Sales of Receivables and Servicing Rights (Tables)

12 Months Ended

Dec. 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 Consolidated Statements of Income, for the years ended December 31 is as follows:
($ in millions)		2016	2015		2014
Residential mortgage loan sales(a)	$	6,927	5,078	(b)	5,467
Origination fees and gains on loan sales		186	171		153
Gross mortgage servicing fees		199	222		246

• 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)		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		83	63
Amortization		(131)	(140)
Other-than-temporary impairment		-	(111)
Balance, end of period	$	1,156	1,204
Valuation allowance for servicing rights:
Balance, beginning of period	$	(419)	(534)
Recovery of MSR impairment		7	4
Other-than-temporary impairment		-	111
Balance, end of period		(412)	(419)
Carrying amount after valuation allowance	$	744	785

Estimated Amortization Expense on Servicing Rights

Estimated amortization expense for the years ending December 31, 2017 through 2021 is as follows:
($ in millions)		Total
2017	$	2
2018		1
2019		1
2020		1
2021		1

Estimated amortization expense for the years ending December 31, 2017 through 2021 is as follows:
($ in millions)		Total
2017	$	142
2018		124
2019		109
2020		96
2021		84

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)		2016	2015
Fixed-rate residential mortgage loans:
Balance, beginning of period	$	757	823
Balance, end of period		722	757
Adjustable-rate residential mortgage loans:
Balance, beginning of period		27	33
Balance, end of period		22	27
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 Consolidated Statements of Income for the years ended December 31:
($ in millions)	2016	2015	2014
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio	24	90	95
Recovery of (provision for) MSR impairment	7	4	(65)

Servicing Assets and Residual Interests Economic Assumptions

As of December 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 years ended December 31 were as follows:
		2016					2015
		Weighted-					Weighted-
		Average	Prepayment			Weighted-	Average	Prepayment			Weighted-
		Life	Speed		OAS Spread	Average	Life	Speed		OAS Spread	Average
	Rate	(in years)	(annual)		(bps)	Default Rate	(in years)	(annual)		(bps)	Default Rate
Residential mortgage loans:
Servicing rights	Fixed	7.2	10.3	%	584	N/A	6.9	11.0	%	534	N/A
Servicing rights	Adjustable	2.8	30.2		679	N/A	3.4	25.2		303	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, 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 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	$	722	6.5	10.2	%	$	(28)	(55)	(124)	654	$	(18)	(35)
Servicing rights	Adjustable		22	3.2	25.3			(1)	(3)	(6)	738		-	(1)

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