Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.21.2
Derivative Financial Instruments
 9 Months Ended
Sep. 30, 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 for accounting purposes; therefore, changes in fair value are recognized in current period earnings. Realized and unrealized gains and losses from the Company's non-designated derivative instruments are included in loan origination fees and gain on sale of loans, net in the Condensed Consolidated Statements of Income.
Changes in the fair value of the Company's derivative financial instruments are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Unrealized gains (losses) $ (4,153) $ 61,969  $ (52,758) $ 160,167 
Notional and Fair Value
The notional and fair value of derivative financial instruments not designated as hedging instruments were as follows at September 30, 2021 and December 31, 2020:
Fair Value
Notional
Value		 Derivative
Asset		 Derivative
Liability
Balance at September 30, 2021
IRLCs $ 3,992,088  $ 35,721  $ — 
Forward commitments $ 4,104,845  $ 20,071  $ — 
Balance at December 31, 2020
IRLCs $ 5,151,179  $ 130,338  $ — 
Forward commitments $ 5,480,491  $ —  $ 38,270 
The Company had an additional $868.3 million and $895.2 million of outstanding forward contracts and mandatory sell commitments, comprised of closed loans with equal and offsetting unpaid principal balance ("UPB") amounts allocated to them, at September 30, 2021 and December 31, 2020, respectively. The Company also had $710.4 million and $908.0 million in closed hedge instruments not yet settled at September 30, 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:
September 30, 2021 December 31, 2020
Unobservable Input Range (Weighted Average)
Loan funding probability (“pull-through”)
0% -100% (91.1%)
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 September 30, 2021 and 2020.
The table below represents financial assets and liabilities that are subject to master netting arrangements categorized by financial instrument:
Gross
Amounts of
Recognized Assets
(Liabilities)		 Gross
Amounts
Offset in the
Balance
Sheet		 Net
Amounts of
Recognized Assets
(Liabilities) in
the Balance
Sheet
September 30, 2021
Forward delivery commitments $ 22,088  $ (2,641) $ 19,447 
Best efforts sales commitments 486  —  486 
Margin calls 138  —  138 
Total assets $ 22,712  $ (2,641) $ 20,071 
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)