Transfers and Servicing of Mortgage Loans

6 Months Ended

Jun. 30, 2011

Transfers and Servicing of Mortgage Loans [Abstract]

Transfers and Servicing of Mortgage Loans

4.  Transfers and Servicing of Mortgage Loans

Residential mortgage loans are sold through one of the following methods: (i) sales to Fannie Mae and Freddie Mac and loan sales to other investors guaranteed by Ginnie Mae (collectively “GSEs”), or (ii) sales to private investors. The Company may have continuing involvement in mortgage loans sold by retaining one or more of the following: servicing rights and servicing obligations, recourse obligations and/or beneficial interests (such as interest-only strips, principal-only strips, or subordinated interests). During the six months ended June 30, 2011, the Company did not retain any interests from sales or securitizations other than mortgage servicing rights. See Note 9, “Credit Risk” for a further description of recourse obligations.

The total servicing portfolio consists of loans associated with capitalized mortgage servicing rights, loans held for sale, and the servicing portfolio associated with loans subserviced for others. The total servicing portfolio, including loans subserviced for others was $173.7 billion and $166.1 billion as of June 30, 2011 and December 31, 2010, respectively. Mortgage servicing rights (“MSRs”) recorded in the Condensed Consolidated Balance Sheets are related to the capitalized servicing portfolio, and are created either through the direct purchase of servicing from a third party, or through the sale of an originated loan.

The activity in the loan servicing portfolio associated with capitalized servicing rights consisted of:

	Six Months
	Ended June 30,
	2011			2010
	(In millions)
Balance, beginning of period	$	134,753		$	127,700
Additions		18,649			12,381
Payoffs, sales and curtailments		(10,966	)		(9,984	)
Balance, end of period	$	142,436		$	130,097

The activity in capitalized MSRs consisted of:

	Six Months
	Ended June 30,
	2011			2010
	(In millions)
Mortgage Servicing Rights:
Balance, beginning of period	$	1,442		$	1,413
Additions		257			195
Changes in fair value due to:
Realization of expected cash flows		(89	)		(110	)
Changes in market inputs or assumptions used in the valuation model		(102	)		(262	)
Balance, end of period	$	1,508		$	1,236

Contractually specified servicing fees, late fees and other ancillary servicing revenue were recorded within Loan servicing income as follows:

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2011		2010		2011		2010
	(In millions)
Net service fee revenue	$	110	$	99	$	216	$	196
Late fees		4		5		10		10
Other ancillary servicing revenue		8		8		19		18

As of June 30, 2011 and December 31, 2010, the MSRs had a weighted-average life of approximately 5.6 years and 5.7 years, respectively. See Note 12, “Fair Value Measurements” for additional information regarding the valuation of MSRs.

The following table sets forth information regarding cash flows relating to loan sales in which the Company has continuing involvement:

	Six Months
	Ended June 30,
	2011			2010
	(In millions)
Proceeds from new loan sales or securitizations	$	18,818		$	12,599
Servicing fees received (1)		216			196
Other cash flows on retained interests (2)		—			1
Purchases of delinquent or foreclosed loans (3)		(20	)		(30	)
Servicing advances (4)		(884	)		(846	)
Repayment of servicing advances		846			829

(1)	Excludes late fees and other ancillary servicing revenue.
(2)	Represents cash flows received on retained interests other than servicing fees.
(3)	Excludes indemnification payments to investors and insurers of the related mortgage loans.
(4)	As of June 30, 2011 and December 31, 2010, outstanding servicing advance receivables of $218 million and $187 million, respectively, were included in Accounts receivable, net.

During the three months and six ended June 30, 2011, pre-tax gains of $140 million and $318 million, respectively, related to the sale or securitization of residential mortgage loans were recognized in Gain on mortgage loans, net in the Condensed Consolidated Statements of Operations.

During the three months and six ended June 30, 2010, pre-tax gains of $96 million and $198 million, respectively, related to the sale or securitization of residential mortgage loans were recognized in Gain on mortgage loans, net in the Condensed Consolidated Statements of Operations.