| Borrowings | 6. Borrowings Our operating partnership and certain of its Delaware statutory trust and/or limited liability company subsidiaries, as applicable, have entered into master repurchase agreements and loan agreements to finance the acquisition and ownership of the SFR properties, other REO properties and the remaining mortgage loans in our portfolio. We have effective control of the assets associated with these agreements and therefore have concluded these are financing arrangements. As of September 30, 2018 , the average annualized interest rate on borrowings under our repurchase and loan agreements was 4.73% , excluding amortization of deferred debt issuance costs and loan discounts. The following table sets forth data with respect to our repurchase and loan agreements as of September 30, 2018 and December 31, 2017 ($ in thousands): Maximum Borrowing Capacity Book Value of Collateral Amount Outstanding Amount of Available Funding September 30, 2018 CS Repurchase Agreement due November 16, 2018 $ 350,000 $ 230,938 $ 179,686 $ 170,314 Nomura Loan Agreement due April 5, 2020 (1) 250,000 49,670 31,083 218,917 MSR Loan Agreement due November 9, 2018 (2) 489,259 613,144 489,259 — HOME II Loan Agreement due November 9, 2019 (3) 83,270 101,166 83,270 — HOME III Loan Agreement due November 9, 2019 (3) 89,150 112,478 89,150 — HOME IV Loan Agreement (A) due December 9, 2022 114,201 146,537 114,201 — HOME IV Loan Agreement (B) due December 9, 2022 114,590 147,569 114,590 — Term Loan Agreement due April 6, 2022 100,000 115,240 100,000 — FYR SFR Loan Agreement due September 1, 2028 508,700 588,787 508,700 — Less: unamortized loan discount — — (5,211 ) — Less: deferred debt issuance costs — — (7,797 ) — $ 2,099,170 $ 2,105,529 $ 1,696,931 $ 389,231 December 31, 2017 CS Repurchase Agreement due November 16, 2018 $ 350,000 $ 281,722 $ 189,173 $ 160,827 Nomura Loan Agreement due April 5, 2018 250,000 169,521 102,785 147,215 MSR Loan Agreement due November 9, 2018 (2) 489,259 622,065 489,259 — HOME II Loan Agreement due November 9, 2019 (3) 83,270 103,324 83,270 — HOME III Loan Agreement due November 9, 2019 (3) 89,150 114,698 89,150 — HOME IV Loan Agreement (A) due December 9, 2022 114,201 149,698 114,201 — HOME IV Loan Agreement (B) due December 9, 2022 114,590 150,718 114,590 — Term Loan Agreement due April 6, 2022 100,000 116,250 100,000 — Less: unamortized loan discount — — (6,158 ) — Less: deferred debt issuance costs — — (6,113 ) — $ 1,590,470 $ 1,707,996 $ 1,270,157 $ 308,042 _____________ (1) Represents initial maturity date. Does not include a potential additional one -year extension to April 5, 2021. (2) On October 19, 2018, we exercised our option to extend the maturity of the MSR Loan Agreement to November 9, 2019. We have the option to extend the maturity date for up to two additional one -year extensions. (3) Represents initial maturity date. We have the option to extend the maturity date for up to three successive one -year extensions. Our business model relies to a significant degree on both short-term financing and longer duration asset-backed financing arrangements, and we generally do not carry sufficient liquid funds to retire any of our short-term obligations upon their maturity. Prior to or upon such short-term maturities, management generally expects to (1) refinance the remaining outstanding short-term facilities, obtain additional financing or replace the short-term facilities with longer-term facilities and (2) continue to liquidate non-rental REO properties and certain mortgage loans, which will generate cash to reduce the related financing. We are in continuous dialogue with our lenders, and we are currently not aware of any circumstances that would adversely affect our ability to complete such refinancings. We believe we will be successful in our efforts to refinance or obtain additional financing based on our recent success in renewing our outstanding facilities and obtaining additional financing with new counterparties and our ongoing relationships with lenders. CS Repurchase Agreement Credit Suisse (“CS”) is the lender on the repurchase agreement entered into on March 22, 2013, (the “CS Repurchase Agreement”) with an initial aggregate maximum borrowing capacity of $100.0 million . The CS Repurchase Agreement has been amended on several occasions, ultimately increasing the maximum borrowing capacity to $350.0 million as of September 30, 2018 . The maturity date of the CS Repurchase Agreement is November 16, 2018, and we expect to renew this facility upon maturity. At September 30, 2018 , an aggregate of $179.7 million was outstanding under the CS Repurchase Agreement. Under the terms of the CS Repurchase Agreement, as collateral for the funds drawn thereunder, subject to certain conditions, our operating partnership and/or one or more of our limited liability company subsidiaries will sell to the lender equity interests in the Delaware statutory trust subsidiary that owns the applicable underlying mortgage or REO assets on our behalf, or the trust will directly sell such underlying mortgage assets. In the event the lender determines the value of the collateral has decreased, the lender has the right to initiate a margin call and require us, or the applicable trust subsidiary, to post additional collateral or to repay a portion of the outstanding borrowings. The price paid by the lender for each mortgage or REO asset we finance under the CS Repurchase Agreement is based on a percentage of the market value of the mortgage or REO asset and, in the case of mortgage assets, may depend on its delinquency status. With respect to funds drawn under the CS Repurchase Agreement, our applicable subsidiary is required to pay the lender interest monthly and certain other customary fees, administrative costs and expenses to maintain and administer the CS Repurchase Agreement. We do not collateralize any of our repurchase facilities with cash. The CS Repurchase Agreement is fully guaranteed by us. On September 4, 2018 we amended and restated our repurchase agreement with CS to, among other things, modify the interest rate from the CS cost of funds rate plus a fixed spread of 2.75% to one-month LIBOR plus a spread of 3.00% , resulting in a net lower cost of financing to us. The CS Repurchase Agreement requires us to maintain various financial and other covenants, including maintaining a minimum adjusted tangible net worth, a maximum ratio of indebtedness to adjusted tangible net worth and a minimum fixed charge coverage ratio. In addition, the CS Repurchase Agreement contains customary events of default. Nomura Loan Agreement Nomura Corporate Funding Americas, LLC (“Nomura”) is the lender under a loan agreement dated April 10, 2015 (the “Nomura Loan Agreement”) with an initial aggregate maximum funding capacity of $100.0 million . The Nomura Loan Agreement has been amended on several occasions, ultimately increasing the maximum funding capacity to $250.0 million ( $150.0 million of which was uncommitted but available to us subject to our meeting certain eligibility requirements) as of September 30, 2018 . The maturity date of the Nomura Loan Agreement is April 5, 2020, with a potential additional one -year extension to April 5, 2021. As of September 30, 2018 , we had an aggregate of $31.1 million outstanding under the Nomura Loan Agreement. Under the terms of the Nomura Loan Agreement, subject to certain conditions, Nomura may advance funds to us from time to time, with such advances collateralized by SFR properties and other REO properties. The advances paid under the Nomura Loan Agreement with respect to the applicable properties from time to time will be based on a percentage of the market value of the properties. We may be required to repay a portion of the amounts outstanding under the Nomura Loan Agreement should the loan-to-value ratio of the funded collateral decline. Under the terms of the Nomura Loan Agreement, we are required to pay interest monthly based on the one-month LIBOR plus a spread of 3.00% and certain other customary fees, administrative costs and expenses in connection with Nomura's structuring, management and ongoing administration of the facility. The Nomura Loan Agreement is fully guaranteed by us. The Nomura Loan Agreement requires us to maintain various financial and other covenants, including a minimum adjusted tangible net worth, a maximum ratio of indebtedness to adjusted tangible net worth and specified levels of unrestricted cash. In addition, the Nomura Loan Agreement contains events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, certain material adverse changes, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction. The remedies for such events of default are also customary for this type of transaction and include the acceleration of the principal amount outstanding under the Nomura Loan Agreement and the liquidation by Nomura of the SFR and REO properties then subject thereto. Seller Financing Arrangements We have entered into the following seller financing arrangements: • In connection with the seller financing related to our acquisition of 4,262 properties on September 30, 2016 (the “HOME SFR Transaction”), we entered into a loan agreement (the “MSR Loan Agreement”) between HOME Borrower, the sellers and MSR Lender, LLC (“MSR Lender”), as agent. Pursuant to the MSR Loan Agreement, HOME Borrower borrowed approximately $489.3 million from the Lenders (the “MSR Loan”). Effective October 14, 2016, the MSR Loan Agreement was assigned to MSR Lender and, in connection with MSR Lender’s securitization of the MSR Loan, we and MSR Lender amended and restated the MSR Loan Agreement to match the terms of the bonds in MSR Lender's securitization of the MSR Loan. The aggregate amount and the aggregate interest rate of the MSR Loan remained unchanged from the original loan agreement. The MSR Loan is a floating rate loan with eight floating rate components. Interest is computed and settled monthly based on one-month LIBOR plus a weighted average fixed spread of 3.285% . The initial maturity date of the MSR Loan is November 9, 2018, with borrower option to extend the initial maturity date for three successive one -year terms to an ultimate maturity date of November 9, 2021, provided, among other things, that there is no event of default under the MSR Loan Agreement on each maturity date. On October 19, 2018, HOME Borrower exercised the option to extend the maturity date to November 9, 2019. The MSR Loan is secured by the membership interests of HOME Borrower and the properties and other assets of HOME Borrower. On September 29, 2016, we entered into an interest rate cap to manage the economic risk of increases in the floating rate portion of the MSR Loan Agreement. See Note 10 . • In connection with the seller financing related to the first closing under the HOME Flow Transaction on March 30, 2017, HOME Borrower II entered into the HOME II Loan Agreement with entities sponsored by Amherst, pursuant to which we initially borrowed approximately $79.9 million . On November 13, 2017, HOME Borrower II entered into an amended and restated loan agreement. Pursuant to the amended and restated HOME II Loan Agreement, our borrowings thereunder have increased to $83.3 million , the weighted average fixed-rate spread over one-month LIBOR decreased from 2.75% to 2.10% and the initial maturity date was changed from October 9, 2019 to November 9, 2019. HOME Borrower II pays interest on the outstanding principal balance monthly. HOME Borrower II has the option to extend the HOME II Loan Agreement beyond the initial maturity date for three successive one -year extensions, provided, among other things, that there is no event of default under the HOME II Loan Agreement on each maturity date. The HOME II Loan Agreement is secured by the membership interests of HOME Borrower II and the properties and other assets of HOME Borrower II. The HOME II Loan Agreement is also cross-defaulted and cross-collateralized with the HOME III Loan Agreement. On October 16, 2018, we entered into an interest rate cap to manage the economic risk of increases in the floating rate portion of the HOME II Loan Agreement. See Note 10 . • In connection with the seller financing related to the second closing under the HOME Flow Transaction on June 29, 2017, HOME Borrower III entered into the HOME III Loan Agreement with entities sponsored by Amherst, pursuant to which we initially borrowed approximately $87.8 million . On November 13, 2017, HOME Borrower III entered into an amended and restated loan agreement. Pursuant to the amended and restated HOME III Loan Agreement, our borrowings thereunder have increased to $89.1 million , the weighted average fixed-rate spread over one-month LIBOR decreased from 2.30% to 2.10% and the initial maturity date was changed from October 9, 2019 to November 9, 2019. HOME Borrower III pays interest on the outstanding principal balance monthly. HOME Borrower III has the option to extend the HOME III Loan Agreement beyond the initial maturity date for three successive one -year extensions, provided, among other things, that there is no event of default under the HOME III Loan Agreement on each maturity date. The HOME III Loan Agreement is secured by the membership interests of HOME Borrower III and the properties and other assets of HOME Borrower III. The HOME III Loan Agreement is also cross-defaulted and cross-collateralized with the HOME II Loan Agreement. On October 16, 2018, we entered into an interest rate cap to manage the economic risk of increases in the floating rate portion of the HOME III Loan Agreement. See Note 10 . • In connection with the seller financing related to the third and final closing under the HOME Flow Transaction on November 29, 2017, HOME Borrower IV entered into two separate loan agreements with entities sponsored by Amherst, pursuant to which we borrowed $114.2 million pursuant to the first loan agreement and $114.6 million pursuant to the second loan agreement. The HOME IV Loan Agreements have a fixed interest rate of 4.00% and a maturity date of December 9, 2022. HOME Borrower IV pays interest on the outstanding principal balance monthly. The HOME IV Loan Agreements are secured by first priority mortgages on a portion of the properties acquired in the third and final closing under the HOME Flow Transaction. Under the terms of the MSR Loan Agreement, the HOME II Loan Agreement, the HOME III Loan Agreement and the HOME IV Loan Agreements, each of the facilities are non-recourse to us and are secured by a lien on the membership interests of HOME Borrower, HOME Borrower II, HOME Borrower III, HOME Borrower IV and the acquired properties and other assets of each entity, respectively. The assets of each entity are the primary source of repayment and interest on their respective loan agreements, thereby making the cash proceeds of rent payments and any sales of the acquired properties the primary sources of the payment of interest and principal by each entity to the respective lenders. Each of the loan agreements require that the applicable borrower comply with various affirmative and negative covenants that are customary for loans of this type, including limitations on the indebtedness each entity can incur, limitations on sales and dispositions of the properties collateralizing the respective loan agreements, minimum net asset requirements and various restrictions on the use of cash generated by the operations of such properties while the respective loan agreements are outstanding. Each loan agreement also includes customary events of default, the occurrence of which would allow the respective lenders to accelerate payment of all amounts outstanding thereunder. We have limited indemnification obligations for wrongful acts taken by HOME Borrower, HOME Borrower II, HOME Borrower III or HOME Borrower IV under their respective loan agreements in connection with the secured collateral. Even though the MSR Loan Agreement, the HOME II Loan Agreement, the HOME III Loan Agreement and the HOME IV Loan Agreements are non-recourse to us and all of our subsidiaries other than the entities party to the respective loan agreements, we have agreed to limited bad act indemnification obligations to the respective lenders for the payment of (i) certain losses arising out of certain bad or wrongful acts of our subsidiaries that are party to the respective loan agreements and (ii) the principal amount of each of the facilities and all other obligations thereunder in the event we cause certain voluntary bankruptcy events of the respective subsidiaries party to the loan agreements. Any of such liabilities could have a material adverse effect on our results of operations and/or our financial condition. Terms and covenants related to the Term Loan Agreement On April 6, 2017, RESI TL1 Borrower, LLC (“TL1 Borrower”), our indirect wholly-owned subsidiary, entered into a credit and security agreement (the “Term Loan Agreement”) with American Money Management Corporation, as agent, on behalf of Great American Life Insurance Company and Great American Insurance Company as initial lenders, with the potential to add other lenders from time to time as a party to the Term Loan Agreement. Pursuant to the Term Loan Agreement, TL1 Borrower borrowed $100.0 million to finance the ownership and operation of SFR properties. The Term Loan Agreement has a maturity date of April 6, 2022 and a fixed interest rate of 5.00% . TL1 Borrower pays interest on the outstanding principal balance monthly. The Term Loan Agreement requires that the TL1 Borrower comply with various affirmative and negative covenants that are customary for loans of this type, including, without limitation, reporting requirements to the agent; maintenance of minimum levels of liquidity, indebtedness and tangible net worth; limitations on sales and dispositions of the properties collateralizing the Term Loan Agreement and various restrictions on the use of cash generated by the operations of the properties while the Term Loan Agreement is outstanding. We may be required to make prepayments of a portion of the amounts outstanding under the Term Loan Agreement under certain circumstances, including certain levels of declines in collateral value. The Term Loan Agreement also includes customary events of default, the occurrence of which would allow the lenders to accelerate payment of all amounts outstanding thereunder. The Term Loan Agreement is non-recourse to us and is secured by a lien on the membership interests of TL1 Borrower and the properties and other assets of TL1 Borrower. The assets of TL1 Borrower are the primary source of repayment and interest on the Term Loan Agreement, thereby making the cash proceeds received by TL1 Borrower from rent payments and any sales of the underlying properties the primary sources of the payment of interest and principal by TL1 Borrower to the lenders. We have limited indemnification obligations for wrongful acts taken by TL1 Borrower and RESI TL1 Pledgor, LLC, the sole member of TL1 Borrower, in connection with the secured collateral for the Term Loan Agreement. FYR SFR Loan Agreement On August 8, 2018, FYR SFR Borrower, LLC ("FYR SFR Borrower"), our wholly-owned subsidiary, entered into loan agreement (the "FYR SFR Loan Agreement") with Berkadia Commercial Mortgage LLC, as lender ("Berkadia") for $508.7 million , secured by 2,798 of the RHA Acquired Properties as well as 2,015 other properties already owned by us and previously financed on our existing warehouse facilities with other lenders (the "FYR SFR Collateral Properties"). The FYR SFR Loan Agreement was originated as part of the Federal Home Loan Mortgage Corporation’s (“Freddie Mac”) single-family rental pilot program and has been purchased from Berkadia by Freddie Mac. The FYR SFR Loan Agreement is interest only, with a fixed interest rate of 4.65% and a 10 -year term, maturing on September 1, 2028. FYR SFR Borrower pays interest on the outstanding principal balance monthly. The FYR SFR Loan Agreement is secured by first priority mortgages on the FYR SFR Collateral Properties and the equity interests of FYR SFR Borrower. The FYR SFR Loan Agreement requires that FYR SFR Borrower comply with various affirmative and negative covenants that ar e customary for loans of this type, incl uding limitations on indebtedness FYR SFR Borrower can incur, limitations on sales and dispositions of the FYR SFR Collateral Properties and various restrictions on the use of cash generated by the operations of the SFR Collateral Properties while the FYR SFR Loan Agreement is outstanding. Compliance with Covenants We are currently in compliance with the covenants and other requirements with respect to each of the repurchase and loan agreements. We monitor our lending partners’ ability to perform under the repurchase and loan agreements and have concluded there is currently no reason to doubt that they will continue to perform under the repurchase and loan agreements as contractually obligated. |
