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Debt

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Note 8 — Debt

Repurchase agreement

On November 25, 2014, the Company entered into a repurchase facility pursuant to which a newly formed Delaware statutory trust wholly owned by the operating partnership, AJX Mortgage Trust I, the “Seller,” will acquire, from time to time, pools of mortgage loans that are primarily secured by first liens on one-to-four family residential properties from its affiliates and/or third party sellers. The facility was amended on May 13, 2015 to increase the transaction limit. These mortgage loans will generally be sold from time to time by the operating partnership as the “Guarantor” to the Seller pursuant to the terms of a mortgage loan purchase agreement by and between the Guarantor, as seller, and the Seller, as purchaser, in accordance with the terms thereof. Pursuant to the Master Repurchase Agreement (the “MRA”), these mortgage loans, together with the Seller’s 100% ownership interests in its wholly owned subsidiary, a newly formed Delaware limited liability company (“REO I”), and any future REO subsidiaries wholly owned by the Seller and certain other property of the Seller, will be sold by the Seller to Nomura Corporate Funding Americas, LLC, as Buyer, from time to time, pursuant to one or more transactions, not exceeding $200 million, with a simultaneous agreement by the Seller to repurchase such mortgage loans and other property, as provided in the MRA. The obligations of the Seller are guaranteed by the operating partnership. Repurchases under this facility carry interest calculated based on a spread to one-month LIBOR and are fixed for the term of the borrowing. The purchase price for each mortgage loan or REO is generally equal to 65% of the acquisition price for such asset or the then current BPO for the asset. The difference between the market value of the asset and the amount of the repurchase agreement is the amount of equity the Company has in the position and is intended to provide the lender some protection against fluctuations of value in the collateral and/or the failure by the Company to repay the borrowing at maturity. The Company has effective control over the assets associated with this agreement and therefore it is accounted for as a financing arrangement. The facility termination date is November 24, 2015.

Gregory services these mortgage loans and the REO properties pursuant to the terms of a servicing agreement by and among the Servicer, the Seller, REO I and any other REO Subsidiary, which servicing agreement has the same fees and expenses terms as the Company’s servicing agreement described under Note 9 — Related Party Transactions. The operating partnership as Guarantor will provide to the Buyer a limited guaranty of certain losses incurred by the Buyer in connection with certain events and/or the Seller’s obligations under the MLPA, following the breach of certain covenants by the Seller or an REO Subsidiary related to their status as a special purpose entity, the occurrence of certain bad acts by the Seller Parties, the occurrence of certain insolvency events of the Seller or an REO Subsidiary or other events specified in the Guaranty. As security for its obligations under the Guaranty, the Guarantor will pledge the Trust Certificate representing the Guarantor’s 100% beneficial interest in the Seller. While the Guaranty establishes a master netting arrangement, the arrangement does not meet the criteria for offsetting. The amount outstanding on the Company’s repurchase facility and the carrying value of the Company’s loans pledged as collateral are presented as gross amounts in the Company’s balance sheets at June 30, 2015 and December 31, 2014. The following table sets forth the details of the repurchase agreement ($ in thousands):

						June 30, 2015												December 31, 2014
Maturity Date		Maximum borrowing capacity				Amount outstanding				Carrying value of collateral				Interest rate				Amount outstanding				Carrying value of collateral				Interest rate
November 24, 2015		$	200,000			$	153,804			$	241,689				4.00	%		$	15,249			$	23,460				4.00	%

Secured borrowings

From the commencement of operations to June 30, 2015, the Company has completed three securitizations pursuant to Rule 144A under the Securities Act. The securitizations are structured as debt financings and not REMIC sales, and the loans included in the securitizations remain on the Company’s balance sheet as the Company is the primary beneficiary of the securitization trusts, which are variable interest entities (“VIEs”). The securitization VIEs are structured as pass through entities that receive principal and interest on the underlying mortgages and distribute those payments to the holders of the notes. The Company’s exposure to the obligations of the VIEs is generally limited to its investments in the entities. The notes that are issued by the securitization trusts are secured solely by the mortgages held by the applicable trusts and not by any of the Company’s other assets. The mortgage loans of the applicable trusts are the only source of repayment and interest on the notes issued by such trusts. The Company does not guarantee any of the obligations of the trusts under the terms of the agreement governing the notes or otherwise.

The Company’s securitizations are structured with Class A notes, Class B notes, and a trust certificate representing the residual interests in the mortgages. For each of the Company’s three securitizations, the Company has retained the Class B notes and the trust certificate. The Class A notes are senior, sequential pay, fixed rate notes. The Class B notes are subordinate, sequential pay, fixed rate notes with Class B-2 notes subordinate to the Class B-1 notes. If the Class A notes have not been redeemed by the payment date 36 months after issue, or otherwise paid in full by that date, an amount equal to the aggregate interest payment amount that accrued and would otherwise be paid to the Class B-1 and the Class B-2 notes will be paid as principal to the Class A notes on that date and each subsequent payment date until the Class A notes are paid in full. After the Class A notes are paid in full, the Class B-1 and Class B-2 notes will resume receiving their respective interest payment amounts and any interest that accrued but was not paid to the Class B notes while the Class A notes were outstanding. As the holder of the trust certificates, the Company is entitled to receive any remaining amounts in the trust after the Class A notes and Class B notes have been paid in full.

The following table sets forth the original terms of all securitization notes at their respective cutoff dates as of June 30, 2015:

Issuing Trust/Issue Date		Security		Original Principal				Interest Rate
Ajax Mortgage Loan Trust 2014-A/ October 2014		Class A notes due 2057⁽¹⁾		$	45 million				4.00	%
		Class B-1 notes due 2057⁽²⁾		$	8 million				5.19	%
		Class B-2 notes due 2057⁽²⁾		$	8 million				5.19	%
		Trust certificates⁽³⁾		$	20.4 million				–

Ajax Mortgage Loan Trust 2014-B / November 2014		Class A notes due 2054⁽¹⁾		$	41.2 million				3.85	%
		Class B-1 notes due 2054⁽²⁾		$	13.7 million				5.25	%
		Class B-2 notes due 2054⁽²⁾		$	13.7 million				5.25	%
		Trust certificates⁽³⁾		$	22.9 million				–

Ajax Mortgage Loan Trust 2015-A / May 2015		Class A notes due 2054⁽¹⁾		$	35.6 million				3.88	%
		Class B-1 notes due 2054⁽²⁾		$	8.7 million				5.25	%
		Class B-2 notes due 2054⁽²⁾		$	8.7 million				5.25	%
		Trust certificates⁽³⁾		$	22.8 million				–

(1)

The Class A notes are senior, sequential pay, fixed rate notes.

(2)

The Class B notes are subordinate, sequential pay, fixed rate notes with Class B-2 notes subordinate to the Class B-1 notes. We have retained the Class B notes.

(3)

The trust certificate issued by the trust and the beneficial ownership of the trust are retained by Great Ajax Funding LLC as the depositor. As the holder of the trust certificate, we are entitled to receive any remaining amounts in the trust after the Class A notes and Class B notes have been paid in full.

Servicing for the mortgage loans in 2014-A, 2014-B and 2015-A is provided by the Servicer at a servicing fee rate of 0.65% annually of UPB for re-performing loans and 1.25% annually of UPB for non-performing loans, and is paid monthly by us. The following table sets forth the status of the 2014-A, 2014-B and 2015-A notes held by others at the securitization cutoff date, at December 31, 2014 and at June 30, 2015 ($ in thousands):

		Balances at June 30, 2015								Balances at December 31, 2014								Original balances at securitization cutoff date
Class of Notes		Carrying value of mortgages				Bond principal balance				Carrying value of mortgages				Bond principal balance				Mortgage UPB				Bond principal balance
2014-A		$	58,313			$	41,681			$	58,905			$	44,016			$	81,405			$	45,000
2014-B			68,379				39,344				68,654				40,663				91,535				41,191
2015-A			53,116				35,324				—				—				75,835				35,643
		$	179,808			$	116,349			$	127,559			$	84,679			$	248,775			$	121,834

The Company’s obligations under its secured borrowings are not fixed, and the payments on these borrowings are predicated upon cash flows received on the underlying mortgage loans. Accordingly, a projection of contractual maturities over the next five years is inapplicable.