Consolidations and Transfers of Financial Assets

3 Months Ended

Mar. 31, 2014

Consolidations and Transfers of Financial Assets [Abstract]

Consolidations and Transfers of Financial Assets

We have interests in various entities that are considered to be variable interest entities (“VIEs”). The primary types of entities are securitization trusts guaranteed by us via lender swap and portfolio securitization transactions, mortgage and asset-backed trusts that were not created by us, as well as housing partnerships that are established to finance the acquisition, construction, development or rehabilitation of affordable multifamily and single-family housing. These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. We consolidate the substantial majority of our single-class securitization trusts because our role as guarantor and master servicer provides us with the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed. In contrast, we do not consolidate single-class securitization trusts when other organizations have the power to direct these activities.

Unconsolidated VIEs

We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include securitization trusts and limited partnerships. The following table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with unconsolidated mortgage-backed trusts as of March 31, 2014 and December 31, 2013, as well as our maximum exposure to loss and the total assets of these unconsolidated mortgage-backed trusts.



	As of
	March 31, 2014				December 31, 2013
	(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated balance sheets related to mortgage-backed trusts:
Assets:
Trading securities:
Fannie Mae securities		$	5,785			$	5,660
Non-Fannie Mae securities		8,197				8,559
Total trading securities		13,982				14,219
Available-for-sale securities:
Fannie Mae securities		5,593				5,866
Non-Fannie Mae securities		27,063				27,441
Total available-for-sale securities		32,656				33,307
Other assets		119				119
Other liabilities		(1,734		)		(1,668		)
Net carrying amount		$	45,023			$	45,977
Maximum exposure to loss⁽¹⁾		$	52,360			$	54,148
Total assets of unconsolidated mortgage-backed trusts		$	281,719			$	313,202

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⁽¹⁾	Our maximum exposure to loss generally represents the greater of our recorded investment in the entity or the unpaid principal balance of the assets covered by our guaranty. However, our securities issued by Fannie Mae multi-class resecuritization trusts that are not consolidated do not give rise to any additional exposure to loss as we already consolidate the underlying collateral.

Additionally, our maximum exposure to loss related to our involvement with limited partnership investments was $15 million and $14 million as of March 31, 2014 and December 31, 2013, respectively. The total assets of these unconsolidated limited partnership investments were $6.7 billion and $6.8 billion as of March 31, 2014 and December 31, 2013, respectively.

Transfers of Financial Assets

We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three months ended March 31, 2014 and 2013, the unpaid principal balance of portfolio securitizations was $32.5 billion and $69.4 billion, respectively.

The following table displays some key characteristics of the securities retained in unconsolidated portfolio securitization trusts as of March 31, 2014 and December 31, 2013.



	Fannie Mae Single-class MBS & Fannie Megas			REMICS & SMBS⁽¹⁾
	(Dollars in millions)
As of March 31, 2014
Unpaid principal balance	$	331		$	6,879
Fair value	366			8,012
Weighted-average coupon	6.20		%	5.35		%
Weighted-average loan age	7.7		years	5.5		years
Weighted-average maturity	21.2		years	11.9		years

As of December 31, 2013
Unpaid principal balance	$	349		$	6,899
Fair value	383			7,959
Weighted-average coupon	6.21		%	5.36		%
Weighted-average loan age	7.4		years	5.4		years
Weighted-average maturity	21.5		years	12.6		years

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⁽¹⁾	Consists of real estate mortgage investment conduits (“REMICs”) and stripped mortgage-backed securities (“SMBS”).

For the three months ended March 31, 2014 and 2013, the principal and interest received on retained interests was $340 million and $459 million, respectively.

Managed Loans

“Managed loans” are on-balance sheet mortgage loans, as well as mortgage loans that we have securitized in unconsolidated portfolio securitization trusts. The unpaid principal balance of securitized loans in unconsolidated portfolio securitization trusts, which are primarily loans that are guaranteed or insured, in whole or in part, by the U.S. government, was $2.0 billion and $2.1 billion as of March 31, 2014 and December 31, 2013, respectively. For information on our on-balance sheet mortgage loans, see “Note 3, Mortgage Loans.”

Qualifying Sales of Portfolio Securitizations

We consolidate the substantial majority of our single-class MBS trusts; therefore, these portfolio securitization transactions do not qualify for sale treatment. The assets and liabilities of consolidated trusts created via portfolio securitization transactions that do not qualify as sales are reported in our condensed consolidated balance sheets.

We recognize assets obtained and liabilities incurred in qualifying sales of portfolio securitizations at fair value. There were no proceeds from the initial sale of securities from portfolio securitizations for the three months ended March 31, 2014, compared with $176 million for the three months ended March 31, 2013. Our continuing involvement in the form of guaranty assets and guaranty liabilities with assets that were transferred into unconsolidated trusts is not material to our consolidated financial statements.

- Definition

The entire disclosure for consolidation of the reporting entity. Provides users with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

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