Fair Value Measurements (Tables)

9 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair value measurements of assets and liabilities on a recurring basis

The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2017 and September 30, 2016, and the changes in the fair value of the Level 3 assets during the nine months ended June 30, 2017 and 2016.

		Fair Value at June 30, 2017
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Homebuilding:
Debt securities collateralized by residential real estate	Other assets	$	—	$	—	$	8.8	$	8.8
Financial Services and Other:
Mortgage loans held for sale (a)	Mortgage loans held for sale	—		618.4		5.3		623.7
Derivatives not designated as hedging instruments (b):
Interest rate lock commitments	Other assets	—		12.5		—		12.5
Forward sales of MBS	Other assets	—		2.5		—		2.5
Best-efforts and mandatory commitments	Other assets	—		1.6		—		1.6

		Fair Value at September 30, 2016
	Balance Sheet Location	Level 1		Level 2			Level 3		Total
		(In millions)
Financial Services and Other:
Mortgage loans held for sale (a)	Mortgage loans held for sale	$	—	$	640.9		$	6.8	$	647.7
Derivatives not designated as hedging instruments (b):
Interest rate lock commitments	Other assets	—		9.3			—		9.3
Forward sales of MBS	Other liabilities	—		(2.6		)	—		(2.6		)
Best-efforts and mandatory commitments	Other liabilities	—		(0.2		)	—		(0.2		)

	Level 3 Assets at Fair Value for the Nine Months Ended June 30, 2017
	Balance at    September 30, 2016		Net realized and unrealized gains (losses)		Purchases		Sales and Settlements			Principal Reductions			Net transfers to (out of) Level 3		Balance at    June 30, 2017
	(In millions)
Debt securities collateralized by residential real estate	$	—	$	—	$	8.8	$	—		$	—		$	—	$	8.8
Mortgage loans held for sale (a)	6.8		0.8		—		(8.9		)	—			6.6		5.3
	Level 3 Assets at Fair Value for the Nine Months Ended June 30, 2016
	Balance at    September 30, 2015		Net realized and unrealized gains (losses)		Purchases		Sales and Settlements			Principal Reductions			Net transfers to (out of) Level 3		Balance at    June 30, 2016
	(In millions)
Debt securities collateralized by residential real estate (c)	$	33.9	$	2.2	$	—	$	(35.8	)	$	(0.3	)	$	—	$	—
Mortgage loans held for sale (a)	13.9		1.2		—		(15.6		)	—			14.9		14.4

________________

(a) Mortgage loans held for sale are reflected at fair value. Interest income earned on mortgage loans held for sale is based on contractual interest rates and included in financial services interest and other income. Mortgage loans held for sale at June 30, 2017 and September 30, 2016 include $5.3 million and $6.8 million, respectively, of loans for which the Company elected the fair value option upon origination and did not sell into the secondary market. Mortgage loans held for sale totaling $6.6 million and $14.9 million were transferred to Level 3 during the nine months ended June 30, 2017 and 2016, respectively, due to significant unobservable inputs used in determining the fair value of these loans. The fair value of these mortgage loans held for sale is generally calculated considering pricing in the secondary market and adjusted for the value of the underlying collateral, including interest rate risk, liquidity risk and prepayment risk. The Company plans to sell these loans as market conditions permit.

(b) Fair value measurements of these derivatives represent changes in fair value, as calculated by reference to quoted prices for similar assets, and are reflected in the balance sheet as other assets or other liabilities. Changes in the fair value of these derivatives are included in financial services revenues in the consolidated statements of operations.

(c) In October 2012, the Company purchased defaulted debt securities, which were secured by residential real estate, for $18.6 million in cash. In fiscal 2015, the Company purchased the residential real estate parcel and all additional defaulted debt securities associated with the parcel for $19.9 million in cash, of which $5.1 million was allocated to the land and $14.8 million was allocated to the debt securities. The Company sold these debt securities to a third party for $35.8 million in January 2016. The resulting gain of $4.5 million on the sale is included in homebuilding other income in the consolidated statement of operations for the nine months ended June 30, 2016.

Fair value measurements of assets on a non-recurring basis

The following table summarizes the Company’s assets measured at fair value on a nonrecurring basis at June 30, 2017 and September 30, 2016:

		Fair Value at    June 30, 2017				Fair Value at    September 30, 2016
	Balance Sheet Location	Level 2		Level 3		Level 2		Level 3
		(In millions)
Homebuilding:
Inventory held and used (a) (b)	Inventories	$	—	$	7.9	$	—	$	5.2
Inventory available for sale (a) (c)	Inventories	—		—		—		0.8
Financial Services and Other:
Mortgage loans held for sale (a) (d)	Mortgage loans held for sale	—		2.2		1.6		2.4
Other mortgage loans (a) (e)	Other assets	—		1.6		—		3.8
Real estate owned (a) (e)	Other assets	—		—		—		0.1

_____________________

(a) The fair values included in the table above represent only those assets whose carrying values were adjusted to fair value as a result of impairment in the respective period and were held at the end of the period.

(b) In performing its impairment analysis of communities, discount rates ranging from 10% to 14% were used in the periods presented.

(c) The fair value of inventory available for sale was determined based on recent offers received from outside third parties, comparable sales or actual contracts.

(d) These mortgage loans have some degree of impairment affecting their marketability. When available, quoted prices in the secondary market are used to determine fair value (Level 2); otherwise, a cash flow valuation model is used to determine fair value (Level 3).

(e) The fair values of other mortgage loans and real estate owned are determined based on the value of the underlying collateral.

Carrying values and fair values of financial assets and liabilities not reflected at fair value

For the financial assets and liabilities that the Company does not reflect at fair value, the following tables present both their respective carrying value and fair value at June 30, 2017 and September 30, 2016:

	Carrying Value		Fair Value at June 30, 2017
			Level 1		Level 2		Level 3		Total
	(In millions)
Homebuilding:
Cash and cash equivalents (a)	$	460.8	$	460.8	$	—	$	—	$	460.8
Restricted cash (a)	10.9		10.9		—		—		10.9
Senior notes (b)	2,439.7		—		2,583.3		—		2,583.3
Other secured notes (a)	13.4		—		—		13.4		13.4
Financial Services and Other:
Cash and cash equivalents (a)	51.6		51.6		—		—		51.6
Restricted cash (a) (c)	8.5		8.5		—		—		8.5
Mortgage repurchase facility (a)	473.4		—		—		473.4		473.4

	Carrying Value		Fair Value at September 30, 2016
			Level 1		Level 2		Level 3		Total
	(In millions)
Homebuilding:
Cash and cash equivalents (a)	$	1,271.8	$	1,271.8	$	—	$	—	$	1,271.8
Restricted cash (a)	9.5		9.5		—		—		9.5
Senior notes (b)	2,786.7		—		2,947.4		—		2,947.4
Other secured notes (a)	11.6		—		—		11.6		11.6
Financial Services and Other:
Cash and cash equivalents (a)	31.4		31.4		—		—		31.4
Mortgage repurchase facility (a)	473.0		—		—		473.0		473.0

_____________________

(a) The fair value approximates carrying value due to its short-term nature, short maturity or floating interest rate terms, as applicable.

(b) The fair value is determined based on quoted prices, which is classified as Level 2 within the fair value hierarchy.

(c) Restricted cash of the financial services segment represents escrow funds for taxes and insurance and is included in other assets in the Financial Services and Other section of the consolidated balance sheet.