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Mortgage Loans

6 Months Ended

Jun. 30, 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, net. For purposes of our condensed consolidated balance sheet, we present accrued interest receivable, net 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
	June 30, 2020		December 31, 2019
	(Dollars in millions)
Single-family	$	3,070,902	$	2,972,361
Multifamily	346,932		327,593
Total unpaid principal balance of mortgage loans	3,417,834		3,299,954
Cost basis and fair value adjustments, net	54,467		43,224
Allowance for loan losses	(12,966)		(9,016)
Total mortgage loans⁽¹⁾	$	3,459,335	$	3,334,162

⁽¹⁾Excludes $9.5 billion and $8.4 billion of accrued interest receivable, net of allowance on mortgage loans as of June 30, 2020 and December 31, 2019, respectively.

The following tables display information about our redesignation of loans from HFI to HFS and the sales of mortgage loans during the period.


		For the Three Months Ended June 30,						For the Six Months Ended June 30,

		2020		2019		2020		2019
	(Dollars in millions)
Single family loans redesignated from HFI to HFS:
Amortized cost		$	—	$	7,188	$	1,637	$	10,133
Lower of cost or fair value adjustment at time of redesignation⁽¹⁾		—		(479)		(9)		(719)
Allowance reversed at time of redesignation		—		902		184		1,369

Single-family loans sold:
Unpaid principal balance		$	495	$	6,498	$	495	$	6,556
Realized gains, net		40		284		40		320

⁽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 $6.6 billion and $7.6 billion as of June 30, 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.

Pursuant to the CARES Act, for purposes of reporting to the credit bureaus, servicers must report a borrower receiving a COVID-19-related payment accommodation, such as a forbearance plan or loan modification, as current if the borrower was current prior to receiving the accommodation and the borrower makes all required payments in accordance with the accommodation. For purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan. The increase in loans classified as delinquent as of June 30, 2020 compared with December 31, 2019 was primarily attributable to the economic dislocation caused by the COVID-19 pandemic.


	As of June 30, 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	$	39,079	$	50,701	$	81,322	$	171,102	$	2,440,848	$	2,611,950	$	63,592	$	7,709
15-year or less, amortizing fixed-rate	3,048		4,164		4,784		11,996		389,389		401,385		4,175		554
Adjustable-rate	523		829		1,084		2,436		37,138		39,574		879		149
Other⁽²⁾	1,870		1,727		5,009		8,606		54,920		63,526		2,813		799
Total single-family	44,520		57,421		92,199		194,140		2,922,295		3,116,435		71,459		9,211
Multifamily⁽³⁾	1,160		N/A		3,614		4,774		345,870		350,644		1,447		35
Total	$	45,680	$	57,421	$	95,813	$	198,914	$	3,268,165	$	3,467,079	$	72,906	$	9,246


	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 June 30, 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%	$	294,252	$	292,692	$	161,857	$	235,568	$	288,585	$	960,619	$	2,233,573
Greater than 80% and less than or equal to 90%	58,979		102,702		58,330		21,836		5,206		10,422		257,475
Greater than 90% and less than or equal to 100%	58,649		49,724		4,377		808		255		3,749		117,562
Greater than 100%	10		55		62		130		134		2,949		3,340
Total 20 and 30-year or more, amortizing fixed-rate	411,890		445,173		224,626		258,342		294,180		977,739		2,611,950
15-year or less, amortizing fixed-rate:
Less than or equal to 80%	66,148		52,825		20,646		39,058		55,074		160,012		393,763
Greater than 80% and less than or equal to 90%	3,234		2,578		287		35		16		35		6,185
Greater than 90% and less than or equal to 100%	1,093		269		6		8		5		16		1,397
Greater than 100%	—		—		5		7		6		22		40
Total 15-year or less, amortizing fixed-rate	70,475		55,672		20,944		39,108		55,101		160,085		401,385
Adjustable-rate:
Less than or equal to 80%	1,834		2,390		3,428		6,818		3,706		20,340		38,516
Greater than 80% and less than or equal to 90%	163		287		319		101		14		32		916
Greater than 90% and less than or equal to 100%	67		55		9		5		—		5		141
Greater than 100%	—		—		—		—		—		1		1
Total adjustable-rate	2,064		2,732		3,756		6,924		3,720		20,378		39,574
Other:
Less than or equal to 80%	—		43		347		859		1,112		41,160		43,521
Greater than 80% and less than or equal to 90%	—		3		29		65		48		2,101		2,246
Greater than 90% and less than or equal to 100%	—		1		14		28		22		1,011		1,076
Greater than 100%	—		1		8		16		15		1,015		1,055
Total other	—		48		398		968		1,197		45,287		47,898
Total	$	484,429	$	503,625	$	249,724	$	305,342	$	354,198	$	1,203,489	$	3,100,807

Total for all classes by LTV ratio:⁽²⁾
Less than or equal to 80%	$	362,234	$	347,950	$	186,278	$	282,303	$	348,477	$	1,182,131	$	2,709,373
Greater than 80% and less than or equal to 90%	62,376		105,570		58,965		22,037		5,284		12,590		266,822
Greater than 90% and less than or equal to 100%	59,809		50,049		4,406		849		282		4,781		120,176
Greater than 100%	10		56		75		153		155		3,987		4,436
Total	$	484,429	$	503,625	$	249,724	$	305,342	$	354,198	$	1,203,489	$	3,100,807


	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 $15.6 billion and $17.1 billion as of June 30, 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, which represents 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 June 30, 2020, by Year of Origination
	2020		2019		2018		2017		2016		Prior		Total
	(Dollars in millions)
Internally assigned credit risk rating:
Non-classified⁽¹⁾	$	29,922	$	69,049	$	63,048	$	52,321	$	45,235	$	81,098	$	340,673
Classified⁽²⁾	6		707		1,361		2,665		1,642		3,590		9,971
Total	$	29,928	$	69,756	$	64,409	$	54,986	$	46,877	$	84,688	$	350,644


	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 June 30, 2020 and December 31, 2019, we had loans with an amortized cost of $14 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. However, our current TDR accounting described herein is 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 accounted for as a TDR result in term extensions, interest rate reductions or a combination of both. The average term extension of a single-family modified loan was 168 months and 160 months for the three months ended June 30, 2020 and 2019, respectively. The average interest rate reduction was 0.34 and 0.10 percentage points, for the three months ended June 30, 2020 and 2019, respectively. During the six months ended June 30, 2020 and 2019, the average term extension of a single-family modified loan was 168 months and 158 months, respectively, and the average interest rate reduction was 0.33 and 0.10 percentage points, respectively.

The following tables display the number of loans and amortized cost in loans classified as a TDR.


	For the Three Months Ended June 30,
	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	8,511	$	1,497		10,402	$	1,706
15-year or less, amortizing fixed-rate	796	68			1,181	106
Adjustable-rate	142	22			213	31
Other	556	70			799	109
Total single-family	10,005	1,657			12,595	1,952
Multifamily	—	—			3	20
Total TDRs	10,005	$	1,657		12,598	$	1,972


	For the Six Months Ended June 30,
	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		19,367	$	3,406		21,847		$	3,532
15-year or less, amortizing fixed-rate		1,869	166			2,476		220
Adjustable-rate		286	46			430		63
Other		1,093	138			1,735		236
Total single-family		22,615	3,756			26,488		4,051
Multifamily		—	—			6		33
Total TDRs		22,615	$	3,756		26,494		$	4,084

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 June 30,
	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		5,398	$	1,066	3,913		$	594
15-year or less, amortizing fixed-rate		35	3		119		10
Adjustable-rate		5	1		15		2
Other		548	94		499		81
Total single-family		5,986	1,164		4,546		687
Multifamily		2	14		1		6
Total TDRs that subsequently defaulted		5,988	$	1,178	4,547		$	693


	For the Six Months Ended June 30,
	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		8,573	$	1,587		8,289		$	1,258
15-year or less, amortizing fixed-rate		85	6			251		18
Adjustable-rate		12	2			23		3
Other		875	145			1,142		185
Total single-family		9,545	1,740			9,705		1,464
Multifamily		4	16			1		6
Total TDRs that subsequently defaulted		9,549	$	1,756		9,706		$	1,470

Nonaccrual Loans

The table below displays the forgone interest and the accrued interest receivable written off through the reversal of interest income for loans. For updates to our application of our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, see “Note 1, Summary of Significant Accounting Policies.”


	For the Three Months Ended June 30, 2020		For the Six Months Ended June 30, 2020
	(Dollars in millions)
Single-family:
Total forgone interest⁽¹⁾	$	246	$	420
Accrued interest receivable written off through the reversal of interest income	45		132

Multifamily:
Total forgone interest⁽¹⁾	$	3	$	3
Accrued interest receivable written off through the reversal of interest income	2		2

⁽¹⁾For loans on nonaccrual status held as of period end, represents the amount of interest income we did not recognize but would have recognized if the loans had performed in accordance with their original contractual terms.

The table below includes 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.


		As of
		June 30, 2020		March 31, 2020		December 31, 2019		For the Three Months Ended June 30, 2020		For the Six Months Ended June 30, 2020
		Amortized Cost										Total Interest Income Recognized⁽¹⁾
	(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate		$	23,783	$	23,212	$	23,427	$	75	$	221
15-year or less, amortizing fixed-rate		844		856		858		2		6
Adjustable-rate		275		279		288		1		2
Other		2,851		2,827		2,973		10		27
Total single-family		27,753		27,174		27,546		88		256
Multifamily		316		91		435		—		1
Total		$	28,069	$	27,265	$	27,981	$	88	$	257

(1)Single-family interest income recognized includes payments received while the loans were performing as well as while on nonaccrual status, for 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 and six months ended June 30, 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 June 30, 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	$	72,782	$	762	$	71
15-year or less, amortizing fixed-rate	1,250		11		1
Adjustable-rate	130		1		—
Other	18,139		189		14
Total single-family	92,301		963		86
Multifamily	321		3		—
Total individually impaired loans with related allowance recorded	92,622		966		86
With no related allowance recorded:⁽¹⁾
Single-family:
20- and 30-year or more, amortizing fixed-rate	14,803		241		34
15-year or less, amortizing fixed-rate	308		4		1
Adjustable-rate	359		4		1
Other	2,870		55		6
Total single-family	18,340		304		42
Multifamily	397		6		—
Total individually impaired loans with no related allowance recorded	18,737		310		42
Total individually impaired loans	$	111,359	$	1,276	$	128


	For the Six Months Ended June 30, 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	$	74,478	$	1,566	$	149
15-year or less, amortizing fixed-rate	1,286		22		2
Adjustable-rate	124		3		—
Other	18,999		393		30
Total single-family	94,887		1,984		181
Multifamily	279		5		—
Total individually impaired loans with related allowance recorded	95,166		1,989		181
With no related allowance recorded:⁽¹⁾
Single-family:
20- and 30-year or more, amortizing fixed-rate	14,640		453		61
15-year or less, amortizing fixed-rate	313		7		2
Adjustable-rate	379		9		1
Other	2,934		103		9
Total single-family	18,266		572		73
Multifamily	380		8		—
Total individually impaired loans with no related allowance recorded	18,646		580		73
Total individually impaired loans	$	113,812	$	2,569	$	254

⁽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.