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Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 20 — Fair Value Measurements

Fair Value Determination

ASC Topic 820, “Fair Value Measurement,” defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and requires disclosures about fair value measurements. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. The hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

o
Level 1 - Valuation is based on quoted prices for identical instruments traded in active markets.
o
Level 2 - Valuation is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data.
o
Level 3 - Valuation is based on significant unobservable inputs for determining the fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the assets or liabilities.

Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period in which a change in valuation technique or methodology occurs. Given the nature of some of the Company’s assets and liabilities, clearly determinable market-based valuation inputs are often not available; therefore, these assets and liabilities are valued using internal estimates. As subjectivity exists

with respect to the valuation estimates used, the fair values disclosed may not equal prices that can ultimately be realized if the assets are sold or the liabilities are settled with third parties.

Below is a description of the valuation methods for the assets and liabilities recorded at fair value on either a recurring or nonrecurring basis and for estimating fair value of financial instruments not recorded at fair value for disclosure purposes. While management believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the measurement date.

Cash, Cash Equivalents and Restricted Cash

Cash and restricted cash are recorded at historical cost. The carrying amount is a reasonable estimate of fair value as these instruments have short-term maturities and interest rates that approximate market, a Level 1 measurement.

Loans Held for Investment, at Amortized Cost and Loans Held for Investment, at Fair Value

The Company uses a third-party loan valuation specialist to estimate the fair value of its nonperforming mortgage loans, a Level 3 measurement. The significant unobservable inputs used in the fair value measurement of the Company’s nonperforming mortgage loans are interest rates, market yield requirements, the probability of default, loss given default, voluntary prepayment speed and loss timing. The Company uses a third-party loan valuation model to estimate the fair value of its performing mortgage loans, a Level 3 measurement. The significant unobservable inputs used in the fair value measurement of the Company’s performing mortgage loans are discount rate, constant prepayment rate, constant default rate, and loss severity rate. Significant changes in any of those inputs in isolation could result in a significant change to the mortgage loans’ fair value measurement.

Collateral Dependent or Loans Individually Evaluated

Nonaccrual loans held for investment and carried at amortized cost are evaluated individually and are adjusted to the fair value of the collateral when the fair value of the collateral is below the carrying value of the loan. To the extent such a loan is collateral dependent, the Company determines the allowance for credit losses based on the estimated fair value of the underlying collateral. The fair value of each loan’s collateral is generally based on appraisals or broker price opinions obtained, less estimated costs to sell, a Level 3 measurement.

Loans Held for Sale, at Fair Value

The Company elected to account for certain loans originated with the intent to sell at fair value using FASB ASC Topic 825, Financial Instruments (ASC 825). The FVO loans held for sale are measured based on a discounted cash flow model, or on the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value, including the value attributable to mortgage servicing and credit risk, and current commitments to purchase loans, a Level 2 measurement. Management identified all loans to be accounted for at estimated fair value at the instrument level. Changes in fair value are reflected in income as they occur.

Retained Securities, at Fair Value

Retained securities, or Trust Certificate, is carried at fair value. The fair value of the Trust Certificate is classified within Level 3 of the fair value hierarchy, as it is not actively traded and its valuation requires the use of significant unobservable inputs. The Company estimates the fair value of the Trust Certificate using a discounted cash flow model, which incorporates projected cash flows from the underlying mortgage loan pool, including assumptions regarding the timing and amount of loan liquidations (the “liquidation rate”) and a discount rate reflecting the risk profile of a subordinated, first-loss interest in nonperforming loan collateral. Significant changes in any of the input factors in isolation, including the liquidation rate, could result in a significant change to the Trust Certificate's fair value measurement.

Real Estate Owned, Net (“REO”)

Real estate owned, net is initially recorded at the property’s estimated fair value, based on appraisals or broker price opinions obtained, less estimated costs to sell at acquisition date, a Level 3 measurement. From time to time, nonrecurring fair value adjustments are made to real estate owned, net based on the current updated appraised value of the property, or management’s judgment and estimation of value based on recent market trends or negotiated sales prices with potential buyers.

Mortgage Servicing Rights

The Company determined the fair values based on a third-party valuation specialist using a model that calculates the present value of estimated future net servicing income, a Level 3 measurement.

Derivative Instruments

Derivative financial instruments are measured at fair value using readily observable market inputs and the overall fair value measurement is classified as Level 2.

Secured and Unsecured Financing, Net (“Corporate Debt”)

The Company determined the fair values estimate of the secured and unsecured financing using the estimated cash flows discounted at an appropriate market rate, a Level 3 measurement.

Warehouse Repurchase Facilities, Net

Warehouse repurchase facilities are recorded at historical cost. The carrying amount is a reasonable estimate of fair value as these instruments have short-term maturities of one-year or less and interest rates that approximate market plus a spread, a Level 2 measurement.

Securitized Debt, at Amortized Cost and Securitized Debt, at Fair Value

The Company obtains the fair value estimates at instrument level from a third-party broker dealer based on trader input on benchmark securities. The fair values take into consideration input factors such as bond structure and collateral characteristics, and performance and pricing factors such as yield, spread, average life, prepayment speeds, default rate, and severities. The fair values are considered a Level 2 measurement. Significant changes in any of the input factors in isolation could result in a significant change to securitized debt’s fair value measurement.

Accrued Interest Receivable and Accrued Interest Payable

The carrying amounts of accrued interest receivable and accrued interest payable approximate fair value due to the short-term nature of these instruments, a Level 1 measurement.

The Company does not have any off-balance sheet financial instruments.

Receivables Due From Servicers

The carrying amounts of receivables due from servicers approximate fair value due to the short-term nature of these instruments, a Level 1 measurement.

Fair Value Disclosures

The following tables present information on assets and liabilities measured and recorded at fair value as of June 30, 2026 and December 31, 2025, by level, in the fair value hierarchy:

 

 

Fair Value Measurements Using

 

 

Total at

 

June 30, 2026

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Nonrecurring fair value measurements:

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans requiring specific allowance, net

 

$

—

 

 

$

—

 

 

$

8,627

 

 

$

8,627

 

Real estate owned, net

 

 

—

 

 

 

—

 

 

 

142,085

 

 

 

142,085

 

Total nonrecurring fair value measurements

 

 

—

 

 

 

—

 

 

 

150,712

 

 

 

150,712

 

Recurring fair value measurements:

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment, at fair value

 

 

—

 

 

 

—

 

 

 

5,460,522

 

 

 

5,460,522

 

Retained securities, at fair value

 

 

—

 

 

 

—

 

 

 

29,924

 

 

 

29,924

 

Mortgage servicing rights

 

 

—

 

 

 

—

 

 

 

14,307

 

 

 

14,307

 

Derivative assets

 

 

—

 

 

 

118

 

 

 

—

 

 

 

118

 

Total recurring fair value measurements

 

 

—

 

 

 

118

 

 

 

5,504,753

 

 

 

5,504,871

 

Total assets

 

$

—

 

 

$

118

 

 

$

5,655,465

 

 

$

5,655,583

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Recurring fair value measurements:

 

 

 

 

 

 

 

 

 

 

 

 

Securitized debt, at fair value

 

$

—

 

 

$

4,609,891

 

 

$

—

 

 

$

4,609,891

 

Total recurring fair value measurements

 

 

—

 

 

 

4,609,891

 

 

 

—

 

 

 

4,609,891

 

Total liabilities

 

$

—

 

 

$

4,609,891

 

 

$

—

 

 

$

4,609,891

 

 

 

 

Fair Value Measurements Using

 

 

Total at

 

December 31, 2025

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Nonrecurring fair value measurements:

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans requiring specific allowance, net

 

$

—

 

 

$

—

 

 

$

10,830

 

 

$

10,830

 

Real estate owned, net

 

 

—

 

 

 

—

 

 

 

118,289

 

 

 

118,289

 

Total nonrecurring fair value measurements

 

 

—

 

 

 

—

 

 

 

129,119

 

 

 

129,119

 

Recurring fair value measurements:

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment, at fair value

 

 

—

 

 

 

—

 

 

 

4,729,869

 

 

 

4,729,869

 

Mortgage servicing rights

 

 

—

 

 

 

—

 

 

 

12,963

 

 

 

12,963

 

Derivative assets

 

 

—

 

 

 

66

 

 

 

—

 

 

 

66

 

Total recurring fair value measurements

 

 

—

 

 

 

66

 

 

 

4,742,832

 

 

 

4,742,898

 

Total assets

 

$

—

 

 

$

66

 

 

$

4,871,951

 

 

$

4,872,017

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Recurring fair value measurements:

 

 

 

 

 

 

 

 

 

 

 

 

Securitized debt, at fair value

 

$

—

 

 

$

4,236,737

 

 

$

—

 

 

$

4,236,737

 

Total recurring fair value measurements

 

 

—

 

 

 

4,236,737

 

 

 

—

 

 

 

4,236,737

 

Total liabilities

 

$

—

 

 

$

4,236,737

 

 

$

—

 

 

$

4,236,737

 

 

The following table presents gains and losses recognized on assets measured on a nonrecurring basis for the three and six months ended June 30, 2026 and 2025:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

Gain (Loss) on Assets Measured on a Nonrecurring Basis

 

2026

 

 

2025

 

 

2026

 

 

2025

 

 

 

(In thousands)

 

Real estate owned, net

 

$

(3,636

)

 

$

(2,150

)

 

$

(6,852

)

 

$

(4,223

)

Individually evaluated loans requiring specific allowance, net

 

 

19

 

 

 

(40

)

 

 

(70

)

 

 

(441

)

Total net loss

 

$

(3,617

)

 

$

(2,190

)

 

$

(6,922

)

 

$

(4,664

)

The following tables present the primary valuation techniques and unobservable inputs related to Level 3 assets that are recorded on a recurring and nonrecurring basis as of June 30, 2026 and December 31, 2025:

 

 

June 30, 2026

Asset Category

 

Fair Value

 

 

Primary
Valuation
Technique

 

Unobservable
Input

 

Range

 

Weighted
Average (1)

 

 

($ in thousands)

Nonrecurring:

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans requiring specific allowance, net

 

$

8,627

 

 

Market comparables

 

Selling costs

 

8.0%

 

8.0%

Real estate owned, net

 

 

142,085

 

 

Market comparables

 

Selling costs

 

8.0%

 

8.0%

 

 

 

 

 

 

 

 

 

 

 

 

Recurring:

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment, at fair value

 

$

5,460,522

 

 

Discounted cash flow

 

Discount rate

 

7.8%

 

7.8%

 

 

 

 

 

 

Prepayment rate

 

0.0% to 65.0%

 

11.0%

 

 

 

 

 

 

Default rate

 

0.6% to 6.3%

 

1.4%

 

 

 

 

 

 

Loss severity rate

 

0.0% to 22.8%

 

9.3%

Retained securities, at fair value

 

 

29,924

 

 

Discounted cash flow

 

Discount rate

 

12.0%

 

12.0%

 

 

 

 

 

 

 

Monthly liquidation rate

 

0.5% to 2.6%

 

1.2%

Mortgage servicing rights — GNMA loans

 

 

14,160

 

 

Discounted cash flow

 

Discount rate

 

8.0% to 12.0%

 

8.0%

 

 

 

 

 

 

Prepayment rate

 

2.2% to 12.1%

 

5.9%

Mortgage servicing rights — BPC MC Trust loans

 

 

147

 

 

Discounted cash flow

 

Discount rate

 

15.0%

 

15.0%

 

 

 

 

 

 

Prepayment rate

 

3.0% to 75.6%

 

39.0%

 

(1)
Individually evaluated loans requiring specific allowance, net is weighted by collateral value; real estate owned, net is weighted by selling price; loans held for investment at fair value and mortgage servicing rights are weighted by UPB.

 

 

December 31, 2025

Asset Category

 

Fair Value

 

 

Primary
Valuation
Technique

 

Unobservable
Input

 

Range

 

Weighted
Average (1)

 

 

($ in thousands)

Nonrecurring:

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans requiring specific allowance, net

 

$

10,830

 

 

Market comparables

 

Selling costs

 

8.0%

 

8.0%

Real estate owned, net

 

 

118,289

 

 

Market comparables

 

Selling costs

 

8.0%

 

8.0%

 

 

 

 

 

 

 

 

 

 

 

 

Recurring:

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment, at fair value

 

$

4,729,869

 

 

Discounted cash flow

 

Discount rate

 

7.6%

 

7.6%

 

 

 

 

 

 

Prepayment rate

 

0.0% to 65.0%

 

12.0%

 

 

 

 

 

 

Default rate

 

0.4% to 6.0%

 

1.0%

 

 

 

 

 

 

Loss severity rate

 

0.0% to 8.7%

 

1.0%

Mortgage servicing rights — GNMA loans

 

 

12,748

 

 

Discounted cash flow

 

Discount rate

 

8.0%

 

8.0%

 

 

 

 

 

 

Prepayment rate

 

2.2% to 12.0%

 

5.6%

Mortgage servicing rights — BPC MC Trust loans

 

 

215

 

 

Discounted cash flow

 

Discount rate

 

15.0%

 

15.0%

 

 

 

 

 

 

Prepayment rate

 

4.9% to 54.1%

 

36.5%

 

(1)
Individually evaluated loans requiring specific allowance, net is weighted by collateral value; real estate owned, net is weighted by selling price; loans held for investment at fair value and mortgage servicing rights are weighted by UPB.

The following is a roll-forward of loans held for investment that are measured and recorded at estimated fair value on a recurring basis for the periods indicated:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

 

 

(In thousands)

 

Beginning balance

 

$

5,154,508

 

 

$

3,287,188

 

 

$

4,729,869

 

 

$

2,766,951

 

Originations

 

 

586,319

 

 

 

684,465

 

 

 

1,223,465

 

 

 

1,320,002

 

Loans liquidated

 

 

(187,067

)

 

 

(148,951

)

 

 

(361,818

)

 

 

(281,661

)

REO transfer

 

 

(20,913

)

 

 

(12,811

)

 

 

(46,955

)

 

 

(19,340

)

Principal paydowns

 

 

(14,495

)

 

 

(13,414

)

 

 

(27,318

)

 

 

(24,189

)

Unrealized gain included in net income

 

 

24,483

 

 

 

30,028

 

 

 

25,522

 

 

 

64,742

 

Loans transferred to held for sale

 

 

(82,313

)

 

 

—

 

 

 

(82,313

)

 

 

—

 

Loans repurchased

 

 

—

 

 

 

—

 

 

 

70

 

 

 

—

 

Ending balance

 

$

5,460,522

 

 

$

3,826,505

 

 

$

5,460,522

 

 

$

3,826,505

 

The following is a roll-forward of loans held for sale that are measured and recorded at estimated fair value on a recurring basis for the periods indicated:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

 

 

(In thousands)

 

Beginning balance

 

$

—

 

 

$

5,008

 

 

$

—

 

 

$

—

 

Originations

 

 

86,258

 

 

 

40,922

 

 

 

88,484

 

 

 

45,809

 

Loans sold

 

 

(168,571

)

 

 

(46,953

)

 

 

(170,797

)

 

 

(46,954

)

Unrealized gain included in net income

 

 

—

 

 

 

1,023

 

 

 

—

 

 

 

1,145

 

Loans transferred from held for investment

 

 

82,313

 

 

 

—

 

 

 

82,313

 

 

 

—

 

Ending balance

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

The following is a roll-forward of securitized debt measured and recorded at estimated fair value on a recurring basis for the periods indicated:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

 

 

(In thousands)

 

Beginning balance

 

$

4,426,240

 

 

$

2,459,767

 

 

$

4,236,737

 

 

$

2,207,408

 

Additions

 

 

398,441

 

 

 

982,140

 

 

 

912,166

 

 

 

1,356,500

 

Paydowns and payoffs

 

 

(212,493

)

 

 

(216,722

)

 

 

(510,461

)

 

 

(352,405

)

Total unrealized (gain) loss included in net income

 

 

(2,297

)

 

 

7,584

 

 

 

(28,551

)

 

 

21,266

 

Ending balance

 

$

4,609,891

 

 

$

3,232,769

 

 

$

4,609,891

 

 

$

3,232,769

 

The Company estimates the fair value of certain financial instruments on a quarterly basis. These instruments are recorded at fair value using a valuation allowance only if they are individually evaluated. As described above, these adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets. As of June 30, 2026 and December 31, 2025, financial assets and liabilities measured at fair value include loans held for investment at fair value, loans held for sale at fair value, mortgage servicing rights, derivative instruments, securitized debt at fair value and retained securities at fair value. Financial assets measured at the lower of cost or estimated fair value include certain individually evaluated loans held for investment and REOs, which are measured using unobservable inputs, including appraisals and broker price opinions on the values of the underlying collateral. Individually evaluated loans requiring an allowance were carried at approximately $8.6 million and $10.8 million as of June 30, 2026 and December 31, 2025, respectively, net of specific allowance for credit losses of approximately $1.1 million and $1.0 million, respectively.

A financial instrument is cash, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from a second entity on potentially favorable terms. The methods and assumptions used in estimating the fair values of the Company’s financial instruments are described above.

The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:

 

 

June 30, 2026

 

 

 

Carrying

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

Asset Category

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value

 

 

 

(In thousands)

 

Assets:

 

 

 

Cash

 

$

76,115

 

 

$

76,115

 

 

$

—

 

 

$

—

 

 

$

76,115

 

Restricted cash

 

 

169,088

 

 

 

169,088

 

 

 

—

 

 

 

—

 

 

 

169,088

 

Loans held for investment, at amortized cost

 

 

1,823,039

 

 

 

—

 

 

 

—

 

 

 

1,780,007

 

 

 

1,780,007

 

Loans held for investment, at fair value

 

 

5,460,522

 

 

 

—

 

 

 

—

 

 

 

5,460,522

 

 

 

5,460,522

 

Retained securities, at fair value

 

 

29,924

 

 

 

—

 

 

 

—

 

 

 

29,924

 

 

 

29,924

 

Accrued interest receivables

 

 

53,107

 

 

 

53,107

 

 

 

—

 

 

 

—

 

 

 

53,107

 

Mortgage servicing rights

 

 

14,307

 

 

 

—

 

 

 

—

 

 

 

14,307

 

 

 

14,307

 

Derivative assets

 

 

118

 

 

 

—

 

 

 

118

 

 

 

—

 

 

 

118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured financing, net

 

$

73,427

 

 

$

—

 

 

$

—

 

 

$

74,972

 

 

$

74,972

 

Unsecured senior notes, net

 

 

486,170

 

 

 

—

 

 

 

—

 

 

 

497,453

 

 

 

497,453

 

Warehouse and repurchase facilities, net

 

 

311,676

 

 

 

—

 

 

 

311,676

 

 

 

—

 

 

 

311,676

 

Securitized debt, at amortized cost

 

 

1,570,782

 

 

 

—

 

 

 

1,442,690

 

 

 

—

 

 

 

1,442,690

 

Securitized debt, at fair value

 

 

4,609,891

 

 

 

—

 

 

 

4,609,891

 

 

 

—

 

 

 

4,609,891

 

Accrued interest payable

 

 

52,961

 

 

 

52,961

 

 

 

—

 

 

 

—

 

 

 

52,961

 

 

 

 

December 31, 2025

 

 

 

Carrying

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

Asset Category

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value

 

 

 

(In thousands)

 

Assets:

 

 

 

Cash

 

$

92,103

 

 

$

92,103

 

 

$

—

 

 

$

—

 

 

$

92,103

 

Restricted cash

 

 

157,134

 

 

 

157,134

 

 

 

—

 

 

 

—

 

 

 

157,134

 

Loans held for investment, at amortized cost

 

 

2,028,262

 

 

 

—

 

 

 

—

 

 

 

1,976,279

 

 

 

1,976,279

 

Loans held for investment, at fair value

 

 

4,729,869

 

 

 

—

 

 

 

—

 

 

 

4,729,869

 

 

 

4,729,869

 

Accrued interest receivable

 

 

49,678

 

 

 

49,678

 

 

 

—

 

 

 

—

 

 

 

49,678

 

Mortgage servicing rights

 

 

12,963

 

 

 

—

 

 

 

—

 

 

 

12,963

 

 

 

12,963

 

Derivative assets

 

 

66

 

 

 

—

 

 

 

66

 

 

 

—

 

 

 

66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured financing, net

 

$

286,679

 

 

$

—

 

 

$

—

 

 

$

289,660

 

 

$

289,660

 

Warehouse repurchase facilities, net

 

 

308,506

 

 

 

—

 

 

 

308,506

 

 

 

—

 

 

 

308,506

 

Securitized debt, at amortized cost

 

 

1,705,589

 

 

 

—

 

 

 

1,588,620

 

 

 

—

 

 

 

1,588,620

 

Securitized debt, at fair value

 

 

4,236,737

 

 

 

—

 

 

 

4,236,737

 

 

 

—

 

 

 

4,236,737

 

Accrued interest payable

 

 

37,111

 

 

 

37,111

 

 

 

—

 

 

 

—

 

 

 

37,111