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VARIABLE INTEREST ENTITIES | 6 Months Ended
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Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES The determination of whether the assets and liabilities of the VIEs are consolidated or not consolidated in the consolidated balance sheets depends on the terms of the related transaction and the Company’s continuing involvement, if any, with the VIE. The Company is deemed the primary beneficiary and therefore consolidates VIEs for which it has both (a) the power, through voting rights or similar rights, to direct the activities that most significantly impact the VIE's economic performance, and (b) benefits, as defined, from the VIE. The Company determines whether it holds a significant variable interest in a VIE based on a consideration of both qualitative and quantitative factors regarding the nature, size, and form of its involvement with the VIE. The Company assesses whether it is the primary beneficiary of a VIE on an ongoing basis. The Company did not provide any non-contractual financial support to VIEs for the six months ended June 30, 2022 and year ended December 31, 2021. Consolidated VIEs The Company is a holding company, its sole material asset is its equity interest in LD Holdings and as the sole managing member of LD Holdings, the Company indirectly operates and controls all of LD Holdings’ business and affairs. LD Holdings is considered a VIE and the financial results of LD Holdings and its subsidiaries are consolidated. A portion of net earnings or loss is allocated to noncontrolling interest to reflect the entitlement of the Continuing LLC Members. The Company is involved in several types of securitization and financing transactions that utilize special purpose entities (“SPEs”). The Company’s principal use of SPEs is to obtain liquidity by securitizing certain of its financial and non-financial assets. SPEs involved in the Company’s securitization and other financing transactions are often considered VIEs. The Company consolidates securitization facilities that finance mortgage loans held for sale, and SPEs established as trusts to finance mortgage servicing rights and servicing advance receivables. The Company sells assets to a securitization or trust, which issues beneficial interests which are collateralized by the transferred assets and entitle the investors to specified cash flows generated therefrom. The Company may retain beneficial interests in the assets sold. The Company’s economic exposure to loss from outstanding third-party financing is generally limited to the carrying value of the assets financed. The Company has retained risks in the securitizations including customary representations and warranties. For securitization facilities, the Company, as seller, has an option to prepay and to redeem outstanding classes of issued notes at the Company’s discretion after a set time period has elapsed. The Company generally has discretion regarding when or if it will exercise these options, but would do so only when it was in the Company’s best interest. The Company’s exposure to these entities is primarily through its role as seller, servicer, and administrator. Servicing functions include, but are not limited to, general collection activity on current and noncurrent accounts, loss mitigation efforts including repossession and sale of collateral, as well as preparing and furnishing statements. The Company also holds certain conditional repurchase options specific to these securitizations that allow it to repurchase assets from the securitization entity. The Company sells mortgage loans to investors through private label securitizations which are accounted for either as sales or secured borrowings. The Company may retain economic interests in the securitized and sold assets, which are generally retained in the form of senior or subordinated interests, residual interests, and/or servicing rights. The Company evaluates its interests in each private label securitization for classification as a VIE. The Company accounts for a securitization as a sale when it has relinquished control over the transferred financial assets and does not hold other interests in the VIE that individually, or in the aggregate, would absorb more than an insignificant amount of the VIE’s expected losses or receive more than an insignificant amount of the VIE’s expected residual returns. The Company has an option to exercise a cleanup call to purchase the remaining mortgage loans and any trust property when the remaining aggregate principal balance is less than 10% of the initial aggregate principal balance. The table below presents a summary of the carrying value and balance sheet classification of assets and liabilities in the Company’s securitization and SPE VIEs
|  | June 30, 2022 |  | December 31, 2021 |  |
Assets |  |  |  |  |  |
Loans held for sale, at fair value |  | $ | 1,800,968 |  |  | $ | 2,557,490 |  |  |
Restricted cash |  | 67,998 |  |  | 100,494 |  |  |
Servicing rights, at fair value |  | 484,393 |  |  | 400,678 |  |  |
Prepaid expenses and other assets |  | 37,349 |  |  | 17,756 |  |  |
|  | $ | 2,390,708 |  |  | $ | 3,076,418 |  |  |
Liabilities |  |  |  |  |  |
Warehouse and other lines of credit |  | $ | 1,800,000 |  |  | $ | 2,600,000 |  |  |
Debt obligations, net: |  |  |  |  |  |
MSR Facilities |  | 114,711 |  |  | 15,000 |  |  |
Servicing advance facilities |  | 32,739 |  |  | 15,070 |  |  |
Term notes |  | 199,415 |  |  | 199,133 |  |  |
|  | $ | 2,146,865 |  |  | $ | 2,829,203 |  |  |
Non-Consolidated VIEs The nature, purpose, and activities of non-consolidated VIEs currently encompass the Company’s investments in retained interests from securitizations and joint ventures. The table below presents a summary of the nonconsolidated VIEs for which the Company holds variable interests.
|  | June 30, 2022
|  | Carrying value |  | Maximum exposure to loss |  | Total assets in VIEs
|  | Assets |  | Liabilities |  |
Retained interests |  | $ | 105,308 |  |  | $ | — |  |  | $ | 105,308 |  |  | $ | 2,376,297 |
Investments in joint ventures |  | 18,408 |  |  | — |  |  | 18,408 |  |  | 15,061 |
|  | $ | 123,716 |  |  | $ | — |  |  | $ | 123,716 |  |  |
|  | December 31, 2021
|  | Carrying value |  | Maximum exposure to loss |  | Total assets in VIEs
|  | Assets |  | Liabilities |  |
Retained interests |  | $ | 72,874 |  |  | $ | — |  |  | $ | 72,874 |  |  | $ | 1,424,857 |
Investments in joint ventures |  | 18,553 |  |  | — |  |  | 18,553 |  |  | 20,783 |
|  | $ | 91,427 |  |  | $ | — |  |  | $ | 91,427 |  |  |
Retained interests In 2022 and 2021, the Company completed the sale and securitization of non-owner occupied residential mortgage loans. Pursuant to the credit risk retention requirements, the Company, as sponsor, is required to retain at least a 5% economic interest in the credit risk of the assets collateralizing the securitization transactions. The retained interests represent a variable interest in the securitizations. The Company determined it was not the primary beneficiary of the VIE. The Company’s continuing involvement is limited to customary servicing obligations as servicing administrator associated with retained servicing rights and the receipt of principal and interest associated with the retained interests. The investors and the securitization trusts have no recourse to the Company’s assets; holders of the securities issued by each trust can look only to the loans owned by the trust for payment. The retained interests held by the Company are subject principally to the credit risk stemming from the underlying transferred loans. The securitization trusts used to effect these transactions are variable interest entities that the Company does not consolidate. The Company remeasures the carrying value of its retained interests at each reporting date to reflect their current fair value which is included in trading securities, at fair value on the consolidated balance sheets, with corresponding gains or losses included in other income on the consolidated income statements. As of June 30, 2022, the remaining principal balance of loans transferred to these securitization trusts was $2.4 billion of which $0.5 million was 90 days or more past due. Investments in joint ventures The Company’s joint ventures include investments with home builder s, real estate brokers, and commercial real estate companies to provide loan origination services and real estate settlement services to customers referred by the Company’s joint venture partners. The Company is generally not determined to be the primary beneficiary in its joint venture VIEs because it does not have the power, through voting rights or similar rights, to direct the activities that most significantly impact the economic performance of the VIE. The Company’s pro rata share of net earnings of joint ventures was $4.2 million and $6.2 million for the three and six months ended June 30, 2022, respectively, and $2.9 million and $5.1 million for the three and six months ended June 30, 2021, respectively, and is included in other income in the consolidated statements of operations.

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI https://asc.fasb.org/topic&trid=2197479 + Details
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