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Servicing of Financial Assets
 3 Months Ended
Mar. 31, 2023
Transfers and Servicing of Financial Assets [Abstract]  
Servicing of Financial Assets
NOTE 4. SERVICING OF FINANCIAL ASSETS
RESIDENTIAL MORTGAGE BANKING ACTIVITIES
The fair value of residential MSRs is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of residential MSRs. The Company compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.
The table below presents an analysis of residential MSRs under the fair value measurement method: 
Three Months Ended March 31
 20232022
 (In millions)
Carrying value, beginning of year$812 $418 
Additions4 19 
Purchases (1)
10 75 
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions(12)47 
Economic amortization associated with borrower repayments (2)
(24)(17)
Carrying value, end of year$790 $542 
_________
(1)Purchases of residential MSRs can be structured with cash hold back provisions, therefore the timing of payment may be made in future periods.
(2)Includes both total loan payoffs as well as partial paydowns. Regions' MSR decay methodology is a discounted net cash flow approach.
Data and assumptions used in the fair value calculation, as well as the valuation’s sensitivity to rate fluctuations, related to residential MSRs (excluding related derivative instruments) are as follows: 
March 31
 20232022
 (Dollars in millions)
Unpaid principal balance$54,557 $41,639 
Weighted-average CPR (%)7.7 %9.6 %
Estimated impact on fair value of a 10% increase$(43)$(48)
Estimated impact on fair value of a 20% increase$(84)$(78)
Option-adjusted spread (basis points)546 445 
Estimated impact on fair value of a 10% increase$(19)$(10)
Estimated impact on fair value of a 20% increase$(38)$(21)
Weighted-average coupon interest rate3.6 %3.5 %
Weighted-average remaining maturity (months)306299
Weighted-average servicing fee (basis points)27.1 27.4 
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the residential MSRs is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. The derivative instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.
Servicing related fees, which include contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans totaled $38 million and $27 million for the three months ended March 31, 2023 and 2022, respectively.
Residential mortgage loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. Regions may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.
Regions maintains an immaterial repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability is reported in other liabilities on the consolidated balance sheets and reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income.
COMMERCIAL MORTGAGE BANKING ACTIVITIES
Regions is an approved DUS lender. The DUS program provides liquidity to the multi-family housing market. In connection with the DUS program, Regions services commercial mortgage loans, retains commercial MSRs and intangible assets associated with the DUS license, and assumes a loss share guarantee associated with the loans. Regions' related DUS commercial MSRs are recorded in other assets at the lower of cost or estimated fair value and are amortized in proportion to, and over the estimated period that net servicing income is expected to be received based on projections of the amount and timing of estimated future net cash flows. See Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2022 for additional information. Also see Note 11 for additional information related to the guarantee.
Regions' DUS portfolio totaled $79 million and $81 million at March 31, 2023 and December 31, 2022, respectively. Regions periodically evaluates DUS MSRs for impairment based on fair value. The estimated fair value of the DUS commercial MSRs was approximately $94 million at March 31, 2023 and $96 million at December 31, 2022.
Servicing related fees in connection with the DUS program, which include contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of DUS commercial mortgage loans totaled $5 million and $7 million for the three months ended March 31, 2023 and 2022, respectively.