Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.22.2
Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2022
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 June 30, Six Months Ended June 30,
2022 2021 2022 2021
Unrealized hedging losses $ (46,957) $ (91,606) $ (6,924) $ (48,605)
Notional and Fair Value
The notional and fair value of derivative financial instruments not designated as hedging instruments were as follows at June 30, 2022 and December 31, 2021:
Fair Value
Notional
Value		 Derivative
Asset		 Derivative
Liability
Balance at June 30, 2022
IRLCs $ 2,156,288  $ 14,600  $ — 
Forward commitments $ 2,446,093  $ 8,480  $ 2,765 
Best efforts sales commitments $ 190,800  $ —  $ 1,356 
Balance at December 31, 2021
IRLCs $ 2,388,097  $ 22,119  $ — 
Forward commitments $ 3,217,162  $ 5,842  $ 2,079 
The Company had an additional $395.3 million and $654.0 million of outstanding forward contracts and mandatory sell commitments, comprised of closed loans with equal and offsetting UPB amounts allocated to them, at June 30, 2022 and December 31, 2021, respectively. The Company also had $709.5 million and $767.5 million in closed hedge instruments not yet settled at June 30, 2022 and December 31, 2021, 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:
June 30, 2022 December 31, 2021
Unobservable Input Range (Weighted Average)
Loan funding probability (“pull-through”)
0% -100% (92.7%)
0% - 100% (91.5%)
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 June 30, 2022 and 2021.
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
June 30, 2022
Forward delivery commitments $ 15,336  $ (6,856) $ 8,480 
Total assets $ 15,336  $ (6,856) $ 8,480 
Forward delivery commitments $ (4,035) $ 1,270  $ (2,765)
Best efforts sales commitments (1,356) —  (1,356)
Total liabilities $ (5,391) $ 1,270  $ (4,121)
December 31, 2021
Forward delivery commitments $ 7,541  $ (1,699) $ 5,842 
Total assets $ 7,541  $ (1,699) $ 5,842 
Forward delivery commitments $ 1,575  $ (2,710) $ (1,135)
Best efforts sales commitments (944) —  (944)
Total liabilities $ 631  $ (2,710) $ (2,079)