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MORTGAGE BANKING (Tables)

12 Months Ended

Dec. 31, 2019

The following table summarizes activity related to the Company’s residential mortgage loan sales and the Company's mortgage banking activity:



	Year Ended December 31,
(in millions)	2019		2018		2017
Residential mortgage loan sold with servicing retained		$20,430		$8,149		$3,161
Gain on sales⁽¹⁾	251		89		35
Contractually specified servicing, late and other ancillary fees⁽¹⁾	208		118		53

⁽¹⁾Reported in mortgage banking fees in 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:



	As of and for the Year Ended December 31,
(in millions)	2019			2018
Mortgage servicing rights:
Balance as of beginning of period		$221			$201
Amount capitalized	—			36
Purchases	—			16
Amortization	(38		)	(32		)
Carrying amount before valuation allowance	183			221
Valuation allowance for servicing assets:
Balance as of beginning of period	—			3
Valuation charge-offs (recoveries)	1			(3		)
Balance at end of period	1			—
Net carrying value of MSRs		$182			$221

Servicing asset at amortized cost

The following table summarizes changes in MSRs recorded using the amortization method:



	As of and for the Year Ended December 31,
(in millions)	2019			2018
Mortgage servicing rights:
Balance as of beginning of period		$221			$201
Amount capitalized	—			36
Purchases	—			16
Amortization	(38		)	(32		)
Carrying amount before valuation allowance	183			221
Valuation allowance for servicing assets:
Balance as of beginning of period	—			3
Valuation charge-offs (recoveries)	1			(3		)
Balance at end of period	1			—
Net carrying value of MSRs		$182			$221

Servicing asset at fair value

The following table summarizes changes in MSRs recorded using the fair value method:



	As of and for the Year Ended December 31,
(in millions)	2019			2018
Fair value as of beginning of the period		$600			$—
Acquired MSRs	—			590
Amounts capitalized	270			73
Changes in unpaid principal balance during the period ⁽¹⁾	(119		)	(32		)
Changes in fair value during the period ⁽²⁾	(109		)	(31		)
Fair value at end of the period		$642			$600

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

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:



	December 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	$193	50 bps adverse change	100 bps adverse change	$243	50 bps adverse change	100 bps adverse change
Weighted average life (in years)	6.4	50 bps adverse change	100 bps adverse change	6.5	50 bps adverse change	100 bps adverse change
Weighted average constant prepayment rate	8.9%	$28	$53	8.5%	$24	$56
Weighted average discount rate	9.4%	4	7	9.3%	5	9

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



	December 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	$642	50 bps adverse change	100 bps adverse change	$600	50 bps adverse change	100 bps adverse change
Weighted average life (in years)	5.5	50 bps adverse change	100 bps adverse change	8.0	50 bps adverse change	100 bps adverse change
Weighted average constant prepayment rate	13.9%	$116	$222	8.2%	$68	$148
Weighted average option adjusted spread	440 bps	12	25	609 bps	13	26