Mortgage Servicing Rights

9 Months Ended

Sep. 30, 2025


NOTE 6			Mortgage Servicing Rights

The Company capitalizes MSRs as separate assets when loans are sold and servicing is retained. MSRs may also be purchased from others. The Company carries MSRs at fair value, with changes in the fair value recorded in earnings during the period in which they occur. The Company serviced $216.1 billion of residential mortgage loans for others at September 30, 2025, and $216.6 billion at December 31, 2024, including subserviced mortgages with no corresponding MSR asset. Included in mortgage banking revenue are the MSR fair value changes arising from market rate and model assumption changes, including a gain on the sale of MSRs in the second quarter of 2024, net of the value change in derivatives used to economically hedge MSRs. These changes resulted in net gains of $12 million and net losses of $10 million for the three months ended September 30, 2025 and 2024, respectively, and net gains of $10 million and $11 million for the nine months ended September 30, 2025 and 2024, respectively. Loan servicing and ancillary fees, not including valuation changes, included in mortgage banking revenue were $173 million and $170 million for the three months ended September 30, 2025 and 2024, respectively, and $517 million and $526 million for the nine months ended September 30, 2025 and 2024, respectively.

Changes in fair value of capitalized MSRs are summarized as follows:


	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in Millions)	2025		2024		2025		2024
Balance at beginning of period	$	3,305	$	3,326	$	3,369	$	3,377
Rights purchased	—		—		—		1
Rights capitalized	71		72		194		191
Rights sold	1		1		2		(188)
Changes in fair value of MSRs
Due to fluctuations in market interest rates(a)	(3)		(121)		(43)		27
Due to revised assumptions or models(b)	13		3		23		44
Other changes in fair value(c)	(98)		(94)		(256)		(265)
Balance at end of period	$	3,289	$	3,187	$	3,289	$	3,187

(a)Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.

(b)Includes changes in MSR value not caused by changes in market interest rates, such as changes in assumed cost to service, ancillary income and option adjusted spread, as well as the impact of any model changes.

(c)Primarily the change in MSR value from passage of time and cash flows realized (decay), but also includes the impact of changes to expected cash flows not associated with changes in market interest rates, such as the impact of delinquencies.

The estimated sensitivity to changes in interest rates of the fair value of the MSR portfolio and the related derivative instruments was as follows:


	September 30, 2025												December 31, 2024
(Dollars in Millions)	Down 100 bps		Down 50 bps		Down 25 bps		Up 25 bps		Up 50 bps		Up 100 bps		Down 100 bps		Down 50 bps		Down 25 bps		Up 25 bps		Up 50 bps		Up 100 bps
MSR portfolio	$	(365)	$	(173)	$	(84)	$	78	$	150	$	275	$	(310)	$	(144)	$	(69)	$	63	$	120	$	217
Derivative instrument hedges	398		187		89		(79)		(151)		(285)		325		147		69		(61)		(118)		(220)
Net sensitivity	$	33	$	14	$	5	$	(1)	$	(1)	$	(10)	$	15	$	3	$	—	$	2	$	2	$	(3)

The fair value of MSRs and their sensitivity to changes in interest rates is influenced by the mix of the servicing portfolio and characteristics of each segment of the portfolio. The Company’s servicing portfolio consists of the distinct portfolios of government-insured mortgages, conventional mortgages and Housing Finance Agency (“HFA”) mortgages. The servicing portfolios are predominantly comprised of fixed-rate agency loans with limited adjustable-rate or jumbo mortgage loans. The HFA servicing portfolio is comprised of loans originated under state and local housing authority program guidelines which assist purchases by first-time or low- to moderate-income homebuyers through a favorable rate subsidy, down payment and/or closing cost assistance on government- and conventional-insured mortgages.

The following table provides a summary of the Company’s MSRs and related characteristics by portfolio:


	September 30, 2025												December 31, 2024
(Dollars in Millions)	HFA			Government			Conventional(d)			Total			HFA			Government			Conventional(d)			Total
Servicing portfolio(a)	$	56,166		$	23,995		$	135,668		$	215,829		$	52,807		$	25,139		$	138,428		$	216,374
Fair value	$	840		$	472		$	1,977		$	3,289		$	856		$	512		$	2,001		$	3,369
Value (bps)(b)	150			197			146			152			162			204			145			156
Weighted-average servicing fees (bps)	35			45			25			30			35			45			25			30
Multiple (value/servicing fees)	4.23			4.41			5.75			5.06			4.57			4.56			5.69			5.17
Weighted-average note rate	5.12		%	4.40		%	4.01		%	4.34		%	4.92		%	4.35		%	3.87		%	4.18		%
Weighted-average age (in years)	4.7			6.6			5.4			5.4			4.5			6.1			5.0			5.0
Weighted-average expected prepayment (constant prepayment rate)	10.0		%	10.2		%	8.3		%	8.9		%	9.9		%	10.2		%	7.8		%	8.6		%
Weighted-average expected life (in years)	7.5			6.8			7.2			7.3			7.5			6.8			7.4			7.4
Weighted-average option adjusted spread(c)	7.3		%	6.9		%	5.1		%	5.9		%	5.8		%	6.2		%	5.6		%	5.7		%

(a)Represents principal balance of mortgages having corresponding MSR asset.

(b)Calculated as fair value divided by the servicing portfolio.

(c)Option adjusted spread is the incremental spread added to the risk-free rate to reflect optionality and other risk inherent in the MSRs.

(d)Represents loans sold primarily to GSEs.