Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

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

The following summarizes the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:



	June 30, 2018
	Level One		Level Two		Level Three		Cash Collateral and Netting		Total
	(In millions)
ASSETS
Mortgage loans held for sale	$	—	$	50	$	5	$	—	$	55
Mortgage servicing rights	—		—		483		—		483
Other assets—Derivative assets:
Interest rate lock commitments	—		—		2		—		2
Assets related to discontinued operations	—		3		—		—		3
LIABILITIES
Mortgage servicing rights secured liability	$	—	$	—	$	437	$	—	$	437
Other liabilities:
Liability to deliver MSRs	—		—		1		—		1



	December 31, 2017
	Level One		Level Two		Level Three		Cash Collateral and Netting		Total
	(In millions)
ASSETS
Mortgage loans held for sale	$	—	$	94	$	9	$	—	$	103
Mortgage servicing rights	—		—		476		—		476
Other assets—Derivative assets:
Interest rate lock commitments	—		—		4		—		4
Assets related to discontinued operations	—		167		1		—		168
LIABILITIES
Mortgage servicing rights secured liability	$	—	$	—	$	419	$	—	$	419
Other liabilities:
Liability to deliver MSRs	—		—		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, 2018				December 31, 2017
	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	$	55	$	1	$	103	$	1
Aggregate unpaid principal balance	55		1		103		2
Difference	$	—	$	—	$	—	$	(1	)

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,
	2018		2017
Initial capitalization rate of additions to MSRs owned	1.12	%	1.14	%



	June 30, 2018		December 31, 2017
MSRs Owned
Capitalization servicing rate	0.65	%	0.67	%
Capitalization servicing multiple	2.2		2.3
Weighted-average servicing fee (in basis points)	29		29
Weighted-average life (years)	4.7		5.7



	June 30, 2018		December 31, 2017
MSRs Under Secured Borrowing Arrangement
Capitalization servicing rate	0.95	%	0.85	%
Capitalization servicing multiple	3.6		3.2
Weighted-average servicing fee (in basis points)	27		27
Weighted-average life (years)	5.9		5.6

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 secured liability were as follows (in annual rates):



	June 30, 2018		December 31, 2017
Weighted-average prepayment speed (CPR)	9.9	%	11.2	%
Option adjusted spread, in basis points (OAS)	861		928
Weighted-average delinquency rate	4.0	%	4.0	%

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



	June 30, 2018		December 31, 2017
MSRs Owned
Weighted-average prepayment speed (CPR)	13.2	%	9.2	%
Option adjusted spread, in basis points (OAS)	736		393
Weighted-average delinquency rate	11.8	%	12.4	%



	June 30, 2018		December 31, 2017
MSRs Under Secured Borrowing Arrangement
Weighted-average prepayment speed (CPR)	9.9	%	11.2	%
Option adjusted spread, in basis points (OAS)	861		928
Weighted-average delinquency rate	4.0	%	4.0	%

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, 2018
	Weighted- Average Prepayment Speed			Option Adjusted Spread			Weighted- Average Delinquency Rate
	(In millions)
MSRs Owned
Impact on fair value of 10% adverse change	$	(3	)	$	(1	)	$	(2	)
Impact on fair value of 20% adverse change	(5		)	(2		)	(5		)

MSRs Under Secured Borrowing Arrangement
Impact on fair value of 10% adverse change	$	(15	)	$	(18	)	$	(5	)
Impact on fair value of 20% adverse change	(29		)	(35		)	(9		)

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, 2018															Three Months Ended June 30, 2017
	MLHS			MSRs			IRLCs, net			MSRs Secured Liability			Liability to Deliver MSRs			MLHS			MSRs			IRLCs, net			MSRs Secured Liability
	(In millions)
Balance, beginning of period	$	8		$	496		$	3		$	(443	)	$	(1	)	$	32		$	596		$	4		$	—
Purchases, Issuances, Sales and Settlements:
Purchases	1			—			—			—			—			3			—			—			—
Issuances	—			—			—			—			—			2			7			—			(113		)
Sales	(4		)	(3		)	—			—			—			(1		)	(19		)	—			—
Settlements	—			—			(5		)	13			1			(6		)	—			(7		)	1
	(3		)	(3		)	(5		)	13			1			(2		)	(12		)	(7		)	(112		)
Realized and unrealized gains (losses) included in:
Gain on loans held for sale, net	—			—			4			—			(1		)	—			—			7			—
Change in fair value of MSRs	—			(10		)	—			6			—			—			(29		)	—			(1		)
Net interest expense	—			—			—			(13		)	—			—			—			—			(1		)
	—			(10		)	4			(7		)	(1		)	—			(29		)	7			(2		)
Transfers into Level Three	1			—			—			—			—			6			—			—			—
Transfers out of Level Three	(1		)	—			—			—			—			(4		)	—			—			—
Balance, end of period	$	5		$	483		$	2		$	(437	)	$	(1	)	$	32		$	555		$	4		$	(114	)



	Six Months Ended June 30, 2018															Six Months Ended June 30, 2017
	MLHS			MSRs			IRLCs, net			MSRs Secured Liability			Liability to Deliver MSRs			MLHS			MSRs			IRLCs, net			MSRs Secured Liability
	(In millions)
Balance, beginning of period	$	9		$	476		$	4		$	(419	)	$	(2	)	$	47		$	690		$	9		$	—
Purchases, Issuances, Sales and Settlements:
Purchases	4			—			—			—			—			5			—			—			—
Issuances	—			3			—			—			—			3			18			—			(113		)
Sales	(9		)	(9		)	—			—			—			(17		)	(95		)	—			—
Settlements	—			—			(9		)	27			3			(9		)	—			(24		)	1
	(5		)	(6		)	(9		)	27			3			(18		)	(77		)	(24		)	(112		)
Realized and unrealized gains (losses) included in:
Gain on loans held for sale, net	—			—			7			—			(2		)	—			—			19			—
Change in fair value of MSRs	—			13			—			(18		)	—			—			(58		)	—			(1		)
Net interest expense	—			—			—			(27		)	—			1			—			—			(1		)
	—			13			7			(45		)	(2		)	1			(58		)	19			(2		)
Transfers into Level Three	3			—			—			—			—			11			—			—			—
Transfers out of Level Three	(2		)	—			—			—			—			(9		)	—			—			—
Balance, end of period	$	5		$	483		$	2		$	(437	)	$	(1	)	$	32		$	555		$	4		$	(114	)

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 and Comprehensive Income (Loss) 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,
	2018			2017			2018			2017
	(In millions)
Gain on loans held for sale, net	$	2		$	4		$	4		$	7
Loan servicing income, net	(2		)	(4		)	(1		)	(6		)

- 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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