Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Financial Instruments Carried at Fair Value

The following tables present the financial instruments carried at fair value by caption on the Consolidated Statement of Financial Condition and by level in the valuation hierarchy.

	September 30, 2020
	Level 1		Level 2		Level 3		Total Fair Value
	(Dollars in millions)
Investment securities available-for-sale
Agency - Commercial	$	—	$	1,171	$	—	$	1,171
Agency - Residential	—		837		—		837
Municipal obligations	—		30		—		30
Corporate debt obligations	—		77		—		77
Other MBS	—		49		—		49
Certificate of deposits	—		1		—		1
Loans held-for-sale
Residential first mortgage loans	—		5,349		—		5,349
Loans held-for-investment
Residential first mortgage loans	—		12		—		12
Home equity	—		—		2		2
Mortgage servicing rights	—		—		323		323
Derivative assets
Rate lock commitments (fallout-adjusted)	—		—		257		257
Futures	—		—		—		—
Mortgage-backed securities forwards	—		9		—		9
Interest rate swaps and swaptions	—		66		—		66
Total assets at fair value	$	—	$	7,601	$	582	$	8,183
Derivative liabilities
Mortgage backed securities forwards	$	—	$	(37)	$	—	$	(37)
Interest rate swaps	—		(9)		—		(9)
DOJ Liability	—		—		(35)		(35)
Total liabilities at fair value	$	—	$	(46)	$	(35)	$	(81)

	December 31, 2019
	Level 1		Level 2		Level 3		Total Fair Value
	(Dollars in millions)
Investment securities available-for-sale
Agency - Commercial	$	—	$	947	$	—	$	947
Agency - Residential	—		1,015		—		1,015
Municipal obligations	—		31		—		31
Corporate debt obligations	—		77		—		77
Other MBS	—		45		—		45
Certificate of Deposit	—		1		—		1
Loans held-for-sale
Residential first mortgage loans	—		5,219		—		5,219
Loans held-for-investment
Residential first mortgage loans	—		10		—		10
Home equity	—		—		2		2
Mortgage servicing rights	—		—		291		291
Derivative assets
Rate lock commitments (fallout-adjusted)	—		—		34		34
Mortgage-backed securities forwards	—		2		—		2
Interest rate swaps and swaptions	—		26		—		26
Total assets at fair value	$	—	$	7,373	$	327	$	7,700
Derivative liabilities
Rate lock commitments (fallout-adjusted)	$	—	$	—	$	(1)	$	(1)
Mortgage-backed securities forwards	—		(9)		—		(9)
Interest rate swaps	—		(8)		—		(8)
DOJ Liability	—		—		(35)		(35)
Contingent consideration	—		—		(10)		(10)
Total liabilities at fair value	$	—	$	(17)	$	(46)	$	(63)

Roll Forward of Financial Instruments Classified as Level 3

The following tables include a roll forward of the Consolidated Statements of Financial Condition amounts (including the change in fair value) for financial instruments classified by us within Level 3 of the valuation hierarchy:

	Balance at Beginning of Period		Total Gains (Losses) Recorded in Earnings (1)		Purchases / Closings		Sales		Settlement		Transfers Out		Balance at End of  Period
	(Dollars in millions)
Three Months Ended September 30, 2020
Assets
Loans held-for-investment
Home equity	$	2	$	—	$	—	$	—	$	—	$	—	$	2
Mortgage servicing rights (2)	261		(23)		85		—		—		—		323
Rate lock commitments (net) (2)(3)	205		90		333		—		—		(371)		257
Totals	$	468	$	67	$	418	$	—	$	—	$	(371)	$	582
Liabilities
DOJ Liability	$	(35)	$	—	$	—	$	—	$	—	$	—	$	(35)
Contingent consideration	(27)		—		—		—		27		—		—
Totals	$	(62)	$	—	$	—	$	—	$	27	$	—	$	(35)
Three Months Ended September 30, 2019
Assets
Loans held-for-investment
Home equity	$	2	$	—	$	—	$	—	$	—	$	—	$	2
Mortgage servicing rights (2)	316		(58)		39		(12)		—		—		285
Rate lock commitments (net) (2)(3)	50		20		113		—		—		(133)		50
Totals	$	368	$	(38)	$	152	$	(12)	$	—	$	(133)	$	337
Liabilities
DOJ Liability	$	(35)	$	—	$	—	$	—	$	—	$	—	$	(35)
Contingent consideration	(7)		(4)		—		—		3		—		(8)
Totals	$	(42)	$	(4)	$	—	$	—	$	3	$	—	$	(43)

(1)There were no unrealized gains (losses) recorded in OCI during the three months ended September 30, 2020 and 2019.

(2)We utilized swaptions, futures, forward agency and loan sales and interest rate swaps to manage the risk associated with mortgage servicing rights and rate lock commitments. Gains and losses for individual lines do not reflect the effect of our risk management activities related to such Level 3 instruments.

(3)Rate lock commitments are reported on a fallout-adjusted basis. Transfers out of Level 3 represent the settlement value of the commitments that are transferred to LHFS, which are classified as Level 2 assets.

	Balance at Beginning of Period		Total Gains (Losses) Recorded in Earnings (1)		Purchases / Closings		Sales		Settlement		Transfers Out		Balance at End of  Period
	(Dollars in millions)
Nine Months Ended September 30, 2020
Assets
Loans held-for-investment
Home equity	$	2	$	—	$	—	$	—	$	—	$	—	$	2
Mortgage servicing rights (2)	291		(131)		209		(46)		—		—		323
Rate lock commitments (net) (2)(3)	34		274		805		—		—		(856)		257
Totals	$	327	$	143	$	1,014	$	(46)	$	—	$	(856)	$	582
Liabilities
DOJ Liability	$	(35)	$	—	$	—	$	—	$	—	$	—	$	(35)
Contingent consideration	(10)		(17)		—		—		27		—		—
Totals	$	(45)	$	(17)	$	—	$	—	$	27	$	—	$	(35)
Nine Months Ended September 30, 2019
Assets
Loans held-for-investment
Home equity	$	2	$	—	$	—	$	—	$	—	$	—	$	2
Mortgage servicing rights (2)	290		(151)		203		(57)		—		—		285
Rate lock commitments (net) (2)(3)	20		75		245		—		—		(290)		50
Totals	$	312	$	(76)	$	448	$	(57)	$	—	$	(290)	$	337
Liabilities
DOJ Liability	$	(60)	$	25	$	—	$	—	$	—	$	—	$	(35)
Contingent consideration	(6)		(5)		—		—		3		—		(8)
Totals	$	(66)	$	20	$	—	$	—	$	3	$	—	$	(43)

(1)There were no unrealized gains (losses) recorded in OCI during the nine months ended September 30, 2020 and 2019.

(2)We utilized swaptions, futures, forward agency and loan sales and interest rate swaps to manage the risk associated with mortgage servicing rights and rate lock commitments. Gains and losses for individual lines do not reflect the effect of our risk management activities related to such Level 3 instruments.

(3)Rate lock commitments are reported on a fallout-adjusted basis. Transfers out of Level 3 represent the settlement value of the commitments that are transferred to LHFS, which are classified as Level 2 assets.

Quantitative Information about Recurring Level 3 Fair Value Instruments

The following tables present the quantitative information about recurring Level 3 fair value financial instruments and the fair value measurements as of:

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars in millions)
September 30, 2020
Assets
Loans held-for-investment
Home equity	$	2	Discounted cash flows	Discount rate Constant prepayment rate Constant default rate	7.2% -10.8% (9.0%) 23.1% - 34.7% (28.9%) 1.7%-2.6% (2.2%)	(1)
Mortgage servicing rights	$	323	Discounted cash flows	Option adjusted spread Constant prepayment rate Weighted average cost to service per loan	3.7% - 21.2% (7.6%) 0% - 14.3% (11.4%) $67 - $95 ($82)	(1)
Rate lock commitments (net)	$	257	Consensus pricing	Closing pull-through rate	80.6% - 87.2% (81.9%)	(1)
Liabilities
DOJ Liability	$	(35)	Discounted cash flows	See description below	See description below

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars in millions)
December 31, 2019
Assets
Loans held-for-investment
Home equity	$	2	Discounted cash flows	Discount rate Constant prepayment rate Constant default rate	7.2% -10.8% (9.0%) 13.0% - 19.5% (16.2%) 2.7%-4.0% (3.3%)	(1)
Mortgage servicing rights	$	291	Discounted cash flows	Option adjusted spread Constant prepayment rate Weighted average cost to service per loan	2.4% - 20.4% (5.3%) 0% - 12.3% (10.6%) $67 - $95 ($84)	(1)
Rate lock commitments (net)	$	34	Consensus pricing	Origination pull-through rate	80.0% - 87.2% (81.5%)	(1)
Liabilities
DOJ Liability	$	(35)	Discounted cash flows	See description below	See description below
Contingent consideration	$	(10)	Discounted cash flows	See description below	See description below	(2)

(1)Unobservable inputs were weighted by their relative fair value of the instruments.

(2)Unobservable inputs were not weighted as only one instrument exists.

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents assets measured at fair value on a nonrecurring basis:

	Total (1)		Level 2		Level 3		Losses
	(Dollars in millions)
September 30, 2020
Loans held-for-sale (2)	$	14	$	14	$	—	$	(1)
Impaired loans held-for-investment (2)
Residential first mortgage loans	21		—		21		(3)
Repossessed assets (3)	6		—		6		(3)
Totals	$	41	$	14	$	27	$	(7)
December 31, 2019
Loans held-for-sale (2)	$	6	$	6	$	—	$	(1)
Impaired loans held-for-investment (2)
Residential first mortgage loans	14		—		14		(5)
Repossessed assets (3)	10		—		10		(3)
Totals	$	30	$	6	$	24	$	(9)

(1)The fair values are determined at various dates dependent upon when certain conditions were met requiring fair value measurement.

(2)Gains (losses) reflect fair value adjustments on assets for which we did not elect the fair value option.

(3)Gains (losses) reflect write downs of repossessed assets based on the estimated fair value of the specific assets.

Quantitative Information about Nonrecurring Level 3 Fair Value Financial Instruments

The following table presents the quantitative information about nonrecurring Level 3 fair value financial instruments and the fair value measurements:

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars in millions)
September 30, 2020
Impaired loans held-for-investment
Residential first mortgage loans	$	21	Fair value of collateral	Loss severity discount	0% - 100% (12.4%)	(1)
Repossessed assets	$	6	Fair value of collateral	Loss severity discount	0% - 96.3% (31.8%)	(1)
December 31, 2019
Impaired loans held-for-investment
Residential first mortgage loans	$	14	Fair value of collateral	Loss severity discount	25% - 30% (25.9%)	(1)
Repossessed assets	$	10	Fair value of collateral	Loss severity discount	0% - 100% (17.1%)	(1)

(1)Unobservable inputs were weighted by their relative fair value of the instruments.

Carrying Amount and Estimated Fair Value of Financial Instruments

The following table presents the carrying amount and estimated fair value of financial instruments that are carried either at fair value, cost, or amortized cost:

	September 30, 2020
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
	(Dollars in millions)
Assets
Cash and cash equivalents	$	280	$	280	$	280	$	—	$	—
Investment securities available-for-sale	2,165		2,165		—		2,165		—
Investment securities held-to-maturity	440		458		—		458		—
Loans held-for-sale	5,372		5,372		—		5,372		—
Loans held-for-investment	16,476		16,266		—		12		16,254
Loans with government guarantees	2,500		2,480		—		2,480		—
Mortgage servicing rights	323		323		—		—		323
Federal Home Loan Bank stock	377		377		—		377		—
Bank owned life insurance	355		355		—		355		—
Repossessed assets	6		6		—		—		6
Other assets, foreclosure claims	22		22		—		22		—
Derivative financial instruments, assets	332		332		—		75		257
Liabilities
Retail deposits
Demand deposits and savings accounts	$	(8,223)	$	(7,634)	$	—	$	(7,634)	$	—
Certificates of deposit	(1,525)		(1,539)		—		(1,539)		—
Wholesale deposits	(1,034)		(1,053)		—		(1,053)		—
Government deposits	(1,748)		(1,703)		—		(1,703)		—
Company controlled deposits	(7,416)		(7,377)		—		(7,377)		—
Federal Home Loan Bank advances and other	(3,426)		(3,455)		—		(3,455)		—
Long-term debt	(493)		(449)		—		(449)		—
DOJ Liability	(35)		(35)		—		—		(35)
Contingent consideration	—		—		—		—		—
Derivative financial instruments, liabilities	(46)		(46)		—		(46)		—

	December 31, 2019
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
	(Dollars in millions)
Assets
Cash and cash equivalents	$	426	$	426	$	426	$	—	$	—
Investment securities available-for-sale	2,116		2,116		—		2,116		—
Investment securities held-to-maturity	598		599		—		599		—
Loans held-for-sale	5,258		5,258		—		5,258		—
Loans held-for-investment	12,129		12,031		—		10		12,021
Loans with government guarantees	736		707		—		707		—
Mortgage servicing rights	291		291		—		—		291
Federal Home Loan Bank stock	303		303		—		303		—
Bank owned life insurance	349		349		—		349		—
Repossessed assets	10		10		—		—		10
Other assets, foreclosure claims	45		45		—		45		—
Derivative financial instruments, assets	62		88		—		54		34
Liabilities
Retail deposits
Demand deposits and savings accounts	$	(6,811)	$	(6,050)	$	—	$	(6,050)	$	—
Certificates of deposit	(2,353)		(2,368)		—		(2,368)		—
Wholesale deposits	(633)		(640)		—		(640)		—
Government deposits	(1,213)		(1,156)		—		(1,156)		—
Custodial deposits	(4,136)		(4,066)		—		(4,066)		—
Federal Home Loan Bank advances	(4,815)		(4,816)		—		(4,816)		—
Long-term debt	(496)		(462)		—		(462)		—
DOJ Liability	(35)		(35)		—		—		(35)
Contingent consideration	(10)		(10)		—		—		(10)
Derivative financial instruments, liabilities	(18)		(44)		—		(43)		(1)

Changes in Fair Value Included in Earnings

The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Dollars in millions)
Assets
Loans held-for-sale
Net gain on loan sales	$	340	$	97	$	899	$	272
Loans held-for-investment
Other noninterest income	$	—	$	1	$	—	$	1
Liabilities
DOJ Liability
Other noninterest income	$	—	$	—	$	—	$	25

Differences Between Aggregate Fair Value and Aggregate Remaining Contractual Principal Balance Outstanding

The following table reflects the difference between the aggregate fair value and aggregate remaining contractual principal balance outstanding for assets and liabilities for which the fair value option has been elected:

	September 30, 2020						December 31, 2019
	UPB		Fair Value		Fair Value Over / (Under) UPB		UPB		Fair Value		Fair Value Over / (Under) UPB
	(Dollars in millions)
Assets
Nonaccrual loans
Loans held-for-sale	$	6	$	5	$	(1)	$	3	$	3	$	—
Loans held-for-investment	9		8		(1)		5		4		(1)
Total nonaccrual loans	$	15	$	13	$	(2)	$	8	$	7	$	(1)
Other performing loans
Loans held-for-sale	$	5,125	$	5,344	$	219	$	5,057	$	5,216	$	159
Loans held-for-investment	6		5		(1)		8		8		—
Total other performing loans	$	5,131	$	5,349	$	218	$	5,065	$	5,224	$	159
Total loans
Loans held-for-sale	$	5,131	$	5,349	$	218	$	5,060	$	5,219	$	159
Loans held-for-investment	15		13		(2)		13		12		(1)
Total loans	$	5,146	$	5,362	$	216	$	5,073	$	5,231	$	158
Liabilities
DOJ Liability (1)	$	(118)	$	(35)	$	83	$	(118)	$	(35)	$	83

(1)We are obligated to pay $118 million in installment payments upon meeting certain performance conditions, as described in Note 15 - Legal Proceedings, Contingencies and Commitments.