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Mortgage Loans | 12 Months Ended
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Sep. 30, 2020
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] |
Mortgage Loans | MORTGAGE LOANS Mortgage Loans Held for Sale and Related Derivatives Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. At September 30, 2020, mortgage loans held for sale had an aggregate carrying value of $1.53 billion and an aggregate outstanding principal balance of $1.46 billion. At September 30, 2019, mortgage loans held for sale had an aggregate carrying value of $1.07 billion and an aggregate outstanding principal balance of $1.04 billion. During the years ended September 30, 2020, 2019 and 2018, mortgage loans originated totaled $12.2 billion, $8.7 billion and $7.6 billion, respectively, and mortgage loans sold totaled $11.8 billion, $8.4 billion and $7.4 billion, respectively. The Company had gains on sales of loans and servicing rights of $437.2 million, $319.4 million and $265.1 million during the years ended September 30, 2020, 2019 and 2018, respectively. Net gains on sales of loans and servicing rights are included in revenues in the consolidated statements of operations. During fiscal 2020, approximately 66% of the Company’s mortgage loans were sold directly to Fannie Mae or into securities backed by Ginnie Mae and 28% were sold to two other major financial entities. In response to C-19, the U.S. government has taken various actions to support the economy and the continued functioning of the financial markets. On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, which included changes to current forbearance options for government-backed loans designed to keep homeowners in their homes. Due to the uncertainty surrounding these forbearance options, servicing values declined rapidly at the end of March. As a result, the Company began retaining the servicing rights on a portion of its loan originations. Servicing values have since improved, and the Company expects to sell these rights to third parties. At September 30, 2020, the fair value of mortgage servicing rights was $17.1 million and is included in other assets in the consolidated balance sheet. To manage the interest rate risk inherent in its mortgage operations, the Company hedges its risk using derivative instruments, generally forward sales of mortgage-backed securities (MBS), which are referred to as “hedging instruments” in the following discussion. The Company does not enter into or hold derivatives for trading or speculative purposes. Newly originated loans that have been closed but not committed to third-party purchasers are hedged to mitigate the risk of changes in their fair value. Hedged loans are committed to third-party purchasers typically within three days after origination. The notional amounts of the hedging instruments used to hedge mortgage loans held for sale may vary in relationship to the underlying loan amounts, depending on the movements in the value of each hedging instrument relative to the value of the underlying mortgage loans. The fair value change related to the hedging instruments generally offsets the fair value change in the mortgage loans held for sale. The net fair value change, which for the years ended September 30, 2020, 2019 and 2018 was not significant, is recognized in revenues in the consolidated statements of operations. At September 30, 2020 and 2019, the Company’s mortgage loans held for sale that were not committed to third-party purchasers totaled $1.2 billion and $663.8 million, respectively. The Company also uses hedging instruments as part of a program to offer below market interest rate financing to its homebuyers. At September 30, 2020 and 2019, the Company had MBS totaling $1.1 billion and $111.4 million, respectively, that did not yet have interest rate lock commitments or closed loans created or assigned and recorded a liability of $5.3 million and $0.5 million for the fair value of such MBS position. Loan Commitments and Related Derivatives The Company is party to interest rate lock commitments (IRLCs), which are extended to borrowers who have applied for loan funding and meet defined credit and underwriting criteria. At September 30, 2020 and 2019, the notional amount of IRLCs, which are accounted for as derivative instruments recorded at fair value, totaled $1.8 billion and $727.9 million, respectively. The Company manages interest rate risk related to its IRLCs through the use of best-efforts whole loan delivery commitments and hedging instruments. These instruments are considered derivatives in an economic hedge and are accounted for at fair value with gains and losses recognized in revenues in the consolidated statements of operations. At September 30, 2020 and 2019, the notional amount of best-efforts whole loan delivery commitments totaled $84.6 million and $25.2 million, respectively, and the notional amount of hedging instruments related to IRLCs not yet committed to purchasers totaled $1.6 billion and $636.2 million, respectively. Other Mortgage Loans and Loss Reserves Mortgage loans are sold with limited recourse provisions derived from industry-standard representations and warranties in the relevant agreements. These representations and warranties primarily involve the absence of misrepresentations by the borrower or other parties, the appropriate underwriting of the loan and in some cases, a required minimum number of payments to be made by the borrower. The Company generally does not retain any other continuing interest related to mortgage loans sold in the secondary market. The majority of other mortgage loans consists of loans repurchased due to these limited recourse obligations. Typically, these loans are impaired, and some result in real estate owned through the foreclosure process. At September 30, 2020 and 2019, the Company’s total other mortgage loans and real estate owned, before loss reserves, totaled $14.9 million and $11.4 million, respectively. The Company has recorded reserves for estimated losses on other mortgage loans, real estate owned and future loan repurchase obligations due to the limited recourse provisions, all of which are recorded as reductions of revenue. The loss reserve for loan repurchase and settlement obligations is estimated based on analysis of the volume of mortgages originated, loan repurchase requests received, actual repurchases and losses through the disposition of such loans or requests and discussions with mortgage purchasers. The reserve balances at September 30, 2020 and 2019 totaled $8.9 million and $8.7 million, respectively. Other mortgage loans and real estate owned net of the related loss reserves are included in other assets, while loan repurchase obligations are included in accrued expenses and other liabilities in the Company’s consolidated balance sheets.

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- Definition The entire disclosure for investment in mortgage loan on real estate by entity with substantial portion of business acquiring and holding investment real estate or interest in real estate. Includes, but is not limited to, information for each mortgage loan receivable equaling or exceeding three percent of carrying amount of mortgage. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 12 -Subsection 29 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 948 -SubTopic 310 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-29) -URI http://asc.fasb.org/extlink&oid=120402547&loc=d3e617274-123014 + Details
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