Our expected investments; changes in the value of our investments; interest rate mismatches between our investments and our borrowings used to funds such purchases; changes in interest rates and mortgage prepayment rates; effects of interest rate caps on our adjustable rate investments; rates of default or decreased recovery rates on our investments; prepayments of the mortgage and other loans underlying our mortgage-backed or other asset-backed securities; the degree to which our hedging strategies may or may not protect us from interest rate volatility; impact of and changes in governmental regulations; tax law, and rates; accounting guidance and similar matters; availability of investment opportunities in real estate-related and other securities; availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our understanding of our competition and market trends in our industry, interest rates, the debt securities markets; or the general economy.For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see risk factors in our most recent annual report on Form 10-K and all subsequent quarterly reports on Form 10-Q. We do not undertake and specifically disclaim any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. Operator I will now turn the conference over to Mr. Matthew Lambiase, President and Chief Executive Officer. Please proceed, sir. Matthew Lambiase Thank you, (Rocco). Good morning and welcome to Chimera Investment Corp.’s second quarter 2011 earnings call. This is Matt Lambiase. I’m the President and CEO. And joining me on the call this morning I have Alex Denahan, our CFO; Chris Woschenko, our Head of Investments; Rose-Marie Lyght, the CIO of our manager FIDAC; Choudhary Yarlagadda, the Head of Structuring at FIDAC; and Jay Diamond, the Managing Director at FIDAC and a member of Chimera’s Board of Directors.
We’re all here to answer your questions after my comments. As you know, the mortgage market has experienced significant volatility in the recent quarter. Many bullish mortgage investors who were encouraged by the falling unemployment rate earlier in the year, had to reevaluate their positions in light of new and bleak data on home prices and home sales.The distress is further compounded when a well-publicized sale of a large distressed mortgage-backed securities portfolio held by the Federal Reserve did not go well. Many banks with residential mortgage exposure and mortgage insurance companies also came under significant pressure during the period. So with all the volatility that we’ve experienced in the mortgage market in the last few months, I think it’s important to highlight certain aspects of Chimera’s portfolio. First, Chimera does not own pay option ARMs, home-equity loans or second mortgage loans or securities in its portfolio. These assets saw a significant drop in price as the Federal Reserve had a difficult time liquidating the AIG Maiden Lane II portfolio during the second quarter. The majority of the assets in the Maiden Lane II portfolio were home-equity securities and the prices of these bonds in the ABX Index which tracks them, went down materially as the market tried to absorb the supply. Chimera is not involved in these types of securities and so the change in the level of the home-equity ABX Index is not a good proxy for the change in the value of our portfolio. To-date, we’ve been successful finding better risk reward in higher quality sectors of the mortgage credit space. And while all credit has traded off in the second quarter, the bonds in our portfolio were far less volatile than the ABX Index and home equity securities. Read the rest of this transcript for free on seekingalpha.com