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Fair Value of Assets and Liabilities
 12 Months Ended
Dec. 31, 2017
Fair Value Disclosures [Abstract]  
Fair Value of Assets and Liabilities
Fair Value of Assets and Liabilities

For a description of the fair value hierarchy and the Company’s fair value methodologies, see “Note 2. Summary of Significant Accounting Policies.” The Company records certain assets and liabilities at fair value as listed in the following tables.

Financial Instruments Recorded at Fair Value

The following tables present the fair value hierarchy for assets and liabilities measured at fair value:
December 31, 2017
Level 1 Inputs
 
Level 2 Inputs
 
Level 3 Inputs
 
Balance at Fair Value
Assets:
 
 
 
 
 
 
 
Loans held for investment
$
—

 
$
—

 
$
2,932,325

 
$
2,932,325

Loans held for investment by the Company
—

 
—

 
361,230

 
361,230

Loans held for sale by the Company
—

 
—

 
235,825

 
235,825

Securities available for sale:
 
 
 
 
 
 
 
Asset-backed senior securities related to Company-sponsored securitizations
—

 
37,020

 
—

 
37,020

Certificates of deposit
—

 
24,758

 
—

 
24,758

Corporate debt securities
—

 
16,258

 
—

 
16,258

Asset-backed securities
—

 
14,843

 
—

 
14,843

Commercial paper
—

 
14,665

 
—

 
14,665

Asset-backed subordinated residual certificates related to Company-sponsored securitizations and CLUB Certificate transactions
—

 
—

 
10,029

 
10,029

Total securities available for sale
—

 
107,544

 
10,029

 
117,573

Servicing assets
—

 
—

 
33,676

 
33,676

Total assets
$
—

 
$
107,544

 
$
3,573,085

 
$
3,680,629

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Notes, certificates and secured borrowings
—

 
—

 
2,954,768

 
2,954,768

Payable to securitization residual certificate holders
—

 
—

 
1,479

 
1,479

Servicing liabilities
—

 
—

 
833

 
833

Loan trailing fee liability
—

 
—

 
8,432

 
8,432

Total liabilities
$
—

 
$
—

 
$
2,965,512

 
$
2,965,512



December 31, 2016
Level 1 Inputs
 
Level 2 Inputs
 
Level 3 Inputs
 
Balance at
Fair Value
Assets:
 
 
 
 
 
 
 
Loans held for investment
$
—

 
$
—

 
$
4,295,121

 
$
4,295,121

Loans held for investment by the Company
—

 
—

 
16,863

 
16,863

Loans held for sale by the Company
—

 
—

 
9,048

 
9,048

Securities available for sale:
 
 
 
 
 
 
 
Corporate debt securities
—

 
181,223

 
—

 
181,223

Certificates of deposit
—

 
27,501

 
—

 
27,501

Asset-backed securities
—

 
25,364

 
—

 
25,364

Commercial paper
—

 
20,164

 
—

 
20,164

U.S. agency securities
—

 
19,623

 
—

 
19,623

U.S. Treasury securities
—

 
2,496

 
—

 
2,496

Other securities
—

 
10,766

 
—

 
10,766

Total securities available for sale
—

 
287,137

 
—

 
287,137

Servicing assets
—

 
—

 
21,398

 
21,398

Total assets
$
—

 
$
287,137

 
$
4,342,430

 
$
4,629,567

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Notes and certificates
$
—

 
$
—

 
$
4,320,895

 
$
4,320,895

Loan trailing fee liability
—

 
—

 
4,913

 
4,913

Servicing liabilities
—

 
—

 
2,846

 
2,846

Total liabilities
$
—

 
$
—

 
$
4,328,654

 
$
4,328,654



Financial instruments are categorized in the valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. Since the Company’s loans held for investment and related notes, certificates and secured borrowings, loans held for sale, loan servicing rights, asset-backed securities related to consolidated VIEs, and loan trailing fee liability do not trade in an active market with readily observable prices, the Company uses significant unobservable inputs to measure the fair value of these assets and liabilities. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, changes in fair value for assets and liabilities within the Level 2 or Level 3 categories may include changes in fair value that were attributable to observable and unobservable inputs, respectively. The Company did not transfer any assets or liabilities in or out of Level 3 during the years ended December 31, 2017 or 2016.

Significant Unobservable Inputs

The Company primarily uses a model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect our best estimates of the assumptions a market participant would use to calculate fair value. The following tables present quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements at December 31, 2017 and 2016:
 
 
 
 
 
 
 
December 31, 2017
 
 
 
Loans Held for Investment,
Loans Held for Sale,
Notes, Certificates
and Secured Borrowings (1)
 
Asset-Backed Securities
Related to Consolidated VIEs
 
 
 
 
 
 
 
Minimum
 
Maximum
 
Weighted
Average
 
Minimum
 
Maximum
 
Weighted
Average
Discount rates
 
1.7
%
 
17.2
%
 
8.5
%
 
5.8
%
 
15.0
%
 
9.5
%
Net cumulative expected loss rates (2)(4)
 
0.4
%
 
41.8
%
 
13.8
%
 
10.9
%
 
37.2
%
 
19.7
%
Cumulative expected prepayment rates (2)(4)
 
11.3
%
 
51.0
%
 
31.6
%
 
28.3
%
 
33.7
%
 
30.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
Servicing Assets/Liabilities
 
Loan Trailing Fee Liability
 
 
 
 
 
 
 
Minimum
 
Maximum
 
Weighted
Average
 
Minimum
 
Maximum
 
Weighted
Average
Discount rates
 
 
 
 
 
 
1.9
%
 
17.1
%
 
8.8
%
 
1.9
%
 
17.1
%
 
8.9
%
Net cumulative expected loss rates (2)
 
0.4
%
 
41.8
%
 
12.4
%
 
0.8
%
 
41.8
%
 
13.2
%
Cumulative expected prepayment rates (2)
 
11.3
%
 
51.0
%
 
31.7
%
 
11.3
%
 
51.0
%
 
31.4
%
Total market servicing rates
(% per annum on outstanding principal balance) (3)
 
0.66
%
 
0.90
%
 
0.66
%
 
N/A

 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
Loans Held for Investment,
Loans Held for Sale,
Notes and Certificates (1)
 
Servicing Assets/Liabilities
 
Loan Trailing Fee Liability
 
Minimum
 
Maximum
 
Weighted
Average
 
Minimum
 
Maximum
 
Weighted
Average
 
Minimum
 
Maximum
 
Weighted
Average
Discount rates
1.2
%
 
16.6
%
 
7.2
%
 
3.4
%
 
15.1
%
 
7.8
%
 
3.4
%
 
15
%
 
7.7
%
Net cumulative expected loss rates (2)
0.3
%
 
33.9
%
 
14.6
%
 
0.3
%
 
33.9
%
 
12.8
%
 
0.3
%
 
33.9
%
 
13.5
%
Cumulative expected prepayment rates (2)
8.0
%
 
42.7
%
 
30.7
%
 
8.0
%
 
42.7
%
 
29.3
%
 
8.0
%
 
42.7
%
 
28.3
%
Total market servicing rates (% per annum on outstanding principal balance) (3)
N/A

 
N/A

 
N/A

 
0.63
%
 
0.90
%
 
0.63
%
 
N/A

 
N/A

 
N/A

N/A Not applicable
(1)  
Loans held for investment and loans held for sale include loans invested in by the Company.
(2) 
Expressed as a percentage of the original principal balance of the loan, note, certificate or secured borrowing, except for asset-backed securities.
(3)  
Includes collection fees estimated to be paid to a hypothetical third-party servicer.
(4) 
For asset-backed securities, expressed as a percentage of the outstanding collateral balance.

At December 31, 2017 and 2016, the discounted cash flow methodology used to estimate the note, certificate and secured borrowings’ fair values used the same projected net cash flows as their related loans. As demonstrated by the following tables, the fair value adjustments for loans held for investment and loans held for sale were largely offset by the fair value adjustments of the notes, certificates and secured borrowings due to the payment dependent design of the notes, certificates and secured borrowings and because the principal balances of the loans were close to the combined principal balances of the notes, certificates and secured borrowings.
The following table presents additional information about Level 3 loans held for investment, loans held for sale, and notes, certificates and secured borrowings measured at fair value on a recurring basis for the years ended December 31, 2017 and 2016:
 
Loans Held For Investment
 
Loans Held for Sale
 
Notes, Certificates
and Secured Borrowings
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
Balance at December 31, 2015
$
4,678,209

 
$
(125,586
)
 
$
4,552,623

 
$
—

 
$
—

 
$
—

 
$
4,697,169

 
$
(125,586
)
 
$
4,571,583

Purchases
2,653,589

 
—

 
2,653,589

 
4,638,436

 
—

 
4,638,436

 
—

 
—

 
—

Transfers (to) from loans held for investment (from) to loans held for sale
20,573

 
—

 
20,573

 
(20,573
)
—

—

 
(20,573
)
 
—

 
—

 
—

Issuances
—

 
—

 
—

 
—

 
—

 
—

 
2,681,109

 
—

 
2,681,109

Sales
—

 
—

 
—

 
(4,617,863
)
 
—

 
(4,617,863
)
 
—

 
—

 
—

Principal payments and retirements
(2,385,102
)
 
—

 
(2,385,102
)
 
—

 
—

 
—

 
(2,385,234
)
 
—

 
(2,385,234
)
Charge-offs
(420,131
)
 
420,131

 
—

 
—

 
—

 
—

 
(420,132
)
 
420,132

 
—

Recoveries
—

 
(36,784
)
 
(36,784
)
 
—

 
—

 
—

 
—

 
(36,785
)
 
(36,785
)
Change in fair value recorded in earnings
—

 
(509,778
)
 
(509,778
)
 
—

 
—

 
—

 
—

 
(509,778
)
 
(509,778
)
Balance at December 31, 2016
$
4,547,138

 
$
(252,017
)
 
$
4,295,121

 
$
—

 
$
—

 
$
—

 
$
4,572,912

 
$
(252,017
)
 
$
4,320,895

Purchases
1,720,343

 
5

 
1,720,348

 
5,232,503

 
6,420

 
5,238,923

 
—

 
—

 
—

Transfers (to) from loans held for investment (from) to loans held for sale
(253,124
)
 
(4,112
)
 
(257,236
)
 
253,124

 
4,112

 
257,236

 
—

 
—

 
—

Issuances
—

 
—

 
—

 
—

 
—

 
—

 
2,019,316

 
(17,937
)
 
2,001,379

Sales
—

 
—

 
—

 
(5,483,146
)
 
8,067

 
(5,475,079
)
 
—

 
—

 
—

Principal payments and retirements
(2,383,510
)
 
—

 
(2,383,510
)
 
(2,481
)
 
—

 
(2,481
)
 
(2,941,692
)
 
31,606

 
(2,910,086
)
Charge-offs
(489,456
)
 
489,456

 
—

 
—

 
—

 
—

 
(489,456
)
 
489,456

 
—

Recoveries
—

 
(47,913
)
 
(47,913
)
 
—

 
—

 
—

 
—

 
(47,914
)
 
(47,914
)
Change in fair value recorded in earnings
—

 
(394,485
)
 
(394,485
)
 
—

 
(18,599
)
 
(18,599
)
 
—

 
(409,506
)
 
(409,506
)
Balance at December 31, 2017
$
3,141,391

 
$
(209,066
)
 
$
2,932,325

 
$
—

 
$
—

 
$
—

 
$
3,161,080

 
$
(206,312
)
 
$
2,954,768



The following table presents additional information about Level 3 loans invested in by the Company measured at fair value on a recurring basis for the years ended December 31, 2017 and 2016:
 
Loans Held For Investment
by the Company
 
Loans Held For Sale
by the Company
 
Total Loans Invested
in by the Company
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
 
Outstanding Principal Balance
 
Valuation Adjustment
 
Fair Value
Balance at
December 31, 2015
$
3,462

 
$
(4
)
 
$
3,458

 
$
—

 
$
—

 
$
—

 
$
3,462

 
$
(4
)
 
$
3,458

Purchases
79,736

 
(656
)
 
79,080

 
104,102

 
—

 
104,102

 
183,838

 
(656
)
 
183,182

Transfers (to) from loans held for investment (from) to loans held for sale
(55,984
)
 
—

 
(55,984
)
 
55,984

 
—

 
55,984

 
—

 
—

 
—

Sales
—

 
—

 
—

 
(144,655
)
 
—

 
(144,655
)
 
(144,655
)
 
—

 
(144,655
)
Principal payments
(6,705
)
 
—

 
(6,705
)
 
(5,927
)
 
—

 
(5,927
)
 
(12,632
)
 
—

 
(12,632
)
Charge-offs
(1,994
)
 
1,994

 
—

 
(159
)
 
159

 
—

 
(2,153
)
 
2,153

 
—

Recoveries
—

 
(493
)
 
(493
)
 
—

 
—

 
—

 
—

 
(493
)
 
(493
)
Change in fair value recorded in earnings
—

 
(2,493
)
 
(2,493
)
 
—

 
(456
)
 
(456
)
 
—

 
(2,949
)
 
(2,949
)
Balance at
December 31, 2016
$
18,515

 
$
(1,652
)
 
$
16,863

 
$
9,345

 
$
(297
)
 
$
9,048

 
$
27,860

 
(1,949
)
 
$
25,911

Purchases
19,069

 
(707
)
 
18,362

 
1,629,228

 
(192
)
 
1,629,036

 
1,648,297

 
(899
)
 
1,647,398

Transfers (to) from loans held for investment (from) to loans held for sale
354,410

 
4,112

 
358,522

 
(354,410
)
 
(4,112
)
 
(358,522
)
 
—

 
—

 
—

Sales
—

 
—

 
—

 
(990,267
)
 
5,871

 
(984,396
)
 
(990,267
)
 
5,871

 
(984,396
)
Principal payments
(16,433
)
 
—

 
(16,433
)
 
(49,248
)
 
—

 
(49,248
)
 
(65,681
)
 
—

 
(65,681
)
Charge-offs
(4,182
)
 
4,182

 
—

 
(2,375
)
 
2,375

 
—

 
(6,557
)
 
6,557

 
—

Recoveries
—

 
(343
)
 
(343
)
 
—

 
—

 
—

 
—

 
(343
)
 
(343
)
Change in fair value recorded in earnings
—

 
(15,741
)
 
(15,741
)
 
—

 
(10,093
)
 
(10,093
)
 
—

 
(25,834
)
 
(25,834
)
Balance at
December 31, 2017
$
371,379

 
$
(10,149
)
 
$
361,230

 
$
242,273

 
$
(6,448
)
 
$
235,825

 
$
613,652

 
(16,597
)
 
$
597,055


The following table presents additional information about Level 3 servicing assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2017 and 2016:
 
Servicing Assets
 
Servicing Liabilities
Fair value at December 31, 2015
$
10,250

 
$
3,973

Issuances (1)
16,546

 
3,371

Changes in fair value, included in investor fees
(5,403
)
 
(4,498
)
Other net changes included in deferred revenue
5

 
—

Fair value at December 31, 2016
$
21,398

 
$
2,846

Issuances (1)
34,950

 
333

Changes in fair value, included in investor fees
(23,172
)
 
(2,346
)
Other net changes included in deferred revenue
500

 
—

Fair value at December 31, 2017
$
33,676

 
$
833

(1) 
Represents the gains or losses on sales of the related loans.

The following table presents additional information about the Level 3 loan trailing fee liability measured at fair value on a recurring basis for the years ended December 31, 2017 and 2016:
Year Ended December 31,
2017
 
2016
Fair value at beginning of period
$
4,913

 
$
—

Issuances
7,470

 
5,843

Cash payment of loan trailing fee
(4,358
)
 
(1,174
)
Change in fair value, included in origination and servicing
407

 
244

Fair value at end of period
$
8,432

 
$
4,913



Significant Recurring Level 3 Fair Value Asset and Liability Input Sensitivity

Fair valuation adjustments are recorded through earnings related to Level 3 instruments for the years ended December 31, 2017, 2016 and 2015. Certain unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. When multiple inputs are used within the valuation techniques for loans, notes, certificates and secured borrowings, servicing assets and liabilities, and loan trailing fee liability, a change in one input in a certain direction may be offset by an opposite change from another input.

A specific loan that is projected to have larger future default losses than previously estimated has lower expected future cash flows over its remaining life, which reduces its estimated fair value. Conversely, a specific loan that is projected to have smaller future default losses than previously estimated has increased expected future cash flows over its remaining life, which increases its estimated fair value.

The fair value sensitivity of loans invested in by the Company to adverse changes in key assumptions as of December 31, 2017, are as follows:
 
December 31, 2017
Fair value of loans invested in by the Company
$
597,055

Expected weighted-average life (in years)
1.5

Discount rates
 
100 basis point increase
$
(7,449
)
200 basis point increase
$
(14,715
)
Expected credit loss rates on underlying loans
 
10% adverse change
$
(10,090
)
20% adverse change
$
(18,935
)
Expected prepayment rates
 
10% adverse change
$
(3,548
)
20% adverse change
$
(5,894
)


The fair value sensitivity of loans invested in by the Company to adverse changes in key assumptions as of December 31, 2016, was not material.

The Company’s selection of the most representative market servicing rates for servicing assets and servicing liabilities is inherently judgmental. The Company reviews third-party servicing rates for its loans, loans in similar credit sectors and market servicing benchmarking analyses provided by third-party valuation firms, when available. The table below shows the impact on the estimated fair value of servicing assets and liabilities, calculated using different market servicing rate assumptions as of December 31, 2017 and 2016:
 
December 31, 2017
 
December 31, 2016
 
Servicing Assets
 
Servicing Liabilities
 
Servicing Assets
 
Servicing Liabilities
Weighted-average market servicing rate assumptions
0.66
%
 
0.66
%
 
0.63
%
 
0.63
%
Change in fair value from:
 
 
 
 
 
 
 
Servicing rate increase by 0.10%
$
(7,749
)
 
$
233

 
$
(5,673
)
 
$
964

Servicing rate decrease by 0.10%
$
7,760

 
$
(222
)
 
$
5,812

 
$
(825
)


Financial Instruments, Assets, and Liabilities Not Recorded at Fair Value

The following tables present the fair value hierarchy for financial instruments, assets, and liabilities not recorded at fair value:
December 31, 2017
Carrying Amount
 
Level 1 Inputs
 
Level 2 Inputs
 
Level 3 Inputs
 
Balance at
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (1)
$
401,719

 
—

 
$
401,719

 
$
—

 
$
401,719

Restricted cash
242,570

 
—

 
242,570

 
—

 
242,570

Servicer reserve receivable
13,685

 
—

 
13,685

 
—

 
13,685

Deposits
855

 
—

 
855

 
—

 
855

Total assets
$
658,829

 
—

 
$
658,829

 
$
—

 
$
658,829

Liabilities:
 
 
 
 
 
 
 
 
 
Accrued expenses and other liabilities
$
13,856

 
$
—

 
$
—

 
$
13,856

 
$
13,856

Accounts payable
11,151

 
—

 
11,151

 
—

 
11,151

Payable to investors
143,310

 
—

 
143,310

 
—

 
143,310

Payable to securitization note holders
310,644

 
—

 
310,644

 
—

 
310,644

Warehouse notes payable
32,100

 
—

 
—

 
32,100

 
32,100

Total liabilities
$
511,061

 
$
—

 
$
465,105

 
$
45,956

 
$
511,061

(1) 
Carrying amount approximates fair value due to the short maturity of these financial instruments.
December 31, 2016
Carrying Amount
 
Level 1 Inputs
 
Level 2 Inputs
 
Level 3 Inputs
 
Balance at
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (1)
$
515,602

 
$
—

 
$
515,602

 
$
—

 
$
515,602

Restricted cash
177,810

 
—

 
177,810

 
—

 
177,810

Servicer reserve receivable
4,938

 
—

 
4,938

 
—

 
4,938

Deposits
855

 
—

 
855

 
—

 
855

Total assets
$
699,205

 
$
—

 
$
699,205

 
$
—

 
$
699,205

Liabilities:
 
 
 
 
 
 
 
 
 
Accrued expenses and other liabilities
$
10,981

 
$
—

 
$
—

 
$
10,981

 
$
10,981

Accounts payable
10,889

 
—

 
10,889

 
—

 
10,889

Payable to investors
125,884

 
—

 
125,884

 
—

 
125,884

Total liabilities
$
147,754

 
$
—

 
$
136,773

 
$
10,981

 
$
147,754


(1) 
Carrying amount approximates fair value due to the short maturity of these financial instruments.