Mortgage Loans

6 Months Ended

Mar. 31, 2023

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

MORTGAGE LOANS

MORTGAGE LOANS

Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. The Company typically sells the servicing rights for the majority of loans when the loans are sold. Servicing rights retained are typically sold within six months of loan origination. At March 31, 2023, mortgage loans held for sale of $2.12 billion had an aggregate outstanding principal balance of $2.14 billion. At September 30, 2022, mortgage loans held for sale of $2.39 billion had an aggregate outstanding principal balance of $2.51 billion. Mortgage loans held for sale at both dates were primarily composed of mortgage loans measured at fair value on a recurring basis using Level 2 inputs.

During the six months ended March 31, 2023 and 2022, mortgage loans originated totaled $9.6 billion and $8.4 billion, respectively, and mortgage loans sold totaled $9.9 billion and $8.1 billion, respectively. The Company had gains on sales of loans and servicing rights of $154.5 million and $233.8 million during the three and six months ended March 31, 2023, respectively, compared to $168.0 million and $302.0 million in the prior year periods. Net gains on sales of loans and servicing rights are included in revenues in the consolidated statements of operations. During the six months ended March 31, 2023, approximately 53% of the Company’s mortgage loans were sold directly to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or into securities backed by the Government National Mortgage Association (Ginnie Mae), and 43% were sold to one other major financial entity.

The Company also uses hedging instruments as part of a program to offer below market interest rate financing to its homebuyers. At March 31, 2023 and September 30, 2022, the Company had mortgage-backed securities (MBS) totaling $1.1 billion and $532.4 million, respectively, that did not yet have interest rate lock commitments (IRLCs) or closed loans created or assigned. The Company recorded a liability of $2.4 million at March 31, 2023 and an asset of $4.8 million at September 30, 2022 for the fair value of such MBS position which is measured using Level 2 inputs.

The Company is party to IRLCs, which are extended to borrowers who have applied for loan funding and meet defined credit and underwriting criteria. At March 31, 2023 and September 30, 2022, the notional amount of IRLCs, which are accounted for as derivative instruments recorded at fair value using Level 2 inputs, totaled $3.0 billion and $4.0 billion, respectively.