v3.26.1
Allowance for Loss Sharing
 3 Months Ended
Mar. 31, 2026
Commitments and Contingencies Disclosure [Abstract]  
Allowance for Loss Sharing
Note 13 - Allowance for Loss Sharing
The Company has risk-sharing obligations on substantially all loans originated under the Fannie Mae DUS program. Servicing fees for risk-sharing loans include compensation for the risk-sharing obligations and are larger than the servicing fees received for loans with no risk-sharing obligations.
When a loan is sold under the Fannie Mae DUS program, the Company undertakes an obligation to partially guarantee the performance of the loan. A liability is recognized for the fair value of the guarantee obligation undertaken for the non-contingent aspect of the guarantee and is removed only upon either the expiration or settlement of the guarantee. At March 31, 2026 and December 31, 2025, we had $1.7 million of guarantee obligations included in the allowance for loss-sharing obligations, respectively.
In addition to and separately from the fair value of the guarantee, the Company estimates an allowance for loss-sharing under CECL over the contractual period in which we are exposed to credit risk. The general reserve related to loss-sharing was based on a collective pooling basis with similar risk characteristics, a reasonable and supportable forecast and a reversion period based on our average historical losses through the remaining contractual term of the portfolio. In instances where payment under the loss-sharing obligations of a loan is determined to be probable and estimable (as the loan is probable of, or is, in foreclosure), we record a liability for the estimated loss-sharing specific reserve. At March 31, 2026 and December 31, 2025, our allowance for loss-sharing obligations related to the specific reserve was $8.4 million and $9.3 million, respectively.
At March 31, 2026 and December 31, 2025, our allowance for loss-sharing obligations associated with expected losses under CECL was $7.3 million and $8.4 million, respectively, and represented 0.10% and 0.11%, respectively, of our Fannie Mae servicing portfolio. During the three months ended March 31, 2026, we recorded a decrease in CECL reserves of $1.2 million.
At March 31, 2026 and December 31, 2025, the unpaid principal balance outstanding of loans sold with loss sharing under the DUS program was approximately $7.9 billion, respectively. The Company’s internal credit risk rating process is used to classify loans and commitments according to the degree of credit risk associated with the ability of the borrower to repay. If payment is required under this program, the Company would not have a contractual interest in the collateral underlying the commercial mortgage loan on which the loss occurred, although the value of the collateral is taken into account in determining the Company’s share of such losses.
A summary of the Company’s allowance for loss sharing for the for the year ended December 31, 2025 and three months ended March 31, 2026 are as follows (dollars in thousands):
General ReserveSpecific ReserveTotal
Balance at January 1, 2026$10,151 $9,333 $19,484 
Write-offs— — — 
Recoveries
— — — 
Provision/(benefit) for loss sharing
(1,175)(960)(2,135)
Balance at March 31, 2026$8,976 $8,373 $17,349 
General ReserveSpecific ReserveTotal
Balance at January 1, 2025$— $— $— 
Allowance acquired in acquisition11,919 11,667 23,586 
Write-offs— — — 
Recoveries— — — 
Provision/(benefit) for loss sharing(1,768)(2,334)(4,102)
Balance at December 31, 2025$10,151 $9,333 $19,484 

As of March 31, 2026, the maximum quantifiable allowance for loss sharing associated with the Company’s guarantees under the Fannie Mae DUS agreement and the Loss Sharing Agreement was $1.2 billion from a total recourse at risk pool of $7.9 billion. The maximum quantifiable allowance for loss sharing is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company
retains some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement.
For U.S. Treasury securities classified as HTM, the Company does not record an allowance for credit losses as the expectation of nonpayment of the amortized cost basis, based on historical losses, adjusted for current conditions and reasonable and supportable forecasts, is zero.