Company: AFRM
Filing Date: 2025-08-28
Form Type: 10-K
Source: 0001820953-25-000080
Chunk: 129

Company: Affirm Holdings, Inc.
Filing Date: 2025-08-28
Form: 10-K
Item: Item 7
Chunk 129
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 we are required to pay per our contractual servicing arrangement.

With respect to fair value adjustments, we remeasure the fair value of servicing assets and liabilities each period and recognize the change in fair value in servicing income. We utilize a discounted cash flow approach to remeasure the fair value of servicing rights. Because we earn servicing income based on the outstanding principal balance of the portfolio, fair value adjustments are impacted by the timing and amount of loan repayments. As such, over the term of each loan portfolio sold, fair value adjustments for servicing assets will decrease servicing income and fair value adjustments for servicing liabilities will increase servicing income. We discuss our valuation methodology and significant Level 3 inputs for servicing assets and liabilities within Note 13. Fair Value of Financial Assets and Liabilities of the accompanying notes to our consolidated financial statements. 

Servicing income for the year ended June 30, 2025 increased by $25.1 million, or 26%, compared to the same period in 2024. The increase was primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of loans owned by third-party loan owners. The average unpaid principal balance of loans owned by third-party loan owners increased from $4.9 billion during the year ended June 30, 2024 to $6.6 billion during the year ended June 30, 2025, an increase of 36%. 

Loss on Loan Purchase Commitment

We purchase certain loans from our originating bank partners that are processed through our platform and put back to us by our originating bank partners. Under the terms of the agreements with our originating bank partners, we are generally required to pay the principal amount plus accrued interest for such loans and fees. In certain instances, our originating bank partners may originate loans with zero or below market interest rates that we are required to purchase. In these instances, we may be required to purchase the loan for a price in excess of the fair market value of such loans, which results in a loss. These losses are recognized as loss on loan purchase commitment in our consolidated statements of operations and comprehensive income (loss). These costs are incurred on a per loan basis.

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Loss on loan purchase commitment for the year ended June 30, 2025 increased by $61.9 million, or 34%, compared to the same period in 2024, primarily due to an increase in total volume of loans purchased. During the year ended June 30, 2025, we purchased