Quarterly report pursuant to Section 13 or 15(d)

Mortgage Servicing Rights (Tables)

v2.4.0.8
Mortgage Servicing Rights (Tables)
 9 Months Ended
Sep. 30, 2013
Transfers and Servicing [Abstract]  
Activity for Residential First Mortgage MSRs
The table below presents activity for residential first-lien MSRs for the three and nine months ended September 30, 2013 and 2012. Commercial and residential reverse MSRs, which are carried at the lower of cost or market value and accounted for using the amortization method, totaled $10 million and $135 million at September 30, 2013 and December 31, 2012, and are not included in the tables in this Note.

Rollforward of Mortgage Servicing Rights
 
 
 
 
 
 
 
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
(Dollars in millions)
2013
 
2012
 
2013
 
2012
Balance, beginning of period
$
5,827

 
$
5,708

 
$
5,716

 
$
7,378

Additions
129

 
100

 
399

 
268

Sales
(729
)
 
(15
)
 
(1,774
)
 
(113
)
Amortization of expected cash flows (1)
(240
)
 
(346
)
 
(814
)
 
(1,149
)
Impact of changes in interest rates and other market factors (2)
24

 
(280
)
 
1,162

 
(1,022
)
Model and other cash flow assumption changes: (3)
 
 
 
 
 
 
 
Projected cash flows, primarily due to decreases in costs to service loans
9

 
113

 
23

 
506

Impact of changes in the Home Price Index
(197
)
 
(62
)
 
(399
)
 
(42
)
Impact of changes to the prepayment model
206

 
—

 
609

 
342

Other model changes (4)
29

 
(131
)
 
136

 
(1,081
)
Balance, September 30
$
5,058

 
$
5,087

 
$
5,058

 
$
5,087

Mortgage loans serviced for investors (in billions)
$
616

 
$
1,142

 
$
616

 
$
1,142

(1) 
Represents the net change in fair value of the MSR asset due to the recognition of modeled cash flows.
(2) 
These amounts reflect the changes in modeled MSR fair value primarily due to observed changes in interest rates, volatility, spreads and the shape of the forward swap curve.
(3) 
These amounts reflect periodic adjustments to the valuation model to reflect changes in the modeled relationship between inputs and their impact on projected cash flows as well as changes in certain cash flow assumptions such as cost to service and ancillary income per loan.
(4) 
These amounts include the impact of periodic recalibrations of the model to reflect changes in the relationship between market interest rate spreads and projected cash flows. Also included is a decrease of $929 million for the nine months ended September 30, 2012 due to changes in OAS rate inputs.

Assumption for Fair Value of MSRs
Significant Economic Assumptions
 
September 30, 2013
 
December 31, 2012
 
Fixed
 
Adjustable
 
Fixed
 
Adjustable
Weighted-average OAS
4.08
%
 
7.33
%
 
4.00
%
 
6.63
%
Weighted-average life, in years
5.19

 
2.75

 
3.65

 
2.10

Sensitivity of the Weighted-Average Lives and Fair Value of MSRs
Sensitivity Impacts
 
September 30, 2013
 
Change in Weighted-average Lives
 
 
(Dollars in millions)
Fixed
 
Adjustable
 
Change in
Fair Value
Prepayment rates
 
 
 
 
 
 
 
 
 
Impact of 10% decrease
0.24

 
years
 
0.19

 
years
 
$
303

Impact of 20% decrease
0.51

 
 
 
0.40

 
 
 
639

 
 
 
 
 
 
 
 
 
 
Impact of 10% increase
(0.22
)
 
 
 
(0.16
)
 
 
 
(275
)
Impact of 20% increase
(0.42
)
 
 
 
(0.31
)
 
 
 
(526
)
OAS level
 
 
 
 
 
 
 
 
 
Impact of 100 bps decrease
 
 
 
 
 
 
 
 
$
261

Impact of 200 bps decrease
 
 
 
 
 
 
 
 
545

 
 
 
 
 
 
 
 
 
 
Impact of 100 bps increase
 
 
 
 
 
 
 
 
(240
)
Impact of 200 bps increase
 
 
 
 
 
 
 
 
(461
)