For the quarterly period ended March 31, 2022
For the transition period from _____________ to _____________
Commission File Number: 001-39645

(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
5887 Copley Drive
San Diego, California
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (858) 560-6330
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Name of each exchange on which registered
Class A common stock, $0.01 par value per shareGHLDThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
  Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x
As of May 2, 2022, the registrant had 20,723,912 shares of Class A common stock outstanding and 40,333,019 shares of Class B common stock outstanding.

Table of Contents


This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
Important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements include, but are not limited to, those factors described below under "Summary of Risk Factors" and in Part II, Item 1A. Risk Factors in this Quarterly Report.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described elsewhere in this Quarterly Report. Moreover, we operate in a very competitive environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under Part II, Item 1A. “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report and our other filings with the Securities and Exchange Commission ("SEC"), before making an investment decision regarding our common stock.

A disruption in the secondary home loan market or our ability to sell the loans we originate could have a detrimental effect on our business.
Macroeconomic and U.S. residential real estate market conditions could materially and adversely affect our clients, origination volume, revenue, and results of operations.
We highly depend on certain U.S. government-sponsored entities and government agencies, and any organizational or pricing changes in these entities, their guidelines or their current roles could materially and adversely affect us.
Changes in prevailing interest rates or U.S. monetary policies may have a detrimental effect on our business. Our hedging strategies may not be successful in mitigating interest rate risk.
Our servicing rights are subject to termination with or without cause.
Our existing and any future indebtedness could adversely affect our liquidity and our ability to operate our business.
A significant disruption in the technology that supports our origination and servicing platform could harm us.
The acquisition of Residential Mortgage Services Holdings, Inc. ("RMS") or other future acquisitions or investments, may cause our financial results to differ from expectations; we may

not be able to achieve anticipated benefits from the RMS acquisition or other future acquisitions or investments.
The coronavirus ("COVID-19") pandemic has had, and will likely continue to have, an adverse effect on our business.
Pressure from existing and new competitors may adversely affect us.
Our failure to maintain or grow our historical referral relationships with our referral partners may materially and adversely affect us.
Servicing advances can be subject to delays in recovery or may not be recoverable at all.
From time to time our estimates of the fair value of certain assets prove to be inaccurate and we are required to write them down.
The success and growth of our business will depend upon our ability to adapt to and implement technological changes.
Our business may be materially and adversely affected by a cybersecurity breach or other vulnerability involving our computer systems or those of certain of our third-party service providers.
Operating and growing our business may require additional capital that may not be available.
We are subject to certain operational risks, including employee or customer fraud, the obligation to repurchase sold loans in the event of a documentation error, and data processing system failures and errors.
We are periodically required to repurchase mortgage loans, or indemnify purchasers of our mortgage loans, including if these loans fail to meet certain criteria or characteristics.
Seasonality may cause fluctuations in our financial results.
If we fail to protect our brand and reputation, our ability to grow our business and increase the volume of mortgages we originate and service may be adversely affected.
We may fail to comply with the complex legal and regulatory framework (including state licensing requirements) governing our mortgage loan origination and servicing activities.
We are controlled by McCarthy Capital Mortgage Investors, LLC (“MCMI”), and MCMI’s interests may conflict with our interests and the interests of our other stockholders.
We are a “controlled company” and rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.
Our directors and executive officers have significant control over our business.
We are a holding company and depend upon distributions from Guild Mortgage Company LLC ("GMC") to meet our obligations.
We have a dual class common stock structure.
We identified material weaknesses in our internal control over financial reporting.

Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows.



(In thousands, except share and per share amounts)March 31,
December 31,
Cash and cash equivalents$243,999 $243,108 
Restricted cash6,312 5,012 
Mortgage loans held for sale1,281,799 2,204,216 
Ginnie Mae loans subject to repurchase right628,157 728,978 
Accounts and interest receivable34,513 68,359 
Derivative assets78,002 27,961 
Mortgage servicing rights, net937,556 675,340 
Intangible assets, net39,038 41,025 
Goodwill173,434 175,144 
Other assets210,708 214,061 
Total assets$3,633,518 $4,383,204 
Liabilities and stockholders’ equity
Warehouse lines of credit$1,156,829 $1,927,478 
Notes payable160,167 250,227 
Ginnie Mae loans subject to repurchase right628,815 729,260 
Accounts payable and accrued expenses51,294 56,836 
Accrued compensation and benefits49,788 75,079 
Investor reserves17,380 18,437 
Contingent liabilities due to acquisitions20,438 59,500 
Derivative liabilities12,087 2,079 
Operating lease liabilities93,949 97,836 
Note due to related party2,099 2,614 
Deferred compensation plan100,493 101,600 
Deferred tax liabilities210,921 142,245 
Total liabilities2,504,260 3,463,191 
Commitments and contingencies (Note 14)  
Stockholders’ equity
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding
Class A common stock, $0.01 par value; 250,000,000 shares authorized; 20,723,912 shares issued and outstanding at March 31, 2022 and December 31, 2021
207 207 
Class B common stock, $0.01 par value; 100,000,000 shares authorized; 40,333,019 shares issued and outstanding at March 31, 2022 and December 31, 2021
403 403 
Additional paid-in capital43,407 42,175 
Retained earnings1,085,192 877,194 
Non-controlling interest49 34 
Total stockholders’ equity1,129,258 920,013 
Total liabilities and stockholders’ equity$3,633,518 $4,383,204 
See accompanying notes to condensed consolidated financial statements

Three Months Ended March 31,
(In thousands, except per share amounts)20222021
Loan origination fees and gain on sale of loans, net$242,639 $446,589 
Loan servicing and other fees53,177 45,199 
Valuation adjustment of mortgage servicing rights184,601 35,743 
Interest income15,263 15,098 
Interest expense(14,138)(16,511)
Other income, net220 69 
Net revenue481,762 526,187 
Salaries, incentive compensation and benefits187,329 266,724 
General and administrative(5,630)26,906 
Occupancy, equipment and communication18,312 14,832 
Depreciation and amortization3,913 1,654 
(Relief) provision for foreclosure losses(321)2,462 
Total expenses203,603 312,578 
Income before income tax expense278,159 213,609 
Income tax expense70,186 53,005 
Net income207,973 160,604 
Net income attributable to non-controlling interest15  
Net income attributable to Guild$207,958 $160,604 
Net income per share attributable to Class A and Class B Common Stock:
Basic$3.41 $2.68 
Diluted$3.38 $2.67 
Weighted average shares outstanding of Class A and Class B Common Stock:
Basic61,057 60,000 
Diluted61,494 60,211 
See accompanying notes to condensed consolidated financial statements

(In thousands, except share amounts)

Class A
Class A
Class B
Class B
Non-Controlling InterestsTotal
Balance at December 31, 202019,666,981 $197 40,333,019 $403 $18,035 $717,357 $ $735,992 
Stock-based compensation— — — — 1,632 — — 1,632 
Net income— — — — — 160,604 — 160,604 
Balance at March 31, 202119,666,981 $197 40,333,019 $403 $19,667 $877,961 $ $898,228 
Class A
Class A
Class B
Class B
Non-Controlling InterestsTotal
Balance at December 31, 202120,723,912 $207 40,333,019 $403 $42,175 $877,194 $34 $920,013 
Stock-based compensation— — — — 1,272 — — 1,272 
Dividend equivalents on unvested restricted stock units forfeited— — — — (40)40 —  
Net income— — — — — 207,958 15 207,973 
Balance at March 31, 202220,723,912 $207 40,333,019 $403 $43,407 $1,085,192 $49 $1,129,258 
See accompanying notes to condensed consolidated financial statements

Three Months Ended March 31,
(In thousands)20222021
Cash flows from operating activities
Net income$207,973 $160,604 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization3,913 1,654 
Valuation adjustment of mortgage servicing rights(184,601)(35,743)
Valuation adjustment of mortgage loans held for sale40,956 61,634 
Unrealized gain on derivatives(40,033)(43,001)
Amortization of right-of-use assets5,583 3,779 
(Relief) provision for investor reserves(2,627)2,348 
(Relief) provision for foreclosure losses(321)2,462 
Valuation adjustment of contingent liabilities due to acquisitions(28,891)6,620 
Gain on sale of mortgage loans excluding fair value of other financial instruments, net(165,918)(355,157)
Deferred income taxes68,676 43,262 
Provision for (benefit from) investor reserves1,570 (2,006)
Foreclosure loss reserve237 (1,514)
Stock-based compensation1,272 1,632 
Changes in operating assets and liabilities:
Origination of mortgage loans held for sale(6,134,863)(9,815,270)
Proceeds on sale of and payments from mortgage loans held for sale7,182,242 10,131,643 
Accounts and interest receivable33,929 4,216 
Other assets(2,593)(2,936)
Mortgage servicing rights(77,615)(103,976)
Accounts payable and accrued expenses(5,540)2,659 
Accrued compensation and benefits(25,291)(30,520)
Income taxes1,507 9,866 
Contingent liability payments(2,871)(8,146)
Operating lease liabilities(5,557)(3,854)
Deferred compensation plan liability2,669 3,756 
Real estate owned, net108 (182)
Net cash provided by operating activities871,746 34,349 
Cash flows from investing activities
Proceeds from the sale of property and equipment168  
Purchases of property and equipment(1,218)(667)
Net cash used in investing activities(1,050)(667)
Cash flows from financing activities
Borrowings on warehouse lines of credit6,191,467 9,558,537 
Repayments on warehouse lines of credit(6,962,097)(9,630,640)
Borrowings on MSR notes payable 23,500 
Repayments on MSR notes payable(90,000)(4,250)
Contingent liability payments(7,300) 
Net change in notes payable(575)(501)
Net cash used in financing activities(868,505)(53,354)
Increase (decrease) in cash, cash equivalents and restricted cash2,191 (19,672)

Cash, cash equivalents and restricted cash, beginning of period248,120 339,633 
Cash, cash equivalents and restricted cash, end of period$250,311 $319,961 
Cash, cash equivalents and restricted cash at end of period are comprised of the following:
Cash and cash equivalents$243,999 $315,450 
Restricted cash6,312 4,511 
Total cash, cash equivalents and restricted cash$250,311 $319,961 
Supplemental information
Cash paid for interest, net$12,008 $12,349 
Cash paid for income taxes, net of refunds$ $(124)
Supplemental disclosure of non-cash investing activities:
Measurement period adjustment to goodwill$(1,710)$ 
See accompanying notes to condensed consolidated financial statements

(In thousands, except as otherwise indicated)
Guild Holdings Company, including our consolidated subsidiaries (collectively, “Guild”, the “Company”, “we”, “us” or “our”) originates, sells, and services residential mortgage loans within the United States.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with U.S. generally accepted accounting principles (“GAAP”) applicable to interim financial statements. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results of the interim period. The condensed consolidated balance sheet data as of December 31, 2021 was derived from audited financial statements but does not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. The Company follows the same accounting policies for preparing quarterly and annual reports.
Principles of Consolidation

The Company's consolidated financial statements include the accounts of the Company, Guild Mortgage Company LLC ("GMC") and their consolidated subsidiaries and those variable interest entities ("VIE") where the Company is the primary beneficiary.

Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to our business activities and the business activities of the other investors.

The Company consolidates one VIE. At March 31, 2022, the VIE had minimal assets and liabilities.

All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although management is not currently aware of any factors that would significantly change its estimates and assumptions, actual results could materially differ from those estimates.
Beginning in early 2020 and continuing through 2022, the coronavirus (“COVID-19”) pandemic, including the emergence of new variants and strains of COVID-19, has presented a substantial public health challenge throughout the United States. The Company remains fully functional in both its origination and servicing operations. The Company continues to monitor guidance published by the World Health Organization, Centers for Disease Control and Prevention, local and federal government agencies and the Mortgage Bankers Association and is in continual communication with its investors regarding the developments in the mortgage industry.
Escrow and Fiduciary Funds
As a loan servicer, the Company maintains segregated bank accounts in trust for investors and escrow balances for mortgagors, which are excluded from the Company’s Condensed Consolidated Balance Sheets. These accounts totaled $1.0 billion and $1.1 billion at March 31, 2022 and December 31, 2021.
Recent Accounting Standards
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP guidance on

contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the practical expedients in ASU 2020-04 apply to derivatives impacted by changes in the interest rate used for margining, discounting, or contract price alignment. The guidance in ASU 2020-04 is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur. Once ASU 2020-04 is elected, the guidance must be applied prospectively for all eligible contract modifications. The Company is in the process of transitioning its funding facilities and financing facilities that utilize LIBOR as the reference rate. For contracts to which ASC Topic 470, Debt applies, we have applied the optional expedients available from ASU 2020-04 and accounted for the contract modifications related to reference rate reform prospectively. Of the contracts that have been adjusted for the new reference rate, there has not been a material impact on the consolidated financial statements. We expect to amend the remaining borrowings before the July 1, 2023 LIBOR cessation date.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Inputs used to measure fair value are prioritized within a three-level fair value hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The categorization of assets and liabilities measured at fair value within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three levels of inputs used to measure fair value are as follows:
Level One - Level One inputs are unadjusted, quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level Two - Level Two inputs are observable for that asset or liability, either directly or indirectly, and include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, observable inputs for the asset or liability other than quoted prices and inputs derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified contractual term, the inputs must be observable for substantially the full term of the asset or liability.
Level Three - Level Three inputs are unobservable inputs for the asset or liability that reflect the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, and are developed based on the best information available.
The Company updates the valuation of each instrument recorded at fair value on a monthly or quarterly basis, evaluating all available observable information which may include current market prices or bids, recent trade activity, changes in the levels of market activity and benchmarking of industry data. The assessment also includes consideration of identifying the valuation approach that would be used currently by market participants. If it is determined that a change in valuation technique or its application is appropriate, or if there are other changes in availability of observable data or market activity, the current methodology will be analyzed to determine if a transfer between levels of the valuation hierarchy is appropriate. Such reclassifications are reported as transfers into or out of a level as of the beginning of the quarter that the change occurs.
Fair value is based on quoted market prices, when available. If quoted prices are not available, fair value is estimated based upon other observable inputs. Unobservable inputs are used when observable inputs are not available and are based upon judgments and assumptions, which are the Company’s assessment of the assumptions market participants would use in pricing the asset or liability. These inputs may include assumptions about risk, counterparty credit quality, the Company’s creditworthiness and liquidity and are developed based on the best information available. When a determination is made to classify an asset or liability within Level Three of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement of the asset or liability. The fair value of assets and liabilities classified within Level Three of the valuation hierarchy also typically includes observable factors and the realized or unrealized gain or loss recorded from the valuation of these instruments would also include amounts determined by observable factors.
Recurring Fair Value Measurements
The Company’s fair value measurements are evaluated within the fair value hierarchy, based on the nature of the inputs used to determine the fair value at the measurement date. At March 31, 2022 and

December 31, 2021, the Company had the following assets and liabilities that are measured at fair value on a recurring basis:
Trading Securities — Trading securities are classified within Level One of the valuation hierarchy. Valuation is based upon quoted prices for identical instruments traded in active markets. Level One trading securities include securities traded on active exchange markets, such as the New York Stock Exchange. Trading securities are included within prepaid expenses and other assets in the Condensed Consolidated Balance Sheets.
Derivative Instruments — Derivative instruments are classified within Level Two and Level Three of the valuation hierarchy, and include the following:
Interest Rate Lock Commitments — "IRLCs" are classified within Level Three of the valuation hierarchy. IRLCs represent an agreement to extend credit to a mortgage loan applicant, or an agreement to purchase a loan from a third-party originator, whereby the interest rate on the loan is set prior to funding. The fair value of IRLCs is based upon the estimated fair value of the underlying mortgage loan, including the expected net future cash flows related to servicing the mortgage loan, net of estimated incentive compensation expenses, and adjusted for: (i) estimated costs to complete and originate the loan and (ii) an adjustment to reflect the estimated percentage of IRLCs that will result in a closed mortgage loan under the original terms of the agreement (pull-through rate). The pull-through rate is considered a significant unobservable input and is estimated based on changes in pricing and actual borrower behavior using a historical analysis of loan closing and fallout data. The average pull-through rate used to calculate the fair value of IRLCs as of March 31, 2022 and December 31, 2021, was 93.8% and 91.5%, respectively. On a quarterly basis, actual loan pull-through rates are compared to the modeled estimates to confirm the assumptions are reflective of current trends. Generally, a change in interest rates is accompanied by a directionally opposite change in the assumption used for the pull-through percentage, and the impact to fair value of a change in pull-through would be partially offset by the related change in price.
Forward Delivery Commitments — Forward delivery commitments are classified within Level Two of the valuation hierarchy. Forward delivery commitments fix the forward sales price that will be realized upon the sale of mortgage loans into the secondary market. The fair value of forward delivery commitments is primarily based upon the current agency mortgage-backed security market to-be-announced pricing specific to the loan program, delivery coupon and delivery date of the trade. Best efforts sales commitments are also entered into for certain loans at the time the borrower commitment is made. These best-efforts sales commitments are valued using the committed price to the counterparty against the current market price of the IRLC or mortgage loan held for sale.
Option contracts are a type of forward commitment that represents the rights to buy or sell mortgage-backed securities at specified prices in the future. Their value is based upon the underlying current to-be-announced pricing of the agency mortgage-backed security market, and market-based volatility. See Note 5 for additional information on the derivative instruments.
Mortgage Loans Held for Sale — "MLHS" are carried at fair value. The fair value of MLHS is based on secondary market pricing for loans with similar characteristics, and as such, is classified as a Level Two measurement. For Level Two MLHS, fair value is estimated through a market approach by using either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to servicing rights and credit risk, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted for credit risk and other individual loan characteristics. The agency mortgage-backed security market is a highly liquid and active secondary market for conforming conventional loans whereby quoted prices exist for securities at the pass-through level and are published on a regular basis. The Company has the ability to access this market and it is the market into which conforming mortgage loans are typically sold.
Mortgage Servicing Rights — "MSRs" are classified within Level Three of the valuation hierarchy due to the use of significant unobservable inputs and the lack of an active market for such assets. The fair value of MSRs is estimated based upon projections of expected future cash flows considering prepayment estimates, the Company’s historical prepayment rates, portfolio characteristics, interest rates based on interest rate yield curves, implied volatility, costs to service and other economic factors. The Company obtains valuations from an independent third party on a monthly basis, and records an adjustment based on this third-party valuation. See Note 6 for additional information on our MSRs.
Contingent Liabilities due to acquisitions — Contingent liabilities represent future obligations of the Company to make payments to the former owners of its acquired companies. The Company determines the fair value of its contingent liabilities using a discounted cash flow approach whereby the Company forecasts the cash outflows related to the future payments, which are based on a percentage of net income specified in the purchase agreements. The Company then discounts these expected payment amounts to calculate the present value, or fair value, as of the valuation date. The Company’s

management evaluates the underlying projections used in determining fair value each period and makes updates to these underlying projections.
The Company uses a risk-adjusted discount rate to value the contingent liabilities which is considered a significant unobservable input, and as such, the liabilities are classified as a Level Three measurement. Management’s underlying projections adjust for market penetration and other economic expectations, and the discount rate is risk-adjusted for key factors such as uncertainty in the mortgage banking industry due to its reliance on external influences (interest rates, regulatory changes, etc.), upfront payments, and credit risk. An increase in the discount rate will result in a decrease in the fair value of the contingent liabilities. Conversely, a decrease in the discount rate will result in an increase in the fair value of the contingent liabilities. At March 31, 2022 and December 31, 2021, the range of the risk adjusted discount rate was 15.0% - 17.1%, with a median of 16.5%, and 15.0% - 19.5%, with a median of 19.1%, respectively. Adjustments to the fair value of the contingent liabilities (other than payments) are recorded as a gain or loss and are included within general and administrative expenses in the Condensed Consolidated Statements of Income.
The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2022:
DescriptionLevel 1Level 2Level 3Total
Trading securities$114 $ $ $114 
Forward delivery commitments 78,002  78,002 
Mortgage loans held for sale 1,281,799  1,281,799 
Mortgage servicing rights  937,556 937,556 
Total assets at fair value$114 $1,359,801 $937,556 $2,297,471 
Best efforts sales commitments 236  236 
Interest rate lock commitments  11,851 11,851 
Contingent liabilities due to acquisitions  20,438 20,438 
Total liabilities at fair value$ $236 $32,289 $32,525 
The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2021:
DescriptionLevel 1Level 2Level 3Total
Trading securities$107 $ $ $107 
Forward delivery commitments 5,842  5,842 
Interest rate lock commitments  22,119 22,119 
Mortgage loans held for sale 2,204,216  2,204,216 
Mortgage servicing rights  675,340 675,340 
Total assets at fair value$107 $2,210,058 $697,459 $2,907,624 
Forward delivery commitments$ $2,079 $ $2,079 
Contingent liabilities due to acquisitions  59,500 59,500 
Total liabilities at fair value$ $2,079 $59,500 $61,579 

The table below presents a reconciliation of certain Level Three assets and liabilities measured at fair value on a recurring basis for the periods ended:
Balance at December 31, 2020$130,338 $18,094 
Net transfers and revaluation losses(92,329)— 
Payments— (8,146)
Valuation adjustments— 6,620 
Balance at March 31, 2021$38,009 $16,568 
Balance at December 31, 2021$22,119 $59,500 
Net transfers and revaluation losses(33,970)— 
Payments— (10,171)
Valuation adjustments— (28,891)
Balance at March 31, 2022$(11,851)$20,438 
Changes in the availability of observable inputs may result in reclassifications of certain assets or liabilities. Such reclassifications are reported as transfers in or out of Level Three as of the beginning of the period that the change occurs. There were no transfers between fair value levels during the three months ended March 31, 2022 and 2021.
Non-Recurring Fair Value Measurements
Certain assets and liabilities that are not typically measured at fair value on a recurring basis may be subject to fair value measurement requirements under certain circumstances. These adjustments to fair value usually result from write-downs of individual assets. At March 31, 2022 and December 31, 2021, the Company had the following financial assets measured at fair value on a non-recurring basis:
Ginnie Mae Loans subject to Repurchase Right — Government National Mortgage Association ("GNMA" or "Ginnie Mae") securitization programs allow servicers to buy back individual delinquent mortgage loans from the securitized loan pool once certain conditions are met. If a borrower makes no payment for three consecutive months, the servicer has the option to repurchase the delinquent loan for an amount equal to 100% of the loan’s remaining principal balance. Under ASC 860, Transfers and Servicing, this buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. The Company records these assets and liabilities at their fair value, which is determined to be the remaining unpaid principal balance ("UPB"). The Company’s future expected realizable cash flows are the cash payments of the remaining UPB whether paid by the borrower or reimbursed through a claim filed with the United States Department of Housing and Urban Development ("HUD"). The Company considers the fair value of these assets and liabilities to fall into the Level Two bucket in the valuation hierarchy due to the assets and liabilities having specified contractual terms and the inputs are observable for substantially the full term of the assets' and liabilities' lives.
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a non-recurring basis at March 31, 2022:
DescriptionLevel 1Level 2Level 3Total
Ginnie Mae loans subject to repurchase right$ $628,157 $ $628,157 
Total assets at fair value$ $628,157 $ $628,157 
Ginnie Mae loans subject to repurchase right$ $628,815 $ $628,815 
Total liabilities at fair value$ $628,815 $ $628,815 

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a non-recurring basis at December 31, 2021:
DescriptionLevel 1Level 2Level 3Total
Ginnie Mae loans subject to repurchase right$ $728,978 $ $728,978 
Total assets at fair value$ $728,978 $ $728,978 
Ginnie Mae loans subject to repurchase right$ $729,260 $ $729,260 
Total liabilities at fair value$ $729,260 $ $729,260 
Fair Value Option
The following is the estimated fair value and UPB of MLHS that have contractual principal amounts and for which the Company has elected the fair value option. The fair value option was elected for MLHS as the Company believes fair value best reflects their expected future economic performance:
Fair ValuePrincipal
Amount Due
Difference (1)
Balance at March 31, 2022$1,281,799 $1,302,905 $(21,106)
Balance at December 31, 2021$2,204,216 $2,184,326 $19,890 
(1)Represents the amount of gains included in loan origination fees and gain on sale of loans, net due to changes in fair value of items accounted for using the fair value option.
Accounts and interest receivable consisted of the following:
 March 31, 2022December 31, 2021
Trust advances$28,639 $43,660 
Foreclosure advances, net4,353 19,311 
Receivables related to loan sales, net(682)3,043 
Other2,203 2,345 
Total accounts and interest receivable$34,513 $68,359 
Management has established a foreclosure reserve for estimated uncollectible balances of the foreclosure and trust advances. Management believes that substantially all other accounts and interest receivable amounts are collectible and, accordingly, no allowance for doubtful accounts is necessary.
The activity of the foreclosure loss reserve was as follows:
Three Months Ended March 31,
Balance — beginning of period$10,355 $12,402 
Utilization of foreclosure reserve237 (1,514)
(Relief) provision for foreclosure losses(321)2,462 
Balance — end of period$10,271 $13,350 


Other assets consisted of the following:
March 31, 2022December 31, 2021
Prepaid expenses$32,819 $32,900 
Company owned life insurance39,709 38,824 
Property and equipment, net15,105 15,834 
Right-of-use assets82,571 86,484 
Income tax receivable39,499 39,295 
Real estate owned738 471 
Land153 146 
Trading securities114 107 
Total other assets$210,708 $214,061 
Property and equipment, net consisted of the following:
March 31, 2022December 31, 2021
Computer equipment$30,407 $30,355 
Furniture and equipment25,396 25,833 
Leasehold improvements16,913 16,214 
Internal-use software in production1,911 1,548 
Internal-use software8,557 8,557 
Property and equipment, gross83,184 82,507 
Accumulated depreciation(68,079)(66,673)
Property and equipment, net$15,105 $15,834 
Depreciation and amortization expense for property and equipment was $1.9 million and $1.7 million for the three months ended March 31, 2022 and 2021, respectively.
The Company uses forward commitments in hedging the interest rate risk exposure on its fixed and adjustable rate commitments. The Company’s derivative instruments are not designated as hedging instruments for accounting purposes; therefore, changes in fair value are recognized in current period earnings. Realized and unrealized gains and losses from the Company's non-designated derivative instruments are included in loan origination fees and gain on sale of loans, net in the Condensed Consolidated Statements of Income.
Changes in the fair value of the Company's derivative financial instruments are as follows:
Three Months Ended March 31,
Unrealized gains$40,033 $43,001 
Notional and Fair Value
The notional and fair value of derivative financial instruments not designated as hedging instruments were as follows at March 31, 2022 and December 31, 2021:

Fair Value
Balance at March 31, 2022
IRLCs$2,826,402 $ $11,851 
Forward commitments$2,994,592 $78,002 $ 
Best efforts sales commitments$258,669 $ $236 
Balance at December 31, 2021
IRLCs$2,388,097 $22,119 $ 
Forward commitments$3,217,162 $5,842 $2,079 
The Company had an additional $455.7 million and $654.0 million of outstanding forward contracts and mandatory sell commitments, comprised of closed loans with equal and offsetting UPB amounts allocated to them, at March 31, 2022 and December 31, 2021, respectively. The Company also had $730.5 million and $767.5 million in closed hedge instruments not yet settled at March 31, 2022 and December 31, 2021, respectively. See Note 2 for fair value disclosure of the derivative instruments.
The following table presents the quantitative information about IRLCs and the fair value measurements:
March 31, 2022December 31, 2021
Unobservable InputRange (Weighted Average)
Loan funding probability (“pull-through”)
0% -100% (93.8%)
0% - 100% (91.5%)
Counterparty agreements for forward commitments contain master netting agreements. The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. The Company incurred no credit losses due to nonperformance of any of its counterparties during the periods ended March 31, 2022 and 2021.
The table below represents financial assets and liabilities that are subject to master netting arrangements categorized by financial instrument:
Amounts of
Recognized Assets
Offset in the
Amounts of
Recognized Assets
(Liabilities) in
the Balance
March 31, 2022
Forward delivery commitments$79,212 $(1,210)$78,002 
Total assets $79,212 $(1,210)$78,002 
Best efforts sales commitments$(236)$ $(236)
Total liabilities$(236)$ $(236)
December 31, 2021
Forward delivery commitments$7,541 $(1,699)$5,842 
Total assets$7,541 $(1,699)$5,842 
Forward delivery commitments$1,575 $(2,710)$(1,135)
Best efforts sales commitments(944) (944)
Total liabilities$631 $(2,710)$(2,079)

The activity of mortgage servicing rights was as follows:
Three Months Ended March 31,
Balance — beginning of period$675,340 $446,998 
MSRs originated77,615 103,976 
Changes in fair value:
Due to collection/realization of cash flows(24,894)(44,862)
Due to changes in valuation model inputs or assumptions209,495 80,605 
Balance — end of period$937,556 $586,717 
The following table presents the weighted average discount rate, prepayment speed and cost to service assumptions used to determine the fair value of MSRs:
March 31, 2022December 31, 2021
Unobservable InputRange (Weighted Average)
Discount rate
9.3% - 15.5% (9.9%)
9.3% - 15.5% (9.9%)
Prepayment rate
6.5% - 30.0% (9.1%)
7.3% - 29.5% (13.6%)
Cost to service (per loan)
$71.9 - $472.5 ($90.0)
$71.9 - $247.6 ($91.4)
At March 31, 2022 and December 31, 2021, the MSRs had a weighted average life of approximately 7.7 years and 5.9 years, respectively. See Note 2 for additional information regarding the valuation of MSRs.
Actual revenue generated from servicing activities included contractually specified servicing fees, as well as late fees and other ancillary servicing revenue, which were recorded within loan servicing and other fees as follows for the periods ended March 31, 2022 and 2021:
Three Months Ended March 31,
Servicing fees from servicing portfolio$51,564 $43,856 
Late fees1,515 1,069 
Other ancillary servicing revenue98 274 
Total loan servicing and other fees$53,177 $45,199 
At March 31, 2022 and December 31, 2021, the UPB of mortgage loans serviced totaled $73.3 billion and $70.9 billion, respectively. Conforming conventional loans serviced by the Company are sold to the Federal National Mortgage Association ("FNMA" or "Fannie Mae") or the Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") programs on a nonrecourse basis, whereby foreclosure losses are generally the responsibility of FNMA and FHLMC and not the Company. Similarly, certain loans serviced by the Company are secured through GNMA programs, whereby the Company is insured against loss by the Federal Housing Association ("FHA") or partially guaranteed against loss by the Department of Veterans Affairs ("VA").
The key assumptions used to estimate the fair value of MSRs are prepayment speeds, the discount rate and costs to service. Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore, the estimated life of the MSRs and related cash flows decrease. Decreases in prepayment speeds generally have a positive effect on the value of MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease and therefore, the estimated life of the MSRs and related cash flows increase. Increases in the discount rate generally have an adverse effect on the value of the MSRs. The discount rate is risk adjusted for key factors such as uncertainty in the mortgage banking industry due to its reliance on external influences (interest rates, regulatory changes, etc.), premium for market liquidity, and credit risk. A higher discount rate would indicate higher uncertainty of the future cash flows. Conversely, decreases in the discount rate generally have a positive effect on the value of the MSRs. Increases in the costs to service generally have an adverse effect on the value of the MSRs as an increase in costs to service would reduce the Company’s future net cash inflows from servicing a loan. Conversely, decreases in the costs to service generally have a positive effect on the value of the MSRs. MSR uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties.

The following table illustrates the impact of adverse changes on the prepayment speeds, discount rate and cost to service at two different data points at March 31, 2022 and December 31, 2021, respectively:
Prepayment SpeedsDiscount RateCost to Service (per loan)
10% Adverse
20% Adverse
10% Adverse
20% Adverse
10% Adverse
20% Adverse
March 31, 2022
Mortgage servicing rights$(35,148)$(68,457)$(37,146)$(71,892)$(10,314)$(21,166)
December 31, 2021
Mortgage servicing rights$(35,704)$(69,207)$(23,135)$(45,139)$(7,875)$(16,288)
The Company sells substantially all of its originated mortgage loans into the secondary market. The Company may retain the right to service some of these loans upon sale through ownership of servicing rights. A reconciliation of the changes in mortgage loans held for sale to the amounts presented in the Condensed Consolidated Statements of Cash Flows is set forth below:
Three Months Ended March 31,
Balance at the beginning of period$2,204,216 $2,368,777 
Origination of mortgage loans held for sale6,134,863 9,815,270 
Proceeds on sale of and payments from mortgage loans held for sale(7,182,242)(10,131,643)
Gain on sale of mortgage loans excluding fair value of other financial instruments, net165,918 355,157 
Valuation adjustment of mortgage loans held for sale(40,956)(61,634)
Balance at the end of period$1,281,799 $2,345,927 
At March 31, 2022, mortgage loans held for sale included UPB of the underlying loans of $1.3 billion and had a fair value of $1.3 billion. At December 31, 2021, mortgage loans held for sale included UPB of the underlying loans of $2.2 billion and had a fair value of $2.2 billion.
The Company’s estimate of the investor reserves considers the current macro-economic environment and recent repurchase trends; however, if the Company experiences a prolonged period of higher repurchase and indemnification activity, then the realized losses from loan repurchases and indemnifications may ultimately be in excess of the liability. The maximum exposure under the Company’s representations and warranties would be the outstanding principal balance and any premium received on all loans ever sold by the Company, less any loans that have already been paid in full by the mortgagee, that have defaulted without a breach of representations and warranties, that have been indemnified via settlement or make-whole, or that have been repurchased. Additionally, the Company may receive relief of certain representations and warranty obligations on loans sold to FNMA or FHLMC on or after January 1, 2013 if FNMA or FHLMC satisfactorily concludes a quality control loan file review or if the borrower meets certain acceptable payment history requirements within 12 or 36 months after the loan is sold to FNMA or FHLMC.
The activity of the investor reserves was as follows:
Three Months Ended March 31,
Balance — beginning of period$18,437 $14,535 
Provision for (benefit from) investor reserves1,570 (2,006)
(Relief) provision for investor reserves(2,627)2,348 
Balance — end of period$17,380 $14,877 
The changes in the carrying amount of goodwill allocated to the origination segment are presented in the following table:

Balance at December 31, 2021$175,144 
Measurement period adjustment(1)
Balance at March 31, 2022$173,434 
(1)During the three months ended March 31, 2022, we recorded a measurement period adjustment which included a decrease to goodwill of $1.7 million and an increase to income tax receivable of $1.7 million. This adjustment did not impact the Company's statement of income.
Intangible Assets
The following table presents our intangible assets, net as of March 31, 2022:
 Gross IntangiblesAccumulated AmortizationNet IntangiblesWeighted Average Amortization Period (Years)
Referral network$42,300 $5,287 $37,013 4.9
Non-compete agreements2,700 675 2,025