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Financial Guarantees
12 Months Ended
Dec. 31, 2017
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 off-balance sheet guarantees expose us to credit losses primarily relating to the unpaid principal balance of our unconsolidated Fannie Mae MBS and other financial guarantees. The remaining contractual terms of our guarantees range from 5 days to 35 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 off-balance sheet maximum exposure, guaranty obligation recognized in our consolidated balance sheets and the potential maximum recovery from third parties through available credit enhancements and recourse related to our financial guarantees.
 
As of December 31,
 
2017
 
 
2016
 
Maximum Exposure
 
Guaranty Obligation
 
Maximum Recovery(1)
 
Maximum Exposure
 
Guaranty Obligation
 
Maximum Recovery(1)
 
(Dollars in millions)
Unconsolidated Fannie Mae MBS
$
10,876

 
 
$
127

 
 
$
7,340

 
 
$
12,607

 
 
$
143

 
 
$
8,048

Other guaranty arrangements(2)
14,265

 
 
131

 
 
2,404

 
 
15,335

 
 
137

 
 
2,663

    Total
$
25,141

 
 
$
258

 
 
$
9,744

 
 
$
27,942

 
 
$
280

 
 
$
10,711

__________
(1) 
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 13, Concentrations of Credit Risk.”
(2) 
Primarily consists of credit enhancements and long-term standby commitments.