ECC Capital : Annual Report

Consolidated Financial Statements and

Independent Auditor's Report

ECC Capital Corporation and Subsidiaries

Year Ended December 31, 2021

ECC Capital Corporation and Subsidiaries

Table of Contents

Independent Auditor's Report

To Board of Directors

ECC Capital Corporation and Subsidiaries Corona Del Mar, California

Opinion

We have audited the accompanying consolidated financial statements of ECC Capital Corporation (a Maryland corporation) and subsidiaries, which comprise the consolidated balance sheet as of December 31, 2021, and the related consolidated statement of operations, stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ECC Capital Corporation and subsidiaries as of December 31, 2021, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of ECC Capital Corporation and subsidiaries and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about ECC Capital Corporation and subsidiaries' ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.

www.rogersllc.com

9600 Blackwell Road, Suite 250 Office: 301 527-1300

Rockville, MD 20850

Fax: 301 279-2819 2

Independent Auditor's Report (Continued)

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:

•  Exercise professional judgment and maintain professional skepticism throughout the audit.

•  Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

•  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of ECC Capital Corporation and subsidiaries' internal control. Accordingly, no such opinion is expressed.

•  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

•  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about ECC Capital Corporation and subsidiaries' ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Rockville, MD

April 13, 2022

www.rogersllc.com

9600 Blackwell Road, Suite 250 Office: 301 527-1300

Rockville, MD 20850

Fax: 301 279-2819 3

ECC CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

December 31, 2021

(in thousands, except share data)

ASSETS

Cash and cash equivalents Restricted cash

Mortgage loans held for sale-at fair value Mortgage loans held for investment, net Accrued mortgage loan interest Mortgage servicing rights

Real estate owned

Prepaid expenses and other assets

Total assets

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