Wells Fargo 2008 Annual Report Download - page 115

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
commercial mortgage servicing rights, and other interests
held related to residential mortgage loan securitizations
are presented in the following table.
Key economic assumptions and the sensitivity of the
current fair value to immediate adverse changes in those
assumptions at December 31, 2008, for residential and
($ in millions) Mortgage Other Other
servicing interests interests
rights held held –
subordinate
bonds
Fair value of interests held $15,246 $ 312 $ 244
Expected weighted-average life (in years) 4.3 5.6 5.0
Prepayment speed assumption (annual CPR) 16.0% 13.3% 15.9%
Decrease in fair value from:
10% increase $ 585 $ 13 $ 1
25% increase 1,337 31 3
Discount rate assumption 8.1% 18.6% 12.8%
MSRs and other interests held
Decrease in fair value from:
100 basis point increase $ 610 $ 13
200 basis point increase 1,168 24
Other interests held – subordinate bonds
Decrease in fair value from:
50 basis point increase $5
100 basis point increase 11
Credit loss assumption 3.1%
Decrease in fair value from:
10% higher losses $22
25% higher losses 45
For securitizations completed in 2008 and 2007, we
used the following assumptions to determine the fair value
Mortgage Other Other interests held –
servicing rights interests held subordinate bonds
2008 2007 2008 2007 2008 2007
Prepayment speed (annual CPR (1) ) (2) 12.7% 13.5% 36.0% 14.1% 13.3% 24.3%
Life (in years) (2) 7.1 6.8 2.3 7.2 5.7 4.4
Discount rate (2) 9.4% 9.8% 7.2% 10.2% 6.7% 6.9%
Expected life of loan losses 1.1% 0.8%
(1) Constant prepayment rate.
(2) Represents weighted averages for all other interests held resulting from securitizations completed in 2008 and 2007.
of mortgage servicing rights and other interests held at the
date of securitization.
the other interests held is calculated independently without
changing any other assumptions. In reality, changes in one
factor may result in changes in others (for example, changes
in prepayment speed estimates could result in changes
in the discount rates), which might magnify or counteract
the sensitivities.
We also retained some AAA-rated fixed-rate and
adjustable rate mortgage-backed securities (MBS). The fair
value of the securities was $5,147 million and $7,423 million
at December 31, 2008 and 2007, respectively, and was deter-
mined using an independent third party pricing service.
Adverse changes in key economic assumptions used to
measure the fair value of retained interests in securitizations
that we acquired in the Wachovia acquisition were analyzed.
The price sensitivity to these adverse changes was not signif-
icant and, accordingly, are not included in the table above.
The sensitivities in the table above are hypothetical
and caution should be exercised when relying on this data.
Changes in fair value based on a 10% variation in assumptions
generally cannot be extrapolated because the relationship
of the change in the assumption to the change in fair value
may not be linear. Also, in the table above, the effect of
a variation in a particular assumption on the fair value of