JP Morgan Chase 2015 Annual Report Download - page 287

JPMorgan Chase & Co./2015 Annual Report 277
The following table presents the components of mortgage
fees and related income (including the impact of MSR risk
management activities) for the years ended December 31,
2015, 2014 and 2013.
Year ended December 31,
(in millions) 2015 2014 2013
CCB mortgage fees and related
income
Net production revenue $ 769 $ 1,190 $3,004
Net mortgage servicing revenue:
Operating revenue:
Loan servicing revenue 2,776 3,303 3,552
Changes in MSR asset fair value
due to collection/realization of
expected cash flows (917) (905) (1,094)
Total operating revenue 1,859 2,398 2,458
Risk management:
Changes in MSR asset fair value
due to market interest rates
and other(a) (160) (1,606) 2,119
Other changes in MSR asset fair
value due to other inputs and
assumptions in model(b) (245) (218) (511)
Change in derivative fair value
and other 288 1,796 (1,875)
Total risk management (117) (28) (267)
Total net mortgage servicing
revenue 1,742 2,370 2,191
Total CCB mortgage fees and
related income 2,511 3,560 5,195
All other 2310
Mortgage fees and related income $2,513 $ 3,563 $5,205
(a) Represents both the impact of changes in estimated future
prepayments due to changes in market interest rates, and the
difference between actual and expected prepayments.
(b) Represents the aggregate impact of changes in model inputs and
assumptions such as projected cash flows (e.g., cost to service),
discount rates and changes in prepayments other than those
attributable to changes in market interest rates (e.g., changes in
prepayments due to changes in home prices).
The table below outlines the key economic assumptions
used to determine the fair value of the Firm’s MSRs at
December 31, 2015 and 2014, and outlines the
sensitivities of those fair values to immediate adverse
changes in those assumptions, as defined below.
December 31,
(in millions, except rates) 2015 2014
Weighted-average prepayment speed
assumption (“CPR”) 9.81% 9.80%
Impact on fair value of 10% adverse
change $ (275) $ (337)
Impact on fair value of 20% adverse
change (529) (652)
Weighted-average option adjusted spread 9.02% 9.43%
Impact on fair value of 100 basis points
adverse change $ (258) $ (300)
Impact on fair value of 200 basis points
adverse change (498) (578)
CPR: Constant prepayment rate.
The sensitivity analysis in the preceding table is
hypothetical and should be used with caution. Changes in
fair value based on variation in assumptions generally
cannot be easily extrapolated, because the relationship of
the change in the assumptions to the change in fair value
are often highly interrelated and may not be linear. In this
table, the effect that a change in a particular assumption
may have on the fair value is calculated without changing
any other assumption. In reality, changes in one factor may
result in changes in another, which would either magnify or
counteract the impact of the initial change.