Mortgage Servicing Rights (Tables)

9 Months Ended

Sep. 30, 2015

Text Block [Abstract]

Changes in Fair Value of Capitalized MSRs

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

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Millions)	2015			2014			2015			2014
Balance at beginning of period	$	2,481		$	2,412		$	2,338		$	2,680
Rights purchased		7			1			22			3
Rights capitalized		182			109			491			264
Rights sold		–			–			–			(141	)
Changes in fair value of MSRs
Due to fluctuations in market interest rates (a)		(168	)		29			(127	)		(129	)
Due to revised assumptions or models (b)		7			15			9			71
Other changes in fair value (c)		(112	)		(105	)		(336	)		(287	)
Balance at end of period	$	2,397		$	2,461		$	2,397		$	2,461

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

(b) Includes changes in MSR value not caused by changes in market interest rates, such as changes in cost to service, ancillary income, and discount rate, as well as the impact of any model changes.

(c) Primarily represents changes due to realization of expected cash flows over time (decay).

Sensitivity to Changes in Market Interest Rates to Fair Value of MSRs Portfolio and Related Derivative Instruments

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

	September 30, 2015																		December 31, 2014
(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	$	(585	)	$	(272	)	$	(129	)	$	108		$	200		$	375		$	(540	)	$	(242	)	$	(114	)	$	100		$	185		$	346
Derivative instrument hedges		496			247			121			(108	)		(203	)		(368	)		441			223			109			(102	)		(197	)		(375	)
Net sensitivity	$	(89	)	$	(25	)	$	(8	)	$	–		$	(3	)	$	7		$	(99	)	$	(19	)	$	(5	)	$	(2	)	$	(12	)	$	(29	)

MSRs and Related Characteristics by Portfolio

A summary of the Company’s MSRs and related characteristics by portfolio was as follows:

	September 30, 2015												December 31, 2014
(Dollars in Millions)	HFA			Government			Conventional (b)			Total			HFA			Government			Conventional (b)			Total
Servicing portfolio	$	23,843		$	40,362		$	162,730		$	226,935		$	19,706		$	40,471		$	162,620		$	222,797
Fair value	$	265		$	433		$	1,699		$	2,397		$	213		$	426		$	1,699		$	2,338
Value (bps) (a)		111			107			104			106			108			105			104			105
Weighted-average servicing fees (bps)		36			33			27			29			37			33			27			29
Multiple (value/servicing fees)		3.08			3.24			3.85			3.66			2.92			3.18			3.85			3.62
Weighted-average note rate		4.47	%		4.09	%		4.09	%		4.13	%		4.58	%		4.18	%		4.14	%		4.19	%
Weighted-average age (in years)		3.3			3.5			3.4			3.4			3.6			3.2			3.1			3.2
Weighted-average expected prepayment (constant prepayment rate)		12.7	%		15.1	%		11.4	%		12.2	%		12.8	%		14.8	%		11.4	%		12.1	%
Weighted-average expected life (in years)		6.1			5.4			6.3			6.1			6.2			5.5			6.5			6.3
Weighted-average discount rate		11.8	%		11.2	%		9.5	%		10.0	%		11.9	%		11.2	%		9.6	%		10.1	%

(a) Value is calculated as fair value divided by the servicing portfolio.

(b) Represents loans sold primarily to GSEs.