Quarterly report pursuant to Section 13 or 15(d)

Derivatives and Risk Management Activities

v3.22.2.2
Derivatives and Risk Management Activities
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Risk Management Activities
11. Derivative and Risk Management Activities
The Company’s principal market exposure is to interest rate risk, specifically long-term U.S. Treasury and mortgage interest rates, due to their impact on mortgage-related assets and commitments. The Company is also subject to changes in short-term interest rates, such as LIBOR and SOFR, due to their impact on certain variable rate asset-backed debt such as warehouse lines of credit. Various financial instruments are used to manage and reduce this risk, including forward delivery commitments on MBS or whole loans and interest rate swaps.
The Company did not have any derivative instruments designated as hedging instruments as of September 30, 2022 or December 31, 2021.
The following tables summarize the fair value and notional amount of derivative instruments (in thousands):
September 30, 2022
Derivative assets Derivative liabilities
Fair value Notional amount Fair value Notional amount
IRLCs and LPCs $ 3,678  $ 344,617  $ 13,740  $ 590,007 
Forward MBS and TBAs 32,254  1,162,300  97  15,071 
Interest rate swaps and futures contracts 53,967  1,430,600  —  — 
Total fair value and notional amount $ 89,899  $ 2,937,517  $ 13,837  $ 605,078 

December 31, 2021
Derivative assets Derivative liabilities
Fair value Notional amount Fair value Notional amount
IRLCs and LPCs $ 24,786  $ 2,095,238  $ —  $ — 
Forward MBS and TBAs 1,250  948,000  1,685  1,515,000 
Interest rate swaps and futures contracts 22,834  11,977,300  24,993  12,193,100 
Total fair value and notional amount $ 48,870  $ 15,020,538  $ 26,678  $ 13,708,100 


The follow table details the gains/(losses) on derivative instruments (in thousands):
For the three months ended September 30, 2022 For the nine months ended September 30, 2022 For the three months ended September 30, 2021 For the six months ended September 30, 2021 For the three months ended March 31, 2021
Derivative activity Successor Predecessor
IRLCs and LPCs $ (24,189) $ (34,848) $ (5,119) $ (8,656) $ (49,557)
Forward MBS and TBAs 54,856  265,822  (8,349) (48,638) 113,331 
Interest rate swaps and futures contracts 53,123  292,666  1,254  (36,129) 43,935 
The Company is exposed to risk in the event of nonperformance by counterparties in their derivative contracts. In general, the Company manages such risk by evaluating the financial position and creditworthiness of counterparties, monitoring the amount of exposure and/or dispersing the risk among multiple counterparties. The Company either maintains or deposits cash as margin collateral with its counterparties to the extent the relative value of its derivatives are above or below their initial strike price. The Company held collateral from its counterparties of $75.6 million as of September 30, 2022 and had provided collateral to its counterparties of $23.2 million as of December 31, 2021. The Company does not offset fair value amounts recognized for derivative instruments with amounts collected or deposited on derivative instruments in the Company’s Condensed Consolidated Statements of Financial Condition. Margin collateral is included in other assets, net, when in a receivable position or in payables and other liabilities when in a payable position in the Company's Condensed Consolidated Statements of Financial Condition.