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SEC Filings

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

10. Residential Loans at Fair Value
Residential Loans Held for Investment
Residential loans held for investment and carried at fair value include reverse loans, mortgage loans related to Non-Residual Trusts and charged-off loans. In connection with the adoption of fresh start accounting effective February 10, 2018, the Company elected fair value accounting for its mortgage loans related to the Residual Trusts. The Company's residual interests in the Residual Trusts were subsequently sold in November 2018.
Credit Risk
Concentrations of credit risk associated with the residential loan portfolio carried at fair value and held for investment are limited due to the large number of customers and their dispersion across many geographic areas. At December 31, 2018, the concentrations of homes securing reverse loans and mortgage loans related to Non-Residual Trusts (represented by 5% or more of unpaid principal balance) were located in California, Texas, New York and Florida.
The Company does not currently own residual interests in or provide credit support to the Non-Residual Trusts. This credit risk is considered in the fair value of the related mortgage loans.
HECMs are insured by the FHA. Although performing and nonperforming reverse loans are covered by FHA insurance, the Company may incur expenses and losses in the process of foreclosing on and liquidating these loans that are not reimbursable by FHA in accordance with program guidelines, such as a portion of foreclosure related legal fees and closing costs incurred on the sale of REO.
The charged-off loan portfolio was acquired for a substantial discount to face value and, as a result, exposes the Company to minimal credit risk.
Residential Loans Held for Sale
The Company sells substantially all of its originated or purchased mortgage loans into the secondary market for securitization or to private investors as whole loans. The Company may retain the right to service these loans upon sale either through ownership of servicing rights or through subservicing arrangements. Refer to Note 6 for additional information regarding these sales of residential loans that are held for sale.
A reconciliation of the changes in residential loans held for sale to the amounts presented on the consolidated statements of cash flows is presented in the following table (in thousands):
 
 
Successor
 
 
Predecessor
 
 
For the Period From February 10, 2018 Through December 31, 2018
 
 
For the Period From January 1, 2018 Through February 9, 2018
 
For the Year Ended 
 December 31, 2017
Balance at beginning of the period
 
$
371,282

 
 
$
588,553

 
$
1,176,280

Purchases and originations of loans held for sale
 
11,821,103

 
 
1,207,155

 
16,128,212

Proceeds from sales of and payments on loans held for sale (1)
 
(11,441,044
)
 
 
(1,421,102
)
 
(16,957,389
)
Realized gains (losses) on sales of loans (2)
 
(5,602
)
 
 
3,582

 
171,537

Change in unrealized gains (losses) on loans held for sale (2)
 
7,425

 
 
(9,343
)
 
10,309

Interest income (2)
 
23,790

 
 
2,298

 
34,126

Loans acquired from Non-Residual Trusts (3)
 

 
 

 
25,062

Other
 
333

 
 
139

 
416

Balance at end of the period
 
$
777,287

 
 
$
371,282


$
588,553

__________
(1)
Excludes realized gains and losses on freestanding derivatives.
(2)
Amount is a component of net gains on sales of loans on the consolidated statements of comprehensive income (loss). Refer to Note 7 for additional information related to the components of net gains on sales of loans.
(3)
Loans acquired from Non-Residual Trusts upon exercise of mandatory call obligation.

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