Mortgage Backed Securities

Mortgage Backed Securities constitute approximately 20-25% of AFN’s total investment portfolio. A significant portion of these assets consist of investments in Residential Mortgage-Backed Securities (RMBS) and mortgage loans secured by properties. RMBS investments generally consist of pools of mortgage loans secured by residential real property and in some cases guaranteed by agencies of the U. S. Government.

Investing in these types of assets allows us to capitalize on our manager’s expertise in real estate structured finance and real estate debt investments. The majority of our investments in this asset class consist of RMBS rated A or AA by Standard & Poor’s, or S&P and residential mortgage loans characterized by borrowers with average Fair Isaac Corporation (FICO) scores exceeding 720 and strong collateral credit quality. Our investments in these assets consist principally of Adjustable Rate Mortgages (ARMs) and Hybrid ARMs. We also invest in residential mortgage loans backed by guarantees of U.S. Federally Chartered Entities such as the Federal National Mortgage Association (Fannie Mae), as well as loans that are not guaranteed by such agencies.