Capitalized servicing assets

12 Months Ended

Dec. 31, 2012

Capitalized servicing assets

7.     Capitalized servicing assets

Changes in capitalized servicing assets were as follows:

	Residential Mortgage Loans									Small-Balance Commercial Mortgage Loans
For Year Ended December 31,	2012			2011			2010			2012			2011			2010
	(In thousands)
Beginning balance	$	131,264		$	92,066		$	101,155		$	15,678		$	26,197		$	40,251
Originations		14,577			13,920			27,430			—			—			—
Purchases		109			61,642			593			—			—			—
Consolidation of loan securitization trusts (note 19)		—			—			(1,843	)		—			—			—
Amortization		(41,095	)		(36,364	)		(35,269	)		(7,535	)		(10,519	)		(14,054	)
		104,855			131,264			92,066			8,143			15,678			26,197
Valuation allowance		(4,500	)		(1,800	)		—			—			—			—
Ending balance, net	$	100,355		$	129,464		$	92,066		$	8,143		$	15,678		$	26,197

	Commercial Mortgage Loans									Total
For Year Ended December 31,	2012			2011			2010			2012			2011			2010
	(In thousands)
Beginning balance	$	51,250		$	42,613		$	32,896		$	198,192		$	160,876		$	174,302
Originations		19,653			17,613			16,976			34,230			31,533			44,406
Purchases		—			—			—			109			61,642			593
Consolidation of loan securitization trusts (note 19)		—			—			—			—			—			(1,843	)
Amortization		(10,925	)		(8,976	)		(7,259	)		(59,555	)		(55,859	)		(56,582	)
		59,978			51,250			42,613			172,976			198,192			160,876
Valuation allowance		—			—			—			(4,500	)		(1,800	)		—
Ending balance, net	$	59,978		$	51,250		$	42,613		$	168,476		$	196,392		$	160,876

Residential mortgage loans serviced for others were $32.1 billion at December 31, 2012, $36.3 billion at December 31, 2011 and $15.9 billion at December 31, 2010. Small-balance commercial mortgage loans serviced for others were $3.8 billion, $4.4 billion and $5.2 billion at December 31, 2012, 2011 and 2010, respectively. Commercial mortgage loans serviced for others were $10.6 billion, $9.0 billion and $8.1 billion at December 31, 2012, 2011 and 2010, respectively.

Changes in the valuation allowance for capitalized residential mortgage servicing assets were not significant in 2012, 2011 or 2010. The estimated fair value of capitalized residential mortgage loan servicing assets was approximately $138 million at December 31, 2012 and $168 million at December 31, 2011. The fair value of capitalized residential mortgage loan servicing assets was estimated using weighted-average discount rates of 10.6% and 10.4% at December 31, 2012 and 2011, respectively, and contemporaneous prepayment assumptions that vary by loan type. At December 31, 2012 and 2011, the discount rate represented a weighted-average option-adjusted spread (“OAS”) of 929 basis points (hundredths of one percent) and 978 basis points, respectively, over market implied forward London Interbank Offered Rates. The estimated fair value of capitalized small-balance commercial mortgage loan servicing assets was approximately $43 million at December 31, 2012 and $49 million at December 31, 2011. The fair value of capitalized small-balance commercial loan servicing assets was estimated using weighted-average discount rates of 19.4% and 19.2% at December 31, 2012 and 2011, respectively, and contemporaneous prepayment assumptions that vary by loan type. At December 31, 2012 and 2011, the discount rate represented a weighted-average OAS of 1,791 basis points and 1,783 basis points, respectively, over market implied forward London Interbank Offered Rates. The estimated fair value of capitalized residential and small-balance commercial mortgage loan servicing rights may vary significantly in subsequent periods due to changing interest rates and the effect thereof on prepayment speeds. The estimated fair value of capitalized commercial mortgage loan servicing assets was approximately $71 million and $60 million at December 31, 2012 and 2011, respectively. An 18% discount rate was used to estimate the fair value of capitalized commercial mortgage loan servicing rights at December 31, 2012 and 2011 with no prepayment assumptions because, in general, the servicing agreements allow the Company to share in customer loan prepayment fees and thereby recover the remaining carrying value of the capitalized servicing rights associated with such loan. The Company’s ability to realize the carrying value of capitalized commercial mortgage servicing rights is more dependent on the borrowers’ abilities to repay the underlying loans than on prepayments or changes in interest rates.

The key economic assumptions used to determine the fair value of capitalized servicing rights at December 31, 2012 and the sensitivity of such value to changes in those assumptions are summarized in the table that follows. Those calculated sensitivities are hypothetical and actual changes in the fair value of capitalized servicing rights may differ significantly from the amounts presented herein. The effect of a variation in a particular assumption on the fair value of the servicing rights is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another which may magnify or counteract the sensitivities. The changes in assumptions are presumed to be instantaneous.

	Residential			Small-Balance Commercial			Commercial
Weighted-average prepayment speeds		19.50	%		9.16	%
Impact on fair value of 10% adverse change	$	(8,924,000	)	$	(1,814,000	)
Impact on fair value of 20% adverse change		(16,880,000	)		(3,480,000	)
Weighted-average OAS		9.29	%		17.91	%
Impact on fair value of 10% adverse change	$	(2,857,000	)	$	(1,468,000	)
Impact on fair value of 20% adverse change		(5,577,000	)		(2,832,000	)
Weighted-average discount rate								18.00	%
Impact on fair value of 10% adverse change							$	(3,078,000	)
Impact on fair value of 20% adverse change								(5,940,000	)