Mortgage Servicing Rights (Tables)

3 Months Ended

Mar. 31, 2016

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)	2016			2015
Balance at beginning of period	$	2,512		$	2,338
Rights purchased		9			6
Rights capitalized		99			145
Changes in fair value of MSRs
Due to fluctuations in market interest rates (a)		(301	)		(131	)
Other changes in fair value (b)		(97	)		(108	)
Balance at end of period	$	2,222		$	2,250

(a)

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

(b)

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

Sensitivity to Changes in Interest Rates of the 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 was as follows:


	March 31, 2016																		December 31, 2015
(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	$	(590	)	$	(296	)	$	(145	)	$	134		$	249		$	467		$	(598	)	$	(250	)	$	(114	)	$	96		$	176		$	344
Derivative instrument hedges		528			274			138			(134	)		(263	)		(517	)		475			226			107			(98	)		(192	)		(377	)
Net sensitivity	$	(62	)	$	(22	)	$	(7	)	$	–		$	(14	)	$	(50	)	$	(123	)	$	(24	)	$	(7	)	$	(2	)	$	(16	)	$	(33	)

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


	March 31, 2016												December 31, 2015
(Dollars in Millions)	HFA			Government			Conventional (c)			Total			HFA			Government			Conventional (c)			Total
Servicing portfolio (a)	$	28,241		$	39,921		$	161,586		$	229,748		$	26,492		$	40,350		$	162,533		$	229,375
Fair value	$	314		$	385		$	1,523		$	2,222		$	297		$	443		$	1,772		$	2,512
Value (bps) (b)		111			96			94			97			112			110			109			110
Weighted-average servicing fees (bps)		36			34			27			29			36			34			27			29
Multiple (value/servicing fees)		3.08			2.82			3.48			3.34			3.11			3.24			4.04			3.79
Weighted-average note rate		4.45	%		4.06	%		4.08	%		4.12	%		4.46	%		4.08	%		4.09	%		4.13	%
Weighted-average age (in years)		3.1			3.7			3.5			3.5			3.1			3.6			3.4			3.4
Weighted-average expected prepayment (constant prepayment rate)		12.7	%		17.2	%		13.3	%		13.9	%		12.8	%		13.9	%		10.4	%		11.3	%
Weighted-average expected life (in years)		6.1			4.8			5.5			5.5			6.1			5.7			6.6			6.4
Weighted-average discount rate		11.8	%		11.2	%		9.4	%		10.0	%		11.8	%		11.2	%		9.4	%		10.0	%

(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.