Chimera Investment's Q4 2024: Navigating Book Value Volatility and GSE Reform Opportunities

These are the key contradictions discussed in Chimera Investment Corporation's latest 2024Q4 earnings call, specifically including: Book Value Volatility Management and Opportunities from GSE Reform:



Interest Rate Environment:
- The yield on average interest earning assets was 6%, and the average cost of funds was 4.5% in the fourth quarter of 2024, with a net interest spread of 1.5%.
- This was attributed to a significant rise in interest rates during the quarter and a positively sloping yield curve, which impacted the GAAP book value due to changes in interest rates and credit spreads.

Portfolio Composition and Diversification:
- Chimera's investment portfolio consists of $12.3 billion, with $10.7 billion in residential loans and $519 million in agency MBS, posturing for diversification and stable dividends.
- The strategy aims to increase liquidity and diversify sources of income by investing in agency RMBS, mortgage servicing rights, and non-QM loans, driven by strong credit performance and technical indicators.

Securitization and Funding Strategy:
- Chimera successfully securitized $287 million of investor loans in January 2025, with strong demand across the capital structure, especially at the bottom end, indicating favorable market conditions.
- The company is focused on optimizing liability hedges to lock in fixed rates on floating rate liabilities, maintaining a stable EAD and dividend paying ability.

Housing Market Performance:
- US home prices rose by 4.3% between the third quarter of 2023 and the third quarter of 2024, reflecting positive homeowners' equity and supporting existing portfolio values.
- The housing market faced challenges due to high interest rates, affordability issues, and long-term supply/demand imbalances, affecting home sales and construction.