Company: TWO-PC
Filing Date: 2025-10-28
Form Type: 10-Q
Source: 0001465740-25-000152
Chunk: 20

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-10-28
Form: 10-Q
Item: Item 1
Chunk 20
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 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 nine months ended September 30, 2025 and 2024:Three Months EndedNine Months EndedSeptember 30,September 30,(in thousands)2025202420252024Servicing fee income$127,349 $126,597 $377,929 $400,278 Ancillary and other fee income5,277 3,928 15,572 12,220 Float income33,822 41,207 88,160 101,582 Total$166,448 $171,732 $481,661 $514,080 As previously discussed, RoundPoint handles substantially all servicing functions for the mortgage loans underlying the Company’s MSR, as well as its originated or purchased mortgage loans held-for-sale. For the remaining portion of the Company’s serviced mortgage assets, the Company contracts with appropriately licensed third-party subservicers to handle the servicing functions in the name of the subservicer. All third-party subservicing costs and other servicing expenses directly related to the Company’s MSR portfolio are included within the servicing costs line item on the Company’s consolidated statements of comprehensive (loss) income. All servicing-related general and administrative expenses incurred by RoundPoint are included within the compensation and benefits and other operating expenses line items on the Company’s consolidated statements of comprehensive (loss) income.Mortgage Servicing AdvancesAs the servicer of record for the MSR assets, the Company may be required to advance principal and interest payments to security holders, and intermittent tax and insurance payments to local authorities and insurance companies on mortgage loans that are in forbearance, delinquency or default. The Company is responsible for funding these advances, potentially for an extended period of time, before receiving reimbursement from Fannie Mae