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Mortgage Servicing Rights (Tables)
6 Months Ended
Jun. 30, 2019
Text Block [Abstract]  
Changes in Fair Value of Capitalized MSRs
Changes in fair value of capitalized MSRs are summarized as follows:
 
                                   
    Three Months Ended
June 30
      Six Months Ended
June 30
 
(Dollars in Millions)           2019             2018               2019             2018  
Balance at beginning of period
  $ 2,656     $ 2,780       $ 2,791     $ 2,645  
Rights purchased
    6       2         7       4  
Rights capitalized
    127       97         205       197  
Changes in fair value of MSRs
                                 
Due to fluctuations in market interest rates(a)
    (211 )     38         (330 )     152  
Due to revised assumptions or models(b)
    4       26         15       50  
Other changes in fair value(c)
    (124 )     (99 )        (230 )     (204
Balance at end of period
  $ 2,458     $ 2,844       $ 2,458     $ 2,844  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 option adjusted spread, 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 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:
 
                                                                                                         
    June 30, 2019           December 31, 2018  
(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
  $ (697 )   $ (328 )   $ (157 )   $ 142     $ 269     $ 478             $ (501   $ (223   $ (105   $ 92     $ 171     $ 295  
Derivative instrument hedges
    673       326       158       (145 )     (283 )     (546 )             455       215       104       (94     (177     (321
Net sensitivity
  $ (24 )   $ (2 )   $ 1     $ (3 )   $ (14 )   $ (68 )           $ (46   $ (8   $ (1   $ (2   $ (6   $ (26
 
 
 
 
 
 
 
 
 
 
 
MSRs and Related Characteristics by Portfolio
A summary of the Company’s MSRs and related characteristics by portfolio was as follows:
 
                                                                         
   
June 30, 2019
  December 31, 2018  
(Dollars in Millions)   HFA     Government     Conventional (d)     Total           HFA     Government     Conventional (d)     Total  
Servicing portfolio (a)
  $ 45,117     $ 36,012     $ 145,840     $ 226,969             $ 44,384     $ 35,990     $ 148,910     $ 229,284  
Fair value
  $ 475     $ 438     $ 1,545     $ 2,458             $ 526     $ 465     $ 1,800     $ 2,791  
Value (bps) (b)
    105       122       106       108               119       129       121       122  
Weighted-average servicing fees (bps)
    34       37       27       30               34       36       27       30  
Multiple (value/servicing fees)
    3.07       3.27       3.91       3.59               3.45       3.63       4.52       4.11  
Weighted-average note rate
    4.65     4.00     4.08     4.18             4.59     3.97     4.06     4.15
Weighted-average age (in years)
    3.5       4.8       4.8       4.5               3.3       4.7       4.5       4.3  
Weighted-average expected prepayment (constant prepayment rate)
    12.1     13.4     12.4     12.5             9.8     11.0     9.1     9.5
Weighted-average expected life (in years)
    6.6       5.8       5.9       6.0               7.7       6.7       7.1       7.2  
Weighted-average option adjusted spread (c)
    8.5     8.1     7.1     7.5             8.6     8.3     7.2     7.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.