Dream Finders Homes, Inc.

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Additional Risks Related to Our Financial Services Businesses

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Our reserve for title claims losses and related reinsurance agreements subjects us to risks related to potentially incurring losses related to reserve assumptions, claim loss prevention procedures and credit risk of our counterparties.

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We establish reserves for title claims based on actuarial estimates and assumptions regarding future claim experience. These assumptions inherently involve a high degree of judgment and uncertainty, and actual results may differ materially. If our experience deviates from these assumptions—such as higher-than-expected claim frequency, severity, or changes in claim utilization patterns—we may be required to increase our reserves, adversely affecting our profitability and financial position.

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We attempt to mitigate claim losses through underwriting and risk assessment procedures. However, due to inherent limitations, these procedures may not prevent all losses, and failure in our loss prevention methods could result in substantial unexpected losses.

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In addition, although we do not currently cede material amounts of reinsurance, we may do so in the future. Reinsurance is used to reduce exposure to large claims, but we remain liable to policyholders even if a reinsurer fails to meet its obligations. Therefore, we are exposed to credit risk from our reinsurers. The failure, insolvency, or unwillingness of any current or future reinsurance counterparty to perform under their agreements could materially and adversely affect our results of operations and financial condition.

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Use of independent agents may increase the frequency and severity of title claims.

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In certain cases, we rely on independent agents to conduct or procure title searches and examinations, for which they retain most of the title premium. Although governed by agency agreements that define responsibilities and liability, agents may fail to meet their contractual obligations. We monitor agents through audits and performance tracking, but oversight cannot eliminate all risk. Regulatory or legal developments could increase our exposure to liability for agents’ errors or omissions. As a result, our use of independent agents may lead to increased title claims in both frequency and severity.

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Our financial services segment is subject to risks related to our hedging strategies.

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We use limited hedging strategies to manage interest rate risk, primarily related to loans held for sale and interest rate lock commitments. While these strategies can reduce exposure, they are inherently complex and may not fully offset losses from unexpected interest rate volatility. Although hedging is not currently a significant part of our operations, ineffective interest rate risk management could have an adverse, though likely not material, impact on our financial results.

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Our mortgage banking business is subject to risks related to mortgage sales and loan repurchase obligations.

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Our mortgage banking operations depend on the ability to sell originated mortgage loans into the secondary market or directly to large investors such as Fannie Mae and Freddie Mac. If the Company is unable to complete these sales, we may be required to hold the loans long-term, exposing us to borrower credit risk, reduced liquidity, and increased capital requirements. Although we typically sell loans within 30–60 days using mortgage warehouse facilities, a default by lenders under these facilities could require us to fund loans in the pipeline. In such cases, our revolving credit facility and operating cash flow may be insufficient to support continued lending activity, potentially limiting our ability to originate and sell loans competitively.

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Any limitation on, or reduction or elimination of, tax benefits associated with homeownership would have an adverse effect upon the demand for homes, which could be material to our business.

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While tax laws generally permit significant expenses associated with homeownership, primarily mortgage interest expense and real estate taxes, to be deducted for the purpose of calculating an individual’s federal and, in many cases, state taxable income, the ability to deduct mortgage interest expense and real estate taxes for federal income tax purposes is limited. The federal government or a state government may change its income tax laws by eliminating, limiting or substantially reducing these income tax benefits without offsetting provisions, which may increase the after-tax cost of owning a new home for many of our potential homebuyers. For example, the Tax Cuts and Jobs Act, which became effective January 1, 2018, contained substantial changes to the Internal Revenue Code of 1986, as amended (the “Code”) including (i) limitations on the ability of our homebuyers to deduct property taxes, (ii) limitations on the ability of our homebuyers to deduct mortgage interest and (iii) limitations on the ability of our homebuyers to deduct state and local income taxes. The One Big Beautiful Bill Act enacted on July 4, 2025 (the “OBBBA”), continued these changes with some modifications increasing the ability of some homebuyers to deduct property taxes and state and local income taxes but introduced a new overall limit on the tax benefit of itemized deductions (that include property taxes, state and local income taxes and mortgage interest) for taxpayers in the top marginal income tax bracket. Further changes in income tax laws by the federal government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes.

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Federal income tax credits currently available to certain builders of energy-efficient new homes may not be extended by future legislation.

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In August 2022, the U.S. Congress passed the Inflation Reduction Act of 2022, which extended the availability of the Code Section 45L credit for energy-efficient new homes (the “Federal Energy Credits”) and provided a tax credit of $2,000 per qualifying home ($1,600 after the benefit is deducted from cost of sales as required by the IRS) to eligible homebuilders for homes delivered through December 31, 2022. Additionally, the Inflation Reduction Act of 2022 expanded the credit to eligible homebuilders, resulting in an increase from $2,000 to either $2,500 or $5,000 per qualifying home, depending on which specified energy efficiency standards are achieved, effective January 1, 2023 through December 31, 2032.

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For the year ended December 31, 2023, we claimed $3 million of Federal Energy Credits. For the year ended December 31, 2024, we have estimated $12 million of Federal Energy Credits within our income tax provision. The increase in the amount of expected Federal Energy Credits in 2024 compared to the amount claimed in 2023 was primarily due to more homes delivered in 2024 that are expected to qualify for Federal Energy Credits compared to the prior year.

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The OBBBA terminated the Code Section 45L credit for homes purchased after June 30, 2026, which could potentially increase our future effective income tax rates materially thereafter.