10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013
Commission File Number: 001-35808

ZAIS FINANCIAL CORP.
(Exact Name of Registrant as Specified in its Charter)

Maryland	90-0729143
(State or Other Jurisdiction of Incorporation or	(IRS Employer
Organization)	Identification No.)

Two Bridge Avenue, Suite 322 Red Bank, New Jersey 07701-1106
(Address of Principal Executive Offices, Including Zip Code)

(732) 978-7518
(Registrant's Telephone Number, Including Area Code)

       Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo o

       Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes xNo o

       Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

			Smaller reporting
Large accelerated filer o	Accelerated filer o	Non-accelerated filer x	company o
		(Do not check if a smaller
		reporting company)

       Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo x

       Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:

       The Company has 7,970,886 shares of common stock, par value $0.0001 per share, outstanding as of August 12, 2013.

ZAIS FINANCIAL CORP.
FORM 10-Q TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	40
Item 4. Controls and Procedures	42
PART II. OTHER INFORMATION	43
Item 1. Legal Proceedings	43
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3. Defaults Upon Senior Securities	43
Item 4. Mine Safety Disclosures	43
Item 5. Other Information	43
Item 6. Exhibits	44
Signatures	45

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ZAIS Financial Corp. and Subsidiaries
Consolidated Balance Sheets

	June 30, 2013			December 31, 2012
		(Expressed in United States Dollars)
	(unaudited)
Assets
Cash	$	21,174,544		$	19,061,110
Restricted cash		12,545,944			3,768,151
Real estate securities, at fair value - $364,386,699 and $133,538,998 pledged as collateral,
respectively		444,536,696			170,671,683
Mortgage loans, at fair value - $120,517,248 and $ - pledged as collateral, respectively		120,783,425			—
Derivative assets, at fair value		7,169,531			—
Other assets		1,648,040			1,345,665
Receivable for real estate securities sold		—			6,801,398
Total assets	$	607,858,180		$	201,648,007
Liabilities
Repurchase agreements	$	308,497,415		$	116,080,467
Loan repurchase facility		89,112,325			—
Payable for real estate securities purchased		20,607,149			6,195,767
Derivative liabilities, at fair value		5,069,472			1,144,744
Dividends and distributions payable		4,004,010			—
Accounts payable and other liabilities		2,609,191			1,820,581
Accrued interest payable		436,893			74,966
Common stock repurchase liability		—			11,190,687
Total liabilities		430,336,455			136,507,212
Commitments and contingencies (Note 13)
Stockholders' equity
12.5% Series A cumulative non-voting preferred stock, $0.0001 par value; 50,000,000 shares
authorized; zero shares and 133 shares issued and outstanding, respectively		—			—
Common stock $0.0001 par value; 500,000,000 shares authorized; 7,970,886 shares issued
and 7,970,886 shares outstanding, and 2,586,131 shares issued and 2,071,096 shares
outstanding, respectively		798			207
Additional paid-in capital		164,207,617			39,759,770
(Accumulated deficit)/retained earnings		(5,179,730	)		5,281,941
Total ZAIS Financial Corp. stockholders' equity		159,028,685			45,041,918
Non-controlling interests in operating partnership		18,493,040			20,098,877
Total stockholders' equity		177,521,725			65,140,795
Total liabilities and stockholders' equity	$	607,858,180		$	201,648,007

The accompanying notes are an integral part of these consolidated financial statements.

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ZAIS Financial Corp. and Subsidiaries
Consolidated Statements of Operations (unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(Expressed in United States Dollars)
Interest income
Real estate securities	$	5,031,558		$	2,278,821		$	8,438,685		$	5,039,871
Mortgage loans		903,953			—			932,859			—
Total interest income		5,935,511			2,278,821			9,371,544			5,039,871
Interest expense
Repurchase agreements		867,484			378,407			1,381,519			667,147
Loan repurchase facility		289,296			—			289,296			—
Total interest expense		1,156,780			378,407			1,670,815			667,147
Net interest income		4,778,731			1,900,414			7,700,729			4,372,724
Other gains / (losses)
Change in unrealized (loss) / gain on real estate
securities		(15,642,642	)		2,903,133			(14,739,365	)		9,392,927
Change in unrealized gain on mortgage loans		1,596,197			—			1,567,291			—
Realized (loss) / gain on real estate securities		(246,055	)		109,183			(246,055	)		(1,951,862	)
Realized gain on mortgage loans		66,244			—			66,244			—
Gain / (loss) on derivative instruments		3,698,381			(897,767	)		3,979,525			(755,952	)
Total other gains / (losses)		(10,527,875	)		2,114,549			(9,372,360	)		6,685,113
Expenses
Professional fees		231,389			398,325			1,492,573			943,436
Advisory fee - related party		704,687			245,283			1,193,072			472,578
Loan servicing fees		114,534			—			114,534			—
General and administrative expenses		769,123			43,340			1,123,372			80,655
Total expenses		1,819,733			686,948			3,923,551			1,496,669
Net (loss) / income		(7,568,877	)		3,328,015			(5,595,182	)		9,561,168
Net (loss) / income allocated to non-controlling
interests		(788,476	)		—			(489,382	)		—
Preferred dividends		—			4,157			15,379			7,574
Net (loss) / income attributable to ZAIS
Financial Corp. common stockholders	$	(6,780,401	)	$	3,323,858		$	(5,121,179	)	$	9,553,594
Net (loss) / income per share applicable to common
stockholders - basic and diluted	$	(.85	)	$	1.10		$	(.78	)	$	3.16
Weighted average number of shares of common stock:
Basic		7,970,886			3,022,617			6,564,284			3,022,617
Diluted		8,897,800			3,022,617			7,491,198			3,022,617

The accompanying notes are an integral part of these consolidated financial statements.

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ZAIS Financial Corp. and SubsidiariesConsolidatedStatements of Stockholders' Equity

	Preferred Stock				Common Stock
																Total ZAIS			Non-
													(Accumulated			Financial			controlling
	Shares of				Shares of					Additional			Deficit) /			Corp.			Interests in
	Preferred		Preferred		Common		Common			Paid-in			Retained			Stockholders'			Operating
	Stock		Stock at Par		Stock		Stock at Par			Capital			Earnings			Equity			Partnership			Total Equity
	(Expressed in United States Dollars)
Balance at December 31, 2011	—		$	—	3,022,617		$	302		$	60,452,038		$	(5,134,466	)	$	55,317,874		$	—		$	55,317,874
Net proceeds from offering of preferred stock	133			—	—			—			115,499			—			115,499			—			115,499
Net proceeds from offering of OP units	—			—	—			—			—			—			—			20,393,704			20,393,704
Net proceeds from offering of common stock	—			—	232,039			24			4,757,446			—			4,757,470			—			4,757,470
Distributions on OP units	—			—	—			—			—			—			—			(1,117,280	)		(1,117,280	)
Dividends on common stock	—			—	—			—			—			(9,471,442	)		(9,471,442	)		—			(9,471,442	)
Repurchase of common stock	—			—	(668,525	)		(67	)		(14,181,192	)		—			(14,181,259	)		—			(14,181,259	)
Common stock repurchase liability	—			—	(515,035	)		(52	)		(10,923,892	)		—			(10,923,944	)		—			(10,923,944	)
Rebalancing of ownership percentage between
the Company and operating partnership	—			—	—			—			(460,129	)		—			(460,129	)		460,129			—
Net income	—			—	—			—			—			19,887,849			19,887,849			362,324			20,250,173
Balance at December 31, 2012	133			—	2,071,096			207			39,759,770			5,281,941			45,041,918			20,098,877			65,140,795
Reversal of common stock repurchase liability	—			—	249,790			25			5,440,150			—			5,440,175			—			5,440,175
Repurchase of preferred shares	(133	)		—	—			—			(133,000	)		—			(133,000	)		—			(133,000	)
Net proceeds from initial public offering	—			—	5,650,000			566			118,861,934			—			118,862,500			—			118,862,500
Equity raise payments	—			—	—			—			(216,658	)		—			(216,658	)		—			(216,658	)
Distributions on OP units	—			—	—			—			—			—			—			(621,034	)		(621,034	)
Dividends on common stock	—			—	—			—			—			(5,340,492	)		(5,340,492	)		—			(5,340,492	)
Rebalancing of ownership percentage between
the Company and operating partnership	—			—	—			—			495,421			—			495,421			(495,421	)		—
Net loss	—			—	—			—			—			(5,121,179	)		(5,121,179	)		(489,382	)		(5,610,561	)
Balance at June 30, 2013 (unaudited)	—		$	—	7,970,886		$	798		$	164,207,617		$	(5,179,730	)	$	159,028,685		$	18,493,040		$	177,521,725

The accompanying notes are an integral part of these consolidatedfinancialstatements.

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ZAIS Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)

	Six Months Ended June 30,
	2013			2012
	(Expressed in United States Dollars)
Cash flows from operating activities
Net (loss) / income	$	(5,595,182	)	$	9,561,168
Adjustments to reconcile net (loss) / income to net cash provided by operating activities
Net (accretion)/amortization of (discounts)/premiums related to real
estate securities		(1,566,256	)		(873,704	)
Net accretion of discounts related to mortgage loans		(259,435	)		—
Change in unrealized loss/(gain) on real estate securities		14,739,365			(9,392,927	)
Change in unrealized (gain) on mortgage loans		(1,567,291	)		—
Realized loss on real estate securities		246,055			1,951,862
Realized (gain) on mortgage loans		(66,244	)		—
Change in unrealized (gain)/loss on derivative instruments		(3,244,803	)		650,448
Changes in operating assets and liabilities
(Increase) / decrease in other assets		(302,375	)		46,722
Increase / (decrease) in accounts payable and other liabilities		788,610			(358,638	)
Increase / (decrease) in accrued interest payable		361,927			(799	)
Net cash provided by operating activities		3,534,371			1,584,132
Cash flows from investing activities
Acquisitions of real estate securities, net of change in payable for real estate securities
purchased		(344,623,655	)		(72,680,829	)
Proceeds from principal repayments on real estate securities		24,639,160			10,230,669
Proceeds from sale of real estate securities, net of changes in receivable for real estate
securities sold		53,913,098			28,759,376
Acquisition of mortgage loans		(119,758,049	)		—
Proceeds from principal repayments on mortgage loans		867,594			—
Restricted cash used in investment activities		(8,777,793	)		(565,997	)
Net cash used in investing activities		(393,739,645	)		(34,256,781	)
Cash flows from financing activities
Proceeds from issuance of common stock, net		118,862,500			—
Proceeds from issuance of preferred stock, net		—			115,499
Payment of common stock repurchase liability		(5,750,512	)		—
Borrowings from repurchase agreements		287,941,369			49,598,893
Repayments of repurchase agreements		(95,524,421	)		(17,054,902	)
Borrowings from loan repurchase facility		89,112,325			—
Dividends on common stock and distributions on OP units (net of dividends and
distributions payable)		(1,957,516	)		(3,264,427	)
Repurchase of preferred stock including dividend		(148,379	)		(7,574	)
Equity raise payments		(216,658	)		—
Net cash provided by financing activities		392,318,708			29,387,489
Net increase/(decrease) in cash		2,113,434			(3,285,160	)
Cash
Beginning of period		19,061,110			6,326,724
End of period	$	21,174,544		$	3,041,564
Supplemental disclosure of cash flow information
Interest paid on repurchase agreements and loan repurchase facility	$	1,308,888		$	667,946
Taxes paid	$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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ZAIS FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.	Formation and Organization
	ZAIS Financial Corp. (the "Company") was incorporated in Maryland on May 24, 2011, and has elected to be taxed and to qualify as a real estate investment trust ("REIT") beginning with the taxable year ended December 31, 2011. The Company was initially capitalized and commenced operations on July 29, 2011, when it completed an exchange of a mutually agreed upon portion of the shareholders' and limited partners' interests in the ZAIS Matrix VI-A Ltd. and ZAIS Matrix VI-B L.P. funds (the "Matrix Funds") managed by ZAIS Group, LLC ("ZAIS"), which included cash of $3,036,222 and real estate securities having a fair value of $57,416,118, for 3,022,617 shares of the Company's common stock or operating partnership units ("OP units") in ZAIS Financial Partners, L.P., the Company's consolidated operating partnership subsidiary (the "Operating Partnership"). All OP units were converted into shares of common stock upon issuance. On February 13, 2013, the Company completed its initial public offering ("IPO"), pursuant to which the Company sold 5,650,000 shares of its common stock at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of $1.2 million were $118.9 million.
	The Company primarily invests in, finances and manages residential mortgage-backed securities ("RMBS") and performing and re-performing residential mortgage loans. The Company's RMBS strategy focuses on non-Agency RMBS (as defined below) with an emphasis on securities that, when originally issued, were rated in the highest rating category by one or more of the nationally recognized statistical rating organizations, as well as Agency RMBS (as defined below) (including exposure to Agency RMBS through To-Be-Announced ("TBA") securities). RMBS include securities that are not issued or guaranteed by a federally chartered corporation, such as the Federal National Mortgage Association ("Fannie Mae"), or the Federal Home Loan Mortgage Corporation ("Freddie Mac"), or an agency of the U.S. Government, such as the Government National Mortgage Association ("Ginnie Mae") ("non-Agency RMBS") and securities that are issued or guaranteed by a federally chartered corporation or a U.S. Government agency ("Agency RMBS"). The Company also has the discretion to invest in other real estate-related and financial assets, including mortgage servicing rights ("MSRs"), interest only strips created from RMBS ("IOs"), commercial mortgage-backed securities ("CMBS") and asset-backed securities ("ABS").
	The Company is externally managed by ZAIS REIT Management, LLC (the "Advisor"), a subsidiary of ZAIS, and has no employees. The Company is the sole general partner of, and conducts substantially all of its business through, the Operating Partnership.
	The Company's charter authorizes the issuance of up to 500,000,000 shares of common stock with a par value of $0.0001 per share, and 50,000,000 shares of preferred stock, with a par value of $0.0001 per share. The Company's board of directors is authorized to amend its charter, without the approval of stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series of capital stock or to classify and reclassify any unissued shares of its capital stock into other classes or series of stock that the Company has authority to issue.
2.	Summary of Significant Accounting Policies
	Basis of Quarterly Presentation
	The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial reporting. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for the interim period are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Certain prior period amounts have been reclassified to conform to the current period's presentation.

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The Company currently operates as one business segment.

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership, and all of the wholly owned subsidiaries of the Operating Partnership. The Company, which serves as the sole general partner of and conducts substantially all of its business through the Operating Partnership, holds approximately 89.6% of the OP units in the Operating Partnership. The Operating Partnership in turn holds directly or indirectly all of the equity interests in its subsidiaries. All intercompany balances have been eliminated in consolidation.

Variable Interest Entities

A variable interest entity ("VIE") is an entity that lacks one or more of the characteristics of a voting interest entity. The Company evaluates each of its investments to determine if each is a VIE based on: (1) the sufficiency of the entity's equity investment at risk to finance its activities without additional subordinated financial support provided by any parties, including the equity holders; (2) whether as a group the holders of the equity investment at risk have (a) the power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impacts the entity's economic performance, (b) the obligation to absorb the expected losses of the legal entity and (c) the right to receive the expected residual returns of the legal entity; and (3) whether the voting rights of these investors are proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected returns of their equity, or both, and whether substantially all of the entity's activities involve or are conducted on behalf of an investor that has disproportionately fewer voting rights. An investment that lacks one or more of the above three characteristics is considered to be a VIE. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE is subject to consolidation if the equity investors either do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, are unable to direct the entity's activities, or are not exposed to the entity's losses or entitled to its residual returns. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses.

The Company has evaluated its real estate securities investments to determine if each represents a variable interest in a VIE. The Company monitors these investments and analyzes them for potential consolidation. The Company's real estate securities investments represent variable interests in VIEs. At June 30, 2013 and December 31, 2012, no VIEs required consolidation as the Company was not the primary beneficiary of any of these VIEs. At June 30, 2013 and December 31, 2012, the maximum exposure of the Company to VIEs is limited to the fair value of its investments in real estate securities as disclosed in the consolidated balance sheets.

Cash and Cash Equivalents

The Company considers highly liquid short-term interest bearing instruments with original maturities of three months or less and other instruments readily convertible into cash to be cash equivalents. The Company's deposits with financial institutions may exceed federally insurable limits of $250,000 per institution. The Company mitigates this risk by depositing funds with major financial institutions. At June 30, 2013, the Company's cash was held with two custodians.

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Restricted Cash

Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or repurchase agreements. Cash held by counterparties as collateral is not available to the Company for general corporate purposes, but may be applied against amounts due to derivative or repurchase agreement counterparties or returned to the Company when the collateral requirements are exceeded or at the maturity of the derivatives or repurchase agreements.

Real Estate Securities and Mortgage Loans - Fair Value Election

U.S. GAAP permits entities to choose to measure many financial instruments and certain other items at fair value. The Company has elected the fair value option for each of its real estate securities and mortgage loans, at the date of purchase, including those contributed in connection with the Company's initial formation transaction. The fair value option election permits the Company to measure these real estate securities and mortgage loans at estimated fair value with the change in estimated fair value included as changes in unrealized gain/loss on real estate securities and mortgage loans in the Company's consolidated statements of operations. The Company believes that the election of the fair value option for its real estate securities and mortgage loans more appropriately reflects the results of the Company's operations.

Determination of Fair Value Measurement

The "Fair Value Measurements and Disclosures" Topic of the FASB ASC defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.

Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values. Furthermore, the analysis of whether it is more likely than not that the Company will be required to sell securities in an unrealized loss position prior to an expected recovery in fair value (if any), the amount of such expected required sales, and the projected identification of which securities would be sold is also subject to significant judgment.

Any proposed changes to the valuation methodology will be reviewed by the Advisor to ensure changes are consistent with the applicable accounting guidance and approved as appropriate. The fair value methodology may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the Advisor's valuation methods will be appropriate and consistent with other market participants, the use of different methodologies, or assumptions by other market participants, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The Company categorizes its financial instruments in accordance with U.S. GAAP, based on the priority of the inputs to the valuation, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1 Quoted prices for identical assets or liabilities in an active market.

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Level 2 Financial assets and liabilities whose values are based on the following:

• Quoted prices for similar assets or liabilities in active markets
   
• Quoted prices for identical or similar assets or liabilities in nonactive markets.
   
• Pricing models whose inputs are observable for substantially the full term of the asset or liability.
   
• Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3  Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment. The Company utilizes proprietary modeling analysis to support the independent third party broker quotes selected to determine the fair value of investments and derivative instruments.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Real Estate Securities

The fair value of the Company's real estate securities considers the underlying characteristics of each security including coupon, maturity date and collateral. The Company estimates the fair value of its Agency RMBS and non-Agency RMBS based upon a combination of observable prices in active markets, multiple indicative quotes from brokers and executable bids. In evaluating broker quotes the Company also considers additional observable market data points including recent observed trading activity for identical and similar securities, back-testing, broker challenges and other interactions with market participants, as well as yield levels generated by model-based valuation techniques. In the absence of observable quotes, the Company utilizes model-based valuation techniques that may contain unobservable valuation inputs.

When available, the fair value of real estate securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from either broker quotes, observed traded levels or model-based valuation techniques using observable inputs such as benchmark yields or issuer spreads.

The Company's Agency RMBS are valued using the market data described above, which includes inputs determined to be observable or whose significant fair value drivers are observable. Accordingly, Agency RMBS securities are classified as Level 2 in the fair value hierarchy.

While the Company's non-Agency RMBS are valued using the same process with similar inputs as the Agency RMBS, a significant amount of inputs are unobservable due to relatively low levels of market activity. The fair value of these securities is typically based on broker quotes or the Company's model-based valuation. Accordingly, the Company's non-Agency RMBS are classified as Level 3 in the fair value hierarchy. Model-based valuation consists primarily of discounted cash flow and yield analyses. Significant model inputs and assumptions include constant voluntary prepayment rates, constant default rates, delinquency rates, loss severity, market-implied discount rates, default rates, expected loss severity, weighted average life, collateral composition, borrower characteristics and prepayment rates, and may also include general economic conditions, including home price index forecasts, servicing data and other relevant information. Where possible, collateral-related assumptions are determined on an individual loan level basis.

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Mortgage Loans

The fair value of the Company's mortgage loans is determined using a proprietary model that considers data such as loan origination information and additional updated borrower and loan servicing data as available, forward interest rates, general economic conditions, home price index forecasts and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans include market-implied discount rates, and projections of default rates, delinquency rates, loss severity and prepayment rates. The Company uses loan level data, macro-economic inputs and forward interest rates to generate loss adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair values established for mortgage loans held by the Company may differ from the fair values that would have been established if a ready market existed for these mortgage loans. Accordingly, mortgage loans are classified as Level 3 in the fair value hierarchy.

Derivative Instruments

Interest Rate Swap Agreements

An interest rate swap is an agreement between the Company and a counterparty to exchange periodic interest payments where one party to the contract makes a fixed rate payment in exchange for a floating rate payment from the other party. Interest rate swap agreements are valued using counterparty valuations. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations. These counterparty valuations are generally based on models with market observable inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's swap agreements are governed by the International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. As of June 30, 2013 and December 31, 2012, no credit valuation adjustment was made in determining the fair value of derivatives.

TBA Securities

A TBA security is a forward contract for the purchase of Agency RMBS at a predetermined price with a stated face amount, coupon and stated maturity at an agreed upon future date. The specific Agency RMBS delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association ("SIFMA"), are not known at the time of the transaction. The Company estimates the fair value of TBA securities based on independent third party closing levels. Accordingly, TBAs are classified as Level 2 in the fair value hierarchy.

Interest Income Recognition and Impairment – Real Estate Securities

Interest income on Agency RMBS is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency RMBS at the time of purchase are amortized into interest income over the life of such securities using the effective yield method and adjusted for actual prepayments in accordance with ASC 310-20 "Nonrefundable Fees and Other Costs".

Interest income on the non-Agency RMBS, which were purchased at a discount to par value and/or were rated below AA at the time of purchase, is recognized based on the effective yield method in accordance with ASC 325-40 "Beneficial Interests in Securitized Financial Assets". The effective yield on these securities is based on the projected cash flows from each security, which are estimated based on the Company's observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. Therefore, actual maturities of the securities are generally shorter than stated contractual maturities.

Interest income is recorded as interest income-real estate securities in the consolidated statements of operations.

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Based on the projected cash flows from the Company's non-Agency RMBS purchased at a discount to par value, a portion of the purchase discount may be designated as credit protection against future credit losses and, therefore, not accreted into interest income. The amount designated as credit discount is determined, and may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively.

Agency and non-Agency RMBS are periodically evaluated for other-than-temporary impairment ("OTTI"). A security with a fair value that is less than amortized cost is considered impaired. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a security has been deemed to be other-than-temporarily impaired, the amount of OTTI is bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses is recognized in the consolidated statement of operations as a realized loss on real estate securities. The remaining OTTI related to the valuation adjustment is recognized as a component of change in unrealized gain/loss on real estate securities in the consolidated statement of operations. For the three and six months ended June 30, 2013, the Company recognized $39,179 in OTTI. For the three and six months ended June 30, 2012, the Company recognized $87,058 and $215,345, respectively, in OTTI. Realized gains and losses on sale of real estate securities are determined using the specific identification method. Real estate securities transactions are recorded on the trade date.

Interest Income Recognition - Mortgage Loans

When mortgage loans purchased by the Company show evidence of a deterioration in credit quality since origination, management determines that it is probable the Company will not collect all contractual cash flows and the fair value option of accounting has been elected, the Company will apply the guidance which addresses accounting for differences between contractual cash flows and cash flows expected to be collected from its initial investment. The yield that may be accreted (accretable yield) will be determined by the excess of the Company's initial estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the Company's initial investment in the mortgage loan. Interest income will be recognized using the accretable yield on a level-yield basis over the life of the loan as long as cash flows can be reasonably estimated. On a quarterly basis, the Company updates its estimate of the cash flows expected to be collected. The excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) will not be recognized as an adjustment of yield but will be recognized prospectively through adjustment of the loan's accretable yield over its remaining life. The amount of interest income to be recognized cannot result in a carrying amount that exceeds the payoff amount of the loan. Loans that are delinquent for 60 days or more are considered non-performing. Income recognition is suspended for loans when they become more than 90 days delinquent, or when, in management's opinion, a full recovery of interest and principal becomes doubtful. Income recognition is resumed when the loan becomes contractually current.

Expense Recognition

Expenses are recognized when incurred. Expenses include, but are not limited to, loan servicing fees, advisory fees, professional fees for legal, accounting and consulting services, and general and administrative expenses such as insurance, custodial and miscellaneous fees.

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Offering Costs

Offering costs are accounted for as a reduction of additional paid-in capital. Offering costs in connection with the Company's IPO were paid out of the proceeds of the IPO. Costs incurred to organize the Company were expensed as incurred. The Company's obligation to pay for organization and offering expenses directly related to the IPO was capped at $1,200,000 and the Advisor paid for such expenses incurred above the cap.

Repurchase Agreements - Real Estate Securities

The Company finances a portion of its RMBS portfolio through the use of repurchase agreements entered into under master repurchase agreements with four financial institutions. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Repurchase agreements are recorded on trade date at the contract amount.

The Company pledges cash and certain of its RMBS as collateral under these repurchase agreements. The amounts available to be borrowed are dependent upon the fair value of the RMBS pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in fair value of pledged RMBS, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. As of June 30, 2013 and December 31, 2012, the Company has met all margin call requirements.

Repurchase Agreements - Mortgage Loans

The Company finances a portion of its mortgage loan portfolio through the use of repurchase agreements entered into under a master repurchase agreement with Citibank, N.A. ("Citi"), pursuant to which the Company may sell, and later repurchase trust certificates representing interests in residential mortgage loans (the "Trust Certificates") in an aggregate principal amount of up to $250 million, $150 million of which was committed (the "Loan Repurchase Facility"). The borrowings under the Loan Repurchase Facility are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreement. The borrowings under the Loan Repurchase Facility are recorded on the trade date at the contract amount.

The Company pledges cash and certain of its Trust Certificates as collateral under the Loan Repurchase Facility. The amounts available to be borrowed are dependent upon the fair value of the Trust Certificates pledged as collateral, which fluctuates with changes in interest rates, type of underlying mortgage loan and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in fair value of pledged Trust Certificates, the lender may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. As of June 30, 2013 the Company has met all margin call requirements.

Derivatives and Hedging Activities

The Company accounts for its derivative financial instruments in accordance with derivative accounting guidance, which requires an entity to recognize all derivatives as either assets or liabilities in the balance sheets and to measure those instruments at fair value. The Company has not designated any of its derivative agreements as hedging instruments for accounting purposes. As a result, changes in the fair value of derivatives are recorded through current period earnings.

Interest Rate Swap Agreements

The Company's interest rate swap agreements contain legally enforceable provisions that allow for netting or setting off of all individual interest rate swap receivables and payables with each respective counterparty and, therefore, the fair value of those interest rate swap agreements are netted. The credit support annex provisions of the Company's interest rate swap agreements allow the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. At June 30, 2013 and December 31, 2012, all collateral provided under these agreements consisted of cash collateral.

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TBA Securities

The Company enters into TBA contracts as a means of acquiring exposure to Agency RMBS and may from time to time utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company may choose, prior to settlement, to move the settlement of these securities to a later date by entering into an offsetting position (referred to as a "pair off"), settling the paired off positions against each other for cash, and simultaneously entering into a similar TBA contract for a later settlement date, which is commonly collectively referred to as a "dollar roll" transaction.

Counterparty Risk and Concentration

Counterparty risk is the risk that counterparties may fail to fulfill their obligations or that pledged collateral value becomes inadequate. The Company attempts to manage its exposure to counterparty risk through diversification, use of financial instruments and monitoring the creditworthiness of counterparties.

As explained in the footnotes above, while the Company engages in repurchase financing activities with several financial institutions, the Company maintains custody accounts with two custodians. There is no guarantee that these custodians will not become insolvent. While there are certain regulations that seek to protect customer property in the event of a failure, insolvency or liquidation of a custodian, there is no certainty that the Company would not incur losses due to its assets being unavailable for a period of time in the event of a failure of a custodian that has custody of the Company's assets. Although management monitors the credit worthiness of its custodians, such losses could be significant and could materially impair the ability of the Company to achieve its investment objective.

Net Income (Loss) Per Share

The Company's basic earnings per share ("EPS") is computed by dividing net income or loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding OP units were converted to common stock, where such exercise or conversion would result in a lower EPS. The dilutive effect of partnership interests is computed assuming all units are converted to common stock.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 2011. The Company was organized and has operated and intends to continue to operate in a manner that will enable it to qualify to be taxed as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company's annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. GAAP). As a REIT, the Company will not be subject to federal income tax on its taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. However, the Company intends to continue to operate in a manner that will enable it to qualify for treatment as a REIT.

The Company evaluates uncertain income tax positions when applicable. Based upon its analysis of income tax positions, the Company concluded that it does not have any uncertain tax positions that meet the recognition or measurement criteria as of either June 30, 2013 or December 31, 2012.

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	The Company has elected to treat one of its direct wholly owned subsidiaries, ZAIS I TRS Inc., and one of its indirect wholly owned subsidiaries, ZFC Trust TRS I, LLC, as taxable REIT subsidiaries (the "TRS entities"). The Company may perform certain non-customary services, including real estate or non-real estate-related services through these TRS entities. Earnings from services performed through the TRS entities are subject to federal and state income taxes irrespective of the dividends-paid deduction available to REITs for federal income tax purposes. In addition, for the Company to continue to qualify to be taxed as a REIT, the Company’s total investment in all TRS entities may not exceed 25% of the value of the total assets of Company determined for federal income tax purposes. For the three and six months ended June 30, 2013 and 2012, the Company did not have any significant activity in the TRS entities. Accordingly, no provision for federal income taxes has been made in the accompanying consolidated financial statements, as the TRS entities did not generate taxable income for the periods presented. Recent Accounting Pronouncements In December 2011, the FASB issued ASU No. 2011-11: Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11") which requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the amendment requires disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. In addition, in January 2013, the FASB issued ASU 2013-01: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (Topic 210), Balance Sheet. The update addresses implementation issues regarding ASU 2011-11 and is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. This guidance is to be applied retrospectively for all comparative periods presented and does not amend the circumstances in which the Company offsets its derivative positions. This guidance does not have a material effect on the Company's financial statements. However, this guidance expands the disclosure requirements to which the Company is subject, which are presented in Note 14.
3.	Fair Value
	Fair Value Measurement Financial assets and liabilities recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis as of June 30, 2013, by level within the fair value hierarchy:

	Assets and Liabilities at Fair Value
	Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	—	$	—	$	120,783,425	$	120,783,425
Real estate securities
Agency RMBS
30-year adjustable rate mortgage		—		2,591,883		—		2,591,883
30-year fixed rate mortgage		—		171,910,223		—		171,910,223
Non-Agency RMBS		—		—		270,034,590		270,034,590
Derivative assets		—		7,169,531		—		7,169,531
Total	$	—	$	181,671,637	$	390,818,015	$	572,489,652
Liabilities
Derivative liabilities	$	—	$	5,069,472	$	—	$	5,069,472
Total	$	—	$	5,069,472	$	—	$	5,069,472

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The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis as of December 31, 2012, by level within the fair value hierarchy:

	Assets and Liabilities at Fair Value
	Level 1		Level 2		Level 3		Total
Assets
Real estate securities
Agency RMBS
30-year adjustable rate mortgage	$	—	$	3,240,330	$	—	$	3,240,330
30-year fixed rate mortgage		—		66,519,702		—		66,519,702
Non-Agency RMBS		—		—		100,911,651		100,911,651
Total	$	—	$	69,760,032	$	100,911,651	$	170,671,683
Liabilities
Derivative liabilities	$	—	$	1,144,744	$	—	$	1,144,744
Total	$	—	$	1,144,744	$	—	$	1,144,744

The following table presents additional information about the Company's financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

	June 30, 2013						December 31, 2012
	RMBS			Mortgage loans			RMBS			Mortgage loans
Beginning balance	$	100,911,651		$	—		$	76,473,092		$	—
Total net transfers into/out of Level 3		—			—			—			—
Acquisitions		193,538,950			119,758,049			68,617,460			—
Proceeds from sales		—			—			(43,379,205	)		—
Net accretion of discounts		6,706,957			259,435			1,337,369			—
Proceeds from principal repayments		(24,322,480	)		(867,594	)		(16,938,626	)		—
Total losses (realized / unrealized) included        in earnings		(7,505,685	)		—			(2,579,401	)		—
Total gains (realized / unrealized) included        in earnings		705,197			1,633,535			17,380,962			—
Ending balance	$	270,034,590		$	120,783,425		$	100,911,651		$	—
The amount of total gains or (losses) for the period        included in earnings attributable to the change in        unrealized gains or losses relating to assets or        liabilities still held at the reporting date	$	(14,228,335	)	$	1,567,291		$	10,764,268		$	—

There were no financial assets or liabilities that were accounted for at fair value on a nonrecurring basis at June 30, 2013 and December 31, 2012. There were no transfers into or out of Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2013.

The following table presents quantitative information about the Company's real estate securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max		Weighted Average
Non-Agency RMBS (1)
Alternative – A	$	112,066,781	Broker quotes/comparable trades	Constant voluntary prepayment	2.2%	17.1%	7.9%
				Constant default rate	1.3%	11.5%	6.1%
				Loss severity	0.7%	67.9%	40.6%
				Delinquency	9.4%	39.9%	20.1%
Pay option adjustable rate		27,680,063	Broker quotes/comparable trades	Constant voluntary prepayment	1.2%	22.5%	9.0%
				Constant default rate	2.8%	9.4%	5.3%
				Loss severity	1.9%	84.1%	46.0%
				Delinquency	8.7%	35.0%	16.7%
Prime		97,763,571	Broker quotes/comparable trades	Constant voluntary prepayment	3.4%	22.6%	12.1%
				Constant default rate	0.2%	9.0%	5.6%
				Loss severity	3.8%	69.2%	38.3%
				Delinquency	2.9%	29.2%	15.8%
Subprime		32,524,175	Broker quotes/comparable trades	Constant voluntary prepayment	1.1%	14.3%	4.3%
				Constant default rate	3.1%	16.4%	5.6%
				Loss severity	9.9%	81.0%	50.3%

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Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of						Weighted
	June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max		Average
				Delinquency	12.9%	30.7%	20.0	%
Total Non-Agency RMBS	$	270,034,590
____________________

(1) The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level.

The following table presents quantitative information about the Company's mortgage loans which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:
Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of								Weighted
	June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max				Average
Mortgage Loans	$	120,783,425	Model	Constant voluntary prepayment	1.1	%	7.6	%	3.5	%
				Constant default rate	0.1	%	5.3	%	4.0	%
				Loss severity	13.9	%	42.8	%	33.8	%
	$	120,783,425		Delinquency	3.4	%	14.5	%	13.5	%
During the three months ended June 30, 2013, the Company purchased mortgage loans having an unpaid principal balance of $134.5 million. The Company determined the accretable yield on this portfolio to be $68.4 million at the time of purchase. During the six months ended June 30, 2013, the Company purchased mortgage loans having an unpaid principal balance of $152.2 million for $119.8 million. The Company determined the accretable yield on these portfolios to be a total of $83.4 million at the time of purchase. The total accretable yield on the Company's mortgage loans at June 30, 2013 was $82.4 million. The fair value measurements of these assets are sensitive to changes in assumptions regarding prepayment, probability of default, loss severity in the event of default, forecasts of home prices, and significant activity or developments in the non-Agency securities market. Significant changes in any of those inputs in isolation may result in significantly higher or lower fair value measurements. A change in the assumption used for forecasts of home price changes is accompanied by directionally opposite changes in the assumptions used for probability of default and loss severity. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurements. Fair Value Option Changes in fair value for assets and liabilities for which the fair value election is made are recognized in income as they occur. The fair value option may be elected on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The following table presents the difference between the fair value and the aggregate unpaid principal amount and/or notional balance of assets for which the fair value option was elected:

	June 30, 2013							December 31, 2012
			Principal							Principal
			and/or Notional							and/or Notional
	Fair Value		Balance(1)		Difference			Fair Value		Balance		Difference
Financial instruments
Assets
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	2,591,883	$	2,531,514	$	60,369		$	3,240,330	$	3,083,892	$	156,438
30-year fixed rate mortgage		171,910,223		170,265,662		1,644,561			66,519,702		61,034,333		5,485,369
Non-Agency RMBS		270,034,590		401,105,036		(131,070,446	)		100,911,651		109,197,632		(8,285,981	)
Total RMBS		444,536,696		573,902,212		(129,365,516	)		170,671,683		173,315,857		(2,644,174	)
Mortgage loans		120,783,425		151,108,199		(30,324,774	)		—		—		—
Total financial instruments	$	565,320,121	$	725,010,411	$	(159,690,290	)	$	170,671,683	$	173,315,857	$	(2,644,174	)
____________________

(1) Non-Agency RMBS includes an IO with a notional balance of $80.0 million.

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Fair Value of Other Financial Instruments In addition to the above disclosures regarding assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure about the fair value of all other financial instruments. Estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair values. The following table summarizes the estimated fair value for all other financial instruments:
	June 30, 2013		December 31, 2012
Other financial instruments
Assets
Cash	$	21,174,544	$	19,061,110
Restricted Cash		12,545,944		3,768,151
Liabilities
Repurchase agreements	$	308,672,976	$	109,270,298
Loan repurchase facility		89,331,282		—
Common stock repurchase liability		—		11,190,687

	Cash includes cash on hand for which fair value equals carrying value (a Level 1 measurement). Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or repurchase agreements. Due to the short-term nature of the restrictions, fair value approximates carrying value (a Level 1 measurement). The fair value of repurchase agreements and of the Loan Repurchase Facility is based on an expected present value technique using observable market interest rates. As such, the Company considers the estimated fair value to be a Level 2 measurement. This method discounts future estimated cash flows using rates the Company determined best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality. The fair value of the common stock repurchase liability is equal to the agreed upon purchase price. The Company considers the estimated fair value to be a Level 3 measurement.
4.	Real Estate Securities
	The following table presents the principal balance, amortized cost, gross unrealized gains, gross unrealized losses, and fair value of the Company's real estate securities portfolio at June 30, 2013. The Company's non-Agency RMBS portfolio is not issued or guaranteed by Fannie Mae, Freddie Mac or any other U.S. Government agency or a federally chartered corporation and are therefore subject to additional credit risks.

	Principal or							Gross Unrealized (1)							Weighted Average
	Notional		Premium			Amortized
	Balance		(Discount)			Cost		Gains		Losses			Fair Value		Coupon		Yield (2)
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	2,531,514	$	269,463		$	2,800,977	$	—	$	(209,094	)	$	2,591,883	2.80	%	2.28	%
30-year fixed rate
mortgage		170,265,662		7,140,749			177,406,411		678,522	$	(6,174,710	)		171,910,223	3.43		3.14
Non-Agency RMBS
Alternative – A(3)		211,822,035		(100,256,547	)		111,565,488		3,418,507	$	(2,917,214	)		112,066,781	4.95		6.41
Pay option adjustable rate		36,308,960		(7,839,404	)		28,469,556		114,962	$	(904,455	)		27,680,063	0.84		6.15
Prime		106,386,157		(12,568,896	)		93,817,261		5,053,935		(1,107,625	)		97,763,571	5.41		6.51
Subprime		46,587,884		(13,204,279	)		33,383,605		538,207	$	(1,397,637	)		32,524,175	0.65		6.98
Total RMBS	$	573,902,212	$	(126,458,914	)	$	447,443,298	$	9,804,133	$	(12,710,735	)	$	444,536,696	3.88	%	5.17	%
____________________

(1)	The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. The Company recorded net change in unrealized loss/gain on its real estate securities of a loss of $15.6 million and a gain of $2.9 million for the three months ended June 30, 2013 and 2012, respectively, and a loss of $14.7 million and a gain of $9.4 million for the six months ended June 30, 2013 and 2012, respectively, as change in unrealized loss/gain on real estate securities in the consolidated statements of operations.
(2)	Unleveraged yield.
(3)	Alternative-A RMBS includes an IO with a notional balance of $80.0 million.

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The following table presents the principal balance, amortized cost, gross unrealized gains, gross unrealized losses, and fair value of the Company's real estate securities portfolio at December 31, 2012:
								Gross Unrealized (1)							Weighted Average
	Principal		Premium			Amortized
	Balance		(Discount)			Cost		Gains		Losses			Fair Value		Coupon		Yield (2)
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	3,083,892	$	351,047		$	3,434,939	$	—	$	(194,609	)	$	3,240,330	2.84	%	2.28	%
30-year fixed rate
mortgage		61,034,333		3,056,889			64,091,222		2,442,401		(13,921	)		66,519,702	3.82		3.44
Non-Agency RMBS
Alternative – A		38,549,827		(8,606,689	)		29,943,138		3,436,729		—			33,379,867	5.69		7.95
Pay option adjustable
rate		1,249,426		(378,803	)		870,623		95,221		—			965,844	1.19		8.67
Prime		64,978,647		(8,074,525	)		56,904,122		5,668,301		(2,298	)		62,570,125	5.79		7.34
Subprime		4,419,732		(825,131	)		3,594,601		401,214		—			3,995,815	0.98		9.10
Total RMBS	$	173,315,857	$	(14,477,212	)	$	158,838,645	$	12,043,866	$	(210,828	)	$	170,671,683	4.81	%	5.89	%
____________________

(1)	The Company has elected the fair value option pursuant to ASC 825 for its real estate securities.
(2)	Unleveraged yield.
The following table presents certain information regarding the Company's Agency and non-Agency RMBS securities as of June 30, 2013 by weighted average life:

	Agency RMBS						Non-Agency RMBS
					Weighted						Weighted
			Amortized		Average				Amortized		Average
	Fair Value		Cost		Yield		Fair Value		Cost		Yield
Weighted average life (1)
Greater than 5 years	$	174,502,106	$	180,207,388	3.12	%	$	270,034,590	$	267,235,910	6.49	%
	$	174,502,106	$	180,207,388	3.12	%	$	270,034,590	$	267,235,910	6.49	%
____________________

(1)		Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses.
	At June 30, 2013, the contractual maturities of the real estate securities ranged from 8.2 to 33.6 years, with a weighted average maturity of 26.4 years. All real estate securities held by the Company at June 30, 2013 are issued by issuers based in the United States of America. The following table presents proceeds from the sale of real estate securities, realized losses on the sale of real estate securities and realized losses on other-than-temporary impairments:

	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Proceeds from the sale of real estate
securities	$	47,111,700		$	3,257,082		$	53,913,098		$	28,759,376
Realized (loss)/gain on the sale of real estate
securities		(206,876	)		196,241			(206,876	)		(1,736,517	)
Realized loss on other-than-temporary
impairments		(39,179	)		(87,058	)		(39,179	)		(215,345	)

The following table presents certain information regarding the Company's Agency and non-Agency RMBS securities as of December 31, 2012 by weighted average life:
	Agency RMBS						Non-Agency RMBS
					Weighted						Weighted
			Amortized		Average				Amortized		Average
	Fair Value		Cost		Yield		Fair Value		Cost		Yield
Weighted average life (1)
Greater than 5 years	$	69,760,032	$	67,526,161	3.38	%	$	100,911,651	$	91,312,484	7.63	%
	$	69,760,032	$	67,526,161	3.38	%	$	100,911,651	$	91,312,484	7.63	%
____________________

(1) Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses.

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	At December 31, 2012, the contractual maturities of the real estate securities ranged from 8.6 to 33.7 years, with a weighted average maturity of 26.1 years. All real estate securities held by the Company at December 31, 2012 are issued by issuers based in the United States of America.
5.	Mortgage Loans
	On March 22, 2013, the Company purchased a residential mortgage loan portfolio with an aggregate unpaid principal balance of $17.7 million. On May 30, 2013, the Company entered into the Loan Repurchase Facility and utilized $10.6 million of the Loan Repurchase Facility to finance its then existing residential mortgage loan portfolio. On May 31, 2013, the Company utilized $78.5 million of the Loan Repurchase Facility to fund a portion of the purchase price of its acquisition of a residential mortgage loan portfolio with an unpaid principal balance of $134.5 million.
	The following table presents the fair value, principal balance and weighted coupon and yield of the Company's mortgage loan portfolio as of June 30, 2013:

	June 30, 2013
					Weighted Average
			Principal
	Fair Value		Balance		Coupon		Yield
Loan Type
Performing Loans:
Fixed	$	59,118,932	$	75,383,607	4.92	%	6.99	%
ARM		60,455,915		73,919,489	4.53		6.54
		119,574,847		149,303,096
Nonperforming loans		1,208,578		1,805,103	6.52		9.27
Total	$	120,783,425	$	151,108,199	4.75	%	6.78	%

The following table presents the difference between the fair value and the aggregate unpaid principal balance of the Company's mortgage loans:
	June 30, 2013							December 31, 2012
			Principal							Principal
	Fair Value		Balance		Difference			Fair Value		Balance		Difference
Loan Type
Performing loans:
Fixed		59,118,932		75,383,607		(16,264,675	)		—		—		—
ARM		60,455,915		73,919,489		(13,463,574	)		—		—		—
		119,574,847		149,303,096		(29,728,249	)
Nonperforming loans		1,208,578		1,805,103		(596,525	)		—		—		—
Total	$	120,783,425	$	151,108,199	$	(30,324,774	)	$	—	$	—	$	—

Nonperforming loans includes four loans having a fair value of $358,000 and a principal balance of $555,000 that were on non-accrual status.

As of June 30, 2013, the mortgage loan portfolio consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of certain concentrations of credit risk in the mortgage loan portfolio:

	June 30, 2013		December 31, 2012
Concentration
Percentage of fair value of mortgage loans with unpaid-principal-balance-to
current -property-value in excess of 100%	92.8	%	—
Mortgage loans secured by properties in the following states:
Each representing 10% or more of fair value:			—
California	21.2	%
Florida	19.7	%

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	June 30, 2013		December 31, 2012
Georgia	10.1	%
Additional states each representing more than 5% of fair value	NJ, VA		—

6.	Repurchase Agreements
	Real Estate Securities
	Repurchase agreements related to real estate securities involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date. The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." Repurchase agreements related to real estate securities entered into by the Company are accounted for as financings and require the repurchase of the transferred securities at the end of each arrangement's term, typically 30 to 90 days. The Company maintains the beneficial interest in the specific securities pledged during the term of the repurchase arrangement and receives the related principal and interest payments. Interest rates on these borrowings are fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the repurchase arrangement at which time the Company may enter into a new repurchase arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty. In response to declines in fair value of pledged securities due to changes in market conditions or the publishing of monthly security paydown factors, the lender requires the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparty in order to re-establish the agreed-upon collateral requirements, referred to as margin calls. Under the terms of the Company's master repurchase agreements related to real estate securities, the counterparty may sell or re-hypothecate the pledged collateral.
	The following table presents certain information regarding the Company's real estate securities repurchase agreements as of June 30, 2013 by remaining maturity and collateral type:

	Agency RMBS				Non-Agency RMBS
			Weighted				Weighted
	Balance		Average Rate		Balance		Average Rate
Repurchase agreements maturing
within
30 days or less	$	147,472,330	0.39	%	$	161,025,085	2.03	%
31-60 days		—	—			—	—
61-90 days		—	—			—	—
Greater than 90 days		—	—			—	—
Total / weighted average	$	147,472,330	0.39	%	$	161,025,085	2.03	%
The following table presents certain information regarding the Company's real estate securities repurchase agreements as of December 31, 2012 by remaining maturity and collateral type:

	Agency RMBS				Non-Agency RMBS
			Weighted				Weighted
	Balance		Average Rate		Balance		Average Rate
Repurchase agreements maturing
within
30 days or less	$	44,174,600	0.49	%	$	49,441,377	2.15	%
31-60 days		10,866,170	0.49			—	—
61-90 days		11,598,320	0.47			—	—
Greater than 90 days		—	—			—	—
Total / weighted average	$	66,639,090	0.49	%	$	49,441,377	2.15	%
Although real estate securities repurchase agreements are committed borrowings until maturity, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or cash to fund margin calls.

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The following table presents information with respect to the Company's posting of RMBS collateral at June 30, 2013:
Repurchase agreements secured by Agency RMBS	$	147,472,330
Fair value of Agency RMBS pledged as collateral under repurchase agreements		150,498,206
Fair value of Agency RMBS not pledged as collateral under repurchase agreements		24,003,900
Repurchase agreements secured by non-Agency RMBS		161,025,085
Fair value of non-Agency RMBS pledged as collateral under repurchase agreements		213,888,493
Fair value of non-Agency RMBS not pledged as collateral under repurchase agreements		56,146,097
Cash pledged under repurchase agreements		6,400,451

The following table presents information with respect to the Company's posting of RMBS collateral at December 31, 2012:
Repurchase agreements secured by Agency RMBS	$	66,639,090
Fair value of Agency RMBS pledged as collateral under repurchase agreements		63,535,780
Fair value of Agency RMBS not pledged as collateral under repurchase agreements		6,224,252
Repurchase agreements secured by non-Agency RMBS		49,441,377
Fair value of non-Agency RMBS pledged as collateral under repurchase agreements		70,003,218
Fair value of non-Agency RMBS not pledged as collateral under repurchase agreements		30,908,433
Cash pledged under repurchase agreements		1,335,305

7.	Loan Repurchase Facility
	Mortgage Loans
	The Loan Repurchase Facility is used to fund purchases of the Company's target assets and, during the six months ended June 30, 2013, the Company utilized the Loan Repurchase Facility to fund a portion of its residential mortgage loan portfolio with an unpaid principal balance of approximately $152.2 million at the time of acquisition. The Loan Repurchase Facility closed on May 30, 2013, and is committed for a period of 364 days from inception. The obligations are fully guaranteed by the Company.
	The principal amount paid by Citi under the Loan Repurchase Facility for the Trust Certificate, which represent interests in residential mortgage loans, is based on a percentage of the lesser of the market value or the unpaid principal balance of such mortgage loans backing the Trust Certificate. Upon the Company's repurchase of a Trust Certificate sold to Citi under the Loan Repurchase Facility, the Company is required to repay Citi a repurchase amount based on the purchase price plus accrued interest. The Company is also required to pay Citi a commitment fee for the Loan Repurchase Facility, as well as certain other administrative costs and expenses in connection with Citi's structuring, management and ongoing administration of the Loan Repurchase Facility.
	The Loan Repurchase Facility contains margin call provisions that provide Citi with certain rights in the event of a decline in the market value of the mortgage loans backing the purchased Trust Certificate, subject to a floor amount. Under these provisions, Citi may require the Company to transfer cash sufficient to eliminate any margin deficit resulting from such a decline.
	The following table presents certain information regarding the Company's Loan Repurchase Facility as of June 30, 2013 by remaining maturity:

	Mortgage loans
	Balance		Weighted Average Rate
Loan Repurchase Facility borrowings maturing within
30 days or less	$	—	—	%
31-90 days		—	—
91-180 days		—	—
Greater than 180 days to 1 year		89,112,325	2.94
Total / weighted average	$	89,112,325	2.94	%

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The following table presents information with respect to the Company's posting of mortgage loan collateral at June 30, 2013:
Repurchase agreements secured by mortgage loans	$	89,112,325
Fair value of mortgage loans pledged as collateral under repurchase agreements		120,517,248
Fair value of mortgage loans not pledged as collateral under repurchase agreements		266,177
Cash pledged under repurchase agreements		—

The following is a summary of financial information relating to mortgage loans at fair value sold under agreements to repurchase:
	Three Months Ended					Six Months Ended
				December 31,					December 31,
	June 30, 2013			2012		June 30, 2013			2012
Period end:
Balance	$	89,112,325		$	—	$	89,112,325		$	—
Unused amount(1)	$	60,887,675			—	$	60,887,675			—
Weighted-average interest rate at end of period		2.94	%		—		2.94	%		—
Fair value of mortgage loans pledged as
collateral under repurchase agreements	$	120,517,248			—	$	120,517,248			—
During the period:
Weighted-average interest rate		2.94	%		—		2.94	%		—
Average balance of loans sold under
agreements to repurchase	$	266,499			—	$	266,499			—
Maximum daily amount outstanding	$	89,112,325			—	$	89,112,325			—
Total interest expense	$	289,296			—	$	289,296			—
____________________

(1) The amount the Company is able to borrow under loan repurchase agreements is tied to the fair value of unencumbered mortgage loans eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold.

8.	Derivative Instruments
	Interest Rate Swap Agreements
	To help mitigate exposure to higher short-term interest rates, the Company uses currently-paying and forward-starting, three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. These agreements establish an economic fixed rate on related borrowings because the variable-rate payments received on the swap agreements largely offset interest accruing on the related borrowings, leaving the fixed-rate payments to be paid on the swap agreements as the Company's effective borrowing rate, subject to certain adjustments including changes in spreads between variable rates on the swap agreements and actual borrowing rates.
	The Company's interest rate swap agreements have not been designated as hedging instruments.
	TBA Securities
	The Company enters into TBA contracts as a means of acquiring exposure to Agency RMBS and may, from time to time, utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company accounts for its TBA contracts as derivative instruments due to the fact that it does not intend to take physical delivery of the securities.
	The following table summarizes information related to derivative instruments:

Non-hedge derivatives	June 30, 2013		December 31, 2012
Notional amount of interest rate swaps	$	225,725,000	$	32,600,000
Net notional amount of TBA contracts		62,000,000		—
Total net notional amount	$	287,725,000	$	32,600,000

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During the three months ended June 30, 2013, the Company paired off purchases of TBA securities with a combined notional amount of $388.0 million by entering into simultaneous sales of TBA securities and realized gains of $0.9 million and recognized unrealized losses of $4.1 million as a result. During the six months ended June 30, 2013, the Company paired off purchases of TBA securities with a combined notional amount of $473.0 million by entering into simultaneous sales of TBA securities and realized gains of $0.8 million and recognized unrealized losses of $3.7 million as a result. For the three and six months ended June 30, 2013, the Company recognized unrealized losses of $1.4 million and $1.4 million, respectively on TBA securities that had not been paired off as of June 30, 2013. The following table presents the fair value of the Company's derivative instruments and their balance sheet location:
			June 30,			December 31,
Derivative instruments	Designation	Balance Sheet Location	2013			2012
Interest rate swaps	Non-hedge	Derivative assets (liabilities), at fair value	$	7,169,531		$	(1,144,744	)
TBAs(1)	Non-hedge	Derivative liabilities, at fair value	$	(5,069,472	)	$	—
____________________

(1)	Fair value as of June 30, 2013 includes $1.4 million of unrealized loss on TBA contracts that have not been paired off as of June 30, 2013.
The following table summarizes gains and losses related to derivatives:

		Three Months Ended						Six Months Ended
	Income Statement
Non-hedge derivatives	Location	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Interest rate swaps	Gain / (loss) on derivative instruments	$	8,272,229		$	(897,767	)	$	8,216,927		$	(755,952	)
TBAs(1)	Gain / (loss) on derivative instruments		(4,573,848	)		—			(4,237,402	)		—
____________________

(1)	Gains and losses from purchases and sales of TBAs consists of $0.8 million of net TBA dollar roll net interest income and a net loss of $5.4 million due to price declines.
The following table presents information about the Company's interest rate swap agreements as of June 30, 2013:

			Weighted Average		Weighted Average		Weighted Average
Maturity	Notional Amount		Pay Rate		Receive Rate		Years to Maturity
2016	$	12,102,000	1.20	%	0.27	%	3.2
2017		11,050,000	1.28		0.28		3.8
2018		38,000,000	1.54		0.28		4.9
2021		9,448,000	2.16		0.27		8.2
2023		155,125,000	2.05		0.27		9.7
Total/Weighted average	$	225,725,000	1.88	%	0.27	%	8.2
The following table presents information about the Company's interest rate swap agreements as of December 31, 2012:

			Weighted Average		Weighted Average		Weighted Average
Maturity	Notional Amount		Pay Rate		Receive Rate		Years to Maturity
2016	$	12,102,000	1.21	%	0.31	%	3.7
2017		11,050,000	1.28		0.31		4.3
2021		9,448,000	2.16		0.31		8.7
Total/Weighted average	$	32,600,000	1.51	%	0.31	%	5.3
Restricted cash at June 30, 2013 included $5.2 million of cash pledged as collateral against TBA contracts and $1.0 million of cash pledged as collateral against interest rate swap agreements. Restricted cash at December 31, 2012 included $2.4 million of cash pledged as collateral against interest rate swaps.

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9.	Earnings Per Share
	The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share:

	Three Months Ended					Six Months Ended
	June 30, 2013			June 30, 2012		June 30, 2013			June 30, 2012
Numerator:
Net (loss)/income attributable to ZAIS Financial        Corp. common stockholders	$	(6,780,401	)	$	3,323,858	$	(5,121,179	)	$	9,553,594
Effect of dilutive securities:
Loss allocated to Operating Partnership non-               controlling interests		(788,476	)		—		(489,382	)		—
Dilutive net (loss) / income available to        stockholders	$	(7,568,877	)	$	3,323,858	$	(5,610,561	)	$	9,553,594
Denominator:
Weighted average number of shares of common        stock		7,970,886			3,022,617		6,564,284			3,022,617
Effect of dilutive securities:
Weighted average OP units		926,914			—		926,914			—
Weighted average dilutive shares		8,897,800			3,022,617		7,491,198			3,022,617
Net (loss) / income per share applicable to ZAIS        Financial Corp. common stockholders -        Basic/Diluted	$	(.85	)	$	1.10	$	(.78	)	$	3.16

10.	Related Party Transactions
	ZAIS REIT Management, LLC
	The Company is externally managed and advised by the Advisor, a subsidiary of ZAIS. Subject to certain restrictions and limitations, the Advisor is responsible for managing the Company's affairs on a day-to-day basis including, among other responsibilities, (i) the selection, purchase and sale of the Company's portfolio of assets, (ii) the Company's financing activities, and (iii) providing the Company with advisory services.
	The Company pays to its Advisor an advisory fee, calculated and payable quarterly in arrears, equal to 1.5% per annum of the Company's stockholders' equity, as defined in the amended and restated investment advisory agreement between the Company and the Advisor, dated as of December 13, 2012, as amended from time to time (the "Investment Advisory Agreement"). Prior to the Company's IPO, the advisory fee paid to the Advisor was calculated based on the Company's net asset value, as set forth in the Investment Advisory Agreement.
	The Advisor may be paid or reimbursed for the documented cost of its performing certain services for the Company, which may include legal, accounting, due diligence tasks and other services, that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm's-length basis. In addition, the Company may be required to pay its portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Advisor and its affiliates required for the Company's operations. To date, the Advisor has not sought reimbursement for the services and expenses described in the two preceding sentences. The Advisor may seek such reimbursement in the future, as a result of which the expense ratio of the Company may increase. The Company will also pay directly, or reimburse the Advisor for, products and services provided by third parties to the Company, other than those operating expenses required to be borne by the Advisor under the Investment Advisory Agreement. After an initial three-year term, the Advisor may be terminated annually upon the affirmative vote of at least two-thirds of the Company's independent directors or by a vote of the holders of at least two-thirds of the outstanding shares of the Company's common stock based upon (i) unsatisfactory performance by the Advisor that is materially detrimental to the Company or (ii) a determination that the advisory fees payable to the Advisor are not fair, subject to the Advisor's right to prevent such termination due to unfair fees by accepting a reduction of advisory fees agreed to by at least two-thirds of the Company's independent directors. Additionally, upon such a termination without cause, the Investment Advisory Agreement provides that the Company will pay the Advisor a termination fee equal to three times the average annual advisory fee earned by the Advisor during the prior 24-month period immediately preceding such termination, calculated as of the end of the most recently completed fiscal year before the date of termination.

- 23 -

	For the three and six months ended June 30, 2013, the Company incurred $0.7 million and $1.2 million in advisory fee expense, respectively. For the three and six months ended June 30, 2012, the Company incurred $0.2 million and $0.5 million in advisory fee expense, respectively. At June 30, 2013, $0.7 million in advisory fee expense was included in accounts payable and other liabilities in the consolidated balance sheet. The advisory fee was calculated and payable as set forth above. For the six months ended June 30, 2013, the Company acquired RMBS with a principal balance of $17.4 million for $15.7 million from a fund managed by ZAIS. The Company had no such acquisitions from funds managed by ZAIS for the three months ended June 30, 2013.
11.	Stockholders' Equity
	Common Stock
	The holders of shares of the Company's common stock are entitled to one vote per share on all matters voted on by stockholders, including election of the Company's directors. The Company's charter does not provide for cumulative voting in the election of directors. Therefore, the holders of a majority of the outstanding shares of the Company's common stock can elect its entire board of directors. Subject to any preferential rights of any outstanding series of preferred stock, the holders of shares of the Company's common stock are entitled to such distributions as may be authorized from time to time by the Company's board of directors out of legally available funds and declared by the Company and, upon liquidation, are entitled to receive all assets available for distribution to stockholders. Holders of shares of the Company's common stock do not have preemptive rights. This means that stockholders do not have an automatic option to purchase any new shares of common stock that the Company issues. In addition, stockholders only have appraisal rights under circumstances specified by the Company's board of directors or where mandated by law.
	Initial Public Offering
	On February 13, 2013, the Company completed its IPO, pursuant to which the Company sold 5,650,000 shares of its common stock to the public at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of approximately $1.2 million were $118.9 million. In connection with the IPO, the Advisor paid $6.3 million in underwriting fees. The Company did not pay any underwriting fees, discounts or commissions in connection with the IPO.
	Common Stock Repurchase
	In January 2013, the Company's agreement with one of its stockholders to repurchase 515,035 shares of common stock was amended to require the Company to repurchase only 265,245 shares of the Company's common stock. The amended repurchase amount was approximately $5.8 million which was predominantly paid to such stockholder during the three months ended March 31, 2013 with the remaining amount paid during the three months ended June 30, 2013. The Company had 7,970,886 and 2,071,096 shares of common stock outstanding as of June 30, 2013 and December 31, 2012, respectively.
	Private Placements
	In October 2012, the Company completed a private placement in which it sold 195,458 shares of common stock and 22,492 OP units. In December 2012, the Company completed a private placement in which it sold 36,581 shares of common stock and 904,422 OP units. Net proceeds from the two private placements were $25,151,174, net of approximately $763,000 in offering costs.

- 24 -

	Dividends and Distributions On May 1, 2012, the Company declared a cash dividend of $0.51 per share of common stock. The common stock dividend was paid on May 15, 2012 to stockholders of record as of the close of business on May 1, 2012. On June 5, 2012, the Company declared a cash dividend of $0.57 per share of common stock. The common stock dividend was paid on June 21, 2012 to stockholders of record as of the close of business on June 5, 2012. On October 22, 2012, the Company declared a cash dividend of $0.89 per share of common stock and OP unit. The dividend was paid on October 29, 2012 to stockholders and OP unit holders of record as of the close of business on October 22, 2012. On November 29, 2012, the Company declared a cash dividend of $0.98 per share of common stock and OP unit. The dividend was paid on December 6, 2012 to stockholders and OP unit holders of record as of the close of business on November 29, 2012. On December 19, 2012, the Company declared a cash dividend of $1.16 per share of common stock and OP unit. The dividend was paid on December 26, 2012 to stockholders and OP unit holders of record as of the close of business on December 19, 2012. On May 14, 2013, the Company declared a cash dividend of $0.22 per share of common stock and OP unit. The dividend was paid on May 31, 2013 to stockholders and OP unit holders of record as of the close of business on May 24, 2013. On June 25, 2013, the Company declared a cash dividend of $0.45 per share of common stock and OP unit. The dividend was payable on July 23, 2013 to stockholders and OP unit holders of record as of the close of business on July 9, 2013. Preferred Shares The Company's charter authorizes its board of directors to classify and reclassify any unissued shares of its common stock and preferred stock into other classes or series of stock. Prior to issuance of shares of each class or series, the board of directors is required by the Company's charter to set, subject to the charter restrictions on transfer of its stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of common stock or preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or change in control that might involve a premium price for holders of the Company's common stock or otherwise be in their best interest. On January 18, 2012 the Company completed a private placement of 133 shares of its 12.5% Series A Cumulative Non-Voting Preferred Stock (the "Series A Preferred Stock") raising net proceeds of $115,499, net of $17,501 in offering fees. On February 15, 2013, the Company redeemed all 133 shares of its 12.5% Series A Preferred Stock outstanding for an aggregate redemption price, including preferred dividend, of $148,379.
12.	Non-controlling Interests in Operating Partnership
	Non-controlling interests in the Operating Partnership in the accompanying consolidated financial statements relate to OP units in the Operating Partnership held by parties other than the Company.

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	Certain individuals and entities own OP units in the Operating Partnership. An OP unit and a share of common stock of the Company have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership. OP unit holders have the right to redeem their OP units, subject to certain restrictions. The redemption is required to be satisfied in shares of common stock, cash, or a combination thereof, at the Company's option, calculated as follows: one share of the Company's common stock, or cash equal to the fair value of a share of the Company's common stock at the time of redemption, for each OP unit. When an OP unit holder redeems an OP unit, non-controlling interest in the Operating Partnership is reduced and the Company's equity is increased. As of June 30, 2013, the non-controlling interest OP unit holders owned 926,914 OP units, or 10.4% of the Operating Partnership. As of December 31, 2012, the non-controlling interest OP unit holders owned 926,914 OP units, or 30.9% of the Operating Partnership. Pursuant to ASC 810, Consolidation, regarding the accounting and reporting for non-controlling interests and changes in ownership interests of a subsidiary, changes in a parent's ownership interest (and transactions with non-controlling interest unit holders in the Operating Partnership) while the parent retains its controlling interest in its subsidiary, should be accounted for as equity transactions. The carrying amount of the non-controlling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the Company.
13.	Commitments and Contingencies
	Advisor Services
	The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company's investment portfolio including determination of fair value; and other general and administrative responsibilities. In the event that the Advisor is unable to provide the respective services, the Company will be required to obtain such services from an alternative source.
	Litigation
	From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any contingencies that would require accrual or disclosure in the financial statements at June 30, 2013 or December 31, 2012.
14.	Offsetting Assets and Liabilities
	The following tables present information about certain assets and liabilities that are subject to master netting arrangements (or similar agreements) and can potentially be offset on the Company's consolidated balance sheet at June 30, 2013 and December 31, 2012:
	Offsetting of Liabilities

						Net Amounts of		Gross Amounts Not Offset in the
			Gross Amounts			Liabilities		Consolidated Balance Sheet
	Gross Amounts		Offset in the			Presented in the		Financial
	of Recognized		Consolidated			Consolidated		Instruments			Cash Collateral
	Liabilities		Balance Sheet			Balance Sheet		Pledged			Pledged			Net Amount
June 30, 2013
Repurchase agreements	$	308,497,415	$	—		$	308,497,415	$	(302,096,964	)	$	(6,400,451	)	$	—
Loan repurchase facility		89,112,325		—			89,112,325		(89,112,325	)		—			—
Derivative liabilities
(TBA contracts)		8,138,671		(3,069,199	)		5,069,472		—			(5,069,472	)		—
Total	$	405,748,411	$	(3,069,199	)	$	402,679,212	$	(391,209,289	)	$	(11,469,923	)	$	—
December 31, 2012
Repurchase agreements	$	116,080,467		—		$	116,080,467	$	(114,745,162	)	$	(1,335,305	)	$	—
Derivative liabilities (interest rate swap
agreements)		1,144,744		—			1,144,744		—			(1,144,744	)		—
	$	117,225,211	$	—		$	117,225,211	$	(114,745,162	)	$	(2,480,049	)	$	—

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Offsetting of Assets
						Net Amounts of		Gross Amounts Not Offset in the
			Gross Amounts			Assets Presented		Consolidated Balance Sheet
	Gross Amounts		Offset in the			in the		Financial
	of Recognized		Consolidated			Consolidated		Instruments		Cash Collateral
	Assets		Balance Sheet			Balance Sheet		Pledged		Pledged		Net Amount
June 30, 2013
Derivative assets (interest rate swap agreements)	$	7,590,729	$	(421,198	)	$	7,169,531	$	—	$	983,441	$	8,152,972
	$	7,590,729	$	(421,198	)	$	7,169,531	$	—	$	983,441	$	8,152,972

15.	Subsequent Events
	On July 25, 2013, the Company utilized approximately $98.7 million of its Loan Repurchase Facility to fund a portion of the purchase price of its acquisition of a residential mortgage loan portfolio with an unpaid principal balance of approximately $167.8 million.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company's financial statements and accompanying notes included in Item 1, "Financial Statements," of this quarterly report on Form 10-Q.

Forward-Looking Statements

The Company makes forward-looking statements in this quarterly report on Form 10-Q within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For these statements, the Company claims the protections of the safe harbor for forward-looking statements contained in such Sections. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company's control. These forward-looking statements include information about possible or assumed future results of the Company's business, financial condition, liquidity, results of operations, plans and objectives. When the Company uses the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "could," "would," "may," "potential" or the negative of these terms or other comparable terminology, the Company intends to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking:

• the Company's investment objectives and business strategy;

• the Company's ability to obtain future financing arrangements;

• the Company's expected leverage;

• the Company's expected investments;

• estimates or statements relating to, and the Company's ability to make, future distributions;

• the Company's ability to compete in the marketplace;

• the Company's ability to acquire the assets it targets and achieve risk adjusted returns;

• the Company's ability to borrow funds at favorable rates;

• market, industry and economic trends;

• recent market developments and actions taken and to be taken by the U.S. Government, the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System, the Federal Depositary Insurance Corporation, Fannie Mae, Freddie Mac, Ginnie Mae and the SEC;

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• mortgage loan modification programs and future legislative actions;

• the Company's ability to maintain its qualification as a REIT;

• the Company's ability to maintain its exclusion from qualification under the Investment Company Act of 1940, as amended (the "1940 Act");

• projected capital and operating expenditures;

• availability of qualified personnel;

• prepayment rates; and

• projected default rates.

The Company's beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company or are within its control, including:

• the factors referenced in the Company's annual report on Form 10-K, including those set forth under Item 1, "Business" and Item 1A, "Risk Factors" therein and the factors described herein under this heading, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and under the heading "Quantitative and Qualitative Disclosures about Market Risk";

• general volatility of the capital markets;

• changes in the Company's investment objectives and business strategy;

• the availability, terms and deployment of capital;

• the availability of suitable investment opportunities;

• the Company's dependence on its Advisor and the Company's ability to find a suitable replacement if the Company or the Advisor were to terminate the investment advisory agreement the Company has entered into with the Advisor;

• changes in the Company's assets, interest rates or the general economy;

• increased rates of default and/or decreased recovery rates on the Company's investments;

• changes in interest rates, interest rate spreads, the yield curve or prepayment rates; changes in prepayments of the Company's assets;

• limitations on the Company's business as a result of its qualification as a REIT; and

• the degree and nature of the Company's competition, including competition for RMBS, residential mortgage loans or its other target assets.

Upon the occurrence of these or other factors, the Company's business, financial condition, liquidity and results of operations may vary materially from those expressed in, or implied by, any such forward-looking statements.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements apply only as of the date of this quarterly report on Form 10-Q. The Company is not obligated, and does not intend, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. See Item 1A, "Risk Factors" of the Company's annual report on Form 10-K.

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Overview

The Company is a Maryland corporation that primarily invests in, finances and manages non-Agency RMBS, Agency RMBS and performing and re-performing residential mortgage loans. The Company's RMBS strategy focuses on non-Agency RMBS with an emphasis on securities that, when originally issued, were rated in the highest rating category by one or more of the nationally recognized statistical rating organizations, as well as Agency RMBS (including exposure to Agency RMBS through TBA contracts). The Company also has the discretion to invest in other real estate-related and financial assets, MSRs, IOs, CMBS and ABS. The Company refers collectively to the assets it targets for acquisition as its target assets. The Company expects to allocate, over time, an estimated 50% to 60% of its equity to mortgage loans; 30% to 40% of its equity to non-Agency RMBS; 5% to 10% of its equity to MSRs, other real-estate related and financial assets and cash; and 0% to 5% of its equity to Agency RMBS.

The Company's income is generated primarily by the net spread between the income it earns on its assets and the cost of its financing and hedging activities. The Company's objective is to provide attractive risk-adjusted returns to its stockholders, primarily through quarterly distributions and secondarily through capital appreciation.

The Company completed its formation transaction and commenced operations on July 29, 2011. On February 13, 2013, the Company successfully completed its IPO, pursuant to which the Company sold 5,650,000 shares of its common stock to the public at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of approximately $1.2 million were $118.9 million. In connection with the IPO, the Advisor paid $6.3 million in underwriting fees. The Company did not pay any underwriting fees, discounts or commissions in connection with the IPO.

As of June 30, 2013, the Company held a diversified portfolio of fixed rate mortgage loans and adjustable rate mortgage loans ("ARMs") with an estimated fair value of $120.8 million and RMBS assets with an estimated fair value of $444.5 million, consisting primarily of senior tranches of non-Agency RMBS that were originally highly rated but subsequently downgraded, and Agency RMBS collateralized by either fixed rate mortgage loans or ARMs. The Company also held contracts to purchase TBA securities which had a net notional value of $62.0 million as of June 30, 2013. The borrowings the Company used to fund the purchase of its portfolio totaled approximately $397.6 million as of June 30, 2013 under master repurchase agreements with four real estate securities repurchase agreement counterparties and under the Loan Repurchase Facility with another counterparty.

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2011. The Company serves as the sole general partner of, and conducts substantially all of its business through, the Operating Partnership. The Company also expects to operate its business so that it is not required to register as an investment company under the 1940 Act.

Results of Operations

Our results of operations for the quarter ended June 30, 2013, were impacted by communications from Federal Reserve officials which led investors to reassess expectations of continued quantitative easing. As a result, interest rates increased significantly during the quarter and volatility increased across many markets. As risk premiums increased across many fixed income sectors, Agency RMBS spreads widened considerably, resulting in a decline in the value of these assets. Non-Agency RMBS spreads also widened, despite improving credit conditions in the residential mortgage market. Housing market fundamentals continued to exhibit strength, with home prices nationwide increasing 11.9% in June 2013 compared to June 2012, according to CoreLogic^®'s June 2013 Home Price Index report. In addition, modest employment growth continued during the quarter, although the unemployment rate remained at an elevated level. Economic growth appears to be building into the second half of the year after a lower than expected start to 2013.

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The following discussion of the Company's results of operations highlights the Company's performance for the three and six months ended June 30, 2013.

Investments

The following table sets forth certain information regarding the Company's RMBS at June 30, 2013:

	Principal or
	Notional		Premium			Amortized		Gross Unrealized(1)					Fair		Weighted Average
	Balance		(Discount)			Cost		Gains		Losses			Value		Coupon		Yield(2)
Real estate securities
Agency RMBS
30-year adjustable
rate mortgage	$	2,531,514	$	269,463		$	2,800,977	$	—	$	(209,094	)	$	2,591,883	2.80	%	2.28	%
30-year fixed rate
mortgage		170,265,662		7,140,749			177,406,411		678,522	$	(6,174,710	)		171,910,223	3.43		3.14
Non-Agency RMBS
Alternative – A(3)		211,822,035		(100,256,547	)		111,565,488		3,418,507	$	(2,917,214	)		112,066,781	4.95		6.41
Pay option
adjustable rate		36,308,960		(7,839,404	)		28,469,556		114,962	$	(904,455	)		27,680,063	0.84		6.15
Prime		106,386,157		(12,568,896	)		93,817,261		5,053,935		(1,107,625	)		97,763,571	5.41		6.51
Subprime		46,587,884		(13,204,279	)		33,383,605		538,207	$	(1,397,637	)		32,524,175	0.65		6.98
Total RMBS	$	573,902,212	$	(126,458,914	)	$	447,443,298	$	9,804,133	$	(12,710,735	)	$	444,536,696	3.88	%	5.17	%

____________________

(1)	The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. The Company recorded net change in unrealized loss / gain on its real estate securities of a loss of $15.6 million and a gain of $2.9 million for the three months ended June 30, 2013 and 2012, respectively, and a loss of $14.7 million and a gain of $9.4 million for the six months ended June 30, 2013 and 2012, respectively, as change in unrealized loss/gain on real estate securities in the consolidated statements of operations.
(2)	Unleveraged yield.
(3)	Alternative-A RMBS includes an IO with a notional balance of $80.0 million.

Investment Activity

RMBS. During the three months ended June 30, 2013, the Company acquired Agency RMBS with a principal balance of $48.2 million for $50.4 million and non-Agency RMBS with a principal balance of $108.7 million (including an IO with a notional amount of $91.6 million) for $18.1 million. During the same period, the Company sold Agency RMBS with a principal balance of $45.2 million for $47.1 million. The Company did not sell any non-Agency RMBS during this period. During the six months ended June 30, 2013, the Company acquired Agency RMBS with a principal balance of $159.2 million for $165.8 million and non-Agency RMBS with a principal balance of $325.4 million for $193.2 million. During the same period, the Company sold Agency RMBS with a principal balance of $45.2 million for $47.1 million. The Company did not sell any non-Agency RMBS during this period. During the six months ended June 30, 2013, the Company acquired RMBS with a principal balance of $17.4 million for $15.7 million from a fund managed by ZAIS. The Company had no such acquisitions from funds managed by ZAIS during the three months ended June 30, 2013.

The fair value of the Company's Agency RMBS and non-Agency RMBS at June 30, 2013 were $174.5 million and $270.0 million, respectively.

Mortgage Loans. During the three months ended June 30, 2013, the Company acquired fixed rate mortgage loans and ARMs with a principal balance of $134.5 million. During the six months ended June 30, 2013, the Company acquired fixed rate mortgage loans and ARMs with a principal balance of $152.2 million for $119.8 million. During the three and six months ended June 30, 2013, the Company did not sell any mortgage loans.

The fair value of the Company's mortgage loans at June 30, 2013 was approximately $120.8 million.

TBA Securities. As of June 30, 2013, the Company had entered into TBA contracts to purchase and sell Agency RMBS resulting in additional net exposure at June 30, 2013 to Agency RMBS of $62.0 million of notional value. Because these TBA securities are carried as derivative liabilities on the consolidated balance sheets, the fair value of the net exposure at June 30, 2013 was $5.1 million. Additionally, during the three and six months ended June 30, 2013, the Company paired off purchases of TBA securities with a notional amount of $388.0 million and $473.0 million, respectively, by entering into simultaneous sales of TBA securities.

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Financing and Other Liabilities. As of June 30, 2013, the Company had 64 repurchase agreements outstanding with four real estate securities repurchase agreement counterparties totaling $308.5 million, which was used to finance investments in Agency RMBS and non-Agency RMBS. These agreements are secured by cash collateral and a portion of the Company's Agency RMBS and non-Agency RMBS and bear interest at rates that have historically moved in close relationship to LIBOR. As of June 30, 2013, the Company also had a Loan Repurchase Facility outstanding totaling $89.1 million which was used to finance mortgage loans. This agreement is secured by a portion of the Company's mortgage loan portfolio and bears interest at rates that have historically moved in close relationship to LIBOR.

As of June 30, 2013, the Company had fully deployed the IPO proceeds but it was not fully invested in its long-term target assets and was not fully leveraged during the quarter to the extent contemplated by its long-term business plan. Consequently, the Company's results for this quarterly period are not indicative of the results expected to be achieved once the Company is fully invested in its long-term target assets and leveraged to the extent contemplated by its long-term business plan.

The following table presents certain information regarding the Company's repurchase agreements as of June 30, 2013 by remaining maturity and collateral type:

	Agency RMBS				Non-Agency RMBS
			Weighted				Weighted
			Average				Average
	Balance		Rate		Balance		Rate
Repurchase agreements maturing within
30 days or less	$	147,472,330	0.39	%	$	161,025,085	2.03	%
31-60 days		—	—			—	—
61-90 days		—	—			—	—
Greater than 90 days		—	—			—	—
Total / weighted average	$	147,472,330	0.39	%	$	161,025,085	2.03	%

The following table presents certain information regarding the Company's Loan Repurchase Facility as of June 30, 2013 by remaining maturity:

	Mortgage Loans
			Weighted
			Average
	Balance		Rate
Loan Repurchase Facility borrowings maturing within
30 days or less	$	—	—	%
31-90 days		—	—
91-180 days		—	—
Greater than 180 days to 1 year		89,112,325	2.94
Total / weighted average	$	89,112,325	2.94	%

Derivative Instruments. As of June 30, 2013, the Company had outstanding interest rate swap agreements designed to mitigate the effects of increases in interest rates under a portion of its repurchase agreements. These interest rate swap agreements provide for the Company to pay fixed interest rates and receive floating interest rates indexed to LIBOR, effectively fixing the floating interest rates on $225.7 million of borrowings under its repurchase agreements as of June 30, 2013.

The following table presents certain information about the Company's interest rate swap agreements as of June 30, 2013:

							Weighted
			Weighted		Weighted		Average
	Notional		Average		Average		Years to
Maturity	Amount		Pay Rate		Receive Rate		Maturity
2016	$	12,102,000	1.20	%	0.27	%	3.2
2017		11,050,000	1.28		0.28		3.8
2018		38,000,000	1.54		0.28		4.9
2021		9,448,000	2.16		0.27		8.2
2023		155,125,000	2.05		0.27		9.7

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							Weighted
			Weighted		Weighted		Average
	Notional		Average		Average		Years to
Maturity	Amount		Pay Rate		Receive Rate		Maturity
Total/Weighted average	$	225,725,000	1.88	%	0.27	%	8.2

The following analysis focuses on the results generated during the three and six months ended June 30, 2013 and 2012.

Net Interest Income

For the three months ended June 30, 2013, the Company's interest income was $5.9 million, as compared to $2.3 million of interest income for the three months ended June 30, 2012. The increase in interest income was due to an increase in the Company's average RMBS portfolio, which increased interest income by $3.0 million, and the addition of the Company's mortgage loan portfolio, which increased interest income by $0.9 million, partially offset by a decline in the average RMBS portfolio yield, which decreased interest income by $0.3 million. For the three months ended June 30, 2013, the Company's interest expense was $1.2 million, as compared to $0.4 million of interest expense for the three months ended June 30, 2012. The increase in interest expense was due to an increase in borrowings from repurchase agreements. For the six months ended June 30, 2013, the Company's interest income was $9.4 million, as compared to $5.0 million of interest income for the six months ended June 30, 2012. The increase in interest income was due to an increase in the Company's average RMBS portfolio, which increased interest income by $3.6 million, and the addition of the Company's mortgage loan portfolio, which increased interest income by $0.9 million, partially offset by a decline in the average RMBS portfolio yield, which decreased interest income by $0.1 million. For the six months ended June 30, 2013, the Company's interest expense was $1.7 million, as compared to $0.7 million of interest expense for the six months ended June 30, 2012. The increase in interest expense was due to an increase in borrowings from repurchase agreements.

As of June 30, 2013, the weighted average net interest spread between the yield on the Company's assets and the cost of funds, including the impact of interest rate hedging, was 1.21% for the Company's Agency RMBS, 4.46% for the Company's non-Agency RMBS and 3.84% for the Company's mortgage loans. As of June 30, 2012, the weighted average net interest spread between the yield on the Company's assets and the cost of funds, including the impact of interest rate hedging, was 2.60% for the Company's Agency RMBS and 4.72% for the Company's non-Agency RMBS.

The Company's net interest income is also impacted by prepayment speeds, as measured by the weighted average Constant Prepayment Rate ("CPR") on its assets. The three-month average and the six-month average CPR for the period ended June 30, 2013 of the Company's Agency RMBS were 4.56% and 6.67%, respectively, and were 18.09% and 14.43%, respectively, for the Company's non-Agency RMBS. The three-month average and the six-month average CPR for the period ended June 30, 2012 of the Company's Agency RMBS were 4.60% and 3.74%, respectively, and were 16.52% and 16.78%, respectively, for the Company's non-Agency RMBS. The non-Agency RMBS CPR includes both voluntary and involuntary amounts.

Expenses

Professional Fees. For the three months ended June 30, 2013, the Company incurred professional fees of $0.2 million, as compared to $0.4 million in professional fees for the three months ended June 30, 2012. The decrease in professional fees was primarily due to a decrease in year-end audit fees of $0.2 million, due to the timing of the completion of the 2012 audit in the first quarter of 2013. For the six months ended June 30, 2013, the Company incurred professional fees of $1.5 million, as compared to $0.9 million in professional fees for the six months ended June 30, 2012. The increase in professional fees was primarily due to an increase in year-end audit fees of $0.4 million and increased legal fees of $0.3 million, which reflects the increased reporting requirements of being a public company. The increase in professional fees was partially offset by a decrease of $0.2 million in consulting fees related to general corporate matters.

Advisory Fee Expense (Related Party). Pursuant to the terms of the Investment Advisory Agreement, during the three months ended June 30, 2013, the Company incurred advisory fee expense of $0.7 million, as compared to $0.2 million for the three months ended June 30, 2012. The Company incurred advisory fee expense of $1.2 million for the six months ended June 30, 2013, as compared to $0.5 million for the six months ended June 30, 2012. The increases in advisory fee expense over these periods were due to the Company's increased capitalization as a result of its IPO.

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       General and Administrative Expenses. For the three months ended June 30, 2013, general and administrative expenses were $0.8 million, as compared to $0.04 million of general and administrative expenses for the three months ended June 30, 2012. The increase in general and administrative expenses was primarily due to mortgage loan transaction costs of $0.3 million, increased insurance expense of $0.2 million, additional public company expenses of $0.2 million and directors fees of $0.1 million related to the independent directors who joined the Company in connection with the Company's IPO in February 2013. For the six months ended June 30, 2013, general and administrative expenses were $1.1 million, as compared to $0.1 million of general and administrative expenses for the six months ended June 30, 2012. The increase in general and administrative expenses was primarily due to mortgage loan transaction costs of $0.3 million, increased insurance expense of $0.4 million, additional public company expenses of $0.2 million and directors fees of $0.1 million related to the independent directors who joined the Company in connection with the Company's IPO in February 2013.

Realized and Unrealized Gain (Loss)

       For the three months ended June 30, 2013, the Company sold certain of its RMBS and recognized a net loss of $0.2 million. During this period, the Company recognized an immaterial amount in OTTI as realized losses and its change in unrealized gain/loss on its RMBS was a loss of $15.6 million due to changes in the fair value of the Company RMBS. The Company also recognized a gain of $1.6 million on its change in unrealized gain/loss on its mortgage loans and realized a gain of $0.1 million on its mortgage loans for pay-offs in excess of cost. For the six months ended June 30, 2013, the Company sold certain of its RMBS and recognized a net loss of $0.2 million. During this period, the Company recognized an immaterial amount in OTTI as realized losses and its change in unrealized gain/loss on its RMBS was a loss of $14.7 million due to changes in the fair value of the Company's RMBS. The Company also recognized a gain of $1.6 million on its change in unrealized gain/loss on its mortgage loans and realized a gain of $0.1 million on its mortgage loans for pay-offs in excess of cost.

       For the three months ended June 30, 2012, the Company sold certain of its RMBS and recognized a net gain of $0.1 million. During this period, the Company recognized $0.1 million in OTTI as realized losses and its change in unrealized gain/loss on its RMBS was a gain of $2.9 million due to changes in the fair value of the Company's RMBS. For the six months ended June 30, 2012, the Company sold certain of its RMBS and recognized a net loss of $1.9 million. During this period, the Company recognized $0.2 million in OTTI as realized losses and its change in unrealized gain/loss on its RMBS was a gain of $9.4 million due to changes in the fair value of the Company's RMBS.

       The Company has not designated its interest rate swaps as hedging instruments.

       The Company recorded the change in estimated fair value related to interest rate swaps held during the three and six months ended June 30, 2013 and 2012, and TBAs held during the three and six months ended June 30, 2013 in earnings as gain/(loss) on derivative instruments. Included in gain/(loss) on derivative instruments are the net swap payments and net TBA payments for the derivative instruments.

       The Company has elected to record the change in estimated fair value related to its RMBS and mortgage loans in earnings by electing the fair value option.

       The following amounts related to realized gains and losses, as well as changes in estimated fair value of the Company's RMBS portfolio, mortgage loans and derivative instruments are included in the Company's consolidated statement of operations for the three and six months ended June 30, 2013 and 2012:

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Other gain / (loss)
Change in unrealized (loss) / gain on real estate
securities	$	(15,642,642	)	$	2,903,133	$	(14,739,365	)	$	9,392,927
Change in unrealized gain on mortgage loans		1,596,197			—		1,567,291			—
Realized (loss) / gain on real estate securities		(246,055	)		109,183		(246,055	)		(1,951,862	)

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	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Realized gain on mortgage loans		66,244			—			66,244			—
Gain / (loss) on derivative instruments		3,698,381			(897,767	)		3,979,525			(755,952	)
Total other gains / (losses)	$	(10,527,875	)	$	2,114,549		$	(9,372,360	)	$	6,685,113

Factors Impacting Operating Results

       The Company held a diversified portfolio of RMBS assets with a fair value of $444.5 million and mortgage loans with a fair value of $120.8 million as of June 30, 2013, and RMBS assets with a fair value of $170.7 million as of December 31, 2012. In addition, the Company anticipates having available borrowing capacity from which it expects to be able to acquire additional assets. The Company's operating results will be impacted by the Company's actual available borrowing capacity.

       The Company expects that the results of its operations will also be affected by a number of other factors, including the level of its net interest income, the fair value of its assets and the supply of, and demand for, the target assets in which it may invest. The Company's net interest income, which includes the amortization of purchase premiums and accretion of purchase discounts, varies, primarily as a result of changes in market interest rates and prepayment speeds, as measured by CPR on the Company's target assets. Interest rates and prepayment speeds vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. The Company's operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers whose mortgage loans are held directly by the Company or included in its non-Agency RMBS or in other assets it may acquire in the future.

Changes in Fair Value of the Company's Assets

       The Company's RMBS and mortgage loans are carried at fair value and future mortgage-related assets may also be carried at fair value. Accordingly, changes in the fair value of the Company's assets may impact the results of its operations for the period in which such change in value occurs. The expectation of changes in real estate prices is a major determinant of the value of mortgage loans and, therefore, of RMBS. This factor is beyond the Company's control.

Changes in Market Interest Rates

       With respect to the Company's business operations, increases in interest rates, in general, may, over time, cause: (i) the interest expense associated with the Company's borrowings to increase; (ii) the value of its investment portfolio to decline; (iii) coupons on its ARMs and hybrid ARMs (including RMBS secured by such collateral) and on its other floating rate securities and residential mortgage loans to reset, although on a delayed basis, to higher interest rates; (iv) prepayments on its RMBS and residential mortgage loans to slow, thereby slowing the amortization of the Company's purchase premiums and the accretion of its purchase discounts; and (v) the value of its interest rate swap agreements to increase. Conversely, decreases in interest rates, in general, may, over time, cause: (i) prepayments on the Company's RMBS and residential mortgage loans to increase, thereby accelerating the amortization of its purchase premiums and the accretion of its purchase discounts; (ii) the interest expense associated with its borrowings to decrease; (iii) the value of its investment portfolio to increase; (iv) the value of its interest rate swap agreements to decrease; and (v) coupons on its ARMs and hybrid ARMs (including RMBS secured by such collateral) and on its other floating rate securities and residential mortgage loans to reset, although on a delayed basis, to lower interest rates. As of June 30, 2013 and December 31, 2012, 13.5% and 19.1% of the Company's RMBS assets, respectively, as measured by fair value, consisted of RMBS assets with a variable interest rate component, including ARMs and hybrid ARMs. Additionally, as of June 30, 2013, 50.1% of the Company's mortgage loan portfolio as measured by fair value consisted of mortgage loans with a variable interest rate component, including ARMs and hybrid ARMs.

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Prepayment Speeds

       Prepayment speeds on residential mortgage loans, and therefore, RMBS vary according to interest rates, the type of investment, conditions in the financial markets, competition, defaults, foreclosures and other factors that cannot be predicted with any certainty. In general, when interest rates rise, it is relatively less attractive for borrowers to refinance their mortgage loans and, as a result, prepayment speeds tend to decrease. This can extend the period over which the Company earns interest income. When interest rates fall, prepayment speeds on residential mortgage loans, and therefore, RMBS tend to increase, thereby decreasing the period over which the Company earns interest income. Additionally, other factors such as the credit rating of the borrower, the rate of home price appreciation or depreciation, financial market conditions, foreclosures and lender competition, none of which can be predicted with any certainty, may affect prepayment speeds on RMBS. In particular, despite the historically low interest rates, recent severe dislocations in the housing market, including home price depreciation resulting in many borrowers owing more on their mortgage loans than the values of their homes have prevented many such borrowers from refinancing their mortgage loans, which has impacted prepayment rates and the value of RMBS assets. However, mortgage loan modification and refinance programs or future legislative action may make refinancing mortgage loans more accessible or attractive to such borrowers, which could cause the rate of prepayments on RMBS assets to accelerate. For RMBS assets, including some of the Company's RMBS assets, that were purchased or are trading at a premium to their par value, higher prepayment rates would adversely affect the value of such assets or cause the holder to incur losses with respect to such assets.

Mortgage Extension Risk

       The Advisor computes the projected weighted-average life of the Company's investments based on assumptions regarding the rate at which the borrowers will prepay the underlying mortgages and the rate at which defaults, foreclosures and recoveries will occur. In general, when the Company acquires a fixed-rate mortgage or hybrid ARM asset, the Company may, but is not required to, enter into an interest rate swap agreement or other hedging instrument that effectively fixes the Company's borrowing costs for a period close to the anticipated average life of the fixed-rate portion of the related assets. This strategy is designed to protect the Company from rising interest rates, because the borrowing costs are effectively fixed for the duration of the fixed-rate portion of the related RMBS.

       However, if prepayment rates decrease in a rising interest rate environment, the life of the fixed-rate portion of the related assets could extend beyond the term of the swap agreement or other hedging instrument. This could have a negative impact on the Company's results of operations, as borrowing costs would no longer be fixed after the maturity or termination of hedging instruments while the income earned on the mortgage assets would remain fixed. This situation may also cause the fair value of the Company's mortgage assets to decline, with little or no offsetting gain from the related hedging transactions. In extreme situations, the Company may be forced to sell assets to maintain adequate liquidity, which could cause the Company to incur losses.

       In addition, the use of this swap hedging strategy effectively limits increases in the Company's book value in a declining rate environment, due to the effectively fixed nature of the Company's hedged borrowing costs. In an extreme rate decline, prepayment rates on the Company's assets might actually result in certain of its assets being fully paid off while the corresponding swap or other hedge instrument remains outstanding. In such a situation, the Company may be forced to liquidate the swap or other hedge instrument at a level that causes it to incur a loss.

Credit Risk

       The Company is subject to credit risk in connection with its investments. Although the Company does not expect to encounter credit risk in its Agency RMBS, it does expect to encounter credit risk related to its non-Agency RMBS, mortgage loans and other target assets, including assets it may acquire in the future. Increases in defaults and delinquencies will adversely impact the Company's operating results, while declines in rates of default and delinquencies may improve the Company's operating results from this aspect of its business.

Size of Investment Portfolio

       The size of the Company's investment portfolio, as measured by the aggregate principal balance of its mortgage-related securities and the other assets the Company owns, is a key revenue driver. Generally, as the size of the Company's investment portfolio grows, the amount of interest income the Company receives increases. A larger investment portfolio, however, drives increased expenses, as the Company incurs additional interest expense to finance the purchase of its assets.

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Critical Accounting Policies and Use of Estimates

Mortgage Loans – Fair Value Election

       U.S. GAAP permits entities to choose to measure many financial instruments and certain other items at fair value. The Company has elected the fair value option for each of its mortgage loans at the date of purchase, which permits it to measure these loans at estimated fair value with the change in estimated fair value included as changes in unrealized gain/loss on mortgage loans. The Company believes that the election of the fair value option for its mortgage loans more appropriately reflects the results of its operations for a particular reporting period as changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company's investment performance.

Determination of Fair Value Measurement – Mortgage Loans

       The fair value of the Company's mortgage loans considers data such as loan origination and additional updated borrower and loan servicing data as available, forward interest rates, general economic conditions, home price index forecasts and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans include market-implied discount rates, and projections of default rates, delinquency rates, loss severity and prepayment rates. The Company uses loan level data, macro-economic inputs and forward interest rates to generate loss adjusted cash flows and other information in determining the fair value. Because of the inherent uncertainty of such valuation, the fair values established for these holdings may differ from the values that would have been established if a ready market for these holdings existed.

Interest Income on Mortgage Loans – Fair Value Election

       When mortgage loans purchased by the Company show evidence of a deterioration in credit quality since origination, management determines that it is probable the Company will not collect all contractual cash flows and the fair value option of accounting has been elected, the Company will apply the guidance which addresses accounting for differences between contractual cash flows and cash flows expected to be collected from its initial investment. The yield that may be accreted (accretable yield) will be limited to the excess of the Company's initial estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the Company's initial investment in the mortgage loan. Interest income will be recognized using the accretable yield on a level-yield basis over the life of the loan as long as cash flows can be reasonably estimated. On a quarterly basis, the Company updates its estimate of the cash flows expected to be collected. The excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) will not be recognized as an adjustment of yield but will be recognized prospectively through adjustment of the loan's accretable yield over its remaining life. The amount of interest income to be recognized cannot result in a carrying amount that exceeds the payoff amount of the loan. Loans that are delinquent for 60 days or more are considered non-performing. Income recognition is suspended for loans when they become more than 90 days delinquent, or when, in management's opinion, a full recovery of interest and principal becomes doubtful. Income recognition is resumed when the loan becomes contractually current.

       Refer to the section of the Company's annual report on Form 10-K for the year ended December 31, 2012 entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Use of Estimates" for a full discussion of its critical accounting policies.

Recent Accounting Pronouncements

       In December 2011, the FASB issued ASU No. 2011-11: Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11") which requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the amendment requires disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. In addition, in January 2013, the FASB issued ASU 2013-01: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (Topic 210), Balance Sheet. The update addresses implementation issues about ASU 2011-11 and is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. This guidance is to be applied retrospectively for all comparative periods presented and does not amend the circumstances in which the Company offsets its derivative positions. This guidance does not have a material effect on the Company's financial statements. However, this guidance expands the disclosure requirements to which the Company is subject, which are presented in Note 14 of the consolidated financial statements.

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Liquidity and Capital Resources

       Liquidity is a measure of the Company's ability to turn non-cash assets into cash and to meet potential cash requirements. The Company uses significant cash to purchase securities, pay dividends, repay principal and interest on its borrowings, fund its operations and meet other general business needs. The Company's primary sources of liquidity are its existing cash balances, borrowings under its repurchase agreements, the net proceeds of offerings of equity and debt securities and net cash provided by operating activities, private funding sources, including other borrowings structured as repurchase agreements, securitizations, term financings and derivative agreements, and future issuances of common equity, preferred equity, convertible securities, trust preferred and/or debt securities. The Company does not currently have any committed borrowing capacity, other than pursuant to the repurchase agreements discussed below.

       The borrowings the Company used to fund the purchase of its RMBS portfolio and its mortgage loan portfolio totaled approximately $308.5 million and $89.1 million, respectively, as of June 30, 2013 under master repurchase agreements with four real estate securities repurchase agreement counterparties and under the Loan Repurchase Facility with another counterparty.

       As of June 30, 2013, the Company had a total of $364.4 million in fair value of RMBS pledged against its securities repurchase agreement borrowings and $120.5 million in fair value of mortgage loans pledged against its borrowings under the Loan Repurchase Facility.

       Under repurchase agreements, the Company may be required to pledge additional assets to its repurchase agreement counterparties (lenders) in the event that the estimated fair value of the existing pledged collateral under such agreements declines and such lenders demand additional collateral, which may take the form of additional securities or cash. Generally, the Company's repurchase agreements contain a LIBOR-based financing rate, term and haircuts depending on the types of collateral and the counterparties involved. Further, as of June 30, 2013, the range of haircut provisions associated with the Company's repurchase agreements was between 3% and 5% for fully pledged Agency RMBS and between 15% and 40% for fully pledged non-Agency RMBS and was between 27% and 28% for fully pledged mortgage loans. For additional information about the Loan Repurchase Facility, see Note 7 of the consolidated financial statements.

       If the estimated fair value of the assets increases due to changes in market interest rates or market factors, lenders may release collateral back to the Company. Specifically, margin calls may result from a decline in the value of the investments securing the Company's repurchase agreements, prepayments on the mortgages securing such investments and from changes in the estimated fair value of such investments generally due to principal reduction of such investments from scheduled amortization and resulting from changes in market interest rates and other market factors. Counterparties also may choose to increase haircuts based on credit evaluations of the Company and/or the performance of the assets in question. The recent disruptions in the financial and credit markets have resulted in increased volatility in these levels, and this volatility could persist as market conditions continue to change rapidly. Should prepayment speeds on the mortgages underlying the Company's investments or market interest rates suddenly increase, margin calls on the Company's repurchase agreements could result, causing an adverse change in its liquidity position. To date, the Company has satisfied all of its margin calls and has never sold assets in response to any margin call under its repurchase agreement borrowings.

       The Company's borrowings under repurchase agreements are renewable at the discretion of its lenders and, as such, the Company's ability to roll-over such borrowings is not guaranteed. The terms of the repurchase transaction borrowings under the Company's repurchase agreements generally conform to the terms in the standard master repurchase agreement as published by SIFMA, as to repayment, margin requirements and the segregation of all assets the Company has initially sold under the repurchase transaction. In addition, each lender typically requires that the Company include supplemental terms and conditions to the standard master repurchase agreement. Typical supplemental terms and conditions, which differ by lender, may include changes to the margin maintenance requirements, required haircuts and purchase price maintenance requirements, requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction, and cross default and setoff provisions.

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       As of June 30, 2013, the Company had an effective leverage ratio of 2.55x which includes $62.8 million in fair value of Agency RMBS exposure acquired through contracts to acquire TBA securities.

       The Company maintains cash, unpledged Agency RMBS, non-Agency RMBS and mortgage loans (which may be subject to various haircuts if pledged as collateral to meet margin requirements) and collateral in excess of margin requirements held by the Company's counterparties (collectively, the "Cushion") to meet routine margin calls and protect against unforeseen reductions in the Company's borrowing capabilities. The Company's ability to meet future margin calls will be impacted by the Cushion, which varies based on the fair value of its securities, its cash position and margin requirements. The Company's cash position fluctuates based on the timing of its operating, investing and financing activities and is managed based on the Company's anticipated cash needs. As of June 30, 2013, the Company had a Cushion of $86.8 million.

       As of June 30, 2013, the Company had a total of $12.5 million of restricted cash pledged against its swaps, TBAs and repurchase agreements.

       The Company believes these identified sources of liquidity will be adequate for purposes of meeting its short-term (within one year) liquidity and long-term liquidity needs. However, the Company's ability to meet its long-term liquidity and capital resource requirements may require additional financing. The Company's short-term and long-term liquidity needs include funding future investments and operating costs. In addition to qualify as a REIT, the Company must distribute annually at least 90% of its net taxable income excluding net capital gains. These distribution requirements limit the Company's ability to retain earnings and thereby replenish or increase capital for operations.

       The Company's current policy is to pay quarterly distributions which, on an annual basis, will equal all or substantially all of its net taxable income. Taxable and GAAP earnings will typically differ due to differences in premium amortization and discount accretion, certain non-taxable unrealized and realized gains and losses, and non-deductible general and administrative expenses.

Cash Generated from Operating Activities

       The Company's operating activities provided net cash of $3.5 million for the six months ended June 30, 2013. The cash provided by operating activities is primarily a result of income earned on the Company's assets, partially offset by interest expense on repurchase agreements and operating expenses.

       The Company's operating activities provided net cash of $1.6 million for the six months ended June 30, 2012. The cash provided by operating activities is primarily a result of income earned on the Company's assets partially offset by interest expense on repurchase agreements and operating expenses.

Cash Used in Investing Activities

       The Company's investing activities used net cash of $393.7 million for the six months ended June 30, 2013. During the six months ended June 30, 2013, the Company utilized cash to purchase $344.6 million in RMBS (net of changes in amounts payable for real estate securities purchased) and $119.8 million in mortgage loans and increased restricted cash by $8.7 million in connection with swap, TBAs and repurchase agreements, which was offset by principal repayments on real estate securities of $24.6 million, principal repayments on mortgage loans of $0.9 million and proceeds from the sale of real estate securities of $53.9 million (net of changes in amounts receivable for real estate securities sold).

       The Company's investing activities used net cash of $34.3 million for the six months ended June 30, 2012. During the six months ended June 30, 2012, the Company utilized cash to purchase $72.7 million in RMBS and increased restricted cash by $0.6 million. The decrease in cash was partially offset by proceeds from the sale of RMBS of $28.8 million and principal repayments on real estate securities of $10.2 million.

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Cash Generated from Financing Activities

       The Company's financing activities provided cash of $392.3 million for the six months ended June 30, 2013, which was a result of net proceeds and borrowings from the Loan Repurchase Facility of $89.1 million, net proceeds from the issuance of common stock of $118.9 million and borrowings from real estate securities repurchase agreements of $287.9 million, partially offset by repayments of repurchase agreements of $95.5 million, repurchases of common stock of $5.8 million, the payment of dividends and distributions on common stock and OP units of $2.0 million, and other items.

       The Company's financing activities provided cash of $29.4 million for the six months ended June 30, 2012, which was the result of borrowings from repurchase agreements of $49.6 million and proceeds from the issuance of preferred stock of $0.1 million, partially offset by repayments of repurchase agreements of $17.1 million and the payment of dividends and distributions on common stock and OP units of $3.3 million.

Contractual Obligations

       The Company has entered into an Investment Advisory Agreement with the Advisor. The Advisor is entitled to receive a quarterly advisory fee and the reimbursement of certain expenses; however, those obligations do not have fixed and determinable payments. Additionally, as discussed above under "Liquidity and Capital Resources," the borrowings the Company used to fund the purchase of its portfolio totaled approximately $397.6 million as of June 30, 2013 under master repurchase agreements with four real estate securities repurchase agreement counterparties and under the Loan Repurchase Facility with another counterparty. These borrowings were all due within one year.

Off-Balance Sheet Arrangements

       As of the date of this quarterly report on Form 10-Q, the Company had no off-balance sheet arrangements.

Inflation

       Virtually all of the Company's assets and liabilities are and will be interest rate sensitive in nature. As a result, interest rates and other factors influence the Company's performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. The Company's financial statements are prepared in accordance with U.S. GAAP and the Company's activities and balance sheet shall be measured with reference to historical cost and/or fair value without considering inflation.

Non-GAAP Financial Measures

       Core Earnings is a non-GAAP measure that the Company defines as GAAP net income, excluding changes in unrealized gains or losses on real estate securities and mortgage loans, realized gains or losses on real estate securities and mortgage loans, gains or losses on derivative instruments, and certain non-recurring adjustments.

       The Company believes that providing investors with this non-GAAP financial information, in addition to the related GAAP measures, gives investors greater transparency to the information used by management in its financial and operational decision-making. However, because Core Earnings is an incomplete measure of the Company's financial performance and involves differences from net income computed in accordance with GAAP, it should be considered along with, but not as an alternative to, the Company's net income computed in accordance with GAAP as a measure of the Company's financial performance. In addition, because not all companies use identical calculations, the Company's presentation of Core Earnings may not be comparable to other similarly-titled measures of other companies.

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       The following table reconciles net income computed in accordance with GAAP with Core Earnings:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(unaudited)
Net (loss) / income – GAAP	$	(7,568,877	)	$	3,328,015		$	(5,595,182	)	$	9,561,168
Recurring adjustments for non-core earnings:
Change in unrealized loss / (gain) on real estate
securities		15,642,642			(2,903,133	)	14,739,365				(9,392,927	)
Change in unrealized (gain) on mortgage loans		(1,596,197	)		—			(1,567,291	)		—
Realized loss / (gain) on real estate securities		246,055			(109,183	)		246,055			1,951,862
Realized (gain) on mortgage loans		(66,244	)		—			(66,244	)		—
(Gain) / loss on derivative instruments		(3,698,381	)		897,767			(3,979,525	)		755,952
Core Earnings - non-GAAP	$	2,958,998		$	1,213,466		$	3,777,178		$	2,876,055
Core Earnings - per weighted average share
outstanding - non-GAAP	$	0.33		$	0.40		$	0.50		$	0.95

Subsequent Events

       On July 25, 2013, the Company utilized approximately $98.7 million of its Loan Repurchase Facility to fund a portion of the purchase price of its acquisition of a residential mortgage loan portfolio with an unpaid principal balance of approximately $167.8 million.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

       The primary components of the Company's market risk are related to interest rate risk, prepayment risk, credit risk and fair value risk. While the Company does not seek to avoid risk completely, the Company believes that risk can be quantified from historical experience and the Company will seek to actively manage that risk, to earn sufficient compensation to justify taking risk and to maintain capital levels consistent with the risks the Company undertakes.

Interest Rate Risk

       Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the Company's control.

       The Company is subject to interest rate risk in connection with any floating or inverse floating rate investments and its repurchase agreements. The Company's repurchase agreements may be of limited duration and are periodically refinanced at current market rates. The Company intends to manage this risk using interest rate derivative agreements. These instruments are intended to serve as a hedge against future interest rate increases on the Company's borrowings. The Company primarily assesses its interest rate risk by estimating and managing the duration of its assets relative to the duration of its liabilities. Duration measures the change in the fair value of an asset based on a change in an interest rate. The Company generally calculates duration using various financial models and empirical data. Different models and methodologies can produce different duration numbers for the same securities.

       The borrowings the Company used to fund the purchase of its portfolio totaled approximately $397.6 million as of June 30, 2013 under RMBS master repurchase agreements with four real estate securities repurchase agreement counterparties and the Loan Repurchase Facility with an additional counterparty. At June 30, 2013, the Company also had interest rate swaps with an outstanding notional amount of $225.7 million, resulting in variable rate debt of $171.9 million. A 50 basis point increase in LIBOR would increase the quarterly interest expense related to the $171.9 million in variable rate debt by $0.2 million. Such hypothetical impact of interest rates on the Company's variable rate debt does not consider the effect of any change in overall economic activity that could occur in a rising interest rate environment. Further, in the event of such a change in interest rates, the Company may take actions to further mitigate its exposure to such a change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in the Company's financial structure.

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Net Interest Income

       The Company's operating results will depend in large part on differences between the income from its investments and its borrowing costs. Most of the Company's repurchase agreements and its Loan Repurchase Facility provide financing based on a floating rate of interest calculated on a fixed spread over LIBOR. During periods of rising interest rates, the borrowing costs associated with the Company's investments tend to increase while the income earned on the Company's fixed interest rate investments may remain substantially unchanged. This will result in a narrowing of the net interest spread between the related assets and borrowings and may result in losses.

       Hedging techniques are partly based on assumed levels of prepayments of the Company's RMBS and mortgage loans. If prepayments are slower or faster than assumed, the effectiveness of any hedging strategies the Company uses will be reduced and may cause losses on such transactions. Hedging strategies involving the use of derivative securities are complex and may produce volatile returns.

Fair Value

       Changes in interest rates may also have an impact on the fair value of the assets the Company acquires.

Prepayment Risk

       As the Company receives prepayments of principal on its investments, premiums paid on such investments will be amortized against interest income. In general, an increase in prepayment rates will accelerate the amortization of purchase premiums, thereby reducing the interest income earned on the investments. Conversely, discounts on such investments are accreted into interest income. In general, an increase in prepayment rates will accelerate the accretion of purchase discounts, thereby increasing the interest income earned on the investments.

Credit Risk

       The Company is subject to credit risk in connection with its investments. Although the Company does not expect to encounter credit risk in its Agency RMBS, the Company does expect to encounter credit risk related to its non-Agency RMBS, mortgage loans and other target assets, including assets it may acquire in the future. A portion of its assets are comprised of residential mortgage loans that are unrated. The credit risk related to these investments pertains to the ability and willingness of the borrowers to pay, which is assessed before credit is granted or renewed and periodically reviewed throughout the loan or security term. The Company believes that residual loan credit quality is primarily determined by the borrowers' credit profiles and loan characteristics.

Extension Risk

       If prepayment rates decrease in a rising interest rate environment, the life of the fixed-rate portion of the related assets could extend beyond the term of the swap agreement or other hedging instrument. This could have a negative impact on the Company's results from operations, as borrowing costs would no longer be fixed after the end of the hedging instrument, while the income earned on the hybrid adjustable-rate assets would remain fixed. This situation may also cause the fair value of the Company's hybrid adjustable-rate assets to decline, with little or no offsetting gain from the related hedging transactions. In extreme situations, the Company may be forced to sell assets to maintain adequate liquidity, which could cause it to incur losses.

Fair Value Risk

       The Company intends to elect the fair value option of accounting on most of its securities investments and residential mortgage loans and account for them at their estimated fair value with unrealized gains and losses included in earnings pursuant to accounting guidance. The estimated fair value of these securities and residential mortgage loans fluctuates primarily due to changes in interest rates and other factors. Generally, in a rising interest rate environment, the estimated fair value of these securities and residential mortgage loans would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of these securities and residential mortgage loans would be expected to increase.

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Item 4. Controls and Procedures

     The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of "disclosure controls and procedures" as promulgated under the Exchange Act and the rules and regulations thereunder. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of June 30, 2013. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.

Changes in Internal Controls over Financial Reporting

There have been no changes in the Company's "internal control over financial reporting" (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three month period ended June 30, 2013 that have materially affected, or was reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     From time to time, the Company may be involved in various claims and legal actions in the ordinary course of business. As of June 30, 2013, the Company was not involved in any legal proceedings.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in the "Risk Factors" section of the Company's combined Annual Report on Form 10-K for the year ended December 31, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Purchases of Equity Securities

The Company repurchased the following shares of its common stock during the six months ended June 30, 2013:

					Maximum Number
					(or Approximate
				Total Number of	Dollar Value) of
				Shares (or OP units)	Shares (or Units)
	Total number	Average price		Purchased as Part of	that May Yet Be
	of shares	paid per		Publicly Announced	Purchased Under
	(or OP units)	share or		Plans	the Plans or
Period	purchased(1)	(OP unit)		or Programs	Programs
January 1 to January 31	265,245	$	21.68	—	—
Total	265,245	$	21.68	—	—

____________________

(1)       The repurchase was made from a single stockholder. The Company paid to such stockholder approximately $5.8 million.

Item 3. Defaults Upon Senior Securities

     None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

(a)	Exhibits Files
	Exhibit No.	Description
	3.1*	Articles of Amendment and Restatement of ZAIS Financial Corp., incorporated by reference to Exhibit 3.1 of the Registrant's Form S-11, as amended (Registration No. 333-185938).
	3.2*	Articles Supplementary of ZAIS Financial Corp., incorporated by reference to Exhibit 3.2 of the Registrant's Form S-11, as amended (Registration No. 333-185938).
	3.3*	Bylaws of ZAIS Financial Corp., incorporated by reference to Exhibit 3.3 of the Registrant's Form S-11, as amended (Registration No. 333-185938).
	4.1*	Specimen Common Stock Certificate of ZAIS Financial Corp., incorporated by reference to Exhibit 4.1 of the Registrant's Form S-11, as amended (Registration No. 333-185938).
	10.1*	Agreement of Limited Partnership, dated as of July 29, 2011, of ZAIS Financial Partners, L.P., as amended on August 3, 2011, October 11, 2012, and December 13, 2012, incorporated by reference to Exhibit 10.2 of the Registrant's Form S-11, as amended (Registration No. 333-185938).
	10.2*	Amendment to Agreement of Limited Partnership, dated as of February 13, 2013, of ZAIS Financial Partners, L.P., incorporated by reference to Exhibit 10.3 of the Registrant's Form 10-K, filed March 28, 2013.
	10.3*	Master Repurchase Agreement, dated as of May 30, 2013, between Citibank, N.A. and ZFC Trust, incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K, filed on June 4, 2013.
	10.4*	Guaranty, dated as of May 30, 2013, by ZAIS Financial Corp. in favor of Citibank, N.A., incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K, filed on June 4, 2013.
	10.5	Master Mortgage Loan Sale Agreement ("MMLSA"), dated as of May 31, 2013, between Citigroup Global Markets Realty Corp. and ZFC Trust.
	10.6	Trade Confirmation pursuant to the MMLSA, dated as of May 31, 2013, between Citigroup Global Markets Realty Corp. and ZFC Trust.
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of the Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of the Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS**	XBRL Instance Document
	101.SCH**	XBRL Taxonomy Extension Scheme Document
	101.CAL**	XBRL Taxonomy Calculation Linkbase Document
	101.DEF**	XBRL Extension Definition Linkbase Document
	101.LAB**	XBRL Taxonomy Extension Linkbase Document
	101.PRE**	XBRL Taxonomy Presentation Linkbase Document

____________________

*	Previously filed
**	This exhibit is being furnished rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ZAIS FINANCIAL CORP.
Date: August 13, 2013	By:	/s/ Michael Szymanski
		Michael Szymanski
		Chief Executive Officer and President
	By:	/s/ Paul McDade
		Paul McDade
		Chief Financial Officer and Treasurer

- 45 -

EX-10.5

MASTER MORTGAGE LOAN SALE AGREEMENT

between

CITIGROUP GLOBAL MARKETS REALTY CORP.

Seller

and

ZFC TRUST

Purchaser

Dated as of May 31, 2013

Table of Contents
(continued)

		Page
TABLE OF CONTENTS
SECTION 1.	Agreement to Purchase	1
SECTION 2.	Mortgage Loan Schedule	2
SECTION 3.	Purchase Price; Payments; Delivery of Mortgage Files; No Repurchase
	Obligation for Breach Discovered During Due Diligence Review	2
SECTION 4.	Closing	2
SECTION 5.	Representations, Warranties and Covenants of Seller	3
SECTION 6.	Representations, Warranties and Covenants of Purchaser	4
SECTION 7.	Representations, Warranties and Covenants as to Individual Mortgage Loans	5
SECTION 8.	Repurchase	10
SECTION 9.	Costs	11
SECTION 10.	Servicing Transfer; Interim Servicing; Foreclosure Actions; Use of Seller’s Name	11
SECTION 11.	Confirmation	13
SECTION 12.	REO Properties	13
SECTION 13.	Survival of Agreement	13
SECTION 14.	Notices	13
SECTION 15.	Severability Clause	13
SECTION 16.	Counterparts	13
SECTION 17.	Place of Delivery and Governing Law	14
SECTION 18.	Further Assurances	14
SECTION 19.	Successors and Assigns; Assignment	14
SECTION 20.	Amendments	14
SECTION 21.	Interpretation	14
SECTION 22.	Intention of the Parties	14
SECTION 23.	Confidential Information	15
SECTION 24.	Reproduction of Documents	15
SECTION 25.	Exhibits	15
SCHEDULES AND EXHIBITS
EXHIBIT A	Contents of Mortgage File
EXHIBIT B	Form of Assignment and Conveyance
EXHIBIT C	Additional Defined Terms
EXHIBIT D	Form of Confirmation
EXHIBIT E	Form of Assignment and Assumption Agreement
EXHIBIT F	Mortgage Loan Schedule Fields

2

MASTER MORTGAGE LOAN SALE AGREEMENT

       This Master Mortgage Loan Sale Agreement (the “Agreement”) is entered into as of May 31, 2013 by and between CITIGROUP GLOBAL MARKETS REALTY CORP., having an office at 390 Greenwich Street, 5^th Floor, New York, New York 10013 (“Seller”), and ZFC TRUST, having an office at c/o ZAIS Financial Partners, L.P., Two Bridge Avenue, Suite 322, Red Bank, New Jersey 07701 (“Purchaser”).

       Seller desires to sell, from time to time, and Purchaser desires to purchase, from time to time, from Seller, without recourse, on terms and conditions described below, (a) certain first and second lien, fixed and adjustable rate mortgage loans which may be non-performing mortgage loans and mortgage loans in foreclosure, including those with Mortgagors subject to bankruptcy (the “Loans”), each secured by a mortgage, deed of trust, security deed, or any other instrument which constitutes a lien (“Mortgage”) on residential real property (“Mortgaged Property”), securing payment by a borrower of a promissory note (the “Mortgage Note”) and any modification thereto and (b) certain mortgage loans secured by Cooperative Shares (as defined on Exhibit C) and the related Proprietary Lease (as defined on Exhibit C) conferring exclusive occupancy rights to a cooperative apartment (“Cooperative Loans”; collectively with Loans, the “Mortgage Loans”). The Mortgage Loans shall be sold to Purchaser on a servicing released basis and shall be delivered in groups of whole loans (each such group, a “Mortgage Loan Package”) on various dates as provided in the related Confirmation (each, a “Closing Date”). For purposes of this Agreement, “Confirmation” shall mean, with respect to any Mortgage Loan Package purchased and sold on any Closing Date, the trade confirmation between the Purchaser and the Seller (including any exhibits, schedules and attachments thereto) substantially in the form of Exhibit D attached hereto, setting forth the terms and conditions of such transaction and describing the Mortgage Loans to be purchased by the Purchaser on such Closing Date.

       Seller and Purchaser, in consideration of the premises and the mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree as follows:

       SECTION 1.Agreement to Purchase. On the related Closing Date, Seller agrees to sell, from time-to-time and Purchaser agrees to purchase, on the terms and conditions stated herein, certain Mortgage Loans having an aggregate principal balance as of the date set forth in the related Confirmation (the “Cut-off Date”) in an amount as set forth in the related Confirmation (the “Cut-off Date Principal Balance”), or in such other amount as agreed by Purchaser and Seller as evidenced by the actual aggregate principal balance of the Mortgage Loans accepted by the Purchaser on the related Closing Date. Each such conveyance shall include, without limitation, all servicing rights and the right to all payments of interest, principal, penalties, fees, charges and other amounts received or receivable on or in respect of the Mortgage Loans after the related Cut-off Date, together with all of Seller’s right, title and interest in and to the loan documents and such other documents set forth on Exhibit A hereto (the “Mortgage Files”), and any and all proceeds of the foregoing. Seller reserves the right, in its sole discretion, to remove from sale prior to the related Closing Date, any Mortgage Loan that (i) becomes an REO Property (as defined herein) or (ii) becomes subject to any litigation proceeding that the Seller deems to be in its best interest to retain.

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       SECTION 2.Mortgage Loan Schedule. Seller and Purchaser hereby agree that the Mortgage Loans to be purchased under this Agreement on each Closing Date shall be the Mortgage Loans identified in the schedule (the “Mortgage Loan Schedule”) attached as Schedule One to the related assignment and conveyance which shall be in the form attached hereto as Exhibit B (the “Assignment & Conveyance”). The Mortgage Loan Schedule shall include the fields identified on Exhibit F.

       SECTION 3.Purchase Price; Payments; Delivery of Mortgage Files; No Repurchase Obligation for Breach Discovered During Due Diligence Review.

(a)	On the related Closing Date, unless otherwise set forth in the related Confirmation, the purchase price for the Mortgage Loans (the “Purchase Price”) shall be an amount equal to the sum of (a) the product of (i) the percentage set forth in the related Confirmation (the “Purchase Price Percentage”) and (ii) the Cut-off Date Principal Balance and (b) accrued and unpaid interest on the Mortgage Loans from the last date through which interest has been paid by the obligor on the related Mortgage Note (the “Mortgagor”) through the day prior to the Closing Date for Mortgage Loans that are less than sixty (60) days delinquent as of the Cut-off Date.
(b)	Purchaser shall be entitled to all payments of principal and interest and other recoveries on the Mortgage Loans received after the related Cut-off Date.
(c)	Pursuant to the terms of a fully executed bailment agreement, Seller shall, prior to the related Closing Date, deliver to a document custodian acceptable to the Seller, the Mortgage File with respect to each Mortgage Loan to be held on behalf of the Seller pending the sale of the Mortgage Loans to the Purchaser. The Purchaser shall conduct such due diligence review as it deems appropriate prior to the related Closing Date.
(d)	Purchaser hereby agrees to pay, promptly upon receipt of any payment notice or request by the Seller, any costs or expenses (including, without limitation, any and all customary, reasonable, necessary and documented “out-of-pocket” costs and expenses incurred by the Seller or its servicer in the performance of its servicing obligations (collectively, “Servicing Advances”) incurred prior to the related Servicing Transfer Date) associated with the Mortgage Loans which are assessed or billed following the related Cut-Off Date, provided such costs or expenses arise after the related Cut-Off Date.

       SECTION 4.Closing. The closing of the purchase and sale of the Mortgage Loans identified on the Mortgage Loan Schedule shall take place on the related Closing Date.

       The obligation of Purchaser to purchase and the Seller to sell the Mortgage Loans as contemplated by this Agreement shall be subject to each of the following conditions:

(a) all of the representations and warranties under this Agreement shall be true and correct in all material respects as of the related Closing Date;

2

(b)	the parties shall have received fully executed copies of the bailment agreement in accordance with Section 3(c) above;
(c)	the parties shall have received fully executed copies of the related Confirmation;
(d)	the parties shall have received fully executed copies of the escrow agreement to be entered into among the parties hereto and Citibank, N.A. as of the related Closing Date (the “Escrow Agreement”); and
(e)	all other terms and conditions of this Agreement shall have been complied with in all material respects.

       Subject to the foregoing conditions, Purchaser shall pay to Seller on the related Closing Date the Purchase Price as determined pursuant to Section 3 of this Agreement, by wire transfer of immediately available funds to the account designated in writing by Seller. Immediately upon receipt of such wire transfer, Seller shall deliver to Purchaser or its designee (via email to the following email address: robert.gross@bingham.com) a fully executed copy of the related Assignment and Conveyance. Seller shall advise Purchaser in writing at least one (1) Business Day prior to the related Closing Date of the account to which such funds are to be wired.

       SECTION 5.Representations, Warranties and Covenants of Seller. Seller represents and warrants to, and covenants with, Purchaser that as of the related Closing Date:

(a)	It is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation;
(b)	It has the full power and authority to hold each Mortgage Loan, to sell each Mortgage Loan and to execute, deliver and perform, and to enter into and consummate all transactions contemplated by this Agreement. Seller has duly authorized the execution, delivery and performance of this Agreement, has duly executed and delivered this Agreement, and this Agreement constitutes the legal, valid and binding obligations of it, enforceable against it in accordance with their terms, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance;
(c)	Neither the execution and delivery of this Agreement and the other documents and agreements contemplated hereby, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and such other documents and agreements will result in the breach of any term or provision of the charter or by-laws of Seller or result in the breach of any material term or provision of, or conflict with or result in the acceleration of any obligation under, any material agreement, indenture or loan or credit agreement or other instrument to which Seller or its property is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to which Seller or its property is subject, which breach, conflict, acceleration or violation would have a material adverse effect on the ability of Seller to perform its obligations under this Agreement; and

3

(d) To the Seller’s knowledge, there is no action, suit, proceeding or investigation active or pending against Seller which, either in any one instance or in the aggregate, would draw into question the validity of this Agreement or of any action taken or to be taken in connection with the obligations of Seller contemplated herein. To the Seller’s knowledge, there is no action, suit, proceeding or investigation threatened against such Seller which, either in any one instance or in the aggregate, would draw into question the validity of this Agreement or of any action taken or to be taken in connection with the obligations of Seller contemplated herein.

       SECTION 6.Representations, Warranties and Covenants of Purchaser. Purchaser represents and warrants to, and covenants with, Seller that each of the following representations and warranties of Purchaser is true and correct and shall be true and correct on the related Closing Date:

(a)	Purchaser is duly organized, validly existing and in good standing under the laws of the State of its organization with full power and authority to execute, deliver and perform this Agreement and to enter into and consummate the transactions contemplated by this Agreement. Purchaser is duly qualified and in good standing in all jurisdictions where it is required to be qualified, except where the failure to be qualified is not material. Purchaser has taken all action required to authorize its execution, delivery and performance of this Agreement;
(b)	The execution and delivery of this Agreement by Purchaser and the performance of its obligations hereunder will not (i) conflict with or violate (A) the organizational documents of Purchaser, or (B) any provision of any law or regulation to which Purchaser is subject, or (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any agreement or instrument to which Purchaser is a party or by which it is bound or any order or decree applicable to Purchaser or result in the creation or imposition of any lien on any of its assets or property. Purchaser has obtained all consents, approvals, authorizations or orders of any court or governmental agency or body, if any, required for the execution, delivery and performance by Purchaser of this Agreement;
(c)	There is no action, suit or proceeding pending or, to the best of Purchaser’s knowledge, threatened against Purchaser in any court or by or before any other governmental agency or instrumentality which would prohibit its entering into this Agreement or performing any of its obligations under or pursuant to this Agreement;
(d)	This Agreement constitutes the valid, binding and legal obligation of Purchaser, enforceable against Purchaser in accordance with the terms hereof, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors’ rights in general and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and

4

(e) Purchaser will abide by the modification terms of any Mortgage Loan that has been modified prior to the Servicing Transfer Date and will continue to process any Mortgage Loan modifications that are in process as of the Servicing Transfer Date in accordance with the terms of such potential modification and if applicable, with all requirements of the Home Affordable Modification Program (March 2009) issued by U.S. Department of the Treasury pursuant to Section 101 and 109 of the Emergency Economic Stabilization Act of 2008, as the same may be amended or modified (“HAMP”); provided, however, that Purchaser’s obligations under this Section 6(e) are subject to its receipt from the Interim Servicer of a schedule of the material terms of any such modifications within a reasonable period of time following the related Servicing Transfer Date. With respect to Mortgage Loans which are sixty (60) or more days delinquent (using a method of calculating delinquency acceptable under HAMP) as of the Servicing Transfer Date (as defined hereunder), Purchaser agrees that it will comply with HAMP requirements, including all reporting requirements thereunder. Purchaser or its servicer, as applicable, is an eligible HAMP participant and has executed a Commitment to Purchase Financial Instrument and Servicer Participation Agreement (the “SPA”) with the Federal National Mortgage Association (“Fannie Mae”), which SPA is in full force and effect as of the Closing Date. If applicable, the Purchaser has granted all necessary consents, waivers and delegations to its servicer in order for its servicer to service any HAMP-eligible Mortgage Loans that are (i) subject to a HAMP modification as of the related Servicing Transfer Date, and (ii) sixty (60) or more days delinquent (using the MBA method of delinquency) as of the related Servicing Transfer Date, in each case in accordance with HAMP. Further, Purchaser or its servicer, as applicable, will enter into any necessary agreements with Seller’s servicer (the “Interim Servicer”) and Fannie Mae, as agent for the United States Treasury, with respect to such Mortgage Loans (including, without limitation, an assignment and assumption agreement in the form attached hereto as Exhibit E). The Purchaser covenants to the Seller that it will (or will cause its servicer to) reasonably cooperate with the Seller or the Interim Servicer with respect to any of the Seller’s or the Interim Servicer’s HAMP reporting obligations with respect to any Mortgage Loan that is subject to HAMP.

       SECTION 7.Representations, Warranties and Covenants as to Individual Mortgage Loans. As further material inducement to Purchaser to enter into this Agreement, Seller represents and warrants to Purchaser, as of the related Closing Date with respect to each Mortgage Loan, that:

(a)	With respect to Seller and the Interim Servicer, no misrepresentation, fraud or similar occurrence with respect to any Mortgage Loan has taken place.
(b)	The information with respect to the Mortgage Loan set forth in the Mortgage Loan Schedule is true, and correct in all material respects.
(c)	(1) During the period in which the Seller owned the Mortgage Loans, and the Interim Servicer serviced the Mortgage Loans, any and all requirements of any applicable federal, state or local law including, without limitation, real estate settlement procedures, consumer credit protection, or unfair and deceptive practices laws applicable to the servicing of mortgage loans of a type similar to the Mortgage Loan including, without limitation, any provisions relating to prepayment penalties, have been complied with and the consummation of the transactions contemplated hereby will not involve the violation of any such laws or regulations. (2) No Mortgage Loan is subject to the provisions of the Home Ownership and Equity Protection Act of 1994 as amended (“HOEPA”), or has an “annual percentage rate” or “total points and fees” payable by the Mortgagor that exceeds the applicable thresholds defined under HOEPA and its implementing regulations, including 12 C.F.R. Section 226.32(a)(1)(i) and (ii)). (3) No Mortgage Loan is subject to any comparable federal, state or local statutes or regulations, or any other statute or regulation providing for heightened regulatory scrutiny, assignee liability to holders of such mortgage loans or additional legal liability for mortgage loans having high interest rates, points and/or fees. (4) There is no pending action or proceeding directly involving the Mortgaged Property in which compliance with any environmental law, rule, or regulation is an issue.

5

(d)	The Seller and the Interim Servicer are (or, during the period in which it held and disposed of an interest in the Mortgage Loan or engaged in any activity with respect to the Mortgage Loan, was) duly licensed or approved and validly authorized under applicable law to own and service, as applicable, such Mortgage Loan, or was exempt from such licensing or approval requirements.
(e)	As of the related Closing Date, all taxes; governmental assessments; insurance premiums; water, sewer, and municipal charges; leasehold payments; or ground rents that previously became due and owing have been paid by the Mortgagor, or an escrow of funds from the Mortgagor had/has been established in an amount sufficient to pay for every such item that remains unpaid and that had/has been assessed but is not yet due and payable.
(f)	To the Seller’s knowledge, the Mortgage Loans, the terms of the Mortgage Note and the Mortgage have not been impaired, waived, altered, or modified in any material respect, except by a written instrument that, if required by applicable law, has been recorded or is in the process of being recorded. The terms of any waiver, alteration, or modification are reflected in the Mortgage Loan Schedule and have been approved by each Insurer as required thereby. There is no default, breach, violation, or event of acceleration existing under the Mortgage Note and the Mortgage; the Seller has not waived any default, breach, violation, or event of acceleration; and no foreclosure action is currently being threatened or has begun with respect to the Mortgage Loan.

6

(g)	(1) The related Mortgaged Property is insured by a fire and extended perils insurance policy, and is insured against such other hazards as are customary in the area where the Mortgaged Property is located, in a coverage amount equal to the lesser of (x) the unpaid principal balance of such Mortgage Loan and (y) 100% of the replacement cost of all improvements to the Mortgaged Property. (2) If any portion of the related Mortgaged Property is in an area identified by any governmental authority as having special flood hazards, the Mortgaged Property is insured by a flood insurance policy that meets the current guidelines of the Federal Insurance Administration and in a coverage amount equal to the lesser of (x) the unpaid principal balance of such Mortgage Loan and (y) 100% of the replacement cost of all improvements to the Mortgaged Property. (3) Each such insurance policy (a) is issued by an insurer duly qualified as such under the laws of the states in which the Mortgaged Properties are located, duly authorized, and licensed in such states to transact the applicable insurance business and to write the insurance provided, (b) is a valid and binding obligation of the insurer and is in full force and effect, (c) contains a standard mortgagee clause naming the Seller, its successors, and its assigns as mortgagee, and (d) may not be reduced, terminated, or canceled without thirty (30) days' prior written notice to the mortgagee. No such notice has been received by Seller or the Interim Servicer. (4) All premiums due and owing on such insurance policies have been paid. (5) The related Mortgage obligates the Mortgagor to maintain all such insurance policies, and if the Mortgagor fails to do so, authorizes the mortgagee to maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement from the Mortgagor. (6) Neither the Seller nor the Interim Servicer has engaged in any act or omission that would impair the coverage of any such insurance policy, the benefits of the endorsement provided for therein, or the validity and binding effect of either including, without limitation, the provision or receipt of any unlawful fee, commission, kickback, or other compensation or value of any kind.
(h)	The Seller has not received notice of any circumstance that would render any Mortgage Loan document and any other agreement executed by a Mortgagor or obligated party in connection with the Mortgage Loan unenforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law).
(i)	Any primary mortgage insurance policy (a “PMI Policy”) required with respect to the Mortgage Loan was issued by an Insurer duly qualified as such under the laws of the states in which the Mortgaged Properties are located, duly authorized, and licensed in such states to transact the applicable insurance business and to write the insurance provided. All provisions of such PMI Policy are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. Any Mortgage Loan subject to a Mortgagor-paid PMI Policy obligates the Mortgagor thereunder to maintain the PMI Policy and to pay all premiums and charges in connection with the PMI Policy up to the time it may be discontinued according to federal law or, in the case of a lender-paid PMI Policy, the premiums and charges are included in the interest rate for the Mortgage Loan.

7

(j)	A customary lender's title policy was issued at origination, and each policy is valid and remains in full force and effect. No claims have been made under such title insurance policy, and neither the Seller nor the Interim Servicer has done, by act or omission, anything that would impair its coverage. Neither the Seller nor the Interim Servicer has provided or received any unlawful fee, commission, kickback, or other compensation or value of any kind in connection with the title insurance policy.
(k)	The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the enforcement of the lien against the Mortgaged Property, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law). There are no known homestead exemptions that would prevent foreclosure of the Mortgaged Property.
(l)	The Seller is the sole owner and holder of the Mortgage Loan, and the Mortgage Loan is not assigned or pledged to any other Person. The Seller has good, indefeasible, and marketable title to the Mortgage Loan, and has full right to transfer, sell, and assign the Mortgage Loan to the Depositor. Each sale of the Mortgage Loan to the Seller was in exchange for fair equivalent value, and the Seller was solvent both prior to and after the transfer and had sufficient capital to pay and was able to pay its debts as they would generally mature.
(m)	(1) The related Mortgage is a valid, subsisting and enforceable (except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law)) first lien on all of the Mortgaged Property, subject only to (i) the lien of current real property taxes and assessments not yet due and payable, (ii) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording and (iii) other matters to which like properties are commonly subject. (2) The related original Mortgage has been recorded or is in the process of being recorded in the appropriate jurisdictions wherein such recordation is required to perfect the lien thereof. (3) There are no mechanics’ or similar liens or claims that have been filed for work, labor, or material affecting the Mortgaged Property that are liens prior to, or equal to or coordinate with, the lien of the Mortgage.
(n)	The Seller has not received notice from the Mortgagor, any governmental authority, or any other person of any noncompliance with any use or occupancy law, ordinance, regulation, standard, license, or certificate with respect to the Mortgaged Property.
(o)	The related Mortgage File contains each of the documents and instruments specified on Exhibit A attached hereto. The Mortgage Note, the Mortgage, the assignment of mortgage, and any other Mortgage Loan documents required to be delivered under the this Agreement have been delivered or will be delivered to the Purchaser’s document custodian. In the event the Mortgage is a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated, is named in the Mortgage and currently so serves, and no fees or expenses are or will become payable by the Purchaser to the trustee under the deed of trust, except in connection with a trustee's sale after default by the Mortgagor.

8

(p)	The Seller has not received notice of any pending claim that would deem any mortgaged property to be damaged by waste, fire, hurricane, earthquake or earth movement, windstorm, flood, tornado, or other casualty materially adversely affecting the value of each mortgaged property or the use for which the premises were intended. The Seller is not aware of any proceeding pending for the total or partial condemnation of any mortgaged property.
(q)	To the extent that any manufactured home is included as part of the Mortgaged Property: such manufactured home is (1) together with the related land, subject to the Mortgage, (2) deemed to be a part of the real property on which it is located pursuant to the applicable law of the jurisdiction in which it is located, and (3) treated as a single-family residence under Section 25(e)(10) of the Internal Revenue Code.
(r)	To the Seller’s knowledge, no Mortgagor has asserted any right to rescission, set-off, counterclaim, or defense. The operation of the terms of the Mortgage Loan documents, or the exercise of any rights thereunder, will not render the Mortgage Loan unenforceable. Unless otherwise disclosed on the mortgage loan schedule, no Mortgagor is currently subject to any federal or state bankruptcy or insolvency proceeding.
(s)	With respect to each Mortgage Loan, (i) no portion of the loan proceeds is currently escrowed for the purpose of making monthly payments on behalf of the Mortgagor, and (ii), during the period in which the Seller owned the Mortgage Loans, no payments due and payable under the terms of the note and mortgage or deed of trust, except for seller or builder concessions, have been paid by any other person (other than a guarantor) who was involved in, or benefited from, the sale of the Mortgaged Property or the origination, refinancing, sale, or servicing of the Mortgage Loan.
(t)	The proceeds of the Mortgage Loan have been fully disbursed, there is no requirement for future advances thereunder.
(u)	The Seller has not received notice that any Mortgage does not contain an enforceable provision (except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law)) for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder.
(v)	No Mortgage Loan is the subject of litigation other than standard foreclosure proceedings.

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       For purposes of the representations set forth above, “Seller has not received notice” refers to actual written notice received by an authorized officer of the Seller, without further inquiry, which notice was received in connection with or following the Seller’s acquisition of the related Mortgage Loan and subsequent to the Mortgage Loan’s origination.

       With respect to any representations related to insurance, no representation is made as to, and the representations are subject to and limited by, (a) the effect of any rescission by the insurer, the effect of an insurer’s financial condition or insolvency, the availability of replacement insurance or insurer, whether an insurer will seek to cancel a policy or to contest a claim, or the amount of any actual recovery and (b) as to the enforcement of any such insurance policy, as such enforcement may be limited by, rescission, bankruptcy, insolvency, reorganization, or other similar laws affecting the enforceability of insurance contracts and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law).

       It is understood and agreed that the representations and warranties set forth in Section 5 and Section 7 shall survive the sale and delivery of the Mortgage Loans to Purchaser for a period of one (1) year following the related Closing Date and shall inure to the benefit of Purchaser, notwithstanding any restrictive or qualified endorsement or any examination or failure to examine any Mortgage File.

       SECTION 8.Repurchase. In the event Purchaser discovers that a breach of any representation or warranty contained in Sections 5 and 7 has occurred and such breach materially and adversely affects the value of the related Mortgage Loans and the interests of the Purchaser in such Mortgage Loans (a “Breach”), Purchaser may demand by providing written notice (the “Demand Notice”) to the Seller that Seller repurchase the affected Mortgage Loans from Purchaser. Such notice from the Purchaser shall be accompanied by sufficient documentation to enable the Seller to reasonably determine the validity of Purchaser’s assertion. Notwithstanding the foregoing, Seller shall have ninety (90) days to cure any Breach. This cure period will commence upon the date of Purchaser’s written notice to Seller of the related Breach. In the event a Breach is not cured within such ninety (90) day period, at Purchaser’s option, the affected Mortgage Loan shall be repurchased by the Seller; provided, however, that in no event shall the Seller have any obligation to repurchase any Mortgage Loan sold to the Purchaser hereunder if the related Demand Notice is not received within one (1) year following the related Closing Date. With respect to any representations and warranties made by the Seller (other than the second sentence of Section 5(d) herein), in the event that it is discovered that the circumstances with respect to the Mortgage Loan are not accurately reflected in such representation and warranty notwithstanding the lack of knowledge of Seller, then, notwithstanding that such representation and warranty is made “to Seller’s knowledge,” there shall be a breach of such representation and Seller shall cure such breach or repurchase the affected Mortgage Loan as provided in this Section 8. The repurchase price shall be equal to the sum of (i) the product of (a) the unpaid principal balance of the affected Mortgage Loan as of the repurchase date and (b) the Purchase Price Percentage plus (ii) for Mortgage Loans for which accrued interest was part of the Purchase Price, accrued interest on such Mortgage Loan from the last paid-through date to the date of repurchase (up to the amount of such interest paid by Purchaser as part of the Purchase Price), plus (iii) all unreimbursed Servicing Advances paid as part of the Purchase Price by the Purchaser (or its servicer), plus (iv) all Servicing Advances incurred by the Purchaser on such Mortgage Loan following the related Cut-off Date to the date of repurchase.

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       Upon completion of any repurchase by Seller under this Agreement, the Purchaser and the Seller shall arrange for the reassignment of the repurchased Mortgage Loan to the Seller and the delivery to the Seller of any documents held by the Purchaser or its custodian relating to the repurchased Mortgage Loan. In the case of any lien for which an assignment from Seller to Purchaser has been recorded prior to repurchase, Purchaser shall, within thirty (30) calendar days of the repurchase, provide an executed assignment from Purchaser to Seller.

       It is understood and agreed that the obligations of Seller set forth in this Section 8 constitute the sole remedy available to Purchaser with respect to a breach of Seller’s representations and warranties contained herein. In no event shall either Seller or Purchaser be liable for any additional damages, including, without limitation, consequential, punitive or exemplary damages, with respect to any such breach.

       SECTION 9.Costs. Each party will pay any commissions it has incurred and the fees of its attorneys in connection with the negotiations for, documenting of and closing of the transactions contemplated by this Agreement. Purchaser shall be responsible for, and shall bear all fees and expenses related to, the recordation of assignments of Mortgage from Seller to Purchaser with respect to the Mortgage Loans.

       SECTION 10.Servicing Transfer; Interim Servicing; Foreclosure Actions;Use of Seller’s Name.

(a) Servicing Transfer. On the date or dates set forth in the Confirmation upon which the actual transfer of servicing or debt collecting responsibilities for any Mortgage Loan, as applicable, being herein is transferred from the Seller to the Purchaser or its designee (each such date, a “Servicing Transfer Date”), the Seller shall cause the related servicer or debt collector, as applicable, to transfer the servicing with respect to the Mortgage Loans to the Purchaser in accordance with the servicing transfer guidelines of such.

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(b)	Interim Servicing. From and after the related Servicing Transfer Date, the Purchaser shall, and shall cause its servicers, agents, vendors and subservicers to, comply with all applicable federal, state and local laws, rules and regulations. Purchaser shall, promptly upon receipt of any payment notice or request by the Seller, reimburse Seller for any Servicing Advances made on behalf of Purchaser and any interim servicing fees (as applicable) incurred following the related Cut- Off Date through and including the related Servicing Transfer Date. The Purchaser shall be liable for all Servicing Advances incurred with respect to the Mortgage Loans after the related Cut-off Date. The Seller shall be liable for all Servicing Advances incurred with respect to the Mortgage Loans on or prior to the related Cut-off Date. Following the related Closing Date and prior to the related Servicing Transfer Date, the Seller shall cause the Interim Servicer to service the Mortgage Loan in accordance with Accepted Servicing Practices and all of their respective obligations under HAMP.
(c)	Foreclosure Actions. Notwithstanding anything to the contrary, any foreclosure action pending at the time of the related Servicing Transfer Date of any Mortgage Loan may be dismissed by the Seller in its sole discretion. Purchaser understands that neither Seller, its affiliates nor its agents will be liable for any foreclosure expenses incurred or billed, with respect to any Mortgage Loan after the related Cut-Off Date; and Purchaser agrees to transfer into its name, or restart if required, the foreclosure action of any Mortgage Loan in process as of the related Closing Date. Purchaser shall notify the appropriate court that it is assuming such foreclosure action as soon as reasonably practical after the Closing Date and promptly provide to Seller evidence of such notice. Purchaser and Seller shall cooperate and assist each other, as requested, to ensure an orderly transfer of the responsibilities with respect to the handling of any such foreclosed Mortgage Loan.
(d)	Use of Seller’s Name. Purchaser shall not, without the express prior written consent of Seller: (i) use or permit the use by any person of Seller’s or Seller’s affiliates’ or agents’ names; (ii) represent or imply that it is affiliated with, authorized by, or in any way related to Seller or Seller’s affiliates or agents; (iii) institute any legal, collection or enforcement proceeding in the name of Seller or Seller’s affiliates or agents or continue to prosecute any pending legal, collection or enforcement proceeding in the name of Seller or Seller’s affiliates or agents; or (iv) mislead, whether through misrepresentation or nondisclosure or otherwise, a Mortgagor or any other person as to the identity of the owner of the Mortgage Loans. The Purchaser shall indemnify the Seller and hold it harmless against any losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and other costs and expenses based on or grounded upon, or resulting from, a breach of this Section 10(d). The indemnification obligation of the Purchaser set forth herein shall survive the termination of this Agreement notwithstanding any applicable statute of limitations, which the Purchaser hereby expressly waives.

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       SECTION 11.Confirmation. The terms and conditions set forth in the related Confirmation between the Purchaser and the Seller with respect to each Closing Date shall be incorporated herein. In the event of any conflict between the terms of this Agreement and the related Confirmation, this Agreement shall control unless the related Confirmation specifically references the conflict and states that such Confirmation shall control.

       SECTION 12.REO Properties. The parties hereto agree that Seller does not intend to sell REO property (“REO Property”) to the Purchaser hereunder and shall not sell to the Purchaser any Mortgage Loan that becomes an REO Property prior to the related Closing Date. The parties hereto further agree that no REO Property will be deemed to be part of any sale hereunder and the Seller shall return to the Purchaser the portion of the Purchase Price paid in respect to the related Mortgage Loan. Upon the earlier of the Purchaser’s discovery of the REO Property or the Purchaser’s receipt of notice from the Seller of the REO Property, the Purchaser shall immediately reconvey and transfer the related REO Property to the Seller, and the Purchaser and the Seller shall arrange for the reassignment of the REO Property to the Seller and the delivery to the Seller of any and all documents held by the Purchaser or its custodian relating to such REO Property and the related Mortgage Loan.

       SECTION 13.Survival of Agreement. This Agreement includes provisions which the parties hereto intend will remain in effect after each Closing Date contemplated by this Agreement. Accordingly, this Agreement shall survive and remain in effect after the closing.

       SECTION 14.Notices. All demands, notices and communications under this Agreement shall be in writing and shall be deemed to have been duly given if (i) mailed by registered or certified mail, return receipt requested or by overnight delivery service, addressed to the appropriate party hereto at the address stated in the introduction to this Agreement or (ii) transmitted by facsimile transmission or by electronic mail with acknowledgment, to the appropriate party hereto at the facsimile number or the electronic mail address provided by the other party to this Agreement. Any such demand, notice or communication shall be deemed to have been received on the date delivered to or received at the premises of the addressee (as evidenced by the date noted on the return receipt or overnight delivery receipt).

       SECTION 15.Severability Clause. Any part, provision, representation or warranty of this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable law, the parties hereto waive any provision of law which prohibits or renders void or unenforceable any provision hereof.

       SECTION 16.Counterparts. For the purpose of facilitating the execution of this Agreement, and for other purposes, this Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. The parties agree that this Agreement, any documents to be delivered pursuant to this Agreement and any notices hereunder may be transmitted between them by email and/or by facsimile. The parties intend that faxed signatures and electronically imaged signatures such as .pdf files shall constitute original signatures and are binding on all parties. The original documents shall be promptly delivered, if requested.

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       SECTION 17.Place of Delivery and Governing Law. This Agreement shall be deemed to have been made in the State of New York. This Agreement shall be construed in accordance with the laws of the State of New York and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with the laws of the State of New York, without regard to principles of conflicts of law (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law which shall govern). The parties hereby agree that all disputes arising hereunder shall be submitted to and hereby subject themselves to the jurisdiction of the courts of competent jurisdiction, state and federal, in the State of New York.

       SECTION 18.Further Assurances. Each party to this Agreement agrees to execute and deliver such instruments and take such actions as the other party may, from time to time, reasonably request to effect the purpose and carry out the terms of this Agreement; provided, however, that the requesting party shall be solely responsible for all out-of-pocket costs and expenses incurred by the non-requesting party in connection with any such request.

       SECTION 19.Successors and Assigns; Assignment. This Agreement shall inure to the benefit of and be binding upon Seller and Purchaser and the respective successors and assigns of Seller and Purchaser. This Agreement may not be assigned by Purchaser, other than to (i) an affiliate of Purchaser, or (ii) to a New York common law trust created by the Purchaser for a purpose other than the securitization of the Mortgage Loans to third-party investors, of which the Purchaser, an affiliate of Purchaser or a repo or lending counterparty of the Purchaser or an affiliate of the Purchaser is the beneficial owner or an affiliate of the Purchaser, in each case, without the prior written consent of the Seller; provided, however, that the Purchaser may assign solely its rights but not its obligations under this Agreement. For the avoidance of doubt, in the event that this Agreement is assigned pursuant to clause (ii) above, the Purchaser shall not, and shall cause any beneficial owner of the trust not to, sell the resulting securities associated with any internal securitization of the Mortgage Loans to any third party investor.

       SECTION 20.Amendments. Neither this Agreement, nor any provision hereof may be changed, waived, discharged or terminated orally, but only by a written instrument signed by both Seller and Purchaser.

       SECTION 21.Interpretation. For all purposes of this Agreement, initially capitalized terms used herein have the meanings ascribed hereto in this Agreement. Except as expressly otherwise provided herein or unless the context otherwise requires, for purposes of this Agreement the words “herein,” “hereto,” “hereof” and “hereunder” and other words of similar effect shall refer to this Agreement as a whole and not to any particular provisions.

       SECTION 22.Intention of the Parties. It is the intention of the parties that Purchaser is purchasing, and Seller is selling, the Mortgage Loans and not a debt instrument of Seller or any other security. Accordingly, each party intends to treat the transaction for federal income tax purposes and each transaction shall be reflected on Seller’s books and records, tax returns, balance sheet and other financial statements as a sale by Seller, and a purchase by Purchaser, of the Mortgage Loans.

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       SECTION 23.Confidential Information. The parties hereto shall keep confidential and shall not divulge to any party, without the other party’s prior written consent, the price paid by the Purchaser for the Mortgage Loans, except to the extent that it is appropriate for the related party to do so in working with legal counsel, auditors, taxing authorities and/or other governmental agencies. Each of the parties shall, with respect to all Mortgage Loans, comply with the applicable provisions of the Gramm-Leach-Bliley Act of 1999 (the “GLBA”) and any applicable state and local privacy laws pursuant to the GLBA for financial institutions and applicable state and local privacy laws.

       SECTION 24.Reproduction of Documents. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications which may hereafter be executed, (b) documents received by any party at the closing, and (c) financial statements, certificates and other information previously or hereafter furnished, may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

       SECTION 25.Exhibits. The exhibits to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement.

[Signature Page Follows]

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       IN WITNESS WHEREOF, Seller and Purchaser have caused their names to be signed hereto by their respective authorized officers as of the date first above written.

CITIGROUP GLOBAL MARKETS REALTY CORP.,
Seller
By:	/s/ Shameer Hussein
Name:	Shameer Hussein
Title:	Authorized Agent
ZFC TRUST,
Purchaser
By:	/s/ Michael Szymanski
Name:	Michael Szymanski
Title:	Trustee

Mortgage Loan Sale Agreement (May 2013)

EXHIBIT A

CONTENTS OF MORTGAGE FILE

A. With respect to each Mortgage Loan, the Mortgage File shall include each of the following items, to the extent in Seller’s possession:

       1. Mortgage Note. The original Mortgage Note, endorsed, "Pay to the order of _______, without recourse" or a copy of the Mortgage Note together with a lost note affidavit;

       2. Mortgage. The original Mortgage, with evidence of recording thereon; provided, that (a) if the original Mortgage has been delivered for recording to the public recording office of the jurisdiction in which the Mortgaged Property is located but has not yet been returned to the Seller by such recording office, then (i) a copy of the Mortgage with the recording information included on such copy, and (ii) when the original Mortgage becomes available, the original of such Mortgage, with evidence of recording thereon, and (b) if such Mortgage has been lost or if such public recording office retains the original recorded mortgage, a photocopy of such Mortgage with the recording information included on such copy;

       3. Assignment of Mortgage. The original Assignment of Mortgage to Purchaser, or, if such original Assignment of Mortgage has been delivered for recording to the public recording office of the jurisdiction in which the Mortgaged Property is located but has not yet been returned to the Seller by such recording office, then a copy of such Assignment of Mortgage;

       4. Intervening Assignments. Originals or copies of all intervening Assignments of Mortgage showing an unbroken chain of title from originator to Seller with evidence of recording thereon; provided, that (i) if any original intervening Assignment of Mortgage has been delivered for recording to the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located but has not yet been returned to the Seller by such recording office, a copy of such Assignment of Mortgage together with evidence of transmittal of the original Assignment of Mortgage to the appropriate public recording office with a request to record such original Assignment of Mortgage and such original intervening Assignment of Mortgage, with evidence of recording thereon, if and when such Assignment of Mortgage becomes available, and (ii) if such intervening Assignment of Mortgage has been lost or if such public recording office retains the original recorded intervening Assignment of Mortgage, a photocopy of such Assignment of Mortgage with the recording information included on such copy;

       5. Title Policy. An original or a copy of the final Title Policy or final Attorney’s Opinion, if available;

       6. Additional Documents. Originals or copies of all assumption, extension, release and written modification agreements, if any;

       7. Power of Attorney. If the Mortgage Note, the Mortgage, any Assignment of Mortgage or any other related document has been signed by a person on behalf of the Mortgagor, an original or copy of the power of attorney or other instrument that authorized and empowered such person to sign; and

       8. Guaranty. The original or copy of any guarantee in the Seller’s possession executed in connection with the Mortgage Loan.

B. With respect to each Cooperative Loan, the Mortgage File shall include each of the following items, to the extent in Seller’s possession:

       1. Mortgage Note. The original Mortgage Note, endorsed, "Pay to the order of _______, without recourse" or a copy of the Mortgage Note together with a lost note affidavit;

       2. Lien Search. The original lien search performed with respect to the Cooperative Loan;

       3. UCC Financing Statement. A copy of the Uniform Commercial Code (“UCC-1”) financing statement with evidence of recording thereon.

       4. Assignment of UCC Financing Statement. Original assignment of the UCC-1 from the last assignee to blank;

       5. Cooperative Shares. The original Cooperative Shares, membership certificate, or other contractual agreement evidencing ownership;

       6. Stock Power. The original executed blank Stock Power;

       7. Proprietary Lease. The original Proprietary Lease or occupancy agreement;

       8. Recognition Agreement. The original Recognition Agreement;

       9. Security Agreement. The original security agreement, chattel mortgage or equivalent document executed in connection with the Cooperative Loan (if any);

       10. Proprietary Lease. The original assignment of Proprietary Lease or occupancy agreement, in blank, if applicable;

       11. Power of Attorney. If the Mortgage Note, the Proprietary Lease or any other related document has been signed by a person on behalf of the Mortgagor, an original or copy of the power of attorney or other instrument that authorized and empowered such person to sign;

       12. Additional Documents. Originals or copies of all assumption, extension, release and modification agreements, if any; and

       13. Guaranty. The original or copy of any guarantee in the Seller’s possession executed in connection with the Cooperative Loan.

EXHIBIT B

FORM OF ASSIGNMENT AND CONVEYANCE

       On this _______ day of ________, 20__, Citigroup Global Markets Realty Corp. (“Seller”) as the Seller under that certain Master Mortgage Loan Sale Agreement, dated as of May 31, 2013 (the “Agreement”) does hereby sell, transfer, assign, set over and convey to ZFC Trust (the “Purchaser”) as the Purchaser under the Agreement, without recourse, all rights, title and interest of the Seller in and to the Mortgage Loans listed on the Mortgage Loan Schedule attached hereto, together with the related servicing rights thereto, the Mortgage Files and all rights and obligations arising under the documents contained therein. The ownership of each Mortgage Note, Mortgage, and the contents of the Mortgage File is vested in the Purchaser and the ownership of all records and documents with respect to the related Mortgage Loan prepared by or which come into the possession of the Seller shall immediately vest in the Purchaser and shall be retained and maintained, in trust, by the Seller at the will of the Purchaser in such custodial capacity only.

       Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Agreement.

CITIGROUP GLOBAL MARKETS REALTY CORP.,

Seller

By:

Name:  

Title:

EXHIBIT C

ADDITIONAL DEFINED TERMS

       Definitions with respect to terms used but not otherwise defined in this Agreement:

       Accepted Servicing Practices: With respect to each Mortgage Loan, those mortgage servicing practices (i) of prudent mortgage lending institutions that service mortgage loans of the same type as such Loan in the jurisdiction where the related Mortgaged Property (as applicable) is located, (ii) that are in compliance with all applicable federal, state and local laws and regulations, including HAMP, if applicable, and (iii) in compliance with the terms of the Mortgage and the Note.

       Cooperative: The private, non-profit cooperative apartment corporation which owns all of the real property that comprises the Project, including the land, separate dwelling units and all common areas.

       Cooperative Apartment: The specific dwelling unit relating to a Cooperative Loan.

       Cooperative Shares: The shares of stock issued by the Cooperative, owned by the Mortgagor, and allocated to a Cooperative Apartment and represented by a Stock Certificate

       Project: All real property owned by the Cooperative including the land, separate dwelling units and all common areas.

       Proprietary Lease: A lease on a Cooperative Apartment evidencing the possessory interest of the Mortgagor in such Cooperative Apartment.

       Recognition Agreement: An agreement whereby a Cooperative and a lender with respect to a Cooperative Loan (i) acknowledge that such lender may make, or intends to make, such Cooperative Loan, and (ii) make certain agreements with respect to such Cooperative Loan.

       Stock Certificates: The certificates evidencing ownership of the Cooperative Shares issued by the Cooperative.

       Stock Power: An assignment of the Stock Certificate or an assignment of the Cooperative Shares issued by the Cooperative.

EXHIBIT D

FORM OF CONFIRMATION

Confirmation Citi-Zais (May 2013)

Exhibit A

Mortgage Loan Schedule

EXHIBIT E

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (the “Assignment and Assumption Agreement”) is entered into as of [_________], 2010, by and between [______________] (“Assignor”) and [_____________] (“Assignee”).

All terms used, but not defined, herein shall have the meanings ascribed to them in the Underlying Agreement (defined below).

WHEREAS, Assignor and Federal National Mortgage Association, a federally chartered corporation, as financial agent of the United States (“Fannie Mae”), are parties to a Commitment to Purchase Financial Instrument and Servicer Participation Agreement, a complete copy of which (including all exhibits, amendments and modifications thereto) is attached hereto and incorporated herein by this reference (the “Underlying Agreement”);

WHEREAS, Assignor has agreed to assign to Assignee all of its rights and obligations under the Underlying Agreement with respect to the Eligible Loans that are identified on the schedule attached hereto as Schedule 1 (collectively, the “Assigned Rights and Obligations”); and

WHEREAS, Assignee has agreed to assume the Assigned Rights and Obligations.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Assignment. Assignor hereby assigns to Assignee all of Assignor’s rights and obligations under the Underlying Agreement with respect to the Assigned Rights and Obligations.

2. Assumption. Assignee hereby accepts the foregoing assignment and assumes all of the rights and obligations of Assignor under the Underlying Agreement with respect to the Assigned Rights and Obligations.

3. Effective Date. The date on which the assignment and assumption of rights and obligations under the Underlying Agreement is effective is [_________], 2010.

4. Successors. All future transfers and assignments of the Assigned Rights and Obligations transferred and assigned hereby are subject to the transfer and assignment provisions of the Underlying Agreement. This Assignment and Assumption Agreement shall inure to the benefit of, and be binding upon, the permitted successors and assigns of the parties hereto.

5. Counterparts. This Assignment and Assumption Agreement may be executed in counterparts, each of which shall be an original, but all of which together constitute one and the same instrument.

E-1

IN WITNESS WHEREOF, Assignor and Assignee, by their duly authorized officials, hereby execute and deliver this Assignment and Assumption Agreement, together with Schedule 1, effective as of the date set forth in Section 3 above.

ASSIGNOR:

By:

Name: 

Title:

Date:

ASSIGNEE:

By:

Name: 

Title:

Date:

E-2

SCHEDULE I TO EXHIBIT E

MORTGAGE LOANS

E-3

EXHIBIT A TO EXHIBIT E

SERVICER PARTICIPATION AGREEMENT

(TO BE ATTACHED ON THE NEXT PAGE)

E-4

EXHIBIT F

MORTGAGE LOAN SCHEDULE FIELDS

1. Seller Loan ID

2. Servicer Loan ID

3. Original Balance

4. Current Unpaid Principal Balance

5. Deferred Principal Balance

6. Interest Bearing Principal Balance

7. Origination Date

8. First Payment Date

9. Current Maturity Date

10. Current P&I Payment

11. Original Interest Rate

12. Current Interest Rate

13. Next Payment Due Date/Interest Paid to Date

14. ARM Next Interest Rate Change Date/Next Payment Change Date

15. ARM Index

16. ARM Gross Margin

17. ARM Interest Rate Ceiling

18. ARM Interest Rate Floor

19. ARM Life Rate Cap

20. ARM Periodic Rate Cap

21. ARM Rate Frequency (Interest Adj Period)

22. I0 Indicator

23. MI Flag

24. Lien Status

25. Property Type

26. Modification Flag

27. Borrower Name First

28. Borrower Name Last

29. Property Street Address

30. Property City

31. Property State

32. Property Zip Code

33. Bankruptcy Flag

34. Foreclosure Flag

35. Purchase Price Percentage

36. Modification Date

37. Current rate type (Fixed, ARM or Step)

38. REO Flag

39. MERS MIN ID

40. Active in MERS Flag (Y/N) as of the closing date

F-1

EX-10.6

Citigroup Global Markets Realty Corp.
390 Greenwich Street 5^th Floor
New York, New York 10013

May 31, 2013

ZFC Trust
c/o ZAIS Financial Partners, L.P.
2 Bridge Avenue, Suite 322
Red Bank, NJ 07701
Attention: Don Kutch

Re:	Sale of First Lien, Performing and Re-performing Mortgage Loans
	by Citigroup Global Markets Realty Corp.

Ladies and Gentlemen:

     This trade confirmation (the “Confirmation”) confirms the agreement between Citigroup Global Markets Realty Corp. (the “Seller”) and ZFC Trust (the “Purchaser”) pursuant to which the Seller has agreed to sell, and the Purchaser has agreed to purchase, without recourse, certain first lien, performing and re-performing residential mortgage loans identified on the mortgage loan schedule attached hereto as Exhibit A (the “Mortgage Loans”), on a servicing released basis, subject to the terms set forth herein. The Mortgage Loans will be sold pursuant to a mutually agreeable Master Mortgage Loan Sale Agreement (the “Purchase Agreement”), between the Seller and the Purchaser.

For purposes of the Mortgage Loans to be sold pursuant to this Confirmation, the following terms shall have the following meanings:

Cut-off Date:	April 30, 2013 or such other date as mutually agreed to by the parties hereto.
Cut-off Date Principal Balance:	$136,564,152.31
Closing Date:	May 31, 2013 or such other date as mutually agreed to by the parties hereto.
Bid Cut-off Date	February 28, 2013.
Bid Cut-off Date Principal Balance:	$146,503,111.36
Servicing Retained/Released:	Released.
Servicing Transfer Date:	Not applicable
Purchase Price Percentage:	As set forth in Exhibit A

Purchase Price:	The purchase price for the each Mortgage Loan shall be equal to the sum of (a) the product of (i) the Purchase Price Percentage and (ii) the Cut-off Date Principal Balance, (b) accrued and unpaid interest on the Mortgage Loan from the last date through which interest has been paid by the Mortgagor through the day prior to the Closing Date for Mortgage Loans that are less than sixty (60) days delinquent as of the Cut-off Date.
Due Diligence:	The Purchaser will have completed its due diligence prior to the Closing Date and has agreed to purchase the Mortgage Loans based on the results of such due diligence.
Certain Provisions of the Purchase Agreement Inapplicable:	The parties hereto acknowledge that the following sections of the Purchase Agreement are inapplicable to this specific transaction and therefore shall be of no force or effect: Section 6(e), Sections 10(a) and the second sentence of 10(b). The parties intend that, pursuant to Section 11 of the Purchase Agreement, that this Confirmation shall control.
Entire Agreement/Governing Law:	This Confirmation and the Purchase Agreement contain the entire agreement relating to the subject matter hereof between Purchaser and Seller and supersede any prior oral or written agreement between the parties. This Confirmation may only be amended by a written document signed by both parties. This letter shall be governed in accordance with the laws of the state of New York, without regard to conflict of laws rules (other than section 5-1401 of the New York General Obligations Law which shall govern).

     Please acknowledge your agreement to the terms and conditions of this Confirmation by signing in the appropriate space below and returning a copy of the same to the undersigned. Telecopy signatures shall be deemed valid and binding to the same extent as the original.

CITIGROUP GLOBAL MARKETS REALTY CORP.
as Seller
By:	/s/ Shameer Hussein
Name:	Shameer Hussein
Title:	Authorized Agent

Confirmed and Agreed to:

ZFC TRUST, as Purchaser

By:	/s/ Michael F. Szymanski
Name:	Michael F. Szymanski
Title:	Trustee

EX-31.1

EXHIBIT 31.1
CERTIFICATIONS

I, Michael Szymanski, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of ZAIS Financial Corp. (the "registrant");
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 13, 2013

By:	/s/ Michael Szymanski
	Name:	Michael Szymanski
	Title:	Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2
CERTIFICATIONS

I, Paul McDade, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of ZAIS Financial Corp. (the "registrant");
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 13, 2013

By:	/s/ Paul McDade
	Name:	Paul McDade
	Title:	Chief Financial Officer and Treasurer

EX-32.1

EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002, 10 U.S.C. SECTION 1350

In connection with the quarterly report on Form 10-Q of ZAIS Financial Corp. (the "Company") for the quarter ended June 30, 2013 to be filed with the Securities and Exchange Commission on or about the date hereof (the "report"), I, Michael Szymanski, Chief Executive Officer and President of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1.	The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

Date: August 13, 2013

By:	/s/ Michael Szymanski
	Name:	Michael Szymanski
	Title:	Chief Executive Officer and President

EX-32.2

EXHIBIT 32.2
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002, 10 U.S.C. SECTION 1350

In connection with the quarterly report on Form 10-Q of ZAIS Financial Corp. (the "Company") for the quarter ended June 30, 2013 to be filed with the Securities and Exchange Commission on or about the date hereof (the "report"), I, Paul McDade, Chief Financial Officer and Treasurer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1.	The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

Date: August 13, 2013

By:	/s/ Paul McDade
	Name:	Paul McDade
	Title:	Chief Financial Officer and Treasurer

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Stockholders' Equity

6 Months Ended

Jun. 30, 2013

Stockholders' Equity [Abstract]

Stockholders' Equity

11.	Stockholders' Equity
	Common Stock
	The holders of shares of the Company's common stock are entitled to one vote per share on all matters voted on by stockholders, including election of the Company's directors. The Company's charter does not provide for cumulative voting in the election of directors. Therefore, the holders of a majority of the outstanding shares of the Company's common stock can elect its entire board of directors. Subject to any preferential rights of any outstanding series of preferred stock, the holders of shares of the Company's common stock are entitled to such distributions as may be authorized from time to time by the Company's board of directors out of legally available funds and declared by the Company and, upon liquidation, are entitled to receive all assets available for distribution to stockholders. Holders of shares of the Company's common stock do not have preemptive rights. This means that stockholders do not have an automatic option to purchase any new shares of common stock that the Company issues. In addition, stockholders only have appraisal rights under circumstances specified by the Company's board of directors or where mandated by law.
	Initial Public Offering
	On February 13, 2013, the Company completed its IPO, pursuant to which the Company sold 5,650,000 shares of its common stock to the public at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of approximately $1.2 million were $118.9 million. In connection with the IPO, the Advisor paid $6.3 million in underwriting fees. The Company did not pay any underwriting fees, discounts or commissions in connection with the IPO.
	Common Stock Repurchase
	In January 2013, the Company's agreement with one of its stockholders to repurchase 515,035 shares of common stock was amended to require the Company to repurchase only 265,245 shares of the Company's common stock. The amended repurchase amount was approximately $5.8 million which was predominantly paid to such stockholder during the three months ended March 31, 2013 with the remaining amount paid during the three months ended June 30, 2013. The Company had 7,970,886 and 2,071,096 shares of common stock outstanding as of June 30, 2013 and December 31, 2012, respectively.
	Private Placements
	In October 2012, the Company completed a private placement in which it sold 195,458 shares of common stock and 22,492 OP units. In December 2012, the Company completed a private placement in which it sold 36,581 shares of common stock and 904,422 OP units. Net proceeds from the two private placements were $25,151,174, net of approximately $763,000 in offering costs.

Dividends and Distributions

On May 1, 2012, the Company declared a cash dividend of $0.51 per share of common stock. The common stock dividend was paid on May 15, 2012 to stockholders of record as of the close of business on May 1, 2012.

On June 5, 2012, the Company declared a cash dividend of $0.57 per share of common stock. The common stock dividend was paid on June 21, 2012 to stockholders of record as of the close of business on June 5, 2012.

On October 22, 2012, the Company declared a cash dividend of $0.89 per share of common stock and OP unit. The dividend was paid on October 29, 2012 to stockholders and OP unit holders of record as of the close of business on October 22, 2012.

On November 29, 2012, the Company declared a cash dividend of $0.98 per share of common stock and OP unit. The dividend was paid on December 6, 2012 to stockholders and OP unit holders of record as of the close of business on November 29, 2012.

On December 19, 2012, the Company declared a cash dividend of $1.16 per share of common stock and OP unit. The dividend was paid on December 26, 2012 to stockholders and OP unit holders of record as of the close of business on December 19, 2012.

On May 14, 2013, the Company declared a cash dividend of $0.22 per share of common stock and OP unit. The dividend was paid on May 31, 2013 to stockholders and OP unit holders of record as of the close of business on May 24, 2013.

On June 25, 2013, the Company declared a cash dividend of $0.45 per share of common stock and OP unit. The dividend was payable on July 23, 2013 to stockholders and OP unit holders of record as of the close of business on July 9, 2013.

Preferred Shares

The Company's charter authorizes its board of directors to classify and reclassify any unissued shares of its common stock and preferred stock into other classes or series of stock. Prior to issuance of shares of each class or series, the board of directors is required by the Company's charter to set, subject to the charter restrictions on transfer of its stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of common stock or preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or change in control that might involve a premium price for holders of the Company's common stock or otherwise be in their best interest.

On January 18, 2012 the Company completed a private placement of 133 shares of its 12.5% Series A Cumulative Non-Voting Preferred Stock (the "Series A Preferred Stock") raising net proceeds of $115,499, net of $17,501 in offering fees.

On February 15, 2013, the Company redeemed all 133 shares of its 12.5% Series A Preferred Stock outstanding for an aggregate redemption price, including preferred dividend, of $148,379.

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Derivative Instruments (Schedule of Information Related to Derivative Instruments) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Derivative [Line Items]
Notional amount	$ 287,725,000	$ 32,600,000
Interest Rate Swaps [Member]
Derivative [Line Items]
Notional amount	225,725,000	32,600,000
TBAs [Member]
Derivative [Line Items]
Notional amount	$ 62,000,000

XML

Consolidated Statements of Operations (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Interest income
Real estate securities	$ 5,031,558	$ 2,278,821	$ 8,438,685	$ 5,039,871
Mortgage loans	903,953		932,859
Total interest income	5,935,511	2,278,821	9,371,544	5,039,871
Interest expense
Repurchase agreements	867,484	378,407	1,381,519	667,147
Loan repurchase facility	289,296		289,296
Total interest expense	1,156,780	378,407	1,670,815	667,147
Net interest income	4,778,731	1,900,414	7,700,729	4,372,724
Other gains / (losses)
Change in unrealized (loss) / gain on real estate securities	(15,642,642)	2,903,133	(14,739,365)	9,392,927
Change in unrealized gain on mortgage loans	1,596,197		1,567,291
Realized (loss) / gain on real estate securities	(246,055)	109,183	(246,055)	(1,951,862)
Realized gain on mortgage loans	66,244		66,244
Gain / (loss) on derivative instruments	3,698,381	(897,767)	3,979,525	(755,952)
Total other gains / (losses)	(10,527,875)	2,114,549	(9,372,360)	6,685,113
Expenses
Professional fees	231,389	398,325	1,492,573	943,436
Advisory fee - related party	704,687	245,283	1,193,072	472,578
Loan servicing fees	114,534		114,534
General and administrative expenses	769,123	43,340	1,123,372	80,655
Total expenses	1,819,733	686,948	3,923,551	1,496,669
Net (loss) / income	(7,568,877)	3,328,015	(5,595,182)	9,561,168
Net (loss) / income allocated to non-controlling interests	(788,476)		(489,382)
Preferred dividends		4,157	15,379	7,574
Net (loss) / income attributable to ZAIS Financial Corp. common stockholders	$ (6,780,401)	$ 3,323,858	$ (5,121,179)	$ 9,553,594
Net (loss) / income per share applicable to common Net income per share applicable to common stockholders - basic and diluted	$ (0.85)	$ 1.10	$ (0.78)	$ 3.16
Weighted average number of shares of common stock:
Basic	7,970,886	3,022,617	6,564,284	3,022,617
Diluted	8,897,800	3,022,617	7,491,198	3,022,617

XML

Real Estate Securities

6 Months Ended

Jun. 30, 2013

Real Estate Securities [Abstract]

Real Estate Securities

4.

Real Estate Securities

The following table presents the principal balance, amortized cost, gross unrealized gains, gross unrealized losses, and fair value of the Company's real estate securities portfolio at June 30, 2013. The Company's non-Agency RMBS portfolio is not issued or guaranteed by Fannie Mae, Freddie Mac or any other U.S. Government agency or a federally chartered corporation and are therefore subject to additional credit risks.

	Principal or							Gross Unrealized (1)							Weighted Average
	Notional		Premium			Amortized
	Balance		(Discount)			Cost		Gains		Losses			Fair Value		Coupon		Yield (2)
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	2,531,514	$	269,463		$	2,800,977	$	-	$	(209,094	)	$	2,591,883	2.80	%	2.28	%
30-year fixed rate
mortgage		170,265,662		7,140,749			177,406,411		678,522	$	(6,174,710	)		171,910,223	3.43		3.14
Non-Agency RMBS
Alternative - A(3)		211,822,035		(100,256,547	)		111,565,488		3,418,507	$	(2,917,214	)		112,066,781	4.95		6.41
Pay option adjustable rate		36,308,960		(7,839,404	)		28,469,556		114,962	$	(904,455	)		27,680,063	0.84		6.15
Prime		106,386,157		(12,568,896	)		93,817,261		5,053,935		(1,107,625	)		97,763,571	5.41		6.51
Subprime		46,587,884		(13,204,279	)		33,383,605		538,207	$	(1,397,637	)		32,524,175	0.65		6.98
Total RMBS	$	573,902,212	$	(126,458,914	)	$	447,443,298	$	9,804,133	$	(12,710,735	)	$	444,536,696	3.88	%	5.17	%
____________________

(1)	The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. The Company recorded net change in unrealized loss/gain on its real estate securities of a loss of $15.6 million and a gain of $2.9 million for the three months ended June 30, 2013 and 2012, respectively, and a loss of $14.7 million and a gain of $9.4 million for the six months ended June 30, 2013 and 2012, respectively, as change in unrealized loss/gain on real estate securities in the consolidated statements of operations.
(2)	Unleveraged yield.
(3)	Alternative-A RMBS includes an IO with a notional balance of $80.0 million.

The following table presents the principal balance, amortized cost, gross unrealized gains, gross unrealized losses, and fair value of the Company's real estate securities portfolio at December 31, 2012:
								Gross Unrealized (1)							Weighted Average
	Principal		Premium			Amortized
	Balance		(Discount)			Cost		Gains		Losses			Fair Value		Coupon		Yield (2)
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	3,083,892	$	351,047		$	3,434,939	$	-	$	(194,609	)	$	3,240,330	2.84	%	2.28	%
30-year fixed rate
mortgage		61,034,333		3,056,889			64,091,222		2,442,401		(13,921	)		66,519,702	3.82		3.44
Non-Agency RMBS
Alternative - A		38,549,827		(8,606,689	)		29,943,138		3,436,729		-			33,379,867	5.69		7.95
Pay option adjustable
rate		1,249,426		(378,803	)		870,623		95,221		-			965,844	1.19		8.67
Prime		64,978,647		(8,074,525	)		56,904,122		5,668,301		(2,298	)		62,570,125	5.79		7.34
Subprime		4,419,732		(825,131	)		3,594,601		401,214		-			3,995,815	0.98		9.10
Total RMBS	$	173,315,857	$	(14,477,212	)	$	158,838,645	$	12,043,866	$	(210,828	)	$	170,671,683	4.81	%	5.89	%
____________________

(1)	The Company has elected the fair value option pursuant to ASC 825 for its real estate securities.
(2)	Unleveraged yield.
The following table presents certain information regarding the Company's Agency and non-Agency RMBS securities as of June 30, 2013 by weighted average life:

	Agency RMBS						Non-Agency RMBS
					Weighted						Weighted
			Amortized		Average				Amortized		Average
	Fair Value		Cost		Yield		Fair Value		Cost		Yield
Weighted average life (1)
Greater than 5 years	$	174,502,106	$	180,207,388	3.12	%	$	270,034,590	$	267,235,910	6.49	%
	$	174,502,106	$	180,207,388	3.12	%	$	270,034,590	$	267,235,910	6.49	%
____________________

(1)		Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses.
	At June 30, 2013, the contractual maturities of the real estate securities ranged from 8.2 to 33.6 years, with a weighted average maturity of 26.4 years. All real estate securities held by the Company at June 30, 2013 are issued by issuers based in the United States of America. The following table presents proceeds from the sale of real estate securities, realized losses on the sale of real estate securities and realized losses on other-than-temporary impairments:

	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Proceeds from the sale of real estate
securities	$	47,111,700		$	3,257,082		$	53,913,098		$	28,759,376
Realized (loss)/gain on the sale of real estate
securities		(206,876	)		196,241			(206,876	)		(1,736,517	)
Realized loss on other-than-temporary
impairments		(39,179	)		(87,058	)		(39,179	)		(215,345	)

The following table presents certain information regarding the Company's Agency and non-Agency RMBS securities as of December 31, 2012 by weighted average life:
	Agency RMBS						Non-Agency RMBS
					Weighted						Weighted
			Amortized		Average				Amortized		Average
	Fair Value		Cost		Yield		Fair Value		Cost		Yield
Weighted average life (1)
Greater than 5 years	$	69,760,032	$	67,526,161	3.38	%	$	100,911,651	$	91,312,484	7.63	%
	$	69,760,032	$	67,526,161	3.38	%	$	100,911,651	$	91,312,484	7.63	%
____________________

(1) Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses.

At December 31, 2012, the contractual maturities of the real estate securities ranged from 8.6 to 33.7 years, with a weighted average maturity of 26.1 years. All real estate securities held by the Company at December 31, 2012 are issued by issuers based in the United States of America.

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Real Estate Securities (Tables)

6 Months Ended

Jun. 30, 2013

Real Estate Securities [Abstract]

Schedule of Information Regarding Real Estate Securities

The following table presents the principal balance, amortized cost, gross unrealized gains, gross unrealized losses, and fair value of the Company's real estate securities portfolio at June 30, 2013. The Company's non-Agency RMBS portfolio is not issued or guaranteed by Fannie Mae, Freddie Mac or any other U.S. Government agency or a federally chartered corporation and are therefore subject to additional credit risks.

	Principal or							Gross Unrealized (1)							Weighted Average
	Notional		Premium			Amortized
	Balance		(Discount)			Cost		Gains		Losses			Fair Value		Coupon		Yield (2)
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	2,531,514	$	269,463		$	2,800,977	$	-	$	(209,094	)	$	2,591,883	2.80	%	2.28	%
30-year fixed rate
mortgage		170,265,662		7,140,749			177,406,411		678,522	$	(6,174,710	)		171,910,223	3.43		3.14
Non-Agency RMBS
Alternative - A(3)		211,822,035		(100,256,547	)		111,565,488		3,418,507	$	(2,917,214	)		112,066,781	4.95		6.41
Pay option adjustable rate		36,308,960		(7,839,404	)		28,469,556		114,962	$	(904,455	)		27,680,063	0.84		6.15
Prime		106,386,157		(12,568,896	)		93,817,261		5,053,935		(1,107,625	)		97,763,571	5.41		6.51
Subprime		46,587,884		(13,204,279	)		33,383,605		538,207	$	(1,397,637	)		32,524,175	0.65		6.98
Total RMBS	$	573,902,212	$	(126,458,914	)	$	447,443,298	$	9,804,133	$	(12,710,735	)	$	444,536,696	3.88	%	5.17	%
____________________

(1)	The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. The Company recorded net change in unrealized loss/gain on its real estate securities of a loss of $15.6 million and a gain of $2.9 million for the three months ended June 30, 2013 and 2012, respectively, and a loss of $14.7 million and a gain of $9.4 million for the six months ended June 30, 2013 and 2012, respectively, as change in unrealized loss/gain on real estate securities in the consolidated statements of operations.
(2)	Unleveraged yield.
(3)	Alternative-A RMBS includes an IO with a notional balance of $80.0 million.

The following table presents the principal balance, amortized cost, gross unrealized gains, gross unrealized losses, and fair value of the Company's real estate securities portfolio at December 31, 2012:
								Gross Unrealized (1)							Weighted Average
	Principal		Premium			Amortized
	Balance		(Discount)			Cost		Gains		Losses			Fair Value		Coupon		Yield (2)
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	3,083,892	$	351,047		$	3,434,939	$	-	$	(194,609	)	$	3,240,330	2.84	%	2.28	%
30-year fixed rate
mortgage		61,034,333		3,056,889			64,091,222		2,442,401		(13,921	)		66,519,702	3.82		3.44
Non-Agency RMBS
Alternative - A		38,549,827		(8,606,689	)		29,943,138		3,436,729		-			33,379,867	5.69		7.95
Pay option adjustable
rate		1,249,426		(378,803	)		870,623		95,221		-			965,844	1.19		8.67
Prime		64,978,647		(8,074,525	)		56,904,122		5,668,301		(2,298	)		62,570,125	5.79		7.34
Subprime		4,419,732		(825,131	)		3,594,601		401,214		-			3,995,815	0.98		9.10
Total RMBS	$	173,315,857	$	(14,477,212	)	$	158,838,645	$	12,043,866	$	(210,828	)	$	170,671,683	4.81	%	5.89	%
____________________

(1)	The Company has elected the fair value option pursuant to ASC 825 for its real estate securities.
(2)	Unleveraged yield.

Schedule of Information Regarding Gains and Losses on Securities

The following table presents proceeds from the sale of real estate securities, realized losses on the sale of real estate securities and realized losses on other-than-temporary impairments:

	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Proceeds from the sale of real estate
securities	$	47,111,700		$	3,257,082		$	53,913,098		$	28,759,376
Realized (loss)/gain on the sale of real estate
securities		(206,876	)		196,241			(206,876	)		(1,736,517	)
Realized loss on other-than-temporary
impairments		(39,179	)		(87,058	)		(39,179	)		(215,345	)

Schedule of Certain Information Regarding Real Estate Securities

The following table presents certain information regarding the Company's Agency and non-Agency RMBS securities as of June 30, 2013 by weighted average life:

	Agency RMBS						Non-Agency RMBS
					Weighted						Weighted
			Amortized		Average				Amortized		Average
	Fair Value		Cost		Yield		Fair Value		Cost		Yield
Weighted average life (1)
Greater than 5 years	$	174,502,106	$	180,207,388	3.12	%	$	270,034,590	$	267,235,910	6.49	%
	$	174,502,106	$	180,207,388	3.12	%	$	270,034,590	$	267,235,910	6.49	%
____________________

(1) Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses.

The following table presents certain information regarding the Company's Agency and non-Agency RMBS securities as of December 31, 2012 by weighted average life:
		Agency RMBS						Non-Agency RMBS
						Weighted						Weighted
				Amortized		Average				Amortized		Average
		Fair Value		Cost		Yield		Fair Value		Cost		Yield
	Weighted average life (1)
	Greater than 5 years	$	69,760,032	$	67,526,161	3.38	%	$	100,911,651	$	91,312,484	7.63	%
		$	69,760,032	$	67,526,161	3.38	%	$	100,911,651	$	91,312,484	7.63	%
	____________________

(1) Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses.

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Derivative Instruments (Schedule of Information About Interest Rate Swaps) (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Derivative [Line Items]
Notional Amount	$ 287,725,000	$ 32,600,000
Swap [Member]
Derivative [Line Items]
Notional Amount	225,725,000	32,600,000
Weighted Average Pay Rate	1.88%	1.51%
Weighted Average Receive Rate	0.27%	0.31%
Weighted Average Years to Maturity	8 years 2 months 12 days	5 years 3 months 18 days
Swap [Member] | Derivative - Maturity Date One [Member]
Derivative [Line Items]
Maturity	Dec. 31, 2016	Dec. 31, 2016
Notional Amount	12,102,000	12,102,000
Weighted Average Pay Rate	1.20%	1.21%
Weighted Average Receive Rate	0.27%	0.31%
Weighted Average Years to Maturity	3 years 2 months 12 days	3 years 8 months 12 days
Swap [Member] | Derivative - Maturity Date Two [Member]
Derivative [Line Items]
Maturity	Dec. 31, 2017	Dec. 31, 2017
Notional Amount	11,050,000	11,050,000
Weighted Average Pay Rate	1.28%	1.28%
Weighted Average Receive Rate	0.28%	0.31%
Weighted Average Years to Maturity	3 years 9 months 18 days	4 years 3 months 18 days
Swap [Member] | Derivative - Maturity Date Three [Member]
Derivative [Line Items]
Maturity	Dec. 31, 2018
Notional Amount	38,000,000
Weighted Average Pay Rate	1.54%
Weighted Average Receive Rate	0.28%
Weighted Average Years to Maturity	4 years 10 months 24 days
Swap [Member] | Derivative - Maturity Date Four [Member]
Derivative [Line Items]
Maturity	Dec. 31, 2021	Dec. 31, 2021
Notional Amount	9,448,000	9,448,000
Weighted Average Pay Rate	2.16%	2.16%
Weighted Average Receive Rate	0.27%	0.31%
Weighted Average Years to Maturity	8 years 2 months 12 days	8 years 8 months 12 days
Swap [Member] | Derivative - Maturity Date Five [Member]
Derivative [Line Items]
Maturity	Dec. 31, 2023
Notional Amount	$ 155,125,000
Weighted Average Pay Rate	2.05%
Weighted Average Receive Rate	0.27%
Weighted Average Years to Maturity	9 years 8 months 12 days

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Non-controlling Interests in Operating Partnership

6 Months Ended

Jun. 30, 2013

Non-controlling Interests in Operating Partnership [Abstract]

Non-controlling Interests in Operating Partnership

12.	Non-controlling Interests in Operating Partnership
	Non-controlling interests in the Operating Partnership in the accompanying consolidated financial statements relate to OP units in the Operating Partnership held by parties other than the Company.

Certain individuals and entities own OP units in the Operating Partnership. An OP unit and a share of common stock of the Company have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership. OP unit holders have the right to redeem their OP units, subject to certain restrictions. The redemption is required to be satisfied in shares of common stock, cash, or a combination thereof, at the Company's option, calculated as follows: one share of the Company's common stock, or cash equal to the fair value of a share of the Company's common stock at the time of redemption, for each OP unit. When an OP unit holder redeems an OP unit, non-controlling interest in the Operating Partnership is reduced and the Company's equity is increased. As of June 30, 2013, the non-controlling interest OP unit holders owned 926,914 OP units, or 10.4% of the Operating Partnership. As of December 31, 2012, the non-controlling interest OP unit holders owned 926,914 OP units, or 30.9% of the Operating Partnership.

Pursuant to ASC 810, Consolidation, regarding the accounting and reporting for non-controlling interests and changes in ownership interests of a subsidiary, changes in a parent's ownership interest (and transactions with non-controlling interest unit holders in the Operating Partnership) while the parent retains its controlling interest in its subsidiary, should be accounted for as equity transactions. The carrying amount of the non-controlling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the Company.

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Loan Repurchase Facility (Narrative) (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended		6 Months Ended
	May 31, 2013	Mar. 22, 2013	Jun. 30, 2013
Line of Credit Facility [Line Items]
Unpaid principal balance of loans acquired	$ 134.5	$ 17.7	$ 152.2
Loan Repurchase Facility [Member]
Line of Credit Facility [Line Items]
Term of facility			364 days

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Earnings Per Share (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Numerator:
Net (loss) / income attributable to ZAIS Financial Corp. common stockholders	$ (6,780,401)	$ 3,323,858	$ (5,121,179)	$ 9,553,594
Effect of dilutive securities:
Loss allocated to Operating Partnership non-controlling interests	(788,476)		(489,382)
Dilutive net (loss) / income available to stockholders	$ (7,568,877)	$ 3,323,858	$ (5,610,561)	$ 9,553,594
Denominator:
Weighted average number of shares of common stock	7,970,886	3,022,617	6,564,284	3,022,617
Effect of dilutive securities:
Weighted average OP units	926,914		926,914
Weighted average dilutive shares	8,897,800	3,022,617	7,491,198	3,022,617
Net (loss) / income per share applicable to ZAIS Financial Corp. common stockholders - Basic/Diluted	$ (0.85)	$ 1.10	$ (0.78)	$ 3.16

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Fair Value (Schedule of Fair Value of Other Financial Instruments) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Assets
Restricted cash	$ 12,545,944	$ 3,768,151
Portion at Fair Value, Fair Value Disclosure [Member]
Assets
Cash	21,174,544	19,061,110
Restricted cash	12,545,944	3,768,151
Liabilities
Repurchase agreements	308,672,976	109,270,298
Loan repurchase facility	89,331,282
Common stock repurchase liability		$ 11,190,687

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Loan Repurchase Facility (Tables) (Line of Credit [Member])

6 Months Ended

Jun. 30, 2013

Line of Credit [Member]

Debt Instrument [Line Items]

Schedule of Information Regarding Repurchase Agreements

The following table presents certain information regarding the Company's Loan Repurchase Facility as of June 30, 2013 by remaining maturity:

	Mortgage loans
	Balance		Weighted Average Rate
Loan Repurchase Facility borrowings maturing within
30 days or less	$	-	-	%
31-90 days		-	-
91-180 days		-	-
Greater than 180 days to 1 year		89,112,325	2.94
Total / weighted average	$	89,112,325	2.94	%

Schedule of Information Regarding Posting of Collateral

The following table presents information with respect to the Company's posting of mortgage loan collateral at June 30, 2013:
Repurchase agreements secured by mortgage loans	$	89,112,325
Fair value of mortgage loans pledged as collateral under repurchase agreements		120,517,248
Fair value of mortgage loans not pledged as collateral under repurchase agreements		266,177
Cash pledged under repurchase agreements		-

Schedule of Financial Information

The following is a summary of financial information relating to mortgage loans at fair value sold under agreements to repurchase:
	Three Months Ended					Six Months Ended
				December 31,					December 31,
	June 30, 2013			2012		June 30, 2013			2012
Period end:
Balance	$	89,112,325		$	-	$	89,112,325		$	-
Unused amount(1)	$	60,887,675			-	$	60,887,675			-
Weighted-average interest rate at end of period		2.94	%		-		2.94	%		-
Fair value of mortgage loans pledged as
collateral under repurchase agreements	$	120,517,248			-	$	120,517,248			-
During the period:
Weighted-average interest rate		2.94	%		-		2.94	%		-
Average balance of loans sold under
agreements to repurchase	$	266,499			-	$	266,499			-
Maximum daily amount outstanding	$	89,112,325			-	$	89,112,325			-
Total interest expense	$	289,296			-	$	289,296			-
____________________

(1) The amount the Company is able to borrow under loan repurchase agreements is tied to the fair value of unencumbered mortgage loans eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold.

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Repurchase Agreements (Tables) (Securities Sold under Agreements to Repurchase [Member])

6 Months Ended

Jun. 30, 2013

Securities Sold under Agreements to Repurchase [Member]

Debt Instrument [Line Items]

Schedule of Information Regarding Repurchase Agreements

The following table presents certain information regarding the Company's real estate securities repurchase agreements as of June 30, 2013 by remaining maturity and collateral type:

	Agency RMBS				Non-Agency RMBS
			Weighted				Weighted
	Balance		Average Rate		Balance		Average Rate
Repurchase agreements maturing
within
30 days or less	$	147,472,330	0.39	%	$	161,025,085	2.03	%
31-60 days		-	-			-	-
61-90 days		-	-			-	-
Greater than 90 days		-	-			-	-
Total / weighted average	$	147,472,330	0.39	%	$	161,025,085	2.03	%
The following table presents certain information regarding the Company's real estate securities repurchase agreements as of December 31, 2012 by remaining maturity and collateral type:

	Agency RMBS				Non-Agency RMBS
			Weighted				Weighted
	Balance		Average Rate		Balance		Average Rate
Repurchase agreements maturing
within
30 days or less	$	44,174,600	0.49	%	$	49,441,377	2.15	%
31-60 days		10,866,170	0.49			-	-
61-90 days		11,598,320	0.47			-	-
Greater than 90 days		-	-			-	-
Total / weighted average	$	66,639,090	0.49	%	$	49,441,377	2.15	%

Schedule of Information Regarding Posting of Collateral

The following table presents information with respect to the Company's posting of RMBS collateral at June 30, 2013:
Repurchase agreements secured by Agency RMBS	$	147,472,330
Fair value of Agency RMBS pledged as collateral under repurchase agreements		150,498,206
Fair value of Agency RMBS not pledged as collateral under repurchase agreements		24,003,900
Repurchase agreements secured by non-Agency RMBS		161,025,085
Fair value of non-Agency RMBS pledged as collateral under repurchase agreements		213,888,493
Fair value of non-Agency RMBS not pledged as collateral under repurchase agreements		56,146,097
Cash pledged under repurchase agreements		6,400,451

The following table presents information with respect to the Company's posting of RMBS collateral at December 31, 2012:
Repurchase agreements secured by Agency RMBS	$	66,639,090
Fair value of Agency RMBS pledged as collateral under repurchase agreements		63,535,780
Fair value of Agency RMBS not pledged as collateral under repurchase agreements		6,224,252
Repurchase agreements secured by non-Agency RMBS		49,441,377
Fair value of non-Agency RMBS pledged as collateral under repurchase agreements		70,003,218
Fair value of non-Agency RMBS not pledged as collateral under repurchase agreements		30,908,433
Cash pledged under repurchase agreements		1,335,305

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Repurchase Agreements (Schedule of Certain Information Regarding Repurchase Agreements) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance	$ 147,472,330	$ 66,639,090
Weighted Average Rate	0.39%	0.49%
Non-Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance	161,025,085	49,441,377
Weighted Average Rate	2.03%	2.15%
30 Days or Less [Member] | Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance	147,472,330	44,174,600
Weighted Average Rate	0.39%	0.49%
30 Days or Less [Member] | Non-Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance	161,025,085	49,441,377
Weighted Average Rate	2.03%	2.15%
31-60 Days [Member] | Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance		10,866,170
Weighted Average Rate		0.49%
31-60 Days [Member] | Non-Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance
Weighted Average Rate
61-90 Days [Member] | Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance		11,598,320
Weighted Average Rate		0.47%
61-90 Days [Member] | Non-Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance
Weighted Average Rate
Greater Than 90 Days [Member] | Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance
Weighted Average Rate
Greater Than 90 Days [Member] | Non-Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance
Weighted Average Rate

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Fair Value (Schedule of Financial Instruments Utilizing Level 3 Inputs) (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Residential Mortgage Backed Securities [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 100,911,651	$ 76,473,092
Total net transfers into/out of Level 3
Acquisitions	193,538,950	68,617,460
Proceeds from sales		(43,379,205)
Net accretion of discounts	6,706,957	1,337,369
Proceeds from principal repayments	(24,322,480)	(16,938,626)
Total losses (realized / unrealized) included in earnings	(7,505,685)	(2,579,401)
Total gains (realized / unrealized) included in earnings	705,197	17,380,962
Ending balance	270,034,590	100,911,651
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date	(14,228,335)	10,764,268
Mortgage Receivables Member
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance
Total net transfers into/out of Level 3
Acquisitions	119,758,049
Proceeds from sales
Net accretion of discounts	259,435
Proceeds from principal repayments	(867,594)
Total losses (realized / unrealized) included in earnings
Total gains (realized / unrealized) included in earnings	1,633,535
Ending balance	120,783,425
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date	$ 1,567,291

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Real Estate Securities (Schedule of Certain Information Regarding Real Estate Securities) (Details) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2013		Dec. 31, 2012
Agency RMBS [Member]
Greater than 5 years
Fair Value	$ 174,502,106	[1]	$ 69,760,032	[1]
Amortized Cost	180,207,388	[1]	67,526,161	[1]
Weighted Average Yield	3.12%	[1]	3.38%	[1]
Fair Value	174,502,106	[1]	69,760,032	[1]
Amortized Cost	180,207,388	[1]	67,526,161	[1]
Weighted Average Yield	3.12%	[1]	3.38%	[1]
Non-Agency RMBS [Member]
Greater than 5 years
Fair Value	270,034,590	[1]	100,911,651	[1]
Amortized Cost	267,235,910	[1]	91,312,484	[1]
Weighted Average Yield	6.49%	[1]	7.63%	[1]
Fair Value	270,034,590	[1]	100,911,651	[1]
Amortized Cost	$ 267,235,910	[1]	$ 91,312,484	[1]
Weighted Average Yield	6.49%	[1]	7.63%	[1]

[1] Actual maturities of real estate securities are generally shorter than stated contractual maturities. Maturities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses.

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Loan Repurchase Facility (Schedule of Certain Information Regarding Loan Repo Facility) (Details) (Mortgage Loans [Member], USD $)	Jun. 30, 2013
Assets Sold under Agreements to Repurchase [Line Items]
Balance	$ 89,112,325
Weighted Average Rate	2.94%
30 Days or Less [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance
Weighted Average Rate
31 to 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance
Weighted Average Rate
91-180 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance
Weighted Average Rate
Greater than 180 Days to 1 Year [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Balance	$ 89,112,325
Weighted Average Rate	2.94%

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Formation and Organization (Details) (USD $)	0 Months Ended	3 Months Ended	6 Months Ended		12 Months Ended	0 Months Ended	1 Months Ended
	Jul. 29, 2011	Dec. 31, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Feb. 13, 2013 Common Stock [Member]	Dec. 31, 2012 Common Stock [Member]	Oct. 31, 2012 Common Stock [Member]
Formation and Organization [Abstract]
Exchange offer contribution - cash	$ 3,036,222
Exchange offer contribution - debt securities	57,416,118
Exchange offer contribution - shares issued	3,022,617
Common stock, shares authorized		500,000,000	500,000,000		500,000,000
Common stock, par value per share		$ 0.0001	$ 0.0001		$ 0.0001
Preferred Stock, Shares Authorized		50,000,000	50,000,000		50,000,000
Preferred Stock, Par or Stated Value Per Share		$ 0.0001	$ 0.0001		$ 0.0001
Class of Stock [Line Items]
Shares of stock issued						5,650,000	36,581	195,458
Common stock issued, price per share						$ 21.25
Gross proceeds from issuance initial public offering						120,100,000
Offering fees		763,000	216,658			1,200,000
Value of stock issued			$ 118,862,500		$ 4,757,470	$ 118,900,000

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Subsequent Events (Details) (USD $)	0 Months Ended		6 Months Ended		1 Months Ended
	May 31, 2013	Mar. 22, 2013	Jun. 30, 2013	Jun. 30, 2012	Jul. 25, 2013 Subsequent Event [Member]
Subsequent Event [Line Items]
Utilization of facility			$ 89,112,325		$ 98,700,000
Unpaid principal balance of loans acquired	$ 134,500,000	$ 17,700,000	$ 152,200,000		$ 167,800,000

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Mortgage Loans (Schedule of Fair Value, Principal Balance and Weighted Average Coupon and Yield) (Details) (Mortgage Receivable [Member], USD $)	6 Months Ended
	Jun. 30, 2013		Dec. 31, 2012
Mortgage Loans on Real Estate [Line Items]
Fair Value	$ 120,783,425
Principal Balance	151,108,199	[1]
Weighted Average Coupon	4.75%
Weighted Average Yield	6.78%
Performing Loans [Member]
Mortgage Loans on Real Estate [Line Items]
Fair Value	119,574,847
Principal Balance	149,303,096
Weighted Average Coupon
Weighted Average Yield
Fixed [Member]
Mortgage Loans on Real Estate [Line Items]
Fair Value	59,118,932
Principal Balance	75,383,607
Weighted Average Coupon	4.92%
Weighted Average Yield	6.99%
ARM [Member]
Mortgage Loans on Real Estate [Line Items]
Fair Value	60,455,915
Principal Balance	73,919,489
Weighted Average Coupon	4.53%
Weighted Average Yield	6.54%
Nonperforming Loans [Member]
Mortgage Loans on Real Estate [Line Items]
Fair Value	1,208,578
Principal Balance	$ 1,805,103
Weighted Average Coupon	6.52%
Weighted Average Yield	9.27%

[1] Non-Agency RMBS includes an IO with a notional balance of $80.0 million.

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Mortgage Loans (Tables)

6 Months Ended

Jun. 30, 2013

Mortgage Loans [Abstract]

Schedule of Mortgage Loans

The following table presents the fair value, principal balance and weighted coupon and yield of the Company's mortgage loan portfolio as of June 30, 2013:

	June 30, 2013
					Weighted Average
			Principal
	Fair Value		Balance		Coupon		Yield
Loan Type
Performing Loans:
Fixed	$	59,118,932	$	75,383,607	4.92	%	6.99	%
ARM		60,455,915		73,919,489	4.53		6.54
		119,574,847		149,303,096
Nonperforming loans		1,208,578		1,805,103	6.52		9.27
Total	$	120,783,425	$	151,108,199	4.75	%	6.78	%

The following table presents the difference between the fair value and the aggregate unpaid principal balance of the Company's mortgage loans:
	June 30, 2013							December 31, 2012
			Principal							Principal
	Fair Value		Balance		Difference			Fair Value		Balance		Difference
Loan Type
Performing loans:
Fixed		59,118,932		75,383,607		(16,264,675	)		-		-		-
ARM		60,455,915		73,919,489		(13,463,574	)		-		-		-
		119,574,847		149,303,096		(29,728,249	)
Nonperforming loans		1,208,578		1,805,103		(596,525	)		-		-		-
Total	$	120,783,425	$	151,108,199	$	(30,324,774	)	$	-	$	-	$	-

Schedule of Concentrations of Credit Risk

As of June 30, 2013, the mortgage loan portfolio consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of certain concentrations of credit risk in the mortgage loan portfolio:

	June 30, 2013		December 31, 2012
Concentration
Percentage of fair value of mortgage loans with unpaid-principal-balance-to
current -property-value in excess of 100%	92.8	%	-
Mortgage loans secured by properties in the following states:
Each representing 10% or more of fair value:			-
California	21.2	%
Florida	19.7	%

	June 30, 2013		December 31, 2012
Georgia	10.1	%
Additional states each representing more than 5% of fair value	NJ, VA		-

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Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities
Net (loss) / income	$ (5,595,182)	$ 9,561,168
Adjustments to reconcile net (loss) / income to net cash provided by operating activities
Net (accretion)/amortization of (discounts)/premiums related to real estate securities	(1,566,256)	(873,704)
Net accretion of discounts related to mortgage loans	(259,435)
Change in unrealized loss/(gain) on real estate securities	14,739,365	(9,392,927)
Change in unrealized (gain) on mortgage loans	(1,567,291)
Realized loss on real estate securities	246,055	1,951,862
Realized (gain) on mortgage loans	(66,244)
Change in unrealized (gain)/loss on derivative instruments	(3,244,803)	650,448
Changes in operating assets and liabilities
(Increase) / decrease in other assets	(302,375)	46,722
Increase / (decrease) in accounts payable and other liabilities	788,610	(358,638)
Increase / (decrease) in accrued interest payable	361,927	(799)
Net cash provided by operating activities	3,534,371	1,584,132
Cash flows from investing activities
Acquisitions of real estate securities, net of change in payable for real estate securities purchased	(344,623,655)	(72,680,829)
Proceeds from principal repayments on real estate securities	24,639,160	10,230,669
Proceeds from sale of real estate securities, net of changes in receivable for real estate securities sold	53,913,098	28,759,376
Acquisition of mortgage loans	(119,758,049)
Proceeds from principal repayments on mortgage loans	867,594
Restricted cash used in investment activities	(8,777,793)	(565,997)
Net cash used in investing activities	(393,739,645)	(34,256,781)
Cash flows from financing activities
Proceeds from issuance of common stock, net	118,862,500
Proceeds from issuance of preferred stock, net		115,499
Payment of common stock repurchase liability	(5,750,512)
Borrowings from repurchase agreements	287,941,369	49,598,893
Repayments of repurchase agreements	(95,524,421)	(17,054,902)
Borrowings from loan repurchase facility	89,112,325
Dividends on common stock and distributions on OP units (net of dividends and distributions payable)	(1,957,516)	(3,264,427)
Repurchase of preferred stock including dividend	(148,379)	(7,574)
Equity raise payments	(216,658)
Net cash provided by financing activities	392,318,708	29,387,489
Net increase/(decrease) in cash	2,113,434	(3,285,160)
Cash
Beginning of period	19,061,110	6,326,724
End of period	21,174,544	3,041,564
Supplemental disclosure of cash flow information
Interest paid on repurchase agreements and loan repurchase facility	1,308,888	667,946
Taxes paid

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2.	Summary of Significant Accounting Policies
	Basis of Quarterly Presentation
	The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial reporting. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for the interim period are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Certain prior period amounts have been reclassified to conform to the current period's presentation.

The Company currently operates as one business segment.

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership, and all of the wholly owned subsidiaries of the Operating Partnership. The Company, which serves as the sole general partner of and conducts substantially all of its business through the Operating Partnership, holds approximately 89.6% of the OP units in the Operating Partnership. The Operating Partnership in turn holds directly or indirectly all of the equity interests in its subsidiaries. All intercompany balances have been eliminated in consolidation.

Variable Interest Entities

A variable interest entity ("VIE") is an entity that lacks one or more of the characteristics of a voting interest entity. The Company evaluates each of its investments to determine if each is a VIE based on: (1) the sufficiency of the entity's equity investment at risk to finance its activities without additional subordinated financial support provided by any parties, including the equity holders; (2) whether as a group the holders of the equity investment at risk have (a) the power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impacts the entity's economic performance, (b) the obligation to absorb the expected losses of the legal entity and (c) the right to receive the expected residual returns of the legal entity; and (3) whether the voting rights of these investors are proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected returns of their equity, or both, and whether substantially all of the entity's activities involve or are conducted on behalf of an investor that has disproportionately fewer voting rights. An investment that lacks one or more of the above three characteristics is considered to be a VIE. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE is subject to consolidation if the equity investors either do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, are unable to direct the entity's activities, or are not exposed to the entity's losses or entitled to its residual returns. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses.

The Company has evaluated its real estate securities investments to determine if each represents a variable interest in a VIE. The Company monitors these investments and analyzes them for potential consolidation. The Company's real estate securities investments represent variable interests in VIEs. At June 30, 2013 and December 31, 2012, no VIEs required consolidation as the Company was not the primary beneficiary of any of these VIEs. At June 30, 2013 and December 31, 2012, the maximum exposure of the Company to VIEs is limited to the fair value of its investments in real estate securities as disclosed in the consolidated balance sheets.

Cash and Cash Equivalents

The Company considers highly liquid short-term interest bearing instruments with original maturities of three months or less and other instruments readily convertible into cash to be cash equivalents. The Company's deposits with financial institutions may exceed federally insurable limits of $250,000 per institution. The Company mitigates this risk by depositing funds with major financial institutions. At June 30, 2013, the Company's cash was held with two custodians.

Restricted Cash

Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or repurchase agreements. Cash held by counterparties as collateral is not available to the Company for general corporate purposes, but may be applied against amounts due to derivative or repurchase agreement counterparties or returned to the Company when the collateral requirements are exceeded or at the maturity of the derivatives or repurchase agreements.

Real Estate Securities and Mortgage Loans - Fair Value Election

U.S. GAAP permits entities to choose to measure many financial instruments and certain other items at fair value. The Company has elected the fair value option for each of its real estate securities and mortgage loans, at the date of purchase, including those contributed in connection with the Company's initial formation transaction. The fair value option election permits the Company to measure these real estate securities and mortgage loans at estimated fair value with the change in estimated fair value included as changes in unrealized gain/loss on real estate securities and mortgage loans in the Company's consolidated statements of operations. The Company believes that the election of the fair value option for its real estate securities and mortgage loans more appropriately reflects the results of the Company's operations.

Determination of Fair Value Measurement

The "Fair Value Measurements and Disclosures" Topic of the FASB ASC defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.

Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values. Furthermore, the analysis of whether it is more likely than not that the Company will be required to sell securities in an unrealized loss position prior to an expected recovery in fair value (if any), the amount of such expected required sales, and the projected identification of which securities would be sold is also subject to significant judgment.

Any proposed changes to the valuation methodology will be reviewed by the Advisor to ensure changes are consistent with the applicable accounting guidance and approved as appropriate. The fair value methodology may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the Advisor's valuation methods will be appropriate and consistent with other market participants, the use of different methodologies, or assumptions by other market participants, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The Company categorizes its financial instruments in accordance with U.S. GAAP, based on the priority of the inputs to the valuation, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1 Quoted prices for identical assets or liabilities in an active market.

Level 2 Financial assets and liabilities whose values are based on the following:

• Quoted prices for similar assets or liabilities in active markets
   
• Quoted prices for identical or similar assets or liabilities in nonactive markets.
   
• Pricing models whose inputs are observable for substantially the full term of the asset or liability.
   
• Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3  Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment. The Company utilizes proprietary modeling analysis to support the independent third party broker quotes selected to determine the fair value of investments and derivative instruments.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Real Estate Securities

The fair value of the Company's real estate securities considers the underlying characteristics of each security including coupon, maturity date and collateral. The Company estimates the fair value of its Agency RMBS and non-Agency RMBS based upon a combination of observable prices in active markets, multiple indicative quotes from brokers and executable bids. In evaluating broker quotes the Company also considers additional observable market data points including recent observed trading activity for identical and similar securities, back-testing, broker challenges and other interactions with market participants, as well as yield levels generated by model-based valuation techniques. In the absence of observable quotes, the Company utilizes model-based valuation techniques that may contain unobservable valuation inputs.

When available, the fair value of real estate securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from either broker quotes, observed traded levels or model-based valuation techniques using observable inputs such as benchmark yields or issuer spreads.

The Company's Agency RMBS are valued using the market data described above, which includes inputs determined to be observable or whose significant fair value drivers are observable. Accordingly, Agency RMBS securities are classified as Level 2 in the fair value hierarchy.

While the Company's non-Agency RMBS are valued using the same process with similar inputs as the Agency RMBS, a significant amount of inputs are unobservable due to relatively low levels of market activity. The fair value of these securities is typically based on broker quotes or the Company's model-based valuation. Accordingly, the Company's non-Agency RMBS are classified as Level 3 in the fair value hierarchy. Model-based valuation consists primarily of discounted cash flow and yield analyses. Significant model inputs and assumptions include constant voluntary prepayment rates, constant default rates, delinquency rates, loss severity, market-implied discount rates, default rates, expected loss severity, weighted average life, collateral composition, borrower characteristics and prepayment rates, and may also include general economic conditions, including home price index forecasts, servicing data and other relevant information. Where possible, collateral-related assumptions are determined on an individual loan level basis.

Mortgage Loans

The fair value of the Company's mortgage loans is determined using a proprietary model that considers data such as loan origination information and additional updated borrower and loan servicing data as available, forward interest rates, general economic conditions, home price index forecasts and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans include market-implied discount rates, and projections of default rates, delinquency rates, loss severity and prepayment rates. The Company uses loan level data, macro-economic inputs and forward interest rates to generate loss adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair values established for mortgage loans held by the Company may differ from the fair values that would have been established if a ready market existed for these mortgage loans. Accordingly, mortgage loans are classified as Level 3 in the fair value hierarchy.

Derivative Instruments

Interest Rate Swap Agreements

An interest rate swap is an agreement between the Company and a counterparty to exchange periodic interest payments where one party to the contract makes a fixed rate payment in exchange for a floating rate payment from the other party. Interest rate swap agreements are valued using counterparty valuations. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations. These counterparty valuations are generally based on models with market observable inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's swap agreements are governed by the International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. As of June 30, 2013 and December 31, 2012, no credit valuation adjustment was made in determining the fair value of derivatives.

TBA Securities

A TBA security is a forward contract for the purchase of Agency RMBS at a predetermined price with a stated face amount, coupon and stated maturity at an agreed upon future date. The specific Agency RMBS delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association ("SIFMA"), are not known at the time of the transaction. The Company estimates the fair value of TBA securities based on independent third party closing levels. Accordingly, TBAs are classified as Level 2 in the fair value hierarchy.

Interest Income Recognition and Impairment - Real Estate Securities

Interest income on Agency RMBS is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency RMBS at the time of purchase are amortized into interest income over the life of such securities using the effective yield method and adjusted for actual prepayments in accordance with ASC 310-20 "Nonrefundable Fees and Other Costs".

Interest income on the non-Agency RMBS, which were purchased at a discount to par value and/or were rated below AA at the time of purchase, is recognized based on the effective yield method in accordance with ASC 325-40 "Beneficial Interests in Securitized Financial Assets". The effective yield on these securities is based on the projected cash flows from each security, which are estimated based on the Company's observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. Therefore, actual maturities of the securities are generally shorter than stated contractual maturities.

Interest income is recorded as interest income-real estate securities in the consolidated statements of operations.

Based on the projected cash flows from the Company's non-Agency RMBS purchased at a discount to par value, a portion of the purchase discount may be designated as credit protection against future credit losses and, therefore, not accreted into interest income. The amount designated as credit discount is determined, and may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively.

Agency and non-Agency RMBS are periodically evaluated for other-than-temporary impairment ("OTTI"). A security with a fair value that is less than amortized cost is considered impaired. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a security has been deemed to be other-than-temporarily impaired, the amount of OTTI is bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses is recognized in the consolidated statement of operations as a realized loss on real estate securities. The remaining OTTI related to the valuation adjustment is recognized as a component of change in unrealized gain/loss on real estate securities in the consolidated statement of operations. For the three and six months ended June 30, 2013, the Company recognized $39,179 in OTTI. For the three and six months ended June 30, 2012, the Company recognized $87,058 and $215,345, respectively, in OTTI. Realized gains and losses on sale of real estate securities are determined using the specific identification method. Real estate securities transactions are recorded on the trade date.

Interest Income Recognition - Mortgage Loans

When mortgage loans purchased by the Company show evidence of a deterioration in credit quality since origination, management determines that it is probable the Company will not collect all contractual cash flows and the fair value option of accounting has been elected, the Company will apply the guidance which addresses accounting for differences between contractual cash flows and cash flows expected to be collected from its initial investment. The yield that may be accreted (accretable yield) will be determined by the excess of the Company's initial estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the Company's initial investment in the mortgage loan. Interest income will be recognized using the accretable yield on a level-yield basis over the life of the loan as long as cash flows can be reasonably estimated. On a quarterly basis, the Company updates its estimate of the cash flows expected to be collected. The excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) will not be recognized as an adjustment of yield but will be recognized prospectively through adjustment of the loan's accretable yield over its remaining life. The amount of interest income to be recognized cannot result in a carrying amount that exceeds the payoff amount of the loan. Loans that are delinquent for 60 days or more are considered non-performing. Income recognition is suspended for loans when they become more than 90 days delinquent, or when, in management's opinion, a full recovery of interest and principal becomes doubtful. Income recognition is resumed when the loan becomes contractually current.

Expense Recognition

Expenses are recognized when incurred. Expenses include, but are not limited to, loan servicing fees, advisory fees, professional fees for legal, accounting and consulting services, and general and administrative expenses such as insurance, custodial and miscellaneous fees.

Offering Costs

Offering costs are accounted for as a reduction of additional paid-in capital. Offering costs in connection with the Company's IPO were paid out of the proceeds of the IPO. Costs incurred to organize the Company were expensed as incurred. The Company's obligation to pay for organization and offering expenses directly related to the IPO was capped at $1,200,000 and the Advisor paid for such expenses incurred above the cap.

Repurchase Agreements - Real Estate Securities

The Company finances a portion of its RMBS portfolio through the use of repurchase agreements entered into under master repurchase agreements with four financial institutions. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Repurchase agreements are recorded on trade date at the contract amount.

The Company pledges cash and certain of its RMBS as collateral under these repurchase agreements. The amounts available to be borrowed are dependent upon the fair value of the RMBS pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in fair value of pledged RMBS, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. As of June 30, 2013 and December 31, 2012, the Company has met all margin call requirements.

Repurchase Agreements - Mortgage Loans

The Company finances a portion of its mortgage loan portfolio through the use of repurchase agreements entered into under a master repurchase agreement with Citibank, N.A. ("Citi"), pursuant to which the Company may sell, and later repurchase trust certificates representing interests in residential mortgage loans (the "Trust Certificates") in an aggregate principal amount of up to $250 million, $150 million of which was committed (the "Loan Repurchase Facility"). The borrowings under the Loan Repurchase Facility are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreement. The borrowings under the Loan Repurchase Facility are recorded on the trade date at the contract amount.

The Company pledges cash and certain of its Trust Certificates as collateral under the Loan Repurchase Facility. The amounts available to be borrowed are dependent upon the fair value of the Trust Certificates pledged as collateral, which fluctuates with changes in interest rates, type of underlying mortgage loan and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in fair value of pledged Trust Certificates, the lender may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. As of June 30, 2013 the Company has met all margin call requirements.

Derivatives and Hedging Activities

The Company accounts for its derivative financial instruments in accordance with derivative accounting guidance, which requires an entity to recognize all derivatives as either assets or liabilities in the balance sheets and to measure those instruments at fair value. The Company has not designated any of its derivative agreements as hedging instruments for accounting purposes. As a result, changes in the fair value of derivatives are recorded through current period earnings.

Interest Rate Swap Agreements

The Company's interest rate swap agreements contain legally enforceable provisions that allow for netting or setting off of all individual interest rate swap receivables and payables with each respective counterparty and, therefore, the fair value of those interest rate swap agreements are netted. The credit support annex provisions of the Company's interest rate swap agreements allow the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. At June 30, 2013 and December 31, 2012, all collateral provided under these agreements consisted of cash collateral.

TBA Securities

The Company enters into TBA contracts as a means of acquiring exposure to Agency RMBS and may from time to time utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company may choose, prior to settlement, to move the settlement of these securities to a later date by entering into an offsetting position (referred to as a "pair off"), settling the paired off positions against each other for cash, and simultaneously entering into a similar TBA contract for a later settlement date, which is commonly collectively referred to as a "dollar roll" transaction.

Counterparty Risk and Concentration

Counterparty risk is the risk that counterparties may fail to fulfill their obligations or that pledged collateral value becomes inadequate. The Company attempts to manage its exposure to counterparty risk through diversification, use of financial instruments and monitoring the creditworthiness of counterparties.

As explained in the footnotes above, while the Company engages in repurchase financing activities with several financial institutions, the Company maintains custody accounts with two custodians. There is no guarantee that these custodians will not become insolvent. While there are certain regulations that seek to protect customer property in the event of a failure, insolvency or liquidation of a custodian, there is no certainty that the Company would not incur losses due to its assets being unavailable for a period of time in the event of a failure of a custodian that has custody of the Company's assets. Although management monitors the credit worthiness of its custodians, such losses could be significant and could materially impair the ability of the Company to achieve its investment objective.

Net Income (Loss) Per Share

The Company's basic earnings per share ("EPS") is computed by dividing net income or loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding OP units were converted to common stock, where such exercise or conversion would result in a lower EPS. The dilutive effect of partnership interests is computed assuming all units are converted to common stock.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 2011. The Company was organized and has operated and intends to continue to operate in a manner that will enable it to qualify to be taxed as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company's annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. GAAP). As a REIT, the Company will not be subject to federal income tax on its taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. However, the Company intends to continue to operate in a manner that will enable it to qualify for treatment as a REIT.

The Company evaluates uncertain income tax positions when applicable. Based upon its analysis of income tax positions, the Company concluded that it does not have any uncertain tax positions that meet the recognition or measurement criteria as of either June 30, 2013 or December 31, 2012.

The Company has elected to treat one of its direct wholly owned subsidiaries, ZAIS I TRS Inc., and one of its indirect wholly owned subsidiaries, ZFC Trust TRS I, LLC, as taxable REIT subsidiaries (the "TRS entities"). The Company may perform certain non-customary services, including real estate or non-real estate-related services through these TRS entities. Earnings from services performed through the TRS entities are subject to federal and state income taxes irrespective of the dividends-paid deduction available to REITs for federal income tax purposes. In addition, for the Company to continue to qualify to be taxed as a REIT, the Company's total investment in all TRS entities may not exceed 25% of the value of the total assets of Company determined for federal income tax purposes.

For the three and six months ended June 30, 2013 and 2012, the Company did not have any significant activity in the TRS entities. Accordingly, no provision for federal income taxes has been made in the accompanying consolidated financial statements, as the TRS entities did not generate taxable income for the periods presented.

Recent Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11: Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11") which requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the amendment requires disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. In addition, in January 2013, the FASB issued ASU 2013-01: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (Topic 210), Balance Sheet. The update addresses implementation issues regarding ASU 2011-11 and is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. This guidance is to be applied retrospectively for all comparative periods presented and does not amend the circumstances in which the Company offsets its derivative positions. This guidance does not have a material effect on the Company's financial statements. However, this guidance expands the disclosure requirements to which the Company is subject, which are presented in Note 14.

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Mortgage Loans

6 Months Ended

Jun. 30, 2013

Mortgage Loans [Abstract]

Mortgage Loans

5.	Mortgage Loans
	On March 22, 2013, the Company purchased a residential mortgage loan portfolio with an aggregate unpaid principal balance of $17.7 million. On May 30, 2013, the Company entered into the Loan Repurchase Facility and utilized $10.6 million of the Loan Repurchase Facility to finance its then existing residential mortgage loan portfolio. On May 31, 2013, the Company utilized $78.5 million of the Loan Repurchase Facility to fund a portion of the purchase price of its acquisition of a residential mortgage loan portfolio with an unpaid principal balance of $134.5 million.
	The following table presents the fair value, principal balance and weighted coupon and yield of the Company's mortgage loan portfolio as of June 30, 2013:

	June 30, 2013
					Weighted Average
			Principal
	Fair Value		Balance		Coupon		Yield
Loan Type
Performing Loans:
Fixed	$	59,118,932	$	75,383,607	4.92	%	6.99	%
ARM		60,455,915		73,919,489	4.53		6.54
		119,574,847		149,303,096
Nonperforming loans		1,208,578		1,805,103	6.52		9.27
Total	$	120,783,425	$	151,108,199	4.75	%	6.78	%

The following table presents the difference between the fair value and the aggregate unpaid principal balance of the Company's mortgage loans:
	June 30, 2013							December 31, 2012
			Principal							Principal
	Fair Value		Balance		Difference			Fair Value		Balance		Difference
Loan Type
Performing loans:
Fixed		59,118,932		75,383,607		(16,264,675	)		-		-		-
ARM		60,455,915		73,919,489		(13,463,574	)		-		-		-
		119,574,847		149,303,096		(29,728,249	)
Nonperforming loans		1,208,578		1,805,103		(596,525	)		-		-		-
Total	$	120,783,425	$	151,108,199	$	(30,324,774	)	$	-	$	-	$	-

Nonperforming loans includes four loans having a fair value of $358,000 and a principal balance of $555,000 that were on non-accrual status.

As of June 30, 2013, the mortgage loan portfolio consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of certain concentrations of credit risk in the mortgage loan portfolio:

	June 30, 2013		December 31, 2012
Concentration
Percentage of fair value of mortgage loans with unpaid-principal-balance-to
current -property-value in excess of 100%	92.8	%	-
Mortgage loans secured by properties in the following states:
Each representing 10% or more of fair value:			-
California	21.2	%
Florida	19.7	%

	June 30, 2013		December 31, 2012
Georgia	10.1	%
Additional states each representing more than 5% of fair value	NJ, VA		-

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Fair Value

6 Months Ended

Jun. 30, 2013

Fair Value [Abstract]

Fair Value

3.

Fair Value

Fair Value Measurement Financial assets and liabilities recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis as of June 30, 2013, by level within the fair value hierarchy:

	Assets and Liabilities at Fair Value
	Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	-	$	-	$	120,783,425	$	120,783,425
Real estate securities
Agency RMBS
30-year adjustable rate mortgage		-		2,591,883		-		2,591,883
30-year fixed rate mortgage		-		171,910,223		-		171,910,223
Non-Agency RMBS		-		-		270,034,590		270,034,590
Derivative assets		-		7,169,531		-		7,169,531
Total	$	-	$	181,671,637	$	390,818,015	$	572,489,652
Liabilities
Derivative liabilities	$	-	$	5,069,472	$	-	$	5,069,472
Total	$	-	$	5,069,472	$	-	$	5,069,472

The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis as of December 31, 2012, by level within the fair value hierarchy:

	Assets and Liabilities at Fair Value
	Level 1		Level 2		Level 3		Total
Assets
Real estate securities
Agency RMBS
30-year adjustable rate mortgage	$	-	$	3,240,330	$	-	$	3,240,330
30-year fixed rate mortgage		-		66,519,702		-		66,519,702
Non-Agency RMBS		-		-		100,911,651		100,911,651
Total	$	-	$	69,760,032	$	100,911,651	$	170,671,683
Liabilities
Derivative liabilities	$	-	$	1,144,744	$	-	$	1,144,744
Total	$	-	$	1,144,744	$	-	$	1,144,744

The following table presents additional information about the Company's financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

	June 30, 2013						December 31, 2012
	RMBS			Mortgage loans			RMBS			Mortgage loans
Beginning balance	$	100,911,651		$	-		$	76,473,092		$	-
Total net transfers into/out of Level 3		-			-			-			-
Acquisitions		193,538,950			119,758,049			68,617,460			-
Proceeds from sales		-			-			(43,379,205	)		-
Net accretion of discounts		6,706,957			259,435			1,337,369			-
Proceeds from principal repayments		(24,322,480	)		(867,594	)		(16,938,626	)		-
Total losses (realized / unrealized) included        in earnings		(7,505,685	)		-			(2,579,401	)		-
Total gains (realized / unrealized) included        in earnings		705,197			1,633,535			17,380,962			-
Ending balance	$	270,034,590		$	120,783,425		$	100,911,651		$	-
The amount of total gains or (losses) for the period        included in earnings attributable to the change in        unrealized gains or losses relating to assets or        liabilities still held at the reporting date	$	(14,228,335	)	$	1,567,291		$	10,764,268		$	-

There were no financial assets or liabilities that were accounted for at fair value on a nonrecurring basis at June 30, 2013 and December 31, 2012. There were no transfers into or out of Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2013.

The following table presents quantitative information about the Company's real estate securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max		Weighted Average
Non-Agency RMBS (1)
Alternative - A	$	112,066,781	Broker quotes/comparable trades	Constant voluntary prepayment	2.2%	17.1%	7.9%
				Constant default rate	1.3%	11.5%	6.1%
				Loss severity	0.7%	67.9%	40.6%
				Delinquency	9.4%	39.9%	20.1%
Pay option adjustable rate		27,680,063	Broker quotes/comparable trades	Constant voluntary prepayment	1.2%	22.5%	9.0%
				Constant default rate	2.8%	9.4%	5.3%
				Loss severity	1.9%	84.1%	46.0%
				Delinquency	8.7%	35.0%	16.7%
Prime		97,763,571	Broker quotes/comparable trades	Constant voluntary prepayment	3.4%	22.6%	12.1%
				Constant default rate	0.2%	9.0%	5.6%
				Loss severity	3.8%	69.2%	38.3%
				Delinquency	2.9%	29.2%	15.8%
Subprime		32,524,175	Broker quotes/comparable trades	Constant voluntary prepayment	1.1%	14.3%	4.3%
				Constant default rate	3.1%	16.4%	5.6%
				Loss severity	9.9%	81.0%	50.3%

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of						Weighted
	June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max		Average
				Delinquency	12.9%	30.7%	20.0	%
Total Non-Agency RMBS	$	270,034,590
____________________

(1) The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level.

The following table presents quantitative information about the Company's mortgage loans which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:
Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of								Weighted
	June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max				Average
Mortgage Loans	$	120,783,425	Model	Constant voluntary prepayment	1.1	%	7.6	%	3.5	%
				Constant default rate	0.1	%	5.3	%	4.0	%
				Loss severity	13.9	%	42.8	%	33.8	%
	$	120,783,425		Delinquency	3.4	%	14.5	%	13.5	%
During the three months ended June 30, 2013, the Company purchased mortgage loans having an unpaid principal balance of $134.5 million. The Company determined the accretable yield on this portfolio to be $68.4 million at the time of purchase. During the six months ended June 30, 2013, the Company purchased mortgage loans having an unpaid principal balance of $152.2 million for $119.8 million. The Company determined the accretable yield on these portfolios to be a total of $83.4 million at the time of purchase. The total accretable yield on the Company's mortgage loans at June 30, 2013 was $82.4 million. The fair value measurements of these assets are sensitive to changes in assumptions regarding prepayment, probability of default, loss severity in the event of default, forecasts of home prices, and significant activity or developments in the non-Agency securities market. Significant changes in any of those inputs in isolation may result in significantly higher or lower fair value measurements. A change in the assumption used for forecasts of home price changes is accompanied by directionally opposite changes in the assumptions used for probability of default and loss severity. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurements. Fair Value Option Changes in fair value for assets and liabilities for which the fair value election is made are recognized in income as they occur. The fair value option may be elected on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The following table presents the difference between the fair value and the aggregate unpaid principal amount and/or notional balance of assets for which the fair value option was elected:

	June 30, 2013							December 31, 2012
			Principal							Principal
			and/or Notional							and/or Notional
	Fair Value		Balance(1)		Difference			Fair Value		Balance		Difference
Financial instruments
Assets
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	2,591,883	$	2,531,514	$	60,369		$	3,240,330	$	3,083,892	$	156,438
30-year fixed rate mortgage		171,910,223		170,265,662		1,644,561			66,519,702		61,034,333		5,485,369
Non-Agency RMBS		270,034,590		401,105,036		(131,070,446	)		100,911,651		109,197,632		(8,285,981	)
Total RMBS		444,536,696		573,902,212		(129,365,516	)		170,671,683		173,315,857		(2,644,174	)
Mortgage loans		120,783,425		151,108,199		(30,324,774	)		-		-		-
Total financial instruments	$	565,320,121	$	725,010,411	$	(159,690,290	)	$	170,671,683	$	173,315,857	$	(2,644,174	)
____________________

(1) Non-Agency RMBS includes an IO with a notional balance of $80.0 million.

Fair Value of Other Financial Instruments In addition to the above disclosures regarding assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure about the fair value of all other financial instruments. Estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair values. The following table summarizes the estimated fair value for all other financial instruments:
	June 30, 2013		December 31, 2012
Other financial instruments
Assets
Cash	$	21,174,544	$	19,061,110
Restricted Cash		12,545,944		3,768,151
Liabilities
Repurchase agreements	$	308,672,976	$	109,270,298
Loan repurchase facility		89,331,282		-
Common stock repurchase liability		-		11,190,687

Cash includes cash on hand for which fair value equals carrying value (a Level 1 measurement). Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or repurchase agreements. Due to the short-term nature of the restrictions, fair value approximates carrying value (a Level 1 measurement). The fair value of repurchase agreements and of the Loan Repurchase Facility is based on an expected present value technique using observable market interest rates. As such, the Company considers the estimated fair value to be a Level 2 measurement. This method discounts future estimated cash flows using rates the Company determined best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality. The fair value of the common stock repurchase liability is equal to the agreed upon purchase price. The Company considers the estimated fair value to be a Level 3 measurement.

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Real Estate Securities (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended			12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Minimum [Member]	Dec. 31, 2012 Minimum [Member]	Jun. 30, 2013 Maximum [Member]	Dec. 31, 2012 Maximum [Member]	Jun. 30, 2013 Weighted Average [Member]	Dec. 31, 2012 Weighted Average [Member]
Investment Holdings [Line Items]
Contractual maturities					8 years 2 months 12 days	8 years 4 months 24 days	33 years 7 months 6 days	33 years 8 months 12 days	26 years 4 months 24 days	26 years 1 month 6 days
Proceeds from the sale of real estate securities	$ 47,111,700	$ 3,257,082	$ 53,913,098	$ 28,759,376
Realized (loss)/gain on the sale of real estate securities	(206,876)	196,241	(206,876)	(1,736,517)
Realized loss on other-than-temporary impairments	$ (39,179)	$ (87,058)	$ (39,179)	$ (215,345)

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Derivative Instruments [Abstract]

Schedule of Information about Interest Rate Swaps

The following table summarizes information related to derivative instruments:

Non-hedge derivatives	June 30, 2013		December 31, 2012
Notional amount of interest rate swaps	$	225,725,000	$	32,600,000
Net notional amount of TBA contracts		62,000,000		-
Total net notional amount	$	287,725,000	$	32,600,000

Schedule of Fair Value of Derivative Instruments

The following table presents the fair value of the Company's derivative instruments and their balance sheet location:
				June 30,			December 31,
	Derivative instruments	Designation	Balance Sheet Location	2013			2012
	Interest rate swaps	Non-hedge	Derivative assets (liabilities), at fair value	$	7,169,531		$	(1,144,744	)
	TBAs(1)	Non-hedge	Derivative liabilities, at fair value	$	(5,069,472	)	$	-
	____________________

(1) Fair value as of June 30, 2013 includes $1.4 million of unrealized loss on TBA contracts that have not been paired off as of June 30, 2013.

Schedule of Gains / (Losses) Related to Derivatives

The following table summarizes gains and losses related to derivatives:

		Three Months Ended						Six Months Ended
	Income Statement
Non-hedge derivatives	Location	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Interest rate swaps	Gain / (loss) on derivative instruments	$	8,272,229		$	(897,767	)	$	8,216,927		$	(755,952	)
TBAs(1)	Gain / (loss) on derivative instruments		(4,573,848	)		-			(4,237,402	)		-
____________________

(1) Gains and losses from purchases and sales of TBAs consists of $0.8 million of net TBA dollar roll net interest income and a net loss of $5.4 million due to price declines.

Schedule of Information Related to Derivative Instruments

The following table presents information about the Company's interest rate swap agreements as of June 30, 2013:

			Weighted Average		Weighted Average		Weighted Average
Maturity	Notional Amount		Pay Rate		Receive Rate		Years to Maturity
2016	$	12,102,000	1.20	%	0.27	%	3.2
2017		11,050,000	1.28		0.28		3.8
2018		38,000,000	1.54		0.28		4.9
2021		9,448,000	2.16		0.27		8.2
2023		155,125,000	2.05		0.27		9.7
Total/Weighted average	$	225,725,000	1.88	%	0.27	%	8.2
The following table presents information about the Company's interest rate swap agreements as of December 31, 2012:

			Weighted Average		Weighted Average		Weighted Average
Maturity	Notional Amount		Pay Rate		Receive Rate		Years to Maturity
2016	$	12,102,000	1.21	%	0.31	%	3.7
2017		11,050,000	1.28		0.31		4.3
2021		9,448,000	2.16		0.31		8.7
Total/Weighted average	$	32,600,000	1.51	%	0.31	%	5.3

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Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	May 30, 2013 Loan Repurchase Facility [Member]	Jun. 30, 2013 ZAIS Financial Partners, LP. [Member]
Noncontrolling Interest [Line Items]
Equity interest held						89.60%
Interest Income Recognition and Impairment
Realized loss on other-than-temporary impairments	$ 39,179	$ 87,058	$ 39,179	$ 215,345
Threshold period past due after which loans are considered considered non-performing			60 days
Threshold period past due after which income recognition is suspended			90 days
Offering Costs
Maximum offering expenses	1,200,000		1,200,000
Line of Credit Facility [Line Items]
Maximum amount of facility					250,000,000
Committed amount					$ 150,000,000

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Fair Value (Schedule of Fair Value Option) (Details) (USD $)	Jun. 30, 2013		Dec. 31, 2012
Financial Instruments [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	$ 565,320,121		$ 170,671,683
Principal and/or Notional Balance	725,010,411	[1]	173,315,857
Difference	(159,690,290)		(2,644,174)
30-Year Adjustable Rate Mortgage [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	2,591,883		3,240,330
Principal and/or Notional Balance	2,531,514	[1]	3,083,892
Difference	60,369		156,438
30-Year Fixed Rate Mortgage [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	171,910,223		66,519,702
Principal and/or Notional Balance	170,265,662	[1]	61,034,333
Difference	1,644,561		5,485,369
Non-Agency RMBS [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	270,034,590		100,911,651
Principal and/or Notional Balance	401,105,036	[1]	109,197,632
Difference	(131,070,446)		(8,285,981)
Residential Mortgage Backed Securities [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	444,536,696		170,671,683
Principal and/or Notional Balance	573,902,212	[1]	173,315,857
Difference	(129,365,516)		(2,644,174)
Mortgage Loans [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	120,783,425
Principal and/or Notional Balance	151,108,199	[1]
Difference	(30,324,774)
Interest-Only Securities [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Principal and/or Notional Balance	$ 80,000,000

[1] Non-Agency RMBS includes an IO with a notional balance of $80.0 million.

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Derivative Instruments (Schedule of Losses and Gains of Derivative Instruments) (Details) (Not Designated as Hedging Instrument [Member], USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Interest Rate Swap [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivative instruments	$ 8,272,229		$ (897,767)		$ 8,216,927		$ (755,952)
TBAs [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivative instruments	(4,573,848)	[1]		[1]	(4,237,402)	[1]		[1]
Realized gains (losses) on sale of derivative					800,000
Unrealized gains (losses) recognized					$ (5,400,000)

[1] Gains and losses from purchases and sales of TBAs consists of $0.8 million of net TBA dollar roll net interest income and a net loss of $5.4 million due to price declines.

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Loan Repurchase Facility (Schedule of Information Regarding Posting of Mortgage Loan Collateral) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Assets Sold under Agreements to Repurchase [Line Items]
Fair value of mortgage loans pledged as collateral under repurchase agreements	$ 120,517,248
Cash pledged under repurchase agreements	6,400,451	1,335,305
Mortgage Loans [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements secured by mortgage loans	89,112,325
Fair value of mortgage loans pledged as collateral under repurchase agreements	120,517,248
Fair value of mortgage loans not pledged as collateral under repurchase agreements	266,177
Cash pledged under repurchase agreements

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Mortgage Loans (Schedule of Concentrations of Credit Risk) (Details) (Mortgage Receivable [Member])	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Loans with Unpaid Principal Balance in Excess of Fair Value of Collateral [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	92.80%
Geographic Concentration Risk [Member] | California [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	21.20%
Geographic Concentration Risk [Member] | Florida [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	19.70%
Geographic Concentration Risk [Member] | Georgia [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	10.10%

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Consolidated Balance Sheets [Abstract]
Real estate securities, pledged as collateral	$ 364,386,699	$ 133,538,998
Mortgage loans, pledged as collateral	$ 120,517,248
12.5% Series A cumulative non-voting preferred stock, par or stated value per share	$ 0.0001	$ 0.0001
12.5% Series A cumulative non-voting preferred stock, shares authorized	50,000,000	50,000,000
12.5% Series A cumulative non-voting preferred stock, shares issued	0	133
12.5% Series A cumulative non-voting preferred stock, shares outstanding	0	133
Common stock, par value per share	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	7,970,886	2,586,131
Common stock, shares outstanding	7,970,886	2,071,096

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Derivative Instruments

6 Months Ended

Jun. 30, 2013

Derivative Instruments [Abstract]

Derivative Instruments

8.	Derivative Instruments
	Interest Rate Swap Agreements
	To help mitigate exposure to higher short-term interest rates, the Company uses currently-paying and forward-starting, three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. These agreements establish an economic fixed rate on related borrowings because the variable-rate payments received on the swap agreements largely offset interest accruing on the related borrowings, leaving the fixed-rate payments to be paid on the swap agreements as the Company's effective borrowing rate, subject to certain adjustments including changes in spreads between variable rates on the swap agreements and actual borrowing rates.
	The Company's interest rate swap agreements have not been designated as hedging instruments.
	TBA Securities
	The Company enters into TBA contracts as a means of acquiring exposure to Agency RMBS and may, from time to time, utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company accounts for its TBA contracts as derivative instruments due to the fact that it does not intend to take physical delivery of the securities.
	The following table summarizes information related to derivative instruments:

Non-hedge derivatives	June 30, 2013		December 31, 2012
Notional amount of interest rate swaps	$	225,725,000	$	32,600,000
Net notional amount of TBA contracts		62,000,000		-
Total net notional amount	$	287,725,000	$	32,600,000

During the three months ended June 30, 2013, the Company paired off purchases of TBA securities with a combined notional amount of $388.0 million by entering into simultaneous sales of TBA securities and realized gains of $0.9 million and recognized unrealized losses of $4.1 million as a result. During the six months ended June 30, 2013, the Company paired off purchases of TBA securities with a combined notional amount of $473.0 million by entering into simultaneous sales of TBA securities and realized gains of $0.8 million and recognized unrealized losses of $3.7 million as a result. For the three and six months ended June 30, 2013, the Company recognized unrealized losses of $1.4 million and $1.4 million, respectively on TBA securities that had not been paired off as of June 30, 2013. The following table presents the fair value of the Company's derivative instruments and their balance sheet location:
			June 30,			December 31,
Derivative instruments	Designation	Balance Sheet Location	2013			2012
Interest rate swaps	Non-hedge	Derivative assets (liabilities), at fair value	$	7,169,531		$	(1,144,744	)
TBAs(1)	Non-hedge	Derivative liabilities, at fair value	$	(5,069,472	)	$	-
____________________

(1)	Fair value as of June 30, 2013 includes $1.4 million of unrealized loss on TBA contracts that have not been paired off as of June 30, 2013.
The following table summarizes gains and losses related to derivatives:

		Three Months Ended						Six Months Ended
	Income Statement
Non-hedge derivatives	Location	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Interest rate swaps	Gain / (loss) on derivative instruments	$	8,272,229		$	(897,767	)	$	8,216,927		$	(755,952	)
TBAs(1)	Gain / (loss) on derivative instruments		(4,573,848	)		-			(4,237,402	)		-
____________________

(1)	Gains and losses from purchases and sales of TBAs consists of $0.8 million of net TBA dollar roll net interest income and a net loss of $5.4 million due to price declines.
The following table presents information about the Company's interest rate swap agreements as of June 30, 2013:

			Weighted Average		Weighted Average		Weighted Average
Maturity	Notional Amount		Pay Rate		Receive Rate		Years to Maturity
2016	$	12,102,000	1.20	%	0.27	%	3.2
2017		11,050,000	1.28		0.28		3.8
2018		38,000,000	1.54		0.28		4.9
2021		9,448,000	2.16		0.27		8.2
2023		155,125,000	2.05		0.27		9.7
Total/Weighted average	$	225,725,000	1.88	%	0.27	%	8.2
The following table presents information about the Company's interest rate swap agreements as of December 31, 2012:

			Weighted Average		Weighted Average		Weighted Average
Maturity	Notional Amount		Pay Rate		Receive Rate		Years to Maturity
2016	$	12,102,000	1.21	%	0.31	%	3.7
2017		11,050,000	1.28		0.31		4.3
2021		9,448,000	2.16		0.31		8.7
Total/Weighted average	$	32,600,000	1.51	%	0.31	%	5.3
Restricted cash at June 30, 2013 included $5.2 million of cash pledged as collateral against TBA contracts and $1.0 million of cash pledged as collateral against interest rate swap agreements. Restricted cash at December 31, 2012 included $2.4 million of cash pledged as collateral against interest rate swaps.

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Consolidated Statements of Stockholders' Equity (USD $)	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	(Accumulated Deficit) / Retained Earnings [Member]	Total ZAIS Financial Corp. Stockholders' Equity [Member]	Non-controlling Interests in Operating Partnership [Member]
Balance at Dec. 31, 2011	$ 55,317,874		$ 302	$ 60,452,038	$ (5,134,466)	$ 55,317,874
Balance, shares at Dec. 31, 2011			3,022,617
Net proceeds from offering of preferred stock	115,499			115,499		115,499
Net proceeds from offering of preferred stock, shares		133
Net proceeds from offering of OP units	20,393,704						20,393,704
Net proceeds from offering of common stock	4,757,470		24	4,757,446		4,757,470
Net proceeds from offering of common stock, shares			232,039
Distributions on OP units	(1,117,280)						(1,117,280)
Dividends on common stock	(9,471,442)				(9,471,442)	(9,471,442)
Repurchase of stock	(14,181,259)		(67)	(14,181,192)		(14,181,259)
Repurchase of stock, shares			(668,525)
Common stock repurchase liability/Reversal of Common stock repurchase liability	(10,923,944)		(52)	(10,923,892)		(10,923,944)
Common stock repurchase liability/Reversal of Common stock repurchase liability, shares			(515,035)
Rebalancing of ownership percentage between the Company and Operating Partnership				(460,129)		(460,129)	460,129
Net (loss) income	20,250,173				19,887,849	19,887,849	362,324
Balance at Dec. 31, 2012	65,140,795		207	39,759,770	5,281,941	45,041,918	20,098,877
Balance, shares at Dec. 31, 2012		133	2,071,096
Net proceeds from offering of common stock	118,862,500		566	118,861,934		118,862,500
Net proceeds from offering of common stock, shares			5,650,000
Equity raise payments	(216,658)			(216,658)		(216,658)
Distributions on OP units	(621,034)						(621,034)
Dividends on common stock	(5,340,492)				(5,340,492)	(5,340,492)
Repurchase of stock	(133,000)			(133,000)		(133,000)
Repurchase of stock, shares		(133)
Common stock repurchase liability/Reversal of Common stock repurchase liability	5,440,175		25	5,440,150		5,440,175
Common stock repurchase liability/Reversal of Common stock repurchase liability, shares			249,790
Rebalancing of ownership percentage between the Company and Operating Partnership				495,421		495,421	(495,421)
Net (loss) income	(5,610,561)				(5,121,179)	(5,121,179)	(489,382)
Balance at Jun. 30, 2013	$ 177,521,725		$ 798	$ 164,207,617	$ (5,179,730)	$ 159,028,685	$ 18,493,040
Balance, shares at Jun. 30, 2013			7,970,886

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Related Party Transactions (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Related Party Transaction [Line Items]
Advisory fee - related party	$ 704,687	$ 245,283	$ 1,193,072	$ 472,578
Maximum offering expenses	1,200,000		1,200,000
Acquisitions of real estate securities			344,623,655	72,680,829
ZAIS REIT Management, LLC [Member]
Related Party Transaction [Line Items]
Advisory fee, rate			1.50%
Advisory fee - related party	700,000	200,000	1,200,000	500,000
Advisory fees due to related party	700,000		700,000
Principal balance of securities acquired			17,400,000
Acquisitions of real estate securities			$ 15,700,000

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Consolidated Balance Sheets (USD $)	Jun. 30, 2013	Dec. 31, 2012
Assets
Cash	$ 21,174,544	$ 19,061,110
Restricted cash	12,545,944	3,768,151
Real estate securities, at fair value - $364,386,699 and $133,538,998 pledged as collateral, respectively	444,536,696	170,671,683
Mortgage loans, at fair value - $120,517,248 and $ - pledged as collateral, respectively	120,783,425
Derivative assets, at fair value	7,169,531
Other assets	1,648,040	1,345,665
Receivable for real estate securities sold		6,801,398
Total assets	607,858,180	201,648,007
Liabilities
Repurchase agreements	308,497,415	116,080,467
Loan repurchase facility	89,112,325
Payable for real estate securities purchased	20,607,149	6,195,767
Derivative liabilities, at fair value	5,069,472	1,144,744
Dividends and distributions payable	4,004,010
Accounts payable and other liabilities	2,609,191	1,820,581
Accrued interest payable	436,893	74,966
Common stock repurchase liability		11,190,687
Total liabilities	430,336,455	136,507,212
Commitments and contingencies (Note 13)
Stockholders' equity
12.5% Series A cumulative non-voting preferred stock, $0.0001 par value; 50,000,000 shares authorized; zero shares and 133 shares issued and outstanding, respectively
Common stock $0.0001 par value; 500,000,000 shares authorized; 7,970,886 shares issued and 7,970,886 shares outstanding, and 2,586,131, shares issued and 2,071,096 shares outstanding, respectively	798	207
Additional paid-in capital	164,207,617	39,759,770
(Accumulated deficit)/retained earnings	(5,179,730)	5,281,941
Total ZAIS Financial Corp. stockholders' equity	159,028,685	45,041,918
Non-controlling interests in operating partnership	18,493,040	20,098,877
Total stockholders' equity	177,521,725	65,140,795
Total liabilities and stockholders' equity	$ 607,858,180	$ 201,648,007

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Loan Repurchase Facility (Schedule of Financial Information) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013		Jun. 30, 2013		Dec. 31, 2012
Line of Credit Facility [Line Items]
Fair value of mortgage loans pledged as collateral under repurchase agreements	$ 120,517,248		$ 120,517,248
Loan Repurchase Facility [Member]
Line of Credit Facility [Line Items]
Balance	89,112,325		89,112,325
Unused amount	60,887,675	[1]	60,887,675	[1]		[1]
Weighted-average interest rate at end of period	2.94%		2.94%
Fair value of mortgage loans pledged as collateral under repurchase agreements	120,517,248		120,517,248
Weighted-average interest rate	2.94%		2.94%
Average balance of loans sold under agreements to repurchase	266,499		266,499
Maximum daily amount outstanding	89,112,325		89,112,325
Total interest expense	$ 289,296		$ 289,296

[1] The amount the Company is able to borrow under loan repurchase agreements is tied to the fair value of unencumbered mortgage loans eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold.

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Reconciliation of Earnings and Shares Used in Calculating Basic and Diluted Earnings Per Share

The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share:

	Three Months Ended					Six Months Ended
	June 30, 2013			June 30, 2012		June 30, 2013			June 30, 2012
Numerator:
Net (loss)/income attributable to ZAIS Financial        Corp. common stockholders	$	(6,780,401	)	$	3,323,858	$	(5,121,179	)	$	9,553,594
Effect of dilutive securities:
Loss allocated to Operating Partnership non-               controlling interests		(788,476	)		-		(489,382	)		-
Dilutive net (loss) / income available to         stockholders	$	(7,568,877	)	$	3,323,858	$	(5,610,561	)	$	9,553,594
Denominator:
Weighted average number of shares of common        stock		7,970,886			3,022,617		6,564,284			3,022,617
Effect of dilutive securities:
Weighted average OP units		926,914			-		926,914			-
Weighted average dilutive shares		8,897,800			3,022,617		7,491,198			3,022,617
Net (loss) / income per share applicable to ZAIS         Financial Corp. common stockholders -         Basic/Diluted	$	(.85	)	$	1.10	$	(.78	)	$	3.16

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value [Abstract]

Schedule of Financial Instruments Accounted for at Fair Value on a Recurring Basis

The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis as of June 30, 2013, by level within the fair value hierarchy:

	Assets and Liabilities at Fair Value
	Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	-	$	-	$	120,783,425	$	120,783,425
Real estate securities
Agency RMBS
30-year adjustable rate mortgage		-		2,591,883		-		2,591,883
30-year fixed rate mortgage		-		171,910,223		-		171,910,223
Non-Agency RMBS		-		-		270,034,590		270,034,590
Derivative assets		-		7,169,531		-		7,169,531
Total	$	-	$	181,671,637	$	390,818,015	$	572,489,652
Liabilities
Derivative liabilities	$	-	$	5,069,472	$	-	$	5,069,472
Total	$	-	$	5,069,472	$	-	$	5,069,472

The following table sets forth the Company's financial instruments that were accounted for at fair value on a recurring basis as of December 31, 2012, by level within the fair value hierarchy:

	Assets and Liabilities at Fair Value
	Level 1		Level 2		Level 3		Total
Assets
Real estate securities
Agency RMBS
30-year adjustable rate mortgage	$	-	$	3,240,330	$	-	$	3,240,330
30-year fixed rate mortgage		-		66,519,702		-		66,519,702
Non-Agency RMBS		-		-		100,911,651		100,911,651
Total	$	-	$	69,760,032	$	100,911,651	$	170,671,683
Liabilities
Derivative liabilities	$	-	$	1,144,744	$	-	$	1,144,744
Total	$	-	$	1,144,744	$	-	$	1,144,744

Schedule of Financial Instruments Utilizing Level 3 Inputs

The following table presents additional information about the Company's financial instruments which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

	June 30, 2013						December 31, 2012
	RMBS			Mortgage loans			RMBS			Mortgage loans
Beginning balance	$	100,911,651		$	-		$	76,473,092		$	-
Total net transfers into/out of Level 3		-			-			-			-
Acquisitions		193,538,950			119,758,049			68,617,460			-
Proceeds from sales		-			-			(43,379,205	)		-
Net accretion of discounts		6,706,957			259,435			1,337,369			-
Proceeds from principal repayments		(24,322,480	)		(867,594	)		(16,938,626	)		-
Total losses (realized / unrealized) included        in earnings		(7,505,685	)		-			(2,579,401	)		-
Total gains (realized / unrealized) included        in earnings		705,197			1,633,535			17,380,962			-
Ending balance	$	270,034,590		$	120,783,425		$	100,911,651		$	-
The amount of total gains or (losses) for the period        included in earnings attributable to the change in        unrealized gains or losses relating to assets or        liabilities still held at the reporting date	$	(14,228,335	)	$	1,567,291		$	10,764,268		$	-

Schedule of Quantitative Information about Level 3 Fair Value Measurements

The following table presents quantitative information about the Company's real estate securities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max		Weighted Average
Non-Agency RMBS (1)
Alternative - A	$	112,066,781	Broker quotes/comparable trades	Constant voluntary prepayment	2.2%	17.1%	7.9%
				Constant default rate	1.3%	11.5%	6.1%
				Loss severity	0.7%	67.9%	40.6%
				Delinquency	9.4%	39.9%	20.1%
Pay option adjustable rate		27,680,063	Broker quotes/comparable trades	Constant voluntary prepayment	1.2%	22.5%	9.0%
				Constant default rate	2.8%	9.4%	5.3%
				Loss severity	1.9%	84.1%	46.0%
				Delinquency	8.7%	35.0%	16.7%
Prime		97,763,571	Broker quotes/comparable trades	Constant voluntary prepayment	3.4%	22.6%	12.1%
				Constant default rate	0.2%	9.0%	5.6%
				Loss severity	3.8%	69.2%	38.3%
				Delinquency	2.9%	29.2%	15.8%
Subprime		32,524,175	Broker quotes/comparable trades	Constant voluntary prepayment	1.1%	14.3%	4.3%
				Constant default rate	3.1%	16.4%	5.6%
				Loss severity	9.9%	81.0%	50.3%

Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of						Weighted
	June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max		Average
				Delinquency	12.9%	30.7%	20.0	%
Total Non-Agency RMBS	$	270,034,590
____________________

(1) The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level.

The following table presents quantitative information about the Company's mortgage loans which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:
Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of								Weighted
	June 30, 2013		Valuation Technique(s)	Unobservable Input	Min / Max				Average
Mortgage Loans	$	120,783,425	Model	Constant voluntary prepayment	1.1	%	7.6	%	3.5	%
				Constant default rate	0.1	%	5.3	%	4.0	%
				Loss severity	13.9	%	42.8	%	33.8	%
	$	120,783,425		Delinquency	3.4	%	14.5	%	13.5	%

Schedule of Fair Value Option

The following table presents the difference between the fair value and the aggregate unpaid principal amount and/or notional balance of assets for which the fair value option was elected:

	June 30, 2013							December 31, 2012
			Principal							Principal
			and/or Notional							and/or Notional
	Fair Value		Balance(1)		Difference			Fair Value		Balance		Difference
Financial instruments
Assets
Real estate securities
Agency RMBS
30-year adjustable rate
mortgage	$	2,591,883	$	2,531,514	$	60,369		$	3,240,330	$	3,083,892	$	156,438
30-year fixed rate mortgage		171,910,223		170,265,662		1,644,561			66,519,702		61,034,333		5,485,369
Non-Agency RMBS		270,034,590		401,105,036		(131,070,446	)		100,911,651		109,197,632		(8,285,981	)
Total RMBS		444,536,696		573,902,212		(129,365,516	)		170,671,683		173,315,857		(2,644,174	)
Mortgage loans		120,783,425		151,108,199		(30,324,774	)		-		-		-
Total financial instruments	$	565,320,121	$	725,010,411	$	(159,690,290	)	$	170,671,683	$	173,315,857	$	(2,644,174	)
____________________

(1) Non-Agency RMBS includes an IO with a notional balance of $80.0 million.

Schedule of Fair Value of Other Financial Instruments

The following table summarizes the estimated fair value for all other financial instruments:
		June 30, 2013		December 31, 2012
	Other financial instruments
	Assets
	Cash	$	21,174,544	$	19,061,110
	Restricted Cash		12,545,944		3,768,151
	Liabilities
	Repurchase agreements	$	308,672,976	$	109,270,298
	Loan repurchase facility		89,331,282		-
	Common stock repurchase liability		-		11,190,687

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Mortgage Loans (Schedule of Mortgage Loans at Fair Value) (Details) (Mortgage Receivable [Member], USD $)	Jun. 30, 2013		Dec. 31, 2012
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	$ 120,783,425
Principal Balance	151,108,199	[1]
Difference	(30,324,774)
Performing Loans [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	119,574,847
Principal Balance	149,303,096
Difference	(29,728,249)
Fixed [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	59,118,932
Principal Balance	75,383,607
Difference	(16,264,675)
ARM [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	60,455,915
Principal Balance	73,919,489
Difference	(13,463,574)
Nonperforming Loans [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value	1,208,578
Principal Balance	1,805,103
Difference	(596,525)
Fair value of loans on non-accrual status	358,000
Principal balance of loans on non-accrual status	$ 555,000

[1] Non-Agency RMBS includes an IO with a notional balance of $80.0 million.

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Derivative Instruments (Schedule of Fair Value of Derivative Instruments) (Details) (Not Designated as Hedging Instrument [Member], USD $)	Jun. 30, 2013		Dec. 31, 2012
Interest Rate Swap [Member]
Derivatives, Fair Value [Line Items]
Derivative assets (liabilities), at fair value	$ 7,169,531		$ (1,144,744)
TBAs [Member]
Derivatives, Fair Value [Line Items]
Derivative assets (liabilities), at fair value	$ (5,069,472)	[1]		[1]

[1] Fair value as of June 30, 2013 includes $1.4 million of unrealized loss on TBA contracts that have not been paired off as of June 30, 2013.

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Real Estate Securities (Schedule of Information Regarding Real Estate Securities) (Details) (USD $)	3 Months Ended		6 Months Ended				12 Months Ended		6 Months Ended		12 Months Ended		6 Months Ended		12 Months Ended			6 Months Ended		12 Months Ended		6 Months Ended		12 Months Ended		6 Months Ended		12 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 30-Year Adjustable Rate Mortgage [Member]		Dec. 31, 2012 30-Year Adjustable Rate Mortgage [Member]		Jun. 30, 2013 30-Year Fixed Rate Mortgage [Member]		Dec. 31, 2012 30-Year Fixed Rate Mortgage [Member]		Jun. 30, 2013 Alternative - A [Member]		Dec. 31, 2012 Alternative - A [Member]		Jun. 30, 2013 Interest-Only Securities [Member]	Jun. 30, 2013 Pay Option Adjustable Rate [Member]		Dec. 31, 2012 Pay Option Adjustable Rate [Member]		Jun. 30, 2013 Prime [Member]		Dec. 31, 2012 Prime [Member]		Jun. 30, 2013 Subprime [Member]		Dec. 31, 2012 Subprime [Member]		Jun. 30, 2013 Total RMBS [Member]		Dec. 31, 2012 Total RMBS [Member]
Investment Holdings [Line Items]
Principal or Notional Balance					$ 2,531,514		$ 3,083,892		$ 170,265,662		$ 61,034,333		$ 211,822,035	[1]	$ 38,549,827		$ 80,000,000	$ 36,308,960		$ 1,249,426		$ 106,386,157		$ 64,978,647		$ 46,587,884		$ 4,419,732		$ 573,902,212		$ 173,315,857
Premium (Discount)					269,463		351,047		7,140,749		3,056,889		(100,256,547)	[1]	(8,606,689)			(7,839,404)		(378,803)		(12,568,896)		(8,074,525)		(13,204,279)		(825,131)		(126,458,914)		(14,477,212)
Amortized Cost					2,800,977		3,434,939		177,406,411		64,091,222		111,565,488	[1]	29,943,138			28,469,556		870,623		93,817,261		56,904,122		33,383,605		3,594,601		447,443,298		158,838,645
Gross Unrealized
Gains						[2]		[3]	678,522	[2]	2,442,401	[3]	3,418,507	[1],[2]	3,436,729	[3]		114,962	[2]	95,221	[3]	5,053,935	[2]	5,668,301	[3]	538,207	[2]	401,214	[3]	9,804,133	[2]	12,043,866	[3]
Losses					(209,094)	[2]	(194,609)	[3]	(6,174,710)	[2]	(13,921)	[3]	(2,917,214)	[1],[2]		[3]		(904,455)	[2]		[3]	(1,107,625)	[2]	(2,298)	[3]	(1,397,637)	[2]		[3]	(12,710,735)	[2]	(210,828)	[3]
Fair Value					2,591,883		3,240,330		171,910,223		66,519,702		112,066,781	[1]	33,379,867			27,680,063		965,844		97,763,571		62,570,125		32,524,175		3,995,815		444,536,696		170,671,683
Weighted Average Coupon					2.80%		2.84%		3.43%		3.82%		4.95%	[1]	5.69%			0.84%		1.19%		5.41%		5.79%		0.65%		0.98%		3.88%		4.81%
Weighted Average Yield					2.28%	[4]	2.28%	[4]	3.14%	[4]	3.44%	[4]	6.41%	[1],[4]	7.95%	[4]		6.15%	[4]	8.67%	[4]	6.51%	[4]	7.34%	[4]	6.98%	[4]	9.10%	[4]	5.17%	[4]	5.89%	[4]
Change in unrealized (loss) / gain on real estate securities	$ (15,642,642)	$ 2,903,133	$ (14,739,365)	$ 9,392,927

[1] Alternative-A RMBS includes an IO with a notional balance of $80.0 million.

[2] The Company has elected the fair value option pursuant to ASC 825 for its real estate securities. The Company recorded net change in unrealized loss / gain on its real estate securities of a loss of $15.6 million and a gain of $2.9 million for the three months ended June 30, 2013 and 2012, respectively, and a loss of $14.7 million and a gain of $9.4 million for the six months ended June 30, 2013 and 2012, respectively, as change in unrealized loss/gain on real estate securities in the consolidated statements of operations.

[3] The Company has elected the fair value option pursuant to ASC 825 for its real estate securities.

[4] Unleveraged yield.

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Fair Value (Schedule of Quantitative Information about Level 3 Fair Value Measurements) (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Non-Agency RMBS [Member] | Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 270,034,590	[1]
Alternative - A [Member] | Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	112,066,781	[1]
Alternative - A [Member] | Minimum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	2.20%	[1]
Constant default rate	1.30%	[1]
Loss severity	0.70%	[1]
Delinquency	9.40%	[1]
Alternative - A [Member] | Maximum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	17.10%	[1]
Constant default rate	11.50%	[1]
Loss severity	67.90%	[1]
Delinquency	39.90%	[1]
Alternative - A [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	7.90%	[1]
Constant default rate	6.10%	[1]
Loss severity	40.60%	[1]
Delinquency	20.10%	[1]
Pay Option Adjustable Rate [Member] | Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	27,680,063	[1]
Pay Option Adjustable Rate [Member] | Minimum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	1.20%	[1]
Constant default rate	2.80%	[1]
Loss severity	1.90%	[1]
Delinquency	8.70%	[1]
Pay Option Adjustable Rate [Member] | Maximum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	22.50%	[1]
Constant default rate	9.40%	[1]
Loss severity	84.10%	[1]
Delinquency	35.00%	[1]
Pay Option Adjustable Rate [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	9.00%	[1]
Constant default rate	5.30%	[1]
Loss severity	46.00%	[1]
Delinquency	16.70%	[1]
Prime [Member] | Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	97,763,571	[1]
Prime [Member] | Minimum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	3.40%	[1]
Constant default rate	0.20%	[1]
Loss severity	3.80%	[1]
Delinquency	2.90%	[1]
Prime [Member] | Maximum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	22.60%	[1]
Constant default rate	9.00%	[1]
Loss severity	69.20%	[1]
Delinquency	29.20%	[1]
Prime [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	12.10%	[1]
Constant default rate	5.60%	[1]
Loss severity	38.30%	[1]
Delinquency	15.80%	[1]
Subprime [Member] | Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	32,524,175	[1]
Subprime [Member] | Minimum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	1.10%	[1]
Constant default rate	3.10%	[1]
Loss severity	9.90%	[1]
Delinquency	12.90%	[1]
Subprime [Member] | Maximum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	14.30%	[1]
Constant default rate	16.40%	[1]
Loss severity	81.00%	[1]
Delinquency	30.70%	[1]
Subprime [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	4.30%	[1]
Constant default rate	5.60%	[1]
Loss severity	50.30%	[1]
Delinquency	20.00%	[1]
Mortgage Loans [Member] | Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 120,783,425
Mortgage Loans [Member] | Minimum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	1.10%
Constant default rate	0.10%
Loss severity	13.90%
Delinquency	3.40%
Mortgage Loans [Member] | Maximum [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	7.60%
Constant default rate	5.30%
Loss severity	42.80%
Delinquency	14.50%
Mortgage Loans [Member] | Weighted Average [Member] | Market Approach Valuation Technique [Member]
Unobservable Input
Constant voluntary prepayment	3.50%
Constant default rate	4.00%
Loss severity	33.80%
Delinquency	13.50%

[1] The Company uses third-party dealer quotes to estimate fair value of some of its financial assets. The Company verifies selected prices by using a variety of methods, including comparing prices to internally estimated prices and corroborating the prices by reference to other independent market data, such as relevant benchmark indices and prices of similar instruments. Where the Company has disclosed unobservable inputs for broker quotes or comparable trades, those inputs are based on the Company's validations performed at the security level.

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Fair Value (Narrative) (Details) (USD $)	0 Months Ended		6 Months Ended
	May 31, 2013	Mar. 22, 2013	Jun. 30, 2013	Jun. 30, 2012
Fair Value [Abstract]
Unpaid principal balance of loans acquired	$ 134,500,000	$ 17,700,000	$ 152,200,000
Payments to acquire mortgage loan portfolio			119,758,049
Accretable yield of loans acquired during period	68,400,000		83,400,000
Mortgage loans, total accretable yield			$ 82,400,000

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Loan Repurchase Facility

6 Months Ended

Jun. 30, 2013

Loan Repurchase Facility [Abstract]

Loan Repurchase Facility

7.	Loan Repurchase Facility
	Mortgage Loans
	The Loan Repurchase Facility is used to fund purchases of the Company's target assets and, during the six months ended June 30, 2013, the Company utilized the Loan Repurchase Facility to fund a portion of its residential mortgage loan portfolio with an unpaid principal balance of approximately $152.2 million at the time of acquisition. The Loan Repurchase Facility closed on May 30, 2013, and is committed for a period of 364 days from inception. The obligations are fully guaranteed by the Company.
	The principal amount paid by Citi under the Loan Repurchase Facility for the Trust Certificate, which represent interests in residential mortgage loans, is based on a percentage of the lesser of the market value or the unpaid principal balance of such mortgage loans backing the Trust Certificate. Upon the Company's repurchase of a Trust Certificate sold to Citi under the Loan Repurchase Facility, the Company is required to repay Citi a repurchase amount based on the purchase price plus accrued interest. The Company is also required to pay Citi a commitment fee for the Loan Repurchase Facility, as well as certain other administrative costs and expenses in connection with Citi's structuring, management and ongoing administration of the Loan Repurchase Facility.
	The Loan Repurchase Facility contains margin call provisions that provide Citi with certain rights in the event of a decline in the market value of the mortgage loans backing the purchased Trust Certificate, subject to a floor amount. Under these provisions, Citi may require the Company to transfer cash sufficient to eliminate any margin deficit resulting from such a decline.
	The following table presents certain information regarding the Company's Loan Repurchase Facility as of June 30, 2013 by remaining maturity:

	Mortgage loans
	Balance		Weighted Average Rate
Loan Repurchase Facility borrowings maturing within
30 days or less	$	-	-	%
31-90 days		-	-
91-180 days		-	-
Greater than 180 days to 1 year		89,112,325	2.94
Total / weighted average	$	89,112,325	2.94	%

The following table presents information with respect to the Company's posting of mortgage loan collateral at June 30, 2013:
Repurchase agreements secured by mortgage loans	$	89,112,325
Fair value of mortgage loans pledged as collateral under repurchase agreements		120,517,248
Fair value of mortgage loans not pledged as collateral under repurchase agreements		266,177
Cash pledged under repurchase agreements		-

The following is a summary of financial information relating to mortgage loans at fair value sold under agreements to repurchase:
	Three Months Ended					Six Months Ended
				December 31,					December 31,
	June 30, 2013			2012		June 30, 2013			2012
Period end:
Balance	$	89,112,325		$	-	$	89,112,325		$	-
Unused amount(1)	$	60,887,675			-	$	60,887,675			-
Weighted-average interest rate at end of period		2.94	%		-		2.94	%		-
Fair value of mortgage loans pledged as
collateral under repurchase agreements	$	120,517,248			-	$	120,517,248			-
During the period:
Weighted-average interest rate		2.94	%		-		2.94	%		-
Average balance of loans sold under
agreements to repurchase	$	266,499			-	$	266,499			-
Maximum daily amount outstanding	$	89,112,325			-	$	89,112,325			-
Total interest expense	$	289,296			-	$	289,296			-
____________________

(1) The amount the Company is able to borrow under loan repurchase agreements is tied to the fair value of unencumbered mortgage loans eligible to secure those agreements and the Company's ability to fund the agreements' margin requirements relating to the collateral sold.

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Offsetting Assets and Liabilities (Schedule of Offsetting of Assets) (Details) (USD $)	Jun. 30, 2013
Derivatives
Gross Amounts of Recognized Assets	$ 7,590,729
Gross Amounts Offset in the Consolidated Balance Sheet	(421,198)
Net Amounts of Assets Presented in the Consolidated Balance Sheet	7,169,531
Gross Amounts Not Offset in the Consolidated Balance Sheet
Financial Instruments Pledged
Cash Collateral Pledged	983,441
Net Amount	8,152,972
Interest Rate Swap [Member]
Derivatives
Gross Amounts of Recognized Assets	7,590,729
Gross Amounts Offset in the Consolidated Balance Sheet	(421,198)
Net Amounts of Assets Presented in the Consolidated Balance Sheet	7,169,531
Gross Amounts Not Offset in the Consolidated Balance Sheet
Financial Instruments Pledged
Cash Collateral Pledged	983,441
Net Amount	$ 8,152,972

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Offsetting Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2013

Offsetting Assets and Liabilities [Abstract]

Schedule of Offsetting of Liabilities

Offsetting of Liabilities

						Net Amounts of		Gross Amounts Not Offset in the
			Gross Amounts			Liabilities		Consolidated Balance Sheet
	Gross Amounts		Offset in the			Presented in the		Financial
	of Recognized		Consolidated			Consolidated		Instruments			Cash Collateral
	Liabilities		Balance Sheet			Balance Sheet		Pledged			Pledged			Net Amount
June 30, 2013
Repurchase agreements	$	308,497,415	$	-		$	308,497,415	$	(302,096,964	)	$	(6,400,451	)	$	-
Loan repurchase facility		89,112,325		-			89,112,325		(89,112,325	)		-			-
Derivative liabilities
(TBA contracts)		8,138,671		(3,069,199	)		5,069,472		-			(5,069,472	)		-
Total	$	405,748,411	$	(3,069,199	)	$	402,679,212	$	(391,209,289	)	$	(11,469,923	)	$	-
December 31, 2012
Repurchase agreements	$	116,080,467		-		$	116,080,467	$	(114,745,162	)	$	(1,335,305	)	$	-
Derivative liabilities (interest rate swap
agreements)		1,144,744		-			1,144,744		-			(1,144,744	)		-
	$	117,225,211	$	-		$	117,225,211	$	(114,745,162	)	$	(2,480,049	)	$	-

Schedule of Offsetting of Assets

Offsetting of Assets
						Net Amounts of		Gross Amounts Not Offset in the
			Gross Amounts			Assets Presented		Consolidated Balance Sheet
	Gross Amounts		Offset in the			in the		Financial
	of Recognized		Consolidated			Consolidated		Instruments		Cash Collateral
	Assets		Balance Sheet			Balance Sheet		Pledged		Pledged		Net Amount
June 30, 2013
Derivative assets (interest rate swap agreements)	$	7,590,729	$	(421,198	)	$	7,169,531	$	-	$	983,441	$	8,152,972
	$	7,590,729	$	(421,198	)	$	7,169,531	$	-	$	983,441	$	8,152,972

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Mortgage Loans (Narrative) (Details) (USD $)	0 Months Ended		6 Months Ended		0 Months Ended
	May 31, 2013	Mar. 22, 2013	Jun. 30, 2013	Jun. 30, 2012	May 30, 2013 Loan Repurchase Facility [Member]	May 31, 2013 Loan Repurchase Facility [Member]
Mortgage Loans [Abstract]
Unpaid principal balance of loans acquired	$ 134,500,000	$ 17,700,000	$ 152,200,000
Line of Credit Facility [Line Items]
Utilization of facility			$ 89,112,325		$ 10,600,000	$ 78,500,000

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Related Party Transactions

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

10.	Related Party Transactions
	ZAIS REIT Management, LLC
	The Company is externally managed and advised by the Advisor, a subsidiary of ZAIS. Subject to certain restrictions and limitations, the Advisor is responsible for managing the Company's affairs on a day-to-day basis including, among other responsibilities, (i) the selection, purchase and sale of the Company's portfolio of assets, (ii) the Company's financing activities, and (iii) providing the Company with advisory services.
	The Company pays to its Advisor an advisory fee, calculated and payable quarterly in arrears, equal to 1.5% per annum of the Company's stockholders' equity, as defined in the amended and restated investment advisory agreement between the Company and the Advisor, dated as of December 13, 2012, as amended from time to time (the "Investment Advisory Agreement"). Prior to the Company's IPO, the advisory fee paid to the Advisor was calculated based on the Company's net asset value, as set forth in the Investment Advisory Agreement.
	The Advisor may be paid or reimbursed for the documented cost of its performing certain services for the Company, which may include legal, accounting, due diligence tasks and other services, that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm's-length basis. In addition, the Company may be required to pay its portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Advisor and its affiliates required for the Company's operations. To date, the Advisor has not sought reimbursement for the services and expenses described in the two preceding sentences. The Advisor may seek such reimbursement in the future, as a result of which the expense ratio of the Company may increase. The Company will also pay directly, or reimburse the Advisor for, products and services provided by third parties to the Company, other than those operating expenses required to be borne by the Advisor under the Investment Advisory Agreement. After an initial three-year term, the Advisor may be terminated annually upon the affirmative vote of at least two-thirds of the Company's independent directors or by a vote of the holders of at least two-thirds of the outstanding shares of the Company's common stock based upon (i) unsatisfactory performance by the Advisor that is materially detrimental to the Company or (ii) a determination that the advisory fees payable to the Advisor are not fair, subject to the Advisor's right to prevent such termination due to unfair fees by accepting a reduction of advisory fees agreed to by at least two-thirds of the Company's independent directors. Additionally, upon such a termination without cause, the Investment Advisory Agreement provides that the Company will pay the Advisor a termination fee equal to three times the average annual advisory fee earned by the Advisor during the prior 24-month period immediately preceding such termination, calculated as of the end of the most recently completed fiscal year before the date of termination.

For the three and six months ended June 30, 2013, the Company incurred $0.7 million and $1.2 million in advisory fee expense, respectively. For the three and six months ended June 30, 2012, the Company incurred $0.2 million and $0.5 million in advisory fee expense, respectively. At June 30, 2013, $0.7 million in advisory fee expense was included in accounts payable and other liabilities in the consolidated balance sheet. The advisory fee was calculated and payable as set forth above.

For the six months ended June 30, 2013, the Company acquired RMBS with a principal balance of $17.4 million for $15.7 million from a fund managed by ZAIS. The Company had no such acquisitions from funds managed by ZAIS for the three months ended June 30, 2013.

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Repurchase Agreements

6 Months Ended

Jun. 30, 2013

Repurchase Agreements [Abstract]

Repurchase Agreements

6.	Repurchase Agreements
	Real Estate Securities
	Repurchase agreements related to real estate securities involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date. The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." Repurchase agreements related to real estate securities entered into by the Company are accounted for as financings and require the repurchase of the transferred securities at the end of each arrangement's term, typically 30 to 90 days. The Company maintains the beneficial interest in the specific securities pledged during the term of the repurchase arrangement and receives the related principal and interest payments. Interest rates on these borrowings are fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the repurchase arrangement at which time the Company may enter into a new repurchase arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty. In response to declines in fair value of pledged securities due to changes in market conditions or the publishing of monthly security paydown factors, the lender requires the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparty in order to re-establish the agreed-upon collateral requirements, referred to as margin calls. Under the terms of the Company's master repurchase agreements related to real estate securities, the counterparty may sell or re-hypothecate the pledged collateral.
	The following table presents certain information regarding the Company's real estate securities repurchase agreements as of June 30, 2013 by remaining maturity and collateral type:

	Agency RMBS				Non-Agency RMBS
			Weighted				Weighted
	Balance		Average Rate		Balance		Average Rate
Repurchase agreements maturing
within
30 days or less	$	147,472,330	0.39	%	$	161,025,085	2.03	%
31-60 days		-	-			-	-
61-90 days		-	-			-	-
Greater than 90 days		-	-			-	-
Total / weighted average	$	147,472,330	0.39	%	$	161,025,085	2.03	%
The following table presents certain information regarding the Company's real estate securities repurchase agreements as of December 31, 2012 by remaining maturity and collateral type:

	Agency RMBS				Non-Agency RMBS
			Weighted				Weighted
	Balance		Average Rate		Balance		Average Rate
Repurchase agreements maturing
within
30 days or less	$	44,174,600	0.49	%	$	49,441,377	2.15	%
31-60 days		10,866,170	0.49			-	-
61-90 days		11,598,320	0.47			-	-
Greater than 90 days		-	-			-	-
Total / weighted average	$	66,639,090	0.49	%	$	49,441,377	2.15	%
Although real estate securities repurchase agreements are committed borrowings until maturity, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets would require the Company to provide additional collateral or cash to fund margin calls.

The following table presents information with respect to the Company's posting of RMBS collateral at June 30, 2013:
Repurchase agreements secured by Agency RMBS	$	147,472,330
Fair value of Agency RMBS pledged as collateral under repurchase agreements		150,498,206
Fair value of Agency RMBS not pledged as collateral under repurchase agreements		24,003,900
Repurchase agreements secured by non-Agency RMBS		161,025,085
Fair value of non-Agency RMBS pledged as collateral under repurchase agreements		213,888,493
Fair value of non-Agency RMBS not pledged as collateral under repurchase agreements		56,146,097
Cash pledged under repurchase agreements		6,400,451

The following table presents information with respect to the Company's posting of RMBS collateral at December 31, 2012:
Repurchase agreements secured by Agency RMBS	$	66,639,090
Fair value of Agency RMBS pledged as collateral under repurchase agreements		63,535,780
Fair value of Agency RMBS not pledged as collateral under repurchase agreements		6,224,252
Repurchase agreements secured by non-Agency RMBS		49,441,377
Fair value of non-Agency RMBS pledged as collateral under repurchase agreements		70,003,218
Fair value of non-Agency RMBS not pledged as collateral under repurchase agreements		30,908,433
Cash pledged under repurchase agreements		1,335,305

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Formation and Organization

6 Months Ended

Jun. 30, 2013

Formation and Organization [Abstract]

Formation and Organization

1.	Formation and Organization
	ZAIS Financial Corp. (the "Company") was incorporated in Maryland on May 24, 2011, and has elected to be taxed and to qualify as a real estate investment trust ("REIT") beginning with the taxable year ended December 31, 2011. The Company was initially capitalized and commenced operations on July 29, 2011, when it completed an exchange of a mutually agreed upon portion of the shareholders' and limited partners' interests in the ZAIS Matrix VI-A Ltd. and ZAIS Matrix VI-B L.P. funds (the "Matrix Funds") managed by ZAIS Group, LLC ("ZAIS"), which included cash of $3,036,222 and real estate securities having a fair value of $57,416,118, for 3,022,617 shares of the Company's common stock or operating partnership units ("OP units") in ZAIS Financial Partners, L.P., the Company's consolidated operating partnership subsidiary (the "Operating Partnership"). All OP units were converted into shares of common stock upon issuance. On February 13, 2013, the Company completed its initial public offering ("IPO"), pursuant to which the Company sold 5,650,000 shares of its common stock at a price of $21.25 per share for gross proceeds of $120.1 million. Net proceeds after the payment of offering costs of $1.2 million were $118.9 million.
	The Company primarily invests in, finances and manages residential mortgage-backed securities ("RMBS") and performing and re-performing residential mortgage loans. The Company's RMBS strategy focuses on non-Agency RMBS (as defined below) with an emphasis on securities that, when originally issued, were rated in the highest rating category by one or more of the nationally recognized statistical rating organizations, as well as Agency RMBS (as defined below) (including exposure to Agency RMBS through To-Be-Announced ("TBA") securities). RMBS include securities that are not issued or guaranteed by a federally chartered corporation, such as the Federal National Mortgage Association ("Fannie Mae"), or the Federal Home Loan Mortgage Corporation ("Freddie Mac"), or an agency of the U.S. Government, such as the Government National Mortgage Association ("Ginnie Mae") ("non-Agency RMBS") and securities that are issued or guaranteed by a federally chartered corporation or a U.S. Government agency ("Agency RMBS"). The Company also has the discretion to invest in other real estate-related and financial assets, including mortgage servicing rights ("MSRs"), interest only strips created from RMBS ("IOs"), commercial mortgage-backed securities ("CMBS") and asset-backed securities ("ABS").
	The Company is externally managed by ZAIS REIT Management, LLC (the "Advisor"), a subsidiary of ZAIS, and has no employees. The Company is the sole general partner of, and conducts substantially all of its business through, the Operating Partnership.
	The Company's charter authorizes the issuance of up to 500,000,000 shares of common stock with a par value of $0.0001 per share, and 50,000,000 shares of preferred stock, with a par value of $0.0001 per share. The Company's board of directors is authorized to amend its charter, without the approval of stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series of capital stock or to classify and reclassify any unissued shares of its capital stock into other classes or series of stock that the Company has authority to issue.

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Derivative Instruments (Narrative) (Details) (USD $)				3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2013 Interest Rate Swaps [Member]	Dec. 31, 2012 Interest Rate Swaps [Member]	Jun. 30, 2013 TBAs [Member]	Jun. 30, 2013 TBAs [Member] Short [Member]	Jun. 30, 2013 TBAs [Member] Short [Member]	Jun. 30, 2013 TBAs [Member] Long [Member]	Jun. 30, 2013 TBAs [Member] Long [Member]
Derivative [Line Items]
Notional amount of contracts paired off and sold				$ 388,000,000	$ 473,000,000
Realized gains (losses) on sale of derivative				900,000	800,000
Unrealized gains (losses) recognized				(4,100,000)	(3,700,000)	(1,400,000)	(1,400,000)
Cash pledged as collateral against interest rate swaps which the Company has a right to reclaim	$ 1,000,000	$ 2,400,000	$ 5,200,000

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Repurchase Agreements (Schedule of Information Regarding Posting of Collateral) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Assets Sold under Agreements to Repurchase [Line Items]
Fair value of RMBS pledged as collateral under repurchase agreements	$ 364,386,699	$ 133,538,998
Cash pledged under repurchase agreements	6,400,451	1,335,305
Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements secured by RMBS	147,472,330	66,639,090
Fair value of RMBS pledged as collateral under repurchase agreements	150,498,206	63,535,780
Fair value of RMBS not pledged as collateral under repurchase agreements	24,003,900	6,224,252
Non-Agency RMBS [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements secured by RMBS	161,025,085	49,441,377
Fair value of RMBS pledged as collateral under repurchase agreements	213,888,493	70,003,218
Fair value of RMBS not pledged as collateral under repurchase agreements	$ 56,146,097	$ 30,908,433

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Fair Value (Schedule of Financial Instruments Accounted for at Fair Value on a Recurring Basis) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Assets
Derivative assets	$ 7,169,531
Liabilities
Derivative liabilities	5,069,472	1,144,744
Fair Value, Measurements, Recurring [Member]
Assets
Mortgage loans	120,783,425
Derivative assets	7,169,531
Total	572,489,652	170,671,683
Liabilities
Derivative liabilities	5,069,472	1,144,744
Total	5,069,472	1,144,744
Fair Value, Measurements, Recurring [Member] | 30-Year Adjustable Rate Mortgage [Member]
Assets
Real estate securities	2,591,883	3,240,330
Fair Value, Measurements, Recurring [Member] | 30-Year Fixed Rate Mortgage [Member]
Assets
Real estate securities	171,910,223	66,519,702
Fair Value, Measurements, Recurring [Member] | Non-Agency RMBS [Member]
Assets
Real estate securities	270,034,590	100,911,651
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Assets
Mortgage loans
Derivative assets
Total
Liabilities
Derivative liabilities
Total
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | 30-Year Adjustable Rate Mortgage [Member]
Assets
Real estate securities
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | 30-Year Fixed Rate Mortgage [Member]
Assets
Real estate securities
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Non-Agency RMBS [Member]
Assets
Real estate securities
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Assets
Mortgage loans
Derivative assets	7,169,531
Total	181,671,637	69,760,032
Liabilities
Derivative liabilities	5,069,472	1,144,744
Total	5,069,472	1,144,744
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | 30-Year Adjustable Rate Mortgage [Member]
Assets
Real estate securities	2,951,883	3,240,330
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | 30-Year Fixed Rate Mortgage [Member]
Assets
Real estate securities	171,910,223	66,519,702
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Non-Agency RMBS [Member]
Assets
Real estate securities
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Assets
Mortgage loans	120,783,425
Derivative assets
Total	390,818,015	100,911,651
Liabilities
Derivative liabilities
Total
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | 30-Year Adjustable Rate Mortgage [Member]
Assets
Real estate securities
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | 30-Year Fixed Rate Mortgage [Member]
Assets
Real estate securities
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Non-Agency RMBS [Member]
Assets
Real estate securities	$ 270,034,590	$ 100,911,651

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Stockholders' Equity (Details) (USD $)	3 Months Ended	6 Months Ended		12 Months Ended									1 Months Ended		0 Months Ended		1 Months Ended		0 Months Ended	1 Months Ended
	Dec. 31, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Jun. 25, 2013	May 14, 2013	Jan. 31, 2013	Dec. 19, 2012	Nov. 29, 2012	Oct. 22, 2012	Jun. 05, 2012	May 01, 2012	Dec. 31, 2012 ZAIS Financial Partners, L.P. [Member]	Oct. 31, 2012 ZAIS Financial Partners, L.P. [Member]	Feb. 13, 2013 ZAIS REIT Management, LLC [Member]	Feb. 13, 2013 Common Stock [Member]	Dec. 31, 2012 Common Stock [Member]	Oct. 31, 2012 Common Stock [Member]	Feb. 15, 2013 Preferred Stock [Member]	Jan. 18, 2012 Preferred Stock [Member]
Stockholders' Equity [Abstract]
Common stock, shares outstanding	2,071,096	7,970,886		2,071,096
Class of Stock [Line Items]
Shares of stock issued																5,650,000	36,581	195,458		133
Common stock issued, price per share																$ 21.25
Gross proceeds from issuance initial public offering																$ 120,100,000
Value of stock issued		118,862,500		4,757,470												118,900,000				115,499
Value of OP units and common stock issued	25,151,174
Offering fees	763,000	216,658													6,300,000	1,200,000				17,501
Common stock repurchase liability, common shares	515,035			515,035			265,245
Payments for common stock repurchased		5,750,512
Number of shares repurchased																			133
Payments for Repurchase of Preferred Stock and Preference Stock		$ 148,379	$ 7,574																$ 148,379
Limited Partners' Capital Account [Line Items]
Issuance of OP units													904,422	22,492
Dividend declared, amount per share					$ 0.45	$ 0.22		$ 1.16	$ 0.98	$ 0.89	$ 0.57	$ 0.51

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

13.	Commitments and Contingencies
	Advisor Services
	The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company's investment portfolio including determination of fair value; and other general and administrative responsibilities. In the event that the Advisor is unable to provide the respective services, the Company will be required to obtain such services from an alternative source.
	Litigation
	From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. Management is not aware of any contingencies that would require accrual or disclosure in the financial statements at June 30, 2013 or December 31, 2012.

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Earnings Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share

9.	Earnings Per Share
	The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share:

	Three Months Ended					Six Months Ended
	June 30, 2013			June 30, 2012		June 30, 2013			June 30, 2012
Numerator:
Net (loss)/income attributable to ZAIS Financial        Corp. common stockholders	$	(6,780,401	)	$	3,323,858	$	(5,121,179	)	$	9,553,594
Effect of dilutive securities:
Loss allocated to Operating Partnership non-               controlling interests		(788,476	)		-		(489,382	)		-
Dilutive net (loss) / income available to         stockholders	$	(7,568,877	)	$	3,323,858	$	(5,610,561	)	$	9,553,594
Denominator:
Weighted average number of shares of common        stock		7,970,886			3,022,617		6,564,284			3,022,617
Effect of dilutive securities:
Weighted average OP units		926,914			-		926,914			-
Weighted average dilutive shares		8,897,800			3,022,617		7,491,198			3,022,617
Net (loss) / income per share applicable to ZAIS         Financial Corp. common stockholders -         Basic/Diluted	$	(.85	)	$	1.10	$	(.78	)	$	3.16

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Basis of Quarterly Presentation

Basis of Quarterly Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial reporting. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for the interim period are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Certain prior period amounts have been reclassified to conform to the current period's presentation.

The Company currently operates as one business segment.

Estimates

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership, and all of the wholly owned subsidiaries of the Operating Partnership. The Company, which serves as the sole general partner of and conducts substantially all of its business through the Operating Partnership, holds approximately 89.6% of the OP units in the Operating Partnership. The Operating Partnership in turn holds directly or indirectly all of the equity interests in its subsidiaries. All intercompany balances have been eliminated in consolidation.

Variable Interest Entities

Variable Interest Entities

A variable interest entity ("VIE") is an entity that lacks one or more of the characteristics of a voting interest entity. The Company evaluates each of its investments to determine if each is a VIE based on: (1) the sufficiency of the entity's equity investment at risk to finance its activities without additional subordinated financial support provided by any parties, including the equity holders; (2) whether as a group the holders of the equity investment at risk have (a) the power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impacts the entity's economic performance, (b) the obligation to absorb the expected losses of the legal entity and (c) the right to receive the expected residual returns of the legal entity; and (3) whether the voting rights of these investors are proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected returns of their equity, or both, and whether substantially all of the entity's activities involve or are conducted on behalf of an investor that has disproportionately fewer voting rights. An investment that lacks one or more of the above three characteristics is considered to be a VIE. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE is subject to consolidation if the equity investors either do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, are unable to direct the entity's activities, or are not exposed to the entity's losses or entitled to its residual returns. VIEs are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses.

The Company has evaluated its real estate securities investments to determine if each represents a variable interest in a VIE. The Company monitors these investments and analyzes them for potential consolidation. The Company's real estate securities investments represent variable interests in VIEs. At June 30, 2013 and December 31, 2012, no VIEs required consolidation as the Company was not the primary beneficiary of any of these VIEs. At June 30, 2013 and December 31, 2012, the maximum exposure of the Company to VIEs is limited to the fair value of its investments in real estate securities as disclosed in the consolidated balance sheets.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers highly liquid short-term interest bearing instruments with original maturities of three months or less and other instruments readily convertible into cash to be cash equivalents. The Company's deposits with financial institutions may exceed federally insurable limits of $250,000 per institution. The Company mitigates this risk by depositing funds with major financial institutions. At June 30, 2013, the Company's cash was held with two custodians.

Restricted Cash

Restricted Cash

Restricted cash represents the Company's cash held by counterparties as collateral against the Company's derivatives and/or repurchase agreements. Cash held by counterparties as collateral is not available to the Company for general corporate purposes, but may be applied against amounts due to derivative or repurchase agreement counterparties or returned to the Company when the collateral requirements are exceeded or at the maturity of the derivatives or repurchase agreements.

Fair Value Election and Determination of Fair Value Measurement

Real Estate Securities and Mortgage Loans - Fair Value Election

U.S. GAAP permits entities to choose to measure many financial instruments and certain other items at fair value. The Company has elected the fair value option for each of its real estate securities and mortgage loans, at the date of purchase, including those contributed in connection with the Company's initial formation transaction. The fair value option election permits the Company to measure these real estate securities and mortgage loans at estimated fair value with the change in estimated fair value included as changes in unrealized gain/loss on real estate securities and mortgage loans in the Company's consolidated statements of operations. The Company believes that the election of the fair value option for its real estate securities and mortgage loans more appropriately reflects the results of the Company's operations.

Determination of Fair Value Measurement

The "Fair Value Measurements and Disclosures" Topic of the FASB ASC defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under U.S. GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.

Fair value under U.S. GAAP represents an exit price in the normal course of business, not a forced liquidation price. If the Company was forced to sell assets in a short period to meet liquidity needs, the prices it receives could be substantially less than their recorded fair values. Furthermore, the analysis of whether it is more likely than not that the Company will be required to sell securities in an unrealized loss position prior to an expected recovery in fair value (if any), the amount of such expected required sales, and the projected identification of which securities would be sold is also subject to significant judgment.

Any proposed changes to the valuation methodology will be reviewed by the Advisor to ensure changes are consistent with the applicable accounting guidance and approved as appropriate. The fair value methodology may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the Advisor's valuation methods will be appropriate and consistent with other market participants, the use of different methodologies, or assumptions by other market participants, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The Company categorizes its financial instruments in accordance with U.S. GAAP, based on the priority of the inputs to the valuation, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1 Quoted prices for identical assets or liabilities in an active market.

Level 2 Financial assets and liabilities whose values are based on the following:

• Quoted prices for similar assets or liabilities in active markets
   
• Quoted prices for identical or similar assets or liabilities in nonactive markets.
   
• Pricing models whose inputs are observable for substantially the full term of the asset or liability.
   
• Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3  Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires significant judgment and considers factors specific to the investment. The Company utilizes proprietary modeling analysis to support the independent third party broker quotes selected to determine the fair value of investments and derivative instruments.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Real Estate Securities

The fair value of the Company's real estate securities considers the underlying characteristics of each security including coupon, maturity date and collateral. The Company estimates the fair value of its Agency RMBS and non-Agency RMBS based upon a combination of observable prices in active markets, multiple indicative quotes from brokers and executable bids. In evaluating broker quotes the Company also considers additional observable market data points including recent observed trading activity for identical and similar securities, back-testing, broker challenges and other interactions with market participants, as well as yield levels generated by model-based valuation techniques. In the absence of observable quotes, the Company utilizes model-based valuation techniques that may contain unobservable valuation inputs.

When available, the fair value of real estate securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from either broker quotes, observed traded levels or model-based valuation techniques using observable inputs such as benchmark yields or issuer spreads.

The Company's Agency RMBS are valued using the market data described above, which includes inputs determined to be observable or whose significant fair value drivers are observable. Accordingly, Agency RMBS securities are classified as Level 2 in the fair value hierarchy.

While the Company's non-Agency RMBS are valued using the same process with similar inputs as the Agency RMBS, a significant amount of inputs are unobservable due to relatively low levels of market activity. The fair value of these securities is typically based on broker quotes or the Company's model-based valuation. Accordingly, the Company's non-Agency RMBS are classified as Level 3 in the fair value hierarchy. Model-based valuation consists primarily of discounted cash flow and yield analyses. Significant model inputs and assumptions include constant voluntary prepayment rates, constant default rates, delinquency rates, loss severity, market-implied discount rates, default rates, expected loss severity, weighted average life, collateral composition, borrower characteristics and prepayment rates, and may also include general economic conditions, including home price index forecasts, servicing data and other relevant information. Where possible, collateral-related assumptions are determined on an individual loan level basis.

Mortgage Loans

The fair value of the Company's mortgage loans is determined using a proprietary model that considers data such as loan origination information and additional updated borrower and loan servicing data as available, forward interest rates, general economic conditions, home price index forecasts and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans include market-implied discount rates, and projections of default rates, delinquency rates, loss severity and prepayment rates. The Company uses loan level data, macro-economic inputs and forward interest rates to generate loss adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair values established for mortgage loans held by the Company may differ from the fair values that would have been established if a ready market existed for these mortgage loans. Accordingly, mortgage loans are classified as Level 3 in the fair value hierarchy.

Derivative Instruments

Interest Rate Swap Agreements

An interest rate swap is an agreement between the Company and a counterparty to exchange periodic interest payments where one party to the contract makes a fixed rate payment in exchange for a floating rate payment from the other party. Interest rate swap agreements are valued using counterparty valuations. The Company utilizes proprietary modeling analysis or industry standard third party analytics to support the counterparty valuations. These counterparty valuations are generally based on models with market observable inputs such as interest rates and contractual cash flows, and, as such, are classified as Level 2 on the fair value hierarchy. The Company's swap agreements are governed by the International Swap and Derivative Association trading agreements, which are separately negotiated agreements with dealer counterparties. As of June 30, 2013 and December 31, 2012, no credit valuation adjustment was made in determining the fair value of derivatives.

TBA Securities

A TBA security is a forward contract for the purchase of Agency RMBS at a predetermined price with a stated face amount, coupon and stated maturity at an agreed upon future date. The specific Agency RMBS delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association ("SIFMA"), are not known at the time of the transaction. The Company estimates the fair value of TBA securities based on independent third party closing levels. Accordingly, TBAs are classified as Level 2 in the fair value hierarchy.

Interest Income Recognition and Impairment

Interest Income Recognition and Impairment - Real Estate Securities

Interest income on Agency RMBS is accrued based on the effective yield method on the outstanding principal balance and their contractual terms. Premiums and discounts associated with Agency RMBS at the time of purchase are amortized into interest income over the life of such securities using the effective yield method and adjusted for actual prepayments in accordance with ASC 310-20 "Nonrefundable Fees and Other Costs".

Interest income on the non-Agency RMBS, which were purchased at a discount to par value and/or were rated below AA at the time of purchase, is recognized based on the effective yield method in accordance with ASC 325-40 "Beneficial Interests in Securitized Financial Assets". The effective yield on these securities is based on the projected cash flows from each security, which are estimated based on the Company's observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, prepayments of principal and credit losses. Therefore, actual maturities of the securities are generally shorter than stated contractual maturities.

Interest income is recorded as interest income-real estate securities in the consolidated statements of operations.

Based on the projected cash flows from the Company's non-Agency RMBS purchased at a discount to par value, a portion of the purchase discount may be designated as credit protection against future credit losses and, therefore, not accreted into interest income. The amount designated as credit discount is determined, and may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors. If the performance of a security with a credit discount is more favorable than forecasted, a portion of the amount designated as credit discount may be accreted into interest income prospectively.

Agency and non-Agency RMBS are periodically evaluated for other-than-temporary impairment ("OTTI"). A security with a fair value that is less than amortized cost is considered impaired. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a security has been deemed to be other-than-temporarily impaired, the amount of OTTI is bifurcated into: (i) the amount related to expected credit losses; and (ii) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses is recognized in the consolidated statement of operations as a realized loss on real estate securities. The remaining OTTI related to the valuation adjustment is recognized as a component of change in unrealized gain/loss on real estate securities in the consolidated statement of operations. For the three and six months ended June 30, 2013, the Company recognized $39,179 in OTTI. For the three and six months ended June 30, 2012, the Company recognized $87,058 and $215,345, respectively, in OTTI. Realized gains and losses on sale of real estate securities are determined using the specific identification method. Real estate securities transactions are recorded on the trade date.

Interest Income Recognition - Mortgage Loans

When mortgage loans purchased by the Company show evidence of a deterioration in credit quality since origination, management determines that it is probable the Company will not collect all contractual cash flows and the fair value option of accounting has been elected, the Company will apply the guidance which addresses accounting for differences between contractual cash flows and cash flows expected to be collected from its initial investment. The yield that may be accreted (accretable yield) will be determined by the excess of the Company's initial estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the Company's initial investment in the mortgage loan. Interest income will be recognized using the accretable yield on a level-yield basis over the life of the loan as long as cash flows can be reasonably estimated. On a quarterly basis, the Company updates its estimate of the cash flows expected to be collected. The excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) will not be recognized as an adjustment of yield but will be recognized prospectively through adjustment of the loan's accretable yield over its remaining life. The amount of interest income to be recognized cannot result in a carrying amount that exceeds the payoff amount of the loan. Loans that are delinquent for 60 days or more are considered non-performing. Income recognition is suspended for loans when they become more than 90 days delinquent, or when, in management's opinion, a full recovery of interest and principal becomes doubtful. Income recognition is resumed when the loan becomes contractually current.

Expense Recognition

Expense Recognition

Expenses are recognized when incurred. Expenses include, but are not limited to, loan servicing fees, advisory fees, professional fees for legal, accounting and consulting services, and general and administrative expenses such as insurance, custodial and miscellaneous fees.

Offering Costs

Offering Costs

Offering costs are accounted for as a reduction of additional paid-in capital. Offering costs in connection with the Company's IPO were paid out of the proceeds of the IPO. Costs incurred to organize the Company were expensed as incurred. The Company's obligation to pay for organization and offering expenses directly related to the IPO was capped at $1,200,000 and the Advisor paid for such expenses incurred above the cap.

Repurchase Agreements

Repurchase Agreements - Real Estate Securities

The Company finances a portion of its RMBS portfolio through the use of repurchase agreements entered into under master repurchase agreements with four financial institutions. Repurchase agreements are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Repurchase agreements are recorded on trade date at the contract amount.

The Company pledges cash and certain of its RMBS as collateral under these repurchase agreements. The amounts available to be borrowed are dependent upon the fair value of the RMBS pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in fair value of pledged RMBS, the lenders may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. As of June 30, 2013 and December 31, 2012, the Company has met all margin call requirements.

Repurchase Agreements - Mortgage Loans

The Company finances a portion of its mortgage loan portfolio through the use of repurchase agreements entered into under a master repurchase agreement with Citibank, N.A. ("Citi"), pursuant to which the Company may sell, and later repurchase trust certificates representing interests in residential mortgage loans (the "Trust Certificates") in an aggregate principal amount of up to $250 million, $150 million of which was committed (the "Loan Repurchase Facility"). The borrowings under the Loan Repurchase Facility are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreement. The borrowings under the Loan Repurchase Facility are recorded on the trade date at the contract amount.

The Company pledges cash and certain of its Trust Certificates as collateral under the Loan Repurchase Facility. The amounts available to be borrowed are dependent upon the fair value of the Trust Certificates pledged as collateral, which fluctuates with changes in interest rates, type of underlying mortgage loan and liquidity conditions within the banking, mortgage finance and real estate industries. In response to declines in fair value of pledged Trust Certificates, the lender may require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements, referred to as margin calls. As of June 30, 2013 the Company has met all margin call requirements.

Derivatives and Hedging Activities

Derivatives and Hedging Activities

The Company accounts for its derivative financial instruments in accordance with derivative accounting guidance, which requires an entity to recognize all derivatives as either assets or liabilities in the balance sheets and to measure those instruments at fair value. The Company has not designated any of its derivative agreements as hedging instruments for accounting purposes. As a result, changes in the fair value of derivatives are recorded through current period earnings.

Interest Rate Swap Agreements

The Company's interest rate swap agreements contain legally enforceable provisions that allow for netting or setting off of all individual interest rate swap receivables and payables with each respective counterparty and, therefore, the fair value of those interest rate swap agreements are netted. The credit support annex provisions of the Company's interest rate swap agreements allow the parties to mitigate their credit risk by requiring the party which is out of the money to post collateral. At June 30, 2013 and December 31, 2012, all collateral provided under these agreements consisted of cash collateral.

TBA Securities

The Company enters into TBA contracts as a means of acquiring exposure to Agency RMBS and may from time to time utilize TBA dollar roll transactions to finance Agency RMBS purchases. The Company may also enter into TBA contracts as a means of hedging against short-term changes in interest rates. The Company may choose, prior to settlement, to move the settlement of these securities to a later date by entering into an offsetting position (referred to as a "pair off"), settling the paired off positions against each other for cash, and simultaneously entering into a similar TBA contract for a later settlement date, which is commonly collectively referred to as a "dollar roll" transaction.

Counterparty Risk and Concentration

Counterparty Risk and Concentration

Counterparty risk is the risk that counterparties may fail to fulfill their obligations or that pledged collateral value becomes inadequate. The Company attempts to manage its exposure to counterparty risk through diversification, use of financial instruments and monitoring the creditworthiness of counterparties.

As explained in the footnotes above, while the Company engages in repurchase financing activities with several financial institutions, the Company maintains custody accounts with two custodians. There is no guarantee that these custodians will not become insolvent. While there are certain regulations that seek to protect customer property in the event of a failure, insolvency or liquidation of a custodian, there is no certainty that the Company would not incur losses due to its assets being unavailable for a period of time in the event of a failure of a custodian that has custody of the Company's assets. Although management monitors the credit worthiness of its custodians, such losses could be significant and could materially impair the ability of the Company to achieve its investment objective.

Net Income (Loss) Per Share

Net Income (Loss) Per Share

The Company's basic earnings per share ("EPS") is computed by dividing net income or loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if outstanding OP units were converted to common stock, where such exercise or conversion would result in a lower EPS. The dilutive effect of partnership interests is computed assuming all units are converted to common stock.

Income Taxes

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 2011. The Company was organized and has operated and intends to continue to operate in a manner that will enable it to qualify to be taxed as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company's annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. GAAP). As a REIT, the Company will not be subject to federal income tax on its taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. However, the Company intends to continue to operate in a manner that will enable it to qualify for treatment as a REIT.

The Company evaluates uncertain income tax positions when applicable. Based upon its analysis of income tax positions, the Company concluded that it does not have any uncertain tax positions that meet the recognition or measurement criteria as of either June 30, 2013 or December 31, 2012.

The Company has elected to treat one of its direct wholly owned subsidiaries, ZAIS I TRS Inc., and one of its indirect wholly owned subsidiaries, ZFC Trust TRS I, LLC, as taxable REIT subsidiaries (the "TRS entities"). The Company may perform certain non-customary services, including real estate or non-real estate-related services through these TRS entities. Earnings from services performed through the TRS entities are subject to federal and state income taxes irrespective of the dividends-paid deduction available to REITs for federal income tax purposes. In addition, for the Company to continue to qualify to be taxed as a REIT, the Company's total investment in all TRS entities may not exceed 25% of the value of the total assets of Company determined for federal income tax purposes.

For the three and six months ended June 30, 2013 and 2012, the Company did not have any significant activity in the TRS entities. Accordingly, no provision for federal income taxes has been made in the accompanying consolidated financial statements, as the TRS entities did not generate taxable income for the periods presented.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11: Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11") which requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the amendment requires disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. In addition, in January 2013, the FASB issued ASU 2013-01: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (Topic 210), Balance Sheet. The update addresses implementation issues regarding ASU 2011-11 and is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. This guidance is to be applied retrospectively for all comparative periods presented and does not amend the circumstances in which the Company offsets its derivative positions. This guidance does not have a material effect on the Company's financial statements. However, this guidance expands the disclosure requirements to which the Company is subject, which are presented in Note 14.

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Offsetting Assets and Liabilities

6 Months Ended

Jun. 30, 2013

Offsetting Assets and Liabilities [Abstract]

Offsetting Assets and Liabilities

14.	Offsetting Assets and Liabilities
	The following tables present information about certain assets and liabilities that are subject to master netting arrangements (or similar agreements) and can potentially be offset on the Company's consolidated balance sheet at June 30, 2013 and December 31, 2012:
	Offsetting of Liabilities

						Net Amounts of		Gross Amounts Not Offset in the
			Gross Amounts			Liabilities		Consolidated Balance Sheet
	Gross Amounts		Offset in the			Presented in the		Financial
	of Recognized		Consolidated			Consolidated		Instruments			Cash Collateral
	Liabilities		Balance Sheet			Balance Sheet		Pledged			Pledged			Net Amount
June 30, 2013
Repurchase agreements	$	308,497,415	$	-		$	308,497,415	$	(302,096,964	)	$	(6,400,451	)	$	-
Loan repurchase facility		89,112,325		-			89,112,325		(89,112,325	)		-			-
Derivative liabilities
(TBA contracts)		8,138,671		(3,069,199	)		5,069,472		-			(5,069,472	)		-
Total	$	405,748,411	$	(3,069,199	)	$	402,679,212	$	(391,209,289	)	$	(11,469,923	)	$	-
December 31, 2012
Repurchase agreements	$	116,080,467		-		$	116,080,467	$	(114,745,162	)	$	(1,335,305	)	$	-
Derivative liabilities (interest rate swap
agreements)		1,144,744		-			1,144,744		-			(1,144,744	)		-
	$	117,225,211	$	-		$	117,225,211	$	(114,745,162	)	$	(2,480,049	)	$	-

Offsetting of Assets
						Net Amounts of		Gross Amounts Not Offset in the
			Gross Amounts			Assets Presented		Consolidated Balance Sheet
	Gross Amounts		Offset in the			in the		Financial
	of Recognized		Consolidated			Consolidated		Instruments		Cash Collateral
	Assets		Balance Sheet			Balance Sheet		Pledged		Pledged		Net Amount
June 30, 2013
Derivative assets (interest rate swap agreements)	$	7,590,729	$	(421,198	)	$	7,169,531	$	-	$	983,441	$	8,152,972
	$	7,590,729	$	(421,198	)	$	7,169,531	$	-	$	983,441	$	8,152,972

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 12, 2013
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Entity Registrant Name	ZAIS Financial Corp.
Entity Central Index Key	0001527590
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		7,970,886

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Subsequent Events

6 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

15.	Subsequent Events
	On July 25, 2013, the Company utilized approximately $98.7 million of its Loan Repurchase Facility to fund a portion of the purchase price of its acquisition of a residential mortgage loan portfolio with an unpaid principal balance of approximately $167.8 million.

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Offsetting Assets and Liabilities (Schedule of Offsetting of Liabilities) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Repurchase agreements
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet	$ 308,497,415	$ 116,080,467
Total
Gross Amounts of Recognized Liabilities	405,748,411	117,225,211
Gross Amounts Offset in the Consolidated Balance Sheet	(3,069,199)
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet	402,679,212	117,225,211
Gross Amounts Not Offset in the Consolidated Balance Sheet
Financial Instruments Pledged	(391,209,289)	(114,745,162)
Cash Collateral Pledged	(11,469,923)	(2,480,049)
Net Amount
Agency and Non-Agency Securities [Member]
Repurchase agreements
Gross Amounts of Recognized Liabilities	308,497,415	116,080,467
Gross Amounts Offset in the Consolidated Balance Sheet
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet	308,497,415	116,080,467
Gross Amounts Not Offset in the Consolidated Balance Sheet
Financial Instruments Pledged	(302,096,964)	(114,745,162)
Cash Collateral Pledged	(6,400,451)	(1,335,305)
Net Amount
Mortgage Loans [Member]
Repurchase agreements
Gross Amounts of Recognized Liabilities	89,112,325
Gross Amounts Offset in the Consolidated Balance Sheet
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet	89,112,325
Gross Amounts Not Offset in the Consolidated Balance Sheet
Financial Instruments Pledged	(89,112,325)
Cash Collateral Pledged
Net Amount
Interest Rate Swap [Member]
Derivatives
Gross Amounts of Recognized Liabilities		1,144,744
Gross Amounts Offset in the Consolidated Balance Sheet
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		1,144,744
Gross Amounts Not Offset in the Consolidated Balance Sheet
Financial Instruments Pledged
Cash Collateral Pledged		(1,144,744)
Net Amount
TBAs [Member]
Derivatives
Gross Amounts of Recognized Liabilities	8,138,671
Gross Amounts Offset in the Consolidated Balance Sheet	(3,069,199)
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet	5,069,472
Gross Amounts Not Offset in the Consolidated Balance Sheet
Financial Instruments Pledged
Cash Collateral Pledged	(5,069,472)
Net Amount

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Non-controlling Interests in Operating Partnership (Details) (ZAIS Financial Partners, L.P. [Member])	Jun. 30, 2013	Dec. 31, 2012
ZAIS Financial Partners, L.P. [Member]
Noncontrolling Interest [Line Items]
Units issued and outstanding	926,914	926,914
Non-controlling interest equity interest	10.40%	30.90%