| 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, 2011 and 2010. Commercial and residential reverse MSRs, which are carried at the lower of cost or market value and accounted for using the amortization method, totaled $157 million and $278 million at September 30, 2011 and December 31, 2010, and are not included in the tables in this Note.
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Three Months Ended September 30 |
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Nine Months Ended September 30 |
(Dollars in millions) |
2011 |
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2010 |
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2011 |
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2010 |
Balance, beginning of period |
$ |
12,372 |
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$ |
14,745 |
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$ |
14,900 |
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$ |
19,465 |
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Additions |
251 |
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|
784 |
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1,502 |
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2,861 |
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Sales |
(218 |
) |
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(39 |
) |
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(452 |
) |
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(103 |
) |
Impact of customer payments (1)
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(665 |
) |
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(924 |
) |
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(2,010 |
) |
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(2,961 |
) |
Impact of changes in interest rates and other market factors (2)
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(4,471 |
) |
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(2,142 |
) |
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(4,856 |
) |
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(6,142 |
) |
Model and other cash flow assumption changes: (3)
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Projected cash flows, primarily due to increases in cost to service loans |
(243 |
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(1,648 |
) |
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(2,272 |
) |
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(2,724 |
) |
Impact of changes in the Home Price Index |
— |
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905 |
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434 |
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871 |
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Impact of changes to the prepayment model |
1,470 |
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717 |
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1,596 |
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1,144 |
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Other model changes |
(616 |
) |
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(147 |
) |
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(962 |
) |
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(160 |
) |
Balance, September 30 |
$ |
7,880 |
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$ |
12,251 |
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$ |
7,880 |
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$ |
12,251 |
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Mortgage loans serviced for investors (in billions) |
$ |
1,512 |
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$ |
1,669 |
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$ |
1,512 |
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$ |
1,669 |
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(1) |
Represents the change in the market value of the MSR asset due to the impact of customer payments received during the period. |
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(2) |
These amounts reflect the changes in modeled MSR fair value largely due to observed changes in interest rates, volatility, spreads and the shape of the forward swap curve. |
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(3) |
These amounts reflect periodic adjustments to the valuation model as well as changes in certain cash flow assumptions such as costs to service and ancillary income per loan. |
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