FORWARD-LOOKING INFORMATION



The Company makes forward-looking statements herein and will make
forward-looking statements in future filings with the Securities and Exchange
Commission (the "SEC"), press releases or other written or oral communications
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). For these statements, the Company claims the
protections of the safe harbor for forward-looking statements contained in such
sections. Forward-looking statements are subject to substantial risks and
uncertainties, many of which are difficult to predict and are generally beyond
the Company's control. In particular, it is difficult to fully assess the
ongoing impact of the COVID-19 pandemic on the United States economy, the
mortgage finance markets and the broader financial markets. There is still
uncertainty around the severity and duration of the pandemic domestically and
internationally, as well as uncertainty around the efficacy of Federal, State
and local governments' efforts to contain the spread of COVID-19 and respond to
its direct and indirect impacts on many aspects of Americans' lives and economic
activity.

These forward-looking statements include information about possible or assumed
future results of the Company's business, financial condition, liquidity,
results of operations, plans and objectives. When the Company uses the words
"believe," "expect," "anticipate," "estimate," "plan," "continue," "intend,"
"should," "may" or similar expressions, the Company intends to identify
forward-looking statements. Statements regarding the following subjects, among
others, may be forward-looking: market trends in the Company's industry,
interest rates, real estate values, the debt securities markets, the U.S.
housing and the U.S. and foreign commercial real estate markets or the general
economy or the market for residential and/or commercial mortgage loans; the
Company's business and investment strategy; the Company's projected operating
results; changes in interest rates and the market value of the Company's target
assets; credit risks; servicing-related risks, including those associated with
foreclosure and liquidation; the state of the U.S. and to a lesser extent,
international economy generally or in specific geographic regions; economic
trends and economic recoveries; the Company's ability to obtain and maintain
financing arrangements, including under the Company's repurchase agreements, a
form of secured financing, and securitizations; the current potential return
dynamics available in residential mortgage-backed securities ("RMBS"), and
commercial mortgage-backed securities ("CMBS" and collectively with RMBS,
"MBS"); the level of government involvement in the U.S. mortgage market; the
anticipated default rates on CMBS and Commercial Loans; the loss severity on
Non-Agency MBS; the general volatility of the securities markets in which the
Company participates; changes in the value of the Company's assets; the
Company's expected portfolio of assets; the Company's expected investment and
underwriting process; interest rate mismatches between the Company's target
assets and any borrowings used to fund such assets; changes in prepayment rates
on the Company's target assets; effects of hedging instruments on the Company's
target assets; rates of default or decreased recovery rates on the Company's
target assets; the degree to which the Company's hedging strategies may or may
not protect the Company from interest rate volatility; the impact of and changes
in governmental regulations, tax law and rates, accounting guidance and similar
matters; the Company's ability to maintain the Company's qualification as a real
estate investment trust for U.S. federal income tax purposes; the Company's
ability to maintain its exemption from registration under the Investment Company
Act of 1940, as amended (the "1940 Act"); the availability of opportunities to
acquire Agency RMBS, Non-Agency RMBS, CMBS, Residential and Commercial Whole
Loans, Residential and Commercial Bridge Loans and other mortgage assets; the
availability of qualified personnel; estimates relating to the Company's ability
to make distributions to its stockholders in the future; the Company's
understanding of its competition; the uncertainty and economic impact of
pandemics, epidemics or other public health emergencies, such as the ongoing
outbreak of COVID-19; and the Manager's expectations regarding COVID-19
recovery.

The forward-looking statements are based on the Company's beliefs, assumptions
and expectations of its future performance, taking into account all information
currently available to it.  Forward-looking statements are not predictions of
future events.  These beliefs, assumptions and expectations can change as a
result of many possible events or factors, not all of which are known to the
Company.  Some of these factors, are described in "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" herein and in the Company's Annual Report on Form 10-K for the year
ended December 31, 2021, filed with the SEC on March 8, 2022. These and other
risks, uncertainties and factors, including those described in the annual,
quarterly and current reports that the Company files with the SEC, could cause
its actual results to differ materially from those included in any
forward-looking statements the Company makes.  All forward-looking statements
speak only as of the date they are made.  New risks and uncertainties arise over
time and it is not possible to predict those events or how they may affect the
Company.  Except as required by law, the Company is not obligated to, and does
not intend to, update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
                                       44

--------------------------------------------------------------------------------


  Table of Contents




Overview

Western Asset Mortgage Capital Corporation, a Delaware corporation, and its
subsidiaries (the "Company" unless otherwise indicated or except where the
context otherwise requires "we," "us" or "our") commenced operations in
May 2012, focused on investing in, financing and managing a portfolio of real
estate related securities, Whole Loans and other financial assets, which we
collectively refer to as our target assets.  We are externally managed by
Western Asset Management Company, LLC (our "Manager") pursuant to the terms of a
management agreement. We conduct our operations to qualify and be taxed as a
real estate investment trust, or REIT, for U.S. federal income tax purposes.
Accordingly, we generally will not be subject to U.S. federal income taxes on
our taxable income that we distribute currently to our stockholders as long as
we maintain our intended qualification as a REIT. However, certain activities
that we may perform may cause us to earn income which will not be qualifying
income for REIT purposes. We have designated a subsidiary as a taxable REIT
subsidiary, or TRS, to engage in such activities. We also intend to operate our
business in a manner that permits us to maintain our exemption from registration
under the 1940 Act. Our common stock is traded on the New York Stock Exchange,
or the NYSE, under the symbol "WMC."

  Our objective is to provide attractive risk adjusted returns to our
stockholders primarily through an attractive dividend, which we intend to
support with sustainable distributable earnings (which we previously referred to
as core earnings), as well as the potential for higher returns through capital
appreciation. Our investment strategy is based on our Manager's perspective of
which mix of our target assets it believes provides us with the best risk-reward
opportunities at any given time. We also deploy leverage as part of our
investment strategy to increase potential returns.

Our Investment Strategy



Our Manager's investment philosophy, which developed from a singular focus in
fixed-income asset management over a variety of credit cycles and conditions, is
to provide clients with a long-term value-oriented portfolio. We benefit from
the breadth and depth of our Manager's overall investment philosophy, which
focuses on a macroeconomic analysis as well as an in-depth analysis of
individual assets and their relative value. In making investment decisions on
our behalf, our Manager seeks to identify assets across the broad mortgage
universe with attractive risk adjusted returns, which incorporates its view on
the outlook for the mortgage markets, including relative valuation, supply and
demand trends, the level of interest rates, the shape of the yield curve,
prepayment rates, financing and liquidity, residential real estate prices,
delinquencies, default rates, recovery of various segments of the economy and
vintage of collateral, subject to maintaining our REIT qualification and our
exemption from registration under the 1940 Act.

In December 2021, we announced that our investment strategy will focus on
residential real estate-related investments, including but not limited to
non-qualified mortgage loans, Non-Agency RMBS, and other related investments. We
believe this focus will allow us to address attractive market opportunities
while maintaining alignment with our Manager's core competencies. The portfolio
transition is expected to be accomplished over the next 15 months. We plan to
transition out of the commercial investments in our portfolio, though we may
from time to time make commercial investments on an opportunistic basis.

Our Target Assets



 Residential Whole Loans. - Residential Whole Loans are mortgages secured by
single family residences held directly by us or through consolidated trusts with
us holding the beneficial interest in the trusts. Our Residential Whole Loans
are mainly adjustable rate mortgages that do not qualify for the Consumer
Finance Protection Bureau's (or CFPB) safe harbor provision for "qualified
mortgages" ("Non-QM mortgages"). Our Manager's review, relating to Non-QM
mortgages, includes an analysis of the loan originator's procedures and
documentation for compliance with Ability to Repay requirements. As discussed in
Note 7 "Financing," we have and may continue to securitize Whole Loan interests,
selling more senior interests in the pool of loans and retaining residual
portions. The characteristics of our Residential Whole Loans may vary going
forward.

Non-Agency RMBS. - RMBS that are not guaranteed by a U.S. Government agency or
U.S. Government-sponsored entity. The mortgage loan collateral for Non-Agency
RMBS consists of residential mortgage loans that do not generally conform to
underwriting guidelines issued by a U.S. Government agency or U.S.
Government-sponsored entity due to certain factors, including mortgage balances
in excess of Agency underwriting guidelines, borrower characteristics, loan
characteristics and/or level of documentation, and therefore are not issued or
guaranteed by a U.S. Government agency or U.S. Government-
                                       45

--------------------------------------------------------------------------------

Table of Contents





sponsored entity. The mortgage loan collateral may be classified as subprime,
Alternative-A or prime depending on the borrower's credit rating and the
underlying level of documentation. Non-Agency RMBS collateral may also include
reperforming loans, which are conventional mortgage loans that were current at
the time of the securitization, but had been delinquent in the past. Non-Agency
RMBS may be secured by fixed-rate mortgages, adjustable-rate mortgages or hybrid
adjustable-rate mortgages.

Agency RMBS. - Agency RMBS, which are RMBS for which the principal and interest
payments are guaranteed by a U.S. Government agency, such as the Government
National Mortgage Association ("GNMA" or "Ginnie Mae"), or a U.S.
Government-sponsored entity ("GSE"), such as the Federal National Mortgage
Association ("FNMA" or "Fannie Mae") or the Federal Home Loan Mortgage
Corporation ("FHLMC" or "Freddie Mac").  The Agency RMBS we acquire can be
secured by fixed-rate mortgages, adjustable-rate mortgages or hybrid
adjustable-rate mortgages. Fixed-rate mortgages have interest rates that are
fixed for the term of the loan and do not adjust. The interest rates on
adjustable-rate mortgages generally adjust annually (although some may adjust
more frequently) to an increment over a specified interest rate index. Hybrid
adjustable-rate mortgages have interest rates that are fixed for a specified
period of time (typically three, five, seven or ten years) and, thereafter,
adjust to an increment over a specified interest rate index. Adjustable-rate
mortgages and hybrid adjustable-rate mortgages generally have periodic and
lifetime constraints on the amount by which the loan interest rate can change on
any predetermined interest rate reset date. These investments can be in the form
of pools, TBA and CMO (including interest only, principal only or other
structures).

GSE Risk Sharing Securities Issued by Fannie Mae and Freddie Mac. - From time to
time we have and may in the future continue to invest in risk sharing securities
issued by Fannie Mae and Freddie Mac. Principal and interest payments on these
securities are based on the performance of a specified pool of Agency
residential mortgages. The payments due on these securities, however, are not
secured by the referenced mortgages. The payments due are full faith and credit
obligations of Fannie Mae or Freddie Mac respectively, but neither agency
guarantees full payment of the underlying mortgages.  Investments in these
securities generally are not qualifying assets for purposes of the 75% real
estate asset test applicable to REITs and generally do not generate qualifying
income for purposes of the 75% real estate income test applicable to REITs. As a
result, we may be limited in our ability to invest in such assets.

Other investments. - In addition to Residential Whole Loans and Non-Agency RMBS,
our current target investments, we may also make investments in Commercial Loans
and Non-Agency CMBS and other securities on an opportunistic basis, which our
Manager believes will assist us in meeting our investment objective and are
consistent with our overall investment policies.  These investments will
normally be limited by the REIT requirements that 75% our assets be real estate
assets and that 75% of our income be generated from real estate, thereby
limiting our ability to invest in such assets.

Our Investment Portfolio

Our investment strategy will focus on residential real estate related investments, including but not limited to non-qualified mortgage loans, Non-Agency RMBS and other related investments. The portfolio transition is expected to be accomplished over 15 months.

Our investment portfolio composition at March 31, 2022.


                                       46

--------------------------------------------------------------------------------


  Table of Contents



                     [[Image Removed: wmc-20220331_g2.jpg]]




Our Financing Strategy

During 2020, the uncertainties created by the COVID-19 pandemic made it
challenging to obtain financing arrangements on favorable terms.  In the latter
part of 2020 and the beginning of 2021, terms for financing arrangements have
improved significantly. As a result, we diversified our financing sources to
provide an alternative to short-term repurchase agreements with daily margin
requirements. We expect to continue to seek financing arrangements without daily
margin requirements or with margin requirements that apply only after a
significant reduction in the valuation of the assets financed, including but not
limited to repurchase agreements, term financing, securitization and convertible
senior unsecured notes, as the market permits. We believe the amount of leverage
we use is consistent with our intention of keeping total borrowings within a
prudent range, as determined by our Manager, taking into account a variety of
factors such as general economic, political and financial market conditions, the
anticipated liquidity and price volatility of our assets, the availability and
cost of financing the assets, the creditworthiness of financing counterparties
and the health of the U.S. residential and commercial mortgage markets. We
expect to maintain a debt-to-equity ratio of two to four and a half times the
amount of our stockholders' equity, depending on our investment composition. We
seek to enhance equity returns by effectively utilizing leverage and seeking to
limit our exposure to interest rate volatility and daily margin calls. The
following table presents our debt-to-equity ratio on March 31, 2022 and
December 31, 2021:

(dollars in thousands)          March 31, 2022              December 31, 2021
Total debt(1)              $                458,727    $                   736,357
Total equity               $                165,006    $                   193,109
Debt-to-equity ratio                            2.8                            3.8

(1) Total debt excludes the securitized debt which is non-recourse to us.

Our Hedging and Risk Management Strategy



Our overall portfolio strategy is designed to generate attractive returns to our
investors through various economic cycles. In connection with our risk
management activities, we may enter into a variety of derivative and
non-derivative instruments. When purchased, our primary objective for acquiring
these derivatives and non-derivative instruments is to mitigate our exposure to
future events that are outside our control. Our derivative instruments are
designed to mitigate the
                                       47

--------------------------------------------------------------------------------

Table of Contents





effects of market risk and cash flow volatility associated with interest rate
risk, including prepayment risk. As part of our hedging strategy, we may enter
into interest rate swaps, including forward starting swaps, interest rate
swaptions, U.S. Treasury options, future contracts, TBAs, credit default swaps,
forwards and other similar instruments. There can be no assurance that
appropriate hedging strategies will be available or that if implemented they
will be successful.

Critical Accounting Policies

The consolidated financial statements include our accounts, those of our
wholly-owned subsidiaries and certain VIEs in which we are the primary
beneficiary.  All intercompany amounts have been eliminated in consolidation.
In accordance with GAAP, our consolidated financial statements require the use
of estimates and assumptions that involve the exercise of judgment and use of
assumptions as to future uncertainties.  Our most critical accounting policies
will involve decisions and assessments that could affect our reported assets and
liabilities, as well as our reported revenues and expenses. We believe that all
of the decisions and assessments upon which our consolidated financial
statements have been based were reasonable at the time made and based upon
information available to us at that time. There have been no significant changes
to our critical accounting policies that are disclosed in our most recent Annual
Report on Form 10-K for the year ended December 31, 2021.

2022 Activity

Investment Activity



We continually evaluate potential investments and our investment selection is
based on supply and demand of our target assets, costs of financing, and the
expected future interest rate volatility costs of hedging. During the three
months ended March 31, 2022, we acquired $119.1 million of Residential Whole
Loans and $40.0 million of Non-Agency RMBS. Also,we along with the other
investors sold a Commercial REO for total proceeds of $54.7 million.



The following table presents our investing activity for the three months ended March 31, 2022 (dollars in thousands):


                                            Balance at                                                                                                                                                                                                    Balance at
                                           December 31,                 

Loan Modification/Capitalized Principal Payments Proceeds from


                         Realized        Unrealized     Premium and discount
Investment Type                                2021         Purchases              Interest                and Basis Recovery           Sales          Transfers to REO     Gain/(Loss)      Gain/(loss)      amortization, net        March 31, 2022
Agency RMBS and Agency RMBS IOs           $      1,172    $        -                                N/A $                  (76)   $             -                     N/A $           -    $        (156)   $                 -                         $       940
Non-Agency RMBS                                 27,769        39,952                                N/A                   (187)                 -                     N/A             -           (3,425)                   102                              64,211

Non-Agency CMBS                                105,358             -                                N/A                   (644)                 -                     N/A             -              974                   (402)                            105,286
Other securities(1)                             51,648             -                                N/A                      -                  -                     N/A             -           (2,374)                  (234)                             49,040
Total MBS and other securities                 185,947        39,952                                N/A                   (907)                 -                     N/A             -           (4,981)                  (534)                            219,477
Residential Whole Loans                      1,023,502       119,093                              64                   (95,569)                 -                    -                -          (41,843)                (2,537)                          1,002,710
Residential Bridge Loans                         5,428             -                               -                      (105)                 -                    -                -               27                      -                               5,350
Commercial Loans                               130,572             -                               -                        (4)                 -                    -                -           (2,073)                     -                             128,495
Securitized commercial loans                 1,355,808             -                               -                         -                  -                    -                -          (73,564)                 6,699                           1,288,943
REO                                             43,607             -                                N/A                      -            (54,681)                   -           12,198                -                       N/A                            1,124
Total Investments                         $  2,744,864    $  159,045    $                         64    $              (96,585)   $       (54,681)   $               -    $      12,198    $    (122,434)   $             3,628                         $ 2,646,099

(1) Other securities include $42.4 million of GSE CRTs and $6.7 million of ABS at March 31, 2022.




Portfolio Characteristics

Residential Real Estate Investments

Residential Whole Loans


                                       48

--------------------------------------------------------------------------------

Table of Contents





The Residential Whole Loans have low LTV's and are comprised of 2,505 Non-QM
adjustable rate mortgages and six investor fixed rate mortgages. The following
table presents certain information about our Residential Whole Loans investment
portfolio at March 31, 2022 (dollars in thousands):
                                                                                                  Weighted Average
                                                                                                                            Contractual
                                                Principal                               Original            Expected          Maturity        Coupon
Current Coupon Rate       Number of Loans        Balance         Original LTV         FICO Score(1)       Life (years)        (years)          Rate
    2.01% - 3.00%               40            $    20,896                54.2  %           751                      6.5              29.0      2.9  %
    3.01% - 4.00%               543               266,264                61.1  %           744                      4.4              27.9      3.7  %
    4.01% - 5.00%              1,232              453,466                55.1  %           752                      4.1              27.2      4.6  %
    5.01% - 6.00%               668               260,311                63.8  %           741                      3.7              26.7      5.4  %
    6.01% - 7.00%               26                  9,320                67.8  %           725                      3.8              25.6      6.3  %
    7.01% - 8.00%                2                    430                73.7  %           748                      3.2              26.5      7.1  %

Total                          2,511          $ 1,010,687                59.0  %           747                      4.1              27.3      4.5  %




(1)The original FICO score is not available for 249 loans with a principal balance of approximately $83.2 million at March 31, 2022. We have excluded these loans from the weighted average computations.

Residential Bridge Loans



  We are no longer allocating capital to Residential Bridge Loans. The following
table presents certain information about the remaining eight Residential Bridge
Loans left in the portfolio at March 31, 2022 (dollars in thousands):

                                                                             Weighted Average
                                                                                    Contractual
                                               Principal                              Maturity        Coupon
Current Coupon Rate       Number of Loans       Balance         Original LTV        (months)(1)        Rate

    7.01% - 9.00%                3            $    2,946                70.4  %               0.0      8.8  %
   9.01% - 11.00%                3                 2,288                77.0  %               0.0     10.5  %
   11.01% - 13.00%               2                   495                69.7  %               0.0     11.4  %

Total                            8            $    5,729                73.0  %               0.0      9.7  %





(1) Non-performing loans that are past their maturity date are excluded from the
calculation of the weighted average contractual maturity. The weighted average
contractual maturity for these loans is zero.

Non-performing Residential Loans

The following table presents the aging of the Residential Whole Loans and Bridge Loans as of March 31, 2022 (dollars in thousands):


                                           Residential Whole Loans                                             Bridge Loans
                            No of Loans          Principal            Fair Value           No of Loans           Principal           Fair Value
Current                        2,479           $   994,489          $   986,712                  1             $      849          $       859
1-30 days                         16                 7,247                7,250                  1                     75                   75
31-60 days                         2                   824                  766                  -                      -                    -
61-90 days                         1                   536                  509                  -                      -                    -
90+ days                          13                 7,591                7,473                  6                  4,805                4,416
Total                          2,511           $ 1,010,687          $ 1,002,710                  8             $    5,729          $     5,350

Residential Whole Loans in Non-Accrual Status


                                       49

--------------------------------------------------------------------------------


  Table of Contents




As of March 31, 2022, there were 13 Non-QM loans carried at fair value in
non-accrual status with an unpaid principal balance of approximately $7.6
million and a fair value of $7.5 million. These nonperforming loans represent
approximately 0.8% of the total outstanding principal balance. No allowance or
provision for credit losses was recorded as of and for the three months ended
March 31, 2022 since the valuation adjustment, if any, would be reflected in the
fair value of these loans. We stopped accruing interest income for these loans
when they became contractually 90 days delinquent.

  As of March 31, 2022, there were six Residential Bridge Loans carried at fair
value in non-accrual status with an unpaid principal balance of approximately
$4.8 million and a fair value of $4.4 million. No allowance and provision for
credit losses was recorded for loans carried at fair value as of and for the
three months ended March 31, 2022 since valuation adjustments, if any, would be
reflected in the fair value of these loans. We stopped accruing interest income
for these loans when they became contractually 90 days delinquent.

  As of March 31, 2022, we had four real estate owned ("REO") properties with an
aggregate carrying value of $1.1 million related to foreclosed Bridge Loans. The
REO properties are held for sale and accordingly carried at the lower of cost or
fair value less cost to sell. The REO properties are classified in "Other
assets" in the Consolidated Balance Sheet.

Non-Agency RMBS



The following table presents the fair value and weighted average purchase price
for each of our Non-Agency RMBS categories, including IOs accounted for as
derivatives, together with certain of their respective underlying loan
collateral attributes and current performance metrics as of March 31, 2022 (fair
value dollars in thousands):

                                                                         Weighted Average
                                      Purchase                                               Original        60+ Day
Category       Fair Value              Price             Life (Years)      Original LTV        FICO         Delinquent       CPR
Prime         $     44,095      $      91.87                 9.6                 46.4  %       535               0.9  %     15.5  %
Alt-A               20,116             65.31                19.1                 69.9  %       641              14.4  %     13.3  %

Total         $     64,211      $      83.55                12.6                 53.7  %       568               5.1  %     14.8  %



Agency RMBS Portfolio

The following table summarizes our Agency portfolio by investment category as of March 31, 2022 (dollars in thousands):


                                                                                                                           Net Weighted
                                              Principal Balance           Amortized Cost          Fair Value              Average Coupon

Agency RMBS IOs and IIOs (1)                                  N/A       $            55          $       62                             1.1  %
Agency RMBS IOs and IIOs accounted for as
derivatives (1)                                               N/A                      N/A              878                             1.8  %
Total Agency RMBS                                            -                       55                 940                             1.7  %
Total                                       $                -          $            55          $      940                             1.7  %




(1)IOs and IIOs have no principal balances and bear interest based on a notional balance. The notional balance is used solely to determine interest distributions on the interest-only class of securities.

Commercial Real Estate Investments

With the new focus on residential real estate related investments, we plan to transition out of commercial real estate investments over the next 15 months.



Non-Agency CMBS

                                       50

--------------------------------------------------------------------------------

Table of Contents

The following table presents certain characteristics of our Non-Agency CMBS portfolio as of March 31, 2022 (dollars in thousands):


                                   Principal                                Weighted Average
Type                 Vintage        Balance       Fair Value         Life (Years)        Original LTV
Conduit:
                    2006-2009     $     164      $        159                  1.9             83.7  %
                    2010-2020        78,776            21,691                  4.4             62.8  %
                                     78,940            21,850                  4.4             62.9  %
Single Asset:
                    2010-2020       100,034            83,436                  1.7             65.3  %
Total                             $ 178,974      $    105,286                  2.2             64.8  %



Commercial Real Estate Investments

The following table presents our commercial loan investments as of March 31, 2022 (dollars in thousands):



                                         Principal
     Loan             Loan Type           Balance     Fair Value      Original LTV          Interest Rate           Maturity Date         Extension Option               Collateral            Geographic Location
CRE 3          Interest-Only Mezzanine $   90,000    $   27,060           58%          1-Month LIBOR plus 9.25%       6/29/2021                None(1)            Entertainment and Retail              NJ
               loan
CRE 4          Interest-Only First         38,367        38,229           63%          1-Month LIBOR plus 3.02%        8/6/2022         A One-Year Extensions              Retail                       CT
               Mortgage
CRE 5          Interest-Only First         24,535        24,242           62%          1-Month LIBOR plus 3.75%       11/6/2022        Two One-Year Extensions             Hotel                        NY
               Mortgage
CRE 6          Interest-Only First         13,207        13,049           62%          1-Month LIBOR plus 3.75%       11/6/2022        Two One-Year Extensions             Hotel                        CA
               Mortgage
CRE 7          Interest-Only First          7,259         7,172           62%          1-Month LIBOR plus 3.75%       11/6/2022        Two One-Year Extensions             Hotel                      IL, FL
               Mortgage
CRE 8          Interest-Only First          4,425         4,381           79%          1-Month LIBOR plus 4.85%       12/6/2022                 None             Assisted Living Facilities             FL
               Mortgage
SBC 3          Interest-Only First         14,362        14,362           49%          1-Month LIBOR plus 4.10%        7/6/2022                 None                                                    CT
               Mortgage                                                                                                                                              Nursing Facilities
                                       $  192,155    $  128,495

(1) CRE 3 is in default and not eligible for extension.

Non-Performing Commercial Loans

The COVID-19 pandemic has adversely impacted a broad range of industries in which our commercial loan borrowers operate and could impair their ability to fulfill their financial obligations to us, most significantly retail and hospitality asset. All but the one loan discussed below remain current.

CRE 3 Loan



As of March 31, 2022, the CRE 3 junior mezzanine loan with an outstanding
principal balance of $90.0 million secured by a retail facility was
non-performing and past its maturity date of June 29, 2021. We were receiving
interest payments on this loan from a reserve that was exhausted in May 2021. We
are currently in discussions with the borrower and
                                       51

--------------------------------------------------------------------------------

Table of Contents





certain other lenders regarding alternatives to address the situation which
might include modifications of loan terms, deferral of payments and the funding
of new advances. There can be no assurance that these discussions will result in
an outcome in which we would be repaid any amount of the loan and we may suffer
further declines in fair value with respect to the mezzanine investment. We
could experience a total loss of our investment under various scenarios, which
at current levels would result in a $27.1 million reduction in the Company's
book value. Refer to Note 6 - "Commercial Loans" for details.

The following table presents the aging of the Commercial Loans as of March 31, 2022 (dollars in thousands):


                              Commercial Loans
                 No of Loans       Principal      Fair Value
Current                6          $ 102,155      $  101,435
1-30 days              -                  -               -
31-60 days             -                  -               -
61-90 days             -                  -               -
90+ days               1             90,000          27,060
Total                  7          $ 192,155      $  128,495

Commercial Real Estate Owned



In February 2022, we and the other investors sold the unencumbered hotel
property for $55.9 million which was foreclosed on in the third quarter of 2021.
We and the other investors fully recovered our aggregate initial investment of
$42.0 million. We recognized a gain on sale of approximately $12.2 million.

Geographic Concentration



The mortgages underlying our Non-Agency RMBS and Non-Agency CMBS are located in
various states across the United States and other countries. The following table
presents the five largest concentrations by location for the mortgages
collateralizing our Non-Agency RMBS and Non-Agency CMBS as of March 31, 2022,
based on fair value (dollars in thousands):

                     Non-Agency RMBS                                  Non-Agency CMBS
              Concentration      Fair Value                    Concentration      Fair Value
California           37.2  %    $    23,890      California           36.4  %    $    38,343
Florida              14.6  %          9,402      Nevada               18.5  %         19,468
New York              7.2  %          4,628      Bahamas              13.7  %         14,420
New Jersey            3.8  %          2,425      Delaware              5.2  %          5,474
Texas                 3.7  %          2,363      Texas                 4.1  %          4,298



The following table presents the various states across the United States in
which the collateral securing our Residential Whole Loans and Residential Bridge
Loans at March 31, 2022, based on principal balance, is located (dollars in
thousands):
                                    Residential Whole Loans                                                           Residential Bridge Loans
                                   State                  Principal                                                  State                  Principal
                               Concentration               Balance                                               Concentration               Balance
California                                69.6  %       $   703,135                New York                                 45.9  %       $    2,631
New York                                  12.6  %           127,581                California                               30.6  %            1,754
Georgia                                    3.3  %            33,024                Florida                                  19.6  %            1,125
Texas                                      2.9  %            29,139                New Jersey                                3.9  %              219
Florida                                    2.7  %            27,221                Total                                   100.0  %            5,729
Other                                      8.9  %            90,587
Total                                    100.0  %       $ 1,010,687



                                       52

--------------------------------------------------------------------------------


  Table of Contents



Financing Activity

We will look to continue to expand and diversify our financing sources, especially those sources that provide an alternative to short-term repurchase agreements with daily margin requirements.

Repurchase Agreements



Our repurchase agreements bear interest at a contractually agreed-upon rate and
have terms ranging from one month to 12 months. Our counterparties generally
require collateral in excess of the loan amount, or haircuts. As of March 31,
2022, the contractual haircuts required under repurchase agreements on our
investments were as follows:

                                                  Minimum        Maximum
Short-Term Borrowings
Agency RMBS IOs                                     33%            37%
Non-Agency RMBS                                     13%            61%
Residential Whole Loans                             21%            21%
Residential Bridge Loans                            18%            18%
Commercial Loans                                    55%            55%
Other Securities                                    63%            65%

Long-Term Borrowings
Non-Agency CMBS and Non-Agency RMBS Facility
Non-Agency RMBS                                     25%            25%
Non-Agency CMBS                                     30%            30%
Other Securities                                    25%            30%

Residential Whole Loan Facility
Residential Whole Loans(1)                          10%            10%

Commercial Whole Loan Facility
Commercial Loans(2)                                 22%            31%



(1) The haircut is based on 10% of the outstanding principal amount of the Residential Whole Loans. (2) Each Commercial Loan is financed separately under this facility and the haircuts are dependent on the type of collateral.

Convertible Senior Unsecured Notes



During the quarter ended March 31, 2022, we repurchased $3.4 million aggregate
principal amount of the 2022 Notes at an approximate 0.8% premium to par value,
plus accrued and unpaid interest.

Securitized Debt



In February 2022, we completed a residential mortgage-backed securitization. The
Arroyo Trust 2022 issued $398.9 million of mortgage-backed notes and we retained
the subordinate non-offered securities in the securitization, which include the
Class B, Class A-IO-S and Class XS certificates. These non-offered securities
were eliminated in the consolidation. As of March 31, 2022, Residential Whole
Loans, with an outstanding principal balance of approximately $415.2 million,
serve as collateral for the Arroyo Trust 2022's securitized debt.

                                       53

--------------------------------------------------------------------------------


  Table of Contents



Outstanding Borrowings

Repurchase Agreements

At March 31, 2022, we had outstanding borrowings under six of our repurchase agreements. The following table summarizes certain characteristics of our repurchase agreements at March 31, 2022 (dollars in thousands):

Weighted Average Interest Rate on


                                                 Repurchase Agreement         Borrowings Outstanding at end               Weighted Average
Securities Pledged                                    Borrowings                        of period                    Remaining Maturity (days)
Short-Term Borrowings:

Agency RMBS                                      $             354                                    1.13  %                                 32

Non-Agency RMBS(1)                                          54,388                                    2.33  %                                 11
Residential Whole Loans (2)                                  1,322                                    2.95  %                                 28
Residential Bridge Loans (2)                                 4,231                                    2.95  %                                 28
Commercial Loans (2)                                         6,463                                    3.56  %                                 28

Other Securities                                             2,410                                    3.49  %                                 18
Total short term borrowings                                 69,168                                    2.53  %                                 15
Long Term Borrowings:
Non-Agency CMBS and Non-Agency RMBS
Facility
Non-Agency CMBS (1)                                         56,486                                    2.14  %                                 35
Non-Agency RMBS                                             16,451                                    2.15  %                                 35
Other Securities                                            27,506                                    2.22  %                                 35
Subtotal                                                   100,443                                    2.17  %                                 35
Residential Whole Loan Facility
Residential Whole Loans (2)                                109,111                                    2.25  %                                218
Commercial Whole Loan Facility
Commercial Loans                                            63,658                                    2.27  %                                178
Total long term borrowings                                 273,212                                    2.22  %                                141
Repurchase agreements borrowings                 $         342,380                                    2.29  %                                116
Less unamortized debt issuance costs                             -                                        N/A                                N/A
Repurchase agreement borrowings, net             $         342,380                                    2.29  %                                116




(1)Includes repurchase agreement borrowings on securities eliminated upon VIE
consolidation.
(2)Repurchase agreement borrowings on loans owned are through trust
certificates. The trust certificates are eliminated in consolidation.

At March 31, 2022, we had outstanding repurchase agreement borrowings with the following counterparties:



(dollars in thousands)                                                        Amount              Percent of Total Amount           Company Investments
Repurchase Agreement Counterparties                                         Outstanding                 Outstanding                  Held as Collateral            Counterparty Rating(1)
Credit Suisse AG, Cayman Islands Branch (2)                               $    207,753                              60.7  %       $             241,846                      A+
Citigroup Global Markets Inc.                                                  100,443                              29.3  %                     173,733                      A+
RBC Capital Markets LLC                                                         19,405                               5.7  %                      22,349                      AA-
Nomura Securities International, Inc. (3)                                       12,016                               3.5  %                      21,092                  Unrated (3)

All other counterparties (4)                                                     2,763                               0.8  %                       6,956
Total                                                                     $    342,380                             100.0  %       $             465,976





                                       54

--------------------------------------------------------------------------------

Table of Contents





(1)The counterparty ratings presented above are the long-term issuer credit
ratings as rated at March 31, 2022 by S&P.
(2)Includes master repurchase agreements in which the buyer includes Alpine
Securitization LTD., a Credit Suisse sponsored asset-backed commercial paper
conduit.
(3)  Nomura Holdings, Inc., the parent company of Nomura Securities
International, Inc., is rated BBB+ by S&P at March 31, 2022.
(4)  Represents amount outstanding with two counterparties, which each holds
collateral valued less than 5% of our stockholders' equity as security for our
obligations under the applicable repurchase agreements as of March 31, 2022.

The following table presents our average repurchase agreement borrowings, excluding unamortized debt issuance costs, by type of collateral pledged for the three months ended March 31, 2022 (dollars in thousands):



Collateral                                    Three Months Ended March 31, 2022
Agency RMBS                                  $                              850

Non-Agency RMBS(1)                                                       56,798
Non-Agency CMBS(1)                                                       71,803
Residential Whole Loans                                                 201,228
Commercial loans                                                         65,272

Residential Bridge Loans                                                  5,625

Other securities                                                         36,343
Total                                        $                          437,919
Maximum borrowings during the period(2)      $                          613,518





(1)Includes repurchase agreement borrowings on securities eliminated upon VIE
consolidation.
(2)Amount represents the maximum borrowings at month-end during each of the
respective periods.

Repurchase Agreements Financial Metrics



Certain of our financing agreements provide the counterparty with the right to
terminate the agreement and accelerate amounts due under the associated
agreement if we do not maintain certain financial metrics. Although specific to
each financing arrangement, typical financial metrics include minimum equity and
liquidity requirements, leverage ratios, and performance triggers. In addition,
some of the financing arrangements contain cross-default features, whereby
default under an agreement with one lender simultaneously causes default under
agreements with other lenders. with borrowings outstanding as of March 31, 2022.
We complied with the terms of such financial metrics as of March 31, 2022.

Securitized Debt

Residential Mortgage-Backed Notes

Arroyo Trust 2019

The following table summarizes the consolidated Arroyo Trust 2019's issued mortgage-backed notes at March 31, 2022 which is classified in "Securitized debt, net" in the Consolidated Balance Sheets (dollars in thousands):


                                       55

--------------------------------------------------------------------------------


  Table of Contents




Classes                                 Principal Balance       Coupon        Carrying Value       Contractual Maturity

Issued Mortgage-Backed Notes
Class A-1                             $          234,900         3.3%       $       234,900                       4/25/2049
Class A-2                                         12,598         3.5%                12,598                       4/25/2049
Class A-3                                         19,959         3.8%                19,959                       4/25/2049
Class M-1                                         25,055         4.8%                25,055                       4/25/2049
Subtotal                              $          292,512                    $       292,512
Less: Unamortized deferred financing
costs                                                   N/A                           3,280
Total                                 $          292,512                    $       289,232



Arroyo Trust 2020

The following table summarizes the consolidated Arroyo Trust 2020's issued mortgage-backed notes at March 31, 2022 which is classified in "Securitized debt, net" in the Consolidated Balance Sheets (dollars in thousands):



Classes                                 Principal Balance       Coupon        Carrying Value       Contractual Maturity
Issued Mortgage-Backed Notes
Class A-1A                            $           96,193         1.7%       $        96,193                       3/25/2055
Class A-1B                                        11,414         2.1%                11,414                       3/25/2055
Class A-2                                         13,518         2.9%                13,518                       3/25/2055
Class A-3                                         17,963         3.3%                17,963                       3/25/2055
Class M-1                                         11,739         4.3%                11,739                       3/25/2055
Subtotal                              $          150,827                    $       150,827
Less: Unamortized deferred financing
costs                                                   N/A                           1,910
Total                                 $          150,827                    $       148,917



Arroyo Trust 2022

The following table summarizes the consolidated Arroyo Trust 2022's issued mortgage-backed notes at March 31, 2022 which is classified as "Securitized debt, net" on the Consolidated Balance Sheets (dollars in thousands):



Classes                                           Principal Balance       Coupon         Fair Value         Contractual Maturity
Issued Mortgage-Backed Notes
Class A-1A                                      $          238,419         2.5%       $      232,676                      12/25/2056
Class A-1B                                                  82,942         3.3%               79,703                      12/25/2056
Class A-2                                                   21,168         3.6%               20,381                      12/25/2056
Class A-3                                                   28,079         3.7%               26,918                      12/25/2056
Class M-1                                                   17,928         3.7%               16,744                      12/25/2056

Total                                           $          388,536                    $      376,422

Commercial Mortgage-Backed Notes


                                       56

--------------------------------------------------------------------------------

Table of Contents





We hold a controlling financial variable interest in CSMC USA and were required
to consolidate the CMBS VIE. Refer to Note 7 - "Financings" for details. The
following table summarizes the consolidated 2014 CSMC USA's commercial mortgage
pass-through certificates at March 31, 2022 which is classified in "Securitized
debt, net" in the Consolidated Balance Sheets (dollars in thousands):

Classes         Principal Balance    Coupon    Fair Value   Contractual Maturity
Class A-1      $          120,391     3.3  % $   117,768                 9/11/2025
Class A-2                 531,700     4.0  %     523,078                 9/11/2025
Class B                   136,400     4.2  %     126,957                 9/11/2025
Class C                    94,500     4.3  %      86,707                 9/11/2025
Class D                   153,950     4.4  %     142,388                 9/11/2025
Class E                   180,150     4.4  %     152,369                 9/11/2025
Class F                   153,600     4.4  %     113,725                 9/11/2025
Class X-1(1)                    N/A   0.7  %      12,347                 9/11/2025
Class X-2(1)                    N/A   0.2  %       2,572                 9/11/2025
               $        1,370,691            $ 1,277,911

(1) Class X-1 and X-2 are interest-only classes with notional balances of $652.1 million and $733.5 million as of March 31, 2022, respectively.



The above table does not reflect the portion of the class F bond held by us
because the bond is eliminated in consolidation. Our ownership interest in the F
bonds represents a controlling financial interest, which resulted in
consolidation of the trust. The bond had a fair market value of $11.0 million at
March 31, 2022, and our exposure to loss is limited to our ownership interest in
this bond.

Convertible Senior Unsecured Notes

2022 Notes



As of March 31, 2022, we had $34.3 million of the 2022 Notes outstanding. The
2022 Notes mature on October 1, 2022, unless earlier converted, redeemed or
repurchased by the holders pursuant to their terms, and are not redeemable by us
except during the final three months prior to maturity.

2024 Notes



As of March 31, 2022, we had $86.3 million aggregate principal amount of the
2024 Notes outstanding. The 2024 notes mature on September 15, 2024, unless
earlier converted, redeemed or repurchased by the holders pursuant to their
terms, and are not redeemable by us except during the final three months prior
to maturity.

Recourse and Non-Recourse Financing



We utilize both recourse and non-recourse debt to finance our portfolio. Our
recourse debt included our short and long-term repurchase agreement financings
and our convertible senior unsecured notes. At March 31, 2022, our total
non-recourse financing is comprised of $814.6 million of securitized debt issued
in connection with our three Residential Whole Loan securitizations and
$1.3 billion of securitized debt from owning a Non-Agency CMBS bond with a fair
value of $14.9 million that was deemed to be a controlling financial variable
interest in CSMC USA which required us to consolidate the CMBS VIE.

                                       57

--------------------------------------------------------------------------------


  Table of Contents



(dollars in thousands)                  March 31, 2022                December 31, 2021
Recourse and non-recourse financing    $     2,551,209               $        2,599,845
Non-recourse financing
Arroyo 2019-2                                  289,232                          337,571
Arroyo 2020-1                                  148,917                          181,547
Arroyo 2022-1                                  376,422                                -

CMSC USA                                     1,277,911                        1,344,370
Total recourse financing               $       458,727   $458,727    $          736,357

Stockholders' equity                   $       165,006               $          193,109

Recourse leverage                                   2.8x                             3.8x





Hedging Activity

The following tables summarize the hedging activity during the three months ended March 31, 2022 (dollars in thousands):




                                      Notional Amount at                                   Settlements,            Notional Amount at
                                                                                          Terminations or
Derivative Instrument                 December 31, 2021            Acquisitions             Expirations              March 31, 2022
Fixed pay interest rate swaps       $            22,000          $     265,000          $        (35,000)         $          252,000

Credit default swaps                              6,170                      -                         -                       6,170

Total derivative instruments        $            28,170          $     265,000          $        (35,000)         $          258,170



                            Fair Value at                                 Settlements,             Realized                                    Fair Value at
                             December 31,                                Terminations or            Gains /
Derivative Instrument            2021             Acquisitions             Expirations              Losses            Mark-to-market          March 31, 2022
Fixed pay interest rate
swaps                       $       (38)         $          -          $         (5,540)         $    5,540          $         (449)         $         (487)

Credit default swaps               (459)                    -                         -                   -                   2,213                   1,754

Total derivative
instruments                 $      (497)         $          -          $         (5,540)         $    5,540          $        1,764          $        1,267



Dividends

During the three months ended March 31, 2022, we declared a $0.04 dividend per share generating a dividend yield of approximately 9.4% based on the stock closing price of $1.71 on March 31, 2022.

Book Value

The following chart reflects our book value per common share basic and diluted


                        over five consecutive quarters:
                                       58

--------------------------------------------------------------------------------


  Table of Contents



                     [[Image Removed: wmc-20220331_g3.jpg]]

  We continue to implement measures to improve our balance sheet by increasing
liquidity, reducing leverage, and seek alternative financing arrangements to
preserve long-term shareholder value. The decrease in book value from $3.20 as
of December 31, 2021, to $2.73 as of March 31, 2022, was primarily due to a
decline in fair value in our investment portfolio, mainly the Residential Whole
Loan investments attributable to spread widening. Also, contributing were lower
net interest income from accelerated premium amortization associated prepayments
in our Residential Whole Loan portfolio.

Results of Operations

Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021.

General

Due to the continued uncertainty still surrounding the ongoing COVID-19
pandemic, our results of operations for the three months ended March 31, 2022
and March 31, 2021 may not be comparable. During the first quarter of 2022, we
continued to make progress towards strengthening our balance sheet, improving
liquidity and the transition of our portfolio to residential investments.

During the three months ended March 31, 2022, we completed our third
securitization, continued to repurchase our 2022 Notes, and sold the hotel REO,
realizing a gain on sale. However, due to spread widening we experienced a
significant decline in the fair value of Residential Whole Loan investments.
This decline in fair value of $41.8 million was a key contributor to the
generation of a net loss of $25.9 million, or $0.43 per basic and diluted
weighted common share for the three months ended March 31, 2022

In contrast, for the three months ended March 31, 2021, the improved residential
credit markets resulted in a significant increase in our Residential Whole Loan
investments, which was a key contributor to the generation of net income of $8.0
million, or $0.13 per basic and diluted weighted common share.

                                       59

--------------------------------------------------------------------------------


  Table of Contents



Net Interest Income

  The following tables set forth certain information regarding our net interest
income on our investment portfolio for the three months ended March 31, 2022 and
March 31, 2021 (dollars in thousands):
                                            Average Amortized          Total Interest
Three Months Ended March 31, 2022            Cost of Assets                Income              Yield on Average Assets

Investments

Agency RMBS                                $             59          $              4                         27.50  %
Non-Agency CMBS                                     166,171                     2,570                          6.27  %
Non-Agency RMBS                                      40,422                       530                          5.32  %
Residential Whole Loans                           1,052,261                     8,746                          3.37  %
Residential Bridge Loans                              5,798                        20                          1.40  %
Commercial loans                                    192,156                     1,246                          2.63  %
Securitized commercial loans                      1,274,896                    21,872                          6.96  %
Other securities                                     47,641                       654                          5.57  %
Total investments                          $      2,779,404          $         35,642                          5.20  %

                                            Average Carrying           Total Interest              Average Cost of
                                                  Value                    Expense                    Funds(1)
Borrowings
Repurchase agreements                      $        437,919          $          2,442                          2.26  %
Convertible senior unsecured notes,
net                                                 118,308                     2,597                          8.90  %
Securitized debt                                  1,991,512                    26,320                          5.36  %
Total borrowings                           $      2,547,739          $         31,359                          4.99  %

Net interest income and net interest
margin(2)                                                            $          4,283                          0.62  %


                                            Average Amortized          Total Interest
Three Months Ended March 31, 2021            Cost of Assets                Income              Yield on Average Assets

Investments

Agency RMBS                                $             89          $              4                         18.23  %
Non-Agency CMBS                                     208,870                     4,767                          9.26  %
Non-Agency RMBS                                      29,554                       355                          4.87  %
Residential Whole Loans                             970,642                    10,058                          4.20  %
Residential Bridge Loans                             14,141                       230                          6.60  %
Commercial Loans                                    325,227                     5,217                          6.51  %
Securitized commercial loan                       1,568,571                    24,564                          6.35  %
Other securities                                     49,396                       822                          6.75  %
Total investments                          $      3,166,490          $         46,017                          5.89  %

                                            Average Carrying           Total Interest              Average Cost of
                                                  Value                    Expense                    Funds(1)
Borrowings
Repurchase agreements                      $        348,541          $          3,604                          4.19  %
Convertible senior unsecured notes,
net                                                 169,010                     3,540                          8.49  %
Securitized debt                                  2,336,479                    29,625                          5.14  %
Total borrowings                           $      2,854,030          $         36,769                          5.22  %

Net interest income and net interest
margin(2)                                                            $          9,248                          1.18  %


                                       60

--------------------------------------------------------------------------------


  Table of Contents






(1) Average cost of funds does not include the interest expense related to our
derivatives. In accordance with GAAP, such costs are included in "Gain (loss) on
derivative instruments, net" in the Consolidated Statements of Operations.
(2) Since we do not apply hedge accounting, our net interest margin in this
table does not reflect the benefit / cost of our interest rate swaps. See
"Non-GAAP Financial Measures" for net investment income table that includes the
benefit / cost from our interest rate swaps.


Interest Income



For the three months ended March 31, 2022, and March 31, 2021, we earned
interest income on our investments of approximately $35.6 million and $46.0
million, respectively. The decrease of approximately $10.4 million was mainly
due to a smaller investment portfolio from principal payments and payoffs of
$421.4 million of commercial investments and $416.0 million of residential
investments. Also, interest income was further reduced by our $90.0 million
commercial mezzanine loan becoming non-performing in May 2021, and certain
Non-Agency CMBS positions were placed on non-accrual status. The decrease was
partially offset by acquisitions of $587.0 million of residential investments.

Interest Expense



Interest expense decreased from $36.8 million for the three months ended
March 31, 2021 to $31.4 million for the three months ended March 31, 2022. The
decrease in interest expense was a result of a smaller investment portfolio,
improved cost of financing from the improved terms on our amended residential
and securities financing facilities and Residential Whole Loan facility and a
decrease in our convertible senior unsecured notes outstanding as a result of
the repurchases.

Other income (loss), net

Realized gain (loss), net

Realized gain (loss) represents the net gain (loss) on sales or settlements from
our investment portfolio and debt. The following table presents the realized
gains (losses) of our investments and debt for each of the three months ended
March 31, 2022 and March 31, 2021 (dollars in thousands):

                                                      For the three months ended March 31, 2022                                                 For 

the three months ended March 31, 2021


                                    Proceeds                                                                                    Proceeds                                                          Net Gain
                                   (Payments)            Gross Gains          Gross Losses          Net Gain  (Loss)           (Payments)            Gross Gains           Gross Losses            (Loss)

Non-Agency CMBS                 $           -          $          -          $          -          $              -          $          -          $          -          $      (5,929)         $  (5,929)

Loans transferred to REO(1)                 -                     -                     -                         -                   684                     -                    (36)               (36)
Disposition of REO(2)                  54,681                12,198                     -                    12,198                     -                     -                      -                  -
Convertible senior unsecured
notes(3)                               (3,408)                  (53)                    -                       (53)               (6,315)                  240                      -                240
Total                           $      51,273          $     12,145          $          -          $         12,145          $     (5,631)         $        240          $      (5,965)         $  (5,725)






(1)Realized gains/losses recognized on the transfer of Residential Bridge Loans
to REO. Proceeds represent the fair value less estimated selling costs of the
real estate on the date of transfer.
(2)Realized gains/losses recognized in connection with the sale of the hotel
REO.
(3)Realized gains/losses recognized on the extinguishment of the 2022 Notes. See
Note 7 - Financings for details.

Unrealized gain (loss), net



Our investments, and securitized debt, for which we have elected the fair value
option are recorded at fair value with the periodic changes in fair value being
recorded in earnings.  The change in unrealized gain (loss) is directly
attributable to changes in market pricing on the underlying investments and
securitized debt during the period.
                                       61

--------------------------------------------------------------------------------

Table of Contents

The following table presents the net unrealized gains (losses) we recorded on our investments and securitized debt (dollars in thousands):


                                                                Three 

months ended Three months ended


                                                                  March 31, 2022           March 31, 2021

Agency RMBS                                                     $           (48)         $             26
Non-Agency CMBS                                                             974                   (13,972)
Non-Agency RMBS                                                          (3,424)                    1,454
Residential Whole Loans                                                 (41,843)                   17,321
Residential Bridge Loans                                                     27                       203
Commercial loans                                                         (2,073)                    1,622
Securitized commercial loans                                            (73,564)                   75,810
Other securities                                                         (2,374)                      681
Securitized debt                                                         83,422                   (74,095)

Total                                                           $       (38,903)         $          9,050


Gain (loss) on derivatives, net



  As of March 31, 2022, we had interest rate swaps and forward starting swaps
with a notional amount of $252.0 million, including $100.0 million of forward
starting swaps. Our hedging strategy is designed to mitigate our exposure to
interest rate volatility.

The following table presents the components of gain (loss) on derivatives for the three months ended March 31, 2022 and March 31, 2021 (dollars in thousands):



                                                 Realized Gain (Loss), net
                                          Other Settlements       Variation Margin       Return (Recovery) of                                   Contractual interest
Description                                 / Expirations            Settlement                 Basis                Mark-to-Market           income (expense), net(1)             Total
Three months ended March 31, 2022
Interest rate swaps                       $            -          $       5,540          $               -          $         (449)         $                    (291)         $     4,800

Agency and Non-Agency Interest-Only
Strips- accounted for as
derivatives                                            -                      -                        (72)                   (109)                                89                  (92)

Credit default swaps                                  15                      -                          -                   2,213                                  -                2,228

Total                                     $           15          $       5,540          $             (72)         $        1,655          $                    (202)         $     6,936

Three months ended March 31, 2021



Agency and Non-Agency Interest-Only
Strips- accounted for as
derivatives                               $            -          $           -          $             (94)         $            -          $                     121          $        27

Credit default swaps                                  16                      -                          -                     (17)                                 -                   (1)

Total                                     $           16          $           -          $             (94)         $          (17)         $                     121          $        26

(1)Contractual interest income (expense), net on derivative instruments includes interest settlement paid or received.

Other, net



For the three months ended March 31, 2022 and March 31, 2021, "Other, net" was a
loss of $145 thousand and a loss of $28 thousand, respectively. The balance is
mainly comprised of income on cash balances, miscellaneous net interest income
(expense) on cash collateral for our repurchase agreements and derivatives, and
miscellaneous fees and expenses on residential mortgage loans.
                                       62

--------------------------------------------------------------------------------


  Table of Contents




Expenses

Management Fee

We incurred management fee expense of approximately $1.1 million and $1.5
million for the three months ended March 31, 2022 and March 31, 2021,
respectively. The decline in management fees was a result of our Manager
voluntarily waiving 25% of its management fee solely for the duration of
calendar year 2022 in order to support our earnings potential and our transition
to a residential focused investment portfolio. Future waivers, if any, will be
at the Manager's discretion.

The management fees, expense reimbursements and the relationship between our
Manager and us are discussed further in Note 10, "Related Party Transactions" to
the financial statements contained in this Quarterly Report on Form 10-Q.

Other Operating Expenses



We incurred other operating expenses of approximately $296 thousand and $392
thousand for the three months ended March 31, 2022, and March 31, 2021,
respectively. Other operating costs comprise bank fees, trustee fees and asset
management/loan servicing fees for loans acquired serving released. Formerly,
transaction and financing costs were included in this expense category.

Transaction costs

We incurred transaction costs of $2.6 million for the three months ended March 31, 2022, and there were no similar costs for the three months ended March 31, 2021. The transaction costs are associated with the Arroyo Trust 2022-1 securitization that was completed in February 2022. We elected the fair value option for the securitized debt. Under generally accepted accounting principles, we were required to expense the associated finance costs.

General and Administrative Expenses



General and administrative expenses for the three months ended March 31, 2022
compared to the three months ended March 31, 2021 was relatively flat quarter
over quarter.

Non-GAAP Financial Measures

We believe that our non-GAAP measures (described below), when considered with
GAAP, provide supplemental information useful to investors in evaluating the
results of our operations. Our presentations of such non-GAAP measures may not
be comparable to similarly-titled measures of other companies, who may use
different calculations. As a result, such non-GAAP measures should not be
considered as substitutes for our GAAP net income, as measures of our financial
performance or any measure of our liquidity under GAAP.

Distributable Earnings (formerly referred to as Core Earnings) is a non-GAAP
financial measure that is used by us to approximate cash yield or income
associated with our portfolio and is defined as GAAP net income (loss) as
adjusted, excluding: (i) net realized gain (loss) on investments and termination
of derivative contracts; (ii) net unrealized gain (loss) on investments and
debt; (iii) net unrealized gain (loss) resulting from mark-to-market adjustments
on derivative contracts; (iv) provision for income taxes; (v) non-cash
stock-based compensation expense; (vi) non-cash amortization of the convertible
senior unsecured notes discount; (vii) one-time charges such as acquisition
costs and impairment on loans; and (viii) one-time events pursuant to changes in
GAAP and certain other non-cash charges after discussions between us, our
Manager and our independent directors and after approval by a majority of our
independent directors.

We utilize Distributable Earnings as a key metric to evaluate the effective
yield of the portfolio. Distributable Earnings allows us to reflect the net
investment income of our portfolio as adjusted to reflect the net interest rate
swap interest expense.  Distributable Earnings allows us to isolate the interest
expense associated with our interest rate swaps in order to monitor and project
our borrowing costs and interest rate spread. It is one metric of several used
in determining the appropriate distributions to our shareholders.
                                       63

--------------------------------------------------------------------------------


  Table of Contents



The table below reconciles Net Income to Distributable Earnings for the three months ended March 31, 2022 and March 31, 2021:

Three months


                                                                           ended March 31,        Three months ended
(dollars in thousands)                                                           2022               March 31, 2021

Net income (loss) attributable to common stockholders and participating securities

$     (25,853)         $         7,953
Income tax provision (benefit)                                                        56                       98
Net income (loss) before income taxes                                            (25,797)                   8,051

Adjustments:

Investments:

Unrealized (gain) loss on investments, securitized debt and other liabilities

                                                                       38,903                   (9,050)
Realized (gain) loss on investments                                               (8,713)                   5,965

One-time transaction costs                                                         2,740                       (4)

Derivative Instruments:
Net realized gain on derivatives                                                  (5,540)                       -
Net unrealized (gain) loss on derivatives                                         (1,655)                      17

Other:

Realized (gain) loss on extinguishment of convertible senior unsecured notes

                                                                       53                     (240)
Amortization of discount on convertible senior unsecured notes                       223                      245
Other non-cash adjustments                                                             -                      977
Non-cash stock-based compensation expense                                            165                      182
Total adjustments                                                                 26,176                   (1,908)
Distributable Earnings                                                     $         379          $         6,143




                                       64

--------------------------------------------------------------------------------

Table of Contents





Alternatively, our Distributable Earnings can also be derived as presented in
the table below by starting with Adjusted net interest income, which includes
interest income on Interest-Only Strips accounted for as derivatives and other
derivatives, and net interest expense incurred on interest rate swaps and
foreign currency swaps and forwards (a Non-GAAP financial measure) subtracting
Total expenses, adding Non-cash stock based compensation, adding one-time
transaction costs, adding amortization of discount on convertible senior notes
and adding interest income on cash balances and other income (loss), net:

                                                                             Three months            Three months
                                                                            ended March 31,         ended March 31,
(dollars in thousands)                                                           2022                    2021
Net interest income                                                        $        4,283          $        9,248
Interest income from IOs and IIOs accounted for as derivatives                         17                      27
Net interest income (expense) from interest rate swaps                               (291)                      -
Adjusted net interest income                                                        4,009                   9,275
Total expenses                                                                     (6,497)                 (4,518)
Other non-cash adjustments                                                              -                     977
Non-cash stock-based compensation                                                     165                     182
One-time transaction costs                                                          2,740                      (4)
Amortization of discount on convertible unsecured senior notes                        223                     245
Interest income on cash balances and other income (loss), net                        (130)                    (12)
Income attributable to non-controlling interest                                      (131)                     (2)
Distributable Earnings                                                     $          379          $        6,143

Reconciliation of GAAP Book Value to Non-GAAP Economic Book Value



"Economic book value" is a non-GAAP financial measure of our financial position
on an unconsolidated basis. We own certain securities that represent a
controlling variable interest, which under GAAP requires consolidation; however,
our economic exposure to these variable interests is limited to the fair value
of the individual investments. Economic book value is calculated by taking the
GAAP book value and 1) adding the fair value of the retained interest or
acquired security of the VIEs held by us and 2) removing the asset and
liabilities associated with each of consolidated trusts (CSMC USA, Arroyo
2019-2, Arroyo 2020-1 and Arroyo 2022-1). Management considers that Economic
book value provides investors with a useful supplemental measure to evaluate our
financial position as it reflects the actual financial interest of these
investments irrespective of the variable interest consolidation model applied
for GAAP reporting purposes. Economic book value does not represent and should
not be considered as a substitute for Stockholders' Equity, as determined in
accordance with GAAP, and our calculation of this measure may not be comparable
to similarly titled measures reported by other companies.

The table below is a reconciliation of the GAAP Book Value to Non-GAAP Economic Book Value (dollars in thousands - except per share data):


                                                                            $ Amount             Per Share

GAAP Book Value at March 31, 2022                                        $  

165,006 $ 2.73

Adjustments to deconsolidate VIEs and reflect the Company's interest in the securities owned Deconsolidation of VIEs assets

                                             (2,197,379)             (36.39)
Deconsolidation of VIEs liabilities                                         2,099,721               34.78
Interest in securities of VIEs owned, at fair value                           102,031                1.69
Economic Book Value at March 31, 2022                                    $  

169,379 $ 2.81

Net Interest Income and Net Interest Margin


                                       65

--------------------------------------------------------------------------------

Table of Contents





The following tables set forth certain information regarding our Non-GAAP net
investment income and net interest margin which includes interest income on
Agency and Non-Agency Interest-Only Strips classified as derivatives and
excludes the interest expense for third-party consolidated VIEs for the three
months ended March 31, 2022 and March 31, 2021 (dollars in thousands):


                                              Average Amortized          Total Interest
Three Months Ended March 31, 2022             Cost of Assets(1)             Income(2)            Yield on Average Assets

Investments

Agency RMBS                                  $          1,022          $             21                           8.33  %
Non-Agency CMBS                                       166,171                     2,570                           6.27  %
Non-Agency RMBS                                        40,422                       530                           5.32  %
Residential Whole Loans                             1,052,261                     8,746                           3.37  %
Residential Bridge Loans                                5,798                        20                           1.40  %
Commercial loans                                      192,156                     1,246                           2.63  %
Securitized commercial loans                        1,274,896                    21,872                           6.96  %
Other securities                                       47,641                       654                           5.57  %

Total investments                                   2,780,367                    35,659                           5.20  %
Adjustments:
Securitized commercial loans from
consolidated VIEs                                  (1,274,896)                  (21,872)                          6.96  %
Investments in consolidated VIEs
eliminated in consolidation                            13,966                       219                           6.36  %
Adjusted total investments                   $      1,519,437          $         14,006                           3.74  %

                                              Average Carrying           Total Interest           Average Effective Cost
                                                    Value                    Expense                     of Funds
Borrowings
Repurchase agreements                        $        437,919          $          2,442                           2.26  %
Convertible senior unsecured notes,
net                                                   118,308                     2,597                           8.90  %
Securitized debt                                    1,991,512                    26,320                           5.36  %
Interest rate swaps                                          n/a                    291                           0.05  %
Total borrowings                                    2,547,739                    31,650                           5.04  %
Adjustments:
Securitized debt from consolidated
VIEs(3)                                            (1,259,147)                  (20,829)                          6.71  %
Adjusted total borrowings                    $      1,288,592          $         10,821                           3.41  %

Adjusted net interest income and net
interest margin                                                        $          3,185                           0.85  %



(1)Includes Agency and Non-Agency Interest-Only Strips accounted for as derivatives. (2)Refer to below table for components of interest income. (3)Includes only the third-party sponsored securitized debt from CSMC USA.


                                       66

--------------------------------------------------------------------------------


  Table of Contents



                                              Average Amortized          Total Interest
Three Months Ended March 31, 2021             Cost of Assets(1)            Income(2)            Yield on Average Assets

Investments
Agency RMBS                                   $         1,352          $            31                          9.30  %
Non-Agency CMBS                                       208,870                    4,767                          9.26  %
Non-Agency RMBS                                        29,554                      355                          4.87  %
Residential Whole-Loans                               970,642                   10,058                          4.20  %
Residential Bridge Loans                               14,141                      230                          6.60  %
Commercial loans                                      325,227                    5,217                          6.51  %
Securitized commercial loan                         1,568,571                   24,564                          6.35  %
Other securities                                       49,396                      822                          6.75  %
Total investments                                   3,167,753                   46,044                          5.89  %
Adjustments:
Securitized commercial loans from
consolidated VIEs                                  (1,568,571)                 (24,564)                         6.35  %
Investments in consolidated VIEs
eliminated in consolidation                            59,051                    1,193                          8.19  %
Adjusted total investments                    $     1,658,233          $        22,673                          5.55  %

                                               Average Carrying          Total Interest         Average Effective Cost
                                                    Value                   Expense                    of Funds
Borrowings
Repurchase agreements                         $       348,541          $         3,604                          4.19  %

Convertible senior unsecured notes, net $ 169,010 $


     3,540                          8.49  %
Securitized debt                                    2,336,479                   29,625                          5.14  %

Total borrowings                                    2,854,030                   36,769                          5.22  %
Adjustments:
Securitized debt from consolidated
VIEs(3)                                            (1,495,410)                 (23,035)                         6.25  %
Adjusted total borrowings                     $     1,358,620          $        13,734                          4.10  %

Adjusted net interest income and net
interest margin                                                        $         8,939                          2.19  %




(1)Includes Agency and Non-Agency Interest-Only Strips accounted for as
derivatives.
(2)Refer to below table for components of interest income.
(3)Includes only the third-party sponsored securitized debt from RETL Trust and
CSMC USA.

The following table reconciles total interest income to adjusted interest income, which includes interest income on Agency and Non-Agency Interest-Only Strips classified as derivatives (Non-GAAP financial measure) for the three months ended March 31, 2022 and March 31, 2021:


                                       67

--------------------------------------------------------------------------------


  Table of Contents



                                                                                Three months          Three months
                                                                               ended March 31,       ended March 31,

(dollars in thousands)                                                              2022                  2021
Coupon interest income:

Agency RMBS                                                                    $          8          $         15
Non-Agency CMBS                                                                       2,972                 2,337
Non-Agency RMBS                                                                         545                   413
Residential Whole Loans                                                              11,283                12,105
Residential Bridge Loans                                                                 20                   232
Commercial loans                                                                      1,246                 5,153
Securitized commercial loans                                                         15,173                18,414
Other Securities                                                                        888                 1,591
Subtotal coupon interest                                                             32,135                40,260

Premium accretion, discount amortization and amortization of basis, net:



Agency RMBS                                                                              (4)                  (11)
Non-Agency CMBS                                                                        (402)                2,430
Non-Agency RMBS                                                                         (15)                  (58)
Residential Whole Loans                                                              (2,537)               (2,047)
Residential Bridge Loans                                                                  -                    (2)
Commercial loans                                                                          -                    64
Securitized commercial loans                                                          6,699                 6,150
Other Securities                                                                       (234)                 (769)
Subtotal accretion and amortization                                                   3,507                 5,757
Interest income                                                                $     35,642          $     46,017
Contractual interest income, net of amortization of basis on Agency and
Non-Agency Interest-Only Strips, classified as derivatives(1):
Coupon interest income                                                         $         89          $        121
Amortization of basis                                                                   (72)                  (94)

Subtotal                                                                                 17                    27
Total adjusted interest income                                                 $     35,659          $     46,044

(1)Reported in "Gain (loss) on derivative instruments, net" in our Consolidated Statements of Operations.



Effective Cost of Funds

Effective Cost of Funds includes the net interest component related to our
interest rate swaps, as well as the impact of our foreign currency swaps and
forwards. While we have not elected hedge accounting for these instruments, such
derivative instruments are viewed by us as an economic hedge against increases
in future market interest rates on our liabilities and changes in foreign
currency exchange rates on our assets and liabilities and are characterized as
hedges for purposes of satisfying the REIT requirements and therefore the
Effective Cost of Funds reflects interest expense adjusted to include the
realized gain/loss (i.e., the interest income/expense component) for all of our
interest rate swaps and the impact of our foreign currency swaps and forwards.

                                       68

--------------------------------------------------------------------------------

Table of Contents





The following table reconciles the Effective Cost of Funds (Non-GAAP financial
measure) with interest expense for the three months ended March 31, 2022 and
March 31, 2021:

                                                                           Three months ended March 31, 2022                Three months ended March 31, 2021
                                                                                                  Cost of Funds/                                   Cost of Funds/
                                                                                                    Effective                                        Effective
(dollars in thousands)                                                   Reconciliation          Borrowing Costs          Reconciliation          Borrowing Costs
Interest expense                                                       $         31,359                   4.99  %       $         36,769                   5.22  %
Adjustments:
Interest expense on Securitized debt from consolidated VIEs                     (20,829)                 (6.71) %                (23,035)                 (6.25) %
Net interest paid - interest rate swaps                                             291                   0.05  %                      -                      -  %
Effective Cost of Funds                                                $         10,821                   3.41  %       $         13,734                   4.10  %
Weighted average borrowings                                            $      1,288,592                                 $      1,358,620

Liquidity and Capital Resources

General



Liquidity is a measure of our ability to meet potential cash requirements,
including ongoing commitments to repay borrowings, fund and maintain our assets
and operations, make distributions to our stockholders, and other general
business needs.  To maintain our REIT qualifications under the Internal Revenue
Code, we must distribute annually at least 90% of our taxable income, excluding
capital gains and, such distributions requirements limit our ability to retain
earnings and increase capital for operations. Our principal sources of funds
generally consist of borrowings under repurchase agreements, Residential Whole
Loan securitizations, payments of principal and interest we receive on our
investment portfolio, cash generated from investment sales and, to the extent
such transactions are entered into, proceeds from capital market and unsecured
convertible note transactions.

We will continue to closely monitor developments related to COVID-19 as it
relates to our liquidity position and financial obligations. We currently
believe we have sufficient liquidity and capital resources available, for at
least the next 12 months, to fund our operations, meet our financial
obligations, purchase our target assets, and make dividend payments to maintain
our REIT qualifications. As of March 31, 2022, we had $42.8 million in cash and
cash equivalents. Also our other sources of liquidity were unencumbered
investments, and unused borrowing capacity in certain borrowing facilities since
the amount borrowed is less than the maximum advance rate.

Sources of Liquidity

Our primary sources of liquidity are as follows:

Cash Generated from Operations




For the three months ended March 31, 2022, net cash provided by operating
activities was approximately $1.6 million. This was primarily attributable to
the net interest income on our investments, less operating expenses, and general
and administrative expenses. For the three months ended March 31, 2021, net cash
provided by operating activities was approximately $3.9 million. This was
primarily attributable to margin settlements of interest rate swaps, operating
expenses, and general and administrative expenses, which were offset by the
interest income we earned on our investments.

Cash Provided by and Used in Investing Activities



For the three months ended March 31, 2022, net cash used in investing activities
was approximately $4.3 million. This was primarily attributable to purchases of
Non-Agency RMBS and Residential Whole Loans during the quarter, which was
partially offset by receipts of principal payments and payoffs on our
investments and the sale of an REO hotel. For the three months ended March 31,
2021, net cash provided by investing activities was approximately $145.2
million. This was primarily
                                       69

--------------------------------------------------------------------------------

Table of Contents





attributable to proceeds from sales to meet the margin calls and receipts of
principal payments and payoffs on our investments, which were partially offset
by our investment acquisitions.

Cash Provided by and Used in Financing Activities



For the three months ended March 31, 2022, net cash provided by financing
activities was approximately $5.3 million. This was attributable the Arroyo
Trust 2022 securitization, which was partially offset by a net decrease in
repurchase agreement borrowings, paydowns in our securitized debt, and
extinguishment of convertible senior unsecured notes. For the three months ended
March 31, 2021, net cash used in financing activities was approximately $207.4
million. This was attributable to net repayments of our repurchase agreement
borrowings to reduce our exposure to short term financings and repayment of
securitized debt related to consolidated VIEs which was offset net proceeds from
the Arroyo 2020-1 that closed during the quarter ended June 30, 2020.

Repurchase Agreements



As of March 31, 2022, we had borrowings under six of our master repurchase
agreements of approximately $342.4 million.  The following tables present our
repurchase agreement borrowings by type of collateral pledged, as of March 31,
2022 and March 31, 2021, and the respective effective cost of funds (Non-GAAP
financial measure) for the three months ended March 31, 2022 and March 31, 2021,
respectively (dollars in thousands).  See "Non-GAAP Financial Measures" for more
information:


                                                               March 31, 2022                                           Three months ended March 31, 2022
                                                                                       Weighted                                                   Weighted                                     Weighted
                                                              Value of                 Average                     Weighted                        Average                                      Average
                                        Borrowings           Collateral             Interest Rate                Average Cost                 Effective Cost of                                 Haircut
Collateral                              Outstanding            Pledged              end of period                  of Funds                  Funds (Non-GAAP)(1)                             end of period

Agency RMBS, at fair value            $        354          $      300                         1.13  %                    0.95  %                             0.95  %                                  25.00  %
Non-Agency CMBS, at fair value(2)           56,486             106,380                         2.14  %                    1.75  %                             1.75  %                                  40.00  %
Non-Agency RMBS, at fair value              70,839              81,898                         2.29  %                    2.51  %                             2.51  %                                  31.87  %
Residential Whole Loans, at fair
value(3)                                   110,433             121,794                         2.26  %                    2.33  %                             2.33  %                                  10.00  %
Residential Bridge Loans(3)                  4,231               5,129                         2.95  %                    2.67  %                             2.67  %                                  20.00  %
Commercial loans, at fair value(3)          70,121             101,435                         2.39  %                    2.55  %                             2.55  %                                  29.73  %

Other securities, at fair value             29,916              49,040                         2.32  %                    1.94  %                             1.94  %                                  37.01  %
Interest rate swaps                               n/a                 n/a                          n/a                        n/a                             0.27  %                                       n/a
Total                                 $    342,380          $  465,976                         2.29  %                    2.26  %                             2.53  %                                  26.05  %





(1)The effective cost of funds for the period presented is calculated on an
annualized basis and includes interest expense for the period and net periodic
interest payments on interest rate swaps of approximately $291 thousand for the
three months ended March 31, 2022.  While interest rate swaps are not accounted
for using hedge accounting, such instruments are viewed by us as an economic
hedge against increases in interest rates on our liabilities and are treated as
hedges for purposes of satisfying the REIT requirements.  See "Non-GAAP
Financial Measures."
(2)Includes repurchase agreement borrowings on securities eliminated upon VIE
consolidation.
(3)Repurchase agreement borrowings collateralized by Whole Loans, Bridge Loans
and commercial loans owned through trust certificates.  The trust certificates
are eliminated upon consolidation.

                                       70

--------------------------------------------------------------------------------


  Table of Contents



                                                                     March 31, 2021                                            Three months ended March 31, 2021
                                                                                               Weighted                                                  Weighted                                   Weighted
                                                                  Fair Value of                Average                     Weighted                      Average                                    Average
                                            Borrowings             Collateral               Interest Rate                Average Cost               Effective Cost of                               Haircut
Collateral                                  Outstanding            Pledged(3)               end of period                  of Funds                  Funds (Non-GAAP)                            end of period

Agency RMBS, at fair value                $      1,242          $        1,629                         1.13  %                    1.18  %                          1.18  %                                 25.00  %
Non-Agency CMBS, at fair value(1)               76,226                 144,346                         4.76  %                    4.86  %                          4.86  %                                 40.21  %
Non-Agency RMBS, at fair value                  14,456                  26,659                         5.20  %                    5.25  %                          5.25  %                                 33.33  %
Residential Whole Loans, at fair value(2)       57,296                  92,497                         3.09  %                    8.04  %                          8.04  %                                 35.99  %
Residential Bridge Loans(2)                     10,097                  12,044                         2.70  %                    2.76  %                          2.76  %                                 20.00  %
Commercial loans, at fair value(2)             153,542                 312,061                         2.36  %                    2.43  %                          2.43  %                                 34.86  %
Membership interest(3)                          19,551                  34,439                         2.86  %                    3.05  %                          3.05  %                                 35.00  %

Other securities, at fair value                 15,969                  48,666                         5.08  %                    5.17  %                          5.17  %                                 36.75  %

Total                                     $    348,379          $      672,341                         3.28  %                    4.19  %                          4.19  %                                 35.71  %





(1)Includes repurchase agreement borrowings on securities eliminated upon VIE
consolidation.
(2)Repurchase agreement borrowings collateralized by Whole Loans, Bridge Loans
and commercial loan owned through trust certificates. The trust certificates are
eliminated upon consolidation.
(3)The pledged amount relates to our non-controlling membership interest in our
wholly-owned subsidiary, WMC RETL LLC, which was financed under a repurchase
agreement. The membership interest is eliminated in consolidation.


Contractual Obligations and Commitments



Our contractual obligations as of March 31, 2022 are as follows (dollars in
thousands):

                                              Less than 1            1 to 3              3 to 5             More than
                                                 year                years               years               5 years               Total

Borrowings under repurchase agreements $ 342,380 $ -

$ - $ - $ 342,380 Contractual interest on repurchase agreements

                                         3,257                  -                    -                    -                3,257
Convertible senior unsecured notes                34,287             86,250                    -                    -              120,537
Contractual interest on convertible senior
unsecured notes                                    6,979              8,733                    -                    -               15,712
Securitized debt(2)                                    -                  -            1,370,691              831,875            2,202,566
Contractual interest on securitized debt          80,823            161,647               77,453              650,210              970,133

Total                                       $    467,726          $ 256,630          $ 1,448,144          $ 1,482,085          $ 3,654,585





(1)The table above does not include amounts due under the Management Agreement
(as defined herein) with our Manager, as those obligations do not have fixed and
determinable payments.
(2)The securitized debt is non-recourse to us and can only be settled with the
loans that serve as collateral. The collateral for the securitized debt has a
principal balance of $2.3 billion. Assumes entire outstanding principal balance
at March 31, 2022 is paid at maturity.


Management Agreement



On May 9, 2012, we entered into a management agreement (the "Management
Agreement") with our Manager which describes the services to be provided by our
Manager and compensation for such services. Our Manager is responsible for
managing our operations, including: (i) performing all of our day-to-day
functions; (ii) determining investment criteria in conjunction with our Board of
Directors; (iii) sourcing, analyzing and executing investments, asset sales and
financings; (iv) performing asset management duties; and (v) performing
financial and accounting management, subject to the direction and oversight of
our Board of Directors. Pursuant to the terms of the Management Agreement, our
Manager is paid a management fee equal to 1.50% per annum of our stockholders'
equity, (as defined in the Management Agreement), calculated and payable (in
cash) quarterly in arrears.

In December 2021, the Manager agreed to voluntarily waive 25% of its management
fee solely for the duration of calendar year 2022 in order to support the
earnings potential of the Company and its transition to a residential focused
investment portfolio. Future waivers, if any, will be at the Manager's
discretion.

Off-Balance Sheet Arrangements


                                       71

--------------------------------------------------------------------------------


  Table of Contents




We do not have any relationships with any entities or financial partnerships,
such as entities often referred to as structured investment vehicles, or special
purpose or variable interest entities, established to facilitate off-balance
sheet arrangements or other contractually narrow or limited purposes.

Further, other than guaranteeing certain obligations of our wholly-owned taxable
REIT subsidiary or TRS and the obligations of our wholly-owned subsidiary, WMC
CRE LLC, we have not guaranteed any obligations of any entities or entered into
any commitment to provide additional funding to any such entities.

Dividends



To maintain our qualification as a REIT, U.S. federal income tax law generally
requires that we distribute at least 90% of our REIT taxable income annually,
determined without regard to the deduction for dividends paid and excluding
capital gains. We must pay tax at regular corporate rates to the extent that we
annually distribute less than 100% of our taxable income.

We evaluate each quarter to determine our ability to pay dividends to our
stockholders based on our net taxable income if and to the extent authorized by
our Board of Directors. Before we pay any dividend, whether for U.S. federal
income tax purposes or otherwise, we must first meet both our operating
requirements and debt service payments. If our cash available for distribution
is less than our net taxable income, we could be required to sell assets or
borrow funds to make cash distributions or we may make a portion of the required
distribution in the form of a taxable stock distribution.


                                       72

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses