US Bank 2014 Annual Report Download - page 112

rights sold during 2014), $192 million and $102 million for
the years ended December 31, 2014, 2013 and 2012,
respectively. Loan servicing fees, not including valuation
changes, included in mortgage banking revenue, were $732
million, $754 million and $720 million for the years ended
December 31, 2014, 2013 and 2012, respectively.
Changes in fair value of capitalized MSRs for the years ended December 31, are summarized as follows:
(Dollars in Millions) 2014 2013 2012
Balance at beginning of period ........................................................................... $2,680 $1,700 $1,519
Rights purchased ...................................................................................... 5842
Rights capitalized ...................................................................................... 382 769 957
Rights sold............................................................................................. (141) – –
Changes in fair value of MSRs
Due to fluctuations in market interest rates(a) ....................................................... (276) 617 (249)
Due to revised assumptions or models(b) ............................................................ 86 33 (21)
Other changes in fair value(c) ........................................................................ (398) (447) (548)
Balance at end of period .................................................................................. $2,338 $2,680 $1,700
(a) Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.
(b) Includes changes in MSR value not caused by changes in market interest rates, such as changes in cost to service, ancillary income, and discount rate, as well as the impact of any model
changes. In addition, 2014 includes a $44 million revaluation gain related to excess servicing rights sold.
(c) Primarily represents changes due to realization of expected cash flows over time (decay).
The estimated sensitivity to changes in market interest rates of the fair value of the MSRs portfolio and the related derivative
instruments as of December 31 follows:
2014 2013
(Dollars in Millions)
Down
100 bps
Down
50 bps
Down
25 bps
Up
25 bps
Up
50 bps
Up
100 bps
Down
100 bps
Down
50 bps
Down
25 bps
Up
25 bps
Up
50 bps
Up
100 bps
MSR portfolio ........................... $(540) $(242) $(114) $ 100 $ 185 $ 346 $(435) $(199) $(93) $ 82 $ 154 $ 287
Derivative instrument hedges ........... 441 223 109 (102) (197) (375) 399 194 91 (82) (157) (301)
Net sensitivity ........................ $ (99) $ (19) $ (5) $ (2) $ (12) $ (29) $ (36) $ (5) $ (2) $ – $ (3) $ (14)
The fair value of MSRs and their sensitivity to changes
in interest rates is influenced by the mix of the servicing
portfolio and characteristics of each segment of the
portfolio. The Company’s servicing portfolio consists of the
distinct portfolios of government-insured mortgages,
conventional mortgages and Mortgage Revenue Bond
Programs (“MRBP”). The servicing portfolios are
predominantly comprised of fixed-rate agency loans with
limited adjustable-rate or jumbo mortgage loans. The MRBP
division specializes in servicing loans made under state and
local housing authority programs. These programs provide
mortgages to low-income and moderate-income borrowers
and are generally government-insured programs with a
favorable rate subsidy, down payment and/or closing cost
assistance.
A summary of the Company’s MSRs and related characteristics by portfolio as of December 31 follows:
2014 2013
(Dollars in Millions) MRBP Government Conventional(b) Total MRBP Government Conventional(b) Total
Servicing portfolio .................... $19,706 $40,471 $162,620 $222,797 $15,896 $41,659 $169,287 $226,842
Fair value............................. $ 213 $ 426 $ 1,699 $ 2,338 $ 180 $ 500 $ 2,000 $ 2,680
Value (bps)(a) .......................... 108 105 104 105 113 120 118 118
Weighted-average servicing fees
(bps) ............................... 37 33 27 29 39 32 29 30
Multiple (value/servicing fees) ........ 2.92 3.18 3.85 3.62 2.90 3.75 4.07 3.93
Weighted-average note rate .......... 4.58% 4.18% 4.14% 4.19% 4.70% 4.24% 4.17% 4.22%
Weighted-average age (in years)...... 3.6 3.2 3.1 3.2 3.8 2.6 2.5 2.6
Weighted-average expected
prepayment (constant prepayment
rate) ............................... 12.8% 14.8% 11.4% 12.1% 13.5% 11.5% 10.9% 11.2%
Weighted-average expected life
(in years) ........................... 6.2 5.5 6.5 6.3 6.2 6.9 7.2 7.1
Weighted-average discount rate ...... 11.9% 11.2% 9.6% 10.1% 11.9% 11.2% 9.8% 10.2%
(a) Value is calculated as fair value divided by the servicing portfolio.
(b) Represents loans sold primarily to GSEs.
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