AG Mortgage Investment Trust, Inc. (NYSE:MITT) Q4 2022 Earnings Call Transcript

Operator: Our next question will come from Matthew Erdner with Jones Trading. Your line is open.

Matthew Erdner: What do you think the best allocation of capital is and where do you guys see opportunities going forward in ’23?

Nick Smith: Yes, certainly. Obviously given the multi decade loan origination values and resi, and sort of this being a transitional period. I think you don’t necessarily have to be creative, but you’d have to be open to changing investment theses and being open to new products. We did sort of conveniently see the implementation, or maybe it hasn’t been implemented yet, but it’s been announced it will be implemented for May deliveries for Fannie and Freddie, new LPAs. Although, net-net, these changes are beneficial to private label execution and competitiveness, there are some places where they actually become more competitive or sort of try to take away from being cherry picked. So, we certainly see that as an interesting place to deploy capital, as the government sort of further makes explicit.

What was implicit the subsidization of better credits, subsidizing lower credit. So, we see opportunity there and given wide spreads, as spreads come in the private label market, the private label market will become increasingly competitive versus that bid. So, we think that’s a longer-term view. We’re also interested in looking at sort of prime second liens, and key locks. Obviously, given sort of the lock in effect of first liens. We think there’s an opportunity, given the cash out market, more or less being shut out for key locks in second lien to take that space. So those are sort of the larger food groups, but always looking at more things.

Matthew Erdner: And then do you think the better opportunity is on a securitized to set product or loan origination?

Nick Smith: So, I think we announced last quarter, we saw opportunities in securities. We were able to deploy a little bit of capital there, I think spreads tightened in December and kind of into January, where that’s probably shifted back to loans. But I think we announced the market, we’re open to taking advantage of those opportunities within call it new resi mortgage credit. We’re certainly not going to buy the loans and make the credit if we can buy it cheaper in the secondary. But I don’t think it’s as obvious as an opportunity as it was a 90 days ago.

Operator: At this time, we have no further questions in the queue. So, I would like to turn it back to management for any additional or closing remarks.

Jenny Neslin: Thank you. And thank you to everyone for joining us this morning and for your questions. We appreciate it and look forward to speaking with you again next quarter. Enjoy the rest of the day.

Operator: Ladies and gentlemen, this does conclude today’s call and we appreciate your participation. You may disconnect at any time.