Note 10 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

10. Commitments and Contingencies

a. Land Purchase and Option Agreements

We are subject to obligations associated with entering into contracts for the purchase of land and improved homesites. These purchase contracts typically require us to provide a cash deposit or deliver a letter of credit in favor of the seller, and our purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the near-term use of funds from our corporate financing sources. Option contracts generally require a non-refundable deposit for the right to acquire lots over a specified period of time at predetermined prices. We generally have the right at our discretion to terminate our obligations under both purchase contracts and option contracts by forfeiting our cash deposit or by repaying amounts drawn under our letter of credit with no further financial responsibility to the land seller, although in certain instances, the land seller has the right to compel us to purchase a specified number of lots at predetermined prices.

In some instances, we may also expend funds for due diligence, development and construction activities with respect to our land purchase and option contracts prior to purchase, which we would have to write off should we not purchase the land. At December 31, 2014, we had non-refundable cash deposits outstanding of approximately $38.8 million and capitalized pre-acquisition and other development and construction costs of approximately $7.3 million relating to land purchase and option contracts having a total remaining purchase price of approximately $406.7 million.

Our utilization of option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries, general housing market conditions, and geographic preferences. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

b. Land Development and Homebuilding Joint Ventures

Our joint ventures have historically obtained secured acquisition, development and construction financing designed to reduce the use of funds from corporate financing sources. As of December 31, 2014, we held membership interests in 21 homebuilding and land development joint ventures, of which seven were active and 14 were inactive or winding down. As of such date, only one joint venture had $30 million of project specific debt outstanding. This joint venture bank debt is non-recourse to us and is scheduled to mature in June 2015. As of December 31, 2014, we had $0.1 million of joint venture surety bonds outstanding subject to indemnity arrangements by us related to one project which was substantially complete as of such date.

c. Surety Bonds

We obtain surety bonds in the normal course of business to ensure completion of the infrastructure of our projects. At December 31, 2014, we had approximately $504.5 million in surety bonds outstanding (exclusive of surety bonds related to our joint ventures), with respect to which we had an estimated $295.0 million remaining in cost to complete.

d. Mortgage Loans and Commitments

We commit to making mortgage loans to our homebuyers through our mortgage financing subsidiary, Standard Pacific Mortgage. Standard Pacific Mortgage sells substantially all of the loans it originates in the secondary mortgage market and finances these loans under its mortgage credit facilities for a short period of time (typically for 30 to 45 days), as investors complete their administrative review of applicable loan documents. Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $37.8 million at December 31, 2014 and carried a weighted average interest rate of approximately 3.8%. Interest rate risks related to these obligations are mitigated through the preselling of loans to investors. As of December 31, 2014, Standard Pacific Mortgage had approximately $172.0 million in closed mortgage loans held for sale and $38.1 million of mortgage loans that we were committed to sell to investors subject to our funding of the loans and completion of the investors’ administrative review of the applicable loan documents.

Substantially all of the loans originated by Standard Pacific Mortgage are sold with servicing rights released on a non-recourse basis. These sales are generally subject to Standard Pacific Mortgage’s obligation to repay its gain on sale if the loan is prepaid by the borrower within a certain time period following such sale, or to repurchase the loan if, among other things, the purchaser’s underwriting guidelines are not met, or there is fraud in connection with the loan. As of December 31, 2014, we had incurred an aggregate of $10.8 million in losses related to loan repurchases and make-whole payments we had been required to make on the $9.0 billion total dollar value of the loans we originated from the beginning of 2004 through the end of 2014. During the years ended December 31, 2014, 2013 and 2012, Standard Pacific Mortgage recorded loan loss expense related to indemnification and repurchase allowances of $0.5 million, $0 and $1.0 million, respectively. As of December 31, 2014, Standard Pacific Mortgage had indemnity and repurchase allowances related to loans sold of approximately $2.2 million. In addition, during the years ended December 31, 2014, 2013 and 2012, Standard Pacific Mortgage made make-whole payments totaling approximately $0.5 million related to 12 loans, $0.8 million related to nine loans and $1.0 million related to eight loans, respectively.

e. Insurance and Litigation Accruals

We are involved in various litigation and legal claims arising in the ordinary course of business and have established insurance and litigation accruals for estimated future claim costs (please see Note 2.r. for further discussion).

f. Operating Leases

We lease office facilities and certain equipment under noncancelable operating leases. Future minimum rental payments under these leases having an initial term in excess of one year as of December 31, 2014 are as follows:

	Year Ended December 31,
	(Dollars in thousands)
2015	$	4,681
2016		4,004
2017		2,837
2018		1,631
2019		873
Thereafter		44
Total rental obligations	$	14,070

Rent expense under noncancelable operating leases, net of sublease income, for each of the years ended December 31, 2014, 2013 and 2012 was approximately $4.4 million, $3.8 million and $3.6 million, respectively.