v3.26.3
FAIR VALUE MEASUREMENTS
 9 Months Ended
Sep. 30, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
Fair value represents the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date (i.e., an exit price). The Company holds a variety of assets and liabilities, certain of which are not publicly traded or that are otherwise illiquid. Significant judgment and estimation go into the assumptions that drive the fair value of these assets and liabilities. Due to the inherent uncertainty of valuations of investments that are determined to be illiquid or do not have readily ascertainable fair values, the estimates of fair value may differ from the values ultimately realized, and those differences can be material.
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs utilized in measuring financial assets and liabilities at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:
Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 — Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The Company follows this hierarchy for its fair value measurements. The classifications are based on the lowest level of input that is significant to the fair value measurement.
The following table presents the carrying values and fair values of assets and liabilities recorded at fair value on a recurring basis as of September 30, 2026 and December 31, 2025. It excludes cash and cash equivalents and other short-term receivables and payables for which the carrying value approximates fair value due to their short-term nature and are classified within Level 1.
September 30, 2026December 31, 2025
Carrying Value / Fair ValueLevel 1Level 2Level 3Carrying Value / Fair ValueLevel 1Level 2Level 3
Assets:
RTLs$448,931 $— $— $448,931 $176,584 $— $— $176,584 
NQMs214,359 — — 214,359 87,630 — — 87,630 
Derivative assets1,103 1,103 — — — — — — 
Total Assets$664,393 $1,103 $— $663,290 $264,214 $— $— $264,214 
Liabilities:
Secured financings$(512,944)$— $(512,944)$— $(207,084)$— $(207,084)$— 
Total Liabilities$(512,944)$— $(512,944)$— $(207,084)$— $(207,084)$— 
The following tables summarize the changes in the Company’s Level 3 financial assets measured at fair value on a recurring basis:
RTLsNQMsTotal
Balance at June 30, 2026$380,209 $199,490 $579,699 
Acquisition and funding activities112,184 27,196 139,380 
Paydowns(44,155)(10,002)(54,157)
Fair Value Adjustments due to:
Realization of cash flows
(17)(244)(261)
Other factors710 (2,081)(1,371)
Balance at September 30, 2026$448,931 $214,359 $663,290 
Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date$690 $(2,201)$(1,511)
RTLsNQMsTotal
Balance at December 31, 2025$176,584 $87,630 $264,214 
Acquisition and funding activities396,683 151,399 548,082 
Paydowns(125,244)(21,468)(146,712)
Fair Value Adjustments due to:
Realization of cash flows
(72)(492)(564)
Other factors980 (2,710)(1,730)
Balance at September 30, 2026$448,931 $214,359 $663,290 
Changes in unrealized gains (losses) included in earnings related to financial assets still held at the reporting date$1,020 $(2,733)$(1,713)
Residential Transition Loans
The Company classifies RTLs as Level 3 in the fair value hierarchy. Performing and non-performing RTLs are valued using an income approach through pricing models to forecast cash flows with inputs such as default rates, prepayment speeds and discount rates and may include adjustments based on consensus pricing (broker quotes).
Significant increases (decreases) in default rates, loss severity assumptions or discount rates, in isolation, would result in a significantly lower (higher) fair value measurement. Generally, a change in default rate assumptions is accompanied by a directionally similar change in loss severity assumptions.
The following table summarizes certain information regarding the ranges and weighted averages of significant inputs (weighted by fair value) used in valuing RTLs, at fair value classified as Level 3:
Fair ValueDiscount RatePrepayment RateDefault RateLoss Severity
September 30, 2026$448,931 
7.0% – 10.0%
(7.8%)
40.0%1.0%15.0%
December 31, 2025$176,584 
7.6% – 8.7%
(8.0%)
50.0%1.3%25.0%
Residential Mortgage Loans
Residential mortgage loans, at fair value are typically pooled together by the originator and sold into certain exit markets, depending upon underlying attributes of the loan, such as agency eligibility, product type, interest rate and credit quality. NQMs are loans that do not meet the qualified mortgage rules per the Consumer Financial Protection Bureau. Residential mortgage loans, at fair value are valued using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, (ii) current commitments to purchase loans, (iii) recent observable market trades for similar loans, adjusted for credit risk and other individual loan characteristics, (iv) internal pricing models to forecast loan level cash flows using inputs such as default rates, prepayment speeds and discount rates or (v) consensus pricing (broker quotes) or historical sale transactions for similar loans. As these prices are derived from market observable inputs combined with management’s best estimate, the Company classifies these valuations as Level 3 in the fair value hierarchy.
Significant increases (decreases) in prepayment rates, delinquency rates or discount rates, in isolation, would result in a significantly lower (higher) fair value measurement.
The following table summarizes certain information regarding the ranges and weighted averages of significant inputs (weighted by fair value) used in valuing residential mortgage loans, at fair value classified as Level 3:
Fair ValueDiscount RatePrepayment Rate
Default Rate
Loss Incidence
September 30, 2026$214,359 
5.9% – 7.7%
(6.3%)
4.1% – 26.9%
(9.1%)
0.0% – 5.6%
(0.4%)
3.2%
December 31, 2025$87,630 
5.6% – 6.9%
(6.0%)
5.8% – 26.9%
(16.8%)
0.0% – 1.6%
(0.4%)
0.1%
Derivative Instruments
The fair value of the Company's interest rate futures is determined using daily settlement prices published by the Chicago Board of Trade. Because the valuation is derived from quoted prices for the identical contract, the Company classifies these instruments as Level 1 within the fair value hierarchy.
Secured Financings
The fair value of secured financings is measured using a discounted cash flow methodology based on observable market interest rates for similar instruments and the remaining contractual maturities of the arrangements. Because these instruments bear interest at floating rates that reprice frequently at market-based spreads, their fair value approximates their outstanding face amount. The Company classifies these valuations as Level 2 within the fair value hierarchy. No change in the fair value of the Company’s secured financings was attributable to instrument-specific credit risk in any period presented, determined as the total change in fair value less the portion attributable to changes in the benchmark interest rate.