Financial Instruments

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Financial Instruments

Financial Instruments

Derivatives

Our primary market exposure is to interest rate risk, specifically U.S. treasury and mortgage interest rates, due to their impact on mortgage-related assets and commitments. We use forward sales commitments on whole loans and mortgage-backed securities to manage and reduce this risk. We do not have any derivative instruments designated as hedging instruments.

Interest Rate Lock Commitments—Interest rate lock commitments ("IRLCs") represent an agreement to extend credit to a mortgage loan applicant. We commit (subject to loan approval) to fund the loan at the specified rate, regardless of changes in market interest rates between the commitment date and the funding date. Outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of commitment through the loan funding date or expiration date. Loan commitments generally range between 30 and 90 days and the borrower is not obligated to obtain the loan. Therefore, IRLCs are subject to fallout risk, which occurs when approved borrowers choose not to close on the underlying loans. We review our commitment-to-closing ratio (pull-through rate) as part of an estimate of the number of mortgage loans that will fund according to the IRLCs.

Forward Sales Commitments—We are exposed to interest rate and price risk on loans held for sale from the funding date until the date the loan is sold. Forward sales commitments on whole loans and mortgage-backed securities are used to fix the forward sales price that will be realized at the sale of each loan.

Notional Amounts	March 31, 2020		December 31, 2019
Interest rate lock commitments	$	73,382	$	37,453
Forward sales commitments	66,448		39,447

The locations and amounts of gains (losses) recognized in income related to our derivatives are as follows:

		March 31,
Instrument	Classification	2020			2019
Interest rate lock commitments	Service revenue	$	1,195		$	446
Forward sales commitments	Service revenue	(1,571		)	(244		)

Fair Value of Financial Instruments

A summary of assets and liabilities related to our financial instruments, measured at fair value on a recurring basis and as reflected in our consolidated balance sheets, is set forth below:

	Balance at March 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	194,530	$	194,530	$	—	$	—
Short-term investments
U.S. treasury securities	75,049		75,049		—		—
Loans held for sale	44,321		—		44,321		—
Prepaid expenses and other current assets
Interest rate lock commitments	1,825		—		—		1,825
Forward sales commitments	200		—		200		—
Total prepaid expenses and other current assets	2,025		—		200		1,825
Long-term investments
U.S. treasury securities	24,717		24,717		—		—
Agency bonds	1,994		1,994		—		—
Total long-term investments	26,711		26,711		—		—
Total assets	$	342,636	$	296,290	$	44,521	$	1,825
Liabilities
Accrued liabilities
Interest rate lock commitments	$	200	$	—	$	—	$	200
Forward sales commitments	1,816		—		1,816		—
Total liabilities	$	2,016	$	—	$	1,816	$	200

	Balance at December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market funds	$	221,442	$	221,442	$	—	$	—
Short-term investments
U.S. treasury securities	70,029		70,029		—		—
Loans held for sale	21,985		—		21,985		—
Prepaid expenses and other current assets
Interest rate lock commitments	496		—		—		496
Forward sales commitments	4		—		4		—
Total prepaid expenses and other current assets	500		—		4		496
Long-term investments
U.S. treasury securities	30,978		30,978		—		—
Total assets	$	344,934	$	322,449	$	21,989	$	496
Liabilities
Accrued liabilities
Interest rate lock commitments	$	58	$	—	$	—	$	58
Forward sales commitments	57		—		57		—
Total liabilities	$	115	$	—	$	57	$	58

The significant unobservable input used in the fair value measurement of IRLCs is the pull-through rate. Significant changes in the input could result in a significant change in fair value measurement.

The following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:

Key Inputs	Valuation Technique	March 31, 2020	December 31, 2019
Weighted-average pull-through rate	Market pricing	75.1%	78.2%

The following is a summary of changes in the fair value of IRLCs for the period ended March 31, 2020:

Balance, net—December 31, 2019	$	430
Issuances of interest rate lock commitments	3,318
Settlements of interest rate lock commitments	(2,494		)
Net gain recognized in earnings	371
Balance, net—March 31, 2020	$	1,625
Changes in fair value recognized during the period relating to assets still held at March 31, 2020	$	1,195

There were no transfers into or out of Level 3 financial instruments during the period.

See Note 14 for the carrying amount and estimated fair value of our convertible senior notes.

Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis include items such as property and equipment, goodwill and other intangible assets, cost method investments, and other assets. These assets are measured at fair value if determined to be impaired. During the period ended March 31, 2020, we determined that the fair value of our cost method investment in a privately-held company was less than the carrying value of $2,000 based on a variety of impairment indicators including the historical performance and future prospects of the company; therefore, we recognized a non-cash impairment charge of $1,420 related to this investment. The impairment charge is included in Impairment costs within our consolidated statement of cash flows and is included in Other income (expense), net within our consolidated statements of operations. We did not record any other significant nonrecurring fair value measurements after initial recognition for the period ended March 31, 2020.

The following table summarizes the cost or amortized cost, gross unrealized gains and losses, and estimated fair market value of our cash, money market funds, restricted cash, and available-for-sale investments.

	March 31, 2020
	Fair Value Hierarchy	Cost or Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		Short-term Investments		Long-term Investments
Cash	N/A	$	18,831	$	—	$	—		$	18,831	$	—	$	—
Money markets funds	Level 1	194,530		—		—			194,530		—		—
Restricted cash	N/A	16,772		—		—			16,772		—		—
U.S. treasury securities	Level 1	99,192		574		—			99,766		75,049		24,717
Agency bonds	Level 1	2,000		—		(6		)	1,994		—		1,994
Total		$	331,325	$	574	$	(6	)	$	331,893	$	75,049	$	26,711

	December 31, 2019
	Fair Value Hierarchy	Cost or Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		Short-term Investments		Long-term Investments
Cash	N/A	$	13,237	$	—	$	—		$	13,237	$	—	$	—
Money markets funds	Level 1	221,442		—		—			221,442		—		—
Restricted cash	N/A	12,769		—		—			12,769		—		—
U.S. treasury securities	Level 1	100,998		31		(22		)	101,007		70,029		30,978
Total		$	348,446	$	31	$	(22	)	$	348,455	$	70,029	$	30,978

As of March 31, 2020 and December 31, 2019, the aggregate fair value of available-for-sale debt securities in an unrealized loss position totaled $2,094 and $46,550, with aggregate unrealized losses of $6 and $22, respectively. We have evaluated our portfolio of available-for-sale debt securities based on credit quality indicators for expected credit losses and do not believe there are any expected credit losses. Our portfolio consists of U.S. treasury securities, all with high quality credit ratings issued by various credit agencies.

As of March 31, 2020 and December 31, 2019, we had accrued interest of $164 and $183, respectively, on our available-for-sale investments, of which we have recorded no expected credit losses. Accrued interest receivable is presented within other current assets in our consolidated balance sheets.