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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2022
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 13. Fair Value Measurements Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a three-tiered fair value hierarchy has been established based on the level of observable inputs used in the measurement of fair value (e.g., Level 1 representing quoted prices for identical assets or liabilities in an active market; Level 2 representing values using observable inputs other than quoted prices included within Level 1; and Level 3 representing estimated values based on significant unobservable inputs). There have been no significant changes to the valuation techniques and inputs used by the Company in estimating fair values of Level 2 and Level 3 assets and liabilities as disclosed in the Company’s Annual Reports on Form 10-K for the year ended December 31, 2021. The following tables present the estimated carrying amount and fair value of the Company’s financial instruments and other assets and liabilities measured at fair value on a recurring basis:
| June 30, 2022
|  |  | Recurring Fair Value Measurements
Fair Value - Recurring Basis | Total Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |
Mortgage loans held for sale | $ | 2,072 |  |  | $ | — |  |  | $ | 2,072 |  |  | $ | — |
Mortgage servicing rights | 6,151 |  |  | — |  |  | — |  |  | 6,151 |
Equity securities | 59 |  |  | 5 |  |  | — |  |  | 54 |
Derivative financial instruments |  |  |  |  |  |  |
IRLCs | 62 |  |  | — |  |  | — |  |  | 62 |
LPCs | 3 |  |  | — |  |  | — |  |  | 3 |
Forward MBS trades | 12 |  |  | — |  |  | 12 |  |  | — |
Liabilities |  |  |  |  |  |  |
Derivative financial instruments |  |  |  |  |  |  |
IRLCs | 1 |  |  | — |  |  | — |  |  | 1 |
LPCs | 1 |  |  | — |  |  | — |  |  | 1 |
Forward MBS trades | 13 |  |  | — |  |  | 13 |  |  | — |
Treasury futures | 18 |  |  | — |  |  | 18 |  |  | — |
Mortgage servicing rights financing | 24 |  |  | — |  |  | — |  |  | 24 |
Excess spread financing | 532 |  |  | — |  |  | — |  |  | 532 |
| December 31, 2021 |
|  |  | Recurring Fair Value Measurements |
Fair Value - Recurring Basis | Total Fair Value |  | Level 1 |  | Level 2 |  | Level 3 |
Assets |  |  |  |  |  |  |  |
Mortgage loans held for sale | $ | 4,381 |  |  | $ | — |  |  | $ | 4,381 |  |  | $ | — |  |
Mortgage servicing rights | 4,223 |  |  | — |  |  | — |  |  | 4,223 |  |
Equity securities | 63 |  |  | 9 |  |  | — |  |  | 54 |  |
Derivative financial instruments |  |  |  |  |  |  |  |
IRLCs | 134 |  |  | — |  |  | — |  |  | 134 |  |
Forward MBS trades | 7 |  |  | — |  |  | 7 |  |  | — |  |
LPCs | 3 |  |  | — |  |  | — |  |  | 3 |  |
Liabilities |  |  |  |  |  |  |  |
Derivative financial instruments |  |  |  |  |  |  |  |
Forward MBS trades | 8 |  |  | — |  |  | 8 |  |  | — |  |
LPCs | 2 |  |  | — |  |  | — |  |  | 2 |  |
Swap futures | 6 |  |  | — |  |  | 6 |  |  | — |  |
Mortgage servicing rights financing | 10 |  |  | — |  |  | — |  |  | 10 |  |
Excess spread financing | 768 |  |  | — |  |  | — |  |  | 768 |  |
The tables below present a reconciliation for all of the Company’s Level 3 assets and liabilities measured at fair value on a recurring basis:
| Six Months Ended June 30, 2022
| Assets | Liabilities
Fair Value - Level 3 Assets and Liabilities | Mortgage servicing rights |  | Equity securities |  | IRLCs |  | Excess spread financing |  | Mortgage servicing rights financing
Balance - beginning of period | $ | 4,223 |  |  | $ | 54 |  |  | $ | 134 |  |  | $ | 768 |  |  | $ | 10 |
Changes in fair value included in earnings | 663 |  |  | — |  |  | (72) |  |  | 117 |  |  | 14 |
Purchases | 1,178 |  |  | — |  |  | — |  |  | — |  |  | — |
Issuances | 360 |  |  | — |  |  | — |  |  | — |  |  | — |
Sales | (289) |  |  | — |  |  | — |  |  | — |  |  | — |
Repayments | — |  |  | — |  |  | — |  |  | (292) |  |  | — |
Settlements | — |  |  | — |  |  | — |  |  | (61) |  |  | — |
Other changes | 16 |  |  | — |  |  | — |  |  | — |  |  | — |
Balance - end of period | $ | 6,151 |  |  | $ | 54 |  |  | $ | 62 |  |  | $ | 532 |  |  | $ | 24 |
| Six Months Ended June 30, 2021
| Assets |  | Liabilities
Fair Value - Level 3 Assets and Liabilities | Mortgage servicing rights |  | IRLCs |  | Excess spread financing |  | Mortgage servicing rights financing
Balance - beginning of period | $ | 2,703 |  |  | $ | 414 |  |  | $ | 934 |  |  | $ | 33 |
Changes in fair value included in earnings | (190) |  |  | (210) |  |  | 14 |  |  | (12) |
Purchases | 218 |  |  | — |  |  | — |  |  | — |
Issuances | 554 |  |  | — |  |  | — |  |  | — |
Sales | (12) |  |  | — |  |  | — |  |  | — |
Settlements | — |  |  | — |  |  | (81) |  |  | — |
Other changes | 34 |  |  | — |  |  | — |  |  | — |
Balance - end of period | $ | 3,307 |  |  | $ | 204 |  |  | $ | 867 |  |  | $ | 21 |
No transfers were made in or out of Level 3 fair value assets and liabilities for the Company during the six months ended June 30, 2022 and 2021. The tables below present the quantitative information for significant unobservable inputs used in the fair value measurement of Level 3 assets and liabilities.
| June 30, 2022 |  | December 31, 2021
| Range |  | Weighted Average |  | Range |  | Weighted Average
Level 3 Inputs | Min |  | Max |  |  | Min |  | Max |
MSR(1) |  |  |  |  |  |  |  |  |  |  |
Discount rate | 10.4 | % |  | 13.7 | % |  | 11.3 | % |  | 9.5 | % |  | 13.7 | % |  | 10.9 | %
Prepayment speed | 6.7 | % |  | 14.0 | % |  | 7.7 | % |  | 11.7 | % |  | 16.4 | % |  | 13.0 | %
Cost to service per loan(2) | $ | 58 |  |  | $ | 114 |  |  | $ | 74 |  |  | $ | 59 |  |  | $ | 168 |  |  | $ | 77 |
Average life(3) |  |  |  |  | 7.9 years |  |  |  |  |  | 5.8 years
IRLCs |  |  |  |  |  |  |  |  |  |  |
Value of servicing (reflected as a percentage of loan commitment) | — | % |  | 4.5 | % |  | 1.8 | % |  | (0.7) | % |  | 2.4 | % |  | 1.4 | %
Excess spread financing(1) |  |  |  |  |  |  |  |  |  |  |
Discount rate | 10.0 | % |  | 13.8 | % |  | 11.3 | % |  | 9.5 | % |  | 13.8 | % |  | 11.2 | %
Prepayment speed | 7.4 | % |  | 14.0 | % |  | 9.7 | % |  | 12.8 | % |  | 15.2 | % |  | 13.4 | %
Average life(3) |  |  |  |  | 6.5 years |  |  |  |  |  | 5.4 years
Mortgage servicing rights financing |  |  |  |  |  |  |  |  |  |  |
Advance financing and counterparty fee rates | 4.8 | % |  | 8.5 | % |  | 7.2 | % |  | 4.5 | % |  | 7.9 | % |  | 6.5 | %
Annual advance recovery rates | 17.7 | % |  | 23.4 | % |  | 19.0 | % |  | 19.2 | % |  | 23.0 | % |  | 21.3 | %
(1)The inputs are weighted by investor. (2)Presented in whole dollar amounts. (3)Average life is included for informational purposes. The tables below present a summary of the estimated carrying amount and fair value of the Company’s financial instruments not carried at fair value:
| June 30, 2022
| Carrying Amount |  | Fair Value
Financial Instruments | Level 1 |  | Level 2 |  | Level 3
Financial assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 514 |  |  | $ | 514 |  |  | $ | — |  |  | $ | — |
Restricted cash | 115 |  |  | 115 |  |  | — |  |  | — |
Advances and other receivables, net | 892 |  |  | — |  |  | — |  |  | 892 |
Loans subject to repurchase from Ginnie Mae | 1,400 |  |  | — |  |  | 1,400 |  |  | — |
Financial liabilities |  |  |  |  |  |  |
Unsecured senior notes, net | 2,672 |  |  | 2,152 |  |  | — |  |  | — |
Advance and warehouse facilities, net | 3,407 |  |  | — |  |  | 3,412 |  |  | — |
Liability for loans subject to repurchase from Ginnie Mae | 1,400 |  |  | — |  |  | 1,400 |  |  | — |
| December 31, 2021
| Carrying Amount |  | Fair Value
Financial Instruments | Level 1 |  | Level 2 |  | Level 3
Financial assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 895 |  |  | $ | 895 |  |  | $ | — |  |  | $ | — |
Restricted cash | 146 |  |  | 146 |  |  | — |  |  | — |
Advances and other receivables, net | 1,228 |  |  | — |  |  | — |  |  | 1,228 |
Loans subject to repurchase from Ginnie Mae | 1,496 |  |  | — |  |  | 1,496 |  |  | — |
Financial liabilities |  |  |  |  |  |  |
Unsecured senior notes, net | 2,670 |  |  | 2,737 |  |  | — |  |  | — |
Advance and warehouse facilities, net | 4,997 |  |  | — |  |  | 5,009 |  |  | — |
Liability for loans subject to repurchase from Ginnie Mae | 1,496 |  |  | — |  |  | 1,496 |  |  | — |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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