Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Derivative Financial Instruments

Summary of derivative financial instruments

	September 30, 2020					December 31, 2019
		Fair value					Fair value
	Notional	Derivative		Derivative		Notional	Derivative		Derivative
Instrument	amount	assets		liabilities		amount	assets		liabilities
	(in thousands)
Not subject to master netting arrangements:
Interest rate lock commitments	18,873,579	$	544,151	$	2,706	7,122,316	$	138,511	$	1,861
Repurchase agreement derivatives			—		—			8,187		—
Used for hedging purposes (1):
Forward purchase contracts	31,443,783		72,640		15,903	13,618,361		12,364		19,040
Forward sales contracts	42,438,243		21,652		98,765	16,220,526		17,097		18,045
MBS put options	12,950,000		27,336		—	6,100,000		3,415		—
MBS call options	1,850,000		4,255		—	—		—		—
Swaption purchase contracts	3,125,000		5,568		—	1,750,000		2,409		—
Put options on interest rate futures purchase contracts	2,275,000		5,910		—	2,250,000		3,945		—
Call options on interest rate futures purchase contracts	950,000		1,570		—	750,000		1,469		—
Treasury futures purchase contracts	1,000,000		—		—	1,276,000		—		—
Treasury futures sale contracts	450,000		—		—	1,010,000		—		—
Interest rate swap futures purchase contracts	3,585,000		—		—	3,210,000		—		—
Total derivatives before netting			683,082		117,374			187,397		38,946
Netting			(104,828)		(92,837)			(27,711)		(16,616)
		$	578,254	$	24,537		$	159,686	$	22,330
Collateral received from derivative counterparties, net		$	(11,991)				$	(11,095)

(1) All the hedging derivatives are interest rate derivatives and are used as economic hedges.

Summary of the notional value activity for derivative contracts used to hedge the IRLCs and inventory of loans held for sale at fair value and MSRs

	Notional amounts, quarter ended September 30, 2020
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	20,709,914	143,902,517	(133,168,648)	31,443,783
Forward sale contracts	25,302,147	175,642,745	(158,506,649)	42,438,243
MBS put options	11,200,000	29,850,000	(28,100,000)	12,950,000
MBS call options	—	1,850,000	—	1,850,000
Swaption purchase contracts	3,375,000	3,625,000	(3,875,000)	3,125,000
Swaption sale contracts	—	3,875,000	(3,875,000)	—
Put options on interest rate futures purchase contracts	350,000	3,325,000	(1,400,000)	2,275,000
Call options on interest rate futures purchase contracts	1,800,000	1,200,000	(2,050,000)	950,000
Put options on interest rate futures sale contracts	—	1,400,000	(1,400,000)	—
Call options on interest rate futures sale contracts	—	2,050,000	(2,050,000)	—
Treasury futures purchase contracts	925,000	1,561,500	(1,486,500)	1,000,000
Treasury futures sale contracts	450,000	1,486,500	(1,486,500)	450,000
Interest rate swap futures purchase contracts	3,460,000	1,200,000	(1,075,000)	3,585,000
Interest rate swap futures sales contracts	—	1,075,000	(1,075,000)	—

	Notional amounts, quarter ended September 30, 2019
	Beginning of		Dispositions/	End of
Instrument	quarter	Additions	expirations	quarter
	(in thousands)
Forward purchase contracts	19,497,698	100,139,970	(103,807,843)	15,829,825
Forward sale contracts	14,276,156	122,174,329	(121,333,675)	15,116,810
MBS put options	12,775,000	29,575,000	(32,300,000)	10,050,000
MBS call options	2,250,000	—	(2,250,000)	—
Put options on interest rate futures purchase contracts	2,835,000	9,850,000	(8,335,000)	4,350,000
Call options on interest rate futures purchase contracts	3,687,500	1,750,000	(4,837,500)	600,000
Put options on interest rate futures sale contracts	—	8,335,000	(8,335,000)	—
Call options on interest rate futures sale contracts	—	4,837,500	(4,837,500)	—
Treasury futures purchase contracts	486,100	5,132,000	(4,209,600)	1,408,500
Treasury futures sale contracts	1,550,000	3,792,100	(4,209,600)	1,132,500
Interest rate swap futures purchase contracts	2,900,000	1,800,000	(790,000)	3,910,000
Interest rate swap futures sale contracts	—	790,000	(790,000)	—

	Notional amounts, nine months ended September 30, 2020
	Beginning of		Dispositions/	End of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	13,618,361	370,704,328	(352,878,906)	31,443,783
Forward sale contracts	16,220,526	444,965,072	(418,747,355)	42,438,243
MBS put options	6,100,000	79,600,000	(72,750,000)	12,950,000
MBS call options	—	1,850,000	—	1,850,000
Swaption purchase contracts	1,750,000	14,700,000	(13,325,000)	3,125,000
Swaption sale contracts	—	13,325,000	(13,325,000)	—
Put options on interest rate futures purchase contracts	2,250,000	12,025,000	(12,000,000)	2,275,000
Call options on interest rate futures purchase contracts	750,000	9,740,000	(9,540,000)	950,000
Put options on interest rate futures sale contracts	—	12,000,000	(12,000,000)	—
Call options on interest rate futures sale contracts	—	9,540,000	(9,540,000)	—
Treasury futures purchase contracts	1,276,000	5,516,700	(5,792,700)	1,000,000
Treasury futures sale contracts	1,010,000	5,232,700	(5,792,700)	450,000
Interest rate swap futures purchase contracts	3,210,000	4,150,000	(3,775,000)	3,585,000
Interest rate swap futures sales contracts	—	3,775,000	(3,775,000)	—

	Notional amounts, nine months ended September 30, 2019
	Beginning of		Dispositions/	End of
Instrument	period	Additions	expirations	period
	(in thousands)
Forward purchase contracts	6,657,026	237,370,321	(228,197,522)	15,829,825
Forward sale contracts	6,890,046	275,749,351	(267,522,587)	15,116,810
MBS put options	4,635,000	77,185,000	(71,770,000)	10,050,000
MBS call options	1,450,000	6,750,000	(8,200,000)	—
Put options on interest rate futures purchase contracts	3,085,000	19,422,500	(18,157,500)	4,350,000
Call options on interest rate futures purchase contracts	1,512,500	13,127,800	(14,040,300)	600,000
Put options on interest rate futures sale contracts	—	27,297,800	(27,297,800)	—
Call options on interest rate futures sale contracts	—	4,837,500	(4,837,500)	—
Treasury futures purchase contracts	835,000	11,943,400	(11,369,900)	1,408,500
Treasury futures sale contracts	1,450,000	11,052,400	(11,369,900)	1,132,500
Interest rate swap futures purchase contracts	625,000	4,075,000	(790,000)	3,910,000
Interest rate swap futures sale contracts	—	790,000	(790,000)	—

Summaries of derivative assets and related netting amounts

	September 30, 2020						December 31, 2019
	Gross		Gross amount		Net amount		Gross		Gross amount		Net amount
	amount of		offset in the		of assets in the		amount of		offset in the		of assets in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	assets		balance sheet		balance sheet		assets		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements:
Interest rate lock commitments	$	544,151	$	—	$	544,151	$	138,511	$	—	$	138,511
Repurchase agreement derivatives		—		—		—		8,187		—		8,187
		544,151		—		544,151		146,698		—		146,698
Derivatives subject to master netting arrangements:
Forward purchase contracts		72,640		—		72,640		12,364		—		12,364
Forward sale contracts		21,652		—		21,652		17,097		—		17,097
MBS put options		27,336		—		27,336		3,415		—		3,415
MBS call options		4,255		—		4,255		—		—		—
Swaption purchase contracts		5,568		—		5,568		2,409		—		2,409
Put options on interest rate futures purchase contracts		5,910		—		5,910		3,945		—		3,945
Call options on interest rate futures purchase contracts		1,570		—		1,570		1,469		—		1,469
Netting		—		(104,828)		(104,828)		—		(27,711)		(27,711)
		138,931		(104,828)		34,103		40,699		(27,711)		12,988
	$	683,082	$	(104,828)	$	578,254	$	187,397	$	(27,711)	$	159,686

Summary of the amount of derivative asset positions by significant counterparty after considering master netting arrangements and financial instruments or cash pledged

	September 30, 2020								December 31, 2019
			Gross amount not								Gross amount not
			offset in the								offset in the
			consolidated								consolidated
	Net amount		balance sheet						Net amount		balance sheet
	of assets in the				Cash				of assets in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		received		amount		balance sheet		instruments		received		amount
	(in thousands)
Interest rate lock commitments	$	544,151	$	—	$	—	$	544,151	$	138,511	$	—	$	—	$	138,511
JPMorgan Chase Bank, N.A.		18,772		—		—		18,772		2,196		—		—		2,196
RJ O'Brien		7,480		—		—		7,480		5,414		—		—		5,414
Wells Fargo Bank, N.A.		5,256		—		—		5,256		—		—		—		—
Goldman Sachs		1,148		—		—		1,148		2,548		—		—		2,548
Deutsche Bank		—		—		—		—		9,138		—		—		9,138
Mizuho Securities		—		—		—		—		1,597		—		—		1,597
Others		1,447		—		—		1,447		282		—		—		282
	$	578,254	$	—	$	—	$	578,254	$	159,686	$	—	$	—	$	159,686

Summary of net derivative liabilities and assets sold under agreements to repurchase and related netting amounts

	September 30, 2020						December 31, 2019
					Net						Net
					amount						amount
	Gross		Gross amount		of liabilities		Gross		Gross amount		of liabilities
	amount of		offset in the		in the		amount of		offset in the		in the
	recognized		consolidated		consolidated		recognized		consolidated		consolidated
	liabilities		balance sheet		balance sheet		liabilities		balance sheet		balance sheet
	(in thousands)
Derivatives not subject to master netting arrangements – Interest rate lock commitments	$	2,706	$	—	$	2,706	$	1,861	$	—	$	1,861
Derivatives subject to a master netting arrangement:
Forward purchase contracts		15,903		—		15,903		19,040		—		19,040
Forward sale contracts		98,765		—		98,765		18,045		—		18,045
Netting		—		(92,837)		(92,837)		—		(16,616)		(16,616)
		114,668		(92,837)		21,831		37,085		(16,616)		20,469
Total derivatives		117,374		(92,837)		24,537		38,946		(16,616)		22,330
Assets sold under agreements to repurchase:
Amount outstanding		7,267,046		—		7,267,046		4,141,680		—		4,141,680
Unamortized debt issuance cost, net		(7,858)		—		(7,858)		(627)		—		(627)
		7,259,188		—		7,259,188		4,141,053		—		4,141,053
	$	7,376,562	$	(92,837)	$	7,283,725	$	4,179,999	$	(16,616)	$	4,163,383

Summary of amount of derivative liabilities and assets sold under agreements to repurchase by significant counterparty after considering master netting arrangements and financial instruments or cash pledged

	September 30, 2020								December 31, 2019
			Gross amounts								Gross amounts
			not offset in the								not offset in the
	Net amount		consolidated						Net amount		consolidated
	of liabilities		balance sheet						of liabilities		balance sheet
	in the				Cash				in the				Cash
	consolidated		Financial		collateral		Net		consolidated		Financial		collateral		Net
	balance sheet		instruments		pledged		amount		balance sheet		instruments		pledged		amount
	(in thousands)
Interest rate lock commitments	$	2,706	$	—	$	—	$	2,706	$	1,861	$	—	$	—	$	1,861
Credit Suisse First Boston Mortgage Capital LLC		3,613,132		(3,607,746)		—		5,386		1,235,430		(1,235,430)		—		—
Morgan Stanley Bank, N.A.		784,434		(784,434)		—		—		582,941		(582,941)		—		—
Bank of America, N.A.		767,391		(767,391)		—		—		379,400		(374,190)		—		5,210
JPMorgan Chase Bank, N.A.		741,341		(741,341)		—		—		936,172		(936,172)		—		—
Citibank, N.A.		637,347		(632,928)		—		4,419		655,831		(653,170)		—		2,661
BNP Paribas		370,013		(370,013)		—		—		183,880		(183,880)		—		—
Royal Bank of Canada		363,193		(363,193)		—		—		175,897		(175,897)		—		—
Federal Home Loan Mortgage Corporation		5,755		—		—		5,755		—		—		—		—
Mizuho Securities		2,366		—		—		2,366		—		—		—		—
Barclays Capital		1,648		—		—		1,648		—		—		—		—
Wells Fargo Bank, N.A.		—		—		—		—		11,212		—		—		11,212
Others		2,257		—		—		2,257		1,386		—		—		1,386
	$	7,291,583	$	(7,267,046)	$	—	$	24,537	$	4,164,010	$	(4,141,680)	$	—	$	22,330

Summary of gains (losses) recognized on derivative financial instruments and the respective income statement line items

		Quarter ended September 30,				Nine months ended September 30,
Derivative activity	Income statement line	2020		2019		2020		2019
		(in thousands)
Interest rate lock commitments	Net gains on loans held for sale at fair value (1)	$	173,381	$	33,347	$	404,795	$	95,785
Repurchase agreement derivatives	Interest expense	$	83	$	92	$	83	$	(1,608)
Hedged item (2):
Interest rate lock commitments and loans held for sale	Net gains on loans held for sale at fair value	$	(77,320)	$	(55,540)	$	(403,992)	$	(157,362)
Mortgage servicing rights	Net loan servicing fees–Change in fair value of mortgage servicing rights and mortgage servicing liabilities	$	6,521	$	250,146	$	1,027,327	$	587,883

(1) Represents net increase in fair value of IRLCs from the beginning to the end of the reporting period. Amounts recognized at the date of commitment and fair value changes recognized during the period until purchase of the underlying loans are shown in the rollforward of IRLCs for the period in Note 6 – Fair Value – Assets and Liabilities Measured at Fair Value on a Recurring Basis.

(2) All the hedging derivatives are interest rate derivatives and are used as economic hedges.