Note 7—Netting of Financial Instruments

The Company uses derivative financial instruments to manage exposure to interest rate risk for the commitments it makes to purchase or originate mortgage loans at specified interest rates (interest rate lock commitments or “IRLCs”), its inventory of mortgage loans held for sale and MSRs. The Company has elected to net derivative asset and liability positions, and cash collateral obtained from (or posted to) its counterparties when subject to an enforceable master netting arrangement. In the event of default, all counterparties are subject to legally enforceable master netting agreements. The derivatives that are not subject to a master netting arrangement are IRLCs.

As of September 30, 2013 and December 31, 2012, the Company was not party to reverse repurchase agreements or securities lending transactions that are required to be disclosed in the following table.

Offsetting of Derivative Assets

	September 30, 2013								December 31, 2012
	Gross amount of recognized assets		Gross amount offset in the balance sheet			Net amount of assets in the balance sheet			Gross amount of recognized assets		Gross amount offset in the balance sheet			Net amount of assets in the balance sheet
	(in thousands)
Derivatives subject to master netting arrangements:
MBS put options	$	—	$	—		$	—		$	967	$	—		$	967
Forward purchase contracts	21,226		—			21,226			1,645		—			1,645
Forward sale contracts	505		—			505			1,818		—			1,818
Netting	—		(19,382		)	(19,382		)	—		(1,091		)	(1,091		)
	21,731		(19,382		)	2,349			4,430		(1,091		)	3,339
Derivatives not subject to master netting arrangements - IRLCs	21,717		—			21,717			23,951		—			23,951
	$	43,448	$	(19,382	)	$	24,066		$	28,381	$	(1,091	)	$	27,290

Derivative Assets, Financial Assets, and Collateral Held by Counterparty

The following table summarizes by significant counterparty the amount of derivative asset positions after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance qualifying for setoff accounting.

	September 30, 2013								December 31, 2012
			Gross amount not offfset in the								Gross amount not offset in the
	Net amount		consolidated balance sheet						Net amount		consolidated balance sheet
	of assets in the balance sheet		Financial instruments		Cash collateral received		Net amount		of assets in the balance sheet		Financial instruments		Cash collateral received		Net amount
	(in thousands)
Interest rate lock commitments	$	21,717	$	—	$	—	$	21,717	$	23,951	$	—	$	—	$	23,951
Nomura	1,036		—		—		1,036		—		—		—		—
Goldman Sachs	591		—		—		591		—		—		—		—
Bank of America, N.A.	—		—		—		—		1,782		—		—		1,782
Citibank, N.A.	—		—		—		—		522		—		—		522
Bank of NY Mellon	—		—		—		—		311		—		—		311
Wells Fargo	—		—		—		—		18		—		—		18
Other	722		—		—		722		706		—		—		706
	$	24,066	$	—	$	—	$	24,066	$	27,290	$	—	$	—	$	27,290

Offsetting of Derivative Liabilities and Financial Liabilities

Following is a summary of net derivative liabilities and assets sold under agreements to repurchase. As discussed above, all derivatives with the exception of IRLCs are subject to master netting arrangements. The assets sold under agreements to repurchase do not qualify for setoff accounting.

	September 30, 2013								December 31, 2012
	Gross amount of recognized liabilities		Gross amount offset in the consolidated balance sheet			Net amount of liabilities in the consolidated balance sheet			Gross amount of recognized liabilities		Gross amount offset in the consolidated balance sheet			Net amount of liabilities in the consolidated balance sheet
	(in thousands)
Derivatives:
Subject to a master netting arrangement:
Forward purchase contracts	$	215	$	—		$	215		$	389	$	—		$	389
Forward sale contracts	48,069		—			48,069			1,894		—			1,894
Netting	—		(42,667		)	(42,667		)	—		(1,785		)	(1,785		)
	48,284		(42,667		)	5,617			2,283		(1,785		)	498
Derivatives not subject to a master netting arrangement - IRLCs	159		—			159			11		—			11
Total derivatives	48,443		(42,667		)	5,776			2,294		(1,785		)	509

Mortgage loans sold under agreements to repurchase	387,883		—			387,883			393,534		—			393,534
	$	436,326	$	(42,667	)	$	393,659		$	395,828	$	(1,785	)	$	394,043

Derivative Liabilities, Financial Liabilities, and Collateral Held by Counterparty

The following table summarizes by significant counterparty the amount of derivative liabilities and assets sold under agreements to repurchase after considering master netting arrangements and financial instruments or cash pledged that does not qualify under the accounting guidance for setoff accounting. All assets sold under agreements to repurchase are secured by sufficient collateral or exceed the liability amount recorded on the consolidated balance sheets.

	September 30, 2013									December 31, 2012
			Gross amount not offset in the consolidated									Gross amount not offset in the consolidated
	Net amount of		balance sheet							Net amount of		balance sheet
	liabilities in the consolidated balance sheet		Financial instruments			Cash collateral pledged		Net amount		liabilities in the consolidated balance sheet		Financial instruments			Cash collateral pledged		Net amount
	(in thousands)
Interest rate lock commitments	$	159	$	—		$	—	$	159	$	11	$	—		$	—	$	11
Bank of America, N.A.	200,074		(199,423		)	—		651		150,082		(150,082		)	—		—
Credit Suisse First Boston Mortgage Capital LLC	188,645		(188,460		)	—		185		122,443		(122,252		)	—		191
Daiwa Capital Markets	1,589		—			—		1,589		20		—			—		20
Morgan Stanley Bank, N.A.	543		—			—		543		53		—			—		53
Bank of NY Mellon	524		—			—		524		—		—			—		—
Citibank, N.A.	34		—			—		34		121,200		(121,200		)	—		—
Other	2,091		—			—		2,091		234		—			—		,234
	$	393,659	$	(387,883	)	$	—	$	5,776	$	394,043	$	(393,534	)	$	—	$	509