v3.26.1
Mortgage Servicing Rights
 3 Months Ended
Mar. 31, 2026
Transfers and Servicing [Abstract]  
Mortgage Servicing Rights
5. MORTGAGE SERVICING RIGHTS
The following table presents changes in the fair value of the MSR portfolio related to the Company's mortgage banking business and other information related to its servicing portfolio:
Three Months Ended March 31,
20262025
(in millions)
Balance, beginning of period$1,494 $1,127 
Additions from loans sold with servicing rights retained295 260 
Carrying value of MSRs sold(211)(83)
Change in fair value22 (20)
Realization of cash flows(84)(43)
Balance, end of period$1,516 $1,241 
Unpaid principal balance of mortgage loans serviced for others$75,083 $70,563 
Changes in the fair value of MSRs are recorded as Net loan servicing revenue in the Consolidated Income Statement. Due to the regulatory capital impact of MSRs on capital ratios, the Company sells certain MSRs and related servicing advances in the normal course of business. The Company may also sell excess servicing spread related to certain mortgage loans serviced by the Company. During the three months ended March 31, 2026 and 2025, the Company recognized a net gain of $12.0 million and net loss of $0.3 million on MSR sales, respectively, which are reflected in Net loan servicing revenue in the Consolidated Income Statement. The UPB of loans underlying these sales totaled $11.7 billion and $8.7 billion for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026 and December 31, 2025, the Company had a remaining receivable balance of $21 million and $22 million, respectively, related to holdbacks on MSR sales for servicing transfers, which are recorded in Other assets on the Consolidated Balance Sheet.
The Company receives loan servicing fees, net of subservicing costs, based on the UPB of the underlying loans. Loan servicing fees are collected from payments made by borrowers. The Company may receive other remuneration from rights to various borrower contracted fees, such as late charges, collateral reconveyance charges, and non-sufficient funds fees. Contractually specified servicing fees, late fees, and ancillary income associated with the Company's MSR portfolio totaled $77.3 million and $59.0 million for the three months ended March 31, 2026 and 2025, respectively. Early payoff fee income totaled $6.5 million and $4.4 million for the three months ended March 31, 2026 and 2025, respectively. These amounts are recorded as Net loan servicing revenue in the Consolidated Income Statement.
In accordance with its contractual loan servicing obligations, the Company is required to advance funds to or on behalf of investors when borrowers do not make payments. The Company advances property taxes and insurance premiums for borrowers who have insufficient funds in escrow accounts, plus any other costs to preserve real estate properties. The Company
may also advance funds to maintain, repair, and market foreclosed real estate properties. The Company is entitled to recover all or a portion of the advances from borrowers of reinstated and performing loans, from the proceeds of liquidated properties or from the government agency or GSE guarantor of charged-off loans. Servicing advances are charged-off when they are deemed to be uncollectible. As of March 31, 2026 and December 31, 2025, net servicing advances totaled $92 million and $108 million, respectively, which are recorded in Other assets on the Consolidated Balance Sheet.
The following table presents the effect of hypothetical changes in the fair value of MSRs caused by assumed immediate adverse changes in the below inputs that are used to determine fair value:
March 31, 2026
(in millions)
Fair value of mortgage servicing rights$1,516 
Decrease in fair value resulting from adverse changes in:
Option adjusted spread
10% change(26)
20% change(51)
Conditional prepayment rate
10% change(54)
20% change(103)
Cost to service
10% change(13)
20% change(26)
Sensitivities are hypothetical changes in fair value and cannot be extrapolated because the relationship of changes in assumptions to changes in fair value may not be linear. In addition, the offsetting effect of hedging activities are not contemplated in these results and further, the effect of a variation in a particular assumption is calculated without changing any other assumptions, whereas a change in one factor may result in changes to another. Accordingly, no assurance can be given that actual results would be consistent with the results of these estimates. As a result, actual future changes in MSR values may differ significantly from those reported.