The following table displays changes in our allowance for single-family loans, multifamily loans and total allowance for loan losses. The benefit or provision for loan losses excludes provision for accrued interest receivable losses, guaranty loss reserves and credit losses on available-for-sale (“AFS”) debt securities. Cumulatively, these amounts are recognized as “Benefit (provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income.


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance	$	(5,389)	$	(6,064)	$	(4,950)	$	(9,344)
Benefit (provision) for loan losses	(2,339)		839		(2,869)		4,003
Write-offs	289		51		564		271
Recoveries	(65)		(133)		(182)		(212)
Other	16		(8)		(51)		(33)
Ending Balance	$	(7,488)	$	(5,315)	$	(7,488)	$	(5,315)
Multifamily allowance for loan losses:
Beginning balance	$	(680)	$	(1,050)	$	(679)	$	(1,208)
Benefit (provision) for loan losses	(169)		45		(153)		175
Write-offs	39		7		39		54
Recoveries	(4)		(21)		(21)		(40)

Ending Balance	$	(814)	$	(1,019)	$	(814)	$	(1,019)
Total allowance for loan losses:
Beginning balance	$	(6,069)	$	(7,114)	$	(5,629)	$	(10,552)
Benefit (provision) for loan losses	(2,508)		884		(3,022)		4,178
Write-offs	328		58		603		325
Recoveries	(69)		(154)		(203)		(252)
Other	16		(8)		(51)		(33)
Ending Balance	$	(8,302)	$	(6,334)	$	(8,302)	$	(6,334)

Our benefit or 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 type, volume and effectiveness of our loss mitigation activities, including forbearances and loan modifications, the volume of foreclosures completed, and the volume and pricing of loans redesignated from HFI to HFS. Our benefit or provision can also be impacted by updates to the models, assumptions, and data used in determining our allowance for loan losses.

In recent periods, changes in actual and projected interest rates have been a meaningful driver of our benefit or provision for loan losses as these changes drive prepayment speeds and impact the measurement of the economic concessions granted to borrowers on modified loans. Pursuant to our adoption of ASU 2022-02 on January 1, 2022, we prospectively discontinued TDR accounting and no longer measure the economic concession for restructurings occurring on or after the adoption date. This accounting also results in the elimination of any existing economic concession related to a loan that was previously designated as a TDR if such loan is restructured on or after January 1, 2022. See “Note 1, Summary of Significant Accounting Policies—New Accounting Guidance” for more information about our adoption of ASU 2022-02.

Our single-family provision for loan losses for the three months ended September 30, 2022 was primarily driven by a provision from actual and forecasted home prices. Actual home prices declined slightly on a national basis in the third quarter of 2022. In addition, our home price forecast worsened compared with the second quarter of 2022. While our second quarter 2022 home price forecast estimated home price growth in the second half of 2022 and in 2023, our current home price forecast estimates additional home price declines in the fourth quarter of 2022 and throughout 2023. Lower home prices increase the likelihood that loans will default and increase the amount of credit loss on loans that do default, which increases our estimate of losses and ultimately increases our loss reserves and provision for loan losses.

•Provision from actual and forecasted home prices in the third quarter of 2022 discussed above was the largest driver of our single-family provision for loan losses for the first nine months of 2022. The impact of this home-price related provision in the third quarter of 2022 was partially offset by a benefit from actual and expected home price growth in each of the first and second quarters of 2022. During the first half of the year, our forecasted home prices were positive for the second half of 2022 through 2023. In addition, we observed strong actual home price growth through the second quarter of 2022.

•Provision from higher actual and projected interest rates as of September 30, 2022 compared with December 31, 2021. As mortgage rates increase, we expect a decrease in future prepayments on single-family loans, including modified loans accounted for as TDRs. Lower expected prepayments extend the expected lives of these TDR loans, which increases the expected impairment relating to economic concessions provided on them, resulting in a provision for loan losses.

•Provision from changes in loan activity, which includes provision on newly acquired loans. Throughout the first nine months of 2022, refinance loan volumes have continued to decline and purchase loans have increased as a percentage of acquisitions compared to the first nine months of 2021. As we shift to more purchase loans, the credit profile of our acquisitions weakens as purchase loans generally have higher origination LTV ratios than refinance loans. This drove a higher estimated risk of default and loss severity in the allowance and therefore a higher loan loss provision for those loans at the time of acquisition. In addition, for the third quarter of 2022, our loan loss provision also increased as our more negative home price forecast impacted our estimate of losses on newly acquired loans.

•Benefit from actual and forecasted home price growth. For the three months ended September 30, 2021, actual home price growth continued to be strong. We also increased our expectations for home price growth on a national basis for full-year 2021.

•Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. For the three months ended September 30, 2021, the benefit was driven by the removal of the remaining non-modeled adjustment related to COVID-19 as discussed below.

•Benefit from the redesignation of certain nonperforming and reperforming single-family loans from HFI to HFS. We redesignated certain nonperforming and reperforming single-family loans from HFI to HFS, as we no longer intended to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off against the allowance for loan losses. Amounts recorded in the allowance related to these loans exceeded the amounts written off, resulting in a net benefit for loan losses.

•Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. During the first and second quarters of 2021, management used its judgment to supplement the loss projections developed by our credit loss model to account for uncertainty arising from the COVID-19 pandemic that was not represented in historical data or otherwise captured by our credit model. As of September 30, 2021, management removed the remaining non-modeled adjustment as the effects of the economic stimulus, the vaccine rollout, and the effectiveness of COVID-19-related loss mitigation strategies became much less uncertain. Specifically, the decrease in uncertainty as of September 30, 2021 compared with the end of 2020 was primarily driven by the passage of the American Rescue Plan Act of 2021 and the broad implementation of the COVID-19 vaccination program in the United States, which contributed to a significant increase in business activity and helped support continued economic growth. There was also a steady decline in the number of borrowers in a COVID-19-

related forbearance, lessening expectations of loan losses. Additionally, we believed the array of possible future economic environments included in our credit model, which captured scenarios that may be remote, combined with data consumed over the course of the COVID-19 pandemic removed the need to continue to supplement modeled results.

The impact of these factors was partially offset by a provision for higher actual and projected interest rates, which reduced our single-family benefit for loan losses recognized for the nine months ended September 30, 2021. Actual and projected interest rates were higher as of September 30, 2021 compared with December 31, 2020.

The increase in single-family write-offs for the three and nine months ended September 30, 2022 compared with the three and nine months ended September 30, 2021 was primarily driven by higher lower-of-cost-or-market adjustments at the time of loan redesignation due to price declines on our HFS loans as interest rates rose. In addition, we had higher write-offs on single-family loans that went to foreclosure for the three and nine months ended September 30, 2022 due to increased foreclosure activity as well as a decrease in the estimated proceeds from sales of REO as a result of the recent decline in home prices.

The largest driver of our multifamily provision for loan losses for the three and nine months ended September 30, 2022, was a provision for higher actual and projected interest rates. Rising interest rates may reduce the ability of multifamily borrowers to refinance their loans, which often have balloon balances at maturity, increasing our provision for loan losses. Additionally, rising interest rates also increase the chance that multifamily borrowers with adjustable-rate mortgages may default due to higher payments if the property net operating income is not increasing at a similar rate.

•Benefit from actual and projected economic data. For the three and nine months ended September 30, 2021, property value forecasts increased due to continued demand for multifamily housing. In addition, improved job growth led to an increase in projected average property net operating income, which reduced the probability of loan defaults resulting in a benefit for loan losses for the quarter and year-to-date.

•Benefit from lower expected loan losses as a result of the COVID-19 pandemic. Similar to our single-family benefit for loan losses described above, for the first and second quarters of 2021 management used its judgment to supplement the loss projections developed by our credit loss model to account for uncertainty arising from the COVID-19 pandemic. As of September 30, 2021, management removed the remaining non-modeled adjustment as the effects of the economic stimulus, the vaccine rollout, and the effectiveness of COVID-19-related loss mitigation strategies were less uncertain.