Securitization Activities and Consolidation

9 Months Ended

Sep. 30, 2020

Securitization Activities and Consolidation [Abstract]

Variable Interest Entity Disclosure [Text Block]

Securitization Activities and Consolidation

Our primary business activities in our Single-family Guarantee and Multifamily segments involve the securitization of loans or other mortgage-related assets using trusts that are VIEs. These trusts issue beneficial interests in the loans or other mortgage-related assets that they own. We guarantee the principal and interest payments on some or all of the issued beneficial interests in substantially all of our securitization transactions. We consolidate VIEs when we have a controlling financial interest in the VIE and are therefore considered the primary beneficiary of the VIE. See Note 5 for additional information on our guarantee activities.

Consolidated VIEs

The table below presents the carrying value and classification of the assets and liabilities of consolidated VIEs on our condensed consolidated balance sheets.

Table 3.1 - Consolidated VIEs

(In millions)	September 30, 2020		December 31, 2019
Condensed Consolidated Balance Sheet Line Item
Assets:
Cash and cash equivalents (includes $1,489 and $869 of restricted cash and cash equivalents)		$1,490		$870
Securities purchased under agreements to resell	50,546		23,137
Investment securities, at fair value	1,734		597
Mortgage loans held-for-investment, net	2,115,509		1,940,523
Accrued interest receivable, net	6,954		6,170
Other assets	21,246		9,824
Total assets of consolidated VIEs		$2,197,479		$1,981,121
Liabilities:
Accrued interest payable		$5,604		$5,536
Debt	2,138,420		1,898,355
Other liabilities	—		1
Total liabilities of consolidated VIEs		$2,144,024		$1,903,892

Non-Consolidated VIEs

Our involvement with VIEs for which we are not the primary beneficiary takes one or both of two forms - purchasing an investment in these entities or providing a guarantee to these entities. As part of the Single Security Initiative, we have the ability to commingle TBA-eligible Fannie Mae collateral in certain of our resecuritization products that we do not consolidate. We extend our guarantee of these products to cover principal and interest that are payable from the underlying Fannie Mae collateral. See Note 5 for additional information on our guarantee of Fannie Mae securities.

The following table presents the carrying amounts and classification of the assets and liabilities recorded on our condensed consolidated balance sheets related to non-consolidated VIEs with which we were involved in the design and creation and have a significant continuing involvement, as well as our maximum exposure to loss and total assets of the VIEs. Our maximum exposure to loss includes the guaranteed UPB of the securities issued by the non-consolidated VIEs, the UPB of unguaranteed securities that we acquired from these securitization transactions, and the UPB of master servicer and guarantor advances made to the holders of the guaranteed securities. While we include the UPB of Fannie Mae securities backing non-consolidated Freddie Mac resecuritization trusts because we are providing a guaranty for the timely payment and interest on the underlying Fannie Mae securities that we have not previously guaranteed, we exclude the UPB of Freddie Mac securities backing these same trusts primarily because we already consolidate the underlying Freddie Mac collateral of these trusts on our condensed consolidated balance sheets. Our maximum exposure to loss also excludes our interest rate exposure on certain securitization activity and other mortgage-related guarantees measured at fair value where our interest rate exposure may be unlimited. We generally reduce our exposure to these guarantees with unlimited interest rate exposure through separate contracts with third parties. Total assets of non-consolidated VIEs excludes our investments in and obligations to non-consolidated Freddie Mac resecuritization trusts, including the UPB of Fannie Mae securities, primarily because we already consolidate the underlying Freddie Mac collateral of these trusts on our condensed consolidated balance sheets. We do not believe the maximum exposure to loss disclosed in the table below is representative of the actual loss we are likely to incur, based on our historical

loss experience and after consideration of proceeds from related collateral liquidation, including possible recoveries under credit enhancements. See Note 6 for additional information on credit enhancements.

Table 3.2 - Non-Consolidated VIEs

(In millions)	September 30, 2020		December 31, 2019
Assets and Liabilities Recorded on our Condensed Consolidated Balance Sheets(1)
Assets:
Investment securities, at fair value		$37,410		$37,918
Accrued interest receivable, net	247		212
Derivative assets, net	49		14
Other assets	5,474		3,951
Liabilities:
Derivative liabilities, net	50		108
Other liabilities	4,135		3,761
Maximum Exposure to Loss(2)	372,341		307,820
Total Assets of Non-Consolidated VIEs	366,496		335,562

(1) Includes our variable interests in REMICs and Strips, commingled Supers, K Certificates, SB Certificates, certain senior subordinate securitization structures, and other securitization products that we do not consolidate.

(2) Includes amounts related to Fannie Mae securities backing non-consolidated Freddie Mac resecuritization trusts. These amounts were previously included in text in prior periods.

We also obtain interests in various other VIEs created by third parties through the normal course of business. To the extent that we were not involved in the design and creation of these VIEs, they are excluded from the table above. Our interests in these VIEs are generally passive in nature and are not expected to result in us obtaining a controlling financial interest in these VIEs in the future.