XML 42 R10.htm IDEA: XBRL DOCUMENT v3.19.2
Consolidations and Transfers of Financial Assets
6 Months Ended
Jun. 30, 2019
Consolidations and Transfers of Financial Assets [Abstract]  
Consolidations and Transfers of Financial Assets Consolidations and Transfers of Financial Assets
We have interests in various entities that are considered to be variable interest entities (“VIEs”). The primary types of entities are securitization and resecuritization trusts, limited partnerships and special purpose vehicles (“SPVs”). These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. We consolidate the substantial majority of our single-class securitization trusts because our role as guarantor and master servicer provides us with the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed. In contrast, we do not consolidate single-class securitization trusts when other organizations have the power to direct these activities. Historically, the vast majority of underlying assets of our resecuritization trusts were limited to Fannie Mae securities that were collateralized by mortgage loans held in consolidated trusts. However, beginning with the implementation of the Single Security Initiative in June 2019, we include securities issued by Freddie Mac in some of our resecuritization trusts. The mortgage loans that serve as collateral for Freddie Mac-issued UMBS are not held in trusts that are consolidated by Fannie Mae.
Unconsolidated VIEs
We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include securitization trusts, limited partnerships, and certain SPVs designed to transfer credit risk. The following table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with unconsolidated securitization and resecuritization trusts.
 
As of
 
June 30, 2019
 
December 31, 2018
Assets and liabilities recorded in our condensed consolidated balance sheets related to mortgage-backed trusts:

(Dollars in millions)
Assets:
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
Fannie Mae
 
$
2,173

 
 
 
$
1,422

 
Non-Fannie Mae
 
4,352

 
 
 
4,809

 
Total trading securities
 
6,525

 
 
 
6,231

 
Available-for-sale securities:
 
 
 
 
 
 
 
Fannie Mae
 
1,615

 
 
 
1,704

 
Non-Fannie Mae
 
791

 
 
 
1,207

 
Total available-for-sale securities
 
2,406

 
 
 
2,911

 
Other assets
 
60

 
 
 
66

 
Other liabilities
 
(90
)
 
 
 
(101
)
 
Net carrying amount
 
$
8,901

 
 
 
$
9,107

 

Our maximum exposure to loss generally represents the greater of our recorded investment in the entity or the unpaid principal balance of the assets covered by our guaranty. Our involvement in unconsolidated resecuritization trusts may give rise to additional exposure to loss depending on the type of resecuritization trust. Fannie Mae non-commingled resecuritization trusts refers to our resecuritization trusts that are backed entirely by Fannie Mae MBS. These non-commingled single-class and multi-class resecuritization trusts that are not consolidated do not give rise to any additional exposure to loss as we already consolidate the underlying collateral.
Fannie Mae commingled resecuritization trusts refers to our resecuritization trusts that are backed in whole or in part by Freddie Mac securities. The guaranty that we provide to these commingled resecuritization trusts increases our exposure to loss relating to the Freddie Mac securities that serve as the underlying collateral. Our maximum exposure to loss for these unconsolidated trusts is measured by the amount of Freddie Mac securities that back these resecuritization trusts. However a portion of these Freddie Mac securities may be backed in whole or in part by Fannie Mae MBS. Therefore, to the extent that these Freddie Mac securities are backed by Fannie Mae MBS, it would not give rise to any additional exposure and our total exposure to collateral that is ultimately guaranteed by Freddie Mac may be lower than the disclosed maximum exposure to loss. Our maximum exposure to loss related to unconsolidated securitization and resecuritization trusts was approximately $20 billion and $14 billion as of June 30, 2019 and December 31, 2018, respectively. The total assets of our unconsolidated securitization and resecuritization trusts were approximately $110 billion and $80 billion as of June 30, 2019 and December 31, 2018, respectively.
The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of low-income housing tax credit investments (“LIHTC”), community investments and other entities, was $96 million and the related carrying value was $75 million as of June 30, 2019. As of December 31, 2018, the maximum exposure to loss was $111 million
and the related carrying value was $89 million. The total assets of these limited partnership investments were $2.1 billion and $2.3 billion as of June 30, 2019 and December 31, 2018, respectively.
The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents the unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities (“CAS”) SPVs. The maximum exposure to loss related to these unconsolidated SPVs was $4.6 billion and $920 million as of June 30, 2019 and December 31, 2018, respectively. The total assets related to these unconsolidated SPVs were $4.7 billion and $931 million as of June 30, 2019 and December 31, 2018, respectively.
The unpaid principal balance of our multifamily loan portfolio was $310.9 billion as of June 30, 2019. As our lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” and “Note 6, Financial Guarantees” with respect to this population are consistent with the FASB’s stated objectives for the disclosures related to unconsolidated VIEs.
Transfers of Financial Assets
We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three months ended June 30, 2019 and 2018, the unpaid principal balance of portfolio securitizations was $57.3 billion and $51.6 billion, respectively. For the six months ended June 30, 2019 and 2018, the unpaid principal balance of portfolio securitizations was $98.7 billion and $115.9 billion, respectively.
We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multi-class portfolio securitization trusts. As of June 30, 2019, the unpaid principal balance of retained interests was $2.7 billion and its related fair value was $3.7 billion. As of December 31, 2018, the unpaid principal balance of retained interests was $1.5 billion and its related fair value was $2.2 billion. For the three months ended June 30, 2019 and 2018, the principal, interest and other fees received on retained interests was $122 million and $128 million, respectively. For the six months ended June 30, 2019 and 2018, the principal, interest and other fees received on retained interests was $238 million and $354 million, respectively.
Managed Loans
Managed loans include primarily loans that are guaranteed or insured, in whole or in part, by the U.S. government. For those loans that we have securitized in unconsolidated portfolio securitization trusts, the outstanding unpaid principal balance was $1.1 billion as of June 30, 2019 and $1.2 billion as of December 31, 2018. For information regarding on-balance sheet managed loans, see “Note 3, Mortgage Loans.”