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FAIR VALUE | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
FAIR VALUE | FAIR VALUE The Company's consolidated financial statements include assets and liabilities that are measured based on their estimated fair values. Refer to Note 1 - Description of Business, Presentation and Summary of Significant Accounting Policies in the 2020 Form 10-K for information on the fair value hierarchy, valuation methodologies, and key inputs used to measure financial assets and liabilities recorded at fair value, as well as methods and assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis. The following tables present the carrying amount and estimated fair value of financial instruments included in the consolidated financial statements.
|  | September 30, 2021
|  | Carrying Amount |  | Estimated Fair Value
|  |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 506,608 |  |  | $ | 506,608 |  |  | $ | — |  |  | $ | — |
Restricted cash |  | 97,805 |  |  | 97,805 |  |  | — |  |  | — |
Loans held for sale, at fair value |  | 8,873,736 |  |  | — |  |  | 8,873,736 |  |  | — |
Derivative assets, at fair value |  | 341,359 |  |  | — |  |  | 75,241 |  |  | 266,118 |
Servicing rights, at fair value |  | 1,841,512 |  |  | — |  |  | — |  |  | 1,841,512 |
Trading securities |  | 56,412 |  |  | — |  |  | 56,412 |  |  | — |
Loans eligible for repurchase |  | 632,722 |  |  | — |  |  | 632,722 |  |  | — |
Liabilities |  |  |  |  |  |  |  |
Warehouse and other lines of credit |  | $ | 8,212,142 |  |  | $ | — |  |  | $ | 8,212,142 |  |  | $ | — |
Derivative liabilities, at fair value |  | 48,899 |  |  | 41,952 |  |  | 39 |  |  | 6,908 |
Servicing rights, at fair value(1) |  | 4,818 |  |  | — |  |  | — |  |  | 4,818 |
Debt obligations: |  |  |  |  |  |  |  |
Secured credit facilities |  | 99,707 |  |  | — |  |  | 99,707 |  |  | — |
2020-VF1 Notes |  | 10,382 |  |  | — |  |  | 10,382 |  |  | — |
GMSR VFN |  | 15,000 |  |  | — |  |  | 15,000 |  |  | — |
Term notes |  | 199,008 |  |  | — |  |  | 200,000 |  |  | — |
Senior notes |  | 1,084,654 |  |  | — |  |  | 1,066,278 |  |  | — |
Liability for loans eligible for repurchase |  | 632,722 |  |  | — |  |  | 632,722 |  |  | — |
(1)Included in accounts payable and accrued expenses on the consolidated balance sheets.
|  | December 31, 2020
|  | Carrying Amount |  | Estimated Fair Value
|  |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 284,224 |  |  | $ | 284,224 |  |  | $ | — |  |  | $ | — |
Restricted cash |  | 204,465 |  |  | 204,465 |  |  | — |  |  | — |
Loans held for sale, at fair value |  | 6,955,424 |  |  | — |  |  | 6,955,424 |  |  | — |
Derivative assets, at fair value |  | 647,939 |  |  | 483 |  |  | 107 |  |  | 647,349 |
Servicing rights, at fair value |  | 1,127,866 |  |  | — |  |  | — |  |  | 1,127,866 |
Loans eligible for repurchase |  | 1,246,158 |  |  | — |  |  | 1,246,158 |  |  | — |
Liabilities |  |  |  |  |  |  |  |
Warehouse and other lines of credit |  | $ | 6,577,429 |  |  | $ | — |  |  | $ | 6,577,429 |  |  | $ | — |
Derivative liabilities, at fair value |  | 168,169 |  |  | 4,299 |  |  | 163,566 |  |  | 304 |
Servicing rights, at fair value (1) |  | 3,564 |  |  | — |  |  | — |  |  | 3,564 |
Debt obligations: |  |  |  |  |  |  |  |
2020-VF1 Notes |  | 7,571 |  |  | — |  |  | 8,593 |  |  |
GMSR VFN |  | 15,000 |  |  | — |  |  | 15,000 |  |  | — |
Term notes |  | 198,640 |  |  | — |  |  | 200,000 |  |  | — |
Senior notes |  | 491,255 |  |  | — |  |  | 518,245 |  |  | — |
Liability for loans eligible for repurchase |  | 1,246,158 |  |  | — |  |  | 1,246,158 |  |  | — |
(1)Included in accounts payable and accrued expenses on the consolidated balance sheets. Financial Statement Items Measured at Fair Value on a Recurring Basis The following tables presents the Company’s assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy as of the dates indicated.
|  | September 30, 2021
|  | Recurring Fair Value Measurements of Assets (Liabilities) Using:
|  | Quoted Market Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value Measurements
Fair value through net income: |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |
Loans held for sale |  | $ | — |  |  | $ | 8,873,736 |  |  | $ | — |  |  | $ | 8,873,736 |
Trading securities |  | — |  |  | 56,412 |  |  | — |  |  | 56,412 |
Derivative assets: |  |  |  |  |  |  |  |
Interest rate lock commitments |  | — |  |  | — |  |  | 266,118 |  |  | 266,118 |
Forward sales contracts |  | — |  |  | 75,241 |  |  | — |  |  | 75,241 |
Servicing rights |  | — |  |  | — |  |  | 1,841,512 |  |  | 1,841,512 |
Total assets at fair value |  | $ | — |  |  | $ | 9,005,389 |  |  | $ | 2,107,630 |  |  | $ | 11,113,019 |
Liabilities: |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |
Interest rate lock commitments |  | $ | — |  |  | $ | — |  |  | $ | 6,908 |  |  | $ | 6,908 |
Interest rate swap futures |  | 31,063 |  |  | — |  |  | — |  |  | 31,063 |
Forward sales contracts |  | — |  |  | 39 |  |  | — |  |  | 39 |
Put options on treasuries |  | 10,889 |  |  | — |  |  | — |  |  | 10,889 |
Servicing rights(1) |  | — |  |  | — |  |  | 4,818 |  |  | 4,818 |
Total liabilities at fair value |  | $ | 41,952 |  |  | $ | 39 |  |  | $ | 11,726 |  |  | $ | 53,717 |
(1)Included in accounts payable and accrued expenses on the consolidated balance sheets.
|  | December 31, 2020
|  | Recurring Fair Value Measurements of Assets (Liabilities) Using:
|  | Quoted Market Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value Measurements
Fair value through net income: |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |
Loans held for sale |  | $ | — |  |  | $ | 6,955,424 |  |  | $ | — |  |  | $ | 6,955,424 |
Derivative assets: |  |  |  |  |  |  |  |
Interest rate lock commitments |  | — |  |  | — |  |  | 647,349 |  |  | 647,349 |
Forward sales contracts |  | — |  |  | 107 |  |  | — |  |  | 107 |
Interest rate swap futures |  | 483 |  |  | — |  |  | — |  |  | 483 |
Servicing rights |  | — |  |  | — |  |  | 1,127,866 |  |  | 1,127,866 |
Total assets at fair value |  | $ | 483 |  |  | $ | 6,955,531 |  |  | $ | 1,775,215 |  |  | $ | 8,731,229 |
Liabilities: |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |
Interest rate lock commitments |  | $ | — |  |  | $ | — |  |  | $ | 304 |  |  | $ | 304 |
Forward sales contracts |  | — |  |  | 163,566 |  |  | — |  |  | 163,566 |
Put options on treasuries |  | 4,299 |  |  | — |  |  | — |  |  | 4,299 |
Servicing rights (1) |  | — |  |  | — |  |  | 3,564 |  |  | 3,564 |
Total liabilities at fair value |  | $ | 4,299 |  |  | $ | 163,566 |  |  | $ | 3,868 |  |  | $ | 171,733 |
(1)Included in accounts payable and accrued expenses on the consolidated balance sheets. The following presents the changes in the Company’s assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
|  | Three Months Ended September 30, 2021 |  | Nine Months Ended September 30, 2021
|  | Interest Rate Lock Commitments(1) |  | Servicing Rights, net(2) |  |  | Interest Rate Lock Commitments(1) |  | Servicing Rights, net(2) |  |
Balance at beginning of period |  | $ | 333,081 |  |  | $ | 1,776,395 |  |  |  | $ | 647,045 |  |  | $ | 1,124,302 |  |  |
Total net gains included in earnings (realized and unrealized) |  | 640,372 |  |  | 233,166 |  |  |  | 1,749,343 |  |  | 1,079,525 |  |  |
Sales and settlements |  |  |  |  |  |  |  |  |  |  |
Sales |  | — |  |  | (172,867) |  |  |  | — |  |  | (367,133) |  |  |
Settlements (3) |  | (558,918) |  |  | — |  |  |  | (1,585,368) |  |  | — |  |  |
Transfers of IRLCs to closed loans |  | (155,325) |  |  | — |  |  |  | (551,810) |  |  | — |  |  |
Balance at end of period |  | $ | 259,210 |  |  | $ | 1,836,694 |  |  |  | $ | 259,210 |  |  | $ | 1,836,694 |  |  |
(1)Interest rate lock commitments include both assets and liabilities and are shown net. (2)Balance is net of $4.8 million servicing liability at September 30, 2021. (3)Funded amount for interest rate lock commitments.
|  | Three Months Ended September 30, 2020 |  | Nine Months Ended September 30, 2020
|  | Interest Rate Lock Commitments(1) |  | Servicing Rights, net(2) |  | Contingent Consideration |  | Interest Rate Lock Commitments(1) |  | Servicing Rights, net (2) |  | Contingent Consideration
Balance at beginning of period |  | $ | 519,514 |  |  | $ | 569,927 |  |  | $ | (13,169) |  |  | $ | 128,208 |  |  | $ | 444,443 |  |  | $ | (2,374) |
Total net gains (losses) included in earnings (realized and unrealized) |  | 1,180,734 |  |  | 206,407 |  |  | (19,670) |  |  | 2,635,861 |  |  | 339,096 |  |  | (32,650) |
Sales and settlements |  |  |  |  |  |  |  |  |  |  |  |
Sales |  | — |  |  | 659 |  |  | — |  |  | — |  |  | (6,546) |  |  | — |
Settlements (3) |  | (767,645) |  |  | — |  |  | 11,083 |  |  | (1,580,842) |  |  | — |  |  | 13,268 |
Transfers of IRLCs to closed loans |  | (210,945) |  |  | — |  |  | — |  |  | (461,569) |  |  | — |  |  | — |
Balance at end of period |  | $ | 721,658 |  |  | $ | 776,993 |  |  | $ | (21,756) |  |  | $ | 721,658 |  |  | $ | 776,993 |  |  | $ | (21,756) |
(1)Interest rate lock commitments include both assets and liabilities and are shown net. (2)Balance is net of $3.5 million servicing rights liability at September 30, 2020. (3)Settlements refer to the funded amount for interest rate lock commitments, and the payment amount for contingent consideration. The following presents the gains and losses included in earnings for the three and nine months ended September 30, 2021 and 2020 relating to the Company’s assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
|  | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021
|  | Interest Rate Lock Commitments(1) |  | Servicing Rights, net(2) |  |  | Interest Rate Lock Commitments(1) |  | Servicing Rights, net(3) |
Total net (losses) gains included in earnings |  | $ | (73,871) |  |  | $ | 233,166 |  |  |  | $ | (387,835) |  |  | $ | 1,079,525 |  |
Change in unrealized gains relating to assets and liabilities still held at period end |  | $ | 259,210 |  |  | $ | 326,527 |  |  |  | $ | 259,210 |  |  | $ | 1,126,433 |  |
(1)(Losses) included in gain on origination and sale of loans, net. (2)Includes $345.9 million in gains included in gain on origination and sale of loans, net and $112.7 million of losses included in change in fair value of servicing rights, net, for the three months ended September 30, 2021. (3)Includes $1.3 billion in gains included in gain on origination and sale of loans, net and $223.4 million of losses included in change in fair value of servicing rights, net, for the nine months ended September 30, 2021
|  | Three Months Ended September 30, 2020 |  | Nine Months Ended September 30, 2020
|  | Interest Rate Lock Commitments(1) |  | Servicing Rights, net(2) |  | Contingent Consideration(4) |  | Interest Rate Lock Commitments(1) |  | Servicing Rights, net(3) |  | Contingent Consideration(4)
Total net gains (losses) included in earnings |  | $ | 202,144 |  |  | $ | 206,407 |  |  | $ | (19,670) |  |  | $ | 593,450 |  |  | $ | 339,096 |  |  | $ | (32,650) |
Change in unrealized gains (losses) relating to assets and liabilities still held at period end |  | $ | 721,658 |  |  | $ | 254,130 |  |  | $ | (19,670) |  |  | $ | 721,658 |  |  | $ | 457,478 |  |  | $ | (32,650) |
(1)Gains included in gain on origination and sale of loans, net. (2)Includes $262.4 million in gains included in gain on origination and sale of loans, net and $56.0 million in losses included in change in fair value of servicing rights, net, for the three months ended September 30, 2020. (3)Includes $574.8 million in gains included in gain on origination and sale of loans, net and $235.7 million in losses included in change in fair value of servicing rights, net, for the nine months ended September 30, 2020 (4)Losses included in general and administrative expense. The following table presents quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring basis:
|  | September 30, 2021 |  | December 31, 2020
Unobservable Input |  | Range of inputs |  | Weighted Average |  | Range of inputs |  | Weighted Average
IRLCs: |  |  |  |  |  |  |  |  |  |  |  |
Pull-through rate |  | 3.0% | - | 99.9% |  | 76.1% |  | 2.8% | - | 99.9% |  | 70.5%
Servicing rights |  |  |  |  |  |  |  |  |  |  |  |
Discount rate(1) |  | 4.7% | - | 9.1% |  | 6.0% |  | 5.0% | - | 10.0% |  | 6.2%
Prepayment rate(1) |  | 8.6% | - | 19.0% |  | 10.1% |  | 13.4% | - | 34.8% |  | 14.0%
Cost to service (per loan) |  | $70 | - | $126 |  | $84 |  | $71 | - | $139 |  | $89
(1)The Company estimates the fair value of MSRs using an option-adjusted spread (“OAS”) model, which projects MSR cash flows over multiple interest rate scenarios in conjunction with the Company’s prepayment model, and then discounts these cash flows at risk-adjusted rates. Financial Statement Items Measured at Fair Value on a Nonrecurring Basis The Company did not have any material assets or liabilities that were recorded at fair value on a non-recurring basis as of September 30, 2021 or December 31, 2020. Financial Statement Items Measured at Amortized Cost Warehouse lines - The Company’s warehouse lines of credit bear interest at a rate that is periodically adjusted based on a market index. The carrying value of warehouse lines of credit approximates fair value. Debt obligations, net - Debt consists of secured credit facilities, term notes, and senior notes. The Company’s secured credit facilities and term notes accrue interest at a stated rate of 30-day or 90-day LIBOR, or other alternative base rate such as SOFR, plus a margin, they are highly liquid and short-term in nature and as a result, their carrying value approximated fair value as of September 30, 2021 and December 31, 2020. Fair value of the Company’s Senior Notes issued in October 2020 and March 2021 were estimated using the quoted market prices at September 30, 2021. The Senior Notes are classified as Level 2 in the fair value hierarchy.

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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 http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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