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Investments in Securities
 6 Months Ended
Jun. 30, 2015
Investments, Debt and Equity Securities [Abstract]  
Investments in Securities
Investments in Securities
Trading Securities
Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. The following table displays our investments in trading securities.
 
As of
 
June 30, 2015
 
December 31, 2014
 
(Dollars in millions)
Mortgage-related securities:
 
 
 
 
 
 
 
Fannie Mae
 
$
5,079

 
 
 
$
4,940

 
Freddie Mac
 
1,537

 
 
 
1,369

 
Ginnie Mae
 
239

 
 
 
166

 
Alt-A private-label securities
 
475

 
 
 
920

 
Subprime private-label securities
 
718

 
 
 
1,307

 
CMBS
 
2,424

 
 
 
2,515

 
Mortgage revenue bonds
 
602

 
 
 
722

 
Other mortgage-related securities
 
—

 
 
 
99

 
Total mortgage-related securities
 
11,074

 
 
 
12,038

 
U.S. Treasury securities
 
23,790

 
 
 
19,466

 
Total trading securities
 
$
34,864

 
 
 
$
31,504

 
The following table displays information about our net trading gains and losses.
 
For the Three
 
For the Six
 
Months Ended
 
Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Net trading gains
$
20

 
$
249

 
$
56

 
$
394

Net trading (losses) gains recognized in the period related to securities still held at period end
(1
)
 
233

 
(3
)
 
353

Available-for-Sale Securities
We measure available-for-sale (“AFS”) securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other comprehensive (loss) income” and we recognize realized gains and losses from the sale of AFS securities in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive income.
The following table displays the gross realized gains, losses and proceeds on sales of AFS securities.
 
For the Three
 
For the Six
 
Months Ended
 
Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)

Gross realized gains
$
413

 
$
396

 
$
813

 
$
399

Gross realized losses
50

 
—

 
57

 
2

Total proceeds(1)
3,096

 
1,705

 
5,208

 
1,740


__________
(1) 
Excludes proceeds from the initial sale of securities from new portfolio securitizations.
The following tables display the amortized cost, gross unrealized gains and losses, and fair value by major security type for AFS securities.
 
As of June 30, 2015
 
Total Amortized Cost(1)
 
Gross Unrealized Gains
 
Gross Unrealized Losses - OTTI(2)
 
Gross Unrealized Losses - Other(3)
 
Total Fair Value
 
(Dollars in millions)
Fannie Mae
 
$
4,376

 
 
 
$
284

 
 
 
$
—

 
 
 
$
(22
)
 
 
$
4,638

Freddie Mac
 
4,565

 
 
 
382

 
 
 
—

 
 
 
—

 
 
4,947

Ginnie Mae
 
380

 
 
 
55

 
 
 
—

 
 
 
—

 
 
435

Alt-A private-label securities
 
2,877

 
 
 
756

 
 
 
(3
)
 
 
 
—

 
 
3,630

Subprime private-label securities
 
2,932

 
 
 
911

 
 
 
(1
)
 
 
 
(5
)
 
 
3,837

CMBS
 
1,301

 
 
 
43

 
 
 
—

 
 
 
—

 
 
1,344

Mortgage revenue bonds
 
3,032

 
 
 
157

 
 
 
(14
)
 
 
 
(4
)
 
 
3,171

Other mortgage-related securities
 
2,028

 
 
 
131

 
 
 
—

 
 
 
—

 
 
2,159

Total
 
$
21,491

 
 
 
$
2,719

 
 
 
$
(18
)
 
 
 
$
(31
)
 
 
$
24,161


 
As of December 31, 2014
 
Total Amortized Cost(1)
 
Gross Unrealized Gains
 
Gross Unrealized Losses - OTTI(2)
 
Gross Unrealized Losses - Other(3)
 
Total Fair Value
 
(Dollars in millions)
Fannie Mae
 
$
5,330

 
 
 
$
328

 
 
 
$
—

 
 
 
$
(19
)
 
 
$
5,639

Freddie Mac
 
5,100

 
 
 
428

 
 
 
—

 
 
 
—

 
 
5,528

Ginnie Mae
 
416

 
 
 
60

 
 
 
—

 
 
 
—

 
 
476

Alt-A private-label securities
 
4,638

 
 
 
1,055

 
 
 
(15
)
 
 
 
—

 
 
5,678

Subprime private-label securities
 
4,103

 
 
 
1,161

 
 
 
(9
)
 
 
 
(15
)
 
 
5,240

CMBS
 
1,341

 
 
 
56

 
 
 
—

 
 
 
—

 
 
1,397

Mortgage revenue bonds
 
3,859

 
 
 
177

 
 
 
(8
)
 
 
 
(5
)
 
 
4,023

Other mortgage-related securities
 
2,626

 
 
 
183

 
 
 
(23
)
 
 
 
(113
)
 
 
2,673

Total
 
$
27,413

 
 
 
$
3,448

 
 
 
$
(55
)
 
 
 
$
(152
)
 
 
$
30,654

__________
(1) 
Amortized cost consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments as well as net other-than-temporary impairments (“OTTI”) recognized in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive income.
(2) 
Represents the noncredit component of OTTI losses recorded in “Accumulated other comprehensive income” in our condensed consolidated balance sheets, as well as cumulative changes in fair value of securities for which we previously recognized the credit component of OTTI.
(3) 
Represents the gross unrealized losses on securities for which we have not recognized OTTI.
The following tables display additional information regarding gross unrealized losses and fair value by major security type for AFS securities in an unrealized loss position.
 
As of June 30, 2015
 
Less Than 12 Consecutive Months
 
12 Consecutive Months or Longer
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
(Dollars in millions)
Fannie Mae
 
$
(5
)
 
 
$
332

 
 
$
(17
)
 
 
$
557

Alt-A private-label securities
 
—

 
 
33

 
 
(3
)
 
 
29

Subprime private-label securities
 
(1
)
 
 
53

 
 
(5
)
 
 
102

Mortgage revenue bonds
 
(14
)
 
 
488

 
 
(4
)
 
 
20

Total
 
$
(20
)
 
 
$
906

 
 
$
(29
)
 
 
$
708

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
Less Than 12 Consecutive Months
 
12 Consecutive Months or Longer
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
(Dollars in millions)
Fannie Mae
 
$
—

 
 
$
113

 
 
$
(19
)
 
 
$
627

Alt-A private-label securities
 
(2
)
 
 
171

 
 
(13
)
 
 
112

Subprime private-label securities
 
—

 
 
—

 
 
(24
)
 
 
460

Mortgage revenue bonds
 
(2
)
 
 
47

 
 
(11
)
 
 
155

Other mortgage-related securities
 
—

 
 
8

 
 
(136
)
 
 
1,021

Total
 
$
(4
)
 
 
$
339

 
 
$
(203
)
 
 
$
2,375

Other-Than-Temporary Impairments
We recognized $12 million and $23 million of OTTI for the three months ended June 30, 2015 and 2014, respectively, and $182 million and $74 million of OTTI for the six months ended June 30, 2015 and 2014, respectively, which are included in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive income. During the first six months ended June 30, 2015, OTTI was primarily driven by a change in our intent to sell certain securities. As a result, we recognized the entire difference between the amortized cost basis of these securities and their fair value as OTTI.
The following table displays the modeled attributes, including default rates and severities, which were used to determine as of June 30, 2015 whether our senior interests in certain non-agency mortgage-related securities (including those we intend to sell) will experience a cash shortfall. An estimate of voluntary prepayment rates is also an input to the present value of expected losses.
 
As of June 30, 2015
 
 
 
Alt-A
 
Subprime
 
Option ARM
 
Fixed Rate
 
Variable Rate
 
Hybrid Rate
 
(Dollars in millions)
 
Vintage Year
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2004 & Prior:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid principal balance
$
99

 
 
$
12

 
 
 
$
711

 
 
 
$
109

 
 
 
$
268

 
Weighted average collateral default(1)
25.1
%
 
 
22.8
%
 
 
 
7.8
%
 
 
 
15.8
%
 
 
 
10.6
%
 
Weighted average collateral severities(2)
53.5

 
 
57.2

 
 
 
42.6

 
 
 
35.9

 
 
 
29.9

 
Weighted average voluntary prepayment rates(3)
8.0

 
 
10.7

 
 
 
13.5

 
 
 
9.5

 
 
 
10.7

 
Average credit enhancement(4)
38.8

 
 
16.6

 
 
 
11.0

 
 
 
25.4

 
 
 
10.6

 
2005:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid principal balance
$
7

 
 
$
197

 
 
 
$
312

 
 
 
$
124

 
 
 
$
324

 
Weighted average collateral default(1)
43.0
%
 
 
29.3
%
 
 
 
12.2
%
 
 
 
25.0
%
 
 
 
14.4
%
 
Weighted average collateral severities(2)
61.8

 
 
53.0

 
 
 
47.9

 
 
 
52.9

 
 
 
37.1

 
Weighted average voluntary prepayment rates(3)
4.1

 
 
7.0

 
 
 
11.9

 
 
 
8.6

 
 
 
10.1

 
Average credit enhancement(4)
57.2

 
 
8.6

 
 
 
1.3

 
 
 
29.0

 
 
 
8.7

 
2006:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid principal balance
$
4,765

 
 
$
307

 
 
 
$
352

 
 
 
$
637

 
 
 
$
705

 
Weighted average collateral default(1)
44.8
%
 
 
34.2
%
 
 
 
19.7
%
 
 
 
22.6
%
 
 
 
8.6
%
 
Weighted average collateral severities(2)
61.9

 
 
32.5

 
 
 
50.7

 
 
 
35.7

 
 
 
34.2

 
Weighted average voluntary prepayment rates(3)
2.6

 
 
6.6

 
 
 
8.0

 
 
 
8.0

 
 
 
12.8

 
Average credit enhancement(4)
16.8

 
 
—

 
 
 
—

 
 
 
1.5

 
 
 
—

 
2007 & After:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid principal balance
$
193

 
 
$
—

 
 
 
$
—

 
 
 
$
—

 
 
 
$
—

 
Weighted average collateral default(1)
40.1
%
 
 
N/A

 
 
 
N/A

 
 
 
N/A

 
 
 
N/A

 
Weighted average collateral severities(2)
12.4

 
 
N/A

 
 
 
N/A

 
 
 
N/A

 
 
 
N/A

 
Weighted average voluntary prepayment rates(3)
1.6

 
 
N/A

 
 
 
N/A

 
 
 
N/A

 
 
 
N/A

 
Average credit enhancement(4)
27.7

 
 
N/A

 
 
 
N/A

 
 
 
N/A

 
 
 
N/A

 
Total:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid principal balance
$
5,064

 
 
$
516

 
 
 
$
1,375

 
 
 
$
870

 
 
 
$
1,297

 
Weighted average collateral default(1)
44.2
%
 
 
32.1
%
 
 
 
11.8
%
 
 
 
22.1
%
 
 
 
10.4
%
 
Weighted average collateral severities(2)
60.1

 
 
40.0

 
 
 
47.3

 
 
 
38.5

 
 
 
34.3

 
Weighted average voluntary prepayment rates(3)
2.6

 
 
6.9

 
 
 
11.7

 
 
 
8.3

 
 
 
11.7

 
Average credit enhancement(4)
17.7

 
 
3.7

 
 
 
6.0

 
 
 
8.4

 
 
 
4.4

 
__________

(1) 
The expected remaining cumulative default rate of the collateral pool backing the securities, as a percentage of the current collateral unpaid principal balance, weighted by security unpaid principal balance.
(2) 
The expected remaining loss given default of the collateral pool backing the securities, calculated as the ratio of remaining cumulative loss divided by cumulative defaults, weighted by security unpaid principal balance.
(3) 
The average monthly voluntary prepayment rate, weighted by security unpaid principal balance.
(4) 
The average percent current credit enhancement provided by subordination of other securities. Excludes excess interest projections and monoline bond insurance.
The following table displays activity related to the unrealized credit loss component on debt securities held by us and recognized in our condensed consolidated statements of operations and comprehensive income.
 
For the Three Months Ended
 
For the Six Months Ended
  
June 30,
 
June 30,
  
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Balance, beginning of period
$
2,744

 
$
7,096

 
$
5,260

 
$
7,904

Additions for the credit component on debt securities for which OTTI was not previously recognized
—

 
—

 
—

 
1

Additions for the credit component on debt securities for which OTTI was previously recognized
—

 
8

 
4

 
47

Reductions for securities no longer in portfolio at period end
(72
)
 
(384
)
 
(1,165
)
 
(437
)
Reductions for securities which we intend to sell or it is more likely than not that we will be required to sell before recovery of amortized cost basis
(70
)
 
(755
)
 
(1,439
)
 
(1,453
)
Reductions for amortization resulting from changes in cash flows expected to be collected over the remaining life of the securities
(45
)
 
(94
)
 
(103
)
 
(191
)
Balance, end of period
$
2,557

 
$
5,871

 
$
2,557

 
$
5,871

Maturity Information
The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.
  
As of June 30, 2015
 
Total Amortized Cost
 
Total
Fair
Value
 
One Year or Less
 
After One Year Through Five Years
 
After Five Years Through Ten Years
 
After Ten Years
 
 
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
  
(Dollars in millions)
Fannie Mae
 
$
4,376

 
 
$
4,638

 
 
$
—

 
 
$
—

 
 
$
220

 
 
$
228

 
 
$
190

 
 
$
205

 
 
$
3,966

 
 
$
4,205

Freddie Mac
 
4,565

 
 
4,947

 
 
1

 
 
1

 
 
269

 
 
282

 
 
370

 
 
404

 
 
3,925

 
 
4,260

Ginnie Mae
 
380

 
 
435

 
 
—

 
 
—

 
 
1

 
 
1

 
 
56

 
 
63

 
 
323

 
 
371

Alt-A private-label securities
 
2,877

 
 
3,630

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
2,877

 
 
3,630

Subprime private-label securities
 
2,932

 
 
3,837

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
2,932

 
 
3,837

CMBS
 
1,301

 
 
1,344

 
 
187

 
 
190

 
 
1,043

 
 
1,082

 
 
—

 
 
—

 
 
71

 
 
72

Mortgage revenue bonds
 
3,032

 
 
3,171

 
 
13

 
 
13

 
 
100

 
 
101

 
 
250

 
 
253

 
 
2,669

 
 
2,804

Other mortgage-related securities
 
2,028

 
 
2,159

 
 
—

 
 
—

 
 
—

 
 
—

 
 
33

 
 
36

 
 
1,995

 
 
2,123

Total
 
$
21,491

 
 
$
24,161

 
 
$
201

 
 
$
204

 
 
$
1,633

 
 
$
1,694

 
 
$
899

 
 
$
961

 
 
$
18,758

 
 
$
21,302