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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2017
Derivative Financial Instruments |
Derivative Financial Instruments | Note 13 — Derivative Financial Instruments Structured Business. During the first quarter of 2017, our remaining two qualifying LIBOR cap hedges, with a notional value of $55.6 million, and our remaining two qualifying interest rate swap cash flow hedges, with a notional value of $41.5 million, matured. We entered into the LIBOR cap hedges due to certain CLO agreements requiring a LIBOR cap of 2% and 3% and we entered into the interest rate swaps to hedge the variable cash flows associated with existing variable-rate debt. As of September 30, 2017, the Structured Business did not have any derivative financial instruments. At December 31, 2016, the fair value of our LIBOR cap hedges and interest rate swaps was less than $0.1 million and $(0.2) million, respectively. The following table presents the effect of our qualifying derivative financial instruments on the statements of income (dollars in thousands):
|  | Loss Recognized In Other Comprehensive Income (Effective Portion) For the Nine Months Ended September 30, |  | Loss Reclassified from Accumulated Other Comprehensive Income into Interest Expense (Effective Portion) For the Nine Months Ended September 30, |
Derivative |  | 2017 |  | 2016 |  | 2017 |  | 2016 |
Interest Rate Swaps/Cap |  | $ | — |  | $ | 196 |  | $ | (237 | ) | $ | (4,012 | )
As of December 31, 2016, the cumulative amount of other comprehensive income (loss) related to net unrealized losses on derivatives designated as qualifying hedges were de minimis. Agency Business. The following is a summary of our non-qualifying derivative financial instruments:
|  | September 30, 2017 |
|  |  |  |  |  |  |  | Fair Value |
Derivative |  | Count |  | Notional Value |  | Balance Sheet Location |  | Derivative Assets |  | Derivative Liabilities |
Rate Lock Commitments |  | 7 |  | $ | 30,179,000 |  | Other Assets/ Other Liabilities |  | $ | 419,758 |  | $ | (64,378 | )
Forward Sale Commitments |  | 81 |  | 358,712,203 |  | Other Assets/ Other Liabilities |  | 68,989 |  | (1,817,072 | )
|  |  |  | $ | 388,891,203 |  |  |  | $ | 488,747 |  | $ | (1,881,450 | )
|  | December 31, 2016 |
Rate Lock Commitments |  | 12 |  | $ | 156,685,400 |  | Other Assets/ Other Liabilities |  | $ | 2,816,132 |  | $ | (764,429 | )
Forward Sale Commitments |  | 105 |  | 819,033,129 |  | Other Assets/ Other Liabilities |  | 2,798,858 |  | (1,535,150 | )
|  |  |  | $ | 975,718,529 |  |  |  | $ | 5,614,990 |  | $ | (2,299,579 | )
We enter into contractual commitments to originate and sell mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrower “rate locks” a specified interest rate within time frames established by us. All potential borrowers are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the rate lock by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, we enter into a forward sale commitment with the investor simultaneous with the rate lock commitment with the borrower. The forward sale contract locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan into the sale commitment. These commitments meet the definition of a derivative and are recorded at fair value, including the effects of interest rate movements which are reflected as a component of other income, net in the consolidated statements of income. The estimated fair value of rate lock commitments also includes the fair value of the expected net cash flows associated with the servicing of the loan which is recorded as income from MSRs in the consolidated statements of income. During the three and nine months ended September 30, 2017, we recorded net gains of $0.2 million and net losses of $2.3 million, respectively, from changes in the fair value of these derivatives in other income, net and $18.9 million and $56.2 million, respectively, of income from MSRs. During both the three and nine months ended September 30, 2016, we recorded $0.2 million of net gains from changes in the fair value of these derivatives in other income, net and $16.0 million of income from MSRs. See Note 14 — Fair Value for details.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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