New York Mortgage Trust Inc (NYMT) Q1 2020 Earnings Call Transcript

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New York Mortgage Trust Inc (NYMT 1.98%)
Q1 2020 Earnings Call
May 22, 2020, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the New York Mortgage Trust First Quarter 2020 Results Conference Call. [Operator Instructions] This conference is being recorded on Friday, May 22nd, 2020.

A press release and supplemental financial presentation with New York Mortgage Trust first quarter 2020 results was released yesterday. Both the press release and supplemental financial presentation are available on the company's website at www.nymtrust.com. Additionally, we are hosting a live webcast of today's call, which you can access in the Events & Presentations section of the company's website.

At this time, management would like me to inform you that certain statements made during the conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although New York Mortgage Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time-to-time in the company's filings with the Securities and Exchange Commission.

Now, at this time, I would like to introduce Steve Mumma, Chairman and CEO. Steve, please go ahead.

Steven R. Mumma -- Chairman and Chief Executive Officer

Thank you, operator. Good morning, everyone, and thank you for being on the call. Jason Serrano, our President, will also be speaking this morning as we talk through the first quarter presentation. I will be speaking to the company's overview and financial summary sections, while Jason will be speaking to our investment strategy and business outlook sections.

The first quarter was defined by two periods, January 1st to March 9th, where the company continued to execute their plan raising $500 million in accretive capital and deploying it into residential and multi-family credit investments, and post-March 9th, where we saw unprecedented market disruptions from the COVID-19 global pandemic. As a response to these disruptions, we took decisive action to restructure our portfolio and focus on our core strengths, residential and multi-family credit opportunities. And at the same time, we focused on reducing our exposure to what we can't control, short-term mark-to-market borrowings on our repos.

Beginning on March 23rd and continuing through the quarter end, we sold over $2 billion in assets, reducing our outstanding repurchase agreements by $1.7 billion, finishing the quarter with $173 million in cash liquidity, $1.4 billion in unencumbered assets, and a portfolio leverage of 0.7 times. In early April, we completed a $250 million borrowing against our unencumbered residential loan portfolio. Combined with the proceeds received from the settlement of securities sold in March, we were able to repay an additional $560 million in securities repo. After giving effect to these transactions, the company's liquidity improved to over $200 million, while reducing our portfolio leverage further to 0.6 times.

These actions did come at a significant cost as the company had its worst quarter in its history, seen its book value decline by 33% and temporarily suspending its quarterly dividends. However, we believe our efforts have better positioned the company to weather the oncoming economic storm caused by the pandemic, and to recover some of the $300 million of unrealized losses carried on our balance sheet, allowing us to return to delivering the results -- delivering the results to our stockholders that they have come to expect.

I will now move over to Slide 6, our overview section. As of March 31st, 2020, our investment portfolio totaled $3 billion, and our total market capitalization was $800 million. As of last night's close, our total market capitalization has moved up to $1.1 billion. Today, our investment portfolio is 100% focused on credit strategies, choosing to manage through our strength of asset management in both residential and multi-family, while reducing our dependency on mark-to-market leverage. We have 57 professionals employed across three offices, all working from home since March 13th.

Moving over to Slide 8, where I'll discuss market conditions and housing fundamentals. On the economic front, COVID-19 has impacted the global as well as our country's economy significantly. Our first quarter GDP contracted 4.8% and is expected to decline further in the second quarter. Unemployment rate was close to 15% last month, and we saw lifetime lows in the 10-year treasury. Housing sales declined 17.8% last month and home price appreciation is expected to decline 1% or 2% into the next year.

In response to these factors, the US government initiated several programs to help both businesses and consumers committing upwards of $3 trillion to deal with this crisis. One of these initiatives, the CARES Act, which gives borrowers opportunity to defer mortgage payments, directly impacts our business. We have a history of dealing with payment interruptions from our borrowers, and we feel confident that as we emerge in is crisis, we will be able to assist and manage our borrowers back to their pre-crisis performance. In addition, given the dislocation in the mortgage credit markets, we believe this will present opportunities not seen over -- that we have not seen over the last several years.

In Slides 9, 10 and 11, I will address the COVID impact as it has had on our markets, our company and our response. In US, more specifically the mortgage market started feeling the effects of COVID-19 in early March. On March 16th, we started to experience increased margin calls. And by March 20th, it was clear we will be a full blown liquidity crunch. It was a combination of factors that impacted our company and our industry. Reduced liquidity access from the dealers for all types of collateral, decreased availability for credit sensitive securities and accelerating price declines, due in part to increased margin calls and a lack of buyer participants, which were quickly transitioning from return on equity investors to return on asset investors. On March 23rd, we stopped meeting margin calls and began discussions on some form of forbearance relief from our securities lenders. Over the course of the next few weeks, we sold over $2 billion of assets, including 100% of our agency portfolio and 100% of our Freddie K PO portfolio.

Reducing our securities, we purchased borrowings by over $1.6 billion. By April 7th, we were able to pay an additional $560 million in repurchase agreements by utilizing the $213 million in proceeds from sales initiated in March and $250 million in increased borrowings from our residential loan portfolio. As of today, the company has three lenders, with a total outstanding of $1.1 billion in borrowings. We are in good standing with all and ultimately we never entered into any formal forbearance agreements. In addition, we have over $200 million in cash and $1.5 million in unencumbered investments today.

On Slide 12, you can see the changes in the portfolio leverage of the company from December 31st, 2019 to March 31st, 2020. Our company has a history of managing through volatile markets. Never have we experienced such rapid price declines without the corresponding underlying asset deterioration. Our decision to liquidate the agency in Freddie K portfolios was a difficult one, but necessary as we needed to reduce low margin high leverage strategies and levered non-cash illiquid assets from our portfolio. We believe our remaining portfolio of credit investments gives us the best path to recover the book value declines that we have incurred.

We will maintain a disciplined and measured approach as we continue to monitor the effects of COVID-19 on our markets and focus on credit assets that rely less on leverage from short-term mark-to-market financing. In addition, we continue to focus on financing transactions that have longer committed terms and minimal or no exposure to mark-to-market.

As we move over to the financial results, we've included -- included in Slides 26 to 34 is our Quarterly Comparative Financial Information section that will help in aiding discussions of our performance -- our financial performance.

On Slide 14, we'll go through the first quarter financial snapshot, which you can see our basic and diluted GAAP loss per share of $1.71 and comprehensive loss per share of $2.11. Our economic return for the quarter was a negative 32.6%. We temporarily suspended both our common and preferred dividends on March 23rd. We continue to evaluate market conditions and hope to reinstate our dividends in the near future. Our investment portfolio totaled $3 billion with 78% in credit asset -- in residential credit assets and 20% focused on multi-family credit assets.

Our average net margin -- net interest margin for the first quarter was 2.92%, up 2 basis points from the previous quarter. Our average asset yield decreased by 16 basis points, but that was more than offset by the 18 basis point decline in our cost of financing, primarily due to Fed actions which began late last year. With $2 billion in asset sales and the related reduction of $1.7 billion in borrowings, our quarter end portfolio leverage was 0.7 times and our overall leverage ratio was 0.8 times. As I previously stated, our current portfolio leverage is 0.6 times today.

On Slide 15, our first quarter summary, you can see that we had $512 million loss in the first quarter -- I'm sorry -- we had $512 million in equity raise in the first quarter with two successful raises, one in January and one in February, generating $20 million of accretive capital. In addition, we have $333 million in purchases through the first week of March. The last two weeks of March, we sold $2 billion in securities and loans, and we had a GAAP net loss of $599 million and a comprehensive loss of $241 million.

Going into Slide 16 where there is further details of our financial results. You can see that we had net interest income of $47.1 million, an increase of $3.1 million from the previous quarter. We would expect second quarter net interest income to decrease due to the sale of the portfolio of sales that took place at the end of March. However, we don't expect a significant decrease in our net interest margin in terms of basis point spread. We had not-interest losses totaling $622 million, including $153 million in realized losses and $397 million in unrealized losses. These losses were primarily related to the $2 billion in asset sales and the mark down of our quarter end portfolio valuation. Sales included $1.4 billion of Agency and non-Agency securities, $550 million in Freddie K first loss POs and $50 million in loan sales. Also included in the realized and unrealized losses was the impact of unwinding our entire swap portfolio. The company has over $300 million of unrealized losses still on its balance sheet, which we believe we can substantially recover in the future as the world reopens post COVID-19.

We had total G&A expenses of $10.8 million for the quarter, an increase of $1.5 million from the previous quarter. This increase was largely attributable to $1 million related to long-term incentive costs -- amortization costs and a $500,000 increase in professional fees primarily related to the expenses incurred over the last two weeks of the quarter. For presentation purposes, the calculation of net loss attributable to common stockholders includes our preferred dividends. Even though they were not declared, the preferred dividends must be paid in full prior to any common stock [Technical Issues] and therefore included when determining net income for common stockholders.

The graph on the page shows that -- shows the five quarters' book value. The first quarter -- for the first quarter of 2020, we broke out the realized and unrealized losses for the purpose of illustrating that almost two-thirds of the book value decline is related to unrealized losses, which we believe we can substantially recover in the future.

I'll now turn the presentation over to Jason, who will go through our investment strategy. Jason?

Jason T. Serrano -- President

Thank you, Steve. Good morning. Starting on Page -- on Slide 18. As Steve mentioned, our book is now weighted toward single family at 78% versus 20% in multi-family. On 12/31, we had $1.5 billion of repo against $2.4 billion of assets. Looking at the end of the quarter, we ended with about $1 billion of assets, with about $118 million of total securitization repo, which when we get into the second where a lot of the liquidity issues arose, that $180 million is net of restricted cash.

On Page 19, we're looking at here on the single-family credit strategy. It starts with the residential loans, which is our distressed loan portfolio, where we've been purchasing sub-performing loans that had a checker delinquency history in the past but showed elements of being able to continue paying on the mortgage loans with servicing oversight help. In that case, we spent time with our servicer working on the borrowers in determining their servicing strategies and looking at different ways we can maintain a borrowers current payment from being, let's say, 30 to 60 days delinquent being coming a current loan or 12-month current loan, which is the goal. Obviously, with respect to the COVID-19 outcome and economic distress, we're spending obviously more time with our servicers ensuring that borrowers are getting the relief that they need and/or just understanding the terms of our loans. So, this is not an unusual strategy for us in working with borrowers that we've managed non-performing and sub-performing portfolios collectively for over 10 years on average on our team. So we have -- with our calls with our servicers, we have design strategy to meet the issues that have arose out of COVID-19.

On the performing loan strategy, where most of those assets, other than outside $94 million is related to scratch and dent loans. These are assets we've been purchasing at discounts to par with respect to some kind of technical issue at origination of that loan that was supposed to be sold to either Agency or a non-Agency conduit. In that case, with lower rates, we're seeing a pickup of prepayment rates on our portfolio, which is shortening the duration of our discount, which is actually increasing return of that asset class. Performance has been -- has done well through this period as well on the performing side.

On the securities side, where I'm going to spend most of my time is where we saw a liquidity trap at the end of March. Lower prices led to higher margin calls led to more sales led a lower prices and armored [Phonetic]. In that case, we saw an opportunity to sell $405 million, mostly in securities, to reduce our exposure to mark-to-market liquidity, increase our liquidity against the margin calls. Today, with -- on the securities side, as I said earlier, with $118 million of total repo balance outstanding after effective restricted cash, our focus is going to be on looking at the close to $1 billion of unencumbered assets and looking to obtain term financing structures.

Steve mentioned earlier that there was a $900 million of potential term structures that we're looking at for our portfolio. We have a number of proposals out there and we will be executing a few in the few weeks -- next few weeks. Looking to reinvest those cash -- that cash into assets that will have shorter duration, low LTV and high coupon carry, which I'll talk about in a minute.

Now, going over to Page 20, we're looking at the distressed loan strategies and servicing strategy updates. Again, our SPL characteristics, we have been focusing on buying loans in this space at low LTV, about 73% with a high cash carry on coupon relative to the conforming markets. In March, we actually saw the highest collections in our history of managing these types of loans, which we started the year at the end of 2019 with an 18% increase in total borrowers that are paying to -- and in one quarter, we had a 6% increase as of March 31st. After March -- obviously in middle of March, we saw the largest print ever and job losses of 23.15 million, which is about 8.7 times what we saw in any four-week time period during the great financial recession. We quickly went from looking at some opportunities and refinancings and other strategies to shorten duration to more of a defensive posture and managing our loans for the delinquencies that we would see, given the job losses and income losses altogether.

Today, we have a -- well, as of March 31st, our portfolio had 7% COVID forbearance, which is actually -- that time was in line with the Fannie and Freddie and GSE underlying forbearance rates around 6% to 7%. Again, this is a sub-performing loan book to be equal to performing loan book and forbearance rates is quite an achievement. Fast forwarding to 4/30, we had 21% of loans that entered into forbearance relief plans. Those loans -- of those loans, 55% or about 9.5% of the total loans were current in the month -- in 2020. So, while it's 21%, looking further into the data, it shows that only 9.5% of loans were current prior to COVID, so increasing our COVID forbearance rate from 7% to about 9.5%.

Again, we spend weekly calls with our servicers. We have design strategies for these types of outcomes. It's going -- the servicing industry is going to be under a lot of pressure over the course of the next few months as those forbearance plans that were in place with respect to the CARES Act or where borrowers are calling and getting updates and finding with -- finding out they're going to get extended or not. In our strategies, we try to deal with the borrower one by one and have design strategies for each borrower that were coming in and asking for a relief. We think we don't see a one-size-fits-all strategy here with respect to servicing outcome. We are outside the CARES Act, given these are private loans. And therefore, we are able to provide, we think, better relief efforts and longer standing relief efforts for these borrowers.

On Page 21 [Phonetic], now skipping over to multi-family, where 20% of our portfolio currently sits. We -- as Steve mentioned, we sold out our first loss position, which was mostly the $1 billion of sales we did in the quarter. We delivered out of the first loss and basically moved up the capital structure into the mezzanine bonds that we own on our balance sheet where we currently own today. So, in doing so, we sold down about $800 million of POs, first loss positions, and today we have a portfolio with a minimum of 7% credit support in that security line item of $268 million, 7% credit support against a portfolio of loans, which were underwritten and origination by our multi-family team. We feel very comfortable with the exposure there -- limited exposure to student housing. In fact, when we look at the forbearance rates, it's a fraction of what we're seeing from the single-family side, and this is due to higher lease rollovers from expectations, as well as landlords that have actually proactively reached out to tenants and helped them with securing government aid as it relates to job losses or PPP plans, etc, as it relates to the CARES Act. So we think those efforts as well as solid fundamentals in the multi-family space has really helped keep the pay ratio high and the delinquency rates low on the underlying loans

Going to Page 22, spending more time now on our direct loan exposure where half of our exposure is in multi-family space. What we call direct exposure is loans to multi-family properties, typically 150, 300 units. These are loans mostly in the South, Southeast part of the United States, where the underlying borrower is taking out a senior loan with respect to likely Freddie Mac. In the average loan portfolio section box to the right, you can see that loan is around $29.8 million on average, where we provide a $6.2 million average mezz loan or pref to -- from a 68% LTV to an 80% LTV at our position. Again, these are loans that our two properties in mostly the South, Southeast part of the United States where we see the best demand characteristics and migration from the Northeast, particularly to those markets. Job losses in those markets, we think, will be given the economies are already, in most cases, have come back with respect to isolation measures. We think we'll have a faster return and will outperform the Northeast markets with respect to the multi-family.

In our portfolio, we have 50 mezzanine loans or pref loans where we have one loan as of 4/30 that was in and as of today, that is in a state of COVID forbearance. Prior to -- up to 3/31, we didn't have any loans that needed forbearance relief. We do have one loan today that comprises roughly 1% of portfolio. We're actively reaching out to our -- to the property managers and the sponsors on all of these properties to get assessment of their forbearance-related plans with respect to their tenants. To-date, we've been surprised on the level of activity and general performance underlying portfolios. This is an area that we will likely overweight with respect to the cash raising from financing in the near future. So, the expectation here is that we will continue investing into this asset class.

Switch over to Page 23, where we sold -- this is the Agency exposure, as Steve mentioned earlier, we took advantage of the liquidity that was being off the mark in our Agency book. We sold off the position to delever increased liquidity paid our margin calls today. This is an asset class that we find challenged with respect to generating any meaningful return. As of Friday, the yield in this asset class was about 1.1%. You have a very short duration now in this market as we modeled out about 1.5 years versus 5.5-year duration in January. So, with respect to -- while the interest rate volatility is definitely lower, there is no structural changes coming to this market that will have to be analyzed that we've never seen before.

As relates to COVID plan, forbearance reliefs and different measures FHFA may roll out for those particular forbearance plans whether those loans get bought out of the portfolio or stay in the portfolio, will change the CPR rates. So these are additional factors that it will be very hard to model. There is no real history on those -- that type of activity. And therefore, we think this is definitely an asset class that will be underweighting. We will continue using the Agency CMBS space as an incubator for cash to the extent that we were looking to raising capital and put into the market. That is an area where we don't see negative convexity risk, given the fact that the borrowers and aligned multi-family CMBS from Freddie Mac in particular are locked out from any kind of pre-payment potential. So then -- so, the premium assets, you can buy there have durations that are well -- can be well analyzed and modeled out.

On Page 25, just looking at our -- the outlook for the second quarter, we -- obviously we're going to continue our credit focus where we have ample experience looking at both distress and delinquency and dislocation both in multi-family and single-family asset classes. In this market, we can target higher discounts and look for better upside with respect to the low rate environment. I mentioned earlier, we were looking at some -- in particular, short duration strategies in multi-family bridge loans, etc, where a sponsor was likely going to take out a K-Series or Freddie Mac senior loan and looking at the underlying fundamentals, may want to wait a year or two to take out that senior loan and lock them in for 10 years. That's an opportunity to provide bridge loan financing at high -- at low-double digit and total teens return opportunity to a 50% to 65% LTV type of property under very short duration.

In single-family, we're finding value in the scratch and dent markets, where we're looking at assets with an [Indecipherable] price where we see rates continue to come down and more prepayment optionality for those borrowers that are getting into -- that were supposed to go into a Fannie Mae securitization, Freddie Mac securitization, and did not make it because of a technical issue. So, our ability to refinance those borrowers into a Fannie, Freddie deal on the follow is something that we think will add value. On our financial position, given our -- as Steve mentioned, our total leverage ratio of about 0.6 times, plenty of cash on balance sheet with unencumbered assets, we are, again, as you said, looking at different proposals for term finance non-mark-to-market structures where we can redeploy that capital into a market that has opportunities in both single-family and multi-family. In that particular case, the goal for us is to focus on credit -- in credit to focus on low LTV product where there is ample credit support protection -- to protect against 20%s, so moderate unemployment rate in this market.

So, the prices in this market are definitely reflecting the unemployment rate that we've seen, different measures and economists have looked at unemployment rate coming back from 20%s level to a 30.5%, so even 11.5% flat line over the course of 2021. So these are the types of scenarios that we have to abide by and look at when we're looking at any of these -- anything in the credit space to ensure that it has the downside protection and being able to utilize our expertise in managing distress.

So with that, I'll pass it over to Steve.

Steven R. Mumma -- Chairman and Chief Executive Officer

Thanks, Jason. Operator, why don't we open it up for questions now?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Doug Harter from Credit Suisse. Your line is now open.

Douglas Harter -- Credit Suisse -- Analyst

Thanks. Given the commentary you made around kind of target asset mix, what do you think -- what type of leverage do you think your balance sheet can sustain right now and kind of what should we think about in terms of facing to get there?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. Look, Doug, going forward, I think, all the -- all of us who are in the credit market, we're going to look to put more secure financing in place. So, as we look -- as we -- as Jason mentioned, we're in the process of working to get some of our over $1 billion of unencumbered securities out on some longer-term financing of 12 to 18 months non-mark-to-market. So, it's going to definitely be on a lower leverage amount, probably LTVs of 60% to 65%. So I would imagine, at our 0.6 to 0.7 times, longer term we probably start to look like between 1 and 1.5 times. And that will depend on the underlying asset. But as we continue, I think, we are going to do, given the opportunities today, focus on more loan oriented type investing either direct lending or residential loan purchasing, there'll be combined with some kind of longer-term financing. So, again, given the kinds of advanced rates we're seeing, my guess would be between 1 and 1.5 times.

Douglas Harter -- Credit Suisse -- Analyst

And kind of -- just -- I guess, how should we think about the net interest margin, yeah, kind of in that environment no? I'm just trying to -- using 1, 1.5 turns of leverage and kind of backing into what that would mean from an ROE kind of after the preferred dividend and after the expenses, I guess just trying to figure out how that's -- what that sort of pencils out to and are there going to be other sort of fee income that you've generated in the past?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. Look, I think, to some extent, selling some of the assets that we sold to Freddie K POs, for example, so if you think about the assets we did sell, we sold the Agency, which was a lower yielding high leverage strategy and we sold the POs, which was obviously a high yielding lower levered, but still leverage strategy. The net margin was 292 basis points. I think, at the end, when we get done with it, we're going to be around the very similar neighborhood, 280 to 195 basis points.

And if you look at -- if you take the leverage out, keeping in mind that we have much lower cost of interest expense because of the lower leverage, I mean, I think we will still move toward generating a high single-digit, low double-digit yield in this difficult environment. As we get more comfortable and get more financing in place, it's longer term and we understand the cost of that financing which has changed substantially from our discussions that started to take place in the beginning of April to today. It's probably come in 300 or 400 basis points. We're better able to judge what that looks like as we go into the end of the second quarter into the third quarter.

Douglas Harter -- Credit Suisse -- Analyst

Great. Thanks, Steve.

Steven R. Mumma -- Chairman and Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from the line of Eric Hagen from KBW. Your line is now open.

Eric Hagen -- KBW -- Analyst

Hey, gentlemen. Good morning and hope you guys are doing well. A few questions here. On the preferred equity and mezz debt side, were there marks on those positions during the quarter?

Steven R. Mumma -- Chairman and Chief Executive Officer

Absolutely.

Eric Hagen -- KBW -- Analyst

And then -- yeah, let me -- I'll just kind of go through my questions.

Steven R. Mumma -- Chairman and Chief Executive Officer

Sure.

Eric Hagen -- KBW -- Analyst

$300 million in unrealized losses that you think are recoverable versus the $390-something million were unrealized taken during the quarter, can you just help us tie together the difference there?

Steven R. Mumma -- Chairman and Chief Executive Officer

Sure.

Eric Hagen -- KBW -- Analyst

And it looks like maybe the unrealized losses are sitting mostly in the resi credit portfolio, but can you get more specific on where those losses sit? And then, finally, you guys noted that there were some settlements of sales that took place post quarter end. Was there any impact on book value from that? And what's the outlook for the dividend from here?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. So, the first one on -- sure. Thanks, Eric. The first -- the question -- I don't know, on mark-to-market on the preferred, so we account for the preferred in two different buckets. One, from an accounting standpoint, qualifies as a loan, it shows up as an individual line as a loan. And if it doesn't qualify as loan, it shows up as an investment unconsolidated subsidiary. But across those two asset classes, there was about $9 million in unrealized losses. Those losses are calculated based on how you go through any fair market valuation assessment, the Level 3 assets. We're looking at the current rates that preferreds are being issued at today in terms of our lending rates that we're active in the marketplace and our competitors as well as the underlying properties. So, it was about $9 million on that portfolio.

As Jason pointed out, there was only -- today, at April 30th, there's only one loan that's delinquent, it's $3 million of the $311 million. All of them are meeting their cash flow commitments to us so far. And when you look at trying to reconcile the unrealized, and this is where GAAP accounting doesn't do favors to people who look at financial statements. So if you think about realized versus unrealized, realize is the difference between the amortized purchase costs and the sales price, and unrealized is where you last market to the amortized costs. So, we end up with $300 million on the balance sheet. But as you can imagine, we were in a positive position on some of those asset classes. So, as you transition from up $100 million to down $300 million, that's where you generate your $400 million or $396 million. Another part of the aspect of the $396 million is the unwinding of the swap book, where it showed that we had a $73 million realized loss, but that was offset by $43 million of unrealized losses previously taken. So, really a net of $28 million.

So, the $300 million that ends up on the balance sheet is across the residential portfolio. And I think, the best way to look at that, Eric, is if you look at the fair value table in what the 10-Q is filed next week, it will lay out exactly where all those unrealized losses sit. I don't have that right in front of me, otherwise I'd give you the numbers, but I don't have it sitting in front of me. So, I don't want to guess off the top of my head, but it will be disclosed Tuesday when we file the 10-Q.

Eric Hagen -- KBW -- Analyst

Super. And then, how about the impact on...

Steven R. Mumma -- Chairman and Chief Executive Officer

And in the sales -- yeah, as it relates to the sale...

Eric Hagen -- KBW -- Analyst

[Speech Overlap] dividend as well, Steve. Thanks.

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah, yeah, yeah. The sale that took place in early April were really sales that we entered into at the end of the March on a trade day basis and just settled in the first week of April. And then, as a dividend, we continue to evaluate the markets. I would like to go through the June 1st payment cycle to see if the delta change in the COVID cash payment flows, but we're very hopeful that will be reinstating the dividends in the near future.

Eric Hagen -- KBW -- Analyst

Great. And not to be too dense on the book value, but it sounds like no real meaningful impact from the end of the quarter on book value.

Steven R. Mumma -- Chairman and Chief Executive Officer

No. I mean, look, we know from the other people that have come out and announced, there are several REITs that have come out and said their book values are up. Look, there's no question that securities portfolio is up. There is no question that some of our other asset classes have improved liquidity, started to improve in terms of -- you're starting to see two way flows of securities and loan transacting, securitization is being done. We're still continuing to evaluate the residential loan market as it relates to forbearance. So, we would prefer not to go out. While we feel comfortable that the book value is higher, we don't really want to put a number on how much higher it is.

Eric Hagen -- KBW -- Analyst

Got it. Thank you so much and have a nice holiday weekend.

Steven R. Mumma -- Chairman and Chief Executive Officer

Thanks, Eric.

Operator

Thank you. Our next question comes from the line of Jules Kirsch from Jules P. Kirsch. Your line is now open.

Jules Kirsch -- Jules P. Kirsch -- Analyst

Good morning, gentlemen. I hope you do have an enjoyable weekend. My question concerns the likelihood going forward of further margin calls. Has that exposure changed? And if so, in what direction?

Jason T. Serrano -- President

Yeah, I mean, look just from the mere fact that we've almost taken $1.7 billion of liabilities off the balance sheet, that in itself has reduced the margin calls, which was one of the goals of the company. We have one -- we have one non-Agency security out on the repo, which has been marked down significantly, and we believe the marks on that portfolio represent probably lower than where the actual price of the security is today. So we don't foresee significant margin calls in that in the future. And then, the remaining part of our borrowings on our residential loan portfolio, which has been marked to where we think represent market clearing levels on the loan side. So, while there can be additional margin calls, we don't think we're in a situation where we'll have significant amount of margin calls that put the company under distress again unknowingly.

Jules Kirsch -- Jules P. Kirsch -- Analyst

Thank you.

Jason T. Serrano -- President

Sure. Thanks for the question.

Operator

Thank you. Our next question comes from the line of Stephen Laws from Raymond James. Your line is now open.

Stephen Laws -- Raymond James -- Analyst

Hi. Good morning, Steve. Good to hear from you guys. Hope everyone is doing well. Wanted to follow-up, maybe I apologize if I missed a comment, but a question earlier -- somewhat around the dividend, but really more taxable income. I think, one of the -- in the release was $170 million of unrealized gain reversal. Was that in taxable income and has been distributed? Where does that leave you from a distribution requirement standpoint? And from a taxable income basis, how do we think about what is losses on security sales, where they're floored at zero and can't offset ordinary income versus what's normal course of business and can offset ordinary income from the portfolio to drive that taxable income?

Steven R. Mumma -- Chairman and Chief Executive Officer

It's a very good question, Steve. We -- obviously when we look at our taxable distribution requirements for the year, it's a yearly requirement that we have to meet. And so, when we just -- when we suspended the dividend, that was 100% related to meeting near-term liquidity concerns. And as we go forward and set our dividend policy, obviously we're going to take all this into consideration. But as we sit today, we feel confident that given where we think when we reinstated dividend and our ability to generate the return to cover those dividends, we won't have any significant mismatch of what we're required to pay and what we are [Technical Issues].

Stephen Laws -- Raymond James -- Analyst

Okay. Thanks for that color. And I know you have to still early in the year for dividend commentaries. I understand that.

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah.

Stephen Laws -- Raymond James -- Analyst

To think about cash flows a little more and just interest income on the loan portfolio, I appreciate the reconciliation of the 7%, that's maybe 9.5% roughly, I believe, Jason said at the end of April. Where do you -- do you have any thoughts on where that goes or can you give us some color on the geographic footprint of those loans? And then, as they do go into some forbearance plan, how does that work with regards to accruing interest? To accrue interest for, say, 90 days or certain period of time on your income statement, or does it not run through the income statement once it starts taking forbearance?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. So, on the servicing side, the overall what we're seeing is a market that's going to trend to about a 20% forbearance rate. And I think, in totality, on the non-Agency side of the equation, including new performing loans that originate in 2019, we think that number is going to in the 20%s. Our portfolio at a 20%-plus COVID relief plan effort, which most of those loans -- 55% of the loans were already delinquent prior to the COVID plans. We're giving extra relief without pursuing foreclosure measures, etc. We think we're going to continue to see that increase. We think we've seen that the largest increase to-date in that -- in the last monthly cycle in April. We have seen a number of borrowers that have made payment after the COVID plan has been in place for a one-month deferral. And remember, our servicing strategies do not just simply have to offer a six-month or 12-month forbearance. We also look at month to month deferrals as well to ensure that the borrow is not being put into a situation where he won't be able to access credit in the future such as a refinance with a longer-dated forbearance.

What everybody has read is that the -- as loan goes into forbearance, the payment disruption is not reported to the credit bureaus, but what is -- it is reported is the fact that the borrower went into forbearance. So having a forbearance on your credit actually does limit your capability of accessing every finance at lower rates. So we're very careful not to have that be a headwind against the bar and lowering his overall payment in accessing record low mortgage rates, which we expect to see over the course of next six months. So that is on a case-by-case basis. And again, we do expect that number to increase, but we think we've seen the largest increase to-date in the month of March -- sorry, month of April. As you can see on our portfolio, we bought these loans with a number of these loans already delinquent from the start. We are working with a loan servicer and servicers that have vast experience. And in one of our larger services dedicated personnel to our servicing book. So we're not taking a performing loan -- servicing strategy and trying to figure out forbearance related to relief plans. We've been in active conversation with a number of these borrowers for over a year. And the conversations continue through these forbearance plans. So, we have borrowers that understand the relief efforts that our service has been provided to them, and we have a servicing team that is -- was basically selected and built to deal with high level amount of delinquent performance.

So we feel pretty comfortable that our ability to service through this environment. Obviously the question of total delinquencies will be a function of total job losses and where those job losses are. Your question earlier is where our portfolio and the footprint, we have a national footprint portfolio we have underweighted portfolios in selection in the northeast part of the United States for a number of years are simply related to the foreclosure delinquent -- foreclosure timelines that are associated in a market like New York. That could take up to five years to pursue a foreclosure. We -- in buying our portfolio, we are looking at loans that are more aligned with us. In fact, we have a 70-ish% LTV. So there's plenty of equity in those loans and for borrowers to want to keep access to that equity going to forbearance or delinquency just reduces the LTV of the borrowers' equity position. And that's something that they want to avoid as well -- as us.

So, again, we're aligned in these relief plans and do you expect to have to outperform the market as a whole and potentially even the agency market with respect to their forbearance relief plans on a 100% performing loan portfolio.

Stephen Laws -- Raymond James -- Analyst

Great. Thanks for the call.

Jason T. Serrano -- President

And Steve, the last part of your question is about the accrual. If they go into the forbearance plan, we would stop accruing immediately. Typically, you do 90 days in the new stop, but if somebody is going into a plan, we would stop accruing at that point.

Stephen Laws -- Raymond James -- Analyst

Right. The cash basis I think our model [Phonetic]. Yeah. That's right, as I think about my model to have that clarified. Last question, if you don't mind, really appreciate your closure in the deck and the financial tables. I wanted to ask one on Page 14 regarding the investment portfolio. Given the shift in mix, should we expect that yield on average earning assets to go up? Without the agency assets, have these been historically adjusted to remove the impact of the lower yielding Agency securities or how do we think about yield on average interest earning assets going forward without the Agency CMBS?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. I mean, if you -- so we really sold two large blocks of assets, the low-yielding Agency portfolio and the higher yielding Freddie K first loss POs. And so, interestingly enough, when you take out those two portfolios, the net margin overall for the company doesn't change significantly. I would -- I did the calculation, we've obviously done the calculations forward, and I would say it's going to be within 10 to 15 basis points of where we were last quarter -- first quarter, $292 million as we said.

Stephen Laws -- Raymond James -- Analyst

That's good color. I know you mentioned the stable spreads during your prepared remarks, but I wasn't sure if things were shifting.

Steven R. Mumma -- Chairman and Chief Executive Officer

No, no -- yeah, yeah.

Stephen Laws -- Raymond James -- Analyst

Great. Thanks a lot, Steve, and Jason. Appreciate it.

Steven R. Mumma -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Christopher Nolan from Ladenburg Thalmann. Your line is now open.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Hey, guys.

Steven R. Mumma -- Chairman and Chief Executive Officer

Good morning.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

On the comments that you guys made in terms of ramping up to a high-single digit low-double digit ROE, what should we expect for the next couple of quarters? I mean, should you be able to achieve somewhere in that range in the second quarter or third quarter?

Jason T. Serrano -- President

Yeah. I mean, Chris, look, I think the difficulty of coming down with a very specific ramp on where and when we're going to get there, really, I mean, one of the reasons why we've hesitated to reinstate our dividend is, we want to get our handle around this June 1st cycle mortgage payments that come through with the borrowers. And exactly as these states start to reopen, how is the economy reacting? And how quickly do we think it's going to happen? So, as we go and put on these longer-term funding against our unencumbered portfolio that will give us some excess cash. That will, as we start to reinvest some of that cash, will get a better sense of exactly when we think we're going to meet those goals. So we don't really at this point want to put a timeline -a specific timeline on that.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Great. And then, on the mezzanine for the direct lending, Jason, do you have -- on the mezzanine parts of the direct lending, you're sort of in a position on the capital structure for your borrowers, which -- going into credit down cycle, I think, for multi-family. I mean, how you guys look to limit your losses on them? The loans are structured as more of a short duration type of opportunity. The premise of the borrower taken the loan was that there were some capital improvements, management issues that were underlying that property. The new sponsor took it over. So, there is an expectation there that you'd have cash flow improvement on the underlying property. And then, that loan could be refinanced -- our mezzanine loan to be refinanced out with a agency supplemental. You have to remember that the multi-family market is backstopped by the Fannie and Freddie multi-family lending -- senior lending. So there's plenty of liquidity on the senior loans that exist in that market. Part of the crisis that we've seen in the securitization space and residential loans is the fact that lending disappeared. So your ROA -- your ROE return now became the same return but on an ROE basis, and that basically brought the price down 20, 25 points in some cases so.

So, where there is still lending and still active financing, you have not seen price declines to that extent. And this is one of those cases, the multi-family space with senior lending is still is basically backed up by Fannie and Freddie. In our case, were mostly for our assets. Given the size of our assets are mostly supported by senior loans from Freddie Mac. So, to the extent that their management plan went in place, there is a potential supplemental that can be taken out. But overall, we've seen cash flows. We've seen cash flows to be are pretty stable. With respect to these assets, again, our portfolio is mostly in the Southeast part of the United States. So, with a one loan delinquency as of today, we are seeing very stable trends to that market. Obviously unemployment rate benefits and PPP benefits have been helpful to the underlying tenants. We are supported by an 82% LTV on those loans. And to the extent, our portfolio just wasn't originated obviously this month, we have a seasoning in these loans where the LTV has actually decreased due to 6%, 6.5% increase in property value prices or more, given the location of these assets. Again, in the South, Southeast part of United States where you've had a lot of appraisal up to high-single digits and in these marks on an annualized basis.

So, we feel comfortable about our position. We feel comfortable about our sponsors. The part of the reason -- the loans that we provide and the reason why we provide these loans to these sponsors that they're well capitalized sponsors. They're not sponsors that come in with one loan opportunity and are not comfortable or don't know how to run a building. They're seasoned veterans in the space, have ample liquidity, ample access to the Fannie-Freddie pipe -- securitization, financing channels. So, we think that the liquidity and the sponsors are strong, and the underlying assets have been proved. Could we see increases in delinquencies with tenants, etc? Yes, absolutely. There are reserves -- interest reserves built into these loans as well. And there are various mechanisms that the senior lending forbearance plans will allow Freddie Mac as part -- is looking at up to 100 -- up to 90, 120 days of forbearance for the landlords, which obviously will create income and help support that landlord if he has any liquidity issue. So, we're not expecting a large increase of delinquencies in this space, given where the borrowers -- where the assets are located and the sponsors that support them.

Jason T. Serrano -- President

And Chris, one of the things we like this asset class is, given the legal protection that we have in the sense that the seniors sitting at 68% LTV, we're sitting at 82% LTV. To the extent they don't meet the terms of our loan, we can take over the property. So there's a significant amount of equity in the property that we think that protects us and has protected us historically. We have one exposure to a student housing is very small amount of the portfolio, which is probably the highest concern right now. And the one loan that's in the forward delinquency was a loan that has had issues from a property manager operation standpoint. It's more poor execution as opposed to a bad property. So, while they've chosen a COVID forbearance plan, because that's what the markets allow them to do, it is something that we're watching but we don't have, right now as we sit, we feel very good about the properties. And they continue to perform above the expectation, given where -- given what they could do.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Yeah. My concern would be not so much the LTV, it's more than debt service coverage that these guys have after they pay off their first lien mortgage.

Steven R. Mumma -- Chairman and Chief Executive Officer

That's right. Well, yes -- and part of the protection is, look, there's no cash distribution out until all of our payments are made. So, there is a cash trap within these structures, which is helpful to entice them to make sure that they get these things back cash flowing properly so they can take cash out of the property. But look, that's why most of our loans are -- the seniors are Freddie and Fannie. And as Jason said, there is programs from both those institutions to lend money to let them help them meet their cash flow requirements.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Great. Thanks, guys.

Steven R. Mumma -- Chairman and Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from the line of Matthew Howlett from Nomura. Your line is now open.

Matthew Howlett -- Nomura -- Analyst

Hi, Jason; hi, Steve. Thanks for taking my question. Look, it's a monumental to get to finance and that it's going to be a lot of cash. I think, I heard you correctly, you're going to sort of deploy it slowly and see how things go. I want to sort of put it out there if you do reinstate the preferred and common and you can buy obviously you can look at sort of various pressure capital stacks, because that's something you'll look at when you look at sort of capital deployment options.

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah, absolutely. Absolutely, Matt. I mean, I think the question is, as we look forward to opportunities and we think about our business model, we need to figure out ways to create longer-term financing structures that eliminate or reduce the mark-to-market exposure, which going into March we thought we were low levered, which we were at 1.5 times. But with over -- at the beginning of March, we had over $1 billion of unencumbered assets, but we still were unable to -- we still had difficulty meeting margin calls. And so, therefore we reduced the portfolio. But as we go forward, and raise -- and get additional capital that those returns -- those incremental investments are going to be driven toward reinstating the dividend and making sure that we cover the dividend with cash.

Matthew Howlett -- Nomura -- Analyst

Got it. And then, just when I look at the model going forward, and you guys have always had net interest margin, and also realized gains and sort of part of those that MPL, and that's still going to be part of the core model, right sort of looking at it going forward these gains you take on these whole loans and other strategies.

Steven R. Mumma -- Chairman and Chief Executive Officer

That's right. That's right. I mean, that's absolutely right. Look, I mean, part of the $300 million of unrealized loss sitting on the balance sheet, there is going to be some recovery of that unrealized. And that's going to be an aspect of everybody's income in the REIT sector. Our direct lend generates fees that will always be part of our income. And we will continue to invest in assets that we think are distressed that give us a chance for capital appreciation. It will never be just 100% net spread model. That's just not our core DNA and, we think there's better opportunities in buying distressed opportunities.

Matthew Howlett -- Nomura -- Analyst

Right. Certainly it's always never been entirely part of it. And then, on the residential transitional loans, could you comment on anything is left in the portfolio, what you look at, how you look at that market today where the opportunities could be or is it something that you see value and opportunities elsewhere?

Steven R. Mumma -- Chairman and Chief Executive Officer

Do you mean fix and flip?

Matthew Howlett -- Nomura -- Analyst

Yes.

Steven R. Mumma -- Chairman and Chief Executive Officer

Is that what you...

Jason T. Serrano -- President

Yeah. So, on the fix and flip market, we have underweighted that. We have roughly $90 million exposure there in that performing loan category. And we've underweighted simply because of the refinancing that was happening in those underlying pools in the fix and flip market that was taking a lot of the borrowers out of the fix and flip loan into a 30-year loan, invest in the non-QM market. Now with the non-QM market essentially closed, there is definitely going to be more pressure on the underlying borrowers there to make payment. Obviously selling houses is more difficult in this environment. So we think there's going to be more extensions on the fix and flip market. I think eventually that will play itself out in the very near-term where extensions will increase somewhat probably beyond 20% to 30% ratios, if not more. And then, the question is, what happened to hose properties after that?

We have -- we are very confident in our ability to take over properties to manage properties whether it's rental cash flows or into a sale. I see more of a distressed -- I see two options there, a distress option to buy delinquent loans in that space, where there is a lack of servicing from an originator that didn't have the searching personnel to manage a 20% or 30% delinquent book, where you can transfer servicing and basically utilize our servicing capability that we've built up to do that.

And the other side is that you're going to see more bridge loan opportunities in the space, shorter duration, hard money financing, if you will. It's a very strong sponsors, which could also provide an opportunity for us. In those cases in the past, you'd take a 7-ish% type of net coupon and you lever that 1 times or so with the market was doing today, you could do that on a lever basis and still generate a double-digit return, which is obviously attractive. The question is, tracking that sponsor and their ability to move the asset or rental or rent the asset so ensuring that the cap rates in those markets supportive of the debt that you're taking. So, again, high coupon debt, some of that will have to be in a form of a flip. So we are evaluating, we know the players in the space, there is large portfolios that have been marked out for sale in the hundreds and millions of range that we've been tracking. And we think that there may be a better opportunity down the line from here than today.

Matthew Howlett -- Nomura -- Analyst

Yeah. It sounds like you guys have really, really kind of different opportunities. And then last question, I might as well throw it in there, guys. Really one of the few reserve demand is successfully through financial crisis. You got through it, it came out very strong on the other hand. If there's any broad comments in terms of the cycle versus what you saw during that cycle it and sort of how you're going to position the company today versus what you did last time around? Just any broad thoughts. Thank you. Appreciate it.

Steven R. Mumma -- Chairman and Chief Executive Officer

You're talking about the '08 cycle versus this cycle?

Matthew Howlett -- Nomura -- Analyst

Correct.

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah, look, I think, the problem with the cycle today is, I think we're still in the middle of it, right. I mean, we have massive amounts of people out of jobs. The hope is, as we get to reopening these economies, a large percentage of those people go back to work immediately and we see the unemployment drop significantly. But we need to see that first before we try to figure out exactly how we're going to come out of this thing. So I think these opportunities are going to continue to unfold over the summer and into early fall. And that's why we are hesitant, Matt, to put out specific guidance of where we think the opportunities are going to be. But I think the big difference here is, you had over-levered overpriced assets and debt in 2008 on almost every single asset category. Today, it's really being driven right now just by the social distancing stay at home, where the economies are literally shut down. So, the asset price deterioration, we don't know where it's going to end up yet. And is it going to be a factor and function of how much government support is going to be pumped into the economy both to consumers and businesses and how quickly we can reopen and/or get a vaccine to get the place back to whatever the new normal is going to be.

Jason T. Serrano -- President

I'll further add that there is a little bit differences in asset selection and where distresses in the system. So, in 2008, the average bar in this non-QM space at over 100 LTV. Today, a lot of the financing that was done was at lower levels. You can see it today in home sales -- homes on the market for sale, you're at basically 3.5 months of supply. That number jumped to over 10 months of supply quickly in 2009 into '10. So, you're not seeing the stress on the supply side, you have to have a contraction of homes on the market. And again, there was a home shortage to begin with prior to COVID. And now that it's exacerbated by the lack of assets that are on the market. So in some markets, you may see home price appreciation because of that, where in some markets where there is still COVID-related shutdowns, you may see double-digit type of declines, particularly in the service sector, in particular markets like Las Vegas where the economy is supported by the service sector and you have massive amounts of unemployed borrowers.

The other side of the coin is that the asset over the last eight years have performed the best has been basically the smaller lower dollar properties across the market, where you can earn a higher coupon and advance those assets at similar rates. In this environment, with respect to job losses in the service sector versus other markets like information technology and sectors like that, you have basically one-third of the job losses in information technology and in service sector. So, economies that are supported by those types of economies, you will see better results -- and better results in the middle price range of houses. So, you'll -- simply looking at Ginnie Mae versus Freddie Mac doing forbearance ratios, you're seeing basically 2 to 3X increase. I believe you'll see about 2 to 3x of forbearance plans in the G&A space versus the Freddie Mac space and you will see an increase in supply in the lower income housing or at lower price range than you would see in the mid-price range because of this. Before it was across the board in all asset classes across all peers of price of price home prices. And today, I think you'll see more exacerbated distress in the lower income lower price range.

Matthew Howlett -- Nomura -- Analyst

Great information, and great long weekend, guys. Thank you.

Steven R. Mumma -- Chairman and Chief Executive Officer

Thanks, Matt.

Operator

Thank you. Our next question comes from the line of Jason Stewart from JonesTrading. Your line is now open.

Jason Stewart -- JonesTrading` -- Analyst

Hi, good morning. Thanks. Jason, on the forbearance comments, just want to make sure I understood correctly. 9.5% of the forbearance, I guess, structures today were current and are now in forbearance. The rest were at some form of delinquency and/or in forbearance. Is that the right way to think about that?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah.

Jason Stewart -- JonesTrading` -- Analyst

And when you -- in your comments, can you give us the average term of the forbearance agreement, if you don't mind?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. So, we have elected to do more deferments than forbearance. And that's simply because the borrower will have more liquidity on his mortgage loan after effective COVID-related shutdowns than a forbearance. The GSE just last week passed through new servicing regs and that was -- that establishes that borrowers after forbearance will go into deferment. We're already doing that now. So we thought that was a better model from the beginning, which is why we like to go through deferment and add less stress on the servicer as well to track it also because our borrowers often speak to our servicing personnel that are -- that is allocated to that loan. This also creates kind of a monthly dialog on what's happening. And so, we can design a longer-term structure, if necessary. So some of these borrowers getting obviously didn't know the extent of their job loss or income loss. And so, it would be hard for us to say that three months, six months, nine months or 12 months is appropriate. So taking a month to month type of approach, we thought was a better result and then structuring into what could be a more of a long-term solution once the effects of the COVID-19 economy. It has been impacted and overcome.

So, yeah -- so again, forbearances is not utilized to an extent it is on the Fannie, Freddie portfolio's ECL that's been reported. And in the case of the permits. It is a month to month forbearance, if you will.

Jason Stewart -- JonesTrading` -- Analyst

Okay. And I would expect that part of our plan is to keep contact rates up and I think to your comment, I just want to make sure I understood this correctly. You think that at the end of this cycle, we will be in its portfolio back to pre-COVID levels. Is that what's you're characterizing this plan as an ultimate outcome?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. I mean, look, there's going to be -- it's going to bifurcate. We have loans at 4.5% 4.78% coupons, the refinance market today is -- will likely approach 3%, if not lower. So there is substantial spread for these borrowers to refinance into achieve lower financing costs, which is one of our goals. And so that will tell on one side of the equation, where borrowers are not long-term impacted with COVID-related distress and can continue paying and take advantage of low rates and we want to bill our borrowers to that outcome.

On the other side, there will be borrowers that we will not be able to continue paying, loss of job, we had some kind of permanent damage in their fiscal side of the equation. So, those are situations we're going to have to work out with the other loss plans we have in place such as didn't lose or short sales to avoid foreclosure to the extent we could rent back to property to those borrowers. We will assess that as well, which are all plans we put in place after 2010. And our managing 10s of thousands of mortgage loans. There were in non-performing loan space. So, you have to assess whether the borrower has the ability or not and then put the bar into the right plan when that assessment is done. We just believe that was too early in March to make that determination upfront, which is why we want the high contact ratio, and we think it serves the servicer and the borrowers better by over-communicating.

Jason Stewart -- JonesTrading` -- Analyst

Understood. Okay. And then, one high level question. When you think about term financing, and I don't need to. I don't need details on which we're currently discussing but generically at a high level over the medium-term. What does term financing look like for structured credit and the mezzanine part of the capital structure and what impact more specifically, if you think that has over time on asset prices. I would imagine loss adjusted yield is one component. But if you could remove that just talk about the impact of what financing looks like and the impact on asset prices over time, that would be helpful. Thanks.

Jason T. Serrano -- President

Yeah, yeah. I mean, we expect asset prices to improve as the term structures are more utilized across the market. Again, in March, you basically lost repo financing across the entire securitization market. When I say lost, yeah obviously margin calls but also inability to add assets onto facilities to meet margin calls in the thick of it in March counterparties want cash or treasuries and did not want increase their book with respect to new assets to meet margin calls.

So, there was a complete shutdown of securitization market. And while these mezzanines asset classes were sold with the concept of taking, repo leverage against these assets to generate a double-digit return in the most space. So when you lose the financing, you have to back out the price decline to get to generate a double-digit return, that's what you saw in the market in March and into April. So, as the term financing structure is more utilized, do you expect prices to increase? We've already seen since 3/31 a meaningful increase in asset prices in the security space, which was the most distressed part of the market. And that's due to financing proposals out there.

I'd also mention that financing proposals, we've seen financing proposal from a number of counterparties. We evaluated a number of proposals, and initially the proposals were fairly expensive in March and into April. We took our stance of waiting for a better clearing levels once some of the -- some players were selling out large positions and emergency financing. Since that is cleared for the most part, we have seen level -- we've seen pricing come down from high-single digits on these type of portfolios to mid-single digit type of financing costs. So, we were rewarded by waiting, and we were only able to wait because we didn't have the same. We didn't have a cash liquidity issue into April, which would have forced us to take that financing at these -- at the higher level. So we had the ability to be patient with the financing, use it opportunistically, which we've done and we will likely put one in place shortly, and likely will be in that type of range single-digit yields with advanced rates and anywhere from 55% to 75% depending on the asset and the securitization type.

Jason Stewart -- JonesTrading` -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Jon Evans from SG Capital. Your line is now open.

Jon Evans -- SG Capital -- Analyst

Can you just talk a little bit about, maybe in the medium-term or longer term, how you kind of view the capital structure now with where you are and where you want to get to from a leverage standpoint relative to kind of the preferreds, etc, do you expect to get more term financing and not raise more preferred debt? Can you just talk about you guys' thought process? It seems relatively expensive now.

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. I mean, look, I think, given where the stock is trading, both preferred and common, we have no interest in going and accessing the market at these levels. I think, we feel like, to the extent that we can get longer term structured finance against the assets that we're investing in, that's going to be the way that we're going to focus in the foreseeable feature, right. I mean, I think if you look historically what the company has done accessing the equity and preferred markets, it's been when we can raise accretive capital and we've got -- we want to get -- we've got to get our stock price back closer to where book value should be before you've even contemplated that. And our preferreds are trading in the $16 to $18 range. That doesn't make any sense to go out and do 10% or 11% preferred. So, I think we have better access to lower cost in capital and structures -- loan structures than we do in the actual equity capital markets.

And from a ratio preferred to common, we have $2 billion of equity and we have about $500 million of preferred. So, 1.5, obviously we took the $700 million hit to our common side. So, the preferred is a little bit larger percentage, but we've also -- the dividend of the preferred, and dividend of the common closely track each other. So, it's one, is not that much more accretive or destructive right now as we sit here today. We need to reinstate all the dividends before we get a better sense of cost of capital, where our stock starts to perform after we reinstate the dividend.

Jon Evans -- SG Capital -- Analyst

And then, just relative, I know it's a Board decision in the future, but some of your peers have paid their common dividend with stock. Is that something that you guys look to do to preserve cash?

Steven R. Mumma -- Chairman and Chief Executive Officer

Right now, it's not a consideration, especially on our stock is trading at less than 50% of book value. We don't need to do that and we would prefer not to reinstate a dividend with dilutive stock issuance. We'd rather wait until we feel comfortable that we can meet all the dividend requirements in cash, which like we've said on the call that we hope that's in the near-term.

Jon Evans -- SG Capital -- Analyst

Okay. Thank you for your time. I appreciate it.

Steven R. Mumma -- Chairman and Chief Executive Officer

No. Thank you. Thank you. Our next question comes from the line of Douglas Koke [Phonetic] from NH Holdings. Your line is now open.

Douglas Koke -- NH Holdings -- Analyst

Hi. Two quick and relatively simple questions. The first one, on the balance sheet, you have $2 million of equity, as you said, and so $2.7 million of liabilities. But you said there's a 0.6 leverage rate -- ratio. I'm just wondering which of those liabilities are disregarded?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. So, the liabilities, there is a lot of securitized debt on our balance sheet. So we're only -- when we define, if you look at the definitions back in the glossary in the notes on the particular pages where the leverage ratio is calculated. We use what's called callable debt. And so, let's see, if you go to Page 12 on the presentation, that's -- and you look at the financing, we're really just reflecting the debt that we've -- that is callable nature in the portfolio side. The $1.4 billion of debt is really what we consider callable. The other debt that's in the balance sheet on the-- in the balance sheet statement is securitized debt, which truly doesn't have any call back to the company requirement. So it's collateralized by very particular assets that are in its structure that doesn't have any risk back to the company.

Douglas Koke -- NH Holdings -- Analyst

Well, following up on that though is that the same where you're classified the multi-family loans in the past to $17.8 million that you ended up having to liquidate.

Jason T. Serrano -- President

That's right, that's right. The $17.8 billion of multi-family debt was related to securitizations. And if you look at our balance sheet today, we don't have any of that, that's all gone. Okay. And so, the liabilities that are left that are securitized debt as we have $1 billion of residential securitized debt, and another $31.034 billion and $38 million. So, the total of those two is about $1.1 billion in securitized debt that's not -- has no call back to the company.

Douglas Koke -- NH Holdings -- Analyst

So were there no margin calls then on that $17.8 billion previously?

Steven R. Mumma -- Chairman and Chief Executive Officer

No, no, none, zero.

Douglas Koke -- NH Holdings -- Analyst

They won't involve the margin calls? Okay. You just liquidated that to help with other margins.

Steven R. Mumma -- Chairman and Chief Executive Officer

Well, the POs, so the $17 billion is related to the structure that the securities were issued off of. The POs that we actually owned, we had them out on repo. That was mark-to-market and it was receiving margin calls. And that's more -- that's one of the asset classes we elected to sell to reduce those margin calls.

Douglas Koke -- NH Holdings -- Analyst

Second quick question -- with regard to the multi-family second mortgage positions were Fannie and Freddie or Gennie, whenever, senior if they go a forbearance agreement, is NYMT's second position loan payable at that point or not payable? Are they forced also in the forbearance?

Steven R. Mumma -- Chairman and Chief Executive Officer

They are forced into forbearance, but what does happen is, the property itself is cash-strapped. And so they need to come current with our forbearance interest prior to taking any cash out of the structure. And right now, we only have one property that's in a senior forbearance, which is the one that we're on forbearance on.

Douglas Koke -- NH Holdings -- Analyst

And then, they are in continued forbearance, what, the cash is obviously -- I mean, obviously this property is still generating cash. That cash is...

Steven R. Mumma -- Chairman and Chief Executive Officer

Well, typically -- yeah, typically what happens is, obviously the reason they're going to the agencies to ask for forbearance as they have a higher percentage of renters not paying rent, which is not the case so far in our portfolio. But in the case where it does happen, and they're asking for relief, but the money that they receive on their rents is distributed forward. It's just a net number that they're being lent to cover the DSCR requirements for the month. To not getting lengthy entire amount of rental income for the month are getting -- they're getting lengthy amount of money that fixes -- that essentially fills up the bucket.

Douglas Koke -- NH Holdings -- Analyst

And that additional lending and then it's similar to NYMT's second mortgage position.

Steven R. Mumma -- Chairman and Chief Executive Officer

That's right. But the way that lending is currently structured from the agencies is that is a loan for a short -- for a 12-month period that they need to repay. So, I think that's one reason why many of -- I think that's one reason why many of them have elected not to take it. I mean, it's a 12 month mandate, but doesn't really solve their problem. So, I think, many of these sponsors have liquidity to meet the need so far. And so, I think they look at the cost of that debt for forbearance versus other liquidity options, and that's where they're making the decisions.

Douglas Koke -- NH Holdings -- Analyst

Thank you.

Steven R. Mumma -- Chairman and Chief Executive Officer

Thanks.

Operator

Thank you. Our next question comes from the line of Mark DeVries from Barclays. Your line is now open.

Mark DeVries -- Barclays -- Analyst

Yeah, thanks. Appreciate this may be a difficult question. But of the 20% to 30% hit the book you took in the quarter from unrealized losses that you're optimistic, you'll get back, you have a sense for how much of that is due to the market pricing and higher defaults and how much of it is higher discount rates? And also just how are you thinking about what the market is pricing in from a default perspective relative to what you expect? I'm just trying to get a better sense of how much of that could ultimately come back to you, either through reversal of marks or just realized cash flows?

Steven R. Mumma -- Chairman and Chief Executive Officer

Yeah. I mean, the initial hit the market took on these prices as a function of lack of financing and then also forced sales, which then caused more markdowns and then more selling. So that negative feedback loop that was created in March was basically more of a technical decline so that that initially brought prices down now as the markets go back to work in some communities and stay-at-home measures are in others, the market is evaluating the unemployment rate and the credit side of the equation. Through the last month, obviously we've got a lot of reporting on unemployment rate per market and what the Governor's plans are per state. We've had increases across the board in the asset classes in the securitizations sector, simply because of the modeling done on unemployment rate was only a fraction of the losses of taking on the bonds relative to the liquidity issues that were experienced due to lack of financing. So, as I mentioned earlier, with financing channels coming back more in term structured orientation versus monthly mark-to-market repo, we do expect prices to increase to withstand -- to back into basically an ROE of a double-digit versus an ROA of a double-digit.

Mark DeVries -- Barclays -- Analyst

Okay, got it. Thank you.

Operator

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Steve Mumma for closing remarks.

Steven R. Mumma -- Chairman and Chief Executive Officer

Thank you, operator. The company's priority continues to center around the health and safety of our staff, partners and community. We believe our business continuity planning and infrastructure has positioned us well for the reality of working remotely. While these last six weeks has caused us to maintain a more defensive approach to investment in liability management, our long-term goals of delivering attractive risk-adjusted returns remains in place. We appreciate all your questions during the call today, and we look forward to discussing the second quarter in August. Have a safe and healthy Memorial Day holiday weekend and thank you very much for your participation.

Jason T. Serrano -- President

Thanks, operator.

Operator

[Operator Closing Remarks]

Duration: 83 minutes

Call participants:

Steven R. Mumma -- Chairman and Chief Executive Officer

Jason T. Serrano -- President

Douglas Harter -- Credit Suisse -- Analyst

Eric Hagen -- KBW -- Analyst

Jules Kirsch -- Jules P. Kirsch -- Analyst

Stephen Laws -- Raymond James -- Analyst

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Matthew Howlett -- Nomura -- Analyst

Jason Stewart -- JonesTrading` -- Analyst

Jon Evans -- SG Capital -- Analyst

Douglas Koke -- NH Holdings -- Analyst

Mark DeVries -- Barclays -- Analyst

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