6.         Fair Value Measurement

Definition and Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable or unobservable:

A fair value hierarchy for inputs is implemented in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are used when available. The availability of valuation techniques and the ability to attain observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is newly issued and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.

The fair value hierarchy is categorized into three broad levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted, quoted prices in active markets for identical assets and liabilities.

Level 2 - Valuations based on quoted prices in an inactive market, or on models whose inputs are observable either directly or indirectly for substantially the full term of the assets and liabilities. Level 2 inputs include (i) quoted prices for similar assets in active markets; (ii) quoted prices for identical or similar assets in markets that are not active; (iii) inputs that are derived principally from or corroborated by observable market data by correlation or other means; and (iv) inputs other than quoted prices that are observable for the assets.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level of input that is significant to the fair value measurement. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. The availability of observable inputs is affected by a variety of factors. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each asset.

The Company’s board of directors is responsible for determining in good faith the fair value of the Company’s Level 3 investments in accordance with the Company’s valuation policy and procedures approved by the board of directors, based on, among other factors, the input of the Advisor, the Sub-Advisor, the Company’s audit committee, and independent third-party valuation firms. The determination of the fair value of the Company’s Level 3 assets for which market prices are not available, requires judgment.

For most of the Company’s assets, market prices will not be available. Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, the fair value of the assets may differ significantly from the values that would have been used had a readily available market value existed for such assets, and the differences could be material. Furthermore, through the valuation process, the Company’s board of directors may determine that the fair value of the Company’s Level 3 assets differs materially from the values that were provided by independent valuation firms.

For financial reporting purposes, the Company follows a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an “exit price” at the measurement date, or the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an asset or liability that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., the Company’s own data or assumptions) that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value.

In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

Valuation Techniques and Inputs

Following are descriptions of the valuation methodologies used to measure the Company’s assets and liabilities measured at fair value:

Residential Mortgage Loans - The Company recognizes residential mortgage loans at fair value. Residential mortgage loans are categorized as Level 3 in the fair value hierarchy and valued using a Discounted Cash Flow ("DCF") approach in which the expected future cash flows (principal, interest, prepayments) are discounted to present value using a market participant discount rate.

Mortgage Servicing Rights Investments - Mortgage servicing rights investments' values are based on an evaluation of the net assets of the special-purpose entity holding the MSR participation interests, whereby the entity assets are valued by the present value of future cash flows from servicing certain loans, adjusted for prepayment, default risk, and servicing costs. Mortgage servicing rights investments are categorized as Level 3 in the fair value hierarchy.

Futures Contracts - Futures contracts that are traded on an exchange are valued at their last reported sales price as of the valuation date. Listed futures contracts are categorized in Level 1 of the fair value hierarchy.

The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of  June 30, 2026:

FOOTNOTES:

The following table provides a reconciliation of investments for which Level 3 inputs were used in determining fair value for the six months ended June 30, 2026:

The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of  June 30, 2026, were as follows: