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Sales of Receivables and Servicing Rights (Tables)
 3 Months Ended
Mar. 31, 2016
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) 2016  2015  
Residential mortgage loan sales(a)$ 1,114a 1,001 (b) 
        
Origination fees and gains on loan sales  42  44  
Gross mortgage servicing fees  52  59  

  • 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) 2016 2015 
Carrying amount before valuation allowance:     
Balance, beginning of period$ 1,204  1,392 
Servicing rights that result from the transfer of residential mortgage loans  12  13 
Amortization  (27)  (34) 
Balance, end of period$ 1,189  1,371 
Valuation allowance for servicing rights:     
Balance, beginning of period$ (419)  (534) 
Provision for MSR impairment  (85)  (48) 
Balance, end of period  (504)  (582) 
Carrying amount after valuation allowance$ 685  789 
      
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, 2016. Future amortization expense may vary from these projections. Estimated amortization expense for the remainder of 2016 through 2020 is as follows:
    
($ in millions) Total
Remainder of 2016$1 
2017 2 
2018 2 
2019 1 
2020 1 
    

    
Estimated amortization expense for the remainder of 2016 through 2020 is as follows:
    
($ in millions) Total
Remainder of 2016$90 
2017 109 
2018 98 
2019 89 
2020 80 
    
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) 2016 2015 
Fixed-rate residential mortgage loans:     
Balance, beginning of period$ 757  823 
Balance, end of period  660  759 
Adjustable-rate residential mortgage loans:     
Balance, beginning of period  27  33 
Balance, end of period  25  29 
Fixed-rate automobile loans:     
Balance, beginning of period  1  2 
Balance, end of period  -  1 
      
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 
  March 31, 
($ in millions) 20162015 
Changes in fair value and settlement of free-standing derivatives purchased      
to economically hedge the MSR portfolio$ 96  65  
Provision for MSR impairment  (85)  (48)  
Servicing Assets and Residual Interests Economic Assumptions
                   
As of March 31, 2016 and 2015, 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, 2016 March 31, 2015
 RateWeighted-Average Life (in years)Prepayment Speed (annual)OAS Spread (bps)Weighted-Average Default Rate Weighted-Average Life (in years)Prepayment Speed (annual)OAS Spread (bps)Weighted-Average Default Rate
Residential mortgage loans:                 
Servicing rightsFixed6.3 12.6%539 N/A  6.2 12.6% 900 N/A 
Servicing rightsAdjustable3.0 27.5  681 N/A  3.6 23.4  1,180 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, 2016, 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    Impact of Adverse Change on Fair ValueOAS 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 rightsFixed$660 5.2 14.1% $(33) (63)(138) 603 $(15) (29) 
Servicing rightsAdjustable 25 2.9 27.8   (2) (3)(7) 713   - (1) 

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