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SEC Filings

10-K
DITECH HOLDING CORP filed this Form 10-K on 04/16/2019
Entire Document
 

The following table summarizes the assets and liabilities measured at fair value on a recurring basis using Level 3 inputs (dollars in thousands):
 
 
Successor
 
 
Predecessor
 
 
December 31, 2018
 
 
December 31, 2017
Assets
 
 
 
 
 
Reverse loans
 
$
8,202,775

 
 
$
9,789,444

Mortgage loans related to Non-Residual Trusts
 
117,410

 
 
301,435

Mortgage loans related to Residual Trusts and other loans held for investment (1)
 
1,044

 
 

Mortgage loans held for sale
 
61

 
 
68

Charged-off loans
 
48,440

 
 
45,800

Receivables related to Non-Residual Trusts
 
1,945

 
 
5,608

Servicing rights carried at fair value
 
548,579

 
 
714,774

Freestanding derivative instruments (IRLCs)
 
16,617

 
 
26,637

Assets at fair value using Level 3 inputs
 
$
8,936,871

 
 
$
10,883,766

As a percentage of total assets measured at fair value on a recurring basis
 
91.84
%
 
 
94.85
%
 
 
 
 
 
 
Liabilities
 
 
 
 
 
Freestanding derivative instruments (IRLCs)
 
$
327

 
 
$
269

Mortgage-backed debt related to Non-Residual Trusts
 
131,313

 
 
348,682

HMBS related obligations
 
7,264,821

 
 
9,175,128

Liabilities at fair value using Level 3 inputs
 
$
7,396,461

 
 
$
9,524,079

As a percentage of total liabilities measured at fair value on a recurring basis
 
99.82
%
 
 
99.99
%
__________
(1)
In connection with the adoption of fresh start accounting effective February 10, 2018, we elected to change our method of accounting for mortgage loans related to Residual Trusts and other loans held for investment as well as mortgage-backed debt related to Residual Trusts from amortized cost to fair value.
When available, we generally use quoted market prices to determine fair value. If quoted market prices are not available, fair value is based upon internally-developed valuation models, such as a discounted cash flow model, that where possible, use current market-based or independently sourced market parameters, such as market rates commensurate with an instrument’s credit quality and duration. We consider market liquidity when estimating fair value based on the type of asset or liability measured and the valuation method used. For example, for mortgage loans where the significant inputs have become unobservable due to illiquidity in the markets for non-agency and non-conforming mortgage loans, we use a discounted cash flow technique to estimate fair value. This technique incorporates forecasting of expected cash flows discounted at an appropriate market discount rate that is intended to reflect the lack of liquidity in the market. Level 3 unobservable assumptions reflect our own estimates for assumptions that market participants would use in pricing the asset or liability.
Unobservable inputs used in our internal valuation models require considerable judgment and are inherently difficult to estimate. Changes to these inputs can have a significant effect on fair value measurements. Accordingly, our estimates of fair value are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. Separate from the possible future impact to our results of operations from changes to inputs, the value of market-sensitive assets and liabilities may change subsequent to the balance sheet date due to the nature and magnitude of future credit and market conditions. Such credit and market conditions may change quickly and in unforeseen ways and the resulting volatility could have a significant, negative effect on future operating results. These fluctuations would not be indicative of deficiencies in our models or inputs.
All of the techniques used and information obtained in the valuation process provide a range of estimated values, which are evaluated in order to establish an estimated value that, based on management's judgment, represents a reasonable estimate of fair value. It is not uncommon for the range of value to vary widely, and in such cases, we select an estimated value that we believe is the best indication of value based on the yield a market participant in the current environment would expect.

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