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Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2026
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, 2025 is a more detailed description of our financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy. At March 31, 2026, 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, 2025.
The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at March 31, 2026 and December 31, 2025, as well as the fair value hierarchy of the valuation inputs used to measure fair value.
Table 6.1 – Assets and Liabilities Measured at Fair Value on a Recurring Basis
March 31, 2026Fair ValueFair Value Measurements Using
(In Thousands)Level 1Level 2Level 3
Assets
Residential consumer loans$21,299,884 $— $— $21,299,884 
Residential investor loans3,295,715 — — 3,295,715 
HEI341,101 — — 341,101 
Real estate securities:
  Trading182,137 — — 182,137 
  AFS294,250 — — 294,250 
Servicing investments299,696 — — 299,696 
Strategic investments10,123 — — 10,123 
Derivative assets154,880 69,781 75,222 9,877 
Total Assets$25,877,786 $69,781 $75,222 $25,732,783 
Liabilities
ABS issued$20,417,812 $— $— $20,417,812 
Derivative liabilities156,244 146,207 — 10,037 
Non-controlling interest95,492 — — 95,492 
Total Liabilities$20,669,548 $146,207 $— $20,523,341 
December 31, 2025Fair ValueFair Value Measurements Using
(In Thousands)Level 1Level 2Level 3
Assets
Residential consumer loans$17,935,761 $— $— $17,935,761 
Residential investor loans3,602,250 — — 3,602,250 
HEI329,883 — — 329,883 
Real estate securities:
  Trading135,459 — — 135,459 
  AFS287,557 — — 287,557 
Servicing investments302,230 — — 302,230 
Strategic investments6,310 — — 6,310 
Derivative assets105,597 56,458 31,119 18,020 
Total Assets$22,705,047 $56,458 $31,119 $22,617,470 
Liabilities
ABS issued$17,433,600 $— $— $17,433,600 
Derivative liabilities28,150 26,973 — 1,177 
Non-controlling interest92,644 — — 92,644 
Total Liabilities$17,554,394 $26,973 $— $17,527,421 
The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended March 31, 2026.
Table 6.2 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets
Residential Consumer LoansResidential Investor
Loans		HEIReal Estate Trading SecuritiesReal Estate AFS
Securities		Servicing InvestmentsStrategic Investments
Derivatives, net (1)
(In Thousands)
Beginning balance - December 31, 2025
$17,935,761 $3,602,250 $329,883 $135,459 $287,557 $302,230 $6,310 $16,843 
Acquisitions (3)
6,724,282 — — 44,606 10,185 — 527 — 
Originations (3)
— 432,422 2,612 — — — — — 
Sales(2,037,561)(694,091)— (25,670)— — — — 
Transfer to fair value option— — — — — — 1,350 — 
Principal paydowns(1,243,489)(264,358)(3,926)(75)(408)(18,207)— — 
Consolidation of securitized bridge loans (2)
— 277,283 — — — — — — 
Gains (losses) in net income, net(78,098)(32,427)12,495 27,817 924 13,980 1,936 1,997 
Unrealized gains in OCI, net— — — — (4,008)— — — 
Other settlements, net (3)
(1,011)(25,364)37 — — 1,693 — (19,000)
Ending balance -
March 31, 2026
$21,299,884 $3,295,715 $341,101 $182,137 $294,250 $299,696 $10,123 $(160)
Change in unrealized gains or (losses) for the period included in earnings for assets held at the end of the reporting period (4)
$(81,515)$(35,868)$12,724 $27,871 $(4,189)$14,586 $(150)$(196)
Liabilities
ABS IssuedNon-controlling interest
(In Thousands)
Beginning balance - December 31, 2025
$17,433,600 $92,645 
Issuance4,811,866 — 
Sales(1,943)— 
Principal paydowns(1,659,632)— 
(Gains) losses in net income (loss), net(166,079)3,894 
Other settlements, net— (1,047)
Ending balance - March 31, 2026
$20,417,812 $95,492 
Change in unrealized (gains) or losses for the period included in earnings for liabilities held at the end of the reporting period (4)
$(217,033)$3,894 
(1)Derivatives, net, consists of loan purchase and interest rate lock commitments, and are presented on a net basis.
(2)For the three months ended March 31, 2026, we transferred $218 million of residential investor bridge loans to joint ventures sponsored by us in connection with our CAFL bridge securitizations. These joint ventures are consolidated under GAAP as we are the primary beneficiary. For additional information on our principles of consolidation, see Note 16 of the Notes to Consolidated Financial Statements, included in Part I, Item 1 of the 2025 Quarterly Report on Form 10-Q.
(3)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.
(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 March 31, 2026.
Table 6.3 – Fair Value Methodology for Level 3 Financial Instruments
March 31, 2026
Fair
Value (1)
Input Values
(Dollars in Thousands, except Input Values)Unobservable InputRange
Weighted
Average (2)
Assets
Residential consumer loans (4)
$21,299,884
Senior credit spread to TBA price (3)
$0.63 -$1.38 $0.93 
Senior credit spread to Treasury Curve (3)
140 -200 bps146 bps
Subordinate credit spread to Treasury Curve (3)
160 -675 bps263 bps
Senior credit support (3)
7 -20 %8 %
IO discount rate (3)
10 -23 %21 %
Liability price$4 -$105 $99 
Residential investor loans:
Residential investor term loans (4)
1,906,368 
Whole loan spread (3)
250 -250 bps250 bps
Liability price$90 -$99 $94 
Residential investor bridge loans (4)
1,389,347 Whole loan discount rate7 -10 %7 %
Liability Price$79 -$161 $101 
Dollar price of loans$4 -$101 $83 
HEI341,101Discount rate8 -8 %8 %
Prepayment rate (Annual CPR)8 -15 %14 %
Home price appreciation (depreciation)4 -4 %4 %
Liability price (4)
$157 -$157 $157 
Real estate securities - trading and AFS securities476,387Discount rate— -22 %9 %
Prepayment rate (Annual CPR)— -29 %5 %
Default rate— -81 %32 %
Loss severity— -50 %12 %
Servicing investments299,696Prepayment rate (Annual CPR)1 -100 %10 %
Prepayment yield (Annual CPY)50 -100 %72 %
Discount rate8 -10 %9 %
Strategic investments10,123Transaction Price$200 -$3,813 $1,125 
Total Assets$25,722,906 
Liabilities
ABS issued (4)
$20,417,812Discount rate— -46 %1 %
Prepayment rate (annual CPR)2 -60 %14 %
Default rate— -12 %— %
Loss severity— -50 %1 %
Non-controlling interests (6)
95,492Discount rate12 -15 %14 %
Derivatives, net (5)
160 
Senior credit spread to TBA price (3)
$0.63 -$1.38 $0.93 
Senior credit spread to Treasury Curve (3)
140 -200 bps148 bps
Subordinate credit spread to Treasury Curve (3)
160 -675 bps262 bps
Senior credit support (3)
7 -20 %9 %
IO discount rate (3)
10 -23 %20 %
Pull-through rate17 -100 %70 %
Total Liabilities$20,513,464 
Footnotes to Table 6.3
(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 value for all loan types is based on unpaid principal balance ("UPB"). The weighted average input value for all other assets and liabilities is based on relative fair value.
(3)Values represent pricing inputs used in a securitization pricing model. Credit spreads represent spreads to the applicable treasury curve unless specified otherwise.
(4)The fair value of the loans and HEI held by consolidated entities is based on the fair value of the ABS issued by these entities and the securities and other investments we own in those entities, which we determined were more readily observable in accordance with accounting guidance for Collateralized Financing Entities ("CFE"). At March 31, 2026, the fair value of securities we owned at the consolidated Sequoia and CAFL Term was $1.00 billion, and $316 million, respectively. At March 31, 2026, the fair value of our securities in the four CAFL Bridge loan securitizations accounted for under the CFE election and our HEI securitization entity was $66 million and $27 million, respectively.
(5)For the purpose of this presentation, derivative assets and liabilities, which include loan purchase commitments, are presented on a net basis.
(6)Of the total $124 million payable to non-controlling interests, $95 million is measured at fair value on a recurring basis.
The following table summarizes the estimated fair values of assets and liabilities that are not measured at fair value at March 31, 2026 and December 31, 2025.
Table 6.4 – Carrying Values and Estimated Fair Values of Assets and Liabilities
March 31, 2026December 31, 2025
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$14,830 $14,830 $14,414 $14,414 
Cash and cash equivalents1202,414 202,414 255,664 255,664 
Restricted cash192,285 92,285 193,446 193,446 
Liabilities
Debt obligation facilities and other financing2$4,112,303 $4,112,887 $4,045,578 $4,046,266 
ABS issued, net3— — 58,431 58,386 
Convertible notes, net1293,699 301,256 292,993 299,045 
Trust preferred securities and subordinated notes, net3138,917 83,700 138,906 80,910 
Senior Notes1322,449 317,803 321,905 335,904 
Guarantee obligations (2)
34,074 2,564 1,267 2,627 
(1)Balance consists of residential investor loans reported at the lower of cost or market for which the carrying value approximates fair value at March 31, 2026.
(2)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets.
During the three months ended March 31, 2026, we elected the fair value option for $45 million of securities, $6.58 billion (principal balance) of residential consumer loans, and $438 million (principal balance) of residential investor loans.
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.