MORTGAGE BANKING (Tables)

3 Months Ended

Mar. 31, 2019

The following table summarizes activity related to residential mortgage loans sold with servicing rights retained for the three months ended March 31, 2019 and 2018.



	Three Months Ended March 31,
(in millions)	2019		2018
Residential mortgage loans sold with servicing retained		$2,919		$655
Gain on sales ⁽¹⁾	37		13
Contractually specified servicing, late and other ancillary fees⁽¹⁾	48		15

⁽¹⁾ Reported in mortgage banking fees on the Consolidated Statements of Operations.

Schedule of valuation allowance for impairment of recognized servicing assets

The following table summarizes changes in MSRs recorded using the amortization method for the three months ended March 31, 2019 and 2018.



	As of and for the Three Months Ended March 31,
(in millions)	2019			2018
Mortgage servicing rights:
Balance as of beginning of period		$221			$201
Amount capitalized	—			8
Amortization	(9		)	(8		)
Carrying amount before valuation allowance	212			201
Valuation allowance for servicing assets:
Balance as of beginning of period	—			3
Valuation recoveries	—			(3		)
Balance at end of period	—			—
Net carrying value of MSRs		$212			$201

Servicing asset at amortized cost

The following table summarizes changes in MSRs recorded using the amortization method for the three months ended March 31, 2019 and 2018.



	As of and for the Three Months Ended March 31,
(in millions)	2019			2018
Mortgage servicing rights:
Balance as of beginning of period		$221			$201
Amount capitalized	—			8
Amortization	(9		)	(8		)
Carrying amount before valuation allowance	212			201
Valuation allowance for servicing assets:
Balance as of beginning of period	—			3
Valuation recoveries	—			(3		)
Balance at end of period	—			—
Net carrying value of MSRs		$212			$201

Servicing asset at fair value

The following table summarizes changes in MSRs recorded using the fair value method for the three months ended March 31, 2019. There were no MSRs recorded using the fair value method for the three months ended March 31, 2018.



	Three Months Ended March 31, 2019
(in millions)	Three Months Ended March 31, 2019
Fair value as of beginning of the period		$600
Amounts capitalized	35
Changes in unpaid principal balance during the period ⁽¹⁾	(26		)
Changes in fair value during the period ⁽²⁾	(46		)
Fair value at end of the period		$563

⁽¹⁾ Represents changes in value due to i) passage of time including the impact from both regularly scheduled loan principal payments and partial paydowns, and ii)

loans that paid off during the period.

⁽²⁾ Represents changes in value primarily due to market driven changes in interest rates and prepayment speeds.

Schedule of fair value assumptions used to estimate the value of Mortgage Servicing Rights

For MSRs under the amortization method, the key economic assumptions used to estimate the fair value are presented below:



	March 31, 2019			December 31, 2018
	Actual	Decline in fair value due to		Actual	Decline in fair value due to
(dollars in millions)	Actual	Decline in fair value due to		Actual	Decline in fair value due to
Fair value	$224	50 bps adverse change	100 bps adverse change	$243	50 bps adverse change	100 bps adverse change
Weighted average life (in years)	6.1	50 bps adverse change	100 bps adverse change	6.5	50 bps adverse change	100 bps adverse change
Weighted average constant prepayment rate	9.6%	$27	$58	8.5%	$24	$56
Weighted average discount rate	9.3%	4	8	9.3%	5	9

For MSRs under the fair value method, the key economic assumptions used to estimate the fair value are presented below:



	March 31, 2019			December 31, 2018
	Actual	Decline in fair value due to		Actual	Decline in fair value due to
(dollars in millions)	Actual	Decline in fair value due to		Actual	Decline in fair value due to
Fair value	$563	50 bps adverse change	100 bps adverse change	$600	50 bps adverse change	100 bps adverse change
Weighted average life (in years)	6.7	50 bps adverse change	100 bps adverse change	8.0	50 bps adverse change	100 bps adverse change
Weighted average constant prepayment rate	10.7%	$81	$177	8.2%	$68	$148
Weighted average option adjusted spread	568 bps	11	22	609 bps	13	26