Allowance for Loan Losses (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2020

Dec. 31, 2019

Allowance for Loan Losses Rollforward by Segment [Table Text Block]

The following table displays changes in our allowance for single-family loans, multifamily loans and total allowance for loan losses, including the transition impact of adopting the CECL standard.


	For the Three Months Ended March 31, 2020
	Balance December 31, 2019		Transition Impact from the Adoption of the CECL Standard		Balance January 1, 2020		Provision for Loan Losses		Write-offs		Recoveries		Other		Balance March 31, 2020
	(Dollars in millions)
Single-family	$	(8,759)	$	(1,229)	$	(9,988)	$	(2,177)	$	70	$	(3)	$	28	$	(12,070)
Multifamily	(257)		(493)		(750)		(407)		19		(1)		—		(1,139)
Total allowance for loan losses	$	(9,016)	$	(1,722)	$	(10,738)	$	(2,584)	$	89	$	(4)	$	28	$	(13,209)

Our provision for loan losses can vary substantially from period to period based on a number of factors, such as changes in actual and forecasted home prices or property valuations, fluctuations in actual and forecasted interest rates, borrower payment behavior, events such as natural disasters or pandemics, the types and volume of our loss mitigation activities, including forbearance and loan modifications, the volume of foreclosures completed, and the redesignation of loans from HFI to HFS. Estimating the impact of the COVID-19 outbreak on our expected loan loss reserves required significant management judgment, including estimates of the number of single-family borrowers who will receive forbearance and any resulting loan modifications that will be provided once the forbearance period ends. Under our CECL methodology, depending on the type of loan modification granted, loss severity estimates vary. Our provision can also be impacted by updates to the models, assumptions, and data used in determining our allowance for loan losses.

The primary factors that impacted our single-family provision for loan losses in the first quarter of 2020 were:

•Expected loan losses as a result of the COVID-19 outbreak. Given the rapidly changing and deteriorating market conditions in recent weeks as a result of the unprecedented COVID-19 outbreak, we believe our model used to estimate single-family credit losses as of March 31, 2020 does not capture the entirety of losses we expect to incur relating to COVID-19. As such, management used its judgment to increase the loss projections developed by our credit loss model to reflect our current expectations relating to COVID-19’s impact. These judgments included adjusting our modeled results for (1) the expected impact of widespread forbearance programs, including the rate of borrower participation, and the volume and type of loan modifications as a result thereof, (2) the effect of TDR accounting relief from the CARES Act, and (3) lower expected prepayment volumes given the sharp rise in unemployment rates that are expected to stay elevated over the near term. In developing this model adjustment, management considered the current credit risk profile of our single-family loan book of business, as well as relevant historical credit loss experience during rare or stressful economic environments.

•A decrease in our expectations for home price growth. We revised our forecast to reflect near zero home price appreciation on a national basis for 2020 due to COVID-19 market disruptions. Lower home prices increase the likelihood that loans will default and increase the amount of credit loss on loans that do default, which impacts our estimate of losses and ultimately increases our loss reserves and provision for credit losses.

•These factors were partially offset by lower actual and projected mortgage interest rates. As mortgage interest rates decline, we expect an increase in future prepayments on single-family loans, including modified loans. Higher expected prepayments shorten the expected lives of modified loans, which decreases the expected impairment relating to term and interest-rate concessions provided on these loans and results in a benefit for credit losses. As noted above, we adjusted downward our modeled expectation of prepayment volumes due to the COVID-19 outbreak, which reduced the modeled benefit from interest rates.

The primary factor that contributed to a decrease in single-family write-offs in the first quarter of 2020 compared to the first quarter of 2019 was a reduction in the number of reperforming loans redesignated from HFI to HFS, resulting in lower write-offs.

Our multifamily provision for loan losses in the first quarter of 2020 was primarily driven by expected loan losses as a result of the COVID-19 outbreak. Similar to the single-family provision for loan losses discussed above, we believe our model used to estimate multifamily credit losses as of March 31, 2020 does not capture the entirety of losses we expect to incur relating to COVID-19. As such, management used its judgment to increase the loss projections developed by our credit loss model to reflect our current expectations relating to COVID-19’s impact. Accordingly, our current multifamily provision for loan losses was primarily driven by higher expected unemployment rates, which we expect will increase the number of loans in forbearance and reduce property net operating income in the near term, thereby decreasing forecasted property values and increasing the probability of loan default. In developing these adjustments, management considered the current credit risk profile of our multifamily loan book of business, as well as relevant historical credit loss experience during rare or stressful economic environments.

For the three months ended March 31, 2020, we recorded a benefit of $58 million related to changes in the expected benefit of freestanding credit enhancements on our single-family loans. Additionally, we recorded a benefit of $127 million related to freestanding credit enhancements on our multifamily loans. Freestanding credit enhancements primarily consist of transactions under our CAS program, our CIRT program, and certain lender risk-sharing programs, including our multifamily DUS program. The impact from these credit enhancements is recorded in “Fee and other income” in our condensed consolidated statements of operations and comprehensive income.

The following tables display prior period changes in single-family and multifamily allowance for loan losses and the prior period amortized cost in our HFI loans by impairment or allowance methodology and portfolio segment prior to the adoption of the CECL standard. For a description of our previous allowance and impairment methodology refer to “Note 1, Summary of Significant Accounting Policies” in our 2019 Form 10-K.


	For the Three Months Ended March 31, 2019
	Balance December 31, 2018		Benefit (Provision) for Loan Losses		Write-offs		Recoveries		Other		Balance March 31, 2019
	(Dollars in millions)
Single-family	$	(13,969)	$	647	$	381	$	(45)	$	1	$	(12,985)
Multifamily	(234)		(13)		—		—		—		(247)
Total allowance for loan losses	$	(14,203)	$	634	$	381	$	(45)	$	1	$	(13,232)

Loans in Mortgage Portfolio [Table Text Block]

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.


	As of December 31, 2019
	Single-Family		Multifamily					Total
	(Dollars in millions)
Allowance for loan losses by segment:
Individually impaired loans	$	(8,175)		$	(45)	$	(8,220)
Collectively reserved loans	(584)			(212)		(796)
Total allowance for loan losses	$	(8,759)		$	(257)	$	(9,016)
Amortized cost in loans by segment:
Individually impaired loans	$	97,196		$	680	$	97,876
Collectively reserved loans	2,909,115			329,938		3,239,053
Total amortized cost in loans	$	3,006,311		$	330,618	$	3,336,929