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FAIR VALUE

12 Months Ended

Dec. 31, 2021

The Company's consolidated financial statements include assets and liabilities that are measured based on their estimated fair values. Refer to Note 1- Description of Business, Presentation and Summary of Significant Accounting Policies for information on the fair value hierarchy, valuation methodologies, and key inputs used to measure financial assets and liabilities recorded at fair value, as well as methods and assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis.

The following tables present the carrying amount and estimated fair value of financial instruments included in the consolidated financial statements.


	December 31, 2021
	Carrying Amount		Estimated Fair Value
			Level 1		Level 2		Level 3

Assets
Cash and cash equivalents	$	419,571	$	419,571	$	—	$	—
Restricted cash	201,025		201,025		—		—
Loans held for sale, at fair value	8,136,817		—		8,136,817		—
Derivative assets, at fair value	194,665		4,924		5,358		184,383
Servicing rights, at fair value	2,006,712		—		—		2,006,712
Trading securities, at fair value	72,874		—		72,874		—
Loans eligible for repurchase	363,373		—		363,373		—

Liabilities
Warehouse and other lines of credit	$	7,457,199	$	—	$	7,457,199	$	—
Derivative liabilities, at fair value	37,797		31,070		2,964		3,763
Servicing rights, at fair value	7,310		—		—		7,310
Debt obligations:
Secured credit facilities	343,759		—		345,596		—
Term Notes	199,133		—		200,000		—


Senior Notes	1,085,316		—		1,057,977		—
Liability for loans eligible for repurchase	363,373		—		363,373		—


	December 31, 2020
	Carrying Amount		Estimated Fair Value
			Level 1		Level 2		Level 3

Assets
Cash and cash equivalents	$	284,224	$	284,224	$	—	$	—
Restricted cash	204,465		204,465		—		—
Loans held for sale, at fair value	6,955,424		—		6,955,424		—
Derivative assets, at fair value	647,939		483		107		647,349
Servicing rights, at fair value	1,127,866		—		—		1,127,866

Loans eligible for repurchase	1,246,158		—		1,246,158		—

Liabilities
Warehouse and other lines of credit	$	6,577,429	$	—	$	6,577,429	$	—
Derivative liabilities, at fair value	168,169		4,299		163,566		304
Servicing rights, at fair value	3,564		—		—		3,564

Debt obligations:
Secured credit facilities	22,571		—		23,593		—
Term Notes	198,640		—		200,000		—


Senior Notes	491,255				518,245
Liability for loans eligible for repurchase	1,246,158		—		1,246,158		—

Financial Statement Items Measured at Fair Value on a Recurring Basis

The following tables presents the Company’s assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy as of the dates indicated.











	December 31, 2021
	Recurring Fair Value Measurements of Assets and Liabilities Using:
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Fair value through net income:
Assets:
Loans held for sale	$	—	$	8,136,817	$	—	$	8,136,817
Trading Securities	—		72,874		—		72,874
Derivative assets:
Interest rate lock commitments	—		—		184,383		184,383
Forward sale contracts	—		5,358		—		5,358
Interest rate swap futures	4,924		—		—		4,924


Servicing rights	—		—		2,006,712		2,006,712
Total assets at fair value	$	4,924	$	8,215,049	$	2,191,095	$	10,411,068
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	3,763	$	3,763
Forward sale contracts	—		2,964		—		2,964

Put options on treasuries	31,070		—		—		31,070

Servicing rights	—		—		7,310		7,310

Total liabilities at fair value	$	31,070	$	2,964	$	11,073	$	45,107


	December 31, 2020
	Recurring Fair Value Measurements of Assets and Liabilities Using:
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Fair value through net income:
Assets:
Loans held for sale	$	—	$	6,955,424	$	—	$	6,955,424
Derivative assets:
Interest rate lock commitments	—		—		647,349		647,349
Forward sale contracts	—		107		—		107
Interest rate swap futures	483		—		—		483

Servicing rights	—		—		1,127,866		1,127,866
Total assets at fair value	$	483	$	6,955,531	$	1,775,215	$	8,731,229
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	304	$	304

Forward sale contracts	—		163,566		—		163,566
Put options on treasuries	4,299		—		—		4,299
Servicing rights	—		—		3,564		3,564

Total liabilities at fair value	$	4,299	$	163,566	$	3,868	$	171,733

The following presents the changes in the Company’s assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


	Year Ended December 31, 2021
		IRLCs, net		Servicing Rights, net

Balance at beginning of period		$	647,045	$	1,124,302


Total net gains or losses included in earnings (realized and unrealized)		2,169,847		1,258,829
Sales and settlements

Sales		—		(383,729)
Settlements (1)		(1,969,541)		—
Transfers of IRLCs to closed loans		(666,731)		—
Balance at end of period		$	180,620	$	1,999,402

(1)Funded amount for IRLCs.


	Year Ended December 31, 2020
		IRLCs, net		Servicing Rights, net		Contingent Consideration

Balance at beginning of period		$	128,208	$	444,443	$	(2,374)


Total net gains or losses included in earnings (realized and unrealized)		3,628,891		686,632		(32,650)
Sales and settlements

Sales		—		(6,773)		—
Settlements (1)(2)		(2,460,225)		—		34,835
Transfers of IRLCs to closed loans		(649,829)		—		—
Transfers from Level 3 (3)		—		—		189
Balance at end of period		$	647,045	$	1,124,302	$	—

(1)The $34.8 million settlement of contingent consideration included $14.7 million to satisfy the initial contingent consideration liability, the remaining $20.1 million was paid in accordance with an annual earnout computation.

(2)Funded amount for IRLCs.

(3)The $189,000 as of December 31, 2020 represents a fixed amount recorded in accounts payable and accrued liabilities on the Company’s consolidated balance sheet.


	Year Ended December 31, 2019
		IRLCs, net		Servicing Rights, net		Contingent Consideration

Balance at beginning of period		$	60,466	$	408,989	$	(961)


Total net gains or losses included in
earnings (realized and unrealized)		957,418		200,392		(2,374)
Sales and settlements

Sales		—		(164,938)		—
Settlements (1)		(655,644)		—		961
Transfers of IRLCs to closed loans		(234,032)		—		—
Balance at end of period		$	128,208	$	444,443	$	(2,374)

(1)Funded amount for IRLCs.

The following presents the gains and losses included in earnings relating to the Company’s assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


	Year Ended December 31, 2021
		IRLCs, net (1)		Servicing Rights, net (2)


Total net (losses) gains included in earnings		$	(466,425)	$	1,258,829

Change in unrealized gains relating to assets and liabilities still held at period end		$	180,620	$	1,341,289

(1)Gains (losses) included in gain on origination and sale of loans, net.

(2)Includes $1.6 billion in gains included in gain on origination and sale of loans, net and $351.8 million in losses included in change in fair value of servicing rights, net, for the year ended December 31, 2021.


	Year Ended December 31, 2020
		IRLCs (1)		Servicing Rights, net (2)


Total net gains included in earnings		$	518,837	$	686,632

Change in unrealized gains relating to assets and liabilities still held at period end		$	647,045	$	860,212

(1)Gains (losses) included in gain on origination and sale of loans, net.

(2)Includes $986.1 million in gains included in gain on origination and sale of loans, net and $299.4 million in losses included in change in fair value of servicing rights, net, for the year ended December 31, 2020.


	Year Ended December 31, 2019
		IRLCs (1)		Servicing Rights, net (2)		Contingent Consideration (3)


Total net gains (losses) included in earnings		$	67,742	$	200,392	$	(2,374)

Change in unrealized gains (losses) relating to assets and liabilities still held at period end		$	128,208	$	229,979	$	(2,374)

(1)Gains (losses) included in gain on origination and sale of loans, net.

(2)Includes $334.2 million in gains included in gain on origination and sale of loans, net and $133.8 million in losses included in change in fair value of servicing rights, net, for the year ended December 31, 2019.

(3)Gains (losses) included in general and administrative expense.

The following table presents quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring basis:



	December 31, 2021				December 31, 2020
Unobservable Input	Range of inputs			Weighted Average (2)	Range of inputs			Weighted Average (2)
IRLCs:
Pull-through rate	0.3%	-	99.3%	74.2%	2.8%	-	99.9%	70.5%

Servicing rights
Discount rate(1)	4.5%	-	9.0%	5.8%	5.0%	-	10.0%	6.2%
Prepayment rate(1)	8.4%	-	18.7%	10.2%	13.4%	-	34.8%	14.0%
Cost to service (per loan)	$70	-	$114	$82	$71	-	$139	$89

(1)The Company estimates the fair value of MSRs using an option-adjusted spread (“OAS”) model, which projects MSR cash flows over multiple interest rate scenarios in conjunction with the Company’s prepayment model, and then discounts these cash flows at risk-adjusted rates.

(2)Weighted average inputs are based on the committed amounts for IRLCs and the UPB of the underlying loans for servicing rights.

Financial Statement Items Measured at Fair Value on a Nonrecurring Basis

The Company did not have any material assets or liabilities that were recorded at fair value on a non-recurring basis as of December 31, 2021 and 2020.

Financial Statement Items Measured at Amortized Cost

Warehouse lines - The Company’s warehouse lines of credit bear interest at a rate that is periodically adjusted based on a market index. The carrying value of warehouse lines of credit approximates fair value.

Debt obligations, net - Debt consists of secured credit facilities, Term Notes, and Senior Notes. The Company’s secured credit facilities and Term Notes accrue interest at a stated rate of 30-day or 90-day LIBOR, or other alternative base rate such as SOFR, plus a margin, they are highly liquid and short-term in nature and as a result, their carrying value approximated fair value as of December 31, 2021 and 2020. Fair value of the Company’s Senior Notes issued in October 2020 and March 2021 were estimated using the quoted market prices at December 31, 2021. The Senior Notes are classified as Level 2 in the fair value hierarchy.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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