애널리 캐피털 매니지먼트(NLY) 2026년 3분기 실적 발표: 장부가치 하락 속 EAD로 배당 충당

핵심 요약

• 애널리 캐피탈 매니지먼트는 2026년 3분기 주당 분배가능이익(EAD)이 0.80달러를 기록해 전 분기 대비 0.01달러 증가했으며, 분기 배당금인 0.75달러를 상회했다고 발표했습니다.
• 주당 장부가치는 전 분기 대비 11.4% 하락한 17.86달러를 기록했습니다. 금리 상승, 에이전시 MBS 스프레드 확대, 변동성 증가 등이 자산 가치를 압박함에 따라 배당금을 포함한 경제적 수익률은 마이너스(-) 7.6%를 기록했습니다.
• 주로 자기자본 감소로 인해 경제적 레버리지는 5.6배에서 5.9배로 상승했으며, 헤지 비율은 97%에서 100%로 높아졌습니다. 애널리의 분기 말 기준 파이낸싱 가능 자산은 85억 달러였습니다.
• 포트폴리오 비중은 에이전시 920억 달러, 주거용 신용 104억 달러, 모기지 서비스권(MSR) 43억 달러로, 각각 회사 전체 자본의 55%, 23%, 22%를 차지했습니다.
• 경영진은 2026년 4분기에도 EAD가 배당금을 상회할 것으로 전망하며, 현재 포트폴리오가 배당 지급을 충분히 뒷받침한다고 밝혔습니다. 추가 자본 배분 우선순위는 주거용 신용 1순위, 에이전시 MBS 2순위, MSR 3순위를 유지하고 있습니다.
• 실적 발표 전화회의 전 금요일 기준, 경영진은 배당 발생액을 제외한 장부가치가 약 2% 증가했으며 배당금을 포함할 경우 3%에 가깝다고 설명했습니다.

주요 재무 데이터

쿠폰 이자수익 증가, 투자증권 및 주거용 모기지 대출 평균 잔액 확대, 증권화 활동, 영업비용 절감 등이 EAD를 견인했습니다. 이러한 긍정적 요인들은 증권화 부채 및 레포 잔액 증가, 자금조달 금리의 소폭 상승을 상쇄했습니다.

사업 및 영업 실적

에이전시 MBS

에이전시 포트폴리오의 3분기 말 시가는 920억 달러를 기록했습니다. 애널리는 주로 5.5% 및 6% 쿠폰 등 고쿠폰 특정 풀(specified pools)에 집중하며 명목금액 기준 약 20억 달러의 MBS를 추가했습니다.

해당 분기 동안 미 국채 10년물 금리가 82bp 상승함에 따라 에이전시 MBS 스프레드가 확대되었습니다. 회사는 금리 노출을 제한하기 위해 주로 국채 선물 중심의 헤지를 확대했습니다. 4분기 초에는 특정 풀의 초과 성과를 현금화한 후 20억 달러가 넘는 만기 경과 풀(seasoned pools) 중심의 자산을 고쿠폰 TBA로 교체 매매했습니다.

경영진은 현재 에이전시 스프레드가 10%대 중후반 수준의 예상 신규 투자 수익률을 제공한다고 밝혔습니다. 또한 현재 금리 수준에서는 음의 볼록성이 낮아져 포트폴리오의 듀레이션 민감도와 헤지 리밸런싱 필요성이 줄어들 것으로 예상했습니다.

주거용 신용

주거용 신용 포트폴리오는 104억 달러로 전반적으로 변동이 없었습니다. 온슬로 베이는 70억 달러의 금리 확정 실적과 분기 최고치인 58억 달러의 대출 집행을 기록했습니다. 현재 진행 중인 금리 확정 파이프라인의 평균 FICO 점수는 766점, 평균 담보대출비율(LTV)은 67%였습니다.

애널리는 3분기 중 74억 달러 규모의 증권화를 결제했으며, 10월에는 22억 달러를 추가로 발행 결정했습니다. 실적 발표 당시 기준 회사는 2026년 한 해 동안 37건의 증권화 거래를 통해 210억 달러 이상을 발행 결정했습니다.

경영진은 잔여 증권화 지분, 시가평가 제외 파이낸싱 시설을 통해 조달된 전체 대출, 선별된 BB 등급 비적격 모기지(Non-QM) 채권 등에 힘입어 주택 신용 자산의 예상 수익률이 13%~16%에 달할 것으로 전망했습니다.

모기지 서비스권(MSR)

MSR 포트폴리오는 43억 달러로 증가했습니다. 애널리는 시가 약 1억 4,000만 달러 규모의 일괄 매입 패키지 1건을 결제했으며, 지속 매입 채널 규모는 5,000만 달러를 넘어서며 분기 최고치를 기록했습니다.

포트폴리오 가치평가 배율은 6.15배로 소폭 상승했습니다. 중도상환 속도는 4.8 CPR로 둔화되었으며, 심각한 연체율은 60bp 미만을 유지했습니다. 경영진은 낮은 약정 금리, 제한적인 중도상환, 에스크로 잔액을 통한 이자수익이 예측 가능한 현금 흐름을 지속적으로 뒷받침하고 있다고 말했습니다.

애널리는 MSR을 단독 수익 기회이자 포트폴리오 다변화 수단으로 보고 있습니다. 금리 상승 시 에스크로 부유 자금 이자수익이 늘어나는 한편, MSR 가치평가 상승은 금리 상승에 따른 에이전시 MBS 약세를 상쇄하는 데 도움이 될 수 있습니다.

경영진 전망

경영진은 2026년 4분기에도 EAD가 0.75달러의 배당금을 다시 상회할 것으로 예상하며, 기존 포트폴리오와 현재의 신규 투자 수익률 모두 배당 지급을 뒷받침한다고 밝혔습니다.

경영진은 현재 레버리지 수준으로도 필요한 수익을 창출하고 있다고 밝혔으나, 전술적으로 레버리지를 확대할 수 있는 여력과 상당한 유동성을 확보한 채 4분기에 진입했습니다. 자본 집행 우선순위는 주거용 신용이 최우선이며, 에이전시 MBS와 MSR이 그 뒤를 바짝 잇고 있습니다.

경영진은 변동성 감소세가 지속될 경우 에이전시 MBS 여건이 개선될 것으로 기대하고 있습니다. 또한 제한적인 모기지 공급과 더불어 채권형 펀드로의 자금 유입, 정부지원기업(GSE), 해외 투자자 및 은행의 수요 지원을 주요 호재로 언급했습니다.

비적격 모기지(Non-QM) 대출과 관련해 경영진은 2026년 대출 취급 규모를 상단에 가까운 1,500억~1,750억 달러로 추정했으며, 해당 부문이 전체 모기지 대출 취급액의 약 8%~9% 수준을 유지할 것으로 전망했습니다. 이러한 추정치는 경영진의 전망치로 명시되었습니다.

리스크 및 관전 포인트

• 3분기 미 국채 10년물 금리가 82bp 상승하고 모기지 금리가 7.5%에 달하면서 금리 및 스프레드 변동성이 확대되었습니다.
• 인플레이션이 연방준비제도(Fed)의 목표치를 상회하는 수준을 유지함에 따라, 시장은 2027년 말까지 25bp의 금리 인상이 약 3회 추가로 단행될 가능성을 반영하고 있었습니다.
• 고금리와 주택 구매력 제한으로 인해 주택 거래량이 침체된 상태를 유지하고 주택 가격에 압박을 가할 수 있습니다. 경영진은 모기지 금리가 7.375%~7.5% 수준에서 지속될 경우 전국 주택 가격이 몇 퍼센트 하락할 수 있다고 말했습니다.
• 주택 시장 여건은 지역별로 상이합니다. 경영진은 텍사스와 플로리다를 포함한 남동부 지역의 약세를 특히 지적했으며, 해당 지역의 재고 소진 기간이 10년 만에 최고치에 도달했다고 언급했습니다.
• 100%의 헤지 비율과 적극적인 듀레이션 관리에도 불구하고, 에이전시 MBS는 스프레드 확대 및 시가평가 변동성 노출 위험이 여전히 존재합니다.
• 분기 말 이후 주거용 증권화 스프레드가 소폭 확대되었으나, 경영진은 투자자 수요와 시장 깊이가 여전히 견조하다고 평가했습니다.

애널리스트 Q&A 주요 내용

• 배당 커버리지: 경영진은 4분기에도 배당금을 상회하는 이익을 거둘 것으로 예상하며, 현재 주당 0.75달러의 배당 수준을 안정적으로 유지할 수 있다고 판단하고 있습니다.
• 자본 배분: 추가 자본 배분의 최우선 순위는 주거용 신용이며, 에이전시 MBS와 MSR이 그 뒤를 바짝 잇고 있습니다.
• 헤지 전략: 애널리는 금리 상승에 따라 국채 선물을 추가해 평소보다 높은 선물 비중으로 4분기에 진입했습니다. 경영진은 헤지 균형을 유지하면서 수익률을 개선하기 위해 일부 선물을 스왑으로 전환하는 방안을 검토할 계획입니다.
• 신용 건전성: 주거용 포트폴리오의 시가평가 LTV는 64%였으며, 평균 차입자의 자기자본은 약 40만 달러에 달했습니다. 경영진은 차입자의 우수한 신용도와 제한적인 복합 리스크를 감안할 때 완만한 전국 주택 가격 하락은 관리 가능한 수준이라고 밝혔습니다.
• MSR 공급: 경영진은 낮은 대출 집행 수익성, 업계 재편, 유동성 확보 필요성으로 인해 모기지 취급기관들이 MSR 매각을 지속할 것으로 예상합니다. 애널리는 가격이 매력적일 때 매수하고 은행 수요가 강해지면 매각할 수 있습니다.
• 비적격 모기지(Non-QM) 전망: 경영진은 주택 구매 수요 중심의 시장 환경과 고금리가 유지되는 동안 비적격 모기지가 전체 모기지 대출 취급액에서 높은 비중을 유지할 것으로 예상합니다. 모기지 금리 하락으로 일반 및 정부 보증 모기지의 재융자가 활성화될 경우 해당 비중은 크게 감소할 수 있습니다.

실적 발표 전화회의 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Thank you for standing by, and welcome to the Annaly Capital Management Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I'd now like to turn the call over to Sean Kensil, Director of Investor Relations. You may begin.

Sean Kensil

Good morning, and welcome to the Third Quarter 2026 Earnings Call for Annaly Capital Management. Please note that this call is being recorded. As a reminder, materials for today's call are available on our website at www.annaly.com.

Today's call may include forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially and refer to certain non-GAAP measures. Please see the notices in our earnings release for important information regarding forward-looking statements and non-GAAP measures.

Participants on this morning's call include David Finkelstein, Chief Executive Officer and Co-Chief Investment Officer; Serena Wolfe, Chief Financial Officer; Mike Fania, Co-Chief Investment Officer and Head of Residential Credit; V.S. Srinivasan, Head of Agency; and Ken Adler, Head of Mortgage Servicing Rights.

And with that, I'll turn the call over to David.

David Finkelstein

Thank you, Sean. Good morning, everyone, and thanks for joining our Q3 earnings call. I'll begin with an overview of the macro environment and our performance during the quarter and discuss each of our 3 investment businesses, finishing with our outlook. Serena will then provide a more detailed review of our financials, after which we'll open the call up to Q&A.

Now starting with the macro landscape. The U.S. economy remains resilient, supported by heavy AI investment and healthy consumption. The labor market is stable, while inflation remains above the Fed's target, driven in part by higher energy prices. The bond market faced a challenging third quarter, with the 10-year treasury yield rising 82 basis points to multi-decade highs. The sell-off accelerated following the Fed's first rate hike since 2023, and markets are now pricing nearly 3 additional 25 basis point hikes through the end of next year. Higher rates also reflected concerns around government debt, heavy corporate issuance and a repricing of the Fed's neutral rate.

Mortgage rates have accordingly reached 7.5%. The level during this cycle seen only briefly in the fall of 2023, and thus housing activity is likely to stay subdued as affordability challenges persist and the existing borrower lock-in effect continues to constrain turnover. Weaker demand could soften home prices, though supply and demand remain broadly balanced, notwithstanding regional disparities, and underlying borrower credit remains fundamentally sound.

As upward pressure on rates intensified during the month of September, rate volatility rose significantly, with implied volatility measures reaching their highest levels since the administration's initial tariff announcement 1.5 years ago. And this drove mortgage spreads wider and led to meaningful underperformance in Agency MBS. Against this backdrop, our portfolio delivered a negative 7.6% economic return for the quarter. Earnings remain durable, however, with EAD of $0.80 per share, again, exceeding our dividend, while economic leverage ended Q3 up modestly at 5.9 turns.

In capital markets, we announced the redemption of our $443 million Series I floating rate preferred stock during the third quarter, and the redemption helps us maintain a very conservative capital structure. And we view balance sheet leverage as more attractive, particularly as repo financing remains readily available in terms of residential credit and MSR warehouse lines continue to improve. Relatedly, we issued $757 million in common equity in the quarter through our ATM program, with proceeds used both to fund the preferred redemption as well as to invest across our portfolios.

Now turning to our investment strategies and beginning with Agency. The sharp selloff in rates led to meaningful extension across the MBS universe, particularly in the more negatively [ convexed ] portions of the market. This created duration mismatches and contributed to selling pressure from some more highly levered investors late in the quarter, which exacerbated the volatility-driven MBS spread widening. While we are certainly not immune to mortgage underperformance, we were positioned for rate and spread volatility with conservative duration exposure and historically low leverage heading into the quarter.

Our Agency portfolio decreased modestly to $92 billion in market value, representing 55% of the firm's capital that we added approximately $2 billion notional in MBS in the quarter. Activity focused on deploying a portion of our common equity raised in a higher coupon specified pools, primarily [ 5.5s and 6s ]. This past quarter also demonstrated the value of our allocation of high-quality specified pools. On average, our pools for more than 3.5 years season and carry loan balances less than half those of new production, providing both call and extension protection. As mortgage rates increase, paves declined on call-protected pools as expected but increased on extension protected pools. And given the distribution and quality of our collateral, the average pay up on our portfolio increased modestly over the quarter.

Now early in the fourth quarter, we monetized some of this outperformance, rotating over $2 billion in primarily seasoned pools in the higher coupon TBAs, which stand to benefit more from a decline in volatility, something we have begun to see since the end of the third quarter. On the liability side, as rates moved higher, we responded by adding to our hedge position, primarily in treasury futures, to keep our overall interest rate exposure contained. And we entered the fourth quarter with slightly more rate exposure, however, as current higher yields offer attractive value. And we're also comfortable carrying somewhat more duration as the rise in rates materially reduced negative [ convexity ] in both our portfolio and the broader MBS universe. And as a result, asset durations should be less sensitive to further rate moves in the current environment, reducing the need for hedge rebalancing.

Moving to residential credit. Our portfolio ended the third quarter roughly flat quarter-over-quarter at $10.4 billion in market value, representing 23% of the firm's capital. Residential spreads traded in a tight range for the majority of Q3, with AAA non-QM spreads ending the quarter approximately 10 basis points wider, largely in sympathy with other securitized products. Our Onslow Bay correspondent channel delivered another strong quarter, with $7 billion of lock volume and $5.8 billion of fundings, our highest quarterly funding volume since the channel's inception more than 5 years ago. And importantly, growth has not come at the expense of credit discipline, with our current lock pipeline carrying an average FICO of 766 and an average LTV of 67%.

Now with respect to securitization, we settled $7.4 billion of transactions in Q3, while pricing an additional $2.2 billion in October. Annaly remains the market's largest expanded credit sponsor, and we have now [ prized ] more than $21 billion securitizations in 2026 across 37 deals. And while the new issue market has experienced marginal widening post quarter end, we're encouraged by the resiliency of the private label market, and expect 2026 to be a post-GFC record in transaction volume.

Now to discuss MSR, our portfolio increased to $4.3 billion market value, with our allocation of the sector representing 22% of the firm's capital. We took a measured approach to purchases during the quarter, settling one bulk package for roughly $140 million in market value, while our flow channel experienced just over $50 million in volume and new quarterly highs as we continue to gain market share in the co-issue sector. Both supply in the market increased quarter-over-quarter, and we expect it to stay robust throughout the balance of the year given current mortgage industry dynamics, as we've spoken about extensively over the past year. And this environment should provide ample opportunity to responsibly grow our portfolio. Year-to-date, we remain the largest purchaser of bulk MSR, reflecting the value we bring to the origination community as a strategic partner with a deep permitting capital base.

MSR valuations modestly increased, with our multiple ending the quarter at 6.15x, largely driven by higher interest rates and wider current coupon MBS spreads. Our prepayment speeds remained very low this past quarter, decreasing to 4.8 CPR, reflecting our portfolio's low average note rate, seasonal factors and higher mortgage rates. Credit performance remains strong, with serious delinquencies below 60 basis points and along with healthy income from our escrow deposits, these factors support a predictable cash flow profile that continues to be a complement to our other investment strategies and an important contributor to our EAD.

Now turning to our outlook. We're mindful of uncertainty in the market. We entered the fourth quarter prudently positioned with substantial liquidity, and we remain focused on preserving capital while dynamically allocating across our 3 businesses as opportunities emerge. Within Agency, we continue to manage [ call and ] extension risk proactively as the rate outlook evolves, while current spread levels offer compelling new money returns in the mid- to high teens. And while elevated volatility persists, the outlook for Agency MBS is constructive as spreads retraced the widest level since before the GSEs began more actively increasing their portfolios in mid-2025. At the same time, the technical picture remains favorable, with record bond fund inflows and continued support from the GSEs, overseas investors and banks, while supply is limited given seasonal and high primary mortgage rates.

In residential credit, our scaled Onslow Bay correspondent platform gives us direct access to high-quality whole loans, greater control over asset selection and supports one of the leading securitization programs across asset-backed finance. As the largest issuer of expanded credit MBS, we're uniquely positioned to participate in the continued growth in the non-Agency market, with non-QM issuance up nearly 60% year-to-date. And the investments we have made across our platform over the past several years have supported expansion, operating efficiency and disciplined credit execution.

And lastly, in MSR, our differentiated portfolio of low note rate, high-quality assets continues to generate durable cash flows, supported by our diversified network of servicing and recapture partnerships. And as demonstrated this year, we have the flexibility and capacity to grow the portfolio accretively, further enhancing our earnings and cash flow profile.

Now collectively, our 3 complementary businesses provide multiple avenues to deploy capital efficiently without the burden of a high fixed cost origination model. We remain patient, but we have ample liquidity and balance sheet capacity to put capital to work. And we believe the combination of diversified earnings, proprietary asset creation, conservative leverage and capital allocation flexibility positions Annaly well to continue delivering attractive risk-adjusted returns.

Now with that, I'll turn the call over to Serena to discuss our financials.

Serena Wolfe

Thank you, David. Today, I will briefly review the financial highlights for the quarter ended September 30, 2026. As in prior quarters, our earnings release discloses GAAP and non-GAAP earnings metrics. And my comments will focus on our non-GAAP EAD and related key performance metrics, which exclude PAA.

As David noted, the challenging fixed income market environment weighed on book value during the third quarter. Our diversified hub and finance platform nevertheless, continue to generate solid earnings, supported by higher coupon income, continued residential credit securitization activity and lower operating expenses.

As of September 30, 2026, our book value per share decreased 11.4% from the prior quarter to $17.86. Including our quarterly dividend of $0.75 per share, we generated an economic return of negative 7.6% for the quarter. Book value performance primarily reflected wider Agency MBS spreads and the impact of elevated rate volatility, including market-driven duration and convexity effects. Gains in our hedging instruments provided meaningful offset.

Earnings available for distribution increased by $0.01 to $0.80 per share, and again exceeded our quarterly dividend of $0.75 per share. The increase was driven primarily by higher coupon interest income on larger average investment securities and residential mortgage loan balances, along with lower operating expenses. These benefits more than offset higher interest expense from increased securitization debt and repo balances as well as modestly higher funding rates.

Net interest margin declined by 7 basis points to 1.69%, while net interest spread declined by 8 basis points to 1.42%. Average asset yields were relatively stable at 5.45%. In comparison, our average economic cost of funds increased 7 basis points to 4.03%, primarily reflecting a greater proportion of securitized debt in our funding mix and slightly higher repo rates.

We continue to actively manage the balance sheet through the market volatility. Economic leverage increased to 5.9x from 5.6x, primarily reflecting the decline in equity, while our hedge ratio increased to 100% from 97% as we maintained our defensive positioning. Our weighted average repo rate for the quarter increased 3 basis points to 3.87%, while weighted average repo days to maturity ended the quarter at 30 days, down 3 days from the prior quarter.

Despite interest rate volatility in the third quarter, the reefer funding market continues to function smoothly, ensuring reliable and efficient access to short-term financing for Agency MBS. Meanwhile, we continue to maintain ample financing availability for our credit businesses to support their growth, which David highlighted earlier. Total warehouse capacity across our residential credit and MSR businesses remained $8.3 billion, including $2.8 billion of committed capacity. We maintained significant available capacity, with utilization rates of approximately 57% for residential credit and 50% for MSR.

We ended the third quarter with $6.9 billion of unencumbered assets, including $4.2 billion in cash and unencumbered Agency MBS. In addition, we had approximately $1.6 billion of MSR collateral pledged and available to support future advances, subject to market advance rates. In total, we had approximately $8.5 billion of assets available for financing at quarter end, that approximately $1.1 billion from the prior quarter, primarily reflecting lower equity and reduced unencumbered Agency MBS. This represented approximately 54% of our total equity and continue to provide meaningful liquidity and financial flexibility.

Finally, our OpEx to equity ratio decreased 11 basis points to 1.29% for the quarter, while year-to-date ratio remained 1.34%. As anticipated, expenses moderated from the elevated second quarter level, reflecting lower compensation of the G&A expenses.

That concludes our remarks. We will now take questions. Thank you, operator.

Operator

[Operator Instructions] Your first question comes from the line of Bose George from KBW.

질의응답

Bose George

Can I start with the -- just get an update on the mark-to-market book value?

David Finkelstein

Sure, Bose. As of Friday, excluding the dividend accrual, we were up about 2%, inclusive of the dividend closer to 3% on a sideways since.

Bose George

Great. And then just wanted to ask about dividend coverage, just given the expectation for current economic returns, how does that compare with the required ROE to cover the dividend?

David Finkelstein

Sure. So obviously, we outearned in Q3. We expect to outearn in Q4, and we'll see how 2027 evolves. But as it stands today, we didn't delever in Q3, notwithstanding the volatility and the current portfolio delivers the dividend. And as we laid out our projected returns, which are up quarter-over-quarter, new money gets us there as well. So we're comfortable with where the dividend is at today.

Operator

Your next question comes from the line of Crispin Love from Piper Sandler.

Crispin Love

David, on that last point, the market level returns kind of as you showed out on Slide 7, it looks like each strategy is a little bit higher than last quarter. Can you just discuss some of the dynamics there, driving returns a little bit higher? And then also just where you're most interested in adding incremental capital today in the macro environment? And I do appreciate you guys -- 3 businesses that you want to add, but like maybe if you could stack right?

David Finkelstein

Sure. So I'll start with the end of your question on capital allocation, then we'll go through each of the 3 businesses in terms of how the returns evolve heading into Q4. So in terms of capital allocation, it's not much different than last quarter, returns across the 3 businesses are incrementally higher. And as we did say last quarter, we still want to grow the residential credit business responsibly, considerate of credit that's at the margin where we'd like to grow, and agency returns are ample and certainly compelling, and so that would be second.

And then MSR, we still have room to grow. Obviously, those headline returns are a little bit lower than Agency and resi. But one point to note is that position is largely funded with capital of very little leverage. So we do have room to grow and maintain a 20% capital allocation to the sector. So the order is resi first; close second, agency; and then not far behind is MSR. So let's just talk about returns in each, and I'll start with Srini on the agency and then go to Mike and Ken.

V.S. Srinivasan

Sure, David. So basically, Agency spreads for the quarter widened about 20 basis points. Now when we say spreads widened about 20 basis points, we generally refer to current coupon spreads. And given that only is [ 5 and 6.5s ] are over par, we really can't invest in current coupons. So we are slightly below current coupon, call it, 5.5 or 6s is our preferred coupon. And for those -- compared to where current coupon was at the last quarter spends are about 10 basis points wider. So that gets us to 15 to 17 basis points with about 100 basis point increase in prospective results.

Michael Fania

Sure, Crispin, this is Mike. On the resi side, what those returns reflect the 13% to 16%. First, it will reflect the equity that we're retaining through our securitization. So call that $0.06 to $0.07 of capital on the retained OBX securities using maybe, call it, a turn of leverage. So we'll retain, call it, 10% to 12%, 1 turn of leverage gets to that $0.06 to $0.07 of deployment.

Given spreads have widened, we've seen our equity basis has been able to widen as well. And given the volatility, we're pricing in incremental premium. We can also earn mid-teens returns on just residential loans, putting on nonmark-to-market facilities. Our non-mark-to-market facilities are very accretive in the current environment and call it maybe 4 to 5 turns of leverage, and this is non-mark-to-market, you're calling it 15%, 16%.

And lastly, there is an opportunity to buy BB non-QM bonds. So these are new issue third-party shelves. Right now, they trade, call it, [ 4 25 ] per swaps. You can use 20% to 25% haircuts on those. And the financing there is in the low 100. So that would actually get you closer to that 16%, 17%. So there's a number of options at which we'll be able to get mid-teens or potentially a little bit above mid-teens.

Ken Adler

Yes. Thanks. This is Ken. On the MSR front, the change in return from the prior quarter is largely driven by all rates rising. And as capital is deployed, that capital earns a higher rate of return. Additionally, with the MSR, a bulk of the negative duration, certainly on the lower note rate collateral, is driven by the float income as we manage the borrowers' escrow accounts. So as rates rise, we, as the servicer earn a higher rate of return on those escrow balances, and that applies to prospective investments. So those 2 items are really driving the change in prospective return quarter-over-quarter.

David Finkelstein

Yes. And Crispin, just to add to that point, we entered Q3 with about 1.25 hikes priced in to the market, and we ended the quarter and sit today with about 4, including the hike that occurred in September. So just that float income increase in income alone gets you a lot more yield.

Crispin Love

Great. That makes sense. And then just one last question for me. Just on just the recent rate fall in the third quarter and then just a little bit of a change in the fourth quarter. Have [indiscernible] any state changes to your hedging strategy in kind of recent months, recent weeks, especially as rates were rising, you had a little bit of a different environment in October. So just curious on a little bit of the change in the second half of 3Q [ and ] October.

David Finkelstein

Yes. Look, as the market was selling off, we did dynamically hedge, and we predominantly used the futures market to achieve that. And we entered Q4 with a relatively higher percentage of futures than we normally operate with. So heading into this quarter, our anticipation will be to find opportunities to convert some of those futures into swaps, which gives us a little bit more yield and keeps a good balance on our hedge profile.

But generally speaking, over the last couple of weeks, we've been somewhat encouraged by the [ vol ] subsiding to some extent. You see it both in realized and an implied vols somewhat. And so we'd like to think we're out of the woods. We're still very, very vigilant when it comes to our hedge profile and making sure that we're managing the portfolio responsibly.

When we look at the environment today and the level of rates, we understand why rates are higher. Obviously, inflation is a big driver, and we are in a hiking cycle, as shallow as that may end up being heavy debt issuance. And also, the economy has proven to be able to grow at higher rates. And so the neutral rate is higher. And so we feel like the new normal is higher rates. And so the floor on rates is higher. But we do generally like the rates market. We're carrying a little bit of duration here, and we think that's appropriate given the attractiveness of rates, and we're comfortable with the positioning.

Operator

Your next question comes from the line of Doug Harter from BTIG.

Douglas Harter

You guys put up a smaller decline in economic return than your peers. Clearly, diversification helped that. But I was wondering if you could help us think how, like the agency portfolio performed this quarter as we try to compare that to peers?

David Finkelstein

Yes. I would -- look, I think -- I have a brief understanding of how others performed. And I think the agency sector was largely pretty well clustered, close to one another for the most part. I think my understanding is that folks were deliberate about managing duration exposure.

And I'll tell you something, Doug, agency -- it's not that easy to differentiate an agency portfolio, which may not sound too attractive to agency monoline peers. But at the end of the day, there's a lot of correlation amongst agency assets. You can be up in coupon, down in coupon, specs, TBAs. But when the agency market cheapens, it tends to affect the entire sector and performance, ex how you manage duration can be somewhat uniform. I think this quarter, we were probably somewhat contextual with the -- our agency portfolio with how others perform because I think everybody was pretty responsible about navigating the rates market and hedging.

Douglas Harter

I appreciate that, David. And then on the residential credit, you talked a little bit about some of the spread widening you've seen on new issue deals. Can you just talk about whether there have been any kind of other structural changes or what the depth of the investor base looks like kind of as we've gone through this market?

Michael Fania

Sure, Doug. This is Mike. I would say at the top of the capital stack, we ended Q2, call it, [ 1 30 ] over the curve. That's to treasuries. At the end of Q3, we're 5, 10 basis points wider, call it [ 1 40 ]. We just priced our latest deal, our latest transaction post quarter end, non-QM 16. That was done at [ 1 50 ]. We have seen other AAA sponsors and other shelves probably price, call it 5 to 15 basis points wider. I do think reflecting the strength of the OBX main, the programmatic nature of the platform and then also the performance as well. So I do think we're still firmly in that kind of Tier 1 category, and we're benefiting from that.

In terms of structural changes, what we have seen, it's been fairly modest, right? So the deals that have been coming, they call it maybe low 7% gross WACC, low to mid-7% gross WACC. The current coupon within non-QM right now, the 102.5 rate is probably closer to 8%. So these deals are modestly out of the money.

What the market has really demanded as a concession to be able to move the risk is that the AAA bond, which traditionally is pro rata with the AA and the single A, has turned into a full sequential. So it's a fairly modest change. The BBB and down, the M1 and down has always been a sequential pay. So you're really changing the structure of the waterfall of 2 bonds. And then what you're seeing is those AA and those single A bonds because instead of being pro rata and factoring down, they become sequential pay in the initial period before the call.

So very modest changes, but I would say that the market is still healthy. The market is very resilient. We've seen 95 billion of non-QM issuance this year. Last year, the entire year was 80 billion. 45% of all issuance we've seen in non-Agency has been within the non-QM market. So I haven't really seen any change in terms of investor depth, and it's a slight structural change to be able to absorb modestly out of the money transactions.

Operator

Your next question comes from the line of Jason Stewart from Compass Point.

Jason Stewart

We noticed a decent uptick in home equity securitization volume. Just maybe if you could talk, Mike, about the 2 sides there, how you're approaching sizing that as an asset and then how the market is pricing those liabilities today?

Michael Fania

Sure. Thanks, Jason. So on home equity, we'll classify that as both HELOCs and closed-end seconds. We've seen, in terms of total issuance, right, in the size of the entire market. We've seen about $220 billion of issuance within the non-agency market. About 15% of that has been closed-end seconds and HELOCs. It's around $33 billion. In terms of our production and what we really focus on, it's probably, call it, 5% to 6% of our production that we see through the correspondent.

We are active predominantly in full documentation, HELOCs and closed-end seconds. We've talked about that before. There's a small kind of niche market within the alternative stock. But really, the focus continues to be on non-QM and DSCR. A lot of it is scalability. A lot of it is our competitive advantages are within non-QM and DSCR. Close-end seconds and HELOCs, they trade at very large premiums. Even to be able to aggregate them through a correspondent, you need to be willing to pay [ 1 06, 1 07 ] type dollar prices. So that is something where we've been, I think a little bit more conservative than the rest of the market.

But in terms of the distribution, the securitization market, similar to non-QM, it's very healthy. It's not the same size. But I will say that it's -- we continue to see transactions, we continue to see deals. If you call AAA, non-QM right now for Tier 1 issuers, if we call that [ 1 50 to 1 55 ], I would say for Tier 1 closed-end second issuers, it's probably 5 to 10 basis points inside of non-QM. And part of that is that the market does believe it's a better convexity profile. But in terms of our strategy, we'll continue to buy those assets, but I think we're probably a little bit more conservative in terms of our scenario analysis, analytics and are willing to pay premiums. But market is open, it's healthy. And I would say, maybe, call it, 5 to 10 basis points inside the non-QM AAA market right now.

Operator

Your next question comes from the line of Marissa Lobo from UBS.

Ameeta Lobo Nelson

Just on MSRs, historically, MSRs have provided you a natural offset to the negative convexity in Agency MBS. But as we're seeing the mortgage universe become more fully extended and the convexity profile improving, how are you thinking about the role of MSRs in the portfolio today? And should we think about them more as a stand-alone return opportunity? Or do they continue to provide more diversification across rate scenarios?

Ken Adler

This is Ken. Thanks for the question. I would answer as both. The stand-alone return is certainly ample and we talked about that earlier. In terms of the hedging properties, beyond the gamma, the convexity sort of hedging, there's another form of hedging that's going on, and that's the model hedging. We use prepayment models to measure our duration, convexities and other risk measures. To the extent prepayment speeds for some other reason, come in faster or slower than the model, MSR provides a direct hedge to the portfolio. Considering if speeds come in slower than expected, that's always good for MSR. And that's in today's market with the mortgage [ university ] discount, just not good for the Agency MBS portfolio. So there's this model error that's being hedged through on the MSR.

David Finkelstein

Yes. One more point, Marissa, I'll say is in -- following up on Ken's point, is that to the extent that the mortgage market's at a reasonable discount like it is, and turnover is actually lower than natural turnover, which should be the case in the MSR portfolio is going to hedge that as well. And as I talked about a moment ago in terms of float income, it's a hedge for short rates, higher short rates increases in float income and MSR benefits from that as well. So there's still a very productive balancing component to the MSR portfolio in the current environment.

V.S. Srinivasan

I would also add that away from models and all of that, agency MBS has been trading directionally with rates. So when rates sell off, MBS spreads have been under pressure. And what we have observed over the last 3 years is when rates sell off, MSR actually trades very, very well. So from a pure mark-to-market trading perspective, it does provide cushion on book value loads.

Ameeta Lobo Nelson

Okay. Great. And then just shifting to residential credit and thinking about home price appreciation, can you talk to your home price outlook and its flat HPA manageable? And what are the assumptions that are underlying that 13% to 16% residential credit return?

Michael Fania

Sure. So thanks, Marissa. I'll address the second part of it, the 13% to 16%. Again, that's mostly the OBX platform. It's non-QM and DSCR. I will say that that's modeled to, call it, maybe a 20% lifetime speed, which is generally where non-QM has come in. In terms of [ cume ] losses, that probably represents close to 75 basis points of [ cume ] loss in terms of what our projections are. So there's significant room for upside.

If you look at the totality of our securitization program, we've issued, I think, close to $67 billion life to date. The actual amount of realized losses we have taken inside the trust is around $6 million. So it's been less than 1 basis point. So one of the areas where we've outperformed our initial expectations has been within credit modeling. We do expect to take more losses and like time to losses on a lot of non-term DSCR, maybe closer to 10 to 15 basis points as they season. But it just shows you that there is a level of conservatism in terms of those projections.

In terms of the housing market, a lot of it will depend upon what mortgage rates do and where mortgage rates ultimately settle. If we stay at [ 7 and 3/8 ] to 7.5% for an extended period of time, we do believe housing can go negative. It can go negative by a couple of points nationally. So a lot of it is dependent upon mortgage rates.

In terms of where we sit today, what we would say, the modestly bullish case for housing, still positive. September was up 8 basis points month-over-month. It's up 1% year-over-year. If you look at ZIP code level, 77% have positive year-over-year increases. There's a significant amount of homeowner equity, call it, $35 trillion to $40 trillion, depending upon what you think that the size of the market is. The average borrower is locked into a [ 4 65 ] rate. Inventory is still 15% below 2019. And new listings, which is reflecting that mortgage rate, they haven't really increased. It's only up 1% to 2%.

The caution, and this is what a lot of people are seeing now, and we do have a level of conservatism in terms of just not only our purchase assumptions but also the quality of the portfolio, as Dave mentioned, the Southeast is very weak. Texas, Florida, you see the public builders talking about competing with resale, month supply is at a 10-year high. And [ 7 and 3/8 ] mortgage payment, that mortgage payment is up 6% to 7% just over the last quarter relative to Q3. And everyone knows the affordability issues that we have, right? So if we stay at these rates, yes, we do think it could go down 2% to 3%, 3% to 4%.

Ameeta Lobo Nelson

But manageable within the -- yes. I guess within the equity cushion that you...

Michael Fania

Yes, it's very manageable. As Dave mentioned in the script, our average borrower has close to 400,000 of equity. It's a 64 mark-to-market LTV in our portfolio. The D60 plus of our portfolio right now is 160 basis points. And we are predominantly targeting upper middle-class borrowers, right? So it is not necessarily this first-time home buyer. It is not necessarily the borrower who has been challenged with their discretionary income in this inflationary environment. So I think from that perspective, we feel pretty good about the strategy.

David Finkelstein

Yes. Marissa, there's also very little layered risk in the portfolio. So we can manage and wouldn't even mind seeing HPA home prices come down a little bit to increase the affordability equation to get turnover up.

Operator

Your next question comes from the line of Rick Shane from JPM.

Richard Shane

There's been a lot of great questions this time so. Just wanted to talk a little bit -- I mean empirically, it's one thing to understand what's going on in MSR, but there are, I would describe, a lot of exogenous factors that are impacting -- potentially impacting valuation, mortgage volumes, industry capacity, potentially the impact of AI affecting speeds. I am curious when we think about, again, sort of your empirical models and then overlay all of these different structural things that are happening in mortgage right now, how is that impacting value pricing demand and where you see attractive opportunity within MSR?

Unknown Executive

Yes. Thanks for the question, and those are certainly things we're thinking about all day and actually all night. Look, I mean, the mortgage industry is in a place because of consolidation, because of technology, where people are operating much more efficiently and are operating at much lower profit margins. So because the efficiency that's priced in because there's overcapacity, because there's technology, because there's consolidation, it's tough to decouple all the reasons.

The profitability of the origination part of the business is very low. And the value of a newly created MSR today is somewhere depending on the loan type between 1 point and 1.5 points. And the profitability of the mortgage industry is substantially lower than that. And on average, when you look at the MBA numbers is in the 20 basis point range now. And since they've been measuring it on average is in the 40 basis point range.

So originators are just forced to sell MSR going forward in our view. So if loan production picks up, they have to sell MSR because they're not making as much money. Historically, when volumes picked up, margins picked up, and they picked up because of the shortage of capacity that occurred. We think because of technology that won't occur anymore. So as a result, there'll be lots of MSRs selling volumes pick up because the profitability will not increase on a per unit basis, allowing more MSR retention.

And then we think, if origination volumes don't pick up, what we're seeing is capitulation, consolidation, needs for liquidity to keep the platforms going until profitability might increase, and that's creating MSR selling as well. So we just see a continual restructuring of how the industry works. Where folks without a cost of capital like ours or better are not really going to be able to hold MSR and they're still holding a lot of legacy MSR and then go forward the new MSR, we have a tough time on seeing how they'll be able to retain that. And I think when you look at the MSR transfer data, that's public, you'll see who the sellers are, the bulk sellers are. And you'll see this thesis kind of playing out already.

David Finkelstein

Yes, Rick, I'll jump in here and just talk about the demand side and valuation. The market -- the bid for MSR is somewhat bifurcated. You have folks like us, capital participants in the market that have obviously accumulated a lot of MSR. And you also have banks, which, particularly given the likelihood of MSR not being a constraint when it comes to the Basel re-proposal, which we expect to get out the final which in the next couple of months, banks have been a strong source of demand, particularly in lower loan balance type MSR that carry a lot of escrow balances relative to the capital committed.

And so they've been a significant bid. As we talked about last quarter, we sold into the bank bid at levels that we thought were quite attractive. And then folks like us, we benefited from all the liquidity that's been generated with the activity in the MSR market and have traded quite a bit an MSR, and we still have a fair amount of appetite to add MSR and as do others like us that are portfolio companies. So we understand the market pricing. We still think it's fair. When there's a rich bid out there, we'll sell MSRs we've evidenced very recently. And I think we're -- from a portfolio standpoint, we're positioned conservatively and our pricing is -- on our portfolio is probably the most conservative in the industry.

Richard Shane

Look, I appreciate the answer. And it's an interesting thing. I think 25 years ago, we wrote something that said the procyclicality of margins would start to erode because of technology. And it feels like we're finally on the cusp of that, and I do think that there's probably no industry that's -- financial services industry that's going to be more transformed by AI than mortgage. So it's a really interesting time, and I do appreciate your insights.

Operator

Your next question comes from the line of Jason Weaver from JonesTrading.

Jason Weaver

So first, Dave, since the beginning of the year, we thought of the GSEs is showing a stabilizing bid behind the BS spreads. And I don't think we've seen any data since August. But do you have any sense as to the extent they've been involved or stepped away from purchases over the past several weeks?

David Finkelstein

Yes. Look, everything is anecdotal, subsequent to August because we don't have that data either. It did appear as though the activity was a little bit slow in the summer. But anecdotally, we have heard that they have been involved in the market. And I think -- you even got a tweet out of the FHFA director in September talking about the GSEs buying and some adjective to describe a considerable quality or quantity of MSR. So our understanding is that they probably are. They still do have a fair amount of dry powder. I think a less look at the end of August. Total capacity under the PSPA caps for loans and MBS was like $140 billion. They do still have to keep a lot of dry powder for loan buyouts and things like that. But our understanding is that they still have some ammunition left.

Jason Weaver

Got it. And second, I think you mentioned layering into some higher coupon TBAs in your prepared remarks. And I wonder if you could talk just a bit about how you see the risk reward in current coupon production, where under a sharp uptick in prepayments could occur under a flight to quality?

V.S. Srinivasan

Sure. I mean -- before we go there, I just want to define what higher coupon is. We refer to [indiscernible] [ 5.5s or 6s ] as higher coupon now, 6.5 float is quite small. They're going to start getting more issuance in 6.5 in the coming months. But 5.5s and 6s are [indiscernible] right now. And at this point, they're both with convictions. The only coupon that's changing at a [ $1 trillion ] price is 6.5. So most of the PPAs we bought were [ 5.5s and 6s ].

In terms of prepayments, we think -- TBA, particularly in production coupon, continues to deteriorate at an accelerating pace because more and more collateral is being carved out in the specified pools. And so what is left for TBA is significantly more inevitably convex. So up the coupon side, we generally don't like being in TBA for very long. We obviously -- when we want to add margin exposure, we typically do it in TBA and then over time, swap it into pools. So right now, we're not worried about our TBAs at [ 5.5s and 6s ] mainly because they are discounts, but at some point, particularly for 6s, we will swap them into specified pools.

Operator

Your next question comes from the line of Kenneth Lee from RBC Capital Markets.

Kenneth Lee

Just at a higher level, curious as to how you'd characterize your overall risk appetite just given the current rate outlook and the potential trade-off between market vol and return opportunity as you see across the various asset categories?

David Finkelstein

Yes. Thanks, Ken. Good question. So look, we're reasonably optimistic on the outlook here. Rates are higher. We do think there's somewhat of a ceiling to rate. I think when you look at the level of interest rates, it's obviously being driven by strong growth in inflation. And there's some real costs associated with these high rate levels. Obviously, the AI sector is continuing to borrow and continuing to invest. But the rest of the economy, to some extent, is being crowded out. That's households, corporates, and it's becoming more expensive for government to issue debt. So we feel like there's limits to how high rates can go, but there's also a new floor on the level of rates, given we are, as I spoke about in this new normal environment.

So that -- what that says to us or suggests to us is that vol should come down. And it has, to some extent, as we started the fourth quarter, we've reset. And our view is that things are going to stabilize or continue to stabilize, and you will see implied vols coming down because realized vols are a little bit lower. So that gives us a little more optimism in terms of our appetite for risk. And I think the position is, to a large extent, reflecting that. We let our leverage organically increase this past quarter. We didn't delever. We did delever the capital structure a little bit on the prep side. And I'll just tell you a little bit about that because that was really about capital structure and leverage optimization.

When we issued prep a year ago, we issued it at [ 8 and 7 As ] and agency spreads were 18% to 19% or thereabout. So the spread on that was about 1,000 basis points. And then you fast forward to when we made the decision to reduce our structural leverage, which was right after earnings, I believe. And at that time, we had floating rate prep outstanding and we've gone from 2 cuts priced into the market over the prior year to 4 hikes. And so the cost of that increased to around 10%.

Meanwhile, Agency spreads were relatively tight at that time and levered returns, as we spoke about on the last call, could be -- were as low as 14% to 15%. So that spread compressed quite a bit. We reduced capital structure leverage, and we felt good about it. And then you fast forward and the market cheapened again, obviously, to get closer to the higher teens returns. So here we are again and things look pretty appealing from that standpoint. And we're comfortable with our leverage. We have a little capacity to increase it tactically, but we're generating the returns we need with current leverage. And should spreads tighten, I think we show in our spread shocks for a 25 basis point tightening, it's just over 10% return from that. So we're in a position where we like to be and we're comfortable with the risk in the market, and we think all will continue to come down, and we'll be back in business like we were prior to the episode of vol in the late summer.

Operator

Your final question comes from the line of Trevor Cranston from Citizens JMP.

Trevor Cranston

Okay. Question on the non-QM market. Obviously, it's less rate sensitive in general than the conventional space, but curious, your outlook on how the increase in rates, particularly if mortgage rates hold up here, how that impacts the non-QM space and what your outlook is for origination volumes there going forward compared to where they've been in the last couple of quarters?

Michael Fania

Sure. Thanks for the question, Trevor. This is Mike. In terms of non-QM origination this year, we still think it probably is going to be and, call it, the [ 1 50 to 1 75 ] in terms of 175 billion. I would say it's probably leaning towards the higher number and the higher amount of that range. In terms of total mortgage origination, maybe we'll call it 1.9 trillion to 2 trillion. So we do think it will continue to be around, call it, 8% to 9% of the entire market.

The reason that non-QM is still an elevated percentage of originations, a lot of it is just because mortgage rates are elevated. It is a purchase market, right? And non-QM is targeting to a lot of investors, right? So over 50% of this market is investor. Investors right now are about 20% of all real estate purchases, which is a higher share. So we are getting a higher percentage of the end borrower at this point. And also, to your point, self-employed borrowers are a little bit more inelastic in terms of -- at this level of rates.

So I don't know if the share itself will grow. I think a lot of what you've seen over the last number of years has been maturation. But originators, at this point, pretty much to a T, have rolled out the product. It's still higher gross margins than the conforming market than the government market. And it's a product that originators need to have to be able to serve their brokers or serve their LOs on the retail side. So I would expect it to continue to be 8% to 9% of originations at this point.

In terms of if the market rallies, right, if the market rallies and the mortgage rate is at 6, 6.75, that percentage is going to shrink exponentially because you're going to see a lot of rate and term refinance of government and conventional. So the share is outsized a lot just because it is a purchase market. This market does target the purchase borrower, high investor share. And there's not a lot of rate and term and cash out at this point.

Operator

And that concludes our question-and-answer session. I will now turn the call back over to CEO, David Finkelstein, for closing remarks.

David Finkelstein

Thank you, and thank you, everybody, for joining us. We'll talk to you soon.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.