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VARIABLE INTEREST ENTITIES | 3 Months Ended
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Mar. 31, 2025
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES The Company evaluates its involvement with entities to determine if these entities meet the definition of a VIE and whether the Company is the primary beneficiary and should consolidate the VIE. The Company did not provide any non-contractual financial support to VIEs for the three months ended March 31, 2025, and year ended December 31, 2024. Consolidated VIEs LD Holdings The Company is a holding company with its sole material asset being its equity interest in LD Holdings. As the sole managing member of LD Holdings, the Company indirectly operates and controls all of LD Holdings’ business and affairs. LD Holdings is considered a VIE and the financial results of LD Holdings and its subsidiaries are consolidated. A portion of net earnings or loss is allocated to noncontrolling interest to reflect the entitlement of the Continuing LLC Members. Refer to Note 11 – Equity for further details. Securitization and Special Purpose Entities (“SPEs”) The Company consolidates securitization facilities that finance mortgage loans held for sale and mortgage loans held for investment, as well as SPEs established as trusts to finance mortgage servicing rights and servicing advance receivables. Assets are transferred to a securitization or trust, which issues beneficial interests collateralized by the transferred assets, entitling the investors to specified cash flows. The Company may retain beneficial interests in the transferred assets and also holds conditional repurchase options specific to these securitizations that allow it to repurchase assets from the securitization entity. The Company’s economic exposure to loss from outstanding third-party financing is generally limited to the carrying value of the assets financed. The Company has retained risks in the securitizations including customary representations and warranties. For securitization facilities, the Company, as seller, has an option to prepay and redeem outstanding classes of issued notes after a set period of time. The Company’s exposure to these entities is primarily through its role as seller, servicer, and administrator. Servicing functions include, but are not limited to, general collection activity, preparing and furnishing statements, and loss mitigation efforts including repossession and sale of collateral. Retained interests In April 2024, the Company completed a transfer and securitization of a pool of performing, re-performing and non-performing residential mortgage loans. Pursuant to the credit risk retention requirements, mello Credit Strategies LLC, as sponsor, is required to retain at least a 5% economic interest in the credit risk of the assets collateralizing this securitization transaction. On the closing date, MCS and its wholly owned subsidiary retained a horizontal residual interest in the MMCA 2024-SD1 securitization comprised of the Class B notes and Trust Certificate. The Company determined that MCS is considered to be the primary beneficiary of the VIE as it retains all the risk and reward from the residual interest, and, therefore, the securitization trust is required to be consolidated. As of March 31, 2025, the remaining principal balance of loans transferred to the securitization trust was $139.8 million of which $8.2 million was 90 days or more past due. The table below presents a summary of the carrying value and balance sheet classification of assets and liabilities in the Company’s securitization and SPE VIEs.
|  | March 31, 2025 |  | December 31, 2024 |  |
Assets |  |  |  |  |  |
Loans held for sale, at fair value |  | $ | 304,027 |  |  | $ | 293,165 |  |  |
Loans held for investment, at fair value |  | 114,447 |  |  | 116,627 |  |  |
Restricted cash |  | 3,894 |  |  | 10,794 |  |  |
Servicing rights, at fair value |  | 627,527 |  |  | 625,699 |  |  |
Other assets |  | 79,657 |  |  | 76,471 |  |  |
Total |  | $ | 1,129,552 |  |  | $ | 1,122,756 |  |  |
Liabilities |  |  |  |  |  |
Warehouse and other lines of credit |  | $ | 300,000 |  |  | $ | 300,000 |  |  |
Debt obligations, net: |  |  |  |  |  |
MSR facilities |  | 198,863 |  |  | 193,800 |  |  |
Servicing advance facilities |  | 57,136 |  |  | 72,530 |  |  |
Term Notes |  | 200,000 |  |  | 200,000 |  |  |
Other secured financings |  | 95,046 |  |  | 97,767 |  |  |
Total |  | $ | 851,045 |  |  | $ | 864,097 |  |  |
Non-Consolidated VIEs The nature, purpose, and activities of non-consolidated VIEs currently encompass the Company’s investments in retained interests from securitizations and joint ventures. The table below presents a summary of the nonconsolidated VIEs for which the Company holds variable interests.
|  | March 31, 2025
|  | Carrying value |  | Maximum exposure to loss |  | Total assets in VIEs
|  | Assets |  | Liabilities |  |
Retained interests |  | $ | 87,355 |  |  | $ | — |  |  | $ | 87,355 |  |  | $ | 2,049,124 |
Investments in joint ventures |  | 18,214 |  |  | — |  |  | 18,214 |  |  | 13,448 |
Total |  | $ | 105,569 |  |  | $ | — |  |  | $ | 105,569 |  |  |
|  | December 31, 2024
|  | Carrying value |  | Maximum exposure to loss |  | Total assets in VIEs
|  | Assets |  | Liabilities |  |
Retained interests |  | $ | 87,466 |  |  | $ | — |  |  | $ | 87,466 |  |  | $ | 2,078,478 |
Investments in joint ventures |  | 18,113 |  |  | — |  |  | 18,113 |  |  | 15,880 |
Total |  | $ | 105,579 |  |  | $ | — |  |  | $ | 105,579 |  |  |
Retained interests In 2022 and 2021, the Company completed the sale and securitization of non-owner occupied residential mortgage loans. Pursuant to the credit risk retention requirements, the Company, as sponsor, is required to retain at least a 5% economic interest in the credit risk of the assets collateralizing the securitization transactions. The retained interests represent a variable interest in the securitizations. The Company determined it was not the primary beneficiary of the VIE. The Company’s continuing involvement is limited to customary servicing obligations as servicer and servicing administrator associated with retained servicing rights and the receipt of principal and interest associated with the retained interests. The investors and the securitization trusts have no recourse to the Company’s assets; holders of the securities issued by each trust can look only to the loans owned by the trust for payment. The retained interests held by the Company are subject principally to the credit risk stemming from the underlying transferred loans. The securitization trusts used to effect these transactions are variable interest entities that the Company does not consolidate. The Company remeasures the carrying value of its retained interests at each reporting date to reflect their current fair value which is included in trading securities, at fair value on the consolidated balance sheets, with corresponding gains or losses included in other income on the consolidated statements of operations. As of March 31, 2025, the remaining principal balance of loans transferred to these securitization trusts was $2.0 billion of which $4.9 million was 90 days or more past due. Investments in joint ventures The Company’s joint ventures include investments with home builders, real estate brokers, and commercial real estate companies to provide loan origination services and real estate settlement services to customers referred by the Company’s joint venture partners. The Company is generally not determined to be the primary beneficiary in its joint venture VIEs because it does not have the power, through voting rights or similar rights, to direct the activities that most significantly impact the economic performance of the VIE. The Company’s pro rata share of net earnings of joint ventures was $1.0 million for the three months ended March 31, 2025 and $2.3 million for the three months ended March 31, 2024, and is included in other income in the consolidated statements of operations.

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent + Details
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