Derivative Instruments

3 Months Ended

Mar. 31, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative 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 consist primarily of interest-rate swaps and interest-rate options. See “Note 9, Derivative Instruments” in our 2024 Form 10-K for additional information on interest-rate risk management.

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 condensed consolidated balance sheets at their fair value on a trade date basis. See “Note 13, 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 condensed 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, including derivative instruments designated as hedges.


	As of March 31, 2025						As of December 31, 2024
	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	$	21,028	$	—	$	—		$	26,704		$	—	$	—
Receive-fixed	9,401		—		—			10,057			—		—

Total risk management derivatives designated as hedging instruments	30,429		—		—			36,761			—		—
Risk management derivatives not designated as hedging instruments:
Swaps:(1)
Pay-fixed	161,278		—		—			146,628			—		—
Receive-fixed	121,759		142		(1,739)			135,686			71		(2,164)
Basis	250		30		—			250			26		—
Foreign currency	320		—		(70)			310			—		(81)
Swaptions:(1)
Pay-fixed	7,006		254		(19)			7,006			280		(31)
Receive-fixed	5,916		24		(92)			5,916			24		(92)
Futures(1)	70		—		—			86			—		—
Total risk management derivatives not designated as hedging instruments	296,599		450		(1,920)			295,882			401		(2,368)


Netting adjustment(2)	—		(399)		1,893			—			(362)		2,367
Total risk management derivatives portfolio	327,028		51		(27)			332,643			39		(1)
Mortgage commitment derivatives:
Mortgage commitments to purchase whole loans	3,384		7		(1)			2,634			1		(9)
Forward contracts to purchase mortgage-related securities	24,321		43		(5)			31,883			3		(118)
Forward contracts to sell mortgage-related securities	55,283		2		(105)			78,934			108		(10)
Total mortgage commitment derivatives	82,988		52		(111)			113,451			112		(137)
Credit enhancement derivatives	29,581		24		(19)			28,775			28		(16)
Derivatives at fair value	$	439,597	$	127	$	(157)		$	474,869		$	179	$	(154)

(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 $1.6 billion and $2.0 billion as of March 31, 2025 and December 31, 2024, respectively. Cash collateral received was $76 million and $3 million as of March 31, 2025 and December 31, 2024, respectively.

We record all gains and losses, including accrued interest, on derivatives while they are not in a qualifying designated hedging relationship in “Fair value gains (losses), net” in our condensed 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 Three Months Ended March 31,
		2025		2024
		(Dollars in millions)
Risk management derivatives:
Swaps:
Pay-fixed		$	(879)	$	1,362
Receive-fixed		1,015		(696)
Basis		12		1
Foreign currency		9		(8)
Swaptions:
Pay-fixed		(14)		23
Receive-fixed		—		(4)
Futures		(1)		1
Net contractual interest income (expense) on interest-rate swaps		(218)		(199)
Total risk management derivatives fair value gains (losses), net		(76)		480
Mortgage commitment derivatives fair value gains (losses), net		(242)		207
Credit enhancement derivatives fair value gains (losses), net		(17)		(15)
Total derivatives fair value gains (losses), net		$	(335)	$	672

Effect of Fair Value Hedge Accounting

The following table displays the effect of fair value hedge accounting on our condensed consolidated statements of operations and comprehensive income, including gains and losses recognized on fair value hedging relationships.



	For the Three Months Ended March 31,
		2025	2024
			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 condensed consolidated statements of operations and comprehensive income			$	37,399	$	(31,910)	$	35,216	$	(29,580)

Gains (losses) from fair value hedging relationships:
Mortgage loans HFI and related interest-rate contracts:
Hedged items			$	436	$	—	$	(334)	$	—
Discontinued hedge related basis adjustment amortization			16		—		8		—


Derivatives designated as hedging instruments			(441)		—		309		—
Interest accruals on hedging instruments			56		—		66		—
Debt of Fannie Mae and related interest-rate contracts:
Hedged items			—		(212)		—		428
Discontinued hedge-related basis adjustment amortization			—		(226)		—		(206)
Derivatives designated as hedging instruments			—		216		—		(355)
Interest accruals on derivative hedging instruments			—		(23)		—		(167)
Total effect of fair value hedges			$	67	$	(245)	$	49	$	(300)

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 condensed 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 March 31, 2025 and December 31, 2024.


	As of March 31, 2025
	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	$	1,096,598	$	(364)	$	(364)	$	161,901	$	21,033

Debt of Fannie Mae	(45,051)		2,952		2,952		N/A		N/A


	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

(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 12, Netting Arrangements” for information on our rights to offset assets and liabilities as of March 31, 2025 and December 31, 2024.

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 S&P Global Ratings and Moody's Investors Service. 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 $1.0 billion and $1.3 billion, for which we posted collateral of $783 million and $948 million as of March 31, 2025 and December 31, 2024, 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 March 31, 2025 and December 31, 2024 would have been $579 million and $725 million, respectively.