XML 47 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
MORTGAGE BANKING (Tables)
 6 Months Ended
Jun. 30, 2018
Mortgage Banking [Abstract]  
Schedule of mortgage banking activities
Information related to residential mortgage loan sales and the Company's mortgage banking activity is presented below:
 
Three Months Ended June 30,
Six Months Ended June 30,
(in millions)
2018

 
2017

2018

 
2017

Residential mortgage loan sale proceeds

$670

 

$729


$1,325

 

$1,544

Gain on sales
17

 
19

30

 
29

Mortgage servicing fees
16

 
14

31

 
27

Repurchased residential mortgages
—

 
—

2

 
1

Valuation recoveries
—

 
1

3

 
1
Schedule of valuation allowance for impairment of recognized servicing assets
Changes related to MSRs are presented below:
 
As of and for the Three Months Ended June 30,
 
As of and for the Six Months Ended June 30,
(in millions)
2018

 
2017

 
2018

 
2017

MSRs:
 
 
 
 
 
 
 
Balance as of beginning of period

$201

 

$170

 

$201

 

$168

Amount capitalized
8

 
8

 
15

 
18

Purchases
16

 
—

 
16

 
—

Amortization
(8
)
 
(8
)
 
(15
)
 
(16
)
Carrying amount before valuation allowance
217

 
170

 
217

 
170

Valuation allowance for servicing assets:
 
 
 
 
 
 
 
Balance as of beginning of period
—

 
5

 
3

 
5

Valuation recoveries
—

 
(1
)
 
(3
)
 
(1
)
Balance at end of period
—

 
4

 
—

 
4

Net carrying value of MSRs

$217

 

$166

 

$217

 

$166
Servicing asset at amortized cost
Changes related to MSRs are presented below:
 
As of and for the Three Months Ended June 30,
 
As of and for the Six Months Ended June 30,
(in millions)
2018

 
2017

 
2018

 
2017

MSRs:
 
 
 
 
 
 
 
Balance as of beginning of period

$201

 

$170

 

$201

 

$168

Amount capitalized
8

 
8

 
15

 
18

Purchases
16

 
—

 
16

 
—

Amortization
(8
)
 
(8
)
 
(15
)
 
(16
)
Carrying amount before valuation allowance
217

 
170

 
217

 
170

Valuation allowance for servicing assets:
 
 
 
 
 
 
 
Balance as of beginning of period
—

 
5

 
3

 
5

Valuation recoveries
—

 
(1
)
 
(3
)
 
(1
)
Balance at end of period
—

 
4

 
—

 
4

Net carrying value of MSRs

$217

 

$166

 

$217

 

$166
Schedule of fair value assumptions used to estimate the value of Mortgage Servicing Rights
The key economic assumptions used to estimate the value of MSRs are presented in the following table:
 
June 30, 2018
 
December 31, 2017
 
Weighted Average
 
 
Weighted Average
 
(dollars in millions)
Range
 
Range
Fair value
$254
Min
Max
 
$218
Min
Max
Weighted average life (in years)
6.4
2.4
8.7
 
5.9
2.3
8.4
Weighted average constant prepayment rate
9.4%
6.0%
20.8%
 
10.0%
6.6%
20.1%
Weighted average discount rate
9.8%
9.1%
12.1%
 
9.9%
9.1%
12.1%
Schedule of fair value assumptions used to estimate the value of Mortgage Servicing Rights capitalized in current period
The key economic assumptions used in estimating the fair value of MSRs capitalized during the period are presented below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Weighted average life (in years)
7.3
 
6.2
 
7.4
 
6.6
Weighted average constant prepayment rate
7.6%
 
11.1%
 
7.5%
 
  9.9%
Weighted average discount rate
  9.8%
 
  9.9%
 
  9.8%
 
  9.9%
Schedule of the impact to fair value of an adverse change in key economic assumptions
The sensitivity analysis below presents the impact to current fair value of an immediate 50 basis point and 100 basis point adverse change in the key economic assumptions and presents the decline in fair value that would occur if the adverse change were realized. These sensitivities are hypothetical, with the effect of a variation in a particular assumption on the fair value of the mortgage servicing rights calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another (e.g., changes in interest rates, which drive changes in prepayment rates, could result in changes in the discount rates), which may amplify or counteract the sensitivities. The primary risk inherent in the Company’s MSRs is an increase in prepayments of the underlying mortgage loans serviced, which is dependent upon market movements of interest rates.
(in millions)
June 30, 2018
 
December 31, 2017
Prepayment rate:
 
 
 
Decline in fair value from a 50 basis point decrease in interest rates

$16

 

$22

Decline in fair value from a 100 basis point decrease in interest rates
47

 
46

Weighted average discount rate:
 
 
 
Decline in fair value from a 50 basis point increase in weighted average discount rate

$5

 

$4

Decline in fair value from a 100 basis point increase in weighted average discount rate
9

 
8