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Derivative Financial Instruments | 12 Months Ended
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Dec. 31, 2014
Derivative Financial Instruments | Note 10. Derivative Financial Instruments The following table presents the fair value and notional amount of derivative financial instruments held by us at December 31, 2014 and 2013.
|  | December 31, 2014 |  |  | December 31, 2013 |
(In Thousands) |  | Fair Value |  |  | Notional Amount |  |  | Fair Value |  |  | Notional Amount |
Assets - Cash Flow Hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Assets - Risk Management Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | — |  |  | $ | — |  |  | $ | 5,972 |  |  | $ | 268,000 |
TBAs |  |  | 6,654 |  |  |  | 1,074,000 |  |  |  | 1,138 |  |  |  | 241,000 |
Futures |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Swaptions |  |  | 7,006 |  |  |  | 575,000 |  |  |  | 595 |  |  |  | 340,000 |
Credit default index swaps |  |  | 1,597 |  |  |  | 50,000 |  |  |  | — |  |  |  | — |
Assets - Other Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loan purchase commitments |  |  | 1,160 |  |  |  | 288,467 |  |  |  | — |  |  |  | 360 |
Loan forward sale commitments |  |  | — |  |  |  | — |  |  |  | 81 |  |  |  | 10,000 |
Total Assets |  | $ | 16,417 |  |  | $ | 1,987,467 |  |  | $ | 7,786 |  |  | $ | 859,360 |
Liabilities - Cash Flow Hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | (46,845 | ) |  | $ | 139,500 |  |  | $ | (16,519 | ) |  | $ | 139,500 |
Liabilities - Risk Management Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | (1,328 | ) |  |  | 206,000 |  |  |  | (80 | ) |  |  | 50,500 |
TBAs |  |  | (9,506 | ) |  |  | 1,110,000 |  |  |  | (661 | ) |  |  | 235,000 |
Futures |  |  | (372 | ) |  |  | 90,000 |  |  |  | (528 | ) |  |  | 162,000 |
Liabilities - Other Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loan purchase commitments |  |  | (41 | ) |  |  | 27,324 |  |  |  | (379 | ) |  |  | 42,562 |
Loan forward sale commitments |  |  | (239 | ) |  |  | 102,793 |  |  |  | — |  |  |  | — |
Total Liabilities |  | $ | (58,331 | ) |  | $ | 1,675,617 |  |  | $ | (18,167 | ) |  | $ | 629,562 |
Total Derivative Financial Instruments, Net |  | $ | (41,914 | ) |  | $ | 3,663,084 |  |  | $ | (10,381 | ) |  | $ | 1,488,922 |
Risk Management Derivatives To manage, to varying degrees, risks associated with certain assets and liabilities on our consolidated balance sheets, we may enter into derivative contracts. At December 31, 2014, we were party to interest rate agreements with an aggregate notional amount of $920 million, TBA contracts sold with an aggregate notional amount of $2.2 billion and financial futures contracts with an aggregate notional amount of $90 million. Net market valuation adjustments on risk management derivatives related to unsecuritized loans we own or plan to acquire were negative $31 million, positive $51 million, and negative $11 million for the years ended December 31, 2014, 2013, and 2012, respectively. Net market valuation adjustments on risk management derivatives related to other investments, including MSR’s and certain real estate securities, were negative $7.8 million, positive $0.2 million, and negative $12.6 million for the years ending December 31, 2104, 2013, and 2012 respectively. Loan Purchase and Forward Sale Commitments LPCs and FSCs that qualify as derivatives are recorded at their estimated fair values. Net valuation adjustments on LPCs and FSCs were positive $14 million and negative $1 million for the years ended December 31, 2014 and 2013, respectively, and are reported on our consolidated statements of income in mortgage banking activities. Derivatives Designated as Cash Flow Hedges To manage the variability in interest expense related to our long-term debt and certain adjustable-rate securitization entity liabilities that are included in our consolidated balance sheets for financial reporting purposes, we designated certain interest rate swaps as cash flow hedges with an aggregate notional balance of $140 million. For the years December 31, 2014, 2013, and 2012, these cash flow hedges changed in value by negative $30 million, positive $32 million, and positive $4 million, respectively, which was recorded in accumulated other comprehensive income, a component of equity. For interest rate agreements currently or previously designated as cash flow hedges, our total unrealized loss reported in accumulated other comprehensive income was $30 million and $16 million at December 31, 2014 and 2013, respectively. For the years ended December 31, 2014, 2013, and 2012, we reclassified less than $1 million, less than $1 million, and $15 million, respectively, of unrealized losses on derivatives to interest expense. Concurrent with the derecognition of Acacia assets and liabilities in 2012, we accelerated our amortization of net unrealized losses on interest rate agreements and recognized interest expense of $11 million. Accumulated other comprehensive loss of less than $1 million will be amortized into interest expense, a component of our consolidated statements of income, over the remaining life of the hedged liabilities. The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the years ended December 31, 2014, 2013, and 2012. Impact on Interest Expense of Our Interest Rate Agreements Accounted for as Cash Flow Hedges
|  | Year Ended December 31, |
(In Thousands) |  | 2014 |  |  | 2013 |  |  | 2012 |
Net interest expense on cash interest rate agreements |  | $ | (5,951 | ) |  | $ | (5,889 | ) |  | $ | (5,805 | )
Realized expense due to ineffective portion of cash flow hedges |  |  | — |  |  |  | — |  |  |  | (34 | )
Realized net losses reclassified from other comprehensive income |  |  | (164 | ) |  |  | (281 | ) |  |  | (14,820 | )
Total Interest Expense |  | $ | (6,115 | ) |  | $ | (6,170 | ) |  | $ | (20,659 | )
Derivative Counterparty Credit Risk We incur credit risk to the extent that counterparties to our derivative financial instruments do not perform their obligations under specified contractual agreements. If a derivative counterparty does not perform, we may not receive the proceeds to which we may be entitled under these agreements. Each of our derivative counterparties that is not a clearinghouse must maintain compliance with International Swaps and Derivatives Association (“ISDA”) agreements or other similar agreements (or receive a waiver of non-compliance after a specific assessment) in order to conduct derivative transactions with us. Additionally, we review non-clearinghouse derivative counterparty credit standings, and in the case of a deterioration of creditworthiness, appropriate remedial action is taken. To further mitigate counterparty risk, we exit derivatives contracts with counterparties that (i) do not maintain compliance with (or obtain a waiver from) the terms of their ISDA or other agreements with us; or (ii) do not meet internally established guidelines regarding creditworthiness. Our ISDA and similar agreements currently require full bilateral collateralization of unrealized loss exposures with our derivative counterparties. Through a margin posting process, our positions are revalued with counterparties each business day and cash margin is generally transferred to either us or our derivative counterparties as collateral based upon the directional changes in fair value of the positions. We also attempt to transact with several different counterparties in order to reduce our specific counterparty exposure. With respect to certain of our derivatives, clearing and settlement is through one or more clearinghouses, which may be substituted as a counterparty. Clearing and settlement of derivative transactions through a clearinghouse is also intended to reduce specific counterparty exposure. We consider counterparty risk as part of our fair value assessments of all derivative financial instruments. At December 31, 2014, we assessed this risk as remote and did not record a specific valuation adjustment. At December 31, 2014, we had outstanding derivative agreements with six counterparties (other than clearinghouses) and were in compliance with ISDA agreements governing our open derivative positions.

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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 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5618551-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624181-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624163-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708773-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624177-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579245-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579240-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41641-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624171-113959 + Details
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