In March of 2013, the Bancorp recognized an immaterial loss on the securitization and sale of certain automobile loans with a carrying amount of approximately $509 million. The Bancorp utilized a securitization trust to facilitate the securitization process. The trust issued asset-backed securities in the form of notes and equity certificates, with varying levels of credit subordination and payment priority. The Bancorp does not hold any of the notes or equity certificates issued by the trust, and the investors in these securities have no credit recourse to the Bancorp's assets for failure of debtors to pay when due. As part of the sale, the Bancorp obtained servicing responsibilities and recognized a servicing asset with an initial fair value of $6 million.

The Bancorp sold fixed and adjustable rate residential mortgage loans during 2013, 2012, and 2011. In those sales, the Bancorp obtained servicing responsibilities and the investors have no recourse to the Bancorp's other assets for failure of debtors to pay when due. The Bancorp receives annual servicing fees based on a percentage of the outstanding balance. The Bancorp identifies classes of servicing assets based on financial asset type and interest rates.

Information related to residential mortgage loan sales and the Bancorp’s mortgage banking activity, which is included in mortgage banking net revenue in the Consolidated Statements of Income, for the years ended December 31 is as follows:

($ in millions)		2013	2012	2011
Residential mortgage loan sales	$	21,529	21,574	14,733

Origination fees and gains on loan sales		453	821	396
Servicing fees		251	250	234

The following table presents changes in the servicing assets related to residential mortgage and automobile loans for the years ended December 31:

($ in millions)		2013	2012
Carrying amount before valuation allowance as of the beginning of the period	$	1,358	1,239
Servicing obligations that result from the transfer of residential mortgage loans		244	305
Servicing obligations that result from the transfer of automobile loans		6	-
Amortization		(168)	(186)
Carrying amount before valuation allowance		1,440	1,358
Valuation allowance for servicing assets:
Beginning balance		(661)	(558)
Recovery of (provision for) MSR impairment		192	(103)
Ending balance		(469)	(661)
Carrying amount as of the end of the period	$	971	697

Amortization expense recognized on servicing rights for the years ended December 31, 2013, 2012 and 2011 was $168 million, $186 million and $135 million, respectively. The Bancorp's projections of amortization expense shown below are based on existing asset balances as of December 31, 2013. Future amortization expense may vary from these projections.

Estimated amortization expense for the years ending December 31, 2014 through 2018 is as follows:


($ in millions)		Total
2014	$	95
2015		88
2016		81
2017		76
2018		71

Temporary impairment or impairment recovery, affected through a change in the MSR valuation allowance, is captured as a component of mortgage banking net revenue in the Consolidated Statements of Income. The Bancorp maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in the value of the MSR portfolio. This strategy includes the purchase of free-standing derivatives and various available-for-sale securities. The interest income, mark-to-market adjustments and gain or loss from sale activities associated with these portfolios are expected to economically hedge a portion of the change in value of the MSR portfolio caused by fluctuating discount rates, earnings rates and prepayment speeds. The fair value of the servicing asset is based on the present value of expected future cash flows.

The following table displays the beginning and ending fair value of the servicing assets for the years ended December 31:

($ in millions)		2013	2012
Fixed rate residential mortgage loans:
Beginning balance	$	664	649
Ending balance		929	664
Adjustable rate residential mortgage loans:
Beginning balance		33	32
Ending balance		38	33
Fixed rate automobile loans:
Beginning balance		-	-
Ending balance		4	-

The following table presents activity related to valuations of the MSR portfolio and the impact of the non-qualifying hedging strategy, which is included in the Consolidated Statements of Income for the years ended December 31:

($ in millions)		2013	2012	2011
Securities gains, net - non-qualifying hedges on MSRs	$	13	3	9
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio (Mortgage banking net revenue)		(30)	63	344
Recovery of (provision for) MSR impairment (Mortgage banking net revenue)		192	(103)	(242)

As of December 31, 2013 and 2012, the key economic assumptions used in measuring the interests in residential mortgage loans that continued to be held by the Bancorp at the date of sale or securitization resulting from transactions completed during the years ended December 31 were as follows:

		2013						2012
	Rate	Weighted-Average Life (in years)	Prepayment Speed (annual)		Discount Rate (annual)		Weighted-Average Default rate	Weighted-Average Life (in years)	Prepayment Speed (annual)		Discount Rate (annual)		Weighted-Average Default rate
Residential mortgage loans:
Servicing assets	Fixed	7.3	9.1	%	10.2	%	N/A	6.9	9.6	%	10.4	%	N/A
Servicing assets	Adjustable	3.6	22.8		11.5		N/A	3.8	22.0		11.4		N/A

Based on historical credit experience, expected credit losses for residential mortgage loan servicing assets have been deemed immaterial, as the Bancorp sold the majority of the underlying loans without recourse. At December 31, 2013 and 2012, the Bancorp serviced $69.2 billion and $62.5 billion, respectively, of residential mortgage loans for other investors. The value of MSRs that continue to be held by the Bancorp is subject to credit, prepayment and interest rate risks on the sold financial assets.


At December 31, 2013, the sensitivity of the current fair value of residual cash flows to immediate 10%, 20% and 50% adverse changes in prepayment speed assumptions and immediate 10% and 20% adverse changes in other assumptions are as follows:

					Prepayment						Residual Servicing
					Speed Assumption						Cash Flows
			Fair	Weighted-Average Life (in				Impact of Adverse Change on Fair Value			Discount			Impact of Adverse Change on Fair Value
($ in millions)^(a)	Rate		Value	years)	Rate			10%	20%	50%	Rate			10%	20%
Residential mortgage loans:
Servicing assets	Fixed	$	929	6.8	10.3	%	$	(36)	(69)	(157)	10.4	%	$	(37)	(72)
Servicing assets	Adjustable		38	3.2	25.6			(2)	(3)	(7)	11.6			(1)	(2)

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on these variations in the assumptions typically cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. The Bancorp believes variations of these levels are reasonably possible; however, there is the potential that adverse changes in key assumptions could be even greater. Also, in the previous table, the effect of a variation in a particular assumption on the fair value of the interests that continue to be held by the Bancorp is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which might magnify or counteract these sensitivities.