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Mortgage Servicing Rights (Tables)
 12 Months Ended
Dec. 31, 2019
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)   2019        2018        2017  
Balance at beginning of period
   $ 2,791        $ 2,645        $ 2,591  
Rights purchased
     20          8          13  
Rights capitalized
     559          397          445  
Rights sold
(a)
     5          (27 )         –  
Changes in fair value of MSRs
                              
Due to fluctuations in market interest rates
(
b
)
     (390 )         98          (23 ) 
Due to revised assumptions or models
(
c
)
     23          56          18  
Other changes in fair value
(
d
)
     (462 )         (386 )         (399 ) 
   
 
 
  
Balance at end of period
   $ 2,546        $ 2,791        $ 2,645  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
MSRs sold in 2019 include those having a negative fair value, resulting from the related loans being severely delinquent.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b)
Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(c)
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
(d)
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 as of December 31 follows:
 
                                                                                                 
    2019      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
   $ (663 )     $ (316 )     $ (153 )     $ 141      $ 269     $ 485      $ (501 )    $ (223 )    $ (105 )    $ 92     $ 171     $ 295  
Derivative instrument hedges
     613        306        152        (143 )       (279 )      (550 )       455       215       104       (94 )      (177 )      (321 ) 
Net sensitivity
   $ (50 )     $ (10 )     $ (1 )     $ (2 )     $ (10 )    $ (65 )     $ (46 )    $ (8 )    $ (1 )    $ (2 )    $ (6 )    $ (26 ) 
 
 
 
 
 
 
 
MSRs and Related Characteristics by Portfolio
A summary of the Company’s MSRs and related characteristics by portfolio as of December 31 follows:
 
                                                                 
    2019     2018  
(Dollars in Millions)   HFA     Government     Conventional
(d)
     Total     HFA     Government     Conventional
(d)
     Total  
Servicing portfolio
(a)
   $ 44,906     $ 35,302     $ 143,310     $ 223,518     $ 44,384     $ 35,990     $ 148,910     $ 229,284  
Fair value
   $ 486     $ 451     $ 1,609     $ 2,546     $ 526     $ 465     $ 1,800     $ 2,791  
Value (bps)
(b)
     108       128       112       114       119       129       121       122  
Weighted-average servicing fees (bps)
     34       39       28       31       34       36       27       30  
Multiple (value/servicing fees)
     3.15       3.29       4.00       3.67       3.45       3.63       4.52       4.11  
Weighted-average note rate
     4.65 %      3.99 %      4.07 %      4.17 %      4.59 %      3.97 %      4.06 %      4.15 % 
Weighted-average age (in years)
     3.7       4.9       4.8       4.6       3.3       4.7       4.5       4.3  
Weighted-average expected prepayment (constant prepayment rate)
     12.2 %      13.7 %      12.2 %      12.4 %      9.8 %      11.0 %      9.1 %      9.5 % 
Weighted-average expected life (in years)
     6.5       5.7       5.9       6.0       7.7       6.7       7.1       7.2  
Weighted-average option adjusted spread
(c)
     8.4 %      7.9 %      6.9 %      7.3 %      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.