Company: TWO-PC
Filing Date: 2025-07-29
Form Type: 10-Q
Source: 0001465740-25-000140
Chunk: 194

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-07-29
Form: 10-Q
Item: Item 8
Chunk 194
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 to service:$65.03 $65.02 Impact on fair value of 10% adverse change$(37,578)$(36,191)Impact on fair value of 20% adverse change$(75,157)$(72,381)These assumptions and sensitivities are hypothetical and should be considered with caution. Changes in fair value based on 10% and 20% variations in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of MSR is calculated without changing any other assumptions. In reality, changes in one factor may result in changes in another (e.g., increased market interest rates may result in lower prepayments and increased credit losses) that could magnify or counteract the sensitivities. Further, these sensitivities show only the change in the asset balances and do not show any expected change in the fair value of the instruments used to manage the interest rates and prepayment risks associated with these assets.

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

Risk Mitigation ActivitiesThe primary risks associated with the Company’s MSR are changes in interest rates, mortgage spreads and prepayments. The Company economically hedges interest rate and mortgage spread risk primarily with its Agency RMBS portfolio. Prepayment risk is carefully monitored and partially mitigated through the Company’s ability to retain the MSR, in certain circumstances, through recapture if the underlying loan is refinanced.Mortgage Servicing Income and CostsThe following table presents the components of servicing income recorded on the Company’s consolidated statements of comprehensive (loss) income for the three and six months ended June 30, 2025 and 2024:Three Months EndedSix Months EndedJune 30,June 30,(in thousands)2025202420252024Servicing fee income$124,409 $139,361 $250,580 $273,681 Ancillary and other fee income5,201 4,435 10,295 8,292 Float income28,744 32,219 54,338 60,375 Total$158,354 $176,015 $315,213 $342,348 As previously discussed, RoundPoint handles substantially all servicing functions for the mortgage loans underlying the Company’s MSR. For the remaining portion of the Company’s serviced mortgage assets