We maintain an allowance for loan losses for HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts, excluding loans for which we have elected the fair value option. When calculating our allowance for loan losses, we consider the unpaid principal balance, net of unamortized premiums and discounts, and other cost basis adjustments of HFI loans at the balance sheet date. We record write-offs as a reduction to our allowance for loan losses at the point of foreclosure, completion of a short sale, upon the redesignation of nonperforming and reperforming loans from HFI to HFS or when a loan is determined to be uncollectible.

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 “Provision for credit losses” in our condensed consolidated statements of operations and comprehensive income.


	For the Three Months Ended March 31,
			2023		2022
		(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance			$	(9,443)	$	(4,950)
Benefit (provision) for loan losses			4		(282)
Write-offs			42		27
Recoveries			(76)		(33)
Other			(6)		(3)
Ending balance			$	(9,479)	$	(5,241)
Multifamily allowance for loan losses:
Beginning balance			$	(1,904)	$	(679)
Benefit (provision) for loan losses			(180)		28
Write-offs			237		—
Recoveries			(9)		(7)

Ending balance			$	(1,856)	$	(658)
Total allowance for loan losses:
Beginning balance			$	(11,347)	$	(5,629)
Benefit (provision) for loan losses			(176)		(254)
Write-offs			279		27
Recoveries			(85)		(40)
Other			(6)		(3)
Ending balance			$	(11,335)	$	(5,899)

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.

We recognized a modest single-family benefit for loan losses in the first quarter of 2023, primarily driven by a benefit from actual and forecasted home price growth, substantially offset by a provision on newly acquired loans, as described in more detail below:

•Benefit from actual and forecasted home price growth. During the first quarter of 2023, we observed modest actual home price appreciation. In addition, our updated 2023 home price forecast changed from our prior estimate, resulting in a lower estimate of home price declines for the year. Higher home prices decrease the likelihood that loans will default and reduce the amount of losses on loans that do default, which impacts our estimate of losses and ultimately reduces our loss reserves and provision for loan losses.

•Provision on newly acquired loans. The portion of our single-family acquisitions consisting of purchase loans increased in the first quarter of 2023 compared with the first quarter of 2022. As we shift to more purchase loans, which generally have higher origination loan to value (“LTV”) ratios than refinance loans, the credit profile of our acquisitions weakens. In addition, the average original LTV ratio of purchase loans acquired in the first quarter of 2023 was higher than for purchase loan acquisitions in the first quarter of 2022. These factors 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.

The primary factors that contributed to our single-family provision for loan losses in the first quarter of 2022 were a provision for higher actual and projected interest rates partially offset by a benefit from the release of economic concessions, as described in more detail below:

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

•Benefit from the release of economic concessions on loans previously designated as TDRs that received loss mitigation arrangements during the quarter. Pursuant to our adoption of accounting guidance ASU 2022-02, we removed from our allowance the prior economic concession recorded on a loan previously designated as a TDR when the loan was modified or received or extended a loss mitigation arrangement such as a forbearance plan, repayment plan or other loan workout during the period. See “Note 1, Summary of Significant Accounting Policies” in our 2022 Form 10-K for additional information about our adoption of ASU 2022-02.

•Provision for actual and projected economic data, which was primarily driven by decreases in multifamily actual and projected property values. This resulted in higher estimated LTV ratios, which increased our estimate of expected loan losses.

•Provision relating to our multifamily seniors housing loans. In the first quarter of 2023, uncertainty related to our seniors housing loans remained elevated, including uncertainty related to adjustable-rate loans.

•Benefit from actual and projected interest rates. Actual and projected interest rates decreased as of March 31, 2023 compared with December 31, 2022, which reduced the probability of default resulting in a benefit for loan losses.

Multifamily write-offs for the first quarter of 2023 were due to the write-off of a seniors housing portfolio. The seniors housing loans in our multifamily book have been disproportionately affected by the COVID-19 pandemic and ongoing economic trends, higher operating costs exacerbated by the increase in inflation, and higher short-term interest rates for adjustable-rate mortgages, resulting in increased costs for these borrowers.