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Mortgage Servicing Rights
 12 Months Ended
Dec. 31, 2024
Transfers and Servicing [Abstract]  
Mortgage Servicing Rights Mortgage Servicing Rights
The Company had investments in mortgage servicing rights that resulted from the sale of loans to the secondary market for which we retained the servicing. The Company accounted for mortgage servicing rights at their fair value. A primary risk associated with mortgage servicing rights is the potential reduction in fair value as a result of higher than anticipated prepayments due to loan refinancing prompted, in part, by declining interest rates or government intervention. Conversely, these assets generally increase in value in a rising interest rate environment to the extent that prepayments are slower than anticipated. The Company utilized derivatives as economic hedges to offset changes in the fair value of the mortgage servicing rights resulting from the actual or anticipated changes in prepayments stemming from changing interest rate environments. There is also a risk of valuation decline due to higher-than-expected default rates, which we do not believe can be effectively managed using derivatives. For further information regarding the derivative instruments utilized to manage our MSR risks, see Note 15 - Derivative and Hedging Activities.

At December 31, 2024, we have classified all remaining mortgage servicing rights as held for sale and completed the sale in 2025.

Changes in the fair value of residential first mortgage servicing rights ("MSRs") were as follows:
Year Ended December 31,
(in millions)202420232022
Balance at beginning of period$1,111 $1,033 $1,012 
Additions from loans sold with servicing retained184 208 19 
Reductions from sales(1,194)(51)— 
Decrease in MSR fair value due to pay-offs, pay-downs, run-off, model changes, and other (1)
(105)(80)(8)
Changes in estimates of fair value due to interest rate risk (1) (2)
30 1 10 
Fair value of MSRs at end of period$26 $1,111 $1,033 
(1) Changes in fair value are included within net return on mortgage servicing rights on the Consolidated Statements of (Loss) Income.
(2) Represents estimated MSR value change resulting primarily from market-driven changes which we manage through the use of derivatives.

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 as of December 31, 2023. The sensitivity disclosures for December 31, 2024 are inconsequential.

December 31, 2023
Fair Value
(dollars in millions)Actual10% adverse change20% adverse change
Option adjusted spread5.4 %$(20)$(39)
Constant prepayment rate7.9 %(37)(71)
Weighted average cost to service per loan$69 $(10)$(21)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. To isolate the effect of the specified change, the fair value shock analysis is consistent with the identified adverse change, while holding all other assumptions constant. In practice, a change in one assumption generally impacts other assumptions, which may either magnify or counteract the effect of the change. For further information on the fair value of mortgage servicing rights, see Note 18 - Fair Value Measurement.

Contractual servicing and subservicing fees, including late fees and other ancillary income are presented below. Contractual servicing fees are included within net return on mortgage servicing rights on the Consolidated Statements of (Loss) Income. Contractual subservicing fees including late fees and other ancillary income are included within loan administration income on the Consolidated Statements of (Loss) Income. Subservicing fee income is recorded for fees earned on subserviced loans, net of third-party subservicing costs.
The following table summarizes income and fees associated with owned mortgage servicing rights:

Year Ended December 31,
(in millions)202420232022
Net return on mortgage servicing rights
Servicing fees, ancillary income and late fees (1)
$202 $227 $20 
Decrease in MSR fair value due to pay-offs, pay-downs, run-off, model changes and other(105)(80)(8)
Changes in fair value due to interest rate risk30 1 10 
Gain on MSR derivatives (2)
(54)(47)(16)
Net transaction costs— 2 — 
Total return (loss) included in net return on mortgage servicing rights$73 $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 mortgage servicing rights.

The following table summarizes income and fees associated with our mortgage loans subserviced for others:
Year Ended December 31,
(in millions)202420232022
Loan administration income on mortgage loans subserviced
Servicing fees, ancillary income and late fees (1)
$117 $154 $11 
Charges on subserviced custodial balances (2)
(141)(168)(8)
Other servicing charges2(3)—
Total income (loss) on mortgage loans subserviced, included in loan administration income$(22)$(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.
For the years ended December 31, 2024, and December 31, 2023, we earned approximately $10 million and $95 million, respectively, in service fee income for loans serviced for the FDIC in connection with the Signature Transaction.