DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIESDerivatives instruments utilized by the Company primarily include interest rate lock commitments, forward sale contracts, MBS put options, put options on treasuries, and interest rate swap futures. Derivative financial instruments are recognized as assets or liabilities and are measured at fair value. The Company accounts for derivatives as free-standing derivatives and does not designate any derivative financial instruments for hedge accounting. All derivative financial instruments are recognized on the consolidated balance sheets at fair value with changes in the fair values being reported in current period earnings. The Company does not use derivative financial instruments for purposes other than in support of its risk management activities. Refer to Note 1- Description of Business, Presentation and Summary of Significant Accounting Policies and Note 3- Fair Value for further details on derivatives in the 2021 Form 10-K.

The following summarizes the Company’s outstanding derivative instruments:

				Fair Value
	Notional		Balance Sheet Location	Asset		Liability
September 30, 2022:
Interest rate lock commitments	$	1,645,122	Derivative asset, at fair value	$	20,910
Interest rate lock commitments	3,171,270		Derivative liabilities, at fair value	—		85,628
Forward sale contracts	20,523,121		Derivative asset, at fair value	295,737		—
Forward sale contracts	896,425		Derivative liabilities, at fair value	—		38,086
Put options on treasuries	—		Derivative asset, at fair value	—		—
Put options on treasuries	1,725		Derivative liabilities, at fair value	—		6,643
Interest rate swap futures	—		Derivative asset, at fair value	—		—
Interest rate swap futures	650		Derivative liabilities, at fair value	—		19,480
			Total derivative financial instruments	$	316,647	$	149,837

				Fair Value
	Notional		Balance Sheet Location	Asset		Liability
December 31, 2021:
Interest rate lock commitments	$	11,530,721	Derivative asset, at fair value	$	184,383	$	—
Interest rate lock commitments	1,125,911		Derivative liabilities, at fair value	—		3,763
Forward sale contracts	19,482,705		Derivative asset, at fair value	5,358		—
Forward sale contracts	13,171,462		Derivative liabilities, at fair value	—		2,964
Put options on treasuries	—		Derivative asset, at fair value	—		—
Put options on treasuries	16,980		Derivative liabilities, at fair value	—		31,070
Interest rate swap futures	2,640		Derivative asset, at fair value	4,924		—
Interest rate swap futures	—		Derivative liabilities, at fair value	—		—
			Total derivative financial instruments	$	194,665	$	37,797

Because many of the Company’s current derivative agreements are not exchange-traded, the Company is exposed to credit loss in the event of nonperformance by the counterparty to the agreements. The Company controls this risk through credit monitoring procedures including financial analysis, dollar limits and other monitoring procedures. The notional amount of the contracts does not represent the Company’s exposure to credit loss.

The following summarizes the realized and unrealized net gains or losses on derivative financial instruments and the consolidated statements of operations line items where such gains and losses are included:

		Three Months Ended September 30,				Nine Months Ended September 30,
Derivative instrument	Statements of Operations Location	2022		2021		2022		2021
Interest rate lock commitments, net	Gain on origination and sale of loans, net	$	(122,323)	$	(73,871)	$	(245,338)	$	(387,835)
Forward sale contracts	Gain on origination and sale of loans, net	259,360		(29,867)		1,221,817		477,215
Interest rate swap futures	Gain on origination and sale of loans, net	2,279		(29,683)		(82,251)		(81,891)
Put options	Gain on origination and sale of loans, net	12,547		19,891		128,706		47,063
Forward sale contracts	Change in fair value of servicing rights, net	(16,293)		(5,838)		(113,920)		(84,842)
Interest rate swap futures	Change in fair value of servicing rights, net	(31,598)		(14,033)		(197,177)		(6,855)
Put options	Change in fair value of servicing rights, net	(2,946)		(1,682)		(3,460)		(2,461)
Total realized and unrealized gains (losses) on derivative financial instruments		$	101,026	$	(135,083)	$	708,377	$	(39,606)