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Financial Guarantees
12 Months Ended
Dec. 31, 2016
Guarantees [Abstract]  
Financial Guarantees
Financial Guarantees
We generate revenue by absorbing the credit risk of mortgage loans in unconsolidated trusts in exchange for a guaranty fee. We also provide credit enhancements on taxable or tax-exempt mortgage revenue bonds issued by state and local governmental entities to finance multifamily housing for low- and moderate-income families. Additionally, we issue long-term standby commitments that generally require us to purchase loans from lenders if the loans meet certain delinquency criteria.
We recognize a guaranty obligation for our obligation to stand ready to perform on our guarantees to unconsolidated trusts and other guaranty arrangements. These guarantees expose us to credit losses on the mortgage loans or, in the case of mortgage-related securities, the underlying mortgage loans of the related securities. The remaining contractual terms of our guarantees range from 1 day to 36 years; however, the actual term of each guaranty may be significantly less than the contractual term based on the prepayment characteristics of the related mortgage loans.
The following table displays our maximum exposure, guaranty obligation recognized in our consolidated balance sheets and the maximum potential recovery from third parties through available credit enhancements and recourse related to our financial guarantees.
 
As of December 31,
 
2016
 
 
2015
 
Maximum Exposure(1)
 
Guaranty Obligation
 
Maximum Recovery(2)
 
Maximum Exposure(1)
 
Guaranty Obligation
 
Maximum Recovery(2)
 
(Dollars in millions)
Unconsolidated Fannie Mae MBS
$
12,607

 
 
$
143

 
 
$
8,048

 
 
$
15,069

 
 
$
194

 
 
$
8,857

Other guaranty arrangements(3)
15,335

 
 
137

 
 
2,663

 
 
16,504

 
 
135

 
 
2,869

    Total
$
27,942

 
 
$
280

 
 
$
10,711

 
 
$
31,573

 
 
$
329

 
 
$
11,726

__________
(1) 
Primarily consists of the unpaid principal balance of the underlying mortgage loans.
(2) 
Recoverability of such credit enhancements and recourse is subject to, among other factors, our mortgage insurers’ and financial guarantors’ ability to meet their obligations to us. For information on our mortgage insurers and financial guarantors, see “Note 15, Concentrations of Credit Risk.”
(3) 
Primarily consists of credit enhancements and long-term standby commitments.