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Derivative Financial Instruments | 6 Months Ended
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Jun. 30, 2021
Derivative Financial Instruments |
Derivative Financial Instruments | Note 11 — Derivative Financial Instruments ​ We enter into derivative financial instruments to manage exposures that arise from business activities resulting in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. We do not use these derivatives for speculative purposes, but are instead using them to manage our exposure to interest rate risk. ​ Agency Rate Lock and Forward Sale Commitments. 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 under the GSE programs, we enter into a forward sale commitment with the investor simultaneously 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 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 loss on derivative instruments, net in the consolidated statements of operations. 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 operations. During the three and six months ended June 30,2021, we recorded net gains of $9.9 million and $1.2 million, respectively, from changes in the fair value of these derivatives and $26.3 million and $63.2 million, respectively, of income from MSRs. During the three and six months ended June 30, 2020, we recorded a net loss of $4.1 million and a net gain of $4.2 million, respectively, from changes in the fair value of these derivatives and $32.4 million and $54.4 million, respectively, of income from MSRs. The gains and losses are recorded in loss on derivative instruments, net on our consolidated statements of operations. See Note 12 for details. ​ Interest Rate Swap Futures. We enter into over-the-counter interest rate swap futures (“Swap Futures”) to hedge our exposure to changes in interest rates inherent in (1) our Agency Business SFR - fixed rate loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt, and (2) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization. The Swap Futures do not meet the criteria for hedge accounting, typically have a three-month maturity and are tied to the five-year and ten-year swap rates. Our Swap Futures are cleared by a central clearing house and variation margin payments, made in cash, are treated as a legal settlement of the derivative itself as opposed to a pledge of collateral. ​ During the three months ended June 30, 2021, we recorded realized and unrealized losses of $9.4 million and $3.0 million, respectively, to our Agency Business related to our Swap Futures. During the six months ended June 30, 2021, we recorded realized and unrealized losses of $6.5 million and $0.4 million, respectively, to our Agency Business related to our Swap Futures. During the three months ended June 30, 2020, we recorded realized and unrealized losses of $0.2 million and $0.1 million, respectively, to our Structured Business and realized losses of $11.2 million and unrealized gains of $8.2 million to our Agency Business related to our Swap Futures. During the six months ended June 30, 2020, we recorded realized and unrealized losses of $2.8 million and $0.5 million, respectively, to our Structured Business and realized and unrealized losses of $57.3 million and $1.6 million, respectively, to our Agency Business related to our Swap Futures. The realized and unrealized gains and losses are recorded in loss on derivative instruments, net on our consolidated statements of operations. ​ A summary of our non-qualifying derivative financial instruments is as follows ($ in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30, 2021
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Fair Value
​ | ​ | ​ | ​ | Notional | ​ | Balance Sheet | ​ | Derivative | ​ | Derivative
Derivative |  | Count |  | Value |  | Location |  | Assets |  | Liabilities
Agency Business | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Rate Lock Commitments | ​ | 5 | ​ | $ | 16,550 | ​ | Other Assets/Other Liabilities | ​ | $ | 124 | ​ | $ | (127)
Forward Sale Commitments | ​ | 43 | ​ | ​ | 328,069 | ​ | Other Assets/Other Liabilities | ​ | ​ | 2,263 | ​ | ​ | (266)
Swap Futures | ​ | 2,196 | ​ | ​ | 219,600 | ​ | ​ | ​ | ​ | — | ​ | ​ | —
​ | ​ | ​ | ​ | $ | 564,219 | ​ | ​ | ​ | $ | 2,387 | ​ | $ | (393)
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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 2020
Agency Business |  | ​ |  | ​ | ​ |  | ​ |  | ​ | ​ |  | ​ | ​
Rate Lock Commitments | ​ | 7 | ​ | $ | 136,354 | ​ | Other Assets/Other Liabilities | ​ | $ | 1,967 | ​ | $ | (231)
Forward Sale Commitments | ​ | 114 | ​ | ​ | 1,048,763 | ​ | Other Assets/Other Liabilities | ​ | ​ | 1,925 | ​ | ​ | (990)
Swap Futures | ​ | 453 | ​ | ​ | 45,300 | ​ | ​ | ​ | ​ | — | ​ | ​ | —
​ | ​ | ​ | ​ | $ | 1,230,417 | ​ | ​ | ​ | $ | 3,892 | ​ | $ | (1,221)
​

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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