XML 22 R10.htm IDEA: XBRL DOCUMENT

Loans Held for Sale

12 Months Ended

Dec. 31, 2021

3) Loans Held for Sale

The Company elected the fair value option for loans held for sale. Changes in the fair value of the loans are included in mortgage fee income. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on mortgage loans held for investment and is included in mortgage fee income on the consolidated statement of earnings. See Note 17 of the Notes to Consolidated Financial Statements for additional disclosures regarding loans held for sale.

The following table presents the aggregate fair value and the aggregate unpaid principal balance of loans held for sale.

	2021		2020
	December 31
	2021		2020
Aggregate fair value	$	302,776,827	$	422,772,418
Unpaid principal balance		294,481,503		406,407,323
Unrealized gain		8,295,324		16,365,095

Mortgage Fee Income

Mortgage fee income consists of origination fees, processing fees, interest income and certain other income related to the origination and sale of mortgage loans held for sale.

Major categories of mortgage fee income for loans held for sale are summarized as follows:

	2021			2020
	Years Ended December 31
	2021			2020
Loan fees	$	37,723,433		$	43,432,532
Interest income		9,385,469			10,628,581
Secondary gains		230,417,029			231,759,342
Change in fair value of loan commitments		(3,113,095	)		7,637,377
Change in fair value of loans held for sale		(8,783,376	)		10,413,492
Provision for loan loss reserve		(2,211,230	)		(4,938,214	)
Mortgage fee income	$	263,418,230		$	298,933,110

Loan Loss Reserve

When a repurchase demand corresponding to a mortgage loan previously held for sale and sold to a third-party investor is received from a third-party investor, the relevant data is reviewed and captured so that an estimated future loss can be calculated. The key factors that are used in the estimated loss calculation are as follows: (i) lien position, (ii) payment status, (iii) claim type, (iv) unpaid principal balance, (v) interest rate, and (vi) validity of the demand. Other data is captured and is useful for management purposes; the actual estimated loss is generally based on these key factors. The Company conducts its own review upon the receipt of a repurchase demand. In many instances, the Company is able to resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor.

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2021 and 2020

3) Loans Held for Sale (Continued)

The loan loss reserve, which is included in other liabilities and accrued expenses, is summarized as follows:

	2021			2020
	December 31
	2021			2020
Balance, beginning of period	$	20,583,618		$	4,046,288
Provision for current loan originations (1)		2,211,230			4,938,214
Additional provision for loan loss reserve		-			16,506,030
Charge-offs, net of recaptured amounts		(20,347,709	)		(4,906,914	)
Balance, at December 31	$	2,447,139		$	20,583,618

(1) Included in Mortgage fee income

The Company maintains reserves for estimated losses on current production volumes. For the year ended December 31, 2021, $2,211,230 in reserves were added at a rate of 3.9 basis points per loan, the equivalent of $390 per $1,000,000 in loans originated. This is a decrease over the year ended December 31, 2020, when $4,938,214 in reserves were added at a rate of 8.9 basis points per loan originated, the equivalent of $890 per $1,000,000 in loans originated. The Company also increased its loan loss reserve for the year ended December 31, 2020 by an additional $16,506,030 to account for changes in estimates specific to settlements of loan losses. See Note 10 for additional information regarding mortgage loan loss settlements. The unique nature of COVID-19 creates significant difficulty for forecasting potential future losses. The Company will continue to monitor data and economic conditions in order to maintain adequate loss reserves on current production. Thus, the Company believes that the final loan loss reserve as of December 31, 2021, represents its best estimate for adequate loss reserves on loans sold.

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2021 and 2020