Mortgage Servicing Rights (Tables)
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6 Months Ended |
12 Months Ended |
Jun. 30, 2016 |
Dec. 31, 2015 |
| Transfers and Servicing [Abstract] |
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| Schedule of Servicing Assets at Fair Value |
Changes in the carrying value of residential first mortgage MSRs, accounted for at fair value, were as follows: | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | 2016 | | 2015 | | 2016 | | 2015 | | (Dollars in millions) | Balance at beginning of period | $ | 281 |
| | $ | 279 |
| | $ | 296 |
| | $ | 258 |
| Additions from loans sold with servicing retained | 65 |
| | 77 |
| | 122 |
| | 146 |
| Reductions from sales | — |
| | (49 | ) | | (24 | ) | | (71 | ) | Changes in fair value due to (1) | | | | | | | | Decrease in MSR due to pay-offs, pay-downs and run-off | (15 | ) | | (11 | ) | | (26 | ) | | (26 | ) | Changes in estimates of fair value (2) | (30 | ) | | 21 |
| | (67 | ) | | 10 |
| Fair value of MSRs at end of period | $ | 301 |
| | $ | 317 |
| | $ | 301 |
| | $ | 317 |
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| | (1) | Changes in fair value are included within net (loss) return on mortgage servicing rights on the Consolidated Statements of Operations. |
| | (2) | Represents estimated MSR value change resulting primarily from market-driven changes in interest rates |
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Changes in the carrying value of residential first mortgage MSRs, accounted for at fair value, were as follows. | | | | | | | | | | | | | | For the Years Ended December 31, | | 2015 | | 2014 | | 2013 | | (Dollars in millions) | Balance at beginning of period | $ | 258 |
| | $ | 285 |
| | $ | 711 |
| Additions from loans sold with servicing retained | 260 |
| | 272 |
| | 402 |
| Reductions from sales | (176 | ) | | (232 | ) | | (835 | ) | Changes due to (1) | | | | | | Decrease in MSR value due to pay-offs and pay-downs | (43 | ) | | (31 | ) | | (99 | ) | Changes in estimates of fair value (2) | (3 | ) | | (36 | ) | | 106 |
| Fair value of MSRs at end of period | $ | 296 |
| | $ | 258 |
| | $ | 285 |
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| | (1) | Changes in fair value are included within net return on mortgage servicing asset on the Consolidated Statements of Operations. |
| | (2) | Represents estimated MSR value change resulting primarily from market-driven changes in interest rates. |
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| Schedule of Servicing Assets at Fair Value, Servicing Fees |
The following table summarizes the servicing fees: | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | 2016 | | 2015 | | 2016 | | 2015 | | (Dollars in millions) | Income on mortgage servicing rights | | | | | | | | Servicing fees, ancillary income and late fees (1) | $ | 21 |
| | $ | 17 |
| | $ | 38 |
| | $ | 34 |
| Changes in fair value (2) | (45 | ) | | 12 |
| | (93 | ) | | (14 | ) | Gain on MSR derivatives (3) | 19 |
| | (14 | ) | | 45 |
| | (5 | ) | Net transaction costs | 1 |
| | (6 | ) | | — |
| | (8 | ) | Total (loss) return, included in net return on mortgage servicing rights | $ | (4 | ) | | $ | 9 |
| | $ | (10 | ) | | $ | 7 |
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| | (1) | Servicing fees are recorded on the accrual basis. Ancillary income and late fees are recorded on a cash basis. |
| | (2) | Includes a $2 million gain related to the sale of MSRs during the three and six months ended June 30, 2015. |
| | (3) | Changes in the derivatives utilized as economic hedges to offset changes in fair value of the MSRs. |
The agency servicing fees, ancillary income and late fees increased during the six month ended June 30, 2016, as compared to the six month ended June 30, 2015, primarily driven by the higher amount of loans serviced and fewer MSR sales during 2016.
The following table summarizes income and fees associated on our mortgage loans subserviced: | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | 2016 | | 2015 | | 2016 | | 2015 | | (Dollars in millions) | Income on mortgage loans subserviced | | | | | | | | Subservicing fees, ancillary income and late fees (1) | $ | 7 |
| | $ | 9 |
| | $ | 14 |
| | $ | 16 |
| Other servicing charges | (3 | ) | | (2 | ) | | (4 | ) | | (5 | ) | Total income, included in loan administration | $ | 4 |
| | $ | 7 |
| | $ | 10 |
| | $ | 11 |
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| | (1) | Servicing fees are recorded on the accrual basis. Ancillary income and late fees are recorded on cash basis. |
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The following table summarizes income and fees associated with the mortgage servicing asset. | | | | | | | | | | | | | | For the Years Ended December 31, | | 2015 | | 2014 | | 2013 | | (Dollars in millions) | Income on mortgage servicing asset | | | | | | Servicing fees, ancillary income and late fees (1) | $ | 69 |
| | $ | 69 |
| | $ | 185 |
| Fair value adjustments (2) | (44 | ) | | (69 | ) | | (5 | ) | Gain (loss) on MSR derivatives (3) | 5 |
| | 26 |
| | (70 | ) | Net transaction costs | (2 | ) | | (2 | ) | | (19 | ) | Total income on mortgage servicing asset, included in net return on mortgage servicing asset | $ | 28 |
| | $ | 24 |
| | $ | 91 |
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| | (1) | Servicing fees are recorded on the accrual basis. Ancillary income and late fees are recorded on a cash basis. |
| | (2) | Includes a $2 million gain related to the sale of MSRs during the year ended December 31, 2015. |
| | (3) | Changes in the derivatives utilized as economic hedges to offset changes in fair value of the MSRs. |
Contractual servicing and subservicing fees. 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 asset on the Consolidated Statements of Operations. Contractual subservicing fees including late fees and other ancillary income are included within loan administration income on the Consolidated Statements of Operations. Subservicing fee income is recorded for fees earned, net of third party subservicing costs, for loans subserviced.
The following table summarizes income and fees associated with subserviced mortgage loans. | | | | | | | | | | | | | | For the Years Ended December 31, | | 2015 | | 2014 | | 2013 | | (Dollars in millions) | Income (expenses) on mortgage loans subserviced | | | | | | Servicing fees, ancillary income and late fees (1) | $ | 33 |
| | $ | 28 |
| | $ | 17 |
| Other servicing charges | (7 | ) | | (4 | ) | | (11 | ) | Total income on mortgage loans subserviced, included in loan administration | $ | 26 |
| | $ | 24 |
| | $ | 6 |
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| | (1) | Servicing fees are recorded on the accrual basis. Ancillary income and late fees are recorded on cash basis. |
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| Schedule of Sensitivity Analysis of Fair Value |
The following table summarizes the hypothetical effect on the fair value of servicing rights carried at fair value using adverse changes of 10 percent and 20 percent to the weighted average of certain significant assumptions used in valuing these assets: | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2016 | | December 31, 2015 | | | | Fair value due to | | | | Fair value due to | | Actual | | 10% adverse change | | 20% adverse change | | Actual | | 10% adverse change | | 20% adverse change | | | | (Dollars in millions) | Option adjusted spread | 8.37 | % | | $ | 293 |
| | $ | 285 |
| | 8.24 | % | | $ | 287 |
| | $ | 279 |
| Constant prepayment rate | 16.38 | % | | 287 |
| | 274 |
| | 12.63 | % | | 285 |
| | 275 |
| Weighted average cost to service per loan | $ | 70.99 |
| | 297 |
| | 293 |
| | $ | 71.86 |
| | 292 |
| | 288 |
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The following table summarizes the hypothetical effect on the fair value of servicing rights carried at fair value using adverse changes of 10 percent and 20 percent to the weighted-average of certain significant assumptions used in valuing these assets. | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2015 | | December 31, 2014 | | | | Fair value due to | | | | Fair value due to | | Actual | | 10% adverse change | | 20% adverse change | | Actual | | 10% adverse change | | 20% adverse change | | | | (Dollars in millions) | Option adjusted spread | 8.24 | % | | $ | 287 |
| | $ | 279 |
| | 8.88 | % | | $ | 250 |
| | $ | 243 |
| Constant prepayment rate | 12.63 | % | | 285 |
| | 275 |
| | 14.98 | % | | 253 |
| | 245 |
| Weighted average cost to service per loan | $ | 71.86 |
| | 292 |
| | 288 |
| | $ | 74.49 |
| | 258 |
| | 255 |
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