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Fair Value

3 Months Ended

Mar. 31, 2022

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 March 31, 2022
	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		$	—		$	1,742		$	47		$	—		$	1,789
Other agency		—			2,710			—			—			2,710
Private-label and other mortgage securities		—			127			—			—			127
Non-mortgage-related securities:
U.S. Treasury securities		79,987			—			—			—			79,987
Other securities		—			16			—			—			16
Total trading securities		79,987			4,595			47			—			84,629
Available-for-sale securities:
Mortgage-related securities:
Fannie Mae		—			58			418			—			476
Other agency		—			12			—			—			12
Alt-A and subprime private-label securities		—			5			—			—			5
Mortgage revenue bonds		—			—			141			—			141
Other		—			4			168			—			172
Total available-for-sale securities		—			79			727			—			806
Mortgage loans		—			3,824			668			—			4,492
Other assets:
Risk management derivatives:
Swaps		—			7			82			—			89
Swaptions		—			102			—			—			102
Netting adjustment		—			—			—			(109)			(109)
Mortgage commitment derivatives		—			1,739			—			—			1,739
Credit enhancement derivatives		—			—			3			—			3
Total other assets		—			1,848			85			(109)			1,824
Total assets at fair value		$	79,987		$	10,346		$	1,527		$	(109)		$	91,751

Liabilities:
Long-term debt:


Of Fannie Mae		$	—		$	1,784		$	307		$	—		$	2,091

Of consolidated trusts		—			19,956			161			—			20,117
Total long-term debt		—			21,740			468			—			22,208
Other liabilities:
Risk management derivatives:
Swaps		—			2,895			—			—			2,895
Swaptions		—			21			—			—			21
Netting adjustment		—			—			—			(2,881)			(2,881)
Mortgage commitment derivatives		—			1,141			—			—			1,141
Credit enhancement derivatives		—			—			28			—			28
Total other liabilities		—			4,057			28			(2,881)			1,204
Total liabilities at fair value		$	—		$	25,797		$	496		$	(2,881)		$	23,412


	Fair Value Measurements as of December 31, 2021
	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, including restricted cash equivalents(2)		$	250		$	—		$	—		$	—		$	250
Trading securities:
Mortgage-related securities:
Fannie Mae		—			1,519			57			—			1,576
Other agency		—			2,893			—			—			2,893
Private-label and other mortgage securities		—			137			—			—			137
Non-mortgage-related securities:
U.S. Treasury securities		83,581			—			—			—			83,581
Other securities		—			19			—			—			19
Total trading securities		83,581			4,568			57			—			88,206
Available-for-sale securities:
Mortgage-related securities:
Fannie Mae		—			64			431			—			495
Other agency		—			12			—			—			12
Alt-A and subprime private-label securities		—			3			2			—			5
Mortgage revenue bonds		—			—			144			—			144
Other		—			5			176			—			181
Total available-for-sale securities		—			84			753			—			837
Mortgage loans		—			4,209			755			—			4,964
Other assets:
Risk management derivatives:
Swaps		—			25			152			—			177
Swaptions		—			62			—			—			62
Netting adjustment		—			—			—			(237)			(237)
Mortgage commitment derivatives		—			169			—			—			169

Total other assets		—			256			152			(237)			171
Total assets at fair value		$	83,831		$	9,117		$	1,717		$	(237)		$	94,428

Liabilities:
Long-term debt:


Of Fannie Mae		$	—		$	2,008		$	373		$	—		$	2,381

Of consolidated trusts		—			21,640			95			—			21,735
Total long-term debt		—			23,648			468			—			24,116
Other liabilities:
Risk management derivatives:
Swaps		—			1,165			—			—			1,165
Swaptions		—			23			—			—			23
Netting adjustment		—			—			—			(1,173)			(1,173)
Mortgage commitment derivatives		—			197			—			—			197
Credit enhancement derivatives		—			—			21			—			21
Total other liabilities		—			1,385			21			(1,173)			233
Total liabilities at fair value		$	—		$	25,033		$	489		$	(1,173)		$	24,349

(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 and restricted cash equivalents are composed 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 both 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 March 31, 2022
			Total Gains (Losses) (Realized/Unrealized)																			Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31, 2022(4)(5)		Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of March 31, 2022(1)
	Balance, December 31, 2021		Included in Net Income			Included in Total OCI (Loss)(1)		Purchases(2)		Sales(2)		Issues(3)		Settlements(3)		Transfers out of Level 3		Transfers into Level 3		Balance, March 31, 2022
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	57	$	(6)		$	—	$	—	$	—	$	—	$	—	$	(9)	$	5	$	47	$	(4)	$	—


Total trading securities	$	57	$	(6)	(5)(6)	$	—	$	—	$	—	$	—	$	—	$	(9)	$	5	$	47	$	(4)	$	—

Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	431	$	1		$	(4)	$	—	$	—	$	—	$	(10)	$	—	$	—	$	418	$	—	$	(3)
Alt-A and subprime private-label securities	2		—			—		—		—		—		—		(2)		—		—		—		—
Mortgage revenue bonds	144		—			—		—		—		—		(3)		—		—		141		—		—
Other	176		(8)			(1)		—		—		—		—		—		1		168		—		(1)
Total available-for-sale securities	$	753	$	(7)	(6)(7)	$	(5)	$	—	$	—	$	—	$	(13)	$	(2)	$	1	$	727	$	—	$	(4)

Mortgage loans	$	755	$	(25)	(5)(6)	$	—	$	—	$	—	$	—	$	(41)	$	(44)	$	23	$	668	$	(21)	$	—
Net derivatives	131		(82)		(5)	—		—		—		—		8		—		—		57		(74)		—

Long-term debt:

Of Fannie Mae	$	(373)	$	66	(5)	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(307)	$	66	$	—
Of consolidated trusts	(95)		2		(5)(6)	—		—		—		(86)		18		1		(1)		(161)		2		—
Total long-term debt	$	(468)	$	68		$	—	$	—	$	—	$	(86)	$	18	$	1	$	(1)	$	(468)	$	68	$	—


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Three Months Ended March 31, 2021
			Total Gains (Losses) (Realized/Unrealized)																			Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31, 2021(4)(5)		Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of March 31, 2021(1)
	Balance, December 31, 2020		Included in Net Income			Included in Total OCI (Loss)(1)		Purchases(2)		Sales(2)		Issues(3)		Settlements(3)		Transfers out of Level 3		Transfers into Level 3		Balance, March 31, 2021
	(Dollars in millions)
Trading securities:
Mortgage-related:
Fannie Mae	$	94	$	(1)		$	—	$	—	$	—	$	—	$	—	$	(7)	$	23	$	109	$	2	$	—
Other agency	1		—			—		—		—		—		—		(1)		—		—		—		—

Total trading securities	$	95	$	(1)	(5)(6)	$	—	$	—	$	—	$	—	$	—	$	(8)	$	23	$	109	$	2	$	—

Available-for-sale securities:
Mortgage-related:
Fannie Mae	$	195	$	—		$	(3)	$	—	$	—	$	—	$	(3)	$	—	$	—	$	189	$	—	$	(2)
Alt-A and subprime private-label securities	2		—			(1)		—		—		—		—		—		—		1		—		—
Mortgage revenue bonds	216		—			(1)		—		—		—		(24)		—		—		191		—		—
Other	235		3			3		—		—		—		(11)		—		—		230		—		2
Total available-for-sale securities	$	648	$	3	(6)(7)	$	(2)	$	—	$	—	$	—	$	(38)	$	—	$	—	$	611	$	—	$	—


Mortgage loans	$	861	$	8	(5)(6)	$	—	$	—	$	—	$	—	$	(47)	$	(23)	$	21	$	820	$	9	$	—
Net derivatives	333		(132)		(5)	—		—		—		—		(35)		—		—		166		(167)		—

Long-term debt:

Of Fannie Mae	$	(416)	$	34	(5)	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(382)	$	34	$	—
Of consolidated trusts	(83)		1		(5)(6)	—		—		—		—		4		20		—		(58)		—		—
Total long-term debt	$	(499)	$	35		$	—	$	—	$	—	$	—	$	4	$	20	$	—	$	(440)	$	34	$	—

(1)Gains (losses) included in “Other comprehensive loss” are included in “Changes in unrealized 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 gains, 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 March 31, 2022
	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)	$	47	Various



Available-for-sale securities:
Mortgage-related securities:
Agency(3)	380		Consensus
	38		Various

Total agency	418



Mortgage revenue bonds	92		Single Vendor
	49		Various
Total mortgage revenue bonds	141

Other	167		Discounted Cash Flow	Spreads (bps)	200.0	-	515.0	499.8



	1		Various
Total other	168
Total available-for-sale securities	$	727

Net derivatives	$	82	Dealer Mark
	(25)		Discounted Cash Flow
Total net derivatives	$	57


	Fair Value Measurements as of December 31, 2021
	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)	$	57	Various

Available-for-sale securities:
Mortgage-related securities:
Agency(3)	379		Consensus
	52		Various
Total agency	431





Alt-A and subprime private-label securities	2		Various

Mortgage revenue bonds	94		Single Vendor	Spreads (bps)	9.3	-	49.4	27.2
	50		Various
Total mortgage revenue bonds	144

Other	175		Discounted Cash Flow	Spreads (bps)	409.0	-	443.0	422.0



	1		Various
Total other	176
Total available-for-sale securities	$	753

Net derivatives	$	152	Dealer Mark
	(21)		Discounted Cash Flow
Total net derivatives	$	131

(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 that were measured at fair value on a nonrecurring basis as of March 31, 2022 or December 31, 2021. We held $308 million and $38 million in Level 2 assets as of March 31, 2022 and December 31, 2021, respectively, composed of mortgage loans held for sale that were impaired. We had no Level 2 liabilities that were measured at fair value on a nonrecurring basis as of March 31, 2022 or December 31, 2021.

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis.


		Fair Value Measurements as of
	Valuation Techniques	March 31, 2022		December 31, 2021
		(Dollars in millions)
Nonrecurring fair value measurements:
Mortgage loans:(1)
Mortgage loans held for sale, at lower of cost or fair value	Consensus	$	499	$	201
	Single Vendor	1,514		1,383

Total mortgage loans held for sale, at lower of cost or fair value		2,013		1,584

Single-family mortgage loans held for investment, at amortized cost	Internal Model	1,075		867


Multifamily mortgage loans held for investment, at amortized cost	Appraisal	19		37

	Broker Price Opinion	59		118
	Internal Model	28		23
Total multifamily mortgage loans held for investment, at amortized cost		106		178

Acquired property, net:
Single-family	Accepted Offer	16		13
	Appraisal	84		73
	Internal Model	39		75
	Walk Forward	70		37
	Various	11		11
Total single-family		220		209

Multifamily	Various	—		34

Total nonrecurring assets at fair value		$	3,414	$	2,872

(1)When we measure impairment, including recoveries, based on the fair value of the loan or the underlying collateral and impairment is recorded on any component of the mortgage loan, including accrued interest receivable and amounts due from the borrower for advances of taxes and insurance, we present the entire fair value measurement amount with the corresponding mortgage loan.

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 2021 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 three months ended March 31, 2022.

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 March 31, 2022
	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, including restricted cash and cash equivalents	$	88,981	$	51,656		$	37,325		$	—		$	—		$	88,981
Securities purchased under agreements to resell or similar arrangements	17,907		—			17,907			—			—			17,907
Trading securities	84,629		79,987			4,595			47			—			84,629
Available-for-sale securities	806		—			79			727			—			806
Mortgage loans held for sale	5,920		—			1,312			4,996			—			6,308
Mortgage loans held for investment, net of allowance for loan losses	4,044,618		—			3,672,291			192,844			—			3,865,135
Advances to lenders	5,977		—			5,977			—			—			5,977
Derivative assets at fair value	1,824		—			1,848			85			(109)			1,824
Guaranty assets and buy-ups	90		—			—			192			—			192
Total financial assets	$	4,250,752	$	131,643		$	3,741,334		$	198,891		$	(109)		$	4,071,759

Financial liabilities:

Short-term debt:
Of Fannie Mae	$	4,045	$	—		$	4,044		$	—		$	—		$	4,044

Long-term debt:
Of Fannie Mae	176,124		—			178,526			700			—			179,226
Of consolidated trusts	4,028,628		—			3,795,577			33,002			—			3,828,579
Derivative liabilities at fair value	1,204		—			4,057			28			(2,881)			1,204
Guaranty obligations	99		—			—			96			—			96
Total financial liabilities	$	4,210,100	$	—		$	3,982,204		$	33,826		$	(2,881)		$	4,013,149


	As of December 31, 2021
	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, including restricted cash and cash equivalents	$	108,631	$	64,531		$	44,100		$	—			$	—	$	108,631
Securities purchased under agreements to resell or similar arrangements	20,743		—			20,743			—				—		20,743
Trading securities	88,206		83,581			4,568			57				—		88,206
Available-for-sale securities	837		—			84			753				—		837
Mortgage loans held for sale	5,134		—			178			5,307				—		5,485
Mortgage loans held for investment, net of allowance for loan losses	3,963,108		—			3,796,917			209,090				—		4,006,007
Advances to lenders	8,414		—			8,413			1				—		8,414
Derivative assets at fair value	171		—			256			152				(237)		171
Guaranty assets and buy-ups	92		—			—			207				—		207
Total financial assets	$	4,195,336	$	148,112		$	3,875,259		$	215,567			$	(237)	$	4,238,701

Financial liabilities:

Short-term debt:
Of Fannie Mae	$	2,795	$	—		$	2,795		$	—			$	—	$	2,795

Long-term debt:
Of Fannie Mae	198,097		—			205,142			799				—		205,941
Of consolidated trusts	3,957,299		—			3,951,537			32,644				—		3,984,181
Derivative liabilities at fair value	233		—			1,385			21				(1,173)		233
Guaranty obligations	101		—			—			101				—		101
Total financial liabilities	$	4,158,525	$	—		$	4,160,859		$	33,565			$	(1,173)	$	4,193,251

For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2021 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. 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
	March 31, 2022									December 31, 2021
	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		$	4,492		$	2,091		$	20,117		$	4,964		$	2,381		$	21,735
Unpaid principal balance		4,340			1,988			18,758			4,601			2,197			19,314

(1)Includes nonaccrual loans with a fair value of $63 million and $86 million as of March 31, 2022 and December 31, 2021, respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of March 31, 2022 and December 31, 2021 was $1 million and $3 million, respectively. Includes loans that are 90 days or more past due with a fair value of $95 million and $125 million as of March 31, 2022 and December 31, 2021, respectively. The difference between unpaid principal balance and the fair value of these 90 or more days past due loans as of March 31, 2022 and December 31, 2021 was $1 million and $6 million, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded losses of $191 million for the three months ended March 31, 2022 and gains of $25 million for the three months ended March 31, 2021 from changes in the fair value of loans recorded at fair value in “Fair value gains, net” in our condensed consolidated statements of operations and comprehensive income.

We recorded gains of $1.1 billion and $373 million for the three months ended March 31, 2022 and March 31, 2021, respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value gains, 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.

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