Mortgage Loans Held for Portfolio

3 Months Ended

Mar. 31, 2020

The following table presents information as of March 31, 2020, and December 31, 2019, on mortgage loans, all of which are secured by one- to four-unit residential properties and single-unit second homes.



	March 31, 2020			December 31, 2019
Fixed rate medium-term mortgage loans	$	29		$	27
Fixed rate long-term mortgage loans	3,150			3,199
Subtotal	3,179			3,226
Unamortized premiums	66			91
Unamortized discounts	(3		)	(3		)
Mortgage loans held for portfolio⁽¹⁾	3,242			3,314
Less: Allowance for credit losses	(3		)	—
Total mortgage loans held for portfolio, net	$	3,239		$	3,314


(1)	Excludes accrued interest receivable of $19 at March 31, 2020, and December 31, 2019.

Medium-term loans have original contractual terms of 15 years or less, and long-term loans have contractual terms of more than 15 years.

Payment Status of Mortgage Loans. Payment status is the key credit quality indicator for conventional mortgage loans and allows the Bank to monitor the migration of past due loans. Past due loans are those where the borrower has failed to make timely payments of principal and/or interest in accordance with the terms of the loan. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure. The following tables present the payment status for mortgage loans and other delinquency statistics for Bank’s mortgage loans at March 31, 2020, and December 31, 2019.



March 31, 2020
	Origination Year
Payment Status	<2016		2016 to 2020		Amortized Cost⁽¹⁾
30 – 59 days delinquent	$	12	$	3	$	15
60 – 89 days delinquent	3		2		5
90 days or more delinquent	3		4		7
Total past due	18		9		27
Total current loans	2,981		234		3,215
Total MPF	$	2,999	$	243	$	3,242
In process of foreclosure, included above⁽²⁾					$	1
Nonaccrual loans⁽³⁾					$	7
Serious delinquencies as a percentage of total mortgage loans outstanding⁽⁴⁾					0.22		%



December 31, 2019
Payment Status	Recorded Investment⁽¹⁾
30 – 59 days delinquent	$	15
60 – 89 days delinquent	2
90 days or more delinquent	7
Total past due	24
Total current loans	3,310
Total MPF	$	3,334
In process of foreclosure, included above⁽²⁾	$	—
Nonaccrual loans	$	7
Serious delinquencies as a percentage of total mortgage loans outstanding⁽⁴⁾	0.22		%

(1)

With the adoption of new accounting guidance for the measurement of credit losses on financial instruments on January 1, 2020, payment status of mortgage loans is disclosed at amortized cost. The recorded investment at December 31, 2019, in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance. The amortized cost at March 31, 2020, in a loan is the unpaid principal balance of the loan, adjusted for net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs.


(2)	Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.


(3)	At March 31, 2020, $6 of these mortgage loans on nonaccrual status did not have an associated allowance for credit losses.


(4)	Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the recorded investment of total mortgage loans outstanding.

Allowance for Credit Losses on MPF Loans. MPF loans are evaluated collectively when similar risk characteristics exist. MPF loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis, factoring in the credit enhancement structure at the master commitment level. The Bank determines its allowances for credit losses on MPF loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. The Bank uses models that employ a variety of methods, such as projected cash flows, to estimate expected credit losses over the life of the loans. These models rely on a number of inputs, such as current and forecasted property values and interest rates as well as historical borrower behavior experience. At March 31, 2020, the Bank’s reasonable and supportable forecast of housing prices expects, on average, for prices to appreciate 1% over a one-year forecast horizon before reverting to long-term housing price appreciation rates of 4% over a three-year forecast horizon based on historical averages. The Bank also incorporates associated credit enhancements, if any, to determine its estimate of expected credit losses.

Certain MPF loans may be evaluated for credit losses by the Bank using the practical expedient for collateral-dependent assets. A mortgage loan is considered collateral-dependent if repayment is expected to be provided by the

sale of the underlying property, that is, if it is considered likely that the borrower will default. The Bank may estimate the fair value of this collateral by applying an appropriate loss severity rate or using third-party estimates or property valuation models. The expected credit loss of a collateral-dependent mortgage loan is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. The Bank will either reserve for these estimated losses or record a direct charge-off of the loan balance, if certain triggering criteria are met. Expected recoveries of prior charge-offs, if any, are included in the allowance for credit loss.

Upon adoption of new accounting guidance for the measurement of credit losses on financial instruments applied prospectively on January 1, 2020, the Bank recorded an adjustment for the cumulative effect of the accounting change of $3. The amounts of charge-offs and recoveries of allowance for credit losses on the mortgage loan portfolio were de minimis during the three months ended March 31, 2020 and 2019, which resulted in an allowance for credit losses on MPF loans of $3 and a de minimis amount at March 31, 2020, and December 31, 2019, respectively.

See “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” and “Item 8. Financial Statements and Supplementary Data – Note 10 – Allowance for Credit Losses” in the Bank’s 2019 Form 10-K for information on the prior methodology for evaluating credit losses, as well as a discussion on classes of financing receivables, placing them on nonaccrual status, and charging them off when necessary. For more information related to the Bank’s accounting policies for collateral-dependent loans, see “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s 2019 Form 10-K.