XML 45 R30.htm IDEA: XBRL DOCUMENT v3.20.2
Mortgage Servicing Rights (Tables)
9 Months Ended
Sep. 30, 2020
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)   2020     2019             2020     2019  
Balance at beginning of period
  $ 1,840     $ 2,458    
 
   $ 2,546     $ 2,791  
Rights purchased
    8       6    
 
     16       13  
Rights capitalized
    321       168    
 
     712       373  
Rights sold (a)
    1       4    
 
     3       4  
Changes in fair value of MSRs
     
 
    
Due to fluctuations in market interest rates (b)
    (8     (243  
 
     (815     (573
Due to revised assumptions or models (c)
    (7     15    
 
     37       30  
Other changes in fair value (d)
    (177     (112  
 
 
 
     (521     (342
Balance at end of period
  $ 1,978     $ 2,296    
 
 
 
   $ 1,978     $ 2,296  
 
(a)
MSRs sold 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 assumed cost to service, ancillary income and option adjusted spread, as well as the impact of any model changes.
(d)
Primarily the change in MSR value from passage of time and cash flows realized (decay), but also includes the impact of changes to expected cash flows not associated with changes in market interest rates, such as the impact of delinquencies.
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:
 
    September 30, 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
  $ (396   $ (255   $ (144   $ 169     $ 353     $ 727    
 
   $ (663   $ (316   $ (153   $ 141     $ 269     $ 485  
Derivative instrument hedges
    529       287       150       (161     (334     (706  
 
 
 
     613       306       152       (143     (279     (550
Net sensitivity
  $ 133     $ 32     $ 6     $ 8     $ 19     $ 21    
 
 
 
   $ (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:
 
    September 30, 2020            December 31, 2019  
(Dollars in Millions)   HFA     Government     Conventional (d)     Total            HFA     Government     Conventional (d)     Total  
Servicing portfolio (a)
  $ 41,233     $ 28,532     $ 142,033     $ 211,798    
 
  $ 44,906     $ 35,302     $ 143,310     $ 223,518  
Fair value
  $ 378     $ 312     $ 1,288     $ 1,978    
 
  $ 486     $ 451     $ 1,609     $ 2,546  
Value (bps) (b)
    92       109       91       93    
 
    108       128       112       114  
Weighted-average servicing fees (bps)
    35       40       30       32    
 
    34       39       28       31  
Multiple (value/servicing fees)
    2.64       2.74       3.01       2.89    
 
    3.15       3.29       4.00       3.67  
Weighted-average note rate
    4.52     3.93     3.91     4.03  
 
    4.65     3.99     4.07     4.17
Weighted-average age (in years)
    3.9       5.4       4.5       4.5    
 
    3.7       4.9       4.8       4.6  
Weighted-average expected prepayment (constant prepayment rate)
    15.4     17.4     19.9     18.7  
 
    12.2     13.7     12.2     12.4
Weighted-average expected life (in years)
    5.4       4.6       4.1       4.4    
 
    6.5       5.7       5.9       6.0  
Weighted-average option adjusted spread (c)
    7.7     7.3     6.2     6.7  
 
 
 
    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.