MORTGAGE LOAN SALES AND SERVICING RIGHTS
|9 Months Ended|
Sep. 30, 2022
|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 three-month and nine-month periods ended September 30, 2022 and 2021:
(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, 2022 and 2021:
(1)Represents decrease in value due to passage of time, including the impact from both regularly scheduled principal payments and partial loan paydowns.
(2)Represents decrease in value associated with loans that paid off during the period.
(3)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 sensitive to movement in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which are 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, 2022, and December 31, 2021 follows:
Total servicing, late and other ancillary fees included in mortgage banking income was $23 million and $22 million for the three-month periods ended September 30, 2022 and 2021, respectively. Total servicing, late fees and other ancillary fees included in mortgage banking income was $68 million and $57 million for the nine-month periods ended September 30, 2022 and 2021, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties was $32 billion and $31 billion at September 30, 2022 and December 31, 2021, 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://www.xbrl.org/2003/role/disclosureRef