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Consolidations and Transfers of Financial Assets
9 Months Ended
Sep. 30, 2014
Consolidations and Transfers of Financial Assets [Abstract]  
Consolidations and Transfers of Financial Assets
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.
We continually assess whether we are the primary beneficiary of the VIEs with which we are involved and therefore may consolidate or deconsolidate a VIE through the duration of our involvement. Examples of certain events that may change whether or not we consolidate the VIE include a change in the design of the entity or a change in our ownership in the entity such that we no longer hold substantially all of the certificates issued by a multi-class securitization trust. As of September 30, 2014, we consolidated certain VIEs that were not consolidated as of December 31, 2013. As a result of consolidating these entities, which had combined total assets of $439 million in unpaid principal balance as of September 30, 2014, we derecognized our investment in these entities and recognized the assets and liabilities of the consolidated entities at fair value. As of September 30, 2014, we also deconsolidated certain VIEs that were consolidated as of December 31, 2013. As a result of deconsolidating these entities, which had combined total assets of $316 million in unpaid principal balance as of December 31, 2013, we derecognized the assets and liabilities of the entities and recognized at fair value our retained interests as securities in our condensed consolidated balance sheets.
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 September 30, 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
 
September 30, 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
 
$
5,310

 
 
 
$
5,660

 
Non-Fannie Mae securities
 
7,590

 
 
 
8,559

 
Total trading securities
 
12,900

 
 
 
14,219

 
Available-for-sale securities:
 
 
 
 
 


 
Fannie Mae securities
 
5,057

 
 
 
5,866

 
Non-Fannie Mae securities
 
23,795

 
 
 
27,441

 
Total available-for-sale securities
 
28,852

 
 
 
33,307

 
Other assets
 
117

 
 
 
119

 
Other liabilities
 
(1,526
)
 
 
 
(1,668
)
 
Net carrying amount
 
$
40,343

 
 
 
$
45,977

 
Maximum exposure to loss(1)
 
$
47,456

 
 
 
$
54,148

 
Total assets of unconsolidated mortgage-backed trusts
 
$
256,715

 
 
 
$
313,202

 
__________
(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.
The total assets of our unconsolidated limited partnership investments were $6.0 billion and $6.8 billion as of September 30, 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 September 30, 2014 and 2013, the unpaid principal balance of portfolio securitizations was $44.2 billion and $52.2 billion, respectively. For the nine months ended September 30, 2014 and 2013, the unpaid principal balance of portfolio securitizations was $113.1 billion and $184.0 billion, respectively.
The following table displays some key characteristics of the securities retained in unconsolidated portfolio securitization trusts as of September 30, 2014 and December 31, 2013.
 
Fannie Mae Single-class MBS & Fannie Megas
 
REMICS & SMBS(1)
 
(Dollars in millions)
As of September 30, 2014
 
 
 
 
 
Unpaid principal balance
$
297

 
 
$
6,576

 
Fair value
330

 
 
7,667

 
Weighted-average coupon
6.19

%
 
5.25

%
Weighted-average loan age
8.2

years
 
5.9

years
Weighted-average maturity
20.7

years
 
10.8

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
__________
(1) 
Consists of real estate mortgage investment conduits (“REMICs”) and stripped mortgage-backed securities (“SMBS”).
For the three months ended September 30, 2014 and 2013, the principal and interest received on retained interests was $386 million and $434 million, respectively. For the nine months ended September 30, 2014 and 2013, the principal and interest received on retained interests was $1.1 billion and $1.4 billion, 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 $1.9 billion and $2.1 billion as of September 30, 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 and nine months ended September 30, 2014. Proceeds from the initial sale of securities from portfolio securitizations were $48 million and $299 million for the three and nine months ended September 30, 2013, respectively. 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 condensed consolidated financial statements.