Mortgage Servicing Rights (Tables)

12 Months Ended

Dec. 31, 2023

Transfers and Servicing [Abstract]

Schedule of Changes in the Fair Value of Residential First Mortgage MSRs

Changes in the fair value of residential first mortgage MSRs were as follows:

(in millions)	Year Ended December 31, 2023
Balance at beginning of period	$	1,033
Additions from loans sold with servicing retained	208
Reductions from sales	(51)
Decrease in MSR fair value due to pay-offs, pay-downs, run-off, model changes, and other (1)	(80)
Changes in estimates of fair value due to interest rate risk (1) (2)	1
Fair value of MSRs at end of period	$	1,111

(1)Changes in fair value are included within net return on mortgage servicing rights on the Consolidated Statements of Income and Comprehensive Income.

(2)Represents estimated MSR value change resulting primarily from market-driven changes which we manage through the use of derivatives.

Summary of Adverse Changes to Weighted-Average Assumptions on the Fair Value of Servicing Rights

The following table summarizes the hypothetical effect on the fair value of servicing rights using adverse changes of 10 percent and 20 percent to the weighted average of certain significant assumptions used in valuing these assets:

	December 31, 2023
				Fair Value
(dollars in millions)	Actual			10% adverse change		20% adverse change
Option adjusted spread	5.4		%	$	1,091	$	1,072
Constant prepayment rate	7.9		%	1,073		1,040
Weighted average cost to service per loan	$	69		$	1,100	$	1,090

	December 31, 2022
				Fair Value
(dollars in millions)	Actual			10% adverse change		20% adverse change
Option adjusted spread	5.9		%	$	1,012	$	992
Constant prepayment rate	7.9		%	1,000		970
Weighted average cost to service per loan	$	68		$	1,023	$	1,013

Summary of Income and Fees

The following table summarizes income and fees associated with owned MSRs:

(in millions)	Year Ended December 31, 2023		Month Ended December 31, 2022
Net return on mortgage servicing rights
Servicing fees, ancillary income and late fees (1)	$	227	$	20
Decrease in MSR fair value due to pay-offs, pay-downs, run-off, model changes and other	(80)		(8)
Changes in fair value due to interest rate risk	1		10
Gain on MSR derivatives (2)	(47)		(16)
Net transaction costs	2		—
Total return included in net return on mortgage servicing rights	$	103	$	6

(1)Servicing fees are recorded on an accrual basis. Ancillary income and late fees are recorded on a cash basis.

(2)Changes in the derivatives utilized as economic hedges to offset changes in fair value of the MSRs.

The following table summarizes income and fees associated with our mortgage loans subserviced for others:

(in millions)	Year Ended December 31, 2023		Year Ended December 31, 2022
Loan administration income on mortgage loans subserviced
Servicing fees, ancillary income and late fees (1)	$	154	$	11
Charges on subserviced custodial balances (2)	(168)		(8)
Other servicing charges	(3)		—
Total (loss) income on mortgage loans subserviced, included in loan administration income	$	(17)	$	3

(1)Servicing fees are recorded on an accrual basis. Ancillary income and late fees are recorded on a cash basis.

(2)Charges on subserviced custodial balances represent interest due to MSR owner.