Derivative Instruments

12 Months Ended

Dec. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative InstrumentsDerivative instruments are an integral part of our strategy in managing interest-rate risk. Derivative instruments may be

privately-negotiated, bilateral contracts, or they may be listed and traded on an exchange. We refer to our derivative

transactions made pursuant to bilateral contracts as our over-the-counter (“OTC”) derivative transactions and our

derivative transactions accepted for clearing by a derivatives clearing organization as our cleared derivative

transactions. We typically do not settle the notional amount of our risk management derivatives; rather, notional

amounts provide the basis for calculating actual payments or settlement amounts. The derivative contracts we use for

interest-rate risk management purposes fall into these broad categories:

•Interest-rate swap contracts. An interest-rate swap is a transaction between two parties in which each party

agrees to exchange payments tied to different interest rates or indices for a specified period of time, generally

based on a notional amount of principal. The types of interest-rate swaps we use include pay-fixed swaps,

receive-fixed swaps and basis swaps.

•Interest-rate option contracts. These contracts primarily include pay-fixed swaptions, receive-fixed swaptions,

cancellable swaps and interest-rate caps. A swaption is an option contract that allows us or a counterparty to

enter into a pay-fixed or receive-fixed swap at some point in the future.

•Foreign currency swaps. These swaps convert debt that we issue in foreign denominated currencies into U.S.

dollars. We enter into foreign currency swaps only to the extent that we hold foreign currency debt.

•Futures. These are standardized exchange-traded contracts that either obligate a buyer to buy an asset at a

predetermined date and price or a seller to sell an asset at a predetermined date and price. The types of

futures contracts we enter into include SOFR and U.S. Treasury.

We account for certain forms of credit risk transfer transactions as derivatives. In our credit risk transfer transactions, a

portion of the credit risk associated with losses on a reference pool of mortgage loans is transferred to a third party. We

enter into derivative transactions that are associated with some of our credit risk transfer transactions, whereby we

manage investment risk to guarantee that certain unconsolidated VIEs have sufficient cash flows to pay their contractual

obligations.

We enter into forward purchase and sale commitments that lock in the future delivery of mortgage loans and mortgage-

related securities at a fixed price or yield. Certain commitments to purchase mortgage loans and purchase or sell

mortgage-related securities meet the criteria of a derivative. We typically settle the notional amount of our mortgage

commitments that are accounted for as derivatives.

We recognize all derivatives as either assets or liabilities in our consolidated balance sheets at their fair value on a

trade-date basis. See “Note 16, Fair Value” for additional information on derivatives recorded at fair value.

Fair Value Hedge Accounting

Pursuant to our fair value hedge accounting program, we may designate certain interest-rate swaps as hedging

instruments in hedges of the change in fair value attributable to the designated benchmark interest rate for certain

closed pools of fixed-rate, single-family mortgage loans or our funding debt. For hedged items in qualifying fair value

hedging relationships, changes in fair value attributable to the designated risk are recognized as a basis adjustment to

the hedged item. We also report changes in the fair value of the derivative hedging instrument in the same consolidated

statements of operations and comprehensive income line item used to recognize the earnings effect of the hedged

item’s basis adjustment. The objective of our fair value hedges is to reduce GAAP earnings volatility related to changes

in benchmark interest rates.

Notional and Fair Value Position of our Derivatives

The following table displays the notional amount and estimated fair value of our asset and liability derivative

instruments.

	As of December 31,
	2024			2023
	Notional Amount	Estimated Fair Value		Notional Amount	Estimated Fair Value
		Asset Derivatives	Liability Derivatives		Asset Derivatives	Liability Derivatives
	(Dollars in millions)
Risk management derivatives designated as hedging instruments:
Swaps:(1)
Pay-fixed	$26,704	$—	$—	$9,954	$—	$—
Receive-fixed	10,057	—	—	28,587	—	—
Total risk management derivatives designated as hedging instruments	36,761	—	—	38,541	—	—
Risk management derivatives not designated as hedging instruments:
Swaps:(1)
Pay-fixed	146,628	—	—	136,648	—	—
Receive-fixed	135,686	71	(2,164)	115,288	76	(3,085)
Basis	250	26	—	250	44	—
Foreign currency	310	—	(81)	316	—	(66)
Swaptions:(1)
Pay-fixed	7,006	280	(31)	5,816	195	(12)
Receive-fixed	5,916	24	(92)	2,666	13	(60)
Futures(1)	86	—	—	32	—	—
Total risk management derivatives not designated as hedging instruments	295,882	401	(2,368)	261,016	328	(3,223)
Netting adjustment(2)	—	(362)	2,367	—	(283)	3,200
Total risk management derivatives portfolio	332,643	39	(1)	299,557	45	(23)
Mortgage commitment derivatives:
Mortgage commitments to purchase whole loans	2,634	1	(9)	2,734	14	—
Forward contracts to purchase mortgage- related securities	31,883	3	(118)	14,264	98	(2)
Forward contracts to sell mortgage-related securities	78,934	108	(10)	43,942	—	(102)
Total mortgage commitment derivatives	113,451	112	(137)	60,940	112	(104)
Credit enhancement derivatives	28,775	28	(16)	27,624	45	(13)
Derivatives at fair value	$474,869	$179	$(154)	$388,121	$202	$(140)

(1)Centrally cleared derivatives have no ascribable fair value because the positions are settled daily.

(2)The netting adjustment represents the effect of the legal 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. Cash collateral posted was $2.0 billion and $2.9

billion as of December 31, 2024 and 2023, respectively. Cash collateral received was $3 million and $5 million as of December 31, 2024

and 2023, respectivelyWe record all gains and losses, including accrued interest, on derivatives while they are not in a qualifying hedging

relationship in “Fair value gains (losses), net” in our consolidated statements of operations and comprehensive income.

The following table displays, by type of derivative instrument, the fair value gains and losses, net on our derivatives.

	For the Year Ended December 31,
	2024	2023	2022
	(Dollars in millions)
Risk management derivatives:
Swaps:
Pay-fixed	$1,472	$(1,441)	$5,541
Receive-fixed	242	2,441	(4,788)
Basis	(22)	39	(143)
Foreign currency	(15)	32	(87)
Swaptions:
Pay-fixed	66	(2)	142
Receive-fixed	(20)	(10)	(19)
Futures	1	—	(1)
Net contractual interest expense on interest-rate swaps	(964)	(711)	(265)
Total risk management derivatives fair value gains (losses), net	760	348	380
Mortgage commitment derivatives fair value gains (losses), net	533	120	2,708
Credit enhancement derivatives fair value gains (losses), net	(82)	46	(97)
Total derivatives fair value gains (losses), net	$1,211	$514	$2,991

Effect of Fair Value Hedge Accounting

The following table displays the effect of fair value hedge accounting on our consolidated statements of operations and

comprehensive income, including gains and losses recognized on fair value hedging relationships.

		For the Year Ended December 31,
		2024		2023
		Interest Income: Mortgage Loans	Interest Expense: Long- Term Debt	Interest Income: Mortgage Loans	Interest Expense: Long- Term Debt
	(Dollars in millions)
Total amounts presented in our consolidated statements of operations and comprehensive income		$144,152	$(121,223)	$133,234	$(110,269)
Gains (losses) from fair value hedging relationships:
Mortgage loans HFI and related interest-rate contracts:
Hedged items		$(675)	$—	$398	$—
Discontinued hedge-related basis adjustment amortization		33	—	56	—
Derivatives designated as hedging instruments		636	—	(430)	—
Interest accruals on derivative hedging instruments		315	—	155	—
Debt of Fannie Mae and related interest-rate contracts:
Hedged items		—	502	—	(128)
Discontinued hedge-related basis adjustment amortization		—	(863)	—	(834)
Derivatives designated as hedging instruments		—	(363)	—	682
Interest accruals on derivative hedging instruments		—	(425)	—	(888)
Gains (losses) recognized in net interest income on fair value hedging relationships		$309	$(1,149)	$179	$(1,168)

Hedged Items in Fair Value Hedging Relationships

The following table displays the carrying amounts of the hedged items that have been in qualifying fair value hedges

recorded in our consolidated balance sheets, including the hedged item’s cumulative basis adjustments and the closed

portfolio balances under the portfolio layer method. The hedged item carrying amounts and total basis adjustments

include both open and discontinued hedges. The amortized cost and designated UPB consists only of open hedges as

of December 31, 2024.

	As of December 31, 2024
	Carrying Amount Assets (Liabilities)	Cumulative Amount of Fair Value Hedging Basis Adjustments Included in the Carrying Amount		Closed Portfolio of Mortgage Loans Under Portfolio Layer Method
		Total Basis Adjustments(1)(2)	Remaining Adjustments - Discontinued Hedge	Total Amortized Cost	Designated UPB
	(Dollars in millions)
Mortgage loans HFI	$1,109,445	$(816)	$(816)	$813,536	$26,825
Debt of Fannie Mae	(47,849)	3,390	3,390	N/A	N/A

	As of December 31, 2023
	Carrying Amount Assets (Liabilities)	Cumulative Amount of Fair Value Hedging Basis Adjustments Included in the Carrying Amount		Closed Portfolio of Mortgage Loans Under Portfolio Layer Method
		Total Basis Adjustments(1)(2)	Remaining Adjustments - Discontinued Hedge	Total Amortized Cost	Designated UPB
	(Dollars in millions)
Mortgage loans HFI	$449,137	$(174)	$(174)	$218,419	$9,955
Debt of Fannie Mae	(59,462)	3,751	3,751	N/A	N/A

(1)No basis adjustment associated with open hedges, as all hedges are designated at the close of business, with a one-day term.

(2)Based on the unamortized balance of the hedge-related cost basis.

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest-rate derivative contracts. We are exposed to

the risk that a counterparty in a derivative transaction will default on payments due to us, which may require us to seek

a replacement derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable

to find a suitable replacement. We manage our derivative counterparty credit exposure relating to our risk management

derivative transactions mainly through enforceable master netting arrangements, which allow us to net derivative assets

and liabilities with the same counterparty or clearing organization and clearing member. For our OTC derivative

transactions, we require counterparties to post collateral, which may include cash, U.S. Treasury securities, agency debt

and agency mortgage-related securities. See “Note 15, Netting Arrangements” for information on our rights to offset

assets and liabilities as of December 31, 2024 and 2023.

For certain OTC derivatives, the amount of collateral we pledge to counterparties related to our derivative instruments is

determined after considering our credit ratings. Currently, our long-term senior debt is rated AA+ or above by the three

major rating agencies. If our long-term senior debt credit ratings were downgraded to established thresholds in our OTC

derivative contracts, which range from A3/A- to Baa2/BBB or below, we would be required to provide additional

collateral to certain counterparties. The aggregate fair value of our OTC derivative instruments with credit-risk-related

contingent features that were in a net liability position was $1.3 billion and $1.8 billion, for which we posted collateral of

$948 million and $1.6 billion as of December 31, 2024 and 2023, respectively. If our credit ratings were downgraded to

Baa2/BBB or below, the maximum additional collateral we would have been required to post to our counterparties as of

December 31, 2024 and 2023 would have been $725 million and $798 million, respectively.