Mortgage Servicing Rights (Tables)

3 Months Ended

Mar. 31, 2024

Changes in Fair Value of Capitalized MSRs

Changes in fair value of capitalized MSRs are summarized as follows:


	Three Months Ended March 31
(Dollars in Millions)	2024		2023
Balance at beginning of period	$	3,377	$	3,755
Rights purchased	—		1
Rights capitalized	55		96
Rights sold(a)	—		1
Changes in fair value of MSRs
Due to fluctuations in market interest rates(b)	103		(38)
Due to revised assumptions or models(c)	8		5
Other changes in fair value(d)	(81)		(96)
Balance at end of period	$	3,462	$	3,724

(a)MSRs sold include those having a negative fair value, resulting from the loans being severely delinquent.

(b)Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.

(c)Includes changes in MSR value not caused by changes in market interest rates, such as changes in assumed cost to service, ancillary income and option adjusted spread, as well as the impact of any model changes.

(d)Primarily the change in MSR value from passage of time and cash flows realized (decay), but also includes the impact of changes to expected cash flows not associated with changes in market interest rates, such as the impact of delinquencies.

Sensitivity to Changes in Interest Rates of the Fair Value of MSR Portfolio and Related Derivative Instruments

The estimated sensitivity to changes in interest rates of the fair value of the MSR portfolio and the related derivative instruments was as follows:


	March 31, 2024												December 31, 2023
(Dollars in Millions)	Down 100 bps		Down 50 bps		Down 25 bps		Up 25 bps		Up 50 bps		Up 100 bps		Down 100 bps		Down 50 bps		Down 25 bps		Up 25 bps		Up 50 bps		Up 100 bps
MSR portfolio	$	(349)	$	(163)	$	(78)	$	71	$	136	$	248	$	(370)	$	(173)	$	(84)	$	77	$	147	$	268
Derivative instrument hedges	369		165		77		(71)		(137)		(258)		381		178		86		(79)		(152)		(289)
Net sensitivity	$	20	$	2	$	(1)	$	—	$	(1)	$	(10)	$	11	$	5	$	2	$	(2)	$	(5)	$	(21)

The following table provides a summary of the Company’s MSRs and related characteristics by portfolio:


	March 31, 2024												December 31, 2023
(Dollars in Millions)	HFA			Government			Conventional(d)			Total			HFA			Government			Conventional(d)			Total
Servicing portfolio(a)	$	49,275		$	25,961		$	150,250		$	225,486		$	48,286		$	25,996		$	151,056		$	225,338
Fair value	$	809		$	521		$	2,132		$	3,462		$	769		$	507		$	2,101		$	3,377
Value (bps)(b)	164			201			142			154			159			195			139			150
Weighted-average servicing fees (bps)	36			44			26			30			36			44			26			30
Multiple (value/servicing fees)	4.60			4.51			5.52			5.11			4.45			4.41			5.41			5.00
Weighted-average note rate	4.66		%	4.27		%	3.85		%	4.08		%	4.56		%	4.23		%	3.81		%	4.02		%
Weighted-average age (in years)	4.4			5.7			4.5			4.6			4.3			5.5			4.3			4.4
Weighted-average expected prepayment (constant prepayment rate)	10.2		%	10.7		%	8.8		%	9.3		%	10.5		%	11.1		%	9.1		%	9.6		%
Weighted-average expected life (in years)	7.2			6.6			7.1			7.1			7.2			6.5			7.0			7.0
Weighted-average option adjusted spread(c)	5.4		%	5.9		%	4.6		%	5.0		%	5.4		%	5.9		%	4.6		%	4.9		%

(a)Represents principal balance of mortgages having corresponding MSR asset.

(b)Calculated as fair value divided by the servicing portfolio.

(c)Option adjusted spread is the incremental spread added to the risk-free rate to reflect optionality and other risk inherent in the MSRs.

(d)Represents loans sold primarily to GSEs.