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Fair Value

9 Months Ended

Sep. 30, 2018

Fair ValueWe use fair value measurements for the initial recording of certain assets and liabilities and periodic remeasurement of certain assets and liabilities on a recurring or nonrecurring basis.

Fair Value Measurement

Fair value measurement guidance defines fair value, establishes a framework for measuring fair value, and sets forth disclosures around fair value measurements. This guidance applies whenever other accounting guidance requires or permits assets or liabilities to be measured at fair value. The guidance establishes a three-level fair value hierarchy that prioritizes the inputs into the valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority, Level 1, to measurements based on unadjusted quoted prices in active markets for identical assets or liabilities. The next priority, Level 2, is given to measurements of assets and liabilities based on limited observable inputs or observable inputs for similar assets and liabilities. The lowest priority, Level 3, is given to measurements based on unobservable inputs.

Recurring Changes in Fair Value

The following tables display our assets and liabilities measured in our condensed consolidated balance sheets at fair value on a recurring basis subsequent to initial recognition, including instruments for which we have elected the fair value option.



	Fair Value Measurements as of September 30, 2018
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Netting Adjustment⁽¹⁾				Estimated Fair Value
	(Dollars in millions)
Recurring fair value measurements:
Assets:
Cash equivalents⁽²⁾		$	249		$	—		$	—		$	—			$	249
Trading securities:
Mortgage-related securities:
Fannie Mae		—			1,393			76			—				1,469
Other agency		—			3,642			—			—				3,642
Alt-A and subprime private-label securities		—			1,367			—			—				1,367
Mortgage revenue bonds		—			—			1			—				1
Non-mortgage-related securities:
U.S. Treasury securities		37,328			—			—			—				37,328
Other securities		—			94			—			—				94
Total trading securities		37,328			6,496			77			—				43,901
Available-for-sale securities:
Mortgage-related securities:
Fannie Mae		—			1,628			200			—				1,828
Other agency		—			272			—			—				272
Alt-A and subprime private-label securities		—			593			24			—				617
Mortgage revenue bonds		—			—			464			—				464
Other		—			8			348			—				356
Total available-for-sale securities		—			2,501			1,036			—				3,537
Mortgage loans		—			8,188			965			—				9,153
Other assets:
Risk management derivatives:
Swaps		—			2,389			98			—				2,487
Swaptions		—			335			—			—				335
Other		—			—			18			—				18
Netting adjustment		—			—			—			(2,775		)		(2,775		)
Mortgage commitment derivatives		—			286			2			—				288
Total other assets		—			3,010			118			(2,775		)		353
Total assets at fair value		$	37,577		$	20,195		$	2,196		$	(2,775	)		$	57,193



	Fair Value Measurements as of September 30, 2018
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Netting Adjustment⁽¹⁾				Estimated Fair Value
		(Dollars in millions)
Liabilities:
Long-term debt:
Of Fannie Mae:
Senior floating		$	—		$	6,904		$	347		$	—			$	7,251
Total of Fannie Mae		—			6,904			347			—				7,251
Of consolidated trusts		—			24,785			163			—				24,948
Total long-term debt		—			31,689			510			—				32,199
Other liabilities:
Risk management derivatives:
Swaps		—			2,342			1			—				2,343
Swaptions		—			368			—			—				368
Other		—			—			1			—				1
Netting adjustment		—			—			—			(2,648		)		(2,648		)
Mortgage commitment derivatives		—			194			18			—				212
Total other liabilities		—			2,904			20			(2,648		)		276
Total liabilities at fair value		$	—		$	34,593		$	530		$	(2,648	)		$	32,475



	Fair Value Measurements as of December 31, 2017
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Netting Adjustment⁽¹⁾				Estimated Fair Value
		(Dollars in millions)
Recurring fair value measurements:
Assets:
Trading securities:
Mortgage-related securities:
Fannie Mae		$	—		$	2,905		$	971		$	—			$	3,876
Other agency		—			1,083			35			—				1,118
Alt-A and subprime private-label securities		—			259			194			—				453
CMBS		—			9			—			—				9
Mortgage revenue bonds		—			—			1			—				1
Non-mortgage-related securities:
U.S. Treasury securities		29,222			—			—			—				29,222
Total trading securities		29,222			4,256			1,201			—				34,679
Available-for-sale securities:
Mortgage-related securities:
Fannie Mae		—			1,911			208			—				2,119
Other agency		—			357			—			—				357
Alt-A and subprime private-label securities		—			1,237			77			—				1,314
CMBS		—			15			—			—				15
Mortgage revenue bonds		—			—			671			—				671
Other		—			10			357			—				367
Total available-for-sale securities		—			3,530			1,313			—				4,843
Mortgage loans		—			9,480			1,116			—				10,596
Other assets:
Risk management derivatives:
Swaps		—			4,035			146			—				4,181
Swaptions		—			108			—			—				108
Other		—			—			22			—				22
Netting adjustment		—			—			—			(4,272		)		(4,272		)
Mortgage commitment derivatives		—			131			1			—				132
Total other assets		—			4,274			169			(4,272		)		171
Total assets at fair value		$	29,222		$	21,540		$	3,799		$	(4,272	)		$	50,289



	Fair Value Measurements as of December 31, 2017
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Netting Adjustment⁽¹⁾				Estimated Fair Value
		(Dollars in millions)
Liabilities:
Long-term debt:
Of Fannie Mae:
Senior floating		$	—		$	7,810		$	376		$	—			$	8,186
Total of Fannie Mae		—			7,810			376			—				8,186
Of consolidated trusts		—			29,911			582			—				30,493
Total long-term debt		—			37,721			958			—				38,679
Other liabilities:
Risk management derivatives:
Swaps		—			4,721			33			—				4,754
Swaptions		—			324			—			—				324
Other		—			—			1			—				1
Netting adjustment		—			—			—			(4,979		)		(4,979		)
Mortgage commitment derivatives		—			227			1			—				228
Total other liabilities		—			5,272			35			(4,979		)		328
Total liabilities at fair value		$	—		$	42,993		$	993		$	(4,979	)		$	39,007

__________


⁽¹⁾	Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and received.

⁽²⁾

Cash equivalents are comprised of U.S. Treasuries that have a maturity of three months or less at the date of acquisition.The following tables display a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The tables also display gains and losses due to changes in fair value, including realized and unrealized gains and losses, recognized in our condensed consolidated statements of operations and comprehensive income for Level 3 assets and liabilities. When assets and liabilities are transferred between levels, we recognize the transfer as of the end of the period.



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Three Months Ended September 30, 2018
																															Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2018⁽⁵⁾⁽⁶⁾
				Total Gains (Losses) (Realized/Unrealized)
	Balance, June 30, 2018			Included in Net Income				Included in Total Other Comprehensive Income (Loss)⁽¹⁾				Purchases		Sales			Issues⁽³⁾		Settlements⁽³⁾			Transfers out of Level 3			Transfers into Level 3			Balance, September 30, 2018
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	79		$	(3	)			$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	76			$	2
Mortgage revenue bonds	1			—					—			—		—			—		—			—			—			1				—
Total trading securities	$	80		$	(3	)	⁽⁶⁾⁽⁷⁾		$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	77			$	2
Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	204		$	—				$	(1	)	$	—	$	—		$	—	$	(3	)	$	—		$	—		$	200			$	—
Alt-A and subprime private-label securities	26			—					—			—		—			—		(2		)	—			—			24				—
Mortgage revenue bonds	506			1					(3		)	—		(4		)	—		(36		)	—			—			464				—
Other	357			7					(7		)	—		—			—		(9		)	—			—			348				—
Total available-for-sale securities	$	1,093		$	8		⁽⁷⁾⁽⁸⁾		$	(11	)	$	—	$	(4	)	$	—	$	(50	)	$	—		$	—		$	1,036			$	—
Mortgage loans	$	1,018		$	7		⁽⁶⁾⁽⁷⁾		$	—		$	—	$	—		$	—	$	(47	)	$	(44	)	$	31		$	965			$	2
Net derivatives	117			(18		)	⁽⁶⁾		—			—		—			—		(1		)	—			—			98				(27		)
Long-term debt:
Of Fannie Mae:
Senior floating	$	(354	)	$	7				$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	(347	)		$	7
Of consolidated trusts	(319		)	2					—			—		—			—		4			172			(22		)	(163		)		—
Total long-term debt	$	(673	)	$	9		⁽⁶⁾		$	—		$	—	$	—		$	—	$	4		$	172		$	(22	)	$	(510	)		$	7



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Nine Months Ended September 30, 2018
																															Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2018⁽⁵⁾⁽⁶⁾
				Total Gains (Losses) (Realized/Unrealized)
	Balance, December 31, 2017			Included in Net Income				Included in Total Other Comprehensive Income (Loss)⁽¹⁾				Purchases⁽²⁾		Sales⁽²⁾			Issues⁽³⁾		Settlements⁽³⁾			Transfers out of Level 3⁽⁴⁾			Transfers into Level 3			Balance, September 30, 2018
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	971		$	163				$	—		$	1	$	(1,060	)	$	—	$	—		$	—		$	1		$	76			$	2
Other agency	35			(1		)			—			—		—			—		(1		)	(33		)	—			—				—
Alt-A and subprime private-label securities	194			(85		)			—			—		—			—		(5		)	(104		)	—			—				—
Mortgage revenue bonds	1			—					—			—		—			—		—			—			—			1				—
Total trading securities	$	1,201		$	77		⁽⁶⁾⁽⁷⁾		$	—		$	1	$	(1,060	)	$	—	$	(6	)	$	(137	)	$	1		$	77			$	2
Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	208		$	1				$	(1	)	$	—	$	—		$	—	$	(8	)	$	—		$	—		$	200			$	—
Alt-A and subprime private-label securities	77			—					(45		)	—		—			—		(4		)	(4		)	—			24				—
Mortgage revenue bonds	671			1					(6		)	—		(22		)	—		(180		)	—			—			464				—
Other	357			21					1			—		—			—		(31		)	—			—			348				—
Total available-for-sale securities	$	1,313		$	23		⁽⁷⁾⁽⁸⁾		$	(51	)	$	—	$	(22	)	$	—	$	(223	)	$	(4	)	$	—		$	1,036			$	—
Mortgage loans	$	1,116		$	35		⁽⁶⁾⁽⁷⁾		$	—		$	—	$	—		$	—	$	(174	)	$	(131	)	$	119		$	965			$	17
Net derivatives	134			(104		)	⁽⁶⁾		—			—		—			—		15			53			—			98				(56		)
Long-term debt:
Of Fannie Mae:
Senior floating	$	(376	)	$	29				$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	(347	)		$	29
Of consolidated trusts	(582		)	9					—			—		—			1		35			503			(129		)	(163		)		(3		)
Total long-term debt	$	(958	)	$	38		⁽⁶⁾		$	—		$	—	$	—		$	1	$	35		$	503		$	(129	)	$	(510	)		$	26



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Three Months Ended September 30, 2017
																															Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2017⁽⁵⁾⁽⁶⁾
				Total Gains (Losses) (Realized/Unrealized)
	Balance, June 30, 2017			Included in Net Income				Included in Total Other Comprehensive Income (Loss)⁽¹⁾				Purchases⁽²⁾		Sales⁽²⁾			Issues⁽³⁾		Settlements⁽³⁾			Transfers out of Level 3			Transfers into Level 3⁽⁴⁾			Balance, September 30, 2017
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	1,871		$	16				$	—		$	—	$	—		$	—	$	—		$	(8	)	$	7		$	1,886			$	27
Alt-A and subprime private-label securities	264			(2		)			—			—		—			—		(9		)	—			—			253				(1		)
Mortgage revenue bonds	1			—					—			—		—			—		—			—			—			1				—
Total trading securities	$	2,136		$	14		⁽⁶⁾⁽⁷⁾		$	—		$	—	$	—		$	—	$	(9	)	$	(8	)	$	7		$	2,140			$	26
Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	206		$	—				$	—		$	—	$	—		$	—	$	(2	)	$	(16	)	$	8		$	196			$	—
Alt-A and subprime private-label securities	178			—					10			—		—			—		(8		)	—			—			180				—
Mortgage revenue bonds	873			5					(3		)	—		(59		)	—		(67		)	—			—			749				—
Other	380			—					4			—		—			—		(14		)	—			—			370				—
Total available-for-sale securities	$	1,637		$	5		⁽⁷⁾⁽⁸⁾		$	11		$	—	$	(59	)	$	—	$	(91	)	$	(16	)	$	8		$	1,495			$	—
Mortgage loans	$	1,119		$	9		⁽⁶⁾⁽⁷⁾		$	—		$	—	$	—		$	—	$	(58	)	$	(6	)	$	26		$	1,090			$	6
Net derivatives	124			18			⁽⁶⁾		—			—		—			—		(16		)	—			(1		)	125				(14		)
Long-term debt:
Of Fannie Mae:
Senior floating	$	(365	)	$	(4	)			$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	(369	)		$	(4	)
Of consolidated trusts	(760		)	(2		)			—			—		—			—		33			141			(117		)	(705		)		(5		)
Total long-term debt	$	(1,125	)	$	(6	)	⁽⁶⁾		$	—		$	—	$	—		$	—	$	33		$	141		$	(117	)	$	(1,074	)		$	(9	)



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Nine Months Ended September 30, 2017
																																Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2017⁽⁵⁾⁽⁶⁾
				Total Gains (Losses) (Realized/Unrealized)
	Balance, December 31, 2016			Included in Net Income				Included in Total Other Comprehensive Income (Loss)⁽¹⁾				Purchases⁽²⁾		Sales⁽²⁾			Issues⁽³⁾			Settlements⁽³⁾			Transfers out of Level 3			Transfers into Level 3⁽⁴⁾			Balance, September 30, 2017
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	835		$	20				$	—		$	63	$	—		$	—		$	(5	)	$	(30	)	$	1,003		$	1,886			$	3
Alt-A and subprime private-label securities	271			9					—			—		—			—			(27		)	—			—			253				10
Mortgage revenue bonds	21			3					—			—		(21		)	—			(2		)	—			—			1				—
Total trading securities	$	1,127		$	32		⁽⁶⁾⁽⁷⁾		$	—		$	63	$	(21	)	$	—		$	(34	)	$	(30	)	$	1,003		$	2,140			$	13
Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	230		$	1				$	(2	)	$	—	$	—		$	—		$	(8	)	$	(63	)	$	38		$	196			$	—
Other agency	5			—					—			—		(1		)	—			—			(4		)	—			—				—
Alt-A and subprime private-label securities	217			—					(5		)	—		—			—			(32		)	—			—			180				—
Mortgage revenue bonds	1,272			40					(15		)	—		(383		)	—			(165		)	—			—			749				—
Other	429			—					(10		)	—		—			—			(49		)	—			—			370				—
Total available-for-sale securities	$	2,153		$	41		⁽⁷⁾⁽⁸⁾		$	(32	)	$	—	$	(384	)	$	—		$	(254	)	$	(67	)	$	38		$	1,495			$	—
Mortgage loans	$	1,197		$	41		⁽⁶⁾⁽⁷⁾		$	—		$	—	$	—		$	—		$	(175	)	$	(73	)	$	100		$	1,090			$	21
Net derivatives	44			118			⁽⁶⁾		—			—		—			—			(40		)	5			(2		)	125				3
Long-term debt:
Of Fannie Mae:
Senior floating	$	(347	)	$	(22	)			$	—		$	—	$	—		$	—		$	—		$	—		$	—		$	(369	)		$	(22	)
Of consolidated trusts	(241		)	(6		)			—			—		—			(2		)	52			229			(737		)	(705		)		(6		)
Total long-term debt	$	(588	)	$	(28	)	⁽⁶⁾		$	—		$	—	$	—		$	(2	)	$	52		$	229		$	(737	)	$	(1,074	)		$	(28	)

__________


⁽¹⁾	Gains (losses) included in other comprehensive income (loss) are included in “Changes in unrealized gains on AFS securities, net of reclassification adjustments and taxes” in our condensed consolidated statements of operations and comprehensive income.


⁽²⁾	Purchases and sales include activity related to the consolidation and deconsolidation of assets of securitization trusts. For the nine months ended September 30, 2018, includes the dissolution of a Fannie Mae-wrapped private-label securities trust.


⁽³⁾	Issues and settlements include activity related to the consolidation and deconsolidation of liabilities of securitization trusts.

⁽⁴⁾

Transfers of long-term debt of consolidated trusts out of Level 3 during the first nine months of 2018 consisted of securities for which prices were available from multiple third-party vendors and demonstrated an increased and sustained level of observability over time. Transfers of Fannie Mae trading securities into Level 3 during the nine months ended September 30, 2017 consisted primarily of a Fannie Mae security backed by private-label mortgage-related securities. Prices for this security were based on inputs that were not readily available. Transfers of long-term debt of consolidated trusts into Level 3 during the first nine months of 2017 consisted of securities for which prices were estimated using inputs that were not readily available.


⁽⁵⁾	Amount represents temporary changes in fair value. Amortization, accretion and OTTI are not considered unrealized and are not included in this amount.


⁽⁶⁾	Gains (losses) are included in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.


⁽⁷⁾	Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and comprehensive income.

⁽⁸⁾

Gains (losses) are included in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive income.The following tables display valuation techniques and the range and the weighted average of significant unobservable inputs for our Level 3 assets and liabilities measured at fair value on a recurring basis.



	Fair Value Measurements as of September 30, 2018
	Fair Value		Significant Valuation Techniques	Significant Unobservable Inputs⁽¹⁾	Range⁽¹⁾				Weighted - Average⁽¹⁾
	(Dollars in millions)
Recurring fair value measurements:
Trading securities:
Mortgage-related securities:
Agency⁽²⁾	$	76	Various
Mortgage revenue bonds	1		Various
Total trading securities	$	77
Available-for-sale securities:
Mortgage-related securities:
Agency⁽²⁾	$	107	Single Vendor
	93		Various
Total Agency	200
Alt-A and subprime private-label securities	24		Various
Mortgage revenue bonds	326		Single Vendor	Spreads (bps)	(2.0	)	-	377.8	53.0
	138		Various
Total mortgage revenue bonds	464
Other	297		Discounted Cash Flow	Default Rate (%)	5.9				5.9
				Prepayment Speed (%)	10.2				10.2
				Severity (%)	75.0				75.0
				Spreads (bps)	58.3		-	394.0	392.5
	51		Various
Total other	348
Total available-for-sale securities	$	1,036
Net derivatives	$	97	Dealer Mark
	1		Various
Total net derivatives	$	98



	Fair Value Measurements as of December 31, 2017
	Fair Value		Significant Valuation Techniques	Significant Unobservable Inputs⁽¹⁾	Range⁽¹⁾				Weighted - Average⁽¹⁾
	(Dollars in millions)
Recurring fair value measurements:
Trading securities:
Mortgage-related securities:
Agency⁽²⁾	$	971	Single Vendor	Prepayment Speed (%)	0.0		-	177.0	160.0
				Spreads (bps)	51.5		-	375.0	200.1
	35		Various
Total agency	1,006
Alt-A and subprime private-label securities	154		Consensus
	40		Various
Total Alt-A and subprime private-label securities	194
Mortgage revenue bonds	1		Various
Total trading securities	$	1,201
Available-for-sale securities:
Mortgage-related securities:
Agency⁽²⁾	$	112	Single Vendor	Prepayment Speed (%)	0.0		-	175.7	147.1
				Spreads (bps)	150.0		-	210.0	182.3
	96		Various
Total agency	208
Alt-A and subprime private-label securities	77		Various
Mortgage revenue bonds	475		Single Vendor	Spreads (bps)	(17.0	)	-	248.0	39.0
	196		Various
Total mortgage revenue bonds	671
Other	325		Discounted Cash Flow	Prepayment Speed (%)	1.6		-	2.5	2.5
				Severity (%)	50.0		-	88.0	86.6
				Spreads (bps)	84.8		-	607.0	577.9
	32		Various
Total other	357
Total available-for-sale securities	$	1,313
Net derivatives	$	113	Dealer Mark
	21		Various
Total net derivatives	$	134

_________

⁽¹⁾

Valuation techniques for which no unobservable inputs are disclosed generally reflect the use of third-party pricing services or dealers, and the range of unobservable inputs applied by these sources is not readily available or cannot be reasonably estimated. Where we have disclosed unobservable inputs for consensus and single vendor techniques, those inputs are based on our validations performed at the security level using discounted cash flows. The prepayment speed used for trading agency securities and available-for-sale agency securities is the Public Securities Association prepayment speed, which can be greater than 100%. For all other securities, the Conditional Prepayment Rate is used as the prepayment speed, which can be between 0% and 100%.


⁽²⁾	Includes Fannie Mae and Freddie Mac securities.

In our condensed consolidated balance sheets certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when we evaluate loans for impairment). We had no Level 1 assets or liabilities held as of September 30, 2018 or December 31, 2017 that were measured at fair value on a nonrecurring basis. We held $863 million and $14 million in Level 2 assets, comprised of mortgage loans held for sale, and no Level 2 liabilities that were measured at fair value on a nonrecurring basis as of September 30, 2018 or December 31, 2017, respectively.

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis. The significant unobservable inputs related to these techniques primarily relate to collateral dependent valuations. The related ranges and weighted averages are not meaningful when aggregated as they vary significantly from property to property.



		Fair Value Measurements as of
	Valuation Techniques	September 30, 2018			December 31, 2017
		(Dollars in millions)
Nonrecurring fair value measurements:
Mortgage loans held for sale, at lower of cost or fair value	Single Vendor		$	623		$	1,880
	Consensus		1,623			1,113
	Various		1			—
Total mortgage loans held for sale, at lower of cost or fair value			2,247			2,993
Single-family mortgage loans held for investment, at amortized cost	Internal Model		770			1,623
Multifamily mortgage loans held for investment, at amortized cost	Asset Manager Estimate		143			163
	Various		22			32
Total multifamily mortgage loans held for investment, at amortized cost			165			195
Acquired property, net:⁽¹⁾
Single-family	Accepted Offers		175			218
	Appraisals		431			438
	Walk Forwards		149			222
	Internal Model		270			319
	Various		38			113
Total single-family			1,063			1,310
Multifamily	Various		50			19
Other assets	Various		—			2
Total nonrecurring assets at fair value			$	4,295		$	6,142

__________

⁽¹⁾

The most commonly used techniques in our valuation of acquired property are proprietary home price model and third-party valuations (both current and walk forward). Based on the number of properties measured as of September 30, 2018, these methodologies comprised approximately 78% of our valuations, while accepted offers comprised approximately 17% of our valuations. Based on the number of properties measured as of December 31, 2017, these methodologies comprised approximately 77% of our valuations, while accepted offers comprised approximately 18% of our valuations.

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. See “Note 15, Fair Value” in our 2017 Form 10-K for information on the valuation control processes and the valuation techniques we use for fair value measurement and disclosure as well as our basis for classifying these measurements as Level 1, Level 2 or Level 3 of the valuation hierarchy in more specific situations. We made no material changes to the valuation control processes or the valuation techniques for the nine months ended September 30, 2018.Fair Value of Financial Instruments

The following table displays the carrying value and estimated fair value of our financial instruments. The fair value of financial instruments we disclose includes commitments to purchase multifamily and single-family mortgage loans that we do not record in our condensed consolidated balance sheets. The fair values of these commitments are included as “Mortgage loans held for investment, net of allowance for loan losses.” The disclosure excludes all non-financial instruments; therefore, the fair value of our financial assets and liabilities does not represent the underlying fair value of our total consolidated assets and liabilities.



	As of September 30, 2018
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustment			Estimated Fair Value
	(Dollars in millions)
Financial assets:
Cash and cash equivalents and restricted cash	$	51,031	$	32,982	$	18,049	$	—	$	—		$	51,031
Federal funds sold and securities purchased under agreements to resell or similar arrangements	26,598		—		26,598		—		—			26,598
Trading securities	43,901		37,328		6,496		77		—			43,901
Available-for-sale securities	3,537		—		2,501		1,036		—			3,537
Mortgage loans held for sale	10,572		—		1,660		9,527		—			11,187
Mortgage loans held for investment, net of allowance for loan losses	3,222,562		—		2,935,066		210,018		—			3,145,084
Advances to lenders	4,022		—		4,020		2		—			4,022
Derivative assets at fair value	353		—		3,010		118		(2,775		)	353
Guaranty assets and buy-ups	149		—		—		368		—			368
Total financial assets	$	3,362,725	$	70,310	$	2,997,400	$	221,146	$	(2,775	)	$	3,286,081
Financial liabilities:
Federal funds purchased and securities sold under agreements to repurchase	$	749	$	—	$	749	$	—	$	—		$	749
Short-term debt:
Of Fannie Mae	28,248		—		28,251		—		—			28,251
Of consolidated trusts	274		—		—		273		—			273
Long-term debt:
Of Fannie Mae	218,434		—		221,671		771		—			222,442
Of consolidated trusts	3,127,414		—		2,989,699		39,447		—			3,029,146
Derivative liabilities at fair value	276		—		2,904		20		(2,648		)	276
Guaranty obligations	162		—		—		117		—			117
Total financial liabilities	$	3,375,557	$	—	$	3,243,274	$	40,628	$	(2,648	)	$	3,281,254



	As of December 31, 2017
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustment			Estimated Fair Value
	(Dollars in millions)
Financial assets:
Cash and cash equivalents and restricted cash	$	60,260	$	35,060	$	25,200	$	—	$	—		$	60,260
Federal funds sold and securities purchased under agreements to resell or similar arrangements	19,470		—		19,470		—		—			19,470
Trading securities	34,679		29,222		4,256		1,201		—			34,679
Available-for-sale securities	4,843		—		3,530		1,313		—			4,843
Mortgage loans held for sale	4,988		—		101		5,333		—			5,434
Mortgage loans held for investment, net of allowance for loan losses	3,173,537		—		2,886,470		315,719		—			3,202,189
Advances to lenders	4,938		—		4,936		2		—			4,938
Derivative assets at fair value	171		—		4,274		169		(4,272		)	171
Guaranty assets and buy-ups	149		—		—		436		—			436
Total financial assets	$	3,303,035	$	64,282	$	2,948,237	$	324,173	$	(4,272	)	$	3,332,420
Financial liabilities:
Short-term debt:
Of Fannie Mae	$	33,377	$	—	$	33,379	$	—	$	—		$	33,379
Of consolidated trusts	379		—		—		378		—			378
Long-term debt:
Of Fannie Mae	243,375		—		249,780		837		—			250,617
Of consolidated trusts	3,052,923		—		3,014,250		40,683		—			3,054,933
Derivative liabilities at fair value	328		—		5,272		35		(4,979		)	328
Guaranty obligations	258		—		—		456		—			456
Total financial liabilities	$	3,330,640	$	—	$	3,302,681	$	42,389	$	(4,979	)	$	3,340,091

For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2017 Form 10-K.Fair Value Option

We elected the fair value option for our credit risk sharing debt securities issued under our CAS series issued prior to January 1, 2016 and certain loans and debt that contain embedded derivatives that would otherwise require bifurcation. Under the fair value option, we elected to carry these instruments at fair value instead of bifurcating the embedded derivative from such instruments.

We elected the fair value option for all long-term structured debt instruments that are issued in response to specific investor demand and have interest rates that are based on a calculated index or formula and are economically hedged with derivatives at the time of issuance. By electing the fair value option for these instruments, we are able to eliminate the volatility in our results of operations that would otherwise result from the accounting asymmetry created by recording these structured debt instruments at cost while recording the related derivatives at fair value.

Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for the debt instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated statements of operations and comprehensive income.

The following table displays the fair value and unpaid principal balance of the financial instruments for which we have made fair value elections.



	As of
	September 30, 2018									December 31, 2017
	Loans⁽¹⁾			Long-Term Debt of Fannie Mae			Long-Term Debt of Consolidated Trusts			Loans⁽¹⁾			Long-Term Debt of Fannie Mae			Long-Term Debt of Consolidated Trusts
	(Dollars in millions)
Fair value		$	9,153		$	7,251		$	24,948		$	10,596		$	8,186		$	30,493
Unpaid principal balance		9,140			6,496			23,245			10,246			7,368			27,717

__________

⁽¹⁾

Includes nonaccrual loans with a fair value of $160 million and $227 million as of September 30, 2018 and December 31, 2017, respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of September 30, 2018 and December 31, 2017 was $19 million and $46 million, respectively. Includes loans that are 90 days or more past due with a fair value of $106 million and $159 million as of September 30, 2018 and December 31, 2017, respectively. The difference between unpaid principal balance and the fair value of these 90 or more days past due loans as of September 30, 2018 and December 31, 2017 was $15 million and $34 million, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded losses of $63 million and $239 million for the three and nine months ended September 30, 2018, respectively, and gains of $30 million and $166 million for the three and nine months ended September 30, 2017, respectively, from changes in the fair value of loans recorded at fair value in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.

We recorded gains of $128 million and $629 million for the three and nine months ended September 30, 2018, respectively, and gains of $35 million and losses of $422 million for the three and nine months ended September 30, 2017, respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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