Consolidations and Transfers of Financial Assets

9 Months Ended

Sep. 30, 2023

Consolidations and Transfers of Financial Assets [Abstract]

Consolidations and Transfers of Financial Assets

Consolidations and Transfers of Financial AssetsWe have interests in various entities that are considered to be variable interest entities (“VIEs”). The primary types of entities are securitization and resecuritization trusts, limited partnerships and special purpose vehicles (“SPVs”). These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. We consolidate the substantial majority of our single-class securitization trusts because our role as guarantor and master servicer provides us with the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed. In contrast, we do not consolidate single-class securitization trusts when other organizations have the power to direct these activities unless we have the unilateral ability to dissolve the trust. We also do not consolidate our resecuritization trusts unless we have the unilateral ability to dissolve the trust. The underlying assets of our resecuritization trusts include both Fannie Mae securities collateralized solely by mortgage loans held in consolidated trusts, as well as uniform mortgage-backed securities (“UMBS®”) collateralized with securities issued by Fannie Mae or Freddie Mac. The mortgage loans that serve as collateral for Freddie Mac-issued securities are not held in trusts that are consolidated by Fannie Mae.

Unconsolidated VIEs

We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include securitization and resecuritization trusts, limited partnerships, and certain SPVs designed to transfer credit risk. The following table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with unconsolidated securitization and resecuritization trusts.

	As of
	September 30, 2023		December 31, 2022
	(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated balance sheets related to unconsolidated mortgage-backed trusts:
Investments in securities, at fair value	$	2,735	$	3,353
Other assets	37		40
Other liabilities	(43)		(45)
Net carrying amount	$	2,729	$	3,348

Our maximum exposure to loss generally represents the greater of our carrying value in the entity or the unpaid principal balance of the assets covered by our guaranty. Our involvement in unconsolidated resecuritization trusts may give rise to additional exposure to loss depending on the type of resecuritization trust. Fannie Mae non-commingled resecuritization trusts are backed entirely by Fannie Mae MBS. These non-commingled single-class and multi-class resecuritization trusts are not consolidated and do not give rise to any additional exposure to loss as we already consolidate the underlying collateral.

Fannie Mae commingled resecuritization trusts are backed in whole or in part by Freddie Mac securities. The guaranty that we provide to these commingled resecuritization trusts may increase our exposure to loss to the extent that we are providing a guaranty for the timely payment and interest on the underlying Freddie Mac securities that we have not previously guaranteed. Our maximum exposure to loss for these unconsolidated trusts is measured by the amount of Freddie Mac securities that are held in these resecuritization trusts.

Our maximum exposure to loss related to unconsolidated securitization and resecuritization trusts, which includes but is not limited to our exposure to these Freddie Mac securities, was approximately $224 billion and $240 billion as of September 30, 2023 and December 31, 2022, respectively. The total assets of our unconsolidated securitization and resecuritization trusts were approximately $230 billion and $240 billion as of September 30, 2023 and December 31, 2022, respectively.

The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of LIHTC investments, community investments and other entities, was $478 million and the related net carrying value was $474 million as of September 30, 2023. As of December 31, 2022, the maximum exposure to loss was $427 million and the related net carrying value was $424 million. The total assets of these limited partnership investments were $5.5 billion and $4.3 billion as of September 30, 2023 and December 31, 2022, respectively.

The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents the unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities® (“CAS”) and Multifamily Connecticut Avenue SecuritiesTM (“MCASTM”) SPVs. The maximum exposure to loss related to these unconsolidated SPVs was $20.1 billion and $16.9 billion as of September 30, 2023 and December 31, 2022, respectively. The total assets related to these unconsolidated SPVs were $20.1 billion and $17.0 billion as of September 30, 2023 and December 31, 2022, respectively.

The unpaid principal balance of our multifamily loan portfolio was $455.6 billion as of September 30, 2023. As our lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” and “Note 6, Financial Guarantees” with respect to this population are consistent with the FASB’s stated objectives for the disclosures related to unconsolidated VIEs

Transfers of Financial Assets

We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three months ended September 30, 2023 and 2022, the unpaid principal balance of portfolio securitizations was $35.3 billion

and $56.1 billion, respectively. For the nine months ended September 30, 2023 and 2022, the unpaid principal balance of portfolio securitizations was $100.5 billion and $235.9 billion, respectively. The substantial majority of these portfolio securitization transactions generally do not qualify for sale treatment. Portfolio securitization trusts that do qualify for sale treatment primarily consist of loans that are guaranteed or insured, in whole or in part, by the U.S. government.

We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multi-class portfolio securitization trusts. As of September 30, 2023, the unpaid principal balance of retained interests was $844 million and its related fair value was $1.3 billion. As of December 31, 2022, the unpaid principal balance of retained interests was $910 million and its related fair value was $1.4 billion. For the three months ended September 30, 2023 and 2022, the principal, interest and other fees received on retained interests was $72 million and $86 million, respectively. For the nine months ended September 30, 2023 and 2022, the principal, interest and other fees received on retained interests was $220 million and $308 million, respectively.