Allowance for Loan Losses

6 Months Ended

Jun. 30, 2024

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 “Benefit (provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income.


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance	$	(6,275)	$	(9,479)	$	(6,671)	$	(9,443)
Benefit (provision) for loan losses	530		1,399		869		1,403
Write-offs	141		53		256		95
Recoveries	(99)		(27)		(157)		(103)
Other	—		64		—		58
Ending balance	$	(5,703)	$	(7,990)	$	(5,703)	$	(7,990)
Multifamily allowance for loan losses:
Beginning balance	$	(2,104)	$	(1,856)	$	(2,059)	$	(1,904)
Benefit (provision) for loan losses	(245)		(152)		(402)		(332)
Write-offs	38		17		171		254
Recoveries	(12)		(1)		(33)		(10)

Ending balance	$	(2,323)	$	(1,992)	$	(2,323)	$	(1,992)
Total allowance for loan losses:
Beginning balance	$	(8,379)	$	(11,335)	$	(8,730)	$	(11,347)
Benefit (provision) for loan losses	285		1,247		467		1,071
Write-offs	179		70		427		349
Recoveries	(111)		(28)		(190)		(113)
Other	—		64		—		58
Ending balance	$	(8,026)	$	(9,982)	$	(8,026)	$	(9,982)

Our benefit (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.

Our single-family benefit for loan losses for the three and six months ended June 30, 2024 was primarily driven by a benefit from actual and forecasted home price growth, partially offset by a provision from changes in loan activity, as described below:

•Benefit from actual and forecasted home price growth. During the three and six months ended June 30, 2024, actual home prices appreciated more than originally projected and our forecast of future home prices also

improved. 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 from changes in loan activity. This includes provision on newly acquired loans and was primarily driven by the credit risk profile of our single-family acquisitions for the three and six months ended June 30, 2024, which primarily consisted of purchase loans. Purchase loans generally have higher origination LTV ratios than refinance loans; therefore, purchase loans have a higher estimated risk of default and loss severity in the allowance than refinance loans and a correspondingly higher loan loss provision at the time of acquisition.

Our single-family benefit for loan losses for the three and six months ended June 30, 2023 was primarily driven by a benefit from actual and forecasted home price growth, partially offset by a provision from changes in loan activity, as described in more detail below:

•Benefit from actual and forecasted home price growth. During the three and six months ended June 30, 2023, we observed strong actual home price appreciation. In addition, our updated 2023 home price forecast changed from our prior estimate, resulting in a shift to positive home price appreciation for the year.

Our multifamily provision for loan losses for the three months ended June 30, 2024 was primarily driven by continued declines in estimated actual and near-term projected multifamily property values and the impact of new 30-day loan delinquencies in our multifamily guaranty book of business, including provision attributable to a portfolio of approximately $600 million of adjustable-rate conventional loans.

Our multifamily provision for loan losses for the six months ended June 30, 2024 was primarily driven by declines in estimated actual and near-term projected multifamily property values, the impact of new 30-day loan delinquencies in our multifamily guaranty book of business, and increases in actual and projected interest rates.

Our multifamily provision for loan losses for the three and six months ended June 30, 2023 was primarily driven by decreases in estimated multifamily property values. This resulted in higher estimated LTV ratios on the loans in our multifamily guaranty book of business, which increased our estimate of expected credit losses on these loans.

Multifamily write-offs for the six months ended June 30, 2023 were due to the write-off of a seniors housing portfolio in the first quarter of 2023.