
6. LOANS

The Company invests in residential loans. Loans are classified as either held for investment or held for sale. Loans are eligible to be accounted for under the fair value option. If loans are elected under the fair value option, they are carried at fair value with changes in fair value recognized in earnings. Otherwise, loans held for investment are carried at cost less impairment and loans held for sale are accounted for at the lower of cost or fair value.

Excluding loans transferred or pledged to securitization vehicles, as of June 30, 2026 and December 31, 2025, the Company had $7.3 billion and $5.0 billion, respectively, of loans for which the fair value option was elected. If the Company intends to sell or securitize the loans and the securitization vehicle is not expected to be consolidated, the loans are classified as held for sale. Any origination fees and costs or purchase premiums or discounts are deferred and recognized upon sale. The Company determines the fair value of loans held for sale on an individual loan basis. The carrying value of the Company’s residential loans held for sale was $2.1 million and $37.1 million at June 30, 2026 and December 31, 2025, respectively.


	Residential Loans
	(dollars in thousands)
Beginning balance January 1, 2026	$	5,020,784

Purchases / originations / draws (1)	15,012,633
Sales and transfers (2)	(12,475,215)



Principal payments	(251,049)
Gains / (losses)	(8,940)
(Amortization) / accretion	(17,234)

Ending balance June 30, 2026	$	7,280,979


(1) Includes residential loans acquired from exercise of optional redemption provisions of securitization vehicles with a carrying value of $977.3 million during the six months ended June 30, 2026. (2) Includes transfer of residential loans to securitization vehicles with a carrying value of $11.8 billion during the six months ended June 30, 2026.

The Company’s residential mortgage loans are primarily comprised of performing adjustable-rate and fixed-rate whole loans. The Company’s residential loans are accounted for under the fair value option with changes in fair value reflected in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). The Company also consolidates securitization trusts in which it retained securities because it also has certain powers and rights to direct the activities of such trusts. Refer to the “Variable Interest Entities” Note for further information related to the Company’s consolidated residential mortgage loan trusts.

The mortgage loans are secured by first or second liens on primarily one-to-four family residential properties. A subsidiary of the Company has engaged a third party to act as its custodian, agent and bailee for the purposes of receiving and holding certain documents, instruments and papers related to the residential mortgage loans it purchases. Pursuant to the custodial agreement, the custodian segregates and maintains continuous custody of all documents constituting the mortgage file with respect to each mortgage loan owned by the subsidiary in secure and fire resistant facilities and in a manner consistent with the standard of care employed by prudent mortgage loan document custodians. At or prior to the funding of any residential mortgage loan, the related seller, pursuant to the terms of our mortgage loan purchase agreement, must deliver to the custodian the mortgage loan documents including the mortgage note, the mortgage and other related loan documents. In addition, a complete credit file for the related mortgage and borrower must be delivered to the subsidiary prior to the date of purchase.


	For the Three Months Ended				For the Six Months Ended
	June 30, 2026		June 30, 2025		June 30, 2026		June 30, 2025
	(dollars in thousands)
Interest income	$	674,055	$	467,959	$	1,270,844	$	894,014
Net gains (losses) on disposal of investments (1)	(38,240)		(14,315)		(68,182)		(24,308)
Net unrealized gains (losses) on instruments measured at fair value through earnings (1)	(142,407)		94,051		(127,988)		334,881
Total included in net income (loss)	$	493,408	$	547,695	$	1,074,674	$	1,204,587

(1) These amounts are presented in the line item Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (loss).


Geographic Concentrations of Residential Mortgage Loans
June 30, 2026		December 31, 2025
Property location	% of Balance	Property location	% of Balance
California	38.0%	California	39.2%
New York	10.6%	New York	11.3%
Florida	8.1%	Florida	8.7%
Texas	5.4%	Texas	5.3%
All other (none individually greater than 5%)	37.9%	All other (none individually greater than 5%)	35.5%


Total	100.0%		100.0%


	June 30, 2026		December 31, 2025
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$1 - $4,396	$450	$1 - $4,396	$459
Interest rate	1.63% - 18.00%	6.62%	2.00% - 18.00%	6.67%
Maturity	11/1/2029 - 7/1/2066	7/6/2054	11/1/2029 - 1/1/2066	1/3/2054
FICO score at loan origination	522 - 850	763	549 - 850	761
Loan-to-value ratio at loan origination	1% - 100%	67%	1% - 100%	67%

At June 30, 2026 and December 31, 2025, approximately 12% and 13%, respectively, of the carrying value of the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, were adjustable-rate. At June 30, 2026, the aggregate fair value and unpaid principal balance of loans ninety days or more past due and in nonaccrual status was $527.6 million (of which $502.6 million has been pledged or transferred to securitization vehicles), and $524.5 million, respectively. The non-accrual balances represent approximately 1% of the total loan portfolio. The weighted average loan-to-value ratio at loan origination for loans in non-accrual status was 72%. The recorded investment of residential mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to the requirements of the applicable jurisdiction was $344.7 million at June 30, 2026. At December 31, 2025, the aggregate fair value and unpaid principal balance of loans ninety days or more past due and in nonaccrual status was $446.0 million (of which $405.8 million has been pledged or transferred to securitization vehicles), and $451.5 million, respectively. The non-accrual

balances represent approximately 1% of the total loan portfolio. The weighted average loan-to-value ratio at loan origination for loans in non-accrual status was 73%. The recorded investment of residential mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to the requirements of the applicable jurisdiction was $198.3 million at December 31, 2025.