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Servicing of Financial Assets | 3 Months Ended
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Sep. 30, 2024
Transfers and Servicing of Financial Assets [Abstract] |
Servicing of Financial Assets | NOTE 5. 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 September 30 |  | Nine Months Ended September 30 |  |
| 2024 |  | 2023 |  | 2024 |  | 2023 |  |
| (In millions)
Carrying value, beginning of period | $ | 1,020 |  |  | $ | 801 |  |  | $ | 906 |  |  | $ | 812 |  |  |
Additions | 8 |  |  | 8 |  |  | 20 |  |  | 20 |  |  |
Purchases (1) | 4 |  | 106 |  | 134 |  |  | 138 |  |  |
Increase (decrease) in fair value(2): |  |  |  |  |  |  |  |  |
Due to change in valuation inputs or assumptions | (28) |  |  | 45 |  |  | 4 |  |  | 41 |  |  |
Economic amortization associated with borrower repayments (3) | (33) |  |  | (28) |  |  | (93) |  |  | (79) |  |  |
Carrying value, end of period | $ | 971 |  |  | $ | 932 |  |  | $ | 971 |  |  | $ | 932 |  |  |
_________ (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)Included in mortgage income. Amounts presented exclude offsetting impact from related derivatives. (3)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):
| September 30
| 2024 |  | 2023
| (Dollars in millions)
Unpaid principal balance | $ | 68,361 |  |  | $ | 61,452 |
Weighted-average CPR (%) | 9.0 | % |  | 7.7 | %
Estimated impact on fair value of a 10% increase | $ | (46) |  |  | $ | (59) |
Estimated impact on fair value of a 20% increase | $ | (87) |  |  | $ | (100) |
Option-adjusted spread (basis points) | 496 |  |  | 483 |
Estimated impact on fair value of a 10% increase | $ | (21) |  |  | $ | (20) |
Estimated impact on fair value of a 20% increase | $ | (43) |  |  | $ | (40) |
Weighted-average coupon interest rate | 3.8 | % |  | 3.7 | %
Weighted-average remaining maturity (months) | 298 |  | 303
Weighted-average servicing fee (basis points) | 27.3 |  |  | 27.3 |
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 $53 million and $42 million for the three months ended September 30, 2024 and 2023, respectively and $143 million and $119 million for the nine months ended September 30, 2024 and 2023, 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. See Note 1 "Summary of Significant Accounting Policies" in the Annual Report on Form 10-K for the year ended December 31, 2023 for additional information. Also see Note 12 for additional information related to the guarantee. Regions' DUS portfolio of MSRs totaled $86 million and $87 million at September 30, 2024 and December 31, 2023, respectively. Regions periodically evaluates DUS MSRs for impairment based on fair value. The estimated fair value of the DUS MSRs was approximately $108 million at September 30, 2024 and $109 million at December 31, 2023. 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 $6 million and $5 million for the three months ended September 30, 2024 and 2023, respectively and $19 million and $17 million for the nine months ended September 30, 2024 and 2023.

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- Definition The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 210 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-04(11)) -Publisher 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