We maintain an allowance for loan losses for HFI loans held by Fannie Mae and loans backing Fannie Mae MBS issued from consolidated trusts. When calculating our allowance for loan losses, we consider our net recorded investment in the loan at the balance sheet date, which includes unpaid principal balance, net of amortized premiums and discounts, and other cost basis adjustments. We record charge-offs as a reduction to the allowance for loan losses when losses are confirmed through the receipt of assets in full satisfaction of a loan, such as the underlying collateral upon foreclosure or cash upon completion of a short sale. Additionally, we record charge-offs as a reduction to our allowance for loan losses when a loan is determined to be uncollectible or upon the redesignation of nonperforming loans from HFI to HFS.

We aggregate single-family HFI loans that are not individually impaired based on similar risk characteristics for purposes of estimating incurred credit losses and establishing a collective single-family loss reserve using an econometric model that derives an overall loss reserve estimate. We base our allowance methodology on historical events and trends, such as loss severity (in event of default), default rates, and recoveries from mortgage insurance contracts and other credit enhancements. In addition, management performs a review of the observable data used in its estimate to ensure it is representative of prevailing economic conditions and other events existing as of the balance sheet date.

Individually impaired single-family loans currently include those restructured in a TDR and acquired credit-impaired loans. When a loan has been restructured, we measure impairment using a cash flow analysis discounted at the loan’s original effective interest rate. However, if we expect to recover our recorded investment in an individually impaired loan through probable foreclosure of the underlying collateral, we measure impairment based on the fair value of the collateral, reduced by estimated disposal costs and adjusted for estimated proceeds from mortgage, flood, or hazard insurance and other credit enhancements.

We identify multifamily loans for evaluation for impairment through a credit risk assessment process. If we determine that a multifamily loan is individually impaired, we generally measure impairment on that loan based on the fair value of the underlying collateral less estimated costs to sell the property. We establish a collective loss reserve for all loans in our multifamily guaranty book of business that are not individually impaired using an internal model that applies loss factors to loans in similar risk categories. Our loss factors are developed based on our historical default and loss severity experience.

The following tables display changes in single-family, multifamily and total allowance for loan losses.



	For the Three Months Ended June 30,
	2016										2015
	Of Fannie Mae			Of Consolidated Trusts				Total			Of Fannie Mae			Of Consolidated Trusts				Total
	(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance	$	24,490			$	1,107		$	25,597		$	29,759			$	1,755		$	31,514
Provision (benefit) for loan losses⁽¹⁾	(1,292		)		(40		)	(1,332		)	1,268				(227		)	1,041
Charge-offs⁽²⁾⁽³⁾	(789		)		(29		)	(818		)	(2,032		)		(23		)	(2,055		)
Recoveries	114				1			115			257				4			261
Transfers⁽⁴⁾	191				(191		)	—			256				(256		)	—
Other⁽⁵⁾	22				—			22			116				(1		)	115
Ending balance	$	22,736			$	848		$	23,584		$	29,624			$	1,252		$	30,876
Multifamily allowance for loan losses:
Beginning balance	$	67			$	155		$	222		$	114			$	192		$	306
Provision (benefit) for loan losses⁽¹⁾	(8		)		4			(4		)	6				(18		)	(12		)
Charge-offs⁽²⁾⁽³⁾	(3		)		—			(3		)	(19		)		—			(19		)
Transfers⁽⁴⁾	1				(1		)	—			—				—			—
Other⁽⁵⁾	—				—			—			(1		)		—			(1		)
Ending balance	$	57			$	158		$	215		$	100			$	174		$	274
Total allowance for loan losses:
Beginning balance	$	24,557			$	1,262		$	25,819		$	29,873			$	1,947		$	31,820
Provision (benefit) for loan losses⁽¹⁾	(1,300		)		(36		)	(1,336		)	1,274				(245		)	1,029
Charge-offs⁽²⁾⁽³⁾	(792		)		(29		)	(821		)	(2,051		)		(23		)	(2,074		)
Recoveries	114				1			115			257				4			261
Transfers⁽⁴⁾	192				(192		)	—			256				(256		)	—
Other⁽⁵⁾	22				—			22			115				(1		)	114
Ending balance	$	22,793			$	1,006		$	23,799		$	29,724			$	1,426		$	31,150



	For the Six Months Ended June 30,
	2016										2015
	Of Fannie Mae			Of Consolidated Trusts				Total			Of Fannie Mae			Of Consolidated Trusts				Total
	(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance	$	26,439			$	1,270		$	27,709		$	32,956			$	2,221		$	35,177
Provision (benefit) for loan losses⁽¹⁾	(2,418		)		70			(2,348		)	1,473				(374		)	1,099
Charge-offs⁽²⁾⁽³⁾	(2,042		)		(55		)	(2,097		)	(7,360		)		(42		)	(7,402		)
Recoveries	231				3			234			871				12			883
Transfers⁽⁴⁾	440				(440		)	—			615				(615		)	—
Other⁽⁵⁾	86				—			86			1,069				50			1,119
Ending balance	$	22,736			$	848		$	23,584		$	29,624			$	1,252		$	30,876
Multifamily allowance for loan losses:
Beginning balance	$	71			$	171		$	242		$	161			$	203		$	364
Benefit for loan losses⁽¹⁾	(11		)		(9		)	(20		)	(31		)		(31		)	(62		)
Charge-offs⁽²⁾⁽³⁾	(8		)		—			(8		)	(34		)		—			(34		)
Recoveries	1				—			1			—				—			—
Transfers⁽⁴⁾	4				(4		)	—			—				—			—
Other⁽⁵⁾	—				—			—			4				2			6
Ending balance	$	57			$	158		$	215		$	100			$	174		$	274
Total allowance for loan losses:
Beginning balance	$	26,510			$	1,441		$	27,951		$	33,117			$	2,424		$	35,541
Provision (benefit) for loan losses⁽¹⁾	(2,429		)		61			(2,368		)	1,442				(405		)	1,037
Charge-offs⁽²⁾⁽³⁾	(2,050		)		(55		)	(2,105		)	(7,394		)		(42		)	(7,436		)
Recoveries	232				3			235			871				12			883
Transfers⁽⁴⁾	444				(444		)	—			615				(615		)	—
Other⁽⁵⁾	86				—			86			1,073				52			1,125
Ending balance	$	22,793			$	1,006		$	23,799		$	29,724			$	1,426		$	31,150

__________


⁽¹⁾	Provision (benefit) for loan losses is included in “Benefit (provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income.


⁽²⁾	While we purchase the substantial majority of loans that are four or more months delinquent from our MBS trusts, we do not exercise this option to purchase loans during a forbearance period. Charge-offs of consolidated trusts generally represent loans that remained in our consolidated trusts at the time of default.


⁽³⁾	Our charge-offs for 2015 reflect initial charge-offs associated with our approach to adopting the charge-off provisions of Advisory Bulletin AB 2012-02, “Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention,” as well as charge-offs relating to a change in accounting policy for nonaccrual loans.


⁽⁴⁾	Includes transfers from trusts for delinquent loan purchases.


⁽⁵⁾	Amounts represent changes in other loss reserves which are reflected in provision (benefit) for loan losses, charge-offs, and recoveries.