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Mortgage banking activities

9 Months Ended

Sep. 30, 2020

Note 10 – Mortgage banking activities

Income from mortgage banking activities includes mortgage servicing fees earned in connection with administering residential mortgage loans and valuation adjustments on mortgage servicing rights. It also includes gain on sales and securitizations of residential mortgage loans, losses on repurchased loans, including interest advances, and trading gains and losses on derivative contracts used to hedge the Corporation’s securitization activities. In addition, lower-of-cost-or-market valuation adjustments to residential mortgage loans held for sale, if any, are recorded as part of the mortgage banking activities.

The following table presents the components of mortgage banking activities:

			Quarters ended September 30,			Nine months ended September 30,
(In thousands)			2020		2019		2020		2019
Mortgage servicing fees, net of fair value adjustments:
	Mortgage servicing fees	$	12,966	$	11,797	$	32,992	$	35,400
	Mortgage servicing rights fair value adjustments		(20,491)		(4,842)		(33,360)		(25,853)
Total mortgage servicing fees, net of fair value adjustments			(7,525)		6,955		(368)		9,547
Net gain on sale of loans, including valuation on loans held-for-sale			10,916		5,421		20,389		14,653
Trading account (loss) profit:
	Unrealized (losses) gains on outstanding derivative positions		(4)		227		(4)		-
	Realized losses on closed derivative positions		(1,958)		(2,111)		(8,391)		(5,555)
Total trading account loss			(1,962)		(1,884)		(8,395)		(5,555)
Losses on repurchased loans, including interest advances [1]			(10,955)		-		(10,955)		-
Total mortgage banking activities		$	(9,526)	$	10,492	$	671	$	18,645
[1]	The Corporation, from time to time, repurchases delinquent loans from its GNMA servicing portfolio, in compliance with Guarantor guidelines, and may incur in losses related to previously advanced interest on delinquent loans. During the quarter ended September 30, 2020 the Corporation repurchased $687.9 million of GNMA loans and recorded a loss of $10.5 million for previously advanced interest on delinquent loans. Effective for the quarter ended September 30, 2020, the Corporation has determined to present these losses as part of its Mortgage Banking Activities, which were previously presented within the indemnity reserves on loans sold component of non-interest income, which amounted to $0.7 million and $2.4 million for the quarter and nine months ended September 30, 2019, respectively.