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Mortgage Loans

12 Months Ended

Dec. 31, 2019

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

We 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 HFI or 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 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 below, 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 December 31,
	2019			2018
	(Dollars in millions)
Single-family	$	2,972,361		$	2,929,925
Multifamily	327,593			293,858
Total unpaid principal balance of mortgage loans	3,299,954			3,223,783
Cost basis and fair value adjustments, net	43,224			39,815
Allowance for loan losses for HFI loans	(9,016		)	(14,203		)
Total mortgage loans	$	3,334,162		$	3,249,395

The following table displays information about our redesignated mortgage loans.



	For the Year Ended December 31,
	2019		2018		2017
	(Dollars in millions)
Carrying value of loans redesignated from HFI to HFS⁽¹⁾	$	17,126	$	21,960	$	12,886
Carrying value of loans redesignated from HFS to HFI⁽¹⁾	28		56		113
Loans sold - unpaid principal balance	19,737		21,918		12,184
Realized gains on sale of mortgage loans	1,238		444		723


⁽¹⁾	Represents the carrying value of the loans after redesignation, excluding allowance.

The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process was $7.6 billion and $10.1 billion as of December 31, 2019 and 2018, 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.

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 December 31, 2019
	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		$	28,909		$	7,497		$	13,695		$	50,101	$	2,886,520	$	2,936,621		$	29	$	24,573
Government⁽²⁾		44			21			133			198		16,931		17,129			133		—
Alt-A		1,721			602			1,290			3,613		38,642		42,255			1		2,198
Other		559			206			467			1,232		9,074		10,306			1		775
Total single-family		31,233			8,326			15,585			55,144		2,951,167		3,006,311			164		27,546
Multifamily⁽³⁾		7			N/A			115			122		330,496		330,618			—		435
Total		$	31,240		$	8,326		$	15,700		$	55,266	$	3,281,663	$	3,336,929		$	164	$	27,981



	As of December 31, 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		$	30,471		$	7,881		$	14,866		$	53,218	$	2,816,047	$	2,869,265		$	22	$	26,170
Government⁽²⁾		57			17			169			243		21,887		22,130			169		—
Alt-A		2,332			821			1,844			4,997		48,274		53,271			2		3,082
Other		804			283			713			1,800		13,038		14,838			2		1,128
Total single-family		33,664			9,002			17,592			60,258		2,899,246		2,959,504			195		30,380
Multifamily⁽³⁾		56			N/A			171			227		295,437		295,664			—		492
Total		$	33,720		$	9,002		$	17,763		$	60,485	$	3,194,683	$	3,255,168		$	195	$	30,872


⁽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. The estimated mark-to-market LTV ratio is a strong predictor of credit performance. The likelihood of default and the gross severity of a loss in the event of default are typically lower as the LTV ratio decreases.



	As of December 31,
	2019⁽¹⁾						2018⁽¹⁾
	Primary		Alt-A		Other		Primary		Alt-A		Other
	(Dollars in millions)
Estimated mark-to-market LTV ratio:⁽²⁾
Less than or equal to 80%	$	2,556,685	$	37,932	$	9,002	$	2,521,766	$	45,476	$	12,291
Greater than 80%and less than or equal to 90%	243,459		2,225		642		228,614		3,804		1,195
Greater than 90%and less than or equal to 100%	131,653		1,078		318		109,548		1,997		645
Greater than 100%	4,824		1,020		344		9,337		1,994		707
Total	$	2,936,621	$	42,255	$	10,306	$	2,869,265	$	53,271	$	14,838


⁽¹⁾	Excludes the “government” class, which consists of $17.1 billion and $22.1 billion as of December 31, 2019 and 2018, 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. This 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 divided by the estimated current value of the property as of the end of each reported period, 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 December 31,
	2019		2018
	(Dollars in millions)
Credit risk profile by internally assigned grade:
Non-classified	$	323,773	$	289,231
Classified⁽¹⁾	6,845		6,433
Total	$	330,618	$	295,664

⁽¹⁾

Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that jeopardizes the timely full repayment. Loans classified as “Doubtful” have a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values. As of December 31, 2019, we had loans with recorded investment of $5 million classified as doubtful, compared with $1 million as of December 31, 2018.

Individually Impaired Loans

Individually impaired loans include 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 and loans for which we have elected the fair value option. The following tables display the unpaid principal balance, total recorded investment, related allowance, average recorded investment and total interest income recognized for individually impaired loans.



	As of December 31,
	2019									2018
	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		$	64,201		$	62,150	$	(5,884	)		$	81,791		$	78,688	$	(9,406	)
Government		243			247		(48		)		264			270		(55		)
Alt-A		11,453			10,535		(1,676		)		16,576			15,158		(2,793		)
Other		3,485			3,296		(567		)		5,482			5,169		(1,001		)
Total single-family		79,382			76,228		(8,175		)		104,113			99,285		(13,255		)
Multifamily		314			315		(45		)		197			196		(40		)
Total individually impaired loans with related allowance recorded		79,696			76,543		(8,220		)		104,310			99,481		(13,295		)
With no related allowance recorded:⁽¹⁾
Single-family:
Primary		19,047			18,249		—				15,939			15,191		—
Government		64			60		—				61			56		—
Alt-A		2,339			2,098		—				2,628			2,363		—
Other		611			561		—				718			666		—
Total single-family		22,061			20,968		—				19,346			18,276		—
Multifamily		363			365		—				343			346		—
Total individually impaired loans with no related allowance recorded		22,424			21,333		—				19,689			18,622		—
Total individually impaired loans⁽²⁾		$	102,120		$	97,876	$	(8,220	)		$	123,999		$	118,103	$	(13,295	)


⁽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 restructured in a TDR with a recorded investment of $96.9 billion and $117.2 billion as of December 31, 2019 and 2018, respectively. Includes multifamily loans restructured in a TDR with a recorded investment of $102 million and $187 million as of December 31, 2019 and 2018, respectively.



	For the Year Ended December 31,
	2019									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			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		$	71,048		$	2,954		$	264		$	85,063		$	3,522		$	381		$	92,893		$	3,721		$	319
Government		263			11			—			276			17			—			292			10			—
Alt-A		12,685			540			38			18,202			772			57			23,536			929			56
Other		4,177			154			13			6,691			250			19			9,158			318			19
Total single-family		88,173			3,659			315			110,232			4,561			457			125,879			4,978			394
Multifamily		287			7			—			235			3			—			273			9			—
Total individually impaired loans with related allowance recorded		88,460			3,666			315			110,467			4,564			457			126,152			4,987			394
With no related allowance recorded:⁽¹⁾
Single-family:
Primary		16,243			1,008			150			15,005			967			119			15,166			1,107			96
Government		57			4			—			57			4			—			61			3			—
Alt-A		2,176			169			15			2,625			218			17			3,000			270			13
Other		599			38			4			807			56			5			997			84			4
Total single-family		19,075			1,219			169			18,494			1,245			141			19,224			1,464			113
Multifamily		375			31			—			336			14			—			297			19			—
Total individually impaired loans with no related allowance recorded		19,450			1,250			169			18,830			1,259			141			19,521			1,483			113
Total individually impaired loans		$	107,910		$	4,916		$	484		$	129,297		$	5,823		$	598		$	145,673		$	6,470		$	507

⁽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.

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, including loan modifications in a trial period, 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. For discussion of how modifications are factored into the determination of the allowance for loans losses, see “Note 1, Summary of Significant Accounting Policies.”

The substantial majority of the loan modifications we complete result in term extensions, interest rate reductions or a combination of both. The average term extension of a single-family modified loan was 162 months, 109 months and 153 months for the years ended December 31, 2019, 2018 and 2017, respectively. The average interest rate reduction was 0.13, 0.21 and 0.56 percentage points for the years ended December 31, 2019, 2018 and 2017, respectively.

The following table displays the number of loans and recorded investment in loans classified as a TDR.



	For the Year Ended December 31,
	2019					2018					2017
	Number of Loans		RecordedInvestment⁽¹⁾			Number of Loans		RecordedInvestment⁽¹⁾			Number of Loans		RecordedInvestment⁽¹⁾
	(Dollars in millions)
Single-family:
Primary		48,858		$	7,688		89,192		$	13,437		59,708		$	8,247
Government		72		8			115		11			171		18
Alt-A		2,465		313			5,378		697			5,369		771
Other		464		81			1,127		208			1,158		207
Total single-family		51,859		8,090			95,812		14,353			66,406		9,243
Multifamily		11		56			14		74			8		99
Total TDRs		51,870		$	8,146		95,826		$	14,427		66,414		$	9,342


⁽¹⁾	Based on the nature of our modification programs, which do not include principal or past-due interest forgiveness, there is not a material difference between the recorded investment in our loans pre- and post- modification. Therefore, these amounts represent recorded investment post-modification.

The decrease in loans classified as TDRs for the year ended December 31, 2019 compared with the year ended December 31, 2018 was primarily attributable to significantly higher 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.

For loans that had a payment default in the period presented and that were classified as a TDR in the twelve months prior to the payment default, the following table displays the number of loans and our recorded investment in these loans at the time of payment default. For the 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 Year Ended December 31,
	2019					2018					2017
	Number of Loans		Recorded Investment			Number of Loans		Recorded Investment			Number of Loans		Recorded Investment
	(Dollars in millions)
Single-family:
Primary		15,875		$	2,425		18,613		$	2,697		19,539		$	2,722
Government		74		10			55		7			91		10
Alt-A		1,453		218			2,412		386			2,588		400
Other		447		87			662		131			760		145
Total single-family		17,849		2,740			21,742		3,221			22,978		3,277
Multifamily		2		18			2		3			2		12
Total TDRs that subsequently defaulted		17,851		$	2,758		21,744		$	3,224		22,980		$	3,289