0001830197hmpt:A550MWarehouseFacilityMember2021-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~March 31,~~September 30, 2021


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

For the transition period from ______________ to ______________

Commission File Number: 001-39964

Home Point Capital Inc.

(Exact name of registrant as specified in its charter)

Delaware

90-1116426

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

2211 Old Earhart Road, Suite 250

Ann Arbor, Michigan

48105

(Address of Principal Executive Offices)

(Zip Code)

(888) 616-6866

Registrant's telephone number, including area code

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

Title of each class

Trading Symbol

Name of each exchange on which
registered

Common Stock, par value

$0.0000000072 per share

HMPT

The Nasdaq Stock Market LLC

(The Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~May 11,~~November 3, 2021, the registrant had ~~139,054,287~~139,527,512 shares of common stock, par value $0.0000000072 per share, outstanding.

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TABLE OF CONTENTS


			Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)F ~~inancial Statements~~			1
Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020 ~~(Unaudited)~~			1
Condensed Consolidated Statements of Operations for the three and nin e months ended ~~March 31,~~September 30, 2021 and 2020 ~~(Unaudited)~~			2
Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended ~~March 31,~~September 30, 2021 and ~~March 31, 2020~~September ~~(Unaudited)~~30, 2020			3
Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 (~~Unaudited)~~			4
Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~			56
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2426
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3739
Item 4. Controls and Procedures			3740
PART II—OTHER INFORMATION
Item 1. Legal Proceedings			3841
Item 1A. Risk Factors			3841
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3841
Item 3. Defaults Upon Senior Securities			3841
Item 4. Mine Safety Disclosures			3841
Item 5. Other Information			3841
Item 6. Exhibits			3942
Signatures			4143

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Cautionary Note on Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains certain “forward-looking statements,” as that term is defined in the U.S. federal securities ~~laws.~~laws, including the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements other than statements of historical facts contained in this Report, including among others, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs, the industry in which we operate and other similar matters. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can,” “continue,” “potential,” “should” and the negative of these terms or other comparable terminology often identify forward-looking statements. These forward-looking statements, which are based on currently available information, operating plans, and projections about future events and trends, are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, including the risks discussed in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed on March 12, 2021 (our “2020 Annual Report”). Factors, risks, and uncertainties that could cause actual outcomes and results to be materially different from those contemplated by forward-looking statements include, among others:

•~~the spread of the COVID-19 outbreak and severe disruptions in the U.S. and global economy and financial markets it has caused;~~

•our reliance on our financing arrangements to fund mortgage loans and otherwise operate our business;

•the dependence of our loan origination and servicing revenues on macroeconomic and U.S. residential real estate market conditions;

•the requirement to repurchase mortgage loans or indemnify investors if we breach representations and warranties;

•counterparty risk;

•the requirement to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances;

•competition for mortgage assets that may limit the availability of desirable originations, acquisitions and result in reduced risk-adjusted returns;

•our ability to continue to grow our loan origination business or effectively manage significant increases in our loan production volume;

•competition in the industry in which we operate;

•our success and growth of our production and servicing activities and the dependence upon our ability to adapt to and implement technological changes;

•the effectiveness of our risk management efforts;

•our ability to detect misconduct and fraud;

•any failure to attract and retain a highly skilled workforce, including our senior executives;

•our ability to obtain, maintain, protect and enforce our intellectual property;

•any cybersecurity risks, cyber incidents and technology failures;

•material changes to the laws, regulations or practices applicable to reverse mortgage programs operated by the Federal Housing Administration (“FHA”) and the U.S. Department of Housing and Urban Development;

•our vendor relationships;

•our failure to deal appropriately with various issues that may give rise to reputational risk, including legal and regulatory requirements;

•risks and uncertainties associated with litigation, including any employment, intellectual property, consumer protection, class action and other litigation matters, and related unfavorable publicity;

•exposure to new risks and increased costs as a result of initiating new business activities or strategies or significantly expanding existing business activities or strategies;

•any failure to comply with the significant amount of regulation applicable to our ~~new~~ investment management subsidiary;

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•the impact of changes in political or economic stability or byin government policies on our material vendors with operations in India;

•our ability to fully utilize our net operating loss (“NOL”) and other tax carryforwards;

•any challenge by the Internal Revenue Service of the amount, timing and/or use of our NOL carryforwards;

•possible changes in legislation and the effect on our ability to use the tax benefits associated with our NOL carryforwards;

•the impact of other changes in tax laws;

•the impact of interest rate fluctuations;

•risks associated with hedging against interest rate exposure;

•the impact of any prolonged economic slowdown, recession or declining real estate values;

•risks associated with financing our assets with borrowings;

•risks associated with a decrease in value of our collateral;

•the dependence of our operations on access to our financing arrangements, which are mostly uncommitted;

•risks associated with the financial and restrictive covenants included in our financing agreements;

•our exposure to volatility in the London Inter-Bank Offered Rate;

•our ability to raise the debt or equity capital required to finance our assets and grow our business;

•risks associated with higher risk loans that we service;

•risks associated with derivative financial instruments;

•our ability to foreclose on our mortgage assets in a timely manner or at all;

•our ability to obtain and/or maintain licenses and other approvals in those jurisdictions where required to conduct our business;

•the impact of revised rules and regulations and enforcement of existing rules and regulations by the Consumer Financial Protection Bureau (the “CFPB”);

•legislative and regulatory changes that impact the mortgage loan industry or housing market;

•changes in regulations or the occurrence of other events that impact the business, operations or prospects of government agencies such as the Government National Mortgage Association, the Federal Housing Administration or the U.S. Department of Veterans Affairs, the U.S. Department of Agriculture, or Government-Sponsored Enterprises such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, or such changes that increase the cost of doing business with such entities;

•the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulations and regulatory agencies, and any other legislative and regulatory changes that impact the business, operations or governance of mortgage lenders;

•the CFPB, and its issued and future rules and the enforcement thereof;

•changes in government support of homeownership;

•changes in government or government sponsored home affordability programs;

•changes in governmental regulations, accounting treatment, tax rates and similar matters;

•risks associated with our acquisition of mortgage servicing rights;

•the impact of our counterparties terminating our servicing rights under which we conduct servicing activities; ~~and~~

•our failure to deal appropriately with issues that may give rise to reputational ~~risk.~~risk; and

iii

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•the spread of the COVID-19 outbreak and severe disruptions in the U.S. and global economy and financial markets it has caused.

Many of the important factors that will determine these results are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements, which speak only as of the date of this Report. Except as otherwise required by law, we do not assume any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events. You should refer to the risks and uncertainties listed under the heading “Risk Factors” in our 2020 Annual Report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (“SEC”), for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements.

Unless the context otherwise indicates, any reference in this Report to “Home Point,” “our Company,” “the Company,” “us,” “we” and “our” refers to Home Point Capital Inc. and its subsidiaries.

Website and Social Media Disclosure

We use our website (www.investors.homepoint.com) and our corporate Facebook, LinkedIn, and Twitter accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website and social media channels are not, however, a part of this Report.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

HOME POINT CAPITAL INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

March 31, 2021 (unaudited) December 31, 2020
Assets:
Cash and cash equivalents $ 219,285 $ 165,230
Restricted cash 41,863 31,663
Cash and cash equivalents and Restricted cash 261,148 196,893
Mortgage loans held for sale (at fair value) 5,191,261 3,301,694
Mortgage servicing rights (at fair value) 1,156,357 748,457
Property and equipment, net 23,027 21,710
Accounts receivable, net 290,555 152,845
Derivative assets 186,909 334,323
Goodwill and intangibles 10,789 10,789
GNMA loans eligible for repurchase 1,446,495 2,524,240
Other assets 103,850 87,622
Total assets $ 8,670,391 $ 7,378,573
Liabilities and Shareholders’ Equity:
Liabilities:
Warehouse lines of credit $ 4,847,431 $ 3,005,415
Term debt and other borrowings, net 888,437 454,022
Accounts payable and accrued expenses 196,542 167,532
GNMA loans eligible for repurchase 1,446,495 2,524,240
Other liabilities 509,189 299,890
Total liabilities 7,888,094 6,451,099
Commitments and Contingencies (Note 9) 0 0
Shareholders’ Equity:
Preferred stock (Authorized shares: 250,000,000; NaN issued and outstanding, par value $0.0000000072 per share) 0 0
Common stock (Authorized shares: 1,000,000,000; 138,860,103 shares issued and outstanding, par value $0.0000000072 per share) 0 0
Additional paid-in capital 520,261 519,510
Retained earnings 262,036 407,964
Total shareholders' equity 782,297 927,474
Total liabilities and shareholders' equity $ 8,670,391 $ 7,378,573


	September 30, 2021 (unaudited)		December 31, 2020
Assets:
Cash and cash equivalents	$	160,636	$	165,230
Restricted cash	42,491		31,663
Cash and cash equivalents and Restricted cash	203,127		196,893
Mortgage loans held for sale (at fair value)	6,680,196		3,301,694
Mortgage servicing rights (at fair value)	1,402,140		748,457
Property and equipment, net	22,945		21,710
Accounts receivable, net	117,538		152,845
Derivative assets	164,602		334,323
Goodwill and intangibles	10,789		10,789
GNMA loans eligible for repurchase	265,132		2,524,240
Other assets	111,640		87,622
Total assets	$	8,978,109	$	7,378,573
Liabilities and Shareholders’ Equity:
Liabilities:
Warehouse lines of credit	$	6,308,477	$	3,005,415
Term debt and other borrowings, net	1,065,762		454,022
Accounts payable and accrued expenses	127,793		167,532
GNMA loans eligible for repurchase	265,132		2,524,240
Deferred tax liabilities	224,303		174,002
Other liabilities	225,440		125,888
Total liabilities	8,216,907		6,451,099
Commitments and Contingencies (Note 9)	0		0

Shareholders’ Equity:
Preferred stock (Authorized shares: 250,000,000; none issued and outstanding, par value $0.0000000072 per share)	—		—
Common stock (Authorized shares: 1,000,000,000; 139,527,024 shares issued and outstanding, par value $0.0000000072 per share)	—		—
Additional paid-in capital	522,080		519,510
Retained earnings	239,122		407,964
Total shareholders' equity	761,202		927,474
Total liabilities and shareholders' equity	$	8,978,109	$	7,378,573

See accompanying notes to the unaudited condensed consolidated financial statements.

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HOME POINT CAPITAL INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

Three months ended March 31,
2021 2020
Revenue:
Gain on loans, net $ 301,228 $ 102,563
Loan fee income 44,115 12,031
Interest income 25,577 15,849
Interest expense (32,935) (15,913)
Interest expense, net (7,358) (64)
Loan servicing fees 70,338 43,246
Change in fair value of mortgage servicing rights, net 12,848 (91,527)
Other income 801 1,380
Total revenue, net 421,972 67,629
Expenses:
Compensation and benefits 153,642 52,950
Loan expense 22,418 6,800
Loan servicing expense 8,093 7,953
Occupancy and equipment 8,555 5,320
General and administrative 22,244 7,222
Depreciation and amortization 2,761 1,499
Other expenses 9,336 2,238
Total expenses 227,049 83,982
Income (loss) before income tax 194,923 (16,353)
Income tax expense (benefit) 50,117 (3,489)
Income from equity method investments 4,163 2,316
Total net income (loss) $ 148,969 $ (10,548)
Earnings (loss) per share:
Basic $ 1.07 $ (0.08)
Diluted $ 1.07 $ (0.08)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue:
Gain on loans, net	$	145,471	$	503,344	$	521,727	$	962,778
Loan fee income	34,484		28,205		118,099		60,630

Interest income	36,719		14,709		96,944		42,370
Interest expense	(45,532)		(17,559)		(122,603)		(47,845)
Interest expense, net	(8,813)		(2,850)		(25,659)		(5,475)
Loan servicing fees	91,831		48,350		247,753		133,904
Change in fair value of mortgage servicing rights, net	3,544		(66,749)		(90,513)		(230,524)
Other income	8,084		498		9,537		2,138
Total revenue, net	274,601		510,798		780,944		923,451
Expenses:
Compensation and benefits	114,612		117,177		395,550		251,462
Loan expense	16,618		8,733		51,796		21,686
Loan servicing expense	6,681		6,481		22,282		22,742
Production technology	7,583		6,378		25,038		14,540
General and administrative	21,741		16,213		74,527		38,981
Depreciation and amortization	2,440		1,236		7,551		4,162
Other expenses	5,649		7,094		23,620		12,087
Total expenses	175,324		163,312		600,364		365,660
Income before income tax	99,277		347,486		180,580		557,791
Income tax expense	27,341		93,294		50,250		149,306
(Loss) income from equity method investments	(713)		9,870		16,649		14,050
Total net income	$	71,223	$	264,062	$	146,979	$	422,535

Earnings per share:
Basic	$	0.51	$	1.90	$	1.06	$	3.13
Diluted	$	0.51	$	1.90	$	1.05	$	3.12

See accompanying notes to the unaudited condensed consolidated financial statements.

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HOME POINT CAPITAL INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

Common Stock Additional
Paid in Capital Retained
Earnings
(Accumulated
Deficit) Total
Shareholders’
Equity
Shares Amount
Beginning balance, December 31, 2019 138,860,111 0 $ 454,861 $ (44,549) $ 410,312
Contributed capital — — 63,773 — 63,773
Stock based compensation — — 146 — 146
Net loss — — — (10,548) (10,548)
Ending balance, March 31, 2020 138,860,111 0 $ 518,780 $ (55,097) $ 463,683
Common Stock Additional
Paid in Capital Retained
Earnings
(Accumulated
Deficit) Total
Shareholders’
Equity
Shares Amount
Beginning balance, December 31, 2020 138,860,111 0 $ 519,510 $ 407,964 $ 927,474
Contributed capital — — — 192 192
Distribution to parent — — — (295,089) (295,089)
EE stock purchase (option exercise) — — (1,028) — (1,028)
Stock based compensation — — 1,779 — 1,779
Net income — — — 148,969 148,969
Ending balance, March 31, 2021 138,860,111 0 $ 520,261 $ 262,036 $ 782,297


	Common Stock		Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Total Shareholders’ Equity
	Shares	Amount
Beginning balance, June 30, 2020	138,860,103	—	$	519,033	$	113,924	$	632,957

Distributions to parent	—	—	—		(154,492)		(154,492)
Stock based compensation	—	—	144		—		144
Net income	—	—	—		264,062		264,062
Ending balance, September 30, 2020	138,860,103	—	$	519,177	$	223,494	$	742,671

	Common Stock		Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Total Shareholders’ Equity
	Shares	Amount
Beginning balance, June 30, 2021	139,487,097	—	$	520,505	$	188,823	$	709,328
Contributed capital	—	—	—		—		—
Dividend to shareholders	—	—	—		(20,924)		(20,924)
EE stock purchase (option exercise)	39,927	—	(105)		—		(105)
Stock based compensation	—	—	1,680		—		1,680
Net income	—	—	—		71,223		71,223
Ending balance, September 30, 2021	139,527,024	—	$	522,080	$	239,122	$	761,202

	Common Stock		Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Total Shareholders’ Equity
	Shares	Amount
Beginning balance, December 31, 2019	138,860,103	—	$	454,861	$	(44,549)	$	410,312
Contributed capital	—	—	63,774		—		63,774
Distributions to parent	—	—	—		(154,492)		(154,492)
Stock based compensation	—	—	542		—		542
Net income	—	—	—		422,535		422,535
Ending balance, September 30, 2020	138,860,103	—	$	519,177	$	223,494	$	742,671

	Common Stock		Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Total Shareholders’ Equity
	Shares	Amount
Beginning balance, December 31, 2020	138,860,103	—	$	519,510	$	407,964	$	927,474
Contributed capital	—	—	—		192		192
Dividend to shareholders	—	—	—		(20,924)		(20,924)
Distribution to parent	—	—	—		(295,089)		(295,089)
EE stock purchase (option exercise)	666,921	—	(2,636)		—		(2,636)
Stock based compensation	—	—	5,206		—		$	5,206
Net income	—	—	—		146,979		146,979
Ending balance, September 30, 2021	139,527,024	—	$	522,080	$	239,122	$	761,202

See accompanying notes to the unaudited condensed consolidated financial statements.

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HOME POINT CAPITAL INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended March 31,
2021 2020
Operating activities:
Net income (loss) $ 148,969 $ (10,548)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation 2,761 1,024
Amortization of intangible assets 0 475
Amortization of debt issuance costs 802 153
Gain on loans, net (301,228) (102,563)
Provision for representation and warranty reserve 5,730 1,567
Stock based compensation expense 1,779 146
Deferred income tax 43,783 (3,493)
Gain on equity investment (4,163) (2,316)
Origination of mortgage loans held for sale (31,055,708) (8,344,755)
Proceeds on sale and payments from mortgage loans held for sale 29,001,344 8,311,842
Purchases of mortgage servicing rights (4,817) 0
Change in fair value of mortgage servicing rights, net (12,848) 91,527
Change in fair value of mortgage loans held for sale 75,790 (35,040)
Non-cash lease expense 0 (117)
Change in fair value of derivative assets 147,414 (240,693)
Changes in operating assets and liabilities:
Increase in accounts receivable, net (137,710) (1,759)
Increase in other assets (12,065) (254)
(Decrease) increase in accounts payable and accrued expenses (20,371) 37,281
Increase in other liabilities 209,166 95,310
Net cash used in operating activities (1,911,372) (202,213)
Investing activities:
Purchases of property and equipment, net of disposals (4,078) (2,395)
Net cash used in investing activities (4,078) (2,395)
Financing activities:
Proceeds from warehouse borrowings 31,135,000 8,285,605
Payments on warehouse borrowings (29,292,983) (8,142,553)
Proceeds from term debt borrowings 820,000 22,600
Payments on term debt borrowings (335,000) (40,000)
Proceeds from other borrowings 65,000 64,500
Payments on other borrowings (105,000) (43,000)
Payments of debt issuance costs (11,387) 0
Employee stock purchases (option expense) (1,028) 0
Capital contributions from parent 192 63,773
Distribution to parent (295,089) 0
Net cash provided by financing activities 1,979,705 210,925
Net increase in cash, cash equivalents and restricted cash 64,255 6,317
Cash, cash equivalents and restricted cash at beginning of period 196,893 81,731
Cash, cash equivalents and restricted cash at end of period $ 261,148 $ 88,048
Supplemental disclosure:
Cash paid for interest $ 22,788 $ 16,325
Cash (refunded) paid for taxes $ (260) $ 4


	Nine Months Ended September 30,
	2021		2020
Operating activities:
Net income	$	146,979	$	422,535
Adjustments to reconcile net income to cash used in operating activities:
Depreciation	7,551		3,370
Amortization of intangible assets	—		792
Amortization of debt issuance costs	2,444		531
Gain on sale of mortgage servicing rights	(7,426)		—
Gain on loans, net	(521,727)		(962,778)
Provision for representation and warranty reserve	9,358		10,025
Stock based compensation expense	5,206		542
Deferred income tax	50,301		133,645
Income from equity method investment	(16,649)		(14,050)
Origination of mortgage loans held for sale	(79,464,436)		(38,534,747)
Proceeds on sale and payments from mortgage loans held for sale	75,786,570		38,585,878
Change in fair value of mortgage servicing rights, net	90,512		230,524
Change in fair value of mortgage loans held for sale	6,906		(54,709)
Non-cash lease expense	—		108
Change in fair value of derivative assets	169,721		(274,250)
Changes in operating assets and liabilities:
Accounts receivable, net	35,360		(21,448)
Other assets	(7,369)		3,671
Accounts payable and accrued expenses	(40,959)		74,787
Other liabilities	90,194		10,479
Net cash used in operating activities	(3,657,464)		(385,095)

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

HOME POINT CAPITAL INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


Investing activities:
Purchases of property and equipment, net of disposals	(8,786)		(9,914)
Purchases of mortgage servicing rights	(33,027)		—
Proceeds from sale of mortgage servicing rights	111,609		—
Net cash provided (used) in investing activities	69,796		(9,914)

Financing activities:
Proceeds from warehouse borrowings	81,365,921		38,381,219
Payments on warehouse borrowings	(78,062,859)		(37,766,925)
Proceeds from term debt borrowings	1,213,400		47,600
Payments on term debt borrowings	(550,000)		(60,000)
Proceeds from other borrowings	75,000		64,500
Payments on other borrowings	(115,000)		(103,500)
Payments of debt issuance costs	(14,103)		—
Employee stock purchases (option expense)	(2,636)		—
Capital contributions from parent	192		63,774
Dividends to shareholders	(20,924)		—
Distribution to parent	(295,089)		—
Net cash provided by financing activities	3,593,902		626,668
Net increase in cash, cash equivalents and restricted cash	6,234		231,659
Cash, cash equivalents and restricted cash at beginning of period	196,893		81,731
Cash, cash equivalents and restricted cash at end of period	$	203,127	$	313,390
Supplemental disclosure:
Cash paid for interest	$	104,119	$	46,715
Cash (refunded) paid for taxes	$	(33,740)	$	22,034

See accompanying notes to the unaudited condensed consolidated financial statements.

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HOME POINT CAPITAL INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Amounts)

(unaudited)

Note 1 – Organization and Operations

Nature of Business

Home Point Capital Inc., a Delaware corporation (“HPC” or the “Company”), through its subsidiaries, is a residential mortgage originator and servicer with a business model focused on growing originations by leveraging a network of partner relationships. The Company manages the customer experience through its in-house servicing operation and proprietary Home Ownership Platform. The Company’s business operations are organized into the following 2 segments: (1) Origination and (2) Servicing. Home Point Financial Corporation, a New Jersey corporation (“HPF”), a wholly owned subsidiary of the Company, originates, sells, and services residential real estate mortgage loans throughout the United States. Home Point Asset Management LLC, a Delaware limited liability company (“HPAM”), is a wholly owned subsidiary of the Company and manages certain servicing assets. HPAM’s wholly owned subsidiary, Home Point Mortgage Acceptance Corporation, an Alabama Corporation (“HPMAC”), services residential real estate mortgage loans. Home Point Corporation Insurance Agency LLC, a Michigan limited liability company (“HPCIA” and together with HPF, HPAM, and HPMAC, the “wholly owned subsidiaries”), is a wholly owned subsidiary of the Company that brokers home owner insurance policies.

HPF and HPMAC are each an approved seller and servicer of one-to-four family first mortgages by the Federal National Mortgage Association (“FNMA” or “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”) and are each an approved issuer by the Government National Mortgage Association (“GNMA” or “Ginnie Mae”) (collectively, the “Agencies”), and as such, HPF and HPMAC must meet certain Agency eligibility requirements.

Note 2 – Basis of Presentation and Significant Accounting Policies

Basis of ~~Presentation:~~Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). for interim financial information. The condensed consolidated financial statements include the financial statements of HPC and ~~all~~ its wholly owned ~~subsidiaries, including HPF and HPMAC.~~subsidiaries. The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with Article 10 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The consolidated balance sheet as of December 31, 2020 and related notes were derived from the audited consolidated financial statements but do not include all disclosures required by U.S. ~~GAAP.~~GAAP for complete financial statements. Certain information and footnote disclosures normally included in complete financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position as of ~~March 31,~~September 30, 2021 and its results of operations for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020. The unaudited condensed consolidated financial information should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020.

All intercompany balances and transactions have been eliminated in consolidation.

Use of ~~Estimates:~~Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires HPC to make estimates and assumptions about future events that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable.

Examples of reported amounts that rely on significant estimates include mortgage loans held for sale, mortgage servicing rights (“MSRs”), servicing advances reserve, derivative assets, derivative liabilities, assets acquired and liabilities assumed in business combinations, reserves for mortgage repurchases and indemnifications, and deferred tax valuation allowance considerations. Significant estimates are also used in determining the recoverability and fair value of property and equipment, goodwill, and intangible assets.

Stock Split:

On January 21, 2021, the Company effected a stock split of its outstanding common stock pursuant to which the 100 outstanding shares were split into 1,380,601.11 shares each, for a total of 138,860,103 shares of outstanding common stock. As a result, all amounts relating to share and per share amounts have been retroactively adjusted to reflect this stock split.

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Initial Public ~~Offerin~~g:Offering

On February 2, 2021, the Company completed its initial public offering (“IPO”) in which the Company’s stockholders sold 7,250,000 shares of its common stock at a public offering price of $13 per share. In conjunction with the IPO, the Company’s board of directors also approved a reorganization of the Company through merging Home Point Capital LP (“HPLP”) with and into the Company, with the Company as the surviving entity. As a secondary offering, there were 0 proceeds to the Company from the sale of the shares being sold by the selling stockholders and all related expenses for the IPO were recorded in General and administrative expenses. ~~Following~~Upon the completion of the IPO, investment entities directly or indirectly managed by Stone

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Point Capital LLC, which are referred to as the Trident Stockholders, beneficially owned approximately 92% of the voting power of the Company’s common stock.

~~COVID-19 Pandemic Update~~: While the financial markets have demonstrated volatility due to the economic impacts of COVID-19, the impact to the Company has been comprised of increased demand, resulting in record levels of Origination volume. Another area of impact is the result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020, in response to the pandemic. The CARES Act allows borrowers with federally backed loans to request a temporary mortgage forbearance. In addition, in February 2021, the federal government announced an additional extension of the eligible forbearance period of three to six months depending on loan type. The CARES Act imposes several new compliance obligations on mortgage servicing activities, including, but not limited to mandatory forbearance offerings, altered credit reporting obligations, and moratoriums on foreclosure actions and late fee assessments. As of March 31, 2021, approximately 10,000 loans, or 2.4% of the loans in our MSR Servicing Portfolio had elected the forbearance option. Of the 2.4% of the loans in our MSR Servicing Portfolio that had elected the forbearance option as of March 31, 2021, approximately 10% remained current on their March 31, 2021 payments. As a result of the CARES Act forbearance requirements, there has been increases in delinquencies in the MSR Servicing Portfolio and the Company is monitoring delinquencies through the expiration of the applicable CARES Act programs. While the Company has not experienced a material adverse effect on its results of operations, financial position, or liquidity due to COVID-19, it is difficult to predict what the ongoing impact of the pandemic will be on the economy, the Company’s customers or its business. If the pandemic continues, it may have an adverse effect on the Company’s results of future operations, financial position, and liquidity during the remainder of fiscal year 2021.

Summary of Significant Accounting Policies

Mortgage loans held for sale are accounted for using the fair value option. Therefore, mortgage loans originated and intended for sale in the secondary market are reflected at fair value. Changes in the fair value are recognized in current period earnings in Gain on loans, net, within the unaudited condensed consolidated statements of operations. Refer to Note 3 – Mortgage Loans Held for ~~Sale.~~Sale.

Mortgage servicing rights are recognized as assets on the condensed consolidated balance sheets when loans are sold and the associated servicing rights are retained. The Company maintains one class of MSR asset and has elected the fair value option. The Company determines the fair value of mortgage servicing rights by estimating the fair value of the future cash flows associated with the mortgage loans being serviced. Key economic assumptions used in measuring the fair value of mortgage servicing rights include, but are not limited to, prepayment speeds, discount rates, delinquencies, and cost to service. The assumptions used in the valuation model are validated on a periodic basis. The Company obtains valuations from an independent third party on a quarterly basis and records an adjustment based on this third-party valuation.

Changes in the fair value are recognized in Change in fair value of mortgage servicing rights, net on the Company's unaudited condensed consolidated statements of operations. Purchased mortgage servicing rights are recorded at the fair value which often is the purchase price at the date of purchase. Refer to Note 4 – Mortgage Servicing ~~Rights.~~Rights.

Derivative financial instruments, including economic hedging activities, are recorded at fair value as either Derivative assets or in Other liabilities on the condensed consolidated balance sheets on a gross basis. The Company has accounted for its derivative instruments as non-designated hedge instruments and uses the derivative instruments to manage risk. The Company’s derivative instruments include, but are not limited to, forward mortgage-backed securities sales commitments, interest rate lock commitments, and other derivative instruments entered into to economically hedge fluctuations in MSRs’ fair value. The impact of the Company’s Derivative assets is reported in Change in fair value of derivative assets on the unaudited condensed consolidated statements of cash flows and the impact of the Company’s derivative liabilities is reported in Increase in other liabilities on the unaudited condensed consolidated statements of cash flows. The Company records derivative assets and liabilities and related cash margin on a gross basis, even when a legally enforceable master netting arrangement exists between the Company and the derivative counterparty. Refer to Note 5 – Derivative Financial ~~Instruments.~~Instruments.

Forward mortgage-backed securities (“MBS”) sale commitments that have not settled are considered derivative financial instruments and are recognized at fair value. These forward commitments will be fulfilled with loans not yet sold or securitized, new originations, and purchases. The forward commitments allow the Company to reduce the risk related to market price volatility. These derivatives are not designated as hedging instruments. Gain or loss on derivatives is recorded in Gain on loans, net in the unaudited condensed consolidated statements of operations.

Interest rate lock commitments (“IRLCs”) represent an agreement to extend credit to a mortgage loan applicant, or an agreement to purchase a loan from a third-party originator, whereby the interest rate on the loan is set prior to funding. The loan commitment binds the Company (subject to the loan approval process) to fund the loan at the specified rate, regardless of whether interest rates have changed between the commitment date and the loan funding date. As such, outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of the commitment through the loan funding date or expiration date. The loan commitments generally range between 30 and 90 days; however, the borrower is not obligated to obtain the loan. The Company is subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs. Forward MBS sale commitments or whole loans and options on forward contracts are used to manage the interest rate and price risk. These derivatives are not designated as hedging instruments. Historical

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commitment-to-closing ratios are considered to estimate the quantity of mortgage loans that will fund within the terms of the IRLCs. Change in fair value of IRLC derivatives is recorded in Gain on loans, net in the unaudited condensed consolidated statements of operations.

Mortgage servicing rights hedges are accounted for at fair value. MSRs are subject to substantial interest rate risk as the mortgage notes underlying the servicing rights permit the borrowers to prepay the loans. Therefore, the value of MSRs generally tend to diminish in periods of declining interest rates as prepayments increase and increase in periods of rising interest rates as prepayments decrease. Although the level of interest rates is a key driver of prepayment activity, there are other factors that influence prepayments, including home prices, underwriting standards, and product characteristics.

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The Company manages the impact that the volatility associated with changes in fair value of its MSRs has on its earnings with a variety of derivative instruments. The amount and composition of derivatives used to economically hedge the value of MSRs will depend on the Company's exposure to loss of value on the MSRs, the expected cost of the derivatives, expected liquidity needs, and the expected increase to earnings generated by the origination of new loans resulting from the decline in interest rates. This serves as a business hedge of the MSRs, providing a benefit when increased borrower refinancing activity results in higher loan origination volumes, which would partially offset declines in the value of the MSRs thereby reducing the need to use derivatives. The benefit of this business hedge depends on the decline in interest rates required to create an incentive for borrowers to refinance their mortgage loans and lower their interest rates; however, this benefit may not be realized under certain circumstances regardless of the change in interest rates. The change in fair value of MSR hedges is recorded in Change in fair value of mortgage servicing rights, net in the unaudited condensed consolidated statements of operations.

Equity Method Investments are business entities, which the Company does not have control of, but has the ability to exercise significant influence over operating and financial policies and are accounted for using the equity method. The Company evaluates its equity method investments for impairment whenever an event or change in circumstances occurs that may have a significant adverse impact on the carrying value of the investment. If a loss in value has occurred that is deemed to be other-than-temporary, an impairment loss is recorded. The Company recognizes investments in equity method investments initially at cost and are adjusted for HPC’s share of earnings or losses, contributions or distributions. Equity method investments are reported on the consolidated balance sheets in Other assets. As of September 30, 2021, Longbridge Financial, LLC (“Longbridge”) was the Company’s only significant equity method investment, of which the Company owned 49.7 percent of the outstanding equity securities. The following presents condensed financial information of Longbridge (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Total revenue	$	20,134	$	114,064	$	210,752	$	240,739
Net (loss) income	(1,435)		15,962		33,499		28,901
Net (loss) income attributable to the Company	(713)		7,933		16,649		14,364

Earnings per share (“EPS”) is calculated and presented in the unaudited condensed consolidated financial statements for both basic and diluted earnings per share. Basic EPS excludes all dilutive common stock equivalents and is based on the weighted average number of common shares outstanding during the period. There were ~~138.9~~139.1 million and ~~127.4~~138.8 million weighted average shares outstanding for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and 139.2 million and 135.1 million weighted average shares outstanding for the nine months ended September 30, 2021 and 2020, respectively. Diluted EPS, as calculated using the treasury stock method, reflects the potential dilution that would occur if the Company’s dilutive outstanding stock options and stock awards were issued. For the three months ended ~~March 31,~~September 30, 2021 and 2020, 140.0 million and 139.2 million weighted average shares were outstanding on a fully diluted basis. For the nine months ended September 30, 2021 and 2020, 139.7 million and 135.5 million shares ~~would be~~were outstanding on a fully-diluted basis. ~~For the three months ended March 31, 2020, 103,229 shares were excluded from the computation of diluted (loss) per share due to their anti-dilutive effect.~~

~~Recently Adopted Accounting Standards~~

~~Accounting Standards Update (“ASU”) 2019-13,~~ ~~Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~ (ASU 2019-13), provides final guidance that eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. This amendment is effective for annual periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020, and there was no impact to the unaudited condensed consolidated financial statements.

Accounting Standards Issued but Not Yet Adopted

ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, eliminates particular exceptions related to the method for intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects on the accounting for income taxes. This amendment is effective for annual periods beginning after December 15, 2021. This will be effective for the Company beginning January 1, 2022. The Company ~~is currently assessing the potential~~does not anticipate a material impact as a result of the adoption of this standard ~~will have~~ on its condensed consolidated financial statements.

ASU 2021-01, Reference Rate Reform (Topic 848) Scope, clarifies some of the guidance of the Financial Accounting Standards Board (“FASB” or “the Board”) as part of the Board’s monitoring of global reference rate reform activities. The ASU permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets. The Company is in the process of reviewing its derivative and hedging instruments that utilize LIBOR (as defined below) as the reference rate and is currently evaluating the potential impact that the adoption of this ASU will have on its consolidated financial statements.

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ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Subject to meeting certain criteria, the new guidance provides optional expedients and exceptions to applying contract modification accounting under existing U.S. GAAP, to address the expected phase out of the London Inter-bank Offered Rate (“LIBOR”) by the end of 2021. This guidance is effective upon issuance and allows application to contract changes as early as January 1, 2020. The Company is in the process of reviewing its funding facilities and financing facilities that utilize LIBOR as the reference rate and is currently evaluating the potential impact that the adoption of this ASU will have on its condensed consolidated financial statements.

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Note 3 – Mortgage Loans Held for Sale

The Company sells its originated mortgage loans into the secondary market. The Company may retain the right to service some of these loans upon sale through ownership of servicing rights. The following presents mortgage loans held for sale at fair value, by type, as of ~~March 31,~~September 30, 2021 (in thousands):


		March 31, 2021							September 30, 2021
		Unpaid Principal		Fair Value Adjustment		Total Fair Value			Unpaid Principal		Fair Value Adjustment		Total Fair Value
Conventional(1)	Conventional(1)	$	3,756,193	$	38,519	$	3,794,712	Conventional(1)	$	5,646,674	$	111,266	$	5,757,940
Government(2)	Government(2)	1,367,552		28,805		1,396,357		Government(2)	897,033		24,942		921,975
Reverse(3)		275		(83)		192
Other(3)								Other(3)	364		(83)		281
Total	Total	$	5,124,020	$	67,241	$	5,191,261	Total	$	6,544,071	$	136,125	$	6,680,196

(1)Conventional ~~includes~~is comprised of FNMA and FHLMC mortgage loans.

(2)Government ~~includes~~is comprised of GNMA mortgage loans (including Federal Housing Administration, Department of Veterans Affairs, and United States Department of Agriculture).

(3)Other is comprised of home equity lines of credit (“HELOCs”) and Reverse ~~loan presented in Mortgage loans held for sale on the condensed consolidated balance sheets as a result of a repurchase~~loans.

The Company had ~~$58.0~~$26.8 million of unpaid principal balances, which had a fair value of ~~$57.1~~$22.9 million, of mortgage loans held for sale on nonaccrual status at ~~March 31,~~September 30, 2021.

The following presents mortgage loans held for sale at fair value, by type, as of December 31, 2020 (in thousands):


		December 31, 2020							December 31, 2020
		Unpaid Principal		Fair Value Adjustment		Total Fair Value			Unpaid Principal		Fair Value Adjustment		Total Fair Value
Conventional(1)	Conventional(1)	$	2,183,480	$	91,939	$	2,275,419	Conventional(1)	$	2,183,480	$	91,939	$	2,275,419
Government(2)	Government(2)	974,908		51,175		1,026,083		Government(2)	974,908		51,175		1,026,083
Reverse(3)		275		(83)		192
Other(3)								Other(3)	275		(83)		192
Total	Total	$	3,158,663	$	143,031	$	3,301,694	Total	$	3,158,663	$	143,031	$	3,301,694

(1)Conventional ~~includes~~is comprised of FNMA and FHLMC mortgage loans.

(2)Government ~~includes~~is comprised of GNMA mortgage loans (including Federal Housing Administration, Department of Veterans Affairs and United States Department of Agriculture).

(3)Other is comprised of HELOCs and Reverse ~~loan presented in Mortgage loans held for sale on the condensed consolidated balance sheets as a result of a repurchase~~loans.

The Company had $26.3 million of unpaid principal balances, which had a fair value of $23.5 million, of mortgage loans held for sale on nonaccrual status at December 31, 2020.

The following presents a reconciliation of the changes in mortgage loans held for sale to the amounts presented on the unaudited condensed consolidated statements of cash flows as of ~~March 31,~~September 30, 2021 and 2020 (in thousands):


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Fair value at beginning of period	Fair value at beginning of period	$	3,301,694	$	1,554,230	Fair value at beginning of period	$	5,412,452	$	1,904,174	$	3,301,694	$	1,554,230
Mortgage loans originated and purchased	Mortgage loans originated and purchased	31,055,708		8,344,755		Mortgage loans originated and purchased	21,546,957		18,289,697		79,464,436		38,534,747
Proceeds on sales and payments received	Proceeds on sales and payments received	(29,001,344)		(8,311,842)		Proceeds on sales and payments received	(20,208,378)		(17,565,561)		(75,786,570)		(37,869,214)
Change in fair value	Change in fair value	(75,790)		35,040		Change in fair value	3,727		17,074		(6,906)		54,709
(Loss) gain on loans(1)	(Loss) gain on loans(1)	(89,007)		110,201		(Loss) gain on loans(1)	(74,562)		(363,549)		(292,458)		7,363
Fair value at end of period	Fair value at end of period	$	5,191,261	$	1,732,384	Fair value at end of period	$	6,680,196	$	2,281,835	$	6,680,196	$	2,281,835

(1)This line as presented on the condensed consolidated statements of cash flows excludes ~~OMSR~~originated mortgage servicing rights and MSR hedging.

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Note 4 – Mortgage Servicing Rights

The Company sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold.

The MSRs give the Company the contractual right to receive service fees and other remuneration in exchange for performing loan servicing functions on behalf of investors in mortgage loans and securities. Upon sale, an MSR asset is capitalized, which represents the current fair value of the future net cash flows that are expected to be realized for performing servicing activities.

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The following presents an analysis of the changes in capitalized mortgage servicing rights ~~as of March 31,~~for the three and nine months ended September 30, 2021 and 2020 (in thousands):


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Balance at beginning of period	Balance at beginning of period	$	748,457	$	575,035	Balance at beginning of period	$	1,267,253	$	499,782	$	748,457	$	575,035
MSRs originated	MSRs originated	294,357		94,972		MSRs originated	212,368		155,623		776,174		352,118
MSRs purchased	MSRs purchased	4,817		0		MSRs purchased	14,326		—		33,027		—
MSRs sold						MSRs sold	(103,017)		—		(103,017)		—
Changes in valuation model inputs	Changes in valuation model inputs	197,896		(157,984)		Changes in valuation model inputs	85,150		(17,210)		188,334		(211,668)
Change due to cash payoffs and principal amortization	Change due to cash payoffs and principal amortization	(89,170)		(36,152)		Change due to cash payoffs and principal amortization	(73,940)		(54,932)		(240,835)		(132,222)
Balance at end of period	Balance at end of period	$	1,156,357	$	475,871	Balance at end of period	$	1,402,140	$	583,263	$	1,402,140	$	583,263

The following presents the Company’s total capitalized mortgage servicing portfolio (based on the ~~unpaid principal balance (“UPB”)~~UPB of the underlying mortgage loans) as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):


		March 31, 2021			December 31, 2020				September 30, 2021			December 31, 2020
Ginnie Mae	Ginnie Mae	$	25,287,243		$	26,206,612		Ginnie Mae	$	17,019,501		$	26,206,612
Fannie Mae	Fannie Mae	45,670,884			36,395,373			Fannie Mae	63,688,774			36,395,373
Freddie Mac	Freddie Mac	34,815,557			25,621,697			Freddie Mac	45,085,793			25,621,697
Other	Other	47,688			53,567			Other	38,218			53,567
Total mortgage servicing portfolio	Total mortgage servicing portfolio	$	105,821,372		$	88,277,249		Total mortgage servicing portfolio	$	125,832,286		$	88,277,249

MSR balance	MSR balance	$	1,156,357		$	748,457		MSR balance	$	1,402,140		$	748,457
MSR balance as % of unpaid mortgage principal balance	MSR balance as % of unpaid mortgage principal balance	1.09		%	0.85		%	MSR balance as % of unpaid mortgage principal balance	1.11		%	0.85		%

The following presents the key weighted average assumptions used in determining the fair value of the Company’s MSRs as of ~~March 31,~~September 30, 2021 and December 31, 2020:


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Discount rate	Discount rate	9.37	%	9.47	%	Discount rate	8.89	%	9.47	%
Prepayment speeds	Prepayment speeds	10.23	%	14.43	%	Prepayment speeds	9.54	%	14.43	%

The key assumptions used to estimate the fair value of the MSRs are discount rate and the Conditional Prepayment Rate (“CPR”). Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase. Decreases in prepayment speeds generally have a positive effect on the value of the MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease. Increases in the discount rate result in a lower MSR value and decreases in the discount rate result in a higher MSR value.

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The following table illustrates the hypothetical effect on the fair value of the Company’s MSR portfolio when applying unfavorable discount rate and prepayment speeds at two different data points as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):

Discount Rate Prepayment Speeds
100 BPS
Adverse Change
200 BPS
Adverse Change
10% Adverse
Change
20% Adverse
Change
March 31, 2021
HPF Portfolio $ (47,935) $ (91,953) $ (46,751) $ (90,842)
HPMAC Portfolio (295) (566) (235) (454)
December 31, 2020
HPF Portfolio $ (26,327) $ (50,702) $ (44,961) $ (85,383)
HPMAC Portfolio (27) (52) (53) (101)


	Discount Rate				Prepayment Speeds
	100 BPS Adverse Change		200 BPS Adverse Change		10% Adverse Change		20% Adverse Change
September 30, 2021	$	(59,159)	$	(113,493)	$	(56,936)	$	(109,450)
December 31, 2020	$	(26,354)	$	(50,754)	$	(45,014)	$	(85,484)

MSR uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties. Refer to Note 12 – Fair Value Measurements, for further discussions on the key assumptions used to estimate the fair value of the MSRs.

The following presents information related to loans serviced ~~for which the Company has continuing involvement through servicing agreements~~ as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):

March 31,
2021 December 31,
2020
Total unpaid principal balance $ 110,064,444 $ 91,590,114
Loans 30-89 days delinquent 899,244 1,353,029
Loans delinquent 90 or more days or in foreclosure(1)
2,722,036 3,641,183

~~(1)~~Of the $2.7 billion and $3.6 billion of loans delinquent 90 days or more, approximately $1.7 billion and $2.5 billion are in forbearance primarily related to COVID-19 forbearance provided under the CARES Act as of March 31, 2021 and December 31, 2020, respectively.


	September 30, 2021		December 31, 2020
Total unpaid principal balance	$	131,405,675	$	91,590,114
Loans 30-89 days delinquent	816,670		1,353,029
Loans delinquent 90 or more days or in foreclosure	1,084,419		3,641,183

The following presents components of Loan servicing fees as reported in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Contractual servicing fees	Contractual servicing fees	$	67,483	$	42,905	Contractual servicing fees	$	84,271	$	49,387	$	229,369	$	135,813
Late fees	Late fees	1,142		2,065		Late fees	1,458		1,313		3,923		4,564
Other	Other	1,713		(1,724)		Other	6,102		(2,350)		14,461		(6,473)
Loan servicing fees	Loan servicing fees	$	70,338	$	43,246	Loan servicing fees	$	91,831	$	48,350	$	247,753	$	133,904

The Company held ~~$25.6~~$25.5 million and $20.6 million of escrow funds within Other liabilities in the condensed consolidated balance sheets for its customers for which it services mortgage loans as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

On September 2, 2021, HPF completed the sale of MSRs relating to certain single family mortgage loans serviced for Ginnie Mae with an aggregate unpaid principal balance of approximately $10.7 billion. The total net proceed for the sale of MSRs was approximately $121.6 million with certain customary holdbacks and adjustments and resulted in a gain of $7.4 million. The sale represented approximately 8.6% of HPF’s total mortgage servicing portfolio as of June 30, 2021 and approximately 40.6% percent of HPF’s total Ginnie Mae mortgage servicing portfolio as of June 30, 2021. Ginnie Mae consented to the transfer of the MSRs.

~~Tabl~~eTable of Contents

Note 5 – Derivative Financial Instruments

The Company’s derivative instruments include but are not limited to forward mortgage-backed securities sales commitments, interest rate lock commitments, and other derivative instruments entered into to hedge MSRs’ fluctuations in fair value. The Company records derivative assets and liabilities and related cash margin on a gross basis, even when a legally enforceable master netting arrangement exists between the Company and the derivative counterparty.

The following presents the outstanding notional balances for derivative instruments not designated as hedging instruments ~~for the three months ended March 31,~~as of September 30, 2021 and 2020 (in thousands):


		Three Months Ended March 31, 2021									September 30, 2021
		Notional Value		Derivative Asset		Derivative Liability		Recorded Gain/(Loss)			Notional Value		Derivative Asset		Derivative Liability		Recorded Gain/(Loss)
Mortgage-backed securities forward trades	Mortgage-backed securities forward trades	$	13,274,522	$	123,084	$	2,334	$	180,554	Mortgage-backed securities forward trades	$	11,113,975	$	54,504	$	3,304	$	51,725
Interest rate lock commitments	Interest rate lock commitments	14,423,428		20,193		0		(239,588)		Interest rate lock commitments	10,002,894		38,315		17,748		(36,404)
Hedging mortgage servicing rights	Hedging mortgage servicing rights	5,409,000		137		39,763		(92,042)		Hedging mortgage servicing rights	7,497,000		254		42,145		(49,323)
Margin	Margin			43,495		222,243				Margin			71,529		79,220
Total	Total			$	186,909	$	264,340			Total			$	164,602	$	142,417
Cash placed with counterparties, net	Cash placed with counterparties, net			$	178,748					Cash placed with counterparties, net					$	7,691


		Three Months Ended March 31, 2020									September 30, 2020
		Notional Value		Derivative Asset		Derivative Liability		Recorded Gain/(Loss)			Notional Value		Derivative Asset		Derivative Liability		Recorded Gain/(Loss)
Mortgage-backed securities forward trades	Mortgage-backed securities forward trades	$	4,498,053	$	843	$	95,965	$	(90,934)	Mortgage-backed securities forward trades	$	9,637,702	$	2,793	$	23,586	$	(8,444)
Interest rate lock commitments	Interest rate lock commitments	6,719,412		131,962		0		106,774		Interest rate lock commitments	15,103,027		272,837		—		26,082
Hedging mortgage servicing rights	Hedging mortgage servicing rights	5,595,000		28,929		0		94,661		Hedging mortgage servicing rights	4,306,000		8,730		—		2,161
Margin	Margin			119,503		537				Margin			30,642		208
Total	Total			$	281,237	$	96,502			Total			$	315,002	$	23,794
Cash held with counterparties, net				$	118,966
Cash held from counterparties, net										Cash held from counterparties, net			$	30,434

The following presents a summary of derivative assets and liabilities and related netting amounts as of ~~March 31,~~September 30, 2021 (in thousands):


		March 31, 2021							September 30, 2021
		Gross Amount of Recognized Assets (liabilities)		Gross Offset		Net Assets (Liabilities)			Gross Amount of Recognized Assets (liabilities)		Gross Offset		Net Assets (Liabilities)
Balance at March 31, 2021
Balance at September 30, 2021								Balance at September 30, 2021
Derivatives subject to master netting agreements:	Derivatives subject to master netting agreements:							Derivatives subject to master netting agreements:
Assets:	Assets:							Assets:
Mortgage-backed securities forward trades	Mortgage-backed securities forward trades	$	123,084	$	(91,333)	$	31,751	Mortgage-backed securities forward trades	$	54,504	$	(53,680)	$	824
Hedging mortgage servicing rights	Hedging mortgage servicing rights	137		(137)		0		Hedging mortgage servicing rights	254		—		254
Margin (cash placed with counterparties)	Margin (cash placed with counterparties)	43,495		(22,659)		20,836		Margin (cash placed with counterparties)	71,529		(34,776)		36,753
Liabilities:	Liabilities:							Liabilities:
Mortgage-backed securities forward trades	Mortgage-backed securities forward trades	(2,334)		2,334		0		Mortgage-backed securities forward trades	(3,304)		3,665		361
Hedging mortgage servicing rights	Hedging mortgage servicing rights	(39,763)		22,796		(16,967)		Hedging mortgage servicing rights	(42,145)		34,776		(7,369)
Margin (cash placed with counterparties)		(222,243)		88,999		(133,244)
Margin (cash held from counterparties)								Margin (cash held from counterparties)	(79,220)		50,015		(29,205)

Derivatives not subject to master netting agreements:	Derivatives not subject to master netting agreements:							Derivatives not subject to master netting agreements:
Assets:	Assets:							Assets:
Interest rate lock commitments	Interest rate lock commitments	20,193		—		20,193		Interest rate lock commitments	38,315		—		38,315
Hedging mortgage servicing rights		0		—		0

Liabilities:								Liabilities:
Interest rate lock commitments								Interest rate lock commitments	(17,748)		—		(17,748)

Total derivatives	Total derivatives							Total derivatives
Assets	Assets	$	186,909	$	(114,129)	$	72,780	Assets	$	164,602	$	(88,456)	$	76,146
Liabilities	Liabilities	$	(264,340)	$	114,129	$	(150,211)	Liabilities	$	(142,417)	$	88,456	$	(53,961)

1112

~~Tabl~~eTable of Contents

The following presents a summary of derivative assets and liabilities and related netting amounts as of December 31, 2020 (in thousands):


		December 31, 2020							December 31, 2020
		Gross Amount of Recognized Assets (liabilities)		Gross Offset		Net Assets (Liabilities)			Gross Amount of Recognized Assets (liabilities)		Gross Offset		Net Assets (Liabilities)
Balance at December 31, 2020	Balance at December 31, 2020							Balance at December 31, 2020
Derivatives subject to master netting agreements:	Derivatives subject to master netting agreements:							Derivatives subject to master netting agreements:
Assets:	Assets:							Assets:
Mortgage-backed securities forward trades	Mortgage-backed securities forward trades	$	1,320	$	0	$	1,320	Mortgage-backed securities forward trades	$	1,320	$	—	$	1,320
Hedging mortgage servicing rights	Hedging mortgage servicing rights	4,419		0		4,419		Hedging mortgage servicing rights	4,419		—		4,419
Margin (cash placed with counterparties)	Margin (cash placed with counterparties)	58,290		(45,427)		12,863		Margin (cash placed with counterparties)	58,290		(45,427)		12,863
Liabilities:	Liabilities:							Liabilities:
Mortgage-backed securities forward trades	Mortgage-backed securities forward trades	(61,124)		45,595		(15,529)		Mortgage-backed securities forward trades	(61,124)		45,595		(15,529)
Hedging mortgage servicing rights		0		0		0
Margin (cash held with counterparties)		0		(168)		(168)

Margin (cash held from counterparties)								Margin (cash held from counterparties)	—		(168)		(168)

Derivatives not subject to master netting agreements:	Derivatives not subject to master netting agreements:							Derivatives not subject to master netting agreements:
Assets:	Assets:							Assets:
Interest rate lock commitments	Interest rate lock commitments	257,785		—		257,785		Interest rate lock commitments	257,785		—		257,785
Hedging mortgage servicing rights	Hedging mortgage servicing rights	12,509		—		12,509		Hedging mortgage servicing rights	12,509		—		12,509
Total derivatives	Total derivatives							Total derivatives
Assets	Assets	$	334,323	$	(45,427)	$	288,896	Assets	$	334,323	$	(45,427)	$	288,896
Liabilities	Liabilities	$	(61,124)	$	45,427	$	(15,697)	Liabilities	$	(61,124)	$	45,427	$	(15,697)

For information on the determination of fair value, refer to Note 12 – Fair Value ~~Measurements.~~Measurements.

Note 6 – Accounts Receivable, net

The following presents principal categories of Accounts receivable, net as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):


		As of March 31, 2021		As of December 31, 2020			As of September 30, 2021		As of December 31, 2020
Servicing advance receivable	Servicing advance receivable	$	79,849	$	97,893	Servicing advance receivable	$	50,367	$	97,893
Servicing advance reserves	Servicing advance reserves	(8,749)		(8,380)		Servicing advance reserves	(6,729)		(8,380)
Servicing receivable-general	Servicing receivable-general	4,033		2,660		Servicing receivable-general	2,780		2,660
Income tax receivable		47,877		54,347
Current income tax receivable						Current income tax receivable	20,784		54,347
Interest on servicing deposits	Interest on servicing deposits	188		165		Interest on servicing deposits	482		165
Pair off receivable	Pair off receivable	158,938		0		Pair off receivable	22,319		—
Agency receivables, net						Agency receivables, net	10,414		—
Warehouse receivable						Warehouse receivable	9,855		—
Other	Other	8,419		6,160		Other	7,266		6,160
Accounts receivable, net	Accounts receivable, net	$	290,555	$	152,845	Accounts receivable, net	$	117,538	$	152,845

~~Servicing advances are an important component~~As part of ~~the business and are amounts that the Company, as servicer, is required to advance to, or on behalf of,~~managing the Company’s servicing clients, if such amounts are not received from borrowers. These amounts include principal and interest payments, property taxes and insurance premiums, and amounts to maintain, repair, and market real estate properties on behalf of the Company’s servicing clients. In general, servicing advances, have the highest reimbursement priority such that the Company is entitled to repayment of the advances from the loan or property liquidation proceeds before most other claims on these proceeds. However, not all advances are collectable and an allowance for servicing advance reserves is ~~recognized. This allowance represents~~recognized with management’s estimate of current expected losses and is maintained at a level that management considers adequate based upon continuing assessments of collectability, historical loss experience, current trends, and ~~historical loss experience.~~reasonable and supportable forecasts.

1213

~~Tabl~~eTable of Contents

The following presents changes to the servicing advance reserve for the three months and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Servicing advance reserve, at beginning of period	Servicing advance reserve, at beginning of period	$	(8,380)	$	(4,308)	Servicing advance reserve, at beginning of period	$	(9,098)	$	(6,549)	$	(8,380)	$	(4,308)
Additions		(1,343)		(1,976)
Additions, net of adjustments						Additions, net of adjustments	1,500		(1,487)		(724)		(6,419)
Charge-offs	Charge-offs	974		911		Charge-offs	869		773		2,375		3,464
Servicing advance reserve, at end of period	Servicing advance reserve, at end of period	$	(8,749)	$	(5,373)	Servicing advance reserve, at end of period	$	(6,729)	$	(7,263)	$	(6,729)	$	(7,263)

Note 7 – Warehouse Lines of Credit

The Company maintains mortgage warehouse lines of credit arrangements with various financial institutions, primarily to fund the origination of mortgage loans. The Company held mortgage funding arrangements with ~~twelve~~11 separate financial institutions with a total maximum borrowing capacity of ~~$6.4~~$7.5 billion at ~~March 31,~~September 30, 2021 and $4.2 billion at December 31, 2020. As of ~~March 31,~~September 30, 2021, the Company had ~~$1.5~~$1.9 billion of unused capacity under its warehouse lines of credit.

The following presents the amounts outstanding as of ~~March 31,~~September 30, 2021 and December 31, 2020 and maturity dates under the Company’s various mortgage funding arrangements:

Maturity Date

Balance at March 31, 2021

Balance at December 31, 2020

Maturity Date

Balance at September 30, 2021

Balance at December 31, 2020

$1,000M Warehouse Facility

May 2021

914.4

million

466.0

million

$600M Warehouse Facility

August 2021

543.7

million

421.9

million

$300M Warehouse Facility

September 2021

250.3

million

223.9

million

$450M Warehouse Facility

September 2022

324.1

million

223.9

million

$500M Warehouse Facility

September 2021

441.4

million

401.2

million

$500M Warehouse Facility

September 2022

418.6

million

401.2

million

$500M Warehouse Facility

September 2021

473.4

million

437.8

million

$500M Warehouse Facility

September 2022

441.2

million

437.8

million

$500M Warehouse Facility

January 2022

445.4

million

232.1

million

$500M Warehouse Facility

January 2022

366.2

million

232.1

million

$500M Warehouse Facility

January 2022

437.9

million

$500M Warehouse Facility

January 2022

449.3

million

—

million

$1,200M Warehouse Facility

February 2022

675.8

million

459.9

million

$1.2B Warehouse Facility

February 2022

706.4

million

459.9

million

$1.0B Warehouse Facility

August 2022

596.8

million

421.9

million

$500M Warehouse Facility

March 2023

14.2

million

$500M Warehouse Facility

March 2023

433.3

million

—

million

$1.5B Warehouse Facility(1)

May 2023

1,190.7

million

466.0

million

$550M Warehouse Facility

Evergreen

465.1

million

171.0

million

$550M Warehouse Facility

Evergreen

400.2

million

171.0

million

$88.5M Warehouse Facility

Evergreen

39.3

million

40.6

million

$88.5M Warehouse Facility

Evergreen

12.3

million

40.6

million

Gestation

Evergreen

146.7

million

151.0

million

Gestation

Evergreen

245.8

million

151.0

million

Early Funding(2)

723.7

million

—

million

Total warehouse lines of credit

4,847.4

million

3,005.4

million

Total warehouse lines of credit

6,308.5

million

3,005.4

million

(1) On July 21, 2021, borrowing capacity on this facility temporarily increased to $1.5 billion through September 15, 2021, and such temporary increase was then subsequently extended through January 15, 2022.

(2) In addition to warehouse facilities, the Company is an approved lender for early funding facilities with Fannie Mae through its As Soon As Pooled (“ASAP”) program and Freddie Mac through its Early Funding (“EF”) program. From time to time, the Company enter into agreements to deliver certified pools consisting of mortgage loans securitized by Fannie Mae or Freddie Mac, as applicable, and receive funding in exchange for such pools. All mortgage loans delivered under these programs must adhere to a set of eligibility criteria. Early funding programs with Fannie Mae and Freddie Mac do not have stated expiration dates or maximum capacities.

The Company’s warehouse facilities’ variable interest rates are calculated using a base rate generally tied to 1-month LIBOR plus applicable interest rate margins, with varying interest rate floors. ~~The weighted average interest rate for the Company’s warehouse facilities was 2.46% as of March 31, 2021 and 2.75% as of December 31, 2020.~~ The Company’s borrowings are 100% secured by the fair value of the mortgage loans held for sale at fair value.

The Company’s warehouse facilities generally require the maintenance of certain financial covenants relating to net worth, profitability, liquidity, and ratio of indebtedness to net worth, among others. As of ~~March 31,~~September 30, 2021, the Company was in compliance with all warehouse facility covenants.

The Company continually evaluates its warehouse capacity in relation to expected financing needs.

1314

~~Tabl~~eTable of Contents

Note 8 – Term Debt and Other Borrowings, net

The Company maintains term debt and other borrowings as follows:

Maturity Date

Collateral

Balance at March 31, 2021

Balance at December 31, 2020

Maturity Date

Collateral

Balance at September 30, 2021

Balance at December 31, 2020

$500M MSR Facility

January 2023

Mortgage Servicing Rights

346.6

million

411.6

million

$1.0B MSR Facility

May 2025

Mortgage Servicing Rights

525.0

million

411.6

million

$550M Senior Notes

February 2026

550.0

million

$550M Senior Notes

February 2026

Unsecured

550.0

million

—

million

$85M Servicing Advance Facility

May 2021

Servicing Advances

1.0

million

43.2

million

$115M Servicing Advance Facility(1)

May 2022

Servicing Advances

1.0

million

43.2

million

$10M Operating Line of Credit(2)

May 2021

Mortgage Loans

3.3

million

1.0

million

$10M Operating Line of Credit(2)

May 2022

Mortgage Loans

3.3

million

1.0

million

Total

900.9

million

455.8

million

Total

1,079.3

million

455.8

million

Debt issuance costs

(12.4)

million

(1.8)

million

Debt issuance costs

(13.5)

million

(1.8)

million

Term debt and other borrowings, net

888.4

million

454.0

million

Term debt and other borrowings, net

1,065.8

million

454.0

million

(1) Subsequent to September 30, 2021, the Servicing Advance Facility’s capacity was reduced to $90.0 million.

(2) Subsequent to September 30, 2021, the Operating Line of Credit’s capacity was increased to $35.0 million.

The Company maintains a ~~$500 million~~$1.0 billion MSR financing facility (the “MSR Facility”), which is comprised of ~~$450~~$650.0 million of committed capacity and ~~$50~~$350.0 million of uncommitted capacity and is collateralized by the Company’s FNMA, FHLMC, and GNMA mortgage servicing rights. In May 2021, the MSR Facility was increased from $500.0 million to $1.0 billion. Interest on the MSR Facility is based on 3-Month LIBOR plus the applicable margin with advance rates generally ranging from 62.5% to 72.5% of the value of the underlying mortgage servicing rights. The MSR Facility has a three-year revolving period ending on ~~January 31, 2022~~May 4, 2024 followed by a one-year period during which the balance drawn must be repaid and no further amounts may be drawn down, which ends on ~~January 31, 2023.~~May 20, 2025. The MSR Facility requires the maintenance of certain financial covenants relating to net worth, liquidity, and indebtedness of the Company. As of ~~March 31,~~September 30, 2021, the Company was in compliance with all ~~covenants.~~covenants under the MSR Facility.

OnIn January ~~19,~~of 2021, the Company issued ~~$550~~$550.0 million aggregate principal amount of its ~~5.00%~~5.0% Senior Notes due 2026 (the “Senior Notes”) in a private placement transaction. The Senior Notes are guaranteed on a senior unsecured basis by each of the Company’s wholly owned subsidiaries existing on the date of issuance, other than ~~Home Point Asset Management LLC~~HPAM and ~~Home Point Mortgage Acceptance Corporation.~~HPMAC. The Senior Notes bear interest at a rate of ~~5.00%~~5.0% per annum, payable semi-annually in arrears. The Senior Notes will mature on February 1, 2026. $269.7 million of the gross proceeds from the issuance of the Senior Notes was used to repay outstanding amounts under the Company’s $500 million MSR Facility, $269.3 million of the gross proceeds from the issuance was used to fund a distribution to the shareholders of the Company’s parent entity at the time, HPLP, and the remaining gross proceeds were used to pay costs related to the transaction.

The Indenture governing the Senior Notes contains covenants and restrictions that, among other things and subject to certain exceptions, limit the ability of the Company and its restricted subsidiaries to (i) incur certain additional debt or issue certain preferred shares; (ii) incur liens; (iii) make certain distributions, investments, and other restricted payments; (iv) engage in certain transactions with affiliates; and (v) merge or consolidate or sell, transfer, lease, or otherwise dispose of all or substantially all of their assets. The Indenture governing the Senior Notes does not include any financial maintenance covenants.

The Company has an ~~$85~~$115.0 million servicing advance facility which is collateralized by all of the Company’s servicing advances. The servicing advance facility’s capacity was increased from $85.0 million to $115.0 million in May 2021. The facility carries an interest rate of 1-month LIBOR plus a margin and an advance rate ranging from 85-95%. The servicing advance facility requires the maintenance of certain financial covenants relating to net worth, liquidity, and indebtedness of the Company. As of ~~March 31,~~September 30, 2021, the Company was in compliance with all ~~covenants.~~covenants under the servicing advance facility.

The Company also has a ~~$10~~$10.0 million operating line with an interest rate based on the Wall Street Journal prime rate.

As of ~~March 31,~~September 30, 2021, the Company had total unused capacity for its servicing advance facility and operating line of credit of ~~$61.3~~$37.9 million and $9.0 million, respectively.

~~The servicing advance facility and the operating line~~

Table of credit each has a maturity date of May 27, 2021. As of the date of these unaudited condensed consolidated financial statements were issued, the Company is in discussions with the lender to renew both facilities and the Company expects to execute a renewal prior to the maturity date.Contents

Note 9 – Commitments and Contingencies

Commitments to Extend Credit

The Company’s IRLCs expose the Company to market risk if interest rates change and the applicable loan is not economically hedged or committed to an investor. The Company is also exposed to credit loss if the applicable loan is originated and not sold to an investor and the customer does not perform. The collateral upon extension of credit typically consists of a first deed of trust in the mortgagor’s residential property. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon. Total commitments to originate loans were ~~$14.4~~$10.0 billion as of ~~March 31,~~September 30, 2021 and $16.0 billion as of December 31, 2020.

~~Table of~~ ~~Contents~~

Litigation

The Company is subject to various legal proceedings arising out of the ordinary course of business. There is a putative class action lawsuit alleging a single cause of action under the Real Estate Settlement Procedures Act (“RESPA”) for which the Company had accrued $2.0 million as of March 31, 2021. There were no current or pending claims against the Company which are expected to have a material impact on the Company's condensed consolidated balance sheets, statements of operations, or cash flows.

Regulatory Contingencies

The Company is subject to periodic audits and examinations, both formal and informal in nature, from various federal and state agencies, including those conducted as part of regulatory oversight of our mortgage origination, servicing, and financing activities. Such audits and examinations could result in additional actions, penalties, or fines by state or federal governmental bodies, regulators, or the courts with respect to our mortgage origination, servicing, and financing activities, which may be applicable generally to the mortgage industry or to the Company in particular. The Company did not pay any material penalties or fines during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 or 2020 and is not currently required to pay any such penalties or fines.

Note 10 – Regulatory Net Worth Requirements

The Company is subject to various regulatory capital requirements administered by the Department of Housing and Urban Development (“HUD”), which govern non-supervised, direct endorsement mortgagees. The Company is also subject to regulatory capital requirements administered by Ginnie Mae, Fannie Mae, and Freddie Mac, which govern issuers of Ginnie Mae, Fannie Mae, and Freddie Mac securities. Additionally, the Company is required to maintain minimum net worth requirements for many of the states in which it sells and services loans. Each state has its own minimum net worth requirement; these range from $0 to ~~$1,000,~~$1.0 million, depending on the state.

Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary remedial actions by regulators that, if undertaken, could (i) remove the Company’s ability to sell and service loans to, or on behalf of, the Agencies and (ii) have a direct material effect on the Company’s condensed consolidated financial statements. In accordance with the regulatory capital guidelines, the Company must meet specific quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Further, changes in regulatory and accounting standards, as well as the impact of future events on the Company’s results, may significantly affect the Company’s net worth adequacy.

The Company is subject to the following minimum net worth, minimum capital ratio, and minimum liquidity requirements established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac Seller/Servicers, and Ginnie Mae for single family issuers.

Minimum Net Worth

The minimum net worth requirement for Fannie Mae and Freddie Mac is defined as follows:

•Base Adjusted/Tangible Net Worth (as defined by HUD) of ~~$2,500~~$2.5 million plus 25 basis points of outstanding UPB for total loans serviced.

•Adjusted/Tangible Net Worth consists of total equity less goodwill, intangible assets, affiliate receivables, deferred tax assets and certain pledged assets.

The minimum net worth requirement for Ginnie Mae is defined as follows:

•Base Adjusted/Tangible Net Worth (as defined by HUD) of ~~$2,500~~$2.5 million plus 35 basis points of the issuer’s total single-family effective outstanding obligations.

•Adjusted/Tangible Net Worth consists of total equity less goodwill, intangible assets, affiliate receivables, deferred tax assets and certain pledged assets.

Minimum Capital Ratio

For Fannie Mae, Freddie Mac, and Ginnie Mae, the Company is also required to hold a ratio of Adjusted/Tangible Net Worth to Total Assets greater than 6%.

Table of Contents

Minimum Liquidity

The minimum liquidity requirement for Fannie Mae and Freddie Mac is defined as follows:

•3.5 basis points of total Agency servicing.

•Incremental 200 basis points of total nonperforming Agency, measured as 90 plus day delinquencies, servicing in excess of 6% of the total Agency servicing UPB.

~~Table of~~ ~~Contents~~

•Allowable assets for liquidity may include: cash and cash equivalents (unrestricted); available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of Government Sponsored Entities (“GSE”), US Treasury Obligations); and unused/available portion of committed servicing advance lines.

The minimum liquidity requirement for Ginnie Mae is defined as follows:

•Maintain liquid assets equal to the greater of ~~$1,000~~$1.0 million or 10 basis points of our outstanding single-family MBS.

The most restrictive of the minimum net worth and capital requirements require the Company to maintain a minimum adjusted net worth balance of ~~$276.3~~$322.2 million as of ~~March 31,~~September 30, 2021. As of ~~March 31,~~September 30, 2021, the Company was in compliance with this requirement.

The Company met all minimum net worth requirements to which it was subject as of ~~March 31,~~September 30, 2021.

The following presents the Company’s required and actual net worth amounts as of ~~March 31,~~September 30, 2021 (in thousands):


Home Point Financial Corporation	Home Point Financial Corporation					Home Point Financial Corporation
		Adjusted Net Worth		Net Worth Required			Adjusted Net Worth		Net Worth Required
HUD	HUD	$	1,243,055	$	2,500	HUD	$	1,185,943	$	2,500
Ginnie Mae	Ginnie Mae	$	1,243,055	$	102,149	Ginnie Mae	$	1,185,943	$	65,448
Fannie Mae	Fannie Mae	$	1,243,055	$	276,254	Fannie Mae	$	1,185,943	$	322,231
Freddie Mac	Freddie Mac	$	1,243,055	$	276,254	Freddie Mac	$	1,185,943	$	322,231
Various States	Various States	$	1,243,055	$0 - 1,000		Various States	$	1,185,943	$0 - 1,000
Home Point Mortgage Acceptance Corporation	Home Point Mortgage Acceptance Corporation					Home Point Mortgage Acceptance Corporation
		Adjusted Net Worth		Net Worth Required			Adjusted Net Worth		Net Worth Required
HUD	HUD	$	18,954	$	2,500	HUD	$	44,066	$	2,500
Ginnie Mae	Ginnie Mae	$	18,954	$	2,816	Ginnie Mae	$	44,066	$	2,761
Fannie Mae	Fannie Mae	$	18,954	$	3,907	Fannie Mae	$	44,066	$	11,284
Freddie Mac	Freddie Mac	$	18,954	$	3,907	Freddie Mac	$	44,066	$	11,284
Various States	Various States	$	18,954	$0 - 1,000		Various States	$	44,066	$0 - 1,000

Note 11 – Representation and Warranty Reserve

Certain ~~whole~~ loan sale contracts include provisions requiring the Company to repurchase a loan if a borrower fails to make certain initial loan payments due to the acquirer or if the accompanying mortgage loan fails to meet customary representations and warranties. Additionally, the Company may receive relief of certain representations and warranty obligations on loans sold to FNMA or FHLMC on or after January 1, 2013 if FNMA or FHLMC satisfactorily concludes a quality control loan file review or if the borrower meets certain acceptable payment history requirements within 12 or 36 months after the loan is sold to FNMA or FHLMC. The current UPB of loans sold by the Company represents the maximum potential exposure to repurchases related to representations and warranties. Reserve levels are a function of expected losses based on historical experience, current conditions, loan volume and ~~loan volume.~~reasonable and supportable forecasts. While the amount of repurchases is uncertain, the Company considers the liability to be appropriate.

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The following presents the activity of the outstanding ~~repurchase~~ reserves for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):

Three Months Ended March 31,
2021 2020
Repurchase reserve, at beginning of period $ 18,080 $ 3,964
Additions 6,593 1,458
(Charge-offs)/recoveries (863) 109
Repurchase reserves, at end of period $ 23,810 $ 5,531


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Reserve at beginning of period	$	27,901	$	14,704	$	18,080	$	3,964
Additions	1,258		2,770		12,262		17,017
Charge-offs	(1,721)		(3,485)		(2,904)		(6,992)
Reserve at end of period	$	27,438	$	13,989	$	27,438	$	13,989

Note 12 – Fair Value Measurements

The Company uses fair value measurements to record certain assets and liabilities at fair value on a recurring basis, such as MSRs, derivatives, and mortgage loans held for sale. The Company has elected fair value accounting for loans held for sale and

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MSRs to more closely align the Company’s accounting with its interest rate risk strategies without having to apply the operational complexities of hedge accounting.

The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:


Level Input:						Input Definition:

Level 1						Unadjusted, quoted prices in active markets for identical assets or liabilities.

Level 2						Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk and others.

Level 3						Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity), unobservable inputs may be used. Unobservable inputs reflect the Company's own assumptions about the factors that market participants would use in pricing the asset or liability and are based on the best information available in the circumstances.

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

While the Company believes its valuation methods are appropriate and consistent with those used by other market participants, the use of different methods or assumptions to estimate the fair value of certain financial statement items could result in a different estimate of fair value at the reporting date. Those estimated values may differ significantly from the values that would have been used had a readily available market for such items existed, or had such items been liquidated, and those differences could be material to the condensed consolidated financial statements.

The following describes the methods used in estimating the fair values of certain condensed consolidated financial statements items:

Mortgage Loans Held for Sale: The majority of the Company's mortgage loans held for sale at fair value are saleable into the secondary mortgage markets and their fair values are estimated using observable quoted market or contracted prices or market price equivalents, which would be used by other market participants. These saleable loans are considered Level 2. A smaller portion of the Company's mortgage loans held for sale consist of loans repurchased from the GSEs that have subsequently been deemed to be non-saleable. These loans are considered Level 3.

Derivative Financial Instruments: The Company estimates the fair value of an IRLC based on the value of the underlying mortgage loan, quoted MBS prices and estimates of the fair value of the MSRs and the probability that the mortgage loan will fund within the terms of the ~~interest rate lock commitment.~~IRLC. The Company estimates the fair value of forward sales commitments based on quoted MBS prices. The average pull-through rate for IRLCs was ~~83%~~87% for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 73% for the year ended December 31, 2020. Given the significant and unobservable nature of the pull-through factor, IRLCs are classified as Level 3. The Company treats forward mortgage-backed securities sale commitments that have not settled as derivatives and recognizes them at fair value. These forward commitments will be fulfilled with loans not yet sold or securitized and new originations and purchases. The forward commitments allow the Company to reduce the risk related to market price volatility. These derivatives are not designated as hedging instruments; therefore, the Company reports the loss in fair value in Gain on loans, net in the unaudited condensed consolidated statements of operations. These derivatives are classified as Level 2.

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MSR-related derivatives represent a combination of derivatives used to offset possible adverse changes in the fair value of MSRs, which include options on swap contracts, interest rate swap contracts, and other instruments. These derivatives are not designated as hedging ~~instruments; therefore,~~instruments, and the Company reports the loss in fair value in Change in fair value of mortgage servicing rights, net in the condensed consolidated statements of operations. The fair value of MSR-related derivatives is determined using quoted prices for similar instruments. These derivatives are classified as Level 2.

Mortgage Servicing Rights: The Company uses a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting servicing cash flows discounted at a rate that management believes market participants would use in their determinations of value. The Company obtains valuations from an independent third party on a monthly basis to support the reasonableness of the fair value estimate. The key assumptions used in the estimation of the fair value of MSRs include prepayment speeds, discount rates, default rates, cost to service, contractual servicing fees, and escrow earnings, resulting in a Level 3 classification.

The following presents the major categories of assets and liabilities measured at fair value on a recurring basis (in thousands):


	September 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Mortgage loans held for sale	$	—	$	6,660,384	$	8,840	$	6,669,224
Mortgage loans held for sale – EBO	—		—		10,972		10,972
Derivative assets (IRLCs)	—		—		38,315		38,315
Derivative assets (MBS forward trades)	—		54,504		—		54,504
Derivative assets (MSRs)	—		254		—		254
Mortgage servicing rights	—		—		1,402,140		1,402,140
Total assets	$	—	$	6,715,142	$	1,460,267	$	8,175,409


Liabilities:
Derivative liabilities (MBS forward trades)	$	—	$	6,068	$	—	$	6,068
Derivative liabilities (MSR)	—		39,381		—		39,381
Total liabilities	$	—	$	45,449	$	—	$	45,449


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Mortgage loans held for sale	$	—	$	3,257,320	$	3,800	$	3,261,120
Mortgage loans held for sale – EBO	—		—		40,574		40,574
Derivative assets (IRLCs)	—		—		257,785		257,785
Derivative assets (MBS forward trades)	—		2,994		—		2,994
Derivative assets (MSRs)	—		15,254		—		15,254
Mortgage servicing rights	—		—		748,457		748,457
Total assets	$	—	$	3,275,568	$	1,050,616	$	4,326,184
Liabilities:
Derivative liabilities (MBS forward trades)	$	—	$	61,124	$	—	$	61,124
Total liabilities	$	—	$	61,124	$	—	$	61,124

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March 31, 2021
Level 1 Level 2 Level 3 Total
Assets:
Mortgage loans held for sale $ 0 $ 5,145,683 $ 6,529 $ 5,152,212
Mortgage loans held for sale – EBO 0 0 39,049 39,049
Derivative assets (IRLCs) 0 0 20,193 20,193
Derivative assets (MBS forward trades) 0 123,084 0 123,084
Derivative assets (MSRs) 0 137 0 137
Mortgage servicing rights 0 0 1,156,357 1,156,357
Total assets $ 0 $ 5,268,904 $ 1,222,128 $ 6,491,032

March 31, 2021
Level 1 Level 2 Level 3 Total
Liabilities:
Derivative liabilities (MBS forward trades) $ 0 $ 2,334 $ 0 $ 2,334
Derivative liabilities (MSR) 0 39,763 0 39,763
Total liabilities $ 0 $ 42,097 $ 0 $ 42,097

December 31, 2020
Level 1 Level 2 Level 3 Total
Assets:
Mortgage loans held for sale $ 0 $ 3,257,321 $ 3,800 $ 3,261,121
Mortgage loans held for sale – EBO 0 0 40,574 40,574
Derivative assets (IRLCs) 0 0 257,785 257,785
Derivative assets (MBS forward trades) 0 2,994 0 2,994
Derivative assets (MSRs) 0 15,254 0 15,254
Mortgage servicing rights 0 0 748,457 748,457
Total assets $ 0 $ 3,275,569 $ 1,050,616 $ 4,326,185
Liabilities:
Derivative liabilities (MBS forward trades) $ 0 $ 61,124 $ 0 $ 61,124
Total liabilities $ 0 $ 61,124 $ 0 $ 61,124

The following presents a reconciliation of Level 3 assets measured at fair value on a recurring basis (in thousands):


		Three Months Ended March 31,									Three Months Ended September 30, 2021
		MSRs		IRLC		MLHS		EBO			MSRs		IRLC		MLHS		EBO
Balance at beginning of period	Balance at beginning of period	$	748,457	$	257,785	$	3,800	$	40,573	Balance at beginning of period	$	1,267,253	$	56,464	$	9,344	$	36,132
Purchases, sales, issuances, contributions and settlements	Purchases, sales, issuances, contributions and settlements	299,174		0		2,973		(1,367)		Purchases, sales, issuances, contributions and settlements	123,678		—		(588)		(24,261)
Change in fair value	Change in fair value	108,726		(237,592)		(244)		(157)		Change in fair value	11,209		(18,149)		84		(899)
Transfers in/out(1)		0		0		0		0

Balance at end of period	Balance at end of period	$	1,156,357	$	20,193	$	6,529	$	39,049	Balance at end of period	$	1,402,140	$	38,315	$	8,840	$	10,972

											Nine Months Ended September 30, 2021
											MSRs		IRLC		MLHS		EBO
Balance at beginning of period										Balance at beginning of period	$	748,457	$	257,785	$	3,800	$	40,573
Purchases, sales, issuances, contributions and settlements										Purchases, sales, issuances, contributions and settlements	706,185		—		5,480		(28,308)
Change in fair value										Change in fair value	(52,502)		(219,470)		(440)		(1,293)

Balance at end of period										Balance at end of period	$	1,402,140	$	38,315	$	8,840	$	10,972

Three Months Ended March 31, 2020
MSRs IRLC MLHS EBO
Balance at beginning of period $ 575,035 $ 25,618 $ 1,159 $ 3,094
Purchases, Sales, Issuances, Contributions and Settlements 94,972 0 26 (2,178)
Change in fair value (194,137) 106,344 43 0
Transfers in/out(1)
0 0 0 0
Balance at end of period $ 475,870 $ 131,962 $ 1,228 $ 916

~~(1)Transfers in/out represents acquired assets and assets transferred out due to reclassification as real estate owned, foreclosure or claims.~~

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	Three Months Ended September 30, 2020
	MSRs		IRLC		MLHS		EBO
Balance at beginning of period	$	499,782	$	201,873	$	2,096	$	—
Purchases, Sales, Issuances, Contributions and Settlements	155,623		—		1,633		—
Change in fair value	(72,142)		70,964		(516)		—
Balance at end of period	$	583,263	$	272,837	$	3,213	$	—

	Nine Months Ended September 30, 2020
	MSRs		IRLC		MLHS		EBO
Balance at beginning of period	$	575,035	$	25,618	$	1,159	$	3,094
Purchases, Sales, Issuances, Contributions and Settlements	352,118		—		2,614		(3,094)
Change in fair value	(343,890)		247,219		(560)		0
Balance at end of period	$	583,263	$	272,837	$	3,213	$	—

The following presents an estimated fair value and UPB of mortgage loans held for sale that have contractual principal amounts and for which the Company has elected the fair value option. The fair value option was elected for mortgage loans held for sale as the Company believes fair value best reflects its expected future economic performance (in thousands):


		Fair Value		Principal Amount Due Upon Maturity		Difference(1)			Fair Value		Principal Amount Due Upon Maturity		Difference(1)
Balance at March 31, 2021		$	5,152,211	$	5,080,974	$	71,237
Balance at September 30, 2021								Balance at September 30, 2021	$	6,669,224	$	6,529,999	$	139,225
Balance at December 31, 2020	Balance at December 31, 2020	$	3,261,121	$	3,117,552	$	143,569	Balance at December 31, 2020	$	3,261,121	$	3,117,552	$	143,569

(1)Represents the amount of gains related to changes in fair value of items accounted for using the fair value option included in Gain on loans, net within the condensed consolidated statements of operations.

The Company ~~did not transfer any~~transferred in $5.2 million of assets ~~or liabilities between categories~~to Level 3 during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 ~~or 2020 other than the transfers between EBO~~which consists of loans ~~to Other assets.~~for which an active market currently does not exist. The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at ~~March 31,~~September 30, 2021 and December 31, ~~2020, respectively.~~2020.

The following is a summary of the key unobservable inputs used in the valuation of the Level 3 assets as of ~~March 31,~~September 30, 2021 and December 31, 2020:

~~March 31,~~September 30, 2021

Asset

Key Input

Range

Weighted
Average

Mortgage servicing rights

Discount rate

~~9.0%~~8.6% - 12.2%

~~9.4%~~8.9%

Prepayment speeds

~~7.3%~~7.7% - ~~13.8%~~12.7%

~~10.2%~~12.7%

Interest rate lock commitments

Pull-through rate

~~27%~~51% - 100%

~~83%~~87%

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December 31, 2020

Asset

Key Input

Range

Weighted
Average

Mortgage servicing rights

Discount rate

9.0% - 12.2%

9.5%

Prepayment speeds

13.8% - 16.4%

14.4%

Interest rate lock commitments

Pull-through rate

16% - 100%

73%

The key assumptions used to estimate the fair value of the MSRs are discount rate and the CPR. Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase. Decreases in prepayment speeds generally have a positive effect on the value of the MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease. Increases in the discount rate result in a lower MSR value and decreases in the discount rate result in a higher MSR value. MSR uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties.

Fair Value of Other Financial Instruments: As of ~~March 31,~~September 30, 2021 and December 31, 2020, all financial instruments were either recorded at fair value or the carrying value approximated fair value. For financial instruments that were not recorded at fair value, such as cash and cash equivalents, restricted cash, servicing advances, warehouse and operating lines of credit, and accounts payable, and accrued expenses, their carrying values approximated fair value due to the short-term nature of such instruments. For our long-term secured borrowings not recorded at fair value, the carrying value approximated fair value due to the collateralization of such borrowings.

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Note 13 – Stock Options

~~On January 21, 2021, the Company’s board of directors approved the adoption of the Company’s~~The Company maintains its 2021 Incentive Plan (“2021 Plan”) ~~and~~with a designated 6.9 million shares of the Company’s authorized common stock that may be granted as stock options and restricted stock awards thereunder. The 2021 Plan allows for the assumption and substitution of outstanding options to purchase common units of HPLP granted under the Home Point Capital LP 2015 Option Plan (the “2015 Option Plan”). The aggregate number of shares of the Company’s common stock available will be reduced by the number of shares of common stock underlying the award. The expiration date of the 2021 Plan shall be the tenth (10th) anniversary of the effective date of the 2021 Plan, which is January 21, 2031. The 2021 Plan contains vesting conditions based on both time-vesting service criteria, as well as performance based vesting terms, which are based on the achievement of specified performance criteria outlined in the underlying award agreement.

Prior to the consummation of the merger in connection with the IPO, the 2015 Option Plan governed awards of stock options to key persons conducting business for HPLP and its direct and indirect subsidiaries, including the Company. The 2015 Option Plan allowed awards in the form of options that are exercisable into common units of HPLP. In connection with the IPO, all outstanding options under the 2015 Option Plan were canceled and “substitute options” were granted under the 2021 Plan. The substitute options have an exercise price and cover a number of shares of common stock that results in the substitute options having the same (subject to rounding) intrinsic value as the outstanding options granted under the 2015 Option Plan.

The Company recognized ~~$1.8~~$1.7 million and $0.1 million of compensation expense related to stock options for the three months ended September 30, 2021 and 2020, respectively, and $5.2 million and $0.5 million of compensation expense related to stock options for the nine months ended September 30, 2021 and 2020, respectively, within Compensation and benefits expense on the unaudited condensed consolidated statements of ~~operations for the three months ended March 31, 2021 and 2020, respectively.~~operations. The unrecognized compensation expense related to outstanding and unvested stock options was ~~$15.0~~$10.3 million ~~as of March 31,~~for the three and nine months ended September 30, 2021, which ~~are~~is expected to vest and be recognized over a weighted-average period of ~~5.33~~2.5 years. As of March 31, 2021, the number of options vested and exercisable was 2,343,173 and the weighted-average exercise price of the options currently exercisable was $2.78. The remaining contractual term of the options currently exercisable was 7.43 years as of March 31, 2021.

The following presents the activity of the Company’s stock options:


		Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Life (Years)	Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020	Outstanding at December 31, 2020	0	$	0	—	$	—	Outstanding at December 31, 2020	—	$	—
Granted	Granted	13,381,516	4.13		7.28	6.29		Granted	13,381,516	8.55
Exercised	Exercised	357,400	1.78		—	3.59		Exercised	(1,039,594)	9.79
Forfeited	Forfeited	0	0		—	—		Forfeited	(179,033)	9.82
Outstanding at March 31, 2021		13,024,116	$	4.19	7.43	$	6.36
Expired								Expired	(37,475)	$	9.79
Outstanding at September 30, 2021								Outstanding at September 30, 2021	12,125,414	$	8.43

The following presents a summary of the Company’s non-vested activity:


		Number of Shares	Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2020	Non-vested at December 31, 2020	0	$	0	Non-vested at December 31, 2020	—	$	—
Granted	Granted	13,381,516	6.29		Granted	13,381,516	8.55
Vested	Vested	2,343,173	3.78		Vested	(1,917,325)	9.19
Exercised	Exercised	357,400	3.59		Exercised	(1,039,594)	9.79
Forfeited	Forfeited	0	0		Forfeited	(179,033)	9.82
Non-vested at March 31, 2021		10,680,943	$	6.36
Expired					Expired	(37,475)	$	9.79
Non-vested at September 30, 2021					Non-vested at September 30, 2021	10,208,089	$	8.28

The Company applied certain assumptions in determining the fair value of the options granted during the three months ended March 31, 2021. Expected life was estimated to be 8.3 years, risk-free interest rate applied was 1.7% and expected volatility utilized was 24.9%. The expected life of each stock option is estimated based on its vesting and contractual terms. The risk-free interest rate reflected the yield on zero-coupon Treasury securities with a term approximating the expected life of the stock options. The expected volatility was based on an analysis of the historical volatilities of peer companies, adjusted for certain characteristics specific to the Company. The Company applied an estimated forfeiture rate of 0 - 10.4% to unvested options outstanding during the three months ended March 31, 2021.

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Note 14 – Income Taxes

Three Months Ended March 31,
2021 2020
Income (loss) before income taxes $ 194,923 $ (16,353)
Total provision (benefit) from income taxes 50,117 (3,489)
Effective tax provision rate 25.7% 21.3%


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Income before income taxes	$	99,277	$	347,486	$	180,580	$	557,791
Total provision from income taxes	27,341		93,294		50,250		149,306
Effective tax provision rate	27.5%		26.8%		27.8%		26.8%

The Company’s effective income tax rate was ~~25.7%~~27.5% and ~~21.3%~~26.8% for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and 27.8% and 26.8% for the nine months ended September 30, 2021 and 2020, respectively, compared to the statutory rate of 21%. The Company calculated the provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income and adjusted for discrete items that occurred during the period. Several factors influence the effective tax rate, including the impact of equity investments, state taxes and permanent disallowed deductions for tax such as officer's compensation limitations applicable to a public entity and non-deductible transaction costs.

Note 15 – Segments

Management has organized the Company into 2 reportable segments based primarily on its services as follows: (1) Origination and (2) Servicing. The key factors used to identify these reportable segments is how the chief operating decision maker (“CODM”) monitors performance, allocates capital, and makes strategic and operational decisions that aligns with the Company and Company's internal operations. The Origination segment consists of a combination of retail and third-party loan production options. The Servicing segment performs loan servicing for both newly originated loans the Company is holding for sale and loans the Company services for others.

Origination

In the Origination segment, the Company originates and sells residential real estate mortgage loans in the United States through its consumer direct third party originations, and correspondent channels that offer a variety of loan programs that support the financial needs of the borrowers. In each of the channels, the Company’s primary source of revenue is the difference between the cost of originating or purchasing the loan and the price which the loan is sold to investors as well as the fair value of originated MSRs and hedging gains and losses. Loan origination fees and interest income earned on loans held pending sale or securitization are also included in the revenues for this segment.

Servicing

In the Servicing segment, the Company generates revenue through contractual fees earned by performing daily administrative and management activities for mortgage loans. These activities include collecting loan payments, remitting payments to investors, sending monthly statements, managing escrow accounts, servicing delinquent loan work-outs, and managing and disposing of foreclosed properties. Servicing of the Company’s customers is primarily conducted in-house.

Other Information About the Company’s Segments

The Company's CODM evaluates performance, makes operating decisions, and allocates resources based on the Company's contribution margin. Contribution margin is the Company’s measure of profitability for its 2 reportable segments. Contribution margin is defined as revenue from Gain on loans, net, Loan fee income, Loan servicing fees, Change in fair value of MSRs, Interest income, and Other income (which includes Income from equity method investment) less directly attributable expenses. The accounting policies applied by the Company’s segments are the same as those described in Note 2 – Basis of Presentation and Significant Accounting Policies, and the decrease in MSRs due to valuation assumptions is consistent with the changes described in Note 4 - Mortgage Servicing ~~Rights.~~Rights. Directly attributable expenses include salaries, commissions and associate benefits, general and administrative expenses, and other expenses, such as servicing costs and origination costs. Direct operating expenses incurred in connection with the activities of the segments are included in the respective segments.

The Company does not allocate assets to its reportable segments as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources. The balance sheet is managed on a consolidated basis and is not used in the context of segment reporting. In addition, the Company does not enter into transactions between its reportable segments.

The Company also reports an “All Other” category that includes unallocated corporate expenses, such as IT, finance, and human resources. These operations are neither significant individually or in aggregate and therefore do not constitute a reportable segment.

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The following tables present the key operating data for our business segments for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands). ~~For~~Starting with the three months ended March 31, 2021, the Company changed how contribution margin is calculated. Contribution margin is calculated as Total U.S. GAAP Revenue less directly attributable expenses. The Company previously calculated the contribution margin by excluding the Change in MSRs due to valuation assumptions, net of hedge. The updated calculation of the contribution margin presented herein aligns with how management and the CODM view the contribution margin for the Servicing segment. The Company commenced using such presentation for the three months ended March 31, 2021 and intends to use such presentation on a go-forward ~~basis, and~~basis; previous periods have been revised to conform with this new calculation.


		Three Months Ended March 31, 2021															Three Months Ended September 30, 2021
		Origination		Servicing		Segments Total		All Other		Total		Reconciliation Item(1)		Total Consolidated			Origination		Servicing		Segments Total		All Other		Total		Reconciliation Item(1)		Total Consolidated
Revenue	Revenue															Revenue
Gain on loans, net	Gain on loans, net	$	301,228	$	0	$	301,228	$	0	$	301,228	$	0	$	301,228	Gain on loans, net	$	145,302	$	173	$	145,475	$	(4)	$	145,471	$	—	$	145,471
Loan fee income	Loan fee income	44,115		0		44,115		0		44,115		0		44,115		Loan fee income	34,484		—		34,484		—		34,484		—		34,484
Loan servicing fees	Loan servicing fees	(8)		70,346		70,338		0		70,338		0		70,338		Loan servicing fees	28		91,803		91,831		—		91,831		—		91,831
Change in FV of MSRs, net	Change in FV of MSRs, net	0		12,848		12,848		0		12,848		0		12,848		Change in FV of MSRs, net	—		3,544		3,544		—		3,544		—		3,544
Interest income (loss), net		1,288		252		1,540		(8,898)		(7,358)		0		(7,358)
Interest income (expense), net																Interest income (expense), net	4,035		623		4,658		(13,471)		(8,813)		—		(8,813)
Other income (loss)																Other income (loss)	—		7,476		7,476		(105)		7,371		713		8,084
Total U.S. GAAP Revenue																Total U.S. GAAP Revenue	183,849		103,619		287,468		(13,580)		273,888		713		274,601
Contribution margin																Contribution margin	$	67,325	$	86,179	$	153,504	$	(54,940)	$	98,564	$	—	$	—

																	Three Months Ended September 30, 2020
																	Origination		Servicing		Segments Total		All Other		Total		Reconciliation Item(1)		Total Consolidated
Revenue																Revenue
Gain on loans, net																Gain on loans, net	$	503,344	$	—	$	503,344	$	—	$	503,344	$	—	$	503,344
Loan fee income																Loan fee income	28,205		—		28,205		—		28,205		—		28,205
Loan servicing fees																Loan servicing fees	236		48,114		48,350		—		48,350		—		48,350
Change in FV of MSRs, net																Change in FV of MSRs, net	—		(66,749)		(66,749)		—		(66,749)		—		(66,749)
Interest income (expense), net																Interest income (expense), net	318		598		916		(3,766)		(2,850)		—		(2,850)
Other income	Other income	0		128		128		4,836		4,964		(4,163)		801		Other income	—		89		89		10,279		10,368		(9,870)		498
Total U.S. GAAP Revenue	Total U.S. GAAP Revenue	346,623		83,574		430,197		(4,062)		426,135		$	(4,163)	$	421,972	Total U.S. GAAP Revenue	532,103		(17,948)		514,155		6,513		520,668		(9,870)		510,798
Contribution margin	Contribution margin	$	188,808	$	64,852	$	253,660	$	(54,574)	$	199,086	$	0	$	0	Contribution margin	$	424,026	$	(31,885)	$	392,141	$	(34,785)	$	357,356	$	—	$	—

																	Nine Months Ended September 30, 2021
																	Origination		Servicing		Segments Total		All Other		Total		Reconciliation Item(1)		Total Consolidated
Revenue																Revenue
Gain on loans, net																Gain on loans, net	$	521,534	$	190	$	521,724	$	3	$	521,727	$	—	$	521,727
Loan fee income																Loan fee income	118,099		—		118,099		—		118,099		—		118,099
Loan servicing fees																Loan servicing fees	20		247,733		247,753		—		247,753		—		247,753
Change in FV of MSRs, net																Change in FV of MSRs, net	—		(90,513)		(90,513)		—		(90,513)		—		(90,513)
Interest income (expense), net																Interest income (expense), net	8,021		1,291		9,312		(34,971)		(25,659)		—		(25,659)
Other income																Other income	—		7,653		7,653		18,533		26,186		(16,649)		9,537
Total U.S. GAAP Revenue																Total U.S. GAAP Revenue	647,674		166,354		814,028		(16,435)		797,593		$	(16,649)	$	780,944
Contribution margin																Contribution margin	$	233,811	$	111,424	$	345,388	$	(148,006)	$	197,229	$	—	$	—

(1)The Company includes the income from its equity method investments in the All Other category. In order to reconcile to Total net revenue on the condensed consolidated statements of operations, it must be removed as is presented above.

Three Months Ended March 31, 2020
Origination Servicing Segments
Total All Other Total
Reconciliation
Item(1)
Total
Consolidated
Revenue
Gain on loans, net $ 102,563 $ 0 $ 102,563 $ 0 $ 102,563 $ 0 $ 102,563
Loan fee income 12,031 0 12,031 0 12,031 0 12,031
Loan servicing fees (562) 43,808 43,246 0 43,246 0 43,246
Change in FV of MSRs, net 0 (91,527) (91,527) 0 (91,527) 0 (91,527)
Interest income (loss), net 526 5,264 5,790 (5,854) (64) 0 (64)
Other income 0 58 58 3,638 3,696 (2,316) 1,380
Total U.S. GAAP Revenue 114,558 (42,397) 72,161 (2,216) 69,945 $ (2,316) $ 67,629
Contribution margin $ 62,728 $ (55,664) $ 7,064 $ (21,102) $ (14,037) 0 0

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	Nine Months Ended September 30, 2020
	Origination		Servicing		Segments Total		All Other		Total		Reconciliation Item(1)		Total Consolidated
Revenue
Gain on loans, net	$	962,778	$	—	$	962,778	$	—	$	962,778	$	—	$	962,778
Loan fee income	60,630		—		60,630		—		60,630		—		60,630
Loan servicing fees	(1,982)		135,886		133,904		—		133,904		—		133,904
Change in FV of MSRs, net	—		(230,524)		(230,524)		—		(230,524)		—		(230,524)
Interest income (expense), net	1,804		7,132		8,936		(14,411)		(5,475)		—		(5,475)
Other income	—		205		205		15,983		16,188		(14,050)		2,138
Total U.S. GAAP Revenue	1,023,230		(87,301)		935,929		1,572		937,501		(14,050)		923,451
Contribution margin	$	790,538	$	(129,965)	$	660,573	$	(88,732)	$	571,841	$	—	$	—

(1)The Company includes the income from its equity method investments in the All Other segment. In order to reconcile to Total net revenue on the condensed consolidated statements of operations, it must be removed as is presented above.

The following table presents a reconciliation of contribution margin to consolidated U.S. GAAP Income (loss) before income tax (in thousands):

Three Months Ended March 31,
2021 2020
Income (loss) before income tax $ 194,923 $ (16,353)
Income from equity method investment 4,163 2,316
Contribution margin $ 199,086 $ (14,037)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Income before income tax	$	99,277	$	347,486	$	180,580	$	557,791
(Loss) income from equity method investment	(713)		9,870		16,649		14,050
Contribution margin	$	98,564	$	357,356	$	197,229	$	571,841

Note 16 – Related Parties

The Company has entered into transactions and agreements to purchase various services and products from certain affiliates of our sponsor, Stone Point Capital LLC. The services range from valuation services of mortgage servicing rights, mortgage related services, insurance brokerage services, and loan review services for certain loan originations. The Company incurred expenses of ~~$6.3~~$6.0 million and ~~$0.2~~$0.3 million, in the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and $16.1 million and $0.7 million for the nine months ended September 30, 2021 and 2020, respectively, for products, services, and other transactions, which are included in ~~Occupancy and equipment,~~Production technology, General and administrative and Other expenses in the unaudited condensed consolidated statements of operations.

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Note 17 – Subsequent Events

The Company has evaluated all subsequent events through the date these condensed consolidated financial statements were issued.

~~Amendment~~Dividend Payment

On November 4, 2021, the Company announced that its board of ~~MSR Facility~~directors declared a dividend of $0.04 per share for the third quarter of 2021 to stockholders of record at the close of business on November 15, 2021, payable on or about November 30, 2021.

Gestation Agreement

On ~~May 4,~~November 2, 2021, HPF entered into a ~~Second Amended and Restated Credit~~Mortgage Loan Participation Sale Agreement (the ~~“Credit~~“Gestation Agreement”) with JPMorgan Chase Bank, National Association, as purchaser (“Purchaser”). Subject to compliance with the ~~Company, as guarantor, Goldman Sachs Bank USA, as~~terms and conditions of the ~~administrative agent,~~Gestation Agreement, including the affirmative and negative covenants contained therein, the ~~financial institutions that may~~Gestation Agreement permits Purchaser to purchase from HPF from time to time ~~become parties~~during the term of the Gestation Agreement participation certificates evidencing a 100% undivided beneficial ownership interest in designated pools of fully amortizing first lien residential mortgage loans that are intended to ultimately be included in residential mortgage-backed securities (the “Agency MBS”) issued or guaranteed, as applicable, by Fannie Mae, Freddie Mac, and Ginnie Mae.

The aggregate purchase price of participation certificates owned by Purchaser at any given time for which Purchaser has not been paid the purchase price for the related Agency MBS by the applicable takeout investor as specified in the applicable takeout commitment cannot exceed $1.5 billion. Unless terminated earlier in accordance with its terms, the Gestation Agreement expires on November 2, 2022.

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The Gestation Agreement and certain ancillary agreements thereto ~~as lenders. The Credit Agreement amends~~contain various financial and ~~restates that certain Amended and Restated Credit Agreement, dated as of July 11, 2019 (as amended, supplemented or otherwise modified, the “Prior Credit Agreement”), which related~~non-financial covenants, including, among other covenants, financial covenants relating to the MSR Facility. The Credit Agreement provides for amendments to certain terms set forth in the Prior Credit Agreement, including (i) increasing the maximum facility amount, collateralized by FNMA, FHLMC,maintenance of tangible net worth, liquidity, and GNMA mortgage servicing rights, from $500.0 million to $1.0 billion, of which $650.0 million is committed and $350.0 million is uncommitted, and (ii) extending the three-year revolving period from January 31, 2022 to May 4, 2024, followed by a one-year period during which the balance drawn must be repaid and no further amounts may be drawn down, which ends on May 4, 2025. The changes to the GNMA extended three-year revolving period will take effect upon acknowledgement and approval by GNMA.

The Credit Agreement contains certain customary events of default and certain financial maintenance covenants under the Credit Agreement, which require each of HPF and the Company to not exceed a specified ratio of ~~debt~~total indebtedness to tangible net ~~worth at the end of each calendar month,~~worth. HPF is also generally required to maintain ~~certain minimum liquidity~~its status as an approved issuer by Ginnie Mae, an approved lender by Fannie Mae, and ~~tangible net worth requirements, and to comply with a limitation on additional indebtedness.~~an approved seller/servicer by Freddie Mac.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis supplements our management’s discussion and analysis for the year ended December 31, 2020 as contained in our 2020 Annual Report, and presumes that readers have read or have access to such discussion and analysis. The following discussion and analysis should also be read together with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Report. This discussion contains forward-looking statements that reflect our plans and strategy for our business, and involve risks and uncertainties. You should review the “Risk Factors” section of our 2020 Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read “Cautionary Note on Forward-Looking Statements” in this ~~Report .~~Report.

Data as of and for the three and nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020, have been derived from our unaudited condensed consolidated financial statements included elsewhere in this Report.

Overview

We are a leading residential mortgage originator and servicer with a mission to create financially healthy, happy homeowners. Our business model is focused on growing originations through highly leverageable partner networks supported by at-scale operations, and managing the customer experience through our in-house servicing operation and proprietary Home Ownership Platform. ~~Our originations are primarily sourced through~~We partner with a nationwide network of more than ~~6,000~~7,400 independent mortgage brokerages, or our Broker ~~Partners. We enable the success of our Broker Partner network through a unique blend of~~Partners and provide in market sales coverage and an efficient and scaled loan fulfillment process ~~which is supported by~~through our fully integrated technology platform. We also source customers through nearly ~~600~~650 correspondent sellers, or our Correspondent Partners.

We maintain ongoing connectivity with approximately ~~400,000~~430,000 customers through our servicing ~~platform with the ultimate objective of establishing Customers for Life.~~

platform. Servicing is a strategic cornerstone of our business and central to our ~~Customer for Life~~ strategy. Retaining our servicing and managing the servicing platform in-house gives us the opportunity to establish a deeper relationship with our ~~customers. This relationship is enhanced through our proprietary Home Ownership Platform. The proprietary Home Ownership Platform differs from competitors in the way in which it~~customers that personalizes the experience for borrowers through the use of our Home Ownership Platform’s customized dashboards ~~which allow us to~~that deliver critical information about borrowers’ accounts such as payment deadlines, forbearance status and escrow distributions and customized offerings ~~which allow us to connect borrowers to~~through other third-party financial products such as insurance policies and home equity loans.

This connectivity and ongoing dialogue help us proactively find ways to help our customers save money, either through a refinancing of their mortgage or savings on another home-related product. We believe the frequency of customer interaction, coupled with providing effective solutions beyond the mortgage, will result in the development of trusted, long-standing relationships and ultimately increase the lifetime value of the customer relationships.

~~By executing on this strategy, we have developed our~~ ~~de novo~~ platform into an industry leader with a historic market-leading growth position. As of December 31, 2020, we were the third largest wholesale lender with the fastest growth of the top five wholesale originators, according to ~~Inside Mortgage Finance. Overall, Home Point is the 10th largest non-bank originator in the United States, according to~~ ~~Inside Mortgage Finance, having originated $29.4 billion in the three months ended March 31, 2021.~~

Segments

Our operations are organized into two separate reportable segments: Origination and Servicing.

In our Origination segment, we source loans through three distinct production channels: Direct, Wholesale and Correspondent. The Direct channel provides the Company’s existing servicing customers with various financing options. At the same time, it supports the servicing assets in the ecosystem by retaining existing servicing customers who may otherwise refinance their existing mortgage loans with a competitor. The Wholesale channel consists of mortgages originated through ~~a nationwide network of more than 6,000~~our Broker Partners. The Correspondent channel consists of closed and funded mortgages that we purchase from a trusted network of Correspondent Partners. Once a loan is locked, it becomes channel agnostic. The channels in our Origination segment function in unison through the following activities: hedging, funding, and production. ~~Our Origination segment generated Contribution margins of $188.8 million and $62.7 million for the three months ended March 31, 2021 and 2020, respectively.~~

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Our Servicing segment consists primarily of servicing loans that were produced in our Originations segment where the Company retained the servicing rights. Servicing consists of collecting loan payments, remitting principal and interest payments to investors, managing escrow funds for the payment of mortgage-related expenses, such as taxes and insurance, performing loss mitigation activities on behalf of investors and otherwise administering our mortgage loan servicing portfolio in compliance with state and federal regulations. We also strategically buy and sell servicing rights. ~~Our Servicing segment generated Contribution margins of $64.9 million and contribution loss of $55.7 million for the three months ended March 31, 2021 and 2020, respectively.~~

We believe that maintaining both an Origination segment and a Servicing segment provides us with a more balanced business model in both rising and declining interest rate environments, as compared to other industry participants that predominantly focus on either origination or servicing, instead of both.

Three ~~months ended March 31,~~Months Ended September 30, 2021 Compared to Three Months Ended ~~March 31,~~September 30, 2020 Summary

For the three months ended ~~March 31,~~September 30, 2021, we originated ~~$29.4~~$20.8 billion of mortgage loans compared to ~~$8.2~~$18.1 billion for the three months ended ~~March 31,~~September 30, 2020, representing an increase of ~~$21.3~~$2.7 billion or ~~260%~~15%. We generated ~~$149.0~~$274.6 million of revenue for the three months ended September 30, 2021 compared to $510.8 million for the three months ended September 30, 2020. We generated $71.2 million of net income for the three months ended ~~March 31,~~September 30, 2021 compared to a net ~~loss~~income of ~~$10.5~~$264.1 million for the three months ended ~~March 31,~~September 30, 2020. We generated ~~$324.1~~$196.4 million of Adjusted revenue for the three months ended ~~March 31,~~September 30, 2021 compared to ~~$125.3~~$532.5 million for the three months ended ~~March 31,~~September 30, 2020. We generated ~~$73.2~~$15.1 million of Adjusted net income for the three months ended ~~March 31,~~September 30, 2021 compared to ~~$33.0~~$272.7 million of Adjusted net income for the three months ended September 30, 2020. Refer to “Non-GAAP Financial Measures” for further information regarding our use of Adjusted revenue and Adjusted net income, including limitations related to such non-GAAP measures and a reconciliation of such measures to net income, the nearest comparable financial measure calculated and presented in accordance with U.S. GAAP.

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The above-described decreases in revenue, net income, Adjusted revenue and Adjusted net income were primarily due to the decrease in Gain on loans, net of $357.9 million which was driven by a decrease in margins as a result of the competitive environment for the three months ended September 30, 2021. Gain on sale margins decreased by 202 basis points or 71% for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The decline in margins was partially offset by an increase in fallout adjusted locks of $3.3 billion for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily due to an increase in our overall share of the origination market between the two periods. The decrease in Gain on loans, net was partially offset by an increase in loan servicing fees of $43.5 million due to a larger average servicing portfolio and a favorable Change in fair value of MSR of $70.3 million for the three months ended ~~March 31,~~September 30, 2021 compared to three months ended September 30, 2020.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020 Summary

For the nine months ended September 30, 2021, we originated $75.7 billion of mortgage loans compared to $38.0 billion for the nine months ended September 30, 2020, representing an increase of $37.6 billion or 99%. We generated $780.9 million of revenue for the nine months ended September 30, 2021 compared to $923.5 million for the nine months ended September 30, 2020. We generated $147.0 million of net income for the nine months ended September 30, 2021 compared to a net income of $422.5 million for the nine months ended September 30, 2020. We generated $647.3 million of Adjusted revenue for the nine months ended September 30, 2021 compared to $1.0 billion for the nine months ended September 30, 2020. We generated $38.5 million of Adjusted net income for the nine months ended September 30, 2021 compared to $494.5 million for the nine months ended September 30, 2020. Refer to “Non-GAAP Financial Measures” for further information regarding our use of Adjusted Revenue and Adjusted net income, including limitations related to such non-GAAP measures and a reconciliation of such measures to net income (loss), the nearest comparable financial measure calculated and presented in accordance with U.S. GAAP.

Total net income for the three months ended March 31, 2021 included a $102.0 million increase in the fair value of Mortgage Servicing Rights (“MSR”), net of our MSR hedge results, primarily as a result of an increase in interest rates during the three months ended March 31, 2021. According to the Mortgage Bankers Association (the “MBA”), the average 30-year mortgage rate was approximately 2.90% during January 2021 and increased to 3.31% in March 2021. An increase of this nature generally results in lower prepayment speeds and a subsequent upward adjustment to the fair value of our MSRs for the loans that still exist in our portfolio.

The above-described ~~increase~~decreases in net income, Adjusted revenue and Adjusted net income ~~was~~were primarily due to the ~~increase~~decrease in Gain on loans, net of ~~$198.7 million and the increase in Loan fee income of $32.1~~$441.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020. Gain on sale margins decreased by 142 basis points or 59% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The ~~increase~~decrease in Gain on loans, net ~~and Loan fee income~~ was driven by ~~the increase~~decreases in ~~Origination volume described above and increased~~our margins which increased by 30.5 basis points or 31.3% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Our increased Origination volume also resulted in an increase in Compensation and benefits expense of $100.7 million or 190.2% for the three months ended March 31, 2021 compared to that for the three months ended March 31, 2020.

~~Recent Developments – COVID-19~~

~~Business Operations~~

While the financial markets have demonstrated significant volatility due to the economic impacts of COVID-19, our flexible, scalable platform and technology-enabled infrastructure have enabled us to respond quickly to the increased market demand, resulting in record levels of Origination volume. We continue to expect the increase in origination demands to remain steady as a result of the ~~low interest rate~~competitive environment ~~and~~for the nine months ended September 30, 2021. The decline in margins was partially offset by an increase in fallout adjusted locks of $23.2 billion for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to an increase in our ~~competitive positioning in the markets.~~

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted and signed into law. The CARES Act allows borrowers with federally backed loans to request a temporary mortgage forbearance through December 31, 2020. In addition, in February 2021, the federal government announced an additional extensionoverall share of the ~~original forbearance periods~~origination market between the two periods. The decrease in Gain on loans, net was partially offset by an increase in loan servicing fees of ~~three~~$113.8 million due to ~~six~~a larger servicing portfolio and a favorable Change in fair value of MSR of $140.0 million for the nine months ~~depending on loan type. As of March 31,~~ended September 30, 2021 approximately 10,000, or 2.4%, of the loans in our MSR Servicing Portfolio had elected the forbearance option. Of the 2.4% of the loans in our MSR Servicing Portfolio that had elected the forbearance option as of March 31, 2021, approximately 10.4% remained current on their March 31, 2021 payments. As a result of the CARES Act forbearance requirements, we have experienced, and expect to continue to experience, increases in delinquencies in our MSR Servicing Portfolio.

~~As of March 31, 2021, the 60 days or more delinquent rate in our MSR Servicing Portfolio was 2.7%,~~ compared to ~~4.4% as of December 31,~~the nine months ended September 30, 2020. As a servicer, we may be required to advance principal and interest to the investor for up to four months on Government Sponsored Entity (“GSE”) backed mortgages and longer on other government agency backed mortgages on behalf of borrowers who have entered a forbearance plan. In response to these potential GSE requirements, in April 2020 we amended our servicing advance facility to extend the maturity date to May 2021 and increased the total capacity from $50 million to $85 million. We plan to extend this facility beyond the current maturity date.

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We are currently prohibited from collecting certain servicing-related fees, such as late fees, and initiating foreclosure proceedings until the termination of the CARES Act forbearance period. As a result, we expect the effects of the CARES Act forbearance requirements to reduce our servicing income and increase our servicing expenses.

Finally, under the CARES Act, we elected to defer the payment of $11.2 million of employer-related payroll taxes during 2020. Under the CARES Act, 50.0% of the deferred payroll taxes are due by December 31, 2021 and 50.0% are due by December 31, 2022. We have recorded the accrual for deferred payroll taxes within Accounts payable and accrued expenses in our unaudited condensed consolidated balance sheet as of March 31, 2021, as applicable.

~~Associate Safety~~

~~We are continuing to focus on protecting the safety and well-being of our associates.~~

While the COVID-19 pandemic has not had a material negative impact on our operational performance, financial performance, or liquidity to date, it is difficult to predict what the ongoing impact of the pandemic will be on the economy and our business.

Key Factors Affecting Results of Operations for Periods Presented

Residential Real Estate Market Conditions

Our Origination volume is impacted by broader residential real estate market conditions and the general economy. Housing affordability, availability and general economic conditions influence the demand for our products. Housing affordability and availability are impacted by mortgage interest rates, availability of funds to finance purchases, availability of alternative investment products and the relative relationship of supply and demand. General economic conditions are impacted by unemployment rates, changes in real wages, inflation, consumer confidence, seasonality and the overall economic environment. Recent market conditions, such as low interest rates and limited supply of housing, have led to home price appreciation and a decrease in the affordability index.

Changes in Interest Rates

Origination volume is impacted by changes in interest rates. Decreasing interest rates tend to increase the volume of purchase loan origination and refinancing whereas increasing interest rates tend to decrease the volume of purchase loan origination and refinancing.

Changes in interest rates also impact the value of ~~interest rate lock commitments~~IRLCs and loans held for sale. ~~Interest rate lock commitments~~IRLCs represent an agreement to extend credit to a customer whereby the interest rate is set prior to the loan funding. These commitments bind us to fund the loan at a specified rate. When loans are funded, they are classified as held for sale until they are sold. During the origination and sale process, the value of ~~interest rate lock commitments~~IRLCs and loans held for sale inventory rises and falls with changes in interest rates; for example, if we enter into ~~interest rate lock commitments~~IRLCs at low interest rates followed by an increase in interest rates in the market, the ~~value~~values of our ~~interest rate lock commitment~~IRLCs will decrease.

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The fair value of MSRs is also driven primarily by interest rates, which impact the likelihood of loan prepayments. In periods of rising interest rates, the fair value of the MSRs generally increases as prepayments decrease, and therefore the estimated life of the MSRs and related expected cash flows increase. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore the estimated life of the MSRs, and related cash flows, decrease.

There has been a long-term trend of falling interest rates, with intermittent periods of rate increases. According to the MBA, average 30-year mortgage rates declined by approximately 68 basis points from March 31, 2020 to March 31, 2021. When rates decline, our Origination volume generally increases as refinance opportunities increase. However, during the three months ended March 31, 2021, interest rates increased by approximately 41 basis points. An increase of this nature generally results in lower prepayment speeds and a subsequent upward adjustment to the fair value of our MSRs for the loans that still exist in our portfolio. Because origination volumes tend to increase in declining interest rate environments and decrease in increasing rate environments, weWe believe that our two principal sources of revenue, mortgage origination and mortgage loan servicing, contribute to a stable business profile by creating a natural hedge against changes in the interest rate environment. Additionally, to mitigate the interest rate risk impact, we employ economic hedging strategies. Our economic hedging strategies allow us to protect our investment and help us manage our liquidity through forward delivery commitments on mortgage-backed securities or whole loans and options on forward contracts.

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Key Performance Indicators

We review several operating metrics, including the following key performance indicators to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make strategic decisions. We believe these key metrics are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and they may be used by investors to help analyze the health of our business.

Our origination metrics enable us to monitor our ability to generate revenue and expand our market share across different channels. In addition, they help us track origination quality and compare our performance against the nationwide originations market and our competitors. We monitor both Origination volume, which represents funded volume, and Fallout Adjusted (“FOA”) lock volume which represents pull through adjusted volume expected from locks taken during the period at the inception of the lock. We also view gain on sale margins by channel which helps us to view the margin drivers that are attributable to the specific channels and those that are attributable to capital markets activities. Other key performance indicators include the number of Broker Partners and number of Correspondent Partners, which enable us to monitor key inputs of our business model. Our servicing metrics enable us to monitor the size of our customer base, the characteristics and value of our MSR Servicing Portfolio, and help drive retention efforts.

Origination Segment KPIs

The following summarizes key performance indicators for our business for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020:

Three Months Ended March 31,
($ in thousands) 2021 2020
Origination Volume by Channel
Wholesale $ 19,668,264 $ 4,946,545
Correspondent 8,243,380 2,925,706
Direct 1,514,287 292,812
Origination volume $ 29,425,931 $ 8,165,063
FOA Lock Volume by Channel
Wholesale $ 16,139,923 $ 6,962,668
Correspondent 6,673,059 3,227,697
Direct 739,796 335,386
FOA Lock Volume $ 23,552,778 $ 10,525,751
Gain on sale margin by Channel (a)
Wholesale $ 245,050 $ 130,171
Correspondent 22,162 21,412
Direct 26,758 14,579
Other gain (loss) on sale(b)
7,272 (63,598)
Total gain on sale margin $ 301,242 $ 102,564

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~~Tabl~~eTable of Contents

Three Months Ended March 31,
2021 2020
Gain on sale margin by Channel (bps) (a)
Wholesale 152 187
Correspondent 33 66
Direct 362 435
Other gain (loss) on sale(b)
3 (60)
Total gain on sale margin 128 97
Market Share
Overall share of origination market(c)
1.5 % 1.2 %
Share of wholesale channel(d)
7.0 % 4.7 %
Origination Volume by Purpose
Purchase 20.4 % 39.3 %
Refinance 79.6 % 60.7 %
Third Party Partners
Number of Broker Partners(e)
6,023 3,512
Number of Correspondent Partners(f)
620 552


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2021		2020		2021		2020
Origination Volume by Channel
Wholesale	$	16,355,449	$	10,981,395	$	54,405,648	$	23,772,112
Correspondent	3,434,186		6,280,039		17,375,985		12,696,815
Direct	1,005,985		852,433		3,910,769		1,576,959
Origination volume	$	20,795,621	$	18,113,867	$	75,692,402	$	38,045,886

FOA Lock Volume by Channel
Wholesale	$	16,709,845	$	11,242,589	$	48,415,960	$	26,375,827
Correspondent	4,149,963		6,547,672		14,785,605		14,469,776
Direct	1,034,634		799,514		2,610,410		1,725,915
FOA Lock Volume	$	21,894,442	$	18,589,775	$	65,811,975	$	42,571,518

	Three Months Ended September 30,
	2021				2020
Gain on Sale Margin by Channel	Amount		bps		Amount		bps
Wholesale	$	121,999	73		$	359,512	320
Correspondent	8,351		20		40,431		62
Direct	30,252		292		33,564		420
Gain on sale margin attributable to channels	160,602		73		433,507		233
Other gain on sale(a)	23,247		11		98,596		53
Gain on sale margin (b)	$	183,849	84		$	532,103	286

~~Servicing Segment KPIs~~


	Nine Months Ended September 30,
	2021					2020
Gain on Sale Margin by Channel	Amount			bps		Amount			bps
Wholesale	$	481,535		99		$	742,217		281
Correspondent	39,784			27		112,006			77
Direct	83,332			319		74,086			429
Gain on sale margin attributable to channels	604,651			91		928,309			218
Other gain on sale(a)	43,023			7		94,921			22
Gain on sale margin (b)	$	647,674		98		$	1,023,230		240

	Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020		2021			2020
Market Share
Overall share of origination market(c)	2.2		%	1.4	%	2.2		%	1.4	%
Share of wholesale channel(d)	10.2		%	6.4	%	10.2		%	6.4	%

Origination Volume by Purpose
Purchase	34.6		%	29.0	%	29.3		%	31.7	%
Refinance	65.4		%	71.0	%	70.7		%	68.3	%

Third Party Partners
Number of Broker Partners(e)	7,452			4,921		7,452			4,921
Number of Correspondent Partners(f)	652			587		652			587

~~The following summarizes key performance indicators for our business as~~

Table of ~~March 31, 2021 and 2020:~~Contents

As of March 31,
($ in thousands) 2021 2020
Mortgage Servicing
MSR Servicing Portfolio - UPB(g)
$ 105,821,372 $ 56,717,057
MSR Servicing Portfolio - Units(h)
396,641 251,990
60 days or more delinquent(i)
2.7 % 1.7 %
MSR Portfolio
MSR multiple(j)
3.84 2.61
Weighted Average Note Rate (k)
3.19 % 3.94 %

(a)~~Calculated as gain on sale,~~Includes loan fee income, interest income (expense), net, divided by Fallout Adjusted Lock volume. We previously calculated gain on sale margin as gain on sale, net, divided by Total Funded Origination Volume. We believe that the calculation of gain on sale margin presented herein aligns more closely with when revenue is recognized under U.S. GAAP and we intend to use such presentation on a go-forward basis.

~~(b)Includes~~ realized and unrealized gains (losses) on locks and mortgage loans held for sale, net hedging results, the provision for the representation and warranty reserve and differences between modeled and actual pull-through.

(b)Gain on sale margin calculated as gain on sale divided by Fallout Adjusted Lock volume. Gain on sale includes gain on loans, net, loan fee income, interest income (expense), net, and loan servicing fees (expense) for the Origination segment.

(c)~~March 31,~~Overall share of origination market share data is as of June 30, 2021 ~~market~~obtained from Inside Mortgage Finance, a third party provider of residential mortgage industry news and statistics. The data as of September 30, 2021 is not yet available from Inside Mortgage Finance as of the date of this filing. ~~Overall share~~

(d)Share of ~~origination market~~wholesale channel as of ~~March 31,~~June 30, 2021 and 2020 is calculated as the Company’s originations dollar value for the three months ended March 31, 2021 and 2020, respectively, divided by the total residential originations during the year ended December 31, 2020 in the United States of America perobtained from Inside Mortgage Finance,, a third party provider of residential mortgage industry news and statistics.

~~(d)March 31,~~ The data as of September 30, 2021 ~~market data~~ is not yet available from Inside Mortgage Finance as of the date of this filing. Share of wholesale channel as of March 31, 2021 and 2020 is calculated as the Company’s originations dollar value for the three months ended March 31, 2021 and 2020, respectively, divided by the total wholesale originations during the year ended December 31, 2020 in the United States of America per ~~Inside Mortgage Finance~~.

(e)Number of Broker Partners with whom the Company sources loans.

(f)Number of Correspondent Partners from whom the Company purchases loans.

~~(g)~~

Servicing Segment KPIs

The following summarizes key performance indicators for our business as of September 30, 2021 and 2020:


	As of September 30,
($ in thousands)	2021			2020
Mortgage Servicing
MSR Servicing Portfolio - UPB(a)	$	125,832,286		$	73,951,042
MSR Servicing Portfolio - Units(b)	428,622			307,236

60 days or more delinquent(c)	0.9		%	6.6		%

MSR Portfolio
MSR multiple(d)	4.20			2.57
Weighted Average Note Rate (e)	2.98		%	3.63		%

(a)The unpaid principal balance of loans we service on behalf of Ginnie Mae, Fannie Mae, Freddie Mae and others, at period end.

~~(h)~~(b)Number of loans in our servicing portfolio at period end.

~~Table of~~ ~~Contents~~

~~(i)~~(c)Total balances of outstanding loan principals for which installment payments are at least 60 days past due as a percentage of the outstanding loan principal as of a specified date. Includes delinquent loans in COVID-19 pandemic-related forbearance plans provided in the CARES Act.

~~(j)~~(d)Calculated as the MSR fair market value as of a specified date divided by the related UPB divided by the weighted average service fee.

~~(k)~~(e)Weighted average interest rate of our MSR portfolio at period end.

Non-GAAP Financial Measures

We believe that certain non-GAAP financial measures presented herein, including Adjusted revenue and Adjusted net income can provide useful information to investors and others in understanding and evaluating our operating results. These measures are not financial measures calculated in accordance with U.S. GAAP and should not be considered as a substitute for net income, or any other operating performance measure calculated in accordance with U.S. GAAP and may not be comparable to a similarly titled measure reported by other companies.

We believe that the presentation of Adjusted revenue and Adjusted net income provides useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted revenue and Adjusted net income provide indicators of performance that are not affected by fluctuations in certain costs or other items. Accordingly, management believes that these measurements are useful for comparing general operating performance from period to period, and management relies on these measures for planning and forecasting of future periods. The Company measures the performance of the segments primarily on a contribution margin basis. Additionally, these measures allow management to compare our results with those of other companies that have different financing and capital structures. However, other companies may define Adjusted revenue and Adjusted net income differently, and as a result, our measures of Adjusted revenue and Adjusted net income may not be directly comparable to those of other companies.

Adjusted revenue. We define Adjusted revenue as Total revenue, net exclusive of the impact of the change in fair value of MSRs related to changes in valuation inputs and assumptions, net of MSRs hedge and adjusted for Income from equity method investment.

Adjusted net income. We define Adjusted net income as Net income ~~(loss)~~ exclusive of the impact of the change in fair value of MSRs related to changes in valuation inputs and assumptions, net of MSRs economic hedging results.

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The non-GAAP information presented below should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the related notes.

The following is a reconciliation of Adjusted revenue and Adjusted net income to the nearest U.S. GAAP financial measures of Total revenue, net and Net income, ~~(loss),~~ as applicable:

Reconciliation of Adjusted Revenue to Total Revenue, Net


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2021		2020		2021		2020
Total revenue, net	Total revenue, net	$	421,972	$	67,629	Total revenue, net	$	274,601	$	510,798	$	780,944	$	923,451
Income from equity method investment		4,163		2,316
(Loss) income from equity method investment						(Loss) income from equity method investment	(713)		9,870		16,649		14,050
Change in fair value of MSR (due to inputs and assumptions), net of hedge(a)	Change in fair value of MSR (due to inputs and assumptions), net of hedge(a)	(102,020)		55,374		Change in fair value of MSR (due to inputs and assumptions), net of hedge(a)	(77,486)		11,816		(150,323)		98,302
Adjusted revenue	Adjusted revenue	$	324,115	$	125,319	Adjusted revenue	$	196,402	$	532,484	$	647,270	$	1,035,803

Reconciliation of Adjusted Net Income to Total Net Income ~~(Loss)~~


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2021		2020		2021		2020
Total net income (loss)		$	148,969	$	(10,548)
Total net income						Total net income	$	71,223	$	264,062	$	146,979	$	422,535
Change in fair value of MSR (due to inputs and assumptions), net of hedge(a)	Change in fair value of MSR (due to inputs and assumptions), net of hedge(a)	(102,020)		55,374		Change in fair value of MSR (due to inputs and assumptions), net of hedge(a)	(77,486)		11,816		(150,323)		98,302
Income tax effect of change in fair value of MSR (due to inputs and assumptions), net of hedge(b)	Income tax effect of change in fair value of MSR (due to inputs and assumptions), net of hedge(b)	26,231		(11,814)		Income tax effect of change in fair value of MSR (due to inputs and assumptions), net of hedge(b)	21,340		(3,172)		41,830		(26,313)
Adjusted net income	Adjusted net income	$	73,180	$	33,012	Adjusted net income	$	15,077	$	272,706	$	38,486	$	494,524

(a)MSR fair value changes due to valuation inputs and assumptions are measured using a stochastic discounted cash flow model that includes assumptions such as prepayment speeds, delinquencies, discount rates, and effects of changes in market interest rates. Refer to Note 2 – Basis of Presentation and Significant Accounting Policies and Note 4 – Mortgage Servicing Rights to our unaudited condensed consolidated financial statements included elsewhere in this Report. We exclude changes in fair value of MSRs (due to inputs and assumptions), net of hedge from Adjusted revenue as they add volatility and we believe that they are not indicative of the Company’s operating performance or results of operations. This adjustment does not include changes in fair value

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of MSRs due to realization of cash flows. Realization of cash flows occurs when cash is collected as customers make scheduled payments, partial prepayments of principal, or pay their mortgage in full.

(b)The income tax effect of change in fair value of MSR (due to inputs and assumptions), net of hedge is calculated as the MSR valuation change, net of hedge multiplied by the quotient of Income tax expense (benefit) divided by Income (loss) before income tax.

Results of Operations ~~— Three~~—Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020

Consolidated Results of Operations

The following table sets forth certain consolidated financial data for each of the periods indicated:

Three Months Ended March 31,
($ in thousands) 2021 2020 $ Change % Change
Gain on loans, net $ 301,228 $ 102,563 $ 198,665 193.7 %
Loan fee income 44,115 12,031 32,084 266.7 %
Interest income 25,577 15,849 9,728 61.4 %
Interest expense (32,935) (15,913) (17,022) 107.0 %
Interest expense, net (7,358) (64) (7,294) (11396.9 %)
Loan servicing fees 70,338 43,246 27,092 62.6 %
Change in fair value of mortgage servicing rights, net 12,848 (91,527) 104,375 (114.0 %)
Other income 801 1,380 (579) (42.0) %
Total revenue, net 421,972 67,629 354,343 524.0 %
Compensation and benefits 153,642 52,950 100,692 190.2 %
Loan expense 22,418 6,800 15,618 229.7 %
Loan servicing expense 8,093 7,953 140 1.8 %
Occupancy and equipment 8,555 5,320 3,235 60.8 %
General and administrative 22,244 7,222 15,022 208.0 %
Depreciation and amortization 2,761 1,499 1,262 84.2 %
Other expenses 9,336 2,238 7,098 317.2 %
Total expenses 227,049 83,982 143,067 170.4 %
Income (loss) before income tax 194,923 (16,353) 211,276 1292.0 %
Income tax expense (benefit) 50,117 (3,489) 53,606 1536.4 %
Income from equity method investment 4,163 2,316 1,847 79.7 %
Total net income (loss) $ 148,969 $ (10,548) 159,517 1512.3 %

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	Three Months Ended September 30,
($ in thousands)	2021		2020		$ Change		% Change
Gain on loans, net	$	145,471	$	503,344	$	(357,873)	(71.1	%)
Loan fee income	34,484		28,205		6,279		22.3	%
Interest income	36,719		14,709		22,010		149.6	%
Interest expense	(45,532)		(17,559)		(27,973)		159.3	%
Interest expense, net	(8,813)		(2,850)		(5,963)		209.2	%
Loan servicing fees	91,831		48,350		43,481		89.9	%
Change in fair value of mortgage servicing rights, net	3,544		(66,749)		70,293		(105.3	%)
Other income	8,084		498		7,586		1523.3	%
Total revenue, net	274,601		510,798		(236,197)		(46.2	%)

Compensation and benefits	114,612		117,177		(2,565)		(2.2	%)
Loan expense	16,618		8,733		7,885		90.3	%
Loan servicing expense	6,681		6,481		200		3.1	%
Production Technology	7,583		6,378		1,205		18.9	%
General and administrative	21,741		16,213		5,528		34.1	%
Depreciation and amortization	2,440		1,236		1,204		97.4	%
Other expenses	5,649		7,094		(1,445)		(20.4	%)
Total expenses	175,324		163,312		12,012		7.4	%

Income before income tax	99,277		347,486		(248,209)		(71.4	%)
Income tax expense	27,341		93,294		(65,953)		(70.7	%)
(Loss) income from equity method investment	(713)		9,870		(10,583)		(107.2	%)
Total net income	$	71,223	$	264,062	(192,839)		(73.0	%)

	Nine Months Ended September 30,
($ in thousands)	2021		2020		$ Change		% Change
Gain on loans, net	$	521,727	$	962,778	$	(441,051)	(45.8	%)
Loan fee income	118,099		60,630		57,469		94.8	%
Interest income	96,944		42,370		54,574		128.8	%
Interest expense	(122,603)		(47,845)		(74,758)		156.3	%
Interest expense, net	(25,659)		(5,475)		(20,184)		(368.7	%)
Loan servicing fees	247,753		133,904		113,849		85.0	%
Change in fair value of mortgage servicing rights, net	(90,513)		(230,524)		140,011		(60.7	%)
Other income	9,537		2,138		7,399		346.1	%
Total revenue, net	780,944		923,451		(142,507)		(15.4	%)

Compensation and benefits	395,550		251,462		144,088		57.3	%
Loan expense	51,796		21,686		30,110		138.8	%
Loan servicing expense	22,282		22,742		(460)		(2.0	%)
Production Technology	25,038		14,540		10,498		72.2	%
General and administrative	74,527		38,981		35,546		91.2	%
Depreciation and amortization	7,551		4,162		3,389		81.4	%
Other expenses	23,620		12,087		11,533		95.4	%
Total expenses	600,364		365,660		234,704		64.2	%

Income before income tax	180,580		557,791		(377,211)		67.6	%
Income tax expense	50,250		149,306		(99,056)		66.3	%
Income from equity method investment	16,649		14,050		2,599		18.5	%
Total net income	$	146,979	$	422,535	(275,556)		65.2	%

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The ~~increase~~decrease in Net income for the three and nine months ended September 30, 2021 was primarily the result of ~~an increase~~a decrease in Gain on loans, net due to ~~increased Origination volume.~~decreased margins as a result of the competitive environment during the three and nine months ended September 30, 2021. The ~~increase~~decrease in Total net income was ~~further driven~~partially offset by ~~an increase in Loan fee income due to the growth of our Origination volume as well as~~ a favorable Change in fair value of mortgage servicing rights ~~net that was primarily driven by~~due to the increase in mortgage interest ~~rates which resulted in a~~rates. The decrease ~~of prepayment speeds. The increase~~ in Total net income was also partially offset by an increase ~~of Compensation and benefits expense~~in Loan servicing fees due to ~~increases~~an increase in ~~commissions and headcount~~our mortgage servicing portfolio. Total expenses increased slightly for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 due to an increase in Loan expense as a result of ~~the growth~~increased loan origination volume and a slight increase in ~~Origination volume.~~General and administrative expense due to an increase in marketing expenses for advertising and professional services expense.

Total Revenue, net

Gain on loans, net

Gain on loans, net is driven by volume ~~(fallout adjusted~~(FOA locks) ~~and~~, our gain on sale margin within each channel of our Origination segment, and other for each of the periods presented:

~~Table of~~ ~~Contents~~


											Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)										($ in thousands)	2021		2020		2021		2020
FOA Lock Volume by Channel										FOA Lock Volume by Channel
Wholesale										Wholesale	$	16,709,845	$	11,242,589	$	48,415,960	$	26,375,827
Correspondent										Correspondent	4,149,963		6,547,672		14,785,605		14,469,776
Direct										Direct	1,034,634		799,514		2,610,410		1,725,915
FOA Lock Volume										FOA Lock Volume	$	21,894,442	$	18,589,775	$	65,811,975	$	42,571,518

		Three Months Ended March 31,									Three Months Ended September 30,
		2021				2020					2021				2020
Channel		Fallout adjusted Locks	Gain on sale Margin (a)		Gain on loans, net	Fallout adjusted Locks	Gain on sale Margin (a)		Gain on loans, net
Gain on Sale Margin by Channel										Gain on Sale Margin by Channel	Amount		bps		Amount		bps
Wholesale	Wholesale	16,139,923	1.52	%	245,050	6,962,668	1.87	%	130,171	Wholesale	$	121,999	73		$	359,512	320
Correspondent	Correspondent	6,673,059	0.33	%	22,162	3,227,697	0.66	%	21,412	Correspondent	8,351		20		40,431		62
Direct	Direct	739,796	3.62	%	26,758	335,386	4.35	%	14,579	Direct	30,252		292		33,564		420
Other gain on sale		n/a	n/a		7,272	n/a	n/a		(63,598)
Total gain on sale		23,552,778	1.28	%	301,242	10,525,751	0.97	%	102,564
Gain on sale margin attributable to channels										Gain on sale margin attributable to channels	160,602		73		433,507		233
Other gain on sale(a)										Other gain on sale(a)	23,247		11		98,596		53
Gain on sale margin (b)										Gain on sale margin (b)	$	183,849	84		$	532,103	286

											Nine Months Ended September 30,
											2021				2020
Gain on Sale Margin by Channel										Gain on Sale Margin by Channel	Amount		bps		Amount		bps
Wholesale										Wholesale	$	481,535	99		$	742,217	281
Correspondent										Correspondent	39,784		27		112,006		77
Direct										Direct	83,332		319		74,086		429
Gain on sale margin attributable to channels										Gain on sale margin attributable to channels	604,651		91		928,309		218
Other gain on sale(a)										Other gain on sale(a)	43,023		7		94,921		22
Gain on sale margin (b)										Gain on sale margin (b)	$	647,674	98		$	1,023,230	240

(a)~~Gain on sale margin represents the margin on new~~Includes loan fee income, interest ~~rate lock commitments,~~income (expense), net, realized and unrealized gains ~~and losses~~(losses) on mortgage loans, changes in fair value of all loan-related derivatives, including interest rate lock commitments and, freestanding loan-related derivatives, and the provision for the losses related to the representation and warranty reserve, and is calculated as the ratio of Gain on loans, net to the UPB of new fallout-adjusted interest rate lock commitments.

~~In addition, the table below provides details of the characteristics of our mortgage loan production for each of the periods presented:~~

Three Months Ended March 31,
(in thousands, except Gain on sale margin) 2021 2020
Origination volume $ 29,425,931 $ 8,165,053
Originated MSR - UPB $ 28,022,026 $ 7,748,482
Retained servicing (UPB)(a)
96.3% 97.1 %

~~(a)Represents the percentage of our loan sales UPBs for which we retained the underlying servicing UPB during the period.~~

~~The increase in Gain on loans, net was due to an increase of $13.0 billion, or 123.7% of new fallout adjusted lock volume, combined with a 31.3% increase in margin.~~

We experienced increases in fallout adjusted lock volume across all of our origination channels primarily due to an increase in our overall share of the origination market, which increased to 1.5% from 1.2% and our share of the wholesale channel which increased to 7.0% from 4.7%. In addition, the overall origination market increased as a result of lower mortgage interest rates where average mortgage interest rates were 2.9% compared to 3.5% according to the Mortgage Bankers Association. In general, when mortgage interest rates are lower, demand increases, which generally leads to higher volume, and specifically, a higher amount of refinance originations. The increase in Gain on loans, net attributable to increased new fallout adjusted lock volume was partially offset by lower margins on new fallout adjusted locks attributable to our origination channels, primarily due to an increase in competition among mortgage lenders. Generally, when mortgage interest rates rise, competition increases and as a result, gain on sale margins decline. The increase in Gain on loans, net was also due to a $70.9 million favorable change in Other gain on sale for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Other includes realized and unrealized gains/(losses) onFOA locks and mortgage loans held for sale, net hedging results, the provision for the representation and warranty reserve and differences between modeled and actual pull-through. ~~The $63.6 million loss in Other~~

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In addition, the table below provides details of the characteristics of our mortgage loan production for each of the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Origination volume	$	20,795,621	$	18,113,867	$	75,692,401	$	38,045,886
Originated MSR - UPB	$	27,946,562	$	17,749,342	$	82,252,911	$	37,066,235
Retained servicing (UPB)(a)	95.1%		100.0%		96.7%		99.4%

(a)Represents the percentage of our loan sales UPBs for which we retained the underlying servicing UPB during the period.

For the three months ended ~~March 31, 2020 was the result of interest rate volatility due~~September 30, 2021 compared to ~~the economic instability caused by the onset of the COVID-19 pandemic during the period. The $7.3 million gain in Other for~~ the three months ended ~~March 31, 2021~~September 30, 2020, the decrease in Gain on loans, net was primarily ~~attributable~~due to ~~higher actual pull-through~~a decrease of $348.3 million, or 65% in gain on sale margin.

For the nine months ended September 30, 2021 compared to ~~modeled pull-through as~~the nine months ended September 30, 2020, the decrease in Gain on loans, net was primarily due to a ~~result~~decrease of ~~increasing mortgage interest rates~~$375.6 million, or 37% in gain on sale margin.

Although we experienced increases in FOA lock volume and Origination volume across all of our origination channels primarily due to an increase in our overall share of the origination market, which increased to 2.2% from 1.4% and our share of the wholesale channel which increased to 10.2% from 6.4%, we saw a significant decrease in gain on sale margins due to competitive environment during the ~~period.~~three months ended September 30, 2021 compared to the prior year, which also negatively impacted our results for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Loan fee income

The increase in Loan fee income was primarily driven by an increase in Origination volume discussed above.

Loan servicing fees


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2021		2020		2021		2020
Retained servicing fees, net of guarantee fees	Retained servicing fees, net of guarantee fees	$	67,483	$	42,905	Retained servicing fees, net of guarantee fees	$	84,271	$	49,387	$	229,369	$	135,813
Late fees and other	Late fees and other	2,855		341		Late fees and other	7,560		(1,037)		18,384		(1,909)
Loan servicing fees	Loan servicing fees	$	70,338	$	43,246	Loan servicing fees	$	91,831	$	48,350	$	247,753	$	133,904

The table below provides details of the characteristics of our mortgage loan servicing portfolio for each of the periods presented:

~~Table of~~ ~~Contents~~


		As of March 31,					As of September 30,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2021		2020
MSR Servicing Portfolio - UPB	MSR Servicing Portfolio - UPB	$	105,821,372	$	56,717,057	MSR Servicing Portfolio - UPB	$	125,832,286	$	73,951,042
Average MSR Servicing Portfolio - UPB		$	97,049,310	$	54,658,802
Average MSR Servicing Portfolio - UPB for the three months ended						Average MSR Servicing Portfolio - UPB for the three months ended	$	125,045,611	$	70,426,343
Average MSR Servicing Portfolio - UPB for the nine months ended						Average MSR Servicing Portfolio - UPB for the nine months ended	$	107,054,768	$	63,275,794
MSR Servicing Portfolio – units	MSR Servicing Portfolio – units	396,641		251,990		MSR Servicing Portfolio – units	428,622		307,236
MSRs Fair Value Multiple (x)	MSRs Fair Value Multiple (x)	3.8x		2.6x		MSRs Fair Value Multiple (x)	4.2x		2.6x
Delinquency Rates (%)	Delinquency Rates (%)	2.7%		1.7%		Delinquency Rates (%)	0.9%		6.6%
Weighted average credit score	Weighted average credit score	739		722		Weighted average credit score	742		734
Weighted average servicing fee, net (bps)	Weighted average servicing fee, net (bps)	28.4		32.2		Weighted average servicing fee, net (bps)	26.5		30.7

The increase in loan servicing fees for the three and nine months ended September 30, 2021 compared to three and nine months ended September 30, 2020 was primarily driven by ~~an increase in Retained Servicing fees, net of guarantee fees due to~~ an increase in the Average MSR Servicing Portfolio of ~~$42.4~~$54.6 billion, or ~~77.6% which~~a 78% increase for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, and $43.8 billion, or a 69.2% increase for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increases in the Average MSR Servicing Portfolio during the three and nine months ended September 30, 2021 was ~~primarily driven by~~due to an increase in Origination ~~volume.~~volume which increased Retained Servicing fees, net of guarantee fees.

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Change in fair value of MSRs


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2021		2020		2021		2020
Realization of cash flows	Realization of cash flows	$	(89,170)	$	(36,153)	Realization of cash flows	$	(73,942)	$	(54,933)	$	(240,836)	$	(132,222)
Valuation inputs and assumptions	Valuation inputs and assumptions	197,896		(157,984)		Valuation inputs and assumptions	85,150		(17,210)		188,334		(211,667)
Hedge		(95,878)		102,610
Economic hedging activities						Economic hedging activities	(7,665)		5,394		(38,011)		113,365
Change in fair value of MSRs	Change in fair value of MSRs	$	12,848	$	(91,527)	Change in fair value of MSRs	$	3,544	$	(66,749)	$	(90,513)	$	(230,524)

The increase in Change in fair value of MSRs for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily driven by the Valuation inputs and assumptions gain recorded for the three months ended ~~March 31,~~September 30, 2021 that was ~~driven by~~primarily due to an increase in interest rates during the period as ~~compared to~~well as the ~~loss recorded in~~favorable impact resulting from the MSR sale executed during the three months ended ~~March 31, 2020 that was driven by a decrease in interest rates during the period. An increase in interest rates results in lower modeled prepayment speeds.~~September 30, 2021. The favorable change from Valuation inputs and assumptions ~~gains and losses are offset by our economic hedging activities designed to offset the effects of changes in interest rates on valuation input and assumptions. The increases were~~was partially offset by an increase in loss from realization of cash flows due to an increase in actual prepayments, combined with higher scheduled payments collected on loans in our MSR portfolio ~~for the three months ended March 31, 2021~~as a result of a 78% increase in our average servicing portfolio, compared to the three months ended ~~March 31,~~September 30, 2020. Valuation inputs and assumptions gains are partially offset by our economic hedging activities designed to offset the effects of changes in interest rates on valuation input and assumptions.

The ~~higher prepayments experienced during~~increase in Change in fair value of MSRs for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the nine months ended September 30, 2020 was primarily driven by the ~~result of lower mortgage~~Valuation inputs and assumptions gain recorded for the nine months ended September 30, 2021 that was driven by an increase in interest rates during the ~~three~~period as well as the favorable impact resulting from the MSR sale executed during the nine months ended ~~March 31, 2021 as compared~~September 30, 2021. The favorable change from Valuation inputs and assumptions was partially offset by an increase in loss from realization of cash flows due to ~~the three months ended March 31, 2020. The~~an increase in actual prepayments, combined with higher scheduled payments collected on loans in our MSR portfolio ~~for the three months ended March 31, 2021~~as a result of a 69.2% increase in our average servicing portfolio, compared to the ~~three~~nine months ended ~~March 31, 2020 was due~~September 30, 2020. Valuation inputs and assumptions gains are offset by our economic hedging activities designed to offset the ~~82% increase~~effects of changes in ~~the average servicing portfolio.~~interest rates on valuation input and assumptions.

Interest expense, net

The components for Interest expense, net for the periods presented were as follows:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2021		2020		2021		2020
Interest income	Interest income	$	25,577	$	15,849	Interest income	$	36,719	$	14,709	$	96,944	$	42,370
Interest expense	Interest expense	(32,935)		(15,913)		Interest expense	$	(45,532)	(17,559)		$	(122,603)	(47,845)
Interest expense, net	Interest expense, net	$	(7,358)	$	(64)	Interest expense, net	$	(8,813)	$	(2,850)	$	(25,659)	$	(5,475)

The increase in interest expense, net for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020 was due to an increase in average warehouse borrowings outstanding as a result of our increased origination volume combined with an increase in our term debt interest expense as a result of ~~our new~~the Senior Notes (as defined below) issued during the ~~three months ended March 31,~~first quarter of 2021. The increase in interest expense was partially offset by an increase in interest income from higher interest earned on mortgage loans held for sale due to an increase in average mortgage loans held for sale ~~due to~~which was driven by the increase in Origination volume.

Expenses

~~Increase~~The increase in total expenses for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily driven by increases in Loan expense and General and administrative expense.

Loan expense

TheLoan expense increase for the three months ended September 30, 2021 was primarily due to the increase in Origination volume compared to the respective periods in 2020. Additionally, we experienced increases in various loan processing fees in the current year periods compared to prior periods as third party costs increased.

General and administrative expense

General and administrative expense increased by $5.5 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily driven by an increase in Professional services fees of $3.9 million to meet additional compliance and corporate requirements, an increase in Occupancy and equipment expense of $1.1 million due to increased headcount for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, and an increase in Advertising and marketing expense of $0.6 million to support our market share increase.

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The increase in total expenses for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily driven by an increase in Compensation and benefits expense, ~~due to an increase in Origination volume.~~Loan expense, Production technology expense, General and administrative expense and Other expenses.

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Compensation and benefits expense

Compensation and benefits expense increased ~~primarily~~by $144.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 driven by an increase of ~~$39.4~~$8.4 million in commissions and bonuses resulting from an increase in Origination volume, as well as an increase of ~~$61.3~~$135.7 million in salary and benefits expense largely driven by an ~~150.3%~~33% increase in employee headcount to support our increased Origination volume ~~as well as~~for the nine months ended September 30, 2021 compared to ~~support~~ the ~~growth of our servicing portfolio.~~nine months ended September 30, 2020. As a percentage of volume, Compensation and benefits expense was 0.5% and ~~0.6%~~0.7% of Origination volume for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 ~~and March 31, 2020, respectively.~~compared to the nine months ended September 30, 2020.

Loan expense

TheLoan expense increase for the nine months ended September 30, 2021 was ~~consistent with~~primarily due to the increase in Origination ~~volume.~~

~~Loan servicing expense~~ increased primarily driven by $1.9 million in loan servicing operations costs due to a 57% increase in mortgage servicing portfolio units. The increase was partially offset by a decrease of $1.8 million in write-offs of uncollectible servicing advances due to a decrease in foreclosure costs on defaulted loans. We experienced lower foreclosure-related expenses as a result of the foreclosure moratoriums enacted by state governments in responsevolume compared to the ~~COVID-19 pandemic.~~respective periods in 2020. Additionally, we experienced increases in various loan processing fees in the current year periods compared to prior periods as third party costs increased.

~~Occupancy and equipment~~Production technology expense

Production technology expense increased ~~was~~by $10.5 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by an increase in equipment and information technology associated expense ~~of $3.0 million~~ driven by our increased headcount, ~~due to~~ higher Origination volume and the increased size of our servicing portfolio.

General and administrative expense

General and administrative expense increased by $35.5 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily driven by an increase in professional services fees of ~~$15.7~~$27.4 million ~~related~~for the nine months ended September 30, 2021 compared to ~~our loan origination process~~the nine months ended September 30, 2020 to meet additional compliance and corporate requirements and an increase in ~~advertising~~Occupancy and ~~marketing~~equipment expense of ~~$0.4~~$8.4 million ~~as a result of~~related to the increase in Origination ~~volume. These increases were partially offset~~volume and an increase in headcount.

Other expense

Other expense increased by ~~a decrease in travel and entertainment of $1.0~~$11.5 million ~~as we restricted our associates’ non-essential business travel in response~~for the nine months ended September 30, 2021 compared to the ~~COVID-19 pandemic.~~

~~Depreciation and amortization expense~~ ~~decreased~~nine months ended September 30, 2020 primarily driven ~~by a reduction in amortization of intangibles, partially offset~~ by an increase in ~~depreciation~~other employee benefit expenses of $6.1 million provided during the year to recognize employee contributions and for work from home expenses as well as an increase in insurance expense of $5.3 million related to ~~increases~~D&O insurance expense the Company incurred in ~~fixed assets.~~light of its status as a publicly traded entity.

Income tax expense

Income tax expense on continuing operations ~~increased~~decreased for the three and nine months ended September 30, 2021 compared to three and nine months ended September 30, 2020 primarily due to ~~an increase~~a decrease in pre-tax income. Our overall effective tax rate of ~~25.7%~~27.5% and ~~21.3%~~26.8% for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and 27.8% and 26.8% for the nine months ended September 30, 2021 and 2020, respectively, differed from the U.S. statutory rate of 21.0% primarily due the impact of income from equity method investment and state incomes taxes in both years. In addition, in 2021, the difference from the statutory rate was also attributable to non-deductible transaction costs related to our initial public offering (the “IPO”) and limitations on the tax deductibility of officers’ compensation applicable to a public entity.

Summary Results by Segment for the Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020

We have two segments:

•Our Origination segment consists of a combination of retail and third-party loan production operations. The increase in revenues for the Origination segment was primarily driven by an increase in loan Origination volume.

•Our Servicing segment consists of servicing loans the Company had initially originated and subsequently sold, for which the Company retained servicing rights as well as MSRs the Company occasionally purchases from others. The increase in revenues for the Servicing segment was primarily driven by an increase in servicing fees due to increase in our servicing portfolio and a gain we recorded in the Change in fair value of mortgage servicing rights, net due to an increase in interest rates that resulted in lower modeled prepayment speeds.

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Origination

The table below presents details of Revenue and Contribution margin for the Origination segment for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2021		2020		2021		2020
Gain on loans, net	Gain on loans, net	$	301,228	$	102,563	Gain on loans, net	$	145,302	$	503,344	$	521,534	$	962,778
Loan fee income	Loan fee income	44,115		12,031		Loan fee income	34,484		28,205		118,099		60,630
Loan servings fees		(8)		(562)
Loan servicing fees						Loan servicing fees	28		236		20		(1,982)
Change in fair value of mortgage servicing rights, net						Change in fair value of mortgage servicing rights, net	—		—		—		—
Interest income	Interest income	1,288		526		Interest income	4,035		318		8,021		1,804
Total Origination segment revenue	Total Origination segment revenue	346,623		114,558		Total Origination segment revenue	183,849		532,103		647,674		1,023,230
Directly attributable expense	Directly attributable expense	157,817		51,830		Directly attributable expense	116,524		108,077		413,863		232,692
Contribution margin	Contribution margin	$	188,806	$	62,728	Contribution margin	$	67,325	$	424,026	$	233,811	$	790,538

~~Table of~~ ~~Contents~~

Servicing

The table below presents details of Revenue and Contribution margin for the Servicing segment for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2021		2020		2021		2020
Gain on loans, net						Gain on loans, net	$	173	$	—	$	190	$	—
Loan servicing fees	Loan servicing fees	$	70,346	$	43,808	Loan servicing fees	91,803		48,114		247,733		135,886
Interest income	Interest income	252		5,264		Interest income	623		598		1,291		7,132
Other income	Other income	128		58		Other income	7,476		89		7,653		205
Total Servicing segment revenue	Total Servicing segment revenue	70,726		49,130		Total Servicing segment revenue	100,075		48,801		256,867		143,223
Directly attributable expense	Directly attributable expense	18,722		13,267		Directly attributable expense	17,440		13,937		54,930		42,664
Primary margin	Primary margin	52,004		35,863		Primary margin	82,635		34,864		201,937		100,559
Change in MSR fair value: amortization	Change in MSR fair value: amortization	(89,170)		(36,153)		Change in MSR fair value: amortization	(73,942)		(54,933)		(240,836)		(132,222)
Adjusted contribution margin						Adjusted contribution margin	8,693		(20,069)		(38,899)		(31,663)
Change in MSR fair value: mark-to-market, net of hedge	Change in MSR fair value: mark-to-market, net of hedge	102,018		(55,375)		Change in MSR fair value: mark-to-market, net of hedge	77,486		(11,816)		150,323		(98,302)
Contribution margin	Contribution margin	$	64,852	$	(55,665)	Contribution margin	$	86,179	$	(31,885)	$	111,424	$	(129,965)

Liquidity and Capital Resources

Sources and Uses of Cash

Historically, our primary sources of liquidity have included:

•Borrowings, including under our warehouse funding facilities and other secured and unsecured financing facilities

•Cash flow from our operations, including:

•Sale of mortgage loans held for sale

•Loan origination fees

•Servicing fee income

•Interest income on loans held for sale, and

•Cash and marketable securities on hand

Historically, our primary uses of funds have included:

•Origination of loans

•Payment of interest expense

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•Repayment of debt

•Payment of operating expenses, and

•Changes in margin requirements for derivative contracts

We are also subject to contingencies which may have a significant impact on the use of our cash.

Summary of Certain Indebtedness

To originate and aggregate loans for sale into the secondary market, we use our own working capital and borrow on a short-term basis primarily through committed and uncommitted mortgage warehouse lines of credit that we have established with different large global and regional banks and financial institutions. Our loan funding facilities are primarily in the form of master repurchase agreements and participation agreements. New loan originations that are financed under these facilities are generally financed at approximately 95% to 100% of the principal balance of the loan (although certain types of loans are financed at lower percentages of the principal balance of the loan).

At the time of either the funding or purchase, mortgage loans are pledged as collateral for borrowings on mortgage warehouse lines of credit. In most cases, loans will remain on one of the warehouse lines of credit facilities for only a short time, generally less than one month, until the loans are pooled and sold. During the time the loans are held for sale, we earn Interest income from the borrower on the underlying mortgage loan. This income is partially offset by the interest and fees we have to pay under the mortgage warehouse lines of credit.

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When we sell a pool of loans in the secondary market, the proceeds received from the sale of the loans are used to pay back the amounts we owe on the mortgage warehouse lines of credit. We rely on the cash generated from the sale of loans to fund future loans and repay borrowings under our mortgage warehouse lines of credit. Delays or failures to sell loans in the secondary market could have an adverse effect on our liquidity position.

As of ~~March 31,~~September 30, 2021, we held mortgage warehouse lines of credit ~~arrangements~~ with ~~twelve~~11 separate financial institutions with a total maximum borrowing capacity of ~~$6.4~~$7.5 billion and an unused borrowing capacity of ~~$1.5~~$1.9 billion. Refer to Note 7 – Warehouse Lines of Credit of our unaudited condensed consolidated financial statements.

As of ~~March 31,~~September 30, 2021, we maintained a servicing advance financing facility, MSR financing facility and an operating line of credit with total combined maximum borrowing capacity of ~~$574.5~~$918.5 million and unused borrowing capacity of ~~$223.7~~$389.2 million. ~~Our servicing advance financing facility~~Refer to Note 8 – Term Debt and the operating line of credit each has a maturity date of May 27, 2021. We are currently in active discussions with the lender of the two facilities and expect to renew the facilities prior to the maturity date. Refer toOther Borrowings, net ~~Note 7 – Warehouse Lines of Credit~~of our unaudited condensed consolidated financial statements.

The amount owed and outstanding on our loan funding facilities fluctuates significantly based on our origination volume, the amount of time it takes us to sell the loans we originate, and the amount of loans being self-funded with cash.

Our debt financing agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. A margin deficit generally will result from any decline in the market value (as determined by the applicable lender) of the assets subject to the related financing agreement relative to the available financing and offsetting hedges. Upon notice from the applicable lender, we generally will be required to satisfy the margin call on the day of such notice or the following business day.

The warehouse facilities and other lines of credit require maintenance of certain operating and financial covenants, and the availability of funds under these facilities is subject to, among other conditions, our continued compliance with these covenants. These financial covenants include, but are not limited to, maintaining a certain minimum tangible net worth, minimum liquidity, minimum profitability levels, and ratio of indebtedness to tangible net worth, among others. A breach of these covenants can result in an event of default under these facilities following which the lenders would be able to pursue certain remedies against us. In addition, each of these facilities includes cross-default or cross- acceleration provisions that could result in all facilities terminating if an event of default or acceleration of maturity occurs under any facility.

OnIn January ~~19,~~of 2021, we issued $550.0 million aggregate principal amount of our ~~5.000% senior unsecured notes~~5.0% Senior Notes due 2026 (the “Senior ~~Unsecured~~ Notes”) ~~to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and to certain non-U.S. persons~~ in transactions outside the United States in accordance with Regulation S under the Securities Act according to the terms and conditions of an indenture (the “Senior Unsecured Notes Indenture”) and purchase agreement, the proceeds of which were used to fund a distribution of $269.3 million to Home Point Capital LP, our direct parent prior to the consummation of the merger in connection with our initial public offering, to repay the $270.0 million of indebtedness then-currently outstanding under our $500 million MSR financing facility, and to pay fees and expenses related thereto.

private placement transaction. Interest on the Senior ~~Unsecured~~ Notes is payable at a rate of ~~5.000%~~5.0% per annum, semi-annually on February 1 and August 1 of each year, beginning August 1, 2021. The Senior ~~Unsecured~~ Notes will mature on February 1, 2026. The ~~Senior Unsecured Notes~~ Indenture governing the Senior ~~Unsecured~~ Notes ~~also~~ contains customary covenants and events of default.

~~We were~~As of September 30, 2021, the Company was in compliance with all ~~covenants under our~~ warehouse ~~facilities and other lines of credit as of March 31, 2021 and March 31, 2020~~facility covenants and with all covenants under the Indenture governing the Senior ~~Unsecured Notes Indenture as of March 31, 2021.~~Notes.

Cash Flows

Our cash flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 are summarized below.

Three Months Ended March 31,
($ in thousands) 2021 2020
Net cash used in operating activities $ (1,911,372) $ (202,213)
Net cash used in investing activities (4,078) (2,395)
Net cash provided by financing activities 1,979,705 210,925
Net increase in Cash and cash equivalents and restricted cash 64,255 6,317
Cash and cash equivalents and restricted cash at end of period $ 261,148 $ 88,048

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~~Operating Activities~~


	Nine Months Ended September 30,
($ in thousands)	2021		2020
Net cash used in operating activities	$	(3,657,464)	$	(385,095)
Net cash provided (used) in investing activities	69,796		(9,914)
Net cash provided by financing activities	3,593,902		626,668
Net increase in Cash and cash equivalents and restricted cash	6,234		231,659
Cash and cash equivalents and restricted cash at end of period	$	203,127	$	313,390

~~Our Cash flows from~~Net cash used by operating activities ~~are~~increased by $3.3 billion for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase is primarily ~~influenced~~driven by ~~changes~~increase in the ~~levels~~level of our inventory of loans held for sale ~~for the three months ended March 31, 2021 and 2020~~ as ~~shown below:~~

($ in thousands) Three Months Ended March 31,
Cash flows from: 2021 2020
Mortgage loans held for sale $ (2,054,364) $ (32,913)
Gain on loans, net (301,228) (102,563)
Change in fair value of derivative assets 147,414 (240,693)
Other operating sources 296,806 173,956
Net cash used in operating activities $ (1,911,372) $ (202,213)

~~Cash used in operating activities increased primarily due to~~a result of an increase in origination volume. Cash provided in Change in fair value of derivative assets was primarily due to decrease in our interest rate lock commitment revenue and margin call assets as a result of increased interest rates duringvolume at lower margins for the ~~three~~nine months ended March 31, 2021. Increases in cash used were partially offset by a cash provided in Other operating sources primarily due to an increase in Net income, increases in Other liabilities and Deferred income tax due to increases in deferred tax liabilities related to MSRs and derivative assets for the three months ended March 31,September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

~~Investing Activities~~

Cash ~~used in~~provided by investing activities increased by $79.7 million primarily due to ~~the additional~~proceeds from sale of mortgage servicing rights of $111.6 million, offset by purchase of ~~IT equipment as a result~~mortgage servicing rights of $33.0 million during the ~~increased headcount in the three~~nine months ended ~~March 31, 2021 compared to the three months ended March 31, 2020.~~

~~Financing Activities~~

~~Our Cash flows from financing activities are primarily influenced by changes in Warehouse borrowings as shown below:~~

($ in thousands) Three Months Ended March 31,
Cash flows from: 2021 2020
Warehouse borrowings $ 1,842,017 $ 143,052
Other financing sources 432,585 4,100
(Distribution to) contribution from parent (294,897) 63,773
Net cash provided by financing activities $ 1,979,705 $ 210,925
September 30, 2021.

Cash provided by financing activities increased by $3.0 billion primarily due to an increase in proceeds from warehouse borrowings net of payments on warehouse borrowings to be utilized for funding our increased loan origination ~~volume.~~volume for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Additionally, we issued $550 million of Senior ~~Unsecured~~ Notes during the ~~three~~nine months ended March 31, 2021 which increased the other financing sources. These increases were partially offset by approximately $270 million pay down of our MSR financing facility with the proceeds of the Senior Unsecured Notes.September 30, 2021. Increases in cash provided by the financing activities were offset by approximately ~~$270~~$295 million of distributions paid to ~~HPLP,~~Home Point Capital LP (“HPLP”), our direct parent prior to the consummation of the merger consummated in connection with the IPO, during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to $63.8 million of contribution from HPLP recorded during the ~~three~~nine months ended ~~March 31, 2020.~~

~~Shareholders’ Equity~~

~~Total shareholders’ equity increased by $318.6~~September 30, 2020 as well as $20.9 million ~~or 68.7% for~~of dividends paid to shareholders during the ~~three~~nine months ended ~~March 31, 2021 compared to the three months ended March 31, 2020. The increase was primarily driven by net income of $149.0 million recognized for the three months ended March 31,~~September 30, 2021.

~~Table of~~ ~~Contents~~

Contractual Obligations and Other Commitments

For a discussion of our contractual obligations, refer to “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Other Commitments” in our 2020 Annual Report. There have not been any material changes to our contractual obligations since December 31, 2020.

Repurchase and Indemnification Obligations

In the ordinary course of business, we are exposed to liability with respect to certain representations and warranties that we make to the investors who purchase the loans that we originate. Under certain circumstances, we may be required to repurchase mortgage loans, or indemnify the purchaser of such loans for losses incurred, if there has been a breach of these representations and warranties, or in the case of early payment defaults. In addition, in the event of an early payment default, we are contractually obligated to refund certain premiums paid to us by the investors who purchased the related loan. Refer to Note 11 – Representation and Warranty Reserve to our unaudited condensed consolidated financial statements for additional information.

Off Balance Sheet Arrangements

Refer to Note 9 – Commitments and Contingencies to our unaudited condensed consolidated financial statements included elsewhere in this form.

New Accounting Pronouncements Not Yet Effective

Refer to Note 2 – Basis of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements for a discussion of recent accounting developments and the expected effect on the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, as a mortgage lender, we are subject to a variety of risks which can affect our operations and profitability. We broadly define these areas of risk as interest rate risk, credit risk, and risk related to the COVID-19 pandemic.

Our 2020 Annual Report provides a detailed discussion of the market risks affecting our operations. No material change has occurred in our market risks since the disclosure contained in our 2020 Annual Report.

Table of Contents

Item 4. Controls and Procedures

Management's Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”) Rules 13a-15(e) and 15d-15(e)) are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the appropriate time periods, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2021.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of our “Legal Proceedings,” refer to Note 9 – Commitments and Contingencies of our unaudited condensed consolidated financial statements included elsewhere in this Report.

Item 1A. Risk Factors

We have disclosed the risk factors affecting our business, financial condition and operating results in the section entitled “Risk Factors” in our 2020 Annual Report. There have been no material changes from the risk factors previously disclosed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Equity Securities

None.

Issuer Repurchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

~~None.~~Stockholder Proposal Deadline

The Company expects to hold its 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”) at a date, time, and location to be announced, which will be the Company’s first annual meeting of stockholders after the IPO.

In accordance with Section 2.03 of the Company’s Amended and Restated Bylaws (the “Bylaws”), the Company has set the time period for receipt of stockholder proposals for inclusion in the Company’s proxy materials for the 2022 Annual Meeting as no earlier than the close of business on January 31, 2022 and no later than the close of business on March 2, 2022. Any stockholder proposal requested to be included in the proxy materials must (i) be received by the Company at 2211 Old Earhart Road, Suite 250, Ann Arbor, Michigan 48105, Attn: Corporate Secretary and (ii) satisfy all of the requirements of the Bylaws and not otherwise be permitted to be excluded under Rule 14a-8 of the Exchange Act.

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Item 6. Exhibits


Exhibit Number						Description
3.1						Amended and Restated Certificate of Incorporation of Home Point Capital Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on February 3, 2021 and incorporated herein by reference).
3.2						Amended and Restated Bylaws of Home Point Capital Inc. (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K on February 3, 2021 and incorporated herein by reference).
~~4.1~~						Registration Rights Agreement, dated as of February 2, 2021, by and among the Company and Trident VI, L.P., Trident VI Parallel Fund, L.P., Trident VI DE Parallel Fund, L.P. and Trident VI Professionals Fund, L.P. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K on February 3, 2021 and incorporated herein by reference).
~~4.2~~						Indenture, dated as of January 19, 2021, by and among Home Point Capital Inc., the guarantors party thereto and U.S. Bank National Association, as trustee, governing the 5.000% Senior Notes due 2026 (including Form of Senior Note) (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (Registration No. 333-251963) on January 22, 2021 and incorporated herein by reference).
~~10.1~~10.1*+						Amendment No. 41 to the Amended and Restated Master Repurchase Agreement, ~~and Securities Contract,~~ dated as of ~~February 11,~~July 22, 2021, by and among Goldman Sachs Bank USA, as buyer, HPFC Sub 1 LLC, as seller, and Home Point Financial Corporation, as guarantor.
10.2*						Confirmation and Amendment of Participation Agreement, dated as of July 21 , 2021, by and between Home Point Financial Corporation, as seller, ~~Morgan Stanley~~and Merchants Bank ~~N.A.,~~of Indiana, as ~~buyer,~~participant.
10.3+						Mortgage Warehouse Agreement, dated as of September 1, 2021, by and ~~Morgan Stanley Mortgage~~between Home Point Financial Corporation, as seller, and Texas Capital ~~Holdings LLC, as agent (filed~~Bank, National Association (filed as Exhibit ~~10.2.4~~10.1 to the Company’s ~~Annual~~Current Report on Form ~~10-K~~8-K on ~~March 12,~~September 7 , 2021 and incorporated herein by reference).
~~10.2+~~10.4*						Confirmation and Amendment of Participation Agreement, dated as of September 13, 2021, by and between Home Point Financial Corporation, as seller, and Merchants Bank of Indiana, as participant.
10.5						Amendment No. 117 to ~~the~~ Master Repurchase Agreement, dated as of ~~March 2,~~September 17, 2021, by and ~~among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, Credit Suisse~~between UBS AG, ~~acting through its Cayman Islands Branch, as buyer, Alpine Securitization LTD,~~ as buyer, and Home Point Financial Corporation, as seller (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on ~~March 3,~~September 21, 2021 and incorporated herein by reference).
~~10.3+~~10.6+						Amendment No. 25 to Amended and Restated Master Repurchase Agreement and Amended and Restated Pricing Letter, dated as of ~~January 13,~~September 17, 2021, by and among Home Point Financial Corporation, as seller, TIAA, FSB, as administrative agent and a buyer, and Capital One, National Association, as a buyer (filed as Exhibit ~~10.5.2 to the Company’s Registration Statement on Form S-1 (Registration No. 333-251963) on January 22, 2021 and incorporated herein by reference).~~
~~10.4+~~						Third Amendment to Amended and Restated Credit Agreement, dated as of January 27, 2021, by and among Home Point Financial Corporation, as borrower, Home Point Capital Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent, and the lenders party thereto (filed as Exhibit 10.10.3 to the Company’s Annual Report on Form 10-K on March 12, 2021 and incorporated herein by reference).
~~10.5~~						Stockholders’ Agreement, dated as of February 2, 2021, by and among the Company and Trident VI, L.P., Trident VI Parallel Fund, L.P., Trident VI DE Parallel Fund, L.P. and Trident VI Professionals Fund, L.P. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on February 3, 2021 and incorporated herein by reference).
~~10.6†~~						~~Home Point Capital Inc. 2021 Incentive Plan (filed as Exhibit~~ 10.2 to the Company’s Current Report on Form 8-K on ~~February 3, 2021 and incorporated herein by reference).~~
~~10.7†~~						Form of Substitute Option Agreement under the 2021 Incentive Plan (filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1 (Registration No. 333-251963) on January 22, 2021 and incorporated herein by reference).
~~10.8†~~						~~Form of 2021 Employee Stock Purchase Plan (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K on February 3, 2021 and incorporated herein by reference).~~
~~10.9+~~						Master Repurchase Agreement and Securities Contract, dated as of January 8, 2021, by and between Bank of Montreal, as buyer, and Home Point Financial Corporation, as seller (filed as Exhibit 10.18 to the Company’s Registration Statement on Form S-1 (Registration No. 333-251963) on January 22, 2021 and incorporated herein by reference).
~~10.10+†~~						Consulting Agreement, dated January 9, 2021, by and between Home Point Financial Corporation and Andrew Bon Salle (filed as Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (Registration No. 333-251963) on January 22, 2021 and incorporated herein by reference).
~~10.11+†~~						Amendment No. 2 to Home Point Capital LP 2015 Option Plan, dated January 6, 2021 (filed as Exhibit 10.20 to the Company’s Registration Statement on Form S-1 (Registration No. 333-251963) on January 22, 2021 and incorporated herein by reference).
~~10.12†~~						Form of Non-Employee Director RSU Agreement under the 2021 Incentive Plan (filed as Exhibit 10.21 to the Company’s Registration Statement on Form S-1 (Registration No. 333-251963) on January 22, 2021 and incorporated herein by reference).
~~10.13~~						~~Form of Director and Officer Indemnification Agreement (filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K on March 12, 2021 and incorporated herein by reference).~~

~~Table of~~ ~~Contents~~


~~Exhibit Number~~						~~Description~~
10.14*						~~Confirmation and Amendment of Participation Agreement, dated as of March 1, 2021, by and between Home Point Financial Corporation, as seller, and Merchants Bank of Indiana, as participant.~~
~~10.15*+~~						Amendment No. 5 to Master Repurchase Agreement and Securities Contract, dated as of March 10, 2021, by and between Home Point Financial Corporation, as seller, Morgan Stanley Bank, N.A., as buyer, and Morgan Stanley Mortgage Capital Holdings LLC, as agent.
10.16*						~~Confirmation and Amendment of Participation Agreement, dated as of March~~ 18 ~~, 2021, by and between Home Point Financial Corporation, as seller, and Merchants Bank of Indiana, as participant~~.
~~10.17+~~						~~Master Repurchase Agreement, dated as of March~~ 24 ~~, 2021, by and between Goldman Sachs Bank USA, as buyer, and Home Point Financial Corporation, as seller and guarantor~~ ~~(filed as Exhibit 10.1 to the Company~~’~~s Current Report on Form 8-K on March~~ 26 ,September 21, 2021 and incorporated herein by reference).
31.1*						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.2*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
32.1*						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

~~† Compensatory arrangements for director(s) and/or executive officer(s).~~

+ Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.

The agreements and other documents filed as exhibits to this Report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	HOME POINT CAPITAL INC.


Dated: ~~May 13,~~November 5, 2021	By:	/s/ William A. Newman
	Name:	William A. Newman
	Title:	President and Chief Executive Officer (Principal Executive Officer)

Dated: ~~May 13,~~November 5, 2021	By:	/s/ Mark E. Elbaum
	Name:	Mark E. Elbaum
	Title:	Chief Financial Officer (Principal Financial Officer)

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	March 31, 2021 (unaudited)		December 31, 2020
Assets:
Cash and cash equivalents	$	219,285	$	165,230
Restricted cash	41,863		31,663
Cash and cash equivalents and Restricted cash	261,148		196,893
Mortgage loans held for sale (at fair value)	5,191,261		3,301,694
Mortgage servicing rights (at fair value)	1,156,357		748,457
Property and equipment, net	23,027		21,710
Accounts receivable, net	290,555		152,845
Derivative assets	186,909		334,323
Goodwill and intangibles	10,789		10,789
GNMA loans eligible for repurchase	1,446,495		2,524,240
Other assets	103,850		87,622
Total assets	$	8,670,391	$	7,378,573
Liabilities and Shareholders’ Equity:
Liabilities:
Warehouse lines of credit	$	4,847,431	$	3,005,415
Term debt and other borrowings, net	888,437		454,022
Accounts payable and accrued expenses	196,542		167,532
GNMA loans eligible for repurchase	1,446,495		2,524,240
Other liabilities	509,189		299,890
Total liabilities	7,888,094		6,451,099
Commitments and Contingencies (Note 9)	0		0

Shareholders’ Equity:
Preferred stock (Authorized shares: 250,000,000; NaN issued and outstanding, par value $0.0000000072 per share)	0		0
Common stock (Authorized shares: 1,000,000,000; 138,860,103 shares issued and outstanding, par value $0.0000000072 per share)	0		0
Additional paid-in capital	520,261		519,510
Retained earnings	262,036		407,964
Total shareholders' equity	782,297		927,474
Total liabilities and shareholders' equity	$	8,670,391	$	7,378,573


	Three Months Ended March 31,
(in thousands, except Gain on sale margin)	2021		2020
Origination volume	$	29,425,931	$	8,165,053
Originated MSR - UPB	$	28,022,026	$	7,748,482
Retained servicing (UPB)(a)	96.3%		97.1 %


($ in thousands)	Three Months Ended March 31,
Cash flows from:	2021		2020
Mortgage loans held for sale	$	(2,054,364)	$	(32,913)
Gain on loans, net	(301,228)		(102,563)
Change in fair value of derivative assets	147,414		(240,693)
Other operating sources	296,806		173,956
Net cash used in operating activities	$	(1,911,372)	$	(202,213)