Better Home & Finance Holding Co 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Better Home & Finance Holding Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Better Home & Finance Holding Company and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP New York, NY March 19, 2025 We have served as the Company's auditor since 2020. 85 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, (Amounts in thousands, except share and per share amounts) 2024 2023 Assets Cash and cash equivalents $ 211,101 $ 503,591 Restricted cash 24,416 24,475 Short-term investments 53,774 25,597 Mortgage loans held for sale, at fair value 399,241 170,150 Loans held for investment (net of allowance for credit losses of $ 1,667 and none as of December 31, 2024 and December 31, 2023, respectively) 111,477 4,793 Other receivables, net 17,549 16,888 Assets held for sale 10,411 — Property and equipment, net 2,717 16,454 Right-of-use assets 1,387 19,988 Internal use software and other intangible assets, net 20,936 38,126 Goodwill 23,615 32,390 Derivative assets, at fair value 2,539 1,716 Prepaid expenses and other assets 33,894 51,386 Total Assets $ 913,057 $ 905,554 Liabilities and Stockholders’ (Deficit)/Equity Liabilities Warehouse lines of credit $ 244,070 $ 126,218 Liabilities held for sale 6,116 — Convertible Note 519,749 514,644 Customer Deposits 134,130 11,839 Accounts payable and accrued expenses (includes $ 74 and none payable to related parties as of December 31, 2024 and December 31, 2023, respectively) 48,134 66,558 Escrow payable and other customer accounts 74 3,376 Derivative liabilities, at fair value — 949 Warrant and equity related liabilities, at fair value 1,407 2,331 Lease liabilities 4,081 31,202 Other liabilities (includes none and $ 390 payable to related parties as of December 31, 2024 and 2023, respectively) 13,466 25,837 Total Liabilities 971,227 782,954 Commitments and contingencies (see Note 17) Stockholders’ (Deficit) /Equity Common stock $ 0.0001 par value; 66,000,000 and 66,000,000 shares authorized as of December 31, 2024 and December 31, 2023, respectively, and 15,168,795 and 15,035,467 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 2 2 Notes receivable from stockholders ( 9,158 ) ( 10,111 ) Additional paid-in capital 1 1,863,288 1,838,499 Accumulated deficit ( 1,910,366 ) ( 1,704,076 ) Accumulated other comprehensive loss ( 1,936 ) ( 1,714 ) Total Stockholders’ (Deficit)/Equity ( 58,170 ) 122,600 Total Liabilities and Stockholders’ (Deficit)/Equity $ 913,057 $ 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 consolidated financial statements. 86 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Year Ended December 31, (Amounts in thousands, except share and per share amounts) 2024 2023 Revenues: Gain on loans, net $ 78,098 $ 58,796 Other revenue 12,888 16,109 Net interest income Interest income 38,990 29,031 Interest expense ( 21,488 ) ( 31,596 ) Net interest income/(loss) 17,502 ( 2,565 ) Total net revenues 108,488 72,340 Expenses: Compensation and benefits 141,089 181,735 General and administrative 52,230 60,150 Technology 26,110 39,431 Marketing and advertising 33,984 19,523 Loan origination expense 9,864 9,476 Depreciation and amortization 33,227 42,891 Other expenses/(Income) 17,424 253,556 Total Expenses 313,928 606,762 Loss before income tax (benefit)/expense ( 205,440 ) ( 534,422 ) Income tax expense (benefit) 850 1,998 Net loss ( 206,290 ) ( 536,420 ) Other comprehensive income/(loss): Foreign currency translation adjustment, net of tax ( 222 ) ( 291 ) Comprehensive loss $ ( 206,512 ) $ ( 536,711 ) Per share data: Loss per share attributable to common stockholders: Basic $ ( 13.65 ) $ ( 58.09 ) Diluted $ ( 13.65 ) $ ( 58.09 ) Weighted average common shares outstanding — basic 15,111,701 9,233,683 Weighted average common shares outstanding — diluted 15,111,701 9,233,683 The accompanying notes are an integral part of these consolidated financial statements. 87 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) For the Year Ended December 31, 2024 Common Stock Notes Receivables from Stockholders Additional Paid-In Capital 1 Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' (Deficit) Equity (Amounts in thousands, except share and per share amounts) Issued and Outstanding 1 Par Value 1 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 6,814 — — 1,560 — — 1,560 Cancellation of common stock ( 30,673 ) — — — — — — Stock-based compensation — — — 28,534 — — 28,534 Tax withholding upon vesting of restricted stock units ( 67,235 ) — — ( 1,972 ) — — ( 1,972 ) Shares issued for vested restricted stock units 224,422 — — — — — — Vesting of common stock issued via notes receivable from stockholders — — ( 893 ) 885 — — ( 8 ) Settlement of notes receivable from stockholders — — 1,846 ( 1,846 ) — — — Net loss — — — — ( 206,290 ) — ( 206,290 ) Other comprehensive loss— foreign currency translation adjustment, net of tax — — — — — ( 222 ) ( 222 ) Balance - December 31, 2024 15,168,795 $ 2 $ ( 9,158 ) $ 1,863,288 $ ( 1,910,366 ) $ ( 1,936 ) $ ( 58,170 ) 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 consolidated financial statements. 88 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) For the Year Ended December 31, 2023 Convertible preferred stock Common Stock Notes Receivables from Stockholders Additional Paid-In Capital 1 Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' (Deficit) Equity (Amounts in thousands, except share and per share amounts) Shares Amount Issued and Outstanding 1 Par Value 1 Balance - December 31, 2022 2,174,429 $ 436,280 1,961,567 $ — $ ( 53,225 ) $ 618,121 $ ( 1,167,656 ) $ ( 1,423 ) $ ( 604,183 ) Recapitalization of shares due to Business Combination (Note 3) 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 ) 618,120 ( 1,167,656 ) ( 1,423 ) ( 604,183 ) Conversion of convertible preferred stock to common stock ( 6,646,295 ) ( 436,280 ) 6,646,295 1 — 436,278 — — 436,279 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 — — 37,966 — — 37,966 Exercise of warrants — — 291,523 — — 4,289 — — 4,289 Transaction costs related to the Business Combination — — — — — ( 17,173 ) — — ( 17,173 ) Recognition of derivative liability related to earnout — — — — — ( 548 ) — — ( 548 ) Assumption of private & public placement warrants — — — — — ( 1,276 ) — — ( 1,276 ) Issuance of common stock for options exercised — — 36,291 — — 656 — — 656 Cancellation of common stock — — ( 56,110 ) — — ( 8 ) — — ( 8 ) Stock-based compensation — — — — — 58,284 — — 58,284 Tax withholding upon vesting of restricted stock units — — — — — ( 5,966 ) — — ( 5,966 ) Shares issued for vested restricted stock units — — 280,148 — — — — — — Vesting of common stock issued via notes receivable from stockholders — — — — ( 3,561 ) 3,561 — — — Forfeiture of shares — — ( 308,813 ) — 30,487 ( 30,485 ) — — 2 Forgiveness of officer loans — — — — 988 — — — 988 Shares transferred in settlement of loans — — ( 149,626 ) — 15,200 ( 15,199 ) — — 1 Net loss — — — — — — ( 536,420 ) — ( 536,420 ) Other comprehensive loss— foreign currency translation adjustment, net of tax — — — — — — — ( 291 ) ( 291 ) Balance - December 31, 2023 — $ — 15,035,467 $ 2 $ ( 10,111 ) $ 1,838,499 $ ( 1,704,076 ) $ ( 1,714 ) $ 122,600 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 consolidated financial statements. 89 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (Amounts in thousands) 2024 2023 Cash Flows from Operating Activities: Net loss $ ( 206,290 ) $ ( 536,420 ) Adjustments to reconcile net loss to net cash (used in)/provided by operating activities: Depreciation of property and equipment 7,089 5,837 Impairments 16,405 9,435 Amortization of internal use software and other intangible assets 26,138 37,054 Gain on sale of loans, net ( 59,242 ) ( 46,678 ) Non-cash interest and amortization of debt issuance costs and discounts 6,208 8,191 Other non-cash adjustments — 988 Change in fair value of warrants ( 924 ) 507 Change in fair value of convertible preferred stock warrants — ( 266 ) Change in fair value of bifurcated derivative — 236,603 Stock-based compensation 26,753 54,160 (Recovery of)/Provision for loan repurchase reserve ( 9,923 ) ( 1,823 ) Provision for credit losses 1,667 — Change in fair value of derivatives ( 1,685 ) 452 Change in fair value of mortgage loans held for sale ( 2,321 ) 26 Change in operating lease of right-of-use assets ( 2,292 ) 5,270 Originations of mortgage loans held for sale ( 3,649,956 ) ( 2,969,326 ) Proceeds from sale of mortgage loans held for sale 3,478,682 3,089,204 Change in operating assets and liabilities: Operating lease liabilities ( 6,228 ) ( 10,810 ) Other receivables, net ( 1,908 ) ( 97 ) Prepaid expenses and other assets 16,859 14,697 Accounts payable and accrued expenses ( 21,084 ) ( 22,211 ) Escrow payable and other customer accounts 567 ( 4,625 ) Other liabilities 1,514 ( 29,888 ) Net cash used in operating activities ( 379,971 ) ( 159,720 ) Cash Flows from Investing Activities: Purchase of property and equipment ( 3,388 ) ( 456 ) Proceeds from sale of property and equipment 2,938 764 Capitalization of internal use software ( 6,694 ) ( 9,322 ) Acquisitions of businesses, net of cash acquired — ( 12,713 ) Maturities of short-term investments 183,309 31,321 Purchase of short-term investments ( 211,863 ) ( 48,188 ) Origination of loans held for investment ( 110,903 ) — Principal payments received on loans held for investment 2,791 — Net cash used in investing activities ( 143,810 ) ( 38,594 ) Cash Flows from Financing Activities: Issuance of convertible notes — 528,586 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 117,852 ( 17,831 ) Repayments on finance lease liabilities — ( 1,062 ) Net increase (decrease) in customer deposits 122,291 ( 534 ) Repayments on corporate line of credit — ( 146,449 ) Payment of debt issuance costs — ( 3,649 ) Transaction costs related to the Business Combination — ( 17,173 ) Proceeds from exercise of stock options 91 87 Net cash provided by financing activities 239,131 381,402 Effects of currency translation on cash, cash equivalents, and restricted cash ( 217 ) ( 1,087 ) Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash, including cash classified within assets held for sale ( 284,867 ) 182,001 Less: net change in cash, cash equivalents and restricted cash classified within assets held for sale ( 7,682 ) — Cash, cash equivalents, and restricted cash—Beginning of year 528,066 346,065 Cash, cash equivalents, and restricted cash—End of year $ 235,517 $ 528,066 The accompanying notes are an integral part of these consolidated financial statements. 90 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Continued from previous page The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown on the previous page. Year Ended December 31, (Amounts in thousands) 2024 2023 Cash and cash equivalents, end of year $ 211,101 $ 503,591 Restricted cash, end of year 24,416 24,475 Total cash, cash equivalents and restricted cash end of year $ 235,517 $ 528,066 Supplemental Disclosure of Cash Flow Information: Interest paid $ 13,822 $ 12,044 Income taxes refunded, net $ ( 677 ) $ ( 8,451 ) Non-Cash Investing and Financing Activities: Assumption private placement and public warrants $ — $ 1,276 Reduction of lease liability via modification/termination $ 20,894 $ 2,518 Recognition of derivative liability related to earnout $ — $ 548 Capitalization of stock-based compensation related to internal use software $ 1,781 $ 4,123 Vesting of stock options early exercised in prior periods $ 1,560 $ 2,781 Vesting of common stock issued via notes receivable from stockholders $ 893 $ 3,561 Acquisition earnout $ — $ 3,430 Forgiveness of notes receivable from stockholders $ — $ 46,700 Settlement of notes receivable from stockholders $ 1,846 $ — Reclasses to Internal Use Software $ 2,254 $ — The accompanying notes are an integral part of these consolidated financial statements. 91 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO 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 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 U.S. 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. and offers a multitude of financial products and services to consumers via regulated entities obtained through acquisitions. On August 22, 2023 (the “Closing Date”), the Company consummated the previously announced Business Combination (the “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”) (such merger, the “Second 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,” and the “Company,” 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. Class A common stock and warrants are listed on the Nasdaq Capital Market under the ticker symbols “BETR” and “BETRW.” Within the fourth quarter of 2024, the Company decided to dispose of certain operating units in the U.K., see Note 12 for further details. 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 reclassification 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. 92 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of Significant Accounting Policies Basis of Presentation — The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Business Combination has been accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Aurora was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Better issuing stock for the net assets of Aurora, accompanied by a recapitalization. All share amounts in periods prior to the Business Combination have been retroactively adjusted using the Exchange Ratio for the equivalent number of shares outstanding immediately after the Business Combination to effect the reverse recapitalization. Further, all periods prior to the Reverse Stock Split have been retroactively adjusted to reflect the Reverse Stock Split. The financials of Better are presented here for all comparative periods. Consolidation — The accompanying 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 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 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, which includes 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, bifurcated derivatives, the incremental borrowing rate used in determining lease liabilities, and the fair value of warrant and equity related liabilities. Business Combinations — The Company includes the financial results of businesses that the Company acquires from the date of acquisition. The Company records all assets acquired and liabilities assumed at fair value, with the excess of the purchase price over the aggregate fair values recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. During the measurement period, the Company may record adjustments to the assets acquired and liabilities assumed. Transaction costs associated with business combinations are expensed as incurred. Cash and Cash Equivalents — Cash and cash equivalents consists of cash on hand and other highly liquid and short-term investments with maturities of 90 days or less at acquisition. Of the cash and cash equivalents balances as of December 31, 2024 and 2023, $ 1.3 million and $ 1.4 million, respectively, were insured by the Federal Deposit Insurance Corporation (“FDIC”). Restricted Cash — Restricted cash primarily consists of amounts provided as collateral for the Company’s various warehouse lines of credit as well as escrow funds received from and held on behalf of borrowers. In some instances, the Company may administer funds that are legally owned by a third-party which are excluded from the Company’s consolidated balance sheets. As of December 31, 2024 and 2023, the Company held $ 24.4 million, and $ 24.5 million, respectively, of restricted balances in accordance with the covenants of the agreements relating to its warehouse lines of credit (Note 6) and escrow funds (Note 17). Included in assets held for sale on the consolidated balance sheets are $ 3.9 million of restricted cash, see Note 12 for further details. 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 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. 93 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 (“CECL”) 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. 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 Accounting Standard Codification (“ASC”) 825 – Financial Instruments (“ASC 825”), for all LHFS with changes in fair value recorded in gain on loans, net in the 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 (“ASC 860”). The Company generally sells all of its loans servicing released. For interim servicing, the Company engaged 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. 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. Loan Repurchase Reserve — The Company sells LHFS in the secondary market and in connection with those sales, 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 or indemnify losses on the loan with the identified defects. The loan repurchase reserve on loans sold relates to expenses incurred due to the potential repurchase of loans, indemnification of losses based on alleged violations or representations and warranties, which are customary to the mortgage banking industry. Provisions for potential losses are charged to expenses and are included within gain on loans, net on the consolidated statements of operations and comprehensive loss. The loan repurchase reserve represents the Company’s estimate of the total losses expected to occur and is considered to be adequate by management based upon the Company’s evaluation of the potential exposure related to the loan sale agreements over the life of the associated loans sold. The Company records the loan repurchase reserve within other liabilities on the consolidated balance sheets. See Note 18 for further analysis. 94 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 costs, 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 collectibility of the reported amounts, including expected defaults and prepayments. See Note 7. Other Receivables, Net — Other receivables, net consist primarily of amounts due from a third party loan sub-servicer, margin account balances with brokers, an integrated relationship partner, and servicing partners of loan purchasers. Other receivables, net is net of the allowance for credit losses, in accordance with Accounting Standards Codification (“ASC”) 326, Financial Instruments-Credit Losses, which requires an entity to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. Management’s estimate of credit losses and allowance is based on historical collection experience and a review of the current status of other receivables. It is reasonably possible that management’s estimate of the allowance will change. No allowance has been taken as of December 31, 2024 and 2023, respectively, as the balances reflect amounts considered by management to be fully collectible. Derivatives and Hedging Activities — The Company enters into IRLCs to originate 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. These IRLCs are not designated as accounting hedging instruments and are reflected in the consolidated balance sheets as derivative assets or liabilities, at fair value, with changes in fair value are recorded in current period earnings. Unrealized gains and losses on the IRLCs are recorded as derivative assets or liabilities, at fair value, on the consolidated balance sheets and in gain on loans, net within the consolidated statements of operations and comprehensive loss. The fair value of IRLCs are measured based on the value of the underlying mortgage loan, quoted MBS prices, estimates of the fair value of the mortgage servicing rights, and adjusted by the estimated loan funding probability, or “pull-through factor”. The Company enters into forward sales commitment contracts for the sale of its mortgage loans held for sale or in the pipeline. These contracts are loan sales agreements in which the Company commits in principle to delivering a mortgage loan of a specified principal amount and quality to a loan purchaser at a specified price on or before a specified date. Generally, the price the loan purchaser will pay the Company is agreed upon prior to the loan being funded (i.e., on the same day the Company commits to lend funds to a potential borrower). Under the majority of the forward sales commitment contracts if the Company fails to deliver the agreed-upon mortgage loans by the specified date, the Company must pay a “pair-off” fee to compensate the loan purchaser. The Company’s forward sale commitments are not designated as accounting hedging instruments and are reflected in the consolidated balance sheets as derivative assets or liabilities at fair value with changes in fair value are recorded in current period earnings. Unrealized gains and losses from changes in fair value on forward sales commitments are recorded as derivative assets or liabilities, at fair value on the consolidated balance sheets and in gain on loans, net within the consolidated statements of operations and comprehensive loss. Forward commitments are entered into under arrangements between the Company and counterparties under Master Securities Forward Transaction 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 Company has evaluated agreements with counterparties and for those counterparties that meet the conditions, positions are presented net. The Company does not utilize any other derivative instruments to manage risk. Fair Value Measurements — Assets and liabilities recorded at fair value on a recurring basis on the 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 95 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Property and Equipment, net — Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation expense is computed on the straight-line method over the estimated useful life of the asset, generally three to five years for computer and hardware and four to seven years for furniture and equipment. Leasehold improvements are depreciated over the shorter of the related lease term or the estimated useful life of the assets. Expenditures for maintenance and repairs necessary to maintain property and equipment in efficient operating condition are charged to operations as incurred while costs of additions and improvements are capitalized. The Company’s property and equipment are considered long-lived assets and are reviewed for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the sum of the undiscounted cash flows expected to result from the use and eventual disposal of the asset and the asset’s carrying amount. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of their carrying amount or the fair value of the asset, less costs to sell. See Note 5 for details on the Company’s impairment losses included within other expenses/(income) on the consolidated statements of operations and comprehensive loss. Goodwill — Goodwill represents the excess of the purchase price of an acquired business over the fair value of the assets acquired, less liabilities assumed in connection with the acquisition. Goodwill is tested for impairment at least annually on the first day of the fourth quarter at each reporting unit level, or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired, and is required to be written down when impaired. The guidance for goodwill impairment testing begins with an optional qualitative assessment to determine whether it is more likely than not that goodwill is impaired. The Company is not required to perform a quantitative impairment test unless it is determined, based on the results of the qualitative assessment, that it is more likely than not that goodwill is impaired. The quantitative impairment test is prepared at the reporting unit level. In performing the impairment test, management compares the estimated fair values of the applicable reporting units to their aggregate carrying values, including goodwill. If the carrying amounts of a reporting unit including goodwill were to exceed the fair value of the reporting unit, an impairment loss is recognized within the consolidated statements of operations and comprehensive loss in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Outside of the disposal groups held for sale, the Company currently has one reporting unit. For further details on goodwill impairment see Note 5 and Note 10. 96 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Internal Use Software and Other Intangible Assets, Net — The Company reports and accounts for acquired intellectual properties included in other intangible asset with an indefinite life, such as domain name, under ASC 350 , Intangibles-Goodwill and Other (“ASC 350”). Intangible assets with indefinite lives are recorded at their estimated fair value at the date of acquisition and are tested for impairment on an annual basis as well as when there is reason to suspect that their values have been diminished or impaired. Any write-downs will be included in results from operations. Intangible assets with finite lives are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. The Company capitalizes certain development costs incurred in connection with its internal use software and website development. Software costs incurred in the preliminary stages of development are expensed as incurred. Once a software application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial software testing. The Company also capitalizes costs related to specific software upgrades and enhancements when it is probable the expenditures will result in additional features and functionality. Software maintenance costs are expensed as incurred. For website development, costs incurred in the planning stage are expensed as incurred whereas costs associated with the application and infrastructure development, graphics development, and content development are capitalized depending on the type of cost in each of those respective stages. Internal use software and website development are amortized on a straight-line basis over its estimated useful life, generally three years . Impairment of Long-Lived Assets — Long‑lived assets, including property and equipment, right-of-use assets, capitalized software, and other finite-lived intangible assets, are evaluated for recoverability when events or changes in circumstances indicate that the asset may have been impaired. In evaluating an asset for recoverability, the Company considers the future cash flows expected to result from the continued use of the asset and the eventual disposition of the asset. If the sum of the expected future cash flows, on an undiscounted basis, is less than the carrying amount of the asset, an impairment loss equal to the excess of the carrying amount over the fair value of the asset is recognized. See Note 5 for details on the Company’s impairment gains or losses included within other expenses/(income) expenses on the consolidated statements of operations and comprehensive loss. Impairment of Indefinite-Lived Intangible Assets —In accordance with ASC 350-30-65 Goodwill and Other Intangible Assets , the Company assesses the impairment of indefinite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review include items such as significant underperformance compared to historical or projected future operating results and significant changes in the manner or use of the acquired assets or the strategy for the overall business. When the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. See Note 5 for details on the Company’s impairment losses included within other expenses/(income) on the consolidated statements of operations and comprehensive loss. Assets and Liabilities Held for Sale — Assets and liabilities to be disposed of by sale are reclassified into assets held for sale and liabilities held for sale on the consolidated balance sheets. The Company presents the assets and liabilities of a disposal group as held for sale upon meeting all of the following criteria: • Management, having the authority to approve the action, commits to a plan to sell the asset (disposal group). • The asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal groups). • An active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated. • The sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale, within one year. • The asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value. 97 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The determination as to whether the sale of the disposal group is probable may include significant judgments from management related to the estimated timing of the closing of a future sales transaction. Assets held for sale are measured at the lower of their carrying amount or fair value less cost to sell and are not depreciated or amortized. See Note 12 for further detail on assets and liabilities held for sale. 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 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. Leases — The Company accounts for its leases in accordance with ASC 842, Leases (“ASC 842”). The Company’s lease portfolio primarily consists of operating leases for a number of small offices across the country for licensing purposes as well as several larger offices for employee and Company headquarters. The Company also leases various types of equipment, such as laptops and printers. The Company determines whether an arrangement is a lease at inception. The Company has made an accounting policy election to exempt leases with an initial term of 12 months or less (“short-term leases”) from being recognized on the consolidated balance sheets. Short-term leases are not material in comparison to the Company’s overall lease portfolio. Payments related to short-term leases are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term. The Company also elected not to separate non-lease components of a contract from the lease component to which they relate. For leases with initial terms of greater than 12 months, the Company determines its classification as an operating or finance lease. At lease commencement, the Company recognizes a lease obligation and corresponding right-of-use asset based on the initial present value of the fixed lease payments using the Company's incremental borrowing rates for its population of leases. For leases that qualify as an operating lease, the right-of-use assets related to operating lease obligations are recorded in right-of-use assets in the consolidated balance sheets. The rate implicit on the Company’s leases are not readily determinable, therefore, management uses its incremental borrowing rate to discount the lease payments based on the information available at lease commencement. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow over a similar term, and with a similar security, in a similar economic environment, an amount equal to the fixed lease payments. The commencement date is the date the Company takes initial possession or control of the leased premise or asset, which is generally when the Company enters the leased premises and begins to make improvements in preparation for its intended use. Non-cancelable lease terms for most of the Company's real estate leases typically range between 1 - 10 years and may also provide for renewal options. Renewal options are typically solely at the Company’s discretion and are only included within the lease term when the Company is reasonably certain that the renewal options would be exercised. When a modification to the contractual terms occurs, the lease liability and right-of-use asset is remeasured based on the remaining lease payments and incremental borrowing rate as of the effective date of the modification. When a lease is terminated, the carrying amount of the lease liability and right-of-use asset are reduced, and any difference between them is recognized as a gain or loss within other expenses/(income) on the consolidated statements of operations and comprehensive loss. The Company evaluates its right-of-use assets for impairment consistent with the impairments of long-lived assets policy disclosure described above. 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 98 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 interest expense the consolidated statements of operations and comprehensive income (loss). See Note 15 for further details on the Convertible Note. Warrant Liabilities — The Company assumed publicly-traded warrants (“Public Warrants”) issued in Aurora’s initial public offering, private placement warrants issued by Aurora in connection with its formation and warrants attached to certain private placement units (collectively, the “Private Warrants” and, together with the Public Warrants, the “Warrants”). Each Warrant issued entitles the holder to purchase one share of Class A common stock at an exercise price of $ 11.50 per share, subject to certain adjustments, at any time commencing 30 days after the consummation of the Business Combination (which for the avoidance of doubt was September 21, 2023). Subsequent to the Reverse Stock Split, 50 Warrants would need to be exercised to purchase one share of Class A common stock at an exercise price of $ 575 per share. The Public Warrants are publicly traded and may be exercised on a cashless basis upon the occurrence of certain conditions. The Private Warrants are exercisable on a cashless basis and are not redeemable by the Company so long as they are held by the initial purchasers or their permitted transferees, subject to certain exceptions. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants. The Company evaluated the Public Warrants and Private Warrants and concluded that both meet the definition of a derivative and will be accounted for at fair value in accordance with ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity , as the Public Warrants and Private Warrants are not considered indexed to the Company's stock. Changes in the fair value of Warrants are included within other expenses/(income) in the consolidated statement of operations and comprehensive loss. As of December 31, 2024 the balance of the Warrants was immaterial and is included in other liabilities on the consolidated balance sheets. Sponsor Locked-Up Shares — The Sponsor Locked-Up Shares are accounted for as a derivative and are included within warrants and equity related liabilities on the consolidated balance sheets. These shares are subject to transfer restrictions, which will be released contingent upon the price of Class A common stock exceeding certain thresholds or upon some strategic events, which include events that are not indexed to Class A common stock. As the Sponsor Locked-Up Shares are not considered indexed to the Company’s stock, they are accounted for at fair value in accordance with ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity. Changes in the fair value of Sponsor Locked-Up Shares are included within other expenses/(income) in the consolidated statement of operations and comprehensive loss. As of December 31, 2024 the balance of the Sponsor Locked-Up Shares was immaterial and is included in other liabilities on the consolidated balance sheets. Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred income tax assets to the amount expected to be realized based on management’s consideration of all positive and contradictory evidence available. The Company evaluates uncertainty in income tax positions based on a more-likely-than-not recognition standard. If that threshold is met, the tax position is then measured at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. If applicable, the Company records interest and penalties as a component of income tax expense. Foreign Currency Translation — The U.S. dollar is the functional currency of the Company’s consolidated entities operating in the United States. The Company’s non U.S. dollar functional currency operations include a non-operating service entity as well as several operating entities resulting from acquisitions. All balance sheet accounts have been translated using the exchange rates in effect as of the balance sheet date. Amounts in the consolidated statements of operations and comprehensive loss have been translated using the monthly average exchange rates for each month in the year. Accumulated net translation adjustments have been reported separately in other comprehensive loss in the consolidated statements of operations and comprehensive loss. 99 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 4. 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. 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 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 100 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Stock-Based Compensation — The Company measures and records the expense related to stock-based compensation awards based on the fair value of those awards as determined on the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period and uses the straight-line method to recognize stock-based compensation. For stock-based compensation with performance conditions, the Company records stock-based compensation expense when it is deemed probable that the performance condition will be met. For Restricted Stock Units (“RSUs”), the fair value of the stock-based compensation award is based on the closing price of the Company’s common stock on the date of the grant. For stock options, the Company uses the Black-Scholes-Merton (“Black-Scholes”) option-pricing model to determine the fair value. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based compensation awards, including the option’s expected term and the price volatility of the underlying stock. The Company calculates the fair value of stock options granted using the following assumptions: a) Expected Volatility—The Company estimated volatility for option grants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the options’expected term. b) Expected Term—The expected term of the Company’s options represents the period that the stock-based awards are expected to be outstanding. The Company has elected to use the midpoint of the stock options vesting term and contractual expiration period to compute the expected term, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. c) Risk-Free Interest Rate—The risk-free interest rate is based on the implied yield currently available on US Treasury zero-coupon issues with a term that is equal to the options’ expected term at the grant date. d) Dividend Yield—The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero. Forfeitures of stock options and RSUs are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from initial estimates. The Company records compensation expense related to stock options issued to non-employees, including consultants based on the fair value of the stock options on the grant date over the service performance period as the stock options vest. 101 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company previously allowed stock option holders to early exercise stock options prior to the vesting date. The early exercise of stock options not yet vested are not reflected within stockholders’ equity or on the consolidated balance sheets as they relate to unvested share awards and therefore are considered non-substantive exercises. 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. Other Expenses/(Income) — 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, restructuring and impairment expenses, 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. Net Income (Loss) Per Share — Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. Historically, for purpose of this calculation, outstanding stock options, public and private warrants, and sponsor locked-up shares are considered potential dilutive common shares. Diluted net income (loss) per share is the amount of net income (loss) available to each share of common stock outstanding during the reporting period, adjusted to include the effect of potentially dilutive common shares. For periods in which the Company reports net losses, basic and diluted net loss per share attributable to common stockholders are the same because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. For the years ended December 31, 2024 and 2023, the Company reported a net loss attributable to common stockholders. Segments — The Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, manages the Company’s business activities as a single operating and reportable segment at the consolidated level. Accordingly, the CODM uses consolidated net income to measure segment profit or loss, allocate resources and assess performance. Further, the CODM reviews and utilizes functional expenses (general and administrative, marketing and advertising, loan origination expense, and others as presented in the consolidated statements of operations and comprehensive loss) at the consolidated level to manage the Company’s operations. Other segment items included in consolidated net income are net interest income and income tax expense (benefit), which are reflected in the consolidated statements of operations and comprehensive loss. Emerging Growth Company and Smaller Reporting Company Status —The Company is an emerging growth company (“EGC”), as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required 102 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS to comply with the new or revised financial accounting standards. The JOBS Act provides that an EGC can elect to opt out of the extended transition period and comply with the requirements that apply to non-EGCs but any such election to opt out is irrevocable. The Company has not elected to opt out of such extended transition period which means that when a financial accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. The Company will be eligible to use this extended transition period under the JOBS Act until the earlier of the date it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of the Company’s financials to those of other public companies more difficult. Management expects to cease to be an EGC on the last day of the Company’s fiscal year following March 8, 2026, which is the fifth anniversary of the date on which Aurora consummated its initial public offering. Reclassification of Prior Period Presentation in the Consolidated Balance Sheet and Consolidated Statement of Operations and Comprehensive Loss —Reclassifications of the previously reported consolidated balance sheet and consolidated 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 year 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 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 103 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. • 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 consolidated statements of operations and comprehensive loss are as follows: 104 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands) Year Ended December 31, 2023 Caption name change As previously reported Reclassifications As reclassified Revenues: Mortgage platform revenue, net Gain on loans, net $ 61,328 $ ( 2,532 ) $ 58,796 Cash offer program revenue 304 ( 304 ) — Other platform revenue Other revenue 11,293 4,816 16,109 Net interest income Interest income 15,575 13,456 29,031 Warehouse interest expense Interest expense ( 11,680 ) ( 19,916 ) ( 31,596 ) Net interest income 3,895 ( 6,460 ) ( 2,565 ) Total net revenues 76,820 ( 4,480 ) 72,340 Expenses: Compensation and benefits — 181,735 181,735 Mortgage platform expenses Loan origination expense 84,083 ( 74,607 ) 9,476 Cash offer program expenses 397 ( 397 ) — Other platform expenses Other expenses/(Income) 13,048 240,508 253,556 General and administrative expenses 147,214 ( 87,064 ) 60,150 Marketing and advertising expenses 22,080 ( 2,557 ) 19,523 Technology and product development expenses 83,815 ( 44,384 ) 39,431 Restructuring and impairment expenses 17,459 ( 17,459 ) — Depreciation and amortization — 42,891 42,891 Total expenses 368,096 238,666 606,762 Interest and other income (expense), net Other income (expense) 13,614 ( 13,614 ) — Interest and amortization on non-funding debt ( 19,916 ) 19,916 — Change in fair value of warrant liabilities ( 507 ) 507 — 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 ( 243,146 ) 243,146 — Loss before income tax (benefit) expense ( 534,422 ) — ( 534,422 ) Income tax (benefit) expense 1,998 — 1,998 Net loss $ ( 536,420 ) $ — $ ( 536,420 ) Reclassification of the Consolidated 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 consolidated 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 Adopted Accounting Standards 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 the annual fiscal year 2024, and interim periods starting in fiscal year 2025. A public entity should apply the amendments in this ASU retrospectively to all prior periods 105 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS presented in the financial statements. The Company adopted ASU 2023-07 effective January 1, 2024 using a retrospective method. For further details, refer to the segments section in Note 2. Recently Issued Accounting Standards Not Yet Adopted In July 2023, the FASB issued 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 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 December 31, 2024, the Company does not expect ASU 2023-06 will have any 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 December 31, 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 Accounting Standards Codification (“Codification”). 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 Securities and Exchange Commission’s (the “SEC”) 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 December 31, 2024, the Company does not expect ASU 2023-06 will have any 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. As of December 31, 2024, 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, and in January 2025, ASU 2025-01, Income Statement - Comprehensive Income - Expense Disaggregation Disclosures (subtopic 220-40), which requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The ASUs are effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim periods within annual 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. 3. Business Combination The Business Combination has been accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Aurora was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Better issuing stock for the net assets of Aurora, accompanied by a recapitalization. The net assets of Aurora were recorded at fair value (which approximated 106 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS historical cost considering the nature of the assets transferred), with no goodwill or other intangible assets recorded. Financial statements and footnotes presented prior to the Business Combination represent the operations of Better. At the Closing of and in connection with the Business Combination, the following occurred: • Exchange of Pre-Business Combination Better Stock —Each outstanding share of Better common stock prior to the Business Combination (“Pre-Business Combination Better Stock”), each warrant to purchase preferred stock was exercised and all series of preferred stock were converted to common stock and exchanged for approximately 3.06 shares (the "Exchange Ratio") of the Company’s common stock. Outstanding options to purchase Pre-Business Combination Better common stock and restricted stock units ("RSUs") were converted into the right to receive options or warrants to purchase shares of Class B common stock or RSUs representing the right to receive shares of Class B common stock, as applicable, on the same terms and conditions that are in effect with respect to such options or RSUs on the day of the closing of the Business Combination, subject to adjustments using the Exchange Ratio. • Private and Public Warrants — 6,075,047 redeemable public warrants to acquire shares of Aurora (“Public Warrants”), together with 3,733,358 private warrants to acquire shares of Aurora (“Private Warrants” and, together with the Public Warrants, the “Warrants”), have converted into warrants to acquire shares of Class A common stock. As contemplated by the Sponsor Agreement, dated as of May 10, 2021, by and among Aurora and Novator Capital Sponsor Ltd. (“Sponsor”) (as amended, the “Sponsor Agreement”), Sponsor forfeited 1,715,014 Private Warrants, effective as of the Closing Date, which comprised 50 % of the Private Warrants held by Sponsor on May 10, 2021. Each Warrant entitles the holder to purchase one share of the Company’s Class A common stock at an exercise price of $ 11.50 per share, subject to certain adjustments. The Warrants became exercisable at any time commencing 30 days after the completion of the Business Combination (which for the avoidance of doubt was September 21, 2023), and will expire five years after the Business Combination or earlier upon redemption or liquidation. Subsequent to the Reverse Stock Split, 50 Warrants would need to be exercised to purchase one share of Class A common stock. • Sponsor Locked-Up Shares —Pursuant to the Sponsor Agreement, the Sponsor forfeited upon Closing 50 % of the Aurora private warrants and 20 % of the Sponsor’s shares of Class A common stock received in respect of Aurora class B ordinary shares as of the Closing became subject to transfer restrictions, contingent upon the price of Class A common stock exceeding certain thresholds (the “Sponsor Locked-Up Shares”). The Sponsor Locked-Up Shares will be released in three tranches if the volume weighted average price (the “VWAP”) of Class A common stock exceeds certain price thresholds: (i) one-third of such shares will be released if VWAP for any 20 trading days during any consecutive 30 -trading day period exceeds $ 625.00 per share, (ii) one-third of such shares will be released if the VWAP for any 20 trading days during any consecutive 30 -trading day period exceeds $ 750.00 per share, and (iii) one-third of such shares will be released if the VWAP for any 20 trading days during any consecutive 30 -trading day period exceeds $ 875.00 per share (adjusted by the Reverse Stock Split). In addition to the transfer restriction, upon certain change in control events included in the Sponsor Agreement, if there is a change in control event within five years following the Closing, the shares which have not reached the thresholds stated above will be forfeited. If after five years there is no such change in control event, the lock-up period will go on in perpetuity until the price thresholds are met. • Aurora Trust Account —The Company received gross cash consideration of $ 21.4 million as a result of the Business Combination as well as $ 0.2 million from Aurora’s operating cash account. • Convertible Note —The Company received $ 528.6 million from SoftBank Group Corp (“SB Northstar”) as a result of issuing notes, see Note 15 for further details. • Sponsor Share Purchase —The purchase for $ 17.0 million by the Sponsor of 1.7 million shares of Class A common stock. • Conversion of Convertible Preferred Stock and Exercise of Convertible Preferred Stock Warrants —See Note 22 for further details. • Conversion or Exchange of Pre-Closing Bridge Notes —See Note 15 for further details. 107 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • Transaction or Exchange costs —The Company incurred $ 17.2 million of equity issuance costs, consisting of financial advisory, legal, share registration, and other professional fees, which are recorded to additional paid-in capital as a reduction of transaction proceeds. The number of shares of common stock issued immediately following the Business Combination was as follows: Number of Shares (2) Class A Class B Class C Pre-Business Combination Better Stockholders 812,037 11,488,148 137,546 Legacy Aurora Public Shareholders 4,252 — — Legacy Aurora Non-public Shareholders (Sponsor and affiliates of Aurora) (1) 161,838 — — Pre-Closing Bridge Note Investors 800,000 — 1,300,000 Sponsor Share Purchase Investors 34,000 — — Total (1) 1,812,127 11,488,148 1,437,546 (1) Excludes 13,888 Sponsor Locked-Up Shares. (2) Amounts have been adjusted for the Reverse Stock Split 4. Revenue Revenue — The Company disaggregates revenue based on the following revenue streams: Gain on loans, net consisted of the following : Year Ended December 31, (Amounts in thousands) 2024 2023 Gain on sale of loans, net $ 59,242 $ 46,678 Integrated partnership fees 8,933 10,295 Loan repurchase reserve recovery/(provision) 9,923 1,823 Total gain on loans, net $ 78,098 $ 58,796 Other revenue consisted of the following: Year Ended December 31, (Amounts in thousands) 2024 2023 International lending revenue $ 3,999 $ 3,410 Insurance Services 3,466 3,026 Real estate services 2,470 7,396 Other revenue 2,953 2,277 Total other revenue $ 12,888 $ 16,109 Net interest income consisted of the following: Year Ended December 31, (Amounts in thousands) 2024 2023 Mortgage interest income $ 19,839 $ 15,317 Interest Income from Investments 19,151 13,714 Warehouse interest expense ( 13,766 ) ( 11,680 ) Other interest expense ( 7,722 ) ( 19,916 ) Total net interest income/(loss) $ 17,502 $ ( 2,565 ) 108 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Restructuring and Impairments In December 2021, the Company initiated an operational restructuring program that included plans for cost reductions in response to a difficult interest rate environment as well as a slowing housing market. The restructuring program, which continued during the year ended December 31, 2024, consists of reductions in headcount and any associated costs that primarily include reduction in real estate footprint expenses and one-time employee termination benefits. Although restructuring initiatives have formally concluded as of December 31, 2024, the Company will continue to assess its cost structure and make adjustments as necessary. Due to reduced headcount, the Company has also reduced its real estate footprint. 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 were expensed over the amended lease term and are included within general and administrative expenses within the consolidated statements of operations and comprehensive loss. The corresponding leasehold improvements were depreciated over the amended lease term by $ 3.7 million and is included within depreciation and amortization expenses within the consolidated statements of operations and comprehensive loss. During the fourth quarter of 2024, management classified several U.K. entities as held for sale. The Company recorded goodwill impairment of $ 7.3 million and a write down of the disposal group to fair value, less cost to sell, of $ 4.2 million, and is included within other expense/(income) within the consolidated statements of operations and comprehensive loss. See Note 10 and Note 12, respectively, for further details. For the years ended December 31, 2024 and 2023, the Company impaired property and equipment of $ 4.8 million and $ 7.9 million, respectively, which was related to termination of lease agreement and disposal of laptops resulting from a reduction in the workforce, and are included within other expense/(income) within the consolidated statements of operations and comprehensive loss. For the years ended December 31, 2024 and 2023, the Company’s restructuring and impairment expenses consist of the following: Year Ended December 31, 2024 (Amounts in thousands) 2024 2023 Employee one-time termination benefits (1) 1,280 2,968 Impairments of Right-of-Use assets (2) — 2,321 Real estate restructuring loss (2) — 5,284 Impairment of assets held for sale (2) 4,220 — Impairment of goodwill and intangible assets (2) 7,479 2,332 Impairment of property and equipment (2) 4,794 7,934 Other restructuring gains (2) ( 114 ) ( 3,380 ) Total Restructuring and Impairments $ 17,659 $ 17,459 (1) Employee one-time termination benefits are included in compensation and benefits on the consolidated statements of operations and comprehensive loss. (2) Impairments of Right-of-Use Assets, real estate restructuring loss, impairments of assets held for sale, impairments of goodwill and intangible assets, impairment of property and equipment, and other restructuring gains are included in other expense/(income) on the consolidated statements of operations and comprehensive loss. The cumulative amount of one-time termination benefits, impairment of loan commitment asset (during fiscal year 2022), impairment of right-of-use assets, and impairment of property and equipment as of December 31, 2024 is $ 123.6 million, $ 105.6 million, $ 8.5 million, and $ 16.8 million, respectively. 109 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Mortgage Loans Held for Sale and Warehouse Lines of Credit The Company has the following outstanding warehouse lines of credit: December 31, (Amounts in thousands) Maturity Facility Size 2024 2023 Funding Facility 1 (1) September 30, 2025 $ 100,000 $ 60,747 61,709 Funding Facility 2 (2) March 6, 2025 150,000 74,472 40,088 Funding Facility 3 (3) August 1, 2025 175,000 108,851 24,421 Total warehouse lines of credit $ 425,000 $ 244,070 $ 126,218 __________________ (1) Interest charged under the facility is at the 30-day term SOFR plus 2.125 %. Cash collateral deposit of $ 15.0 million is maintained and included in restricted cash. (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. Subsequent to December 31, 2024, the Company extended the maturity to March 6, 2026. (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 December 31, 2024. 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: December 31, (Amounts in thousands) 2024 2023 Funding Facility 1 $ 61,341 $ 63,483 Funding Facility 2 83,562 42,316 Funding Facility 3 123,081 26,894 Total LHFS pledged as collateral 267,984 132,693 Company-funded LHFS 10,056 12,386 Company-funded HELOC 118,879 25,098 Total LHFS 396,919 170,177 Fair value adjustment 2,322 ( 27 ) Total LHFS at fair value $ 399,241 $ 170,150 Average days loans held for sale, other than Company-funded LHFS and Company-funded HELOC, for the years ended December 31, 2024 and 2023 were approximately 21 days and 22 days, respectively. This is defined as the average days between funding and sale for loans funded during each period. As of December 31, 2024 and 2023, the the unpaid principal balance of loans that were either 90 days past due or non-performing was $ 1.4 million and an immaterial amount, respectively. As of December 31, 2024 and 2023, the weighted average annualized interest rate for the warehouse lines of credit was 6.44 % and 7.43 %, 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, leverage ratios, and earnings. In addition, these warehouse lines also require the Company to maintain compensating cash balances which aggregated to $ 18.8 million as of December 31, 2024 and 2023 and are included in restricted cash on the accompanying consolidated balance sheets. The Company was in compliance with all financial covenants under the warehouse lines as of December 31, 2024 and 2023, respectively. 110 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. 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 98.6 % and 22.2 % of the total loan portfolio as of December 31, 2024 and 2023, respectively. The Company’s Loans Held for Investment portfolio is summarized as follows: (Amounts in thousands) December 31, 2024 December 31, 2023 Property - Buy to Let $ 111,630 $ 1,063 Other 1,514 3,730 Allowance for credit losses $ ( 1,667 ) $ — Total Loans Held for Investment, net $ 111,477 $ 4,793 Accrued interest receivable on loans receivable totaled $ 0.4 million and an immaterial amount, respectively, as of December 31, 2024 and December 31, 2023 and is included in other receivables, net on the 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 receivable on loans receivable as of December 31, 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 years ended December 31, 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 December 31, 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 December 31, 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 December 31, 2024 and December 31, 2023, there were no loans that were placed on non-accrual status. During the years ended December 31, 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 111 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. The Company utilizes 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 December 31, 2024 and December 31, 2023. The tables below present loans by credit quality indicator and vintage year: December 31, 2024 (Amounts in thousands) 2024 2023 2022 2021 2020 Prior Total Property - Buy to Let 0-20 Months $ — $ — $ — $ — $ — $ — $ — 21-40 Months — — — — — — — Over 40 Months 110,891 739 — — — — 111,630 Total $ 110,891 $ 739 $ — $ — $ — $ — $ 111,630 Other 0-20 Months $ — $ 34 $ 255 $ 435 $ 77 $ 2 $ 803 21-40 Months — 13 630 68 — — 711 Over 40 Months — — — — — — — Total $ — $ 47 $ 885 $ 503 $ 77 $ 2 $ 1,514 Total $ 110,891 $ 786 $ 885 $ 503 $ 77 $ 2 $ 113,144 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 $ 4,793 112 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Property and Equipment Property and equipment consists of the following: As of December 31, (Amounts in thousands) 2024 2023 Computer and Hardware $ 5,423 $ 16,276 Furniture and equipment 1,580 2,796 Land and buildings — 3,030 Leasehold improvements 2,509 12,248 Total property and equipment 9,512 34,349 Less: Accumulated depreciation ( 6,795 ) ( 17,896 ) Property and equipment, net $ 2,717 $ 16,454 Total depreciation expense on property and equipment for the years ended December 31, 2024 and 2023 was $ 7.1 million and $ 5.8 million, respectively. Included in depreciation expense was $ 3.7 million of accelerated depreciation due to a lease modification for the year ended December 31, 2024, for further information see Note 5. An impairment of $ 4.8 million and $ 7.9 million was recognized for the years ended December 31, 2024 and 2023, respectively, related to computers and hardware and is included within other expense/(income) within the consolidated statements of operations and comprehensive loss. 9. Leases The below table presents the lease related assets and liabilities recorded on the accompanying balance sheet: As of December 31, (Amounts in thousands) Balance Sheet Caption 2024 2023 Assets: Operating lease right-of-use assets Right-of-use asset $ 1,387 $ 19,988 Total leased assets $ 1,387 $ 19,988 Liabilities: Operating lease liabilities Lease liabilities $ 4,081 $ 31,202 Total lease liabilities $ 4,081 $ 31,202 The components of operating lease costs, included within general and administrative expenses within the consolidated statements of operations and comprehensive loss, were as follows: Year Ended December 31, (Amounts in thousands) 2024 2023 Operating lease cost $ 8,903 $ 10,713 Short-term lease cost 512 236 Variable lease cost 906 1,241 Total operating lease cost $ 10,321 $ 12,190 113 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The components of finance lease costs were as follows: Year Ended December 31, 2023 (Amounts in thousands) Depreciation and Amortization Interest Expense Total Total finance lease cost $ 135 $ 39 $ 174 Supplemental cash flow and non-cash information related to leases were as follows: Year Ended December 31, (Amounts in thousands) 2024 2023 Cash paid for amounts included in measurement of operating lease liabilities $ 8,668 $ 17,504 Right-of-use assets obtained in exchange for lease liabilities: Operating lease right-of-use assets recognized $ 1,261 $ 787 Supplemental balance sheet information related to leases was as follows: Year Ended December 31, (Amounts in thousands) 2024 2023 Operating leases Weighted average remaining lease term (in years) 1.3 5.3 Weighted average discount rate 5.4 % 5.1 % As of December 31, 2024, the Company held no finance leases, and the maturity analysis of operating lease liabilities are as follows: (Amounts in thousands) Operating Leases 2025 $ 3,560 2026 480 2027 198 Total lease payments 4,238 Less amount representing interest ( 157 ) Total lease liabilities $ 4,081 Subsequent to December 31, 2024 the Company entered into a lease agreement to lease real estate offices space until 2030 with total future lease payments of $ 5.1 million. 10. Goodwill and Internal Use Software and Other Intangible Assets, Net Changes in the carrying amount of goodwill, net consisted of the following: Year Ended December 31, (Amounts in thousands) 2024 2023 Balance at beginning of period $ 32,390 $ 17,388 Goodwill acquired—Goodholm & Birmingham — 14,041 Goodwill impairment ( 7,266 ) — Reclassification of disposal units goodwill to assets held for sale ( 1,112 ) — Effect of foreign currency exchange rate changes ( 397 ) 961 Balance at end of period $ 23,615 $ 32,390 During the fourth quarter of 2024, the Company recorded goodwill impairment charges of $ 7.3 million which is included within other expense/(income) in the consolidated statements of operations and comprehensive loss. The goodwill 114 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS impairment is related to entities in the U.K. for which management has classified as held for sale, see Note 12. No impairment of goodwill was recognized for the year ended December 31, 2023. Internal use software and other intangible assets, net consisted of the following: As of December 31, 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 $ 147,994 $ ( 129,487 ) $ 18,507 Intellectual property and other 6.0 869 ( 291 ) $ 578 Total Intangible assets with finite lives, net 148,863 ( 129,778 ) 19,085 Intangible assets with indefinite lives Domain name 1,820 — $ 1,820 Licenses and other 31 — $ 31 Total Internal use software and other intangible assets, net $ 150,714 $ ( 129,778 ) $ 20,936 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 $ 8.5 million and $ 13.1 million in internal use software and website development costs during the years ended December 31, 2024 and 2023, respectively. Included in capitalized internal use software and website development costs are $ 1.8 million and $ 4.1 million of stock-based compensation costs for the years ended December 31, 2024 and 2023, respectively. Amortization expense totaled $ 26.1 million and $ 37.1 million during the years ended December 31, 2024 and 2023, respectively. For the years ended December 31, 2024 and 2023, none and $ 2.3 million impairment were recognized relating to other intangible assets (see Note 5). Amortization expense related to intangible assets as of December 31, 2024 is expected to be as follows: (Amounts in thousands) Total 2025 $ 10,685 2026 5,357 2027 2,059 2028 656 2029 and thereafter 328 Total $ 19,085 115 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Prepaid Expenses and Other Assets Prepaid expenses and other assets consisted of the following: As of December 31, (Amounts in thousands) 2024 2023 Prepaid expenses $ 17,165 $ 27,859 Tax receivables 5,484 8,348 Security Deposits 11,245 15,179 Total prepaid expenses and other assets $ 33,894 $ 51,386 116 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. Assets and Liabilities Held for Sale During the fourth quarter of 2024, management enacted a plan to sell several entities in the U.K. which are being actively marketed, are available for sale in their current respective conditions, and management expects to complete the respective sales within one year and all criteria included in Note 2 have been met. The Company recorded a write down of the disposal group to fair value, less cost to sell, in the amount of 4.2 million which is included in other expenses/(income) on the consolidated statements of operations and comprehensive loss. The following table represents summarized balance sheet information of assets and liabilities held for sale: (Amounts in thousands) As of December 31, 2024 Cash and cash equivalents $ 3,814 Restricted cash 3,868 Mortgage loans held for sale, at fair value 1,721 Other receivables, net 1,244 Property and equipment, net 35 Internal use software and other intangible assets, net 2,203 Goodwill 1,112 Prepaid expenses and other assets 634 Write down of assets to fair value less cost to sell ( 4,220 ) Total assets held for sale $ 10,411 Accounts payable and accrued expenses 1,684 Escrow payable and other customer accounts 3,868 Other liabilities 564 Total liabilities held for sale $ 6,116 13. Customer Deposits In relation to the Company’s banking activities tied to the Birmingham acquisition 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 December 31, 2024 and December 31, 2023 was $ 134.1 million and $ 11.8 million, respectively, on the consolidated balance sheets. The following table presents average balances and weighted average rates paid on deposits for the years indicated: Year Ended December 31, 2024 Year Ended December 31, 2023 (Amounts in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Notice $ 10,405 2.94 % $ 2,826 2.55 % Term 44,970 3.94 % 2,826 2.04 % Savings 3,285 2.11 % 5,324 2.19 % Total Deposits $ 58,660 3.00 % $ 10,976 2.26 % 117 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents maturities of customer deposits: (Amounts in thousands) As of December 31, 2024 Demand Deposits $ 29,647 Maturing In: 2025 10,471 2026 28,228 2027 38,801 2028 — Thereafter 26,983 Total 134,130 Interest Expense on deposits is recorded in interest expense in the consolidated statements of operations and comprehensive loss for the year indicated as follows: Year Ended December 31, (Amounts in thousands) 2024 2023 Notice $ 460 $ 73 Term 1,946 23 Savings 102 96 Total Interest Expense $ 2,508 $ 192 Deposits are for U.K. banking clients and are protected up to £ 85.0 thousand ($ 106.7 thousand) per eligible person by the Financial Services Compensation Scheme in the U.K. Of the total customer deposits as of December 31, 2024, $ 29.5 million were over the applicable insured amount. 118 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. Other Liabilities Other liabilities consisted of the following: As of December 31, (Amounts in thousands) 2024 2023 Deferred Revenue 3,038 272 Loan Repurchase Reserve (Note 18) 7,523 19,472 Other Liabilities 2,905 6,093 Total other liabilities $ 13,466 $ 25,837 15. Corporate Line of Credit, Pre-Closing Bridge Notes and Convertible Notes 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 year ended December 31, 2024. For the year ended December 31, 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 and amortization on non-funding debt expense within the consolidated statements of 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 of $ 650.0 million automatically converted into Class C common stock at a conversion price of $ 500.00 per share, adjusted by the 1-for-50 reverse stock split, (and the Pre-Closing Bridge Notes held by the Sponsor in an aggregate principal amount of $ 100.0 million were exchanged for 0.8 million shares of Class A common stock. For the year ended December 31, 2023, the Company recorded a loss of $ 236.6 million 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 plus accrued interest in cash, at any time on or before the 30 th 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 date of notice of optional 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. 119 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2024 and 2023, the carrying amount of the Convertible Note was $ 519.7 million and $ 514.6 million on the consolidated balance sheets, respectively. For the years ended December 31, 2024 and 2023, the Company recorded a total of $ 7.6 million and $ 2.2 million, respectively, of interest expense related to the Convertible Note. Interest expense from the Convertible Note is included in interest expense within the 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 December 31, 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. 16. 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 new pilot programs, both for the Company and the counterparty, for which there are not 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. 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, and 1/0 Real Estate. In September 2021, the Company and TheNumber entered into a technology integration and license agreement. 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. 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 $ 1.0 million and $ 0.8 million for the years ended December 31, 2024 and 2023 respectively, which are included within general and administrative expenses on the consolidated statements of operations and comprehensive loss. The Company included a payable of $ 56 thousand, within accounts payable and accrued expenses on the consolidated balance sheets, and $ 230 thousand, within other liabilities on the consolidated balance sheets, as of December 31, 2024 and 2023, respectively. Notable —In previous years, the Company or subsidiaries of the Company, entered into several agreements (herein referred to as the “Notable Agreements”) with Notable Finance LLC (“Notable”), an entity in which Vishal Garg and 1/0 Real Estate (an entity affiliated with Vishal Garg), collectively hold a majority ownership interest. The Notable Agreements included products such as a consumer lending program, a non-revolving personal line of credit, and other financial products which were offered to borrowers of the Company. The Notable Agreements also included the ability for the Company to purchase up to $ 20.0 million of unsecured home improvement loans underwritten and originated by Notable for the Company’s customers. During 2024, the Company decided to cease offering the products and services provided via the Notable Agreements. As of December 31, 2024 and 2023, the Company had $ 4.2 million and $ 6.3 million of unsecured home improvement loans purchased from Notable, which are included within mortgage loans held for sale, at fair value on the consolidated balance sheets. Notable will continue to provide servicing for the loans purchased from Notable that remain on the Company’s balance sheet. During the years ended December 31, 2024 and 2023, the Company had purchases of loans from Notable of none and $ 0.2 million, respectively. For the year ended December 31, 2024, the Company incurred $ 64.5 thousand of expenses for amortization of internal use software under the agreement, which are included within depreciation and amortization on the consolidated statements of operations and comprehensive loss. For the year December 31, 2023, the Company incurred $ 43.2 thousand of expenses under the agreement, which are included within marketing and advertising expenses, and depreciation and amortization on the consolidated statements of operations and comprehensive loss. As the Company has ceased offering products and services with Notable, the Company has impaired $ 0.2 million of capitalized internal use software which is included within other expense/(income) within the consolidated statements of operations and comprehensive loss. 120 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other Related Party Services —The Company has relationships with 1/0 Capital LLC and Zethos Inc (doing business as “True Work”), companies affiliated with Vishal Garg, the Chief Executive Officer, which provide services to the Company varying from data analytics to information technology support services. For the years ended December 31, 2024 and 2023, the Company incurred expenses of $ 120.4 thousand and $ 165.9 thousand, respectively, in relation to these services, which are included in general and administrative expenses on the consolidated statements of operations and comprehensive loss. The Company included a payable of $ 18.2 thousand, within accounts payable and accrued expenses on the consolidated balance sheets, and $ 159.7 thousand, within other liabilities on the consolidated balance sheets as of December 31, 2024 and 2023, respectively. 17. 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, 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 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 employee related labor disputes initially brought forth during the third quarter of 2020. The disputes allege 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. The majority of such legal claims and proceedings are in the early stages and, to the extent applicable, have not yet reached the class certification stage and as such the ultimate outcomes cannot be predicted with certainty due to inherent uncertainties in the legal claims and proceedings. As part of the disputes and other similar types of legal matters, the Company included an estimated liability of $ 8.3 million and $ 8.4 million as of December 31, 2024 and 2023, respectively, which is included in accounts payable and accrued expenses on the consolidated balance sheets. During the year ended December 31, 2024, the changes in the liability included settlements of $ 0.5 million as well as additional accruals of $ 0.4 million related to certain other employment matters, which were included within general and administrative expense on the consolidated statement of operations and comprehensive loss. There were no changes in the estimated liability for the year ended December 31, 2023. In June 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. In September 2023, Ms. Pierce 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 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 2021, 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 December 31, 2024 and 2023, the Company included an estimated liability of $ 6.6 million and $ 8.6 million, respectively, within accounts payable and accrued expenses on the consolidated balance sheets. For the year ended December 31, 2024, the Company recorded additional accruals for these potential TRID defects of $ 0.3 million which is included within loan origination expense in the consolidated statement of operations and comprehensive loss. During the year ended December 31, 2024, the Company had relief of the liability due to payments to customers in the amount of $ 2.3 million. For the year ended December 31, 2023, the Company reduced the estimated liability for these potential TRID defects in the amount of $ 3.3 million and is included within loan origination expense in the 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 with the identified defects. The Company is continuing to remediate TRID tolerance defects as necessary. 121 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 December 31, 2024 and 2023, the Company had outstanding commitments to fund mortgage loans in notional amounts of approximately $ 129.9 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 December 31, 2024 and 2023, respectively, on the consolidated balance sheets. See Note 20. 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 December 31, 2024 and 2023, the Company had outstanding forward sales commitment contracts of notional amounts of approximately $ 158.0 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 December 31, 2024 and 2023, respectively, on the consolidated balance sheets. See Note 20. Concentrations —See below for areas considered to be concentrations of credit risk for the Company: Significant loan purchasers are those which represent more than 10% of the Company’s loan volume. During the year ended December 31, 2024, the Company had three loan purchasers that accounted for 37 %, 26 %, and 19 % of loans sold by the Company. During the year ended December 31, 2023, the Company had one loan purchaser that accounted for 66 % 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 December 31, 2024, the Company had originated 10% of its LHFS secured by properties in California. 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 December 31, 2024 and 2023, the majority of the Company’s cash and cash equivalent balances are in excess of the insured limits at various financial institutions. 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 December 31, 2024 and 2023 was $ 0.1 million and $ 3.4 million, respectively, and are included within escrow payable and other customer accounts on the consolidated balance sheets. 18. 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. 122 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For all counterparties with open positions as of December 31, 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. To the extent that the loans performance does not comply with such representations, the Company may be required to repurchase the loans or indemnify these loan purchasers for losses. The Company repurchased $ 9.9 million ( 30 loans) and $ 22.1 million ( 55 loans) in unpaid principal balance of loans during the years ended December 31, 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 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: Year Ended December 31, (Amounts in thousands) 2024 2023 Loan repurchase reserve at beginning of year $ 19,472 $ 26,745 Recovery ( 9,923 ) ( 1,823 ) Charge-offs ( 2,026 ) ( 5,450 ) Loan repurchase reserve at end of year $ 7,523 $ 19,472 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 6. 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 consolidated financial statements unless the Company found a suitable alternative source. 123 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. 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: Year Ended December 31, (Amounts in thousands, except for share and per share amounts) 2024 2023 Basic and diluted net loss per share: Net loss $ ( 206,290 ) $ ( 536,420 ) Shares used in computation: Weighted average common shares outstanding (1) 15,111,701 9,233,683 Weighted-average effect of dilutive securities: Assumed exercise of stock options — — Assumed exercise of Public & Private Warrants — — Diluted weighted-average common shares outstanding 15,111,701 9,233,683 Earnings (loss) per share attributable to common stockholders: Basic $ ( 13.65 ) $ ( 58.09 ) Diluted $ ( 13.65 ) $ ( 58.09 ) 1. Year ended December 31, 2023 has 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. Basic and diluted loss per share are the same for each class of common stock (i.e., Class A, Class B and Class C) 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). The Company's potentially dilutive securities, which include stock options, RSUs, warrants to purchase shares of common stock, 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: Year Ended December 31, (Amounts in thousands) 2024 2023 (2) RSUs and Options to purchase common stock (1) 1,145 963 Public warrants (1)(3) 6,075 6,075 Private warrants (1)(3) 3,733 3,733 Sponsor locked-up shares (1) 14 14 Total 10,967 10,785 __________________ (1) Securities have an antidilutive effect under the treasury stock method. (2) Year ended December 31, 2023 has 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. (3) Public and Private warrants are unadjusted by the Reverse Stock Split as a holder must exercise 50 warrants to receive one share of common stock. 124 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20. Fair Value Measurements The Company’s financial instruments measured at fair value on a recurring basis are summarized below: December 31, 2024 (Amounts in thousands) Level 1 Level 2 Level 3 Total Mortgage loans held for sale, at fair value $ — $ 399,241 $ — $ 399,241 Derivative assets, at fair value (1) — 1,231 1,308 2,539 Total Assets $ — $ 400,472 $ 1,308 $ 401,780 Derivative liabilities, at fair value (1) —included within other liabilities $ — $ — $ 86 $ 86 Warrants and equity related liabilities, at fair value (2) 729 678 — 1,407 Total Liabilities $ 729 $ 678 $ 86 $ 1,493 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) —included within other liabilities $ — $ 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 December 31, 2024, derivative assets represent forward sale commitments and IRLCs, and liabilities represent IRLCs. As of December 31, 2023, derivative assets represent IRLCs, and liabilities represent both IRLCs and forward sale commitments. (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 December 31, 2024 and 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 $ 19.7 million and $ 1.9 million of IRLCs during the years ended December 31, 2024 and 2023, respectively. The number of days from the date of the IRLC to expiration of the rate lock commitment outstanding as of December 31, 2024 and 2023 was approximately, on average, 54 days and 52 days, respectively. The Company attempts to match the maturity date of the IRLCs with the forward commitments. Derivatives are presented in the consolidated balance 125 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS sheets under derivative assets, at fair value and other liabilities, at fair value. During the year ended December 31, 2024, the Company recognized $ 0.5 million of losses and $ 5.2 million of gains related to changes in the fair value of IRLCs and forward sale commitments, respectively. During the year ended December 31, 2023, the Company recognized $ 3.2 million of gains and $ 7.2 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 consolidated statements of operations and comprehensive loss. Unrealized activity related to changes in the fair value of forward sale commitments were $ 5.7 million of gains and $ 4.7 million of losses, included in the $ 5.2 million of gains and $ 7.2 million of gains, during the years ended December 31, 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 December 31, 2024 IRLCs $ 129,900 $ 1,308 $ 86 Forward commitments $ 158,000 1,231 — Total $ 2,539 $ 86 Balance as of December 31, 2023 IRLCs $ 227,380 $ 1,716 $ 77 Forward commitments $ 265,000 — 872 Total $ 1,716 $ 949 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 December 31, 2024 and 2023, Level 3 instruments include IRLCs, bifurcated derivative, and convertible preferred stock warrants. The following table presents the rollforward of Level 3 IRLCs: Year Ended December 31, (Amounts in thousands) 2024 2023 Balance at beginning of period $ 1,640 $ ( 1,513 ) Change in fair value of IRLCs ( 418 ) 3,153 Balance at end of period $ 1,222 $ 1,640 The following table presents the rollforward of Level 3 bifurcated derivative: Year Ended December 31, (Amounts in thousands) 2024 2023 Balance at beginning of year $ — $ 236,603 Change in fair value of bifurcated derivative — ( 236,603 ) Balance at end of year $ — $ — 126 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the rollforward of Level 3 convertible preferred stock warrants: Year Ended December 31, (Amounts in thousands) 2024 2023 Balance at beginning of year $ — $ 3,096 Issuances — — Exercises — ( 2,829 ) Change in fair value of convertible preferred stock warrants — ( 266 ) Balance at end of year $ — $ — 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 Consolidated Balance Sheet Offsetting of Forward Commitments - Assets Balance as of: December 31, 2024: $ 1,249 $ ( 18 ) $ 1,231 December 31, 2023 $ — $ — $ — Offsetting of Forward Commitments - Liabilities Balance as of: December 31, 2024: $ — $ — $ — 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: December 31, 2024 (Amounts in dollars, except percentages) Range Weighted Average Level 3 Financial Instruments: IRLCs Pull-through factor 0.45 % - 100.00 % 74.8 % December 31, 2023 (Amounts in dollars, except percentages) Range Weighted Average Level 3 Financial Instruments: IRLCs Pull-through factor 0.77 % - 100.00 % 89.8 % U.S. GAAP requires disclosure of fair value information about financial instruments, whether recognized or not recognized in the 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. 127 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The estimated fair value of the Company’s cash and cash equivalents, restricted cash, warehouse lines of credit, and escrow funds 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: As of December 31, 2024 2023 (Amounts in thousands) Fair Value Level Carrying Amount Fair Value Carrying Amount Fair Value Short-term investments Level 1 $ 53,774 $ 53,791 $ 25,597 $ 25,563 Loans held for investment Level 3 $ 113,144 $ 113,348 $ 4,793 $ 5,103 Convertible Note Level 3 $ 519,749 $ 371,160 $ 514,644 $ 309,135 In determining the fair value of the Convertible Note and loans held for investment, management uses factors that are material to the valuation process, including but not limited to, risks, prospects, and economic and market conditions, among other factors. As a number of assumptions and estimates were involved that are largely unobservable, Convertible Note, and loans held for investment are classified as Level 3 inputs within the fair value hierarchy. 21. Income Taxes The Company is subject to US (federal, state and local) and foreign income taxes. The components of income (loss) before income tax expense (benefit) are as follows: Year Ended December 31, (Amounts in thousands) 2024 2023 U.S. $ ( 163,597 ) $ ( 504,096 ) Foreign ( 41,843 ) ( 30,326 ) (Loss) income before income tax expense $ ( 205,440 ) $ ( 534,422 ) The following table displays the components of the Company’s federal, state and local, and foreign income taxes. Year Ended December 31, (Amounts in thousands) 2024 2023 Current Income Tax Expense (Benefit): Federal $ 121 $ 127 Foreign 349 1,780 State and local 376 8 Total Current Income Tax Expense (Benefit) 846 1,915 Deferred Income Tax Expense (Benefit): Federal ( 25,971 ) ( 46,751 ) Foreign ( 7,756 ) ( 8,351 ) State and local ( 2,475 ) ( 7,436 ) Valuation Allowance 36,206 62,621 Total Deferred Income Tax Expense (Benefit) 4 83 Income Tax Expense (Benefit) $ 850 $ 1,998 128 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table displays the difference between the U.S. federal statutory corporate tax rate and the effective tax rate. Year Ended December 31, 2024 2023 US federal statutory corporate tax rate 21.00 % 21.00 % State and local tax 0.61 % 1.02 % Stock-based compensation - 3.27 % - 0.74 % Fair value of warrants 0.09 % - 9.33 % Others - 2.33 % - 0.79 % Foreign tax rate differential 0.81 % 0.23 % R&D tax credit 0.09 % — % Unrecognized tax benefits - 0.06 % - 0.02 % Change in valuation allowance - 17.35 % - 11.75 % Effective Tax Rate - 0.41 % - 0.38 % The difference between the U.S. Federal statutory tax rate and the effective tax rate relates to permanent differences between book and taxable income with respect to reporting for income tax purposes and the change in valuation allowance. The permanent differences will not be reversed in the future. These amounts were predominantly comprised of changes in valuation allowance, state and local taxes, and stock option expense. Deferred Income Tax Assets and Liabilities The Company evaluates the deferred income tax assets for the recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including the Company’s historical profitability and losses and projections of future taxable income (loss). As of December 31, 2024, the Company continued to conclude that the negative evidence with respect to the recoverability of its deferred income tax assets outweighed the positive evidence. It is more likely than not that the deferred income tax assets will not be realized. As of December 31, 2024 and 2023, the Company had a 100 % valuation allowance on its domestic deferred tax assets. The Company’s framework for assessing the recoverability of deferred income tax assets requires it to weigh all available evidence, to the extent it exists, including: • the sustainability of future profitability required to realize the deferred income tax assets, • the cumulative net income or losses in the consolidated statements of operations and comprehensive income in recent years 129 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table displays deferred income tax assets and deferred income tax liabilities: As of December 31, (Amounts in thousands) 2024 2023 Deferred Income Tax Assets Net operating loss $ 372,712 $ 334,955 Reserves 5,110 4,550 Loan repurchase reserve 1,969 5,219 Restructuring reserve 2,376 2,532 Accruals 174 — Deferred revenue — 22 Internal use software 12,221 6,172 Other 587 2,382 Total Deferred Income Tax Assets 395,149 355,832 Deferred Income Tax Liabilities Non-qualified stock options ( 10,182 ) ( 6,215 ) Intangible assets ( 467 ) ( 840 ) Depreciation ( 939 ) ( 1,741 ) Total Deferred Income Tax Liabilities ( 11,588 ) ( 8,796 ) Net Deferred Tax Asset before Valuation Allowance 383,561 347,036 Less: Valuation Allowance ( 383,362 ) ( 346,833 ) Deferred Income Tax Assets, Net $ 199 $ 203 As of December 31, 2024 and 2023 the Company had federal net operating loss (“NOL”) carryforwards of approximately $ 1,285 million and $ 1,160 million, respectively, and state NOL carryforwards of $ 1,017 million and $ 936 million, respectively, which are available to offset future taxable income. As of December 31, 2024 and 2023 the Company had foreign (U.K.) NOL carryforwards of approximately $ 189 million and $ 155 million, respectively, which are available to offset future taxable income. Certain U.S. federal and state NOLs as of December 31, 2024 will begin to expire in 2035. Utilization of the NOL carryforwards for purposes of federal income tax is subject to an annual limitation pursuant to Internal Revenue Code Section 382 (“Section 382”) due to ownership changes that have occurred. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has assessed and concluded there have been multiple changes of control as defined by Section 382 since inception. As of December 31, 2024, the Company's deferred income tax asset relating to the Company's NOL carryforwards will be subject to an annual limitation pursuant to Section 382, thereby limiting the amount of NOL utilization each year. A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows: Year Ended December 31, (Amounts in thousands) 2024 2023 Unrecognized tax benefits - January 1 $ 1,353 $ 1,353 Gross increases - tax positions in prior period — — Gross decreases - tax positions in prior period — — Gross increases - tax positions in current period — — Settlement — — Lapse of statute of limitations — — Unrecognized tax benefits - December 31 $ 1,353 $ 1,353 130 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During 2024, the gross unrecognized tax benefits did not change, however $ 121.5 thousand of interest and penalties were accrued on the $ 1.35 million unrecognized tax benefit balance as of December 31, 2023. Included in the balance of unrecognized tax benefits of $ 1.35 million as of December 31, 2024, are tax benefits that if recognized, will affect the effective tax rate. The Company does not expect a material change in uncertain tax positions in the next 12 months. The Company files a consolidated federal income tax return, foreign income tax returns and various state consolidated or combined income tax returns. The Company’s major tax jurisdictions are U.S. federal, New York State, New York City, California, and India. The Company generally remains subject to examination for Federal income tax returns for the years 2021 and forward, state income tax returns for the years 2020 and forward, and foreign income tax return for the years 2020 and forward. The Pillar Two rules are intended to ensure that large multinational enterprise ("MNE") groups pay a minimum level of tax on the income arising in each of the jurisdictions in which they operate. The rules do so by imposing a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the 15 percent minimum rate. The Pillar Two rules include: • “[A]n Income Inclusion Rule (IIR), which imposes top-up tax on a parent entity in respect of the low taxed income of a constituent entity.” • “[A]n Undertaxed Payment Rule (UTPR), which denies deductions or requires an equivalent adjustment to the extent the low tax income of a constituent entity is not subject to tax under an IIR.” Management believes that the Company does not meet the requirements of a MNE and therefore the Pillar Two rules would not have a material future financial effect on the Company. 22. Convertible Preferred Stock In connection with the Business Combination, as described in Note 3, all series of Better convertible preferred stock were converted into Better common stock and subsequently converted to the Company’s common stock at the 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 convertible preferred stock warrants for the years ended December 31, 2024 and 2023 was none and a gain of $ 0.3 million, respectively,and was recorded in other expenses within the consolidated statements of operations and comprehensive loss. 23. Stockholders' Equity On the Closing Date, the Company consummated the Business Combination pursuant to the terms of the Merger Agreement and on August 24, 2023, the Company’s Class A common stock began trading and Public Warrants continued trading on the Nasdaq 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, Class B, or Class C common stock, as applicable. The Company’s authorized capital stock consists of 36.0 million shares of Class A common stock, 14.0 million shares of Class B common stock, and 16.0 million shares of Class C common stock, each with a par value per share of $ 0.0001 . Each holder of Class A common stock has the right to one vote per share and each holder of Class B common stock has the right to three votes per share. Except as described below or otherwise provided by the Company’s certificate of incorporation or required by applicable law, shares of Class C common stock are non-voting and will not entitle the holder thereof to any voting power. Shares of Class A common stock, Class B common stock and Class C common stock are treated equally, identically and ratably, on a per share basis, with respect to any dividends or distributions as may be declared and paid from time to time. Upon the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, holders of Class A common stock, Class B common stock and Class C common stock will be entitled to receive ratably all assets of the Company available for distribution to its stockholders unless disparate or different treatment of the shares of each such class with respect to distributions upon any such liquidation, dissolution or winding up is 131 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS approved in advance by the affirmative vote of the holders of a majority of the then-outstanding shares of Class A common stock, Class B common stock and Class C common stock, each voting separately as a class. Further, each share of Class B common stock is convertible into one fully paid and nonassessable share of Class A common stock or Class C common stock at the option of the holder thereof at any time upon written notice to the Company. Each share of Class C common stock is convertible into one fully paid and nonassessable share of Class A common stock at the option of the holder thereof at any time upon written notice to the Company. The Company's equity structure consists of different classes of common stock which as presented below: As of December 31, 2024 (Amounts in thousands, except share amounts) Shares Authorized Shares Issued and outstanding Par Value Common A Stock 36,000,000 9,193,901 $ 2 Common B Stock 14,000,000 4,537,349 — Common C Stock 16,000,000 1,437,545 — Total common stock 66,000,000 15,168,795 $ 2 As of December 31, 2023 (Amounts in thousands, except share amounts) Shares Authorized 1 Shares Issued and outstanding 1 Par Value 1 Common A Stock 36,000,000 7,187,207 $ 2 Common B Stock 14,000,000 6,410,714 — Common C Stock 16,000,000 1,437,546 — Total common stock 66,000,000 15,035,467 $ 2 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. Private and Public Warrants— As of December 31, 2024 and 2023, the Company had a total of $ 1.3 million and $ 1.9 million, respectively, of Private Warrants held by a related party, and Public Warrants, which are included as warrant and equity related liabilities, at fair value, within the consolidated balance sheets. The change in fair value of Warrants for the year ended December 31, 2024 and 2023, was a loss of $ 0.6 million and a loss of $ 0.7 million, respectively, and is included in other expenses/(income) within the consolidated statements of operations and comprehensive loss. Sponsor Locked-Up Shares— As of December 31, 2024 and 2023, the Company had a total of $ 0.1 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, at fair value, in the consolidated balance sheets. The change in fair value of Sponsor Locked-Up Shares for the years ended December 31, 2024 and 2023, was a loss of $ 0.3 million and $ 0.2 million, respectively, and is included in other expenses/(income) within the 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 had 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 December 31, 2024 and 2023, the Company had a total of $ 16.0 million and $ 18.3 million, respectively, of outstanding promissory notes. 132 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Of the notes outstanding as of December 31, 2024 and 2023, $ 9.2 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 consolidated balance sheets. The balance as of December 31, 2024 and 2023 does not include any promissory notes due from directors and officers of the Company. Of the notes outstanding as of December 31, 2024 and 2023, $ 6.8 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 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 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. 24. Stock-Based Compensation Equity Incentive Plans —On November 3, 2016, Better’s board of directors and stockholders adopted the Better 2016 Equity Incentive Plan (the “2016 Plan”), which provides for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”) and deferred stock to eligible employees, directors and consultants of the Company. On May 15, 2017, Better’s board of directors and stockholders adopted the Better 2017 Equity Incentive Plan (the “2017 Plan”), which provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards and RSUs to eligible employees, directors and consultants of the Company. The 2017 Plan was most recently amended and approved by the stockholders of Better in August 2020. Upon closing of the Business Combination, the remaining unallocated share reserves under the 2016 Plan and the 2017 Plan were cancelled and no new awards will be granted under either the 2016 Plan or the 2017 Plan. Awards outstanding under the 2016 Plan and the 2017 Plan were assumed by Better Home & Finance upon the closing of the Business Combination and continue to be governed by the terms of the 2016 Plan and the 2017 Plan. In connection with the Business Combination each holder of Better HoldCo options and RSUs received an equivalent award adjusted based on the Exchange Ratio that vests in accordance with the original terms of the award. In connection with the Business Combination, the Better Home & Finance’s 2023 Equity Incentive Plan (the “2023 Plan”) was adopted and approved by the Company's board of directors on August 22, 2023. The 2023 Plan allows for the issuance of stock options, stock appreciation rights, restricted stock awards, RSUs and other equity and equity-based awards for issuance to Better Home & Finance’s service providers. A total of 1,772,533 shares of Class A common stock were initially reserved for issuance pursuant to the 2023 Plan (the “Initial Share Reserve”). The Initial Share Reserve will automatically increase on January 1 of each year beginning January 1, 2024 and ending in 2033, in an amount equal to the lesser of (i) five percent ( 5 %) of the shares of Class A common stock outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares of Class A common stock as is determined by the Board or committee of the Board; provided, however, that no more than 12,286,879 shares of Class A common stock may be issued upon the exercise of incentive stock options. On December 7, 2023, the Board determined there would be no such automatic increase to the Initial Share Reserve on January 1, 2024. As of December 31, 2024, 568,973 awards have been granted under the 2023 Plan. As of December 31, 2024 1,622,392 are available for issuance under the 2023 Plan. In connection with the Business Combination, the Better Home & Finance 2023 Employee Stock Purchase Plan (the “ESPP”) became effective on August 22, 2023, pursuant to which eligible employees may purchase shares of Class A common stock at a discounted rate. A total of 322,279 shares of Class A common stock were initially reserved for issuance pursuant to the ESPP (the “ESPP Share Reserve”). The ESPP Share Reserve will automatically increase on January 1 of each year beginning January 1, 2024 and ending in 2033, in an amount equal to the lesser of (i) one percent ( 1 %) of the shares of Class A common stock outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares of Class A common stock as is determined by the Board; provided, however, that no more than 2,417,091 shares of Class A common stock may be issued under the ESPP. On December 7, 2023, the Board determined there would be no such automatic increase to the Initial ESPP Share Reserve on January 1, 2024. As of December 31, 2024, no shares have been issued under the ESPP. 133 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company no longer allows for the early exercise of awards under the 2016 Plan, 2017 Plan, or the 2023 Plan. Stock Options — The following is a summary of stock option activity during the year ended December 31, 2024: (Amounts in thousands, except options, prices, and averages) Number of Options Weighted Average Exercise Price Intrinsic Value Weighted Average Remaining Term Stock Options: Outstanding—January 1, 2024 702,128 $ 76.86 $ 102 6.1 Options granted — $ — Options exercised ( 5,212 ) $ 10.27 Options cancelled or forfeited ( 2,362 ) $ 84.54 Options expired ( 38,331 ) $ 76.75 Outstanding—December 31, 2024 656,223 $ 77.37 $ 34 5.01 Vested and exercisable—December 31, 2024 613,774 $ 78.27 $ 34 4.81 Options expected to vest 42,486 $ 64.67 $ — 7.90 December 31, 2024 656,260 $ 77.39 $ 34 5.01 As of December 31, 2024, total stock-based compensation cost not yet recognized related to unvested stock options was $ 3.8 million, which is expected to be recognized over a weighted-average period of 1.9 years. Intrinsic value is calculated by subtracting the exercise price of the stock option from the fair value of the Company’s Common A Stock on December 31, 2024 for in-the-money stock options, multiplied by the number of shares of Common A Stock per each stock option. The total intrinsic value of stock options exercised during the years ended December 31, 2024, and 2023 was $ 0.09 million, and $ 0.27 million, respectively. The weighted average grant-date fair value per share of stock options granted during the years ended December 31, 2024 and 2023 was none , as no options were granted, and $ 34.00 , respectively. The total grant date fair value of options vested for the years ended December 31, 2024 and 2023 was $ 10.5 million and $ 13.7 million, respectively. The Company previously allowed stock option holders to early exercise in exchange for cash prior to the vesting date. Shares of common stock issued upon early exercise are considered shares restricted until the completion of the original vesting period of the options and are therefore classified to stock options exercised, not vested on the consolidated balance sheets within other liabilities based upon the respective exercise price of the stock option and are not remeasured. Upon the completion of the vesting period, the Company reclassifies the liability to additional paid in capital on the consolidated balance sheets. Included within other liabilities on the consolidated balance sheets as of December 31, 2024 and 2023 was an immaterial amount and $ 1.5 million, respectively, of stock options exercised, not vested, which represents 365 and 1,739,740 , respectively, of restricted shares. Fair Value of Awards Granted —Prior to the Close of the Business Combination, as Pre-Business Combination Better’s Common O Stock was not publicly traded, the fair value of the shares of Common O Stock was approved by the Better’s Board of Directors as there was no public market for the Better’s common stock as of the date of the awards were granted, which subsequently converted to Class A common stock upon completion of the Business Combination. In estimating the fair value of the Better’s Common O Stock, management used the assistance of third-party valuation specialist and consider factors management believes are material to the valuation process, including, but not limited to, the price at which equity was issued by Better to independent third parties or transacted between third parties, actual and projected financial results, risks, prospects, and economic and market conditions, among other factors. Management believes the combination of these factors provides an appropriate estimate of the expected fair value and reflects the best estimate of the fair value of the Pre-Business Combination Better’s Common O Stock at each grant date. 134 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The expected volatility was based on the historical and implied volatility of similar companies whose stock or option prices are publicly available, after considering the industry, stage of life cycle, size, market capitalization, and financial leverage of the other companies. The risk-free interest rate assumption was based on observed U.S. Treasury yield curve interest rates in effect at the time of grant appropriate for the expected term of the stock options granted. As permitted under authoritative guidance, due to the limited amount of stock option exercises, Better used the simplified method to compute the expected term for stock options granted to employees in the years ended December 31, 2024 and 2023, respectively. Awards issued under the 2023 Plan used the fair value of the Company’s Class A common stock as traded on the public market to derive the fair value of the respective award. The Company estimated the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which affect the fair value of each stock option. The assumptions used to estimate the fair value of stock options granted are as follows: Year Ended December 31, 2023 (Amounts in dollars, except percentages) Range Weighted Average Fair value of Better's Common O Stock1 $ 22.30 - $ 55.8 $ 50.50 Expected volatility 76.50 % - 77.40 % 76.7 % Expected term (years) 5.0 - 6.1 5.8 Risk-free interest rate 3.60 % - 4.20 % 4.00 % 1. Periods has 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. Restricted Stock Units —RSUs generally vest over four years upon satisfaction of service-based conditions. The following is a summary of RSU activity during the year ended December 31, 2024: (Amounts in thousands, except shares and averages) Number of Shares Weighted Average Grant Date Fair Value Unvested—December 31, 2023 (1) 229,530 $ 124.49 RSUs granted (1) 568,973 $ 23.39 RSUs vested (2) ( 231,566 ) $ 71.23 RSUs cancelled or forfeited ( 78,035 ) $ 53.81 Unvested—December 31, 2024 488,902 43.28 1. Included in the Unvested balance as of December 31, 2023 are 49,516 Performance Stock Units grant ("PSU"). During the year ended December 31, 2022 the Company’s Board of Directors (the “Board”) approved the Performance Stock Units grant ("PSU") of 49,516 PSUs to an executive employee. The PSUs will be eligible to vest upon the satisfaction of specified market-based conditions tied to the price of the Company's publicly traded shares at three distinct price threshold levels. The PSUs are also subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company through November 1, 2022. As of December 31, 2023, 49,516 PSUs remained outstanding. 2. Included in the Granted balance are 109,356 Performance Stock Units grant ("PSU"). During the year ended December 31, 2024 the Company’s Board of Directors (the “Board”) approved the Performance Stock Units grants ("PSU") of 109,356 PSUs to executive employees. The PSUs will be eligible to vest upon the satisfaction of specified market-based conditions tied to the price of the Company's publicly traded shares at four distinct price threshold levels. As of December 31, 2024, 158,872 PSUs remained outstanding. The weighted-average grant date fair value of the PSUs granted during 2024 was $ 5.95 . The fair value of this award was estimated using a Monte Carlo simulation to address the path-dependent nature of the market-based vesting conditions. Based on the award term, equity value, expected volatility, risk-free rate, and a series of random variables with a normal distribution, the future equity value was simulated. Each trial within the simulation includes assumptions of achieving a per share valuation level of the Company’s common stock as stipulated in the agreement to determine whether the market-based conditions are met resulting in vesting or not, and the future value of the award. The simulation was run for 50K trials and the mean results from all the trials was taken as an indication of the fair value of each Tranche. 135 Table of Contents BETTER HOME & FINANCE HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2024, the Company recorded a total stock‑based compensation expense of $ 16.3 million related to RSUs awarded to employees and non-employees directors. As of December 31, 2024, total stock-based compensation cost not yet recognized related to unvested RSUs was $ 14.9 million, which is expected to be recognized over a weighted-average period of 3.91 years. Stock-Based Compensation Expense —S tock-based compensation expense is included within compensation and benefits in the consolidated statements of operations and comprehensive loss. The Company recognized stock-based compensation expense as follows: Year Ended December 31, (Amounts in thousands) 2024 2023 Total stock-based compensation expense 1 $ 26,753 $ 54,145 __________________ (1) Technology expense excludes $ 1.8 million and $ 4.1 million of stock-based compensation expense, which was capitalized (see Note 10) for the years ended December 31, 2024 and 2023, respectively 25. 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, HUD, and the FHA and may be 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 December 31, 2024, the Company was in compliance with all necessary requirements. Additionally, the Company may be 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. In 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 has implemented additional financial requirements and remains in compliance with all applicable obligations as of December 31, 2024 and 2023. 26. Subsequent Events The Company evaluated subsequent events from the date of the consolidated balance sheets of December 31, 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 consolidated financial statements, except as described in Note 6 and Note 9, and as follows: Share Repurchase Authorization —On January 22, 2025, the Company announced that the Company’s Board of Directors has authorized a stock repurchase program for up to $ 25.0 million of the Company’s Class A common stock, par value $ 0.0001 per share, that will expire on December 31, 2025. **** 136 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures None.