Sales of Receivables and Servicing Rights (Tables)

9 Months Ended

Sep. 30, 2018

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		For the nine months ended
		September 30,		September 30,
($ in millions)		2018	2017	2018	2017
Residential mortgage loan sales(a)	$	1,446	1,593	3,919	4,740
Origination fees and gains on loan sales		25	40	77	106
Gross mortgage servicing fees		56	56	162	152

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

Changes in the Servicing Assets

The following table presents changes in the servicing rights related to residential mortgage loans for the nine months ended September 30:
($ in millions)		2018	2017
Balance, beginning of period	$	858	744
Servicing rights originated - residential mortgage loans		62	99
Servicing rights acquired - residential mortgage loans		82	109
Changes in fair value:
Due to changes in inputs or assumptions(a)		103	(15)
Other changes in fair value(b)		(95)	(89)
Balance, end of period	$	1,010	848

• 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.

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 three months ended		For the nine months ended
		September 30,		September 30,
($ in millions)		2018	2017	2018	2017
Securities (losses) gains, net - non-qualifying hedges on MSRs	$	(1)	2	(18)	4
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio(a)		(24)	1	(89)	16
MSR fair value adjustment due to changes in inputs or assumptions(a)		25	(2)	103	(15)

(a) Included in mortgage banking net revenue in the Condensed 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 three months ended September 30, 2018 and 2017 were as follows:
		September 30, 2018				September 30, 2017
	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	6.5	11.1	%	517	7.6	9.2	%	499
Servicing rights	Adjustable	3.3	23.7		700	2.5	35.1		650

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

At September 30, 2018, 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
											OAS Spread		Impact of
				Weighted-				Impact of Adverse Change					Adverse Change
			Fair	Average Life				on Fair Value					on Fair Value
($ in millions)(a)	Rate		Value	(in years)	Rate			10%	20%	50%	(bps)		10%	20%
Residential mortgage loans:
Servicing rights	Fixed	$	996	6.6	9.1	%	$	(36)	(70)	(162)	533	$	(20)	(39)
Servicing rights	Adjustable		14	3.5	23.2			(1)	(2)	(4)	842		-	(1)

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