XML 329 R11.htm IDEA: XBRL DOCUMENT

Financial Instruments

9 Months Ended

Sep. 30, 2023

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.

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.

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.


Notional Amounts	September 30, 2023		December 31, 2022
Forward sales commitments	$	322,652	$	301,548
IRLCs	249,515		210,787

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


		Three Months Ended September 30,				Nine Months Ended September 30,
Instrument	Classification	2023		2022		2023		2022
Forward sales commitments	Revenue	$	335	$	11,602	$	2,367	$	1,757
IRLCs	Revenue	(1,567)		(8,462)		1,005		(4,433)

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 September 30, 2023		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	$	91,399	$	91,399	$	—	$	—

Total cash equivalents	91,399		91,399		—		—
Short-term investments
U.S. treasury securities	8,349		8,349		—		—
Agency bonds	33,403		33,403		—		—
Total short-term investments	41,752		41,752		—		—
Loans held for sale	137,680		—		137,680		—
Other current assets
Forward sales commitments	2,190		—		2,190		—
IRLCs	3,067		—		—		3,067
Total other current assets	5,257		—		2,190		3,067
Mortgage servicing rights, at fair value	34,773		—		—		34,773
Long-term investments
U.S. treasury securities	5,474		5,474		—		—

Total long-term investments	5,474		5,474		—		—
Total assets	$	316,335	$	138,625	$	139,870	$	37,840
Liabilities
Accrued liabilities
Forward sales commitments	$	27	$	—	$	27	$	—
IRLCs	765		—		—		765
Total liabilities	$	792	$	—	$	27	$	765


	Balance at December 31, 2022		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	$	186,410	$	186,410	$	—	$	—

Total cash equivalents	186,410		186,410		—		—
Short-term investments
U.S. treasury securities	96,925		96,925		—		—
Agency bonds	25,334		25,334		—		—

Total short-term investments	122,259		122,259		—		—
Loans held for sale	199,604		—		199,604		—
Other current assets
Forward sales commitments	1,669		—		1,669		—
IRLCs	2,338		—		—		2,338
Total other current assets	4,007		—		1,669		2,338
Mortgage servicing rights, at fair value	36,261		—		—		36,261
Long-term investments
U.S. treasury securities	29,480		29,480		—		—
Total assets	$	578,021	$	338,149	$	201,273	$	38,599
Liabilities
Accrued liabilities
Forward sales commitments	$	1,873	$	—	$	1,873	$	—
IRLCs	1,041		—		—		1,041
Total liabilities	$	2,914	$	—	$	1,873	$	1,041

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

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 and Mortgage Servicing Rights (“MSRs”):


		September 30, 2023		December 31, 2022
Key Inputs	Valuation Technique	Range	Weighted-Average	Range	Weighted-Average
IRLCs
Pull-through rate	Market pricing	69.7% - 100.0%	93.5%	62.0% - 100.0%	91.0%
MSRs
Prepayment speed	Discounted cash flow	6.0% - 12.0%	6.5%	6.0% - 14.4%	6.6%
Default rates	Discounted cash flow	0.1% - 1.0%	0.2%	0.0% - 0.5%	0.1%
Discount rate	Discounted cash flow	10.0% - 12.8%	10.1%	9.5% - 12.4%	9.6%

The following is a summary of changes in the fair value of IRLCs:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance, net—beginning of period	$	3,870	$	9,510	$	1,297	$	1,155
IRLCs acquired in business combination	—		—		—		4,326
Issuances of IRLCs	10,638		20,440		39,769		40,740
Settlements of IRLCs	(11,650)		(23,494)		(38,241)		(40,762)
Fair value changes recognized in earnings	(556)		(5,408)		(523)		(4,411)
Balance, net—end of period	$	2,302	$	1,048	$	2,302	$	1,048

The following is a summary of changes in the fair value of MSRs:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance—beginning of period	$	35,503	$	35,050	$	36,261	$	—
MSRs acquired in business combination	—		—		—		33,982
MSRs originated	120		1,811		699		2,774
MSRs sales	(384)		(541)		(1,122)		(1,314)
Fair value changes recognized in earnings	(466)		594		(1,065)		1,472
Balance, net—end of period	$	34,773	$	36,914	$	34,773	$	36,914

The following table presents the carrying amounts and estimated fair values of our convertible senior notes that are not recorded at fair value on our consolidated balance sheets:


	September 30, 2023				December 31, 2022
Issuance	Net Carrying Amount		Estimated Fair Value		Net Carrying Amount		Estimated Fair Value
2023 notes	$	—	$	—	$	23,431	$	22,147
2025 notes	232,511		192,411		512,683		309,292
2027 notes	567,154		333,500		565,474		267,398

The difference between the principal amounts of our 2025 notes and our 2027 notes, which were $234,505 and $575,000, respectively, and the net carrying amounts of the notes represents the unamortized debt issuance costs. The estimated fair value of each tranche of convertible senior notes is based on the closing trading price of the notes on the last day of trading for the period and is classified as Level 2 within the fair value hierarchy due to the limited trading activity of the notes. Based on the closing price of our common stock of $7.04 on September 30, 2023, the if-converted values of both convertible notes were less than the principal amounts, respectively. See Note 14 for additional details on our convertible senior notes.

See Note 10 for the carrying amount of our convertible preferred stock.

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, and other assets. These assets are remeasured at fair value if determined to be impaired.

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 were as follows:


	September 30, 2023
	Fair Value Hierarchy	Cost or Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Cash, Cash Equivalents, and Restricted Cash		Short-term Investments		Long-term Investments
Cash	N/A	$	34,404	$	—	$	—	$	34,404	$	34,404	$	—	$	—
Money markets funds	Level 1	91,399		—		—		91,399		91,399		—		—
Restricted cash	N/A	1,414		—		—		1,414		1,414		—		—
U.S. treasury securities	Level 1	13,876		6		(59)		13,823		—		8,349		5,474
Agency bonds	Level 1	33,463		—		(60)		33,403		—		33,403		—

Total		$	174,556	$	6	$	(119)	$	174,443	$	127,217	$	41,752	$	5,474


	December 31, 2022
	Fair Value Hierarchy	Cost or Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Cash, Cash Equivalents, and Restricted Cash		Short-term Investments		Long-term Investments
Cash	N/A	$	53,430	$	—	$	—	$	53,430	$	45,790	$	—	$	—
Money markets funds	Level 1	186,410		—		—		186,410		186,410		—		—
Restricted cash	N/A	2,406		—		—		2,406		2,406		—		—
U.S. treasury securities	Level 1	127,130		28		(753)		126,405		—		96,925		29,480
Agency bonds	Level 1	25,339		—		(5)		25,334		—		25,334		—

Total		$	394,715	$	28	$	(758)	$	393,985	$	234,606	$	122,259	$	29,480

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. government securities, all with a high-quality credit rating issued by various credit agencies.

As of September 30, 2023 and December 31, 2022, we had accrued interest of $611 and $576, respectively, on our available-for-sale investments, of which we have recorded no expected credit losses. Accrued interest receivable is recorded in other current assets in our consolidated balance sheets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details