COMMITMENTS AND CONTINGENCIES
Representations and Warranties Reserve
Loans sold to investors, which the Company believes met investor and agency underwriting guidelines at the time of sale, may be subject to repurchase by the Company in the event of specific default by the borrower or upon subsequent discovery that underwriting or documentation standards were not explicitly satisfied. The Company may, upon mutual agreement, indemnify the investor against future losses on such loans or be subject to other guaranty requirements and subject to loss. The Company initially records its exposure under such guarantees at estimated fair value upon the sale of the related loan, within "Accounts payable, accrued expenses, and other" as well as within "Loan production income" and continues to evaluate its on-going exposures in subsequent periods. The reserve is estimated based on the Company’s assessment of its obligations, including expected losses, expected frequency, the overall potential remaining exposure, as well as an estimate for a market participant’s potential readiness to stand by to perform on such obligations. The Company repurchased $207.4 million, $234.4 million and $259.0 million in UPB of loans during the years ended December 31, 2025, 2024, and 2023, respectively, related to its representations and warranties obligations.
The activity of the representations and warranties reserve was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | | For the year ended December 31, |
| | | | | | 2025 | | 2024 | | 2023 |
| Balance, beginning of period | | | | | $ | 87,647 | | | $ | 62,865 | | | $ | 60,495 | |
| Additions | | | | | 35,289 | | | 43,437 | | | 49,676 | |
Loss realized, net of adjustments | | | | | (20,659) | | | (18,655) | | | (47,306) | |
| Balance, end of period | | | | | $ | 102,277 | | | $ | 87,647 | | | $ | 62,865 | |
Commitments to Originate Loans
As of December 31, 2025, the Company had agreed to extend credit to potential borrowers for approximately $20.4 billion. These contracts represent off-balance sheet credit risk where the Company may be required, subject to completion of underwriting, to extend credit to these borrowers based on the prevailing interest rates and prices at the time of execution. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon.
Legal and Regulatory Matters
The Company operates in a heavily regulated industry that is highly sensitive to consumer protection, and is subject to numerous federal, state and local laws. The Company is routinely involved in consumer complaints, regulatory actions and legal proceedings in the ordinary course of our business. The Company also, from time to time, initiates legal proceedings against parties from which we believe we have a contractual or other recourse. The Company is also routinely involved in state regulatory audits and examinations, and is occasionally involved in other governmental proceedings arising in connection with its business activities. Based on the Company's assessment of the facts and circumstances associated with these matters, we do not believe any of the legal or regulatory matters with which the Company is currently involved, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, or cash flows. However, actual outcomes may differ from those expected and could have a material effect on our financial position, results of operations, or cash flows in a future period.