Loan Servicing

Residential Mortgage Banking Activities

The following tables summarize residential mortgage banking activities:



(Dollars in millions)	Jun 30, 2018		Dec 31, 2017
UPB of residential mortgage and home equity loan servicing portfolio	$	118,753	$	118,424
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate	88,492		89,124
Mortgage loans sold with recourse	452		490
Maximum recourse exposure from mortgage loans sold with recourse liability	237		251
Indemnification, recourse and repurchase reserves	34		37



As of / For the Six Months Ended June 30,
(Dollars in millions)	2018			2017
UPB of residential mortgage loans sold from LHFS	$	5,536		$	6,309
Pre-tax gains recognized on mortgage loans sold and held for sale	74			65
Servicing fees recognized from mortgage loans serviced for others	128			133
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others	0.28		%	0.28		%
Weighted average interest rate on mortgage loans serviced for others	4.01			4.00

The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value:



Six Months Ended June 30,
(Dollars in millions)	2018			2017
Residential MSRs, carrying value, January 1	$	914		$	915
Additions	63			63
Change in fair value due to changes in valuation inputs or assumptions:
Prepayment speeds	67			(45		)
OAS	17			42
Servicing costs	—			9
Realization of expected net servicing cash flows, passage of time and other	(70		)	(69		)
Residential MSRs, carrying value, June 30	$	991		$	915

Gains (losses) on derivative financial instruments used to mitigate the income statement effect of changes in residential MSR fair value	$	(84	)	$	3

The sensitivity of the fair value of the residential MSRs to changes in key assumptions is presented in the following table:



	June 30, 2018							December 31, 2017
	Range				Weighted Average			Range				Weighted Average
(Dollars in millions)	Min		Max					Min		Max
Prepayment speed	7.8	%	8.9	%	8.1		%	7.1	%	10.1	%	9.1		%
Effect on fair value of a 10% increase					$	(29	)					$	(31	)
Effect on fair value of a 20% increase					(56		)					(60		)

OAS	7.9	%	8.5	%	8.1		%	8.4	%	8.9	%	8.5		%
Effect on fair value of a 10% increase					$	(30	)					$	(28	)
Effect on fair value of a 20% increase					(57		)					(54		)

Composition of loans serviced for others:
Fixed-rate residential mortgage loans					99.2		%					99.1		%
Adjustable-rate residential mortgage loans					0.8							0.9
Total					100.0		%					100.0		%

Weighted average life					7.0 years							6.4 years

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of an adverse variation in one assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change.

Commercial Mortgage Banking Activities

The following table summarizes commercial mortgage banking activities for the periods presented:



(Dollars in millions)	Jun 30, 2018		Dec 31, 2017
UPB of CRE mortgages serviced for others	$	27,586	$	28,441
CRE mortgages serviced for others covered by recourse provisions	4,475		4,153
Maximum recourse exposure from CRE mortgages sold with recourse liability	1,241		1,218
Recorded reserves related to recourse exposure	5		5
CRE mortgages originated during the year-to-date period	3,337		6,753
Commercial MSRs at fair value	152		142