UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2021~~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: 1-14100

IMPAC MORTGAGE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Maryland	33-0675505
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~19500~~4000 ~~Jamboree~~MacArthur ~~Road~~Blvd., ~~Irvine~~Suite 6000, ~~California~~Newport ~~92612~~Beach, CA 92660

(Address of principal executive offices)

(949) 475-3600

(Company’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	IMH	NYSE American
Preferred Stock Purchase Rights	IMH	NYSE American

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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, or a non-accelerated filer, 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 Filer ☐

Emerging Growth Company ☐

Accelerated Filer ☐

Non-accelerated Filer ☒

Smaller Reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ☐ No ☒

As of June 30, ~~2021~~2022, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $267.94 million, based on the closing sales price of common stock on the NYSE American on June 30, ~~2021~~2022. For purposes of the calculation only, all directors and executive officers and beneficial holders of more than 10% of the stock of the registrant have been deemed affiliates. There were 2136,~~455~~568,~~170~~876 shares of common stock outstanding as of March 49, ~~2022~~2023.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s definitive Proxy Statement relating to its 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission are incorporated by reference into Part III of this Annual Report on Form 10-K. The proxy statement will be filed by the registrant with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, ~~2021~~2022.

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IMPAC MORTGAGE HOLDINGS, INC.

~~2021~~2022 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	1112
ITEM 1B.	UNRESOLVED STAFF COMMENTS	2630
ITEM 2.	PROPERTIES	2630
ITEM 3.	LEGAL PROCEEDINGS	2631
ITEM 4.	MINE SAFETY DISCLOSURES	2731
PART II
ITEM 5.	MARKET FOR COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	2731
ITEM 6.	RESERVED	2731
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2832
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	6069
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	6169
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	6169
ITEM 9A.	CONTROLS AND PROCEDURES	6169
ITEM 9B.	OTHER INFORMATION	6270
ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION	6270

PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	6270
ITEM 11.	EXECUTIVE COMPENSATION	6271
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	6271
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	6271
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	6271
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	6371
ITEM 16.	FORM 10-K SUMMARY	6676
SIGNATURES		6777

Table of Contents

PART I

ITEM 1. BUSINESS

Impac Mortgage Holdings, Inc., sometimes referred to herein as the “Company,” “we,” “our” or “us,” is a Maryland corporation incorporated in August 1995 and includes the following subsidiaries: Integrated Real Estate Service Corporation (IRES), Impac Mortgage Corp. (IMC), IMH Assets Corp. (IMH Assets), Copperfield Capital Corporation (CCC) and Impac Funding Corporation (IFC). IMC a subsidiary of IRES, conducts our mortgage lending and real estate services operations.

Forward-Looking Statements

This report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements, some of which are based on various assumptions and events that are beyond our control, may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “likely,” “should,” “could,” “seem to,” “anticipate,” “plan,” “intend,” “project,” “assume,” or similar terms or variations on those terms or the negative of those terms. The forward-looking statements are based on current management expectations. Actual results may differ materially as a result of many factors, including, but not limited to the following: successful development, marketing, sale and financing of new and existing financial products; expansion of NonQM loan originations and conventional and government-insured loan programs; local, national and international economic conditions, including the impact of the Covid-19 pandemic on the economy and demand for our products; ability to successfully diversify our loan products; ability to successfully sell loans to third-party investors; volatility in the mortgage industry; unexpected interest rate fluctuations and margin compression; performance of third-party sub-servicers; our ability to manage personnel expenses in relation to mortgage production levels; our ability to successfully use warehousing capacity and satisfy financial convents requirements; increased competition in the mortgage lending industry by larger or more efficient companies; issues and system risks related to our technology; ability to successfully create cost and product efficiencies through new technology; more than expected increases in default rates or loss severities and mortgage related losses; ability to obtain additional financing through lending and repurchase facilities, debt or equity funding, strategic relationships or otherwise; our ability to maintain adequate cash flow and liquidity to manage our operations; the terms of any financing, whether debt or equity, that we do obtain and our expected use of proceeds from any financing; increase in loan repurchase requests and ability to adequately settle repurchase obligations; failure to create brand awareness; the outcome, including any settlements, of litigation or regulatory actions pending against us or other legal contingencies; our compliance with applicable local, state and federal laws and regulations; and other general market and economic conditions.

For a discussion of these and other risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see Item 1A. “Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. This document speaks only as of its date and we do not undertake, and specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements except as required by law.

Available Information

Our internet website address is www.impaccompanies.com. We make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements for our annual stockholders’ meetings, as well as any amendments to those reports, free of charge through our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. You can learn more about us by reviewing our SEC filings on our website by clicking on “Investor Relations” located on our home page and proceeding to “Financial Information.” We also make available on our website, under “Corporate Governance,” charters for the audit, compensation, and governance and nominating committees of our board of directors, our Code of Business Conduct and Ethics, our Corporate Governance Guidelines and other company information, including amendments to such documents and waivers, if any, to our Code of Business Conduct and Ethics. These documents will also be furnished, free of charge, upon written request to Impac Mortgage Holdings, Inc., Attention: Stockholder Relations, ~~19500~~4000 ~~Jamboree~~MacArthur ~~Road~~Blvd., ~~Irvine~~Suite 6000, ~~California~~Newport ~~92612~~Beach, CA 92660. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including our Company.

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Our Company

We were founded in 1995 and are an established nationwide independent residential mortgage lender which originates, sells and services residential mortgage loans. We originate non-qualified mortgages (NonQM), conventional mortgage loans, which are intended to be eligible for sale to U.S. government-sponsored enterprises, (GSEs), including the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) (conventional loans), and government-insured mortgage loans eligible for government securities issued through the Government National Mortgage Association (Ginnie Mae or government loans).

Recent Updates

~~Segments~~As part of our continuous expense management assessment, as previously noted, we have undertaken a number of initiatives during the latter half of 2022 and into the first quarter of 2023 that we believe will significantly reduce our expense run rate. In January 2023, we exited our legacy commercial office space of 120,000 sq. ft. and relocated to a new 19,000 sq.ft. office space. The reduction of space was made possible by our ability to maintain a majority of our workforce as a hybrid or remote workforce, minimizing in-office space needs. In accordance with the terms of the lease termination agreement, we paid termination consideration of $3.0 million. We estimate that the amount of base rent, common area maintenance (CAM) charges, storage, parking, and any other miscellaneous charges that would have been payable during the final 20 months of the original lease term would have been in excess of $8.8 million. The new lease term runs through July 31, 2025 with an average rent of $1.35 per sq. ft. over the term of the lease, which, including CAM charges, totals approximately $800 thousand over the term of the lease, resulting in significant savings.

In line with our expense management strategies, in addition to the lease termination in January 2023, we repositioned our retail consumer direct channel, CashCall Mortgage (CCM) to be a mortgage broker rather than a direct lender at the end of 2022 and into 2023. As noted in previous years, our GSE loan originations were sold directly through aggregators. While we remain in good standing with our aggregator partners, the cost to produce retail loans in light of the rising rate environment and severe margin compression felt across the residential mortgage industry proved challenging—resulting in lower origination volumes and higher cost to produce throughout 2022. We believe that the broker fulfillment model has many strengths including a reduced expense load associated with personnel, operational and technology support, and reduced marketing needs due to organic lead volume generated by the CCM brand. Broker fulfillment also supports a broader product offering to CCM consumers, allowing the Company to move away from the expense and complexity of managing multiple lending products with support from several departments. We believe adopting a more cost-effective origination strategy is essential to managing the overall monthly expense load of the retail channel while also driving revenue across a broad spectrum of product offerings to consumers.

~~Our~~Additionally, ~~business~~given ~~activities~~our ~~are~~lack ~~organized~~of ~~and~~conventional ~~presented~~GSE inorigination ~~three~~volume ~~primary~~and ~~operating~~servicing ~~segments:~~rights ~~Mortgage~~over ~~Lending,~~ the ~~Long-Term~~past ~~Mortgage~~several ~~Portfolio~~years, ~~and~~with ~~Real~~no ~~Estate~~direct ~~Services.~~GSE ~~Our~~deliveries ~~mortgage~~to ~~lending~~Fannie ~~segment~~Mae ~~provides~~or ~~mortgage~~Freddie ~~lending~~Mac ~~products~~since ~~through~~2016 ~~three~~and ~~lending channels~~2020, ~~retail~~respectively, ~~wholesale~~we ~~and~~intend ~~correspondent~~to ~~and~~voluntarily ~~opportunistically~~relinquish ~~retains~~our ~~mortgage~~GSE ~~servicing~~Seller/Servicer ~~rights. Our~~designation ~~long-term~~which ~~mortgage~~have ~~portfolio~~been ~~consists~~suspended ofduring ~~residual~~these ~~interests~~periods inof ~~securitization trusts~~non-delivery. ~~Our~~We ~~real~~expect ~~estate~~to ~~services~~be ~~segment~~a ~~performs master servicing and provides loss mitigation services for primarily our securitized long~~third-~~term~~party ~~mortgage~~originator ~~portfolio. A description of each operating segment is presented below~~ with ~~further~~both ~~details and discussions of each segment~~GSE’s ~~results~~to ofsupport ~~operations~~our ~~presented~~broker inmodel, ~~Item 7.~~as ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations~~needed.”

In addition to the segments described above, we also have a corporate segment, which supports all of the operating segments. The corporate segment includes unallocated corporate and other administrative costs as described below.

~~Mortgage~~Our ~~Lending~~wholesale channel continued to experience significant volume and margin deterioration during the latter half of 2022, and into 2023. The continued volatility experienced with the Non-QM market associated with liquidity, product offerings, expansive credit to meet consumer demand, and rising rates have all proven to be a considerable hindrance to maintaining a profitable channel in the wholesale space. It is our belief that the market conditions and projections will not improve in the near term, and as a result in the first quarter of 2023, the Company decided to wind down operations within its wholesale channel until market conditions improve. With minimal active loans in the pipeline, the Company had no outstanding warehousing or counterparty obligations associated with its wholesale activity. At December 31, 2022, we did not renew our $25.0 million warehouse facility, thereby further reducing warehouse capacity to $16.0 million with one counterparty.

We are focused on expanding our mortgage lending platform which provides conventional and government-insured mortgage loans as well as providing innovative products to meet the needs of borrowers not met by traditional conventional and government products. Our mortgage lending operation generates origination and processing fees, net of origination costs, at the time of origination, interest income during the period from origination to sale of loan, as well as gains or unexpected losses when the loans are sold to third party investors, including Ginnie Mae. We opportunistically retain mortgage servicing rights from the sale of mortgage loans and earn servicing fees, net of sub-servicer costs, from our mortgage servicing portfolio. From time to time, we have sold mortgage servicing rights from our servicing portfolio.

~~NonQMs~~As ~~are~~noted ~~generally~~above, ~~loans that do not meet~~ the ~~qualified~~Company ~~mortgage~~intends ~~(QM) guidelines set out by the Consumer Financial Protection Bureau (CFPB). We continue~~ to ~~believe~~remain ~~there~~focused ison anserving ~~underserved~~consumers ~~mortgage~~through ~~market~~its ~~for~~retail ~~borrowers with good credit who may not meet the QM guidelines~~channel, ~~for~~exclusively ~~example~~through ~~self-employed~~a ~~borrowers.~~broker ~~The~~model ~~third~~fulfillment ~~quarter~~strategy ofuntil ~~2020 saw the re-emergence of the NonQM~~ market ~~including~~conditions ~~capital~~improve ~~markets~~to ~~distribution~~support ~~exits~~other ~~for~~opportunities ~~the~~in ~~product. In~~ the ~~fourth~~direct ~~quarter~~and/or ofwholesale ~~2020, we re-engaged~~ lending ~~in the NonQM market~~space.

~~The~~On ~~re-emergence~~September ~~of the NonQM market has been defined by products that fit within a much tighter credit box~~14, ~~which is where our NonQM originations have been historically. We believe the quality~~2022, ~~consistency and performance of our NonQM originations has been demonstrated through~~ the ~~previous~~Company ~~issuance~~commenced ofexchange 21offers ~~securitizations since 2018, whereby our originations were represented as~~ (the ~~largest~~Exchange ~~originator~~Offers) ~~in over half of the deals~~ and ~~represented~~a noconsent ~~less~~solicitation ~~than~~for ~~the~~its ~~third~~outstanding ~~largest~~shares ~~originator in the other deals. Four~~ of ~~the~~its ~~21 securitizations were 100~~9.375% ~~backed~~Series B byCumulative ~~Impac~~Redeemable ~~NonQM~~Preferred ~~collateral~~Stock, ~~with~~par ~~the~~value ~~senior tranches receiving AAA ratings~~$0.01 Asper ~~interest~~share ~~rates~~(the ~~continue~~Series B toPreferred ~~rise~~stock), and ~~the~~9.125% ~~demand~~Series C byCumulative ~~consumers~~Redeemable ~~for~~Preferred ~~the NonQM product grows~~Stock, wepar ~~expect~~value ~~the investor appetite will continue to increase for the NonQM mortgages~~$0.01 Aper NonQM borrower is generally less sensitive to interest rates and generally does not have the same income documentation that a conforming loan borrower does, nonetheless the borrower is still required to meet the “ability to repay” guidelines.

As a nationwide mortgage lender, our mortgage lending activities primarily consist of the origination, sale and servicing of conventional loans eligible for sale to Fannie Mae and Freddie Mac, NonQM and Jumbo mortgages and loans eligible for government insurance (government loans) by the Federal Housing Administration (FHA), Veterans Affairs (VA), and United States Department of Agriculture (USDA). We currently originate and fund mortgages through our wholly-owned subsidiary, IMC, which consist of three channels: Retail (consumer direct), Wholesale and Correspondent.

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●share ~~Retail~~(Series ~~channel~~C -Preferred ~~CashCall~~stock). ~~Mortgage~~On October 20, 2022 (~~CCM~~the Expiration Date), ~~operates~~the asexchange aoffers ~~centralized~~and ~~call~~consent ~~center~~solicitation ~~that~~expired ~~utilizes~~with aapproximately ~~marketing~~69% ~~platform~~of tothe ~~generate~~Series ~~customer~~B ~~leads~~Preferred ~~through~~stock and approximately 67% of the ~~internet~~Series C Preferred stock tendering their shares and ~~call~~voting ~~center~~in ~~loan~~favor ~~agents.~~of Ascertain aamendments ~~centralized~~to ~~retail~~the ~~call~~Company’s ~~center~~charter, ~~loan~~as ~~applications~~discussed ~~are~~in further detail below. Holders of Series B Preferred stock received (the Series B Consideration), for each share of Series B Preferred stock tendered, (i) 13.33 shares of newly issued common stock and ~~taken~~(ii) by30 ~~loan~~shares ~~agents~~of ~~directly~~newly ~~from~~issued ~~consumers~~8.25% Series D Cumulative Redeemable Preferred Stock (Series D Preferred stock). Holders of Series C Preferred stock were entitled to received (the Series C Consideration), for each share of Series C Preferred stock tendered, (i) 1.25 shares of newly issued common stock, (ii) 1.5 warrants to purchase an equal number of shares of common stock at an exercise price of $5.00 per share and ~~through~~(iii) one share of Series D Preferred stock. In connection with the ~~Internet~~closing of the Exchange Offers, the Company issued, on October 26, 2022, a total of 7,330,319 shares of newly issued common stock, 14,773,811 shares of Series D Preferred stock and 1,425,695 warrants to purchase an equal number of shares of common stock.

●Concurrently ~~Wholesale~~with ~~channel~~the -Exchange ~~Originates~~Offers, ~~loans~~the ~~sourced~~Company ~~through~~received ~~mortgage~~consent ~~brokers~~from the requisite holders of each of its outstanding Series B Preferred stock and its outstanding Series C Preferred stock to amend its charter to (i) make all shares of Series B Preferred stock that remain outstanding after the closing of the Exchange Offers redeemable for the same consideration as the Series B Consideration and (ii) make all shares of Series C Preferred stock that remain outstanding after the closing of the Exchange Offers redeemable for the same consideration as the Series C Consideration. On October 27, 2022, the Company provided notice to holders of Series B Preferred stock and Series C Preferred stock that such shares would be redeemed (the Redemption) on November 15, 2022 upon which holders of Series B Preferred stock and Series C Preferred stock will only be entitled to receive the Series B Consideration and the Series C Consideration, as the case may be. In connection with the Redemption, the Company issued an additional approximately 3,298,439 shares of newly issued common stock, 6,599,035 shares of Series D Preferred stock and 681,923 warrants to purchase an equal number of shares of common stock.

●In ~~Correspondent~~addition, ~~channel~~on -August ~~Acquires~~25, ~~closed~~2022, ~~loans~~the ~~from~~Maryland Circuit Court issued an Order to Segregate Funds and/or Stock (Segregation Order) in connection with the Timm, et al v. Impac Mortgage Holdings, Inc., et al. outstanding litigation (Maryland Action) on behalf of holders of the Company’s Series B Preferred stock directing the Company, if the Exchange Offer for the Series B Preferred stock were timely completed, to deposit 13,311,840 shares of Series D Preferred stock, plus, in either event, 4,437,280 shares of newly issued common stock (collectively, the Series B Common Fund) in the custody of a third party custodian or escrow agent approved ~~correspondent~~by ~~sellers~~class counsel. On December 16, 2022, the Circuit Court issued its Final Judgment Order which was entered on December 19, 2022. The Final Judgment Order granted Plaintiff Camac’s Motion for Attorney’s Fees, Litigation Costs, and Incentive Payment, granted in part and denied in part Plaintiff Timm’s Petition for Incentive Award and Payment of Costs and Expenses. The Company completed the distribution of the Series D Preferred stock and common stock to the former holders of shares of Series B Preferred stock and class counsel required by the Final Judgment Order in February 2023.

All holders of Series B Preferred stock and Series C Preferred stock in connection with the Exchange Offers and the Redemption only received the applicable consideration payable therein and were not entitled to any other payment with respect to the liquidation preference of, or any accrued and unpaid dividends on, any shares of Series B Preferred stock or Series C Preferred stock (whether or not such dividends have accumulated and whether or not such dividends accrued before or after completion of the Exchange Offers), other than the rights of holders of Series B Preferred stock to receive the 2009 Dividend Amount, as discussed in further detail in the section “Financing Activities” presented in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

Segments

Our ~~origination~~business ~~volumes~~activities ~~increased~~are 6%organized and presented in ~~2021~~three toprimary ~~$2.9 billion~~operating assegments: ~~compared~~Mortgage toLending, ~~$2.7 billion~~the inLong-Term ~~2020.~~Mortgage OfPortfolio ~~the~~and $2Real Estate Services.9 ~~billion~~During in2021 ~~total~~and ~~originations~~2022, inour ~~2021~~mortgage lending segment provided mortgage lending products through two lending channels, ~~approximately~~retail $2and wholesale and opportunistically retained mortgage servicing rights.3 ~~billion,~~As ornoted ~~80%~~above, ~~was~~in ~~originated~~2023 ~~through~~we shifted to deliver the ~~retail~~same ~~channel~~products through a mortgage broker model. Our Inlong-term ~~contrast~~mortgage portfolio consisted of residual interests in securitization trusts, prior to the sale during ~~2020,~~the ~~our~~first ~~retail~~quarter ~~originations~~of ~~contributed~~2022. ~~90%~~Our toreal estate services segment performs master servicing and provides loss mitigation services for primarily our ~~total~~securitized ~~origination~~long-term ~~volume~~mortgage portfolio. A description of each operating segment is presented below with further details and discussions of each segment’s results of operations presented in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

Each of our three origination channels, Retail, Wholesale and Correspondent, produces similar mortgage loan products and applies similar underwriting standards.


	For the year ended December 31,
(in millions)	2021		%		2020		%
Originations by Channel:
Retail	$	2,318.3	80	%	$	2,477.5	90	%
Wholesale		585.1	20			215.0	8
Correspondent		—	0			54.4	2
Total originations	$	2,903.4	100	%	$	2,746.9	100	%

Retail—Our call center based retail channel utilizes a high-volume, rapid response time funding model with a focus on providing exceptional customer service. The centralized retail call center is a compliment to IMC’s business-to-business origination channel and provides additional capacity to process increased origination volumes of expanded products including our NonQM loan programs and government insured Ginnie Mae programs, while having the ability to generate servicing assets for IMC.

When retail loans are originated, the origination documentation is completed inclusive of customer disclosures and other aspects of the lending process and funding of the transaction is completed internally. Our call center representatives contact borrowers through either inbound or outbound marketing campaigns sourced from our digital marketing campaigns, TV and radio ads, purchase-money and refinance mortgage leads, including leads sourced from customer referrals and retention of customers in the servicing portfolio that are seeking to refinance or purchase a property. For the year ended December 31, 2021, we closed $2.3 billion of loans in this origination channel, which equaled 80% of total originations, as compared to $2.5 billion or 90% of total originations during 2020.

Wholesale—In a wholesale transaction, our account executives work directly with mortgage brokers who originate and document loans for delivery to our operational center where we underwrite and fund the mortgage loan. Each loan is underwritten to our underwriting standards and, if approved, the borrower is sent new disclosures under our name and the loan is funded in the name of IMC.

Prior to accepting loans from mortgage brokers, each mortgage broker is required to meet our guidelines for minimum experience, credit score and net worth. We also obtain a third-party due diligence report for each prospective broker that verifies licensing and provides information on any industry sanctions that might exist. In addition, each mortgage broker is required to sign our broker agreement that contains certain representations and warranties from the brokers. For the year ended December 31, 2021, we closed loans totaling $585.1 million in this origination channel, which equaled 20% of total originations, as compared to $215.0 million, or 8%, of total originations during 2020.

Correspondent—Although we have not engaged in correspondent lending since the first quarter of 2020, we intend to begin lending through our correspondent division during the second quarter of 2022.

Correspondent originations represent mortgage loans acquired from our correspondent sellers, which we have historically targeted a market of small banks, credit unions and small mortgage banking firms. Prior to accepting loans from correspondent sellers, each seller is underwritten to determine if it meets our financial and other underwriting guidelines. Our review of each prospective seller includes obtaining a third party due diligence report that verifies licensing, insurance coverage, quality of recent Federal Housing Administration (FHA) originations and provides

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~~information on any industry sanctions that might exist.~~ In addition, ~~each seller is required~~ to ~~sign our correspondent seller agreement that contains certain representations and warranties from~~ the ~~seller~~segments ~~allowing~~described usabove, towe ~~require~~also ~~the~~have ~~seller to repurchase~~ a ~~loan~~corporate ~~sold~~segment, towhich ussupports ~~for~~all ~~various~~of ~~reasons~~the ~~including~~operating ~~(i) ineligibility~~segments. ~~for~~The ~~sale~~corporate tosegment ~~GSEs,~~includes ~~(ii) early~~unallocated ~~payment~~corporate ~~default,~~and ~~(iii) early~~other ~~pay-off~~administrative orcosts ~~(iv) if~~as ~~the~~described ~~loan is uninsurable by a government agency~~below.

InMortgage our correspondent channel, the correspondent seller originates and closes the loan. After the loan is originated, the correspondent seller submits the required documentation for us to review and make a determination if it meets our underwriting guidelines. The loan is acquired by us only after we approve it for purchase. We focus on customer service for our clients by facilitating prompt review by our due diligence team, providing bid pricing on both newly originated and seasoned portfolios, enabling clients to deliver one loan at a time on a flow basis and providing clients with expedited funding timelines. We purchase NonQM loans, conventional loans eligible for sale to the GSEs and government-insured loans eligible for Ginnie Mae securities. For the year ended December 31, 2021, we closed no loans in the correspondent origination channel as a result of the aforementioned closure during the first quarter of 2020 as a result of the COVID-19 pandemic, compared to $54.4 million of originations for the year ended December 31, 2020. Lending

~~Since~~We ~~2011~~remain committed to offering a broad suite of mortgage lending products to consumers through our broker fulfillment model, including conventional, government, and alternative credit products. Through this model, we have ~~provided~~access ~~loans~~to an expanded product offering to ~~customers~~include ~~predominantly~~more ininnovative products than previously available to meet the ~~Western~~needs Uof borrowers who may not be served by traditional conventional and government products.S. Our ~~with~~broker ~~California,~~fulfillment ~~Arizona,~~model ~~Nevada~~generates origination fees and ~~Washington~~broker ~~comprising~~fee ~~85%~~income, net of ~~originations~~origination costs. The overall expense of origination is significantly decreased in ~~2021~~a broker fulfillment model due to reduced need for headcount and skillset, in addition to hedging and capital markets execution risks. ~~Currently~~We do not retain interest income during the period of origination to sale of loan, nor do we ~~provide~~retain ~~nationwide~~gains ~~lending~~or ~~with~~have ~~our~~exposure ~~retail~~to ~~call~~any ~~center~~losses ~~and~~when ~~mortgage~~loans ~~brokers~~are sold to third party investors. Mortgage servicing rights are not maintained in the broker fulfillment model.

Non-QM loans are loans that do not meet the qualified mortgage (QM) guidelines set out by the Consumer Financial Protection Bureau (CFPB). While we believe there is an underserved mortgage market for these consumers, such as self-employed borrowers, the addressable Non-QM market has retracted significantly from the prior year due to rate and credit changes in the market. Under the broker fulfillment model, we have engaged with a number of lenders who are able to offer competitive Non-QM products that serve the needs of our borrowers.

We reserve an opportunistic approach with respect to originating Federal Housing Administration (FHA) and Veterans Affairs (VA) loans as a direct lender, as well as holding the mortgage servicing rights of these Ginnie Mae securitizable loans. We have participated in Ginnie Mae securitizations in the past, and maintain our Housing and Urban Development (HUD), VA, and Ginnie Mae designations in good standing. While we currently do not hold any Ginnie Mae servicing, we welcome the development of market conditions that would attract borrowers to these government-sponsored loan programs and allow us to participate in meaningful origination activity. Currently, the rate environment has been prohibitively high which has reduced volume materially. Despite changes to FHA and VA guidelines in the first quarter of 2023 to allow for lower mortgage insurance premiums (MIP) and Funding Fee charges, the only available products due to streamline refinance restrictions are cash-out refinance and purchase transactions.

We maintain our licensing status and ability to lend directly as a nationwide mortgage lender; however, the change to our business model is reflective of the need to promote flexibility to drive revenue and reduce expenses while still offering a competitive product to consumers. The broker fulfillment model allows us to originate loans eligible for sale to Fannie Mae and Freddie Mac, NonQM and Jumbo mortgages and loans eligible for government insurance (government loans) by the FHA, VA, and United States Department of Agriculture (USDA), as well as second lien products. We currently originate mortgages through our wholly-owned subsidiary, IMC, under which our retail channel, CCM, is situated.

Our origination volumes decreased 76% in 2022 to $693.7 million as compared to $2.9 billion in 2021. Of the $693.7 million in total originations in 2022, approximately $422.0 million, or 61%, was originated through the retail channel. In contrast, during 2021, our retail originations contributed 80% to our total origination volume.

Our origination channels, Retail and Wholesale, produce similar mortgage loan products and apply similar underwriting standards.


	For the year ended December 31,
(in millions)	2022		%		2021		%
Originations by Channel:
Retail	$	422.0	61	%	$	2,318.3	80	%
Wholesale		271.7	39			585.1	20
Total originations	$	693.7	100	%	$	2,903.4	100	%

Retail—Prior to the repositioning to a mortgage broker, our call center based retail channel utilized a high-volume, rapid response time funding model with a focus on providing exceptional customer service. The centralized retail call center was a compliment to IMC’s business-to-business origination channel and provided additional capacity to process increased origination volumes of expanded products including our NonQM loan programs and government insured Ginnie Mae programs, while having the ability to generate servicing assets for IMC.

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When retail loans were originated, the origination documentation was completed inclusive of customer disclosures and other aspects of the lending process and funding of the transaction was completed internally. Our call center representatives contacted borrowers through either inbound or outbound marketing campaigns sourced from our digital marketing campaigns, TV and radio ads, purchase-money and refinance mortgage leads, including leads sourced from customer referrals and retention of customers in the servicing portfolio that are seeking to refinance or purchase a property. For the year ended December 31, 2022, we closed $422.0 million of loans in this origination channel, which equaled 61% of total originations, as compared to $2.3 billion or 80% of total originations during 2021.

As previously noted, during the fourth quarter of 2022 and first quarter of 2023, we repositioned our retail consumer direct channel, CCM to be a mortgage broker rather than a direct lender.

Wholesale—In a wholesale transaction, our account executives worked directly with mortgage brokers who originated and document loans for delivery to our operational center where we underwrote and funded the mortgage loan. Each loan was underwritten to our underwriting standards and, if approved, the borrower was sent new disclosures under our name and the loan was funded in the name of IMC.

Prior to accepting loans from mortgage brokers, each mortgage broker was required to meet our guidelines for minimum experience, credit score and net worth. We also obtained a third-party due diligence report for each prospective broker that verifies licensing and provided information on any industry sanctions that might exist. In addition, each mortgage broker was required to sign our broker agreement that contains certain representations and warranties from the brokers. For the year ended December 31, 2022, we closed loans totaling $271.7 million in this origination channel, which equaled 39% of total originations, as compared to $585.1 million, or 20%, of total originations during 2021.

As previously noted, during the fist quarter of 2023, we decided to wind down operations in the Wholesale Channel due to significantly diminished volume as a result of volatility in the market around rates and credit risk.

Correspondent— While the Company has historically maintained a Correspondent Channel opportunistically, it currently has no plans to originate loans in the Correspondent Channel.

Since 2011, we have provided loans to customers predominantly in the Western U.S. with California, Arizona, Nevada and Washington comprising 69% of originations in 2022.

Loan Types

Our loan products primarily include conventional loans intended to be eligible for sale to Fannie Mae and Freddie Mac and loans eligible for government insurance by FHA, VA and USDA (the Agencies), NonQM and Jumbo. The FHA, VA and USDA loans are government-insured loans eligible for Ginnie Mae securities issuance. WePrior ~~have~~to the wind down of our wholesale channel and our repositioning to a mortgage broker, we established strict lending guidelines, including determining the prospective borrowers’ ability to repay the mortgage, which we believe ~~will~~would keep delinquencies and foreclosures at acceptable levels. We ~~continue~~had totraditionally ~~refine~~evaluated our guidelines to expand our reach to the underserved market of credit worthy borrowers who can fully document and substantiate an ability to repay mortgage loans, but unable to obtain financing through traditional programs, for example self-employed borrowers. In conjunction with establishing strict lending guidelines, we ~~have~~had also established investor relationships which ~~provide~~provided us with an exit strategy for these NonQM loans. In the fourth quarter of 2020, we began originating conventional prime jumbo mortgages, which generally conform to the underwriting guidelines of the GSEs but exceed the maximum loan size allowed for single unit properties.

The following table indicates the breakdown of our originations by loan type for the periods indicated:


	For the year ended December 31,
(in millions)	~~2021~~2022		~~2020~~2021
Originations by Loan Type:
Conventional	$	~~2,096~~211.98	$	2,~~401~~096.69
NonQM		~~683~~462.65		~~264~~683.06
Jumbo		735.75		1073.7
Government		4913.29		7049.62
Total originations	$	~~2,903~~693.47	$	2,~~746~~903.94

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Loan Sales—Selling Loans to GSEs, Issuing Ginnie Mae Securities and Selling Loans on a Whole Loan Basis

We primarily ~~sell~~have sold our conventional, jumbo and NonQM loans on a servicing released whole loan basis to private investors and issue securities through Ginnie Mae for our government insured product. We ~~securitize~~securitized government-insured loans by issuing Ginnie Mae securities through a process whereby a pool of loans iswas transferred to Ginnie Mae as collateral for a government-insured mortgage-backed security. Prior to our suspension by Freddie Mac in July 2020, we would opportunistically sell loans on a servicing-retained basis where the loan iswas sold to an investor such as Freddie Mac, and we ~~retain~~retained the right to service that loan, called mortgage servicing rights (MSRs). Traditionally, we ~~have~~had not sold a significant amount of residential mortgage loans on a whole loan basis where the investor also acquires the servicing rights. Throughout ~~2020~~2021 and ~~2021~~2022, we ~~continued to~~ selectively ~~retain~~retained mortgage servicing as well as increase whole loan sales on a servicing released basis to investors. The largest ~~seven~~five investors accounted for 8275% of the Company’s servicing released loan sales for the year ended December 31, ~~2021~~2022. No other investors accounted for more than 5% of the loan sales for the year ended December 31, ~~2021~~2022.

4Additionally, given our lack of conventional GSE origination volume and servicing rights over the past several years, with no direct GSE deliveries to Fannie Mae or Freddie Mac since 2016 and 2020, respectively, we intend to voluntarily relinquish our GSE Seller/Servicer designation, which has been suspended during these period of non-delivery. We expect to be a third-party originator with both GSE’s to support our broker model, as needed.

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During the fourth quarter of 2017, Fannie Mae sufficiently limited the manner and volume for our deliveries of eligible loans such that we elected to cease deliveries to them and we expanded our whole loan investor base for these loans. In 2019, with the creation of the uniform mortgage-backed securities (UMBS) market, which was intended to improve liquidity and align prepayment speeds across Fannie Mae and Freddie Mac securities, Freddie Mac raised concerns about the high prepayment speeds of our loans generated through our retail direct channel. We have continued to expand our investor base and complete servicing released loan sales to non-GSE whole loan investors and expect to continue to utilize these alternative exit strategies for Fannie Mae and Freddie Mac eligible loans. The use of alternative exit strategies has resulted in, and could further result in, adverse pricing, delays in our ability to sell timely as a result of due diligence and investor overlays, and subjects us to changes in risk, collateral, and counterparty eligibility requirements. In July 2020, we received notification from Freddie Mac that our eligibility to sell whole loans to Freddie Mac was suspended, without cause. While we believe that the overall volume delivered under purchase commitments to the GSEs was immaterial prior to the notification, we are committed to operating actively and in good standing with our broad range of capital markets counterparties. We continue to take steps to manage our prepayment speeds to be more consistent with our industry peers and to reestablish the full confidence and delivery mechanisms to our investor base. We seek to satisfy the requirements as outlined by Freddie Mac to achieve reinstatement, while we continue to satisfy our obligations on a timely basis to our other counterparties, as we have done without exception. Despite being in a suspended status with Freddie Mac, we remain an approved originator and/or seller/servicer with the GSEs, Agencies and Counterparties for agency, non-agency, and government insured or guaranteed loan programs.

The following table indicates the breakdown of our loan sales to GSEs, issuance of Ginnie Mae securities and loans sold to investors on a whole loan servicing-released basis for the periods as indicated:


	For the year ended
	December 31,
(in millions)	~~2021~~2022		~~2020~~2021
Ginnie Mae	$	524.25	$	9252.2
Freddie Mac		—		~~131.5~~—
Fannie Mae		—		—
Total servicing retained sales		524.25		~~223~~52.72
Other (servicing released)		~~2,707~~974.51		32,~~095~~707.75
Total loan sales	$	~~2,759~~978.76	$	32,~~319~~759.47

Mortgage Servicing

While we had continued to selectively retain mortgage servicing throughout 2022, in December 2022, we sold $68.0 million in unpaid principal balance (UPB) of our government insured MSRs for approximately $725 thousand, receiving $508 thousand in proceeds upon sale, with the remaining proceeds received in 2023 upon transfer of the servicing and transfer of all trailing documents. As a result of the servicing sale, we currently have no servicing portfolio at December 31, 2022.

Upon our sale of loans to GSEs or the issuance of securities through Ginnie Mae, we generally retain the mortgage servicing rights with respect to the mortgage loans. We also sell loans on a servicing-released basis to secondary market investors where we do not retain the servicing rights. When we retain servicing rights, we are entitled to receive a servicing fee which is collected from interest payments made by the borrower and paid to us on a monthly basis equal to a specified percentage, typically between 0.25% and 0.44% per annum of the outstanding principal balance of the loans. We may also be entitled to receive additional servicing compensation, such as late payment fees and earn additional income through the use of non-interest bearing escrows. As a mortgage servicer, we are required to advance certain amounts to meet the contractual loan servicing requirements for certain investors. We may advance principal, interest, property taxes and insurance for borrowers that have become delinquent, plus any other costs to preserve the property. Also, we will advance funds to maintain, repair and market foreclosed real estate properties. Such advances are typically repaid when the loan becomes current or repaid from the proceeds generated from the sale of the property subsequent to foreclosure.

We have hired a nationally recognized residential servicer to sub-service the servicing portfolio. Although we use a sub-servicer to provide primary servicing and certain default servicing functions, our servicing surveillance team, which is experienced in loss mitigation and real estate recovery, monitors and surveys the performance of the loans and sub-servicer. We generally earn a servicing fee on each loan, but we also incur the cost of the sub-servicer as well as the internal servicing surveillance team. Incurring the cost of both a sub-servicer and an internal surveillance team reduces the ~~net revenues we earn from the mortgage servicing portfolio; however, we believe it reduces our risk by minimizing delinquencies and repurchase risk.~~

In 2020, we sold approximately $4.2 billion in unpaid principal balance (UPB) of Freddie Mac and GNMA MSRs in the second and third quarters, which in conjunction with the historically low interest rate environment that increased significant voluntary prepayments, decreasing our mortgage servicing portfolio to $30.5 million at December 30, 2020. 6

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Wenet ~~have~~revenues ~~continued~~we toearn ~~selectively~~from ~~retain~~the ~~GNMA~~ mortgage servicing ~~in 2021, increasing our mortgage servicing~~ portfolio; ~~to $71.8 million at December 21~~however, ~~2021. The~~we ~~value~~believe ofit ~~mortgage~~reduces ~~servicing~~our ~~rights~~risk ~~are affected~~ by ~~increases~~minimizing ~~and~~delinquencies ~~decreases in mortgage interest rates,~~ and werepurchase ~~expect continued volatility in the value of mortgage servicing rights going forward~~risk.

Risk Management

We are exposed to various business risks which may significantly impact our financial statements. Our risk management framework and governance structure is intended to provide oversight and ongoing management of the risks inherent in our business activities and create a culture of risk awareness. Our Compliance and Risk Management teams oversee governance processes and monitoring of these risks including the establishment of risk strategy and documentation of risk policies and controls. Compliance and Risk Management work in partnership with the business to provide oversight of enterprise risk management and controls. This includes establishing enterprise-level risk management policies, appropriate governance activities and creating risk transparency through risk reporting. For further discussion on operational and market risks, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operational and Market Risks.”

Underwriting

WePrior to our repositioning to a broker model, we primarily ~~originate~~originated residential first mortgage loans for sale that ~~conform~~conformed to the respective underwriting guidelines established by Fannie Mae, Freddie Mac, FHA, VA and USDA. Our mortgage loans ~~are~~were underwritten individually on a loan-by-loan basis. Each mortgage loan originated from our retail and wholesale channel ~~are~~were underwritten by one of our underwriters or by a third party contract underwriter using our underwriting guidelines. When we originate loans from our correspondent channel, each mortgage loan is reviewed internally or by a third party underwriting company to determine if the borrower meets our underwriting guidelines.

Our criteria for underwriting generally ~~include~~included, but ~~are~~were not limited to, full documentation of borrower’s income, assets, other relevant financial information, the specific agency’s eligible loan-to-value (LTV), borrower’s debt-to-income ratio and full appraisals when required. Variances from any of these standards ~~are~~were permitted only to the extent allowable under the specific program requirements. Our underwriting procedures for all retail and wholesale loans ~~require~~required the use of a GSE automated underwriting system (AUS). Our underwriting procedures for all correspondent originated loans includes a file review verifying that the borrower’s credit and the collateral meet our applicable program guidelines and an appropriate AUS report has been completed. We also confirm the loan is compliant with regulatory guidelines. In addition, we perform quality control procedures on selected pools prior to our acquisition of the loan.

Quality Control

Prior to ~~funding~~our repositioning to a broker model, retail and wholesale loans ~~are~~were reviewed internally by our quality control department to verify the loan conforms to our program guidelines and meets state and federal compliance guidelines. ~~Prior to the acquisition of a correspondent loan, we perform quality control procedures on selected pools. Management reviews the reports prior to the acquisition of any correspondent loan.~~ We also ~~perform~~performed post origination quality controls procedures on at least 10% of all mortgage loans funded or acquired from third party originators. Additionally, we closely ~~monitor~~monitored the servicing performance of loans retained in our mortgage servicing portfolio to identify any opportunities to improve our underwriting process or procedures and identify any issues with mortgage brokers or correspondent sellers. Findings ~~are~~were summarized monthly and the appropriate changes ~~are~~were implemented.

Hedging

We ~~are~~were historically exposed to interest rate risks relating to our mortgage lending operations. We use derivative instruments to manage some of our interest rate risk; however, we dodid not attempt to hedge interest rate risk completely. For further discussion on interest rate risk and hedging, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operation and Market Risks.”

Data Security

Sensitive borrower information, such as name, address and social security number is included in nearly all mortgage loan files. We seek to keep this information secure for every borrower. To do so, our policy requires all sensitive borrower data to be transmitted to us through our secure website portal which allows all of our customers, correspondent sellers, mortgage brokers and individual borrowers to send data to us securely in an encrypted manner. For a discussion of cybersecurity and data privacy risk see Item 1A. “Risk Factors - Cybersecurity risks, data privacy breaches, cyber incidents and technology failures may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.”

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sellers, mortgage brokers and individual borrowers to send data to us securely in an encrypted manner. For a discussion of cybersecurity and data privacy risk see Item 1A. “Risk Factors - Cybersecurity risks, data privacy breaches, cyber incidents and technology failures may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.”

Long-Term Mortgage Portfolio

~~The~~In March 2022, we sold our residual interest certificates and assigned certain optional termination and loan purchase rights relating to 37 securitizations that closed between 2000 and 2007, which entailed the entire legacy securitization portfolio within our long-term mortgage portfolio. ~~primarily~~As ~~consists~~a result of ~~residual~~the ~~interests~~sale, in ~~the~~accordance ~~securitization~~with ~~trusts~~FASB ~~reflected~~ASC as810-10-25, we deconsolidated the securitized mortgage trust assets totaling approximately $1.6 billion and trust liabilities inof ~~our~~$1.6 ~~consolidated~~billion ~~balance~~as ~~sheets~~of ~~that~~the ~~hold~~sale ~~non-conforming~~date ~~mortgage~~as ~~loans~~the ~~originated~~Company ~~between~~was ~~2002~~no ~~and~~longer ~~2007.~~the ~~Since~~primary webeneficiary ~~are~~of nothe ~~longer~~consolidated ~~adding~~securitization ~~new~~trusts. ~~mortgage~~We ~~loans~~will toremain as the ~~long-term~~master ~~mortgage~~servicer ~~portfolio,~~with respect to all of the ~~long-term~~securitizations ~~mortgage~~until ~~portfolio~~such ~~continues~~time tothat ~~decrease~~the ~~and~~deals isare acollapsed, ~~smaller~~payoff ~~component~~or ofthe ~~our~~master ~~overall~~servicing ~~operating~~rights ~~results.~~are sold.

~~Our~~ long-term mortgage portfolio consists of our residual interests in securitizations represented on our consolidated balance sheets as the difference between total trust assets and total trust liabilities. Our long-term mortgage portfolio includes adjustable rate and, to a lesser extent, fixed rate Alt-A single-family residential mortgages and commercial (primarily multifamily residential loans) mortgages that were acquired and originated primarily by our discontinued, prior non-conforming mortgage lending operations and retained in our long-term portfolio before 2008. Alt-A mortgages are primarily first lien mortgages made to borrowers whose credit was generally within established Fannie Mae and Freddie Mac guidelines at origination date but have loan characteristics that make them non-conforming under those guidelines.

InPrior previous years, we securitized mortgage loans by transferring originated residential single-family mortgage loans and multifamily commercial loans (the “transferred assets”) into non-recourse bankruptcy remote trusts which in turn issued tranches of bonds to ~~investors supported only by~~ the ~~cash~~sale ~~flows~~ of the ~~transferred~~legacy ~~assets.~~securitization ~~Because the assets and liabilities in the securitizations are nonrecourse to us~~portfolio, the ~~bondholders~~long-term ~~cannot~~mortgage ~~look~~portfolio toprimarily usconsisted ~~for repayment~~ of ~~their~~residual ~~bonds~~interests in the ~~event~~securitization oftrusts areflected ~~shortfall.~~as ~~These securitizations were structured to include interest rate derivatives, which have since expired. We retained the residual interest in each~~ trust, ~~and~~assets ~~in most cases are the master servicer. A trustee~~ and ~~servicer,~~liabilities ~~unrelated~~in toour ~~us,~~consolidated ~~was~~balance ~~named~~sheets ~~for~~that ~~each~~held ~~securitization.~~non-conforming ~~Cash~~mortgage ~~flows from the~~ loans ~~(the~~originated ~~loan~~between ~~payments~~2002 and ~~liquidation~~2007. ofSince ~~foreclosed~~we ~~real~~were ~~estate~~no ~~properties)~~longer ~~collected~~adding bynew ~~the~~mortgage ~~loan~~loans ~~servicer are remitted~~ to ~~us,~~ the ~~master~~long-term ~~servicer.~~mortgage ~~The~~portfolio, ~~master servicer remits payments to~~ the ~~trustee~~long-term ~~who~~mortgage ~~remits~~portfolio ~~payments~~continued to ~~the~~decrease ~~bondholders (investors). The servicer collects loan payments~~ and ~~performs~~was ~~loss~~a ~~mitigation~~smaller ~~activities~~component ~~for~~of ~~defaulted~~our ~~loans.~~overall ~~These~~operating ~~activities include foreclosing on properties securing defaulted loans, which~~ results ~~in real estate owned (REO)~~.

~~Commercial~~The ~~mortgages~~long-term mortgage portfolio consisted of our residual interests in securitizations represented on our consolidated balance sheets as the difference between total trust assets and total trust liabilities. The long-term mortgage portfolio ~~are~~included ~~primarily~~ adjustable rate ~~mortgages~~and, ~~with~~to ~~initial~~a ~~fixed~~lesser ~~interest~~extent, fixed rate ~~periods~~Alt-A ofsingle-family ~~two,~~residential ~~three,~~mortgages ~~five,~~and ~~seven~~commercial ~~and~~(primarily ~~ten~~multifamily ~~years~~residential loans) mortgages that ~~subsequently~~were ~~convert~~acquired toand ~~adjustable~~originated ~~rate~~primarily ~~mortgages~~by ~~(hybrid~~our ~~ARMs)~~discontinued, ~~and~~prior ~~are~~non-conforming ~~primarily~~mortgage ~~secured~~lending ~~with~~operations ~~multi~~and retained in our long-~~family~~term ~~residential~~portfolio ~~real~~before ~~estate~~2008. ~~Commercial~~Alt-A mortgages ~~have~~are ~~provided~~primarily ~~greater~~first ~~asset~~lien ~~diversification~~mortgages onmade ~~our~~to ~~consolidated~~borrowers ~~balance~~whose ~~sheets~~credit aswas ~~borrowers~~generally ofwithin ~~commercial~~established ~~mortgages~~Fannie ~~typically~~Mae ~~have~~and ~~higher~~Freddie ~~credit~~Mac ~~scores~~guidelines ~~and~~at ~~commercial~~origination ~~mortgages~~date ~~typically~~but have ~~lower~~loan ~~LTVs~~characteristics that make them non-conforming under those guidelines.

~~Before~~In ~~2007~~previous years, we securitized mortgage loans inby ~~the~~transferring ~~form~~originated ofresidential ~~collateralized~~single-family mortgage ~~obligations,~~loans orand ~~CMOs,~~multifamily ~~which~~commercial ~~were~~loans ~~consolidated~~(the ~~and~~“transferred ~~accounted~~assets”) ~~for~~into asnon-recourse ~~secured~~bankruptcy ~~borrowings~~remote ~~for~~trusts ~~financial~~which ~~statement~~in ~~purposes.~~turn ~~Securitized~~issued ~~mortgages~~tranches inof bonds to investors supported only by the ~~form~~cash flows of ~~real~~the ~~estate~~transferred ~~mortgage~~assets. ~~investment~~Because ~~conduits,~~the orassets ~~REMICs,~~and ~~were~~liabilities ~~either~~in ~~consolidated~~the orsecuritizations ~~unconsolidated~~were ~~depending~~nonrecourse onto us, the ~~design~~bondholders could not look to us for repayment of their bonds in the ~~securitization~~event ~~structure~~of a shortfall. WeThese ~~consolidated~~securitizations ~~the~~were ~~variable~~structured ~~interest~~to ~~entity,~~include orinterest ~~VIE~~rate derivatives, aswhich ~~the~~had ~~primary~~since ~~beneficiary~~expired. ofWe retained the ~~sole~~ residual interest in each ~~securitization~~ trust, ~~where~~and wein ~~also~~most ~~performed~~cases are the master ~~servicing~~servicer. ~~Amounts~~A ~~consolidated~~trustee ~~were~~and ~~included~~servicer, inunrelated ~~trust~~to ~~assets~~us, ~~and~~was ~~liabilities~~named asfor ~~securitized~~each ~~mortgage~~securitization. ~~collateral,~~Cash flows from the loans (the loan payments and liquidation of foreclosed real estate ~~owned,~~properties) ~~derivative~~collected ~~assets,~~by ~~securitized~~the ~~mortgage~~loan ~~borrowings~~servicer ~~and~~were ~~derivative~~remitted ~~liabilities~~to inus, the ~~accompanying~~master ~~consolidated~~servicer. ~~balance~~The ~~sheets.~~master Atservicer ~~December 31,~~remits ~~2021,~~payments ~~our~~to ~~residual~~the ~~interests~~trustee inwho ~~securitizations~~remits ~~(represented~~payments byto the ~~difference~~bondholders ~~between~~(investors). ~~total~~The ~~trust~~servicer ~~assets~~collects loan payments and ~~total~~performs ~~trust~~loss ~~liabilities)~~mitigation ~~increased~~activities tofor ~~$27~~defaulted loans.~~9 million,~~ ~~compared~~These toactivities ~~$16.7 million~~include atforeclosing ~~December 31~~on properties securing defaulted loans, ~~2020~~which results in real estate owned (REO).

~~Since~~Commercial ~~2007~~mortgages in the long-term mortgage portfolio were primarily adjustable rate mortgages with initial fixed interest rate periods of two, wethree, ~~have~~five, ~~not~~seven ~~added~~and ~~any~~ten ~~mortgage~~years ~~loans~~that subsequently converted to ~~our~~adjustable ~~long~~rate mortgages (hybrid ARMs), and were primarily secured with multi-~~term~~family ~~mortgage~~residential ~~portfolio~~real estate. Commercial mortgages had provided greater asset diversification on our consolidated balance sheets as borrowers of commercial mortgages typically have higher credit scores and commercial mortgages typically have lower LTVs.

~~For~~Before ~~additional~~2007, ~~information~~we ~~regarding~~securitized mortgage loans in the ~~long-term~~form of collateralized mortgage ~~portfolio~~obligations, ~~refer~~or toCMOs, ~~Item 7. “Management’s~~which ~~Discussion~~were consolidated and ~~Analysis~~accounted for as secured borrowings for financial statement purposes. Securitized mortgages in the form of ~~Financial~~real ~~Condition~~estate mortgage investment conduits,” or REMICs, were either consolidated or unconsolidated depending on the design of the securitization structure. We consolidated the variable interest entity, or VIE, as the primary beneficiary of the sole residual interest in each securitization trust where we also performed the master servicing. Amounts consolidated were included in trust assets and ~~Note 6~~liabilities as securitized mortgage collateral, real estate owned, derivative assets, securitized mortgage borrowings and derivative liabilities in the accompanying consolidated balance sheets. ~~“Securitized~~As ~~Mortgage~~a ~~Trusts”~~result of the sale and deconcolidation in the ~~notes~~first toquarter of 2022, at December 31, 2022, we had no residual interests in securitizations (represented by the difference between total trust assets and total trust liabilities) on our consolidated ~~financial~~balance ~~statements~~sheets as compared to $27.9 million at December 31, 2021.

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For additional information regarding the long-term mortgage portfolio refer to Item 7. “Management’s Discussion and Analysis of Financial Condition,” and Note 6. “Securitized Mortgage Trusts” in the notes to the consolidated financial statements.

Master Servicing

Until 2007, we were retaining master servicing rights on substantially all of our non-conforming single-family residential and commercial mortgage acquisitions and originations that were sold through securitizations. Since 2008, we have not retained any additional master servicing rights, but have continued to be the master servicer of previously retained master servicing rights.

The function of a master servicer includes collecting loan payments from loan servicers and remitting loan payments, less master servicing fees receivable and other fees, to a trustee or other purchaser for each series of mortgage-backed securities or mortgages master serviced. In addition, as master servicer, we monitor compliance with the servicing guidelines and perform or contract with third parties to perform all functions not adequately performed by any loan servicer. The master servicer is also required to advance funds, or cause the loan servicers to advance funds, to cover principal and interest payments not received from borrowers depending on the status of their mortgages, but only to the extent that it is determined that such advances are recoverable either from the borrower or from the liquidation of the property.

Master servicing fees are generally 0.03% per annum on the unpaid principal balance of the mortgages serviced. As a master servicer, we also earn income or incur expense on principal and interest payments received from borrowers until those payments are remitted to the investors of those mortgages. Fees from the master servicing portfolio have declined significantly due to a decrease in principal balances since the end of 2008, which in turn affects the amount we earn on balances held in custodial accounts. At December 31, ~~2021~~2022, we were the master servicer for approximately 97,~~000~~600 mortgages with an outstanding unpaid principal balance (UPB) of approximately $21.06 billion, of which $~~389~~301.67 million of those loans were 60 or more days delinquent. At December 31, ~~2021~~2022, we were also the master servicer for unconsolidated securitizations (included in the total master servicing portfolio above) totaling approximately $~~164~~138.63 million in unpaid principal balance, of which $7968.16 million of those loans were 60 or more days delinquent. Fees earned from master servicing are separate from those earned from mortgage servicing which are generated from servicing rights generated from loans sold servicing retained from new originations since 2011.

As previously noted, during the first quarter of 2022 we sold the legacy securitization portfolio, however we will remain as the master servicer with respect to all of the securitizations until such time that the deals are collapsed, payoff or the master servicing rights are sold.

Real Estate Services

In 2008, we established our Real Estate Services segment to provide solutions to the distressed mortgage and real estate markets. We provide loss mitigation and real estate services primarily on our own long-term mortgage portfolio, including default surveillance, loan modification services, short sale services (where a lender agrees to take less than the balance owed from the borrower), REO surveillance and disposition services and monitoring, reconciling and reporting services for residential and multifamily mortgage portfolios. As ~~The~~noted ~~activities~~above, ~~and~~in ~~related~~March ~~revenues~~2022, ~~have~~we ~~declined~~sold inour ~~recent~~residual ~~years~~interest certificates, and weassigned ~~expect~~certain ~~these~~optional ~~revenues~~termination toand ~~gradually~~loan ~~decline~~purchase ~~over~~rights ~~time~~which asentails the entire legacy securitization portfolio within our long-term mortgage portfolio ~~declines~~. ~~These~~As ~~operations~~a result, it is our expectation that the real estate services fees, net generated from the long-term mortgage portfolio will decline in future periods as the securitizations are ~~conducted~~called or collapsed by ~~IMC~~the purchaser. In the second quarter of 2020, CCC was created to, among other activities, assist with managing mortgage loans held-for-sale, and provide origination and servicing solutions focusing on loss mitigation strategies, including loan modifications and restructurings to assist borrowers.

Corporate

This segment includes all corporate services groups including information technology, human resources, legal, facilities, accounting, treasury and corporate administration. This corporate services group supports all operating segments. A portion of these costs are allocated to the operating segments based on certain allocation methods. These corporate services groups are centralized to be efficient and avoid any duplicate cost burdens. Specific costs associated with being a publicly traded company are not allocated and remain in this segment.

The corporate segment also includes debt expense related to the Convertible Notes which were extended in 2020 and due in 2022 as well as capital leases. Debt service expense is not allocated and remains in this segment. We have taken advantage of very low financing rates and entered into capital lease arrangements to finance the purchase of equipment, mostly computer equipment, used in all three segments. The interest expense associated with the capital leases is not allocated and remains in this segment.9

Human Capital Management

The Company’s key human capital management objectives are to attract, retain and develop talent to deliver on

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~~the~~The ~~Company’s~~corporate ~~strategy.~~segment Toalso ~~support~~includes ~~these~~debt ~~objectives,~~expense ~~the~~related ~~Company’s~~to ~~human~~the ~~resources~~Convertible ~~programs~~Notes ~~are~~which ~~designed~~were ~~to:~~extended ~~keep~~in ~~people~~2022 ~~safe~~ and ~~healthy;~~due ~~enhance~~and ~~the~~payable ~~Company’s~~in ~~culture~~three ~~through~~equal ~~efforts~~installments ~~aimed~~of at$5.0 ~~making~~million ~~the~~on ~~workplace~~each ~~more~~of ~~inclusive~~May ~~and~~9, ~~free~~2023, ~~from~~May ~~discrimination~~9, or2024 ~~harassment~~and on the ~~basis~~stated maturity date of ~~color,~~May ~~race~~9, ~~sex,~~2025 ~~national~~as ~~origin,~~well ~~ethnicity,~~as ~~religion,~~capital ~~age,~~leases. ~~disability,~~Debt ~~sexual~~service ~~orientation,~~expense ~~gender~~is ~~identification~~not orallocated ~~expression~~and orremains ~~any~~in ~~other~~this ~~status~~segment. ~~protected~~We byhave ~~applicable~~taken ~~law;~~advantage ~~acquire~~of very low financing rates and ~~retain~~entered ~~diverse~~into ~~talent;~~capital ~~reward~~lease ~~and~~arrangements ~~support~~to ~~employees~~finance ~~through~~the ~~competitive~~purchase ~~pay~~of ~~and~~equipment, ~~benefit~~mostly ~~programs;~~computer ~~develop~~equipment, ~~talent~~used toin ~~prepare~~all ~~them~~three ~~for~~segments. ~~critical~~The ~~roles~~interest ~~and~~expense ~~leadership~~associated ~~positions;~~with ~~and~~the ~~facilitate~~capital ~~internal~~leases ~~talent~~is ~~mobility~~not toallocated ~~create~~and aremains ~~high-performing~~in ~~workforce.~~this segment.

Human Capital Management

The Company’s key human capital management objectives are to attract, retain and develop talent to deliver on the Company’s strategy. To support these objectives, the Company’s human resources programs are designed to: keep people safe and healthy; enhance the Company’s culture through efforts aimed at making the workplace more inclusive and free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law; acquire and retain diverse talent; reward and support employees through competitive pay and benefit programs; develop talent to prepare them for critical roles and leadership positions; and facilitate internal talent mobility to create a high-performing workforce.

The COVID-19 pandemic ~~has~~ had a significant impact on how we managed our human capital. Nearly all of our workforce began working remotely since March 2020, and we instituted safety protocols and procedures for the ~~essential~~ employees who returned to work on site.

As of December 31, ~~2021~~2022, we had a total of ~~326~~98 employees, nearly all of whom are full-time. Management believes that relations with our employees are good. We are not a party to any collective bargaining agreements.

Regulation

The U.S. mortgage industry is heavily regulated. Our mortgage lending operations, as well as our real estate services, are subject to federal, state and local laws that regulate and restrict the manner in which we operate in the residential mortgage industry, including, but not limited to, laws and regulations which: regulate our business practices; limit the interest rates, finance charges and other fees we may charge or pay; impose underwriting requirements; regulate our marketing techniques and practices; mandate disclosures and notices to consumers; regulate our servicing practices; and impose licensing requirements and financial obligations on us.. Plus, mortgage bankers and brokers in our wholesale production ~~channel~~channelfrom ~~and correspondents from~~ which we purchase loans are also subject to regulation, which may have an effect on our business and the mortgage loans we are able to fund or acquire. Compliance with regulations in the mortgage industry requires us to incur costs and expenses in our operations. To the extent we, or others with which we conduct business, do not comply with applicable laws and regulations, we may be subject to fines, reimbursements and other penalties which could include restrictions on our operations. Changes in these regulatory and legal requirements, including changes in their enforcement, could materially and adversely affect our business and our financial condition, liquidity and results of operations. The laws and regulations that we are subject to include (but are not limited to) the following:

●

the Bank Secrecy Act and the USA PATRIOT Act, as well as related regulations issued by the U.S. Department of the Treasury and federal banking regulators (collectively, AML laws) which require financial to implement an AML compliance program that is reasonably designed to prevent money laundering and the financing of terrorism;

●

the Federal Truth-in-Lending Act (known as TILA) and Regulation Z promulgated thereunder, which require certain disclosures to the borrowers regarding the terms of the loans, regulates the methods in which compensation can be paid to brokers and loan originators; and prohibits lenders from making residential mortgage loans unless a good faith determination is made of a borrower’s creditworthiness based on verified and documented information;

●

the Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the extension of credit;

● the Fair Housing Act, which prohibits discrimination in housing on the basis of race, color, national origin, ~~religion, sex, familial status, or handicap, in housing-related transactions;~~

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religion, sex, familial status, or handicap, in housing-related transactions;

●

the Fair Credit Reporting Act, which regulates the use and reporting of information related to the borrower’s credit experience;

●

the Fair and Accurate Credit Transaction Act, which regulates credit reporting and use of credit information in making unsolicited offers of credit;

● state and federal privacy regulations which include the Gramm-Leach-Bliley Act, which imposes requirements on all lenders with respect to their collection and use of nonpublic financial information and requires them to maintain the security of that information and the California Consumer Privacy Act (and comparable data privacy regulations in other states) which enhances privacy rights and consumer protections for California residents and property owners;

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requires them to maintain the security of that information and the California Consumer Privacy Act (and comparable data privacy regulations in other states) which enhances privacy rights and consumer protections for California residents and property owners;

●

the Real Estate Settlement Procedures Act (known as RESPA) and Regulation X promulgated thereunder, outlaws kickbacks that increase the cost of settlement services;

●

the Home Mortgage Disclosure Act (known as HMDA) and Regulation C promulgated thereunder, which requires the reporting of public loan data;

●

the Telephone Consumer Protection Act and the CAN-SPAM Act, which regulate commercial solicitations via telephone, fax, and the Internet;

●

the Depository Institutions Deregulation and Monetary Control Act of 1980, which preempts certain state usury laws;

●

the Alternative Mortgage Transaction Parity Act of 1982, which preempts certain state lending laws which regulate alternative mortgage transactions;

●

the Fair Debt Collection Practices Act, which prohibits unfair debt collection practices;

●

the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which establishes national minimum standards for mortgage licensees;

●

regulations promulgated by the CFPB to help assure that consumers are provided with timely and understandable information about residential mortgage loans that protect them against Unfair, Deceptive or Abusive Acts or Practices;

●

interagency final rules required pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) establishing minimum national underwriting guidelines for residential mortgages that lenders will be allowed to securitize without retaining any of the loans’ default risk; and

●

the Secure and Fair Enforcement for Mortgage Licensing Act, commonly known as the SAFE Act, which is designed to enhance consumer protection and reduce fraud by requiring states to establish minimum standards for the licensing and registration of state licensed mortgage loan originators.

Since its formation, the CFPB has taken a very active role in the mortgage industry. The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, and its rulemaking and regulatory agenda relating to loan servicing and origination continues to evolve. The CFPB also has broad supervisory and enforcement powers with regard to non-depository financial institutions that engage in the origination and servicing of mortgage loans. The CFPB has conducted routine examinations of our business and will conduct future examinations

As part of its enforcement authority, the CFPB can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, remediation of practices, external compliance monitoring and civil money penalties. The CFPB has been active in investigations and enforcement actions and has issued large civil money penalties since its inception to parties the CFPB determines violated the laws and regulations it enforces.

In addition, various federal, state and local laws have been enacted that are designed to discourage predatory lending and servicing practices. Some states have enacted, or may enact, similar laws or regulations, which in some cases impose restrictions and requirements greater than those in federal law. Also, under the anti-predatory lending laws of some states, the origination of certain residential loans, including loans that are not classified as “high cost” loans under applicable law, must satisfy a net tangible benefits test with respect to the related borrower. This test may be highly subjective and open to interpretation. As a result, a court may determine that a residential loan, for example, does not meet 11

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~~the~~practices, ~~test~~external ~~even~~compliance ifmonitoring ~~the~~and ~~related~~civil ~~originator~~money ~~reasonably believed that the test was satisfied~~penalties. ~~Failure~~The ofCFPB ~~residential~~has ~~loan~~been ~~originators~~active orin ~~servicers~~investigations toand ~~comply~~enforcement ~~with~~actions ~~these~~and ~~laws,~~has toissued ~~the~~large ~~extent~~civil ~~any~~money ofpenalties ~~their~~since ~~residential~~its ~~loans~~inception ~~are or become part of our mortgaged-related assets, could subject us~~ to ~~monetary~~parties ~~penalties~~the ~~and~~CFPB ~~could~~determines ~~result~~violated in the ~~borrowers~~laws ~~rescinding~~and ~~the~~regulations ~~affected~~it ~~residential loans~~enforces.

~~Our~~In ~~mortgage~~addition, ~~lending~~various ~~operations~~federal, isstate anand ~~approved~~local ~~Housing~~laws ~~and~~have ~~Urban~~been ~~Development~~enacted ~~(HUD)~~that ~~lender,~~are adesigned ~~Ginnie~~to ~~Mae~~discourage ~~approved~~predatory ~~issuer~~lending and ~~servicer~~servicing ~~and~~practices. anSome ~~approved~~states ~~but~~have ~~inactive~~enacted, ~~seller/servicer~~or ofmay ~~Fannie~~enact, ~~Mae. As~~similar ~~previously~~laws ~~disclosed~~or regulations, onwhich ~~July~~in 7,some ~~2020~~cases weimpose ~~were~~restrictions ~~suspended~~and byrequirements ~~Freddie~~greater ~~Mac~~than ~~and~~those ~~are~~in ~~working~~federal tolaw. ~~satisfy~~Also, under the ~~requirements~~anti-predatory ~~outlined~~lending tolaws ~~achieve~~of ~~reinstatement. As~~some ~~such~~states, wethe ~~are~~origination ~~required~~of tocertain ~~submit~~residential ~~annually~~loans, toincluding ~~Fannie~~loans ~~Mae,~~that ~~Freddie~~are ~~Mac~~not ~~(when~~classified anas ~~active~~“high ~~seller/servicer),~~cost” ~~and~~loans ~~HUD,~~under as applicable law, ~~audited~~must ~~financial~~satisfy ~~statements,~~a ornet ~~the~~tangible ~~equivalent,~~benefits ~~according~~test with respect to the ~~financial~~related ~~reporting~~borrower. ~~requirements~~This oftest ~~each~~may ~~regulatory~~be ~~entity~~highly ~~for~~subjective ~~its~~and ~~sellers/servicers.~~open ~~Our~~to ~~lending~~interpretation. ~~activities~~As ~~are~~a ~~also~~result, ~~subject~~a tocourt ~~examination~~may bydetermine ~~Fannie~~that ~~Mae,~~a ~~Ginnie~~residential ~~Mae~~loan, ~~Freddie~~for ~~Mac~~example, ~~HUD,~~does ~~CFPB~~not ~~and~~meet ~~state~~the ~~regulatory~~test ~~agencies~~even ~~including~~if the ~~California~~related ~~Department~~originator ofreasonably ~~Financial~~believed ~~Protection~~that ~~and~~the ~~Innovation~~test ~~(f/k/a~~was ~~California~~satisfied. ~~Department~~Failure of ~~Business~~residential ~~Oversight)~~loan atoriginators ~~any~~or ~~time~~servicers to ~~assure~~comply ~~compliance~~ with ~~applicable~~these ~~regulations~~laws, ~~policies~~to ~~and~~the ~~procedures.~~extent ~~Also~~any ~~refer~~of totheir ~~“Regulatory~~residential ~~Risks”~~loans ~~under~~are ~~Item 1A.~~or ~~Risk~~become ~~Factors~~part ~~for~~of aour ~~further~~mortgaged-related ~~discussion~~assets, ofcould ~~regulations~~subject ~~that~~us ~~may~~to ~~affect~~monetary uspenalties and could result in the borrowers rescinding the affected residential loans.

Our mortgage lending operations is an approved Housing and Urban Development (HUD) lender and a Ginnie Mae approved issuer and servicer. As previously disclosed, we intend to voluntarily relinquish our GSE Seller/Servicer designation with Fannie Mae and Freddie Mac. We are required to submit annually to Fannie Mae and Freddie Mac (when an active seller/servicer), and HUD, as applicable, audited financial statements, or the equivalent, according to the financial reporting requirements of each regulatory entity for its sellers/servicers. Our lending activities are also subject to examination by Fannie Mae, Ginnie Mae, Freddie Mac, HUD, CFPB and state regulatory agencies including the California Department of Financial Protection and Innovation (f/k/a California Department of Business Oversight) at any time to assure compliance with applicable regulations, policies and procedures. Also refer to “Regulatory Risks” under Item 1A. “Risk Factors” for a further discussion of regulations that may affect us.

Competition

We operate in a highly competitive industry that could become even more competitive as a result of legislative, regulatory, economic, and technological changes, as well as continued consolidation or expansion. Our competitors include banks, thrifts, credit unions, real estate brokerage firms, mortgage brokers, fintech companies and mortgage banking companies. Competition is based on a number of factors including, among others, customer service, quality and range of products and services offered, price, reputation, interest rates, lending limits and customer convenience. To compete effectively, we must have a very high level of operational, technological, and managerial expertise, as well as access to capital at a competitive cost. Many of our competitors are larger than we are and have access to greater financial resources than we do, which can place us at a competitive disadvantage. In addition, many of our largest competitors are banks or affiliated with banking institutions, the advantages of which include, but are not limited to, the ability to hold new mortgage loan originations in an investment portfolio and having access to financing with more favorable terms than we do, including lower funding costs with bank deposits as a source of liquidity.

Our real estate services segment competes with firms that provide similar services, including loan modification companies, real estate asset management and disposition companies and real estate brokerage firms. Our competitors include large mortgage servicers, established subprime loan servicers, and newer entrants to the specialty servicing and recovery collections business. Efforts to market our ability to provide real estate services for others is more difficult than many of our competitors because we have not historically provided such services to unrelated third parties, and we are not a rated primary or special servicer of residential mortgage loans as designated by a rating agency.

Risk factors, as outlined below, provide additional information related to risks associated with competition in the mortgage industry.

ITEM 1A. RISK FACTORS

In addition to other information in this report, please consider the following discussion of factors that make an investment in our securities risky. The risks or uncertainties described in this Form 10-K can materially and adversely affect our business, results of operations or financial condition. The risks and uncertainties described below have been grouped under general risk categories, one or more of which categories may be applicable to the risk factors described. The risks and uncertainties described in this Form 10-K are not the only ones facing us. Additional risks and uncertainties of which we are unaware or that we currently deem immaterial may also become important factors that can harm our

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business, results of operations and financial condition.

Summary of Risk Factors

The following is a summary of the risks more fully described below and should not be relied upon as an exhaustive summary of the material risks facing our business.

Risks Related to our Business

●

We have a history of losses, and we may be unable to achieve or sustain profitability.

●

Our liquidity may be adversely affected if we are not able to generate earnings, access additional capital or generate other sources of cash.

●

Our success is primarily dependent on our ability to increase the profitability of our mortgage lending segment.

●

We may not be able to access financing sources on favorable terms, or at all, which could adversely affect our ability to implement and operate our business as planned.

●

If we are unable to satisfy our debt obligations or to meet or maintain the requisite financial covenant requirements with our lenders, our financial condition and results of operations may be materially and adversely effected.

●

Our use of financial leverage exposes us to increased risks, including breaches and additional potential breaches of the financial covenants under our borrowing facilities, which could result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs, as well as triggering cross-defaults under other debt agreements.

●

The success and growth of our business will depend upon our ability to adapt to and implement technological changes.

●

Our performance may be adversely affected by the performance of parties who service or sub-service our mortgage loans.

●

Our ability to utilize our net operating losses and certain other tax attributes may be limited.

●

Our NonQM product offerings may expose us to a higher risk of delinquencies, regulatory risks, foreclosures, counterparty risk and losses adversely affecting our earnings and financial condition.

●

Cybersecurity risks, data privacy breaches, cyber incidents and technology failures may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our consolidated financial results.

●

Delayed mortgage loan sales could result in a liquidity shortage which would adversely affect our operating results.

●

Loss of our current executive officers or other key management could significantly harm our business.

●

We may become, and in some cases are, a defendant in lawsuits, some of which may be class action matters, and we may not prevail in these matters.

●

If we are forced to liquidate, we may have few unpledged assets for distribution to unsecured creditors or equity holders.

●

Our hedging strategies implemented by our mortgage lending operations may not be successful in mitigating our risks associated with the market movement of interest rates.

●

Further spread of COVID-19 or any mutations thereof could negatively impact the availability of key personnel necessary to conduct our business.

●

The continued impact of the pandemic could negatively impact the availability of key third party service providers necessary to conduct our business and the ability of counterparties to meet contractual obligations to us.

●

We depend on the accuracy and completeness of information provided by customers and counterparties.

●

Representations and warranties made by us in our loan sales, servicing rights sales and securitizations may subject us to liability.

●

The geographic concentration of our mortgages increases our exposure to risks in those areas.

●

Our vendor relationships subject us to a variety of risks.

●

Our risk management policies and procedures may not be effective.

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●

If we fail to maintain effective systems of internal control over financial reporting and disclosure controls and procedures, we may not be able to report our consolidated financial results accurately or prevent fraud, which could cause current and potential stockholders to lose confidence in our financial reporting, adversely affect the trading price of our securities or harm our operating results.

Risks Related to Our Industry

●

Our earnings may decrease, or losses increase, because of changes in prevailing interest rates.

●

The pandemic has impaired and may continue to impair the ability of borrowers to repay outstanding loans or other obligations, resulting in increases in forbearances and/or delinquencies, which could negatively impact our business.

●

A decline in real estate values may have a material adverse effect on our consolidated financial condition and consolidated results of operation.

●

Our business is affected by changes in the state of the general economy and the financial markets, and a slowdown or downturn in the general economy or the financial markets could adversely affect our results of operations.

●

Replacement of the LIBOR benchmark interest rate may have an adverse impact on our business, financial condition or results of operations.

Risks Related to Regulation

●

Loss, suspension, or an unanticipated change in the status of our approvals, or limitations placed on our delivery volume, or the potential limitation or wind-down of, the role Fannie Mae, Freddie Mac and Ginnie Mae play in the residential mortgage-backed security (MBS) market have had, and could continue to have, an adverse effect on our business, operations and financial condition.

●

Regulatory laws affecting our operations, or interpretations of them, may affect our mortgage lending operations.

●

The CFPB continues to be active in its monitoring of the loan origination and servicing sectors, and its rules increase our regulatory compliance burden and associated costs.

●

Regulatory proceedings and related matters could adversely affect us.

Risks Related to Our Common Stock

●

If we do not continue to satisfy the NYSE American continued listing requirements, our Common Stock could be delisted from the NYSE American.

●

The Company incurs significant expenses and administrative burdens as a public company, which could have a material adverse effect on our business, financial condition and results of operations.

●

Our share price has been and may continue to be volatile and the trading of our shares may be limited.

●

Issuances of additional shares of our common stock or other securities may adversely affect the market price of our common stock and significantly dilute stockholders.

●

We do not expect to pay dividends in the foreseeable future and we may be restricted in paying dividends on our common stock.

●

Our principal stockholders beneficially own a large portion of our stock, and accordingly, may have control over stockholder matters and sales may adversely affect the market price of our common stock.

●

Provisions in our charter documents and Maryland law, as well as our NOL Rights Plan, impose limitations that may delay or prevent our acquisition by a third party.

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Risks Related to Our Business

~~Our~~We ~~long-term~~have ~~success~~a ishistory ~~primarily~~of ~~dependent~~losses, onand ~~our~~we ~~ability~~may tobe ~~increase~~unable ~~the~~to ~~profitability~~achieve ofor ~~our~~sustain ~~mortgage originations~~profitability.

We ~~believe~~have ~~that~~experienced anet ~~key~~losses ~~driver~~in ~~for~~each of our ~~Company~~last ~~will~~five befiscal ~~increasing~~years. In ~~the~~2022, ~~profitability~~2021 ofand ~~our~~2020, ~~mortgage~~we ~~lending~~incurred ~~operations.~~net ~~Our~~losses ~~success~~of is$39.4 ~~dependent~~million, on$3.9 ~~many~~million ~~factors~~and ~~such~~$88.2 asmillion, ~~the~~respectively. ~~documentation~~Although ~~and~~we ~~data~~anticipate ~~capture~~decreasing ~~technology~~our weoperating ~~employ,~~expenses ~~increasing~~in ~~our~~2023 ~~loan~~as ~~origination~~compared ~~operational~~to ~~capacities~~2022, ~~increasing~~and ~~our~~making ~~mortgage~~changes ~~origination~~to ~~efficiencies,~~our ~~attracting~~business ~~qualified employees~~model, ~~ability~~including torepositioning ~~maintain~~ our ~~approvals~~retail ~~and~~consumer ~~sell~~direct orchannel ~~securitize~~to ~~loans~~be ~~eligible~~a ~~for~~mortgage ~~sale~~broker torather ~~Fannie~~than ~~Mae,~~a ~~Freddie~~direct ~~Mac~~lender, ~~Ginnie~~we ~~Mae~~may ~~and~~not ~~other~~succeed ~~investors,~~in ~~ability~~increasing toour ~~increase~~revenues ~~our~~and ~~mortgage~~margins ~~servicing~~sufficiently ~~portfolio~~to offset our expenses. Accordingly, ~~the~~we ~~ability~~may continue to ~~obtain~~incur ~~adequate~~losses ~~warehouse~~for ~~borrowing~~the ~~capacity~~foreseeable future. As a result, ~~the~~we ~~ability~~may be unable to ~~adequately~~satisfy ~~maintain~~our ~~loan~~future ~~quality~~operating costs and ~~manage~~liabilities, ~~the~~including ~~risk~~repayment of ~~losses~~our ~~from~~debt, ~~loan~~which ~~repurchases,~~may ~~the~~materially ~~changing~~and ~~regulatory~~adversely ~~environment~~affect ~~for~~our ~~mortgage~~financial ~~lending~~condition and ~~the~~results ~~ability~~of ~~to fund our originations~~operations.

IfOur weliquidity ~~are~~may ~~unable~~be toadversely ~~generate~~affected ~~sufficient~~if ~~net earnings from our mortgage lending operations,~~ we ~~may~~are benot ~~unable~~able to ~~satisfy~~generate ~~our~~net ~~future operating costs and liabilities~~earnings, ~~including~~access ~~repayment~~additional ofcapital ~~our~~or ~~debt~~generate ~~obligations,~~other ~~which~~sources ~~may materially and adversely affect our financial condition and results~~ of ~~operations~~cash.

Although we currently forecast adequate liquidity to operate our business for the next 12 months, repayment of $5.0 million in principal of Convertible Notes due May 9, 2023, with no additional added capital or liquidity, may result in a more limited amount of liquidity to operate our business. We may seek to raise secured or unsecured debt, raise equity or working capital, retire or restructure the Convertible Notes (which pay down $5.0 million each May 9th for the next three years), pursue actions to reorganize the capital structure or redeploy the liquidity to other corporate finance and strategic opportunities. We cannot provide assurance that any of such efforts will be successful or will improve our liquidity. If we are not successful in generating net earnings, restructuring our capital obligations, accessing additional capital or generating other sources of cash, our liquidity and ability to operate our business and continue as a going concern will be materially and adversely affected. The perception that we may not be able to continue as a going concern may also make it more difficult to operate our business due to concerns about our ability to meet our contractual obligations.

Our success is primarily dependent on our ability to increase the profitability of our mortgage lending segment.

We believe that a key driver for our Company will be increasing the profitability of our mortgage lending segment, including broker, retail and wholesale originations. Our success is dependent on many factors such as the documentation and data capture technology we employ, increasing our loan origination operational capacities, increasing our mortgage origination efficiencies, managing origination expense relative to market driven margins, attracting qualified employees, ability to sell or securitize loans eligible for sale to Fannie Mae, Freddie Mac, Ginnie Mae and other investors, the ability to fund eligible loans with lenders under a broker fulfillment strategy, the ability to obtain adequate warehouse borrowing capacity, the ability to adequately maintain loan quality and manage the risk of losses from loan repurchases, the changing regulatory environment for mortgage lending and the ability to fund, if necessary, our originations.

If we are unable to generate sufficient net earnings from our mortgage lending segment, which includes the ability to generate sufficient net income under the broker model, we may be unable to satisfy our future operating costs and liabilities, including repayment of our debt obligations, which may materially and adversely affect our financial condition, liquidity and results of operations.

We may not be able to access financing sources on favorable terms, or at all, which could adversely affect our ability to implement and operate our business as planned.

Future financing sources may include borrowings in the form of credit facilities (including term loans and revolving facilities), repurchase agreements, warehouse facilities, structured financing arrangements, public and private equity and debt issuances and derivative instruments, in addition to transactions or asset specific funding arrangements. Our access to sources of financing depends upon a number of factors some of which we have little or no control over, including general market conditions, resources and policies or lenders. In addition, if regulatory capital requirements imposed on our private lenders change, they may be required to limit, or increase the cost of, financing they provide to us. This could potentially increase our financing costs and reduce our liquidity as well as limit our ability to expand our mortgage operations. Depending on market conditions at the relevant time, we may have to rely more heavily on additional equity issuances, which may be dilutive to our shareholders, or on less efficient forms of debt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations and future business opportunities. We cannot assure you that we will have access to such equity or debt capital on favorable terms (including, without limitation, cost and term) at the desired times, or at all, which could negatively affect our results of operations and

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our ability to meet our operating and debt obligations. If our access to such funds are restricted, or are on terms that are materially adverse or are unavailable at all, we may not be able to continue those operations which may affect our financial condition, including our income and loan origination volumes.

We have significant debt obligations including:

● $2015.0 million Convertible Promissory Notes with $5.0 million due on each May ~~2022~~9 of 2023, 2024 and 2025;

● Junior Subordinated Notes with an outstanding principal balance of $62.0 million at December 31, ~~2021~~2022 and due March 2034; and

●

Warehouse facilities with third-party lenders which are secured by and used to fund residential mortgage loans until such loans are sold.

Our ability to make scheduled payments on our debt obligations depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt. If we are unable to generate cash flow from operations, we may be required to pursue one or more alternatives, including, but not limited to, monetizing certain assets (including but not limited to our ~~residual~~servicing ~~interests~~and/or master servicing rights), incurring additional debt, restructuring existing debt and/or pursuing actions to reorganize the capital structure or obtaining additional equity capital on terms that may be unfavorable to us or, highly dilutive to our shareholders and other stakeholders. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could have a material adverse effect on our financial condition and results of operations. Additionally, if we are unable to sell loans timely toand/or repay our warehouse lenders, our liquidity may be adversely affected.

In addition, our credit and warehouse facilities contain covenants, including requirements to maintain a certain minimum net worth, liquidity, litigation judgment thresholds, debt ratios, profitability levels and other customary debt covenants. A breach of the covenants can result in an event of default under our facilities and as such allows the lender to pursue certain remedies, including foreclosure on our assets. Furthermore, a breach under one facility may constitute a cross default under other agreements which would allow counterparties to pursue additional remedies against us. At December 31, ~~2021~~2022, we were not in compliance with certain financial covenants under our warehouse facilities and received the necessary waivers. In the event we are in noncompliance with our debt obligations, we cannot provide any assurance that we will be able to obtain waivers in the event of future noncompliance of our debt obligations.

Further spread of COVID-19 or any mutations thereof could negatively impact the availability of key personnel necessary to conduct our business.

The continued effects of the pandemic could adversely impact our financial condition and results of operations due to interrupted service and availability of personnel, including our executive officers and other employees that are part of our management team and an inability to recruit, attract and retain skilled personnel. To the extent our management or personnel are impacted in significant numbers by the outbreak of pandemic or epidemic disease and are not available or allowed to conduct work, our business and operating results may be negatively impacted. Additionally, the pandemic could negatively impact our ability to ensure operational continuity in the event our business continuity plan is not effective or ineffectively implemented or deployed during a disruption.

Our financial results and results of operations could be negatively impacted by the inability of third-party vendors to provide services we rely on to conduct our business and operate effectively, including vendors that provide IT services, mortgage origination support services, corporate support services, government services or other operational support services. Further, an inability of our counterparties to make or satisfy the conditions or representations and warranties in agreements they have entered into with us could also have a material adverse effect on our financial condition, results of operations and cash flows.

Significant and widespread decreases in the fair values of our assets have caused and could continue to cause us

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to breach financial covenants under our borrowing facilities related to profitability, net worth and leverage. Such covenants, if breached, can result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs, as well as triggering cross-defaults under other debt agreements. During the second and fourth quarters of 2021, we breached such financial covenants in certain borrowing agreements with our financing counterparties and were able to obtain waivers. We regularly engage in discussions with our financing counterparties in regards to such financial covenants; however, we cannot be certain whether we will be able to remain in compliance with these financial covenants, or whether our financing counterparties will negotiate terms or amendments in respect of these financial covenants, the timing of any such negotiations or amendments or the terms thereof. Even if we continue to obtain temporary or permanent amendments or waivers from financing counterparties to amend and or waive financial covenants, there is no certainty that we will be able to remain in compliance with such amended covenants and or receive waivers in the event we breach a covenant. If any of our counterparties elected not to renew our borrowing facility, we may not be able to find a replacement counterparty, which could have a material adverse effect on our financial condition, results of operations and cash flows.

~~The~~Significant ~~use~~and widespread decreases in the fair values of ~~alternative~~our ~~exit~~assets ~~strategies~~have ~~subjects~~caused and could continue to cause us to ~~risk~~breach ~~associated~~financial covenants under our borrowing facilities related to profitability, net worth and leverage. Such covenants, if breached, can result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs, as well as triggering cross-defaults under other debt agreements. During each quarter in 2022, we breached such financial covenants in certain borrowing agreements with ~~the~~our ~~potential~~financing ~~limitation~~counterparties and were able to obtain waivers. We regularly engage in discussions with our financing counterparties in regards to such financial covenants; however, we cannot be certain whether we will be able to remain in compliance with these financial covenants, or ~~elimination~~whether our financing counterparties will negotiate terms or amendments in respect of ~~delivery~~these ~~options~~financial covenants, the timing of any such negotiations or amendments or the terms thereof. Even if we continue to obtain temporary or permanent amendments or waivers from financing counterparties ~~which~~to ~~has~~amend ~~had~~and or waive financial covenants, there is no certainty that we will be able to remain in compliance with such amended covenants and ~~could~~or ~~continue~~receive waivers in the event we breach a covenant. If any of our counterparties elected not to renew our borrowing facility, we may not be able to find a replacement counterparty, which could have a material adverse effect on our financial condition, results of operations and cash flows.

It is important for us to sell or securitize the loans we originate. Prepayment speeds on loans generated through our retail direct channel have been a concern for some investors dating back to 2016, which has resulted and could further result in adverse pricing or delays in our ability to sell or securitize loans and related MSRs on a timely and profitable basis. The use of alternative exit strategies has resulted in and could further result in adverse pricing, delays in our ability to sell timely as a result of due diligence, investor overlays, and increased staffing. In addition, reliance on these investors subjects us to changes in risk, collateral, and counterparty eligibility requirements which may affect our ability to deliver and securitize loans. If we are unable to meet all required eligibility criteria, which may be amended and/or implemented without notice, it could impact the volume, products, pricing, and servicing options for originated loans which could have a material adverse impact on overall operations, profitability and cash flows. Additionally, there can be no assurance that investors will continue to purchase our collateral at favorable terms, or at all.

The success and growth of our business will depend upon our ability to adapt to and implement technological changes.

We operate in an industry experiencing rapid technological change and frequent product introductions. We rely on our technology to make our platform available to clients, evaluate loan applicants and service loans. In addition, we may increasingly rely on technological innovation as we introduce new products, expand our current products into new markets and continue to streamline various loan-related and lending processes. The process of integrating new technologies and products is complex, and if we are unable to successfully innovate and continue to deliver a superior client experience, the demand for our products and services may decrease and our growth and operations may be harmed. 16

The origination process is increasingly dependent on technology, and our business relies on our continued ability to process loan applications over the internet, accept electronic signatures, and provide instant process status updates and other client- and loan applicant-expected conveniences. Maintaining and improving this technology will require significant capital expenditures.

The implementation of new technologies, including migrating to new technology solutions such as loan origination systems (LOS) or point of sale systems (POS) requires significant financial and personnel resources. To the extent we are dependent on any particular technology or technological solution, we may be harmed if such technology or technological solution becomes non-compliant with existing industry standards, fails to meet or exceed the capabilities of our competitors' equivalent technologies or technological solutions, becomes increasingly expensive to service, retain and update or malfunctions or functions in a way we did not anticipate that results in loan defects potentially requiring repurchase. Additionally, new technologies and technological solutions are continually being released. As such, it is difficult to predict the problems we may encounter in improving our technologies' functionality.

To operate our LOS, POS and websites and provide our loan products and services, we use software packages from a variety of third parties, which are customized and integrated with code that we have developed ourselves. We rely on third-party software products and services related to automated underwriting functions and loan document production.

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IfWe weoperate ~~are~~in ~~unable~~an industry experiencing rapid technological change and frequent product introductions. We rely on our technology to ~~integrate~~make ~~this~~our ~~software~~platform inavailable ato ~~fully~~clients, ~~functional~~evaluate ~~manner~~loan applicants and service loans. In addition, we may ~~experience~~increasingly ~~increased~~rely ~~costs~~on ~~and~~technological ~~difficulties~~innovation ~~that~~as ~~could~~we ~~delay~~introduce ornew ~~prevent~~products, ~~the~~expand ~~successful~~our ~~development,~~current ~~introduction~~products orinto ~~marketing~~new markets and continue to streamline various loan-related and lending processes. The process of integrating new technologies and products is complex, and if we are unable to successfully innovate and continue to deliver a superior client experience, the demand for our products and services may decrease and our growth and operations may be harmed.

The origination and broker process is increasingly dependent on technology, and our business relies on our continued ability to generate and manage leads, process loan applications over the internet, accept electronic signatures, and provide instant process status updates and other client- and loan applicant-expected conveniences. Maintaining and improving this technology will require significant capital expenditures.

The implementation of new technologies, including migrating to new technology solutions such as loan origination systems (LOS), point of sale systems (POS) or customer relationship management systems (CRM) requires significant financial and personnel resources. To the extent we are dependent on any particular technology or technological solution, we may be harmed if such technology or technological solution becomes non-compliant with existing industry standards, fails to meet or exceed the capabilities of our competitors' equivalent technologies or technological solutions, becomes increasingly expensive to service, retain and update or malfunctions or functions in a way we did not anticipate that results in loan defects potentially requiring repurchase. Additionally, new technologies and technological solutions are continually being released. As such, it is difficult to predict the problems we may encounter in improving our technologies' functionality.

To operate our LOS, POS, CRM and websites and provide our loan products and services, we use software packages from a variety of third parties, which are customized and integrated with code that we have developed ourselves. We rely on third-party software products and services related to automated underwriting functions and loan document production. If we are unable to integrate this software in a fully functional manner, we may experience increased costs and difficulties that could delay or prevent the successful development, introduction or marketing of new products and services.

There is no assurance that we will be able to successfully adopt new technology as critical systems and applications become obsolete and better ones become available. Additionally, if we fail to implement and maintain technologies to respond to technological developments and changing client and loan applicant needs in a cost-effective manner, or fail to acquire or integrate our third-party technologies effectively, we may experience disruptions in our operations, lose market share or incur substantial costs.

Our performance may be adversely affected by the performance of parties who service or sub-service our mortgage loans.

We contract with third parties for the servicing of ~~our~~the mortgage loans in ~~our~~the long-term mortgage portfolio, for which we are the master servicer~~, and the servicing portfolio in our mortgage lending operations~~. Although we use third-party servicers, we retain primary responsibility to ensure the serviced loans meet contractual and regulatory requirements. Our operations, performance and liabilities are subject to risks associated with inadequate or untimely servicing. If a servicer defaults or fails to perform to certain standards then this can be deemed to be a default or failure by us to perform those duties or functions. If we, or our sub-servicers, commit a material breach of our obligations as a servicer or master servicer, we may be subject to damages or termination if the breach is not cured within a specified period of time following notice, causing us to lose servicing rights income. In addition, we may be required to indemnify the investor or securitization trustee against losses from any failure by us, as master servicer or on behalf of the sub-servicer, to perform the servicing obligations properly. If, as a result of a servicer or sub-servicer’s failure to perform adequately, we were terminated as servicer by an investor, trustee or master servicer, the value of any servicing or master servicing rights held by us could be adversely affected. ~~Also, this could affect the cash flow generated by our servicing rights portfolio.~~

Poor performance by a sub-servicer may result in greater than expected delinquencies and foreclosures and losses on our mortgage loans or, in the case of our long-term mortgage portfolio, in our resulting exposure to investors, bond holders, bond insurers or others to whom we are responsible for the performance of our loan sub-servicers. As master servicer in our securitizations we are responsible for the duties, responsibilities and actions of the subservicers. Their actions, or lack thereof, may impose liability upon us from third party claims. A substantial increase in our delinquency or foreclosure rate could adversely affect our ability to access the capital and secondary markets for our financing needs. With respect to our long-term mortgage portfolio, greater delinquencies would adversely affect our cash flows and the value of our residual interests, if any, we hold in connection with that securitization.

The value of mortgage servicing rights are dependent upon various factors, including, but not limited to, the adequate performance of the servicing function by our sub-servicer, the responsibilities imposed on us by the investors of our loans for which we hold the servicing rights, interest rates, the cost of our sub-servicers, loan prepayments and delinquencies. As these factors and others vary, the value of our mortgage servicing rights may fluctuate which may affect our ability to meet financial covenants, maintain credit facilities, expand our operations and generate income from our operations.17

Our NonQM product offerings may expose us to a higher risk of delinquencies, regulatory risks, foreclosures, counterparty risk and losses adversely affecting our earnings and financial condition.

We originate and acquire various types of residential mortgage products, which include NonQM and non-conforming loan products. Unlike Qualified Mortgages, NonQM loans do not benefit from a presumption that the borrower has the ability to repay the loan. In the event that these NonQM mortgages begin to experience a significant rate of default, we could be subject to statutory claims for violations of the ability to repay standard. Any such claims could materially and adversely affect our ability to underwrite these loans, our business, and results of operations or financial condition.

While we undertake initiatives to mitigate any exposure and use our commercially reasonable efforts to ensure that we have made a reasonable determination that the borrowers will have the ability to repay a loan, this type of product has increased risk and exposure to litigation and claims of borrowers. If, however, we were to make a loan which does not satisfy the regulatory standards for ascertaining the borrower’s ability to repay the loan, the consequences could include giving the borrower a defense to repayment of the loan, which may prevent us from collecting interest and principal on that loan.

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Our ability to utilize our net operating losses and certain other tax attributes may be limited.

At the end of our 2022 taxable year, we had estimated federal and California net operating loss (NOL) carryforwards of approximately $850.1 million and $624.8 million, respectively. Federal NOLs begin to expire in 2027 and California NOLs begin to expire in 2028. We may not generate sufficient taxable income in future periods to be able to realize fully the tax benefits of our NOL carryforwards. Although, under existing tax rules, we are generally allowed to use those NOL carryforwards to offset taxable income in subsequent taxable years, our ability to use those NOL carryforwards to offset income may be severely limited to the extent that we experience an ownership change within the meaning of Section 382 of the Internal Revenue Code. These provisions could also limit our ability to deduct certain losses (built-in losses) we recognize after an ownership change with respect to assets we own at the time of the ownership change. In general, an ownership change, as defined by Section 382, results from transactions increasing ownership of certain stockholders or public groups in our stock by more than 50% over a three-year period. In addition, the generation of taxable income from cancellation of debt may further reduce the NOL. Any limitation on our NOL carryforwards that could be used to offset taxable income would adversely affect our liquidity and cash flow, as and when we become profitable. On October 23, 2019, our Board enacted a three-year Tax Benefit Preservation Rights Agreement (NOL rights plan), which was approved at the Company’s 2020 annual meeting of stockholders, is designed to mitigate the risk of losing net operating loss carryforwards and certain other tax attributes from being limited in reducing future income taxes. Our NOL rights plan was extended by our Board to October 2025 subject to shareholder approval at our 2023 annual meeting of shareholders. Although our NOL rights plan is intended to prevent an ownership change, we cannot provide any assurance that our shareholders will approve the extension of our rights plan to 2025, that we will not experience an ownership change or that we will otherwise be able to use, in full or in part, our NOLs.

Our NonQM product offerings may expose us to a higher risk of delinquencies, regulatory risks, foreclosures, counterparty risk and losses adversely affecting our earnings and financial condition.

We originate and broker various types of residential mortgage products, which include NonQM and non-conforming loan products. Unlike Qualified Mortgages, NonQM loans do not benefit from a presumption that the borrower has the ability to repay the loan. In the event that these NonQM mortgages begin to experience a significant rate of default, we could be subject to statutory claims for violations of the ability to repay standard. Despite the Company now brokering residential mortgage products, the Company is still subject to early pay off, early payment default, fraud, and rep and warrant provisions, as part of its broker agreements. Any such claims could materially and adversely affect our ability to underwrite these loans, our business, and results of operations or financial condition.

NonQM loans are mortgages that generally did not qualify for purchase by government-sponsored entities such as Fannie Mae and Freddie Mac. Credit risks associated with all these mortgages may be greater than those associated with conforming mortgages. Mortgages made to these borrowers may entail a higher risk of delinquency and higher losses than mortgages made to borrowers who utilize conventional mortgage sources. Delinquency, foreclosures and losses generally increase during economic slowdowns or recessions. The actual risk of delinquencies, foreclosures and losses on mortgages made to these borrowers may be higher to the extent the economy enters a recession. The combination of different underwriting criteria and higher rates of interest can adversely affect our business and financial condition from higher prepayment rates and higher delinquency rates and/or credit losses. Additionally, during periods of market dislocation, similar to what occurred during the first and second quarters of 2020, liquidity for NonQM and non-conforming loan products suffer more acute pressure which creates a substantial widening of credit spreads on these assets, causing a severe decline in the values assigned by investors and counterparties for NonQM and non-conforming assets. These periods of market dislocation have adversely affected the values assigned to our NonQM and non-conforming assets. Further periods of economic dislocation caused by the pandemic or other factors may adversely affect the liquidity for our products and may have a material adverse effect on our business, financial condition and results of operations.

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A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of theft of certain personally identifiable information of consumers, misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships.

As our reliance on rapidly changing technology has increased, so have the risks posed to its information systems, both proprietary and those provided to us by third-party service providers. System disruptions and failures caused by fire, power loss, telecommunications outages, unauthorized intrusion, unintended employee actions, computer viruses and disabling devices, natural disasters and other similar events may interrupt or delay our ability to provide services to our customers or result in the unintended disclosure of consumer information.

Despite our efforts to ensure the integrity of our systems, our investment in significant physical and technological security measures, employee training, contractual precautions and business continuity plans, and our implementation of policies and procedures designed to help mitigate cybersecurity risks and cyber intrusions, there can be no assurance that any such cyber intrusions or data privacy breaches will not occur or, if they do occur, that they will be adequately addressed. We also may not be able to anticipate or implement effective preventive measures against all security breaches, especially because the methods of attack change frequently or may not be recognized until after such attack has been launched, and because security attacks can originate from a wide variety of sources, including third parties such as persons involved with organized crime or associated with external service providers. We are also held accountable for the actions and inactions of our third-party vendors regarding cybersecurity, data privacy breaches and other consumer-related matters.

Any of the foregoing events could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, additional regulatory scrutiny, governmental enforcement actions, significant litigation exposure and harm to our reputation, any of which could have a material adverse effect on our business, consolidated financial condition, liquidity and consolidated results of operations.

~~Inability~~Delayed ~~to successfully complete securitizations, or delayed~~ mortgage loan sales ~~or securitization closings,~~ could result in a liquidity shortage which would adversely affect our operating results.

~~We are exploring utilizing securitizations as an additional exit strategy to generate cash proceeds to repay borrowings and replenish our borrowing capacity.~~ If there is a delay in mortgage loan sales or ~~securitization closing or~~ any reduction in our ability to complete mortgage loan sales ~~or securitizations~~, we may be required to utilize other sources of financing, which, may not be available on favorable terms or at all. In addition, delays in closing mortgage sales ~~or securitizations of our mortgages~~ exposes us to additional credit and interest rate risk up to the closing of the transaction. Several factors could affect our ability to complete ~~securitizations of our mortgages or~~ mortgage loan sales, including:

15● conditions in the secondary markets;

~~Table~~● credit quality of ~~Contents~~the mortgages originated through our mortgage operations;

● ~~conditions~~operational ininefficiencies ~~the~~causing ~~securities~~delay ~~and~~in ~~secondary markets~~settlement; and

● ~~credit~~our ~~quality~~ability ofto ~~the~~obtain ~~mortgages~~credit ~~acquired or originated through our mortgage operations;~~enhancements.

● volume of our mortgage loan acquisitions and originations;

● operational inefficiencies causing delay in settlement;

● our ability to obtain credit enhancements; and

● lack of investors purchasing higher risk components of the securities.

If we are unable to sell a sufficient number of mortgages at a premium, or ~~profitably securitize a significant number of our mortgages in a particular financial reporting period, of~~ if we experience a delay in mortgage loan sales ~~or securities closings~~, then we could experience a liquidity shortage leading to lower net earnings or a loss for that period. We cannot assure you that we will be able to continue to profitably ~~securitize or~~ sell our loans on a whole loan basis, or at all.

We may not be able to access financing sources on favorable terms, or at all, which could adversely affect our ability to implement and operate our business as planned.

Loss of our current executive officers or other key management could significantly harm our business.

We depend on the diligence, skill and experience of our senior executives. We believe that our future results will also depend in part upon our attracting and retaining highly skilled and qualified management. We seek to compensate our executive officers, as well as other employees, through competitive salaries, bonuses and other incentive plans, but there can be no assurance that these programs will allow us to retain key management executives or hire new key employees. The loss of our senior executive officers and key management could have a material adverse effect on our operations because other officers may not have the experience and expertise to readily replace these individuals. Competition for such personnel is intense, and we cannot assure you that we will be successful in attracting or retaining such personnel. The loss of, and changes in, key personnel and their responsibilities may be disruptive to our business and could have a material adverse effect on our business, financial condition and results of operations.

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We may become, and in some cases are, a defendant in lawsuits, some of which may be class action matters, and we may not prevail in these matters.

Individual and class action lawsuits and regulatory actions alleging improper marketing practices, abusive loan terms and fees, disclosure violations and other matters are risks faced by all mortgage originators. We are a defendant in purported class actions pending in different states and could be named in other matters. We will incur defense costs and other expenses in connection with the lawsuits, and we cannot assure you that the ultimate outcome of these or other actions will not have a material adverse effect on our financial condition or results of operations. In addition to the expense and burden incurred in defending any of these actions and any damages that we may suffer, our management’s efforts and attention may be diverted from the ordinary business operations in order to address these claims. Plus, we may be deemed in default of our warehouse lines if a judgment for money that exceeds specified thresholds is rendered against us. If the final resolution is unfavorable to us in any of these actions, our financial condition, results of operations and cash flows might be materially adversely affected. For additional information regarding ongoing litigation, refer to Note 13. “Commitments and Contingencies” in the notes to the consolidated financial statements.

16If we are forced to liquidate, we may have few unpledged assets for distribution to unsecured creditors or equity holders.

~~Table~~In the event we were forced to liquidate and distribute our assets, our common stockholders would share in our assets only after we satisfy any amounts we owe to our creditors (including our warehouse facilities and the holders of ~~Contents~~$15.0 million in Convertible Notes and $62.0 million in junior subordinated notes) and preferred equity holders. Similarly, our preferred equity holders would share in our assets only after we satisfy any amounts owed to our creditors. The majority of our assets are either collateral for specific borrowings or pledged as collateral for secured liabilities. Additionally, there is volatility and significant judgement with respect to the valuation of a significant portion our assets and liabilities. If our liquidation or dissolution were attributable to our inability to profitably operate our business, then it is likely that we would have material liabilities at the time of liquidation or dissolution. Accordingly, we cannot provide any assurance that sufficient assets will remain available after the payment of our creditors to enable preferred equity holders and/or common stockholders to receive any liquidation distribution with respect to any preferred equity or common stock, as applicable.

Our hedging strategies implemented by our mortgage lending operations may not be successful in mitigating our risks associated with the market movement of interest rates.

We use various derivative financial instruments to provide a level of protection against interest rate risks in our mortgage lending operations, but no hedging strategy can protect us completely. When interest rates change, we expect to record a gain or loss on derivatives which would be offset by an inverse change in the value of mortgage loans held-for-sale, our held mortgage servicing rights, forward sale and interest rate lock commitments. We cannot assure you, however, that our use of derivatives will offset the risks related to changes in interest rates. There have been periods, and it is likely that there will be periods in the future, during which we will not have offsetting gains or losses in mortgage loans, forward sale and interest rate lock commitment values after accounting for our derivative financial instruments. The derivative financial instruments we select may not have the effect of reducing our interest rate risk. In addition, the nature and timing of hedging transactions may influence the effectiveness of these strategies. Poorly designed strategies, improperly executed and recorded transactions or inaccurate assumptions could actually increase our risk and losses. In addition, hedging strategies involve transaction and other costs. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses.

~~Our~~Further ~~ability~~spread toof ~~utilize~~COVID-19 ~~our~~or ~~net~~any ~~operating~~mutations ~~losses~~thereof ~~and~~could ~~certain~~negatively ~~other~~impact ~~tax~~the ~~attributes~~availability ~~may~~of bekey ~~limited~~personnel necessary to conduct our business.

AtThe ~~the~~continued ~~end~~effects of ~~our~~the ~~2021~~pandemic ~~taxable~~could ~~year,~~adversely weimpact ~~had~~our ~~estimated~~financial ~~federal~~condition and ~~California~~results ~~net operating loss (NOL) carryforwards~~ of ~~approximately~~operations ~~$623.5 million~~due ~~and $435.2 million, respectively. Federal NOLs begin~~ to ~~expire~~interrupted inservice ~~2027~~ and ~~California~~availability ~~NOLs begin to expire in 2028. We may not generate sufficient taxable income in future periods to be able to realize fully the tax benefits~~ of ~~our NOL carryforwards. Although~~personnel, ~~under~~including ~~existing tax rules, we are generally allowed to use those NOL carryforwards to offset taxable income in subsequent taxable years,~~ our ~~ability~~executive toofficers ~~use~~and ~~those~~other ~~NOL~~employees ~~carryforwards to offset income may be severely limited to the extent~~ that weare ~~experience~~part ~~an ownership change within the meaning~~ of ~~Section 382 of the Internal Revenue Code. These provisions could also limit~~ our ~~ability~~management toteam ~~deduct~~and ~~certain losses (built-in losses) we recognize after~~ an ~~ownership~~inability ~~change with respect~~ to ~~assets~~recruit, weattract ~~own~~and atretain ~~the~~skilled ~~time~~personnel. ofTo the ~~ownership~~extent ~~change.~~our Inmanagement ~~general, an ownership change, as defined by Section 382, results from transactions increasing ownership of certain stockholders~~ or ~~public~~personnel ~~groups~~are impacted in ~~our~~significant ~~stock~~numbers by ~~more than 50% over a three-year period. In addition,~~ the ~~generation~~outbreak of ~~taxable~~pandemic ~~income~~or ~~from~~epidemic ~~cancellation~~disease ofand ~~debt~~are ~~may~~not ~~further~~available ~~reduce~~or ~~the~~allowed ~~NOL. Any limitation on our NOL carryforwards that could be used~~ to ~~offset~~conduct ~~taxable~~work, ~~income would adversely affect~~ our ~~liquidity~~business and ~~cash~~operating ~~flow,~~results asmay ~~and~~be ~~when~~negatively ~~we become profitable~~impacted. ~~On October 23~~Additionally, ~~2019, our Board enacted~~ the ~~Tax~~pandemic ~~Benefit~~could ~~Preservation~~negatively ~~Rights~~impact ~~Agreement~~our ~~(NOL~~ability ~~rights plan), which was approved at the Company’s 2020 annual meeting of stockholders, is designed~~ to ~~mitigate~~ensure ~~the~~operational ~~risk~~continuity ~~of losing net operating loss carryforwards and certain other tax attributes from being limited~~ in ~~reducing~~the ~~future~~event ~~income taxes. Although~~ our ~~NOL~~business ~~rights~~continuity plan is ~~intended to prevent an ownership change, we cannot provide any assurance that we will~~ not ~~experience~~effective ~~an ownership change~~ or ~~that~~ineffectively weimplemented ~~will otherwise be able to use, in full~~ or indeployed ~~part,~~during ~~our~~a ~~NOLs~~disruption.

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We depend on the accuracy and completeness of information provided by customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by, or on behalf of, customers and counterparties, including financial statements and other financial information. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information. In deciding whether to originate or extend credit, we may rely upon our customers' representations that their financial statements are accurate. We also may rely on customer representations and certifications, or other audit or accountants' reports, with respect to the business and financial condition of our commercial clients. Our financial condition, results of operations, financial reporting and reputation could be materially adversely affected if we rely on materially misleading, false, inaccurate or fraudulent information.

Representations and warranties made by us in our loan sales, servicing rights sales and securitizations may subject us to liability.

In connection with our loan and/or servicing rights sales to third parties and our prior securitizations, we transferred mortgages and/or servicing rights to third parties or, to a lesser extent, into a trust in exchange for cash and, in the case of a securitized mortgage, residual certificates issued by the trust. The trustee, purchaser, bondholder, guarantor or other entities involved in the sales or issuance of the securities (which may include bond insurers) may have recourse to us with respect to the breach of the representations and warranties made by us at the time such mortgages and/or servicing rights are transferred or when the securities are sold. We attempt to mitigate the potential recourse from such purchasers by seeking remedies from correspondent sellers and wholesale brokers who originated the mortgages if we did not originate the loan. However, many of the entities we acquired loans from in the past are no longer in business or may not be able to financially cover the losses. Furthermore, if we discover, prior to the sale or transfer of a loan, that there is any fraud or misrepresentation with respect to the mortgage and the originator fails to repurchase the mortgage, then we may not be able to sell the mortgage or we may have to sell the mortgage at a discount. Changes in the timing, processes and procedures of our primary investors’ review of loans which they purchase from us may affect the number of loans that are rejected, the timing of our loan sales, or the frequency of repurchase demands issued to us. Also, similar changes by mortgage insurers who agree to insure loans may also affect the frequency and timing of our loan sales. As a result, the effectiveness of our loan sales, our repurchase reserves and our profitability may be adversely affected.

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the loan. However, many of the entities we acquired loans from in the past are no longer in business or may not be able to financially cover the losses. Furthermore, if we discover, prior to the sale or transfer of a loan, that there is any fraud or misrepresentation with respect to the mortgage and the originator fails to repurchase the mortgage, then we may not be able to sell the mortgage or we may have to sell the mortgage at a discount. Changes in the timing, processes and procedures of our primary investors’ review of loans which they purchase from us may affect the number of loans that are rejected, the timing of our loan sales, or the frequency of repurchase demands issued to us. Also, similar changes by mortgage insurers who agree to insure loans may also affect the frequency and timing of our loan sales. As a result, the effectiveness of our loan sales, our repurchase reserves and our profitability may be adversely affected.

The geographic concentration of our mortgages increases our exposure to risks in those areas.

We do not set limitations on the percentage of mortgages composed of properties located in any one area (whether by state, zip code or other geographic measure). Concentration in any one area increases our exposure to the economic and natural hazard risks associated with that area. A majority of our mortgage ~~acquisitions and~~ originations ~~and mortgages held in our long-term mortgage portfolio~~ are secured by properties in California (approximately 7757% of our mortgage originations were generated from California in ~~2021~~2022) and, to a lesser extent, Arizona, Florida and ~~Nevada~~Texas. These states have previously experienced, and may experience in the future, economic downturns and California and Florida have also suffered the effects of certain natural hazards. During past economic downturns, real estate values in California and Florida have decreased drastically, which could have a material adverse effect on our results of operations or financial condition. In addition, Florida is among several states with higher than average costs for investors in circumstances of mortgage default and foreclosure, since the foreclosure process takes significantly longer than average. Accordingly, to the extent the mortgages we originate or are held in our long-term mortgage portfolio experience defaults or foreclosures in that area, we may be exposed to higher losses.

Furthermore, if borrowers are not insured for natural disasters, which are typically not covered by standard hazard insurance policies, then they may not be able to repair the property or may stop paying their mortgages if the property is damaged. This would cause increased foreclosures and decrease our ability to recover losses on properties affected by such disasters. This would have a material adverse effect on our results of operations or financial condition.

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damaged. This would cause increased foreclosures and decrease our ability to recover losses on properties affected by such disasters. This would have a material adverse effect on our results of operations or financial condition.

Our vendor relationships subject us to a variety of risks.

We have significant vendors that, among other things, provide us with financial, technology and other services to support our mortgage loan servicing and origination businesses. Some of these outsourced services, such as technology, could have a material effect on our business and operations if our third party provider was unable to, or failed to, properly provide such services. With respect to vendors engaged to perform activities required by servicing criteria, we have elected to take responsibility for assessing compliance with the applicable servicing criteria for the applicable vendor and are required to have procedures in place to provide reasonable assurance that the vendor’s activities comply in all material respects with servicing criteria applicable to the vendor, including but not limited to, monitoring compliance with our predetermined policies and procedures and monitoring the status of payment processing operations. In the event that a vendor’s activities do not comply with the servicing criteria, it could negatively impact our servicing agreements. In addition, if our current vendors were to stop providing services to us on acceptable terms, including as a result of one or more vendor bankruptcies due to poor economic conditions, we may be unable to procure alternatives from other vendors in a timely and efficient manner and on acceptable terms, or at all. Further, we may incur significant costs to resolve any such disruptions in service and this could adversely affect our business, financial condition and results of operations. Additionally, the CFPB has stated that supervised banks and non-banks could be held liable for actions of their service providers. As a result, we could be exposed to liability, CFPB enforcement actions or other administrative penalties if the vendors with whom we do business violate consumer protection laws.

If we are forced to liquidate, we may have few unpledged assets for distribution to unsecured creditors or equity holders.

In the event we were forced to liquidate and distribute our assets, our common stockholders would share in our assets only after we satisfy any amounts we owe to our creditors and preferred equity holders. Similarly, our preferred equity holders would share in our assets only after we satisfy any amounts owed to our creditors. The majority of our assets are either collateral for specific borrowings or pledged as collateral for secured liabilities. Additionally, there is volatility and significant judgement with respect to the valuation of a significant portion our assets and liabilities. If our liquidation or dissolution were attributable to our inability to profitably operate our business, then it is likely that we would have material liabilities at the time of liquidation or dissolution. Accordingly, we cannot provide any assurance that

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sufficient assets will remain available after the payment of our creditors to enable preferred equity holders and/or common stock holders to receive any liquidation distribution with respect to any preferred equity or common stock, as applicable.

Our risk management policies and procedures may not be effective.

Our risk management framework seeks to mitigate risk and appropriately balance risk and return. We have established policies and procedures intended to identify, monitor and manage the types of risk to which we are subject, including credit risk, market and interest rate risk, liquidity risk, cyber risk, regulatory, legal and reputational risk. Although we have devoted significant resources to develop our risk management policies and procedures and expect to continue to do so in the future, these policies and procedures, as well as our risk management techniques such as our hedging strategies, may not be fully effective. There may also be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated. As regulations and markets in which we operate continue to evolve, our risk management framework may not always keep sufficient pace with those changes. If our risk management framework does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.

Effective internal control over financial reporting and disclosure controls and procedures are necessary for us to provide reliable consolidated financial reports and effectively prevent fraud and operate successfully as a public company. We cannot be certain that our efforts to improve or maintain our internal control over financial reporting and disclosure controls and procedures will be successful or that we will be able to maintain adequate controls over our financial processes and reporting in the future. Any failure to develop or maintain effective controls or difficulties encountered in their implementation or other effective improvement of our internal control over financial reporting and disclosure controls and procedures could harm our operating results, or cause us to fail to meet our reporting obligations. In the past, we have reported, and may discover in the future, material weaknesses in our internal control over financial reporting.

Ineffective internal control over financial reporting and disclosure controls and procedures could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities or affect our ability to access the capital markets and could result in regulatory proceedings against us by, among others, the SEC. In addition, a material weakness in internal control over financial reporting, which may lead to deficiencies in the preparation of consolidated financial statements, could lead to litigation claims against us. The defense of any such claims may cause the diversion of management’s attention and resources, and we may be required to pay damages if any such claims or proceedings are not resolved in our favor. Any litigation, even if resolved in our favor, could cause us to incur significant legal and other expenses or cause delays in our public reporting. Such events could harm our business, affect our ability to raise capital and adversely affect the trading price of our securities.

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Risks Related to Our Industry

Our earnings may decrease, or losses increase, because of changes in prevailing interest rates.

Our profitability is directly affected by changes in prevailing interest rates over which we have no control. The following are certain material risks we face related to changes in interest rates:

Originations:

●

an increase in interest rates could adversely affect our loan originations volume because refinancing an existing loan would be less attractive for homeowners and qualifying for a purchase money loan may be more difficult for consumers;

● an increase in interest rates could render certain products ineligible to consumers, such as rate reduction requirements for certain government loans;an increase in interest rates could also adversely affect our production margins due to increased competition among originators;

Servicing:

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● a decrease in interest rates may increase prepayment speeds which may lead to (i) increased MSR amortization; (ii) decrease in servicing fees; and (iii) decrease in the value of our MSRs;

Debt:

●

an increase in interest rates would increase the cost of servicing our outstanding debt or the costs associated with financing new debt, including our ability to finance loan originations.

Any of the foregoing could materially and adversely affect our business, consolidated financial condition and consolidated results of operations.

Borrowers that have been negatively impacted by the pandemic may not remit payments of principal and interest relating to their mortgage loans on a timely basis, or at all. This could be due to an inability to make such payments, an unwillingness to make such payments, or a temporary or permanent waiver of the requirement to make such payments, including under the terms of any applicable forbearance, modification, or maturity extension agreement or program. On March 27, 2020, the CARES Act was enacted to provide financial assistance to individuals and businesses affected by the pandemic. The CARES Act provides certain measures to support individuals in maintaining solvency through monetary relief, including in the form of loan forgiveness/forbearance. The CARES Act, among other things, provides any homeowner with a federally-backed mortgage who is experiencing financial hardship the option of up to six months of forbearance on their mortgage payments, with a potential to extend that forbearance for another six months. During the forbearance period, no additional fees, penalties or interest can accrue on the homeowner’s account. The CARES Act also established a temporary moratorium on foreclosures. Transactions we enter into to finance loans with warehouse counterparties and to sell whole loans to third parties, may be negatively impacted by the pandemic related payment forbearances, waiver, or other payment deferral program, including but not limited to, reducing proceeds from these transactions, require us to repurchase impacted loans and reduce proceeds or incur losses on loans sold that are within forbearance or other deferred payment programs. To the extent borrower forbearance affects our ability to finance and sell loans to third parties, it may have a material adverse effect on our consolidated financial condition, consolidated results of operations and consolidated cash flows.

A decline in real estate values may have a material adverse effect on our consolidated financial condition and consolidated results of operation.

If there is a decline in real estate values, borrowers may default on our residential loans. A reduction in real estate values reduces a borrower’s equity in their home which generally increases the underlying loan to value ratio and leads to a corresponding risk of default. If a borrower defaults and we have sold the loan or the servicing of the loan, we may violate our representations and warranties from the sale and be obligated to repurchase the loan. In addition, we may have certain early payment default obligations as a broker that could expose us to repurchase risk. To the extent any of these events occur, it may have a material adverse effect on our financial condition, results of operations and cash flows.

Our customer activity is intrinsically linked to the health of the economy generally and of the financial markets specifically. In addition to the economic factors, a downturn in the real estate or commercial markets generally could cause our customers and potential customers to exit the market for loans. As a result, we believe that fluctuations, disruptions, instability or downturns in the general economy and the financial markets could disproportionately affect demand for our lending products. In addition, the spread of the Covid-19 virus has caused economic disruption worldwide, the effect of which may be over an extended period of time and may have a material adverse effect on our financial condition or results of operations. If such conditions occur and persist, our business and financial results, including our liquidity and our ability to fulfill our debt obligations, could be materially adversely affected.23

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Our customer activity is intrinsically linked to the health of the economy generally and of the financial markets specifically. In addition to the economic factors, a downturn in the real estate or commercial markets generally could cause our customers and potential customers to exit the market for loans. As a result, we believe that fluctuations, disruptions, instability or downturns in the general economy and the financial markets could disproportionately affect demand for our lending products. Furthermore, the recent failures of Silicon Valley Bank and Signature Bank, together with the impact such failures have had on other financial institutions, customers, vendors and depositors, could have significant adverse effects on economic conditions in the United States and globally which could materially and adversely affect our business and operations. In addition, the spread of the Covid-19 virus has caused economic disruption worldwide, the effect of which may be over an extended period of time and may have a material adverse effect on our consolidated financial condition or consolidated results of operations. If such conditions occur and persist, our business and financial results, including our liquidity and our ability to fulfill our debt obligations, could be materially adversely affected.

Replacement of the LIBOR benchmark interest rate may have an adverse impact on our business, financial condition or results of operations.

On July 27, 2017, the Financial Conduct Authority (FCA), a regulator of financial services firms in the United Kingdom, announced that it intends to stop persuading or compelling banks to submit London Interbank Offered Rate (LIBOR) rates after 2021. The Alternative Reference Rates Committee (ARRC), a group of private-market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York to help ensure a successful transition from U.S. dollar LIBOR (USD-LIBOR) to a more robust reference rate, proposed that the Secured Overnight Financing Rate (SOFR) represents the best alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a transition plan with specific steps and timelines designed to encourage the adoption of SOFR and guide the transition to SOFR from USD-LIBOR. The Financial Conduct Authority in the United Kingdom and other regulatory bodies have issued statements encouraging cessation of new transactions referencing USD LIBOR after December 31, 2021, while supporting extension of the publication of major USD-LIBOR tenors to mid-2023, to allow additional legacy contracts to mature on their existing terms. Announcements by government-sponsored entities such as Fannie Mae and Freddie Mac, suggest that the SOFR will become the LIBOR replacement for the industry.

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from U.S. dollar LIBOR (USD-LIBOR) to a more robust reference rate, proposed that the Secured Overnight Financing Rate (SOFR) represents the best alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a transition plan with specific steps and timelines designed to encourage the adoption of SOFR and guide the transition to SOFR from USD-LIBOR. The Financial Conduct Authority in the United Kingdom and other regulatory bodies have issued statements encouraging cessation of new transactions referencing USD LIBOR after December 31, 2021, while supporting extension of the publication of major USD-LIBOR tenors to mid-2023, to allow additional legacy contracts to mature on their existing terms. Announcements by government-sponsored entities such as Fannie Mae and Freddie Mac, suggest that the SOFR will become the LIBOR replacement for the industry.

While regulators and market participants continue to promote the creation and functioning of post-LIBOR indices (SOFR in particular), the impact of the discontinuance and replacement of LIBOR is uncertain. It is not currently possible to know with certainty what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views and alternatives may have on the financial markets for LIBOR-linked financial instruments for the periods preceding and following LIBOR's cessation. Differences in contractual provisions of certain legacy assets and liabilities and other factors may cause the consequences of the discontinuance of LIBOR to vary by instrument. While enacted and pending legislation is intended to address issues with respect to legacy LIBOR-linked assets and liabilities, it is unclear whether they will completely address the issues associated with legacy transactions. We are evaluating the potential impact of the possible SOFR replacement of the LIBOR benchmark interest rate, but are not able to predict what the impact of such a transition will have on our business, consolidated financial condition, or consolidated results of operations at this time. The market transition away from LIBOR to an alternative reference rate is complex and could have a range of adverse effects on our business, consolidated financial condition and consolidated results of operations. In particular any such transition could:

●

adversely affect the interest rates paid or received on, the revenue and expenses associate with, and the value of our floating-rate obligations, loans, derivatives, and other financial instruments tied to LIBOR rates, or other securities or financial arrangements given LIBOR’s role in determining market interest rates globally;

●

legal and execution risks, relating to documentation changes for the transition of legacy contracts to alternate benchmark rates; and/or

●

require the transition to or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on the applicable alternative pricing benchmark.

While cessation timelines have been agreed by the industry and regulatory authorities, we continue to assess how the discontinuation of existing benchmark rates could materially affect our business, consolidated financial condition and consolidated results of operations.

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Litigation in the mortgage industry related to securitizations against issuers, sellers, servicers, originators, underwriters and others may adversely affect our business operations.

As defaults, delinquencies, foreclosures, and losses in the real estate market occur, there have been lawsuits by various investors, insurers, underwriters and others against various participants in securitizations, such as sponsors, depositors, underwriters, servicers and loan sellers. Some lawsuits have alleged that the mortgage loans had origination defects, that there were misrepresentations made about the mortgage loans and that the parties failed to properly disclose the quality of the mortgage loans or repurchase defective loans wherein servicing standards were not maintained or that there were other misrepresentations or false representations. Historically, we both securitized and sold mortgage loans to third parties that may have been deposited or included in pools for securitizations. As a result, we may incur significant legal and other expenses in defending against claims and litigation and we may be required to pay settlement costs, damages, penalties or other charges which could adversely affect our financial condition and results of operations.

Risks Related to Regulation

Loss, suspension, or ~~suspension~~an unanticipated change in the status of our approvals, or limitations placed on our delivery volume, or the potential limitation or wind-down of, the role Fannie Mae, Freddie Mac and Ginnie Mae play in the residential mortgage-backed security (MBS) market have had, and could continue to have, an adverse effect on our business, operations and financial condition.

21We have historically originated, and currently broker loans which are intended to be eligible for sale to Fannie Mae, Freddie Mac, (together, the GSEs), government insured or guaranteed loans, such as FHA, VA and USDA loans, and loans eligible for Ginnie Mae securities issuance (collectively, the Agencies), in addition to other investors and counterparties (collectively, the Counterparties). We also have serviced loans sold to the GSEs, as well as securitized with the Agencies and other Counterparties. The role of the GSEs, Agencies, and Counterparties may become limited over time in their ability to guarantee mortgages or purchase mortgage loans. Conversely, the GSEs, Agencies, and Counterparties may propose to implement reforms relating to borrowers, lenders, and investors in the mortgage market, including reducing the maximum size of a purchasable loan, phasing-in a minimum down payment requirement for borrowers, changing underwriting standards, changing their approval or reinstatement criteria, and increasing accountability and transparency in the securitization process. The GSEs, Agencies, and Counterparties may also limit the amount of loans a company can sell to them based upon the company’s net worth or the performance of loans sold to them. These limitations and reforms could negatively impact our financial condition, net earnings and growth.

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We originate loans which are intended to be eligible for sale to Fannie Mae, Freddie Mac, (together, the GSEs), government insured or guaranteed loans, such as FHA, VA and USDA loans, and loans eligible for Ginnie Mae securities issuance (collectively, the Agencies), in addition to other investors and counterparties (collectively, the Counterparties). We also have serviced loans sold to the GSEs, as well as securitized with the Agencies and other Counterparties. The role of the GSEs, Agencies, and Counterparties may become limited over time in their ability to guarantee mortgages or purchase mortgage loans. Conversely, the GSEs, Agencies, and Counterparties may propose to implement reforms relating to borrowers, lenders, and investors in the mortgage market, including reducing the maximum size of a purchasable loan, phasing-in a minimum down payment requirement for borrowers, changing underwriting standards, and increasing accountability and transparency in the securitization process. The GSEs, Agencies, and Counterparties may also limit the amount of loans a company can sell to them based upon the company’s net worth or the performance of loans sold to them. These limitations and reforms could negatively impact our financial condition, net earnings and growth.

We have historically serviced loans on behalf of Fannie Mae and Freddie Mac, as well as loans that have been delivered into securitization programs sponsored by Ginnie Mae and other Counterparties in connection with the issuance of agency guaranteed mortgage-backed securities and other non-agency securitizations. These entities establish the base service fee to compensate us for servicing loans as well as the assessment of fines and penalties that may be imposed upon us for failing to meet servicing standards.

~~The~~As ~~extent~~previously ~~and timing of any regulatory reform regarding the GSEs~~noted, ~~Agencies,~~given ~~Counterparties~~our ~~and~~lack ~~the~~of ~~home~~conventional ~~mortgage~~GSE ~~market,~~origination asvolume ~~well as any effect on the Company’s business operations~~ and ~~financial~~servicing ~~results,~~rights ~~are~~over ~~uncertain. It is important for us to sell or securitize~~ the ~~loans~~past weseveral ~~originate and~~years, ~~when doing so, maintain the option to also sell the related MSR's associated~~ with ~~these~~no ~~loans. Prepayment speeds on loans generated through our retail~~ direct ~~channel~~GSE ~~have~~deliveries ~~been a concern for some investors dating back~~ to ~~2016,~~Fannie ~~which~~Mae ~~has resulted and could further result in adverse pricing~~ or ~~delays~~Freddie inMac ~~our~~since ~~ability~~2016 ~~to sell or securitize loans~~ and ~~related~~2020, ~~MSRs on a timely and profitable basis. During the fourth quarter of 2017~~respectively, ~~Fannie Mae sufficiently limited the manner and volume for our deliveries of eligible loans such that~~ we ~~elected~~intend to ~~cease~~voluntarily ~~deliveries~~relinquish ~~to them and we expanded~~ our ~~whole~~GSE ~~loan~~Seller/Servicer ~~investor~~designation ~~base for these loans. In 2019, with the creation of the uniform mortgage-backed securities (UMBS) market,~~ which ~~was~~has ~~intended~~been tosuspended ~~improve~~during ~~liquidity~~these ~~and~~period ~~align prepayment speeds across Fannie Mae and Freddie Mac securities, Freddie Mac raised concerns about the high prepayment speeds~~ of ~~our loans generated through our retail direct channel. We have continued to expand our investor base and complete servicing released loan sales to~~ non-~~GSE whole loan investors and expect to continue to utilize these alternative exit strategies for Fannie Mae and Freddie Mac eligible loans~~delivery. InSuch ~~July~~actions ~~2020,~~could wehave ~~received~~an ~~notification~~impact ~~from~~on ~~Freddie Mac that our eligibility to sell whole loans to Freddie Mac was suspended, without cause. While we believe that~~ the ~~overall~~status ~~volume~~of ~~delivered under purchase commitments to~~ the ~~GSEs~~Company’s ~~was~~approved ~~immaterial~~status ~~prior to the notification, we are committed to operating actively and in good standing~~ with ~~our~~Ginne ~~broad range of capital markets counterparties~~Mae. We ~~continue~~expect to ~~take steps to manage our prepayment speeds to~~ be ~~more~~a ~~consistent~~third-party originator with ~~our~~both ~~industry~~GSE’s ~~comparables and~~ to ~~reestablish~~support ~~the full confidence and delivery mechanisms to~~ our ~~investor~~broker ~~base,~~model ~~but~~as ~~we cannot provide any assurance that our eligibility to sell whole loans to Freddie Mac will be restored~~needed.

Substantive changes to risk-based and collateral eligibility requirements by any of the GSEs, Agencies or Counterparties may affect our ability to ~~originate,~~ deliver or securitize loans. These changes may also be implemented by a GSE, Agency or Counterparty without advance notice. If the GSEs, Agencies or Counterparties cease to exist, wind down, or otherwise significantly change their business operations or if we lose our approved seller/servicer or approved counterparty status with the GSEs, Agencies or Counterparties, or if one of these parties materially limits the amount of loans we can sell to them, or we are otherwise unable to sell loans to them there could be a material adverse effect on our mortgage ~~lending~~ operations, financial condition, results of operations, and cash flows.

~~Regulatory laws affecting our operations, or interpretations of them, may affect our mortgage lending operations.~~25

Existing laws, regulations, or regulatory policies and changes thereto or to the way they are interpreted can affect whether and to what extent we may be able to expand our mortgage lending activities and compliance with such requirements could expose us to fines, penalties or licensing restrictions that could affect our operations. Many states and local governments and the Federal government have enacted or may enact laws or regulations that restrict or prohibit some provisions in some programs or businesses that we currently participate in or plan to participate in the future. As such, we cannot be sure that in the future we will be able to engage in activities that were similar to those we engaged or participated in in the past thereby limiting our ability to commence new operations. As a result, we might be at a competitive disadvantage which would affect our operations and profitability.

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Regulatory laws affecting our operations, or interpretations of them, may affect our mortgage lending segment.

We are subject to federal, state and local laws and regulations related to the mortgage industry that generally regulate interest rates and other charges, require certain disclosures, and require applicable licensing. In addition, other state and local laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of our loans. Violations of certain provisions of these federal and state laws and regulations may limit our ability to collect all or part of the principal of or interest on the loans and in addition could subject us to damages and additional lawsuits, could result in the mortgagors rescinding the loans whether held by us or subsequent holders of the loans, or could cause us to repurchase the loan and thereby suffer a loss on the transaction. In addition, such violations could subject us to fines and penalties imposed by state and federal regulators and cause us to be in default under our credit and repurchase lines and could result in the loss of licenses held by us including the ability to expand or continue lending in certain areas.

The regulatory changes in loan originator compensation, qualified mortgage requirements and other regulatory restrictions may put us at a competitive disadvantage to our competitors. Since some banks and financial institutions are not subject to the same regulatory changes as mortgage lenders, they could have an advantage over independent mortgage lenders. As a result of the nature of our operations, our capital, costs, source of funds and other similar factors may affect our ability to maintain and grow lending.

The CFPB has implemented rules and interpretations with strict residential mortgage loan compliance and underwriting standards as called for in the Dodd-Frank Act. The Act imposes significant liability for violation of those underwriting standards, and offers certain protection from that liability only for loans that comply with tight limitations and that do not contain certain alternative features (like balloon payments or interest only provisions). Those requirements and subsequent changes may affect our ability to originate residential mortgage loans or the profitability of those operations.

In addition, interim or temporary regulations and/or guidance under federal, state, and local laws may be subject to the interpretation of regulators and/or federal, state, and local examiners. We might be subject to new interpretation of regulatory matters that subjects us to fines, penalties, consent orders, or other restrictions that could have a material adverse impact on operations and profitability.

The CFPB continues to be active in its monitoring of the loan origination and servicing sectors, and its rules increase our regulatory compliance burden and associated costs.

We are subject to the regulatory, supervisory and examination authority of the CFPB, which has oversight of federal and state non-depository lending and servicing institutions, including residential mortgage originators and loan servicers. The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including TILA and RESPA and the Fair Debt Collections Practices Act. The CFPB has issued a number of regulations under the Dodd-Frank Act relating to loan origination and servicing activities, including ability-to-repay and “Qualified Mortgage” standards and other origination standards and practices as well as servicing requirements that address, among other things, periodic billing statements, certain notices and acknowledgements, prompt crediting of borrowers’ accounts for payments received, additional notice, review and timing requirements with respect to delinquent borrowers, loss mitigation, prompt investigation of complaints by borrowers, and lender-placed insurance notices. The CFPB has also amended provisions of Home Ownership and Equity Protection Act regarding the determination of high-cost mortgages, and of Regulation B, to implement additional requirements under the Equal Credit Opportunity Act with respect to valuations, including appraisals and automated valuation models. The CFPB has also issued guidance to loan servicers to address potential risks to borrowers that may arise in connection with transfers of servicing. Additionally, the CFPB has increased the focus on lender liability and vendor management across the mortgage servicing and settlement services industries, which may vary depending on the services being performed.

The CFPB’s examinations have increased, and will likely continue to increase, our administrative and compliance costs. They could also greatly influence the availability and cost of residential mortgage credit and increase servicing costs and risks. These increased costs of compliance, the effect of these rules on the lending industry and loan servicing, and any failure in our ability to comply with the new rules by their effective dates, could be detrimental to our business. The CFPB also issued guidelines on sending examiners to banks and other institutions that service and/or originate mortgages to assess whether consumers’ interests are protected. The CFPB has conducted routine examinations of our business and will conduct future examinations. 26

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~~active~~servicing. ~~in investigations and enforcement actions and~~Additionally, ~~when~~the ~~necessary,~~CFPB has ~~issued~~increased ~~civil money penalties to parties~~ the ~~CFPB~~focus ~~determines~~on ~~have~~lender ~~violated~~liability ~~the laws~~ and ~~regulations~~vendor itmanagement ~~enforces.~~across ~~We anticipate an increase in regulatory enforcement activity by~~ the ~~CFPB~~mortgage ~~under~~servicing ~~the~~and ~~new~~settlement ~~Biden~~services ~~administration. Our failure to comply with the federal consumer protection laws~~industries, ~~rules and regulations to~~ which wemay ~~are~~vary ~~subject,~~depending ~~whether~~on ~~actual~~the orservices ~~alleged,~~being ~~could expose us to enforcement actions or potential litigation liabilities~~performed.

The CFPB also has broad enforcement powers, and can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, limits on activities or functions, remediation of practices, external compliance monitoring and civil money penalties. The CFPB has been active in investigations and enforcement actions and, when necessary, has issued civil money penalties to parties the CFPB determines have violated the laws and regulations it enforces. We anticipate an increase in regulatory enforcement activity by the CFPB under the Biden administration. Our failure to comply with the federal consumer protection laws, rules and regulations to which we are subject, whether actual or alleged, could expose us to enforcement actions or potential litigation liabilities.

In addition, the occurrence of one or more of the foregoing events or a determination by any court or regulatory agency that our policies and procedures do not comply with applicable law could impact our business operations. For example, if the violation is related to our servicing operations it could lead to downgrades by one or more rating agencies, a transfer of our servicing responsibilities, increased delinquencies on mortgage loans we service or any combination of these events. Such a determination could also require us to modify our servicing standards. The expense of complying with new or modified servicing standards may be substantial. Any such changes or revisions may have a material impact on our servicing operations, which could be detrimental to our business.

Regulatory proceedings and related matters could adversely affect us.

We have been, and may in the future become, involved in regulatory proceedings. We consider most of the proceedings to be in the normal course of our business or typical for the industry; however, it is inherently difficult to assess the outcome of these matters, and we may not prevail in any proceedings or litigation. There could be substantial cost and management diversion in such litigation and proceedings, and any adverse determination could have a material adverse effect on our business, reputation, or our consolidated financial condition and consolidated results of our operations.

Risks Related to Our Common Stock

If we do not continue to satisfy the NYSE American continued listing requirements, our ~~common~~Common ~~stock~~Stock could be delisted from the NYSE American.

The listing of our ~~common~~Common ~~stock~~Stock on the NYSE American is contingent on our compliance with the NYSE American’s conditions for continued listing, including requirements relating to maintaining minimum stockholders’ equity. We cannot assure you that we will be able to meet those listing conditions. If the NYSE American delists our common stock from trading on its exchange due to our failure to meet the NYSE American’s listing conditions, we and our securityholders could face significant material adverse consequences, including:

●On August 26, 2022, the Company received a ~~limited~~notification ~~availability~~(the Deficiency Letter) from the NYSE American stating that the Company was not in compliance with a certain NYSE American continued listing standard relating to stockholders’ equity. Specifically, the Deficiency Letter stated that the Company is not in compliance with Sections 1003(a)(i) and 1003(a)(iii) of ~~market~~the ~~quotations~~NYSE ~~for~~American ~~our~~Company ~~securities;~~Guide, which requires an issuer to have, respectively, stockholder’s equity of $4 million or more if it has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years and stockholders’ equity of $6.0 million or more if it has reported losses from continuing operations and/or net losses in its five most recent fiscal years. The Deficiency Letter noted that Company had stockholders’ equity of $3.5 million as of June 30, 2022 and has reported net losses from continuing operations in its five most recent fiscal years ended December 31, 2021.

~~●a reduced level of trading activity in the secondary trading market for our securities;~~ 27

Table ~~●a limited amount~~ of ~~analyst coverage; and~~Contents

●a decreased ability to issue additional securities or obtain additional financing in the future.

The Company was required to submit a plan to the NYSE American by September 26, 2022 advising of actions it has taken or will take to regain compliance with the continued listing standards by February 26, 2024. The Company timely submitted its plan on September 26, 2022.

On November 15, 2022, the Company received a notification (the Acceptance Letter) from the NYSE American that it has accepted the Company’s plan to regain compliance with the NYSE American’s continued listing standards and has granted the Company until February 26, 2024 to regain such compliance. If the Company does not make progress consistent with the terms of the accepted plan anytime during the plan period or is not in compliance with the NYSE American’s continued listing standards by February 26, 2024, the NYSE American may commence delisting procedures.

If the NYSE American delists our Common Stock from trading on its exchange due to our failure to meet the NYSE American’s listing conditions, we and our security holders could face significant material adverse consequences, including:

●

a limited availability of market quotations for our securities;

●

a reduced level of trading activity in the secondary trading market for our securities;

●

a limited amount of analyst coverage; and

●

a decreased ability to issue additional securities or obtain additional financing in the future.

The Company incurs significant expenses and administrative burdens as a public company, which could have a material adverse effect on our business, financial condition and results of operations.

The Company incurs legal, accounting, administrative and other costs and expenses as a public company.. Compliance with public company requirements increases costs and makes certain activities more time-consuming. Risks associated with the Company’s status as a public company may at times make it more difficult to attract and retain qualified persons to serve on the board of directors or as executive officers. These public company compliance costs require the Company to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by shareholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

Our share price has been and may continue to be volatile and the trading of our shares may be limited.

The market price of our securities has been volatile. We cannot guarantee that a consistently active trading market for our securities will continue. In addition, there can be no assurances that such markets will continue or that any shares which may be purchased may be sold without incurring a loss. Any such market price variation of our shares may not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value, and may not be indicative of the market price for the shares in the future. The market price of our common stock is likely to continue to be highly volatile and could be significantly affected by factors including:

●

unanticipated fluctuations in our operating results;

●

general market and mortgage industry conditions;

●

mortgage and real estate fees;

●

continued losses and our ability to satisfy our obligations;

●

delinquencies and defaults on outstanding mortgages;

●

loss severities on loans and REO;

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●

prepayments on mortgages;

●

the regulatory environment and results of our mortgage originations;

●

mark to market adjustments related to the fair value of loans held-for-sale, mortgage servicing rights, long-term debt and derivatives;

●

interest rates; and

●

litigation.

In addition, significant price and volume fluctuations in the stock market have particularly affected the market prices for the securities of mortgage companies such as ours. Furthermore, general conditions in the mortgage industry may adversely affect the market price of our securities. These broad market fluctuations have adversely affected and may continue to adversely affect the market price of our securities. If our results of operations fail to meet the expectations of security analysts or investors in a future quarter, the market price of our securities could also be materially adversely affected and we may experience difficulty in raising capital.

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continue to adversely affect the market price of our securities. If our results of operations fail to meet the expectations of security analysts or investors in a future quarter, the market price of our securities could also be materially adversely affected and we may experience difficulty in raising capital.

Issuances of additional shares of our common stock or other securities may adversely affect the market price of our common stock and significantly dilute stockholders.

In order to support our business objectives, we may raise capital through the sale of equity or convertible securities. The issuance or sale, or the proposed sale, of substantial amounts of our common stock, preferred stock or other securities in the public market or in private transactions could materially adversely affect the market price of our common stock or other outstanding securities and dilute our book value per share.

We do not expect to pay dividends in the foreseeable future and we may be restricted in paying dividends on our common stock.

We are currently prohibited from paying dividends under Maryland law and do not anticipate paying any dividends on our common or preferred stock in the foreseeable future. Under section 2-311 of the Maryland General Corporation Law (MGCL), a Maryland corporation generally cannot pay a dividend or make any other distribution to its stockholders, including a redemption or repurchase of shares of stock in exchange for cash, other assets or indebtedness of the corporation, if, after giving effect to the dividend or other distribution: (a) the corporation would not be able to pay its debts as wethey ~~intend~~become due in the usual course of business; or (b) the corporation’s total assets would be less than the sum of the corporation’s total liabilities plus, unless its charter permits otherwise (which our Charter does not), the amount that would be needed, if the corporation were to ~~retain~~be ~~any~~dissolved ~~future~~at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution. Notwithstanding this restriction, a Maryland corporation may make a distribution from: (i) its net earnings for ~~funding~~the ~~growth~~fiscal year in which the distribution is made; (ii) its net earnings for the preceding fiscal year; or (iii) the sum of its net earnings for its preceding eight fiscal quarters even if, after such distribution, the corporation’s total assets would be less than its total liabilities, if, after giving effect to the distribution, the corporation would be able to pay its debts as they become due in the usual course of its business. The Company does not have net earnings during the current or preceding fiscal year, or over the prior eight fiscal quarters. In addition, our existing and any future credit or warehouse facilities or other contracts may contain covenants prohibiting dividend payments upon an occurrence of a default or otherwise. We also are prohibited from paying dividends on our common stock until our preferred stock dividends are paid under the terms of our Series BD Preferred Stock. As a result of ~~December~~receiving 31the requisite stockholder consents on the Exchange Offers on October 20, ~~2021~~2022 and completion of the Redemption, wethe ~~had~~aggregate cumulative undeclared dividends in arrears of approximately $1920.13 million, or approximately $2830.7147 per outstanding share of Series B Preferred ~~Stock~~stock, were exchanged and are no longer considered in the earnings per share calculation. However, ~~Additionally~~as a result of the Company not being able to satisfy the new dividend payment on the 8.25% dividend on the Series D Preferred stock as a result of the aforementioned Cash Consideration Restrictions, ~~every~~the Company has approximately $52 thousand in cumulative dividends in arrears on the new Series D Preferred D stock from the date of issuance through December 31, 2022. Every quarter the cumulative undeclared dividends in arrears ~~increases~~will accumulate by approximately $0.~~5859~~0021 per ~~Preferred~~share Bof ~~share~~Series D Preferred stock, or approximately $~~390~~72 thousand, increasing the new Series D Preferred stock liquidation preference. As a result, you should not rely on an investment in our stock if you require dividend income. Capital appreciation, if any, of our stock may be your sole source of gain for the foreseeable future.

As of February 28, ~~2022~~2023, Todd M. Pickup and Richard H. Pickup, and their respective affiliates beneficially owned approximately 137.67% and 3117.18%, respectively, of our outstanding common stock. ~~Their beneficial ownership includes 395,349 shares~~ and ~~534,884~~the ~~shares~~Camac ofFund ~~our common stock that Todd Pickup~~ and ~~Richard~~its ~~Pickup,~~affiliates ~~respectively,~~beneficially ~~has~~owned ~~the~~approximately ~~right to acquire at any time by converting the outstanding $20~~13.05% ~~million in principal balance~~ of ~~Amended~~our ~~Convertible~~outstanding ~~Notes~~common ~~due May 9, 2022, at the initial conversion price of $21~~stock.50 per share. Additionally, their beneficial ownership also includes 85,060 and 116,957 warrants that Todd Pickup and Richard Pickup, respectively, has the right to acquire at any time by converting the warrants that expire April 15, 2025, at a cash exercise price of $2.97 per share . These stockholders could exercise significant influence over our Company. Such ownership may have the effect of control over substantially all matters requiring stockholder approval, including the election of directors. Furthermore, such ownership and control may have the effect of delaying or preventing a change in control of our Company, impeding a merger, consolidation, takeover or other business combination involving our Company or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company. We do not expect that these stockholders will vote together as a group. In addition, sales of significant amounts of shares held by these stockholders, or the prospect of these sales, could adversely affect the market price of our common stock.

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Provisions in our charter documents and Maryland law, as well as our NOL Rights Plan, impose limitations that may delay or prevent our acquisition by a third party.

Our charter and bylaws contain provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions include, among other things, advance notice for raising business issues or making nominations at meetings and blank check preferred stock that allows our board of directors, without stockholder approval, to designate and issue additional series of preferred stock with rights and terms as our board of directors may determine, including rights to dividends and proceeds in a liquidation that are senior to our common stock.

We are also subject to certain provisions of the ~~Maryland General Corporation Law~~MGCL, which could delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the price for their common stock or may otherwise be in the best interests of our stockholders. This includes the “business combinations” statute that prohibits transactions between a Maryland corporation and “interested stockholders,” which is any person who beneficially owns 10% or more of the voting power of our then-outstanding voting stock for a period of five years unless the board of directors approved the transaction prior to the party’s becoming an interested stockholder. The five-year period runs from the most recent date on which the interested stockholder became an interested stockholder. The law also requires a super majority stockholder vote for such transactions after the end of the five-year period.

Maryland law also provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by a vote of two-thirds of the shares eligible to vote. The control share acquisition statute would not apply to shares acquired in a merger, consolidation or share exchange if we were a party to the transaction. The control share acquisition statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if our acquisition would be in our stockholders’ best interests.

We have also adopted an NOL rights plan, pursuant to which each share of common stock also has a “right” attached to it. Although the NOL rights plan was adopted to help preserve the value of certain deferred tax benefits, including those generated by net operating losses, it also has the effect of deterring or delaying an acquisition of our Company by a third party. The rights are not exercisable except upon the occurrence of certain takeover-related events—most importantly, the acquisition by a third party (the “Acquiring Person”) of more than 4.99% of our outstanding voting shares. Once triggered, the rights entitle the stockholders, other than the Acquiring Person, to certain “flip-in”, “flip-over” and exchange rights. The effect of triggering the rights is to expose the Acquiring Person to severe dilution of its ownership interest, as the shares of our common stock (or any surviving corporation) are offered to all of the stockholders other than the Acquiring Person at a steep discount to their market value. We have in the past, and may in the future, grant waivers to the limitations imposed by our NOL rights plan. This may affect the holdings of those shareholders who obtained the waivers and may affect the protection of, and hence the ability to make use of, our NOL’s.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

~~Our~~On December 15, 2022, we entered into a Lease Termination Agreement (the Termination Agreement) relating to the lease (the Lease) for the Company’s primary executive, administrative and ~~administrative~~operations offices ~~are~~ located at 19500 Jamboree Road, Irvine, California ~~92612~~(the ~~where~~Premises). weThe ~~have~~Lease, aas ~~premises~~amended, ~~lease~~was ~~expiring~~originally inentered ~~September~~into ~~2024.~~in ~~The~~March ~~premises~~2005, ~~consist~~and ofthe ~~four~~Premises ~~floors~~consisted ~~where~~of ~~we occupy~~ approximately ~~119~~120,~~600~~000 ~~square~~sq. ~~feet~~ft.

In January 2023, the Company entered into a new sublease agreement for approximately 19,000 sq. ft. of executive, administrative and operations workspace. The term of the new lease term is through July 31, 2025 with an average rent of $1.35 per sq. ft. over the term of the lease, which, including CAM charges, totals approximately $800 thousand over the term of the lease.

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ITEM 3. LEGAL PROCEEDINGS

Information with respect to this item may be found in Note 13 – Commitments and Contingencies in the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, which information is incorporated herein by reference.

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

Our common stock is currently listed on the NYSE American under the symbol “IMH”.

On March 49, ~~2022~~2023, the last quoted price of our common stock on the NYSE American was $0.7537 per share. As of March 49, ~~2022~~2023, there were ~~174~~172 holders of record, including holders who are nominees for an undetermined number of beneficial owners, of our common stock.

Our Board of Directors ~~authorizes~~may authorize in its discretion the payment of cash dividends on its common stock, subject to compliance with applicable law and an ongoing review of our profitability, liquidity and future operating cash requirements. We ~~and~~are ~~some~~currently ofprohibited ~~our~~from ~~subsidiaries~~paying ~~are~~dividends ~~subject~~under toMaryland ~~restrictions~~law ~~under~~and ~~our~~do ~~warehouse~~not ~~borrowings~~anticipate ~~and~~paying ~~long-term~~any ~~debt~~dividends ~~agreements~~ on our ~~ability~~common toor ~~pay~~preferred ~~dividends~~stock ifin ~~there~~the isforeseeable anfuture. ~~event~~Under section 2-311 of ~~default~~the MGCL, a Maryland corporation generally cannot pay a dividend or ~~otherwise.~~make ~~Plus,~~any ~~certain~~other ~~debt~~distribution ~~arrangements~~to ~~require~~its ~~the~~stockholders, ~~maintenance~~including ofa ~~ratios~~redemption ~~and~~or ~~contain~~repurchase ~~restrictive~~of ~~financial~~shares ~~covenants~~of ~~that~~stock ~~could~~in ~~limit~~exchange ~~our~~for ~~ability~~cash, ~~and~~other ~~the~~assets ~~ability~~or indebtedness of ~~our~~the ~~subsidiaries~~corporation, if, after giving effect to ~~pay~~the ~~dividends.~~dividend ~~Furthermore,~~or weother ~~will~~distribution: (a) the corporation would not be ~~prohibited~~able ~~from~~to ~~paying~~pay ~~dividends~~its ondebts ~~our~~as ~~common~~they ~~stock~~become ~~until~~due wein ~~satisfy~~the ~~all~~usual course of business; or (b) the ~~outstanding~~corporation’s ~~dividends~~total ~~owed~~assets onwould ~~our~~be ~~preferred~~less ~~stock.~~than Asthe sum of ~~December~~the 31corporation’s total liabilities plus, ~~2021~~unless its charter permits otherwise (which our Charter does not), wethe ~~had~~amount ~~cumulative~~that ~~undeclared~~would ~~dividends~~be inneeded, ~~arrears~~if ofthe ~~approximately~~corporation ~~$19.1~~were ~~million~~to be dissolved at the time of the distribution, orto ~~approximately~~satisfy ~~$28.71~~the ~~per~~preferential ~~outstanding~~rights ~~share~~upon dissolution of ~~Series~~stockholders Bwhose ~~Preferred~~preferential ~~Stock~~rights on dissolution are superior to those receiving the distribution. ~~Additionally~~Notwithstanding this restriction, ~~every~~a ~~quarter~~Maryland ~~the~~corporation ~~cumulative~~may ~~undeclared~~make ~~dividends~~a distribution from: (i) its net earnings for the fiscal year in ~~arrears~~which ~~increases~~the bydistribution ~~$0.5859~~is ~~per~~made; ~~Preferred~~(ii) its Bnet ~~share,~~earnings orfor ~~approximately~~the ~~$390~~preceding ~~thousand. The~~fiscal ~~Board~~year; or (iii) the sum of ~~Directors~~its ~~did~~net ~~not~~earnings ~~declare~~for ~~cash~~its ~~dividends~~preceding oneight ~~our~~fiscal ~~common~~quarters ~~stock~~even ~~during~~if, after such distribution, the ~~years~~corporation’s ~~ended~~total ~~December 31,~~assets ~~2021~~would ~~and~~be ~~2020.~~less Wethan doits ~~not~~total ~~expect~~liabilities, if, after giving effect to ~~declare~~the ordistribution, ~~pay~~the ~~any~~corporation ~~cash~~would ~~dividends~~be onable ~~our~~to ~~common~~pay ~~stock~~its debts as they become due in the ~~foreseeable~~usual ~~future~~course of its business. The Company does not have net earnings during the current or preceding fiscal year, or over the prior eight fiscal quarters

In addition, we and some of our subsidiaries are subject to restrictions under our warehouse borrowings and long-term debt agreements on our ability to pay dividends if there is an event of default or otherwise. Plus, certain debt arrangements require the maintenance of ratios and contain restrictive financial covenants that could limit our ability, and the ability of our subsidiaries, to pay dividends. Furthermore, we will be prohibited from paying dividends on our common stock until we satisfy all of the outstanding dividends owed on our preferred stock. The Company has approximately $52 thousand in cumulative dividends in arrears on the new Series D Preferred stock from the date of issuance. Every quarter the cumulative undeclared dividends in arrears will accumulate by approximately $0.0021 per share of Series D Preferred stock, or approximately $72 thousand, increasing the new Series D Preferred stock liquidation preference. The Board of Directors did not declare cash dividends on our common stock during the years ended December 31, 2022 and 2021. We do not expect to declare or pay any cash dividends on our common stock in the foreseeable future.

ITEM 6. RESERVED

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Refer to Item 1. “Business—Forward- Looking Statements” for a complete description of forward-looking statements. Refer to Item 1. “Business” for information on our businesses and operating segments.

Amounts are presented in thousands, except per share data or as otherwise indicated.

Market Conditions

~~The~~ U.S. ~~economy~~economic ~~continued~~activity ~~its~~slowed ~~recovery~~ during ~~2021~~2022 ~~despite~~reflecting ~~concerns over rising inflation and a surge in COVID-19 cases in~~ the ~~second~~impacts ~~half~~ of ~~the~~significantly ~~year.~~higher ~~As previously discussed~~inflation, ~~the~~rising ~~COVID-19~~interest ~~pandemic~~rates ~~has resulted in disruption to business~~ and ~~economic~~energy ~~activity~~price volatility as well as torepercussions ~~the~~from ~~capital~~ongoing ~~markets.~~geopolitical ~~COVID-19's~~uncertainty ~~effects~~alongside incontinued ~~the~~economic ~~U.S.~~impacts ~~and~~from ~~globally have been extreme, and~~ the ~~duration~~coronavirus of(COVID-19) ~~the~~ pandemic ~~and~~which ~~its~~resulted ~~ultimate~~in ~~repercussions~~supply ~~continue~~chain ~~to remain unclear~~disruptions. ~~Unprecedented~~Inflation ~~government~~across ~~economic~~many ~~intervention,~~key ~~including~~economies ~~additional~~reached ~~government~~generational ~~support~~highs, ~~enacted~~prompting ~~during~~central ~~the~~banks ~~first~~to ~~quarter~~undertake ofmonetary ~~2021,~~policy ~~has~~tightening ~~likely~~actions ~~dampened~~that ~~the~~are ~~pandemic's~~likely ~~effects,~~to ~~but~~create atheadwinds ~~uncertain~~to ~~long-term~~economic ~~cost~~growth. ~~However,~~U.S. ~~these~~Gross ~~government~~Domestic ~~support~~Product ~~measures~~(GDP) ~~combined~~grew ~~with~~at ~~progress~~an onestimated ~~vaccinations~~annual ~~along~~rate ~~with the easing and removal~~ of ~~many~~2.1% ~~restrictions~~in ~~by states~~2022, ~~have~~while ~~helped speed~~ the ~~economic~~personal ~~recovery~~consumption ~~along~~expenditures ~~considerably.~~price ~~These~~index ~~actions~~of as5.0% ~~well~~in asDecember ~~several~~2022 ~~other~~remained ~~factors,~~well ~~including supply chain breakdowns and labor shortages, have contributed to higher inflation, which rose~~ above the Federal Reserve Board’s (FRB) target inflation rate ~~in 2021~~. ~~U.S.~~The ~~Gross~~FRB ~~Domestic~~increased ~~Product~~short-term ~~(GDP)~~interest ~~grew~~rates atby ana ~~estimated~~total ~~annual rate~~ of ~~5.7~~425 ~~percent~~basis inpoints ~~2021,~~during ~~while~~2022 ~~the~~and ~~U.S.~~has ~~economy~~indicated ~~added~~that ~~over~~it ~~1.7~~will ~~million~~increase ~~jobs~~short-term ~~during~~interest ~~2021~~rates ~~and~~further ~~the~~in ~~total~~2023 ~~unemployment~~in ~~rate~~order ~~fell~~ to 3fight inflation.9 ~~percent~~While atthere ~~December~~is ~~2021~~debate asamong ~~compared~~economists ~~with~~as ~~6.7~~to ~~percent~~whether atthese ~~December 2020. In December 2021~~factors, ~~the~~coupled ~~FRB~~with ~~decided~~recent toperiods ~~hold~~of ~~short-term~~economic ~~interest~~contraction ~~rates~~in ~~steady~~the ~~(at~~U.S., ~~near~~indicate ~~zero)~~that ~~while~~the ~~announcing~~U.S. ithas ~~will~~entered, ~~accelerate~~or in the ~~reduction~~near ofterm ~~its~~will ~~monthly~~enter, ~~bond~~a ~~buying program~~recession, ~~which~~it ~~will~~remains ~~bring~~difficult ~~the~~to ~~program~~predict tothe anfull ~~end~~impact inon ~~early~~macroeconomic ~~2022~~conditions. These Itconditions ishave ~~expected~~created ~~the~~significant ~~FRB~~uncertainty ~~will~~about ~~start~~the ~~increasing~~future ~~short-term~~economic ~~interest~~environment ~~rates~~which inwill ~~2022~~continue ~~after~~to ~~the~~evolve ~~completion~~and ofimpact ~~its~~our ~~bond~~business ~~buying~~in ~~program~~future periods.

Concerns over domestic and global policy issues, trade policy in the U.S. and geopolitical events, as well as the implications of those events on the markets in general, further add to the global uncertainty. Interest rate levels, inflation and slowing economic growth, in combination with global economic conditions, fiscal and monetary policy and the level of regulatory and government scrutiny of financial institutions will continue to impact our results in 2023 and beyond.

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Selected Financial Results for 2022 and 2021


	For the Three Months Ended						For the Year Ended
	December 31,		September 30,		December 31,		December 31,		December 31,
(in thousands, except per share data)	2022		2022		2021		2022		2021
Revenues:
Gain (loss) on sale of loans, net	$	865	$	(682)	$	14,861	$	6,317	$	65,294
Real estate services fees, net		349		290		212		1,081		1,144
(Loss) gain on mortgage servicing rights, net		(157)		196		(68)		194		34
Servicing fees (expense), net		36		32		(39)		63		(432)
Broker fee income		50		—		—		50		—
Other		(73)		3		(29)		890		279
Total revenues (expenses), net		1,070		(161)		14,937		8,595		66,319
Expenses:
Personnel expense		5,060		5,701		13,204		30,705		52,778
General, administrative and other		3,664		3,792		3,978		15,698		16,795
Occupancy		2,041		1,038		1,062		5,297		4,236
Business promotion		261		545		2,249		4,425		7,395
Total expenses		11,026		11,076		20,493		56,125		81,204
Operating (loss) earnings:		(9,956)		(11,237)		(5,556)		(47,530)		(14,885)
Other (expense) income:
Net interest (expense) income		(1,390)		(1,334)		403		(3,869)		2,398
Change in fair value of long-term debt		(430)		(435)		1,459		2,757		2,098
Change in fair value of net trust assets		—		—		7,284		9,248		6,582
Total other (expense) income, net		(1,820)		(1,769)		9,146		8,136		11,078
(Loss) earnings before income taxes		(11,776)		(13,006)		3,590		(39,394)		(3,807)
Income tax expense		(8)		7		8		38		71
Net (loss) earnings	$	(11,768)	$	(13,013)	$	3,582	$	(39,432)	$	(3,878)
Other comprehensive (loss) earnings:
Change in fair value of instrument specific credit risk		6,097		3,347		(1,148)		17,213		(2,722)
Total comprehensive (loss) earnings	$	(5,671)	$	(9,666)	$	2,434	$	(22,219)	$	(6,600)

Diluted weighted average common shares		31,144		21,523		21,359		23,918		21,332
Diluted (loss) earnings per share	$	(0.38)	$	(0.62)	$	0.15	$	(1.65)	$	(0.22)

~~Although~~Status ~~the U.S. economy continued to improve during 2021, the impact~~ of the COVID-19 pandemic, including the emergence of new variants, and higher inflation on economic conditions both in the United States and abroad continues to create global uncertainty about the future economic environment, including the pace and extent of the economic recovery. Concerns over interest rate levels, energy prices, domestic and global policy issues, trade policy in the U.S. and geopolitical events as well as the implications of those events on the markets in general further add to the global uncertainty. Interest rate levels and energy prices, in combination with global economic conditions, fiscal and monetary policy and the level of regulatory and government scrutiny of financial institutions will continue to impact our results in 2022 and beyond.Operations

For the year ended December 31, 2022, net loss was $39.4 million, or $1.65 per diluted common share, as compared to net loss of $3.9 million, or $0.22 per diluted common share in 2021. For the quarter ended December 31, 2022, net loss was $11.8 million, or $0.38 per diluted common share, as compared to net earnings of $3.6 million, or $0.15 per diluted common share in the fourth quarter of 2021, and net loss of $13.0 million, or $0.62 per diluted common share, in the third quarter of 2022.

28Net loss for the year ended December 31, 2022 increased to $39.4 million as compared to $3.9 million for the year ended December 31, 2021. The year over year increase in net loss was primarily due to a $59.0 million decrease in gain on sale of loans, net, coupled with a $2.9 million decrease in other income, which was partially offset by an $25.1 million decrease in operating expenses. The sharp and unexpected decline in gain on sale of loans, net reflects the intense pressure on mortgage originations due to the dramatic collapse of the mortgage refinance market and the weakening mortgage purchase market, which has suffered from a lack of housing inventory and significant increase in mortgage interest rates resulting in customer affordability issues. As previously discussed, the increase in interest rates which began in the fourth quarter of 2021, caused a significant increase in credit spreads, which accelerated through the fourth quarter 2022, resulting in a substantial over supply of low coupon originations causing a severe decline in margins and diminishing capital market distribution exits for originators reliant upon an aggregation execution model. To mitigate the risks associated with reduced distribution exits and extended settlement timelines, we began pulling back on production, significantly increasing the pricing on our loan products as well as completely shifting to best-efforts delivery for non-agency production in the first quarter of 2022. As a result, origination volumes decreased significantly during 2022. For the year ended December 31, 2022, we originated $693.7 million of loans as compared to $2.9 billion of loans originated during the same period in 2021. During the year ended December 31, 2022, margins were 91 bps as compared to 225 bps during the same period in 2021.

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~~Selected~~Other ~~Financial~~income ~~Results~~decreased $2.9 million to $8.1 million for ~~2021~~the year ended December 31, 2022 primarily due to a $3.6 million reduction in trust gains and ~~2020~~net interest (expense) income collectively, which was the result of the sale of the legacy securitization portfolio during the first quarter of 2022, and which was in turn offset by a $659 thousand increase in fair value of our long-term debt. Offsetting the decreases in total revenues and other income was a $25.1 million decrease in operating expenses during 2022 primarily due to a reduction in variable compensation commensurate with reduced originations as well as a reduction in headcount to support reduced volume.


	For the Three Months Ended						For the Year Ended
	December 31,		September 30,		December 31,		December 31,		December 31,
(in thousands, except per share data)	2021		2021		2020		2021		2020
Revenues:
Gain on sale of loans, net	$	14,861	$	19,608	$	21,455	$	65,294	$	14,004
Servicing (expense) fees, net		(39)		(124)		(131)		(432)		3,603
(Loss) gain on mortgage servicing rights, net		(68)		101		(1,624)		34		(28,509)
Real estate services fees, net		212		244		294		1,144		1,312
Other		(29)		(11)		3		279		1,498
Total revenues, net		14,937		19,818		19,997		66,319		(8,092)
Expenses:
Personnel expense		13,204		12,685		13,255		52,778		52,880
Business promotion		2,249		2,185		552		7,395		3,859
General, administrative and other		5,040		4,927		6,116		21,031		24,534
Total expenses		20,493		19,797		19,923		81,204		81,273
Operating (loss) earnings:		(5,556)		21		74		(14,885)		(89,365)
Other income (expense):
Net interest income		403		777		708		2,398		5,137
Change in fair value of long-term debt		1,459		(1,803)		(1,802)		2,098		1,899
Change in fair value of net trust assets		7,284		3,112		(1,092)		6,582		(5,688)
Total other income (expense)		9,146		2,086		(2,186)		11,078		1,348
Earnings (loss) before income taxes		3,590		2,107		(2,112)		(3,807)		(88,017)
Income tax expense		8		21		78		71		133
Net earnings (loss)	$	3,582	$	2,086	$	(2,190)	$	(3,878)	$	(88,150)
Other comprehensive earnings (loss):
Change in fair value of instrument specific credit risk		(1,148)		631		505		(2,722)		(20)
Total comprehensive earnings (loss)	$	2,434	$	2,717	$	(1,685)	$	(6,600)	$	(88,170)

Diluted weighted average common shares		21,359		21,345		21,255		21,332		21,251
Diluted earnings (loss) per share	$	0.15	$	0.08	$	(0.10)	$	(0.22)	$	(4.15)

~~Status~~As part of ~~Operations~~our continuous expense management assessment, as previously noted, we have undertaken a number of initiatives during the latter half of 2022 and into the first quarter of 2023 that we believe will significantly reduce our expense run rate. In January 2023, we exited our legacy commercial office space of 120,000 sq. ft. and relocated to a new 19,000 sq.ft. office space. The reduction of space was made possible by our ability to maintain a majority of our workforce as a hybrid or remote workforce, minimizing in-office space needs. In accordance with the terms of the lease termination agreement, we paid termination consideration of $3.0 million. We estimate that the amount of base rent, common area maintenance (CAM) charges, storage, parking, and any other miscellaneous charges that would have been payable during the final 20 months of the original lease term would have been in excess of $8.8 million. The new lease term runs through July 31, 2025 with an average rent of $1.35 per sq. ft. over the term of the lease, which including CAM charges, totals approximately $800 thousand over the term of the lease, resulting in significant savings.

~~For~~In ~~the~~line ~~year~~with ~~ended~~our ~~December 31~~expense management strategies, ~~2021~~ we repositioned our retail consumer direct channel, ~~net~~CashCall ~~loss~~Mortgage ~~was~~(CCM), $3to be a mortgage broker rather than a direct lender at the end of 2022 and into 2023.9 As ~~million~~noted in previous years, orour $0GSE loan originations were sold directly through aggregators.22 While ~~per~~we ~~diluted~~remain ~~common~~in ~~share~~good standing with our aggregator partners, asthe ~~compared~~cost to ~~net~~produce ~~loss~~retail loans in light of ~~$88.2~~the ~~million,~~rising orrate ~~$4.15~~environment ~~per~~and ~~diluted~~severe ~~common~~margin ~~share~~compression felt across the residential mortgage industry proved challenging—resulting in ~~2020~~lower origination volumes and higher cost to produce throughout 2022. ~~For~~The ~~the~~broker ~~quarter~~fulfillment ~~ended~~model ~~December 31, 2021,~~has ~~net~~many ~~earnings~~strengths ~~were~~including ~~$3.6~~a ~~million,~~reduced orexpense ~~$0.15~~load ~~per~~associated ~~diluted~~with ~~common~~personnel, ~~share~~operational and technology support, asand ~~compared~~reduced marketing needs due to ~~net~~organic ~~loss~~lead ofvolume $2generated by the CCM brand.2 Broker ~~million~~fulfillment also supports a broader product offering to CCM consumers, orallowing ~~$0.10~~the ~~per~~Company ~~diluted~~to ~~common~~move ~~share~~away infrom the ~~fourth~~expense ~~quarter~~and complexity of ~~2020,~~managing ~~and~~multiple ~~net~~lending ~~earnings~~products ofwith ~~$2.1~~support ~~million,~~from orseveral $0departments.08 ~~per~~We ~~diluted~~believe ~~common~~adopting ~~share,~~a inmore cost-effective origination strategy is essential to managing the ~~third~~overall ~~quarter~~monthly expense load of ~~2021~~the retail channel while also driving revenue across a broad spectrum of product offerings to consumers.

~~Net loss for the year ended December 31~~Additionally, ~~2021~~ ~~decreased~~given toour ~~$3.9~~lack ~~million as compared to $88.2 million for the year ended December 31, 2021. The year over year decrease in net loss was primarily due to a $51.3 million increase in gain on sale~~ of ~~loans,~~conventional ~~net,~~GSE aorigination ~~$28.5~~volume ~~million~~and ~~decrease in loss on sale of mortgage~~ servicing rights, net, as well as a $9.7 million increase in other income. The increase in gain on sale of loans, net for 2021 was due to origination volumes increasing to $2.9 billion, with margins of 225 basis points (bps), as compared to $2.7 billion in originations in 2020, with margins of approximately 51 bps. Margins increased year over ~~year primarily due to~~ the ~~aforementioned~~past ~~temporary~~several ~~suspension of lending in 2020~~years, aswith ~~well~~no asdirect anGSE ~~increase~~deliveries ~~in NonQM production. The decrease in loss on sale of mortgage servicing rights, net was due~~ to aFannie ~~$28.5~~Mae ~~million~~or ~~reduction as a result of the sale of $4.2 billion in unpaid principal balance (UPB) of~~ Freddie Mac ~~and~~since ~~GNMA~~2016 ~~MSRs in the second~~ and ~~third quarters of~~ 2020, ~~resulting in losses of $6.5 million~~respectively, aswe ~~well~~intend asto ~~losses~~voluntarily ofrelinquish ~~$22.0~~our ~~million~~GSE ~~resulting~~Seller/Servicer ~~from~~designation ~~changes~~which inhas ~~fair~~been ~~value~~suspended ofduring ~~MSRs~~these asperiod ~~a result~~ of ~~prepayments and prepayment assumptions during 2020~~non-delivery. ~~Additionally,~~ ~~other~~We ~~income~~expect ~~increased~~to ~~$9.7~~be ~~million~~a ~~year~~third-party ~~over~~originator ~~year~~with ~~primarily~~both ~~due~~GSE’s to asupport ~~decrease~~our inbroker ~~residual~~model ~~discount~~as ~~rates on the long-term mortgage portfolio~~needed.

Our Wholesale Channel continued to experience significant volume and margin deterioration during the latter half of 2022, and into 2023. The continued volatility experienced with the Non-QM market associated with liquidity, product offerings, expansive credit to meet consumer demand, and rising rates have all proven to be a considerable hindrance to maintaining a profitable channel in the Wholesale space. It is our belief that the market conditions and projections will not improve in the near term, and as a result in the first quarter of 2023, the Company decided to wind down operations within its Wholesale Channel until market conditions improve. With minimal active loans in the pipeline, the Company had no outstanding warehousing or counterparty obligations associated with its wholesale activity.

As noted above, the Company will remain focused on serving consumers through its retail channel, exclusively through a broker model fulfillment strategy until market conditions improve to support other opportunities in the direct and/or wholesale lending space.

Non-GAAP Financial Measures

For the year ended December 31, ~~2021~~2022, ~~core~~adjusted loss before tax (as defined below) was $1252.40 million, or $02.5817 per diluted common share, as compared to ~~core~~an adjusted loss before tax of $5812.74 million, or $20.7658 per diluted common share, in ~~2020~~2021. For the quarter ended December 31, ~~2021~~2022, ~~core~~adjusted loss before tax was $511.0 million, or $0.2335 per diluted common share, as compared to ~~core~~an ~~earnings~~adjusted loss before tax of $35.30 million, or $0.1623 per diluted common share, for the fourth quarter of ~~2020~~2021, and adjusted loss before tax of $12.6 million, or $0.59 per diluted common share, for the third quarter of 2022.

Table of Contents

To supplement our consolidated financial statements, which are prepared and ~~core~~presented ~~earnings~~in accordance with generally accepted accounting principles in the United States (GAAP), we use the following non-GAAP financial measures: adjusted loss before tax ofand ~~$810~~diluted ~~thousand,~~adjusted orloss $0per common share before tax.04 Adjusted ~~per~~loss and diluted adjusted loss per common share are financial measurements calculated by adjusting GAAP net loss before tax to exclude certain non-cash items, ~~for~~such as fair value adjustments and mark-to-market of mortgage servicing rights (MSRs), and legacy non-recurring expenses. We believe adjusted loss provides useful information to investors regarding our results of operations as it assists both investors and management in analyzing and benchmarking the ~~third~~performance ~~quarter~~and value of ~~2021~~our core business of mortgage lending over multiple periods. Adjusted loss facilitates company-to-company operating performance comparisons by backing out potential non-cash differences caused by variations in hedging strategies and changes in valuations for long-term debt and net trust assets, which may vary for different companies for reasons unrelated to operating performance, as well as certain historical cost (benefit) items which may vary for different companies for reasons unrelated to operating performance. These non-GAAP financial measures are not intended to be considered in isolation and should not be a substitute for (loss) earnings before income taxes, (loss) earnings or diluted (loss) earnings per common share (EPS) or any other operating performance measure calculated in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies. The tables below provide a reconciliation of (loss) earnings before tax and diluted (loss) earnings per common share to non-GAAP adjusted loss before tax and non-GAAP diluted adjusted loss per common share before tax:

To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP), we use the following non-GAAP financial measures: core (loss) earnings before tax and diluted core (loss) earnings per share before tax. Core (loss) earnings and diluted core (loss) earnings per share are financial measurements calculated by adjusting GAAP net (loss) earnings before tax to exclude certain non-cash items, such as fair value adjustments and mark-to-market of mortgage servicing rights (MSRs), and legacy non-recurring expenses. The fair value adjustments are non-cash items which management believes should be excluded when discussing our ongoing and future operations. We use core (loss) earnings before tax as we believe that it more accurately reflects our current business operations of mortgage originations and further aids our investors in understanding and analyzing our core operating results and comparing them among periods. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for net earnings (loss) before income taxes, net (loss) earnings or diluted (loss) earnings per common share (EPS) prepared in accordance with GAAP. The tables below provide a reconciliation of net earnings (loss) before tax and diluted earnings (loss) per common share to non-GAAP core (loss) earnings before tax and per common share non-GAAP core (loss) earnings before tax:


	For the Three Months Ended						For the Year Ended
	December 31,		September 30,		December 31,		December 31,		December 31,
(in thousands, except per share data)	2022		2022		2021		2022		2021
(Loss) earnings before income taxes:	$	(11,776)	$	(13,006)	$	3,590	$	(39,394)	$	(3,807)

Change in fair value of mortgage servicing rights		138		(223)		(32)		(317)		(221)
Change in fair value of long-term debt		430		435		(1,459)		(2,757)		(2,098)
Change in fair value of net trust assets, including trust REO (losses) gains		—		—		(7,284)		(9,248)		(6,582)
Legacy corporate-owned life insurance (1)		225		177		166		(257)		330
Adjusted loss before tax	$	(10,983)	$	(12,617)	$	(5,019)	$	(51,973)	$	(12,378)

Diluted weighted average common shares		31,144		21,523		21,359		23,918		21,332
Diluted adjusted loss per common share before tax	$	(0.35)	$	(0.59)	$	(0.23)	$	(2.17)	$	(0.58)

Diluted (loss) earnings per common share	$	(0.38)	$	(0.62)	$	0.15	$	(1.65)	$	(0.22)
Adjustments:
Cumulative non-declared dividends on preferred stock		—		0.02		0.02		—		0.04
Change in fair value of mortgage servicing rights		0.01		(0.01)		—		(0.01)		(0.01)
Change in fair value of long-term debt		0.01		0.01		(0.07)		(0.11)		(0.10)
Change in fair value of net trust assets, including trust REO gains (losses)		—		—		(0.34)		(0.39)		(0.31)
Legacy corporate-owned life insurance		0.01		0.01		0.01		(0.01)		0.02
Diluted adjusted loss per common share before tax	$	(0.35)	$	(0.59)	$	(0.23)	$	(2.17)	$	(0.58)

(1)

Amounts included in other revenues, general, administrative and other expense and net interest income for amounts associated with the cash surrender value of corporate-owned life insurance trusts, premiums associated with the corporate-owned life insurance trusts liabilities, and interest expense on the corporate-owned life insurance trusts, respectively, in the accompanying consolidated statements of operations and comprehensive loss.


	For the Three Months Ended						For the Year Ended
	December 31,		September 30,		December 31,		December 31,		December 31,
(in thousands, except per share data)	2021		2021		2020		2021		2020
Net earnings (loss) before tax:	$	3,590	$	2,107	$	(2,112)	$	(3,807)	$	(88,017)

Change in fair value of mortgage servicing rights		(32)		(150)		1,621		(221)		24,229
Change in fair value of long-term debt		(1,459)		1,803		1,802		(2,098)		(1,899)
Change in fair value of net trust assets, including trust REO gains		(7,284)		(3,112)		1,092		(6,582)		5,688
Legal settlements and professional fees, for legacy matters (1)		—		—		750		—		750
Legacy corporate-owned life insurance (2)		166		162		150		330		577
Core (loss) earnings before tax	$	(5,019)	$	810	$	3,303	$	(12,378)	$	(58,672)

Diluted weighted average common shares		21,359		21,345		21,255		21,332		21,251
Diluted core (loss) earnings per common share before tax	$	(0.23)	$	0.04	$	0.16	$	(0.58)	$	(2.76)

Diluted earnings (loss) per common share	$	0.15	$	0.08	$	(0.10)	$	(0.22)	$	(4.15)
Adjustments:
Income tax benefit		—		—		—		—		0.01
Cumulative non-declared dividends on preferred stock		0.02		0.02		—		0.04		—
Change in fair value of mortgage servicing rights		—		(0.01)		0.08		(0.01)		1.14
Change in fair value of long-term debt		(0.07)		0.08		0.08		(0.10)		(0.09)
Change in fair value of net trust assets, including trust REO gains		(0.34)		(0.14)		0.05		(0.31)		0.26
Legal settlements and professional fees, for legacy matters		—		—		0.04		—		0.04
Legacy corporate-owned life insurance		0.01		0.01		0.01		0.02		0.03
Diluted core (loss) earnings per common share before tax	$	(0.23)	$	0.04	$	0.16	$	(0.58)	$	(2.76)

Key Metrics

● Total mortgage originations volumes were $~~759~~21.45 million in the fourth quarter of ~~2021~~2022 and $2693.97 ~~billion~~million in ~~2021~~2022 as compared to $~~810~~759.04 million in the fourth quarter of ~~2020~~2021 and $2.79 billion in ~~2020~~2021.

● NonQM mortgage origination volumes ~~increased~~were to $~~382~~18.14 million in the fourth quarter of ~~2021~~2022 and $~~683~~462.65 million in ~~2021~~2022 as compared to $2382.21 million in the fourth quarter of ~~2020~~2021 and $~~264~~683.06 million in ~~2020~~2021.

3035

Table of Contents

● Gain on sale of loans, net decreased to $~~14.9~~865 ~~million,~~thousand ~~with margins of approximately 196 bps~~ in the fourth quarter of ~~2021~~2022, as compared to $2114.59 million, ~~with margins of approximately 265 bps~~ in the fourth quarter of ~~2020~~2021. Gain on sale of loans, net ~~increased~~decreased to $656.3 million, with margins of approximately ~~225~~91 bps for ~~2021~~2022 as compared to $1465.03 million, with margins of approximately 51225 bps for ~~2020~~2021.

● ~~Mortgage~~During ~~servicing~~the first quarter of 2022, we sold the legacy securitization portfolio ~~increased~~for to$37.5 million recording a $719.82 million atincrease ~~December~~in 31fair value, ~~2021~~net asof ~~compared~~$277 tothousand in transaction costs, resulting in the deconsolidation of securitized mortgage trust assets of approximately $301.56 ~~million~~billion atand ~~December~~related ~~31,~~securitized ~~2020~~mortgage trust liabilities of approximately $1.6 billion.

● ~~Servicing~~In ~~(expense)~~December ~~fees~~2022, ~~net~~we ~~was~~sold an$68.0 ~~expense~~million ofin ~~$39~~UPB ~~thousand~~of inour ~~the~~government ~~fourth~~insured ~~quarter~~MSRs offor ~~2021~~approximately ~~and~~$725 ~~expense~~thousand, ofreceiving $~~432~~508 thousand in ~~2021,~~proceeds asupon ~~compared~~sale, towith ~~expense~~the ofremaining ~~$131~~proceeds ~~thousand~~received in ~~the~~2023 ~~fourth~~upon ~~quarter~~transfer of ~~2020~~the ~~and net~~ servicing ~~fees~~and transfer of ~~$3.6~~all ~~million~~trailing ~~in 2020~~documents.

● ~~Operating~~Servicing ~~expenses~~fees (~~personnel~~expense), ~~business~~net ~~promotion~~was ~~and~~income ~~general,~~of ~~administrative and other) remained relatively flat at~~ $~~20.5~~36 ~~million~~thousand in the fourth quarter of ~~2021~~2022 and income of $~~81.2~~63 ~~million~~thousand in ~~2021~~2022, as compared to expense of $~~19.9~~39 ~~million~~thousand in the fourth quarter of ~~2020~~2021 and an expense of $~~81.3~~432 ~~million~~thousand in ~~2020~~2021.

●

Operating expenses (personnel, business promotion and general, administrative and other) decreased to $11.0 million in the fourth quarter of 2022 and $56.1 million in 2022 as compared to $20.5 million in the fourth quarter of 2021 and $81.2 million in 2021.

Mortgage Lending

~~During~~For the year ended ~~2021~~2022, total originations ~~increased~~were ~~6% to~~ $2693.97 ~~billion~~million as compared to $2.79 billion in ~~2020~~2021. Retail originations represented the largest channel of originations with 8061%, or $2422.30 ~~billion~~million, of total originations in ~~2021~~2022, which was down from 9080% of total originations, or $2.53 billion, in ~~2020~~2021. The ~~reduction~~decrease in ~~retail~~ originations as compared to 2021, was due to ~~our~~the ~~pivot~~continued ~~during~~increase in interest rates which began in the ~~first~~fourth quarter of 2021, toresulting ~~shift~~in ~~our~~a ~~origination~~reduction ~~focus~~in purchase loans due to ~~originate~~a ~~NonQM~~decrease in ~~both~~home ~~our~~purchase ~~Retail~~affordability and ~~third-party~~in ~~originator~~refinance ~~(TPO)~~volume ~~channels~~due to the number of loans that had previously refinanced during the preceding historically low interest rate environment. ~~For~~While we began to shift our origination focus away from more rate and margin sensitive conventional originations during the ~~fourth~~first quarter of 2021, ~~our~~the ~~total~~increase ~~originations~~in ~~decreased~~interest torates ~~$759.4~~which ~~million~~began in the fourth quarter of 2021 and accelerated throughout 2022, resulted in a 6%significant ~~decrease~~increase in credit spreads, asin ~~compared~~which tofurther ~~$810.0~~resulted ~~million~~in ~~for~~a ~~the~~substantial ~~fourth~~over ~~quarter~~supply of ~~2020. The~~low ~~increase~~coupon originations causing a severe decline in ~~originations~~margins asand ~~compared~~diminished ~~2020,~~capital ~~was~~market distribution exits for originators reliant upon an aggregation execution model. To mitigate the ~~result~~risks ofassociated ~~our~~with ~~temporary~~reduced ~~suspension~~distribution ofexits ~~lending~~and ~~activities~~extended ~~during~~settlement ~~2020~~timelines, ~~due~~we began to ~~uncertainty~~pull ~~caused~~back byon production, significantly increasing the ~~COVID~~pricing on our loan products as well as completely shifting to a best-19efforts ~~pandemic~~delivery for non-agency production in the first quarter of 2022, which significantly reduced our origination volumes during 2022 as compared to 2021. We continue to manage our headcount, pipeline and capacity to balance the risks inherent in an aggregation execution model.


	For the year ended December 31,
(in millions)	~~2021~~2022		%		~~2020~~2021		%
Originations by Channel:
Retail	$	~~2,318~~422.30	8061	%	$	2,~~477~~318.53	9080	%
Wholesale		~~585~~271.17	2039			~~215~~585.01	820
Correspondent		—	0			54.4	2
Total originations	$	693.7	100	%	$	2,903.4	100	%
Total originations	$	2,903.4	100	%	$	2,746.9	100	%

Our loan products include conventional loans for Fannie Mae and Freddie Mac, NonQM, jumbo and government loans insured by FHA, VA and USDA.

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Originations by Loan Type:


	For the Year Ended December 31,
(in millions)	~~2021~~2022		~~2020~~2021		% Change
Conventional	$	~~2,096~~211.98	$	2,~~401~~096.69	(1390)	%
NonQM		~~683~~462.65		~~264~~683.06	~~159~~(32)
Jumbo		735.75		1073.7	~~589~~(93)
Government (1)		4913.29		7049.62	(3072)
Total originations	$	~~2,903~~693.47	$	2,~~746~~903.94	6(76)	%

Weighted average FICO (2)		~~759~~741		~~762~~759
Weighted average LTV (3)		5764.76%		6057.57%
Weighted average coupon		34.1490%		3.3714%
Avg. loan size (in thousands)	$	~~362~~382.42	$	~~367~~362.94

(1)	Includes government-insured loans including FHA, VA and USDA.

(2)	FICO—Fair Isaac Corporation credit score.

(3)	LTV—loan to value—measures ratio of loan balance to estimated property value based upon third party appraisal.

During the fourth quarter of 2021, we originated $382.1 million in NonQM loans and were on pace to exceed our fourth quarter 2021 NonQM originations during the first quarter of 2022, prior to the dislocation in NonQM pricing as a result of widening credit spreads. As described above, as a result of the market dislocation we backed off NonQM production in the latter half of the first quarter of 2022 with NonQM originations decreasing to $18.4 million in the fourth quarter of 2022 down from $314.3 million during the first quarter of 2022, and down from $382.1 million during the fourth quarter of 2021. For the year ended December 31, 2022, NonQM originations decreased to $462.5 million, or 67% of total originations, as compared to $683.6 million, or 24% of total originations, for the year ended December 31, 2021. The increase in the percentage NonQM originations is the result of the dramatic decline in conventional originations in 2022 as a result of the aforementioned intense pressure on mortgage originations due to the dramatic collapse of the mortgage refinance market and the weakening mortgage purchase market.

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WeIn ~~continue~~2022, toour ~~believe~~NonQM ~~there~~originations ishad ana ~~underserved~~weighted ~~mortgage~~average ~~market~~Fair ~~for~~Isaac ~~borrowers~~Corporation ~~with good~~ credit ~~who~~score ~~may not meet the qualified mortgage~~ (QMFICO) ~~guidelines~~of ~~set~~738 ~~out~~and bya ~~the~~weighted ~~Consumer~~average ~~Financial~~LTV ~~Protection~~ratio ~~Bureau~~of 67%. ~~During~~In ~~the first quarter of 2020~~2021, ~~prior~~our toNonQM ~~the~~originations ~~disruption~~had ~~caused~~a byweighted ~~the~~average ~~pandemic,~~FICO weof ~~originated~~747 ~~$261.6 million in NonQM loans~~ and ~~were~~a onweighted ~~pace~~average toLTV ~~exceed~~ratio ~~our~~of ~~fourth quarter 2019 NonQM originations~~65%. AsIn ~~financial markets became dislocated in March 2020~~2022, ~~spreads~~the ~~widened~~retail ~~substantially~~channel onaccounted ~~credit~~for ~~assets~~43% ~~due~~of toNonQM ~~COVID-19~~originations ~~pandemic~~while ~~related payment delinquencies and forbearances, causing a severe decline in~~ the ~~values~~third ~~assigned~~party byoriginations ~~investors~~(TPO) ~~and~~channels ~~counterparties~~accounted for ~~NonQM~~57% ~~assets.~~of ~~The dislocation in the~~ NonQM ~~market~~production. In ~~diminished capital market distribution exits~~2021, ~~increased~~ the ~~cost~~retail ~~and~~channel ~~liquidity~~accounted tofor ~~finance~~28% ~~the~~of ~~product~~NonQM ~~and~~originations ~~reduced~~while the ~~ability~~TPO tochannels ~~finance~~accounted ~~additional~~for ~~NonQM~~72% ~~loans. As~~of ~~a result, we paused~~ NonQM ~~originations in April 2020~~production.

We believe the quality, consistency and performance of our NonQM originations has been demonstrated through the previous issuance of 21 securitizations since 2018, whereby our originations were represented as the largest originator in over half of the deals and represented no less than the third largest originator in the other deals. Four of the 21 securitizations were 100% backed by NonQM collateral from the Company with the senior tranches receiving AAA ratings.

~~The~~ ~~third~~For ~~quarter of 2020 saw~~ the re-emergence of the NonQM market including capital markets distribution exits for the product. We re-engaged lending in the NonQM market during the fourth quarter of 2020, and have continued throughout 2021 rebuilding our TPO NonQM origination team in anticipation of increasing mortgage interest rates and declining conventional margins. With the increase in mortgage interest rates and margin compression seen in conventional originations in the first quarter of 2021, we accelerated our pivot to NonQM in both our TPO and Retail channels. During the year ended December 31, ~~2021~~2022, ~~NonQM~~refinance ~~originations~~volume ~~increased~~decreased 81% to $~~683~~500.64 million, ~~or 24% of total originations,~~ as compared to $~~264~~2.06 ~~million,~~billion orin ~~10%~~2021. ofThe ~~total~~decrease in originations, ~~for~~was ~~the~~due ~~year~~to ~~ended December 31, 2020. In~~ the ~~fourth~~aforementioned ~~quarter~~significant ofincrease ~~2021,~~in ~~our~~interest ~~NonQM~~rates ~~originations~~as ~~exceeded~~compared ~~conventional~~to ~~originations~~2021. We ~~for~~continue ~~the~~to ~~first~~manage ~~time~~our ~~since~~headcount, ~~the~~pipeline ~~first~~and ~~quarter~~capacity ofto ~~2019,~~balance ~~which~~the werisks ~~expect~~inherent toin ~~continue~~an ~~for~~aggregation ~~the~~execution ~~foreseeable future~~model.


	For the Year Ended December 31,
(in millions)	2022		%		2021		%
Refinance	$	500.4	72	%	$	2,611.9	90	%
Purchase		193.3	28			291.5	10
Total originations	$	693.7	100	%	$	2,903.4	100	%

InAs ~~2021~~of December 31, 2022, ~~our~~we ~~NonQM originations~~ had aapproximately ~~weighted~~581 ~~average~~approved ~~Fair~~wholesale ~~Isaac~~relationships ~~Company~~with ~~credit~~mortgage ~~score~~brokerage ~~(FICO)~~companies ~~of 747~~ and aare ~~weighted~~approved ~~average~~to ~~LTV~~lend ~~ratio~~in of47 ~~65%~~states. In ~~2020,~~While ~~our~~we ~~NonQM~~currently ~~originations~~have ~~had~~no aapproved ~~weighted~~correspondent ~~average~~relationships ~~FICO~~with ~~of 730 and a weighted average LTV ratio of 68%. In 2021~~banks, ~~the~~credit ~~retail~~unions ~~channel~~and ~~accounted~~mortgage ~~for 28% of NonQM originations while the TPO channels accounted for 72% of NonQM production. In 2020~~companies, ~~the~~we ~~retail~~are ~~channel~~approved ~~accounted~~to ~~for~~lend ~~22%~~in of50 ~~NonQM originations while the TPO channels accounted for 78% of NonQM production~~states.

We believe the quality, consistency and performance of our NonQM originations has been demonstrated through the previous issuance of 21 securitizations since 2018, whereby our originations were represented as the largest originator in over half of the deals and represented no less than the third largest originator in the other deals. Four of the 21 securitizations were 100% backed by Impac NonQM collateral with the senior tranches receiving AAA ratings.37

For the year ended December 31, 2021, refinance volume was flat at $2.6 billion as compared to 2020. Our purchase money transactions increased 96% to $291.5 million for the year ended December 31, 2021, as compared to $148.4 million in 2020.


	For the Year Ended December 31,
(in millions)	2021		%		2020		%
Refinance	$	2,611.9	90	%	$	2,598.5	95	%
Purchase		291.5	10			148.4	5
Total originations	$	2,903.4	100	%	$	2,746.9	100	%

As of December 31, 2021, we have approximately 581 approved wholesale relationships with mortgage brokerage companies and are approved to lend in 47 states. While we currently have no approved correspondent relationships with banks, credit unions and mortgage companies, we are approved to lend in 50 states and anticipate reengaging correspondent lending in 2022, to further increase our NonQM footprint outside of California.

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Mortgage Servicing

~~The~~In ~~following~~December ~~table~~2022, ~~includes~~we ~~information~~sold ~~about~~$68.0 million of our government insured MSRs for approximately $725 thousand, receiving $508 thousand in proceeds upon sale, with the remaining proceeds received in 2023 upon transfer of the servicing and transfer of all trailing documents. As a result of the sale, we were not servicing mortgage loans at December 31, 2022 as compared to a mortgage servicing portfolio: of $71.8 million at December 31, 2021. The servicing portfolio generated net servicing fees of $63 thousand for the year ended December 31, 2022, as compared to net servicing expense of $432 thousand for the year ended December 31, 2021, as a result of the small UPB of the servicing portfolio during the year.


	At December 31,		% 60+ days		At December 31,		% 60+ days
(in millions)	2021		delinquent (1)		2020		delinquent (1)
Ginnie Mae	$	71.8	0.74	%	$	30.5	2.00	%
Freddie Mac		—	0.00			—	0.00
Fannie Mae		—	0.00			—	0.00
Total servicing portfolio	$	71.8	0.74	%	$	30.5	2.00	%

Number of loans		136				50
Weighted average coupon		2.55%				2.61%
Weighted average FICO		742				738
Weighted average LTV		82.1%				85.0%
Avg. portfolio balance (in millions)	$	53.0			$	1,633.0
Avg. loan size (in thousands)	$	528.2			$	610.5

(1) Based on loan count.

At December 31 2021, the mortgage servicing portfolio increased to $71.8 million as compared to $30.5 million at December 31, 2020. We continue to sell whole loan sales on a servicing released basis to investors and selectively retain GNMA mortgage servicing. The servicing portfolio generated net servicing expense of $ (0.4) thousand for the year ended December 31, 2021, as compared to net servicing fees of $3.6 million for the year ended December 31, 2020, as a result of the previous servicing sales in the second and third quarters of 2020 as well as portfolio runoff caused by the decrease in mortgage interest rates. Despite the increase in UPB of the servicing portfolio during 2021, we continue to recognize a servicing expense related to interim subservicing and other servicing costs due to the small UPB of our servicing portfolio.

Delinquencies within the servicing portfolio were 0.74% for 60+ days delinquent as of December 31, 2021 as compared to 2.0% as of December 31, 2020. The decrease was the result of the small UPB of GNMA servicing we retained during the year ended December 31, 2021.

Real Estate Services

Real estate services fees, net are generated from our former long-term mortgage portfolio. We provide portfolio loss mitigation and real estate services including real estate owned (REO) surveillance and disposition services, default surveillance and loss recovery services, short sale and real estate brokerage services, portfolio monitoring and reporting services. Additionally, ~~The~~as ~~source~~previously ofnoted, ~~revenue~~in ~~for~~March ~~this~~2022, ~~segment~~we sold our residual interest certificates, and assigned certain optional termination and loan purchase rights which entails the entire legacy securitization portfolio within our long-term mortgage portfolio. As a result, it is ~~primarily~~our expectation that the real estate services fees, net generated from the long-term mortgage portfolio will decline in future periods as the securitizations are called or collapsed by the purchaser. For the year ended December 31, 2022, ~~along~~real ~~with~~estate service fees, net were $1.1 million as compared to $1.1 million for the year ended December 31, 2021. For the year ended December 31, 2022, the real estate services segment posted a ~~small~~loss ~~number~~before ofincome ~~third~~taxes ~~party~~of ~~clients~~$292 thousand as ~~well~~compared to a loss before income taxes of $265 thousand for the year ended December 31, 2021.

As the long-term mortgage portfolio continues to decline, we expect real estate services and the related revenues to decline. For the year ended December 31, 2021, the real estate services segment posted a net loss of $265 thousand as compared to a net loss of $173 thousand for the year ended December 31, 2020.

Long-Term Mortgage Portfolio

~~The~~Our former long-term mortgage portfolio primarily ~~includes~~included (a) the residual interests in securitizations, (b) master servicing rights from the securitizations and (c) long-term debt.

~~Although~~As previously noted, in March 2022, we ~~have~~sold ~~seen~~the ~~some~~legacy ~~stabilization~~securitization ~~and~~portfolio ~~improvement~~which, in ~~defaults~~accordance with FASB ASC 810-10-25, resulted in deconsolidation of the ~~portfolio~~securitized ismortgage ~~expected~~trust toassets ~~continue~~totaling toapproximately ~~suffer~~$1.6 ~~losses~~billion and ~~may~~trust ~~continue~~liabilities ~~for~~of $1.6 billion as of the ~~foreseeable~~sale ~~future~~date as we were no longer the primary beneficiary of the consolidated securitization trusts. ~~Such~~ ~~losses~~We ~~have~~will ~~been~~remain ~~included~~as the master servicer with respect to all of the securitizations until such time that the deals are collapsed or payoff. Prior to the aforementioned sale and transfer of the legacy securitization portfolio in ~~estimating~~March 2022, the ~~fair~~residual ~~value~~interests generated cash flows of $1.1 million in the ~~related~~first ~~securitized~~quarter ~~mortgage~~of ~~collateral~~2022 ~~and~~prior ~~borrowings~~to the sale as compared to $3.1 million in 2021.

For the year ended December 31, 2021, our residual interest in securitizations (represented by the difference between total trust assets and total trust liabilities) generated cash flows of $3.1 million as compared to $2.1 million for the year ended December 31, 2020. The increase in cash flows from our residual interest in securitizations during 2021 was due to the historically low interest rate environment which has allowed for an increase in excess spread to be remitted to the residual holder and an increase in prepayments which have paid off older vintage bonds as well as cure over-collateralization deficiencies in certain trusts. At December 31, 2021, our residual interest in securitizations (represented

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by the difference between total trust assets and total trust liabilities) increased to $27.9 million compared to $16.7 million at December 31, 2020. The increase in residual fair value at December 31, 2021 was the result of a decrease in investor yield requirements for certain securitized mortgage collateral and borrowings, as well as residual discount rates, as estimated bond prices have continued to improve and corresponding yields have decreased.

For additional information regarding the long-term mortgage portfolio refer to Financial Condition and Results of Operations below.

Corporate

The corporate segment includes all corporate services groups, public company costs as well as debt expense related to the Convertible Notes and capital leases. This corporate services group supports all operating segments. A portion of the corporate services costs are allocated to the operating segments. The costs associated with being a public company, unused space ~~for~~from ~~growth~~our corporate office as well as the interest expense related to the Convertible Notes and capital leases is not allocated to our operating segments and remains in this segment.

For additional information regarding the corporate segment refer to Results of Operations by Business Segment below.

Critical Accounting Policies

We define critical accounting policies as those that are important to the portrayal of our financial condition and results of operations. Our critical accounting policies require management to make difficult and complex judgments that rely on estimates about the effect of matters that are inherently uncertain due to the effect of changing market conditions and/or consumer behavior. In determining which accounting policies meet this definition, we considered our policies with respect to the valuation of our assets and liabilities and estimates and assumptions used in determining those valuations. We believe the most critical accounting issues that require the most complex and difficult judgments and that are particularly susceptible to significant change to our financial condition and results of operations include the following:

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We believe the most critical accounting issues that require the most complex and difficult judgments and that are particularly susceptible to significant change to our financial condition and results of operations include the following:

●

fair value measurements;

●

variable interest entities and transfers of financial assets and liabilities;

●

repurchase reserve;

●

interest income and interest expense; and

●

income taxes.

Fair Value Measurements

Financial Accounting Standards Board—Accounting Standards Codification FASB ASC 820-10-35 defines fair value, establishes a framework for measuring fair value and outlines a fair value hierarchy based on the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (also referred to as an exit price). Fair value measurements are categorized into a three-level hierarchy based on the extent to which the measurement relies on observable market inputs in measuring fair value. Level 1, which is the highest priority in the fair value hierarchy, is based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 is based on observable market-based inputs, other than quoted prices, in active markets for similar assets or liabilities. Level 3, which is the lowest priority in the fair value hierarchy, is based on unobservable inputs. Assets and liabilities are classified within this hierarchy in their entirety based on the lowest level of any input that is significant to the fair value measurement.

The use of fair value to measure our financial instruments is fundamental to our financial statements and is a critical accounting estimate because a substantial portion of our assets and liabilities are recorded at estimated fair value. Financial instruments classified as Level 3 are generally based on unobservable inputs, and the process to determine fair value is generally more subjective and involves a high degree of management judgment and assumptions. These assumptions may have a significant effect on our estimates of fair value, and the use of different assumptions, as well as changes in market conditions and interest rates, could have a material effect on our results of operations or financial condition.

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Mortgage loans held-for-sale—We elected to carry our mortgage loans held-for-sale originated or acquired from the mortgage lending operation at fair value. Fair value is based on quoted market prices, where available, prices for other traded mortgage loans with similar characteristics, and purchase commitments and bid information received from market participants.

Mortgage servicing rights—We elected to carry all of our mortgage servicing rights arising from our mortgage lending operation at fair value. The fair value of mortgage servicing rights is based upon a discounted cash flow model. The valuation model incorporates assumptions that market participants would use in estimating the fair value of servicing. These assumptions include estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late fees, among other considerations.

Derivative financial instruments—We utilize certain derivative instruments in the ordinary course of our business to manage our exposure to changes in interest rates. These derivative ~~instruments~~ include Hedging Instruments (typically to-be-announced ~~MBS~~mortgage-backed ~~and~~securities (TBA MBS), forward loan ~~sale~~ commitments ~~(TBA~~and ~~MBS~~interest orrate ~~Hedging~~swap ~~Instruments~~futures). We also issue interest rate lock commitments (IRLCs) to borrowers in connection with single family mortgage loan originations. We recognize all derivative instruments at fair value. The concept of fair value relating to IRLCs is no different than fair value for any other financial asset or liability: fair value is the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Because IRLCs do not trade in the market, the Company determines the estimated fair value based on expectations of what an investor would pay to acquire the Company’s IRLCs, which utilizes current market information for secondary market prices for underlying loan types with similar characteristics using the TBA MBS market, which is actively quoted and easily validated through external sources. The data inputs used in this valuation include, but are not limited to, loan type, underlying loan amount, note rate, loan program, and expected sale date of the loan, adjusted for current market conditions. These valuations are adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. For all IRLCs, the base value is then adjusted for the anticipated current secondary market prices for underlying loans and estimated servicing value with similar coupons, maturities and credit quality, subject to the anticipated loan funding probability (Pull through Rate). This value is adjusted for other costs that would be required by a market participant acquiring the IRLCs. The fair value of the Hedging Instruments is based on the actively quoted TBA MBS market using observable inputs related to characteristics of the underlying MBS stratified by product, coupon and settlement date and are recorded in other liabilities in the consolidated balance sheets. The initial and subsequent changes in value of IRLCs and forward sale commitments are a component of gain on sale of loans, net in the consolidated statements of operations and comprehensive loss.

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would be required by a market participant acquiring the IRLCs. The fair value of TBA MBS are based on the actively quoted TBA MBS market using observable inputs related to characteristics of the underlying MBS stratified by product, coupon and settlement date and are recorded in other liabilities in the consolidated balance sheets. The fair value of swap futures are based on the actively traded instruments in a liquid market. The initial and subsequent changes in value of IRLCs and Hedging Instruments are a component of gain on sale of loans, net in the consolidated statements of operations and comprehensive loss.

Long-term debt—Long-term debt (consisting of junior subordinated notes) is reported at fair value within the long-term mortgage portfolio. These securities are measured based upon an analysis prepared by management, which utilizes a discounted cash flow analysis which takes into consideration our credit risk. Unrealized gains and losses are recognized in earnings in the accompanying consolidated statements of operations and comprehensive loss as change in fair value of long-term debt. Our estimate of the fair value of the long-term debt requires us to exercise significant judgment as to the timing and amount of the future obligation. Changes in assumptions resulting from changes in our credit risk profile will affect the estimated fair value of the long-term debt and those changes are recorded as a component of net earnings. A change in assumptions associated with the improvement in our credit risk profile could result in a significant increase in the estimated fair value of the long-term debt which would result in a significant charge to net earnings.

Variable Interest Entities and Transfers of Financial Assets and Liabilities

Historically, we securitized mortgages in the form of collateralized mortgage obligations (CMO) and real estate mortgage investment conduits (REMICs), (collectively, securitizations), which were either consolidated or unconsolidated depending on the design of the securitization structure. These securitizations ~~are~~were evaluated for consolidation in accordance with the variable interest model of FASB ASC 810-10-25. A variable interest entity (VIE) is consolidated in the financial statements if the Company has the power to direct activities that most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. We ~~consolidate~~consolidated certain VIEs where we ~~are~~were both the primary beneficiary of the residual interests in the securitization trusts as well as the master servicer. Being the master servicer provides control over the collateral through the ability to direct the servicers to take specific loss mitigation efforts. ~~The~~As noted below, in the first quarter of 2022, we sold the legacy securitization portfolio. Prior to the sale of the legacy securitization portfolio, the assets and liabilities that ~~are~~were included in the consolidated VIEs ~~include~~included the mortgage loans and real estate owned collateralizing the debt securities which ~~are~~were included in securitized mortgage trust assets on our consolidated balance sheets and the debt securities payable to investors which ~~are~~were included in securitized mortgage trust liabilities on our accompanying consolidated balance sheets.

35In March 2022, we sold our residual interest certificates, and assigned certain optional termination and loan purchase rights which entailed the entire legacy securitization portfolio within our long-term mortgage portfolio. As a result of the sale, in accordance with FASB ASC 810-10-25, we deconsolidated the securitized mortgage trust assets totaling approximately $1.6 billion and trust liabilities of $1.6 billion as of the sale date as the Company was no longer the primary beneficiary of the consolidated securitization trusts. The Company shall remain the master servicer with respect to all of the securitizations until such time that the securitization trusts are collapsed or payoff.

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For consolidated securitizations that are structured as secured borrowings, we recognize interest income over the life of the securitized mortgage collateral and interest expense incurred for the securitized mortgage borrowings.

Investors in the securities issued by the securitization trust have no recourse to our non-securitized assets or to us and have no ability to require us to provide additional assets, but rather have recourse only to the assets transferred to the trust.

Repurchase Reserve

When we sell loans through whole loan sales we are required to make normal and customary representations and warranties about the loans to the purchaser. Our whole loan sale agreements generally require us to repurchase loans if we breach a representation or warranty given to the loan purchaser. In addition, we may be required to repurchase loans as a result of borrower fraud or if a payment default occurs on a mortgage loan shortly after its sale.

Investors may request us to repurchase loans or to indemnify them against losses on certain loans which the investors believe either do not comply with applicable representations or warranties or defaulted shortly after its purchase. Upon completion of our investigation regarding the investor claims, we may reject the investor claim, repurchase or provide indemnification on certain loans, as appropriate. We maintain a liability reserve for expected losses on dispositions of loans expected to be repurchased or on which indemnification is expected to be provided. We regularly evaluate the adequacy of this repurchase liability reserve based on trends in repurchase and indemnification requests, actual loss experience, settlement negotiations, and other relevant factors including economic conditions.

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We record a provision for losses relating to such representations and warranties as part of each loan sale transaction. The method used to estimate the liability for representations and warranties is a function of the representations and warranties given and considers a combination of factors, including, but not limited to, estimated future defaults and loan repurchase rates and the potential severity of loss in the event of defaults and the probability of reimbursement by the correspondent loan seller. We establish a liability at the time loans are sold and continually update our estimated repurchase liability. The level of the repurchase liability for representations and warranties is difficult to estimate and requires considerable management judgment. The level of mortgage loan repurchase losses is dependent on economic factors, investor demand strategies, and other external conditions that may change over the lives of the underlying loans.

Interest Income and Interest Expense

~~Interest~~Prior to the sale of the legacy securitization trusts and related deconsolidation of the trusts, interest income on securitized mortgage collateral and interest expense on securitized mortgage borrowings ~~are~~were recorded using the effective interest method for the period based on the previous quarter-end’s estimated fair value. Interest expense on long-term debt is recorded using the effective interest method based on estimated future interest rates and cash flows.

Income Taxes

Provision for income taxes is calculated using the asset and liability method, which requires the recognition of deferred income taxes. Deferred tax assets and liabilities are recognized and reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain changes in the valuation allowance. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. We provide a valuation allowance against deferred tax assets if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the adequacy of the valuation allowance, we consider all forms of evidence, including: (1) historic earnings or losses; (2) the ability to realize deferred tax assets through carry back to prior periods; (3) anticipated taxable income resulting from the reversal of taxable temporary differences; (4) tax planning strategies; and (5) anticipated future earnings exclusive of the reversal of taxable temporary differences.

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Financial Condition and Results of Operations

Financial Condition

For the years ended December 31, ~~2021~~2022 and ~~2020~~2021

The following table shows the condensed consolidated balance sheets for the following periods:


(in thousands, except per share data)	December 31,		December 31,		$		%
	~~2021~~2022		~~2020~~2021		Change		Change
ASSETS
Cash	$	2925,~~555~~864	$	5429,~~150~~555	$	(243,~~595~~691)	(4512)	%
Restricted cash		54,~~657~~140		5,~~602~~657		55(1,517)	1(27)
Mortgage loans held-for-sale		~~308~~13,~~477~~052		~~164~~308,~~422~~477		~~144~~(295,~~055~~425)	88(96)
Mortgage servicing rights		~~749~~—		~~339~~749		~~410~~(749)	~~121~~(100)
Securitized mortgage trust assets		~~1,642,730~~—		21,~~103~~642,~~269~~730		(~~460~~1,~~539~~642,730)	(22100)
Other assets		3517,~~603~~275		4135,~~524~~603		(518,~~921~~328)	(1451)
Total assets	$	260,~~022,771~~331	$	2,~~369~~022,~~306~~771	$	(~~346~~1,~~535~~962,440)	(1597)	%
LIABILITIES & EQUITY
LIABILITIES & (DEFICIT) EQUITY
Warehouse borrowings	$	~~285~~3,~~539~~622	$	~~151~~285,~~932~~539	$	~~133~~(281,~~607~~917)	88(99)	%
Convertible notes		2015,000		20,000		—(5,000)	—(25)
Long-term debt (Par value; $62,000)		4627,~~536~~753		4446,~~413~~536		2(18,~~123~~783)	5(40)
Securitized mortgage trust liabilities		~~1,614,862~~—		21,~~086~~614,~~557~~862		(~~471~~1,~~695~~614,862)	(23100)
Repurchase reserve		45,~~744~~875		74,~~054~~744		(21,~~310)~~131	~~(33)~~24
Other liabilities		4119,~~154~~684		4341,~~699~~154		(221,~~545~~470)	(652)
Total liabilities		271,~~012,835~~934		2,~~353~~012,~~655~~835		(~~340~~1,~~820~~940,901)	(1496)	%
Total equity		9,936		15,651		(5,715)	(37)
Total (deficit) equity		(11,603)		9,936		(21,539)	(217)	%
Total liabilities and stockholders’ equity	$	2,022,771	$	2,369,306	$	(346,535)	(15)	%
Total liabilities and stockholders’ (deficit) equity	$	60,331	$	2,022,771	$	(1,962,440)	(97)	%

Book and tangible book value per share	$	(0.4732)	$	0.7447	$	(0.2778)	(37168)	%

At December 31, ~~2021~~2022, cash decreased to $2925.69 million from $5429.26 million at December 31, ~~2020~~2021. Cash balances decreased primarily due to payment of operating expenses aspartially ~~well~~offset asby anthe ~~increase~~aforementioned $37.5 million in ~~warehouse~~proceeds ~~line~~from ~~haircuts~~the ~~due~~sale toand antransfer ~~increase~~of inthe ~~warehouse~~legacy ~~borrowings~~securitization portfolio during the first quarter of 2022.

Mortgage loans held-for-sale ~~increased~~decreased $~~144~~295.14 million to $~~308~~13.51 million at December 31, ~~2021~~2022 as compared to $~~164~~308.45 million at December 31, ~~2020~~2021. During the year ended December 31, ~~2021~~2022, we had originations of $2693.97 ~~billion~~million offset by $2978.86 ~~billion~~million in loan sales. As a normal course of our origination and sales cycle, loans held-for-sale at the end of any period ~~are~~were generally sold within one or two subsequent months.

Mortgage servicing rights ~~increased~~decreased $~~410~~749 thousand to ~~$749 thousand~~zero at December 31, ~~2021~~2022 as compared to $~~339~~749 thousand at December 31, ~~2020~~2021. ~~The~~In ~~increase~~2022, ~~was~~the mortgage servicing portfolio decreased due to a mark-to-market decrease in fair value of $70 thousand partially offset by additions of $~~536~~46 thousand from servicing retained loan sales of $514.75 million in UPB. At In December 31 2022, ~~2021,~~ we ~~serviced~~sold $7168.8 0 million in UPB of our government insured MSRs for approximately $725 thousand, receiving $508 thousand in proceeds upon sale, with the remaining proceeds received in 2023 upon transfer of the servicing and transfer of all trailing documents. At December 31, 2022, we had no servicing for others as compared to $3071.58 million at December 31, ~~2020~~2021.

~~Warehouse~~Other ~~borrowings~~assets ~~increased~~decreased $~~133~~18.6 3 million to $~~285~~17.5 3 million at December 31, ~~2021~~ 2022 as compared to $~~151~~35.9 6 million at December 31, ~~2020.~~ 2021. The ~~increase~~reduction in other assets was ~~due~~primarily attributable to a $~~144~~9.10 million ~~increase~~decrease in ~~mortgage~~ROU ~~loans~~assets ~~held-for-sale~~as ata ~~December 31, 2021~~result asof ~~compared~~the toaforementioned ~~December~~lease ~~31,~~modification ~~2020. During~~and ~~2021,~~termination weof ~~increased~~ our ~~warehouse~~former ~~lending~~corporate ~~capacity~~office byin ~~$65~~December ~~million~~2022, toas ~~$615.0~~well ~~million~~as ~~and~~amortization ~~increased~~of ~~our~~the ~~warehouse~~ROU ~~counterparties~~asset ~~from~~prior ~~three~~ to ~~four as a result of~~ the ~~increase~~lease inmodification ~~NonQM~~and ~~origination volumes~~termination.

Warehouse borrowings decreased $281.9 million to $3.6 million at December 31, 2022 as compared to $285.5 million at December 31, 2021. The decrease was due to a $295.4 million decrease in mortgage loans held-for-sale

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at December 31, 2022 as compared to December 31, 2021. During 2022, we decreased our warehouse lending capacity by $574.0 million to $41.0 million and decreased our warehouse counterparties from four to two as a result of the decrease in origination volumes. At December 31, 2022, we did not renew our $25.0 million warehouse facility further reducing warehouse capacity to $16.0 million with one counterparty.

~~Repurchase~~Convertible ~~reserve~~notes decreased $25.30 million to $415.70 million at December 31, ~~2021~~2022 as compared to $720.1 0 million at December 31, ~~2020~~2021. On April 29, 2022, the Company and holders of its Notes agreed to extend the maturity date of the Notes upon conclusion of the term on May 9, 2022. The ~~decrease~~Company ~~was~~decreased ~~due~~the aggregate principal amount of the Notes to $215.40 million, following the pay-down of $5.0 million in ~~settlements~~principal ~~primarily~~of ~~related~~the toNotes ~~repurchased~~on ~~loans~~May ~~and~~9, ~~indemnifications~~2022 ~~partially~~(Third ~~offset~~Amendment). The byNotes ~~$111~~are ~~thousand~~due ~~increase~~and payable in ~~provision~~three ~~for~~equal ~~repurchases~~installments asof a$5.0 ~~result~~million on each of anMay ~~increase~~9, in2023, ~~originations~~May 9, 2024 and the stated maturity date of May 9, 2025.

~~Book~~The estimated fair value ~~per~~of ~~share~~long-term debt decreased ~~37%~~by $18.7 million to $027.478 million from $46.5 million at December 31, 2021. The asdecrease ~~compared~~in toestimated fair value was the result of a $017.742 atmillion ~~December 31~~change in the instrument specific credit risk (included in other comprehensive loss in the consolidated statements of operations) primarily the result of an increase in the credit risk associated with the Company’s risk profile and a $2.8 million change in the market specific credit risk (included in Change in fair value of long-term debt in the consolidated statements of operations) as a result of an increase in the risk free rate component of the discount rate and forward LIBOR curve during 2022, ~~2020~~ partially offset by a $1.2 million increase due to accretion (included in interest expense in the consolidated statements of operations).

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Book value per common share decreased 15% to ($1.96) as of December 31, 2021, as compared to ($1.70) as of December 31, 2020 (inclusive of the remaining $51.8 million of liquidation preference on our preferred stock). Inclusive of the Preferred B stock cumulative undeclared dividends in arrears of $19.1 million (as discussed further in Note 13 – Commitments and Contingencies of the “Notes to Consolidated Financial Statements”), book value per common share was ($2.86) as of December 31, 2021.

Repurchase reserves increased $1.2 million to $5.9 million at December 31, 2022 as compared to $4.7 million at December 31, 2021. The ~~changes~~increase inwas ~~our~~due ~~trust~~to ~~assets~~$2.4 ~~and~~million ~~trust~~in ~~liabilities~~provision for repurchases as ~~summarized~~a ~~below~~result of an increase in expected future losses related to repurchased loans partially offset by $1.3 million in settlements primarily related to repurchased loans and indemnifications.


	December 31,		December 31,		$		%
	2021		2020		Change		Change
Securitized mortgage collateral	$	1,639,251	$	2,100,175	$	(460,924)	(22)	%
Real estate owned (REO)		3,479		3,094		385	12
Total trust assets (1)		1,642,730		2,103,269		(460,539)	(22)

Securitized mortgage borrowings	$	1,614,862	$	2,086,557	$	(471,695)	(23)	%
Total trust liabilities (1)		1,614,862		2,086,557		(471,695)	(23)
Residual interests in securitizations	$	27,868	$	16,712	$	11,156	67	%

(1) At December 31, 2021, the UPB of trust assets and trust liabilities was approximately $1.8 billion and $1.7 billion, respectively. At December 31, 2020, the UPB of trust assets and trust liabilities was approximately $2.5 billion and $2.4 billion, respectively.

Since the consolidated securitization trusts are nonrecourse to us, trust assets and liabilities have been netted in the table above to present our interest in these trusts more simply, which are considered the residual interests in securitizations. The residual interests are represented by the fair value of securitized mortgage collateral and real estate owned, offset by the fair value of securitized mortgage borrowings. We receive cash flows from our residual interests in securitizations to the extent they are available after required distributions to bondholders and maintaining specified overcollateralization levels and other specified parameters (such as maximum delinquency and cumulative default) within the trusts. The estimated fair value of the residual interests, represented by the difference in the fair value of total trust assets and total trust liabilities, was $27.9 million at December 31, 2021 compared to $16.7 million at December 31, 2020. The increase in residual fair value at December 31, 2021 was the result of a decrease in investor yield requirements for certain securitized mortgage collateral and borrowings, as well as residual discount rates, as estimated bond prices have continued to improve and corresponding yields have decreased.

We update our collateral assumptions quarterly based on recent delinquency, default, prepayment and loss experience. Additionally, we update the forward interest rates and investor yield (discount rate) assumptions based on information derived from market participants. During the year ended December 31, 2021, actual losses declined as compared to forecasted losses for the majority of trusts, including those with residual value. Principal payments, prepayments and liquidations of securitized mortgage collateral and securitized mortgage borrowings also contributed to the reduction in trust assets and liabilities.

●Other ~~The~~liabilities ~~estimated fair value of securitized mortgage collateral~~ decreased $~~460~~21.95 million ~~during 2021 primarily due~~ to ~~reductions~~$19.7 inmillion ~~principal~~at ~~from~~December ~~borrower~~31, ~~payments~~2022 ~~and~~as ~~transfers~~compared ~~of loans~~ to ~~REO~~$41.2 ~~for~~million ~~single-family~~at ~~and~~December ~~multi-family~~31, ~~collateral~~2021. The ~~Additionally,~~reduction in other ~~trust~~liabilities ~~assets~~was ~~increased $385 thousand during the year ended December 31, 2021,~~ primarily ~~due~~attributable to a $812.05 million ~~increase~~decrease in ~~REO~~ROU ~~from~~liabilities ~~foreclosures~~ as ~~well as~~ a ~~$111~~result ~~thousand~~of ~~increase in~~ the ~~net~~aforementioned ~~realizable~~lease ~~value~~modification ~~(NRV)~~and termination of ~~REO.~~our ~~Partially~~former ~~offsetting~~corporate ~~the~~office ~~increase~~ in ~~REO~~December ~~was~~2022 aas ~~decrease~~well as amortization of ~~$7.7~~the ~~million~~ROU inliability ~~REO~~prior ~~from~~to ~~liquidations~~the lease modification and termination.

Book value per share decreased 168% to ($0.32) at December 31, 2022 as compared to $0.47 at December 31, 2021. Book value per common share increased 79% to ($0.41) as of December 31, 2022 (inclusive of the $3.5 million of liquidation preference on our Series D Preferred stock), as compared to ($1.96) as of December 31, 2021 (which was inclusive of the remaining $51.8 million of liquidation preference on our preferred stock). Inclusive of the Series D Preferred stock cumulative undeclared dividends in arrears of $52 thousand in 2022 and Series B Preferred stock cumulative undeclared dividends in arrears of $19.1 million in 2021, (as discussed further in Note 8 – Redeemable Preferred Stock of the “Notes to Consolidated Financial Statements”), book value per common share increased 86% to ($0.41) as of December 31, 2022 as compared to ($2.86) as of December 31, 2021.

●As ~~The~~previously ~~estimated~~disclosed, ~~fair~~in ~~value~~March 2022, we sold our residual interest certificates, and assigned certain optional termination and loan purchase rights relating to 37 securitizations that closed between 2000 and 2007, which entailed the entire legacy securitization portfolio within our long-term mortgage portfolio. As a result of the sale, in accordance with FASB ASC 810-10-25, we deconsolidated the securitized mortgage ~~borrowings~~trust ~~decreased~~assets totaling approximately $~~471~~1.76 ~~million~~billion ~~during~~and ~~2021~~trust ~~primarily~~liabilities ~~due~~of to$1.6 ~~reductions~~billion inas ~~principal~~of ~~balances~~the ~~from~~sale ~~principal~~date ~~payments~~as ~~during~~the Company was no longer the ~~period~~primary ~~for~~beneficiary ~~single-family~~of ~~and~~the ~~multi-family~~consolidated ~~collateral~~securitization ~~partially~~trusts. ~~offset~~We bywill anremain ~~increase~~as inthe ~~loss~~master ~~assumptions~~servicer with respect to all of the securitizations until such time that the deals are collapsed, payoff or the master servicing rights are sold.

Prior to 2008, we securitized mortgage loans by transferring originated and acquired residential single-family mortgage loans and multi-family commercial loans (the “transferred assets”) into non-recourse bankruptcy remote trusts which in turn issued tranches of bonds to investors supported only by the cash flows of the transferred assets. Because the assets and liabilities in the securitizations are nonrecourse to us, the bondholders cannot look to us for repayment of their bonds in the event of a shortfall. These securitizations were structured to include interest rate derivatives. We retained the residual interest in each trust, and in most cases would perform the master servicing function. A trustee and sub-servicer,

3843

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unrelated to us, was utilized for each securitization. Cash flows from the loans (the loan payments as well as liquidation of foreclosed real estate properties) collected by the loan sub-servicer are remitted to us, the master servicer. The ~~master~~changes ~~servicer~~in ~~remits~~our ~~payments~~trust toassets ~~the trustee who remits payments to the bondholders (investors). The sub-servicer collects loan payments~~ and ~~performs~~trust ~~loss~~liabilities ~~mitigation~~as ~~activities~~summarized ~~for defaulted loans~~below. These activities include foreclosing on properties securing defaulted loans, which results in REO. Our real estate services segment also performs loss mitigation activities for loans within the portfolio.

For the trusts we consolidate, the loans are included in the consolidated balance sheets as “securitized mortgage trust assets”, the foreclosed loans are included in the consolidated balance sheets as “real estate owned” and the various bond tranches owned by investors are included in the consolidated balance sheets as “securitized mortgage trust liabilities.” To the extent there is excess overcollateralization (as defined in the securitization agreements) in these securitization trusts, we receive cash flows from the excess interest collected monthly from the residual interest we own. Because (i) we elected the fair value option on the securitized mortgage collateral, securitized mortgage borrowings, and (ii) real estate owned is reflected at NRV, which closely approximates fair market value, the net of the trust assets and trust liabilities represents the estimated fair value of the residual interests we own.


	December 31,		December 31,		$		%
	2022		2021		Change		Change
Securitized mortgage collateral	$	—	$	1,639,251	$	(1,639,251)	(100)	%
Real estate owned (REO)		—		3,479		(3,479)	(100)
Total trust assets (1)		—		1,642,730		(1,642,730)	(100)

Securitized mortgage borrowings	$	—	$	1,614,862	$	(1,614,862)	(100)	%
Total trust liabilities (1)		—		1,614,862		(1,614,862)	(100)
Residual interests in securitizations	$	—	$	27,868	$	(27,868)	(100)	%

To estimate fair value of the assets and liabilities within the securitization trusts each reporting period, management uses an industry standard valuation and analytical model that is updated monthly with current collateral, real estate, derivative, bond and cost (~~servicer, trustee, etc.~~1) ~~information~~At ~~for~~December ~~each securitization trust. We employ an internal process to validate the accuracy of the model as well as the data within this model. Forecasted assumptions sometimes referred to as “curves~~31,” ~~for defaults, loss severity, interest rates (LIBOR, which is currently available for periods beyond~~ 2021, ~~however there is a likelihood that this information will be replaced with~~ the ~~Secured~~UPB ~~Overnight~~of ~~Financing~~trust ~~Rate~~assets ~~(SOFR) in the near future)~~ and ~~prepayments are input into the valuation model for each securitization~~ trust. Weliabilities ~~hire~~was ~~third-party~~approximately ~~market participants to provide forecasted curves for the aforementioned assumptions for each of the securitizations~~$1.8 ~~Management~~billion ~~employs a process to qualitatively~~ and ~~quantitatively review the assumption curves for reasonableness using other information gathered from the mortgage and real estate market (i~~$1.~~e.,~~7 ~~third party home price indices~~billion, published industry reports discussing regional mortgage and commercial loan performance and delinquency) as well as actual default and foreclosure information for each trust from the respective trusteesrespectively.

We use the valuation model to generate the expected cash flows to be collected from the trust assets and the expected required bondholder distribution (trust liabilities). To the extent that the trusts are over collateralized, we may receive the excess interest as the holder of the residual interest. The information above provides us with the future expected cash flows for the securitized mortgage collateral, real estate owned, securitized mortgage borrowings, and the residual interests.

To determine the discount rates to apply to these cash flows, we gather information from the bond pricing services and other market participants regarding estimated investor required yields for each bond tranche. Based on that information and the collateral type and vintage, we determine an acceptable range of expected yields an investor would require including an appropriate risk premium for each bond tranche. We use the blended yield of the bond tranches together with the residual interests to determine an appropriate yield for the securitized mortgage collateral in each securitization.

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The following table presents changes in the trust assets and trust liabilities for the year ended December 31, 2021:


	TRUST ASSETS						TRUST LIABILITIES
	Level 3 Recurring Fair
	Value Measurement						Level 3 Recurring Fair
			NRV				Value Measurement
	Securitized		Real				Securitized		Net
	mortgage		estate		Total trust		mortgage		trust
	collateral		owned		assets		borrowings		assets
Recorded fair value at December 31, 2020	$	2,100,175	$	3,094	$	2,103,269	$	(2,086,557)	$	16,712
Total gains/(losses) included in earnings:
Interest income		(12,162)		—		(12,162)		—		(12,162)
Interest expense		—		—		—		(37,090)		(37,090)
Change in FV of net trust assets, excluding REO (1)		151,759		—		151,759		(145,288)		6,471
Gains from REO – not at FV but at NRV (2)		—		111		111		—		111
Total gains (losses) included in earnings		139,597		111		139,708		(182,378)		(42,670)
Transfers in and/or out of level 3		—		—		—		—		—
Purchases, issuances and settlements		(600,521)		274		(600,247)		654,073		53,826
Recorded fair value at December 31, 2021	$	1,639,251	$	3,479	$	1,642,730	$	(1,614,862)	$	27,868

(1) Represents change in fair value of net trust assets, including trust REO gains in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

(2) Accounted for at net realizable value.

~~Inclusive~~Prior to the sale of ~~gains~~the ~~from~~legacy ~~REO~~securitization trusts, ~~total~~we ~~trust~~estimated ~~assets~~fair ~~above~~value ~~reflect~~of athe ~~net~~assets ~~gain~~and ofliabilities ~~$151.9~~within ~~million~~the assecuritization atrusts ~~result~~each ofreporting anperiod, ~~increase~~management inused ~~fair~~an ~~value~~industry ~~from~~standard ~~securitized~~valuation ~~mortgage~~and ~~collateral~~analytical ofmodel ~~$151.8 million~~that ~~coupled~~was updated monthly with ~~gains~~current ~~from~~collateral, ~~REO~~real ofestate, ~~$111~~derivative, ~~thousand~~bond and cost (servicer, trustee, etc.) ~~Net~~information ~~losses~~for oneach securitization trust. ~~liabilities~~We ~~were~~employed ~~$145.3~~an ~~million~~internal asprocess ato ~~result~~validate the accuracy of the ~~increase~~model inas ~~fair~~well ~~value~~as ofthe ~~securitized~~data ~~mortgage~~within ~~borrowings~~this model. AsWe aused ~~result,~~the ~~other~~valuation ~~income,~~model ~~change~~to ingenerate ~~fair~~the ~~value~~expected ofcash ~~net~~flows to be collected from the trust assets, ~~including~~and ~~trust~~the ~~REO~~expected ~~gains~~required bondholder distribution (~~losses~~trust liabilities). ~~increased~~To bythe $6extent that the trusts were over collateralized, we may have received the excess interest as the holder of the residual interest.6 ~~million~~The information above provided us with the future expected cash flows for the ~~year~~securitized ~~ended~~mortgage ~~December 31~~collateral, ~~2021~~ real estate owned, securitized mortgage borrowings and the residual interests.

~~The~~To ~~table~~determine ~~below~~the ~~reflects~~discount rates applied to these cash flows, we gathered information from the ~~net~~bond ~~trust~~pricing ~~assets~~services asand aother ~~percentage~~market participants regarding estimated investor required yields for each bond tranche. Based on that information and the collateral type and vintage, we determined an acceptable range of ~~total~~expected ~~trust~~yields ~~assets~~an (investor would require including an appropriate risk premium for each bond tranche. We used the blended yield of the bond tranches together with the residual interests to determine an appropriate yield for the securitized mortgage collateral in ~~securitizations):~~each securitization.


	December 31,			December 31,
	2021			2020
Net trust assets	$	27,868		$	16,712
Total trust assets		1,642,730			2,103,269
Net trust assets as a percentage of total trust assets		1.70	%		0.79	%

The following table presents changes in the trust assets and trust liabilities for the year ended December 31, 2022:


	TRUST ASSETS						TRUST LIABILITIES
	Level 3 Recurring Fair
	Value Measurement						Level 3 Recurring Fair
			NRV				Value Measurement
	Securitized		Real				Securitized		Net
	mortgage		estate		Total trust		mortgage		trust
	collateral		owned		assets		borrowings		assets
Recorded fair value at December 31, 2021	$	1,639,251	$	3,479	$	1,642,730	$	(1,614,862)	$	27,868
Total gains/(losses) included in earnings:
Interest income		2,019		—		2,019		—		2,019
Interest expense		—		—		—		(7,564)		(7,564)
Change in FV of net trust assets, excluding REO (1)		9,248		—		9,248		—		9,248
Total gains (losses) included in earnings		11,267		—		11,267		(7,564)		3,703
Transfers in and/or out of level 3		—		—		—		—		—
Purchases, issuances and settlements		(1,650,518)		(3,479)		(1,653,997)		1,622,426		(31,571)
Recorded fair value at December 31, 2022	$	—	$	—	$	—	$	—	$	—

(1)	Represents change in fair value of net trust assets, including trust REO gains in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

For the year ended December 31, 2021, the estimated fair value of the net trust assets increased as a percentage of total trust assets as result of decreased the investor yield requirements for certain securitized mortgage collateral and borrowings, as well as residual discount rates, as estimated bond prices have continued to improve and corresponding yields have decreased.

Since the consolidated securitization trusts are nonrecourse to us, our economic risk is limited to our residual interests in these securitization trusts. Therefore, in the following table we have netted trust assets and trust liabilities to present these residual interests more simply. Our residual interests in securitizations are segregated between our single-family (SF) residential and multi-family (MF) residential portfolios and are represented by the difference between trust assets and trust liabilities.44

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~~The~~Total ~~following~~trust ~~tables~~assets ~~present~~above ~~the~~reflect ~~estimated~~a ~~fair~~net ~~value~~gain of ~~our~~$9.2 ~~residual~~million ~~interests~~as bya ~~securitization~~result ~~vintage~~of ~~year~~an ~~and~~increase ~~other~~in ~~related~~fair ~~assumptions~~value ~~used~~related to ~~derive~~the ~~these~~sale ~~values~~of atour ~~December 31, 2021~~legacy ~~and~~securitization portfolio for the year ended December 31, ~~2020:~~ 2022.


	Estimated Fair Value of Residual									Estimated Fair Value of Residual
	Interests by Vintage Year at									Interests by Vintage Year at
	December 31, 2021									December 31, 2020
Origination Year	SF			MF			Total			SF			MF			Total
2002-2003 (1)	$	13,167		$	722		$	13,889		$	8,575		$	524		$	9,099
2004		7,661			736			8,397			2,654			775			3,429
2005		851			442			1,293			58			68			126
2006		—			4,289			4,289			—			4,058			4,058
Total	$	21,679		$	6,189		$	27,868		$	11,287		$	5,425		$	16,712
Weighted avg. prepayment rate		15.4	%		15.3	%		15.4	%		10.1	%		13.3	%		10.3	%
Weighted avg. discount rate		11.8	%		11.6	%		11.7	%		17.4	%		18.0	%		17.6	%

The table below reflects the net trust assets as a percentage of total trust assets (residual interests in securitizations):

(1) 2002-2003 vintage year includes CMO 2007-A, since the majority of the mortgages collateralized in this securitization were originated during this period.


	December 31,			December 31,
	2022			2021
Net trust assets	$	—		$	27,868
Total trust assets		—			1,642,730
Net trust assets as a percentage of total trust assets		—	%		1.70	%

We utilize a number of assumptions to value securitized mortgage collateral, securitized mortgage borrowings and residual interests. These assumptions include estimated collateral default rates and loss severities (credit losses), collateral prepayment rates, forward interest rates and investor yields (discount rates). We use the same collateral assumptions for securitized mortgage collateral and securitized mortgage borrowings as the collateral assumptions determine collateral cash flows which are used to pay interest and principal for securitized mortgage borrowings and excess spread, if any, to the residual interests. However, we use different investor yields (discount rates) assumptions for securitized mortgage collateral and securitized mortgage borrowings and the discount rates used for residual interests based on underlying collateral characteristics, vintage year, assumed risk and market participant assumptions.

At December 31, 2021, total weighted averaged prepayment assumptions increased 50% to 15.4% from 10.3% at December 31, 2020, as a result of the historically low interest rate environment, which resulted in collateral runoff of 27% during the year. At December 31, 2021, total weighted average discount rate decreased 34% to 11.7% from 17.6% at December 31, 2020, as a result of continued improvement in bond prices resulting in a corresponding reduction in yields.

The table below reflects the estimated future credit losses and investor yield requirements for trust assets by product (SF and MF) and securitization vintage at December 31, 2021:


	Estimated Future				Investor Yield
	Losses (1)				Requirement (2)
	SF		MF		SF		MF
2002-2003	5	%	*	% (3)	5	%	8	%
2004	8		*	(3)	3		3
2005	8		*	(3)	2		3
2006	9		*	(3)	3		5
2007	3		*	(3)	5		3

(1) Estimated future losses derived by dividing future projected losses by unpaid principal balances at December 31, 2021.

(2) Investor yield requirements represent our estimate of the yield third-party market participants would require to price our trust assets and liabilities given our prepayment, credit loss and forward interest rate assumptions.

(3) Represents less than 1%.

The following tables present the estimated fair value of our residual interests by securitization vintage year and other related assumptions used to derive these values for the period indicated:


	Estimated Fair Value of Residual
	Interests by Vintage Year at
	December 31, 2021
Origination Year	SF			MF			Total
2002-2003 (1)	$	13,167		$	722		$	13,889
2004		7,661			736			8,397
2005		851			442			1,293
2006		—			4,289			4,289
Total	$	21,679		$	6,189		$	27,868
Weighted avg. prepayment rate		15.4	%		15.3	%		15.4	%
Weighted avg. discount rate		11.8	%		11.6	%		11.7	%

(1)	2002-2003 vintage year includes CMO 2007-A, since the majority of the mortgages collateralized in this securitization were originated during this period.

Prior to the sale of the legacy securitization trusts, we utilized a number of assumptions to value securitized mortgage collateral, securitized mortgage borrowings and residual interests. These assumptions included estimated collateral default rates and loss severities (credit losses), collateral prepayment rates, forward interest rates and investor yields (discount rates). We used the same collateral assumptions for securitized mortgage collateral and securitized mortgage borrowings as the collateral assumptions to determine collateral cash flows which were used to pay interest and principal for securitized mortgage borrowings and excess spread, if any, to the residual interests. However, we used different investor yield (discount rate) assumptions for securitized mortgage collateral and securitized mortgage borrowings and the discount rate used for residual interests based on underlying collateral characteristics, vintage year, assumed risk and market participant assumptions.

Long-Term Mortgage Portfolio Credit Quality

WeAr ~~use~~previously ~~the~~noted, ~~Mortgage~~with ~~Bankers Association (MBA) method to define delinquency as a contractually required payment being 30 or more days past due. We measure delinquencies from~~ the ~~date~~sale of the ~~last~~legacy ~~payment~~securitization ~~due~~portfolio ~~date~~ in ~~which~~March a2022, ~~payment~~we ~~was~~remain ~~received.~~the ~~Delinquencies~~master ~~for~~servicer ~~loans~~with ~~60 days~~respect ~~late~~to orall ~~greater,~~of ~~foreclosures~~the ~~and~~securitizations ~~delinquent~~until ~~bankruptcies~~such ~~were~~time ~~$310.5 million~~that ~~or 17.3% of~~ the ~~long-term~~deals ~~mortgage~~are ~~portfolio~~collapsed, aspaid ~~of December 31~~off, ~~2021,~~ asor ~~compared~~the tomaster ~~$514.0 million~~servicing orrights ~~20.9%~~are ~~as of December 31, 2020~~sold.

41We used the Mortgage Bankers Association (MBA) method to define delinquency as a contractually required payment being 30 or more days past due. We measured delinquencies from the date of the last payment due date in which a payment was received. Delinquencies for loans 60 days late or greater, foreclosures and delinquent bankruptcies were $310.5 million or 17.3% as of December 31, 2021.

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The following table ~~summarizes~~summarized the unpaid principal balances of loans in our mortgage portfolio, included within securitized mortgage collateral, that were 60 or more days delinquent (utilizing the MBA method) as of ~~the~~December ~~periods~~31, ~~indicated~~2021:


	December 31,		Total		~~December 31,~~		~~Total~~
Securitized mortgage collateral	2021		Collateral		~~2020~~		~~Collateral~~
60 - 89 days delinquent	$	21,086	1.2	%	$	~~47,483~~	~~1.9~~	%
90 or more days delinquent		147,387	8.2			~~290,621~~	~~11.8~~
Foreclosures (1)		89,181	5.0			~~126,802~~	~~5.2~~
Delinquent bankruptcies (2)		52,854	2.9			~~49,069~~	~~2.0~~
Total 60 or more days delinquent	$	310,508	17.3	%	$	513,975	20.9	%
REO (3)		—	—
Total collateral	$	1,798,079	100.0	%	$	2,454,657	100.0	%
Total 60 or more days delinquent and REO	$	310,508	17.3	%
Total collateral	$	1,798,079	100.0	%

(1)	Represents properties in the process of foreclosure.

(2)	Represents bankruptcies that are 30 days or more delinquent.

At December 31, 2021, mortgage loans 60 or more days delinquent (whether or not subject to forbearance) declined 40% as compared to December 31, 2020. Delinquency and forbearance are taken into account as part of our credit loss assumptions when determining the estimated fair value of our residual interests. At December 31, 2021, residential loss assumptions for certain trusts decreased as compared to December 31, 2020. To the extent delinquencies and loans in forbearance increase in deals with residual fair value, the estimated fair value of our residual interests may decrease due to a reduction or delay in the timing of estimated cash flows.

The following table ~~summarizes~~summarizeed the UPB of securitized mortgage collateral, mortgage loans held-for-sale and real estate owned, that were non-performing as of the dates indicated (excludes 60-89 days delinquent):


			Total				~~Total~~
	December 31,		Collateral		~~December 31,~~		~~Collateral~~
	2021		%		~~2020~~		%
90 or more days delinquent (including forbearances), foreclosures and delinquent bankruptcies	$	289,422	16.1	%	$	466,492	19.0	%
90 or more days delinquent (including forbearances), REO, foreclosures and delinquent bankruptcies	$	289,422	16.1	%
Real estate owned inside and outside trusts		3,479	0.2			3,173	0.1
Real estate owned inside trusts at NRV		3,479	0.2
Total non-performing assets	$	292,901	16.3	%	$	~~469,665~~	~~19.1~~	%

Non-performing assets ~~consist~~consisted of non-performing loans (mortgages that are 90 or more days delinquent, including loans in foreclosure and delinquent bankruptcies plus REO). It is our policy to place a mortgage loan on nonaccrual status when it becomes 90 days delinquent and to reverse from revenue any accrued interest, except for interest income on securitized mortgage collateral when the scheduled payment iswas received from the servicer. The servicers are required to advance principal and interest on loans within the securitization trusts to the extent the advances are considered recoverable. IFC, a subsidiary of IMH and master servicer, may be required to advance funds, or in most cases cause the loan servicers to advance funds, to cover principal and interest payments not received from borrowers depending on the status of their mortgages. AsAt of December 31, 2021, non-performing assets asto ~~a percentage of the~~ total collateral was 16.3%. ~~At December 31, 2020, non-performing assets to total collateral was 19.1%.~~ Non-performing assets decreased by approximately $~~176~~60.83 million at December 31, ~~2021~~2022 as compared December 31, ~~2020. At December 31,~~ 2021~~, the estimated fair value of non-performing assets was $101~~.~~7 million~~ ~~or 5.0% of total assets. At December 31, 2020, the estimated fair value of non-performing assets was $135.0 million or 5.7% of total assets.~~

Prior to the sale of the legacy securitization trusts, REO, which ~~consists~~consisted of residential real estate acquired in satisfaction of loans, iswas carried at the lower of cost or net realizable value less estimated selling costs. Adjustments to the loan carrying value required at the time of foreclosure ~~are~~were included in the change in the fair value of net trust assets prior to the sale of the portfolio. Changes in our estimates of net realizable value subsequent to the time of foreclosure and through the time of ultimate disposition ~~are~~were recorded as ~~gains~~change orin ~~losses~~fair ~~from~~value ~~real~~of ~~estate~~net ~~owned~~trust assets including trust REO gains in the consolidated statements of operations and comprehensive loss prior to the sale of the portfolio.

For the year ended December 31, 2021, we recorded a $111 thousand increase in net realizable value of the REO compared to an increase of $7.4 million for the comparable 2020 period. Increases and write-downs of the net realizable value reflect increases or declines in value of the REO subsequent to foreclosure date, but prior to the date of

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sale.

For the year ended December 31, 2022, no REO entries were recorded as the REO was a component of the sale of the legacy portfolio in March 2022. For the year ended December 31, 2021, we recorded a $111 thousand increase in net realizable value of the REO. Increases and write-downs of the net realizable value reflect increases or declines in value of the REO subsequent to foreclosure date, but prior to the date of sale.

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The following table presents the balances of the REO:


	December 31,		December 31,
	~~2021~~2022		~~2020~~2021
REO	$	~~10,335~~—	$	10,~~140~~335
Impairment (1)		~~(6,856)~~—		(6,~~967~~856)
Ending balance	$	~~3,479~~—	$	3,~~173~~479
REO inside trusts	$	~~3,479~~—	$	3,~~094~~479
REO outside trusts		—		79—
Total	$	~~3,479~~—	$	3,~~173~~479

(1)	Impairment represents the cumulative write-downs of net realizable value subsequent to foreclosure.

InPrior ~~calculating~~to the sale of the legacy securitization trusts, we calculated the cash flows to assess the fair value of the securitized mortgage collateral, we ~~estimate~~estimated the future losses embedded in our loan portfolio. In evaluating the adequacy of these losses, management ~~takes~~took many factors into consideration. For instance, a detailed analysis of historical loan performance data iswas accumulated and reviewed. This data iswas analyzed for loss performance and prepayment performance by product type, origination year and securitization issuance. The data iswas also broken down by collection status. Our ~~estimate~~estimated of losses for these loans iswas developed by estimating both the rate of default of the loans and the amount of loss severity in the event of default. The rate of default iswas assigned to the loans based on their attributes (e.g., original loan- to- value, borrower credit score, documentation type, geographic location, etc.) and collection status. The rate of default iswas based on analysis of migration of loans from each aging category. The loss severity iswas determined by estimating the net proceeds from the ultimate sale of the foreclosed property. The results of that analysis ~~are~~were then applied to the current mortgage portfolio and an estimate iswas created. We believe that pooling of mortgages with similar characteristics iswas an appropriate methodology in which to evaluate the future loan losses.

Management recognizes that there are qualitative factors that must be taken into consideration when evaluating and measuring losses in the loan portfolios. These items include, but are not limited to, economic indicators that may affect the borrower’s ability to pay, changes in value of collateral, political factors, employment and market conditions, competitor’s performance, market perception, historical losses, ~~COVID-19 pandemic~~ and industry statistics. The assessment for losses iswas based on delinquency trends and prior loss experience and management’s judgment and assumptions regarding various matters, including general economic conditions and loan portfolio composition. Management continually ~~evaluates~~evaluated these assumptions and various relevant factors affecting credit quality and inherent losses.

Results of Operations

For the year ended December 31, ~~2021~~2022 as compared to ~~2020~~2021


	For the Year Ended December 31,
					$		%
	~~2021~~2022		~~2020~~2021		Change		Change
Revenues (losses)	$	66,319	$	(8,092)	$	74,411	920	%
Revenues	$	8,595	$	66,319	$	(57,724)	(87)	%
Expenses		(8156,~~204~~125)		(81,~~273~~204)		6925,079	031
Net interest income		2,398		5,137		(2,739)	(53)
Net interest (expense) income		(3,869)		2,398		(6,267)	(261)
Change in fair value of long-term debt		2,~~098~~757		12,~~899~~098		~~199~~659	1031
Change in fair value of net trust assets, including trust REO gains		6,582		(5,688)		12,270	216
Change in fair value of net trust assets, including trust REO losses		9,248		6,582		2,666	41
Income tax expense		(7138)		(~~133~~71)		6233	4746
Net loss	$	(339,~~878~~432)	$	(883,~~150~~878)	$	84(35,~~272~~554)	96(917)	%
Loss per share available to common stockholders—basic	$	(01.2265)	$	(40.1522)	$	3(1.9343)	95(656)	%
Loss per share available to common stockholders—diluted	$	(01.2265)	$	(40.1522)	$	3(1.9343)	95(656)	%

4347

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Revenues


	For the Year Ended December 31,
					$		%
	~~2021~~2022		~~2020~~2021		Change		Change
Gain on sale of loans, net	$	656,~~294~~317	$	1465,~~004~~294	$	51(58,~~290~~977)	~~366~~(90)	%
Servicing (expenses) fees, net		(432)		3,603		(4,035)	(112)
Servicing fees (expense), net		63		(432)		495	115
Real estate services fees, net		1,~~144~~081		1,~~312~~144		(~~168~~63)	(136)
Gain (loss) on mortgage servicing rights, net		34		(28,509)		28,543	100
Gain on mortgage servicing rights, net		194		34		160	471
Other revenues		279		1,498		(1,219)	(81)
Broker fee income		50		—		50	n/a
Total revenues (losses)	$	66,319	$	(8,092)	$	74,411	920	%
Other revenues		890		279		611	219
Total revenues	$	8,595	$	66,319	$	(57,724)	(87)	%

Gain on sale of loans, net. For the year ended December 31, ~~2021~~2022, gain on sale of loans, net totaled $656.3 million compared to $1465.03 million in the comparable ~~2020~~2021 period. The ~~increase~~decrease in gain on sale of loans, net was most notably due to a $2262.05 million ~~increase~~decrease in gain on sale of loans, a $1912.42 million increase in mark-to-market ~~gains~~losses on loans held-for-sale (LHFS), a $82.93 million ~~decrease~~increase in ~~realized~~provision ~~and~~for ~~unrealized~~repurchases ~~net losses on derivative financial instruments~~ and a $~~5.1~~490 ~~million~~thousand decrease in ~~provision~~premiums ~~for~~from ~~repurchases~~servicing retained loan sales. Partially offsetting ~~the~~these ~~increase~~decreases in gain on sale of loans, net was a $213.62 million ~~increase~~decrease in direct origination expenses and a $15.64 million ~~decrease~~increase in ~~premiums~~realized ~~from~~and ~~servicing~~unrealized ~~retained~~net ~~loan~~gains ~~sales~~on derivative financial instruments.

AsThe ~~previously~~sharp ~~discussed,~~decline ~~for~~in ~~the~~gain ~~year~~on ~~ended~~sale ~~December 31, 2021,~~reflects the ~~increase~~intense inpressure ~~gain~~ on ~~sale~~mortgage originations due to the dramatic collapse of ~~loans,~~the ~~net~~mortgage ~~was~~refinance market and the ~~result~~weakening ofmortgage ~~our~~purchase ~~temporary~~market, ~~suspension~~which has suffered from a lack of ~~lending~~housing ~~activities~~inventory ~~during~~and ~~the~~a ~~second~~significant ~~quarter~~increase ofin ~~2020~~mortgage ~~due~~interest torates ~~the~~resulting ~~uncertainty~~in ~~caused~~customer byhome ~~the~~purchase affordability ~~pandemic~~issues. ~~The~~ ~~uncertainty~~As ~~and~~previously ~~corresponding~~discussed, ~~temporary~~the ~~suspension~~increase in interest rates which began in the fourth quarter of ~~lending~~2021, ~~activities~~caused ~~resulted~~a significant increase in credit spreads which accelerated throughout 2022, resulting in a substantial ~~remarking~~over supply of ~~our~~low ~~NonQM~~coupon ~~loan~~originations ~~portfolio~~causing ~~held-~~a severe decline in margins and diminishing capital market distribution exits for~~-sale~~ asoriginators areliant ~~result~~upon ofan ~~credit~~aggregation ~~spreads~~execution ~~widening~~model. To ~~substantially~~mitigate ~~due~~the torisks ~~potential~~associated ~~pandemic~~with ~~related~~reduced ~~payment~~distribution ~~delinquencies~~exits and ~~forbearances~~extended settlement timelines, ~~which~~we ~~caused~~began ato ~~severe~~pull ~~decline~~back inon production, significantly increasing the ~~values~~pricing ~~assigned~~on byour ~~counterparties~~loan products as well as completely shifting to best-efforts delivery for ~~NonQM~~non-agency ~~assets~~production in the first quarter of 2022. As a result, origination volumes decreased significantly during 2022. For the year ended December 31, ~~2021~~2022, we originated and sold $2693.97 ~~billion~~million and $2978.86 ~~billion~~million of mortgage loans, respectively, as compared to $2.79 billion and $32.38 billion of loans originated and sold, respectively, during the same period in ~~2020~~2021. During the year ended December 31, ~~2021~~2022, ~~margins~~as ~~increased~~a toresult ~~approximately~~of ~~225~~historically low volume our margins were 91 bps as compared to 51225 bps ~~for~~during the same period in ~~2020 as a result the aforementioned uncertainty caused by the pandemic~~2021.

Servicing (expenses) fees, net. For the year ended December 31, ~~2021~~2022, servicing ~~expenses~~fees, ~~was~~net were $~~(0.4)~~63 ~~million~~thousand compared to servicing ~~fees~~expenses, net of ($~~3.6~~432) ~~million~~thousand in the comparable ~~2020~~2021 period. The ~~decrease~~increase in servicing fees, net was ~~the~~due ~~result~~to of the ~~sale~~increase ofin ~~$4.2~~the ~~billion~~average insize ~~UPB~~ of ~~Freddie~~our ~~Mac~~mortgage ~~and~~servicing ~~GNMA~~portfolio ~~MSRs,~~resulting in ~~the~~increased ~~second~~servicing ~~and~~fees ~~third~~as ~~quarters~~compared ofto ~~2020. In addition,~~ the ~~substantial~~same ~~decrease~~period in ~~mortgage~~2021. For ~~interest~~the ~~rates~~years ~~during~~ended ~~2020~~December 31, 2022 ~~caused~~and a2021, ~~significant~~we ~~increase~~had in$4.5 ~~runoff~~million ofand ~~our~~$52.2 ~~mortgage~~million, ~~servicing~~respectively, ~~portfolio~~in ~~which~~servicing ~~combined~~retained ~~with~~loan ~~the servicing~~ sales. The ~~decreased the~~ servicing portfolio average balance 97increased 29% to $5166.2 million for the year ended December 31, ~~2021~~2022 as compared to an average balance of $151.62 ~~billion~~million for the comparable period in ~~2020~~2021. AsWhile awe ~~result~~continued ofto ~~the~~selectively retain mortgage servicing ~~sales~~throughout 2022, in ~~the~~December ~~second~~2022, ~~and~~we ~~third~~sold ~~quarters~~$68.0 ofmillion ~~2020,~~in weUPB ~~will~~of ~~continue~~our togovernment ~~recognize~~insured aMSRs ~~servicing~~for ~~expense~~approximately ~~related~~$725 tothousand, ~~interim~~receiving ~~subservicing~~$508 ~~and~~thousand ~~other~~in ~~servicing~~proceeds ~~costs~~upon ~~related~~sale, towith the ~~small~~remaining ~~UPB~~proceeds ofreceived ~~remaining~~in ~~servicing~~2023 ~~portfolio. For~~upon ~~the~~transfer ~~years~~of ~~ended~~the ~~December 31, 2021~~servicing and ~~2020,~~transfer weof ~~had~~all ~~$51~~trailing documents.7 As ~~million~~a ~~and~~result ~~$223.7~~of ~~million,~~the ~~respectively~~servicing sale, inwe currently have no servicing ~~retained~~portfolio ~~loan~~at ~~sales.~~December 31, 2022.

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Gain on mortgage servicing rights, net.

Gain (loss) on mortgage servicing rights, net.


	For the Year Ended December 31,
					$		%
	2022		2021		Change		Change
Gain on sale of mortgage servicing rights	$	264	$	160	$	104	65	%
Changes in fair value:
Due to changes in valuation market rates, inputs or assumptions		53		61		(8)	(13)
Other changes in fair value:
Scheduled principal prepayments		(43)		(48)		5	10
Voluntary prepayments		(80)		(139)		59	42
Total changes in fair value	$	(70)	$	(126)	$	56	44

Gain on mortgage servicing rights, net	$	194	$	34	$	160	471	%


	For the Year Ended December 31,
					$		%
	2021		2020		Change		Change
Gain (loss) on sale of mortgage servicing rights	$	160	$	(6,547)	$	6,707	102	%
Changes in fair value:
Due to changes in valuation market rates, inputs or assumptions		61		(17,682)		17,743	100
Other changes in fair value:
Scheduled principal prepayments		(48)		(500)		452	90
Voluntary prepayments		(139)		(3,780)		3,641	96
Total changes in fair value	$	(126)	$	(21,962)	$	21,836	99

Gain (loss) on mortgage servicing rights, net	$	34	$	(28,509)	$	28,543	100	%

The year over year increase in gain on mortgage servicing rights, net was primarily due to the collection of holdbacks in excess of previously reserved for amounts on prior period mortgage servicing sales partially offset by a reduction due to the aforementioned servicing sale during the fourth quarter of 2022. For the year ended December 31, 2022, gain on sale MSRs, net was $194 thousand compared to a gain of $34 thousand in the comparable 2021 period. For the year ended December 31, 2022, we recorded a $264 thousand gain on sale of MSR, net as a result of the collection of holdbacks in excess of previously reserved for amounts on prior period mortgage servicing sales which was partially offset by an $18 thousand loss on sale of MSRs during the fourth quarter of 2022. During the year ended December 31, 2021, we recorded a $160 thousand gain on MSRs, net as a result of the collection of holdbacks in excess of previously reserved for amounts on prior period mortgage servicing sales. Additionally, for the year ended December 31, 2022, we recorded a $70 thousand loss from change in fair value of MSRs due to voluntary and scheduled prepayments partially offset by an increase in fair value changes associated with changes in market interest rates, inputs and assumptions. For the year ended December 31, 2021, we recorded a $126 thousand loss from change in fair value of MSRs due to voluntary and scheduled prepayments partially offset by an increase in fair value changes associated with changes in market interest rates, inputs and assumptions.

44Real estate services fees, net. For the year ended December 31, 2022, real estate services fees, net were flat at $1.1 million compared to $1.1 million in the comparable 2021 period. While real estate service fees were flat year over year, we expect them to decline over time as a result of a decrease in transactions related to the decline in the number of loans and the UPB of the long-term mortgage portfolio. Additionally, as previously noted, in March 2022, we sold our residual interest certificates, and assigned certain optional termination and loan purchase rights which entailed the entire legacy securitization portfolio within our long-term mortgage portfolio. As a result, it is our expectation that the real estate services fees generated from the long term mortgage portfolio will decline in future periods as the securitization trusts are called or collapsed by the purchaser.

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The year over year reduction in loss on mortgage servicing rights, net was primarily due to the aforementioned servicing sales during the second and third quarters of 2020. For the year ended December 31, 2021, gain on MSRs, net was $34 thousand compared to a loss of $28.5 million in the comparable 2020 period. For the year ended December 31, 2021, we recorded a $126 thousand loss from change in fair value of MSRs due to voluntary and scheduled prepayments partially offset by an increase in fair value changes associated with changes in market interest rates, inputs and assumptions. For the year ended December 31, 2020, we recorded a $22.0 million loss from change in fair value of MSRs primarily due to prepayments, with $17.7 million due to an increase in prepayment speed assumptions and $3.8 million due to voluntary prepayments. Additionally, during the year ended December 31, 2021, we recorded a $160 thousand gain on mortgage servicing rights, net as a result of the collection of holdbacks in excess of previously reserved for amounts on prior period mortgage servicing sales. During the year ended December 31, 2020, we recorded a net loss of $6.5 million on the aforementioned loan servicing sales.

~~Real~~Broker ~~estate~~fee ~~services fees, net~~income. ~~For~~ ~~the~~As ~~year~~previously ~~ended~~noted ~~December 31, 2021,~~in ~~real~~Item ~~estate services fees, net were $~~1.1- ~~million~~“Business” ~~compared~~of toPart ~~$1.3 million~~I inof ~~the~~this ~~comparable~~Annual ~~2020~~Report ~~period.~~on ~~The~~Form ~~$0.2~~10-K, ~~million~~in ~~decrease~~December ~~was~~2022, ~~primarily~~we ~~the~~repositioned ~~result~~our ofretail aconsumer ~~decrease~~direct inchannel ~~transactions~~CCM, ~~related~~ to ~~the~~be ~~decline~~a inbroker ~~the~~rather ~~number~~than ofa ~~loans~~direct ~~and~~lender. As ~~the~~a ~~UPB~~result, ofduring the ~~long-term~~fourth ~~mortgage~~quarter ~~portfolio~~of as2022 ~~compared~~we tohad ~~2020. We~~broker ~~expect the real estate services~~ fee, ~~net~~income toof ~~continue~~$50 tothousand ~~decline~~on as$2.1 ~~the~~million ~~long-term~~of ~~mortgage~~brokered ~~portfolio declines in size~~loans.

Other revenues. For the year ended December 31, ~~2021~~2022, other revenues were $~~280~~890 thousand as compared to $~~1.5~~279 ~~million~~thousand in the comparable ~~2020~~2021 period. The $~~1.2~~611 ~~million~~thousand ~~decrease~~increase ~~in other revenues~~ was primarily the result of aan ~~decrease~~increase in the cash surrender value ~~associated~~of ~~with~~ the corporate-owned life insurance trusts asduring ~~compared~~the tofirst ~~2020~~quarter of 2022, as a result of the ~~payment~~application of ~~premiums. In~~prior ~~addition,~~year ~~other~~investment ~~revenues~~gains ~~declined~~which ~~$133~~get ~~thousand~~applied asat athe ~~result~~annual ofrenewal adate ~~reduction~~ in ~~contract underwriting which was performed during~~ the ~~second~~first ~~and~~quarter ~~third quarters~~ of ~~2020~~each ~~during~~fiscal ~~our pause in lending~~year.

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Expenses


	For the Year Ended December 31,
					$		%
	~~2021~~2022		~~2020~~2021		Change		Change
Personnel expense	$	5230,~~778~~705	$	52,~~880~~778	$	(~~102~~22,073)	(042)	%
General, administrative and other		2115,~~031~~698		2416,~~534~~795		(31,~~503~~097)	(147)
Business promotion		7,395		3,859		3,536	92
Occupancy		5,297		4,236		1,061	25
Total expenses	$	81,204	$	81,273	$	(69)	(0)	%
Business promotion		4,425		7,395		(2,970)	(40)
Total expenses	$	56,125	$	81,204	$	(25,079)	(31)	%

Total expenses decreased ~~slightly~~ to $8156.21 million for the year ended December 31, ~~2021~~2022 compared to $81.32 million for the comparable period ~~2020~~2021. Personnel expense decreased $~~102~~22.1 ~~thousand~~million to $5230.87 million for the year ended December 31, ~~2021~~2022 as compared to $52.8 million in the same period in ~~2020~~2021. WeThe ~~continue~~decrease toin ~~expand~~personnel ~~our~~expense ~~NonQM~~was ~~platform~~primarily asrelated ~~well~~to asa ~~balance~~reduction ~~the industry wide escalation~~ in ~~cost~~variable ofcompensation ~~production~~as ~~and~~well ~~operational talent~~ as wea ~~manage~~reduction ~~our~~in headcount, ~~pipeline and capacity~~ to ~~balance~~support ~~the~~reduced ~~risks~~volume ~~inherent in an aggregation execution model. As a result, average headcount increased 1% for the year ended December 31, 2021~~ as compared to the same period in ~~2020~~2021. ~~Personnel~~Average ~~expense~~headcount decreased 37% to ~~182~~210 ~~bps~~for ~~of funding’s during~~ the year ended December 31, 2022 ~~2021~~ as compared to ~~193~~335 ~~bps~~ for the ~~comparable~~same ~~2020~~ period in 2021.

General, administrative and other expenses decreased to $2115.07 million for the year ended December 31, ~~2021~~2022 compared to $2416.58 million for the same period in ~~2020~~2021. The decrease in general, administrative and other expenses was primarily due to a $1.4 million decrease in premiums associated with the corporate-owned life insurance trusts liability, a $1.0 million decrease in other various general and administrative expenses, an $889 thousand decrease in legal and professional fees, a $724 thousand decrease in occupancy expense partially due to right of use (ROU) asset impairment during the first quarter of 2020 and a reduction in occupancy expense associated with the vacated space. Partially offsetting these decreases in general, administrative and other expenses was a $499 thousand increase in insurance expense.

the result of an $1.7 million decrease in data processing, professional fees and general administrative and other expense all related to a reduction in fundings during the period. Partially offsetting the decline in general, administrative and other expenses was a $348 thousand increase in legal fees associated with the aforementioned Exchange Offers and a $215 thousand increase in CAM expense primarily related to a true up of prior and current year maintenance for the corporate headquarters.

~~Business~~Occupancy ~~promotion~~expense increased ~~$3.5 million~~ to $75.43 million for the year ended December 31, ~~2021~~2022 compared to $34.9 2 million for the ~~comparable~~same period in ~~2020~~2021. ~~Business~~The ~~promotion~~increase ~~had~~in ~~remained~~occupancy ~~low~~expense aswas primarily due to the modification and early termination of the Company’s previous corporate office. On December 15, 2022, IFC, a ~~result~~wholly-owned subsidiary of IMH, and Jacaranda Holdings, LLC (the ~~interest~~Landlord), ~~rate~~entered ~~environment~~into ~~which~~a ~~required~~Lease ~~significantly~~Termination ~~less~~Agreement ~~business~~(the ~~promotion~~Termination Agreement) relating to ~~source~~the ~~leads~~lease (the Lease) for the Company’s primary executive, administrative and operations offices located at 19500 Jamboree Road, Irvine, California (the Premises). ~~Beginning~~ The Lease, as amended, was originally entered into in ~~second~~March ~~quarter~~2005, and the Premises consisted of ~~2021~~approximately 120,000 wesq. ~~began~~ft. Pursuant to ~~increase~~the ~~our~~Termination ~~marketing~~Agreement, ~~expenditures~~IFC inand anLandlord ~~effort~~agreed to ~~target~~terminate ~~NonQM~~the ~~production~~Lease on January 31, 2023, in lieu of the ~~retail~~Lease’s ~~channel~~original expiration date of September 30, ~~continue~~2024. In accordance with the terms of the Termination Agreement, on December 16, 2022, IFC paid to ~~expand~~Landlord ~~production~~the ~~outside~~termination consideration of ~~California~~$3.0 ~~and~~million ~~maintain~~among ~~our~~other ~~lead~~required ~~volume~~action items. As a result of the Termination Agreement, the Company accounted for the termination as ~~competition~~a ~~increased~~lease modification, recording an additional $970 thousand of occupancy expense in December 2022 related to the modification, with an additional $1.2 ~~Although~~million wein ~~continue~~occupancy expense occurring in January 2023, when the Premises was vacated. Additionally, during the first quarter of 2022, the Company recorded a $123 thousand right of use (ROU )asset impairment charge related to ~~source~~the ~~leads~~sublease ~~through~~of ~~digital~~approximately ~~campaigns~~1,900 ~~which~~sq. ~~allows~~ft. ~~for~~of a ~~more~~floor ~~cost~~within ~~effective~~the ~~approach~~Company’s previous corporate office, reducing the ~~competitiveness~~carrying ~~within~~value of the ~~California~~lease ~~market~~asset ~~has~~to ~~driven~~its upestimated ~~advertising~~fair ~~costs~~value.

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Business promotion decreased $3.0 million to $4.4 million for the year ended December 31, 2022 compared to $7.4 million for the comparable period in 2021. Business promotion previously remained low as a result of the prior more favorable interest rate environment requiring significantly less business promotion to source leads. Beginning in second quarter of 2021, we began to increase our marketing expenditures in an effort to more directly target NonQM production in the retail channel, expand production expansion outside of California and maintain our lead volume as competition increased. Due to the dislocation within the NonQM market based on the significant increase in interest rates, starting in the second quarter of 2022 and continuing through the end of 2022, we reduced our marketing spend as we pulled back on our origination volumes to mitigate the aforementioned risks associated with the current market environment. Although we continue to source leads through digital campaigns, which we believe allows for a more cost effective approach, the recent competitiveness among other lenders for NonQM production within the California market has driven up advertising costs.

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Other Income


	For the Year Ended December 31,
					Increase		%
	~~2021~~2022		~~2020~~2021		(Decrease)		Change
Interest income	$	6515,~~666~~268	$	~~118~~65,~~908~~666	$	(50,398)	(77)	%
Interest expense		(6319,~~268~~137)		(~~113~~63,~~771~~268)		44,131	70
Net interest income		2,398		5,137
Net interest (expense) income		(3,869)		2,398		(6,267)	(261)

Change in fair value of long-term debt		2,~~098~~757		12,~~899~~098		659	31
Change in fair value of net trust assets, including trust REO gains		69,~~582~~248		(56,~~688)~~582		2,666	41
Total other income	$	11,078	$	1,348
Total other income, net	$	8,136	$	11,078	$	(2,942)	(27)	%

Net Interest Income

We earn net interest income primarily from mortgage assets, which include securitized mortgage collateral (prior to the sale in March 2022) and loans held-for-sale, or collectively, “mortgage assets,” and, to a lesser extent, interest income earned on cash and cash equivalents. Interest expense is primarily interest paid on borrowings secured by mortgage assets, which include securitized mortgage borrowings (prior to the sale in March 2022) and warehouse borrowings and, to a lesser extent, interest expense paid on long-term debt, Convertible Notes, ~~MSR Financing~~ and corporate -owned life insurance trusts. Interest income and interest expense during the period primarily represents the effective yield, based on the fair value of the trust assets and liabilities.

The following tables summarize average balance, interest and weighted average yield on interest-earning assets and interest-bearing liabilities, for the periods indicated.


	For the Year Ended December 31,
	~~2021~~2022						~~2020~~2021
	Average						Average
	Balance		Interest		Yield		Balance		Interest		Yield
ASSETS
Securitized mortgage collateral	$	1263,~~872,153~~763	$	5910,~~022~~772	34.1508	%	$	21,~~281~~872,~~574~~153	$	~~106~~59,~~959~~022	43.6915	%
Mortgage loans held-for-sale		~~199~~81,~~796~~809		63,~~634~~910	34.3278			~~275~~199,~~874~~796		116,~~837~~634	43.2932
Other		44,376		10	0.02			51,243		112	0.22
Other (1)		47,297		586	1.24			44,376		10	0.02
Total interest-earning assets	$	2392,~~116,325~~869	$	6515,~~666~~268	3.1089	%	$	2,~~608~~116,~~691~~325	$	~~118~~65,~~908~~666	43.5610	%
LIABILITIES
Securitized mortgage borrowings	$	1259,~~856,869~~768	$	509,~~897~~575	23.7469	%	$	21,~~269~~856,~~727~~869	$	9850,~~030~~897	42.3274	%
Warehouse borrowings		~~191~~74,~~794~~435		63,~~543~~119	34.4119			~~252~~191,~~565~~794		96,~~444~~543	3.7441
MSR financing facilities		—		—	—			3,014		119	3.95
Long-term debt		38,198		4,692	12.28			45,534		3,965	8.71
Long-term debt		45,534		3,965	8.71			42,825		3,797	8.87
Convertible notes		16,753		1,176	7.02			20,000		1,404	7.02
Convertible notes		20,000		1,404	7.02			24,241		1,982	8.18
Other (2)		13,254		575	4.34			12,779		459	3.59
Other		12,779		459	3.59			8,942		399	4.46
Total interest-bearing liabilities	$	402,408	$	19,137	4.76	%	$	2,126,976	$	63,268	2.97	%
Total interest-bearing liabilities	$	2,126,976	$	63,268	2.97	%	$	2,601,314	$	113,771	4.37	%
Net interest (expense) spread (3)

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