Servicing Activities

Mortgage Servicing Rights

The following table summarizes past activity related to mortgage servicing rights (MSRs), which were carried at fair value. Management estimated fair value using our transaction data and other market data or, in periods when there were limited MSRs market transactions that were directly observable, internally developed discounted cash flow models (an income approach) were used to estimate the fair value. These internal valuation models estimated net cash flows based on internal operating assumptions that we believed would be used by market participants in orderly transactions combined with market-based assumptions for loan prepayment rates, interest rates, and discount rates that we believed approximate yields required by investors in this asset.



Three months ended June 30, ($ in millions)	2014		2013
Estimated fair value at April 1,	$	—	$	917
Additions	—		6
Sales (a)	—		(911		)
Changes in fair value
Due to changes in valuation inputs or assumptions used in the valuation model	—		(4		)
Other changes in fair value	—		(8		)
Estimated fair value at June 30,	$	—	$	—


(a)	Includes the sales of agency MSRs to Ocwen Financial Corp. (Ocwen) and Quicken Loans, Inc. (Quicken) on April 1, 2013 and April 16, 2013.



Six months ended June 30, ($ in millions)	2014		2013
Estimated fair value at January 1,	$	—	$	952
Additions	—		60
Sales (a)	—		(911		)
Changes in fair value
Due to changes in valuation inputs or assumptions used in the valuation model	—		(32		)
Other changes in fair value	—		(69		)
Estimated fair value at June 30,	$	—	$	—


(a)	Includes the sales of agency MSRs to Ocwen and Quicken on April 1, 2013 and April 16, 2013.

Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model included all changes due to a revaluation by a model or by a benchmarking exercise. Other changes in fair value primarily included the accretion of the present value of the discount related to forecasted cash flows and the economic runoff of the portfolio.

Risk Mitigation Activities

The primary risk of servicing rights is interest rate risk and the resulting impact on prepayments. A significant decline in interest rates could lead to higher-than-expected prepayments that could reduce the value of the MSRs. We previously economically hedged the impact of these risks with both derivative and nonderivative financial instruments. Refer to Note 19 for additional information regarding the derivative financial instruments used to economically hedge MSRs.

The components of servicing valuation and hedge activities, net, were as follows.



	Three months ended June 30,					Six months ended June 30,
($ in millions)	2014		2013			2014		2013
Change in estimated fair value of mortgage servicing rights	$	—	$	(12	)	$	—	$	(101	)
Change in fair value of derivative financial instruments	—		—			—		(112		)
Servicing asset valuation and hedge activities, net	$	—	$	(12	)	$	—	$	(213	)

Mortgage Servicing Fees

The components of mortgage servicing fees were as follows.



	Three months ended June 30,				Six months ended June 30,
($ in millions)	2014		2013		2014		2013
Contractual servicing fees, net of guarantee fees and including subservicing	$	—	$	3	$	—	$	61
Late fees	—		—		—		1
Ancillary fees	—		—		—		4
Total mortgage servicing fees	$	—	$	3	$	—	$	66

Automobile Finance Servicing Activities

We service consumer automobile contracts. Historically, we have sold a portion of our consumer automobile contracts. With respect to contracts we sell, we retain the right to service and earn a servicing fee for our servicing function. Typically, we conclude that the fee we are paid for servicing consumer automobile finance receivables represents adequate compensation, and consequently, we do not recognize a servicing asset or liability. We recognized automobile servicing fees of $7 million and $16 million during the three months and six months ended June 30, 2014, respectively, compared to $16 million and $35 million for the three months and six months ended June 30, 2013, respectively.

Automobile Finance Serviced Assets

The total serviced automobile finance loans outstanding were as follows.



($ in millions)	June 30, 2014		December 31, 2013
On-balance sheet automobile finance loans and leases
Consumer automobile	$	58,114	$	56,417
Commercial automobile	33,041		33,803
Operating leases	18,814		17,680
Other	50		54
Off-balance sheet automobile finance loans
Loans sold to third-party investors
Securitizations	650		887
Whole-loan	1,586		2,748
Total serviced automobile finance loans and leases	$	112,255	$	111,589