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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ______________  to ______________
Commission File Number: 001-39964
Home Point Capital Inc.
(Exact name of registrant as specified in its charter)
Delaware90-1116426
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
2211 Old Earhart Road, Suite 250
Ann Arbor, Michigan
48105
(Address of Principal Executive Offices)(Zip Code)
(888) 616-6866
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which
registered
Common Stock, par value
$0.0000000072 per share
HMPT
The Nasdaq Stock Market LLC
(The Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
As of August 5, 2022, the registrant had 138,381,757 shares of common stock, par value $0.0000000072 per share, outstanding.


Table of Contents
TABLE OF CONTENTS
Page
PART I—FINANCIAL INFORMATION
PART II—OTHER INFORMATION

i

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Cautionary Note on Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Report”) contains certain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs, the industry in which we operate and other similar matters. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can,” “continue,” “potential,” “should” and the negative of these terms or other comparable terminology often identify forward-looking statements. Forward-looking statements are not guarantees of future performance, are based upon assumptions, and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, including the risks discussed in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed on March 17, 2022 (our “2021 Annual Report”). Factors, risks, and uncertainties that could cause actual outcomes and results to be materially different from those contemplated include, among others:
our reliance on our financing arrangements to fund mortgage loans and otherwise operate our business;
the dependence of our loan origination and servicing revenues on macroeconomic and U.S. residential real estate market conditions;
the requirement to repurchase mortgage loans or indemnify investors if we breach representations and warranties;
counterparty risk;
the requirement to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances;
risks related to any subservicer;
competition for mortgage assets that may limit the availability of desirable originations, acquisitions and result in reduced risk-adjusted returns;
our ability to continue to grow our loan origination business or effectively manage significant increases in our loan production volume;
difficult conditions or disruptions in the mortgage-backed securities (“MBS”), mortgage, real estate and financial markets;
competition in the industry in which we operate;
our ability to acquire loans and sell the resulting MBS in the secondary markets on favorable terms in our production activities;
our ability to adapt to and implement technological changes;
the effectiveness of our risk management efforts;
our ability to detect misconduct and fraud;
any failure to attract and retain a highly skilled workforce, including our senior executives;
our ability to obtain, maintain, protect and enforce our intellectual property;
any cybersecurity risks, cyber incidents and technology failures;
material changes to the laws, regulations or practices applicable to reverse mortgage programs operated by the Federal Housing Administration (“FHA”) and the U.S. Department of Housing and Urban Development;
our vendor relationships;
our failure to deal appropriately with various issues that may give rise to reputational risk, including legal and regulatory requirements;
any employment litigation and related unfavorable publicity;
exposure to new risks and increased costs as a result of initiating new business activities or strategies or significantly expanding existing business activities or strategies;
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the impact of changes in political or economic stability or by government policies on our material vendors with operations in India;
our ability to fully utilize our net operating loss (“NOL”) and other tax carryforwards;
any challenge by the Internal Revenue Service of the amount, timing and/or use of our NOL carryforwards;
possible changes in legislation and the effect on our ability to use the tax benefits associated with our NOL carryforwards;
the impact of other changes in tax laws;
the impact of interest rate fluctuations;
risks associated with hedging against interest rate exposure;
the impact of any prolonged economic slowdown, recession or declining real estate values;
risks associated with financing our assets with borrowings;
risks associated with a decrease in value of our collateral;
the dependence of our operations on access to our financing arrangements, which are mostly uncommitted;
risks associated with the financial and restrictive covenants included in our financing agreements;
risks associated with changes in the London Inter-Bank Offered Rate reporting practices and the use of alternative reference rates;
our ability to raise the debt or equity capital required to finance our assets and maintain and grow our business;
risks associated with derivative financial instruments;
our ability to comply with continually changing federal, state and local laws and regulations;
the impact of revised rules and regulations and enforcement of existing rules and regulations by the Consumer Financial Protection Bureau;
the impact of revised rules and regulations and enforcement of existing rules and regulations by state regulatory agencies;
our ability to comply with the Government-Sponsored Enterprises (“GSE”), FHA, U.S. Department of Veterans Affairs (“VA”) and U.S. Department of Agriculture (“USDA”) guidelines and changes in these guidelines or GSE and Government National Mortgage Association (“Ginnie Mae”) guarantees;
changes in regulations or the occurrence of other events that impact the business, operations or prospects of government agencies such as Ginnie Mae, the FHA or the VA, the USDA, or GSEs such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, or such changes that increase the cost of doing business with such entities;
our ability to obtain and/or maintain licenses and other approvals in those jurisdictions where required to conduct our business;
our ability to comply with the regulations applicable to our investment management subsidiary;
the impact of private legal proceedings;
risks associated with our acquisition of mortgage servicing rights;
the impact of our counterparties terminating our servicing rights under which we conduct servicing activities;
risks associated with higher risk loans that we service;
our ability to foreclose on our mortgage assets in a timely manner or at all; and
the effects of the COVID-19 pandemic on our business.

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Many of the important factors that will determine these results are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements, which speak only as of the date of this Report. Except as otherwise required by law, we do not assume any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events. You should refer to the risks and uncertainties listed under the heading “Risk Factors” in our 2021 Annual Report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (“SEC”), for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements.
Unless the context otherwise indicates, any reference in this Report to “Home Point,” “our Company,” “the Company,” “us,” “we” and “our” refers to Home Point Capital Inc. and its subsidiaries.
Website and Social Media Disclosure
We use our website (www.investors.homepoint.com) and our corporate Facebook, LinkedIn, and Twitter accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website and social media channels are not, however, a part of this Report.

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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements

HOME POINT CAPITAL INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)
(Unaudited)
June 30, 2022December 31, 2021
Assets:
Cash and cash equivalents$135,843 $170,987 
Restricted cash27,065 36,803 
Cash and cash equivalents and Restricted cash162,908 207,790 
Mortgage loans held for sale (at fair value)2,018,640 5,107,161 
Mortgage servicing rights (at fair value)1,419,105 1,525,103 
Property and equipment, net18,039 21,892 
Accounts receivable, net176,995 129,092 
Derivative assets59,280 84,385 
Goodwill10,789 10,789 
Government National Mortgage Association loans eligible for repurchase117,092 65,237 
Assets held for sale50,748 63,664 
Other assets40,824 43,228 
Total assets$4,074,420 $7,258,341 
Liabilities and Shareholders’ Equity:
Liabilities:
Warehouse lines of credit$1,910,395 $4,718,658 
Term debt and other borrowings, net845,531 1,226,524 
Accounts payable and accrued expenses106,005 138,193 
Government National Mortgage Association loans eligible for repurchase117,092 65,237 
Deferred tax liabilities214,871 229,752 
Derivative liabilities60,309 26,736 
Other liabilities87,815 76,588 
Total liabilities3,342,018 6,481,688 
Note 9 – Commitments and Contingencies
Shareholders’ Equity:
Preferred stock (250,000,000 authorized shares, none issued and outstanding, $0.0000000072 par value per share)
  
Common stock (1,000,000,000 authorized shares, 138,380,272 and 139,326,953 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively, $0.0000000072 par value per share)
  
Additional paid-in capital511,675 523,811 
Retained earnings220,727 252,842 
Total shareholders’ equity732,402 776,653 
Total liabilities and shareholders’ equity$4,074,420 $7,258,341 





See accompanying notes to the unaudited condensed consolidated financial statements.
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HOME POINT CAPITAL INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited – dollars in thousands, except per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue:
Gain on loans, net$13,234 $75,029 $58,638 $376,257 
Loan fee income15,255 39,500 35,159 83,615 
Interest income27,533 34,648 54,610 60,225 
Interest expense(28,920)(44,136)(62,015)(77,071)
Interest expense, net(1,387)(9,488)(7,405)(16,846)
Loan servicing fees62,872 85,584 143,936 155,922 
Change in fair value of mortgage servicing rights(29,887)(106,905)(12,704)(94,057)
Other income9,921 652 10,555 1,453 
Total revenue, net70,008 84,372 228,179 506,344 
Expenses:
Compensation and benefits75,601 127,296 165,033 280,938 
Loan expense6,969 17,483 15,984 35,178 
Loan servicing expense7,121 7,507 12,867 15,600 
Production technology4,343 8,170 9,208 17,455 
General and administrative16,969 26,549 36,640 52,786 
Depreciation and amortization2,627 2,350 5,314 5,111 
Other expenses5,772 8,637 11,068 17,973 
Total expenses119,402 197,992 256,114 425,041 
(Loss) income before income tax(49,394)(113,620)(27,935)81,303 
Income tax benefit (expense)14,121 27,209 9,798 (22,908)
(Loss) income from equity method investment(9,144)13,198 (14,416)17,361 
Net (loss) income$(44,417)$(73,213)$(32,553)$75,756 
(Loss) earnings per share:
Basic$(0.32)$(0.53)$(0.23)$0.54 
Diluted$(0.32)$(0.53)$(0.23)$0.54 









See accompanying notes to the unaudited condensed consolidated financial statements.
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HOME POINT CAPITAL INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited – dollars in thousands, except share amounts)
Common StockAdditional
Paid in Capital
Treasury
Stock
Retained
Earnings
Total
Shareholders’
Equity
SharesAmount
Beginning balance, January 1, 2022139,326,953 $ $523,811 $ $252,842 $776,653 
Stock repurchase(461,690)— — (1,513)— (1,513)
Distributions to shareholders— — — — (5,575)(5,575)
Employee stock purchases (option exercise)97,223 — 122 — — 122 
Equity-based compensation— — 1,706 — — 1,706 
Net income— — — — 11,864 11,864 
Balance at March 31, 2022138,962,486 $ $525,639 $(1,513)$259,131 $783,257 
Stock repurchase(718,106)— — (2,261)— (2,261)
Retirement of treasury stock— — (15,338)3,774 11,564  
Distributions to shareholders— — — — (5,551)(5,551)
Employee stock purchases (option exercise)11,114 — (33)— — (33)
Equity-based compensation (restricted stock units vesting)124,778 — 1,407 — — 1,407 
Net loss— — — — (44,417)(44,417)
Ending balance, June 30, 2022138,380,272 $ $511,675 $ $220,727 $732,402 
Common StockAdditional
Paid in Capital
Retained
Earnings
Total
Shareholders’
Equity
SharesAmount
Beginning balance, January 1, 2021138,860,103 $ $519,510 $407,964 $927,474 
Contributed capital— — — 192 192 
Distributions to parent— — — (295,089)(295,089)
Employee stock purchases (option exercise)185,073 — (1,028)— (1,028)
Equity-based compensation— — 1,779 — 1,779 
Net income— — — 148,969 148,969 
Balance at March 31, 2021139,045,176 $ $520,261 $262,036 $782,297 
Employee stock purchases (option exercise)441,921 — (1,503)— (1,503)
Equity-based compensation— — 1,747 — 1,747 
Net loss— — — (73,213)(73,213)
Ending balance, June 30, 2021139,487,097 $ $520,505 $188,823 $709,328 






See accompanying notes to the unaudited condensed consolidated financial statements.
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HOME POINT CAPITAL INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited – dollars in thousands)
Six Months Ended June 30,
20222021
Operating activities:
Net (loss) income$(32,553)$75,756 
Adjustments to reconcile net (loss) income to cash used in operating activities:
Depreciation5,314 5,111 
Amortization of debt issuance costs1,660 1,620 
Gain on loans, net(58,638)(376,257)
Provision for representation and warranty reserve13,724 9,821 
Equity-based compensation expense3,113 3,526 
Deferred income tax (benefit) expense(14,881)22,789 
Loss (income) from equity method investment14,416 (17,361)
Distributions for mortgage loans held for sale(22,568,858)(57,917,479)
Proceeds from sale and payments of mortgage loans held for sale25,032,673 55,578,192 
Decrease in fair value of mortgage servicing rights12,704 94,057 
Decrease in fair value of mortgage loans held for sale113,594 10,633 
Decrease in fair value of derivative assets25,105 209,106 
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net10,620 (24,515)
Decrease (increase) in other assets2,404 (7,157)
Decrease in accounts payable and accrued expenses(40,455)(21,394)
Increase (decrease) in other liabilities31,075 (30,659)
Net cash provided by (used for) operating activities2,551,017 (2,384,211)
Investing activities:
Purchases of property and equipment, net of disposals(1,461)(6,751)
Purchase of mortgage servicing rights(17,833)(18,701)
Proceeds from sale of mortgage servicing rights630,622  
Equity method investment(1,500) 
Net cash provided by (used for) investing activities609,828 (25,452)
Financing activities:
Proceeds from warehouse borrowings24,046,240 57,710,590 
Payments on warehouse borrowings(26,854,503)(55,658,415)
Proceeds from term debt borrowings400,000 1,140,000 
Payments on term debt borrowings(780,000)(375,000)
Proceeds from other borrowings70,000 65,000 
Payments on other borrowings(73,250)(105,000)
Write off (payments of debt issuance costs),net597 (14,103)
Employee stock purchases (option expense)89 (2,531)
Common stock repurchases(3,774) 
Contributed capital from parent 192 
Dividends paid to shareholders(11,126) 
Distributions to parent 1
 (295,089)
Net cash (used for) provided by financing activities(3,205,727)2,465,644 
Net (decrease) increase in cash, cash equivalents and restricted cash(44,882)55,981 
Cash, cash equivalents and restricted cash at beginning of period207,790 196,893 
Cash, cash equivalents and restricted cash at end of period$162,908 $252,874 
Supplemental disclosure:
Cash paid for interest$65,502 $53,267 
Cash received from tax refunds, net$(1,951)$(268)
See accompanying notes to the unaudited condensed consolidated financial statements.
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HOME POINT CAPITAL INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Amounts)
(unaudited)
Note 1 – Organization and Operations
Nature of Business
Home Point Capital Inc., a Delaware corporation (“HPC”, or the “Company”), through its subsidiaries, is a residential mortgage originator and servicer with a business model focused on growing originations by leveraging a network of partner relationships and its servicing operation. The Company’s business operations are organized into the following two segments: (1) Origination and (2) Servicing. Home Point Financial Corporation (“HPF”), a New Jersey corporation and a wholly owned subsidiary of the Company, originates, sells, and services residential real estate mortgage loans throughout the United States of America (“U.S.”). Home Point Asset Management LLC (“HPAM”), a Delaware limited liability company, is a wholly owned subsidiary of the Company and manages certain servicing assets. HPAM’s wholly owned subsidiary, Home Point Mortgage Acceptance Corporation (“HPMAC”), an Alabama Corporation, services residential real estate mortgage loans. Home Point Corporation Insurance Agency LLC (“HPCIA”), a Michigan limited liability company, is a wholly owned subsidiary of the Company that brokers home owner insurance policies.
Both HPF and HPMAC are approved sellers and servicers of one-to-four family first mortgages by the Federal National Mortgage Association (“FNMA” or “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”) and are approved issuers by the Government National Mortgage Association (“GNMA” or “Ginnie Mae”) (collectively, the “Agencies”), and as such, HPF and HPMAC must meet certain Agency eligibility requirements.
Note 2 – Basis of Presentation and New Accounting Pronouncements
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. The condensed consolidated financial statements include the financial statements of HPC and its wholly owned subsidiaries. The accompanying condensed consolidated financial statements have been prepared in conformity with Article 10 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The consolidated balance sheet as of December 31, 2021 and related notes were derived from the audited consolidated financial statements but do not include all disclosures required by U.S. GAAP for complete financial statements. Certain information and footnote disclosures normally included in complete financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position as of June 30, 2022, its results of operations for the three and six months ended June 30, 2022 and 2021, and its cash flows for the six months ended June 30, 2022 and 2021. The condensed consolidated financial information should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021.
All intercompany balances and transactions have been eliminated in consolidation.
Reclassifications
The Company reclassified gains and losses on MSR sales from Other income to the Change in fair value of mortgage servicing rights on the consolidated statement of operations. Prior periods have been reclassified to conform to current period presentation.
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. GAAP requires HPC to make estimates and assumptions about future events that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable.
Examples of reported amounts that rely on significant estimates include mortgage loans held for sale, mortgage servicing rights (“MSRs”), servicing advances reserve, derivative assets, derivative liabilities, reserves for mortgage repurchases and indemnifications, and deferred tax valuation allowance considerations. Significant estimates are also used in determining the recoverability and fair value of property and equipment and goodwill.
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Recently Adopted Accounting Pronouncements
ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, eliminates particular exceptions related to the method for intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This amendment is effective for annual periods beginning after December 15, 2021. The Company adopted ASU 2019-12 as of January 1, 2022. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Accounting Pronouncements Issued but Not Yet Adopted
Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, subject to meeting certain criteria, provides optional expedients and exceptions related to applying U.S. GAAP to certain contract modifications and hedging relationships that reference the London Interbank Offered Rate ("LIBOR") or another rate that is expected to be discontinued. This guidance was effective upon issuance and allows application to contract changes as early as January 1, 2020. Subsequently, in 2021, the FASB issued ASU 2021-01, Reference Rate Reform, to further clarify and expand certain aspects of Topic 848. The Company is in the process of reviewing its derivative and hedging instruments that utilize LIBOR as the reference rate. The Company plans to adopt ASU 2020-04 and ASU 2021-01 when LIBOR is discontinued for the Company and does not expect it to have a material impact on its consolidated financial statements.
Note 3 – Mortgage Loans Held for Sale
The Company sells its originated mortgage loans into the secondary market. The Company may retain the right to service some of these loans upon sale through ownership of servicing rights. The following presents mortgage loans held for sale (“MLHS”) at fair value, by type:
June 30, 2022
Unpaid
Principal
Fair Value
Adjustment
Total
Fair Value
(dollars in thousands)
Conventional(1)
$1,351,092 $(15,935)$1,335,157 
Government(2)
679,660 3,631 683,291 
Reverse(3)
275 (83)192 
Total$2,031,027 $(12,387)$2,018,640 
December 31, 2021
Unpaid
Principal
Fair Value
Adjustment
Total
Fair Value
(dollars in thousands)
Conventional(1)
$4,206,099 $79,389 $4,285,488 
Government(2)
799,579 21,902 821,481 
Reverse(3)
275 (83)192 
Total$5,005,953 $101,208 $5,107,161 
(1)Conventional includes mortgage loans meeting the eligibility requirements to be sold to FNMA or FHLMC.
(2)Government includes mortgage loans meeting the eligibility requirements to be sold to GNMA (including Federal Housing Administration, Department of Veterans Affairs and United States Department of Agricultural mortgage loans).
(3)Reverse loan presented in MLHS on the condensed consolidated balance sheets as a result of a repurchase.
MLHS on nonaccrual status had $24.0 million and $26.1 million of unpaid principal balances and $19.4 million and $21.6 million estimated fair value, as of June 30, 2022 and December 31, 2021, respectively.
The Company had $2.0 billion in unpaid principal balance pledged to secure its mortgage warehouse line of credit as of June 30, 2022.
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The following presents a reconciliation of the changes in MLHS to the amounts presented on the condensed consolidated statements of cash flows:
Six Months Ended June 30,
20222021
Fair value at beginning of period$5,107,161 $3,301,694 
Mortgage loans originated and purchased22,568,858 57,917,479 
Proceeds on sales and payments received(25,032,673)(55,578,192)
Change in fair value(113,594)(10,633)
Loss on loans(1)
(511,112)(217,896)
Fair value at end of period$2,018,640 $5,412,452 
(1)This line as presented on the condensed consolidated statements of cash flows excludes originated mortgage servicing rights and mortgage servicing rights hedging.
Note 4 – Mortgage Servicing Rights
The Company sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold.
Mortgage Servicing Rights (“MSRs”) give the Company the contractual right to receive service fees and other remuneration in exchange for performing loan servicing functions on behalf of investors in mortgage loans and securities. Upon sale of a mortgage loan for which the Company retains the underlying servicing, an MSR asset is capitalized, which represents the current fair value of the future net cash flows that are expected to be realized for performing servicing activities.
The following presents an analysis of the changes in capitalized MSRs:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(dollars in thousands)
Balance at beginning of period$1,490,224 $1,156,357 $1,525,103 $748,457 
MSRs originated155,942269,449364,683563,806
MSRs purchased9,24513,88417,83318,701
MSRs sold(275,312)(755,556)
Changes in valuation model inputs72,395(94,713)349,381103,183
Change due to cash payoffs and principal amortization(33,389)(77,724)(82,339)(166,894)
Balance at end of period$1,419,105 $1,267,253 $1,419,105 $1,267,253 
The following presents the Company’s total capitalized mortgage servicing portfolio (based on the unpaid principal balance (“UPB”) of the underlying mortgage loans):
June 30, 2022December 31, 2021
(dollars in thousands)
Ginnie Mae$8,391,398$5,602,582
Fannie Mae45,950,07370,174,987
Freddie Mac36,143,00352,547,588
Other31,94734,417
Total$90,516,421$128,359,574
MSR balance$1,419,105 $1,525,103 
The following presents the key weighted average assumptions used in determining the fair value of the Company’s MSRs:
June 30, 2022December 31, 2021
Discount rate7.93 %8.68 %
Weighted average prepayment speeds6.37 %8.30 %
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The key assumptions used to estimate the fair value of the MSRs are discount rate and the Conditional Prepayment Rate (“CPR” or “prepayment speeds”). An increase in prepayment speeds generally has an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase. A decrease in prepayment speeds generally has a positive effect on the value of the MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease. Increases in the discount rate result in a lower MSR value and decreases in the discount rate result in a higher MSR value. MSR uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties.
The following presents the impact on the fair value of the Company’s MSR portfolio when applying the following hypothetical data points:
Discount Rate
Prepayment Speeds
100 BPS
Adverse Change
200 BPS
Adverse Change
10% Adverse
Change
20% Adverse
Change
(dollars in thousands)
June 30, 2022$(69,128)$(131,943)$(45,752)$(88,681)
December 31, 2021$(66,885)$(128,172)$(56,278)$(108,621)
The following presents information related to loans serviced:
June 30, 2022December 31, 2021
(dollars in thousands)
Total unpaid principal balance$92,158,562 $133,889,085 
Loans 30-89 days delinquent898,742 656,012 
Loans delinquent 90 or more days or in foreclosure753,270 777,650 
The following presents components of Loan servicing fees as reported in the Company’s condensed consolidated statements of operations:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(dollars in thousands)
Contractual servicing fees$62,618 $77,615 $143,381 $145,098 
Late fees891 1,323 2,016 2,465 
Other(637)6,646 (1,461)8,359 
Total$62,872 $85,584 $143,936 $155,922 
The Company held for its customers $16.5 million and $19.9 million of escrow funds recorded in Other liabilities in the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively. The Company reported $21.2 million and $74.7 million loss on MSR sales in the Change in fair value of mortgage servicing rights in the condensed consolidated statement of operations for the three and six months ended June 30, 2022, respectively.
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Note 5 – Derivative Financial Instruments
The following presents the outstanding notional amounts and fair values of derivative instruments not designated as hedging instruments:
June 30, 2022
Notional
Value
Derivative
Asset
Derivative
Liability
(dollars in thousands)
Forward sale contracts$3,730,800 $13,718 $14,434 
Interest rate lock commitments3,306,824 22,622 6,375 
Forward purchase contracts305,000 77 3,741 
Treasury futures purchase contracts510,000 2,121 698 
Margin20,742 35,061 
Total$59,280 $60,309 
December 31, 2021
Notional
Value
Derivative
Asset
Derivative
Liability
(dollars in thousands)
Forward sale contracts$7,819,802 $6,969 $8,242 
Interest rate lock commitments6,068,763 29,887 2,843 
Forward purchase contracts1,521,000 3,031 281 
Interest rate swap futures contracts1,540,000 25,313 5,662 
Treasury futures purchase contracts4,720,000 111  
Margin19,074 9,708 
Total$84,385 $26,736 
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The following presents the recorded gain (loss) on derivative financial instruments:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(dollars in thousands)
Forward sale contracts$(91,472)$283,156 $(2,804)$43,568 
Interest rate lock commitments50,983 (386,845)(9,770)(206,291)
Forward purchase contracts819 17,509 (3,053)(3,878)
Interest rate swap and Treasury futures purchase contracts$(43,601)$52,606 $(161,953)$(18,049)
Counterparty agreements for forward commitments contain master netting agreements. The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. The Company incurred no credit losses due to nonperformance of any of its counterparties for the three and six months ended June 30, 2022 and 2021.
The following presents a summary of derivative assets and liabilities and related netting amounts:
June 30, 2022
Gross Amounts Not Offset in the Statement of Financial Position(1)
Gross Amount of Assets (Liabilities) RecognizedFinancial InstrumentsCash CollateralNet Amount
(dollars in thousands)
Derivatives subject to master netting agreements:
Assets:
Forward sale contracts$13,718 $(9,944)$(3,413)$361 
Forward purchase contracts77 (77)  
Interest rate swap and Treasury futures purchase contracts2,121 (2,121)  
Liabilities:
Forward sale contracts(14,434)9,944  (4,490)
Forward purchase contracts(3,741)77 3,362 (302)
Interest rate swap and Treasury futures purchase contracts(698)2,121 (1,423) 
Derivatives not subject to master netting agreements:
Assets:
Interest rate lock commitments22,622 — — 22,622 
Liabilities:
Interest rate lock commitments(6,375)— — (6,375)
Total derivatives
Assets$38,538 $(12,142)$(3,413)$22,983 
Liabilities$(25,248)$12,142 $1,939 $(11,167)
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December 31, 2021
Gross Amounts Not Offset in the Statement of Financial Position(1)
Gross Amount of Assets (Liabilities) RecognizedFinancial InstrumentsCash CollateralNet Amount
(dollars in thousands)
Derivatives subject to master netting agreements:
Assets:
Forward sale contracts$6,969 $(4,886)$(1,272)$811 
Forward purchase contracts3,031 (258)(2,627)146 
Interest rate swap and Treasury futures purchase contracts25,424 (5,662) 19,762 
Liabilities:
Forward sale contracts(8,242)4,886 1,252 (2,104)
Forward purchase contracts(281)258  (23)
Interest rate swap and Treasury futures purchase contracts(5,662)5,662   
Derivatives not subject to master netting agreements:
Assets:
Interest rate lock commitments29,887 — — 29,887 
Liabilities:
Interest rate lock commitments(2,843)— — (2,843)
Total derivatives
Assets$65,311 $(10,806)$(3,899)$50,606 
Liabilities$(17,028)$10,806 $1,252 $