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Investments in Securities
 12 Months Ended
Dec. 31, 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 consolidated statements of operations and comprehensive income. The following table displays our investments in trading securities.
 
As of December 31,
 
2015
 
2014
 
(Dollars in millions)
Mortgage-related securities:
 
 
 
Fannie Mae
$
4,813

 
$
4,940

Freddie Mac
1,314

 
1,369

Ginnie Mae
426

 
166

Alt-A private-label securities
436

 
920

Subprime private-label securities
644

 
1,307

Commercial mortgage-backed securities (“CMBS”)
2,341

 
2,515

Mortgage revenue bonds
449

 
722

Other mortgage-related securities
—

 
99

Total mortgage-related securities
10,423

 
12,038

U.S. Treasury securities
29,485

 
19,466

Total trading securities
$
39,908

 
$
31,504

The following table displays information about our net trading gains and losses.
 
For the Year Ended December 31,
 
2015
 
2014
 
2013
 
 
(Dollars in millions)
Net trading gains (losses)
 
$
(368
)
 
 
$
485

 
 
$
260

Net trading gains (losses) recognized in the period related to securities still held at period end
 
(453
)
 
 
420

 
 
297

Available-for-Sale Securities
We record AFS securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other comprehensive income (loss)” and we recognize realized gains and losses from the sale of AFS securities in “Investment gains, net” in our 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 Year Ended December 31,
 
2015
 
2014
 
2013
 
(Dollars in millions)
Gross realized gains
$
1,066

 
$
569

 
$
1,632

Gross realized losses
70

 
5

 
979

Total proceeds (excludes initial sale of securities from new portfolio securitizations)
8,023

 
3,265

 
15,157

The following tables display the amortized cost, gross unrealized gains and losses, and fair value by major security type for AFS securities in our retained mortgage portfolio.
 
 
As of December 31, 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
 
$
4,008

 
 
 
$
243

 
 
 
$
—

 
 
 
$
(30
)
 
 
$
4,221

Freddie Mac
 
4,000

 
 
 
299

 
 
 
—

 
 
 
—

 
 
4,299

Ginnie Mae
 
343

 
 
 
48

 
 
 
—

 
 
 
—

 
 
391

Alt-A private-label securities
 
2,029

 
 
 
653

 
 
 
(4
)
 
 
 
—

 
 
2,678

Subprime private-label securities
 
2,526

 
 
 
759

 
 
 
—

 
 
 
(4
)
 
 
3,281

CMBS
 
1,235

 
 
 
20

 
 
 
—

 
 
 
—

 
 
1,255

Mortgage revenue bonds
 
2,639

 
 
 
99

 
 
 
(29
)
 
 
 
(8
)
 
 
2,701

Other mortgage-related securities
 
1,361

 
 
 
49

 
 
 
(6
)
 
 
 
—

 
 
1,404

Total
 
$
18,141

 
 
 
$
2,170

 
 
 
$
(39
)
 
 
 
$
(42
)
 
 
$
20,230

 
 
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

s
__________
(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 consolidated statements of operations and comprehensive income.
(2) 
Represents the noncredit component of OTTI losses recorded in “Accumulated other comprehensive income” in our 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 December 31, 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
 
$
(8
)
 
 
$
659

 
 
$
(22
)
 
 
$
491

Alt-A private-label securities
 
(1
)
 
 
26

 
 
(3
)
 
 
54

Subprime private-label securities
 
—

 
 
12

 
 
(4
)
 
 
91

Mortgage revenue bonds
 
(35
)
 
 
631

 
 
(2
)
 
 
22

Other mortgage-related securities
 
(6
)
 
 
224

 
 
—

 
 
—

   Total
 
$
(50
)
 
 
$
1,552

 
 
$
(31
)
 
 
$
658

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
For AFS securities, OTTI is considered to have occurred when the fair value of a debt security is below its amortized cost basis and we intend to sell or it is more likely than not that we will be required to sell the security before recovery. Additionally, OTTI is considered to have occurred if we do not expect to recover the entire amortized cost basis of a debt security even if we do not intend to sell the security or it is not more likely than not we will be required to sell the security before recovery.
We recognized $196 million, $90 million and $64 million of OTTI for the years ended December 31, 2015, 2014 and 2013, respectively, which are included in “Investment gains, net” in our consolidated statements of operations and comprehensive income. OTTI recognized for the year ended December 31, 2015 increased compared with the year ended December 31, 2014 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 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 December 31, 2015
 
 
 
Alt-A
 
Subprime
 
Option ARM
 
Fixed Rate
 
Variable Rate
 
Hybrid Rate
 
(Dollars in millions)
 
Unpaid principal balance
$
4,367

 
 
$
434

 
 
 
$
817

 
 
 
$
805

 
 
 
$
987

 
Weighted average collateral default(1)
41.2
%
 
 
28.2
%
 
 
 
12.0
%
 
 
 
20.4
%
 
 
 
8.6
%
 
Weighted average collateral severities(2)
58.8

 
 
34.4

 
 
 
45.0

 
 
 
37.3

 
 
 
33.1

 
Weighted average voluntary prepayment rates(3)
2.7

 
 
7.5

 
 
 
11.6

 
 
 
8.7

 
 
 
12.5

 
Average credit enhancement(4)
18.2

 
 
3.6

 
 
 
7.2

 
 
 
8.7

 
 
 
4.3

 
__________

(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 consolidated statements of operations and comprehensive income.
 
For the Year Ended
 
December 31,
 
2015
 
2014
 
(Dollars in millions)
Balance, beginning of period
$
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

 
58

Reductions for securities no longer in portfolio at period end
(1,171
)
 
(904
)
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
(1,492
)
 
(1,453
)
Reductions for amortization resulting from changes in cash flows expected to be collected over the remaining life of the securities
(184
)
 
(346
)
Balance, end of period
$
2,421

 
$
5,260

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 December 31, 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
 
$
4,008

 
 
$
4,221

 
 
$
—

 
 
$
—

 
 
$
160

 
 
$
164

 
 
$
114

 
 
$
123

 
 
$
3,734

 
 
$
3,934

Freddie Mac
 
4,000

 
 
4,299

 
 
1

 
 
1

 
 
185

 
 
192

 
 
310

 
 
337

 
 
3,504

 
 
3,769

Ginnie Mae
 
343

 
 
391

 
 
—

 
 
—

 
 
1

 
 
1

 
 
61

 
 
68

 
 
281

 
 
322

Alt-A private-label securities
 
2,029

 
 
2,678

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
2,029

 
 
2,678

Subprime private-label securities
 
2,526

 
 
3,281

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
2,526

 
 
3,281

CMBS
 
1,235

 
 
1,255

 
 
278

 
 
280

 
 
899

 
 
917

 
 
—

 
 
—

 
 
58

 
 
58

Mortgage revenue bonds
 
2,639

 
 
2,701

 
 
11

 
 
11

 
 
112

 
 
113

 
 
202

 
 
205

 
 
2,314

 
 
2,372

Other mortgage-related securities
 
1,361

 
 
1,404

 
 
—

 
 
—

 
 
—

 
 
—

 
 
29

 
 
30

 
 
1,332

 
 
1,374

Total
 
$
18,141

 
 
$
20,230

 
 
$
290

 
 
$
292

 
 
$
1,357

 
 
$
1,387

 
 
$
716

 
 
$
763

 
 
$
15,778

 
 
$
17,788

Weighted average yield(1)
 
4.94
%
 
 
 
 
 
4.36
%
 
 
 
 
 
4.51
%
 
 
 
 
 
6.28
%
 
 
 
 
 
4.93
%
 
 
 
__________

(1) 
Yields are determined by dividing interest income (including amortization and accretion of premiums, discounts and other cost basis adjustments) by amortized cost balances as of year-end. Yields on tax-exempt obligations have been computed on a tax equivalent basis.