XML 25 R14.htm IDEA: XBRL DOCUMENT v3.25.1
Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
For financial reporting purposes, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an exit price at the measurement date, or the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an asset or liability that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value.
In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.
Determination of Fair Value
Included in Note 6 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2024 is a more detailed description of our financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy. At March 31, 2025, our valuation policy and processes had not changed from those described in our Annual Report on Form 10-K for the year ended December 31, 2024.
The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at March 31, 2025 and December 31, 2024, as well as the fair value hierarchy of the valuation inputs used to measure fair value.
Table 6.1 – Assets and Liabilities Measured at Fair Value on a Recurring Basis
March 31, 2025Fair ValueFair Value Measurements Using
(In Thousands)Level 1Level 2Level 3
Assets
Residential consumer loans$12,752,258 $— $— $12,752,258 
Residential investor loans4,439,834 — — 4,439,834 
Consolidated Agency multifamily loans423,673 — — 423,673 
HEI600,386 — — 600,386 
Real estate securities:
  Trading171,363 — — 171,363 
  AFS204,602 — — 204,602 
Servicing investments298,290 — — 298,290 
Strategic investments3,460 — — 3,460 
Derivative assets158,909 11,154 126,250 21,505 
Total Assets$19,052,775 $11,154 $126,250 $18,915,371 
Liabilities
ABS issued$14,127,674 $— $— $14,127,674 
Derivative liabilities12,835 8,137 — 4,698 
Non-controlling interest106,160 — — 106,160 
Total Liabilities$14,246,669 $8,137 $— $14,238,532 
December 31, 2024Fair ValueFair Value Measurements Using
(In Thousands)Level 1Level 2Level 3
Assets
Residential consumer loans$11,077,823 $— $— $11,077,823 
Residential investor loans4,587,090 — — 4,587,090 
Consolidated agency multifamily loans424,597 — — 424,597 
HEI589,785 — — 589,785 
Real estate securities:
  Trading193,749 — — 193,749 
  AFS211,474 — — 211,474 
Servicing investments297,683 — — 297,683 
Strategic investments3,460 — — 3,460 
Derivative assets46,003 16,446 23,738 5,819 
Total Assets$17,431,664 $16,446 $23,738 $17,391,480 
Liabilities
ABS issued$12,879,530 $— $— $12,879,530 
Derivative liabilities23,660 23,164 — 496 
Non-controlling interest99,510 — — 99,510 
Total Liabilities$13,002,700 $23,164 $— $12,979,536 
The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended March 31, 2025.
Table 6.2 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets
Residential Consumer LoansResidential Investor
Loans		Consolidated Agency Multifamily LoansHEIReal Estate Trading SecuritiesReal Estate AFS
Securities		Servicing InvestmentsStrategic Investments
Derivatives, net (1)
(In Thousands)
Beginning balance - December 31, 2024
$11,077,823 $4,587,090 $424,597 $589,785 $193,749 $211,474 $297,683 $3,460 $5,323 
Acquisitions2,383,197 6,800 — — 8,359 844 — — — 
Originations— 454,362 — 1,834 — — — — — 
Sales(423,972)(346,455)— — (2,714)(11,673)— — — 
Principal paydowns(423,920)(287,639)(2,294)(10,348)(162)(96)1,956 — — 
Consolidation of securitized bridge loans (2)
— 43,383 — — — — — — — 
Gains (losses) in net income, net139,976 (15,221)1,370 19,048 (27,869)681 (1,349)— 31,254 
Unrealized gains in OCI, net— — — — — 3,372 — — — 
Other settlements, net (3)
(846)(2,486)— 67 — — — — (19,770)
Ending balance - March 31, 2025
$12,752,258 $4,439,834 $423,673 $600,386 $171,363 $204,602 $298,290 $3,460 $16,807 
Change in unrealized gains or (losses) for the period included in earnings for assets held at the end of the reporting period (4)
$132,299 $(16,696)$1,340 $18,495 $(27,693)$3,422 $(1,053)$— $16,807 
Liabilities
ABS IssuedNon-controlling interest
(In Thousands)
Beginning balance - December 31, 2024
$12,879,530 $99,510 
Acquisitions1,625,956 — 
Sales— — 
Principal paydowns(503,956)(1,187)
Gains (losses) in net income (loss), net126,144 5,997 
Other settlements, net— 1,840 
Ending balance - March 31, 2025
$14,127,674 $106,160 
Change in unrealized gains or (losses) for the period included in earnings for liabilities held at the end of the reporting period (4)
$97,883 $(4,640)
(1)For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, are presented on a net basis.
(2)In the fourth quarter of 2024, we completed our first CAFL securitization sponsored by our joint venture that we consolidate under GAAP as we are the primary beneficiary. During the three months ended March 31, 2025, we transferred $43 million of residential investor bridge loans to the joint venture under the replenishment feature of this securitization. For additional information on our principles of consolidation, see Note 16 of the Notes to Consolidated Financial Statements, included in Part I, Item 1 of the 2025 Quarterly Report on Form 10-Q.
(3)Other settlements, net: for residential consumer and residential investor loans, primarily represents the transfer of loans to REO; for HEI, represents the share of HEI disposition fees paid to our third party originators for our purchased HEI portfolio; for derivatives, represents the transfer of the fair value of loan purchase and interest rate lock commitments at the time loans are acquired to the basis of residential consumer and investor loans; and for mortgage servicing rights ("MSRs) and other investments, primarily represents an investment that was exchanged into a new instrument that is no longer measured at fair value on a recurring basis.
Footnotes to table 6.2 continued
(4)All changes in unrealized gains or (losses) are included in net income, with the exception of Real Estate AFS Securities, which are included in comprehensive income.
The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value.
Table 6.3 – Fair Value Methodology for Level 3 Financial Instruments
March 31, 2025
Fair
Value (1)
Input Values
(Dollars in Thousands, except Input Values)Unobservable InputRange
Weighted
Average (2)
Assets
Residential consumer loans (4)
$12,752,258
Senior credit spread to TBA price (3)
$0.94 -$1.81 $1.06 
Senior credit spread to Swap rate (3)
130 -300 bps186 bps
Subordinate credit spread to Swap rate170 -625 bps268 bps
Senior credit support (3)
7 -7 %7 %
IO discount rate (3)
7 -22 %19 %
Liability price$27 -$103 $96 
Residential investor loans:
Residential investor term loans (4)
2,559,176 
Whole loan spread (3)
245 -245 bps245 bps
Liability price$90 -$100 $94 
Residential investor bridge loans (4)
1,880,658 Whole loan discount rate7 -13 %8 %
Whole loan spread445 -445 bps445 bps
Liability Price$101 -$134 $102 
Dollar price of non-performing loans$38 -$100 $80 
Consolidated agency multifamily loans(6)
423,673Liability price$99 -$99 $99 
HEI600,386Discount rate10 -10 %10 %
Prepayment rate (Annual CPR)1 -20 %14 %
Home price appreciation (depreciation)4 -4 %4 %
Liability price (4)
$142 -$199 $160 
Real estate securities - trading and AFS securities375,965Discount rate5 -40 %13 %
Prepayment rate (Annual CPR)— -50 %10 %
Default rate— -8 %— %
Loss severity25 -50 %24 %
Servicing investments298,290Prepayment rate (Annual CPR)2 -50 %13 %
Discount rate8 -19 %13 %
Derivative assets, net (7)
16,807
Senior credit spread to TBA price (3)
$0.94 -$1.81 $1.06 
Senior credit spread to Swap rate (3)
130 -300 bps186 bps
Subordinate credit spread to Swap rate170 -625 bps268 bps
Senior credit support (3)
7 -7 %7 %
IO discount rate (3)
7 -22 %19 %
Pull-through rate1 -100 %58 %
Strategic investments3,460Transaction Price$200 -$1,000 $494 
Total Assets$18,910,673 
March 31, 2025
Fair
Value (1)
Input Values
(Dollars in Thousands, except Input Values)Unobservable InputRange
Weighted
Average (2)
Liabilities
ABS issued (4)
$14,127,674Discount rate4 -18 %6 %
Prepayment rate (annual CPR)— -57 %5 %
Default rate— -13 %— %
Loss severity— -50 %3 %
Non-controlling interests (8)
106,160Discount rate13 -20 %16 %
Total Liabilities$14,233,834 
(1)The predominant valuation technique used to determine our Level 3 fair value assets and liabilities is based on the discounted cash flow model.
(2)The weighted average input values for all loan types are based on unpaid principal balance. The weighted average input values for all other assets and liabilities are based on relative fair value.
(3)Values represent pricing inputs used in a securitization pricing model. Credit spreads represent spreads to applicable swap rates unless specified otherwise.
(4)The fair value of the loans and HEI held by consolidated entities is based on the fair value of the ABS issued by these entities and the securities and other investments we own in those entities, which we determined were more readily observable in accordance with accounting guidance for Collateralized Financing Entities ("CFE"). At March 31, 2025, the fair value of securities we owned at the consolidated Sequoia, CAFL Term, Freddie Mac SLST, and Freddie Mac K-Series was $533 million, $327 million, $264 million and $36 million, respectively. At March 31, 2025, the fair value of our securities in the two CAFL Bridge loan securitizations accounted for under the CFE election and our HEI securitization entities was $29 million and $50 million, respectively.
(5)Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool).
(6)Consolidated agency multifamily loans represent securitized financial assets and liabilities of the Company's CFEs.
(7)For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, are presented on a net basis.
(8)Of the total $130 million payable to non-controlling interests, $106 million is measured at fair value on a recurring basis.
The following table summarizes the estimated fair values of assets and liabilities that are not measured at fair value at March 31, 2025 and December 31, 2024.
Table 6.4 – Carrying Values and Estimated Fair Values of Assets and Liabilities
March 31, 2025December 31, 2024
Level in Fair Value HierarchyCarrying
Value		Estimated Fair
Value		Carrying
Value		Estimated Fair
Value
(In Thousands)
Assets
Cash and cash equivalents1$259,918 $259,918 $245,165 $245,165 
Restricted cash186,557 86,557 67,762 67,762 
Liabilities
Debt obligation facilities and other financing2$3,028,525 $3,029,522 $2,818,292 $2,819,393 
ABS issued, net3330,569 332,661 390,674 392,344 
Convertible notes, net1366,374 368,369 365,739 365,455 
Trust preferred securities and subordinated notes, net3138,871 89,280 138,860 93,465 
Senior Notes1226,915 233,134 139,989 146,716 
Guarantee obligations (1)
32,447 2,836 2,806 3,204 
(1)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance
During the three months ended March 31, 2025, we elected the fair value option for $8 million of securities, $2.34 billion (principal balance) of residential consumer loans, and $461 million (principal balance) of residential investor loans. Additionally, during the three months ended March 31, 2025, we elected the fair value option for $2 million of newly originated HEI.    
Nonrecurring Fair Values
We measure the fair value of certain assets and liabilities on a nonrecurring basis when events or changes in circumstances indicate that the carrying value may be impaired. Adjustments to fair value generally result from the write-down of asset values due to impairment. REO in Other Assets and Liabilities are classified as Level 3 in the fair value hierarchy based upon fair value determinations using appraisals, broker price opinions, comparable properties or other indications of value.
Refer to Note 15 for further information on our REO.