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BANK OF AMERICA CORP /DE/

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BANK OF AMERICA CORP /DE/

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1.0.0.3 false Mortgage Servicing Rights false 1 $ false false iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 shares Standard http://www.xbrl.org/2003/instance shares 0 5 Mortgage Servicing Rights 3 us-gaap_ScheduleOfServicingAssetsAtFairValueTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0 <div> NOTE 22 – Mortgage Servicing Rights The Corporation accounts for consumer MSRs at fair value with changes in fair value recorded in the Consolidated Statement of Income in mortgage banking income. The Corporation economically hedges these MSRs with certain derivatives and securities including MBS and U.S. Treasuries. The securities that economically hedge the MSRs are recorded in other assets with changes in the fair value of the securities and the related interest income recorded as mortgage banking income. The following table presents activity for residential first mortgage MSRs for 2009 and 2008.     <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="62%"></td> <td valign="bottom" width="13%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr> <td valign="bottom">(Dollars in millions)</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" colspan="2" align="right">2009</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">     </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" colspan="2" align="right">2008</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Balance, January 1 </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,733</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">    </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,053</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Merrill Lynch balance, January 1, 2009 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">209</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">    </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Countrywide balance, July 1, 2008 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">    </td> <td valign="bottom"> </td> <td valign="bottom" align="right">17,188</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Additions / sales </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5,728</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">    </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,587</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Impact of customer payments </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(3,709</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">    </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(3,313</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="top"> Other changes in MSR market value </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">4,504</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">     </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">(6,782</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="top"> Balance, December 31 </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom"> $</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">19,465</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">     </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom"> $</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">12,733</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="top"> Mortgage loans serviced for investors (in billions) </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom"> $</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">1,716</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">     </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom"> $</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">1,654</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> </tr> </table> During 2009 and 2008, other changes in MSR market value were $4.5 billion and $(6.8) billion. These amounts reflect the change in discount rates and prepayment speed assumptions, mostly due to changes in interest rates, as well as the effect of changes in other assumptions. The amounts do not include $782 million in gains in 2009 resulting from lower than expected prepayments and $(333) million in losses in 2008 resulting from higher than expected prepayments. The net amounts of $5.3 billion and $(7.1) billion are included in the line “mortgage banking income (loss)” in the table “Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings” in Note 20 – Fair Value Measurements. At December 31, 2009 and 2008, the fair value of consumer MSRs was $19.5 billion and $12.7 billion. The Corporation uses an OAS valuation approach to determine the fair value of MSRs which factors in prepayment risk. This approach consists of projecting servicing cash flows under multiple interest rate scenarios and discounting these cash flows using risk-adjusted discount rates. The key economic assumptions used in valuations of MSRs include weighted-average lives of the MSRs and the OAS levels. Key economic assumptions used in determining the fair value of MSRs at December 31, 2009 and 2008 were as follows:     <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="45%"></td> <td valign="bottom" width="13%"></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> </tr> <tr> <td height="8"></td> <td height="8" colspan="14"></td> </tr> <tr> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" colspan="12" align="center">December 31</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" colspan="4" align="center">2009</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" colspan="4" align="center">2008</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> </tr> <tr> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom"> (Dollars in millions)</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">Fixed</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">Adjustable</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">Fixed</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">Adjustable</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Weighted-average option adjusted spread </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.67</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom">  </td> <td valign="bottom" align="right">4.64</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.71</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom">  </td> <td valign="bottom" align="right">6.40</td> <td valign="bottom" nowrap="nowrap">% </td> </tr> <tr> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="top"> Weighted-average life, in years </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">5.62</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">3.26</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">3.26</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">2.71</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> </tr> </table>     The following table presents the sensitivity of the weighted-average lives and fair value of MSRs to changes in modeled assumptions. The sensitivities in the following table are hypothetical and should be used with caution. As the amounts indicate, changes in fair value based on variations 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 a variation in a particular assumption on the fair value of a MSR that continues to be held by the Corporation is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities. Additionally, the Corporation has the ability to hedge interest rate and market valuation fluctuations associated with MSRs. The below sensitivities do not reflect any hedge strategies that may be undertaken to mitigate such risk.     <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="46%"></td> <td valign="bottom" width="21%"></td> <td></td> <td></td> <td valign="bottom" width="14%"></td> <td></td> <td></td> <td valign="bottom" width="14%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td height="8"></td> <td height="8" colspan="10"></td> </tr> <tr> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" colspan="8" align="center">December 31, 2009</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" colspan="4" align="center">Change in Weighted- average Lives</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2"> </td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom">(Dollars in millions)</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">Fixed</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">Adjustable</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" colspan="2" align="right">Change in Fair Value</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Prepayment rates </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Impact of 10% decrease </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0.32</td> <td valign="bottom" nowrap="nowrap"> years </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0.14</td> <td valign="bottom" nowrap="nowrap"> years </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">895</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Impact of 20% decrease </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0.68</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0.31</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,895</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Impact of 10% increase </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(0.29</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(0.12</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(807</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="top"> Impact of 20% increase </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">(0.54</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">) </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">(0.22</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">) </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">(1,540</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td valign="top"> OAS level </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Impact of 100 bps decrease </td> <td valign="bottom"> </td> <td valign="bottom" align="right">n/a</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">n/a</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">900</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Impact of 200 bps decrease </td> <td valign="bottom"> </td> <td valign="bottom" align="right">n/a</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">n/a</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,882</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Impact of 100 bps increase </td> <td valign="bottom"> </td> <td valign="bottom" align="right">n/a</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">n/a</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(828</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="top"> Impact of 200 bps increase </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">n/a</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">n/a</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" align="right">(1,592</td> <td style="BORDER-BOTTOM: #b23040 1px solid" valign="bottom" nowrap="nowrap">) </td> </tr> </table> n/a = not applicable Commercial and residential reverse mortgage MSRs are accounted for using the amortization method (i.e., lower of cost or market). Commercial and residential reverse mortgage MSRs totaled $309 million and $323 million at December 31, 2009 and 2008 and are not included in the tables above. </div> NOTE 22 – Mortgage Servicing Rights The Corporation accounts for consumer MSRs at fair value with changes in fair value recorded in the Consolidated false false No definition available. No authoritative reference available. false false 1 1 false UnKnown UnKnown UnKnown false true