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Mortgage Loans
3 Months Ended
Mar. 31, 2017
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 “Investment gains (losses), net” 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 that are guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies, and 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, 2017
 
December 31, 2016
 
(Dollars in millions)
Single-family
$
2,852,739

 
$
2,833,750

Multifamily
240,691

 
229,896

Total unpaid principal balance of mortgage loans
3,093,430

 
3,063,646

Cost basis and fair value adjustments, net
38,201

 
39,572

Allowance for loan losses for loans held for investment
(22,129
)
 
(23,465
)
Total mortgage loans
$
3,109,502

 
$
3,079,753


During the three months ended March 31, 2017 and 2016, we redesignated loans with a carrying value of $2.5 billion and $596 million, respectively, from HFI to HFS. During the three months ended March 31, 2017, we redesignated loans with a carrying value of $35 million from HFS to HFI. We sold loans with an unpaid principal balance of $93 million and $1.1 billion during the three months ended March 31, 2017 and 2016, respectively.
The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process was $17.1 billion and $18.3 billion as of March 31, 2017 and December 31, 2016, 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 nonmodified single-family loan to accrual status at the point that the borrower brings the loan current. We return a modified single-family loan 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, 2017
 
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
$
24,067

 
$
6,468

 
$
19,363

 
$
49,898

 
$
2,688,070

 
$
2,737,968

 
$
19

 
$
29,929

Government(2)
47

 
16

 
237

 
300

 
35,931

 
36,231

 
237

 

Alt-A
3,119

 
1,006

 
3,753

 
7,878

 
70,426

 
78,304

 
2

 
5,421

Other
1,131

 
371

 
1,378

 
2,880

 
24,463

 
27,343

 
5

 
1,985

Total single-family
28,364

 
7,861

 
24,731

 
60,956

 
2,818,890

 
2,879,846

 
263

 
37,335

Multifamily(3)
25

 
N/A

 
114

 
139

 
242,465

 
242,604

 

 
383

Total
$
28,389

 
$
7,861

 
$
24,845

 
$
61,095

 
$
3,061,355

 
$
3,122,450

 
$
263

 
$
37,718

  
As of December 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
$
31,631

 
$
7,910

 
$
21,761

 
$
61,302

 
$
2,654,195

 
$
2,715,497

 
$
22

 
$
33,448

Government(2)
56

 
22

 
256

 
334

 
36,814

 
37,148

 
256

 

Alt-A
3,629

 
1,194

 
4,221

 
9,044

 
72,903

 
81,947

 
2

 
6,019

Other
1,349

 
438

 
1,582

 
3,369

 
25,974

 
29,343

 
5

 
2,238

Total single-family
36,665

 
9,564

 
27,820

 
74,049

 
2,789,886

 
2,863,935

 
285

 
41,705

Multifamily(3)
44

 
N/A

 
129

 
173

 
231,708

 
231,881

 

 
403

Total
$
36,709

 
$
9,564

 
$
27,949

 
$
74,222

 
$
3,021,594

 
$
3,095,816

 
$
285

 
$
42,108

__________
(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, 2017(1)
 
December 31, 2016(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%
$
2,334,050

 
$
54,618

 
$
18,508

 
$
2,321,201

 
$
56,250

 
$
19,382

Greater than 80% and less than or equal to 90%
249,910

 
9,225

 
3,297

 
244,231

 
9,787

 
3,657

Greater than 90% and less than or equal to 100%
120,954

 
6,175

 
2,336

 
114,412

 
6,731

 
2,627

Greater than 100%
33,054

 
8,286

 
3,202

 
35,653

 
9,179

 
3,677

Total
$
2,737,968

 
$
78,304

 
$
27,343

 
$
2,715,497

 
$
81,947

 
$
29,343

__________
(1) 
Excludes $36.2 billion and $37.1 billion as of March 31, 2017 and December 31, 2016, 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,
 
2017
 
2016
  
(Dollars in millions) 

Credit risk profile by internally assigned grade:
 
 
 
Non-classified
$
239,265

 
$
228,749

Classified:(1)
 
 
 
Substandard
3,336

 
3,129

Doubtful
3

 
3

Total classified
3,339

 
3,132

Total
$
242,604

 
$
231,881

_________
(1) 
A loan classified as “Substandard” has a well-defined weakness that jeopardizes the timely full repayment. “Doubtful” refers to a 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, 2017
 
December 31, 2016
 
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
 
$
101,570

 
 
 
$
96,469

 
 
 
$
13,746

 
 
$
105,113

 
 
 
$
99,825

 
 
 
$
14,462

 
Government
 
296

 
 
 
299

 
 
 
58

 
 
302

 
 
 
305

 
 
 
59

 
Alt-A
 
27,380

 
 
 
24,912

 
 
 
5,053

 
 
28,599

 
 
 
26,059

 
 
 
5,365

 
Other
 
10,312

 
 
 
9,724

 
 
 
1,874

 
 
11,087

 
 
 
10,465

 
 
 
2,034

 
Total single-family
 
139,558

 
 
 
131,404

 
 
 
20,731

 
 
145,101

 
 
 
136,654

 
 
 
21,920

 
Multifamily
 
298

 
 
 
300

 
 
 
37

 
 
320

 
 
 
323

 
 
 
33

 
Total individually impaired loans with related allowance recorded
 
139,856

 
 
 
131,704

 
 
 
20,768

 
 
145,421

 
 
 
136,977

 
 
 
21,953

 
With no related allowance recorded:(1)
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Single-family:
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Primary
 
15,917

 
 
 
15,023

 
 
 

 
 
15,733

 
 
 
14,758

 
 
 

 
Government
 
65

 
 
 
60

 
 
 

 
 
63

 
 
 
59

 
 
 

 
Alt-A
 
3,494

 
 
 
3,075

 
 
 

 
 
3,511

 
 
 
3,062

 
 
 

 
Other
 
1,130

 
 
 
1,044

 
 
 

 
 
1,159

 
 
 
1,065

 
 
 

 
Total single-family
 
20,606

 
 
 
19,202

 
 
 

 
 
20,466

 
 
 
18,944

 
 
 

 
Multifamily
 
298

 
 
 
299

 
 
 

 
 
266

 
 
 
266

 
 
 

 
Total individually impaired loans with no related allowance recorded
 
20,904

 
 
 
19,501

 
 
 

 
 
20,732

 
 
 
19,210

 
 
 

 
Total individually impaired loans(2)
 
$
160,760

 
 
 
$
151,205

 
 
 
$
20,768

 
 
$
166,153

 
 
 
$
156,187

 
 
 
$
21,953

 
 
For the Three Months Ended March 31,
 
2017
 
2016
 
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
 
$
98,223

 
 
 
$
986

 
 
 
$
88

 
 
 
$
109,318

 
 
 
$
1,021

 
 
 
$
104

 
Government
 
301

 
 
 
3

 
 
 

 
 
 
323

 
 
 
3

 
 
 

 
Alt-A
 
25,550

 
 
 
249

 
 
 
15

 
 
 
28,665

 
 
 
253

 
 
 
19

 
Other
 
10,171

 
 
 
87

 
 
 
5

 
 
 
12,013

 
 
 
92

 
 
 
8

 
Total single-family
 
134,245

 
 
 
1,325

 
 
 
108

 
 
 
150,319

 
 
 
1,369

 
 
 
131

 
Multifamily
 
311

 
 
 
2

 
 
 

 
 
 
616

 
 
 
5

 
 
 

 
Total individually impaired loans with related allowance recorded
 
134,556

 
 
 
1,327

 
 
 
108

 
 
 
150,935

 
 
 
1,374

 
 
 
131

 
With no related allowance recorded:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Single-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Primary
 
14,988

 
 
 
289

 
 
 
23

 
 
 
15,241

 
 
 
268

 
 
 
20

 
Government
 
61

 
 
 
1

 
 
 

 
 
 
57

 
 
 
1

 
 
 

 
Alt-A
 
3,087

 
 
 
73

 
 
 
3

 
 
 
3,367

 
 
 
62

 
 
 
3

 
Other
 
1,067

 
 
 
23

 
 
 
1

 
 
 
1,135

 
 
 
22

 
 
 
1

 
Total single-family
 
19,203

 
 
 
386

 
 
 
27

 
 
 
19,800

 
 
 
353

 
 
 
24

 
Multifamily
 
283

 
 
 
3

 
 
 

 
 
 
350

 
 
 
3

 
 
 

 
Total individually impaired loans with no related allowance recorded
 
19,486

 
 
 
389

 
 
 
27

 
 
 
20,150

 
 
 
356

 
 
 
24

 
Total individually impaired loans
 
$
154,042

 
 
 
$
1,716

 
 
 
$
135

 
 
 
$
171,085

 
 
 
$
1,730

 
 
 
$
155

 
__________
(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 $150.0 billion and $155.0 billion as of March 31, 2017 and December 31, 2016, respectively. Includes multifamily loans restructured in a TDR with a recorded investment of $244 million and $248 million as of March 31, 2017 and December 31, 2016, respectively.
(3) 
Total single-family interest income recognized of $1.7 billion for the three months ended March 31, 2017 consists of $1.4 billion of contractual interest and $268 million of effective yield adjustments. 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.
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.
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, 2017 and 2016, the average term extension of a single-family modified loan was 153 months and 157 months, respectively, and the average interest rate reduction was 0.94 and 0.73 percentage points, respectively.
The following table displays the number of single-family loans and recorded investment in loans restructured in a TDR.
 
For the Three Months Ended March 31,
 
2017
 
2016
 
Number of Loans
 
Recorded Investment
 
Number of Loans
 
Recorded Investment
 
(Dollars in millions)
Primary
 
17,235

 
 
 
$
2,363

 
 
 
17,190

 
 
 
$
2,332

 
Government
 
61

 
 
 
6

 
 
 
54

 
 
 
6

 
Alt-A
 
1,565

 
 
 
224

 
 
 
1,911

 
 
 
270

 
Other
 
309

 
 
 
53

 
 
 
399

 
 
 
72

 
Total TDRs(1)
 
19,170

 
 
 
$
2,646

 
 
 
19,554

 
 
 
$
2,680

 

__________
(1) 
During the three months ended March 31, 2017 and 2016, there were no multifamily loans that were restructured in a TDR.
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,
 
2017
 
2016
 
Number of Loans
 
Recorded Investment
 
Number of Loans
 
Recorded Investment
 
(Dollars in millions)
Single-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary
 
4,479

 
 
 
$
621

 
 
 
5,461

 
 
 
$
802

 
Government
 
19

 
 
 
2

 
 
 
15

 
 
 
2

 
Alt-A
 
614

 
 
 
96

 
 
 
852

 
 
 
144

 
Other
 
201

 
 
 
38

 
 
 
243

 
 
 
49

 
Total single-family
 
5,313

 
 
 
757

 
 
 
6,571

 
 
 
997

 
Multifamily
 
1

 
 
 
4

 
 
 

 
 
 

 
       Total TDRs that subsequently defaulted
 
5,314

 
 
 
$
761

 
 
 
6,571

 
 
 
$
997