Capitalized servicing assets

12 Months Ended

Dec. 31, 2015

7. Capitalized servicing assets

Changes in capitalized servicing assets were as follows:


	Residential Mortgage Loans									Commercial Mortgage Loans
For Year Ended December 31,	2015			2014			2013			2015			2014			2013
	(In thousands)
Beginning balance	$	109,871		$	126,377		$	104,855		$	72,939		$	72,499		$	59,978
Originations		35,556			28,285			52,375			29,914			15,922			26,754
Purchases		243			289			272			—			730			—
Recognized in loan securitization transactions		—			—			13,696			—			—			—
Amortization		(27,367	)		(45,080	)		(44,821	)		(19,161	)		(16,212	)		(14,233	)

		118,303			109,871			126,377			83,692			72,939			72,499
Valuation allowance		—			—			(300	)		—			—			—

Ending balance, net	$	118,303		$	109,871		$	126,077		$	83,692		$	72,939		$	72,499


	Other									Total
For Year Ended December 31,	2015			2014			2013			2015			2014			2013
	(In thousands)
Beginning balance	$	4,107		$	11,225		$	8,143		$	186,917		$	210,101		$	172,976
Originations		—			—			—			65,470			44,207			79,129
Purchases		—			—			—			243			1,019			272
Recognized in loan securitization transactions		—			—			9,382			—			—			23,078
Amortization		(3,378	)		(7,118	)		(6,300	)		(49,906	)		(68,410	)		(65,354	)

		729			4,107			11,225			202,724			186,917			210,101
Valuation allowance		—			—			—			—			—			(300	)

Ending balance, net	$	729		$	4,107		$	11,225		$	202,724		$	186,917		$	209,801

Residential mortgage loans serviced for others were $61.7 billion at December 31, 2015, $67.2 billion at December 31, 2014 and $72.4 billion at December 31, 2013. Reflected in residential mortgage loans serviced for others were loans sub-serviced for others of $37.8 billion, $42.1 billion and $46.6 billion at December 31, 2015, 2014, and 2013, respectively. Commercial mortgage loans serviced for others were $11.0 billion at December 31, 2015, $11.3 billion at December 31, 2014 and $11.4 billion at December 31, 2013.

The estimated fair value of capitalized residential mortgage loan servicing assets was approximately $249 million at December 31, 2015 and $228 million at December 31, 2014. The fair value of capitalized residential mortgage loan servicing assets was estimated using weighted-average discount rates of 12.4% and 11.9% at December 31, 2015 and 2014, respectively, and contemporaneous prepayment assumptions that vary by loan type. At December 31, 2015 and 2014, the discount rate represented a weighted-average option-adjusted spread (“OAS”) of 1119 basis points (hundredths of one percent) and 1065 basis points, respectively, over market implied forward London Interbank Offered Rates (“LIBOR”). The estimated fair value of capitalized residential 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 $99 million and $87 million at December 31, 2015 and 2014, respectively. An 18% discount rate was used to estimate the fair value of capitalized commercial mortgage loan servicing rights at December 31, 2015 and 2014 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 significant portfolios of capitalized servicing rights at December 31, 2015 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			Commercial
Weighted-average prepayment speeds		11.92	%
Impact on fair value of 10% adverse change	$	(9,208,000	)
Impact on fair value of 20% adverse change		(17,696,000	)
Weighted-average OAS		11.19	%
Impact on fair value of 10% adverse change	$	(7,758,000	)
Impact on fair value of 20% adverse change		(15,011,000	)
Weighted-average discount rate					18.00	%
Impact on fair value of 10% adverse change				$	(4,302,000	)
Impact on fair value of 20% adverse change					(8,300,000	)

As described in note 19, during 2013 the Company securitized approximately $1.3 billion of one-to-four family residential mortgage loans formerly held in the Company’s loan portfolio in guaranteed mortgage securitizations with Ginnie Mae and securitized and sold approximately $1.4 billion of automobile loans. In conjunction with these transactions, the Company retained the servicing rights to the loans.

- Definition

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

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