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Derivatives
 12 Months Ended
Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES
Derivatives
We analyze the interest-rate sensitivity of financial assets and liabilities across a variety of interest-rate scenarios based on market prices, models, and economics. We use derivatives primarily to hedge interest-rate sensitivity mismatches between our financial assets and liabilities. We principally use interest-rate swaps, purchased or written options (including swaptions), and exchange-traded futures in our interest-rate risk management activities. We designate certain derivatives as hedging instruments in qualifying hedge accounting relationships. Interest-rate risk management derivatives that are not designated in qualifying hedge accounting relationships are economic hedges of financial instruments measured at fair value on a recurring basis or of other transactions or instruments that expose us to interest-rate risk. When we use derivatives to mitigate our exposures, we consider a number of factors, including cost, exposure to counterparty credit risk, and our overall risk management strategy.
We routinely enter into commitments to purchase and sell investments in mortgage-related securities, purchase and sell mortgage loans, and purchase and extinguish or issue debt of our consolidated trusts. Most of these commitments meet the definition of a derivative and, therefore, are subject to the accounting guidance for derivatives and hedging. We also enter into certain types of guarantees that are accounted for as derivatives. These guarantees primarily include our obligation to support payment of the interest due on the notes issued by VIEs used in certain CRT transactions.
We evaluate whether financial instruments that we purchase or issue contain embedded derivatives. We generally elect to measure newly acquired or issued financial instruments that contain embedded derivatives at fair value, with changes in fair value recorded in earnings.
On our consolidated statements of cash flows, cash flows related to derivatives are classified as either operating activities (such as periodic settlements of interest payments) or investing activities (such as variation margin payments and cash flows related to the acquisition and termination of derivatives) depending on the nature of the activity. Cash flows related to physical settlement of forward commitments accounted for as derivative instruments are classified as operating, investing, or financing activities depending on the financial instruments to which they relate.
Derivative Assets and Liabilities at Fair Value
Derivatives are reported at their fair value on our consolidated balance sheets. Derivatives in a net asset position, including net derivative interest receivable or payable, are reported as derivative assets, net, which is included in other assets on our consolidated balance sheets. Similarly, derivatives in a net liability position, including net derivative interest receivable or payable, are reported as derivative liabilities, net, which is included in other liabilities on our consolidated balance sheets.
The table below presents the notional value and fair value of derivatives reported on our consolidated balance sheets.
Table 9.1 - Derivative Assets and Liabilities at Fair Value
December 31, 2025December 31, 2024
 Notional or
Contractual
Amount		Derivative AssetsDerivative Liabilities
Notional or
Contractual
Amount
Derivative AssetsDerivative Liabilities
(In millions)
Not designated as hedges
Interest-rate risk management derivatives:
Swaps$557,848 $1,148 ($306)$382,761 $1,512 ($340)
Written options40,480 — (1,459)33,117 — (1,826)
Purchased options(1)
108,030 3,893 — 126,750 4,649 — 
Futures87,007 — — 165,894 — — 
Total interest-rate risk management derivatives793,365 5,041 (1,765)708,522 6,161 (2,166)
Mortgage commitment derivatives57,170 28 (15)37,407 26 (40)
CRT-related derivatives(2)
26,883 — (155)28,962 — (186)
Other31,096 73 (601)20,505 94 (695)
Total derivatives not designated as hedges908,514 5,142 (2,536)795,396 6,281 (3,087)
Designated as fair value hedges
Interest-rate risk management derivatives:
Swaps125,908 198 (2,224)159,086 209 (4,149)
Total derivatives designated as fair value hedges125,908 198 (2,224)159,086 209 (4,149)
Receivables (payables)107 — 91 — 
Netting adjustments(3)
(3,981)3,979 (6,080)6,282 
Total derivatives portfolio, net$1,034,422 $1,466 ($781)$954,482 $501 ($954)
(1)Includes swaptions on credit indices with a notional amount of $6.4 billion and $6.8 billion at December 31, 2025 and December 31, 2024, respectively, and a fair value of $1.0 million at both December 31, 2025 and December 31, 2024.
(2)Includes derivative instruments related to CRT transactions that are considered freestanding credit enhancements.
(3)Represents counterparty netting and cash collateral netting.
Derivative Counterparty Credit Risk
Cleared derivatives refer to interest-rate swaps that the U.S. Commodity Futures Trading Commission has determined are subject to the central clearing requirement of the Dodd-Frank Act. Exchange-traded derivatives refer to standardized interest-rate futures contracts and options on futures contracts. OTC derivatives refer to those derivatives that are bilaterally negotiated with counterparties and settled with those counterparties.
Our use of cleared derivatives, exchange-traded derivatives, and OTC derivatives exposes us to counterparty credit risk in the event our counterparties fail to meet their contractual obligations. We are required to post margin in connection with our derivative transactions. The use of cleared and exchange-traded derivatives decreases our credit risk exposure to individual counterparties because a central counterparty is substituted for individual counterparties. OTC derivatives expose us to the credit risk of individual counterparties because transactions are executed and settled between us and each counterparty, exposing us to potential losses if a counterparty fails to meet its obligations.
Our use of interest-rate swaps and option-based derivatives is subject to internal credit and legal reviews. On an ongoing basis, we review the credit fundamentals of all of our derivative counterparties, clearinghouses, and clearing members to confirm that they continue to meet our internal risk management standards.
The majority of our interest-rate swaps are subject to the central clearing requirement. Changes in the value of open exchange- traded contracts and cleared derivatives are settled daily via payments made through the clearinghouse. We net our exposure to cleared derivatives by clearinghouse and clearing member. A downgrade in our credit ratings could cause the clearing members we use for our cleared and exchange-traded derivatives to demand additional collateral.
Many of our transactions involving forward purchase and sale commitments of mortgage-related securities utilize the MBSD/ FICC as a clearinghouse. As a clearing member of the clearinghouse, we post margin to the MBSD/FICC and are exposed to the counterparty credit risk of the organization (including its clearing members). In the event a clearing member fails and causes losses to the MBSD/FICC clearing system, we could be subject to loss, as members are generally required to cover losses caused by defaulting members on a pro rata basis. It is difficult to estimate our maximum exposure under these transactions, as this would require an assessment of transactions that we and other members of the MBSD/FICC may execute in the future.
We use master netting and collateral agreements to reduce our credit risk exposure to our OTC derivative counterparties for interest-rate swap and option-based derivatives. Master netting agreements provide for the netting of amounts receivable and payable from an individual counterparty, as well as posting of collateral in the form of cash, Treasury securities or agency mortgage-related or debt securities, or a combination of both by either the counterparty or us, depending on which party is in a liability position. On a daily basis, the market value of each counterparty's derivatives outstanding is calculated to determine the amount of our net credit exposure, which is equal to the market value of derivatives in a net gain position by counterparty after giving consideration to collateral posted. In the event a counterparty defaults on its obligations under the derivative agreement and the default is not remedied in the manner prescribed in the agreement, we have the right under the agreement to sell the collateral. As a result, our use of master netting and collateral agreements reduces our exposure to our counterparties in the event of default. We offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement. Non-cash collateral held is not recognized on our consolidated balance sheets as we do not obtain effective control over the collateral, and non-cash collateral posted is not derecognized from our consolidated balance sheets as we do not relinquish effective control over the collateral. Therefore, non-cash collateral held or posted is not presented as an offset against derivative assets or derivative liabilities on our consolidated balance sheets. See Note 10 for additional information on our collateralized arrangements. Although it is our practice not to repledge assets held as collateral, these agreements may allow us or our counterparties to repledge all or a portion of the collateral.
A significant majority of our net uncollateralized exposure to OTC derivative counterparties is concentrated with three counterparties, all of which were investment grade as of December 31, 2025. We regularly review the market value of securities pledged as collateral and derivative counterparty collateral posting thresholds, where applicable, in an effort to manage our exposure to losses.
For certain OTC derivatives, the amount of collateral we pledge to counterparties related to our derivative instruments is determined after giving consideration to our credit rating. None of our OTC derivative instruments containing credit-risk related contingent features, netted by counterparty, were in a liability position at December 31, 2025 or December 31, 2024 and, as a result, we did not post cash or non-cash collateral in the normal course of business. Therefore, as of both December 31, 2025 and December 31, 2024, a downgrade in our credit ratings would not have required us to post additional collateral to our counterparties.
The table below presents offsetting and collateral information related to derivatives which are subject to enforceable master netting agreements or similar arrangements.
Table 9.2 - Offsetting of Derivatives
December 31, 2025December 31, 2024
 Derivative AssetsDerivative LiabilitiesDerivative AssetsDerivative Liabilities
(In millions)
OTC derivatives$5,247 ($3,989)$6,360 ($6,315)
Cleared and exchange-traded derivatives77 — 74 — 
Mortgage commitment derivatives50 (15)53 (40)
Other73 (756)94 (881)
Total derivatives5,447 (4,760)6,581 (7,236)
Counterparty netting(2,998)2,998 (3,906)3,906 
Cash collateral netting(1)
(983)981 (2,174)2,376 
Net amount presented in the consolidated balance sheets1,466 (781)501 (954)
Gross amount not offset in the consolidated balance sheets(2)
(1,155)— (190)11 
Net amount$311 ($781)$311 ($943)
(1)Excess cash collateral held is presented as a derivative liability, while excess cash collateral posted is presented as a derivative asset.
(2)Does not include the fair value amount of non-cash collateral posted or held that exceeds the associated net asset or liability, netted by counterparty, presented on the consolidated balance sheets.
Gains and Losses on Derivatives
The table below presents the gains and losses on derivatives not designated in qualifying hedge relationships. These amounts are reported on our consolidated statements of income as investment gains, net.
Table 9.3 - Gains and Losses on Derivatives
Year Ended December 31,
(In millions)202520242023
Interest-rate risk management derivatives:
Swaps($419)$514 $359 
Written options364 (134)170 
Purchased options(674)452 (335)
Futures(185)556 197 
Total interest-rate risk management derivatives fair value gains (losses)(914)1,388 391 
Mortgage commitment derivatives(603)103 17 
CRT-related derivatives(1)
48 75 (176)
Other189 (134)11 
Total derivatives not designated as hedges fair value gains (losses)($1,280)$1,432 $243 
(1)Includes derivative instruments related to CRT transactions that are considered freestanding credit enhancements.
Hedge Accounting
We apply fair value hedge accounting to certain single-family mortgage loans where we hedge the changes in fair value of these loans attributable to the designated benchmark interest rate, using interest-rate swaps. We also apply fair value hedge accounting to certain issuances of debt where we hedge the changes in fair value of the debt attributable to the designated benchmark interest rate, using interest-rate swaps. Under the portfolio layer method fair value hedge accounting strategy, we hedge the changes in fair value of a portion of a closed pool of single-family mortgage loans that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount of cash flows. As part of this strategy, we have also elected to measure the change in fair value of the hedged item on the basis of the benchmark rate component of the contractual coupon cash flows determined at the hedge inception and by assuming the hedged item has a term that reflects only the designated cash flows being hedged.
We apply hedge accounting to qualifying hedge relationships. A qualifying hedge 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 hedge relationship. No amounts have been excluded from the assessment of hedge effectiveness. To assess hedge effectiveness, we use a statistical regression analysis.
At inception of the hedge relationship, we prepare formal contemporaneous documentation of our risk management objective and strategies for undertaking the hedge.
If a hedge relationship qualifies for fair value hedge accounting, all changes in fair value of the derivative hedging instrument, including interest accruals, are recognized in the same consolidated statements of income line item used to present the earnings effect of the hedged item. Therefore, changes in the fair value of the hedged item, mortgage loans and debt, attributable to the risk being hedged are recognized in interest income and interest expense, respectively, along with the changes in the fair value of the respective derivative hedging instruments.
Changes in the fair value of the hedged item attributable to the risk being hedged are recognized as a cumulative basis adjustment against the mortgage loans and debt. The cumulative basis adjustments are amortized to the same consolidated statements of income line item used to present the changes in fair value of the hedged item using the effective interest method considering the contractual terms of the hedged item, with amortization beginning no later than the period in which hedge accounting was discontinued.
The table below presents the effects of fair value hedge accounting by consolidated statements of income line item, including the gains and losses on derivatives and hedged items designated in qualifying hedge relationships and other components due to the application of hedge accounting.
Table 9.4 - Gains and Losses on Fair Value Hedges
Year Ended December 31,
202520242023
(In millions)Interest IncomeInterest ExpenseInterest IncomeInterest ExpenseInterest IncomeInterest Expense
Total amounts of income and expense line items presented in our consolidated statements of income in which the effects of fair value hedges are recorded:$129,820 ($108,417)$117,877 ($98,140)$105,363 ($86,821)
Interest contracts on mortgage loans held-for-investment:
Gain (loss) on fair value hedging relationships:
Hedged items894 — (1,857)— 671 — 
Derivatives designated as hedging instruments(942)— 1,650 — (854)— 
Interest accruals on hedging instruments541 — 874 — 948 — 
Discontinued hedge related basis adjustments amortization247 — 202 — 198 — 
Interest contracts on debt:
Gain (loss) on fair value hedging relationships:
Hedged items— (2,038)— (1,816)— (3,080)
Derivatives designated as hedging instruments— 2,068 — 1,831 — 3,084 
Interest accruals on hedging instruments— (1,605)— (3,261)— (4,065)
Discontinued hedge related basis adjustment amortization— (22)— (8)— (377)
Total impact of fair value hedge accounting$740 ($1,597)$869 ($3,254)$963 ($4,438)
The table below presents the cumulative basis adjustments and the carrying amounts of the hedged item by its respective balance sheet line item.
Table 9.5 - Cumulative Basis Adjustments Due to Fair Value Hedging
December 31, 2025
Carrying Amount Assets / (Liabilities)Cumulative Amount of Fair Value Hedging Basis Adjustment Included in the Carrying AmountClosed Portfolio Under the Portfolio Layer Method
(In millions)TotalUnder the Portfolio Layer MethodDiscontinued - Hedge RelatedTotal Amount by Amortized Cost BasisDesignated Amount by UPB
Mortgage loans held-for-investment$1,084,479 ($2,768)($330)($2,438)$44,826 $8,585 
Debt(68,285)2,054 — 15 — — 
December 31, 2024
Carrying Amount Assets / (Liabilities)Cumulative Amount of Fair Value Hedging Basis Adjustment Included in the Carrying AmountClosed Portfolio Under the Portfolio Layer Method
(In millions)TotalUnder the Portfolio Layer MethodDiscontinued - Hedge RelatedTotal Amount by Amortized Cost BasisDesignated Amount by UPB
Mortgage loans held-for-investment$1,117,060 ($3,909)($695)($3,214)$56,394 $12,070 
Debt(107,241)4,050 — 19 — —