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Mortgage Servicing Rights (Tables)
 3 Months Ended
Mar. 31, 2020
Text Block [Abstract]  
Changes in Fair Value of Capitalized MSRs
 
                 
    
Three Months Ended
March 31
  
(Dollars in Millions)    2020     2019  
Balance at beginning of period
   $ 2,546      $ 2,791  
Rights purchased
     5        1  
Rights capitalized
     201        78  
Rights sold (a)
      1       –  
Changes in fair value of MSRs
     
Due to fluctuations in market interest rates (
b
)
     (743 )       (119 ) 
Due to revised assumptions or models (
c
)
     17        11  
Other changes in fair value (
d
)
     (140 )       (106 ) 
Balance at end of period
   $ 1,887      $ 2,656  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
MSRs sold in 2020 include those having a negative fair value, resulting from the 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 was as follows:
 
                                                                                                         
    March 31, 2020             December 31, 2019  
(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
   $ (447 )     $ (291 )     $ (163 )     $ 168      $ 337      $ 663           $ (663 )    $ (316 )    $ (153 )    $ 141     $ 269     $ 485  
Derivative instrument hedges
     590        286        145        (150 )       (307 )       (657 )                613       306       152       (143 )      (279 )      (550 ) 
Net sensitivity
   $ 143      $ (5 )     $ (18 )     $ 18      $ 30      $ 6               $ (50 )    $ (10 )    $ (1 )    $ (2 )    $ (10 )    $ (65 ) 
 
 
 
 
 
 
MSRs and Related Characteristics by Portfolio
A summary of the Company’s MSRs and related characteristics by portfolio was as follows:
 
                                                                         
    March 31, 2020            December 31, 2019  
(Dollars in Millions)   HFA     Government     Conventional (d)     Total            HFA     Government     Conventional (d)     Total  
Servicing portfolio (a)
   $ 45,073     $ 34,836     $ 144,211     $ 224,120         $ 44,906     $ 35,302     $ 143,310     $ 223,518  
Fair value
   $ 396     $ 349     $ 1,142     $ 1,887         $ 486     $ 451     $ 1,609     $ 2,546  
Value (bps) (b)
     88       100       79       84           108       128       112       114  
Weighted-average servicing fees (bps)
     34       39       29       31           34       39       28       31  
Multiple (value/servicing fees)
     2.55       2.54       2.77       2.68           3.15       3.29       4.00       3.67  
Weighted-average note rate
     4.63 %      3.97 %      4.05 %      4.15 %          4.65 %      3.99 %      4.07 %      4.17 % 
Weighted-average age (in years)
     3.8       5.0       4.8       4.6           3.7       4.9       4.8       4.6  
Weighted-average expected
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
prepayment (constant prepayment rate)
     16.2 %      19.5 %      20.7 %      19.6 %          12.2 %      13.7 %      12.2 %      12.4 % 
Weighted-average expected life (in years)
     5.1       4.2       3.8       4.1           6.5       5.7       5.9       6.0  
Weighted-average option adjusted spread (c)
     8.3 %      7.8 %      6.7 %      7.3 %              8.4 %      7.9 %      6.9 %      7.3 % 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.