Financial Guarantees

9 Months Ended

Sep. 30, 2019

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 1 day to 33 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.

As the guarantor of structured securities backed in whole or in part by Freddie Mac-issued securities, we extend our guaranty to the underlying Freddie Mac securities in our resecuritization trusts. However, Freddie Mac continues to guarantee the payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not charge an incremental guaranty fee to include Freddie Mac securities in the structured securities that we issue. Due to the funding commitment available to Freddie Mac through its senior preferred stock purchase agreement with Treasury, we have concluded that the associated credit risk is negligible. As such, we exclude from the following table approximately $28.9 billion of Freddie Mac securities backing unconsolidated Fannie Mae-issued structured securities as of September 30, 2019.

The following table displays our off-balance sheet maximum exposure, guaranty obligation recognized in our condensed consolidated balance sheets and the potential maximum recovery from third parties through available credit enhancements and recourse related to our financial guarantees.



	As of
	September 30, 2019						December 31, 2018
	Maximum Exposure		Guaranty Obligation		Maximum Recovery⁽¹⁾		Maximum Exposure		Guaranty Obligation		Maximum Recovery⁽¹⁾
	(Dollars in millions)
Unconsolidated Fannie Mae MBS	$	6,603	$	26	$	6,354	$	7,278	$	30	$	6,811
Other guaranty arrangements⁽²⁾	12,981		135		2,609		13,847		130		2,711
Total	$	19,584	$	161	$	8,963	$	21,125	$	160	$	9,522


⁽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” in our 2018 Form 10-K and “Note 10, Concentrations of Credit Risk” in this report.

⁽²⁾

Primarily consists of credit enhancements and long-term standby commitments.