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Fair Value

6 Months Ended

Jun. 30, 2020

We use fair value measurements for the initial recording of certain assets and liabilities and periodic remeasurement of certain assets and liabilities on a recurring or nonrecurring basis.

Fair Value Measurement

Fair value measurement guidance defines fair value, establishes a framework for measuring fair value, and sets forth disclosures around fair value measurements. This guidance applies whenever other accounting guidance requires or permits assets or liabilities to be measured at fair value. The guidance establishes a three-level fair value hierarchy that prioritizes the inputs into the valuation techniques used to measure fair value. The hierarchy gives the highest priority, Level 1, to measurements based on unadjusted quoted prices in active markets for identical assets or liabilities. The next highest priority, Level 2, is given to measurements of assets and liabilities based on limited observable inputs or observable inputs for similar assets and liabilities. The lowest priority, Level 3, is given to measurements based on unobservable inputs.

Recurring Changes in Fair Value

The following tables display our assets and liabilities measured in our condensed consolidated balance sheets at fair value on a recurring basis subsequent to initial recognition, including instruments for which we have elected the fair value option.


	Fair Value Measurements as of June 30, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)					Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)					Netting Adjustment⁽¹⁾	Estimated Fair Value
	(Dollars in millions)
Recurring fair value measurements:
Assets:
Cash equivalents⁽²⁾		$	7,667	$	—		$	—		$	—	$	7,667
Trading securities:
Mortgage-related securities:
Fannie Mae		—		7,015			38			—		7,053
Other agency		—		3,122			—			—		3,122
Private-label and other mortgage securities		—		361			98			—		459
Non-mortgage-related securities:
U.S. Treasury securities		96,037		—			—			—		96,037
Other securities		—		73			—			—		73
Total trading securities		96,037		10,571			136			—		106,744
Available-for-sale securities:
Mortgage-related securities:
Fannie Mae		—		948			446			—		1,394
Other agency		—		180			—			—		180
Alt-A and subprime private-label securities		—		5			2			—		7
Mortgage revenue bonds		—		—			278			—		278
Other		—		7			254			—		261
Total available-for-sale securities		—		1,140			980			—		2,120
Mortgage loans		—		6,506			797			—		7,303
Other assets:
Risk management derivatives:
Swaps		—		1,277			229			—		1,506
Swaptions		—		654			—			—		654
Netting adjustment		—		—			—			(2,108)		(2,108)
Mortgage commitment derivatives		—		767			—			—		767
Credit enhancement derivatives		—		—			85			—		85
Total other assets		—		2,698			314			(2,108)		904
Total assets at fair value		$	103,704	$	20,915		$	2,227		$	(2,108)	$	124,738

Liabilities:
Long-term debt:
Of Fannie Mae:

Senior floating		$	—	$	4,113		$	433		$	—	$	4,546
Total of Fannie Mae		—		4,113			433			—		4,546
Of consolidated trusts		—		23,794			89			—		23,883
Total long-term debt		—		27,907			522			—		28,429
Other liabilities:
Risk management derivatives:
Swaps		—		2,033			1			—		2,034
Swaptions		—		474			—			—		474
Netting adjustment		—		—			—			(2,396)		(2,396)
Mortgage commitment derivatives		—		1,224			—			—		1,224
Credit enhancement derivatives		—		—			44			—		44
Total other liabilities		—		3,731			45			(2,396)		1,380
Total liabilities at fair value		$	—	$	31,638		$	567		$	(2,396)	$	29,809


	Fair Value Measurements as of December 31, 2019
	Quoted Prices in Active Markets for Identical Assets (Level 1)					Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)					Netting Adjustment⁽¹⁾	Estimated Fair Value
		(Dollars in millions)
Recurring fair value measurements:
Assets:

Trading securities:
Mortgage-related securities:
Fannie Mae		$	—	$	3,379		$	45		$	—	$	3,424
Other agency		—		4,489			1			—		4,490
Private-label and other mortgage securities		—		629			—			—		629
Non-mortgage-related securities:
U.S. Treasury securities		39,501		—			—			—		39,501
Other securities		—		79			—			—		79
Total trading securities		39,501		8,576			46			—		48,123
Available-for-sale securities:
Mortgage-related securities:
Fannie Mae		—		1,349			171			—		1,520
Other agency		—		198			—			—		198
Alt-A and subprime private-label securities		—		57			—			—		57
Mortgage revenue bonds		—		—			315			—		315
Other		—		8			306			—		314
Total available-for-sale securities		—		1,612			792			—		2,404
Mortgage loans		—		7,137			688			—		7,825
Other assets:
Risk management derivatives:
Swaps		—		1,071			159			—		1,230
Swaptions		—		124			—			—		124
Netting adjustment		—		—			—			(1,288)		(1,288)
Mortgage commitment derivatives		—		165			—			—		165
Credit enhancement derivatives		—		—			40			—		40
Total other assets		—		1,360			199			(1,288)		271
Total assets at fair value		$	39,501	$	18,685		$	1,725		$	(1,288)	$	58,623

Liabilities:
Long-term debt:
Of Fannie Mae:

Senior floating		$	—	$	5,289		$	398		$	—	$	5,687
Total of Fannie Mae		—		5,289			398			—		5,687
Of consolidated trusts		—		21,805			75			—		21,880
Total long-term debt		—		27,094			473			—		27,567
Other liabilities:
Risk management derivatives:
Swaps		—		1,346			1			—		1,347
Swaptions		—		440			11			—		451
Netting adjustment		—		—			—			(1,694)		(1,694)
Mortgage commitment derivatives		—		306			—			—		306
Credit enhancement derivatives		—		—			25			—		25
Total other liabilities		—		2,092			37			(1,694)		435
Total liabilities at fair value		$	—	$	29,186		$	510		$	(1,694)	$	28,002

⁽¹⁾Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and received.

⁽²⁾Cash equivalents are comprised of U.S. Treasuries that have a maturity at the date of acquisition of three months or less.

The following tables display a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The tables also display gains and losses due to changes in fair value, including realized and unrealized gains and losses, recognized in our condensed consolidated statements of operations and comprehensive income for Level 3 assets and liabilities.


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Three Months Ended June 30, 2020
			Total Gains (Losses) (Realized/Unrealized)																														Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2020⁽⁴⁾⁽⁵⁾	Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of June 30, 2020⁽¹⁾
	Balance, March 31, 2020		Included in Net Income			Included in Total OCI Gain/(Loss)⁽¹⁾				Purchases⁽²⁾			Sales⁽²⁾			Issues⁽³⁾			Settlements⁽³⁾			Transfers out of Level 3			Transfers into Level 3			Balance, June 30, 2020
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	68	$	—		$	—	$	—		$	—		$	—		$	—		$	(34)		$	4		$	38		$	—	$	—

Private-label and other mortgage securities	94		7			—		—			—			—			(3)			—			—			98			5		—
Total trading securities	$	162	$	7	⁽⁵⁾⁽⁶⁾	$	—	$	—		$	—		$	—		$	(3)		$	(34)		$	4		$	136		$	5	$	—

Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	188	$	—		$	(4)	$	—		$	—		$	—		$	(2)		$	—		$	264		$	446		$	—	$	(3)
Alt-A and subprime private-label securities	—		—			—		—			—			—			—			—			2			2			—		—
Mortgage revenue bonds	296		—			1		—			—			—			(19)			—			—			278			—		1
Other	284		(3)			—		—			—			—			(27)			—			—			254			—		—
Total available-for-sale securities	$	768	$	(3)	⁽⁵⁾⁽⁶⁾	$	(3)	$	—		$	—		$	—		$	(48)		$	—		$	266		$	980		$	—	$	(2)

Mortgage loans	$	638	$	15	⁽⁵⁾⁽⁶⁾	$	—	$	—		$	—		$	—		$	(25)		$	(21)		$	190		$	797		$	12	$	—
Net derivatives	217		49		⁽⁵⁾	—		—			—			—			3			—			—			269			52		—
Long-term debt:
Of Fannie Mae:
Senior floating	(432)		(24)		⁽⁵⁾	—		—			—			—			23			—			—			(433)			(24)		—
Of consolidated trusts	(83)		(3)		⁽⁵⁾⁽⁶⁾	—		—			—			—			4			1			(8)			(89)			(2)		—
Total long-term debt	$	(515)	$	(27)		$	—	$	—		$	—		$	—		$	27		$	1		$	(8)		$	(522)		$	(26)	$	—


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Six Months Ended June 30, 2020
			Total Gains (Losses) (Realized/Unrealized)																														Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2020⁽⁴⁾⁽⁵⁾	Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of June 30, 2020⁽¹⁾
	Balance, December 31, 2019		Included in Net Income			Included in Total OCI Gain/(Loss)⁽¹⁾				Purchases⁽²⁾			Sales⁽²⁾			Issues⁽³⁾			Settlements⁽³⁾			Transfers out of Level 3			Transfers into Level 3			Balance, June 30, 2020
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	45	$	(9)		$	—	$	—		$	—		$	—		$	—		$	(45)		$	47		$	38		$	(8)	$	—
Other agency	1		—			—		—			—			—			—			(1)			—			—			—		—
Private-label and other mortgage securities	—		7			—		—			—			—			(3)			—			94			98			—		—
Total trading securities	$	46	$	(2)	⁽⁵⁾⁽⁶⁾	$	—	$	—		$	—		$	—		$	(3)		$	(46)		$	141		$	136		$	(8)	$	—

Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	171	$	—		$	—	$	—		$	—		$	—		$	(3)		$	—		$	278		$	446		$	—	$	—
Alt-A and subprime private-label securities	—		—			—		—			—			—			—			—			2			2			—		—
Mortgage revenue bonds	315		(3)			3		74			(74)			—			(37)			—			—			278			—		5
Other	306		(14)			(1)		268			(268)			—			(37)			—			—			254			—		(1)
Total available-for-sale securities	$	792	$	(17)	⁽⁶⁾⁽⁷⁾	$	2	$	342		$	(342)		$	—		$	(77)		$	—		$	280		$	980		$	—	$	4

Mortgage loans	$	688	$	(9)	⁽⁵⁾⁽⁶⁾	$	—	$	—		$	—		$	—		$	(54)		$	(44)		$	216		$	797		$	(14)	$	—
Net derivatives	162		90		⁽⁵⁾	—		—			—			—			(1)			18			—			269			96		—
Long-term debt:
Of Fannie Mae:
Senior floating	(398)		(58)		⁽⁵⁾	—		—			—			—			23			—			—			(433)			(58)		—
Of consolidated trusts	(75)		1		⁽⁵⁾⁽⁶⁾	—		—			—			—			7			1			(23)			(89)			2		—
Total long-term debt	$	(473)	$	(57)		$	—	$	—		$	—		$	—		$	30		$	1		$	(23)		$	(522)		$	(56)	$	—


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Three Months Ended June 30, 2019
			Total Gains (Losses) (Realized/Unrealized)																												Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2019⁽⁴⁾⁽⁵⁾		Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of June 30, 2019⁽¹⁾
	Balance, March 31, 2019		Included in Net Income			Included in Total OCI Gain/(Loss)⁽¹⁾				Purchases⁽²⁾			Sales⁽²⁾			Issues⁽³⁾			Settlements⁽³⁾			Transfers out of Level 3			Transfers into Level 3			Balance, June 30, 2019
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	67	$	1		$	—	$	—		$	(14)		$	—		$	(16)		$	—		$	36		$	74		$	2	$	—


Total trading securities	$	67	$	1	⁽⁵⁾⁽⁶⁾	$	—	$	—		$	(14)		$	—		$	(16)		$	—		$	36		$	74		$	2	$	—

Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	199	$	—		$	2	$	—		$	—		$	—		$	(7)		$	(62)		$	—		$	132		$	—	$	3
Alt-A and subprime private-label securities	23		5			(5)		—			(23)			—			—			—			—			—			—		—
Mortgage revenue bonds	425		—			(1)		—			(4)			—			(56)			—			—			364			—		—
Other	337		5			(5)		—			—			—			(9)			(2)			—			326			—		(3)
Total available-for-sale securities	$	984	$	10	⁽⁶⁾⁽⁷⁾	$	(9)	$	—		$	(27)		$	—		$	(72)		$	(64)		$	—		$	822		$	—	$	—


Mortgage loans	$	934	$	17	⁽⁵⁾⁽⁶⁾	$	—	$	—		$	(13)		$	—		$	(36)		$	(159)		$	27		$	770		$	14	$	—
Net derivatives	203		20		⁽⁵⁾	—		—			—			—			(31)			(9)			—			183			18		—
Long-term debt:
Of Fannie Mae:
Senior floating	(376)		(22)		⁽⁵⁾	—		—			—			—			—			—			—			(398)			(22)		—
Of consolidated trusts	(224)		(1)		⁽⁵⁾⁽⁶⁾	—		—			—			—			5			120			(2)			(102)			(1)		—
Total long-term debt	$	(600)	$	(23)		$	—	$	—		$	—		$	—		$	5		$	120		$	(2)		$	(500)		$	(23)	$	—


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Six Months Ended June 30, 2019
			Total Gains (Losses) (Realized/Unrealized)																												Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2019⁽⁴⁾⁽⁵⁾		Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of June 30, 2019⁽¹⁾
	Balance, December 31, 2018		Included in Net Income			Included in Total OCI Gain/(Loss)⁽¹⁾				Purchases⁽²⁾			Sales⁽²⁾			Issues⁽³⁾			Settlements⁽³⁾			Transfers out of Level 3			Transfers into Level 3			Balance, June 30, 2019
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	32	$	3		$	—	$	—		$	(14)		$	—		$	(16)		$	—		$	69		$	74		$	3	$	—

Private-label and other mortgage securities	1		—			—		—			—			—			(1)			—			—			—			—		—
Total trading securities	$	33	$	3	⁽⁵⁾⁽⁶⁾	$	—	$	—		$	(14)		$	—		$	(17)		$	—		$	69		$	74		$	3	$	—

Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	152	$	—		$	6	$	—		$	—		$	—		$	(7)		$	(103)		$	84		$	132		$	—	$	5
Alt-A and subprime private-label securities	24		5			(5)		—			(23)			—			(1)			—			—			—			—		—
Mortgage revenue bonds	434		—			(1)		—			(4)			—			(65)			—			—			364			—		(1)
Other	342		12			(10)		—			—			—			(17)			(2)			1			326			—		(7)
Total available-for-sale securities	$	952	$	17	⁽⁶⁾⁽⁷⁾	$	(10)	$	—		$	(27)		$	—		$	(90)		$	(105)		$	85		$	822		$	—	$	(3)


Mortgage loans	$	937	$	31	⁽⁵⁾⁽⁶⁾	$	—	$	—		$	(13)		$	—		$	(70)		$	(187)		$	72		$	770		$	22	$	—
Net derivatives	194		118		⁽⁵⁾	—		—			—			—			(120)			(9)			—			183			24		—
Long-term debt:
Of Fannie Mae:
Senior floating	(351)		(47)		⁽⁵⁾	—		—			—			—			—			—			—			(398)			(47)		—
Of consolidated trusts	(201)		(4)		⁽⁵⁾⁽⁶⁾	—		—			—			—			10			169			(76)			(102)			(2)		—
Total long-term debt	$	(552)	$	(51)		$	—	$	—		$	—		$	—		$	10		$	169		$	(76)		$	(500)		$	(49)	$	—

⁽¹⁾Gains (losses) included in other comprehensive loss are included in “Changes in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustments and taxes” in our condensed consolidated statements of operations and comprehensive income.

⁽²⁾Purchases and sales include activity related to the consolidation and deconsolidation of assets of securitization trusts.

⁽³⁾Issues and settlements include activity related to the consolidation and deconsolidation of liabilities of securitization trusts.

⁽⁴⁾Amount represents temporary changes in fair value. Amortization, accretion and the impairment of credit losses are not considered unrealized and are not included in this amount.

⁽⁵⁾Gains (losses) are included in “Fair value losses, net” in our condensed consolidated statements of operations and comprehensive income.

⁽⁶⁾Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and comprehensive income.

⁽⁷⁾Gains (losses) are included in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.

The following tables display valuation techniques and the range and the weighted average of significant unobservable inputs for our Level 3 assets and liabilities measured at fair value on a recurring basis, excluding instruments for which we have elected the fair value option. Changes in these unobservable inputs can result in significantly higher or lower fair value measurements of these assets and liabilities as of the reporting date.


	Fair Value Measurements as of June 30, 2020
	Fair Value		Significant Valuation Techniques	Significant Unobservable Inputs⁽¹⁾	Range⁽¹⁾				Weighted - Average⁽¹⁾⁽²⁾
	(Dollars in millions)
Recurring fair value measurements:
Trading securities:
Mortgage-related securities:
Agency⁽³⁾	$	38	Various
Private-label securities and other mortgage securities	98		Various
Total trading securities	$	136

Available-for-sale securities:
Mortgage-related securities:
Agency⁽³⁾	$	388	Consensus
	58		Various

Total agency	446
Alt-A and subprime private-label securities	2		Various

Mortgage revenue bonds	186		Single Vendor	Spreads (bps)	35.0	-	318.3	92.3
	92		Various
Total mortgage revenue bonds	278
Other	220		Discounted Cash Flow	Spreads (bps)	485.0	-	510.0	497.7



	34		Various
Total other	254
Total available-for-sale securities	$	980
Net derivatives	$	228	Dealer Mark
	41		Various
Total net derivatives	$	269


	Fair Value Measurements as of December 31, 2019
	Fair Value		Significant Valuation Techniques	Significant Unobservable Inputs⁽¹⁾	Range⁽¹⁾				Weighted - Average⁽¹⁾⁽²⁾
	(Dollars in millions)
Recurring fair value measurements:
Trading securities:
Mortgage-related securities:
Agency⁽³⁾	$	46	Various
Available-for-sale securities:
Mortgage-related securities:
Agency⁽³⁾	$	107	Consensus
	64		Various
Total agency	171

Available-for-sale securities:
Mortgage-related securities:



Mortgage revenue bonds	$	222	Single Vendor	Spreads(bps)	23.0	-	205.1	76.1
	93		Various
Total mortgage revenue bonds	315
Other	267		Discounted Cash Flow	Spreads(bps)	300.0				300.0



	39		Various
Total other	306
Total available-for-sale securities	$	792
Net derivatives	$	147	Dealer Mark
	15		Various
Total net derivatives	$	162

⁽¹⁾Valuation techniques for which no unobservable inputs are disclosed generally reflect the use of third-party pricing services or dealers, and the range of unobservable inputs applied by these sources is not readily available or cannot be reasonably estimated. Where we have disclosed unobservable inputs for consensus and single vendor techniques, those inputs are based on our validations performed at the security level using discounted cash flows.

⁽²⁾Unobservable inputs were weighted by the relative fair value of the instruments.

⁽³⁾Includes Fannie Mae and Freddie Mac securities.

In our condensed consolidated balance sheets, certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when we evaluate loans for impairment). We had no Level 1 assets or liabilities held as of June 30, 2020 or December 31, 2019 that were measured at fair value on a nonrecurring basis. We held $15 million and $274 million in Level 2 assets as of June 30, 2020 and December 31, 2019, respectively, comprised of mortgage loans held for sale and mortgage loans held for investment that were impaired. We had no Level 2 liabilities that were measured at fair value on a nonrecurring basis as of June 30, 2020 or December 31, 2019.

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis. The significant unobservable inputs related to these techniques primarily relate to collateral dependent valuations. The related ranges and weighted averages are not meaningful when aggregated as they vary significantly from property to property.


		Fair Value Measurements as of
	Valuation Techniques	June 30, 2020		December 31, 2019
	(Dollars in millions)
Nonrecurring fair value measurements:
Mortgage loans held for sale, at lower of cost or fair value	Consensus	$	1,311	$	471
	Single Vendor	720		605

Total mortgage loans held for sale, at lower of cost or fair value		2,031		1,076

Single-family mortgage loans held for investment, at amortized cost	Internal Model	759		555


Multifamily mortgage loans held for investment, at amortized cost	Asset Manager Estimate	—		24
	Various	75		16
Total multifamily mortgage loans held for investment, at amortized cost		75		40
Acquired property, net:⁽¹⁾
Single-family	Accepted Offers	105		101
	Appraisals	204		362
	Walk Forwards	186		240
	Internal Model	92		164
	Various	35		51
Total single-family		622		918
Multifamily	Various	24		9

Total nonrecurring assets at fair value		$	3,511	$	2,598

⁽¹⁾The most commonly used techniques in our valuation of acquired property are a proprietary home price model and third-party valuations (both current and walk forward). Based on the number of properties measured as of June 30, 2020, these methodologies comprised approximately 75% of our valuations, while accepted offers comprised approximately 21% of our valuations. Based on the number of properties measured as of December 31, 2019, these methodologies comprised approximately 85% of our valuations, while accepted offers comprised approximately 12% of our valuations.

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. See “Note 15, Fair Value” in our 2019 Form 10-K for information on the valuation control processes and the valuation techniques we use for fair value measurement and disclosure as well as our basis for classifying these measurements as Level 1, Level 2 or Level 3 of the valuation hierarchy in more specific situations. We made no material changes to the valuation control processes or the valuation techniques for the six months ended June 30, 2020.

Fair Value of Financial Instruments

The following table displays the carrying value and estimated fair value of our financial instruments. The fair value of financial instruments we disclose includes commitments to purchase multifamily and single-family mortgage loans that we do not record in our condensed consolidated balance sheets. The fair values of these commitments are included as “Mortgage loans held for investment, net of allowance for loan losses.” The disclosure excludes all non-financial instruments; therefore, the fair value of our financial assets and liabilities does not represent the underlying fair value of our total consolidated assets and liabilities.


	As of June 30, 2020
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustment		Estimated Fair Value
	(Dollars in millions)
Financial assets:
Cash and cash equivalents and restricted cash	$	120,224	$	106,949	$	13,275	$	—	$	—	$	120,224
Federal funds sold and securities purchased under agreements to resell or similar arrangements	25,450		—		25,450		—		—		25,450
Trading securities	106,744		96,037		10,571		136		—		106,744
Available-for-sale securities	2,120		—		1,140		980		—		2,120
Mortgage loans held for sale	7,580		—		110		7,892		—		8,002
Mortgage loans held for investment, net of allowance for loan losses	3,451,755		—		3,400,773		195,726		—		3,596,499
Advances to lenders	7,983		—		7,982		1		—		7,983
Derivative assets at fair value	904		—		2,698		314		(2,108)		904
Guaranty assets and buy-ups	120		—		—		260		—		260
Total financial assets	$	3,722,880	$	202,986	$	3,461,999	$	205,309	$	(2,108)	$	3,868,186

Financial liabilities:

Short-term debt:
Of Fannie Mae	$	42,250	$	—	$	42,269	$	—	$	—	$	42,269

Long-term debt:
Of Fannie Mae	233,387		—		244,967		860		—		245,827
Of consolidated trusts	3,444,338		—		3,565,283		31,733		—		3,597,016
Derivative liabilities at fair value	1,380		—		3,731		45		(2,396)		1,380
Guaranty obligations	133		—		—		85		—		85
Total financial liabilities	$	3,721,488	$	—	$	3,856,250	$	32,723	$	(2,396)	$	3,886,577


	As of December 31, 2019
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustment		Estimated Fair Value
	(Dollars in millions)
Financial assets:
Cash and cash equivalents and restricted cash	$	61,407	$	50,057	$	11,350	$	—	$	—	$	61,407
Federal funds sold and securities purchased under agreements to resell or similar arrangements	13,578		—		13,578		—		—		13,578
Trading securities	48,123		39,501		8,576		46		—		48,123
Available-for-sale securities	2,404		—		1,612		792		—		2,404
Mortgage loans held for sale	6,773		—		229		7,054		—		7,283
Mortgage loans held for investment, net of allowance for loan losses	3,327,389		—		3,270,535		127,650		—		3,398,185
Advances to lenders	6,453		—		6,451		2		—		6,453
Derivative liabilities at fair value	271		—		1,360		199		(1,288)		271
Guaranty assets and buy-ups	142		—		—		305		—		305
Total financial assets	$	3,466,540	$	89,558	$	3,313,691	$	136,048	$	(1,288)	$	3,538,009

Financial liabilities:
Federal funds purchased and securities sold under agreements to repurchase	$	478	$	—	$	478	$	—	$	—	$	478
Short-term debt:
Of Fannie Mae	26,662		—		26,667		—		—		26,667

Long-term debt:
Of Fannie Mae	155,585		—		164,144		401		—		164,545
Of consolidated trusts	3,285,139		—		3,312,763		31,827		—		3,344,590
Derivative liabilities at fair value	435		—		2,092		37		(1,694)		435
Guaranty obligations	154		—		—		97		—		97
Total financial liabilities	$	3,468,453	$	—	$	3,506,144	$	32,362	$	(1,694)	$	3,536,812

For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2019 Form 10-K.

Fair Value Option

We elected the fair value option for loans and debt that contain embedded derivatives that would otherwise require bifurcation. Additionally, we elected the fair value option for our credit risk-sharing securities accounted for as debt of Fannie Mae issued under our CAS series prior to January 1, 2016. Under the fair value option, we elected to carry these instruments at fair value instead of bifurcating the embedded derivative from such instruments.

Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for the debt instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated statements of operations and comprehensive income.

The following table displays the fair value and unpaid principal balance of the financial instruments for which we have made fair value elections.


	As of
	June 30, 2020																December 31, 2019
	Loans⁽¹⁾					Long-Term Debt of Fannie Mae			Long-Term Debt of Consolidated Trusts					Loans⁽¹⁾				Long-Term Debt of Fannie Mae	Long-Term Debt of Consolidated Trusts
	(Dollars in millions)
Fair value		$	7,303	$	4,546		$	23,883		$	7,825	$	5,687		$	21,880
Unpaid principal balance		6,906		4,466			20,777			7,514		5,200			19,653

⁽¹⁾Includes nonaccrual loans with a fair value of $139 million and $129 million as of June 30, 2020 and December 31, 2019, respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of June 30, 2020 and December 31, 2019 was $19 million and $11 million, respectively. Includes loans that are 90 days or more past due with a fair value of $232 million and $80 million as of June 30, 2020 and December 31, 2019, respectively. The difference between unpaid principal balance and the fair value of these 90 or more days past due loans as of June 30, 2020 and December 31, 2019 was $34 million and $10 million, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded losses of $10 million and gains of $141 million for the three and six months ended June 30, 2020, respectively, and gains of $126 million and $239 million for the three and six months ended June 30, 2019, respectively, from changes in the fair value of loans recorded at fair value in “Fair value losses, net” in our condensed consolidated statements of operations and comprehensive income.

We recorded losses of $574 million and $312 million for the three and six months ended June 30, 2020 respectively, and losses of $222 million and $552 million for the three and six months ended June 30, 2019, respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value losses, net” in our condensed consolidated statements of operations and comprehensive income.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details