Fair Value

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

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 fair value 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 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 December 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
Recurring fair value measurements:	(Dollars in millions)
Assets:
Trading securities:
Mortgage-related		$	—		$	3,164		$	47		$	—		$	3,211
Non-mortgage-related(3)		46,898			20			—			—			46,918
Total trading securities		46,898			3,184			47			—			50,129
Available-for-sale securities:
Agency(4)		—			55			371			—			426
Other mortgage-related		—			7			263			—			270
Total available-for-sale securities		—			62			634			—			696
Mortgage loans		—			3,102			543			—			3,645
Derivative assets		—			300			29			(154)			175
Total assets at fair value		$	46,898		$	6,648		$	1,253		$	(154)		$	54,645
Liabilities:
Long-term debt:
Of Fannie Mae		$	—		$	919		$	242		$	—		$	1,161
Of consolidated trusts		—			16,124			136			—			16,260
Total long-term debt		—			17,043			378			—			17,421
Derivative liabilities		—			4,764			66			(4,662)			168
Total liabilities at fair value		$	—		$	21,807		$	444		$	(4,662)		$	17,589

	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
Recurring fair value measurements:	(Dollars in millions)
Assets:
Cash equivalents, including restricted cash equivalents(2)		$	250		$	—		$	—		$	—		$	250
Trading securities:
Mortgage-related		—			4,549			57			—			4,606
Non-mortgage-related(3)		83,581			19			—			—			83,600
Total trading securities		83,581			4,568			57			—			88,206
Available-for-sale securities:
Agency(4)		—			76			431			—			507
Other mortgage-related		—			8			322			—			330
Total available-for-sale securities		—			84			753			—			837
Mortgage loans		—			4,209			755			—			4,964
Derivative 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
Derivative 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. Treasury securities that have a maturity at the date of acquisition of three months or less.

(3)Primarily includes U.S. Treasury securities.

(4)Agency securities consist of securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae.

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 consolidated statements of operations and comprehensive income for Level 3 assets and liabilities.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Year Ended December 31, 2022
			Total Gains (Losses) (Realized/Unrealized)																				Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2022(4)(5)		Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of December 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, December 31, 2022
	(Dollars in millions)
Trading securities:
Mortgage-related	$	57	$	(8)	(5)(6)		$	—	$	—	$	—	$	—	$	(1)	$	(54)	$	53	$	47	$	(6)	$	—
Available-for-sale securities:
Agency	$	431	$	2			$	(18)	$	—	$	—	$	—	$	(44)	$	—	$	—	$	371	$	—	$	(14)
Other mortgage-related	322		(10)				(2)		—		—		—		(46)		(2)		1		263		—		(2)
Total available-for-sale securities	$	753	$	(8)	(6)(7)		$	(20)	$	—	$	—	$	—	$	(90)	$	(2)	$	1	$	634	$	—	$	(16)
Mortgage loans	$	755	$	(67)	(5)(6)		$	—	$	—	$	(4)	$	—	$	(135)	$	(82)	$	76	$	543	$	(57)	$	—
Net derivatives	131		(204)		(5)		—		—		—		—		36		—		—		(37)		(168)		—
Long-term debt:
Of Fannie Mae	$	(373)	$	131	(5)		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(242)	$	131	$	—
Of consolidated trusts	(95)		6		(5)(6)		—		—		—		(86)		39		2		(2)		(136)		6		—
Total long-term debt	$	(468)	$	137			$	—	$	—	$	—	$	(86)	$	39	$	2	$	(2)	$	(378)	$	137	$	—

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Year Ended December 31, 2021
			Total Gains (Losses) (Realized/Unrealized)																				Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2021(4)(5)		Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of December 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, December 31, 2021
	(Dollars in millions)
Trading securities:
Mortgage-related	$	95	$	(24)	(5)(6)		$	—	$	18	$	—	$	—	$	—	$	(165)	$	133	$	57	$	—	$	—
Available-for-sale securities:
Agency	$	195	$	1			$	(1)	$	—	$	—	$	—	$	(33)	$	(107)	$	376	$	431	$	—	$	2
Other mortgage-related	453		13				(6)		—		—		—		(138)		—		—		322		—		(1)
Total available-for-sale securities	$	648	$	14	(6)(7)		$	(7)	$	—	$	—	$	—	$	(171)	$	(107)	$	376	$	753	$	—	$	1
Mortgage loans	$	861	$	31	(5)(6)		$	—	$	89	$	(66)	$	—	$	(194)	$	(86)	$	120	$	755	$	26	$	—
Net derivatives	333		(209)		(5)		—		—		—		—		7		—		—		131		(202)		—
Long-term debt:
Of Fannie Mae	$	(416)	$	43	(5)		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(373)	$	43	$	—
Of consolidated trusts	(83)		(1)		(5)(6)		—		—		—		—		16		20		(47)		(95)		(2)		—
Total long-term debt	$	(499)	$	42			$	—	$	—	$	—	$	—	$	16	$	20	$	(47)	$	(468)	$	41	$	—

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	For the Year Ended December 31, 2020
			Total Gains (Losses) (Realized/Unrealized)																				Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2020(4)(5)		Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of December 31, 2020(1)
	Balance, December 31, 2019		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, December 31, 2020
	(Dollars in millions)
Trading securities:
Mortgage-related	$	46	$	(9)	(5)(6)		$	—	$	—	$	(95)	$	—	$	(3)	$	(49)	$	205	$	95	$	(8)	$	—
Available-for-sale securities:
Agency	$	171	$	1			$	4	$	—	$	(1)	$	—	$	(15)	$	(243)	$	278	$	195	$	—	$	—
Other mortgage-related	621		(9)				1		—		—		—		(162)		—		2		453		—		4
Total available-for-sale securities	$	792	$	(8)	(6)(7)		$	5	$	—	$	(1)	$	—	$	(177)	$	(243)	$	280	$	648	$	—	$	4
Mortgage loans	$	688	$	47	(5)(6)		$	—	$	—	$	(21)	$	—	$	(132)	$	(104)	$	383	$	861	$	11	$	—
Net derivatives	162		233		(5)		—		—		—		—		(80)		18		—		333		159		—
Long-term debt:
Of Fannie Mae	$	(398)	$	(41)	(5)		$	—	$	—	$	—	$	—	$	23	$	—	$	—	$	(416)	$	(41)	$	—
Of consolidated trusts	(75)		(2)		(5)(6)		—		—		—		—		18		5		(29)		(83)		(1)		—
Total long-term debt	$	(473)	$	(43)			$	—	$	—	$	—	$	—	$	41	$	5	$	(29)	$	(499)	$	(42)	$	—

(1)Gains (losses) are included in “Other comprehensive loss” in our 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 (losses), net” in our consolidated statements of operations and comprehensive income.

(6)Gains (losses) included in “Net interest income” in our consolidated statements of operations and comprehensive income includes amortization of cost basis adjustments.

(7)Gains (losses) are included in “Investment gains (losses), net” in our 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 December 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(3)	$	47	Various
Available-for-sale securities:
Agency(3)	371		Consensus
Other mortgage-related	142		Discounted Cash Flow	Spreads (bps)	531.0	-	582.0	557.7
	96		Single Vendor
	25		Various
Total other mortgage-related	263
Total available-for-sale securities	$	634
Net derivatives	$	25	Dealer Mark
	(62)		Discounted Cash Flow
Total net derivatives	$	(37)

	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(3)	$	57	Various
Available-for-sale securities:
Agency(3)	379		Consensus
	52		Various
Total Agency	431
Other mortgage-related	175		Discounted Cash Flow	Spreads (bps)	409.0	-	434.0	422.0
	94		Single Vendor	Spreads (bps)	9.3	-	49.4	27.2
	53		Various
Total other mortgage-related	322
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 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 held no Level 1 assets or liabilities that were measured at fair value on a nonrecurring basis as of December 31, 2022 or 2021. We held $30 million and $38 million in Level 2 assets as of December 31, 2022 and 2021, respectively, composed of mortgage loans held for sale that were impaired. We had no Level 2 or Level 3 liabilities that were measured at fair value on a nonrecurring basis as of December 31, 2022 or 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 December 31,
	Valuation Techniques	2022		2021
		(Dollars in millions)
Nonrecurring fair value measurements:
Mortgage loans:(1)
Mortgage loans held for sale, at lower of cost or fair value	Consensus	$	1,571	$	201
	Single Vendor	92		1,383
Total mortgage loans held for sale, at lower of cost or fair value		1,663		1,584
Single-family mortgage loans held for investment, at amortized cost	Internal Model	1,636		867
Multifamily mortgage loans held for investment, at amortized cost	Appraisal	3		37
	Broker Price Opinion	614		118
	Internal Model	27		23
Total multifamily mortgage loans held for investment, at amortized cost		644		178
Acquired property, net:
Single-family	Accepted Offer	17		13
	Appraisal	65		73
	Internal Model	215		75
	Walk Forward	91		37
	Various	12		11
Total single-family		400		209
Multifamily	Various	119		34
Total nonrecurring assets at fair value		$	4,462	$	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. The following is a description of 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.

Instruments	Valuation Techniques	Classification
U.S Treasury Securities	We classify securities whose values are based on quoted market prices in active markets for identical assets as Level 1 of the valuation hierarchy.	Level 1
Trading Securities and Available-for-Sale Securities	We classify securities in active markets as Level 2 of the valuation hierarchy if quoted market prices in active markets for identical assets are not available. For all valuation techniques used for securities where there is limited activity or less transparency around these inputs to the valuation, these securities are classified as Level 3 of the valuation hierarchy. Single Vendor: Uses one vendor price to estimate fair value. We generally validate these observations of fair value through the use of a discounted cash flow technique whose unobservable inputs (for example, spreads) are disclosed in the table above. Consensus: Uses an average of two or more vendor prices for similar securities. We generally validate these observations of fair value through the use of a discounted cash flow technique whose unobservable inputs (for example, spreads) are disclosed in the table above.	Level 2 and 3
	Discounted Cash Flow: In the absence of prices provided by third-party pricing services supported by observable market data, we estimate the fair value of a portion of our securities using a discounted cash flow technique that uses inputs such as default rates, prepayment speeds, loss severity and spreads based on market assumptions where available. For private-label securities, an increase in unobservable prepayment speeds in isolation would generally result in an increase in fair value, and an increase in unobservable spreads, severity rates or default rates in isolation would generally result in a decrease in fair value. For mortgage revenue bonds classified as Level 3 of the valuation hierarchy, an increase in unobservable spreads would result in a decrease in fair value. Although we have disclosed unobservable inputs for the fair value of our recurring Level 3 securities above, interrelationships exist among these inputs such that a change in one unobservable input typically results in a change to one or more of the other inputs.
Mortgage Loans Held for Investment	Build-up: We derive the fair value of performing mortgage loans using a build-up valuation technique starting with the base value for our Fannie Mae MBS with similar characteristics and then add or subtract the fair value of the associated guaranty asset, guaranty obligation (“GO”) and master servicing arrangement. We set the GO equal to the estimated fair value we would receive if we were to issue our guaranty to an unrelated party in a stand-alone arm’s length transaction at the measurement date. The fair value of the GO is estimated based on our current guaranty pricing for loans underwritten after 2008 and our internal valuation models considering management’s best estimate of key loan characteristics for loans underwritten before 2008. Our performing loans are generally classified as Level 2 of the valuation hierarchy to the extent that significant inputs are observable. To the extent that unobservable inputs are significant, the loans are classified as Level 3 of the valuation hierarchy.	Level 2 and 3
	Consensus: Calculated through the extrapolation of indicative sample bids obtained from multiple active market participants plus the estimated value of any applicable mortgage insurance, the estimated fair value using the Consensus method represents an estimate of the prices we would receive if we were to sell these single-family nonperforming and certain reperforming loans in the whole loan market. The fair value of any mortgage insurance on a nonperforming or reperforming loan is estimated using product-specific pricing grids that have been derived from loan-level bids on whole loan transactions. These loans are generally classified as Level 3 of the valuation hierarchy because significant inputs are unobservable. To the extent that significant inputs are observable, the loans are classified as Level 2 of the valuation hierarchy. We estimate the fair value for a portion of our senior-subordinated trust structures using the average of two or more vendor prices at the security level as a proxy for estimating loan fair value. These loans are classified as Level 3 of the valuation hierarchy because significant inputs are unobservable.
	Single Vendor: We estimate the fair value of our reverse mortgages using the single vendor valuation technique. Internal Model: The internal model used to value collateral contains four sub-component models: 1) Location Model, 2) Neighborhood Model, 3) Automated Valuation Model (“AVM”) Imputation Model and 4) Final Valuation Model. These models consider characteristics of the property, neighborhood, local housing markets, underlying loan and home price growth to derive a final estimated value. These loans are classified as Level 3 of the valuation hierarchy because significant inputs are unobservable.

Instruments	Valuation Techniques	Classification
Mortgage Loans Held for Investment	Appraisal: We use appraisals to estimate the fair value for a portion of our multifamily loans based on either estimated replacement cost, the present value of future cash flows, or sales of similar properties. Significant unobservable inputs include estimated replacement or construction costs, property net operating income, capitalization rates, and adjustments made to sales of comparable properties based on characteristics such as financing, conditions of sale, and physical characteristics of the property. Broker Price Opinion: We use broker price opinions to estimate the fair value for a portion of our multifamily loans. This technique uses both current property value and the property value adjusted for stabilization and market conditions. The unobservable inputs used in this technique are property net operating income and market capitalization rates to estimate property value. Asset Manager Estimate: This technique uses the net operating income and tax assessments of the specific property as well as Metropolitan Statistical Area-specific market capitalization rates and average per unit sales values to estimate property fair value.	Level 2 and 3
	An increase in prepayment speeds in isolation would generally result in an increase in the fair value of our mortgage loans classified as Level 3 of the valuation hierarchy, and an increase in severity rates, default rates or spreads in isolation would generally result in a decrease in fair value. Although we have disclosed unobservable inputs for the fair value of the mortgage loans classified as Level 3 above, interrelationships exist among these inputs such that a change in one unobservable input typically results in a change to one or more of the other inputs.
Mortgage Loans Held for Sale	Loans are reported at the lower of cost or fair value in our consolidated balance sheets. The valuation methodology and inputs used in estimating the fair value of HFS loans are the same as our HFI loans and are described above in “Mortgage Loans Held for Investment.” To the extent that significant inputs are unobservable, the loans are classified within level 3 of the valuation hierarchy.	Level 2 and 3
Acquired Property, Net and Other Assets	Single-family acquired property valuation techniques Accepted Offer: An Offer to Purchase Real Estate that has been submitted by a potential purchaser of an acquired property and accepted by Fannie Mae in a pending sale. Appraisal: An appraisal is an estimate based on recent historical data of the value of a specific property by a certified or licensed appraiser. Adjustments are made for differences between comparable properties for unobservable inputs such as square footage, location, and condition of the property. Broker Price Opinion: This technique provides an estimate of what the property is worth based upon a real estate broker’s use of specific market research and a sales comparison approach that is similar to the appraisal process. This information, all of which is unobservable, is used along with recent and pending sales and current listings of similar properties to arrive at an estimate of value.	Level 3
	Property Inspection Report with Value: This technique provides an estimate of what the property is worth based upon a third party model that is adjusted for condition of the property and/or any other factors impacting the marketability. Appraisal and Broker Price Opinion, and Property Inspection Report with Value Walk Forward (“Walk Forward”): We use these techniques to adjust appraisal, broker price opinion, and property inspection valuations for changing market conditions by applying a walk forward factor based on local price movements since the time the third-party value was obtained. Internal Model: We use an internal model to estimate fair value for distressed properties. The valuation methodology and inputs used are described under “Mortgage Loans Held for Investment.”
	Multifamily acquired property valuation techniques Appraisal: We use this method to estimate property values for distressed properties. The valuation methodology and inputs used are described under “Mortgage Loans Held for Investment.” Broker Price Opinion: We use this method to estimate property values for distressed properties. The valuation methodology and inputs used are described under “Mortgage Loans Held for Investment.” Asset Manager Estimate: We use this method to estimate property values for distressed properties. The valuation methodology and inputs used are described under “Mortgage Loans Held for Investment.”

Instruments	Valuation Techniques	Classification
Asset and Liability Derivative Instruments (collectively “Derivatives”)	The valuation process for the majority of our risk management derivatives uses observable market data provided by third-party sources, resulting in Level 2 classification of the valuation hierarchy. Single Vendor: We use one vendor price to estimate fair value. We generally validate these observations of fair value through the use of a discounted cash flow technique. Clearing House: We use the clearing house-provided value for interest-rate derivatives which are transacted through a clearing house. Internal Model: We use internal models to value interest-rate derivatives which are valued by referencing yield curves derived from observable interest rates and spreads to project and discount cash flows to present value. Discounted Cash Flow: We use discounted cash flow to estimate fair value for credit enhancement derivatives related to CRT. Dealer Mark: Certain highly complex structured swaps primarily use a single dealer mark due to lack of transparency in the market and may be modeled using observable interest rates and volatility levels as well as significant unobservable assumptions, resulting in Level 3 classification of the valuation hierarchy. Mortgage commitment derivatives that use observable market data, quotes and actual transaction price levels adjusted for market movement are typically classified as Level 2 of the valuation hierarchy. To the extent mortgage commitment derivatives include adjustments for market movement that cannot be corroborated by observable market data, we classify them as Level 3 of the valuation hierarchy.	Level 2 and 3
Debt of Fannie Mae and Consolidated Trusts	We classify debt instruments that have quoted market prices in active markets for similar liabilities when traded as assets as Level 2 of the valuation hierarchy. For all valuation techniques used for debt instruments where there is limited activity or less transparency around these inputs to the valuation, these debt instruments are classified as Level 3 of the valuation hierarchy. Consensus: Uses an average of two or more vendor prices or dealer marks that represents estimated fair value for similar liabilities when traded as assets. Single Vendor: Uses a single vendor price that represents estimated fair value for these liabilities when traded as assets. Discounted Cash Flow: Uses spreads based on market assumptions where available. The valuation methodology and inputs used in estimating the fair value of MBS assets are described under “Trading Securities and Available-for-Sale Securities.”	Level 2 and 3

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 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 December 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	$	87,841	$	32,991	$	54,850	$	—	$	—	$	87,841
Securities purchased under agreements to resell	14,565		—		14,565		—		—		14,565
Trading securities	50,129		46,898		3,184		47		—		50,129
Available-for-sale securities	696		—		62		634		—		696
Mortgage loans held for sale	2,033		—		48		2,029		—		2,077
Mortgage loans held for investment, net of allowance for loan losses	4,112,403		—		3,437,979		171,857		—		3,609,836
Advances to lenders	1,502		—		1,502		—		—		1,502
Derivative assets at fair value	175		—		300		29		(154)		175
Guaranty assets and buy-ups	87		—		—		166		—		166
Total financial assets	$	4,269,431	$	79,889	$	3,512,490	$	174,762	$	(154)	$	3,766,987
Financial liabilities:
Short-term debt:
Of Fannie Mae	$	10,204	$	—	$	10,208	$	—	$	—	$	10,208
Long-term debt:
Of Fannie Mae	123,964		—		122,066		558		—		122,624
Of consolidated trusts	4,087,720		—		3,511,958		42,150		—		3,554,108
Derivative liabilities at fair value	168		—		4,764		66		(4,662)		168
Guaranty obligations	94		—		—		66		—		66
Total financial liabilities	$	4,222,150	$	—	$	3,648,996	$	42,840	$	(4,662)	$	3,687,174

	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	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

The following is a description of the valuation techniques we use for fair value measurement of our financial instruments as well as our basis for classifying these measurements as Level 1, Level 2 or Level 3 of the valuation hierarchy in certain specific situations.

Instruments	Description	Classification
Financial Instruments for which Fair Value Approximates Carrying Value	We hold certain financial instruments that are not carried at fair value but for which the carrying value approximates fair value due to the short-term nature and negligible credit risk inherent in them. These financial instruments include cash and cash equivalents, the majority of advances to lenders, and securities sold/purchased under agreements to repurchase/resell.	Level 1 and 2
Securities Sold/Purchased Under Agreements to Repurchase/Resell	The carrying value for the majority of these specific instruments approximates the fair value due to the short-term nature and the negligible inherent credit risk, as they involve the exchange of collateral that is easily traded. Were we to calculate the fair value of these instruments, we would use observable inputs.	Level 2
Mortgage Loans Held for Sale	Loans are reported at the lower of cost or fair value in our consolidated balance sheets. The valuation methodology and inputs used in estimating the fair value of HFS loans are the same as for our HFI loans and are described under “Fair Value Measurement—Mortgage Loans Held for Investment” in the valuation techniques for assets and liabilities held at fair value table. To the extent that significant inputs are unobservable, the loans are classified within Level 3 of the valuation hierarchy.	Level 2 and 3
Mortgage Loans Held for Investment	For a description of loan valuation techniques, refer to “Fair Value Measurement—Mortgage Loans Held for Investment” in the valuation techniques for assets and liabilities held at fair value table. We measure the fair value of certain loans that are delivered under the Home Affordable Refinance Program® (“HARP®”) using a modified build-up approach while the loan is performing. Under this modified approach, we set the credit component of the consolidated loans (that is, the guaranty obligation) equal to the compensation we would currently receive for a loan delivered to us under the program because the total compensation for these loans is equal to their current exit price in the government-sponsored enterprise securitization market. If, subsequent to delivery, the refinanced loan becomes past due or is modified, the fair value of the guaranty obligation is then measured consistent with other loans that have similar characteristics.	Level 2 and 3
Advances to Lenders	The carrying value for the majority of our advances to lenders approximates the fair value due to the short-term nature and the negligible inherent credit risk. If we were to calculate the fair value of these instruments, we would use discounted cash flow models that use observable inputs such as spreads based on market assumptions, resulting in Level 2 classification. Advances to lenders also include loans that do not qualify for Fannie Mae MBS securitization and are valued using a discounted cash flow technique that uses estimated credit spreads of similar collateral and prepayment speeds that consider recent prepayment activity. We classify these valuations as Level 3 given that significant inputs are not observable or are determined by extrapolation of observable inputs.	Level 2 and 3
Guaranty Assets and Buy-ups	Guaranty assets related to our portfolio securitizations are recorded in our consolidated balance sheets at fair value on a recurring basis and are classified as Level 3. Guaranty assets in lender swap transactions are recorded in our consolidated balance sheets at the lower of cost or fair value. These assets, which are measured at fair value on a nonrecurring basis, are also classified as Level 3. We estimate the fair value of guaranty assets by using proprietary models to project cash flows based on management’s best estimate of key assumptions such as prepayment speeds and forward yield curves. Because guaranty assets are similar to an interest-only income stream, the projected cash flows are discounted at rates that consider the current spreads on interest-only swaps that reference Fannie Mae MBS and also liquidity considerations of the guaranty assets. The fair value of guaranty assets includes the fair value of any associated buy-ups.	Level 3
Guaranty Obligations	The fair value of all guaranty obligations, measured subsequent to their initial recognition, is our estimate of a hypothetical transaction price we would receive if we were to issue our guaranty to an unrelated party in a standalone arm’s-length transaction at the measurement date. The valuation methodology and inputs used in estimating the fair value of the guaranty obligations are described under “Fair Value Measurement—Mortgage loans held for investment—build-up” in the valuation techniques for assets and liabilities held at fair value.	Level 3

Fair Value Option

We elect 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 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 December 31,
	2022						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	$	3,645	$	1,161	$	16,260	$	4,964	$	2,381	$	21,735
Unpaid principal balance	3,835		1,145		16,311		4,601		2,197		19,314

(1)    Includes nonaccrual loans with a fair value of $40 million and $86 million as of December 31, 2022 and 2021, respectively. Includes loans that are 90 days or more past due with a fair value of $48 million and $125 million as of December 31, 2022 and 2021, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded losses of $503 million and gains of $28 million and $263 million for the years ended December 31, 2022, 2021 and 2020, respectively, from changes in the fair value of loans recorded at fair value in “Fair value gains (losses), net” in our consolidated statements of operations and comprehensive income.

We recorded gains of $2.3 billion and $631 million and losses of $432 million for the years ended December 31, 2022, 2021 and 2020, respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value gains (losses), net” in our consolidated statements of operations and comprehensive income.