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Note 10 - Mortgage Loans Held for Sale | 6 Months Ended
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Apr. 30, 2025
Mortgage Loans Held for Sale |
Mortgage Loans Held for Sale |
10. | Mortgage Loans Held for Sale
Our wholly owned mortgage banking subsidiary, K. Hovnanian American Mortgage, LLC (“K. Hovnanian Mortgage”), originates mortgage loans, primarily from the sale of our homes. Such mortgage loans are sold in the secondary mortgage market within a short period of time of origination. Mortgage loans held for sale are collateralized by the underlying property. Loans held for sale are recorded at fair value with changes in the value recognized in the Condensed Consolidated Statements of Operations in “Financial services” revenue. We use forward sales of mortgage-backed securities (“MBS”), interest rate commitments from borrowers and forward commitments to sell loans to third parties to protect us from interest rate fluctuations. These short-term instruments do not require any payments to be made to the counterparty or purchaser in connection with the execution of the commitments. At April 30, 2025 and October 31, 2024, $113.9 million and $145.7 million, respectively, of mortgages held for sale were pledged against our mortgage warehouse lines of credit (see Note 11). We may incur losses with respect to mortgages that were previously sold that are delinquent and which had underwriting defects, but only to the extent the losses are not covered by mortgage insurance or the resale value of the home. The reserves for these estimated losses are included in “Financial services” liabilities on the Condensed Consolidated Balance Sheets. At both April 30, 2025 and October 31, 2024, we had specific reserves for 10 identified mortgage loans, as well as reserves for an estimate of future losses on mortgages sold but not yet identified to us. The activity in our loan origination reserves during the three and six months ended April 30, 2025 and 2024 were as follows:
|  | Three Months Ended |  | Six Months Ended |
|  | April 30, |  | April 30, |
(In thousands) |  | 2025 |  |  | 2024 |  | 2025 |  |  | 2024 |
Loan origination reserves, beginning of period |  | $ | 2,626 |  |  | $ | 2,059 |  |  | $ | 2,520 |  |  | $ | 2,013 |
Provisions for estimated losses during the period |  |  | 112 |  |  |  | 85 |  |  |  | 257 |  |  |  | 413 |
Payments/settlements |  |  | - |  |  |  | (110 | ) |  |  | (39 | ) |  |  | (392 | )
Loan origination reserves, end of period |  | $ | 2,738 |  |  | $ | 2,034 |  |  | $ | 2,738 |  |  | $ | 2,034 |

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- Definition The entire disclosure for claims held for amounts due to entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/310-10/tableOfContent Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 835 -SubTopic 30 -Name Accounting Standards Codification -Section 45 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482925/835-30-45-2 + Details
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