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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments The following table presents the fair value and notional amount of our derivative financial instruments at September 30, 2015 and December 31, 2014. Table 10.1 – Fair Value and Notional Amount of Derivative Financial Instruments
|  | September 30, 2015 |  | December 31, 2014
|  | Fair Value |  | Notional Amount |  | Fair Value |  | Notional Amount
(In Thousands) |  |  |  |
Assets - Risk Management Derivatives |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 4,351 |  |  | $ | 475,000 |  |  | $ | — |  |  | $ | — |
TBAs |  | 8,910 |  |  | 1,460,500 |  |  | 6,654 |  |  | 1,074,000 |
Swaptions |  | 12,437 |  |  | 925,000 |  |  | 7,006 |  |  | 575,000 |
Credit default index swaps |  | 2,792 |  |  | 50,000 |  |  | 1,597 |  |  | 50,000 |
Assets - Other Derivatives |  |  |  |  |  |  |  |
Loan purchase commitments |  | 10,133 |  |  | 1,338,694 |  |  | 1,160 |  |  | 288,467 |
Total Assets |  | $ | 38,623 |  |  | $ | 4,249,194 |  |  | $ | 16,417 |  |  | $ | 1,987,467 |
Liabilities - Cash Flow Hedges |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | (51,853 | ) |  | $ | 139,500 |  |  | $ | (46,845 | ) |  | $ | 139,500 |
Liabilities - Risk Management Derivatives |  |  |  |  |  |  |  |
Interest rate swaps |  | (20,562 | ) |  | 1,009,500 |  |  | (1,328 | ) |  | 206,000 |
TBAs |  | (14,994 | ) |  | 1,915,000 |  |  | (9,506 | ) |  | 1,110,000 |
Futures |  | (188 | ) |  | 36,000 |  |  | (372 | ) |  | 90,000 |
Liabilities - Other Derivatives |  |  |  |  |  |  |  |
Loan purchase commitments |  | (447 | ) |  | 189,289 |  |  | (41 | ) |  | 27,324 |
Loan forward sale commitments |  | — |  |  | — |  |  | (239 | ) |  | 102,793 |
Total Liabilities |  | $ | (88,044 | ) |  | $ | 3,289,289 |  |  | $ | (58,331 | ) |  | $ | 1,675,617 |
Total Derivative Financial Instruments, Net |  | $ | (49,421 | ) |  | $ | 7,538,483 |  |  | $ | (41,914 | ) |  | $ | 3,663,084 |
Risk Management Derivatives To manage, to varying degrees, risks associated with certain assets and liabilities on our consolidated balance sheet, we may enter into derivative contracts. At September 30, 2015, we were party to swaps and swaptions with an aggregate notional amount of $2.41 billion, TBA contracts sold with an aggregate notional amount of $3.38 billion, and financial futures contracts with an aggregate notional amount of $36 million. At December 31, 2014, we were party to swaps and swaptions with an aggregate notional amount of $920 million, TBA contracts sold with an aggregate notional amount of $2.18 billion, and financial futures contracts with an aggregate notional amount of $90 million. Net market valuation adjustments on risk management derivatives were negative $29 million and negative $58 million for the three and nine months ended September 30, 2015, respectively. Net market valuation adjustments on risk management derivatives were negative $4 million and negative $29 million for the three and nine months ended September 30, 2014, respectively. These net market valuation adjustments are recorded in mortgage banking and investment activities, net and MSR income (loss), net on our consolidated statements of income. 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 $25 million and positive $44 million for the three and nine months ended September 30, 2015, respectively, and are recorded in mortgage banking and investment activities, net on our consolidated statements of income. 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 three months ended September 30, 2015 and 2014, changes in the values of designated cash flow hedges were negative $12 million and negative $3 million, respectively, and were recorded in accumulated other comprehensive income, a component of equity. For the nine months ended September 30, 2015 and 2014, changes in the values of designated cash flow hedges were negative $5 million and negative $17 million, respectively. For interest rate agreements currently or previously designated as cash flow hedges, our total unrealized loss reported in accumulated other comprehensive income was $51 million and $46 million at September 30, 2015 and December 31, 2014, respectively. For both the three and nine months ended September 30, 2015 and 2014, we reclassified less than $1 million of unrealized losses on derivatives to interest expense. Accumulated other comprehensive loss of less than $1 million will be amortized into interest expense, a component of our consolidated income statements, over the remaining life of the hedge liabilities. The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the three and nine months ended September 30, 2015 and 2014. Table 10.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Net interest expense on cash flows hedges |  | $ | (1,466 | ) |  | $ | (1,487 | ) |  | $ | (4,425 | ) |  | $ | (4,465 | )
Realized expense due to ineffective portion of cash flow hedges |  | — |  |  | — |  |  | — |  |  | — |
Realized net losses reclassified from other comprehensive income |  | (19 | ) |  | (32 | ) |  | (77 | ) |  | (131 | )
Total Interest Expense |  | $ | (1,485 | ) |  | $ | (1,519 | ) |  | $ | (4,502 | ) |  | $ | (4,596 | )
Derivative Counterparty Credit Risk As discussed in our Annual Report on Form 10-K for the year ended December 31, 2014, we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At September 30, 2015, we assessed this risk as remote and did not record a specific valuation adjustment. At September 30, 2015, we had outstanding derivative agreements with eight counterparties (other than clearinghouses) and were in compliance with ISDA agreements governing our open derivative positions.

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