Your voting rights as a holder of the preferred stock will be limited. Our common stock is the only class or series of our capital stock currently outstanding that has full voting rights. Voting rights for holders of the preferred stock exist primarily with respect to the ability to elect two additional directors to our board of directors following a Nonpayment Event (as defined below) and as described in the sections entitled “Forward-Looking Statements”“Description of Series A Preferred Stock — Voting Rights” and “Description of Series B Preferred Stock — Voting Rights.” Other than the limited circumstances described in this prospectus.

The preferred stock outstandingis redeemable in whole or in part at our option on and after July 6, 2023 as described in the sections entitled “Description of Series A Preferred Stock — Optional Redemption” and “Description of Series B Preferred Stock — Optional Redemption.” We may choose to redeem the preferred stock at times when prevailing dividend rates are lower than the dividend rate paid on the preferred stock. In this circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective dividend rate as high as the preferred stock being redeemed.

Our charter provides that we mayArticles of Amendment and Restatement authorizes us to issue up to 150,000,000 shares of stock, consisting of 125,000,000 shares of common stock, par value $0.01 per share, and 25,000,000 shares of preferred stock, par value $0.01 per share. As of August 10, 2017, 18,248,304the date of this prospectus, we had the following stock issued and outstanding: (i) 22,930,460 shares of common stock, were issued(ii) 2,307,400 shares of Series A preferred stock and outstanding, including 624,106(iii) 2,892,600 shares reserved for issuance upon redemption of unitsSeries B preferred stock.

Our board of directors will not authorize, and we will not pay or declare and set apart for payment, any dividend on the preferences, conversionSeries A preferred stock at any time that:

the terms and other rights, voting powers, restrictions, limitationsconditions of any of our agreements, including any agreement relating to our indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof, or a default thereunder; or

If and when all accumulated and unpaid dividends on the Series A preferred stock will have been paid in full through the most recently completed dividend period following a Nonpayment Event, then the right of the holders of shares of Series A preferred stock to elect the Preferred Stock Directors will cease (but subject always to revesting of such voting rights in the case of any further vote or action by our stockholders.

Our Articles of Amendment and Transfer; Change of Control Provisions

Any dividend, including any dividend payable on the Series B preferred stock for any partial dividend period, will be computed on the basis of at least:

The statute permits various exemptions from its provisions, including business combinations that are approved by ourOur board of directors beforewill not authorize, and we will not pay or declare and set apart for payment, any dividend on the Series B preferred stock at any time that:

Notwithstanding the interested stockholder becomes an interested stockholder.

As long as any shares of Series B preferred stock are outstanding, no dividends or other distributions will be declared and paid or declared and set apart for payment on any class or series of Parity Stock for any period unless full cumulative dividends have been declared and paid or declared and a sum sufficient for the five-year prohibitionpayment thereof set apart for such payment on the Series B preferred stock for all past dividend periods. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) on shares of the Series B preferred stock and any shares of Parity Stock, all dividends declared and paid on shares of the Series B preferred stock and any Parity Stock will be declared and paid pro rata so that the amount of dividends declared and paid per share of Series B preferred stock and per share of such Parity Stock will in all cases bear to each other the same ratio that accumulated dividends per share of Series B preferred stock and per share of Parity Stock bear to each other. No interest, or sum of money in lieu of interest, will be payable in respect of any dividend payment or payments on the Series B preferred stock that may be in arrears.

In the event of our voluntary or involuntary liquidation, dissolution or winding up, the holders of shares of Series B preferred stock will be entitled to be paid out of our assets legally available for distribution to our stockholders, subject to the payment of our debts and other liabilities and the supermajority vote requirements will not apply to such business combinations. As a result, any person may be able to enter into business combinations with us in whole or in part at any time. According to resolutions of our board of directors, we are not permitted to opt back in to these provisions without the approvalpreferential rights of the holders of a majority of our shares of common stock. If this resolution were repealedany class or rescinded with approval byseries of Senior Stock, a voteliquidation preference of $25.00 per share, plus an amount equal to any accumulated and unpaid dividends thereon (whether or not authorized or declared) to, but not including, the date of payment, before any distribution of assets is made to holders of shares of Junior Stock.

In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, our stockholders, or our board of directors does not otherwise approve a business combination, the business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

Notice of any liquidation stating the payment date or dates when, and the place or places where, the amounts distributable in each circumstance shall be payable, will be given no fewer than 30 days and no more than 60 days prior to the payment date, to each holder of record of shares of Series B preferred stock at the address of such holder as it shall appear on our stock records. After payment of the shares for purposesfull amount of these appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition. The control share acquisition statute does not applyliquidating distributions to shares acquired in a merger, consolidation or share exchange if wewhich they are a party to the transaction, nor does it apply to acquisitions approved by or exempted by our charter or bylaws.

The Maryland Unsolicited Takeovers Act, or the “MUTA,” permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directorsSeries B preferred stock is not redeemable prior to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provisionJuly 6, 2023, except in the chartercircumstances described below, in the section below titled “— Change of Control,” or bylaws,pursuant to certain provisions of our Articles of Amendment and Restatement.

We may redeem any or all of its five provisions, which provide that:

If fewer than all the outstanding shares of Series B preferred stock are to be redeemed, we will select those shares to be divided into three classes;redeemed pro rata for the Series B preferred stock or in such other manner as determined to be fair and equitable to holders of shares of Series B preferred stock. If full cumulative dividends on all outstanding shares of Series B preferred stock have not been declared and paid or declared and set apart for payment for all past dividend periods, no shares of the Series B preferred stock may be redeemed pursuant, unless all outstanding shares of the Series B preferred stock are simultaneously redeemed, and neither we nor any of our affiliates may purchase or otherwise acquire shares of the Series B preferred stock otherwise than pursuant to a purchase or exchange offer made to all holders of the Series B preferred stock.

the number of directors mayshares of Series B preferred stock to be fixed only by voteredeemed;

the place or places where certificates (if any) for shares of the directors;

that dividends on the request of stockholders entitled to cast at least a majority of all the votes entitledshares to be cast atredeemed will cease to accumulate on the meeting is required for stockholders to require the calling of a special meeting of stockholders.redemption date.

A board of directors may implement all or any of those provisions without amending the charter or bylaws and without stockholder approval. The corporation may be prohibited by its charter or by resolution of its board of directors from electing any of the provisions of the statute. Our charter provides that we will not elect to be subject to the provisions of the MUTA pursuant to which our board of directors would be divided into three classes. That prohibition in our charter may not be repealed unless the repeal, or classification of our directors, is approved by our stockholders by a vote of at least a majority of the votes entitled to be cast. We are not prohibited from implementing any other provision of the statute. Our charter provides an election by us into certain provisions of the statute in order that, except as may be provided by our board of directors in setting the terms of any class of preferred stock, any vacancies on the board may be filled only by a majority of the directors then in office, even ifIf less than a quorum, and a director elected to fill a vacancy will serve for the balance of the unexpired term.

If (i) we have given notice of redemption of any shares of Series B preferred stock and executive officers).(ii) we have irrevocably set apart for payment the funds necessary for redemption (including any accumulated and

Maryland law permitsIf a Maryland corporation to include in its charterredemption date falls after a provision limiting liability of its directorsdividend record date and officerson or prior to the corporationcorresponding dividend payment date, each holder of shares of Series B preferred stock on the dividend record date will be entitled to the dividend payable on such shares on the corresponding dividend payment date, notwithstanding such redemption of such shares on or prior to the dividend payment date, and its stockholders for money damages,each holder of shares of Series B preferred stock that are redeemed on such redemption date will be entitled to the dividends, if any, accruing after the end of the dividend period to which the dividend payment date relates to, but not including, such redemption date.

In the event of any provisionChange of Control, each holder of Series B preferred stock will have the right and option, but not the obligation, to require that limitswe (i) redeem all of such holder’s Series B preferred stock for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends thereon (whether or not authorized or declared) to, but not including, the liability of directors or officersdate fixed for redemption, without interest, and (ii) purchase in cash any warrants issued pursuant to the corporationApril Purchase Agreement or its stockholders:the May Purchase Agreement and held by such holder of Series B preferred stock in the amount calculated as the greater of the (x) the put price of such warrants and (y) the value of such warrants.

Except as described below, the holders of the outstanding shares of Series B preferred stock are not entitled to the extent that it is proved that the person actually received an improper benefit(i) vote on any matter or profit(ii) receive notice of, or to participate in, money, property or services; or

Any Preferred Stock Director may be removed at any time without cause by the holders of record of a majority of the entire boardoutstanding shares of directors, our stockholders, atthe Series B preferred stock and Series A preferred stock, when they have the voting rights described above (voting together as a single class). So long as a Nonpayment Event continues, any meeting thereof, byvacancy in the affirmative voteoffice of a majority of all ofPreferred Stock Director (other than prior to the votes entitled to be cast on the matter, may approve a plan of liquidation and dissolution.initial election

The affirmative vote of persons for electionthe holders of at least two-thirds of the outstanding shares of Series B preferred stock and Series A preferred stock, voting together as a single class, is required to:

adopt any amendment, alteration or repeal of any provision of our Articles of Amendment and Restatement that materially and adversely changes the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms and conditions of redemption of the Series B preferred stock (it being understood that an increase in the number of directors is not a material and adverse change). The holders of shares of Series B preferred stock will have exclusive voting rights on any amendment to our boardArticles of directorsAmendment and Restatement that would alter the proposal of business to be considered by stockholders at the annual meeting may be made only:

declare or pay any dividend, distribution or similar payments with respect to special meetingsJunior Stock, other than (i) any dividend, distribution, or similar payment that we reasonably determine is necessary for us to maintain our status as a REIT (for the avoidance of stockholders, onlydoubt, we may take into account our policy of maintaining a steady dividend rate in making this determination) or (ii) any such dividend, distribution, or similar payment, if (x) the business specifiednet book value of our consolidated assets after such payment is greater than the net book value of our consolidated assets as of December 31, 2019, as calculated and determined in each case as of such date in accordance with U.S. generally accepted accounting principles, (y) the net book value of our consolidated assets after such payment is greater than the net book value of our consolidated assets of as of the end of the most recent calendar quarter, as calculated and determined in each case as of such date in accordance with U.S. generally accepted accounting principles, and (z) such payment does not exceed 8.0% of the net book value of our consolidated assets as calculated and determined in accordance with U.S. generally accepted accounting principles and as reflected in our noticemost recently reported balance sheet prior to the date of meeting may be brought before the meeting of stockholders and nominations of persons for election to our board of directors may be made only:

provided thatenter into any line of business other than businesses currently undertaken by us in the ordinary course of business consistent with past practice, mortgage and mortgage-related businesses, businesses described in our boardForm 10-K and financial services or banking businesses, unless such ancillary business represents revenues of directors has determined that directors shall be elected at such meeting, byless than 10% of our revenues for our last fiscal year.

insurance companies;

tax-exempt organizations, tax-deferred and tax-advantaged accounts;

financial institutions or broker-dealers;

non-U.S. individuals and non-U.S. corporations (except to the extent discussed in “—  Taxation of Non-U.S. Holders” or “—  Foreign Account Tax Compliance Act” below);

We elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with our short taxable year ended December 31, 2014. We believe that, commencing with our short taxable year ended December 31, 2014, we have been organized and have operated in such a manner as to qualify for taxation as a REIT under the U.S. federal income tax laws, and we intend to continue to operate in such a manner, but no assurances can be given that we will operate in a manner so as to qualify or remain qualified as a REIT. This section discusses the laws governing the U.S. federal income tax treatment of a REIT and its stockholders. These laws are highly technical and complex.

In connection with this offering, Morrison & Foersterfiling, Mayer Brown LLP will render an opinion that, commencing with our taxable year ended December 31, 2014, we were organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and our current and proposed method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT for our taxable year ending December 31, 20162020 and subsequent taxable years. Investors should be aware that Morrison & FoersterMayer Brown LLP’s opinion is based upon customary assumptions, will be conditioned upon certain representations made by us as to factual matters, including representations regarding the nature of our assets and the conduct of our business, is not binding upon the IRS, or any court and speaks as of the date issued. In addition, Morrison & FoersterMayer Brown LLP’s opinion will be based on existing U.S. federal income tax law governing qualification as a REIT, which is subject to change either prospectively or retroactively. Moreover, our qualification and taxation as a REIT depends upon our ability to meet on a continuing basis, through actual results, certain qualification tests set forth in the U.S. federal income tax laws. Those qualification tests involve the percentage of income that we earn from specified sources, the percentage of our assets that falls within specified categories, the diversity of our capital stock ownership, and the percentage of our earnings that we distribute. Morrison & FoersterMayer Brown LLP will not review our compliance with those tests on a continuing basis. Accordingly, no assurance can be given that our actual results of operations for any particular taxable year will satisfy such requirements. Our ability to satisfy the REIT qualification tests will depend upon our analysis of the characterization and fair market values of our assets, some of which will not be susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis (which, based on the types of assets we will own, could fluctuate rapidly, significantly and unpredictably). In addition, we will be required to make estimates of or otherwise determine the value of real property that is collateral for our mortgage loan assets. There can be no assurance that the IRS would not challenge our valuations or valuation estimates of this collateral. For a discussion of the tax consequences of our failure to qualify as a REIT, see “Risk Factors — Risks Related to this Offering — Failure to Qualify.”

If we qualify as a REIT, we generally will not be subject to U.S. federal income tax on our REIT taxable income that we currently distribute to our stockholders, but taxable income generated by any domestic TRS, such as Thetis TRS, will be subject to regular corporate income tax. However, we will be subject to U.S. federal tax in the following circumstances:

We will pay U.S. federal income tax on our taxable income, including net capital gain, that we do not distribute to stockholders during, or within a specified time period after, the calendar year in which the income is earned.

We will pay a 100% tax on net income earned from sales or other dispositions of property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business.

the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, multiplied, in either case, by

a fraction intended to reflect our profitability.

If we fail to distribute during a calendar year at least the sum of: (i) 85% of our REIT ordinary income for the year, (ii) 95% of our REIT capital gain net income for the year and (iii) any undistributed taxable income from earlier periods, we will pay a 4% nondeductible excise tax on the excess of the required distribution over the amount we actually distributed, plus any retained amounts on which income tax has been paid at the corporate level.

We may elect to retain and pay income tax on our net long-term capital gain. In that case, a U.S. stockholder would be taxed on its proportionate share of our undistributed long-term capital gain (to the extent that we make a timely designation of such gain to the stockholder) and would receive a credit or refund for its proportionate share of the tax we paid.

We will be subject to a 100% excise tax on transactions between us and a TRS that are not conducted on an arms’-lengtharm’s-length basis including for taxable years beginning after December 31, 2015, “redetermined TRS service income.” Redetermined TRS service income generally represents gross income of a taxable REIT subsidiary that is understated and attributable to services provided to us or on our behalf.

The earnings of our TRSs and any other TRS that we may form will be subject to U.S. federal corporate income tax.

If we acquire any asset from a C corporation, or a corporation that generally is subject to full corporate- level tax, in a merger or other transaction in which we acquire a basis in the asset that

To monitor compliance with the share ownership requirements, we generally will be required to maintain records regarding the actual ownership of our shares. To do so, we must demand written statements each year from the record holders of significant percentages of our shares pursuant to which the record holders must disclose the actual owners of the shares (i.e., the persons required to include our dividends in their gross income). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these record-keeping requirements. If you fail or refuse to comply with the demands, you will be required by Treasury Regulations to submit a statement with your tax return disclosing your actual ownership of our shares and other information. In addition, we must satisfy all relevant filing and other administrative requirements that must be met to elect and maintain REIT status. We intend to comply with these requirements.

A corporation that is a “qualified REIT subsidiary” is not treated as a corporation separate from its parent REIT. All assets, liabilities, and items of income, deduction, and credit of a qualified REIT subsidiary are treated as assets, liabilities, and items of income, deduction, and credit of the REIT. A qualified REIT subsidiary is a corporation, other than a TRS, all of the shares of which is owned, directly or through one or more qualified REIT subsidiaries or disregarded entities, by the REIT. Thus, in applying the requirements described herein, any qualified REIT subsidiary that we own will be ignored, and all assets, liabilities, and items of income, deduction, and credit of such subsidiary will be treated as our assets, liabilities, and items of income, deduction, and credit.

income derived from a REMIC in proportion to the real estate assets held by the REMIC, unless at least 95% of the REMIC’s assets are real estate assets, in which case all of the income derived from the REMIC; and

income derived from the temporary investment of new capital that is attributable to the issuance of our shares or a public offering of our debt with a maturity date of at least five years and that we receive during the one-year period beginning on the date on which we received such new capital.

Second, in general, at least 95% of our gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% gross income test (except for income derived from the temporary investment of new capital), other types of interest and dividends, gain from the sale or disposition of stock or securities or any combination of these.

We intend togenerally acquire re-performing and non-performing mortgage loans. Our mortgage loans will beare secured by a first lien on real property. Interest on debt secured by mortgages on real property or on interests in real property, including, for this purpose, prepayment penalties, loan assumption fees and late payment charges that are not compensation for services, generally is qualifying income for purposes of the 75% gross income test.

Under the applicable Treasury Regulation (referred to as the “interest apportionment regulation”), if we receive interest income with respect to a mortgage loan that is secured by both real property and other property, and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property on the date that we acquired the mortgage loan, the interest income will be apportioned between the real property and the other collateral, and our income from the arrangement will qualify for purposes of the 75% gross income test only to the extent that the interest is allocable to the real property. Even if a mortgage loan is not secured by real property, or is undersecured, the income that it generates may nonetheless qualify for purposes of the 95% gross income test. In Revenue Procedure 2014-51, the IRS interpreted the “principal amount” of the loan for purposes of that test to be the face amount of the loan, despite the Code’s requirement that taxpayers treat any market discount (discussed below) as interest rather than principal. For taxable years beginning after December 31, 2015, inIn the case of mortgage loans secured by both real and personal property, if the fair market value of such personal property does not exceed 15% of the total fair market value of all property securing the loan, then the personal property securing the loan will be treated as real property for purposes of determining whether the mortgage interest income is qualifying for purposes of the 75% gross income test.

We expect togenerally acquire re-performing and non-performing mortgage loans for substantially less than their face amount. However, we believe that all of the mortgage loans that we will acquire are secured only by real property and no other property value is taken into account in our underwriting and pricing. Accordingly, we believe that the interest apportionment rules and Revenue Procedure 2014-51 (to the extent it addresses interest apportionment) will not apply to our mortgage loans. Nevertheless, if the IRS were to assert successfully that our mortgage loans were secured by other property, then depending upon the value of the real property securing our mortgage loans and their face amount, and the sources of our gross income generally, we might not be able to satisfy the 75% income test.

Under the Code, if the terms of a loan are modified in a manner constituting a “significant modification,” such modification triggers a deemed exchange of the original loan for the modified loan. IRS Revenue Procedure 2014-51 provides a safe harbor pursuant to which we will not be required to

We may earn income from fees in certain circumstances. Fee income generally will be qualifying income for purposes of both the 75% and 95% gross income tests if it is received in consideration for entering into an agreement to make a loan secured by real property and the fees are not determined by income and profits. Other fees, including certain amounts received in connection with mortgage servicing rights (which we do not currently intend to acquire on a standalone basis), generally are not qualifying income for purposes of either gross income test. Any fees earned by a TRS, like other income earned by a TRS, will not be included in the REIT’s gross income for purposes of the gross income tests.

Certain foreign currency gains will be excluded from gross income for purposes of one or both of the gross income tests. “Real estate foreign exchange gain” will be excluded from gross income for purposes of the 75% and 95% gross income tests. Real estate foreign exchange gain generally includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 75% gross income test, foreign currency gain attributable to the acquisition or ownership of  (or becoming or being the obligor under) obligations secured by mortgages on real property or on interest in real property and certain foreign currency gain attributable to certain “qualified business units” of a REIT. “Passive foreign exchange gain” will be excluded from gross income for purposes of the 95% gross income test. Passive foreign

Second, rents we receive from a “related party tenant” will not qualify as rents from real property in satisfying the gross income tests unless the tenant is a TRS, at least 90% of the property is leased to unrelated tenants, the rent paid by the TRS is substantially comparable to the rent paid by the unrelated tenants for comparable space and the rent is not attributable to an increase in rent due to a modification of a lease with a “controlled TRS” (i.e., a TRS in which we own directly or indirectly more than 50% of the voting power or value of the stock). A tenant is a related party tenant if the REIT, or an actual or constructive owner of 10% or more of the REIT, actually or constructively owns 10% or more of the tenant.

Third, if rent attributable to personal property, leased in connection with a lease of real property, is greater than 15% of the total rent received under the lease, then the portion of rent attributable to the personal property will not qualify as rents from real property.

Fourth, we generally must not operate or manage our real property or furnish or render services to our tenants, other than through an “independent contractor” who is adequately compensated and from whom we do not derive revenue. We may, however, provide services directly to tenants if the services are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not considered to be provided for the tenants’ convenience. In addition, we may provide a minimal amount of  “non-customary” services to the tenants of a property, other than through an independent contractor, as long as our income from the services does not exceed 1% of our income from the related property. Furthermore, we may own up to 100% of the stock of a TRS, which may provide customary and non-customary services to tenants without tainting our rental income from the related properties.

If a portion of the rent that we receive from a property does not qualify as “rents from real property” because the rent attributable to personal property exceeds 15% of the total rent for a taxable year, the portion of the rent that is attributable to personal property will not be qualifying income for purposes of either the 75% or 95% gross income test. Thus, if such rent attributable to personal property, plus any other income that is non-qualifying income for purposes of the 95% gross income test, during a taxable year exceeds 5% of our gross income during the year, we would lose our REIT qualification. Further, the rent from a particular property does not qualify as “rents from real property” if  (i) the rent is considered based on the income or profits of the tenant, (ii) the tenant either is a related party tenant or fails to qualify for the exceptions to the related party tenant rule for qualifying taxable REIT subsidiaries or (iii) we furnish non-customary services to the tenants of the property, or manage or operate the property, other than through a qualifying independent contractor or a taxable REIT subsidiary.

A REIT will not be considered, however, to have foreclosed on a property where the REIT takes control of the property as a mortgagee-in-possession and cannot receive any profit or sustain any loss except as a creditor of the mortgagor. Property generally ceases to be foreclosure property at the end of the third taxable year following the taxable year in which the REIT acquired the property, or longer if an extension is granted by the Secretary of the U.S. Treasury. This grace period terminates and foreclosure property ceases to be foreclosure property on the first day:

our failure to meet those tests is due to reasonable cause and not to willful neglect; and

any loan to an individual or an estate;

any “section 467 rental agreement,” other than an agreement with a related party tenant;

any obligation to pay “rents from real property;”

certain securities issued by governmental entities that are not dependent in whole or in part on the profits of  (or payments made by) a non-governmental entity;

any security (including debt securities) issued by another REIT;

any debt instrument of an entity treated as a partnership for U.S. federal income tax purposes in which we are a partner to the extent of our proportionate interest in the equity and certain debt securities issued by that partnership; or

We may in the future enter into repurchase agreements under which we nominally sell certain of our assets to a counterparty and simultaneously entered into an agreement to repurchase the sold assets in exchange for a purchase price that reflects a financing charge. Based on positions the IRS has taken in analogous situations, we believe that these transactions would be treated as secured debt and that we would be treated for REIT asset and income test purposes as the owner of the assets that would be the subject of such agreements notwithstanding that such agreements may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could assert that we did not own our assets subject to sale and repurchase agreements during the term of such agreements, in which case we could fail to qualify as a REIT.

Derivative instruments generally are not qualifying assets for purposes of the 75% asset test. Thus, interest rate swaps, futures contracts, and other similar instruments that are used in “hedging transactions” as defined in “—  Hedging Transactions,” are non-qualifying assets for purposes of the 75% asset test.

As discussed above, we may invest opportunistically in other types of mortgage-related assets. To the extent we invest in such assets, we intend to do so in a manner that will enable us to satisfy each of the asset tests described above. However, we cannot assure you that we will be able to satisfy the asset tests described above.

We believe that the assets that we may hold will satisfy the foregoing asset test requirements. We will monitor the status of our assets and our future acquisition of assets to ensure that we comply with those requirements, but we cannot assure you that we will be successful in this effort. No independent appraisals will be obtained to support our estimates of and conclusions as to the value of our assets and securities, or in many cases, the real estate collateral for the mortgage loans that support our assets. Moreover, the values of some assets may not be susceptible to a precise determination. As a result, no assurance can be given that the IRS will not contend that our ownership of securities and other assets violates one or more of the asset tests applicable to REITs.

Each taxable year, we must distribute dividends, other than capital gain dividends and deemed distributions of retained capital gain, to our stockholders in an aggregate amount at least equal to:

the sum of

90% of our “REIT taxable income,” computed without regard to the dividends paid deduction and our net capital gain, and

90% of our after-tax net income, if any, from foreclosure property,

the sum of certain items of non-cash income.

We must make such distributions in the taxable year to which they relate, or in the following taxable year if either (i) we declare the distribution before we timely file our U.S. federal income tax return for the year and pay the distribution on or before the first regular dividend payment date after such declaration or (ii) we declare the distribution in October, November or December of the taxable year, payable to stockholders of record on a specified day in any such month, and we actually pay the dividend before the end of January of the following year. The distributions under clause (i) are taxable to the stockholders in the year in which paid, and the distributions in clause (ii) are treated as paid on December 31 of the prior taxable year. In both instances, these distributions relate to our prior taxable year for purposes of the 90% distribution requirement.

The manner in which excess inclusion income is calculated is not clear under current law. As required by IRS guidance, we intend to make such determinations based on what we believe to be a reasonable method. However, there can be no assurance that the IRS will not challenge our method of making any such determinations. If the IRS were to disagree with any such determinations made or with the method used by us, the amount of any excess inclusion income required to be taken into account by one or more stockholders (as described above) could be significantly increased. Tax-exempt investors, foreign investors and taxpayers with net operating losses should carefully consider the tax consequences described above, and are urged to consult their tax advisors.

The term “U.S. holder” means a beneficial owner of our shares of common stockShares that, for U.S. federal income tax purposes, is:

If a partnership, entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our shares of common stock,Shares, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership and certain determinations made at the partner level. If you are a partner in a partnership holding our shares of common stock,Shares, you should consult your tax advisor regarding the consequences of the purchase, ownership and disposition of our shares of common stockShares by the partnership.

As long as we qualify as a REIT, a taxable U.S. holder must generally take into account as ordinary income distributions made out of our current or accumulated earnings and profits that we do not designate as capital gain dividends or retained long-term capital gain. In addition, for taxable years beginning after December 31, 2017 and before January 1, 2026, U.S. holders that are individuals, trusts and estates generally will be entitled to up to a 20% pass-through deduction with respect to that ordinary dividend income for purposes of determining their U.S. federal income tax (but not for purposes of the 3.8% Medicare tax), provided that certain holding period requirements have been met. Corporate U.S. holders are not entitled to the pass-through deduction or the dividends-received deduction with respect to our distributions. A noncorporate U.S. holder’s ability to claim the deduction equal to 20% of qualifying dividends received may be limited by the U.S. holder’s particular circumstances. In addition, for any noncorporate U.S. holder will not qualifythat claims a deduction in respect of qualifying dividends, the maximum threshold for the dividends

We may elect to retain and pay income tax on the net long-term capital gain that we recognize in a taxable year. In that case, to the extent we designate such amount on a timely notice to such stockholder, a U.S. holder would be taxed on its proportionate share of our undistributed long-term capital gain. The U.S. holder would receive a credit or refund for its proportionate share of the tax we paid. The U.S. holder would increase the basis in its shares of common stockShares by the amount of its proportionate share of our undistributed long-term capital gain, minus its share of the tax we paid.

A U.S. holder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if the distribution does not exceed the adjusted basis of the U.S. holder’s shares of common stock.Shares. Instead, the distribution will reduce the adjusted basis of such shares of common stock.Shares. A U.S. holder will recognize a distribution in excess of both our current and accumulated earnings and profits and the U.S. holder’s adjusted basis in his or her shares of common stockShares as long-term capital gain, or short-term capital gain if the shares of common stockShares have been held for one year or less, assuming the shares of common stockShares are a capital asset in the hands of the U.S. holder. In addition, if we declare a distribution in October, November or December of any year that is payable to a U.S. holder of record on a specified date in any such month, such distribution shall be treated as both paid by us and received by the U.S. holder on December 31 of such year, provided that we actually pay the distribution during January of the following calendar year, as described in “—  Distribution Requirements.”

Stockholders may not include in their individual income tax returns any of our net operating losses or capital losses. Instead, these losses are generally carried over by us for potential offset against our future income.

Taxable distributions from us and gain from the disposition of our shares of common stockShares will not be treated as passive activity income and, therefore, a U.S. holder generally will not be able to apply any “passive activity losses,” such as losses from certain types of limited partnerships in which such U.S. holder is a limited partner, against such income. In addition, taxable distributions from us and gain from the

In general, a U.S. holder who is not a dealer in securities must treat any gain or loss realized upon a taxable disposition of our shares of common stockShares as long-term capital gain or loss if the U.S. holder has held such shares of common stockShares for more than one year and otherwise as short-term capital gain or loss. In general, a U.S. holder will realize gain or loss in an amount equal to the difference between the sum of the fair market value of any property and the amount of cash received in such disposition and the U.S. holder’s adjusted tax basis. A holder’s adjusted tax basis generally will equal the U.S. holder’s acquisition cost, increased by the excess of net capital gains deemed distributed to the U.S. holder (discussed above) less tax deemed paid by such U.S. holder on such gains and reduced by any returns of capital. However, a U.S. holder must treat any loss upon a sale or exchange of shares of common stockShares held by such holder for six months or less as a long-term capital loss to the extent of capital gain dividends and any other actual or deemed distributions from us that such U.S. holder treats as long term capital gain. All or a portion of any loss that a U.S. holder realizes upon a taxable disposition of our shares of common stockShares may be disallowed if the U.S. holder purchases our shares of common stockShares (or substantially similar shares of common stock)shares) within 30 days before or after the disposition.

A taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated as long-term capital gain or loss. The maximum tax rate on long-term capital gain applicable to U.S. holders taxed at individual rates is 20% for sales and exchanges of assets held for more than one year. The maximum tax rate on long-term capital gain from the sale or exchange of  “section 1250 property,” or depreciable real property, is 25%, which applies to the lesser of the total amount of the gains or the accumulated depreciation on the Section 1250 property. Individuals, trusts and estates whose income exceeds certain thresholds are also subject to a 3.8% Medicare tax on gain from the sale of our shares of common stock.Shares.

With respect to distributions that we designate as capital gain dividends and any retained capital gain that we are deemed to distribute, we will designate whether such a distribution is taxable to U.S. holders taxed at individual rates at a 20% or 25% rate. The highest marginal individual incomeFor taxable years beginning after December 31, 2017 and before January 1, 2026, the maximum tax rate currentlyfor U.S. holders taxed at individual rates is 39.6%37%. Thus, the tax rate differential between capital gain and ordinary income for those taxpayers may be

For most non-U.S. holders, investment in a REIT that invests principally in mortgage loans and MBS is not the most tax-efficient way to invest in such assets. That is because receiving distributions of income derived from such assets in the form of REIT dividends subjects most non-U.S. holders to withholding taxes that direct investment in those asset classes, and the direct receipt of interest and principal payments with respect to them, would not.

A non-U.S. holder that receives a distribution from us that is not attributable to gain from our sale or exchange of  “United States real property interests,” as defined below, and that we do not designate as a capital gain dividend or retained capital gain will recognize ordinary income to the extent that we pay the distribution out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply unless an applicable tax treaty reduces or eliminates the tax. Reduced treaty rates are not available to the extent that income is attributable to our excess inclusion income allocable to the non-U.S. holder. See “—  Taxable Mortgage Pools and Excess Inclusion Income.” If a distribution is treated as effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business, the distribution will not incur the 30% withholding tax, but the non-U.S. holder generally will be subject to U.S. federal income tax on the distribution at graduated rates, in the same manner as U.S. holders are taxed on distributions and also may be subject to the 30% branch profits tax in the case of a

We may sellThe shares of common stock and preferred stock listed in the securitiestables appearing under the heading “Selling Stockholders” are being registered to permit the resale of such shares by the selling stockholders, and their respective transferees, assignees and successors-in-interest, from time to time pursuantafter the date of this prospectus. There can be no assurance that the selling stockholders will sell any or all of the common stock or preferred stock offered hereby. We will not receive any of the proceeds from the sale of the common stock or preferred stock by the selling stockholders. We will pay substantially all of the expenses incident to underwrittenthis offering of the shares by the selling stockholders to the public offerings, negotiated transactions, at the market offerings, block tradesother than commissions and discounts of underwriters, brokers, dealers or agents, if any.

The selling stockholders may sell all or a combinationportion of these methods. We may sell the securities toshares of common stock or through underwriters or dealers, through agents, or directly to one or more purchasers.