Mortgage Loans

6 Months Ended

Mar. 31, 2021

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 March 31, 2021, mortgage loans held for sale had an aggregate carrying value of $1.76 billion and an aggregate outstanding principal balance of $1.73 billion. At September 30, 2020, mortgage loans held for sale had an aggregate carrying value of $1.53 billion and an aggregate outstanding principal balance of $1.46 billion. During the six months ended March 31, 2021 and 2020, mortgage loans originated totaled $7.3 billion and $4.9 billion, respectively, and mortgage loans sold totaled $7.0 billion and $4.6 billion, respectively. The Company had gains on sales of loans and servicing rights of $178.6 million and $317.4 million during the three and six months ended March 31, 2021, respectively, compared to $73.3 million and $147.0 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. During the six months ended March 31, 2021, approximately 54% of the Company’s mortgage loans were sold directly to the Federal National Mortgage Association (Fannie Mae) or into securities backed by the Government National Mortgage Association (Ginnie Mae), and 37% were sold to two other major financial entities.

In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which included changes to forbearance options for government-backed loans designed to keep homeowners in their homes during the COVID-19 pandemic (C-19). Due to the uncertainty surrounding these forbearance options, servicing values declined rapidly at the end of March 2020. As a result, the Company began retaining the servicing rights on a portion of its loan originations. Servicing values have since improved, and the Company sold a portion of its retained mortgage servicing rights in the six months ended March 31, 2021. The Company expects to continue retaining some servicing rights prior to selling them to third parties, typically within six months of loan origination. At March 31, 2021 and September 30, 2020, the fair value of mortgage servicing rights was $6.4 million and $17.1 million, respectively, and is included in other assets in the consolidated balance sheets.

The Company also uses hedging instruments as part of a program to offer below market interest rate financing to its homebuyers. At March 31, 2021 and September 30, 2020, the Company had mortgage-backed securities (MBS) totaling $1.5 billion and $1.1 billion, respectively, that did not yet have interest rate lock commitments or closed loans created or assigned and recorded an asset of $5.0 million and a liability of $5.3 million, respectively, for the fair value of such MBS position.