Allowance for Loan Losses

12 Months Ended

Dec. 31, 2024

Allowance for Loan LossesWe 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 consolidated statements of operations and comprehensive

income.


	For the Year Ended December 31,
	2024	2023	2022
	(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance	$(6,671)	$(9,443)	$(4,950)
Benefit (provision) for loan losses	888	2,079	(5,061)
Write-offs	717	873	883
Recoveries	(253)	(203)	(276)
Other	—	23	(39)
Ending balance	$(5,319)	$(6,671)	$(9,443)
Multifamily allowance for loan losses:
Beginning balance	$(2,059)	$(1,904)	$(679)
Benefit (provision) for loan losses	(748)	(497)	(1,245)
Write-offs	505	401	43
Recoveries	(86)	(59)	(23)
Ending balance	$(2,388)	$(2,059)	$(1,904)
Total allowance for loan losses:
Beginning balance	$(8,730)	$(11,347)	$(5,629)
Benefit (provision) for loan losses	140	1,582	(6,306)
Write-offs	1,222	1,274	926
Recoveries	(339)	(262)	(299)
Other	—	23	(39)
Ending balance	$(7,707)	$(8,730)	$(11,347)

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.

Our single-family benefit for loan losses in 2024 was primarily driven by improvements to our longer-term single-family

home price forecast, partially offset by provision from the risk profile of newly acquired loans, and provision related to

higher mortgage interest rates.

•Home price forecast benefit. We recognized a benefit from improvements to our longer-term single-family home

price forecast. Higher home prices decrease the likelihood that loans will default and reduce the amount of

losses on loans that default, which impacts our estimate of losses and ultimately reduces our loss reserves and

provision for loan losses.

•Provision for newly acquired loans. The provision for newly acquired loans was primarily driven by the credit

risk profile of our 2024 single-family acquisitions, which primarily consisted of purchase loans. Purchase loans

generally have higher origination LTV ratios than refinance loans; therefore, purchase loans generally 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.

•Provision for higher interest rates. We also recognized provision from higher mortgage interest rates. As

mortgage rates increase, we expect a decrease in future prepayments on single-family loans. Lower expected

prepayments extend the expected life of the loan, which increases our expectation of loan losses.

Our single-family benefit for loan losses for 2023 was primarily driven by a benefit from actual and forecasted home

price growth, partially offset by a provision from changes in loan activity and a provision relating to the redesignation of

loans from HFI to HFS, as described below:

•Benefit from actual and forecasted home price growth. During 2023, we observed stronger than expected

actual and forecasted home price appreciation.

•Provision from changes in loan activity. This includes provision on newly acquired loans and was primarily

driven by the credit risk profile of our 2023 single-family acquisitions, which had a higher proportion of purchase

loans compared with our 2022 single-family acquisitions.

•Provision from redesignation of loans from HFI to HFS. In 2023 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, these loans had an amortized cost of $3.3 billion with a related

allowance of $42 million. Since interest rates on the loans were below current market interest rates, their

carrying value exceeded their fair value at the time of redesignation, which resulted in a write-off against the

allowance of $658 million, with a net impact of $616 million in additional provision for loan losses.

Our multifamily provision for loan losses in 2024 was primarily driven by declining multifamily property values, an

increase in multifamily loan delinquencies, and provision related to our estimate of losses on loans involving fraud or

suspected fraud. These factors were partially offset by an improved long-term forecast of multifamily property net

operating income (“NOI”).

•Provision relating to declining multifamily property values. During 2024, multifamily property values declined,

primarily due to elevated interest rates resulting in higher market yield requirements. This decrease in property

values led to higher LTV ratios for loans in our multifamily guaranty book of business, which drove higher

estimated risk of default and loss severity in the allowance and therefore a higher loan loss provision.

•Provision relating to increased delinquencies. Multifamily loan delinquencies increased in 2024, particularly for

adjustable-rate conventional loans that became seriously delinquent and were written down to their net

recoverable amount, which contributed to the multifamily provision for loan losses.

•Provision relating to fraud or suspected fraud. Expected losses relating to multifamily lending transactions

involving fraud or suspected fraud further heightened the risk of default and added to our multifamily loan loss

provision.

•Benefit relating to improved NOI forecast. Our forecast of NOI on multifamily properties improved compared to

our prior forecast, which also positively impacted our projection of multifamily property values. This

improvement in our NOI forecast was primarily due to a refinement of our forecast assumptions to use the

average NOI historical growth rate for a longer period of the forecast.

The primary factors that contributed to our multifamily provision for loan losses in 2023 were:

•Provision from changes in loan activity. This was primarily driven by new acquisitions resulting in book growth,

as well as increased delinquencies and declining DSCRs on the multifamily guaranty book, particularly in

instances where the DSCR declined to at or below a 1.0x coverage ratio.

•Provision from actual and projected economic data. Multifamily property values decreased throughout 2023,

which resulted in higher estimated LTV ratios on the loans in our multifamily guaranty book of business,

resulting in a provision for loan losses.