Mortgage banking activities consist of residential and commercial mortgage originations, sales and servicing.

We apply the amortization method to commercial MSRs and apply the fair value method to residential MSRs. The amortized

cost of commercial MSRs was $1.2 billion and $1.3 billion, with an estimated fair value of $1.9 billion and $1.7 billion, at March 31, 2022 and 2021, respectively. Table 9.1 presents the changes in MSRs measured using the fair value method.

Table 9.1: Analysis of Changes in Fair Value MSRs


	Quarter ended March 31,
(in millions)		2022		2021
Fair value, beginning of period		$	6,920	6,125
Servicing from securitizations or asset transfers (1)		342		406
Sales and other (2)		1		(1)
Net additions		343		405
Changes in fair value:
Due to valuation inputs or assumptions:
Mortgage interest rates (3)		1,699		1,630
Servicing and foreclosure costs (4)		(3)		9
Discount rates		55		47
Prepayment estimates and other (5)		(146)		(95)
Net changes in valuation inputs or assumptions		1,605		1,591
Changes due to collection/realization of expected cash flows (6)		(357)		(585)
Total changes in fair value		1,248		1,006
Fair value, end of period		$	8,511	7,536

(1)Includes impacts associated with exercising cleanup calls on securitizations and our right to repurchase delinquent loans from GNMA loan securitization pools. MSRs may increase upon repurchase due to servicing liabilities associated with these delinquent GNMA loans.

(2)Includes sales and transfers of MSRs, which can result in an increase in MSRs if related to portfolios with servicing liabilities.

(3)Includes prepayment rate changes as well as other valuation changes due to changes in mortgage interest rates.

(4)Includes costs to service and unreimbursed foreclosure costs.

(5)Represents other changes in valuation model inputs or assumptions including prepayment rate estimation changes that are independent of mortgage interest rate changes.

(6)Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.

Table 9.2 provides key economic assumptions and sensitivity of the current fair value of residential MSRs to immediate adverse changes in those assumptions. Amounts for residential MSRs include purchased servicing rights as well as servicing

rights resulting from the transfer of loans. See Note 15 (Fair Values of Assets and Liabilities) for additional information on key economic assumptions for residential MSRs.

Table 9.2: Economic Assumptions and Sensitivity of Residential MSRs


($ in millions, except cost to service amounts)	Mar 31, 2022			Dec 31, 2021
Fair value of interests held	$	8,511		6,920
Expected weighted-average life (in years)	5.7			4.7

Key economic assumptions:
Prepayment rate assumption (1)	11.1		%	14.7
Impact on fair value from 10% adverse change	$	339		356
Impact on fair value from 25% adverse change	803			834

Discount rate assumption	7.4		%	6.4
Impact on fair value from 100 basis point increase	$	337		276
Impact on fair value from 200 basis point increase	646			529

Cost to service assumption ($ per loan)	102			106
Impact on fair value from 10% adverse change	177			165
Impact on fair value from 25% adverse change	441			411

(1)Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.

The sensitivities in the preceding table are hypothetical and caution should be exercised when relying on this data. Changes in value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in value may not be linear. Also, the effect of a variation in a particular assumption on the value of the other interests held is calculated independently without changing

any other assumptions. In reality, changes in one factor may result in changes in others, which might magnify or counteract the sensitivities.

We present the components of our managed servicing portfolio in Table 9.3 at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.

Table 9.3: Managed Servicing Portfolio


(in billions)	Mar 31, 2022			Dec 31, 2021
Residential mortgage servicing:
Serviced and subserviced for others	$	705		718
Owned loans serviced	273			276
Total residential servicing	978			994
Commercial mortgage servicing:
Serviced and subserviced for others	598			597
Owned loans serviced	132			130
Total commercial servicing	730			727
Total managed servicing portfolio	$	1,708		1,721
Total serviced for others, excluding subserviced for others	$	1,293		1,304
MSRs as a percentage of loans serviced for others	0.75		%	0.63
Weighted average note rate (mortgage loans serviced for others)	3.81			3.82

At March 31, 2022, and December 31, 2021, we had servicer advances, net of an allowance for uncollectible amounts, of $2.9 billion and $3.2 billion, respectively. As the servicer of loans for others, we advance certain payments of principal, interest, taxes, insurance, and default-related expenses which are generally reimbursed within a short timeframe from cash flows from the trust, GSEs, insurer or borrower. The credit risk related to these advances is limited since the reimbursement is generally senior to cash payments to investors. We also advance payments of taxes and insurance for our owned loans which are collectible

from the borrower. We maintain an allowance for uncollectible amounts for advances on loans serviced for others that may not be reimbursed if the payments were not made in accordance with applicable servicing agreements or if the insurance or servicing agreements contain limitations on reimbursements. Servicing advances on owned loans are charged-off when deemed uncollectible.

Table 9.4 presents the components of mortgage banking noninterest income.

Table 9.4: Mortgage Banking Noninterest Income


		Quarter ended March 31,
(in millions)			2022		2021
Servicing fees:
Contractually specified servicing fees, late charges and ancillary fees			$	635	724
Unreimbursed direct servicing costs (1)			(24)		(124)
Servicing fees			611		600
Amortization (2)			(59)		(65)
Changes due to collection/realization of expected cash flows (3)	(A)		(357)		(585)
Net servicing fees			195		(50)
Changes in fair value of MSRs due to valuation inputs or assumptions (4)	(B)		1,605		1,591
Net derivative gains (losses) from economic hedges (5)			(1,646)		(1,640)
Market-related valuation changes to MSRs, net of hedge results			(41)		(49)
Total net servicing income			154		(99)
Net gains on mortgage loan originations/sales (6)			539		1,425
Total mortgage banking noninterest income			693		1,326
Total changes in fair value of MSRs carried at fair value	(A)+(B)		$	1,248	1,006

(1)Includes costs associated with foreclosures, unreimbursed interest advances to investors, and other interest costs.

(2)Includes a $4 million reversal of impairment recorded in first quarter 2022 on the commercial amortized MSRs. There was no impairment recorded in first quarter 2021 on the commercial amortized MSRs.

(3)Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.

(4)Refer to the analysis of changes in fair value MSRs presented in Table 9.1 in this Note for more detail.

(5)See Note 14 (Derivatives) for additional discussion and detail on economic hedges.

(6)Includes net gains (losses) of $1.3 billion in both first quarter 2022 and 2021, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments.