Mortgage Banking

12 Months Ended

Dec. 31, 2011

Mortgage Banking [Abstract]

Mortgage Banking

Note 8 – Mortgage Banking

Mortgage Servicing Rights

The activity in MSR is detailed in the table below ($ in thousands):

	2011			2010
Balance at beginning of period	$	51,151		$	50,513
Origination of servicing assets		14,160			18,657
Disposals of mortgage loans sold serviced released		-			(1,772	)
Change in fair value:
Due to market changes		(15,130	)		(8,943	)
Due to runoff		(6,907	)		(7,304	)
Balance at end of period	$	43,274		$	51,151

In the determination of the fair value of MSR at the date of securitization, certain key economic assumptions are made.  At December 31, 2011, the fair value of MSR included an assumed average prepayment speed of 18.55 CPR and an average discount rate of 10.80%.  By way of example, an increase in either the prepayment speed or discount rate assumption will result in a decrease in the fair value of the MSR, while a decrease in either assumption will result in an increase in the fair value of the MSR.  In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and discount rates.  These fluctuations can be rapid and may continue to be significant.  Therefore, estimating prepayment speed and/or discount rates within ranges that market participants would use in determining the fair value of MSR requires significant management judgment.

During the first quarter of 2010, Trustmark completed the final settlement of the sale of approximately $920.9 million in mortgages serviced for others, which reduced Trustmark's MSR by approximately $8.5 million. In addition, during December of 2010, Trustmark purchased approximately $53.9 million of GNMA serviced loans, which were subsequently sold to a third party. Trustmark retained the servicing for these loans, which are fully guaranteed by FHA/VA. The effect of these transactions did not have a material impact on Trustmark's results of operations.

Mortgage Loans Sold/Serviced

During 2011 and 2010, Trustmark sold $969.4 million and $1.1 billion of residential mortgage loans. Pretax gains on these sales were recorded in mortgage banking noninterest income and totaled $12.0 million in 2011, $15.3 million in 2010 and $20.8 million in 2009.  Trustmark receives annual servicing fee income approximating 0.33% of the outstanding balance of the underlying loans.  Trustmark's total mortgage loans serviced for others totaled $4.5 billion at December 31, 2011, compared with $4.3 billion at December 31, 2010.  The investors and the securitization trusts have no recourse to the assets of Trustmark for failure of debtors to pay when due.

Trustmark is subject to losses in its loan servicing portfolio due to loan foreclosures.  For loans sold without recourse, Trustmark has obligations to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations or warranties made by Trustmark at the time of the sale, herein referred to as mortgage loan servicing putback expenses.  Such representations and warranties typically include those made regarding loans that had missing or insufficient file documentation and/or loans obtained through fraud by borrowers or other third parties such as appraisers.  The total mortgage loan servicing putback expenses incurred by Trustmark during 2011 were $5.1 million, $2.1 million during 2010 and were immaterial for 2009.  At December 31, 2011 and 2010, accrued mortgage loan servicing putback expenses were approximately $4.3 million and $900 thousand, respectively.  There is inherent uncertainty in reasonably estimating the requirement for reserves against future mortgage loan servicing putback expenses.  Future putback expenses are dependent on many subjective factors, including the review procedures of the purchasers and the potential refinance activity on loans sold with servicing released and the subsequent consequences under the representations and warranties.