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Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 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 June 30, 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 June 30, 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
June 30, 2026Fair ValueFair Value Measurements Using
(In Thousands)Level 1Level 2Level 3
Assets
Residential consumer loans$23,638,696 $— $— $23,638,696 
Residential investor loans3,111,606 — — 3,111,606 
HEI339,735 — — 339,735 
Real estate securities:
  Trading193,550 — — 193,550 
  AFS287,347 — — 287,347 
Servicing investments290,825 — — 290,825 
Strategic investments10,123 — — 10,123 
Derivative assets59,436 8,099 29,616 21,721 
Total Assets$27,931,318 $8,099 $29,616 $27,893,603 
Liabilities
ABS issued$22,515,907 $— $— $22,515,907 
Derivative liabilities10,912 4,289 — 6,623 
Non-controlling interest92,631 — — 92,631 
Total Liabilities$22,619,450 $4,289 $— $22,615,161 
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 six months ended June 30, 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 
Acquisitions12,998,585 — — 98,314 10,185 4,572 527 — 
Originations— 842,158 3,003 — — — — — 
Sales(4,592,312)(1,068,959)— (65,616)— — — — 
Transfer to fair value option— — — — — — 1,350 — 
Principal paydowns(2,557,332)(594,866)(9,542)(284)(549)(27,751)— — 
Consolidation of securitized bridge loans (2)
— 411,779 — — — — — — 
Gains (losses) in net income, net(140,968)(37,914)16,290 25,677 1,530 11,774 1,936 44,039 
Unrealized gains in OCI, net— — — — (11,376)— — — 
Other settlements, net (3)
(5,038)(42,842)101 — — — — (45,784)
Ending balance -
June 30, 2026
$23,638,696 $3,111,606 $339,735 $193,550 $287,347 $290,825 $10,123 $15,098 
Change in unrealized gains or (losses) for the period included in earnings for assets held at the end of the reporting period (4)
$(114,738)$(39,501)$16,499 $25,857 $(11,556)$13,286 $(150)$15,098 
Liabilities
ABS IssuedNon-controlling interest
(In Thousands)
Beginning balance - December 31, 2025
$17,433,600 $92,645 
Issuance8,561,389 — 
Sales(3,689)— 
Principal paydowns(3,191,968)— 
(Gains) losses in net income (loss), net(283,425)3,605 
Other settlements, net— (3,619)
Ending balance - June 30, 2026
$22,515,907 $92,631 
Change in unrealized (gains) or losses for the period included in earnings for liabilities held at the end of the reporting period (4)
$(373,025)$289 
(1)Derivatives, net, consists of loan purchase and interest rate lock commitments, and are presented on a net basis.
(2)For the six months ended June 30, 2026, we transferred $348 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 this 2026 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 June 30, 2026.
Table 6.3 – Fair Value Methodology for Level 3 Financial Instruments
June 30, 2026
Fair
Value (1)
Input Values
(Dollars in Thousands, except Input Values)Unobservable InputRange
Weighted
Average (2)
Assets
Residential consumer loans (4)
$23,638,696
Senior credit spread to TBA price (3)
$0.63 -$1.44 $0.95 
Senior credit spread to Treasury Curve (3)
125 -200 bps139 bps
Subordinate credit spread to Treasury Curve (3)
145 -675 bps262 bps
Senior credit support (3)
7 -20 %10 %
IO discount rate (3)
10 -20 %16 %
Liability price$24 -$105 $100 
Residential investor loans:
Residential investor term loans (4)
1,796,137 
Whole loan spread (3)
220 -220 bps220 bps
Liability price$89 -$99 $93 
Residential investor bridge loans (4)
1,315,469 Whole loan discount rate7 -12 %7 %
Liability Price$69 -$158 $100 
Dollar price of loans$21 -$105 $86 
HEI339,735Discount rate8 -8 %8 %
Prepayment rate (Annual CPR)8 -15 %14 %
Home price appreciation (depreciation)4 -4 %4 %
Liability price (4)
$158 -$158 $158 
Real estate securities - trading and AFS securities480,897Discount rate4 -22 %9 %
Prepayment rate (Annual CPR)— -31 %4 %
Default rate— -89 %34 %
Loss severity— -40 %10 %
Servicing investments290,825Prepayment rate (Annual CPR)— -39 %10 %
Prepayment yield (Annual CPY)10 -50 %30 %
Discount rate8 -11 %10 %
Derivative assets, net (5)
15,098
Senior credit spread to TBA price (3)
$0.63 -$1.44 $0.92 
Senior credit spread to Treasury Curve (3)
125 -200 bps139 bps
Subordinate credit spread to Treasury Curve (3)
145 -675 bps264 bps
Senior credit support (3)
7 -20 %10 %
IO discount rate (3)
10 -20 %16 %
Pull-through rate27 -100 %73 %
Strategic investments10,123Transaction Price$200 -$3,813 $1,125 
Total Assets$27,886,980 
Liabilities
ABS issued (4)
$22,515,907Discount rate— -22 %1 %
Prepayment rate (annual CPR)— -53 %13 %
Default rate— -21 %— %
Loss severity— -50 %1 %
Non-controlling interests (6)
92,631Discount rate12 -15 %13 %
Total Liabilities$22,608,538 
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 June 30, 2026, the fair value of securities we owned at the consolidated Sequoia and CAFL Term was $1.23 billion, and $314 million, respectively. At June 30, 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 $70 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 $119 million payable to non-controlling interests, $93 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 June 30, 2026 and December 31, 2025.
Table 6.4 – Carrying Values and Estimated Fair Values of Assets and Liabilities
June 30, 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$13,863 $13,863 $14,414 $14,414 
Cash and cash equivalents1191,846 191,846 255,664 255,664 
Restricted cash199,465 99,465 193,446 193,446 
Liabilities
Debt obligation facilities and other financing2$4,079,669 $4,080,151 $4,045,578 $4,046,266 
ABS issued, net3— — 58,431 58,386 
Convertible notes, net1294,369 300,439 292,993 299,045 
Trust preferred securities and subordinated notes, net3138,929 78,120 138,906 80,910 
Senior Notes1443,607 451,517 321,905 335,904 
Guarantee obligations (2)
33,689 3,689 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 June 30, 2026.
(2)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets.
During the three and six months ended June 30, 2026, we elected the fair value option for $54 million and $98 million of securities, $6.16 billion and $12.74 billion (principal balance) of residential consumer loans, and $410 million and $848 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.