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Fair Value Disclosures | 12 Months Ended
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Oct. 31, 2014
Fair Value Disclosures [Abstract] |
Fair Value Disclosures | Fair Value Disclosures Financial Instruments A summary of assets and (liabilities) at October 31, 2014 and 2013, related to our financial instruments, measured at fair value on a recurring basis, is set forth below (amounts in thousands):
|  |  |  | Fair value
Financial Instrument |  | Fair value hierarchy |  | October 31, 2014 |  | October 31, 2013
Corporate Securities |  | Level 2 |  | $ | 12,026 |  |  | $ | 52,508 |
Residential Mortgage Loans Held for Sale |  | Level 2 |  | $ | 101,944 |  |  | $ | 113,517 |
Forward Loan Commitments – Residential Mortgage Loans Held for Sale |  | Level 2 |  | $ | (341 | ) |  | $ | (496 | )
Interest Rate Lock Commitments (“IRLCs”) |  | Level 2 |  | $ | (108 | ) |  | $ | (181 | )
Forward Loan Commitments – IRLCs |  | Level 2 |  | $ | 108 |  |  | $ | 181 |
At October 31, 2014 and 2013, the carrying value of cash and cash equivalents and restricted cash approximated fair value. Mortgage Loans Held for Sale At the end of the reporting period, we determine the fair value of our mortgage loans held for sale and the forward loan commitments we have entered into as a hedge against the interest rate risk of our mortgage loans using the market approach to determine fair value. The evaluation is based on the current market pricing of mortgage loans with similar terms and values as of the reporting date, and such pricing is applied to the mortgage loan portfolio. We recognize the difference between the fair value and the unpaid principal balance of mortgage loans held for sale as a gain or loss. In addition, we recognize the fair value of our forward loan commitments as a gain or loss. These gains and losses are included in “Other income - net.” Interest income on mortgage loans held for sale is calculated based upon the stated interest rate of each loan and is included in “Other income - net.” The table below provides, for the periods indicated, the aggregate unpaid principal and fair value of mortgage loans held for sale as of the date indicated (amounts in thousands):
| Aggregate unpaid principal balance |  | Fair value |  | Excess
At October 31, 2014 | $ | 100,463 |  |  | $ | 101,944 |  |  | $ | 1,481 |
At October 31, 2013 | $ | 111,896 |  |  | $ | 113,517 |  |  | $ | 1,621 |
IRLCs represent individual borrower agreements that commit us to lend at a specified price for a specified period as long as there is no violation of any condition established in the commitment contract. These commitments have varying degrees of interest rate risk. We utilize best-efforts forward loan commitments (“Forward Commitments”) to hedge the interest rate risk of the IRLCs and residential mortgage loans held for sale. Forward Commitments represent contracts with third-party investors for the future delivery of loans whereby we agree to make delivery at a specified future date at a specified price. The IRLCs and Forward Commitments are considered derivative financial instruments under ASC 815, “Derivatives and Hedging,” which requires derivative financial instruments to be recorded at fair value. We estimate the fair value of such commitments based on the estimated fair value of the underlying mortgage loan and, in the case of IRLCs, the probability that the mortgage loan will fund within the terms of the IRLC. The fair values of IRLCs and forward loan commitments are included in either “Receivables, prepaid expenses and other assets” or “Accrued expenses”, as appropriate, in our Consolidated Balance Sheets. To manage the risk of non-performance of investors regarding the Forward Commitments, we assess the creditworthiness of the investors on a periodic basis. Marketable Securities As of October 31, 2014 and 2013, the amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of marketable securities were as follows (amounts in thousands):
| October 31, 2014 |  | October 31, 2013
Amortized cost | $ | 12,028 |  |  | $ | 52,502 |
Gross unrealized holding gains | 1 |  |  | 71 |
Gross unrealized holding losses | (3 | ) |  | (65 | )
Fair value | $ | 12,026 |  |  | $ | 52,508 |
The estimated fair values of corporate securities are based on quoted prices provided by brokers. The remaining contractual maturities of marketable securities as of October 31, 2014, ranged from 1 month to 13 months. Inventory We recognize inventory impairment charges based on the difference in the carrying value of the inventory and its fair value at the time of the evaluation. The fair value of the aforementioned inventory was determined using Level 3 criteria. Estimated fair value is primarily determined by discounting the estimated future cash flow of each community. See Note 1, “Significant Accounting Policies - Inventory,” for additional information regarding our methodology on determining fair value. As further discussed in Note 1, determining the fair value of a community’s inventory involves a number of variables, many of which are interrelated. If we used a different input for any of the various unobservable inputs used in our impairment analysis, the results of the analysis may have been different, absent any other changes. The table below summarizes, for the periods indicated, the ranges of certain quantitative unobservable inputs utilized in determining the fair value of impaired communities:
| Selling price per unit (in thousands) |  | Sales pace per year (in units) |  | Discount rate
Three months ended October 31, 2014 | $337 - $902 |  | 7 - 23 |  | 12.5% - 16.5%
Three months ended July 31, 2014 | $698 - $1,233 |  | 10 - 22 |  | 15.9%
Three months ended April 30, 2014 | $634 - $760 |  | 4 - 7 |  | 12.0% - 15.3%
Three months ended January 31, 2014 | $388 - $405 |  | 21 - 23 |  | 16.6%
Three months ended October 31, 2013 | $315 - $362 |  | 2 - 7 |  | 15.0%
Three months ended July 31, 2013 | $475 - $500 |  | 2 |  | 15.0%
Three months ended April 30, 2013 | — |  | — |  | —%
Three months ended January 31, 2013 | $303 - $307 |  | 15 |  | 15.3%
The table below provides, for the periods indicated, the fair value of operating communities whose carrying value was adjusted and the amount of impairment charges recognized on operating communities ($ amounts in thousands):
|  |  |  | Impaired operating communities
Three months ended: |  | Number of communities tested |  | Number of communities |  | Fair value of communities, net of impairment charges |  | Impairment charges recognized
Fiscal 2014: |  |  |  |  |  |  |  |
January 31 |  | 67 |  |  | 1 |  |  | $ | 7,131 |  |  | $ | 1,300 |
April 30 |  | 65 |  |  | 2 |  |  | $ | 6,211 |  |  | 1,600 |
July 31 |  | 63 |  |  | 1 |  |  | $ | 14,122 |  |  | 4,800 |
October 31 |  | 55 |  |  | 7 |  |  | $ | 38,473 |  |  | 9,855 |
|  |  |  |  |  |  |  | $ | 17,555 |
Fiscal 2013: |  |  |  |  |  |  |  |
January 31 |  | 60 |  |  | 2 |  |  | $ | 5,377 |  |  | $ | 700 |
April 30 |  | 79 |  |  | 1 |  |  | $ | 749 |  |  | 340 |
July 31 |  | 76 |  |  | 1 |  |  | $ | 191 |  |  | 100 |
October 31 |  | 63 |  |  | 2 |  |  | $ | 6,798 |  |  | 2,200 |
|  |  |  |  |  |  |  | $ | 3,340 |
Fiscal 2012: |  |  |  |  |  |  |  |
January 31 |  | 113 |  |  | 8 |  |  | $ | 49,758 |  |  | $ | 6,425 |
April 30 |  | 115 |  |  | 2 |  |  | $ | 22,962 |  |  | 2,560 |
July 31 |  | 115 |  |  | 4 |  |  | $ | 6,609 |  |  | 2,685 |
October 31 |  | 108 |  |  | 3 |  |  | $ | 9,319 |  |  | 1,400 |
|  |  |  |  |  |  |  | $ | 13,070 |
Investments in Distressed Loans and REO Gibraltar’s distressed loans were recorded at estimated fair value at inception based on the acquisition price as determined by Level 3 inputs and was based on the estimated discounted future cash flows to be generated by the loans discounted at the rates used to value the portfolios at the acquisition dates. The table below provides, as of the dates indicated, the carrying amount and estimated fair value of distressed loans (amounts in thousands):
| October 31, 2014 |  | October 31, 2013
Carrying amount | $ | 4,001 |  |  | $ | 36,374 |
Estimated fair value | $ | 4,001 |  |  | $ | 45,355 |
Gibraltar’s REO was recorded at estimated fair value at the time it was acquired through foreclosure or deed in lieu actions using Level 3 inputs. The valuation techniques used to estimate fair value are third-party appraisals, broker opinions of value, or internal valuation methodologies (which may include discounted cash flows, capitalization rate analysis, or comparable transactional analysis). Unobservable inputs used in estimating the fair value of REO assets are based upon the best information available under the circumstances and take into consideration the financial condition and operating results of the asset, local market conditions, the availability of capital, interest and inflation rates, and other factors deemed appropriate by management. Acquisition of Shapell The purchase price allocation performed in connection with the Acquisition was primarily based on Level 3 inputs. The valuation techniques used to value the assets and liabilities acquired are described in Note 2, “Acquisition”. Acquisition of CamWest The purchase price allocation performed in connection with our acquisition of CamWest was primarily based on Level 3 inputs. The assets acquired were primarily inventory. The valuation techniques used to value this inventory were similar to the criteria used in valuing inventory as described in Note 1, “Significant Accounting Policies - Inventory”. Debt The table below provides, as of the dates indicated, the book value and estimated fair value of our debt at October 31, 2014 and 2013 (amounts in thousands):
|  |  | October 31, 2014 |  | October 31, 2013
| Fair value hierarchy |  | Book value |  | Estimated fair value |  | Book value |  | Estimated fair value
Loans payable (a) | Level 2 |  | $ | 654,261 |  |  | $ | 652,944 |  |  | $ | 107,222 |  |  | $ | 106,988 |
Senior notes (b) | Level 1 |  | 2,657,376 |  |  | 2,821,559 |  |  | 2,325,336 |  |  | 2,458,737 |
Mortgage company loan facility (c) | Level 2 |  | 90,281 |  |  | 90,281 |  |  | 75,000 |  |  | 75,000 |
|  |  | $ | 3,401,918 |  |  | $ | 3,564,784 |  |  | $ | 2,507,558 |  |  | $ | 2,640,725 |
(a) | The estimated fair value of loans payable was based upon contractual cash flows discounted at interest rates that we believed were available to it for loans with similar terms and remaining maturities as of the applicable valuation date.
(b) | The estimated fair value of our senior notes is based upon their indicated market prices.
(c) | We believe that the carrying value of our mortgage company loan borrowings approximates their fair value.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 + Details
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