Our Financial Services are principally comprised of our mortgage lending operations, Inspire Home Loans Inc. (which we refer to as “Inspire”). Inspire is a full-service mortgage lender and primarily originates mortgage loans for our homebuyers. Inspire sells substantially all of the loans it originates either as loans with servicing rights released, or with servicing rights retained, in the secondary mortgage market within a short period of time after origination, generally within 30 days. Inspire primarily finances these loans using its mortgage repurchase facilities. 

Mortgage loans held for sale and mortgage servicing rights are carried at fair value, with gains and losses from the changes in fair value reflected in financial services revenue on the consolidated statements of operations. Management believes carrying mortgage loans held for sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them. As of June 30, 2025 and December 31, 2024, Inspire had mortgage loans held for sale with an aggregate fair value of $184.4 million and $236.9 million, respectively, and an aggregate outstanding principal balance of $187.1 million and $241.6 million, respectively. The loss from the change in fair value for mortgage loans held for sale was $1.2 million for the three months ended June 30, 2025 and the gain from the change in fair value for mortgage loans held for sale was $2.0 million for the six months ended June 30, 2025. The gain from the change in fair value for mortgage loans held for sale was $0.9 million for the three months ended June 30, 2024, and the loss from the change in fair value for mortgage loans held for sale was $4.2 million for the six months ended June 30, 2024. During the three months ended June 30, 2025, we sold mortgage servicing rights with an unpaid principal balance of approximately $3.0 billion. Refer to Note 13 – Fair Value Disclosures for further information regarding our mortgage servicing rights. The total unpaid principal balance of mortgage loans serviced at June 30, 2025 and December 31, 2024 was $100.1 million and $2.9 billion, respectively.

Net gains and losses from the sale of mortgage loans held for sale are included in financial services revenue on the consolidated statements of operations, and include (1) net gains on sale of loans, which are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale, with sale proceeds reflecting the cash received from investors through the sale of the mortgage loan and servicing release premium; (2) the fair value of originated mortgage servicing rights; (3) the change in fair value of mortgage loans held for sale; (4) the change in fair value of derivatives instruments, including interest rate lock commitments and forward commitments on mortgage-backed securities; (5) provision for or benefit from investor reserves; and (6) fees earned from originating mortgage loans. Fees earned from originating mortgage loans, which are recognized at the time the mortgage loans are funded, include origination fees, credits, commitment fees, and discount points provided directly to our customers to reduce interest rates. Net gains on the sale of mortgage loans were $15.3 million and $28.1 million for the three and six months ended June 30, 2025, respectively, and were $14.0 million and $31.8 million for the three and six months ended June 30, 2024, respectively.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, had an aggregate principal balance of $111.1 million and $76.3 million as of June 30, 2025 and December 31, 2024, respectively, and carried a weighted average interest rate of approximately 5.2% and 5.5%, respectively. Interest rate risks related to these obligations are typically mitigated through our interest rate hedging program or by the preselling of loans to investors. Derivative instruments used to economically hedge our market and interest rate risk are carried at fair value. Derivative instruments typically include interest rate lock commitments and forward commitments on mortgage-backed securities. Changes in fair value of these derivatives as well as any gains or losses upon settlement, are reflected in financial services revenue on our condensed consolidated statements of operations. Refer to Note 13 – Fair Value Disclosures for further information regarding our derivative instruments.