Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 07, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | IMPAC MORTGAGE HOLDINGS INC | |
Entity Central Index Key | 1,000,298 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 20,953,756 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
ASSETS | ||
Cash and cash equivalents | $ 29,485 | $ 33,223 |
Restricted cash | 5,704 | 5,876 |
Mortgage loans held-for-sale | 655,506 | 568,781 |
Finance receivables | 26,989 | 41,777 |
Mortgage servicing rights | 174,067 | 154,405 |
Securitized mortgage trust assets | 3,524,053 | 3,670,550 |
Goodwill | 104,587 | 104,587 |
Intangible assets, net | 20,532 | 21,582 |
Loans eligible for repurchase from Ginnie Mae | 54,632 | 47,697 |
Other assets | 27,379 | 33,222 |
Total assets | 4,622,934 | 4,681,700 |
LIABILITIES | ||
Warehouse borrowings | 650,342 | 575,363 |
MSR financings | 45,000 | 35,133 |
Convertible notes, net | 24,977 | 24,974 |
Long-term debt | 45,337 | 44,982 |
Securitized mortgage trust liabilities | 3,508,477 | 3,653,265 |
Liability for loans eligible for repurchase from Ginnie Mae | 54,632 | 47,697 |
Contingent consideration | 554 | |
Other liabilities | 33,970 | 34,585 |
Total liabilities | 4,362,735 | 4,416,553 |
Commitments and contingencies (See Note 10) | ||
STOCKHOLDERS’ EQUITY | ||
Common stock, $0.01 par value; 200,000,000 shares authorized; 20,952,679 and 20,949,679 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | 210 | 209 |
Additional paid-in capital | 1,234,149 | 1,233,704 |
Accumulated other comprehensive earnings, net of tax | 25,578 | |
Net accumulated deficit: | ||
Cumulative dividends declared | (822,520) | (822,520) |
Retained deficit | (177,239) | (146,267) |
Net accumulated deficit | (999,759) | (968,787) |
Total stockholders’ equity | 260,199 | 265,147 |
Total liabilities and stockholders’ equity | 4,622,934 | 4,681,700 |
Series A-1 junior participating preferred stock | ||
STOCKHOLDERS’ EQUITY | ||
Preferred stock | ||
Series B 9.375% redeemable preferred stock | ||
STOCKHOLDERS’ EQUITY | ||
Preferred stock | 7 | 7 |
Series C 9.125% redeemable preferred stock | ||
STOCKHOLDERS’ EQUITY | ||
Preferred stock | $ 14 | $ 14 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 20,952,679 | 20,949,679 |
Common stock, shares outstanding | 20,952,679 | 20,949,679 |
Series A-1 junior participating preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 2,500,000 | 2,500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series B 9.375% redeemable preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, dividend rate (as a percent) | 9.375% | 9.375% |
Preferred stock, liquidation value (in dollars) | $ 16,640 | $ 16,640 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 665,592 | 665,592 |
Preferred stock, shares outstanding | 665,592 | 665,592 |
Series C 9.125% redeemable preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, dividend rate (as a percent) | 9.125% | 9.125% |
Preferred stock, liquidation value (in dollars) | $ 35,127 | $ 35,127 |
Preferred stock, shares authorized | 5,500,000 | 5,500,000 |
Preferred stock, shares issued | 1,405,086 | 1,405,086 |
Preferred stock, shares outstanding | 1,405,086 | 1,405,086 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues: | ||
Gain on sale of loans, net | $ 21,482 | $ 37,319 |
Servicing fees, net | 9,463 | 7,320 |
Gain (loss) on mortgage servicing rights, net | 7,705 | (977) |
Real estate services fees, net | 1,385 | 1,633 |
Other | 90 | 47 |
Total revenues | 40,125 | 45,342 |
Expenses: | ||
Personnel expense | 17,742 | 24,919 |
Business promotion | 9,731 | 10,231 |
General, administrative and other | 8,275 | 8,023 |
Accretion of contingent consideration | 845 | |
Change in fair value of contingent consideration | 539 | |
Total expenses | 35,748 | 44,557 |
Operating income | 4,377 | 785 |
Other income (expense): | ||
Interest income | 50,150 | 61,584 |
Interest expense | (49,130) | (61,138) |
Change in fair value of long-term debt | 1,224 | (2,497) |
Change in fair value of net trust assets, including trust REO gains | (2,138) | 6,319 |
Total other income | 106 | 4,268 |
Earnings before income taxes | 4,483 | 5,053 |
Income tax expense | 610 | 426 |
Net earnings | 3,873 | 4,627 |
Other comprehensive earnings: | ||
Change in fair value of instrument specific credit risk | (1,440) | |
Total comprehensive earnings | $ 2,433 | $ 4,627 |
Earnings per common share: | ||
Basic (in dollars per share) | $ 0.18 | $ 0.29 |
Diluted (in dollars per share) | $ 0.18 | $ 0.29 |
Real Estate | ||
Revenues: | ||
Real estate services fees, net | $ 1,385 | $ 1,633 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands | Preferred Stock | Common Stock | Additional Paid-In Capital | Cumulative Dividends Declared | Retained Deficit | Accumulated Other Comprehensive Earnings | Total |
Balance at Dec. 31, 2017 | $ 21 | $ 209 | $ 1,233,704 | $ (822,520) | $ (146,267) | $ 265,147 | |
Balance (in shares) at Dec. 31, 2017 | 2,070,678 | 20,949,679 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Proceeds and tax benefit from exercise of stock options | $ 1 | 15 | 16 | ||||
Proceeds and tax benefit from exercise of stock options (in shares) | 3,000 | ||||||
Stock based compensation | 430 | 430 | |||||
Other comprehensive earnings | $ (1,440) | (1,440) | |||||
Net earnings | 3,873 | 3,873 | |||||
Balance at Mar. 31, 2018 | $ 21 | $ 210 | $ 1,234,149 | $ (822,520) | (177,239) | 25,578 | 260,199 |
Balance (in shares) at Mar. 31, 2018 | 2,070,678 | 20,952,679 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Reclassification and adjustment related to adoption of new standard | ASU 2016-01 | (27,018) | $ 27,018 | |||||
Reclassification and adjustment related to adoption of new standard | ASU 2016-16 | $ (7,827) | $ (7,827) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net earnings | $ 3,873 | $ 4,627 | |
Loss on sale of mortgage servicing rights | 2 | 414 | |
Change in fair value of mortgage servicing rights | (9,180) | 1,122 | |
Gain on sale of mortgage loans | (28,851) | (31,595) | |
Change in fair value of mortgage loans held-for-sale | 4,891 | (5,203) | |
Change in fair value of derivatives lending, net | 1,815 | (79) | |
Provision (recovery) for repurchases | 378 | (1,666) | |
Origination of mortgage loans held-for-sale | (1,320,128) | (1,580,019) | |
Sale and principal reduction on mortgage loans held-for-sale | 1,246,881 | 1,558,851 | |
Gains from REO | (2,193) | (1,533) | |
Change in fair value of net trust assets, excluding REO | 4,331 | (4,786) | |
Change in fair value of long-term debt | (1,224) | 2,497 | |
Accretion of interest income and expense | 14,531 | 25,550 | |
Amortization of intangible and other assets | 1,193 | 1,192 | |
Accretion of contingent consideration | 845 | ||
Change in fair value of contingent consideration | 539 | ||
Amortization of debt issuance costs and discount on note payable | 21 | 100 | |
Stock-based compensation | 430 | 500 | |
Impairment of deferred charge | 276 | ||
Excess tax benefit from share based compensation | 12 | ||
Net change in other assets | (3,833) | 2,046 | |
Net change in other liabilities | (949) | (15,871) | |
Net cash used in operating activities | (88,014) | (42,181) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Net change in securitized mortgage collateral | 116,205 | 182,824 | |
Proceeds from the sale of mortgage servicing rights | 481 | ||
Finance receivable advances to customers | (165,668) | (183,613) | |
Repayments of finance receivables | 180,456 | 208,994 | |
Purchase of premises and equipment | (109) | (291) | |
Proceeds from the sale of REO | 5,418 | 6,859 | |
Net cash provided by investing activities | 136,302 | 215,254 | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Repayment of MSR financing | (25,133) | ||
Borrowings under MSR financing | 35,000 | 35,133 | |
Repayment of warehouse borrowings | (1,204,301) | (1,498,519) | |
Borrowings under warehouse agreements | 1,279,280 | 1,519,778 | |
Repayment of term financing | (30,000) | ||
Payment of acquisition related contingent consideration | (554) | (7,958) | |
Repayment of securitized mortgage borrowings | (136,444) | (211,895) | |
Principal payments on capital lease | (59) | (101) | |
Debt issuance costs | (100) | ||
Tax payments on stock based compensation awards | (3) | (21) | |
Proceeds from exercise of stock options | 16 | 30 | |
Net cash used in financing activities | (52,198) | (193,653) | |
Net change in cash, cash equivalents and restricted cash | (3,910) | (20,580) | |
Cash, cash equivalents and restricted cash at beginning of period | 39,099 | 46,067 | $ 46,067 |
Cash, cash equivalents and restricted cash at end of period | 35,189 | 25,487 | $ 39,099 |
NON-CASH TRANSACTIONS: | |||
Transfer of securitized mortgage collateral to real estate owned | 4,835 | 2,267 | |
Mortgage servicing rights retained from loan sales and issuance of mortgage backed securities | $ 10,482 | $ 12,066 |
Summary of Business and Financi
Summary of Business and Financial Statement Presentation | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Business and Financial Statement Presentation | |
Summary of Business and Financial Statement Presentation | Note 1.—Summary of Business and Financial Statement Presentation Business Summary Impac Mortgage Holdings, Inc. (the Company or IMH) is a Maryland corporation incorporated in August 1995 and has the following direct and indirect wholly-owned subsidiaries: Integrated Real Estate Service Corporation (IRES), Impac Mortgage Corp. (IMC), IMH Assets Corp. (IMH Assets) and Impac Funding Corporation (IFC). The Company’s operations include the mortgage lending operations and real estate services conducted by IRES and IMC and the long-term mortgage portfolio (residual interests in securitizations reflected as net trust assets and liabilities in the consolidated balance sheets) conducted by IMH. IMC’s mortgage lending operations include the activities of CashCall Mortgage (CCM). Financial Statement Presentation The accompanying unaudited consolidated financial statements of IMH and its subsidiaries (as defined above) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These interim period condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the United States Securities and Exchange Commission (SEC). All significant intercompany balances and transactions have been eliminated in consolidation. In addition, certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation. Management has made a number of material estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period to prepare these consolidated financial statements in conformity with GAAP. Additionally, other items affected by such estimates and assumptions include the valuation of trust assets and trust liabilities, contingencies, the estimated obligation of repurchase liabilities related to sold loans, the valuation of long-term debt, mortgage servicing rights, mortgage loans held-for-sale and derivative instruments, including interest rate lock commitments (IRLC). Actual results could differ from those estimates and assumptions. Recent Accounting Pronouncements Accounting Standards Update (ASU) No. 2014-09, 2015-04, 2016-08, 2016-10, 2016-12, 2016-20, 2017-13 and 2017-14, collectively implemented as Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), “Revenue from Contracts with Customers (Topic 606)” , provides guidance for revenue recognition. This ASC’s core principle requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects consideration to which the company expects to be entitled in exchange for those goods or services. The standard also clarifies the principal versus agent considerations, providing the evaluation must focus on whether the entity has control of the goods or services before they are transferred to the customer. The new standard permits the use of either the modified retrospective or full retrospective transition method. The Company's revenue is primarily generated from loan originations, loan servicing and real estate services. Origination revenue is comprised of fee income earned at origination of a loan, interest income earned for the period the loans are held and gain on sale on loans upon disposition of the loan. Servicing revenue is comprised of servicing fees and other ancillary fees in connection with our servicing activities. Real estate services revenue is comprised of income earned from various real estate services and support such as loss mitigation, loan modification, surveillance and disposition and monitoring services. The Company performed a review of the guidance as compared to current accounting policies and have evaluated all services rendered to customers as well as underlying contracts to determine the impact of this standard to the Company’s revenue recognition process. The majority of services rendered by the Company in connection with loan originations, loan servicing and the long-term mortgage portfolio are not within the scope of FASB ASC 606. However, the Company identified real estate services revenues that were within the scope of FASB ASC 606 and the impact upon adoption was not materially different from the previous revenue recognition processes. The Company adopted this guidance on January 1, 2018, and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, " Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. " The amendments in ASU 2016-01, among other things, requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); requires separate presentation in other comprehensive income for the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The update is effective for interim and annual reporting periods beginning after December 15, 2017 on a modified retrospective basis, using a cumulative-effect adjustment to the balance sheet as of the beginning of the year adopted. The Company adopted this guidance on January 1, 2018, which resulted in a $27.0 million reclass, net of tax, between opening retained earnings and other comprehensive income (loss) within stockholders’ equity. In August 2016, the FASB issued ASU 2016-15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments .” The update amends the guidance in Accounting Standards Codification 230, Statement of Cash Flows, and clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows with the objective of reducing the existing diversity in practice related to eight specific cash flow issues. In addition, in November 2016, the FASB issued Statement of Cash Flows (Topic 230), Restricted Cash (ASU In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” This ASU requires entities to recognize at the transaction date the income tax consequences of intercompany asset transfers other than inventory. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. The adoption of this standard was applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this guidance on January 1, 2018, which resulted in a $7.8 million cumulative effect adjustment to opening retained earnings. In May 2017, the FASB issued ASU 2017-09, “ Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” The update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective for annual reporting periods beginning after December 15, 2017. The Company adopted this guidance on January 1, 2018, and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “ Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU allows a reclassification from accumulated other comprehensive earnings (AOCE) to retained earnings for the stranded tax effects caused by the revaluation of deferred taxes resulting from the newly enacted corporate tax rate in the Tax Cuts and Jobs Act. The ASU is effective in years beginning after December 15, 2018, but permits early adoption in a period for which financial statements have not yet been issued. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. In February 2018, the FASB ASU 2018-03, “ Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities .” This amendment clarifies certain aspects of the new guidance (ASU 2016-01) on recognizing and measuring financial instruments and presentation requirements for certain fair value option liabilities. ASU 2018-03 is effective for interim periods beginning after June 15, 2018 and will be effective for our 2018 annual reporting period. The standard requires entities to record a cumulative-effect adjustment to the statement of financial position at the beginning of the fiscal year in which the amendments are adopted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. In March 2018, the FASB issued ASU 2018-05, “ Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” |
Mortgage Loans Held-for-Sale
Mortgage Loans Held-for-Sale | 3 Months Ended |
Mar. 31, 2018 | |
Mortgage Loans Held-for-Sale | |
Mortgage Loans Held-for-Sale | Note 2.—Mortgage Loans Held-for-Sale A summary of the unpaid principal balance (UPB) of mortgage loans held-for-sale by type is presented below: March 31, December 31, 2018 2017 Government (1) $ 179,150 $ 263,512 Conventional (2) 358,575 193,055 Other (3) 103,470 93,012 Fair value adjustment (4) 14,311 19,202 Total mortgage loans held for sale $ 655,506 $ 568,781 (1) Includes all government-insured loans including Federal Housing Administration (FHA), Veterans Affairs (VA) and United States Department of Agriculture (USDA). (2) Includes loans eligible for sale to Federal National Mortgage Association (Fannie Mae or FNMA) and Federal Home Loan Mortgage Corporation (Freddie Mac or FHLMC). (3) Includes non-qualified mortgages (NonQM) and jumbo loans. (4) Changes in fair value are included in gain on sale of loans, net in the accompanying consolidated statements of operations. Gain on mortgage loans held-for-sale (LHFS), included in gain on sale of loans, net in the consolidated statements of operations, is comprised of the following the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, 2018 2017 Gain on sale of mortgage loans $ 29,338 $ 38,240 Premium from servicing retained loan sales 10,482 12,066 Unrealized losses from derivative financial instruments (2,100) (1,145) Realized gains from derivative financial instruments 12,045 1,125 Mark to market (loss) gain on LHFS (4,891) 5,203 Direct origination expenses, net (23,014) (19,836) Provision for repurchases (378) 1,666 Total gain on sale of loans, net $ 21,482 $ 37,319 |
Mortgage Servicing Rights
Mortgage Servicing Rights | 3 Months Ended |
Mar. 31, 2018 | |
Mortgage Servicing Rights | |
Mortgage Servicing Rights | Note 3.—Mortgage Servicing Rights The Company retains mortgage servicing rights (MSRs) from its sales and securitization of certain mortgage loans or as a result of purchase transactions. MSRs are reported at fair value based on the income derived from the net projected cash flows associated with the servicing contracts. The Company receives servicing fees, less subservicing costs, on the UPB of the loans. The servicing fees are collected from the monthly payments made by the mortgagors or when the underlying real estate is foreclosed upon and liquidated. The Company may receive other remuneration from rights to various mortgagor-contracted fees, such as late charges, collateral reconveyance charges and nonsufficient fund fees, and the Company is generally entitled to retain the interest earned on funds held pending remittance (or float) related to its collection of mortgagor principal, interest, tax and insurance payments. The following table summarizes the activity of MSRs for the three months ended March 31, 2018 and year ended December 31, 2017: March 31, December 31, 2018 2017 Balance at beginning of period $ 154,405 $ 131,537 Additions from servicing retained loan sales 10,482 56,049 Addition from purchases — 5,618 Reductions from bulk sales (1) — (895) Changes in fair value (2) 9,180 (37,904) Fair value of MSRs at end of period $ 174,067 $ 154,405 (1) In the first quarter of 2017, the Company sold substantially all of its NonQM MSRs. (2) Changes in fair value are included within gain (loss) on MSRs, net in the accompanying consolidated statements of operations. At March 31, 2018 and December 31, 2017, the outstanding principal balance of the mortgage servicing portfolio was comprised of the following: March 31, December 31, 2018 2017 Government insured $ 3,346,717 $ 2,834,680 Conventional (1) 13,403,157 13,493,463 NonQM 1,947 1,957 Total loans serviced $ 16,751,821 $ 16,330,100 (1) At March 31, 2018 and December 31, 2017, $13.4 billion and $13.5 billion, respectively, of Fannie Mae and Freddie Mac servicing has been pledged as collateral as part of the MSR Financing (See Note 4.—Debt– MSR Financings). Pledged collateral was approximately 79% and 81% of the fair value of MSRs in the consolidated balance sheets at March 31, 2018 and December 31, 2017, respectively. The table below illustrates hypothetical changes in fair values of MSRs, caused by assumed immediate changes to key assumptions that are used to determine fair value. See Note 6.—Fair Value of Financial Instruments for a description of the key assumptions used to determine the fair value of MSRs. March 31, December 31, Mortgage Servicing Rights Sensitivity Analysis 2018 2017 Fair value of MSRs $ 174,067 $ 154,405 Prepayment Speed: Decrease in fair value from 10% adverse change (4,418) (5,643) Decrease in fair value from 20% adverse change (9,029) (11,275) Decrease in fair value from 30% adverse change (13,752) (16,807) Discount Rate: Decrease in fair value from 10% adverse change (6,449) (5,461) Decrease in fair value from 20% adverse change (12,449) (10,555) Decrease in fair value from 30% adverse change (18,043) (15,316) Sensitivities are hypothetical changes in fair value and cannot be extrapolated because the relationship of changes in assumptions to changes in fair value may not be linear. Also, the effect of a variation in a particular assumption is calculated without changing any other assumption, whereas a change in one factor may result in changes to another. Accordingly, no assurance can be given that actual results would be consistent with the results of these estimates. As a result, actual future changes in MSR values may differ significantly from those displayed above. Gain (loss) on mortgage servicing rights, net is comprised of the following for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, 2018 2017 Change in fair value of mortgage servicing rights $ 9,180 $ (1,122) Loss on sale of mortgage servicing rights (2) (414) Realized and unrealized (losses) gains from hedging instruments (1,473) 559 Gain (loss) on mortgage servicing rights, net $ 7,705 $ (977) Servicing fees, net is comprised of the following for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, 2018 2017 Contractual servicing fees $ 11,538 $ 8,366 Late and ancillary fees 151 85 Subservicing and other costs (2,226) (1,131) Servicing fees, net $ 9,463 $ 7,320 Loans Eligible for Repurchase from Ginnie Mae (GNMA) The Company routinely sells loans in GNMA guaranteed mortgage‑backed securities (MBS) by pooling eligible loans through a pool custodian and assigning rights to the loans to GNMA. When these GNMA loans are initially pooled and securitized, the Company meets the criteria for sale treatment and derecognizes the loans. The terms of the GNMA MBS program allow, but do not require, the Company to repurchase mortgage loans when the borrower has made no payments for three consecutive months. When the Company has the unconditional right, as servicer, to repurchase GNMA pool loans it has previously sold and are more than 90 days past due, the Company then re-recognizes the loans on its consolidated balance sheets in other assets, at their UPB, and records a corresponding liability in other liabilities in the consolidated balance sheets. At March 31, 2018 and December 31, 2017, loans eligible for repurchase from GNMA totaled $54.6 million and $47.7 million in UPB, respectively. As part of the Company’s repurchase reserve, the Company records a repurchase provision to provide for estimated losses from the sale or securitization of all mortgage loans, including these loans. The loans eligible for repurchase from GNMA are in the Company’s servicing portfolio. The Company monitors the delinquency of the servicing portfolio and directs the subservicer to mitigate losses on delinquent loans. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2018 | |
Debt | |
Debt | Note 4.—Debt Warehouse Borrowings The Company, through its subsidiaries, enters into Master Repurchase Agreements with lenders providing warehouse facilities. The warehouse facilities are uncommitted facilities used to fund, and are secured by, residential mortgage loans from the time of funding until the time of settlement when sold to the investor. In accordance with the terms of the Master Repurchase Agreements, the Company is required to maintain cash balances with the lender as additional collateral for the borrowings, which are included in restricted cash in the accompanying consolidated balance sheets. The following table presents certain information on warehouse borrowings and related accrued interest for the periods indicated: Maximum Balance Outstanding At Borrowing March 31, December 31, Capacity 2018 2017 Maturity Date Short-term borrowings: Repurchase agreement 1 $ 150,000 $ 127,272 $ 100,630 June 15, 2018 Repurchase agreement 2 35,000 31,172 31,632 May 28, 2018 Repurchase agreement 3 (1) 225,000 150,345 154,020 December 21, 2018 Repurchase agreement 4 (2) 250,000 131,745 152,772 May 28, 2018 Repurchase agreement 5 175,000 147,792 88,920 January 31, 2019 Repurchase agreement 6 200,000 61,848 47,389 June 28, 2018 Repurchase agreement 7 50,000 168 — December 26, 2018 Total warehouse borrowings $ 1,085,000 $ 650,342 $ 575,363 (1) As of March 31, 2018 and December 31, 2017, $27.0 million and $41.8 million, respectively, are associated with finance receivables made to the Company’s warehouse customers. (2) In April 2018, the maturity of the line was extended for 30 days to May 28, 2018, while the annual renewal is completed. MSR Financings On August 17, 2017, IMC (Borrower), entered into a Line of Credit Promissory Note with a lender providing for a revolving line of credit of $30.0 million (FHLMC Financing). The Borrower is able to borrow up to 55% of the fair market value of FHLMC pledged mortgage servicing rights. The Line of Credit has a term until May 31, 2018 and will automatically renew for subsequent one year periods unless the lender provides the Borrowers 150 days’ notice of its intention not to renew. Interest payments are payable monthly and accrue interest at the rate per annum equal to one-month LIBOR plus 4.0% and the balance of the obligation may be prepaid at any time. The obligations under the Line of Credit are secured by FHLMC pledged mortgage servicing rights and is guaranteed by Integrated Real Estate Services, Corp. In February 2018, the maximum borrowing capacity of the revolving line of credit was increased to $50.0 million and the term was extended to January 31, 2019. At March 31, 2018, $30.0 million was outstanding under the FHLMC Financing and was secured by $65.7 million of mortgage servicing rights. On February 10, 2017, IMC (Borrower), entered into a Loan and Security Agreement (Agreement) with a lender providing for a revolving loan commitment of $40.0 million for a period of two years (FNMA Financing). The Borrower is able to borrow up to 55% of the fair market value of FNMA pledged servicing rights. Upon the two year anniversary of the Agreement, any amounts outstanding will automatically be converted into a term loan due and payable in full on the one year anniversary of the conversion date. Interest payments are payable monthly and accrue interest at the rate per annum equal to one-month LIBOR plus 4.0% and the balance of the obligation may be prepaid at any time. The Borrower initially drew down $35.1 million, and used a portion of the proceeds to pay off the Term Financing (approximately $30.1 million) originally entered into in June 2015 as discussed below. The Borrower also paid the lender an origination fee of $100 thousand, which is deferred and amortized over the life of the FNMA Financing. At March 31, 2018, $15.0 million was outstanding under the FNMA Financing and was secured by $71.4 million of mortgage servicing rights. Convertible Notes In May 2015, the Company issued an additional $25.0 million Convertible Promissory Notes (2015 Convertible Notes). The 2015 Convertible Notes mature on or before May 9, 2020 and accrue interest at a rate of 7.5% per annum, to be paid quarterly. The Company had approximately $50 thousand in transaction costs, which were deferred and amortized over the life of the 2015 Convertible Notes. Noteholders may convert all or a portion of the outstanding principal amount of the 2015 Convertible Notes into shares of the Company’s common stock (Conversion Shares) at a rate of $21.50 per share, subject to adjustment for stock splits and dividends (Conversion Price). The Company has the right to convert the entire outstanding principal of the 2015 Convertible Notes into Conversion Shares at the Conversion Price if the market price per share of the common stock, as measured by the average volume-weighted closing stock price per share of the common stock on the NYSE AMERICAN (or any other U.S. national securities exchange then serving as the principal such exchange on which the shares of common stock are listed), reaches the level of $30.10 for any twenty (20) trading days in any period of thirty (30) consecutive trading days after the Closing Date. Upon conversion of the 2015 Convertible Notes by the Company, the entire amount of accrued and unpaid interest (and all other amounts owing) under the 2015 Convertible Notes are immediately due and payable. Furthermore, if the conversion of the 2015 Convertible Notes by the Company occurs prior to the third anniversary of the Closing Date, then the entire amount of interest under the 2015 Convertible Notes through the third anniversary is immediately due and payable. To the extent the Company pays any cash dividends on its shares of common stock prior to conversion of the 2015 Convertible Notes, upon conversion of the 2015 Convertible Notes, the Noteholders will also receive such dividends on an as-converted basis of the 2015 Convertible Notes less the amount of interest paid by the Company prior to such dividend. Unless an event of default has occurred and is continuing, each purchaser of the 2015 Convertible Notes agrees, for the three years after the Closing Date, to vote all Conversion Shares for each of the Company’s nominees for election to the Company’s board of directors and not to nominate any other candidate for election to the board of directors at any time within such three year period. Long-term Debt Junior Subordinated Notes The Company carries its Junior Subordinated Notes at estimated fair value as more fully described in Note 6.— Fair Value of Financial Instruments . The following table shows the remaining principal balance and fair value of junior subordinated notes issued as of March 31, 2018 and December 31, 2017: March 31, December 31, 2018 2017 Junior Subordinated Notes (1) $ 62,000 $ 62,000 Fair value adjustment (16,663) (17,018) Total Junior Subordinated Notes $ 45,337 $ 44,982 (1) Stated maturity of March 2034; requires quarterly distributions initially at a variable rate of 3‑month LIBOR plus 3.75% per annum. |
Securitized Mortgage Trusts
Securitized Mortgage Trusts | 3 Months Ended |
Mar. 31, 2018 | |
Securitized Mortgage Trusts | |
Securitized Mortgage Trusts | Note 5.—Securitized Mortgage Trusts Securitized Mortgage Trust Assets Securitized mortgage trust assets, which are recorded at their estimated fair value (FMV), are comprised of the following at March 31, 2018 and December 31, 2017: March 31, December 31, 2018 2017 Securitized mortgage collateral $ 3,513,901 $ 3,662,008 REO 10,152 8,542 Total securitized mortgage trust assets $ 3,524,053 $ 3,670,550 Securitized Mortgage Trust Liabilities Securitized mortgage trust liabilities, which are recorded at their estimated FMV, are comprised of the following at March 31, 2018 and December 31, 2017: March 31, December 31, 2018 2017 Securitized mortgage borrowings $ 3,508,477 $ 3,653,265 Changes in fair value of net trust assets, including trust REO losses, are comprised of the following for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, 2018 2017 Change in fair value of net trust assets, excluding REO $ (4,331) $ 4,786 Gains from REO 2,193 1,533 Change in fair value of net trust assets, including trust REO gains $ (2,138) $ 6,319 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | Note 6.—Fair Value of Financial Instruments The use of fair value to measure the Company’s financial instruments is fundamental to its consolidated financial statements and is a critical accounting estimate because a substantial portion of its assets and liabilities are recorded at estimated fair value. FASB ASC 825 requires disclosure of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate such fair values. The following table presents the estimated fair value of financial instruments included in the consolidated financial statements as of the dates indicated: March 31, 2018 December 31, 2017 Carrying Estimated Fair Value Carrying Estimated Fair Value Amount Level 1 Level 2 Level 3 Amount Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 29,485 $ 29,485 $ — $ — $ 33,223 $ 33,223 $ — $ — Restricted cash 5,704 5,704 — — 5,876 5,876 — — Mortgage loans held-for-sale 655,506 — 655,506 — 568,781 — 568,781 — Finance receivables 26,989 — 26,989 — 41,777 — 41,777 — Mortgage servicing rights 174,067 — — 174,067 154,405 — — 154,405 Derivative assets, lending, net 3,854 — — 3,854 4,777 — 420 4,357 Securitized mortgage collateral 3,513,901 — — 3,513,901 3,662,008 — — 3,662,008 Liabilities Warehouse borrowings $ 650,342 $ — $ 650,342 $ — $ 575,363 $ — $ 575,363 $ — MSR financings 45,000 — — 45,000 35,133 — — 35,133 Convertible notes 24,977 — — 24,977 24,974 — — 24,974 Contingent consideration — — — — 554 — — 554 Long-term debt 45,337 — — 45,337 44,982 — — 44,982 Securitized mortgage borrowings 3,508,477 — — 3,508,477 3,653,265 — — 3,653,265 Derivative liabilities, lending, net 892 — 892 — — — — — The fair value amounts above have been estimated by management using available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop the estimates of fair value in both inactive and orderly markets. Accordingly, the estimates presented are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. For securitized mortgage collateral and securitized mortgage borrowings, the underlying Alt-A (non-conforming) residential and commercial loans and mortgage-backed securities market have experienced significant declines in market activity, along with a lack of orderly transactions. The Company’s methodology to estimate fair value of these assets and liabilities include the use of internal pricing techniques such as the net present value of future expected cash flows (with observable market participant assumptions, where available) discounted at a rate of return based on the Company’s estimates of market participant requirements. The significant assumptions utilized in these internal pricing techniques, which are based on the characteristics of the underlying collateral, include estimated credit losses, estimated prepayment speeds and appropriate discount rates. Refer to Recurring Fair Value Measurements below for a description of the valuation methods used to determine the fair value of investment securities available-for-sale, securitized mortgage collateral and borrowings, derivative assets and liabilities, long-term debt, mortgage servicing rights and mortgage loans held-for-sale. The carrying amount of cash, cash equivalents and restricted cash approximates fair value. Finance receivables carrying amounts approximate fair value due to the short-term nature of the assets and do not present unanticipated interest rate or credit concerns. Warehouse borrowings carrying amounts approximate fair value due to the short-term nature of the liabilities and do not present unanticipated interest rate or credit concerns. Convertible notes are recorded at amortized cost. The estimated fair value is determined using a discounted cash flow model using estimated market rates. MSR financings carrying amount approximates fair value as the underlying facility bears interest at a rate that is periodically adjusted based on a market index. Fair Value Hierarchy The application of fair value measurements may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability or whether management has elected to carry the item at its estimated fair value. FASB ASC 820-10-35 specifies a hierarchy of valuation techniques based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy: · Level 1—Quoted prices (unadjusted) in active markets for identical instruments or liabilities that an entity has the ability to assess at measurement date. · Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices that are observable for an asset or liability, including interest rates and yield curves observable at commonly quoted intervals, prepayment speeds, loss severities, credit risks and default rates; and market-corroborated inputs. · Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers is unobservable. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when estimating fair value. As a result of the lack of observable market data resulting from inactive markets, the Company has classified its investment securities available-for-sale, mortgage servicing rights, securitized mortgage collateral and borrowings, derivative assets and liabilities (trust and IRLCs), and long-term debt as Level 3 fair value measurements. Level 3 assets and liabilities measured at fair value on a recurring basis were approximately 85% and 99% and 87% and 99%, respectively, of total assets and total liabilities measured at estimated fair value at March 31, 2018 and December 31, 2017. Recurring Fair Value Measurements The Company assesses the financial instruments on a quarterly basis to determine the appropriate classification within the fair value hierarchy, as defined by ASC Topic 810. Transfers between fair value classifications occur when there are changes in pricing observability levels. Transfers of financial instruments among the levels occur at the beginning of the reporting period. There were no material transfers between our Level 1 and Level 2 classified instruments during the three months ended March 31, 2018. The following tables present the Company’s assets and liabilities that are measured at estimated fair value on a recurring basis, including financial instruments for which the Company has elected the fair value option at March 31, 2018 and December 31, 2017, based on the fair value hierarchy: Recurring Fair Value Measurements March 31, 2018 December 31, 2017 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Mortgage loans held-for-sale $ — $ 655,506 $ — $ — $ 568,781 $ — Derivative assets, lending, net (1) — — 3,854 — 420 4,357 Mortgage servicing rights — — 174,067 — — 154,405 Securitized mortgage collateral — — 3,513,901 — — 3,662,008 Total assets at fair value $ — $ 655,506 $ 3,691,822 $ — $ 569,201 $ 3,820,770 Liabilities Securitized mortgage borrowings $ — $ — $ 3,508,477 $ — $ — $ 3,653,265 Long-term debt — — 45,337 — — 44,982 Contingent consideration — — — — — 554 Derivative liabilities, lending, net (2) — 892 — — — — Total liabilities at fair value $ — $ 892 $ 3,553,814 $ — $ — $ 3,698,801 (1) At March 31, 2018, derivative assets, lending, net included $3.9 million in IRLCs and is included in other assets in the accompanying consolidated balance sheets. At December 31, 2017, derivative assets, lending, net included $4.4 million in IRLCs and $420 thousand in Hedging instruments, respectively, and is included in other assets in the accompanying consolidated balance sheets. (2) At March 31, 2018, derivative liabilities, lending, net included $892 thousand in Hedging Instruments and is included in other liabilities in the accompanying consolidated balance sheets. The following tables present reconciliations for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2018 and 2017: Level 3 Recurring Fair Value Measurements For the Three Months Ended March 31, 2018 Interest Securitized Securitized Mortgage rate lock Long- mortgage mortgage servicing commitments, term Contingent collateral borrowings rights net debt consideration Fair value, December 31, 2017 $ 3,662,008 $ (3,653,265) $ 154,405 $ 4,357 $ (44,982) $ (554) Total gains (losses) included in earnings: Interest income (1) 5,688 — — — — — Interest expense (1) — (20,080) — — (139) — Change in fair value (32,755) 28,424 9,180 (503) 1,224 — Change in instrument specific credit risk — — — — (1,440) (2) — Total gains (losses) included in earnings (27,067) 8,344 9,180 (503) (355) — Transfers in and/or out of Level 3 — — — — — — Purchases, issuances and settlements: Purchases — — — — — — Issuances — — 10,482 — — — Settlements (121,040) 136,444 — — — 554 Fair value, March 31, 2018 $ 3,513,901 $ (3,508,477) $ 174,067 $ 3,854 $ (45,337) $ — Unrealized gains (losses) still held (3) $ (533,589) $ 2,694,742 $ 174,067 $ 3,854 $ 16,663 $ — (1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. Net interest income, including cash received and paid, was $2.2 million for three months ended March 31, 2018. The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations is primarily from contractual interest on the securitized mortgage collateral and borrowings. (2) Amount represents the change in instrument specific credit risk in other comprehensive earnings in the consolidated statements of operations and comprehensive earnings as required by the adoption of ASU 2016-01 on January 1, 2018. (3) Represents the amount of unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held and reflected in the fair values at March 31, 2018. Level 3 Recurring Fair Value Measurements For the Three Months Ended March 31, 2017 Interest Securitized Securitized Mortgage rate lock Long- mortgage mortgage servicing commitments, term Contingent collateral borrowings rights net debt consideration Fair value, December 31, 2016 $ 4,021,891 $ (4,017,603) $ 131,537 $ 11,169 $ (47,207) $ (31,072) Total gains (losses) included in earnings: Interest income (1) 15,484 — — — — — Interest expense (1) — (40,695) — — (340) — Change in fair value 51,052 (46,266) (1,122) 1,164 (2,497) (1,384) Total gains (losses) included in earnings 66,536 (86,961) (1,122) 1,164 (2,837) (1,384) Transfers in and/or out of Level 3 — — — — — — Purchases, issuances and settlements: Purchases — — — — — — Issuances — — 12,066 — — — Settlements (185,091) 211,896 (895) — — 7,958 Fair value, March 31, 2017 $ 3,903,336 $ (3,892,668) $ 141,586 $ 12,333 $ (50,044) $ (24,498) Unrealized gains (losses) still held (2) $ (825,087) $ 2,977,521 $ 141,586 $ 12,333 $ 20,719 $ (24,498) (1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. Net interest income, including cash received and paid, was $2.1 million for the three months ended March 31, 2017. The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations is primarily from contractual interest on the securitized mortgage collateral and borrowings. (2) Represents the amount of unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held and reflected in the fair values at March 31, 2017. The following table presents quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and nonrecurring basis at March 31, 2018: Estimated Valuation Unobservable Range of Weighted Financial Instrument Fair Value Technique Input Inputs Average Assets and liabilities backed by real estate Securitized mortgage collateral, and $ 3,513,901 DCF Prepayment rates 1.7 - 25.1 % 7.1 % Securitized mortgage borrowings (3,508,477) Default rates 0.01 - 4.2 % 1.1 % Loss severities 9.9 - 84.7 % 46.1 % Discount rates 3.9 - 25.0 % 4.6 % Other assets and liabilities Mortgage servicing rights $ 174,067 DCF Discount rate 9.0 - 14.0 % 9.7 % Prepayment rates 6.9 - 88.8 % 10.3 % Derivative assets - IRLCs, net 3,854 Market pricing Pull-through rate 15.1 - 99.9 % 78.5 % Long-term debt (45,337) DCF Discount rate 9.9 % 9.9 % DCF = Discounted Cash Flow For assets and liabilities backed by real estate, a significant increase in discount rates, default rates or loss severities would result in a significantly lower estimated fair value. The effect of changes in prepayment speeds would have differing effects depending on the seniority or other characteristics of the instrument. For other assets and liabilities, a significant increase in discount rates would result in a significantly lower estimated fair value. A significant increase in one-month LIBOR would result in a significantly higher estimated fair value for derivative liabilities, net, securitized trusts. The Company believes that the imprecision of an estimate could be significant. The following tables present the changes in recurring fair value measurements included in net earnings for the three months ended March 31, 2018 and 2017: Recurring Fair Value Measurements Changes in Fair Value Included in Net Earnings For the Three Months Ended March 31, 2018 Change in Fair Value of Interest Interest Net Trust Long-term Other Revenue Gain on sale Income (1) Expense (1) Assets Debt and Expense of loans, net Total Securitized mortgage collateral $ 5,688 $ — $ (32,755) $ — $ — $ — $ (27,067) Securitized mortgage borrowings — (20,080) 28,424 — — — 8,344 Derivative liabilities, net, securitized trusts — — — — — — — Long-term debt — (139) — 1,224 — — 1,085 Mortgage servicing rights (2) — — — — 9,180 — 9,180 Mortgage loans held-for-sale — — — — — (4,891) (4,891) Derivative assets — IRLCs — — — — — (503) (503) Derivative liabilities — Hedging Instruments — — — — 285 (1,597) (1,312) Total $ 5,688 $ (20,219) $ (4,331) (3) $ 1,224 $ 9,465 $ (6,991) $ (15,164) (1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. (2) Included in loss on MSRs, net in the consolidated statements of operations. (3) For the three months ended March 31, 2018, change in the fair value of net trust assets, excluding REO was $4.3 million. Recurring Fair Value Measurements Changes in Fair Value Included in Net Earnings For the Three Months Ended March 31, 2017 Change in Fair Value of Interest Interest Net Trust Long-term Other Revenue Gain on sale Income (1) Expense (1) Assets Debt and Expense of loans, net Total Securitized mortgage collateral $ 15,484 $ — $ 51,052 $ — $ — $ — $ 66,536 Securitized mortgage borrowings — (40,695) (46,266) — — — (86,961) Derivative liabilities, net, securitized trusts — — — — — — — Long-term debt — (340) — (2,497) — — (2,837) Mortgage servicing rights (2) — — — — (1,122) — (1,122) Contingent consideration — — — — (1,384) — (1,384) Mortgage loans held-for-sale — — — — — 5,203 5,203 Derivative assets — IRLCs — — — — — 1,164 1,164 Derivative liabilities — Hedging Instruments — — — — 1,223 (2,309) (1,086) Total $ 15,484 $ (41,035) $ 4,786 (3) $ (2,497) $ (1,283) $ 4,058 $ (20,487) (1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. (2) Included in loss on MSRs, net in the consolidated statements of operations. (3) For the three months ended March 31, 2017, change in the fair value of net trust assets, excluding REO was $4.8 million. The following is a description of the measurement techniques for items recorded at estimated fair value on a recurring basis. Mortgage servicing rights —The Company elected to carry its MSRs arising from its mortgage loan origination operation at estimated fair value. The fair value of MSRs is based upon market prices for similar instruments and a discounted cash flow model. The valuation model incorporates assumptions that market participants would use in estimating the fair value of servicing. These assumptions include estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late fees, among other considerations. Mortgage servicing rights are considered a Level 3 measurement at March 31, 2018. Mortgage loans held-for-sale —The Company elected to carry its mortgage loans held-for-sale originated or acquired at estimated fair value. Fair value is based on quoted market prices, where available, prices for other traded mortgage loans with similar characteristics, and purchase commitments and bid information received from market participants. Given the meaningful level of secondary market activity for mortgage loans, active pricing is available for similar assets and accordingly, the Company classifies its mortgage loans held-for-sale as a Level 2 measurement at March 31, 2018. Securitized mortgage collateral —The Company elected to carry its securitized mortgage collateral at fair value. These assets consist primarily of non-conforming mortgage loans securitized between 2002 and 2007. Fair value measurements are based on the Company’s internal models used to compute the net present value of future expected cash flows with observable market participant assumptions, where available. The Company’s assumptions include its expectations of inputs that other market participants would use in pricing these assets. These assumptions include judgments about the underlying collateral, prepayment speeds, estimated future credit losses, forward interest rates, investor yield requirements and certain other factors. As of March 31, 2018, securitized mortgage collateral had UPB of $4.0 billion, compared to an estimated fair value on the Company’s balance sheet of $3.5 billion. The aggregate UPB exceeds the fair value by $0.5 billion at March 31, 2018. As of March 31, 2018, the UPB of loans 90 days or more past due was $0.5 billion compared to an estimated fair value of $0.2 billion. The aggregate UPB of loans 90 days or more past due exceed the fair value by $0.3 billion at March 31, 2018. Securitized mortgage collateral is considered a Level 3 measurement at March 31, 2018. Securitized mortgage borrowings —The Company elected to carry its securitized mortgage borrowings at fair value. These borrowings consist of individual tranches of bonds issued by securitization trusts and are primarily backed by non-conforming mortgage loans. Fair value measurements include the Company’s judgments about the underlying collateral and assumptions such as prepayment speeds, estimated future credit losses, forward interest rates, investor yield requirements and certain other factors. As of March 31, 2018, securitized mortgage borrowings had an outstanding principal balance of $4.0 billion, net of $2.2 billion in bond losses, compared to an estimated fair value of $3.5 billion. The aggregate outstanding principal balance exceeds the fair value by $0.5 billion at March 31, 2018. Securitized mortgage borrowings are considered a Level 3 measurement at March 31, 2018. Contingent consideration— Contingent consideration was applicable to the acquisition of CCM and was estimated and recorded at fair value at the acquisition date as part of purchase price consideration. Additionally, each reporting period, the Company estimated the change in fair value of the contingent consideration and any change in fair value is recognized in the Company’s consolidated statements of operations if it is determined to not be a measurement period adjustment. The estimate of the fair value of contingent consideration required significant judgment and assumptions to be made about future operating results, discount rates and probabilities of various projected operating result scenarios. In the fourth quarter of 2017, the earn-out period ended and the remaining $554 thousand in contingent consideration payments were paid during the three months ended March 31, 2018. Contingent consideration was considered a Level 3 measurement at March 31, 2017 and as of March 31, 2018, we have no further contingent consideration liability. Long-term debt —The Company elected to carry its remaining long-term debt (consisting of junior subordinated notes) at fair value. These securities are measured based upon an analysis prepared by management, which considered the Company’s own credit risk, including settlements with trust preferred debt holders and discounted cash flow analysis. As of March 31, 2018, long-term debt had UPB of $62.0 million compared to an estimated fair value of $45.3 million. The aggregate UPB exceeds the fair value by $16.7 million at March 31, 2018. The long-term debt is considered a Level 3 measurement at March 31, 2018. Derivative assets and liabilities, Lending —The Company’s derivative assets and liabilities are carried at fair value as required by GAAP and are accounted for as free standing derivatives. The derivatives include IRLCs with prospective residential mortgage borrowers whereby the interest rate on the loan is determined prior to funding and the borrowers have locked in that interest rate. These commitments are determined to be derivative instruments in accordance with GAAP. The derivatives also include hedging instruments (typically TBA MBS) used to hedge the fair value changes associated with changes in interest rates relating to its mortgage lending originations as well as mortgage servicing rights. The Company hedges the period from the interest rate lock (assuming a fall-out factor) to the date of the loan sale. The estimated fair value of IRLCs are based on underlying loan types with similar characteristics using the TBA MBS market, which is actively quoted and easily validated through external sources. The data inputs used in this valuation include, but are not limited to, loan type, underlying loan amount, note rate, loan program and expected sale date of the loan, adjusted for current market conditions. These valuations are adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. For all IRLCs, the base value is then adjusted for the anticipated Pull-through Rate. The anticipated Pull-through Rate is an unobservable input based on historical experience, which results in classification of IRLCs as a Level 3 measurement at March 31, 2018. The fair value of the Hedging Instruments is based on the actively quoted TBA MBS market using observable inputs related to characteristics of the underlying MBS stratified by product, coupon and settlement date. Therefore, the Hedging Instruments are classified as a Level 2 measurement at March 31, 2018. The following table includes information for the derivative assets and liabilities, lending for the periods presented: Total Gains (Losses) (1) Notional Amount For the Three Months Ended March 31, December 31, March 31, 2018 2017 2018 2017 Derivative – IRLC's $ 354,117 $ 398,225 $ (503) $ 1,164 Derivative – TBA MBS 407,936 687,500 10,448 (1,184) (1) Amounts included in gain on sale of loans, net within the accompanying consolidated statements of operations. Nonrecurring Fair Value Measurements The Company is required to measure certain assets and liabilities at estimated fair value from time to time. These fair value measurements typically result from the application of specific accounting pronouncements under GAAP. The fair value measurements are considered nonrecurring fair value measurements under FASB ASC 820-10. The following tables present financial and non-financial assets and liabilities measured using nonrecurring fair value measurements at March 31, 2018 and 2017, respectively: Nonrecurring Fair Value Measurements March 31, 2018 March 31, 2017 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 REO (1) $ — $ 1,307 $ — $ — $ 6,342 $ — Deferred charge (2) — — — — — 8,409 (1) Balance represents REO at March 31, 2018 which have been impaired subsequent to foreclosure. (2) With the adoption of ASU 2016-16 on January 1, 2018, $7.8 million in deferred charge was eliminated with a cumulative effect adjustment to opening retained earnings. Total Gains (Losses) (1) For the Three Months Ended March 31, 2018 2017 REO (2) $ 2,193 $ 1,533 Deferred charge (3) — (277) (1) Total losses reflect losses from all nonrecurring measurements during the period. (2) For the three months ended March 31, 2018 and 2017, the Company recorded $2.2 million and $1.5 million, respectively, in gains which represent recovery of the net realizable value (NRV) attributable to an improvement in state specific loss severities on properties held during the period which resulted in an increase to NRV. (3) For the three months ended March 2017, the Company recorded $277 thousand in income tax expense resulting from impairment write-downs of deferred charge based on changes in estimated cash flows and lives of the related mortgages retained in the securitized mortgage collateral. With the adoption of ASU 2016-16 on January 1, 2018, there will no longer be impairment of deferred charge. Real estate owned —REO consists of residential real estate acquired in satisfaction of loans. Upon foreclosure, REO is adjusted to the estimated fair value of the residential real estate less estimated selling and holding costs, offset by expected contractual mortgage insurance proceeds to be received, if any. Subsequently, REO is recorded at the lower of carrying value or estimated fair value less costs to sell. REO balance representing REOs which have been impaired subsequent to foreclosure are subject to nonrecurring fair value measurement and included in the nonrecurring fair value measurements tables. Fair values of REO are generally based on observable market inputs, and considered Level 2 measurements at March 31, 2018. Deferred charge— Deferred charge represented the deferral of income tax expense on inter-company profits that resulted from the sale of mortgages from taxable subsidiaries to IMH in prior years. The Company evaluated the deferred charge for impairment quarterly using internal estimates of estimated cash flows and lives of the related mortgages retained in the securitized mortgage collateral. If the deferred charge was determined to be impaired, it was recognized as a component of income tax expense. On January 1, 2018, the Company adopted ASU 2016-16, which resulted in a $7.8 million cumulative effect adjustment to opening retained earnings eliminating the remaining deferred charge on the balance sheet. Deferred charge was considered a Level 3 measurement at March 31, 2017. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Taxes | |
Income Taxes | Note 7.—Income Taxes The Company calculates its quarterly tax provision pursuant to the guidelines in ASC 740 Income Taxes. ASC 740 requires companies to estimate the annual effective tax rate for current year ordinary income. In calculating the effective tax rate, permanent differences between financial reporting and taxable income are factored into the calculation, but temporary differences are not. The estimated annual effective tax rate represents the best estimate of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision. The Company recorded income tax expense of $610 thousand and $426 thousand for the three months ended March 31, 2018 and 2017, respectively. Tax expense for the three months ended March 31, 2018 is primarily the result of state income taxes from states where the Company does not have net operating loss carryforwards or state minimum taxes, including AMT. Tax expense for the three months ended March 31, 2017 is primarily the result of amortization of the deferred charge and state income taxes from states where the Company does not have net operating loss carryforwards or state minimum taxes, including AMT. The deferred charge represents the deferral of income tax expense on inter-company profits that resulted from the sale of mortgages from taxable subsidiaries to IMH prior to 2008. The deferred charge amortization and/or impairment, which does not result in any tax liability to be paid, is calculated based on the change in the estimated fair value of the underlying securitized mortgage collateral during the period. Prior to the adoption of ASU 2016-16 on January 1, 2018, the deferred charge was included in other assets in the accompanying consolidated balance sheets and was amortized as a component of income tax expense in the accompanying consolidated statements of operations. As of December 31, 2017, the Company had estimated federal net operating loss (NOL) carryforwards of approximately $619.9 million. Federal NOL carryforwards begin to expire in 2027. As of December 31, 2017, the Company had estimated California NOL carryforwards of approximately $431.0 million, which begin to expire in 2028. The Company may not be able to realize the maximum benefit due to the nature and tax entities that holds the NOL. |
Reconciliation of Earnings Per
Reconciliation of Earnings Per Share | 3 Months Ended |
Mar. 31, 2018 | |
Reconciliation of Earnings Per Share | |
Reconciliation of Earnings Per Share | Note 8.—Reconciliation of Earnings Per Share Basic net earnings per share is computed by dividing net earnings available to common stockholders (numerator) by the weighted average number of vested, common shares outstanding during the period (denominator). Diluted net earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding plus the effect of dilutive potential common shares outstanding during the period using the if-converted method. Dilutive potential common shares include shares issuable upon conversion of Convertible Notes, dilutive effect of outstanding stock options and deferred stock units (DSUs). For the Three Months Ended March 31, 2018 2017 Numerator for basic earnings per share: Net earnings $ 3,873 $ 4,627 Numerator for diluted earnings per share: Net earnings $ 3,873 $ 4,627 Interest expense attributable to convertible notes (1) — 454 Net earnings plus interest expense attributable to convertible notes $ 3,873 $ 5,081 Denominator for basic earnings per share (2): Basic weighted average common shares outstanding during the period 20,951 16,025 Denominator for diluted earnings per share (2): Basic weighted average common shares outstanding during the period 20,951 16,025 Net effect of dilutive convertible notes (1) — 1,163 Net effect of dilutive stock options and DSU’s 151 234 Diluted weighted average common shares 21,102 17,422 Net earnings per common share: Basic $ 0.18 $ 0.29 Diluted $ 0.18 $ 0.29 (1) Adjustments to diluted earnings per share for the convertible notes for the three months ended March 31, 2018 were excluded from the calculation as they are anti-dilutive. (2) Number of shares presented in thousands. At March 31, 2018, there were 1.2 million anti-dilutive stock options outstanding. There were 838 thousand anti-dilutive stock options outstanding the three months ended March 31, 2017. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting | |
Segment Reporting | Note 9.—Segment Reporting The Company has three primary reporting segments which include mortgage lending, long-term mortgage portfolio and real estate services. Unallocated corporate and other administrative costs, including the costs associated with being a public company, are presented in Corporate and other. Statement of Operations Items for the Mortgage Real Estate Long-term Corporate Three Months Ended March 31, 2018: Lending Services Portfolio and other Consolidated Gain on sale of loans, net $ 21,482 $ — $ — $ — $ 21,482 Real estate services fees, net — 1,385 — — 1,385 Servicing fees, net 9,463 — — — 9,463 Gain on mortgage servicing rights, net 7,705 — — — 7,705 Other revenue — — 84 6 90 Other operating expense (31,548) (638) (65) (3,497) (35,748) Other income (expense) 334 — 196 (424) 106 Net (loss) earnings before income tax expense $ 7,436 $ 747 $ 215 $ (3,915) 4,483 Income tax expense 610 Net earnings $ 3,873 Statement of Operations Items for the Mortgage Real Estate Long-term Corporate Three Months Ended March 31, 2017: Lending Services Portfolio and other Consolidated Gain on sale of loans, net $ 37,319 $ — $ — $ — $ 37,319 Real estate services fees, net — 1,633 — — 1,633 Servicing fees, net 7,320 — — — 7,320 Loss on mortgage servicing rights, net (977) — — — (977) Other revenue 14 — 61 (28) 47 Accretion of contingent consideration (845) — — — (845) Change in fair value of contingent consideration (539) — — — (539) Other operating expense (38,085) (995) (86) (4,007) (43,173) Other income (expense) 407 — 4,713 (852) 4,268 Net (loss) earnings before income tax expense $ 4,614 $ 638 $ 4,688 $ (4,887) $ 5,053 Income tax expense 426 Net earnings $ 4,627 Mortgage Real Estate Long-term Corporate Balance Sheet Items as of: Lending Services Portfolio and other Consolidated Total Assets at March 31, 2018 (1) $ 1,089,230 $ — $ 3,523,949 $ 9,755 $ 4,622,934 Total Assets at December 31, 2017 (1) $ 992,983 $ 251 $ 3,678,377 $ 10,089 $ 4,681,700 (1) All segment asset balances exclude intercompany balances. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 10.—Commitments and Contingencies Legal Proceedings The Company is a defendant in or a party to a number of legal actions or proceedings that arise in the ordinary course of business. In some of these actions and proceedings, claims for monetary damages are asserted against the Company. In view of the inherent difficulty of predicting the outcome of such legal actions and proceedings, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss related to each pending matter may be, if any. In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation when those matters present loss contingencies that are both probable and estimable. In any case, there may be an exposure to losses in excess of any such amounts whether accrued or not. Any estimated loss is subject to significant judgment and is based upon currently available information, a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated loss will change from time to time, and actual results may vary significantly from the current estimate. Therefore, an estimate of possible loss represents what the Company believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Company’s maximum loss exposure. Based on the Company’s current understanding of these pending legal actions and proceedings, management does not believe that judgments or settlements arising from pending or threatened legal matters, individually or in the aggregate, will have a material adverse effect on the consolidated financial position, operating results or cash flows of the Company. However, in light of the inherent uncertainties involved in these matters, some of which are beyond the Company’s control, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period. The legal matter updates summarized below are ongoing and may have an effect on the Company’s business and future financial condition and results of operations: On April 30, 2012, a purported class action was filed entitled Marentes v. Impac Mortgage Holdings, Inc., alleging that certain loan modification activities of the Company constitute an unfair business practice, false advertising and marketing, and that the fees charged are improper. The complaint seeks unspecified damages, restitution, injunctive relief, attorney’s fees and prejudgment interest. On August 22, 2012, the plaintiff filed an amended complaint adding Impac Funding Corporation as a defendant and on October 2, 2012, the plaintiff dismissed Impac Mortgage Holdings, Inc., without prejudice. Trial is currently scheduled for June 2018. On November 1, 2016, a qui tam action was filed under seal entitled United States of America ex rel Jeremy Calva, et al. v. Impac Secured Assets Corp., et al. The matter was unsealed on November 3, 2017. The complaint alleges the defendants violated the False Claims Act by misrepresenting loan delinquency rates for loans deposited into certain securitization trusts, not notifying the trustee of certain trusts that delinquent loans were deposited into the trusts, not notifying anyone that Company affiliates were the originator of most loans as well as the sponsor, depositor, issuer, and master servicer of certain trusts, causing government entities to buy bonds in those trusts. The complaint seeks an order that the defendants cease and desist from submitting false claims to the plaintiffs, as well as civil penalties, damages, attorneys’ fees, and costs incurred in the case. Neither the United States, nor any of the states or cities named as plaintiff in the matter elected to intervene in the case. The defendants filed a motion to dismiss the complaint on March 23, 2018. The Company is a party to other litigation and claims which are normal in the course of our operations. While the results of such other litigation and claims cannot be predicted with certainty, we believe the final outcome of such matters will not have a material adverse effect on our financial condition or results of operations. The Company believes that it has meritorious defenses to the claims and intends to defend these claims vigorously and as such the Company believes the final outcome of such matters will not have a material adverse effect on its financial condition or results of operations. Nevertheless, litigation is uncertain and the Company may not prevail in the lawsuits and can express no opinion as to their ultimate resolution. An adverse judgment in any of these matters could have a material adverse effect on the Company’s financial position and results of operations. Please refer to IMH’s report on Form 10-K for the year ended December 31, 2017 for a description of litigation and claims. Repurchase Reserve When the Company sells mortgage loans, it makes customary representations and warranties to the purchasers about various characteristics of each loan such as the origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law. The Company’s whole loan sale agreements generally require it to repurchase loans if the Company breached a representation or warranty given to the loan purchaser. The following table summarizes the repurchase reserve activity, within other liabilities on the consolidated balance sheets, related to previously sold loans for the three months ended March 31, 2018 and year ended December 31, 2017: March 31, December 31, 2018 2017 Beginning balance $ 6,020 $ 5,408 Provision for repurchases 378 1,557 Settlements (946) (945) Total repurchase reserve $ 5,452 $ 6,020 Short-Term Loan Commitments The Company uses a portion of its warehouse borrowing capacity to provide secured short-term revolving financing to small and medium-size mortgage originators to finance mortgage loans from the closing of the mortgage loans until sold to investors (Finance Receivables). As of March 31, 2018, the warehouse lending operations had warehouse lines to non-affiliated customers totaling $122.5 million, of which there was an outstanding balance of $27.0 million in finance receivables compared to $41.8 million as of December 31, 2017. The finance receivables are generally secured by residential mortgage loans as well as personal guarantees. Commitments to Extend Credit The Company enters into IRLCs with prospective borrowers whereby the Company commits to lend a certain loan amount under specific terms and interest rates to the borrower. These loan commitments are treated as derivatives and are carried at fair value. See Note 6. — Fair Value of Financial Instruments for more information. |
Equity and Share Based Payments
Equity and Share Based Payments | 3 Months Ended |
Mar. 31, 2018 | |
Equity and Share Based Payments | |
Share Based Payments and Employee Benefit Plans | Note 11.—Equity and Share Based Payments The following table summarizes activity, pricing and other information for the Company’s stock options for the three months ended March 31, 2018: Weighted- Average Number of Exercise Shares Price Options outstanding at December 31, 2017 1,582,754 $ 13.61 Options granted — — Options exercised (3,000) 5.39 Options forfeited/cancelled (72,623) 16.31 Options outstanding at March 31, 2018 1,507,131 13.50 Options exercisable at March 31, 2018 917,801 $ 12.04 As of March 31, 2018, there was approximately $2.5 million of total unrecognized compensation cost related to stock option compensation arrangements granted under the plan, net of estimated forfeitures. That cost is expected to be recognized over the remaining weighted average period of 1.8 years. The following table summarizes activity, pricing and other information for the Company’s DSU’s, also referred to as deferred stock units as the issuance of the stock is deferred until termination of service, for the three months ended March 31, 2018: Weighted- Average Number of Grant Date Shares Fair Value DSU's outstanding at December 31, 2017 100,750 $ 10.41 DSU’s granted — — DSU’s exercised — — DSU’s forfeited/cancelled — — DSU’s outstanding at March 31, 2018 100,750 $ 10.41 As of March 31, 2018, there was approximately $203 thousand of total unrecognized compensation cost related to the DSU compensation arrangements granted under the plan. That cost is expected to be recognized over a weighted average period of 2.2 years. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events | |
Subsequent Events | Note 12.—Subsequent Events Subsequent events have been evaluated through the date of this filing. |
Summary of Business and Finan19
Summary of Business and Financial Statement Presentation (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Business and Financial Statement Presentation | |
Financial Statement Presentation | Financial Statement Presentation The accompanying unaudited consolidated financial statements of IMH and its subsidiaries (as defined above) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These interim period condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the United States Securities and Exchange Commission (SEC). All significant intercompany balances and transactions have been eliminated in consolidation. In addition, certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation. Management has made a number of material estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period to prepare these consolidated financial statements in conformity with GAAP. Additionally, other items affected by such estimates and assumptions include the valuation of trust assets and trust liabilities, contingencies, the estimated obligation of repurchase liabilities related to sold loans, the valuation of long-term debt, mortgage servicing rights, mortgage loans held-for-sale and derivative instruments, including interest rate lock commitments (IRLC). Actual results could differ from those estimates and assumptions. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Accounting Standards Update (ASU) No. 2014-09, 2015-04, 2016-08, 2016-10, 2016-12, 2016-20, 2017-13 and 2017-14, collectively implemented as Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), “Revenue from Contracts with Customers (Topic 606)” , provides guidance for revenue recognition. This ASC’s core principle requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects consideration to which the company expects to be entitled in exchange for those goods or services. The standard also clarifies the principal versus agent considerations, providing the evaluation must focus on whether the entity has control of the goods or services before they are transferred to the customer. The new standard permits the use of either the modified retrospective or full retrospective transition method. The Company's revenue is primarily generated from loan originations, loan servicing and real estate services. Origination revenue is comprised of fee income earned at origination of a loan, interest income earned for the period the loans are held and gain on sale on loans upon disposition of the loan. Servicing revenue is comprised of servicing fees and other ancillary fees in connection with our servicing activities. Real estate services revenue is comprised of income earned from various real estate services and support such as loss mitigation, loan modification, surveillance and disposition and monitoring services. The Company performed a review of the guidance as compared to current accounting policies and have evaluated all services rendered to customers as well as underlying contracts to determine the impact of this standard to the Company’s revenue recognition process. The majority of services rendered by the Company in connection with loan originations, loan servicing and the long-term mortgage portfolio are not within the scope of FASB ASC 606. However, the Company identified real estate services revenues that were within the scope of FASB ASC 606 and the impact upon adoption was not materially different from the previous revenue recognition processes. The Company adopted this guidance on January 1, 2018, and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, " Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. " The amendments in ASU 2016-01, among other things, requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); requires separate presentation in other comprehensive income for the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The update is effective for interim and annual reporting periods beginning after December 15, 2017 on a modified retrospective basis, using a cumulative-effect adjustment to the balance sheet as of the beginning of the year adopted. The Company adopted this guidance on January 1, 2018, which resulted in a $27.0 million reclass, net of tax, between opening retained earnings and other comprehensive income (loss) within stockholders’ equity. In August 2016, the FASB issued ASU 2016-15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments .” The update amends the guidance in Accounting Standards Codification 230, Statement of Cash Flows, and clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows with the objective of reducing the existing diversity in practice related to eight specific cash flow issues. In addition, in November 2016, the FASB issued Statement of Cash Flows (Topic 230), Restricted Cash (ASU In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” This ASU requires entities to recognize at the transaction date the income tax consequences of intercompany asset transfers other than inventory. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. The adoption of this standard was applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this guidance on January 1, 2018, which resulted in a $7.8 million cumulative effect adjustment to opening retained earnings. In May 2017, the FASB issued ASU 2017-09, “ Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” The update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective for annual reporting periods beginning after December 15, 2017. The Company adopted this guidance on January 1, 2018, and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “ Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU allows a reclassification from accumulated other comprehensive earnings (AOCE) to retained earnings for the stranded tax effects caused by the revaluation of deferred taxes resulting from the newly enacted corporate tax rate in the Tax Cuts and Jobs Act. The ASU is effective in years beginning after December 15, 2018, but permits early adoption in a period for which financial statements have not yet been issued. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. In February 2018, the FASB ASU 2018-03, “ Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities .” This amendment clarifies certain aspects of the new guidance (ASU 2016-01) on recognizing and measuring financial instruments and presentation requirements for certain fair value option liabilities. ASU 2018-03 is effective for interim periods beginning after June 15, 2018 and will be effective for our 2018 annual reporting period. The standard requires entities to record a cumulative-effect adjustment to the statement of financial position at the beginning of the fiscal year in which the amendments are adopted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. In March 2018, the FASB issued ASU 2018-05, “ Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” |
Mortgage Loans Held-for-Sale (T
Mortgage Loans Held-for-Sale (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Mortgage Loans Held-for-Sale | |
Summary of the unpaid principal balance (UPB ) of mortgage loans held-for-sale by type | March 31, December 31, 2018 2017 Government (1) $ 179,150 $ 263,512 Conventional (2) 358,575 193,055 Other (3) 103,470 93,012 Fair value adjustment (4) 14,311 19,202 Total mortgage loans held for sale $ 655,506 $ 568,781 (1) Includes all government-insured loans including Federal Housing Administration (FHA), Veterans Affairs (VA) and United States Department of Agriculture (USDA). (2) Includes loans eligible for sale to Federal National Mortgage Association (Fannie Mae or FNMA) and Federal Home Loan Mortgage Corporation (Freddie Mac or FHLMC). (3) Includes non-qualified mortgages (NonQM) and jumbo loans. (4) Changes in fair value are included in gain on sale of loans, net in the accompanying consolidated statements of operations. |
Schedule of gain on loans held-for-sale (LHFS) | For the Three Months Ended March 31, 2018 2017 Gain on sale of mortgage loans $ 29,338 $ 38,240 Premium from servicing retained loan sales 10,482 12,066 Unrealized losses from derivative financial instruments (2,100) (1,145) Realized gains from derivative financial instruments 12,045 1,125 Mark to market (loss) gain on LHFS (4,891) 5,203 Direct origination expenses, net (23,014) (19,836) Provision for repurchases (378) 1,666 Total gain on sale of loans, net $ 21,482 $ 37,319 |
Mortgage Servicing Rights (Tabl
Mortgage Servicing Rights (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Mortgage Servicing Rights | |
Schedule of changes in the fair value of MSRs | March 31, December 31, 2018 2017 Balance at beginning of period $ 154,405 $ 131,537 Additions from servicing retained loan sales 10,482 56,049 Addition from purchases — 5,618 Reductions from bulk sales (1) — (895) Changes in fair value (2) 9,180 (37,904) Fair value of MSRs at end of period $ 174,067 $ 154,405 (1) In the first quarter of 2017, the Company sold substantially all of its NonQM MSRs. (2) Changes in fair value are included within gain (loss) on MSRs, net in the accompanying consolidated statements of operations. |
Schedule of the outstanding loans serviced by entity | March 31, December 31, 2018 2017 Government insured $ 3,346,717 $ 2,834,680 Conventional (1) 13,403,157 13,493,463 NonQM 1,947 1,957 Total loans serviced $ 16,751,821 $ 16,330,100 (1) At March 31, 2018 and December 31, 2017, $13.4 billion and $13.5 billion, respectively, of Fannie Mae and Freddie Mac servicing has been pledged as collateral as part of the MSR Financing (See Note 4.—Debt– MSR Financings). Pledged collateral was approximately 79% and 81% of the fair value of MSRs in the consolidated balance sheets at March 31, 2018 and December 31, 2017, respectively. |
Schedule of hypothetical changes in the fair values of MSRs | March 31, December 31, Mortgage Servicing Rights Sensitivity Analysis 2018 2017 Fair value of MSRs $ 174,067 $ 154,405 Prepayment Speed: Decrease in fair value from 10% adverse change (4,418) (5,643) Decrease in fair value from 20% adverse change (9,029) (11,275) Decrease in fair value from 30% adverse change (13,752) (16,807) Discount Rate: Decrease in fair value from 10% adverse change (6,449) (5,461) Decrease in fair value from 20% adverse change (12,449) (10,555) Decrease in fair value from 30% adverse change (18,043) (15,316) |
Schedule of Gain (loss) on mortgage servicing rights | For the Three Months Ended March 31, 2018 2017 Change in fair value of mortgage servicing rights $ 9,180 $ (1,122) Loss on sale of mortgage servicing rights (2) (414) Realized and unrealized (losses) gains from hedging instruments (1,473) 559 Gain (loss) on mortgage servicing rights, net $ 7,705 $ (977) |
Schedule of components of servicing income | For the Three Months Ended March 31, 2018 2017 Contractual servicing fees $ 11,538 $ 8,366 Late and ancillary fees 151 85 Subservicing and other costs (2,226) (1,131) Servicing fees, net $ 9,463 $ 7,320 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Instrument [Line Items] | |
Schedule of information on warehouse borrowings | Maximum Balance Outstanding At Borrowing March 31, December 31, Capacity 2018 2017 Maturity Date Short-term borrowings: Repurchase agreement 1 $ 150,000 $ 127,272 $ 100,630 June 15, 2018 Repurchase agreement 2 35,000 31,172 31,632 May 28, 2018 Repurchase agreement 3 (1) 225,000 150,345 154,020 December 21, 2018 Repurchase agreement 4 (2) 250,000 131,745 152,772 May 28, 2018 Repurchase agreement 5 175,000 147,792 88,920 January 31, 2019 Repurchase agreement 6 200,000 61,848 47,389 June 28, 2018 Repurchase agreement 7 50,000 168 — December 26, 2018 Total warehouse borrowings $ 1,085,000 $ 650,342 $ 575,363 (1) As of March 31, 2018 and December 31, 2017, $27.0 million and $41.8 million, respectively, are associated with finance receivables made to the Company’s warehouse customers. (2) In April 2018, the maturity of the line was extended for 30 days to May 28, 2018, while the annual renewal is completed. |
Junior Subordinated Notes | |
Debt Instrument [Line Items] | |
Schedule of remaining principal balance and fair value | March 31, December 31, 2018 2017 Junior Subordinated Notes (1) $ 62,000 $ 62,000 Fair value adjustment (16,663) (17,018) Total Junior Subordinated Notes $ 45,337 $ 44,982 (1) Stated maturity of March 2034; requires quarterly distributions initially at a variable rate of 3‑month LIBOR plus 3.75% per annum. |
Securitized Mortgage Trusts (Ta
Securitized Mortgage Trusts (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Securitized Mortgage Trusts | |
Schedule of trust assets | March 31, December 31, 2018 2017 Securitized mortgage collateral $ 3,513,901 $ 3,662,008 REO 10,152 8,542 Total securitized mortgage trust assets $ 3,524,053 $ 3,670,550 |
Schedule of trust liabilities | March 31, December 31, 2018 2017 Securitized mortgage borrowings $ 3,508,477 $ 3,653,265 |
Schedule of changes in fair value of net trust assets, including trust REO losses | For the Three Months Ended March 31, 2018 2017 Change in fair value of net trust assets, excluding REO $ (4,331) $ 4,786 Gains from REO 2,193 1,533 Change in fair value of net trust assets, including trust REO gains $ (2,138) $ 6,319 |
Fair Value of Financial Instr24
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value of Financial Instruments | |
Schedule of estimated fair value of financial instruments included in consolidated financial statements | March 31, 2018 December 31, 2017 Carrying Estimated Fair Value Carrying Estimated Fair Value Amount Level 1 Level 2 Level 3 Amount Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 29,485 $ 29,485 $ — $ — $ 33,223 $ 33,223 $ — $ — Restricted cash 5,704 5,704 — — 5,876 5,876 — — Mortgage loans held-for-sale 655,506 — 655,506 — 568,781 — 568,781 — Finance receivables 26,989 — 26,989 — 41,777 — 41,777 — Mortgage servicing rights 174,067 — — 174,067 154,405 — — 154,405 Derivative assets, lending, net 3,854 — — 3,854 4,777 — 420 4,357 Securitized mortgage collateral 3,513,901 — — 3,513,901 3,662,008 — — 3,662,008 Liabilities Warehouse borrowings $ 650,342 $ — $ 650,342 $ — $ 575,363 $ — $ 575,363 $ — MSR financings 45,000 — — 45,000 35,133 — — 35,133 Convertible notes 24,977 — — 24,977 24,974 — — 24,974 Contingent consideration — — — — 554 — — 554 Long-term debt 45,337 — — 45,337 44,982 — — 44,982 Securitized mortgage borrowings 3,508,477 — — 3,508,477 3,653,265 — — 3,653,265 Derivative liabilities, lending, net 892 — 892 — — — — — |
Schedule of assets and liabilities that are measured at estimated fair value on recurring basis | Recurring Fair Value Measurements March 31, 2018 December 31, 2017 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Mortgage loans held-for-sale $ — $ 655,506 $ — $ — $ 568,781 $ — Derivative assets, lending, net (1) — — 3,854 — 420 4,357 Mortgage servicing rights — — 174,067 — — 154,405 Securitized mortgage collateral — — 3,513,901 — — 3,662,008 Total assets at fair value $ — $ 655,506 $ 3,691,822 $ — $ 569,201 $ 3,820,770 Liabilities Securitized mortgage borrowings $ — $ — $ 3,508,477 $ — $ — $ 3,653,265 Long-term debt — — 45,337 — — 44,982 Contingent consideration — — — — — 554 Derivative liabilities, lending, net (2) — 892 — — — — Total liabilities at fair value $ — $ 892 $ 3,553,814 $ — $ — $ 3,698,801 (1) At March 31, 2018, derivative assets, lending, net included $3.9 million in IRLCs and is included in other assets in the accompanying consolidated balance sheets. At December 31, 2017, derivative assets, lending, net included $4.4 million in IRLCs and $420 thousand in Hedging instruments, respectively, and is included in other assets in the accompanying consolidated balance sheets. (2) At March 31, 2018, derivative liabilities, lending, net included $892 thousand in Hedging Instruments and is included in other liabilities in the accompanying consolidated balance sheets. |
Schedule of reconciliation for all assets and liabilities measured at estimated fair value on recurring basis using significant unobservable inputs (Level 3) | Level 3 Recurring Fair Value Measurements For the Three Months Ended March 31, 2018 Interest Securitized Securitized Mortgage rate lock Long- mortgage mortgage servicing commitments, term Contingent collateral borrowings rights net debt consideration Fair value, December 31, 2017 $ 3,662,008 $ (3,653,265) $ 154,405 $ 4,357 $ (44,982) $ (554) Total gains (losses) included in earnings: Interest income (1) 5,688 — — — — — Interest expense (1) — (20,080) — — (139) — Change in fair value (32,755) 28,424 9,180 (503) 1,224 — Change in instrument specific credit risk — — — — (1,440) (2) — Total gains (losses) included in earnings (27,067) 8,344 9,180 (503) (355) — Transfers in and/or out of Level 3 — — — — — — Purchases, issuances and settlements: Purchases — — — — — — Issuances — — 10,482 — — — Settlements (121,040) 136,444 — — — 554 Fair value, March 31, 2018 $ 3,513,901 $ (3,508,477) $ 174,067 $ 3,854 $ (45,337) $ — Unrealized gains (losses) still held (3) $ (533,589) $ 2,694,742 $ 174,067 $ 3,854 $ 16,663 $ — (1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. Net interest income, including cash received and paid, was $2.2 million for three months ended March 31, 2018. The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations is primarily from contractual interest on the securitized mortgage collateral and borrowings. (2) Amount represents the change in instrument specific credit risk in other comprehensive earnings in the consolidated statements of operations and comprehensive earnings as required by the adoption of ASU 2016-01 on January 1, 2018. (3) Represents the amount of unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held and reflected in the fair values at March 31, 2018. Level 3 Recurring Fair Value Measurements For the Three Months Ended March 31, 2017 Interest Securitized Securitized Mortgage rate lock Long- mortgage mortgage servicing commitments, term Contingent collateral borrowings rights net debt consideration Fair value, December 31, 2016 $ 4,021,891 $ (4,017,603) $ 131,537 $ 11,169 $ (47,207) $ (31,072) Total gains (losses) included in earnings: Interest income (1) 15,484 — — — — — Interest expense (1) — (40,695) — — (340) — Change in fair value 51,052 (46,266) (1,122) 1,164 (2,497) (1,384) Total gains (losses) included in earnings 66,536 (86,961) (1,122) 1,164 (2,837) (1,384) Transfers in and/or out of Level 3 — — — — — — Purchases, issuances and settlements: Purchases — — — — — — Issuances — — 12,066 — — — Settlements (185,091) 211,896 (895) — — 7,958 Fair value, March 31, 2017 $ 3,903,336 $ (3,892,668) $ 141,586 $ 12,333 $ (50,044) $ (24,498) Unrealized gains (losses) still held (2) $ (825,087) $ 2,977,521 $ 141,586 $ 12,333 $ 20,719 $ (24,498) (1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. Net interest income, including cash received and paid, was $2.1 million for the three months ended March 31, 2017. The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations is primarily from contractual interest on the securitized mortgage collateral and borrowings. (2) Represents the amount of unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held and reflected in the fair values at March 31, 2017. |
Schedule of quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and non-recurring basis | Estimated Valuation Unobservable Range of Weighted Financial Instrument Fair Value Technique Input Inputs Average Assets and liabilities backed by real estate Securitized mortgage collateral, and $ 3,513,901 DCF Prepayment rates 1.7 - 25.1 % 7.1 % Securitized mortgage borrowings (3,508,477) Default rates 0.01 - 4.2 % 1.1 % Loss severities 9.9 - 84.7 % 46.1 % Discount rates 3.9 - 25.0 % 4.6 % Other assets and liabilities Mortgage servicing rights $ 174,067 DCF Discount rate 9.0 - 14.0 % 9.7 % Prepayment rates 6.9 - 88.8 % 10.3 % Derivative assets - IRLCs, net 3,854 Market pricing Pull-through rate 15.1 - 99.9 % 78.5 % Long-term debt (45,337) DCF Discount rate 9.9 % 9.9 % DCF = Discounted Cash Flow |
Schedule of changes in recurring fair value measurements included in net earnings | The following tables present the changes in recurring fair value measurements included in net earnings for the three months ended March 31, 2018 and 2017: Recurring Fair Value Measurements Changes in Fair Value Included in Net Earnings For the Three Months Ended March 31, 2018 Change in Fair Value of Interest Interest Net Trust Long-term Other Revenue Gain on sale Income (1) Expense (1) Assets Debt and Expense of loans, net Total Securitized mortgage collateral $ 5,688 $ — $ (32,755) $ — $ — $ — $ (27,067) Securitized mortgage borrowings — (20,080) 28,424 — — — 8,344 Derivative liabilities, net, securitized trusts — — — — — — — Long-term debt — (139) — 1,224 — — 1,085 Mortgage servicing rights (2) — — — — 9,180 — 9,180 Mortgage loans held-for-sale — — — — — (4,891) (4,891) Derivative assets — IRLCs — — — — — (503) (503) Derivative liabilities — Hedging Instruments — — — — 285 (1,597) (1,312) Total $ 5,688 $ (20,219) $ (4,331) (3) $ 1,224 $ 9,465 $ (6,991) $ (15,164) (1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. (2) Included in loss on MSRs, net in the consolidated statements of operations. (3) For the three months ended March 31, 2018, change in the fair value of net trust assets, excluding REO was $4.3 million. Recurring Fair Value Measurements Changes in Fair Value Included in Net Earnings For the Three Months Ended March 31, 2017 Change in Fair Value of Interest Interest Net Trust Long-term Other Revenue Gain on sale Income (1) Expense (1) Assets Debt and Expense of loans, net Total Securitized mortgage collateral $ 15,484 $ — $ 51,052 $ — $ — $ — $ 66,536 Securitized mortgage borrowings — (40,695) (46,266) — — — (86,961) Derivative liabilities, net, securitized trusts — — — — — — — Long-term debt — (340) — (2,497) — — (2,837) Mortgage servicing rights (2) — — — — (1,122) — (1,122) Contingent consideration — — — — (1,384) — (1,384) Mortgage loans held-for-sale — — — — — 5,203 5,203 Derivative assets — IRLCs — — — — — 1,164 1,164 Derivative liabilities — Hedging Instruments — — — — 1,223 (2,309) (1,086) Total $ 15,484 $ (41,035) $ 4,786 (3) $ (2,497) $ (1,283) $ 4,058 $ (20,487) (1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. (2) Included in loss on MSRs, net in the consolidated statements of operations. (3) For the three months ended March 31, 2017, change in the fair value of net trust assets, excluding REO was $4.8 million. |
Schedule of information for derivative assets and liabilities - lending | Total Gains (Losses) (1) Notional Amount For the Three Months Ended March 31, December 31, March 31, 2018 2017 2018 2017 Derivative – IRLC's $ 354,117 $ 398,225 $ (503) $ 1,164 Derivative – TBA MBS 407,936 687,500 10,448 (1,184) (1) Amounts included in gain on sale of loans, net within the accompanying consolidated statements of operations. |
Schedule of financial and non-financial assets and liabilities measured using nonrecurring fair value measurements | Nonrecurring Fair Value Measurements March 31, 2018 March 31, 2017 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 REO (1) $ — $ 1,307 $ — $ — $ 6,342 $ — Deferred charge (2) — — — — — 8,409 (1) Balance represents REO at March 31, 2018 which have been impaired subsequent to foreclosure. (2) With the adoption of ASU 2016-16 on January 1, 2018, $7.8 million in deferred charge was eliminated with a cumulative effect adjustment to opening retained earnings. Total Gains (Losses) (1) For the Three Months Ended March 31, 2018 2017 REO (2) $ 2,193 $ 1,533 Deferred charge (3) — (277) (1) Total losses reflect losses from all nonrecurring measurements during the period. (2) For the three months ended March 31, 2018 and 2017, the Company recorded $2.2 million and $1.5 million, respectively, in gains which represent recovery of the net realizable value (NRV) attributable to an improvement in state specific loss severities on properties held during the period which resulted in an increase to NRV. (3) For the three months ended March 2017, the Company recorded $277 thousand in income tax expense resulting from impairment write-downs of deferred charge based on changes in estimated cash flows and lives of the related mortgages retained in the securitized mortgage collateral. With the adoption of ASU 2016-16 on January 1, 2018, there will no longer be impairment of deferred charge. |
Reconciliation of Earnings Pe25
Reconciliation of Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Reconciliation of Earnings Per Share | |
Schedule of computation of basic and diluted earnings per common share | For the Three Months Ended March 31, 2018 2017 Numerator for basic earnings per share: Net earnings $ 3,873 $ 4,627 Numerator for diluted earnings per share: Net earnings $ 3,873 $ 4,627 Interest expense attributable to convertible notes (1) — 454 Net earnings plus interest expense attributable to convertible notes $ 3,873 $ 5,081 Denominator for basic earnings per share (2): Basic weighted average common shares outstanding during the period 20,951 16,025 Denominator for diluted earnings per share (2): Basic weighted average common shares outstanding during the period 20,951 16,025 Net effect of dilutive convertible notes (1) — 1,163 Net effect of dilutive stock options and DSU’s 151 234 Diluted weighted average common shares 21,102 17,422 Net earnings per common share: Basic $ 0.18 $ 0.29 Diluted $ 0.18 $ 0.29 (1) Adjustments to diluted earnings per share for the convertible notes for the three months ended March 31, 2018 were excluded from the calculation as they are anti-dilutive. (2) Number of shares presented in thousands. |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting | |
Reconciliation of earnings from segment to consolidated | Statement of Operations Items for the Mortgage Real Estate Long-term Corporate Three Months Ended March 31, 2018: Lending Services Portfolio and other Consolidated Gain on sale of loans, net $ 21,482 $ — $ — $ — $ 21,482 Real estate services fees, net — 1,385 — — 1,385 Servicing fees, net 9,463 — — — 9,463 Gain on mortgage servicing rights, net 7,705 — — — 7,705 Other revenue — — 84 6 90 Other operating expense (31,548) (638) (65) (3,497) (35,748) Other income (expense) 334 — 196 (424) 106 Net (loss) earnings before income tax expense $ 7,436 $ 747 $ 215 $ (3,915) 4,483 Income tax expense 610 Net earnings $ 3,873 Statement of Operations Items for the Mortgage Real Estate Long-term Corporate Three Months Ended March 31, 2017: Lending Services Portfolio and other Consolidated Gain on sale of loans, net $ 37,319 $ — $ — $ — $ 37,319 Real estate services fees, net — 1,633 — — 1,633 Servicing fees, net 7,320 — — — 7,320 Loss on mortgage servicing rights, net (977) — — — (977) Other revenue 14 — 61 (28) 47 Accretion of contingent consideration (845) — — — (845) Change in fair value of contingent consideration (539) — — — (539) Other operating expense (38,085) (995) (86) (4,007) (43,173) Other income (expense) 407 — 4,713 (852) 4,268 Net (loss) earnings before income tax expense $ 4,614 $ 638 $ 4,688 $ (4,887) $ 5,053 Income tax expense 426 Net earnings $ 4,627 |
Reconciliation of assets from segment to consolidated | Mortgage Real Estate Long-term Corporate Balance Sheet Items as of: Lending Services Portfolio and other Consolidated Total Assets at March 31, 2018 (1) $ 1,089,230 $ — $ 3,523,949 $ 9,755 $ 4,622,934 Total Assets at December 31, 2017 (1) $ 992,983 $ 251 $ 3,678,377 $ 10,089 $ 4,681,700 (1) All segment asset balances exclude intercompany balances. |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies | |
Schedule of the activity related to the repurchase reserve for previously sold loans | March 31, December 31, 2018 2017 Beginning balance $ 6,020 $ 5,408 Provision for repurchases 378 1,557 Settlements (946) (945) Total repurchase reserve $ 5,452 $ 6,020 |
Equity and Share Based Paymen28
Equity and Share Based Payments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity and Share Based Payments | |
Summary of activity, pricing and other information for the Company's stock options | Weighted- Average Number of Exercise Shares Price Options outstanding at December 31, 2017 1,582,754 $ 13.61 Options granted — — Options exercised (3,000) 5.39 Options forfeited/cancelled (72,623) 16.31 Options outstanding at March 31, 2018 1,507,131 13.50 Options exercisable at March 31, 2018 917,801 $ 12.04 |
Summary of activity, pricing and other information for the Company's (DSU's) | Weighted- Average Number of Grant Date Shares Fair Value DSU's outstanding at December 31, 2017 100,750 $ 10.41 DSU’s granted — — DSU’s exercised — — DSU’s forfeited/cancelled — — DSU’s outstanding at March 31, 2018 100,750 $ 10.41 |
Mortgage Loans Held-for-Sale (D
Mortgage Loans Held-for-Sale (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Mortgage loans held-for-Sale | |||
Fair value adjustment | $ 14,311 | $ 19,202 | |
Total mortgage loans held-for-sale | 655,506 | 568,781 | |
Gain on LHFS | |||
Total gain on sale of loans, net | 28,851 | $ 31,595 | |
Government | |||
Mortgage loans held-for-Sale | |||
Fair value adjustment | 179,150 | 263,512 | |
Conventional | |||
Mortgage loans held-for-Sale | |||
Fair value adjustment | 358,575 | 193,055 | |
Other | |||
Mortgage loans held-for-Sale | |||
Fair value adjustment | 103,470 | $ 93,012 | |
Mortgage loans, held-for-sale | |||
Gain on LHFS | |||
Gain on sale of mortgage loans | 29,338 | 38,240 | |
Premium from servicing retained loan sales | 10,482 | 12,066 | |
Unrealized losses from derivative financial instruments | (2,100) | (1,145) | |
Realized gains from derivative financial instruments | 12,045 | 1,125 | |
Mark to market (loss) gain on LHFS | (4,891) | 5,203 | |
Direct origination expenses, net | (23,014) | (19,836) | |
Provision for repurchases | (378) | 1,666 | |
Total gain on sale of loans, net | $ 21,482 | $ 37,319 |
Mortgage Servicing Rights (Deta
Mortgage Servicing Rights (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Changes in the fair value of MSRs | |||
Balance at beginning of period | $ 154,405 | $ 131,537 | $ 131,537 |
Additions from servicing retained loan sales | 10,482 | 56,049 | |
Addition from purchases | 5,618 | ||
Reductions from bulk sales | (895) | ||
Changes in fair value | 9,180 | (37,904) | |
Fair value of MSRs at end of period | 174,067 | 154,405 | |
Total loans serviced | $ 16,751,821 | $ 16,330,100 | |
Pledged collateral | 79.00% | 81.00% | |
Mortgage Servicing Rights Sensitivity Analysis | |||
Change in fair value of mortgage servicing rights | $ 9,180 | (1,122) | |
Loss on sale of mortgage servicing rights | (2) | (414) | |
Realized and unrealized (losses) gains from hedging instruments | (1,473) | 559 | |
Gain (loss) on mortgage servicing rights, net | 7,705 | (977) | |
Servicing income, net | |||
Contractual servicing fees | 11,538 | 8,366 | |
Late and Ancillary fees | 151 | 85 | |
Subservicing and other costs | (2,226) | (1,131) | |
Servicing fees, net | 9,463 | $ 7,320 | |
Government | |||
Changes in the fair value of MSRs | |||
Total loans serviced | 3,346,717 | $ 2,834,680 | |
Conventional | |||
Changes in the fair value of MSRs | |||
Total loans serviced | 13,403,157 | 13,493,463 | |
NonQM | |||
Changes in the fair value of MSRs | |||
Total loans serviced | 1,947 | 1,957 | |
Mortgage servicing rights | |||
Mortgage Servicing Rights Sensitivity Analysis | |||
Fair value of MSRs | 174,067 | 154,405 | |
Prepayment Speed, Decrease in fair value from 10% adverse change | (4,418) | (5,643) | |
Prepayment Speed, Decrease in fair value from 20% adverse change | (9,029) | (11,275) | |
Prepayment Speed, Decrease in fair value from 30% adverse change | (13,752) | (16,807) | |
Discount Rate, Decrease in fair value from 10% adverse change | (6,449) | (5,461) | |
Discount Rate, Decrease in fair value from 20% adverse change | (12,449) | (10,555) | |
Discount Rate, Decrease in fair value from 30% adverse change | $ (18,043) | $ (15,316) |
Debt - Warehouse Borrowings (De
Debt - Warehouse Borrowings (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Warehouse Borrowings [Abstract] | ||
Maximum Borrowing Capacity | $ 1,085,000 | |
Balance Outstanding | 650,342 | $ 575,363 |
Repurchase agreement 1 | ||
Warehouse Borrowings [Abstract] | ||
Maximum Borrowing Capacity | 150,000 | |
Balance Outstanding | 127,272 | 100,630 |
Repurchase agreement 2 | ||
Warehouse Borrowings [Abstract] | ||
Maximum Borrowing Capacity | 35,000 | |
Balance Outstanding | 31,172 | 31,632 |
Repurchase agreement 3 | ||
Warehouse Borrowings [Abstract] | ||
Maximum Borrowing Capacity | 225,000 | |
Balance Outstanding | 150,345 | 154,020 |
Repurchase agreement 4 | ||
Warehouse Borrowings [Abstract] | ||
Maximum Borrowing Capacity | 250,000 | |
Balance Outstanding | $ 131,745 | 152,772 |
Extended term | 30 days | |
Repurchase agreement 5 | ||
Warehouse Borrowings [Abstract] | ||
Maximum Borrowing Capacity | $ 175,000 | |
Balance Outstanding | 147,792 | 88,920 |
Repurchase agreement 6 | ||
Warehouse Borrowings [Abstract] | ||
Maximum Borrowing Capacity | 200,000 | |
Balance Outstanding | 61,848 | $ 47,389 |
Repurchase agreement 7 | ||
Warehouse Borrowings [Abstract] | ||
Maximum Borrowing Capacity | 50,000 | |
Balance Outstanding | $ 168 |
Debt - MSR Financings (Details)
Debt - MSR Financings (Details) - USD ($) $ in Thousands | Aug. 17, 2017 | Feb. 10, 2017 | Mar. 31, 2018 | Feb. 28, 2018 |
Long-term Debt | ||||
Maximum Borrowing Capacity | $ 1,085,000 | |||
Notice period (in days) | 150 days | |||
Loan And Security Agreement [Member] | ||||
Long-term Debt | ||||
Maximum Borrowing Capacity | $ 100 | |||
Loan And Security Agreement [Member] | Impac Mortgage Corp. | ||||
Long-term Debt | ||||
Maximum Borrowing Capacity | $ 40,000 | |||
Maximum borrowing capacity (in percentage) | 55.00% | |||
Debt Instrument, Frequency of Periodic Payment | P2Y | |||
Revolving loan commitment period | 1 year | |||
Proceeds from Issuance of Secured Debt | $ 35,100 | |||
1ML | Impac Mortgage Corp. | ||||
Long-term Debt | ||||
Interest margin over base rate (as a percent) | 4.00% | |||
FHLMC Financing | ||||
Long-term Debt | ||||
Maximum Borrowing Capacity | $ 30,000 | $ 50,000 | ||
Maximum borrowing capacity (in percentage) | 55.00% | |||
Automatic renewal period | 1 year | |||
Financing secured by MSRs | 65,700 | |||
Amount outstanding during the year | 30,000 | |||
FHLMC Financing | 1ML | ||||
Long-term Debt | ||||
Interest margin over base rate (as a percent) | 4.00% | |||
FNMA Financing | ||||
Long-term Debt | ||||
Financing secured by MSRs | 71,400 | |||
Amount outstanding during the year | $ 15,000 | |||
Term Loan Member | ||||
Long-term Debt | ||||
Repayments of Debt | $ 30,100 |
Debt - Convertible Notes (Detai
Debt - Convertible Notes (Details) - 2015 Convertible Notes $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended |
May 31, 2015USD ($)D$ / shares | Mar. 31, 2018 | |
Convertible Notes | ||
Amount of debt issued | $ | $ 25,000 | |
Interest rate of debt (as a percent) | 7.50% | |
Transaction costs | $ | $ 50 | |
Conversion price (in dollars per share) | $ / shares | $ 21.50 | |
Conditional conversion price (in dollars per share) | $ / shares | $ 30.10 | |
Number of trading days for which stock price must exceed specified price | D | 20 | |
Number of consecutive trading days during which stock price must exceed specified price | D | 30 | |
Convertible notes voting restriction period | 3 years |
Debt - Long-term Debt (Details)
Debt - Long-term Debt (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Trust Preferred Securities and Junior Subordinated Notes, Fair Value [Abstract] | ||
Long-term debt | $ 45,337 | $ 44,982 |
Trust Preferred Securities | LIBOR | ||
Long-term Debt | ||
Applicable margin (as a percent) | 3.75% | |
Junior Subordinated Notes | ||
Trust Preferred Securities and Junior Subordinated Notes, Fair Value [Abstract] | ||
Long-term debt | $ 62,000 | 62,000 |
Fair value adjustment | (16,663) | (17,018) |
Total | $ 45,337 | $ 44,982 |
Securitized Mortgage Trusts - S
Securitized Mortgage Trusts - Securitized Mortgage Trust Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Trust Assets | ||
Securitized mortgage collateral | $ 3,513,901 | $ 3,662,008 |
REO | 10,152 | 8,542 |
Total securitized mortgage trust assets | $ 3,524,053 | $ 3,670,550 |
Securitized Mortgage Trusts -36
Securitized Mortgage Trusts - Securitized Mortgage Trust Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Securitized Mortgage Trust Liabilities [Abstract] | ||
Securitized mortgage borrowings | $ 3,508,477 | $ 3,653,265 |
Securitized Mortgage Trusts - C
Securitized Mortgage Trusts - Change in Fair Value of Net Trust Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Change in fair value of net trust assets, including trust REO losses | ||
Change in fair value of net trust assets, excluding REO | $ (4,331) | $ 4,786 |
Gains from REO | 2,193 | 1,533 |
Change in fair value of net trust assets, including trust REO gains | $ (2,138) | $ 6,319 |
Fair Value of Financial Instr38
Fair Value of Financial Instruments - Fair value of Financial Instruments Included in the Consolidated Financial Statements (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Assets | ||||
Mortgage servicing rights | $ 174,067 | $ 154,405 | $ 131,537 | |
Liabilities | ||||
MSR financings | 35,000 | $ 35,133 | ||
Carrying Amount | ||||
Assets | ||||
Cash and cash equivalents. | 29,485 | 33,223 | ||
Restricted cash | 5,704 | 5,876 | ||
Mortgage loans held for-for-sale | 655,506 | 568,781 | ||
Finance receivables | 26,989 | 41,777 | ||
Mortgage servicing rights | 174,067 | 154,405 | ||
Derivatives assets, lending, net | 3,854 | 4,777 | ||
Securitized mortgage collateral | 3,513,901 | 3,662,008 | ||
Liabilities | ||||
Warehouse borrowings | 650,342 | 575,363 | ||
MSR financings | 45,000 | 35,133 | ||
Convertible notes | 24,977 | 24,974 | ||
Contingent consideration | 554 | |||
Long-term debt | 45,337 | 44,982 | ||
Securitized mortgage borrowings | 3,508,477 | 3,653,265 | ||
Derivative liabilities, lending, net | 892 | |||
Estimated Fair Value | Level 1 | ||||
Assets | ||||
Cash and cash equivalents. | 29,485 | 33,223 | ||
Restricted cash | 5,704 | 5,876 | ||
Estimated Fair Value | Level 2 | ||||
Assets | ||||
Mortgage loans held for-for-sale | 655,506 | 568,781 | ||
Finance receivables | 26,989 | 41,777 | ||
Derivatives assets, lending, net | 420 | |||
Liabilities | ||||
Warehouse borrowings | 650,342 | 575,363 | ||
Derivative liabilities, lending, net | 892 | |||
Estimated Fair Value | Level 3 | ||||
Assets | ||||
Mortgage servicing rights | 174,067 | 154,405 | ||
Derivatives assets, lending, net | 3,854 | 4,357 | ||
Securitized mortgage collateral | 3,513,901 | 3,662,008 | ||
Liabilities | ||||
MSR financings | 45,000 | 35,133 | ||
Convertible notes | 24,977 | 24,974 | ||
Contingent consideration | 554 | |||
Long-term debt | 45,337 | 44,982 | ||
Securitized mortgage borrowings | $ 3,508,477 | $ 3,653,265 |
Fair Value of Financial Instr39
Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Fair Value Measurements | |||
Transfers between Level 1 and Level 2 | $ 0 | ||
Transfers between Level 2 and Level 1 | 0 | ||
Assets | |||
Mortgage servicing rights | $ 174,067 | $ 154,405 | $ 131,537 |
Level 3 | |||
Fair Value Measurements | |||
Percentage of level three assets to total assets measured at fair value | 85.00% | 87.00% | |
Percentage of level three liabilities to total liabilities measured at fair value | 99.00% | 99.00% | |
Recurring basis | Level 2 | |||
Assets | |||
Mortgage loans held for-for-sale | $ 655,506 | $ 568,781 | |
Derivatives assets, lending, net | 420 | ||
Total assets at fair value | 655,506 | 569,201 | |
Liabilities | |||
Derivative liabilities, lending, net | 892 | ||
Total liabilities at fair value | 892 | ||
Recurring basis | Level 3 | |||
Assets | |||
Derivatives assets, lending, net | 3,854 | 4,357 | |
Mortgage servicing rights | 174,067 | 154,405 | |
Securitized mortgage collateral | 3,513,901 | 3,662,008 | |
Total assets at fair value | 3,691,822 | 3,820,770 | |
Liabilities | |||
Securitized mortgage borrowings | 3,508,477 | 3,653,265 | |
Long-term debt | 45,337 | 44,982 | |
Contingent consideration | 554 | ||
Total liabilities at fair value | $ 3,553,814 | $ 3,698,801 |
Fair Value of Financial Instr40
Fair Value of Financial Instruments - Reconciliation of All Assets and Liabilities Measured Using Level 3 Input (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Level 3 | ||
Purchases, issuances and settlements | ||
Net interest income including cash received and paid | $ 2,200 | $ 2,100 |
Securitized mortgage borrowings | ||
Purchases, issuances and settlements | ||
Unrealized gains (losses) still held | 2,694,742 | 2,977,521 |
Changes in fair value of liabilities during the period | ||
Fair value in the beginning of the period | (3,653,265) | (4,017,603) |
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | 8,344 | (86,961) |
Purchases, issuances and settlements | ||
Settlements | 136,444 | 211,896 |
Fair value at the end of the period | (3,508,477) | (3,892,668) |
Securitized mortgage borrowings | Interest expense | ||
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | (20,080) | (40,695) |
Securitized mortgage borrowings | Change in fair value | ||
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | 28,424 | (46,266) |
Long-term debt | ||
Purchases, issuances and settlements | ||
Unrealized gains (losses) still held | 16,663 | 20,719 |
Changes in fair value of liabilities during the period | ||
Fair value in the beginning of the period | (44,982) | (47,207) |
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | (355) | (2,837) |
Purchases, issuances and settlements | ||
Fair value at the end of the period | (45,337) | (50,044) |
Long-term debt | Interest expense | ||
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | (139) | (340) |
Long-term debt | Change in fair value | ||
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | 1,224 | (2,497) |
Long-term debt | Change in instrument specific credit risk | ||
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | (1,440) | |
Contingent consideration | ||
Purchases, issuances and settlements | ||
Unrealized gains (losses) still held | (24,498) | |
Changes in fair value of liabilities during the period | ||
Fair value in the beginning of the period | (554) | (31,072) |
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | (1,384) | |
Purchases, issuances and settlements | ||
Settlements | 554 | 7,958 |
Fair value at the end of the period | (24,498) | |
Contingent consideration | Change in fair value | ||
Total gains (losses) included in earnings: | ||
Total (losses) gains included in earnings | (1,384) | |
Securitized mortgage collateral | ||
Changes in fair value of assets during the period | ||
Fair value at the beginning of the period | 3,662,008 | 4,021,891 |
Total gains (losses) included in earnings: | ||
Total gains (losses) included in earnings | (27,067) | 66,536 |
Purchases, issuances and settlements | ||
Settlements | (121,040) | (185,091) |
Fair value at the end of the period | 3,513,901 | 3,903,336 |
Unrealized gains (losses) still held | (533,589) | (825,087) |
Securitized mortgage collateral | Interest income | ||
Total gains (losses) included in earnings: | ||
Total gains (losses) included in earnings | 5,688 | 15,484 |
Securitized mortgage collateral | Change in fair value | ||
Total gains (losses) included in earnings: | ||
Total gains (losses) included in earnings | (32,755) | 51,052 |
Mortgage servicing rights | ||
Changes in fair value of assets during the period | ||
Fair value at the beginning of the period | 154,405 | 131,537 |
Total gains (losses) included in earnings: | ||
Total gains (losses) included in earnings | 9,180 | (1,122) |
Purchases, issuances and settlements | ||
Issuances | 10,482 | 12,066 |
Settlements | (895) | |
Fair value at the end of the period | 174,067 | 141,586 |
Unrealized gains (losses) still held | 174,067 | 141,586 |
Mortgage servicing rights | Change in fair value | ||
Total gains (losses) included in earnings: | ||
Total gains (losses) included in earnings | 9,180 | (1,122) |
Interest rate lock commitments. net (IRLCs) | ||
Changes in fair value of assets during the period | ||
Fair value at the beginning of the period | 4,357 | 11,169 |
Total gains (losses) included in earnings: | ||
Total gains (losses) included in earnings | (503) | 1,164 |
Purchases, issuances and settlements | ||
Fair value at the end of the period | 3,854 | 12,333 |
Unrealized gains (losses) still held | 3,854 | 12,333 |
Interest rate lock commitments. net (IRLCs) | Change in fair value | ||
Total gains (losses) included in earnings: | ||
Total gains (losses) included in earnings | $ (503) | $ 1,164 |
Fair Value of Financial Instr41
Fair Value of Financial Instruments - Valuation Techniques And Unobservable Inputs Applied (Details) - Level 3 $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Minimum | |
Unobservable input | |
Loss severities (as a percent) | 9.90% |
Maximum | |
Unobservable input | |
Loss severities (as a percent) | 84.70% |
Weighted Average | |
Unobservable input | |
Discount rates (as a percent) | 4.60% |
Loss severities (as a percent) | 46.10% |
Securitized mortgage borrowings | |
Valuation techniques | |
Estimated fair value of liabilities | $ (3,508,477) |
Securitized mortgage borrowings | Minimum | |
Unobservable input | |
Default rates (as a percent) | 0.01% |
Securitized mortgage borrowings | Maximum | |
Unobservable input | |
Default rates (as a percent) | 4.20% |
Securitized mortgage borrowings | Weighted Average | |
Unobservable input | |
Default rates (as a percent) | 1.10% |
Securitized mortgage borrowings | DCF | Minimum | |
Unobservable input | |
Loss severities (as a percent) | 3.90% |
Securitized mortgage borrowings | DCF | Maximum | |
Unobservable input | |
Loss severities (as a percent) | 25.00% |
Long-term debt | DCF | |
Valuation techniques | |
Estimated fair value of liabilities | $ (45,337) |
Unobservable input | |
Discount rates (as a percent) | 9.90% |
Long-term debt | DCF | Weighted Average | |
Unobservable input | |
Discount rates (as a percent) | 9.90% |
Securitized mortgage collateral | DCF | |
Valuation techniques | |
Estimated fair value of assets | $ 3,513,901 |
Securitized mortgage collateral | DCF | Minimum | |
Unobservable input | |
Prepayment rates (as a percent) | 1.70% |
Securitized mortgage collateral | DCF | Maximum | |
Unobservable input | |
Prepayment rates (as a percent) | 25.10% |
Securitized mortgage collateral | DCF | Weighted Average | |
Unobservable input | |
Prepayment rates (as a percent) | 7.10% |
Mortgage servicing rights | DCF | |
Valuation techniques | |
Estimated fair value of assets | $ 174,067 |
Mortgage servicing rights | DCF | Minimum | |
Unobservable input | |
Discount rates (as a percent) | 9.00% |
Prepayment rates (as a percent) | 6.90% |
Mortgage servicing rights | DCF | Maximum | |
Unobservable input | |
Discount rates (as a percent) | 14.00% |
Mortgage servicing rights | DCF | Weighted Average | |
Unobservable input | |
Discount rates (as a percent) | 9.70% |
Prepayment rates (as a percent) | 10.30% |
Mortgage servicing rights | Derivative liabilities, net, securitized trusts | DCF | Maximum | |
Unobservable input | |
Prepayment rates (as a percent) | 88.80% |
Interest rate lock commitments. net (IRLCs) | Market pricing | |
Valuation techniques | |
Estimated fair value of assets | $ 3,854 |
Interest rate lock commitments. net (IRLCs) | Market pricing | Minimum | |
Unobservable input | |
Pull-through rate (as a percent) | 15.10% |
Interest rate lock commitments. net (IRLCs) | Market pricing | Maximum | |
Unobservable input | |
Pull-through rate (as a percent) | 99.90% |
Interest rate lock commitments. net (IRLCs) | Market pricing | Weighted Average | |
Unobservable input | |
Pull-through rate (as a percent) | 78.50% |
Fair Value of Financial Instr42
Fair Value of Financial Instruments - Changes in Recurring Fair Value Measurements Included in Earnings (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in the fair value of trust assets, excluding REO | $ (4,331) | $ 4,786 | |
Change in fair value of net trust assets, excluding REO | (4,331) | 4,786 | |
Securitized mortgage collateral | |||
Difference between aggregate unpaid principal balance and fair value of securitized mortgage collateral | 14,311 | $ 19,202 | |
Securitized Mortgage Borrowings | |||
Outstanding principal balance of securitized mortgage borrowings | 16,751,821 | 16,330,100 | |
Contingent consideration | |||
Contingent consideration payments were paid | 539 | ||
Contingent consideration | 554 | ||
Derivative liabilities, net, securitized trusts | TBA's | |||
Derivative assets and liabilities | |||
Derivative Liability, Notional Amount | 407,936 | 687,500 | |
Derivative, Gain (Loss) on Derivative, Net | 10,448 | (1,184) | |
Derivative assets - IRLCs | Interest rate lock commitments. net (IRLCs) | |||
Derivative assets and liabilities | |||
Derivative Liability, Notional Amount | 354,117 | 398,225 | |
Derivative, Gain (Loss) on Derivative, Net | (503) | 1,164 | |
Level 3 | |||
Contingent consideration | |||
Contingent consideration payments were paid | 554 | ||
Contingent consideration | 0 | 0 | |
Recurring basis | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Total | (15,164) | (20,487) | |
Recurring basis | Interest income | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Total | 5,688 | 15,484 | |
Recurring basis | Interest expense | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Total | (20,219) | (41,035) | |
Recurring basis | Change in Fair Value of Net Trust Assets | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Total | (4,331) | 4,786 | |
Recurring basis | Change in Fair Value of Long-term Debt | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Total | 1,224 | (2,497) | |
Recurring basis | Other revenue | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Total | 9,465 | (1,283) | |
Recurring basis | Gain on sale of loans, net | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Total | (6,991) | 4,058 | |
Recurring basis | Contingent consideration | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | (1,384) | ||
Recurring basis | Contingent consideration | Other revenue | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | (1,384) | ||
Recurring basis | Securitized mortgage borrowings | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | 8,344 | (86,961) | |
Recurring basis | Securitized mortgage borrowings | Interest expense | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | (20,080) | (40,695) | |
Recurring basis | Securitized mortgage borrowings | Change in Fair Value of Net Trust Assets | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | 28,424 | (46,266) | |
Recurring basis | Derivative liabilities, net, securitized trusts | Hedging Instruments | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | (1,312) | (1,086) | |
Recurring basis | Derivative liabilities, net, securitized trusts | Hedging Instruments | Other revenue | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | 285 | 1,223 | |
Recurring basis | Derivative liabilities, net, securitized trusts | Hedging Instruments | Gain on sale of loans, net | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | (1,597) | (2,309) | |
Recurring basis | Long-term debt | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | 1,085 | (2,837) | |
Recurring basis | Long-term debt | Interest expense | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | (139) | (340) | |
Recurring basis | Long-term debt | Change in Fair Value of Long-term Debt | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of liabilities | 1,224 | (2,497) | |
Recurring basis | Securitized mortgage collateral | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | (27,067) | 66,536 | |
Recurring basis | Securitized mortgage collateral | Interest income | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | 5,688 | 15,484 | |
Recurring basis | Securitized mortgage collateral | Change in Fair Value of Net Trust Assets | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | (32,755) | 51,052 | |
Recurring basis | Mortgage servicing rights | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | 9,180 | (1,122) | |
Recurring basis | Mortgage servicing rights | Other revenue | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | 9,180 | (1,122) | |
Recurring basis | Mortgage loans held-for-sale | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | (4,891) | 5,203 | |
Recurring basis | Mortgage loans held-for-sale | Gain on sale of loans, net | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | (4,891) | 5,203 | |
Recurring basis | Derivative assets - IRLCs | Interest rate lock commitments. net (IRLCs) | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | (503) | 1,164 | |
Recurring basis | Derivative assets - IRLCs | Interest rate lock commitments. net (IRLCs) | Gain on sale of loans, net | |||
Change in Fair Value Included in Net Earnings (Loss) | |||
Change in fair value of assets | (503) | $ 1,164 | |
Recurring basis | Level 3 | |||
Long-term debt | |||
Estimated fair value of long-term debt | 45,337 | $ 44,982 | |
Recurring basis | Level 3 | Long-term debt | |||
Long-term debt | |||
Long-term debt unpaid principal balance | 62,000 | ||
Estimated fair value of long-term debt | 45,300 | ||
Difference between aggregate unpaid principal balances and fair value of long-term debt | 16,700 | ||
Recurring basis | Level 3 | Securitized mortgage collateral | |||
Securitized mortgage collateral | |||
Unpaid principal balance of securitized mortgage collateral | 4,000,000 | ||
Estimated fair value of securitized mortgage collateral | 3,500,000 | ||
Difference between aggregate unpaid principal balance and fair value of securitized mortgage collateral | 500,000 | ||
Unpaid principal balance of loans 90 days or more past due | 500,000 | ||
Estimated fair value of loans 90 days or more past due | 200,000 | ||
Difference between aggregate unpaid principal balances and fair value of mortgage loans | 300,000 | ||
Securitized Mortgage Borrowings | |||
Outstanding principal balance of securitized mortgage borrowings | 4,000,000 | ||
Estimated fair value of securitized mortgage borrowings | 3,500,000 | ||
Bond losses | 2,200,000 | ||
Difference between aggregate unpaid principal balances and fair value of securitized mortgage borrowings | $ 500,000 |
Fair Value of Financial Instr43
Fair Value of Financial Instruments - Nonrecurring Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Fair Value Measurements | |||
Retained earnings | $ (999,759) | $ (968,787) | |
Total Gains (Losses) (1) | |||
Retained earnings | (999,759) | $ (968,787) | |
ASU 2016-16 | |||
Fair Value Measurements | |||
Deferred charge | (7,800) | ||
Retained earnings | 7,800 | ||
Total Gains (Losses) (1) | |||
Retained earnings | 7,800 | ||
Nonrecurring Fair Value Measurements | |||
Total Gains (Losses) (1) | |||
REO | 2,193 | $ 1,533 | |
Deferred charge | (277) | ||
Nonrecurring Fair Value Measurements | Level 2 | |||
Fair Value Measurements | |||
REO | $ 1,307 | 6,342 | |
Nonrecurring Fair Value Measurements | Level 3 | |||
Fair Value Measurements | |||
Deferred charge | $ 8,409 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Reconciliation of income taxes to the expected statutory federal corporate income tax rates | |||
Income tax expense (benefit) | $ 610 | $ 426 | |
Federal | |||
Reconciliation of income taxes to the expected statutory federal corporate income tax rates | |||
Net operating loss carryforwards | $ 619,900 | ||
California | |||
Reconciliation of income taxes to the expected statutory federal corporate income tax rates | |||
Operating loss carryforwards expired | $ 431,000 |
Reconciliation of Earnings Pe45
Reconciliation of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Numerator for basic earnings per share: | ||
Net (loss) earnings | $ 3,873 | $ 4,627 |
Numerator for diluted (loss) earnings per share: | ||
Net earnings | 3,873 | 4,627 |
Interest expense attributable to convertible notes | 454 | |
Net earnings plus interest expense attributable to convertible notes | $ 3,873 | $ 5,081 |
Denominator for basic (loss) earnings per share: | ||
Basic weighted average common shares outstanding during the period | 20,951 | 16,025 |
Denominator for diluted (loss) earnings per share: | ||
Basic weighted average common shares outstanding during the period | 20,951 | 16,025 |
Net effect of dilutive convertible notes | 1,163 | |
Net effect of dilutive stock options and DSU's | 151 | 234 |
Diluted weighted average common shares | 21,102 | 17,422 |
Basic (in dollars per share) | $ 0.18 | $ 0.29 |
Diluted (in dollars per share) | $ 0.18 | $ 0.29 |
Antidilutive stock options excluded from weighted average share calculations (in shares) | 1,200 | |
Stock options | ||
Denominator for diluted (loss) earnings per share: | ||
Antidilutive stock options excluded from weighted average share calculations (in shares) | 838 |
Segment Reporting - Statement o
Segment Reporting - Statement of Operations Items (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018USD ($)item | Mar. 31, 2017USD ($) | |
Segment Reporting | ||
Number of reportable segments | item | 3 | |
Gain on sale of loans, net | $ 21,482 | $ 37,319 |
Real estate services fees, net | 1,385 | 1,633 |
Servicing fees, net | 9,463 | 7,320 |
Gain (loss) on mortgage servicing rights, net | 7,705 | (977) |
Other revenue | 90 | 47 |
Accretion of contingent consideration | (845) | |
Change in fair value of contingent consideration | (539) | |
Other operating expense | (35,748) | (43,173) |
Other income (expense) | 106 | 4,268 |
Earnings before income taxes | 4,483 | 5,053 |
Income tax expense (benefit) | 610 | 426 |
Net earnings | 3,873 | 4,627 |
Corporate and Other. | ||
Segment Reporting | ||
Other revenue | 6 | (28) |
Other operating expense | (3,497) | (4,007) |
Other income (expense) | (424) | (852) |
Earnings before income taxes | (3,915) | (4,887) |
Mortgage Lending | Operating segments | ||
Segment Reporting | ||
Gain on sale of loans, net | 21,482 | 37,319 |
Servicing fees, net | 9,463 | 7,320 |
Gain (loss) on mortgage servicing rights, net | 7,705 | (977) |
Other revenue | 14 | |
Accretion of contingent consideration | (845) | |
Change in fair value of contingent consideration | (539) | |
Other operating expense | (31,548) | (38,085) |
Other income (expense) | 334 | 407 |
Earnings before income taxes | 7,436 | 4,614 |
Real Estate Services | Operating segments | ||
Segment Reporting | ||
Real estate services fees, net | 1,385 | 1,633 |
Other operating expense | (638) | (995) |
Earnings before income taxes | 747 | 638 |
Long-term Portfolio | Operating segments | ||
Segment Reporting | ||
Other revenue | 84 | 61 |
Other operating expense | (65) | (86) |
Other income (expense) | 196 | 4,713 |
Earnings before income taxes | $ 215 | $ 4,688 |
Segment Reporting - Balance She
Segment Reporting - Balance Sheet Items (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Segment Reporting | ||
Total assets | $ 4,622,934 | $ 4,681,700 |
Operating segments | ||
Segment Reporting | ||
Total assets | 9,755 | 10,089 |
Mortgage Lending | Operating segments | ||
Segment Reporting | ||
Total assets | 1,089,230 | 992,983 |
Real Estate Services | Operating segments | ||
Segment Reporting | ||
Total assets | 251 | |
Long-term Portfolio | Operating segments | ||
Segment Reporting | ||
Total assets | $ 3,523,949 | $ 3,678,377 |
Commitments and Contingencies48
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Continuing operations repurchase reserve activity | ||
Beginning balance | $ 6,020 | $ 5,408 |
Provision for repurchases | 378 | 1,557 |
Settlements | (946) | (945) |
Total repurchase reserve | 5,452 | 6,020 |
Approved warehouse lines | 1,085,000 | |
Outstanding balance | 26,989 | $ 41,777 |
Non-affiliated customers | Warehouse Borrowings | ||
Continuing operations repurchase reserve activity | ||
Approved warehouse lines | $ 122,500 |
Equity and Share Based Paymen49
Equity and Share Based Payments - Stock Options (Details) - Stock options $ / shares in Units, $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Number of Shares | |
Options outstanding at beginning of period (in shares) | shares | 1,582,754 |
Options exercised (in shares) | shares | (3,000) |
Options forfeited / cancelled (in shares) | shares | (72,623) |
Options outstanding at end of year (in shares) | shares | 1,507,131 |
Options exercisable at end of year (in shares) | shares | 917,801 |
Weighted-Average Exercise Price | |
Options outstanding at beginning of period (in dollars per share) | $ / shares | $ 13.61 |
Options exercised (in dollars per share) | $ / shares | 5.39 |
Options forfeited / cancelled (in dollars per share) | $ / shares | 16.31 |
Options outstanding at end of year (in dollars per share) | $ / shares | 13.50 |
Options exercisable at end of year (in dollars per share) | $ / shares | $ 12.04 |
Additional disclosure related to options | |
Unrecognized compensation cost | $ | $ 2.5 |
Weighted-average period over which compensation cost is expected to be recognized | 1 year 9 months 18 days |
Equity and Share Based Paymen50
Equity and Share Based Payments - Deferred Stock Units (Details) - Deferred stock units $ / shares in Units, $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Number of Shares | |
DSU's outstanding at beginning of year (in shares) | shares | 100,750 |
DSU's outstanding at end of year (in shares) | shares | 100,750 |
Weighted-Average Grant Date Fair Value | |
DSU's outstanding at beginning of year (in dollars per share) | $ / shares | $ 10.41 |
DSU's outstanding at end of year (in dollars per share) | $ / shares | $ 10.41 |
Additional information regarding DSUs | |
Unrecognized compensation cost | $ | $ 203 |
Weighted-average period over which compensation cost is expected to be recognized | 2 years 2 months 12 days |