| Fair Value | 6. Fair Value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on the assumptions market participants would use when pricing an asset or liability and follows a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. All aspects of nonperformance risk, including the Company’s own credit standing, are considered when measuring the fair value of a liability. Following is a description of the three levels of the fair value hierarchy: Level 1 Inputs: Quoted prices for identical instruments in active markets. Level 2 Inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 Inputs: Instruments with unobservable inputs that are significant to the fair value measurement. The Company classifies assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There wer e no transfers within the hierarchy for the Successor year ended December 31, 2022, nine months ended December 31, 2021, or for the Predecessor three months ended March 31, 2021 or year ended December 31, 2020. Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and the details of the valuation models, key inputs to those models and significant assumptions utilized. Within the assumption tables presented, not meaningful ("NM") refers to a range of inputs that is too broad to provide meaningful information to the user or to an input that has no range and consists of a single data point. Instrument Valuation techniques Classification of Fair Value Hierarchy Assets Loans held for investment, subject to HMBS related obligations (1) HECM loans - securitized into Ginnie Mae HMBS These loans are valued utilizing a present value methodology that discounts estimated projected cash flows over the life of the loan portfolio using conditional prepayment rate ("CPR"), loss frequency and severity, borrower mortality, borrower draw, and discount rate assumptions. Level 3 Loans held for investment, subject to nonrecourse debt (1) HECM buyouts - securitized (nonperforming) These loans are valued utilizing a present value methodology that discounts estimated projected cash flows over the life of the portfolio using 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 on the underlying securitization trust and values these loans using these aggregated pools. The range of inputs provided is based on the range of inputs utilized for each securitization trust. Loans held for investment Inventory buy-outs The fair value of repurchased loans is based on expected cash proceeds of the liquidation of the underlying properties and expected claim proceeds from HUD. The primary assumptions utilized in valuing nonperforming repurchased loans include 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 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 Loan purchase commitments ("LPCs") This product is valued based on current market prices for HMBS. Level 2 Forward MBS and TBAs This product is valued using forward dealer marks from the Company's approved counterparties, forward prices with dealers in such securities, or internally-developed third party models utilizing observable market inputs. Level 2 Interest rate swaps and futures contracts This product is valued using quoted market prices. Level 1 Other assets Retained bonds Management obtains third party valuations to assess the reasonableness of the fair value calculations provided by the internal valuation model. The primary assumptions utilized include weighted average life remaining and discount rate. Level 3 Investments To the extent market prices are not observable, the Company engages third party valuation experts to assist in determining the fair value of these investments. The values are determined utilizing a market approach that estimates fair value based on what other participants in the market have paid for reasonably similar assets that have been sold within a reasonable period from the valuation date. Level 3 Purchase Commitments - reverse mortgage loans Purchase commitments are valued based on the value of the underlying loan. These loans are valued based on an expected margin on sale of 3.00%. Level 3 Liabilities HMBS related obligations HMBS related obligations The estimated fair value is based on the net present value of projected cash flows over the estimated life of the liability. The estimated fair value of the HMBS related obligations also includes the consideration required by a market participant to transfer the HECM and HMBS servicing obligations, including exposure resulting from shortfalls in FHA insurance proceeds, as well as, assumptions that it believes a market participant would consider in valuing the liability, including, but not limited to, assumptions for repayment, costs to transfer servicing obligations, shortfalls in FHA insurance proceeds, and discount rates. The significant unobservable inputs used in the measurement include 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 TRA obligation The fair value is derived through the use of a DCF model. The significant unobservable assumptions used in the DCF include the ability to utilize tax attributes based on current tax forecasts, a constant U.S. federal income tax rate, and a discount rate. Level 3 Warrant liability Warrants The warrants are publicly traded and are valued based on the closing market price of the applicable date of the Consolidated Statements of Financial Condition. Level 1 December 31, 2022 December 31, 2021 Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average Assets Loans held for investment, subject to HMBS related obligations Conditional repayment rate NM 21.9 % NM 20.8 % Loss frequency NM 4.1 % NM 4.5 % Loss severity 2.4% - 12.1% 2.7 % 3.1% - 7.7% 3.3 % Discount rate NM 5.0 % NM 2.4 % Average draw rate NM 1.1 % NM 1.1 % Loans held for investment, subject to nonrecourse debt: HECM buyouts - securitized (nonperforming) Conditional repayment rate NM 39.2 % NM 41.2 % Loss frequency 23.1% - 100.0% 51.7 % 25.0% - 100% 59.5 % Loss severity 2.4% - 12.1% 5.2 % 3.1% - 7.7% 4.3 % Discount rate NM 8.7 % NM 4.1 % HECM buyouts - securitized (performing) WAL (in years) NM 8.0 NM 9.0 Conditional repayment rate NM 15.2 % NM 13.3 % Loss severity 2.4% - 12.1% 4.8 % 3.1% - 7.7% 7.7 % Discount rate NM 8.2 % NM 3.7 % December 31, 2022 December 31, 2021 Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average Non-agency reverse mortgage loans - securitized WAL (in years) NM 9.7 NM 7.5 LTV 0.0% - 74.7% 43.1 % 0.1% - 64.7% 43.4 % Conditional repayment rate NM 14.3 % NM 18.6 % Loss severity NM 10.0 % NM 10.0 % HPA (10.1)% - 7.3% 3.8 % (4.6)% - 14% 4.7 % Discount rate NM 7.1 % NM 3.6 % Fix & flip mortgage loans - securitized Prepayment rate (SMM) NM 11.2 % NM 14.1 % Discount rate NM 17.5 % NM 5.7 % Loss rate NM 0.5 % NM 0.6 % Loans held for investment: Inventory buy-outs Conditional repayment rate NM 41.3 % NM 43.2 % Loss frequency NM 47.6 % NM 59.4 % Loss severity 2.4% - 12.1% 5.6 % 3.1% - 7.7% 3.8 % Discount rate NM 8.7 % NM 4.1 % Non-agency reverse mortgage loans WAL (in years) NM 12.0 NM 9.2 LTV 0.1% - 67.9% 36.4 % 0.2% - 68.7% 47.8 % Conditional repayment rate NM 13.8 % NM 14.8 % Loss severity NM 10.0 % NM 10.0 % HPA (10.1)% - 7.3% 3.6 % (4.6)% - 14.0% 4.4 % Discount rate NM 7.1 % NM 3.6 % Fix & flip mortgage loans Prepayment rate (SMM) NM 9.5 % NM 11.9 % Discount rate 16.3% - 25.8% 16.6 % 5.7% - 10.0% 5.9 % Loss rate NM 0.2 % NM 0.4 % Agricultural loans Discount rate NM 9.7 % NM 4.8 % Prepayment rate (SMM) 11.0% - 100.0% 11.8 % 9.0% - 100.0% 22.1 % Default rate (CDR) 0.0% - 1.0% 0.9 % 0.0% - 0.9% 0.9 % Loans held for sale: SRL Prepayment rate (CPR) 18.5% - 25.0% 19.7 % 1.0% - 17.1% 14.2 % Discount rate NM 8.3 % NM 3.3 % Default rate (CDR) NM 1.0 % 1.0% - 57.2% 2.2 % Portfolio loans Prepayment rate (CPR) 0.0% - 24.3% 18.4 % 0.0% - 14.5% 8.7 % Discount rate NM 10.9 % NM 3.9 % December 31, 2022 December 31, 2021 Instrument / Unobservable Inputs Range Weighted Average Range Weighted Average Default rate (CDR) NM 1.0 % 1.0% - 54.0% 3.2 % Mortgage Servicing Rights Weighted average prepayment speed (CPR) 1.0% - 8.5% 6.4 % 0.0% - 12.8% 8.3 % Discount rate NM 10.1 % NM 8.5 % Other assets: Retained bonds WAL (in years) 2.4 - 24.1 4.9 2.6 - 25.0 5.1 Discount rate (16.8)% - 12.2% 6.9 % 1.9% - 8.2% 2.7 % Liabilities HMBS related obligations Conditional repayment rate NM 21.8 % NM 20.8 % Discount rate NM 5.0 % NM 2.3 % Nonrecourse debt: Reverse mortgage loans Performing/Nonperforming HECM securitizations WAL (in years) 1.5 - 1.6 1.6 0.2 - 0.8 0.5 Conditional repayment rate 19.9% - 22.2% 21.1 % 30.8% - 54.4% 43.5 % Discount rate NM 8.6 % NM 2.3 % Securitized non-agency reverse WAL (in years) 0.2 - 11.7 6.4 1.0 - 2.3 1.6 Conditional repayment rate 8.3% - 46.1% 16.5 % 18.4% - 35.9% 28.2 % Discount rate NM 7.2 % NM 2.2 % Nonrecourse commercial loan financing liability WAL (in months) NM 4.3 NM 4.0 Weighted average prepayment speed (SMM) NM 15.3 % NM 14.0 % Discount rate NM 14.5 % NM 3.1 % Nonrecourse MSR financing liability Weighted average prepayment speed (CPR) 0.8% - 9.2% 5.1 % 2.0% - 11.0% 7.7 % Discount rate 10.0% - 12.0% 10.2 % 8.1% - 10.1% 9.1 % Deferred purchase price liabilities Deferred purchase price liabilities Discount rate NM 8.0 % NM 35.0% TRA obligation Discount rate NM 48.3 % NM 13.5 % Fair Value of Assets and Liabilities The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis (in thousands): December 31, 2022 Total Fair Value Level 1 Level 2 Level 3 Assets Loans held for investment, subject to HMBS related obligations $ 11,114,100 $ — $ — $ 11,114,100 Loans held for investment, subject to nonrecourse debt: Reverse mortgage loans 7,065,477 — — 7,065,477 Fix & flip mortgage loans 389,161 — — 389,161 Loans held for investment: Reverse mortgage loans 771,724 — — 771,724 Fix & flip mortgage loans 127,469 — — 127,469 Agricultural loans 8,805 — — 8,805 Loans held for sale: Residential mortgage loans 12,123 — 12,123 — SRL 69,187 — — 69,187 Portfolio 43,272 — — 43,272 Fix and flip 49,402 — — 49,402 MSR 95,096 — — 95,096 Derivative assets: LPCs, 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 December 31, 2021 Total Fair Value Level 1 Level 2 Level 3 Assets Loans held for investment, subject to HMBS related obligations $ 10,556,054 $ — $ — $ 10,556,054 Loans held for investment, subject to nonrecourse debt: Reverse mortgage loans 5,823,301 — — 5,823,301 Fix & flip mortgage loans 394,893 — — 394,893 Loans held for investment: Reverse mortgage loans 940,604 — — 940,604 Fix & flip mortgage loans 62,933 — — 62,933 Agricultural loans 27,791 — — 27,791 Loans held for sale: Residential mortgage loans 8,730 — 8,730 — SRL 98,852 — — 98,852 Portfolio 50,574 — — 50,574 MSR 427,942 — — 427,942 Derivative assets: LPCs, forward MBS, and TBAs 1,619 — 1,619 — Interest rate swaps and futures contracts 22,834 22,834 — — Other assets: Investments 6,000 — — 6,000 Retained bonds 55,614 — — 55,614 Total assets $ 18,477,741 $ 22,834 $ 10,349 $ 18,444,558 Liabilities HMBS related obligations $ 10,422,358 $ — $ — $ 10,422,358 Nonrecourse debt: Nonrecourse debt in consolidated VIE trusts 5,857,069 — — 5,857,069 Nonrecourse commercial loan financing liability 111,738 — — 111,738 Nonrecourse MSR financing liability 142,435 — — 142,435 Deferred purchase price liabilities: Deferred purchase price liabilities 137 — — 137 TRA obligation 29,380 — — 29,380 Derivative liabilities: Forward MBS and TBAs 56 — 56 — Interest rate swaps and futures contracts 24,993 24,993 — — Warrant liability 5,497 5,497 — — Total liabilities $ 16,593,663 $ 30,490 $ 56 $ 16,563,117 Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3, in thousands): Successor Assets Year ended December 31, 2022 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale MSR Retained bonds Purchase commitments Investments Beginning balance $ 11,587,382 $ 6,218,194 $ 149,426 $ 427,942 $ 55,614 $ — $ 6,000 Total gain or losses included in earnings 190,714 (744,123) (15,213) 22,989 (8,668) 9,356 (6,000) Purchases, settlements, and transfers: Purchases and additions, net 6,165,003 117,010 1,119,578 122,362 — — — Sales and settlements (2,178,245) (1,847,648) (1,103,492) (478,197) (507) — — Transfers in/(out) between categories (3,742,756) 3,711,205 11,562 — — — — Ending balance $ 12,022,098 $ 7,454,638 $ 161,861 $ 95,096 $ 46,439 $ 9,356 $ — Successor Liabilities Year ended December 31, 2022 HMBS related obligations Nonrecourse debt in consolidated VIE trusts Nonrecourse commercial loan financing liability Nonrecourse MSR financing liability TRA Liability Beginning balance $ (10,422,358) $ (5,857,069) $ (111,738) $ (142,435) $ (29,380) Total gain or losses included in earnings (29,015) 316,963 2,527 (8,162) 25,599 Purchases, settlements, and transfers: Purchases and additions, net (2,870,650) (3,202,519) (205,746) (14,196) — Settlements 2,325,268 1,566,768 208,199 104,231 — Ending balance $ (10,996,755) $ (7,175,857) $ (106,758) $ (60,562) $ (3,781) Successor Assets Nine months ended December 31, 2021 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale MSR Retained Bonds Investments Beginning balance $ 11,171,736 $ 5,291,444 $ 118,396 $ 267,364 $ — $ 9,470 Total gain or losses included in earnings 272,802 71,126 532 (15,200) 1,344 (3,470) Purchases, settlements, and transfers: Purchases and additions, net 4,438,629 80,542 879,172 178,279 54,752 — Sales and settlements (2,235,651) (1,275,674) (857,503) (2,501) (482) — Transfers in/(out) between categories (2,060,134) 2,050,756 8,829 — — — Ending balance $ 11,587,382 $ 6,218,194 $ 149,426 $ 427,942 $ 55,614 $ 6,000 Successor Liabilities Nine months ended December 31, 2021 HMBS related obligations Nonrecourse debt in consolidated VIE trusts Nonrecourse commercial loan financing liability Nonrecourse MSR financing liability TRA Liability Beginning balance $ (9,926,132) $ (5,205,892) $ — $ (22,051) $ — Total gain or losses included in earnings 62,306 (74,333) 1,019 (2,998) 2,570 Purchases, settlements, and transfers: Purchases and additions, net (2,491,919) (1,813,458) (176,863) (117,386) (31,950) Settlements 1,933,387 1,236,614 64,106 — — Ending balance $ (10,422,358) $ (5,857,069) $ (111,738) $ (142,435) $ (29,380) Predecessor Assets Three months ended March 31, 2021 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale MSR Investments Beginning balance $ 10,659,984 $ 5,396,167 $ 142,226 $ 180,684 $ 18,934 Total gain or losses included in earnings 132,499 (37,757) 2,316 20,349 (9,464) Purchases, settlements, and transfers: Purchases and additions, net 1,143,109 21,064 164,450 74,978 — Sales and settlements (534,738) (360,128) (147,687) (8,647) — Transfers in/(out) between categories (229,118) 272,098 (42,909) — — Ending balance $ 11,171,736 $ 5,291,444 $ 118,396 $ 267,364 $ 9,470 Predecessor Liabilities Three months ended March 31, 2021 HMBS related obligations Nonrecourse debt in consolidated VIE trusts Nonrecourse MSR financing liability Beginning balance $ (9,788,668) $ (5,257,754) $ (14,088) Total gain or losses included in earnings (41,434) (30,770) 390 Purchases, settlements, and transfers: Purchases and additions, net (602,172) (575,668) (8,353) Settlements 506,142 658,300 — Ending balance $ (9,926,132) $ (5,205,892) $ (22,051) Predecessor Assets For the year ended December 31, 2020 Loans held for investment Loans held for investment, subject to nonrecourse debt Loans held for sale MSR Debt Securities Investments Beginning balance $ 10,894,577 $ 3,511,212 $ 164,830 $ 2,600 $ 102,260 $ 20,508 Total gain or losses included in earnings 627,251 304,663 (992) 4,562 2,288 (5,512) Purchases, settlements, and transfers: Purchases and additions, net 3,616,667 136,838 348,951 173,522 24,489 3,938 Sales and settlements (1,536,977) (1,285,902) (554,141) — (129,037) — Transfers in/(out) between categories (2,941,534) 2,729,356 183,578 — — — Ending balance $ 10,659,984 $ 5,396,167 $ 142,226 $ 180,684 $ — $ 18,934 Predecessor Liability For the year ended December 31, 2020 HMBS related obligations Nonrecourse debt in consolidated VIE trusts Nonrecourse MSR financing liability Beginning balance $ (9,320,209) $ (3,490,196) $ — Total gain or losses included in earnings (359,951) (294,802) 798 Purchases, settlements, and transfers: Purchases and additions, net (2,051,953) (3,110,368) (15,101) Settlements 1,943,445 1,637,612 215 Ending balance $ (9,788,668) $ (5,257,754) $ (14,088) Fair Value Option The Company has elected to measure substantially all of its loans held for investment, loans held for sale, HMBS related obligations, and non-recourse debt at fair value under the fair value option provided for by ASC 825-10, Financial Instruments-Overall. The Company elected to apply the provisions of the fair value option to these assets and liabilities in order to align financial reporting presentation with the Company's operational and risk management strategies. Presented in the tables below are the fair value and UPB, at December 31, 2022 and December 31, 2021, of financial assets and liabilities for which the Company has elected the fair value option (in thousands): December 31, 2022 Estimated Fair Value Unpaid Principal Balance Assets at fair value under the fair value option Loans held for investment, subject to HMBS related obligations $ 11,114,100 $ 10,719,000 Loans held for investment, subject to nonrecourse debt: Reverse mortgage loans 7,065,477 7,240,125 Commercial mortgage loans 389,161 405,970 Loans held for investment: Reverse mortgage loans 771,724 724,800 Commercial mortgage loans 136,274 143,373 Loans held for sale: Residential mortgage loans 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 December 31, 2021 Estimated Fair Value Unpaid Principal Balance Assets at fair value under the fair value option Loans held for investment, subject to HMBS related obligations $ 10,556,054 $ 9,849,835 Loans held for investment, subject to nonrecourse debt: Reverse mortgage loans 5,823,301 5,165,479 Commercial mortgage loans 394,893 388,788 Loans held for investment: Reverse mortgage loans 940,604 815,426 Commercial mortgage loans 90,724 89,267 Loans held for sale: Residential mortgage loans 8,730 9,709 Commercial mortgage loans 149,426 145,463 Liabilities at fair value under the fair value option HMBS related obligations 10,422,358 9,849,835 Nonrecourse debt: Nonrecourse debt in consolidated VIE trusts 5,857,069 5,709,946 Nonrecourse MSR financing liability 142,435 142,435 Nonrecourse commercial loan financing liability 111,738 107,744 Net fair value gains on loans and related obligations Provided in the table below is a summary of the components of net fair value gains on loans and related obligations (in thousands): For the year ended December 31, 2022 For the nine months ended December 31, 2021 For the three months ended March 31, 2021 For the year ended December 31, 2020 Successor Predecessor Net fair value gains on loans and related obligations: Interest income on reverse and commercial loans $ 857,271 $ 495,163 $ 160,568 $ 709,679 Change in fair value of loans (1,380,503) (159,589) (56,811) 281,105 Net fair value gains (losses) on loans (523,232) 335,574 103,757 990,784 Interest expense on HMBS and nonrecourse obligations (560,316) (329,344) (119,201) (526,690) Change in fair value of derivatives 332,630 (28,233) 43,972 (12,482) Change in fair value of related obligations 840,407 313,024 42,670 (155,485) Net fair value gains (losses) on related obligations 612,721 (44,553) (32,559) (694,657) Net fair value gains on loans and related obligations $ 89,489 $ 291,021 $ 71,198 $ 296,127 As the cash flows on the underlying mortgage loans will be utilized to settle the outstanding obligations, the Company's own credit risk would not impact the fair value on the outstanding HMBS liabilities and nonrecourse debt. Fair Value of Other Financial Instruments As of December 31, 2022 and December 31, 2021, all financial instruments were either recorded at fair value or the carrying value approximated fair value with the exception of notes payable, ne t, and promissory notes receivable. Notes payable, net, includes our senior secured high-yield debt and related-party credit line recorded at the carrying value of $399.4 million and $353.4 million as of December 31, 2022 and December 31, 2021, respectively, and have a fair value of $231.9 million and $347.0 million as of December 31, 2022 and December 31, 2021, respectively. The fair value for Notes payable, net, was determined using quoted market prices adjusted for accrued interest, which is considered to be a Level 2 input. Promissory notes receivable are recorded at the net carrying value of $0 and $4.1 million, including accrued interest, as of December 31, 2022 and December 31, 2021, respectively. The carrying value approximates fair value. The fair value for promissory notes receivable was determined using a DCF model using discount rate assumptions which is considered to be a Level 3 input. For other financial instruments that were not recorded at fair value, such as cash and cash equivalents including restricted cash, servicer advances, and other financing lines of credit, the carrying value approximates fair value due to the short-term nature of such instruments. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 3 inputs, with the exception of cash and cash equivalents, including restricted cash, which are Level 1 inputs. |
