BB&T 2011 Annual Report Download - page 118

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(1) Balances exclude loans serviced for others, with no other continuing involvement.
(2) Includes amounts related to residential mortgage loans held for sale and excludes amounts related to government
guaranteed loans. Refer to Loans and Leases Note for additional disclosures related to past due government
guaranteed loans.
The unpaid principal balances of BB&T’s total residential mortgage servicing portfolio were $91.6 billion, $83.5 billion
and $73.7 billion at December 31, 2011, 2010 and 2009, respectively. The unpaid principal balances of residential
mortgage loans serviced for others consist primarily of agency conforming fixed-rate mortgage loans and totaled
$67.1 billion, $61.8 billion and $54.6 billion at December 31, 2011, 2010 and 2009, respectively. Mortgage loans serviced
for others are not included in loans and leases on the accompanying Consolidated Balance Sheets.
During 2011, 2010 and 2009, BB&T sold residential mortgage loans from the held for sale portfolio with unpaid principal
balances of $17.2 billion, $19.1 billion and $25.8 billion, respectively, and recognized pre-tax gains of $175 million,
$235 million and $357 million, respectively, including the impact of interest rate lock commitments. These gains are
recorded in noninterest income as a component of mortgage banking income. BB&T retained the related mortgage
servicing rights and receives servicing fees.
At December 31, 2011, 2010 and 2009, the approximate weighted average servicing fee was 0.34%, 0.35% and 0.37%,
respectively, of the outstanding balance of the residential mortgage loans serviced for others. The weighted average
coupon interest rate on the portfolio of mortgage loans serviced for others was 5.02%, 5.26% and 5.57% at December 31,
2011, 2010 and 2009, respectively. BB&T recognized servicing fees of $240 million, $226 million and $190 million
during 2011, 2010 and 2009, respectively, as a component of mortgage banking income.
At December 31, 2011 and 2010, BB&T had $1.3 billion and $1.6 billion, respectively, of residential mortgage loans sold with
recourse liability. In the event of nonperformance by the borrower, BB&T has maximum recourse exposure of approximately
$522 million and $597 million as of December 31, 2011 and 2010, respectively. At both December 31, 2011 and 2010, BB&T
has recorded $6 million of reserves related to these recourse exposures. Payments made to date have been immaterial.
BB&T also issues standard representations and warranties related to mortgage loan sales to government-sponsored
entities. Although these agreements often do not specify limitations, BB&T does not believe that any payments related to
these warranties would materially change the financial condition or results of operations of BB&T. BB&T has recorded
$29 million and $15 million of reserves related to potential losses resulting from repurchases of loans sold at
December 31, 2011 and 2010, respectively.
Residential mortgage servicing rights are recorded at fair value with changes in fair value recorded as a component of mortgage
banking income. BB&T uses various derivative instruments to mitigate the income statement effect of changes in fair value due
to changes in valuation inputs and assumptions of its residential mortgage servicing rights. The following is an analysis of the
activity in BB&T’s residential mortgage servicing rights for the years ended December 31, 2011, 2010 and 2009:
Residential Mortgage Servicing Rights
Years Ended December 31,
2011 2010 2009
(Dollars in millions)
Carrying value, January 1, $ 830 $ 832 $ 370
Additions 225 265 398
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions (341) (138) 190
Other changes (1) (151) (129) (126)
Carrying value, December 31, $ 563 $ 830 $ 832
(1) Represents the realization of expected net servicing cash flows, expected borrower payments and the passage of time.
During 2011, management revised its servicing costs assumptions in the valuation of residential mortgage servicing rights
due to the expectation of higher costs that are impacting the industry. The impact of these changes resulted in a
$30 million reduction in the value of residential mortgage servicing rights. Management also updated prepayment speed
forecast assumptions primarily due to a decrease in interest rates which caused the fair value of residential mortgage
servicing rights to decrease $293 million.
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