Loan Servicing

6 Months Ended

Jun. 30, 2013

NOTE 5. Loan Servicing

Residential Mortgage Banking Activities

The following tables summarize residential mortgage banking activities for the periods presented:

			June 30,		December 31,
			2013		2012

			(Dollars in millions)
	Mortgage loans managed or securitized (1)		$	28,014	$	29,882
	Less: Loans securitized and transferred to AFS securities			4		4
		LHFS		2,419		3,547
		Covered mortgage loans		910		1,040
		Mortgage loans sold with recourse		886		1,019
	Mortgage loans held for investment		$	23,795	$	24,272

	Mortgage loans on nonaccrual status		$	254	$	269
	Mortgage loans 90 days or more past due and still accruing interest (2)			68		92
	Mortgage loans net charge-offs - year to date			47		133
	UPB of residential mortgage loan servicing portfolio			107,057		101,270
	UPB of residential mortgage loans serviced for others (primarily agency conforming
		fixed rate)		80,846		73,769
	Maximum recourse exposure from mortgage loans sold with recourse liability			403		446
	Recorded reserves related to recourse exposure			12		12
	Repurchase reserves for mortgage loan sales to GSEs			59		59


(1)	Balances exclude loans serviced for others with no other continuing involvement.
(2)	Includes amounts related to residential mortgage LHFS and excludes amounts related to government guaranteed loans and covered mortgage loans.

		As Of / For The
		Six Months Ended June 30,
		2013			2012

		(Dollars in millions)
UPB of residential mortgage loans sold from the held for sale portfolio		$	16,541		$	12,675
Pre-tax gains recognized on mortgage loans sold and held for sale			219			236
Servicing fees recognized from mortgage loans serviced for others			127			121
Approximate weighted average servicing fee on the outstanding balance of
	residential mortgage loans serviced for others		0.31	%		0.33	%
Weighted average coupon interest rate on mortgage loans serviced for others			4.32			4.81

Gains on residential mortgage loan sales, including marking LHFS to fair value and the impact of interest rate lock commitments, are recorded in noninterest income as a component of mortgage banking income. BB&T retained the related MSRs and receives servicing fees.

Payments made to date where BB&T has recourse exposure on residential mortgage loans sold with recourse liability have been immaterial.

BB&T also issues standard representations and warranties related to mortgage loan sales to GSEs. Although these agreements often do not specify limitations, BB&T does not believe that any payments related to these warranties would materially change the financial condition or results of operations of BB&T.

Residential MSRs are recorded on the Consolidated Balance Sheets at fair value with changes in fair value recorded as a component of mortgage banking income in the Consolidated Statements of Income. BB&T uses various derivative instruments to mitigate the income statement effect of changes in fair value due to changes in valuation inputs and assumptions of its residential MSRs.

			Six Months Ended June 30,
				2013		2012

			(Dollars in millions)
Carrying value, January 1,			$	627	$	563
	Additions			192		134
	Change in fair value due to changes in valuation inputs or assumptions:
		Prepayment speeds		218		12
		Weighted average OAS		(44)		(36)
		Servicing costs		(21)		(22)
	Realization of expected net servicing cash flows, passage of time and other			(80)		(73)
Carrying value, June 30,			$	892	$	578

Gains (losses) on derivative financial instruments used to mitigate the
	income statement effect of changes in fair value		$	(133)	$	99

During 2013, the prepayment speed assumptions were updated as actual observed prepayment speeds were slower, primarily as a result of rising interest rates. These valuation increases were partially offset by realization of servicing cash flows as well as higher servicing costs due to regulatory requirements and decreases to OAS due to market changes in required rates of return.

The sensitivity of the fair value of the residential MSRs to adverse changes in key economic assumptions is included in the accompanying table:

			June 30, 2013
			Range				Weighted
			Minimum		Maximum		Average

							(Dollars in millions)

Prepayment speed			6.9	%	11.9	%		8.7	%
	Effect on fair value of a 10% increase						$	(32)
	Effect on fair value of a 20% increase							(63)

OAS			9.5	%	10.2	%		9.7	%
	Effect on fair value of a 10% increase						$	(33)
	Effect on fair value of a 20% increase							(63)

Composition of residential loans serviced for others:
	Fixed-rate mortgage loans							99.6	%
	Adjustable-rate mortgage loans							0.4
		Total						100.0	%

Weighted average life								7.1	yrs

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, 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. Also, in the above table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change.

Commercial Mortgage Banking Activities

CRE mortgage loans serviced for others are not included in loans and leases on the accompanying Consolidated Balance Sheets. The following table summarizes commercial mortgage banking activities for the periods presented:

		June 30,		December 31,
		2013		2012

		(Dollars in millions)
UPB of CRE mortgages serviced for others		$	28,461	$	29,520
CRE mortgages serviced for others covered by recourse provisions			5,012		4,970
Maximum recourse exposure from CRE mortgages
	sold with recourse liability		1,384		1,368
Recorded reserves related to recourse exposure			12		13
Originated CRE mortgages during the period - year to date			1,990		4,934