Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the New York Mortgage Trust Third Quarter 2021 Results Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for questions.

[Operator Instructions] This conference is being recorded on Tuesday, November 2, 2021. A press release and supplemental financial presentation with New York Mortgage Trust third quarter 2021 results was released this morning. Both the press release and 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 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 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, at this time, I would like to introduce Steve Mumma, Chairman and CEO. Please go ahead, Steve..

Thank you, operator. Good morning everyone, and thank you for being on the call. Jason Serrano, our President, will be speaking to our investment portfolio. And Kristine Nario, our CFO, will be speaking in more detail about our financial results today.

We will all be speaking to our supplemental financial presentation that was released this morning and is available on our website. We will allow questions following conclusion of our presentation. The company continues to deliver solid results in the third quarter, with GAAP earnings per share of $0.10 and comprehensive earnings per share of $0.08.

However, the numbers of the quarter were negatively impacted by non-recurring one-time charges, including $3.4 million in expenses related to the early redemption of our 7.875% Series C preferred stock, which was refinanced into a 6.875% Series F preferred stock, lower cost of capital by 100 basis points.

Additionally, we called a 2020 residential securitization that resulted in the acceleration of $1.6 million of deferred debt issuance costs. The loan pools refinanced in August lowering our cost of debt by approximately 210 basis points. We expect to continue to raise the company's cost of funds with future structure transactions.

This trend will have a positive impact on our earnings going forward. Now turning to page six of the supplemental presentation. You'll see our investment portfolio totaled $3.3 billion and our market capitalization was $2.2 billion.

The portfolio was up approximately $100 million from our market capital -- with our market capitalization unchanged from the previous quarter. Our capital is currently allocated at 74% to single family and 20% to multi-family, with 6% in other assets, which is largely attributable to our liquidity position.

We continue to focus on credit investments, as we believe we can generate better risk adjusted returns with more stable funding. On slide seven, we highlight some of our key developments during the quarter. We declared a $0.10 common stock dividend. Our book value is $4.74 unchanged from the previous quarter.

And we generated a quarterly economic rate of return of 2.1%. As I said before, we'd be deemed our 2020-loan securitization for $204 million in July and issue $256 million in our 2021-loan securitization in August, lowering the average cost of funds by 210 basis points.

We also redeemed $105 million of our 7.875% Series C preferred stock and replaced it with $139 million of 6.875% Series F preferred stock, again lowering our cost of capital by 100 basis points. We continue to focus on longer term financing options to fund our growing business to help us navigate the ever changing financial landscape.

On slide nine, we cover key portfolio metrics on our quarter -- on a quarter-over-quarter comparison.

Our net interest margin for the third quarter was 3.25%, an increase of 28 basis points from the previous quarter, with our portfolio weighted average asset yield at 6.39%, an improvement of eight basis points and our funding costs improving by 20 basis points ending at 3.14%.

This was largely due to a refinancing of the 2021 securitization that I previously spoke about. Our leverage ratio remains low at three times -- at 0.3 times and our liquidity remains strong as we go into the fourth quarter. Now, I'd like to turn the presentation over to Kristine Nario, our CFO.

Kristine?.

Thank you, Steve. Good morning everyone, and thank you again for being on the call. In discussing the financial results for the quarter, I will be using some of the information from the quarterly comparative financial information section included in slides 23 to 30 of the supplemental presentation. Slide 10 summarizes our activity in the third quarter.

We acquired residential loans for $371 million funded multi-family joint venture and mezzanine lending investments for $53 million and $43 million respectively, and purchased $29 million of investment securities. We sold residential loans for proceeds totaling $50 million and non-agency RMBS and CMBS for proceeds totaling $133 million.

We also had total repayments of approximately $307 million, primarily from our residential loans that were purchased at a discount. We had net income of $37 million and comprehensive income of $31.5 million attributable to our common stockholders. Our book value ended up $4.74 unchanged from the previous quarter. Slide 11 details our financial results.

We had net interest income of $31 million relatively flat as compared to the previous quarter.

Our continued investment in higher yielding business purpose loans during the quarter contributed to the $1.7 million increase in single family interest income, offset by a $1.5 million decrease in multi-family interest income due to sales of CMBS early in the quarter and payoffs related to our mezzanine lending investments accounted for as loans.

Although, there was a decrease in mezzanine investments accounted for as loans, our mezzanine investments accounted for as equity increased during the period, contributing $6.2 million in preferred return during the quarter.

As these mezzanine lending investments qualified for a loan accounting treatment under GAAP, it would have contributed 39 basis points in net interest margin.

Interest expense on single family portfolio decreased by $0.6 million, primarily due to the completion of a new RPL strategy loan securitization in the third quarter, replacing a redeem 2020 RPL strategy securitization at a lower cost.

In addition, we recognize the full quarter impact of 58 basis points in interest costs savings related to our BPL securitization that closed in the latter part of the second quarter.

We had non-interest income of $49.4 million, mostly from net unrealized gains of $30.1 million due to continued improvement in pricing on our assets, particularly our residential loans and investment in consolidated SLST.

We also generated $8.3 million of net realized gains primarily from the sale of CMBS and non-agency RMBS and residential loan prepayment activity. In addition, as discussed earlier, our mezzanine investments accounted for as equity contributed $6.2 million of preferred return.

We also generated other income of $0.8 million, which is primarily related to $2.1 million of income recognized by an equity investment that invest in residential properties, partially offset by the $1.6 million of loss related to the redemption of a 2020 RPL strategies loan securitization for an amortized debt issuance costs remaining at the time of redemption.

Included in our results for the quarter is a net loss activity related to multi-family apartment properties in which the company has equity investments. Because of certain control provisions we consolidate these properties in our financial statements in accordance with GAAP.

We received variable distributions from these equity investments on a pro rata and management fees based upon property performance. We also participate in allocation of excess cash on sale of multi-family real estate assets. We pursue these investments for the potential participation in value appreciation of the underlying real estate.

These properties generated operating income of $4 million and incurred interest expense and operating expenses of $1.1 million and $8.5 million, respectively. After reflecting the share in the losses to the non-controlling interest of $0.4 million in total, these multi-family apartment properties incurred a net loss of $5.3 million for the quarter.

It should be noted that the net loss in these properties includes a $5.7 million of depreciation expense and amortization of lease and tangibles related to the real estate. We had total G&A expenses of $12.5 million relatively flat compared to the previous quarter.

We had portfolio operating expenses of $7 million, which increased primarily due to the growth of the business purpose loan portfolio. Jason will now go over the market and strategy update.

Jason?.

Thank you Kristine and good morning. I was speaking from page 13. While home price appreciation ease somewhat from a record, getting paid not much was accomplished to the current U.S. housing supply deficit.

With 5.5 million homes needed to meet short, midterm demand, only 1.2 million homes are now on the market for sale, which has over 1 million units short of the past 20 year average. Additionally, supply chain and labor constraints kept new home construction around 1 million units. With the demand continuing to outpace supply, we expect U.S.

housing credit risks remains range pass through 2020 as higher home prices are required to meet outside demand. Thus, we believe short-term lending for housing remodeling and fix and flip sector provides one of the best ways to the play the supply and demand and balance here.

Over the past year, we focused on ramping up at $753 million portfolio while maintaining strong credit characteristics.

Secondly, while more of a niche market, the scratches down sector is still an attractive space for us to spend our resources, given ability to buy new mortgage originations at a 6% discount on average the par, but nearly half $0.5 billion of loans purchase we are not provide -- we provide great flexibility to generate a double-digit return with the discounts this month.

Lastly, our origination effort in the multi-family sector provides tremendous value with new mezzanine loans and JV opportunities also at a double-digit return. With single family housing supply issues and higher population mobility trends, it's not the privacy of pickets rates [ph] to fall -- with 6% the national average.

The building a fundamental strength of the multi-family market is hard to ignore. And we have a strong pipeline take advantage of the strong finance year. Now going to page 14.

The key value proposition of NYMT is to find an approach where we can offer an efficient process supported by technology, to do more with originators or sell responses, any sectors.

Because of these relationships fostered over several years and proven capability, we can compete on more dimensions and just prices, which is a key aspect of our portfolio growth. In the quarter, we added $505 million of new investments. Growth was observed in all the core strategies.

In the BPL sector, we added new origination pipelines that will allow us to continue increasing assets on balance sheet. In the mortgage sector, originators are still trying to work off technical origination errors from 2020's record origination volume.

And with the multi-family lending tailored loans and JV solutions are meeting the needs of mid size multi-family sponsors in the South, Southeast of the U.S., as we now are processing record volumes for our pipelines. Going to page 15 on our debt structure.

On the funding side of the equation, we primarily focus on strategies that do not rely on short-term callable mark-to-market leverage to generate attractive returns.

To the extent that leverage is part of the strategy, we utilize term securitization markets, which helps significantly lower our mark-to-market repo balances by 90% since the end of 2019. Repo markets are in full swing. Availability is arguably greater than prior to the pandemic.

However, we believe running one of the lowest per foot REIT in the market now at 0.1 times, while still being able to deliver an attractive dividend provides excellent risk adjusted returns.

Furthermore, we can organically grow our balance sheet and dividends by simply reinvesting our cash on balance sheet and through utilization on the securitization market. Now moving to page 16, our single family overview.

As in prior quarters here, we show a cross section of our residential strategy that is now 74% of our capital allocation and predominantly in residential loans. The average LTV at 65% across all loan types, there's not a reporting error here.

Instead it shows the consistency across our investment platform to seek value without sacrificing quality across the market. We prefer to give up some yield with better loan characteristics for a more consistent total return profile over a multi-year period.

As I already discussed highlights of our strategies in the detail on scratch and dent space, I'd like to spend a moment to discuss the 851 million of loans on our balance sheet.

Related to RPL, we stopped pursuing RPL market about two years ago due to excess liquidity, that we're bidding -- that we were bidding into, which priced out investors were calling it a double-digit return without taking on some kind of risky market based modeling assumptions.

However, our portfolio continues to benefit from strong returns and it books that can't be replicated in this environment. We invested this space in two forms, through RPLs and through the SLST transaction shown at the bottom under securities. SLST was a portfolio of RPL and sold by Freddie Mac that contained at staples 10-year financing.

HPA allow these securities, the securitization purchased back in 2019 to delever at a faster rate, providing considerable downside protection, and now upside optionality with respect to a potential vehicle, strong credit performance supports further potential for book value upside with respect to our issue to securitization.

On page 17, starting with the right side of this page. 66% of the RPL loans are now current, which accelerated price accretion from $89 purchase price to now $97. With this result, we can now pull these loans into a rated securitization providing attracted forward monthly return in the high teens against a 65% LTV loan pool.

Also our scratch and dent loan portfolio consistently printed above a 30% CPR, which is a similar trend to general agency originations. We believe similar prepayment trends to our scratch and dent book demonstrates the quality of loans we're buying in scratch and dent market and the technical nature of the defects created a ton of origination.

We are well compensated here, as the average price discounted of our prepaid loans is five to seven points below par. The quick recapture this discount is why we continue to focus on this market. Now shifting over to the left side of this page 17, the story is straightforward.

We continue to add our details in scratch and dent portfolio and are pleased that our loss rate on both sectors is 0% since we've launched these strategies a few years ago. With larger portfolios, the securitization market is supportive of our field book.

After redeeming a privacy issue securitization, we were able to reissue another deal in the market last quarter, tighter [ph] financing costs in the unrated space, allowing us to save 210 basis points for the coupon. With our growing residential loan pipeline, we expect to become a more frequent issuer in the securitization market.

We are simultaneously working on a few deals at the moment. Look forward to sharing more about this execution soon Turning to page 18 on the BPL market. Our BPL portfolio is now $753 million with just over 1,700 loans on balance sheet.

Despite a material increase to market competition over the past few years, we have been able to maintain our yield in this sector with an average coupon of over 9%, the strong credit experience borrowers that focus on low cost, quick turnaround we have projects.

Much like our HELOC, there are a lot of moving parts, operational activities, such as draw schedules, interim cash activity, payoff requests. Because of our dedicated operations team that manages the loans from boarding to payoff, we offer added value supports where origination partners in this space by helping with the asset management process here.

Again, we can win business here on another dimension, other than market price. Turning to page 19 on our multi-family overview. Our multi-family book of mezzanine lending and JV opportunities is now 20% of our capital.

As mentioned earlier, we have focused on lending to 150 to 300 unit garden-style low rise properties in secondary and tertiary markets with past eight years.

With no losses on any investment made here to date, our deep credit underwriting of the market, property and sponsors create an opportunity to provide funding solutions across multi-family capital structure. With these solutions, we worked to creatively structure a deal that meets sponsor's needs as well as ours.

With the vast experience and strong reputation in this market, we are a preferred partner and expect to materially grow this business in the near term by closely work -- by working closely with the relationships fostered over several years.

On page 20, our credit characteristics and coupons have been consistent for many years in the sector and has -- and so has performance. But the geographic footprint in the South, Southeast United States, occupancy rates remain high, supported by population shifts favoring these regions.

Due to higher property valuations, we have seen an increase to loan payoff requests in our portfolio. Our loans are structured with minimum return rules for additional income in these cases. In the last quarter, $60 million paid off at a 12.16% lifetime IRR or 100 basis points above the contractual coupon.

In summary on page 21, we offer our investors a diversified strategy that takes advantages of our opportunities across the residential market and cap structure. With this focus on preserving book value, we can efficiently move in and move out of markets when this proposition changes.

We're excited about our ability to provide attractive risk adjusted returns for our investors with minimal portfolio leverage. With that, I'll pass it back to Steve. Thank you..

Thank you, Jason and Kristine.

Operator, could you please open it up for questions?.

Thank you. [Operator Instructions] Our first question comes from the line of Bose George from KBW. Your line is open..

Hey, everyone. Good morning..

Good morning, Bose..

I wanted to ask about the BPL space, we've seen a lot of acquisitions in this space and, you've noticed historically you didn't really want to do that. Just curious of the activity in the space as it has intensified the competition and changed anything in terms of returns or how you source lump..

Yeah. So, we have seen a number of those deals on our plate and had evaluated most of all of them that's been out there. We're finding that we can win business here through our operational platform, which I described earlier, as well as relationships at least developed back in 2019.

And the fact that we were kind of an early entry back into the market in 2020, that helps support us in these originators when there are originating loans. So, with that experience in the background, we were able to contain and maintain our pipeline. We are evaluating other platforms.

And we really look to move into this market through kind of an operation light type of model in that -- and this is the market that -- and that we believe over time will generally trend to an investor loan product, which is -- was typically called DSCR loans, which is a more of a 30-year term market versus the when you're a bridge loan.

So, there's a transition that I think the market will start seeing over the course of the next year. And therefore, we're looking for ways to play that transition more so than just staying within the BPL sector..

Okay. No, that make sense.

And then, can you just remind me, what are -- you have that are repo funded, is there room to take the repo down further?.

Yeah. We are working on securitization in the space, which would take one of our largest lines we have today, down roughly 80%. So, the securitization that we're looking to complete, it will remove and reduce our current repo, that's minimal our balance sheet today, but it will further reduce it, based on those realizations.

So, hopefully we were able to talk more about that next quarter..

Okay. Great. Thanks..

Your next question comes from the line of Stephen Laws from Raymond James. Your line is open..

Hi. Good morning. It's sort of a follow-up, I think to Bose, but you guys have made a lot of progress in the quarter on reducing financing costs both on the securitization, as well as the lower cost preferred. And I think that probably really kicks into earnings here in the coming quarters.

Is that largely the accomplished mainly what you can do there? Or is there more opportunities here to keep pushing down the cost of capital on the overall portfolio financing costs?.

Jason, why don’t you take that?.

Yeah. So, with respect to the loan pools, we -- the securitizations we're considering we would lower our overall financing costs. The market -- when we entered last quarter for that upgrade, unrated SPL transaction was the lowest financing cost. The market has seen at 187 basis points. The market is a bit wider today than that point.

We still see in the space roughly -- the market's at about 75 and 100 basis points higher, but that's still competitive to kind of repo cost out there. And advance rates are roughly the same. So, our goal is to continue to reduce our repo exposure, which would lower our financing costs as well as on a corporate basis.

And we do have a prof that is callable, and that is something we are looking at as well. So, there's some opportunity on our corporate balance sheet as well for our interest costs that can help lower the cost of capital across our balance sheet..

Great. Thanks, Jason. And Kristine, appreciate the comments around the REO, or the real estate -- operating real estate that you provided, and I may have been writing the numbers down, so apologies I missed this.

But I think you said it was a $5.3 million loss before reflecting the creation, but can you give -- did you provide an outlook or how we should think about that maybe over the next 12 months as we look out, for me there are improvements there, or those assets you look to exit?.

Well, the $5.3 million is the net loss, as you indicated, but note that majority of that loss has really related to depreciation expense and amortization of lease intangibles related to that real estate. In terms of the outlook, I mean, the way we look at these investments, it's really -- we pursue these for value appreciation.

And so really the exit upon sale is when we get the benefit of a gain on that. So that's how we kind of look at this investment, but in terms of estimate for the year, I don't have that in front of me. And I could get back to, if you'd like..

That's fine..

Yeah. Steve, I think when we -- so because of kind of the requirements, we consolidate these, we still look at all these investors at what our actual net dollar investment is in these properties.

And so, we evaluate them more on a net basis as opposed to a gross basis and that gross basis, as Kristine mentioned, generates a lot of depreciation expense. So, there's going to be a negative component in our earnings going forward.

That's going to be related to these properties, which we will spend as that grows in size because we are increasing our pace in our JV investing.

And to the extent that we fall into the control category for accounting, we're going to have to consolidate with we'll then put the additional expense pressure on the P&L, but it doesn't really put any pressure back to the company from an actual cash flow standpoint.

So, we will continue going forward to spend more time disclosing that information and describing it and how it actually impacts the actual earnings in the company. But for this quarter, it was $5.3 million on 377 million shares. So a little over a penny of share drag on the actual earnings..

Great. Appreciate the color there, Steve. And lastly, just to touch on the BPL, no leverage on those assets.

If you looked at something like a CLO where you could have a replenishment period that that helps offset the shorter duration of those loans, are there other types of structures where you would consider adding some financing? Are you really just happy running that BPL portfolio with no leverage for the foreseeable future?.

Yeah. So, we actually do have leveraging on our BPL loans. We did a securitization in this year, that is a revolving structure. So it allows us to replenish the loans as a payoff, and that's -- financing balance around $180 million that we have related to that securitization.

So -- yeah, that's a deal that we've been utilizing and with new investments and payoffs coming in, we're continuing to add back to that securitization..

Great. Appreciate the correction there. Thanks, Jason..

No worries..

Your next question comes from the line of Doug Harter from Credit Suisse. Your line is open..

Thanks. As you guys execute on the securitization and take down the repo substantially, how do you think about kind of replenishing that? Do you think -- you have the ability to kind of grow the asset base as you do that and kind of ramp the repo line back up, or just kind of thought around that..

Yeah. What's interesting is that the balance that we're looking to do is an asset class that is -- that we were no longer active in at the moment due to pricing, which is the RPL space. So, we're looking at a rated securitization in the RPL space, which would reduce our repo balance there.

But there would not be the punishment in that current concept because that strategies is something we've moved on from repo pricing, correct back to -- interesting place for us.

But what we're going to be doing -- and basically looking at the RPL and scrap and dent market and potentially even DSCR loans as a way of growing our loan, our residential loan book. And in this case, we'd be taking loans from our RPL, repo account and pausing those loans in a a rated securitization. So as a matter of fact, our cash would be minimal.

But that is not something we're looking to replace..

Those two kind of asset classes where you're looking to grow, kind of have given you a nice returns, but kind of the opposite seems that they seem to be very short duration.

It's just -- can you talk about your ability or your confidence to be able to grow those short duration assets?.

Yeah. We have a number of regime partners that -- are there in the market that we've been bounced from. And we think we could do more with those partners that we've been working with and have strategies with them to increase our portfolio pipeline, which is really starting to show itself in the fourth quarter.

But there are scenarios we're looking at to lock up pipelines in the space, and to reduce the variability with respect to our pipelines in this market. The market is a great market and you're right to point out that it is a shorter duration from a reinvestment of that cash that comes back on an annual basis, becomes challenging.

We believe the market will end up with kind of pushing into a longer duration type of market for these types of loans. In previous years, the fix and flip market was a contractor that sold the home and therefore paid off the loan.

From some of the pipelines, we're seeing 40%, if not more of the loans are now going into a rated -- started going into a three-year term refinance of their fix and flip loan versus selling the home and be came off, that we think there's ways to take advantage of that, but particularly with our own portfolio and we captured up our back for a longer duration loan.

So, those are the types of things we're going to be looking at and have been looking at the last six months, if not longer. And we think we could be executing something that's space shortly, which would add duration to our portfolio and reduce the reinvestment -- timelines that we currently are facing..

And then just to follow up on that, can you just talk about how the yields might change as you go from kind of the shorter duration fix and flip to kind of a longer term longer term asset?.

Yeah. So the yield that were -- the coupons are actually hiring it on a short dated fix and flip loans than what we're seeing, obviously in the third year kind of DSCR investor loans. But I would argue that the securitization market acceptance of those loans is probably the greatest out of all the markets that we're at.

So, execution that we're seeing in this space is excellent for these types of loans, taking out four and a half, 5% loan and a full drop into securitization or hesitancy in this space is simply bad in the fact that, you don't want to build a book here and not have enough size to excavate the securitization and holding the repo for a long period of time.

So, therefore we have not entered the space until we feel confident that we can originate or buy enough loans to actually a securitization with a short time period. We're getting more comfortable with the pipelines that we're working on right now.

And that's something that we're going to evaluate in the quarter, but to the extent that that happens, we would be able to kind of move into securitization space there and unlock value with respect to our current portfolio of the detail loans that are refinancing as well as the loans that we're seeing that are available to us, that we have not moved on, because of the risk of being able to accumulate enough loans for securitization.

So, we feel that, at the moment that there's enough loans there, with the kind of quality that we're looking for to execute a securitization in that case, we we'd look to move into that phase..

Very helpful. Thank you..

Your next question comes from the line of Eric Hagen from BTIG. Your line is open..

Hey, good morning. A couple of questions here. So, from the perspective of an equity investor with assets -- am I coming to you [ph]..

Yes..

Yes..

Yeah..

Yeah. So from the perspective of an equity investor with assets, feeling like they're maybe more or less priced for very low credit losses already, what would you say is the upside in the scratch and dent and reperforming loan opportunity.

And then the second question is in the commercial mez loans, what's your risk attachment point, or how much credit subordination do you have in those loans? The same question effectively applies to the preferred equity, like how much credit cushion has beneath your preferred lessen those investments..

Yeah. So with respect to the RPL and scratch and dent loans, I guess your question is what is the upside meaning in that portfolio given credit losses? Is that the question? Yeah.

So, that's a portfolio on scratch and dent side where given the size, we could look to rate securitization for those types of loans, but as we wait, and looking out those loans are very lightly levered, we're experiencing about a 30% CPR rate on our portfolio.

Part of it has been seen that that book in securitization is simply the fact that the durations have shortened on that portfolio, given the refinance activity and being able to pick up the six points a discount over the last six months has been something that we'd rather do outside of securitization therefore, you wouldn't benefit from the longer duration term get outstanding for your equity return.

So, there's still upside there. And that we own those loans on our balance sheet and we still refinance rate where the CPR rate activity, we'll continue to finance at a high rate, to the extent that, we're -- we can move a portion of going into securitization.

We believe that the equity returns on that the pool will -- given the coupon of those loans can generate a double-digit return to securitization. So that's really the timing for us we make that decision or potentially sell loans in a portfolio sale to generate kind of an equity return on those bonds.

And on BPL -- sorry our RPL, that's a market where at this point it's mature for us.

The loans have been -- we value higher given the two-thirds of the portfolio is current on their payments from where we bought those loans, almost double and as well as the fact that the FICO scores continue to improve, the borrower's credit continues to improve and the LTVs are in the 65% range today, which is a very strong portfolio for securitization, and would be one of the kind of lower LTV RPL securitizations done in the market.

So, we feel pretty good about the ability to finance those loans to securitization, and we believe that the equity return upon securitization of those loans is double-digit. So, the point there is to add leverage through securitization market to earn out the return of those loans over the course of the remaining life.

And then -- and multi-family, if you turn to page 19, the average LTV that we originate to is -- it is about 80%. And for JV equities in 82% range, so our credit subordination, there would be the 20% of -- in the cap structure. It's the extent that we are -- in providing the mez loan with them.

With a half percent coupon, at 1.74 DRCR levels feel that's a very attractive level, again, have not received, have not incurred at a dollar of loss in this portfolio since the beginning of last six, seven years origination of these types of loans.

And we're -- today, we're seeing a -- one of the largest increases to pipeline activity in the quarter now that we've seen in the history of the company.

We're seeing a lot of opportunity where investors are coming into the South, Southeast United States look and take advantage of the rent rate increases out, and then pushing that market, given the mobility of tenants moving to those markets, and taking out a mez loan or JV with us is something that is becoming more attractive, given our footprint in that market and understanding of those assets in that market.

So, we're very busy and we look to continue to grow that part of the book substantially over the quarter..

Okay. Thank you..

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

Steve, given the prospect of fed paper and fed tightenings in 2022, how do you think the impact to scratch and dent and BPL markets?.

Jason, do you want to take, or you want me to?.

Yeah. I'll take it. So, the first impact that we'll see is on the securitization market. And then obviously, one of the things that we're seeing is a flattening of the curve and flattening of the curve typically is a negative for securitization financing and for repo financing as well.

While we don't utilize repo financing the market does in whole, and the effect that it was that, you can't efficiently finance your assets as well as you did prior with a flattening of the curve.

In that case, we have -- part of the reason we're not as aggressive in this space as other market participants is simply because we are looking for better price points on this market. And do expect that the efficiency of the repo markets will cause prices to come down from where they are today and in our various parts.

So, we see just basically over excess liquidity in the market and various aspects of the market to take within the RPL market, which has recently not a lot of player there today.

And that can come back to us in a positive way with respect to pricing, if the curve continues to flatten and there's more opportunity for us to buy loans at a cheaper dollar value than what's currently offered today.

So, we see it as more of an opportunity than a risk given our cash and low leverage in this space, and ability to kind of step into this market at cheaper valuation in the future..

So, in that case, where would you think to take leverage up in the event that you do have an opportunity to buy assets in a more attractive price point?.

Yeah. The leverage would be more -- would be outside of the repo markets. And because we're not using repo, a mark participant would -- could generate a better short-term leverage return on that asset.

To the extent that repo markets pull back and to the extent that the curve flattens, then there's an opportunity for us to kind of step into cheaper valuations. And we would look to use our current non-market financial facility for the securitization for those losses. To the extent that we are -- we've made a large pool.

We could -- we would use a repo line as a gestation period to then securitize, but that would be honest, short term basis. And I don't believe it would be material impacts or current leverage, so that would be how we would use it..

Great. Thank you..

Sure..

Your next question comes from the line of Jason Stewart from JonesTrading. Your line is open..

Thanks. Good morning. Maybe you could talk a little bit about how you evaluate the whole loan bid and RPL versus doing a securitization and maybe whether -- how that sort of logic and thought process might change as you consider redeploying the capital into other areas in like the multi-family mez sector..

Yeah. The bids has been very strong on the RPL space. There's also a lower or lack of supply available to be purchased [technical difficulty] cut their supply, which is a big funding, a big supply source for the market as well. Banks haven't been as active in the past as well. So, the supply that is out there, it's all good.

And we've seen a run-up in pricing and -- in areas where really the buyer is an unlevered buyer at this point where it would not be -- more of an insurance company type of bid versus a rebate, because it's pretty generated double your return based on loans in that space.

So, over time, we believe that market will like knock and to be better opportunity for us to look back into that space. Yeah, absolutely. There are opportunity in the multi-family space. We were -- as I said earlier, we have record kind of setting pipelines in that area.

And given the conservative underwriting and the sponsors that we've been working with for over seven years in this space, there is opportunity for us to look at kind of portfolio opportunities in this space in the South and as well as single opportunity, which is what we've been doing for the past seven years.

We think we can grow our portfolio through some cross-collaboration opportunities as well as single deal. So, we actually do expect that the capitalization percent of our book to be allocated more heavily towards multi-family space for the next quarter..

Thanks for that.

I guess my question is more so, is there an opportunity for you to hit that whole on bid instead of resecuritizing and then redeploy that capital?.

Hitting the hole on bid that's available in the market today, we just don't see it. Yeah. We don't see it as an attractive opportunity. The types of scenarios you have to run to generate that return, you have to extrapolate a lot of the positive aspects of the housing market today for a long period of time we're not comfortable with.

So, we just don't see an opportunity to consistently generate a double-digit return that at the cross without a short-term price volatility. And we're very focused on protecting our book value here in this market. So, we just -- we're kind of a past today on that asset class.

Even though, to your point, you could potentially take a whole pool down and securitize it immediately and earn that NIM over that securitization. Today, we just don't see double-digit return by pursuing that even if you just wouldn't take a tool and securitizing it in the same day which is not awful, but that we just don't see we return there..

Okay. Okay. Fair enough. And then in the multi-family side, maybe you could talk about the types of projects that you're seeing a little bit more of marginal competition for and where you see the sweet spot of me. You mentioned secondary and tertiary markets in the Southeast.

Does size play a part in that? Is it geography? I mean, where do you see the sweet spot for where you're deploying capital in terms of project specific characteristics..

Yeah. So, if you look at page 20 of our multi-family section, it's kind of gives state breakdown of where we are. And what about this market here is that, we have -- we tried to stay in front of where the migration is going. For example, Nashville was a hot market for us a couple of years ago.

And we've transferred and moved on to marketplace Chattanooga outside of Nashville and Texas, Florida, and kind of the Southeast part of United States has been a very exciting opportunity for us in that market.

As it relates to new market entrance moving in and taking down collateral, taking on pools, this staple financing you can get from Freddie Mac tenure financing is very attractive in 3% range on tenure financing.

So, there's still an opportunity there to -- for sponsors to lever these low-rise projects and today, we offer measure JV financing and in some ways that is looked at as an alternative to kind of equity contribution.

And there are -- especially with on the JV side, but there's opportunities for us to earn fees on other parts of the business outside of just a collection of interest, which we're evaluating and pursuing. So, operating more as a partner to the sponsor versus just a lender is something we've been evaluating and in pursuing as well.

But the markets, in general -- I mean, the markets like Austin, Texas is obviously been extremely a hot market, lots of appraisal increase there, lots of growth rates and increasing rental rates. And we're seeing a lot of our booking refinanced out of that that market, the gains in economy critical side.

But we're in the sub -- not only are we in the tertiary market there, but also in asset classes that are Class B plus transitional type of assets, that either have some type of management overhaul that could add value to the property or some kind of deferred maintenance project that needs to be instituted in our capital helps with the deferred maintenance projects that they're looking to complete.

So, that's where we kind of find our sweet spots in these markets..

Great. And that's helpful. Thank you..

Your last question comes from the line of Matthew Howlett from B. Riley. Your line is open..

Thanks guys. Thanks for taking my question. Just to two questions on the funding. Did you say you had an unsecured debt that was callable here, was that the convertible or upcoming, will be callable sometime in the future? And then two on the securitization.

Are you now a critical mass where you've got to start issuing off your own shelf? Is it you're big enough now to start issuing under the full name, do you think that will improve funding costs over time versus selling it into a conduit?.

Yeah. Matt, we've issued off our own shelf and we continue as rough round shelf posts in the BPL space and the RPL space. I'll let Jason go into further that. But as it relates to callable side, we have a callable puffer. That's still outstanding with a seven and three quarter coupon.

We have a five-year convertible debt instrument issued by the company that's going to mature in January of 2022. So, there'll be some change over in capital structure, if there's opportunities there. But I'll let Jason speak further the securitization. Sorry, Jason..

Yeah. So on the securitization side, we do have a shelf out that we've been issuing deals out of NYMT, shelf with different ticker names relating to the asset class. And so, we're able to do this ourselves, and the company has been able to issue through their own shelves for a number of years.

So, we typically don't sell into a conduit deal in this space..

Got it. Okay. So the name's out there, you have your own shelf. Gotcha. And I guess, the final question on -- when we all know you recognize the balance sheet, it's got a lot of room to grow here. What -- for a model purposes and we sort of, I look at it $4 billion or $5 billion marketing investment portfolio.

What's -- what can you tell us in terms of how to think about the cadence for growth of that investment portfolio over the next 12 months?.

I think over the next 12 months, certainly we have plenty of room to grow the balance sheet without adding additional capital. I mean, we've said before, we're sitting at $3.3 billion. We certainly have room to go to $4 billion, pretty easily from a capital standpoint. We've had tremendous asset purchase success this year.

We've just seen a huge amount of prepayments coming from a lot of asset classes. That's -- and so it's been difficult growing that portfolio. We are working on some transactions, hopefully that we could talk about in our fourth quarter call that should accelerate some of the pipeline opportunities. Jason, go ahead to..

Yeah. I think you've covered it. I mean, we put $505 million out in the third quarter.

We do expect to meet those type of numbers, given our pipelines, the refinancing activity wall from a total capital growth is -- and obviously it growth capital, but it does come with respect to either prepayment with a discount on a scratch and dent or multi-family prepayments that have a dual maintenance kind of clauses, appeal on a discount as well.

So, in our space, prepayments generally are positive aspect to return. And that's our design. Some of the asset classes we're considering, we'll have a longer duration kind of hold period on those loans, which would allow growth to be become more regular in this space.

And through securitization executions is kind of looking at the -- distributions as a form of the investment versus a discounted asset held on a balance sheet, that is lightly levered. So those are the types of opportunities we're looking at.

But to Steve's point earlier, we do have pipelines that multi-family that are there is truly strong and there was a number of pipeline strategies that we've talked to some irrigation partners on the detail side and BSL side that we are very excited about. And hopefully we can talk more about that in the first quarter of next year..

That's a good way to think about it. And the excess capital position in the company is one in which the portfolio could easily meet or exceed $4 billion..

That's correct. Absolutely. That's correct. Yeah, go ahead, Jason..

Yeah. No. We're excited about here is that we can increase our EPS by deploying more cash on the balance sheet and taking some levered asset class we have and moving those into securitization, which is what the RPL deals I described earlier.

Those are put in -- my notes earlier, those are kind of organic growth opportunities where we don't depend on third-party capital, and simply just by pursuing the deals that we just talked about in our fourth quarter. So, from our standpoint, we can control the growth here without needing a -- kind of third-party or a capital market event for us..

Great. Terrific. Thanks a lot..

There are no questions at this time. I would not like to turn the call back over to Mr. Steve Mumma for any closing remarks..

Thank you operator, and thank you everyone for being on the call. We all look forward to speaking about the fourth quarter and our year in 2021. Thanks everyone. Be safe..

This concludes today's conference call. You may now disconnect. Thank you for participating..