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Fair Value Measurements (Tables)

12 Months Ended

Sep. 30, 2021

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 September 30, 2021 and 2020, and the changes in the fair value of the Level 3 assets during fiscal 2021 and 2020.


		Fair Value at September 30, 2021
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Mortgage loans held for sale (1)	Mortgage loans held for sale	$	—	$	2,009.4	$	11.7	$	2,021.1
Mortgage servicing rights (2)	Other assets	—		—		4.1		4.1
Derivatives not designated as hedging instruments (3):
Interest rate lock commitments (4)	Other assets	—		17.2		—		17.2
Forward sales of mortgage-backed securities	Other assets	—		8.5		—		8.5


		Fair Value at September 30, 2020
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Debt securities collateralized by residential real estate	Other assets	$	—	$	—	$	3.9	$	3.9
Mortgage loans held for sale (1)	Mortgage loans held for sale	—		1,503.2		15.1		1,518.3
Mortgage servicing rights (2)	Other assets	—		—		17.1		17.1
Derivatives not designated as hedging instruments (3):
Interest rate lock commitments	Other assets	—		31.3		—		31.3
Forward sales of mortgage-backed securities	Other liabilities	—		(16.2)		—		(16.2)


	Level 3 Assets at Fair Value for the Year Ended September 30, 2021
	Balance at September 30, 2020		Net realized and unrealized gains (losses)		Purchases / Originations		Sales and Settlements		Principal Reductions		Net transfers to (out of) Level 3		Balance at September 30, 2021
	(In millions)
Debt securities collateralized by residential real estate	$	3.9	$	—	$	—	$	(3.9)	$	—	$	—	$	—
Mortgage loans held for sale (1)	15.1		0.3		—		(3.3)		—		(0.4)		11.7
Mortgage servicing rights (2)	17.1		(0.2)		24.7		(37.5)		—		—		4.1
	Level 3 Assets at Fair Value for the Year Ended September 30, 2020
	Balance at September 30, 2019		Net realized and unrealized gains (losses)		Purchases / Originations		Sales and Settlements		Principal Reductions		Net transfers to (out of) Level 3		Balance at September 30, 2020
	(In millions)
Debt securities collateralized by residential real estate	$	3.9	$	—	$	—	$	—	$	—	$	—	$	3.9
Mortgage loans held for sale (1)	9.8		0.2		—		(2.6)		—		7.7		15.1
Mortgage servicing rights (2)	—		1.9		15.2		—		—		—		17.1

___________________________________________

(1)The Company typically elects the fair value option upon origination for mortgage loans held for sale. Interest income earned on mortgage loans held for sale is based on contractual interest rates and included in other income. Mortgage loans held for sale valued using Level 3 inputs at September 30, 2021 and 2020 include $11.7 million and $15.1 million, respectively, of loans for which the Company elected the fair value option upon origination and did not sell into the secondary market. Mortgage loans held for sale totaling $7.7 million were transferred to Level 3 during fiscal 2020 due to significant unobservable inputs used in determining the fair value of these loans. The fair value of these mortgage loans held for sale is generally calculated considering pricing in the secondary market and adjusted for the value of the underlying collateral, including interest rate risk, liquidity risk and prepayment risk. The Company plans to sell these loans as market conditions permit. Mortgage loans totaling $0.4 million were transferred to Level 2 during fiscal 2021 because their fair value was based on actual quoted prices related to the pending sale of those loans in the secondary market.

(2)Although the majority of the Company’s mortgage loans are sold on a servicing-released basis, when the servicing rights are retained, the Company records them at fair value using third-party valuations. The valuation at the time the servicing asset is retained is reflected in the purchases/originations column with subsequent changes in value classified as realized and unrealized gains (losses). The key assumptions used in the valuation, which are generally unobservable inputs, are mortgage prepayment rates, discount rates and delinquency rates, which were 11%, 11% and 6%, respectively, at September 30, 2021.

(3)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 as other assets or accrued expenses and other liabilities. Changes in the fair value of these derivatives are included in revenues in the consolidated statements of operations. The net fair value change in fiscal 2021 and 2020 recognized in revenues in the consolidated statements of operations was not significant.

(4)The fair value of interest rate lock commitments at September 30, 2021 reflects $17.9 million of servicing release premiums in other assets and a change in fair value of $0.7 million in other liabilities.

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 September 30, 2021 and 2020.


		Fair Value at September 30,
	Balance Sheet Location	2021				2020
		Level 2		Level 3		Level 2		Level 3
		(In millions)
Mortgage loans held for sale (1) (2)	Mortgage loans held for sale	$	—	$	3.8	$	1.5	$	2.2
Other mortgage loans (1) (3)	Other assets	—		1.3		0.6		2.0

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(1)The fair values included in the table above represent only those assets whose carrying values were adjusted to fair value as a result of impairment in the respective period and were held at the end of the period.

(2)These mortgage loans have some degree of impairment affecting their marketability and are valued at the lower of carrying value or fair value. When available, quoted prices in the secondary market are used to determine fair value (Level 2); otherwise, a cash flow valuation model is used to determine fair value (Level 3).

(3)The fair values of other mortgage loans were determined based on the value of the underlying collateral

Fair value of financial assets and liabilities

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 September 30, 2021 and 2020.


	Carrying Value		Fair Value at September 30, 2021
			Level 1		Level 2		Level 3		Total
	(In millions)
Cash and cash equivalents (1)	$	3,210.4	$	3,210.4	$	—	$	—	$	3,210.4
Restricted cash (1)	26.8		26.8		—		—		26.8
Notes payable (2) (3)	5,412.4		—		3,950.9		1,589.3		5,540.2


	Carrying Value		Fair Value at September 30, 2020
			Level 1		Level 2		Level 3		Total
	(In millions)
Cash and cash equivalents (1)	$	3,018.5	$	3,018.5	$	—	$	—	$	3,018.5
Restricted cash (1)	21.6		21.6		—		—		21.6
Notes payable (2) (3)	4,283.3		—		3,285.5		1,203.7		4,489.2

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(1)The fair values of cash, cash equivalents and restricted cash approximate their carrying values due to their short-term nature and are classified as Level 1 within the fair value hierarchy.

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

(3)The fair values of other secured notes and borrowings on the revolving credit facility and the mortgage repurchase facility approximate carrying value due to their short-term nature or floating interest rate terms, as applicable, and are classified as Level 3 within the fair value hierarchy.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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