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Loan Servicing
 12 Months Ended
Dec. 31, 2020
Transfers and Servicing [Abstract]  
Loan Servicing LOAN SERVICING
Mortgage Loan Servicing
We retain the servicing rights on certain mortgage loans sold. The unpaid principal balance of mortgage loans serviced for others is listed below:
TABLE 7.1
December 3120202019
(in millions)
Mortgage loans sold with servicing retained$4,653 $4,686 
The following table summarizes activity relating to mortgage loans sold with servicing retained:
TABLE 7.2
Year Ended December 31202020192018
(in millions)
Mortgage loans sold with servicing retained$1,636 $1,381 $1,060 
Pretax gains resulting from above loan sales (1)
70 32 19 
Mortgage servicing fees (1)
12 11 9 
(1) Recorded in mortgage banking operations on the Consolidated Statements of Income.
Following is a summary activity relating to MSRs:
TABLE 7.3
Year Ended December 31202020192018
(in millions)
Balance at beginning of period$42.6 $36.8 $29.1 
Additions16.0 14.3 12.5 
Payoffs and curtailments(14.8)(5.0)(1.8)
(Impairment) charge / recovery(5.8)(1.0)(0.5)
Amortization(2.4)(2.5)(2.5)
Balance at end of period$35.6 $42.6 $36.8 
Fair value, beginning of period$45.2 $41.1 $32.4 
Fair value, end of period35.6 45.2 41.1 
The fair value of MSRs is highly sensitive to changes in assumptions and is determined by estimating the present value of the asset’s future cash flows utilizing market-based prepayment rates, discount rates and other assumptions validated through comparison to trade information, industry surveys and with the use of independent third-party valuations. Changes in prepayment speed assumptions have the most significant impact on the fair value of MSRs. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of MSRs and as interest rates increase, mortgage loan prepayments decline, which results in an increase in the fair value of MSRs. Measurement of fair value is limited to the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different time.

Following is a summary of the sensitivity of the fair value of MSRs to changes in key assumptions:
TABLE 7.4
December 3120202019
(dollars in millions)
Weighted average life (months)66.678.9
Constant prepayment rate (annualized)13.4 %10.6 %
Discount rate9.5 %9.7 %
Effect on fair value due to change in interest rates:
+0.25%$2 $3 
+0.50%4 5 
-0.25%(2)(3)
-0.50%(3)(5)
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the changes in assumptions to fair value may not be linear. Also, in this table, the effects of an adverse variation in a particular assumption on the fair value of MSRs is calculated without changing any other assumptions, while in reality, changes in one factor may result in changing another, which may magnify or contract the effect of the change. We had a $7.3 million valuation allowance for MSRs as of December 31, 2020, compared to $1.5 million at December 31, 2019.
SBA-Guaranteed Loan Servicing
We retain the servicing rights on SBA-guaranteed loans sold to investors. The standard sale structure under the SBA Secondary Participation Guaranty Agreement provides for us to retain a portion of the cash flow from the interest payment received on the SBA guaranteed portion of the loan, which is commonly known as a servicing spread. The unpaid principal balance of SBA-guaranteed loans serviced for investors was as follows:
TABLE 7.5
December 3120202019
(in millions)
SBA loans sold to investors with servicing retained$217 $225 
The following table summarizes activity relating to SBA loans sold with servicing retained:
TABLE 7.6
Year Ended December 31202020192018
(in millions)
SBA loans sold with servicing retained$33 $23 $41 
Pretax gains resulting from above loan sales (1)
3 2 4 
SBA servicing fees (1)
2 2 3 
(1) Recorded in non-interest income.
Following is a summary of the activity in SBA servicing rights:
TABLE 7.7
Year Ended December 31202020192018
(in millions)
Balance at beginning of period$3 $4 $5 
Additions1 — 1 
Payoffs, curtailments and amortization(1)(1)(1)
Impairment charge— — (1)
Balance at end of period$3 $3 $4 
Fair value, beginning of period$3 $4 $5 
Fair value, end of period3 3 4 
Following is a summary of key assumptions and the sensitivity of the SBA servicing rights to changes in these assumptions. The declines in fair values were immaterial in the scenarios presented.
TABLE 7.8
December 3120202019
(dollars in millions)
Weighted average life (months)3842
Constant prepayment rate17.8 %16.8 %
Discount rate13.2 16.2 
Decline in fair value due to change in interest rates:
1% adverse change$(0.1)$(0.1)
2% adverse change(0.1)(0.1)
Decline in fair value due to change in constant prepayment rates:
10% adverse change(0.1)(0.1)
20% adverse change(0.1)(0.3)
We had a valuation allowance for SBA servicing rights as of December 31, 2020 of $1.1 million, compared to $1.2 million at December 31, 2019.
Other Loan Servicing
During the fourth quarter of 2020, we sold $0.5 billion in indirect auto loans with servicing retained. The servicing asset totaled $0.7 million at December 31, 2020.