Mortgage Loans

3 Months Ended

Mar. 31, 2020

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 amortized cost of HFI loans for which we have not elected the fair value option at the unpaid principal balance, net of unamortized premiums and discounts, other cost basis adjustments, and accrued interest receivable. For purposes of our condensed consolidated balance sheet, we present accrued interest receivable separately from the amortized cost of our loans held for investment. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation changes in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.

For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable type. In the current period, we revised the financing receivable classes used for disclosure to consist of: “20- and 30-year or more, amortizing fixed-rate,” “15-year or less, amortizing fixed-rate,” “Adjustable-rate,” and “Other.” The “Other” class primarily consists of reverse mortgage loans, interest-only loans, negative-amortizing loans and second liens. We believe the revised classifications are more aligned with how we assess and manage the credit risk of our loans. We have revised the presentation of certain loan disclosures for prior periods to conform with the revised current period classes of financing receivables.

The following table displays the carrying value of mortgage loans and our allowance for loan losses.


	As of
	March 31, 2020		December 31, 2019
	(Dollars in millions)
Single-family	$	2,996,281	$	2,972,361
Multifamily	334,397		327,593
Total unpaid principal balance of mortgage loans	3,330,678		3,299,954
Cost basis and fair value adjustments, net	45,341		43,224
Allowance for loan losses	(13,209)		(9,016)
Total mortgage loans	$	3,362,810	$	3,334,162

The following tables display information about our sales of mortgage loans during the period along with our redesignations of loans at the time of redesignation.


		For the Three Months Ended March 31,

		2020		2019
	(Dollars in millions)
Single family loans redesignated from HFI to HFS:
Amortized cost		$	1,637	$	2,945
Lower of cost or fair value adjustment at time of redesignation⁽¹⁾		(9)		(240)
Allowance reversed at time of redesignation		184		467

Single-family loans sold:

Unpaid principal balance		$	—	$	58
Realized gains (losses)		—		36

⁽¹⁾Consists of the write-off against the allowance at the time of redesignation.

The amortized cost of single-family mortgage loans for which formal foreclosure proceedings were in process was $7.9 billion and $7.6 billion as of March 31, 2020 and December 31, 2019, 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 amortized cost of our HFI mortgage loans by portfolio segment and class, excluding loans for which we have elected the fair value option.


	As of March 31, 2020
	30 - 59 Days Delinquent		60 - 89 Days Delinquent		Seriously Delinquent⁽¹⁾		Total Delinquent		Current		Total		Loans 90 Days or More Delinquent and Accruing Interest		Nonaccrual Loans with No Allowance
	(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate	$	29,663	$	6,665	$	13,323	$	49,651	$	2,497,239	$	2,546,890	$	23	$	6,653
15-year or less, amortizing fixed-rate	1,803		280		450		2,533		373,012		375,545		—		542
Adjustable-rate	383		76		165		624		41,864		42,488		—		150
Other⁽²⁾	2,302		756		1,847		4,905		61,288		66,193		132		710
Total single-family	34,151		7,777		15,785		57,713		2,973,403		3,031,116		155		8,055
Multifamily⁽³⁾	37		N/A		158		195		337,499		337,694		—		33
Total	$	34,188	$	7,777	$	15,943	$	57,908	$	3,310,902	$	3,368,810	$	155	$	8,088


	As of December 31, 2019
	30 - 59 Days Delinquent		60 - 89 Days Delinquent		Seriously Delinquent⁽¹⁾		Total Delinquent		Current		Total		Loans 90 Days or More Delinquent and Accruing Interest
	(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate	$	26,882	$	7,126	$	13,082	$	47,090	$	2,470,457	$	2,517,547	$	28
15-year or less, amortizing fixed-rate	1,616		286		445		2,347		371,740		374,087		—
Adjustable-rate	412		85		167		664		44,244		44,908		—
Other⁽²⁾	2,323		829		1,891		5,043		64,726		69,769		136
Total single-family	31,233		8,326		15,585		55,144		2,951,167		3,006,311		164
Multifamily⁽³⁾	7		N/A		115		122		330,496		330,618		—
Total	$	31,240	$	8,326	$	15,700	$	55,266	$	3,281,663	$	3,336,929	$	164

⁽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⁾Reverse mortgage loans included in "Other" are not aged due to their nature 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 amortized cost of our single-family HFI loans by class, year of origination and credit quality indicator, excluding loans for which we have elected the fair value option. The estimated mark-to-market LTV ratio is a primary factor we consider when estimating our allowance for loan losses for single-family loans. As LTV ratios increase, the borrower's equity in the home decreases, which may negatively affect the borrower's ability to refinance or to sell the property for an amount at or above the outstanding balance of the loan.


	As of March 31, 2020, by Year of Origination⁽¹⁾
	2020		2019		2018		2017		2016		Prior		Total
	(Dollars in millions)
Estimated mark-to-market LTV ratio:⁽²⁾
20- and 30-year or more, amortizing fixed-rate:
Less than or equal to 80%	$	76,429	$	307,581	$	177,622	$	252,599	$	312,333	$	1,034,737	$	2,161,301
Greater than 80% and less than or equal to 90%	16,159		93,510		72,787		40,029		10,145		14,220		246,850
Greater than 90% and less than or equal to 100%	17,666		92,907		16,344		2,080		503		4,715		134,215
Greater than 100%	—		443		143		167		170		3,601		4,524
Total 20 and 30-year or more, amortizing fixed-rate	110,254		494,441		266,896		294,875		323,151		1,057,273		2,546,890
15-year or less, amortizing fixed-rate:
Less than or equal to 80%	15,233		56,811		23,322		42,251		58,651		172,743		369,011
Greater than 80% and less than or equal to 90%	795		3,502		668		97		23		46		5,131
Greater than 90% and less than or equal to 100%	322		967		22		10		8		23		1,352
Greater than 100%	—		2		7		9		7		26		51
Total 15-year or less, amortizing fixed-rate	16,350		61,282		24,019		42,367		58,689		172,838		375,545
Adjustable-rate:
Less than or equal to 80%	433		2,551		3,917		7,631		4,116		22,449		41,097
Greater than 80% and less than or equal to 90%	38		360		501		208		21		54		1,182
Greater than 90% and less than or equal to 100%	17		125		49		7		1		8		207
Greater than 100%	—		—		—		—		—		2		2
Total adjustable-rate	488		3,036		4,467		7,846		4,138		22,513		42,488
Other:
Less than or equal to 80%	—		42		348		871		1,134		42,367		44,762
Greater than 80% and less than or equal to 90%	—		4		33		73		60		2,470		2,640
Greater than 90% and less than or equal to 100%	—		1		17		37		26		1,193		1,274
Greater than 100%	—		2		11		18		19		1,198		1,248
Total other	—		49		409		999		1,239		47,228		49,924
Total	$	127,092	$	558,808	$	295,791	$	346,087	$	387,217	$	1,299,852	$	3,014,847

Total for all classes by LTV ratio⁽²⁾
Less than or equal to 80%	$	92,095	$	366,985	$	205,209	$	303,352	$	376,234	$	1,272,296	$	2,616,171
Greater than 80% and less than or equal to 90%	16,992		97,376		73,989		40,407		10,249		16,790		255,803
Greater than 90% and less than or equal to 100%	18,005		94,000		16,432		2,134		538		5,939		137,048
Greater than 100%	—		447		161		194		196		4,827		5,825
Total	$	127,092	$	558,808	$	295,791	$	346,087	$	387,217	$	1,299,852	$	3,014,847


	As of December 31, 2019⁽¹⁾
	20- and 30-Year or More, Amortizing Fixed-Rate		15-Year or less, Amortizing Fixed-Rate		Adjustable-Rate		Other		Total
	(Dollars in millions)
Estimated mark-to-market LTV ratio:⁽²⁾
Less than or equal to 80%	$	2,145,018	$	368,181	$	43,415	$	47,005	$	2,603,619
Greater than 80% and less than or equal to 90%	237,623		4,556		1,275		2,872		246,326
Greater than 90% and less than or equal to 100%	130,152		1,284		215		1,398		133,049
Greater than 100%	4,754		66		3		1,365		6,188
Total	$	2,517,547	$	374,087	$	44,908	$	52,640	$	2,989,182

⁽¹⁾Excludes $16.3 billion and $17.1 billion as of March 31, 2020 and December 31, 2019, respectively, of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies. The 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 amortized cost of our multifamily HFI loans by year of origination and credit-risk rating, excluding loans for which we have elected the fair value option. Property rental income and property valuations are key inputs to our internally assigned credit risk ratings.


	As of March 31, 2020, by Year of Origination
	2020		2019		2018		2017		2016		Prior		Total
	(Dollars in millions)
Internally assigned credit risk rating:
Non-classified⁽¹⁾	$	9,858	$	69,507	$	63,830	$	53,715	$	46,030	$	87,262	$	330,202



Classified⁽²⁾	—		347		910		1,655		1,458		3,122		7,492
Total	$	9,858	$	69,854	$	64,740	$	55,370	$	47,488	$	90,384	$	337,694


	As of December 31, 2019
	(Dollars in millions)
Internally assigned credit risk rating:
Non-classified⁽¹⁾	$	323,773
Classified⁽²⁾	6,845
Total	$	330,618

⁽¹⁾A loan categorized as “Non-classified” is current or adequately protected by the current financial strength and debt service capability of the borrower.

⁽²⁾Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that jeopardizes the timely full repayment. “Doubtful” refers to a loan with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values. As of March 31, 2020 and December 31, 2019, we had loans with amortized cost of $39 million and $5 million, respectively, classified as doubtful.

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. Our current TDR accounting described herein will be temporarily impacted by our election to account for certain eligible loan modifications under the COVID-19 Relief granted pursuant to the CARES Act. See “Note 1, Summary of Significant Accounting Policies” for more information on the impact of the CARES Act.

The substantial majority of the loan modifications we complete result in term extensions, interest rate reductions or a combination of both. During the three months ended March 31, 2020 and 2019, the average term extension of a single-family modified loan was 168 months and 157 months, respectively, and the average interest rate reduction was 0.32 and 0.10 percentage points, respectively.

The following table displays the number of loans and amortized cost in loans classified as a TDR.


	For the Three Months Ended March 31,
	2020									2019
	Number of Loans				Amortized Cost		Number of Loans				Amortized Cost
	(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate		10,856	$	1,909		11,445		$	1,826
15-year or less, amortizing fixed-rate		1,073	98			1,295		114
Adjustable-rate		144	24			217		32
Other		537	68			936		127
Total single-family		12,610	2,099			13,893		2,099
Multifamily		—	—			3		13
Total TDRs		12,610	$	2,099		13,896		$	2,112

For loans that defaulted in the period presented and that were classified as a TDR in the twelve months prior to the default, the following table displays the number of loans and the amortized cost of 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 March 31,
	2020									2019
	Number of Loans				Amortized Cost		Number of Loans				Amortized Cost
	(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate		3,175	$	521		4,376		$	664
15-year or less, amortizing fixed-rate		50	3			132		8
Adjustable-rate		7	1			8		1
Other		327	51			643		104
Total single-family		3,559	576			5,159		777
Multifamily		2	2			—		—
Total TDRs that subsequently defaulted		3,561	$	578		5,159		$	777

Nonaccrual Loans

The table below displays the amortized cost of and interest income on our HFI single-family and multifamily loans on nonaccrual status by class, excluding loans for which we have elected the fair value option. For the three months ended March 31, 2020, the total amount of foregone interest income for single-family nonaccrual loans was $182 million, of which $87 million was accrued interest receivable written off through the reversal of interest income for nonaccrual loans held at period end. For the three months ended March 31, 2020, the total amount of foregone interest income for multifamily nonaccrual loans held as of period end was $1 million.


		As of						For the Three Months Ended March 31, 2020
		March 31, 2020		December 31, 2019
		Amortized Cost						Total Interest Income Recognized ⁽¹⁾
	(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate		$	23,212	$	23,427	$	101
15-year or less, amortized fixed-rate		856		858		2
Adjustable-rate		279		288		1
Other		2,827		2,973		13
Total single-family		27,174		27,546		117
Multifamily		91		435		—
Total		$	27,265	$	27,981	$	117

⁽¹⁾Represents the amount of cash payments received for nonaccrual loans held as of period end.

Individually Impaired Loans

Prior to the adoption of the CECL standard, we recorded a specific loss reserve for individually impaired loans and a collective loss reserve for all other 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 amortized cost, related allowance as of December 31, 2019 and average amortized cost, total interest income recognized, and interest income recognized on a cash basis for individually impaired loans for the three months ended March 31, 2019.


	As of December 31, 2019
	Unpaid Principal Balance					Total Amortized Cost			Related Allowance for Loan Losses
	(Dollars in millions)
Individually impaired loans:
With related allowance recorded:
Single-family:
20- and 30-year or more, amortizing fixed-rate		$	63,091	$	61,033		$	(5,851)
15-year or less, amortizing fixed-rate		954		960			(24)
Adjustable-rate		156		157			(9)
Other		15,181		14,078			(2,291)
Total single-family		79,382		76,228			(8,175)
Multifamily		314		315			(45)
Total individually impaired loans with related allowance recorded		79,696		76,543			(8,220)
With no related allowance recorded:⁽¹⁾
Single-family:
20- and 30-year or more, amortizing fixed-rate		18,372		17,578			—
15-year or less, amortizing fixed-rate		410		407			—
Adjustable-rate		265		265			—
Other		3,014		2,718			—
Total single-family		22,061		20,968			—
Multifamily		363		365			—
Total individually impaired loans with no related allowance recorded		22,424		21,333			—
Total individually impaired loans⁽²⁾		$	102,120	$	97,876		$	(8,220)

⁽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 an amortized cost of $96.9 billion as of December 31, 2019. Includes multifamily loans restructured in a TDR with an amortized cost of $102 million as of December 31, 2019.



	For the Three Months Ended March 31, 2019
	Average Amortized Cost					Total Interest Income Recognized			Interest Income Recognized on a Cash Basis
	(Dollars in millions)
Individually impaired loans:
With related allowance recorded:
Single-family:
20- and 30-year or more, amortizing fixed-rate		$	76,400	$	804		$	79
15-year or less, amortizing fixed-rate		1,323		12			1
Adjustable-rate		120		1			—
Other		19,898		204			15
Total single-family		97,741		1,021			95
Multifamily		247		2			—
Total individually impaired loans with related allowance recorded		97,988		1,023			95
With no related allowance recorded:⁽¹⁾
Single-family:
20- and 30-year or more, amortizing fixed-rate		14,474		212			26
15-year or less, amortizing fixed-rate		318		4			1
Adjustable-rate		400		4			1
Other		3,000		48			3
Total single-family		18,192		268			31
Multifamily		353		2			—
Total individually impaired loans with no related allowance recorded		18,545		270			31
Total individually impaired loans		$	116,533	$	1,293		$	126

⁽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.