MORTGAGE LOAN SALES AND SERVICING RIGHTS
|3 Months Ended|
Mar. 31, 2020
|Transfers and Servicing [Abstract]|
|LOAN SALES AND SECURITIZATIONS||
Residential Mortgage Portfolio
The following table summarizes activity relating to residential mortgage loans sold with servicing retained for the three-month periods ended March 31, 2020 and 2019:
On January 1, 2020, Huntington made an irrevocable election to subsequently measure all classes of residential MSRs at fair value in order to eliminate any potential measurement mismatch between our economic hedges and the MSRs. The impact of the irrevocable election was not material.
The following table summarizes the changes in MSRs recorded using the fair value method for the three-month periods ended March 31, 2020 and 2019 (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 fair value method, a summary of key assumptions and the sensitivity of the MSR value to changes in these assumptions at March 31, 2020, and December 31, 2019 follows:
Total servicing, late fees and other ancillary fees included in mortgage banking income was $17 million and $15 million for the three-month periods ended March 31, 2020 and 2019, respectively. The unpaid principal balance of
residential mortgage loans serviced for third parties was $22.8 billion and $22.4 billion at March 31, 2020 and December 31, 2019, respectively.
The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef