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MORTGAGE BANKING (Tables) | 9 Months Ended
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Sep. 30, 2018
Mortgage Banking [Abstract] |
Schedule of mortgage banking activities | The following table summarizes activity related to residential mortgage loans sold with servicing rights retained for the three and nine months ended September 30, 2018 and 2017.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Residential mortgage loans sold with servicing retained |  | $1,848 |  |  |  | $828 |  |  |  | $3,173 |  |  |  | $2,372 |
Gain on sales (1) | 29 |  |  | 25 |  |  | 59 |  |  | 54 |
Contractually specified servicing, late and other ancillary fees (1) | 38 |  |  | 13 |  |  | 69 |  |  | 40 |
(1) Reported in mortgage banking fees in the Consolidated Statements of Operations.
Schedule of valuation allowance for impairment of recognized servicing assets |
| As of and for the Three Months Ended September 30, |  | As of and for the Nine Months Ended September 30,
(in millions) | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
MSRs: |  |  |  |  |  |  |
Balance as of beginning of period |  | $217 |  |  |  | $170 |  |  |  | $201 |  |  |  | $167 |
Amount capitalized | 11 |  |  | 9 |  |  | 26 |  |  | 28 |
Purchases | — |  |  | — |  |  | 16 |  |  | — |
Amortization | (9 | ) |  | (8 | ) |  | (24 | ) |  | (24 | )
Carrying amount before valuation allowance | 219 |  |  | 171 |  |  | 219 |  |  | 171 |
Valuation allowance for servicing assets: |  |  |  |  |  |  |
Balance as of beginning of period | — |  |  | 4 |  |  | 3 |  |  | 5 |
Valuation recoveries | — |  |  | — |  |  | (3 | ) |  | (1 | )
Balance at end of period | — |  |  | 4 |  |  | — |  |  | 4 |
Net carrying value of MSRs |  | $219 |  |  |  | $167 |  |  |  | $219 |  |  |  | $167 |
Servicing asset at amortized cost |
| As of and for the Three Months Ended September 30, |  | As of and for the Nine Months Ended September 30,
(in millions) | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
MSRs: |  |  |  |  |  |  |
Balance as of beginning of period |  | $217 |  |  |  | $170 |  |  |  | $201 |  |  |  | $167 |
Amount capitalized | 11 |  |  | 9 |  |  | 26 |  |  | 28 |
Purchases | — |  |  | — |  |  | 16 |  |  | — |
Amortization | (9 | ) |  | (8 | ) |  | (24 | ) |  | (24 | )
Carrying amount before valuation allowance | 219 |  |  | 171 |  |  | 219 |  |  | 171 |
Valuation allowance for servicing assets: |  |  |  |  |  |  |
Balance as of beginning of period | — |  |  | 4 |  |  | 3 |  |  | 5 |
Valuation recoveries | — |  |  | — |  |  | (3 | ) |  | (1 | )
Balance at end of period | — |  |  | 4 |  |  | — |  |  | 4 |
Net carrying value of MSRs |  | $219 |  |  |  | $167 |  |  |  | $219 |  |  |  | $167 |
Servicing asset at fair value |
| As of and for the Three Months Ended September 30, 2018 |  | As of and for the Nine Months Ended September 30, 2018
(in millions) |
MSRs: |  |  |
Fair value as of beginning of the period |  | $— |  |  |  | $— |
Acquired MSRs | 590 |  |  | 590 |
Amounts capitalized | 29 |  |  | 29 |
Changes in unpaid principal balance during the period (1) | (12 | ) |  | (12 | )
Changes in fair value during the period (2) | 5 |  |  | 5 |
Fair value at end of the period |  | $612 |  |  |  | $612 |
(1) Represents changes in value due to i) passage of time including the impact from both regularly scheduled loan principal payments and partial paydowns, and ii) loans that paid off during the period. (2) Represents changes in value primarily due to market driven changes in interest rates and prepayment speeds.
Schedule of fair value assumptions used to estimate the value of Mortgage Servicing Rights | For MSRs under the amortization method, the key economic assumptions used to estimate the fair value are presented below:
| September 30, 2018 |  | December 31, 2017
| Actual | Decline in fair value due to |  | Actual | Decline in fair value due to
(dollars in millions) |
Fair value | $261 | 50 bps adverse change | 100 bps adverse change |  | $218 | 50 bps adverse change | 100 bps adverse change
Weighted average life (in years) | 6.9 |  | 5.9
Weighted average constant prepayment rate | 7.7% | $18 | $43 |  | 10.0% | $22 | $46
Weighted average discount rate | 9.3% | 5 | 10 |  | 9.9% | 4 | 8
For MSRs under the fair value method, the key economic assumptions used to estimate the fair value are presented below:
| September 30, 2018
| Actual | Decline in fair value due to
(dollars in millions)
Fair value | $612 | 50 bps adverse change | 100 bps adverse change
Weighted average life (in years) | 8.7
Weighted average constant prepayment rate | 7.3% | $54 | $123
Weighted average option adjusted spread | 625 bps | 14 | 27

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- Definition Tabular disclosure of a sensitivity analysis or stress test showing the hypothetical effect on the fair value of the transferor's interests in transferred financial assets (including any servicing assets or servicing liabilities) of two or more unfavorable variations from the expected levels for each key assumption that is reported, independently determined from any change in another key assumption, and a description of the objectives, methodology, and limitations of the sensitivity analysis or stress test. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 20 -Section 50 -Paragraph 4 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=109247956&loc=d3e107314-111719 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 20 -Section 50 -Paragraph 4 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=109247956&loc=d3e107314-111719 + Details
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- Definition Tabular disclosure of activity in the balance of servicing assets subsequently measured at amortized cost. Includes, but is not limited to, beginning and ending balances, additions, disposals, and amortization. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 4 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=68078379&loc=d3e122739-111746 + Details
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- Definition Tabular disclosure of the activity in the balance of servicing assets (including a description of where changes in fair value are reported in the statement of income for each period for which results of operations are presented), including but not limited to, the following: beginning and ending balances, additions (for instance, through purchases of servicing assets), disposals, changes in fair value during the period resulting from changes in inputs or assumptions used in the valuation model, other changes in fair value along with a description of those changes, and other changes that affect the balance along with a description of those changes. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 3 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=68078379&loc=d3e122625-111746 + Details
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