Chimera Investment Stock

Chimera Investment Corporation operates as a real estate investment trust (REIT) in the United States.

The company primarily engages in the business of investing directly or having a beneficial interest in a diversified portfolio of mortgage assets, including residential mortgage loans, Agency RMBS, Non-Agency RMBS, Agency CMBS, business purpose and investor loans, and other real estate-related assets. The MBS and other real estate-related securities the company purchases may include investment-grade, non-investment grade, and non-rated classes.

During 2023, the company focused its investment activities primarily on acquiring and securitizing pools of residential mortgage loans, and when market or other conditions were favorable, exercising call options on existing securitizations to acquire the underlying mortgage loans and use additional securitization to re-finance those called mortgage loans. During 2024, the company expects to continue acquiring and securitizing mortgage loans, as well as calling the company’s existing securitizations depending on market conditions. When the company securitizes mortgage loans, the company typically retains the most subordinate classes of securities, which means the company is the first-loss security holder. In addition, most of these subordinate securities are subject to the Dodd-Frank Act and related laws and regulations relating to credit risk retention for securitizations, or the Risk Retention Rules, which significantly limits the liquidity of these securities.

In 2024, in addition to the company’s securitization and business purpose loan activities, the company will explore opportunities to increase the company’s Agency MBS portfolio. The company has also financed and may continue to finance a portion of the company’s loan portfolio with long-term secured financing facilities rather than securitization until the securitization market improves once the Fed begins rate cuts.

Securitization Programs

The company has the following five securitization programs:

The company’s ‘R’ program, its most active program, securitizes seasoned reperforming mortgage loans, whether newly acquired from a third party or upon the exercise of a call option, in a Real Estate Mortgage Investment Conduit, or REMIC, transaction;

The company’s ‘NR’ program securitizes seasoned residential mortgage loans that are not eligible to be securitized in REMIC, transactions;

The company’s ‘I’ program securitizes Non-Agency eligible investor mortgage loans;

The company’s ‘J’ program securitizes jumbo prime residential mortgage loans; and

The company’s ‘INV’ program securitizes Agency-eligible investor mortgage loans.

The company did not sponsor any securitizations under the company’s ‘J’ and ‘INV’ programs during the year ended December 31, 2023.

Investment Portfolio

At December 31, 2023, approximately 91% of the company’s investment portfolio was residential mortgage loans, 8% of the company’s investment portfolio was Non-Agency RMBS, and 1% of the company’s investment portfolio was Agency MBS.

Residential Mortgage Loans

The company invests in residential mortgage loans (mortgage loans secured by residential real property) through secondary market purchases from banks, non-bank financial institutions, and the Agencies. The company’s residential mortgage loan portfolio is primarily comprised reperforming residential mortgage loans, which have been outstanding, or seasoned, for more than 120 months, and typically have higher loan-to-value ratios and spottier pay histories.

The company’s residential mortgage loan portfolio also includes business purpose loans and investor loans. The company’s business purpose loans are loans to businesses that are secured by real property, which will be renovated by the borrower. Upon completion of the renovation the property typically will be either (i) sold by the borrower, or (ii) refinanced by the borrower who may then subsequently sell or rent the property. Most, but not all, of the properties securing the company’s business purpose loans are residential, and a portion of the loan is used to cover renovation costs. The company’s business purpose loans are included as a part of the company’s Loans held for investment portfolio and are carried at fair value. The company’s business purpose loans tend to be short duration, often less than one year, and generally the coupon rate is higher than the company’s residential mortgage loans.

The company’s investor loans are loans to individuals securing non-primary residences as well as to individuals or businesses who rent the residential properties secured by such loans. The company acquires pools of such loans which are eligible for sale to one of the Agencies, as well as pools of loans which are not eligible for such sales. In both cases, the company securitizes the investor loans as part of the company’s loan securitization program.

The company acquires residential mortgage loans primarily to securitize them, as discussed above, or to retain them in the company’s portfolio as loans held for investment. Until the company securitizes its residential mortgage loans, the company finances its residential mortgage loan portfolio through warehouse facilities and repurchase agreements.

The company acquires mortgage loans in the secondary market that are originated by third parties and is not underwritten to the company’s specifications. Third-party servicers service the mortgage loans in the company’s portfolio. The company conducts a due diligence review of each servicer before the servicer is retained and periodically thereafter. Servicing procedures typically follow Fannie Mae guidelines but are specified in each servicing agreement. In addition, the company has purchased residential mortgage loans on a servicing-retained basis, which means a third-party servicer (which may or may not be the seller of the mortgage loans) retained the right to service the loans. In the future, however, the company may decide to originate mortgage loans or other types of financing, and the company may elect to service mortgage loans and other types of assets.

The company engages a third party to perform an independent review of the mortgage files to assess the origination and servicing of the mortgage loans, as well as the company’s ability to enforce the lien on the related mortgaged properties. The company typically obtains representations and warranties with respect to the mortgage loans from each seller, including the origination and servicing of the mortgage loans as well as the enforceability of the lien on the related mortgaged properties. If any of the representations and warranties with respect to a mortgage loan the company acquires are breached, the related seller may be obligated to repurchase the loan from the company.

Residential Mortgage-Backed Securities

The company invests in mortgage pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac, which are securities representing interests in ‘pools’ of mortgage loans secured by residential real properties where payments of both interest and principal, plus pre-paid principal, on the securities are made monthly to holders of the security, in effect passing through monthly payments made by the individual borrowers on the mortgage loans that underlie the securities, net of fees paid to the issuer/guarantor and servicers of the securities. The company may also invest in collateralized mortgage obligations, or CMOs, issued by the Agencies. CMOs consist of multiple classes of securities, with each class bearing different stated maturity dates. Monthly payments of principal, including prepayments, are first returned to investors holding the shortest maturity class; investors holding the longer maturity classes receive principal only after the first class has been retired. The company refers to residential mortgage-backed securities issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac as Agency RMBS.

The company also invests in investment grade, non-investment grade and non-rated Non-Agency RMBS. The company evaluates certain credit characteristics of these types of securities and the underlying mortgage loans, including, but not limited to, loan balance distribution, geographic concentration, property type, occupancy, periodic and lifetime caps, weighted-average loan-to-value and weighted-average Fair Isaac Corporation, or FICO, score. Qualifying securities are then analyzed using base line expectations of expected prepayments and loss severities, the current state of the fixed-income market and the broader economy in general. Losses and prepayments are stressed simultaneously based on a credit risk-based model. Securities in this portfolio are monitored for variance from expected prepayments, severities, losses and cash flow. The due diligence process is particularly important and costly with respect to newly formed originators or issuers because there may be little or no information publicly available about these entities and investments. The company may also invest in interest-only, or IO, Agency and Non-Agency RMBS. These IO RMBS represent the right to receive a specified proportion of the contractual interest flows of the collateral.

The company has invested in and intends to continue to invest in Non-Agency RMBS, which are typically certificates created by the securitization of a pool of mortgage loans that are collateralized by residential real estate properties.

Agency CMBS

The Agency CMBS the company acquires are Ginnie Mae Construction Loan Certificates, or CLCs, and the resulting project loan certificates, or PLCs, when the construction project is complete. Each CLC is backed by a single multifamily property or health care facility. The investor in the CLC is committed to fund the full amount of the project; however, actual funding occurs as construction progresses on the property. Before each construction advance is funded, it is insured by the Federal Housing Administration, or the FHA, and issued by Ginnie Mae. The principal balance of the CLC increases as payments by the investor fund each construction advance. Each Ginnie Mae approved mortgage originator must provide the Agency with supporting documentation regarding advances and disbursements before each construction advance is issued by Ginnie Mae. The company also reviews this documentation prior to funding each Ginnie Mae guaranteed advance. Upon completion of the construction project, the CLC is replaced with a PLC. Ginnie Mae guarantees the timely payment of principal and interest on each CLC and PLC. This obligation is backed by the full faith and credit of the United States.

As the holder of a CLC, the company generally receives monthly payments of interest equal to a pro rata share of the interest payments on the underlying mortgage loan, less applicable servicing and guaranty fees. Ginnie Mae CLCs pay interest only during construction, and so there are no payments of principal. As a holder of a PLC, the company generally receives monthly payments of principal and interest equal to the aggregate amount of the scheduled monthly principal and interest payments on the mortgage loans underlying that PLC, less applicable servicing and guaranty fees. In addition, such payments will include any prepayments and other unscheduled recoveries of principal of, and any prepayment penalties on, an underlying mortgage loan to the extent received by the Ginnie Mae Issuer during the month preceding the month of the payment. The mortgage loans underlying the PLCs generally contain a lock-out and prepayment penalty period of 10 years during which the related borrower must pay a prepayment penalty equal to a specified percentage of the principal amount of the mortgage loan in connection with voluntary and certain involuntary prepayments. Ginnie Mae does not guaranty the payment of prepayment penalties.

Other Real Estate-Related Assets

The company may invest in commercial mortgage loans consisting of first or second lien loans secured by multifamily properties, which are residential rental properties consisting of five or more dwelling units, or by mixed residential or other commercial properties, retail properties, office properties or industrial properties. These loans may or may not conform to the Agency guidelines.

The company may invest in non-Agency CMBS, which are secured by, or evidence ownership interests in, a single commercial mortgage loan or a pool of mortgage loans secured by commercial properties. These securities may be senior, subordinated, investment grade or non-investment grade.

The company may invest in securities issued in various collateralized debt obligation, or CDO, offerings to gain exposure to bank loans, corporate bonds, ABS, mortgages, RMBS, CMBS, and other instruments.

The company has invested in a limited partnership managed by a registered investment advisor in which the company owns a minority equity interest. The limited partnership invests in REIT eligible assets, primarily residential assets. The company makes other similar investments, as well as invests in entities, which originate or service mortgage loans.

Tax Status

The company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. The company is not subject to federal income tax to the extent that it makes qualifying distributions of taxable income to its stockholders. To maintain qualification as a REIT, the company must distribute approximately 90% of its annual REIT taxable income to its shareholders and meet certain other requirements, such as assets it might hold, income it might generate and its shareholder composition.

History

Chimera Investment Corporation was founded in 2007. The company was incorporated in Maryland in 2007.