Sales of Receivables and Servicing Rights (Tables)

12 Months Ended

Dec. 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 Consolidated Statements of Income, for the years ended December 31 is as follows:
($ in millions)		2015		2014	2013
Residential mortgage loan sales(a)	$	5,078	(b)	5,467	21,529
Origination fees and gains on loan sales		171		153	453
Gross mortgage servicing fees		222		246	251

• 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

The following table presents changes in the servicing rights related to residential mortgage and automobile loans for the years ended December 31:
($ in millions)		2015	2014
Carrying amount before valuation allowance:
Balance, beginning of period	$	1,392	1,440
Servicing rights that result from the transfer of residential mortgage loans		63	73
Amortization		(140)	(121)
Other-than-temporary impairment		(111)	0
Balance, end of period	$	1,204	1,392
Valuation allowance for servicing rights:
Balance, beginning of period	$	(534)	(469)
Recovery of (provision for) MSR impairment		4	(65)
Other-than-temporary impairment		111	0
Balance, end of period		(419)	(534)
Carrying amount after valuation allowance	$	785	858

Estimated Amortization Expense on Servicing Rights

The Bancorp's projections of amortization expense shown below are based on existing asset balances as of December 31, 2015. Future amortization expense may vary from these projections. Estimated amortization expense for the years ending December 31, 2016 through 2020 is as follows:
($ in millions)		Total
2016	$	2
2017		2
2018		2
2019		1
2020		1

Estimated amortization expense for the years ending December 31, 2016 through 2020 is as follows:
($ in millions)		Total
2016	$	114
2017		103
2018		93
2019		85
2020		77

Fair Value of the Servicing Assets

The following table displays the beginning and ending fair value of the servicing rights for the years ended December 31:
($ in millions)		2015	2014
Fixed-rate residential mortgage loans:
Balance, beginning of period	$	823	929
Balance, end of period		757	823
Adjustable-rate residential mortgage loans:
Balance, beginning of period		33	38
Balance, end of period		27	33
Fixed-rate automobile loans:
Balance, beginning of period		2	4
Balance, end of period		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 the Consolidated Statements of Income for the years ended December 31:
($ in millions)		2015	2014	2013
Securities gains, net - non-qualifying hedges on MSRs	$	-	-	13
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio (mortgage banking net revenue)		90	95	(30)
Recovery of (provision for) MSR impairment (mortgage banking net revenue)		4	(65)	192

Servicing Assets and Residual Interests Economic Assumptions

As of December 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 years ended December 31 were as follows:

2015

2014

Weighted-

Weighted-

Average

Prepayment

Weighted-

Average

Prepayment

Weighted-

Life

Speed

OAS Spread

Average

Life

Speed

Discount Rate

Average

Rate

(in years)

(annual)

(bps)

Default Rate

(in years)

(annual)

(annual)

Default Rate

Residential mortgage loans:

Servicing rights

Fixed

6.9

11.0

%

534

N/A

6.6

11.3

%

10.0

%

N/A

Servicing rights

Adjustable

3.4

25.2

303

N/A

3.7

22.3

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 December 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 Assumption						Cash Flows
			Fair	Weighted-Average Life				Impact of Adverse Change on Fair Value			OAS Spread		Impact of Adverse Change on Fair Value
($ in millions)(a)	Rate		Value	(in years)	Rate			10%	20%	50%	(bps)		10%	20%
Residential mortgage loans:
Servicing rights	Fixed	$	757	5.9	11.8	%	$	(32)	(61)	(134)	618	$	(18)	(34)
Servicing rights	Adjustable		27	3.0	27.0			(2)	(3)	(7)	703		(1)	(1)

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