AG Mortgage Investment Trust, Inc. (NYSE: MITT) is doubling down on its bet that Non-QM lending will be a key driver of future growth. Reporting second quarter 2025 results on Aug. 1, the residential mortgage REIT announced it has increased its majority interest in Arc Home, its Non-QM and non-agency TPO lending subsidiary, from 44.6% to 66%.
Though the cost of the transaction was not explicitly stated, MITT noted it was completed Friday, Aug. 1 and paid for through the issuance of about 2 million MITT shares, which was approved unanimously by the company’s board, including independent directors. CEO T.J. Durkin called the move “a logical next step” in MITT’s strategy to build a “best-in-class vertically integrated residential mortgage origination and securitization platform.”
Arc Home has been operating at breakeven in recent quarters, but MITT executives expect the increased stake to deliver “meaningful earnings accretion” beginning in late 2025 and “in earnest” in 2026, "with minimal dilution of ~2% to book value." Nicholas Smith, chief investment officer at MITT, said the company is “confident that Arc can continue to gain share in a growing and increasingly attractive corner of the mortgage market.”
Gain-on-sale margins in the Non-QM market were described as “somewhat consistent” quarter-over-quarter, with expectations they will remain stable given the current demand profile.
Durkin pointed to volume growth and Arc’s “proven capability to be a leader in the Non-QM space” as reasons for the investment. “We’re largely hitting those goals,” he said, adding that no immediate changes are planned to Arc’s operations or loan retention strategy.
“We are confident that Arc [Home] can continue to gain share in a growing and increasingly attractive corner of the mortgage market.” —Nicholas Smith, Chief Investment Officer, AG Mortgage Investment Trust, Inc.
Arc Home’s Q2 pipeline was briefly dented by April’s market volatility — dubbed “Liberation Day” by traders — but rebounded quickly. CFO Anthony Rossiello reported Arc Home’s earnings available for distribution (EAD) contribution at a loss of $130,000 for the quarter, noting May and June earnings offset most of the earlier hit.
For the quarter, MITT reported book value of $10.39 per share, down 2.4% from Q1, and EAD of $0.18 per share. The REIT raised its common dividend 5% to $0.21 per share. The company’s $7.3 billion investment portfolio grew 2.3% in the quarter, aided by $341 million in agency-eligible loan purchases and $104 million in home equity loan acquisitions, with most of those home equity loans securitized in early July.
Executives also highlighted two new residential mortgage warehouse facilities designed to cut mark-to-market risk and improve cash management, as well as refinancing of high-cost acquisition debt for Western Asset Mortgage Capital, which it acquired in 2023. That latter move freed up about $40 million for reinvestment, including in a $647 million closed-end second loan securitization.
Durkin said the Arc Home transaction and related moves are about positioning MITT for the next phase. “We believe this is a positive step forward in scaling the company and enhancing our cap table,” he told analysts. “Executing the business plan, without having to do anything additional, will be positive to EAD in ’26.”
