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 carrying value of HFI loans 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 our allowance for loan losses at the point of foreclosure, completion of a short sale, upon the redesignation of loans from HFI to HFS or when a loan is determined to be uncollectible.

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 that provide loan level loss coverage and are either contractually attached to a loan or that were entered into contemporaneously with and in contemplation of a guaranty or loan purchase transaction. We use recent regional historical sales and appraisal information including the sales of our own foreclosed properties, to develop our loss severity estimates for all loan categories. Our allowance calculation also incorporates a loss confirmation period (the anticipated time lag between a credit loss event and the confirmation of the credit loss resulting from that event) to ensure our allowance estimate captures credit losses that have been incurred as of the balance sheet date but have not been confirmed. 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. We consider a loan to be impaired when, based on current information, it is probable that we will not receive all amounts due, including interest, in accordance with the contractual terms of the loan agreement. When a loan has been restructured, we measure impairment using a cash flow analysis discounted at the loan’s original effective interest rate. 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 or similar sources.

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. For groups of smaller-balance homogeneous multifamily loans, we evaluate collectively for impairment. We establish a collective multifamily 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 table displays changes in single-family, multifamily and total allowance for loan losses.



	For the Three Months Ended March 31,
	2017			2016
	(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance	$	23,283		$	27,709
Benefit for loan losses⁽¹⁾	(420		)	(1,016		)
Charge-offs⁽²⁾	(1,040		)	(1,279		)
Recoveries	85			119
Other⁽³⁾	30			64
Ending balance	$	21,938		$	25,597
Multifamily allowance for loan losses:
Beginning balance	$	182		$	242
Provision (benefit) for loan losses⁽¹⁾	9			(16		)
Charge-offs⁽²⁾	—			(5		)
Recoveries	—			1
Ending balance	$	191		$	222
Total allowance for loan losses:
Beginning balance	$	23,465		$	27,951
Benefit for loan losses⁽¹⁾	(411		)	(1,032		)
Charge-offs⁽²⁾	(1,040		)	(1,284		)
Recoveries	85			120
Other⁽³⁾	30			64
Ending balance	$	22,129		$	25,819

__________


⁽¹⁾	Benefit for loan losses is included in “Benefit 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⁾	Amounts represent changes in other loss reserves which are reflected in benefit for loan losses, charge-offs, and recoveries.

The following table displays the allowance for loan losses and recorded investment in our HFI loans, excluding loans for which we have elected the fair value option, by impairment or allowance methodology and portfolio segment.



	As of
	March 31, 2017							December 31, 2016
	Single-Family		Multifamily			Total		Single-Family		Multifamily			Total
	(Dollars in millions)
Allowance for loan losses by segment:
Individually impaired loans⁽¹⁾	$	20,731		$	37	$	20,768	$	21,920		$	33	$	21,953
Collectively reserved loans	1,207			154		1,361		1,363			149		1,512
Total allowance for loan losses	$	21,938		$	191	$	22,129	$	23,283		$	182	$	23,465

Recorded investment in loans by segment:
Individually impaired loans⁽¹⁾	$	150,606		$	599	$	151,205	$	155,598		$	589	$	156,187
Collectively reserved loans	2,729,240			242,005		2,971,245		2,708,337			231,292		2,939,629
Total recorded investment in loans	$	2,879,846		$	242,604	$	3,122,450	$	2,863,935		$	231,881	$	3,095,816

__________


⁽¹⁾	Includes acquired credit-impaired loans.