LDI 10-K & 10-Q changes, risk factors and insider trading

An investment in our Class A Common Stock involves risk. You should carefully consider the following risks as well as the other information included in this annual report on Form 10-K and the information incorporated by reference herein. Any of the following risks could materially and adversely affect our business, reputation, financial conditioncondition, orand results of operations. However, the selected risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations.us. In any such a case, the trading price of theour Class A Common Stock could decline and you may lose all or part of your investment in our Company. Additionally,Statements whilein somethis ofsection are based on the factors,Company’s eventsbeliefs and contingenciesopinions describedregarding hereinmatters maythat havecould occurredmaterially adversely affect the Company and our Class A Common Stock in the past,future. theReferences disclosuresto hereinpast events are provided by way of example only and are not representationsintended to be a complete listing or representation as to whether such matters have or have not theyoccurred havepreviously occurred,or andtheir are instead provided because future occurrenceslikelihood of suchoccurring factors,in events,the or contingencies could have a material adverse effect.future. Certain statements below are forward-looking statements. See the information included under the heading "“Cautionary Statement Regarding Forward-Looking Information"” included elsewhere in this annual report on Form 10-K. Because of the following risk factors, as well as other variables affecting the Company’s operating results, past financial performance may not be a reliable indicator of future performance, and historical trends shouldmay not beaccurately used to anticipateindicate results or trends in future periods.

•We may not achieve some or all of the expected benefits of our Project North Star strategic plan.

•Our servicing rights are highly volatile assets with continually changing values that mymay decrease or be inaccurate.

•Our servicing rights portfolio may experience unanticipated increased delinquencies and defaults as it ages.

•Our vendor relationships subject us to a variety of risks and they may failurefail to adequately provide essential services.

•We depend on the programs of the Agencies and Ginnie Mae and changes or failures to comply with guidelines could materially alter our business.

•OurControl multi-classof commonthe stockCompany structureis concentrated with a few large stockholders whose interests may conflict with yours, limit or preclude your ability to influence corporate matters and may adversely affect the trading market for our Class A Common Stock. The Hsieh Stockholders hold a majority of the voting power of our common stock.

•We have controllinglarge stockholders with the right to engage or invest in the same or similar businesses as us.

We may not achieve some or all of the expected benefits of our Project North Star strategic plan and our initiatives may adversely affect our business.

In November 2024, we announced our Project North StartOur strategic plan is designed to address current and anticipated mortgage market conditions and facilitate durableprofitable revenuemarket share growth, positiveprofitable operating leverage,operations, best-in-class productivity,mortgage banking operations, operational efficiencies, and investments in platformstechnology that improve the customer experience, our manufacturing processes, our risk profile and solutions that support and ultimately transform our customers'growth homeownershipprospects. journey.Our Project North Starstrategy is described more fully in Part I, Item 1, “Business—Vision 2025 and Project North Star.Strategy.” We may not realize, in full or in part, the anticipated benefits, savings and improvements in our operations from Projectour Northstrategic Starplan due to unforeseen difficulties, delays, unexpected costs, market conditions materially different than our predictions, or other risks described in these Item 1A Risk Factors. If we are unable to execute on our business strategies, including Project North Star,strategies we may face significant challenges in:

We may not be able to execute on our Project North Star strategic plan and failure to do so could adversely affect our ability to generate revenue and control our expenses.

We have derived substantially all of our revenue from originating, selling and servicing traditional mortgage loans. Efforts to expand intowith new or revised consumer products,products and services, such as HELOCs, closed-end second lien mortgage loans, insurance, real estate services, or other products consistent with our business purpose, may not succeed and may reduce expected revenue growth. Furthermore, we incur expenses and expend resources upfront to develop, acquire and market new products andproducts, platform enhancements to incorporateenhancements, additional features, improveimproved functionality orand otherwiseother changes to make our products more desirable to consumers. New and revised products and services may not achieve high levels of market acceptance and employee acceptance. Some of the new or revised products and services we have introduced have not been, and may never be, as successful as anticipated.

Recently launchedNew and futurerevised products couldand services can fail to attain sufficient market acceptance for many reasons, including:

•our failure to predict market demand accurately or to supply products and services that meet market demand in a timely fashion;

•negative publicity about our products’the performance or effectiveness of our products or services or our customer experience;

•our ability to obtain financing sources at competitive rates to support such products and services;

•delays in releasing the new or revised products and services to market;

•defective or inadequate systems and procedures to support and facilitate the new or revised products; and services;

•the offering or anticipated offering of competing products or services by our competitors.

If our new andnew recentlyproducts, launchedservices, productsenhancements or expansions do not achieve adequate acceptance in the market, our competitive position, revenue and operating results couldcan be harmed. The adverse effect on our financial results may be particularly acute because of the significant development, marketing, sales and other expenses we will have incurred in connection with the new or revised products or enhancementsservices before such products or enhancementsservices generate sufficient revenue. Additionally, we canmay provide no assurance that we willnot be able to develop, commercially market and achieve acceptance of our new or revised products and recently launched products.services. Our investment of resources to develop new and revised products and services maycan either be insufficient or result in expenses that are excessive in light of revenue actually originated from these new products.or revised products and services.

In addition, significantly expanding existing business activities or strategies maycan expose us to new or increased financial, operational, regulatory, reputational and other risks. For example, our closed-end second lien mortgage loans and second lien HELOCs mayare resultsubject into a higher risk of loss than other loans since our second lien is subordinated to more senior secured loan claims. As another example, developing an in-house servicing operation required us to heavily invest in employee recruiting and development, and to implement new technologies and new control processes to manage the increased risk and regulatory requirements. Even with several years of experience now, we still cannot be certain that we will be able to manage the associated costs, risks and compliance requirements of maintaining our in-house mortgage servicing capabilities indue accordanceto witha ournumber expectations.of Suchreasons, riskssuch includeas a lack of sufficient experienced management-level personnel, increased administrative burden, increased logistical problems common to large, expansive operations, increased credit and liquidity risk and increased regulatory scrutiny. In addition, while our strategy is to continue growing our MSR business, in 2024 we soldhave made bulk sales of MSRs to meet liquidity needs and we may be required to sell additional MSRs.

We believe that developing and maintaining awareness of our brands in a cost-effective manner is critical to attracting new and retaining existing consumers.customers. Successful promotion of our brands will depend largely on the effectiveness of our marketing efforts and the experience of our consumers.customers. Our efforts to build our brands have involved significant expense, and our future marketing efforts will require us to maintain or incur significant additional expense. These brand promotion activities may not result in increased revenue and, even if they do, any increases may not offset the expenses incurred. If we fail to successfully promote and maintain our brands or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may lose our existing consumerscustomers to our competitors or be unable to attract new consumers.customers.

Additionally, reputational risk, or the risk to our business, results of operations and financial condition from negative public opinion, is inherent in our business. Negative public opinion or perceptions about our services, trustworthiness, and business practices can result from actual or alleged activities or conduct by our employees or representatives in(even anyif numberrelated to isolated incidents or to practices not specific to the origination or servicing of activities,loans), including lending and debt collection practices, cybersecurity incidents, marketing and promotion practices, corporate governancegovernance, and actions taken by government regulators and community organizations in response to those activities. Negative public opinion can also result from media coverage, including on social media or by the analysis community, whether factually accurate or not.not, or from advocacy by special interest groups supporting additional governmental requirements on non-bank consumer loans and other financial products. Negative public opinion could erode trust and confidence and damage our reputation among existing and potential customers. In turn, this could decrease the demand for our products,products and services, increase regulatory scrutinyscrutiny, lead to more restrictive laws or regulations, and detrimentally affect our business.

Part of our growth strategy has included acquisitions, and weWe may acquiregrow by acquiring additional companies or businesses. We may not be successful in identifying origination platforms or businesses, or other businesses that meet our acquisition criteria in the future. In addition, even after a potential acquisition target has been identified, we may not be successful in completing or integrating the acquisition. We face significant competition for attractive acquisition opportunities from other well-capitalized companies, who may have greater financial resources and a greater access to debt and equity capital to secure and complete acquisitions than we do. As a result of such competition, we may be unable to acquire certain assets or businesses that we deem attractive or the purchase price may be significantly elevated or other terms may be substantially more onerous. Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate and integrate such acquisitions could impede our growth.

One of the focuses of our origination efforts is retention, which involves actively working with existing customers to refinance their mortgage loans with us instead of another residential mortgage originator of mortgage loans. Customers who refinance have no obligation to refinance their loans with us and may choose to refinance with a competitor. Additionally, we may elect not to refinance an existing customer’s mortgage loan due to a number of reasons, including, but not limited to, the customer’s inability to meet our eligibility requirements. Further, we may be contractually restricted from soliciting certain customers whose loans we service. If customers refinance with a competitor, this decreases the profitability of our retained servicing portfolio because the original loan will be repaid prematurely, and we will not have an opportunity to earn further servicing fees after the original loan is paid in full. If we are not successful in retaining our existing loans that are refinanced, our servicing portfolio will become increasingly subject to run-off, which could have a material adverse effect on our consolidated financial position, results of operations or cash flow.

We employ various economic hedging strategies that utilize derivative instruments to mitigate the interest rate and fall-out risks that are inherent in many of our assets, including our IRLCs, our LHFS and our MSRs. Our derivative instruments, which currently consist of forward sale contracts, interest rate swap futures, and put options on treasuries are accounted for as free-standing derivatives and are included on our consolidated balance sheetsheets at fair market value. Our operating results may suffer because losses on derivatives we enter into may not be offset by changes in the fair value of the related hedged transaction.

We monitor the markets and make necessary adjustments to our models and apply management judgment in the interpretation and adjustment of the results produced by our models. As a result of the time and resources, including technical and staffing resources, that are required to perform these processes effectively, it may not be possible to update or replace existing models quickly enough to ensure that they will always properly account for the impacts of recent information and actions. In addition, we may not have adequate resources or the required expertise to sufficiently control processes for model updates, including model development, testing, independent validation and implementation. Flawed models or uses of models, particularlyincluding those that rely on artificial intelligence (“AI”), may result in, among other consequences, erroneous, biased or misleading outputs, inappropriate business decisions, inadequate risk management or enhanced regulatory supervision, which could have a material adverse effect on the Company’s results of operations, financial condition and reputation.

A substantial portion of our aggregate mortgage loan origination is secured by properties concentrated in the states of California, Texas and Florida, and properties securing a substantial portion of our outstanding UPB of mortgage loan servicing rights portfolio are located in California, Texas, Florida, Virginia,Arizona, ArizonaVirginia and Washington.New York. To the extent that these states have experienced or may experience weaker economic conditions or greater rates of decline in real estate values than the United States generally, the concentration of loans that we service in those states makes the adverse impact from any decreases in the value of our servicing rights more severe. The impact of property value declines may increase in magnitude and it may continue for a long period of time. Homeowners’ insurance in California, Florida, Texas and other states has become increasingly expensive and harder to obtain, including as a result of wildfires, hurricanes and other calamities, which has resulted in, and may continue to result in, higher delinquency rates relative to other states and may adversely affect our lending business. Additionally, if states in which we have greater concentrations of business were to change their licensing or other regulatory requirements to make our business cost-prohibitive, we may be required to stop doing business in those states or may be subject to a higher cost of doing business in those states, which could materially adversely affect our business, financial condition and results of operations.

We believe that market conditions in recent years have resulted in manyMany purchasers of mortgage loans beingare particularly aware of the conditions under which mortgage loan originators or sellers must indemnify them against losses related to purchased mortgage loans, or repurchase those mortgage loans, and the benefits of enforcing repurchase remedies they may have.

Repurchased loans typically can only be resold at a discount to their repurchase price. In recent years, we experienced, and we may again, experience, increased severity of lossesLosses on repurchased loans or loans subject to repurchase that were originated at interest rates lower than currently prevailing rates.rates typically result in more severe losses. Additionally, certain investors may no longer offer alternatives to repurchase that could help to mitigate losses on repurchased loans. To recognize these potential indemnification and repurchase losses, we have recorded estimated loan loss obligations for loans sold of $18.4$16.1 million and $32.0$18.4 million at December 31, 20242025 and 2023,2024, respectively. Our liability for repurchase losses is assessed quarterly. Although not all mortgage loans repurchased are in arrears or default, as a practical matter most have been. Factors that we consider in evaluating our reserve for such losses include default expectations, actual and expected investor repurchase demands (influenced by, among other things, current and expected mortgage loan file requests and mortgage loan insurance rescission notices), appeals success rates (where the investor rescinds the demand based on a cure of the defect or acknowledges that the mortgage loan satisfies the investor’s applicable representations and warranties), reimbursement by third-party originators, and projected loss severity. Also, although we re-evaluate our reserves for repurchase losses each quarter, evaluations are estimates and the reserves may not be adequate. Additionally, if home values decrease, our realized mortgage loan losses from mortgage loan indemnifications and repurchases may increase.

Additionally, we mayare not bealways able to recover amounts from some third parties from whom we may seek indemnification or against whom we may assert a loan repurchase demand in connection with a breach of a representation or warranty due to financial difficulties or otherwise. As a result, we are exposed to counterparty risk in the event of non-performance by counterparties to our various contracts, including, without limitation, as a result of the rejection of an agreement or transaction in bankruptcy proceedings, which could result in substantial losses for which we may not have insurance coverage.

Certain of our loan funding and MSR-backed facilities are subject to margin calls based on the lender’s opinion of the value of the loan collateral securing such financing. In addition, certain of our hedges related to newly originated mortgages are also subject to margin calls. A margin call would require us to repay a portion of the outstanding borrowings. A large, unanticipated margin call could have a material adverse effect on our liquidity. We have faced some margin calls on hedges and our financing facilities and may face additional margin calls in the future. Our regular stress tests of our positions may not be adequate to prevent additional margin calls that could impact our liquidity, particularly if the interest rate market experiences significant volatility.

•the speed of prepayment and repayment withinof the underlying pools of loans;

•ancillary fee income; and

•amounts of future servicing advances.advances and associated interest expenses; and

On February 1, 2023, we completed the transfer of servicing operations from Cenlar FSB (“Cenlar”) and brought the servicing of all MSRs in-house. Cenlar was our primary subservicer from 2012 to 2023. Notably, on October 26, 2021, Cenlar entered into a consent order with its prudential regulator, the Office of the Comptroller of the Currency, regarding an alleged failure to establish effective controls and risk management practices related to its mortgage servicing and subservicing activities. When Cenlar serviced our loans on our behalf, there were a number of factors out of our control that could have negatively impacted Cenlar’s ability to effectively service our portfolio and to satisfy their contractual obligations to us. These included both intentional actions taken by Cenlar took in running their businesses such as management of staffing levels and the number of customers serviced, and the occurrence of external events, including, but not limited to regulatory changes, enforcement actions, and natural disasters that may have posed challenges to Cenlar. The failure on Cenlar’s part to effectively service our portfolio of MSRs in the past has resulted in, and may result in, residual, regulatory, operational and litigation risk, which could adversely impact our business, financial condition, liquidity and results of operations. Cenlar recently announced that its subservicing business is being acquired by one of our competitors. Our current servicing operations also hashave addressed, and could be required to continue to address, any past servicing concerns on behalf of Cenlar, which also could result in regulatory, operational and litigation risk.

In-house servicing of loans carries with it increasedincreases operational and compliance costs as we become directly responsible for complying with investor and regulatory requirements.

Our transition from an outsourcing model to an in-house model for the servicing of loans means that we are more directly responsible for complying with applicable laws and regulations related to servicing, as well as the guidelines set forth by the Agencies and other investors (including securitization trusts) on whose behalf we service mortgage loans. Failure to meetcomply stipulationswith ofthese servicinglaws, regulations, or guidelines, which risk is higher than some of our competitors due to our limited operating history, can result in litigation, the assessment of fines and loss of reimbursement of loan-related advances, expenses, interest and servicing fees, as well as reputational damage. When the subservicing of a loan is transferred to the Company to be serviced in-house, the loan may have been previously serviced in a manner that will contribute towards our not meeting certain servicing guidelines.guidelines or legal requirements. If not recovered from a prior servicer, such event could lead to the eventual realization of a loss to us.

For mortgage loans, during any period in which a borrower is not making payments, we are required under most of our servicing agreements in respect of our servicing rights to advance our own funds to meet contractual principal and interest remittance requirements for investors and pay property taxes and insurance premiums, legal expenses and other protective advances. We also advance funds under these agreements to maintain, repair and market real estate properties on behalf of investors. When home values rise, costs increase, or delinquencies increase, as they recently have, we are typically required to advance greater amounts. In addition, if a mortgage loan serviced by us is in default or becomes delinquent, the repayment to us of the advance may be delayed until the mortgage loan is repaid or refinanced or foreclosure or a liquidation occurs. If the home value decreases and the property is sold in foreclosure or is real estate owned, we may not recover some or all of our advance funds. A delay in our ability to collect an advanceadvances may adversely affect our liquidity, and our inability to be reimbursed for an advanceadvances could adversely affect our business, financial condition and results of operations. As our servicing portfolio continues to age, defaults might increase as the loans age, which may increase our costs of servicing and could be detrimental to our business. Market disruptions, natural disasters, pandemics, or economic downturns may necessitate the offering of a temporary period of forbearance for customers unable to pay on certain mortgage loans and may also increase the number of defaults, delinquencies or forbearances related to the loans we service, increasing the advances we make for such loans and delaying our recoveries. We have recently beenare subject to such forbearance requirements in California, Florida and other jurisdictions in connection with fires, hurricanes and other catastrophe events. In connection with large scale catastrophe or other adverse events, particularly in jurisdictions where we have large concentrations of serviced loans, we may be required to advance funds in excess of our funding capacity, which could materially and adversely affect our mortgage loan servicing activities and our status as an approved servicer by Fannie Mae and Freddie Mac and result in our termination as an issuer and approved servicer by Ginnie Mae.

Any significant increase in required servicing advances or delinquent or other loan repurchases, could have a significant adverse impact on our cash flows, even if they are reimbursable, and could also have a detrimental effect on our business and financial condition.

Adverse actions by Ginnie Mae could materially and adversely impact our business, reputation, financial condition, liquidity and results of operations, including if Ginnie Mae were to terminate us as an issuer or servicer of Ginnie Mae loans or otherwise take action indicating that such a termination was planned. For example, such actions could make financing our business more difficult, including by making future financing more expensive or, if a lender were to allege a default under our debt agreements, could trigger cross-defaults under all our other material debt agreements. See “Changes in GSEor failure to satisfy Agency or Ginnie Mae sellingguidelines and/or servicing guidelinesrequirements could adversely affect our business, financial condition and results of operationsbusiness” below for additional discussion.

Our servicing rights portfolio may experience unanticipated increased delinquencies and defaults as it ages, which may adversely affect our business and financial condition.

With respect to mortgage loans, the likelihood of delinquencies and defaults, and the associated risks to our business, including higher costs to service such mortgage loans and a greater risk that we may incur losses due to repurchase or indemnification demands, may change as mortgage loans season, or increase in age. Newly originated mortgage loans typically exhibit low delinquency and default rates as the changes in economic conditions, individual financial circumstances and other factors that drive borrower delinquency often do not appear for months or years. The delinquency rate and defaults of the loans underlying the servicing rights portfolio, in particular FHA insured loans, increased in recent years and may continue to increase as the portfolio continues to season, but we may not accurately predict the magnitude of this impact on our results of operations. In addition, it may be difficult to compare our business to our mortgage loan originator competitors. Such competitors may havebe better abilityable to model delinquency and default risk and may have abe better ability than we doare in establishing appropriate loss reserves based on their longer operating histories. Any inadequacy of our loss reserves established for delinquenciesdelinquencies, anddefaults, defaultsor otherwise may result in future financial restatements or other adverse events.

We are party to joint ventures,ventures with partners such as home builders and real estate brokers, and the termination of any of these joint ventures (including as a result of one of our partners exiting the industryindustry, operating independently, or the formation offorming a joint venture with another lender), or a decline in the activity of the building industry generally, could cause revenue from loans originated through these joint ventures to decline, which would negatively impact our business. We face significant competition for attractive joint ventures opportunities, and we may be unsuccessful in forming profitable joint ventures, which could adversely affect our growth strategy. We could be held liable for the activities of the joint ventures or our joint venture partners, particularly if they do not comply with applicable laws or regulations, which could materially increase our expenses, harm our reputation, and hinder our ability to form new joint ventures.

MERSCORP, Inc. maintains an electronic registry, referred to as the MERS®System, which tracks servicers, ownership of servicing rightsrights, and ownership of mortgage loans in the United States. Mortgage Electronic Registration Systems, Inc. (“MERS”), a wholly owned subsidiary of MERSCORP, Inc., can serve as a nominee for the owner of a mortgage loan and in that role initiate foreclosures or become the mortgagee of record for the loan in local land records. We have in the past and intend to continue to use MERS as a nominee. The MERS®System is widely used by participants in the mortgage finance industry.

MERS’s legal standing to initiate foreclosures or act as nominee for lenders in mortgages and deeds of trust recorded in local land records has been disputed and questioned. The ownership and enforceability of mortgage loans registered in MERS has also been challenged. These challenges have focused public attention on MERS and on how mortgage loans are recorded in local land records. Ongoing or future challenges could result in delays and additional costs in commencing, prosecuting and completing foreclosure proceedings, conducting foreclosure sales of mortgaged properties and submitting proofs of claim in borrower bankruptcy cases. An adverse decision in any jurisdiction may delay the foreclosure process in other jurisdictions.jurisdictions and compound such adverse effects.

In deciding whether to extend credit or to enter into other transactions with borrowers, we rely on information furnished to us by or on behalf of borrowers, including credit, identification, employment and other relevant information. Some of the information regarding borrowers provided to us is used to determine whether to lend to borrowers and the risk profiles of such borrowers. Such risk profiles are subsequently utilized by warehouse line counterparties who lend us capital to fund mortgage loans. We also may rely on representations of borrowers as to the accuracy and completeness of that information.

While we have a practice of seeking to independently verify some of the borrower information that we use in deciding whether to extend credit or to agree to a loan modification, including, depending on the program, employment, assets, income and credit score,Moreover, not all borrower information is independently verified, and if any of the independently-verified borrower information that is independently verified (or any other information considered in the loan review process) is misrepresented intentionally or negligentlynegligently, and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected. Additionally, there is a risk that, following the date of the credit report that we obtain and review, a borrower may have become delinquent in the payment of an outstanding obligation, defaulted on a pre-existing debt obligation, taken on additional debt, lost his or her job or other sources of income; or sustained other adverse financial events.events, which could also lower the value of the loan. Whether a misrepresentation is made by the loan applicant, another third-party or one of our employees, we generally bear the risk of loss associated with thesuch misrepresentation. We may not detect all misrepresented information in our mortgage loan originations or from service providers we engage to assist in the loan approval process. A loan subject to a material misrepresentation is typically unsalable or subject to repurchase.

We are also subject to the risk of fraudulent activity associated with the origination and servicing of loans, and this risk is compounded with recent advancements in technology innovation such as AI which has the ability to make fraud schemes more sophisticated. The level of our fraud charge-offscharge-offs, fraud-related expenses, and results of operations could be materially adversely affected if fraudulent activity were to significantly increase or if we were unable to adequately prevent fraud.

We originate and sell Agency-eligible and non-Agency-eligible residential mortgage loans. Agency-eligible loans are underwritten in accordance with guidelines defined by the Agencies, as well as additional requirements in some cases, designed to predict a borrower’s ability and willingness to repay and reduce origination risk. In spite of these standards, our underwriting guidelines may not always correlate with mortgage loan defaults. We are increasingly automating our underwriting and these automated processes may result in, among other consequences, erroneous, biased or misleading outputs; inappropriate business decisions; inadequate risk management; or enhanced regulatory supervision. For example, FICO scores, which we obtain on a substantial majority of our loans, purport only to be a measurement of the relative degree of historical risk a borrower represents to a lender (i.e., that a borrower with a higher score is statistically expected to be less likely to default in payment than a borrower with a lower score). While we seek to consider these risks in our reserve assumptions and pricing,However, underwriting guidelines cannot predict all future events or other occurrences such as life events, natural disasters, pandemics, a change in the borrower’s employment, financial condition or other negative local or macroeconomic conditions, including but not limited to, increased property tax rates and increased costs for homeowners’ insurance. For example, we cannot predict two common reasons for a default on a mortgage loan: loss of employment and serious medical illness. Loans made on rental properties, to self-employed customers, or on other higher-risk loans mayoften have a higher risk of default and may be more expensive to service because of regulatory or Agency requirements and more involved monitoring and oversight. Any increase in default rates could have a material adverse effect on our business, financial condition, liquidity and results of operations.

A substantial portion of our assets are recorded at fair value based upon significant estimates and assumptionsassumptions, with changes in fair value included in our consolidated results of operations. The determination of the fair value of our assets involves numerous estimates and assumptions made by our management. Such estimates and assumptions include, without limitation, estimates of future cash flows associated with our servicing rights and derivative assets based upon assumptions involving, among other things, discount rates, prepayment speeds, cost of servicing of the underlying serviced mortgage loans, pull-through rates and direct origination expenses. The use of different estimates or assumptions in connection with the valuation of these assets could produce materially different fair values, or our fair value estimates may not be realized in an actual sale or settlement, either of which could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We have significant and critical vendors that, among other things, provide us with financial, technologytechnology, marketing and other services to support our loan servicing and originations activities. Our servicing vendors help us provide escrow, print, loss mitigation, foreclosure, insurance and bankruptcy services. In the event that a vendor’s activities do not comply with the applicable servicing criteria or applicable laws and regulations, we could be exposed to liability as the loan servicer and it could negatively impact our relationships with our servicingcustomers, customersthe Agencies, investors, or our regulators, among others. In addition, if our current vendors were to stop providing services to us on acceptable terms, including as a result of one or more vendor bankruptcies, cyber attacks, or otherwise, we may be unable to procure alternatives from other vendors in a timely and efficient manner and on acceptable terms, or at all. If a vendor fails to comply with applicable legal requirements on our behalf,requirements, or provide to us the services we are contractually owed, we may incur significant costs to resolve any such disruptions in service and this could adversely affect our business, financial condition and results of operations. If a vendor we rely on is unable to provide services to us as expected, as a result of their own lack of operational resilience measures or otherwise, we may experience increased costs and operational impacts, including business disruption.

Our risk management framework seeks to anticipate, mitigate, detect, measure and manage risk while balancing risk and return according to the Company’s risk appetite. We have established policies and procedures intended to help identify, monitor and manage the types of risk to which we are subject, including market and interest rate risk, liquidity risk, cyber risk, regulatory and compliance risk, legal risk, reputational risk, operational risk, vendor risk, and counterparty risk. Developing and maintaining our risk management policies, procedures and framework requires significant resources and we may not devote sufficient resources to the risk management program in the future. These risk management policies and procedures, as well as our risk management techniques such as our hedging strategies, may not be fully effective. There may also be risks that exist, or that develop in the future, that we are not able to anticipate, or that we have not appropriately anticipated, identified or mitigated. As regulations and markets in which we operate continue to evolve, our risk management framework may not always keep sufficient pace with those changes. In addition, our management team may choose to accept risks that we are not able to effectively manage. If our risk management framework does not effectively identify or mitigate our risks, we could be subject to heightened regulatory scrutiny or requirements, suffer unexpected losses and otherwise be materially adversely affected.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included under Part II. Item 8 of this report. The results of operations described below are not necessarily indicative of the results to be expected for any future periods. This discussion includes forward-looking information that involves risks and assumptions which could cause actual results or outcomes to differ materially from management’s expectations. See our cautionary language at the beginning of this report under “Special Note Regarding Forward-Looking Statements” and for a more complete discussion of the factors that could affect our future results refer to Part I. “Item IA. Risk Factors”

Increases in interest rates may affect affordability and the ability for potential home buyers to qualify for a mortgage loan. As interest rates increase, rate and term refinancings become less attractive to consumers. However, rising interest rates during periods of inflationary pressures can make real assets, including real estate, an attractive investment. Demand for real estate may result in ongoing support for purchase mortgages and home price appreciation creating borrower equity that could result in opportunities for cash-out refinancings orrefinancings, home equity lines of credit.credit, or closed end seconds.

Our mortgage loan refinancing volumes (and to a lesser degree, our purchase volumes), balance sheet, and results of operations are influenced by changes in interest rates and how we effectively manage the related interest rate risk. The majority of our assets are subject to interest rate risk, including LHFS, LHFI, IRLCs, trading securities, servicing rights, forward sales contracts, interest rate swap futures and put options. We refer to such forward sales contracts, interest rate swap futures and put options collectively as “Hedging Instruments.” As interest rates increase, our LHFS, LHFI and IRLCs generally decrease in value while our Hedging Instruments utilized to hedge against interest rate risk typically increase in value. Rising interest rates cause our expected mortgage loan servicing revenues to increase due to a decline in mortgage loan prepayments which extends the average life of our servicing portfolio and increases the value of our servicing rights. Conversely, as interest rates decrease, our LHFS, LHFI and IRLCs generally increase in value while our Hedging Instruments decrease in value. In a declining interest rate environment, borrowers tend to refinance their mortgage loans, which increases prepayment speedspeeds and causes expected mortgage loan servicing revenues to decrease,decrease. whichThis reduces the average life of our servicing portfolio and decreases the value of our servicing rights. Changes in fair value of our servicing rights are recorded as unrealized gains and losses in changes in fair value of servicing rights, net, in our consolidated statements of operations.

(4)Excludes otherNon-Agency Non-Agency.products.

The following table sets forth our consolidated financial statement data for 20242025 compared to 2023.2024. A comparative discussion of results for 20232024 compared to 20222023 is provided in the "“Results of Operations"” section within the Company’s Annual Report of loanDepot, Inc. on Form 10-K for the year ended December 31, 2023.2024.

Net loss of $107.5 million for 2025 reflects a decrease of $94.6 million compared to a net loss of $202.2 million for 2024 reflects a decrease of $33.4 million compared to net loss of $235.5 million for 2023.2024. The decrease is primarily attributable to an increase in total net revenues of $86.2$129.5 million due to a 42 basis point increase in pull-through weighted gain on sale margin and a 6.4%13.8% increase in pull-through weighted lock volume that resulted in a $117.6$100.3 million increase in gain on origination and sale of loans.loans, and a 19 basis point increase in pull-through weighted gain on sale margin. The increase in total net revenues was partially offset by a $50.8$7.2 million increase in total expenses, including increases in personnel, direct origination, servicing,marketing and otheradvertising interestexpense, and servicing expense. Total originations were $26.5 billion for the year ended December 31, 2025, compared to $24.5 billion for the year ended December 31, 2024, compared to $22.7 billion for the year ended December 31, 2023, representing an increase of $1.8$2.0 billion or 8.0%.8.1%.

Net Interest Income (Expense) Income.. Net interest income (expense) income includes interest income earned on LHFS, offset by interest expense incurred on amounts borrowed under warehouse lines for loan financing as well as warehouse line commitment fees. These commitment fees are amortized on a straight-line basis over the duration of the warehouse line agreement. The decreaseincrease in net interest income was predominately driven by highera $250.7 million increase in the average balance of LHFS and lower cost of funds on warehouse lines as short-term interest rates on debt were higherlower duringfor the year ended December 31, 20242025, andoffset by an increase ofin $215.8loans millionfinanced on warehouse lines resulting in the average balance of warehouse lines, partially offset by a higher yield on LHFS and $137.6$241.4 million increase in the average balance of warehouse lines and a lower yield on LHFS.

Gain on origination and sale of loans, net includes several key components. The estimated change in value of a loan from the time we enter into a commitment to lend to the borrower (IRLC) to the closing of the loan (LHFS) up until its eventual sale is recorded in “Fair value gains or losses on IRLC and LHFS.” Various factors, such as mortgage volume, the duration a loan remains at stages in the origination process, and shifts in interest rates, influence fair value changes on IRLC and LHFS. We utilize a hedge strategy to manage the impact of interest rate changes in IRLC and LHFS, "Fair value gains or losses from Hedging Instruments" represents the unrealized gains or losses on Hedging Instruments. When a loan is sold, the difference between proceeds received and the UPB is included in “Premium or discount from loan sales.” Additionally, “Discount points, rebates, and lender paid costs” are recognized at closing of the loan. The fair value of servicing rights retained on loan sales is included in “Fair value of servicing rights additions.” The "Provision for loan loss obligation for loans sold” is established to cover potential losses from a breach of representation or warranty made to purchasers or insurers of the sold loans. We may recover previously recorded provision for loan loss obligations when previous loss estimates need to be lowered for changes in estimated frequency and severity. The $117.6$100.3 million or 22.4%15.6% increase in gain on origination and sale of loans, net was primarily driven by higher gain on sale margin and increased volumes.origination Recoveryvolumes, partially offset by a provision for loan loss obligation for loans sold due to higher sales volume compared to a recovery for loan loss obligations in the prior year that was the result of loanan lossesadjustment also fromfor improved credit performance and reduced repurchase exposure.

Origination Income, Net. Origination income, net, reflects the fees that we earn, net of lender credits we pay, from originating loans. Origination income includes loan origination fees, processing fees, underwriting fees, and other fees collected from the borrower at the time of funding. Lender credits typically include rebates or concessions to borrowers for certain loan origination costs. The $17.1$49.4 million,million or 26.2%,60.1% increase in origination income was primarily the result of an increase in consumer direct and retail loan origination volumevolume, aspartially welloffset asby ana increasedecrease in HELOCjoint feesventure associated with the growth inand HELOC origination volume.

Servicing Fee Income. Servicing fee income reflects contractual servicing fees and ancillary and other fees (including late charges) related to the servicing of mortgage loans. The decrease of $11.1$44.5 million,million or 2.3%,9.2% in servicing income between periods was the result of a decrease in servicing fee collections and reduced ancillary income due to a decrease of $15.8$9.5 billion in the average UPB of our servicing portfolio as a result of bulk sales completed during the secondprior quarter of 2024.year.

Change in Fair Value of Servicing Rights, Net. Change in fair value of servicing rights, net includes (i) fair value gains or losses net of Hedging Instrument gains or losses; (ii) fallout and decay, which includes principal amortization and prepayments; and (iii) realized gains or losses on the sales of servicing rights. The decreaseincrease of $30.7$16.6 million or 7.7% reflects ana increaseddecreased loss of $11.4$22.6 million in fair value, net of hedge, anand increasea $6.8 million decrease in the provision forand lossesbroker offees $6.1 million duerelated to the two bulk sales completed during the second quarter ofin 2024, andpartially offset by a $13.8$12.9 million increase in fallout and decay.

Other Income. Other income includes our pro rata share of the net earnings from joint ventures and fee income from title, escrow, and settlement services for mortgage loan transactions performed by LDSS, fair value gains or losses on trading securities, interest income on cash deposits and interest income and fair value gains or losses from loans held for investment. The decrease of $3.5 million or 4.9% in other income between periods was attributable to a $10.8 million decrease in bank interest income and a $9.2 million decrease in income from joint ventures, partially offset by an $8.3 million increase in title and escrow fees, a $4.9 million increase in income related to loans held for investment, and a $3.4 million increase in fair value gains on trading securities.

Personnel Expense. Personnel expense includes salaries, commissions, incentive compensation, benefits, and other employee costs. The $27.5increase of $41.0 million or 4.8%6.8% is primarily due to a $31.8 million volume-related increase in personnelcommissions expenseand includeda volume-related$12.5 increasesmillion increase in commissions of $28.2 million. A decrease of $0.7 million to salaries &and benefits primarily relateddue to a decrease in severance expenses offset by an increase in salary expense related toaverage headcount. As of December 31, 2024, we had 4,675 employees, as compared to 4,250 employees as of December 31, 2023.

Marketing and Advertising Expense. With elevated interest rates, we adapted our marketing strategy to target increased purchase and cash-out refinance volume. Our approach relies on selected online lead aggregators, alongside search engine optimization, pay-per-click advertising, banner advertising, and organic content generation to cultivate organic online leads. Marketing and advertising expenses remainedincreased relatively unchanged with a $0.2$14.0 million or 0.2% decrease10.6% which primarily reflects costan savingsincrease affectingin aggregate lead aggregators and a decrease in market refinance volume.generation.

General and Administrative Expense. General and administrative expense includes professional fees, data processing expense, communications expense, and other operating expenses. The $8.5$27.1 million or 4.0%13.3% decrease in general and administrative expense included a $19.6$17.3 million reductiondecrease in costs related to the Cybersecurity Incident in the prior year and an $18.7 million decrease in professional and consulting fees primarily related to a decrease in legal fees and a $5.0 million insurance settlement for the reimbursement of legal fees, partially offset by a $5.6 million increase in loss contingency expense,expense due to recoveries in the prior year and a $4.9$2.8 million decreaseincrease in office and equipment expenses related to software subscriptions, a $1.8 million decrease in lease impairment and loss on disposal and a $1.2 million decrease in repairs and maintenance related to the consolidation and reduction of office leases and associated expenses, offset by Cybersecurity related costs of $18.8 million.subscriptions.

Servicing Expense. The increase of $9.7$5.8 million or 35.0%15.4% in servicing expense reflects an increase in default and loss mitigation expense associated with an increase in delinquencies and average age of loans serviced,serviced partiallyand offsetan by a decreaseincrease in our servicing portfolio.

Cash and Cash Equivalents. The $239.1$84.3 million or 36.2%20.0% decrease in cash and cash equivalents relates to net losses for the year, repaymentincreased ofhaircuts debton obligations,warehouse andlines due to an increase in restrictedLHFS, cash,an increase in retained servicing rights, a decrease in margin call payables, and a reduction in accounts payable, accrued expenses and other liabilities, partially offset by proceedsan fromincrease servicingin rightsdebt salesobligations, and financing from net warehouse advances.net.

Restricted Cash. Restricted cash was $63.8 million as of December 31, 2025 compared to $105.6 million as of December 31, 2024 comparedrepresenting toa $85.1 million asdecrease of December 31, 2023 representing an increase of $20.5$41.9 million or 24.1%.39.6%. The increasedecrease was primarily the result of increasesdecreases in cash collateral associated with derivative activities.activities, warehouse lines, and debt obligations.

Loans Held for Sale, at Fair Value. Loans held for sale, at fair value, are primarily fixed and variable rate, 15- to 30-year term first-lien loans secured by residential property. The $470.9$561.8 million or 22.1%21.6% increase reflects $24.1$25.9 billion in loan originationsoriginations, and $666.3$963.4 million in repurchases, and $30.4 million in fair value gains, partially offset by $23.9$26.3 billion in loan sales,sales $218.7and $64.0 million in principal payments and a $122.5 million transfer of loans to loan held for investment.payments.

Loans Held for Investment, at Fair Value. Loans held for investment, at fair value of $116.6 million are the residential mortgage loans securitized in the second quarter of 2024. The securitization transaction did not qualify for sale treatment2024 and wasrecorded recordedon the balance sheet as a secured borrowing. AsThe adecrease result,of the$6.8 loansmillion heldor for5.8% investmentreflect and$11.3 correspondingmillion securitizationof debtprincipal remainpayments, onpartially theoffset consolidatedby balance$4.4 sheets.million of fair value gain.

Loans Eligible for Repurchase. Loans eligible for repurchase were $1.1 billion as of December 31, 2025, as compared to $995.4 million as of December 31, 2024, as compared to $711.4 million as of December 31, 2023, representing an increase of $284.0$79.0 million or 39.9%.7.9%. The increase between periods was due to the increase in Ginnie Mae serviced loans that were 90 days or more delinquent at December 31, 2024,2025, and was also attributable to the increase in our Ginnie Mae servicing portfolio.

Warehouse and Other LinesAssets. The decrease of Credit. The increase of $430.1$19.0 million, or 22.1%,8.1%, wasis primarily related to the primarily$20.0 million insurance receivable received in the resultcurrent ofyear loanrelated originations outpacing loan sales by $486.4 million duringto the yearCybersecurity endedIncident December 31,in 2024.

Derivative Liabilities, at Fair Value. The decrease of $59.9$14.3 millionmillion, or 70.5%57.2%, reflects a $60.9$14.0 million decrease in Hedging Instrument liabilities from higher interest rates and a $1.0$0.3 million increasedecrease in IRLCs.

Equity. The decrease of $197.9$120.6 million, or 28.1%,23.8%, was primarily attributed to a net loss of $202.2$107.5 million, ana increasedecrease toin additional paid in capital of $15.8$20.0 million, primarily related to conversion-related adjustments to the TRA liability and deferred taxes, andliability, the repurchase of treasury shares at cost of $3.8$9.3 million to net settle and withhold tax on vested RSUs.RSUs Thisand wasexercised options, and distributions for taxes on behalf of shareholders of $1.9 million, partially offset by stock-based compensation of $24.9$12.2 million.million and an increase of $5.9 million related to the issuance of common stock through the exercise of stock options.

At this time, we currently believe that our cash on hand, as well as the sources of liquidity described above, will be sufficient to maintain our current operations and fund our loan originations capital commitments for the next twelve months. However, we will continue to review our liquidity needs in light of current and anticipated mortgage market conditions and we are taking various steps to align our cost structure with current and expected mortgage origination volumes.

As a seller and servicer, we are subject to minimum net worth, liquidity, and other financial requirements. In 2022, both FHFA and Ginnie Mae revised these requirements. Effective from September 30, 2023, minimum net worth requirements for FHFA and Ginnie Mae include a base of $2.5 million plus percentages of the seller/servicer’s residential first lien mortgage servicing UPB serviced for each agency and a percentage of other non-agencies servicing UPB. Base liquidity for the agencies depends on the remittance type and includes specific percentages of the seller/servicer's residential first lien mortgage servicing UPB for each agency, along with a percentage for other non-agencies servicing UPB. Large non-depositories require a liquidity buffer based on UPB for FHFA and Ginnie Mae. The capital ratio for FHFA and Ginnie Mae requires tangible net worth/total assets to be equal to or greater than 6% for both agencies. Effective from December 31, 2023, revised FHFA and Ginnie Mae seller-servicer minimum financial eligibility requirements include origination liquidity and third-party ratings. FHFA also requires an annual capital and liquidity plan effective March 31, 2024 and Ginnie Mae has implemented a risk-based capital requirement effective December 31, 2024. As of December 31, 2024,2025, we were in compliance with these financial requirements.

We primarily finance mortgage loans through borrowings under our warehouse and other lines of credit. Under these facilities, we transfer specific loans to our counterparties and receive funds from them. Simultaneously, there is an agreement in place where the counterparties commit to transferring the loans back to us, either at the date the loans are sold or upon our request, and we provide the funds in return. We do not recognize these transfers as sales for accounting purposes. During the year ended December 31, 2024,2025, our loans remained on warehouse lines for an average of 19 days. Our warehouse facilities are generally short-term borrowings with maturities of one year and our securitization facilityfacilities has ahave two and three year term.terms. We utilize both committed and uncommitted loan funding facilities and we evaluate our needs under these facilities based on forecasted volume of loan originations and sales. Our liquidity could be affected as lenders may reassess their exposure to the mortgage origination industry and potentially limit access to uncommitted mortgage warehouse financing or increase associated costs. Moreover, there may be reduced demand from investors to acquire our mortgage loans in the secondary market, further impacting our liquidity. Approximately 67%63% of the mortgage loans that we originated during the year ended December 31, 20242025 were sold in the secondary mortgage market either directly to Fannie Mae and Freddie Mac or securitized into MBS guaranteed by Ginnie Mae. We also sell loans to manyother privatenon-Agency investors.

As of December 31, 2024,2025, we maintained revolving lines of credit with nineeleven counterpartiescounterparties, including two loan funding facilities with GSEs, providing warehouse and other securitization facilities with a total borrowing capacity of $3.7$4.2 billion, of which $951.0$1.3 millionbillion was committed. Our $3.7$4.2 billion of capacity as of December 31, 20242025 was comprised of $3.4$3.9 billion with staggered maturities staggeredwithin throughone November 2025year and a $300.0 million securitization facility that matures in SeptemberApril 2026.2028. As of December 31, 2024,2025, we had $2.4$2.9 billion in outstanding borrowings and $1.2$1.3 billion in additional availability under our facilities. Warehouse and other lines of credit are further discussed in Note 12- Warehouse and Other Lines of Credit of the Notes to Consolidated Financial Statements contained in Item 8.

MSR facilities and Term Notes provide financing for our servicing portfolio investments. As of December 31, 2024,2025, our MSR facilitiesfacility secured by Fannie Mae and Freddie Mac MSRs had an outstanding balance of $568.5$97.8 million,million in MSR facilities and $198.0 million in Term Notes, secured by Fannie Mae MSRs totaling $922.2$412.6 million. As of December 31, 2024,2025, our Ginnie Mae MSR facility secured by Freddie Mac had an outstanding balance of $193.8$312.4 million , secured by Freddie Mac MSRs totaling $482.1 million. As of December 31, 2025, our MSR facility secured by Ginnie Mae had an outstanding balance of $93.4 million in variable funding notes and $200.0$346.9 million in Term Notes, secured by Ginnie Mae MSRs totaling $625.7$661.5 million.

Securities financing facilities provide financing for the retained interest securities associated with our securitizations. As of December 31, 20242025 there were outstanding securities financing facilities of $82.5$79.2 million,million secured by trading securities with a fair value of $87.5$85.6 million.

UnsecuredSenior debt obligationsNotes as of December 31, 20242025 consisted of secured Senior Notes totaling $812.1$310.0 millionmillion, net of $9.0$3.8 million of deferred financing costs and a discount of $26.8 million, and unsecured Senior Notes totaling $497.0 million, net of $2.4 million of deferred financing costs. Periodically, and in accordance with applicable laws and regulations, we may take actions to reduce or repurchase our debt. These actions can include redemptions, tender offers, cash purchases, prepayments, refinancing, exchange offers, open market or privately-negotiated transactions. The decision on amount of debt to be reduced or repurchased depends on several factors, including market conditions, trading levels of our debt, our cash positions, compliance with debt covenants, and other relevant considerations. During the secondyear quarterended ofDecember 31, 2024, we repurchased $478.0 million of 2025 Senior Notes in exchange for $340.6 million of 2027 Senior Notes and cash of $185.0 million which resultedresulting in a $5.7 million loss on extinguishment of debt. Debt obligations are further discussed in Note 13- Debt Obligationsdebt of $5.7 million. In November 2025, the remaining principal balance of $19.8 million on the 2025 Senior Notes towas Consolidated Financial Statements contained in Item 8.redeemed.

In addition to the above contractual obligations, we also have interest rate lock commitments, forward sale contracts, loan loss obligation for sold loans and obligation for sold MSRs. Commitments to originate loans or repurchase loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon and, therefore, those commitments have been excluded from the table above. Refer to Note 6-6 - Derivative Financial Instruments and Hedging Activities and Note 20 - Commitments & Contingencies of the Notes to Consolidated Financial Statements included in Item 8 for further discussion on derivatives and other contractual commitments. At this time, we currently believe that our cash on hand, as well as the sources of liquidity described above, will be sufficient to fund our contractual obligations.

To provide investors with information in addition to our results as determined by GAAP, we disclose certain non-GAAP measures to assist investors in evaluating our financial results. We believe these non-GAAP measures provide useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. They facilitate company-to-company operating performance comparisons by backing out potential differences caused by variations in hedging strategies, changes in valuations, capital structures (affecting interest expense on non-funding debt), taxation, the age and book depreciation of facilities (affecting relative depreciation expense), and other cost or benefit items which may vary for different companies for reasons unrelated to operating performance. These non-GAAP measures include our Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Weighted Average Shares Outstanding, and Adjusted EBITDA (LBITDA).EBITDA. We exclude from these non-GAAP financial measures the change in fair value of MSRs, gains (losses) from the sale of MSRs, and related hedging gains and losses that represent realized and unrealized adjustments resulting from changes in valuation, mostly due to changes in market interest rates, and are not indicative of the Company’s operating performance or results of operation. Beginning in the second quarter of 2024, we began to include the gains (losses) from the sale of MSRs in valuation changes in servicing rights, net of hedging gains and losses to appropriately capture all valuation changes in MSRs up to and including the sales date. Prior periods have been revised to conform with this new presentation. We have excluded expenses directly related to the Cybersecurity Incident, net of insurance recoveries during fiscal 2024, such as costs to investigate and remediate the Cybersecurity Incident, the costs of customer notifications and identity protection, and professional fees, including legal expenses, litigation settlement costs, and commission guarantees. We also exclude stock-based compensation expense, which is a non-cash expense, gains or losses on extinguishment of debt and disposal of fixed assets, non-cash goodwill impairment, and other impairment charges to intangible assets and operating lease right-of-use assets, as well as certain costs associated with our restructuring efforts, as management does not consider these costs to be indicative of our performance or results of operations. Adjusted EBITDA (LBITDA) includes interest expense on funding facilities, which are recorded as a component of “net interest income (expense)”, as these expenses are a direct operating expense driven by loan origination volume. By contrast, interest expense on our non-funding debt is a function of our capital structure and is therefore excluded from Adjusted EBITDA (LBITDA).EBITDA. Adjustments for income taxes are made to reflect historical results of operations on the basis that it was taxed as a corporation under the Internal Revenue Code, and therefore subject to U.S. federal, state and local income taxes. Adjustments to Diluted Weighted Average Shares Outstanding assumes the pro forma conversion of weighted average Class C common stock to Class A common stock. These non-GAAP measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for revenue, net income, or any other operating performance measure calculated in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies. Some of these limitations are:

•Adjusted EBITDA (LBITDA) does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted Total Revenue, Adjusted Net Income (Loss),Loss, and Adjusted EBITDA (LBITDA) do not reflect any cash requirement for such replacements or improvements; and

Because of these limitations, Adjusted Total Revenue, Adjusted Net Income (Loss),Loss, Adjusted Diluted Weighted Average Shares Outstanding, and Adjusted EBITDA (LBITDA) are not intended as alternatives to total revenue, net income (loss), net income (loss) attributable to the Company, or Diluted Earnings (Loss) Per Share or as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted Total Revenue, Adjusted Net Income (Loss),Loss, Adjusted Diluted Weighted Average Shares Outstanding, and Adjusted EBITDA (LBITDA) along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. See below for a reconciliation of these non-GAAP measures to their most comparable U.S. GAAP measures.

During the first quarterhalf of 2026, mortgage rates remained elevated and, according to FHLMC Primary Mortgage Market Survey, reached a one-year high of 6.66% at the end of July 2026, partly due to geopolitical tensions stemming from the conflict in Iran and higher energy prices driving inflation concerns. The rate environment continued to negatively affect housing affordability and loan qualification of homebuyers, contributed to the “lock-in” effect of borrowers that secured lower long-term interest rates during 2020 and 2021 giving rise to a lack of supply of homes available for sale, and decreased demand for refinancing, taken together resulting in lower demand for mortgage loans.

In April 2026 we announced our partnership with Figure Technology Solutions (“Figure”) as part of our strategy to meaningfully accelerate our digital transformation and as a component of our planned return to a market leading position. As part of the partnership, we integrated Figure’s proprietary credit and loan underwriting engine into our own proprietary mello® technology platform and point of sale system, enabling us to seamlessly offer a variety of innovative express path home loan products to our customers. Our 5x5 HomeLoan powered by Figure, which delivers approval in as little as five minutes and funding in as few as five days, brings real value to those seeking smart, seamless, and convenient solutions to their financing needs. As we integrateIntegrating this platform across our channels, we expecthelped to lower our cost of production, improve the customer experience, close more loans more quickly and advancecontributed ourto long-terma objective26% increase in total unit volume compared to the second quarter of profitable market share growth.2025.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

The following table sets forth our consolidated financial statement data for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.

Net Interest Income. Net interest income includes interest income earned on LHFS offset by interest expense incurred on amounts borrowed under warehouse lines for loan financing as well as warehouse line commitment fees. These commitment fees are amortized on a straight-line basis over the duration of the warehouse line agreement. The decreaseincrease in net interest income wasreflects dueincreased toHELOC anvolumes increaseat higher yields and a reduction in loans financed on warehouse linescost duringof thefunds three months ended March 31, 2026 compared to the prior year, partially offset bydriving improved net interest margin as the cost of funds decreased more than the yield on LHFS.margins.

The $25.6$1.9 million or 15.4%1.1% increase in gain on origination and sale of loans, net was primarily driven by a 52.7%4.5% increase in pull-through weighted interest rate lock volumes,volumes offsetand byan a decreaseincrease in pull-through weighted gain on sale margin of 8415 basis points.

Origination Income, Net. Origination income, net, reflects the fees that we earn, net of lender credits we pay, from originating loans. Origination income includes loan origination fees, processing fees, underwriting fees, and other fees collected from the borrower at the time of funding. Lender credits typically include rebates or concessions to borrowers for certain loan origination costs. The $6.8$17.3 million,million or 26.2%,49.5% increase in origination income, net, was the result of originationHELOC feesvolumes increasing 237% from higherthe loanlaunch originations inof our consumer5x5 directHomeLoan andproduct retailduring channelsthe offsetthree bymonths reducedended JVJune and30, HELOC origination volumes.2026.

Change in Fair Value of Servicing Rights, Net. Change in fair value of servicing rights, net includes (i) fair value gains or losses net of Hedging Instrument gains or losses; (ii) collection/realization of cash flows, which includes principal amortization and prepayments; and (iii) realized gains or losses on the sales of servicing rights. The decreaseincrease of $23.3$32.8 million or 56.6%62.7% reflects a $15.3$39.1 million increase in fallout and decay and an increased loss of $8.0 million in fair value, net of hedge.hedge related to improved market pricing from higher mortgage interest rates, decreased investor yield requirements and strong investor demand for lower coupon servicing, offset by a $6.7 million increase in fallout.

Personnel Expense. Personnel expense includes salaries, commissions, incentive compensation, benefits, and other employee costs. The increase of $25.2$26.6 million or 16.8%17.3% is primarily due to ana $18.7$12.8 million volume-related increase in commissions andcommissions, a $6.5$7.8 million increase in salaries and benefits due to an increase in headcount.headcount and a $7.5 million increase in stock-based compensation related to forfeitures in the prior year. As of MarchJune 31,30, 2026, we had 4,6954,626 employees compared to 4,5474,509 employees as of MarchJune 31,30, 2025.

Marketing and Advertising Expense. The decrease of $9.2$11.2 million or 24.2%29.5% primarily reflects a $5.9 million decrease in lead generation, a $4.1 million decrease related to brand marketing expense in the prior quarter, and a $4.5$1.7 million decrease in lead generation and direct mail spend.

Direct Origination Expense. Direct origination expense reflects the unreimbursed portion of direct out-of-pocket expenses that we incur in the loan origination process, including underwriting, appraisal, credit report, loan document and other expenses paid to non-affiliates. The $5.9$7.4 million or 30.9%36.1% increase in direct origination expense was the result of an increase in loan originationsorigination andcost anrelated industry-wideto increasethe involume pricingof forour credit5x5 reportingHomeLoan fees.product.

MarchJune 31,30, 2026 Compared to December 31, 2025

Cash and Cash Equivalents. The $59.8$108.1 million or 17.7%32.1% decrease in cash and cash equivalents relates to repurchases of Senior Notes, increases in cash collateral requirements associated with the Company's warehouse lending facilities which resulted in a corresponding increase in restricted cash, haircutsincreases on warehouse lines,in retained servicing rights, and additional net losses, partially offset by an increase in debt obligations.

Restricted Cash. Restricted cash was $79.8$70.7 million as of MarchJune 31,30, 2026 compared to $63.8 million as of December 31, 2025 representing an increase of $16.0$6.9 million or 25.1%.10.9%. The increase was primarily the result of increases in prepaid lending commitments and increases in cash collateral associated with derivativewarehouse activitieslines and debt obligations.obligations, offset by decreases in cash collateral for hedge positions.

DerivativeLoans Assets,Held for Sale, at Fair Value. The $27.7$522.5 million,million or 65.4%16.5% increasedecrease reflects a$16.4 $26.3billion in loan sales, $42.4 million increasein principal payments, and $13.4 million in Hedgingfair Instrumentsvalue, partially offset by $15.4 billion in loan originations and a $1.4$458.8 million increase in IRLCs from higher notional balances and increasing rates.repurchases.

Derivative Liabilities,Assets, at Fair Value. The increase$16.9 of $6.5 million,million or 61.0%,39.8% increase reflects a $12.7 million increase in Hedging Instruments and a $4.7$4.2 million increase in IRLCs and a $1.9 million increase in Hedging Instrument liabilities from higher interestnotional rates.balances.

Debt Obligations, net. The increase of $14.3$29.9 million,million or 0.7%,1.4% primarily relates to ana $11.7$40.8 million increase in MSRsecured facilities.credit facilities, offset by a $16.0 million repurchase of senior notes.

Equity. Total equity was $337.3$333.0 million and $386.0 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. The decrease was primarily attributed to a net loss of $54.9$61.6 million, $2.4 million in repurchases of treasury shares, and a $2.0 million decrease due to conversion-related adjustments to the TRA liability, partially offset by stock-based compensation of $6.4$11.7 million and an increase of $1.0 million related to the issuance of common stock through the exercise of stock options.

Our liquidity reflects our ability to meet current and potential cash requirements. We forecast the need to have adequate liquid funds available to operate and grow our business. As of MarchJune 31,30, 2026, unrestricted cash and cash equivalents were $277.4$229.1 million and committed and uncommitted available capacity under our warehouse and other lines of credit was $1.2$1.9 billion.

Our lenders require us to comply with various financial covenants including tangible net worth, liquidity, leverage ratios and profitability. As of MarchJune 31,30, 2026, we were in full compliance with all financial covenants. Although these financial covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to operate our business and obtain the financing necessary to achieve that purpose.

As a seller and servicer, we are subject to minimum net worth, liquidity, and other financial requirements. Effective from September 30, 2023, minimum net worth requirements for FHFA and Ginnie Mae include a base of $2.5 million plus percentages of the seller/servicer’s residential first lien mortgage servicing UPB serviced for each agency and a percentage of other non-agencies servicing UPB. Base liquidity for the agencies depends on the remittance type and includes specific percentages of the seller/servicer's residential first lien mortgage servicing UPB for each agency, along with a percentage for other non-agencies servicing UPB. Large non-depositories require a liquidity buffer based on UPB for FHFA and Ginnie Mae. The capital ratio for FHFA and Ginnie Mae requires tangible net worth/total assets to be equal to or greater than 6% for both agencies. Effective from December 31, 2023, revised FHFA and Ginnie Mae seller-servicer minimum financial eligibility requirements include origination liquidity and third-party ratings. FHFA also requires an annual capital and liquidity plan effective March 31, 2024 and Ginnie Mae has implemented a risk-based capital requirement effective December 31, 2024. As of MarchJune 31,30, 2026, we were in compliance with these financial requirements.

We primarily finance mortgage loans through borrowings under our warehouse and other lines of credit. Under these facilities, we transfer specific loans to our counterparties and receive funds from them. Simultaneously, there is an agreement in place where the counterparties commit to transferring the loans back to us, either at the date the loans are sold or upon our request, and we provide the funds in return. We do not recognize these transfers as sales for accounting purposes. During the three months ended MarchJune 31,30, 2026, our loans remained on warehouse lines for an average of 1915 days. Our warehouse facilities are generally short-term borrowings with maturities of one year and our securitization facilities have two and three year terms. We utilize both committed and uncommitted loan funding facilities and we evaluate our needs under these facilities based on forecasted volume of loan originations and sales. Our liquidity could be affected as lenders may reassess their exposure to the mortgage origination industry and potentially limit access to uncommitted mortgage warehouse financing or increase associated costs. Moreover, there may be reduced demand from investors to acquire our mortgage loans in the secondary market, further impacting our liquidity. Approximately 69% of the mortgage loans that we originated during the threesix months ended MarchJune 31,30, 2026 were sold in the secondary mortgage market either directly to Fannie Mae and Freddie Mac or securitized into MBS guaranteed by Ginnie Mae. We also sell loans to other non-Agency investors.

As of MarchJune 31,30, 2026, we maintained revolving lines of credit with eleven counterparties, including two loan funding facilities with GSEs, providing warehouse and securitization facilities with borrowing capacity totaling $4.2$4.4 billion of which $1.3$1.5 billion was committed. Our $4.2$4.4 billion of capacity as of MarchJune 31,30, 2026 was comprised of $3.9$3.6 billion with staggered maturities within one year andyear, a $300.0 million securitization facility that matures in April 2028.2028, and a $500.0 million securitization facility that matures in April 2029. As of MarchJune 31,30, 2026, we had $3.0$2.4 billion of borrowings outstanding and $1.2$1.9 billion of additional availability under our facilities. Warehouse and other lines of credit are further discussed in Note 9- Warehouse and Other Lines of Credit of the Notes to Consolidated Financial Statements contained in Item 1.

When we draw on our warehouse and securitization facilities we must pledge eligible loan collateral. Our warehouse line providers require us to make a capital investment, or “haircut” upon financing the loan, which is generally based on product types and the market value of the loans. The haircuts are normally recovered from sales proceeds. As of MarchJune 31,30, 2026, we had a total of $12.9$16.2 million in restricted cash posted as collateral with our warehouse and securitization facilities, of which $3.3$3.5 million was the minimum requirement.

MSR facilities and Term Notes provide financing for our servicing portfolio investments. As of MarchJune 31,30, 2026, our MSR facility secured by Fannie Mae had an outstanding balance of $102.6$117.6 million in MSR facilities and $198.1$198.2 million in Term Notes, secured by Fannie Mae MSRs totaling $420.3$396.9 million. As of MarchJune 31,30, 2026, our MSR facility secured by Freddie Mac had an outstanding balance of $311.6$321.8 million, secured by Freddie Mac MSRs totaling $488.0$396.7 million. As of MarchJune 31,30, 2026, our MSR facility secured by Ginnie Mae had an outstanding balance of $101.1$114.6 million in variable funding notes and $347.1$347.2 million in Term Notes, secured by Ginnie Mae MSRs totaling $675.9$696.4 million.

Securities financing facilities provide financing for the retained interest securities associated with our securitizations. As of MarchJune 31,30, 2026 there were outstanding securities financing facilities of $78.8$76.1 million, secured by trading securities with a fair value of $83.7$82.0 million.

Servicing advance facilities provide financing for our servicing agreements. As servicer, we are required to fulfill contractual obligations such as principal and interest payments for certain investor as well as taxes, insurance, foreclosure costs, and other necessities to preserve the serviced assets. For GSE-backed mortgages, this obligation extends up to four months, and for other government agency-backed mortgages, it may extend even longer, especially for clients under forbearance plans. The size of servicing advance balances is influenced by delinquency rates and prepayment speeds. As of MarchJune 31,30, 2026 the outstanding balance on our servicing advance facilities was $77.7$71.1 million secured by servicing advance receivables totaling $90.0$93.3 million.

Other secured financings as of MarchJune 31,30, 2026 consisted of securitization debt of $86.6$83.9 million, net of $4.5$3.9 million in discount and $0.7$0.6 million in deferred financing costs and related to the securitization of a pool of residential mortgage loans held by a VIE. Consolidated VIEs are further discussed in Note 8 - Variable Interest Entities of the Notes to Consolidated Financial Statements contained in Item 1.

Senior Notes as of MarchJune 31,30, 2026 consisted of secured Senior Notes totaling $313.8$311.9 million, net of $3.3$2.8 million of deferred financing costs and a discount of $23.6$19.8 million, and unsecured Senior Notes totaling $497.3$487.7 million, net of $2.1$1.8 million of deferred financing costs. Periodically, and in accordance with applicable laws,laws and regulations, we may take actions to reduce or repurchase our debt. These actions can include redemptions, tender offers, cash purchases, prepayments, refinancing, exchange offers, open market or privately-negotiated transactions. The decision on amount of debt to be reduced or repurchased depends on several factors, including market conditions, trading levels of our debt, our cash positions, compliance with debt covenants, and other relevant considerations. During the year ended December 31, 2024, we repurchased $478.0 million of 2025 Senior Notes in exchange for $340.6 million of 2027 Senior Notes and cash of $185.0 million resulting in a loss on extinguishment of debt of $5.7 million. In November 2025, the remaining principal balance of $19.8 million on the 2025 Senior Notes was redeemed. In June 2026, the Company repurchased $6.2 million of 2027 Senior Notes and $9.9 million of 2028 Senior Notes that resulted in a $1.2 million gain on extinguishment of debt, net of discount and deferred financing fees. In July 2026, the Company repurchased $5.2 million of 2027 Senior Notes at an average purchase price of 93.1% of par and $21.4 million of 2028 Senior Notes at an average purchase price of 84.1% of par. Debt obligations are further discussed in Note 10- Debt Obligations of the Notes to Consolidated Financial Statements contained in Item 1.

Our estimated contractual obligations as of MarchJune 31,30, 2026 are as follows: