Quarterly report pursuant to Section 13 or 15(d)

Mortgage Servicing Rights (Tables)

v2.4.0.6
Mortgage Servicing Rights (Tables)
 3 Months Ended
Mar. 31, 2013
Transfers and Servicing [Abstract]  
Activity for Residential First Mortgage MSRs
The table below presents activity for residential first-lien MSRs for the three months ended March 31, 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 $120 million and $135 million at March 31, 2013 and December 31, 2012, and are not included in the tables in this Note.

Rollforward of Mortgage Servicing Rights
 
 
 
 
Three Months Ended
March 31
(Dollars in millions)
2013
 
2012
Balance, January 1
$
5,716

 
$
7,378

Additions
123

 
77

Sales
(183
)
 
—

Impact of customer payments (1)
(314
)
 
(521
)
Impact of changes in interest rates and other market factors (2)
332

 
925

Model and other cash flow assumption changes: (3)
 
 
 
Projected cash flows, primarily due to increases in costs to service loans
(134
)
 
(273
)
Impact of changes in the Home Price Index
(79
)
 
15

Impact of changes to the prepayment model
175

 
—

Other model changes
140

 
(12
)
Balance, March 31
$
5,776

 
$
7,589

Mortgage loans serviced for investors (in billions)
$
949

 
$
1,313

(1) 
Represents the change in the market value of the MSR asset due to the impact of customer payments received during the period.
(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, as well as changes in OAS and prepayment rates.
(3) 
These amounts reflect periodic adjustments to the valuation model as well as changes in certain cash flow assumptions such as cost to service and ancillary income per loan. For the three months ended March 31, 2013 and 2012, included in other model changes is the effect to the MSR cash flow assumptions caused by changes in spreads between primary and secondary markets.

Assumption for Fair Value of MSRs
The significant economic assumptions used in determining the fair value of MSRs at March 31, 2013 and December 31, 2012 are presented below.

Significant Economic Assumptions
 
March 31, 2013
 
December 31, 2012
 
Fixed
 
Adjustable
 
Fixed
 
Adjustable
Weighted-average OAS
3.98
%
 
6.65
%
 
4.00
%
 
6.63
%
Weighted-average life, in years
4.05

 
2.10

 
3.65

 
2.10

Sensitivity of the Weighted-Average Lives and Fair Value of MSRs

Sensitivity Impacts
 
March 31, 2013
 
Change in Weighted-average Lives
 
 
(Dollars in millions)
Fixed
 
Adjustable
 
Change in
Fair Value
Prepayment rates
 
 
 
 
 
 
 
 
 
Impact of 10% decrease
0.31

 
years
 
0.21

 
years
 
$
462

Impact of 20% decrease
0.67

 
 
 
0.45

 
 
 
984

 
 
 
 
 
 
 
 
 
 
Impact of 10% increase
(0.28
)
 
 
 
(0.18
)
 
 
 
(412
)
Impact of 20% increase
(0.52
)
 
 
 
(0.34
)
 
 
 
(781
)
OAS level
 
 
 
 
 
 
 
 
 
Impact of 100 bps decrease
 
 
 
 
 
 
 
 
$
277

Impact of 200 bps decrease
 
 
 
 
 
 
 
 
578

 
 
 
 
 
 
 
 
 
 
Impact of 100 bps increase
 
 
 
 
 
 
 
 
(255
)
Impact of 200 bps increase
 
 
 
 
 
 
 
 
(490
)