NOTE D: ASSETS OF FINANCIAL SERVICES AND THE LIMITED-PURPOSE SUBSIDIARIES
Financial Services
Mortgage loans held-for-sale consist of loans collateralized by first mortgages or
first deeds of trust on single-family attached or detached houses. Mortgage-backed
securities and notes receivable consist of GNMA certificates, FNMA mortgage pass-through
certificates, FHLMC participation certificates, notes receivable secured by
mortgage-backed securities, whole loans and funds held by trustee.
Mortgage loans held-for-sale were reported net of mortgage discounts of $406 and $658
at December 31, 1998 and 1997, respectively. Mortgage loans held-for-sale, which are
generally sold within 60 days of being funded, mortgage-backed securities and notes
receivable are pledged as collateral for certain short-term notes payable (see Note E).
The Company sold the majority of its loan servicing portfolio in the first quarter of
1998 and realized a $6.1 million pre-tax gain, net of expenses and liabilities related to
the sale of servicing. The financial services segment serviced 2,500 and 62,000 loans with
principal balances totaling $301 million and $4.5 billion at December 31, 1998 and 1997,
respectively, including loans subserviced for others of $1.3 billion in 1997. As a
mortgage servicer, the Company may incur risk with respect to mortgages that are
delinquent or in foreclosure to the extent that losses are not covered by a mortgage
insurer or guarantor. The reserve for potential losses on the servicing portfolio was $377
and $1,784, at December 31, 1998 and 1997, respectively. These reserves are established
based on the current economic environment and historical experience for foreclosures and
delinquencies.
Limited-Purpose Subsidiaries
Collateral for bonds payable consists of mortgage-backed securities, notes receivable
secured by mortgage-backed securities and mortgage loans, fixed-rate mortgage loans and
funds held by trustee. Mortgage-backed securities consist of GNMA certificates, FNMA
mortgage pass-through certificates and FHLMC participation certificates. All principal and
interest on the collateral is remitted directly to a trustee and is available for payment
on the bonds.
The components of collateral for bonds payable at December 31 are summarized as
follows:
Neither the Company nor its homebuilding and financial services subsidiaries have
guaranteed or are otherwise obligated with respect to these bond issues.
Mortgage-Backed Securities: Unrealized Gains and Losses
Mortgage-backed securities are held by the financial services segment and reported in
the balance sheet caption, "Mortgage-backed securities and notes receivable,"
and are also held by the limited-purpose subsidiaries and reported in the balance sheet
caption, "Collateral for bonds payable."
The following is a consolidated summary of mortgage-backed securities classified as
available-for-sale and held-to-maturity as of:
