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Servicing of Financial Assets
 12 Months Ended
Dec. 31, 2021
Transfers and Servicing of Financial Assets [Abstract]  
Servicing of Financial Assets
NOTE 6. SERVICING OF FINANCIAL ASSETS
RESIDENTIAL MORTGAGE BANKING ACTIVITIES
The fair value of residential MSRs is calculated using various assumptions including future cash flows, market discount rates, expected prepayment rates, servicing costs and other factors. A significant change in prepayments of mortgages in the servicing portfolio could result in significant changes in the valuation adjustments, thus creating potential volatility in the carrying amount of residential MSRs. The Company compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.
The table below presents an analysis of residential MSRs under the fair value measurement method for the years ended December 31: 
 202120202019
 (In millions)
Carrying value, beginning of year$296 $345 $418 
Additions149 108 42 
Increase (decrease) in fair value:
Due to change in valuation inputs or assumptions43 (89)(62)
Economic amortization associated with borrower repayments (1)
(70)(68)(53)
Carrying value, end of year$418 $296 $345 
_________
(1)"Economic amortization associated with borrower repayments" includes both total loan payoffs as well as partial paydowns. In the first quarter of 2020, Regions revised its MSR decay methodology from a passage of time approach to a discounted net cash flow approach. The change in methodology results in shifts between decay and hedge impacts, but does not impact the overall valuation.
The Company purchases rights to service residential mortgages on a flow basis which totaled approximately $72 million, $59 million and $13 million in the twelve months ended 2021, 2020 and 2019, respectively.
In 2019, the Company purchased the rights to service approximately $409 million in residential mortgage loans for approximately $4 million. The Company also sold $167 million of affordable housing residential mortgage loans and as part of the transaction kept the rights to service the loans, which resulted in the retained residential MSR of approximately $2 million.
Data and assumptions used in the fair value calculation, as well as the valuation’s sensitivity to rate fluctuations, related to residential MSRs (excluding related derivative instruments) as of December 31 are as follows: 
 20212020
 (Dollars in millions)
Unpaid principal balance$36,769 $34,454 
Weighted-average CPR (%)10.5 %15.6 %
Estimated impact on fair value of a 10% increase$(29)$(23)
Estimated impact on fair value of a 20% increase$(52)$(42)
Option-adjusted spread (basis points)451 560 
Estimated impact on fair value of a 10% increase$(8)$(7)
Estimated impact on fair value of a 20% increase$(16)$(13)
Weighted-average coupon interest rate3.5 %3.9 %
Weighted-average remaining maturity (months)295287
Weighted-average servicing fee (basis points)27.3 27.5 
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of an adverse variation in a particular assumption on the fair value of the residential MSRs is calculated without changing any other assumption, while in reality changes in one factor may result in changes in another, which may either magnify or counteract the effect of the change. The derivative instruments utilized by Regions would serve to reduce the estimated impacts to fair value included in the table above.
The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of residential mortgage loans for the years ended December 31:
 202120202019
 (In millions)
Servicing related fees and other ancillary income$102 $95 $102 
Residential mortgage loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. Regions may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.
Regions maintains an immaterial repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability is reported in other liabilities on the consolidated balance sheets and reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income.
COMMERCIAL MORTGAGE BANKING ACTIVITIES
Regions is an approved DUS lender. The DUS program provides liquidity to the multi-family housing market. In connection with the DUS program, Regions services commercial mortgage loans, retains commercial MSRs and intangible assets associated with the DUS license, and assumes a loss share guarantee associated with the loans. Regions' related DUS commercial MSRs, presented in the table below, are recorded in other assets at the lower of cost or estimated fair value and are amortized in proportion to, and over the estimated period that net servicing income is expected to be received based on projections of the amount and timing of estimated future net cash flows. See Note 1 for additional information. Also see Note 23 for additional information related to the guarantee.
The table below presents an analysis of commercial MSRs under the amortization measurement method:
202120202019
(In millions)
Carrying value, beginning of the year$74 $59 $56 
Additions29 25 13 
Economic amortization associated with borrower repayments (1)
(17)(10)(10)
Carrying value, end of the year$86 $74 $59 
________
(1)Economic amortization associated with borrower repayments includes both total loan payoffs as well as partial paydowns.
Regions periodically evaluates the DUS commercial MSRs for impairment based on fair value. The estimated fair value of the DUS commercial MSRs was approximately $96 million and $81 million at December 31, 2021 and 2020, respectively.
The following table presents servicing related fees, which includes contractually specified servicing fees, late fees and other ancillary income resulting from the servicing of DUS commercial mortgage loans for the years ended December 31:
202120202019
(In millions)
Servicing related fees and other ancillary income$25 $19 $16