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Mortgage Banking Activities
 9 Months Ended
Sep. 30, 2021
Mortgage Banking [Abstract]  
Mortgage Banking Activities [Text Block] Mortgage Banking Activities
Residential Mortgage Loan Production

The Company originates, markets and services conventional and government-sponsored residential mortgage loans. Generally, conforming fixed rate residential mortgage loans are held for sale in the secondary market and non-conforming and adjustable-rate residential mortgage loans are retained for investment. Residential mortgage loans originated for sale by the Company are carried at fair value based on sales commitments and market quotes. Changes in the fair value of mortgage loans held for sale are included in Other operating revenue – Mortgage banking revenue. Residential mortgage loans held for sale also includes the fair value of residential mortgage loan commitments and forward sales commitments, which are considered derivative contracts that have not been designated as hedging instruments for accounting purposes. The volume of mortgage loans originated for sale and secondary market prices are the primary drivers of originating and marketing revenue.

Residential mortgage loan commitments are generally outstanding for 60 to 90 days, which represents the typical period from commitment to originate a residential mortgage loan to when the closed loan is sold to an investor. Residential mortgage loan commitments are subject to both credit and interest rate risk. Credit risk is managed through underwriting policies and procedures, including collateral requirements, which are generally accepted by the secondary loan markets. Exposure to interest rate fluctuations is partially managed through forward sales of residential mortgage-backed securities and forward sales contracts. These latter contracts set the price for loans that will be delivered in the next 60 to 90 days.

The unpaid principal balance of residential mortgage loans held for sale, notional amounts of derivative contracts related to residential mortgage loan commitments and forward contract sales and their related fair values included in Mortgage loans held for sale on the Consolidated Balance Sheets were (in thousands):
 September 30, 2021December 31, 2020
 Unpaid Principal Balance/
Notional		Fair ValueUnpaid Principal Balance/
Notional		Fair Value
Residential mortgage loans held for sale$163,924 $166,670 $227,161 $236,444 
Residential mortgage loan commitments239,066 8,249 380,637 20,435 
Forward sales contracts355,961 1,894 549,414 (4,563)
  $176,813  $252,316 

No residential mortgage loans held for sale were 90 days or more past due or considered impaired as of September 30, 2021 or December 31, 2020. No credit losses were recognized on residential mortgage loans held for sale for the nine month period ended September 30, 2021 and 2020.

Mortgage banking revenue was as follows (in thousands):
 Three Months Ended
September 30,		Nine Months Ended September 30,
 2021202020212020
Production revenue:  
Net realized gains on sale of mortgage loans$16,177 $36,300 $62,960 $70,126 
Net change in unrealized gain (loss) on mortgage loans held for sale(1,365)(1,672)(6,537)6,913 
Net change in the fair value of mortgage loan commitments(1,953)1,593 (12,186)23,991 
Net change in the fair value of forward sales contracts2,544 2,210 6,457 (1,844)
Total production revenue15,403 38,431 50,694 99,186 
Servicing revenue10,883 13,528 33,924 43,876 
Total mortgage banking revenue$26,286 $51,959 $84,618 $143,062 

Production revenue includes gain (loss) on residential mortgage loans held for sale and changes in the fair value of derivative contracts not designated as hedging instruments for accounting purposes related to residential mortgage loan commitments and forward sales contracts. Servicing revenue includes servicing fee income and late charges on loans serviced for others.
Residential Mortgage Servicing

Mortgage servicing rights may be originated or purchased. Both originated and purchased mortgage servicing rights are initially recognized at fair value. The Company has elected to carry all mortgage servicing rights at fair value. Changes in the fair value are recognized in earnings as they occur. The unpaid principal balance of loans serviced for others is the primary driver of servicing revenue.

The following represents a summary of mortgage servicing rights (dollars in thousands):
 September 30, 2021December 31, 2020
Number of residential mortgage loans serviced for others97,425 106,201 
Outstanding principal balance of residential mortgage loans serviced for others$14,907,736 $16,228,449 
Weighted average interest rate3.68 %3.84 %
Remaining term (in months)278280

The following represents activity in capitalized mortgage servicing rights (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Beginning Balance$117,629 $97,971 $101,172 $201,886 
Additions11,540 7,424 29,307 21,330 
Disposals— — — (10,801)
Change in fair value due to principal payments(8,806)(11,192)(30,949)(28,971)
Change in fair value due to market assumption changes12,945 3,441 33,778 (85,800)
Ending Balance$133,308 $97,644 $133,308 $97,644 

Changes in the fair value of mortgage servicing rights due to market assumption changes are included in Other operating revenue in the Consolidated Statements of Earnings. Changes in fair value due to principal payments are included in Mortgage banking costs. 

Mortgage servicing rights are not traded in active markets. Fair value is determined by discounting the projected net cash flows. Significant market assumptions used to determine fair value based on significant unobservable inputs were as follows:
 September 30, 2021December 31, 2020
Discount rate – risk-free rate plus a market premium8.46%9.14%
Prepayment rate - based upon loan interest rate, original term and loan type13.57%19.73%
Loan servicing costs – annually per loan based upon loan type:
Performing loans
$69 - $85
$69 - $94
Delinquent loans
$150 - $500
$150 - $500
Loans in foreclosure
$1,000 - $4,000
$1,000 - $4,000
Escrow earnings rate – indexed to rates paid on deposit accounts with comparable average life
1.08%0.43%
Primary/secondary mortgage rate spread
105 bps105 bps
Delinquency rate
2.36%3.54%

Changes in primary residential mortgage interest rates directly affect the prepayment speeds used in valuing our mortgage servicing rights. A separate third party model is used to estimate prepayment speeds based on interest rates, housing turnover rates, estimated loan curtailment, anticipated defaults and other relevant factors. The prepayment model is updated periodically for changes in market conditions and adjusted to better correlate with actual performance of BOK Financial’s servicing portfolio.