Mortgage Servicing Rights (Tables)

9 Months Ended

Sep. 30, 2016

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)	2016			2015			2016			2015
Balance at beginning of period	$	2,056		$	2,481		$	2,512		$	2,338
Rights purchased		18			7			32			22
Rights capitalized		142			182			372			491
Changes in fair value of MSRs
Due to fluctuations in market interest rates (a)		42			(168	)		(446	)		(127	)
Due to revised assumptions or models (b)		–			7			–			9
Other changes in fair value (c)		(127	)		(112	)		(339	)		(336	)
Balance at end of period	$	2,131		$	2,397		$	2,131		$	2,397

(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 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:

	September 30, 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	$	(576	)	$	(291	)	$	(148	)	$	137		$	259		$	495		$	(598	)	$	(250	)	$	(114	)	$	96		$	176		$	344
Derivative instrument hedges		542			281			140			(134	)		(264	)		(523	)		475			226			107			(98	)		(192	)		(377	)
Net sensitivity	$	(34	)	$	(10	)	$	(8	)	$	3		$	(5	)	$	(28	)	$	(123	)	$	(24	)	$	(7	)	$	(2	)	$	(16	)	$	(33	)

MSRs and Related Characteristics by Portfolio

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

	September 30, 2016												December 31, 2015
(Dollars in Millions)	HFA			Government			Conventional (c)			Total			HFA			Government			Conventional (c)			Total
Servicing portfolio (a)	$	32,757		$	38,639		$	158,251		$	229,647		$	26,492		$	40,350		$	162,533		$	229,375
Fair value	$	357		$	355		$	1,419		$	2,131		$	297		$	443		$	1,772		$	2,512
Value (bps) (b)		109			92			90			93			112			110			109			110
Weighted-average servicing fees (bps)		37			34			27			30			36			34			27			29
Multiple (value/servicing fees)		2.95			2.71			3.33			3.10			3.11			3.24			4.04			3.79
Weighted-average note rate		4.41	%		4.02	%		4.05	%		4.10	%		4.46	%		4.08	%		4.09	%		4.13	%
Weighted-average age (in years)		2.9			3.9			3.8			3.7			3.1			3.6			3.4			3.4
Weighted-average expected prepayment (constant prepayment rate)		12.7	%		18.0	%		14.3	%		14.7	%		12.8	%		13.9	%		10.4	%		11.3	%
Weighted-average expected life (in years)		6.1			4.6			5.2			5.2			6.1			5.7			6.6			6.4
Weighted-average discount rate		11.7	%		11.1	%		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.