Mortgage Loans

9 Months Ended

Jun. 30, 2020

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

MORTGAGE LOANS

MORTGAGE LOANS

Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. At June 30, 2020, mortgage loans held for sale had an aggregate carrying value of $1.5 billion and an aggregate outstanding principal balance of $1.4 billion. At September 30, 2019, mortgage loans held for sale had an aggregate carrying value of $1.1 billion and an aggregate outstanding principal balance of $1.0 billion. During the nine months ended June 30, 2020 and 2019, mortgage loans originated totaled $8.4 billion and $6.0 billion, respectively, and mortgage loans sold totaled $8.0 billion and $5.8 billion, respectively. The Company had gains on sales of loans and servicing rights of $116.7 million and $263.7 million during the three and nine months ended June 30, 2020, respectively, compared to $85.4 million and $218.3 million in the prior year periods. Net gains on sales of loans and servicing rights are included in revenues in the consolidated statements of operations. Approximately 93% of the mortgage loans sold by DHI Mortgage during the nine months ended June 30, 2020 were sold to four major financial entities, of which one entity purchased 36%.

In response to C-19, the U.S. government has taken various actions to support the economy and the continued functioning of the financial markets. On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which included changes to current forbearance options for government-backed loans designed to keep homeowners in their homes. Due to the uncertainty surrounding these forbearance options, servicing values declined rapidly at the end of March. The Company began retaining the servicing rights on some of its loan originations during the three months ended June 30, 2020. At June 30, 2020, the fair value of mortgage servicing rights was $10.0 million and is included in other assets in the consolidated balance sheet.

The Company also occasionally uses hedging instruments as part of a program to offer below market interest rate financing to its homebuyers in certain markets. At June 30, 2020, the Company had mortgage-backed securities (MBS) totaling $1.3 billion that did not yet have interest rate lock commitments or closed loans created or assigned and recorded a liability of $11.7 million for the fair value of such MBS position.