Sales of Receivables and Servicing Rights (Tables)

12 Months Ended

Dec. 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 Consolidated Statements of Income, for the years ended December 31 is as follows:
($ in millions)		2017	2016	2015
Residential mortgage loan sales(a)	$	6,369	6,927	5,078(b)
Origination fees and gains on loan sales		138	186	171
Gross mortgage servicing fees		206	199	222

• 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 tables present changes in the servicing rights related to residential mortgage and automobile loans for the years ended December 31:
($ in millions)		2017
Balance, beginning of period	$	744
Servicing rights originated - residential mortgage loans		127
Servicing rights acquired - residential mortgage loans		109
Changes in fair value:
Due to changes in inputs or assumptions(a)		(1)
Other changes in fair value(b)		(121)
Balance, end of period	$	858

• 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		83
Amortization		(131)
Balance, end of period	$	1,156
Valuation allowance for servicing rights:
Balance, beginning of period	$	(419)
Recovery of MSR impairment		7
Balance, end of period		(412)
Carrying amount after valuation allowance	$	744

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)		2017	2016
Fixed-rate residential mortgage loans:
Balance, beginning of period	$	722	757
Balance, end of period		841	722
Adjustable-rate residential mortgage loans:
Balance, beginning of period		22	27
Balance, end of period		17	22
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 for the years ended December 31:
($ in millions)		2017	2016	2015
Securities gains, net - non-qualifying hedges on MSRs	$	2	-	-
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio(a)		2	24	90
MSR fair value adjustment(a)		(122)	-	-
Recovery of MSR impairment(a)		-	7	4

Included in mortgage banking net revenue in the Consolidated Statements of Income.

Servicing Assets and Residual Interests Economic Assumptions

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, securitization, or purchase resulting from transactions completed during the years ended December 31 were as follows:
		2017				2016
		Weighted-	Prepayment			Weighted-	Prepayment
		Average Life	Speed		OAS Spread	Average Life	Speed		OAS Spread
	Rate	(in years)	(annual)		(bps)	(in years)	(annual)		(bps)
Residential mortgage loans:
Servicing rights	Fixed	7.5	9.1	%	497	7.2	10.3	%	584
Servicing rights	Adjustable	2.7	32.1		660	2.8	30.2		679

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

At December 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 OAS spread are as follows:
					Prepayment						OAS
					Speed Assumption						Spread Assumption
			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	$	841	6.0	11.4	%	$	(36)	(69)	(158)	549	$	(17)	(33)
Servicing rights	Adjustable		17	3.3	24.6			(1)	(2)	(5)	785		-	(1)

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