XML 35 R11.htm IDEA: XBRL DOCUMENT v2.3.0.15
Allowance for Loan Losses
9 Months Ended
Sep. 30, 2011
Notes to Consolidated Financial Statements 
Allowance for Loan Losses

4. Allowance for Loan Losses

 

We maintain an allowance for loan losses for HFI loans in our mortgage portfolio and loans backing Fannie Mae MBS issued from consolidated trusts. When calculating our allowance for loan losses, we consider only our net recorded investment in the loan at the balance sheet date, which includes interest income only while the loan was on accrual status. The allowance for loan losses is calculated based on our estimate of incurred losses as of the balance sheet date. Determining the adequacy of our allowance for loan losses is complex and requires judgment about the effect of matters that are inherently uncertain.

 

Allowance for Loan Losses

 

The following table displays changes in both single-family and multifamily allowance for loan losses for the three and nine months ended September 30, 2011 and total allowance for loan losses for the three and nine months ended September 30, 2011 and 2010.

 

    For the Three Months Ended September 30,  
    2011 2010  
    Of Of   Of Of    
    Fannie Consolidated   Fannie Consolidated    
    Mae Trusts Total Mae Trusts Total  
    (Dollars in millions)  
Single-family allowance for loan losses:                    
 Beginning balance $ 54,949 $ 13,078 $ 68,027           
  Provision for loan losses   (235)   4,318   4,083           
  Charge-offs(1)(6)   (3,802)   (260)   (4,062)           
  Recoveries    848   35   883           
  Transfers (2)   1,764   (1,764)   -           
  Other (3)   860   137   997           
 Ending balance $ 54,384 $ 15,544 $ 69,928           
Multifamily allowance for loan losses:                    
 Beginning balance $ 1,017 $ 462 $ 1,479           
  Provision for loan losses   39   37   76           
  Charge-offs (1)   (51)   -   (51)           
  Transfers (2)   6   (6)   -           
  Other (3)   3   -   3           
 Ending balance $ 1,014 $ 493 $ 1,507           
Total allowance for loan losses:                    
 Beginning balance $ 55,966 $ 13,540 $ 69,506 $ 42,844 $ 17,738 $ 60,582  
  Total provision for loan losses   (196)   4,355   4,159   2,144   2,552   4,696  
  Charge-offs(1)(6)   (3,853)   (260)   (4,113)   (5,946)   (1,243)   (7,189)  
  Recoveries    848   35   883   205   304   509  
  Transfers (2)   1,770   (1,770)   -   5,131   (5,131)   -  
  Other (3)   863   137   1,000   895   247   1,142  
 Ending balance(4)(5) $ 55,398 $ 16,037 $ 71,435 $ 45,273 $ 14,467 $ 59,740  

    For the Nine Months Ended September 30,
    2011 2010
    Of Of   Of Of  
    Fannie Consolidated   Fannie Consolidated  
    Mae Trusts Total Mae Trusts Total
    (Dollars in millions)
Single-family allowance for loan losses:                  
 Beginning balance $ 47,377 $ 12,603 $ 59,980         
  Provision for loan losses   9,962   10,410   20,372         
  Charge-offs(1)(6)   (14,766)   (1,466)   (16,232)         
  Recoveries    3,197   1,537   4,734         
  Transfers (2)   7,676   (7,676)   -         
  Other (3)   938   136   1,074         
 Ending balance $ 54,384 $ 15,544 $ 69,928         
Multifamily allowance for loan losses:                  
 Beginning balance $ 1,153 $ 423 $ 1,576         
  Provision for loan losses   41   135   176         
  Charge-offs (1)   (252)   -   (252)         
  Transfers (2)   63   (63)   -         
  Other (3)   9   (2)   7         
 Ending balance $ 1,014 $ 493 $ 1,507         
Total allowance for loan losses:                  
 Beginning balance $ 48,530 $ 13,026 $ 61,556 $ 8,078 $ 1,847 $ 9,925
  Adoption of new accounting standards   -   -   -   -   43,576   43,576
  Total provision for loan losses   10,003   10,545   20,548   11,008   9,922   20,930
  Charge-offs(1)(6)   (15,018)   (1,466)   (16,484)   (12,097)   (6,645)   (18,742)
  Recoveries    3,197   1,537   4,734   367   872   1,239
  Transfers (2)   7,739   (7,739)   -   41,606   (41,606)   -
  Other (3)   947   134   1,081   (3,689)   6,501   2,812
 Ending balance(4)(5) $ 55,398 $ 16,037 $ 71,435 $ 45,273 $ 14,467 $ 59,740

___________
  
  (1)Total charge-offs include accrued interest of $289 million and $811 million for the three months ended September 30, 2011 and 2010, respectively and $1.1 billion and $2.0 billion for the nine months ended September 30, 2011 and 2010, respectively. Single-family charge-offs include accrued interest of $279 million and $1.1 billion for the three and nine months ended September 30, 2011, respectively. Multifamily charge-offs include accrued interest of $10 million and $34 million for the three and nine months ended September 30, 2011, respectively.
  
  (2)Includes transfers from trusts for delinquent loan purchases.
  
  (3)Amounts represent the net activity recorded in our allowances for accrued interest receivable and preforeclosure property taxes and insurance receivable from borrowers. The provision for credit losses, charge-offs, recoveries and transfer activity included in this table reflects all changes for both the allowance for loan losses and the valuation allowances for accrued interest and preforeclosure property taxes and insurance receivable that relate to the mortgage loans.
  (4)Includes $334 million and $397 million as of September 30, 2011 and 2010, respectively, for acquired credit-impaired loans.
  
  (5)Total single-family allowance for loan losses was $58.3 billion as of September 30, 2010. Total multifamily allowance for loan losses was $1.4 billion as of September 30, 2010.
  (6)While we purchase the substantial majority of loans that are four or more months delinquent from our MBS trusts, we do not exercise this option to purchase loans during a forbearance period. Accordingly, charge-offs of consolidated trusts generally represent loans that remained in our consolidated trusts at the time of default.

As of September 30, 2011, the allowance for accrued interest receivable for loans of Fannie Mae was $1.9 billion and for loans of consolidated trusts was $304 million. As of December 31, 2010, the allowance for accrued interest receivable for loans of Fannie Mae was $3.0 billion and for loans of consolidated trusts was $439 million.

 

In the three month period ended June 30, 2010, we identified that for a portion of our delinquent loans we had not estimated and recorded our obligation to reimburse servicers for advances they made on our behalf for preforeclosure property taxes and insurance. We previously recognized these expenses when we reimbursed servicers. We also did not record a receivable from borrowers for these payments or assess the collectibility of the receivable. The nine month period ended September 30, 2010 includes an out-of-period adjustment of $1.1 billion to our condensed consolidated statements of operations reflecting our assessment of the collectibility of the receivable from borrowers.

 

The following table displays the allowance for loan losses and total recorded investment in our HFI loans, excluding loans for which we have elected the fair value option, by impairment or reserve methodology and portfolio segment as of September 30, 2011 and December 31, 2010.

 

    As of
    September 30, 2011 December 31, 2010
    Single-       Single-      
    Family Multifamily Total Family Multifamily Total
    (Dollars in millions)
Allowance for loan losses by segment:                  
 Individually impaired loans $ 44,475 $ 702 $ 45,177 $ 37,296 $ 549 $ 37,845
 Collectively reserved loans   25,121   803   25,924   22,306   1,020   23,326
 Acquired credit-impaired loans   332   2   334   378   7   385
  Total allowance for loan losses $ 69,928 $ 1,507 $ 71,435 $ 59,980 $ 1,576 $ 61,556

Recorded investment in loans by segment: (1)                  
 Individually impaired loans $ 159,031 $ 3,760 $ 162,791 $ 140,062 $ 3,074 $ 143,136
 Collectively reserved loans   2,638,517   173,223   2,811,740   2,677,640   169,332   2,846,972
 Acquired credit-impaired loans   3,546   50   3,596   4,798   108   4,906
  Total recorded investment in loans $ 2,801,094 $ 177,033 $ 2,978,127 $ 2,822,500 $ 172,514 $ 2,995,014

___________
  
  (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.