Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.21.1
Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses forward commitments in hedging the interest rate risk exposure on its fixed and adjustable rate commitments. The Company’s derivative instruments are not designated as hedging instruments; therefore, changes in fair value are recorded in current period earnings. Hedging gains and losses are included in loan origination fees and gain on sale of loans, net in the Condensed Consolidated Statements of Income (Loss).
Net unrealized hedging gains were as follows:
Three Months Ended March 31,
2021 2020
Unrealized hedging gains $ 43,001  $ 30,290 
Notional and Fair Value
The notional and fair value of derivative financial instruments not designated as hedging instruments were as follows at March 31, 2021 and December 31, 2020:
Fair Value
Notional
Value		 Derivative
Asset		 Derivative
Liability
Balance at March 31, 2021
IRLCs $ 4,021,335  $ 38,009  $ — 
Forward commitments $ 4,396,480  $ 97,060  $ — 
Balance at December 31, 2020
IRLCs $ 5,151,179  $ 130,338  $ — 
Forward commitments $ 5,480,491  $ —  $ 38,270 
The Company had an additional $1.1 billion and $895.2 million of outstanding forward contracts and mandatory sell commitments, comprised of closed loans with equal and offsetting UPB amounts allocated to them, at March 31, 2021 and December 31, 2020, respectively. The Company also had $1.4 billion and $908.0 million in closed hedge instruments not yet settled at March 31, 2021 and December 31, 2020, respectively. See Note 2 for fair value disclosure of the derivative instruments.
The following table presents the quantitative information about IRLCs and the fair value measurements:
March 31, 2021 December 31, 2020
Unobservable Input Range (Weighted Average)
Loan funding probability (“pull-through”)
0% -100% (92.2%)
0% - 100% (87.8%)
Counterparty agreements for forward commitments contain master netting agreements. The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. The Company incurred no credit losses due to nonperformance of any of its counterparties during the periods ended March 31, 2021 and 2020.
The table below represents financial liabilities that are subject to master netting arrangements or similar agreements categorized by financial instrument, together with corresponding financial instruments and corresponding collateral received or pledged.
Gross
Amounts of
Recognized Assets
(Liabilities)		 Gross
Amounts
Offset in the
Balance
Sheet		 Net
Amounts of
Recognized Assets
(Liabilities) in
the Balance
Sheet
March 31, 2021
Forward delivery commitments $ 100,931  $ (1,256) $ 99,675 
Best efforts sales commitments (2,615) —  (2,615)
Total assets $ 98,316  $ (1,256) $ 97,060 
December 31, 2020
Forward delivery commitments $ (54,419) $ 4,825  $ (49,594)
Best efforts sales commitments (3,656) —  (3,656)
Margin calls 14,980  —  14,980 
Total liabilities $ (43,095) $ 4,825  $ (38,270)