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Sales of Receivables and Servicing Rights (Tables)
 3 Months Ended
Mar. 31, 2015
Sales of Receivables and Servicing Rights  
Activity Related to Mortgage Banking Net Revenue
Information related to residential mortgage loan sales and the Bancorp’s mortgage banking activity, which is included in mortgage banking net revenue in the Condensed Consolidated Statements of Income, is as follows:
        
  For the three months ended 
  March 31, 
($ in millions) 2015  2014  
Residential mortgage loan sales(a)$ 1,001a(b) 1,672  
        
Origination fees and gains on loan sales  44  41  
Gross mortgage servicing fees  59  62  

  • Represents the unpaid principal balance at the time of the sale.
  • Excludes $568 of HFS residential mortgage loans previously modified in a TDR that were sold during the first quarter of 2015.
Changes in the Servicing Assets
Servicing Rights     
The following table presents changes in the servicing rights related to residential mortgage and automobile loans for the three months ended March 31:
      
($ in millions) 2015 2014 
Carrying amount before valuation allowance as of the beginning of the period$ 1,392 1,440 
Servicing rights that result from the transfer of residential mortgage loans  13  23 
Amortization (34) (23) 
Carrying amount before valuation allowance  1,371 1,440 
Valuation allowance for servicing rights:     
Beginning balance (534) (469) 
(Provision for) recovery of MSR impairment (48) 4 
Ending balance (582) (465) 
Carrying amount as of the end of the period$789 975 
      
Estimated Amortization Expense on Servicing Rights
The Bancorp's projections of amortization expense shown below are based on existing asset balances as of March 31, 2015. Future amortization expense may vary from these projections. Estimated amortization expense for the remainder of 2015 through 2019 is as follows:
    
    
($ in millions) Total
Remainder of 2015$2 
2016 2 
2017 2 
2018 2 
2019 1 

    
Estimated amortization expense for the remainder of 2015 through 2019 is as follows:
    
($ in millions) Total
Remainder of 2015$131 
2016 155 
2017 135 
2018 118 
2019 104 
    
Fair Value of the Servicing Assets
The following table displays the beginning and ending fair value of the servicing rights for the three months ended March 31:
      
($ in millions) 2015 2014 
Fixed-rate residential mortgage loans:     
Beginning balance$823 929 
Ending balance 759 935 
Adjustable rate residential mortgage loans:     
Beginning balance 33 38 
Ending balance 29 37 
Fixed-rate automobile loans:     
Beginning balance  2  4 
Ending balance  1  3 
Activity Related to the MSR Portfolio
The following table presents activity related to valuations of the MSR portfolio and the impact of the non-qualifying hedging strategy, which are included in mortgage banking net revenue in the Condensed Consolidated Statements of Income:
       
  For the three months ended 
  March 31, 
($ in millions) 20152014 
Changes in fair value and settlement of free-standing derivatives purchased      
to economically hedge the MSR portfolio$ 65  24  
(Provision for) recovery of MSR impairment  (48)  4  
Servicing Assets and Residual Interests Economic Assumptions
As of March 31, 2015 and 2014, 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 three months ended were as follows:
                   
  March 31, 2015 March 31, 2014
 RateWeighted-Average Life (in years)Prepayment Speed (annual)OAS Spread (bps)Weighted-Average Default Rate Weighted-Average Life (in years)Prepayment Speed (annual)Discount Rate (annual)Weighted-Average Default Rate
Residential mortgage loans:                 
Servicing rightsFixed6.2 12.6%900 N/A  6.7 10.8%10.0%N/A 
Servicing rightsAdjustable3.6 23.4  1,180 N/A  3.7 22.5 11.7 N/A 
                   
Sensitivity of the Current Fair Value of Residual Cash Flows to Immediate 10%, 20% and 50% Adverse Changes in Assumptions
At March 31, 2015, 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 AssumptionCash Flows
   FairWeighted-Average Life (in    Impact of Adverse Change on Fair ValueOAS  Impact of Adverse Change on Fair Value
($ in millions)(a)Rate Valueyears)Rate  10%20%50% Spread (bps) 10%20%
Residential mortgage loans:                     
Servicing rightsFixed$759 6.4 10.0% $(32) (62)(139) 920 $(25) (47) 
Servicing rightsAdjustable 29 2.6 32.2   (2) (4)(8) 640   - (1) 

  • The impact of the weighted-average default rate on the current fair value of residual cash flows for all scenarios is immaterial.