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Fair Value of Financial Instruments
 9 Months Ended
Sep. 30, 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 September 30, 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 September 30, 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
September 30, 2025Fair ValueFair Value Measurements Using
(In Thousands)Level 1Level 2Level 3
Assets
Residential consumer loans$16,783,281 $— $— $16,783,281 
Residential investor loans3,755,761 — — 3,755,761 
Consolidated Agency multifamily loans— — — — 
HEI326,223 — — 326,223 
Real estate securities:
  Trading134,546 — — 134,546 
  AFS284,372 — — 284,372 
Servicing investments282,256 — — 282,256 
Strategic investments6,460 — — 6,460 
Derivative assets97,948 28,156 35,352 34,440 
Total Assets$21,670,847 $28,156 $35,352 $21,607,339 
Liabilities
ABS issued$16,610,081 $— $— $16,610,081 
Derivative liabilities57,047 48,830 — 8,217 
Non-controlling interest78,099 — — 78,099 
Total Liabilities$16,745,227 $48,830 $— $16,696,397 
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 nine months ended September 30, 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 
Acquisitions9,186,044 43,804 — — 46,475 182,850 — — — 
Originations— 1,419,506 — 8,986 — — — — — 
Sales(2,090,189)(1,620,187)— (262,447)(31,839)(102,378)— — — 
Transfer to fair value option— — — — — — — 1,150 — 
Principal paydowns(1,703,261)(1,059,564)(430,230)(26,796)(447)(15,309)(8,067)— — 
Consolidation of securitized bridge loans (2)
— 475,326 — — — — — — — 
Gains (losses) in net income, net317,296 (39,391)5,633 16,521 (73,392)4,468 (7,361)1,850 80,763 
Unrealized gains in OCI, net— — — — — 3,267 — — — 
Other settlements, net (3)
(4,432)(50,823)— 174 — — — — (59,863)
Ending balance - September 30, 2025
$16,783,281 $3,755,761 $— $326,223 $134,546 $284,372 $282,255 $6,460 $26,223 
Change in unrealized gains or (losses) for the period included in earnings for assets held at the end of the reporting period (4)
$278,972 $1,569 $— $17,269 $(56,323)$6,322 $(6,247)$1,850 $26,223 
Liabilities
ABS IssuedNon-controlling interest
(In Thousands)
Beginning balance - December 31, 2024
$12,879,530 $99,510 
Acquisitions6,046,604 — 
Sales— (46,086)
Principal paydowns(2,661,532)9,707 
Gains (losses) in net income (loss), net345,479 15,955 
Other settlements, net— (987)
Ending balance - September 30, 2025
$16,610,081 $78,099 
Change in unrealized gains or (losses) for the period included in earnings for liabilities held at the end of the reporting period (4)
$813,558 $1,577 
(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 one of our joint ventures that we consolidate under GAAP as we are the primary beneficiary. During the nine months ended September 30, 2025, we transferred $136 million of residential investor bridge loans to the joint venture under the replenishment feature of this securitization. During the nine months ended September 30, 2025, we completed our second CAFL securitization sponsored by one of our joint ventures that we consolidate under GAAP as we are the primary beneficiary, and transferred $339 million of residential investor bridge loans to the joint venture related to 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.
Footnotes to 6.2 Continued
(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.
(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 at September 30, 2025.
Table 6.3 – Fair Value Methodology for Level 3 Financial Instruments
September 30, 2025
Fair
Value (1)
Input Values
(Dollars in Thousands, except Input Values)Unobservable InputRange
Weighted
Average (2)
Assets
Residential consumer loans (4)
$16,783,281
Senior credit spread to TBA price (3)
$0.88 -$1.50 $0.98 
Senior credit spread to Swap rate (3)
185 -275 bps234 bps
Subordinate credit spread to Swap rate190 -675 bps287 bps
Senior credit support (3)
7 -7 %7 %
IO discount rate (3)
22 -25 %24 %
Liability price$21 -$105 $98 
Residential investor loans:
Residential investor term loans (4)
2,300,565 
Whole loan spread (3)
230 -230 bps230 bps
Liability price$92 -$102 $95 
Residential investor bridge loans (4)
1,455,196 Whole loan discount rate7 -13 %9 %
Liability Price$96 -$158 $102 
Dollar price of loans$35 -$100 $66 
HEI326,223Discount rate9 -9 %9 %
Prepayment rate (Annual CPR)7 -15 %15 %
Home price appreciation (depreciation)4 -4 %4 %
Liability price (4)
$150 -$150 $150 
Real estate securities - trading and AFS securities418,918Discount rate3 -30 %8 %
Prepayment rate (Annual CPR)— -32 %6 %
Default rate— -76 %49 %
Loss severity— -50 %19 %
Servicing investments282,256Prepayment rate (Annual CPR)2 -30 %11 %
Prepayment yield (Annual CPY)50 -100 %74 %
Discount rate8 -19 %13 %
Derivative assets, net (5)
26,223
Senior credit spread to TBA price (3)
$0.88 -$2.38 $1.23 
Senior credit spread to Swap rate (3)
185 -275 bps217 bps
Subordinate credit spread to Swap rate190 -735 bps294 bps
Senior credit support (3)
5 -7 %6 %
IO discount rate (3)
12 -25 %20 %
Pull-through rate98 -98 %98 %
Strategic investments6,460Transaction Price$200 -$3,000 $807 
Total Assets$21,599,122 
September 30, 2025
Fair
Value (1)
Input Values
(Dollars in Thousands, except Input Values)Unobservable InputRange
Weighted
Average (2)
Liabilities
ABS issued (4)
$16,610,081Discount rate— -20 %1 %
Prepayment rate (annual CPR)— -47 %7 %
Default rate— -10 %— %
Loss severity— -50 %4 %
Non-controlling interests (6)
78,099Discount rate12 -15 %14 %
Total Liabilities$16,688,180 
(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 ("UPB"). 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 September 30, 2025, the fair value of securities we owned at the consolidated Sequoia, CAFL Term, and Freddie Mac SLST was $650 million, $333 million, and $254 million, respectively. At September 30, 2025, the fair value of our securities in the three CAFL Bridge loan securitizations accounted for under the CFE election and our HEI securitization entities was $40 million and $25 million, respectively.
(5)For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, are presented on a net basis.
(6)Of the total $102 million payable to non-controlling interests, $78 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 September 30, 2025 and December 31, 2024.
Table 6.4 – Carrying Values and Estimated Fair Values of Assets and Liabilities
September 30, 2025December 31, 2024
Level in Fair Value HierarchyCarrying
Value		Estimated Fair
Value		Carrying
Value		Estimated Fair
Value
(In Thousands)
Assets
Residential investor loans held-for-sale (1)
3$101,836 $101,836 $— $— 
Cash and cash equivalents1226,321 226,321 245,165 245,165 
Restricted cash1103,868 103,868 67,762 67,762 
Liabilities
Debt obligation facilities and other financing2$3,576,657 $3,577,448 $2,818,292 $2,819,393 
ABS issued, net3214,938 216,104 390,674 392,344 
Convertible notes, net1415,999 422,266 365,739 365,455 
Trust preferred securities and subordinated notes, net3138,894 83,700 138,860 93,465 
Senior Notes1225,111 227,477 139,989 146,716 
Guarantee obligations (2)
31,660 2,691 2,806 3,204 
(1)Residential investor loans reported at lower of cost or market for which the carrying value approximates fair value at September 30, 2025.
(2)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance.
During the three and nine months ended September 30, 2025, we elected the fair value option for $25 million and $46 million of securities, $3.85 billion and $9.16 billion (principal balance) of residential consumer loans, and $487 million and $1.38 billion (principal balance) of residential investor loans. Additionally, during the three and nine months ended September 30, 2025, we elected the fair value option for $3 million and $9 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, net of expected sales costs.
Refer to Note 15 for further information on our REO.