Annual report pursuant to Section 13 and 15(d)

MORTGAGE LOAN SALES AND SERVICING RIGHTS

v3.10.0.1
MORTGAGE LOAN SALES AND SERVICING RIGHTS
 12 Months Ended
Dec. 31, 2018
Transfers and Servicing [Abstract]  
MORTGAGE LOAN SALES AND SERVICING RIGHTS
MORTGAGE LOAN SALES AND SERVICING RIGHTS
Residential Mortgage Portfolio
The following table summarizes activity relating to residential mortgage loans sold with servicing retained for the years ended December 31, 2018, 2017, and 2016:
  
Year Ended December 31,
(dollar amounts in millions)
2018
 
2017
 
2016
Residential mortgage loans sold with servicing retained
$
3,846

 
$
3,985

 
$
3,632

Pretax gains resulting from above loan sales (1)
87

 
99

 
97

(1)
Recorded in mortgage banking income.
The following table summarizes the changes in MSRs recorded using the amortization method for the years ended December 31, 2018 and 2017:
 
 
 
 

(dollar amounts in millions)
2018
 
2017
Carrying value, beginning of year
$
191

 
$
172

New servicing assets created
44

 
44

Impairment recovery (charge)
6

 
1

Amortization and other
(30
)
 
(26
)
Carrying value, end of year
$
211

 
$
191

Fair value, end of year
$
212

 
$
191

Weighted-average life (years)
6.7

 
7.1


MSRs do not trade in an active, open market with readily observable prices. Therefore, the fair value of MSRs is estimated using a discounted future cash flow model. Changes in the assumptions used may have a significant impact on the valuation of MSRs. MSR values are highly sensitive to movement in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly impacted by the level of prepayments.
 
 
 
 
 
 
 
 
 
 
 
 
For MSRs under the amortization method, a summary of key assumptions and the sensitivity of the MSR value to changes in these assumptions at December 31, 2018, and 2017 follows:
 
December 31, 2018
 
December 31, 2017
 
 
 
Decline in fair value due to
 
 
 
Decline in fair value due to
(dollar amounts in millions)
Actual
 
10%
adverse
change
 
20%
adverse
change
 
Actual
 
10%
adverse
change
 
20%
adverse
change
Constant prepayment rate (annualized)
9.40
%
 
$
(6
)
 
$
(12
)
 
8.30
%
 
$
(5
)
 
$
(10
)
Spread over forward interest rate swap rates
934
 bps
 
(7
)
 
(13
)
 
1,049
 bps
 
(7
)
 
(13
)

Additionally, Huntington held MSRs recorded using the fair value method of $10 million and $11 million at December 31, 2018 and 2017, respectively. The change in fair value representing time decay, payoffs and changes in valuation inputs and assumptions for the years ended December 31, 2018 and 2017 was $1 million and $3 million, respectively.
Total servicing, late and other ancillary fees included in mortgage banking income was $60 million, $56 million, and $50 million for the years ended December 31, 2018, 2017, and 2016, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties was $21.0 billion, $19.8 billion, and $18.9 billion at December 31, 2018, 2017, and 2016, respectively.