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EXHIBIT 99.1

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CONSOLIDATED FINANCIAL STATEMENTS FOR

WAKEFIELD INVESTMENT HOLDINGS LLC

FOR THE YEAR ENDED DECEMBER 31, 2022

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Members

Wakefield Investment Holdings LLC

New York, New York

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Wakefield Investment Holdings LLC (the “Company”) as of December 31, 2021, and the related consolidated statements of operations, changes in partners’ equity and cash flows for the years ended December 31, 2021 and 2020, and the related 2021 notes (collectively, referred to as the “consolidated financial statements”). In our opinion, the 2021 and 2020 consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of their operations and their cash flows for each of the years ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated balance sheet as of December 31, 2022 and the related consolidated statements of operations, changes in partners’ equity, cash flows and related notes, for the year ended December 31, 2022, were not audited by us and accordingly, we do not express an opinion on them.

Basis for Opinion

These 2021 and 2020 consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 2021 and 2020 consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Except as explained above, we conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the 2021 and 2020 consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 2021 and 2020 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the 2021 and 2020 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1)  relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Mortgage Servicing Rights

Description of the Matter

The Company’s capitalized mortgage servicing rights (MSRs) totaled $379 million as of December 31, 2021. As explained in Note A to the consolidated financial statements, the Company recognized MSRs at estimated fair value upon the sale of an originated loan when the Company retained the right to service the loan. Subsequently, the MSRs are amortized over the period of net servicing income or loss and are evaluated for impairment based on the fair value at each reporting date. The Company engaged an independent third-party valuation expert to assist in determining the fair value of the MSRs. The fair value estimates for the MSRs primarily utilize discounted cash flow models that incorporate significant assumptions including discount rate, prepayment rate, servicing cost and estimated life.

Auditing the valuation of MSRs was complex and involved a high degree of subjectivity due to the nature of the assumptions. In particular, the valuation of MSRs was sensitive to assumptions such as discount rate, prepayment rate, servicing cost and estimated life, which were based on current market data and had a significant effect on the valuation of the MSRs.

How We Addressed the Matter in our audit

We obtained an understanding and evaluated the design of internal controls over the MSR valuation process. This included evaluating the design of controls over management’s evaluation of the MSR valuations prepared by the third-party expert and controls over the data inputs and the significant assumptions used in the discounted cash flow models.

Our audit procedures included, among others, testing the completeness and accuracy of the data provided to management’s third-party expert, evaluating the appropriateness of the methodology used to determine the fair value of the MSRs and testing the significant assumptions used in the discounted cash flow models. We utilized information obtained from market participants and recent market activity on other MSR transactions to test management’s assumptions and identify potential sources of contrary information.

/s/ Richey, May & Co., LLP.

We have served as Wakefield Investment Holdings LLC’s auditor since 2020.

Englewood, Colorado

February 14, 2022

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WAKEFIELD INVESTMENT HOLDINGS LLC

CONSOLIDATED BALANCE SHEETS

($ in thousands)

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The accompanying notes are an integral part of these consolidated financial statements.

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WAKEFIELD INVESTMENT HOLDINGS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands)

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The accompanying notes are an integral part of these consolidated financial statements.

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WAKEFIELD INVESTMENT HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ EQUITY

($ in thousands)

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The accompanying notes are an integral part of these consolidated financial statements.

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WAKEFIELD INVESTMENT HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

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The accompanying notes are an integral part of these consolidated financial statements.

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WAKEFIELD INVESTMENT HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

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The accompanying notes are an integral part of these consolidated financial statements.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Organization

Wakefield Investment Holdings LLC (Wakefield Holdings) is a holding company owning subsidiaries that engage in real estate investment activities. Wakefield was incorporated in Delaware and maintains its corporate office in New York.

Principles of Consolidation

The consolidated financial statements include the accounts of Wakefield Holdings and Wakefield Investors LLC (Wakefield Investors), which Wakefield Holdings owns an 83% interest in (collectively referred to as “the Company”). Wakefield Investors includes the accounts of its wholly-owned subsidiary Wakefield Partners GP LLC (Wakefield Partners) and a 98% ownership interest in Cardinal Financial Company, Limited Partnership (Cardinal). Cardinal includes the accounts of Lifestyle Home Lending LLC (Lifestyle). Cardinal is primarily engaged in the business of originating, selling and servicing residential mortgage loans through their correspondent, broker, wholesale, retail, and direct-to-consumer origination channels.

All material intercompany transactions have been eliminated in consolidation.

Basis of Accounting

The consolidated financial statements of the Company are prepared on the accrual basis of accounting.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as codified in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC).

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly significant relate to the Company’s fair value measurements of mortgage loans held for sale, mortgage servicing rights (MSRs), derivative assets and liabilities, goodwill, as well as the estimate for the loan loss reserve.

Consolidation, Variable Interest Entities

The Company sells mortgage loans to the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC), which are government-sponsored enterprises. The Company also issues Government National Mortgage Association (GNMA) securities by pooling eligible loans through a custodian and assigning rights to the loans to GNMA. FNMA, FHLMC and GNMA (the Agencies) provide credit enhancements for mortgage loans through certain guarantee provisions. These securitizations involve variable interest entities (VIEs) as the trusts or similar vehicles, by design, that either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entities.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Consolidation, Variable Interest Entities (Continued)

The primary beneficiary of a VIE (i.e., the party that has a controlling financial interest) is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (1) the power to direct the activities of an entity that most significantly impact the VIE’s economic performance; and (2) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company typically retains the right to service loans sold or securitized by the Agencies. Due to the significant influence of the Agencies over the VIEs that hold the assets from loan securitizations, principally through their rights and responsibilities as master servicer, the Company is not the primary beneficiary of the VIEs and therefore the VIEs are not consolidated.

The Company performs on-going reassessments of (1) whether entities previously evaluated under the majority voting-interest framework have become VIEs, based on certain events, and therefore become subject to the VIE consolidation framework; and (2) whether changes in the facts and circumstances regarding the Company’s involvement with a VIE cause the Company’s consolidation determination to change.

The Company consolidates the financial statements of Lifestyle. Although Cardinal does not have the majority interest in Lifestyle, as the managing member, Cardinal is deemed to have control and therefore Lifestyle is consolidated by Cardinal.

Cash and Cash Equivalents

For cash flow purposes, the Company considers cash and temporary investments with original maturities of three months or less, to be cash and cash equivalents. The Company has diversified its credit risk for cash by maintaining deposits in several financial institutions, which may at times exceed amounts covered by insurance from the Federal Deposit Insurance Corporation. The Company evaluates the creditworthiness of these financial institutions in determining the risk associated with these balances. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash and cash equivalents.

Restricted Cash

Restricted cash includes certain cash balances that are restricted under warehouse agreements, escrow cash, and appraisal fees collected from borrowers.

Mortgage Loans Held for Sale and Revenue Recognition

Mortgage loans held for sale are carried at fair value under the fair value option with changes in fair value recorded in gain on sale of mortgage loans held for sale on the consolidated statements of operations. The fair value of mortgage loans held for sale committed to investors is calculated using observable market information such as the investor commitment, assignment of trade or other mandatory delivery commitment prices. The Company values loans committed to Agency investors based on the quoted Agency mortgage backed security (MBS) prices. The fair value of mortgage loans held for sale not committed to investors is based on quoted best execution secondary market prices. If no such quoted price exists, the fair value is determined using quoted prices for a similar asset or assets, such as MBS prices, adjusted for the specific attributes of that loan, which would be used by other market participants. Mortgage loans held for sale not calculated using observable market information is based on third party broker quotations (scratch and dent), the underlying collateral adjusted for a valuation allowance, or market bid pricing.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Mortgage Loans Held for Sale and Revenue Recognition (Continued)

Gains and losses from the sale of mortgage loans held for sale are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale and are recorded in gain on sale of mortgage loans held for sale on the consolidated statements of operations. Sales proceeds reflect the cash received from investors through the sale of the loan and servicing release premium. If the related MSR is sold servicing retained, the MSR addition is recorded in gain on sale of mortgage loans held for sale on the consolidated statements of operations. Gain on sale of mortgage loans held for sale also includes the unrealized gains and losses associated with the changes in the fair value of mortgage loans held for sale, and the realized and unrealized gains and losses from derivative instruments.

Mortgage loans held for sale are considered sold when the Company surrenders control over the financial assets. Control is considered to have been surrendered when the transferred assets have been isolated from the Company, beyond the reach of the Company and its creditors; the purchaser obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and the Company does not maintain effective control over the transferred assets through either an agreement that both entitles and obligates the Company to repurchase or redeem the transferred assets before their maturity or the ability to unilaterally cause the holder to return specific financial assets. The Company typically considers the above criteria to have been met upon acceptance and receipt of sales proceeds from the purchaser.

Loan Origination Fees

Loan origination fees represent revenue earned from originating mortgage loans. Loan origination fees generally represent flat per-loan fee amounts or are based on a percentage of the original principal loan balance and are recognized as revenue at the time the mortgage loans are funded. Loan origination expenses are charged to operations as incurred.

Interest Income

Interest income on mortgage loans held for sale is recognized for the period from loan funding to sale based upon the principal balance outstanding and contractual interest rates. Revenue recognition is discontinued when loans become 90 days delinquent, or when, in management’s opinion, the recovery of principal and interest becomes doubtful and the mortgage loans held for sale are put on nonaccrual status.

Revenue Recognition

ASC 606, Revenue from Contracts with Customers (ASC 606), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue, to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services, as performance obligations are satisfied. The majority of the Company’s revenue generating transactions are not subject to ASC 606, including revenue generated from financial instruments such as the Company’s mortgage loans and derivatives as well as revenue related to the Company’s mortgage servicing activities.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Loan Servicing Fees and Expenses

Loan servicing fees represent revenue earned for servicing loans for various investors. Loan servicing fees are based on a contractual percentage of the outstanding unpaid principal balance and are recognized into revenue as the related mortgage payments are received. Loan servicing expenses are charged to operations as incurred.

Servicing Advances

Servicing advances represent escrows advanced by the Company on behalf of borrowers and investors to cover delinquent balances for property taxes, insurance premiums and other out-of-pocket costs. Servicing advances are made in accordance with the Company’s servicing agreements and are recoverable upon collection of future borrower payments, sale of loan collateral, reimbursement by investor, or mortgage insurance claims. Non- recoverable servicing advances are expensed as incurred. The Company periodically reviews outstanding servicing advances for collectability and establishes a valuation allowance for amounts estimated to be uncollectible amounts.

Property and Equipment, Net

Property and equipment is recorded at cost and depreciated or amortized using the straight line method over the estimated useful lives of the assets.

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The following is a summary of property and equipment:

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The Company periodically assesses property and equipment for impairment whenever events or circumstances indicate the carrying amount of an asset may exceed its fair value. If property and equipment is considered impaired, the impairment losses will be recorded on the consolidated statements of operations. The Company did not recognize any impairment losses during the years ended December 31, 2022 and 2021.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Derivative Instruments

The Company holds and issues derivative financial instruments such as interest rate lock commitments (IRLCs) and forward sale commitments. IRLCs are subject to price risk primarily related to fluctuations in market interest rates. To hedge the interest rate risk on certain IRLCs, the Company uses forward sale commitments, such as to-be- announced securities or mandatory delivery commitments with investors. Management expects these forward sale commitments to experience changes in fair value opposite to the changes in fair value of the IRLCs thereby reducing earnings volatility. Forward sale commitments are also used to hedge the interest rate risk on mortgage loans held for sale that are not committed to investors and still subject to price risk. If the mandatory delivery commitments are not fulfilled, the Company pays a pair-off fee. Best effort forward sale commitments are also executed with investors, whereby certain loans are locked with a borrower and simultaneously committed to an investor at a fixed price. If the best effort IRLC does not fund, there is no obligation to fulfill the investor commitment.

The Company considers various factors and strategies in determining what portion of the IRLCs and uncommitted mortgage loans held for sale to economically hedge. FASB ASC 815-25, Derivatives and Hedging, requires that all derivative instruments be recognized as assets or liabilities on the consolidated balance sheet at their fair value. Changes in the fair value of the derivative instruments are recognized in gain on sale of mortgage loans held for sale on the consolidated statements of operations in the period in which they occur. Gains and losses resulting from the pairing-out of forward sale commitments are recognized in gain on sale of mortgage loans held for sale on the consolidated statements of operations. The Company accounts for all derivative instruments as free-standing derivative instruments and does not designate any for hedge accounting.

Mortgage Servicing Rights and Revenue Recognition

FASB ASC 860-50, Transfers and Servicing, requires that MSRs be initially recorded at fair value at the time the underlying loans are sold. To determine the fair value of the MSR created, the Company applies a valuation multiple to the servicing fee for each loan which is based on the underlying characteristics of the loan. The valuation multiple is derived from a third party valuation model that calculates the net present value of future cash flows. The valuation model incorporates assumptions that market participants would use in estimating future net servicing revenue, including the estimated discount rate, estimated prepayment speeds, the cost of servicing, estimated delinquencies and associated servicing advances, contractual service fees, ancillary income and late fees, float value, the inflation rate, and default rates. The credit quality and stated interest rates of the loans underlying the MSRs affect the assumptions used in the cash flow models. MSRs are not actively traded in open markets; accordingly, considerable judgment is required to estimate their fair value, and changes in these estimates could materially change the estimated fair value. The Company receives a fixed servicing fee monthly based on the outstanding principal balances of the mortgage loans it services for others.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Mortgage Servicing Rights and Revenue Recognition (Continued)

After initially recording the MSRs at fair value, the Company subsequently amortizes the MSRs over the estimated economic life of the related mortgage loans in proportion to the estimated future net servicing revenue. MSRs are periodically evaluated to determine if the amortized cost of MSRs is in excess of the estimated fair value. For this purpose, the Company stratifies its MSRs based on loan term, interest rate, and product type. Estimates of remaining loan lives and prepayment rates are derived from the output of the MSR valuation model. When impairment is identified in any individual stratification, due to the MRSs amortized cost exceeding its estimated fair value, management records a valuation allowance. Valuation allowances are recorded as a reduction to the MSRs on the consolidated balance sheets.

Impairment of the amortized cost of MSRs is assessed based on the fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratification based on risk characteristics of the underlying loans (predominantly interest rates). As interest rates decrease, mortgage refinancing activity may increase, resulting in shortened prepayment speeds of the loans underlying MSRs, which may result in a reduction of the MSR’s fair value. Such fair value adjustment may require an additional valuation allowance being charged to earnings, to the extent that the amortized cost of the MSR exceeds the estimated fair value from stratification. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the MSR asset generally increases, requiring a lower valuation allowance. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation allowance is reduced through a recovery to earnings. If there is another-than-temporary impairment (i.e. recoverability is considered remote when considering interest rates and loan pay-off activity), it is recognized as a write-down of the MSR asset and the related valuation allowance. A direct write-down permanently reduces the carrying value of the MSR asset and valuation allowance, precluding subsequent recoveries.

The key assumptions used in determining the fair value of MSRs when they are initially recorded are as follows for the years ended December 31:

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Sale of Mortgage Servicing Rights

A transfer of servicing rights related to loans previously sold qualifies as a sale at the date on which title passes, if substantially all risks and rewards of ownership have irrevocably passed to the transferee and any protection provisions retained by the transferor are minor and can be reasonably estimated. In addition, if a sale is recognized and only minor protection provisions exist, a liability is accrued for the estimated obligation associated with those provisions.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Loans in Forbearance and Loans Eligible for Repurchase from GNMA

When the Company has the unilateral right to repurchase GNMA pool loans it has previously sold (generally loans that are more than 90 days past due) and the Company has determined there is more than a trivial benefit to repurchase the loans, the Company records its right to repurchase the loan on its consolidated balance sheet as an asset and corresponding liability. The recognition of previously sold mortgage loans does not impact the accounting for the previously recognized MSRs. At December 31, 2022 and 2021, delinquent or defaulted mortgage loans currently in GNMA pools that the Company has recognized on its consolidated balance sheets totaled $380,898 and $391,177, respectively. During the year ended December 31, 2021, the Company elected to effect an early buyout by purchasing $250,000 of delinquent loans in GNMA mortgage-backed securities all of which were subsequently sold under Mortgage Loan Purchase Agreements that had been negotiated with third parties prior to the applicable early buyout. During the years ended December 31, 2022, 2021 and 2020, the Company repurchased $71,551; $65,905 and $18,505, respectively, of GNMA delinquent or defaulted mortgage loans, of which $66,732; $47,800 and $9,007, respectively, of the repurchased loans were eligible to re-pool.

Borrowers that entered into a forbearance plan under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) had an unpaid principal balance of approximately $87,976 or 0.28% of the MSR portfolio as of December 31, 2022, of which $69,653 or 79% was greater than 90 days delinquent.

Goodwill

The Company has goodwill totaling $5,000 in connection with a change in control of ownership. The Company evaluates goodwill annually for impairment or more frequently if impairment indicators arise. The Company did not record any impairment losses during the years ended December 31, 2022 and 2021.

Loan Loss Reserve

Loans sold to investors by the Company and which met investor and Agency underwriting guidelines at the time of sale may be subject to repurchase in the event of specific default by the borrower or subsequent discovery that underwriting standards were not met. The Company may, upon mutual agreement, indemnify the investor against future losses on such loans. The Company has established a reserve for potential losses related to these representations and warranties. Additionally, reserves are established for estimated liabilities from the need to repay, where applicable, a portion of the premium received from investors on the sale of certain mortgage loans if such loans are repaid in their entirety within a specified period after the sale of the loans. In assessing the adequacy of the reserve, management evaluates various factors including actual write-offs during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry. Actual losses incurred are reflected as write-offs against the loan loss reserve.

The activity in the loan loss reserve for mortgage loans held for sale is as follows:

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Loan Loss Reserve (Continued)

Because of the uncertainty in the various estimates underlying the loan loss reserve, there is a range of losses in excess of the recorded loan loss reserve that is reasonably possible. The estimate of the range of possible loss for representations and warranties, in excess of the recorded loan loss reserve, does not represent a probable loss. The estimated loan loss is based on current available information, significant judgment, and a number of assumptions that are subject to change.

Escrow and Fiduciary Funds

The Company maintains segregated bank accounts for escrow balances in trust for investors for mortgagors. The balances of these accounts amounted to $229,068 and $440,419 at December 31, 2022 and 2021, respectively, and are excluded from the consolidated balance sheets.

Advertising and Marketing

Advertising and marketing are expensed as incurred and amounted to $31,252; $84,543 and $53,818 for the years ended December 31, 2022, 2021 and 2020, respectively.

Income Taxes

The Company has elected to be taxed as a partnership under the Internal Revenue Code. Accordingly, no federal income tax provision and state income taxes, to the extent possible, have been recorded in the consolidated financial statements, as all items of income and expense generated by the Company are reported on the partners’ income tax returns. The Company has no federal or state tax examinations in process as of December 31, 2022.

Risks and Uncertainties

In the normal course of business, companies in the mortgage banking industry encounter certain economic and regulatory risks. Economic risks include interest rate risk and credit risk. The Company is subject to interest rate risk to the extent that in a rising interest rate environment, the Company may experience a decrease in loan production, as well as decreases in the value of mortgage loans held for sale not committed to investors and commitments to originate loans, which may negatively impact the Company’s operations. Credit risk is the risk of default that may result from the borrowers’ inability or unwillingness to make contractually required payments during the period in which loans are being held for sale or serviced by the Company.

The Company sells loans to investors without recourse. As such, the investors have assumed the credit risk of loss or default by the borrower. However, the Company is usually required by these investors to make certain standard representations and warranties relating to credit information, loan documentation and collateral. To the extent that the Company does not comply with such representations, or there are early payment defaults, the Company may be required to repurchase the loans or indemnify these investors for any losses from borrower defaults. In addition, if loans pay-off within a specified time frame, the Company may be required to refund a portion of the sales proceeds to the investors.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Risks and Uncertainties (Continued)

The Company’s business requires substantial cash to support its operating activities. As a result, the Company is dependent on its warehouse lines of credit, and other financing facilities in order to finance its continued operations. If the Company’s principal lenders decided to terminate or not to renew any of these financing facilities with the Company, the loss of borrowing capacity could have a material adverse impact on the Company’s consolidated financial statements unless the Company found a suitable alternative source.

With the rapid rise in mortgage interest rates compounding with housing affordability and inventory issues, the mortgage banking industry has been significantly disrupted. The operational and financial performance of the Company depends on future economic developments, and such uncertainty may have an adverse impact on the Company’s financial performance.

Reclassifications

Certain prior year amounts have been reclassified on the consolidated statements of operations and cash flows to conform to the current period presentation, which primarily included separately stating amounts related to the gain on sale of mortgage servicing rights.

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Mortgage loans held for sale are as follows:

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The Company provides construction financing to individuals who are building new single family residential homes. The individual loans generally do not exceed the lesser of the total acquisition costs or the maximum allowable loan to value, applicable to the loan, multiplied by the appraised value of the completed property. The initial construction period terms are typically nine to twelve months from the inception of the loan, with extension periods available for a maximum term of up to eighteen months. At the completion of the home, the Company will provide permanent mortgage financing for the home of up to 30 years. The construction loans in process are pledged against warehouse lines of credit with financial institutions (Note F). Construction loans are carried on the statement of assets and liabilities at the amount drawn on the loan. As costs are incurred the loan provides for subsequent draws which increase the carrying value of the construction loan. The drawn balance of the construction notes totaled $35,170 against undrawn commitments of $43,303 as of December 31, 2022. Interest rates on outstanding construction notes, as of December 31, 2022, ranged between 3.625% and 7.625%.

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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The Company enters into IRLCs to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time (generally between 30 and 90 days), with borrowers who have applied for a loan and have met certain credit and underwriting criteria. In valuing the IRLCs, the Company uses the estimated revenue on each underlying loan, inclusive of any estimated investor pay-ups and paydowns, less any broker commissions to be paid on wholesale loans and any other estimated remaining costs to originate the loan. The estimated revenue, net of all such expenses is then adjusted for the probability that the mortgage loan will fund within the terms of the IRLC (the pullthrough rate). The pullthrough rate is based on estimated changes in market conditions, loan stage, and actual borrower behavior using a historical analysis.

The key unobservable inputs used in determining the fair value of IRLCs are as follows for the year ended December 31, 2022:

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The key unobservable inputs used in determining the fair value of IRLCs are as follows for the year ended December 31, 2021:

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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The fair value of the TBA, AOT or other forward mandatory delivery commitment being used to hedge the mandatory IRLCs and uncommitted mortgage loans held for sale are based on quoted secondary market prices, such as quoted MBS prices, or investor commitment prices. The notional amounts of mortgage loans held for sale not committed to investors amounted to approximately $414,225 and $1,743,827 at December 31, 2022 and 2021, respectively.

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The following summarizes derivative instruments:

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The Company has exposure to credit loss in the event of contractual non-performance by its trading counterparties in derivative instruments that the Company uses in its rate risk management activities. The Company manages this credit risk by selecting only counterparties that the Company believes to be financially strong, spreading the risk among multiple counterparties, by placing contractual limits on the amount of unsecured credit extended to any single counterparty and by entering into netting agreements with counterparties, as appropriate.

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The following summarizes accounts receivable and advances, net:

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WAKEFIELD INVESTMENT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Cardinal had related party receivables at December 31, 2022 and 2021 of $6,544 and $615, respectively, which included $61 and $10, respectively, due from Lifestyle. The Company’s total related party receivables at December 31, 2022 and 2021 of $6,483 and $605, respectively, as noted in (a) and (b) above, excluded the Lifestyle receivable, which were eliminated in consolidation.

The Company periodically evaluates the carrying value of accounts receivable and advance balances with delinquent balances written-off based on specific credit evaluations and circumstances of the debtor.

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The Company’s MSR portfolio is summarized as follows (based on the unpaid principal balance (UPB) of the underlying mortgage loans):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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The following summarizes the activity of MSRs:

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At December 31, 2022 and 2021, the UPB of mortgage loans serviced approximated $31,742,559 and $41,004,106, respectively. Conforming conventional loans serviced by the Company are sold to FNMA and FHLMC on a non-recourse basis, whereby foreclosure losses are generally the responsibility of FNMA and FHLMC, and not the Company. The government loans serviced by the Company are secured through GNMA, whereby the Company is insured against loss by the Federal Housing Administration or partially guaranteed against loss by the Veterans Administration.

The fair value of capitalized MSRs at December 31, 2022 and 2021 was $479,544 and $456,730, respectively. The Company did not record any permanent impairment losses for the years ended December 31, 2022 and 2021.

The key unobservable inputs used in determining the fair value of the Company’s MSRs are as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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The hypothetical effect of an adverse change in these key assumptions would result in a decrease in fair value as follows:

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These sensitivities are hypothetical and should be used with caution. As the table demonstrates, the Company’s methodology for estimating the fair value of MSRs is highly sensitive to changes in key unobservable inputs. For example, actual prepayment experience may differ and any such difference may have a material effect on MSR fair value. Changes in fair value resulting from changes in inputs generally cannot be extrapolated because the relationship of the change in input to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular input on the fair value of the MSRs is calculated without changing any other input; in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may indicate higher prepayments; however, this may be partially offset by lower prepayments due to other factors such as a borrower’s diminished opportunity to refinance), which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and inputs made as of a particular point in time. Those inputs may not be appropriate if they are applied to a different point in time.

The following table summarizes the Company’s estimated future MSR amortization expense. These estimates are based on existing asset balances, the current interest rate environment, and prepayment speeds as of December 31, 2022. The actual amortization expense the Company recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, or circumstances that indicate the carrying amount of an asset may not be recoverable.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands)

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Sale of Mortgage Servicing Rights

During 2022, the Company sold MSR portfolios with a UPB of approximately $16,200,000 for $212,000. The Company recognized a gain on sale of $43,245 which is recorded in gain on sale of MSRs on the consolidated statement of operations. In addition, the Company recorded a receivable totaling $10,594 related to the sales, which is due at various times after the transfer date. There were transfer costs, hedges, and various protection provisions for which an estimated $15,367 was paid. The Company performed temporary sub-servicing activities with respect to the underlying loans through the established transfer date, for which the Company earned a fee and is also entitled to certain other ancillary income amounts.

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At December 31, 2022, the Company has twelve warehouse and master repurchase line of credit agreements, including sublines of credit, with various financial institutions with a total written capacity of $3,370,000 and outstanding credit balances of $679,738, excluding construction sublimit outstanding balances (Note H), at December 31, 2022. The warehouse and master repurchase line of credit agreements have maximum line capacities ranging from $20,000 to $500,000 expiring April 8, 2023 through December 12, 2023. Interest is at variable rates, based on the underlying collateral, ranging from 30-day SOFR +1.40% to one-month LIBOR + 2.25% with certain lines subject to minimum SOFR interest rate floors ranging from 1.80% to 2.75%, as defined in the Cardinal and Lifestyle agreements. Under the warehouse and master repurchase line of credit agreements, the financial institutions will advance amounts ranging from 98% to 100% of the committed price of the mortgage loan. To the extent the advance amount on the committed price of the mortgage loan exceeds the UPB of the loan, certain agreements cap the advance rate at 100% of the UPB of the loan. Certain warehouse and master repurchase line of credit agreements require the Company hold restricted and pledged cash which totaled $6,363 at December 31, 2022.

As of December 31, 2022, the Company had mortgage loans held for sale pledged as collateral under the above warehouse and master repurchase lines of credit agreements. The above agreements also contain covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquid assets, maximum debt to net worth ratio, servicing delinquency rate, and positive net income, as defined in the agreements. The Company was in compliance with all covenants at December 31, 2022. The Company intends to renew the warehouse lines of credit and master repurchase agreements when they mature.

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