Mortgage Servicing Rights (Tables)

3 Months Ended

Mar. 31, 2022

Changes in fair value of capitalized MSRs are summarized as follows:


	Three Months Ended March 31
(Dollars in Millions)	2022			2021
Balance at beginning of period	$	2,953		$	2,210
Rights purchased		3			16
Rights capitalized		237			319
Rights sold (a)		1			—
Changes in fair value of MSRs
Due to fluctuations in market interest rates (b)		368			486
Due to revised assumptions or models (c)		(27	)		(102	)
Other changes in fair value (d)		(103	)		(142	)
Balance at end of period	$	3,432		$	2,787

(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.

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, 2022																		December 31, 2021
(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	$	(485	)	$	(227	)	$	(109	)	$	99		$	189		$	338		$	(636	)	$	(324	)	$	(160	)	$	150		$	287		$	511
Derivative instrument hedges		485			224			106			(94	)		(180	)		(333	)		614			309			152			(142	)		(278	)		(536	)
Net sensitivity	$	—		$	(3	)	$	(3	)	$	5		$	9		$	5		$	(22	)	$	(15	)	$	(8	)	$	8		$	9		$	(25	)

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


	March 31, 2022												December 31, 2021
(Dollars in Millions)	HFA			Government			Conventional (d)			Total			HFA			Government			Conventional (d)			Total
Servicing portfolio (a)	$	41,430		$	21,619		$	160,611		$	223,660		$	40,652		$	21,919		$	156,382		$	218,953
Fair value	$	628		$	365		$	2,439		$	3,432		$	527		$	308		$	2,118		$	2,953
Value (bps) (b)		152			169			152			153			130			141			135			135
Weighted-average servicing fees (bps)		36			41			30			32			36			41			30			32
Multiple (value/servicing fees)		4.23			4.12			5.02			4.75			3.63			3.43			4.50			4.18
Weighted-average note rate		4.02	%		3.66	%		3.38	%		3.53	%		4.07	%		3.70	%		3.41	%		3.56	%
Weighted-average age (in years)		3.8			6.0			3.3			3.7			3.8			5.9			3.3			3.7
Weighted-average expected prepayment (constant prepayment rate)		9.6	%		10.6	%		8.1	%		8.6	%		11.5	%		13.2	%		9.6	%		10.3	%
Weighted-average expected life (in years)		7.5			6.5			7.5			7.4			6.5			5.6			6.9			6.7
Weighted-average option adjusted spread (c)		6.8	%		6.7	%		6.0	%		6.2	%		7.3	%		7.3	%		6.3	%		6.6	%

(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.