Annual report pursuant to Section 13 and 15(d)

Fair Value

v3.22.4
Fair Value
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value
5. Fair Value
Fair value is the 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. Fair value is based on the assumptions market participants would use when pricing an asset or liability and follows a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
All aspects of nonperformance risk, including the Company’s own credit standing, are considered when measuring the fair value of a liability.
Following is a description of the three levels of the fair value hierarchy:
Level 1 Inputs: Quoted prices for identical instruments in active markets.
Level 2 Inputs: 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 or whose significant value drivers are observable.
Level 3 Inputs: Instruments with unobservable inputs that are significant to the fair value measurement.
The Company classifies assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy for the Successor year ended December 31, 2022, nine months ended December 31, 2021, or for the Predecessor three months ended March 31, 2021 or year ended December 31, 2020.
Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and the details of the valuation models, key inputs to those models and significant assumptions utilized. Within the assumption tables presented, not meaningful ("NM") refers to a range of inputs that is too broad to provide meaningful information to the user or to an input that has no range and consists of a single data point.

Instrument Valuation techniques Classification of Fair Value Hierarchy
Assets
Loans held for investment, subject to HMBS related obligations(1)
HECM loans - securitized into Ginnie Mae HMBS
These loans are valued utilizing a present value methodology that discounts estimated projected cash flows over the life of the loan portfolio using conditional prepayment rate ("CPR"), loss frequency and severity, borrower mortality, borrower draw, and discount rate assumptions.
 Level 3
Loans held for investment, subject to nonrecourse debt(1)
HECM buyouts - securitized (nonperforming)
These loans are valued utilizing a present value methodology that discounts estimated projected cash flows over the life of the portfolio using conditional repayment rate, loss frequency, loss severity, and discount rate assumptions.
 Level 3
HECM buyouts - securitized (performing)
These loans are valued utilizing a present value methodology that discounts estimated projected cash flows over the life of the portfolio using weighted average remaining life, conditional repayment rate, loss severity, and discount rate assumptions.
 Level 3
Non-agency reverse mortgage - securitized
These loans are valued utilizing a present value methodology that discounts estimated projected cash flows over the life of the portfolio using weighted average remaining life, loan to value, conditional repayment rate, loss severity, home price appreciation, and discount rate assumptions.
 Level 3
Fix & flip mortgage loans
This product is valued using a discounted cash flow model utilizing prepayment rate (single monthly mortality or "SMM"), discount rate, and loss rate assumptions.
 Level 3
(1) The Company aggregates loan portfolios based upon the underlying securitization trust and values these loans using these aggregated pools. The range of inputs provided are based upon the range of inputs utilized for each securitization trust.
Loans held for investment
Inventory buy-outs The fair value of repurchased loans is based on expected cash proceeds of the liquidation of the underlying properties and expected claim proceeds from HUD. The primary assumptions utilized in valuing nonperforming repurchased loans include conditional prepayment rate, loss frequency, loss severity, and discount rate.

Termination proceeds are adjusted for expected loss frequencies and severities to arrive at net proceeds that will be provided upon final resolution, including assignments to FHA. Historical experience is utilized to estimate the loss rates resulting from scenarios where FHA insurance proceeds are not expected to cover all principal and interest outstanding and, as servicer, the Company is exposed to losses upon resolution of the loan. 		Level 3
Non-agency reverse mortgage The fair value of non-agency reverse mortgage loans is based on values for investments with similar investment grade ratings and the value the Company would expect to receive if the whole-loans were sold to an investor.

The Company values non-agency reverse mortgage loans utilizing a present value methodology that discounts estimated projected cash flows over the life of the loan portfolio. The primary assumptions utilized in valuing the loans include loan to value, conditional prepayment rate, loss severity, home price appreciation, and discount rate. 		Level 3
Fix & flip mortgage loans This product is valued using a DCF model with prepayment rate (SMM), discount rate, and loss rate assumptions. Level 3
Agricultural loans The product is valued using a DCF model with discount rate, prepayment rate, and default rate assumptions. Level 3
Loans held for sale
Residential mortgage loans
Loans valued using observable market prices for identical or similar assets – This includes all mortgage loans that can be sold to the Agencies, which are valued predominantly by published forward agency prices. This will also include all non-agency loans where recently negotiated market prices for the loan pool exist with a counterparty (which approximates fair value), or quoted market prices for similar loans are available.
Level 2
Single Rental Loan ("SRL")
This product is valued using a DCF model utilizing prepayment rate (CPR), discount rate, and constant default rate ("CDR") assumptions.
 Level 3
Portfolio loans This product is valued using a DCF model utilizing prepayment rate (CPR), discount rate, and default rate (CDR) assumptions. Level 3
Mortgage Servicing Rights
MSR The Company valued MSR internally through a DCF analysis and calculated using a pricing model. This pricing model is based on the objective characteristics of the portfolio (loan amount, note rate, etc.) and commonly used industry assumptions such as discount rate and weighted average prepayment speed (CPR). Level 3
Derivative assets/liabilities
IRLCs The fair value is derived from the fair value of similar mortgage loans or bonds, which is based on observable market data. Changes to the fair value of IRLCs are recognized based on changes in interest rates, changes in the probability that the commitment will be exercised (pull through rate), and the passage of time. The expected net future cash flows related to the associated servicing of the loan are included in the fair value measurement of IRLCs. Level 3
Loan purchase commitments ("LPCs") This product is valued based on current market prices for HMBS. Level 2
Forward MBS and TBAs This product is valued using forward dealer marks from the Company's approved counterparties, forward prices with dealers in such securities, or internally-developed third party models utilizing observable market inputs Level 2
Interest rate swaps and futures contracts This product is valued using quoted market prices Level 1
Other assets
Retained bonds
Management obtains third party valuations to assess the reasonableness of the fair value calculations provided by the internal valuation model. The primary assumptions utilized include weighted average life remaining and discount rate.
 Level 3
Investments To the extent market prices are not observable, the Company engages third party valuation experts to assist in determining the fair value of these investments. The values are determined utilizing a market approach which estimates fair value based on what other participants in the market have paid for reasonably similar assets that have been sold within a reasonable period from the valuation date. Level 3
Purchase Commitments - reverse mortgage loans
Purchase commitments are valued based on the value of the underlying loan. These loans are valued based on an expected margin on sale of 3.00%.
 Level 3
Liabilities
HMBS related obligations
HMBS related obligations The estimated fair value is based on the net present value of projected cash flows over the estimated life of the liability. The estimated fair value of the HMBS related obligations also includes the consideration required by a market participant to transfer the HECM and HMBS servicing obligations, including exposure resulting from shortfalls in FHA insurance proceeds, as well as, assumptions that it believes a market participant would consider in valuing the liability, including, but not limited to, assumptions for repayment, costs to transfer servicing obligations, shortfalls in FHA insurance proceeds, and discount rates. The significant unobservable inputs used in the measurement include conditional borrower repayment rates and discount rates. Level 3
Nonrecourse debt
Reverse mortgage loans The estimated fair value is based on the net present value of projected cash flows over the estimated life of the liability. The significant unobservable inputs used in the measurement include weighted average life remaining, conditional repayment rates, and discount rates. Level 3
Nonrecourse commercial loan financing liability The estimated fair value is based on the net present value of projected cash flows over the estimated life of the liability.

The primary assumptions utilized include weighted average life remaining, weighted average prepayment speed (SMM), and discount rates. The Company estimates prepayment speeds giving consideration that the Company may in the future transfer additional loans to the trust, subject to the availability of funds provided for within the trust. 		Level 3
Nonrecourse MSR financing liability
Consistent with the underlying MSR, fair value is derived through a DCF analysis and calculated using a pricing model. This pricing model is based on the objective characteristics of the portfolio (loan amount, note rate, etc.) and commonly used industry assumptions including weighted average prepayment speed (CPR) and discount rate.
Level 3
Deferred purchase price liabilities
Deferred purchase price liabilities These are measured using a present value of future payments utilizing discount rate assumptions. Level 3
TRA obligation The fair value is derived through the use of a DCF model. The significant unobservable assumptions used in the DCF include the ability to utilize tax attributes based on current tax forecasts, a constant U.S. federal income tax rate, and a discount rate. Level 3
Warrant liability
Warrants
The warrants are publicly traded and are valued based on the closing market price of the applicable date of the Consolidated Statements of Financial Condition.
 Level 1

December 31, 2022 December 31, 2021
Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average
Assets
Loans held for investment, subject to HMBS related obligations
Conditional repayment rate NM 21.9  % NM 20.8  %
Loss frequency NM 4.1  % NM 4.5  %
Loss severity
2.4% - 12.1%
 2.7  %
3.1% - 7.7%
3.3  %
Discount rate NM 5.0  % NM 2.4  %
Average draw rate NM 1.1  % NM 1.1  %
Loans held for investment, subject to nonrecourse debt:
HECM buyouts - securitized (nonperforming)
Conditional repayment rate NM 39.2  % NM 41.2  %
Loss frequency
23.1% - 100.0%
 51.7  %
25.0% - 100%
 59.5  %
Loss severity
2.4% - 12.1%
 5.2  %
3.1% - 7.7%
 4.3  %
Discount rate NM 8.7  % NM 4.1  %
HECM buyouts - securitized (performing)
Weighted average remaining life (in years) NM 8.0 NM 9.0
Conditional repayment rate NM 15.2  % NM 13.3  %
Loss severity
2.4% - 12.1%
 4.8  %
3.1% - 7.7%
 7.7  %
Discount rate NM 8.2  % NM 3.7  %
Non-agency reverse mortgage loans - securitized
Weighted average remaining life (in years) NM 9.7 NM 7.5
Loan to value
0.0% - 74.7%
 43.1  %
0.1% - 64.7%
 43.4  %
December 31, 2022 December 31, 2021
Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average
Conditional repayment rate NM 14.3  % NM 18.6  %
Loss severity NM 10.0  % NM 10.0  %
Home price appreciation
(10.1)% - 7.3%
 3.8  %
(4.6)% - 14%
 4.7  %
Discount rate NM 7.1  % NM 3.6  %
Fix & flip mortgage loans - securitized
Prepayment rate (SMM) NM 11.2  % NM 14.1  %
Discount rate NM 17.5  % NM 5.7  %
Loss rate NM 0.5  % NM 0.6  %
December 31, 2022 December 31, 2021
Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average
Loans held for investment:
Inventory buy-outs
Conditional repayment rate NM 41.3  % NM 43.2  %
Loss frequency NM 47.6  % NM 59.4  %
Loss severity
2.4% - 12.1%
 5.6  %
3.1% - 7.7%
 3.8  %
Discount rate NM 8.7  % NM 4.1  %
Non-agency reverse mortgage loans
Weighted average remaining life (in years) NM 12.0 NM 9.2
Loan to value
0.1% - 67.9%
 36.4  %
0.2% - 68.7%
 47.8  %
Conditional repayment rate NM 13.8  % NM 14.8  %
Loss severity NM 10.0  % NM 10.0  %
Home price appreciation
(10.1)% - 7.3%
 3.6  %
(4.6)% - 14.0%
 4.4  %
Discount rate NM 7.1  % NM 3.6  %
Fix & flip mortgage loans
Prepayment rate (SMM) NM 9.5  % NM 11.9  %
Discount rate
16.3% - 25.8%
 16.6  %
5.7% - 10.0%
 5.9  %
Loss rate NM 0.2  % NM 0.4  %
Agricultural loans
Discount rate NM 9.7  % NM 4.8  %
Prepayment rate (SMM)
11.0% - 100.0%
 11.8  %
9.0% - 100.0%
 22.1  %
Default rate (CDR)
0.0% - 1.0%
 0.9  %
0.0% - 0.9%
 0.9  %
Loans held for sale:
SRL
Prepayment rate (CPR)
18.5% - 25.0%
 19.7  %
1.0% - 17.1%
 14.2  %
Discount rate NM 8.3  % NM 3.3  %
Default rate (CDR) NM 1.0  %
1.0% - 57.2%
 2.2  %
Portfolio loans
Prepayment rate (CPR)
0.0% - 24.3%
 18.4  %
0.0% - 14.5%
 8.7  %
Discount rate NM 10.9  % NM 3.9  %
Default rate (CDR) NM 1.0  %
1.0% - 54.0%
 3.2  %
Mortgage Servicing Rights
Weighted average prepayment speed (CPR)
1.0% - 8.5%
 6.4  %
0.0% - 12.8%
 8.3  %
Discount rate NM 10.1  % NM 8.5  %
Derivative assets/liabilities
IRLCs
Pull through rate NM 91.4  % NM 88.1  %
December 31, 2022 December 31, 2021
Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average
Other assets:
Retained bonds
Weighted average remaining life (in years)
2.4 - 24.1
 4.9
2.6 - 25.0
 5.1
Discount rate
(16.8)% - 12.2%
 6.9  %
1.9% - 8.2%
 2.7  %
Liabilities
HMBS related obligations
Conditional repayment rate NM 21.8  % NM 20.8  %
Discount rate NM 5.0  % NM 2.3  %
Nonrecourse debt:
Reverse mortgage loans
Performing/Nonperforming HECM securitizations
Weighted average remaining life (in years)
1.5 - 1.6
 1.6
0.2 - 0.8
 0.5
Conditional repayment rate
19.9% - 22.2%
 21.1  %
30.8% - 54.4%
 43.5  %
Discount rate NM 8.6  % NM 2.3  %
Securitized non-agency reverse
Weighted average remaining life (in years)
0.2 - 11.7
 6.4
1.0 - 2.3
 1.6
Conditional repayment rate
8.3% - 46.1%
 16.5  %
18.4% - 35.9%
 28.2  %
Discount rate NM 7.2  % NM 2.2  %
Nonrecourse commercial loan financing liability
Weighted average remaining life (in months) NM 4.3 NM 4.0
Weighted average prepayment speed (SMM) NM 15.3  % NM 14.0  %
Discount rate NM 14.5  % NM 3.1  %
Nonrecourse MSR financing liability
Weighted average prepayment speed (CPR)
0.8% - 9.2%
 5.1  %
2.0% - 11.0%
 7.7  %
Discount rate
10.0% - 12.0%
 10.2  %
8.1% - 10.1%
 9.1  %
Deferred purchase price liabilities
Deferred purchase price liabilities
Discount rate NM 8.0  % NM
35.0%
TRA obligation
Discount rate NM 48.3  % NM 13.5  %

Fair Value of Assets and Liabilities
The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis (in thousands):
December 31, 2022
Total Fair Value Level 1 Level 2 Level 3
Assets
Loans held for investment, subject to HMBS related obligations $ 11,114,100  $ —  $ —  $ 11,114,100 
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans 7,065,477  —  —  7,065,477 
Fix & flip mortgage loans 389,161  —  —  389,161 
Loans held for investment:
Reverse mortgage loans 771,724  —  —  771,724 
Fix & flip mortgage loans 127,469  —  —  127,469 
Agricultural loans 8,805  —  —  8,805 
Loans held for sale:
Residential mortgage loans 154,117  —  154,117  — 
SRL 69,187  —  —  69,187 
Portfolio 43,272  —  —  43,272 
Fix and flip 49,402  —  —  49,402 
MSR 95,096  —  —  95,096 
Derivative assets:
IRLCs and LPCs 114  —  23  91 
Forward MBS and TBAs 1,469  —  1,469  — 
Interest rate swaps and futures contracts 771  771  —  — 
Other assets:
Purchase commitments - reverse mortgage loans 9,356  —  —  9,356 
Retained bonds 46,439  —  —  46,439 
Total assets $ 19,945,959  $ 771  $ 155,609  $ 19,789,579 
Liabilities
HMBS related obligations $ 10,996,755  $ —  $ —  $ 10,996,755 
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts 7,175,857  —  —  7,175,857 
Nonrecourse commercial loan financing liability 106,758  —  —  106,758 
Nonrecourse MSR financing liability 60,562  —  —  60,562 
Deferred purchase price liabilities:
Deferred purchase price liabilities 5,077  —  —  5,077 
TRA obligation 3,781  —  —  3,781 
Derivative liabilities:
IRLCs and LPCs 183  —  —  183 
Forward MBS and TBAs 1  —  1  — 
Interest rate swaps and futures contracts 385  385  —  — 
Warrant liability 1,117  1,117  —  — 
Total liabilities $ 18,350,476  $ 1,502  $ 1  $ 18,348,973 
December 31, 2021
Total Fair Value Level 1 Level 2 Level 3
Assets
Loans held for investment, subject to HMBS related obligations $ 10,556,054  $ —  $ —  $ 10,556,054 
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans 5,823,301  —  —  5,823,301 
Fix & flip mortgage loans 394,893  —  —  394,893 
Loans held for investment:
Reverse mortgage loans 940,604  —  —  940,604 
Fix & flip mortgage loans 62,933  —  —  62,933 
Agricultural loans 27,791  —  —  27,791 
Loans held for sale:
Residential mortgage loans 1,902,952  —  1,885,627  17,325 
SRL 98,852  —  —  98,852 
Portfolio 50,574  —  —  50,574 
MSR 427,942  —  —  427,942 
Derivative assets:
IRLCs and LPCs 24,786  —  1,564  23,222 
Forward MBS and TBAs 1,250  —  1,250  — 
Interest rate swaps and futures contracts 22,834  22,834  —  — 
Other assets:
Investments 6,000  —  —  6,000 
Retained bonds 55,614  —  —  55,614 
Total assets $ 20,396,380  $ 22,834  $ 1,888,441  $ 18,485,105 
Liabilities
HMBS related obligations $ 10,422,358  $ —  $ —  $ 10,422,358 
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts 5,857,069  —  —  5,857,069 
Nonrecourse commercial loan financing liability 111,738  —  —  111,738 
Nonrecourse MSR financing liability 142,435  —  —  142,435 
Deferred purchase price liabilities:
Deferred purchase price liabilities 12,852  —  —  12,852 
TRA obligation 29,380  —  —  29,380 
Derivative liabilities:
Forward MBS and TBAs 1,685  —  1,685  — 
Interest rate swaps and futures contracts 24,993  24,993  —  — 
Warrant liability 5,497  5,497  —  — 
Total liabilities $ 16,608,007  $ 30,490  $ 1,685  $ 16,575,832 
Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3, in thousands):
Successor
Assets
Year ended December 31, 2022 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale Derivative assets MSR Retained bonds Purchase commitments Investments
Beginning balance $ 11,587,382  $ 6,218,194  $ 166,751  $ 23,222  $ 427,942  $ 55,614  $ —  $ 6,000 
Total gain or losses included in earnings 190,714  (744,123) (15,213) (23,131) 22,989  (8,668) 9,356  (6,000)
Purchases, settlements, and transfers:
Purchases and additions, net 6,165,003  117,010  1,119,578  —  122,362  —  —  — 
Sales and settlements (2,178,245) (1,847,648) (1,103,492) —  (478,197) (507) —  — 
Transfers in/(out) between categories (3,742,756) 3,711,205  (5,763) —  —  —  —  — 
Ending balance $ 12,022,098  $ 7,454,638  $ 161,861  $ 91  $ 95,096  $ 46,439  $ 9,356  $ — 

Successor
Liabilities
Year ended December 31, 2022 HMBS related obligations Deferred purchase price liabilities Nonrecourse debt in consolidated VIE trusts Nonrecourse commercial loan financing liability Nonrecourse MSR financing liability TRA Liability
Beginning balance $ (10,422,358) $ (12,852) $ (5,857,069) $ (111,738) $ (142,435) $ (29,380)
Total gain or losses included in earnings (29,015) —  316,963  2,527  (8,162) 25,599 
Purchases, settlements, and transfers:
Purchases and additions, net (2,870,650) —  (3,202,519) (205,746) (14,196) — 
Settlements 2,325,268  7,775  1,566,768  208,199  104,231  — 
Ending balance $ (10,996,755) $ (5,077) $ (7,175,857) $ (106,758) $ (60,562) $ (3,781)

Successor
Assets
Nine months ended December 31, 2021 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale Derivative assets MSR Retained Bonds Investments
Beginning balance $ 11,171,736  $ 5,291,444  $ 135,681  $ 38,574  $ 267,364  $ —  $ 9,470 
Total gain or losses included in earnings 272,802  71,126  1,214  (14,217) (15,200) 1,344  (3,470)
Purchases, settlements, and transfers:
Purchases and additions, net 4,438,629  80,542  915,522  —  178,279  54,752  — 
Sales and settlements (2,235,651) (1,275,674) (894,494) (1,135) (2,501) (482) — 
Transfers in/(out) between categories (2,060,134) 2,050,756  8,828  —  —  —  — 
Ending balance $ 11,587,382  $ 6,218,194  $ 166,751  $ 23,222  $ 427,942  $ 55,614  $ 6,000 
Successor
Liabilities
Nine months ended December 31, 2021 HMBS related obligations Derivative liabilities Deferred purchase price liabilities Nonrecourse debt in consolidated VIE trusts Nonrecourse commercial loan financing liability Nonrecourse MSR financing liability TRA Liability
Beginning balance $ (9,926,132) $ (936) $ (3,214) $ (5,205,892) $ —  $ (22,051) $ — 
Total gain or losses included in earnings 62,306  (98) (2,240) (74,333) 1,019  (2,998) 2,570 
Purchases, settlements, and transfers:
Purchases and additions, net (2,491,919) —  (7,984) (1,813,458) (176,863) (117,386) (31,950)
Settlements 1,933,387  1,034  586  1,236,614  64,106  —  — 
Ending balance $ (10,422,358) $ —  $ (12,852) $ (5,857,069) $ (111,738) $ (142,435) $ (29,380)

Predecessor
Assets
Three months ended March 31, 2021 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale Derivative assets MSR Investments
Beginning balance $ 10,659,984  $ 5,396,167  $ 152,854  $ 88,660  $ 180,684  $ 18,934 
Total gain or losses included in earnings 132,499  (37,757) 2,764  (50,040) 20,349  (9,464)
Purchases, settlements, and transfers:
Purchases and additions, net 1,143,109  21,064  175,551  —  74,978  — 
Sales and settlements (534,738) (360,128) (152,579) (46) (8,647) — 
Transfers in/(out) between categories (229,118) 272,098  (42,909) —  —  — 
Ending balance $ 11,171,736  $ 5,291,444  $ 135,681  $ 38,574  $ 267,364  $ 9,470 

Predecessor
Liabilities
Three months ended March 31, 2021 HMBS related obligations Derivative liabilities Deferred purchase price liability Nonrecourse debt in consolidated VIE trusts Nonrecourse MSR financing liability
Beginning balance $ (9,788,668) $ (1,084) $ (3,842) $ (5,257,754) $ (14,088)
Total gain or losses included in earnings (41,434) —  (29) (30,770) 390 
Purchases, settlements, and transfers:
Purchases and additions, net (602,172) —  —  (575,668) (8,353)
Settlements 506,142  148  657  658,300  — 
Ending balance $ (9,926,132) $ (936) $ (3,214) $ (5,205,892) $ (22,051)
Predecessor
Assets
For the year ended December 31, 2020 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale Derivative assets MSR Debt Securities Investments
Beginning balance $ 10,894,577  $ 3,511,212  $ 182,973  $ 14,008  $ 2,600  $ 102,260  $ 20,508 
Total gain or losses included in earnings 627,251  304,663  (2,158) 74,470  4,562  2,288  (5,512)
Purchases, settlements, and transfers:
Purchases and additions, net 3,616,667  136,838  409,467  182  173,522  24,489  3,938 
Sales and settlements (1,536,977) (1,285,902) (605,018) —  —  (129,037) — 
Transfers in/(out) between categories (2,941,534) 2,729,356  167,590  —  —  —  — 
Ending balance $ 10,659,984  $ 5,396,167  $ 152,854  $ 88,660  $ 180,684  $ —  $ 18,934 

Predecessor
Liability
For the year ended December 31, 2020 HMBS related obligations Derivative liabilities Deferred purchase price liabilities Nonrecourse debt in consolidated VIE trusts Nonrecourse MSR financing liability
Beginning balance $ (9,320,209) $ (68) $ (4,300) $ (3,490,196) $ — 
Total gain or losses included in earnings (359,951) (834) (3,014) (294,802) 798 
Purchases, settlements, and transfers:
Purchases and additions, net (2,051,953) (182) (138) (3,110,368) (15,101)
Settlements 1,943,445  —  3,610  1,637,612  215 
Ending balance $ (9,788,668) $ (1,084) $ (3,842) $ (5,257,754) $ (14,088)

Fair Value Option
The Company has elected to measure substantially all of its loans held for investment, loans held for sale, HMBS related obligations, and non-recourse debt at fair value under the fair value option provided for by ASC 825-10, Financial Instruments-Overall. The Company elected to apply the provisions of the fair value option to these assets and liabilities in order to align financial reporting presentation with the Company's operational and risk management
strategies. Presented in the tables below are the fair value and UPB, at December 31, 2022 and December 31, 2021, of financial assets and liabilities for which the Company has elected the fair value option (in thousands):
December 31, 2022 Estimated Fair Value Unpaid Principal Balance
Assets at fair value under the fair value option
Loans held for investment, subject to HMBS related obligations $ 11,114,100  $ 10,719,000 
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans 7,065,477  7,240,125 
Commercial mortgage loans 389,161  405,970 
Loans held for investment:
Reverse mortgage loans 771,724  724,800 
Commercial mortgage loans 136,274  143,373 
Loans held for sale:
Residential mortgage loans 154,117  167,407 
Commercial mortgage loans 161,861  173,112 
Other assets:
Purchase commitments - reverse mortgage loans 9,356  9,356 
Liabilities at fair value under the fair value option
HMBS related obligations 10,996,755  10,719,000 
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts 7,175,857  7,819,992 
Nonrecourse MSR financing liability 60,562  60,562 
Nonrecourse commercial loan financing liability 106,758  105,291 

December 31, 2021 Estimated Fair Value Unpaid Principal Balance
Assets at fair value under the fair value option
Loans held for investment, subject to HMBS related obligations $ 10,556,054  $ 9,849,835 
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans 5,823,301  5,165,479 
Commercial mortgage loans 394,893  388,788 
Loans held for investment:
Reverse mortgage loans 940,604  815,426 
Commercial mortgage loans 90,724  89,267 
Loans held for sale:
Residential mortgage loans 1,902,952  1,859,788 
Commercial mortgage loans 149,426  145,463 
Liabilities at fair value under the fair value option
HMBS related obligations 10,422,358  9,849,835 
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts 5,857,069  5,709,946 
Nonrecourse MSR financing liability 142,435  142,435 
Nonrecourse commercial loan financing liability 111,738  107,744 
Net fair value gains on loans and related obligations
Provided in the table below is a summary of the components of net fair value gains on loans and related obligations (in thousands):
For the year ended December 31, 2022 For the nine months ended December 31, 2021 For the three months ended March 31, 2021 For the year ended December 31, 2020
Successor Predecessor
Net fair value gains on loans and related obligations:
Interest income on reverse and commercial loans $ 857,271  $ 495,163  $ 160,568  $ 709,679 
Change in fair value of loans (1,365,798) (108,860) (51,346) 296,676 
Net fair value gains (losses) on loans (508,527) 386,303  109,222  1,006,355 
Interest expense on HMBS and nonrecourse obligations (560,316) (329,344) (119,201) (526,690)
Change in fair value of derivatives 332,630  (28,233) 43,972  (12,482)
Change in fair value of related obligations 840,407  313,024  42,670  (155,485)
Net fair value gains (losses) on related obligations 612,721  (44,553) (32,559) (694,657)
Net fair value gains on loans and related obligations $ 104,194  $ 341,750  $ 76,663  $ 311,698 

As the cash flows on the underlying mortgage loans will be utilized to settle the outstanding obligations, the Company's own credit risk would not impact the fair value on the outstanding HMBS liabilities and nonrecourse debt.
Fair Value of Other Financial Instruments
As of December 31, 2022 and December 31, 2021, all financial instruments were either recorded at fair value or the carrying value approximated fair value with the exception of notes payable, net, and promissory notes receivable. Notes payable, net, includes our senior secured high-yield debt and related-party credit line recorded at the carrying value of $399.4 million and $353.4 million as of December 31, 2022 and December 31, 2021, respectively, and have a fair value of $231.9 million and $347.0 million as of December 31, 2022 and December 31, 2021, respectively. The fair value for Notes payable, net, was determined using quoted market prices adjusted for accrued interest, which is considered to be a Level 2 input. Promissory notes receivable are recorded at the net carrying value of $0 and $4.1 million, including accrued interest, as of December 31, 2022 and December 31, 2021, respectively. The carrying value approximates fair value. The fair value for promissory notes receivable was determined using a DCF model using discount rate assumptions which is considered to be a Level 3 input. For other financial instruments that were not recorded at fair value, such as cash and cash equivalents including restricted cash, servicer advances, and other financing lines of credit, the carrying value approximates fair value due to the short-term nature of such instruments. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 3 inputs, with the exception of cash and cash equivalents, including restricted cash, which are Level 1 inputs.