Quarterly report pursuant to Section 13 or 15(d)

Fair Value (Tables)

v3.23.1
Fair Value (Tables)
 3 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
Fair value measurement inputs and valuation techniques 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 Government National Mortgage Association ("Ginnie Mae" or "GNMA") 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 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 CPR, 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 ("WAL"), CPR, 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 WAL, loan to value ("LTV"), CPR, loss severity, home price appreciation ("HPA"), 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 the Department of Housing and Urban Development ("HUD"). The primary assumptions utilized in valuing nonperforming repurchased loans include CPR, 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 LTV, CPR, loss severity, HPA, and discount rate. 		Level 3
Fix & flip mortgage loans This product is valued using a discounted cash flow ("DCF") model with 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 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 CPR, discount rate, and constant default rate ("CDR") assumptions.
 Level 3
Portfolio loans This product is valued using a DCF model utilizing CPR, discount rate, and 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 CPR. Level 3
Derivative assets/liabilities
Forward mortgage-backed securities ("MBS") and To Be Announced Securities ("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% as of December 31, 2022. There were not any reverse mortgage loan purchase commitments as of March 31, 2023.
 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 CPR and discount rates. Level 3
Nonrecourse debt
Nonrecourse reverse mortgage loans 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 significant unobservable inputs used in the measurement include WAL, CPR, 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 WAL, 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 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
Tax Receivable Agreements ("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 Condensed Consolidated Statements of Financial Condition.
 Level 1

March 31, 2023 December 31, 2022
Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average
Assets
Loans held for investment, subject to HMBS related obligations
Conditional repayment rate NM 19.3  % NM 21.9  %
Loss frequency NM 4.0  % NM 4.1  %
Loss severity
2.4% - 10.9%
 2.5  %
2.4% - 12.1%
2.7  %
Discount rate NM 4.7  % NM 5.0  %
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 38.4  % NM 39.2  %
Loss frequency
23.1% - 100.0%
 51.2  %
23.1% - 100%
 51.7  %
Loss severity
2.4% - 10.9%
 4.9  %
2.4% - 12.1%
 5.2  %
Discount rate NM 8.5  % NM 8.7  %
HECM buyouts - securitized (performing)
WAL (in years) NM 7.9 NM 8.0
Conditional repayment rate NM 15.6  % NM 15.2  %
Loss severity
2.4% - 10.9%
 4.8  %
2.4% - 12.1%
 4.8  %
Discount rate NM 7.9  % NM 8.2  %
March 31, 2023 December 31, 2022
Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average
Non-agency reverse mortgage loans - securitized
WAL (in years) NM 9.7 NM 9.7
LTV
0.0% - 77.0%
 45.6  %
0.0% - 74.7%
 43.1  %
Conditional repayment rate NM 14.4  % NM 14.3  %
Loss severity NM 10.0  % NM 10.0  %
HPA
(10.2)% - 7.8%
 3.8  %
(10.1)% - 7%
 3.8  %
Discount rate NM 6.6  % NM 7.1  %
Fix & flip mortgage loans - securitized
Prepayment rate (SMM) NM 11.2  % NM 11.2  %
Discount rate NM 14.1  % NM 17.5  %
Loss rate NM 0.5  % NM 0.5  %
Loans held for investment:
Inventory buy-outs
Conditional repayment rate NM 41.2  % NM 41.3  %
Loss frequency NM 49.0  % NM 47.6  %
Loss severity
2.4% - 10.9%
 3.8  %
2.4% - 12.1%
 5.6  %
Discount rate NM 8.5  % NM 8.7  %
Non-agency reverse mortgage loans
WAL (in years) NM 11.4 NM 12
LTV
0.1% - 74.6%
 36.7  %
0.1% - 67.9%
 36.4  %
Conditional repayment rate NM 14.1  % NM 13.8  %
Loss severity NM 10.0  % NM 10.0  %
HPA
(10.2)% - 7.8%
 3.6  %
(10.1)% - 7.3%
 3.6  %
Discount rate NM 6.6  % NM 7.1  %
Fix & flip mortgage loans
Prepayment rate (SMM) NM 10.1  % NM 9.5  %
Discount rate
13.0% - 20.5%
 15.6  %
16.3% - 25.8%
 16.6  %
Loss rate NM 0.2  % NM 0.2  %
Agricultural loans
Discount rate NM 9.5  % NM 9.7  %
Prepayment rate (SMM)
19.0% - 100.0%
 74.1  %
11.0% - 100.0%
 11.8  %
Default rate (CDR)
0.0% - 1.0%
 0.9  %
0.0% - 1.0%
 0.9  %
Loans held for sale:
SRL
Prepayment rate (CPR)
18.5% - 25.0%
 19.4  %
18.5% - 25.0%
 19.7  %
Discount rate NM 8.4  % NM 8.3  %
Default rate (CDR) NM 1.0  %
0.0% - 0.0%
 1.0  %
Portfolio loans
Prepayment rate (CPR)
0.0% - 23.7%
 14.0  %
0.0% - 24.3%
 18.4  %
Discount rate NM 10.7  % NM 10.9  %
Default rate (CDR) NM 1.0  % NM 1.0  %
March 31, 2023 December 31, 2022
Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average
Mortgage Servicing Rights
Weighted average prepayment speed (CPR)
0.8% - 12.2%
8.4  %
1.0% - 8.5%
 6.4  %
Discount rate  NM 11.5  % NM 10.1  %
Other assets:
Retained bonds
WAL (in years)
2.4 - 23.9
 4.7
2.4 - 24.1
 4.9
Discount rate
(18.5)% - 11.9%
 6.2  %
(16.8)% - 12.2%
 6.9  %
Liabilities
HMBS related obligations
Conditional repayment rate NM 19.0  % NM 21.8  %
Discount rate NM 4.6  % NM 5.0  %
Nonrecourse debt:
Reverse mortgage loans
Performing/Nonperforming HECM securitizations
WAL (in years)
1.3 - 1.4
 1.4
1.5 - 1.6
 1.6
Conditional repayment rate
17.6% - 20.0%
 18.9  %
19.9% - 22.2%
 21.1  %
Discount rate NM 8.7  % NM 8.6  %
Securitized non-agency reverse
WAL (in years)
0.1 - 11
 4.9
0.2 - 11.7
 6.4
Conditional repayment rate NM 19.8  %
8.3% - 46.1%
 16.5  %
Discount rate NM 6.9  % NM 7.2  %
Nonrecourse commercial loan financing liability
WAL (in months) NM 4.3 NM 4.3
Weighted average prepayment speed (SMM) NM 15.6  % NM 15.3  %
Discount rate NM 7.9  % NM 14.5  %
Nonrecourse MSR financing liability
Weighted average prepayment speed (CPR)
3.2% - 13.5%
 7.6  %
0.8% - 9.2%
 5.1  %
Discount rate
10.0% - 12.0%
 12.0  %
10.0% - 12.0%
 10.2  %
Deferred purchase price liabilities
Deferred purchase price liabilities
Discount rate NM 8.0  % NM 8.0  %
TRA obligation
Discount rate NM 34.3  % NM 48.3  %
Summary of the recognized assets and liabilities that are measured at fair value on a recurring basis
The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis (in thousands):
March 31, 2023
Total Fair Value Level 1 Level 2 Level 3
Assets
Loans held for investment, subject to HMBS related obligations $ 16,623,561  $ —  $ —  $ 16,623,561 
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans 8,009,079  —  —  8,009,079 
Fix & flip mortgage loans 365,748  —  —  365,748 
Loans held for investment:
Reverse mortgage loans 724,306  —  —  724,306 
Fix & flip mortgage loans 11,787  —  —  11,787 
Agricultural loans 875  —  —  875 
Loans held for sale:
Residential mortgage loans 58,751  —  58,751  — 
SRL 15,699  —  —  15,699 
Portfolio 3,044  —  —  3,044 
MSR 13,713  —  —  13,713 
Other assets:
Retained bonds 47,048  —  —  47,048 
Total assets $ 25,873,611  $ —  $ 58,751  $ 25,814,860 
Liabilities
HMBS related obligations $ 16,407,629  $ —  $ —  $ 16,407,629 
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts 7,955,875  —  —  7,955,875 
Nonrecourse commercial loan financing liability 75,689  —  —  75,689 
Nonrecourse MSR financing liability 988  —  —  988 
Deferred purchase price liabilities:
Deferred purchase price liabilities 4,522  —  —  4,522 
TRA obligation 2,202  —  —  2,202 
Warrant liability 1,581  1,581  —  — 
Total liabilities $ 24,448,486  $ 1,581  $ —  $ 24,446,905 
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 12,123  —  12,123  — 
SRL 69,187  —  —  69,187 
Portfolio 43,272  —  —  43,272 
Fix & flip mortgage loans 49,402  49,402 
MSR 95,096  —  —  95,096 
Derivative assets:
Interest rate lock commitments, loan purchase commitments, forward MBS, and TBAs 907  —  907  — 
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 $ 19,803,289  $ 771  $ 13,030  $ 19,789,488 
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 137  —  —  137 
TRA obligation 3,781  —  —  3,781 
Derivative liabilities:
Interest rate swaps and futures contracts 385  385  —  — 
Warrant liability 1,117  1,117  —  — 
Total liabilities $ 18,345,352  $ 1,502  $ —  $ 18,343,850 
Fair value, assets measured on recurring basis, unobservable input reconciliation
Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3, in thousands):
Assets
Three months ended March 31, 2023 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale MSR Retained bonds Purchase commitments
Beginning balance $ 12,022,098  $ 7,454,638  $ 161,861  $ 95,096  $ 46,439  $ 9,356 
Total gain (loss) included in earnings 244,759  298,636  (828) (1,369) 1,031  — 
Purchases, settlements, and transfers:
Purchases and additions 6,462,274  26,981  40,468  405  —  — 
Sales and settlements (406,942) (333,324) (198,338) (80,419) (422) (9,356)
Transfers in (out) between categories (961,660) 927,896  15,580  —  —  — 
Ending balance $ 17,360,529  $ 8,374,827  $ 18,743  $ 13,713  $ 47,048  $ — 
Assets
Three months ended March 31, 2022 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale MSR Retained Bonds Investments
Beginning balance $ 11,587,382  $ 6,218,194  $ 158,156  $ 427,942  $ 55,614  $ 6,000 
Total gain (loss) included in earnings (35,895) (313,720) (1,838) 52,368  (3,289) — 
Purchases, settlements, and transfers:
Purchases and additions 1,848,155  30,342  430,806  53,444  —  — 
Sales and settlements (612,624) (586,276) (368,656) (107,652) (1,450) — 
Transfers in (out) between categories (895,876) 887,450  —  —  —  — 
Ending balance $ 11,891,142  $ 6,235,990  $ 218,468  $ 426,102  $ 50,875  $ 6,000 
Fair value, liabilities measured on recurring basis, unobservable input reconciliation Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3, in thousands):
Liabilities
Three months ended March 31, 2023 HMBS related obligations Nonrecourse debt in consolidated VIE trusts Nonrecourse commercial loan financing liability Nonrecourse MSR financing liability Deferred purchase price liabilities TRA Liability
Beginning balance $ (10,996,755) $ (7,175,857) $ (106,758) $ (60,562) $ (137) $ (3,781)
Total gain (loss) included in earnings (147,451) (237,315) 381  748  —  1,579 
Purchases, settlements, and transfers:
Purchases and additions (5,648,041) (639,499) (22,600) —  (4,385) — 
Settlements 384,618  96,796  53,288  58,826  —  — 
Ending balance $ (16,407,629) $ (7,955,875) $ (75,689) $ (988) $ (4,522) $ (2,202)
Liabilities
Three months ended March 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) $ (7,912) $ (5,857,069) $ (111,738) $ (155,108) $ (29,380)
Total gain (loss) included in earnings 85,582  —  105,340  254  (16,038) — 
Purchases, settlements, and transfers:
Purchases and additions (948,682) —  (1,048,499) (60,658) 7,165  — 
Settlements 737,327  5,000  768,072  44,502  —  — 
Ending balance $ (10,548,131) $ (2,912) $ (6,032,156) $ (127,640) $ (163,981) $ (29,380)
Summary of the fair value and unpaid principal balance ("UPB") Presented in the tables below are the fair value and UPB, at March 31, 2023 and December 31, 2022, of financial assets and liabilities for which the Company has elected the fair value option (in thousands):
March 31, 2023 Estimated Fair Value Unpaid Principal Balance
Assets at fair value under the fair value option
Loans held for investment, subject to HMBS related obligations $ 16,623,561  $ 15,850,053 
Loans held for investment, subject to nonrecourse debt:
Reverse mortgage loans 8,009,079  7,974,381 
Commercial mortgage loans 365,748  373,052 
Loans held for investment:
Reverse mortgage loans 724,306  685,924 
Commercial mortgage loans 12,662  12,946 
Loans held for sale:
Residential mortgage loans 58,751  67,794 
Commercial mortgage loans 18,743  19,747 
Liabilities at fair value under the fair value option
HMBS related obligations 16,407,629  15,850,053 
Nonrecourse debt:
Nonrecourse debt in consolidated VIE trusts 7,955,875  8,139,139 
Nonrecourse MSR financing liability 988  988 
Nonrecourse commercial loan financing liability 75,689  74,604 
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 12,123  15,529 
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 
Summary of the components of net fair value gains on mortgage 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 three months ended March 31, 2023 For the three months ended March 31, 2022
Net fair value gains on loans and related obligations:
Interest income on reverse and commercial loans $ 301,046  $ 163,694 
Change in fair value of loans 266,821  (510,802)
Net fair value gains (losses) on loans 567,867  (347,108)
Interest expense on HMBS and nonrecourse obligations (203,050) (106,643)
Change in fair value of derivatives (4,589) 165,579 
Change in fair value of related obligations (183,834) 295,132 
Net fair value gains (losses) on related obligations (391,473) 354,068 
Net fair value gains on loans and related obligations $ 176,394  $ 6,960