Wells Fargo 2014 Annual Report Download - page 189

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Other interests held
Residential Consumer Commercial (2)
mortgage
servicing Interest-only Subordinated Subordinated Senior
($ in millions, except cost to service amounts) rights (1) strips bonds bonds bonds
Fair value of interests held at December 31, 2014 $ 12,738 117 36 294 546
Expected weighted-average life (in years) 5.7 3.9 5.5 2.9 6.2
Key economic assumptions:
Prepayment speed assumption (3) 12.5% 11.4 7.1
Decrease in fair value from:
10% adverse change $ 738 2
25% adverse change 1,754 6
Discount rate assumption 7.6% 18.7 3.9 4.7 2.8
Decrease in fair value from:
100 basis point increase $ 617 2 2 8 29
200 basis point increase 1,178 4 3 15 55
Cost to service assumption ($ per loan) 179
Decrease in fair value from:
10% adverse change 579
25% adverse change 1,433
Credit loss assumption 0.4% 4.1
Decrease in fair value from:
10% higher losses $ 3
25% higher losses 10
Fair value of interests held at December 31, 2013 $ 15,580 135 39 283 587
Expected weighted-average life (in years) 6.4 3.8 5.9 3.6 6.3
Key economic assumptions:
Prepayment speed assumption (3) 10.7 % 10.7 6.7
Decrease in fair value from:
10% adverse change $ 864 3
25% adverse change 2,065 7
Discount rate assumption 7.8 % 18.3 4.4 4.5 3.6
Decrease in fair value from:
100 basis point increase $ 840 2 2 30 30
200 basis point increase 1,607 5 4 38 58
Cost to service assumption ($ per loan) 191
Decrease in fair value from:
10% adverse change 636
25% adverse change 1,591
Credit loss assumption 0.4 % 14.2
Decrease in fair value from:
10% higher losses $ 29
25% higher losses 39 1
(1) See narrative following this table for a discussion of commercial mortgage servicing rights.
(2) Prepayment speed assumptions do not significantly impact the value of commercial mortgage securitization bonds as the underlying commercial mortgage loans experience
significantly lower prepayments due to certain contractual restrictions, impacting the borrower’s ability to prepay the mortgage.
(3) The prepayment speed assumption for residential mortgage servicing rights includes a blend of prepayment speeds and default rates. Prepayment speed assumptions are
influenced by mortgage interest rate inputs as well as our estimation of drivers of borrower behavior.
187