Sales of Receivables and Servicing Rights (Tables)

3 Months Ended

Mar. 31, 2017

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)		2017		2016
Residential mortgage loan sales(a)	$	1,629	a	1,114
Origination fees and gains on loan sales		29		42
Gross mortgage servicing fees		47		52

Represents the unpaid principal balance at the time of the sale.

Changes in the Servicing Assets

The following tables present changes in the servicing rights related to residential mortgage and automobile loans for the three months ended March 31:
($ in millions)		2017
Balance, beginning of period	$	744
Servicing rights originated - residential mortgage loans		26
Servicing rights acquired - residential mortgage loans		29
Changes in fair value:
Due to changes in inputs or assumptions(a)		4
Other changes in fair value(b)		(27)
Balance, end of period	$	776

• Primarily reflects changes in prepayment speed and OAS spread assumptions which are updated based on market interest rates.
• Primarily reflects changes due to collection of contractual cash flows and the passage of time.

($ in millions)		2016
Carrying amount before valuation allowance:
Balance, beginning of period	$	1,204
Servicing rights that result from the transfer of residential mortgage loans		12
Amortization		(27)
Balance, end of period	$	1,189
Valuation allowance for servicing rights:
Balance, beginning of period	$	(419)
Provision for MSR impairment		(85)
Balance, end of period		(504)
Carrying amount after valuation allowance	$	685

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)		2017	2016
Fixed-rate residential mortgage loans:
Balance, beginning of period	$	722	757
Balance, end of period		756	660
Adjustable-rate residential mortgage loans:
Balance, beginning of period		22	27
Balance, end of period		20	25
Fixed-rate automobile loans:
Balance, beginning of period		-	1
Balance, end of period		-	-

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)		2017	2016
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio	$	(1)	96
MSR fair value adjustment		(23)	-
Provision for MSR impairment		-	(85)

Servicing Assets and Residual Interests Economic Assumptions

As of March 31, 2017 and 2016, 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, 2017				March 31, 2016
	Rate	Weighted-Average Life (in years)	Prepayment Speed (annual)		OAS Spread (bps)	Weighted-Average Life (in years)	Prepayment Speed (annual)		OAS Spread (bps)
Residential mortgage loans:
Servicing rights	Fixed	6.7	9.9	%	485	6.3	12.6	%	539
Servicing rights	Adjustable	2.3	34.9		700	3.0	27.5		681

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

At March 31, 2017, 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			OASSpread		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	$	756	6.0	11.2	%	$	(33)	(63)	(143)	528	$	(15)	(30)
Servicing rights	Adjustable		20	3.3	25.2			(1)	(3)	(6)	757		-	(1)

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