Investment Securities

12 Months Ended

Dec. 31, 2019

Investments, Debt and Equity Securities [Abstract]

As of December 31, 2019 and 2018, our investment portfolio consisted of $100.4 billion and $84.3 billion of investment securities, at fair value, respectively, and $7.4 billion and $7.3 billion of net TBA securities, at fair value, respectively. Our net TBA position is reported at its net carrying value of $25 million and $70 million as of December 31, 2019 and 2018, respectively, in derivative assets / (liabilities) on our accompanying consolidated balance sheets. The net carrying value of our TBA position represents the difference between the fair value of the underlying Agency security in the TBA contract and the cost basis or the forward price to be paid or received for the underlying Agency security.

As of December 31, 2019 and 2018, our investment securities had a net unamortized premium balance of $3.1 billion and $2.9 billion, respectively.

The following tables summarize our investment securities as of December 31, 2019 and 2018, excluding TBA securities, (dollars in millions). Details of our TBA securities as of each of the respective dates are included in Note 5.



	December 31, 2019				December 31, 2018
Investment Securities	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Agency RMBS:
Fixed rate	$	96,375	$	98,074	$	83,047	$	81,753
Adjustable rate	160		163		212		213
CMO	441		447		588		583
Interest-only and principal-only strips	146		164		172		178
Multifamily	37		39		—		—
Total Agency RMBS	97,159		98,887		84,019		82,727
Non-Agency RMBS	198		209		264		266
CMBS	352		370		280		282
CRT securities	961		976		1,006		1,012
Total investment securities	$	98,670	$	100,442	$	85,569	$	84,287



	December 31, 2019
	Agency RMBS									Non-Agency
Investment Securities	Fannie Mae			Freddie Mac			Ginnie Mae			RMBS			CMBS			CRT			Total
Available-for-sale securities:
Par value	$	14,301		$	4,762		$	18		$	—		$	—		$	—		$	19,081
Unamortized discount	(10		)	(2		)	—			—			—			—			(12		)
Unamortized premium	711			276			—			—			—			—			987
Amortized cost	15,002			5,036			18			—			—			—			20,056
Gross unrealized gains	142			29			1			—			—			—			172
Gross unrealized losses	(50		)	(25		)	—			—			—			—			(75		)
Total available-for-sale securities, at fair value	15,094			5,040			19			—			—			—			20,153
Securities remeasured at fair value through earnings:
Par value	45,106			29,881			—			208			348			937			76,480
Unamortized discount	(68		)	(2		)	—			(10		)	(3		)	(2		)	(85		)
Unamortized premium	1,218			967			—			1			7			26			2,219
Amortized cost	46,256			30,846			—			199			352			961			78,614
Gross unrealized gains	991			691			—			10			19			18			1,729
Gross unrealized losses	(32		)	(18		)	—			—			(1		)	(3		)	(54		)
Total securities remeasured at fair value through earnings	47,215			31,519			—			209			370			976			80,289
Total securities, at fair value	$	62,309		$	36,559		$	19		$	209		$	370		$	976		$	100,442
Weighted average coupon as of December 31, 2019	3.62		%	3.75		%	3.77		%	4.05		%	4.49		%	5.07		%	3.68		%
Weighted average yield as of December 31, 2019 ¹	3.03		%	3.09		%	2.08		%	4.39		%	4.38		%	4.05		%	3.07		%

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1.	Incorporates a weighted average future constant prepayment rate assumption of 10.8% based on forward rates as of December 31, 2019.



	December 31, 2018
	Agency RMBS									Non-Agency
Investment Securities	Fannie Mae			Freddie Mac			Ginnie Mae			RMBS			CMBS			CRT			Total
Available-for-sale securities:
Par value	$	17,591		$	5,673		$	25		$	6		$	—		$	—		$	23,295
Unamortized discount	(10		)	(2		)	—			—			—			—			(12		)
Unamortized premium	912			343			—			—			—			—			1,255
Amortized cost	18,493			6,014			25			6			—			—			24,538
Gross unrealized gains	4			2			1			—			—			—			7
Gross unrealized losses	(686		)	(264		)	—			—			—			—			(950		)
Total available-for-sale securities, at fair value	17,811			5,752			26			6			—			—			23,595
Securities remeasured at fair value through earnings:
Par value	39,453			18,428			—			268			281			968			59,398
Unamortized discount	(78		)	(9		)	—			(10		)	(6		)	—			(103		)
Unamortized premium	1,055			638			—			—			5			38			1,736
Amortized cost	40,430			19,057			—			258			280			1,006			61,031
Gross unrealized gains	223			57			—			2			3			18			303
Gross unrealized losses	(386		)	(243		)	—			—			(1		)	(12		)	(642		)
Total securities remeasured at fair value through earnings	40,267			18,871			—			260			282			1,012			60,692
Total securities, at fair value	$	58,078		$	24,623		$	26		$	266		$	282		$	1,012		$	84,287
Weighted average coupon as of December 31, 2018	3.82		%	3.87		%	3.37		%	3.83		%	4.58		%	5.86		%	3.86		%
Weighted average yield as of December 31, 2018 ¹	3.28		%	3.28		%	2.04		%	4.22		%	4.68		%	5.16		%	3.31		%

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1.	Incorporates a weighted average future constant prepayment rate assumption of 7.9% based on forward rates as of December 31, 2018.

As of December 31, 2019 and 2018, our investments in CRT and non-Agency securities had the following credit ratings:



	December 31, 2019						December 31, 2018
CRT and Non-Agency Security Credit Ratings ¹	CRT		RMBS		CMBS		CRT		RMBS		CMBS
AAA	$	—	$	—	$	43	$	—	$	160	$	52
AA	—		81		214		—		17		152
A	13		25		34		17		33		15
BBB	67		71		69		25		43		53
BB	471		21		10		492		8		10
B	308		4		—		453		2		—
Not Rated	117		7		—		25		3		—
Total	$	976	$	209	$	370	$	1,012	$	266	$	282

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1.	Represents the lowest of Standard and Poor's ("S&P"), Moody's, Fitch, DBRS, Kroll Bond Rating Agency ("KBRA") and Morningstar credit ratings, stated in terms of the S&P equivalent rating as of each date.

Our CRT securities reference the performance of loans underlying Agency RMBS issued by Fannie Mae or Freddie Mac, which were subject to their underwriting standards.

The actual maturities of our investment securities are generally shorter than their stated contractual maturities. The actual maturities of our Agency and high credit quality non-Agency RMBS are primarily affected by principal prepayments and to a lesser degree the contractual lives of the underlying mortgages and periodic contractual principal repayments. The actual maturities of our credit-oriented investments are primarily impacted by their contractual lives and default and loss recovery rates. As of December 31, 2019 and 2018, the weighted average expected constant prepayment rate ("CPR") over the remaining life of our Agency and high credit quality non-Agency RMBS investment portfolio was 10.8% and 7.9%, respectively. Our estimates can differ materially for different securities and thus our individual holdings have a wide range of projected CPRs. The following table summarizes our investments as of December 31, 2019 and 2018 according to their estimated weighted average life classification (dollars in millions):



	December 31, 2019						December 31, 2018
Estimated Weighted Average Life of Investment Securities	Fair Value		Amortized Cost		Weighted Average Coupon	Weighted Average Yield	Fair Value		Amortized Cost		Weighted Average Coupon	Weighted Average Yield
≤ 3 years	$	2,671	$	2,654	3.54%	2.61%	$	1,690	$	1,716	3.99%	2.64%
> 3 years and ≤ 5 years	10,822		10,563		3.85%	3.20%	5,518		5,586		3.35%	2.73%
> 5 years and ≤10 years	86,492		85,002		3.67%	3.07%	72,503		73,588		3.92%	3.37%
> 10 years	457		451		3.31%	3.06%	4,576		4,679		3.57%	3.30%
Total	$	100,442	$	98,670	3.68%	3.07%	$	84,287	$	85,569	3.86%	3.31%

The following table presents the gross unrealized loss and fair values of securities classified as available-for-sale by length of time that such securities have been in a continuous unrealized loss position as of December 31, 2019 and 2018 (in millions):



	Unrealized Loss Position For
	Less than 12 Months					12 Months or More					Total
Securities Classified as Available-for-Sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
December 31, 2019	$	1,653	$	(12	)	$	6,984	$	(63	)	$	8,637	$	(75	)
December 31, 2018	$	4,783	$	(72	)	$	18,231	$	(878	)	$	23,014	$	(950	)

We did not recognize OTTI charges on our investment securities classified as available-for-sale during the periods presented on our consolidated statements of operations. As of the end of each respective reporting period, a decision had not been made to sell securities in an unrealized loss position and we did not believe it was more likely than not that we would be required to sell such securities before recovery of their amortized cost basis.

Gains and Losses on Sale of Investment Securities

The following table is a summary of our net gain (loss) from the sale of investment securities for fiscal years 2019, 2018 and 2017 by investment classification of accounting (in millions):



	Fiscal Year 2019									Fiscal Year 2018									Fiscal Year 2017
Investment Securities	Available-for-Sale Securities ²			Fair Value Option Securities			Total			Available-for-Sale Securities ²			Fair Value Option Securities			Total			Available-for-Sale Securities ²			Fair Value Option Securities			Total
Investment securities sold, at cost	$	(732	)	$	(23,040	)	$	(23,772	)	$	(4,306	)	$	(5,344	)	$	(9,650	)	$	(6,324	)	$	(12,913	)	$	(19,237	)
Proceeds from investment securities sold ¹	723			23,437			24,160			4,227			5,286			9,513			6,241			12,933			19,174
Net gain (loss) on sale of investment securities	$	(9	)	$	397		$	388		$	(79	)	$	(58	)	$	(137	)	$	(83	)	$	20		$	(63	)

Gross gain on sale of investment securities	$	—		$	401		$	401		$	6		$	16		$	22		$	16		$	48		$	64
Gross loss on sale of investment securities	(9		)	(4		)	(13		)	(85		)	(74		)	(159		)	(99		)	(28		)	(127		)
Net gain (loss) on sale of investment securities	$	(9	)	$	397		$	388		$	(79	)	$	(58	)	$	(137	)	$	(83	)	$	20		$	(63	)

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1.	Proceeds include cash received during the period, plus receivable for investment securities sold during the period as of period end.

See Note 9 for a summary of changes in accumulated OCI.