Company: TWO-PC
Filing Date: 2025-10-28
Form Type: 10-Q
Source: 0001465740-25-000152
Chunk: 34

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-10-28
Form: 10-Q
Item: Item 1
Chunk 34
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anding derivatives and are recorded at fair value at inception inclusive of the inherent value of servicing the loan. As of September 30, 2025 and December 31, 2024, the Company had outstanding IRLCs of $63.1 million and $18.3 million in principal with a net fair value asset balance of $1.1 million and $0.1 million, respectively.Forward Mortgage Loan Sale Commitments. The Company uses forward mortgage loan sale commitments to manage exposure to interest rate risk and changes in the fair value of IRLCs from the date of the commitment through the date of funding or cancellation or expiration of the lock commitment. Forward mortgage loan sale commitments are also used to manage exposure to interest rate risk and changes in the fair value of the Company’s mortgage loans held-for-sale from the date of funding through the date of sale in the secondary market, typically within 60 days of origination. TBAs are also a form of forward commitments used to help manage the adverse impact of interest rate changes on the value of the Company’s loan origination pipeline (refer to discussion above). Forward mortgage loan sale commitments are recorded at fair value based on pricing of similar instruments in the secondary market based upon the investor, coupon, and estimated sale or delivery month. The Company’s expectation of the amount of IRLCs that will ultimately close is a key factor in determining the notional amount of derivatives used in economically hedging the position. As of September 30, 2025, the Company had no outstanding forward mortgage loan sale commitment derivatives; however, included in the table presenting the Company’s TBA positions above are $46.0 million of short notional TBA positions with a net fair value liability balance of $6 thousand specifically used to manage the adverse impact of interest rate changes on the value of the Company’s loan origination pipeline. As of December 31, 2024, the Company had outstanding forward mortgage loan sale commitment derivatives of $20.4 million in principal with a net fair value asset balance of $0.2 million and no TBA positions specifically used to manage the adverse impact of interest rate changes on the value of the Company’s loan origination pipeline.Credit RiskThe Company’s exposure to credit losses on its Agency RMBS portfolio is limited due to implicit or explicit backing from either a GSE or a U.S. government agency. The payment of principal and interest on the Freddie Mac and Fannie Mae mortgage-backed securities is guaranteed by those respective agencies, and the payment of principal and interest