Agency RMBS consist of single-family residential, pass-through certificates and CMOs, for which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government-sponsored entity.
The agency securities that the Company intends to acquire provide funds for mortgage loans made to residential homeowners. These securities generally represent interests in pools of mortgage loans backed by savings and loan institutions, mortgage bankers, commercial bankers and other mortgage lenders. These pools of mortgage loans are assembled for sale to investors, such as the Company, by various government, government-related or private organizations.
Payments of principal and interest on agency securities, although not the market value of the securities themselves, may be guaranteed by the full faith and credit of the United States, such as those issued by Ginnie Mae, or by a U.S. Government-sponsored entity, such as Fannie Mae or Freddie Mac. See ‘‘—Freddie Mac Gold Certificates,’’ ‘‘—Fannie Mae Certificates’’ and ‘‘—Ginnie Mae Certificates.’’
These Agency RMBS securities are collateralized by either fixed-rate mortgage loans, or FRMs, adjustable-rate mortgage loans, or ARMs, or hybrid ARMs. Hybrid ARMs are mortgage loans that have interest rates that are fixed for an initial period (typically three, five, seven or 10 years) and thereafter reset at regular intervals subject to interest rate caps.
The Company’s allocation between securities collateralized by FRMs, ARMs or hybrid ARMs will depend on various factors including, but not limited to, relative value, expected future prepayment trends, supply and demand, costs of hedging, costs of financing, expected future interest rate volatility and the overall shape of the U.S. Treasury and interest rate swap yield curves. The Company intends to take these factors into account when it considers making these types of investments.
- Avoid 
- Short-Term Growth
- Long-Term Growth 
- Long-Term Value 
