Sales of Receivables and Servicing Rights (Tables)

9 Months Ended

Sep. 30, 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		For the nine months ended
		September 30,		September 30,
($ in millions)		2015	2014	2015		2014
Residential mortgage loan sales(a)	$	1,421	1,228	3,798	(b)	4,423
Origination fees and gains on loan sales		46	34	134		117
Gross mortgage servicing fees		54	61	169		186

• 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 soldduring 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 nine months ended September 30:
($ 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		48	60
Amortization		(111)	(89)
Carrying amount before valuation allowance		1,329	1,411
Valuation allowance for servicing rights:
Beginning balance		(534)	(469)
Provision for MSR impairment		(38)	(7)
Ending balance		(572)	(476)
Carrying amount as of the end of the period	$	757	935

Estimated Amortization Expense on Servicing Rights

The Bancorp's projections of amortization expense shown below are based on existing asset balances as of September 30, 2015. Future amortization expense may vary from these projections. Estimated amortization expense for the remainder of September 30, 2015 through 2019 is as follows:
($ in millions)		Total
Remainder of 2015	$	1
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	$	34
2016		127
2017		114
2018		103
2019		93

Fair Value of the Servicing Assets

The following table displays the beginning and ending fair value of the servicing rights for the nine months ended September 30:
($ in millions)		2015	2014
Fixed-rate residential mortgage loans:
Beginning balance	$	823	929
Ending balance		731	898
Adjustable-rate residential mortgage loans:
Beginning balance		33	38
Ending balance		25	35
Fixed-rate automobile loans:
Beginning balance		2	4
Ending balance		1	2

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 is included in mortgage banking net revenue in the Condensed Consolidated Statements of Income:
		For the three months ended		For the nine months ended
		September 30,		September 30,
($ in millions)		2015	2014	2015	2014
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio	$	85	(22)	119	40
(Provision for) recovery of MSR impairment		(77)	21	(38)	(7)

Servicing Assets and Residual Interests Economic Assumptions

As of September 30, 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:
		September 30, 2015					September 30, 2014
	Rate	Weighted-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 rights	Fixed	7.4	10.9	%	674	N/A	7.0	10.5	%	9.9	%	N/A
Servicing rights	Adjustable	2.8	32.9		671	N/A	3.7	22.2		11.8		N/A

Sensitivity of the Current Fair Value of Residual Cash Flows to Immediate 10%, 20% and 50% Adverse Changes in Assumptions

At September 30, 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 Assumption						Cash Flows
			Fair	Weighted-Average Life				Impact of Adverse Change on Fair Value			OAS		Impact of Adverse Change on Fair Value
($ in millions)(a)	Rate		Value	(in years)	Rate			10%	20%	50%	Spread (bps)		10%	20%
Residential mortgage loans:
Servicing rights	Fixed	$	731	5.7	11.7	%	$	(34)	(66)	(146)	706	$	(19)	(37)
Servicing rights	Adjustable		25	2.5	32.7			(2)	(3)	(7)	668		-	(1)

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