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Investments in Securities
12 Months Ended
Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Investments in Securities
Investments in Securities
Trading Securities
Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value losses, net” in our consolidated statements of operations and comprehensive income. The following table displays our investments in trading securities.
 
As of December 31,
 
2017
 
2016
 
(Dollars in millions)
Mortgage-related securities:
 
 
 
Fannie Mae
$
3,876

 
$
4,769

Other agency
1,118

 
2,058

Alt-A and subprime private-label securities
453

 
636

Commercial mortgage-backed securities (“CMBS”)
9

 
761

Mortgage revenue bonds
1

 
21

Total mortgage-related securities
5,457

 
8,245

U.S. Treasury securities
29,222

 
32,317

Total trading securities
$
34,679

 
$
40,562

The following table displays information about our net trading gains and losses.
 
For the Year Ended December 31,
 
2017
 
2016
 
2015
 
(Dollars in millions)
Net trading gains (losses)
 
$
190

 
 
$
28

 
 
$
(368
)
Net trading gains (losses) recognized in the period related to securities still held at period end
 
161

 
 
(19
)
 
 
(453
)
Available-for-Sale Securities
We record AFS securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other comprehensive loss” and we recognize realized gains and losses from the sale of AFS securities in “Investment gains, net” in our consolidated statements of operations and comprehensive income.
The following table displays the gross realized gains, losses and proceeds on sales of AFS securities.
 
For the Year Ended December 31,
 
2017
 
2016
 
2015
 
(Dollars in millions)
Gross realized gains
$
487

 
$
1,043

 
$
1,066

Gross realized losses
1

 
17

 
70

Total proceeds (excludes initial sale of securities from new portfolio securitizations)
1,780

 
10,993

 
8,023

The following tables display the amortized cost, gross unrealized gains and losses, and fair value by major security type for AFS securities.
 
As of December 31, 2017
 
Total Amortized Cost(1)
 
Gross Unrealized Gains
 
Gross Unrealized Losses(2)
 
Total Fair Value
 
(Dollars in millions)
Fannie Mae
 
$
2,044

 
 
 
$
102

 
 
 
$
(27
)
 
 
$
2,119

Other agency
 
332

 
 
 
25

 
 
 

 
 
357

Alt-A and subprime private-label securities
 
662

 
 
 
652

 
 
 

 
 
1,314

CMBS
 
15

 
 
 

 
 
 

 
 
15

Mortgage revenue bonds
 
655

 
 
 
20

 
 
 
(4
)
 
 
671

Other mortgage-related securities
 
350

 
 
 
17

 
 
 

 
 
367

Total
 
$
4,058

 
 
 
$
816

 
 
 
$
(31
)
 
 
$
4,843

 
As of December 31, 2016
 
Total Amortized Cost(1)
 
Gross Unrealized Gains
 
Gross Unrealized Losses(2)
 
Total Fair Value
 
(Dollars in millions)
Fannie Mae
 
$
2,445

 
 
 
$
137

 
 
 
$
(28
)
 
 
$
2,554

Other agency
 
508

 
 
 
39

 
 
 

 
 
547

Alt-A and subprime private-label securities
 
1,817

 
 
 
895

 
 
 
(3
)
 
 
2,709

CMBS
 
815

 
 
 
4

 
 
 

 
 
819

Mortgage revenue bonds
 
1,245

 
 
 
36

 
 
 
(9
)
 
 
1,272

Other mortgage-related securities
 
431

 
 
 
31

 
 
 

 
 
462

Total
 
$
7,261

 
 
 
$
1,142

 
 
 
$
(40
)
 
 
$
8,363

s
__________
(1) 
Amortized cost consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, as well as OTTI recognized in “Investment gains, net” in our consolidated statements of operations and comprehensive income.
(2) 
Represents the gross unrealized losses on securities for which we have not recognized OTTI, as well as the noncredit component of OTTI and cumulative changes in fair value of securities for which we previously recognized the credit component of OTTI in “Accumulated other comprehensive income” in our consolidated balance sheets.
The following tables display additional information regarding gross unrealized losses and fair value by major security type for AFS securities in an unrealized loss position.
 
As of December 31, 2017
 
Less Than 12 Consecutive Months
 
12 Consecutive Months or Longer
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
(Dollars in millions)
Fannie Mae
 
$
(1
)
 
 
$
134

 
 
$
(26
)
 
 
$
461

Mortgage revenue bonds
 

 
 

 
 
(4
)
 
 
3

   Total
 
$
(1
)
 
 
$
134

 
 
$
(30
)
 
 
$
464

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2016
 
Less Than 12 Consecutive Months
 
12 Consecutive Months or Longer
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
(Dollars in millions)
Fannie Mae
 
$
(2
)
 
 
$
139

 
 
$
(26
)
 
 
$
477

Alt-A and subprime private-label securities
 

 
 

 
 
(3
)
 
 
73

Mortgage revenue bonds
 
(7
)
 
 
78

 
 
(2
)
 
 
6

   Total
 
$
(9
)
 
 
$
217

 
 
$
(31
)
 
 
$
556

Other-Than-Temporary Impairments
For AFS securities, OTTI is considered to have occurred when the fair value of a debt security is below its amortized cost basis and we intend to sell or it is more likely than not that we will be required to sell the security before recovery. Additionally, OTTI is considered to have occurred if we do not expect to recover the entire amortized cost basis of a debt security even if we do not intend to sell the security or it is not more likely than not we will be required to sell the security before recovery.
We recognized $5 million, $35 million and $196 million of OTTI for the years ended December 31, 2017, 2016 and 2015, respectively, which are included in “Investment gains, net” in consolidated statements of operations and comprehensive income. OTTI recognized for the year ended December 31, 2015 was higher than OTTI recognized for the years ended December 31, 2017 and 2016 primarily due to a change in our intent to sell certain securities during 2015. As a result, we recognized the entire difference between the amortized cost basis of these securities and their fair value as OTTI.
The balance of the unrealized credit loss component of AFS debt securities held by us and recognized in our consolidated statements of operations and comprehensive income was $1.1 billion, $1.9 billion and $2.4 billion as of December 31, 2017, 2016 and 2015, respectively. The decrease for the years ended 2017 and 2016 was primarily driven by securities we intend to sell or that it is more likely than not we will be required to sell before recovery of our amortized cost basis.
Maturity Information
The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.
 
As of December 31, 2017
 
Total Amortized Cost
 
Total
Fair
Value
 
One Year or Less
 
After One Year
Through Five Years
 
After Five Years Through Ten Years
 
After Ten Years
 
 
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
  
(Dollars in millions)
Fannie Mae
 
$
2,044

 
 
$
2,119

 
 
$
2

 
 
$
2

 
 
$
12

 
 
$
12

 
 
$
59

 
 
$
63

 
 
$
1,971

 
 
$
2,042

Other agency
 
332

 
 
357

 
 
2

 
 
2

 
 
15

 
 
15

 
 
57

 
 
61

 
 
258

 
 
279

Alt-A and subprime private-label securities
 
662

 
 
1,314

 
 

 
 

 
 

 
 

 
 

 
 

 
 
662

 
 
1,314

CMBS
 
15

 
 
15

 
 
15

 
 
15

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage revenue bonds
 
655

 
 
671

 
 
15

 
 
15

 
 
75

 
 
75

 
 
83

 
 
85

 
 
482

 
 
496

Other mortgage-related securities
 
350

 
 
367

 
 

 
 

 
 

 
 

 
 
5

 
 
5

 
 
345

 
 
362

Total
 
$
4,058

 
 
$
4,843

 
 
$
34

 
 
$
34

 
 
$
102

 
 
$
102

 
 
$
204

 
 
$
214

 
 
$
3,718

 
 
$
4,493

Weighted average yield(1)
 
6.84
%
 
 
 
 
 
4.18
%
 
 
 
 
 
6.60
%
 
 
 
 
 
6.59
%
 
 
 
 
 
6.88
%
 
 
 
__________

(1) 
Yields are determined by dividing interest income (including amortization and accretion of premiums, discounts and other cost basis adjustments) by amortized cost balances as of year-end. Yields on tax-exempt obligations have been computed on a tax equivalent basis.