Lennar Financial Services Segment

The assets and liabilities related to the Lennar Financial Services segment were as follows:



(In thousands)	February 29, 2016		November 30, 2015
Assets:
Cash and cash equivalents	$	91,214	106,777
Restricted cash	9,235		13,961
Receivables, net (1)	150,214		242,808
Loans held-for-sale (2)	684,406		843,252
Loans held-for-investment, net	31,223		30,998
Investments held-to-maturity	39,268		40,174
Investments available-for-sale (3)	45,180		42,827
Goodwill	39,439		38,854
Other (4)	66,900		66,186
	$	1,157,079	1,425,837
Liabilities:
Notes and other debts payable	$	625,322	858,300
Other (5)	212,929		225,678
	$	838,251	1,083,978


(1)	Receivables, net primarily related to loans sold to investors for which the Company had not yet been paid as of February 29, 2016 and November 30, 2015, respectively.


(2)	Loans held-for-sale related to unsold loans carried at fair value.


(3)	Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss).


(4)	As of February 29, 2016 and November 30, 2015, other assets included mortgage loan commitments carried at fair value of $19.1 million and $13.1 million, respectively, and mortgage servicing rights carried at fair value of $15.8 million and $16.8 million, respectively. In addition, other assets also included forward contracts carried at fair value $0.5 million as of November 30, 2015.


(5)	Other liabilities included $62.7 million and $65.0 million as of February 29, 2016 and November 30, 2015, respectively, of certain of the Company’s self-insurance reserves related to construction defects, general liability and workers’ compensation. Other liabilities also included forward contracts carried at fair value of $9.6 million as of February 29, 2016.

At February 29, 2016, the Lennar Financial Services segment warehouse facilities were as follows:



(In thousands)	Maximum Aggregate Commitment
364-day warehouse repurchase facility that matures August 2016 (1)	$	400,000
364-day warehouse repurchase facility that matures August 2016	300,000
364-day warehouse repurchase facility that matures October 2016 (2)	450,000
Total	$	1,150,000


(1)	In accordance with the amended warehouse repurchase facility agreement, the maximum aggregate commitment will be increased to $600 million in the second quarter of fiscal 2016.


(2)	Maximum aggregate commitment includes an uncommitted amount of $250 million.

The Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are expected to be renewed or replaced with other facilities when they mature. Borrowings under the facilities and their prior year predecessors were $625.3 million and $858.3 million at February 29, 2016 and November 30, 2015, respectively, and were collateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $673.1 million and $916.9 million at February 29, 2016 and November 30, 2015, respectively. If the facilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the mortgage loans held-for-sale to investors and by collecting on receivables on loans sold but not yet paid. Without the facilities, the Lennar Financial Services segment would have to use cash from operations and other funding sources to finance its lending activities.

Substantially, all of the loans the Lennar Financial Services segment originates are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements. Over the last several years there has been an industry-wide effort by purchasers to defray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan sale agreements. Mortgage investors could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that the Company has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations have established accruals for possible losses associated with mortgage loans previously originated and sold to investors. The Company establishes accruals for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans as well as previous settlements. While the Company believes that it has adequately reserved for known losses and projected repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations, additional recourse expense may be incurred. Loan origination liabilities are included in Lennar Financial Services’ liabilities in the Company's condensed consolidated balance sheets. The activity in the Company’s loan origination liabilities was as follows:



	Three Months Ended
	February 29,			February 28,
(In thousands)	2016			2015
Loan origination liabilities, beginning of period	$	19,492		11,818
Provision for losses	788			802
Payments/settlements	(172		)	(144	)
Loan origination liabilities, end of period	$	20,108		12,476