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Risk Management and Fair Value of Financial Instruments (Notes)
 12 Months Ended
Dec. 31, 2021
Risk Management and Fair Value of Financial Instruments [Abstract]  
Risk Management and Fair Value of Financial Instruments RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
RISK MANAGEMENT
The following is a description of the Company’s risk management policies.
Interest Rate Risk
The Company is exposed to market risk from changes in interest rates primarily through senior secured debt. At December 31, 2021, the Company's primary interest rate exposure was to interest rate fluctuations, specifically LIBOR, due to its impact on variable rate borrowings of Revolving Credit Facility under the Senior Secured Credit Facility and the Term Loan A Facility. At December 31, 2021, the Company had variable interest rate long-term debt, which was based on LIBOR, from the outstanding Term Loan A Facility of $232 million, excluding $118 million of securitization obligations.
The Company has interest rate swaps with an aggregate notional value of $1,000 million to manage a portion of the Company's exposure to changes in interest rate associated with variable rate borrowings. The fixed interest rates on the swaps range from 2.07% to 3.11%. Although the Company has entered into these interest rate swaps, involving the exchange of floating for fixed rate interest payments, such interest rate swaps do not eliminate interest rate volatility for all of the Company's variable rate indebtedness at December 31, 2021. In addition, the fair value of the interest rate swaps is also subject to movements in LIBOR and will fluctuate in future periods.  The Company has recognized a liability of $46 million for the fair value of the interest rate swaps at December 31, 2021.  Therefore, an increase in the LIBOR yield curve could increase the fair value of the interest rate swaps and decrease interest expense.
Credit Risk and Exposure
The Company is exposed to counterparty credit risk in the event of nonperformance by counterparties to various agreements and sales transactions. The Company manages such risk by evaluating the financial position and creditworthiness of such counterparties and by requiring collateral in instances in which financing is provided. The Company mitigates counterparty credit risk associated with its derivative contracts by monitoring the amounts at risk with each counterparty to such contracts, periodically evaluating counterparty creditworthiness and financial position, and where possible, dispersing its risk among multiple counterparties.
As of December 31, 2021, there were no significant concentrations of credit risk with any individual counterparty or a group of counterparties. The Company actively monitors the credit risk associated with the Company’s receivables.
Market Risk Exposure
Realogy Brokerage Group operates real estate brokerage offices located in and around large metropolitan areas in the U.S. Realogy Brokerage Group has more offices and realizes more of its revenues in California, Florida and the New York metropolitan area than any other regions of the country. For the year ended December 31, 2021, Realogy Brokerage Group generated approximately 25% of its revenues from California, 21% from the New York metropolitan area and 13% from Florida. For the year ended December 31, 2020, Realogy Brokerage Group generated approximately 24% of its revenues from California, 20% from the New York metropolitan area and 11% from Florida. For the year ended December 31, 2019, Realogy Brokerage Group generated approximately 25% of its revenues from California, 22% from the New York metropolitan area and 10% from Florida.
Derivative Instruments
The Company records derivatives and hedging activities on the balance sheet at their respective fair values. The Company enters into interest rate swaps to manage its exposure to changes in interest rates associated with its variable rate borrowings. As of December 31, 2021, the Company had interest rate swaps with an aggregate notional value of $1,000 million to offset the variability in cash flows resulting from the term loan facilities as follows:
Notional Value (in millions)Commencement DateExpiration Date
$450November 2017November 2022
$400August 2020August 2025
$150November 2022November 2027
The swaps help to protect our outstanding variable rate borrowings from future interest rate volatility. The Company has not elected to utilize hedge accounting for these interest rate swaps; therefore, any change in fair value is recorded in the Consolidated Statements of Operations.
The fair value of derivative instruments was as follows:
Not Designated as Hedging InstrumentsBalance Sheet LocationDecember 31, 2021December 31, 2020
Interest rate swap contractsOther current and non-current liabilities46 81 
The effect of derivative instruments on earnings was as follows:
Derivative Instruments Not
Designated as Hedging Instruments		Location of Loss or (Gain) Recognized for Derivative InstrumentsLoss or (Gain) Recognized on Derivatives
Year Ended December 31,
202120202019
Interest rate swap contractsInterest expense$(14)$51 $39 
Fair Value Measurements
The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.
Level Input:Input Definitions:
Level I
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II
Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III
Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
The availability of observable inputs can vary from asset to asset and is affected by a wide variety of factors including, for example, the type of asset, whether the asset is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level III. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The fair value of financial instruments is generally determined by reference to quoted market values. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques, as appropriate. The fair value of interest rate swaps is determined based upon a discounted cash flow approach.
The Company measures financial instruments at fair value on a recurring basis and recognizes transfers within the fair value hierarchy at the end of the fiscal quarter in which the change in circumstances that caused the transfer occurred.
The following table summarizes fair value measurements by level at December 31, 2021 for assets and liabilities measured at fair value on a recurring basis:
Level ILevel IILevel IIITotal
Deferred compensation plan assets (included in other non-current assets)$1 $— $— $1 
Interest rate swaps (included in other current and non-current liabilities)— 46 — 46 
Contingent consideration for acquisitions (included in accrued expenses and other current liabilities and other non-current liabilities)
— — 9 9 
The following table summarizes fair value measurements by level at December 31, 2020 for assets and liabilities measured at fair value on a recurring basis:
Level ILevel IILevel IIITotal
Deferred compensation plan assets (included in other non-current assets)$1 $— $— $1 
Interest rate swaps (included in other non-current liabilities)— 81 — 81 
Contingent consideration for acquisitions (included in accrued expenses and other current liabilities and other non-current liabilities)
— — 3 3 
The fair value of the Company’s contingent consideration for acquisitions is measured using a probability weighted-average discount rate to estimate future cash flows based upon the likelihood of achieving future operating results for individual acquisitions.  These assumptions are deemed to be unobservable inputs and as such the Company’s contingent consideration is classified within Level III of the valuation hierarchy. The Company reassesses the fair value of the contingent consideration liabilities on a quarterly basis.
The following table presents changes in Level III financial liabilities measured at fair value on a recurring basis:
Level III
Fair value of contingent consideration at December 31, 2020$3 
Additions: contingent consideration related to acquisitions completed during the period7 
Reductions: payments of contingent consideration
(1)
Changes in fair value (reflected in general and administrative expenses)— 
Fair value of contingent consideration at December 31, 2021$9 
The following table summarizes the principal amount of the Company’s indebtedness compared to the estimated fair value, primarily determined by quoted market values, at:
 December 31, 2021December 31, 2020
DebtPrincipal AmountEstimated
Fair Value (a)		Principal AmountEstimated
Fair Value (a)
Senior Secured Credit Facility:
Revolving Credit Facility$— $— $— $— 
Term Loan B Facility— — 1,048 1,032 
Term Loan A Facility232 231 684 671 
7.625% Senior Secured Second Lien Notes
550 583 550 595 
4.875% Senior Notes407 418 407 415 
9.375% Senior Notes550 596 550 609 
5.75% Senior Notes900 923 — — 
0.25% Exchangeable Senior Notes403 399 — — 
_______________
(a)The fair value of the Company's indebtedness is categorized as Level II.