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 September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance	$	(5,703)	$	(7,990)	$	(6,671)	$	(9,443)
Benefit (provision) for loan losses	409		718		1,278		2,121
Write-offs	231		699		487		794
Recoveries	(23)		(48)		(180)		(151)
Other	—		(19)		—		39
Ending balance	$	(5,086)	$	(6,640)	$	(5,086)	$	(6,640)
Multifamily allowance for loan losses:
Beginning balance	$	(2,323)	$	(1,992)	$	(2,059)	$	(1,904)
Benefit (provision) for loan losses	(423)		(83)		(825)		(415)
Write-offs	224		52		395		306
Recoveries	(48)		(8)		(81)		(18)

Ending balance	$	(2,570)	$	(2,031)	$	(2,570)	$	(2,031)
Total allowance for loan losses:
Beginning balance	$	(8,026)	$	(9,982)	$	(8,730)	$	(11,347)
Benefit (provision) for loan losses	(14)		635		453		1,706
Write-offs	455		751		882		1,100
Recoveries	(71)		(56)		(261)		(169)
Other	—		(19)		—		39
Ending balance	$	(7,656)	$	(8,671)	$	(7,656)	$	(8,671)

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 months ended September 30, 2024 was primarily driven by a benefit from forecasted home price growth and a benefit from actual and projected interest rates, partially offset by a provision from changes in loan activity, as described below.

•Benefit from forecasted home price growth. During the three months ended September 30, 2024, our forecast of future home prices 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.

•Benefit from actual and projected interest rates. Actual and projected interest rates decreased in the third quarter of 2024, which reduced the probability of default, resulting in a benefit 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 months ended September 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 nine months ended September 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.

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

Our single-family benefit for loan losses for the three and nine months ended September 30, 2023 was primarily driven by a benefit from actual and forecasted home price growth, partially offset by a provision relating to the redesignation of loans from HFI to HFS and a provision from changes in loan activity, as described below:

•Benefit from actual and forecasted home price growth. During the three and nine months ended September 30, 2023, we observed stronger than expected actual and forecasted home price appreciation.

•Provision from redesignation of loans from HFI to HFS. We redesignated certain nonperforming and reperforming single-family loans from HFI to HFS, as we no longer intended to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off against the allowance for loan losses. During the three months ended September 30, 2023, we redesignated loans with an amortized cost of $3.1 billion with an associated write-off against the allowance for loan losses of $638 million. Interest rates on the redesignated loans were below current market interest rates, and as a result, we recorded additional provision for loan losses to the extent that the carrying value of the loans exceeded their fair value at the time of redesignation.

•Provision from changes in loan activity. This includes provision on newly acquired loans and was primarily driven by an increase of the portion of our single-family acquisitions consisting of purchase loans in the three and nine months ended September 30, 2023, as described in our quarterly report on Form 10-Q for the quarter ended September 30, 2023.

Our multifamily provision for loan losses for the three months ended September 30, 2024 was largely driven by certain adjustable-rate conventional loans that were written down to the net recoverable amount during the period. We also recognized provision for loan losses because, compared to our previous forecast, our current period forecast expects further slight decreases in projected multifamily property values and a longer period of time for projected multifamily property values to improve.

Our multifamily allowance and estimate for loan losses as of September 30, 2024 also considers uncertainty. This includes uncertainty relating to multifamily property values, as well as uncertainty due to the ongoing investigation of multifamily lending transactions with suspected fraud, which may increase the risk of default.

Our multifamily provision for loan losses for the nine months ended September 30, 2024 was primarily driven by loan delinquencies in our multifamily guaranty book of business, including provision attributable to adjustable-rate conventional loans that became seriously delinquent and were written down to the net recoverable amount, declines in estimated actual and projected multifamily property values, and provision for uncertainty described above.

The largest driver of our multifamily provision for loan losses for the three months ended September 30, 2023 was a provision for actual and projected interest rates. Rising interest rates increase the likelihood that loans with balloon balances due at maturity will be unable to refinance, due to higher refinancing rates. In addition, rising interest rates increase costs for loans with adjustable-rates, which increases the expected impairment and the provision for loan losses on these loans.

The impact of this factor was offset by a benefit from actual and projected economic data for the three months ended September 30, 2023. The benefit from actual and projected economic data was primarily driven by the impact of a change in our long-term economic forecast assumptions, which was partially offset by continued declines in multifamily property values.