Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Schedule of assets and liabilities measured at fair value on a recurring basis

The following summarizes the fair value hierarchy for instruments measured at fair value on a recurring basis:



	June 30, 2016
	Level One		Level Two		Level Three		Cash Collateral and Netting			Total
	(In millions)
ASSETS
Mortgage loans held for sale	$	—	$	880	$	42	$	—		$	922
Mortgage servicing rights	—		—		679		—			679
Other assets—Derivative assets:
Interest rate lock commitments	—		—		39		—			39
Forward delivery commitments	—		8		—		(5		)	3
MSR-related agreements	—		112		—		(105		)	7
LIABILITIES
Other liabilities—Derivative liabilities:
Forward delivery commitments	$	—	$	18	$	—	$	(13	)	$	5
MSR-related agreements	—		—		—		8			8



	December 31, 2015
	Level One		Level Two		Level Three		Cash Collateral and Netting			Total
	(In millions)
ASSETS
Mortgage loans held for sale	$	—	$	704	$	39	$	—		$	743
Mortgage servicing rights	—		—		880		—			880
Other assets—Derivative assets:
Interest rate lock commitments	—		—		21		—			21
Forward delivery commitments	—		3		—		(2		)	1
MSR-related agreements	—		27		—		(23		)	4
LIABILITIES
Other liabilities—Derivative liabilities:
Forward delivery commitments	$	—	$	2	$	—	$	—		$	2

Schedule of difference between the carrying amounts of Mortgage loans held for sale measured at fair value, and the aggregate unpaid principal amount that the Company is contractually entitled to receive at maturity

The following table reflects the difference between the carrying amounts of MLHS measured at fair value, and the aggregate unpaid principal amount that the Company is contractually entitled to receive at maturity:



	June 30, 2016					December 31, 2015
	Total		Loans 90 days or more past due and on non-accrual status			Total		Loans 90 days or more past due and on non-accrual status
	(In millions)
Carrying amount	$	922	$	8		$	743	$	9
Aggregate unpaid principal balance	909		11			738		11
Difference	$	13	$	(3	)	$	5	$	(2	)

Schedule of components of Mortgage loans held for sale

The following table summarizes the components of mortgage loans held for sale:



	June 30, 2016		December 31, 2015
	(In millions)
First mortgages:
Conforming	$	720	$	616
Non-conforming	159		88
Total first mortgages	879		704
Second lien	4		4
Scratch and Dent	38		35
Other	1		—
Total	$	922	$	743

Schedule of initial and ending capitalization rate of Mortgage Servicing Rights (MSRs)

The following tables summarize certain information regarding the initial and ending capitalization rate of MSRs:



	Six Months Ended June 30,
	2016		2015
Initial capitalization rate of additions to MSRs	1.02	%	1.11	%



	June 30, 2016		December 31, 2015
Capitalization servicing rate	0.73	%	0.89	%
Capitalization servicing multiple	2.6		3.1
Weighted-average servicing fee (in basis points)	29		29

Schedule of significant assumptions used in estimating the fair value of Mortgage servicing rights (MSRs)

The significant assumptions used in estimating the fair value of MSRs were as follows (in annual rates):



	June 30, 2016		December 31, 2015
Weighted-average prepayment speed (CPR)	12.3	%	9.1	%
Option adjusted spread, in basis points (OAS)	992		977
Weighted-average delinquency rate	5.4	%	5.3	%

Schedule of estimated change in the fair value of MSRs from adverse changes in the significant assumptions

The following table summarizes the estimated change in the fair value of MSRs from adverse changes in the significant assumptions:



	June 30, 2016
	Weighted- Average Prepayment Speed			Option Adjusted Spread			Weighted- Average Delinquency Rate
	(In millions)
Impact on fair value of 10% adverse change	$	(34	)	$	(28	)	$	(18	)
Impact on fair value of 20% adverse change	(66		)	(54		)	(37		)

Schedule of activity in assets and liabilities classified within Level Three of the valuation hierarchy

Activity of assets and liabilities classified within Level Three of the valuation hierarchy consisted of:



	Three Months Ended June 30, 2016									Three Months Ended June 30, 2015
	MLHS			MSRs			IRLCs, net			MLHS			MSRs			IRLCs, net
	(In millions)
Balance, beginning of period	$	41		$	770		$	28		$	41		$	986		$	38
Purchases, Issuances, Sales and Settlements:
Purchases	3			—			—			10			—			—
Issuances	2			17			—			2			28			—
Sales	(6		)	(3		)	—			(4		)	(12		)	—
Settlements	(4		)	—			(90		)	(3		)	—			(70		)
	(5		)	14			(90		)	5			16			(70		)
Realized and unrealized gains (losses) included in:
Gain on loans held for sale, net	—			—			101			—			—			54
Change in fair value of MSRs	—			(105		)	—			—			18			—
Interest income	1			—			—			2			—			—
	1			(105		)	101			2			18			54
Transfers into Level Three	9			—			—			8			—			—
Transfers out of Level Three	(4		)	—			—			(8		)	—			—
Balance, end of period	$	42		$	679		$	39		$	48		$	1,020		$	22



	Six Months Ended June 30, 2016									Six Months Ended June 30, 2015
	MLHS			MSRs			IRLCs, net			MLHS			MSRs			IRLCs, net
	(In millions)
Balance, beginning of period	$	39		$	880		$	21		$	42		$	1,005		$	22
Purchases, Issuances, Sales and Settlements:
Purchases	8			—			—			17			—			—
Issuances	3			30			—			2			48			—
Sales	(14		)	(5		)	—			(8		)	(25		)	—
Settlements	(5		)	—			(160		)	(5		)	—			(135		)
	(8		)	25			(160		)	6			23			(135		)
Realized and unrealized gains (losses) included in:
Gain on loans held for sale, net	—			—			178			1			—			135
Change in fair value of MSRs	—			(226		)	—			—			(8		)	—
Interest income	2			—			—			3			—			—
	2			(226		)	178			4			(8		)	135
Transfers into Level Three	20			—			—			15			—			—
Transfers out of Level Three	(11		)	—			—			(19		)	—			—
Balance, end of period	$	42		$	679		$	39		$	48		$	1,020		$	22

Schedule of unrealized gains (losses) related to assets and liabilities classified within Level Three of the valuation hierarchy

Unrealized gains (losses) included in the Condensed Consolidated Statements of Operations related to assets and liabilities classified within Level Three of the valuation hierarchy that are included in the Condensed Consolidated Balance Sheets were as follows:



	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
	(In millions)
Gain on loans held for sale, net	$	35		$	18	$	35		$	18
Change in fair value of mortgage servicing rights	(70		)	69		(165		)	81

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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