ALLOWANCE FOR RISK-SHARING OBLIGATIONS AND GUARANTY OBLIGATION

12 Months Ended

Dec. 31, 2025

ALLOWANCE FOR RISK-SHARING OBLIGATIONS AND GUARANTY OBLIGATION

ALLOWANCE FOR RISK-SHARING OBLIGATIONS AND GUARANTY OBLIGATION

NOTE 4—ALLOWANCE FOR RISK-SHARING OBLIGATIONS AND GUARANTY OBLIGATION

When a loan is sold under the Fannie Mae Delegated Underwriting and Servicing (“DUS”) program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. The guaranty is in force while the loan is outstanding. Substantially all loans sold under the Fannie Mae DUS program contain modified or full- risk-sharing guaranties that are based on the credit performance of the loan. The Company records an estimate of the contingent loss reserve for CECL, for all loans in its Fannie Mae at-risk servicing portfolio and an insignificant number of Freddie Mac SBL pre-securitized loans as discussed in NOTE 2. Most loans are collectively evaluated, while a small portion is individually evaluated. For loans that are individually evaluated, a reserve for estimated credit losses is recorded when it is probable that a risk-sharing loan will foreclose or has foreclosed (“collateral-based reserves”), and a reserve for estimated credit losses is recorded for all other risk-sharing loans that are collectively evaluated (“CECL allowance”). The combined loss reserves, along with an insignificant balance of reserves for Freddie Mac SBL, are presented as Allowance for risk-sharing obligations on the Consolidated Balance Sheets.

Activity related to the allowance for risk-sharing obligations for the years ended December 31, 2025 and 2024 follows:

	For the year ended December 31,
Roll Forward of Allowance for Risk-Sharing Obligations (in thousands)	2025		2024
Beginning balance	$	28,159	$	31,601
Provision (benefit) for risk-sharing obligations		9,387		(974)
Write-offs		—		(468)
Other		—		(2,000)
Ending balance	$	37,546	$	28,159

The Company assesses several qualitative and quantitative factors including the current and expected unemployment rate, macroeconomic conditions, and the multifamily market, to calculate the Company’s CECL allowance each quarter. The key inputs for the CECL allowance are the historical loss rate, the forecast-period loss rate, the reversion-period loss rate, and the UPB of the at-risk servicing portfolio. A summary of the key inputs of the CECL allowance as of the end of each of the quarters presented and the provision impact during each quarter for the years ended December 31, 2025, 2024, and 2023 follows.

		2025
CECL Allowance Calculation Inputs, Details, and Provision Impact		Q1		Q2		Q3		Q4		Total
Forecast-period loss rate (in basis points)		2.1		2.1		2.1		2.1		N/A
Reversion-period loss rate (in basis points)		1.2		1.2		1.2		1.2		N/A
Historical loss rate (in basis points)		0.3		0.3		0.3		0.3		N/A
At-risk Fannie Mae servicing portfolio UPB (in billions)	$	63.6	$	64.7	$	66.0	$	67.5		N/A
CECL allowance (in millions)	$	24.4	$	24.6	$	24.8	$	25.0		N/A
Provision (benefit) for CECL allowance (in millions)	$	0.2	$	0.2	$	0.1	$	0.2	$	0.7

		2024
CECL Allowance Calculation Inputs, Details, and Provision Impact		Q1		Q2		Q3		Q4		Total
Forecast-period loss rate (in basis points)		2.3		2.3		2.1		2.1		N/A
Reversion-period loss rate (in basis points)		1.3		1.3		1.2		1.2		N/A
Historical loss rate (in basis points)		0.3		0.3		0.3		0.3		N/A
At-risk Fannie Mae servicing portfolio UPB (in billions)	$	59.2	$	59.5	$	60.6	$	62.9		N/A
CECL allowance (in millions)	$	25.0	$	24.9	$	23.4	$	24.2		N/A
Provision (benefit) for CECL allowance (in millions)	$	(6.6)	$	(0.1)	$	(1.5)	$	0.8	$	(7.4)

		2023
CECL Allowance Calculation Inputs, Details, and Provision Impact		Q1		Q2		Q3		Q4		Total
Forecast-period loss rate (in basis points)		2.3		2.3		2.3		2.4		N/A
Reversion-period loss rate (in basis points)		1.5		1.5		1.5		1.5		N/A
Historical loss rate (in basis points)		0.6		0.6		0.6		0.6		N/A
At-risk Fannie Mae servicing portfolio UPB (in billions)	$	54.5	$	55.7	$	57.4	$	58.5		N/A
CECL allowance (in millions)	$	28.7	$	28.9	$	31.0	$	31.6		N/A
Provision (benefit) CECL allowance (in millions)	$	(11.0)	$	0.2	$	0.5	$	0.6	$	(9.7)

During the first quarters of 2025, 2024 and 2023, the Company updated its ten-year look-back period, resulting in loss data from the earliest year being replaced with loss data for the most recently completed year. In 2024 and 2023 the look-back period updates resulted in the historical loss rate factors decreasing and the benefit for CECL allowance, as noted in the table above. The Company also increased its forecast-period and reversion-period loss rates during the three months ended March 31, 2023 to incorporate uncertain macroeconomic conditions. For the three months ended March 31, 2024, the ratio of the forecast-period loss rate to the historical loss rate increased, resulting in a much lower benefit for CECL allowance than in 2023.

The weighted-average remaining life of the at-risk Fannie Mae servicing portfolio as of December 31, 2025 was 5.1 years compared to 5.7 years as of December 31, 2024.

As of December 31, 2025, 11 Fannie Mae DUS loans and three Freddie Mac SBLs had aggregate collateral-based reserves of $12.6 million compared to three Fannie Mae DUS loans and three Freddie Mac SBLs that had aggregate collateral-based reserves of $4.0 million as of December 31, 2024.

Activity related to the guaranty obligation for the years ended December 31, 2025 and 2024 follows:

	For the year ended December 31,
Roll Forward of Guaranty Obligation (in thousands)	2025		2024
Beginning balance	$	35,980	$	39,868
Additions, following the sale of loan		5,679		4,218
Amortization and write-offs		(8,735)		(8,106)
Ending balance	$	32,924	$	35,980

As of December 31, 2025 and 2024, the maximum quantifiable contingent liability associated with the Company’s guarantees for the at-risk loans serviced under the Fannie Mae DUS agreement was $14.1 billion and $12.9 billion, respectively. This maximum quantifiable contingent liability relates to the at-risk loans serviced for Fannie Mae at the specific point in time indicated. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans were determined to be without value at the time of settlement.