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Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements
15. Fair Value Measurements
The Company’s financial instruments measured at fair value on a recurring basis are summarized below. As of March 31, 2026, certain derivative instruments, including interest rate swaps associated with the Birmingham Bank disposal group, have been reclassified to assets and liabilities of discontinued operations, see Note 3. The December 31, 2025 amounts presented below have been reclassified to conform to the current-period presentation.
March 31, 2026
(Amounts in thousands)Level 1Level 2Level 3Total
Mortgage loans held for sale, at fair value$— $563,036 $— $563,036 
Derivative assets, at fair value (1)
— 2,008 4,009 6,017 
Total Assets $— $565,044 $4,009 $569,053 
Derivative liabilities, at fair value (1)
$— $— $329 $329 
Warrants and equity related liabilities, at fair value (2)
1,761 1,479 — 3,240 
Total Liabilities $1,761 $1,479 $329 $3,569 
December 31, 2025
(Amounts in thousands)Level 1Level 2Level 3Total
Mortgage loans held for sale, at fair value$— $466,681 $— $466,681 
Derivative assets, at fair value (1)
— — 4,210 4,210 
Total Assets $— $466,681 $4,210 $470,891 
Derivative liabilities, at fair value (1)
$— $554 $250 $804 
Warrants and equity related liabilities, at fair value (2)
668 808 — 1,476 
Total Liabilities $668 $1,362 $250 $2,280 
__________________
(1)As of March 31, 2026, derivative assets represent both IRLCs and forward sale commitments, and liabilities represent IRLCs. As of December 31, 2025, derivative assets represent IRLCs, and liabilities represent forward sale commitments, IRLCs and interest rate swaps.
(2)Fair value is derived from methodologies such as the Black-Sholes-Merton model and the Finnerty model where the Company’s underlying stock price is a significant input among other assumptions and inputs.
Specific valuation techniques and inputs used in determining the fair value of each significant class of assets and liabilities are as follows:
Mortgage Loans Held for Sale—The Company originates certain LHFS to be sold to loan purchasers and elected to carry these loans at fair value. The fair value is primarily based on the price obtained for other mortgage loans with similar
characteristics. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and receipt of principal payments associated with the relevant LHFS.
Derivative Assets and Liabilities—The Company uses derivatives to manage various financial risks. The fair values of derivative instruments are determined based on quoted prices for similar assets and liabilities, dealer quotes, and internal pricing models that are primarily sensitive to market observable data. The Company uses other derivative financial instruments, primarily TBA purchase and sale commitments, to manage exposure to interest rate risk and changes in the fair value of the Pipeline. These derivatives are recorded at fair value based on pricing of similar instruments in the secondary market. The changes in value of all derivative financial instruments related to the Pipeline are recorded as Gain on sale of loans, net on the condensed consolidated statements of operations and comprehensive loss. The Company utilizes IRLCs and forward sale commitments. The fair value of IRLCs, which are related to mortgage loan commitments, is based on quoted market prices, adjusted by the pull-through factor, and includes the value attributable to the net servicing fee. The Company evaluated the significance and unobservable nature of the pull-through factor and determined that the classification of IRLCs should be Level 3 as of March 31, 2026 and December 31, 2025. Significant changes in the pull-through factor of the IRLCs, in isolation, could result in significant changes in the IRLCs’ fair value measurement. The value of IRLCs also rises and falls with changes in interest rates; for example, entering into interest rate lock commitments at low interest rates followed by an increase in interest rates in the market, will decrease the value of IRLC. The Company had purchases/issuances of approximately $13.6 million and $8.0 million of IRLCs during the three months ended March 31, 2026 and 2025, respectively.
The number of days from the date of the IRLC to expiration of the rate lock commitment outstanding as of March 31, 2026 was approximately 43 days on average. The Company attempts to match the maturity date of the IRLCs with the forward commitments. Derivatives are presented in the condensed consolidated balance sheets under derivative assets, at fair value and derivative liabilities, at fair value. During the three months ended March 31, 2026, the Company recognized $0.3 million of losses and $3.3 million of gains related to changes in fair value of IRLCs and forward sale commitments, respectively. During the three months ended March 31, 2025, the Company recognized $2.6 million of gains and $2.5 million of losses related to changes in the fair value of IRLCs and forward sale commitments, respectively. Gains and losses related to changes in the fair value of IRLCs and forward sale commitments are included in gain on loans, net within the condensed consolidated statements of operations and comprehensive loss. Unrealized activity related to changes in the fair value of forward sale commitments were $5.1 million of gains and $2.6 million of losses, included in the $3.3 million and $2.5 million of losses, during the three months ended March 31, 2026 and 2025, respectively. The notional and fair value of derivative financial instruments not designated as hedging instruments were as follows:
(Amounts in thousands)Notional ValueDerivative AssetDerivative Liability
Balance as of March 31, 2026
Derivatives not designated as hedging instruments:
IRLCs$244,504 $4,009 $329 
Forward commitments$242,000 2,008 — 
Total$6,017 $329 
Balance as of December 31, 2025
Derivatives not designated as hedging instruments:
IRLCs$271,373 $4,210 $250 
Forward commitments$286,000 — 554 
$4,210 $804 
Derivatives designated as hedging instruments:
Interest rate swaps$268,768 $— $1,627 
Total$4,210 $2,431 
Derivatives Designated as Hedging Instruments—Prior to classification as held for sale, the Company designated interest rate swap contracts as fair value hedges that qualified for hedge accounting. The fair value of interest rate swaps are based on broker quotes. As of March 31, 2026, these interest rate swaps are included within liabilities held for sale as part of the Birmingham Bank disposal group (see Note 3). We elected to account for the fair value hedges using the
portfolio layer method. We previously recorded the interest rate swaps in the line item "Derivative liabilities, at fair value" on our condensed consolidated balance sheet. For qualifying fair value hedges, both the changes in the fair value of the derivative and the portion of the fair value adjustments associated with the portfolio layer attributable to the hedged risk are recognized into earnings as they occur. Derivative amounts impacting earnings are recognized consistent with the classification of the hedged item in the line item "Loans Held for Investment " as part of interest income, a component of consolidated net loss.
In the fiscal year ended December 31, 2025, fair value hedging transactions were executed in which approximately $269 million notional pay-fixed interest rate swaps were consummated with maturities of approximately five years, wherein the Company pays a weighted average fixed rate of approximately 3.7% and receives daily interest based on the Sterling Overnight Index Average (“SONIA”).
Warrant and equity related liabilities—The warrant liability consists of Warrants and certain shares issued to Novator Capital Sponsor Ltd. (the “Sponsor”), a related party, that are subject to transfer restrictions contingent on the price of Class A common stock exceeding certain thresholds (the "Sponsor-Locked-Up Shares"). The warrants consist of the Company's publicly traded warrants ("Public Warrants") and private warrants to acquire shares of Aurora that have been converted into warrants to acquire shares of Class A common stock ("Private Warrants," and together with the Public Warrants, the “Warrants”). The Public Warrants trade on the Nasdaq under the ticker symbol “BETRW” and as such is considered a Level 1 input from an active market to derive the value. The Private Warrants and Sponsor-Locked up Shares, although not publicly traded on an active market, use inputs from the publicly traded Public Warrants and the Company’s publicly traded common stock, respectively, and are further calibrated using unobservable inputs representing Level 2 measurements within the fair value hierarchy.
Private and Public Warrants—As of March 31, 2026 and December 31, 2025, the Company had a total of $2.9 million and $1.2 million of Private Warrants and Public Warrants, respectively, included as warrant and equity related liabilities within the condensed consolidated balance sheets. The change in fair value of Warrants for the three months ended March 31, 2026 and 2025, was a loss of $1.7 million and a gain of $0.2 million, respectively, and is included in other expenses within the condensed consolidated statements of operations and comprehensive loss.
Framework Warrant (2026)— During the three months ended March 31, 2026, the Company issued a warrant (the “2026 Warrant”) in connection with a private placement transaction, which provided the holder the right to purchase up to 211,312 shares of the Company’s Class A common stock. The warrant was fully exercised during the period, resulting in the issuance of 211,312 shares of Class A common stock to the holder and receipt by the Company of aggregate cash proceeds of approximately $5.7 million. The shares issued upon exercise were recorded within common stock and additional paid-in capital. The Company recognized a loss of $4.4 million related to the 2026 Warrant, including changes in fair value prior to exercise, and is included within other expenses in the condensed consolidated statements of operations and comprehensive loss. No amounts related to the 2026 Warrant remained outstanding as of March 31, 2026.
Sponsor Locked-up Shares—As of both March 31, 2026 and December 31, 2025, the Company had a total of $0.3 million of Sponsor Locked-up Share liabilities, which are included within warrant and equity liabilities in the condensed consolidated balance sheets. The change in fair value of Sponsor Locked-up Shares for both the three months ended March 31, 2026 and 2025 was an immaterial loss and was included in other expenses within the condensed consolidated statements of operations and comprehensive loss.
Counterparty agreements for forward sale commitments contain master netting agreements, which contain a legal right to offset amounts due to and from the same counterparty and can be settled on a net basis.
As of March 31, 2026 and December 31, 2025, Level 3 instruments include IRLCs. The following table presents the rollforward of Level 3 IRLCs:
Three Months Ended March 31,
(Amounts in thousands)20262025
Balance at beginning of period $3,961 $1,222 
Change in fair value of IRLCs(281)2,626 
Balance at end of period $3,680 $3,848 
The table below presents gross amounts of recognized assets and liabilities subject to master netting agreements.

(Amounts in thousands)Gross Amount of Recognized AssetsGross Amount of Recognized Liabilities
Net Amounts Presented in the Consolidated Balance Sheet
Exposure under margining arrangementsNet Exposure Under Margining Arrangements
Offsetting of Forward Commitments - Assets
Balance as of:
March 31, 2026:$2,146 $(138)$2,008 $(5,125)$(3,117)
December 31, 2025:$— $— $— $— $— 
Offsetting of Forward Commitments - Liabilities
Balance as of:
March 31, 2026:$— $— $— $— $— 
December 31, 2025:$46 $(600)$(554)$517 $(37)
Significant Unobservable Inputs—The following table presents quantitative information about the significant unobservable inputs used in the recurring fair value measurements of assets categorized within Level 3 of the fair value hierarchy:
March 31, 2026December 31, 2025
(Amounts in dollars, except percentages)RangeWeighted AverageRangeWeighted Average
Level 3 Financial Instruments:
IRLCs
Pull-through factor
0.00% - 99.76%
69.1 %
0.03% - 99.60%
69.2 %
U.S. GAAP requires disclosure of fair value information about financial instruments, whether recognized or not recognized in the condensed consolidated financial statements, for which it is practical to estimate the fair value. In cases where quoted market prices are not available, fair values are based upon the estimation of discount rates to estimated future cash flows using market yields or other valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimates of fair value in both inactive and orderly markets. Accordingly, fair values are not necessarily indicative of the amount the Company could realize on disposition of the financial instruments in a current market exchange. The use of market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts.
The estimated fair value of the Company’s cash and cash equivalents, restricted cash, warehouse lines of credit, and escrow funds approximates their carrying values as these financial instruments are highly liquid or short-term in nature. The following table presents the carrying amounts and estimated fair value of financial instruments that are not recorded at fair value on a recurring or non-recurring basis:
March 31, 2026December 31, 2025
(Amounts in thousands)Fair Value LevelCarrying AmountFair ValueCarrying AmountFair Value
Short-term investmentsLevel 1$103,616 $103,640 $103,607 $103,849 
Loans held for investmentLevel 3$730,936 $747,475 $725,584 $745,367 
Senior NotesLevel 3$198,802 $136,375 $198,802 $135,916 
In determining the fair value of the Senior Notes and loans held for investment, management uses factors that are material to the valuation process, including but not limited to, risks, prospects, and economic and market conditions, among other factors. As a number of assumptions and estimates were involved that are largely unobservable, Senior Notes and loans held for investment are classified as Level 3 inputs within the fair value hierarchy.