Mortgage Banking Activities

6 Months Ended

Jun. 30, 2026

Mortgage Banking Activities [Abstract]


Note 6: Mortgage Banking Activities

Mortgage banking activities consist of residential and commercial mortgage originations, sales and servicing.

We apply the fair value method to residential MSRs and apply the amortization method to commercial MSRs. Table 6.1 presents

MSRs, including the changes in MSRs measured using the fair value method and the amortization method. MSRs are included in other assets on the consolidated balance sheet.

Table 6.1: Mortgage Servicing Rights


	Quarter ended June 30,			Six months ended June 30,
(in millions)	2026		2025	2026		2025
Residential MSRs at fair value, beginning of period	$	5,608	6,536	$	5,696	6,844
Originations/purchases	22		26	39		51
Sales and other	(227)		(37)	(226)		(113)
Net reductions	(205)		(11)	(187)		(62)
Changes in fair value:
Due to valuation inputs or assumptions:
Market interest rates (1)	55		(2)	83		(125)
Servicing and foreclosure costs	—		(7)	(3)		(2)
Discount rates	(18)		(1)	(18)		(1)
Prepayment estimates and other (2)	65		98	96		148
Net changes in valuation inputs or assumptions	102		88	158		20
Changes due to collection/realization of expected cash flows (3)	(162)		(196)	(324)		(385)
Total changes in fair value	(60)		(108)	(166)		(365)
Residential MSRs at fair value, end of period	5,343		6,417	5,343		6,417
Commercial MSRs at amortized cost, end of period (4)	598		631	598		631
Total MSRs	$	5,941	7,048	$	5,941	7,048

(1)Includes prepayment rate changes due to changes in market interest rates. Residential MSRs are economically hedged with derivative instruments to reduce exposure to changes in market interest rates.

(2)Represents other changes in valuation model inputs or assumptions, including prepayment rate estimation changes that are independent of mortgage interest rate changes.

(3)Represents the reduction in the residential MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.

(4)The estimated fair value of commercial MSRs was $776 million and $755 million at June 30, 2026 and 2025, respectively.

Table 6.2 provides key weighted-average assumptions used in the valuation of residential MSRs and sensitivity of the current fair value of residential MSRs to immediate adverse changes in

those assumptions. See Note 11 (Fair Value Measurements) for additional information on key assumptions for residential MSRs.

Table 6.2: Assumptions and Sensitivity of Residential MSRs


($ in millions, except cost to service amounts)	Jun 30, 2026			Dec 31, 2025
Fair value of interests held	$	5,343		5,696
Expected weighted-average life (in years)	6.4			6.3

Key assumptions:
Prepayment rate assumption (1)	7.6		%	8.0
Impact on fair value from 10% adverse change	$	(146)		(163)
Impact on fair value from 25% adverse change	(352)			(394)

Discount rate assumption	9.4		%	9.1
Impact on fair value from 100 basis point increase	$	(220)		(243)
Impact on fair value from 200 basis point increase	(421)			(465)

Cost to service assumption ($ per loan)	89			96
Impact on fair value from 10% adverse change	(91)			(106)
Impact on fair value from 25% adverse change	(227)			(266)

(1)Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.

The sensitivities in the preceding table are hypothetical and caution should be exercised when relying on this data. Changes in value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in value may not be linear. Also, the effect of a variation in a particular assumption on the value of the other interests held is calculated independently without changing any other assumptions. In reality, changes in one factor may result in changes in others, which might magnify or counteract the sensitivities.

We present information for our loans serviced for others in

Table 6.3. As the servicer of loans for others, we advance certain payments of principal, interest, taxes, insurance, and default-related expenses. The credit risk related to these advances is limited since the reimbursement is generally senior to cash payments to investors and are generally reimbursed within a short timeframe from cash flows from the trust, government-sponsored enterprise (GSEs), insurer, or borrower. We maintain an allowance for uncollectible amounts for advances on loans serviced for others that may not be reimbursed if the payments were not made in accordance with applicable servicing agreements or if the insurance or servicing agreements contain limitations on reimbursements.

Table 6.3: Serviced for Others Portfolio


	Jun 30, 2026				Dec 31, 2025
	Residential mortgages			Commercial mortgages	Residential mortgages	Commercial mortgages
Loans serviced for others, unpaid principal balance ($ in billions)	$	362		77	397	77
Weighted average loan rate	3.78		%	4.12	3.78	4.11
Servicer advances, net of an allowance for uncollectible amounts ($ in millions) (1)	$	243		24	437	24

(1)In second quarter 2026, servicer advances are presented only for loans serviced for others, excluding advances related to loans held on our consolidated balance sheet. Prior period balances have been revised to conform with the current period presentation.

Table 6.4 presents the components of mortgage banking noninterest income.

Table 6.4: Mortgage Banking Noninterest Income


	Quarter ended June 30,			Six months ended June 30,
(in millions)	2026		2025	2026		2025

Contractually specified servicing fees, late charges and ancillary fees	$	292	367	$	600	773
Unreimbursed servicing costs (1)	(23)		(76)	(53)		(103)

Amortization for commercial MSRs (2)	(35)		(36)	(76)		(85)
Changes due to collection/realization of expected cash flows (3)	(162)		(196)	(324)		(385)
Net servicing fees	72		59	147		200
Changes in fair value of MSRs due to market interest rates	55		(2)	83		(125)
Net derivative gains (losses) from economic hedges (4)	(55)		(6)	(81)		126
Changes in fair value of MSRs due to other valuation inputs or assumptions (5)	47		90	75		145
Market-related valuation changes to residential MSRs, net of hedge results	47		82	77		146
Total net servicing income	119		141	224		346
Net gains on mortgage loan originations/sales (6)	137		89	233		216
Total mortgage banking noninterest income	$	256	230	$	457	562

(1)Includes costs associated with foreclosures, unreimbursed interest advances to investors, other interest costs, and transaction costs associated with sales of residential MSRs.

(2)Estimated future amortization expense for commercial MSRs was $70 million for the remainder of 2026, and $120 million, $108 million, $84 million, $68 million, and $45 million for the years ended December 31, 2027, 2028, 2029, 2030, and 2031, respectively.

(3)Represents the reduction in the cash flows expected to be collected during the period, net of income accreted due to the passage of time, for residential MSRs measured using the fair value method.

(4)Residential MSRs are economically hedged with derivative instruments to reduce exposure to changes in market interest rates. See Note 10 (Derivatives) for additional information.

(5)Refer to the analysis of changes in residential MSRs presented in Table 6.1 in this Note for more detail.

(6)Includes net gains (losses) of $8 million and $29 million in the second quarter and first half of 2026, respectively, and $(2) million and $(14) million in the second quarter and first half of 2025, respectively, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments.