XML 40 R9.htm IDEA: XBRL DOCUMENT

Mortgage Loans

9 Months Ended

Sep. 30, 2018

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Mortgage LoansWe 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 in this footnote, 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
	September 30, 2018			December 31, 2017
	(Dollars in millions)
Single-family	$	2,924,857		$	2,890,634
Multifamily	284,298			265,069
Total unpaid principal balance of mortgage loans	3,209,155			3,155,703
Cost basis and fair value adjustments, net	39,642			41,906
Allowance for loan losses for loans held for investment	(15,663		)	(19,084		)
Total mortgage loans	$	3,233,134		$	3,178,525

The following table displays information about our redesignated mortgage loans.



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars in millions)
Carrying value of loans redesignated from HFI to HFS	$	4,249	$	2,077	$	17,851	$	7,499
Carrying value of loans redesignated from HFS to HFI	6		59		36		111
Loans sold - unpaid principal balance	9,373		3,433		13,831		6,473
Realized gains on sale of mortgage loans	93		158		301		211

The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process was $10.6 billion and $13.0 billion as of September 30, 2018 and December 31, 2017, 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 non-modified 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 stat

us 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 September 30, 2018
	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	$	33,519	$	7,506	$	14,932	$	55,957	$	2,799,358	$	2,855,315	$	25	$	25,697
Government⁽²⁾	54		18		175		247		23,132		23,379		175		—
Alt-A	2,725		875		1,908		5,508		50,900		56,408		2		3,212
Other	978		319		761		2,058		14,502		16,560		5		1,216
Total single-family	37,276		8,718		17,776		63,770		2,887,892		2,951,662		207		30,125
Multifamily⁽³⁾	20		N/A		198		218		285,736		285,954		—		554
Total	$	37,296	$	8,718	$	17,974	$	63,988	$	3,173,628	$	3,237,616	$	207	$	30,679



	As of December 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	$	35,582	$	10,396	$	23,999	$	69,977	$	2,732,818	$	2,802,795	$	87	$	37,971
Government⁽²⁾	55		21		206		282		30,807		31,089		206		—
Alt-A	3,186		1,147		3,418		7,751		59,475		67,226		5		5,094
Other	1,185		411		1,252		2,848		19,016		21,864		5		1,834
Total single-family	40,008		11,975		28,875		80,858		2,842,116		2,922,974		303		44,899
Multifamily⁽³⁾	26		N/A		276		302		266,699		267,001		—		424
Total	$	40,034	$	11,975	$	29,151	$	81,160	$	3,108,815	$	3,189,975	$	303	$	45,323

__________


⁽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
	September 30, 2018⁽¹⁾						December 31, 2017⁽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%	$	2,541,859	$	47,773	$	13,642	$	2,439,858	$	51,903	$	16,428
Greater than 80%and less than or equal to 90%	215,622		4,151		1,353		238,038		6,680		2,277
Greater than 90%and less than or equal to 100%	87,660		2,230		757		106,076		4,044		1,443
Greater than 100%	10,174		2,254		808		18,823		4,599		1,716
Total	$	2,855,315	$	56,408	$	16,560	$	2,802,795	$	67,226	$	21,864

__________


⁽¹⁾	Excludes $23.4 billion and $31.1 billion as of September 30, 2018 and December 31, 2017, 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
	September 30,			December 31,
	2018			2017
	(Dollars in millions)
Credit risk profile by internally assigned grade:
Non-classified		$	280,952		$	263,416
Classified⁽¹⁾		5,002			3,585
Total		$	285,954		$	267,001

_________

⁽¹⁾

Represents loans classified as “Substandard,” which have a well-defined weakness that jeopardizes the timely full repayment. Loans with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values are referred to as “Doubtful.” We had no loans classified as doubtful for the periods indicated.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
	September 30, 2018										December 31, 2017
	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		$	85,297		$	81,905		$	(10,348	)		$	91,194		$	86,864		$	(11,652	)
Government		269			274			(58		)		276			279			(56		)
Alt-A		18,058			16,505			(3,153		)		23,077			21,045			(4,046		)
Other		6,334			5,972			(1,176		)		8,488			8,006			(1,493		)
Total single-family		109,958			104,656			(14,735		)		123,035			116,194			(17,247		)
Multifamily		231			232			(44		)		279			280			(42		)
Total individually impaired loans with related allowance recorded		110,189			104,888			(14,779		)		123,314			116,474			(17,289		)
With no related allowance recorded:⁽¹⁾
Single-family:
Primary		15,656			14,916			—				16,027			15,158			—
Government		60			55			—				66			60			—
Alt-A		2,730			2,461			—				3,253			2,870			—
Other		815			759			—				988			909			—
Total single-family		19,261			18,191			—				20,334			18,997			—
Multifamily		312			312			—				308			310			—
Total individually impaired loans with no related allowance recorded		19,573			18,503			—				20,642			19,307			—
Total individually impaired loans⁽²⁾		$	129,762		$	123,391		$	(14,779	)		$	143,956		$	135,781		$	(17,289	)



	For the Three Months Ended September 30,
	2018									2017
	Average Recorded Investment			Total Interest Income Recognized			Interest Income Recognized on a Cash Basis			Average Recorded Investment			Total Interest Income Recognized			Interest Income Recognized on a Cash Basis
	(Dollars in millions)
Individually impaired loans:
With related allowance recorded:
Single-family:
Primary		$	84,043		$	871		$	86		$	90,941		$	912		$	75
Government		276			3			—			289			2			—
Alt-A		17,034			179			13			22,904			228			13
Other		6,254			57			4			8,817			78			4
Total single-family		107,607			1,110			103			122,951			1,220			92
Multifamily		231			1			—			232			1			—
Total individually impaired loans with related allowance recorded		107,838			1,111			103			123,183			1,221			92
With no related allowance recorded:⁽¹⁾
Single-family:
Primary		15,140			254			30			15,402			273			24
Government		57			1			—			61			—			—
Alt-A		2,562			54			4			3,008			65			5
Other		784			13			2			983			21			1
Total single-family		18,543			322			36			19,454			359			30
Multifamily		335			8			—			304			6			—
Total individually impaired loans with no related allowance recorded		18,878			330			36			19,758			365			30
Total individually impaired loans		$	126,716		$	1,441		$	139		$	142,941		$	1,586		$	122



	For the Nine Months Ended September 30,
	2018									2017
	Average Recorded Investment			Total Interest Income Recognized			Interest Income Recognized on a Cash Basis			Average Recorded Investment			Total Interest Income Recognized			Interest Income Recognized on a Cash Basis
	(Dollars in millions)
Individually impaired loans:
With related allowance recorded:
Single-family:
Primary		$	86,842		$	2,697		$	302		$	94,594		$	2,853		$	240
Government		277			15			—			295			7			—
Alt-A		19,081			610			45			24,233			717			42
Other		7,140			201			15			9,480			247			14
Total single-family		113,340			3,523			362			128,602			3,824			296
Multifamily		244			2			—			271			7			—
Total individually impaired loans with related allowance recorded		113,584			3,525			362			128,873			3,831			296
With no related allowance recorded:⁽¹⁾
Single-family:
Primary		15,039			740			88			15,173			835			71
Government		58			3			—			61			2			—
Alt-A		2,710			173			13			3,041			205			10
Other		848			44			4			1,023			65			3
Total single-family		18,655			960			105			19,298			1,107			84
Multifamily		333			11			—			294			16			—
Total individually impaired loans with no related allowance recorded		18,988			971			105			19,592			1,123			84
Total individually impaired loans		$	132,572		$	4,496		$	467		$	148,465		$	4,954		$	380

__________


⁽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 classified as TDRs with a recorded investment of $122.4 billion and $134.7 billion as of September 30, 2018 and December 31, 2017, respectively. Includes multifamily loans classified as TDRs with a recorded investment of $210 million and $185 million as of September 30, 2018 and December 31, 2017, respectively.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. In addition to formal loan modifications, we also engage in other loss mitigation activities with troubled borrowers, which include repayment plans and forbearance arrangements, both of which represent informal agreements with the borrower that do not result in the legal modification of the loan’s contractual terms. We account for these informal restructurings as a TDR if we defer more than three missed payments. We also classify loans to certain borrowers who have received bankruptcy relief as TDRs.

The substantial majority of the loan modifications we complete result in term extensions, interest rate reductions or a combination of both. During the three and nine months ended September 30, 2018, the average term extension of a single-family modified loan was 98 months and 104 months, respectively, and the average interest rate reduction was 0.14 and 0.23 percentage points, respectively. During the three and nine months ended September 30, 2017, the average term extension of a single-family modified loan was 156 months and 155 months, respectively, and the average interest rate reduction was 0.35 and 0.66 percentage points, respectively.

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



	For the Three Months Ended September 30,
	2018					2017
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		12,291		$	1,797		13,323		$	1,847
Government		21		3			32		5
Alt-A		779		100			1,229		182
Other		207		37			264		50
Total single-family		13,298		1,937			14,848		2,084
Multifamily		2		7			5		82
Total TDRs		13,300		$	1,944		14,853		$	2,166



	For the Nine Months Ended September 30,
	2018					2017
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		75,790		$	11,469		44,706		$	6,155
Government		95		9			138		15
Alt-A		4,499		583			4,122		600
Other		937		173			844		149
Total single-family		81,321		12,234			49,810		6,919
Multifamily		12		68			8		99
Total TDRs		81,333		$	12,302		49,818		$	7,018

The increase in loans classified as TDRs for the nine months ended September 30, 2018 compared with the nine months ended September 30, 2017 was primarily attributable to single-family loan modifications and other forms of loss mitigation in the areas affected by Hurricanes Harvey, Irma and Maria that resulted in a restructuring of the terms of these loans.he following tables display the number of loans and our recorded investment in these loans at the time of 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 September 30,
	2018					2017
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		3,720		$	519		4,900		$	684
Government		8		—			25		3
Alt-A		438		74			627		95
Other		143		29			178		34
Total single-family		4,309		622			5,730		816
Multifamily		1		2			—		—
Total TDRs that subsequently defaulted		4,310		$	624		5,730		$	816



	For the Nine Months Ended September 30,
	2018					2017
	Number of Loans		RecordedInvestment			Number of Loans		RecordedInvestment
	(Dollars in millions)
Single-family:
Primary		12,372		$	1,774		13,617		$	1,894
Government		37		4			69		8
Alt-A		1,703		275			1,857		288
Other		469		93			529		102
Total single-family		14,581		2,146			16,072		2,292
Multifamily		2		4			1		4
Total TDRs that subsequently defaulted		14,583		$	2,150		16,073		$	2,296