XML 106 R10.htm IDEA: XBRL DOCUMENT v2.4.1.9
Allowance for Loan Losses
3 Months Ended
Mar. 31, 2015
Loans and Leases Receivable, Allowance [Abstract]  
Allowance for Loan Losses
Allowance for Loan Losses
Our allowance for loan losses is a valuation allowance that reflects an estimate of incurred credit losses related to our recorded investment in both single-family and multifamily HFI loans. This population includes both HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts. When calculating our allowance for loan losses, we consider only our net recorded investment in the loan at the balance sheet date, which includes the loan’s unpaid principal balance and any applicable cost basis adjustments. We record charge-offs as a reduction to the allowance for loan losses when losses are confirmed through the receipt of assets in full satisfaction of a loan, such as the underlying collateral upon foreclosure or cash upon completion of a short sale.
We aggregate single-family HFI loans that are not individually impaired based on similar risk characteristics, for purposes of estimating incurred credit losses and establishing a collective single-family loss reserve using an econometric model that derives an overall loss reserve estimate. We base our allowance methodology on historical events and trends, such as loss severity (in event of default), default rates, and recoveries from mortgage insurance contracts and other credit enhancements. In addition, management performs a review of the observable data used in its estimate to ensure it is representative of prevailing economic conditions and other events existing as of the balance sheet date.
Individually impaired single-family loans currently include those restructured in a TDR and acquired credit-impaired loans. When a loan has been restructured, we measure impairment using a cash flow analysis discounted at the loan’s original effective interest rate. However, if we expect to recover our recorded investment in an individually impaired loan through probable foreclosure of the underlying collateral, we measure impairment based on the fair value of the collateral, reduced by estimated disposal costs and adjusted for estimated proceeds from mortgage, flood, or hazard insurance and other credit enhancements.
We identify multifamily loans for evaluation for impairment through a credit risk assessment process. If we determine that a multifamily loan is individually impaired, we generally measure impairment on that loan based on the fair value of the underlying collateral less estimated costs to sell the property. We establish a collective loss reserve for all loans in our multifamily guaranty book of business that are not individually impaired using an internal model that applies loss factors to loans in similar risk categories. Our loss factors are developed based on our historical default and loss severity experience.
The following table displays changes in single-family, multifamily and total allowance for loan losses for the three months ended March 31, 2015 and 2014.
 
For the Three Months Ended March 31,
 
2015
 
2014
 
Of Fannie Mae
 
Of Consolidated Trusts
 
Total
 
Of Fannie Mae
 
Of Consolidated Trusts
 
Total
 
(Dollars in millions)
Single-family allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
32,956

 
 
$
2,221

 
 
$
35,177

 
$
40,202

 
 
$
3,105

 
 
$
43,307

Provision (benefit) for loan losses(1)
205

 
 
(147
)
 
 
58

 
(882
)
 
 
38

 
 
(844
)
Charge-offs(2)(5)
(5,328
)
 
 
(19
)
 
 
(5,347
)
 
(1,447
)
 
 
(101
)
 
 
(1,548
)
Recoveries
614

 
 
8

 
 
622

 
320

 
 
71

 
 
391

Transfers(3)
359

 
 
(359
)
 
 

 
420

 
 
(420
)
 
 

Other(4)
953

 
 
51

 
 
1,004

 
133

 
 
9

 
 
142

Ending balance
$
29,759

 
 
$
1,755

 
 
$
31,514

 
$
38,746

 
 
$
2,702

 
 
$
41,448

Multifamily allowance for loan losses:
 
 
 
 
 
 
 
 

 
 

 
 

Beginning balance
$
161

 
 
$
203

 
 
$
364

 
$
319

 
 
$
220

 
 
$
539

Benefit for loan losses(1)
(37
)
 
 
(13
)
 
 
(50
)
 
(12
)
 
 
(16
)
 
 
(28
)
Charge-offs(2)(5)
(15
)
 
 

 
 
(15
)
 
(51
)
 
 

 
 
(51
)
Other(4)
5

 
 
2

 
 
7

 
2

 
 
1

 
 
3

Ending balance
$
114

 
 
$
192

 
 
$
306

 
$
258

 
 
$
205

 
 
$
463

Total allowance for loan losses:
 
 
 
 
 
 
 
 

 
 

 
 

Beginning balance
$
33,117

 
 
$
2,424

 
 
$
35,541

 
$
40,521

 
 
$
3,325

 
 
$
43,846

Provision (benefit) for loan losses(1)
168

 
 
(160
)
 
 
8

 
(894
)
 
 
22

 
 
(872
)
Charge-offs(2)(5)
(5,343
)
 
 
(19
)
 
 
(5,362
)
 
(1,498
)
 
 
(101
)
 
 
(1,599
)
Recoveries
614

 
 
8

 
 
622

 
320

 
 
71

 
 
391

Transfers(3)
359

 
 
(359
)
 
 

 
420

 
 
(420
)
 
 

Other(4)
958

 
 
53

 
 
1,011

 
135

 
 
10

 
 
145

Ending balance
$
29,873

 
 
$
1,947

 
 
$
31,820

 
$
39,004

 
 
$
2,907

 
 
$
41,911


__________
(1) 
Provision (benefit) for loan losses is included in “Benefit for credit losses” in our condensed consolidated statements of operations and comprehensive income.
(2) 
While we purchase the substantial majority of loans that are four or more months delinquent from our MBS trusts, we do not exercise this option to purchase loans during a forbearance period. Charge-offs of consolidated trusts generally represent loans that remained in our consolidated trusts at the time of default.
(3) 
Includes transfers from trusts for delinquent loan purchases.
(4) 
Amounts represent changes in other loss reserves which are offset by amounts reflected in benefit for credit losses, charge-offs and recoveries.
(5) 
Includes for the three months ended March 31, 2015 charge-offs of (1) $1.8 billion in HFI loans and $724 million in preforeclosure property taxes and insurance receivable in connection with our adoption of the Advisory Bulletin and (2) $1.1 billion in accrued interest receivable that were charged-off in connection with the our adoption of a change in accounting principle related to the treatment of interest previously accrued, but not collected, at the date that loans are placed on nonaccrual status.
The following table displays the allowance for loan losses and total recorded investment in our HFI loans, excluding loans for which we have elected the fair value option, by impairment or reserve methodology and portfolio segment as of March 31, 2015 and December 31, 2014.
 
As of
  
March 31, 2015
 
December 31, 2014
 
Single-Family
 
Multifamily
 
Total
 
Single-Family
 
Multifamily
 
Total
 
(Dollars in millions)
Allowance for loan losses by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually impaired loans(1)
$
28,662

 
 
$
146

 
 
$
28,808

 
$
31,200

 
 
$
175

 
 
$
31,375

Collectively reserved loans
2,852

 
 
160

 
 
3,012

 
3,977

 
 
189

 
 
4,166

Total allowance for loan losses
$
31,514

 
 
$
306

 
 
$
31,820

 
$
35,177

 
 
$
364

 
 
$
35,541

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded investment in loans by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually impaired loans(1)
$
182,956

 
 
$
1,730

 
 
$
184,686

 
$
186,377

 
 
$
1,809

 
 
$
188,186

Collectively reserved loans
2,660,583

 
 
191,298

 
 
2,851,881

 
2,672,184

 
 
187,424

 
 
2,859,608

Total recorded investment in loans
$
2,843,539

 
 
$
193,028

 
 
$
3,036,567

 
$
2,858,561

 
 
$
189,233

 
 
$
3,047,794

__________
(1) 
Includes acquired credit-impaired loans.