Mortgage Servicing Rights (Tables)

12 Months Ended

Dec. 31, 2019

Transfers and Servicing [Abstract]

Schedule of Changes in the Fair Value of Residential First Mortgage MSRs

Changes in the fair value of residential first mortgage MSRs were as follows:

	For the Years Ended December 31,
	2019			2018			2017
	(Dollars in millions)
Balance at beginning of period	$	290		$	291		$	335
Additions from loans sold with servicing retained	223			356			288
Reductions from sales	(57		)	(339		)	(310		)
Decrease in MSR fair value due to pay-offs, pay-downs, run-off, model changes, and other (1)	(89		)	(20		)	(31		)
Changes in estimates of fair value due to interest rate risk (1) (2)	(76		)	2			9
Fair value of MSRs at end of period	$	291		$	290		$	291

(1) Changes in fair value are included within net return on mortgage servicing rights on the Consolidated Statements of Operations.

(2)

Represents estimated MSR value change resulting primarily from market-driven changes.

Summary of Adverse Changes to Weighted-Average Assumptions on the Fair Value of Servicing Rights

The following table summarizes the hypothetical effect on the fair value of servicing rights using adverse changes of 10 percent and 20 percent to the weighted-average of significant assumptions used in valuing these assets:

	December 31, 2019							December 31, 2018
				Fair value resulting from							Fair value resulting from
	Actual			10% adverse change		20% adverse change		Actual			10% adverse change		20% adverse change
	(Dollars in millions)
Option adjusted spread	5.34		%	$	284	$	280	5.42		%	$	284	$	280
Constant prepayment rate	10.59		%	271		257		9.57		%	278		268
Weighted average cost to service per loan	$	84.41		285		282		$	85.57		286		283

Summary of Income and Fees

The following table summarizes income and fees associated with owned mortgage servicing rights:

	For the Years Ended December 31,
	2019			2018			2017
	(Dollars in millions)
Net return (loss) on mortgage servicing rights
Servicing fees, ancillary income and late fees (1)	$	96		$	65		$	60
Decrease in MSR fair value due to pay-offs, pay-downs, run-off, model changes, and other	(89		)	(20		)	(31		)
Changes in fair value	(76		)	2			9
Gain (loss) on MSR derivatives (2)	76			(5		)	(8		)
Net transaction costs	(1		)	(6		)	(8		)
Total return (loss) included in net return on mortgage servicing rights	$	6		$	36		$	22

(1) Servicing fees are recorded on the accrual basis. Ancillary income and late fees are recorded on a cash basis.

(2) Changes in the derivatives utilized as economic hedges to offset changes in fair value of the MSRs.    

The following table summarizes income and fees associated with our mortgage loans subserviced for others: 

	For the Years Ended December 31,
	2019			2018			2017
	(Dollars in millions)
Loan administration income on mortgage loans subserviced
Servicing fees, ancillary income and late fees (1)	$	106		$	54		$	35
Charges on subserviced custodial balances (2)	(67		)	(29		)	(11		)
Other servicing charges	(9		)	(2		)	(3		)
Total income on mortgage loans subserviced, included in loan administration	$	30		$	23		$	21

(1) Servicing fees are recorded on the accrual basis. Ancillary income and late fees are recorded on cash basis.

(2)

Charges on subserviced custodial balances represent interest due to MSR owner