Fair Value Measurements (Tables)

9 Months Ended

Jun. 30, 2015

Fair value measurements of assets and liabilities on a recurring basis

The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2015 and September 30, 2014, and the changes in the fair value of the Level 3 assets during the nine months ended June 30, 2015 and 2014.



		Fair Value at June 30, 2015
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Homebuilding:
Debt securities collateralized by residential real estate (a)	Other assets	$	—	$	—	$	35.6	$	35.6
Financial Services:
Mortgage loans held for sale (b)	Mortgage loans held for sale	—		554.9		13.5		568.4
Derivatives not designated as hedging instruments (c):
Interest rate lock commitments	Other assets	—		1.7		—		1.7
Forward sales of MBS	Other assets	—		2.6		—		2.6
Best-efforts and mandatory commitments	Other assets	—		0.4		—		0.4



		Fair Value at September 30, 2014
	Balance Sheet Location	Level 1		Level 2			Level 3		Total
		(In millions)
Homebuilding:
Debt securities collateralized by residential real estate (a)	Other assets	$	—	$	—		$	20.8	$	20.8
Financial Services:
Mortgage loans held for sale (b)	Mortgage loans held for sale	—		464.9			12.0		476.9
Derivatives not designated as hedging instruments (c):
Interest rate lock commitments	Other assets	—		2.4			—		2.4
Forward sales of MBS	Other liabilities	—		(1.9		)	—		(1.9		)
Best-efforts and mandatory commitments	Other liabilities	—		(0.1		)	—		(0.1		)



	Level 3 Assets at Fair Value for the Nine Months Ended June 30, 2015
	Balance at September 30, 2014		Net realized and unrealized gains		Purchases		Sales and Settlements			Net transfers in (out) of Level 3		Balance at June 30, 2015
	(In millions)
Debt securities collateralized by residential real estate (a)	$	20.8	$	—	$	14.8	$	—		$	—	$	35.6
Mortgage loans held for sale (b)	12.0		0.3		—		(1.7		)	2.9		13.5
	Level 3 Assets at Fair Value for the Nine Months Ended June 30, 2014
	Balance at September 30, 2013		Net realized and unrealized gains		Purchases		Sales and Settlements			Net transfers in (out) of Level 3		Balance at June 30, 2014
	(In millions)
Debt securities collateralized by residential real estate (a)	$	20.3	$	0.5	$	—	$	—		$	—	$	20.8
Mortgage loans held for sale (b)	5.7		0.7		—		(0.5		)	3.4		9.3

(a)

In October 2012, the Company purchased defaulted debt securities, which were secured by residential real estate, for $18.6 million in cash. In the three months ended June 30, 2015, the Company purchased the residential real estate parcel and all additional defaulted debt securities associated with the parcel for $19.9 million in cash, of which $5.1 million was allocated to the land and $14.8 million was allocated to the debt securities. The Company plans to develop the property to build and sell homes and intends to sell the debt securities to a third party in the future. These securities, which are included in other assets in the consolidated balance sheets, are classified as available for sale and are reflected at fair value. The fair value of the securities was determined by estimating the expected proceeds upon their eventual sale. Unrealized gains or losses on these securities, net of tax, are recorded in accumulated other comprehensive income (loss) in the consolidated balance sheets.

(b)

Mortgage loans held for sale are reflected at fair value. Interest income earned on mortgage loans held for sale is based on contractual interest rates and included in financial services interest and other income. Mortgage loans held for sale at June 30, 2015 includes $13.5 million of originated loans for which the Company elected the fair value option upon origination and which the Company has not sold into the secondary market, but plans to sell as market conditions permit. The fair value of these mortgage loans held for sale is generally calculated considering the secondary market and adjusted for the value of the underlying collateral, including interest rate risk, liquidity risk and prepayment risk.


(c)	Fair value measurements of these derivatives represent changes in fair value, as calculated by reference to quoted prices for similar assets, and are reflected in the balance sheet. Changes in these fair values during the periods presented are included in financial services revenues in the consolidated statements of operations.

Fair value measurements of assets on a non-recurring basis

The following table summarizes the Company’s assets measured at fair value on a nonrecurring basis at June 30, 2015 and September 30, 2014:



		Fair Value at June 30, 2015		Fair Value at September 30, 2014
		Fair Value at June 30, 2015		Fair Value at September 30, 2014
	Balance Sheet Location	Level 3		Level 3
		(In millions)
Homebuilding:
Inventory held and used (a) (b)	Inventories	$	16.4	$	19.2
Inventory available for sale (a) (c)	Inventories	5.2		8.2
Financial Services:
Other mortgage loans (a) (d)	Other assets	13.8		16.0
Real estate owned (a) (d)	Other assets	0.5		0.5

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(a)	The fair values included in the table above represent only those assets whose carrying values were adjusted to fair value in the respective quarter.


(b)	In performing its impairment analysis of communities, discount rates ranging from 12% to 18% were used in the periods presented.


(c)	The fair value of inventory available for sale was determined based on recent offers received from outside third parties, comparable sales or actual contracts.


(d)	The fair values of other mortgage loans and real estate owned are determined based on the value of the underlying collateral.

Fair Value, by Balance Sheet Grouping [Table Text Block]

For the financial assets and liabilities that the Company does not reflect at fair value, the following tables present both their respective carrying value and fair value at June 30, 2015 and September 30, 2014:



	Carrying Value		Fair Value at June 30, 2015
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In millions)
Homebuilding:
Cash and cash equivalents (a)	$	766.7	$	766.7	$	—	$	—	$	766.7
Restricted cash (a)	11.7		11.7		—		—		11.7
Senior notes (b)	3,342.7		—		3,393.8		—		3,393.8
Other secured notes (a)	30.4		—		—		30.4		30.4
Financial Services:
Cash and cash equivalents (a)	38.9		38.9		—		—		38.9
Mortgage repurchase facility (a)	448.0		—		—		448.0		448.0



	Carrying Value		Fair Value at September 30, 2014
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In millions)
Homebuilding:
Cash and cash equivalents (a)	$	632.5	$	632.5	$	—	$	—	$	632.5
Restricted cash (a)	10.0		10.0		—		—		10.0
Revolving credit facility (a)	300.0		—		—		300.0		300.0
Senior notes (b)	3,000.2		—		3,033.8		—		3,033.8
Other secured notes (a)	23.4		—		—		23.4		23.4
Financial Services:
Cash and cash equivalents (a)	29.3		29.3		—		—		29.3
Mortgage repurchase facility (a)	359.2		—		—		359.2		359.2

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(a)	The fair value approximates carrying value due to its short-term nature, short maturity or floating interest rate terms, as applicable.


(b)	The fair value is determined based on quoted market prices of recent transactions of the notes, which is classified as Level 2 within the fair value hierarchy.