Quarterly report pursuant to Section 13 or 15(d)

Mortgage Servicing Rights (Tables)

v2.4.0.8
Mortgage Servicing Rights (Tables)
 6 Months Ended
Jun. 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 six months ended June 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 $12 million and $135 million at June 30, 2013 and December 31, 2012, and are not included in the tables in this Note.

Rollforward of Mortgage Servicing Rights
 
 
 
 
 
 
 
 
Three Months Ended
June 30
 
Six Months Ended
June 30
(Dollars in millions)
2013
 
2012
 
2013
 
2012
Balance, beginning of period
$
5,776

 
$
7,589

 
$
5,716

 
$
7,378

Additions
147

 
91

 
270

 
168

Sales
(862
)
 
(98
)
 
(1,045
)
 
(98
)
Impact of customer payments (1)
(260
)
 
(282
)
 
(574
)
 
(803
)
Impact of changes in interest rates and other market factors (2)
806

 
(1,717
)
 
1,138

 
(742
)
Model and other cash flow assumption changes: (3)
 
 
 
 
 
 
 
Projected cash flows, primarily due to decreases in costs to service loans
148

 
666

 
14

 
393

Impact of changes in the Home Price Index
(123
)
 
5

 
(202
)
 
20

Impact of changes to the prepayment model
228

 
342

 
403

 
342

Other model changes (4)
(33
)
 
(888
)
 
107

 
(950
)
Balance, June 30
$
5,827

 
$
5,708

 
$
5,827

 
$
5,708

Mortgage loans serviced for investors (in billions)
$
759

 
$
1,224

 
$
759

 
$
1,224

(1) 
Represents the change in the 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.
(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 are decreases of $879 million and $929 million for the three and six months ended June 30, 2012 due to changes in OAS rate inputs.

Assumption for Fair Value of MSRs
Significant Economic Assumptions
 
June 30, 2013
 
December 31, 2012
 
Fixed
 
Adjustable
 
Fixed
 
Adjustable
Weighted-average OAS
4.14
%
 
7.21
%
 
4.00
%
 
6.63
%
Weighted-average life, in years
4.90

 
2.80

 
3.65

 
2.10

Sensitivity of the Weighted-Average Lives and Fair Value of MSRs
Sensitivity Impacts
 
June 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
 
0.18

 
years
 
$
356

Impact of 20% decrease
0.50

 
 
 
0.39

 
 
 
752

 
 
 
 
 
 
 
 
 
 
Impact of 10% increase
(0.21
)
 
 
 
(0.16
)
 
 
 
(323
)
Impact of 20% increase
(0.40
)
 
 
 
(0.30
)
 
 
 
(616
)
OAS level
 
 
 
 
 
 
 
 
 
Impact of 100 bps decrease
 
 
 
 
 
 
 
 
$
291

Impact of 200 bps decrease
 
 
 
 
 
 
 
 
607

 
 
 
 
 
 
 
 
 
 
Impact of 100 bps increase
 
 
 
 
 
 
 
 
(268
)
Impact of 200 bps increase
 
 
 
 
 
 
 
 
(517
)