Quarterly report pursuant to Section 13 or 15(d)

MORTGAGE LOAN SALES AND SERVICING RIGHTS

v3.21.2
MORTGAGE LOAN SALES AND SERVICING RIGHTS
 9 Months Ended
Sep. 30, 2021
Transfers and Servicing [Abstract]  
LOAN SALES AND SECURITIZATIONS 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 three-month and nine-month periods ended September 30, 2021 and 2020:
Three Months Ended
September 30,		 Nine Months Ended
September 30,
(dollar amounts in millions) 2021 2020 2021 2020
Residential mortgage loans sold with servicing retained $ 2,298  $ 2,391  $ 7,302  $ 6,106 
Pretax gains resulting from above loan sales (1) 80  98  274  196 
(1)Recorded in mortgage banking income.
The following table summarizes the changes in MSRs recorded using the fair value method for the three-month and nine-month periods ended September 30, 2021 and 2020:
Three Months Ended
September 30,		 Nine Months Ended
September 30,
(dollar amounts in millions) 2021 2020 2021 2020
Fair value, beginning of period $ 327  $ 172  $ 210  $ 7 
Fair value election for servicing assets previously measured using the amortized method (1) —  —  —  205 
Servicing assets obtained in acquisition —  `` —  59  — 
New servicing assets created 31  30  103  70 
Change in fair value during the period due to:
Time decay (2) (4) (2) (11) (6)
Payoffs (3) (17) (13) (50) (29)
Changes in valuation inputs or assumptions (4) 1  4  27  (56)
Fair value, end of period $ 338  $ 191  $ 338  $ 191 
Weighted-average life (years) 7.0 6.4 7.0 6.4
(1)Prior to January 1, 2020, substantially all of Huntington’s MSR assets were recorded at amortized cost.
(2)Represents decrease in value due to passage of time, including the impact from both regularly scheduled principal payments and partial loan paydowns.
(3)Represents decrease in value associated with loans that paid off during the period.
(4)Represents change in value resulting primarily from market-driven changes in interest rates.
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.
A summary of key assumptions and the sensitivity of the MSR value to changes in these assumptions at September 30, 2021, and December 31, 2020 follows:
September 30, 2021 December 31, 2020
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)
12.21  % $ (16) $ (30) 17.36  % $ (12) $ (23)
Spread over forward interest rate swap rates 545  bps (7) (14) 519  bps (4) (8)
Total servicing, late fees and other ancillary fees included in mortgage banking income was $22 million and $16 million for the three-month periods ended September 30, 2021 and 2020, respectively. For the nine-month periods ended September 30, 2021 and 2020, total servicing, late fees and other ancillary fees included in mortgage banking income was $57 million and $47 million, respectively.
The unpaid principal balance of residential mortgage loans serviced for third parties was $30.6 billion and $23.5 billion at September 30, 2021 and December 31, 2020, respectively.