Goodwill impairment testing

Goodwill is tested for impairment during the fourth quarter of each fiscal year, or more often if events or circumstances, such as adverse changes in the business climate, indicate that there may be an impairment. Refer to Note 15 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of the Firm’s goodwill impairment testing.

Unanticipated declines in business performance, increases in credit losses, increases in capital requirements, as well as deterioration in economic or market conditions, adverse regulatory or legislative changes or increases in the estimated market cost of equity, could cause the estimated fair values of the Firm’s reporting units to decline in the future, which could result in a material impairment charge to earnings in a future period related to some portion of the associated goodwill.

As of March 31, 2022, the Firm reviewed current economic conditions, estimated market cost of equity, as well as actual business results and projections of business performance. Based on such reviews, the Firm has concluded that goodwill was not impaired as of March 31, 2022, or December 31, 2021, nor was goodwill written off due to impairment during the three months ended March 31, 2022 or 2021.

Mortgage servicing rights

MSRs represent the fair value of expected future cash flows for performing servicing activities for others. The fair value considers estimated future servicing fees and ancillary revenue, offset by estimated costs to service the loans, and generally declines over time as net servicing cash flows are received, effectively amortizing the MSR asset against contractual servicing and ancillary fee income. MSRs are either purchased from third parties or recognized upon sale or securitization of mortgage loans if servicing is retained. Refer to Notes 2 and 15 of JPMorgan Chase’s 2021 Form 10-K for a further description of the MSR asset, interest rate risk management, and the valuation of MSRs.

The following table summarizes MSR activity for the three months ended March 31, 2022 and 2021.


	As of or for the three months ended March 31,
(in millions, except where otherwise noted)	2022		2021
Fair value at beginning of period	$	5,494	$	3,276
MSR activity:
Originations of MSRs	415		404
Purchase of MSRs	715		179
Disposition of MSRs	(57)		1
Net additions/(dispositions)	1,073		584

Changes due to collection/realization of expected cash flows	(232)		(187)

Changes in valuation due to inputs and assumptions:
Changes due to market interest rates and other(a)	894		836
Changes in valuation due to other inputs and assumptions:
Projected cash flows (e.g., cost to service)	—		(24)
Discount rates	—		—
Prepayment model changes and other(b)	65		(15)
Total changes in valuation due to other inputs and assumptions	65		(39)
Total changes in valuation due to inputs and assumptions	959		797
Fair value at March 31	$	7,294	$	4,470

Changes in unrealized gains/(losses) included in income related to MSRs held at March 31	$	959	$	797
Contractual service fees, late fees and other ancillary fees included in income	370		291
Third-party mortgage loans serviced at March 31, (in billions)	576		444
Servicer advances, net of an allowance for uncollectible amounts, at March 31, (in billions)(c)	1.4		1.8

(a)Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments.

(b)Represents changes in prepayments other than those attributable to changes in market interest rates.

(c)Represents amounts the Firm pays as the servicer (e.g., scheduled principal and interest, taxes and insurance), which will generally be reimbursed within a short period of time after the advance from future cash flows from the trust or the underlying loans. The Firm’s credit risk associated with these servicer advances is minimal because reimbursement of the advances is typically senior to all cash payments to investors. In addition, the Firm maintains the right to stop payment to investors if the collateral is insufficient to cover the advance. However, certain of these servicer advances may not be recoverable if they were not made in accordance with applicable rules and agreements.

The following table presents the components of mortgage fees and related income (including the impact of MSR risk management activities) for the three months ended March 31, 2022 and 2021.


	Three months ended March 31,
(in millions)	2022		2021


CCB mortgage fees and related income
Production revenue	$	211	$	757

Net mortgage servicing revenue:
Operating revenue:
Loan servicing revenue	368		248
Changes in MSR asset fair value due to collection/realization of expected cash flows	(232)		(187)
Total operating revenue	136		61
Risk management:
Changes in MSR asset fair value due to market interest rates and other(a)	894		836
Other changes in MSR asset fair value due to other inputs and assumptions in model(b)	65		(39)
Changes in derivative fair value and other	(850)		(912)
Total risk management	109		(115)
Total net mortgage servicing revenue	245		(54)

Total CCB mortgage fees and related income	456		703

All other	4		1
Mortgage fees and related income	$	460	$	704

(a)Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments.

(b)Represents the aggregate impact of changes in model inputs and assumptions such as projected cash flows (e.g., cost to service), discount rates and changes in prepayments other than those attributable to changes in market interest rates (e.g., changes in prepayments due to changes in home prices).

Changes in fair value based on variations in assumptions generally cannot be easily extrapolated, because the relationship of the change in the assumptions to the change in fair value are often highly interrelated and may not be linear. In the following table, the effect that a change in a particular assumption may have on the fair value is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which would either magnify or counteract the impact of the initial change.

The table below outlines the key economic assumptions used to determine the fair value of the Firm’s MSRs at March 31, 2022, and December 31, 2021, and outlines hypothetical sensitivities of those fair values to immediate adverse changes in those assumptions, as defined below.


(in millions, except rates)	Mar 31, 2022			Dec 31, 2021
Weighted-average prepayment speed assumption (constant prepayment rate)	7.68		%	9.90		%
Impact on fair value of 10% adverse change	$	(206)		$	(210)
Impact on fair value of 20% adverse change	(398)			(404)
Weighted-average option adjusted spread(a)	5.99		%	6.44		%
Impact on fair value of a 100 basis point adverse change	$	(300)		$	(225)
Impact on fair value of a 200 basis point adverse change	(577)			(433)

(a)Includes the impact of operational risk and regulatory capital.