Investments in Securities

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Investments in Securities

Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. The following table displays our investments in trading securities.

	As of
	September 30, 2021			December 31, 2020
	(Dollars in millions)
Mortgage-related securities:
Fannie Mae		$	1,715		$	2,404
Other agency(1)		3,139			3,451
Private-label and other mortgage securities		143			158
Total mortgage-related securities (includes $642 million and $793 million, respectively, related to consolidated trusts)		4,997			6,013
Non-mortgage-related securities:
U.S. Treasury securities		92,192			130,456
Other securities		20			73
Total non-mortgage-related securities		92,212			130,529
Total trading securities		$	97,209		$	136,542

(1)Consists of Freddie Mac and Ginnie Mae mortgage-related securities.

The following table displays information about our net trading gains (losses).

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(Dollars in millions)
Net trading gains (losses)	$	(129)	$	(91)	$	(726)	$	691
Net trading gains (losses) recognized in the period related to securities still held at period end	(124)		(71)		(702)		448

Available-for-Sale Securities

We record AFS securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other comprehensive income (loss)” and we recognize realized gains and losses from the sale of AFS securities in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive income. We define the amortized cost basis of our AFS securities as unpaid principal balance, net of unamortized premiums and discounts, and other cost basis adjustments. We record an allowance for credit losses for AFS securities that reflects the impairment for credit losses, which are limited to the amount that fair value is less than the amortized cost. Impairment due to non-credit losses are recorded as unrealized losses within other comprehensive income.

The following tables display the amortized cost, allowance for credit losses, gross unrealized gains and losses in accumulated other comprehensive income (loss) (“AOCI”), and fair value by major security type for AFS securities.

	As of September 30, 2021
	Total Amortized Cost(1)			Allowance for Credit Losses(3)		Gross Unrealized Gains in AOCI		Gross Unrealized Losses in AOCI			Total Fair Value(1)
	(Dollars in millions)
Fannie Mae		$	510	$	—	$	16		$	(8)	$	518
Other agency(2)		14		—		1			—		15
Alt-A and subprime private-label securities		3		—		—			—		3
Mortgage revenue bonds		161		—		5			(2)		164
Other mortgage-related securities		185		—		1			—		186
Total		$	873	$	—	$	23		$	(10)	$	886

	As of December 31, 2020
	Total Amortized Cost(1)			Allowance for Credit Losses			Gross Unrealized Gains in AOCI			Gross Unrealized Losses in AOCI			Total Fair Value(1)
	(Dollars in millions)
Fannie Mae		$	1,094		$	—		$	86		$	(12)	$	1,168
Other agency(2)		59			—			6			—		65
Alt-A and subprime private-label securities		4			—			2			—		6
Mortgage revenue bonds		211			(3)			8			—		216
Other mortgage-related securities		238			—			4			—		242
Total		$	1,606		$	(3)		$	106		$	(12)	$	1,697

(1)We exclude from amortized cost and fair value accrued interest of $3 million and $6 million as of September 30, 2021 and December 31, 2020, respectively, which we record in “Other assets” in our condensed consolidated balance sheets.

(2)Other agency securities consist of securities issued by Freddie Mac and Ginnie Mae.

(3)Total allowance for credit losses is less than $1 million as of September 30, 2021.

Fannie Mae and Other Agency Securities

Our Fannie Mae and other agency AFS securities consist of securities issued by us, Freddie Mac, or Ginnie Mae. The principal and interest on these securities are guaranteed by the issuing agency. We believe that the guaranty provided by the issuing agency, the support provided to the agencies by the U.S. government, the importance of the agencies to the liquidity and stability in the secondary mortgage market, and the long history of zero credit losses on agency mortgage-related securities are all indicators that there are currently no credit losses on these securities, even if the security is in an unrealized loss position. In addition, we generally hold these securities that are in an unrealized loss position to recovery. As a result, unless we intend to sell the security, we do not recognize an allowance for credit losses on agency mortgage-related securities.

Non-Agency Mortgage-Related Securities

As of September 30, 2021, substantially all of our non-agency mortgage-related securities were in an unrealized gain position. As a result, we have not recognized an allowance for credit losses on these securities.

The following table displays additional information regarding gross unrealized losses and fair value by major security type for AFS securities in an unrealized loss position, excluding allowance for credit losses.

	As of
	September 30, 2021										December 31, 2020
	Less Than 12 Consecutive Months					12 Consecutive Months or Longer					Less Than 12 Consecutive Months					12 Consecutive Months or Longer
	Gross Unrealized Losses in AOCI			Fair Value		Gross Unrealized Losses in AOCI			Fair Value		Gross Unrealized Losses in AOCI			Fair Value		Gross Unrealized Losses in AOCI			Fair Value
	(Dollars in millions)
Fannie Mae		$	(2)	$	231		$	(6)	$	105		$	(1)	$	40		$	(11)	$	94
Mortgage revenue bonds		(2)		2			—		—			—		—			—		—
Total		$	(4)	$	233		$	(6)	$	105		$	(1)	$	40		$	(11)	$	94

The following table displays the gross realized gains and proceeds on sales of AFS securities.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(Dollars in millions)
Gross realized gains	$	—	$	15	$	59	$	45
Total proceeds (excludes initial sale of securities from new portfolio securitizations)	—		137		582		258

The following table displays net unrealized gains and losses on AFS securities and other amounts accumulated within our accumulated other comprehensive income, net of tax.

	As of
	September 30, 2021		December 31, 2020
	(Dollars in millions)
Net unrealized gains on AFS securities for which we have not recorded an allowance for credit losses	$	12	$	74
Net unrealized gains (losses) on AFS securities for which we have recorded an allowance for credit losses	(2)		—
Other	33		42
Accumulated other comprehensive income	$	43	$	116

Maturity Information

The following table displays the carrying amount and fair value of our AFS securities by major security type and remaining contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.

	As of September 30, 2021
	Total Carrying Amount(1)			Total Fair Value		One Year or Less					After One Year Through Five Years					After Five Years Through Ten Years					After Ten Years
						Net Carrying Amount(1)			Fair Value		Net Carrying Amount(1)			Fair Value		Net Carrying Amount(1)			Fair Value		Net Carrying Amount(1)			Fair Value
	(Dollars in millions)
Fannie Mae		$	510	$	518		$	—	$	—		$	2	$	2		$	12	$	13		$	496	$	503
Other agency		14		15			—		—			—		—			1		1			13		14
Alt-A and subprime private-label securities		3		3			—		—			—		—			2		2			1		1
Mortgage revenue bonds		161		164			1		1			29		30			10		9			121		124
Other mortgage-related securities		185		186			—		—			—		—			3		4			182		182
Total		$	873	$	886		$	1	$	1		$	31	$	32		$	28	$	29		$	813	$	824

(1)     Net carrying amount consists of amortized cost, net of allowance for credit losses on AFS debt securities but does not include any unrealized fair value gains or losses.