Those unrealized hedging losses are offset by unrealized gains in the RMBS held by the company.
Under GAAP, unrealized Hedging gains and losses go on the earnings line and unrealized change in value of the RMBS held are accounted for in Equity. There is no risk on agency mortgages...you get paid everything. You MUST hedge against short rates popping up.It never was a case of managers thinking rates would go up. You cannot borrow at a higher rate than you earn...
Every leveraged angency MREIT has to hedge for interest rate risk...a inverted yield curve would wipe them out without the hedges.
If hedging makes you too excited, buy something like the Vanguard Ginnie Mae fund and take the 3 or 4%. No leverage..hence no hedging.