Mortgage Loans and Loan Loss Reserves (Tables)

9 Months Ended

Sep. 30, 2020

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Table - Mortgage Loans

The table below provides details of the loans on our condensed consolidated balance sheets.

Table 4.1 - Mortgage Loans

	September 30, 2020									December 31, 2019
(In millions)	Held by Freddie Mac			Held by Consolidated Trusts			Total			Held by Freddie Mac			Held by Consolidated Trusts			Total
Held-for-sale:
Single-family		$13,162			$—			$13,162			$18,543			$—			$18,543
Multifamily	18,509			—			18,509			18,954			—			18,954
Total UPB	31,671			—			31,671			37,497			—			37,497
Cost basis and fair value adjustments, net	(1,086		)	—			(1,086		)	(2,209		)	—			(2,209		)
Total held-for-sale loans, net	30,585			—			30,585			35,288			—			35,288
Held-for-investment:
Single-family	64,672			2,058,138			2,122,810			35,324			1,902,958			1,938,282
Multifamily	9,035			10,203			19,238			10,831			6,642			17,473
Total UPB	73,707			2,068,341			2,142,048			46,155			1,909,600			1,955,755
Cost basis adjustments	1,442			52,939			54,381			(183		)	33,574			33,391
Allowance for credit losses	(1,002		)	(5,771		)	(6,773		)	(1,583		)	(2,651		)	(4,234		)
Total held-for-investment loans, net	74,147			2,115,509			2,189,656			44,389			1,940,523			1,984,912
Total mortgage loans, net		$104,732			$2,115,509			$2,220,241			$79,677			$1,940,523			$2,020,200

The table below provides details of the UPB of loans we purchased, reclassified from held-for-investment to held-for-sale, and sold during the periods presented.

Table 4.2 - Loans Purchased, Reclassified from Held-for-Investment to Held-for-Sale, and Sold

(In billions)	3Q 2020		3Q 2019		YTD 2020		YTD 2019
Single-family:
Purchases
Held-for-investment loans		$335.4		$133.8		$703.8		$305.0
Reclassified from held-for-investment to held-for-sale(1)	0.5		3.0		3.9		8.1
Sale of held-for-sale loans(2)	4.0		3.7		6.2		9.4
Multifamily:
Purchases
Held-for-investment loans	1.6		4.4		5.9		6.8
Held-for-sale loans	14.9		23.1		39.5		50.6
Reclassified from held-for-investment to held-for-sale(1)	1.4		0.4		2.1		1.2
Sale of held-for-sale loans(3)	19.6		19.7		41.3		49.5

(1) We reclassify loans from held-for-investment to held-for-sale when we no longer have both the intent and ability to hold the loans for the foreseeable future. For additional information regarding the fair value of our loans classified as held-for-sale, see Note 15.

(2) Our sales of single-family loans reflect the sale of seasoned single-family mortgage loans.

(3)

Our sales of multifamily loans occur primarily through the issuance of multifamily K Certificates and SB Certificates. See Note 3 for more information on our K Certificates and SB Certificates.

Table - Amortized Cost Basis of Held-for-Investment Loans on Nonaccrual

The table below presents the allowance for credit losses or valuation allowance that was reversed or established due to loan reclassifications between held-for-investment and held-for-sale during the period presented.

Table 4.3 - Loan Reclassifications

	3Q 2020							YTD 2020
(In millions)	UPB		Allowance for Credit Losses Reversed or (Established)		Valuation Allowance (Established) or Reversed			UPB		Allowance for Credit Losses Reversed or (Established)			Valuation Allowance (Established) or Reversed
Single-family reclassifications from:
Held-for-investment to held-for-sale(1)		$523		$27		$—			$3,919		$275			$—
Held-for-sale to held-for-investment(2)	1,440		124		30			1,685		144			34
Multifamily reclassifications from:
Held-for-investment to held-for-sale	1,432		8		(6		)	2,079		8			(6		)
Held-for-sale to held-for-investment	62		—		4			633		(1		)	4

(1) Prior to reclassification from held-for-investment to held-for-sale, we charged-off $47 million and $220 million against the allowance for credit losses during 3Q 2020 and YTD 2020.

(2)

Allowance for credit losses reversed upon reclassifications from held-for-sale to held-for-investment for loans that were previously charged off and the present values of expected future cash flows were in excess of the amortized cost basis upon reclassification.

The table below presents the amortized cost basis of non-accrual loans as of September 30, 2020 and June 30, 2020, including the interest income recognized for the periods presented that is related to the loans on non-accrual status as of the period end.

Table 4.4 - Amortized Cost Basis of Held-for-Investment Loans on Non-accrual

	Non-accrual Amortized Cost Basis				Interest Income Recognized(1)
(In millions)	September 30, 2020		June 30, 2020		3Q 2020		YTD 2020
Single-family:
20- and 30-year or more, amortizing fixed-rate		$12,376		$10,226		$32		$180
15-year amortizing fixed-rate	788		528		1		9
Adjustable-rate	235		150		—		3
Alt-A, interest-only, and option ARM	673		540		1		8
Total single-family	14,072		11,444		34		200
Total multifamily	—		—		—		—
Total single-family and multifamily		$14,072		$11,444		$34		$200

(1)

Represents the amount of payments received during the periods, including those received while the loans were on accrual status, for the held-for-investment loans on non-accrual status as of the period end.

The table below presents our allowance for loan losses and our recorded investment in loans held-for-investment by impairment evaluation methodology.

Table 4.12 - Net Investment in Loans

	December 31, 2019
(In millions)	Single-family			Multifamily			Total
Recorded investment:
Collectively evaluated		$1,936,208			$17,408			$1,953,616
Individually evaluated	35,449			81			35,530
Total recorded investment	1,971,657			17,489			1,989,146
Ending balance of the allowance for loan losses:
Collectively evaluated	(1,350		)	(12		)	(1,362		)
Individually evaluated	(2,872		)	—			(2,872		)
Total ending balance of the allowance	(4,222		)	(12		)	(4,234		)
Net investment in loans		$1,967,435			$17,477			$1,984,912

Table - Detail of Allowance for Credit Losses

The table below provides the amount of accrued interest receivable, net presented on our condensed consolidated balance sheets and the amount of accrued interest receivable related to loans on non-accrual status at end of the periods that is written off through reversal of interest income on our condensed consolidated statements of comprehensive income (loss) by portfolio.

Table 4.5 - Accrued Interest Receivable, Net and Related Charge-offs Through Reversal of Interest Income

	September 30, 2020		3Q 2020			YTD 2020
(In millions)	Accrued Interest Receivable, Net		Accrued Interest Receivable Related Charge-offs			Accrued Interest Receivable Related Charge-offs
Single-family loans		$7,114		($104	)		($225	)
Multifamily loans	123		—			—

The table below summarizes changes in our allowance for credit losses for single-family and multifamily loans held-for-investment, single-family advances of pre-foreclosure costs, and single-family accrued interest receivable related to loans in forbearance plans caused by the COVID-19 pandemic.

Table 4.6 - Details of the Allowance for Credit Losses

(In millions)	3Q 2020			3Q 2019			YTD 2020			YTD 2019
Single-family:
Beginning balance(1)		$6,862			$5,280			$5,184			$6,130
(Benefit) provision for credit losses	310			(181		)	2,090			(480		)
Charge-offs	(121		)	(406		)	(401		)	(1,253		)
Recoveries collected	41			107			165			341
Other	45			41			99			103
Single-family ending balance	7,137			4,841			7,137			4,841
Multifamily ending balance	126			13			126			13
Total ending balance		$7,263			$4,854			$7,263			$4,854
Components of ending balance of single-family allowance for credit losses:
Mortgage loans held-for-investment		$6,647			$4,841
Advances of pre-foreclosure costs	383			N/A
Accrued interest receivable	107			N/A
Total		$7,137			$4,841

(1)

Includes transition adjustments recognized upon the adoption of CECL on January 1, 2020. See Note 1 for more information on transition adjustments.

Table - Recorded Investment of Held-For-Investment Mortgage Loans, by LTV Ratio and Credit Quality Indicator

The tables below present the amortized cost basis of single-family held-for-investment loans by current LTV ratio. Our current LTV ratios are estimates based on available data through the end of each respective period presented. For reporting purposes:

n Loans within the Alt-A category continue to be presented in that category following modification, even though the borrower may have provided full documentation of assets and income to complete the modification and

n

Loans within the option ARM category continue to be presented in that category following modification, even though the modified loan no longer provides for optional payment provisions.

Table 4.7 - Amortized Cost Basis of Single-Family Held-for-Investment Loans by Current LTV Ratio and Vintage

	September 30, 2020
	Year of Origination												Total
(In millions)	2020		2019		2018		2017		2016		Prior
Current LTV Ratio:
20- and 30-year or more, amortizing fixed-rate
≤ 80		$378,844		$198,519		$101,325		$141,534		$180,428		$533,138		$1,533,788
> 80 to 100	166,082		95,300		25,976		7,190		1,829		6,682		303,059
> 100(1)	461		39		45		98		94		1,486		2,223
Total 20- and 30-year or more, amortizing fixed-rate	545,387		293,858		127,346		148,822		182,351		541,306		1,839,070
15-year amortizing fixed-rate
≤ 80	90,860		33,429		13,902		22,955		32,940		92,255		286,341
> 80 to 100	9,607		1,380		89		25		15		31		11,147
> 100(1)	45		1		4		6		6		11		73
Total 15-year amortizing fixed-rate	100,512		34,810		13,995		22,986		32,961		92,297		297,561
Adjustable-rate
≤ 80	2,453		1,960		1,525		4,149		2,786		15,281		28,154
> 80 to 100	349		266		99		81		11		15		821
> 100(1)	—		—		—		—		—		2		2
Total Adjustable-rate	2,802		2,226		1,624		4,230		2,797		15,298		28,977
Alt-A, Interest-only, and option ARM
≤ 80	—		—		—		—		—		10,945		10,945
> 80 to 100	—		—		—		—		—		501		501
> 100(1)	—		—		—		—		—		94		94
Total Alt-A, Interest-only, and option ARM	—		—		—		—		—		11,540		11,540
Total single-family loans		$648,701		$330,894		$142,965		$176,038		$218,109		$660,441		$2,177,148
Total for all loan product types by current LTV ratio:
≤ 80		$472,157		$233,908		$116,752		$168,638		$216,154		$651,619		$1,859,228
> 80 to 100	176,038		96,946		26,164		7,296		1,855		7,229		315,528
> 100(1)	506		40		49		104		100		1,593		2,392
Total single-family loans		$648,701		$330,894		$142,965		$176,038		$218,109		$660,441		$2,177,148

	December 31, 2019
	Current LTV Ratio						Total
(In millions)	≤ 80		> 80 to 100		> 100(1)
20- and 30-year or more, amortizing fixed-rate		$1,405,562		$267,752		$3,954		$1,677,268
15-year amortizing fixed-rate	236,837		6,797		89		243,723
Adjustable-rate	35,478		1,425		6		36,909
Alt-A, interest-only, and option ARM	12,668		901		188		13,757
Total single-family loans		$1,690,545		$276,875		$4,237		$1,971,657

(1)

The serious delinquency rate for the single-family held-for-investment mortgage loans with current LTV ratios in excess of 100% was 10.63% and 4.51% as of September 30, 2020 and December 31, 2019, respectively.

Multifamily

The table below presents the amortized cost basis of our multifamily held-for-investment loans, by credit quality indicator, based on available data through the end of each period presented. These indicators involve significant management judgment and are defined as follows:

n "Pass" is current and adequately protected by the current financial strength and debt service capacity of the borrower;

n "Special mention" has administrative issues that may affect future repayment prospects but does not have current credit     weaknesses. In addition, this category generally includes loans in forbearance;

n "Substandard" has a weakness that jeopardizes the timely full repayment; and

n "Doubtful" has a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions.

Table 4.8 - Amortized Cost Basis of Multifamily Held-for-Investment Loans by Credit Quality Indicator by Vintage

	September 30, 2020																December 31, 2019
	Year of Origination														Total		Total
(In millions)	2020		2019		2018		2017		2016		Prior		Revolving Loans
Category:
Pass		$4,631		$6,791		$1,042		$726		$622		$2,783		$1,843		$18,438		$17,227
Special mention	—		489		115		—		—		113		—		717		141
Substandard	—		—		19		36		—		71		—		126		121
Doubtful	—		—		—		—		—		—		—		—		—
Total		$4,631		$7,280		$1,176		$762		$622		$2,967		$1,843		$19,281		$17,489

Table - TDR Activity

The table below presents the volume of single-family and multifamily loans that were newly classified as TDRs. Loans classified as a TDR in one period may be subject to further action (such as a modification or remodification) in a subsequent period. In such cases, the subsequent action would not be reflected in the table below since the loan would already have been classified as a TDR.

Table 4.10 - TDR Activity

	3Q 2020			3Q 2019			YTD 2020			YTD 2019
(Dollars in millions)	Number of  Loans	Post-TDR Amortized Cost Basis		Number of  Loans	Post-TDR Amortized Cost Basis		Number of  Loans	Post-TDR Amortized Cost Basis		Number of  Loans	Post-TDR Amortized Cost Basis
Single-family:(1)
20- and 30-year or more, amortizing fixed-rate	6,432		$1,290	5,908		$998	18,173		$3,360	19,668		$3,262
15-year amortizing fixed-rate	802	97		693	69		2,121	230		2,364	230
Adjustable-rate	89	18		128	22		274	50		403	64
Alt-A, interest-only, and option ARM	307	47		285	45		608	90		1,331	190
Total single-family	7,630	1,452		7,014	1,134		21,176	3,730		23,766	3,746
Multifamily	—	—		—	—		—	—		—	—

(1)

The pre-TDR amortized cost basis for single-family loans initially classified as TDR during 3Q 2020 and YTD 2020 was $1.4 billion and $3.7 billion, respectively, compared to $1.1 billion and $3.7 billion during 3Q 2019 and YTD 2019, respectively.

Table - Payment Defaults of Completed TDR Modifications

The table below presents the volume of our TDR modifications that experienced payment defaults (i.e., loans that became two months delinquent or completed a loss event) during the applicable periods and had completed a modification during the year preceding the payment default.

Table 4.11 - Payment Defaults of Completed TDR Modifications

	3Q 2020			3Q 2019			YTD 2020			YTD 2019
(Dollars in millions)	Number of Loans	Post-TDR Amortized Cost Basis		Number of Loans	Post-TDR Amortized Cost Basis		Number of Loans	Post-TDR Amortized Cost Basis		Number of Loans	Post-TDR Amortized Cost Basis
Single-family:
20- and 30-year or more, amortizing fixed-rate	2,008		$357	3,256		$407	8,628		$1,575	10,533		$1,237
15-year amortizing fixed-rate	82	9		96	9		398	49		329	24
Adjustable-rate	17	2		33	3		105	16		95	10
Alt-A, interest-only, and option ARM	106	19		178	24		619	123		687	96
Total single-family	2,213	387		3,563	443		9,750	1,763		11,644	1,367
Multifamily	—	—		—	—		—	—		—	—

Table - Delinquency Rates

The table below summarizes the delinquency rates of loans within our single-family credit guarantee and multifamily mortgage portfolios.

Table 4.14 - Delinquency Rates

(Dollars in millions)	December 31, 2019
Single-family:
Non-credit-enhanced portfolio
Serious delinquency rate	0.70		%
Total number of seriously delinquent loans	42,485
Credit-enhanced portfolio:(1)
Primary mortgage insurance:
Serious delinquency rate	0.79		%
Total number of seriously delinquent loans	15,261
Other credit protection:(2)
Serious delinquency rate	0.40		%
Total number of seriously delinquent loans	18,143
Total single-family:
Serious delinquency rate	0.63		%
Total number of seriously delinquent loans	70,162
Multifamily: (3)
Non-credit-enhanced portfolio:
Delinquency rate	—		%
UPB of delinquent loans		$2
Credit-enhanced portfolio:
Delinquency rate	0.09		%
UPB of delinquent loans		$244
Total multifamily:
Delinquency rate	0.08		%
UPB of delinquent loans		$246

(1) The credit-enhanced categories are not mutually exclusive, as a single loan may be covered by both primary mortgage insurance and other credit protection.

(2) Consists of single-family loans covered by financial arrangements (other than primary mortgage insurance) that are designed to reduce our credit risk exposure. See Note 6 for additional information on our credit enhancements.

(3)

Multifamily delinquency performance is based on the UPB of loans that are two monthly payments or more past due or those in the process of foreclosure.

Table - Payment Status of Mortgage Loans

Past Due Status

The tables below present the amortized cost basis of our single-family and multifamily loans, held-for-investment, by payment status. Pursuant to FHFA guidance and the CARES Act, we offer mortgage relief options for borrowers affected by the COVID-19 pandemic. Among other things, we are offering forbearance to single-family and multifamily borrowers experiencing a financial hardship, either directly or indirectly, related to the COVID-19 pandemic. We report single-family loans in forbearance plans as past due during the forbearance period to the extent that payments are past due based on the loans' original contractual terms, irrespective of the forbearance plan, based on the information reported to us by our servicers. We report multifamily loans in forbearance as current as long as the borrower is in compliance with the forbearance agreement, including the agreed upon repayment plan. As a result, all multifamily loans in forbearance are reported as current in the tables below, even if payments are past due based on the loans' original contract terms.

Table 4.9 - Amortized Cost Basis of Held-for-Investment Loans by Payment Status

	September 30, 2020
(In millions)	Current		One Month Past Due		Two Months Past Due		Three Months or More Past Due, or in Foreclosure(1)		Total		Three Months or More Past Due, and Accruing		Non-accrual With No Allowance(2)
Single-family:
20- and 30-year or more, amortizing fixed-rate		$1,754,734		$16,752		$8,190		$59,394		$1,839,070		$47,545		$637
15-year amortizing fixed-rate	291,207		1,456		641		4,257		297,561		3,410		9
Adjustable-rate	27,542		241		121		1,073		28,977		842		5
Alt-A, interest-only, and option ARM	9,738		330		177		1,295		11,540		638		115
Total single-family	2,083,221		18,779		9,129		66,019		2,177,148		52,435		766
Total multifamily(3)	19,274		3		—		4		19,281		4		—
Total single-family and multifamily		$2,102,495		$18,782		$9,129		$66,023		$2,196,429		$52,439		$766

Referenced footnote is included after the next table

	December 31, 2019
(In millions)	Current		One Month Past Due		Two Months Past Due		Three Months or More Past Due, or in Foreclosure(1)		Total		Non-accrual
Single-family:
20- and 30-year or more, amortizing fixed-rate		$1,653,113		$15,481		$3,326		$5,348		$1,677,268		$5,822
15-year amortizing fixed-rate	242,177		1,131		175		240		243,723		252
Adjustable-rate	36,537		238		45		89		36,909		104
Alt-A, interest-only, and option ARM	12,690		489		161		417		13,757		205
Total single-family	1,944,517		17,339		3,707		6,094		1,971,657		6,383
Total multifamily	17,489		—		—		—		17,489		13
Total single-family and multifamily		$1,962,006		$17,339		$3,707		$6,094		$1,989,146		$6,396

(1) Includes $1.1 billion and $1.8 billion of single-family loans that were in the process of foreclosure as of September 30, 2020 and December 31, 2019, respectively.

(2) Loans with no allowance primarily represent those loans that were previously charged-off and therefore the collateral value is sufficiently in excess of the amortized cost to result in recovery of the entire amortized cost basis if the property were foreclosed upon or otherwise subject to disposition.

(3) As of September 30, 2020, includes $0.7 billion of multifamily loans in forbearance that are reported as current.

FHFA requires us to purchase single-family loans from securities if they are delinquent for 120 days, and we have the option to purchase sooner under certain circumstances (e.g., imminent default and seller breaches of representations and warranties). We generally have been purchasing loans from securities when the loans have been delinquent for 120 days or more. In April 2020, we announced that FHFA has instructed us to maintain loans in payment forbearance plans (including COVID-19 payment forbearance plans) in mortgage-backed security pools for at least the duration of the forbearance plan. Once the forbearance period expires, the loan will remain in the related securities pool while:

n An offer to reinstate the loan or enter into either a payment deferral solution, repayment plan or a trial period plan pursuant to a loan modification remains outstanding;

n The loan is in an active repayment plan or trial period plan; or

n A payment deferral solution is in effect.

Beginning on January 1, 2021, at the instruction of FHFA and in alignment with Fannie Mae, we will extend the trigger to purchase delinquent single-family loans out of securitization trusts to 24 months of delinquency, except for loans that are paid off, permanently modified, repurchased by sellers or servicers, subject to foreclosure alternatives, or referred to foreclosure.

Table - Individually Impaired Loans

The table below presents the UPB, recorded investment, related allowance for loan losses, average recorded investment, and interest income recognized for individually impaired loans.

Table 4.13 - Individually Impaired Loans

	December 31, 2019
(In millions)	UPB		Recorded Investment		Associated Allowance
Single-family:
With no allowance recorded:(1)
20- and 30-year or more, amortizing fixed-rate		$2,431		$1,927	N/A
15-year amortizing fixed-rate	21		20		N/A
Adjustable-rate	169		169		N/A
Alt-A, interest-only, and option ARM	847		727		N/A
Total with no allowance recorded	3,468		2,843		N/A
With an allowance recorded:(2)
20- and 30-year or more, amortizing fixed-rate	28,824		28,667			($2,416	)
15-year amortizing fixed-rate	616		625		(13		)
Adjustable-rate	131		130		(7		)
Alt-A, interest-only, and option ARM	3,315		3,184		(436		)
Total with an allowance recorded	32,886		32,606		(2,872		)
Combined single-family:
20- and 30-year or more, amortizing fixed-rate	31,255		30,594		(2,416		)
15-year amortizing fixed-rate	637		645		(13		)
Adjustable-rate	300		299		(7		)
Alt-A, interest-only, and option ARM	4,162		3,911		(436		)
Total single-family	36,354		35,449		(2,872		)
Multifamily:
With no allowance recorded(1)	86		81		N/A
With an allowance recorded	—		—		—
Total multifamily	86		81		—
Total single-family and multifamily		$36,440		$35,530		($2,872	)

Referenced footnotes are included after the next table.

	3Q 2019						YTD 2019
(In millions)	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized On Cash Basis(3)		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized On Cash Basis(3)
Single-family:
With no allowance recorded:(1)
20- and 30-year or more, amortizing fixed-rate		$2,450		$59		$1		$2,573		$207		$6
15-year amortizing fixed-rate	19		1		—		20		1		—
Adjustable-rate	191		3		—		209		9		—
Alt-A, interest-only, and option ARM	880		16		—		932		52		1
Total with no allowance recorded	3,540		79		1		3,734		269		7
With an allowance recorded:(2)
20- and 30-year or more, amortizing fixed-rate	32,618		412		47		34,051		1,394		138
15-year amortizing fixed-rate	641		5		1		665		17		3
Adjustable-rate	129		2		—		139		5		1
Alt-A, interest-only, and option ARM	3,866		55		9		4,097		180		18
Total with an allowance recorded	37,254		474		57		38,952		1,596		160
Combined single-family:
20- and 30-year or more, amortizing fixed-rate	35,068		471		48		36,624		1,601		144
15-year amortizing fixed-rate	660		6		1		685		18		3
Adjustable-rate	320		5		—		348		14		1
Alt-A, interest-only, and option ARM	4,746		71		9		5,029		232		19
Total single-family	40,794		553		58		42,686		1,865		167
Multifamily:
With no allowance recorded(1)	81		1		1		83		3		1
With an allowance recorded	—		—		—		—		—		—
Total multifamily	81		1		1		83		3		1
Total single-family and multifamily		$40,875		$554		$59		$42,769		$1,868		$168

(1) Individually impaired loans with no allowance primarily represent those loans for which the collateral value is sufficiently in excess of the loan balance to result in recovery of the entire recorded investment if the property were foreclosed upon or otherwise subject to disposition.

(2) Consists primarily of loans classified as TDRs.

(3)

Consists of income recognized during the period related to loans on non-accrual status.