Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 29, 2020 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2020 | |
Entity File Number | 001-35000 | |
Entity Registrant Name | Walker & Dunlop, Inc. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 80-0629925 | |
Entity Address, Address Line One | 7501 Wisconsin Avenue, Suite 1200E | |
Entity Address, City or Town | Bethesda | |
Entity Address, State or Province | MD | |
Entity Address, Postal Zip Code | 20814 | |
City Area Code | 301 | |
Local Phone Number | 215-5500 | |
Title of 12(b) Security | Common Stock, $0.01 Par Value Per Share | |
Trading Symbol | WD | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 31,131,823 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001497770 | |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and cash equivalents | $ 205,309 | $ 120,685 |
Restricted cash | 30,745 | 8,677 |
Pledged securities, at fair value | 121,495 | 121,767 |
Loans held for sale, at fair value | 1,186,577 | 787,035 |
Loans held for investment, net | 454,213 | 543,542 |
Mortgage servicing rights | 722,486 | 718,799 |
Goodwill and other intangible assets | 247,257 | 182,959 |
Derivative assets | 158,233 | 15,568 |
Receivables, net | 52,185 | 52,146 |
Other assets | 133,475 | 124,021 |
Total assets | 3,311,975 | 2,675,199 |
Liabilities | ||
Warehouse notes payable | 1,305,846 | 906,128 |
Note payable | 293,371 | 293,964 |
Guaranty obligation, net of accumulated amortization | 55,758 | 54,695 |
Allowance for risk-sharing obligations | 64,110 | 11,471 |
Derivative liabilities | 172,623 | 36 |
Performance deposits from borrowers | 29,575 | 7,996 |
Other liabilities | 347,377 | 358,624 |
Total liabilities | 2,268,660 | 1,632,914 |
Equity | ||
Preferred shares, authorized 50,000; none issued. | ||
Common stock, $0.01 par value. Authorized 200,000; issued and outstanding 30,330 shares at March 31, 2020 and 30,035 shares at December 31, 2019. | 303 | 300 |
Additional paid-in capital ("APIC") | 236,007 | 237,877 |
Accumulated other comprehensive income (loss) ("AOCI") | (1,181) | 737 |
Retained earnings | 801,139 | 796,775 |
Total stockholders' equity | 1,036,268 | 1,035,689 |
Noncontrolling interests | 7,047 | 6,596 |
Total equity | 1,043,315 | 1,042,285 |
Commitments and contingencies (NOTES 2 and 9) | ||
Total liabilities and equity | $ 3,311,975 | $ 2,675,199 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Consolidated Balance Sheets | ||
Preferred shares, authorized | 50,000 | 50,000 |
Preferred shares, issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 200,000 | 200,000 |
Common stock, issued | 30,330 | 30,035 |
Common stock, outstanding | 30,330 | 30,035 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues | ||
Loan origination and debt brokerage fees, net | $ 76,373 | $ 57,797 |
Fair value of expected net cash flows from servicing, net | 68,000 | 40,938 |
Servicing fees | 55,434 | 52,199 |
Net warehouse interest income | 5,495 | 7,021 |
Escrow earnings and other interest income | 10,743 | 14,068 |
Other revenues | 18,112 | 15,414 |
Total revenues | 234,157 | 187,437 |
Expenses | ||
Personnel | 89,525 | 71,631 |
Amortization and depreciation | 39,762 | 37,903 |
Provision for credit losses | 23,643 | 2,675 |
Interest expense on corporate debt | 2,860 | 3,652 |
Other operating costs | 18,090 | 15,492 |
Total expenses | 173,880 | 131,353 |
Income from operations | 60,277 | 56,084 |
Income tax expense | 12,672 | 12,024 |
Net income before noncontrolling interests | 47,605 | 44,060 |
Less: net income (loss) from noncontrolling interests | (224) | (158) |
Walker and Dunlop net income | 47,829 | 44,218 |
Other comprehensive income (loss), net of tax: | ||
Net change in unrealized gains and losses on pledged available-for-sale securities | (1,917) | 301 |
Walker and Dunlop comprehensive income | $ 45,912 | $ 44,519 |
Basic earnings per share (NOTE 10) | $ 1.53 | $ 1.44 |
Diluted earnings per share (NOTE 10) | $ 1.49 | $ 1.39 |
Basic weighted average shares outstanding | 30,226 | 29,680 |
Diluted weighted average shares outstanding | 31,160 | 30,684 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities | ||
Net income before noncontrolling interests | $ 47,605 | $ 44,060 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Gains attributable to the fair value of future servicing rights, net of guaranty obligation | (68,000) | (40,938) |
Change in the fair value of premiums and origination fees | (22,414) | 2,955 |
Amortization and depreciation | 39,762 | 37,903 |
Provision for credit losses | 23,643 | 2,675 |
Originations of loans held for sale | (3,168,168) | (3,773,443) |
Sales of loans to third parties | 2,846,631 | 3,622,404 |
Other operating activities, net | 8,315 | (30,978) |
Net cash provided by (used in) operating activities | (292,626) | (135,362) |
Cash flows from investing activities | ||
Capital expenditures | (778) | (1,461) |
Purchase of equity-method investments | (563) | |
Purchase of pledged available-for-sale ("AFS") securities | (5,000) | (4,078) |
Proceeds from prepayment of pledged debt AFS securities | 3,711 | |
Distributions from (investments in) joint ventures, net | (6,455) | (1,679) |
Acquisitions, net of cash acquired | (43,784) | (7,180) |
Originations of loans held for investment | (33,362) | |
Principal collected on loans held for investment upon payoff | 88,779 | 60,145 |
Net cash provided by (used in) investing activities | 35,910 | 12,385 |
Cash flows from financing activities | ||
Borrowings (repayments) of warehouse notes payable, net | 419,763 | 151,814 |
Borrowings of interim warehouse notes payable | 29,898 | 21,976 |
Repayments of interim warehouse notes payable | (49,850) | |
Repayments of note payable | (744) | (750) |
Proceeds from issuance of common stock | 6,369 | 4,187 |
Repurchase of common stock | (26,737) | (24,159) |
Cash dividends paid | (11,347) | (9,319) |
Payment of contingent consideration | (1,641) | (6,450) |
Debt issuance costs | (964) | (824) |
Net cash provided by (used in) financing activities | 364,747 | 136,475 |
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents (NOTE 2) | 108,031 | 13,498 |
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period | 136,566 | 120,348 |
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period | 244,597 | 133,846 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid to third parties for interest | 11,207 | 17,785 |
Cash paid for income taxes | $ 121 | $ 372 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2020 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
Organization and Basis of Presentation | NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION These financial statements represent the condensed consolidated financial position and results of operations of Walker & Dunlop, Inc. and its subsidiaries. Unless the context otherwise requires, references to “we,” “us,” “our,” “Walker & Dunlop” and the “Company” mean the Walker & Dunlop consolidated companies. The statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they may not include certain financial statement disclosures and other information required for annual financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the Company in the interim periods presented have been included. Results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or thereafter. Walker & Dunlop, Inc. is a holding company and conducts the majority of its operations through Walker & Dunlop, LLC, the operating company. Walker & Dunlop is one of the leading commercial real estate services and finance companies in the United States. The Company originates, sells, and services a range of commercial real estate debt and equity financing products, provides property sales brokerage with a focus on multifamily, and engages in commercial real estate investment management activities. Through its mortgage bankers and property sales brokers, the Company offers its customers agency lending, debt brokerage, and principal lending and investing products, and multifamily property sales services. Through its agency lending products, the Company originates and sells loans pursuant to the programs of the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac,” and together with Fannie Mae, the “GSEs”), the Government National Mortgage Association (“Ginnie Mae”), and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”). Through its debt brokerage products, the Company brokers, and in some cases services, loans for various life insurance companies, commercial banks, commercial mortgage backed securities issuers, and other institutional investors, in which cases the Company does not fund the loan. The Company also provides a variety of commercial real estate debt and equity solutions through its principal lending and investing products, including interim loans, and preferred equity on commercial real estate properties. Interim loans on multifamily properties are offered (i) through the Company and recorded on the Company’s balance sheet (the “Interim Program”) and (ii) through a joint venture with an affiliate of Blackstone Mortgage Trust, Inc., in which the Company holds a 15% ownership interest (the “Interim Program JV”). Interim loans on all commercial real estate property types are also offered through separate accounts managed by the Company’s subsidiary, JCR Capital Investment Corporation (“JCR”). The Company brokers the sale of multifamily properties through its majority-owned subsidiary, Walker & Dunlop Investment Sales (“WDIS”). In some cases, the Company also provides the debt financing for the property sale. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Summary of Significant Accounting Policies | NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation Noncontrolling interests Net income from noncontrolling interests Use of Estimates obligations, allowance for risk-sharing obligations, capitalized mortgage servicing rights, derivative instruments and disclosure of contingent assets and liabilities. Actual results may vary from these estimates. Coronavirus Disease 2019 The COVID-19 Crisis did not have a material impact on the Company’s operations, its cash flows or the amount and availability of its liquidity during the first quarter 2020. Although it is not possible to reliably estimate the extent and duration of the COVID-19 Crisis as of the date of this quarterly report on Form 10-Q, management has made adjustments to the carrying values of the Company’s assets and liabilities impacted by the Crisis based on its best estimates and assumptions. The most significant adjustments to the carrying amount of the Company’s assets and liabilities include the Company’s estimate of future expected credit losses under both the Fannie Mae Delegated Underwriting and Servicing TM Subsequent Events Derivative Assets and Liabilities Derivative assets Loan origination and debt brokerage fees, net Derivative assets Fair value of expected net cash flows from servicing, net Loan origination and debt brokerage fees, net The Company presents two components of its revenue as Loan origination and debt brokerage fees, net Fair value of expected net cash flows from servicing, net. Recently Adopted and Recently Announced Accounting Pronouncement s Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments supportable forecasts, including estimates of prepayments. Exposures with similar risk characteristics are required to be grouped together when estimating expected credit losses. The initial estimate and subsequent changes to the estimated credit losses are required to be reported in current earnings in the income statement and through an allowance in the balance sheet. ASU 2016-13 is applicable to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures. The Standard modifies the way the Company estimates its allowance for risk-sharing obligations and its allowance for loan losses and the way it assesses impairment on its pledged AFS securities. ASU 2016-13 requires modified retrospective application to all outstanding, in-scope instruments, with a cumulative-effect adjustment recorded to opening retained earnings as of the beginning of the period of adoption. The Company adopted the standard as required on January 1, 2020. The Company recognized an increase of $31.6 million in the allowance for risk-sharing obligations with a cumulative-effect adjustment, net of tax recorded to opening retained earnings of $23.7 million and deferred tax assets of $7.9 million. The adjustment to the allowance for loan losses for the Company’s loans held for investment was immaterial. There was no impact to AFS securities because the portfolio consists of agency-backed securities that inherently have an immaterial risk of loss. There have been no material changes to the accounting policies discussed in NOTE 2 of the Company’s 2019 Form 10-K, except for the changes to the Company’s accounting policies related to the allowance for risk-sharing obligations and allowance for loan losses in connection with the adoption of ASU 2016-13. Guaranty Obligation and Allowance for risk sharing obligations Guaranty obligation, net of accumulated amortization In determining the fair value of the guaranty obligation, the Company considers the risk profile of the collateral, historical loss experience, and various market indicators. Generally, the estimated fair value of the guaranty obligation is based on the present value of the cash flows expected to be paid under the guaranty over the estimated life of the loan discounted using a rate consistent with what is used for the calculation of the mortgage servicing right for each loan. The estimated life of the guaranty obligation is the estimated period over which the Company believes it will be required to stand ready under the guaranty. Subsequent to the initial measurement date, the liability is amortized over the life of the guaranty period using the straight-line method as a component of and reduction to Amortization and depreciation Overall CECL Approach The Company uses the weighted-average remaining maturity method (“WARM”) for calculating its allowance for risk-sharing obligations, the Company’s liability for the off-balance-sheet credit exposure associated with the Fannie Mae at risk DUS loans. WARM uses an average annual charge-off rate that contains loss content over multiple vintages and loan terms and is used as a foundation for estimating the CECL reserve. The average annual charge-off rate is applied to the unpaid principal balance (“UPB”) over the contractual term, further adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio as described further below. Considering the Company’s long history servicing Fannie Mae DUS loans, the Company maximizes the use of historical internal data because the Company has extensive historical data from which to calculate historical loss rates and principal paydown by loan term type for its exposure to credit loss on its homogeneous portfolio of Fannie Mae DUS multifamily loans. Additionally, the Company believes its properties, loss history, and underwriting standards are not similar to public data such as loss histories for loans originated for collateralized mortgage-backed securities conduits. Runoff Rate One of the key inputs into a WARM calculation is the runoff rate, which is the expected rate at which loans in the current portfolio will prepay and amortize in the future. As the loans the Company originates have different original lives and runoff over different periods, the Company groups loans by similar origination dates (vintage) and contractual maturity terms for purposes of calculating the runoff rate. The Company originates loans under the DUS program with various terms generally ranging from several years to 15 years; each of these various loan terms has a different runoff rate. The Company uses its historical runoff rate for each of the different loan term pools as a proxy for the expected runoff rate. The Company believes that borrower behavior and macroeconomic conditions will not deviate significantly from historical performance over the approximately ten-year period over which the Company has compiled the actual loss data. The ten-year period captures the various cycles of industry performance and provides a period that is long enough to capture sufficient observations of runoff history. In addition, due to the prepayment protection provisions for Fannie Mae DUS loans, we have not seen significant volatility in historical prepayment rates due to changes in interest rates and would not expect this to change in future periods. The historical annual runoff rate is calculated for each year of a loan’s life for each vintage in the portfolio and aggregated with the calculated runoff rate for each comparable year in every vintage. For example, the annual runoff rate for the first year of loans originated in 2010 is aggregated with the annual runoff rate for the first year of loans originated in 2011, 2012, and so on to calculate the average annual runoff rate for the first year of a loan. This average runoff calculation is performed for each year of a loan’s life for each of the various loan terms to create a matrix of historical average annual runoffs by year for the entire portfolio. The Company segments its current portfolio of at risk DUS loans outstanding by original loan term type and years remaining and then applies the appropriate historical average runoff rates to calculate the expected remaining balance at the end of each reporting period in the future. For example, for a loan with an original ten-year term and seven years remaining, the Company applies the historical average annual runoff rate for a ten-year loan for year four to arrive at the remaining UPB one year from the current period, the historical average runoff rate for year five to arrive at the remaining UPB two years from the current period, and so on up to the loan’s maturity date. CECL Reserve Calculation Once the Company has calculated the estimated outstanding UPB for each future year until maturity for each loan term type, the Company then applies the average annual charge-off rate (as further described below) to each future year’s expected UPB. The Company then aggregates the allowance calculated for each year within each loan term type and for all different maturity years to arrive at the CECL reserve for the portfolio. The weighted-average annual charge-off rate is calculated using a ten-year look-back period, utilizing the average portfolio balance and settled losses for each year. A ten-year period is used as the Company believes that this period of time includes sufficiently different economic conditions to generate a reasonable estimate of expected results in the future, given the relatively long-term nature of the current portfolio. This approach captures the adverse impact of the years following the last recession in 2008-2010 because multifamily commercial loans have a lag period from the time of initial distress indications through the timing of loss settlement. The same loss rate is utilized across each loan term type as the Company is not aware of any historical or industry-published data to indicate there is any difference in the occurrence probability or loss severity for a loan based on its loan origination term. Reasonable and Supportable Forecast Period The Company currently uses one year for its reasonable and supportable forecast period (the “forecast period”) as the Company believes forecasts beyond one year are inherently less reliable. The Company uses forecasts of unemployment rates, historically a highly correlated indicator for multifamily occupancy rates, and net operating income growth to assess what macroeconomic and multifamily market conditions are expected to be like over the coming year. The Company then associates the forecasted conditions with a similar historical period over the past ten years, which could be one or several years, and uses the Company’s average loss rate for that historical period as a basis for the charge-off rate used for the forecast period. For all remaining years until maturity, the Company uses the weighted-average annual charge-off rate for the ten-year period as described above to estimate losses. The average loss rate from a historical period used for the forecast period may be adjusted as necessary if the forecasted macroeconomic and industry conditions differ materially from the historical period. Identification of Specific Reserves for Defaulted Loans The Company monitors the performance of each risk-sharing loan for events or conditions which may signal a potential default. The Company’s process for identifying which risk-sharing loans may be probable of default consists of an assessment of several qualitative and quantitative factors including payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio (“DSCR”), property condition, and financial strength of the borrower or key principal(s). In instances where payment under the guaranty on a specific loan is determined to be probable (as the loan is probable of foreclosure or has foreclosed), the Company separately measures the expected loss through an assessment of the underlying fair value of the asset, disposition costs, and the risk-sharing percentage (the “specific reserve”) through a charge to the provision for risk-sharing obligations, which is a component of Provision for credit losses The amount of the specific reserve considers historical loss experience, adverse situations affecting individual loans, the estimated disposition value of the underlying collateral, and the level of risk sharing. The estimate of property fair value at initial recognition of the specific reserve is based on appraisals, broker opinions of value, or net operating income and market capitalization rates, depending on the facts and circumstances associated with the loan. The Company regularly monitors the specific reserves on all applicable loans and updates loss estimates as current information is received. The settlement with Fannie Mae is based on the actual sales price of the property and selling and property preservation costs and considers the Fannie Mae loss-sharing requirements. The maximum amount of the loss the Company absorbs at the time of default is generally 20% of the origination unpaid principal balance of the loan. Loans Held for Investment, net As of March 31, 2020, Loans held for investment, net Loans held for investment, net During the third quarter of 2018, the Company transferred a portfolio of participating interests in loans held for investment to a third party that is scheduled to mature in the third quarter of 2021. The Company accounted for the transfer as a secured borrowing. The aggregate unpaid principal balance of the loans of $78.5 million is presented as a component of Loans held for investment, net Other liabilities The Company assesses the credit quality in the same manner as it does for the loans in the Fannie Mae at risk portfolio as described above and records a specific reserve for impaired loans. The allowance for loan losses is estimated collectively for loans with similar characteristics and for which there is no evidence of impairment. The collective allowance is based on the same methodology that the Company uses to estimate its CECL reserves for at risk Fannie Mae DUS loans as described above because the nature of the underlying collateral is the same, and the loans have similar characteristics, except they are significantly shorter in maturity. The reasonable and supportable forecast period used for the CECL reserve for loans held for investment is one year. Due to the forecasted economic conditions associated with the Crisis, the Company recorded a $1.1 million provision for loan losses during the three months ended March 31, 2020. The charge-off rate for the forecasted period was 36 basis points and nine basis points as of March 31, 2020 and January 1, 2020, respectively. The charge-off rate for the remaining period until maturity was nine basis points as of both March 31, 2020 and January 1, 2020. One loan held for investment with an unpaid principal balance of $14.7 million that was originated in 2017 as of March 31, 2020 and December 31, 2019 was $443.2 million and $531.9 million, respectively. As of March 31, 2020, $170.8 million of the loans that were current were originated in 2018, while $272.4 million were originated in 2019. Provision for Credit Losses— Provision for credit losses Provision for credit losses For the three months ended March 31, Components of Provision for Credit Losses (in thousands) 2020 2019 Provision for loan losses $ 1,106 $ 623 Provision for risk-sharing obligations 22,537 2,052 Provision for credit losses $ 23,643 $ 2,675 Net Warehouse Interest Income— Net warehouse interest income For the three months ended March 31, Components of Net Warehouse Interest Income (in thousands) 2020 2019 Warehouse interest income - loans held for sale $ 7,402 $ 13,984 Warehouse interest expense - loans held for sale (5,910) (13,955) Net warehouse interest income - loans held for sale $ 1,492 $ 29 Warehouse interest income - loans held for investment $ 6,306 $ 8,779 Warehouse interest expense - loans held for investment (2,303) (1,787) Warehouse interest income - secured borrowings 846 888 Warehouse interest expense - secured borrowings (846) (888) Net warehouse interest income - loans held for investment $ 4,003 $ 6,992 Total net warehouse interest income $ 5,495 $ 7,021 Statement of Cash Flows Pledged securities, at fair value March 31, December 31, (in thousands) 2020 2019 2019 2018 Cash and cash equivalents $ 205,309 $ 109,862 $ 120,685 $ 90,058 Restricted cash 30,745 17,561 8,677 20,821 Pledged cash and cash equivalents (NOTE 9) 8,543 6,423 7,204 9,469 Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 244,597 $ 133,846 $ 136,566 $ 120,348 Income Taxes Contracts with Customers For the three months ended March 31, Description in thousands 2020 2019 Statement of income line item Certain loan origination fees $ 21,348 $ 11,531 Loan origination and debt brokerage fees, net Property sales broker fees, investment management fees, assumption fees, application fees, and other 15,064 8,961 Other revenues Total revenues derived from contracts with customers $ 36,412 $ 20,492 Litigation |
MORTGAGE SERVICING RIGHTS
MORTGAGE SERVICING RIGHTS | 3 Months Ended |
Mar. 31, 2020 | |
MSRs | |
Mortgage Servicing Rights | |
Mortgage Servicing Rights | NOTE 3—MORTGAGE SERVICING RIGHTS Mortgage servicing rights (“MSRs”) represent the carrying value of the commercial servicing rights retained by the Company for mortgage loans originated and sold and MSRs acquired from third parties. The initial capitalized amount is equal to the estimated fair value of the expected net cash flows associated with the servicing rights. MSRs are amortized using the interest method over the period that servicing income is expected to be received. The Company has one class of MSRs. The fair values of the MSRs at March 31, 2020 and December 31, 2019 were $868.4 million and $910.5 million, respectively. The Company uses a discounted static cash flow valuation approach, and the key economic assumption is the discount rate. For example, see the following sensitivities: The impact of a 100 - basis point increase in the discount rate at March 31, 2020 is a decrease in the fair value of $25.8 million. The impact of a 200 - basis point increase in the discount rate at March 31, 2020 is a decrease in the fair value of $50.0 million. These sensitivities are hypothetical and should be used with caution. These hypothetical scenarios do not include interplay among assumptions and are estimated as a portfolio rather than for individual assets. Activity related to capitalized MSRs for the three months ended March 31, 2020 and 2019 is shown in the table below: For the three months ended March 31, Roll Forward of MSRs (in thousands) 2020 2019 Beginning balance $ 718,799 $ 670,146 Additions, following the sale of loan 44,214 47,102 Amortization (35,218) (34,203) Pre-payments and write-offs (5,309) (5,099) Ending balance $ 722,486 $ 677,946 The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s MSRs as of March 31, 2020 and December 31, 2019: Components of MSRs (in thousands) March 31, 2020 December 31, 2019 Gross Value $ 1,221,877 $ 1,201,542 Accumulated amortization (499,391) (482,743) Net carrying value $ 722,486 $ 718,799 The expected amortization of MSRs recorded as of March 31, 2020 is shown in the table below. Actual amortization may vary from these estimates. Expected (in thousands) Amortization Nine Months Ending December 31, 2020 $ 101,336 Year Ending December 31, 2021 $ 124,191 2022 109,526 2023 96,770 2024 83,594 2025 69,674 Thereafter 137,395 Total $ 722,486 |
GUARANTY OBLIGATION AND ALLOWAN
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | 3 Months Ended |
Mar. 31, 2020 | |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | |
Guaranty Obligation and Allowance for Risk-Sharing Obligations | NOTE 4—GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS When a loan is sold under the Fannie Mae DUS program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. The guaranty is in force while the loan is outstanding. The Company does not provide a guaranty for any other loan product it sells or brokers. Activity related to the guaranty obligation for the three months ended March 31, 2020 and 2019 is presented in the following table: For the three months ended March 31, Roll Forward of Guaranty Obligation (in thousands) 2020 2019 Beginning balance $ 54,695 $ 46,870 Additions, following the sale of loan 1,862 4,863 Amortization (2,267) (2,349) Other 1,468 (8) Ending balance $ 55,758 $ 49,376 Activity related to the allowance for risk-sharing obligations for the three months ended March 31, 2020 and 2019 is shown in the following table: For the three months ended March 31, Roll Forward of Allowance for Risk-sharing Obligations (in thousands) 2020 2019 Beginning balance $ 11,471 $ 4,622 Adjustment related to adoption of ASU 2016-13 31,570 — Provision for risk-sharing obligations 22,537 2,052 Write-offs — — Other (1,468) 8 Ending balance $ 64,110 $ 6,682 As of January 1, 2020, the Company recognized the CECL transition adjustment based on its assessment of the multifamily market and the macroeconomic environment, concluding that the projections at the time for the coming year were for continued strong performance similar to the past few years. The Company’s losses have been de minimis over the past few years. Considering that the Company’s historical loss rate consisted of both strong and weak multifamily and macroeconomic periods, the Company concluded it was appropriate to adjust the loss rate downward for the forecast period. The loss factor applied for the forecast period in the WARM CECL calculation was one basis point, which approximated the average of the actual loss rate for the past two years as these conditions were expected to prevail over the course of the forecast period. The Company reverted to the actual historical loss rate of 1.76 basis points for all remaining years in the calculation. Conditions changed drastically beginning in March 2020 due to the Crisis across the world and the resulting global social distancing and lockdown measures that have been put in place by national/state/local authorities with varying expected longevities, macroeconomic conditions have reversed from sustained strength to short-term global economic contraction, causing unemployment rates to rise sharply and a recession to ensue. These conditions are expected to impact unemployment and consumer incomes and therefore have an adverse impact on multifamily occupancy rates and property cash flows in the near term, increasing the likelihood of delinquencies, loan defaults, and risk-sharing losses. The Company concluded that the potential impacts due to the Crisis are expected to be generally consistent with the great financial crisis of 2007-2010. However, the Company expects the Crisis will impact the multifamily market over a one-year period instead of a two-year period but result in less severe losses over the shortened time frame. The charge offs recorded by the Company during the great financial crisis of 2007-2010 totaled 12 basis points over the two-year period. The Company adjusted the charge-off rate down to seven basis points based on the following: • The DSCR of the Company’s current at risk servicing portfolio is substantially higher than it was immediately prior to the last recession, • The fair values of the properties collateralizing the at risk servicing portfolio are higher than they were immediately prior to the last recession, and • The expected positive impacts of the unprecedented level of economic stimulus from the Federal government. The charge-off rate of seven basis points was used for the forecast period as of March 31, 2020, with a reversion to the historical weighted average charge-off rate of 1.76 basis points for all remaining years in the calculation. The calculated CECL reserve for the Company’s $37.2 billion at risk Fannie Mae servicing portfolio as of March 31, 2020 was $57.2 million compared to $34.7 million as of the date of adoption of ASU 2016-13 on January 1, 2020. The significant increase in the CECL reserve was principally related to the forecasted impacts of the Crisis. The weighted-average remaining life of the at risk Fannie Mae servicing portfolio as of March 31, 2020 was 7.5 years. For the year ended December 31, 2019, two loans defaulted, resulting in the recognition of specific reserves of $6.9 million. The properties related to these two at risk loans were both off-campus student living facilities in the same city. The Company does not have any additional at risk loans related to student living facilities in this city. As of March 31, 2020, the maximum quantifiable contingent liability associated with the Company’s guarantees under the Fannie Mae DUS agreement was $7.7 billion. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans were determined to be without value at the time of settlement. |
SERVICING
SERVICING | 3 Months Ended |
Mar. 31, 2020 | |
Loans and Other Servicing Accounts | |
Servicing | |
Servicing | NOTE 5—SERVICING The total unpaid principal balance of loans the Company was servicing for various institutional investors was $94.8 billion as of March 31, 2020 compared to $93.2 billion as of December 31, 2019. As of March 31, 2020 and December 31, 2019, custodial escrow accounts relating to loans serviced by the Company totaled $2.1 billion and $2.6 billion, respectively. These amounts are not included in the accompanying Condensed Consolidated Balance Sheets as such amounts are not Company assets. Certain cash deposits associated with the escrow accounts at other financial institutions exceed the Federal Deposit Insurance Corporation insured limits. The Company places these deposits with financial institutions that meet the requirements of the Agencies and where it believes the risk of loss to be minimal. For most loans we service under the Fannie Mae DUS program, we are required to advance the principal and interest payments and guarantee fees for up to four months should a borrower cease making payments under the terms of their loan, including while that loan is in forbearance. After advancing for four months , we request reimbursement by Fannie Mae for the principal and interest advances, and Fannie Mae will reimburse us within 60 days of the request. For the month of April, the first month principal and interest payments were due following the onset of the COVID-19 Crisis in the U.S., we advanced $0.8 million of principal and interest payments and guarantee fees on loans in our Fannie Mae portfolio. On May 5, 2020, the Company received a commitment from one of its warehouse lending banks to create a $100.0 million sublimit to its Agency warehouse line (as defined below) that would be used to fund its advances of principal and interest payments under the Fannie Mae DUS program. The facility would provide 90% of the principal and interest advance payment and will be collateralized by Fannie Mae’s commitment to repay the advance. Completion of the facility is subject to final documentation, consent of the majority of holders of our term loan, and approval from Fannie Mae. For loans we service under the Ginnie Mae program, we are obligated to advance the principal and interest payments and guarantee fees until the HUD loan is brought current, fully paid, or assigned to HUD. We are eligible to assign a loan to HUD once it is in default for 30 days . If the loan is not brought current, or the loan otherwise defaults, we are not reimbursed for our advances until such time as we assign the loan to HUD or work out a payment modification for the borrower. For loans in default, we may repurchase those loans out of the Ginnie Mae security, at which time our advance requirements cease and we may then modify and resell the loan or assign the loan back to HUD, at which time we will be reimbursed for our advances. For the month of April, we advanced $4.5 million of principal and interest payments and guarantee fees on loans in our HUD portfolio. We are not obligated to make advances on any of the other loans we service in our portfolio, including loans we service under the Freddie Mac Optigo program. As of March 31, 2020 and December 31, 2019, the Company had $2.6 million and $2.1 million of aggregate outstanding principal and interest and tax and escrow advances, respectively. These advances are included as a component of Receivables, net |
WAREHOUSE NOTES PAYABLE
WAREHOUSE NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2020 | |
WAREHOUSE NOTES PAYABLE | |
Warehouse Notes Payable | NOTE 6—WAREHOUSE NOTES PAYABLE At March 31, 2020, to provide financing for the Company’s loan origination activities, the Company has arranged for warehouse lines of credit. In support of the Agencies’ programs, the Company has committed and uncommitted warehouse lines of credit in the amount of $2.7 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”). The Company has pledged substantially all of its loans held for sale against the Agency Warehouse Facilities. Additionally, at March 31, 2020, the Company has arranged for warehouse lines of credit in the amount of $0.5 billion with certain national banks to assist in funding loans held for investment under the Interim Program (“Interim Warehouse Facilities”). The Company has pledged all of its loans held for investment for which funding is obtained against these Interim Warehouse Facilities. The following table provides additional detail about the warehouse lines of credit at March 31, 2020: March 31, 2020 (dollars in thousands) Committed Uncommitted Total Facility Outstanding Facility 1 Amount Amount Capacity Balance Interest rate Agency Warehouse Facility #1 $ 350,000 $ 200,000 $ 550,000 $ 173,125 30-day LIBOR plus 1.15% Agency Warehouse Facility #2 500,000 300,000 800,000 207,948 30-day LIBOR plus 1.15% Agency Warehouse Facility #3 500,000 — 500,000 303,605 30-day LIBOR plus 1.15% Agency Warehouse Facility #4 350,000 — 350,000 141,921 30-day LIBOR plus 1.15% Agency Warehouse Facility #5 — 500,000 500,000 207,317 30-day LIBOR plus 1.15% Total National Bank Agency Warehouse Facilities $ 1,700,000 $ 1,000,000 $ 2,700,000 $ 1,033,916 Fannie Mae repurchase agreement, uncommitted line and open maturity — 1,500,000 1,500,000 51,235 Total Agency Warehouse Facilities $ 1,700,000 $ 2,500,000 $ 4,200,000 $ 1,085,151 Interim Warehouse Facility #1 $ 135,000 $ — $ 135,000 $ 100,300 30-day LIBOR plus 1.90% Interim Warehouse Facility #2 100,000 — 100,000 49,256 30-day LIBOR plus 1.65% Interim Warehouse Facility #3 75,000 75,000 150,000 42,741 30-day LIBOR plus 1.90% to 2.50% Interim Warehouse Facility #4 100,000 — 100,000 — 30-day LIBOR plus 1.75% Interim Warehouse Facility #5 2 29,184 — 29,184 29,184 30-day LIBOR plus 3.00% Total National Bank Interim Warehouse Facilities $ 439,184 $ 75,000 $ 514,184 $ 221,481 Debt issuance costs — — — (786) Total warehouse facilities $ 2,139,184 $ 2,575,000 $ 4,714,184 $ 1,305,846 1 Agency Warehouse Facilities, including the Fannie Mae repurchase agreement are used to fund loans held for sale, while Interim Warehouse Facilities are used to fund loans held for investment. 2 Interim warehouse facility #5 bears interest at 30-day LIBOR plus 3.00% , with an interest-rate floor of 4.50% During the second quarter of 2020, the Company executed the fifth amendment to the warehouse agreement related to Agency Warehouse Facility #2 that temporarily increased the total facility capacity by $2.4 billion to $3.2 billion to fund a large portfolio of loans. The temporary increase expires 60 days after the loans are funded. No other material modifications were made to the agreement during 2020. During the second quarter of 2020, the Company executed the 11 th During the second quarter of 2020, the Company executed the 11 th During the first quarter of 2020, the Company executed a loan and security agreement to establish Interim Warehouse Facility #5. The $29.2 million committed warehouse loan and security agreement with a national bank funds two specific loans. The agreement provides for maturity dates to coincide with the maturity dates for the underlying two specific loans. Based on the current underlying loans, the maximum allowable loan term is two The Company allowed Interim Warehouse Facility #4 to expire according to its terms April 30, 2020. The Company believes that the four remaining committed and uncommitted credit facilities from national banks and the Company’s corporate cash provide the Company with sufficient borrowing capacity to conduct its Interim Program lending operations. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2020 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Goodwill and Other Intangible Assets | NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS Activity related to goodwill for the three months ended March 31, 2020 and 2019 follows: For the three months ended March 31, Roll Forward of Goodwill (in thousands) 2020 2019 Beginning balance $ 180,424 $ 173,904 Additions from acquisitions 64,462 6,520 Impairment — — Ending balance $ 244,886 $ 180,424 The additions from acquisitions shown in the table above during the three months ended March 31, 2020 relates to the immaterial purchases of certain assets and the assumption of certain liabilities from two debt brokerage companies for aggregate consideration of $64.9 million, which consisted of cash of $43.8 million, $5.0 million of the Company’s stock, and $16.1 million of contingent consideration. The contingent consideration may be earned over either a four-year period or five-year period after the closing of each acquisition, provided certain revenue targets have been met. The contingent consideration included for the acquisitions is non-cash consideration and thus not reflected in the amount of cash consideration paid in the Condensed Consolidated Statement of Cash Flows. The Company estimated the fair value of the contingent consideration using a probability-based, discounted cash flow estimate for the revenue targets (Level 3). The acquired businesses operate in the Columbus, Ohio and New York City metropolitan areas. These acquisitions expand the Company’s network of loan originators and geographical reach and provide further diversification to its loan origination platform. Substantially all of the value associated with the acquisitions was related to the assembled workforces and commercial lending platform, resulting in substantially all of the consideration being allocated to goodwill. The Company expects all goodwill to be tax deductible, with the tax-deductible amount of goodwill related to the contingent consideration to be determined once the cash payments to settle the contingent consideration are made. The other assets acquired and the liabilities assumed were immaterial. The operations of these two companies have since been merged into the Company’s existing operations. The goodwill resulting from the acquisitions is allocated to the Company’s single reporting unit. The purchase accounting for the two acquisitions has been completed as of March 31, 2020. The additions from acquisitions during the three months ended March 31, 2019 shown in the table above relates to an immaterial acquisition of a technology company, which was completed in the first quarter of 2019. As of March 31, 2020 and December 31, 2019, the balance of intangible assets acquired from acquisitions totaled $2.4 million and $2.5 million, respectively. As of March 31, 2020, the weighted-average period over which the Company expects the intangible assets to be amortized is 4.5 years. A summary of the Company’s contingent consideration liabilities, which is included in Other liabilities For the three months ended March 31, Roll Forward of Contingent Consideration Liabilities (in thousands) 2020 2019 Beginning balance $ 5,752 $ 11,630 Additions 16,073 — Accretion 227 143 Payments (5,800) (6,450) Ending balance $ 16,252 $ 5,323 The contingent consideration liabilities above relate to acquisitions completed in 2017 and 2020. The last of the five earn-out periods related to these contingent consideration liabilities ends in the first quarter of 2025. The global economic disruption caused by the COVID-19 Crisis has led to significant declines in the value of the U.S. equity markets. Certain sectors of the market have seen substantial impacts to their operations, cash flows, and liquidity. The commercial real estate finance industry has also been impacted, particularly as it relates to financing and property sales activity for office, retail and hospitality assets. The Company has considered whether the disruption from the COVID-19 Crisis represents a triggering event with respect to impairment of its goodwill. Despite the disruption to many sectors of commercial real estate debt finance, financing activity for multifamily assets, which represents over 80% of the Company’s transaction volumes over the past several years and over 90% of its servicing portfolio, has not been as adversely impacted as a result of Fannie Mae’s, Freddie Mac’s, and HUD’s presence in the market. Consequently, the Company concluded that as of March 31, 2020, the COVID-19 Crisis and its direct impacts to the Company, its operations, available liquidity, and its cash flows does not represent a triggering event. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2020 | |
FAIR VALUE MEASUREMENTS | |
Fair Value Measurements | NOTE 8—FAIR VALUE MEASUREMENTS The Company uses valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach to measure assets and liabilities that are measured at fair value. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: ● Level 1 —Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2 —Financial assets and liabilities whose values are based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. ● Level 3 —Financial assets and liabilities whose values are based on inputs that are both unobservable and significant to the overall valuation. The Company's MSRs are measured at fair value at inception, and thereafter on a nonrecurring basis. That is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments when there is evidence of impairment. The Company's MSRs do not trade in an active, open market with readily observable prices. While sales of multifamily MSRs do occur on occasion, precise terms and conditions vary with each transaction and are not readily available. Accordingly, the estimated fair value of the Company’s MSRs was developed using discounted cash flow models that calculate the present value of estimated future net servicing income. The model considers contractually specified servicing fees, prepayment assumptions, estimated revenue from escrow accounts, delinquency status, late charges, costs to service, and other economic factors. The Company periodically reassesses and adjusts, when necessary, the underlying inputs and assumptions used in the model to reflect observable market conditions and assumptions that a market participant would consider in valuing an MSR asset. MSRs are carried at the lower of amortized cost or fair value. A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company's assets and liabilities carried at fair value: ● Derivative Instruments —The derivative positions consist of interest rate lock commitments with borrowers and forward sale agreements to the Agencies. The fair value of these instruments is estimated using a discounted cash flow model developed based on changes in the applicable U.S. Treasury rate and other observable market data. The value was determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company, and are classified within Level 3 of the valuation hierarchy . ● Loans Held for Sale — Loans held for sale are reported at fair value. The Company determines the fair value of the loans held for sale using discounted cash flow models that incorporate quoted observable inputs from market participants. Therefore, the Company classifies these loans held for sale as Level 2 . ● Pledged Securities —Investments in money market funds are valued using quoted market prices from recent trades. Therefore, the Company classifies this portion of pledged securities as Level 1. The Company determines the fair value of its AFS investments in Agency debt securities using discounted cash flows that incorporate observable inputs from market participants and then compares the fair value to broker estimates of fair value . Consequently, the Company classifies this portion of pledged securities as Level 2. On March 23, 2020, the U.S. Federal Reserve announced steps to support the U.S. economy during the COVID-19 Crisis, including directing the Federal Open Market Committee to purchase Treasury securities and Agency mortgage-backed securities in the amounts necessary to support stable market prices and smooth market function. Consequently, Agency mortgage-backed securities remain actively traded by market participants, and the value of the Company’s investments in Agency debt securities have remained stable despite the economic disruption caused by the COVID-19 Crisis. The fair value of the Company’s rate lock commitments tied to Agency loans and loans held for sale increased significantly from December 31, 2019 to March 31, 2020 as a result of (i) a significant increase in the balance of rate lock commitments and loans held for sale due to increased lending activity during the first quarter and (ii) a steep decline in the underlying interest rates, primarily the 10-year U.S. Treasury rate, from the time of rate lock and the end of the first quarter. The increase in the fair value of the Company’s loans held for sale and derivative assets related to the change in interest rates had an equal and offsetting increase in the fair value of derivative liabilities. No changes were made to the valuation methodologies used to estimate fair value. The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2020, and December 31, 2019, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value: Quoted Prices in Significant Significant Active Markets Other Other For Identical Observable Unobservable Assets Inputs Inputs Balance as of (in thousands) (Level 1) (Level 2) (Level 3) Period End March 31, 2020 Assets Loans held for sale $ — $ 1,186,577 $ — $ 1,186,577 Pledged securities 8,543 112,952 — 121,495 Derivative assets — — 158,233 158,233 Total $ 8,543 $ 1,299,529 $ 158,233 $ 1,466,305 Liabilities Derivative liabilities $ — $ — $ 172,623 $ 172,623 Total $ — $ — $ 172,623 $ 172,623 December 31, 2019 Assets Loans held for sale $ — $ 787,035 $ — $ 787,035 Pledged securities 7,204 114,563 — 121,767 Derivative assets — — 15,568 15,568 Total $ 7,204 $ 901,598 $ 15,568 $ 924,370 Liabilities Derivative liabilities $ — $ — $ 36 $ 36 Total $ — $ — $ 36 $ 36 There were no transfers between any of the levels within the fair value hierarchy during the three months ended March 31, 2020. Derivative instruments (Level 3) are outstanding for short periods of time (generally less than 60 days). A roll forward of derivative instruments is presented below for the three months ended March 31, 2020 and 2019: Fair Value Measurements Using Significant Unobservable Inputs: Derivative Instruments For the three months ended March 31, (in thousands) 2020 2019 Derivative assets and liabilities, net Beginning balance $ 15,532 $ 2,839 Settlements (174,295) (103,860) Realized gains recorded in earnings (1) 158,763 101,021 Unrealized gains (losses) recorded in earnings (1) (14,390) (2,286) Ending balance $ (14,390) $ (2,286) (1) Realized and unrealized gains (losses) from derivatives are recognized in Loan origination and debt brokerage fees, net and Fair value of expected net cash flows from servicing, net in the Condensed Consolidated Statements of Income. The following table presents information about significant unobservable inputs used in the recurring measurement of the fair value of the Company’s Level 3 assets and liabilities as of March 31, 2020: Quantitative Information about Level 3 Measurements (in thousands) Fair Value Valuation Technique Unobservable Input (1) Input Value (1) Derivative assets $ 158,233 Discounted cash flow Counterparty credit risk — Derivative liabilities $ 172,623 Discounted cash flow Counterparty credit risk — (1) Significant increases in this input may lead to significantly lower fair value measurements. The carrying amounts and the fair values of the Company's financial instruments as of March 31, 2020 and December 31, 2019 are presented below: March 31, 2020 December 31, 2019 Carrying Fair Carrying Fair (in thousands) Amount Value Amount Value Financial assets: Cash and cash equivalents $ 205,309 $ 205,309 $ 120,685 $ 120,685 Restricted cash 30,745 30,745 8,677 8,677 Pledged securities 121,495 121,495 121,767 121,767 Loans held for sale 1,186,577 1,186,577 787,035 787,035 Loans held for investment, net 454,213 457,254 543,542 546,033 Derivative assets 158,233 158,233 15,568 15,568 Total financial assets $ 2,156,572 $ 2,159,613 $ 1,597,274 $ 1,599,765 Financial liabilities: Derivative liabilities $ 172,623 $ 172,623 $ 36 $ 36 Secured borrowings 70,548 70,548 70,548 70,548 Warehouse notes payable 1,305,846 1,306,632 906,128 906,821 Note payable 293,371 272,874 293,964 297,750 Total financial liabilities $ 1,842,388 $ 1,822,677 $ 1,270,676 $ 1,275,155 The following methods and assumptions were used for recurring fair value measurements as of March 31, 2020. Cash and Cash Equivalents and Restricted Cash —The carrying amounts approximate fair value because of the short maturity of these instruments (Level 1). Pledged Securities —Consist of cash, highly liquid investments in money market accounts invested in government securities, and investments in Agency debt securities. The investments of the money market funds typically have maturities of 90 days or less and are valued using quoted market prices from recent trades. The fair value of the Agency debt securities incorporates the contractual cash flows of the security discounted at market-rate, risk-adjusted yields. Loans Held for Sale —Consist of originated loans that are generally transferred or sold within 60 days from the date that the mortgage loan is funded and are valued using discounted cash flow models that incorporate observable inputs from market participants. Derivative Instruments — Consist of interest rate lock commitments and forward sale agreements. These instruments are valued using discounted cash flow models developed based on changes in the U.S. Treasury rate and other observable market data. The value is determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company . Fair Value of Derivative Instruments and Loans Held for Sale — In the normal course of business, the Company enters into contractual commitments to originate and sell multifamily mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrowers "lock-in" a specified interest rate within time frames established by the Company. All mortgagors are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move between the time of the "lock-in" of rates by the borrower and the sale date of the loan to an investor . To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company's policy is to enter into a sale commitment with the investor simultaneous with the rate lock commitment with the borrower. The sale contract with the investor locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan into the sale commitment . Both the rate lock commitments to borrowers and the forward sale contracts to buyers are undesignated derivatives and, accordingly, are marked to fair value through Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income. The fair value of the Company's rate lock commitments to borrowers and loans held for sale and the related input levels includes, as applicable : ● the estimated gain from the expected loan sale to the investor (Level 2); ● the expected net cash flows associated with servicing the loan, net of any guaranty obligations retained (Level 2); ● the effects of interest rate movements between the date of the rate lock and the balance sheet date (Level 2); and ● the nonperformance risk of both the counterparty and the Company (Level 3; derivative instruments only). The estimated gain considers the origination fees the Company expects to collect upon loan closing (derivative instruments only) and premiums the Company expects to receive upon sale of the loan (Level 2). The fair value of the expected net cash flows associated with servicing the loan is calculated pursuant to the valuation techniques applicable to the fair value of future servicing, net at loan sale (Level 2). To calculate the effects of interest rate movements, the Company uses applicable published U.S. Treasury prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount (Level 2). The fair value of the Company's forward sales contracts to investors considers the market price movement of the same type of security between the trade date and the balance sheet date (Level 2). The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value. The fair value of the Company’s interest rate lock commitments and forward sales contracts is adjusted to reflect the risk that the agreement will not be fulfilled. The Company’s exposure to nonperformance in interest rate lock commitments and forward sale contracts is represented by the contractual amount of those instruments. Given the credit quality of our counterparties and the short duration of interest rate lock commitments and forward sale contracts, the risk of nonperformance by the Company’s counterparties has historically been minimal (Level 3). The following table presents the components of fair value and other relevant information associated with the Company’s derivative instruments and loans held for sale as of March 31, 2020 and December 31, 2019. Fair Value Adjustment Components Balance Sheet Location Fair Value Notional or Estimated Total Adjustment Principal Gain Interest Rate Fair Value Derivative Derivative To Loans (in thousands) Amount on Sale Movement Adjustment Assets Liabilities Held for Sale March 31, 2020 Rate lock commitments $ 2,824,387 $ 49,475 $ 108,151 $ 157,626 $ 157,642 $ (16) $ — Forward sale contracts 3,920,466 — (172,016) (172,016) 591 (172,607) — Loans held for sale 1,096,079 26,633 63,865 90,498 — — 90,498 Total $ 76,108 $ — $ 76,108 $ 158,233 $ (172,623) $ 90,498 December 31, 2019 Rate lock commitments $ 511,114 $ 12,199 $ (1,975) $ 10,224 $ 10,247 $ (23) $ — Forward sale contracts 1,285,656 — 5,308 5,308 5,321 (13) — Loans held for sale 774,542 15,826 (3,333) 12,493 — — 12,493 Total $ 28,025 $ — $ 28,025 $ 15,568 $ (36) $ 12,493 |
FANNIE MAE COMMITMENTS AND PLED
FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES | 3 Months Ended |
Mar. 31, 2020 | |
FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES | |
Fannie Mae Commitments and Pledged Securities | NOTE 9—FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES Fannie Mae DUS Related Commitments The Company is generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program. The Company is required to secure these obligations by assigning restricted cash balances and securities to Fannie Mae, which are classified as Pledged securities, at fair value The Company is in compliance with the March 31, 2020 collateral requirements as outlined above. As of March 31, 2020, reserve requirements for the DUS loan portfolio will require the Company to fund $68.5 million in additional pledged securities over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within the at risk portfolio. Fannie Mae periodically reassesses the DUS Capital Standards and may make changes to these standards in the future. The Company generates sufficient cash flow from its operations to meet these capital standards and does not expect any future changes to have a material impact on its future operations; however, any future increases to collateral requirements may adversely impact the Company’s available cash. Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate the Company's servicing authority for all or some of the portfolio if at any time it determines that the Company's financial condition is not adequate to support its obligations under the DUS agreement. The Company is required to maintain acceptable net worth as defined in the agreement, and the Company satisfied the requirements as of March 31, 2020. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk sharing. At March 31, 2020, the net worth requirement was $200.7 million, and the Company's net worth, as defined in the requirements, was $763.6 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. As of March 31, 2020, the Company was required to maintain at least $39.7 million of liquid assets to meet operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, and Ginnie Mae. As of March 31, 2020, the Company had operational liquidity, as defined in the requirements, of $291.9 million, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. Pledged Securities, at Fair Value Pledged securities, at fair value March 31, December 31, (in thousands) 2020 2019 2019 2018 Pledged cash and cash equivalents: Restricted cash $ 2,989 $ 5,583 $ 2,150 $ 3,029 Money market funds 5,554 840 5,054 6,440 Total pledged cash and cash equivalents $ 8,543 $ 6,423 $ 7,204 $ 9,469 Agency MBS 112,952 111,143 114,563 106,862 Total pledged securities, at fair value $ 121,495 $ 117,566 $ 121,767 $ 116,331 The information in the preceding table is presented to reconcile beginning and ending cash, cash equivalents, restricted cash, and restricted cash equivalents in the Condensed Consolidated Statements of Cash Flows as more fully discussed in NOTE 2. The investments in Agency debt securities consist of Agency MBS and are all accounted for as AFS securities. The following table provides additional information related to the AFS Agency MBS as of March 31, 2020 and December 31, 2019: Fair Value and Amortized Cost of Agency MBS (in thousands) March 31, 2020 December 31, 2019 Fair value $ 112,952 $ 114,563 Amortized cost 114,528 113,580 Total gains for securities with net gains in AOCI 17 1,145 Total losses for securities with net losses in AOCI (1,593) (162) Fair value of securities with unrealized losses 85,974 66,526 The Company has not recorded an allowance for credit losses for any of the securities whose fair value is less than amortized costs as of March 31, 2020. These unrealized losses were primarily related to interest-only Agency MBS securities caused by short-term fluctuations in the fair value of these securities. The contractual cash flows of these securities are guaranteed by the GSEs, which are government-sponsored enterprises under the conservatorship of the Federal Housing Finance Agency. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of these securities. The Company does not intend to sell any of the Agency MBS, nor does the Company believe that it is more likely than not that it would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. None of the pledged securities has been in a continuous unrealized loss position for more than 12 months. The following table provides contractual maturity information related to the Agency MBS. The money market funds invest in short-term Federal Government and Agency debt securities and have no stated maturity date. March 31, 2020 Detail of Agency MBS Maturities (in thousands) Fair Value Amortized Cost Within one year $ — $ — After one year through five years 2,605 2,630 After five years through ten years 94,860 95,159 After ten years 15,487 16,739 Total $ 112,952 $ 114,528 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2020 | |
EARNINGS PER SHARE | |
Earnings Per Share | NOTE 10—EARNINGS PER SHARE EPS is calculated under the two-class method. The two-class method allocates all earnings (distributed and undistributed) to each class of common stock and participating securities based on their respective rights to receive dividends. The Company grants share-based awards to various employees and nonemployee directors under the 2015 Equity Incentive Plan that entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities. The following table presents the calculation of basic and diluted EPS for the three months ended March 31, 2020 and 2019 under the two-class method. Participating securities are included in the calculation of diluted EPS using the two-class method, as this computation was more dilutive than the treasury-stock method. For the three months ended March 31, EPS Calculations (in thousands, except per share amounts) 2020 2019 Calculation of basic EPS Walker & Dunlop net income $ 47,829 $ 44,218 Less: dividends and undistributed earnings allocated to participating securities 1,510 1,509 Net income applicable to common stockholders $ 46,319 $ 42,709 Weighted-average basic shares outstanding 30,226 29,680 Basic EPS $ 1.53 $ 1.44 Calculation of diluted EPS Net income applicable to common stockholders $ 46,319 $ 42,709 Add: reallocation of dividends and undistributed earnings based on assumed conversion 34 38 Net income allocated to common stockholders $ 46,353 $ 42,747 Weighted-average basic shares outstanding 30,226 29,680 Add: weighted-average diluted non-participating securities 934 1,004 Weighted-average diluted shares outstanding 31,160 30,684 Diluted EPS $ 1.49 $ 1.39 The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the treasury-stock method includes the unrecognized compensation costs associated with the awards. An immaterial number of average restricted shares were excluded from the computation of diluted earnings per share under the treasury method for the three months ended March 31, 2020 and 2019 because the effect would have been anti-dilutive (the grant date market price of the restricted shares was greater than the average market price of the Company’s shares during the periods presented). |
TOTAL EQUITY
TOTAL EQUITY | 3 Months Ended |
Mar. 31, 2020 | |
TOTAL EQUITY. | |
Total Equity | NOTE 11—TOTAL EQUITY A summary of changes in total equity for the three months ended March 31, 2020 and 2019: For the three months ended March 31, 2020 Stockholders' Equity Common Stock Retained Noncontrolling Total (in thousands) Shares Amount APIC AOCI Earnings Interests Equity Balance at December 31, 2019 30,035 $ 300 $ 237,877 $ 737 $ 796,775 $ 6,596 $ 1,042,285 Cumulative-effect adjustment for adoption of ASU 2016-13, net of tax — — — — (23,678) — (23,678) Walker & Dunlop net income — — — — 47,829 — 47,829 Net income (loss) from noncontrolling interests — — — — — (224) (224) Contributions from noncontrolling interests 675 675 Other comprehensive income (loss), net of tax — — — (1,918) — — (1,918) Stock-based compensation - equity classified — — 5,061 — — — 5,061 Issuance of common stock in connection with equity compensation plans 675 7 11,362 — — — 11,369 Repurchase and retirement of common stock (380) (4) (18,293) — (8,440) — (26,737) Cash dividends paid ($0.36 per common share) — — — — (11,347) — (11,347) Balance at March 31, 2020 30,330 $ 303 $ 236,007 $ (1,181) $ 801,139 $ 7,047 $ 1,043,315 For the three months ended March 31, 2019 Stockholders' Equity Common Stock Retained Noncontrolling Total (in thousands) Shares Amount APIC AOCI Earnings Interests Equity Balance at December 31, 2018 29,497 $ 295 $ 235,152 $ (75) $ 666,752 $ 5,068 $ 907,192 Cumulative-effect adjustment for adoption of ASU 2016-02, net of tax — — — — (1,002) — (1,002) Walker & Dunlop net income — — — — 44,218 — 44,218 Net income (loss) from noncontrolling interests — — — — — (158) (158) Other comprehensive income (loss), net of tax — — — 301 — — 301 Stock-based compensation - equity classified — — 6,812 — — — 6,812 Issuance of common stock in connection with equity compensation plans 935 9 4,178 — — — 4,187 Repurchase and retirement of common stock (459) (4) (22,400) — (1,755) — (24,159) Cash dividends paid ($0.30 per common share) — — — — (9,319) — (9,319) Balance at March 31, 2019 29,973 $ 300 $ 223,742 $ 226 $ 698,894 $ 4,910 $ 928,072 During the first quarter of 2020, the Company’s Board of Directors approved a new stock repurchase program that permits the repurchase of up to $50.0 million of the Company’s common stock over a 12-month period beginning on February 11, 2020. During the first quarter of 2020, the Company repurchased 0.2 million shares of its common stock under a share repurchase program at a weighted average price of $63.58 per share and immediately retired the shares, reducing stockholders’ equity by $10.2 million. These purchases were made prior to the escalation of the COVID-19 Crisis in mid-March 2020, and future purchases are unlikely until the impacts of the COVID-19 Crisis on the economy and the Company’s liquidity are better understood. As of March 31, 2020, the Company had $39.8 million of authorized share repurchase capacity remaining under the 2020 share repurchase program. On February 4, 2020, the Company’s Board of Directors declared a quarterly dividend of $0.36 per share. The dividend was paid March 9, 2020 to all holders of record of our restricted and unrestricted common stock as of February 21, 2020. Based upon the Company’s financial performance for the three months ended March 31, 2020, strong cash position, and projected future liquidity needs, on May 5, 2020, the Company’s Board of Directors declared a dividend of $0.36 per share for the second quarter of 2020. The dividend will be paid June 5, 2020 to all holders of record of the Company’s restricted and unrestricted common stock as of May 20, 2020. As disclosed in NOTE 7, the Company issued $5.0 million of Company stock in connection with acquisitions during the three months ended March 31, 2020, a non-cash transaction. The Company’s note payable contains direct restrictions to the amount of dividends the Company may pay, and the warehouse credit facilities and agreements with the Agencies contain minimum equity, liquidity, and other capital requirements that indirectly restrict the amount of dividends the Company may pay. The Company does not believe that these restrictions currently limit the amount of dividends the Company intends to pay for the foreseeable future. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of Consolidation | Principles of Consolidation Noncontrolling interests Net income from noncontrolling interests |
Use of Estimates | Use of Estimates obligations, allowance for risk-sharing obligations, capitalized mortgage servicing rights, derivative instruments and disclosure of contingent assets and liabilities. Actual results may vary from these estimates. |
Coronavirus Disease 2019 | Coronavirus Disease 2019 The COVID-19 Crisis did not have a material impact on the Company’s operations, its cash flows or the amount and availability of its liquidity during the first quarter 2020. Although it is not possible to reliably estimate the extent and duration of the COVID-19 Crisis as of the date of this quarterly report on Form 10-Q, management has made adjustments to the carrying values of the Company’s assets and liabilities impacted by the Crisis based on its best estimates and assumptions. The most significant adjustments to the carrying amount of the Company’s assets and liabilities include the Company’s estimate of future expected credit losses under both the Fannie Mae Delegated Underwriting and Servicing TM |
Subsequent Events | Subsequent Events |
Derivative Assets and Liabilities | Derivative Assets and Liabilities Derivative assets Loan origination and debt brokerage fees, net Derivative assets Fair value of expected net cash flows from servicing, net Loan origination and debt brokerage fees, net The Company presents two components of its revenue as Loan origination and debt brokerage fees, net Fair value of expected net cash flows from servicing, net. |
Recently Adopted and Recently Announced Accounting Pronouncements | Recently Adopted and Recently Announced Accounting Pronouncement s Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments supportable forecasts, including estimates of prepayments. Exposures with similar risk characteristics are required to be grouped together when estimating expected credit losses. The initial estimate and subsequent changes to the estimated credit losses are required to be reported in current earnings in the income statement and through an allowance in the balance sheet. ASU 2016-13 is applicable to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures. The Standard modifies the way the Company estimates its allowance for risk-sharing obligations and its allowance for loan losses and the way it assesses impairment on its pledged AFS securities. ASU 2016-13 requires modified retrospective application to all outstanding, in-scope instruments, with a cumulative-effect adjustment recorded to opening retained earnings as of the beginning of the period of adoption. The Company adopted the standard as required on January 1, 2020. The Company recognized an increase of $31.6 million in the allowance for risk-sharing obligations with a cumulative-effect adjustment, net of tax recorded to opening retained earnings of $23.7 million and deferred tax assets of $7.9 million. The adjustment to the allowance for loan losses for the Company’s loans held for investment was immaterial. There was no impact to AFS securities because the portfolio consists of agency-backed securities that inherently have an immaterial risk of loss. There have been no material changes to the accounting policies discussed in NOTE 2 of the Company’s 2019 Form 10-K, except for the changes to the Company’s accounting policies related to the allowance for risk-sharing obligations and allowance for loan losses in connection with the adoption of ASU 2016-13. |
Guaranty Obligation and Allowance for Risk-sharing Obligations | Guaranty Obligation and Allowance for risk sharing obligations Guaranty obligation, net of accumulated amortization In determining the fair value of the guaranty obligation, the Company considers the risk profile of the collateral, historical loss experience, and various market indicators. Generally, the estimated fair value of the guaranty obligation is based on the present value of the cash flows expected to be paid under the guaranty over the estimated life of the loan discounted using a rate consistent with what is used for the calculation of the mortgage servicing right for each loan. The estimated life of the guaranty obligation is the estimated period over which the Company believes it will be required to stand ready under the guaranty. Subsequent to the initial measurement date, the liability is amortized over the life of the guaranty period using the straight-line method as a component of and reduction to Amortization and depreciation Overall CECL Approach The Company uses the weighted-average remaining maturity method (“WARM”) for calculating its allowance for risk-sharing obligations, the Company’s liability for the off-balance-sheet credit exposure associated with the Fannie Mae at risk DUS loans. WARM uses an average annual charge-off rate that contains loss content over multiple vintages and loan terms and is used as a foundation for estimating the CECL reserve. The average annual charge-off rate is applied to the unpaid principal balance (“UPB”) over the contractual term, further adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio as described further below. Considering the Company’s long history servicing Fannie Mae DUS loans, the Company maximizes the use of historical internal data because the Company has extensive historical data from which to calculate historical loss rates and principal paydown by loan term type for its exposure to credit loss on its homogeneous portfolio of Fannie Mae DUS multifamily loans. Additionally, the Company believes its properties, loss history, and underwriting standards are not similar to public data such as loss histories for loans originated for collateralized mortgage-backed securities conduits. Runoff Rate One of the key inputs into a WARM calculation is the runoff rate, which is the expected rate at which loans in the current portfolio will prepay and amortize in the future. As the loans the Company originates have different original lives and runoff over different periods, the Company groups loans by similar origination dates (vintage) and contractual maturity terms for purposes of calculating the runoff rate. The Company originates loans under the DUS program with various terms generally ranging from several years to 15 years; each of these various loan terms has a different runoff rate. The Company uses its historical runoff rate for each of the different loan term pools as a proxy for the expected runoff rate. The Company believes that borrower behavior and macroeconomic conditions will not deviate significantly from historical performance over the approximately ten-year period over which the Company has compiled the actual loss data. The ten-year period captures the various cycles of industry performance and provides a period that is long enough to capture sufficient observations of runoff history. In addition, due to the prepayment protection provisions for Fannie Mae DUS loans, we have not seen significant volatility in historical prepayment rates due to changes in interest rates and would not expect this to change in future periods. The historical annual runoff rate is calculated for each year of a loan’s life for each vintage in the portfolio and aggregated with the calculated runoff rate for each comparable year in every vintage. For example, the annual runoff rate for the first year of loans originated in 2010 is aggregated with the annual runoff rate for the first year of loans originated in 2011, 2012, and so on to calculate the average annual runoff rate for the first year of a loan. This average runoff calculation is performed for each year of a loan’s life for each of the various loan terms to create a matrix of historical average annual runoffs by year for the entire portfolio. The Company segments its current portfolio of at risk DUS loans outstanding by original loan term type and years remaining and then applies the appropriate historical average runoff rates to calculate the expected remaining balance at the end of each reporting period in the future. For example, for a loan with an original ten-year term and seven years remaining, the Company applies the historical average annual runoff rate for a ten-year loan for year four to arrive at the remaining UPB one year from the current period, the historical average runoff rate for year five to arrive at the remaining UPB two years from the current period, and so on up to the loan’s maturity date. CECL Reserve Calculation Once the Company has calculated the estimated outstanding UPB for each future year until maturity for each loan term type, the Company then applies the average annual charge-off rate (as further described below) to each future year’s expected UPB. The Company then aggregates the allowance calculated for each year within each loan term type and for all different maturity years to arrive at the CECL reserve for the portfolio. The weighted-average annual charge-off rate is calculated using a ten-year look-back period, utilizing the average portfolio balance and settled losses for each year. A ten-year period is used as the Company believes that this period of time includes sufficiently different economic conditions to generate a reasonable estimate of expected results in the future, given the relatively long-term nature of the current portfolio. This approach captures the adverse impact of the years following the last recession in 2008-2010 because multifamily commercial loans have a lag period from the time of initial distress indications through the timing of loss settlement. The same loss rate is utilized across each loan term type as the Company is not aware of any historical or industry-published data to indicate there is any difference in the occurrence probability or loss severity for a loan based on its loan origination term. Reasonable and Supportable Forecast Period The Company currently uses one year for its reasonable and supportable forecast period (the “forecast period”) as the Company believes forecasts beyond one year are inherently less reliable. The Company uses forecasts of unemployment rates, historically a highly correlated indicator for multifamily occupancy rates, and net operating income growth to assess what macroeconomic and multifamily market conditions are expected to be like over the coming year. The Company then associates the forecasted conditions with a similar historical period over the past ten years, which could be one or several years, and uses the Company’s average loss rate for that historical period as a basis for the charge-off rate used for the forecast period. For all remaining years until maturity, the Company uses the weighted-average annual charge-off rate for the ten-year period as described above to estimate losses. The average loss rate from a historical period used for the forecast period may be adjusted as necessary if the forecasted macroeconomic and industry conditions differ materially from the historical period. Identification of Specific Reserves for Defaulted Loans The Company monitors the performance of each risk-sharing loan for events or conditions which may signal a potential default. The Company’s process for identifying which risk-sharing loans may be probable of default consists of an assessment of several qualitative and quantitative factors including payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio (“DSCR”), property condition, and financial strength of the borrower or key principal(s). In instances where payment under the guaranty on a specific loan is determined to be probable (as the loan is probable of foreclosure or has foreclosed), the Company separately measures the expected loss through an assessment of the underlying fair value of the asset, disposition costs, and the risk-sharing percentage (the “specific reserve”) through a charge to the provision for risk-sharing obligations, which is a component of Provision for credit losses The amount of the specific reserve considers historical loss experience, adverse situations affecting individual loans, the estimated disposition value of the underlying collateral, and the level of risk sharing. The estimate of property fair value at initial recognition of the specific reserve is based on appraisals, broker opinions of value, or net operating income and market capitalization rates, depending on the facts and circumstances associated with the loan. The Company regularly monitors the specific reserves on all applicable loans and updates loss estimates as current information is received. The settlement with Fannie Mae is based on the actual sales price of the property and selling and property preservation costs and considers the Fannie Mae loss-sharing requirements. The maximum amount of the loss the Company absorbs at the time of default is generally 20% of the origination unpaid principal balance of the loan. |
Loans Held for Investment, net | Loans Held for Investment, net As of March 31, 2020, Loans held for investment, net Loans held for investment, net During the third quarter of 2018, the Company transferred a portfolio of participating interests in loans held for investment to a third party that is scheduled to mature in the third quarter of 2021. The Company accounted for the transfer as a secured borrowing. The aggregate unpaid principal balance of the loans of $78.5 million is presented as a component of Loans held for investment, net Other liabilities The Company assesses the credit quality in the same manner as it does for the loans in the Fannie Mae at risk portfolio as described above and records a specific reserve for impaired loans. The allowance for loan losses is estimated collectively for loans with similar characteristics and for which there is no evidence of impairment. The collective allowance is based on the same methodology that the Company uses to estimate its CECL reserves for at risk Fannie Mae DUS loans as described above because the nature of the underlying collateral is the same, and the loans have similar characteristics, except they are significantly shorter in maturity. The reasonable and supportable forecast period used for the CECL reserve for loans held for investment is one year. Due to the forecasted economic conditions associated with the Crisis, the Company recorded a $1.1 million provision for loan losses during the three months ended March 31, 2020. The charge-off rate for the forecasted period was 36 basis points and nine basis points as of March 31, 2020 and January 1, 2020, respectively. The charge-off rate for the remaining period until maturity was nine basis points as of both March 31, 2020 and January 1, 2020. One loan held for investment with an unpaid principal balance of $14.7 million that was originated in 2017 as of March 31, 2020 and December 31, 2019 was $443.2 million and $531.9 million, respectively. As of March 31, 2020, $170.8 million of the loans that were current were originated in 2018, while $272.4 million were originated in 2019. |
Provision for Credit Losses | Provision for Credit Losses— Provision for credit losses Provision for credit losses For the three months ended March 31, Components of Provision for Credit Losses (in thousands) 2020 2019 Provision for loan losses $ 1,106 $ 623 Provision for risk-sharing obligations 22,537 2,052 Provision for credit losses $ 23,643 $ 2,675 |
Net Warehouse Interest Income | For the three months ended March 31, Components of Provision for Credit Losses (in thousands) 2020 2019 Provision for loan losses $ 1,106 $ 623 Provision for risk-sharing obligations 22,537 2,052 Provision for credit losses $ 23,643 $ 2,675 |
Statement of Cash Flows | March 31, December 31, (in thousands) 2020 2019 2019 2018 Cash and cash equivalents $ 205,309 $ 109,862 $ 120,685 $ 90,058 Restricted cash 30,745 17,561 8,677 20,821 Pledged cash and cash equivalents (NOTE 9) 8,543 6,423 7,204 9,469 Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 244,597 $ 133,846 $ 136,566 $ 120,348 |
Income Taxes | Income Taxes |
Contracts with Customers | Contracts with Customers For the three months ended March 31, Description in thousands 2020 2019 Statement of income line item Certain loan origination fees $ 21,348 $ 11,531 Loan origination and debt brokerage fees, net Property sales broker fees, investment management fees, assumption fees, application fees, and other 15,064 8,961 Other revenues Total revenues derived from contracts with customers $ 36,412 $ 20,492 |
Litigation | Litigation |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of Components of Provision for Credit Losses | For the three months ended March 31, Components of Provision for Credit Losses (in thousands) 2020 2019 Provision for loan losses $ 1,106 $ 623 Provision for risk-sharing obligations 22,537 2,052 Provision for credit losses $ 23,643 $ 2,675 |
Schedule of Net Warehouse Interest Income | For the three months ended March 31, Components of Net Warehouse Interest Income (in thousands) 2020 2019 Warehouse interest income - loans held for sale $ 7,402 $ 13,984 Warehouse interest expense - loans held for sale (5,910) (13,955) Net warehouse interest income - loans held for sale $ 1,492 $ 29 Warehouse interest income - loans held for investment $ 6,306 $ 8,779 Warehouse interest expense - loans held for investment (2,303) (1,787) Warehouse interest income - secured borrowings 846 888 Warehouse interest expense - secured borrowings (846) (888) Net warehouse interest income - loans held for investment $ 4,003 $ 6,992 Total net warehouse interest income $ 5,495 $ 7,021 |
Schedule of Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents | March 31, December 31, (in thousands) 2020 2019 2019 2018 Cash and cash equivalents $ 205,309 $ 109,862 $ 120,685 $ 90,058 Restricted cash 30,745 17,561 8,677 20,821 Pledged cash and cash equivalents (NOTE 9) 8,543 6,423 7,204 9,469 Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 244,597 $ 133,846 $ 136,566 $ 120,348 |
Schedule of Contracts with Customers | For the three months ended March 31, Description in thousands 2020 2019 Statement of income line item Certain loan origination fees $ 21,348 $ 11,531 Loan origination and debt brokerage fees, net Property sales broker fees, investment management fees, assumption fees, application fees, and other 15,064 8,961 Other revenues Total revenues derived from contracts with customers $ 36,412 $ 20,492 |
MORTGAGE SERVICING RIGHTS (Tabl
MORTGAGE SERVICING RIGHTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
MORTGAGE SERVICING RIGHTS | |
Schedule of Activity Related to Capitalized MSRs, Net of Accumulated Amortization | For the three months ended March 31, Roll Forward of MSRs (in thousands) 2020 2019 Beginning balance $ 718,799 $ 670,146 Additions, following the sale of loan 44,214 47,102 Amortization (35,218) (34,203) Pre-payments and write-offs (5,309) (5,099) Ending balance $ 722,486 $ 677,946 |
Summary of Components of Net Carrying Value of MSRs | Components of MSRs (in thousands) March 31, 2020 December 31, 2019 Gross Value $ 1,221,877 $ 1,201,542 Accumulated amortization (499,391) (482,743) Net carrying value $ 722,486 $ 718,799 |
Schedule of Expected Amortization of MSRs | Expected (in thousands) Amortization Nine Months Ending December 31, 2020 $ 101,336 Year Ending December 31, 2021 $ 124,191 2022 109,526 2023 96,770 2024 83,594 2025 69,674 Thereafter 137,395 Total $ 722,486 |
GUARANTY OBLIGATION AND ALLOW_2
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | |
Schedule of Activity Related to Guaranty Obligation | For the three months ended March 31, Roll Forward of Guaranty Obligation (in thousands) 2020 2019 Beginning balance $ 54,695 $ 46,870 Additions, following the sale of loan 1,862 4,863 Amortization (2,267) (2,349) Other 1,468 (8) Ending balance $ 55,758 $ 49,376 |
Summary of Allowance for Risk-Sharing Obligations | For the three months ended March 31, Roll Forward of Allowance for Risk-sharing Obligations (in thousands) 2020 2019 Beginning balance $ 11,471 $ 4,622 Adjustment related to adoption of ASU 2016-13 31,570 — Provision for risk-sharing obligations 22,537 2,052 Write-offs — — Other (1,468) 8 Ending balance $ 64,110 $ 6,682 |
WAREHOUSE NOTES PAYABLE (Tables
WAREHOUSE NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
WAREHOUSE NOTES PAYABLE | |
Schedule of warehouse lines of credit | March 31, 2020 (dollars in thousands) Committed Uncommitted Total Facility Outstanding Facility 1 Amount Amount Capacity Balance Interest rate Agency Warehouse Facility #1 $ 350,000 $ 200,000 $ 550,000 $ 173,125 30-day LIBOR plus 1.15% Agency Warehouse Facility #2 500,000 300,000 800,000 207,948 30-day LIBOR plus 1.15% Agency Warehouse Facility #3 500,000 — 500,000 303,605 30-day LIBOR plus 1.15% Agency Warehouse Facility #4 350,000 — 350,000 141,921 30-day LIBOR plus 1.15% Agency Warehouse Facility #5 — 500,000 500,000 207,317 30-day LIBOR plus 1.15% Total National Bank Agency Warehouse Facilities $ 1,700,000 $ 1,000,000 $ 2,700,000 $ 1,033,916 Fannie Mae repurchase agreement, uncommitted line and open maturity — 1,500,000 1,500,000 51,235 Total Agency Warehouse Facilities $ 1,700,000 $ 2,500,000 $ 4,200,000 $ 1,085,151 Interim Warehouse Facility #1 $ 135,000 $ — $ 135,000 $ 100,300 30-day LIBOR plus 1.90% Interim Warehouse Facility #2 100,000 — 100,000 49,256 30-day LIBOR plus 1.65% Interim Warehouse Facility #3 75,000 75,000 150,000 42,741 30-day LIBOR plus 1.90% to 2.50% Interim Warehouse Facility #4 100,000 — 100,000 — 30-day LIBOR plus 1.75% Interim Warehouse Facility #5 2 29,184 — 29,184 29,184 30-day LIBOR plus 3.00% Total National Bank Interim Warehouse Facilities $ 439,184 $ 75,000 $ 514,184 $ 221,481 Debt issuance costs — — — (786) Total warehouse facilities $ 2,139,184 $ 2,575,000 $ 4,714,184 $ 1,305,846 1 Agency Warehouse Facilities, including the Fannie Mae repurchase agreement are used to fund loans held for sale, while Interim Warehouse Facilities are used to fund loans held for investment. 2 Interim warehouse facility #5 bears interest at 30-day LIBOR plus 3.00% , with an interest-rate floor of 4.50% |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of Goodwill | For the three months ended March 31, Roll Forward of Goodwill (in thousands) 2020 2019 Beginning balance $ 180,424 $ 173,904 Additions from acquisitions 64,462 6,520 Impairment — — Ending balance $ 244,886 $ 180,424 |
Schedule of Contingent Liability | For the three months ended March 31, Roll Forward of Contingent Consideration Liabilities (in thousands) 2020 2019 Beginning balance $ 5,752 $ 11,630 Additions 16,073 — Accretion 227 143 Payments (5,800) (6,450) Ending balance $ 16,252 $ 5,323 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
FAIR VALUE MEASUREMENTS | |
Summary of Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis | Quoted Prices in Significant Significant Active Markets Other Other For Identical Observable Unobservable Assets Inputs Inputs Balance as of (in thousands) (Level 1) (Level 2) (Level 3) Period End March 31, 2020 Assets Loans held for sale $ — $ 1,186,577 $ — $ 1,186,577 Pledged securities 8,543 112,952 — 121,495 Derivative assets — — 158,233 158,233 Total $ 8,543 $ 1,299,529 $ 158,233 $ 1,466,305 Liabilities Derivative liabilities $ — $ — $ 172,623 $ 172,623 Total $ — $ — $ 172,623 $ 172,623 December 31, 2019 Assets Loans held for sale $ — $ 787,035 $ — $ 787,035 Pledged securities 7,204 114,563 — 121,767 Derivative assets — — 15,568 15,568 Total $ 7,204 $ 901,598 $ 15,568 $ 924,370 Liabilities Derivative liabilities $ — $ — $ 36 $ 36 Total $ — $ — $ 36 $ 36 |
Schedule of Roll Forward of Derivative Instruments | Fair Value Measurements Using Significant Unobservable Inputs: Derivative Instruments For the three months ended March 31, (in thousands) 2020 2019 Derivative assets and liabilities, net Beginning balance $ 15,532 $ 2,839 Settlements (174,295) (103,860) Realized gains recorded in earnings (1) 158,763 101,021 Unrealized gains (losses) recorded in earnings (1) (14,390) (2,286) Ending balance $ (14,390) $ (2,286) (1) Realized and unrealized gains (losses) from derivatives are recognized in Loan origination and debt brokerage fees, net and Fair value of expected net cash flows from servicing, net in the Condensed Consolidated Statements of Income. |
Schedule of Significant Unobservable Inputs Used in the Measurement of the Fair Value of Level 3 Assets and Liabilities | Quantitative Information about Level 3 Measurements (in thousands) Fair Value Valuation Technique Unobservable Input (1) Input Value (1) Derivative assets $ 158,233 Discounted cash flow Counterparty credit risk — Derivative liabilities $ 172,623 Discounted cash flow Counterparty credit risk — (1) Significant increases in this input may lead to significantly lower fair value measurements. |
Schedule of Carrying Amounts and the Fair Values of the Company's Financial Instruments | March 31, 2020 December 31, 2019 Carrying Fair Carrying Fair (in thousands) Amount Value Amount Value Financial assets: Cash and cash equivalents $ 205,309 $ 205,309 $ 120,685 $ 120,685 Restricted cash 30,745 30,745 8,677 8,677 Pledged securities 121,495 121,495 121,767 121,767 Loans held for sale 1,186,577 1,186,577 787,035 787,035 Loans held for investment, net 454,213 457,254 543,542 546,033 Derivative assets 158,233 158,233 15,568 15,568 Total financial assets $ 2,156,572 $ 2,159,613 $ 1,597,274 $ 1,599,765 Financial liabilities: Derivative liabilities $ 172,623 $ 172,623 $ 36 $ 36 Secured borrowings 70,548 70,548 70,548 70,548 Warehouse notes payable 1,305,846 1,306,632 906,128 906,821 Note payable 293,371 272,874 293,964 297,750 Total financial liabilities $ 1,842,388 $ 1,822,677 $ 1,270,676 $ 1,275,155 |
Schedule of Fair Value of Derivative Instruments and Loans Held for Sale | Fair Value Adjustment Components Balance Sheet Location Fair Value Notional or Estimated Total Adjustment Principal Gain Interest Rate Fair Value Derivative Derivative To Loans (in thousands) Amount on Sale Movement Adjustment Assets Liabilities Held for Sale March 31, 2020 Rate lock commitments $ 2,824,387 $ 49,475 $ 108,151 $ 157,626 $ 157,642 $ (16) $ — Forward sale contracts 3,920,466 — (172,016) (172,016) 591 (172,607) — Loans held for sale 1,096,079 26,633 63,865 90,498 — — 90,498 Total $ 76,108 $ — $ 76,108 $ 158,233 $ (172,623) $ 90,498 December 31, 2019 Rate lock commitments $ 511,114 $ 12,199 $ (1,975) $ 10,224 $ 10,247 $ (23) $ — Forward sale contracts 1,285,656 — 5,308 5,308 5,321 (13) — Loans held for sale 774,542 15,826 (3,333) 12,493 — — 12,493 Total $ 28,025 $ — $ 28,025 $ 15,568 $ (36) $ 12,493 |
FANNIE MAE COMMITMENTS AND PL_2
FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES | |
Schedule of Pledged Securities at Fair Value | March 31, December 31, (in thousands) 2020 2019 2019 2018 Pledged cash and cash equivalents: Restricted cash $ 2,989 $ 5,583 $ 2,150 $ 3,029 Money market funds 5,554 840 5,054 6,440 Total pledged cash and cash equivalents $ 8,543 $ 6,423 $ 7,204 $ 9,469 Agency MBS 112,952 111,143 114,563 106,862 Total pledged securities, at fair value $ 121,495 $ 117,566 $ 121,767 $ 116,331 |
Schedule of Investment Information Related to AFS Agency MBS | Fair Value and Amortized Cost of Agency MBS (in thousands) March 31, 2020 December 31, 2019 Fair value $ 112,952 $ 114,563 Amortized cost 114,528 113,580 Total gains for securities with net gains in AOCI 17 1,145 Total losses for securities with net losses in AOCI (1,593) (162) Fair value of securities with unrealized losses 85,974 66,526 |
Schedule of Contractual Maturity Information Related to Agency MBS | March 31, 2020 Detail of Agency MBS Maturities (in thousands) Fair Value Amortized Cost Within one year $ — $ — After one year through five years 2,605 2,630 After five years through ten years 94,860 95,159 After ten years 15,487 16,739 Total $ 112,952 $ 114,528 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
EARNINGS PER SHARE | |
Schedule of Basic and Diluted EPS Under Two-Class Method | For the three months ended March 31, EPS Calculations (in thousands, except per share amounts) 2020 2019 Calculation of basic EPS Walker & Dunlop net income $ 47,829 $ 44,218 Less: dividends and undistributed earnings allocated to participating securities 1,510 1,509 Net income applicable to common stockholders $ 46,319 $ 42,709 Weighted-average basic shares outstanding 30,226 29,680 Basic EPS $ 1.53 $ 1.44 Calculation of diluted EPS Net income applicable to common stockholders $ 46,319 $ 42,709 Add: reallocation of dividends and undistributed earnings based on assumed conversion 34 38 Net income allocated to common stockholders $ 46,353 $ 42,747 Weighted-average basic shares outstanding 30,226 29,680 Add: weighted-average diluted non-participating securities 934 1,004 Weighted-average diluted shares outstanding 31,160 30,684 Diluted EPS $ 1.49 $ 1.39 |
TOTAL EQUITY (Tables)
TOTAL EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
TOTAL EQUITY. | |
Summary of Changes in Total Equity | For the three months ended March 31, 2020 Stockholders' Equity Common Stock Retained Noncontrolling Total (in thousands) Shares Amount APIC AOCI Earnings Interests Equity Balance at December 31, 2019 30,035 $ 300 $ 237,877 $ 737 $ 796,775 $ 6,596 $ 1,042,285 Cumulative-effect adjustment for adoption of ASU 2016-13, net of tax — — — — (23,678) — (23,678) Walker & Dunlop net income — — — — 47,829 — 47,829 Net income (loss) from noncontrolling interests — — — — — (224) (224) Contributions from noncontrolling interests 675 675 Other comprehensive income (loss), net of tax — — — (1,918) — — (1,918) Stock-based compensation - equity classified — — 5,061 — — — 5,061 Issuance of common stock in connection with equity compensation plans 675 7 11,362 — — — 11,369 Repurchase and retirement of common stock (380) (4) (18,293) — (8,440) — (26,737) Cash dividends paid ($0.36 per common share) — — — — (11,347) — (11,347) Balance at March 31, 2020 30,330 $ 303 $ 236,007 $ (1,181) $ 801,139 $ 7,047 $ 1,043,315 For the three months ended March 31, 2019 Stockholders' Equity Common Stock Retained Noncontrolling Total (in thousands) Shares Amount APIC AOCI Earnings Interests Equity Balance at December 31, 2018 29,497 $ 295 $ 235,152 $ (75) $ 666,752 $ 5,068 $ 907,192 Cumulative-effect adjustment for adoption of ASU 2016-02, net of tax — — — — (1,002) — (1,002) Walker & Dunlop net income — — — — 44,218 — 44,218 Net income (loss) from noncontrolling interests — — — — — (158) (158) Other comprehensive income (loss), net of tax — — — 301 — — 301 Stock-based compensation - equity classified — — 6,812 — — — 6,812 Issuance of common stock in connection with equity compensation plans 935 9 4,178 — — — 4,187 Repurchase and retirement of common stock (459) (4) (22,400) — (1,755) — (24,159) Cash dividends paid ($0.30 per common share) — — — — (9,319) — (9,319) Balance at March 31, 2019 29,973 $ 300 $ 223,742 $ 226 $ 698,894 $ 4,910 $ 928,072 |
ORGANIZATION AND BASIS OF PRE_2
ORGANIZATION AND BASIS OF PRESENTATION (Details) | Mar. 31, 2020 |
Interim Program JV | |
Joint Venture | |
Ownership interest | 15.00% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Derivative Assets and Liabilities (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Mortgage Banking Activities | ||
Co-broker fees | $ 8.3 | $ 2.9 |
Fair value of expected guaranty obligation recognized at commitment | $ 1.3 | $ 4.1 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ASU 2016-13 (Detail) - USD ($) $ in Thousands | Mar. 31, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements | |||||
Allowance for risk-sharing obligations | $ 64,110 | $ 11,471 | $ 6,682 | $ 4,622 | |
Retained earnings | $ 801,139 | $ 796,775 | |||
ASU 2016-13 | Restatement Adjustment | |||||
New Accounting Pronouncements | |||||
Allowance for risk-sharing obligations | $ 31,600 | ||||
Retained earnings | (23,700) | ||||
Deferred tax assets | $ 7,900 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Guaranty Obligation and Allowance for risk sharing obligations (Details) - Fannie Mae DUS program - Maximum | 3 Months Ended |
Mar. 31, 2020 | |
Debt | |
Term of debt | 15 years |
Maximum delinquency period of loans at which initial loss recognition occurs | 60 days |
Amount of loss absorbed at time of loan default as a percent of the origination unpaid principal balance | 20.00% |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Loans Held-for-Investment, Net (Detail) | Jan. 01, 2020 | Mar. 31, 2020USD ($)loan | Dec. 31, 2019USD ($)loan |
Loans Held-for-Investment, Net | |||
Provision for loan losses | $ 1,100,000 | ||
Loans charge off rate in forecasted period | 0.09% | 0.36% | |
Loans charge off rate in remaining period | 0.09% | 0.09% | |
Amortized cost of loans held for investment, current | $ 443,200,000 | $ 531,900,000 | |
Loans originated in 2018 | 170,800,000 | ||
Loans originated in 2019 | 272,400,000 | ||
Loans Held for Investment | |||
Transfers of financial assets accounted for as secured borrowings | |||
Loan portfolio transferred to third party | 78,500,000 | ||
Other Liabilities | |||
Transfers of financial assets accounted for as secured borrowings | |||
Loan portfolio transferred to third party | 70,500,000 | ||
Secured borrowing | $ 70,500,000 | ||
Loans Held for Investment | |||
Loans Held-for-Investment, Net | |||
Number of loans held for investment | loan | 20 | 22 | |
Unpaid principal balance of loans held for investment | $ 457,900,000 | $ 546,600,000 | |
Net unamortized deferred fees and costs | 1,500,000 | 2,000,000 | |
Allowance for loan losses | $ 2,200,000 | $ 1,100,000 | |
Number of delinquent loans | 1 | 1 | |
Loans held for investment, delinquent | $ 14,700,000 | $ 14,700,000 | |
Number of impaired loans | loan | 1 | 1 | |
Loans held for investment, impaired | $ 14,700,000 | $ 14,700,000 | |
Loan originated in 2017 | $ 14,700,000 | ||
Number of loans on nonaccrual status | loan | 1 | 1 | |
Loans, non-accrual status | $ 14,700,000 | $ 14,700,000 | |
Specific reserve for loan | $ 600,000 | $ 600,000 | |
Loans Held for Investment | Maximum | |||
Loans Held-for-Investment, Net | |||
Loan term (in years) | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Provision for Credit Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Components of Provision for Credit Losses | ||
Provision for loan losses | $ 1,106 | $ 623 |
Provision for risk-sharing obligations | 22,537 | 2,052 |
Provision for credit losses | $ 23,643 | $ 2,675 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Net Warehouse Interest Income (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Net Warehouse Interest Income | ||
Net warehouse interest income | $ 5,495 | $ 7,021 |
Loans Held for Sale | ||
Net Warehouse Interest Income | ||
Warehouse interest income | 7,402 | 13,984 |
Warehouse interest expense | (5,910) | (13,955) |
Net warehouse interest income | 1,492 | 29 |
Loans Held for Investment | ||
Net Warehouse Interest Income | ||
Warehouse interest income | 6,306 | 8,779 |
Warehouse interest expense | (2,303) | (1,787) |
Net warehouse interest income | 4,003 | 6,992 |
Secured Borrowings | ||
Net Warehouse Interest Income | ||
Warehouse interest income | 846 | 888 |
Warehouse interest expense | $ (846) | $ (888) |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash Flows (Detail) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents | ||||
Cash and cash equivalents | $ 205,309 | $ 120,685 | $ 109,862 | $ 90,058 |
Restricted cash | 30,745 | 8,677 | 17,561 | 20,821 |
Pledged cash and cash equivalents (NOTE 9) | 8,543 | 7,204 | 6,423 | 9,469 |
Total cash, cash equivalents, restricted cash, and restricted cash equivalents | $ 244,597 | $ 136,566 | $ 133,846 | $ 120,348 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Excess tax benefits recognized | $ 2.9 | $ 3.4 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Contracts with Customers (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Contracts with Customers | ||
Revenue from contracts with customer | $ 36,412 | $ 20,492 |
Loan Origination Fees | Gains from Mortgage Banking Activities | ||
Contracts with Customers | ||
Revenue from contracts with customer | 21,348 | 11,531 |
Investment Sales Broker Fees, Investment Management Fees, Assumption Fees, Application Fees and Other | Other Revenues | ||
Contracts with Customers | ||
Revenue from contracts with customer | $ 15,064 | $ 8,961 |
MORTGAGE SERVICING RIGHTS - Fai
MORTGAGE SERVICING RIGHTS - Fair Value Disclosures (Detail) - MSRs $ in Millions | 3 Months Ended | |
Mar. 31, 2020USD ($)class | Dec. 31, 2019USD ($) | |
Servicing | ||
Number of classes of MSRs | class | 1 | |
Fair value of the MSRs | $ 868.4 | $ 910.5 |
Sensitivity Analysis of Fair Value, example 1, impact of percent adverse change in discount rate, percent | 1.00% | |
Decrease in fair value as a result of 100 basis point increase in discount rate | $ 25.8 | |
Sensitivity Analysis of Fair Value, example 2, impact of percent adverse change in discount rate, percent | 2.00% | |
Decrease in fair value as a result of 200 basis point increase in discount rate | $ 50 |
MORTGAGE SERVICING RIGHTS - Sch
MORTGAGE SERVICING RIGHTS - Schedule of Activity Related to Capitalized MSRs (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Mortgage Servicing Rights | ||
Beginning balance | $ 718,799 | |
Ending balance | 722,486 | |
MSRs | ||
Mortgage Servicing Rights | ||
Beginning balance | 718,799 | $ 670,146 |
Additions, following sale of loan | 44,214 | 47,102 |
Amortization | (35,218) | (34,203) |
Pre-payments and write-offs | (5,309) | (5,099) |
Ending balance | $ 722,486 | $ 677,946 |
MORTGAGE SERVICING RIGHTS - Sum
MORTGAGE SERVICING RIGHTS - Summary of Components of Net Carrying Value of Acquired and Originated MSRs (Detail) - MSRs - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Mortgage Servicing Rights Acquired and Originated | ||
Gross value | $ 1,221,877 | $ 1,201,542 |
Accumulated amortization | (499,391) | (482,743) |
Net carrying value | $ 722,486 | $ 718,799 |
MORTGAGE SERVICING RIGHTS - S_2
MORTGAGE SERVICING RIGHTS - Schedule of Expected Amortization of MSRs (Detail) - MSRs - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Future amortization | ||
Nine Months Ending December 31, 2020 | $ 101,336 | |
2021 | 124,191 | |
2022 | 109,526 | |
2023 | 96,770 | |
2024 | 83,594 | |
2025 | 69,674 | |
Thereafter | 137,395 | |
Net carrying value | $ 722,486 | $ 718,799 |
GUARANTY OBLIGATION AND ALLOW_3
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS - Schedule of Activity Related to Guaranty Obligation (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS | ||
Guaranty obligation, net of accumulated amortization - beginning balance | $ 54,695 | $ 46,870 |
Additions, following the sale of loan | 1,862 | 4,863 |
Amortization | (2,267) | (2,349) |
Other | 1,468 | (8) |
Guaranty obligation, net of accumulated amortization - ending balance | $ 55,758 | $ 49,376 |
GUARANTY OBLIGATION AND ALLOW_4
GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS - Summary of Allowance for Risk-Sharing Obligations (Detail) $ in Thousands | 3 Months Ended | 12 Months Ended | 24 Months Ended | ||||
Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($)loan | Dec. 31, 2013 | Mar. 31, 2020USD ($) | Jan. 01, 2020USD ($) | Dec. 31, 2019USD ($) | |
Allowance for Risk-Sharing Contracts | |||||||
Beginning balance | $ 11,471 | $ 4,622 | $ 4,622 | ||||
Adjustment related to adoption of ASU 2016-13 | 31,570 | ||||||
Provision for risk-sharing obligations | 22,537 | 2,052 | |||||
Other | (1,468) | 8 | |||||
Ending balance | $ 64,110 | 6,682 | $ 11,471 | ||||
Number of defaulted loans | loan | 2 | ||||||
Amount of specific reserves placed on defaulted at risk loans | $ 6,900 | ||||||
Number of defaulted at risk loans on which loss sharing settlements were reached | loan | 2 | ||||||
Average loss rate for forecasted period | 0.01% | ||||||
Charge off rate in forecasted period | 0.07% | 0.12% | |||||
Weighted average charge off rate for the remaining period | 0.0176% | 0.0176% | |||||
Allowance for risk-sharing obligations | $ 11,471 | $ 6,682 | $ 4,622 | $ 64,110 | 11,471 | ||
Fannie Mae DUS program | |||||||
Allowance for Risk-Sharing Contracts | |||||||
Maximum quantifiable contingent liability associated with guarantees | 7,700,000 | ||||||
Loans serviced | |||||||
Allowance for Risk-Sharing Contracts | |||||||
At risk servicing portfolio | 94,800,000 | $ 93,200,000 | |||||
Fannie Mae DUS Program | |||||||
Allowance for Risk-Sharing Contracts | |||||||
At risk servicing portfolio | 37,200,000 | ||||||
CECL reserve for at risk servicing portfolio | $ 57,200 | $ 34,700 | |||||
Weighted average remaining life of the at risk servicing portfolio | 7 years 6 months |
SERVICING - (Detail)
SERVICING - (Detail) - USD ($) $ in Thousands | May 05, 2020 | Apr. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Servicing | ||||
Total Facility Capacity | $ 4,714,184 | |||
Amount of outstanding principal and interest and tax and escrow advances included as a component of receivables, net on the balance sheet | 2,600 | $ 2,100 | ||
Loans serviced | ||||
Servicing | ||||
Servicing portfolio loans unpaid principal balance | 94,800,000 | 93,200,000 | ||
Custodial escrow accounts | 2,100,000 | $ 2,600,000 | ||
Fannie Mae DUS Program | ||||
Servicing | ||||
Servicing portfolio loans unpaid principal balance | $ 37,200,000 | |||
Notice period of reimbursement of advances | 60 days | |||
Advances of principal and interest payments on behalf of borrowers | $ 800 | |||
Fannie Mae DUS Program | Maximum | ||||
Servicing | ||||
Period of time advances of principal and interest payments and guarantee fees are required to be made | 4 months | |||
HUD Program | ||||
Servicing | ||||
Advances of principal and interest payments on behalf of borrowers | $ 4,500 | |||
Period of time a loan must be in default before assignment to HUD | 30 days | |||
Agency Warehouse Facility Sublimit, Fannie Mae Advances | Fannie Mae DUS Program | ||||
Servicing | ||||
Total Facility Capacity | $ 100,000 | |||
Funding percentage of required advances of principal and interest to be provided | 90.00% |
WAREHOUSE NOTES PAYABLE - Summa
WAREHOUSE NOTES PAYABLE - Summary Information (Detail) | Apr. 30, 2020facility | Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($)loanitem | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) |
Warehouse notes payable | |||||
Committed Amount | $ 2,139,184,000 | ||||
Uncommitted Amount | 2,575,000,000 | ||||
Total Facility Capacity | 4,714,184,000 | ||||
Outstanding Balance | 1,305,846,000 | $ 906,128,000 | |||
Debt issuance costs | (786,000) | ||||
Loans Held for Sale | |||||
Warehouse notes payable | |||||
Interest expense | 5,910,000 | $ 13,955,000 | |||
Loans Held for Sale | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | 1,700,000,000 | ||||
Uncommitted Amount | 2,500,000,000 | ||||
Total Facility Capacity | 4,200,000,000 | ||||
Outstanding Balance | 1,085,151,000 | ||||
Loans Held for Sale | Agency Warehouse Facility #1 | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | 350,000,000 | ||||
Uncommitted Amount | 200,000,000 | ||||
Total Facility Capacity | 550,000,000 | ||||
Outstanding Balance | $ 173,125,000 | ||||
Loans Held for Sale | Agency Warehouse Facility #1 | Agency Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.15% | ||||
Loans Held for Sale | Agency Warehouse Facility #2 | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | $ 500,000,000 | ||||
Uncommitted Amount | 300,000,000 | ||||
Total Facility Capacity | $ 3,200,000,000 | 800,000,000 | |||
Additional borrowing capacity | $ 2,400,000,000 | ||||
Term of temporary increase in facility capacity after funding of loan portfolio | 60 days | ||||
Outstanding Balance | $ 207,948,000 | ||||
Loans Held for Sale | Agency Warehouse Facility #2 | Agency Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.15% | ||||
Loans Held for Sale | Agency Warehouse Facility #3 | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | $ 500,000,000 | ||||
Uncommitted Amount | $ 265,000,000 | ||||
Total Facility Capacity | 500,000,000 | ||||
Outstanding Balance | $ 303,605,000 | ||||
Maturity date | Apr. 30, 2021 | ||||
Loans Held for Sale | Agency Warehouse Facility #3 | Agency Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.15% | ||||
Loans Held for Sale | Agency Warehouse Facility #4 | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | $ 350,000,000 | ||||
Total Facility Capacity | 350,000,000 | ||||
Outstanding Balance | $ 141,921,000 | ||||
Loans Held for Sale | Agency Warehouse Facility #4 | Agency Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.15% | ||||
Loans Held for Sale | Agency Warehouse Facility #5 | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Uncommitted Amount | $ 500,000,000 | ||||
Total Facility Capacity | 500,000,000 | ||||
Outstanding Balance | $ 207,317,000 | ||||
Loans Held for Sale | Agency Warehouse Facility #5 | Agency Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.15% | ||||
Loans Held for Investment | |||||
Warehouse notes payable | |||||
Interest expense | $ 2,303,000 | $ 1,787,000 | |||
Loans Held for Investment | Interim Warehouse Facility #1 | Interim Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | 135,000,000 | ||||
Total Facility Capacity | 135,000,000 | ||||
Outstanding Balance | $ 100,300,000 | ||||
Maturity date | Apr. 30, 2021 | ||||
Loans Held for Investment | Interim Warehouse Facility #1 | Interim Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.90% | ||||
Loans Held for Investment | Interim Warehouse Facility #2 | Interim Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | $ 100,000,000 | ||||
Total Facility Capacity | 100,000,000 | ||||
Outstanding Balance | $ 49,256,000 | ||||
Loans Held for Investment | Interim Warehouse Facility #2 | Interim Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.65% | ||||
Loans Held for Investment | Interim Warehouse Facility #3 | Interim Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | $ 75,000,000 | ||||
Uncommitted Amount | 75,000,000 | ||||
Total Facility Capacity | 150,000,000 | ||||
Outstanding Balance | $ 42,741,000 | ||||
Loans Held for Investment | Interim Warehouse Facility #3 | Interim Warehouse Facility | 30-day LIBOR | Minimum | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.90% | ||||
Loans Held for Investment | Interim Warehouse Facility #3 | Interim Warehouse Facility | 30-day LIBOR | Maximum | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 2.50% | ||||
Loans Held for Investment | Interim Warehouse Facility #4 | Interim Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | $ 100,000,000 | ||||
Total Facility Capacity | $ 100,000,000 | ||||
Loans Held for Investment | Interim Warehouse Facility #4 | Interim Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 1.75% | ||||
Loans Held for Investment | Interim Warehouse Facility #5 | Interim Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | $ 29,184,000 | ||||
Total Facility Capacity | 29,184,000 | ||||
Outstanding Balance | $ 29,184,000 | ||||
Number of loans funded | 2 | ||||
Term of facility | 2 years 6 months | ||||
Number of financial covenants | item | 2 | ||||
Loans Held for Investment | Interim Warehouse Facility #5 | Interim Warehouse Facility | 30-day LIBOR | |||||
Warehouse notes payable | |||||
Percentage added to reference rate | 3.00% | ||||
Interest rate floor | 4.50% | ||||
National Banks | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Total Facility Capacity | $ 2,700,000,000 | ||||
National Banks | Interim Warehouse Facility | |||||
Warehouse notes payable | |||||
Total Facility Capacity | 500,000,000 | ||||
Number of credit facilities | facility | 4 | ||||
National Banks | Loans Held for Sale | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | 1,700,000,000 | ||||
Uncommitted Amount | 1,000,000,000 | ||||
Total Facility Capacity | 2,700,000,000 | ||||
Outstanding Balance | 1,033,916,000 | ||||
National Banks | Loans Held for Investment | Interim Warehouse Facility | |||||
Warehouse notes payable | |||||
Committed Amount | 439,184,000 | ||||
Uncommitted Amount | 75,000,000 | ||||
Total Facility Capacity | 514,184,000 | ||||
Outstanding Balance | 221,481,000 | ||||
Fannie Mae | Loans Held for Sale | Uncommitted Agency Warehouse Facility | Agency Warehouse Facility | |||||
Warehouse notes payable | |||||
Uncommitted Amount | 1,500,000,000 | ||||
Total Facility Capacity | 1,500,000,000 | ||||
Outstanding Balance | $ 51,235,000 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Goodwill (Detail) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020USD ($)item | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | |
Goodwill activity | |||
Beginning balance | $ 180,424 | $ 173,904 | |
Additions from acquisitions | 64,462 | 6,520 | |
Ending balance | $ 244,886 | $ 180,424 | |
Assets acquired | |||
Number of acquisitions during the period | item | 2 | ||
Intangible assets acquired | $ 2,400 | $ 2,500 | |
Weighted average amortization period | 4 years 6 months | ||
2020 Acquisitions | |||
Assets acquired | |||
Stock issued | $ 5,000 | ||
Debt Brokerage Companies | |||
Assets acquired | |||
Number of acquisitions during the period | item | 2 | ||
Total consideration transferred | $ 64,900 | ||
Cash consideration | 43,800 | ||
Stock issued | 5,000 | ||
Contingent consideration | $ 16,100 | ||
Debt Brokerage Company One | |||
Assets acquired | |||
Amortization period | 4 years | ||
Debt Brokerage Company Two | |||
Assets acquired | |||
Amortization period | 5 years |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Contingent Consideration Liabilities (Detail) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)period | Mar. 31, 2019USD ($) | |
Contingent consideration liabilities | ||
Payments | $ (1,641) | $ (6,450) |
Number of initial annual contingent consideration earn-out periods | period | 5 | |
Minimum | ||
Goodwill impairment | ||
Financing activity for multifamily assets as a percentage of transaction volumes | 80.00% | |
Financing activity for multifamily assets as a percentage of servicing portfolio | 90.00% | |
Other Liabilities | ||
Contingent consideration liabilities | ||
Beginning balance | $ 5,752 | 11,630 |
Additions | 16,073 | |
Accretion | 227 | 143 |
Payments | (5,800) | (6,450) |
Ending balance | $ 16,252 | $ 5,323 |
FAIR VALUE MEASUREMENTS - Summa
FAIR VALUE MEASUREMENTS - Summary of Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis (Detail) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Assets | ||||
Loans held for sale | $ 1,186,577 | $ 787,035 | ||
Pledged securities | 121,495 | 121,767 | $ 117,566 | $ 116,331 |
Derivative assets | 158,233 | 15,568 | ||
Liabilities | ||||
Derivative liabilities | 172,623 | 36 | ||
Recurring | ||||
Assets | ||||
Loans held for sale | 1,186,577 | 787,035 | ||
Pledged securities | 121,495 | 121,767 | ||
Derivative assets | 158,233 | 15,568 | ||
Total financial assets | 1,466,305 | 924,370 | ||
Liabilities | ||||
Derivative liabilities | 172,623 | 36 | ||
Total financial liabilities | 172,623 | 36 | ||
Level 1 | Recurring | ||||
Assets | ||||
Pledged securities | 8,543 | 7,204 | ||
Total financial assets | 8,543 | 7,204 | ||
Level 2 | Recurring | ||||
Assets | ||||
Loans held for sale | 1,186,577 | 787,035 | ||
Pledged securities | 112,952 | 114,563 | ||
Total financial assets | 1,299,529 | 901,598 | ||
Level 3 | Recurring | ||||
Assets | ||||
Derivative assets | 158,233 | 15,568 | ||
Total financial assets | 158,233 | 15,568 | ||
Liabilities | ||||
Derivative liabilities | 172,623 | 36 | ||
Total financial liabilities | $ 172,623 | $ 36 |
FAIR VALUE MEASUREMENTS - Addit
FAIR VALUE MEASUREMENTS - Additional Information (Detail) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Fair Value Measurements | |
Amount of transfers between any of the levels within the fair value hierarchy | $ 0 |
Maximum | |
Fair Value Measurements | |
Contract term | 60 days |
FAIR VALUE MEASUREMENTS - Sched
FAIR VALUE MEASUREMENTS - Schedule of Roll Forward of Derivative Instruments (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Derivative assets and liabilities, net | ||
Beginning balance | $ 15,532 | $ 2,839 |
Settlements | (174,295) | (103,860) |
Realized gains recorded in earnings | 158,763 | 101,021 |
Unrealized gains recorded in earnings | (14,390) | (2,286) |
Ending balance | $ (14,390) | $ (2,286) |
FAIR VALUE MEASUREMENTS - Sch_2
FAIR VALUE MEASUREMENTS - Schedule of Significant Unobservable Inputs Used in the Measurement of the Fair Value of Level 3 Assets and Liabilities (Detail) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value Measurements | ||
Derivative assets | $ 158,233 | $ 15,568 |
Derivative liabilities | 172,623 | 36 |
Level 3 | Discounted Cash Flow | Derivative Assets | ||
Fair Value Measurements | ||
Derivative assets | 158,233 | |
Level 3 | Derivative Liabilities | Discounted Cash Flow | ||
Fair Value Measurements | ||
Derivative liabilities | 172,623 | |
Recurring | ||
Fair Value Measurements | ||
Derivative assets | 158,233 | 15,568 |
Derivative liabilities | 172,623 | 36 |
Recurring | Level 3 | ||
Fair Value Measurements | ||
Derivative assets | 158,233 | 15,568 |
Derivative liabilities | $ 172,623 | $ 36 |
FAIR VALUE MEASUREMENTS - Sch_3
FAIR VALUE MEASUREMENTS - Schedule of Carrying Amounts and the Fair Values of the Company's Financial Instruments (Detail) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Financial assets: | ||||
Cash and cash equivalents | $ 205,309 | $ 120,685 | $ 109,862 | $ 90,058 |
Restricted cash | 30,745 | 8,677 | 17,561 | 20,821 |
Pledged securities | 121,495 | 121,767 | $ 117,566 | $ 116,331 |
Loans held for sale | 1,186,577 | 787,035 | ||
Loans held for investment, net | 454,213 | 543,542 | ||
Derivative assets | 158,233 | 15,568 | ||
Financial liabilities: | ||||
Derivative liabilities | 172,623 | 36 | ||
Warehouse notes payable | 1,305,846 | 906,128 | ||
Note payable | 293,371 | 293,964 | ||
Carrying Amount | ||||
Financial assets: | ||||
Cash and cash equivalents | 205,309 | 120,685 | ||
Restricted cash | 30,745 | 8,677 | ||
Pledged securities | 121,495 | 121,767 | ||
Loans held for sale | 1,186,577 | 787,035 | ||
Loans held for investment, net | 454,213 | 543,542 | ||
Derivative assets | 158,233 | 15,568 | ||
Total financial assets | 2,156,572 | 1,597,274 | ||
Financial liabilities: | ||||
Derivative liabilities | 172,623 | 36 | ||
Secured borrowings | 70,548 | 70,548 | ||
Warehouse notes payable | 1,305,846 | 906,128 | ||
Note payable | 293,371 | 293,964 | ||
Total financial liabilities | 1,842,388 | 1,270,676 | ||
Fair Value | ||||
Financial assets: | ||||
Cash and cash equivalents | 205,309 | 120,685 | ||
Restricted cash | 30,745 | 8,677 | ||
Pledged securities | 121,495 | 121,767 | ||
Loans held for sale | 1,186,577 | 787,035 | ||
Loans held for investment, net | 457,254 | 546,033 | ||
Derivative assets | 158,233 | 15,568 | ||
Total financial assets | 2,159,613 | 1,599,765 | ||
Financial liabilities: | ||||
Derivative liabilities | 172,623 | 36 | ||
Secured borrowings | 70,548 | 70,548 | ||
Warehouse notes payable | 1,306,632 | 906,821 | ||
Note payable | 272,874 | 297,750 | ||
Total financial liabilities | $ 1,822,677 | $ 1,275,155 |
FAIR VALUE MEASUREMENTS - Gener
FAIR VALUE MEASUREMENTS - General information (Detail) | 3 Months Ended |
Mar. 31, 2020 | |
Loans Held for Sale | |
Other information | |
Period of originated loans within which they are transferred or sold | 60 days |
Money Market Funds | Maximum | |
Other information | |
Maximum term of maturity of pledged securities | 90 days |
FAIR VALUE MEASUREMENTS - Sch_4
FAIR VALUE MEASUREMENTS - Schedule of Fair Value of Derivative Instruments and Loans Held for Sale (Detail) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Derivative notional amount and balance sheet location | ||
Estimated Gain on Sale | $ 76,108 | $ 28,025 |
Total Fair Value Adjustment | 76,108 | 28,025 |
Derivative assets | 158,233 | 15,568 |
Derivative Liabilities | (172,623) | (36) |
Fair Value Adjustment To Loans Held for Sale | 90,498 | 12,493 |
Loans Held for Sale | ||
Derivative notional amount and balance sheet location | ||
Notional or Principal Amount | 1,096,079 | 774,542 |
Estimated Gain on Sale | 26,633 | 15,826 |
Interest Rate Movement | 63,865 | (3,333) |
Total Fair Value Adjustment | 90,498 | 12,493 |
Fair Value Adjustment To Loans Held for Sale | 90,498 | 12,493 |
Rate Lock Commitments | ||
Derivative notional amount and balance sheet location | ||
Notional or Principal Amount | 2,824,387 | 511,114 |
Estimated Gain on Sale | 49,475 | 12,199 |
Interest Rate Movement | 108,151 | (1,975) |
Total Fair Value Adjustment | 157,626 | 10,224 |
Derivative assets | 157,642 | 10,247 |
Derivative Liabilities | (16) | (23) |
Forward Sale Contracts | ||
Derivative notional amount and balance sheet location | ||
Notional or Principal Amount | 3,920,466 | 1,285,656 |
Interest Rate Movement | (172,016) | 5,308 |
Total Fair Value Adjustment | (172,016) | 5,308 |
Derivative assets | 591 | 5,321 |
Derivative Liabilities | $ (172,607) | $ (13) |
FANNIE MAE COMMITMENTS AND PL_3
FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES - Commitments (Detail) - DUS Risk-Sharing Obligations - Fannie Mae $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Period of funding for collateral requirement | 48 months |
Amount of additional capital required to be funded over the next 48 months | $ 68.5 |
Net worth | 763.6 |
Minimum liquid assets to be maintained to meet operational liquidity requirements | 39.7 |
Operational liquidity | 291.9 |
Minimum | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Net worth requirement | $ 200.7 |
New Tier 2 loans | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Collateral requirements percentage | 0.75% |
Period of funding for collateral requirement | 48 months |
New Tier 2 loans | Money Market Funds | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Restricted liquidity collateral reduction percentage | 5.00% |
New Tier 2 loans | Agency Mortgage Backed Securities | |
LITIGATION, COMMITMENTS, AND CONTINGENCIES | |
Restricted liquidity collateral reduction percentage | 4.00% |
FANNIE MAE COMMITMENTS AND PL_4
FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES - Pledged Securities at Fair Value (Detail) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Pledged cash and cash equivalents | ||||
Restricted cash | $ 2,989 | $ 2,150 | $ 5,583 | $ 3,029 |
Money market funds | 5,554 | 5,054 | 840 | 6,440 |
Total pledged cash and cash equivalents | 8,543 | 7,204 | 6,423 | 9,469 |
Agency MBS | 112,952 | 114,563 | 111,143 | 106,862 |
Pledged securities, at fair value | $ 121,495 | $ 121,767 | $ 117,566 | $ 116,331 |
FANNIE MAE COMMITMENTS AND PL_5
FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES - Agency Multifamily Mortgage Based Securities Pledged Securities (Detail) - Agency Mortgage Backed Securities $ in Thousands | Mar. 31, 2020USD ($)security | Dec. 31, 2019USD ($) |
Investments in Agency debt securities | ||
Fair Value | $ 112,952 | $ 114,563 |
Amortized cost | 114,528 | 113,580 |
Total gains for securities with net gains in AOCI | 17 | 1,145 |
Total losses for securities with net losses in AOCI | (1,593) | (162) |
Fair value of securities with unrealized losses | $ 85,974 | 66,526 |
Pledged securities in a continuous unrealized loss position for more than 12 months | security | 0 | |
Maturities - Fair Value | ||
After one year through five years | $ 2,605 | |
After five years through ten years | 94,860 | |
After ten years | 15,487 | |
Total | 112,952 | 114,563 |
Maturities - Amortized Cost | ||
After one year through five years | 2,630 | |
After five years through ten years | 95,159 | |
After ten years | 16,739 | |
Total | $ 114,528 | $ 113,580 |
EARNINGS PER SHARE - Basic and
EARNINGS PER SHARE - Basic and Diluted EPS (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Calculation of basic EPS | ||
Walker and Dunlop net income | $ 47,829 | $ 44,218 |
Less: dividends and undistributed earnings allocated to participating securities | 1,510 | 1,509 |
Net income applicable to common stockholders | $ 46,319 | $ 42,709 |
Basic weighted average shares outstanding | 30,226 | 29,680 |
Basic EPS | $ 1.53 | $ 1.44 |
Calculation of diluted EPS | ||
Add: reallocation of dividends and undistributed earnings based on assumed conversion | $ 34 | $ 38 |
Net income allocated to common stockholders | $ 46,353 | $ 42,747 |
Add: weighted-average diluted non-participating securities | 934 | 1,004 |
Weighted average diluted shares outstanding | 31,160 | 30,684 |
Diluted EPS | $ 1.49 | $ 1.39 |
TOTAL EQUITY - Summary of Chang
TOTAL EQUITY - Summary of Changes in Total Equity (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Change in Stockholders' Equity | ||
Balances at the beginning of the period | $ 1,042,285 | $ 907,192 |
Balance at the beginning of the period (in shares) | 30,035 | |
Walker and Dunlop net income | $ 47,829 | 44,218 |
Net income (loss) from noncontrolling interests | (224) | (158) |
Contributions from noncontrolling interests | 675 | |
Other comprehensive income (loss), net of tax | (1,918) | 301 |
Stock-based compensation - equity classified | 5,061 | 6,812 |
Issuance of common stock in connection with equity compensation plans | 11,369 | 4,187 |
Repurchase and retirement of common stock | (26,737) | (24,159) |
Cash dividends paid | (11,347) | (9,319) |
Balances at the end of the period | $ 1,043,315 | 928,072 |
Balance at the end of the period (in shares) | 30,330 | |
ASU 2016-02 | ||
Change in Stockholders' Equity | ||
Cumulative effect adjustment for adoption of ASU, net of tax | (1,002) | |
ASU 2016-13 | ||
Change in Stockholders' Equity | ||
Cumulative effect adjustment for adoption of ASU, net of tax | $ (23,678) | |
Common Stock | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | $ 300 | $ 295 |
Balance at the beginning of the period (in shares) | 30,035 | 29,497 |
Issuance of common stock in connection with equity compensation plans | $ 7 | $ 9 |
Issuance of common stock in connection with equity compensation plans (in shares) | 675 | 935 |
Repurchase and retirement of common stock | $ (4) | $ (4) |
Repurchase and retirement of common stock (in shares) | (380) | (459) |
Balances at the end of the period | $ 303 | $ 300 |
Balance at the end of the period (in shares) | 30,330 | 29,973 |
APIC | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | $ 237,877 | $ 235,152 |
Stock-based compensation - equity classified | 5,061 | 6,812 |
Issuance of common stock in connection with equity compensation plans | 11,362 | 4,178 |
Repurchase and retirement of common stock | (18,293) | (22,400) |
Balances at the end of the period | 236,007 | 223,742 |
AOCI | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | 737 | (75) |
Other comprehensive income (loss), net of tax | (1,918) | 301 |
Balances at the end of the period | (1,181) | 226 |
Retained Earnings | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | 796,775 | 666,752 |
Walker and Dunlop net income | 47,829 | 44,218 |
Repurchase and retirement of common stock | (8,440) | (1,755) |
Cash dividends paid | (11,347) | (9,319) |
Balances at the end of the period | 801,139 | 698,894 |
Retained Earnings | ASU 2016-02 | ||
Change in Stockholders' Equity | ||
Cumulative effect adjustment for adoption of ASU, net of tax | (1,002) | |
Retained Earnings | ASU 2016-13 | ||
Change in Stockholders' Equity | ||
Cumulative effect adjustment for adoption of ASU, net of tax | (23,678) | |
Noncontrolling Interests | ||
Change in Stockholders' Equity | ||
Balances at the beginning of the period | 6,596 | 5,068 |
Net income (loss) from noncontrolling interests | (224) | (158) |
Contributions from noncontrolling interests | 675 | |
Balances at the end of the period | $ 7,047 | $ 4,910 |
TOTAL EQUITY - Share Repurchase
TOTAL EQUITY - Share Repurchase (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Repurchases of common stock | ||
Reduction of equity for retirement of repurchased shares | $ 26,737 | $ 24,159 |
Share repurchase program 2020 | Common shares | ||
Repurchases of common stock | ||
Share repurchase program, period for repurchases | 12 months | |
Repurchased and retired shares | 0.2 | |
Weighted average market price of shares repurchased and retired (in dollars per share) | $ 63.58 | |
Reduction of equity for retirement of repurchased shares | $ 10,200 | |
Authorized share repurchase capacity remaining | 39,800 | |
Share repurchase program 2020 | Common shares | Maximum | ||
Repurchases of common stock | ||
Repurchase authorization | $ 50,000 |
TOTAL EQUITY - Dividends (Detai
TOTAL EQUITY - Dividends (Details) - $ / shares | May 05, 2020 | Feb. 04, 2020 | Mar. 31, 2020 | Mar. 31, 2019 |
Dividends | ||||
Cash dividends paid per common share | $ 0.36 | $ 0.30 | ||
Cash dividends declared per common share | $ 0.36 | $ 0.36 |
TOTAL EQUITY - Acquisitions (De
TOTAL EQUITY - Acquisitions (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
2020 Acquisitions | |
Acquisitions | |
Stock issued | $ 5 |