Mortgage Loans

3 Months Ended

Mar. 31, 2015

Mortgage Loans on Real Estate [Abstract]

We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and multifamily mortgage loans, which are secured by five or more residential dwelling units. We classify these loans as either HFI or HFS. We report the carrying value of HFI loans at the unpaid principal balance, net of unamortized premiums and discounts, other cost basis adjustments, and an allowance for loan losses. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation changes in our condensed consolidated statements of operations and comprehensive income. We report the recorded investment of HFI loans at the unpaid principal balance, net of unamortized premiums and discounts, other cost basis adjustments, and accrued interest receivable.

For purposes of the single-family mortgage loan disclosures below, we define “primary” class as mortgage loans that are not included in other loan classes; “government” class as mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies, that are not Alt-A; and “other” class as loans with higher-risk characteristics, such as interest-only loans and negative-amortizing loans, that are neither government nor Alt-A.

The following table displays the carrying value of our mortgage loans as of March 31, 2015 and December 31, 2014.



	As of
	March 31, 2015												December 31, 2014
	Of Fannie Mae				Of Consolidated Trusts				Total				Of Fannie Mae				Of Consolidated Trusts				Total
	(Dollars in millions)
Single-family		$	258,350			$	2,558,761			$	2,817,111			$	262,116			$	2,569,884			$	2,832,000
Multifamily		20,714				170,302				191,016				23,255				164,045				187,300
Total unpaid principal balance of mortgage loans		279,064				2,729,063				3,008,127				285,371				2,733,929				3,019,300
Cost basis and fair value adjustments, net		(12,775		)		49,584				36,809				(12,705		)		48,440				35,735
Allowance for loan losses for loans held for investment		(29,873		)		(1,947		)		(31,820		)		(33,117		)		(2,424		)		(35,541		)
Total mortgage loans		$	236,416			$	2,776,700			$	3,013,116			$	239,549			$	2,779,945			$	3,019,494

During the three months ended March 31, 2015 and 2014, we redesignated loans with a carrying value of $330 million and $2.2 billion, respectively, from HFI to HFS. There were no sales of loans during the three months ended March 31, 2015. We sold loans with an unpaid principal balance of $1.0 billion during the three months ended March 31, 2014.

The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process was $32.3 billion as of March 31, 2015. As a result of our various loss mitigation and foreclosure prevention efforts, we expect that a portion of the loans in the process of formal foreclosure proceedings will not ultimately foreclose.

Nonaccrual Policy

We discontinue accruing interest on loans when we believe collectability of principal or interest is not reasonably assured, which for a single-family loan we have determined, based on our historical experience, to be when the loan becomes two months or more past due according to its contractual terms. We generally place a multifamily loan on nonaccrual status when the loan is deemed to be individually impaired, unless the loan is well secured such that collectability of principal and accrued interest is reasonably assured.

Effective January 1, 2015, we changed our policy for the treatment of interest previously accrued but not collected at the date both single-family and multifamily loans are placed on nonaccrual status. Specifically, interest previously accrued but not collected will be reversed through interest income at the date a loan is placed on nonaccrual status. Previously, when a loan was placed on nonaccrual status, interest previously accrued but not collected became part of the loan’s recorded investment and was reviewed either individually or collectively for impairment.

We also changed our policy for when a non-modified single-family loan is returned to accrual status. Effective January 1, 2015, a non-modified single-family loan will be returned to accrual status at the point that the borrower brings the loan current. Previously, a non-modified single-family loan was returned to accrual status at the point that the borrower had made sufficient payments to reduce their delinquency status below our nonaccrual threshold of 60 days past due. We did not change our policy for returning modified single-family loans to accrual status. We return modified single-family loans to accrual status at the point that the borrower successfully makes all required payments during the trial period (generally three to four months) and modification is made permanent.

See “Note 1, Summary of Significant Accounting Policies” for additional information on such changes in accounting policy.

Changes to our nonaccrual policy were limited to those described above. For most single-family loans, we continue to recognize interest income for loans on nonaccrual status when cash is received. However, if a single-family loan was charged off prior to foreclosure, all payments received are applied on a cost recovery basis to reduce principal on the mortgage loan. We stop applying the cost recovery approach on those single-family loans when they are brought current either through borrower payments or modification and there has been a sufficient performance period to demonstrate that the borrower has the ability and intent to make the remaining payments on their mortgage loans.

For multifamily loans, we apply any payment received on a cost recovery basis to reduce principal on the mortgage loan unless the loan is determined to be well secured. We generally return a multifamily loan to accrual status and stop applying the cost recovery approach when the borrower cures the delinquency of the loan or we otherwise determine that the loan is well secured such that collectability is reasonably assured.

Aging Analysis

The following tables display an aging analysis of the total recorded investment in our HFI mortgage loans by portfolio segment and class as of March 31, 2015 and December 31, 2014, excluding loans for which we have elected the fair value option.



	As of March 31, 2015
	30 - 59 Days Delinquent			60 - 89 Days Delinquent			Seriously Delinquent⁽¹⁾			Total Delinquent			Current		Total		Recorded Investment in Loans 90 Days or More Delinquent and Accruing Interest			Recorded Investment in Nonaccrual Loans
	(Dollars in millions)
Single-family:
Primary		$	25,087		$	7,045		$	34,166		$	66,298	$	2,582,073	$	2,648,371		$	56	$	41,132
Government⁽²⁾		54			18			298			370		44,211		44,581			298		—
Alt-A		3,743			1,321			9,429			14,493		93,801		108,294			7		10,743
Other		1,347			446			3,103			4,896		37,397		42,293			7		3,534
Total single-family		30,231			8,830			46,996			86,057		2,757,482		2,843,539			368		55,409
Multifamily⁽³⁾		98			N/A			135			233		192,795		193,028			—		807
Total		$	30,329		$	8,830		$	47,131		$	86,290	$	2,950,277	$	3,036,567		$	368	$	56,216



	As of December 31, 2014
	30 - 59 Days Delinquent			60 - 89 Days Delinquent			Seriously Delinquent⁽¹⁾			Total Delinquent			Current		Total		Recorded Investment in Loans 90 Days or More Delinquent and Accruing Interest			Recorded Investment in Nonaccrual Loans
	(Dollars in millions)
Single-family:
Primary		$	29,130		$	8,396		$	38,248		$	75,774	$	2,580,446	$	2,656,220		$	55	$	46,556
Government⁽²⁾		63			26			305			394		44,927		45,321			305		—
Alt-A		4,094			1,414			11,603			17,111		95,650		112,761			8		13,007
Other		1,520			516			3,763			5,799		38,460		44,259			6		4,259
Total single-family		34,807			10,352			53,919			99,078		2,759,483		2,858,561			374		63,822
Multifamily⁽³⁾		60			N/A			89			149		189,084		189,233			—		823
Total		$	34,867		$	10,352		$	54,008		$	99,227	$	2,948,567	$	3,047,794		$	374	$	64,645

__________


⁽¹⁾	Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Multifamily seriously delinquent loans are loans that are 60 days or more past due.


⁽²⁾	Primarily consists of reverse mortgages which, due to their nature, are not aged and are included in the current column.


⁽³⁾	Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.

Credit Quality Indicators

The following table displays the total recorded investment in our single-family HFI loans by class and credit quality indicator as of March 31, 2015 and December 31, 2014, excluding loans for which we have elected the fair value option.



	As of
	March 31, 2015⁽¹⁾							December 31, 2014⁽¹⁾
	Primary		Alt-A		Other			Primary		Alt-A		Other
	(Dollars in millions)
Estimated mark-to-market loan-to-value ratio:⁽²⁾
Less than or equal to 80%	$	2,126,305	$	58,557		$	21,584	$	2,156,165	$	60,851		$	22,558
Greater than 80%and less than or equal to 90%	270,619		14,661			5,756		261,709		15,151			6,046
Greater than 90%and less than or equal to 100%	154,066		12,135			5,023		140,778		12,490			5,236
Greater than 100%and less than or equal to 110%	43,305		8,503			3,692		43,014		8,998			3,900
Greater than 110% and less than or equal to 120%	23,264		5,707			2,517		23,439		6,033			2,615
Greater than 120% and less than or equal to 125%	7,445		2,000			848		7,529		2,114			904
Greater than 125%	23,367		6,731			2,873		23,586		7,124			3,000
Total	$	2,648,371	$	108,294		$	42,293	$	2,656,220	$	112,761		$	44,259

__________


⁽¹⁾	Excludes $44.6 billion and $45.3 billion as of March 31, 2015 and December 31, 2014, respectively, of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies, that are not Alt-A loans. The segment class is primarily reverse mortgages for which we do not calculate an estimated mark-to-market loan-to-value (“LTV”) ratio.


⁽²⁾	The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic changes in home value.

The following table displays the total recorded investment in our multifamily HFI loans by credit quality indicator as of March 31, 2015 and December 31, 2014, excluding loans for which we have elected the fair value option.



	As of
	March 31,			December 31,
	2015			2014
	(Dollars in millions)
Credit risk profile by internally assigned grade:⁽¹⁾
Pass		$	186,052		$	182,079
Special Mention		3,015			3,070
Substandard		3,953			3,842
Doubtful		8			242
Total		$	193,028		$	189,233

_________

⁽¹⁾

Pass (loan is current and adequately protected by the current financial strength and debt service capacity of the borrower); special mention (loan with signs of potential weakness); substandard (loan with a well defined weakness that jeopardizes the timely full repayment); and doubtful (loan with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values).

Individually Impaired Loans

Individually impaired loans include troubled debt restructurings (“TDRs”), acquired credit-impaired loans and multifamily loans that we have assessed as probable that we will not collect all contractual amounts due, regardless of whether we are currently accruing interest. The following tables display the total unpaid principal balance, recorded investment and related allowance as of March 31, 2015 and December 31, 2014, and average recorded investment and interest income recognized for the three months ended March 31, 2015 and 2014, for individually impaired loans.



	As of
	March 31, 2015									December 31, 2014
	Unpaid Principal Balance			Total Recorded Investment			Related Allowance for Loan Losses			Unpaid Principal Balance			Total Recorded Investment			Related Allowance for Loan Losses			Related Allowance for Accrued Interest Receivable
	(Dollars in millions)
Individually impaired loans:
With related allowance recorded:
Single-family:
Primary		$	122,873		$	116,908		$	18,954		$	125,960		$	120,221		$	20,327		$	309
Government		282			286			58			281			285			46			12
Alt-A		33,719			30,954			6,935			35,492			32,816			7,778			136
Other		13,896			13,165			2,715			14,667			13,947			3,049			38
Total single-family		170,770			161,313			28,662			176,400			167,269			31,200			495
Multifamily		1,210			1,217			146			1,230			1,241			175			6
Total individually impaired loans with related allowance recorded		171,980			162,530			28,808			177,630			168,510			31,375			501

With no related allowance recorded:⁽¹⁾
Single-family:
Primary		18,139			16,349			—			16,704			14,876			—			—
Government		60			55			—			61			57			—			—
Alt-A		4,737			3,881			—			3,993			3,119			—			—
Other		1,540			1,358			—			1,240			1,056			—			—
Total single-family		24,476			21,643			—			21,998			19,108			—			—
Multifamily		511			513			—			565			568			—			—
Total individually impaired loans with no related allowance recorded		24,987			22,156			—			22,563			19,676			—			—
Total individually impaired loans⁽²⁾		$	196,967		$	184,686		$	28,808		$	200,193		$	188,186		$	31,375		$	501



	For the Three Months Ended March 31,
	2015									2014
	Average Recorded Investment			Total Interest Income Recognized⁽³⁾			Interest Income Recognized on a Cash Basis			Average Recorded Investment			Total Interest Income Recognized⁽³⁾			Interest Income Recognized on a Cash Basis
	(Dollars in millions)
Individually impaired loans:
With related allowance recorded:
Single-family:
Primary		$	117,721		$	1,034		$	104		$	123,465		$	1,094		$	140
Government		282			3			—			238			3			—
Alt-A		31,491			251			17			34,337			270			28
Other		13,416			94			7			14,910			103			11
Total single-family		162,910			1,382			128			172,950			1,470			179
Multifamily		1,229			3			—			2,086			23			—
Total individually impaired loans with related allowance recorded		164,139			1,385			128			175,036			1,493			179

With no related allowance recorded:⁽¹⁾
Single-family:
Primary		16,249			247			41			12,646			185			48
Government		59			1			—			93			1			—
Alt-A		3,736			44			7			2,520			41			10
Other		1,301			18			2			891			11			2
Total single-family		21,345			310			50			16,150			238			60
Multifamily		541			1			—			1,826			20			—
Total individually impaired loans with no related allowance recorded		21,886			311			50			17,976			258			60
Total individually impaired loans⁽²⁾		$	186,025		$	1,696		$	178		$	193,012		$	1,751		$	239

__________


⁽¹⁾	The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is required.


⁽²⁾	Includes single-family loans restructured in a TDR with a recorded investment of $181.9 billion and $185.2 billion as of March 31, 2015 and December 31, 2014, respectively. Includes multifamily loans restructured in a TDR with a recorded investment of $705 million and $716 million as of March 31, 2015 and December 31, 2014, respectively.

⁽³⁾

Total single-family interest income recognized of $1.7 billion for the three months ended March 31, 2015 consists of $1.4 billion of contractual interest and $276 million of effective yield adjustments. Total single-family interest income recognized of $1.7 billion for the three months ended March 31, 2014 consists of $1.4 billion of contractual interest and $275 million of effective yield adjustments.

Troubled Debt Restructurings

A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial difficulties is considered a TDR. In addition to formal loan modifications, we also engage in other loss mitigation activities with troubled borrowers, which include repayment plans and forbearance arrangements, both of which represent informal agreements with the borrower that do not result in the legal modification of the loan’s contractual terms. We account for these informal restructurings as a TDR if we defer more than three missed payments. We also classify loans to certain borrowers who have received bankruptcy relief as TDRs.

The substantial majority of the loan modifications we complete result in term extensions, interest rate reductions or a combination of both. During the three months ended March 31, 2015 and 2014, the average term extension of a single-family modified loan was 161 months and 159 months, respectively, and the average interest rate reduction was 0.77 and 1.23 percentage points, respectively.

The following table displays the number of loans and recorded investment in loans restructured in a TDR for the three months ended March 31, 2015 and 2014.



	For the Three Months Ended March 31,
	2015					2014
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		21,407		$	2,945		28,842		$	4,110
Government		74		8			62		8
Alt-A		2,789		438			4,396		740
Other		590		108			1,038		219
Total single-family		24,860		3,499			34,338		5,077
Multifamily		3		5			6		34
Total troubled debt restructurings		24,863		$	3,504		34,344		$	5,111

The following table displays the number of loans and our recorded investment in these loans at the time of payment default for the three months ended March 31, 2015 and 2014 for loans that were restructured in a TDR in the twelve months prior to the payment default. For purposes of this disclosure, we define loans that had a payment default as: single-family and multifamily loans with completed TDRs that liquidated during the period, either through foreclosure, deed-in-lieu of foreclosure or a short sale; single-family loans with completed modifications that are two or more months delinquent during the period; or multifamily loans with completed modifications that are one or more months delinquent during the period.



	For the Three Months Ended March 31,
	2015					2014
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		6,723		$	1,003		8,598		$	1,310
Government		20		3			18		2
Alt-A		1,153		203			1,444		260
Other		304		66			504		115
Total single-family		8,200		1,275			10,564		1,687
Multifamily		2		4			4		14
Total TDRs that subsequently defaulted		8,202		$	1,279		10,568		$	1,701