Mortgage Loans

6 Months Ended

Jun. 30, 2011

Notes to Consolidated Financial Statements

3. Mortgage Loans

The following table displays our mortgage loans as of June 30, 2011 and December 31, 2010.

			As of
			June 30, 2011						December 31, 2010
			Of		Of				Of		Of
			Fannie		Consolidated				Fannie		Consolidated
			Mae		Trusts		Total		Mae		Trusts		Total
			(Dollars in millions)
Single-family			$	317,690	$	2,510,772	$	2,828,462	$	328,824	$	2,490,623	$	2,819,447
Multifamily				85,461		87,329		172,790		95,157		75,393		170,550
	Total unpaid principal balance of mortgage loans			403,151		2,598,101		3,001,252		423,981		2,566,016		2,989,997
Cost basis and fair value adjustments, net				(16,428)		12,511		(3,917)		(16,498)		11,777		(4,721)
Allowance for loan losses for loans held for investment				(55,966)		(13,540)		(69,506)		(48,530)		(13,026)		(61,556)
		Total mortgage loans	$	330,757	$	2,597,072	$	2,927,829	$	358,953	$	2,564,767	$	2,923,720

During the three months ended June 30, 2011, we did not redesignate any loans from held for investment (“HFI”) to held for sale (“HFS”). During the six months ended June 30, 2011, we redesignated loans with a carrying value of $561 million from HFI to HFS.

The following tables display an aging analysis of the total recorded investment in our HFI mortgage loans, excluding loans for which we have elected the fair value option, by portfolio segment and class as of June 30, 2011 and December 31, 2010. For purposes of this table, each loan in our portfolio is included in only one segment and class category.

				As of June 30, 2011⁽¹⁾
				30 - 59 Days Delinquent		60 - 89 Days Delinquent		Seriously Delinquent⁽²⁾		Total Delinquent		Current		Total		Recorded Investment in Loans Over 90 Days Delinquent and Accruing Interest		Recorded Investment in Nonaccrual Loans

				(Dollars in millions)
Single-family:
	Primary⁽³⁾		$	43,387	$	15,120	$	85,242	$	143,749	$	2,348,882	$	2,492,631	$	115	$	100,192
	Government⁽⁴⁾			107		47		303		457		51,490		51,947		303		-
	Alt-A			7,660		3,372		32,183		43,215		147,541		190,756		19		35,531
	Other⁽⁵⁾			3,641		1,543		12,972		18,156		78,726		96,882		99		14,317
		Total single-family		54,795		20,082		130,700		205,577		2,626,639		2,832,216		536		150,040

Multifamily ⁽⁶⁾				228		NA		849		1,077		173,721		174,798		-		801
		Total	$	55,023	$	20,082	$	131,549	$	206,654	$	2,800,360	$	3,007,014	$	536	$	150,841

				As of December 31, 2010⁽¹⁾
				30 - 59 Days Delinquent		60 - 89 Days Delinquent		Seriously Delinquent⁽²⁾		Total Delinquent		Current		Total		Recorded Investment in Loans Over 90 Days Delinquent and Accruing Interest		Recorded Investment in Nonaccrual Loans

				(Dollars in millions)
Single-family:
	Primary⁽³⁾		$	47,048	$	18,055	$	93,302	$	158,405	$	2,299,080	$	2,457,485	$	139	$	110,758
	Government⁽⁴⁾			125		58		371		554		51,930		52,484		354		-
	Alt-A			8,547		4,097		37,557		50,201		156,951		207,152		21		41,566
	Other⁽⁵⁾			3,785		1,831		15,290		20,906		84,473		105,379		80		17,022
		Total single-family		59,505		24,041		146,520		230,066		2,592,434		2,822,500		594		169,346

Multifamily ⁽⁶⁾				382		NA		1,132		1,514		171,000		172,514		-		1,012
		Total	$	59,887	$	24,041	$	147,652	$	231,580	$	2,763,434	$	2,995,014	$	594	$	170,358

____________
⁽¹⁾	Recorded investment consists of (a) unpaid principal balance; (b) unamortized premiums, discounts and other cost basis adjustments; and
	(c) accrued interest receivable.
⁽²⁾	Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Multifamily seriously delinquent
	loans are loans that are 60 days or more past due.
⁽³⁾	Consists of mortgage loans that are not included in other loan classes.
⁽⁴⁾	Consists of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A.
	Primarily consists of reverse mortgages which due to their nature are not aged and are included in the current column.
⁽⁵⁾	Includes loans with higher-risk loan characteristics, such as interest-only loans and negative-amortizing loans that are neither government
	nor Alt-A.
⁽⁶⁾	Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.

The following table displays the total recorded investment in our HFI loans, excluding loans for which we have elected the fair value option, by portfolio segment, class and credit quality indicators as of June 30, 2011 and December 31, 2010. The single-family credit quality indicator is updated quarterly and the multifamily credit quality indicators are as of the origination date of each loan.

				As of
				June 30, 2011⁽¹⁾⁽²⁾						December 31, 2010⁽¹⁾⁽²⁾
				Primary⁽³⁾		Alt-A		Other⁽⁴⁾		Primary⁽³⁾		Alt-A		Other⁽⁴⁾
				(Dollars in millions)
Single-family
	Estimated mark-to-market LTV ratio:⁽⁵⁾
		Less than or equal to 80%		$	1,548,616	$	69,375	$	26,745	$	1,561,202	$	79,305	$	29,854
		80.01% to 90%			383,654		23,555		10,883		376,414		27,472		13,394
		90.01% to 100%			224,680		21,415		10,740		217,193		24,392		12,935
		100.01% to 110%			120,482		17,107		9,941		112,376		18,022		11,400
		110.01% to 120%			68,729		12,948		8,535		62,283		12,718		8,967
		120.01% to 125%			24,031		5,184		3,615		21,729		5,083		3,733
		Greater than 125%			122,439		41,172		26,423		106,288		40,160		25,096
			Total	$	2,492,631	$	190,756	$	96,882	$	2,457,485	$	207,152	$	105,379

				As of
				June 30, 2011⁽¹⁾		December 31, 2010⁽¹⁾

				(Dollars in millions)
Multifamily
	Original LTV ratio:
		Less than or equal to 70%		$	99,064	$	96,844
		70.01% to 80%			71,187		71,560
		Greater than 80%			4,547		4,110
			Total	$	174,798	$	172,514

	Original debt service coverage ratio:
		Less than or equal to 1.10%		$	14,097	$	15,034
		1.11% to 1.25%			51,556		50,745
		Greater than 1.25%			109,145		106,735
			Total	$	174,798	$	172,514

___________

⁽¹⁾	Recorded investment consists of the following: (a) unpaid principal balance; (b) unamortized premiums, discounts and other cost basis adjustments; and (c) accrued interest receivable.

⁽²⁾	Excludes $51.9 billion and $52.5 billion as of June 30, 2011 and December 31, 2010, respectively, of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A loans. The segment class is primarily reverse mortgages for which we do not calculate an estimated mark-to-market LTV.

⁽³⁾	Consists of mortgage loans that are not included in other loan classes.

⁽⁴⁾	Includes loans with higher-risk loan characteristics, such as interest-only loans and negative-amortizing loans that are neither government nor Alt-A.

⁽⁵⁾	The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic changes in home value.

Individually Impaired Loans

Individually impaired loans include TDRs, acquired credit-impaired loans, and other multifamily loans regardless of whether we are currently accruing interest. The following tables display the total recorded investment, unpaid principal balance, related allowance and average recorded investment as of June 30, 2011 and December 31, 2010 and interest income recognized for the three and six months ended June 30, 2011 and 2010 for individually impaired loans.

					As of June 30, 2011								For the Three Months Ended June 30, 2011						For the Six Months Ended June 30, 2011
					Unpaid Principal Balance		Total Recorded Investment⁽¹⁾		Related Allowance for Loan Losses		Related Allowance for Accrued Interest Receivable		Average Recorded Investment		Total Interest Income Recognized⁽²⁾		Interest Income Recognized on a Cash Basis		Average Recorded Investment		Total Interest Income Recognized⁽²⁾		Interest Income Recognized on a Cash Basis
					Unpaid Principal Balance		Total Recorded Investment⁽¹⁾		Related Allowance for Loan Losses		Related Allowance for Accrued Interest Receivable		Average Recorded Investment		Total Interest Income Recognized⁽²⁾		Interest Income Recognized on a Cash Basis		Average Recorded Investment		Total Interest Income Recognized⁽²⁾		Interest Income Recognized on a Cash Basis

					(Dollars in millions)
Individually impaired loans:
	With related allowance recorded:
		Single-family:
			Primary⁽³⁾		$	106,911	$	99,339	$	28,217	$	690	$	97,984	$	911	$	326	$	97,723	$	1,815	$	367
			Government⁽⁴⁾			233		229		47		6		274		3		-		265		6		-
			Alt-A			32,053		28,920		10,817		296		28,862		239		96		29,213		481		98
			⁽⁵⁾			15,206		14,327		5,131		111		14,158		106		41		14,108		212		47
				Total single-family		154,403		142,815		44,212		1,103		141,278		1,259		463		141,309		2,514		512

		Multifamily				2,076		2,076		523		21		2,055		23		2		2,135		48		3
		Total individually impaired loans
		with related allowance recorded				156,479		144,891		44,735		1,124		143,333		1,282		465		143,444		2,562		515

	With no related allowance recorded:⁽⁶⁾
		Single-family:
			Primary⁽³⁾			11,959		8,127		-		-		7,399		144		31		5,695		252		88
			Government⁽⁴⁾			18		6		-		-		15		3		-		11		4		-
			Alt-A			4,252		2,212		-		-		1,959		53		7		1,331		86		26
			⁽⁵⁾			1,053		591		-		-		541		13		3		385		21		7
				Total single-family		17,282		10,936		-		-		9,914		213		41		7,422		363		121

		Multifamily				688		676		-		-		686		10		2		711		25		5
		Total individually impaired loans
		with no related allowance recorded				17,970		11,612		-		-		10,600		223		43		8,133		388		126

	Total individually impaired loans⁽⁷⁾				$	174,449	$	156,503	$	44,735	$	1,124	$	153,933	$	1,505	$	508	$	151,577	$	2,950	$	641

					As of December 31, 2010
					Unpaid Principal Balance		Total Recorded Investment⁽¹⁾		Related Allowance for Loan Losses		Related Allowance for Accrued Interest Receivable		Average Recorded Investment
					(Dollars in millions)
Individually impaired loans:
	With related allowance recorded:
		Single-family:
			Primary⁽³⁾		$	99,838	$	93,024	$	23,565	$	772	$	81,258
			Government⁽⁴⁾			240		248		38		7		141
			Alt-A			30,932		28,253		9,592		368		25,361
			⁽⁵⁾			14,429		13,689		4,479		137		12,094
				Total single-family		145,439		135,214		37,674		1,284		118,854

		Multifamily				2,372		2,371		556		23		1,496
		Total individually impaired loans
		with related allowance recorded				147,811		137,585		38,230		1,307		120,350

	With no related allowance recorded:⁽⁶⁾
		Single-family:
			Primary⁽³⁾			10,586		7,237		-		-		7,860
			Government⁽⁴⁾			19		13		-		-		11
			Alt-A			3,600		1,884		-		-		2,091
			⁽⁵⁾			879		512		-		-		589
				Total single-family		15,084		9,646		-		-		10,551

		Multifamily				789		811		-		-		642
		Total individually impaired loans
		with no related allowance recorded				15,873		10,457		-		-		11,193

	Total individually impaired loans⁽⁷⁾				$	163,684	$	148,042	$	38,230	$	1,307	$	131,543

___________

⁽¹⁾	Recorded investment consists of the following: (a) unpaid principal balance; (b) unamortized premiums, discounts and other cost basis adjustments; and (c) accrued interest receivable.

⁽²⁾	Total single-family interest income recognized of $1.5 billion for the three months ended June 30, 2011 consists of $1.1 billion of contractual interest and $383 million of effective yield adjustments. Total single-family interest income recognized of $2.9 billion for the six months ended June 30, 2011 consists of $2.1 billion of contractual interest and $735 million of effective yield adjustments.

⁽³⁾	Consists of mortgage loans that are not included in other loan classes.

⁽⁴⁾	Consists of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A.

⁽⁵⁾	Includes loans with higher-risk characteristics, such as interest-only loans and negative-amortizing loans that are neither government nor Alt-A.

⁽⁶⁾	The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is required.

⁽⁷⁾	Includes single-family loans restructured in a TDR with a recorded investment of $149.8 billion and $140.1 billion as of June 30, 2011 and December 31, 2010, respectively. Includes multifamily loans restructured in a TDR with a recorded investment of $993 million and $939 million as of June 30, 2011 and December 31, 2010, respectively.

Interest income recognized on impaired loans was $455 million for the three months ended June 30, 2010 and $2.6 billion for the six months ended June 30, 2010. Interest income recognized on a cash basis on impaired loans was $558 million for the three months ended June 30, 2010 and $891 million for the six months ended June 30, 2010.

Loans Acquired in a Transfer

We acquired delinquent loans from unconsolidated trusts and long-term standby commitments with an unpaid principal balance plus accrued interest of $48 million and $75 million for the three months ended June 30, 2011 and 2010, respectively, and $96 million and $160 million for the six months ended June 30, 2011 and 2010, respectively. The following table displays the outstanding balance, carrying amount and accretable yield of acquired credit-impaired loans as of June 30, 2011 and December 31, 2010, excluding loans that were modified as TDRs subsequent to their acquisition from MBS trusts.

		As of
		June 30,		December 31,
		2011		2010
			(Dollars in millions)
Outstanding contractual balance		$	6,351	$	8,519
Carrying amount:
	Loans on accrual status	$	1,836	$	2,029
	Loans on nonaccrual status		1,696		2,449
Total carrying amount of loans		$	3,532	$	4,478
Accretable yield		$	1,965	$	2,412

The following table displays interest income recognized and the impact to the “Provision for credit losses” related to loans that are still being accounted for as acquired credit-impaired loans, as well as loans that have been subsequently modified as a TDR, for the three and six months ended June 30, 2011 and 2010.

			For the				For the
			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2011		2010		2011		2010
			(Dollars in millions)
Accretion of fair value discount⁽¹⁾			$	250	$	288	$	481	$	554
Interest income on loans returned to accrual status or subsequently
	modified as TDRs			265		298		520		619
		Total interest income recognized on acquired credit-impaired loans	$	515	$	586	$	1,001	$	1,173
Increase (Decrease) in “Provision for loan losses” subsequent to the
	acquisition of credit-impaired loans		$	721	$	(120)	$	959	$	444

__________

⁽¹⁾	Represents accretion of the fair value discount that was recorded on acquired credit-impaired loans.