BETR

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How BETR rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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The risks described below reflect our beliefs and opinions as to factors that could materially and adversely affect us in the future.
References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past.
The risk factors described below should also be read together with the other information set forth in this Annual Report, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC.
Risks Related to Our Operating History, Business Model, Growth and Financial Condition Our business and results of operations are highly sensitive to interest rate levels and volatility.
Changes in interest rates and U.S. monetary policy materially affect mortgage origination demand, gain-on-sale margins, and the value of mortgage-related assets.
Elevated or volatile interest rates reduce housing affordability and refinancing incentives, suppressing both purchase and refinance origination volumes and increasing revenue volatility.
Sustained elevated interest rates, particularly when combined with higher home prices, further reduce housing affordability and borrower demand, which can intensify competitive pressure on pricing and margins.
Because loan production represents a significant portion of our revenues and we historically sell most MSRs, our results are particularly sensitive to changes in origination volumes and margins compared to mortgage originators that retain servicing rights.
Interest rate movements also affect the fair value of our interest rate lock commitments, loans held for sale, and MSRs.
Rising rates generally reduce origination volumes and the market value of loans held for sale, while declining rates may reduce the value of MSRs due to higher expected prepayment speeds.
Although we employ hedging strategies to manage interest rate exposure, such strategies may not fully offset the impact of adverse or rapid rate movements.
Prolonged periods of elevated or volatile interest rates could continue to materially adversely affect our revenues, profitability, and financial condition.
As a result of employee attrition, we have lost certain institutional knowledge and capabilities that has necessitated additional hiring.
Loss of our key leadership could have a material adverse effect on our business.
Our future success depends to a significant extent on the continued services of our senior management and our ability to maintain morale, minimize internal distraction, recruit and retain employees, management and directors, and make changes to our organizational structure in response to the foregoing events.
The experience of our other senior management is a valuable asset to us and would be difficult to replace.
Loan production for refinancing customers’ existing loans is almost entirely driven by interest rates and our ability to maintain or further develop that portion of our business is primarily dependent on the interest rates we offer Tab l e of Contents relative to market interest rates and customers’ current interest rates.
In addition to interest rates, our business operations are also subject to other factors that can impact our ability to maintain or further develop our loan production business.
We have a history of operating losses and may not achieve or maintain profitability in the future.
We have experienced net losses and negative cash flows from operations for most of our operating history.
The year ended December 31, 2020 was the only year that we have achieved an annual operating profit.
Since that time, however, we have incurred net losses, including a net loss of $165.9 million for the year ended December 31, 2025.
Our recent financial performance has been adversely affected because of numerous factors, including persistent elevated interest rates and outsized costs relative to our Funded Loan Volume and revenue resulting from changes in the macroeconomic environment and our business.
Our efforts to grow our business and offer new products have been and may continue to be more costly than we expect.
We may not be able to increase our revenue enough to offset our increased operating expenses and the investments we need to make in our business, and new products may not succeed.
We may incur significant costs to Tab l e of Contents resolve any such disruptions in services or the loss of commercial partnerships and this could materially and adversely affect our business, financial condition, and results of operations.
We depend on our ability to sell loans and MSRs in the secondary market to a limited number of investors and to the GSEs and other secondary market participants.
Our ability to sell and the prices we receive for our loans vary from time to time and may be materially adversely affected by several factors, including, without limitation: (i) an increase in the number of similar loans available for sale; (ii) conditions in the loan securitization market or in the secondary market for loans in general or for our loans in particular, which could make our loans less desirable to potential purchasers; (iii) defaults under loans in general; (iv) loan-level pricing adjustments imposed by Fannie Mae and Freddie Mac, including adjustments for the purchase of loans in forbearance or refinancing loans; (v) the types and volume of loans being originated or sold by us; (vi) the level and volatility of interest rates; and (vii) unease in the banking industry caused by, among other things, bank failures.
Tab l e of Contents We have been and may in the future be required to repurchase or substitute loans or MSRs that we have sold or indemnify purchasers of our loans or MSRs if we breach representations and warranties.
As of December 31, 2025, we had accrued $4.3 million in connection with our reserve for repurchase and indemnification obligations.
We rely heavily on proprietary models and market data to manage risk and operate our business, and model limitations or failures could materially adversely affect our business, financial condition, and results of operations.
We make extensive use of internally developed models and third-party market data to price loans, manage interest rate and hedging risk, forecast volumes and margins, assess credit risk, and support key business decisions.
Because our business relies heavily on automation and operates in a highly competitive and volatile mortgage market, inaccuracies or limitations in these models or data could result in pricing errors, reduced hedge effectiveness, increased repurchase or indemnification obligations, or adverse impacts to profitability.
Models are inherently based on assumptions, historical data, and estimates that may not accurately reflect future conditions, particularly during periods of elevated interest rate volatility, rapid market shifts, or changes in borrower behavior.
Model performance may deteriorate when market conditions diverge from historical patterns, when data inputs are incomplete or delayed, or when models are applied to new products, markets, or customer segments.
Although we seek to monitor and update our models, such efforts may not fully mitigate the risk of adverse outcomes.
If our models fail to perform as expected, or if we rely on inaccurate or outdated market information, our business, financial condition, and results of operations could be materially adversely affected.
If internet search Tab l e of Contents engines modify their search algorithms in ways that are detrimental to us, if financial services sites increase their prices or refuse to include our product offerings in their product-offering comparison tools, or if our competitors’ marketing or promotional efforts are more successful than ours, overall growth in our customer base could slow or our customer base could decline.
Further, negative press may make it more difficult to enter into new arrangements with additional lenders.
Our expansion into platform-based services for third-party originators may not be successful and could adversely affect our results.

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Gone since FY2024

The risks described below are not the only risks that we face.
Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also materially adversely affect our business, prospects, financial condition and results of operations.
The risk factors described below should be read together with the other information set forth in this Annual Report, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC.
RISK FACTORS SUMMARY Our business is subject to a number of risks, which are discussed more fully below and include, but are not limited to, the following: Risks relating to our history, business model, growth and financial condition, including: • We have a history of operating losses, including very significant losses, have not been able to maintain profitability achieved in 2020 and early 2021, and may not achieve and maintain profitability in the future. • We may be unable to effectively manage our growth, including being able to fill certain senior management roles with suitable candidates, which could have a material adverse effect on our business, financial condition and results of operations. • We may be unable to effectively maintain and develop certain relationships with third-party vendors and key commercial partners, which could have a material adverse effect on our ability to attract customers and grow our business. • We depend on our ability to sell loans and MSRs in the secondary market to a limited number of loan purchasers, including GSEs and other secondary market participants for each relevant product. • We have identified three ongoing material weaknesses in internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to implement or maintain an effective system of internal control, which may result in material misstatements in our financial statements. • Our compliance and risk management policies, procedures, and techniques may not be sufficient to identify all of the financial, legal, regulatory, and other risks to which we are exposed, and failure to identify and address such risks could result in substantial losses and materially and adversely disrupt our business operations. • Our CEO is involved in litigation that could have a material adverse effect on our revenues, financial condition, cash flows, results of operations and prospects.
Risks relating to our market, industry, and general economic conditions, including: • Our business is significantly impacted by interest rates.
Changes in prevailing interest rates or U.S. monetary policies that affect interest rates have and may in the future have a material adverse effect on our revenues, financial condition, cash flows, results of operations and prospects. • We operate in a heavily regulated industry, and our loan production and servicing activities, real estate brokerage activities, title and settlement services activities and homeowners insurance agency activities expose us to risks of noncompliance with a large and increasing body of complex laws and regulations at the U.S. federal, state and local levels, which, at times, may be inconsistent. • Our business is highly dependent on the GSEs, including Fannie Mae and Freddie Mac, and certain other U.S. government agencies, and any changes in these entities or agencies or their current roles could have a material adverse effect on our business.
Risks relating to our global operations, including: • We have operations in the United Kingdom (including our acquisition of Birmingham Bank) and India, which subject us to certain operational challenges, laws and regulations, and political or economic risks that we have limited experience in navigating.
Risks relating to our products and customers, including: • We face intense competition from other companies with more well established brands, and may not be able to retain or expand our customer base. • We may fail to accurately predict demand or growth of new or existing product lines which could have a material adverse effect on our revenues, financial condition, cash flows, results of operations and prospects.
Risks relating to our technology and intellectual property, including: • Our products use third-party software, hardware and services that may be difficult to replace or cause errors or failures of our products that could have a material adverse effect on our revenues, financial condition, cash flows results of operations and prospects. • We may not be able to effectively maintain and enforce our intellectual property and proprietary rights and may face allegations of infringement of the intellectual property rights of third parties, which could have a material adverse effect on our revenues, financial condition, cash flows, results of operations and prospects.
Risks relating to our indebtedness and warehouse lines of credit, including: • We rely on our warehouse lines to fund loans and otherwise operate our business.
If one or more facilities are terminated or otherwise become unavailable to use, we may be unable to find replacement financing at commercially favorable terms, or at all, which could have a material adverse effect on our business. • Fluctuations in the interest rate of our facilities or the value of the collateral underlying certain of these facilities could have a material adverse effect on our liquidity.
Risks relating to the regulatory environment, including: • The laws and regulations to which we are subject are constantly evolving, together with the scope of supervision, and we may be unable to comply with new laws and regulations effectively or in a timely manner, which could have a material adverse effect on our business. • We are, and may in the future be, subject to litigation and regulatory enforcement matters from time to time.
If the outcomes of these matters are adverse to us, it could have a material adverse effect on our revenues, financial condition, cash flows, results of operations and prospects.
Risks related to ownership of Common Stock and Better Home & Finance operating as a public company, including: • Our management team has limited experience managing a public company and international or banking operations • The existence of multiple classes of common stock may materially and adversely impact the value and liquidity of Class A Common Stock. • Because we became a public reporting company by means other than a traditional underwritten initial public offering, our stockholders may face additional risks and uncertainties.
Risks Related to Our Operating History, Business Model, Growth and Financial Condition Our business is significantly impacted by interest rates.
Changes in prevailing interest rates or U.S. monetary policies that affect interest rates may have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our financial performance is directly affected by changes in prevailing interest rates, which may subject our financial performance to substantial volatility.
We are particularly affected by the policies of the U.S.
Federal Reserve, which influence interest rates and impact the size of the loan production market.
Federal Reserve ended its quantitative easing program and started its balance sheet reduction plan.
Federal Reserve’s balance sheet consists of U.S.
Treasuries and mortgage-backed securities (“MBS”) issued by Fannie Mae, Freddie Mac and Ginnie Mae.
Federal Reserve increased significantly its primary policy rate, which has and may continue to result in increased interest rates in the future.
Since origination volumes tend to increase in declining interest rate environments and decrease in increasing rate environments, mortgage originators are exposed to cyclical changes as a result of shifts in interest rates, and there has been an overall compression in the mortgage market as a result of fluctuations in interest rates.
Fluctuations in interest rates significantly impact every aspect of our operations: • Increases in interest rates beginning in April 2021 have led to a sizable reduction of the refinance market as fewer consumers are incentivized to refinance their loans.
This has had a material adverse effect on revenues from our Refinance Loans as the market for these loans became more competitive.
Higher interest rates have a similarly negative impact on our purchase mortgage loan business, as homeownership becomes more expensive and demand for homeownership loans fall. • Historically, we have sold the vast majority of our loans with servicing rights released, which means that we do not retain servicing rights and the income stream associated with such MSRs.
Accordingly, since loan production comprises a relatively greater share of our revenue than other home mortgage originators who retain MSRs, our revenues would be more sensitive to rising interest rates, since the value of MSRs generally increase in a rising interest rate environment and that tends to offset, in part, the decline in refinancing and purchase loan production. • Interest rate lock commitments represent an agreement to extend credit to a customer where the interest rate is set prior to (and conditioned on) fully underwriting and funding the loan.
When loans are funded, they are classified as held for sale until they are sold.
During the origination and sale process, the value of interest rate lock commitments and loans held for sale inventory rises and falls with changes in interest rates; for example, if we enter into interest rate lock commitments at low interest rates followed by an increase in interest rates in the market, the value of our interest rate lock commitment will decrease.
The market value of a loan held for sale generally declines as interest rates rise, and fixed-rate loans, which make up a substantial portion of our loans, are more sensitive to changes in market interest rates than adjustable-rate loans.
Such changes in the value of interest rate lock commitments and loans held for sale are recognized as a reduction in gain on loans, net, and accordingly affect our Gain on Sale Margin.
We employ hedging practices designed to mitigate the effects of any fluctuations in interest rates on our financial position related to interest rate lock commitments and loans held for sale.
We hedge our interest rate lock commitments and loans held for sale with forward to-be-announced securities. • Changes in interest rates are also a key driver of the revenue we receive from the sale of MSRs, particularly because our portfolio is composed primarily of MSRs related to high-quality loans, the values of which are highly sensitive to changes in interest rates.
Historically, the value of MSRs has increased when interest rates rise as higher interest rates lead to decreased prepayment rates, and has decreased when interest rates decline as lower interest rates lead to increased prepayment rates.
As a result, decreases in interest rates could materially and adversely affect our business, financial condition, results of operations, and prospects.
Substantial changes in the market and operating environment have put significant strain on our business and have resulted in significant reductions to our workforce and scale, which we have had limited success in managing.
In response to the prevailing interest rate environment and changes in macroeconomic conditions and our industry, as described in more detail elsewhere in this Annual Report, we significantly reduced our workforce to seek to align our headcount with demand for our loan production.
As of December 31, 2024, we had approximately 1,250 team members, compared to approximately 10,400 team members at our peak in the fourth quarter of 2021.
In total, this represents an approximately 88% reduction in our workforce over an approximately thirty-six month period, which has had other detrimental effects on our business, financial condition, and results of operations as described elsewhere in this Annual Report.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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