Better Home & Finance Holding Co 10-Q

Item 1. Financial Statements BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, (Amounts in thousands, except share and per share amounts) 2024 2023 Assets Cash and cash equivalents $ 207,673 $ 503,591 Restricted cash 29,406 24,475 Short-term investments 54,414 25,597 Mortgage loans held for sale, at fair value 339,485 170,150 Loans held for investment (net of allowance for credit losses of $ 1,138 and none as of September 30, 2024 and December 31, 2023, respectively) 81,401 4,793 Other receivables, net 17,337 16,888 Property and equipment, net 12,846 16,454 Right-of-use assets 3,471 19,988 Internal use software and other intangible assets, net 24,684 38,126 Goodwill 33,403 32,390 Derivative assets, at fair value 4,425 1,716 Prepaid expenses and other assets 36,618 51,386 Total Assets $ 845,163 $ 905,554 Liabilities and Stockholders’ (Deficit)/Equity Liabilities Warehouse lines of credit $ 134,481 $ 126,218 Convertible Note 518,012 514,644 Customer deposits 97,782 11,839 Accounts payable and accrued expenses (includes $ 81 and none payable to related parties as of September 30, 2024 and December 31, 2023, respectively) 68,557 66,558 Escrow payable and other customer accounts 4,736 3,376 Derivative liabilities, at fair value 6 949 Warrant and equity related liabilities, at fair value 1,404 2,331 Lease liabilities 4,824 31,202 Other liabilities (includes none and $ 390 payable to related parties as of September 30, 2024 and December 31, 2023, respectively) 14,973 25,837 Total Liabilities 844,775 782,954 Commitments and contingencies (see Note 12) Stockholders’ (Deficit)/Equity Common stock $ 0.0001 par value; 66,000,000 shares authorized as of September 30, 2024 and December 31, 2023, and 15,136,302 and 15,035,467 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 1 2 2 Notes receivable from stockholders ( 9,149 ) ( 10,111 ) Additional paid-in capital 1 1,858,070 1,838,499 Accumulated deficit ( 1,851,143 ) ( 1,704,076 ) Accumulated other comprehensive loss 2,608 ( 1,714 ) Total Stockholders’ (Deficit)/Equity 388 122,600 Total Liabilities and Stockholders’ (Deficit)/Equity $ 845,163 $ 905,554 1. Periods have been adjusted to reflect the 1-for-50 reverse stock split on August 16, 2024. See Note 1 Organization and Nature of the Business - Reverse Stock Split, for additional information. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands, except share and per share amounts) 2024 2023 2024 2023 Revenues: Gain on loans, net $ 21,503 $ 11,553 $ 61,384 $ 50,739 Other revenue 3,070 4,009 8,768 13,664 Net interest income Interest income 9,867 4,043 27,900 18,006 Interest expense ( 5,446 ) ( 14,698 ) ( 14,545 ) ( 27,781 ) Net interest income/(loss) 4,421 ( 10,655 ) 13,355 ( 9,775 ) Total net revenues 28,994 4,907 83,507 54,628 Expenses: Compensation and benefits 37,752 84,329 111,079 156,437 General and administrative 12,611 14,234 41,813 43,700 Technology 7,249 6,349 19,289 31,959 Marketing and advertising 12,101 5,064 25,186 15,925 Loan origination expense 3,774 627 7,142 9,226 Depreciation and amortization 8,259 10,491 25,323 32,791 Other expenses/(Income) 1,332 237,043 270 247,572 Total expenses 83,078 358,137 230,102 537,610 Loss before income tax (benefit)/expense ( 54,084 ) ( 353,230 ) ( 146,595 ) ( 482,982 ) Income tax (benefit)/expense 126 659 472 2,539 Net loss ( 54,210 ) ( 353,889 ) ( 147,067 ) ( 485,521 ) Other comprehensive loss: Foreign currency translation adjustment, net of tax 4,056 ( 759 ) 4,322 ( 987 ) Comprehensive loss $ ( 50,154 ) $ ( 354,648 ) $ ( 142,745 ) $ ( 486,508 ) Per share data: Loss per share attributable to common stockholders: Basic $ ( 3.58 ) $ ( 35.63 ) $ ( 9.74 ) $ ( 66.54 ) Diluted $ ( 3.58 ) $ ( 35.63 ) $ ( 9.74 ) $ ( 66.54 ) Weighted average common shares outstanding — basic 15,121,994 9,931,555 15,102,741 7,296,349 Weighted average common shares outstanding — diluted 15,121,994 9,931,555 15,102,741 7,296,349 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) For the Three Months Ended September 30, 2024 Common Stock (Amounts in thousands, except share and per share amounts) Issued and Outstanding 1 Par Value 1 Notes Receivables from Stockholders Additional Paid-In Capital 1 Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Total Stockholders' (Deficit) Equity Balance as of June 30, 2024 15,110,974 2 ( 9,130 ) 1,852,417 ( 1,796,933 ) ( 1,448 ) 44,908 Issuance of common stock for options exercised 1,483 — — 74 — — 74 Stock-based compensation — — — 5,924 — — 5,924 Tax withholding upon vesting of restricted stock units — — — ( 364 ) — — ( 364 ) Shares issued for vested restricted stock units 23,845 — — — — — — Vesting of common stock issued via notes receivable from stockholders — — ( 19 ) 19 — — — Net loss — — — — ( 54,210 ) — ( 54,210 ) Other comprehensive income— foreign currency translation adjustment, net of tax — — — — — 4,056 4,056 Balance - September 30, 2024 15,136,302 $ 2 $ ( 9,149 ) $ 1,858,070 $ ( 1,851,143 ) $ 2,608 $ 388 1. Periods have been adjusted to reflect the 1-for-50 reverse stock split on August 16, 2024. See Note 1 Organization and Nature of the Business - Reverse Stock Split, for additional information. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) For the Three Months Ended September 30, 2023 Convertible preferred stock Common Stock (Amounts in thousands, except share and per share amounts) Shares 1 Amount Issued and Outstanding 1 Par Value 1 Notes Receivables from Stockholders Additional Paid-In Capital 1 Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Total Stockholders' (Deficit) Equity Balance - June 30, 2023 2,174,429 $ 436,280 1,967,644 $ — $ ( 56,757 ) $ 631,503 $ ( 1,299,320 ) $ ( 1,732 ) $ ( 726,306 ) Recapitalization of shares due to Business Combination 4,471,866 — 4,046,598 1 — ( 1 ) — — — Adjusted Balance as of June 30, 2023 6,646,295 436,280 6,014,242 1 ( 56,757 ) 631,502 ( 1,299,320 ) ( 1,732 ) ( 726,306 ) Conversion of convertible preferred stock to common stock ( 6,646,295 ) ( 436,280 ) 6,646,295 1 — 436,279 — — 436,280 Conversion of pre-closing bridge notes to common stock — — 2,100,000 — — 750,000 — — 750,000 Issuance of common stock upon Business Combination close — — 200,090 — — 37,967 — — 37,967 Exercise of warrants — — 291,523 — — 4,290 — — 4,290 Transaction costs related to the Business Combination — — — — — ( 18,178 ) — — ( 18,178 ) Recognition of derivative liability related to earnout — — — — — ( 1,112 ) — — ( 1,112 ) Assumption private & public placement warrants — — — — — ( 1,276 ) — — ( 1,276 ) Issuance of common stock for options exercised — — 34,686 — — 2,253 — — 2,253 Repurchase or cancellation of common stock — — ( 56,110 ) — — — — — — Stock-based compensation — — — — 1,257 40,869 — — 42,126 Shares issued for vested restricted stock units — — 247,048 — — ( 4,790 ) — — ( 4,790 ) Vesting of common stock issued via notes receivable from stockholders — — — — ( 1,297 ) — — ( 1,297 ) Forfeiture of shares — — ( 308,813 ) — 30,161 ( 30,161 ) — — — Forgiveness of officer loans — — — — 988 — — — 988 Shares transferred in settlement of loans — — ( 149,626 ) — 15,200 ( 15,200 ) — — — Net loss — — — — — — ( 353,889 ) — ( 353,889 ) Other comprehensive loss— foreign currency translation adjustment, net of tax — — — — 1 — ( 698 ) ( 697 ) Balance - September 30, 2023 — $ — 15,019,335 $ 2 $ ( 10,448 ) $ 1,832,444 $ ( 1,653,209 ) $ ( 2,430 ) $ 166,359 1. Periods have been adjusted to reflect the 1-for-50 reverse stock split on August 16, 2024. See Note 1 Organization and Nature of the Business - Reverse Stock Split, for additional information The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) For the Nine Months Ended September 30, 2024 Common Stock (Amounts in thousands, except share and per share amounts) Issued and Outstanding 1 Par Value 1 Notes Receivables from Stockholders Additional Paid-In Capital 1 Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' (Deficit) Equity Balance - December 31, 2023 15,035,467 2 ( 10,111 ) 1,838,499 ( 1,704,076 ) ( 1,714 ) 122,600 Adjustment of transaction costs related to Business Combination — — — ( 2,372 ) — — ( 2,372 ) Issuance of common stock for options exercised 4,254 — — 1,529 — — 1,529 Cancellation of common stock ( 30,673 ) — — — — — — Stock-based compensation — — — 23,120 — — 23,120 Tax withholding upon vesting of restricted stock units — — — ( 1,736 ) — — ( 1,736 ) Shares issued for vested restricted stock units 127,254 — — — — — — Vesting of common stock issued via notes receivable from stockholders — — ( 884 ) 876 — — ( 8 ) Settlement of notes receivable from stockholders — — 1,846 ( 1,846 ) — — — Net loss — — — — ( 147,067 ) — ( 147,067 ) Other comprehensive income— foreign currency translation adjustment, net of tax — — — — — 4,322 4,322 Balance - September 30, 2024 15,136,302 $ 2 $ ( 9,149 ) $ 1,858,070 $ ( 1,851,143 ) $ 2,608 $ 388 1. Periods have been adjusted to reflect the 1-for-50 reverse stock split on August 16, 2024. See Note 1 Organization and Nature of the Business - Reverse Stock Split, for additional information. The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) For the Nine Months Ended September 30, 2023 Convertible preferred stock Common Stock (Amounts in thousands, except share and per share amounts) Shares Amount Issued and Outstanding 1 Par Value 1 Notes Receivables from Stockholders Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Total Stockholders' (Deficit) Equity Balance - December 31, 2022 2,174,429 $ 436,280 1,961,567 $ — $ ( 53,225 ) $ 618,153 $ ( 1,167,688 ) $ ( 1,423 ) $ ( 604,183 ) Recapitalization of shares due to Business Combination 4,471,866 — 4,034,101 1 — ( 1 ) — — — Adjusted Balance as of December 31, 2022 6,646,295 436,280 5,995,668 1 ( 53,225 ) 618,152 ( 1,167,688 ) ( 1,423 ) ( 604,183 ) Conversion of convertible preferred stock to common stock ( 6,646,295 ) ( 436,280 ) 6,646,295 1 — 436,279 — — 436,280 Conversion of pre-closing bridge notes to common stock — — 2,100,000 — — 750,000 — — 750,000 Issuance of common stock upon Business Combination close — — 200,090 — — 37,967 — — 37,967 Exercise of warrants — — 291,523 — — 4,290 — — 4,290 Transaction costs related to the Business Combination — — — — — ( 18,178 ) — — ( 18,178 ) Recognition of derivative liability related to earnout — — — — — ( 1,112 ) — — ( 1,112 ) Assumption private & public placement warrants — — — — — ( 1,276 ) — — ( 1,276 ) Issuance of common stock for options exercised — — 34,686 — — 4,459 — — 4,459 Repurchase or cancellation of common stock — — ( 56,110 ) — — ( 8 ) — — ( 8 ) Stock-based compensation — — — — 926 52,022 — 52,948 Tax withholding upon vesting of restricted stock units — — — — — ( 4,790 ) — — ( 4,790 ) Shares issued for vested restricted stock units — — 265,622 — — — — — — Vesting of common stock issued via notes receivable from stockholders — — — — ( 4,498 ) — — — ( 4,498 ) Forfeiture of shares — — ( 308,813 ) — 30,161 ( 30,161 ) — — — Forgiveness of officer loans — — — — 988 — — — 988 Shares transferred in settlement of loans — — ( 149,626 ) — 15,200 ( 15,200 ) — — Net loss — — — — — — ( 485,521 ) — ( 485,521 ) Other comprehensive loss— foreign currency translation adjustment, net of tax — — — — — ( 1,007 ) ( 1,007 ) Balance - September 30, 2023 — $ — 15,019,335 $ 2 $ ( 10,448 ) $ 1,832,444 $ ( 1,653,209 ) $ ( 2,430 ) $ 166,359 1. Periods have been adjusted to reflect the 1-for-50 reverse stock split on August 16, 2024. See Note 1 Organization and Nature of the Business - Reverse Stock Split, for additional information. The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW Nine Months Ended September 30, (Amounts in thousands) 2024 2023 Cash Flows from Operating Activities: Net loss $ ( 147,067 ) $ ( 485,521 ) Adjustments to reconcile net loss to net cash (used in)/provided by operating activities: Depreciation of property and equipment 4,187 4,694 Impairments — 4,914 Amortization of internal use software and other intangible assets 21,136 28,098 Gain on sale of loans, net ( 44,032 ) ( 42,809 ) Non-cash interest and amortization of debt issuance costs and discounts 4,472 6,043 Other non-cash adjustments — 2,147 Change in fair value of warrants ( 927 ) ( 861 ) Change in fair value of convertible preferred stock warrants — ( 266 ) Change in fair value of bifurcated derivative — 236,603 Stock-based compensation 21,812 47,879 (Recovery of)/Provision for loan repurchase reserve ( 10,168 ) 178 Provision for credit losses 1,138 — Change in fair value of derivatives ( 3,651 ) ( 819 ) Change in fair value of mortgage loans held for sale ( 4,666 ) 6,070 Change in operating lease of right-of-use assets ( 4,321 ) 3,484 Change in operating assets and liabilities: Originations of mortgage loans held for sale ( 2,676,979 ) ( 2,607,781 ) Proceeds from sale of mortgage loans held for sale 2,554,975 2,728,150 Operating lease liabilities ( 5,540 ) ( 8,706 ) Other receivables, net ( 450 ) 5,567 Prepaid expenses and other assets 14,769 14,156 Accounts payable and accrued expenses ( 2,111 ) 2,059 Escrow payable and other customer accounts 1,360 ( 4,848 ) Other liabilities 2,118 ( 17,847 ) Net cash used in operating activities ( 273,945 ) ( 79,416 ) Cash Flows from Investing Activities: Purchase of property and equipment ( 2,917 ) ( 332 ) Proceeds from sale of property and equipment — 643 Capitalization of internal use software ( 4,132 ) ( 8,563 ) Acquisitions of businesses, net of cash acquired — ( 12,713 ) Maturities of short-term investments 139,901 12,324 Purchase of short-term investments ( 167,426 ) ( 33,425 ) Origination of loans held for investment ( 79,715 ) — Principal payments received on loans held for investment 2,464 — Net cash used in investing activities ( 111,825 ) ( 42,066 ) Cash Flows from Financing Activities: Issuance of convertible notes (issued to a related party. See Note 10) — 528,585 Principal payments on convertible notes ( 1,103 ) — Exercise of convertible preferred stock warrants — 1,460 Proceeds from Business Combination — 21,616 Proceeds from issuance of common stock — 16,351 Net borrowings/(repayments) on warehouse lines of credit 8,263 ( 70,513 ) Repayments on finance lease liabilities — ( 1,062 ) Net increase (decrease) in customer deposits 85,943 ( 2,466 ) Repayments on corporate line of credit — ( 146,449 ) Payment of debt issuance costs — ( 3,561 ) Payment of equity financing costs — ( 13,375 ) Proceeds from exercise of stock options 5 343 Net cash provided by/(used in) financing activities 93,108 330,929 Effects of currency translation on cash, cash equivalents, and restricted cash 1,675 ( 941 ) Net (Decrease)/Increase in Cash, Cash Equivalents, and Restricted Cash ( 290,987 ) 208,506 Cash, cash equivalents, and restricted cash—Beginning of period 528,066 346,065 Cash, cash equivalents, and restricted cash—End of period $ 237,079 $ 554,571 7 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown on the previous page. Nine Months Ended September 30, (Amounts in thousands) 2024 2023 Cash and cash equivalents, end of period $ 207,673 $ 526,765 Restricted cash, end of period 29,406 27,806 Total cash, cash equivalents and restricted cash, end of period $ 237,079 $ 554,571 Supplemental Disclosure of Cash Flow Information: Interest paid $ 2,594 $ 12,008 Income taxes paid/(refunded) $ 548 $ ( 5,886 ) Non-Cash Investing and Financing Activities: Capitalization of stock-based compensation related to internal use software $ 1,309 $ 5,100 Vesting of stock options early exercised in prior periods $ 1,524 $ 195 Vesting of common stock issued via notes receivable from stockholders $ 884 $ 3,395 Settlement of Notes Receivable from Stockholders $ 1,846 $ — Reduction of lease liability via modification $ 20,839 $ — Acquisition earnout $ — $ 3,430 Forgiveness of notes receivable from stockholders $ — $ 46,350 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 8 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Nature of the Business Better Home & Finance Holding Company, formerly known as Aurora Acquisition Corp. (“Aurora”), together with its subsidiaries (collectively, the “Company”), provides a comprehensive set of homeownership offerings in the United States while expanding the Company’s offerings in the United Kingdom. The Company’s offerings include mortgage loans, real estate agent services, title and homeowner’s insurance, and other homeownership offerings. The Company leverages Tinman, its proprietary technology platform, to optimize the mortgage process from the initial application, to the integration of a suite of additional homeownership offerings, to the sale of loans to a network of loan purchasers. Mortgage loans originated within the United States are through the Company’s wholly-owned subsidiary Better Mortgage Corporation (“BMC”). BMC is an approved Title II Single Family Program Lender with the Department of Housing and Urban Development’s (“HUD”) Federal Housing Administration (“FHA”), and is an approved seller and servicer with the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FMCC”). The Company has expanded into the U.K. by acquisition of regulated entities to offer a multitude of financial products and services to consumers. On August 22, 2023 (the “Closing Date”), the Company consummated its business combination, pursuant to the terms of the Agreement and Plan of Merger, dated as of May 10, 2021, as amended as of October 27, 2021, November 9, 2021, November 30, 2021, August 26, 2022, February 24, 2023 and June 23, 2023 (as amended, the “Merger Agreement”), by and among Aurora, Better Holdco, Inc. (“Pre-Business Combination Better”), and Aurora Merger Sub I, Inc., formerly a wholly owned subsidiary of Aurora (“Merger Sub”). On the Closing Date, Merger Sub merged with and into Pre-Business Combination Better, with Pre-Business Combination Better surviving the merger (the “First Merger”) and Pre-Business Combination Better merged with and into Aurora, with Aurora surviving the merger and changing its name to “Better Home & Finance Holding Company” (referred to as “Better Home & Finance” or the “Company”) (such merger, and together with the First Merger, the “Business Combination” and the completion thereof, the “Closing”). Unless otherwise indicated, references to “Better,” “Better Home & Finance,” the “Company,” “we,” “us,” “our” and other similar terms refer to (i) Pre-Business Combination Better and its consolidated subsidiaries prior to the Closing and (ii) Better Home & Finance and its consolidated subsidiaries following the Closing. The Company’s Class A common stock, par value $ 0.0001 per share (“Class A common stock”), and public warrants are listed on the Nasdaq Capital Market under the ticker symbols “BETR” and “BETRW,” respectively. Reverse Stock-Split— On Friday, August 16, 2024, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation, effecting a 1-for-50 reverse stock split of the Company’s common stock (the “Reverse Stock Split”) for the primary purpose of increasing the per share trading price of the Company’s Class A common stock to enable the Company to regain compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market (the “Nasdaq”). The Company’s Class A common stock began trading on a split-adjusted basis on the Nasdaq upon the market open on Monday, August 19, 2024. Effective August 16, 2024, as a result of the Reverse Stock Split, every 50 shares of the Company’s issued and outstanding common stock were converted into one issued and outstanding share of Class A common stock, Class B common stock and Class C common stock, as applicable, without any change to the par value per share, the voting rights of the common stock, any stockholder’s percentage interest in the Company’s equity or any other aspect of the common stock. The accompanying financial statements have been retroactively recast to reflect this reverse split stock resulting in a reclass to historic financials between common stock and additional paid-in-capital. On September 3, 2024, the Company received a letter from Nasdaq notifying the Company that the Staff has determined that for the last 10 consecutive business days, from August 19, 2024, to August 30, 2024, the closing bid price of the Company’s common stock has been at $1.00 per share or greater, and accordingly, the Company has regained compliance with Listing Rule 5550(a)(2) and the matter is now closed. 2. Summary of Significant Accounting Policies Basis of Presentation — The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 9 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, and stockholders’ equity (deficit) and cash flows. The results of operations and other information for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2024. The unaudited condensed consolidated financial statements presented herein should be read in conjunction with the audited consolidated financial statements and related notes of Better thereto for the year ended December 31, 2023. Consolidation — The accompanying condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates — The preparation of condensed consolidated financial statements in accordance with U.S. 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the fair value of mortgage loans held for sale, the fair value of derivative assets and liabilities, including interest rate lock commitments and forward sale commitments, the determination of a valuation allowance on the Company’s deferred tax assets, capitalization of internally developed software and its associated useful life, determination of fair value of the stock options at grant date, the fair value of acquired intangible assets and goodwill, the provision for loan repurchase reserves, and the incremental borrowing rate used in determining lease liabilities and warrant liabilities. Short-term investments — Short term investments consist of fixed income securities, typically U.S and U.K. government treasury securities and U.S. and U.K. government agency securities with maturities ranging from 91 days to one year. Management determines the appropriate classification of short-term investments at the time of purchase. Short-term investments reported as held-to-maturity are those investments that the Company has both the positive intent and ability to hold to maturity and are stated at amortized cost on the condensed consolidated balance sheets. All of the Company’s short term investments are classified as held to maturity. The Company has not recognized any impairments on these investments to date and any unrealized gains or losses on these investments are immaterial. Allowance for Credit Losses – Held to Maturity (“HTM”) Short-term Investments — The Company’s HTM Short-term investments are required to utilize the Current Expected Credit Loss approach to estimate expected credit losses. Management measures expected credit losses on short-term investments on a collective basis by major security types that share similar risk characteristics, such as financial asset type and collateral type adjusted for current conditions and reasonable and supportable forecasts. Management classifies the short term investments portfolio by security types, such as U.S. or U.K. government agency securities. The U.S and U.K. government treasury securities and U.S. and U.K. government agency securities are issued by the U.S. and U.K. government entities and agencies, respectively. These securities are either explicitly or implicitly guaranteed by the respective governments as to timely repayment of principal and interest, are highly rated by major rating agencies, and have a long history of no credit losses. Therefore, credit losses for these securities were immaterial as the Company does not currently expect any material credit losses on these short-term investments. Mortgage Loans Held for Sale, at Fair Value — The Company sells its loans held for sale (“LHFS”) to loan purchasers. LHFS primarily consists of mortgage loans as well as home equity line of credit and closed-end second lien loans (together defined as “HELOC”), originated for sale by BMC. The Company elects the fair value option, in accordance with ASC 825 – Financial Instruments (“ASC 825”), for all LHFS with changes in fair value recorded in gain on loans, net in the condensed consolidated statements of operations and comprehensive loss. Management believes that the election of the fair value option for LHFS improves financial reporting by presenting the most relevant market indication of LHFS. The fair value of LHFS is based on market prices and yields at period end. The Company accounts for the gains or losses resulting from sales of loans based on the guidance of ASC 860-20 – Sales of Financial Assets . The Company generally sells all of its loans servicing released. For interim servicing, the Company engages a third-party sub-servicer to collect monthly payments and perform associated services. The Company issues interest rate lock commitments (“IRLC”) to originate mortgage loans and the fair value of the IRLC, adjusted for the probability that a given IRLC will close and fund, is recognized within gain on loans, net. 10 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Subsequent changes in the fair value of the IRLC are measured at each reporting period within gain on loans, net until the loan is funded. When the loan is funded, the IRLC is derecognized and the LHFS is recognized based on the fair value of the loan. The LHFS is subsequently remeasured at fair value at each reporting period and the changes in fair value are included within gain on loans, net until the loan is sold on the secondary market. When the loan is sold on the secondary market, the LHFS is derecognized and the gain/(loss) is included within gain on loans, net based on the cash settlement. LHFS are considered sold when the Company surrenders control over the loans. Control is considered to have been surrendered when the transferred loans have been isolated from the Company, are beyond the reach of the Company and its creditors, and the loan purchaser obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred loans. The Company typically considers the above criteria to have been met upon receipt of sales proceeds from the loan purchaser. Loans Held for Investment — The Company originates, primarily through its U.K. operations, loans held for investment, for which management has the intent and ability to hold for the foreseeable future or until maturity or payoff and are reported at amortized cost, which is the principal amount outstanding, net of cumulative charge-offs, unamortized net deferred loan origination fees and costs and unamortized premiums or discounts on purchased loans. The allowance for credit losses is a valuation account that is deducted from the loans held for investment amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged-off against the allowance when management believes the loan balance is deemed to be uncollectible. Management’s estimation of expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts, including expected defaults and prepayments. See Note 6. Fair Value Measurements — Assets and liabilities recorded at fair value on a recurring basis on the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The price used to measure fair value is not adjusted for transaction costs. The principal market is the market in which the Company would sell or transfer the asset with the greatest volume and level of activity for the asset. In determining the principal market for an asset or liability, it is assumed that the Company has access to the market as of the measurement date. If no market for the asset exists, or if the Company does not have access to the principal market, a hypothetical market is used. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows: Level 1 —Unadjusted quoted market prices in active markets for identical assets or liabilities; Level 2 —Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and liabilities measured at fair value on a recurring basis include LHFS, derivative assets and liabilities, including IRLCs and forward sale commitments, and warrant and equity related liabilities. When developing fair value measurements, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. However, for certain instruments, the Company must utilize unobservable inputs in determining fair value due to the lack of observable inputs in the market, which requires greater judgment in measuring fair value. In instances where there is limited or no observable market data, fair value measurements for assets and liabilities are based primarily upon the Company’s own estimates, and the measurements reflect information and assumptions that management believes a market participant would use in pricing the asset or liability. Warehouse Lines of Credit — Warehouse lines of credit represent the outstanding balance of the Company’s warehouse borrowings collateralized by mortgage loans held for sale or related borrowings collateralized by restricted cash. Generally, warehouse lines of credit are used as interim, short-term financing which bears interest at a fixed margin over an index rate, such as the Secured Overnight Financing Rate (“SOFR”). The outstanding balance of the Company’s warehouse 11 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS lines of credit will fluctuate based on its lending volume. The advances received under the warehouse lines of credit are based upon a percentage of the fair value or par value of the mortgage loans collateralizing the advance, depending upon the type of mortgage loan. Should the fair value of the pledged mortgage loans decline, the warehouse provider may require the Company to provide additional cash collateral or mortgage loans to maintain the required collateral level under the relevant warehouse line. The Company did not incur any significant issuance costs related to its warehouse lines of credit. Convertible Note— As part of the Closing of the Business Combination, the Company issued the Convertible Note to a related party. Upon initial issuance, the Convertible Note is evaluated for redemption and conversion features that could result in embedded derivatives that require bifurcation from the notes. Upon initial issuance, any embedded derivatives are measured at fair value. Convertible Note proceeds are allocated between the carrying value of the note and the fair value of embedded derivatives on the initial issuance date. Any portion of proceeds allocated to embedded derivatives are treated as reductions in, or discounts to, the carrying value of the Convertible Note on the issuance date. Embedded derivatives are adjusted to fair value at each reporting period, with the change in fair value included within the consolidated statements of operations and comprehensive income (loss). See Note 10 for further details on the Convertible Note. Income Taxes — Income taxes are calculated in accordance with ASC 740, Accounting for Income Taxes . An estimated annual effective tax rate is applied to year-to-date income (loss). At the end of each interim period, the estimated effective tax rate expected to be applicable for the full year is calculated. This method differs from that described in the Company’s income taxes policy footnote in the audited consolidated financial statements and related notes thereto for the year ended December 31, 2023, which describes the Company’s annual significant income tax accounting policy and related methodology. Revenue Recognition — The Company generates revenue from the following streams: 1) Gain on loans, net includes revenues generated from the Company’s loan production process, see Note 3. The components of gain on loans, net are as follows: i. Gain on sale of loans, net —This represents the premium the Company receives in excess of the loan principal amount and certain fees charged by loan purchasers upon sale of loans into the secondary market. Gain on sale of loans, net includes unrealized changes in the fair value of LHFS, which are recognized on a loan by loan basis as part of current period earnings until the loan is sold on the secondary market. The fair value of LHFS is measured based on observable market data. This also includes activity for loans originated on behalf of the integrated partnership that are subsequently purchased by the Company as well as the portion of the sale proceeds to be received by the integrated partner. The portion of the sale proceeds that is to be allocated to the integrated partner is accrued as a reduction of gain on sale of loans, net when the loan is initially purchased by the Company from the integrated partner. Gain on sale of loans, net also includes the changes in fair value of IRLCs and forward sale commitments. IRLCs include the fair value upon issuance with subsequent changes in the fair value recorded in each reporting period until the loan is sold on the secondary market. Fair value of forward sale commitments hedging IRLCs and LHFS are measured based on quoted prices for similar assets. ii. Integrated partnership fees —Includes fees that the Company receives for originating loans on behalf of an integrated partnership, which are recognized as revenue upon the integrated partner’s funding of the loan. iii. Provision for loan repurchase reserve recovery/(provision) —In connection with the sale of loans on the secondary market, the Company makes customary representations and warranties to the relevant loan purchasers about various characteristics of each loan, such as the origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local laws. In the event of a breach of its representations and warranties, the Company may be required to repurchase the loan with the identified defects. The provision for loan repurchase reserve, represents the charge for these potential losses. 2) Other revenue consists of revenue from the Company’s additional offerings such as real estate services, insurance services, and international lending revenue, which is recognized based on ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”). ASC 606 outlines a single comprehensive model in accounting for revenue arising from contracts with customers. The core principle, involving a five-step process, of the revenue model is that an 12 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For real estate services, the Company generates revenues from fees related to real estate agent services, mainly from cooperative brokerage fees from the Company’s network of third-party real estate agents, which assist customers in the purchase or sale of a home. The Company recognizes revenues from real estate services upon completion of the performance obligation which is when the mortgage transaction closes. Performance obligations for real estate agent services are typically completed 40 to 60 days after the commencement of the home search process. Payment for these services is typically settled in cash as part of closing costs to the borrower upon closing of the mortgage transaction. Also included in real estate services are settlement services, which are revenue from fees charged for services such as title search fees, wire fees, policy and document preparation, and other mortgage settlement services. The Company recognizes revenues from settlement services upon completion of the performance obligation, which is when the mortgage transaction closes. Insurance revenue primarily consists of fees earned on homeowners insurance policies and title insurance. The Company generates revenues from agent fees on homeowners insurance policies obtained by customers through the Company’s marketplace of third-party insurance carriers. The Company offers title insurance as an agent and works with third-party providers that underwrite the title insurance policies. For title insurance, the Company recognizes revenue from fees upon the completion of the performance obligation which, is when the mortgage transaction closes. For homeowners insurance and title insurance, the Company is the agent in the transactions as the Company does not control the ability to direct the fulfillment of the service, is not primarily responsible for fulfilling the performance of the service, and does not assume the risk in a claim against a policy. For international lending revenue, the Company generates revenue primarily from broker fees earned in the U.K. The Company recognizes international lending revenue upon completion of the performance obligation, which is when the mortgage transaction closes. 3) Net interest income includes interest income from LHFS, calculated based on the note rate of the respective loan, interest income from short-term investments, and interest income on loans held for investment. Interest expense includes interest expense on warehouse lines of credit, interest expense on customer deposits, as well as interest expense on the Convertible Note. Compensation and Benefits — Compensation and benefits include salaries, wages, and incentive pay as well as stock-based compensation, employee health benefits, 401(k) plan benefits, and social security and unemployment taxes. Stock-based compensation includes expenses associated with restricted stock unit grants, performance stock unit grants, and stock option grants, under the Company’s stock plans. Compensation expense for the stock-based payments is based on the fair value of the awards on the grant date. Compensation and benefits expenses are expensed as incurred with the exception of stock-based compensation, which is recognized in a straight-line basis over the requisite service period. General and Administrative Expenses — General and administrative expenses include rent and occupancy expenses, insurance, and external legal, tax and accounting services. General and administrative expenses are expensed as incurred. Technology Expenses — Technology expenses consist of direct costs related to vendors engaged in product management, design, development, and testing of the Company’s websites and products. Technology expenses are expensed as incurred. Marketing and Advertising Expenses — Marketing and advertising expenses consist of direct costs related to customer acquisition expenses, brand costs, and paid marketing. For customer acquisition expenses, the Company primarily generates loan origination leads through third-party financial service websites for which they incur “pay-per-click” expenses. A majority of the Company’s marketing and advertising expenses are incurred from leads purchased from these third-party financial service websites. Marketing and advertising expenses are expensed as incurred. Loan Origination Expenses — Loan origination expenses consist of costs directly attributable to the production of loans such as appraisal fees, processing expenses, underwriting, closing fees, and servicing costs. These expenses are expensed as incurred. 13 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Other Expenses — Other expenses consist of direct costs related to other non-mortgage homeownership activities, including settlement service expenses, lead generation expenses, expenses incurred in relation to our international lending activities, and gains and losses from equity related liabilities. Settlement service expenses consist of fees for transactional services performed by third-party providers for borrowers while lead generation expenses consist of fees for services related to real estate agents. Other expenses are expensed as incurred. Segments — The Company has one reportable segment. The Company’s chief operating decision maker, the Chief Executive Officer, reviews financial information presented on a company-wide basis for purposes of allocating resources and evaluating financial performance. Reclassification of Prior Period Presentation in the Balance Sheet and Statement of Operations and Comprehensive Loss — Reclassifications of the previously reported statement of operations and comprehensive loss have been made to conform to the current period’s presentation, which provides increased transparency to the nature of the costs. To conform to the current presentation, the following changes were made to the prior period condensed consolidated financial statements: Assets • Loans held for investment—Loans held for investment has been reclassified from prepaid expenses and other assets to loans held for investment on the condensed consolidated balance sheets. Equity • Common Stock—Common Stock has been recast to reflect the 1-for-50 reverse stock split, see Note 1 Organization and Nature of the Business - Reverse Stock Split, for additional information. • Additional paid-in-capital—Additional paid-in-capital has been recast to reflect the 1-for-50 reverse stock split,. see Note 1 Organization and Nature of the Business - Reverse Stock Split, for additional information. Revenue • Gain on loans, net (Previously mortgage platform revenue, net)—Loan repurchase reserve recovery (provision) has been reclassified from mortgage platform expenses to gain on loans, net. The Company’s mortgage related activities that do not include originating and selling loans, namely in the U.K., have been reclassified from other platform revenue to other revenue. • Net interest income: • Interest income—Interest income from short-term investments has been reclassified from other income. • Interest expense (Previously warehouse interest expense)—Interest expense and amortization on non-funding debt has been reclassified to interest expense from interest expense and amortization on non-funding debt. Expenses • Loan origination expense (Previously mortgage platform expenses)—The Company’s expenses that were not incurred to originate and sell loans, namely in the U.K., have been reclassified to other expenses. • Other expenses (Previously other platform expenses)—Restructuring and impairment expenses, change in fair value of convertible preferred stock warrants, and change in fair value of bifurcated derivative have been reclassified to other expenses. Previously Allocated Expenses • Compensation and benefits—Compensation and benefits, which includes stock-based compensation, was previously allocated to mortgage platform expenses, other platform expenses, general and administrative expenses, marketing and advertising expenses, and technology and product development expenses based on allocated headcount is now presented as its own financial statement line item. 14 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS • Rent and occupancy—Rent and occupancy was previously allocated to mortgage platform expenses, other platform expenses, general and administrative expenses, marketing and advertising expenses, and technology and product development expenses based on allocated headcount, is now included within general and administrative expenses. • Depreciation and amortization—Depreciation and amortization was previously allocated to mortgage platform expenses, other platform expenses, general and administrative expenses, marketing and advertising expenses, and technology and product development expenses based on allocated headcount is now presented as its own financial statement line item. The impacts of the reclassifications on the condensed consolidated statements of operations and comprehensive loss are as follows: (Amounts in thousands) Nine Months Ended September 30, 2023 Caption name change As previously reported Reclassifications As reclassified Revenues: Mortgage platform revenue, net Gain on loans, net $ 53,277 $ ( 2,538 ) $ 50,739 Cash offer program revenue 304 ( 304 ) — Other platform revenue Other revenue 9,964 3,700 13,664 Net interest income Interest income 12,527 5,479 18,006 Warehouse interest expense Interest expense ( 9,544 ) ( 18,237 ) ( 27,781 ) Net interest income 2,983 ( 12,758 ) ( 9,775 ) Total net revenues 66,528 ( 11,900 ) 54,628 Expenses: Compensation and benefits — 156,437 156,437 Mortgage platform expenses Loan origination expense 71,109 ( 61,883 ) 9,226 Cash offer program expenses 398 ( 398 ) — Other platform expenses Other expenses/(Income) 12,103 235,469 247,572 General and administrative expenses 121,228 ( 77,528 ) 43,700 Marketing and advertising expenses 17,144 ( 1,219 ) 15,925 Technology and product development expenses 67,689 ( 35,730 ) 31,959 Restructuring and impairment expenses 11,508 ( 11,508 ) — Depreciation and amortization — 32,791 32,791 Total expenses 301,179 236,431 537,610 Interest and other income (expense), net Other income (expense) 5,382 ( 5,382 ) — Interest and amortization on non-funding debt ( 18,237 ) 18,237 — Change in fair value of warrant liabilities 861 ( 861 ) — Change in fair value of convertible preferred stock warrants 266 ( 266 ) — Change in fair value of bifurcated derivative ( 236,603 ) 236,603 — Total interest and other expense, net ( 248,331 ) 248,331 — Loss before income tax (benefit) expense ( 482,982 ) — ( 482,982 ) Income tax (benefit) expense 2,539 — 2,539 Net loss $ ( 485,521 ) $ — $ ( 485,521 ) 15 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Reclassification of the Statement of Cash Flows —To conform to the current presentation, borrowings on warehouse lines of credit and repayments of warehouse lines of credit on the statement of cash flows have been combined into net borrowings (repayments) on warehouse lines of credit within cash (used in)/provided by financing activities, as original maturities are short-term (90 days or less), as well as the breakout for gain on sale of loans, net from proceeds from sale of mortgage loans held for sale within cash used in operating activities. Recently Issued Accounting Standards Not Yet Adopted In July 2023, the FASB issued Accounting Standard Update (“ASU”) 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock (“ASU 2023-03”). This ASU amends or supersedes various Securities and Exchange Commission ("SEC") paragraphs within the applicable codification to conform to past SEC staff announcements. This ASU does not provide any new guidance. ASU 2023-03 will become effective for the Company once the addition to the FASB Codification is made available. As of September 30, 2024, the Company does not expect ASU 2023-06 will have a material impact on the consolidated financial statements. In August 2023, the FASB issued ASU 2023-04, Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121 (“ASU 2023-04”). This ASU amends and adds various SEC paragraphs to the FASB Codification to reflect guidance regarding the accounting for obligations to safeguard crypto assets an entity holds for platform users. This ASU does not provide any new guidance. ASU 2023-04 will become effective for the Company once the addition to the FASB Codification is made available. As of September 30, 2024, the Company does not expect ASU 2023-04 will have any impact on the consolidated financial statements. In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). This ASU incorporates certain SEC disclosure requirements into the FASB ASC. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. ASU 2023-06 will become effective for each amendment on the effective date of the SEC’s corresponding disclosure rule changes. As of September 30, 2024, the Company does not expect ASU 2023-06 will have a material impact on the consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures . This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for our annual fiscal year 2024, and interim periods starting in fiscal year 2025. Early adoption is permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. The Company does not expect ASU 2023-07 will have a material impact on the consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company does not expect ASU 2023-09 will have a material impact on the consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement - Comprehensive Income - Expense Disaggregation Disclosures (subtopic 220-410), which requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses. This ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is in the process of assessing the impact the adoption of this guidance will have on the Company’s financial statement disclosures. 16 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Recent Securities and Exchange Commission (SEC) Final Rules Not Yet Adopted In March 2024, the SEC adopted final rules under SEC Release No. 33-11275 : The Enhancement and Standardization of Climate-Related Disclosures for Investors , which requires registrants to provide certain climate-related information in their registration statements and annual reports. The rules require information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks will also include disclosure of a registrant’s greenhouse gas emissions. In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements. These requirements are effective for the Company in various fiscal years, starting with its fiscal year beginning January 1, 2027. Disclosures will be required prospectively, with information for prior periods required only to the extent it was previously disclosed in an SEC filing. On April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. The Company is currently evaluating the impact of these final rules on its consolidated financial statements and disclosures. 3. Revenue Revenue — The Company disaggregates revenue based on the following revenue streams: Gain on loans, net consisted of the following : Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2024 2023 2024 2023 Gain on sale of loans, net $ 15,836 $ 9,589 $ 44,032 $ 42,809 Integrated partnership fees 2,441 2,830 7,184 8,108 Loan repurchase reserve recovery/(provision) 3,226 ( 866 ) 10,168 ( 178 ) Total gain on loans, net $ 21,503 $ 11,553 $ 61,384 $ 50,739 Other revenue consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2024 2023 2024 2023 International lending revenue $ 1,190 $ 1,072 $ 3,517 $ 2,740 Insurance Services 438 997 1,614 2,822 Real estate services 753 651 1,753 6,517 Other revenue 689 1,289 1,884 1,585 Total other revenue $ 3,070 $ 4,009 $ 8,768 $ 13,664 Net interest income consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2024 2023 2024 2023 Mortgage interest income $ 5,400 $ 3,577 $ 12,832 $ 12,305 Interest Income from Investments 4,467 466 15,068 5,701 Warehouse interest expense ( 3,815 ) ( 2,758 ) ( 8,582 ) ( 9,544 ) Other interest expense ( 1,631 ) ( 11,940 ) ( 5,963 ) ( 18,237 ) Total net interest income/(loss) $ 4,421 $ ( 10,655 ) $ 13,355 $ ( 9,775 ) 4. Restructuring and Impairments In December 2021, the Company initiated an operational restructuring program that included plans for costs reductions in response to a difficult interest rate environment as well as a slowing housing market. The restructuring program, which continued during the nine months ended September 30, 2024, consists of reductions in headcount and any associated costs 17 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS that primarily include reduction in real estate footprint expenses and one-time employee termination benefits. The Company expects the restructuring initiatives to continue at least through the end of 2024. Due to reduced headcount, the Company has also reduced its real estate footprint. The Company has impaired right-of-use assets related to office space that is no longer in use or has been completely abandoned. Leases where the Company is unable to terminate or amend the lease with the landlord remain on the balance sheet under lease liabilities. In September 2024, the Company entered into a lease amendment with a landlord to reassign the lease to a third party and release the Company of all rights and obligations under the original lease. The amendment was accounted for as a lease modification (the “Lease Modification”) which reduced the term of the lease from June 30, 2030 to November 1, 2024. Upon entering into the Lease Modification, the Company made the remaining lease payments of $ 7.3 million and incurred initial direct costs of $ 1.1 million. As part of the Lease Modification, the Company reduced the right-of-use asset by $ 12.4 million and removed the lease liability of $ 20.8 million. Total lease costs will be expensed over the amended lease term and are included within general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. All corresponding leasehold improvements will be depreciated over the amended lease term. For both the three months ended September 30, 2024 and 2023, the Company impaired property and equipment of none . For the nine months ended September 30, 2024 and 2023, the Company impaired property and equipment of none and $ 4.8 million, respectively, which was related to termination of lease agreement and sale of laptops resulting from a reduction in the workforce. For the three and nine months ended September 30, 2024 and 2023, the Company’s restructuring and impairment expenses consist of the following: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2024 2023 2024 2023 Employee one-time termination benefits (1) $ 43 $ 765 $ 948 $ 2,319 Impairments of Right-of-Use assets (2) — — — 118 Real estate restructuring loss (2) — ( 37 ) — 5,252 Gain on lease settlement (2) — ( 49 ) — ( 1,025 ) Impairment of property and equipment (2) — — — 4,844 Total Restructuring and Impairments $ 43 $ 679 $ 948 $ 11,508 (1) Employee one-time termination benefits are included in compensation and benefits on the condensed consolidated statements of operations and comprehensive loss. (2) Impairments of Right-of-Use Assets, real estate restructuring loss, gain on lease settlement, and impairment of property and equipment are included in other expenses on the condensed consolidated statements of operations and comprehensive loss. The cumulative amount of one-time termination benefits, impairment of loan commitment assets, impairment of right-of-use assets and real estate restructuring loss, and impairment of property and equipment as of September 30, 2024 is $ 123.2 million, $ 105.6 million, $ 8.5 million, and $ 12.0 million, respectively. 5. Loans Held for Sale and Warehouse Lines of Credit The Company has the following outstanding warehouse lines of credit: (Amounts in thousands) Maturity Facility Size September 30, 2024 December 31, 2023 Funding Facility 1 (1) September 30, 2024 $ 100,000 $ — $ 61,709 Funding Facility 2 (2) December 6, 2024 150,000 72,379 40,088 Funding Facility 3 (3) August 1, 2025 175,000 62,102 24,421 Total warehouse lines of credit $ 425,000 $ 134,481 $ 126,218 __________________ (1) Interest charged under the facility is at the 30-day term SOFR plus 2.125 % . Cash collateral deposit of $ 15 million is maintained and included in restricted cash. Subsequent to September 30, 2024, the Company extended the maturity to September 30, 2025. (2) Interest charged under the facility is at the 30-day term SOFR plus 2.10 % - 2.25 %. Cash collateral deposit of $ 3.8 million is maintained and included in restricted cash. (3) Interest charged under the facility is at the 30-day term SOFR plus 1.75 % - 3.75 %. There is no cash collateral deposit maintained as of September 30, 2024. 18 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The unpaid principal amounts of the Company’s LHFS are also pledged as collateral under the relevant warehouse funding facilities. The Company’s LHFS are summarized below by those pledged as collateral and those fully funded by the Company: (Amounts in thousands) September 30, 2024 December 31, 2023 Funding Facility 1 $ 60,583 $ 63,483 Funding Facility 2 78,667 42,316 Funding Facility 3 66,941 26,894 Total LHFS pledged as collateral 206,191 132,693 Company-funded LHFS 10,250 12,386 Company-funded HELOC 118,377 25,098 Total LHFS 334,818 170,177 Fair value adjustment 4,667 ( 27 ) Total LHFS at fair value $ 339,485 $ 170,150 Average days loans held for sale, excluding Company-funded LHFS and Company-funded HELOC, for the three and nine months ended September 30, 2024 and 2023 were approximately 24 days, 21 days, 28 days, and 21 days, respectively. This is defined as the average days between funding and sale for loans funded during each period. As of September 30, 2024 and December 31, 2023, the Company had an immaterial amount of loans either 90 days past due or non-performing. For the nine months ended September 30, 2024 and 2023, the weighted average interest rate for the warehouse lines of credit was 6.90 % and 6.92 %, respectively. The warehouse lines of credit contain certain restrictive covenants that require the Company to maintain certain minimum net worth, liquid assets, current ratios, liquidity ratios, and leverage ratios. In addition, these warehouse lines also require the Company to maintain compensating cash balances, which aggregated to $ 18.8 million as of September 30, 2024 and December 31, 2023 and are included in restricted cash on the accompanying condensed consolidated balance sheets. The Company was in compliance with all financial covenants under the warehouse lines as of September 30, 2024. 6. Loans Held for Investment Loans Held for Investment —The majority of the Company’s Loans Held for Investment portfolio consists of property - buy to let loans, which is the purchase of property for the purpose of renting to a tenant, which makes up 97.5 % of the total loan portfolio as of September 30, 2024. The Company’s Loans Held for Investment portfolio is summarized as follows: (Amounts in thousands) September 30, 2024 December 31, 2023 Property - Buy to Let $ 80,499 $ 1,063 Other 2,040 3,730 Allowance for credit losses $ ( 1,138 ) $ — Total Loans Held for Investment, net $ 81,401 $ 4,793 Accrued interest receivable on loans receivable totaled $ 0.2 million and an immaterial amount, respectively, as of September 30, 2024 and December 31, 2023 and is included in other receivables, net on the condensed consolidated balance sheets. The Company elected the practical expedient to exclude the applicable accrued interest receivable on loans receivable from the disclosed amortized cost basis. The Company concluded that it has a substantive non-accrual policy which allows for the timely reversal of accrued interest should an asset be placed on non-accrual; accordingly, there was no allowance for credit losses for accrued interest 19 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS receivable on loans receivable as of September 30, 2024. When writing off uncollectible accrued interest receivables on its loans held for investment portfolio, the Company considers 90 days to be a timely manner. Uncollectible amounts of accrued interest receivable are charged off by reversing interest income. The Company had no charge offs of uncollectible accrued interest on its outstanding loans held for investment during the three and nine month periods ended September 30, 2024 and 2023. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. As of both September 30, 2024 and December 31, 2023, there were no loans held for investment past due. The Company considers loans for which the repayment is expected to be provided substantially through the operation or sale of collateral and the borrower is experiencing financial difficulty, or where foreclosure is probable, to be collateral dependent. As of September 30, 2024 and December 31, 2023, there were no loans secured by any asset type for which formal foreclosure proceedings are in process. Loans are placed on non-accrual status and the accrual of interest is discontinued if principal or interest payments become 90 days past due and/or management deems the collectability of the principal and/or interest to be in question. Loans to a customer whose financial condition has deteriorated are considered for non-accrual status whether or not the loan is 90 days or more past due. Generally, payments received on non-accrual loans are recorded as principal reductions. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. As of September 30, 2024 and December 31, 2023, there were no loans that were placed on non-accrual status. During the three and nine months ended September 30, 2024 and 2023, there were no modifications for loans to borrowers experiencing financial difficulty. Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all loans with the exception of homogeneous loans, or loans that are evaluated together in pools of similar loans (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans). This analysis is performed at least on a quarterly basis. Homogeneous loans are not risk rated and credit risk is analyzed largely by the contractual maturity and payment status of the loan. We utilize maturity bands to assess the probability of credit losses within the portfolio. The three main bands are as follows: 0-20 months, 21-40 months, and over 40 months. The following table presents amortized cost for outstanding loans, by class and year of origination/renewal, as of September 30, 2024 and December 31, 2023. 20 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The tables below presents loans by credit quality indicator and vintage year: September 30, 2024 (Amounts in thousands) 2024 2023 2022 2021 2020 Prior Total Property - Buy to Let 0-20 Months $ — $ — $ — $ — $ — $ — $ — 21-40 Months — — — — — — — Over 40 Months 79,710 789 — — — — 80,499 Total $ 79,710 $ 789 $ — $ — $ — $ — $ 80,499 Other 0-20 Months $ — $ 51 $ 302 $ 401 $ 138 $ 18 $ 910 21-40 Months — — 849 266 — — 1,115 Over 40 Months — 15 — — — — 15 Total $ — $ 66 $ 1,151 $ 667 $ 138 $ 18 $ 2,040 Total $ 79,710 $ 855 $ 1,151 $ 667 $ 138 $ 18 $ 82,539 December 31, 2023 (Amounts in thousands) 2023 2022 2021 2020 2019 Prior Total Property - Buy to Let 0-20 Months $ — $ — $ — $ — $ — $ — $ — 21-40 Months — — — — — — — Over 40 Months 1,063 — — — — — 1,063 Total $ 1,063 $ — $ — $ — $ — $ — $ 1,063 Other 0-20 Months $ 116 $ 472 $ 417 $ 175 $ 203 $ 2 $ 1,385 21-40 Months 10 1,093 856 129 — — 2,088 Over 40 Months 17 240 — — — — 257 Total $ 143 $ 1,805 $ 1,273 $ 304 $ 203 $ 2 $ 3,730 Total $ 1,206 $ 1,805 $ 1,273 $ 304 $ 203 $ 2 $ 4,793 7. Goodwill and Internal Use Software and Other Intangible Assets, Net Changes in the carrying amount of goodwill, net consisted of the following: Nine Months Ended September 30, (Amounts in thousands) 2024 2023 Balance at beginning of period $ 32,390 $ 17,388 Goodwill acquired — 14,041 Effect of foreign currency exchange rate changes 1,013 ( 75 ) Balance at end of period $ 33,403 $ 31,354 No impairment of goodwill was recognized for the three and nine months ended September 30, 2024 and 2023. 21 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Internal use software and other intangible assets, net consisted of the following: As of September 30, 2024 (Amounts in thousands, except useful lives) Weighted Average Useful Lives (in years) Gross Carrying Value Accumulated Amortization Net Carrying Value Intangible assets with finite lives Internal use software and website development 3.0 $ 144,504 $ ( 124,678 ) $ 19,826 Intellectual property and other 5.7 1,062 ( 401 ) 661 Total Intangible assets with finite lives, net 145,565 ( 125,079 ) 20,486 Intangible assets with indefinite lives Domain name 1,820 — 1,820 Licenses and other 2,378 — 2,378 Total Internal use software and other intangible assets, net $ 149,763 $ ( 125,079 ) $ 24,684 As of December 31, 2023 (Amounts in thousands, except useful lives) Weighted Average Useful Lives (in years) Gross Carrying Value Accumulated Amortization Net Carrying Value Intangible assets with finite lives Internal use software and website development 3.0 $ 136,879 $ ( 103,587 ) $ 33,292 Intellectual property and other 5.7 1,008 ( 254 ) 754 Total Intangible assets with finite lives, net 137,887 ( 103,841 ) 34,046 Intangible assets with indefinite lives Domain name 1,820 — 1,820 Licenses and other 2,260 — 2,260 Total Internal use software and other intangible assets, net $ 141,967 $ ( 103,841 ) $ 38,126 The Company capitalized $ 2.5 million and $ 5.2 million in internal use software and website development costs during the three months ended September 30, 2024 and 2023, respectively. Included in capitalized internal use software and website development costs are $ 0.4 million and $ 2.7 million of stock-based compensation costs for the three months ended September 30, 2024 and 2023, respectively. Amortization expense totaled $ 6.0 million and $ 9.3 million during the three months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024 and 2023, no impairment was recognized relating to intangible assets. The Company capitalized $ 5.4 million and $ 13.6 million in internal use software and website development costs during the nine months ended September 30, 2024 and 2023, respectively. Included in capitalized internal use software and website development costs are $ 1.3 million and $ 5.1 million of stock-based compensation costs for the nine months ended September 30, 2024 and 2023, respectively. Amortization expense totaled $ 21.1 million and $ 28.1 million during the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, no impairment was recognized relating to intangible assets. 22 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8. Prepaid Expenses and Other Assets Prepaid expenses and other assets consisted of the following: As of September 30, As of December 31, (Amounts in thousands) 2024 2023 Prepaid expenses $ 18,488 $ 27,859 Tax receivables 7,109 8,348 Security Deposits 11,021 15,179 Total prepaid expenses and other assets $ 36,618 $ 51,386 9. Customer Deposits Customer Deposits —In relation to the Company’s banking activities tied to the Company’s acquisition of Birmingham Bank in the U.K., the Company offers individual savings accounts and other depository products with differing maturities and interest rates to its customers. The balance of customer deposits as of September 30, 2024 and December 31, 2023 was $ 97.8 million and $ 11.8 million, respectively, on the condensed consolidated balance sheets. The following table presents average balances and weighted average rates paid on deposits for the periods indicated: Three Months Ended September 30, 2024 2023 (Amounts in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Notice $ 9,059 2.58 % $ 2,190 2.92 % Term 54,789 3.86 % 2,962 2.13 % Savings 3,973 2.07 % 4,991 2.18 % Total Deposits $ 67,821 2.84 % $ 10,143 2.41 % Nine Months Ended September 30, 2024 2023 (Amounts in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Notice $ 4,724 2.76 % $ 2,842 2.62 % Term 28,012 3.86 % 2,402 1.66 % Savings 4,298 2.16 % 5,511 1.97 % Total Deposits $ 37,034 2.93 % $ 10,755 2.08 % The following table presents maturities of customer deposits: (Amounts in thousands) As of September 30, 2024 Demand deposits 41,072 Maturing In: 2024 181 2025 12,605 2026 16,734 2027 15,122 2028 — Thereafter 12,068 Total $ 97,782 23 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Interest Expense on deposits is recorded in interest expense in the condensed consolidated statements of operations and comprehensive loss for the periods indicated as follows: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2024 2023 2024 2023 Notice $ 52 $ 22 $ 97 $ 43 Term 587 4 856 10 Savings 31 26 89 54 Total Interest Expense $ 670 $ 52 $ 1,042 107 Deposits are for U.K. banking clients and are protected up to £ 85.0 thousand ($ 113.8 thousand, USD equivalent as of September 30, 2024 ) per eligible person by the Financial Services Compensation Scheme in the U.K. Of the total customer deposits as of September 30, 2024, $ 22.1 million were over the applicable insured amount. 10. Corporate Line of Credit, Preclosing Bridge Notes, and Convertible Note Corporate Line of Credit —The Company made the final principal payment on its corporate line of credit in August 2023 and as such incurred no interest expense under the corporate line of credit during the three and nine months ended September 30, 2024. For the three months ended September 30, 2023, the Company recorded a total of $ 11.3 million related to interest expense as follows: $ 6.1 million in interest expense related to the line of credit and $ 5.2 million in interest expense related to the amortization of deferred debt issuance costs and discount and other debt servicing fees which is included in interest expense within the condensed consolidated statements of operations and comprehensive loss. For the nine months ended September 30, 2023, the Company recorded a total of $ 17.5 million related to interest expense as follows: $ 11.5 million in interest expense related to the line of credit and $ 6.0 million in interest expense related to the amortization of deferred debt issuance costs and discount and other debt servicing fees, which is included in interest expense within the condensed consolidated statements operations and comprehensive loss. Pre-Closing Bridge Notes— In connection with the Closing of the Business Combination, the Pre-Closing Bridge Notes held by SB Northstar in an aggregate principal amount o f $ 650.0 million automatically converted into Class C common stock at a conversion price of $ 10.00 per share and the Pre-Closing Bridge Notes held by the Sponsor in an aggregate principal amount of $ 100.0 million were exchanged for 40.0 million shares of Class A common stock. For the three and nine months ended September 30, 2023, the Company recorded a loss of $ 237.7 million and a loss of $ 236.6 million, respectively, of changes in fair value of embedded derivatives included in other expenses/(income), within the consolidated statements of operations and comprehensive loss. Convertible Note— In connection with the Closing of the Business Combination, the Company issued to SB Northstar LP, a related party, a Cayman Islands exempted limited partnership, and an affiliate of SoftBank Group Corp., a senior subordinated convertible note in the aggregate principal amount of $ 528.6 million (the “Convertible Note”), $ 550.0 million less approximately $ 21.4 million released to the Company at the Closing from Aurora’s trust account, pursuant to an Indenture, dated as of August 22, 2023 (the “Indenture”). The Convertible Note bears 1 % interest per annum and matures on August 22, 2028, unless earlier converted or redeemed. Per the Indenture, the Company may elect to pay all or any portion of interest in kind by issuing to the holder of such note an additional note or in cash. The counter parties to the Convertible Note and Merger Agreement are related parties. The Convertible Note is convertible, at the option of SB Northstar, into shares of the Company’s Class A common stock, with an initial conversion rate per $1,000 principal amount of Convertible Note equal to (a) $1,000 divided by (b) a dollar amount equal to 115 % of the First Anniversary VWAP (as defined in the Indenture), subject to adjustments as described therein. The Indenture provides that the First Anniversary VWAP may be no less than $ 400.00 and no greater than $ 600.00 , adjusted by the 1-for-50 reverse stock split, subject to adjustments as described therein. The Convertible Note may be redeemed at the option of the Company at a redemption price of 115 % of par pl us accrued interest in cash, at any time on or before the 30th trading day prior to the maturity date of the Convertible Note if the last reported sale price of the Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days during the 30 trading day period ending on, and including, the trading day immediately preceding the d ate of notice of optional 24 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS redemption. The Convertible Note is redeemable prior to maturity in the event of a fundamental change under the Indenture, such as the removal of the Company’s Class A common stock from the Nasdaq. In this event, the Company would be required to redeem the Convertible Note for an amount in cash equal to the principal balance plus accrued and unpaid interest on the redemption date. As of September 30, 2024 and December 31, 2023, the carrying amount of the Convertible Note was $ 518.0 million and $ 514.6 million on the condensed consolidated balance sheets, respectively. For the three and nine months ended September 30, 2024, the Company recorded a total of $ 1.6 million and $ 5.9 million, respectively, of interest expense related to the Convertible Note. Interest expense from the Convertible Note is included in interest expense within the condensed consolidated statements of operations and comprehensive loss. In February 2024, the Company made a cash payment in the amount of $ 2.5 million , which consisted of $ 1.1 million towards the principal and $ 1.4 million of interest from January 1, 2024 through February 15, 2024. For the period February 16, 2024 to September 30, 2024, the Company has elected to pay interest in kind on the Convertible Note, which is calculated at 1 % per annum and accrued at the fair value of the additional note issued. For the both the three and nine months ended September 30, 2023, the Company recorded a total of $ 0.5 million of interest expense related to the Post-Closing Convertible Notes. 11. Related Party Transactions The Company has entered into a number of commercial agreements with related parties, which management believes provide the Company with products or services that are beneficial to its commercial objectives. Often these products and services have been tailored to the Company’s specific needs or are part of pilot programs, both for the Company and the counterparty, for which there are no clear alternative vendors offering comparable services to compare pricing with. It is reasonable to assume that none of these related party commercial agreements were structured at arm’s length and therefore may be beneficial to the counterparty. 1/0 Capital —The Company is a party to an employee and expense allocation agreement with 1/0 Capital, LLC (“1/0 Capital”), an entity affiliated with 1/0 Real Estate, LLC (“1/0 Real Estate”) (an entity wholly owned by 1/0 Holdco LLC, in which Vishal Garg, the Chief Executive Officer of the Company, and certain of the Company’s executive officers each hold a more than five percent ownership interest). Under the employee and expense allocation agreement, 1/0 Capital provides the Company access to certain employees in exchange for reasonable consideration in the form of fees based on their time, as well as IT support services. Any intellectual property created under the agreement by 1/0 Capital employees working on behalf of the Company belongs to the Company. The term of the agreement will continue in perpetuity. The services provided by 1/0 Capital are not integral to the Company’s technology platform and amounts incurred are not material to the Company. In connection with this agreement, the Company incurred gross expense of none in the three months ended September 30, 2024 and reduced the accrued expense by $ 27 thousand in the three months ended September 30, 2023, which are included within general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss. The Company incurred gross expense of none and $ 6 thousand in the nine months ended September 30, 2024 and 2023, respectively, which are included within general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss. As part of this agreement, the Company may provide access to certain of its employees for use by 1/0 Capital which reduced the amounts owed to 1/0 Capital by none for both the three and nine months ended September 30, 2024 and 2023, respectively. The Company is invoiced on a net basis and recorded none and $ 153 thousand payable as of September 30, 2024 and December 31, 2023, respectively, included within other liabilities on the condensed consolidated balance sheets. TheNumber —The Company originally entered into a data analytics services agreement in August 2016 with TheNumber, LLC (“TheNumber”), an entity affiliated with both Vishal Garg, the Chief Executive Officer of the Company, and 1/0 Real Estate. In September 2021, the Company and TheNumber entered into a technology integration and license agreement, which was amended in November 2021, to develop a consumer credit profile technology that is to be launched in three stages. The first stage involves testing TheNumber’s limited graph Application Programming Interface in a testing environment with test data. The second stage involves data such as credit, income, and assets of staged borrowers meeting certain measures of speed and performance. The third stage requires TheNumber to run the product and serve all borrowers on the production side as well as provide data to the Company from its rich data set. The listed services provided by TheNumber are lead generation, market rate analysis, lead growth analysis, property listing analysis, automated valuation models, and financial risk analysis. Both parties agreed to jointly develop all aspects of this program, and the agreement provides for the utilization of TheNumber employees by the Company. In January 2024, the agreement was extended for an additional year. 25 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The services provided by TheNumber are not integral to the Company’s technology platform and amounts incurred are not material to the Company. In connection with these agreements, the Company paid expenses of $ 232 thousand and $ 67 thousand for the three months ended September 30, 2024 and 2023 respectively, which are included within general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss. The Company paid expenses of $ 711 thousand and $ 438 thousand for the nine months ended September 30, 2024 and 2023 respectively, which are included within general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss and had a payable of $ 68 thousand and $ 230 thousand as of September 30, 2024 and December 31, 2023, respectively, included within other liabilities on the condensed consolidated balance sheets. Notable —In October 2021, the Company entered into a private label and consumer lending program agreement (the “2021 Notable Program Agreement”) to provide home improvement lines of credit to qualified borrowers of the Company with Notable Finance, LLC (“Notable”), an entity in which Vishal Garg, the Chief Executive Officer of the Company, and 1/0 Real Estate collectively hold a majority ownership interest. The program is intended to be used by qualified customers of the Company for home improvement purchases. In September 2022, the Company entered into an amendment of the 2021 Notable Program Agreement, the “Amended Notable Program”. The Amended Notable Program expands Notable’s product offerings to include in the private label consumer loan program, a non-revolving personal line of credit, where the unpaid principal balance converts to a closed-end, multiyear unsecured personal loan following a designated draw period, to qualified consumers for the financing of purchases of home improvement products and services. In January 2022, Better Trust I, a subsidiary of the Company, entered into a master loan purchase agreement (the “Notable MLPA”) with Notable to purchase from Notable up to $ 20.0 million of unsecured home improvement loans underwritten and originated by Notable for the Company’s customers. Under the Notable MLPA, Notable originated home improvement loans, all of which Notable makes available for purchase by the Company. No additional cost outside the sale of the loan was contemplated by the Notable MLPA. The services provided by Notable are not integral to the Company’s technology platform and expenses incurred are not material to the Company. As of September 30, 2024 and December 31, 2023, the Company had $ 4.8 million and $ 6.3 million of unsecured home improvement loans from Notable, which are included within mortgage loans held for sale, at fair value on the condensed consolidated balance sheets. For both the three months ended September 30, 2024 and 2023 the Company incurred $ 16 thousand of expenses for amortization of internal use software under the agreement, which are included within depreciation and amortization on the condensed consolidated statements of operations and comprehensive loss. For the nine months ended September 30, 2024, the Company incurred $ 48 thousand of expenses for amortization of internal use software under the agreement, which are included within depreciation and amortization on the condensed consolidated statements of operations and comprehensive loss. For the nine months ended September 30, 2023, the Company incurred $ 38 thousand of expenses under the agreement, which are included within marketing expenses and depreciation and amortization on the condensed consolidated statements of operations and comprehensive loss. Truework —The Company is a party to a data analytics services agreement with Zethos, Inc., (“Truework”), an entity in which Vishal Garg, the Chief Executive Officer of the Company, is an investor. Under the data analytics services agreement, Truework provides digital Verification of Employment (“VOE”) and Verification of Income (“VOI”) services to the Company during the mortgage loan origination process to confirm the employment and income of borrowers seeking a mortgage. This is data required for underwriting mortgages to the specifications of Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FMCC"), and private loan purchasers. These data services are standard product offerings of Truework, which they offer to a number of mortgage lenders. Truework is one of multiple vendors the Company uses for VOE and VOI services, the largest other one being The Work Number by Equifax. The Company uses the two vendors interchangeably based on estimated lowest cost and turnaround time. The Company originally entered into the data services agreement in March 2021, and amended the agreement in October 2021 to run until September 30, 2023. In connection with usage of the services, the Company incurred expenses of $ 51 thousand and none for the three months ended September 30, 2024 and 2023 respectively, which are included within loan origination expenses on the consolidated statements of operations and comprehensive loss. The Company incurred expenses of $ 90 thousand and none for the nine months ended September 30, 2024 and 2023 respectively, which are included within loan origination expenses on the consolidated statements of operations and comprehensive loss. The Company recorded a payable of $ 13 thousand and $ 7 thousand as of September 30, 2024 and December 31, 2023, respectively, and is included within other liabilities on the condensed consolidated balance sheets. 26 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 12. Commitments and Contingencies Litigation —The Company, among other things, engages in mortgage lending, title and settlement services, and other financial technology services. The Company operates in a highly regulated industry and may be subject to various legal and administrative proceedings concerning matters that arise in the normal and ordinary course of business, including inquiries, complaints, audits, examinations, investigations, employee labor disputes, vendors, and potential enforcement actions from regulatory agencies. While the ultimate outcome of these matters cannot be predicted with certainty due to inherent uncertainties in litigation, management is of the opinion that these matters will not have a material impact on the condensed consolidated financial statements of the Company. The Company accrues for losses when they are probable to occur and such losses are reasonably estimable, and discloses pending litigation if the Company believes a possibility exists that the litigation will have a material effect on its financial results. Legal costs expected to be incurred are accounted for as they are incurred. The Company is currently a party to pending legal claims and proceedings regarding an employee related labor dispute brought forth during the third quarter of 2020. The dispute alleges that the Company has failed to pay certain employees for overtime and is in violation of the Fair Labor Standards Act and labor laws in the State of California and the State of Florida. The case is still in its early stages and has not yet reached the class certification stage and as such the ultimate outcome cannot be predicted with certainty due to inherent uncertainties in the legal claims. As part of the dispute, the Company included an estimated liability of $ 8.3 million and $ 8.4 million as of September 30, 2024 and December 31, 2023, respectively, which is included in accounts payable and accrued expenses on the condensed consolidated balance sheets. During the three months ended September 30, 2024, the changes in the liability included settlements of $ 0.2 million as well as a reduction of accrued expense of $ 0.2 million related to certain other employment matters, which is included within general and administrative expense on the consolidated statement of operations and comprehensive loss. During the nine months ended September 30, 2024, changes included settlement payments of $ 0.7 million as well as a reduction of accrued expense of $ 0.1 million related to certain other employment matters, which is included within general and administrative expense on the consolidated statement of operations and comprehensive loss. There were no changes in the estimated liability for both the three and nine months ended September 30, 2023. On June 7, 2022, Sarah Pierce, Pre-Business Combination Better’s former Head of Sales and Operations, filed litigation against Pre-Business Combination Better, Mr. Garg, and Nicholas Calamari, our Chief Administrative Officer and Senior Counsel. Ms. Pierce has since voluntarily dismissed her claims against the Company and Messrs. Garg and Calamari with prejudice and withdrawn her appeal of a separate judgment obtained by the Company against her. Impacts of the settlement were not material to the Company and are included within the condensed consolidated statements of stockholder’s equity. Regulatory Matters —In the third quarter of 2021, following third-party audits of samples of loans produced during the fiscal years 2018, 2019, and 2022, the Company became aware of certain TILA-RESPA Integrated Disclosure (“TRID”) defects in the loan production process that resulted in the final closing costs disclosed in the closing disclosure, in some instances, being greater than those disclosed in the loan estimate. Some of these defects were outside applicable tolerances under the TRID rule, which resulted in potential overcharges to consumers. As of September 30, 2024 and December 31, 2023, the Company included an estimated liability of $ 6.6 million and $ 8.6 million, respectively, within accounts payable and accrued expenses on the condensed consolidated balance sheets. For the three and nine months ended September 30, 2024, the Company recorded additional accruals for these potential TRID defects of $ 0.1 million and $ 0.3 million, respectively, which are included within loan origination expense in the condensed consolidated statement of operations and comprehensive loss. During the three and nine months ended September 30, 2024, the Company had relief of the liability due to payments to customers in the amount of $ 0.1 million and $ 2.2 million, respectively. For the three and nine months ended September 30, 2023, the Company recorded an additional accrual for these potential TRID defects of $ 3.0 million and $ 2.7 million, respectively, and are included within loan origination expense in the condensed consolidated statement of operations and comprehensive loss. This accrual is the Company’s best estimate of potential exposure on the larger population of loans based on the results obtained by the audited sample. The accrued amounts are for estimated refunds potentially due to consumers for TRID tolerance errors for loans produced from 2018 through 2024. The Company is continuing to remediate TRID tolerance defects as necessary. Minimum Bid Price Notice —On October 12, 2023, the Company received a letter from Nasdaq notifying the Company that it is not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Rule”) for continued listing. The Bid Price Rule requires listed securities to maintain a minimum bid price 27 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Company applied for and, on March 7, 2024, received approval from Nasdaq to transfer the listing of its Class A common stock, from the Nasdaq Global Market to the Nasdaq Capital Market. The Class A common stock transferred to the Nasdaq Capital Market effective as of the opening of business on March 13, 2024 and continues to trade under the symbol “BETR.” In accordance with the Compliance Period Rule, the Company has 180 calendar days, from the date of notification, October 12, 2023, to regain compliance. On April 9, 2024, the Company received formal notice that Nasdaq granted the Company’s request for an additional 180-day period, or until October 7, 2024, to evidence compliance with the $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to the Bid Price Rule. On Friday, August 16, 2024, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation, effecting a 1-for-50 reverse stock split of the Company’s common stock (the “Reverse Stock Split”) for the primary purpose of increasing the per share trading price of the Company’s Class A common stock to enable the Company to regain compliance with the minimum bid price requirement for continued listing on The Nasdaq. The Company’s Class A common stock began trading on a split-adjusted basis on the Nasdaq upon the market open on Monday, August 19, 2024. On September 3, 2024, the Company received a letter from Nasdaq notifying the Company that the Staff has determined that for the last 10 consecutive business days, from August 19, 2024, to August 30, 2024, the closing bid price of the Company’s common stock has been at $1.00 per share or greater, and accordingly, the Company has regained compliance with Listing Rule 5550(a)(2) and the matter is now closed. Loan Commitments —The Company enters into IRLCs to fund mortgage loans, at specified interest rates and within a specified period of time, with potential borrowers who have applied for a loan and meet certain credit and underwriting criteria. As of September 30, 2024 and December 31, 2023, the Company had outstanding commitments to fund mortgage loans in notional amounts of approximately $ 223.3 million and $ 227.4 million, respectively. The IRLCs derived from those notional amounts are recorded within derivative assets and liabilities, at fair value as of September 30, 2024 and December 31, 2023, respectively, on the condensed consolidated balance sheets. See Note 15. Forward Sale Commitments —In the ordinary course of business, the Company enters into contracts to sell existing LHFS or loans committed but yet to be funded into the secondary market at specified future dates. As of September 30, 2024 and December 31, 2023, the Company had outstanding forward sales commitment contracts of notional amounts of approximately $ 295.0 million and $ 265.0 million, respectively. The forward sales commitments derived from those notional amounts are recorded within derivative assets and liabilities, at fair value as of September 30, 2024 and December 31, 2023, respectively, on the condensed consolidated balance sheets. See Note 15. Concentrations —See below for areas considered to be concentrations of credit risk for the Company: Significant loan purchasers are those that represent more than 10% of the Company’s loan volume. During the three months ended September 30, 2024, the Company had three loan purchasers that accounted for 36 %, 27 % and 19 % of loans sold by the Company. During the three months ended September 30, 2023, the Company had three loan purchasers that accounted for 56 %, 22 %, and 11 % of loans sold by the Company. During the nine months ended September 30, 2024, the Company had three loan purchasers that accounted for 44 % , 20 % and 20 % of loans sold by the Company. During the nine months ended September 30, 2023, the Company had one loan purchaser that accounted for 68 % of loans sold by the Company. Concentrations of credit risk associated with the LHFS carried at fair value are limited due to the large number of borrowers and their dispersion across many geographic areas throughout the United States. As of September 30, 2024 , the Company had no significant originations representing 10% or greater of its LHFS secured by properties in any specific geographical area. As of December 31, 2023 , the Company originated 12 % and 11 % of its LHFS secured by properties in Florida and Texas, respectively. The Company maintains cash and cash equivalent balances at various financial institutions. Cash accounts at each bank are insured by the Federal Deposit Insurance Corporation for amounts up to $0.25 million. As of September 30, 2024 and December 31, 2023, the majority of the Company’s cash and cash equivalent balances are in excess of the insured limits at various financial institutions. 28 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Escrow Payable and Other Customer Accounts —In accordance with its lender obligations, the Company maintains a separate escrow bank account to hold borrower funds pending future disbursement. The Company administers escrow deposits representing undisbursed amounts received for payment of property taxes, insurance and principal, and interest on mortgage loans held for sale. The Company also administers customer deposits in relation to other non-mortgage products and services that the Company offers. These funds are shown as restricted cash and there is a corresponding escrow payable on the consolidated balance sheet, as they are being held on behalf of the borrower or customer. The balance in these accounts as of September 30, 2024 and December 31, 2023 was $ 4.7 million and $ 3.4 million, respectively. 13. Risks and Uncertainties In the normal course of business, companies in the mortgage lending industry encounter certain economic and regulatory risks. Economic risks include credit risk and interest rate risk, in either a rising or declining interest rate environment. 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 by the Company. Interest Rate Risk —The Company is subject to interest rate risk in a rising interest rate environment, as the Company may experience a decrease in loan production, as well as decreases in the fair value of LHFS, loan applications in process with locked-in rates, and commitments to originate loans, which may negatively impact the Company’s operations. To preserve the value of such fixed-rate loans or loan applications in process with locked-in rates, agreements are executed for best effort or mandatory loan sales to be settled at future dates with fixed prices. These loan sales take the form of short-term forward sales of mortgage-backed securities and commitments to sell loans to loan purchasers. Alternatively, in a declining interest rate environment, customers may withdraw their loan applications that include locked-in rates with the Company. Additionally, when interest rates decline, interest income received from LHFS will decrease. The Company uses an interest rate hedging program to manage these risks. Through this program, mortgage-backed securities are purchased and sold forward. For all counterparties with open positions as of September 30, 2024, in the event that the Company does not deliver into the forward-delivery commitments, they can be settled on a net basis. Net settlements entail paying or receiving cash based upon the change in market value of the existing instrument. The Company currently uses forward sales of mortgage-backed securities, interest rate commitments from borrowers, and mandatory and/or best-efforts forward commitments to sell loans to loan purchasers to protect the Company from interest rate fluctuations. These short-term instruments, which do not require any payments to be paid to the counterparty in connection with the execution of the commitments, are generally executed simultaneously. Credit Risk —The Company’s hedging program is not designated as formal hedging from an accounting standpoint, contains an element of risk because the counterparties to its mortgage securities transactions may be unable to meet their obligations. While the Company does not anticipate nonperformance by any counterparty, it is exposed to potential credit losses in the event the counterparty fails to perform. The Company’s exposure to credit risk in the event of default by the counterparty is the difference between the contract and the current market price. The Company minimizes its credit risk exposure by limiting the counterparties to well-established banks and securities dealers who meet established credit and capital guidelines. Loan Repurchase Reserve —The Company sells loans to loan purchasers without recourse. As such, the loan purchasers have assumed the risk of loss or default by the borrower. However, the Company is usually required by these loan purchasers to make certain standard representations and warranties relating to the loan for up to three years post sale. 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 loan purchasers for losses. 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 loan purchasers. The Company repurchased $ 3.2 million ( 8 l oans) and $ 3.6 million ( 11 l oans) in unpaid principal balance of loans during the three months ended September 30, 2024 and 2023, respectively, related to its loan repurchase obligations. The Company repurchased $ 6.2 million ( 19 l oans) and $ 20.8 million ( 52 l oans) in unpaid principal balance of loans during the nine months ended September 30, 2024 and 2023, respectively, related to its loan repurchase obligations. The Company’s loan repurchase reserve is included within other liabilities on the consolidated balance sheets. The (recovery 29 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS of)/provision for the loan repurchase reserve is included within gain on loans, net on the consolidated statements of operations and comprehensive loss. The following presents the activity of the Company’s loan repurchase reserve: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2024 2023 2024 2023 Loan repurchase reserve at beginning of period $ 11,721 $ 21,832 $ 19,472 $ 26,745 (Recovery)/provision ( 3,226 ) 866 ( 10,168 ) 178 Charge-offs ( 558 ) ( 945 ) ( 1,367 ) ( 5,170 ) Loan repurchase reserve at end of period $ 7,937 $ 21,753 $ 7,937 $ 21,753 Borrowing Capacity —The Company funds the majority of mortgage loans on a short-term basis through committed and uncommitted warehouse lines as well as from operations for any amounts not advanced by warehouse lenders, see Note 5. As a result, the Company’s ability to fund current operations depends on its ability to secure these types of short-term financings. If the Company’s principal lenders decided to terminate or not to renew any of the warehouse lines with the Company, the loss of borrowing capacity could be detrimental to the Company’s condensed consolidated financial statements unless the Company found a suitable alternative source. 14. Net Loss Per Share The computation of net loss per share and weighted average shares of the Company's Common Stock outstanding during the periods presented is as follows: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands, except for share and per share amounts) 2024 2023 2024 2023 Basic net loss per share: Net loss $ ( 54,210 ) $ ( 353,889 ) $ ( 147,067 ) $ ( 485,521 ) Income allocated to participating securities — — — — Net loss attributable to common stockholders - Basic $ ( 54,210 ) $ ( 353,889 ) $ ( 147,067 ) $ ( 485,521 ) Diluted net loss per share: Net loss attributable to common stockholders - Basic $ ( 54,210 ) $ ( 353,889 ) $ ( 147,067 ) $ ( 485,521 ) Net loss income attributable to common stockholders - Diluted $ ( 54,210 ) $ ( 353,889 ) $ ( 147,067 ) $ ( 485,521 ) Shares used in computation: Weighted average common shares outstanding 15,121,994 9,931,555 15,102,741 7,296,349 Weighted-average effect of dilutive securities: — — Assumed exercise of stock options — — — — Assumed exercise of warrants — — — — Assumed conversion of convertible preferred stock — — — — Diluted weighted-average common shares outstanding 15,121,994 9,931,555 15,102,741 7,296,349 Earnings (loss) per share attributable to common stockholders: Basic $ ( 3.58 ) $ ( 35.63 ) $ ( 9.74 ) $ ( 66.54 ) Diluted $ ( 3.58 ) $ ( 35.63 ) $ ( 9.74 ) $ ( 66.54 ) Basic and diluted loss per share are the same for each class of our Common Stock because they are entitled to the same dividend rights. Basic and diluted loss per share are presented together as the amounts for basic and diluted loss per share are the same (i.e., the Company’s other equity-linked instruments outstanding are anti-dilutive for the periods presented). There were no preferred dividends declared or accumulated during the three and nine months ended September 30, 2024 and 2023. Historically, the Company applied the two-class method that requires earnings available to 30 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS common stockholders for the period to be allocated between our Common Stock and participating securities based upon their respective rights to receive dividends as if all earnings for the period had been distributed. Prior to conversion as part of the Closing of the Business Combination, the Company’s outstanding convertible preferred stock was a participating security as the holders of such shares participated in earnings but did not contractually participate in the Company’s losses and therefore no losses were allocated to the convertible preferred stock in prior periods. The Company's potentially dilutive securities, which include stock options, RSUs, convertible preferred stock prior to the Business Combination, warrants to purchase shares of convertible common stock, warrants to purchase shares of preferred stock prior to the Business Combination, pre-closing Bridge Notes prior to the Business Combination, and Sponsor locked-up shares, have been excluded from the computation of diluted net loss per share, as the effect would be anti-dilutive. The Company excluded the following securities, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated as including them would have had an anti-dilutive effect: Nine Months Ended September 30, (Amounts in thousands) 2024 2023 Convertible preferred stock (2) — — Pre-Closing Bridge Notes (2) — — RSUs and Options to purchase common stock (1) 1,156 968 Warrants to purchase convertible preferred stock (1) — — Public Warrants (1) 122 — Private Warrants (1) 75 — Sponsor locked-up shares (1) 14 — Total 1,367 968 __________________ (1) Securities have an antidilutive effect under the treasury stock method. (2) Securities have an antidilutive effect under the if-converted method. 15. Fair Value Measurements The Company’s financial instruments measured at fair value on a recurring basis are summarized below: September 30, 2024 (Amounts in thousands) Level 1 Level 2 Level 3 Total Mortgage loans held for sale, at fair value $ — $ 339,485 $ — $ 339,485 Derivative assets, at fair value (1) — 193 4,232 4,425 Total Assets $ — $ 339,678 $ 4,232 $ 343,910 Derivative liabilities, at fair value (1) $ — $ 4 $ 2 $ 6 Warrants and equity related liabilities, at fair value (2) $ 697 $ 707 $ — $ 1,404 Total Liabilities $ 697 $ 711 $ 2 $ 1,410 December 31, 2023 (Amounts in thousands) Level 1 Level 2 Level 3 Total Mortgage loans held for sale, at fair value $ — $ 170,150 $ — $ 170,150 Derivative assets, at fair value (1) — — 1,716 1,716 Total Assets $ — $ 170,150 $ 1,716 $ 171,866 Derivative liabilities, at fair value (1) $ — $ 872 $ 77 $ 949 Warrants and equity related liabilities, at fair value (2) 972 1,359 — 2,331 Total Liabilities $ 972 $ 2,231 $ 77 $ 3,280 __________________ (1) As of September 30, 2024 and December 31, 2023, derivative assets and liabilities represent both IRLCs and forward sale commitments. 31 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (2) Fair value is based on the intrinsic value of the Company’s underlying stock price at each balance sheet date and includes certain assumptions with regard to volatility. Specific valuation techniques and inputs used in determining the fair value of each significant class of assets and liabilities are as follows: Mortgage Loans Held for Sale —The Company originates certain LHFS to be sold to loan purchasers and elected to carry these loans at fair value in accordance with ASC 825. The fair value is primarily based on the price obtained for other mortgage loans with similar characteristics. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and receipt of principal payments associated with the relevant LHFS. Derivative Assets and Liabilities —The Company uses derivatives to manage various financial risks. The fair values of derivative instruments are determined based on quoted prices for similar assets and liabilities, dealer quotes, and internal pricing models that are primarily sensitive to market observable data. The Company utilizes IRLCs and forward sale commitments. The fair value of IRLCs, which are related to mortgage loan commitments, is based on quoted market prices, adjusted by the pull-through factor, and includes the value attributable to the net servicing fee. The Company evaluated the significance and unobservable nature of the pull-through factor and determined that the classification of IRLCs should be Level 3 as of September 30, 2024 and December 31, 2023. Significant changes in the pull-through factor of the IRLCs, in isolation, could result in significant changes in the IRLCs’ fair value measurement. The value of IRLCs also rises and falls with changes in interest rates; for example, entering into interest rate lock commitments at low interest rates followed by an increase in interest rates in the market, will decrease the value of IRLC. The Company had issuances of approximately $ 10.0 million and $ 0.1 million of IRLCs during the three months ended September 30, 2024 and 2023, respectively. The Company had issuances of approximately $ 15.9 million and $ 0.6 million of IRLCs during the nine months ended September 30, 2024 and 2023, respectively. The number of days from the date of the IRLC to expiration of the rate lock commitment outstanding as of September 30, 2024 was approximately 51 days on average. The Company attempts to match the maturity date of the IRLCs with the forward commitments. Derivatives are presented in the condensed consolidated balance sheets under derivative assets, at fair value and derivative liabilities, at fair value. During the three months ended September 30, 2024, the Company recognized $ 1.0 million of gains and $ 9.1 million of losses related to changes in fair value of IRLCs and forward sale commitments, respectively. During the nine months ended September 30, 2024, the Company recognized gains of $ 2.6 million and losses of $ 2.7 million related to changes in fair value of IRLCs and forward sale commitments, respectively. During the three months ended September 30, 2023, the Company recognized $ 0.9 million of losses and $ 5.0 million of gains related to changes in the fair value of IRLCs and forward sale commitments, respectively. During the nine months ended September 30, 2023, the Company recognized $ 0.1 million and $ 8.4 million of gains related to changes in the fair value of IRLCs and forward sale commitments, respectively. Gains and losses related to changes in the fair value of IRLCs and forward sale commitments are included in gain on loans, net within the condensed consolidated statements of operations and comprehensive loss. Unrealized activity related to changes in the fair value of forward sale commitments were $ 1.0 million of losses and $ 1.5 million of gains, included in the $ 9.1 million of losses and $ 5.0 million of gains, during the three months ended September 30, 2024 and 2023, respectively. Unrealized activity related to changes in the fair value of forward sale commitments were $ 3.5 million of gains and $ 0.8 million of gains, included in the $ 2.7 million of losses and $ 8.4 million of gains, during the nine months ended September 30, 2024 and 2023, respectively. The notional and fair value of derivative financial instruments not designated as hedging instruments were as follows: (Amounts in thousands) Notional Value Derivative Asset Derivative Liability Balance as of September 30, 2024 IRLCs $ 223,343 $ 4,232 $ 2 Forward commitments $ 295,000 193 4 Total $ 4,425 $ 6 Balance as of December 31, 2023 IRLCs $ 227,380 $ 1,716 $ 77 Forward commitments $ 265,000 — 872 Total $ 1,716 $ 949 32 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Warrant and equity related liabilities— The warrant liability consists of Warrants and certain shares issued to Novator Capital Sponsor Ltd. ("Sponsor, a related party") that are subject to transfer restrictions contingent on the price of Class A common stock exceeding certain thresholds (the "Sponsor-Locked-Up Shares"). The warrants consist of the Company's publicly traded warrants ("Public Warrants") and private warrants to acquire shares of Aurora that have been converted into warrants to acquire shares of Class A common stock ("Private Warrants"). The Public Warrants trade on the Nasdaq Capital Market under the ticker symbol “BETRW” and as such is considered a Level 1 input from an active market to derive the value. The Private Warrants and Sponsor-Locked up Shares, although not publicly traded on an active market, use inputs from the publicly traded Public Warrants and the Company’s publicly traded Common Stock, respectively, and are further calibrated using unobservable inputs representing Level 2 measurements within the fair value hierarchy. As of September 30, 2024 and December 31, 2023, Level 3 instruments include IRLCs. The following table presents the rollforward of Level 3 IRLCs: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2024 2023 2024 2023 Balance at beginning of period $ 3,206 $ ( 514 ) $ 1,640 $ ( 1,513 ) Change in fair value of IRLCs 1,024 ( 953 ) 2,590 46 Balance at end of period $ 4,230 $ ( 1,467 ) $ 4,230 $ ( 1,467 ) Counterparty agreements for forward sale commitments contain master netting agreements, which contain a legal right to offset amounts due to and from the same counterparty and can be settled on a net basis. The table below presents gross amounts of recognized assets and liabilities subject to master netting agreements. (Amounts in thousands) Gross Amount of Recognized Assets Gross Amount of Recognized Liabilities Net Amounts Presented in the Condensed Consolidated Balance Sheet Offsetting of Forward Commitments - Assets Balance as of: September 30, 2024: $ 635 $ ( 442 ) $ 193 December 31, 2023 $ — $ — $ — Offsetting of Forward Commitments - Liabilities Balance as of: September 30, 2024: $ 29 $ ( 33 ) $ ( 4 ) December 31, 2023 $ 168 $ ( 1,041 ) $ ( 872 ) Significant Unobservable Inputs — The following table presents quantitative information about the significant unobservable inputs used in the recurring fair value measurements categorized within Level 3 of the fair value hierarchy: September 30, 2024 (Amounts in dollars, except percentages) Range Weighted Average Level 3 Financial Instruments: IRLCs Pull-through factor 0.33 % - 100 % 70.1 % 33 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023 (Amounts in dollars, except percentages) Range Weighted Average Level 3 Financial Instruments: IRLCs Pull-through factor 0.77 % - 100 % 89.8 % U.S. GAAP requires disclosure of fair value information about financial instruments, whether recognized or not recognized in the condensed consolidated financial statements, for which it is practical to estimate the fair value. In cases where quoted market prices are not available, fair values are based upon the estimation of discount rates to estimated future cash flows using market yields or other valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimates of fair value in both inactive and orderly markets. Accordingly, fair values are not necessarily indicative of the amount the Company could realize on disposition of the financial instruments in a current market exchange. The use of market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. The estimated fair value of the Company’s cash and cash equivalents, restricted cash, warehouse lines of credit, and escrow funds and customer deposits approximates their carrying values as these financial instruments are highly liquid or short-term in nature. The following table presents the carrying amounts and estimated fair value of financial instruments that are not recorded at fair value on a recurring or non-recurring basis: September 30, 2024 December 31, 2023 (Amounts in thousands) Fair Value Level Carrying Amount Fair Value Carrying Amount Fair Value Short-term investments Level 1 $ 54,414 $ 54,422 $ 25,597 $ 25,563 Loans held for investment Level 3 $ 81,401 $ 82,931 $ 4,793 $ 5,103 Convertible Note Level 3 $ 518,012 $ 323,990 $ 514,644 $ 309,135 In determining the fair value of the Short-term investments, management used observable inputs such as quoted prices in active markets for identical assets. The fair value of loans held for investment is determined by management estimates of the specific credit risk attributes of each pool of loans, in addition to the quoted secondary-market prices, which account for the interest rate characteristics of each loan. In determining the fair value of the Convertible Note, issued by a related party, management used factors that are material to the valuation process, including but not limited to, the trading price of the Company’s securities, actual and projected financial results, risks, prospects, and economic and market conditions, among other factors. As a number of assumptions and estimates were involved that are largely unobservable, loans held for investment and the Convertible Note were classified as Level 3 inputs within the fair value hierarchy. 16. Income Taxes On a consolidated basis, the Company recorded total income tax expense of $ 0.1 million and $ 0.7 million for the three months ended September 30, 2024 and 2023, respectively. The Company recorded total income tax expense of $ 0.5 million and $ 2.5 million for the nine months ended September 30, 2024 and 2023, respectively. The Company’s quarterly tax provision, and estimate of its annual effective tax rate, is subject to variation due to several factors, including the ability to accurately project the Company’s pre-tax income or loss for the year and the mix of earnings among various tax jurisdictions. The year-to-date effective tax rate, after discrete items, of ( 0.23 )% for the three months ended September 30, 2024, changed from ( 0.19 )% for the three months ended September 30, 2023, as the Company was subject to withholding taxes on an intercompany dividend in 2023. The year-to-date effective tax rate, after discrete items, of ( 0.3 )% for the nine months ended September 30, 2024, changed from ( 0.5 )% for the nine months ended September 30, 2023, as the Company was subject to withholding taxes on an intercompany dividend in 2023. As of each reporting date, the Company considers existing evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred income tax assets. The Company is in a three-year cumulative loss position in all material jurisdictions as of September 30, 2024. Further, due to losses being estimated in the future, management continues to believe it is more likely than not that the benefit of the deferred income tax assets will not be realized. In recognition of this risk, the Company continues to provide a full valuation allowance on deferred income tax assets. 34 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 17. Convertible Preferred Stock In connection with the Business Combination, as described in Note 1, all series of Pre-Business Combination Better convertible preferred stock were converted into Pre-Business Combination Better common stock and subsequently converted to the Company’s Common Stock at an exchange ratio of approximately 3.06 . Convertible Preferred Stock Warrants —Immediately prior to the Closing of the Business Combination, certain convertible preferred stock warrant holders exercised their warrants on a cash basis and the remaining convertible preferred stock warrant holders exercised their warrants on a net basis at the Closing. The change in fair value of warrants for both the three months ended September 30, 2024 and 2023 was none . The change in fair value of warrants for the nine months ended September 30, 2024 and 2023 was none and a gain of $ 0.3 million, respectively, and was recorded in other expenses within the condensed consolidated statements of operations and comprehensive loss. 18. Stockholders' Equity On the Closing Date, the Company consummated the Business Combination pursuant to the terms of the Merger Agreement. The Company’s Class A common stock and Public Warrants currently trade on the Nasdaq Capital Market, under the ticker symbols “BETR” and “BETRW”, respectively. Each outstanding share of Pre-Business Combination Better common stock was exchanged for approximately 3.06 shares of the Company’s Class A or Class B common stock. Private and Public Warrants— As of September 30, 2024 and December 31, 2023, the Company had a total of $ 1.2 million and $ 1.9 million, of Private Warrants held by a related party, and Public Warrants, respectively, which are included as warrant and equity related liabilities within the condensed consolidated balance sheets. The change in fair value of Warrants for the three and nine months ended September 30, 2024 was a gain of $ 0.2 million and gain of $ 0.7 million, respectively, and is included in other expenses within the condensed consolidated statements of operations and comprehensive loss. The change in fair value of Warrants for both the three and nine months ended September 30, 2023 was a gain of $ 0.2 million and is included in other expenses within the condensed consolidated statements of operations and comprehensive loss. Sponsor Locked-up Shares— As of September 30, 2024 and December 31, 2023, the Company had a total of $ 0.2 million and $ 0.4 million, respectively, in respect of Sponsor Locked-up Share liabilities which were issued to a related party, and are included within warrant and equity liabilities in the condensed consolidated balance sheets. The change in fair value of Sponsor Locked-up Shares for the three and nine months ended September 30, 2024 was none and a gain of $ 0.2 million, respectively, and was included in other expenses within the condensed consolidated statements of operations and comprehensive loss. The change in fair value of Sponsor Locked-up Shares for both the three and nine months ended September 30, 2023 was a gain of $ 0.6 million and is included in other expenses within the condensed consolidated statements of operations and comprehensive loss. Notes Receivable from Stockholders —The Company, previously at times, entered into promissory note agreements with certain employees for the purpose of financing the exercise of the Company’s stock options. These employees may have the ability to use the promissory notes to exercise stock options that have not yet been vested by the respective employees. Interest is compounded and accrued based on any unpaid principal balance and is due upon the earliest of maturity, 120 days after an employee leaves the Company, the date the employee sells shares acquired through the promissory note agreement without prior written consent of the Company, or the day prior to the date that any change in the employee’s status would cause the loan to be a prohibited extension or maintenance of credit under Section 402 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”). The Company no longer enters into promissory note agreements for the purpose of financing the exercise of the Company’s stock options and no longer allows for the early exercise of stock options. As of September 30, 2024 and December 31, 2023, the Company had a total of $ 16.0 million and $ 18.3 million, respectively, of outstanding promissory notes. Of the notes outstanding as of September 30, 2024 and December 31, 2023, $ 9.1 million and $ 10.1 million, respectively, were issued for the exercise of stock options vested and are recorded as a component of stockholders’ equity within the condensed consolidated balance sheets. The balance as of September 30, 2024 does not include any promissory notes due from directors and officers of the Company. 35 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Of the notes outstanding as of September 30, 2024 and December 31, 2023, $ 6.9 million and $ 8.2 million, respectively, were issued for the early exercise of stock options not yet vested. Notes issued for the early exercise of stock options not yet vested are not reflected within stockholders’ equity on the condensed consolidated balance sheets as they relate to unvested share awards and therefore are considered non-substantive exercises. As the unvested share awards vest and are exercised in conjunction with the notes, they are recognized in the statement of equity within vesting of our Common Stock issued via notes receivable from stockholders. The notes range in maturity from May 2025 to January 2026 and include interest rates ranging from 0.5 % to 2.5 % per annum. 19. Stock-Based Compensation Stock-Based Compensation Expense —Stock-based compensation expense is included within compensation and benefits in the condensed consolidated statements of operations and comprehensive loss. The Company recognized stock-based compensation expense as follows: Three Months Ended September 30, Nine Months Ended September 30, (Amounts in thousands) 2024 2023 2024 2023 Total stock-based compensation expense 5,487 39,417 21,812 47,879 Stock-based compensation expense excludes $ 0.4 million and $ 2.7 million of stock-based compensation expense for the three months ended September 30, 2024 and 2023, which was capitalized (see Note 7). Stock-based compensation expense excludes $ 1.3 million and $ 5.1 million of stock-based compensation expense for the nine months ended September 30, 2024 and 2023, which was capitalized (see Note 7). 20. Regulatory Requirements The Company is subject to various local, state, and federal regulations related to its loan production by the various states it operates in, as well as federal agencies such as the Consumer Financial Protection Bureau, the U.S. Department of Housing and Urban Development ("HUD"), and the Federal Housing Administration ("FHA") and is subject to the requirements of the agencies to which it sells loans, such as FNMA and FMCC. As a result, the Company may become involved in requests for information, periodic reviews, investigations, and proceedings by such various federal, state, and local regulatory bodies and agencies. The Company is required to meet certain minimum net worth, minimum capital ratio and minimum liquidity requirements, including those established by HUD, FMCC and FNMA. As of September 30, 2024, the Company was in compliance with all necessary requirements. Additionally, the Company is subject to other financial requirements established by government-sponsored enterprises (“GSEs”), which include a limit for a decline in net worth and quarterly profitability requirements. On March 12, 2023 and subsequently on May 19, 2023, the Company failed to meet the additional financial requirements due to the Company’s decline in profitability and decline in net worth. The decline in net worth and decline in profitability permit GSEs to declare a breach of the Company’s contract. The Company instituted additional financial requirements and remains in compliance with these requirements as of September 30, 2024. 21. Subsequent Events The Company evaluated subsequent events from the date of the condensed consolidated balance sheets of September 30, 2024 through the date of the release of financial statements, and has determined that, there have been no subsequent events that require recognition or disclosure in the condensed consolidated financial statements, except as described in Note 5. ****** 36 Table of Contents