Mortgage Loans Held for Sale

3 Months Ended

Mar. 31, 2024

Discontinued Operations and Disposal Groups [Abstract]

The carrying value of mortgage loans held for sale owned by Radian Mortgage Capital totaled $147 million and $33 million at March 31, 2024, and December 31, 2023, respectively, and is based on fair value. The estimated fair value of our mortgage loans held for sale is subject to changes in mortgage interest rates from the date we agree to purchase the mortgage loan through the date we agree to sell the mortgage loan. We elected the fair value option for our mortgage loans held for sale to mitigate income statement volatility and allow for consistent treatment of both loans and any associated hedges or derivatives. Net gains (losses) associated with our mortgage loans held for sale and any related hedges are included in net gains (losses) on investments and other financial instruments in our condensed consolidated statements of operations.

As of March 31, 2024, our mortgage loans held for sale consisted of 217 mortgage loans with a total unpaid principal balance of $145 million, related to properties in 37 states and the District of Columbia. As of March 31, 2024, none of these loans were greater than ninety days delinquent or in nonaccrual status. Interest earned on mortgage loans held for sale is included in net investment income in our condensed consolidated statements of operations.

Further, as of March 31, 2024, the Company had commitments to purchase and fund additional mortgage loans with a total unpaid principal balance of $277 million. Prior to the settlement and funding of these loan purchases, any unrealized net gains (losses) related to these commitments are recorded as derivative assets or liabilities on our consolidated balance sheets.

The following table reflects the outstanding derivative instruments related to our mortgage loan activity as of the dates indicated.


Derivative instruments

	March 31, 2024						December 31, 2023
	Notional (1)		Fair Value				Notional (1)		Fair Value
(In thousands)			Derivative Assets		Derivative Liabilities				Derivative Assets		Derivative Liabilities
Forward mortgage loan purchase commitments	$	277,339	$	435	$	—	$	83,962	$	708	$	—
Hedging instruments (2)
Forward RMBS purchase contracts	$	238,350	$	20	$	397	$	51,100	$	715	$	817
Interest rate swap futures contracts (3)	22,500		499		—		7,300		489		—

(1)Notional amounts provide an indication of the volume of the Company’s derivative capacity.

(2)All of the derivatives used for hedging purposes are interest rate derivatives subject to master netting agreements and are considered economic hedges.

(3)Derivative assets include cash collateral receivables of $357 thousand and $720 thousand as of March 31, 2024, and December 31, 2023, respectively.

Included in our net gains (losses) on investments and other financial instruments in our condensed consolidated statements of operations are net gains (losses) related to our mortgage loans and related hedging activities, which consisted of the following.


Net gains (losses) on mortgage loans held for sale

	Three Months Ended March 31,
(In thousands)		2024		2023
Net realized gains (losses)
Mortgage loans		$	63	$	—
Mortgage loan hedging activities		(783)		(116)
Total realized gains (losses)		(720)		(116)

Mortgage loan servicing rights resulting from loan sales		310		—

Change in unrealized gains (losses) on mortgage loans and related derivatives sold or redeemed		(49)		33

Unrealized gains (losses) on mortgage loans and related derivatives still held
Mortgage loans (1)		1,078		192
Mortgage loan hedging activities		(235)		(29)
Total net unrealized gains (losses)		843		163
Net gains (losses) on mortgage loans held for sale		$	384	$	80

(1)Includes net gains (losses) on mortgage loan commitments accounted for as derivatives prior to settlement.

We primarily fund the purchases of our mortgage loans held for sale with amounts borrowed under our mortgage loan financing facilities. Expenses related to these facilities are included in interest expense in our condensed consolidated statements of operations. See Note 12 for additional information on these facilities and their related terms and covenants.

Net investment income earned on our mortgage loans held for sale and interest expense incurred on our mortgage loan financing facilities consisted of the following.


Net interest margin on mortgage loans held for sale

	Three Months Ended March 31,
(In thousands)		2024		2023
Interest income		$	1,793	$	194
Interest expense		1,438		77
Net interest margin on mortgage loans held for sale		$	355	$	117

In addition to the debt covenants under its financing facilities, Radian Mortgage Capital is also subject to certain requirements established by state and other regulators and loan purchasers, including Freddie Mac, such as certain minimum net worth and capital requirements. The most restrictive of these financial requirements requires Radian Mortgage Capital to maintain a minimum tangible net worth of $3 million. To the extent these requirements are not met, these parties may exercise certain remedies, which may include, as applicable, prohibiting Radian Mortgage Capital from purchasing, selling, or servicing loans. As of March 31, 2024, Radian Mortgage Capital was in compliance with all such requirements.