Derivatives

3 Months Ended

Mar. 31, 2014

Derivatives

Derivatives

4.  Derivatives

Derivative instruments and the risks they manage are as follows:

¡	Forward delivery commitments—Related to interest rate and price risk for Mortgage loans held for sale and interest rate lock commitments
¡	Option contracts— Related to interest rate and price risk for Mortgage loans held for sale and interest rate lock commitments
¡	MSR-related agreements—Related to interest rate risk for Mortgage servicing rights
¡	Interest rate contracts—Related to interest rate risk for variable-rate debt arrangements and fixed-rate leases
¡	Convertible note-related agreements—Related to the issuance of the Convertible notes due in 2014
¡	Foreign exchange contracts—Related to exposure to currency fluctuations that would impact our investment in or borrowings related to our Canadian operations

Derivative instruments are recorded in Other assets and Other liabilities in the Condensed Consolidated Balance Sheets.  The Company does not have any derivative instruments designated as hedging instruments.

The following table summarizes the gross notional amount of derivatives:

	March 31,		December 31,
	2014		2013
	(In millions)
Notional amounts:
Interest rate lock commitments	$	1,391	$	1,378
Forward delivery commitments	3,514		4,527
Option contracts	145		190
MSR-related agreements	1,395		860
Interest rate contracts	699		710
Convertible note-related agreements(1)	—		—

____________

(1) The notional amount of derivative instruments underlying the Convertible-note related agreements is 9.6881 million shares of the Company’s Common stock.  These instruments relate to the issuance of the Convertible notes due 2014.

The following tables presents the balances of outstanding derivative instruments on a gross basis and the application of counterparty and collateral netting:

	March 31, 2014
	Gross Assets		Offsetting Payables		Cash Collateral Paid		Net Amount
	(In millions)
ASSETS
Subject to master netting arrangements:
Forward delivery commitments	$	4	$	(3)	$	2	$	3
MSR-related agreements	8		(8)		—		—
Derivative assets subject to netting	12		(11)		2		3
Not subject to master netting arrangements:
Interest rate lock commitments	21		—		—		21
Forward delivery commitments	2		—		—		2
Interest rate contracts	2		—		—		2
Convertible note-related agreements	16		—		—		16
Derivative assets not subject to netting	41		—		—		41
Total derivative assets	$	53	$	(11)	$	2	$	44
	Gross Liabilities		Offsetting Receivables		Cash Collateral Received		Net Amount
	(In millions)
LIABILITIES
Subject to master netting arrangements:
Forward delivery commitments	$	3	$	(3)	$	—	$	—
MSR-related agreements	—		(8)		11		3
Derivative liabilities subject to netting	3		(11)		11		3
Not subject to master netting arrangements:
Interest rate lock commitments	1		—		—		1
Forward delivery commitments	1		—		—		1
Convertible note-related agreements	16		—		—		16
Derivative liabilities not subject to netting	18		—		—		18
Total derivative liabilities	$	21	$	(11)	$	11	$	21

	December 31, 2013
	Gross Assets		Offsetting Payables		Cash Collateral Received		Net Amount
	(In millions)
ASSETS
Subject to master netting arrangements:
Forward delivery commitments	$	22	$	(13)	$	(8)	$	1
MSR-related agreements	4		(4)		—		—
Derivative assets subject to netting	26		(17)		(8)		1
Not subject to master netting arrangements:
Interest rate lock commitments	23		—		—		23
Forward delivery commitments	4		—		—		4
Option contracts	2		—		—		2
Interest rate contracts	2		—		—		2
Convertible note-related agreements	16		—		—		16
Derivative assets not subject to netting	47		—		—		47
Total derivative assets	$	73	$	(17)	$	(8)	$	48
	Gross Liabilities		Offsetting Receivables		Cash Collateral Received		Net Amount
	(In millions)
LIABILITIES
Subject to master netting arrangements:
Forward delivery commitments	$	8	$	(13)	$	5	$	—
MSR-related agreements	—		(4)		5		1
Derivative liabilities subject to netting	8		(17)		10		1
Not subject to master netting arrangements:
Interest rate lock commitments	1		—		—		1
Forward delivery commitments	2		—		—		2
Convertible note-related agreements	16		—		—		16
Derivative liabilities not subject to netting	19		—		—		19
Total derivative liabilities	$	27	$	(17)	$	10	$	20

The following table summarizes the gains (losses) recorded in the Condensed Consolidated Statements of Operations for derivative instruments:

	Three Months Ended
	March 31,
	2014		2013
	(In millions)
Gain on mortgage loans, net:
Interest rate lock commitments	$	74	$	202
Forward delivery commitments	(20)		54
Option contracts	(1)		(2)
Net derivative gain (loss) related to mortgage servicing rights:
MSR-related agreements	6		(16)