Company: TWO-PC
Filing Date: 2025-07-29
Form Type: 10-Q
Source: 0001465740-25-000140
Chunk: 220

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-07-29
Form: 10-Q
Item: Item 8
Chunk 220
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 ____________________(1)Included in loss on investment securities on the consolidated statements of comprehensive (loss) income.(2)Included in loss on servicing asset on the consolidated statements of comprehensive (loss) income.(3)Included in gain (loss) on mortgage loans held-for-sale on the consolidated statements of comprehensive (loss) income.No transfers between Level 1, Level 2 or Level 3 were made during the three and six months ended June 30, 2025 and 2024. Transfers between Levels are deemed to take place on the first day of the reporting period in which the transfer has taken place.

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Table of ContentsTWO HARBORS INVESTMENT CORP.Notes to the Consolidated Financial Statements (unaudited)

The Company used multiple third-party pricing vendors in the fair value measurement of its Level 3 AFS securities. The significant unobservable inputs used by the third-party pricing vendors included expected default, severity and discount rate. Significant increases (decreases) in any of the inputs in isolation may result in significantly lower (higher) fair value measurement.The Company determines the fair value of its MSR internally using a discounted cash flow model. The tables below present information about the significant unobservable market data used by management as inputs into models utilized to inform their best estimates of the fair value measurement of the Company’s MSR classified as Level 3 fair value assets at June 30, 2025 and December 31, 2024:June 30, 2025Unobservable InputRangeWeighted Average (1)Constant prepayment speed4.7%-31.8%6.4%Option-adjusted spread5.2%-5.2%5.2%Per loan annual cost to service$65.00-$73.88$65.03December 31, 2024Unobservable InputRangeWeighted Average (1)Constant prepayment speed5.2%-29.3%6.3%Option-adjusted spread5.1%-5.1%5.1%Per loan annual cost to service$65.00-$73.88$65.02___________________(1)Calculation for constant prepayment speed and per-loan annual cost to service utilizes underlying loan principal balance for weighting purposes. Calculation for OAS utilizes relative MSR market value for weighting purposes.The Company determines the fair value of its Level 3 IRLCs based on valuation models that incorporate the estimated pull-through rate, which is considered a significant unobservable input.