Mortgage Servicing Rights (Tables)

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Changes in Fair Value of Capitalized MSRs

Changes in fair value of capitalized MSRs for the years ended December 31, are summarized as follows:

(Dollars in Millions)	2015			2014			2013
Balance at beginning of period	$	2,338		$	2,680		$	1,700
Rights purchased		29			5			8
Rights capitalized		632			382			769
Rights sold		–			(141	)		–
Changes in fair value of MSRs
Due to fluctuations in market interest rates(a)		(58	)		(276	)		617
Due to revised assumptions or models(b)		10			86			33
Other changes in fair value(c)		(439	)		(398	)		(447	)
Balance at end of period	$	2,512		$	2,338		$	2,680

(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. 2014 includes a $44 million revaluation gain related to excess servicing rights sold.

(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 interest rates of the fair value of the MSRs portfolio and the related derivative instruments as of December 31 follows:

	2015																		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	$	(598	)	$	(250	)	$	(114	)	$	96		$	176		$	344		$	(540	)	$	(242	)	$	(114	)	$	100		$	185		$	346
Derivative instrument hedges		475			226			107			(98	)		(192	)		(377	)		441			223			109			(102	)		(197	)		(375	)
Net sensitivity	$	(123	)	$	(24	)	$	(7	)	$	(2	)	$	(16	)	$	(33	)	$	(99	)	$	(19	)	$	(5	)	$	(2	)	$	(12	)	$	(29	)

MSRs and Related Characteristics by Portfolio

A summary of the Company’s MSRs and related characteristics by portfolio as of December 31 follows:

	2015												2014
(Dollars in Millions)	HFA			Government			Conventional(c)			Total			HFA			Government			Conventional(c)			Total
Servicing portfolio(a)	$	26,492		$	40,350		$	162,533		$	229,375		$	19,706		$	40,471		$	162,620		$	222,797
Fair value	$	297		$	443		$	1,772		$	2,512		$	213		$	426		$	1,699		$	2,338
Value (bps)(b)		112			110			109			110			108			105			104			105
Weighted-average servicing fees (bps)		36			34			27			29			37			33			27			29
Multiple (value/servicing fees)		3.11			3.24			4.04			3.79			2.92			3.18			3.85			3.62
Weighted-average note rate		4.46	%		4.08	%		4.09	%		4.13	%		4.58	%		4.18	%		4.14	%		4.19	%
Weighted-average age (in years)		3.1			3.6			3.4			3.4			3.6			3.2			3.1			3.2
Weighted-average expected prepayment (constant prepayment rate)		12.8	%		13.9	%		10.4	%		11.3	%		12.8	%		14.8	%		11.4	%		12.1	%
Weighted-average expected life (in years)		6.1			5.7			6.6			6.4			6.2			5.5			6.5			6.3
Weighted-average discount rate		11.8	%		11.2	%		9.4	%		10.0	%		11.9	%		11.2	%		9.6	%		10.1	%

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

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

(c) Represents loans sold primarily to GSEs.