Mortgage Loans

6 Months Ended

Jun. 30, 2017

Mortgage Loans on Real Estate [Abstract]

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, 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
	June 30, 2017			December 31, 2016
	(Dollars in millions)
Single-family	$	2,861,253		$	2,833,750
Multifamily	244,701			229,896
Total unpaid principal balance of mortgage loans	3,105,954			3,063,646
Cost basis and fair value adjustments, net	39,860			39,572
Allowance for loan losses for loans held for investment	(20,399		)	(23,465		)
Total mortgage loans	$	3,125,415		$	3,079,753

During the three and six months ended June 30, 2017, we redesignated loans with a carrying value of $2.9 billion and $5.4 billion, respectively, from HFI to HFS. During the three and six months ended June 30, 2016, we redesignated loans with a carrying value of $1.0 billion and $1.6 billion, respectively, from HFI to HFS. During the three and six months ended June 30, 2017, we redesignated loans with a carrying value of $17 million and $52 million, respectively, from HFS to HFI. We sold loans with an unpaid principal balance of $2.9 billion and $3.0 billion during the three and six months ended June 30, 2017, respectively. We sold loans with an unpaid balance of $1.5 billion and $2.6 billion during the three and six months ended June 30, 2016, respectively.

The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process was $15.6 billion and $18.3 billion as of June 30, 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 June 30, 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	$	27,294	$	6,677	$	17,842	$	51,813	$	2,703,162	$	2,754,975	$	19	$	28,056
Government⁽²⁾	50		21		229		300		35,080		35,380		228		1
Alt-A	3,103		1,000		3,451		7,554		66,845		74,399		2		5,026
Other	1,141		367		1,259		2,767		22,580		25,347		4		1,827
Total single-family	31,588		8,065		22,781		62,434		2,827,667		2,890,101		253		34,910
Multifamily⁽³⁾	27		N/A		95		122		246,506		246,628		—		341
Total	$	31,615	$	8,065	$	22,876	$	62,556	$	3,074,173	$	3,136,729	$	253	$	35,251



	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
	June 30, 2017⁽¹⁾						December 31, 2016⁽¹⁾
	Primary		Alt-A		Other		Primary		Alt-A		Other
	(Dollars in millions)
Estimated mark-to-market loan-to-value (“LTV”) ratio:⁽²⁾
Less than or equal to 80%	$	2,410,185	$	54,917	$	18,219	$	2,321,201	$	56,250	$	19,382
Greater than 80%and less than or equal to 90%	231,412		8,010		2,826		244,231		9,787		3,657
Greater than 90%and less than or equal to 100%	88,637		5,088		1,908		114,412		6,731		2,627
Greater than 100%	24,741		6,384		2,394		35,653		9,179		3,677
Total	$	2,754,975	$	74,399	$	25,347	$	2,715,497	$	81,947	$	29,343

__________


⁽¹⁾	Excludes $35.4 billion and $37.1 billion as of June 30, 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
	June 30,		December 31,
	2017		2016
	(Dollars in millions)
Credit risk profile by internally assigned grade:
Non-classified	$	243,555	$	228,749
Classified:⁽¹⁾
Substandard	3,069		3,129
Doubtful	4		3
Total classified	3,073		3,132
Total	$	246,628	$	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
	June 30, 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		$	97,394		$	92,591		$	12,778		$	105,113		$	99,825		$	14,462
Government		288			291			58			302			305			59
Alt-A		25,862			23,556			4,642			28,599			26,059			5,365
Other		9,651			9,106			1,719			11,087			10,465			2,034
Total single-family		133,195			125,544			19,197			145,101			136,654			21,920
Multifamily		217			218			41			320			323			33
Total individually impaired loans with related allowance recorded		133,412			125,762			19,238			145,421			136,977			21,953
With no related allowance recorded:⁽¹⁾
Single-family:
Primary		16,109			15,225			—			15,733			14,758			—
Government		67			62			—			63			59			—
Alt-A		3,418			3,010			—			3,511			3,062			—
Other		1,078			992			—			1,159			1,065			—
Total single-family		20,672			19,289			—			20,466			18,944			—
Multifamily		268			269			—			266			266			—
Total individually impaired loans with no related allowance recorded		20,940			19,558			—			20,732			19,210			—
Total individually impaired loans⁽²⁾		$	154,352		$	145,320		$	19,238		$	166,153		$	156,187		$	21,953



	For the Three Months Ended June 30,
	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		$	94,599		$	955		$	77		$	106,674		$	1,015		$	71
Government		295			2			—			317			3			—
Alt-A		24,249			240			14			27,901			256			11
Other		9,419			82			5			11,639			93			3
Total single-family		128,562			1,279			96			146,531			1,367			85
Multifamily		259			4			—			556			13			—
Total individually impaired loans with related allowance recorded		128,821			1,283			96			147,087			1,380			85
With no related allowance recorded:⁽¹⁾
Single-family:
Primary		15,091			273			24			15,377			327			30
Government		61			1			—			59			1			—
Alt-A		3,026			67			2			3,361			81			5
Other		1,016			21			1			1,126			30			2
Total single-family		19,194			362			27			19,923			439			37
Multifamily		284			7			—			326			3			—
Total individually impaired loans with no related allowance recorded		19,478			369			27			20,249			442			37
Total individually impaired loans		$	148,299		$	1,652		$	123		$	167,336		$	1,822		$	122



	For the Six Months Ended June 30,
	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		$	96,395		$	1,941		$	165		$	107,984		$	2,036		$	175
Government		298			5			—			320			6			—
Alt-A		24,896			489			29			28,287			509			30
Other		9,805			169			10			11,827			185			11
Total single-family		131,394			2,604			204			148,418			2,736			216
Multifamily		280			6			—			589			18			—
Total individually impaired loans with related allowance recorded		131,674			2,610			204			149,007			2,754			216
With no related allowance recorded:⁽¹⁾
Single-family:
Primary		15,050			562			47			15,323			595			50
Government		61			2			—			58			2			—
Alt-A		3,056			140			5			3,362			143			8
Other		1,041			44			2			1,131			52			3
Total single-family		19,208			748			54			19,874			792			61
Multifamily		278			10			—			335			6			—
Total individually impaired loans with no related allowance recorded		19,486			758			54			20,209			798			61
Total individually impaired loans		$	151,160		$	3,368		$	258		$	169,216		$	3,552		$	277

__________


⁽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 $144.3 billion and $155.0 billion as of June 30, 2017 and December 31, 2016, respectively. Includes multifamily loans restructured in a TDR with a recorded investment of $198 million and $248 million as of June 30, 2017 and December 31, 2016, respectively.

⁽³⁾

Total single-family interest income recognized of $1.7 billion for the three months ended June 30, 2017 consists of $1.5 billion of contractual interest and $229 million of effective yield adjustments. Total single-family interest income recognized of $1.8 billion for the three months ended June 30, 2016 consists of $1.5 billion of contractual interest and $331 million of effective yield adjustments. Total single-family interest income recognized of $3.4 billion for the six months ended June 30, 2017 consists of $2.9 billion of contractual interest and $497 million of effective yield adjustments. Total single-family interest income recognized of $3.5 billion for the six months ended June 30, 2016 consists of $2.9 billion of contractual interest and $641 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 June 30, 2017 and 2016, the average term extension of a single-family modified loan was 155 months and 159 months, respectively, and the average interest rate reduction was 0.67 and 0.72 percentage points, respectively. During the six months ended June 30, 2017 and 2016, the average term extension of a single-family modified loan was 154 months and 159 months, respectively, and the average interest rate reduction was 0.80 and 0.73 percentage points, respectively.

The following tables display the number of loans and recorded investment in loans restructured in a TDR.



	For the Three Months Ended June 30,
	2017					2016
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		14,148		$	1,945		14,814		$	2,028
Government		45		4			28		3
Alt-A		1,328		194			1,623		238
Other		271		46			362		61
Total single-family		15,792		2,189			16,827		2,330
Multifamily		3		17			4		45
Total TDRs		15,795		$	2,206		16,831		$	2,375



	For the Six Months Ended June 30,
	2017					2016
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		31,383		$	4,308		32,004		$	4,360
Government		106		10			82		9
Alt-A		2,893		418			3,534		508
Other		580		99			761		133
Total single-family		34,962		4,835			36,381		5,010
Multifamily		3		17			4		45
Total TDRs		34,965		$	4,852		36,385		$	5,055

The following tables display 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 June 30,
	2017					2016
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		4,238		$	589		4,648		$	638
Government		25		3			27		3
Alt-A		616		97			756		116
Other		150		30			289		40
Total TDRs that subsequently defaulted		5,029		$	719		5,720		$	797



	For the Six Months Ended June 30,
	2017					2016
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		8,717		$	1,210		10,109		$	1,440
Government		44		5			42		5
Alt-A		1,230		193			1,608		260
Other		351		68			532		89
Total single-family		10,342		1,476			12,291		1,794
Multifamily		1		4			—		—
Total TDRs that subsequently defaulted		10,343		$	1,480		12,291		$	1,794