Cherry Hill Mortgage Investment CorpCHMI
Cherry Hill Mortgage Investment Corp Commitments Disclosure
Note 10 — Commitments and Contingencies
The commitments and contingencies of the Company as of December 31, 2024 and December 31, 2023 are described below.
Legal and Regulatory
From time to time, the Company may be subject to potential liability under laws and government regulations and various claims
and legal actions arising in the ordinary course of business. Liabilities are established for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal
claims may be substantially higher or lower than the amounts established for those claims. The Company has established immaterial reserves for these possible matters. Based on information currently available, management is not aware of any legal
or regulatory claims that would have a material effect on the Company’s consolidated financial statements.
Commitments to Purchase/Sell RMBS
As of December 31, 2024 and December 31, 2023, the Company held forward TBA purchase and sale commitments, respectively, with counterparties, which are
forward Agency RMBS trades, whereby the Company committed to purchasing or selling a pool of securities at a particular interest rate. As of the date of the trade, the mortgage-backed securities underlying the pool that will be delivered to fulfill
a TBA trade are not yet designated. The securities are typically “to be announced” 48 hours prior to the established trade settlement date.
See Note 2 — Basis of
Presentation and Significant Accounting Policies for details of unsettled RMBS trades, if any, as of December 31, 2024.
Acknowledgment Agreements
In connection with the Fannie Mae MSR Financing Facility (as defined below in Note 12), entered into by Aurora and QRS III, those parties also entered
into an acknowledgment agreement with Fannie Mae. Pursuant to that agreement, Fannie Mae consented to the pledge by Aurora and QRS III of their respective interests in MSRs for loans owned or securitized by Fannie Mae, and acknowledged the security
interest of the lender in those MSRs. See Note 12—Notes Payable for a description of the Fannie Mae MSR Financing Facility and the financing facility it replaced.
In connection with the Freddie Mac MSR Revolver (as defined below in Note 12), Aurora, QRS V, and the lender, with a limited joinder by the Company, entered into an
acknowledgement agreement with Freddie Mac pursuant to which Freddie Mac consented to the pledge of the Freddie Mac MSRs securing the Freddie Mac MSR Revolver. Aurora and the lender also entered into a consent agreement with Freddie Mac pursuant
to which Freddie Mac consented to the pledge of Aurora’s rights to reimbursement for advances on the underlying loans. See Note 12—Notes Payable for a description of the Freddie Mac MSR Revolver.
Operating Lease
The Company’s operating lease is comprised of corporate office lease with a
remaining term of approximately twenty-three months. Operating lease right-of-use (“ROU”) asset represents the right to use an
underlying asset for the lease term and lease liabilities represent obligations to make lease payments arising from the lease. The Company recognizes lease expense on a straight-line basis over the lease term. The lease cost for the years ended
December 31, 2024 and December 31, 2023 was approximately $34,000 and $0, respectively. Cash used for the operating lease during the years ended December 31, 2024 and December 31, 2023 was approximately $34,000 and $0, respectively.
The table below summarizes the Company’s future commitments under the operating
lease (dollars in thousands):
|
|
Operating Lease Commitments
|
|||
|
2025
|
$
|
75
|
||
|
2026
|
41
|
|||
|
2027
|
-
|
|||
|
Remaining undiscounted lease payments
|
116
|
|||
|
Less: imputed interest
|
7
|
|||
|
Remaining discounted lease payments
|
$
|
109
|
||
Other information related to the operating lease is summarized below as of the periods indicated:
|
Classification
|
December 31, 2024
|
December 31, 2023
|
|||||||
|
ROU Assets
|
|
$
|
109
|
$
|
-
|
||||
|
Lease Liabilities
|
|
$ | (109 | ) |
$
|
-
|
|||
|
Weighted average remaining lease term in years
|
|
1.6
|
-
|
||||||
|
Weighted average discount rate (A)
|
|
8.18
|
%
|
-
|
% | ||||
| (A) |
The Company uses an incremental borrowing
rate in determining the present value of lease payments.
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 6, 2025 | Showing above |
| 2016 | Mar 15, 2017 | |
| 2015 | Mar 15, 2016 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.