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Servicing of Financial Assets
 12 Months Ended
Dec. 31, 2024
Transfers and Servicing of Financial Assets [Abstract]  
Servicing of Financial Assets
NOTE 6. 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 for the years ended December 31: 
 202420232022
 (In millions)
Carrying value, beginning of year$906 $812 $418 
Additions26 27 44 
Purchases (1)
138 158 301 
Increase (decrease) in fair value(2):
Due to change in valuation inputs or assumptions60 17 127 
Economic amortization associated with borrower repayments (3)
(123)(108)(78)
Carrying value, end of year$1,007 $906 $812 
_________
(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) as of December 31 are as follows: 
 20242023
 (Dollars in millions)
Unpaid principal balance$67,546 $62,059 
Weighted-average CPR (%)8.0 %8.2 %
Estimated impact on fair value of a 10% increase$(37)$(43)
Estimated impact on fair value of a 20% increase$(78)$(79)
Option-adjusted spread (basis points)505 482 
Estimated impact on fair value of a 10% increase$(22)$(19)
Estimated impact on fair value of a 20% increase$(45)$(39)
Weighted-average coupon interest rate3.8 %3.8 %
Weighted-average remaining maturity (months)296302
Weighted-average servicing fee (basis points)27.3 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 $191 million, $165 million, and $137 million for the years ended December 31, 2024, 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 engages in the servicing of commercial mortgage loans through agreements with the agencies and through a DUS lending program. Commercial MSRs of loans through the agency programs are measured at fair value while commercial MSRs of loans through the DUS lending program are measured at cost and subsequently amortized.
Commercial mortgage banking through non-DUS agency programs
The fair value of commercial MSRs through non-DUS agency programs 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 this servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of these commercial 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. Regions assumes a loss share guarantee associated with loans sold to Fannie Mae. See Note 1 for additional information. Also see Note 23 for additional information related to the guarantee.
The table below presents an analysis of commercial MSRs through the agency programs under the fair value measurement method for the years ended December 31: 
202420232022
(In millions)
Carrying value, beginning of year$81 $78 $62 
Additions23518
Increase (decrease) in fair value(1):
Due to change in valuation inputs or assumptions9 13 12 
Economic amortization associated with borrower repayments (2)
(16)(15)(14)
Carrying value, end of year$97 $81 $78 
_____
(1)Included in capital markets income. Amounts presented exclude offsetting impact from related derivatives.
(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 commercial MSRs through non-DUS agency programs (excluding related derivative instruments) as of December 31 are as follows: 
20242023
(Dollars in millions)
Unpaid principal balance$7,425 $5,913 
Weighted-average CPR (%)
7.7 %8.1 %
Estimated impact on fair value of a 10% increase$(1)$(1)
Estimated impact on fair value of a 20% increase$(3)$(2)
Weighted-average discount rate (%)
7.1 %7.1 %
Estimated impact on fair value of a 10% increase$(2)$(2)
Estimated impact on fair value of a 20% increase$(5)$(4)
Weighted-average coupon interest rate4.7 %4.3 %
Weighted-average remaining maturity (months)150161
Weighted-average servicing fee (basis points)26.430.1
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 commercial 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 commercial mortgage loans through the agency programs totaled $24 million, $22 million, and $19 million for the years ended December 31, 2024, 2023, and 2022 respectively.
Commercial mortgage banking through the DUS lending program
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 for additional information. Also see Note 23 for additional information related to the guarantee.
The table below presents an analysis of commercial DUS MSRs under the amortization measurement method for the years ended December 31:
202420232022
(In millions)
Carrying value, beginning of year$87 $81 $86 
Additions20 21 12 
Economic amortization associated with borrower repayments (1)
(17)(15)(17)
Carrying value, end of year$90 $87 $81 
________
(1)Economic amortization associated with borrower repayments includes both total loan payoffs as well as partial paydowns.
Regions periodically evaluates DUS MSRs for impairment based on fair value. The estimated fair value of the DUS MSRs was approximately $117 million, $109 million, and $96 million at December 31, 2024, 2023, and 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 $26 million, $23 million, and $24 million for the year ended December 31, 2024, 2023, and 2022.