Allowance for Loan Losses

3 Months Ended

Mar. 31, 2025

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


	For the Three Months Ended March 31,
		2025		2024
		(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance		$	(5,319)	$	(6,671)
(Provision) benefit for loan losses		(16)		339
Write-offs		189		115
Recoveries		(32)		(58)

Ending balance		$	(5,178)	$	(6,275)
Multifamily allowance for loan losses:
Beginning balance		$	(2,388)	$	(2,059)
(Provision) benefit for loan losses		1		(157)
Write-offs		61		133
Recoveries		(28)		(21)

Ending balance		$	(2,354)	$	(2,104)
Total allowance for loan losses:
Beginning balance		$	(7,707)	$	(8,730)
(Provision) benefit for loan losses		(15)		182
Write-offs		250		248
Recoveries		(60)		(79)

Ending balance		$	(7,532)	$	(8,379)

Our (provision) benefit 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 provision for loan losses in the first quarter of 2025 reflected the impact of recent economic uncertainty and improvements in actual and forecasted home price growth.

More specifically, the provision from economic uncertainty was offset by a benefit from actual and forecasted home price growth as described below:

•Provision from economic uncertainty. During the first quarter of 2025, the impact of economic uncertainty associated with recent trade and fiscal policies led to market volatility, which increased our estimate for loan losses and resulted in a provision.

•Benefit from actual and forecasted home price growth. During the first quarter of 2025,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 default,

which impacts our estimate of losses and ultimately reduces our loss reserves and provision for loan losses.

Our single-family benefit for loan losses in the first quarter of 2024 was primarily driven by a benefit from forecasted home price growth, partially offset by a provision from changes in loan activity and a provision from actual and projected interest rates, as described below:

•Benefit from actual and forecasted home price growth. During the first quarter of 2024, we observed stronger-than-expected 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 first quarter 2024 single-family acquisitions, which primarily consisted of purchase loans.

•Provision from actual and projected interest rates. Actual and projected interest rates increased in the first quarter of 2024 compared with our prior forecast. 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 multifamily benefit for loan losses in the first quarter of 2025 was neutral. Our multifamily allowance for loan losses as of March 31, 2025 includes a component related to economic uncertainty, particularly uncertainty related to multifamily property values.

Our multifamily provision for loan losses in the first quarter of 2024 was primarily driven by continued declines in actual and projected multifamily property values, which included provision attributable to property value uncertainty, as well as provision due to increases in actual and projected interest rates compared to our prior forecast. Our forecast of multifamily property value estimated further declines in the near term offset by a long-term improvement.