurred on certain business purpose loans that were realized during the quarter. Absent these credit losses, DE would have been $0.35 As a reminder, these credit losses do not impact DE until actually realized. And as Mike Roper has emphasized for the last few quarters, these loans were marked down in 2024 and earlier when they went delinquent. Our fair value assets are mark to market every quarter.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

So the economic credit loss was realized through GAAP earnings and a reduction in book value a long time ago. Said another way, these realized credit losses that reduced distributable earnings in the second quarter are old news. Mike will provide additional color on the actual resolution amount versus the marks on these loans in his prepared remarks. We were active in the second quarter sourcing $876,000,000 of loans and securities across our target asset classes. These included $5.00 $3,000,000 of non QM loans, dollars 131,000,000 of agency MBS and $217,000,000 of business purpose loans at Lima One.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

We issued our eighteenth non QM securitization in early May. We sold 38,000,000 of newly originated SFR loans and $24,000,000 of delinquent transitional loans. Our overall leverage at the end of the quarter was 5.2 times and our recourse leverage was 1.8 times. Once again, the second quarter demonstrated that MFA's investment portfolio, our balance sheet composition and risk management approach are positioned to deliver results across multiple scenarios and weather unexpected market volatility and uncertainty. And I will now turn the call over to Mike Roper to discuss financial results.

Michael Roper
Michael Roper
CFO at MFA Financial

Thanks, Craig, and good morning. At June 30, GAAP book value was 13.12 per share and economic book value was $13.69 per share, each down about 1% from the March. MFA again paid a common dividend of $0.36 and delivered a total economic return of positive 1.5 for the quarter. MFA generated GAAP earnings of 33,200,000.0 or $0.22 per basic common share in the second quarter. Our GAAP results were driven by growth in our net interest income to $61,300,000 as well as modest net mark to market gains.

Michael Roper
Michael Roper
CFO at MFA Financial

This marks the third consecutive quarter we've grown our net interest income driven by additions of higher yielding assets over the last several quarters. Net interest income also benefited from a non recurring $2,600,000 acceleration of discount accretion on our MSR related assets, which were redeemed during the quarter. During Q2, we continued to make meaningful progress resolving non performing loans. We reduced overall portfolio sixty plus day delinquency from 7.5% to 7.3% and lowered the balance of loans on non accrual status by 33,600,000 compared to last quarter. In addition to our more traditional asset management activities, we resolved approximately $24,000,000 of some of our most challenged transitional loans via loan sale during the quarter.

Michael Roper
Michael Roper
CFO at MFA Financial

We expect to utilize additional loan sales in the second half of this year to continue to accelerate the resolution of underperforming assets, allowing us to unlock and redeploy capital at mid to high teen ROEs. Importantly, because our assets are predominantly accounted for at fair value, the expected losses associated with these potential sales and resolutions have already been recorded in our GAAP results and in book value in prior periods, in some cases years ago as unrealized losses. We mark our portfolio each quarter to what we and our third party pricing services believe are the levels at which the loans would trade in the secondary market to a level net of expected credit losses. Confirming this belief, during the quarter we resolved the rock current approximately $200,000,000 UPB in previously non performing loans. After reversing previously recognized fair value marks on these assets, the net impact on our GAAP results and our book value for the quarter was a net gain of over $03 per share.

Michael Roper
Michael Roper
CFO at MFA Financial

We believe this net gain on asset resolution highlights the quality of our loan marks and of our financial reporting. Moving to our distributable earnings. DE for the quarter was $24,700,000 or $0.24 per share, a decline from $0.29 per share in the first quarter. The decline was driven primarily by credit losses on fair value loans, which totaled $0.10 per share for the quarter, approximately $06 higher than in Q1, as well as a $02 increase in the dividend rate on our Series C Preferred, which began floating on March 31. As Craig mentioned, our DE excluding credit losses was $0.35 per share, nearly in line with our common dividend.

Michael Roper
Michael Roper
CFO at MFA Financial

For the quarter, our consolidated G and A expenses totaled $29,900,000 a decline from $33,500,000 in the first quarter. Second quarter results included severance and related transition costs of $1,200,000 the result of expense reduction initiatives across both MFA and Lima One. We expect that once complete, these initiatives will further improve our cost structure, lowering our run rate G and A expenses by 7% to 10% per year from twenty twenty four levels or approximately $02 to $03 per quarter. Though we expect some short term pressure on distributable earnings, particularly over the next two quarters, we had confidence in both the current earnings power of the portfolio and the current level of our common dividend. We continue to expect that our DE will begin to reconverge with the level of our common dividend in the 2026.

Michael Roper
Michael Roper
CFO at MFA Financial

Finally, subsequent to quarter end, we estimate that our economic book value has increased by approximately 1% to 2% since the end of the second quarter. I'd now like to turn the call over to Brian who will discuss our investment activities in the second quarter.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

Thanks Mike. We grew our investment portfolio to $10,800,000,000 in the second quarter. We continue to focus on our target asset classes of non QM loans, business purpose loans and agency securities. We sourced and purchased over 500,000,000 of non QM loans during the quarter. These loans carry an average coupon of 7.8% and an average LTV of 66%.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

We established relationships with two new originators during the quarter and we'll look to add more moving forward. Underwriting standards in the non QM space remain prudent and mid high teen ROEs remain achievable with securitization funding. The market continues to be supportive of non QM issuance as the total bonds sold by all issuers so far this year has already nearly eclipsed the total from all of last year. We completed our eighteenth non QM securitization in May selling $291,000,000 of bonds at an average coupon of 5.76%. As Craig mentioned credit spreads were volatile during the quarter especially in April when AAAs widened to as much as 175 basis points over treasuries.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

But spreads tightened over the remainder of the quarter back to where they were before the trade war turmoil started. On Monday of this week, we priced our nineteenth non QM securitization and were able to improve pricing due to strong investor demand. We again added to our Agency MBS portfolio during the quarter growing our position to 1,750,000,000. Our focus remains on low pay up securities generally 5.5 that we're able to purchase at modest discounts to par. We plan to grow our agency position further as long as spreads remain attractive.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

Turning to Lima One. Lima originated $217,000,000 of business purpose loans during the quarter, a slight uptick from the first quarter. This included $167,000,000 of single family transitional loans with an average coupon north of 10% and $50,000,000 of new thirty year rental loans with an average coupon of 7.5%. As a reminder, we continue to sell newly originated rental loans to third party investors. Lima as a whole contributed $6,100,000 of mortgage banking income for the quarter, an increase from $5,400,000 in the first quarter.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

Lima again had success adding to its sales force hiring 15 new loan officers during the quarter. Although origination volumes are down both at Lima as well as across the industry, we expect these new hires along with significant progress on technology initiatives to lead growth in origination volume and profitability in the latter half of this year. Moving to our credit performance. As Mike mentioned, the sixty plus day delinquency rate for our entire loan portfolio declined to 7.3% in the second quarter. Default rates for our non QM and rental loans remain exceptionally low at approximately 4% and fell to an all time low in our legacy RPLNPL book.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

We continue to be hard at work addressing our non performing transitional loans. We sold $24,000,000 of delinquent transitional loans during the quarter and expect to sell more later this year. Although the default rate percentage rose again for our single family transitional portfolio, it's important to note that loan delinquencies actually declined by $2,000,000 and we received $269,000,000 of principal repayments up from $249,000,000 in the first quarter. We again resolved $35,000,000 of previously delinquent multifamily loans during the quarter and received $99,000,000 of principal repayments. And with that, we'll turn the call over to the operator for questions.

Operator

Thank you. We'll now be conducting a question and answer session.

Operator

Our first question today is coming from Bose George from KBW. Your line is now live.

Bose George
Managing Director at Keefe, Bruyette & Woods (KBW)

Hey guys, good morning. Actually first I to ask about where you see the economic return for the portfolio. So I mean like you talked about there's this $0.10 of credit, there's a couple of cents that we get from the expense side that gets us above the dividend. I mean is that the economic return or is there sort of incremental upside as you redeploy some of the capital that's in the troubled loans at the moment?

Michael Roper
Michael Roper
CFO at MFA Financial

Thanks for the question, Bose. I think a couple of parts to your question there. So we we talk about the economic return of the portfolio regularly on these calls as well as internally and with our board and setting dividend policy. And one of the sort of downsides of DE and really any accounting metric is that it's backwards looking. When we think about the earnings power of the portfolio, we try to think about the go forward earnings power.

Michael Roper
Michael Roper
CFO at MFA Financial

And if you think about the sort of ROEs the portfolio is generating on a mark to market basis, that's really how we think about the economic earnings power of the portfolio. For example, we have some loans that were purchased in 2021 that are held at a pretty significant discount with a coupon rate of call it 4% because that asset accounted for at fair value. If you think about the total economics of that, whether it shows up in interest income or in the mark, that asset clearly is earning more than 4% today. So when we take that sort of mark to market ROE and do the same thing on the hedges and the liabilities, and then you layer in your expenses and the P and L that Lima is generating associated with their origination platform, The economic earnings power is much closer to the 10% dividend yield already. I think the second part of your question as far as additional upside, I think the answer is definitely yes.

Michael Roper
Michael Roper
CFO at MFA Financial

I mean, we've been running with quite a bit of dry powder for some time now. Our recourse leverage is 1.8 times and even ignoring the $275,000,000 of cash, we have a lot of capacity to turn up that leverage number a bit. So there's definitely some upside there. And you'll see that we've added a large number of assets again this quarter as we have for the last several quarters.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

And Bob, just to clarify one thing, Mike said that the 10% dividend yield, he means the 10% dividend yield on our book value, not on the stock price. That's right.

Bose George
Managing Director at Keefe, Bruyette & Woods (KBW)

Yes. Okay. Yes, absolutely. Makes sense. And then in terms of the different areas where you can allocate capital, like where do you see the best ROEs at the moment?

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

I mean, we still we like really all three. You saw we were most active in NonQM and all three being NonQM, HC and business purpose loans. Our hope is over time to sort of grow the business purpose loan originations, which should have the highest sort of face ROE. And as we've mentioned, we're hiring people down on Lima One and we do expect to see growth in that origination. So really it's continuing to deploy across all those three.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

But if Lima could do more origination we would definitely have prefer that over the other two.

Bose George
Managing Director at Keefe, Bruyette & Woods (KBW)

Okay, great. Thank you.

Michael Roper
Michael Roper
CFO at MFA Financial

Thanks, Bose.

Operator

Thank you. Next question today is coming from Steve Delaney from Citizens JMP. Your line is now live.

Steve Delaney
Director of Mortgage at Citizens JMP Securities, LLC

Hey, good morning everyone. Nice to be on with you today. The 15 new loan officers hired, I understand that's at Lima One. Could you comment on that? Are these going to be generalist producers?

Steve Delaney
Director of Mortgage at Citizens JMP Securities, LLC

Is there any product specialty that you're trying to develop? And I guess most importantly, or is there any new geo? Have you opened offices in any new states as a result of the new producers? Thanks.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

Yes. The focus is generally, I would say West and Midwest in terms of the hires. We believe them to be sort of high quality hires coming over from competitors. And if you think about the ramp process, right, somebody comes online, it takes them a few months to get comfortable with the product and the processes that Lima One has versus where they may have been previously. So it's sort of we're seeing growth now, but we do expect to see much more aggressive growth sort of back half of this year and into next year as these people really start producing.

Steve Delaney
Director of Mortgage at Citizens JMP Securities, LLC

Yes. Okay. So and how many total producers you may have mentioned it, I apologize. Now as we sit today at Lima One?

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

Yes. We were pushing I think 50 and the goal is to continue growing that I think closer to 80.

Steve Delaney
Director of Mortgage at Citizens JMP Securities, LLC

Wow. Okay. So some runway still to go there. Okay. I think that's good.

Steve Delaney
Director of Mortgage at Citizens JMP Securities, LLC

Thank you for the clarity on the dividend coverage. I was looking at Page 16 in the deck, and it's helpful, but the unrealized gain and realized gains and losses don't let us kind of couch on our own with the deck and without Mike's help this morning really we can't really back into coverage based on realized losses. So just throw that out for consideration as far as the way you show it in the deck. But good progress all around strategically and I realize that the losses are a work in process and we've got a little bit ways to go to get all that behind us. But thank you for the time this morning.

Michael Roper
Michael Roper
CFO at MFA Financial

Thanks, Steve. Thanks, Steve. Thanks, Steve.

Operator

Thank you. Your next question today is coming from Jason Stewart from Janney Montgomery Scott. Your line is now live.

Jason Stewart
Director - Mortgage Finance at Janney Montgomery Scott

Hey, good morning. Thank you. Just to follow a little bit on Bose's question. You talked about growing Lima One, but as we think about the balance sheet going into the easing cycle and maybe post steepener on the yield curve, like how do you envision capital allocation trending between the businesses on the balance sheet?

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

Yes, I mean really with if you think about steepener right Lima One is still originating assets that have coupons north of 10%. So if you have steepener and the short end comes down maybe that coupon goes from ten to nine or to 8.5 or something like that. But the borrowing costs against those is also going to come down commensurate. Right now in securitization, you can get funding in the five handles, right? So if that front end were to come down, you would see that that cost of funds drop into probably the low fives, four handles.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

So it's still very sort of accretive to us to originate those loans. And when you look across non QM, it does benefit our existing portfolio and incremental loans will fund incrementally better, but I would expect those loan prices to be bid up more aggressively as the curve does deepen. So it may be a more competitive environment and may compress yields somewhat there.

Jason Stewart
Director - Mortgage Finance at Janney Montgomery Scott

Okay. And then thinking through the post steepener and I guess more specifically than on the agency, that be a strategy you deemphasize at that point in a flatter curve environment and redeploy that capital into Lima One and other strategies?

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

That's right. It really is we view these the current spread levels as opportunistic to deploy capital in Agency MBS. If those spreads were to come in, we would redeploy those assets and that portfolio into our other credit assets.

Jason Stewart
Director - Mortgage Finance at Janney Montgomery Scott

Okay. That's helpful. Thanks. And then just a follow-up from I think last quarter you had said something about $40,000,000 ish of discount on multi transitional. Just comparing quarter to quarter, would that compare to the I think you had $33.6 What's the right comparison to look at there quarter to quarter?

Michael Roper
Michael Roper
CFO at MFA Financial

Yes. So that number there is effectively the discount in terms of the mark on those assets. So I think it's $34,000,000 this quarter. But if you think about those transitional loans, they're very short duration. So they are much less sensitive to moves in market interest rates.

Michael Roper
Michael Roper
CFO at MFA Financial

So I think we sort of think about that discount there and as does a buyer of these loans as a credit discount effectively.

Jason Stewart
Director - Mortgage Finance at Janney Montgomery Scott

Okay, got you. So you've worked through the vast majority of that this quarter. I got you. Okay, thank you.

Michael Roper
Michael Roper
CFO at MFA Financial

So just to clarify that discount has declined from, I think it was 40 or 45 to about 35. So yes, we worked through a lot of it, but there's as I said in my prepared remarks, there's still some wood to chop over the next couple of quarters here.

Jason Stewart
Director - Mortgage Finance at Janney Montgomery Scott

Okay, understood. So it's 30, I got it left over. Understood. Thank you.

Operator

Thank you. Next question today is coming from Jason Weaver from Jones Trading. Your line is now live.

Jason Weaver
MD - Head Specialty Finance & Real Estate Research at Jones Trading

Hi, guys. Thanks for taking my question. Sort of similar to Steve's there, with the buildup at Lima One, can you comment on the sort of distribution potential for new transitional loans if we were to see a bit more relief in rates ahead? Whether you expect securitization financing or loan sales to become a more attractive option under that under those conditions?

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

So on that we've been selling the rental loans. So those are the term loans, right? And part of that reasoning is, when you originate 30,000,000 or $20,000,000 of those a month, it takes some time to get those ready to go into securitization. And taking on that spread risk for an extended period of time doesn't necessarily make sense when you have a bid on the other side that's very strong. So we have been taking advantage of that bid some of those loans to third parties.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

When you think about the shorter term transitional loans, pretty much all of those loans are would be eligible to go into securitizations. And those have a revolving structure in nature. So as we sort of do more loans, right, they're really replacing old loans that are paying off. So we have four deals outstanding currently. If we were to grow originations which we expect to do maybe you're taking from four deals to five or six outstanding.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

But you have to make sure that you have that volume in place to fill back the payoff that you're receiving on the other side. And in terms of the split, if you were to look at that breakdown, it's probably 45% to 50% ground up and then the rest being bridge and traditional fixed flip type loans.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

And Jason, I'd just add one thing. Thirty year rental product is obviously more rate sensitive than transitional loans. So lower short rates, steeper curve, it's likely that volume would pick up on that product.

Jason Weaver
MD - Head Specialty Finance & Real Estate Research at Jones Trading

Got it. Thank you. That's helpful. And I want to go back to in the prepared remarks, you mentioned the $24,000,000 in loan sales and you expect to do more in the second half. Talk about the relative merits there.

Jason Weaver
MD - Head Specialty Finance & Real Estate Research at Jones Trading

Is that a question of just coincidence you were able to find a buyer on that side or is that becoming actively more attractive than pursuing the entire sort of workout process?

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

Yes. It's just a balance, right? It's you're currently you're working out loans and you would test the market to see where those bids are. If the bids are attractive, we would look to move on. If the workout is the best outcome then we'll just work the loan out ourselves.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

So just a balance and we sort of look at every loan individually to determine what's the best outcome.

Jason Weaver
MD - Head Specialty Finance & Real Estate Research at Jones Trading

All right. Fair enough. Thanks again guys.

Michael Roper
Michael Roper
CFO at MFA Financial

Thanks Jason. Thank you.

Operator

Our next question is coming from Eric Hagen from BTIG. Your line is now live.

Eric Hagen
MD, BTIG Mortgage & Specialty Finance Analyst at BTIG

Hey, thanks. Good morning, guys. On the single family rental and single family transitional loans, do you think developers are getting the rental income and exit that they expected? Or is there a lot of range around that outcome because of the execution risk is higher with tariffs and other higher input costs and such?

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

In terms of the execution, right, a lot of our sort of development loans that we do are really they're built and flip to sell not necessarily rent. It's really the prices that they are achieving in the market sort of matching the ARV set out in the appraisal. So we're not really seeing a ton of pressure in regards to that as it relates to tariffs. Could it potentially impact things down line? Sure, but we have yet to see a material impact thus far and we sort of track these month to month.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

So we're not really seeing that. In terms of the if we do have rents, we've seen they've been able to cover future debt service because these loans really get refinanced away from us. So that's what we're seeing. I mean, we're that's what one would expect. We're not really seeing material pressure there either.

Eric Hagen
MD, BTIG Mortgage & Specialty Finance Analyst at BTIG

Yes. Okay. That's helpful. You guys break out the loan book by origination year which is really helpful. But which of the vintages would you maybe label as having higher relative risk versus lower risk just based on when they were originated?

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

Yes. I mean, for if you look at the say multifamily book, the '23 vintage was probably tougher for us. I mean, if you look at the other parts of the book, right, our LTVs are very low. So we're not really worried about losses there. And when you think about on the non QM side where we've seen some increased delinquencies, it's really again 95 times out of 100, we see delinquency, you see that property gets listed for sale and the borrower just sells it and we don't really even have to go through any loss mint activities.

Bryan Wulfsohn
Bryan Wulfsohn
President & Chief Investment Officer at MFA Financial

So the we're sort of we've been really vintage agnostic as it comes to those portfolios.

Eric Hagen
MD, BTIG Mortgage & Specialty Finance Analyst at BTIG

Okay. If I could sneak in one more, I mean, there a catalyst aside from lower interest rates, which could accelerate the call in the non QM portfolio, the callability?

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

I mean, it's really an algebra exercise, Eric. So it's pretty easy for us to do. So lower rate environment, yes theoretically there are more deals that would be callable. In addition with lower rates, our preferred Series C would be set to a lower coupon. So there's marginal benefits in a few different ways.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

If you look at the bulk of the floating rate borrowing, it's for the most part offset with swaps. So lower rate environment is not necessarily going to have a big impact there, but on the edges, lower rates are certainly helpful.

Michael Roper
Michael Roper
CFO at MFA Financial

And I think Eric just to add, there could be a deal with respect to the call rates that's maybe out of the money. But you think about the deleveraging embedded in some of those callable deals, it doesn't necessarily have to be a lower rate to reissue it to still increase the ROE of the portfolio. You're unlocking a lot of capital with the relever.

Eric Hagen
MD, BTIG Mortgage & Specialty Finance Analyst at BTIG

Yes. Got it. Thank you guys so much.

Michael Roper
Michael Roper
CFO at MFA Financial

Thanks, Thanks, Eric.

Operator

Thank you. We reached the end of our question and answer session. I'd to turn the floor back over for any further or closing comments.

Craig Knutson
Craig Knutson
CEO & Director at MFA Financial

Thank you everyone for your interest in MFA Financial. We look forward to speaking with you again in November when we announce our third quarter results.

Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Executives
    • Harold Schwartz
      Harold Schwartz
      Senior VP, General Counsel & Secretary
    • Craig Knutson
      Craig Knutson
      CEO & Director
    • Michael Roper
      Michael Roper
      CFO
    • Bryan Wulfsohn
      Bryan Wulfsohn
      President & Chief Investment Officer
Analysts
    • Bose George
      Managing Director at Keefe, Bruyette & Woods (KBW)
    • Steve Delaney
      Director of Mortgage at Citizens JMP Securities, LLC
    • Jason Stewart
      Director - Mortgage Finance at Janney Montgomery Scott
    • Jason Weaver
      MD - Head Specialty Finance & Real Estate Research at Jones Trading
    • Eric Hagen
      MD, BTIG Mortgage & Specialty Finance Analyst at BTIG
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