Risk Factors Update Summary

• Increased delinquencies in BPL bridge loans led to modifications totaling $295 million and maturity extensions on loans worth approximately $232 million in 2023.
• Elevated inflation led to higher benchmark interest rates, impacting earnings, loan volumes, and liquidity.
• Discussed risks associated with originating, transacting, and funding HEIs, including regulatory uncertainties and potential litigation.
• Added the completion of the first-ever HEI securitization to receive a rating from a ratings agency.
• Highlighted risks from adverse economic conditions, rising interest rates, and changes in U.S. monetary policy.
• Federal Reserve tightened monetary policy, increasing the federal funds rate numerous times due to rising inflation.
• Transition from SFR to BPL term loans could impact business. This shift involves significant value.
• Added the possibility of being subject to risk retention requirements internationally, unique from the U.S.
• Transitioning from LIBOR to SOFR or Ameribor may lead to significant increases in borrowing costs.
• Basel III Endgame proposal may reduce mortgage loan volumes and increase borrowing costs significantly.
• Seeking approval to service loans from Freddie Mac and Fannie Mae is crucial.
• Noted potential impacts on financial results from workforce reductions and workforce concerns.
• Mentioned ongoing litigation and an interlocutory appeal related to Student Loan ABS, indicating potential financial impact.
• Originating HEI exposes the company to new risks, including regulatory and compliance risks and potential recharacterization as mortgage loans.
• Disclosed the exploration of issuing "tokenized" digital securities and risks associated with it.
• Initiatives to form joint ventures with third-party investors may limit business options.
• Market value of securities portfolio declined significantly due to interest-rate volatility and economic factors, including the regional banking crisis.
• Increased conforming loan limits may have a material adverse effect on the residential business.
• Illiquidity in assets like real estate loans and HEI may impair the company's ability to satisfy obligations and impact financial results.
• Repurchased $193 million of outstanding debt securities in 2023, compared to $56 million in 2022.
• Changes in benchmarks like LIBOR to SOFR may adversely affect the value of financial instruments linked to those benchmarks.
• Issued $60 million of unsecured debt securities in early 2024, expanding capital sources.
• Increased interest rates may reduce property values, increase credit losses, and lower mortgage originations, impacting the company's opportunities to acquire new assets.
• Continued focus on HEI investments and securitizations, anticipating increasing consumer demand for HEIs.