Mortgage Loans Held for Sale

12 Months Ended

Dec. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

The carrying value of mortgage loans held for sale owned by Radian Mortgage Capital totaled $33 million and $4 million at December 31, 2023 and 2022, respectively, and is based on fair value. The estimated fair value of our mortgage loans held for sale is subject to changes in mortgage interest rates from the closing or purchased date through the date of the sale into the secondary market. We elected the fair value option for our mortgage loans held for sale to mitigate income statement volatility and allow for consistent treatment of both loans and any associated hedges or derivatives. Net gains (losses) associated with our mortgage loans held for sale and any related hedges are included in net gains (losses) on investments and other financial instruments on our consolidated statements of operations. See Note 5 for additional information about the fair value of these financial instruments.

As of December 31, 2023, our mortgage loans held for sale consisted of 72 mortgage loans with a total unpaid principal balance of $32 million, related to properties in 24 states and the District of Columbia. As of December 31, 2023, none of these loans were greater than ninety days delinquent or in nonaccrual status. Interest earned on mortgage loans held for sale is included in net investment income on our consolidated statements of operations.

Further, as of December 31, 2023, the Company had commitments to purchase and fund additional mortgage loans with a total unpaid principal balance of $84 million. Prior to the settlement and funding of these loan purchases, any unrealized net gains (losses) related to these commitments are recorded as derivative assets or liabilities on our consolidated balance sheets.

The following table reflects the outstanding derivative instruments used to hedge our mortgage loan activity as of the dates indicated.


Derivative hedging instruments

	December 31, 2023						December 31, 2022
	Notional (1)		Fair Value				Notional (1)		Fair Value
(In thousands)			Derivative Assets		Derivative Liabilities				Derivative Assets		Derivative Liabilities
Hedging instruments (2)
Forward RMBS purchase contracts	$	51,100	$	715	$	817	$	4,450	$	—	$	42
Interest rate swap futures contracts	7,300		489		—		—		—		—

(1)Notional amounts provide an indication of the volume of the Company’s derivative activity.

(2)All of the derivatives used for hedging purposes are interest rate derivatives subject to master netting agreements and are considered economic hedges.

Net gains (losses) on our mortgage loans held for sale and related derivatives consisted of the following.


Net gains (losses) on mortgage loans held for sale

	Years Ended December 31,
(In thousands)	2023		2022
Net realized gains (losses)
Mortgage loans	$	(2,634)	$	28
Mortgage loan hedging activities	3,144		—
Total realized gains (losses)	510		28

Mortgage servicing rights resulting from loan sales	41		—

Change in unrealized gains (losses) on mortgage loans and related derivatives sold or redeemed	(20)		—

Unrealized gains (losses) on mortgage loans and related derivatives still held
Mortgage loans (1)	1,331		62
Mortgage loan hedging activities	(1,048)		(42)
Total net unrealized gains (losses)	283		20
Net gains (losses) on investments and other financial instruments	$	814	$	48

(1)Includes net gains (losses) on mortgage loan commitments accounted for as derivatives prior to settlement.

We primarily fund the purchases of our mortgage loans held for sale with amounts borrowed under our mortgage loan financing facilities. Expenses related to these facilities are included in interest expense on our consolidated statements of operations. See Note 12 for additional information on these facilities and their related terms and covenants.

Net investment income earned on the mortgage loans held for sale and interest expense incurred on the mortgage loan financing facilities consisted of the following.


Net interest margin on mortgage loans held for sale

	Years Ended December 31,
(In thousands)	2023		2022
Net investment income	$	4,212	$	39
Interest expense	3,507		15
Net interest margin on mortgage loans held for sale	$	705	$	24

In addition to the debt covenants under its financing facilities, Radian Mortgage Capital is also subject to certain requirements established by state and other regulators and loan purchasers, including Freddie Mac, such as certain minimum net worth and capital requirements. The most restrictive of these requirements requires Radian Mortgage Capital to maintain a minimum tangible net worth of $3 million. To the extent these requirements are not met, these parties may exercise certain remedies, which may include, as applicable, prohibiting Radian Mortgage Capital from purchasing, selling, or servicing loans. As of December 31, 2023, Radian Mortgage Capital was in compliance with all such requirements.