Note 9 - Mortgage Loans Held for Sale

6 Months Ended

Apr. 30, 2014

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

9. Mortgage Loans Held for Sale

Our mortgage banking subsidiary originates mortgage loans, primarily from the sale of our homes. Such mortgage loans are sold in the secondary mortgage market within a short period of time of origination. Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. We have elected the fair value option to record loans held for sale and therefore these loans are recorded at fair value with the changes in the value recognized in the Condensed Consolidated Statements of Operations in “Revenues: Financial services.” We currently use forward sales of mortgage-backed securities, interest rate commitments from borrowers and mandatory and/or best efforts forward commitments to sell loans to investors to protect us from interest rate fluctuations. These short-term instruments, which do not require any payments to be made to the counterparty or investor in connection with the execution of the commitments, are recorded at fair value. Gains and losses on changes in the fair value are recognized in the Condensed Consolidated Statements of Operations in “Revenues: Financial services.”

At April 30, 2014 and October 31, 2013, respectively, $35.6 million and $94.1 million of mortgages held for sale were pledged against our mortgage warehouse lines of credit (see Note 10). We may incur losses with respect to mortgages that were previously sold that are delinquent and which had underwriting defects, but only to the extent the losses are not covered by mortgage insurance or resale value of the home. The reserves for these estimated losses are included in the “Financial services – Accounts payable and other liabilities” balances on the Condensed Consolidated Balance Sheet. We received 10 and 16 repurchase or make-whole inquiries during the three and six months ended April 30, 2014, respectively. We received 11 and 24 repurchase or make-whole inquiries during the three and six months ended April 30, 2013, respectively.

The activity in our loan origination reserves during the three and six months ended April 30, 2014 and 2013 was as follows:

	Three Months Ended April 30,				Six Months Ended April 30,
(In thousands)	2014		2013		2014		2013
Loan origination reserves, beginning of period	$10,719		$9,118		$11,036		$9,334
Provisions for losses during the period	466		709		867		1,335
Adjustments to pre-existing provisions for losses from changes in estimates	(63	)	(61	)	(622	)	(253	)
Payments/settlements	(65	)	-		(224	)	(650	)
Loan origination reserves, end of period	$11,057		$9,766		$11,057		$9,766