Company: KEY-PI
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000091576-25-000038
Chunk: 114

Company: KEYCORP /NEW/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 114
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 by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The range and weighted-average of the significant unobservable inputs used to determine fair value our commercial mortgage servicing assets along with the valuation techniques, are shown in the following table:

150

dollars in millionsDecember 31, 2024December 31, 2023Valuation TechniqueSignificantUnobservable InputRangeWeighted-AverageRangeWeighted-AverageDiscounted cash flowExpected defaults1.00 %2.00 %1.01 %1.00 %2.00 %1.01 %Residual cash flows discount rate7.00 %10.61 %10.31 %7.42 %10.56 %10.17 %Escrow earn rate4.62 %4.70 %4.69 %5.67 %5.72 %5.67 %Loan assumption rate— %2.50 %2.00 %— %2.15 %1.97 %If these economic assumptions change or prove incorrect, the fair value of commercial mortgage servicing assets may also change. Expected credit losses, escrow earn rates, and discount rates are critical to the valuation of commercial mortgage servicing assets. Estimates of these assumptions are based on how a market participant would view the respective rates and reflect historical data associated with the commercial mortgage loans, industry trends, and other considerations. Actual rates may differ from those estimated due to changes in a variety of economic factors. A decrease in the value assigned to the escrow earn rates would cause a decrease in the fair value of our commercial mortgage servicing assets. An increase in the assumed default rates of commercial mortgage loans or an increase in the assigned discount rates would cause a decrease in the fair value of our commercial mortgage servicing assets. Prepayment activity on commercial serviced loans does not significantly impact the valuation of our commercial mortgage servicing assets. Unlike residential mortgages, commercial mortgages experience significantly lower prepayments due to certain contractual restrictions impacting the borrower’s ability to prepay the mortgage. The amortization of commercial mortgage servicing assets is determined in proportion to, and over the period of, the estimated net servicing income. The amortization of commercial servicing assets for each period, as shown in the table at the beginning of this note, is recorded as a reduction to contractual fee income. The contractual fee income from servicing commercial mortgage loans totaled $382