Investments in Securities (Policies)

12 Months Ended

Dec. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Available-for-sale Securities, Policy [Policy Text Block]

Investments in Securities

Securities Classified as Trading or Available-for-Sale

We classify and account for our securities as either trading or available-for-sale (“AFS”). We measure trading securities at fair value in our consolidated balance sheets with unrealized and realized gains and losses included as a component of “Fair value gains (losses), net” in our consolidated statements of operations and comprehensive income. We include interest and dividends on securities in our consolidated statements of operations and comprehensive income. Interest income includes the amortization of cost basis adjustments, including premiums and discounts, recognized as a yield adjustment using the interest method over the contractual term of the security. We measure AFS securities at fair value in our consolidated balance sheets, with unrealized gains and losses included in accumulated other comprehensive income, net of income taxes. We recognize realized gains and losses on AFS securities when securities are sold. We calculate the gains and losses using the specific identification method and record them in “Investment gains, net” in our consolidated statements of operations and comprehensive income. As of December 31, 2018, we did not have any securities classified as held-to-maturity.

Fannie Mae MBS included in “Investments in securities”

When we own Fannie Mae MBS issued by unconsolidated trusts, we do not derecognize any components of the guaranty assets, guaranty obligations, or any other outstanding recorded amounts associated with the guaranty transaction because our contractual obligation to the MBS trust remains in force until the trust is liquidated. We determine the fair value of Fannie Mae MBS based on observable market prices because most Fannie Mae MBS are actively traded. Fannie Mae MBS receive high credit quality ratings primarily because of our guaranty. The fair value of the guaranty obligation, net of deferred profit, associated with Fannie Mae MBS included in “Investments in securities” approximates the fair value of the credit risk that exists on these Fannie Mae MBS absent our guaranty. We record the aggregate amount of Fannie Mae MBS held as “Investments in securities” in our consolidated balance sheets. The unamortized obligation to stand ready to perform over the term of our guaranty and any incurred credit losses that relate to Fannie Mae MBS held as “Investments in securities” is included in “Other liabilities.” Upon subsequent sale of a Fannie Mae MBS, we continue to account for any outstanding recorded amounts associated with the guaranty transaction on the same basis of accounting as prior to the sale of Fannie Mae MBS, as no new assets were retained and no new liabilities have been assumed upon the subsequent sale.

Other-Than-Temporary Impairment of Debt Securities

We evaluate AFS securities for other-than-temporary impairment (“OTTI”) on a quarterly basis. 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 the security or it is more likely than not that we will be required to sell the security before recovery. In such cases, we recognize in “Investment gains, net” in our consolidated statements of operations and comprehensive income the entire difference between the amortized cost basis of a security and its fair value. OTTI is also 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 that we will be required to sell the security before recovery. In these circumstances, we separate the difference between the amortized cost basis of the security and its fair value into the amount representing the credit loss, which we recognize in “Investment gains, net” in our consolidated statements of operations and comprehensive income, and the amount related to all other factors, which we recognize in “Total other comprehensive loss,” net of taxes, in our consolidated statements of operations and comprehensive income. In periods after we recognize OTTI of debt securities, we use the prospective interest method to recognize interest income.Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains (losses), net” in our consolidated statements of operations and comprehensive income.Available-for-Sale SecuritiesWe 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. 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.