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Mortgage Loans
3 Months Ended
Mar. 31, 2016
Mortgage Loans on Real Estate [Abstract]  
Mortgage Loans
 Mortgage Loans
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 held for investment (“HFI”) or held for sale (“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 define the recorded investment of HFI loans as 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, 2016
 
December 31, 2015
 
Of Fannie Mae
 
Of Consolidated Trusts
 
Total
 
Of Fannie Mae
 
Of Consolidated Trusts
 
Total
 
(Dollars in millions)
Single-family
 
$
233,244

 
 
 
$
2,573,346

 
 
 
$
2,806,590

 
 
 
$
238,237

 
 
 
$
2,574,174

 
 
 
$
2,812,411

 
Multifamily
 
12,751

 
 
 
193,228

 
 
 
205,979

 
 
 
13,099

 
 
 
185,243

 
 
 
198,342

 
Total unpaid principal balance of mortgage loans
 
245,995

 
 
 
2,766,574

 
 
 
3,012,569

 
 
 
251,336

 
 
 
2,759,417

 
 
 
3,010,753

 
Cost basis and fair value adjustments, net
 
(12,686
)
 
 
 
50,883

 
 
 
38,197

 
 
 
(12,939
)
 
 
 
49,781

 
 
 
36,842

 
Allowance for loan losses for loans held for investment
 
(24,557
)
 
 
 
(1,262
)
 
 
 
(25,819
)
 
 
 
(26,510
)
 
 
 
(1,441
)
 
 
 
(27,951
)
 
Total mortgage loans
 
$
208,752

 
 
 
$
2,816,195

 
 
 
$
3,024,947

 
 
 
$
211,887

 
 
 
$
2,807,757

 
 
 
$
3,019,644

 

During the three months ended March 31, 2016 and 2015, we redesignated loans with a carrying value of $596 million and $330 million, respectively, from HFI to HFS. We sold loans with an unpaid principal balance of $1.1 billion during the three months ended March 31, 2016. There were no sales of loans during the three months ended March 31, 2015.
The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process was $24.3 billion and $25.6 billion as of March 31, 2016 and December 31, 2015, respectively. 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 Loans
We discontinue accruing interest on loans when we believe collectibility 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. Interest previously accrued but not collected is reversed through interest income at the date a loan is placed on nonaccrual status. We return a non-modified single-family loan to accrual status at the point that the borrower brings the loan current. We return a 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 the modification is made permanent. We place a multifamily loan on nonaccrual status when the loan becomes three months or more past due according to its contractual terms or is deemed to be individually impaired, unless the loan is well secured such that collectibility of principal and accrued interest is reasonably assured. We return a multifamily loan to accrual status when the borrower cures the delinquency of the loan or we otherwise determine that the loan is well secured such that collectibility 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, excluding loans for which we have elected the fair value option.
  
As of March 31, 2016
 
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
 
$
24,913

 
 
 
$
6,564

 
 
 
$
24,390

 
 
 
$
55,867

 
 
$
2,608,768

 
$
2,664,635

 
 
$
42

 
 
$
35,108

Government(2)
 
51

 
 
 
20

 
 
 
273

 
 
 
344

 
 
39,731

 
40,075

 
 
273

 
 

Alt-A
 
3,488

 
 
 
1,083

 
 
 
5,559

 
 
 
10,130

 
 
82,596

 
92,726

 
 
6

 
 
7,359

Other
 
1,291

 
 
 
412

 
 
 
1,930

 
 
 
3,633

 
 
31,192

 
34,825

 
 
3

 
 
2,604

Total single-family
 
29,743

 
 
 
8,079

 
 
 
32,152

 
 
 
69,974

 
 
2,762,287

 
2,832,261

 
 
324

 
 
45,071

Multifamily(3)
 
41

 
 
 
N/A

 
 
 
125

 
 
 
166

 
 
207,790

 
207,956

 
 

 
 
547

Total
 
$
29,784

 
 
 
$
8,079

 
 
 
$
32,277

 
 
 
$
70,140

 
 
$
2,970,077

 
$
3,040,217

 
 
$
324

 
 
$
45,618

  
As of December 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
 
$
29,154

 
 
 
$
7,937

 
 
 
$
26,346

 
 
 
$
63,437

 
 
$
2,598,756

 
$
2,662,193

 
 
$
46

 
 
$
34,216

Government(2)
 
58

 
 
 
24

 
 
 
291

 
 
 
373

 
 
40,461

 
40,834

 
 
291

 
 

Alt-A
 
4,085

 
 
 
1,272

 
 
 
6,141

 
 
 
11,498

 
 
84,603

 
96,101

 
 
6

 
 
7,407

Other
 
1,494

 
 
 
484

 
 
 
2,160

 
 
 
4,138

 
 
32,272

 
36,410

 
 
6

 
 
2,632

Total single-family
 
34,791

 
 
 
9,717

 
 
 
34,938

 
 
 
79,446

 
 
2,756,092

 
2,835,538

 
 
349

 
 
44,255

Multifamily(3)
 
23

 
 
 
N/A

 
 
 
123

 
 
 
146

 
 
200,028

 
200,174

 
 

 
 
591

Total
 
$
34,814

 
 
 
$
9,717

 
 
 
$
35,061

 
 
 
$
79,592

 
 
$
2,956,120

 
$
3,035,712

 
 
$
349

 
 
$
44,846

__________
(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, excluding loans for which we have elected the fair value option.
  
As of
  
March 31, 2016(1)
 
December 31, 2015(1)
  
Primary
 
Alt-A
 
Other
 
Primary
 
Alt-A
 
Other
  
(Dollars in millions) 
Estimated mark-to-market LTV ratio:(2)
  
 
 
 
 
  
 
 
  
 
 
 
 
  
 
Less than or equal to 80% 
$
2,216,911

 
$
57,304

 
 
$
20,615

 
 
$
2,228,533

 
$
59,000

 
 
$
21,274

 
Greater than 80%  and less than or equal to 90%
255,504

 
11,966

 
 
4,619

 
 
250,373

 
12,588

 
 
4,936

 
Greater than 90%  and less than or equal to 100%
133,225

 
8,965

 
 
3,602

 
 
122,939

 
9,345

 
 
3,861

 
Greater than 100%  and less than or equal to 110%
27,604

 
5,984

 
 
2,478

 
 
27,875

 
6,231

 
 
2,596

 
Greater than 110%  and less than or equal to 120%
14,175

 
3,633

 
 
1,512

 
 
14,625

 
3,730

 
 
1,592

 
Greater than 120%  and less than or equal to 125%
4,361

 
1,163

 
 
484

 
 
4,520

 
1,260

 
 
545

 
Greater than 125% 
12,855

 
3,711

 
 
1,515

 
 
13,328

 
3,947

 
 
1,606

 
Total 
$
2,664,635

 
$
92,726

 
 
$
34,825

 
 
$
2,662,193

 
$
96,101

 
 
$
36,410

 
__________
(1) 
Excludes $40.1 billion and $40.8 billion as of March 31, 2016 and December 31, 2015, 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 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, excluding loans for which we have elected the fair value option.
  
As of
  
March 31,
 
December 31,
 
2016
 
2015
  
(Dollars in millions) 
Credit risk profile by internally assigned grade:(1)
 
  
 
 
 
 
 
Pass
 
$
202,213

 
 
 
$
194,132

 
Special Mention
 
3,145

 
 
 
3,202

 
Substandard
 
2,597

 
 
 
2,833

 
Doubtful
 
1

 
 
 
7

 
Total
 
$
207,956

 
 
 
$
200,174

 
_________
(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; excluding loans classified as HFS. The following tables display the total unpaid principal balance, recorded investment, related allowance, average recorded investment and interest income recognized for individually impaired loans.
 
As of
 
March 31, 2016
 
December 31, 2015
 
Unpaid Principal Balance
 
Total Recorded Investment
 
Related Allowance for Loan Losses
 
Unpaid Principal Balance
 
Total Recorded Investment
 
Related Allowance for Loan Losses
 
(Dollars in millions)
Individually impaired loans:
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
With related allowance recorded:
 
 
 
 
 
  

 
 
 
 
 
 
 
 
 
 
  

 
 
 
 
 
Single-family:
 
 
 
 
 
  

 
 
 
 
 
 
 
 
 
 
  

 
 
 
 
 
Primary
 
$
113,863

 
 
 
$
108,108

 
 
 
$
15,657

 
 
$
116,477

 
 
 
$
110,502

 
 
 
$
16,745

 
Government
 
316

 
 
 
320

 
 
 
59

 
 
322

 
 
 
327

 
 
 
59

 
Alt-A
 
30,969

 
 
 
28,261

 
 
 
5,768

 
 
31,888

 
 
 
29,103

 
 
 
6,217

 
Other
 
12,503

 
 
 
11,821

 
 
 
2,239

 
 
12,893

 
 
 
12,179

 
 
 
2,416

 
Total single-family
 
157,651

 
 
 
148,510

 
 
 
23,723

 
 
161,580

 
 
 
152,111

 
 
 
25,437

 
Multifamily
 
575

 
 
 
577

 
 
 
71

 
 
650

 
 
 
654

 
 
 
80

 
Total individually impaired loans with related allowance recorded
 
158,226

 
 
 
149,087

 
 
 
23,794

 
 
162,230

 
 
 
152,765

 
 
 
25,517

 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
With no related allowance recorded:(1)
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Single-family:
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Primary
 
16,410

 
 
 
15,214

 
 
 

 
 
15,891

 
 
 
14,725

 
 
 

 
Government
 
63

 
 
 
59

 
 
 

 
 
58

 
 
 
54

 
 
 

 
Alt-A
 
3,939

 
 
 
3,376

 
 
 

 
 
3,721

 
 
 
3,169

 
 
 

 
Other
 
1,252

 
 
 
1,125

 
 
 

 
 
1,222

 
 
 
1,102

 
 
 

 
Total single-family
 
21,664

 
 
 
19,774

 
 
 

 
 
20,892

 
 
 
19,050

 
 
 

 
Multifamily
 
344

 
 
 
345

 
 
 

 
 
353

 
 
 
354

 
 
 

 
Total individually impaired loans with no related allowance recorded
 
22,008

 
 
 
20,119

 
 
 

 
 
21,245

 
 
 
19,404

 
 
 

 
Total individually impaired loans(2)
 
$
180,234

 
 
 
$
169,206

 
 
 
$
23,794

 
 
$
183,475

 
 
 
$
172,169

 
 
 
$
25,517

 




 
For the Three Months Ended March 31,
 
2016
 
2015
 
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
 
$
109,318

 
 
 
$
1,021

 
 
 
$
104

 
 
 
$
117,721

 
 
 
$
1,034

 
 
 
$
104

 
Government
 
323

 
 
 
3

 
 
 

 
 
 
282

 
 
 
3

 
 
 

 
Alt-A
 
28,665

 
 
 
253

 
 
 
19

 
 
 
31,491

 
 
 
251

 
 
 
17

 
Other
 
12,013

 
 
 
92

 
 
 
8

 
 
 
13,416

 
 
 
94

 
 
 
7

 
Total single-family
 
150,319

 
 
 
1,369

 
 
 
131

 
 
 
162,910

 
 
 
1,382

 
 
 
128

 
Multifamily
 
616

 
 
 
5

 
 
 

 
 
 
1,229

 
 
 
3

 
 
 

 
Total individually impaired loans with related allowance recorded
 
150,935

 
 
 
1,374

 
 
 
131

 
 
 
164,139

 
 
 
1,385

 
 
 
128

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
With no related allowance recorded:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Single-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Primary
 
15,241

 
 
 
268

 
 
 
20

 
 
 
16,249

 
 
 
247

 
 
 
41

 
Government
 
57

 
 
 
1

 
 
 

 
 
 
59

 
 
 
1

 
 
 

 
Alt-A
 
3,367

 
 
 
62

 
 
 
3

 
 
 
3,736

 
 
 
44

 
 
 
7

 
Other
 
1,135

 
 
 
22

 
 
 
1

 
 
 
1,301

 
 
 
18

 
 
 
2

 
Total single-family
 
19,800

 
 
 
353

 
 
 
24

 
 
 
21,345

 
 
 
310

 
 
 
50

 
Multifamily
 
350

 
 
 
3

 
 
 

 
 
 
541

 
 
 
1

 
 
 

 
Total individually impaired loans with no related allowance recorded
 
20,150

 
 
 
356

 
 
 
24

 
 
 
21,886

 
 
 
311

 
 
 
50

 
Total individually impaired loans
 
$
171,085

 
 
 
$
1,730

 
 
 
$
155

 
 
 
$
186,025

 
 
 
$
1,696

 
 
 
$
178

 
__________
(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 $167.5 billion and $170.3 billion as of March 31, 2016 and December 31, 2015, respectively. Includes multifamily loans restructured in a TDR with a recorded investment of $411 million and $451 million as of March 31, 2016 and December 31, 2015, respectively.
(3) 
Total single-family interest income recognized of $1.7 billion for the three months ended March 31, 2016 consists of $1.4 billion of contractual interest and $310 million of effective yield adjustments. 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.
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, 2016 and 2015, the average term extension of a single-family modified loan was 157 months and 161 months, respectively, and the average interest rate reduction was 0.73 and 0.77 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,
 
2016
 
2015
 
Number of Loans
 
Recorded Investment
 
Number of Loans
 
Recorded Investment
 
(Dollars in millions)
Single-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary
 
17,190

 
 
 
$
2,332

 
 
 
21,407

 
 
 
$
2,945

 
Government
 
54

 
 
 
6

 
 
 
74

 
 
 
8

 
Alt-A
 
1,911

 
 
 
270

 
 
 
2,789

 
 
 
438

 
Other
 
399

 
 
 
72

 
 
 
590

 
 
 
108

 
Total single-family
 
19,554

 
 
 
2,680

 
 
 
24,860

 
 
 
3,499

 
Multifamily
 

 
 
 

 
 
 
3

 
 
 
5

 
       Total TDRs
 
19,554

 
 
 
$
2,680

 
 
 
24,863

 
 
 
$
3,504

 
The following table displays the number of loans and our recorded investment in these loans at the time of payment default 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,
 
2016
 
2015
 
Number of Loans
 
Recorded Investment
 
Number of Loans
 
Recorded Investment
 
(Dollars in millions)
Single-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary
 
5,461

 
 
 
$
802

 
 
 
6,723

 
 
 
$
1,003

 
Government
 
15

 
 
 
2

 
 
 
20

 
 
 
3

 
Alt-A
 
852

 
 
 
144

 
 
 
1,153

 
 
 
203

 
Other
 
243

 
 
 
49

 
 
 
304

 
 
 
66

 
Total single-family
 
6,571

 
 
 
997

 
 
 
8,200

 
 
 
1,275

 
Multifamily
 

 
 
 

 
 
 
2

 
 
 
4

 
       Total TDRs that subsequently defaulted
 
6,571

 
 
 
$
997

 
 
 
8,202

 
 
 
$
1,279