Consolidated Results of Operations
This section discusses our condensed consolidated results of operations and should be read together with our condensed consolidated financial statements and the accompanying notes.
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Summary of Condensed Consolidated Results of Operations
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For the Three Months Ended June 30,
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For the Six Months Ended June 30,
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2021
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2020
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Variance
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2021
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2020
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Variance
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(Dollars in millions)
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Net interest income(1)
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$
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8,286
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$
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5,777
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$
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2,509
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$
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15,028
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$
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11,124
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$
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3,904
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Fee and other income
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103
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90
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13
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190
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210
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(20)
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Net revenues
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8,389
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5,867
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2,522
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15,218
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11,334
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3,884
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Investment gains (losses), net
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646
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149
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497
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691
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(9)
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700
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Fair value gains (losses), net(1)
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(446)
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(1,018)
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572
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338
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(1,294)
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1,632
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Administrative expenses
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(746)
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(754)
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8
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(1,494)
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(1,503)
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9
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Credit-related income (expenses):
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Benefit (provision) for credit losses
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2,588
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(12)
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2,600
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3,353
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(2,595)
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5,948
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Foreclosed property expense
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(41)
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(10)
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(31)
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(36)
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(90)
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54
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Total credit-related income (expenses)
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2,547
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(22)
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2,569
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3,317
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(2,685)
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6,002
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TCCA fees
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(758)
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(660)
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(98)
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(1,489)
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(1,297)
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(192)
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Credit enhancement expense(2)
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(274)
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(360)
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86
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(558)
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(736)
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178
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Change in expected credit enhancement recoveries(3)
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(44)
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273
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(317)
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(75)
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461
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(536)
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Other expenses, net(4)
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(280)
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(261)
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(19)
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(599)
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(479)
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(120)
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Income before federal income taxes
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9,034
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3,214
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5,820
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15,349
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3,792
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11,557
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Provision for federal income taxes
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(1,882)
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(669)
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(1,213)
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(3,204)
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(786)
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(2,418)
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Net income
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$
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7,152
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$
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2,545
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$
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4,607
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$
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12,145
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$
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3,006
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$
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9,139
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Total comprehensive income
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$
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7,120
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$
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2,532
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$
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4,588
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$
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12,086
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$
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3,008
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$
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9,078
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(1)In January 2021, we began applying fair value hedge accounting. For qualifying hedging relationships, fair value changes attributable to movements in the designated benchmark interest rates for hedged mortgage loans and funding debt and the fair value change of the designated portion of the paired interest-rate swaps are recognized in “Net interest income.” In prior years, all fair value changes for interest-rate swaps were recognized in “Fair value gains (losses), net.” See “Hedge Accounting Impact” below and “Note 1, Summary of Significant Accounting Policies” for more information about our hedge accounting program.
(2)Consists of costs associated with our freestanding credit enhancements, which primarily include our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) programs, enterprise-paid mortgage insurance (“EPMI”), and certain lender risk-sharing programs.
(3)Consists of increase (decrease) in benefits recognized from our freestanding credit enhancements, including any realized amounts.
(4)Consists of debt extinguishment gains and losses, housing trust fund expenses, loan subservicing costs, servicer fees paid in connection with certain loss mitigation activities, and gains and losses from partnership investments.
Hedge Accounting Impact
Our earnings can experience volatility due to interest-rate changes and differing accounting treatments that apply to certain financial instruments on our balance sheet. Specifically, we have exposure to earnings volatility that is driven by changes in interest rates in two primary areas: our net portfolio and our consolidated MBS trusts. The exposure in the net portfolio is primarily driven by changes in the fair value of risk management derivatives, mortgage commitments, and certain assets, primarily securities, that are carried at fair value. The exposure related to our consolidated MBS trusts relates to changes in our credit loss reserves driven by changes in interest rates.
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Fannie Mae Second Quarter 2021 Form 10-Q
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11
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MD&A | Consolidated Results of Operations
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To help address this volatility, we began applying fair value hedge accounting in January 2021 to reduce the current-period impact on our earnings related to changes in interest rates, particularly the London Inter-bank Offered Rate (“LIBOR”) and the Secured Overnight Financing Rate (“SOFR”). Hedge accounting aligns the timing of when we recognize fair value changes in hedged items attributable to these benchmark interest-rate movements with fair value changes in the hedging instrument.
Under our hedge accounting program, we establish fair value hedging relationships between risk management derivatives, specifically interest-rate swaps, and qualifying portfolios of mortgage loans or funding debt. For hedging relationships that are highly effective, we recognize changes in the fair value of the hedged mortgage loans or funding debt attributable to movements in the benchmark interest rate in net interest income. We then offset that impact with the changes in fair value of the designated interest-rate swap. This has the effect of deferring the recognition of gains and losses on the hedging instrument to future periods by recognizing the offsetting gain or loss on the hedged item as a cost basis adjustment on the underlying loans or funding debt at the end of the hedge term. The cost basis adjustment is then subsequently amortized back into earnings. Accordingly, we deferred $284 million in fair value gains and $875 million in fair value losses as cost basis adjustments in the second quarter and first half of 2021, respectively, on our hedged loans and funding debt that will be amortized through “Net interest income” over the contractual life of the respective hedged items.
Although hedge accounting reduces the earnings volatility related to benchmark interest rate movements in any given period, it does not impact the amount of interest-rate-driven gains or losses we will ultimately recognize through earnings.
While we expect the earnings volatility related to benchmark interest rate movements to be meaningfully reduced as a result of our adoption of hedge accounting, earnings variability driven by other factors, such as spreads, remains. In addition, hedge accounting is not designed to address earnings volatility driven by changes in cost basis amortization recognized in net interest income, which can be influenced by interest rate changes.
See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional discussion of our fair value hedge accounting policy and related disclosures.
Net Interest Income
Our primary source of net interest income is guaranty fees we receive for managing the credit risk on loans underlying Fannie Mae MBS held by third parties.
Guaranty fees consist of two primary components:
•base guaranty fees that we receive over the life of the loan; and
•upfront fees that we receive at the time of loan acquisition primarily related to single-family loan-level pricing adjustments and other fees we receive from lenders, which are amortized into net interest income as cost basis adjustments over the contractual life of the loan. We refer to this as amortization income.
We recognize almost all of our guaranty fee revenue in net interest income because we consolidate the substantial majority of loans underlying our Fannie Mae MBS in consolidated trusts in our condensed consolidated balance sheets. Guaranty fees from these loans account for nearly all of the difference between the interest income on loans in consolidated trusts and the interest expense on the debt of consolidated trusts.
The timing of when we recognize amortization income can vary based on a number of factors, the most significant of which is a change in mortgage interest rates. In a rising interest-rate environment, our mortgage loans tend to prepay more slowly, which typically results in lower net amortization income. Conversely, in a declining interest-rate environment, our mortgage loans tend to prepay faster, typically resulting in higher net amortization income.
We also recognize net interest income on the difference between interest income earned on the assets in our retained mortgage portfolio and our other investments portfolio (collectively, our “portfolios”) and the interest expense associated with the debt that funds those assets. See “Retained Mortgage Portfolio” and “Liquidity and Capital Management—Liquidity Management—Other Investments Portfolio” for more information about our portfolios.
Beginning in January 2021, we recognize fair value changes attributable to movements in benchmark interest rates for hedged mortgage loans and funding debt and total fair value changes for designated interest-rate swaps, as well as the amortization of hedge-related basis adjustments on the associated mortgage loans or funding debt and any related interest accrual on the swap, as a component of net interest income. The income or expense associated with this activity is presented in the “Income from hedge accounting” line item in the table below.
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Fannie Mae Second Quarter 2021 Form 10-Q
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12
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MD&A | Consolidated Results of Operations
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The table below displays the components of our net interest income from our guaranty book of business, which we discuss in “Guaranty Book of Business,” and from our portfolios, as well as from hedge accounting.
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Components of Net Interest Income
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For the Three Months Ended June 30,
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For the Six Months Ended June 30,
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2021
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2020
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Variance
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2021
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2020
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Variance
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(Dollars in millions)
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Net interest income from guaranty book of business:
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Base guaranty fee income(1)
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$
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3,420
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$
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2,677
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|
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$
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743
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$
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6,617
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|
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$
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5,277
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$
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1,340
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Base guaranty fee income related to TCCA(2)
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758
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660
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98
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1,489
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1,297
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192
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Net amortization income(3)
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3,736
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|
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1,955
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1,781
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6,262
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|
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3,461
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|
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2,801
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Total net interest income from guaranty book of business
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7,914
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5,292
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2,622
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14,368
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10,035
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|
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4,333
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Net interest income from portfolios
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306
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485
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(179)
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572
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1,089
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(517)
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Income from hedge accounting(4)
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66
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—
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66
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88
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—
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88
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Total net interest income
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$
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8,286
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|
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$
|
5,777
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|
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$
|
2,509
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|
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$
|
15,028
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|
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$
|
11,124
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$
|
3,904
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(1)Excludes revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, which is remitted to Treasury and not retained by us.
(2)Represents revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us. See “Note 1, Summary of Significant Accounting Policies” for more information on guidance we received from FHFA regarding TCCA fee amounts that we are not required to accrue or remit to Treasury with respect to delinquent loans backing MBS trusts.
(3)Net amortization income refers to the amortization of premiums and discounts on mortgage loans and debt of consolidated trusts. These cost basis adjustments represent the difference between the initial fair value and the carrying value of these instruments as well upfront fees we receive at the time of loan acquisition. It does not include the amortization of cost basis adjustments resulting from hedge accounting, which is included in income from hedge accounting.
(4)Consists of gains and losses from fair value hedging relationships that have been presented in net interest income. See “Note 8, Derivative Instruments” for additional information on the effect of our fair value hedge accounting program and related disclosures.
Net interest income increased in the second quarter and first half of 2021 compared with the second quarter and first half of 2020, primarily driven by higher net amortization income and higher base guaranty fee income, partially offset by lower income from portfolios.
•Higher net amortization income. A continued low interest-rate environment in the second quarter and first half of 2021 led to elevated prepayment volumes as loans refinanced, which accelerated the amortization of cost basis adjustments, including upfront fees we recognize over the contractual life of the loans, on mortgage loans of consolidated trusts and the related debt.
•Higher base guaranty fee income. An increase in the size of our guaranty book of business over the prior year was the primary driver of the increase in base guaranty fee income in the second quarter and first half of 2021.
•Lower income from portfolios. Lower yields in the second quarter and first half of 2021 on mortgage loans and assets in our other investments portfolio, partially offset by a decrease in interest expense on our funding debt due to a decrease in average borrowing costs, contributed to a decline in income from portfolios in the second quarter and first half of 2021.
We have been in a historically low interest-rate environment over the last 18 months, which has contributed to continued strong mortgage refinance activity and high levels of amortization income. Over half of our single-family guaranty book of business has been originated in the last 18 months as borrowers took advantage of the low rate environment. Refinancing activity began to taper in the second quarter of 2021 as fewer borrowers could benefit from refinancing. We expect that lower levels of refinancing in the future will likely slow the rate at which we amortize cost basis adjustments. This will likely result in lower amortization income in any one period as the average life of our outstanding book of business may extend as our book of business turns over more slowly. In addition, a slower turnover rate would limit the impact that changes in our guaranty fees have on our future revenues as any changes would take longer to meaningfully impact the average charged guaranty fee on our total book of business.
For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest for up to six months of delinquency provided that the loans were either current at March 1, 2020 or originated after March 1, 2020. We continue to accrue interest income beyond six months of delinquency provided that the collection of principal and interest
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Fannie Mae Second Quarter 2021 Form 10-Q
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13
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MD&A | Consolidated Results of Operations
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continues to be reasonably assured. This resulted in a large portion of delinquent loans, including those in a forbearance arrangement, remaining on accrual status as of June 30, 2021. See “Note 3, Mortgage Loans” for more information about our nonaccrual accounting policy and “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention” for details about loans in forbearance, as well as on-balance sheet loans past due 90 days or more and continuing to accrue interest.
Analysis of Net Interest Income
The table below displays an analysis of our net interest income, average balances, and related yields earned on assets and incurred on liabilities. For most components of the average balances, we use a daily weighted average of unpaid principal balance net of unamortized cost basis adjustments. When daily average balance information is not available, such as for mortgage loans, we use monthly averages. For the second quarter and first half of 2021, net interest income was impacted by the application of fair value hedge accounting beginning in January 2021.
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Analysis of Net Interest Income and Yield(1)
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For the Three Months Ended June 30,
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2021
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2020
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Average Balance
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Interest Income/ (Expense)
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Average Rates Earned/Paid
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Average Balance
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Interest Income/ (Expense)
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Average Rates Earned/Paid
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(Dollars in millions)
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Interest-earning assets:
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Mortgage loans of Fannie Mae(2)
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$
|
99,364
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|
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$
|
782
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|
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3.15
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%
|
|
$
|
115,310
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|
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$
|
1,028
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|
|
3.57
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%
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Mortgage loans of consolidated trusts(2)
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3,712,015
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|
24,150
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|
|
2.60
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|
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3,311,267
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|
|
25,979
|
|
|
3.14
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|
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Total mortgage loans(3)
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3,811,379
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|
|
24,932
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|
|
2.62
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|
|
3,426,577
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|
|
27,007
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|
|
3.15
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|
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Mortgage-related securities
|
|
6,637
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|
|
42
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|
|
2.53
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|
|
10,976
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|
|
116
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|
|
4.23
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|
|
Non-mortgage-related securities(4)
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|
132,921
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|
|
98
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|
|
0.29
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|
|
103,935
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|
|
129
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|
|
0.49
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|
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Federal funds sold and securities purchased under agreements to resell or similar arrangements
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|
61,428
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|
|
4
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|
|
0.03
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|
|
46,487
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|
|
14
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|
|
0.12
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|
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Advances to lenders
|
|
7,910
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|
|
31
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|
|
1.57
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|
|
7,917
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|
|
25
|
|
|
1.25
|
|
|
Total interest-earning assets
|
|
$
|
4,020,275
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|
|
25,107
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|
|
2.50
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%
|
|
$
|
3,595,892
|
|
|
27,291
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|
|
3.04
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%
|
|
Interest-bearing liabilities:
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|
|
|
|
|
|
|
|
|
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Short-term funding debt
|
|
$
|
3,790
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|
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(1)
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|
0.11
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%
|
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$
|
50,777
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(54)
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|
0.42
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%
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Long-term funding debt(2)
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246,045
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(673)
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|
1.09
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189,906
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|
|
(777)
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|
|
1.64
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Connecticut Avenue Securities® (“CAS”) debt
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|
14,321
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|
|
(149)
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|
4.16
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18,993
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|
|
(219)
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|
|
4.61
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Total debt of Fannie Mae
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264,156
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(823)
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1.25
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259,676
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|
|
(1,050)
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|
|
1.62
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|
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Debt securities of consolidated trusts held by third parties
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|
3,742,947
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|
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(15,998)
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|
1.71
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3,350,210
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|
|
(20,464)
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|
|
2.44
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|
|
Total interest-bearing liabilities
|
|
$
|
4,007,103
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|
|
(16,821)
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|
|
1.68
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%
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|
$
|
3,609,886
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|
|
(21,514)
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|
|
2.38
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%
|
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Net interest income/net interest yield
|
|
|
|
$
|
8,286
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|
|
0.81
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%
|
|
|
|
$
|
5,777
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|
|
0.64
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
14
|
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|
|
|
|
|
|
|
MD&A | Consolidated Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
|
|
Average Balance
|
|
Interest Income/ (Expense)
|
|
Average Rates Earned/Paid
|
|
Average Balance
|
|
Interest Income/ (Expense)
|
|
Average Rates Earned/Paid
|
|
|
|
(Dollars in millions)
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans of Fannie Mae(2)
|
|
$
|
103,372
|
|
|
$
|
1,607
|
|
|
3.11
|
%
|
|
$
|
108,668
|
|
|
$
|
2,044
|
|
|
3.76
|
%
|
|
Mortgage loans of consolidated trusts(2)
|
|
3,658,573
|
|
|
46,678
|
|
|
2.55
|
|
|
3,287,673
|
|
|
53,901
|
|
|
3.28
|
|
|
Total mortgage loans(3)
|
|
3,761,945
|
|
|
48,285
|
|
|
2.57
|
|
|
3,396,341
|
|
|
55,945
|
|
|
3.29
|
|
|
Mortgage-related securities
|
|
7,018
|
|
|
84
|
|
|
2.39
|
|
|
10,926
|
|
|
215
|
|
|
3.94
|
|
|
Non-mortgage-related securities(4)
|
|
148,576
|
|
|
215
|
|
|
0.29
|
|
|
84,370
|
|
|
377
|
|
|
0.88
|
|
|
Federal funds sold and securities purchased under agreements to resell or similar arrangements
|
|
60,769
|
|
|
12
|
|
|
0.04
|
|
|
37,911
|
|
|
121
|
|
|
0.63
|
|
|
Advances to lenders
|
|
9,438
|
|
|
73
|
|
|
1.54
|
|
|
7,167
|
|
|
59
|
|
|
1.63
|
|
|
Total interest-earning assets
|
|
$
|
3,987,746
|
|
|
48,669
|
|
|
2.44
|
%
|
|
$
|
3,536,715
|
|
|
56,717
|
|
|
3.21
|
%
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term funding debt
|
|
$
|
6,768
|
|
|
(4)
|
|
|
0.12
|
%
|
|
$
|
41,309
|
|
|
(156)
|
|
|
0.75
|
%
|
|
Long-term funding debt(2)
|
|
252,853
|
|
|
(1,433)
|
|
|
1.13
|
|
|
162,661
|
|
|
(1,564)
|
|
|
1.92
|
|
|
CAS debt
|
|
14,561
|
|
|
(302)
|
|
|
4.15
|
|
|
19,765
|
|
|
(508)
|
|
|
5.14
|
|
|
Total debt of Fannie Mae
|
|
274,182
|
|
|
(1,739)
|
|
|
1.27
|
|
|
223,735
|
|
|
(2,228)
|
|
|
1.99
|
|
|
Debt securities of consolidated trusts held by third parties
|
|
3,693,674
|
|
|
(31,902)
|
|
|
1.73
|
|
|
3,315,963
|
|
|
(43,365)
|
|
|
2.62
|
|
|
Total interest-bearing liabilities
|
|
$
|
3,967,856
|
|
|
(33,641)
|
|
|
1.70
|
%
|
|
$
|
3,539,698
|
|
|
(45,593)
|
|
|
2.58
|
%
|
|
Net interest income/net interest yield
|
|
|
|
$
|
15,028
|
|
|
0.75
|
%
|
|
|
|
$
|
11,124
|
|
|
0.63
|
%
|
(1)Includes the effects of discounts, premiums and other cost basis adjustments. For the second quarter and first half of 2021, includes cost basis adjustments related to hedge accounting.
(2)Includes income of $66 million and $88 million from hedged funding debt, hedged mortgage loans and paired interest-rate swaps for the second quarter and first half of 2021, respectively. Substantially all of this amount is related to the hedged funding debt and paired interest-rate swaps. There was no income or expense from hedge accounting for the second quarter or first half of 2020.
(3)Average balance includes mortgage loans on nonaccrual status. For nonaccrual mortgage loans not subject to the COVID-19-related nonaccrual guidance, interest income is recognized when cash is received. Interest income from the amortization of loan fees, primarily consisting of upfront cash fees and yield maintenance fees, was $2.4 billion and $4.9 billion, respectively, for the second quarter and first half of 2021, compared to $2.4 billion and $4.0 billion, respectively, for the second quarter and first half of 2020.
(4)Consists of cash, cash equivalents and U.S. Treasury securities.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Consolidated Results of Operations
|
Analysis of Deferred Amortization Income
We initially recognize mortgage loans and debt of consolidated trusts in our condensed consolidated balance sheets at fair value. The difference between the initial fair value and the carrying value of these instruments is recorded as a cost basis adjustment, either as a premium or a discount, in our condensed consolidated balance sheets. We amortize these cost basis adjustments over the contractual lives of the loans or debt. On a net basis, for mortgage loans and debt of consolidated trusts, we are in a premium position with respect to debt of consolidated trusts, which represents deferred income we will recognize in our condensed consolidated statements of operations and comprehensive income as net interest income in future periods.
Deferred Income Represented by Net Premium Position
on Debt of Consolidated Trusts
(Dollars in billions)
Investment Gains (Losses), Net
Investment gains (losses), net primarily includes gains and losses recognized from the sale of available-for-sale (“AFS”) securities, sale of loans, gains and losses recognized on the consolidation and deconsolidation of securities, and lower of cost or fair value adjustments on held for sale (“HFS”) loans.
The increase in net investment gains in the second quarter of 2021 compared with the second quarter of 2020 and the shift from net investment losses in the first half of 2020 to net investment gains in the first half of 2021 was primarily driven by a significant increase in the volume of sales of single-family HFS loans in the 2021 periods.
Fair Value Gains (Losses), Net
The estimated fair value of our derivatives, trading securities and other financial instruments carried at fair value may fluctuate substantially from period to period because of changes in interest rates, the yield curve, mortgage and credit spreads and implied volatility, as well as activity related to these financial instruments.
As discussed above in “Hedge Accounting Impact,” we began applying fair value hedge accounting in January 2021 to reduce earnings volatility in our financial statements driven by changes in interest rates. Accordingly, we now recognize the fair value gains and losses and the contractual interest income and expense associated with risk management derivatives designated in qualifying hedging relationships in net interest income. Prior to the implementation of our hedge accounting program, these fair value changes were included in fair value gains (losses), net. Derivatives not designated in hedging relationships are unaffected by this change.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Consolidated Results of Operations
|
The table below displays the components of our fair value gains and losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Gains (Losses), Net
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
(Dollars in millions)
|
|
Risk management derivatives fair value gains (losses) attributable to:
|
|
|
|
|
|
|
|
|
|
Net contractual interest income (expense) on interest-rate swaps
|
|
$
|
61
|
|
|
$
|
(64)
|
|
|
$
|
104
|
|
|
$
|
(170)
|
|
|
Net change in fair value during the period
|
|
374
|
|
|
126
|
|
|
(637)
|
|
|
(129)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of the presentation of fair value gains (losses) in net interest income for risk management derivatives designated in fair value hedges(1)
|
|
(371)
|
|
|
—
|
|
|
753
|
|
|
—
|
|
|
Risk management derivatives fair value gains (losses), net
|
|
64
|
|
|
62
|
|
|
220
|
|
|
(299)
|
|
|
Mortgage commitment derivatives fair value gains (losses), net
|
|
(553)
|
|
|
(662)
|
|
|
529
|
|
|
(1,655)
|
|
|
Credit enhancement derivatives fair value gains (losses), net
|
|
(18)
|
|
|
31
|
|
|
(108)
|
|
|
20
|
|
|
Total derivatives fair value gains (losses), net
|
|
(507)
|
|
|
(569)
|
|
|
641
|
|
|
(1,934)
|
|
|
Trading securities gains (losses), net
|
|
161
|
|
|
135
|
|
|
(597)
|
|
|
782
|
|
|
CAS debt fair value gains (losses), net
|
|
(25)
|
|
|
(163)
|
|
|
(26)
|
|
|
474
|
|
|
Other, net(2)
|
|
(75)
|
|
|
(421)
|
|
|
320
|
|
|
(616)
|
|
|
Fair value gains (losses), net
|
|
$
|
(446)
|
|
|
$
|
(1,018)
|
|
|
$
|
338
|
|
|
$
|
(1,294)
|
|
(1)Consists of the presentation of $317 million in fair value gains and $54 million in contractual interest income for the three months ended June 30, 2021 and $861 million in fair value losses and $108 million in contractual interest income for the six months ended June 30, 2021 in net interest income, for designated interest-rate swaps as a result of fair value hedge accounting.
(2)Consists of fair value gains and losses on non-CAS debt and mortgage loans held at fair value.
Fair value losses, net in the second quarter of 2021 were primarily driven by decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell mortgage-related securities as prices increased during the commitment period as interest rates declined. These losses were partially offset by gains on trading securities due to decreases in U.S. Treasury yields during the second quarter of 2021, which resulted in gains on fixed-rate securities held in our other investments portfolio as prices rose.
Fair value gains, net in the first half of 2021 were primarily driven by:
•the application of hedge accounting resulting in the presentation of fair value losses on designated interest-rate swaps in “net interest income;”
•increases in the fair value of mortgage commitment derivatives due to gains on commitments to sell mortgage-related securities as prices decreased during the commitment period as interest rates increased; and
•decreases in the fair value of long-term debt of consolidated trusts held at fair value, which are included in “Other, net,” due to increases in interest rates.
These gains were partially offset by fair value losses in the first half of 2021 on trading securities, primarily driven by increases in interest rates during the first quarter, which resulted in losses on fixed-rate securities held in our other investments portfolio.
Fair value losses, net in the second quarter of 2020 were primarily driven by:
•decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell mortgage-related securities as prices increased during the commitment period as interest rates declined, which were partially offset by gains on commitments to buy mortgage-related securities;
•increases in the fair value of long-term debt of consolidated trusts held at fair value, which are included in “Other, net,” due to declines in interest rates; and
•losses on CAS debt reported at fair value resulting from tightening spreads between CAS debt yields and LIBOR during the period.
These losses were partially offset by fair value gains in the second quarter of 2020 on trading securities primarily driven by declines in interest rates, which resulted in gains on mortgage-related securities held in our retained mortgage portfolio.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Consolidated Results of Operations
|
Fair value losses, net in the first half of 2020 were primarily driven by:
• decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell mortgage-related securities as prices increased during the commitment period as interest rates declined, which were partially offset by gains on commitments to buy mortgage-related securities;
• increases in the fair value of long-term debt of consolidated trusts held at fair value, which are included in “Other, net,” due to declines in interest rates; and
• net interest expense on risk management derivatives combined with decreases in the fair value of pay-fixed risk management derivatives due to declines in swap rates, which were partially offset by increases in the fair value of receive-fixed risk management derivatives.
These losses were partially offset by fair value gains in the first half of 2020 on trading securities and CAS debt, primarily driven by declines in interest rates and widened spreads between CAS debt yields and LIBOR, which resulted in gains on fixed-rate securities held in our other investments portfolio and our CAS debt held at fair value.
Credit-Related Income (Expense)
Our credit-related income or expense can vary substantially from period to period based on a number of factors, such as changes in actual and forecasted home prices or property valuations, fluctuations in actual and forecasted interest rates, borrower payment behavior, events such as natural disasters or pandemics, the types and volume of our loss mitigation activities, including forbearances and loan modifications, the volume of foreclosures completed and the redesignation of loans from held for investment (“HFI”) to HFS.
Our credit-related income or expense and our loss reserves can also be impacted by updates to the models, assumptions and data used in determining our allowance for loan losses. As described below, since the onset of the COVID-19 pandemic in early 2020, our credit-related income or expense and our loss reserves have been significantly affected by our estimates of the impact of the pandemic and the pace and strength of the economy’s subsequent recovery, which require significant management judgment. Changes in our expectations regarding the length of time borrowers remain in forbearance, and even more significantly, the loss mitigation outcomes of affected borrowers after the forbearance period ends, remain uncertain and can affect the amount of credit-related income or expense we recognize. Although we believe the estimates underlying our allowance are reasonable, we may observe future volatility in these estimates as we continue to observe actual loan performance data and update our models and assumptions relating to this unprecedented event.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Consolidated Results of Operations
|
Benefit (Provision) for Credit Losses
The table below provides a quantitative analysis of the drivers of our single-family and multifamily benefit or provision for credit losses and the change in expected credit enhancement recoveries. The benefit or provision for credit losses includes our benefit or provision for loan losses, accrued interest receivable losses and our guaranty loss reserves, and excludes credit losses on our AFS securities. It also excludes the transition impact of adopting Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses, Measurement of Credit Losses on Financial Instruments, (the “CECL standard”), which was recorded as an adjustment to retained earnings as of January 1, 2020. Many of the drivers that contribute to our benefit or provision for credit losses overlap or are interdependent. The attribution shown below is based on internal allocation estimates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Benefit (Provision) for Credit Losses and Change in Expected Credit Enhancement Recoveries
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
(Dollars in millions)
|
|
Single-family benefit (provision) for credit losses:
|
|
|
|
|
|
|
|
|
|
Changes in loan activity(1)
|
|
$
|
33
|
|
|
$
|
(70)
|
|
|
$
|
(30)
|
|
|
$
|
(67)
|
|
|
Redesignation of loans from HFI to HFS
|
|
678
|
|
|
—
|
|
|
985
|
|
|
175
|
|
|
Actual and forecasted home prices
|
|
1,124
|
|
|
337
|
|
|
2,303
|
|
|
(584)
|
|
|
Actual and projected interest rates
|
|
304
|
|
|
84
|
|
|
(588)
|
|
|
1,341
|
|
|
Changes in assumptions regarding COVID-19 forbearance and loan delinquencies(2)
|
|
210
|
|
|
(3)
|
|
|
337
|
|
|
(2,590)
|
|
|
Other(3)
|
|
204
|
|
|
(129)
|
|
|
208
|
|
|
(226)
|
|
|
Single-family benefit (provision) for credit losses
|
|
2,553
|
|
|
219
|
|
|
3,215
|
|
|
(1,951)
|
|
|
Multifamily benefit (provision) for credit losses:
|
|
|
|
|
|
|
|
|
|
Changes in loan activity(1)
|
|
(21)
|
|
|
(52)
|
|
|
(140)
|
|
|
(74)
|
|
|
Actual and projected interest rates
|
|
41
|
|
|
58
|
|
|
22
|
|
|
274
|
|
|
Actual and projected economic data(4)
|
|
6
|
|
|
—
|
|
|
321
|
|
|
—
|
|
|
Estimated impact of the COVID-19 pandemic
|
|
23
|
|
|
(261)
|
|
|
77
|
|
|
(874)
|
|
|
Other(3)
|
|
(14)
|
|
|
24
|
|
|
(142)
|
|
|
33
|
|
|
Multifamily benefit (provision) for credit losses
|
|
35
|
|
|
(231)
|
|
|
138
|
|
|
(641)
|
|
|
Total benefit (provision) for credit losses
|
|
$
|
2,588
|
|
|
$
|
(12)
|
|
|
$
|
3,353
|
|
|
$
|
(2,592)
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in expected credit enhancement recoveries:(5)
|
|
|
|
|
|
|
|
|
|
Single-family
|
|
$
|
(57)
|
|
|
$
|
208
|
|
|
$
|
(73)
|
|
|
$
|
266
|
|
|
Multifamily
|
|
7
|
|
|
65
|
|
|
(15)
|
|
|
192
|
|
|
Total change in expected credit enhancement recoveries
|
|
$
|
(50)
|
|
|
$
|
273
|
|
|
$
|
(88)
|
|
|
$
|
458
|
|
|
|
|
|
|
|
|
|
|
|
(1)Primarily consists of loan liquidations, amortization of concessions granted to borrowers and the impact of FHFA’s Advisory Bulletin 2012-02, “Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention” (the “Advisory Bulletin”). For multifamily, changes in loan activity also includes changes in the allowance due to loan delinquencies and the impact of changes in debt service coverage ratios (“DSCRs”) based on updated property financial information, which is used to assess loan credit quality.
(2)Includes changes in the allowance due to assumptions regarding loss mitigation when loans exit forbearance, as well as adjustments to modeled results.
(3)Includes provision for allowance for accrued interest receivable. For single-family, also includes changes in the reserve for guaranty losses that are not separately included in the other components. For multifamily, also includes the impact of credit model enhancements implemented in the first half of 2021.
(4)For the three and six months ended June 30, 2020, the impact of actual and projected economic data is grouped with “Estimated impact of the COVID-19 pandemic” as these impacts were driven by the pandemic.
(5)Includes increase (decrease) in expected credit enhancement recoveries only for active loans. Recoveries received after foreclosure, which are included in “Change in expected credit enhancement recoveries” in “Summary of Condensed Consolidated Results of Operations,” are not included.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Consolidated Results of Operations
|
Single-Family Benefit (Provision) for Credit Losses
The primary factors that contributed to our single-family benefit for credit losses in the second quarter of 2021 were:
•Benefit from actual and forecasted home price growth. During the second quarter of 2021, home price growth was very strong. We also increased our expectations for home price growth on a national basis for full-year 2021. Higher home prices decrease the likelihood that loans will default and reduce the amount of credit loss on loans that do default, which impacts our estimate of losses and ultimately reduces our loss reserves and provision for credit losses. See “Key Market Economic Indicators” for additional information about how home prices affect our credit loss estimates, including a discussion of home price appreciation and our home price forecast.
•Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS. We redesignated certain reperforming single-family loans from HFI to HFS, as we no longer intend to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off against the allowance for loan losses. Amounts recorded in the allowance related to these loans exceeded the amounts written off, resulting in a benefit for credit losses.
•Benefit from lower actual and projected interest rates. Actual and projected interest rates decreased as of June 30, 2021 compared with March 31, 2021. As mortgage interest rates decrease, we expect an increase in future prepayments on single-family loans, including modified loans. Higher expected prepayments shorten the expected lives of modified loans, which decreases the expected impairment relating to term and interest-rate concessions provided on these loans, resulting in a benefit for credit losses.
•Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies as discussed below.
The primary factors that contributed to our single-family benefit for credit losses in the first half of 2021 were:
•Benefit from actual and forecasted home price growth as discussed in “Key Market Economic Indicators.”
•Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS consistent with the discussion above.
•Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. In both the first and second quarters of 2021, management used its judgment to reduce the non-modeled adjustment that was previously applied to the loss projections developed by our credit loss model to account for uncertainty. The decrease in uncertainty as of June 30, 2021 compared with the end of 2020 was primarily driven by the passage of the American Rescue Plan Act of 2021, which provided additional economic stimulus and helped support the continued economic recovery. In addition, the implementation of the COVID-19 vaccination program in the United States, which has contributed to a significant increase in business activity and an improved economy in 2021, decreased uncertainty surrounding the post-pandemic recovery. There has also been decreased political uncertainty, as well as a decrease in the number of borrowers in a COVID-19-related forbearance, lessening expectations of credit losses. However, management continued to apply its judgment and supplement model results as of June 30, 2021 as uncertainty remains regarding the loss mitigation outcomes of borrowers still in forbearance and the future course of the pandemic, including the impact on the economy of the spread of the Delta variant or other new, more infectious variants of the virus and low vaccination rates in certain areas of the country.
The impact of these factors was partially offset by the impact of the following factor, which reduced our single-family benefit for credit losses recognized in the first half of 2021:
•Provision from higher actual and projected interest rates. Actual and projected interest rates were higher as of June 30, 2021 compared with December 31, 2020. As mortgage rates increase, we expect a decrease in future prepayments on single-family loans, including modified loans. Lower expected prepayments extend the expected lives of modified loans, which increases the expected impairment relating to term and interest-rate concessions provided on these loans, resulting in a provision for credit losses.
The primary factors that impacted our single-family benefit (provision) for credit losses in the second quarter and first half of 2020 were:
•Expected credit losses as a result of the COVID-19 pandemic, which included adjustments to modeled results. In the first quarter of 2020, the rapidly changing conditions as a result of the unprecedented COVID-19 pandemic caused us to believe our model used to estimate single-family credit losses did not capture the entirety of losses we expected to incur relating to COVID-19 at that time, which included our expectations surrounding loan forbearance and borrower behavior once the forbearance period ends. As a result,
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Fannie Mae Second Quarter 2021 Form 10-Q
|
20
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MD&A | Consolidated Results of Operations
|
management used its judgment to increase the loss projections developed by our credit loss model in the first quarter of 2020 by $2.5 billion.
During the second quarter of 2020 our credit loss model consumed data from the initial months of the pandemic, including loan delinquencies, updated profile data for loans in forbearance, and an updated home price forecast. As more of this data was consumed by our credit loss model, we reduced our non-modeled adjustment. However, management continued to apply its judgment and supplement model results as of June 30, 2020, taking into account uncertainty at that time regarding the type and extent of loss mitigation that may be needed when loans complete their forbearance period and the continued high degree of uncertainty regarding the future course of the pandemic and its effect on the economy, including the continued availability of fiscal stimulus to support borrowers.
For the second quarter of 2020, our estimate of expected losses due to the pandemic, which included both modeled and non-modeled adjustments, remained relatively flat compared with the first quarter of 2020. A reduction in overall expected forbearance volumes was offset by a weaker credit profile for loans entering forbearance. Furthermore, the positive impact of higher-than-initially-expected borrower prepayment activity was offset by heightened uncertainty as noted above. When taken together, the net impact for the second quarter was a $3 million increase to expected losses as shown in the table above.
•Changes in our expectations for home price growth. In the first quarter of 2020, we significantly reduced our expectations for home price growth to near-zero for 2020, which contributed to our provision for credit losses for the period. However, the negative impact from the first quarter of 2020 was partially reduced in the second quarter of 2020 as we revised our home price forecast to reflect an increase in home price appreciation on a national basis for 2020 based on strong home sales data for the period. This improvement in the 2020 home price forecast was partially offset by our updated long-term projected home price growth estimate, which was lowered as a result of a longer projected economic recovery period at that time.
•Credit benefit from lower actual and projected mortgage interest rates.
Multifamily Benefit (Provision) for Credit Losses
The primary factors that contributed to our multifamily benefit for credit losses in the second quarter and first half of 2021 were:
•Benefit from actual and projected economic data. In the second quarter and first half of 2021, property value forecasts increased due to continued demand for multifamily housing. In addition, improved job growth led to an increase in projected average property net operating income, which reduced the probability of loan defaults resulting in a benefit for credit losses for the quarter and year-to-date.
•Benefit from lower expected credit losses as a result of the COVID-19 pandemic. Similar to our single-family provision for credit losses described above, in both the first and second quarters of 2021, management used its judgment to further reduce the non-modeled adjustment that was previously applied to the loss projections developed by our credit loss model to account for uncertainty. The decrease in uncertainty as of June 30, 2021 compared with the end of 2020 was primarily driven by positive economic growth and the passage of the American Rescue Plan Act of 2021, which provided additional economic stimulus. However, management continued to apply its judgment and supplement model results with a non-modeled adjustment as of June 30, 2021, as uncertainty remains surrounding the future course of the pandemic, including new strains of the virus and its effect on the economy.
Our multifamily provision for credit losses in the second quarter and first half of 2020 was primarily driven by:
•Actual and projected economic data and expected credit losses as a result of the COVID-19 pandemic. Similar to the single-family provision for credit losses for the 2020 periods discussed above, we believed our model used to estimate multifamily credit losses as of June 30, 2020 did not capture the entirety of losses we expected to incur relating to COVID-19 at that time. As a result, management used its judgment to increase the loss projections developed by our credit loss model to reflect our expectations relating to the impact of the pandemic at that time. Our multifamily provision for credit losses was primarily driven by elevated unemployment rates compared with pre-COVID-19 levels. We expected higher unemployment rates would reduce the operating income of multifamily properties in the near term, resulting in an increase in the number of loans in forbearance. Additionally, property values were expected to decrease, increasing the probability of loan defaults.
In the second quarter of 2020, we increased our expected credit losses as a result of significant economic uncertainty and worsened forecasted capitalization rates at that time. We also increased our expected credit losses on senior housing loans to reflect that these properties had been disproportionately impacted by the
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Fannie Mae Second Quarter 2021 Form 10-Q
|
21
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MD&A | Consolidated Results of Operations
|
pandemic, which resulted in increased operating expenses and limited these borrowers’ ability to attract new tenants. These increases in expected credit losses were partially offset by a reduction in our overall estimated forbearance volumes and lower actual and projected interest rates. In developing these adjustments, management considered the credit risk profile of our multifamily loan book of business at that time, as well as relevant historical credit loss experience during rare or stressful economic environments.
Consolidated Balance Sheet Analysis
This section discusses our condensed consolidated balance sheets and should be read together with our condensed consolidated financial statements and the accompanying notes.
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Summary of Condensed Consolidated Balance Sheets
|
|
|
|
As of
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Variance
|
|
|
|
(Dollars in millions)
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents and federal funds sold and securities purchased under agreements to resell or similar arrangements
|
|
$
|
92,767
|
|
|
$
|
66,537
|
|
|
$
|
26,230
|
|
|
Restricted cash and cash equivalents
|
|
76,420
|
|
|
77,286
|
|
|
(866)
|
|
|
Investments in securities
|
|
96,056
|
|
|
138,239
|
|
|
(42,183)
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
Of Fannie Mae
|
|
88,257
|
|
|
117,911
|
|
|
(29,654)
|
|
|
Of consolidated trusts
|
|
3,770,164
|
|
|
3,546,533
|
|
|
223,631
|
|
|
Allowance for loan losses
|
|
(7,114)
|
|
|
(10,552)
|
|
|
3,438
|
|
|
Mortgage loans, net of allowance for loan losses
|
|
3,851,307
|
|
|
3,653,892
|
|
|
197,415
|
|
|
Deferred tax assets, net
|
|
12,575
|
|
|
12,947
|
|
|
(372)
|
|
|
Other assets
|
|
28,913
|
|
|
36,848
|
|
|
(7,935)
|
|
|
Total assets
|
|
$
|
4,158,038
|
|
|
$
|
3,985,749
|
|
|
$
|
172,289
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
Of Fannie Mae
|
|
$
|
251,576
|
|
|
$
|
289,572
|
|
|
$
|
(37,996)
|
|
|
Of consolidated trusts
|
|
3,844,699
|
|
|
3,646,164
|
|
|
198,535
|
|
|
Other liabilities
|
|
24,418
|
|
|
24,754
|
|
|
(336)
|
|
|
Total liabilities
|
|
4,120,693
|
|
|
3,960,490
|
|
|
160,203
|
|
|
Fannie Mae stockholders’ equity:
|
|
|
|
|
|
|
|
Senior preferred stock
|
|
120,836
|
|
|
120,836
|
|
|
—
|
|
|
Other net deficit
|
|
(83,491)
|
|
|
(95,577)
|
|
|
12,086
|
|
|
Total equity
|
|
37,345
|
|
|
25,259
|
|
|
12,086
|
|
|
Total liabilities and equity
|
|
$
|
4,158,038
|
|
|
$
|
3,985,749
|
|
|
$
|
172,289
|
|
Cash and Cash Equivalents and Federal Funds Sold and Securities Purchased under Agreements to Resell or Similar Arrangements, and Investments in Securities
Investments in securities declined from December 31, 2020 to June 30, 2021 primarily driven by a shift from investments in U.S. Treasury securities as of December 31, 2020 to investments in federal funds sold and securities purchased under agreements to resell as of June 30, 2021, as well as a decrease in funding debt issuances during the period. With lower funding debt issuances, our other investments portfolio declined as maturing investments were not replaced.
For further discussion, see “Liquidity and Capital Management—Liquidity Management.”
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|
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|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Consolidated Balance Sheet Analysis
|
Mortgage Loans, Net of Allowance
The mortgage loans reported in our condensed consolidated balance sheets are classified as either HFS or HFI and include loans owned by Fannie Mae and loans held in consolidated trusts.
Mortgage loans, net of allowance for loan losses increased as of June 30, 2021 compared with December 31, 2020, driven by an increase in loan acquisitions, primarily from continued high refinancing activity, outpacing liquidations and sales.
For additional information on our mortgage loans, see “Note 3, Mortgage Loans,” and for additional information on changes in our allowance for loan losses, see “Note 4, Allowance for Loan Losses.”
Debt
The decrease in debt of Fannie Mae from December 31, 2020 to June 30, 2021 was primarily due to decreased funding needs. The increase in debt of consolidated trusts from December 31, 2020 to June 30, 2021 was primarily driven by sales of Fannie Mae MBS, which are accounted for as issuances of debt of consolidated trusts in our condensed consolidated balance sheets, since the MBS certificate ownership is transferred from us to a third party. See “Liquidity and Capital Management—Debt Funding” for a summary of activity in debt of Fannie Mae and a comparison of the mix between our outstanding short-term and long-term debt. Also see “Note 7, Short-Term and Long-Term Debt” for additional information on our total outstanding debt.
Stockholders’ Equity
Our net equity increased as of June 30, 2021 compared with December 31, 2020 by the amount of our comprehensive income recognized during the first half of 2021.
The aggregate liquidation preference of the senior preferred stock increased to $151.7 billion as of June 30, 2021 and will further increase to $158.8 billion as of September 30, 2021 due to the $7.1 billion increase in our net worth during the second quarter of 2021.
Retained Mortgage Portfolio
We use our retained mortgage portfolio primarily to provide liquidity to the mortgage market through our whole loan conduit and to support our loss mitigation activities, particularly in times of economic stress when other sources of liquidity to the mortgage market may decrease or withdraw. Previously, we also used our retained mortgage portfolio for investment purposes.
Our retained mortgage portfolio consists of mortgage loans and mortgage-related securities that we own, including Fannie Mae MBS and non-Fannie Mae mortgage-related securities. Assets held by consolidated MBS trusts that back mortgage-related securities owned by third parties are not included in our retained mortgage portfolio.
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|
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|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
23
|
|
|
|
|
|
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|
|
|
|
MD&A | Retained Mortgage Portfolio
|
The chart below separates the instruments within our retained mortgage portfolio, measured by unpaid principal balance, into three categories based on each instrument’s use:
•Lender liquidity, which includes balances related to our whole loan conduit activity, supports our efforts to provide liquidity to the single-family and multifamily mortgage markets.
•Loss mitigation supports our loss mitigation efforts through the purchase of delinquent loans from our MBS trusts.
•Other represents assets that were previously purchased for investment purposes. The majority of the balance of “Other” as of June 30, 2021 consisted of Fannie Mae reverse mortgage securities and reverse mortgage loans. We expect the amount of assets in “Other” will continue to decline over time as they liquidate, mature or are sold.
Retained Mortgage Portfolio
(Dollars in billions)
The decrease in our retained mortgage portfolio as of June 30, 2021 compared with December 31, 2020 was primarily due to a decrease in our lender liquidity portfolio driven by a decline in mortgage refinance activity, primarily during the second quarter of 2021, leading to lower acquisition volumes through the whole loan conduit. In addition, sales of reperforming mortgage loans drove a decrease in our loss mitigation portfolio.
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|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Retained Mortgage Portfolio
|
The table below displays the components of our retained mortgage portfolio, measured by unpaid principal balance. Based on the nature of the asset, these balances are included in either “Investments in securities” or “Mortgage loans of Fannie Mae” in our Summary of Condensed Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained Mortgage Portfolio
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
(Dollars in millions)
|
|
Lender liquidity:
|
|
|
|
|
|
|
|
|
Agency securities(1)
|
|
$
|
25,652
|
|
|
|
|
$
|
34,810
|
|
|
|
Mortgage loans
|
|
30,000
|
|
|
|
|
45,895
|
|
|
|
Total lender liquidity
|
|
55,652
|
|
|
|
|
80,705
|
|
|
|
Loss mitigation mortgage loans(2)
|
|
45,472
|
|
|
|
|
56,315
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
Reverse mortgage loans
|
|
10,920
|
|
|
|
|
12,388
|
|
|
|
Mortgage loans
|
|
4,073
|
|
|
|
|
4,881
|
|
|
|
Reverse mortgage securities(3)
|
|
6,823
|
|
|
|
|
7,185
|
|
|
|
Private-label and other securities
|
|
403
|
|
|
|
|
473
|
|
|
|
Fannie Mae-wrapped private-label securities
|
|
497
|
|
|
|
|
521
|
|
|
|
Mortgage revenue bonds
|
|
146
|
|
|
|
|
182
|
|
|
|
Total other
|
|
22,862
|
|
|
|
|
25,630
|
|
|
|
Total retained mortgage portfolio
|
|
$
|
123,986
|
|
|
|
|
$
|
162,650
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained mortgage portfolio by segment:
|
|
|
|
|
|
|
|
|
Single-family mortgage loans and mortgage-related securities
|
|
$
|
118,445
|
|
|
|
|
$
|
154,943
|
|
|
|
Multifamily mortgage loans and mortgage-related securities
|
|
$
|
5,541
|
|
|
|
|
$
|
7,707
|
|
|
(1)Consists of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-related securities, including Freddie Mac securities guaranteed by Fannie Mae. Excludes Fannie Mae and Ginnie Mae reverse mortgage securities and Fannie Mae-wrapped private-label securities.
(2)Includes single-family loans classified as troubled debt restructurings (“TDRs”) that were on accrual status of $20.1 billion and $29.4 billion as of June 30, 2021 and December 31, 2020, respectively, and single-family loans on nonaccrual status of $15.9 billion and $19.6 billion as of June 30, 2021 and December 31, 2020. Includes multifamily loans classified as TDRs that were on accrual status of $24 million and $20 million as of June 30, 2021 and December 31, 2020, respectively, and multifamily loans on nonaccrual status of $507 million and $536 million as of June 30, 2021 and December 31, 2020, respectively.
(3)Consists of Fannie Mae and Ginnie Mae reverse mortgage securities.
The amount of mortgage assets that we may own is capped at $250 billion and will decrease to $225 billion on December 31, 2022 under the terms of our senior preferred stock purchase agreement with Treasury. We are currently managing our business to a $225 billion cap pursuant to instructions from FHFA. See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 2020 Form 10-K for additional information on our portfolio cap.
We include 10% of the notional value of interest-only securities in calculating the size of the retained portfolio for the purpose of determining compliance with the senior preferred stock purchase agreement retained portfolio limits and associated FHFA guidance. As of June 30, 2021, 10% of the notional value of our interest-only securities was $2.2 billion, which is not included in the table above.
Under the terms of our MBS trust documents, we have the option or, in some instances, the obligation, to purchase mortgage loans that meet specific criteria from an MBS trust. The purchase price for these loans is the unpaid principal balance of the loan plus accrued interest. If a delinquent loan remains in a single-family MBS trust, the servicer is responsible for advancing the borrower’s missed scheduled principal and interest payments to the MBS holders for up to four months, after which time we must make these missed payments. In addition, we must reimburse servicers for advanced principal and interest payments. The cost of purchasing most delinquent loans from a single-family Fannie Mae MBS trust and holding them in our retained mortgage portfolio is currently less than the cost of advancing delinquent payments to security holders.
Except for loans that are in forbearance or that have been granted certain other types of loss mitigation options (such as a repayment plan or payment deferral), we have historically purchased loans from single-family MBS trusts when they become four consecutive monthly payments delinquent. In September 2020, FHFA instructed both us and Freddie Mac
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Retained Mortgage Portfolio
|
to extend the timeframe for our single-family delinquent loan buyout policy to 24 consecutively missed monthly payments (that is, loans that are 24 months past due) effective January 1, 2021. We expect that in most cases we nevertheless will purchase delinquent loans from single-family MBS trusts prior to the 24-month deadline under one of the exceptions to the FHFA directive, which includes loans that are permanently modified, loans subject to a short-sale or deed-in-lieu of foreclosure, loans that are paid in full and loans referred to foreclosure.
In support of our loss mitigation strategies, we purchased $3.7 billion of loans from our single-family MBS trusts in the first half of 2021, the substantial majority of which were delinquent, compared with $5.6 billion of loans purchased from single-family MBS trusts in the first half of 2020. We expect the amount of loans we buy out of trusts may increase, particularly in 2022, compared with 2020 as a result of COVID-19-related loan delinquencies and loss mitigation strategies, which may increase the size of our retained mortgage portfolio. However, the magnitude of any increase in our retained mortgage portfolio will depend on the volume of loans we ultimately buy, the timing of those purchases, and the length of time those loans remain in our retained mortgage portfolio. These factors are highly uncertain and depend on a number of things, including the length of time loans remain in forbearance, the duration of foreclosure suspensions, and the nature and success of our loss mitigation activities, including payment deferrals and repayment plans, which do not require us to purchase loans out of trust. See “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management—Single-Family Loans in Forbearance” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention” for information on our loans in forbearance.
Guaranty Book of Business
Our “guaranty book of business” consists of:
•Fannie Mae MBS outstanding, excluding the portions of any structured securities we issue that are backed by Freddie Mac securities;
•mortgage loans of Fannie Mae held in our retained mortgage portfolio; and
•other credit enhancements that we provide on mortgage assets.
“Total Fannie Mae guarantees” consists of:
•our guaranty book of business; and
•the portions of any structured securities we issue that are backed by Freddie Mac securities.
We and Freddie Mac issue single-family uniform mortgage-backed securities, or “UMBS®.” In this report, we use the term “Fannie Mae-issued UMBS” to refer to single-family Fannie Mae MBS that are directly backed by fixed-rate mortgage loans and generally eligible for trading in the to-be-announced (“TBA”) market. We use the term “Fannie Mae MBS” or “our MBS” to refer to any type of mortgage-backed security that we issue, including UMBS, Supers®, Real Estate Mortgage Investment Conduit securities (“REMICs”) and other types of single-family or multifamily mortgage-backed securities.
Some Fannie Mae MBS that we issue are backed in whole or in part by Freddie Mac securities. When we resecuritize Freddie Mac securities into Fannie Mae-issued structured securities, such as Supers and REMICs, our guaranty of principal and interest extends to the underlying Freddie Mac securities. However, Freddie Mac continues to guarantee the payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not charge an incremental guaranty fee to include Freddie Mac securities in the structured securities that we issue. References to our single-family guaranty book of business in this report exclude Freddie Mac-acquired mortgage loans underlying Freddie Mac securities that we have resecuritized.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Guaranty Book of Business
|
The table below displays the composition of our guaranty book of business based on unpaid principal balance. Our single-family guaranty book of business accounted for 90% of our guaranty book of business as of June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of Fannie Mae Guaranty Book of Business
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
Single-Family
|
|
Multifamily
|
|
Total
|
|
Single-Family
|
|
Multifamily
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Conventional guaranty book of business(1)
|
|
$
|
3,449,139
|
|
|
$
|
403,364
|
|
|
$
|
3,852,503
|
|
|
$
|
3,305,030
|
|
|
$
|
386,379
|
|
|
$
|
3,691,409
|
|
|
Government guaranty book of business(2)
|
|
18,558
|
|
|
2,138
|
|
|
20,696
|
|
|
20,777
|
|
|
2,268
|
|
|
23,045
|
|
|
Guaranty book of business
|
|
3,467,697
|
|
|
405,502
|
|
|
3,873,199
|
|
|
3,325,807
|
|
|
388,647
|
|
|
3,714,454
|
|
|
Freddie Mac securities guaranteed by Fannie Mae(3)
|
|
168,937
|
|
|
—
|
|
|
168,937
|
|
|
137,316
|
|
|
—
|
|
|
137,316
|
|
|
Total Fannie Mae guarantees
|
|
$
|
3,636,634
|
|
|
$
|
405,502
|
|
|
$
|
4,042,136
|
|
|
$
|
3,463,123
|
|
|
$
|
388,647
|
|
|
$
|
3,851,770
|
|
(1)Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured, in whole or in part, by the U.S. government.
(2)Refers to mortgage loans and mortgage-related securities guaranteed or insured, in whole or in part, by the U.S. government.
(3)Consists of approximately (i) $138.0 billion and $110.7 billion in unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers as of June 30, 2021 and December 31, 2020, respectively; and (ii) $31.0 billion and $26.6 billion in unpaid principal balance of Freddie Mac securities backing Fannie Mae-issued REMICs as of June 30, 2021 and December 31, 2020, respectively.
The GSE Act requires us to set aside each year an amount equal to 4.2 basis points of the unpaid principal balance of our new business purchases and to pay this amount to specified U.S. Department of Housing and Urban Development (“HUD”) and Treasury funds in support of affordable housing. In March 2021, we paid $603 million to the funds based on our new business purchases in 2020. For the first half of 2021, we recognized an expense of $339 million related to this obligation based on $806.5 billion in new business purchases during the period. We expect to pay this amount to the funds in 2022, plus additional amounts to be accrued based on our new business purchases in the second half of 2021. See “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory Matters—Affordable Housing Allocations” in our 2020 Form 10-K for more information regarding this obligation.
Business Segments
We have two reportable business segments: Single-Family and Multifamily. The Single-Family business operates in the secondary mortgage market relating to single-family mortgage loans, which are secured by properties containing four or fewer residential dwelling units. The Multifamily business operates in the secondary mortgage market relating primarily to multifamily mortgage loans, which are secured by properties containing five or more residential units.
The chart below displays net revenues and net income for each of our business segments for the first half of 2020 compared with the first half of 2021. Net revenues consist of net interest income and fee and other income.
Business Segment Net Revenues and Net Income
(Dollars in billions)
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Fannie Mae Second Quarter 2021 Form 10-Q
|
27
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In the following sections, we describe each segment’s business metrics, financial results and credit performance. For an overview of how we are compensated for and manage the risk of credit losses through the life cycle of our loans and how we measure our credit risk, see "Business—Managing Mortgage Credit Risk” in our 2020 Form 10-K.
Single-Family Business
Our Single-Family business provides liquidity to the mortgage market primarily by acquiring single-family loans from lenders and securitizing those loans into Fannie Mae MBS, which are either delivered to the lenders or sold to investors or dealers.
This section supplements and updates information regarding our Single-Family business segment in our 2020 Form 10-K. See “MD&A—Single-Family Business” in our 2020 Form 10-K for additional information regarding the primary business activities, customers and competition of our Single-Family business.
Single-Family Mortgage Market
Housing activity slowed modestly in the second quarter of 2021 compared with the first quarter of 2021. Total home sales moderated due to near record-low inventory of available homes for sale and construction capacity constraints stemming from a surge in material prices. Given recent construction constraints, single-family starts declined in the second quarter of 2021 compared with the first quarter of 2021. However, we continue to expect single-family housing starts to be higher for the full-year 2021 when compared with 2020. We also expect total home sales for the year to exceed the level seen in 2020. We expect the average mortgage rate to rise in 2021, which we expect will lead to a decline in total refinance originations for 2021 compared with 2020.
Total existing home sales averaged 5.8 million units annualized in the second quarter of 2021, compared with 6.3 million units in the first quarter of 2021, according to data from the National Association of REALTORS®. According to the U.S. Census Bureau, new single-family home sales decreased during the second quarter of 2021, averaging an annualized rate of approximately 728,300 units, compared with approximately 896,300 units in the first quarter of 2021.
The 30-year fixed mortgage rate averaged 2.98% in June 2021, compared with 3.08% in March 2021, according to Freddie Mac’s Primary Mortgage Market Survey®.
We forecast that total originations in the U.S. single-family mortgage market in 2021 will decrease from 2020 levels by approximately 7%, from an estimated $4.54 trillion in 2020 to $4.20 trillion in 2021, and that the amount of refinance originations in the U.S. single-family mortgage market will decrease from an estimated $2.89 trillion in 2020 to $2.37 trillion in 2021. Declining origination volume reduces the number of mortgages available for us to acquire, which affects our business volume. See “Key Market Economic Indicators” for additional discussion of how housing activity can affect our financial results and the uncertainties that may affect our forecasts and expectations.
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Fannie Mae Second Quarter 2021 Form 10-Q
|
28
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MD&A | Single-Family Business | Single-Family Market Activity
|
Single-Family Market Activity
Single-Family Mortgage-Related Securities Issuances Share
Our single-family Fannie Mae MBS issuances were $388.5 billion for the second quarter of 2021, compared with $342.8 billion for the second quarter of 2020. Based on the latest data available, the chart below displays our estimated share of single-family mortgage-related securities issuances in the second quarter of 2021 as compared with that of our primary competitors for the issuance of single-family mortgage-related securities.
Single-Family Mortgage-Related Securities Issuances Share
Second Quarter 2021
We estimate our share of single-family mortgage-related securities issuances was 41% in the first quarter of 2021 and 45% in the second quarter of 2020.
Presentation of Our Single-Family Guaranty Book of Business
For purposes of the information reported in this “Single-Family Business” section, we measure the single-family guaranty book of business using the unpaid principal balance of our mortgage loans underlying Fannie Mae MBS outstanding. By contrast, the single-family guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table in the “Guaranty Book of Business” section is based on the unpaid principal balance of the Fannie Mae MBS outstanding, rather than the unpaid principal balance of the underlying mortgage loans. These amounts differ primarily as a result of payments we receive on underlying loans that have not yet been remitted to the MBS holders or instances where we have advanced missed borrower payments on mortgage loans to make required distributions to related MBS holders. As measured for purposes of the information reported below, our single-family conventional guaranty book of business was $3,377.2 billion as of June 30, 2021 and $3,200.9 billion as of December 31, 2020.
Single-Family Business Metrics
Net interest income for our Single-Family business is driven by the guaranty fees we charge and the size of our single-family conventional guaranty book of business. Our business volume and growth in our guaranty book of business is affected by the rate of growth in total U.S. residential mortgage debt outstanding, the size of the U.S. residential mortgage market and our share of mortgage acquisitions. The guaranty fees we charge are based on the characteristics of the loans we acquire. We may adjust our guaranty fees in light of market conditions and to achieve return targets. As a result, the average charged guaranty fee on new acquisitions may fluctuate based on the credit quality and product mix of loans acquired, as well as market conditions and other factors.
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Fannie Mae Second Quarter 2021 Form 10-Q
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29
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MD&A | Single-Family Business | Single-Family Business Metrics
|
The charts below display our average charged guaranty fees, net of TCCA fees, on our single-family conventional guaranty book of business and on new single-family conventional loan acquisitions, along with our average single-family conventional guaranty book of business and our single-family conventional loan acquisitions for the periods presented.
Select Single-Family Business Metrics
(Dollars in billions)
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Average charged guaranty fee on single-family conventional guaranty book of business, net of TCCA fees(1)
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Average single-family conventional guaranty book of business(2)
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Average charged guaranty fee on new single-family conventional acquisitions, net of TCCA fees(1)
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Single-family conventional acquisitions
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(1) Excludes the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.
(2) Our single-family conventional guaranty book of business primarily consists of single-family conventional mortgage loans underlying Fannie Mae MBS outstanding. It also includes single-family conventional mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on single-family conventional mortgage assets. Our single-family conventional guaranty book of business does not include: (a) non-Fannie Mae single-family mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty; (b) mortgage loans guaranteed or insured, in whole or in part, by the U.S. government; or (c) Freddie Mac-acquired mortgage loans underlying Freddie Mac-issued UMBS that we have resecuritized. Our average single-family conventional guaranty book of business is based on quarter-end balances.
Average charged guaranty fee on newly acquired conventional single-family loans is a metric management uses to measure the price we earn as compensation for the credit risk we manage and to assess our return. Average charged guaranty fee represents, on an annualized basis, the sum of the base guaranty fees charged during the period for our new single-family conventional guaranty arrangements, which we will receive monthly over the life of the loan, plus the recognition of any upfront cash payments, including loan-level price adjustments and the adverse market refinance fee, based on an estimated average life at the time of acquisition. We use loan-level price adjustments, including various upfront risk-based fees, to price for the credit risk we assume in providing our guaranty. FHFA must approve changes to the national loan-level price adjustments we charge and can direct us to make other changes to our single-family guaranty fee pricing.
Our average charged guaranty fee on newly acquired conventional single-family loans, net of TCCA fee, increased in the second quarter of 2021 compared with the second quarter of 2020 primarily due to the implementation of the adverse market refinance fee in December 2020. In July 2021, FHFA directed us to eliminate the adverse market refinance fee effective August 1, 2021. As a result, we expect our average charged guaranty fee on new single-family conventional acquisitions to decrease in the second half of 2021. See “Legislation and Regulation—Elimination of Adverse Market Refinance Fee” for additional information on the adverse market refinance fee.
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Fannie Mae Second Quarter 2021 Form 10-Q
|
30
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MD&A | Single-Family Business | Single-Family Business Financial Results
|
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Single-Family Business Financial Results(1)
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For the Three Months Ended June 30,
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|
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For the Six Months Ended June 30,
|
|
|
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|
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2021
|
|
2020
|
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Variance
|
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2021
|
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2020
|
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Variance
|
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|
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(Dollars in millions)
|
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Net interest income(2)
|
|
$
|
7,323
|
|
|
$
|
4,939
|
|
|
$
|
2,384
|
|
|
$
|
13,217
|
|
|
$
|
9,480
|
|
|
$
|
3,737
|
|
|
Fee and other income
|
|
80
|
|
|
71
|
|
|
9
|
|
|
142
|
|
|
165
|
|
|
(23)
|
|
|
Net revenues
|
|
7,403
|
|
|
5,010
|
|
|
2,393
|
|
|
13,359
|
|
|
9,645
|
|
|
3,714
|
|
|
Investment gains (losses), net
|
|
658
|
|
|
96
|
|
|
562
|
|
|
722
|
|
|
(56)
|
|
|
778
|
|
|
Fair value gains (losses), net
|
|
(386)
|
|
|
(1,030)
|
|
|
644
|
|
|
354
|
|
|
(1,490)
|
|
|
1,844
|
|
|
Administrative expenses
|
|
(619)
|
|
|
(625)
|
|
|
6
|
|
|
(1,242)
|
|
|
(1,254)
|
|
|
12
|
|
|
Credit-related income (expense)(3)
|
|
2,525
|
|
|
216
|
|
|
2,309
|
|
|
3,204
|
|
|
(2,034)
|
|
|
5,238
|
|
|
TCCA fees(2)
|
|
(758)
|
|
|
(660)
|
|
|
(98)
|
|
|
(1,489)
|
|
|
(1,297)
|
|
|
(192)
|
|
|
Credit enhancement expense
|
|
(219)
|
|
|
(307)
|
|
|
88
|
|
|
(445)
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|
|
(623)
|
|
|
178
|
|
|
Change in expected credit enhancement recoveries(4)
|
|
(57)
|
|
|
208
|
|
|
(265)
|
|
|
(73)
|
|
|
266
|
|
|
(339)
|
|
|
Other expenses, net(5)
|
|
(315)
|
|
|
(252)
|
|
|
(63)
|
|
|
(602)
|
|
|
(415)
|
|
|
(187)
|
|
|
Income before federal income taxes
|
|
8,232
|
|
|
2,656
|
|
|
5,576
|
|
|
13,788
|
|
|
2,742
|
|
|
11,046
|
|
|
Provision for federal income taxes
|
|
(1,725)
|
|
|
(556)
|
|
|
(1,169)
|
|
|
(2,887)
|
|
|
(574)
|
|
|
(2,313)
|
|
|
Net income
|
|
$
|
6,507
|
|
|
$
|
2,100
|
|
|
$
|
4,407
|
|
|
$
|
10,901
|
|
|
$
|
2,168
|
|
|
$
|
8,733
|
|
(1)See “Note 9, Segment Reporting” for information about our segment allocation methodology.
(2)Reflects the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury. The resulting revenue is included in net interest income and the expense is recognized as “TCCA fees.”
(3)Consists of the benefit or provision for credit losses and foreclosed property income or expense.
(4)Consists of change in benefits recognized from our single-family freestanding credit enhancements, which primarily relate to our CAS and CIRT programs.
(5)Consists primarily of debt extinguishment gains and losses, housing trust fund expenses, servicer fees paid in connection with certain loss mitigation activities, and loan subservicing costs.
Net Interest Income
Single-family net interest income increased in the second quarter and first half of 2021 compared with the second quarter and first half of 2020, primarily driven by higher net amortization income and higher base guaranty fee income, partially offset by lower income from portfolios.
The drivers of net interest income for the Single-Family segment are consistent with the drivers of net interest income in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Net Interest Income.”
Investment Gains (Losses), Net
The increase in net investment gains in the second quarter of 2021 compared with the second quarter of 2020 and the shift from net investment losses in the first half of 2020 to net investment gains in the first half of 2021 was primarily driven by a significant increase in the volume of sales of single-family HFS loans in the 2021 periods. The drivers of investment gains (losses), net for the Single-Family segment are consistent with the drivers of investment gains (losses), net in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Investment Gains (Losses), Net.”
Fair Value Gains (Losses), Net
Fair value losses, net in the second quarter of 2021 were primarily driven by decreases in the fair value of mortgage commitment derivatives, partially offset by gains on trading securities.
Fair value gains, net in the first half of 2021 were largely impacted by the implementation of our hedge accounting program resulting in the presentation of fair value losses on designated interest-rate swaps in “net interest income.” Fair value gains, net in the first half of 2021 were also driven by gains as a result of increases in the fair value of mortgage
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|
Fannie Mae Second Quarter 2021 Form 10-Q
|
31
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MD&A | Single-Family Business | Single-Family Business Financial Results
|
commitment derivatives and decreases in the fair value of long-term debt of consolidated trusts held at fair value, which were partially offset by losses on trading securities.
Fair value losses, net in the second quarter and first half of 2020 were primarily driven by decreases in the fair values of our mortgage commitments derivatives, partially offset by fair value gains on trading securities.
The drivers of fair value gains (losses), net for the Single-Family segment are consistent with the drivers of fair value gains (losses), net in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Fair Value Gains (Losses), Net.”
For information on the implementation of our hedge accounting program and its impact on our financial statements, see “Consolidated Results of Operations—Hedge Accounting Impact” and “Consolidated Results of Operations—Fair Value Gains (Losses), Net.”
Credit-Related Income (Expense)
Credit-related income for the second quarter of 2021 was driven by a benefit for credit losses due primarily to strong actual and forecasted home price growth, the redesignation of certain reperforming loans from HFI to HFS, lower actual and projected interest rates, and a reduction in our allowance for loan losses for changes in assumptions regarding COVID-19 forbearance and loan delinquencies.
Credit-related income for the first half of 2021 was driven by a benefit for credit losses due primarily to strong actual and forecasted home price growth, the redesignation of certain reperforming loans from HFI to HFS and a reduction in our allowance for loan losses for changes in assumptions regarding COVID-19 forbearance and loan delinquencies. The impact of those factors was partially offset by higher actual and projected interest rates.
Credit-related income for the second quarter of 2020 was primarily driven by an increase in actual home prices. In the first quarter of 2020, our expectations for home price growth for 2020 were near-zero. However, in the second quarter of 2020, we revised our home price forecast for the year to reflect an increase in home price appreciation on a national basis for 2020 based on continued strong home sales at that time. This change contributed to credit-related income for the period.
Credit-related expense for the first half of 2020 was primarily driven by an increase in our allowance for loan losses due to losses we expected to incur as a result of the COVID-19 pandemic. This was partially offset by lower actual and projected mortgage interest rates.
See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on the primary factors that contributed to our single-family credit-related income (expense).
Single-Family Mortgage Credit Risk Management
This section updates our discussion of single-family mortgage credit risk management in our 2020 Form 10-K. For an overview of key elements of our mortgage credit risk management, see “Business—Managing Mortgage Credit Risk” in our 2020 Form 10-K. For additional information on our acquisition and servicing policies, underwriting and servicing standards, quality control process, repurchase requests, and representation and warranty framework, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” in our 2020 Form 10-K.
Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards
COVID-19 Selling Policies
Based on current market conditions, we are no longer offering most of the COVID-19-related temporary flexibilities to our Selling Guide requirements that we had previously offered, such as purchasing loans that are subject to a COVID-19-related payment forbearance and offering additional methods of obtaining verbal verifications of borrower employment.
We have maintained our temporary selling policy updates to provide clarity and mitigate risk, including:
•assessment of more recent documentation of borrower employment (including self-employment), income, and assets;
•requiring evidence of receipt of funds from stocks, stock options and mutual funds when used for down payment or closing costs, and reducing the value to 70% when considered for reserves;
•requiring additional due diligence regarding the payment status of a borrower’s existing mortgage loans;
•providing clarity for assessing self-employment income for qualifying purposes; and
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Fannie Mae Second Quarter 2021 Form 10-Q
|
32
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MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
•requiring that loans be no more than six months old to be eligible for sale to us.
COVID-19 Servicing Policies
We continue to work with Freddie Mac as instructed by FHFA to implement temporary policies in response to the COVID-19 pandemic to enable our single-family loan servicers to better assist borrowers impacted by COVID-19. We issued initial requirements to servicers on temporary policies to assist borrowers impacted by COVID-19 in March 2020, and have subsequently amended the requirements. We will continue monitoring the market to determine whether further adjustments to or extensions of our temporary policies are appropriate.
These temporary policies include:
•authorizing servicers to offer up to 12 months of forbearance, upon the request of any single-family borrower experiencing a financial hardship due to the COVID-19 pandemic, regardless of the borrower’s delinquency status; for loans already in a COVID-19-related forbearance as of February 28, 2021, servicers may grant an extension of forbearance for up to an additional six months, to a total of up to 18 months, provided that the forbearance does not result in the loan becoming greater than 18 months delinquent;
•offering a payment deferral workout option to eligible borrowers who have resolved a COVID-19-related financial hardship but cannot afford to bring the loan current by reinstating the loan (that is, repaying all the missed payments at one time) or through a repayment plan (that is, repaying the missed payments over time). The payment deferral workout option allows the borrower to defer up to 18 months of past-due payments, without interest, to the end of the loan term (or when the loan is refinanced, the property is sold or the loan is otherwise paid off before the end of the loan term). All other terms of the loan remain unchanged;
•adjusting the terms for a Flex Modification for COVID-19-impacted borrowers to provide an opportunity to reduce the interest rate regardless of the mortgage loan’s post-modified mark-to-market loan-to-value (“LTV”) ratio. This change, which was announced on June 30, 2021, is intended to help borrowers with a mark-to-market LTV ratio of less than 80% obtain a lower payment on their mortgage loan. Although servicers are encouraged to implement the policy change immediately, they must implement it no later than August 31, 2021;
•suspending foreclosures and certain foreclosure-related activities for single-family properties through July 31, 2021, other than for vacant or abandoned properties; and
•reporting as current to the credit bureaus the obligation of a borrower who receives a forbearance plan or other form of relief as a result of the COVID-19 pandemic during the period covered by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), if the borrower was current before the accommodation and makes payments as agreed under the accommodation in accordance with the Fair Credit Reporting Act, as amended by the CARES Act.
The CFPB and certain states and localities have implemented COVID-19-related borrower and/or renter protections that are more extensive than our Servicing Guide requirements. On June 28, 2021, the CFPB issued a final rule prohibiting certain new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until after December 31, 2021. In addition, on June 29, 2021, FHFA announced that Fannie Mae servicers will not be permitted to initiate foreclosures that would be prohibited under the CFPB rule before the rule’s August 31, 2021 effective date. The CFPB and certain states and localities may continue to consider such proposals in the future or extend the time period of existing protections. Our servicers must comply with all applicable laws.
Single-Family Portfolio Diversification and Monitoring
The table below displays our single-family conventional business volumes and our single-family conventional guaranty book of business, based on certain key risk characteristics that we use to evaluate the risk profile and credit quality of our single-family loans. As shown in the table below, our single-family conventional guaranty book of business has been impacted by record home price appreciation in the first half of 2021. The weighted average mark-to-market LTV ratio decreased from 58% as of December 31, 2020 to 55% as of June 30, 2021, and the percentage of our single-family conventional guaranty book of business with a mark-to-market LTV ratio over 80% decreased from 13% of our single-family conventional guaranty book of business as of December 31, 2020, to 9% as of June 30, 2021.
We provide additional information on the credit characteristics of our single-family loans in quarterly financial supplements, which we furnish to the Securities and Exchange Commission (the “SEC”) with current reports on Form 8-K and make available on our website. Information in our quarterly financial supplements is not incorporated by reference into this report.
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Fannie Mae Second Quarter 2021 Form 10-Q
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33
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MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
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|
Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business(1)
|
|
|
|
Percent of Single-Family Conventional Business Volume at Acquisition(2)
|
|
Percent of Single-Family Conventional
Guaranty Book of Business(3)
As of
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Original LTV ratio:(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<= 60%
|
|
31
|
|
%
|
24
|
|
%
|
33
|
|
%
|
23
|
|
%
|
|
25
|
|
%
|
|
23
|
|
%
|
|
60.01% to 70%
|
|
16
|
|
|
16
|
|
|
16
|
|
|
16
|
|
|
|
15
|
|
|
|
14
|
|
|
|
70.01% to 80%
|
|
31
|
|
|
35
|
|
|
31
|
|
|
35
|
|
|
|
34
|
|
|
|
35
|
|
|
|
80.01% to 90%
|
|
10
|
|
|
12
|
|
|
9
|
|
|
13
|
|
|
|
11
|
|
|
|
11
|
|
|
|
90.01% to 95%
|
|
10
|
|
|
10
|
|
|
9
|
|
|
10
|
|
|
|
10
|
|
|
|
11
|
|
|
|
95.01% to 100%
|
|
2
|
|
|
3
|
|
|
2
|
|
|
3
|
|
|
|
4
|
|
|
|
4
|
|
|
|
Greater than 100%
|
|
*
|
|
*
|
|
*
|
|
*
|
|
|
1
|
|
|
|
2
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Weighted average
|
|
70
|
|
%
|
72
|
|
%
|
69
|
|
%
|
73
|
|
%
|
|
73
|
|
%
|
|
74
|
|
%
|
|
Average loan amount
|
|
$
|
281,749
|
|
|
$
|
280,846
|
|
|
$
|
282,169
|
|
|
$
|
278,525
|
|
|
|
$
|
192,919
|
|
|
|
$
|
185,047
|
|
|
|
Estimated mark-to-market LTV ratio:(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<= 60%
|
|
|
|
|
|
|
|
|
|
|
57
|
|
%
|
|
52
|
|
%
|
|
60.01% to 70%
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
17
|
|
|
|
70.01% to 80%
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
18
|
|
|
|
80.01% to 90%
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
9
|
|
|
|
90.01% to 100%
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
4
|
|
|
|
Greater than 100%
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
*
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Weighted average
|
|
|
|
|
|
|
|
|
|
|
55
|
|
%
|
|
58
|
|
%
|
|
FICO credit score at origination:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< 620
|
|
—
|
|
%
|
*
|
%
|
—
|
|
%
|
*
|
%
|
|
1
|
|
%
|
|
1
|
|
%
|
|
620 to < 660
|
|
3
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
|
4
|
|
|
|
4
|
|
|
|
660 to < 680
|
|
3
|
|
|
2
|
|
|
3
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
680 to < 700
|
|
6
|
|
|
5
|
|
|
5
|
|
|
6
|
|
|
|
7
|
|
|
|
7
|
|
|
|
700 to < 740
|
|
18
|
|
|
19
|
|
|
18
|
|
|
20
|
|
|
|
19
|
|
|
|
20
|
|
|
|
>= 740
|
|
70
|
|
|
72
|
|
|
72
|
|
|
70
|
|
|
|
66
|
|
|
|
64
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Weighted average
|
|
757
|
|
|
759
|
|
|
759
|
|
|
757
|
|
|
|
752
|
|
|
|
750
|
|
|
|
Debt-to-income (“DTI”) ratio at origination:(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<= 43%
|
|
78
|
|
%
|
80
|
|
%
|
79
|
|
%
|
78
|
|
%
|
|
78
|
|
%
|
|
77
|
|
%
|
|
43.01% to 45%
|
|
8
|
|
|
8
|
|
|
8
|
|
|
8
|
|
|
|
8
|
|
|
|
9
|
|
|
|
Greater than 45%
|
|
14
|
|
|
12
|
|
|
13
|
|
|
14
|
|
|
|
14
|
|
|
|
14
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Weighted average
|
|
34
|
|
%
|
34
|
|
%
|
34
|
|
%
|
34
|
|
%
|
|
34
|
|
%
|
|
35
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Single-Family Conventional Business Volume at Acquisition(2)
|
|
Percent of Single-Family Conventional
Guaranty Book of Business(3)
As of
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate:(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
|
|
82
|
|
%
|
85
|
|
%
|
83
|
|
%
|
85
|
|
%
|
|
84
|
|
%
|
|
85
|
|
%
|
|
Intermediate-term
|
|
17
|
|
|
15
|
|
|
17
|
|
|
14
|
|
|
|
15
|
|
|
|
14
|
|
|
|
Total fixed-rate
|
|
99
|
|
|
100
|
|
|
100
|
|
|
99
|
|
|
|
99
|
|
|
|
99
|
|
|
|
Adjustable-rate
|
|
1
|
|
|
*
|
|
*
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Number of property units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 unit
|
|
98
|
|
%
|
98
|
|
%
|
98
|
|
%
|
98
|
|
%
|
|
97
|
|
%
|
|
97
|
|
%
|
|
2-4 units
|
|
2
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Property type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-family homes
|
|
91
|
|
%
|
92
|
|
%
|
91
|
|
%
|
92
|
|
%
|
|
91
|
|
%
|
|
91
|
|
%
|
|
Condo/Co-op
|
|
9
|
|
|
8
|
|
|
9
|
|
|
8
|
|
|
|
9
|
|
|
|
9
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Occupancy type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary residence
|
|
93
|
|
%
|
93
|
|
%
|
92
|
|
%
|
93
|
|
%
|
|
90
|
|
%
|
|
90
|
|
%
|
|
Second/vacation home
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
|
4
|
|
|
|
4
|
|
|
|
Investor
|
|
4
|
|
|
4
|
|
|
5
|
|
|
4
|
|
|
|
6
|
|
|
|
6
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Loan purpose:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
|
|
35
|
|
%
|
26
|
|
%
|
30
|
|
%
|
30
|
|
%
|
|
36
|
|
%
|
|
38
|
|
%
|
|
Cash-out refinance
|
|
22
|
|
|
20
|
|
|
21
|
|
|
21
|
|
|
|
20
|
|
|
|
20
|
|
|
|
Other refinance
|
|
43
|
|
|
54
|
|
|
49
|
|
|
49
|
|
|
|
44
|
|
|
|
42
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Geographic concentration:(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midwest
|
|
13
|
|
%
|
15
|
|
%
|
13
|
|
%
|
14
|
|
%
|
|
14
|
|
%
|
|
14
|
|
%
|
|
Northeast
|
|
14
|
|
|
12
|
|
|
14
|
|
|
12
|
|
|
|
16
|
|
|
|
17
|
|
|
|
Southeast
|
|
23
|
|
|
21
|
|
|
22
|
|
|
21
|
|
|
|
23
|
|
|
|
22
|
|
|
|
Southwest
|
|
19
|
|
|
21
|
|
|
18
|
|
|
21
|
|
|
|
18
|
|
|
|
19
|
|
|
|
West
|
|
31
|
|
|
31
|
|
|
33
|
|
|
32
|
|
|
|
29
|
|
|
|
28
|
|
|
|
Total
|
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
100
|
|
%
|
|
100
|
|
%
|
|
100
|
|
%
|
|
Origination year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 and prior
|
|
|
|
|
|
|
|
|
|
|
23
|
|
%
|
|
30
|
|
%
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
8
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
7
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
6
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
11
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
38
|
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
—
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
100
|
|
%
|
|
100
|
|
%
|
* Represents less than 0.5% of single-family conventional business volume or guaranty book of business.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
(1)Second-lien mortgage loans held by third parties are not reflected in the original LTV or the estimated mark-to-market LTV ratios in this table.
(2)Calculated based on the unpaid principal balance of single-family loans for each category at time of acquisition.
(3)Calculated based on the aggregate unpaid principal balance of single-family loans for each category divided by the aggregate unpaid principal balance of loans in our single-family conventional guaranty book of business as of the end of each period.
(4)The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available.
(5)The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic changes in home value. Excludes loans for which this information is not readily available.
(6)Excludes loans for which this information is not readily available.
(7)Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate loans have maturities equal to or less than 15 years.
(8)Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.
Characteristics of our New Single-Family Loan Acquisitions
Over half of our single-family guaranty book of business has been originated in the last 18 months as borrowers took advantage of the low rate environment. Refinancing activity began to taper in the second quarter of 2021 as fewer borrowers could benefit from refinancing. Accordingly, the share of our single-family loan acquisitions consisting of refinance loans rather than home purchase loans decreased in the second quarter of 2021 compared with the second quarter of 2020. The decline in refinance share led to a decline in the percentage of loans we acquired with a FICO credit score over 740, from 72% in the second quarter of 2020 to 70% in the second quarter of 2021.
Our share of acquisitions of loans with DTI ratios above 45% increased in the second quarter of 2021 compared with the second quarter of 2020. This increase was driven by the higher share of home purchase acquisitions, which tend to have higher DTI ratios than refinance loan acquisitions.
In the second quarter of 2021, we implemented a new low-income refinance program, referred to as RefiNow™, intended to increase refinancings by low-income borrowers by reducing their refinancing costs. To be eligible for the RefiNow™ program, borrowers must meet specified criteria, including having:
•a Fannie Mae-backed mortgage secured by a 1-unit, principal residence;
•a current income at or below 80% of the area median income;
•not missed a mortgage payment in the past six months, and no more than one missed mortgage payment in the past 12 months, unless the missed payment was associated with a COVID-19-related forbearance and has been resolved; and
•a mortgage with an LTV ratio up to 97%, a DTI ratio of 65% or less, and a minimum FICO credit score of 620.
For a discussion of factors that may impact the volume and credit characteristics of loans we acquire in the future, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring” in our 2020 Form 10-K. In this section of our 2020 Form 10-K, we also provide more information on the credit characteristics of loans in our single-family conventional guaranty book of business, including high-balance loans, reverse mortgages and mortgage products with rate resets.
In January 2021, the terms of our senior preferred stock purchase agreement were amended through a letter agreement FHFA entered into on our behalf with Treasury. The letter agreement includes restrictive covenants that impact our single-family business and is described in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 2020 Form 10-K. We are not currently in compliance with the new covenants that restrict our acquisitions of purchase money single-family loans with higher-risk characteristics and our acquisitions of single-family loans backed by investment properties and second homes. We are taking steps to ensure we comply with these covenants and continue to work with FHFA and our lender customers on our implementation efforts.
Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk
Our charter generally requires credit enhancement on any single-family conventional mortgage loan that we purchase or securitize if it has an LTV ratio over 80% at the time of purchase. We generally achieve this through primary mortgage insurance. We also use enterprise paid mortgage insurance (“EPMI”), a form of primary mortgage insurance that is acquired by Fannie Mae. Under FHFA guidance, we began our EPMI pilot in 2018. In May 2021, FHFA instructed us to discontinue our EPMI pilot program and by August 29, 2021 cease acquiring loans insured with EPMI. We also enter into various other types of transactions in which we transfer mortgage credit risk to third parties.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
Our approved monoline mortgage insurers’ financial ability and willingness to pay claims is an important determinant of our overall credit risk exposure. For a discussion of our exposure to and management of the institutional counterparty credit risk associated with the providers of these credit enhancements, see “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Note 13, Concentrations of Credit Risk” in our 2020 Form 10-K and “Risk Management—Institutional Counterparty Credit Risk Management” and “Note 10, Concentrations of Credit Risk” in this report. Also see “Risk Factors” in our 2020 Form 10-K and in this report.
Single-Family Loans without Credit Enhancement
The following table displays the primary characteristics of loans in our single-family conventional guaranty book of business currently without credit enhancement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-Family Loans without Credit Enhancement
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
Unpaid Principal Balance
|
|
Percentage of Single-Family Conventional Guaranty Book of Business
|
|
Unpaid Principal Balance
|
|
Percentage of Single-Family Conventional Guaranty Book of Business
|
|
|
|
(Dollars in billions)
|
|
Low LTV ratio or short-term(1)
|
|
$
|
1,087
|
|
|
32
|
%
|
|
$
|
938
|
|
|
29
|
%
|
|
Pre-credit risk transfer program inception(2)
|
|
384
|
|
|
11
|
|
|
462
|
|
|
14
|
|
|
Recently acquired(3)
|
|
1,178
|
|
|
35
|
|
|
934
|
|
|
29
|
|
|
Other(4)
|
|
401
|
|
|
12
|
|
|
286
|
|
|
9
|
|
|
Less: Loans in multiple categories
|
|
(847)
|
|
|
(25)
|
|
|
(751)
|
|
|
(23)
|
|
|
Total single-family loans currently without credit enhancement
|
|
$
|
2,203
|
|
|
65
|
%
|
|
$
|
1,869
|
|
|
58
|
%
|
(1)Represents loans with an LTV ratio less than or equal to 60% or loans with an original maturity of 20 years or less.
(2)Represents loans that were acquired before the inception of our credit risk transfer programs. Also includes Refi PlusTM loans.
(3)Primarily consists of loans that have been acquired in the past 24 months, and have not been included in a reference pool.
(4)Includes adjustable-rate mortgage loans, loans with a combined LTV ratio greater than 97%, non-Refi Plus loans acquired after the inception of our credit risk transfer programs that became 30 or more days delinquent prior to inclusion in a credit risk transfer transaction, and loans that were delinquent as of June 30, 2021 or December 31, 2020.
We have not entered into new credit risk transfer transactions since the first quarter of 2020 as we discuss below in “Transfer of Mortgage Credit Risk.” As a result, the percentage of loans in our single-family conventional guaranty book of business without credit enhancement has increased in recent periods. The percentage of our single-family conventional loans without credit enhancement was 65% and 58% as of June 30, 2021 and December 31, 2020, respectively.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
Single-Family Loans with Credit Enhancement
The table below displays information about loans in our single-family conventional guaranty book of business covered by one or more forms of credit enhancement, including mortgage insurance or a credit risk transfer transaction. For a description of primary mortgage insurance and the other types of credit enhancements specified in the table, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk” in our 2020 Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-Family Loans with Credit Enhancement
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
Unpaid Principal Balance
|
|
Percentage of Single-Family Conventional Guaranty Book of Business
|
|
Unpaid Principal Balance
|
|
Percentage of Single-Family Conventional Guaranty Book of Business
|
|
|
(Dollars in billions)
|
|
Primary mortgage insurance and other
|
|
$
|
692
|
|
|
20
|
%
|
|
$
|
681
|
|
|
21
|
%
|
|
Connecticut Avenue Securities
|
|
461
|
|
|
14
|
|
|
608
|
|
|
19
|
|
|
Credit Insurance Risk Transfer
|
|
144
|
|
|
4
|
|
|
216
|
|
|
7
|
|
|
Lender risk-sharing
|
|
93
|
|
|
3
|
|
|
131
|
|
|
4
|
|
|
Less: Loans covered by multiple credit enhancements
|
|
(216)
|
|
|
(6)
|
|
|
(304)
|
|
|
(9)
|
|
|
Total single-family loans with credit enhancement
|
|
$
|
1,174
|
|
|
35
|
%
|
|
$
|
1,332
|
|
|
42
|
%
|
Transfer of Mortgage Credit Risk
In addition to primary mortgage insurance, our Single-Family business has developed other risk-sharing capabilities to transfer portions of our single-family mortgage credit risk to domestic and international investors and reinsurers in the private market. Our credit risk transfer transactions have been designed to transfer a portion of the losses we expect would be incurred in an economic downturn or a stressed credit environment. As described in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2020 Form 10-K, we have used primarily three single-family credit risk transfer programs: Connecticut Avenue Securities® (“CAS”), Credit Insurance Risk TransferTM (“CIRTTM”), and lender risk-sharing. At FHFA’s direction, we discontinued entering into new lender risk-sharing transactions as of the end of 2020. We continually evaluate our credit risk transfer transactions, which, in addition to managing our credit risk, also affect our returns on capital.
We have not entered into any new credit risk transfer transactions since the first quarter of 2020 as we continue to evaluate their costs and benefits, including the capital relief these transactions provide. As a result, the percentage of our book that is covered by these transactions has declined from 53% as of March 31, 2020 to 35% as of June 30, 2021. The structure of and extent to which we engage in any additional credit risk transfer transactions in the future will be affected by our capital requirements, the degree of regulatory capital relief provided by the transactions, our risk appetite, the strength of future market conditions, including the cost of these transactions, and the review of our overall business and capital plan.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
The table below displays the mortgage credit risk transferred to third parties and retained by Fannie Mae pursuant to our single-family credit risk transfer transactions. The table excludes the credit risk transferred on single-family transactions that have been cancelled or terminated as of June 30, 2021. The risk in force of these transactions, which refers to the maximum amount of losses that could be absorbed by credit risk transfer investors, was approximately $36 billion as of June 30, 2021 compared with $43 billion as of June 30, 2020. Because of the large number of mortgage prepayments in the past year, the first loss retention layer on our credit risk transfer transactions has increased as a percentage of the outstanding reference pool. As a result, losses on the remaining covered reference pools must generally reach a higher percentage of the remaining outstanding balance before those credit risk transfer transactions will pay any benefits. In addition, home price appreciation since we entered into the transactions has reduced the likelihood that we will incur losses on the covered loans large enough to receive a benefit from these transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2021
|
|
(Dollars in billions)
|
|
|
Senior
|
|
Fannie Mae(1)
$692
|
|
Outstanding Reference Pool(4)(6)
$737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine
|
|
Fannie Mae(1)
$1
|
|
CIRT(2)(3)
$9
|
|
CAS(2)
$14
|
|
Lender Risk-Sharing(2)
$4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Loss
|
|
Fannie Mae(1)
$8
|
|
CAS(2)(5)
$6
|
|
Lender Risk-Sharing(2)
$3
|
|
|
|
|
|
(1)Credit risk retained by Fannie Mae in CAS, CIRT and lender risk-sharing transactions. Tranche sizes vary across programs.
(2)Credit risk transferred to third parties. Tranche sizes vary across programs.
(3)Includes mortgage pool insurance transactions covering loans with an unpaid principal balance of approximately $1.8 billion outstanding as of June 30, 2021.
(4)For CIRT and some lender risk-sharing transactions, “Reference Pool” reflects a pool of covered loans.
(5)For CAS transactions, “First Loss” represents all B tranche balances.
(6)For CAS and some lender risk-sharing transactions, represents outstanding reference pools, not the outstanding unpaid principal balance of the underlying loans. The outstanding unpaid principal balance for all loans covered by credit risk transfer programs, including all loans on which risk has been transferred in lender risk-sharing transactions, was approximately $698 billion as of June 30, 2021.
The following table displays the approximate cash paid or transferred to investors for credit risk transfer transactions outstanding. The cash represents the portion of the guaranty fee paid to investors as compensation for taking on a share of the credit risk.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Transfer Transactions
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
Cash paid or transferred for:
|
|
(Dollars in millions)
|
|
CAS transactions(1)
|
|
$
|
415
|
|
|
$
|
528
|
|
|
CIRT transactions
|
|
158
|
|
|
207
|
|
|
Lender risk-sharing transactions
|
|
140
|
|
|
160
|
|
(1)Consists of cash paid for interest expense net of LIBOR on outstanding CAS debt and amounts paid for both CAS REMIC® and CAS Credit-linked notes (“CLN”) transactions.
Cash paid or transferred to investors for CIRT transactions in the first half of 2021 includes cancellation fees paid on certain CIRT transactions where we determined that the cost of these deals exceeded the expected remaining benefit.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
Single-Family Problem Loan Management
Our problem loan management strategies focus primarily on reducing defaults to avoid losses that would otherwise occur and pursuing foreclosure alternatives to mitigate the severity of the losses we incur. See “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” in our 2020 Form 10-K for a discussion of delinquency statistics on our problem loans, efforts undertaken to manage our problem loans, metrics regarding our loan workout activities, real estate owned (“REO”) management and other single-family credit-related information. The discussion below updates some of that information. We also provide ongoing credit performance information on loans underlying single-family Fannie Mae MBS and loans covered by single-family credit risk transfer transactions. For loans backing Fannie Mae MBS, see the “Forbearance and Delinquency Dashboard” available in the MBS section of our Data Dynamics® tool, which is available at www.fanniemae.com/datadynamics. For loans covered by credit risk transfer transactions, see the “Deal Performance Data” report available in the CAS and CIRT sections of the tool. Information on our website is not incorporated into this report. Information in Data Dynamics may differ from similar measures presented in our financial statements and other public disclosures for a variety of reasons, including as a result of variations in the loan population covered, timing differences in reporting and other factors.
Delinquency
The tables below display the delinquency status of loans and changes in the volume of seriously delinquent loans in our single-family conventional guaranty book of business based on the number of loans. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process, expressed as a percentage of our single-family conventional guaranty book of business based on loan count. Management monitors the single-family serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious delinquency rates are reflective of our performance in assessing and managing credit risk associated with single-family loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan losses.
For purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan. Pursuant to the CARES Act, for purposes of reporting to the credit bureaus, servicers must report a borrower receiving a COVID-19-related payment accommodation during the covered period, such as a forbearance plan or loan modification, as current if the borrower was current prior to receiving the accommodation and the borrower makes all required payments in accordance with the accommodation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquency Status and Activity of Single-Family Conventional Loans
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
June 30, 2020
|
|
Delinquency status:
|
|
|
|
|
|
|
|
30 to 59 days delinquent
|
|
0.74
|
%
|
|
1.02
|
%
|
|
1.47
|
%
|
|
60 to 89 days delinquent
|
|
0.20
|
|
|
0.36
|
|
|
1.60
|
|
|
Seriously delinquent (“SDQ”)
|
|
2.08
|
|
|
2.87
|
|
|
2.65
|
|
|
Percentage of SDQ loans that have been delinquent for more than 180 days
|
|
79
|
|
|
67
|
|
|
14
|
|
|
Percentage of SDQ loans that have been delinquent for more than two years
|
|
6
|
|
|
3
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
Single-family SDQ loans (number of loans):
|
|
|
|
|
|
Beginning balance
|
|
495,806
|
|
|
112,434
|
|
|
Additions
|
|
139,375
|
|
|
427,657
|
|
|
Removals:
|
|
|
|
|
|
Modifications and other loan workouts
|
|
(174,618)
|
|
|
(18,680)
|
|
|
Liquidations and sales
|
|
(37,811)
|
|
|
(15,449)
|
|
|
Cured or less than 90 days delinquent
|
|
(58,812)
|
|
|
(52,172)
|
|
|
Total removals
|
|
(271,241)
|
|
|
(86,301)
|
|
|
Ending balance
|
|
363,940
|
|
|
453,790
|
|
Our single-family serious delinquency rate decreased as of June 30, 2021 compared with December 31, 2020 and June 30, 2020 due to the ongoing economic recovery and the decline in the number of our single-family loans in a COVID-19 forbearance plan. As of June 30, 2021, single-family loans in forbearance comprised 70% of our single-family seriously delinquent loans. The percentage of seriously delinquent loans that have been delinquent for more than 180 days increased as of June 30, 2021 compared with June 30, 2020 primarily due to loans that continue to remain in a COVID-19-related forbearance and have become more delinquent.
Our single-family serious delinquency rate excluding loans in forbearance was 0.64% as of June 30, 2021 and 0.66% as of December 31, 2020. We monitor the single-family serious delinquency rate excluding loans that received a forbearance to better understand the impact that forbearance activity has had on the overall rate and to monitor loans that are seriously delinquent not as a result of COVID-19. We expect the COVID-19 pandemic to result in a continued higher single-family serious delinquency rate over the next several quarters compared with pre-pandemic levels.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
The table below displays the serious delinquency rates for, and the percentage of our seriously delinquent single-family conventional loans represented by, the specified loan categories. Percentage of book amounts present the unpaid principal balance of loans for each category divided by the unpaid principal balance of our total single-family conventional guaranty book of business. The reported categories are not mutually exclusive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-Family Conventional Seriously Delinquent Loan Concentration Analysis
|
|
|
As of
|
|
|
June 30, 2021
|
December 31, 2020
|
June 30, 2020
|
|
|
|
Percentage of Book Outstanding
|
|
Percentage of Seriously Delinquent Loans(1)
|
|
Serious Delinquency Rate
|
|
Percentage of Book Outstanding
|
|
Percentage of Seriously Delinquent Loans(1)
|
|
Serious Delinquency Rate
|
|
Percentage of Book Outstanding
|
|
Percentage of Seriously Delinquent Loans(1)
|
|
Serious Delinquency Rate
|
|
States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California
|
|
20
|
%
|
|
12
|
%
|
|
1.84
|
%
|
|
19
|
%
|
|
12
|
%
|
|
2.62
|
%
|
|
19
|
%
|
|
13
|
%
|
|
2.54
|
%
|
|
Florida
|
|
6
|
|
|
9
|
|
|
2.81
|
|
|
6
|
|
|
9
|
|
|
4.17
|
|
|
6
|
|
|
10
|
|
|
3.98
|
|
|
Illinois
|
|
3
|
|
|
5
|
|
|
2.51
|
|
|
3
|
|
|
5
|
|
|
3.10
|
|
|
4
|
|
|
4
|
|
|
2.71
|
|
|
New Jersey
|
|
3
|
|
|
5
|
|
|
3.33
|
|
|
3
|
|
|
5
|
|
|
4.57
|
|
|
3
|
|
|
5
|
|
|
4.81
|
|
|
New York
|
|
5
|
|
|
7
|
|
|
3.71
|
|
|
5
|
|
|
7
|
|
|
4.79
|
|
|
5
|
|
|
8
|
|
|
4.96
|
|
|
All other states
|
|
63
|
|
|
62
|
|
|
1.88
|
|
|
64
|
|
|
62
|
|
|
2.59
|
|
|
63
|
|
|
60
|
|
|
2.30
|
|
|
Product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A(2)
|
|
1
|
|
|
5
|
|
|
7.88
|
|
|
1
|
|
|
5
|
|
|
9.32
|
|
|
1
|
|
|
6
|
|
|
8.07
|
|
|
Vintages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and prior
|
|
1
|
|
|
10
|
|
|
5.04
|
|
|
2
|
|
|
9
|
|
|
5.88
|
|
|
2
|
|
|
10
|
|
|
5.00
|
|
|
2005-2008
|
|
2
|
|
|
15
|
|
|
8.75
|
|
|
2
|
|
|
15
|
|
|
9.98
|
|
|
3
|
|
|
15
|
|
|
8.37
|
|
|
2009-2021
|
|
97
|
|
|
75
|
|
|
1.69
|
|
|
96
|
|
|
76
|
|
|
2.39
|
|
|
95
|
|
|
75
|
|
|
2.21
|
|
|
Estimated mark-to-market LTV ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<= 60%
|
|
57
|
|
|
66
|
|
|
2.02
|
|
|
52
|
|
|
56
|
|
|
2.52
|
|
|
53
|
|
|
52
|
|
|
2.16
|
|
|
60.01% to 70%
|
|
19
|
|
|
17
|
|
|
2.41
|
|
|
17
|
|
|
18
|
|
|
3.73
|
|
|
17
|
|
|
18
|
|
|
3.36
|
|
|
70.01% to 80%
|
|
15
|
|
|
11
|
|
|
2.16
|
|
|
18
|
|
|
14
|
|
|
3.05
|
|
|
17
|
|
|
15
|
|
|
3.18
|
|
|
80.01% to 90%
|
|
7
|
|
|
4
|
|
|
1.70
|
|
|
9
|
|
|
9
|
|
|
4.17
|
|
|
9
|
|
|
10
|
|
|
4.21
|
|
|
90.01% to 100%
|
|
2
|
|
|
1
|
|
|
1.21
|
|
|
4
|
|
|
2
|
|
|
1.85
|
|
|
4
|
|
|
4
|
|
|
3.43
|
|
|
Greater than 100%
|
|
*
|
|
1
|
|
|
20.48
|
|
|
*
|
|
1
|
|
|
22.43
|
|
|
*
|
|
1
|
|
|
18.12
|
|
|
Credit enhanced:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary MI & other(4)
|
|
20
|
|
|
27
|
|
|
3.31
|
|
|
21
|
|
|
27
|
|
|
4.36
|
|
|
22
|
|
|
26
|
|
|
3.85
|
|
|
Credit risk transfer(5)
|
|
21
|
|
|
34
|
|
|
3.21
|
|
|
30
|
|
|
37
|
|
|
3.69
|
|
|
40
|
|
|
37
|
|
|
2.78
|
|
|
Non-credit enhanced
|
|
65
|
|
|
52
|
|
|
1.63
|
|
|
58
|
|
|
51
|
|
|
2.36
|
|
|
51
|
|
|
51
|
|
|
2.37
|
|
*Represents less than 0.5% of single-family conventional guaranty book of business.
(1)Calculated based on the number of single-family loans that were seriously delinquent for each category divided by the total number of single-family conventional loans that were seriously delinquent.
(2)For a description of our Alt-A loan classification criteria, see “MD&A—Glossary of Terms Used in This Report” in our 2020 Form 10-K.
(3)The credit-enhanced categories are not mutually exclusive. A loan with primary mortgage insurance that is also covered by a credit risk transfer transaction will be included in both the “Primary MI & other” category and the “Credit risk transfer” category. As a result, the “Credit enhanced” and “Non-credit enhanced” categories do not sum to 100%. The total percentage of our single-family conventional guaranty book of business with some form of credit enhancement as of June 30, 2021 was 35%.
(4)Refers to loans included in an agreement used to reduce credit risk by requiring primary mortgage insurance, collateral, letters of credit, corporate guarantees, or other agreements to provide an entity with some assurance that it will be compensated to some degree in the event of a financial loss. Excludes loans covered by credit risk transfer transactions unless such loans are also covered by primary mortgage insurance.
(5)Refers to loans included in reference pools for credit risk transfer transactions, including loans in these transactions that are also covered by primary mortgage insurance. For CAS and some lender risk-sharing transactions, this represents outstanding unpaid principal balance of the underlying loans on the single-family mortgage credit book, not the outstanding reference pool, as of the specified date. Loans included in our credit risk transfer transactions have all been acquired since 2009.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
Single-Family Loans in Forbearance
As a part of our relief programs, we have authorized our servicers to permit payment forbearance to borrowers experiencing a COVID-19-related financial hardship for up to 12 months without regard to the delinquency status of the loan, and for borrowers already in forbearance as of February 28, 2021, for a total of up to 18 months, provided that the forbearance does not result in the loan becoming greater than 18 months delinquent. We estimate that, through June 30, 2021, approximately 8% of the single-family loans, based on loan count, of our conventional guaranty book of business as of March 31, 2020, have been in a COVID-19-related forbearance at some point between then and June 30, 2021 (referred to as our “single-family cumulative forbearance take-up rate”). Based on our expectations regarding the economic recovery, which we discuss in “Key Market Economic Indicators,” we believe that the substantial majority of borrowers who will ultimately request COVID-19-related relief have already done so.
As shown in the tables below, many of the loans that entered forbearance have since exited; therefore, the percentage of loans in our single-family conventional guaranty book of business in forbearance as of June 30, 2021 has declined to 1.8%. Some borrowers whose loans are in forbearance continue to make payments according to the original contractual terms of the loan notwithstanding the forbearance arrangement; we expect some of these borrowers will continue to do so and therefore remain current. The table below provides information on the delinquency and accrual status of our single-family loans in forbearance. We expect many of the loans in forbearance will resolve their delinquency through a payment deferral or other form of loan workout. As discussed below, servicers are required to contact borrowers prior to the end of forbearance to evaluate them for loan workout options that can support their successful transition out of forbearance.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
We continue to accrue interest income on a majority of our single-family loans in forbearance because we have determined that collection of principal and interest on these loans is reasonably assured. For information on our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, see “Note 3, Mortgage Loans.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquency and Accrual Status of Single-Family Loans in Forbearance
|
|
|
|
|
|
June 30, 2021
|
|
|
|
|
|
Number of Loans
|
|
Unpaid Principal Balance(1)
|
|
|
|
Percentage of Loans in Forbearance(2)
|
|
Percentage of Loans on Accrual Status(2)
|
|
|
|
|
|
(Dollars in millions)
|
|
|
Delinquency status:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
26,963
|
|
|
$
|
4,920
|
|
|
|
|
9
|
%
|
|
100
|
%
|
|
|
|
30 to 59 days delinquent
|
|
17,267
|
|
|
3,350
|
|
|
|
|
5
|
|
|
95
|
|
|
|
|
60 to 89 days delinquent
|
|
15,979
|
|
|
3,186
|
|
|
|
|
5
|
|
|
84
|
|
|
|
|
Seriously delinquent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 to 180 days delinquent
|
|
53,138
|
|
|
10,759
|
|
|
|
|
17
|
|
|
84
|
|
|
|
|
180+ days delinquent
|
|
200,332
|
|
|
42,809
|
|
|
|
|
64
|
|
|
75
|
|
|
|
|
Total seriously delinquent
|
|
253,470
|
|
|
53,568
|
|
|
|
|
81
|
|
|
77
|
|
|
|
|
Total loans in forbearance(3)
|
|
313,679
|
|
|
$
|
65,024
|
|
|
|
|
100
|
%
|
|
80
|
|
|
|
|
Percentage of single-family conventional guaranty book of business
|
|
1.8
|
%
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
Number of Loans
|
|
Unpaid
Principal Balance(1)
|
|
|
|
Percentage of Loans in Forbearance(2)
|
|
Percentage of Loans on Accrual Status(2)
|
|
|
|
Delinquency status:
|
|
(Dollars in millions)
|
|
|
|
Current
|
|
64,159
|
|
|
$
|
12,110
|
|
|
|
|
12
|
%
|
|
100
|
%
|
|
|
|
30 to 59 days delinquent
|
|
40,653
|
|
|
7,672
|
|
|
|
|
8
|
|
|
97
|
|
|
|
|
60 to 89 days delinquent
|
|
35,107
|
|
|
6,658
|
|
|
|
|
7
|
|
|
85
|
|
|
|
|
Seriously delinquent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 to 180 days delinquent
|
|
126,611
|
|
|
24,961
|
|
|
|
|
24
|
|
|
85
|
|
|
|
|
180+ days delinquent
|
|
258,025
|
|
|
56,379
|
|
|
|
|
49
|
|
|
82
|
|
|
|
|
Total seriously delinquent
|
|
384,636
|
|
|
81,340
|
|
|
|
|
73
|
|
|
83
|
|
|
|
|
Total loans in forbearance(3)
|
|
524,555
|
|
|
$
|
107,780
|
|
|
|
|
100
|
%
|
|
86
|
|
|
|
|
Percentage of single-family conventional guaranty book of business
|
|
3.0
|
%
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Does not reflect a valuation allowance recorded on the unpaid principal balance of loans in forbearance of $816 million and $1.8 billion as of June 30, 2021 and December 31, 2020, respectively.
(2)Based on loan count.
(3)Amortized cost of these loans was $67.1 billion and $110.4 billion as of June 30, 2021 and December 31, 2020, respectively.
As of June 30, 2021, the vast majority of our single-family conventional loans in forbearance were due to borrowers experiencing a COVID-19-related financial hardship. We expect the number of single-family loans in forbearance to remain elevated through 2021 compared with pre-pandemic levels.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
The table below provides information on the credit profile of our single-family loans in forbearance with select higher-risk characteristics. While the credit profile of our single-family loans in forbearance is weaker than the overall credit profile of our single-family conventional guaranty book of business, only 1% of our single-family loans in forbearance with a mark-to-market LTV ratio over 80% are not covered by mortgage insurance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Select Higher-Risk Characteristics of Single-Family Loans in Forbearance
|
|
|
|
|
As of June 30, 2021
|
|
As of December 31, 2020
|
|
|
|
|
Number of Loans
|
|
Percentage of Unpaid Principal Balance in Forbearance
|
|
Number of Loans
|
|
Percentage of Unpaid Principal Balance in Forbearance
|
|
|
|
|
|
|
|
Loans in forbearance with certain higher-risk characteristics:(1)
|
|
|
|
|
|
|
|
|
|
|
Estimated mark-to-market LTV ratio > 80%
|
|
16,866
|
|
|
7
|
%
|
|
62,144
|
|
15
|
%
|
|
|
Estimated mark-to-market LTV ratio > 80% without mortgage insurance
|
|
2,416
|
|
|
1
|
|
|
6,811
|
|
2
|
|
|
|
DTI ratio > 43%
|
|
121,409
|
|
|
41
|
|
|
201,354
|
|
41
|
|
|
|
FICO credit score at origination < 680
|
|
97,983
|
|
|
27
|
|
|
159,017
|
|
26
|
|
|
(1)The higher-risk categories are not mutually exclusive.
As a part of our loss mitigation efforts, servicers must attempt to contact the borrower no later than 30 days before the end of the forbearance period to evaluate them for a workout option after the forbearance period. Those options include:
•a reinstatement (where the borrower repays all of the missed payments at one time);
•a repayment plan (where the borrower repays the missed payments over time);
•a payment deferral (where the borrower defers the missed payments to the end of the loan term, or to when the loan is refinanced, the property is sold or the loan is otherwise paid off before the end of the loan term); or
•a modification of the loan terms so that the borrower may be brought current, which typically results in the borrower making reduced monthly contractual payments over a longer period of time.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
The table below displays the status as of the current period-end of the single-family loans in our guaranty book of business that received a forbearance in 2020 or 2021. The vast majority of these forbearance arrangements were offered to borrowers who experienced a COVID-19-related financial hardship. Many of these borrowers have successfully resolved their forbearance arrangement, primarily through payment deferral or reinstatement. However, we expect the percentage of loans that receive a modification after resolving their forbearance will increase throughout 2021.
As of June 30, 2021, 96% of loans that received a forbearance and subsequently received a payment deferral were current, and 89% of loans that received a forbearance and subsequently received a completed modification were current. See “Loan Workout Metrics” for additional information about actions we have taken to help reinstate loans to current status.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Status of Single-Family Forbearance Loans
|
|
|
|
As of June 30, 2021
|
|
|
|
|
|
Number of Loans
|
|
Percentage of Loans with Forbearance by Category
|
|
|
|
|
|
|
|
|
|
|
|
Loans that received a forbearance, by status:(1)
|
|
|
|
|
|
|
|
|
|
Active forbearance
|
|
313,679
|
|
|
23
|
%
|
|
|
|
|
|
Payment deferral
|
|
323,037
|
|
|
24
|
|
|
|
|
|
|
Modification(2)
|
|
31,511
|
|
|
2
|
|
|
|
|
|
|
Reinstated(3)
|
|
326,497
|
|
|
24
|
|
|
|
|
|
|
Delinquent at time of exit or repayment plan(4)
|
|
44,906
|
|
|
3
|
|
|
|
|
|
|
Total loans that received a forbearance in our single-family guaranty book of business
|
|
1,039,630
|
|
|
76
|
|
|
|
|
|
|
Loans that have received a forbearance, but paid off
|
|
332,829
|
|
|
24
|
|
|
|
|
|
|
Total loans that have received a forbearance(5)
|
|
1,372,459
|
|
|
100
|
%
|
|
|
|
|
(1)Loans are classified based on their status as of period end; therefore, loans may move from one category to another.
(2)Includes loans that are in trial modifications.
(3)Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that remained current throughout the forbearance arrangement and continue to perform.
(4)Consists of 42,948 loans that were delinquent upon the expiration of the forbearance arrangement and 1,958 delinquent loans that exited forbearance through a repayment plan.
(5)Includes 5,415 loans that were in forbearance as of January 1, 2020.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
The table below displays the status as of December 31, 2020 for single-family loans in our guaranty book of business that received a forbearance in 2020. As of December 31, 2020, 96% of loans that received a forbearance and subsequently received a payment deferral were current and 83% of loans that received a forbearance and subsequently received a completed modification were current.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Status of Single-Family Forbearance Loans
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
Number of Loans
|
|
Percentage of Loans with Forbearance by Category
|
|
|
|
|
|
|
|
Loans that received a forbearance, by status:(1)
|
|
|
|
|
|
|
|
|
|
Active forbearance
|
|
|
|
|
|
524,555
|
|
|
40
|
%
|
|
Payment deferral
|
|
|
|
|
|
220,414
|
|
|
17
|
|
|
Modification(2)
|
|
|
|
|
|
13,277
|
|
|
1
|
|
|
Reinstated(3)
|
|
|
|
|
|
337,086
|
|
|
26
|
|
|
Delinquent at time of exit or repayment plan(4)
|
|
|
|
|
|
45,655
|
|
|
3
|
|
|
Total loans that received a forbearance in our single-family guaranty book of business
|
|
|
|
|
|
1,140,987
|
|
|
87
|
|
|
Loans that have received a forbearance, but paid off
|
|
|
|
|
|
167,388
|
|
|
13
|
|
|
Total loans that have received a forbearance(5)
|
|
|
|
|
|
1,308,375
|
|
|
100
|
%
|
(1)Loans are classified based on their status as of period end; therefore, loans may move from one category to another.
(2)Includes loans that are in trial modifications.
(3)Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that remained current throughout the forbearance arrangement and continue to perform.
(4)Consists of 40,401 loans that were delinquent upon the expiration of the forbearance arrangement and 5,254 delinquent loans that exited forbearance through a repayment plan.
(5)Includes 5,415 loans that were in forbearance as of January 1, 2020.
Accrued Interest Receivable, Net on Single-Family Loans in Forbearance
For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income at the current contractual yield for up to six months of delinquency provided that the loans were either current at March 1, 2020 or originated after March 1, 2020. We continue to accrue interest income beyond six months of delinquency provided that the collection of principal and interest continues to be reasonably assured. Our evaluation of whether the collection of principal and interest is reasonably assured considers the probability of default and the current value of the collateral. Once the forbearance period has ended, we will also consider the extent to which the borrower and the servicer have agreed to any of the loss mitigation options that are available. We then measure an allowance for expected credit losses on the unpaid accrued interest receivable balances such that the balance sheet reflects the net amount of interest we expect to collect. Accordingly, the application of our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic has resulted in a large portion of delinquent loans, including those in forbearance, remaining on accrual status. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K and “Note 3, Mortgage Loans” in this report for additional information about our nonaccrual accounting policy. See also “Risk Factors—COVID-19 Pandemic Risk” in this report for a discussion of credit risk and the COVID-19 pandemic.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
Under our nonaccrual accounting policy for loans negatively impacted by the COVID-19 pandemic, our allowance for accrued interest receivable considers both the loan’s principal and accrued interest receivable balances as well as any proceeds that are expected from contractually attached mortgage insurance when assessing collectability. Our assessment of collectability requires significant management judgment; as a result, our allowance for accrued interest receivable is subject to the same review processes, as well as other established governance and controls, used for our allowance for loan losses. Our allowance for accrued interest receivable on single-family loans in forbearance decreased as of June 30, 2021 compared to the end of 2020, primarily as a result of loans exiting forbearance as well as the record home price appreciation in the first half of 2021. The table below displays an aging analysis of our accrued interest receivable, net of allowance on single-family loans that are in a forbearance plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aging of Accrued Interest Receivable, Net of Allowance on Single-Family Loans in Forbearance
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
Aging analysis of accrued interest receivable:
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
13
|
|
|
$
|
32
|
|
|
|
|
|
|
30 to 59 days delinquent
|
|
19
|
|
|
46
|
|
|
|
|
|
|
60 to 89 days delinquent
|
|
25
|
|
|
55
|
|
|
|
|
|
|
Seriously delinquent:
|
|
|
|
|
|
|
|
|
|
90 to 180 days delinquent
|
|
153
|
|
|
377
|
|
|
|
|
|
|
180+ days delinquent
|
|
1,505
|
|
|
1,427
|
|
|
|
|
|
|
Total accrued interest receivable
|
|
1,715
|
|
|
1,937
|
|
|
|
|
|
|
Allowance for accrued interest receivable
|
|
(120)
|
|
|
(173)
|
|
|
|
|
|
|
Total accrued interest receivable, net
|
|
$
|
1,595
|
|
|
$
|
1,764
|
|
|
|
|
|
Principal and Interest Payments while Loans are in Forbearance
While a loan is in forbearance and remains in an MBS trust, investors in the MBS are entitled to continue to receive principal and interest payments on the MBS even though the borrower is not required to make principal and interest payments. For the majority of loans in our single-family guaranty book of business, our Single-Family Servicing Guide has, until recently, required servicers to advance missed scheduled principal and interest payments to the MBS trusts until the loans were purchased from the MBS trusts, including the portion of interest that represents guaranty fees owed to us. Because we typically do not purchase loans from MBS trusts while they are in forbearance, this servicer payment obligation could have continued for the entirety of the forbearance plan. Beginning in August 2020, at FHFA’s instruction, we reduced our single-family servicers’ obligations to advance these missed borrower payments and only require servicers to advance missed scheduled principal and interest payments on a loan for the first four months of missed borrower payments. After four months, we make the missed scheduled principal and interest payments to the MBS trust for payment to MBS holders so long as the loan remains in the MBS trust. For the second quarter and first half of 2021, we advanced $500 million and $1.1 billion, respectively, in missed borrower principal and interest payments to MBS trusts for payment to MBS holders. Since FHFA’s instruction in August of 2020 through June 30, 2021, we have advanced $2.3 billion in missed borrower principal and interest payments. See “Retained Mortgage Portfolio” for a description of when we purchase loans from single-family MBS trusts.
Loan Workout Metrics
As a part of our credit risk management efforts, loan workouts represent actions we take to help reinstate loans to current status and help homeowners stay in their home or to otherwise avoid foreclosure. Our loan workouts reflect various types of home retention solutions, including repayment plans, payment deferrals, and loan modifications. Our loan workouts also include foreclosure alternatives, such as short sales and deeds-in-lieu of foreclosure.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
The chart below displays the unpaid principal balance of our completed single-family loan workouts by type, as well as the number of loan workouts, for the first half of 2020 compared with the first half of 2021. This table does not include loans in an active forbearance arrangement, trial modifications, loans to certain borrowers who have received bankruptcy relief that are classified as troubled debt restructurings, and repayment plans that have been initiated but not completed.
(1)There were approximately 17,300 loans and 14,800 loans in a trial modification period that was not complete as of June 30, 2021 and 2020, respectively.
(2)Includes repayment plans and foreclosure alternatives. Repayment plans reflect only those plans associated with loans that were 60 days or more delinquent. For the first half of 2021, the table excludes completed forbearance arrangements. For the first half of 2020, the table includes $64 million of completed forbearance arrangements that involve loans that were 90 days or more delinquent.
The increase in home retention solutions in the first half of 2021 compared with the first half of 2020 was driven by completed COVID-19-related payment deferrals, which have been the primary loan workout solution for borrowers exiting COVID-19-related forbearance. The total amount of principal and interest deferred to the end of the loan term for single-family loans that received a payment deferral was $1.8 billion for the first half of 2021.
Given the broad impact of the pandemic and the number of loans in forbearance, we expect higher loan workout activity to continue in the second half of 2021.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
REO Management
If a loan defaults, we may acquire the property through foreclosure or a deed-in-lieu of foreclosure. The table below displays our REO activity by region. Regional REO acquisition trends generally follow a pattern that is similar to, but lags, that of regional delinquency trends.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-Family REO Properties
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
Single-family REO properties (number of properties):
|
|
|
|
|
|
|
|
Beginning of period inventory of single-family REO properties(1)
|
|
7,973
|
|
|
|
17,501
|
|
|
|
Acquisitions by geographic area:(2)
|
|
|
|
|
|
|
|
Midwest
|
|
481
|
|
|
|
1,066
|
|
|
|
Northeast
|
|
509
|
|
|
|
980
|
|
|
|
Southeast
|
|
514
|
|
|
|
1,272
|
|
|
|
Southwest
|
|
229
|
|
|
|
661
|
|
|
|
West
|
|
94
|
|
|
|
300
|
|
|
|
Total REO acquisitions(1)
|
|
1,827
|
|
|
|
4,279
|
|
|
|
Dispositions of REO
|
|
(3,437)
|
|
|
|
(9,105)
|
|
|
|
End of period inventory of single-family REO properties(1)
|
|
6,363
|
|
|
|
12,675
|
|
|
|
Carrying value of single-family REO properties (dollars in millions)
|
|
$
|
916
|
|
|
|
$
|
1,747
|
|
|
|
Single-family foreclosure rate(3)
|
|
0.02
|
|
%
|
|
0.05
|
|
%
|
|
REO net sales price to unpaid principal balance(4)
|
|
109
|
|
%
|
|
83
|
|
%
|
|
Short sales net sales price to unpaid principal balance(5)
|
|
83
|
|
%
|
|
80
|
|
%
|
(1)Includes held-for-use properties, which are reported in our condensed consolidated balance sheets as a component of “Other assets.”
(2)See footnote 8 to the “Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” table for states included in each geographic region.
(3)Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage of the total number of loans in our single-family conventional guaranty book of business as of the end of each period.
(4)Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, excluding those subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at the time of foreclosure. Net sales price represents the contract sales price less selling costs for the property and other charges paid by the seller at closing.
(5)Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective periods divided by the aggregate unpaid principal balance of the related loans. Net sales price includes borrower relocation incentive payments and subordinate lien(s) negotiated payoffs.
The decline in single-family REO properties in the first half of 2021 compared with the first half of 2020 was due to the suspension of foreclosures that began in March 2020 as a result of the COVID-19 pandemic. In response to the pandemic and with instruction from FHFA, we have prohibited our servicers from completing foreclosures on our single-family loans through July 31, 2021, except in the case of vacant or abandoned properties. In addition, as described in “Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards—COVID-19 Servicing Policies,” our servicers are required to comply with a CFPB rule that prohibits certain new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until after December 31, 2021. On July 30, 2021, FHFA announced an extension of our moratorium on single-family REO evictions until September 30, 2021.
Other Single-Family Credit Information
Single-Family Credit Loss Metrics and Loan Sale Performance
The single-family credit loss metrics and loan sale performance measures below present information about losses or gains we realized on our single-family loans during the periods presented. The amount of these losses or gains in a given period is driven by foreclosures, pre-foreclosure sales, REO activity, mortgage loan redesignations, and other events that trigger write-offs and recoveries. The single-family credit loss metrics we present are not defined terms and may not be calculated in the same manner as similarly titled measures reported by other companies. Management uses these measures to evaluate the effectiveness of our single-family credit risk management strategies in conjunction with leading indicators such as serious delinquency and forbearance rates, which are potential indicators of future realized single-family credit losses. We believe these measures provide useful information about our single-family credit
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
performance and the factors that impact it.
The table below displays the components of our single-family credit loss metrics and loan sale performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-Family Credit Loss Metrics and Loan Sale Performance
|
|
|
|
For the Three Months Ended June 30,
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
Amount
|
|
Ratio(1)
|
|
Amount
|
|
Ratio(1)
|
|
Amount
|
|
Ratio(1)
|
|
Amount
|
|
Ratio(1)
|
|
|
|
(Dollars in millions)
|
|
Write-offs
|
|
$
|
(4)
|
|
|
|
|
|
$
|
(50)
|
|
|
|
|
|
|
$
|
(23)
|
|
|
|
|
|
$
|
(115)
|
|
|
|
|
|
|
Recoveries
|
|
79
|
|
|
|
|
|
5
|
|
|
|
|
|
|
84
|
|
|
|
|
|
19
|
|
|
|
|
|
|
Foreclosed property expense
|
|
(28)
|
|
|
|
|
|
(3)
|
|
|
|
|
|
|
(11)
|
|
|
|
|
|
(81)
|
|
|
|
|
|
|
Credit gains (losses) and related ratios
|
|
47
|
|
|
(0.6)
|
|
bps
|
|
(48)
|
|
|
|
0.6
|
bps
|
|
50
|
|
|
(0.3)
|
|
bps
|
|
(177)
|
|
|
|
1.2
|
bps
|
|
Write-offs on the redesignation of mortgage loans from HFI to HFS(2)
|
|
(146)
|
|
|
|
|
|
—
|
|
|
|
|
|
|
(200)
|
|
|
|
|
|
(9)
|
|
|
|
|
|
|
Gains (losses) on sales and other valuation adjustments(3)
|
|
604
|
|
|
|
|
|
88
|
|
|
|
|
|
|
635
|
|
|
|
|
|
(79)
|
|
|
|
|
|
|
Net credit gains (losses), write-offs on redesignations, and gains (losses) on sales and other valuation adjustments, and related ratios
|
|
$
|
505
|
|
|
(6.1)
|
|
bps
|
|
$
|
40
|
|
|
|
(0.5)
|
|
bps
|
|
$
|
485
|
|
|
(3.0)
|
|
bps
|
|
$
|
(265)
|
|
|
|
1.8
|
bps
|
(1)Basis points are calculated based on the amount of each line item annualized divided by the average single-family conventional guaranty book of business during the period.
(2)Consists of the lower of cost or fair value adjustment at time of redesignation.
(3)Consists of gains or losses realized on the sales of nonperforming and reperforming mortgage loans during the period and temporary lower-of-cost-or-market adjustments on HFS loans, which are recognized in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
Our single-family credit loss metrics and loan sale performance have been significantly impacted by the COVID-19 pandemic. As described above in “REO Management,” certain foreclosures have been suspended since March 2020. We also suspended new sales of reperforming and nonperforming loans in the second quarter of 2020, as investor interest in purchasing these loans was severely impacted by the COVID-19 pandemic and its effects. As a result, we had a low volume of loan sales and redesignations in the second quarter and first half of 2020. We subsequently resumed loan sales in the third quarter of 2020 after market conditions improved, contributing to higher levels of loan sales and redesignations in the second quarter and first half of 2021 than in the second quarter and first half of 2020. This resulted in increased single-family credit gains, increased write-offs on the redesignation of mortgage loans from HFI to HFS, as well as increased single-family gains on sales and other valuation adjustments in the second quarter and first half of 2021 compared with the second quarter and first half of 2020.
We do not expect a substantial increase in our realized single-family credit losses in the near term as a result of COVID-19, as we are currently offering up to 18 months of forbearance to eligible single-family borrowers suffering financial hardship relating to the pandemic and because we expect limited foreclosure activity during the remainder of 2021 due in part to the CFPB rule which prohibits certain new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until after December 31, 2021. Over the longer term, we expect the COVID-19 pandemic will result in higher realized single-family credit losses as loans default. See “Risk Factors” in this report for additional information on the potential credit risk impact of the COVID-19 pandemic.
For information on our credit-related income or expense, which includes changes in our allowance, see “Consolidated Results of Operations—Credit-Related Income (Expense)” and “Single-Family Business Financial Results.”
Single-Family Loss Reserves
Our single-family loss reserves, which include our allowance for loan losses and the related accrued interest receivable, and our reserve for guaranty losses, provide for an estimate of credit losses in our single-family guaranty book of business.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
The table below summarizes the changes in our single-family loss reserves, excluding credit losses on our AFS securities. For a discussion of changes in our single-family benefit or provision for credit losses see “Consolidated Results of Operations—Credit-Related Income (Expense).”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-Family Loss Reserves
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
(Dollars in millions)
|
|
|
Changes in loss reserves:
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(8,786)
|
|
|
$
|
(12,092)
|
|
|
$
|
(9,573)
|
|
|
$
|
(8,779)
|
|
|
|
Transition impact of the adoption of the CECL standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,231)
|
|
|
|
Benefit (provision) for credit losses
|
|
2,553
|
|
|
219
|
|
|
3,215
|
|
|
(1,951)
|
|
|
|
Write-offs
|
|
150
|
|
|
50
|
|
|
223
|
|
|
124
|
|
|
|
Recoveries
|
|
(79)
|
|
|
(5)
|
|
|
(84)
|
|
|
(19)
|
|
|
|
Other
|
|
(82)
|
|
|
40
|
|
|
(25)
|
|
|
68
|
|
|
|
Ending balance
|
|
$
|
(6,244)
|
|
|
$
|
(11,788)
|
|
|
$
|
(6,244)
|
|
|
$
|
(11,788)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-offs, net of recoveries annualized, as a percentage of the average single-family conventional guaranty book of business (in bps)
|
|
0.9
|
|
|
0.6
|
|
0.8
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Loss reserves as a percentage of single-family:
|
|
|
|
|
|
|
|
|
|
|
Conventional guaranty book of business
|
|
|
|
|
|
0.18
|
%
|
|
0.30
|
%
|
|
|
Nonaccrual loans at amortized cost
|
|
|
|
|
|
21.33
|
|
|
34.63
|
|
|
Our loss reserves and loss reserves as a percentage of our single-family conventional guaranty book of business decreased in the first half of 2021 primarily as a result of a benefit for credit losses. See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for information on the primary factors that contributed to our single-family benefit for credit losses in the first half of 2021.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
|
Troubled Debt Restructurings and Nonaccrual Loans
The table below displays the single-family loans classified as TDRs that were on accrual status and single-family loans on nonaccrual status. The table includes our amortized cost in HFI and HFS single-family mortgage loans, as well as interest income forgone and recognized for on-balance sheet TDRs on accrual status and nonaccrual loans. For more information on TDRs and nonaccrual loans, see “Note 3, Mortgage Loans.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-Family TDRs on Accrual Status and Nonaccrual Loans
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
(Dollars in millions)
|
|
TDRs on accrual status
|
|
$
|
59,521
|
|
|
|
|
$
|
69,503
|
|
|
|
Nonaccrual loans
|
|
29,275
|
|
|
|
|
27,643
|
|
|
|
Total TDRs on accrual status and nonaccrual loans
|
|
$
|
88,796
|
|
|
|
|
$
|
97,146
|
|
|
|
Accruing on-balance sheet loans past due 90 days or more(1)
|
|
$
|
50,580
|
|
|
|
|
$
|
77,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
2021
|
|
|
|
2020
|
|
|
|
|
(Dollars in millions)
|
|
|
Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:
|
|
|
|
|
|
|
|
|
Interest income forgone(2)
|
|
$
|
678
|
|
|
|
|
$
|
818
|
|
|
|
Interest income recognized(3)
|
|
1,549
|
|
|
|
|
2,083
|
|
|
(1)Includes loans that, as of the end of each period, are 90 days or more past due and continuing to accrue interest. As of June 30, 2021 and December 31, 2020, the substantial majority of these loans had a COVID-19-related forbearance.
(2)Represents the amount of interest income we did not recognize, but would have recognized during the period, for nonaccrual loans and TDRs on accrual status held as of the end of each period had the loans performed according to their original contractual terms.
(3)Primarily includes amounts accrued while the loans were performing, including the amortization of any deferred cost basis adjustments, and cash payments received on nonaccrual loans held as of the end of each period.
We continue to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act and the Consolidated Appropriations Act of 2021, which provide relief from TDR accounting and disclosure requirements for our forbearance plans and loan modifications. As a result, the balance of TDRs on accrual status remains lower as of June 30, 2021 and December 31, 2020 compared with pre-pandemic levels. In addition, loan sales in the first half of 2021 contributed to the further decline in TDRs on accrual status as of June 30, 2021, compared with December 31, 2020. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on the relief from TDR accounting and disclosure requirements.
Under our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income at the current contractual yield for up to six months of delinquency provided that the loans were either current at March 1, 2020 or originated after March 1, 2020. We continue to accrue interest income beyond six months of delinquency provided that the collection of principal and interest continues to be reasonably assured according to our nonaccrual policy. This has resulted in a large portion of loans in forbearance remaining on accrual status. However, as more borrowers resolve their forbearance arrangement, primarily through a payment deferral, the balance of loans accruing on-balance sheet that were past due 90 days or more as of June 30, 2021 compared with December 31, 2020 has declined. For additional information on our accounting policy for nonaccrual loans, see “Note 3, Mortgage Loans.”
Multifamily Business
Our Multifamily business provides mortgage market liquidity primarily for properties with five or more residential units, which may be apartment communities, cooperative properties, seniors housing, dedicated student housing or manufactured housing communities.
This section supplements and updates information regarding our Multifamily business segment in our 2020 Form 10-K. See “MD&A—Multifamily Business” in our 2020 Form 10-K for additional information regarding the primary business activities, customers, competition and market share of our Multifamily business.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Market
|
Multifamily Mortgage Market
Multifamily market fundamentals, which include factors such as vacancy rates and rents, improved significantly during the second quarter of 2021, due to pent up demand for multifamily housing stemming from a rebounding economy, including increasing job growth and rising wages, as well as the continued rollout of vaccinations across the country.
•Vacancy rates. Based on preliminary third-party data, the estimated national multifamily vacancy rate for institutional investment-type apartment properties as of June 30, 2021 decreased to 5.5% compared with 6.0% as of March 31, 2021, and 5.8% as of June 30, 2020. The estimated national multifamily vacancy rate is now back below its estimated average rate of about 6.0% over the last ten years.
•Rents. Effective rents are estimated to have increased by 3.0% during the second quarter of 2021 compared with an increase of 0.5% during the first quarter of 2021 and a decrease of 0.5% during the second quarter of 2020.
Vacancy rates and rents are important to loan performance because multifamily loans are generally repaid from the cash flows generated by the underlying properties. Several years of improvement in these fundamentals helped to increase property values in most metropolitan areas, even over the past year despite pressures from the pandemic. Based on preliminary multifamily property sales data, transaction volumes in the first few months of 2021 trended lower than in previous years yet capitalization rates have remained low. We believe this is due to property owners benefiting from improving fundamentals, and commercial real estate investors remaining interested in the multifamily sector over the long term.
Multifamily construction underway remains elevated, with more than 492,000 units expected to be delivered in 2021, compared with the estimated 399,000 new multifamily units that were completed in 2020.
We expect the multifamily sector to benefit from an improving economy and continued job growth over the coming months, leading to increased rent growth and a lower vacancy rate by year end.
Multifamily Business Metrics
Through the secondary mortgage market, we support rental housing for the workforce population, for senior citizens and students, and for families with the greatest economic need. Over 90% of the multifamily units we financed in the second quarter of 2021 were affordable to families earning at or below 120% of the median income in their area, providing support for both workforce housing and affordable housing.
Multifamily New Business Volume
(Dollars in billions)
(1)Reflects unpaid principal balance of multifamily Fannie Mae MBS issued, multifamily loans purchased, and credit enhancements provided on multifamily mortgage assets during the period.
FHFA established a 2021 multifamily volume cap of $70 billion in new business volume over the four-quarter period from January 1, 2021 through December 31, 2021. FHFA also announced the requirement that at least 50% of our 2021 multifamily business volume must be mission-driven, focused on certain affordable and underserved market segments, which consists of loans on properties affordable for residents who earn 80% of area median income or below, with special provisions for rural housing and for manufactured housing communities. Furthermore, FHFA’s 2021 multifamily volume cap requires that a minimum of 20% of our multifamily business volume in 2021 must be affordable to residents at 60% of area median income or below. Multifamily business that meets the minimum 20% requirement also counts as meeting the minimum 50% requirement.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Business Metrics
|
The January 2021 amendment to the senior preferred stock purchase agreement contains certain restrictions on Fannie Mae’s business activities, including our multifamily business volume. We may not acquire more than $80 billion in multifamily mortgage assets in any 52-week period. FHFA will adjust the dollar amount of this limitation up or down at the end of each calendar year based on changes in the consumer price index. Additionally, at least 50% of our multifamily acquisitions in any calendar year must, at the time of acquisition, be classified as mission-driven, consistent with FHFA guidelines. We understand that the $70 billion multifamily volume cap and related requirements established by FHFA in the fourth quarter of 2020 remain in effect for calendar year 2021, and that the $80 billion limit established under the senior preferred stock purchase agreement operates as an independent limit on our multifamily business volume. For information on how conservatorship may affect our business activities, see “Risk Factors” in our 2020 Form 10-K.
Presentation of Our Multifamily Guaranty Book of Business
For purposes of the information reported in this “Multifamily Business” section, we measure our multifamily guaranty book of business using the unpaid principal balance of mortgage loans underlying Fannie Mae MBS. By contrast, the multifamily guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table in the “Guaranty Book of Business” section is based on the unpaid principal balance of Fannie Mae MBS outstanding, rather than the unpaid principal balance of the underlying mortgage loans. These amounts differ primarily as a result of payments we receive on underlying loans that have not yet been remitted to the MBS holders.
Multifamily Guaranty Book of Business
(Dollars in billions)
(1)Our multifamily guaranty book of business primarily consists of multifamily mortgage loans underlying Fannie Mae MBS outstanding, multifamily mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on multifamily mortgage assets. It does not include non-Fannie Mae multifamily mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty.
Average charged guaranty fee represents our effective revenue rate relative to the size of our multifamily guaranty book of business. Management uses this metric to assess the return we earn as compensation for the multifamily credit risk we manage. Average charged guaranty fee increased in the second quarter of 2021 compared with the second quarter of 2020 due to increased pricing on new multifamily business. While our multifamily guaranty fee pricing is primarily based on the individual credit risk characteristics of the loans we acquire, it is also influenced by market forces such as the availability of other sources of liquidity, our mission-related goals, the FHFA volume cap and the management of our overall portfolio composition.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Business Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily Business Financial Results(1)
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
2021
|
|
2020
|
|
Variance
|
|
2021
|
|
2020
|
|
Variance
|
|
|
|
(Dollars in millions)
|
|
Net interest income
|
|
$
|
963
|
|
|
$
|
838
|
|
|
$
|
125
|
|
|
$
|
1,811
|
|
|
$
|
1,644
|
|
|
$
|
167
|
|
|
Fee and other income
|
|
23
|
|
|
19
|
|
|
4
|
|
|
48
|
|
|
45
|
|
|
3
|
|
|
Net revenues
|
|
986
|
|
|
857
|
|
|
129
|
|
|
1,859
|
|
|
1,689
|
|
|
170
|
|
|
Fair value gains (losses), net
|
|
(60)
|
|
|
12
|
|
|
(72)
|
|
|
(16)
|
|
|
196
|
|
|
(212)
|
|
|
Administrative expenses
|
|
(127)
|
|
|
(129)
|
|
|
2
|
|
|
(252)
|
|
|
(249)
|
|
|
(3)
|
|
|
Credit-related income (expense)(2)
|
|
22
|
|
|
(238)
|
|
|
260
|
|
|
113
|
|
|
(651)
|
|
|
764
|
|
|
Credit enhancement expense(3)
|
|
(55)
|
|
|
(53)
|
|
|
(2)
|
|
|
(113)
|
|
|
(113)
|
|
|
—
|
|
|
Change in expected credit enhancement recoveries(4)
|
|
13
|
|
|
65
|
|
|
(52)
|
|
|
(2)
|
|
|
195
|
|
|
(197)
|
|
|
Other income (expenses), net(5)
|
|
23
|
|
|
44
|
|
|
(21)
|
|
|
(28)
|
|
|
(17)
|
|
|
(11)
|
|
|
Income before federal income taxes
|
|
802
|
|
|
558
|
|
|
244
|
|
|
1,561
|
|
|
1,050
|
|
|
511
|
|
|
Provision for federal income taxes
|
|
(157)
|
|
|
(113)
|
|
|
(44)
|
|
|
(317)
|
|
|
(212)
|
|
|
(105)
|
|
|
Net income
|
|
$
|
645
|
|
|
$
|
445
|
|
|
$
|
200
|
|
|
$
|
1,244
|
|
|
$
|
838
|
|
|
$
|
406
|
|
(1)See “Note 9, Segment Reporting” for information about our segment allocation methodology.
(2)Consists of the benefit or provision for credit losses and foreclosed property income or expense.
(3)Primarily consists of costs associated with our Multifamily CIRTTM (“MCIRTTM”) and Multifamily Connecticut Avenue SecuritiesTM (“MCAS”) programs as well as amortization expense for certain lender risk-sharing programs.
(4)Consists of change in benefits recognized from our freestanding credit enhancements that primarily relates to our Delegated Underwriting and Servicing (“DUS®”) lender risk-sharing.
(5)Consists of investment gains or losses, gains or losses from partnership investments, debt extinguishment gains or loss, and other income or expenses.
Net Interest Income
Net interest income increased in the second quarter and first half of 2021 compared with the second quarter and first half of 2020 primarily due to higher guaranty fee income as a result of an increase in our multifamily guaranty book of business combined with an increase in average charged guaranty fees.
Credit-Related Income (Expense)
Credit-related income for the second quarter and first half of 2021 was primarily driven by a benefit from actual and projected economic data and lower expected losses resulting from the COVID-19 pandemic.
Credit-related expense for the second quarter and first half of 2020 was primarily driven by an increase in our allowance for loan losses due to losses we expected to incur as a result of the COVID-19 pandemic.
See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on our multifamily benefit (provision) for credit losses.
Multifamily Mortgage Credit Risk Management
This section updates our discussion of multifamily mortgage credit risk management in our 2020 Form 10-K in “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management.” For an overview of key elements of our mortgage credit risk management, see “Business—Managing Mortgage Credit Risk” in our 2020 Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
|
Multifamily Acquisition Policy and Underwriting Standards
Our standards for multifamily loans specify maximum original LTV ratio and minimum original debt service coverage ratio (“DSCR”) values that vary based on loan characteristics. Our experience has been that original LTV ratio and DSCR values have been reliable indicators of future credit performance. At underwriting, we evaluate the DSCR based on both actual and underwritten debt service payments. The original DSCR is calculated using the underwritten debt service payments for the loan, which assumes both principal and interest payments, rather than the actual debt service payments. Depending on the loan’s interest rate and structure, using the underwritten debt service payments may result in a more conservative estimate of the debt service payments (for example, loans with an interest-only period). This approach is used for all loans, including those with full and partial interest-only terms.
To address possible fluctuations in borrower income and expenses resulting from the COVID-19 pandemic, we instituted additional reserve requirements in 2020 for certain new multifamily loan acquisitions depending on the product type, LTV ratio and DSCR. As a result of an improving COVID-19 outlook, as of May 2021, we rescinded these temporary COVID-related reserve requirements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Risk Characteristics of Multifamily Guaranty Book of Business
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
June 30, 2020
|
|
Weighted average original LTV ratio
|
|
66
|
|
%
|
|
|
66
|
|
%
|
|
|
66
|
|
%
|
|
Original LTV ratio greater than 80%
|
|
1
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
Original DSCR less than or equal to 1.10
|
|
11
|
|
|
|
|
10
|
|
|
|
|
11
|
|
|
|
Full term interest-only loans
|
|
31
|
|
|
|
|
30
|
|
|
|
|
29
|
|
|
|
Partial term interest-only loans(1)
|
|
52
|
|
|
|
|
51
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Consists of mortgage loans that were underwritten with an interest-only term, regardless of whether the loan is currently in its interest-only period.
We provide additional information on the credit characteristics of our multifamily loans in quarterly financial supplements, which we furnish to the SEC with current reports on Form 8-K. Information in our quarterly financial supplements is not incorporated by reference into this report.
Transfer of Multifamily Mortgage Credit Risk
Lender risk-sharing is a cornerstone of our Multifamily business. We primarily transfer risk through our DUS® program, which delegates to DUS lenders the ability to underwrite and service multifamily loans, in accordance with our standards and requirements. DUS lenders receive credit risk-related revenues for their respective portion of credit risk retained, and, in turn, are required to fulfill any loss-sharing obligation. This aligns the interests of the lender and Fannie Mae throughout the life of the loan. We monitor the capital resources and loss sharing capacity of our DUS lenders on an ongoing basis.
Our DUS model typically results in our lenders sharing approximately one-third of the credit risk on our multifamily loans, either on a pro-rata or tiered basis. Lenders who share on a tiered basis cover loan-level credit losses up to the first 5% of the unpaid principal balance of the loan and then share with us any remaining losses up to a prescribed limit. Loans serviced by DUS lenders and their affiliates represented substantially all of our multifamily guaranty book of business as of June 30, 2021 and December 31, 2020. In certain situations, to effectively manage our counterparty risk, we do not allow the lender to fully share in one-third of the credit risk, but have them share in a smaller portion.
While not a large portion of our multifamily guaranty book of business, our non-DUS lenders typically also have lender risk-sharing, where the lenders typically share or absorb losses based on a negotiated percentage of the loan or the pool balance.
To complement our front-end lender-risk sharing program, we have engaged in back-end credit risk transfer transactions through our Multifamily CIRTTM (“MCIRTTM”) and Multifamily CAS (“MCASTM”) transactions. Through these transactions, we have transferred a portion of credit risk associated with Fannie Mae losses on a reference pool of multifamily mortgage loans.
Our back-end multifamily credit-risk sharing transactions were primarily designed to further reduce the capital requirements associated with loans in the reference pool with the associated benefit of additional credit risk protection in the event of a stress environment. We have transferred multifamily credit risk through lender risk-sharing at the time of acquisition, but our multifamily back-end credit risk transfer activity has occurred later, typically up to a year or more after acquisition.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
|
We have not entered into any new credit risk transfer transactions since the first quarter of 2020 as we evaluate their costs and benefits, including the capital relief these transactions provide. We may engage in credit risk transfer transactions in the future, which could help us manage capital and manage within our risk appetite. The structure of and extent to which we engage in any additional credit risk transfer transactions will be affected by our capital requirements, the degree of regulatory capital relief provided by the transactions, our risk appetite, the strength of future market conditions, including the cost of these transactions, and the review of our overall business and capital plan.
The table below displays the total unpaid principal balance of multifamily loans and the percentage of our multifamily guaranty book of business, based on unpaid principal balance, that are covered by a back-end credit risk transfer transaction. The table does not reflect front-end lender risk-sharing arrangements, as only a small portion of our multifamily guaranty book of business does not include these arrangements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily Loans in Back-End Credit Risk Transfer Transactions
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
Unpaid Principal Balance
|
|
Percentage of Multifamily Guaranty Book of Business
|
|
Unpaid Principal Balance
|
|
Percentage of Multifamily Guaranty Book of Business
|
|
|
|
(Dollars in millions)
|
|
MCIRT
|
|
$
|
70,034
|
|
|
18
|
%
|
|
$
|
72,166
|
|
|
19
|
%
|
|
MCAS
|
|
28,551
|
|
|
7
|
|
|
28,968
|
|
|
7
|
|
|
Total
|
|
$
|
98,585
|
|
|
25
|
%
|
|
$
|
101,134
|
|
|
26
|
%
|
Multifamily Portfolio Diversification and Monitoring
Diversification within our multifamily book of business by geographic concentration, term to maturity, interest-rate structure, borrower concentration, loan size and credit enhancement coverage are important factors that influence credit performance and help reduce our credit risk.
As part of our ongoing credit risk management process, we and our lenders monitor the performance and risk characteristics of our multifamily loans and the underlying properties on an ongoing basis throughout the loan term at the asset and portfolio level. We require lenders to provide quarterly and annual financial updates for the loans for which we are contractually entitled to receive such information. We closely monitor loans with an estimated current DSCR below 1.0, as that is an indicator of heightened default risk. The percentage of loans in our multifamily guaranty book of business, calculated based on unpaid principal balance, with a current DSCR less than 1.0 was approximately 2% as of June 30, 2021 and December 31, 2020. Our estimates of current DSCRs are based on the latest available income information for these properties and exclude co-op loans. Although we use the most recently available results from our multifamily borrowers, there is a lag in reporting, which typically can range from three to six months, but in some cases may be longer.
In addition to the factors discussed above, we track the following credit risk characteristics to determine loan credit quality indicators, which are the internal risk categories we use and which are further discussed in “Note 3, Mortgage Loans”:
•the physical condition of the property;
•delinquency status;
•the relevant local market and economic conditions that may signal changing risk or return profiles; and
•other risk factors.
For example, we closely monitor the rental payment trends and vacancy levels in local markets, as well as capitalization rates, to identify loans that merit closer attention or loss mitigation actions. We manage our exposure to refinancing risk for multifamily loans maturing in the next several years. We have a team that proactively manages upcoming loan maturities to minimize losses on maturing loans. This team assists lenders and borrowers with timely and appropriate refinancing of maturing loans with the goal of reducing defaults and foreclosures related to these loans. The primary asset management responsibilities for our multifamily loans are performed by our DUS and other multifamily lenders. We periodically evaluate these lenders’ performance for compliance with our asset management criteria.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
|
Multifamily Problem Loan Management and Foreclosure Prevention
In addition to the credit performance information on our multifamily loans provided below, we provide information about multifamily loans in a COVID-19-related forbearance that back MBS and whole loan REMICs in a “Multifamily MBS COVID-19 Forbearance List” in the “Data Collections” section of our DUS Disclose® tool, available at www.fanniemae.com/dusdisclose. Information on our website is not incorporated into this report.
Delinquency Statistics on our Problem Loans
The percentage of our multifamily loans classified as substandard in our guaranty book of business increased modestly as of June 30, 2021 compared with December 31, 2020, due to the continued impact of COVID-19. Substandard loans are loans that have a well-defined weakness that could impact their timely full repayment. While the majority of the substandard loans in our multifamily guaranty book of business are currently making timely payments or are in forbearance, we continue to monitor the performance of the full substandard loan population. For more information on our credit quality indicators, including our population of substandard loans, see “Note 3, Mortgage Loans.”
Our multifamily serious delinquency rate decreased to 0.53% as of June 30, 2021 compared with 0.98% as of December 31, 2020 and 1.00% as of June 30, 2020, primarily driven by the ongoing economic recovery resulting in loans that received forbearance transitioning into repayment plans or being modified or otherwise reinstated. Our multifamily serious delinquency rate consists of multifamily loans that were 60 days or more past due based on unpaid principal balance, expressed as a percentage of our multifamily guaranty book of business. Our multifamily serious delinquency rate includes 0.33% and 0.50% of multifamily loans that were 180 days or more past due as of June 30, 2021 and December 31, 2020, respectively.
Management monitors the multifamily serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious delinquency rates are reflective of our performance in assessing and managing credit risk associated with multifamily loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan losses.
Our multifamily serious delinquency rate, excluding loans that received a forbearance, was 0.03% as of June 30, 2021 and December 31, 2020. We monitor this rate to better understand the impact that forbearance activity has had on multifamily serious delinquency and the performance of loans that are seriously delinquent not as a result of COVID-19.
COVID-19 Forbearance and Multifamily Eviction Moratorium
In response to the COVID-19 pandemic and its impact, we have broadly offered forbearance to affected multifamily borrowers, as we describe in “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention” in our 2020 Form 10-K. Since 2020, we have delegated to our lenders the ability to provide forbearance for up to six monthly payments for most loan types through September 30, 2021. For any forbearance request extending beyond six months, we do not delegate the decision and we will determine whether to extend relief based on the borrower’s circumstances. For delegated forbearances, borrowers are required to bring their loans current within a time period determined by multiplying the number of months of forbearance by four. For example, a three-month forbearance would translate into a twelve-month repayment period. In exchange for receiving forbearance, borrowers must agree to suspend tenant evictions for nonpayment of rent, provide monthly operating statements and remit any excess cash flow to our servicers on a monthly basis, to be held until the end of the forbearance period and then applied to missed mortgage payments.
In June 2021, the CDC further extended its moratorium on evictions through July 31, 2021, as described in “Legislation and Regulation—Federal Eviction Moratorium” in this report.
Multifamily Loan Forbearance
We estimate that 1.6% of our multifamily book of business as of March 31, 2020, based on unpaid principal balance, has been in a COVID-19-related forbearance at some point in time through June 30, 2021. Most of these loans have exited forbearance into a repayment plan, have reinstated, have defaulted, or have since liquidated.
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|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
59
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|
|
|
|
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|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
|
The table below displays the status as of June 30, 2021 and December 31, 2020 of the active multifamily loans in our guaranty book of business that have received a forbearance since the start of the pandemic, as well as the serious delinquency rate of such loans. The table excludes multifamily loans that received a forbearance, but liquidated or were foreclosed upon prior to period end. As of June 30, 2021, nearly all of our multifamily loans in forbearance were associated with a COVID-19-related financial hardship. Seniors housing loans, which constituted 4.2% of our multifamily guaranty book of business as of June 30, 2021, comprised approximately 41% of the total unpaid principal balance of multifamily loans that received a forbearance and remained in our multifamily guaranty book as of June 30, 2021. Of those multifamily seniors housing loans that received a forbearance as of the end of the period, based on unpaid principal balance, 42% were in a repayment plan, 50% were reinstated, 5% have defaulted on their forbearance arrangement and the remaining 3% were in active forbearance.
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|
|
|
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|
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|
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|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
Status and SDQ Rate of Multifamily Forbearance Loans Outstanding(1)
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|
|
|
As of June 30, 2021
|
|
|
|
Number of Loans
|
|
|
|
Unpaid Principal Balance
|
|
Percentage of Unpaid Principal Balance in Book of Business
|
|
Percentage of Unpaid Principal Balance with Forbearance by Category
|
|
Percentage of Loans on Accrual Status
|
|
Percentage of Loans that are Seriously Delinquent
|
|
|
|
(Dollars in millions)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans that received a forbearance, by status:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active forbearance(2)
|
|
72
|
|
|
|
|
$
|
1,001
|
|
|
0.2
|
%
|
|
20
|
%
|
|
11
|
%
|
|
100
|
%
|
|
Repayment plan
|
|
130
|
|
|
|
|
1,824
|
|
|
0.5
|
|
|
37
|
|
|
77
|
|
|
36
|
|
|
Reinstated(3)
|
|
109
|
|
|
|
|
1,813
|
|
|
0.4
|
|
|
36
|
|
|
68
|
|
|
—
|
|
|
Defaulted(4)
|
|
38
|
|
|
|
|
327
|
|
|
0.1
|
|
|
7
|
|
|
—
|
|
|
100
|
|
|
Total loans that received a forbearance
|
|
349
|
|
|
|
|
4,965
|
|
|
1.2
|
|
|
100
|
%
|
|
56
|
|
|
40
|
|
|
Loans that have not received a forbearance
|
|
29,029
|
|
|
|
|
396,965
|
|
|
98.8
|
|
|
—
|
|
|
100
|
|
|
0.03
|
|
|
Total multifamily guaranty book of business
|
|
29,378
|
|
|
|
|
$
|
401,930
|
|
|
100
|
%
|
|
1.2
|
%
|
|
99
|
%
|
|
0.53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
Number of Loans
|
|
|
|
Unpaid Principal Balance
|
|
Percentage of Unpaid Principal Balance in Book of Business
|
|
Percentage of Unpaid Principal Balance with Forbearance by Category
|
|
Percentage of Loans on Accrual Status
|
|
Percentage of Loans that are Seriously Delinquent
|
|
|
|
(Dollars in millions)
|
|
Loans that received a forbearance, by status:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active forbearance(2)
|
|
88
|
|
|
|
$
|
1,689
|
|
|
0.4
|
%
|
|
32
|
%
|
|
32
|
%
|
|
100
|
%
|
|
Repayment plan
|
|
183
|
|
|
|
2,707
|
|
|
0.8
|
|
|
52
|
|
|
82
|
|
|
61
|
|
|
Reinstated(3)
|
|
56
|
|
|
|
491
|
|
|
0.1
|
|
|
10
|
|
|
100
|
|
|
—
|
|
|
Defaulted(4)
|
|
33
|
|
|
|
|
325
|
|
|
0.1
|
|
|
6
|
|
|
—
|
|
|
100
|
|
|
Total loans that received a forbearance
|
|
360
|
|
|
|
|
5,212
|
|
|
1.4
|
|
|
100
|
%
|
|
63
|
|
|
71
|
|
|
Loans that have not received a forbearance
|
|
28,285
|
|
|
|
|
379,335
|
|
|
98.6
|
|
|
—
|
|
|
100
|
|
|
0.03
|
|
|
Total multifamily guaranty book of business
|
|
28,645
|
|
|
|
|
$
|
384,547
|
|
|
100
|
%
|
|
1.4
|
%
|
|
99
|
%
|
|
0.98
|
%
|
(1)Excludes $511 million as of June 30, 2021 and $123 million as of December 31, 2020 in multifamily loans that received a forbearance, but liquidated prior to period end. Multifamily loans that received a forbearance, but went to foreclosure prior to period end accounted for
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|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
60
|
|
|
|
|
|
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|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
|
$156 million of these liquidations as of June 30, 2021. There were no multifamily loans that received a forbearance, but went to foreclosure prior to December 31, 2020.
(2)Includes loans that are in the process of extending their forbearance.
(3)Represents loans that are no longer in forbearance but are current according to the original terms of the loan or have been modified and are performing under the modification.
(4)Includes loans that are no longer in forbearance and are not on a repayment plan. Loans in this population may proceed to other loss mitigation activities, such as modification, or foreclosure.
Under our nonaccrual accounting policy for loans negatively impacted by the COVID-19 pandemic, we continue to accrue interest income for up to six months provided that the loans were either current as of March 1, 2020 or originated after March 1, 2020. Multifamily loans are placed on nonaccrual status when the borrower is six months past due
unless the loan is both well secured and in the process of collection. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K and “Note 3, Mortgage Loans” in this report for additional information about our nonaccrual accounting policy.
For multifamily loans that received forbearance and were in our book of business as of June 30, 2021, we have recorded a total accrued interest receivable balance of $63 million, for which we have established a valuation allowance of $8 million.
REO Management
The number of multifamily foreclosed properties held for sale was 24 properties with a carrying value of $222 million as of June 30, 2021, compared with 14 properties with a carrying value of $114 million as of December 31, 2020. The increase was primarily driven by a seniors housing portfolio that defaulted on its forbearance arrangement.
We expect a continued increase in our multifamily foreclosed properties primarily due to loans that received a COVID-19 forbearance but are unable to successfully cure their delinquency through a repayment plan or other modification.
Other Multifamily Credit Information
Multifamily Credit Loss Performance Metrics
The amount of multifamily credit loss or income we realize in a given period is driven by foreclosures, pre-foreclosure sales, REO activity and write-offs, net of recoveries. Our multifamily credit loss performance metrics are not defined terms and may not be calculated in the same manner as similarly titled measures reported by other companies. We believe our multifamily credit losses and our multifamily credit losses, net of freestanding loss-sharing benefit, may be useful to stakeholders because they display our credit losses in the context of our multifamily guaranty book of business, including the benefit we receive from loss-sharing arrangements. Management views multifamily credit losses, net of freestanding loss-sharing benefit as a key metric related to our multifamily business model and our strategy to share multifamily credit risk.
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|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
61
|
|
|
|
|
|
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|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
|
The table below displays the components of our multifamily credit loss performance metrics, as well as our multifamily initial write-off severity rate and write-off loan count.
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Multifamily Credit Loss Performance Metrics
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
2021
|
|
|
2020
|
|
|
|
(Dollars in millions)
|
|
|
Write-offs(1)
|
|
$
|
(13)
|
|
|
|
|
$
|
2
|
|
|
|
$
|
(47)
|
|
|
|
$
|
(18)
|
|
|
|
Recoveries(2)
|
|
18
|
|
|
|
|
—
|
|
|
|
19
|
|
|
|
1
|
|
|
|
Foreclosed property expense
|
|
(13)
|
|
|
|
|
(7)
|
|
|
|
(25)
|
|
|
|
(9)
|
|
|
|
Credit losses
|
|
(8)
|
|
|
|
|
(5)
|
|
|
|
(53)
|
|
|
|
(26)
|
|
|
|
Freestanding loss-sharing benefit(3)
|
|
6
|
|
|
|
|
—
|
|
|
|
21
|
|
|
|
3
|
|
|
|
Credit losses, net of freestanding loss-sharing benefit
|
|
$
|
(2)
|
|
|
|
|
$
|
(5)
|
|
|
|
$
|
(32)
|
|
|
|
$
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit loss ratio (in bps)(4)
|
|
0.8
|
|
|
|
|
0.6
|
|
|
|
2.7
|
|
|
|
1.5
|
|
|
|
Credit loss ratio, net of freestanding loss-sharing benefit (in bps)(3)(4)
|
|
0.2
|
|
|
|
|
0.6
|
|
|
|
1.6
|
|
|
|
1.3
|
|
|
|
Multifamily initial write-off severity rate(5)
|
|
14.5
|
|
%
|
|
|
8.2
|
|
%
|
|
14.0
|
|
%
|
|
17.4
|
|
%
|
|
Multifamily write-off loan count
|
|
6
|
|
|
|
|
3
|
|
|
|
15
|
|
|
|
6
|
|
|
(1)Includes loan write-offs pursuant to the Advisory Bulletin. Write-offs associated with non-REO sales are net of loss sharing.
(2)Excludes decreases of $15 million and $1 million in estimated recoveries for the second quarter of 2021 and 2020, respectively, and excludes a decrease of $28 million and an increase of $1 million in estimated recoveries for the first half of 2021 and 2020, respectively, relating to amounts previously written off pursuant to the Advisory Bulletin. Under the CECL standard we adopted on January 1, 2020, estimated recoveries of amounts previously written off due to improved valuations are recorded as a component of “Benefit (provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income and are adjusted over time as expectations change. The changes in expected loss-sharing benefit associated with these recoveries are included in “Freestanding loss-sharing benefit.”
(3)Represents expected benefits that we receive upon foreclosure as a result of certain freestanding credit enhancements, primarily multifamily DUS lender risk-sharing transactions, as well as the expected loss-sharing benefit from write-offs pursuant to the Advisory Bulletin. These benefits are recorded in “Change in expected credit enhancement recoveries” in our condensed consolidated statements of operations and comprehensive income.
(4)Calculated based on the annualized amount of “Credit losses” and “Credit losses, net of freestanding loss-sharing benefit,” divided by the average multifamily guaranty book of business during the period.
(5)Rate is calculated as the initial write-off amount divided by the average defaulted unpaid principal balance. The rate excludes write-offs pursuant to the provisions of the Advisory Bulletin and any costs, gains or losses associated with REO after initial acquisition through final disposition. Write-offs are net of lender loss-sharing agreements.
Although we have realized some of the credit losses related to COVID-19-impacted loans in recent periods, we expect our realized multifamily credit losses will remain higher over the long term compared to pre-pandemic levels as some loans that have been materially impacted by COVID-19 are ultimately unable to reperform. See “Risk Factors” in this report for additional information on the potential credit risk impact of the COVID-19 pandemic.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
|
Multifamily Loss Reserves
Our multifamily loss reserves, which include our allowance for loan losses and the related accrued interest receivable, and our reserve for guaranty losses, provide for an estimate of credit losses in our multifamily guaranty book of business.
The table below summarizes the changes in our multifamily loss reserves, excluding credit losses on our AFS securities. For a discussion of changes in our multifamily benefit or provision for credit losses, see “Consolidated Results of Operations—Credit-Related Income (Expense).”
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily Loss Reserves
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
2021
|
|
2020
|
|
|
2021
|
|
2020
|
|
|
|
|
(Dollars in millions)
|
|
|
Changes in loss reserves:
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(1,089)
|
|
|
$
|
(1,149)
|
|
|
|
$
|
(1,225)
|
|
|
$
|
(268)
|
|
|
|
Transition impact of the adoption of the CECL standard(1)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(490)
|
|
|
|
Benefit (provision) for credit losses
|
|
35
|
|
|
(231)
|
|
|
|
138
|
|
|
(641)
|
|
|
|
Write-offs
|
|
13
|
|
|
(2)
|
|
|
|
47
|
|
|
18
|
|
|
|
Recoveries
|
|
(18)
|
|
|
—
|
|
|
|
(19)
|
|
|
(1)
|
|
|
|
Ending balance
|
|
$
|
(1,059)
|
|
|
$
|
(1,382)
|
|
|
|
$
|
(1,059)
|
|
|
$
|
(1,382)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected benefit of freestanding credit enhancements on multifamily loans not netted against loss reserves as of the end of the period
|
|
|
$
|
343
|
|
|
$
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Loss reserves as a percentage of multifamily guaranty book of business
|
|
|
0.26
|
%
|
|
0.32
|
%
|
|
|
|
|
|
|
|
|
|
(1)Includes the transition impact of $221 million for the reclassification of freestanding credit enhancements, such as DUS lender risk-sharing, to “Other assets” from “Allowance for loan losses” in our condensed consolidated balance sheets on January 1, 2020.
Troubled Debt Restructurings and Nonaccrual Loans
We continue to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act and the Consolidated Appropriations Act of 2021, which provide relief from TDR accounting and disclosure requirements for our forbearance plans and loan modifications. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on the relief from TDR accounting and disclosure requirements.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
|
The table below displays the multifamily loans classified as TDRs that were on accrual status and multifamily loans on nonaccrual status. The table includes our amortized cost in HFI multifamily mortgage loans, as well as interest income forgone and recognized for on-balance sheet TDRs on accrual status and nonaccrual loans. For more information on TDRs and nonaccrual loans see “Note 3, Mortgage Loans.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily TDRs on Accrual Status and Nonaccrual Loans
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
(Dollars in millions)
|
|
TDRs on accrual status
|
|
$
|
32
|
|
|
$
|
29
|
|
|
Nonaccrual loans
|
|
2,220
|
|
|
2,073
|
|
|
Total TDRs on accrual status and nonaccrual loans
|
|
$
|
2,252
|
|
|
$
|
2,102
|
|
|
|
|
|
|
|
|
Accruing on-balance sheet loans past due 90 days or more
|
|
$
|
110
|
|
|
$
|
610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
(Dollars in millions)
|
|
Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:
|
|
|
|
|
|
Interest income forgone(1)
|
|
$
|
29
|
|
|
$
|
4
|
|
|
Interest income recognized(2)
|
|
13
|
|
|
2
|
|
(1)Represents the amount of interest income we did not recognize, but would have recognized during the period for nonaccrual loans and TDRs on accrual status held as of the end of each period had the loans performed according to their original contractual terms.
(2)Represents interest income recognized during the period, including the amortization of any deferred cost basis adjustments, for loans classified as TDRs on accrual status or nonaccrual loans held as of the end of each period. Primarily includes amounts accrued while the loans were performing. Cash received on nonaccrual loans in a forbearance plan are applied as a reduction of accrued interest receivable until the receivable has been reduced to zero, and then recognized as interest income.
The balance of loans on nonaccrual status remained elevated as of June 30, 2021 and December 31, 2020 compared to pre-pandemic levels primarily due to loans that received a COVID-19 forbearance that became more than six months delinquent and were placed on nonaccrual status. For additional information on our accounting policy for nonaccrual loans, see “Note 3, Mortgage Loans.”
Liquidity and Capital Management
Liquidity Management
This section supplements and updates information regarding liquidity management in our 2020 Form 10-K. See “MD&A—Liquidity and Capital Management—Liquidity Management” in our 2020 Form 10-K for additional information, including discussions of our primary sources and uses of funds, our liquidity and funding risk management practices and contingency planning, factors that influence our debt funding activity, factors that may impact our access to or the cost of our debt funding and factors that could adversely affect our liquidity and funding. Also see “Risk Factors—Liquidity and Funding Risk” in our 2020 Form 10-K for a discussion of liquidity and funding risks.
Debt Funding
We are currently subject to a $300 billion debt limit under our senior preferred stock purchase agreement with Treasury, which will decrease to $270 billion as of December 31, 2022. The unpaid principal balance of our aggregate indebtedness was $252.7 billion as of June 30, 2021. Pursuant to the terms of the senior preferred stock purchase agreement, we are prohibited from issuing debt without the prior consent of Treasury if it would result in our aggregate indebtedness exceeding our outstanding debt limit. The calculation of our indebtedness for purposes of complying with our debt limit reflects the unpaid principal balance and excludes debt basis adjustments and debt of consolidated trusts.
Outstanding Debt
Total outstanding debt of Fannie Mae includes short-term and long-term debt and excludes debt of consolidated trusts. Short-term debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and,
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Fannie Mae Second Quarter 2021 Form 10-Q
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64
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MD&A | Liquidity and Capital Management
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therefore, does not include the current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings with an original contractual maturity of greater than one year.
The following chart and table display information on our outstanding short-term and long-term debt based on original contractual maturity. The primary driver for the decrease in our short-term and long-term debt from December 31, 2020 to June 30, 2021 was decreased funding needs compared with the prior year. In 2020, we had unusually high liquidity demands driven by our expectations relating to the COVID-19 pandemic, as well as historically high loan acquisition volumes through our whole loan conduit, resulting in high volumes of debt issuance during the year. Our funding needs were lower in the first half of 2021 because we built up a large amount of liquidity through our debt issuances in 2020, our expected buyouts relating to the COVID-19 pandemic have declined, and we are now able to retain more of our earnings pursuant to the terms of the January 2021 amendment to the senior preferred stock purchase agreement. As a result of our lower funding needs, we did not issue new debt to replace all of our debt that paid off during the first half of 2021, including no long-term debt issuances during the second quarter of 2021.
Debt of Fannie Mae(1)
(Dollars in billions)
(1)Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis adjustments and other cost basis adjustments. Reported amounts include net discount unamortized cost basis adjustments and fair value adjustments of $1.1 billion and $393 million as of June 30, 2021 and December 31, 2020, respectively.
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Fannie Mae Second Quarter 2021 Form 10-Q
|
65
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MD&A | Liquidity and Capital Management
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Selected Debt Information
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As of
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|
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|
|
June 30, 2021
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December 31, 2020
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(Dollars in billions)
|
|
Selected Weighted-Average Interest Rates(1)
|
|
|
|
|
|
|
Interest rate on short-term debt
|
|
|
0.01
|
%
|
|
0.18
|
%
|
|
Interest rate on long-term debt, including portion maturing within one year
|
|
|
1.39
|
|
|
1.34
|
|
|
Interest rate on callable long-term debt
|
|
|
1.44
|
|
|
1.40
|
|
|
Selected Maturity Data
|
|
|
|
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|
|
Weighted-average maturity of debt maturing within one year (in days)
|
|
|
197
|
|
|
196
|
|
|
Weighted-average maturity of debt maturing in more than one year (in months)
|
|
|
60
|
|
|
52
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|
|
Other Data
|
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Outstanding callable long-term debt
|
|
|
$
|
54.5
|
|
|
$
|
57.5
|
|
|
Connecticut Avenue Securities debt(2)
|
|
|
14.1
|
|
|
15.0
|
|
(1)Excludes the effects of fair value adjustments and hedge-related basis adjustments.
(2)Represents CAS debt issued prior to November 2018. See “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2020 Form 10-K for information regarding our Connecticut Avenue Securities.
We intend to repay our short-term and long-term debt obligations as they become due primarily through proceeds from cash from business operations and the issuance of additional debt securities.
For information on the maturity profile of our outstanding long-term debt, see “Note 7, Short-Term and Long-Term Debt.”
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Fannie Mae Second Quarter 2021 Form 10-Q
|
66
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MD&A | Liquidity and Capital Management
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Debt Funding Activity
The table below displays activity in debt of Fannie Mae. This activity excludes the debt of consolidated trusts and intraday loans. Activity in short-term debt of Fannie Mae relates to borrowings with an original contractual maturity of one year or less while activity in long-term debt of Fannie Mae relates to borrowings with an original contractual maturity of greater than one year. The reported amounts of debt issued and paid off during each period represent the face amount of the debt at issuance and redemption.
The decrease in debt issued and paid off during the second quarter and first half of 2021 compared with the second quarter and first half of 2020 was primarily due to decreased funding needs as discussed above. As a result, we did not issue new debt to replace all of our debt that paid off during the second quarter and first half of 2021.
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Activity in Debt of Fannie Mae
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For the Three Months Ended June 30,
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For the Six Months Ended June 30,
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2021
|
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2020
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2021
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2020
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(Dollars in millions)
|
|
Issued during the period:
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Short-term:
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Amount
|
$
|
8,284
|
|
|
$
|
7,938
|
|
|
$
|
13,426
|
|
|
$
|
167,961
|
|
|
Weighted-average interest rate(1)
|
(0.02)
|
%
|
|
0.12
|
%
|
|
(0.01)
|
%
|
|
1.19
|
%
|
|
Long-term:(2)
|
|
|
|
|
|
|
|
|
Amount
|
$
|
—
|
|
|
$
|
82,913
|
|
|
$
|
2,815
|
|
|
$
|
122,231
|
|
|
Weighted-average interest rate
|
—
|
%
|
|
0.40
|
%
|
|
0.59
|
%
|
|
0.49
|
%
|
|
Total issued:
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|
|
|
|
|
|
|
|
Amount
|
$
|
8,284
|
|
|
$
|
90,851
|
|
|
$
|
16,241
|
|
|
$
|
290,192
|
|
|
Weighted-average interest rate
|
(0.02)
|
%
|
|
0.37
|
%
|
|
0.09
|
%
|
|
0.90
|
%
|
|
Paid off during the period:(3)
|
|
|
|
|
|
|
|
|
Short-term:
|
|
|
|
|
|
|
|
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Amount
|
$
|
8,861
|
|
|
$
|
24,069
|
|
|
$
|
23,320
|
|
|
$
|
152,861
|
|
|
Weighted-average interest rate(1)
|
*
|
|
0.93
|
%
|
|
0.06
|
%
|
|
1.43
|
%
|
|
Long-term:(2)
|
|
|
|
|
|
|
|
|
Amount
|
$
|
21,777
|
|
|
$
|
19,799
|
|
|
$
|
30,227
|
|
|
$
|
43,963
|
|
|
Weighted-average interest rate
|
1.03
|
%
|
|
1.75
|
%
|
|
1.03
|
%
|
|
1.83
|
%
|
|
Total paid off:
|
|
|
|
|
|
|
|
|
Amount
|
$
|
30,638
|
|
|
$
|
43,868
|
|
|
$
|
53,547
|
|
|
$
|
196,824
|
|
|
Weighted-average interest rate
|
0.73
|
%
|
|
1.30
|
%
|
|
0.61
|
%
|
|
1.52
|
%
|
* Represents a weighted-average interest rate of less than 0.005%
(1)Includes interest generated from negative interest rates on certain repurchase agreements, which offset our short-term funding costs. Consequently, market conditions may result in weighted-average interest rates that are negative or at zero.
(2)Includes credit risk-sharing securities issued as CAS debt prior to November 2018. For information on our credit risk transfer transactions, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2020 Form 10-K.
(3)Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original face value, which does not equal the amount of actual cash payment.
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|
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|
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|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
67
|
|
|
|
|
|
|
|
|
|
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|
MD&A | Liquidity and Capital Management
|
Other Investments Portfolio
The chart below displays information on the composition of our other investments portfolio. The balance of our other investments portfolio fluctuates as a result of changes in our cash flows, liquidity in the fixed-income markets, and our liquidity risk management framework and practices.
Our other investments portfolio decreased during the first half of 2021 primarily due to a decrease in U.S. Treasury securities. In the first quarter of 2021, we began to invest funds held by consolidated trusts directly in eligible short-term third-party investments. As the funds underlying these investments are restricted per the trust agreements, these securities are not considered in our sources of liquidity and are excluded from our other investments portfolio. Prior to this change, funds held by consolidated trusts were invested in Fannie Mae short-term debt, as allowed by the trust agreements. We then invested those proceeds in unrestricted short-term investments, which were included in our other investments portfolio. This change did not materially alter our liquidity position.
In addition, we used cash and other liquid assets that accumulated in 2020 to fund our operations during the first half of 2021. Due to lower overall funding needs, we reduced our debt issuances during this period, which also resulted in a reduction in our other investments portfolio as maturing investments were not replaced.
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|
Cash and cash equivalents(1)
|
|
|
|
|
|
|
|
Federal funds sold and securities purchased under agreements to resell or similar arrangements
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
(1) Cash equivalents are comprised of overnight repurchase agreements and U.S. Treasuries that have a maturity at the date of acquisition of three months or less.
Cash Flows
Six Months Ended June 30, 2021. Cash, cash equivalents and restricted cash and cash equivalents increased from $115.6 billion as of December 31, 2020 to $125.3 billion as of June 30, 2021. The increase was primarily driven by cash inflows from (1) the sale of Fannie Mae MBS to third parties and (2) proceeds from repayments and sales of loans.
Partially offsetting these cash inflows were cash outflows primarily from (1) payments on outstanding debt of consolidated trusts, (2) purchases of loans held for investment, and (3) the redemption of funding debt, which outpaced issuances, primarily for the reasons described above.
Six Months Ended June 30, 2020. Cash, cash equivalents and restricted cash and cash equivalents increased from $61.4 billion as of December 31, 2019 to $120.2 billion as of June 30, 2020. The increase was primarily driven by cash inflows from (1) proceeds from repayments and sales of loans, (2) the sale of Fannie Mae MBS to third parties, and (3) the issuance of funding debt, which outpaced redemptions, primarily for the reasons described above.
Partially offsetting these cash inflows were cash outflows primarily from (1) payments on outstanding debt of consolidated trusts and (2) purchases of loans held for investment.
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|
Fannie Mae Second Quarter 2021 Form 10-Q
|
68
|
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MD&A | Liquidity and Capital Management
|
Credit Ratings
As of June 30, 2021, our credit ratings have not changed since we filed our 2020 Form 10-K. For information on our credit ratings, see “MD&A—Liquidity and Capital Management—Liquidity Management—Credit Ratings” in our 2020 Form 10-K.
Capital Management
Capital Requirements
The deficit of our core capital over statutory minimum capital established in the GSE Act was $111.5 billion as of June 30, 2021 and $124.3 billion as of December 31, 2020. As we discuss in “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory Matters—Capital” in our 2020 Form 10-K, FHFA has established a new enterprise regulatory capital framework, which went into effect in February 2021. The dates on which we must comply with the quantitative requirements of the new capital framework are staggered and largely dependent on whether we remain in conservatorship. See “Note 12, Regulatory Capital Requirements” in our 2020 Form 10-K for more information on our statutory capital measures under the GSE Act.
Capital Activity
Under the dividend provisions of the senior preferred stock, we are permitted to retain increases in our net worth until our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers under the enterprise regulatory capital framework discussed in “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory Matters—Capital” in our 2020 Form 10-K. The aggregate liquidation preference of the senior preferred stock increased to $151.7 billion as of June 30, 2021 and will further increase to $158.8 billion as of September 30, 2021 due to the $7.1 billion increase in our net worth during the second quarter of 2021.
See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 2020 Form 10-K for more information on the terms of our senior preferred stock and our senior preferred stock purchase agreement with Treasury. See “Risk Factors—GSE and Conservatorship Risk” in our 2020 Form 10-K for a discussion of the risks associated with the limit on our capital reserves.
Treasury Funding Commitment
Treasury made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. As of June 30, 2021, the remaining amount of Treasury’s funding commitment to us was $113.9 billion. See “Note 11, Equity” in our 2020 Form 10-K for more information on the funding commitment provided by Treasury under the senior preferred stock purchase agreement.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements result primarily from the following:
•our guaranty of mortgage loan securitization and resecuritization transactions, and other guaranty commitments, over which we do not have control;
•liquidity support transactions; and
•partnership interests.
Some of the securities we issue are structured securities backed, in whole or in part, by Freddie Mac securities. When we issue a structured security, we provide a guaranty that we will supplement amounts received from the underlying mortgage-related security as required to permit timely payment of principal and interest on the certificates related to the resecuritization trust. Accordingly, when we issue structured securities backed in whole or in part by Freddie Mac securities, we extend our guaranty to the underlying Freddie Mac security included in the structured security. Our issuance of structured securities backed in whole or in part by Freddie Mac securities creates additional off-balance sheet exposure as we do not have control over the Freddie Mac mortgage loan securitizations. Because we do not have the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed, which constitute control of these securitization trusts, we do not consolidate these trusts in our condensed consolidated balance sheet, giving rise to off-balance sheet exposure.
The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS net of any beneficial interest that we retain, and other financial guarantees was $184.2 billion as of June 30, 2021. Approximately $138.0 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers. Additionally, off-balance sheet exposure includes approximately $31.0 billion of the unpaid principal
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|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
69
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|
MD&A | Off-Balance Sheet Arrangements
|
balance of Freddie Mac securities backing Fannie Mae-issued REMICs. We expect our off-balance sheet exposure to Freddie Mac securities to increase as we issue more structured securities backed by Freddie Mac securities in the future. The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS, net of any beneficial interest that we retain, and other financial guarantees was $153.6 billion as of December 31, 2020. Approximately $110.7 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers and $26.6 billion of this amount consisted of the unpaid principal balance of Freddie Mac securities backing Fannie Mae-issued REMICs. See “Note 6, Financial Guarantees” for more information regarding our maximum exposure to loss on unconsolidated Fannie Mae MBS and Freddie Mac securities.
We also have off-balance sheet exposure to losses from liquidity support transactions and partnership interests.
•Our total outstanding liquidity commitments to advance funds for securities backed by multifamily housing revenue bonds totaled $5.8 billion as of June 30, 2021 and $6.4 billion as of December 31, 2020. These commitments require us to advance funds to third parties that enable them to repurchase tendered bonds or securities that are unable to be remarketed. We hold cash and cash equivalents in our other investments portfolio in excess of these commitments to advance funds.
•We make investments in various limited partnerships and similar legal entities, which consist of low-income housing tax credit investments, community investments and other entities. When we do not have a controlling financial interest in those entities, our condensed consolidated balance sheets reflect only our investment rather than the full amount of the partnership’s assets and liabilities. See “Note 2, Consolidations and Transfers of Financial Assets— Unconsolidated VIEs” for information regarding our limited partnerships and similar legal entities.
Risk Management
Our business activities expose us to the following major categories of risk: credit risk (including mortgage credit risk and institutional counterparty credit risk), market risk (including interest-rate risk), liquidity and funding risk, and operational risk (including cyber/information security risk, third-party risk and model risk), as well as strategic risk, compliance risk and reputational risk. See “MD&A—Risk Management” in our 2020 Form 10-K for a discussion of our management of these risks. This section supplements and updates that discussion but does not address all of the risk management categories described in our 2020 Form 10-K.
Institutional Counterparty Credit Risk Management
This section supplements and updates our discussion of institutional counterparty credit risk management in our 2020 Form 10-K. See “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Risk Factors—Credit Risk” in our 2020 Form 10-K for a discussion of our exposure to institutional counterparty credit risk and our strategy for managing this risk. As described in “Risk Factors” in this report, the COVID-19 pandemic has increased our counterparty credit risk. Also see “Note 10, Concentrations of Credit Risk” in this report for an update on our counterparty credit risk exposure.
Change in Non-Depository Seller and Servicer Liquidity Requirement as a Result of COVID-19 Forbearances
We have previously established minimum liquidity requirements for single-family non-depository servicers to maintain eligibility with Fannie Mae. With the increase in delinquent loans in forbearance plans as a result of the unprecedented circumstances of the COVID-19 pandemic and the CARES Act, we temporarily modified our minimum liquidity requirements for single-family non-depository servicers to maintain eligibility with Fannie Mae. Beginning with the second quarter of 2020, when calculating the minimum liquidity requirement for seriously delinquent mortgage loans for non-depository servicers, an adjustment is included for mortgage loans in a COVID-19-related forbearance plan that are 90 days or more delinquent and were current at the inception of the plan. The adjustment provides partial relief of the minimum liquidity requirements for the servicers of these impacted loans.
In 2020, FHFA announced that it would re-propose the minimum financial eligibility requirements for Fannie Mae and Freddie Mac sellers and servicers due to market volatility driven by the COVID-19 pandemic.
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Fannie Mae Second Quarter 2021 Form 10-Q
|
70
|
|
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MD&A | Risk Management | Institutional Counterparty Credit Risk Management
|
Change in Private Mortgage Insurer Eligibility Requirements
Mortgage insurers must meet and maintain compliance with private mortgage insurer eligibility requirements (“PMIERs”) to be eligible to write mortgage insurance on loans acquired by Fannie Mae. The PMIERs are designed to ensure that mortgage insurers have sufficient liquid assets to pay all claims under a hypothetical future stress scenario. Under FHFA guidance, we and Freddie Mac published an update to the PMIERs in June 2021, which revised PMIERs guidance issued in 2020 that addressed issues arising from the COVID-19 pandemic. The new revisions include:
•maintaining the temporary adjustment when calculating risk-based required assets for nonperforming mortgage loans that became newly delinquent after the onset of the COVID-19 pandemic or that are subject to a forbearance plan granted in response to a financial hardship related to COVID-19; and
•establishing through December 31, 2021, the ability for private mortgage insurers to pay dividends or make other new transfers of cash if they have a PMIERs surplus above a specified level.
The adjustment to the risk-based required assets for nonperforming mortgage loans provides partial relief to mortgage insurers’ capital requirements under the PMIERs for the impacted loans.
Market Risk Management, including Interest-Rate Risk Management
We are subject to market risk, which includes interest-rate risk and spread risk. Interest-rate risk is the risk that movements in benchmark interest rates could adversely affect the fair value of our assets or liabilities or our future earnings. Spread risk represents the change in an instrument’s fair value that relates to factors other than changes in the benchmark interest rate.
We are exposed to interest rate risk through our “net portfolio,” which we define as our retained mortgage portfolio assets; other investments portfolio; outstanding debt of Fannie Mae used to fund the retained mortgage portfolio assets and other investments portfolio; and mortgage commitments and risk management derivatives. Our goal is to manage interest-rate risk from our net portfolio to be neutral to movements in interest rates and volatility on an economic basis, subject to model constraints and prevailing market conditions. We actively manage the interest-rate risk of our net portfolio through the use of interest-rate derivatives and by issuing a broad range of both callable and non-callable debt instruments.
We are also exposed to interest-rate risk in connection with cost basis adjustments related to mortgage assets held by our consolidated MBS trusts. These cost basis adjustments often result from upfront cash fees exchanged at the time of loan acquisition, which include buy-ups, buy-downs, and loan-level risk-based pricing adjustments. Changes in interest rates, which drive loan prepayment rates, can impact the timing of when we recognize amortization income related to these cost basis amounts thereby impacting our earnings. Changes in the timing of income recognition related to cost basis adjustments impact the present value of this income. See “Consolidated Results of Operations—Net Interest Income—Analysis of Deferred Amortization Income” for more information on our outstanding net cost basis adjustments related to consolidated MBS trusts.
We do not currently actively manage or hedge, on an economic basis, our spread risk or the interest rate risk arising from cost basis adjustments associated with mortgage assets held by our consolidated MBS trusts.
For additional information on the impact of market risk on our earnings, see “Earnings Exposure to Interest-Rate Risk” below.
This section supplements and updates information regarding market risk management in our 2020 Form 10-K. See “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management” and “Risk Factors” in our 2020 Form 10-K for additional information, including our sources of interest-rate risk exposure, business risks posed by changes in interest rates, and our strategy for managing interest-rate risk.
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|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
71
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management
|
Measurement of Interest-Rate Risk
The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates and the slope of the yield curve as measured on the last day of each period presented. The table below also provides the daily average, minimum, maximum and standard deviation values for duration gap and for the most adverse market value impact on the net portfolio to changes in the level of interest rates and the slope of the yield curve for the three months ended June 30, 2021 and 2020. Our practice is to allow interest rates to go below zero in the downward shock models unless otherwise prevented through contractual floors.
For information on how we measure our interest-rate risk, see our 2020 Form 10-K in “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management.”
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|
|
Interest-Rate Sensitivity of Net Portfolio to Changes in Interest-Rate Level and Slope of Yield Curve
|
|
|
As of (1)(2)
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
(Dollars in millions)
|
|
Rate level shock:
|
|
|
|
|
|
|
|
|
-100 basis points
|
|
$
|
(345)
|
|
|
|
|
$
|
(179)
|
|
|
|
-50 basis points
|
|
(75)
|
|
|
|
|
8
|
|
|
|
+50 basis points
|
|
26
|
|
|
|
|
(111)
|
|
|
|
+100 basis points
|
|
32
|
|
|
|
|
(154)
|
|
|
|
Rate slope shock:
|
|
|
|
|
|
|
|
|
-25 basis points (flattening)
|
|
(4)
|
|
|
|
|
(9)
|
|
|
|
+25 basis points (steepening)
|
|
13
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, (1)(3)
|
|
|
|
2021
|
|
2020
|
|
|
|
Duration Gap
|
|
Rate Slope Shock 25 bps
|
|
Rate Level Shock 50 bps
|
|
Duration Gap
|
|
Rate Slope Shock 25 bps
|
|
Rate Level Shock 50 bps
|
|
|
|
|
|
Market Value Sensitivity
|
|
|
|
Market Value Sensitivity
|
|
|
|
(In years)
|
|
(Dollars in millions)
|
|
(In years)
|
|
(Dollars in millions)
|
|
Average
|
|
0.02
|
|
|
$
|
(11)
|
|
|
|
|
$
|
(60)
|
|
|
|
(0.01)
|
|
|
$
|
(23)
|
|
|
|
|
$
|
(47)
|
|
|
|
Minimum
|
|
(0.04)
|
|
|
(17)
|
|
|
|
|
(118)
|
|
|
|
(0.09)
|
|
|
(35)
|
|
|
|
|
(136)
|
|
|
|
Maximum
|
|
0.10
|
|
|
(3)
|
|
|
|
|
(18)
|
|
|
|
0.05
|
|
|
(12)
|
|
|
|
|
—
|
|
|
|
Standard deviation
|
|
0.03
|
|
|
4
|
|
|
|
|
27
|
|
|
|
0.03
|
|
|
6
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Computed based on changes in U.S. LIBOR interest-rates swap curve. Changes in the level of interest-rates assume a parallel shift in all maturities of the U.S. LIBOR interest-rate swap curve. Changes in the slope of the yield curve assume a constant 7-year rate, a shift of 16.7 basis points for the 1-year rate (and shorter tenors) and an opposite shift of 8.3 basis points for the 30-year rate. Rate shocks for remaining maturity points are interpolated.
(2)Measured on the last business day of each period presented.
(3)Computed based on daily values during the period presented.
The market value sensitivity of our net portfolio varies across a range of interest-rate shocks depending upon the duration and convexity profile of our net portfolio.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
72
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management
|
We use derivatives to help manage the residual interest-rate risk exposure between our assets and liabilities. Derivatives have enabled us to keep our economic interest-rate risk exposure at consistently low levels in a wide range of interest-rate environments. The table below displays an example of how derivatives impacted the net market value exposure for a 50 basis point parallel interest-rate shock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Impact on Interest-Rate Risk (50 Basis Points)
|
|
|
As of (1)
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
(Dollars in millions)
|
|
Before derivatives
|
|
$
|
(872)
|
|
|
|
|
$
|
(613)
|
|
|
|
After derivatives
|
|
(75)
|
|
|
|
|
8
|
|
|
|
Effect of derivatives
|
|
797
|
|
|
|
|
621
|
|
|
(1)Measured on the last business day of each period presented.
Earnings Exposure to Interest-Rate Risk
While we manage the interest-rate risk of our net portfolio with the objective of remaining neutral to movements in interest rates and volatility on an economic basis, our earnings can experience volatility due to interest-rate changes and differing accounting treatments that apply to certain financial instruments on our balance sheet. Specifically, we have exposure to earnings volatility that is driven by changes in interest rates in two primary areas: our net portfolio and our consolidated MBS trusts. The exposure in the net portfolio is primarily driven by changes in the fair value of risk management derivatives, mortgage commitments, and certain assets, primarily securities, that are carried at fair value. The exposure related to our consolidated MBS trusts relates to changes in the amortization of cost basis adjustments and our credit loss reserves driven by changes in interest rates.
In January 2021, we began applying fair value hedge accounting to address some of the exposure to interest rates, particularly the earnings volatility related to changes in benchmark interest rates, including LIBOR and SOFR. Although we expect the earnings volatility related to changes in the benchmark interest rates to continue to be meaningfully reduced as a result of our adoption of hedge accounting, earnings variability driven by other factors, such as spreads or changes in cost basis amortization recognized in net interest income, remains. In addition, when the shape of the yield curve shifts significantly from period to period, hedge accounting may be less effective. In our current program, we establish new hedging relationships daily to provide flexibility in our overall risk management strategy.
See “Consolidated Results of Operations—Hedge Accounting Impact,” “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our condensed consolidated financial statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 1, Summary of Significant Accounting Policies” in this report and in our 2020 Form 10-K.
We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We have identified one of our accounting policies, allowance for loan losses, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition.
Allowance for Loan Losses
The allowance for loan losses is an estimate of single-family and multifamily HFI loan receivables that we expect will not be collected related to loans held by Fannie Mae and consolidated Fannie Mae MBS trusts. The expected credit losses are deducted from the amortized cost basis of HFI loans to present the net amount expected to be received. We use a discounted cash flow method to measure expected credit losses on our single-family mortgage loans and an
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Critical Accounting Policies and Estimates
|
undiscounted loss method to measure expected credit losses on our multifamily mortgage loans. The models use reasonable and supportable forecasts for key economic drivers, such as home prices (single-family), rental income (multifamily) and capitalization rates (multifamily). Our modeled loan performance is based on our historical experience of loans with similar risk characteristics adjusted to reflect current conditions and reasonable and supportable forecasts. Our historical loss experience and our credit loss estimates capture the possibility of remote events that could result in credit losses on loans that are considered low risk. Our credit loss models, including the forecast data used as key inputs, are subject to our model oversight and review processes as well as other established governance and controls.
Changes to our estimate of expected credit losses, including changes due to the passage of time, are recorded through the benefit (provision) for credit losses. When calculating our allowance for loan losses, we consider only our amortized cost in the loans at the balance sheet date. We record write-offs as a reduction to the allowance for loan losses when losses are confirmed through the receipt of assets in satisfaction of a loan, such as the underlying collateral upon foreclosure or cash upon completion of a short sale. Additionally, we record write-offs as a reduction to our allowance for loan losses when a loan is determined to be uncollectible and upon the redesignation of a nonperforming or reperforming loan from HFI to HFS. We include expected recoveries of amounts previously written off and expected to be written off in determining our allowance for loan losses.
Our process for determining the measurement of expected credit losses for the period under the expected credit loss model is complex and involves significant management judgment, including a reliance on historical loss information and current economic forecasts that may not be representative of credit losses we ultimately realize. For example, uncertainty regarding the expected impacts of the COVID-19 pandemic, including the pace and strength of post-pandemic economic growth, required significant management judgment in assessing our allowance for loan losses as of June 30, 2021.
We provide more detailed information on our accounting for the allowance for loan losses in “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K. See “Note 4, Allowance for Loan Losses” in this report for additional information about our current-period benefit or provision for loan losses, including a discussion of the estimates used in measuring the impact of the COVID-19 pandemic on our allowance. See “Risk Factors” in our 2020 Form 10-K and in this report for a discussion of the risks associated with the need for management to make judgments and estimates in applying our accounting policies and methods.
Impact of Future Adoption of New Accounting Guidance
We identify and discuss the expected impact on our condensed consolidated financial statements of recently issued accounting guidance, if any, in “Note 1, Summary of Significant Accounting Policies.” No applicable guidance was identified during the second quarter of 2021.
Forward-Looking Statements
This report includes statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). In addition, we and our senior management may from time to time make forward-looking statements in our other filings with the SEC, our other publicly available written statements, and orally to analysts, investors, the news media and others. Forward-looking statements often include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “forecast,” “project,” “would,” “should,” “could,” “likely,” “may,” “will” or similar words. Examples of forward-looking statements in this report include, among others, statements relating to our expectations regarding the following matters:
•our future financial performance, financial condition and net worth, and the factors that will affect them, including our expectations regarding our future net revenues, amortization income and guaranty fees;
•our business plans and strategies, and their impact;
•our plans relating to and the effects of our credit risk transfer transactions, as well as the factors that will affect our engagement in future transactions;
•economic, mortgage market and housing market conditions (including expectations regarding home price growth), the factors that will affect those conditions, and the impact of those conditions on our business and financial results;
•volatility in our future financial results and the impact of our adoption of hedge accounting on such volatility;
•the size and composition of our retained mortgage portfolio;
•the amount and timing of our purchases of loans from MBS trusts;
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Forward-Looking Statements
|
•the impact of legislation and regulation on our business or financial results;
•the impact of the COVID-19 pandemic on our business;
•our payments to HUD and Treasury funds under the GSE Act;
•our future off-balance sheet exposure to Freddie Mac-issued securities;
•the risks to our business;
•future delinquency rates, defaults, forbearances, modifications and other loss mitigation activity, foreclosures, and credit losses relating to the loans in our guaranty book of business and the factors that will affect them, including the impact of the COVID-19 pandemic;
•the performance of loans in our book of business and the factors that will affect such performance;
•the amount of our outstanding debt and how we expect to meet our debt obligations; and
•our response to legal and regulatory proceedings and their impact on our business or financial condition.
Forward-looking statements reflect our management’s current expectations, forecasts or predictions of future conditions, events or results based on various assumptions and management’s estimates of trends and economic factors in the markets in which we are active and that otherwise impact our business plans. Forward-looking statements are not guarantees of future performance. By their nature, forward-looking statements are subject to significant risks and uncertainties and changes in circumstances. Our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.
There are a number of factors that could cause actual conditions, events or results to differ materially from those described in our forward-looking statements, including, among others, the following:
•uncertainty regarding our future, our exit from conservatorship and our ability to raise or earn the capital needed to meet our capital requirements;
•uncertainty surrounding the duration, spread and severity of COVID-19 pandemic; the actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the pandemic and COVID-19 vaccination rates; the effectiveness of currently available COVID-19 vaccines against new variants of the coronavirus, including the Delta variant; the nature, extent and success of the forbearance, payment deferrals, modifications and other loss mitigation options we provide to borrowers affected by the pandemic; accounting elections and estimates relating to the impact of the COVID-19 pandemic; borrower and renter behavior in response to the pandemic and its economic impact; the extent to which current economic and operating conditions continue, including whether any future outbreaks or increases in new COVID-19 cases interrupt economic recovery; and how quickly and to what extent affected borrowers, renters and counterparties recover from the negative economic impact of the pandemic;
•the impact of the senior preferred stock purchase agreement and the enterprise regulatory capital framework, as well as future legislative and regulatory requirements or changes, governmental initiatives, or executive orders affecting us, such as the enactment of housing finance reform legislation, including changes that limit our business activities or our footprint;
•actions by FHFA, Treasury, HUD, the CFPB or other regulators, Congress, the Executive Branch, or state or local governments that affect our business;
•changes in the structure and regulation of the financial services industry;
•the potential impact of a change in the corporate income tax rate, which we expect would affect our capital requirements and net income in the quarter of enactment as a result of changes in the value of our deferred tax assets and our net income in subsequent quarters as a result of the change in our effective federal income tax rate;
•the timing and level of, as well as regional variation in, home price changes;
•future interest rates and credit spreads;
•developments that may be difficult to predict, including: market conditions that result in changes in our net amortization income from our guaranty book of business, fluctuations in the estimated fair value of our derivatives and other financial instruments that we mark to market through our earnings; and developments that affect our loss reserves, such as changes in interest rates, home prices or accounting standards, or events such as natural or other disasters, the emergence of widespread health emergencies or pandemics, or other disruptive or catastrophic events;
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Forward-Looking Statements
|
•uncertainties relating to the discontinuance of LIBOR, or other market changes that could impact the loans we own or guarantee or our MBS;
•disruptions or instability in the housing and credit markets;
•the size and our share of the U.S. mortgage market and the factors that affect them, including population growth and household formation;
•growth, deterioration and the overall health and stability of the U.S. economy, including U.S. GDP, unemployment rates, personal income, inflation rates and other indicators thereof;
•changes in fiscal monetary policy;
•our and our competitors’ future guaranty fee pricing and the impact of that pricing on our competitive environment and guaranty fee revenues;
•the volume of mortgage originations;
•the size, composition, quality and performance of our guaranty book of business and retained mortgage portfolio;
•the competitive environment in which we operate, including the impact of legislative, regulatory or other developments on levels of competition in our industry and other factors affecting our market share;
•how long loans in our guaranty book of business remain outstanding;
•challenges we face in retaining and hiring qualified executives and other employees;
•the effectiveness of our business resiliency plans and systems;
•changes in the demand for Fannie Mae MBS, in general or from one or more major groups of investors;
•our conservatorship, including any changes to or termination (by receivership or otherwise) of the conservatorship and its effect on our business;
•the investment by Treasury, including the impact of recent changes or potential future changes to the terms of the senior preferred stock purchase agreement, and its effect on our business, including restrictions imposed on us by the terms of the senior preferred stock purchase agreement, the senior preferred stock, and Treasury’s warrant, as well as the extent that these or other restrictions on our business and activities are applied to us through other mechanisms even if we cease to be subject to these agreements and instruments;
•adverse effects from activities we undertake to support the mortgage market and help borrowers, renters, lenders and servicers;
•actions we may be required to take by FHFA, in its role as our conservator or as our regulator, such as actions in response to the COVID-19 pandemic, changes in the type of business we do, or actions relating to UMBS or our resecuritization of Freddie Mac-issued securities;
•limitations on our business imposed by FHFA, in its role as our conservator or as our regulator;
•our future objectives and activities in support of those objectives, including actions we may take to reach additional underserved borrowers;
•the possibility that changes in leadership at FHFA or the Administration may result in changes in FHFA’s or Treasury’s willingness to pursue our exit from conservatorship or other changes that affect our business;
•our reliance on Common Securitization Solutions, LLC (“CSS”) and the common securitization platform for a majority of our single-family securitization activities, our reduced influence over CSS as a result of changes made in 2020 to the CSS limited liability company agreement and in 2021 to the CSS Board of Managers, and any additional changes FHFA may require in our relationship with or in our support of CSS;
•a decrease in our credit ratings;
•limitations on our ability to access the debt capital markets;
•constraints on our entry into new credit risk transfer transactions;
•significant changes in forbearance, modification and foreclosure activity;
•the volume and pace of future nonperforming and reperforming loan sales and their impact on our results and serious delinquency rates;
•changes in borrower behavior;
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
MD&A | Forward-Looking Statements
|
•actions we may take to mitigate losses, and the effectiveness of our loss mitigation strategies, management of our REO inventory and pursuit of contractual remedies;
•defaults by one or more institutional counterparties;
•resolution or settlement agreements we may enter into with our counterparties;
•our need to rely on third parties to fully achieve some of our corporate objectives;
•our reliance on mortgage servicers;
•changes in GAAP, guidance by the Financial Accounting Standards Board and changes to our accounting policies;
•changes in the fair value of our assets and liabilities;
•the stability and adequacy of the systems and infrastructure that impact our operations, including ours and those of CSS, our other counterparties and other third parties;
•the impact of increasing interdependence between the single-family mortgage securitization programs of Fannie Mae and Freddie Mac in connection with UMBS;
•operational control weaknesses;
•our reliance on models and future updates we make to our models, including the assumptions used by these models;
•domestic and global political risks and uncertainties;
•natural disasters, environmental disasters, terrorist attacks, widespread health emergencies or pandemics, infrastructure failures, or other disruptive or catastrophic events;
•severe weather events, fires, floods or other climate change events for which we may be uninsured or under-insured or that may affect our counterparties, and other risks resulting from climate change and efforts to address climate change;
•cyber attacks or other information security breaches or threats; and
•the other factors described in “Risk Factors” in this report and in our 2020 Form 10-K.
Readers are cautioned not to unduly rely on the forward-looking statements we make and to place these forward-looking statements into proper context by carefully considering the factors discussed in “Risk Factors” in our 2020 Form 10-K and in this report. These forward-looking statements are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under the federal securities laws.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Second Quarter 2021 Form 10-Q
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements | Condensed Consolidated Balance Sheets
|
Item 1. Financial Statements
FANNIE MAE
(In conservatorship)
Condensed Consolidated Balance Sheets — (Unaudited)
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
ASSETS
|
|
Cash and cash equivalents
|
|
$
|
48,879
|
|
|
|
|
$
|
38,337
|
|
|
|
Restricted cash and cash equivalents (includes $68,777 and $68,308, respectively, related to consolidated trusts)
|
|
76,420
|
|
|
|
|
77,286
|
|
|
|
Federal funds sold and securities purchased under agreements to resell or similar arrangements (includes $17,775 and $0, respectively, related to consolidated trusts)
|
|
43,888
|
|
|
|
|
28,200
|
|
|
|
Investments in securities:
|
|
|
|
|
|
|
|
|
Trading, at fair value (includes $6,186 and $6,544, respectively, pledged as collateral)
|
|
95,101
|
|
|
|
|
136,542
|
|
|
|
Available-for-sale, at fair value (with an amortized cost of $932 and $1,606, net of allowance for credit losses of $3 as of June 30, 2021 and December 31, 2020)
|
|
955
|
|
|
|
|
1,697
|
|
|
|
Total investments in securities
|
|
96,056
|
|
|
|
|
138,239
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
Loans held for sale, at lower of cost or fair value
|
|
6,933
|
|
|
|
|
5,197
|
|
|
|
Loans held for investment, at amortized cost:
|
|
|
|
|
|
|
|
|
Of Fannie Mae
|
|
81,363
|
|
|
|
|
112,726
|
|
|
|
Of consolidated trusts
|
|
3,770,125
|
|
|
|
|
3,546,521
|
|
|
|
Total loans held for investment (includes $5,616 and $6,490, respectively, at fair value)
|
|
3,851,488
|
|
|
|
|
3,659,247
|
|
|
|
Allowance for loan losses
|
|
(7,114)
|
|
|
|
|
(10,552)
|
|
|
|
Total loans held for investment, net of allowance
|
|
3,844,374
|
|
|
|
|
3,648,695
|
|
|
|
Total mortgage loans
|
|
3,851,307
|
|
|
|
|
3,653,892
|
|
|
|
Advances to lenders
|
|
6,257
|
|
|
|
|
10,449
|
|
|
|
Deferred tax assets, net
|
|
12,575
|
|
|
|
|
12,947
|
|
|
|
Accrued interest receivable, net (includes $9,821 and $9,635, respectively, related to consolidated trusts and net of allowance of $168 and $216 as of June 30, 2021 and December 31, 2020, respectively)
|
|
10,169
|
|
|
|
|
9,937
|
|
|
|
Acquired property, net
|
|
1,138
|
|
|
|
|
1,261
|
|
|
|
Other assets
|
|
11,349
|
|
|
|
|
15,201
|
|
|
|
Total assets
|
|
$
|
4,158,038
|
|
|
|
|
$
|
3,985,749
|
|
|
|
LIABILITIES AND EQUITY
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accrued interest payable (includes $8,653 and $8,955, respectively, related to consolidated trusts)
|
|
$
|
9,374
|
|
|
|
|
$
|
9,719
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
Of Fannie Mae (includes $2,946 and $3,728, respectively, at fair value)
|
|
251,576
|
|
|
|
|
289,572
|
|
|
|
Of consolidated trusts (includes $22,972 and $24,586, respectively, at fair value)
|
|
3,844,699
|
|
|
|
|
3,646,164
|
|
|
|
Other liabilities (includes $1,325 and $1,523, respectively, related to consolidated trusts)
|
|
15,044
|
|
|
|
|
15,035
|
|
|
|
Total liabilities
|
|
4,120,693
|
|
|
|
|
3,960,490
|
|
|
|
Commitments and contingencies (Note 13)
|
|
—
|
|
|
|
|
—
|
|
|
|
Fannie Mae stockholders’ equity:
|
|
|
|
|
|
|
|
|
Senior preferred stock (liquidation preference of $151,724 and $142,192, respectively)
|
|
120,836
|
|
|
|
|
120,836
|
|
|
|
Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding
|
|
19,130
|
|
|
|
|
19,130
|
|
|
|
Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and 1,158,087,567 shares outstanding
|
|
687
|
|
|
|
|
687
|
|
|
|
Accumulated deficit
|
|
(95,965)
|
|
|
|
|
(108,110)
|
|
|
|
Accumulated other comprehensive income
|
|
57
|
|
|
|
|
116
|
|
|
|
Treasury stock, at cost, 150,675,136 shares
|
|
(7,400)
|
|
|
|
|
(7,400)
|
|
|
|
Total stockholders’ equity (See Note 1: Senior Preferred Stock Purchase Agreement and Senior Preferred Stock for information on the related dividend obligation and liquidation preference)
|
|
37,345
|
|
|
|
|
25,259
|
|
|
|
Total liabilities and equity
|
|
$
|
4,158,038
|
|
|
|
|
$
|
3,985,749
|
|
|
See Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements | Condensed Consolidated Statements of Operations and Comprehensive Income
|
FANNIE MAE
(In conservatorship)
Condensed Consolidated Statements of Operations and Comprehensive Income — (Unaudited)
(Dollars and shares in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
$
|
122
|
|
|
|
|
$
|
219
|
|
|
|
|
|
|
$
|
262
|
|
|
|
|
$
|
535
|
|
|
Available-for-sale securities
|
|
18
|
|
|
|
|
26
|
|
|
|
|
|
|
37
|
|
|
|
|
57
|
|
|
Mortgage loans
|
|
24,932
|
|
|
|
|
27,007
|
|
|
|
|
|
|
48,285
|
|
|
|
|
55,945
|
|
|
Federal funds sold and securities purchased under agreements to resell or similar arrangements
|
|
4
|
|
|
|
|
14
|
|
|
|
|
|
|
12
|
|
|
|
|
121
|
|
|
Other
|
|
31
|
|
|
|
|
25
|
|
|
|
|
|
|
73
|
|
|
|
|
59
|
|
|
Total interest income
|
|
25,107
|
|
|
|
|
27,291
|
|
|
|
|
|
|
48,669
|
|
|
|
|
56,717
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
(1)
|
|
|
|
|
(54)
|
|
|
|
|
|
|
(4)
|
|
|
|
|
(156)
|
|
|
Long-term debt
|
|
(16,820)
|
|
|
|
|
(21,460)
|
|
|
|
|
|
|
(33,637)
|
|
|
|
|
(45,437)
|
|
|
Total interest expense
|
|
(16,821)
|
|
|
|
|
(21,514)
|
|
|
|
|
|
|
(33,641)
|
|
|
|
|
(45,593)
|
|
|
Net interest income
|
|
8,286
|
|
|
|
|
5,777
|
|
|
|
|
|
|
15,028
|
|
|
|
|
11,124
|
|
|
Benefit (provision) for credit losses
|
|
2,588
|
|
|
|
|
(12)
|
|
|
|
|
|
|
3,353
|
|
|
|
|
(2,595)
|
|
|
Net interest income after benefit (provision) for credit losses
|
|
10,874
|
|
|
|
|
5,765
|
|
|
|
|
|
|
18,381
|
|
|
|
|
8,529
|
|
|
Investment gains (losses), net
|
|
646
|
|
|
|
|
149
|
|
|
|
|
|
|
691
|
|
|
|
|
(9)
|
|
|
Fair value gains (losses), net
|
|
(446)
|
|
|
|
|
(1,018)
|
|
|
|
|
|
|
338
|
|
|
|
|
(1,294)
|
|
|
Fee and other income
|
|
103
|
|
|
|
|
90
|
|
|
|
|
|
|
190
|
|
|
|
|
210
|
|
|
Non-interest income (loss)
|
|
303
|
|
|
|
|
(779)
|
|
|
|
|
|
|
1,219
|
|
|
|
|
(1,093)
|
|
|
Administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
(365)
|
|
|
|
|
(382)
|
|
|
|
|
|
|
(752)
|
|
|
|
|
(775)
|
|
|
Professional services
|
|
(184)
|
|
|
|
|
(231)
|
|
|
|
|
|
|
(398)
|
|
|
|
|
(443)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other administrative expenses
|
|
(197)
|
|
|
|
|
(141)
|
|
|
|
|
|
|
(344)
|
|
|
|
|
(285)
|
|
|
Total administrative expenses
|
|
(746)
|
|
|
|
|
(754)
|
|
|
|
|
|
|
(1,494)
|
|
|
|
|
(1,503)
|
|
|
Foreclosed property expense
|
|
(41)
|
|
|
|
|
(10)
|
|
|
|
|
|
|
(36)
|
|
|
|
|
(90)
|
|
|
Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees
|
|
(758)
|
|
|
|
|
(660)
|
|
|
|
|
|
|
(1,489)
|
|
|
|
|
(1,297)
|
|
|
Credit enhancement expense
|
|
(274)
|
|
|
|
|
(360)
|
|
|
|
|
|
|
(558)
|
|
|
|
|
(736)
|
|
|
Change in expected credit enhancement recoveries
|
|
(44)
|
|
|
|
|
273
|
|
|
|
|
|
|
(75)
|
|
|
|
|
461
|
|
|
Other expenses, net
|
|
(280)
|
|
|
|
|
(261)
|
|
|
|
|
|
|
(599)
|
|
|
|
|
(479)
|
|
|
Total expenses
|
|
(2,143)
|
|
|
|
|
(1,772)
|
|
|
|
|
|
|
(4,251)
|
|
|
|
|
(3,644)
|
|
|
Income before federal income taxes
|
|
9,034
|
|
|
|
|
3,214
|
|
|
|
|
|
|
15,349
|
|
|
|
|
3,792
|
|
|
Provision for federal income taxes
|
|
(1,882)
|
|
|
|
|
(669)
|
|
|
|
|
|
|
(3,204)
|
|
|
|
|
(786)
|
|
|
Net income
|
|
7,152
|
|
|
|
|
2,545
|
|
|
|
|
|
|
12,145
|
|
|
|
|
3,006
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustments and taxes
|
|
(31)
|
|
|
|
|
(11)
|
|
|
|
|
|
|
(54)
|
|
|
|
|
7
|
|
|
Other, net of taxes
|
|
(1)
|
|
|
|
|
(2)
|
|
|
|
|
|
|
(5)
|
|
|
|
|
(5)
|
|
|
Total other comprehensive income (loss)
|
|
(32)
|
|
|
|
|
(13)
|
|
|
|
|
|
|
(59)
|
|
|
|
|
2
|
|
|
Total comprehensive income
|
|
$
|
7,120
|
|
|
|
|
$
|
2,532
|
|
|
|
|
|
|
$
|
12,086
|
|
|
|
|
$
|
3,008
|
|
|
Net income
|
|
$
|
7,152
|
|
|
|
|
$
|
2,545
|
|
|
|
|
|
|
$
|
12,145
|
|
|
|
|
$
|
3,006
|
|
|
Dividends distributed or amounts attributable to senior preferred stock
|
|
(7,120)
|
|
|
|
|
(2,532)
|
|
|
|
|
|
|
(12,086)
|
|
|
|
|
(3,008)
|
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
32
|
|
|
|
|
$
|
13
|
|
|
|
|
|
|
$
|
59
|
|
|
|
|
$
|
(2)
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
|
|
$
|
0.00
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
$
|
0.00
|
|
|
Diluted
|
|
0.01
|
|
|
|
|
0.00
|
|
|
|
|
|
|
0.01
|
|
|
|
|
0.00
|
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
5,867
|
|
|
|
|
5,867
|
|
|
|
|
|
|
5,867
|
|
|
|
|
5,867
|
|
|
Diluted
|
|
5,893
|
|
|
|
|
5,893
|
|
|
|
|
|
|
5,893
|
|
|
|
|
5,867
|
|
See Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements | Condensed Consolidated Statements of Cash Flows
|
FANNIE MAE
(In conservatorship)
Condensed Consolidated Statements of Cash Flows — (Unaudited)
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
Net cash provided by (used in) operating activities
|
|
$
|
40,039
|
|
|
|
|
$
|
(39,322)
|
|
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
Proceeds from maturities and paydowns of trading securities held for investment
|
|
23
|
|
|
|
|
23
|
|
|
|
Proceeds from sales of trading securities held for investment
|
|
159
|
|
|
|
|
—
|
|
|
|
Proceeds from maturities and paydowns of available-for-sale securities
|
|
161
|
|
|
|
|
189
|
|
|
|
Proceeds from sales of available-for-sale securities
|
|
582
|
|
|
|
|
121
|
|
|
|
Purchases of loans held for investment
|
|
(395,301)
|
|
|
|
|
(293,666)
|
|
|
|
Proceeds from repayments of loans acquired as held for investment of Fannie Mae
|
|
5,840
|
|
|
|
|
4,634
|
|
|
|
Proceeds from sales of loans acquired held-for-investment of Fannie Mae
|
|
7,435
|
|
|
|
|
427
|
|
|
|
Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts
|
|
603,947
|
|
|
|
|
448,375
|
|
|
|
Advances to lenders
|
|
(212,678)
|
|
|
|
|
(123,805)
|
|
|
|
Proceeds from disposition of acquired property and preforeclosure sales
|
|
2,157
|
|
|
|
|
3,239
|
|
|
|
Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements
|
|
(15,688)
|
|
|
|
|
(11,872)
|
|
|
|
Other, net
|
|
986
|
|
|
|
|
(937)
|
|
|
|
Net cash provided by (used in) investing activities
|
|
(2,377)
|
|
|
|
|
26,728
|
|
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of debt of Fannie Mae
|
|
101,875
|
|
|
|
|
393,641
|
|
|
|
Payments to redeem debt of Fannie Mae
|
|
(139,184)
|
|
|
|
|
(299,933)
|
|
|
|
Proceeds from issuance of debt of consolidated trusts
|
|
650,713
|
|
|
|
|
401,749
|
|
|
|
Payments to redeem debt of consolidated trusts
|
|
(641,462)
|
|
|
|
|
(423,582)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
72
|
|
|
|
|
(464)
|
|
|
|
Net cash provided by (used in) financing activities
|
|
(27,986)
|
|
|
|
|
71,411
|
|
|
|
Net increase in cash, cash equivalents and restricted cash and cash equivalents
|
|
9,676
|
|
|
|
|
58,817
|
|
|
|
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period
|
|
115,623
|
|
|
|
|
61,407
|
|
|
|
Cash, cash equivalents and restricted cash and cash equivalents at end of period
|
|
$
|
125,299
|
|
|
|
|
$
|
120,224
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
53,676
|
|
|
|
|
$
|
57,733
|
|
|
|
Income taxes
|
|
2,750
|
|
|
|
|
—
|
|
|
See Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements | Condensed Consolidated Statements of Changes in Equity
|
FANNIE MAE
(In conservatorship)
Condensed Consolidated Statements of Changes in
Equity — (Unaudited)
(Dollars and shares in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Stockholders’ Equity
|
|
|
|
Shares Outstanding
|
|
Senior
Preferred Stock
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income
|
|
Treasury
Stock
|
|
|
|
Total
Equity
|
|
|
Senior
Preferred
|
|
Preferred
|
|
Common
|
|
|
Balance as of March 31, 2021
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
$
|
120,836
|
|
|
$
|
19,130
|
|
|
$
|
687
|
|
|
$
|
(103,117)
|
|
|
$
|
89
|
|
|
$
|
(7,400)
|
|
|
|
|
$
|
30,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,152
|
|
|
—
|
|
|
—
|
|
|
|
|
7,152
|
|
|
Other comprehensive income, net of tax effect:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net unrealized gains on available- for-sale securities (net of taxes of $1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
|
|
2
|
|
|
Reclassification adjustment for gains included in net income (net of taxes of $9)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33)
|
|
|
—
|
|
|
|
|
(33)
|
|
|
Other (net of taxes of $1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
|
|
(1)
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,120
|
|
|
Balance as of June 30, 2021
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
$
|
120,836
|
|
|
$
|
19,130
|
|
|
$
|
687
|
|
|
$
|
(95,965)
|
|
|
$
|
57
|
|
|
$
|
(7,400)
|
|
|
|
|
$
|
37,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Stockholders’ Equity
|
|
|
|
Shares Outstanding
|
|
Senior
Preferred Stock
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income
|
|
Treasury
Stock
|
|
|
|
Total
Equity
|
|
|
Senior
Preferred
|
|
Preferred
|
|
Common
|
|
|
Balance as of December 31, 2020
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
$
|
120,836
|
|
|
$
|
19,130
|
|
|
$
|
687
|
|
|
$
|
(108,110)
|
|
|
$
|
116
|
|
|
$
|
(7,400)
|
|
|
|
|
$
|
25,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,145
|
|
|
—
|
|
|
—
|
|
|
|
|
12,145
|
|
|
Other comprehensive income, net of tax effect:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net unrealized gains on available- for-sale securities (net of taxes of $1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
|
|
(4)
|
|
|
Reclassification adjustment for gains included in net income (net of taxes of $13)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50)
|
|
|
—
|
|
|
|
|
(50)
|
|
|
Other (net of taxes of $2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
|
|
(5)
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,086
|
|
|
Balance as of June 30, 2021
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
$
|
120,836
|
|
|
$
|
19,130
|
|
|
$
|
687
|
|
|
$
|
(95,965)
|
|
|
$
|
57
|
|
|
$
|
(7,400)
|
|
|
|
|
$
|
37,345
|
|
See Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements | Condensed Consolidated Statements of Changes in Equity
|
FANNIE MAE
(In conservatorship)
Condensed Consolidated Statements of Changes in
Equity — (Unaudited)
(Dollars and shares in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Stockholders’ Equity
|
|
|
|
Shares Outstanding
|
|
Senior
Preferred Stock
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income
|
|
Treasury
Stock
|
|
|
|
Total
Equity
|
|
|
|
Senior
Preferred
|
|
Preferred
|
|
Common
|
|
|
Balance as of March 31, 2020
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
$
|
120,836
|
|
|
$
|
19,130
|
|
|
$
|
687
|
|
|
$
|
(119,454)
|
|
|
$
|
146
|
|
|
$
|
(7,400)
|
|
|
|
|
$
|
13,945
|
|
|
Senior preferred stock dividends paid
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,545
|
|
|
—
|
|
|
—
|
|
|
|
|
2,545
|
|
|
Other comprehensive income, net of tax effect:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net unrealized gains on available-
for-sale securities (net of taxes of $3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11)
|
|
|
—
|
|
|
|
|
(11)
|
|
|
Reclassification adjustment for gains included
in net income (net of taxes of $0)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Other (net of taxes of $0)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
|
|
(2)
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,532
|
|
|
Balance as of June 30, 2020
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
$
|
120,836
|
|
|
$
|
19,130
|
|
|
$
|
687
|
|
|
$
|
(116,909)
|
|
|
$
|
133
|
|
|
$
|
(7,400)
|
|
|
|
|
$
|
16,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae Stockholders’ Equity
|
|
|
|
Shares Outstanding
|
|
Senior
Preferred Stock
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income
|
|
Treasury
Stock
|
|
|
|
Total
Equity
|
|
|
|
Senior
Preferred
|
|
Preferred
|
|
Common
|
|
|
Balance as of December 31, 2019
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
$
|
120,836
|
|
|
$
|
19,130
|
|
|
$
|
687
|
|
|
$
|
(118,776)
|
|
|
$
|
131
|
|
|
$
|
(7,400)
|
|
|
|
|
$
|
14,608
|
|
Transition impact, net of tax, from the adoption of
the current expected credit loss standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,139)
|
|
|
—
|
|
|
—
|
|
|
|
|
(1,139)
|
|
|
Balance as of January 1, 2020, adjusted
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
120,836
|
|
|
19,130
|
|
|
687
|
|
|
(119,915)
|
|
|
131
|
|
|
(7,400)
|
|
|
|
|
13,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,006
|
|
|
—
|
|
|
—
|
|
|
|
|
3,006
|
|
|
Other comprehensive income, net of tax effect:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net unrealized gains on available- for-sale securities (net of taxes of $1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
|
|
4
|
|
|
Reclassification adjustment for gains included in net income (net of taxes of $1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
|
|
3
|
|
|
Other (net of taxes of $1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
|
|
(5)
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,008
|
|
|
Balance as of June 30, 2020
|
|
1
|
|
|
556
|
|
|
1,158
|
|
|
$
|
120,836
|
|
|
$
|
19,130
|
|
|
$
|
687
|
|
|
$
|
(116,909)
|
|
|
$
|
133
|
|
|
$
|
(7,400)
|
|
|
|
|
$
|
16,477
|
|
See Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
|
FANNIE MAE
(In conservatorship)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
Fannie Mae is a leading source of financing for mortgages in the United States. We are a shareholder-owned corporation organized as a government-sponsored entity (“GSE”) and existing under the Federal National Mortgage Association Charter Act (the “Charter Act” or our “charter”). Our charter is an act of Congress, and we have a mission under that charter to provide liquidity and stability to the residential mortgage market and to promote access to mortgage credit. As a result, we are subject to government oversight and regulation. Our regulators include the Federal Housing Finance Agency (“FHFA”), the U.S. Department of Housing and Urban Development (“HUD”), the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of the Treasury (“Treasury”). The U.S. government does not guarantee our securities or other obligations.
We have been under conservatorship, with FHFA acting as conservator, since September 6, 2008. See below and “Note 1, Summary of Significant Accounting Policies” in our annual report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”) for additional information on our conservatorship and the impact of U.S. government support of our business.
The unaudited interim condensed consolidated financial statements as of and for the three and six months ended June 30, 2021 and related notes should be read in conjunction with our audited consolidated financial statements and related notes included in our 2020 Form 10-K.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The accompanying condensed consolidated financial statements include our accounts as well as the accounts of other entities in which we have a controlling financial interest. All intercompany accounts and transactions have been eliminated. Results for the three and six months ended June 30, 2021 may not necessarily be indicative of the results for the year ending December 31, 2021.
Presentation of Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents includes funds held by consolidated MBS trusts that have not yet been remitted to MBS certificateholders under the terms of our servicing guide and the related trust agreements. In 2021, Fannie Mae, in its role as trustee, began to invest funds held by consolidated trusts directly in eligible short-term third-party investments, which may include investments in cash equivalents that are comprised of overnight repurchase agreements and U.S. Treasuries that have a maturity at the date of acquisition of three months or less. The funds underlying these short-term investments are restricted per the trust agreements. Accordingly, any investment in cash equivalents should be classified as restricted and is presented as “Restricted cash and cash equivalents” in our condensed consolidated balance sheets to reflect the investment of funds related to MBS trusts.
Use of Estimates
Preparing condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect our reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of our condensed consolidated financial statements, as well as our reported amounts of revenues and expenses during the reporting periods. Management has made significant estimates in a variety of areas including, but not limited to, the allowance for loan losses. For example, significant uncertainty regarding the expected impacts of the COVID-19 pandemic, including the pace and strength of post-pandemic economic growth, required substantial management judgment in assessing our allowance for loan losses as of June 30, 2021. Actual results could be different from these estimates.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
|
Conservatorship
On September 7, 2008, the Secretary of the Treasury and the Director of FHFA announced several actions taken by Treasury and FHFA regarding Fannie Mae, which included: (1) placing us in conservatorship, with FHFA acting as our conservator, and (2) the execution of a senior preferred stock purchase agreement by our conservator, on our behalf, and Treasury, pursuant to which we issued to Treasury both senior preferred stock and a warrant to purchase common stock.
Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the Housing and Economic Recovery Act of 2008 (together, the “GSE Act”), the conservator immediately succeeded to (1) all rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae with respect to Fannie Mae and its assets, and (2) title to the books, records and assets of any other legal custodian of Fannie Mae. The conservator subsequently issued an order that provided for our Board of Directors to exercise specified authorities. The conservator also provided instructions regarding matters for which conservator decision or notification is required. The conservator retains the authority to amend or withdraw its order and instructions at any time.
The conservator has the power to transfer or sell any asset or liability of Fannie Mae (subject to limitations and post-transfer notice provisions for transfers of qualified financial contracts) without any approval, assignment of rights or consent of any party. However, mortgage loans and mortgage-related assets that have been transferred to a Fannie Mae MBS trust must be held by the conservator for the beneficial owners of the Fannie Mae MBS and cannot be used to satisfy the general creditors of Fannie Mae. Neither the conservatorship nor the terms of our agreements with Treasury change our obligation to make required payments on our debt securities or perform under our mortgage guaranty obligations.
The conservatorship has no specified termination date and there continues to be significant uncertainty regarding our future, including how long we will continue to exist in our current form, the extent of our role in the market, the level of government support of our business, how long we will be in conservatorship, what form we will have and what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship is terminated and whether we will continue to exist following conservatorship. Under the GSE Act, FHFA must place us into receivership if the Director of FHFA makes a written determination that our assets are less than our obligations or if we have not been paying our debts, in either case, for a period of 60 days. In addition, the Director of FHFA may place us into receivership at the Director’s discretion at any time for other reasons set forth in the GSE Act, including if we are critically undercapitalized or if we are undercapitalized and have no reasonable prospect of becoming adequately capitalized. Should we be placed into receivership, different assumptions could be required to determine the carrying value of our assets, which could lead to substantially different financial results. Treasury has made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. We are not aware of any plans of FHFA (1) to fundamentally change our business model, or (2) to reduce the aggregate amount available to or held by the company under our capital structure, which includes the senior preferred stock purchase agreement.
Senior Preferred Stock Purchase Agreement and Senior Preferred Stock
Under our senior preferred stock purchase agreement with Treasury, in September 2008 we issued Treasury one million shares of senior preferred stock and a warrant to purchase shares of our common stock. The senior preferred stock purchase agreement and the dividend and liquidation provisions of the senior preferred stock were amended in January 2021 pursuant to a letter agreement between us, through FHFA in its capacity as conservator, and Treasury. These changes included the following:
•The dividend provisions of the senior preferred stock were amended to permit us to retain increases in our net worth until our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers under the enterprise regulatory capital framework discussed in “Note 12, Regulatory Capital Requirements” in our 2020 Form 10-K. After the “capital reserve end date,” which is defined as the last day of the second consecutive fiscal quarter during which we have had and maintained capital equal to, or in excess of, all of the capital requirements and buffers under the enterprise regulatory capital framework, the amount of quarterly dividends to Treasury will be equal to the lesser of any quarterly increase in our net worth and a 10% annual rate on the then-current liquidation preference of the senior preferred stock.
•At the end of each fiscal quarter, through and including the capital reserve end date, the liquidation preference of the senior preferred stock will be increased by an amount equal to the increase in our net worth, if any, during the immediately prior fiscal quarter.
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Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
84
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Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
|
•We may issue and retain up to $70 billion in proceeds from the sale of common stock without Treasury’s prior consent, provided that (1) Treasury has already exercised its warrant in full, and (2) all currently pending significant litigation relating to the conservatorship and to an amendment to the senior preferred stock purchase agreement made in August 2012 has been resolved, which may require Treasury’s assent.
•FHFA may release us from conservatorship without Treasury’s consent after (1) all currently pending significant litigation relating to the conservatorship and to the August 2012 amendment to the senior preferred stock purchase agreement has been resolved, and (2) our common equity tier 1 capital, together with any other common stock that we may issue in a public offering, equals or exceeds 3% of our “adjusted total assets” under our enterprise regulatory capital framework.
•New restrictive covenants were added that impact both our single-family and multifamily business activities.
The amendment has been accounted for as a modification of the existing arrangement. As a result, there is no change in the carrying value of the senior preferred stock.
Treasury has made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. Pursuant to the senior preferred stock purchase agreement, we have received a total of $119.8 billion from Treasury as of June 30, 2021, and the amount of remaining funding available to us under the agreement is $113.9 billion. We have not received any funding from Treasury under this commitment since the first quarter of 2018.
Dividend provisions of the senior preferred stock permit us to retain increases in our net worth until our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers under the enterprise regulatory capital framework established by FHFA in November 2020. The aggregate liquidation preference of the senior preferred stock increased to $151.7 billion as of June 30, 2021 and will further increase to $158.8 billion as of September 30, 2021 due to the $7.1 billion increase in our net worth during the second quarter of 2021.
See “Note 11, Equity” in our 2020 Form 10-K for additional information about the senior preferred stock purchase agreement and the senior preferred stock.
Statutory Capital
We submit capital reports to FHFA, which monitors our capital levels. The deficit of core capital over statutory minimum capital was $111.5 billion as of June 30, 2021 and $124.3 billion as of December 31, 2020.
Related Parties
Because Treasury holds a warrant to purchase shares of Fannie Mae common stock equal to 79.9% of the total number of shares of Fannie Mae common stock, we and Treasury are deemed related parties. As of June 30, 2021, Treasury held an investment in our senior preferred stock with an aggregate liquidation preference of $151.7 billion. See “Senior Preferred Stock Purchase Agreement and Senior Preferred Stock” above for additional information on transactions under this agreement and the modifications made in the January 2021 letter agreement.
FHFA’s control of both Fannie Mae and Freddie Mac has caused Fannie Mae, FHFA and Freddie Mac to be deemed related parties. Additionally, Fannie Mae and Freddie Mac jointly own Common Securitization Solutions, LLC (“CSS”), a limited liability company created to operate a common securitization platform; as a result, CSS is deemed a related party. As a part of our joint ownership, Fannie Mae, Freddie Mac and CSS are parties to a limited liability company agreement that sets forth the overall framework for the joint venture, including Fannie Mae’s and Freddie Mac’s rights and responsibilities as members of CSS. Fannie Mae, Freddie Mac and CSS are also parties to a customer services agreement that sets forth the terms under which CSS provides mortgage securitization services to us and Freddie Mac, including the operation of the common securitization platform, as well as an administrative services agreement. CSS operates as a separate company from us and Freddie Mac, with all funding and limited administrative support services and other resources provided to it by us and Freddie Mac.
In the ordinary course of business, Fannie Mae may purchase and sell securities issued by Treasury and Freddie Mac. These transactions occur on the same terms as those prevailing at the time for comparable transactions with unrelated parties. Some of the structured securities we issue are backed in whole or in part by Freddie Mac securities. Fannie Mae and Freddie Mac each have agreed to indemnify the other party for losses caused by: its failure to meet its payment or other specified obligations under the trust agreements pursuant to which the underlying resecuritized securities were issued; its failure to meet its obligations under the customer services agreement; its violations of laws; or with respect to material misstatements or omissions in offering documents, ongoing disclosures and related materials relating to the underlying resecuritized securities. Additionally, we make regular income tax payments to and receive tax refunds from the Internal Revenue Service (“IRS”), a bureau of Treasury.
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Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
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85
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Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
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Transactions with Treasury
Our administrative expenses were reduced by $5 million and $4 million for the three months ended June 30, 2021 and 2020, respectively, and $9 million for the six months ended June 30, 2021 and 2020, due to reimbursements from Treasury and Freddie Mac for expenses incurred as program administrator for Treasury’s Home Affordable Modification Program and other initiatives under Treasury’s Making Home Affordable Program.
In December 2011, Congress enacted the Temporary Payroll Cut Continuation Act of 2011 (“TCCA”) which, among other provisions, required that we increase our single-family guaranty fees by at least 10 basis points and remit this increase to Treasury. Effective April 1, 2012, we increased the guaranty fee on all single-family residential mortgages delivered to us by 10 basis points. In 2012, FHFA and Treasury advised us to remit this fee increase to Treasury with respect to all loans acquired by us on or after April 1, 2012 and before January 1, 2022, and to continue to remit these amounts to Treasury on and after January 1, 2022 with respect to loans we acquired before this date until those loans are paid off or otherwise liquidated. The resulting fee revenue and expense are recorded in “Interest income: Mortgage loans” and “TCCA fees,” respectively, in our condensed consolidated statements of operations and comprehensive income.
In 2020, FHFA provided guidance that we are not required to accrue or remit TCCA fees to Treasury with respect to loans backing MBS trusts that have been delinquent for four months or longer. Once payments on such loans resume, we will resume accrual and remittance to Treasury of the associated TCCA fees on the loans.
We recognized $758 million and $660 million in TCCA fees during the three months ended June 30, 2021 and 2020, respectively, and $1.5 billion and $1.3 billion for the six months ended June 30, 2021 and 2020, respectively, of which $758 million had not been remitted to Treasury as of June 30, 2021.
The GSE Act requires us to set aside certain funding obligations, a portion of which is attributable to Treasury’s Capital Magnet Fund. These funding obligations, recognized in “Other expenses, net” in our condensed consolidated statements of operations and comprehensive income, were measured as the product of 4.2 basis points and the unpaid principal balance of our total new business purchases for the respective period, and 35% of this amount is payable to Treasury’s Capital Magnet Fund. We recognized a total of $57 million and $55 million in “Other expenses, net” for the three months ended June 30, 2021 and 2020, respectively, and $119 million and $85 million for the six months ended June 30, 2021 and 2020, respectively, in connection with Treasury’s Capital Magnet Fund, of which $119 million has not been remitted as of June 30, 2021.
Transactions with FHFA
The GSE Act authorizes FHFA to establish an annual assessment for regulated entities, including Fannie Mae, which is payable on a semi-annual basis (April and October), for FHFA’s costs and expenses, as well as to maintain FHFA’s working capital. We recognized FHFA assessment fees, which are recorded in “Administrative expenses” in our condensed consolidated statements of operations and comprehensive income, of $35 million for the three months ended June 30, 2021 and 2020, and $72 million and $67 million for the six months ended June 30, 2021 and 2020, respectively.
Transactions with CSS and Freddie Mac
We contributed capital to CSS, the company we jointly own with Freddie Mac, of $18 million and $19 million for the three months ended June 30, 2021 and 2020, respectively, and $45 million and $48 million for the six months ended June 30, 2021 and 2020, respectively.
Derivatives
We recognize our derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair value on a trade date basis. Changes in fair value and interest accruals on derivatives not in qualifying fair value hedging relationships are recorded as “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. We offset the carrying amounts of certain derivatives that are in gain positions and loss positions as well as cash collateral receivables and payables associated with derivative positions pursuant to the terms of enforceable master netting arrangements. We offset these amounts only when we have the legal right to offset under the contract and we have met all the offsetting conditions. For our over-the-counter (“OTC”) derivative positions, our master netting arrangements allow us to net derivative assets and liabilities with the same counterparty. For our cleared derivative contracts, our master netting arrangements allow us to net our exposure by clearing organization and by clearing member.
After offsetting, we report derivatives in a gain position in “Other assets” and derivatives in a loss position in “Other liabilities” in our condensed consolidated balance sheets.
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Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
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86
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Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
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We evaluate financial instruments that we purchase or issue and other financial and non-financial contracts for embedded derivatives. To identify embedded derivatives that we must account for separately, we determine whether: (1) the economic characteristics of the embedded derivative are not clearly and closely related to the economic characteristics of the financial instrument or other contract (i.e., the host contract); (2) the financial instrument or other contract itself is not already measured at fair value with changes in fair value included in earnings; and (3) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the embedded derivative meets all three of these conditions, we elect to carry the hybrid contract in its entirety at fair value with changes in fair value recorded in earnings.
Fair Value Hedge Accounting
In January 2021, to reduce earnings volatility related to changes in benchmark interest rates, we began applying fair value hedge accounting to certain pools of single-family mortgage loans and certain issuances of our funding debt by designating such instruments as the hedged item in hedging relationships with interest-rate swaps. In these relationships, we have designated the change in the benchmark interest rate, either the London Inter-bank Offered Rate (“LIBOR”) or Secured Overnight Financing Rate (“SOFR”), as the risk being hedged. We have elected to use the last-of-layer method to hedge certain pools of single-family mortgage loans. This election involves establishing fair value hedging relationships on the portion of each loan pool that is not expected to be affected by prepayments, defaults and other events that affect the timing and amount of cash flows. The term of each hedging relationship is generally one business day and we establish hedging relationships daily to align our hedge accounting with our risk management practices.
We apply hedge accounting to qualifying hedging relationships. A qualifying hedging relationship exists when changes in the fair value of a derivative hedging instrument are expected to be highly effective in offsetting changes in the fair value of the hedged item attributable to the risk being hedged during the term of the hedging relationship. We assess hedge effectiveness using statistical regression analysis. A hedging relationship is considered highly effective if the total change in fair value of the hedging instrument and the change in the fair value of the hedged item due to changes in the benchmark interest rate offset each other within a range of 80% to 125% and certain other statistical tests are met.
If a hedging relationship qualifies for hedge accounting, the change in the fair value of the interest-rate swaps and the change in the fair value of the hedged item for the risk being hedged are recorded through net interest income. A corresponding basis adjustment is recorded against the hedged item, either the pool of mortgage loans or the debt, for the changes in the fair value attributable to the risk being hedged. For hedging relationships that hedge pools of single-family mortgage loans, basis adjustments are allocated to individual single-family loans based on the relative unpaid principal balance of each loan at the termination of the hedging relationship. The cumulative basis adjustments on the hedged item are amortized into earnings using the effective interest method over the contractual life of the hedged item, with amortization beginning upon termination of the hedging relationship.
All changes in fair value of the designated portion of the derivative hedging instrument (i.e., interest-rate swap), including interest accruals, are recorded in the same line item in the condensed consolidated statements of operations and comprehensive income used to record the earnings effect of the hedged item. Therefore, changes in the fair value of the hedged mortgage loans and debt attributable to the risk being hedged are recognized in “Interest income” or “Interest expense,” along with the changes in the fair value of the respective derivative hedging instruments.
The recognition of basis adjustments on the hedged item and the subsequent amortization are noncash activities and are removed from net income to derive the “Net cash provided by (used in) operating activities” in our condensed consolidated statement of cash flows. Cash on derivative instruments paid or received while the derivative is designated in a hedging relationship is reported as “Net cash provided by (used in) operating activities” in the condensed consolidated statement of cash flows.
See “Note 3, Mortgage Loans,” “Note 7, Short-Term and Long-Term Debt” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.
Earnings per Share
Earnings per share (“EPS”) is presented for basic and diluted EPS. We compute basic EPS by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. However, as a result of our conservatorship status and the terms of the senior preferred stock, no amounts would be available to distribute as dividends to common or preferred stockholders (other than to Treasury as the holder of the senior preferred stock). Net income (loss) attributable to common stockholders excludes amounts attributable to the senior preferred stock. Weighted average common shares include 4.7 billion shares for the periods ended June 30,
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Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
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87
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Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
|
2021 and 2020 that would have been issued upon the full exercise of the warrant issued to Treasury from the date the warrant was issued through June 30, 2021 and 2020.
The calculation of diluted EPS includes all the components of basic earnings per share, plus the dilutive effect of common stock equivalents such as convertible securities and stock options. Weighted average shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. For the three and six months ended June 30, 2021 and the three months ended June 30, 2020, our diluted EPS weighted-average shares outstanding includes 26 million shares issuable upon the conversion of convertible preferred stock. For the six months ended June 30, 2020, convertible preferred stock is not included in the calculation because a net loss attributable to common shareholders was incurred and it would have an anti-dilutive effect.
2. Consolidations and Transfers of Financial Assets
We have interests in various entities that are considered to be variable interest entities (“VIEs”). The primary types of entities are securitization and resecuritization trusts, limited partnerships and special purpose vehicles (“SPVs”). These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. We consolidate the substantial majority of our single-class securitization trusts because our role as guarantor and master servicer provides us with the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed. In contrast, we do not consolidate single-class securitization trusts when other organizations have the power to direct these activities unless we have the unilateral ability to dissolve the trust. We also do not consolidate our resecuritization trusts unless we have the unilateral ability to dissolve the trust. Historically, the vast majority of underlying assets of our resecuritization trusts were limited to Fannie Mae securities that were collateralized by mortgage loans held in consolidated trusts. However, with our issuance of uniform mortgage-backed securities (“UMBS®”), we include securities issued by Freddie Mac in some of our resecuritization trusts. The mortgage loans that serve as collateral for Freddie Mac-issued securities are not held in trusts that are consolidated by Fannie Mae.
Unconsolidated VIEs
We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include securitization and resecuritization trusts, limited partnerships, and certain SPVs designed to transfer credit risk. The following table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with unconsolidated securitization and resecuritization trusts.
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As of
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June 30, 2021
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December 31, 2020
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(Dollars in millions)
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Assets and liabilities recorded in our condensed consolidated balance sheets related to unconsolidated mortgage-backed trusts:
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Assets:
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|
Trading securities:
|
|
|
|
|
|
Fannie Mae
|
|
$
|
1,146
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|
|
$
|
1,611
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|
|
Non-Fannie Mae
|
|
3,485
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|
|
3,608
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|
|
Total trading securities
|
|
4,631
|
|
|
5,219
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|
|
Available-for-sale securities:
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|
|
|
|
|
Fannie Mae
|
|
562
|
|
|
1,168
|
|
|
Non-Fannie Mae
|
|
224
|
|
|
318
|
|
|
Total available-for-sale securities
|
|
786
|
|
|
1,486
|
|
|
Other assets
|
|
38
|
|
|
41
|
|
|
Other liabilities
|
|
(63)
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|
|
(67)
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|
|
Net carrying amount
|
|
$
|
5,392
|
|
|
$
|
6,679
|
|
Our maximum exposure to loss generally represents the greater of our carrying value in the entity or the unpaid principal balance of the assets covered by our guaranty. Our involvement in unconsolidated resecuritization trusts may give rise to additional exposure to loss depending on the type of resecuritization trust. Fannie Mae non-commingled
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Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
88
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Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets
|
resecuritization trusts are backed entirely by Fannie Mae MBS. These non-commingled single-class and multi-class resecuritization trusts are not consolidated and do not give rise to any additional exposure to loss as we already consolidate the underlying collateral.
Fannie Mae commingled resecuritization trusts are backed in whole or in part by Freddie Mac securities. The guaranty that we provide to these commingled resecuritization trusts may increase our exposure to loss to the extent that we are providing a guaranty for the timely payment and interest on the underlying Freddie Mac securities that we have not previously guaranteed. Our maximum exposure to loss for these unconsolidated trusts is measured by the amount of Freddie Mac securities that are held in these resecuritization trusts.
Our maximum exposure to loss related to unconsolidated securitization and resecuritization trusts, which includes but is not limited to our exposure to these Freddie Mac securities, was approximately $177 billion and $146 billion as of June 30, 2021 and December 31, 2020, respectively. The total assets of our unconsolidated securitization and resecuritization trusts were approximately $230 billion and $180 billion as of June 30, 2021 and December 31, 2020, respectively.
The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of low-income housing tax credit investments (“LIHTC”), community investments and other entities, was $195 million and the related net carrying value was $190 million as of June 30, 2021. As of December 31, 2020, the maximum exposure to loss was $126 million and the related net carrying value was $121 million. The total assets of these limited partnership investments were $3.2 billion as of June 30, 2021 and $2.6 billion as of December 31, 2020.
The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents the unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities® (“CAS”) and Multifamily Connecticut Avenue SecuritiesTM (“MCASTM”) SPVs. The maximum exposure to loss related to these unconsolidated SPVs was $9.1 billion and $11.4 billion as of June 30, 2021 and December 31, 2020, respectively. The total assets related to these unconsolidated SPVs were $9.1 billion and $11.4 billion as of June 30, 2021 and December 31, 2020, respectively.
The unpaid principal balance of our multifamily loan portfolio was $391.7 billion as of June 30, 2021. As our lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” and “Note 6, Financial Guarantees” with respect to this population are consistent with the Financial Accounting Standards Board’s stated objectives for the disclosures related to unconsolidated VIEs.
Transfers of Financial Assets
We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three months ended June 30, 2021 and 2020, the unpaid principal balance of portfolio securitizations was $197.1 billion and $202.9 billion, respectively. For the six months ended June 30, 2021 and 2020, the unpaid principal balance of portfolio securitizations was $413.9 billion and $291.9 billion, respectively. The substantial majority of these portfolio securitization transactions generally do not qualify for sale treatment. Portfolio securitization trusts that do qualify for sale treatment primarily consist of loans that are guaranteed or insured, in whole or in part, by the U.S. government.
We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multi-class portfolio securitization trusts. As of June 30, 2021, the unpaid principal balance of retained interests was $1.2 billion and its related fair value was $2.3 billion. As of December 31, 2020, the unpaid principal balance of retained interests was $1.7 billion and its related fair value was $2.9 billion. For the three months ended June 30, 2021 and 2020, the principal, interest and other fees received on retained interests was $144 million and $170 million, respectively. For the six months ended June 30, 2021 and 2020, the principal, interest and other fees received on retained interests was $287 million and $351 million, respectively.
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Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
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89
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Notes to Condensed Consolidated Financial Statements | Mortgage Loans
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3. Mortgage Loans
We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and multifamily mortgage loans, which are secured by five or more residential dwelling units. We classify these loans as either held for investment (“HFI”) or held for sale (“HFS”). We report the amortized cost of HFI loans for which we have not elected the fair value option at the unpaid principal balance, net of unamortized premiums and discounts, hedge-related basis adjustments, other cost basis adjustments, and accrued interest receivable. For purposes of our condensed consolidated balance sheets, we present accrued interest receivable, net separately from the amortized cost of our loans held for investment. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation changes in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on hedge-related basis adjustments and on the implementation of our fair value hedge accounting program in January 2021.
For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable type. Financing receivable classes used for disclosure consist of: “20- and 30-year or more, amortizing fixed-rate,” “15-year or less, amortizing fixed-rate,” “Adjustable-rate,” and “Other.” The “Other” class primarily consists of reverse mortgage loans, interest-only loans, negative-amortizing loans and second liens.
The following table displays the carrying value of our mortgage loans and allowance for loan losses.
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As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
(Dollars in millions)
|
|
Single-family
|
|
$
|
3,390,827
|
|
|
$
|
3,216,146
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|
|
Multifamily
|
|
391,725
|
|
|
373,722
|
|
|
Total unpaid principal balance of mortgage loans
|
|
3,782,552
|
|
|
3,589,868
|
|
|
Cost basis and fair value adjustments, net
|
|
75,869
|
|
|
74,576
|
|
|
Allowance for loan losses for HFI loans
|
|
(7,114)
|
|
|
(10,552)
|
|
|
Total mortgage loans(1)
|
|
$
|
3,851,307
|
|
|
$
|
3,653,892
|
|
(1)Excludes $10.0 billion and $9.8 billion of accrued interest receivable, net of allowance as of June 30, 2021 and December 31, 2020, respectively.
The following table displays information about our redesignation of loans from HFI to HFS and the sales of mortgage loans during the period.
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|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
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|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(Dollars in millions)
|
|
Single-family loans redesignated from HFI to HFS:
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
$
|
6,305
|
|
|
$
|
—
|
|
|
$
|
9,417
|
|
|
$
|
1,637
|
|
|
Lower of cost or fair value adjustment at time of redesignation(1)
|
|
(146)
|
|
|
—
|
|
|
(200)
|
|
|
(9)
|
|
|
Allowance reversed at time of redesignation
|
|
824
|
|
|
—
|
|
|
1,185
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-family loans sold:
|
|
|
|
|
|
|
|
|
|
Unpaid principal balance
|
|
$
|
7,317
|
|
|
$
|
495
|
|
|
$
|
7,525
|
|
|
$
|
495
|
|
|
Realized gains, net
|
|
653
|
|
|
40
|
|
|
655
|
|
|
40
|
|
(1)Consists of the write-off against the allowance at the time of redesignation.
The amortized cost of single-family mortgage loans for which formal foreclosure proceedings were in process was $5.0 billion as of June 30, 2021 and December 31, 2020. As a result of our various loss mitigation and foreclosure prevention efforts, we expect that a portion of the loans in the process of formal foreclosure proceedings will not ultimately foreclose. In response to the COVID-19 pandemic, we have prohibited our servicers from completing foreclosures on our single-family loans through July 31, 2021, except in the case of vacant or abandoned properties. In addition, our servicers are required to comply with a Consumer Financial Protection Bureau (the “CFPB”) rule that prohibits certain
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
|
new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until after December 31, 2021.
Aging Analysis
The following tables display an aging analysis of the total amortized cost of our HFI mortgage loans by portfolio segment and class, excluding loans for which we have elected the fair value option.
Pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), for purposes of reporting to the credit bureaus, servicers must report a borrower receiving a COVID-19-related payment accommodation during the covered period, such as a forbearance plan or loan modification, as current if the borrower was current prior to receiving the accommodation and the borrower makes all required payments in accordance with the accommodation. For purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
|
30 - 59 Days
Delinquent
|
|
60 - 89 Days Delinquent
|
|
Seriously Delinquent(1)
|
|
Total Delinquent
|
|
Current
|
|
Total
|
|
Loans 90 Days or More Delinquent and Accruing Interest
|
|
Nonaccrual Loans with No Allowance
|
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate
|
|
$
|
18,550
|
|
|
$
|
5,372
|
|
|
$
|
64,064
|
|
|
$
|
87,986
|
|
|
$
|
2,788,952
|
|
|
$
|
2,876,938
|
|
|
$
|
44,622
|
|
|
$
|
6,368
|
|
|
15-year or less, amortizing fixed-rate
|
|
1,773
|
|
|
358
|
|
|
3,331
|
|
|
5,462
|
|
|
506,307
|
|
|
511,769
|
|
|
2,851
|
|
|
202
|
|
|
Adjustable-rate
|
|
170
|
|
|
44
|
|
|
770
|
|
|
984
|
|
|
25,447
|
|
|
26,431
|
|
|
617
|
|
|
101
|
|
|
Other(2)
|
|
715
|
|
|
237
|
|
|
3,348
|
|
|
4,300
|
|
|
41,664
|
|
|
45,964
|
|
|
1,837
|
|
|
767
|
|
|
Total single-family
|
|
21,208
|
|
|
6,011
|
|
|
71,513
|
|
|
98,732
|
|
|
3,362,370
|
|
|
3,461,102
|
|
|
49,927
|
|
|
7,438
|
|
|
Multifamily(3)
|
|
1,219
|
|
|
N/A
|
|
2,027
|
|
|
3,246
|
|
|
391,673
|
|
|
394,919
|
|
|
110
|
|
|
108
|
|
|
Total
|
|
$
|
22,427
|
|
|
$
|
6,011
|
|
|
$
|
73,540
|
|
|
$
|
101,978
|
|
|
$
|
3,754,043
|
|
|
$
|
3,856,021
|
|
|
$
|
50,037
|
|
|
$
|
7,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
30 - 59 Days
Delinquent
|
|
60 - 89 Days Delinquent
|
|
Seriously Delinquent(1)
|
|
Total Delinquent
|
|
Current
|
|
Total
|
|
Loans 90 Days or More Delinquent and Accruing Interest
|
|
Nonaccrual Loans with No Allowance
|
|
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate
|
|
$
|
24,928
|
|
|
$
|
9,414
|
|
|
$
|
88,276
|
|
|
$
|
122,618
|
|
|
$
|
2,619,585
|
|
|
$
|
2,742,203
|
|
|
$
|
68,526
|
|
|
$
|
6,028
|
|
|
|
15-year or less, amortizing fixed-rate
|
|
1,987
|
|
|
601
|
|
|
5,028
|
|
|
7,616
|
|
|
449,443
|
|
|
457,059
|
|
|
4,292
|
|
|
240
|
|
|
|
Adjustable-rate
|
|
268
|
|
|
97
|
|
|
1,143
|
|
|
1,508
|
|
|
29,933
|
|
|
31,441
|
|
|
907
|
|
|
114
|
|
|
|
Other(2)
|
|
1,150
|
|
|
458
|
|
|
5,037
|
|
|
6,645
|
|
|
47,937
|
|
|
54,582
|
|
|
2,861
|
|
|
771
|
|
|
|
Total single-family
|
|
28,333
|
|
|
10,570
|
|
|
99,484
|
|
|
138,387
|
|
|
3,146,898
|
|
|
3,285,285
|
|
|
76,586
|
|
|
7,153
|
|
|
|
Multifamily(3)
|
|
1,140
|
|
|
N/A
|
|
3,688
|
|
|
4,828
|
|
|
372,598
|
|
|
377,426
|
|
|
610
|
|
|
302
|
|
|
|
Total
|
|
$
|
29,473
|
|
|
$
|
10,570
|
|
|
$
|
103,172
|
|
|
$
|
143,215
|
|
|
$
|
3,519,496
|
|
|
$
|
3,662,711
|
|
|
$
|
77,196
|
|
|
$
|
7,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
|
(1)Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Multifamily seriously delinquent loans are loans that are 60 days or more past due.
(2)Reverse mortgage loans included in “Other” are not aged due to their nature and are included in the current column.
(3)Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.
Credit Quality Indicators
The following tables display the total amortized cost of our single-family HFI loans by class, year of origination and credit quality indicator, excluding loans for which we have elected the fair value option. The estimated mark-to-market loan-to-value (“LTV”) ratio is a primary factor we consider when estimating our allowance for loan losses for single-family loans. As LTV ratios increase, the borrower's equity in the home decreases, which may negatively affect the borrower's ability to refinance or to sell the property for an amount at or above the outstanding balance of the loan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021, by Year of Origination(1)
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Estimated mark-to-market LTV ratio:(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
$
|
420,585
|
|
|
$
|
896,208
|
|
|
$
|
221,164
|
|
|
$
|
112,444
|
|
|
$
|
139,038
|
|
|
$
|
795,999
|
|
|
$
|
2,585,438
|
|
|
Greater than 80% and less than or equal to 90%
|
|
69,029
|
|
|
141,426
|
|
|
12,239
|
|
|
2,578
|
|
|
1,133
|
|
|
3,351
|
|
|
229,756
|
|
|
Greater than 90% and less than or equal to 100%
|
|
51,418
|
|
|
7,105
|
|
|
839
|
|
|
414
|
|
|
85
|
|
|
912
|
|
|
60,773
|
|
|
Greater than 100%
|
|
2
|
|
|
11
|
|
|
9
|
|
|
17
|
|
|
39
|
|
|
893
|
|
|
971
|
|
|
Total 20- and 30-year or more, amortizing fixed-rate
|
|
541,034
|
|
|
1,044,750
|
|
|
234,251
|
|
|
115,453
|
|
|
140,295
|
|
|
801,155
|
|
|
2,876,938
|
|
|
15-year or less, amortizing fixed-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
110,924
|
|
|
179,693
|
|
|
31,926
|
|
|
12,068
|
|
|
25,239
|
|
|
146,570
|
|
|
506,420
|
|
|
Greater than 80% and less than or equal to 90%
|
|
2,522
|
|
|
2,020
|
|
|
56
|
|
|
11
|
|
|
5
|
|
|
13
|
|
|
4,627
|
|
|
Greater than 90% and less than or equal to 100%
|
|
653
|
|
|
47
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
6
|
|
|
710
|
|
|
Greater than 100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
9
|
|
|
12
|
|
|
Total 15-year or less, amortizing fixed-rate
|
|
114,099
|
|
|
181,760
|
|
|
31,983
|
|
|
12,081
|
|
|
25,248
|
|
|
146,598
|
|
|
511,769
|
|
|
Adjustable-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
1,857
|
|
|
2,602
|
|
|
1,416
|
|
|
1,680
|
|
|
3,376
|
|
|
15,131
|
|
|
26,062
|
|
|
Greater than 80% and less than or equal to 90%
|
|
148
|
|
|
104
|
|
|
18
|
|
|
12
|
|
|
6
|
|
|
6
|
|
|
294
|
|
|
Greater than 90% and less than or equal to 100%
|
|
73
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
75
|
|
|
Greater than 100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total adjustable-rate
|
|
2,078
|
|
|
2,707
|
|
|
1,434
|
|
|
1,692
|
|
|
3,382
|
|
|
15,138
|
|
|
26,431
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
—
|
|
|
—
|
|
|
37
|
|
|
305
|
|
|
739
|
|
|
31,490
|
|
|
32,571
|
|
|
Greater than 80% and less than or equal to 90%
|
|
—
|
|
|
—
|
|
|
2
|
|
|
8
|
|
|
16
|
|
|
569
|
|
|
595
|
|
|
Greater than 90% and less than or equal to 100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
6
|
|
|
275
|
|
|
284
|
|
|
Greater than 100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
3
|
|
|
290
|
|
|
295
|
|
|
Total other
|
|
—
|
|
|
—
|
|
|
39
|
|
|
318
|
|
|
764
|
|
|
32,624
|
|
|
33,745
|
|
|
Total
|
|
$
|
657,211
|
|
|
$
|
1,229,217
|
|
|
$
|
267,707
|
|
|
$
|
129,544
|
|
|
$
|
169,689
|
|
|
$
|
995,515
|
|
|
$
|
3,448,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for all classes by LTV ratio:(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
$
|
533,366
|
|
|
$
|
1,078,503
|
|
|
$
|
254,543
|
|
|
$
|
126,497
|
|
|
$
|
168,392
|
|
|
$
|
989,190
|
|
|
$
|
3,150,491
|
|
|
Greater than 80% and less than or equal to 90%
|
|
71,699
|
|
|
143,550
|
|
|
12,315
|
|
|
2,609
|
|
|
1,160
|
|
|
3,939
|
|
|
235,272
|
|
|
Greater than 90% and less than or equal to 100%
|
|
52,144
|
|
|
7,153
|
|
|
840
|
|
|
418
|
|
|
93
|
|
|
1,194
|
|
|
61,842
|
|
|
Greater than 100%
|
|
2
|
|
|
11
|
|
|
9
|
|
|
20
|
|
|
44
|
|
|
1,192
|
|
|
1,278
|
|
|
Total
|
|
$
|
657,211
|
|
|
$
|
1,229,217
|
|
|
$
|
267,707
|
|
|
$
|
129,544
|
|
|
$
|
169,689
|
|
|
$
|
995,515
|
|
|
$
|
3,448,883
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020, by Year of Origination(1)
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Prior
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Estimated mark-to-market LTV ratio:(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
$
|
794,156
|
|
|
$
|
233,994
|
|
|
$
|
135,849
|
|
|
$
|
183,315
|
|
|
$
|
221,172
|
|
|
$
|
775,636
|
|
|
$
|
2,344,122
|
|
|
Greater than 80% and less than or equal to 90%
|
|
157,500
|
|
|
85,227
|
|
|
23,440
|
|
|
5,270
|
|
|
1,592
|
|
|
5,958
|
|
|
278,987
|
|
|
Greater than 90% and less than or equal to 100%
|
|
109,743
|
|
|
4,186
|
|
|
820
|
|
|
250
|
|
|
124
|
|
|
1,994
|
|
|
117,117
|
|
|
Greater than 100%
|
|
28
|
|
|
7
|
|
|
28
|
|
|
77
|
|
|
81
|
|
|
1,756
|
|
|
1,977
|
|
|
Total 20- and 30-year or more, amortizing fixed-rate
|
|
1,061,427
|
|
|
323,414
|
|
|
160,137
|
|
|
188,912
|
|
|
222,969
|
|
|
785,344
|
|
|
2,742,203
|
|
|
15-year or less, amortizing fixed-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
181,418
|
|
|
41,374
|
|
|
15,768
|
|
|
31,497
|
|
|
46,088
|
|
|
132,596
|
|
|
448,741
|
|
|
Greater than 80% and less than or equal to 90%
|
|
6,105
|
|
|
811
|
|
|
35
|
|
|
14
|
|
|
8
|
|
|
20
|
|
|
6,993
|
|
|
Greater than 90% and less than or equal to 100%
|
|
1,274
|
|
|
9
|
|
|
3
|
|
|
4
|
|
|
3
|
|
|
10
|
|
|
1,303
|
|
|
Greater than 100%
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
13
|
|
|
22
|
|
|
Total 15-year or less, amortizing fixed-rate
|
|
188,797
|
|
|
42,194
|
|
|
15,809
|
|
|
31,518
|
|
|
46,102
|
|
|
132,639
|
|
|
457,059
|
|
|
Adjustable-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
2,935
|
|
|
1,839
|
|
|
2,412
|
|
|
4,765
|
|
|
2,678
|
|
|
16,248
|
|
|
30,877
|
|
|
Greater than 80% and less than or equal to 90%
|
|
234
|
|
|
152
|
|
|
79
|
|
|
19
|
|
|
5
|
|
|
12
|
|
|
501
|
|
|
Greater than 90% and less than or equal to 100%
|
|
56
|
|
|
3
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
62
|
|
|
Greater than 100%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Total adjustable-rate
|
|
3,225
|
|
|
1,994
|
|
|
2,492
|
|
|
4,784
|
|
|
2,683
|
|
|
16,263
|
|
|
31,441
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
—
|
|
|
41
|
|
|
328
|
|
|
811
|
|
|
1,028
|
|
|
36,216
|
|
|
38,424
|
|
|
Greater than 80% and less than or equal to 90%
|
|
—
|
|
|
2
|
|
|
20
|
|
|
43
|
|
|
30
|
|
|
1,298
|
|
|
1,393
|
|
|
Greater than 90% and less than or equal to 100%
|
|
—
|
|
|
2
|
|
|
8
|
|
|
16
|
|
|
10
|
|
|
602
|
|
|
638
|
|
|
Greater than 100%
|
|
—
|
|
|
—
|
|
|
4
|
|
|
8
|
|
|
9
|
|
|
631
|
|
|
652
|
|
|
Total other
|
|
—
|
|
|
45
|
|
|
360
|
|
|
878
|
|
|
1,077
|
|
|
38,747
|
|
|
41,107
|
|
|
Total
|
|
$
|
1,253,449
|
|
|
$
|
367,647
|
|
|
$
|
178,798
|
|
|
$
|
226,092
|
|
|
$
|
272,831
|
|
|
$
|
972,993
|
|
|
$
|
3,271,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for all classes by LTV ratio:(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
$
|
978,509
|
|
|
$
|
277,248
|
|
|
$
|
154,357
|
|
|
$
|
220,388
|
|
|
$
|
270,966
|
|
|
$
|
960,696
|
|
|
$
|
2,862,164
|
|
|
Greater than 80% and less than or equal to 90%
|
|
163,839
|
|
|
86,192
|
|
|
23,574
|
|
|
5,346
|
|
|
1,635
|
|
|
7,288
|
|
|
287,874
|
|
|
Greater than 90% and less than or equal to 100%
|
|
111,073
|
|
|
4,200
|
|
|
832
|
|
|
270
|
|
|
137
|
|
|
2,608
|
|
|
119,120
|
|
|
Greater than 100%
|
|
28
|
|
|
7
|
|
|
35
|
|
|
88
|
|
|
93
|
|
|
2,401
|
|
|
2,652
|
|
|
Total
|
|
$
|
1,253,449
|
|
|
$
|
367,647
|
|
|
$
|
178,798
|
|
|
$
|
226,092
|
|
|
$
|
272,831
|
|
|
$
|
972,993
|
|
|
$
|
3,271,810
|
|
(1)Excludes $12.2 billion and $13.5 billion as of June 30, 2021 and December 31, 2020, respectively, of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies, which represents primarily reverse mortgages for which we do not calculate an estimated mark-to-market LTV ratio.
(2)The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan divided by the estimated current value of the property as of the end of each reported period, which we calculate using an internal valuation model that estimates periodic changes in home value.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
|
The following tables display the total amortized cost in our multifamily HFI loans by year of origination and credit-risk rating, excluding loans for which we have elected the fair value option. Property rental income and property valuations are key inputs to our internally assigned credit risk ratings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021, by Year of Origination
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Internally assigned credit risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-classified(1)
|
|
$
|
22,243
|
|
|
$
|
81,446
|
|
|
$
|
67,290
|
|
|
$
|
60,608
|
|
|
$
|
49,030
|
|
|
$
|
102,818
|
|
|
$
|
383,435
|
|
|
Classified(2)
|
|
—
|
|
|
218
|
|
|
1,190
|
|
|
1,614
|
|
|
2,856
|
|
|
5,606
|
|
|
11,484
|
|
|
Total
|
|
$
|
22,243
|
|
|
$
|
81,664
|
|
|
$
|
68,480
|
|
|
$
|
62,222
|
|
|
$
|
51,886
|
|
|
$
|
108,424
|
|
|
$
|
394,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020, by Year of Origination
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Prior
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Internally assigned credit risk rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-classified(1)
|
|
$
|
71,977
|
|
|
$
|
68,296
|
|
|
$
|
62,087
|
|
|
$
|
50,907
|
|
|
$
|
43,174
|
|
|
$
|
70,933
|
|
|
$
|
367,374
|
|
|
Classified(2)
|
|
37
|
|
|
1,041
|
|
|
1,529
|
|
|
2,616
|
|
|
1,579
|
|
|
3,250
|
|
|
10,052
|
|
|
Total
|
|
$
|
72,014
|
|
|
$
|
69,337
|
|
|
$
|
63,616
|
|
|
$
|
53,523
|
|
|
$
|
44,753
|
|
|
$
|
74,183
|
|
|
$
|
377,426
|
|
(1)A loan categorized as “Non-classified” is current or adequately protected by the current financial strength and debt service capability of the borrower.
(2)Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that jeopardizes the timely full repayment. “Doubtful” refers to a loan with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values. As of June 30, 2021 and December 31, 2020, we had loans with an amortized cost of $5 million and less than $1 million, respectively, classified as doubtful.
Troubled Debt Restructurings
A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial difficulties is considered a troubled debt restructuring (“TDR”). In addition to formal loan modifications, we also engage in other loss mitigation activities with troubled borrowers, which include repayment plans and forbearance arrangements, both of which represent informal agreements with the borrower that do not result in the legal modification of the loan’s contractual terms. We account for these informal restructurings as a TDR if we defer more than three missed payments. We also classify loans to certain borrowers who have received bankruptcy relief as TDRs. However, our current TDR accounting described herein is temporarily impacted by our election to account for certain eligible loss mitigation activities under the COVID-19 relief granted pursuant to the CARES Act and the Consolidated Appropriations Act of 2021. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on the COVID-19 relief from TDR accounting and disclosure requirements.
The substantial majority of the loan modifications accounted for as a TDR result in term extensions, interest rate reductions or a combination of both. The average term extension of a single-family modified loan was 145 months and 168 months for the three months ended June 30, 2021 and 2020, respectively. The average interest rate reduction was 0.61 and 0.34 percentage points, for the three months ended June 30, 2021 and 2020, respectively. During the six months ended June 30, 2021 and 2020, the average term extension of a single-family modified loan was 142 months and 168 months, respectively, and the average interest rate reduction was 0.57 and 0.33 percentage points, respectively.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
|
The following tables display the number of loans and amortized cost of loans classified as a TDR during the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
|
|
Number of Loans
|
|
Amortized Cost
|
|
Number of Loans
|
|
Amortized Cost
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate
|
|
2,907
|
|
|
$
|
458
|
|
|
8,511
|
|
|
$
|
1,497
|
|
|
15-year or less, amortizing fixed-rate
|
|
308
|
|
|
26
|
|
|
796
|
|
|
68
|
|
|
Adjustable-rate
|
|
37
|
|
|
6
|
|
|
142
|
|
|
22
|
|
|
Other
|
|
174
|
|
|
17
|
|
|
556
|
|
|
70
|
|
|
Total single-family
|
|
3,426
|
|
|
507
|
|
|
10,005
|
|
|
1,657
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total TDRs
|
|
3,426
|
|
|
$
|
507
|
|
|
10,005
|
|
|
$
|
1,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
|
|
Number of Loans
|
|
Amortized Cost
|
|
Number of Loans
|
|
Amortized Cost
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate
|
|
5,896
|
|
|
$
|
929
|
|
|
19,367
|
|
|
$
|
3,406
|
|
|
15-year or less, amortizing fixed-rate
|
|
677
|
|
|
54
|
|
|
1,869
|
|
|
166
|
|
|
Adjustable-rate
|
|
78
|
|
|
12
|
|
|
286
|
|
|
46
|
|
|
Other
|
|
328
|
|
|
35
|
|
|
1,093
|
|
|
138
|
|
|
Total single-family
|
|
6,979
|
|
|
1,030
|
|
|
22,615
|
|
|
3,756
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total TDRs
|
|
6,979
|
|
|
$
|
1,030
|
|
|
22,615
|
|
|
$
|
3,756
|
|
For loans that defaulted in the periods presented and that were classified as a TDR in the twelve months prior to the default, the following tables display the number of loans and the amortized cost of these loans at the time of payment default. For purposes of this disclosure, we define loans that had a payment default as: single-family and multifamily loans with completed TDRs that liquidated during the period, either through foreclosure, deed-in-lieu of foreclosure, or a short sale; single-family loans with completed modifications that are two or more months delinquent during the period; or multifamily loans with completed modifications that are one or more months delinquent during the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
|
|
Number of Loans
|
|
Amortized Cost
|
|
Number of Loans
|
|
Amortized Cost
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate
|
|
1,562
|
|
|
$
|
262
|
|
|
5,398
|
|
|
$
|
1,066
|
|
|
15-year or less, amortizing fixed-rate
|
|
103
|
|
|
8
|
|
|
35
|
|
|
3
|
|
|
Adjustable-rate
|
|
6
|
|
|
1
|
|
|
5
|
|
|
1
|
|
|
Other
|
|
211
|
|
|
38
|
|
|
548
|
|
|
94
|
|
|
Total single-family
|
|
1,882
|
|
|
309
|
|
|
5,986
|
|
|
1,164
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
2
|
|
|
14
|
|
|
Total TDRs that subsequently defaulted
|
|
1,882
|
|
|
$
|
309
|
|
|
5,988
|
|
|
$
|
1,178
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
|
|
Number of Loans
|
|
Amortized Cost
|
|
Number of Loans
|
|
Amortized Cost
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate
|
|
3,972
|
|
|
$
|
675
|
|
|
8,573
|
|
|
$
|
1,587
|
|
|
15-year or less, amortizing fixed-rate
|
|
197
|
|
|
14
|
|
|
85
|
|
|
6
|
|
|
Adjustable-rate
|
|
15
|
|
|
3
|
|
|
12
|
|
|
2
|
|
|
Other
|
|
493
|
|
|
91
|
|
|
875
|
|
|
145
|
|
|
Total single-family
|
|
4,677
|
|
|
783
|
|
|
9,545
|
|
|
1,740
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
4
|
|
|
16
|
|
|
Total TDRs that subsequently defaulted
|
|
4,677
|
|
|
$
|
783
|
|
|
9,549
|
|
|
$
|
1,756
|
|
Nonaccrual Loans
For loans not subject to the COVID-19-related nonaccrual policy described below, we discontinue accruing interest when we believe collectability of principal and interest is not reasonably assured, which for a single-family loan we have determined, based on our historical experience, to be when the loan becomes two months or more past due according to its contractual terms. Interest previously accrued but not collected on such loans is reversed through interest income at the date the loan is placed on nonaccrual status. For single-family loans on nonaccrual status, we recognize income when cash payments are received. We return a non-modified single-family loan to accrual status at the point when the borrower brings the loan current. We return a modified single-family loan to accrual status at the point when the borrower has successfully made all required payments during the trial period (generally three to four months) and the modification is made permanent. We place a multifamily loan on nonaccrual status when the loan becomes two months or more past due according to its contractual terms unless the loan is well secured such that collectability of principal and accrued interest is reasonably assured. For multifamily loans on nonaccrual status, we apply any payment received on a cost recovery basis to reduce principal on the mortgage loan. We return a multifamily loan to accrual status when the borrower cures the delinquency of the loan. Single-family and multifamily loans are reported past due if a full payment of principal and interest is not received within one month of its due date.
For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income for up to six months of delinquency provided that the loan was either current at March 1, 2020 or originated after March 1, 2020. For single-family loans, we continue to accrue interest income beyond six months of delinquency provided that the collection of principal and interest continues to be reasonably assured. Multifamily loans that are in a forbearance arrangement are placed on nonaccrual status when the borrower is six months past due unless the loan is both well secured and in the process of collection. Loans on nonaccrual status that have been placed in a repayment plan or that have been brought current through a modification or a payment deferral are returned to accrual status once the borrower has made six consecutive contractual payments under the terms of the repayment plan or the modified loan. For loans in a forbearance arrangement that are placed on nonaccrual status, cash payments for interest are applied as a reduction of accrued interest receivable until the receivable has been reduced to zero, and then recognized as interest income. If interest is capitalized pursuant to a loan modification, any capitalized interest that had not been previously recognized as interest income is recorded as a discount to the loan and amortized over the life of the loan. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on our nonaccrual policy, including a discussion of regulatory guidance on interest income issued in response to COVID-19, and additional information on our policies for determining if the collection of principal and interest is reasonably assured, as well as our policy for establishing a valuation allowance for expected credit losses on the accrued interest receivable balance for loans negatively impacted by COVID-19.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
|
The tables below display the forgone interest and the accrued interest receivable written off through the reversal of interest income for nonaccrual loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
Interest income forgone(1)
|
|
|
|
$
|
178
|
|
|
$
|
246
|
|
|
Accrued interest receivable written off through the reversal of interest income
|
|
|
|
21
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
Multifamily:
|
|
|
|
|
|
|
|
Interest income forgone(1)
|
|
|
|
$
|
21
|
|
|
$
|
3
|
|
|
Accrued interest receivable written off through the reversal of interest income
|
|
|
|
—
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
Interest income forgone(1)
|
|
|
|
$
|
398
|
|
|
$
|
420
|
|
|
Accrued interest receivable written off through the reversal of interest income
|
|
|
|
129
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
Multifamily:
|
|
|
|
|
|
|
|
Interest income forgone(1)
|
|
|
|
$
|
29
|
|
|
$
|
3
|
|
|
Accrued interest receivable written off through the reversal of interest income
|
|
|
|
1
|
|
|
2
|
|
(1)For loans on nonaccrual status held as of period end, represents the amount of interest income we did not recognize but would have recognized if the loans had performed in accordance with their original contractual terms.
The tables below include the amortized cost of and interest income recognized on our HFI single-family and multifamily loans on nonaccrual status by class, excluding loans for which we have elected the fair value option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
Amortized Cost
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate
|
|
$
|
24,728
|
|
|
$
|
30,173
|
|
|
$
|
22,907
|
|
|
15-year or less, amortizing fixed-rate
|
|
596
|
|
|
945
|
|
|
853
|
|
|
Adjustable-rate
|
|
179
|
|
|
284
|
|
|
270
|
|
|
Other
|
|
1,761
|
|
|
2,583
|
|
|
2,475
|
|
|
Total single-family
|
|
27,264
|
|
|
33,985
|
|
|
26,505
|
|
|
Multifamily
|
|
2,220
|
|
|
2,153
|
|
|
2,069
|
|
|
Total nonaccrual loans
|
|
$
|
29,484
|
|
|
$
|
36,138
|
|
|
$
|
28,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2021
|
|
2020
|
|
|
2021
|
|
2020
|
|
|
|
Total Interest Income Recognized(1)
|
|
|
|
(Dollars in millions)
|
|
Single-family:
|
|
|
|
|
|
|
|
|
|
|
|
20- and 30-year or more, amortizing fixed-rate
|
|
$
|
95
|
|
|
$
|
75
|
|
|
|
|
$
|
180
|
|
|
$
|
221
|
|
|
15-year or less, amortizing fixed-rate
|
|
2
|
|
|
2
|
|
|
|
|
3
|
|
|
6
|
|
|
Adjustable-rate
|
|
—
|
|
|
1
|
|
|
|
|
1
|
|
|
2
|
|
|
Other
|
|
6
|
|
|
10
|
|
|
|
|
11
|
|
|
27
|
|
|
Total single-family
|
|
103
|
|
|
88
|
|
|
|
|
195
|
|
|
256
|
|
|
Multifamily
|
|
4
|
|
|
—
|
|
|
|
|
13
|
|
|
1
|
|
|
Total nonaccrual loans
|
|
$
|
107
|
|
|
$
|
88
|
|
|
|
|
$
|
208
|
|
|
$
|
257
|
|
(1)Single-family interest income recognized includes amounts accrued while the loans were performing, including the amortization of any
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
|
deferred cost basis adjustments, as well as payments received on nonaccrual loans held as of period end. Multifamily interest income recognized includes amounts accrued while the loans were performing and the amortization of any deferred cost basis adjustments for nonaccrual loans held as of period end.
4. Allowance for Loan Losses
We maintain an allowance for loan losses for HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts, excluding loans for which we have elected the fair value option. When calculating our allowance for loan losses, we consider the unpaid principal balance, net of unamortized premiums and discounts, and other cost basis adjustments of HFI loans at the balance sheet date. We record write-offs as a reduction to our allowance for loan losses at the point of foreclosure, completion of a short sale, upon the redesignation of nonperforming and reperforming loans from HFI to HFS or when a loan is determined to be uncollectible.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses
|
The following table displays changes in our allowance for single-family loans, multifamily loans and total allowance for loan losses, including the transition impact of adopting Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which was later amended by ASU 2019-04, ASU 2019-05 and ASU 2019-1 (collectively, the “CECL standard”), on January 1, 2020. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for additional information on changes to our allowance for loan losses resulting from our adoption of the CECL standard.
The benefit or provision for loan losses excludes provision for accrued interest receivable losses, guaranty loss reserves and credit losses on available-for-sale (“AFS”) debt securities. Cumulatively, these amounts are recognized as “Benefit (provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
(Dollars in millions)
|
|
|
Single-family allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(8,547)
|
|
|
$
|
(12,070)
|
|
|
$
|
(9,344)
|
|
|
$
|
(8,759)
|
|
|
|
Transition impact of the adoption of the CECL standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,229)
|
|
|
|
Benefit (provision) for loan losses
|
|
2,493
|
|
|
389
|
|
|
3,164
|
|
|
(1,788)
|
|
|
|
Write-offs
|
|
149
|
|
|
46
|
|
|
220
|
|
|
116
|
|
|
|
Recoveries
|
|
(77)
|
|
|
(3)
|
|
|
(79)
|
|
|
(6)
|
|
|
|
Other
|
|
(82)
|
|
|
40
|
|
|
(25)
|
|
|
68
|
|
|
|
Ending Balance
|
|
$
|
(6,064)
|
|
|
$
|
(11,598)
|
|
|
$
|
(6,064)
|
|
|
$
|
(11,598)
|
|
|
|
Multifamily allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(1,081)
|
|
|
$
|
(1,139)
|
|
|
$
|
(1,208)
|
|
|
$
|
(257)
|
|
|
|
Transition impact of the adoption of the CECL standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(493)
|
|
|
|
Benefit (provision) for loan losses
|
|
35
|
|
|
(228)
|
|
|
130
|
|
|
(635)
|
|
|
|
Write-offs
|
|
14
|
|
|
(1)
|
|
|
47
|
|
|
18
|
|
|
|
Recoveries
|
|
(18)
|
|
|
—
|
|
|
(19)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
(1,050)
|
|
|
$
|
(1,368)
|
|
|
$
|
(1,050)
|
|
|
$
|
(1,368)
|
|
|
|
Total allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(9,628)
|
|
|
$
|
(13,209)
|
|
|
$
|
(10,552)
|
|
|
$
|
(9,016)
|
|
|
|
Transition impact of the adoption of the CECL standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,722)
|
|
|
|
Benefit (provision) for loan losses
|
|
2,528
|
|
|
161
|
|
|
3,294
|
|
|
(2,423)
|
|
|
|
Write-offs
|
|
163
|
|
|
45
|
|
|
267
|
|
|
134
|
|
|
|
Recoveries
|
|
(95)
|
|
|
(3)
|
|
|
(98)
|
|
|
(7)
|
|
|
|
Other
|
|
(82)
|
|
|
40
|
|
|
(25)
|
|
|
68
|
|
|
|
Ending Balance
|
|
$
|
(7,114)
|
|
|
$
|
(12,966)
|
|
|
$
|
(7,114)
|
|
|
$
|
(12,966)
|
|
|
Our benefit or provision for loan losses can vary substantially from period to period based on a number of factors, such as changes in actual and forecasted home prices or property valuations, fluctuations in actual and forecasted interest rates, borrower payment behavior, events such as natural disasters or pandemics, the types and volume of our loss mitigation activities, including forbearances and loan modifications, the volume of foreclosures completed, and the redesignation of loans from HFI to HFS. Our benefit or provision can also be impacted by updates to the models, assumptions, and data used in determining our allowance for loan losses. As described below, our benefit or provision for loan losses and our loss reserves have been significantly affected by our estimates of the impact of the COVID-19 pandemic and the pace and strength of the economy’s subsequent recovery, which require significant management judgment. Changes in our expectations regarding the length of time borrowers remain in forbearance and even more significantly, the loss mitigation outcomes of affected borrowers after the forbearance period ends, remain uncertain and can affect the amount of benefit or provision for loan losses we recognize.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses
|
The primary factors that contributed to our single-family benefit for loan losses for the three months ended June 30, 2021 were:
•Benefit from actual and forecasted home price growth. For the three months ended June 30, 2021, home price growth was very strong. We also increased our expectations for home price growth on a national basis for full-year 2021. Higher home prices decrease the likelihood that loans will default and reduce the amount of loan loss on loans that do default, which impacts our estimate of losses and ultimately reduces our loss reserves and provision for loan losses.
•Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS. We redesignated certain reperforming single-family loans from HFI to HFS, as we no longer intend to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off against the allowance for loan losses. Amounts recorded in the allowance related to these loans exceeded the amounts written off, resulting in a benefit for loan losses.
•Benefit from lower actual and projected interest rates. Actual and projected interest rates decreased as of June 30, 2021 compared with March 31, 2021. As mortgage interest rates decrease, we expect an increase in future prepayments on single-family loans, including modified loans. Higher expected prepayments shorten the expected lives of modified loans, which decreases the expected impairment relating to term and interest-rate concessions provided on these loans, resulting in a benefit for loan losses.
•Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies as discussed below.
The primary factors that contributed to our single-family benefit for loan losses for the six months ended June 30, 2021 were:
•Benefit from actual and forecasted home price growth consistent with the discussion above.
•Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS consistent with the discussion above.
•Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. For the three and six months ended June 30, 2021, management used its judgment to reduce the non-modeled adjustment that was previously applied to the loss projections developed by our credit loss model to account for uncertainty. The decrease in uncertainty as of June 30, 2021 compared with the end of 2020 was primarily driven by the passage of the American Rescue Plan Act of 2021, which provided additional economic stimulus and helped support the continued economic recovery. In addition, the implementation of the COVID-19 vaccination program in the United States, which has contributed to a significant increase in business activity and an improved economy in 2021, decreased uncertainty surrounding the post-pandemic recovery. There has also been decreased political uncertainty, as well as a decrease in the number of borrowers in a COVID-19-related forbearance, lessening expectations of loan losses. However, management continued to apply its judgment and supplement model results as of June 30, 2021 as uncertainty remains regarding the loss mitigation outcomes of borrowers still in forbearance and the future course of the pandemic, including the impact on the economy of the spread of the Delta variant or other new, more infectious variants of the virus and low vaccination rates in certain areas of the country.
The impact of these factors was partially offset by the impact of the following factor which reduced our single-family benefit for loan losses recognized for the six months ended June 30, 2021.
•Provision from higher actual and projected interest rates. Actual and projected interest rates were higher as of June 30, 2021 compared with December 31, 2020. As mortgage rates increase, we expect a decrease in future prepayments on single-family loans, including modified loans. Lower expected prepayments extend the expected lives of modified loans, which increases the expected impairment relating to term and interest-rate concessions provided on these loans, resulting in a provision for loan losses.
The primary factors that impacted our single-family benefit (provision) for loan losses for the three and six months ended June 30, 2020 were:
•Expected loan losses as a result of the COVID-19 pandemic, which included adjustments to modeled results. In the first quarter of 2020, the rapidly changing conditions as a result of the unprecedented COVID-19 pandemic caused us to believe our model used to estimate single-family credit losses did not capture the entirety of losses we expected to incur relating to COVID-19 at that time, which included our expectations surrounding loan forbearance and borrower behavior once the forbearance period ends. As a result, management used its judgment to significantly increase the loss projections developed by our credit loss model in the first quarter of 2020, contributing to the provision for loan losses for the six months ended June 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses
|
During the second quarter of 2020 our credit loss model consumed data from the initial months of the pandemic, including loan delinquencies, updated profile data for loans in forbearance, and an updated home price forecast. As more of this data was consumed by our credit loss model, we reduced our non-modeled adjustment. However, management continued to apply its judgment and supplement model results as of June 30, 2020, taking into account uncertainty at that time regarding the type and extent of loss mitigation that may be needed when loans complete their forbearance period and the continued high degree of uncertainty regarding the future course of the pandemic and its effect on the economy, including the continued availability of fiscal stimulus to support borrowers.
For the second quarter of 2020, our estimate of expected losses due to the pandemic, which included both modeled and non-modeled adjustments, remained relatively flat compared with the first quarter of 2020. A reduction in overall expected forbearance volumes was offset by a weaker credit profile for loans entering forbearance. Furthermore, the positive impact of higher-than-initially-expected borrower prepayment activity was offset by heightened uncertainty as noted above.
•Changes in our expectations for home price growth. In the first quarter of 2020, we significantly reduced our expectations for home price growth to near-zero for 2020, which contributed to our provision for loan losses for the period. However, the negative impact from the first quarter of 2020 was partially reduced in the second quarter of 2020 as we revised our home price forecast to reflect an increase in home price appreciation on a national basis for 2020 based on strong home sales data for the period. This improvement in the 2020 home price forecast was partially offset by our updated long-term projected home price growth estimate, which was lowered as a result of a longer projected economic recovery period at that time.
•Credit benefit from lower actual and projected mortgage interest rates.
The primary factors that contributed to our multifamily benefit for loan losses for the three and six months ended June 30, 2021 were:
•Benefit from actual and projected economic data. For the three and six months ended June 30, 2021, property value forecasts increased due to continued demand for multifamily housing. In addition, improved job growth led to an increase in projected average property net operating income, which reduced the probability of loan defaults resulting in a benefit for loan losses for the quarter and year-to-date.
•Benefit from lower expected credit losses as a result of the COVID-19 pandemic. Similar to our single-family provision for loan losses described above, for both the three and six months ended June 30, 2021, management used its judgment to further reduce the non-modeled adjustment that was previously applied to the loss projections developed by our credit loss model to account for uncertainty. The decrease in uncertainty as of June 30, 2021 compared with the end of 2020, was primarily driven by positive economic growth and the passage of the American Rescue Plan Act of 2021, which provided additional economic stimulus. However, management continued to apply its judgment and supplement model results with a non-modeled adjustment as of June 30, 2021, as uncertainty remains surrounding the future course of the pandemic, including new strains of the virus and its effect on the economy.
The multifamily provision for loan losses for the three and six months ended June 30, 2020 was primarily driven by:
•Actual and projected economic data and expected loan losses as a result of the COVID-19 pandemic. Similar to the single-family provision for loan losses for the 2020 periods discussed above, we believed our model used to estimate multifamily loan losses as of June 30, 2020 did not capture the entirety of losses we expected to incur relating to COVID-19 at that time. As a result, management used its judgment to increase the loss projections developed by our credit loss model to reflect our expectations relating to the impact of the pandemic at that time. Our multifamily provision for loan losses was primarily driven by elevated unemployment rates compared with pre-COVID-19 levels. We expected higher unemployment rates would reduce the operating income of multifamily properties in the near term, resulting in an increase in the number of loans in forbearance. Additionally, property values were expected to decrease, increasing the probability of loan defaults.
In the second quarter of 2020, we increased our expected loan losses as a result of significant economic uncertainty and worsened forecasted capitalization rates at that time. We also increased our expected loan losses on senior housing loans to reflect that these properties had been disproportionately impacted by the pandemic, which resulted in increased operating expenses and limited these borrowers’ ability to attract new tenants. These increases in expected loan losses were partially offset by a reduction in our overall estimated forbearance volumes and lower actual and projected interest rates. In developing these adjustments, management considered the credit risk profile of our multifamily loan book of business at that time, as well as relevant historical credit loss experience during rare or stressful economic environments.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Investments in Securities
|
5. Investments in Securities
Trading Securities
Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. The following table displays our investments in trading securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
(Dollars in millions)
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
1,836
|
|
|
|
|
$
|
2,404
|
|
|
|
Other agency(1)
|
|
3,333
|
|
|
|
|
3,451
|
|
|
|
Private-label and other mortgage securities
|
|
152
|
|
|
|
|
158
|
|
|
|
Total mortgage-related securities (includes $689 million and $793 million, respectively, related to consolidated trusts)
|
|
5,321
|
|
|
|
|
6,013
|
|
|
|
Non-mortgage-related securities:
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
89,707
|
|
|
|
|
130,456
|
|
|
|
Other securities
|
|
73
|
|
|
|
|
73
|
|
|
|
Total non-mortgage-related securities
|
|
89,780
|
|
|
|
|
130,529
|
|
|
|
Total trading securities
|
|
$
|
95,101
|
|
|
|
|
$
|
136,542
|
|
|
(1)Consists of Freddie Mac and Ginnie Mae mortgage-related securities.
The following table displays information about our net trading gains (losses).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(Dollars in millions)
|
|
Net trading gains (losses)
|
$
|
161
|
|
|
$
|
135
|
|
|
|
|
|
|
$
|
(597)
|
|
|
$
|
782
|
|
|
Net trading gains (losses) recognized in the period related to securities still held at period end
|
156
|
|
|
70
|
|
|
|
|
|
|
(586)
|
|
|
525
|
|
Available-for-Sale Securities
We record AFS securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other comprehensive income (loss)” and we recognize realized gains and losses from the sale of AFS securities in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. We define the amortized cost basis of our AFS securities as unpaid principal balance, net of unamortized premiums and discounts, and other cost basis adjustments. We record an allowance for credit losses for AFS securities that reflects the impairment for credit losses, which are limited to the amount that fair value is less than the amortized cost. Impairment due to non-credit losses are recorded as unrealized losses within other comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Investments in Securities
|
The following tables display the amortized cost, allowance for credit losses, gross unrealized gains and losses in accumulated other comprehensive income (loss) (“AOCI”), and fair value by major security type for AFS securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
Total Amortized Cost(1)
|
|
|
|
Allowance for Credit Losses
|
|
|
Gross Unrealized Gains in AOCI
|
|
|
Gross Unrealized Losses in AOCI
|
|
|
Total Fair Value(1)
|
|
|
(Dollars in millions)
|
|
Fannie Mae
|
|
$
|
550
|
|
|
|
|
$
|
—
|
|
|
|
$
|
20
|
|
|
|
|
$
|
(7)
|
|
|
|
|
$
|
563
|
|
|
Other agency(2)
|
|
14
|
|
|
|
|
—
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
15
|
|
|
Alt-A and subprime private-label securities
|
|
4
|
|
|
|
|
—
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bonds
|
|
169
|
|
|
|
|
(3)
|
|
|
|
6
|
|
|
|
|
—
|
|
|
|
|
172
|
|
|
Other mortgage-related securities
|
|
195
|
|
|
|
|
—
|
|
|
|
5
|
|
|
|
|
—
|
|
|
|
|
200
|
|
|
Total
|
|
$
|
932
|
|
|
|
|
$
|
(3)
|
|
|
|
$
|
33
|
|
|
|
|
$
|
(7)
|
|
|
|
|
$
|
955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
Total Amortized Cost(1)
|
|
|
Allowance for Credit Losses
|
|
|
Gross Unrealized Gains in AOCI
|
|
Gross Unrealized Losses in AOCI
|
|
|
Total Fair Value(1)
|
|
|
(Dollars in millions)
|
|
Fannie Mae
|
|
$
|
1,094
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
86
|
|
|
|
|
$
|
(12)
|
|
|
|
|
$
|
1,168
|
|
|
Other agency(2)
|
|
59
|
|
|
|
|
—
|
|
|
|
|
6
|
|
|
|
|
—
|
|
|
|
|
65
|
|
|
Alt-A and subprime private-label securities
|
|
4
|
|
|
|
|
—
|
|
|
|
|
2
|
|
|
|
|
—
|
|
|
|
|
6
|
|
|
Mortgage revenue bonds
|
|
211
|
|
|
|
|
(3)
|
|
|
|
|
8
|
|
|
|
|
—
|
|
|
|
|
216
|
|
|
Other mortgage-related securities
|
|
238
|
|
|
|
|
—
|
|
|
|
|
4
|
|
|
|
|
—
|
|
|
|
|
242
|
|
|
Total
|
|
$
|
1,606
|
|
|
|
|
$
|
(3)
|
|
|
|
|
$
|
106
|
|
|
|
|
$
|
(12)
|
|
|
|
|
$
|
1,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)We exclude from amortized cost and fair value accrued interest of $3 million and $6 million as of June 30, 2021 and December 31, 2020, respectively, which we record in “Other assets” in our condensed consolidated balance sheets.
(2)Other agency securities consist of securities issued by Freddie Mac and Ginnie Mae.
Fannie Mae and Other Agency Securities
Our Fannie Mae and other agency AFS securities consist of securities issued by us, Freddie Mac, or Ginnie Mae. The principal and interest on these securities are guaranteed by the issuing agency. We believe that the guaranty provided by the issuing agency, the support provided to the agencies by the U.S. government, the importance of the agencies to the liquidity and stability in the secondary mortgage market, and the long history of zero credit losses on agency mortgage-related securities are all indicators that there are currently no credit losses on these securities, even if the security is in an unrealized loss position. In addition, we generally hold these securities that are in an unrealized loss position to recovery. As a result, unless we intend to sell the security, we do not recognize an allowance for credit losses on agency mortgage-related securities.
Non-Agency Mortgage-Related Securities
As of June 30, 2021, substantially all of our non-agency mortgage-related securities were in an unrealized gain position. As a result, we have not recognized an allowance for credit losses on these securities.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Investments in Securities
|
The following tables display additional information regarding gross unrealized losses and fair value by major security type for AFS securities in an unrealized loss position, excluding allowance for credit losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Less Than 12 Consecutive Months
|
|
12 Consecutive Months or Longer
|
|
Less Than 12 Consecutive Months
|
|
12 Consecutive Months or Longer
|
|
|
Gross Unrealized Losses in AOCI
|
|
Fair Value
|
|
Gross Unrealized Losses in AOCI
|
|
Fair Value
|
|
Gross Unrealized Losses in AOCI
|
|
Fair Value
|
|
Gross Unrealized Losses in AOCI
|
|
Fair Value
|
|
|
(Dollars in millions)
|
|
Fannie Mae
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
(7)
|
|
|
|
$
|
129
|
|
|
|
$
|
(1)
|
|
|
|
$
|
40
|
|
|
|
$
|
(11)
|
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table displays the gross realized gains and proceeds on sales of AFS securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(Dollars in millions)
|
|
Gross realized gains
|
$
|
46
|
|
|
$
|
9
|
|
|
$
|
59
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
Total proceeds (excludes initial sale of securities from new portfolio securitizations)
|
467
|
|
|
71
|
|
|
582
|
|
|
121
|
|
The following tables display net unrealized gains on AFS securities and other amounts accumulated within our accumulated other comprehensive income, net of tax.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
(Dollars in millions)
|
|
Net unrealized gains on AFS securities for which we have not recorded an allowance for credit losses
|
|
$
|
20
|
|
|
$
|
74
|
|
|
|
|
|
|
|
Other
|
|
37
|
|
|
42
|
|
|
Accumulated other comprehensive income
|
|
$
|
57
|
|
|
$
|
116
|
|
Maturity Information
The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
Total Carrying Amount(1)
|
|
Total
Fair
Value
|
|
One Year or Less
|
|
After One Year Through Five Years
|
|
After Five Years Through Ten Years
|
|
After Ten Years
|
|
|
|
|
Net Carrying Amount(1)
|
|
Fair Value
|
|
Net Carrying Amount(1)
|
|
Fair Value
|
|
Net Carrying Amount(1)
|
|
Fair Value
|
|
Net Carrying Amount(1)
|
|
Fair Value
|
|
|
(Dollars in millions)
|
|
Fannie Mae
|
|
$
|
550
|
|
|
|
$
|
563
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
3
|
|
|
|
$
|
3
|
|
|
|
$
|
12
|
|
|
|
$
|
14
|
|
|
|
$
|
535
|
|
|
|
$
|
546
|
|
|
Other agency
|
|
14
|
|
|
|
15
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
13
|
|
|
|
14
|
|
|
Alt-A and subprime private-label securities
|
|
4
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bonds
|
|
166
|
|
|
|
172
|
|
|
|
1
|
|
|
|
1
|
|
|
|
23
|
|
|
|
24
|
|
|
|
19
|
|
|
|
19
|
|
|
|
123
|
|
|
|
128
|
|
|
Other mortgage-related securities
|
|
195
|
|
|
|
200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
5
|
|
|
|
191
|
|
|
|
195
|
|
|
Total
|
|
$
|
929
|
|
|
|
$
|
955
|
|
|
|
$
|
1
|
|
|
|
$
|
1
|
|
|
|
$
|
26
|
|
|
|
$
|
27
|
|
|
|
$
|
38
|
|
|
|
$
|
41
|
|
|
|
$
|
864
|
|
|
|
$
|
886
|
|
(1) Net carrying amount consists of carrying value, net of allowance for credit losses on AFS debt securities.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Financial Guarantees
|
6. Financial Guarantees
We recognize a guaranty obligation for our obligation to stand ready to perform on our guarantees to unconsolidated trusts and other guaranty arrangements. These off-balance sheet guarantees expose us to credit losses primarily relating to the unpaid principal balance of our unconsolidated Fannie Mae MBS and other financial guarantees. The maximum remaining contractual term of our guarantees is 31 years; however, the actual term of each guaranty may be significantly less than the contractual term based on the prepayment characteristics of the related mortgage loans. We measure our guaranty reserve for estimated credit losses for off-balance sheet exposures over the contractual period for which they are exposed to the credit risk, unless that obligation is unconditionally cancellable by the issuer.
As the guarantor of structured securities backed in whole or in part by Freddie Mac-issued securities, we extend our guaranty to the underlying Freddie Mac securities in our resecuritization trusts. However, Freddie Mac continues to guarantee the payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not charge an incremental guaranty fee to include Freddie Mac securities in the structured securities that we issue. When we began issuing UMBS, we entered into an indemnification agreement under which Freddie Mac agreed to indemnify us for losses caused by its failure to meet its payment or other specified obligations under the trust agreements pursuant to which the underlying resecuritized securities were issued. As a result, and due to the funding commitment available to Freddie Mac through its senior preferred stock purchase agreement with Treasury, we have concluded that the associated credit risk is negligible. Accordingly, we exclude from the following table Freddie Mac securities backing unconsolidated Fannie Mae-issued structured securities of approximately $168.9 billion and $137.3 billion as of June 30, 2021 and December 31, 2020, respectively.
The following table displays our off-balance sheet maximum exposure, guaranty obligation recognized in our condensed consolidated balance sheets and the potential maximum recovery from third parties through available credit enhancements and recourse related to our financial guarantees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
Maximum Exposure
|
|
Guaranty Obligation
|
|
Maximum Recovery(1)
|
|
Maximum Exposure
|
|
Guaranty Obligation
|
|
Maximum Recovery(1)
|
|
|
|
(Dollars in millions)
|
|
Unconsolidated Fannie Mae MBS
|
|
$
|
4,178
|
|
|
$
|
16
|
|
|
$
|
4,044
|
|
|
$
|
4,424
|
|
|
$
|
18
|
|
|
$
|
4,226
|
|
|
Other guaranty arrangements(2)
|
|
11,051
|
|
|
96
|
|
|
2,245
|
|
|
11,828
|
|
|
109
|
|
|
2,438
|
|
|
Total
|
|
$
|
15,229
|
|
|
$
|
112
|
|
|
$
|
6,289
|
|
|
$
|
16,252
|
|
|
$
|
127
|
|
|
$
|
6,664
|
|
(1)Recoverability of such credit enhancements and recourse is subject to, among other factors, the ability of our mortgage insurers and the U.S. government, as a financial guarantor, to meet their obligations to us. For information on our mortgage insurers, “Note 10, Concentrations of Credit Risk.”
(2)Primarily consists of credit enhancements and long-term standby commitments.
7. Short-Term and Long-Term Debt
In January 2021, we began applying fair value hedge accounting to certain debt issuances. The objective of our fair value hedges is to reduce GAAP earnings volatility related to changes in benchmark interest rates. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.
Short-Term Debt
The following table displays our outstanding short-term debt (debt with an original contractual maturity of one year or less) and weighted-average interest rates of this debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
Outstanding
|
|
Weighted- Average Interest Rate(1)
|
|
Outstanding
|
|
Weighted- Average Interest Rate(1)
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt of Fannie Mae
|
|
$
|
2,280
|
|
|
0.01
|
%
|
|
$
|
12,173
|
|
|
0.18
|
%
|
(1)Includes the effects of discounts, premiums and other cost basis adjustments.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt
|
Long-Term Debt
Long-term debt represents debt with an original contractual maturity of greater than one year. The following table displays our outstanding long-term debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Maturities
|
|
Outstanding(1)
|
|
Weighted- Average Interest Rate(2)
|
|
Maturities
|
|
Outstanding(1)
|
|
Weighted- Average Interest Rate(2)
|
|
|
(Dollars in millions)
|
|
Senior fixed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benchmark notes and bonds
|
2021 - 2030
|
|
$
|
96,513
|
|
|
2.14
|
%
|
|
2021 - 2030
|
|
$
|
106,691
|
|
|
2.03
|
%
|
|
Medium-term notes(3)
|
2021 - 2031
|
|
43,898
|
|
|
0.61
|
|
|
2021 - 2030
|
|
48,524
|
|
|
0.63
|
|
|
Other(4)
|
2021 - 2038
|
|
7,073
|
|
|
3.84
|
|
|
2021 - 2038
|
|
6,701
|
|
|
3.90
|
|
|
Total senior fixed
|
|
|
147,484
|
|
|
1.77
|
|
|
|
|
161,916
|
|
|
1.69
|
|
|
Senior floating:
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium-term notes(3)
|
2021 - 2022
|
|
87,364
|
|
|
0.30
|
|
|
2021 - 2022
|
|
100,089
|
|
|
0.35
|
|
|
Connecticut Avenue Securities(5)
|
2023 - 2031
|
|
14,051
|
|
|
4.11
|
|
|
2023 - 2031
|
|
14,978
|
|
|
4.16
|
|
|
Other(6)
|
2037
|
|
397
|
|
|
9.20
|
|
|
2037
|
|
416
|
|
|
7.75
|
|
|
Total senior floating
|
|
|
101,812
|
|
|
0.85
|
|
|
|
|
115,483
|
|
|
0.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt of Fannie Mae(7)
|
|
|
249,296
|
|
|
1.39
|
|
|
|
|
277,399
|
|
|
1.34
|
|
|
Debt of consolidated trusts
|
2021 - 2060
|
|
3,844,699
|
|
|
1.86
|
|
|
2021 - 2060
|
|
3,646,164
|
|
|
1.88
|
|
|
Total long-term debt
|
|
|
$
|
4,093,995
|
|
|
1.83
|
%
|
|
|
|
$
|
3,923,563
|
|
|
1.85
|
%
|
(1)Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis adjustments, and other cost basis adjustments.
(2)Excludes the effects of fair value adjustments and hedge-related basis adjustments.
(3)Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zero-coupon debt.
(4)Includes other long-term debt with an original contractual maturity of greater than 10 years and foreign exchange bonds.
(5)Credit risk-sharing securities that transfer a portion of the credit risk on specified pools of single-family mortgage loans to the investors in these securities, a portion of which is reported at fair value. Represents CAS issued prior to November 2018. See “Note 2, Consolidations and Transfers of Financial Assets” in our 2020 Form 10-K for more information about our CAS structures issued beginning November 2018.
(6)Consists of structured debt instruments that are reported at fair value.
(7)Includes unamortized discounts and premiums, fair value adjustments, hedge-related cost basis adjustments, and other cost basis adjustments in a net discount position of $1.1 billion and $392 million as of June 30, 2021 and December 31, 2020, respectively.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Derivative Instruments
|
8. Derivative Instruments
Derivative instruments are an integral part of our strategy in managing interest-rate risk. Derivative instruments may be privately-negotiated, bilateral contracts, or they may be listed and traded on an exchange. We refer to our derivative transactions made pursuant to bilateral contracts as our over-the-counter (“OTC”) derivative transactions and our derivative transactions accepted for clearing by a derivatives clearing organization as our cleared derivative transactions. We typically do not settle the notional amount of our risk management derivatives; rather, notional amounts provide the basis for calculating actual payments or settlement amounts. The derivative contracts we use for interest-rate risk management purposes consist primarily of interest-rate swaps and interest-rate options. See “Note 8, Derivative Instruments” in our 2020 Form 10-K for additional information on interest-rate risk management.
We account for certain forms of credit risk transfer transactions as derivatives. In our credit risk transfer transactions, a portion of the credit risk associated with losses on a reference pool of mortgage loans is transferred to a third party. We enter into derivative transactions that are associated with some of our credit risk transfer transactions, whereby we manage investment risk to guarantee that certain unconsolidated VIEs have sufficient cash flows to pay their contractual obligations.
We enter into forward purchase and sale commitments that lock in the future delivery of mortgage loans and mortgage-related securities at a fixed price or yield. Certain commitments to purchase mortgage loans and purchase or sell mortgage-related securities meet the criteria of a derivative. We typically settle the notional amount of our mortgage commitments that are accounted for as derivatives.
We recognize all derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair value on a trade date basis. Fair value amounts, which are (1) netted to the extent a legal right of offset exists and is enforceable by law at the counterparty level and (2) inclusive of the right or obligation associated with the cash collateral posted or received, are recorded in “Other assets” or “Other liabilities” in our condensed consolidated balance sheets. See “Note 12, Fair Value” for additional information on derivatives recorded at fair value. We present cash flows from derivatives as operating activities in our condensed consolidated statements of cash flows.
Fair Value Hedge Accounting
As discussed in “Note 1, Summary of Significant Accounting Policies,” we implemented a fair value hedge accounting program in January 2021. Pursuant to this program, we may designate certain interest-rate swaps as hedging instruments in hedges of the change in fair value attributable to the designated benchmark interest rate for certain closed pools of fixed-rate, single-family mortgage loans or our funding debt. For hedged items in qualifying fair value hedging relationships, changes in fair value attributable to the designated risk are recognized as a basis adjustment to the hedged item. We also report changes in the fair value of the derivative hedging instrument in the same condensed consolidated statements of operations and comprehensive income line item used to recognize the earnings effect of the hedged item’s basis adjustment. The objective of our fair value hedges is to reduce GAAP earnings volatility related to changes in benchmark interest rates.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Derivative Instruments
|
Notional and Fair Value Position of our Derivatives
The following table displays the notional amount and estimated fair value of our asset and liability derivative instruments, including derivative instruments designated as hedges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
|
Asset Derivatives
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
Estimated Fair Value
|
|
Notional Amount
|
|
Estimated Fair Value
|
|
Notional Amount
|
|
Estimated Fair Value
|
|
Notional Amount
|
|
Estimated Fair Value
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
Risk management derivatives designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay-fixed
|
|
$
|
1,695
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Receive-fixed
|
|
45,257
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk management derivatives designated as hedges
|
|
46,952
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Risk management derivatives not designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay-fixed
|
|
72,778
|
|
|
—
|
|
|
2,353
|
|
|
(59)
|
|
|
88,361
|
|
|
—
|
|
|
11,461
|
|
|
(595)
|
|
|
|
|
|
|
|
|
Receive-fixed
|
|
35,651
|
|
|
2
|
|
|
44,478
|
|
|
(694)
|
|
|
92,315
|
|
|
233
|
|
|
33,919
|
|
|
(123)
|
|
|
|
|
|
|
|
|
Basis
|
|
250
|
|
|
166
|
|
|
—
|
|
|
—
|
|
|
250
|
|
|
192
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
239
|
|
|
43
|
|
|
104
|
|
|
(31)
|
|
|
237
|
|
|
57
|
|
|
239
|
|
|
(58)
|
|
|
|
|
|
|
|
|
Swaptions(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay-fixed
|
|
4,430
|
|
|
62
|
|
|
410
|
|
|
(18)
|
|
|
5,530
|
|
|
37
|
|
|
2,025
|
|
|
(118)
|
|
|
|
|
|
|
|
|
Receive-fixed
|
|
390
|
|
|
9
|
|
|
950
|
|
|
(28)
|
|
|
3,355
|
|
|
346
|
|
|
700
|
|
|
(16)
|
|
|
|
|
|
|
|
|
Futures(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,398
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Total gross risk management derivatives
|
|
113,738
|
|
|
282
|
|
|
48,295
|
|
|
(830)
|
|
|
254,446
|
|
|
865
|
|
|
48,344
|
|
|
(910)
|
|
|
|
|
|
|
|
|
Accrued interest receivable (payable)
|
|
—
|
|
|
83
|
|
|
—
|
|
|
(29)
|
|
|
—
|
|
|
97
|
|
|
—
|
|
|
(105)
|
|
|
|
|
|
|
|
|
Total risk management derivatives not designated as hedges
|
|
113,738
|
|
|
365
|
|
|
48,295
|
|
|
(859)
|
|
|
254,446
|
|
|
962
|
|
|
48,344
|
|
|
(1,015)
|
|
|
|
|
|
|
|
|
Netting adjustment(2)
|
|
—
|
|
|
(331)
|
|
|
—
|
|
|
849
|
|
|
—
|
|
|
(905)
|
|
|
—
|
|
|
995
|
|
|
|
|
|
|
|
|
Total risk management derivatives portfolio
|
|
160,690
|
|
|
34
|
|
|
48,295
|
|
|
(10)
|
|
|
254,446
|
|
|
57
|
|
|
48,344
|
|
|
(20)
|
|
|
|
|
|
|
|
|
Mortgage commitment derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage commitments to purchase whole loans
|
|
18,500
|
|
|
43
|
|
|
1,609
|
|
|
(2)
|
|
|
35,292
|
|
|
145
|
|
|
51
|
|
|
—
|
|
|
|
|
|
|
|
|
Forward contracts to purchase mortgage-related securities
|
|
76,309
|
|
|
254
|
|
|
28,596
|
|
|
(25)
|
|
|
144,215
|
|
|
844
|
|
|
607
|
|
|
—
|
|
|
|
|
|
|
|
|
Forward contracts to sell mortgage-related securities
|
|
19,017
|
|
|
14
|
|
|
140,605
|
|
|
(449)
|
|
|
199
|
|
|
—
|
|
|
227,828
|
|
|
(1,426)
|
|
|
|
|
|
|
|
|
Total mortgage commitment derivatives
|
|
113,826
|
|
|
311
|
|
|
170,810
|
|
|
(476)
|
|
|
179,706
|
|
|
989
|
|
|
228,486
|
|
|
(1,426)
|
|
|
|
|
|
|
|
|
Credit enhancement derivatives
|
|
11,680
|
|
|
50
|
|
|
9,099
|
|
|
(32)
|
|
|
16,829
|
|
|
179
|
|
|
11,368
|
|
|
(49)
|
|
|
|
|
|
|
|
|
Derivatives at fair value
|
|
$
|
286,196
|
|
|
$
|
395
|
|
|
$
|
228,204
|
|
|
$
|
(518)
|
|
|
$
|
450,981
|
|
|
$
|
1,225
|
|
|
$
|
288,198
|
|
|
$
|
(1,495)
|
|
|
|
|
|
|
|
(1)Centrally cleared derivatives have no ascribable fair value because the positions are settled daily.
(2)The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and received. Cash collateral posted was $556 million and $658 million as of June 30, 2021 and December 31, 2020, respectively. Cash collateral received was $38 million and $568 million as of June 30, 2021 and December 31, 2020, respectively.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Derivative Instruments
|
We record all gains and losses, including accrued interest, on derivatives while they are not in a qualifying designated hedging relationship in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. The following table displays, by type of derivative instrument, the fair value gains and losses, net on our derivatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
(Dollars in millions)
|
|
Risk management derivatives:
|
|
|
|
|
|
|
|
|
|
Swaps:
|
|
|
|
|
|
|
|
|
|
Pay-fixed
|
|
$
|
(695)
|
|
|
$
|
(94)
|
|
|
$
|
1,512
|
|
|
$
|
(4,123)
|
|
|
Receive-fixed
|
|
757
|
|
|
191
|
|
|
(1,098)
|
|
|
3,534
|
|
|
Basis
|
|
19
|
|
|
17
|
|
|
(27)
|
|
|
73
|
|
|
Foreign currency
|
|
4
|
|
|
4
|
|
|
(4)
|
|
|
(34)
|
|
|
Swaptions:
|
|
|
|
|
|
|
|
|
|
Pay-fixed
|
|
(58)
|
|
|
(13)
|
|
|
49
|
|
|
(161)
|
|
|
Receive-fixed
|
|
30
|
|
|
25
|
|
|
(209)
|
|
|
657
|
|
|
Futures
|
|
—
|
|
|
(4)
|
|
|
1
|
|
|
(75)
|
|
|
Net contractual interest income (expense) on interest-rate swaps
|
|
7
|
|
|
(64)
|
|
|
(4)
|
|
|
(170)
|
|
|
Total risk management derivatives fair value gains (losses), net(1)
|
|
64
|
|
|
62
|
|
|
220
|
|
|
(299)
|
|
|
Mortgage commitment derivatives fair value gains (losses), net
|
|
(553)
|
|
|
(662)
|
|
|
529
|
|
|
(1,655)
|
|
|
Credit enhancement derivatives fair value gains (losses), net
|
|
(18)
|
|
|
31
|
|
|
(108)
|
|
|
20
|
|
|
Total derivatives fair value gains (losses), net
|
|
$
|
(507)
|
|
|
$
|
(569)
|
|
|
$
|
641
|
|
|
$
|
(1,934)
|
|
(1) Adjusted for fair value gains (losses) and interest income (expense) presented in “net interest income” in 2021 for interest-rate swaps in designated fair value hedges.
Effect of Fair Value Hedge Accounting
The following table displays the effect of fair value hedge accounting on our condensed consolidated statements of operations and comprehensive income, including gains and losses recognized on fair value hedging relationships.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
|
2021
|
|
|
|
2021
|
|
|
|
|
|
Interest Income: Mortgage Loans
|
|
Interest Expense: Long-Term Debt
|
|
|
|
|
Interest Income: Mortgage Loans
|
|
Interest Expense: Long-Term Debt
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Total amounts presented in our condensed consolidated statements of operations and comprehensive income
|
|
$
|
24,932
|
|
|
$
|
(16,820)
|
|
|
|
|
|
$
|
48,285
|
|
|
$
|
(33,637)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) from fair value hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans HFI and related interest-rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedged items
|
|
$
|
106
|
|
|
$
|
—
|
|
|
|
|
|
$
|
70
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments
|
|
(106)
|
|
|
—
|
|
|
|
|
|
(70)
|
|
|
—
|
|
|
|
|
|
Interest accruals on hedging instruments
|
|
(5)
|
|
|
—
|
|
|
|
|
|
(5)
|
|
|
—
|
|
|
|
|
|
Debt of Fannie Mae and related interest-rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedged items
|
|
—
|
|
|
(390)
|
|
|
|
|
|
—
|
|
|
805
|
|
|
|
|
|
Discontinued hedge-related basis adjustment amortization
|
|
—
|
|
|
(21)
|
|
|
|
|
|
—
|
|
|
(34)
|
|
|
|
|
|
Derivatives designated as hedging instruments
|
|
—
|
|
|
423
|
|
|
|
|
|
—
|
|
|
(791)
|
|
|
|
|
|
Interest accruals on derivative hedging instruments
|
|
—
|
|
|
59
|
|
|
|
|
|
—
|
|
|
113
|
|
|
|
|
|
Total effect of fair value hedges
|
|
$
|
(5)
|
|
|
$
|
71
|
|
|
|
|
|
$
|
(5)
|
|
|
$
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Derivative Instruments
|
Hedged Items in Fair Value Hedging Relationships
The following table displays the carrying amounts of the hedged items that have been in qualifying fair value hedges recorded in our condensed consolidated balance sheets, including the hedged item's cumulative basis adjustments and the closed portfolio balances under the last-of-layer method. The hedged item carrying amounts and total basis adjustments include both open and discontinued hedges. The amortized cost and designated UPB consists only of open hedges as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
|
Carrying Amount Assets (Liabilities)
|
|
Cumulative Amount of Fair Value Hedging Basis Adjustments Included in the Carrying Amount
|
|
Closed Portfolio of Mortgage Loans Under Last-of-Layer Method
|
|
|
|
|
Total Basis Adjustments(1)(2)
|
|
Remaining Adjustments - Discontinued Hedge
|
|
Total Amortized Cost
|
|
Designated UPB
|
|
|
|
(Dollars in millions)
|
|
Mortgage loans HFI
|
|
$
|
125,321
|
|
|
$
|
70
|
|
|
$
|
70
|
|
|
$
|
40,570
|
|
|
$
|
1,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt of Fannie Mae
|
|
(62,688)
|
|
|
771
|
|
|
771
|
|
|
N/A
|
|
N/A
|
(1) No basis adjustment associated with open hedges, as all hedges are designated at the close of business, with a one-day term.
(2) Based on the unamortized balance of the hedge-related cost basis.
Derivative Counterparty Credit Exposure
Our derivative counterparty credit exposure relates principally to interest-rate derivative contracts. We are exposed to the risk that a counterparty in a derivative transaction will default on payments due to us, which may require us to seek a replacement derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable to find a suitable replacement. We manage our derivative counterparty credit exposure relating to our risk management derivative transactions mainly through enforceable master netting arrangements, which allow us to net derivative assets and liabilities with the same counterparty or clearing organization and clearing member. For our OTC derivative transactions, we require counterparties to post collateral, which may include cash, U.S. Treasury securities, agency debt and agency mortgage-related securities.
See “Note 11, Netting Arrangements” for information on our rights to offset assets and liabilities as of June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Segment Reporting
|
9. Segment Reporting
We have two reportable business segments, which are based on the type of business activities each perform: Single-Family and Multifamily. Results of our two business segments are intended to reflect each segment as if it were a stand-alone business. The sum of the results for our two business segments equals our condensed consolidated results of operations. For additional information related to our business segments, including basis of organization and other segment activities, see “Note 10, Segment Reporting” in our 2020 Form 10-K.
Segment Allocations and Results
The majority of our revenues and expenses are directly associated with each respective business segment and are included in determining its operating results. Those revenues and expenses that are not directly attributable to a particular business segment are allocated based on the size of each segment’s guaranty book of business. The substantial majority of the gains and losses associated with our risk management derivatives, including the impact of hedge accounting, are allocated to our Single-Family business segment.
The following tables display our segment results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
Single-Family
|
|
Multifamily
|
|
Total
|
|
Single-Family
|
|
Multifamily
|
|
Total
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
Net interest income(1)
|
|
$
|
7,323
|
|
|
$
|
963
|
|
|
$
|
8,286
|
|
|
$
|
4,939
|
|
|
$
|
838
|
|
|
$
|
5,777
|
|
|
|
|
|
Fee and other income(2)
|
|
80
|
|
|
23
|
|
|
103
|
|
|
71
|
|
|
19
|
|
|
90
|
|
|
|
|
|
Net revenues
|
|
7,403
|
|
|
986
|
|
|
8,389
|
|
|
5,010
|
|
|
857
|
|
|
5,867
|
|
|
|
|
|
Investment gains (losses), net(3)
|
|
658
|
|
|
(12)
|
|
|
646
|
|
|
96
|
|
|
53
|
|
|
149
|
|
|
|
|
|
Fair value gains (losses), net(4)
|
|
(386)
|
|
|
(60)
|
|
|
(446)
|
|
|
(1,030)
|
|
|
12
|
|
|
(1,018)
|
|
|
|
|
|
Administrative expenses
|
|
(619)
|
|
|
(127)
|
|
|
(746)
|
|
|
(625)
|
|
|
(129)
|
|
|
(754)
|
|
|
|
|
|
Credit-related income (expense):(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit (provision) for credit losses
|
|
2,553
|
|
|
35
|
|
|
2,588
|
|
|
219
|
|
|
(231)
|
|
|
(12)
|
|
|
|
|
|
Foreclosed property expense
|
|
(28)
|
|
|
(13)
|
|
|
(41)
|
|
|
(3)
|
|
|
(7)
|
|
|
(10)
|
|
|
|
|
|
Total credit-related income (expense)
|
|
2,525
|
|
|
22
|
|
|
2,547
|
|
|
216
|
|
|
(238)
|
|
|
(22)
|
|
|
|
|
|
TCCA fees(6)
|
|
(758)
|
|
|
—
|
|
|
(758)
|
|
|
(660)
|
|
|
—
|
|
|
(660)
|
|
|
|
|
|
Credit enhancement expense(7)
|
|
(219)
|
|
|
(55)
|
|
|
(274)
|
|
|
(307)
|
|
|
(53)
|
|
|
(360)
|
|
|
|
|
|
Change in expected credit enhancement recoveries(8)
|
|
(57)
|
|
|
13
|
|
|
(44)
|
|
|
208
|
|
|
65
|
|
|
273
|
|
|
|
|
|
Other income (expenses), net
|
|
(315)
|
|
|
35
|
|
|
(280)
|
|
|
(252)
|
|
|
(9)
|
|
|
(261)
|
|
|
|
|
|
Income before federal income taxes
|
|
8,232
|
|
|
802
|
|
|
9,034
|
|
|
2,656
|
|
|
558
|
|
|
3,214
|
|
|
|
|
|
Provision for federal income taxes
|
|
(1,725)
|
|
|
(157)
|
|
|
(1,882)
|
|
|
(556)
|
|
|
(113)
|
|
|
(669)
|
|
|
|
|
|
Net income
|
|
$
|
6,507
|
|
|
$
|
645
|
|
|
$
|
7,152
|
|
|
$
|
2,100
|
|
|
$
|
445
|
|
|
$
|
2,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Segment Reporting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
Single-Family
|
|
Multifamily
|
|
Total
|
|
Single-Family
|
|
Multifamily
|
|
Total
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
Net interest income(1)
|
|
$
|
13,217
|
|
|
$
|
1,811
|
|
|
$
|
15,028
|
|
|
$
|
9,480
|
|
|
$
|
1,644
|
|
|
$
|
11,124
|
|
|
|
|
|
Fee and other income(2)
|
|
142
|
|
|
48
|
|
|
190
|
|
|
165
|
|
|
45
|
|
|
210
|
|
|
|
|
|
Net revenues
|
|
13,359
|
|
|
1,859
|
|
|
15,218
|
|
|
9,645
|
|
|
1,689
|
|
|
11,334
|
|
|
|
|
|
Investment gains (losses), net(3)
|
|
722
|
|
|
(31)
|
|
|
691
|
|
|
(56)
|
|
|
47
|
|
|
(9)
|
|
|
|
|
|
Fair value gains (losses), net(4)
|
|
354
|
|
|
(16)
|
|
|
338
|
|
|
(1,490)
|
|
|
196
|
|
|
(1,294)
|
|
|
|
|
|
Administrative expenses
|
|
(1,242)
|
|
|
(252)
|
|
|
(1,494)
|
|
|
(1,254)
|
|
|
(249)
|
|
|
(1,503)
|
|
|
|
|
|
Credit-related income (expense):(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit (provision) for credit losses
|
|
3,215
|
|
|
138
|
|
|
3,353
|
|
|
(1,953)
|
|
|
(642)
|
|
|
(2,595)
|
|
|
|
|
|
Foreclosed property expense
|
|
(11)
|
|
|
(25)
|
|
|
(36)
|
|
|
(81)
|
|
|
(9)
|
|
|
(90)
|
|
|
|
|
|
Total credit-related income (expense)
|
|
3,204
|
|
|
113
|
|
|
3,317
|
|
|
(2,034)
|
|
|
(651)
|
|
|
(2,685)
|
|
|
|
|
|
TCCA fees(6)
|
|
(1,489)
|
|
|
—
|
|
|
(1,489)
|
|
|
(1,297)
|
|
|
—
|
|
|
(1,297)
|
|
|
|
|
|
Credit enhancement expense(7)
|
|
(445)
|
|
|
(113)
|
|
|
(558)
|
|
|
(623)
|
|
|
(113)
|
|
|
(736)
|
|
|
|
|
|
Change in expected credit enhancement recoveries(8)
|
|
(73)
|
|
|
(2)
|
|
|
(75)
|
|
|
266
|
|
|
195
|
|
|
461
|
|
|
|
|
|
Other income (expenses), net
|
|
(602)
|
|
|
3
|
|
|
(599)
|
|
|
(415)
|
|
|
(64)
|
|
|
(479)
|
|
|
|
|
|
Income before federal income taxes
|
|
13,788
|
|
|
1,561
|
|
|
15,349
|
|
|
2,742
|
|
|
1,050
|
|
|
3,792
|
|
|
|
|
|
Provision for federal income taxes
|
|
(2,887)
|
|
|
(317)
|
|
|
(3,204)
|
|
|
(574)
|
|
|
(212)
|
|
|
(786)
|
|
|
|
|
|
Net income
|
|
$
|
10,901
|
|
|
$
|
1,244
|
|
|
$
|
12,145
|
|
|
$
|
2,168
|
|
|
$
|
838
|
|
|
$
|
3,006
|
|
|
|
|
(1)Net interest income primarily consists of guaranty fees received as compensation for assuming and managing the credit risk on loans underlying Fannie Mae MBS held by third parties for the respective business segment, and the difference between the interest income earned on the respective business segment’s mortgage assets in our retained mortgage portfolio and the interest expense associated with the debt funding those assets. Revenues from single-family guaranty fees include revenues generated by the 10 basis point increase in guaranty fees pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us. Also includes yield maintenance fees we recognized on the prepayment of multifamily loans. Beginning in January 2021, net interest income was impacted by the application of fair value hedge accounting. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.
(2)Single-family fee and other income primarily consists of compensation for engaging in structured transactions and providing other lender services. Multifamily fee and other income consists of fees associated with Multifamily business activities.
(3)Single-family investment gains and losses primarily consist of gains and losses on the sale of mortgage assets. Multifamily investment gains and losses primarily consists of gains and losses on resecuritization activity.
(4)Single-family fair value gains and losses primarily consist of fair value gains and losses on risk management and mortgage commitment derivatives, trading securities, fair value option debt, and other financial instruments associated with our single-family guaranty book of business. Multifamily fair value gains and losses primarily consist of fair value gains and losses on MBS commitment derivatives, trading securities and other financial instruments associated with our multifamily guaranty book of business. Beginning in January 2021, fair value gains (losses), net was impacted by the application of fair value hedge accounting. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.
(5)Credit-related income or expense is based on the guaranty book of business of the respective business segment and consists of the applicable segment’s benefit or provision for credit losses and foreclosed property income or expense on loans underlying the segment’s guaranty book of business.
(6)Consists of the portion of our single-family guaranty fees that is remitted to Treasury pursuant to the TCCA.
(7)Single-family credit enhancement expense consists of costs associated with our freestanding credit enhancements, which primarily include costs associated with our Credit Insurance Risk TransferTM (“CIRTTM”), Connecticut Avenue Securities® (“CAS”) and enterprise-paid mortgage insurance (“EPMI”) programs. Multifamily credit enhancement expense primarily consists of costs associated with our Multifamily CIRTTM (“MCIRTTM”) and Multifamily Connecticut Avenue SecuritiesTM (“MCASTM”) programs as well as amortization expense for certain lender risk-sharing programs. Excludes CAS transactions accounted for as debt instruments and credit risk transfer programs accounted for as derivative instruments.
(8)Consists of change in benefits recognized from our freestanding credit enhancements, primarily from our CAS and CIRT programs as well as certain lender risk-sharing arrangements, including our multifamily DUS program.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk
|
10. Concentrations of Credit Risk
Risk Characteristics of our Guaranty Book of Business
One of the measures by which we gauge our credit risk is the delinquency status of the mortgage loans in our guaranty book of business.
For single-family and multifamily loans, we use this information, in conjunction with housing market and other economic data, to structure our pricing and our eligibility and underwriting criteria to reflect the current risk of loans with higher-risk characteristics, and in some cases we decide to significantly reduce our participation in riskier loan product categories. Management also uses this data together with other credit risk measures to identify key trends that guide the development of our loss mitigation strategies.
We report the delinquency status of our single-family and multifamily guaranty book of business below. We report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loans.
Single-Family Credit Risk Characteristics
For single-family loans, management monitors the serious delinquency rate, which is the percentage of single-family loans, based on the number of loans that are 90 days or more past due or in the foreclosure process, and loans that have higher risk characteristics, such as high mark-to-market LTV ratios.
The following tables display the delinquency status and serious delinquency rates for specified loan categories of our single-family conventional guaranty book of business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
30 Days Delinquent
|
|
60 Days Delinquent
|
|
Seriously Delinquent(1)
|
|
30 Days Delinquent
|
|
60 Days Delinquent
|
|
Seriously Delinquent(1)
|
|
Percentage of single-family conventional guaranty book of business based on UPB
|
0.63
|
%
|
|
0.18
|
%
|
|
2.14
|
%
|
|
0.88
|
%
|
|
0.33
|
%
|
|
3.10
|
%
|
|
Percentage of single-family conventional loans based on loan count
|
0.74
|
|
|
0.20
|
|
|
2.08
|
|
|
1.02
|
|
|
0.36
|
|
|
2.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Percentage of
Single-Family
Conventional
Guaranty Book of Business
Based on UPB
|
|
Serious Delinquency Rate(1)
|
|
Percentage of
Single-Family
Conventional
Guaranty Book of Business
Based on UPB
|
|
Serious Delinquency Rate(1)
|
|
Estimated mark-to-market LTV ratio:
|
|
|
|
|
|
|
|
|
Greater than 100%
|
*
|
|
20.48
|
%
|
|
*
|
|
22.43
|
%
|
|
Geographical distribution:
|
|
|
|
|
|
|
|
|
California
|
20
|
%
|
|
1.84
|
|
|
19
|
%
|
|
2.62
|
|
|
Florida
|
6
|
|
|
2.81
|
|
|
6
|
|
|
4.17
|
|
|
Illinois
|
3
|
|
|
2.51
|
|
|
3
|
|
|
3.10
|
|
|
New Jersey
|
3
|
|
|
3.33
|
|
|
3
|
|
|
4.57
|
|
|
New York
|
5
|
|
|
3.71
|
|
|
5
|
|
|
4.79
|
|
|
All other states
|
63
|
|
|
1.88
|
|
|
64
|
|
|
2.59
|
|
|
Product distribution:
|
|
|
|
|
|
|
|
|
Alt-A
|
1
|
|
|
7.88
|
|
|
1
|
|
|
9.32
|
|
|
Vintages:
|
|
|
|
|
|
|
|
|
2004 and prior
|
1
|
|
|
5.04
|
|
|
2
|
|
|
5.88
|
|
|
2005-2008
|
2
|
|
|
8.75
|
|
|
2
|
|
|
9.98
|
|
|
2009-2021
|
97
|
|
|
1.69
|
|
|
96
|
|
|
2.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Represents less than 0.5% of single-family conventional guaranty book of business.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk
|
(1)Based on loan count, consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of June 30, 2021 or December 31, 2020.
Multifamily Credit Risk Characteristics
For multifamily loans, management monitors the serious delinquency rate, which is the percentage of multifamily loans, based on unpaid principal balance, that are 60 days or more past due, and loans with other higher risk characteristics to determine the overall credit quality of our multifamily book of business. Higher risk characteristics include, but are not limited to, current debt service coverage ratio (“DSCR”) below 1.0 and original LTV ratios greater than 80%. We stratify multifamily loans into different internal risk categories based on the credit risk inherent in each individual loan.
The following tables display the delinquency status and serious delinquency rates for specified loan categories of our multifamily guaranty book of business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021(1)
|
|
December 31, 2020(1)
|
|
|
30 Days Delinquent
|
|
Seriously Delinquent(2)
|
|
30 Days Delinquent
|
|
Seriously Delinquent(2)
|
|
Percentage of multifamily guaranty book of business
|
0.30
|
%
|
|
0.53
|
%
|
|
0.29
|
%
|
|
0.98
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Percentage of Multifamily Guaranty Book of Business(1)
|
|
Serious Delinquency Rate(2)(3)
|
|
Percentage of Multifamily Guaranty Book of Business(1)
|
|
Serious Delinquency Rate(2)(3)
|
|
Original LTV ratio:
|
|
|
|
|
|
|
|
|
Greater than 80%
|
1
|
%
|
|
0.82
|
%
|
|
1
|
%
|
|
1.04
|
%
|
|
Less than or equal to 80%
|
99
|
|
|
0.53
|
|
|
99
|
|
|
0.98
|
|
|
Current DSCR below 1.0(4)
|
2
|
|
|
15.66
|
|
|
2
|
|
|
21.19
|
|
(1)Calculated based on the aggregate unpaid principal balance of multifamily loans for each category divided by the aggregate unpaid principal balance of loans in our multifamily guaranty book of business.
(2)Consists of multifamily loans that were 60 days or more past due as of the dates indicated.
(3)Calculated based on the unpaid principal balance of multifamily loans that were seriously delinquent divided by the aggregate unpaid principal balance of multifamily loans for each category included in our multifamily guaranty book of business.
(4)Our estimates of current DSCRs are based on the latest available income information for these properties. Although we use the most recently available results of our multifamily borrowers, there is a lag in reporting, which typically can range from 3 to 6 months but in some cases may be longer. For certain properties, we do not receive updated financial information.
Other Concentrations
Mortgage Insurers. Mortgage insurance “risk in force” refers to our maximum potential loss recovery under the applicable mortgage insurance policies in force and is generally based on the loan-level insurance coverage percentage and, if applicable, any aggregate pool loss limit, as specified in the policy.
The following table displays our total mortgage insurance risk in force by primary and pool insurance, as well as the total risk-in-force mortgage insurance coverage as a percentage of the single-family conventional guaranty book of business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
Risk in Force
|
|
Percentage of Single-Family Conventional Guaranty Book of Business
|
|
Risk in Force
|
|
Percentage of Single-Family Conventional Guaranty Book of Business
|
|
|
|
(Dollars in millions)
|
|
Mortgage insurance risk in force:
|
|
|
|
|
|
|
|
|
|
Primary mortgage insurance
|
|
$
|
173,773
|
|
|
|
|
$
|
170,890
|
|
|
|
|
Pool mortgage insurance
|
|
278
|
|
|
|
|
291
|
|
|
|
|
Total mortgage insurance risk in force
|
|
$
|
174,051
|
|
|
5%
|
|
$
|
171,181
|
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk
|
Mortgage insurance does not protect us from all losses on covered loans. For example, mortgage insurance does not cover property damage that is not covered by the hazard insurance we require, and such damage may result in a reduction to, or a denial of, mortgage insurance benefits. Specifically, a property damaged by a flood that was outside a Federal Emergency Management Agency (“FEMA”)-identified Special Flood Hazard Area, where we require coverage, or a property damaged by an earthquake are the most likely scenarios where property damage may result in a loss event not covered by hazard insurance.
The table below displays our mortgage insurer counterparties that provided approximately 10% or more of the risk-in-force mortgage insurance coverage on mortgage loans in our single-family conventional guaranty book of business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Risk-in-Force
Coverage by Mortgage Insurer
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
Counterparty:(1)
|
|
|
|
Arch Capital Group Ltd.
|
|
20
|
%
|
|
21
|
%
|
|
Mortgage Guaranty Insurance Corp.
|
|
19
|
|
|
18
|
|
|
Radian Guaranty, Inc.
|
|
17
|
|
|
19
|
|
|
Genworth Mortgage Insurance Corp.
|
|
17
|
|
|
16
|
|
|
Essent Guaranty, Inc.
|
|
16
|
|
|
16
|
|
|
National Mortgage Insurance Corp.
|
|
10
|
|
|
9
|
|
|
Others
|
|
1
|
|
|
1
|
|
|
Total
|
|
100
|
%
|
|
100
|
%
|
(1)Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries of the counterparty.
Three of our mortgage insurer counterparties that are currently not approved to write new business—PMI Mortgage Insurance Co. (“PMI”), Triad Guaranty Insurance Corporation (“Triad”) and Republic Mortgage Insurance Company (“RMIC”)—are currently in run-off. A mortgage insurer that is in run-off continues to collect renewal premiums and process claims on its existing insurance business, but no longer writes new insurance, which increases the risk that the mortgage insurer will fail to pay claims fully. Entering run-off may limit sources of profits and liquidity for the mortgage insurer and could also cause the quality and speed of its claims processing to deteriorate. These three mortgage insurers provided a combined $2.0 billion, or 1%, of the risk-in-force mortgage insurance coverage of our single-family conventional guaranty book of business as of June 30, 2021.
PMI and Triad have been paying only a portion of policyholder claims and deferring the remaining portion. PMI is currently paying 77.5% of claims under its mortgage insurance policies in cash and is deferring the remaining 22.5%, and Triad is currently paying 75% of claims in cash and deferring the remaining 25%. It is uncertain whether PMI or Triad will be permitted in the future to pay their deferred policyholder claims or increase or decrease the amount of cash they pay on claims. RMIC is no longer deferring payments on policyholder claims, but remains in run-off.
We have counterparty credit risk relating to the potential insolvency of, or non-performance by, monoline mortgage insurers that insure single-family loans we purchase or guarantee. There is risk that these counterparties may fail to fulfill their obligations to pay our claims under insurance policies. On at least a quarterly basis, we assess our mortgage insurer counterparties’ respective abilities to fulfill their obligations to us. Our assessment includes financial reviews and analyses of the insurers’ portfolios and capital adequacy. If we determine that it is probable that we will not collect all of our claims from one or more of our mortgage insurer counterparties, it could increase our loss reserves, which could adversely affect our results of operations, liquidity, financial condition and net worth.
When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty obligations, we also consider the recoveries that we will receive on primary mortgage insurance, as mortgage insurance recoveries would reduce the severity of the loss associated with defaulted loans. We evaluate the financial condition of our mortgage insurer counterparties and adjust the contractually due recovery amounts to ensure that expected credit losses as of the balance sheet date are included in our loss reserve estimate. As a result, if our assessment of one or more of our mortgage insurer counterparties’ ability to fulfill their respective obligations to us worsens, it could increase our loss reserves. As of June 30, 2021 and December 31, 2020, our estimated benefit from mortgage insurance, which is based on estimated credit losses as of period end, reduced our loss reserves by $766 million and $1.4 billion, respectively.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk
|
As of June 30, 2021 and December 31, 2020, we had outstanding receivables of $537 million and $560 million, respectively, recorded in “Other assets” in our condensed consolidated balance sheets related to amounts claimed on insured, defaulted loans excluding government-insured loans. As of June 30, 2021 and December 31, 2020, we assessed these outstanding receivables for collectability, and established a valuation allowance of $479 million and $497 million, respectively, which reduced our claim receivable to the amount considered probable of collection.
Mortgage Servicers and Sellers. Mortgage servicers collect mortgage and escrow payments from borrowers, pay taxes and insurance costs from escrow accounts, monitor and report delinquencies, and perform other required activities, including loss mitigation, on our behalf. Our mortgage servicers and sellers may also be obligated to repurchase loans or foreclosed properties, reimburse us for losses or provide other remedies under certain circumstances, such as if it is determined that the mortgage loan did not meet our underwriting or eligibility requirements, if certain loan representations and warranties are violated or if mortgage insurers rescind coverage. Our representation and warranty framework does not require repurchase for loans that have breaches of certain selling representations and warranties if they have met specified criteria for relief.
Our business with mortgage servicers is concentrated. The table below displays the percentage of our single-family guaranty book of business serviced by our top five depository single-family mortgage servicers and top five non-depository single-family mortgage servicers (i.e., servicers that are not insured depository institutions), and identifies one depository servicer that serviced more than 10% of our single-family guaranty book of business based on unpaid principal balance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Single-Family
Guaranty Book of Business
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Wells Fargo Bank, N.A. (together with its affiliates)
|
|
11
|
%
|
|
13
|
%
|
|
Remaining top five depository servicers
|
|
10
|
|
|
11
|
|
|
Top five non-depository servicers
|
|
23
|
|
|
24
|
|
|
Total
|
|
44
|
%
|
|
48
|
%
|
Compared with depository financial institutions, our non-depository servicers pose additional risks because they may not have the same financial strength or operational capacity, or be subject to the same level of regulatory oversight as depository financial institutions.
The table below displays the percentage of our multifamily guaranty book of business serviced by our top five multifamily mortgage servicers, and identifies two servicers that serviced 10% or more of our multifamily guaranty book of business based on unpaid principal balance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Multifamily
Guaranty Book of Business
|
|
|
|
As of
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Walker & Dunlop, Inc.
|
|
13
|
%
|
|
12
|
%
|
|
Wells Fargo Bank, N.A. (together with its affiliates)
|
|
11
|
|
|
12
|
|
|
Remaining top five servicers
|
|
24
|
|
|
24
|
|
|
Total
|
|
48
|
%
|
|
48
|
%
|
If a significant mortgage servicer or seller counterparty, or a number of mortgage servicers or sellers, fails to meet their obligations to us, it could adversely affect our results of operations and financial condition. We mitigate these risks in several ways, including:
•establishing minimum standards and financial requirements for our servicers;
•monitoring financial and portfolio performance as compared with peers and internal benchmarks; and
•for our largest mortgage servicers, conducting periodic financial reviews to confirm compliance with servicing guidelines and servicing performance expectations.
We may take one or more of the following actions to mitigate our credit exposure to mortgage servicers that present a higher risk:
•require a guaranty of obligations by higher-rated entities;
•transfer exposure to third parties;
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk
|
•require collateral;
•establish more stringent financial requirements;
•work with underperforming major servicers to improve operational processes; and
•suspend or terminate the selling and servicing relationship if deemed necessary.
Derivatives Counterparties. For information on credit risk associated with our derivative transactions and repurchase agreements see “Note 8, Derivative Instruments” and “Note 11, Netting Arrangements.”
11. Netting Arrangements
We use master netting arrangements, which allow us to offset certain financial instruments and collateral with the same counterparty, to minimize counterparty credit exposure. The tables below display information related to derivatives, securities purchased under agreements to resell or similar arrangements, and securities sold under agreements to repurchase or similar arrangements, which are subject to an enforceable master netting arrangement or similar agreement that are either offset or not offset in our condensed consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
|
|
|
Gross Amount Offset(1)
|
|
Net Amount Presented in our Condensed Consolidated Balance Sheets
|
|
Amounts Not Offset in our Condensed Consolidated Balance Sheets
|
|
|
|
|
|
Gross Amount
|
|
|
|
Financial Instruments(2)
|
|
Collateral(3)
|
|
Net Amount
|
|
|
|
(Dollars in millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTC risk management derivatives
|
|
$
|
365
|
|
|
$
|
(348)
|
|
|
|
$
|
17
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
$
|
17
|
|
|
Cleared risk management derivatives
|
|
—
|
|
|
17
|
|
|
|
17
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
17
|
|
|
Mortgage commitment derivatives
|
|
311
|
|
|
—
|
|
|
|
311
|
|
|
|
|
(182)
|
|
|
|
|
—
|
|
|
|
129
|
|
|
Total derivative assets
|
|
676
|
|
|
(331)
|
|
|
|
345
|
|
(4)
|
|
|
(182)
|
|
|
|
|
—
|
|
|
|
163
|
|
|
Securities purchased under agreements to resell or similar arrangements(5)
|
|
90,838
|
|
|
—
|
|
|
|
90,838
|
|
|
|
|
—
|
|
|
|
|
(90,838)
|
|
|
|
—
|
|
|
Total assets
|
|
$
|
91,514
|
|
|
$
|
(331)
|
|
|
|
$
|
91,183
|
|
|
|
|
$
|
(182)
|
|
|
|
|
$
|
(90,838)
|
|
|
|
$
|
163
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTC risk management derivatives
|
|
$
|
(859)
|
|
|
$
|
856
|
|
|
|
$
|
(3)
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
$
|
(3)
|
|
|
Cleared risk management derivatives
|
|
—
|
|
|
(7)
|
|
|
|
(7)
|
|
|
|
|
—
|
|
|
|
|
7
|
|
|
|
—
|
|
|
Mortgage commitment derivatives
|
|
(476)
|
|
|
—
|
|
|
|
(476)
|
|
|
|
|
182
|
|
|
|
|
288
|
|
|
|
(6)
|
|
|
Total derivative liabilities
|
|
(1,335)
|
|
|
849
|
|
|
|
(486)
|
|
(4)
|
|
|
182
|
|
|
|
|
295
|
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
(1,335)
|
|
|
$
|
849
|
|
|
|
$
|
(486)
|
|
|
|
|
$
|
182
|
|
|
|
|
$
|
295
|
|
|
|
$
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Netting Arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
Gross Amount Offset(1)
|
|
|
Net Amount Presented in our Condensed Consolidated Balance Sheets
|
|
Amounts Not Offset in our Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
Gross Amount
|
|
|
|
|
|
Financial Instruments(2)
|
|
Collateral(3)
|
|
|
Net Amount
|
|
|
|
|
|
(Dollars in millions)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTC risk management derivatives
|
|
|
$
|
962
|
|
|
|
|
$
|
(952)
|
|
|
|
|
$
|
10
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
10
|
|
|
|
Cleared risk management derivatives
|
|
|
—
|
|
|
|
|
47
|
|
|
|
|
47
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
47
|
|
|
|
Mortgage commitment derivatives
|
|
|
989
|
|
|
|
|
—
|
|
|
|
|
989
|
|
|
|
|
(406)
|
|
|
|
|
(53)
|
|
|
|
|
530
|
|
|
|
Total derivative assets
|
|
|
1,951
|
|
|
|
|
(905)
|
|
|
|
|
1,046
|
|
(4)
|
|
|
(406)
|
|
|
|
|
(53)
|
|
|
|
|
587
|
|
|
|
Securities purchased under agreements to resell or similar arrangements(5)
|
|
|
46,644
|
|
|
|
|
—
|
|
|
|
|
46,644
|
|
|
|
|
—
|
|
|
|
|
(46,644)
|
|
|
|
|
—
|
|
|
|
Total assets
|
|
|
$
|
48,595
|
|
|
|
|
$
|
(905)
|
|
|
|
|
$
|
47,690
|
|
|
|
|
$
|
(406)
|
|
|
|
|
$
|
(46,697)
|
|
|
|
|
$
|
587
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTC risk management derivatives
|
|
|
$
|
(1,015)
|
|
|
|
|
$
|
999
|
|
|
|
|
$
|
(16)
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
(16)
|
|
|
|
Cleared risk management derivatives
|
|
|
—
|
|
|
|
|
(4)
|
|
|
|
|
(4)
|
|
|
|
|
—
|
|
|
|
|
2
|
|
|
|
|
(2)
|
|
|
|
Mortgage commitment derivatives
|
|
|
(1,426)
|
|
|
|
|
—
|
|
|
|
|
(1,426)
|
|
|
|
|
406
|
|
|
|
|
1,017
|
|
|
|
|
(3)
|
|
|
|
Total derivative liabilities
|
|
|
(2,441)
|
|
|
|
|
995
|
|
|
|
|
(1,446)
|
|
(4)
|
|
|
406
|
|
|
|
|
1,019
|
|
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
$
|
(2,441)
|
|
|
|
|
$
|
995
|
|
|
|
|
$
|
(1,446)
|
|
|
|
|
$
|
406
|
|
|
|
|
$
|
1,019
|
|
|
|
|
$
|
(21)
|
|
|
(1)Represents the effect of the right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and received and accrued interest.
(2)Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same counterparty under an enforceable master netting arrangement but we have not elected to offset the related amounts in our condensed consolidated balance sheets.
(3)Represents collateral received that has not been recognized and not offset in our condensed consolidated balance sheets, as well as collateral posted which has been recognized but not offset in our condensed consolidated balance sheets. Does not include collateral held or posted in excess of our exposure. The fair value of non-cash collateral we pledged which the counterparty was permitted to sell or repledge was $4.5 billion and $4.7 billion as of June 30, 2021 and December 31, 2020, respectively. The fair value of non-cash collateral received was $91.0 billion and $46.6 billion, of which $59.8 billion and $46.6 billion could be sold or repledged as of June 30, 2021 and December 31, 2020, respectively. None of the underlying collateral was sold or repledged as of June 30, 2021 or December 31, 2020.
(4)Excludes derivative assets of $50 million and $179 million as of June 30, 2021 and December 31, 2020, respectively, and derivative liabilities of $32 million and $49 million recognized in our condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively, that are not subject to enforceable master netting arrangements.
(5)Includes $34.0 billion and $18.4 billion in securities purchased under agreements to resell classified as “Cash and cash equivalents” in our condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively. Includes $13.0 billion in securities purchased under agreements to resell classified as “Restricted cash and cash equivalents” in our condensed consolidated balance sheets as of June 30, 2021. There were no securities purchased under agreements to resell classified as “Restricted cash and cash equivalents” as of December 31, 2020.
Derivative instruments are recorded at fair value and securities purchased under agreements to resell or similar arrangements are recorded at amortized cost in our condensed consolidated balance sheets. For how we determine our rights to offset the assets and liabilities presented above with the same counterparty, including collateral posted or received, see “Note 14, Netting Arrangements” in our 2020 Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
12. Fair Value
We use fair value measurements for the initial recording of certain assets and liabilities and periodic remeasurement of certain assets and liabilities on a recurring or nonrecurring basis.
Fair Value Measurement
Fair value measurement guidance defines fair value, establishes a framework for measuring fair value, and sets forth disclosures around fair value measurements. This guidance applies whenever other accounting guidance requires or permits assets or liabilities to be measured at fair value. The guidance establishes a three-level fair value hierarchy that prioritizes the inputs into the valuation techniques used to measure fair value. The hierarchy gives the highest priority, Level 1, to measurements based on unadjusted quoted prices in active markets for identical assets or liabilities. The next highest priority, Level 2, is given to measurements of assets and liabilities based on limited observable inputs or observable inputs for similar assets and liabilities. The lowest priority, Level 3, is given to measurements based on unobservable inputs.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
Recurring Changes in Fair Value
The following tables display our assets and liabilities measured in our condensed consolidated balance sheets at fair value on a recurring basis subsequent to initial recognition, including instruments for which we have elected the fair value option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of June 30, 2021
|
|
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Netting Adjustment(1)
|
|
Estimated Fair Value
|
|
|
|
(Dollars in millions)
|
|
Recurring fair value measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents(2)
|
|
|
$
|
3,124
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
3,124
|
|
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
|
—
|
|
|
|
|
1,695
|
|
|
|
|
141
|
|
|
|
|
—
|
|
|
|
|
1,836
|
|
|
|
Other agency
|
|
|
—
|
|
|
|
|
3,333
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
3,333
|
|
|
|
Private-label and other mortgage securities
|
|
|
—
|
|
|
|
|
152
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
152
|
|
|
|
Non-mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
89,707
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
89,707
|
|
|
|
Other securities
|
|
|
—
|
|
|
|
|
73
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
73
|
|
|
|
Total trading securities
|
|
|
89,707
|
|
|
|
|
5,253
|
|
|
|
|
141
|
|
|
|
|
—
|
|
|
|
|
95,101
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
|
—
|
|
|
|
|
479
|
|
|
|
|
84
|
|
|
|
|
—
|
|
|
|
|
563
|
|
|
|
Other agency
|
|
|
—
|
|
|
|
|
15
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
15
|
|
|
|
Alt-A and subprime private-label securities
|
|
|
—
|
|
|
|
|
3
|
|
|
|
|
2
|
|
|
|
|
—
|
|
|
|
|
5
|
|
|
|
Mortgage revenue bonds
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
172
|
|
|
|
|
—
|
|
|
|
|
172
|
|
|
|
Other
|
|
|
—
|
|
|
|
|
6
|
|
|
|
|
194
|
|
|
|
|
—
|
|
|
|
|
200
|
|
|
|
Total available-for-sale securities
|
|
|
—
|
|
|
|
|
503
|
|
|
|
|
452
|
|
|
|
|
—
|
|
|
|
|
955
|
|
|
|
Mortgage loans
|
|
|
—
|
|
|
|
|
4,784
|
|
|
|
|
832
|
|
|
|
|
—
|
|
|
|
|
5,616
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk management derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
—
|
|
|
|
|
118
|
|
|
|
|
176
|
|
|
|
|
—
|
|
|
|
|
294
|
|
|
|
Swaptions
|
|
|
—
|
|
|
|
|
71
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
71
|
|
|
|
Netting adjustment
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(331)
|
|
|
|
|
(331)
|
|
|
|
Mortgage commitment derivatives
|
|
|
—
|
|
|
|
|
311
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
311
|
|
|
|
Credit enhancement derivatives
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
50
|
|
|
|
|
—
|
|
|
|
|
50
|
|
|
|
Total other assets
|
|
|
—
|
|
|
|
|
500
|
|
|
|
|
226
|
|
|
|
|
(331)
|
|
|
|
|
395
|
|
|
|
Total assets at fair value
|
|
|
$
|
92,831
|
|
|
|
|
$
|
11,040
|
|
|
|
|
$
|
1,651
|
|
|
|
|
$
|
(331)
|
|
|
|
|
$
|
105,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior floating
|
|
|
$
|
—
|
|
|
|
|
$
|
2,549
|
|
|
|
|
$
|
397
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,946
|
|
|
|
Total of Fannie Mae
|
|
|
—
|
|
|
|
|
2,549
|
|
|
|
|
397
|
|
|
|
|
—
|
|
|
|
|
2,946
|
|
|
|
Of consolidated trusts
|
|
|
—
|
|
|
|
|
22,917
|
|
|
|
|
55
|
|
|
|
|
—
|
|
|
|
|
22,972
|
|
|
|
Total long-term debt
|
|
|
—
|
|
|
|
|
25,466
|
|
|
|
|
452
|
|
|
|
|
—
|
|
|
|
|
25,918
|
|
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk management derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
—
|
|
|
|
|
813
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
813
|
|
|
|
Swaptions
|
|
|
—
|
|
|
|
|
46
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
46
|
|
|
|
Netting adjustment
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(849)
|
|
|
|
|
(849)
|
|
|
|
Mortgage commitment derivatives
|
|
|
—
|
|
|
|
|
476
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
476
|
|
|
|
Credit enhancement derivatives
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
32
|
|
|
|
|
—
|
|
|
|
|
32
|
|
|
|
Total other liabilities
|
|
|
—
|
|
|
|
|
1,335
|
|
|
|
|
32
|
|
|
|
|
(849)
|
|
|
|
|
518
|
|
|
|
Total liabilities at fair value
|
|
|
$
|
—
|
|
|
|
|
$
|
26,801
|
|
|
|
|
$
|
484
|
|
|
|
|
$
|
(849)
|
|
|
|
|
$
|
26,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2020
|
|
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Netting Adjustment(1)
|
|
Estimated Fair Value
|
|
|
|
|
(Dollars in millions)
|
|
|
Recurring fair value measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents(2)
|
|
|
$
|
1,120
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,120
|
|
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
|
—
|
|
|
|
|
2,310
|
|
|
|
|
94
|
|
|
|
|
—
|
|
|
|
|
2,404
|
|
|
|
Other agency
|
|
|
—
|
|
|
|
|
3,450
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
3,451
|
|
|
|
Private-label and other mortgage securities
|
|
|
—
|
|
|
|
|
158
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
158
|
|
|
|
Non-mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
130,456
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
130,456
|
|
|
|
Other securities
|
|
|
—
|
|
|
|
|
73
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
73
|
|
|
|
Total trading securities
|
|
|
130,456
|
|
|
|
|
5,991
|
|
|
|
|
95
|
|
|
|
|
—
|
|
|
|
|
136,542
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
|
—
|
|
|
|
|
973
|
|
|
|
|
195
|
|
|
|
|
—
|
|
|
|
|
1,168
|
|
|
|
Other agency
|
|
|
—
|
|
|
|
|
65
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
65
|
|
|
|
Alt-A and subprime private-label securities
|
|
|
—
|
|
|
|
|
4
|
|
|
|
|
2
|
|
|
|
|
—
|
|
|
|
|
6
|
|
|
|
Mortgage revenue bonds
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
216
|
|
|
|
|
—
|
|
|
|
|
216
|
|
|
|
Other
|
|
|
—
|
|
|
|
|
7
|
|
|
|
|
235
|
|
|
|
|
—
|
|
|
|
|
242
|
|
|
|
Total available-for-sale securities
|
|
|
—
|
|
|
|
|
1,049
|
|
|
|
|
648
|
|
|
|
|
—
|
|
|
|
|
1,697
|
|
|
|
Mortgage loans
|
|
|
—
|
|
|
|
|
5,629
|
|
|
|
|
861
|
|
|
|
|
—
|
|
|
|
|
6,490
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk management derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
—
|
|
|
|
|
376
|
|
|
|
|
203
|
|
|
|
|
—
|
|
|
|
|
579
|
|
|
|
Swaptions
|
|
|
—
|
|
|
|
|
383
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
383
|
|
|
|
Netting adjustment
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(905)
|
|
|
|
|
(905)
|
|
|
|
Mortgage commitment derivatives
|
|
|
—
|
|
|
|
|
989
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
989
|
|
|
|
Credit enhancement derivatives
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
179
|
|
|
|
|
—
|
|
|
|
|
179
|
|
|
|
Total other assets
|
|
|
—
|
|
|
|
|
1,748
|
|
|
|
|
382
|
|
|
|
|
(905)
|
|
|
|
|
1,225
|
|
|
|
Total assets at fair value
|
|
|
$
|
131,576
|
|
|
|
|
$
|
14,417
|
|
|
|
|
$
|
1,986
|
|
|
|
|
$
|
(905)
|
|
|
|
|
$
|
147,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior floating
|
|
|
$
|
—
|
|
|
|
|
$
|
3,312
|
|
|
|
|
$
|
416
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
3,728
|
|
|
|
Total of Fannie Mae
|
|
|
—
|
|
|
|
|
3,312
|
|
|
|
|
416
|
|
|
|
|
—
|
|
|
|
|
3,728
|
|
|
|
Of consolidated trusts
|
|
|
—
|
|
|
|
|
24,503
|
|
|
|
|
83
|
|
|
|
|
—
|
|
|
|
|
24,586
|
|
|
|
Total long-term debt
|
|
|
—
|
|
|
|
|
27,815
|
|
|
|
|
499
|
|
|
|
|
—
|
|
|
|
|
28,314
|
|
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk management derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
|
—
|
|
|
|
|
881
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
881
|
|
|
|
Swaptions
|
|
|
—
|
|
|
|
|
134
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
134
|
|
|
|
Netting adjustment
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(995)
|
|
|
|
|
(995)
|
|
|
|
Mortgage commitment derivatives
|
|
|
—
|
|
|
|
|
1,426
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
1,426
|
|
|
|
Credit enhancement derivatives
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
49
|
|
|
|
|
—
|
|
|
|
|
49
|
|
|
|
Total other liabilities
|
|
|
—
|
|
|
|
|
2,441
|
|
|
|
|
49
|
|
|
|
|
(995)
|
|
|
|
|
1,495
|
|
|
|
Total liabilities at fair value
|
|
|
$
|
—
|
|
|
|
|
$
|
30,256
|
|
|
|
|
$
|
548
|
|
|
|
|
$
|
(995)
|
|
|
|
|
$
|
29,809
|
|
|
(1)Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and received.
(2)Cash equivalents are comprised of U.S. Treasuries that have a maturity at the date of acquisition of three months or less.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
121
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
The following tables display a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The tables also display gains and losses due to changes in fair value, including realized and unrealized gains and losses, recognized in our condensed consolidated statements of operations and comprehensive income for Level 3 assets and liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|
|
|
For the Three Months Ended June 30, 2021
|
|
|
|
|
|
Total Gains (Losses)
(Realized/Unrealized)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2021(4)(5)
|
|
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of June 30, 2021(1)
|
|
|
|
Balance, March 31, 2021
|
|
Included in Net Income
|
|
Included in Total OCI Gain/(Loss)(1)
|
|
Purchases(2)
|
|
Sales(2)
|
|
Issues(3)
|
|
Settlements(3)
|
|
Transfers out of Level 3
|
|
Transfers into
Level 3
|
|
Balance, June 30, 2021
|
|
|
|
|
(Dollars in millions)
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
109
|
|
|
$
|
(4)
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(32)
|
|
|
$
|
65
|
|
|
$
|
141
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading securities
|
|
$
|
109
|
|
|
$
|
(4)
|
|
(5)(6)
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(32)
|
|
|
$
|
65
|
|
|
$
|
141
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
189
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(4)
|
|
|
$
|
(107)
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
Alt-A and subprime private-label securities
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
1
|
|
|
Mortgage revenue bonds
|
|
191
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18)
|
|
|
—
|
|
|
—
|
|
|
172
|
|
|
—
|
|
|
—
|
|
|
Other
|
|
230
|
|
|
4
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39)
|
|
|
—
|
|
|
—
|
|
|
194
|
|
|
—
|
|
|
—
|
|
|
Total available-for-sale securities
|
|
$
|
611
|
|
|
$
|
5
|
|
(6)(7)
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(61)
|
|
|
$
|
(107)
|
|
|
$
|
—
|
|
|
$
|
452
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
$
|
820
|
|
|
$
|
21
|
|
(5)(6)
|
$
|
—
|
|
|
$
|
85
|
|
|
$
|
(44)
|
|
|
$
|
—
|
|
|
$
|
(53)
|
|
|
$
|
(29)
|
|
|
$
|
32
|
|
|
$
|
832
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
Net derivatives
|
|
166
|
|
|
7
|
|
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
194
|
|
|
28
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior floating
|
|
$
|
(382)
|
|
|
$
|
(15)
|
|
(5)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(397)
|
|
|
$
|
(15)
|
|
|
$
|
—
|
|
|
Of consolidated trusts
|
|
(58)
|
|
|
—
|
|
(5)(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
(1)
|
|
|
(55)
|
|
|
—
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
(440)
|
|
|
$
|
(15)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
(1)
|
|
|
$
|
(452)
|
|
|
$
|
(15)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|
|
|
For the Six Months Ended June 30, 2021
|
|
|
|
|
|
Total Gains (Losses)
(Realized/Unrealized)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2021(4)(5)
|
|
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of June 30, 2021(1)
|
|
|
|
Balance, December 31, 2020
|
|
Included in Net Income
|
|
Included in Total OCI Gain/(Loss)(1)
|
|
Purchases(2)
|
|
Sales(2)
|
|
Issues(3)
|
|
Settlements(3)
|
|
Transfers out of Level 3
|
|
Transfers into
Level 3
|
|
Balance, June 30, 2021
|
|
|
|
|
(Dollars in millions)
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
94
|
|
|
$
|
(5)
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(39)
|
|
|
$
|
88
|
|
|
$
|
141
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
Other agency
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading securities
|
|
$
|
95
|
|
|
$
|
(5)
|
|
(5)(6)
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(40)
|
|
|
$
|
88
|
|
|
$
|
141
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
195
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(7)
|
|
|
$
|
(107)
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A and subprime private-label securities
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
1
|
|
|
Mortgage revenue bonds
|
|
216
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42)
|
|
|
—
|
|
|
—
|
|
|
172
|
|
|
—
|
|
|
—
|
|
|
Other
|
|
235
|
|
|
7
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50)
|
|
|
—
|
|
|
—
|
|
|
194
|
|
|
—
|
|
|
3
|
|
|
Total available-for-sale securities
|
|
$
|
648
|
|
|
$
|
8
|
|
(6)(7)
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(99)
|
|
|
$
|
(107)
|
|
|
$
|
—
|
|
|
$
|
452
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
$
|
861
|
|
|
$
|
29
|
|
(5)(6)
|
$
|
—
|
|
|
$
|
85
|
|
|
$
|
(44)
|
|
|
$
|
—
|
|
|
$
|
(100)
|
|
|
$
|
(52)
|
|
|
$
|
53
|
|
|
$
|
832
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
Net derivatives
|
|
333
|
|
|
(125)
|
|
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14)
|
|
|
—
|
|
|
—
|
|
|
194
|
|
|
(139)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior floating
|
|
$
|
(416)
|
|
|
$
|
19
|
|
(5)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(397)
|
|
|
$
|
19
|
|
|
$
|
—
|
|
|
Of consolidated trusts
|
|
(83)
|
|
|
1
|
|
(5)(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
20
|
|
|
(1)
|
|
|
(55)
|
|
|
—
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
(499)
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
20
|
|
|
$
|
(1)
|
|
|
$
|
(452)
|
|
|
$
|
19
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|
|
|
For the Three Months Ended June 30, 2020
|
|
|
|
|
|
Total Gains (Losses)
(Realized/Unrealized)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30,
2020(4)(5)
|
|
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of June 30,
2020(1)
|
|
|
|
Balance, March 31, 2020
|
|
Included in Net Income
|
|
Included in Total OCI Gain/(Loss)(1)
|
|
Purchases(2)
|
|
Sales(2)
|
|
Issues(3)
|
|
Settlements(3)
|
|
Transfers out of Level 3
|
|
Transfers into
Level 3
|
|
Balance, June 30, 2020
|
|
|
|
|
(Dollars in millions)
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
68
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(34)
|
|
|
$
|
4
|
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private-label and other mortgage securities
|
|
94
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
5
|
|
|
—
|
|
|
Total trading securities
|
|
$
|
162
|
|
|
$
|
7
|
|
(5)(6)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3)
|
|
|
$
|
(34)
|
|
|
$
|
4
|
|
|
$
|
136
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
188
|
|
|
$
|
—
|
|
|
$
|
(4)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
264
|
|
|
$
|
446
|
|
|
$
|
—
|
|
|
$
|
(3)
|
|
|
Alt-A and subprime private-label securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
Mortgage revenue bonds
|
|
296
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19)
|
|
|
—
|
|
|
—
|
|
|
278
|
|
|
—
|
|
|
1
|
|
|
Other
|
|
284
|
|
|
(3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27)
|
|
|
—
|
|
|
—
|
|
|
254
|
|
|
—
|
|
|
—
|
|
|
Total available-for-sale securities
|
|
$
|
768
|
|
|
$
|
(3)
|
|
(6)(7)
|
$
|
(3)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(48)
|
|
|
$
|
—
|
|
|
$
|
266
|
|
|
$
|
980
|
|
|
$
|
—
|
|
|
$
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
$
|
638
|
|
|
$
|
15
|
|
(5)(6)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(25)
|
|
|
$
|
(21)
|
|
|
$
|
190
|
|
|
$
|
797
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
Net derivatives
|
|
217
|
|
|
49
|
|
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
269
|
|
|
52
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior floating
|
|
$
|
(432)
|
|
|
$
|
(24)
|
|
(5)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(433)
|
|
|
$
|
(24)
|
|
|
$
|
—
|
|
|
Of consolidated trusts
|
|
(83)
|
|
|
(3)
|
|
(5)(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
1
|
|
|
(8)
|
|
|
(89)
|
|
|
(2)
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
(515)
|
|
|
$
|
(27)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
1
|
|
|
$
|
(8)
|
|
|
$
|
(522)
|
|
|
$
|
(26)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|
|
|
For the Six Months Ended June 30, 2020
|
|
|
|
|
|
Total Gains (Losses)
(Realized/Unrealized)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2020(4)(5)
|
|
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of June 30, 2020(1)
|
|
|
|
Balance, December 31, 2019
|
|
Included in Net Income
|
|
Included in Total OCI Gain/(Loss)(1)
|
|
Purchases(2)
|
|
Sales(2)
|
|
Issues(3)
|
|
Settlements(3)
|
|
Transfers out of Level 3
|
|
Transfers into
Level 3
|
|
Balance, June 30, 2020
|
|
|
|
|
(Dollars in millions)
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
45
|
|
|
$
|
(9)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(45)
|
|
|
$
|
47
|
|
|
$
|
38
|
|
|
$
|
(8)
|
|
|
$
|
—
|
|
|
Other agency
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Private-label and other mortgage securities
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
94
|
|
|
98
|
|
|
—
|
|
|
—
|
|
|
Total trading securities
|
|
$
|
46
|
|
|
$
|
(2)
|
|
(5)(6)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3)
|
|
|
$
|
(46)
|
|
|
$
|
141
|
|
|
$
|
136
|
|
|
$
|
(8)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
$
|
171
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3)
|
|
|
$
|
—
|
|
|
$
|
278
|
|
|
$
|
446
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Alt-A and subprime private-label securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
Mortgage revenue bonds
|
|
315
|
|
|
(3)
|
|
|
3
|
|
|
74
|
|
|
(74)
|
|
|
—
|
|
|
(37)
|
|
|
—
|
|
|
—
|
|
|
278
|
|
|
—
|
|
|
5
|
|
|
Other
|
|
306
|
|
|
(14)
|
|
|
(1)
|
|
|
268
|
|
|
(268)
|
|
|
—
|
|
|
(37)
|
|
|
—
|
|
|
—
|
|
|
254
|
|
|
—
|
|
|
(1)
|
|
|
Total available-for-sale securities
|
|
$
|
792
|
|
|
$
|
(17)
|
|
(6)(7)
|
$
|
2
|
|
|
$
|
342
|
|
|
$
|
(342)
|
|
|
$
|
—
|
|
|
$
|
(77)
|
|
|
$
|
—
|
|
|
$
|
280
|
|
|
$
|
980
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
$
|
688
|
|
|
$
|
(9)
|
|
(5)(6)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(54)
|
|
|
$
|
(44)
|
|
|
$
|
216
|
|
|
$
|
797
|
|
|
$
|
(14)
|
|
|
$
|
—
|
|
|
Net derivatives
|
|
162
|
|
|
90
|
|
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
18
|
|
|
—
|
|
|
269
|
|
|
96
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior floating
|
|
$
|
(398)
|
|
|
$
|
(58)
|
|
(5)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(433)
|
|
|
$
|
(58)
|
|
|
$
|
—
|
|
|
Of consolidated trusts
|
|
(75)
|
|
|
1
|
|
(5)(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
1
|
|
|
(23)
|
|
|
(89)
|
|
|
2
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
(473)
|
|
|
$
|
(57)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
1
|
|
|
$
|
(23)
|
|
|
$
|
(522)
|
|
|
$
|
(56)
|
|
|
$
|
—
|
|
(1)Gains (losses) included in other comprehensive income (loss) are included in “Changes in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustments and taxes” in our condensed consolidated statements of operations and comprehensive income.
(2)Purchases and sales include activity related to the consolidation and deconsolidation of assets of securitization trusts.
(3)Issues and settlements include activity related to the consolidation and deconsolidation of liabilities of securitization trusts.
(4)Amount represents temporary changes in fair value. Amortization, accretion and the impairment of credit losses are not considered unrealized and are not included in this amount.
(5)Gains (losses) are included in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
(6)Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and comprehensive income.
(7)Gains (losses) are included in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
The following tables display valuation techniques and the range and the weighted average of significant unobservable inputs for our Level 3 assets and liabilities measured at fair value on a recurring basis, excluding instruments for which we have elected the fair value option. Changes in these unobservable inputs can result in significantly higher or lower fair value measurements of these assets and liabilities as of the reporting date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of June 30, 2021
|
|
|
|
Fair Value
|
|
Significant Valuation Techniques
|
|
Significant Unobservable
Inputs(1)
|
|
Range(1)
|
|
Weighted - Average(1)(2)
|
|
|
|
(Dollars in millions)
|
|
Recurring fair value measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency(3)
|
|
$
|
141
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency(3)
|
|
84
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A and subprime private-label securities
|
|
2
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bonds
|
|
118
|
|
|
Single Vendor
|
|
Spreads (bps)
|
|
4.5
|
|
-
|
44.5
|
|
19.3
|
|
|
|
54
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
Total mortgage revenue bonds
|
|
172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
193
|
|
|
Discounted Cash Flow
|
|
Spreads (bps)
|
|
370.0
|
|
-
|
376.0
|
|
373.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
Total other
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivatives
|
|
$
|
176
|
|
|
Dealer Mark
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
Discounted Cash Flow
|
|
|
|
|
|
|
|
|
|
Total net derivatives
|
|
$
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2020
|
|
|
|
Fair Value
|
|
Significant Valuation Techniques
|
|
Significant Unobservable
Inputs(1)
|
|
Range(1)
|
|
Weighted - Average(1)(2)
|
|
|
|
(Dollars in millions)
|
|
Recurring fair value measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency(3)
|
|
$
|
95
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency(3)
|
|
97
|
|
|
Consensus
|
|
|
|
|
|
|
|
|
|
|
|
98
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
Total agency
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A and subprime private-label securities
|
|
2
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage revenue bonds
|
|
144
|
|
|
Single Vendor
|
|
Spreads (bps)
|
|
32.0
|
|
-
|
315.3
|
|
93.4
|
|
|
|
72
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
Total mortgage revenue bonds
|
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
206
|
|
|
Discounted Cash Flow
|
|
Spreads (bps)
|
|
425.0
|
|
-
|
443.0
|
|
434.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
Total other
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivatives
|
|
$
|
203
|
|
|
Dealer Mark
|
|
|
|
|
|
|
|
|
|
|
|
130
|
|
|
Discounted Cash Flow
|
|
|
|
|
|
|
|
|
|
Total net derivatives
|
|
$
|
333
|
|
|
|
|
|
|
|
|
|
|
|
(1)Valuation techniques for which no unobservable inputs are disclosed generally reflect the use of third-party pricing services or dealers, and the range of unobservable inputs applied by these sources is not readily available or cannot be reasonably estimated. Where we have disclosed unobservable inputs for consensus and single vendor techniques, those inputs are based on our validations performed at the security level using discounted cash flows.
(2)Unobservable inputs were weighted by the relative fair value of the instruments.
(3)Includes Fannie Mae and Freddie Mac securities.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
In our condensed consolidated balance sheets, certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when we evaluate loans for impairment). We had no Level 1 assets or liabilities held as of June 30, 2021 or December 31, 2020 that were measured at fair value on a nonrecurring basis. We held $241 million and $25 million in Level 2 assets as of June 30, 2021 and December 31, 2020, respectively, comprised of mortgage loans held for sale that were impaired. We had no Level 2 liabilities that were measured at fair value on a nonrecurring basis as of June 30, 2021 or December 31, 2020.
The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
as of
|
|
|
|
Valuation Techniques
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
(Dollars in millions)
|
|
Nonrecurring fair value measurements:
|
|
|
|
|
|
|
|
Mortgage loans held for sale, at lower of cost or fair value
|
|
Consensus
|
|
$
|
557
|
|
|
$
|
754
|
|
|
|
|
Single Vendor
|
|
384
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans held for sale, at lower of cost or fair value
|
|
|
|
941
|
|
|
1,087
|
|
|
|
|
|
|
|
|
|
|
Single-family mortgage loans held for investment, at amortized cost
|
|
Internal Model
|
|
562
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily mortgage loans held for investment, at amortized cost
|
|
Appraisals
|
|
56
|
|
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Model
|
|
136
|
|
|
125
|
|
|
|
|
Various
|
|
77
|
|
|
40
|
|
|
Total multifamily mortgage loans held for investment, at amortized cost
|
|
|
|
269
|
|
|
390
|
|
|
Acquired property, net:
|
|
|
|
|
|
|
|
Single-family
|
|
Accepted Offers
|
|
12
|
|
|
35
|
|
|
|
|
Appraisals
|
|
44
|
|
|
89
|
|
|
|
|
Internal Model
|
|
53
|
|
|
41
|
|
|
|
|
Walk Forwards
|
|
17
|
|
|
85
|
|
|
|
|
Various
|
|
7
|
|
|
11
|
|
|
Total single-family
|
|
|
|
133
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
Multifamily
|
|
Various
|
|
18
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
Total nonrecurring assets at fair value
|
|
|
|
$
|
1,923
|
|
|
$
|
2,742
|
|
We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. See “Note 15, Fair Value” in our 2020 Form 10-K for information on the valuation control processes and the valuation techniques we use for fair value measurement and disclosure as well as our basis for classifying these measurements as Level 1, Level 2 or Level 3 of the valuation hierarchy in more specific situations. We made no material changes to the valuation control processes or the valuation techniques for the six months ended June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
Fair Value of Financial Instruments
The following table displays the carrying value and estimated fair value of our financial instruments. The fair value of financial instruments we disclose includes commitments to purchase multifamily and single-family mortgage loans that we do not record in our condensed consolidated balance sheets. The fair values of these commitments are included as “Mortgage loans held for investment, net of allowance for loan losses.” The disclosure excludes all non-financial instruments; therefore, the fair value of our financial assets and liabilities does not represent the underlying fair value of our total consolidated assets and liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
|
Carrying Value
|
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
|
Netting Adjustment
|
|
Estimated Fair Value
|
|
|
|
(Dollars in millions)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, including restricted cash and cash equivalents
|
|
$
|
125,299
|
|
|
|
$
|
78,349
|
|
|
|
$
|
46,950
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
125,299
|
|
|
Federal funds sold and securities purchased under agreements to resell or similar arrangements
|
|
43,888
|
|
|
|
—
|
|
|
|
43,888
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
43,888
|
|
|
Trading securities
|
|
95,101
|
|
|
|
89,707
|
|
|
|
5,253
|
|
|
|
|
141
|
|
|
|
|
—
|
|
|
95,101
|
|
|
Available-for-sale securities
|
|
955
|
|
|
|
—
|
|
|
|
503
|
|
|
|
|
452
|
|
|
|
|
—
|
|
|
955
|
|
|
Mortgage loans held for sale
|
|
6,933
|
|
|
|
—
|
|
|
|
1,858
|
|
|
|
|
5,977
|
|
|
|
|
—
|
|
|
7,835
|
|
|
Mortgage loans held for investment, net of allowance for loan losses
|
|
3,844,374
|
|
|
|
—
|
|
|
|
3,688,808
|
|
|
|
|
234,637
|
|
|
|
|
—
|
|
|
3,923,445
|
|
|
Advances to lenders
|
|
6,257
|
|
|
|
—
|
|
|
|
6,256
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
6,257
|
|
|
Derivative assets at fair value
|
|
395
|
|
|
|
—
|
|
|
|
500
|
|
|
|
|
226
|
|
|
|
|
(331)
|
|
|
395
|
|
|
Guaranty assets and buy-ups
|
|
102
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
234
|
|
|
|
|
—
|
|
|
234
|
|
|
Total financial assets
|
|
$
|
4,123,304
|
|
|
|
$
|
168,056
|
|
|
|
$
|
3,794,016
|
|
|
|
|
$
|
241,668
|
|
|
|
|
$
|
(331)
|
|
|
$
|
4,203,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae
|
|
$
|
2,280
|
|
|
|
$
|
—
|
|
|
|
$
|
2,280
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
2,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae
|
|
249,296
|
|
|
|
—
|
|
|
|
258,200
|
|
|
|
|
844
|
|
|
|
|
—
|
|
|
259,044
|
|
|
Of consolidated trusts
|
|
3,844,699
|
|
|
|
—
|
|
|
|
3,891,437
|
|
|
|
|
31,043
|
|
|
|
|
—
|
|
|
3,922,480
|
|
|
Derivative liabilities at fair value
|
|
518
|
|
|
|
—
|
|
|
|
1,335
|
|
|
|
|
32
|
|
|
|
|
(849)
|
|
|
518
|
|
|
Guaranty obligations
|
|
112
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
74
|
|
|
|
|
—
|
|
|
74
|
|
|
Total financial liabilities
|
|
$
|
4,096,905
|
|
|
|
$
|
—
|
|
|
|
$
|
4,153,252
|
|
|
|
|
$
|
31,993
|
|
|
|
|
$
|
(849)
|
|
|
$
|
4,184,396
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
Carrying Value
|
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Netting Adjustment
|
|
Estimated Fair Value
|
|
|
|
(Dollars in millions)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash
|
|
$
|
115,623
|
|
|
|
$
|
97,179
|
|
|
|
$
|
18,444
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
115,623
|
|
|
Federal funds sold and securities purchased under agreements to resell or similar arrangements
|
|
28,200
|
|
|
|
—
|
|
|
|
28,200
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
28,200
|
|
|
Trading securities
|
|
136,542
|
|
|
|
130,456
|
|
|
|
5,991
|
|
|
|
|
95
|
|
|
|
|
—
|
|
|
136,542
|
|
|
Available-for-sale securities
|
|
1,697
|
|
|
|
—
|
|
|
|
1,049
|
|
|
|
|
648
|
|
|
|
|
—
|
|
|
1,697
|
|
|
Mortgage loans held for sale
|
|
5,197
|
|
|
|
—
|
|
|
|
116
|
|
|
|
|
5,502
|
|
|
|
|
—
|
|
|
5,618
|
|
|
Mortgage loans held for investment, net of allowance for loan losses
|
|
3,648,695
|
|
|
|
—
|
|
|
|
3,512,672
|
|
|
|
|
255,556
|
|
|
|
|
—
|
|
|
3,768,228
|
|
|
Advances to lenders
|
|
10,449
|
|
|
|
—
|
|
|
|
10,448
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
10,449
|
|
|
Derivative assets at fair value
|
|
1,225
|
|
|
|
—
|
|
|
|
1,748
|
|
|
|
|
382
|
|
|
|
|
(905)
|
|
|
1,225
|
|
|
Guaranty assets and buy-ups
|
|
115
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
258
|
|
|
|
|
—
|
|
|
258
|
|
|
Total financial assets
|
|
$
|
3,947,743
|
|
|
|
$
|
227,635
|
|
|
|
$
|
3,578,668
|
|
|
|
|
$
|
262,442
|
|
|
|
|
$
|
(905)
|
|
|
$
|
4,067,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae
|
|
$
|
12,173
|
|
|
|
$
|
—
|
|
|
|
$
|
12,177
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
12,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Fannie Mae
|
|
277,399
|
|
|
|
—
|
|
|
|
288,414
|
|
|
|
|
878
|
|
|
|
|
—
|
|
|
289,292
|
|
|
Of consolidated trusts
|
|
3,646,164
|
|
|
|
—
|
|
|
|
3,756,673
|
|
|
|
|
31,584
|
|
|
|
|
—
|
|
|
3,788,257
|
|
|
Derivative liabilities at fair value
|
|
1,495
|
|
|
|
—
|
|
|
|
2,441
|
|
|
|
|
49
|
|
|
|
|
(995)
|
|
|
1,495
|
|
|
Guaranty obligations
|
|
127
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
82
|
|
|
|
|
—
|
|
|
82
|
|
|
Total financial liabilities
|
|
$
|
3,937,358
|
|
|
|
$
|
—
|
|
|
|
$
|
4,059,705
|
|
|
|
|
$
|
32,593
|
|
|
|
|
$
|
(995)
|
|
|
$
|
4,091,303
|
|
For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2020 Form 10-K.
Fair Value Option
We elected the fair value option for loans and debt that contain embedded derivatives that would otherwise require bifurcation. Additionally, we elected the fair value option for our credit risk-sharing securities accounted for as debt of Fannie Mae issued under our CAS series prior to January 1, 2016. Under the fair value option, we elected to carry these instruments at fair value instead of bifurcating the embedded derivative from such instruments.
Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for the debt instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated statements of operations and comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Fair Value
|
The following table displays the fair value and unpaid principal balance of the financial instruments for which we have made fair value elections.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Loans(1)
|
|
Long-Term Debt of Fannie Mae
|
|
Long-Term Debt of Consolidated Trusts
|
|
Loans(1)
|
|
Long-Term Debt of Fannie Mae
|
|
Long-Term Debt of Consolidated Trusts
|
|
|
(Dollars in millions)
|
|
Fair value
|
|
$
|
5,616
|
|
|
|
|
$
|
2,946
|
|
|
|
|
$
|
22,972
|
|
|
|
|
$
|
6,490
|
|
|
|
|
$
|
3,728
|
|
|
|
|
$
|
24,586
|
|
|
|
Unpaid principal balance
|
|
5,227
|
|
|
|
|
2,729
|
|
|
|
|
20,209
|
|
|
|
|
6,046
|
|
|
|
|
3,518
|
|
|
|
|
21,408
|
|
|
(1)Includes nonaccrual loans with a fair value of $125 million and $139 million as of June 30, 2021 and December 31, 2020, respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of June 30, 2021 and December 31, 2020 was less than $1 million and $8 million, respectively. Includes loans that are 90 days or more past due with a fair value of $192 million and $257 million as of June 30, 2021 and December 31, 2020, respectively. The difference between unpaid principal balance and the fair value of these 90 or more days past due loans as of June 30, 2021 and December 31, 2020 was $4 million and $14 million, respectively.
Changes in Fair Value under the Fair Value Option Election
We recorded losses of $5 million and gains of $20 million for the three and six months ended June 30, 2021, respectively, and losses of $10 million and gains of $141 million for the three and six months ended June 30, 2020, respectively, from changes in the fair value of loans recorded at fair value in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
We recorded losses of $89 million and gains of $284 million for the three and six months ended June 30, 2021, respectively, and losses of $574 million and $312 million for the three and six months ended June 30, 2020, respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
13. Commitments and Contingencies
We are party to various types of legal actions and proceedings, including actions brought on behalf of various classes of claimants. We also are subject to regulatory examinations, inquiries and investigations, and other information gathering requests. In some of the matters, indeterminate amounts are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. This variability in pleadings, together with our and our counsel’s actual experience in litigating or settling claims, leads us to conclude that the monetary relief that may be sought by plaintiffs bears little relevance to the merits or disposition value of claims.
We have substantial and valid defenses to the claims in the proceedings described below and intend to defend these matters vigorously. However, legal actions and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. Accordingly, the outcome of any given matter and the amount or range of potential loss at particular points in time is frequently difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how courts will apply the law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel may view the evidence and applicable law.
On a quarterly basis, we review relevant information about all pending legal actions and proceedings for the purpose of evaluating and revising our contingencies, accruals and disclosures. We establish an accrual only for matters when a loss is probable and we can reasonably estimate the amount of such loss. We are often unable to estimate the possible losses or ranges of losses, particularly for proceedings that are in their early stages of development, where plaintiffs seek indeterminate or unspecified damages, where there may be novel or unsettled legal questions relevant to the proceedings, or where settlement negotiations have not occurred or progressed. Given the uncertainties involved in any action or proceeding, regardless of whether we have established an accrual, the ultimate resolution of certain of these matters may be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our net income or loss for that period.
In addition to the matters specifically described below, we are involved in a number of legal and regulatory proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our business or financial condition. We have also advanced fees and expenses of certain current and former officers and directors in connection with various legal proceedings pursuant to our bylaws and indemnification agreements.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements | Commitments and Contingencies
|
Senior Preferred Stock Purchase Agreements Litigation
A consolidated putative class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations”) and two non-class action lawsuits, Arrowood Indemnity Company v. Fannie Mae and Fairholme Funds v. FHFA, filed by Fannie Mae and Freddie Mac shareholders against us, FHFA as our conservator, and Freddie Mac are pending in the U.S. District Court for the District of Columbia. The lawsuits challenge the August 2012 amendment to each company’s senior preferred stock purchase agreement with Treasury.
Plaintiffs filed amended complaints in all three lawsuits on November 1, 2017 alleging that the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendments nullified certain of the shareholders’ rights, particularly the right to receive dividends. Plaintiffs seek unspecified damages, equitable and injunctive relief, and costs and expenses, including attorneys’ fees. Plaintiffs in the class action seek to represent several classes of preferred and/or common shareholders of Fannie Mae and/or Freddie Mac who held stock as of the public announcement of the August 2012 amendments. On September 28, 2018, the court dismissed all of the plaintiffs’ claims except for their claims for breach of an implied covenant of good faith and fair dealing.
Given the stage of these lawsuits, the substantial and novel legal questions that remain, and our substantial defenses, we are currently unable to estimate the reasonably possible loss or range of loss arising from this litigation.
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae (In conservatorship) Second Quarter 2021 Form 10-Q
|
132
|