Netting Arrangements

12 Months Ended

Dec. 31, 2023

We use master netting arrangements, which allow us to offset certain financial instruments and collateral with the same

counterparty, to minimize counterparty credit exposure. The tables below display information related to derivatives and

securities purchased under agreements to resell, which are subject to an enforceable master netting arrangement or

similar agreement that are either offset or not offset in our consolidated balance sheets.


	As of December 31, 2023
		Gross Amount Offset(1)	Net Amount Presented in our Consolidated Balance Sheets		Amounts Not Offset in our Consolidated Balance Sheets
	Gross Amount	Gross Amount Offset(1)	Net Amount Presented in our Consolidated Balance Sheets		Financial Instruments(2)	Collateral(3)		Net Amount
	(Dollars in millions)
Assets:
OTC risk management derivatives	$328	$(294)	$34		$—		$—	$34
Cleared risk management derivatives	—	11	11		—		—	11
Mortgage commitment derivatives	112	—	112		(23)		(9)	80
Total derivative assets	440	(283)	157	(4)	(23)		(9)	125
Securities purchased under agreements to resell(5)	65,425	—	65,425		—		(65,425)	—
Total assets	$65,865	$(283)	$65,582		$(23)		$(65,434)	$125



Liabilities:
OTC risk management derivatives	$(3,223)	$3,203	$(20)		$—	$—	$(20)
Cleared risk management derivatives	—	(3)	(3)		—	3	—
Mortgage commitment derivatives	(104)	—	(104)		23	77	(4)
Total liabilities	$(3,327)	$3,200	$(127)	(4)	$23	$80	$(24)


	As of December 31, 2022
		Gross Amount Offset(1)	Net Amount Presented in our Consolidated Balance Sheets		Amounts Not Offset in our Consolidated Balance Sheets
	Gross Amount	Gross Amount Offset(1)	Net Amount Presented in our Consolidated Balance Sheets		Financial Instruments(2)	Collateral(3)		Net Amount
	(Dollars in millions)
Assets:
OTC risk management derivatives	$237	$(234)	$3		$—		$—	$3
Cleared risk management derivatives	—	80	80		—		—	80
Mortgage commitment derivatives	89	—	89		(50)		(12)	27
Total derivative assets	326	(154)	172	(4)	(50)		(12)	110
Securities purchased under agreements to resell(5)	69,415	—	69,415		—		(69,415)	—
Total assets	$69,741	$(154)	$69,587		$(50)		$(69,427)	$110

Liabilities:
OTC risk management derivatives	$(4,686)	$4,662	$(24)		$—		$—	$(24)
Cleared risk management derivatives	—	—	—		—		—	—
Mortgage commitment derivatives	(78)	—	(78)		50		7	(21)
Total liabilities	$(4,764)	$4,662	$(102)	(4)	$50		$7	$(45)

(1)Represents the effect of the 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 and accrued interest.

(2)Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same counterparty under

an enforceable master netting arrangement but we have not elected to offset the related amounts in our consolidated balance sheets.

(3)Represents collateral received that has not been recognized and not offset in our consolidated balance sheets as well as collateral posted

which has been recognized but not offset in our consolidated balance sheets. Does not include collateral held or posted in excess of our

exposure. The fair value of non-cash collateral we pledged which the counterparty was permitted to sell or repledge was $2.2 billion and

$2.1 billion as of December 31, 2023 and 2022, respectively. The fair value of non-cash collateral received was $65.5 billion and $69.5

billion, of which $55.4 billion and $28.7 billion could be sold or repledged as of December 31, 2023 and 2022, respectively. None of the

underlying collateral was sold or repledged as of December 31, 2023 and 2022.

(4)Excludes derivative assets recognized in our consolidated balance sheets of $45 million and $3 million as of December 31, 2023 and

2022, and derivative liabilities recognized in our consolidated balance sheets of $13 million and $66 million as of December 31, 2023 and

2022, respectively, that were not subject to enforceable master netting arrangements.

(5)Includes $21.8 billion and $45.2 billion of securities purchased under agreements to resell classified as “Cash and cash equivalents” in our

consolidated balance sheets as of December 31, 2023 and 2022, respectively. Includes $12.9 billion and $9.7 billion in securities

purchased under agreements to resell classified as “Restricted cash and cash equivalents” in our consolidated balance sheets as of

December 31, 2023 and 2022, respectively.

Derivative instruments are recorded at fair value and securities purchased under agreements to resell are recorded at

amortized cost in our consolidated balance sheets.

We determine our rights to offset the assets and liabilities presented above with the same counterparty, including

collateral posted or received, based on the contractual arrangements entered into with our individual counterparties and

various rules and regulations that would govern the insolvency of a derivative counterparty. The following is a

description, under various agreements, of the nature of those rights and their effect or potential effect on our financial

position.

The terms of the majority of our contracts for OTC risk management derivatives are governed under master agreements

of the International Swaps and Derivatives Association Inc. (“ISDA”). These agreements provide that all transactions

entered into under the agreement with the counterparty constitute a single contractual relationship. An event of default

by the counterparty allows the early termination of all outstanding transactions under the same ISDA agreement and we

may offset all outstanding amounts related to the terminated transactions including collateral posted or received.

The terms of our contracts for cleared derivatives are governed under the rules of the clearing organization and the

agreement between us and the clearing member of that clearing organization. In the event of a clearing organization

default, all open positions at the clearing organization are closed and a net position (on a clearing member by clearing

member basis) is calculated. Unless otherwise transferred, in the event of a clearing member default, all open positions

cleared through that clearing member are closed and a net position is calculated.

The terms of our contracts for mortgage commitment derivatives are primarily governed by the Fannie Mae Single-

Family Selling Guide (“Selling Guide”), for Fannie Mae-approved lenders, or Master Securities Forward Transaction

Agreements (“MSFTA”), for counterparties that are not Fannie Mae-approved lenders. In the event of default by the

counterparty, both the Selling Guide and the MSFTA allow us to terminate all outstanding transactions under the

applicable agreement and offset all outstanding amounts related to the terminated transactions including collateral

posted or received. Under the Selling Guide, upon a lender event of default, we generally may offset any amounts owed

to a lender against any amounts a lender may owe us under any other existing agreement, regardless of whether or not

such other agreements are in default or payments are immediately due.

The terms of our contracts for securities purchased under agreements to resell are governed by Master Repurchase

Agreements, which are based on the guidelines prescribed by the Securities Industry and Financial Markets

Association. Master Repurchase Agreements provide that all transactions under the agreement constitute a single

contractual relationship. An event of default by the counterparty allows the early termination of all outstanding

transactions under the same agreement and we may offset all outstanding amounts related to the terminated

transactions including collateral posted or received.

In addition to these contractual relationships, we are also a clearing member of two divisions of Fixed Income Clearing

Corporation (“FICC”), a central counterparty (“CCP”). One FICC division clears our trades involving securities

purchased under agreements to resell, securities sold under agreements to repurchase, and other non-mortgage

related securities. The other division clears our forward purchase and sale commitments of mortgage-related securities,

including dollar roll transactions. As a result of these trades, we are required to post initial and variation margin

payments as well as settle certain positions each business day in cash. As a clearing member of FICC, we are exposed

to the risk that the FICC or one or more of the CCP’s clearing members fails to perform its obligations as described

below.

•A default by or the financial or operational failure of FICC would require us to replace transactions cleared

through FICC, thereby increasing operational costs and potentially resulting in losses.

•We may also be exposed to losses if a clearing member of FICC defaults on its obligations as each clearing

member is required to absorb a portion of those fellow-clearing member losses. As a result, we could lose the

margin that we have posted to FICC. Moreover, our exposure could exceed the amount of margin that we

previously posted to FICC, since FICC’s rules require non-defaulting clearing members to cover, on a pro rata

basis, losses caused by a clearing member’s default.

We are unable to develop an estimate of the maximum potential amount of future payments that we could be required to

make to FICC under these arrangements as our exposure is dependent on the volume of trades FICC clearing

members execute now and in the future, which varies daily. Although we are unable to develop an estimate of our

maximum exposure, we expect that losses caused by any clearing member would be partially offset by the fair value of

margin posted by the defaulting clearing member and any other available assets of the CCP for those purposes. We

believe that the risk of a material loss is remote due to FICC’s margin and settlement requirements, guarantee funds

and other resources that are available in the event of a default.

We actively monitor the risks associated with FICC in order to effectively manage this counterparty risk and our

associated liquidity exposure.