Consolidations and Transfers of Financial Assets

3 Months Ended

Mar. 31, 2016

Consolidations and Transfers of Financial Assets [Abstract]

Consolidations and Transfers of Financial Assets

We have interests in various entities that are considered to be VIEs. The primary types of entities are securitization trusts guaranteed by us via lender swap and portfolio securitization transactions and mortgage-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 March 31, 2016, we consolidated certain VIEs that were not consolidated as of December 31, 2015. As a result of consolidating these entities, which had combined total assets of $135 million in unpaid principal balance as of March 31, 2016, we derecognized our investment in these entities and recognized the assets and liabilities of the consolidated entities at fair value. As of March 31, 2016, we also deconsolidated certain VIEs that were consolidated as of December 31, 2015. As a result of deconsolidating these entities, which had combined total assets of $3.0 billion in unpaid principal balance as of December 31, 2015, 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
	March 31, 2016				December 31, 2015
	(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated balance sheets related to mortgage-backed trusts:
Assets:
Trading securities:
Fannie Mae		$	5,270			$	4,704
Non-Fannie Mae		3,816				5,596
Total trading securities		9,086				10,300
Available-for-sale securities:
Fannie Mae		3,833				3,936
Non-Fannie Mae		11,829				14,644
Total available-for-sale securities		15,662				18,580
Other assets		84				100
Other liabilities		(691		)		(827		)
Net carrying amount		$	24,141			$	28,153

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 maximum exposure to loss related to unconsolidated mortgage-backed trusts was approximately $30 billion and $34 billion as of March 31, 2016 and December 31, 2015, respectively. The total assets of our unconsolidated mortgage-backed trusts were approximately $180 billion and $220 billion as of March 31, 2016 and December 31, 2015, respectively.

The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of low-income housing tax credit investments, community investments and other entities, was $133 million and its related carrying value was $100 million as of March 31, 2016. As of December 31, 2015, the maximum exposure to loss was $12 million and its related carrying value was a deficit of $24 million. The total assets of these limited partnership investments were $5.1 billion and $4.9 billion as of March 31, 2016 and December 31, 2015, respectively.

The unpaid principal balance of our multifamily loan portfolio was $206.0 billion as of March 31, 2016. As our lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” and “Note 6, Financial Guarantees” with respect to this population are consistent with the FASB’s stated objectives for the disclosures related to unconsolidated VIEs.

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 March 31, 2016 and 2015, the unpaid principal balance of portfolio securitizations was $48.3 billion and $48.9 billion, respectively.

We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multi-class portfolio securitization trusts. As of March 31, 2016, the unpaid principal balance of retained interests was $5.4 billion and its related fair value was $7.3 billion. The unpaid principal balance of retained interests was $5.5 billion and its related fair value was $6.8 billion as of December 31, 2015. For the three months ended March 31, 2016 and 2015, the principal and interest received on retained interests was $308 million and $350 million, 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 $1.5 billion and $1.6 billion as of March 31, 2016 and December 31, 2015, respectively. For information on our on-balance sheet mortgage loans, see “Note 3, Mortgage Loans.”